Acquisition expands ISG Research coverage of the $800 billion software sector
STAMFORD, Conn. — Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced it has acquired Ventana Research, a leading technology research firm specializing in coverage of the $800 billion software industry.
The move expands the capabilities of ISG Research, an important and fast-growing recurring-revenue-stream business for ISG, at a time when enterprises increasingly are leveraging software and services in combination to improve operating performance, deliver better customer and employee experiences, and drive growth.
“With the addition of Ventana Research, ISG becomes a stronger global powerhouse in technology research,” said Michael P. Connors, chairman and CEO of ISG. “We are famously known for our industry-leading coverage of the managed services sector, and now we are expanding and deepening our coverage of the all-important software industry. No other firm can compete with us when it comes to our comprehensive sourcing data, market coverage, analyst insights and market-making advisor perspectives – a combination that delivers unmatched value to both buyers and sellers of technology services and software.”
Ventana Research, founded in 2002 and based in Bend, Ore., tracks more than 2,000 software vendors – including covering more than 250 in-depth – to provide the industry’s most comprehensive analyst and research coverage of the global software sector. Its team of experienced professionals provides insights and expert guidance on mainstream and disruptive technologies through a unique set of research-based products, including an online community for business and IT professionals.
“Enterprises are relying more and more on independent market research and analyst insights to guide their technology buying decisions and manage their technology ecosystems, while providers seek the same advice to improve their products and hone their go-to-market strategies,” said Mark Smith, founder and CEO of Ventana Research. “We are delighted to be joining ISG and adding our industry-leading capabilities, people, credibility, client relationships and software industry coverage to the ISG Research portfolio.”
Smith will continue to lead Ventana Research in his new role as ISG partner, Software Research.
“Ventana Research will maintain its well-known and trusted portfolio of research products and services, which are a perfect complement to the existing ISG Research portfolio,” said Paul Gottsegen, president of ISG Research and Client Experience. “As we move past the initial integration period, there will be many opportunities to create synergy as we naturally and smoothly integrate Ventana offerings fully into ISG Research and create new offerings that will deliver even more value to our clients.”
Ventana Research becomes one of five service lines of ISG Research. The others are ISG Provider Lens™ (service provider evaluation research), ISG Provider Services (go-to-market research and support for service providers), ISG ProBenchmark® (SaaS-based pricing intelligence platform) and ISG Events (producer of industry conferences and webinars).
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
Reports GAAP revenues of $72 million, a third-quarter record
Reports net income of $3.2 million, GAAP EPS of $0.06 and adjusted EPS of $0.11
Reports third-quarter adjusted EBITDA of $11 million
Declares fourth-quarter dividend of $0.045 per share, payable December 20 to record holders as of December 5
Acquires Ventana Research; expands ISG Research coverage into $800 billion software sector
Sets fourth-quarter guidance: revenues between $68 million and $71 million and adjusted EBITDA between $9.0 million and $10.5 million
STAMFORD, Conn.–(BUSINESS WIRE)– Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced financial results, including record third-quarter revenues, for the quarter ended September 30, 2023.
“ISG delivered strong results in the third quarter, with record revenues of $72 million, our best topline performance ever in a third quarter,” said Michael P. Connors, chairman and CEO. “Our recurring revenues were up 19 percent, revenues in Europe were up 14 percent and firm-wide adjusted EBITDA margin improved 120 basis points from last quarter despite a more difficult macro environment. These results were powered by a relentless focus on execution and our proactive management of the current demand environment.”
Commenting on the macro environment, Connors said: “Our enterprise clients continue to leverage our capabilities with a dual focus on all things digital and cost optimization, a traditional sweet spot for ISG. Overall, clients are slower in their decision-making and spending is being stretched over longer periods of time, amid concerns about continued economic uncertainty and rising geopolitical tensions. With that said, our pipeline remains strong, and the pace of execution will be driven by clients’ need for speed as they position themselves for 2024 when conditions are expected to improve.”
Ventana Research Acquisition
ISG said today it has acquired the business of Ventana Research, a leading technology research firm specializing in coverage of the $800 billion software industry.
The move expands the capabilities of ISG Research, an important and fast-growing recurring-revenue-stream business for ISG, at a time when enterprises increasingly are leveraging software and services in combination to improve operating performance, deliver better customer and employee experiences, and drive growth.
“With the addition of Ventana Research, ISG becomes a stronger global powerhouse in technology research,” said Connors. “We are famously known for our industry-leading coverage of the managed services sector, and now we are expanding and deepening our coverage of the all-important software industry. In addition to increasing our market research coverage, we see synergies to accelerate the growth of our Software Advisory business with enterprises.”
Citing ISG Index™ research, Connors noted that software-based XaaS solutions – both infrastructure-as-a service and software-as-a-service – account for more than 60 percent of global spending on IT and business services, up from 48 percent five years ago. “We expect spending on cloud-based, software-driven services to continue expanding in the coming years,” he said, “and with it, client demand for in-depth research and advice to guide software investment decisions.”
Ventana Research, founded in 2002 and based in Bend, Ore., tracks more than 2,000 software vendors and covers more than 250 of them in-depth to provide the industry’s most comprehensive analyst and research coverage of the global software sector. Its team of experienced professionals provides insights and expert guidance on mainstream and disruptive technologies through a unique set of research-based products, including an online community for business and IT professionals.
Third-Quarter 2023 Results
Reported revenues for the third quarter were a record $71.8 million, up 4.3 percent from $68.8 million in the prior year. Currency translation positively impacted reported revenues by $1.4 million versus the prior year. Reported revenues were $42.5 million in the Americas, up 1 percent; $22.1 million in Europe, up 14 percent; and $7.2 million in Asia Pacific, down 2 percent versus the prior year.
ISG reported third-quarter operating income of $6.2 million, down 16 percent from $7.4 million in the third quarter of 2022. Reported third-quarter net income was $3.2 million, down 42 percent from net income of $5.6 million in the prior year. Fully diluted earnings per share was $0.06, compared with $0.11 per fully diluted share in the prior year.
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the third quarter was $5.7 million, or $0.11 per share on a fully diluted basis, compared with adjusted net income of $7.2 million, or $0.14 per share on a fully diluted basis, in the prior year’s third quarter.
Third-quarter adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was $10.6 million, essentially flat with the prior year.
Other Financial and Operating Highlights
ISG generated $3.2 million of cash from operations in the third quarter, compared with $0.3 million used from operations in the third quarter last year. The firm’s cash balance totaled $18.7 million at September 30, 2023, down from $19.6 million at June 30, 2023.
During the third quarter, ISG paid dividends of $2.3 million and repurchased $0.9 million of shares. As of September 30, 2023, ISG had $79.2 million in debt outstanding, unchanged from December 31, 2022. The firm’s gross-debt-to-adjusted-EBITDA ratio (a non-GAAP measure calculated by dividing outstanding debt by adjusted EBITDA) was 1.8 times.
2023 Fourth-Quarter Revenue and Adjusted EBITDA Guidance
“For the fourth quarter, ISG is targeting revenues of between $68 million and $71 million and adjusted EBITDA of between $9.0 million and $10.5 million,” Connors said. “We will continue to monitor the macroeconomic and geopolitical environment, and other factors, and adjust our business plans accordingly.”
Quarterly Dividend
The ISG Board of Directors declared a fourth-quarter dividend of $0.045 per share payable on December 20, 2023, to shareholders of record on December 5, 2023.
Conference Call
ISG has scheduled a call for 9 a.m., U.S. Eastern Time, Friday, November 3, 2023, to discuss the company’s third-quarter results. The call can be accessed by dialing +1 (888) 330-2057; or, for international callers, by dialing +1 (646) 960-0203. The access code is 1482106. A recording of the conference call will be accessible on ISG’s website (www.isg-one.com) for approximately four weeks following the call.
Forward-Looking Statements
This communication contains “forward-looking statements” which represent the current expectations and beliefs of management of ISG concerning future events and their potential effects. Statements contained herein including words such as “anticipate,” “believe,” “contemplate,” “plan,” “estimate,” “target,” “expect,” “intend,” “will,” “continue,” “should,” “may,” and other similar expressions, are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those risks relate to inherent business, economic and competitive uncertainties and contingencies relating to the businesses of ISG and its subsidiaries including without limitation: (1) failure to secure new engagements or loss of important clients; (2) ability to hire and retain enough qualified employees to support operations; (3) ability to maintain or increase billing and utilization rates; (4) management of growth; (5) success of expansion internationally; (6) competition; (7) ability to move the product mix into higher margin businesses; (8) general political and social conditions such as war, political unrest and terrorism; (9) healthcare and benefit cost management; (10) ability to protect ISG and its subsidiaries’ intellectual property or data and the intellectual property or data of others; (11) currency fluctuations and exchange rate adjustments; (12) ability to successfully consummate or integrate strategic acquisitions; (13) outbreaks of diseases, including coronavirus, or similar public health threats or fear of such an event; and (14) engagements may be terminated, delayed or reduced in scope by clients. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from ISG’s forward-looking statements are included in ISG’s filings with the U.S. Securities and Exchange Commission. ISG undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.
Non-GAAP Financial Measures
ISG reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP). In this release, ISG has presented both GAAP financial results as well as non-GAAP information for the three and nine months ended September 30, 2023 and September 30, 2022. ISG believes that evaluating its ongoing operating results will be enhanced if it discloses certain non-GAAP information. These non-GAAP financial measures exclude non-cash and certain other special charges that many investors believe may obscure the user’s overall understanding of ISG’s current financial performance and the Company’s prospects for the future. ISG believes that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance.
ISG provides adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, acquisition-related costs, and severance, integration and other expense), adjusted net income (defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition-related costs, write-off of deferred financing costs, and severance, integration and other expense, on a tax-adjusted basis), adjusted net income per diluted share, adjusted EBITDA margin, gross-debt-to-adjusted-EBITDA ratio and selected financial data on a constant currency basis which are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations, which management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by ISG to evaluate the Company’s business strategies and management’s performance.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our current and prior-periods local currency financial results using the same point in time exchange rates and then compare the adjusted current and prior period results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP, nor should such amounts be considered in isolation.
Management believes this information facilitates comparison of underlying results over time. Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure. Non-GAAP measures are provided as additional information and should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the forward-looking non-GAAP estimates contained herein to the corresponding GAAP measures is not being provided, due to the unreasonable efforts required to prepare it.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
Information Services Group, Inc.
Condensed Consolidated Statement of Income and Comprehensive Income
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Revenues
$
71,773
$
68,836
$
224,868
$
212,100
Operating expenses
Direct costs and expenses for advisors
43,032
39,786
138,048
125,111
Selling, general and administrative
20,992
20,334
63,992
60,806
Depreciation and amortization
1,526
1,286
4,692
3,872
Operating income
6,223
7,430
18,136
22,311
Interest income
104
37
285
126
Interest expense
(1,533
)
(824
)
(4,676
)
(1,997
)
Foreign currency transaction (loss) gain
(2
)
131
(40
)
248
Income before taxes
4,792
6,774
13,705
20,688
Income tax provision
1,591
1,218
4,680
5,245
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Weighted average shares outstanding:
Basic
48,711
47,888
48,542
48,191
Diluted
50,257
49,844
50,287
50,637
Earnings per share:
Basic
$
0.07
$
0.12
$
0.19
$
0.32
Diluted
$
0.06
$
0.11
$
0.18
$
0.30
Information Services Group, Inc.
Reconciliation from GAAP to Non-GAAP
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Plus:
Interest expense (net of interest income)
1,429
787
4,391
1,871
Income taxes
1,591
1,218
4,680
5,245
Depreciation and amortization
1,526
1,286
4,692
3,872
Interest accretion associated with contingent consideration
26
–
77
8
Acquisition-related costs (1)
99
25
99
41
Severance, integration and other expense
674
8
2,016
458
Foreign currency transaction loss (gain)
2
(131
)
40
(248
)
Non-cash stock compensation
2,098
1,987
6,752
5,432
Adjusted EBITDA
$
10,646
$
10,736
$
31,772
$
32,122
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Plus:
Non-cash stock compensation
2,098
1,987
6,752
5,432
Intangible amortization
769
525
2,352
1,580
Interest accretion associated with contingent consideration
26
–
77
8
Acquisition-related costs (1)
99
25
99
41
Severance, integration and other expense
674
8
2,016
458
Write-off of deferred financing costs
–
–
379
–
Foreign currency transaction loss (gain)
2
(131
)
40
(248
)
Tax effect (2)
(1,174
)
(772
)
(3,749
)
(2,327
)
Adjusted net income
$
5,695
$
7,198
$
16,991
$
20,387
Weighted average shares outstanding:
Basic
48,711
47,888
48,542
48,191
Diluted
50,257
49,844
50,287
50,637
Adjusted earnings per share:
Basic
$
0.12
$
0.15
$
0.35
$
0.42
Diluted
$
0.11
$
0.14
$
0.34
$
0.40
(1)
Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
(2)
Marginal tax rate of 32%, reflecting U.S. federal income tax rate of 21% plus 11% attributable to U.S. states and foreign jurisdictions.
SANTA MONICA, Calif.–(BUSINESS WIRE)– Entravision Communications Corporation (NYSE: EVC), a leading global advertising solutions, media and technology company, today announced financial results for the three- and nine-month periods ended September 30, 2023.
Third Quarter 2023 Highlights
Record quarterly advertising revenue
Net revenue up 14% over the prior-year quarter
Net income attributable to common stockholders down 71% compared to the prior-year quarter
Consolidated EBITDA down 45% compared to the prior-year quarter
Operating cash flow up 45% over the prior-year quarter
Free cash flow down 74% compared to the prior-year quarter
Quarterly cash dividend of $0.05 per share
“We achieved a record quarterly advertising revenue of $274.4 million, up 14% year-over-year, led by strength in our Digital segment, which now comprises 84% of total revenue,” said Chris Young, Chief Financial Officer. “We continued to execute on our Digital transformation strategy during the quarter with the signing of two new partnerships with Match and Pinterest to further diversify our portfolio of digital solutions. While non-returning political revenue and sales mix contributed to the year-over-year decline in our Consolidated EBITDA, we anticipate increased political spending ahead of the 2024 elections will benefit our Television and Audio segments and Consolidated EBITDA in the quarters to come.”
Quarterly Cash Dividend
The Company announced today that its Board of Directors approved a quarterly cash dividend to shareholders of $0.05 per share on the Company’s Class A and Class U common stock, in an aggregate amount of $4.4 million. The quarterly dividend will be payable on December 29, 2023 to shareholders of record as of the close of business on December 15, 2023, and the common stock will trade ex-dividend on December 14, 2023. The Company currently anticipates that future cash dividends will be paid on a quarterly basis; however, any decision to pay future cash dividends will be subject to approval by the Board.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each of these non-GAAP financial measures, and a table reconciling each of these non-GAAP financial measures to its most directly comparable GAAP financial measure is included beginning on page 10.
Unaudited Financial Highlights (In thousands, except share and per share data)
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
% Change
2023
2022
% Change
Net revenue
$
274,417
$
241,014
14
%
$
786,804
$
659,881
19
%
Cost of revenue – digital (1)
199,289
157,095
27
%
562,881
431,951
30
%
Operating expenses (2)
53,809
49,294
9
%
163,069
140,527
16
%
Corporate expenses (3)
13,292
9,525
40
%
35,836
26,769
34
%
Foreign currency (gain) loss
548
1,966
(72
)%
289
2,112
(86
)%
Consolidated EBITDA (4)
14,185
25,972
(45
)%
41,420
66,566
(38
)%
Free cash flow (5)
$
4,004
$
15,443
(74
)%
$
9,470
$
44,026
(78
)%
Net income (loss)
$
2,732
$
9,090
(70
)%
$
2,430
$
19,444
(88
)%
Net (income) loss attributable to redeemable noncontrolling interest
$
(13
)
$
–
*
$
(1
)
$
–
*
Net (income) loss attributable to noncontrolling interest
$
–
$
303
(100
)%
$
342
$
303
13
%
Net income (loss) attributable to common stockholders
$
2,719
$
9,393
(71
)%
$
2,771
$
19,747
(86
)%
Net income (loss) per share attributable to common stockholders, basic and diluted
$
0.03
$
0.11
(73
)%
$
0.03
$
0.23
(87
)%
Weighted average common shares outstanding, basic
87,995,567
84,945,873
87,803,770
85,469,675
Weighted average common shares outstanding, diluted
89,888,721
87,417,501
89,835,363
87,671,726
(1)
Consists primarily of the costs of online media acquired from third-party publishers. Media cost is classified as cost of revenue in the period in which the corresponding revenue is recognized.
(2)
Operating expenses include direct operating and selling, general and administrative expenses. Included in operating expenses are $2.6 million and $1.0 million of non-cash stock-based compensation for the three-month periods ended September 30, 2023 and 2022, respectively, and $7.2 million and $2.9 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2023 and 2022, respectively.
(3)
Corporate expenses include $4.4 million and $1.8 million of non-cash stock-based compensation for the three-month periods ended September 30, 2023 and 2022, respectively, and $9.8 million and $5.1 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2023 and 2022, respectively.
(4)
Consolidated EBITDA means net income (loss) plus gain (loss) on sale of assets, depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation included in operating and corporate expenses, net interest expense, other operating gain (loss), gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses, syndication programming amortization less syndication programming payments, revenue from the Federal Communications Commission, or FCC, spectrum incentive auction less related expenses, expenses associated with investments, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings. We use the term consolidated EBITDA because that measure is defined in our 2017 Credit Agreement and 2023 Credit Agreement, and does not include gain (loss) on sale of assets, depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation, net interest expense, other income (loss), gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses, syndication programming amortization less syndication programming payments, revenue from FCC spectrum incentive auction less related expenses, expenses associated with investments, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings.
(5)
Free cash flow is defined as consolidated EBITDA less cash paid for income taxes, net interest expense, capital expenditures (less amounts reimbursed by landlord) and non-recurring cash expenses plus dividend income, and other operating gain (loss). Net interest expense is defined as interest expense, less non-cash interest expense relating to amortization of debt finance costs, and less interest income.
Unaudited Financial Results (In thousands)
Three-Month Period
Ended September 30,
2023
2022
% Change
Net revenue
$
274,417
$
241,014
14
%
Cost of revenue – digital (1)
199,289
157,095
27
%
Operating expenses (1)
53,809
49,294
9
%
Corporate expenses (1)
13,292
9,525
40
%
Depreciation and amortization
7,356
6,554
12
%
Change in fair value of contingent consideration
(5,997
)
734
*
Impairment charge
989
—
*
Foreign currency (gain) loss
548
1,966
(72
)%
Other operating (gain) loss
—
(58
)
(100
)%
Operating income (loss)
5,131
15,904
(68
)%
Interest expense, net
(2,896
)
(2,267
)
28
%
Dividend income
—
6
(100
)%
Realized gain (loss) on marketable securities
(33
)
(473
)
(93
)%
Income (loss) before income taxes
2,202
13,170
(83
)%
Income tax benefit (expense)
530
(4,080
)
*
Net income (loss)
2,732
9,090
(70
)%
Net (income) loss attributable to redeemable noncontrolling interest
(13
)
—
*
Net (income) loss attributable to noncontrolling interest
—
303
(100
)%
Net income (loss) attributable to common stockholders
$
2,719
$
9,393
(71
)%
(1) Cost of revenue, operating expenses and corporate expenses are defined on page 2.
Net revenue in the third quarter of 2023 totaled $274.4 million, up 14% from $241.0 million in the prior-year period. Of the overall increase, $42.6 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period. The overall increase was partially offset by a decrease of $6.1 million attributable to our television segment, primarily due to decreases in political advertising revenue and national advertising revenue, partially offset by increases in local advertising revenue and spectrum usage rights revenue. In addition, the overall increase was partially offset by a decrease of $3.1 million attributable to our audio segment, primarily due to a decrease in political advertising revenue, and decreases in local and national advertising revenue.
Cost of revenue in the third quarter of 2023 totaled $199.3 million, up 27% from $157.1 million in the prior-year period. The increase was primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period.
Operating expenses in the third quarter of 2023 totaled $53.8 million, up 9% from $49.3 million in the prior-year period. Of the overall increase, $4.1 million was attributable to our digital segment and was primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the timing of the 2023 annual restricted stock unit (“RSU”) grant to certain employees, which was made in February 2023 compared to the 2022 annual grant, which was made in December 2022, and due to an increase in expenses associated with the increase in digital advertising revenue, an increase in salary expense, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period. In addition, of the overall increase in operating expenses, $0.5 million was attributable to our audio segment primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above, and due to an increase in salaries. The overall increase was partially offset by a decrease of $0.1 million attributable to our television segment.
Corporate expenses in the third quarter of 2023 totaled $13.3 million, up 40% from $9.5 million in the prior-year period. The increase was primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above and RSU grant to our new CEO, and increases in professional service fees.
Nine-Month Period
Ended September 30,
2023
2022
% Change
Net revenue
$
786,804
$
659,881
19
%
Cost of revenue – digital (1)
562,881
431,951
30
%
Operating expenses (1)
163,069
140,527
16
%
Corporate expenses (1)
35,836
26,769
34
%
Depreciation and amortization
20,336
19,212
6
%
Change in fair value of contingent consideration
(8,939
)
6,810
*
Impairment charge
989
—
*
Foreign currency (gain) loss
289
2,112
(86
)%
Other operating (gain) loss
—
(1,011
)
(100
)%
Operating income (loss)
12,343
33,511
(63
)%
Interest expense, net
(9,333
)
(5,309
)
76
%
Dividend income
32
20
60
%
Realized gain (loss) on marketable securities
(94
)
(473
)
(80
)%
Gain (loss) on debt extinguishment
(1,556
)
—
*
Income (loss) before income taxes
1,392
27,749
(95
)%
Income tax benefit (expense)
1,038
(8,305
)
*
Net income (loss)
2,430
19,444
(88
)%
Net (income) loss attributable to redeemable noncontrolling interest
(1
)
—
*
Net (income) loss attributable to noncontrolling interest
342
303
13
%
Net income (loss) attributable to common stockholders
$
2,771
$
19,747
(86
)%
Net revenue for the nine-month period of 2023 totaled $786.8 million, up 19% from $659.9 million in the prior-year period. Of the overall increase, $140.9 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period. The overall increase was partially offset by a decrease of $9.1 million attributable to our television segment, primarily due to decreases in political advertising revenue and national advertising revenue, partially offset by increases in local advertising revenue, spectrum usage rights revenue and retransmission consent revenue. In addition, the overall increase was partially offset by a decrease of $4.9 million attributable to our audio segment, primarily due to a decrease in political advertising revenue, and decreases in local and national advertising revenue.
Cost of revenue for the nine-month period of 2023 totaled $562.9 million, up 30% from $432.0 million in the prior-year period. The increase was due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period.
