Los Angeles, CA, Nov. 07, 2022 (GLOBE NEWSWIRE) — FAT (Fresh. Authentic. Tasty) Brands Inc. (Nasdaq: FAT) today announced that it has withdrawn its previously announced proposed registered public offering of shares of its Class A Common Stock as a result of market conditions.
Andy Wiederhorn, the Company’s Chief Executive Officer, said, “This transaction was opportunistic in nature. While we appreciate the significant interest in the proposed offering, we have concluded that the current terms and conditions available in the market were not sufficiently attractive for us to move forward with a transaction at this time. We will continue to monitor market conditions and evaluate whether to pursue another offering in the future.”
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
About FAT (Fresh. Authentic. Tasty.) Brands
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, and franchises and owns over 2,300 units worldwide. For more information on FAT Brands, please visit www.fatbrands.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies including, but not limited to, uncertainties surrounding the severity, duration and effects of the COVID-19 pandemic, many of which are difficult to predict and beyond our control, which could cause our actual results to differ materially from the results expressed or implied in such forward-looking statements. We refer you to the documents we file from time to time with the Securities and Exchange Commission, such as our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks, uncertainties and contingencies. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this press release.
LAKEWOOD, Colo., Nov. 4, 2022 /CNW/ – Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) (“Energy Fuels” or the “Company”) today reported its financial results for the quarter ended September 30, 2022. The Company’s quarterly report on Form 10-Q has been filed with the U.S. Securities and Exchange Commission (“SEC“) and may be viewed on the Electronic Document Gathering and Retrieval System (“EDGAR“) at www.sec.gov/edgar.shtml, on the System for Electronic Document Analysis and Retrieval (“SEDAR“) at www.sedar.com, and on the Company’s website at www.energyfuels.com. Unless noted otherwise, all dollar amounts are in U.S. dollars.
Highlights:
At September 30, 2022, the Company had a robust balance sheet with $122.3 million of working capital, including $77.1 million of cash and cash equivalents, $11.6 million of marketable securities, $27.3 million of inventory, and no short term (or long term) debt. At current commodity prices, the Company’s product inventory has a value of $44.1 million.
During the quarter ended September 30, 2022, the Company incurred a net loss of $9.3 million, which includes increases in development, permitting and land holding costs and selling, general and administration costs associated with the Company’s efforts to enhance its business processes and operational readiness for the current and future growth and activity in our uranium and rare earth element (“REE“) operations.
With recent uranium market strength and having secured three long-term uranium contracts with major U.S. utilities earlier this year, the Company has hired over 20 new employees and is beginning to perform the work needed to recommence production at one or more of our mines and ISR facilities, starting as soon as 2023. Until such time when the Company has ramped back up to commercial uranium production, we can rely on our significant uranium inventories to fulfill our new contract requirements.
In June 2022, the U.S. Department of Energy (“DOE“) issued a Request for Proposals (“RFP“) to purchase uranium (“U3O8“) for the new U.S. Uranium Reserve Program. The DOE states that they expect to purchase up to 1 million pounds of U3O8 inventory from up to four (4) qualified U.S. uranium producers with individual awards ranging from 100,000 pounds to 500,000 pounds. The uranium must be physically located at Honeywell’s Metropolis Works conversion facility (the “U.S. Converter“). Energy Fuels believes it meets all qualifications to supply the Reserve, and the Company currently holds about 610,000 pounds of U3O8 at the U.S. Converter. The Company has submitted a bid to sell U3O8 to the Reserve, taking into consideration our long-term contract commitments and current and expected market conditions. There are no guarantees the DOE will purchase uranium from the Company under this RFP. Assuming the bid review process is not extended by DOE, the Company expects the DOE to issue the awards by mid-November 2022, with deliveries expected to occur by the end of 2022 or early 2023.
During the first nine months of 2022, the Company produced approximately 205 tonnes of mixed partially separated carbonate (“RE Carbonate“), containing approximately 95 tonnes of total rare earth oxides (“TREO“). Energy Fuels’ partially separated RE Carbonate contains a higher concentration of valuable NdPr, roughly 32% – 34% NdPr, compared to our previously produced non-separated RE Concentrate which contained approximately 22% NdPr, and is the most advanced REE material being produced in the U.S. today. During Q4-2022, the Company expects to receive approximately 640 tonnes of monazite, which will be processed into partially separated RE Carbonate during Q4-2022 and Q1-2023.
In May 2022, the Company announced it had entered into agreements to acquire a 58 square mile rare earth land position in Brazil (the “Bahia Project“). The Bahia Project is a well-known heavy mineral sand (“HMS“) deposit that has the potential to feed the Company’s White Mesa Mill with REE and uranium-bearing monazite sand for decades. Due diligence on the Bahia Project was completed at the end of August, at which time the Company advised the sellers that it intended to proceed with the purchases and was ready to commence closing procedures. After completion of a number of administrative logistics required in both the U.S. and Brazil, the mineral transfers were initiated in mid-October, and closing is currently expected to occur in late 2022 or early 2023 upon approval of the Brazilian governmental authorities reviewing the pending transfers. Upon acquisition, the Company plans to conduct an extensive exploration program to better define the HMS and monazite resource, including comprehensive sonic drilling (for a total phase 1 program of 2,250 meters) and geophysical mapping, with the intent to undertake an Initial Assessment under SK-1300 (U.S.) and a Technical Report under NI 43-101 (Canada) during Q4-2023, to be completed in early Q1-2024.
The Company is currently in active discussions with several additional sources of natural monazite sands around the world to significantly increase the supply of feed for our growing REE initiative.
The Company continues to make excellent progress toward installing full REE separation capabilities at the Mill to produce both “light” and “heavy” separated REE oxides in the coming years. The Company plans to initially install a “light” REE separation circuit within the existing Mill facilities in the next 12-18 months with the expected ability to produce between 2,500 – 5,000 tonnes TREO (500 – 1,000 tonnes NdPr oxide or oxalates) per year. As this circuit would be constructed within existing Mill facilities, capital expenditures are expected to be low. The Company is also proceeding with the design, engineering and permitting of a separate crack and leach circuit and a second larger “light” and “heavy” separations circuit with capacity in the order of 10,000 – 15,000 tonnes TREO per year to provide additional REE processing capacity at the Mill in the coming years.