Operating expenses for the nine-month period of 2023 totaled $163.1 million, up 16% from $140.5 million in the prior-year period. Of the overall increase, $18.2 million was attributable to our digital segment and was primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above, and due to an increase in expenses associated with the increase in digital advertising revenue, an increase in salary expense, and due to various acquisitions, which did not fully contribute to our financial results in our digital segment in the comparable period. Additionally, of the overall increase in operating expenses, $0.9 million was attributable to our television segment primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above, partially offset by a decrease in bad debt expense. In addition, of the overall increase in operating expenses, $3.5 million was attributable to our audio segment primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above, and due to an increase in salaries and increased rent expense in the temporary office space until the move to our new permanent offices, which was completed in June 2023.
Corporate expenses for the nine-month period of 2023 totaled $35.8 million, up 34% from $26.8 million in the prior-year period. The increase was primarily due to an increase in non-cash stock-based compensation, which is mainly a result of the 2023 annual RSU grant timing mentioned above and RSU grant to our new CEO, and increases in professional service fees, audit fees and rent expense.
Balance Sheet and Related Metrics
Cash and marketable securities as of September 30, 2023 totaled $128.7 million. Total debt as defined in the Company’s credit agreement was $211.1 million. Net of $50 million of cash and marketable securities, total leverage as defined in the Company’s credit agreement was 2.1 times as of September 30, 2023. Net of total cash and marketable securities, total leverage was 1.1 times.
Unaudited Segment Results (In thousands)
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
% Change
2023
2022
% Change
Net Revenue
Digital
$
231,487
$
188,877
23
%
$
657,865
$
516,966
27
%
Television
29,552
35,678
(17
)%
89,807
98,918
(9
)%
Audio
13,378
16,459
(19
)%
39,132
43,997
(11
)%
Total
$
274,417
$
241,014
14
%
$
786,804
$
659,881
19
%
Cost of Revenue – digital (1)
Digital
$
199,289
$
157,095
27
%
$
562,881
$
431,951
30
%
Operating Expenses (1)
Digital
23,173
19,080
21
%
69,755
51,577
35
%
Television
19,892
20,003
(1
)%
59,859
58,969
2
%
Audio
10,744
10,211
5
%
33,455
29,981
12
%
Total
$
53,809
$
49,294
9
%
$
163,069
$
140,527
16
%
Corporate Expenses (1)
$
13,292
$
9,525
40
%
$
35,836
$
26,769
34
%
Consolidated EBITDA (1)
$
14,185
$
25,972
(45
)%
$
41,420
$
66,566
(38
)%
(1) Cost of revenue, operating expenses, corporate expenses, and consolidated EBITDA are defined on page 2.
Notice of Conference Call
Entravision Communications Corporation will hold a conference call to discuss its third quarter 2023 results on Thursday, November 2, 2023 at 5:00 p.m. Eastern Time. To access the conference call, please dial (844) 836-8739 (U.S.) or (412) 317-5440 (Int’l) ten minutes prior to the start time and reference Conference ID number 10182461. The call will also be available via live webcast on the investor relations portion of the Company’s website located at www.entravision.com.
About Entravision Communications Corporation
Entravision is a global advertising solutions, media and technology company. Over the past three decades, we have strategically evolved into a digital powerhouse, expertly connecting brands to consumers in the U.S., Latin America, Europe, Asia and Africa. Our digital segment, the company’s largest by revenue, offers a full suite of end-to-end advertising services in 40 countries. We have commercial partnerships with Meta, X Corp. (formerly known as Twitter), TikTok, and Spotify, and marketers can use our Smadex and other platforms to deliver targeted advertising to audiences around the globe. In the U.S., we maintain a diversified portfolio of television and radio stations that target Hispanic audiences and complement our global digital services. Entravision remains the largest affiliate group of the Univision and UniMás television networks. Shares of Entravision Class A Common Stock trade on the NYSE under ticker: EVC. Learn more about our offerings at entravision.com or connect with us on LinkedIn and Facebook.
Forward-Looking Statements
This press release contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that actual results will not differ materially from these expectations, and the Company disclaims any duty to update any forward-looking statements made by the Company. From time to time, these risks, uncertainties and other factors are discussed in the Company’s filings with the Securities and Exchange Commission.
(Financial Table Follows)
Entravision Communications Corporation
Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
2023
2022
Net revenue
$
274,417
$
241,014
$
786,804
$
659,881
Expenses:
Cost of revenue – digital
199,289
157,095
562,881
431,951
Direct operating expenses
31,855
30,086
94,782
87,505
Selling, general and administrative expenses
21,954
19,208
68,287
53,022
Corporate expenses
13,292
9,525
35,836
26,769
Depreciation and amortization
7,356
6,554
20,336
19,212
Change in fair value of contingent consideration
(5,997
)
734
(8,939
)
6,810
Impairment charge
989
—
989
—
Foreign currency (gain) loss
548
1,966
289
2,112
Other operating (gain) loss
—
(58
)
—
(1,011
)
269,286
225,110
774,461
626,370
Operating income (loss)
5,131
15,904
12,343
33,511
Interest expense
(4,454
)
(3,055
)
(12,788
)
(7,225
)
Interest income
1,558
788
3,455
1,916
Dividend income
—
6
32
20
Realized gain (loss) on marketable securities
(33
)
(473
)
(94
)
(473
)
Gain (loss) on debt extinguishment
—
—
(1,556
)
—
Income (loss) before income taxes
2,202
13,170
1,392
27,749
Income tax benefit (expense)
530
(4,080
)
1,038
(8,305
)
Net income (loss)
2,732
9,090
2,430
19,444
Net (income) loss attributable to redeemable noncontrolling interest
(13
)
—
(1
)
—
Net (income) loss attributable to noncontrolling interest
—
303
342
303
Net income (loss) attributable to common stockholders
$
2,719
$
9,393
$
2,771
$
19,747
Basic and diluted earnings per share:
Net income (loss) per share attributable to common stockholders, basic and diluted
$
0.03
$
0.11
$
0.03
$
0.23
Cash dividends declared per common share, basic and diluted
$
0.05
$
0.03
$
0.15
$
0.08
Weighted average common shares outstanding, basic
87,995,567
84,945,873
87,803,770
85,469,675
Weighted average common shares outstanding, diluted
89,888,721
87,417,501
89,835,363
87,671,726
Entravision Communications Corporation
Consolidated Balance Sheets
(In thousands; unaudited)
September 30,
December 31,
2023
2022
ASSETS
Current assets
Cash and cash equivalents
$
110,624
$
110,691
Marketable securities
18,063
44,528
Restricted cash
765
753
Trade receivables, net of allowance for doubtful accounts
211,175
224,713
Assets held for sale
1,223
—
Prepaid expenses and other current assets
43,404
27,238
Total current assets
385,254
407,923
Property and equipment, net
67,750
61,362
Intangible assets subject to amortization, net
55,706
61,811
Intangible assets not subject to amortization
207,453
207,453
Goodwill
90,672
86,991
Deferred income taxes
2,591
2,591
Operating leases right of use asset
45,159
44,413
Other assets
21,550
8,297
Total assets
$
876,135
$
880,841
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt
$
8,643
$
5,256
Accounts payable and accrued expenses
240,417
237,415
Operating lease liabilities
7,150
5,570
Total current liabilities
256,210
248,241
Long-term debt, less current maturities, net of unamortized debt issuance costs
201,301
207,292
Long-term operating lease liabilities
46,849
42,151
Other long-term liabilities
17,294
30,198
Deferred income taxes
68,464
67,590
Total liabilities
590,118
595,472
Redeemable noncontrolling interest
47,301
—
Stockholders’ equity
Class A common stock
8
8
Class U common stock
1
1
Additional paid-in capital
742,040
776,298
Accumulated deficit
(501,604
)
(504,375
)
Accumulated other comprehensive income (loss)
(1,729
)
(1,510
)
Total stockholders’ equity
238,716
270,422
Noncontrolling interest
–
14,947
Total equity
238,716
285,369
Total liabilities and equity
$
876,135
$
880,841
Entravision Communications Corporation
Consolidated Statements of Cash Flows
(In thousands; unaudited)
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
2023
2022
Cash flows from operating activities:
Net income (loss)
$
2,732
$
9,090
$
2,430
$
19,444
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
7,356
6,554
20,336
19,212
Impairment charge
989
—
989
—
Deferred income taxes
(40
)
62
(169
)
(3,151
)
Non-cash interest
85
365
264
1,076
Amortization of syndication contracts
118
117
358
348
Payments on syndication contracts
(125
)
(70
)
(366
)
(304
)
Non-cash stock-based compensation
7,032
2,786
17,053
7,995
(Gain) loss on marketable securities
33
473
94
473
(Gain) loss on disposal of property and equipment
(29
)
39
(11
)
(599
)
(Gain) loss on debt extinguishment
—
—
1,556
—
Change in fair value of contingent consideration
(5,997
)
734
(8,939
)
6,810
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(1,219
)
4,708
16,261
22,296
(Increase) decrease in prepaid expenses and other current assets, operating leases right of use asset and other assets
(3,902
)
1,069
(7,199
)
(183
)
Increase (decrease) in accounts payable, accrued expenses and other liabilities
14,993
(10,691
)
26,460
4,725
Net cash provided by operating activities
22,026
15,236
69,117
78,142
Cash flows from investing activities:
Proceeds from sale of property and equipment and intangibles
33
—
83
2,671
Purchases of property and equipment
(5,023
)
(4,673
)
(19,881
)
(7,882
)
Purchase of a business, net of cash acquired
—
—
(6,930
)
—
Investment in variable interest entities, net of cash consolidated
—
(5,164
)
—
(5,164
)
Purchases of marketable securities
(1,183
)
(5,241
)
(11,355
)
(92,480
)
Proceeds from sale of marketable securities
10,000
36,369
38,093
46,868
Purchases of investments
(100
)
—
(300
)
—
Issuance of loan receivable
(5,550
)
—
(13,636
)
—
Net cash provided by (used in) investing activities
(1,823
)
21,291
(13,926
)
(55,987
)
Cash flows from financing activities:
Proceeds from stock option exercises
—
—
554
218
Tax payments related to shares withheld for share-based compensation plans
(63
)
—
(158
)
(267
)
Payments on debt
(1,250
)
(1,001
)
(214,495
)
(2,501
)
Dividends paid
(4,400
)
(2,124
)
(13,182
)
(6,415
)
Distributions to noncontrolling interest
—
—
(3,380
)
—
Repurchase of Class A common stock
—
—
—
(11,280
)
Payment of contingent consideration
(3,403
)
(21,734
)
(35,113
)
(65,340
)
Principal payments under finance lease obligation
(37
)
(33
)
(113
)
(72
)
Proceeds from borrowings on debt
1
—
212,420
—
Payments for debt issuance costs
—
—
(1,777
)
—
Net cash used in financing activities
(9,152
)
(24,892
)
(55,244
)
(85,657
)
Effect of exchange rates on cash, cash equivalents and restricted cash
(3
)
5
(2
)
(1
)
Net increase (decrease) in cash, cash equivalents and restricted cash
11,048
11,640
(55
)
(63,503
)
Cash, cash equivalents and restricted cash:
Beginning
100,341
110,700
111,444
185,843
Ending
$
111,389
$
122,340
$
111,389
$
122,340
Entravision Communications Corporation
Reconciliation of Consolidated EBITDA to Cash Flows From Operating Activities
(In thousands; unaudited)
The most directly comparable GAAP financial measure is operating cash flow. A reconciliation of this non-GAAP measure to cash flows from operating activities for each of the periods presented is as follows:
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
2023
2022
Consolidated EBITDA (1)
$
14,185
$
25,972
$
41,420
$
66,566
EBITDA attributable to redeemable noncontrolling interest
319
—
736
—
EBITDA attributable to noncontrolling interest
—
(5
)
230
(5
)
Interest expense
(4,454
)
(3,055
)
(12,788
)
(7,225
)
Interest income
1,558
788
3,455
1,916
Dividend income
–
6
32
20
Realized gain (loss) on marketable securities
(33
)
(473
)
(94
)
(473
)
Income tax expense
530
(4,080
)
1,038
(8,305
)
Amortization of syndication contracts
(118
)
(117
)
(358
)
(348
)
Payments on syndication contracts
125
70
366
304
Non-cash stock-based compensation included in direct operating expenses
(2,637
)
(981
)
(7,218
)
(2,878
)
Non-cash stock-based compensation included in corporate expenses
(4,395
)
(1,805
)
(9,835
)
(5,117
)
Depreciation and amortization
(7,356
)
(6,554
)
(20,336
)
(19,212
)
Change in fair value of contingent consideration
5,997
(734
)
8,939
(6,810
)
Impairment charge
(989
)
—
(989
)
—
Non-recurring cash severance charge
—
—
(612
)
—
Other operating gain (loss)
—
58
—
1,011
Gain (loss) on debt extinguishment
—
—
(1,556
)
—
Net (income) loss attributable to redeemable noncontrolling interest
(13
)
—
(1
)
—
Net (income) loss attributable to noncontrolling interest
—
303
342
303
Net income (loss) attributable to common stockholders
2,719
9,393
2,771
19,747
Depreciation and amortization
7,356
6,554
20,336
19,212
Impairment charge
989
—
989
—
Deferred income taxes
(40
)
62
(169
)
(3,151
)
Non-cash interest
85
365
264
1,076
Amortization of syndication contracts
118
117
358
348
Payments on syndication contracts
(125
)
(70
)
(366
)
(304
)
Non-cash stock-based compensation
7,032
2,786
17,053
7,995
Realized (gain) loss on marketable securities
33
473
94
473
(Gain) loss on debt extinguishment
—
—
1,556
—
(Gain) loss on disposal of property and equipment
(29
)
39
(11
)
(599
)
Change in fair value of contingent consideration
(5,997
)
734
(8,939
)
6,810
Net income (loss) attributable to redeemable noncontrolling interest
13
—
1
—
Net income (loss) attributable to noncontrolling interest
—
(303
)
(342
)
(303
)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(1,219
)
4,708
16,261
22,296
(Increase) decrease in prepaid expenses and other current assets, operating leases right of use asset and other assets
(3,902
)
1,069
(7,199
)
(183
)
Increase (decrease) in accounts payable, accrued expenses and other liabilities
14,993
(10,691
)
26,460
4,725
Cash flows from operating activities
22,026
15,236
69,117
78,142
(1)
Consolidated EBITDA is defined on page 2.
Entravision Communications Corporation
Reconciliation of Free Cash Flow to Cash Flows From Operating Activities
(In thousands; unaudited)
The most directly comparable GAAP financial measure is operating cash flow. A reconciliation of this non-GAAP measure to cash flows from operating activities for each of the periods presented is as follows:
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2023
2022
2023
2022
Consolidated EBITDA (1)
$
14,185
$
25,972
$
41,420
$
66,566
Net interest expense (1)
(2,811
)
(1,902
)
(9,069
)
(4,233
)
Dividend income
—
6
32
20
Cash paid for income taxes
(2,347
)
(4,018
)
(5,929
)
(11,456
)
Capital expenditures (2)
(5,023
)
(4,673
)
(19,881
)
(7,882
)
Landlord incentive reimbursement
—
—
3,509
—
Non-recurring cash severance charge
—
—
(612
)
—
Other operating gain (loss)
—
58
—
1,011
Free cash flow (1)
4,004
15,443
9,470
44,026
Capital expenditures (2)
5,023
4,673
19,881
7,882
Landlord incentive reimbursement
—
—
(3,509
)
—
EBITDA attributable to redeemable noncontrolling interest
319
—
736
—
EBITDA attributable to noncontrolling interest
—
(5
)
230
(5
)
(Gain) loss on disposal of property and equipment
(29
)
39
(11
)
(599
)
Cash paid for income taxes
2,347
4,018
5,929
11,456
Deferred income taxes
(40
)
62
(169
)
(3,151
)
Income tax (expense) benefit
530
(4,080
)
1,038
(8,305
)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(1,219
)
4,708
16,261
22,296
(Increase) decrease in prepaid expenses and other current assets, operating leases right of use asset and other assets
(3,902
)
1,069
(7,199
)
(183
)
Increase (decrease) in accounts payable, accrued expenses and other liabilities
14,993
(10,691
)
26,460
4,725
Cash Flows From Operating Activities
$
22,026
$
15,236
$
69,117
$
78,142
(1)
Consolidated EBITDA, net interest expense, and free cash flow are defined on page 2.
(2)
Capital expenditures are not part of the consolidated statement of operations.
Christopher T. Young Chief Financial Officer and Treasurer Entravision Communications Corporation 310-447-3870
Reported net sales of $448 million, with gross margin expanding 400 basis points
Operating income of $32 million; adjusted operating income grew 8% to $46 million
EPS of $0.15; adjusted EPS of $0.24, at the high end of the Company’s outlook
Net operating cash flow improved $80 million year to date; maintains full year 2023 free cash flow outlook of at least $110 million
LAKE ZURICH, Ill.–(BUSINESS WIRE)– ACCO Brands Corporation (NYSE: ACCO) today reported financial results for the third quarter and nine months ended September 30, 2023.
“We are pleased with our overall performance and delivered significant gross margin improvement in the third quarter. Gross margins expanded 400 basis points year over year. This improvement reflects the continued recovery of margin from our pricing actions that lagged the pace of inflation last year, as well as cost savings from our restructuring and footprint rationalization efforts. However, macroeconomic weakness, with prolonged softer global demand for technology accessories, and a stronger U.S. dollar led to lower than expected sales in the quarter. Our updated full year sales outlook now reflects a continuing softer demand environment. We remain confident our margin recovery and cost mitigation efforts will drive operating income growth and improved cash flow,” said Tom Tedford, President and Chief Executive Officer of ACCO Brands.
Mr. Tedford concluded, “With our strong cash flow we have reduced debt, and lowered our leverage ratio, positioning us well for the future. We are evaluating ways to further optimize our cost structure and simplify our operations to better leverage our global scale. In addition, we are focused on accelerating our new product development and innovation, as this is a critical component for delivering organic revenue growth over the long term. I am confident that these initiatives, along with our geographically diverse portfolio of leading brands and talented employees, will enable us to further strengthen the company going forward. We are committed to expanding our margin profile and using our strong cash flow to support our quarterly dividend and reduce debt.”
Third Quarter Results
Net sales declined 7.7 percent to $448.0 million from $485.6 million in 2022. Comparable sales fell 9.9 percent, as favorable foreign exchange increased sales by $10.5 million, or 2.2 percent. Both reported and comparable sales declines reflect softer demand due to a weaker macroeconomic environment which has also led to lower global technology spending, and the stabilization of return to office trends.
Operating income was $32.2 million versus an operating loss of $63.0 million in 2022. In 2022, the operating loss was due to a non-cash goodwill impairment charge of $98.7 million related to the North America segment. In 2023, we recognized restructuring charges in EMEA of $3.0 million related to our continued footprint rationalization program. Adjusted operating income increased 7.5 percent to $46.0 million, from $42.8 million in the prior year. This increase reflects recovery of gross margin from the effect of cumulative global price increases and cost reduction actions. This was partially offset by negative fixed cost leverage, and higher SG&A expense primarily due to an increase in incentive compensation compared to the prior year.
The Company reported net income of $14.9 million, or $0.15 per share, compared with a prior year net loss of $68.7 million, or ($0.73) per share. The increase in reported net income was primarily due to the non-repeat of a goodwill impairment charge, partially offset by higher restructuring and income tax expense in the current year. Adjusted net income was $23.1 million, or $0.24 per share, compared with $24.1 million, or $0.25 per share in 2022. Reported and adjusted net income reflects higher interest and non-operating pension expenses.
Business Segment Results
ACCO Brands North America – Third quarter segment net sales of $218.9 million decreased 14.9 percent versus the prior year. Adverse foreign exchange reduced sales by 0.3 percent. Comparable sales of $219.6 million were down 14.6 percent. Both decreases reflect softer demand due to a weaker macroeconomic environment, which has caused lower volumes for technology accessories and certain office products, as well as tight inventory management by retail customers. This more than offset the effect of cumulative pricing actions.
Third quarter operating income in North America was $19.9 million versus an operating loss of $78.4 million a year earlier. The operating loss in 2022 was due to a $98.7 million non-cash goodwill impairment charge. Adjusted operating income was $25.5 million compared to $25.8 million a year ago. The benefit of pricing and cost savings actions was more than offset by the impact of lower sales, negative fixed cost leverage and higher incentive compensation.
ACCO Brands EMEA – Third quarter segment net sales of $126.6 million decreased 2.8 percent versus the prior year. Favorable foreign exchange increased sales by 5.4 percent. Comparable sales of $119.6 million decreased 8.2 percent versus the prior-year period. Both reported and comparable sales declines reflect reduced demand for technology accessories and lower overall demand in the region. This more than offset the effect of cumulative pricing actions.
Third quarter operating income in EMEA was $6.9 million compared to $4.9 million a year earlier, and adjusted operating income was $13.6 million compared to $7.4 million a year ago. In 2023, operating income includes a restructuring charge of $3.0 million related to our footprint rationalization program. The increases in both reported operating income and adjusted operating income reflect recovery of gross margins from price increases and cost savings actions, more than offsetting negative fixed cost leverage and higher incentive compensation.
ACCO Brands International – Thirdquarter segment sales of $102.5 million increased 4.5 percent versus the prior year. Favorable foreign exchange increased sales by 4.3 percent. Comparable sales of $98.3 million increased 0.2 percent versus the year-ago period. Both sales increases reflect stronger pricing and volume growth in Latin America, more than offsetting the impact of weaker economic conditions in Australia and Asia.
Third quarter operating income in the International segment was $16.4 million versus $17.3 million a year earlier. Adjusted operating income was $17.9 million compared to $19.2 million a year ago. The decline in both reflects increased spending to support go-to-market strategies and a favorable reduction of our bad debt reserve during the prior year, which more than offset pricing and cost savings actions.
Nine Month Results
Net sales decreased 7.2 percent to $1,344.2 million from $1,448.2 million in 2022. Adverse foreign exchange reduced sales by $0.9 million, or 0.1 percent. Comparable sales decreased 7.1 percent. Both reported and comparable sales declines reflect lower sales of technology accessories and softer demand in North America and EMEA due to the challenging macroeconomic environment, as well as tight inventory management by our customers. These more than offset the benefit of price increases across all segments, and volume growth in the International segment.
Operating income of $97.5 million compares to an operating loss of $0.8 million in 2022. The operating loss in 2022 was primarily due to a non-cash goodwill impairment charge of $98.7 million, partially offset by the change in value of the contingent consideration. In 2023, we recorded $6.3 million of restructuring charges, largely related to our footprint rationalization program. Adjusted operating income of $136.5 million increased from $123.5 million last year. Both reported and adjusted operating income increases reflect the benefit of global price increases and cost reduction initiatives, partially offset by negative fixed cost leverage and higher SG&A expense primarily due to increased incentive compensation.
Net income was $37.6 million, or $0.39 per share, compared with a net loss of $32.0 million, or ($0.33) per share, in 2022. The increase in reported net income was primarily due to the non-repeat of a goodwill impairment charge, partially offset by higher restructuring and income tax expense in the current year. Adjusted net income was $68.1 million, compared with $70.5 million in 2022, and adjusted earnings per share were $0.70 compared with $0.73 in 2022. Reported and adjusted net income reflect higher interest and non-operating pension expenses.
Capital Allocation and Dividend
Year to date, the Company significantly improved its operating cash flow to $70.7 million versus a cash outflow of $9.6 million in the prior year, driven primarily by improved working capital management. Adjusted free cash flow improved by $75.2 million and was an inflow of $63.2 million versus an outflow of $12.0 million a year earlier. Adjusted free cash flow in 2022 excludes the contingent earnout payment. At the end of the third quarter of 2023, our consolidated leverage ratio was 3.8x.
On October 27, 2023, ACCO Brands announced that its board of directors declared a regular quarterly cash dividend of $0.075 per share. The dividend will be paid on December 6, 2023, to stockholders of record at the close of business on November 15, 2023.
Updated Full Year 2023 Outlook
Reported sales for 2023 are now expected to be down 6 percent to 7 percent. The full year adjusted EPS outlook is now expected to be in the range of $1.03 to $1.07. Low double-digit growth in adjusted operating income is expected to be mostly offset by higher interest and non-cash, non-operating pension expenses. The update reflects the expectation of continued soft demand due to economic uncertainty and a stronger U.S. dollar. The Company is maintaining its 2023 free cash flow outlook to at least $110 million and now expects to end the year with a consolidated leverage ratio of approximately 3.5x.
Webcast
At 8:30 a.m. ET on November 3, 2023, ACCO Brands Corporation will host a conference call to discuss the Company’s third quarter 2023 results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay following the event.
About ACCO Brands Corporation
ACCO Brands, the Home of Great Brands Built by Great People, designs, manufactures and markets consumer and end-user products that help people work, learn, play and thrive. Our widely recognized brands include AT-A-GLANCE®, Five Star®, Kensington®, Leitz®, Mead®, PowerA®, Swingline®, Tilibra® and many others. More information about ACCO Brands Corporation (NYSE: ACCO) can be found at www.accobrands.com.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this earnings release to aid investors in understanding the Company’s performance. Each non-GAAP financial measure is defined and reconciled to its most directly comparable GAAP financial measure in the “About Non-GAAP Financial Measures” section of this earnings release.
Forward-Looking Statements
Statements contained herein, other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, strategies, business operations and similar matters, results of operations, liquidity and financial condition, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the Company’s securities.
Our outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding the impact of inflation and global geopolitical and economic uncertainties, fluctuations in foreign currency exchange rates and acquisitions; and the other factors described below.
Among the factors that could cause our actual results to differ materially from our forward-looking statements are: our ability to successfully execute our restructuring plans and realize the benefits of our productivity initiatives; our ability to obtain additional price increases and realize longer-term cost reductions; the ongoing impact of the COVID-19 pandemic; a relatively limited number of large customers account for a significant percentage of our sales; issues that influence customer and consumer discretionary spending during periods of economic uncertainty or weakness; risks associated with foreign currency exchange rate fluctuations; challenges related to the highly competitive business environment in which we operate; our ability to develop and market innovative products that meet consumer demands and to expand into new and adjacent product categories that are experiencing higher growth rates; our ability to successfully expand our business in emerging markets and the exposure to greater financial, operational, regulatory, compliance and other risks in such markets; the continued decline in the use of certain of our products; risks associated with seasonality; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions, changes in government regulations and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; our ability to secure, protect and maintain our intellectual property rights, and our ability to license rights from major gaming console makers and video game publishers to support our gaming accessories business; continued disruptions in the global supply chain; risks associated with inflation and other changes in the cost or availability of raw materials, transportation, labor, and other necessary supplies and services and the cost of finished goods; risks associated with outsourcing production of certain of our products, information technology systems and other administrative functions; the failure, inadequacy or interruption of our information technology systems or its supporting infrastructure; risks associated with a cybersecurity incident or information security breach, including that related to a disclosure of personally identifiable information; our ability to grow profitably through acquisitions; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including planned synergies; risks associated with our indebtedness, including limitations imposed by restrictive covenants, our debt service obligations, and our ability to comply with financial ratios and tests; a change in or discontinuance of our stock repurchase program or the payment of dividends; product liability claims, recalls or regulatory actions; the impact of litigation or other legal proceedings; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements, the costs of compliance and the impact of changes in such laws; our ability to attract and retain qualified personnel; the volatility of our stock price; risks associated with circumstances outside our control, including those caused by public health crises, such as the occurrence of contagious diseases, severe weather events, war, terrorism and other geopolitical incidents; and other risks and uncertainties described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and in other reports we file with the Securities and Exchange Commission.
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2023
December 31, 2022
(in millions)
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
73.7
$
62.2
Accounts receivable, net
351.7
384.1
Inventories
368.5
395.2
Other current assets
41.1
40.8
Total current assets
835.0
882.3
Total property, plant and equipment
585.7
589.2
Less: accumulated depreciation
(417.5
)
(404.1
)
Property, plant and equipment, net
168.2
185.1
Right of use asset, leases
86.4
88.8
Deferred income taxes
92.5
99.7
Goodwill
664.8
671.5
Identifiable intangibles, net
814.4
847.0
Other non-current assets
22.4
20.3
Total assets
$
2,683.7
$
2,794.7
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable
$
2.9
$
10.3
Current portion of long-term debt
67.2
49.7
Accounts payable
173.0
239.5
Accrued compensation
47.1
38.3
Accrued customer program liabilities
97.0
103.3
Lease liabilities
19.2
21.2
Other current liabilities
112.5
126.7
Total current liabilities
518.9
589.0
Long-term debt, net
892.2
936.5
Long-term lease liabilities
73.9
75.2
Deferred income taxes
134.0
144.1
Pension and post-retirement benefit obligations
140.3
155.5
Other non-current liabilities
86.4
84.3
Total liabilities
1,845.7
1,984.6
Stockholders’ equity:
Common stock
1.0
1.0
Treasury stock
(45.1
)
(43.4
)
Paid-in capital
1,908.5
1,897.2
Accumulated other comprehensive loss
(537.5
)
(540.3
)
Accumulated deficit
(488.9
)
(504.4
)
Total stockholders’ equity
838.0
810.1
Total liabilities and stockholders’ equity
$
2,683.7
$
2,794.7
ACCO Brands Corporation and Subsidiaries
Consolidated Statements of Income (Loss) (Unaudited)
(In millions, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
% Change
2023
2022
% Change
Net sales
$
448.0
$
485.6
(7.7
)%
$
1,344.2
$
1,448.2
(7.2
)%
Cost of products sold
303.2
348.2
(12.9
)%
915.9
1,041.2
(12.0
)%
Gross profit
144.8
137.4
5.4
%
428.3
407.0
5.2
%
Operating costs and expenses:
Selling, general and administrative expenses
98.8
93.9
5.2
%
291.8
284.3
2.6
%
Amortization of intangibles
10.8
9.9
9.1
%
32.7
31.5
3.8
%
Restructuring charges
3.0
0.1
NM
6.3
2.3
NM
Goodwill impairment
—
98.7
NM
—
98.7
NM
Change in fair value of contingent consideration
—
(2.2
)
NM
—
(9.0
)
NM
Total operating costs and expenses
112.6
200.4
(43.8
)%
330.8
407.8
(18.9
)%
Operating income (loss)
32.2
(63.0
)
NM
97.5
(0.8
)
NM
Non-operating expense (income):
Interest expense
15.6
12.1
28.9
%
45.0
32.6
38.0
%
Interest income
(1.6
)
(2.6
)
(38.5
)%
(6.2
)
(6.2
)
NM
Non-operating pension expense (income)
0.2
(0.5
)
NM
0.5
(3.2
)
NM
Other income, net
(3.6
)
(7.4
)
(51.4
)%
(2.1
)
(10.2
)
(79.4
)%
Income (loss) before income tax
21.6
(64.6
)
NM
60.3
(13.8
)
NM
Income tax expense
6.7
4.1
63.4
%
22.7
18.2
24.7
%
Net income (loss)
$
14.9
$
(68.7
)
NM
$
37.6
$
(32.0
)
NM
Per share:
Basic income (loss) per share
$
0.16
$
(0.73
)
NM
$
0.40
$
(0.33
)
NM
Diluted income (loss) per share
$
0.15
$
(0.73
)
NM
$
0.39
$
(0.33
)
NM
Weighted average number of shares outstanding:
Basic
95.4
94.5
95.2
95.6
Diluted
96.7
94.5
96.8
95.6
Cash dividends declared per common share
$
0.075
$
0.075
$
0.225
$
0.225
Statistics (as a % of Net sales, except Income tax rate)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Gross profit (Net sales, less Cost of products sold)
32.3
%
28.3
%
31.9
%
28.1
%
Selling, general and administrative expenses
22.1
%
19.3
%
21.7
%
19.6
%
Operating income (loss)
7.2
%
(13.0
)%
7.3
%
(0.1
)%
Income (loss) before income tax
4.8
%
(13.3
)%
4.5
%
(1.0
)%
Net income (loss)
3.3
%
(14.1
)%
2.8
%
(2.2
)%
Income tax rate
31.0
%
(6.3
)%
37.6
%
(131.9
)%
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,
(in millions)
2023
2022
Operating activities
Net income (loss)
$
37.6
$
(32.0
)
Payments of contingent consideration
—
(9.2
)
Loss on disposal of assets
(0.3
)
(0.1
)
Change in fair value of contingent liability
—
(9.0
)
Depreciation
25.2
28.6
Amortization of debt issuance costs
2.3
2.0
Amortization of intangibles
32.7
31.5
Stock-based compensation
10.4
7.8
Non-cash charge for goodwill impairment
—
98.7
Changes in operating assets and liabilities:
Accounts receivable
30.9
48.8
Inventories
35.5
(20.9
)
Other assets
(5.4
)
(20.1
)
Accounts payable
(72.8
)
(80.8
)
Accrued expenses and other liabilities
(17.8
)
(47.2
)
Accrued income taxes
(7.6
)
(7.7
)
Net cash provided (used) by operating activities
70.7
(9.6
)
Investing activities
Additions to property, plant and equipment
(9.7
)
(11.8
)
Proceeds from the disposition of assets
2.2
0.2
Net cash used by investing activities
(7.5
)
(11.6
)
Financing activities
Proceeds from long-term borrowings
121.9
218.0
Repayments of long-term debt
(145.4
)
(95.2
)
Repayments of notes payable, net
(7.3
)
(7.6
)
Dividends paid
(21.4
)
(21.5
)
Payments of contingent consideration
—
(17.8
)
Repurchases of common stock
—
(19.4
)
Payments related to tax withholding for stock-based compensation
(1.7
)
(2.5
)
Proceeds from the exercise of stock options
—
4.3
Net cash (used) provided by financing activities
(53.9
)
58.3
Effect of foreign exchange rate changes on cash and cash equivalents
2.2
(0.3
)
Net increase in cash and cash equivalents
11.5
36.8
Cash and cash equivalents
Beginning of the period
62.2
41.2
End of the period
$
73.7
$
78.0
About Non-GAAP Financial Measures
We explain below how we calculate each of our non-GAAP financial measures. This is followed by a reconciliation of our current period and historical non-GAAP financial measures to the most directly comparable GAAP financial measures.
We use our non-GAAP financial measures both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe our non-GAAP financial measures provide management and investors with a more complete understanding of our underlying operational results and trends, facilitate meaningful period-to-period comparisons and enhance an overall understanding of our past and future financial performance.
Our non-GAAP financial measures exclude certain items that may have a material impact upon our reported financial results such as restructuring charges, transaction and integration expenses associated with material acquisitions, the impact of foreign currency exchange rate fluctuations and acquisitions, unusual tax items, goodwill impairment charges, and other non-recurring items that we consider to be outside of our core operations. These measures should not be considered in isolation or as a substitute for, or superior to, the directly comparable GAAP financial measures and should be read in connection with the Company’s financial statements presented in accordance with GAAP.
Our non-GAAP financial measures include the following:
Comparable Sales: Represents net sales excluding the impact of material acquisitions, if any, with current-period foreign operation sales translated at prior-year currency rates. We believe comparable sales are useful to investors and management because they reflect underlying sales and sales trends without the effect of material acquisitions and fluctuations in foreign exchange rates and facilitate meaningful period-to-period comparisons. We sometimes refer to comparable sales as comparable net sales.
Adjusted Selling, General and Administrative (SG&A) Expenses: Represents selling, general and administrative expenses excluding transaction and integration expenses related to material acquisitions. We believe adjusted SG&A expenses are useful to investors and management because they reflect underlying SG&A expenses without the effect of expenses related to acquiring and integrating acquisitions that we consider to be outside our core operations and facilitate meaningful period-to-period comparisons.
Adjusted Operating Income (Loss)/Adjusted Income (Loss) Before Taxes/Adjusted Net Income (Loss)/Adjusted Net Income (Loss) Per Diluted Share:Represents operating income (loss), income (loss) before taxes, net income (loss), and net income per diluted share excluding restructuring and goodwill impairment charges, the amortization of intangibles, the amortization of the step-up in value of inventory, the change in fair value of contingent consideration, transaction and integration expenses associated with material acquisitions, non-recurring items in interest expense or other income/expense such as expenses associated with debt refinancing, a bond redemption, or a pension curtailment, and other non-recurring items as well as all unusual and discrete income tax adjustments, including income tax related to the foregoing. We believe these adjusted non-GAAP financial measures are useful to investors and management because they reflect our underlying operating performance before items that we consider to be outside our core operations and facilitate meaningful period-to-period comparisons. Senior management’s incentive compensation is derived, in part, using adjusted operating income and adjusted net income per diluted share, which is derived from adjusted net income. We sometimes refer to adjusted net income per diluted share as adjusted earnings per share or adjusted EPS.
Adjusted Income Tax Expense/Rate:Represents income tax expense/rate excluding the tax effect of the items that have been excluded from adjusted income before taxes, unusual income tax items such as the impact of tax audits and changes in laws, significant reserves for cash repatriation, excess tax benefits/losses, and other discrete tax items. We believe our adjusted income tax expense/rate is useful to investors because it reflects our baseline income tax expense/rate before benefits/losses and other discrete items that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons.
Adjusted EBITDA:Represents net income excluding the effects of depreciation, stock-based compensation expense, amortization of intangibles, the change in fair value of contingent consideration, interest expense, net, other (income) expense, net, and income tax expense, the amortization of the step-up in value of inventory, transaction and integration expenses associated with material acquisitions, restructuring and goodwill impairment charges, non-recurring items in interest expense or other income/expense such as expenses associated with debt refinancing, a bond redemption, or a pension curtailment and other non-recurring items. We believe adjusted EBITDA is useful to investors because it reflects our underlying cash profitability and adjusts for certain non-cash charges, and items that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons. In addition, this calculation of adjusted EBITDA is used in our loan agreement to calculate our leverage ratio covenant.
Free Cash Flow/Adjusted Free Cash Flow:Free cash flow represents cash flow from operating activities less cash used for additions to property, plant and equipment. Adjusted free cash flow represents free cash flow, less cash payments made for contingent earnouts, plus cash proceeds from the disposition of assets. We believe free cash flow and adjusted free cash flow are useful to investors because they measure our available cash flow for paying dividends, funding strategic material acquisitions, reducing debt, and repurchasing shares.
Consolidated Leverage Ratio:Represents balance sheet debt, plus debt origination costs and less any cash and cash equivalents divided by adjusted EBITDA. We believe that consolidated leverage ratio is useful to investors since the company has the ability to, and may decide to use, a portion of its cash and cash equivalents to retire debt.
We also provide forward-looking non-GAAP comparable sales, adjusted earnings per share, free cash flow, adjusted free cash flow, adjusted EBITDA, and adjusted tax rate, and historical and forward-looking consolidated leverage ratio. We do not provide a reconciliation of these forward-looking and historical non-GAAP measures to GAAP because the GAAP financial measure is not currently available and management cannot reliably predict all the necessary components of such non-GAAP measures without unreasonable effort or expense due to the inherent difficulty of forecasting and quantifying certain amounts that are necessary for such a reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, the variability of our tax rate and the impact of foreign currency fluctuation and material acquisitions, and other charges reflected in our historical results. The probable significance of each of these items is high and, based on historical experience, could be material.
ACCO Brands Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share data)
The following tables set forth a reconciliation of certain Consolidated Statements of Income (Loss) information reported in accordance with GAAP to Adjusted Non-GAAP Information for the three months ended September 30, 2023 and 2022.
Three Months Ended September 30, 2023
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
32.2
7.2
%
$
21.6
4.8
%
$
6.7
31.0
%
$
14.9
3.3
%
Reported GAAP diluted income per share (EPS)
$
0.15
Restructuring charges
3.0
3.0
0.7
2.3
Amortization of intangibles
10.8
10.8
2.8
8.0
Gain on sale of property
—
(1.5
)
(0.5
)
(1.0
)
Operating tax gains
(D)
—
(1.3
)
(0.4
)
(0.9
)
Other discrete tax items
—
—
0.2
(0.2
)
Adjusted Non-GAAP
$
46.0
10.3
%
$
32.6
7.3
%
$
9.5
29.1
%
$
23.1
5.2
%
Adjusted net income per diluted share (Adjusted EPS)
$
0.24
Three Months Ended September 30, 2022
SG&A
% of Sales
Operating(Loss) Income
% of Sales
(Loss) Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net (Loss) Income
% of Sales
Reported GAAP
$
$
93.9
19.3
%
$
(63.0
)
(13.0
)%
$
(64.6
)
(13.3
)%
$
4.1
(6.3
)%
$
(68.7
)
(14.1
)%
Reported GAAP diluted loss per share (EPS)
$
(0.73
)
Release of charge for Russia business
0.7
(0.7
)
(0.7
)
(0.1
)
(0.6
)
Restructuring charges
—
0.1
0.1
0.1
—
Goodwill impairment charge
—
98.7
98.7
—
98.7
Amortization of intangibles
—
9.9
9.9
2.6
7.3
Change in fair value of contingent consideration
(C)
—
(2.2
)
(2.2
)
(0.6
)
(1.6
)
Operating tax gains
(D)
—
—
(7.3
)
(2.5
)
(4.8
)
Other discrete tax items
—
—
—
6.2
(6.2
)
Adjusted Non-GAAP
$
94.6
19.5
%
$
42.8
8.8
%
$
33.9
7.0
%
$
9.8
29.0
%
$
24.1
5.0
%
Adjusted net income per diluted share (Adjusted EPS)
$
0.25
See “Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted EBITDA (Unaudited)” for further information regarding adjusted items.
ACCO Brands Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share data)
The following tables set forth a reconciliation of certain Consolidated Statements of Income (Loss) information reported in accordance with GAAP to Adjusted Non-GAAP Information for the nine months ended September 30, 2023 and 2022.
Nine Months Ended September 30, 2023
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
97.5
7.3
%
$
60.3
4.5
%
$
22.7
37.6
%
$
37.6
2.8
%
Reported GAAP diluted income per share (EPS)
$
0.39
Restructuring charges
6.3
6.3
1.6
4.7
Amortization of intangibles
32.7
32.7
8.6
24.1
Other asset write-off
(B)
—
1.1
0.3
0.8
Gain on sale of property
—
(1.5
)
(0.5
)
(1.0
)
Operating tax gains
(D)
—
(1.3
)
(0.4
)
(0.9
)
Other discrete tax items
—
—
(2.8
)
2.8
Adjusted Non-GAAP
$
136.5
10.2
%
$
97.6
7.3
%
$
29.5
30.2
%
$
68.1
5.1
%
Adjusted net income per diluted share (Adjusted EPS)
$
0.70
Nine Months Ended September 30, 2022
SG&A
% of Sales
Operating (Loss) Income
% of Sales
(Loss) Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net (Loss) Income
% of Sales
Reported GAAP
$
284.3
19.6
%
$
(0.8
)
(0.1
)%
$
(13.8
)
(1.0
)%
$
18.2
(131.9
)%
$
(32.0
)
(2.2
)%
Reported GAAP diluted loss per share (EPS)
$
(0.33
)
Charge for Russia business
(0.8
)
0.8
0.8
0.2
0.6
Restructuring charges
—
2.3
2.3
0.6
1.7
Goodwill impairment charge
—
98.7
98.7
—
98.7
Amortization of intangibles
—
31.5
31.5
8.3
23.2
Change in fair value of contingent consideration
(C)
—
(9.0
)
(9.0
)
(2.3
)
(6.7
)
Operating tax gains
(D)
—
—
(11.2
)
(3.8
)
(7.4
)
Other discrete tax items
—
—
—
7.6
(7.6
)
Adjusted Non-GAAP
$
283.5
19.6
%
$
123.5
8.5
%
$
99.3
6.9
%
$
28.8
29.0
%
$
70.5
4.9
%
Adjusted net income per diluted share (Adjusted EPS)
$
0.73
See “Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted EBITDA (Unaudited)” for further information regarding adjusted items.
ACCO Brands Corporation and Subsidiaries
Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited)
(In millions)
The following table sets forth a reconciliation of net income (loss) reported in accordance with GAAP to Adjusted EBITDA.
Three months ended September 30,
Nine months ended September 30,
2023
2022
% Change
2023
2022
% Change
Net income (loss)
$
14.9
$
(68.7
)
NM
$
37.6
$
(32.0
)
NM
Stock-based compensation
1.5
0.6
NM
10.4
7.8
33.3
%
Depreciation
7.9
9.0
(12.2
)%
25.2
28.6
(11.9
)%
(Release) charge for Russia business
—
(0.7
)
NM
—
0.8
NM
Amortization of intangibles
10.8
9.9
9.1
%
32.7
31.5
3.8
%
Restructuring charges
3.0
0.1
NM
6.3
2.3
NM
Goodwill impairment charge
—
98.7
NM
—
98.7
NM
Change in fair value of contingent consideration
(C)
—
(2.2
)
NM
—
(9.0
)
NM
Interest expense, net
14.0
9.5
47.4
%
38.8
26.4
47.0
%
Other income, net
(3.6
)
(7.4
)
(51.4
)%
(2.1
)
(10.2
)
(79.4
)%
Income tax expense
6.7
4.1
63.4
%
22.7
18.2
24.7
%
Adjusted EBITDA (non-GAAP)
$
55.2
$
52.9
4.3
%
$
171.6
$
163.1
5.2
%
Adjusted EBITDA as a % of Net Sales
12.3
%
10.9
%
12.8
%
11.3
%
See “Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted EBITDA (Unaudited)” for further information regarding adjusted items.
Reconciliation of Net Cash (Used) Provided by Operating Activities to Adjusted Free Cash Flow (Unaudited)
(In millions)
The following table sets forth a reconciliation of net cash (used) provided by operating activities reported in accordance with GAAP to Adjusted Free Cash Flow.