During the first nine months of 2022, the Company sold approximately 642,000 pounds of existing inventory of vanadium (“V2O5“) (as ferrovanadium, “FeV“), for an average weighted net price of $13.69 per pound of V2O5. Vanadium markets have dropped in recent months. Therefore, the Company has halted sales of its inventory which currently stands at approximately 987,000 pounds of V2O5. However, the Company expects to resume sales as markets may improve in the future. The Company is evaluating the potential to resume vanadium recovery at the Mill in the future as market conditions may warrant for future sale and to replace sold inventory, where its tailings pond solutions contain an estimated additional 1.0 to 3.0 million recoverable pounds of V2O5.
Mark S. Chalmers, Energy Fuels’ President and CEO, stated:
“Energy Fuels continues to strengthen our U.S. market leading position in uranium and rare earth elements, which are both critical to the clean energy transition. Energy Fuels has ‘one-of-a-kind’ competencies that are critical to uranium, rare earth elements, medical isotopes, and vanadium markets; namely our ability to process feedstocks that are naturally radioactive and recover critical materials needed for the clean energy transition. No other company in the U.S. can do the things Energy Fuels does. We are committed to advancing each of these initiatives in a disciplined manner, while working toward profitability and sustained cash flow.
“Uranium is the fuel for carbon-free nuclear energy, and nations around the world are embracing nuclear, as it provides reliable, carbon-free, baseload electricity. Governments in numerous countries, including the U.S., are supporting both existing and new nuclear to help solve national security, energy security, and carbon reduction challenges. We are saddened by the continuing atrocities being committed by Russian forces in Ukraine, and we stand by our partners in the U.S. nuclear industry and the U.S. government to shift away from Russian uranium and nuclear fuel imports as soon as practicable. As previously disclosed, Energy Fuels has signed new long-term uranium sales contracts with major U.S. nuclear utilities, with sales – and sales revenues – beginning in 2023. We are also excited to announce that we are making significant investments in a number of our existing mines and production facilities, including hiring people, with an eye toward resuming large-scale uranium production very soon. We have been the only U.S. company to continue to produce uranium over the past several years, while maintaining several of our projects on standby status, which provides an excellent foundation from which we can build our production in the coming years. We look forward to maintaining our position as the largest U.S. uranium producer and being a long-term supplier of secure and responsibly sourced U.S. uranium that is insulated from geopolitical, transport, and other supply chain issues. We are also pleased to have been able to submit a bid to sell uranium to the U.S. government under the new U.S. Uranium Reserve, a program that resulted from the Company’s 2018 Section 232 Petition, and we eagerly await the results of that bidding process.
“We also continue to make spectacular progress on rare earth elements. Indeed, we are pleased to announce that we plan to install a commercial-scale “light” rare earth separation circuit within the existing footprint of our White Mesa Mill in Utah that we expect to be operational in the next 12 – 18 months. We are already producing the most advanced rare earth product in the U.S. today, a high-purity, partially separated mixed rare earth carbonate. We expect to go one step further by producing up to 500 – 1,000 tonnes of NdPr oxide (or oxalates) per year by late-2023 or early-2024. If successful, we hope to be the ‘first to market’ in the U.S. for this high-value, advanced material. We anticipate selling our separated NdPr oxide (or oxalate) to major electric vehicle manufacturers in the U.S. and Europe, with a goal to significantly increase this capacity in coming years. This should position Energy Fuels as one of the ‘go to’ suppliers of advanced rare earth materials in the U.S. and one of the first companies that electric vehicle (EV) and other clean technology manufacturers look to for the raw materials they need. Ultimately, we plan to install the capacity to produce over 3,000 tonnes of NdPr oxide, plus 250 tonnes of dysprosium oxide and 100 tonnes of terbium oxide per year, in the next 3-4 years, subject to licensing, commissioning, financing, offtake, market conditions, and sufficient monazite feedstock.
“On the monazite feedstock front, we continue to make excellent progress. With regard to our Bahia Project in Brazil, we continue to move diligently toward closing. The mineral transfers were initiated in mid-October after a number of administrative logistics required for closing were completed in both the U.S. and Brazil. Closing is scheduled to occur as soon as the transfers have been approved by the Brazilian governmental authorities reviewing the pending transfers, which we expect by the end of 2022 or in early 2023. Upon acquisition, the Company plans to conduct an initial phase of exploration drilling on the properties, totaling 2,250 meters, in order to maintain expected production timelines. In addition, we continue discussions with a number of monazite suppliers from around the world interested in partnering with Energy Fuels, and we are confident in our ability to secure monazite supply deals that ensure a ‘win-win’ for both Energy Fuels and our partners.
“Finally, we continue to make progress on medical isotopes with major players in the space. If we can successfully recover radioactive isotopes needed for emerging cancer treatments from our existing process streams, we will have secured yet another opportunity to generate significant cash flows in the next 5 to 10 years. We also continue to track vanadium markets to determine when to resume sales of our existing inventories and when to resume production.”
Webcast at 4:00 pm ET on November 8, 2022:
Energy Fuels will be hosting a video webcast on November 8, 2022 at 4:00 pm ET (2:00 pm MT) to discuss its Q3-2022 financial results, the outlook for 2022, uranium, rare earths, vanadium, and medical isotopes. To join the webcast and access the presentation and viewer-controlled webcast slides, please click on the link below:
Webcast Link
If you would like to participate in the webcast and ask questions, please dial in to 1-888-664-6392 (toll free in the U.S. and Canada).
A link to a recorded version of the proceedings will be available on the Company’s website shortly after the webcast by calling 1-888-390-0541 (toll free in the U.S. and Canada) and by entering the code 619525#. The recording will be available until November 22, 2022.
Financial Discussion:
At September 30, 2022, the Company had $122.3 million of working capital, including $88.7 million of cash and cash equivalents and marketable securities and $27.3 million of inventory, including approximately 692,000 pounds of uranium and 987,000 pounds of high-purity vanadium, both in the form of immediately marketable product. The current spot price of U3O8, according to TradeTech, is $52.50 per pound, and the current mid-point spot price of V2O5, according to Metal Bulletin, is $7.80 per pound. Based on those spot prices, the Company’s uranium and vanadium inventories have a current market value of $36.3 million and $7.7 million, respectively, totaling $44.0 million. The Company also holds RE Carbonate inventory with a current value of $0.1 million, for total product inventory of $44.1 million at current commodity prices.
During the quarter ended September 30, 2022, the Company incurred a net loss of $9.3 million, compared to a net loss of $8.0 million for the third quarter of 2021, and a net loss of $42.0 million for the nine months ended September 30, 2022 compared to a net loss of $29.7 million during the first nine months of 2021. The increased net losses in 2022 are due primarily to a non-cash mark-to-market decrease in the value of investments accounted for at fair value of $13.7 million for the nine months ended September 30, 2022.
Operations Update and Outlook for 2022:
Overview
The Company continues to believe that uranium supply and demand fundamentals point to higher sustained uranium prices in the future. In addition, Russia’s recent invasion of Ukraine and the recent entry into the uranium market by financial entities purchasing uranium on the spot market to hold for the long-term has the potential to result in higher sustained spot and term prices and, perhaps, induce utilities to enter into more long-term contracts with non-Russian producers like Energy Fuels to ensure security of supply and more certain pricing. Having recently secured three long-term uranium contracts with major U.S. utilities, the Company is beginning to perform the work needed to recommence production at one or more of its mines and ISR facilities, starting as soon as 2023. Until such time when the Company has ramped back up to commercial uranium production, it can rely on its significant uranium inventories to fulfill its new contract requirements. To that end, the Company purchased an additional 68,552 pounds of U. S. origin U3O8 on the spot market in October 2022. The Company also continues to evaluate selling a portion of its inventories on the spot market in response to future upside price volatility, into the newly created U.S. Uranium Reserve Program, or for delivery into additional long-term supply contracts if procured. During the nine months ended September 30, 2022, the Company also sold a portion of its vanadium inventory into then strengthening markets.
The Company will also continue to seek new sources of revenue, including through its emerging REE business, as well as new sources of Alternate Feed Materials and new fee processing opportunities at the Mill that can be processed without reliance on current uranium sales prices. The Company is also seeking new sources of natural monazite sands (in addition to the pending acquisition of the Bahia Project) for its emerging REE business, is evaluating the potential to recover radioisotopes for use in the development of targeted alpha therapy medical isotopes for the treatment of cancer, and continues its support of U.S. governmental activities to assist the U.S. uranium mining industry, including the new U.S. Uranium Reserve Program and other efforts to restore domestic nuclear fuel capabilities.
Extraction and Recovery Activities Overview
During 2022, the Company plans to recover 130,000 to 140,000 pounds of uranium, which is an increase over our previous guidance of 100,000 to 120,000 pounds of uranium in 2022. This increased uranium production in 2022, combined with other factors, has resulted in a delayed start of our second REE processing campaign in 2022, which is now expected to commence in November 2022 and carry over into Q1 2023. As a result, the Company now expects to produce approximately 205 tonnes of partially separated RE Carbonate in 2022 containing approximately 95 tonnes of high-value partially separated TREO, with the remaining production from the second 2022 REE processing campaign of approximately 410 tonnes of partially separated RE Carbonate containing approximately 200 tonnes of high-value partially separated TREO being packaged in and attributable to Q1 2023. The total expected production from this second 2022 campaign plus production to date in 2022 is equivalent to approximately 831 tons of non-separated RE Carbonate containing approximately 400 tonnes of non-separated TREO, which falls within our 2022 guidance of 650-1,000 tons of non-separated RE Carbonate containing 300-650 tonnes of non-separated TREO, although a portion of that total expected production will carry over into 2023.
No vanadium production is currently planned during 2022, though the Company sold some of its existing vanadium inventory into recent strong markets and is evaluating the potential to recommence vanadium production in 2023 or later years as market conditions may warrant for future sale and to replace sold inventory.
The Company secured three new long-term sales contracts with U.S. nuclear utilities in May 2022 and is continuing to strategically pursue additional uranium sales commitments with pricing expected to have both fixed and market-related components. The Company believes that recent price increases, volatility and focus on security of supply in light of Russia’s ongoing invasion of Ukraine have increased the potential for the Company to make uranium sales and procure additional term sales contracts with utilities at pricing that sustains production and covers corporate overhead. Therefore, existing inventories may increase from 760,000 pounds of U3O8 (692,000 pounds as of September 30, 2022 plus 68,552 pounds acquired after quarter end) to 890,000 to 900,000 pounds of U3O8 at year-end 2022 or may increase to a lesser extent, or be reduced, in the event the Company sells a portion of its inventory on the spot market, to the U.S. Uranium Reserve Program, or pursuant to term contracts in 2022.
ISR Activities
The Company expects to produce insignificant quantities of U3O8 in the year ending December 31, 2022 from Nichols Ranch. Until such time when market conditions improve sufficiently, suitable term sales contracts can be procured, or the U.S. Uranium Reserve Program is expanded, the Company expects to maintain the Nichols Ranch Project on standby and defer development of further wellfields and header houses. The Company currently holds 34 fully permitted, undeveloped wellfields at Nichols Ranch, including four additional wellfields at the Nichols Ranch wellfields, 22 wellfields at the adjacent Jane Dough wellfields, and eight wellfields at the Hank Project, which is fully permitted to be constructed as a satellite facility to the Nichols Ranch Plant. The Company expects to continue to keep the Alta Mesa Project on standby until such time that market conditions improve sufficiently, suitable term sales contracts can be procured, or the U.S. Uranium Reserve Program is expanded.