Three months ended September 30, 2023
Three months ended September 30, 2022
For the nine months ended September 30, 2023
For the nine months ended September 30, 2022
Net cash provided (used) by operating activities
$
110.0
$
88.3
$
70.7
$
(9.6
)
Net (used) provided by:
Additions to property, plant and equipment
(3.6
)
(4.8
)
(9.7
)
(11.8
)
Proceeds from the disposition of assets
2.2
—
2.2
0.2
Payments of contingent consideration
—
—
—
9.2
Adjusted Free Cash Flow (non-GAAP)
$
108.6
$
83.5
$
63.2
$
(12.0
)
Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted EBITDA (Unaudited)
A. The income tax impact of the non-GAAP adjustments and other discrete tax items.
B. Represents the write off of assets related to a capital project.
C. Represents income from the change in fair value of the contingent consideration for the PowerA acquisition.
D. Represents gains related to the release of reserves for certain operating taxes.
ACCO Brands Corporation and Subsidiaries
Supplemental Business Segment Information and Reconciliation (Unaudited)
(In millions)
2023
2022
Changes
Adjusted
Adjusted
Reported
Adjusted
Operating
Reported
Adjusted
Operating
Adjusted
Adjusted
Operating
Operating
Income
Operating
Operating
Income
Operating
Operating
Reported
Income
Adjusted
Income
(Loss)
Reported
Income
Adjusted
Income
(Loss)
Net Sales
Net Sales
Income
Income
Margin
Net Sales
(Loss)
Items
(Loss)
Margin
Net Sales
(Loss)
Items
(Loss)
Margin
$
%
(Loss) $
(Loss) %
Points
Q1:
ACCO Brands North America
$
176.7
$
5.2
$
5.7
$
10.9
6.2
%
$
208.5
$
13.9
$
5.9
$
19.8
9.5
%
$
(31.8
)
(15.3
)%
$
(8.9
)
(44.9
)%
(330
)
ACCO Brands EMEA
135.8
7.8
5.8
13.6
10.0
%
156.1
5.6
3.5
9.1
5.8
%
(20.3
)
(13.0
)%
4.5
49.5
%
420
ACCO Brands International
90.1
9.0
2.7
11.7
13.0
%
77.0
4.2
2.0
6.2
8.1
%
13.1
17.0
%
5.5
88.7
%
490
Corporate
—
(11.9
)
—
(11.9
)
—
(16.9
)
4.4
(12.5
)
—
0.6
Total
$
402.6
$
10.1
$
14.2
$
24.3
6.0
%
$
441.6
$
6.8
$
15.8
$
22.6
5.1
%
$
(39.0
)
(8.8
)%
$
1.7
7.5
%
90
Q2:
ACCO Brands North America
$
292.6
$
55.1
$
5.6
$
60.7
20.7
%
$
306.6
$
50.7
$
6.5
$
57.2
18.7
%
$
(14.0
)
(4.6
)%
$
3.5
6.1
%
200
ACCO Brands EMEA
125.7
5.7
3.8
9.5
7.6
%
137.9
(1.5
)
3.6
2.1
1.5
%
(12.2
)
(8.8
)%
7.4
NM
610
ACCO Brands International
75.3
6.7
1.6
8.3
11.0
%
76.5
6.3
2.3
8.6
11.2
%
(1.2
)
(1.6
)%
(0.3
)
(3.5
)%
(20
)
Corporate
—
(12.3
)
—
(12.3
)
—
(0.1
)
(9.7
)
(9.8
)
—
(2.5
)
Total
$
493.6
$
55.2
$
11.0
$
66.2
13.4
%
$
521.0
$
55.4
$
2.7
$
58.1
11.2
%
$
(27.4
)
(5.3
)%
$
8.1
13.9
%
220
Q3:
ACCO Brands North America
$
218.9
$
19.9
$
5.6
$
25.5
11.6
%
$
257.2
$
(78.4
)
$
104.2
$
25.8
10.0
%
$
(38.3
)
(14.9
)%
$
(0.3
)
(1.2
)%
160
ACCO Brands EMEA
126.6
6.9
6.7
13.6
10.7
%
130.3
4.9
2.5
7.4
5.7
%
(3.7
)
(2.8
)%
6.2
83.8
%
500
ACCO Brands International
102.5
16.4
1.5
17.9
17.5
%
98.1
17.3
1.9
19.2
19.6
%
4.4
4.5
%
(1.3
)
(6.8
)%
(210
)
Corporate
—
(11.0
)
—
(11.0
)
—
(6.8
)
(2.8
)
(9.6
)
—
(1.4
)
Total
$
448.0
$
32.2
$
13.8
$
46.0
10.3
%
$
485.6
$
(63.0
)
$
105.8
$
42.8
8.8
%
$
(37.6
)
(7.7
)%
$
3.2
7.5
%
150
Q4:
ACCO Brands North America
$
225.7
$
8.9
$
9.8
$
18.7
8.3
%
ACCO Brands EMEA
156.0
12.7
5.7
18.4
11.8
%
ACCO Brands International
117.7
22.7
1.6
24.3
20.6
%
Corporate
—
(8.7
)
(0.4
)
(9.1
)
Total
$
499.4
$
35.6
$
16.7
$
52.3
10.5
%
YTD:
ACCO Brands North America
$
688.2
$
80.2
$
16.9
$
97.1
14.1
%
$
998.0
$
(4.9
)
$
126.4
$
121.5
12.2
%
ACCO Brands EMEA
388.1
20.4
16.3
36.7
9.5
%
580.3
21.7
15.3
37.0
6.4
%
ACCO Brands International
267.9
32.1
5.8
37.9
14.1
%
369.3
50.5
7.8
58.3
15.8
%
Corporate
—
(35.2
)
—
(35.2
)
—
(32.5
)
(8.5
)
(41.0
)
Total
$
1,344.2
$
97.5
$
39.0
$
136.5
10.2
%
$
1,947.6
$
34.8
$
141.0
$
175.8
9.0
%
See “Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted EBITDA (Unaudited)” for further information regarding adjusted items.
ACCO Brands Corporation and Subsidiaries
Supplemental Net Sales Change Analysis (Unaudited)
% Change – Net Sales
$ Change – Net Sales (in millions)
GAAP
Non-GAAP
GAAP
Non-GAAP
Comparable
Comparable
Net Sales
Currency
Net Sales
Net Sales
Currency
Net Sales
Comparable
Change
Translation
Change (A)
Change
Translation
Change (A)
Net Sales
Q1 2023:
ACCO Brands North America
(15.3)%
(0.7)%
(14.6)%
$(31.8)
$(1.5)
$(30.3)
$178.2
ACCO Brands EMEA
(13.0)%
(5.7)%
(7.3)%
(20.3)
(9.0)
(11.3)
144.8
ACCO Brands International
17.0 %
(0.2)%
17.2 %
13.1
(0.2)
13.3
90.3
Total
(8.8)%
(2.4)%
(6.4)%
$(39.0)
$(10.6)
$(28.4)
$413.2
Q2 2023:
ACCO Brands North America
(4.6)%
(0.5)%
(4.1)%
$(14.0)
$(1.6)
$(12.4)
$294.2
ACCO Brands EMEA
(8.8)%
0.3 %
(9.1)%
(12.2)
0.4
(12.6)
125.3
ACCO Brands International
(1.6)%
0.7 %
(2.3)%
(1.2)
0.5
(1.7)
74.8
Total
(5.3)%
(0.2)%
(5.1)%
$(27.4)
$(0.8)
$(26.6)
$494.4
Q3 2023:
ACCO Brands North America
(14.9)%
(0.3)%
(14.6)%
$(38.3)
$(0.7)
$(37.6)
$219.6
ACCO Brands EMEA
(2.8)%
5.4 %
(8.2)%
(3.7)
7.0
(10.7)
119.6
ACCO Brands International
4.5 %
4.3 %
0.2 %
4.4
4.2
0.2
98.3
Total
(7.7)%
2.2 %
(9.9)%
$(37.6)
$10.5
$(48.1)
$437.5
2023 YTD:
ACCO Brands North America
(10.9)%
(0.5)%
(10.4)%
$(84.1)
$(3.8)
$(80.3)
$692.0
ACCO Brands EMEA
(8.5)%
(0.4)%
(8.1)%
(36.2)
(1.6)
(34.6)
389.7
ACCO Brands International
6.5 %
1.8 %
4.7 %
16.3
4.5
11.8
263.4
Total
(7.2)%
(0.1)%
(7.1)%
$(104.0)
$(0.9)
$(103.1)
$1,345.1
(A) Comparable sales represents net sales excluding material acquisitions, if any, and with current-period foreign operation sales translated at the prior-year currency rates.
Christopher McGinnis Investor Relations (847) 796-4320
Third Quarter 2023 Revenues of $274.6 Million Reflect 20.1 Percent Organic Growth Over Third Quarter 2022 Revenues of $228.6 Million
Third Quarter 2023 Revenues Reflect 22.0 Percent Organic Revenue Growth in Kratos Government Solutions Segment and 13.4 Percent Organic Revenue Growth in Kratos Unmanned Systems Segment
Third Quarter 2023 Consolidated Book to Bill Ratio of 1.0 to 1 and Last Twelve Months Ended October 1, 2023 Consolidated Book to Bill Ratio of 1.1 to 1
SAN DIEGO, Nov. 02, 2023 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a Technology Company in the Defense, National Security and Global Markets, today reported its third quarter 2023 financial results, including Revenues of $274.6 million, Operating Income of $12.2 million, Net Loss of $1.6 million, Adjusted EBITDA of $27.7 million and a consolidated book to bill ratio of 1.0 to 1.0.
Included in third quarter 2023 Net Loss and Operating Income is non-cash stock compensation expense of $6.4 million and Company-funded Research and Development (R&D) expense of $10.3 million, including significant ongoing development efforts in our Space and Satellite Communications business to develop our virtual, software-based OpenSpace command & control (C2), telemetry tracking & control (TT&C) and other ground system solutions. The third quarter 2023 Net Loss includes $4.6 million attributable to a non-controlling interest, which includes a charge of $4.2 million adjustment recorded to reflect the estimated increase in the value of the redeemable non-controlling interest to the estimated redemption amount by Kratos.
Kratos reported third quarter 2023 GAAP Net Loss of $1.6 million and a GAAP Net Loss per share of $0.01, compared to a GAAP Net Loss of $8.0 million and a GAAP Net Loss per share of $0.06 for the third quarter of 2022. Adjusted earnings per share (EPS) was $0.12 for the third quarter of 2023, compared to $0.08 for the third quarter of 2022.
Third quarter 2023 Revenues of $274.6 million increased $46.0 million, reflecting 20.1 percent organic growth, from third quarter 2022 Revenues of $228.6 million. Third quarter 2023 Revenues include organic Revenue growth of 22.0 percent in our Government Solutions Segment (KGS) and 13.4 percent organic Revenue growth in our Unmanned Systems Segment (KUS), respectively.
Third quarter 2023 Cash Flow Used from Operations was $0.1 million, reflecting the working capital requirements associated with the 6.9 percent sequential revenue growth of $17.7 million from the second quarter of 2023. Consolidated Days Sales Outstanding continued to improve from 120 in the second quarter of 2023 to 117 days in the third quarter of 2023. Free Cash Flow Used from Operations was $14.3 million after funding of $14.2 million of capital expenditures. Capital expenditures continue to remain elevated due primarily to the manufacture of the two production lots of Valkyries prior to contract award, to meet anticipated customer orders and requirements.
For the third quarter of 2023, KUS generated Revenues of $56.7 million, as compared to $50.0 million in the third quarter of 2022, primarily reflecting increased target drone related activity. KUS’s Operating Income was $2.6 million in the third quarter of 2023 compared to Operating Loss of $0.1 million in the third quarter of 2022.
KUS’s Adjusted EBITDA for the third quarter of 2023 was $5.4 million, compared to third quarter 2022 KUS Adjusted EBITDA of $2.1 million, reflecting a more favorable mix as well as the increased volume.
KUS’s book-to-bill ratio for the third quarter of 2023 was 0.5 to 1.0 and 1.1 to 1.0 for the last twelve months ended October 1, 2023, with bookings of $27.7 million for the three months ended October 1, 2023, and bookings of $244.8 million for the last twelve months ended October 1, 2023. Total backlog for KUS at the end of the third quarter of 2023 was $227.8 million compared to $256.7 million at the end of the second quarter of 2023.
For the third quarter of 2023, KGS Revenues of $217.9 million increased organically 22.0 percent from Revenues of $178.6 million in the third quarter of 2022. The increased Revenues includes organic revenue growth in our Space, Satellite and Cyber, Turbine Technologies, C5ISR, Microwave Electronics Products and Training Solutions businesses.
KGS reported operating income of $15.9 million in the third quarter of 2023 compared to $3.3 million in the third quarter of 2022, primarily reflecting a more favorable mix and increased revenue volume. Third quarter 2023 KGS Adjusted EBITDA was $22.3 million, compared to third quarter 2022 KGS Adjusted EBITDA of $17.9 million, primarily reflecting the more favorable mix and increased revenue.
Kratos’ Space, Satellite and Cyber business generated Revenues of $105.5 million in the third quarter of 2023 compared to $85.8 million in the third quarter of 2022, reflecting a 23.0 percent organic growth rate.
KGS reported a book-to-bill ratio of 1.2 to 1.0 for the third quarter of 2023, a book to bill ratio of 1.1 to 1.0 for the last twelve months ended October 1, 2023 and bookings of $254.6 million and $863.9 million for the three and last twelve months ended October 1, 2023, respectively. KGS includes Kratos’ Space, Satellite, Cyber and Training Solutions business, which reported a book to bill ratio of 1.4 to 1.0 for the third quarter of 2023 and a book to bill ratio of 1.2 to 1.0 for the last twelve months ended October 1, 2023. Bookings for Kratos’ Space, Satellite, Cyber and Training business for the three months and last twelve months ended October 1, 2023 were $153.6 million and $472.8 million, respectively. KGS’s total backlog at the end of the third quarter of 2023 was $937.3 million, as compared to $900.6 million at the end of the second quarter of 2023.
Kratos reported consolidated bookings of $282.3 million and a book-to-bill ratio of 1.0 to 1.0 for the third quarter of 2023, and consolidated bookings of $1.11 billion and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended October 1, 2023. Consolidated backlog was $1.17 billion on October 1, 2023 and $1.16 billion on June 25, 2023. Kratos’ bid and proposal pipeline was $10.3 billion at October 1, 2023, up from $10.0 billion at June 25, 2023. Backlog at October 1, 2023 included funded backlog of $850.9 million and unfunded backlog of $314.1 million.
Eric DeMarco, Kratos’ President and CEO, said, “Kratos continues to successfully execute our stated strategy of making targeted investments and being first to market, with relevant technology, products, systems and software, in mission critical, well-funded, high demand priority areas, which is reflected in our 20% third quarter organic growth rate. At Kratos, affordability is a technology, better is the enemy of good enough – ready to go today, and quantities have a quality all of its own, all of which are clearly being demonstrated geopolitically in multiple conflict areas.”
Mr. DeMarco continued, “Representative of the strength of Kratos’ strategy and our business, we have increased our full year 2023 revenue guidance and we are currently forecasting base case, which excludes potential tactical drone production orders, 2024 over 2023 revenue growth of 10%, with increased EBITDA. Additionally, based on recent large new program opportunities we are pursuing, we are now planning on certain additional investments in 2024, including in the tactical drone and satellite areas, in order to position the Company for potentially even greater growth in 2025 and beyond. Among the new opportunities we are pursuing, we are in discussions with a customer and hope to be under contract next year related to certain other Kratos tactical drone systems, including Thanatos and we are now in source selection on a significant new satellite opportunity with Kratos’ virtualized OpenSpace software system.”
Mr. DeMarco concluded, “Our primary operational challenge remains the obtaining, retaining, and related escalating cost of qualified individuals, including those willing and able to obtain a National Security clearance. As a result, though we expect continued future year over year profit margin expansion, including as noted with our Q3 results and affirmed Q4 EBITDA guidance, we will be cautious in our future EBITDA forecast. Also, as the industry and Kratos are currently operating under a Continuing Resolution Authorization, similar to previous years, we will wait to release our detailed fiscal 2024 business financial forecast in February 2024, when we report our fiscal 2023 results, as we should then have better budgetary and programmatic clarity.”
Financial Guidance
We are providing our initial 2023 fourth quarter financial guidance and increasing our full year 2023 Revenue and affirming our Adjusted EBITDA guidance today, which includes our current forecasted business mix, and our assumptions, including as related to: employee sourcing, hiring and retention; manufacturing, production and supply chain disruptions; parts shortages and related continued potential significant cost and price increases, including for employees, materials and components that are impacting the industry and Kratos. The range of our expected fourth quarter 2023 Revenues and Adjusted EBITDA includes assumptions of forecasted execution, including the number and estimated costs of qualified personnel expected to be obtained and retained to successfully execute on our programs and contracts, as well as expected contract awards. Our revised full year 2023 cash flow guidance reflects the ongoing impact of working capital requirements to fund revenue growth, including the increased estimated FY23 revenues, and the continued increase in inventory balances, as well as the shift of certain payment milestones primarily in our Training Solutions and C5ISR businesses.
Our fourth quarter and full year 2023 guidance ranges are as follows:
Current Guidance Range
$M
Q423
FY23
Revenues
$237 – $257
$1,000 – $1,020
R&D
$9 – $10
$40 – $42
Operating Income
$4 – $7
$25 – $28
Depreciation
$7 – $8
$27 – $28
Amortization
$2 – $3
$8 – $10
Stock Based Compensation
$6 – $7
$24 – $26
Adjusted EBITDA
$19 – $23
$85 – $89
Operating Cash Flow
$20 – $30
Capital Expenditures
$45 – $50
Free Cash Flow Use
$(20) – $(25)
Management will discuss the Company’s financial results, on a conference call beginning at 2:00 p.m. Pacific (5:00 p.m. Eastern) today. The call will be available at www.kratosdefense.com. Participants may register for the call using this Online Form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN that can be used to access the call. For those who cannot access the live broadcast, a replay will be available on Kratos’ website.
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) is a Technology Company that develops and fields transformative, affordable systems, products and solutions for United States National Security, our allies and global commercial enterprises. At Kratos, Affordability is a Technology, and Kratos is changing the way breakthrough technology is rapidly brought to market – at a low cost – with actual products, systems, and technologies rather than slide decks or renderings. Through proven commercial and venture capital backed approaches, including proactive, internally funded research and streamlined development processes, Kratos is focused on being First to Market with our solutions, well in advance of competition. Kratos is the recognized Technology Disruptor in our core market areas, including Space and Satellite Communications, Cyber Security and Warfare, Unmanned Systems, Rocket and Hypersonic Systems, Next-Generation Jet Engines and Propulsion Systems, Microwave Electronics, C5ISR and Virtual and Augmented Reality Training Systems. For more information, visit www.KratosDefense.com.
Notice RegardingForward-LookingStatements This news release contains certain forward-looking statements that involve risks and uncertainties, including, without limitation, express or implied statements concerning the Company’s expectations regarding its future financial performance, including the Company’s expectations for its fourth quarter and full year 2023 revenues, R&D, operating income (loss), depreciation, amortization, stock based compensation expense, and Adjusted EBITDA, and full year 2023 operating cash flow, capital expenditures and other investments, and free cash flow, the Company’s future growth trajectory and ability to achieve improved revenue mix and profit in certain of its business segments and the expected timing of such improved revenue mix and profit, including the Company’s ability to achieve sustained year over year increasing revenues, profitability and cash flow, the Company’s expectation of ramp on projects and that investments in its business, including Company funded R&D expenses and ongoing development efforts, will result in an increase in the Company’s market share and total addressable market and position the Company for significant future organic growth, profitability, cash flow and an increase in shareholder value, the Company’s bid and proposal pipeline and backlog, including the Company’s ability to timely execute on its backlog, demand for its products and services, including the Company’s alignment with today’s National Security requirements and the positioning of its C5ISR and other businesses, planned 2024 investments, including in the tactical drone and satellite areas, and the related potential for additional growth in 2025, ability to successfully compete and expected new customer awards, including the magnitude and timing of funding and the future opportunity associated with such awards, including in the target and tactical drone and satellite communication areas, performance of key contracts and programs, including the timing of production and demonstration related to certain of the Company’s contracts and product offerings, the impact of the Company’s restructuring efforts and cost reduction measures, including its ability to improve profitability and cash flow in certain business units as a result of these actions and to achieve financial leverage on fixed administrative costs, the ability of the Company’s advanced purchases of inventory to mitigate supply chain disruptions and the timing of converting these investments to cash through the sales process, benefits to be realized from the Company’s net operating loss carry forwards, the availability and timing of government funding for the Company’s offerings, including the strength of the future funding environment, the short-term delays that may occur as a result of Continuing Resolutions or delays in U.S. Department of Defense (DoD) budget approvals, timing of LRIP and full rate production related to the Company’s unmanned aerial target system offerings, as well as the level of recurring revenues expected to be generated by these programs once they achieve full rate production, market and industry developments, and the current estimated impact of COVID-19 and employee absenteeism, supply chain disruptions, availability of an experienced skilled workforce, inflation and increased costs, and delays in our financial projections, industry, business and operations, including projected growth. Such statements are only predictions, and the Company’s actual results may differ materially from the results expressed or implied by these statements. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Factors that may cause the Company’s results to differ include, but are not limited to: risks to our business and financial results related to the reductions and other spending constraints imposed on the U.S. Government and our other customers, including as a result of sequestration and extended continuing resolutions, the Federal budget deficit and Federal government shut-downs; risks of adverse regulatory action or litigation; risks associated with debt leverage and cost savings and cash flow improvements expected as a result of the refinancing of our Senior Notes; risks that our cost-cutting initiatives will not provide the anticipated benefits; risks that changes, cutbacks or delays in spending by the DoD may occur, which could cause delays or cancellations of key government contracts; risks of delays to or the cancellation of our projects as a result of protest actions submitted by our competitors; risks that changes may occur in Federal government (or other applicable) procurement laws, regulations, policies and budgets; risks of the availability of government funding for the Company’s products and services due to performance, cost growth, or other factors, changes in government and customer priorities and requirements (including cost-cutting initiatives, the potential deferral of awards, terminations or reduction of expenditures to respond to the priorities of Congress and the Administration, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011, as amended); risks that the unmanned aerial systems and unmanned ground sensor markets do not experience significant growth; risks that products we have developed or will develop will become programs of record; risks that we cannot expand our customer base or that our products do not achieve broad acceptance which could impact our ability to achieve our anticipated level of growth; risks of increases in the Federal government initiatives related to in-sourcing; risks related to security breaches, including cyber security attacks and threats or other significant disruptions of our information systems, facilities and infrastructures; risks related to our compliance with applicable contracting and procurement laws, regulations and standards; risks related to the new DoD Cybersecurity Maturity Model Certification; risks relating to the ongoing conflict in Ukraine and the Israeli-Palestinian military conflict; risks to our business in Israel; risks related to contract performance; risks related to failure of our products or services; risks associated with our subcontractors’ or suppliers’ failure to perform their contractual obligations, including the appearance of counterfeit or corrupt parts in our products; changes in the competitive environment (including as a result of bid protests); failure to successfully integrate acquired operations and compete in the marketplace, which could reduce revenues and profit margins; risks that potential future goodwill impairments will adversely affect our operating results; risks that anticipated tax benefits will not be realized in accordance with our expectations; risks that a change in ownership of our stock could cause further limitation to the future utilization of our net operating losses; risks that we may be required to record valuation allowances on our net operating losses which could adversely impact our profitability and financial condition; risks that the current economic environment will adversely impact our business, including with respect to our ability to recruit and retain sufficient numbers of qualified personnel to execute on our programs and contracts, as well as expected contract awards and risks related to increasing interest rates and risks related to the interest rate swap contract to hedge Term SOFR associated with the Company’s Term Loan A; currently unforeseen risks associated with COVID-19 and risks related to natural disasters or severe weather. These and other risk factors are more fully discussed in the Company’s Annual Report on Form 10-K for the period ended December 25, 2022, and in our other filings made with the Securities and Exchange Commission.