Conventional Activities
Conventional Extraction and Recovery Activities
During the nine months ended September 30, 2022, the Mill did not package any material quantities of U3O8, focusing instead on developing its REE recovery business. During the nine months ended September 30, 2022, the Mill produced approximately 205 tonnes of partially separated RE Carbonate, containing approximately 95 tonnes of high value partially separated TREO. The Mill recovered small quantities of uranium during the Quarter, which were retained in circuit. During 2022, the Company expects to recover 130,000 to 140,000 pounds of uranium at the Mill as finished product. The Company expects to recover approximately 205 tonnes of partially separated RE Carbonate (equivalent to approximately 277 tonnes of non-separated RE Carbonate) containing approximately 95 tonnes of high value partially separated TREO (equivalent to approximately 128 tonnes of non-separated TREO) at the Mill during 2022. The Company expects to sell all or a portion of its mixed RE Carbonate to Neo Performance Materials (“Neo“) or other global separation facilities and/or to stockpile it for future production of separated REE oxides at the Mill or elsewhere. The Company is in advanced discussions with several sources of natural monazite sands (in addition to the Bahia Project) to secure additional supplies of monazite sands, which if successful, would be expected to allow the Company to increase RE Carbonate production.
In addition to its 760,000 pounds of finished uranium inventories currently located at North American conversion facilities and at the Mill (692,000 pounds as of September 30, 2022 plus 68,552 pounds acquired after quarter end) and the 130,000 to 140,000 pounds of U3O8 expected to be produced in 2022, the Company has approximately 170,000 pounds of U3O8 contained in stockpiled Alternate Feed Materials and other ore inventory at the Mill that can be recovered relatively quickly in the future, as general market conditions may warrant (totaling about 1,060,000 to 1,070,000 pounds of U3O8 of total uranium inventory). The Company is also seeking to acquire additional ore inventory from third party mine cleanup activities that can be recovered relatively quickly in the future.
The Company currently holds approximately 987,000 pounds of V2O5 in inventory, and there remains an estimated 1.0 to 3.0 million pounds of additional solubilized recoverable V2O5 remaining in tailings solutions awaiting future recovery, as market conditions may warrant.
Conventional Standby, Permitting and Evaluation Activities
During the nine months ended September 30, 2022, standby and environmental compliance activities continued at the fully permitted and substantially developed Pinyon Plain Project (uranium and, potentially, copper) and the fully permitted and developed La Sal Complex (uranium and vanadium). The Company increased its number of employees, and continued carrying out engineering, procurement and construction management activities, at its Pinyon Plain Project during the Quarter. The timing of the Company’s plans to extract and process mineralized materials from these projects will be based on sustained improvements in general market conditions, procurement of suitable sales contracts and/or the expansion of the U.S. Uranium Reserve Program.
The Company is selectively advancing certain permits at its other major conventional uranium projects, such as the Roca Honda Project, which is a large, high-grade conventional project in New Mexico. The Company is also continuing to maintain required permits at its conventional projects, including the Whirlwind Project, which is now in the process of recommencing mining operations, and the Sheep Mountain Project. In addition, the Company will continue to evaluate the Bullfrog Project. Expenditures for certain of these projects have been adjusted to coincide with expected dates of price recoveries based on the Company’s forecasts. All of these projects serve as important pipeline assets for the Company’s future conventional production capabilities, as market conditions may warrant.
Uranium Sales
During the three months ended September 30, 2022, the Company did not enter into any new uranium sales contracts, having just recently entered into three uranium sale and purchase agreements with major U.S. utilities in May 2022, constituting its first new long-term supply contracts since 2018. Having observed a marked uptick in interest from nuclear utilities seeking long-term uranium supply, the Company remains actively engaged in pursuing additional selective long-term uranium sales contracts. The Company submitted an offer to sell a portion of its inventories currently located at the ConverDyn conversion facility to the DOE’s newly created U.S. Uranium Reserve Program. If the offer is accepted, the Company may complete some sales of uranium during 2022.
Vanadium Sales
As a result of strengthening vanadium markets, during the nine months ended September 30, 2022, the Company sold approximately 642,000 pounds of the Company’s existing inventory of V2O5 (as FeV) at a net weighted average price of $13.69 per pound of V2O5. The Company expects to sell its remaining finished vanadium product when justified into the metallurgical industry, as well as other markets that demand a higher purity product, including the aerospace, chemical, and potentially the vanadium battery industries. The Company expects to sell to a diverse group of customers in order to maximize revenues and profits. The vanadium produced in the 2018/19 Pond Return campaign was a high-purity vanadium product of 99.6%-99.7% V2O5. The Company believes there may be opportunities to sell certain quantities of this high-purity material at a premium to reported spot prices. The Company may also retain vanadium product in inventory for future sale, depending on vanadium spot prices and general market conditions.
RE Carbonate Sales
The Company commenced its ramp-up to commercial production of a mixed RE Carbonate in March 2021 and has shipped all of its RE Carbonate produced to-date to Neo’s Silmet facility in Estonia, where it is currently being fed into their separation process. All RE Carbonate produced at the Mill in 2022 is expected to be sold to Neo for separation at Silmet. Until such time as the Company expects to permit and construct its own separation circuits at the Mill, production in future years is expected to be sold to Neo for separation at Silmet and, potentially, to other REE separation facilities outside of the U.S. To the extent not sold, the Company expects to stockpile mixed RE Carbonate at the Mill for future separation and other downstream REE processing at the Mill or elsewhere. During the quarter ended September 30, 2022, the Company sold approximately 89,000 kilograms of TREO at an average price of $25.03 per kilogram of TREO.
While the Company continues to ramp up its mixed RE Carbonate production and additional funds are spent on process enhancements, improving recoveries, product quality and other optimization, profits from this initiative are expected to be minimal until such time when monazite throughput rates are increased and optimized. However, even at the current throughput rates, the Company is recovering most of its direct costs of this growing initiative, with the other costs associated with ramping up production, process enhancements and evaluating future separation capabilities at the Mill being expensed as underutilized capacity production costs applicable to RE Carbonate and development expenditures. Throughout this process, the Company is gaining important knowledge, experience and technical information, all of which will be valuable for current and future mixed RE Carbonate production and expected future production of separated REE oxides and other advanced REE materials at the Mill. As discussed above, the Company is planning to install a “light” separation circuit within existing Mill facilities and is evaluating installing a separate crack and leach circuit and full separation circuit at the Mill to produce both “light” and “heavy” separated REE oxides in the coming years, subject to successful licensing, financing, and commissioning and continued strong market conditions.
About Energy Fuels: Energy Fuels is a leading U.S.-based uranium mining company, supplying U3O8 to major nuclear utilities. The Company also produces vanadium from certain of its projects, as market conditions warrant, and is ramping up to full commercial-scale production of RE Carbonate. Its corporate offices are in Lakewood, Colorado near Denver, and all its assets and employees are in the United States. Energy Fuels holds three of America’s key uranium production centers: the White Mesa Mill in Utah, the Nichols Ranch ISR Project in Wyoming, and the Alta Mesa ISR Project in Texas. The White Mesa Mill is the only conventional uranium mill operating in the U.S. today, has a licensed capacity of over 8 million pounds of U3O8 per year, and has the ability to produce vanadium when market conditions warrant, as well as RE Carbonate from various uranium-bearing ores. The Nichols Ranch ISR Project is currently on standby and has a licensed capacity of 2 million pounds of U3O8 per year. The Alta Mesa ISR Project is also currently on standby and has a licensed capacity of 1.5 million pounds of U3O8 per year. In addition to the above production facilities, Energy Fuels also has one of the largest S-K 1300 and NI 43-101 compliant uranium resource portfolios in the U.S. and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development. The primary trading market for Energy Fuels’ common shares is the NYSE American under the trading symbol “UUUU,” and the Company’s common shares are also listed on the Toronto Stock Exchange under the trading symbol “EFR.” Energy Fuels’ website is www.energyfuels.com.
Cautionary Note Regarding Forward-Looking Statements: This news release contains certain “Forward Looking Information” and “Forward Looking Statements” within the meaning of applicable United States and Canadian securities legislation, which may include, but are not limited to, statements with respect to: production and sales forecasts; costs of production; any expectation that the Company will be awarded any sales under the U.S. Uranium Reserve; scalability, and the Company’s ability and readiness to re-start, expand or deploy any of its existing projects or capacity to respond to any improvements in uranium market conditions or in response to the Uranium Reserve; any expectation as to future uranium, vanadium, RE Carbonate or REE market fundamentals or sales; any expectation as to recommencement of production at any of the Company’s uranium mines or the timing thereof; any expectation regarding any remaining dissolved vanadium in the Mill’s tailings facility solutions or the ability of the Company to recover any such vanadium at acceptable costs or at all; any expectation as to the ability of the Company to secure any new sources of Alternate Feed Materials or other processing opportunities at the Mill; any expectation as to timelines for the permitting and development of projects; any expectation as to longer term fundamentals in the market and price projections; any expectation as to the implications of the current Russian invasion of Ukraine on uranium, vanadium or other commodity markets; any expectation that the Company will maintain its position as a leading uranium company in the United States; any expectation with respect to timelines to production; any expectation that the Mill will be successful in producing RE Carbonate on a full-scale commercial basis; any expectation that Neo will be successful in separating the Mill’s RE Carbonate on a commercial basis; any expectation that Energy Fuels will be successful in developing U.S. separation, or other value-added U.S. REE production capabilities at the Mill, or otherwise, including the timing of any such initiatives and the expected production capacity or capital and operating costs associated with any such production capabilities; any expectation that the Company will restore U.S. rare earth separation capabilities in the coming years; any expectation with respect to the future demand for REEs; any expectation with respect to the quantities of monazite sands to be acquired by Energy Fuels, the quantities of RE Carbonate to be produced by the Mill or the quantities of contained TREO in the Mill’s RE Carbonate; any expectation that any additional supplies of monazite sands will result in sufficient throughput at the Mill to reduce underutilized capacity production costs and allow the Company to realize its expected margins on a continuous basis; any expectation that the Company may sell its separated NdPr oxide (or oxalate) to major electric vehicle manufacturers in the U.S. and Europe or that the Company may position itself as one of the “go to” suppliers of advanced rare earth materials in the U.S.; any expectation that the Bahia Project has the potential to feed the Mill with REE and uranium-bearing monazite sand for decades; any expectation that the Company will complete comprehensive sonic drilling and geophysical mapping at the Bahia Project or complete an Initial Assessment under SK-1300 (U.S.) and a Technical Report Technical Report under NI 43-101 (Canada) during Q4-2023 or Q1-2024, or otherwise; any expectation that the Company’s evaluation of thorium and radium recovery at the Mill will be successful; any expectation that the potential recovery of medical isotopes from any thorium or radium recovered at the Mill will be feasible; any expectation that any thorium, radium or other isotopes can be recovered at the Mill and sold on a commercial basis; any expectation as to the quantities to be delivered under existing uranium sales contracts, or that such contracts may help underpin the Company’s uranium business for many years to come; any expectation that the Company will be successful in completing any additional contracts for the sale of uranium to U.S. utilities; any expectation that any existing or potential future uranium sales contracts will be at prices and quantities that provide an appropriate rate of return or sustain production and cover corporate overhead; any expectation that the value of the Company’s investments accounted for at fair value may improve in future periods; and any expectation that the Company will generate net income in future periods. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans,” “expects,” “does not expect,” “is expected,” “is likely,” “budgets,” “scheduled,” “estimates,” “forecasts,” “intends,” “anticipates,” “does not anticipate,” or “believes,” or variations of such words and phrases, or state that certain actions, events or results “may,” “could,” “would,” “might” or “will be taken,” “occur,” “be achieved” or “have the potential to.” All statements, other than statements of historical fact, herein are considered to be forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements express or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements include risks associated with: commodity prices and price fluctuations; processing and mining difficulties, upsets and delays; permitting and licensing requirements and delays; changes to regulatory requirements; legal challenges; the availability of sources of Alternate Feed Materials and other feed sources for the Mill; competition from other producers; public opinion; government and political actions; available supplies of monazite sands; the ability of the Mill to produce RE Carbonate to meet commercial specifications on a commercial scale at acceptable costs; the ability of Neo to separate the RE Carbonate produced by the Mill to meet commercial specifications on a commercial scale at acceptable costs; market factors, including future demand for REEs; the ability of the Mill to be able to separate radium or other radioisotopes at reasonable costs or at all; market prices and demand for medical isotopes; and the other factors described under the caption “Risk Factors” in the Company’s most recently filed Annual Report on Form 10-K, which is available for review on EDGAR at www.sec.gov/edgar.shtml, on SEDAR at www.sedar.com, and on the Company’s website at www.energyfuels.com. Forward-looking statements contained herein are made as of the date of this news release, and the Company disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management’s estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. The Company assumes no obligation to update the information in this communication, except as otherwise required by law.