Note Regarding Use of Non-GAAP Financial Measures and Other Performance Metrics This news release contains non-GAAP financial measures, including Adjusted EPS (computed using income from continuing operations before income taxes, excluding income (loss) from discontinued operations, excluding income (loss) attributable to non-controlling interest, excluding depreciation, amortization of intangible assets, amortization of capitalized contract and development costs, stock-based compensation expense, acquisition and restructuring related items and other, which includes, but is not limited to, legal related items, non-recoverable rates and costs, and foreign transaction gains and losses, less the estimated impact to income taxes) and Adjusted EBITDA (which includes net income (loss) attributable to noncontrolling interest and excludes, among other things, losses and gains from discontinued operations, acquisition and restructuring related items, stock compensation expense, foreign transaction gains and losses, and the associated margin rates). Additional non-GAAP financial measures include Free Cash Flow from Operations computed as Cash Flow from Operations less Capital Expenditures plus proceeds from sale of assets and Adjusted EBITDA related to our KUS and KGS businesses. Kratos believes this information is useful to investors because it provides a basis for measuring the Company’s available capital resources, the actual and forecasted operating performance of the Company’s business and the Company’s cash flow, excluding non-recurring items and non-cash items that would normally be included in the most directly comparable measures calculated and presented in accordance with GAAP. The Company’s management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating the Company’s actual and forecasted operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and investors should carefully evaluate the Company’s financial results calculated in accordance with GAAP and reconciliations to those financial results. In addition, non-GAAP financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies. As appropriate, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company’s financial results prepared in accordance with GAAP are included in this news release.
Another Performance Metric the Company believes is a key performance indicator in our industry is our Book to Bill Ratio as it provides investors with a measure of the amount of bookings or contract awards as compared to the amount of revenues that have been recorded during the period and provides an indicator of how much of the Company’s backlog is being burned or utilized in a certain period. The Book to Bill Ratio is computed as the number of bookings or contract awards in the period divided by the revenues recorded for the same period. The Company believes that the rolling or last twelve months’ Book to Bill Ratio is meaningful since the timing of quarter-to-quarter bookings can vary.
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Service revenues
$
106.5
$
88.6
$
301.8
$
235.3
Product sales
168.1
140.0
461.5
413.7
Total revenues
274.6
228.6
763.3
649.0
Cost of service revenues
79.0
65.1
227.2
171.2
Cost of product sales
122.2
108.6
339.4
313.2
Total costs
201.2
173.7
566.6
484.4
Gross profit – service revenues
27.5
23.5
74.6
64.1
Gross profit – product sales
45.9
31.4
122.1
100.5
Total gross profit
73.4
54.9
196.7
164.6
Selling, general and administrative expenses
47.5
44.2
136.7
126.1
Acquisition and restructuring related items and other
–
0.4
0.9
7.0
Research and development expenses
10.3
9.6
30.4
28.0
Depreciation
1.9
1.3
4.8
3.9
Amortization of intangible assets
1.5
3.0
4.5
6.3
Operating income (loss)
12.2
(3.6
)
19.4
(6.7
)
Interest expense, net
(5.1
)
(4.1
)
(15.5
)
(12.9
)
Loss on extinguishment of debt
–
–
–
(13.0
)
Other expense, net
(0.3
)
(1.1
)
(0.4
)
(1.0
)
Income (loss) from continuing operations before income taxes
6.8
(8.8
)
3.5
(33.6
)
Provision (benefit) for income taxes from continuing operations
3.8
(0.8
)
6.9
(4.6
)
Income (loss) from continuing operations
3.0
(8.0
)
(3.4
)
(29.0
)
Income from discontinued operations, net of income taxes
–
–
0.2
0.7
Net income (loss)
3.0
(8.0
)
(3.2
)
(28.3
)
Less: Net income attributable to noncontrolling interest
4.6
–
–
8.1
0.3
Net loss attributable to Kratos
$
(1.6
)
$
(8.0
)
$
(11.3
)
$
(28.6
)
Basic and diluted loss per common share attributable to Kratos:
Loss from continuing operations
$
(0.01
)
$
(0.06
)
$
(0.09
)
$
(0.23
)
Income from discontinued operations
–
–
–
–
Net loss
(0.01
)
$
(0.06
)
$
(0.09
)
$
(0.23
)
Basic and diluted weighted average common shares outstanding
129.6
127.2
129.3
126.5
Adjusted EBITDA (1)
$
27.7
$
20.0
$
66.3
$
51.5
Unaudited Reconciliation of GAAP to Non-GAAP Measures
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net loss attributable to Kratos adjusted for net income attributable to noncontrolling interest, income from discontinued operations, net interest expense, provision (benefit) for income taxes, depreciation and amortization expense of intangible assets, amortization of capitalized contract and development costs, stock-based compensation, acquisition and restructuring related items and other, and foreign transaction loss.
Adjusted EBITDA as calculated by us may be calculated differently than Adjusted EBITDA for other companies. We have provided Adjusted EBITDA because we believe it is a commonly used measure of financial performance in comparable companies and is provided to help investors evaluate companies on a consistent basis, as well as to enhance understanding of our operating results. Adjusted EBITDA should not be construed as either an alternative to net income (loss) or as an indicator of our operating performance or an alternative to cash flows as a measure of liquidity. The adjustments to calculate this non-GAAP financial measure and the basis for such adjustments are outlined below. Please refer to the following table below that reconciles GAAP net loss to Adjusted EBITDA.
The adjustments to calculate this non-GAAP financial measure, and the basis for such adjustments, are outlined below:
Interest income and interest expense, net. The Company receives interest income on investments and incurs interest expense on loans, capital leases and other financing arrangements, including the amortization of issue discounts and deferred financing costs. These amounts may vary from period to period due to changes in cash and debt balances.
Income taxes. The Company’s tax expense can fluctuate materially from period to period due to tax adjustments that may not be directly related to underlying operating performance or to the current period of operations and may not necessarily reflect the impact of utilization of our NOLs.
Depreciation. The Company incurs depreciation expense (recorded in cost of revenues and in operating expenses) related to capital assets purchased, leased or constructed to support the ongoing operations of the business. The assets are recorded at cost or fair value and are depreciated over the estimated useful lives of individual assets.
Amortization of intangible assets. The Company incurs amortization of intangible expense related to acquisitions it has made. These intangible assets are valued at the time of acquisition and are amortized over the estimated useful lives.
Amortization of capitalized contract and development costs. The Company incurs amortization of previously capitalized software development and non-recurring engineering costs related to certain targets in its Unmanned Systems and ballistic missile target businesses as these units are sold.
Stock-based compensation expense. The Company incurs expense related to stock-based compensation included in its GAAP presentation of selling, general and administrative expense. Although stock-based compensation is an expense of the Company and viewed as a form of compensation, these expenses vary in amount from period to period, and are affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of the Company’s shares, risk-free interest rates and the expected term and forfeiture rates of the awards. Management believes that exclusion of these expenses allows comparison of operating results to those of other companies that disclose non-GAAP financial measures that exclude stock-based compensation.
Foreign transaction (gain) loss. The Company incurs transaction gains and losses related to transactions with foreign customers in currencies other than the U.S. dollar. In addition, certain intercompany transactions can give rise to realized and unrealized foreign currency gains and losses.
Acquisition and transaction related items. The Company incurs transaction related costs, such as legal and accounting fees and other expenses, related to acquisitions and divestiture activities. Management believes these items are outside the normal operations of the Company’s business and are not indicative of ongoing operating results.
Restructuring costs. The Company incurs restructuring costs for cost reduction actions which include employee termination costs, facility shut-down related costs and lease commitment costs for unused, excess or exited facilities. Management believes that these costs are not indicative of ongoing operating results as they are either non-recurring and/or not expected when full capacity and volumes are achieved.
Non-recoverable rates and costs. In fiscal 2022, the Company incurred non-recoverable rates and costs as a result of its inability to hire the required direct labor base to execute on its backlog due to a challenging environment in hiring and retaining skilled personnel. In addition, in 2022 the Company incurred non-recoverable rate growth resulting from a smaller than planned direct labor base due to delays in customer program execution and awards.
Legal related items. The Company incurs costs related to pending legal settlements and other legal related matters. Management believes these items are outside the normal operations of the Company’s business and are not indicative of ongoing operating results.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. The Company expects to continue to incur expenses similar to the Adjusted EBITDA financial adjustments described above, and investors should not infer from the Company’s presentation of this non-GAAP financial measure that these costs are unusual, infrequent, or non-recurring.
Reconciliation of Net Loss attributable to Kratos to Adjusted EBITDA is as follows:
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Net loss attributable to Kratos
$
(1.6
)
$
(8.0
)
$
(11.3
)
$
(28.6
)
Income from discontinued operations, net of income taxes
–
–
(0.2
)
(0.7
)
Interest expense, net
5.1
4.1
15.5
12.9
Loss on extinguishment of debt
–
–
–
13.0
Provision (benefit) for income taxes from continuing operations
3.8
(0.8
)
6.9
(4.6
)
Depreciation (including cost of service revenues and product sales)
6.7
5.9
19.5
16.5
Stock-based compensation
6.4
6.6
19.0
19.9
Foreign transaction loss
0.4
1.4
1.4
1.5
Amortization of intangible assets
1.5
3.0
4.5
6.3
Amortization of capitalized contract and development costs
0.8
0.4
2.0
1.0
Acquisition and restructuring related items and other
–
7.4
0.9
14.0
Plus: Net income attributable to noncontrolling interest
4.6
–
8.1
0.3
Adjusted EBITDA
$
27.7
$
20.0
$
66.3
$
51.5
Reconciliation of acquisition and restructuring related items and other included in Adjusted EBITDA:
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Acquisition and transaction related items
$
–
$
0.2
$
–
$
0.6
Restructuring costs
–
0.8
–
1.1
Non-recoverable rates and costs
–
6.4
–
6.4
Legal related items
–
–
0.9
5.9
$
–
$
7.4
$
0.9
$
14.0
Kratos Defense & Security Solutions, Inc.
Unaudited Segment Data
(in millions)
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Revenues:
Unmanned Systems
$
56.7
$
50.0
$
156.8
$
159.0
Kratos Government Solutions
217.9
178.6
606.5
490.0
Total revenues
$
274.6
$
228.6
$
763.3
$
649.0
Operating income (loss)
Unmanned Systems
$
2.6
$
(0.1
)
$
3.2
$
(4.6
)
Kratos Government Solutions
15.9
3.3
35.2
18.4
Unallocated corporate expense, net
(6.3
)
(6.8
)
(19.0
)
(20.5
)
Total operating income (loss)
$
12.2
$
(3.6
)
$
19.4
$
(6.7
)
Note: Unallocated corporate expense, net includes costs for certain stock-based compensation programs (including stock-based compensation costs for stock options, employee stock purchase plan and restricted stock units), the effects of items not considered part of management’s evaluation of segment operating performance, and acquisition and restructuring related items, corporate costs not allocated to the segments, legal related items, and other miscellaneous corporate activities.
Reconciliation of Segment Operating Income (Loss) to Adjusted EBITDA is as follows:
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Unmanned Systems
Operating income (loss)
$
2.6
$
(0.1
)
$
3.2
$
(4.6
)
Other income (expense)
0.1
(0.1
)
0.1
–
Depreciation
2.1
1.7
5.9
5.0
Amortization of intangible assets
0.1
0.2
0.3
0.7
Amortization of capitalized contract and development costs
0.5
0.4
1.3
1.0
Acquisition and restructuring related items and other
–
–
–
5.9
Adjusted EBITDA
$
5.4
$
2.1
$
10.8
$
8.0
% of revenue
9.5
%
4.2
%
6.9
%
5.0
%
Kratos Government Solutions
Operating income
$
15.9
$
3.3
$
35.2
$
18.4
Other income
0.1
0.4
0.9
0.5
Depreciation
4.6
4.2
13.6
11.5
Amortization of intangible assets
1.4
2.8
4.2
5.6
Amortization of capitalized contract and development costs
0.3
–
0.7
–
Acquisition and restructuring related items and other
–
7.2
0.9
7.5
Adjusted EBITDA
$
22.3
$
17.9
$
55.5
$
43.5
% of revenue
10.2
%
10.0
%
9.2
%
8.9
%
Total Adjusted EBITDA
$
27.7
$
20.0
$
66.3
$
51.5
% of revenue
10.1
%
8.7
%
8.7
%
7.9
%
Kratos Defense & Security Solutions, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in millions)
October 1,
December 25,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
42.2
$
81.3
Accounts receivable, net
351.9
328.5
Inventoried costs
150.1
125.5
Prepaid expenses
18.3
11.9
Other current assets
41.9
35.4
Total current assets
604.4
582.6
Property, plant and equipment, net
227.3
213.1
Operating lease right-of-use assets
50.6
47.4
Goodwill
558.2
558.2
Intangible assets, net
50.7
55.2
Other assets
99.6
95.0
Total assets
$
1,590.8
$
1,551.5
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
57.4
$
57.3
Accrued expenses
40.3
33.8
Accrued compensation
55.2
52.2
Accrued interest
1.8
1.5
Billings in excess of costs and earnings on uncompleted contracts
79.4
62.1
Current portion of operating lease liabilities
12.1
10.8
Other current liabilities
15.9
15.6
Other current liabilities of discontinued operations
0.9
0.9
Total current liabilities
263.0
234.2
Long-term debt
234.2
250.2
Operating lease liabilities, net of current portion
43.0
40.8
Other long-term liabilities
76.8
77.4
Other long-term liabilities of discontinued operations
1.1
1.4
Total liabilities
618.1
604.0
Commitments and contingencies
Redeemable noncontrolling interest
19.3
11.2
Stockholders’ equity:
Additional paid-in capital
1,633.5
1,608.4
Accumulated other comprehensive loss
2.5
(0.8
)
Accumulated deficit
(682.6
)
(671.3
)
Total Kratos stockholders’ equity
953.4
936.3
Total liabilities and stockholders’ equity
$
1,590.8
$
1,551.5
Kratos Defense & Security Solutions, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
Nine Months Ended
October 1,
September 25,
2023
2022
Operating activities:
Net loss
$
(3.2
)
$
(28.3
)
Less: income from discontinued operations
0.2
0.7
Loss from continuing operations
(3.4
)
(29.0
)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities from continuing operations:
Depreciation and amortization
24.0
22.8
Amortization of lease right-of-use assets
8.5
7.8
Deferred income taxes
0.1
0.3
Stock-based compensation
19.0
19.9
Litigation related charges
–
5.5
Amortization of deferred financing costs
0.5
0.6
Loss on extinguishment of debt
–
13.0
Provision for doubtful accounts
1.0
–
Changes in assets and liabilities, net of acquisitions:
Accounts receivable
(23.5
)
17.0
Unbilled receivables
(9.1
)
(18.2
)
Inventoried costs
(23.7
)
(28.0
)
Prepaid expenses and other assets
(15.7
)
(17.4
)
Operating lease liabilities
(8.2
)
(7.7
)
Accounts payable
(0.6
)
1.0
Accrued compensation
3.1
3.0
Accrued expenses
6.4
1.1
Accrued interest
0.3
(1.2
)
Billings in excess of costs and earnings on uncompleted contracts
17.4
(10.6
)
Income tax receivable and payable
1.9
(8.3
)
Other liabilities
(0.2
)
(3.9
)
Net cash used in operating activities from continuing operations
(2.2
)
(32.3
)
Investing activities:
Cash paid for acquisitions, net of cash acquired
–
(132.2
)
Capital expenditures
(33.1
)
(34.8
)
Proceeds from sale of assets
8.3
0.1
Net cash used in investing activities from continuing operations
(24.8
)
(166.9
)
Financing activities:
Proceeds from the issuance of long-term debt
–
200.0
Borrowing under credit facility
54.0
100.0
Redemption of Senior Secured Notes
–
(309.8
)
Repayment under credit facility, term loan and other debt
(67.8
)
(1.2
)
Debt issuance costs
–
(3.2
)
Payment under finance leases
(1.2
)
(1.0
)
Payments of employee taxes withheld from share-based awards
(3.6
)
(12.3
)
Proceeds from shares issued under equity plans
6.5
6.1
Net cash used in financing activities from continuing operations
(12.1
)
(21.4
)
Net cash flows from continuing operations
(39.1
)
(220.6
)
Net operating cash flows of discontinued operations
–
(0.3
)
Effect of exchange rate changes on cash and cash equivalents
–
(3.3
)
Net decrease in cash, cash equivalents and restricted cash
(39.1
)
(224.2
)
Cash, cash equivalents and restricted cash at beginning of period
81.3
349.4
Cash, cash equivalents and restricted cash at end of period
$
42.2
$
125.2
Kratos Defense & Security Solutions, Inc.
Unaudited Non-GAAP Measures
Computation of Adjusted Earnings Per Share
(in millions, except per share data)
Adjusted income from continuing operations and adjusted income from continuing operations per diluted common share (Adjusted EPS) are non-GAAP measures for reporting financial performance and exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. Management believes that exclusion of these items assists in providing a more complete understanding of the Company’s underlying continuing operations results and trends and allows for comparability with our peer company index and industry. The Company uses these measures along with the corresponding GAAP financial measures to manage the Company’s business and to evaluate its performance compared to prior periods and the marketplace. The Company defines adjusted income from continuing operations before amortization of intangible assets, depreciation, stock-based compensation, foreign transaction gain/loss, and acquisition and restructuring related items and other. The estimated impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision, and excludes the impact of discrete items, including transaction related expenses and release of valuation allowance, or benefit related to the add-backs.* Adjusted EPS reflects adjusted income on a per share basis using weighted average diluted shares outstanding.
The following table reconciles the most directly comparable GAAP financial measures to the non-GAAP financial measures.
Three Months Ended
Nine Months Ended
October 1,
September 25,
October 1,
September 25,
2023
2022
2023
2022
Net loss attributable to Kratos
$
(1.6
)
$
(8.0
)
$
(11.3
)
$
(28.6
)
Less: GAAP provision (benefit) for income taxes
3.8
(0.8
)
6.9
(4.6
)
Less: Net income attributable to noncontrolling interest
4.6
–
8.1
0.3
Less: income from discontinued operations, net of income taxes
–
–
(0.2
)
(0.7
)
Income (loss) from continuing operations before taxes
6.8
(8.8
)
3.5
(33.6
)
Add: Amortization of intangible assets
1.5
3.0
4.5
6.3
Add: Amortization of capitalized contract and development costs
0.8
0.4
2.0
1.0
Add: Depreciation
6.7
5.9
19.5
16.5
Add: Stock-based compensation
6.4
6.6
19.0
19.9
Add: Loss on extinguishment of debt
–
–
–
13.0
Add: Foreign transaction loss
0.4
1.4
1.4
1.5
Add: Acquisition and restructuring related items and other
–
7.4
0.9
14.0
Non-GAAP Adjusted income from continuing operations before income taxes
22.6
15.9
50.8
38.6
Income taxes on Non-GAAP measure Adjusted income from continuing operations*
6.9
5.7
15.5
13.9
Non-GAAP Adjusted net income
$
15.7
$
10.2
$
35.3
$
24.7
Diluted earnings per common share
$
(0.01
)
$
(0.06
)
$
(0.09
)
$
(0.23
)
Less: GAAP provision (benefit) for income taxes
0.03
(0.01
)
0.05
(0.03
)
Less: Net income attributable to noncontrolling interest
0.03
–
0.06
–
Less: income from discontinued operations, net of income taxes
–
–
–
–
Add: Amortization of intangible assets
0.01
0.02
0.03
0.05
Add: Amortization of capitalized contract and development costs
0.01
–
0.02
0.01
Add: Depreciation
0.05
0.05
0.15
0.13
Add: Stock-based compensation
0.05
0.05
0.15
0.16
Add: Loss on extinguishment of debt
–
–
–
0.10
Add: Foreign transaction loss
–
0.01
0.01
0.01
Add: Acquisition and restructuring related items and other
–
0.06
0.01
0.11
Income taxes on Non-GAAP measure Adjusted income from continuing operations*
(0.05
)
(0.04
)
(0.12
)
(0.11
)
Adjusted income from continuing operations per diluted common share
$
0.12
$
0.08
$
0.27
$
0.20
Weighted average diluted common shares outstanding
129.6
127.2
129.3
126.5
*The impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining Adjusted income from continuing operations before income taxes and recalculating the income tax provision, including current and deferred income taxes, using the Adjusted income from continuing operations before income taxes. The recalculation also adjusts for any discrete tax expense, including transaction related expenses and the release of valuation allowance, or benefit related to the add-backs.
Kratos Thanatos Tactical UAV in Flight – Conceptual Rendition
Preclinical data indicate that narazaciclib shows monotherapy and combination anti-tumor activity in ibrutinib-sensitive and resistant cells and xenograft models
NEWTOWN, Pa., Nov. 02, 2023 (GLOBE NEWSWIRE) — Onconova Therapeutics, Inc. (NASDAQ: ONTX), (“Onconova” or “the Company”), a clinical-stage biopharmaceutical company focused on discovering and developing novel products for patients with cancer, today announced that Onconova and collaborators will present a preclinical poster related to its lead program, narazaciclib, at the 65th American Society for Hematology Annual Meeting & Exposition (ASH), taking place in San Diego, California from December 9 to 12, 2023.
“The poster that we and researchers from the Josep Carreras Leukaemia Research Institute in Barcelona, Spain are presenting at ASH 2023 shows that the study of narazaciclib, either as a single agent or in combination with ibrutinib, effectively controls tumor growth in preclinical models of mantle cell lymphoma (MCL), including those that are resistant to Bruton’s tyrosine kinase inhibitors (BTKis), a mainstay of care for this aggressive and difficult to treat cancer. The experiments included a broad comparison of narazaciclib with three other approved cyclin-D-kinase inhibitors (CDKis), used in combination with several BTKis,” said Steven Fruchtman, M.D., President and CEO of Onconova.