SOURCE Energy Fuels Inc.
For further information: Investor Inquiries: Energy Fuels Inc., Curtis Moore, VP – Marketing and Corporate Development, (303) 974-2140 or Toll free: (888) 864-2125, [email protected], www.energyfuels.com
Acquisition creates a global powerhouse in change management
STAMFORD, Conn., November 3, 2022 ― Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced it has acquired Change 4 Growth, an award-winning company specializing in transformational change for enterprises.
Founded in 2017, Change 4 Growth offers market-leading change solutions and expertise to support large-scale business transformations involving people, process and technology. Last year it was named a top 10 change management company in the U.S. by Manage HR magazine.
“The combination of Change 4 Growth and our existing ISG Enterprise Change business creates a global powerhouse in change management at a time when demand for such services is expected to grow significantly,” said Michael P. Connors, chairman and CEO of ISG. “Enterprises are in a state of continuous transformation, as they adjust to new technologies, new competitors, and ever-changing market forces. To be successful, they need a highly adaptable, change-ready workforce.”
The combined business will go to market as ISG Enterprise Change with capabilities in organizational change management (OCM), communications, training development and delivery, leadership development, mentoring, Diversity, Equity and Inclusion (DEI) programs, executive coaching and culture change.
“Transformational change is a complex journey best undertaken with a strong and knowledgeable partner,” said Beth Thomas, CEO and founder of Change 4 Growth, who has been named partner and co-leader of ISG Enterprise Change. “Together, we will offer unrivalled expertise, methodologies and tools to help our clients build and sustain change-capable organizations. We could not be more excited to be joining ISG and expanding the reach of both firms’ industry-leading solutions.”
Among those solutions is ATLAS™, a transformational change platform developed by Change 4 Growth that provides access to OCM templates and tools for greater efficiency and gives clients real-time visibility via dashboards into the progress and health of their business transformations. ISG Enterprise Change intends to offer this new solution to its clients immediately.
Change 4 Growth and ISG Enterprise Change together have successfully conducted more than 1,000 change management engagements involving more than 5 million employees. The two businesses have served more than 300 clients in industries including retail, automotive, manufacturing, banking and financial services, insurance, utilities and healthcare.
For more information about ISG’s OCM services, visit the ISG 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 800 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 1,300 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 third-quarter GAAP revenues of $69 million, reflecting negative FX impact of $4 million
Reports net income of $6 million, GAAP EPS of $0.11 and adjusted EPS of $0.14
Reports adjusted EBITDA of $11 million
Achieves record year-to-date results: GAAP revenues of $212 million, up 6% in constant currency; net income of $15 million, up 29%; adjusted EBITDA of $32 million, up 12%; GAAP EPS of $0.30, up 30%; adjusted EPS of $0.40, up 18%
Returns $7 million to shareholders in the form of share repurchases and dividends in Q3
Declares fourth-quarter dividend of $0.04 per share, payable December 19 to record holders as of December 5
Sets fourth-quarter guidance for achieving record full-year revenue and EBITDA performance: revenues between $70 million and $72 million and adjusted EBITDA between $10 million and $11 million
STAMFORD, Conn.–(BUSINESS WIRE)– Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced financial results for the third quarter ended September 30, 2022.
“ISG remains on track to deliver record full-year revenue and profitability after another solid operating performance in Q3,” said Michael P. Connors, chairman and CEO. “Despite macroeconomic headwinds, in the third quarter we delivered double-digit growth in recurring revenues, as well as in Europe, on an operating basis. Our product mix of higher-margin digital advisory, research and platform services drove the expansion of our adjusted EBITDA margin to 16 percent, our highest-ever quarterly margin.”
Change 4 Growth Acquisition
ISG said today it has acquired Change 4 Growth, a business specializing in transformational change for enterprises. Founded in 2017, Change 4 Growth offers market-leading change solutions and expertise to support large-scale business transformations involving people, process and technology.
“The combination of Change 4 Growth and our existing ISG Enterprise Change business creates a global powerhouse in change management at a time when demand for such services is expected to grow significantly,” said Connors.
ISG estimates demand for organizational change management (OCM) services will grow at a compound annual rate of more than 15 percent over the next five years, as companies continuously adjust to new technologies, new competitors, and ever-changing market forces.
With the acquisition, Connors noted that ISG adds a new platform solution, ATLAS™, that provides access to OCM templates and tools for greater engagement efficiency and gives clients real-time visibility via dashboards into the progress and health of their business transformations.
Third-Quarter 2022 Results
Reported revenues for the third quarter were $68.8 million, down 3 percent from $71.1 million in the prior year, and up 2 percent in constant currency. Currency translation negatively impacted reported revenues by $4.0 million versus the prior year. Reported revenues were $42.2 million in the Americas, down 2 percent versus the prior year, impacted by the completion of a large Automation engagement; $19.3 million in Europe, down 4 percent versus the prior year on a reported basis and up 13 percent in constant currency, and $7.3 million in Asia Pacific, down 10 percent versus the prior year on a reported basis and down 3 percent in constant currency.
ISG reported third-quarter operating income of $7.4 million, up 2 percent from $7.3 million in the third quarter of 2021. Reported third-quarter net income was $5.6 million, up 26 percent, compared with net income of $4.4 million in the prior year. Fully diluted earnings per share was $0.11, compared with $0.09 per fully diluted share in the prior year. Net income margin (calculated by dividing net income by reported revenues) increased to 8.1 percent, from 6.2 percent in the third quarter of 2021.
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the third quarter was $7.2 million, or $0.14 per share on a fully diluted basis, compared with adjusted net income of $5.9 million, or $0.12 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 $10.7 million, up 5 percent from the third quarter last year. Adjusted EBITDA margin (a non-GAAP measure calculated by dividing adjusted EBITDA by reported revenues) was 16 percent, up 120 basis points from the prior year.
Nine-Month Year-to-Date Results
Reported revenues for the first nine months were a record $212.1 million, up 2 percent versus the prior-year period, and up 6 percent in constant currency. Currency translation negatively impacted reported revenues for the nine-month period by $9.5 million versus the prior year. Reported revenues were $123.1 million in the Americas, up 1 percent versus the prior year; $66.0 million in Europe, down 1 percent versus the prior year on a reported basis and up 11 percent in constant currency, and $23.0 million in Asia Pacific, up 13 percent versus the prior year on a reported basis and up 20 percent in constant currency.
ISG reported year-to-date operating income of $22.3 million, up 23 percent from $18.1 million in the first nine months of 2021. The firm also reported record year-to-date net income and fully diluted earnings per share of $15.4 million and $0.30, respectively, versus net income of $12.0 million and earnings per share of $0.23 in the prior year. Net income margin (calculated by dividing net income by reported revenues) increased to 7.3 percent, from 5.7 percent in the same period last year.
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the first nine months was $20.4 million, or $0.40 per share on a fully diluted basis, compared with adjusted net income of $17.7 million, or $0.34 per share on a fully diluted basis, in the prior-year period.
Year-to-date adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) reached a record $32.1 million, up 12 percent from same period last year. Adjusted EBITDA margin (a non-GAAP measure calculated by dividing adjusted EBITDA by reported revenues) was 15 percent, up more than 140 basis points from the prior year.
Other Financial and Operating Highlights
The firm’s cash balance totaled $19.7 million at September 30, 2022, down from $31.5 million at June 30, 2022. During the third quarter, ISG repurchased $4.8 million of shares, paid dividends of $2.0 million, paid $1.0 million in a final earnout associated with the 2020 Neuralify acquisition, and paid down $1.1 million of debt. As of September 30, 2022, ISG had $71.3 million in debt outstanding, compared with $75.6 million at the end of the third quarter last year. At 1.7 times, the firm’s gross-debt-to-adjusted-EBITDA ratio (a non-GAAP measure calculated by dividing outstanding debt by adjusted EBITDA) was at a record low as of September 30, 2022.
2022 Fourth-Quarter Revenue and Adjusted EBITDA Guidance
“Based on achieving our fourth-quarter guidance, ISG will deliver record revenues and profitability for the full year,” said Connors. “For the fourth quarter, ISG is targeting revenues of between $70 million and $72 million and adjusted EBITDA of between $10 million and $11 million. We will continue to monitor the macroeconomic environment, including the impact of FX, inflation and other factors, and adjust our business plans accordingly.”
Quarterly Dividend
The ISG Board of Directors declared a fourth-quarter dividend of $0.04 per share, payable on December 19, 2022, to shareholders of record on December 5, 2022.
Conference Call
ISG has scheduled a call for 9 a.m., U.S. Eastern Time, Friday, November 4, 2022, to discuss the company’s third-quarter results. The call can be accessed by dialing 1-833-927-1758; or, for international callers, by dialing +1 929-526-1599. The access code is 121223. 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, 2022, and September 30, 2021. 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, 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 800 clients, including 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 1,300 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,
2022
2021
2022
2021
Revenues
$
68,836
$
71,095
$
212,100
$
208,263
Operating expenses
Direct costs and expenses for advisors
39,786
43,249
125,111
127,412
Selling, general and administrative
20,334
19,236
60,806
58,768
Depreciation and amortization
1,286
1,347
3,872
3,962
Operating income
7,430
7,263
22,311
18,121
Interest income
37
65
126
196
Interest expense
(824
)
(538
)
(1,997
)
(1,794
)
Foreign currency transaction gain (loss)
131
1
248
(2
)
Income before taxes
6,774
6,791
20,688
16,521
Income tax provision
1,218
2,370
5,245
4,570
Net income
$
5,556
$
4,421
$
15,443
$
11,951
Weighted average shares outstanding:
Basic
47,888
48,751
48,191
48,521
Diluted
49,844
51,510
50,637
51,713
Earnings per share:
Basic
$
0.12
$
0.09
$
0.32
$
0.25
Diluted
$
0.11
$
0.09
$
0.30
$
0.23
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,
2022
2021
2022
2021
Net income
$
5,556
$
4,421
$
15,443
$
11,951
Plus:
Interest expense (net of interest income)
787
473
1,871
1,598
Income taxes
1,218
2,370
5,245
4,570
Depreciation and amortization
1,286
1,347
3,872
3,962
Interest accretion associated with contingent consideration
–
47
8
113
Acquisition-related costs (1)
25
18
41
(14
)
Severance, integration and other expense
8
41
458
1,341
Foreign currency transaction (gain) loss
(131
)
(1
)
(248
)
2
Non-cash stock compensation
1,987
1,499
5,432
5,075
Adjusted EBITDA
$
10,736
$
10,215
$
32,122
$
28,598
Net income
$
5,556
$
4,421
$
15,443
$
11,951
Plus:
Non-cash stock compensation
1,987
1,499
5,432
5,075
Intangible amortization
525
643
1,580
2,001
Interest accretion associated with contingent consideration
–
47
8
113
Acquisition-related costs (1)
25
18
41
(14
)
Severance, integration and other expense
8
41
458
1,341
Foreign currency transaction (gain) loss
(131
)
(1
)
(248
)
2
Tax effect (2)
(772
)
(719
)
(2,327
)
(2,726
)
Adjusted net income
$
7,198
$
5,949
$
20,387
$
17,743
Weighted average shares outstanding:
Basic
47,888
48,751
48,191
48,521
Diluted
49,844
51,510
50,637
51,713
Adjusted earnings per share:
Basic
$
0.15
$
0.12
$
0.42
$
0.37
Diluted
$
0.14
$
0.12
$
0.40
$
0.34
(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.
STAMFORD, Conn., Nov. 03, 2022 (GLOBE NEWSWIRE) — Eagle Bulk Shipping Inc. (NASDAQ: EGLE) (“Eagle Bulk,” “Eagle” or the “Company”), one of the world’s largest owner-operators within the midsize drybulk vessel segment, today reported financial results for the quarter ended September 30, 2022.