Dr. Fruchtman continued, “We were especially pleased by the broad translational data set that provided an understanding of narazaciclib’s role in cell cycle blockade. These studies show that narazaciclib appears to act in the G1 phase of the cell cycle. Furthermore, the studies also indicate that the combination of narazaciclib and ibrutinib act in a synergistic way to achieve in vitro and in vivo anti-tumor activity in ibrutinib sensitive- and resistant -cells and xenograft models. Together, these data support the potential use of narazaciclib in MCL and other cyclin-dependent indications, and further inform our understanding of narazaciclib’s mechanism of action as we advance the clinical program, led by the Phase 1/2a study in patients with low grade endometrioid endometrial cancer, an indication with a great unmet medical need.”
Poster Presentation Information:
Title: Narazaciclib, a Differentiated CDK4/6 Antagonist, Prolongs Cell Cycle Arrest and Metabolomic Reprogramming, Enabling Restoration of Ibrutinib Sensitivity in Btki-Resistant Mantle Cell Lymphoma Session Name: 605. Molecular Pharmacology and Drug Resistance: Lymphoid Neoplasms: Poster III Session Date: Monday, December 11, 2023 Presentation Time: 6:00 PM – 8:00 PM PT Location: San Diego Convention Center, Halls G-H Poster Number: 4181 Presenters: Dr. Nuria Profitos-Peleja, Lymphoma Translational Group, Josep Carreras Leukaemia Research Institute, Barcelona, Spain
About Onconova Therapeutics, Inc.
Onconova Therapeutics is a clinical-stage biopharmaceutical company focused on discovering and developing novel products for patients with cancer. The Company’s product candidates, narazaciclib and rigosertib, are proprietary targeted anti-cancer agents designed to disrupt specific cellular pathways that are important for cancer cell proliferation.
Narazaciclib, Onconova’s novel, multi-kinase inhibitor (formerly ON 123300), is being evaluated in a Phase 1/2 combination trial with the estrogen blocker letrozole, in advanced endometrial cancer (NCT05705505). Based on preclinical and clinical studies of CDK 4/6 inhibitors, Onconova believes narazaciclib has broad potential and is also evaluating opportunities for combination studies with narazaciclib and letrozole in additional indications, including breast cancer.
Rigosertib is being studied in an investigator-sponsored trial strategy to evaluate the product candidate in multiple indications, including a dose-escalation and expansion Phase 1/2a study of oral rigosertib in combination with nivolumab in patients with KRAS+ non-small cell lung cancer (NCT04263090), a Phase 2 program evaluating oral or IV rigosertib monotherapy in advanced squamous cell carcinoma complicating recessive dystrophic epidermolysis bullosa (RDEB-associated SCC) (NCT03786237, NCT04177498), and a Phase 2 trial evaluating rigosertib in combination with pembrolizumab in patients with metastatic melanoma (NCT05764395).
Some of the statements in this release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. These statements relate to Onconova’s expectations regarding its clinical development and trials, its product candidates, its business and financial position. Onconova has attempted to identify forward-looking statements by terminology including “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “preliminary,” “encouraging,” “approximately” or other words that convey uncertainty of future events or outcomes. Although Onconova believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including the success and timing of Onconova’s clinical trials, investigator-initiated trials and regulatory agency and institutional review board approvals of protocols, Onconova’s collaborations, market conditions and those discussed under the heading “Risk Factors” in Onconova’s most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements contained in this release speak only as of its date. Onconova undertakes no obligation to update any forward-looking statements contained in this release to reflect events or circumstances occurring after its date or to reflect the occurrence of unanticipated events.
Data from 11 participants demonstrates tegoprubart successfully prevented kidney transplant rejection and was generally safe and well-tolerated
Aggregate mean eGFR was above 70 mL/min/1.73m2at all reported time points after day 90 supporting tegoprubart’s potential to protect organ function in patients undergoing kidney transplantation
Eledon will host a conference call today at 5:00 p.m. ET
IRVINE, Calif., Nov. 02, 2023 (GLOBE NEWSWIRE) — Eledon Pharmaceuticals, Inc. (“Eledon”) (NASDAQ: ELDN) today reported results from the Company’s ongoing Phase 1b open-label trial evaluating tegoprubart for the prevention of rejection in patients undergoing de novo kidney transplantation. Results were presented at the American Society of Nephrology Kidney Week 2023 Annual Meeting taking place in Philadelphia, PA from November 2-5, 2023.
“We are excited to present updated safety and efficacy results from our ongoing Phase 1b trial which continue to support the potential of tegoprubart as a novel kidney transplant immunosuppressive therapy to prevent rejection and better preserve organ function without many of the side effects associated with tacrolimus, the current standard of care,” said David-Alexandre C. Gros, M.D., Chief Executive Officer. “We remain committed to the transplant community who are in urgent need of better treatment options, and we look forward to continuing this study in parallel with our Phase 2 BESTOW study initiated earlier this year.”
At the time of data submission, results from the 11 participants in the Phase 1b trial demonstrated that tegoprubart is generally safe and well-tolerated in patients undergoing kidney transplantation. There have been no cases of hyperglycemia, new onset diabetes, tremor, or cytomegalovirus infection commonly seen with tacrolimus. One participant experienced a mild T cell mediated rejection (Banff score 1a) on day 99. This patient was treated for the rejection and remains in the study. There were no cases of graft loss or death.
Aggregate mean estimated glomerular filtration rate (eGFR) – a measure of kidney function – was above 70 mL/min/1.73m2 at all reported time points after day 90. Historical studies have reported average eGFRs generally in the low 50 mL/min/1.73m2 range during the first year after kidney transplant using standard of care. One participant has completed the study with an eGFR of 91 at one year (day 374) and is now enrolled in a Phase 2 open-label extension (OLE) study, which will evaluate the long-term safety, pharmacokinetics, and efficacy of tegoprubart in participants who have completed one year of treatment in either the ongoing Phase 1b or Phase 2 BESTOW study.
“In this Phase 1b trial, patients treated with tegoprubart demonstrated robust improvements in eGFR with a strong safety profile,” said Dr. John S. Gill, MD, Professor of Medicine at the University of British Columbia, St. Paul’s Hospital, Vancouver, Canada, and Principal Investigator of the study. “These results further support the promise of CD40L costimulatory blockade in organ transplantation. I look forward to additional readouts from this study in 2024.”
The Phase 1b open-label study has enrolled 11 participants who underwent kidney transplantation in Canada, Australia, and the United Kingdom. Each participant received rabbit antithymocyte globulin (ATG) induction and a maintenance regimen consisting of tegoprubart, mycophenolate mofetil, and corticosteroids. The primary endpoint of the study is safety. Other endpoints include characterizing the pharmacokinetic profile of tegoprubart, the incidence of biopsy proven rejection, and eGFR.
In September, Eledon announced that the first participant had been dosed in the Company’s Phase 2 BESTOW trial evaluating tegoprubart for the prevention of organ rejection in patients receiving a kidney transplant. The multicenter, two-arm, active comparator clinical study is enrolling approximately 120 participants undergoing kidney transplantation in the United States and other countries to evaluate the safety, pharmacokinetics, and efficacy of tegoprubart compared to the calcineurin inhibitor tacrolimus. The BESTOW trial’s primary endpoint is designed to test the potential superiority of tegoprubart vs. tacrolimus in post kidney transplant kidney function at 12 months as measured by eGFR. The Company expects to complete enrollment at the end of 2024.
Full details on the poster presentations are below:
Title: Tegoprubart for the prevention of rejection in kidney transplant: update of emerging data from an ongoing trial Presenter: Steve Perrin, Ph.D., President and Chief Scientific Officer, Eledon Pharmaceuticals Poster Number: TH-PO835 Session Title: Transplantation: Clinical – I [PO2102-1] Session Date and Time: November 2, 2023 from 10:00 AM to 12:00 PM EDT
Eledon will hold a conference call today, November 2, 2023 at 5:00 p.m. Eastern Time to discuss the updated trial results. The dial-in numbers are 1-888-886-7786 for domestic callers and 1-416-764-8658 for international callers. The conference ID is 66816567. A live webcast of the conference call will be available on the Investor Relations section of the Company’s website at www.eledon.com. The webcast will be archived on the website following the completion of the call.
About Eledon Pharmaceuticals and tegoprubart
Eledon Pharmaceuticals, Inc. is a clinical stage biotechnology company that is developing immune-modulating therapies for the management and treatment of life-threatening conditions. The Company’s lead investigational product is tegoprubart, an anti-CD40L antibody with high affinity for CD40 Ligand, a well-validated biological target within the costimulatory CD40/CD40L cellular pathway. The central role of CD40L signaling in both adaptive and innate immune cell activation and function positions it as an attractive target for non-lymphocyte depleting, immunomodulatory therapeutic intervention. The Company is building upon a deep historical knowledge of anti-CD40 Ligand biology to conduct preclinical and clinical studies in kidney allograft transplantation, xenotransplantation, and amyotrophic lateral sclerosis (ALS). Eledon is headquartered in Irvine, California. For more information, please visit the company’s website at www.eledon.com.
Follow Eledon Pharmaceuticals on social media: LinkedIn; Twitter
Forward-Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. Any statements about the company’s future expectations, plans and prospects, including statements about planned clinical trials, the development of product candidates, expected timing for initiation of future clinical trials, expected timing for receipt of data from clinical trials, the company’s capital resources and ability to finance planned clinical trials, as well as other statements containing the words “believes,” “anticipates,” “plans,” “expects,” “estimates,” “intends,” “predicts,” “projects,” “targets,” “looks forward,” “could,” “may,” and similar expressions, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and are subject to numerous risks and uncertainties, including: risks relating to the safety and efficacy of our drug candidates; risks relating to clinical development timelines, including interactions with regulators and clinical sides, as well as patient enrollment; risks relating to costs of clinical trials and the sufficiency of the company’s capital resources to fund planned clinical trials; and risks associated with the impact of the ongoing coronavirus pandemic. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors. These risks and uncertainties, as well as other risks and uncertainties that could cause the company’s actual results to differ significantly from the forward-looking statements contained herein, are discussed in our quarterly 10-Q, annual 10-K, and other filings with the U.S. Securities and Exchange Commission, which can be found at www.sec.gov. Any forward-looking statements contained in this press release speak only as of the date hereof and not of any future date, and the company expressly disclaims any intent to update any forward-looking statements, whether as a result of new information, future events or otherwise.
NIAID is conducting early phase clinical trials on select next generation COVID-19 vaccine candidates with the intent to identify promising vaccine candidates
TNX-1800, a live virus percutaneous vaccine candidate, is based on Tonix’s recombinant pox virus (RPV) platform
Phase 1 clinical trial of TNX-1800 expected to start in the second half of 2024
NIAIDwill cover the full cost of the clinical trial; Tonix will supply the vaccine candidate
CHATHAM, N.J., Nov. 02, 2023 (GLOBE NEWSWIRE) — Tonix Pharmaceuticals Holding Corp. (Nasdaq: TNXP), a biopharmaceutical company with marketed products and a pipeline of development candidates, today announced that the National Institute of Allergy and Infectious Diseases (NIAID), a part of the National Institutes of Health (NIH), will conduct a Phase 1 clinical trial with TNX-1800 (recombinant horsepox virus, live vaccine),1 Tonix Pharmaceuticals’ vaccine candidate to protect against COVID-19.
Tonix is developing a novel vaccine platform initially targeting COVID-19, smallpox and mpox (monkeypox). The intent is to provide durable protection against severe disease and prevent forward transmission, primarily by eliciting a T-cell immune response. TNX-1800 expresses the spike protein of SARS-CoV-2, was immunogenic, well tolerated2 and showed promise in protecting animals from challenge with SARS-CoV-2 delivered directly into the lungs.3 A related horsepox-based vaccine, TNX-8011, protected animals against challenge with monkeypox virus delivered directly into the lungs.4 TNX-801 is also the vector on which TNX-1800 is based and has been shown to be >1,000-fold more attenuated than modern vaccinia virus vaccine (VACV) strains in immunocompromised mice.5 The Phase 1 trial of TNX-1800 is expected to start in the second half of 2024. NIAID will study TNX-1800 by percutaneous administration.
“We believe our novel vaccine platform technology has the potential to provide durable protection from respiratory pathogens and slow their spread,” said Seth Lederman, M.D., Chief Executive Officer of Tonix Pharmaceuticals. “TNX-1800 will be the first vaccine candidate using our live virus recombinant pox virus (RPV) platform technology to enter clinical trials. We hope to expand the portfolio of RPV-based vaccines to address several other known respiratory threats including smallpox, mpox and tuberculosis. We are committed to supporting NIAID in assembling a variety of vaccine platform options to ensure the availability of effective vaccines in the face of known and emerging threats. We look forward to participating in the Project NextGen initiative.”
“Project NextGen,” is an initiative by the U.S. Department of Health and Human Services (HHS) to advance a pipeline of new, innovative vaccines and therapeutics for COVID-19. NIAID will be conducting clinical trials to evaluate several early-stage vaccine candidates. The Phase 1 study involving TNX-1800 is designed to assess safety and immunogenicity in approximately 60 healthy adult volunteers. Upon completion of the trial, NIAID and Tonix Pharmaceuticals will assess the results and determine the next steps for the development of TNX-1800.
NIAID will cover the full cost of the clinical trial, including operations and related analysis. Tonix will be responsible for providing clinical trial materials, and upon completion will have the right to rely on the findings in regulatory filings with the U.S. Food and Drug Administration (FDA) to support the approval of its COVID-19 vaccine and other vaccines based on the RPV platform.
Project NextGen is a $5 billion initiative to develop the next generation of vaccines and therapeutics to combat COVID-19. Based at the HHS and led by the Administration for Strategic Preparedness and Response’s Biomedical Advanced Research and Development Authority and the NIH’s NIAID, Project NextGen will coordinate across the federal government and the private sector to advance the pipeline of new, innovative vaccines and therapeutics into clinical trials and potential review by the U.S. Food and Drug Administration (FDA) for authorization or approval, and commercial availability for the American people. The program will focus on several areas, including mucosal vaccines, vaccines that provide broader protection against variants of concern and a longer duration of protection, pan-coronavirus vaccines, and new and more durable monoclonal antibodies.
About TNX-1800* TNX-1800 (recombinant horsepox virus) is a live virus vaccine for percutaneous administration that is designed to express the spike protein of the SARS-CoV-2 virus and to elicit a predominant T cell response. The RPV platform is based on a horsepox vector, which is a live replicating, attenuated virus that has been shown to be >1,000-fold more attenuated than modern VACV strains in immunocompromised mice.5 Horsepox and the vaccinia vaccine viruses are closely related orthopoxviruses that are believed to share a common ancestor. Molecular analysis shows that horsepox is closer than modern vaccinia vaccines in DNA sequence to the vaccine discovered and disseminated by Dr. Edward Jenner. 6-9 Live replicating orthopoxviruses, like vaccinia or horsepox, can be engineered to express foreign genes and have been explored as platforms for vaccine development because they possess; (1) large packaging capacity for exogenous DNA inserts, (2) precise virus-specific control of exogenous gene insert expression, (3) lack of persistence or genomic integration in the host, (4) strong immunogenicity as a vaccine, (5) ability to rapidly generate vector/insert constructs, (6) readily manufacturable at scale, and (7) ability to provide direct antigen presentation. Relative to vaccinia, horsepox has substantially decreased virulence in mice.4,6 The current formulation is a frozen liquid, but we believe that future lyophilized versions can be stored and shipped at standard refrigeration. Horsepox-based vaccines are designed to be single dose, vial-sparing vaccines that can be administered without sterile injection, manufactured using conventional cell culture systems with the potential for mass scale production, and packaged in multi-dose vials. Moreover, we believe the low dose of TNX-1800 makes this technology amenable for future implementation in microneedle delivery systems.
About TNX-801* TNX-801 (recombinant horsepox virus) is a live virus vaccine based on horsepox4-7 in pre-clinical development to prevent smallpox and mpox. Tonix reported positive preclinical efficacy data, demonstrating that TNX-801 vaccination protected non-human primates against lethal challenge with monkeypox.4 Tonix has received official written response from a Type B pre-Investigational New Drug Application (IND) meeting with the U.S. Food and Drug Administration (FDA) to develop TNX-801 as a potential vaccine to protect against mpox disease and smallpox.10 Tonix believes the FDA feedback provides a path to agreement on the design of a Phase 1 /2 study and the overall clinical development plan. The Phase 1/2 clinical trial will assess the safety, tolerability, and immunogenicity of TNX-801, following the submission and clearance of an IND. More than 30,000 people have contracted mpox in the U.S. so far during the 2022-23 epidemic,11 The recent cluster of mpox in Chicago revealed breakthrough cases of mpox in individuals who had been vaccinated with the currently authorized non-replicating vaccine, which is administered in two doses.12 In contrast, TNX-801 is delivered percutaneously with only one dose and therefore may achieve higher rates of community protection by eliminating drop-out between doses and limiting forward transmission. Moreover, relying on only one approved mpox vaccine at present is a risk for the global supply chain that has already led to insufficient availability of vaccines to meet global health needs, especially in Africa. TNX-801 has the potential to make a global impact on mpox and the risk of smallpox because of its durable T-cell immune response, the potential to manufacture at scale, and the use of a lower dose than non-replicating vaccines.
Tonix is a biopharmaceutical company focused on commercializing, developing, discovering and licensing therapeutics to treat and prevent human disease and alleviate suffering. Tonix Medicines, our commercial subsidiary, markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg under a transition services agreement with Upsher-Smith Laboratories, LLC from whom the products were acquired on June 30, 2023. Zembrace SymTouch and Tosymra are each indicated for the treatment of acute migraine with or without aura in adults. Tonix’s development portfolio is composed of central nervous system (CNS), rare disease, immunology and infectious disease product candidates. Tonix’s CNS development portfolio includes both small molecules and biologics to treat pain, neurologic, psychiatric and addiction conditions. Tonix’s lead development CNS candidate, TNX-102 SL (cyclobenzaprine HCl sublingual tablet), is in mid-Phase 3 development for the management of fibromyalgia, having completed enrollment of a potentially confirmatory Phase 3 study in the third quarter of 2023, with topline data expected in late December 2023. TNX-102 SL is also being developed to treat fibromyalgia-type Long COVID, a chronic post-acute COVID-19 condition. Enrollment in a Phase 2 proof-of-concept study has been completed, and topline results were reported in the third quarter of 2023. TNX-1900 (intranasal potentiated oxytocin), is in development as a preventive treatment for chronic migraine, and enrollment has been completed in a Phase 2 proof-of-concept study with topline data expected in early December 2023. TNX-1900 is also being studied in binge eating disorder, pediatric obesity and social anxiety disorder by academic collaborators under investigator-initiated INDs. TNX-1300 (cocaine esterase) is a biologic designed to treat cocaine intoxication and has been granted Breakthrough Therapy designation by the FDA. A Phase 2 study of TNX-1300 is expected to be initiated in the fourth quarter of 2023. Tonix’s rare disease development portfolio includes TNX-2900 (intranasal potentiated oxytocin) for the treatment of Prader-Willi syndrome. TNX-2900 has been granted Orphan Drug designation by the FDA. Tonix’s immunology development portfolio includes biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-1500, which is a humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft rejection and for the treatment of autoimmune diseases. A Phase 1 study of TNX-1500 was initiated in the third quarter of 2023. Tonix’s infectious disease pipeline includes TNX-801, a vaccine in development to prevent smallpox and mpox. TNX-801 also serves as the live virus vaccine platform or recombinant pox vaccine platform for other infectious diseases, including TNX-1800, in development as a vaccine to protect against COVID-19. The infectious disease development portfolio also includes TNX-3900 and TNX-4000, which are classes of broad-spectrum small molecule oral antivirals.
*Tonix’s product development candidates are investigational new drugs or biologics and have not been approved for any indication.
Zembrace SymTouch and Tosymra are registered trademarks of Tonix Medicines. Intravail is a registered trademark of Aegis Therapeutics, LLC, a wholly owned subsidiary of Neurelis, Inc. All other marks are property of their respective owners.
1 TNX-1800 and TNX-801 are experimental new vaccines and have not been approved for any indication. 2 Awasthi, M. et al. Viruses. 2023. 15(10):2131. 3 Awasthi, M. et al. BioRxiv. 2023. 4 Trefry S, et al. BioRxiv. 2023. 5 Noyce RS, et al. Viruses. 2023. 15(2):356. 6 Jenner E. “An Inquiry Into the Causes and Effects of the Variole Vaccinae, a Disease Discovered in Some of the Western Counties of England, Particularly Gloucestershire and Known by the Name of the cow‐pox.” London: Sampson Low, 1798. 7 Noyce RS, et al. PloSOne. 2018. 13(1):e0188453. 8 Schrick L et al. N Engl J Med. 2017. 377:1491-1492. 9 Tulman ER, et al. J Virol. 2006. 80(18):9244-58. 10 TNX-801 PR pre-IND meeting August 20, 2023: https://ir.tonixpharma.com/news-events/press-releases/detail/1417/tonix-pharmaceuticals-announces-results-of-pre-ind-meeting 11 McQuiston JH, et al. MMWR Morb Mortal Wkly Rep. 2023. 72:547–552. 12 Centers for Disease Control. MMWR Morb Mortal Wkly Rep. 2023. 72(25);696-698.
This press release and further information about Tonix can be found at www.tonixpharma.com.
Forward Looking Statements
Certain statements in this press release are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “forecast,” “estimate,” “expect,” and “intend,” among others. These forward-looking statements are based on Tonix’s current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks related to the failure to obtain FDA clearances or approvals and noncompliance with FDA regulations; risks related to the failure to successfully market any of our products; risks related to the timing and progress of clinical development of our product candidates; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence upon third parties; and substantial competition. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. Tonix does not undertake an obligation to update or revise any forward-looking statement. Investors should read the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2023, and periodic reports filed with the SEC on or after the date thereof. All of Tonix’s forward-looking statements are expressly qualified by all such risk factors and other cautionary statements. The information set forth herein speaks only as of the date thereof.
MALVERN, Pa., Nov. 02, 2023 (GLOBE NEWSWIRE) — Ocugen, Inc. (Ocugen or the Company) (NASDAQ: OCGN), a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies, biologics, and vaccines, today announced that it will host a conference call and live webcast to discuss the Company’s third quarter 2023 financial results and provide a business update at 8:30 a.m. ET on Thursday, November 9, 2023.
Ocugen will issue a pre-market earnings announcement on the same day. Attendees are invited to participate on the call using the following details:
Dial-in Numbers: (800) 715-9871 for U.S. callers and (646) 307-1963 for international callers Conference ID: 1787631 Webcast: Available on the events section of the Ocugen investor site
A replay of the call and archived webcast will be available for approximately 45 days following the event on the Ocugen investor site.
About Ocugen, Inc. Ocugen, Inc. is a biotechnology company focused on discovering, developing, and commercializing novel gene and cell therapies, biologics, and vaccines that improve health and offer hope for patients across the globe. We are making an impact on patient’s lives through courageous innovation—forging new scientific paths that harness our unique intellectual and human capital. Our breakthrough modifier gene therapy platform has the potential to treat multiple retinal diseases with a single product, and we are advancing research in infectious diseases to support public health and orthopedic diseases to address unmet medical needs. Discover more at www.ocugen.com and follow us on X and LinkedIn.
Cautionary Note on Forward-Looking Statements This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. We may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such statements are subject to numerous important factors, risks, and uncertainties that may cause actual events or results to differ materially from our current expectations. These and other risks and uncertainties are more fully described in our periodic filings with the Securities and Exchange Commission (SEC), including the risk factors described in the section entitled “Risk Factors” in the quarterly and annual reports that we file with the SEC. Any forward-looking statements that we make in this press release speak only as of the date of this press release. Except as required by law, we assume no obligation to update forward-looking statements contained in this press release whether as a result of new information, future events, or otherwise, after the date of this press release.
Enables greater focus on higher margin, higher growth global managed service provider (MSP) solutions, global recruitment process outsourcing (RPO) solutions, and specialty outcome-based and staffing services in North America
Transaction expected to close in the first quarter of 2024; cash consideration of €100 million with additional earnout potential of up to €30 million
Unlocks significant capital to invest in organic and inorganic growth
TROY, Mich., Nov. 2, 2023 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading global specialty talent solutions provider, today announced that it has entered into a definitive agreement to sell its European staffing business to Gi Group Holdings S.P.A. (“Gi”), one of the largest staffing companies in Europe, for cash consideration of up to €130 million. The transaction is expected to close in the first quarter of 2024, subject to receipt of required regulatory approvals and other customary closing conditions.
Under the terms of the agreement, Kelly will transfer its European staffing business within its International operating segment to Gi. Kelly provides staffing services to customers in 14 countries across Europe. The company will retain its managed service provider, recruitment process outsourcing, and functional service provider (FSP) business with customers in the Europe, Middle East, and Africa (EMEA) region.
Following the close of the transaction, Kelly will maintain its global footprint and continue to provide MSP, RPO, and FSP solutions to customers in the EMEA region through KellyOCG, Kelly’s outsourcing and consulting group. As a leading global vendor-neutral provider of talent supply chain strategies and workforce solutions, KellyOCG leverages a network of 3,000 suppliers spanning 140 countries – including Gi – to connect customers across North America, Asia Pacific, and EMEA with top talent to grow their businesses. In Everest Group’s 2023 PEAK Matrix®, KellyOCG was recognized as a leader and major contender for its MSP and RPO solutions, respectively, with the latter earning KellyOCG star performer status. Everest Group also recognized KellyOCG as a leader and star performer in statement-of-work (SOW) management.
“The sale of Kelly’s European staffing business demonstrates our commitment to taking bold, transformative action to optimize our portfolio and maximize value creation,” said Peter Quigley, president and chief executive officer. “This transaction unlocks significant capital to pursue organic and inorganic investments in our chosen specialties. Furthermore, it sharpens our focus on our higher margin, higher growth global MSP solutions, global RPO solutions, and specialty outcome-based and staffing services in North America. Together, we expect these outcomes will accelerate Kelly’s progress toward achieving a normalized, adjusted EBITDA margin in the range of 3.3% to 3.5% as we shared in August and drive profitable growth over the long term.”
The transaction is the latest in a series of strategic actions Kelly has executed to unlock capital in pursuit of its specialty strategy and further optimize its operating model, which includes monetizing non-core real estate holdings and businesses; unwinding Kelly’s cross-shareholding arrangement with Persol and reducing the company’s ownership interest in PersolKelly, its Asia-Pacific staffing joint venture; selling its operations in Brazil and Russia; and most recently, implementing strategic restructuring actions which enhance organizational efficiency and effectiveness.
Quigley and Olivier Thirot, executive vice president and chief financial officer, will provide additional details about this transaction as it relates to the company’s specialty strategy during its upcoming third-quarter earnings conference call on November 9, 2023.
DLA Piper is serving as legal counsel to Kelly.
About Kelly®
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 450,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2022 was $5.0 billion. Learn more at kellyservices.com.
Forward-Looking Statements
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Kelly’s financial expectations, are forward-looking statements. Factors that could cause actual results to differ materially from those contained in this release include, but are not limited to, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business’s anticipated growth strategies, (vi) our future business development, results of operations and financial condition, (vii) damage to our brands, (viii) dependency on third parties for the execution of critical functions, (ix) conducting business in foreign countries, including foreign currency fluctuations, (x) availability of temporary workers with appropriate skills required by customers, (xi) cyberattacks or other breaches of network or information technology security, and (xii) other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. All information provided in this press release is as of the date of this press release and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
Drill intercepts of 6.28 gpt AuEq over 15.00m, 2.96 gpt AuEq over 22.52m, 2.00 gpt AuEq over 61.23m and 1.39 gpt AuEq over 45.67m encountered at Cumberland
Rock chip samples of 37.23, 23.34, 20.34 and 20.23 gpt AuEq from Scarlet Knob
TORONTO, ON / ACCESSWIRE / November 2, 2023 / Eskay Mining Corp. (“Eskay” or the “Company”) (TSXV:ESK)(OTCQX:ESKYF)(Frankfurt:KN7)(WKN:A0YDPM) is pleased to announce it has received very encouraging assay results from its 2023 diamond drill and exploration campaign at its 100% controlled Consolidated Eskay Gold Project in the Golden Triangle of British Columbia. Precious metal-rich volcanogenic massive sulfide (“VMS”) deposits are the focus of Eskay’s exploration.
Cumberland VMS Discovery
Nine short diamond core holes were completed at the Cumberland Showing in 2023 (Figure 2), several of which encountered very promising precious and base metal-rich stockwork and massive mineralization. Notable results include:
3.02 gpt Au, 68.66 gpt Ag, 0.24% Cu, 0.73% Pb and 4.86% Zn (6.28 gpt AuEq) over 15.00m including 8.48 gpt Au, 103.27 gpt Ag, 0.23% Cu, 1.08% Pb and 4.16% Zn (12.02 gpt AuEq) over 3.41m in hole CBL23-28.
1.21 gpt Au, 29.22 gpt Ag, 0.12% Cu, 0.32% Pb and 2.94% Zn (2.96 gpt AuEq) over 22.52m including 3.45 gpt Au, 108.21 gpt Ag, 0.65% Cu, 0.54% Pb and 19.40% Zn (13.24 gpt AuEq) over 1.75m in hole CBL23-29.
0.68 gpt Au, 15.72 gpt Ag, 0.07% Cu, 0.27% Pb and 0.90% Zn (1.39 gpt AuEq) over 45.67m in hole CBL23-30.
0.95 gpt Au, 29.04 gpt Ag, 0.07% Cu, 0.29% Pb and 1.31% Zn (2.00 gpt AuEq) over 61.23m including 1.57 gpt Au, 58.80 gpt Ag, 0.16% Cu, 0.60% Pb and 3.13% Zn (3.91 gpt AuEq) over 20.08m in hole CBL23-31.
Cumberland lies approximately 6km due south of the TV deposit and is similarly situated along the east side of the Eskay anticline. Eskay’s geologic team thinks this discovery opens up considerable exploration potential in areas between Cumberland and the TV-Jeff VMS complex (Figures 3 and 4). It is notable that mineralization at Cumberland displays very high base metals, an indicator of high formational fluid temperatures, a potential sign that this area lies in proximity to a major feeder vent or vents.
Based upon data from this limited first phase drill program, the Cumberland VMS deposit is interpreted to be tabular with a N-S orientation and a near vertical dip, perhaps slightly overturned. It remains open along strike and at depth. A review of historic soil data (Figures 3 and 4) from areas up to 1.5 km south of Cumberland indicates a broad area of strongly anomalous geochemistry, especially elevated silver values, confirming a likely extension of mineralization in this direction. Eskay’s geologic team observed significant outcropping sulfide mineralization while conducting traverses in this region south of Cumberland.
While prospecting late in the season, a notable area of outcropping sulfide mineralization was observed approximately 2.5 km to the northeast of Cumberland and is potentially part of the same VMS system. This area has been named Mahogany Ridge. Historic rock chip sample data from the broader Cumberland trend includes samples grading 25.0, and 27.9 gpt Au.
Given the strong drill and rock chip sample results from the Cumberland-Mahogany Ridge area, Eskay Mining views this discovery as a high priority exploration target. Compelling evidence is emerging that the corridor starting at TV-Jeff in the north through Mahogany Ridge and Cumberland and continuing a further 1.5km south of Cumberland is highly prospective for further precious metal-rich VMS discoveries. Eskay Mining thinks this corridor requires urgent follow up work including drilling in 2024.
“Cumberland is shaping up to be a very compelling and unique target”, commented John DeDecker, Eskay’s VP of Exploration. “Intense polymetallic sulfide mineralization ranges from stockwork-style, to massive seafloor-hosted mineralization. The seafloor-hosted mineralization is associated with barite breccia, and is capped by a non-mineralized and highly magnetic pillow basalt. Drilling and field investigations have defined the orientation of the mineralized seafloor horizon, and have shown that Ag anomalies in historic soil samples, and a pronounced magnetic anomaly evident in the 2021 EM survey lie along the trend of mineralization extending at least 300 m south of Cumberland. Our team looks forward to investigating this area further in 2024. The confirmation of another mineralized seafloor horizon at Scarlet Knob, and extensive disseminated Au mineralization at Tarn Lake opens these areas up to targeted exploration in 2024.”
Summary of significant results from nine core holes completed at the Cumberland Showing in 2023:
Hole
From (m)
To (m)
Length (m)
Au (gpt)
Ag (gpt)
Cu (%)
Pb (%)
Zn (%)
Au Eq (gpt)
CBL23-26
NSV
CBL23-27
1.26
8.15
6.89
0.58
16.93
–
–
–
0.79
22.57
25.76
3.19
0.33
12.50
–
0.25
0.34
0.70
30.50
35.39
4.89
0.43
11.80
–
0.10
0.61
0.85
71.83
92.65
20.82
0.28
1.11
0.06
0.08
2.00
1.16
includes
73.63
76.71
3.08
0.17
6.62
0.08
0.04
2.80
1.44
includes
84.90
85.90
1.00
1.78
23.00
0.35
0.25
11.85
7.13
103.98
121.03
17.05
0.34
10.12
–
–
–
0.47
CBL23-28
1.29
16.29
15.00
3.02
68.66
0.24
0.73
4.86
6.28
includes
5.68
16.29
10.61
4.11
92.84
0.30
0.92
6.33
8.39
includes
9.86
13.27
3.41
8.48
103.27
0.23
1.08
4.16
12.02
CBL23-29
1.69
24.21
22.52
1.21
29.22
0.12
0.32
2.94
2.96
includes
1.69
4.79
3.10
2.90
14.18
0.06
0.29
0.49
3.44
and
14.94
24.21
9.27
1.70
53.89
0.23
0.51
0.62
3.07
includes
22.46
24.21
1.75
3.45
108.21
0.65
0.54
19.40
13.24
CBL23-30
0.89
46.56
45.67
0.68
15.72
0.07
0.27
0.90
1.39
includes
0.89
2.79
1.90
2.72
5.03
0.02
1.46
0.19
3.37
and
17.12
46.56
29.44
0.84
21.40
0.11
0.38
1.56
1.97
CBL23-31
1.22
62.45
61.23
0.95
29.04
0.07
0.29
1.31
2.00
includes
1.22
2.22
1.00
9.84
6.78
0.02
0.15
0.06
10.02
and
30.20
50.28
20.08
1.57
58.80
0.16
0.60
3.13
3.91
includes
30.20
35.20
5.00
1.36
57.82
0.48
0.43
8.75
6.18
and
36.20
38.25
2.05
4.64
155.07
0.07
1.16
1.34
7.57
85.00
95.00
10.00
0.48
13.07
–
0.08
0.17
0.74
CBL23-32
NSV
CBL23-33
NSV
CBL23-34
114.28
117.28
3.00
0.20
7.42
–
0.09
1.38
0.85
127.61
136.65
9.04
0.14
3.42
–
0.02
1.01
0.58
NSV = No Significant Values; AuEq values have been calculated using a Ag-to-Au ratio of 80:1, Cu-to-Au ratio of 8,100:1, Pb-to-Au ratio of 29,800:1 and Zn-to-Au ratio of 26,050:1 for this news release.
Scarlet Knob-Bruce Glacier Discovery
Near the end of the exploration season at a time of maximum snowmelt, Eskay Mining’s exploration team found outcrops of metal-rich VMS mineralization immediately adjacent to the eastern margin of Bruce Glacier. This area is called Scarlet Knob and is located in the northeastern part of the Consolidated Eskay Gold Project approximately 7km southeast of the Eskay Creek mine. Four rock chip samples collected from a 100 m long, 5 m wide sulfide replacement body (Figures 6 and 7) returned very strong precious and base metal values as presented below:
Sample
Au (gpt)
Ag (gpt)
Cu (%)
Pb (%)
Zn (%)
Au Eq (gpt)
1001A
11.71
199.03
0.33
7.77
8.16
20.34
1001B
22.26
461.97
0.22
14.57
10.50
37.23
1001C
10.04
169.50
0.16
12.00
10.02
20.23
1001D
14.80
160.82
0.16
9.53
8.18
23.34
Although this outcropping sulfide body is small, it appears to occur at or near the paleo-sea floor interface, a stratigraphic position conducive for hosting a deposit like that at the nearby Eskay Creek mine. Given the very strong precious metal values from these samples, Eskay mining’s geologic team takes a strong view that this occurrence suggests a bigger system may be present in this area.
Early in the drill season, four core holes were drilled in an area approximately 200 m south of this high-grade discovery. These holes were drilled based upon a conceptual view formed by Eskay Mining’s geologic team that the paleo-seafloor position, possibly mineralized, should be hiding under Bruce Glacier. All four of these drill holes indeed pierced the contact between volcanic rocks and sea floor mudstone, and two of these holes encountered highly elevated precious and base metal values as seen in the table below:
Hole
From (m)
To (m)
Length (m)
Au (gpt)
Ag (gpt)
Cu (%)
Pb (%)
Zn (%)
Au Eq (gpt)
SKN23-01
172.92
174.10
1.18
0.24
46.90
–
1.93
1.19
1.93
255.32
257.51
2.19
0.40
49.66
–
0.45
0.47
1.35
SKN23-02
188.81
191.43
2.62
0.52
33.75
–
0.62
1.63
1.78
SKN23-03
NSV
SKN23-04
NSV
Although these intercepts are not long, the strong precious and base metal contents encountered in these holes are considered the sort of values that might occur proximal to a much stronger VMS system. Combined with the latter surface discovery of high-grade precious and base metal mineralization discussed above, this lends further strong evidence for a larger VMS system in this area. Eskay Mining’s geologic team takes the view that more exploration including core drilling is warranted at Scarlet Knob in 2024.
Tarn Lake
Four diamond drill holes were completed at Tarn Lake during the 2023 drill campaign (Figure 5) to follow up on encouraging drill results from this area in 2022. While all four holes encountered short to moderate length intervals of mineralization, two holes, TN23-14 and TN23-16 encountered short high-grade intervals, 4.84 gpt Au and 8.14 gpt Ag (4.94 gpt AuEq) over 2.00m in TN23-14 and 7.83 gpt Au and 6.96 gpt Ag (7.92 gpt AuEq) over 2.45m in TN23-16. These can be seen in the table below:
Hole
From (m)
To (m)
Length (m)
Au (gpt)
Ag (gpt)
Cu (%)
Pb (%)
Zn (%)
Au Eq (gpt)
TN23-13
34.00
37.69
3.69
0.48
2.69
–
–
–
0.51
43.50
48.50
5.00
0.37
4.44
–
–
–
0.43
TN23-14
66.39
67.80
1.41
3.33
0.84
–
–
–
3.34
78.40
84.40
6.00
2.07
4.82
–
–
–
2.13
includes
80.40
82.40
2.00
4.84
8.14
–
–
–
4.94
114.81
117.90
3.09
0.59
4.70
–
–
–
0.65
TN23-15
51.00
54.02
3.02
0.43
3.08
–
–
–
0.47
63.15
65.28
2.13
0.83
1.95
–
–
–
0.85
136.80
153.70
16.90
0.31
6.40
–
–
–
0.39
175.90
187.50
11.60
0.82
5.88
–
–
–
0.89
208.30
215.82
7.52
0.75
8.00
–
–
–
0.85
244.93
250.30
5.37
0.46
2.04
–
–
–
0.49
TN23-16
130.44
132.89
2.45
7.83
6.96
–
–
–
7.92
includes
130.44
131.39
0.95
12.40
10.00
–
–
–
12.53
Given the most promising results from Tarn Lake to date come from feeder zone type mineralization perhaps occurring deep in a VMS system, Eskay Mining’s geologic team is considering where the upper part of this system, including the favorable paleo-sea floor position, might lie. Rock chip sampling conducted in 2023 shows that disseminated Au mineralization extends approximately 100 m to the west of and over 200 m to the north of the drill holes at Tarn Lake (Figure 6). More field work and follow up drilling will be needed to ascertain if the better part of this system is present in the Tarn Lake area.
Other Targets
Targeting at Hexagon-Mercury (Figure 1), situated on the western flank of the Eskay Anticline approximately 9 km south of Eskay Creek mine, was driven by geophysical anomalies interpreted by Riaz Mirza of Simcoe Geoscience. One of two drill holes completed at the target yielded an intercept of over 100 m of appreciable stockwork sulfide mineralization hosted by volcanic rock thought to be part of the lower Hazelton Group. While no appreciable precious metals were encountered, moderately elevated pathfinder elements are present. Further work is needed in this location to refine future targets.
Two holes tested the Maroon Cliffs target (Figure 1) situated in the far northeast corner of the Consolidated Eskay Gold Project. Similar to Hexagon-Mercury, targeting at Maroon Cliffs was driven by geophysics. Neither hole encountered appreciable precious metal mineralization, and only weak pathfinder geochemistry. The magnetic expression that defined this target is believed to be driven by a package of conglomerate rock with magnetite-bearing clasts observed in core.
One hole was completed at Storie Creek, a target situated just 3.5 km SSE of the Eskay Creek mine. Prior to drilling, Eskay Mining’s geologic team formed the view that favorable Hazelton Group host rocks dip westward under the drill site thus making an intriguing blind target. Drilling determined that an east dipping reverse fault underlies Storie Creek. Therefore, any prospective Hazelton Group rocks will only lie to the east of Storie Creek. Consideration is being given to what further exploration might be done in the area.
Drill hole data from 2023 program:
Hole ID
Easting (m)
Northing (m)
Elevation (m)
Azimuth
Dip
Total Depth (m)
CBL23-26
408644
6261448
367
65
45
210
CBL23-27
408679
6261475
375
40
65
258
CBL23-28
408679
6261475
375
330
80
78
CBL23-29
408679
6261475
375
354
70
81
CBL23-30
408679
6261475
375
10
70
62
CBL23-31
408679
6261475
375
25
65
122
CBL23-32
408679
6261475
375
85
65
95
CBL23-33
408679
6261475
375
30
50
16.5
CBL23-34
408644
6261448
367
45
45
142
TV23-124
409628
6265299
963
283
55
299
TN23-13
415192
6273601
1461
270
44
141.2
TN23-14
415198
6273503
1465
305
55
190.4
TN23-15
415001
6273619
1518
100
50
463.2
TN23-16
415001
6273619
1518
100
75
284
SKN23-01
416097
6273570
1465
270
45
339
SKN23-02
416097
6273570
1465
295
45
289
SKN23-03
416097
6273570
1465
255
45
296
SKN23-04
416097
6273570
1465
275
65
307
MC23-02
421550
6280156
917
180
45
248
MC23-01
423441
6279855
917
180
45
260
HM23-02
408901
6270942
541
245
45
255
HM23-01
408473
6272255
831
245
45
276
SC23-01
411834
6273639
399
130
50
810
SC23-02
413145
6275147
559
130
50
151
QA/QC, Methodology Statement:
Halved HQ drill core samples are submitted to ALS Geochemistry in Terrace, British Columbia for preparation and analysis. ALS is accredited to the ISO/IEC 17025 standard for gold assays. All analytical methods include quality control standards inserted at set frequencies. The entire sample interval is crushed and homogenized, 250 g of the homogenized sample is pulped. All samples were analyzed for gold, silver, mercury, and a suite of 48 major and trace elements. Analysis for gold is by fire assay fusion followed by Inductively Coupled Plasma Atomic Emission Spectroscopy (ICP-AES) on 30 g of pulp. Analysis for silver is by fire assay and gravimetric analysis on 30 g of pulp. Mercury is analyzed using the trace Hg Inductively Coupled Plasma Mass Spectroscopy (ICP-MS) method. All other major and trace elements are analyzed by four-acid digestion followed by ICP-MS.
The assay results for rock chip samples reported for Scarlet Knob were obtained from Skeena Resources field assay laboratory. The entire sample is crushed and homogenized, and 100g of the homogenized sample is pulped. All samples were analyzed for gold, silver, arsenic, copper, lead, and zinc. Duplicates of these samples were sent to ALS Geochemistry in Terrace, British Columbia for certified analyses. Certified assay results for the Scarlet Knob rock chip samples are pending.
Historical rock chip and soil sample data is sourced from Assessment Reports AR17205 and AR22231. Eskay Mining is unable to fully verify this data, and it should be treated as such by the reader.
Mineralization at the TV and Jeff deposits displays similar characteristics and mineralogy to the Eskay Creek deposit and therefore for Au eq, and Au:Ag, a ratio of 78:1 is used and Au eq and Ag eq values are deemed to be reasonable based on assumed gold recovery (84.2%) and silver recovery (87.3%) as reported in the Eskay Creek Project NI 43-101 Technical Report and Prefeasibility Study, British Columbia, Canada, Effective Date: 22 July, 2021, Prepared for: Skeena Resources Ltd., Prepared by: Absence Engineering Canada Inc.
True widths of reported intercepts are not fully understood at this time. More drilling is required to ascertain true widths at these newly identified mineralized areas.
Dr. Quinton Hennigh, P. Geo., a Director of the Company and its technical adviser, a qualified person as defined by National Instrument 43-101, has reviewed and approved the technical contents of this news release.
About Eskay Mining Corp:
Eskay Mining Corp (TSX-V:ESK) is a TSX Venture Exchange listed company, headquartered in Toronto, Ontario. Eskay is an exploration company focused on the exploration and development of precious and base metals along the Eskay rift in a highly prolific region of northwest British Columbia known as the “Golden Triangle,” 70km northwest of Stewart, BC. The Company currently holds mineral tenures in this area comprised of 177 claims (52,600 hectares).
All material information on the Company may be found on its website at www.eskaymining.com and on SEDAR at www.sedar.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements: This Press Release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to risks and uncertainties. Many factors could cause our actual results to differ materially from the statements made, including those factors discussed in filings made by us with the Canadian securities regulatory authorities. Should one or more of these risks and uncertainties, such as actual results of current exploration programs, the general risks associated with the mining industry, the price of gold and other metals, currency and interest rate fluctuations, increased competition and general economic and market factors, occur or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, or expected. We do not intend and do not assume any obligation to update these forward-looking statements, except as required by law. Shareholders are cautioned not to put undue reliance on such forward-looking statements.
(Figure 1. Plan view of Eskay Mining’s land holdings at Consolidate Eskay Gold Project.)
(Figure 2. Plan view (top) and section looking southeast (bottom) showing assay results in Au equivalent for 2023 drill holes at Cumberland.)
(Figure 3. Map of the Cumberland prospect showing Ag values in soil samples and Au in rock chip samples reported in assessment reports 17205 and 22231. The Ag anomaly immediately south of Cumberland lies along the trend of mineralization as determined by drilling and field work in 2023.)
(Figure 4. Magnetic map of the Cumberland-Excelsior-Mahogany Ridge-TV area showing soil sample results from the 2021-2022 exploration programs and historic sampling programs reported in assessment reports 17205, and 22231. There are pronounced magnetic and Ag soil anomalies along trend from mineralization at the Cumberland prospect. This area will be a focus of exploration activities in 2024.)
(Figure 5. Plan view (top) and section looking southeast (bottom) showing assay results in Au equivalent for 2023 drill holes at Tarn Lake.)
(Figure 6. Map of the Bruce Glacier area showing the drill traces at Tarn Lake and Scarlet Knob, and Au assay results for rock chip samples collected during the 2021-2023 exploration programs. An approximately 100 m long and 5 m wide trend of semi-massive replacement-style polymetallic sulfide mineralization at Scarlet Knob yielded several Au- and Ag-bearing samples. Sampling at Tarn Lake shows that disseminated Au mineralization extends at least 100 m west of and 200 m north of 2022-2023 drilling. Both of these areas remain high-priority targets for exploration in 2024.)
(Figure 7. Top: The trend of semi-massive sulfide mineralization that was sampled at Scarlet Knob, with geologist for scale. Bottom: Photograph of sample 1001B showing massive polymetallic sulfide mineralization. This zone is associated with an andesite dike, with the most intense mineralization associated with sulfide replacement of volcaniclastic debris flow breccia surrounding the dike. The presence of replacement-style mineralization indicates a stratigraphic position within 200 m of the paleoseafloor. The confirmation of a paleoseafloor horizon in the 2023 drill holes at Scarlet Knob, raises the possibility that the VMS system that produced the replacement-style mineralization shown above may have fed seafloor vents. Investigation of this possibility will be an objective of the 2024 exploration program.)
EPS of $0.22, up 100% year-over-year Adjusted EBITDA of $16.6 million, up 16.1% year-over-year Our strategy continues to favorably impact our results as Electrical Systems revenues were up 16.8% year-over-year
NEW ALBANY, Ohio, Nov. 01, 2023 (GLOBE NEWSWIRE) — CVG (NASDAQ: CVGI), a diversified industrial products and services company, today announced financial results for its third quarter ended September 30, 2023.
Third Quarter 2023Highlights(Compared with prior year, where comparisons are noted)
Revenues of $246.7 million, down 1.9% due primarily to higher revenue in the prior year as a result of a COVID backlog in Asia-Pacific which offset an increase in revenue in Electrical Systems in 2023.
Operating income of $12.4 million, up 30.5%; adjusted operating income of $12.5 million, up 17.9%. Improved operating income was driven primarily by improved pricing and cost management, partially offset by volume decreases.
Net income and adjusted net income were both $7.3 million, or $0.22 per diluted share, compared to net income of $3.6 million, or $0.11 per diluted share and adjusted net income of $5.1 million, or $0.15 per diluted share.
Adjusted EBITDA of $16.6 million, up 16.1% with an adjusted EBITDA margin of 6.7%, up from 5.7%.
New business wins year-to-date are expected to be approximately $140 million when fully ramped. The majority of the new business awards continue to be in the Electrical Systems segment.
Strong free cash flow and debt pay down reduced our leverage ratio down to 1.5x from 2.7x.
Robert Griffin, Chairman of the Board and Interim President and Chief Executive Officer, said, “CVG continues to execute on its strategic long-term plan, which again delivered year-over-year bottom line improvements in the quarter. Electrical Systems remains a key growth area for the Company, as evidenced by the strong revenue growth compared to last year and the successful start-up at our new Electrical Systems facilities in Aldama, Mexico, and Tangier, Morocco, which has gone very well. As always, I would like to thank our global CVG teams for their hard work, dedication, and commitment as we continue to execute our strategic goals.”
Andy Cheung, Chief Financial Officer, added, “CVG continued executing on our strategy, delivering strong year-over-year improvements in profitability during the quarter. Despite the strong performance, revenues declined slightly year-over-year against a tough comparable base year in 2022, when our Asia-Pacific business benefited from a post-COVID increase in backlogged sales orders. We also had improved earnings and generated strong free cash flow of $12.5 million during the quarter, further strengthening our financial foundation, and reduced our leverage to 1.5x from 2.7x in the third quarter last year.”
“Going forward, we remain committed to driving strong free cash flow, paying down debt, and investing to support our growing, diverse portfolio of businesses.”
Third Quarter Financial Results (amounts in millions except per share data and percentages)
ThirdQuarter
2023
2022
$ Change
% Change
Revenues
$
246.7
$
251.4
$
(4.7
)
(1.9)%
Gross profit
$
33.9
$
26.8
$
7.1
26.5%
Gross margin
13.7
%
10.7
%
Adjusted gross profit 1
$
34.0
$
27.4
$
6.6
24.1%
Adjusted gross margin 1
13.8
%
10.9
%
Operating income
$
12.4
$
9.5
$
2.9
30.5%
Operating margin
5.0
%
3.8
%
Adjusted operating income 1
$
12.5
$
10.6
$
1.9
17.9%
Adjusted operating margin 1
5.1
%
4.2
%
Net income
$
7.3
$
3.6
$
3.7
102.8%
Adjusted net income 1
$
7.3
$
5.1
$
2.2
43.1%
Earnings per share, diluted
$
0.22
$
0.11
$
0.11
100.0%
Adjusted earnings per share, diluted 1
$
0.22
$
0.15
$
0.07
46.7%
Adjusted EBITDA 1
$
16.6
$
14.3
$
2.3
16.1%
Adjusted EBITDA margin 1
6.7
%
5.7
%
1 See Appendix A for GAAP to Non-GAAP reconciliation
Consolidated Results
Third Quarter 2023 Results
Third quarter 2023 revenues were $246.7 million, compared to $251.4 million in the prior year period, a decrease of 1.9%. The overall decrease in revenues was due to higher revenue in the prior year as a result of a COVID backlog in Asia-Pacific. Foreign currency translation also favorably impacted third quarter 2023 revenues by $2.0 million, or 0.8%.
Operating income in the third quarter 2023 was $12.4 million compared to $9.5 million in the prior year period. The increase in operating income was attributable to improved pricing and cost management, partially offset by volume decreases. Third quarter 2023 adjusted operating income was $12.5 million, excluding special charges.
Interest associated with debt and other expenses was $2.6 million and $2.8 million for the third quarter 2023 and 2022, respectively.
Net income was $7.3 million, or $0.22 per diluted share, for the third quarter 2023 compared to net income of $3.6 million, or $0.11 per diluted share, in the prior year period.
On September 30, 2023, the Company had $5.0 million of outstanding borrowings on its U.S. revolving credit facility and $4.1 million outstanding on its China credit facility, $46.3 million of cash and $152.0 million of availability from the credit facilities, resulting in total liquidity of $198.3 million.
Third Quarter 2023 Segment Results
Vehicle Solutions Segment
Revenues were $145.4 million compared to $154.0 million for the prior year period, a decrease of 5.6%, due to higher revenue in the prior year as a result of a COVID backlog in Asia-Pacific.
Operating income was $10.9 million, compared to $9.6 million in the prior year period, an increase of 14.0%, primarily attributable to price increases, material and freight cost reduction improvements, partially offset by volume decreases.
Electrical Systems Segment
Revenues were $53.9 million compared to $46.1 million in the prior year period, an increase of 16.8%, primarily resulting from increased sales volume, pricing and favorable foreign exchange.
Operating income was $5.9 million compared to $5.2 million in the prior year period, an increase of 13.7%. The increase in operating income was primarily attributable to increased sales volume and pricing, partially offset by startup costs related to new facilities.
Aftermarket & Accessories Segment
Revenues were $34.4 million compared to $37.1 million in the prior year period, a decrease of 7.4%, primarily resulting from decreased sales volume.
Operating income was $4.5 million compared to $5.0 million in the prior year period, a decrease of 9.1%. The decrease in operating income was primarily attributable to cost inflation, partially offset by increased pricing.
Industrial Automation Segment
Revenues were $13.0 million compared to $14.1 million in the prior year period, a decrease of 7.8%, primarily due to lower sales volume due to decreased customer demand.
Operating income was $0.7 million compared to an operating loss of $1.0 million in the prior year period. The increase in operating income was primarily attributable to profit reported from the liquidation of certain excess inventories. Adjusted operating income was $0.8 million.
2023 Demand Outlook
According to ACT Research, the 2023 North American Class 8 truck production levels are expected to be at 336,000 units, compared to approximately 315,000 units in 2022. Class 8 estimates from FTR for 2023 are 327,000 units, slightly lower than ACT Research for Class 8 truck builds. Class 5-7 production levels are expected to be at 266,000 units in 2023. The 2024 forecast Class 8 truck builds according to ACT Research is approximately 274,000 units.
According to Transparency Market Research Inc, the global commercial and automotive vehicle wire harness market is growing at approximately 5% per year.
According to Interact Analysis, the Global Off-Highway vehicle market is expected to increase approximately 5% in 2023. Beyond 2023, the Off-Highway vehicle market is expected to grow in the 4-5% range.
According to MacKay and Company, North American aftermarket truck parts are expected to see at least 4% growth in 2023. Compounded annual growth of at least 4% is forecasted for 2023-2027.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures referenced in this release is included as Appendix A to this release.
Conference Call
A conference call to discuss this press release is scheduled for Thursday, November 2, 2023, at 10:00 a.m. ET. Management intends to reference the Q3 2023 Earnings Call Presentation during the conference call. To participate, dial (888) 259-6580 using conference code 93330617. International participants dial (416) 764-8624 using conference code 93330617.
This call is being webcast and can be accessed through the “Investors” section of CVG’s website at ir.cvgrp.com, where it will be archived for one year.
A telephonic replay of the conference call will be available for a period of two weeks following the call. To access the replay, dial (877) 674-7070 using access code 051647 and international callers can dial (416) 764-8692 using access code 051647.
Company Contact Andy Cheung Chief Financial Officer CVG IR@cvgrp.com
Investor Relations Contact Ross Collins or Stephen Poe Alpha IR Group CVGI@alpha-ir.com
About CVG
At CVG, we deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries and communities we serve. Information about the Company and its products is available on the internet at www.cvgrp.com.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions. In particular, this press release may contain forward-looking statements about the Company’s expectations for future periods with respect to its plans to improve financial results, the future of the Company’s end markets, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction equipment business, the Company’s prospects in the wire harness, warehouse automation and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including those included in the Company’s filings with the SEC. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months and Nine Months Ended September 30, 2023 and 2022 (Unaudited) (Amounts in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Revenues
$
246,687
$
251,412
$
771,590
$
746,635
Cost of revenues
212,763
224,570
664,056
672,531
Gross profit
33,924
26,842
107,534
74,104
Selling, general and administrative expenses
21,476
17,304
64,498
49,955
Operating income
12,448
9,538
43,036
24,149
Other expense
383
1,924
488
2,798
Interest expense
2,614
2,813
8,308
6,892
Loss on extinguishment of debt
—
—
—
921
Income before provision for income taxes
9,451
4,801
34,240
13,538
Provision for income taxes
2,161
1,250
8,110
3,520
Net income
$
7,290
$
3,551
$
26,130
$
10,018
Earnings per Common Share:
Basic
$
0.22
$
0.11
$
0.79
$
0.30
Diluted
$
0.22
$
0.11
$
0.78
$
0.30
Weighted average shares outstanding:
Basic
33,100
32,460
33,010
32,950
Diluted
33,350
32,922
33,408
33,645
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except per share amounts)
ASSETS
September 30, 2023
December 31, 2022
Current assets:
Cash
$
46,293
$
31,825
Accounts receivable, net
159,863
152,626
Inventories
128,192
142,542
Other current assets
29,892
12,582
Total current assets
364,240
339,575
Property, plant and equipment, net
71,554
67,805
Intangible assets, net
12,041
14,620
Deferred income taxes
11,181
12,275
Other assets, net
37,026
35,993
Total assets
$
496,042
$
470,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
105,110
$
122,091
Accrued liabilities and other
52,999
42,809
Current portion of long-term debt and short-term debt
18,331
10,938
Total current liabilities
176,440
175,838
Long-term debt
135,573
141,499
Pension and other post-retirement benefits
9,325
8,428
Other long-term liabilities
28,150
24,463
Total liabilities
$
349,488
$
350,228
Stockholders’ equity:
Preferred stock
$
—
$
—
Common stock
330
328
Treasury stock
(15,322
)
(14,514
)
Additional paid-in capital
263,641
261,371
Retained deficit
(69,465
)
(95,595
)
Accumulated other comprehensive loss
(32,630
)
(31,550
)
Total stockholders’ equity
146,554
120,040
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
496,042
$
470,268
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES BUSINESS SEGMENT FINANCIAL INFORMATION (Unaudited) (Amounts in thousands)
Three Months Ended September 30,
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Revenues
$
145,393
$
154,024
$
53,862
$
46,129
$
34,412
$
37,143
$
13,020
$
14,116
$
—
$
—
$
246,687
$
251,412
Gross profit
17,661
13,839
7,881
6,210
6,605
6,389
1,777
404
—
—
33,924
26,842
Selling, general & administrative expenses
6,761
4,279
2,018
1,055
2,104
1,436
1,087
1,371
9,506
9,163
21,476
17,304
Operating income (loss)
$
10,900
$
9,560
$
5,863
$
5,155
$
4,501
$
4,953
$
690
$
(967
)
$
(9,506
)
$
(9,163
)
$
12,448
$
9,538
Nine Months Ended September 30,
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Revenues
$
458,707
$
436,966
$
172,236
$
133,350
$
108,870
$
99,530
$
31,777
$
76,789
$
—
$
—
$
771,590
$
746,635
Gross profit
58,035
35,657
26,524
16,857
21,620
13,341
1,355
8,249
—
—
107,534
74,104
Selling, general & administrative expenses
19,609
18,269
6,932
3,998
6,017
4,636
3,588
4,242
28,352
18,810
64,498
49,955
Operating income (loss)
$
38,426
$
17,388
$
19,592
$
12,859
$
15,603
$
8,705
$
(2,233
)
$
4,007
$
(28,352
)
$
(18,810
)
$
43,036
$
24,149
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES Appendix A: Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) (Amounts in thousands, except per share amounts and percentages)
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Gross profit
$
33,924
$
26,842
$
107,534
$
74,104
Restructuring
70
607
1,443
2,958
Adjusted gross profit
$
33,994
$
27,449
$
108,977
$
77,062
% of revenues
13.8
%
10.9
%
14.1
%
10.3
%
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Operating income (loss)
$
12,448
$
9,538
$
43,036
$
24,149
Restructuring
70
647
1,501
3,387
Deferred consideration purchase accounting
—
103
—
341
Executive transition
—
329
—
329
Total operating income adjustments
70
1,079
1,501
4,057
Adjusted operating income
$
12,518
$
10,617
$
44,537
$
28,206
% of revenues
5.1
%
4.2
%
5.8
%
3.8
%
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Net income
$
7,290
$
3,551
$
26,130
$
10,018
Operating income adjustments
70
1,079
1,501
4,057
Pension settlement
—
1,116
—
1,116
Loss on extinguishment of debt
—
—
—
921
Hryvnia fair value adjustments on forward exchange contracts
—
(153
)
—
98
Adjusted provision for income taxes1
(18
)
(511
)
(375
)
(1,548
)
Adjusted net income
$
7,342
$
5,082
$
27,256
$
14,662
Diluted EPS
$
0.22
$
0.11
$
0.78
$
0.30
Adjustments to diluted EPS
$
—
$
0.04
$
0.04
$
0.14
Adjusted diluted EPS
$
0.22
$
0.15
$
0.82
$
0.44
Reported Tax Provision adjusted for tax effect of special charges at 25%
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Net income
$
7,290
$
3,551
$
26,130
$
10,018
Interest expense
2,614
2,813
8,308
6,892
Provision for income taxes
2,161
1,250
8,110
3,520
Depreciation expense
3,639
3,749
10,615
11,043
Amortization expense
847
851
2,544
2,563
EBITDA
$
16,551
$
12,214
$
55,707
$
34,036
% of revenues
6.7
%
4.9
%
7.2
%
4.6
%
EBITDA adjustments
Restructuring
$
70
$
647
$
1,501
$
3,387
Deferred consideration purchase accounting
—
103
—
341
Loss on extinguishment of debt
—
—
—
921
Hryvnia fair value adjustments on forward exchange contracts
—
(153
)
—
98
Executive transition
—
329
—
329
Pension settlement
—
1,116
—
1,116
Adjusted EBITDA
$
16,621
$
14,256
$
57,208
$
40,228
% of revenues
6.7
%
5.7
%
7.4
%
5.4
%
Three Months Ended September 30, 2023
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
Operating income (loss)
$
10,900
$
5,863
$
4,501
$
690
$
(9,506
)
$
12,448
Restructuring
—
—
—
70
—
70
Adjusted operating income (loss)
$
10,900
$
5,863
$
4,501
$
760
$
(9,506
)
$
12,518
% of revenues
7.5
%
10.9
%
13.1
%
5.8
%
5.1
%
Nine Months Ended September 30, 2023
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
Operating income (loss)
$
38,426
$
19,592
$
15,603
$
(2,233
)
$
(28,352
)
$
43,036
Restructuring
423
8
—
1,070
—
1,501
Adjusted operating income (loss)
$
38,849
$
19,600
$
15,603
$
(1,163
)
$
(28,352
)
$
44,537
% of revenues
8.5
%
11.4
%
14.3
%
(3.7
)%
5.8
%
Three Months Ended September 30, 2022
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
Operating income (loss)
$
9,560
$
5,155
$
4,953
$
(967
)
$
(9,163
)
$
9,538
Restructuring
66
445
136
$
647
Deferred consideration purchase accounting
—
—
—
103
—
103
Executive transition
—
—
—
—
329
329
Adjusted operating income (loss)
$
9,626
$
5,155
$
5,398
$
(728
)
$
(8,834
)
$
10,617
% of revenues
6.2
%
11.2
%
14.5
%
(5.2
)%
4.2
%
Nine Months Ended September 30, 2022
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate/Other
Total
Operating income (loss)
$
17,388
$
12,859
$
8,705
$
4,007
$
(18,810
)
$
24,149
Restructuring
270
571
1,440
800
306
3,387
Deferred consideration purchase accounting
—
—
—
341
—
341
Executive transition
—
—
—
—
329
329
Adjusted operating income (loss)
$
17,658
$
13,430
$
10,145
$
5,148
$
(18,175
)
$
28,206
% of revenues
4.0
%
10.1
%
10.2
%
6.7
%
3.8
%
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Cash flows from operating activities
$
18,468
$
38,301
$
29,990
$
33,794
Purchases of property, plant and equipment
(6,017
)
(3,925
)
(15,196
)
(12,541
)
Free cash flow
$
12,451
$
34,376
$
14,794
$
21,253
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the non-GAAP measures exclude items that (i) management believes reflect the Company’s multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, engage in financial and operational planning and to determine incentive compensation.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on the Company’s financial and operating results and in comparing the Company’s performance to that of its competitors and to comparable reporting periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.
Program recognizes innovative approaches to leveraging technology and new operating models for business success
STAMFORD, Conn.–(BUSINESS WIRE)– Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced the finalists for the 2023 ISG Paragon Awards™ South America, which celebrate the ongoing transformation of sourcing industry partnerships through new approaches and technologies.
Winners in each category will be selected by a panel of independent industry experts and announced at the ISG Sourcing Industry Awards Gala Dinner on Thursday, November 9, at the Grand Hyatt Hotel in São Paulo, Brazil.
Here are the South America finalists for the 2023 awards:
Excellence: Recognizing outstanding delivery by a technology or service provider
Kyndryl with a renowned motor vehicle manufacturer
Megawork Consultoria with a major retailer in Brazil
MIGNOW with a top financial firm offering banking services and solutions
T-Systems do Brasil with a renowned motor vehicle manufacturer
senhasegura with a leading pharmaceutical company
Innovation: Recognizing the importance of imagination and entrepreneurial spirit in helping organizations future-proof their businesses and better serve clients
Monitora Soluções Tecnológicas with a major hotel and apartment chain
Prime Control with a fashion and technology-focused company
Teleperformance with a prominent retail group
Vericode with Brazil’s financial market infrastructure firm
Teltec Solutions with a dynamic food solutions provider
Transformation: Recognizing the successful transformation of an organization or key business function
Enkel with a major player in the food industry
Fcamara with a distributor and wholesaler of food products
Spassu Tecnologia with Brazil’s state-owned oil and gas company
Logicalis with a data intelligence company
Dedalus with a healthcare technology and services provider
Environmental Sustainability: Recognizing outstanding positive impacts in one or more environmental sustainability fields for clients, consumers, communities and/or employees
ST IT Cloud with a global pharmaceutical and life sciences company
TIVIT with a leading agribusiness and food company
Yaman with a comprehensive benefits and rewards provider
Darede Serviços de TI with an energy solutions company
The ISG Paragon Awards™ South America, produced by ISG Events, recognize the innovative ways enterprises and providers are driving business success by leveraging digital technology and new operating models.
“Enterprises in South America seek partners to help them create hybrid, connected, autonomous, intelligent and effective organizations,” said Todd Lavieri, partner and president, ISG Americas and Asia Pacific. “ISG research finds regional providers in South America are outpacing many larger global firms in helping clients adopt the technologies that can deliver transformative business outcomes. It is an honor to recognize the partnerships that are driving agility and productivity in the region.”
Winners of the ISG Provider Lens™ Awards, recognizing outstanding performances by providers featured in ISG Provider Lens™ studies, will also be honored at the November 9 ISG Sourcing Industry Awards gala.
Full details of the ISG Paragon Awards program are available on the award website.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