Quarter highlights:
Generated Revenues, net of $185.3 million
Achieved TCE(1) of $28,099/day basis and TCE Revenue(1) of $128.9 million
Realized net income of $77.2 million, or $5.94 per basic share
Adjusted net income(1) of $74.3 million, or $5.72 per adjusted basic share(1)
Generated EBITDA(1) of $96.0 million
Adjusted EBITDA(1) of $85.1 million
Repurchased $10.0 million in aggregate principal amount, or 9% of the Convertible Bond Debt
Reduced diluted share count by 296,990 shares
Executed an agreement to purchase a 2015-built scrubber-fitted Japanese Ultramax for $27.5 million
Declared a quarterly dividend of $1.80 per share for the third quarter of 2022
Dividend is payable on November 23, 2022 to shareholders of record at the close of business on November 15, 2022
Recent Developments:
Coverage position for the fourth quarter 2022 is as follows:
70% of available days fixed at an average TCE of $25,040
Eagle’s CEO Gary Vogel commented, “We posted another robust quarterly result, generating net income of $77.2 million as our team successfully navigated a volatile landscape. With our commercial platform and dynamic approach to trading ships, as well as our ability to capture significant value from fuel spreads as a result of our fleet scrubber position, we were able to achieve a TCE of $28,099, representing significant outperformance against the BSI of almost 46%.
Consistent with our stated capital allocation strategy and strong results, we declared our fifth consecutive quarterly dividend since adopting our policy late in 2021, representing 30% of earnings and bringing total shareholder distributions to $10.05 per share. Additionally, we opportunistically repurchased approximately 9% of our convertible bond debt in the open market at advantageous prices, resulting in both a decrease in debt outstanding and a reduction to our diluted share count.
On the strategic front, we capitalized on the illiquidity in the S&P markets in early September and executed our 51st transaction, acquiring a high-specification 2015-built Japanese scrubber-fitted Ultramax for $27.5 million. Based on our constructive view of supply side fundamentals, we are likely to add further tonnage on an opportunistic basis as we head into next year, consistent with our continued focus on strategically expanding the business and adding incremental value for our shareholders.”
1 These are non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial tables included in this press release. An explanation of these measures and how they are calculated are also included below under the heading “Supplemental Information – Non-GAAP Financial Measures.”
Fleet Operating Data
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Ownership Days
4,831
4,697
14,424
13,407
Chartered in Days
1,000
563
3,102
1,718
Available Days
5,588
4,931
16,701
14,403
Operating Days
5,574
4,908
16,662
14,308
Fleet Utilization (%)
99.7
%
99.5
%
99.8
%
99.3
%
Fleet Development
Vessel sold and delivered in the third quarter of 2022
Cardinal, a Supramax (55K DWT / 2004-built) for total consideration of $15.8 million
Vessel acquired and expected to be delivered in the fourth quarter of 2022
Tokyo Eagle, a Japanese-built, scrubber-fitted Ultramax (61K DWT / 2015-built) for total consideration of $27.5 million
Results of Operations for the three and nine months ended September 30, 2022 and 2021
For the three months ended September 30, 2022, the Company reported net income of $77.2 million, or basic and diluted income of $5.94 per share and $4.77 per share, respectively. In the comparable quarter of 2021, the Company reported net income of $78.3 million, or basic and diluted income of $6.12 per share and $4.92 per share, respectively.
For the three months ended September 30, 2022, the Company reported adjusted net income of $74.3 million, which excludes net unrealized gains on derivative instruments of $7.1 million and a loss on debt extinguishment of $4.2 million, or basic and diluted adjusted net income of $5.72 per share and $4.58 per share, respectively. In the comparable quarter of 2021, the Company reported adjusted net income of $72.1 million, which excludes net unrealized gains on derivative instruments of $6.3 million and a loss on debt extinguishment of $0.1 million, or basic and diluted adjusted net income of $5.63 per share and $4.52 per share, respectively.
For the nine months ended September 30, 2022, the Company reported net income of $224.7 million, or basic and diluted income of $17.31 per share and $13.86 per share, respectively. In the comparable period of 2021, the Company reported net income of $97.4 million, or basic and diluted income of $7.96 per share and $6.34 per share, respectively.
For the nine months ended September 30, 2022, the Company reported adjusted net income of $220.4 million, which excludes net unrealized gains on derivative instruments of $8.5 million and a loss on debt extinguishment of $4.2 million, or basic and diluted adjusted net income of $16.97 per share and $13.59 per share, respectively. In the comparable period of 2021, the Company reported adjusted net income of $121.7 million, which excludes net unrealized losses on derivative instruments of $24.2 million and a loss on debt extinguishment of $0.1 million, or basic and diluted adjusted net income of $9.95 per share and $7.93 per share, respectively.
Revenues, net
Revenues, net for the three months ended September 30, 2022 were $185.3 million compared to $183.4 million in the comparable quarter in 2021. Net time and voyage charter revenues increased $21.8 million due to an increase in available days driven by an increase in owned days and chartered-in days, partially offset by a decrease of $19.9 million due to lower charter rates.
Revenues, net for the nine months ended September 30, 2022 and 2021 were $568.4 million and $409.8 million, respectively. Net time and voyage charter revenues increased $80.4 million due to higher charter rates and increased $78.2 million due to an increase in available days driven by increases in owned days and chartered-in days.
Voyage expenses
Voyage expenses for the three months ended September 30, 2022 were $40.8 million compared to $30.3 million in the comparable quarter in 2021. Voyage expenses increased primarily due to an increase in bunker consumption expense of $10.1 million driven by an increase in bunker fuel prices.
Voyage expenses for the nine months ended September 30, 2022 were $120.7 million and $81.4 million in the comparable period in 2021. Voyage expenses increased primarily due to an increase in bunker consumption expense of $29.1 million driven by an increase in bunker fuel prices, an increase in port expenses of $8.5 million driven by an increase in fuel surcharges and cost inflation and an increase in broker commissions of $1.7 million driven by an increase in related revenues.
Vessel operating expenses
Vessel operating expenses for the three months ended September 30, 2022 were $33.1 million compared to $28.1 million in the comparable quarter in 2021. Vessel operating expenses increased primarily due to an increase in repair costs of $3.1 million driven by discretionary upgrades and certain unscheduled necessary repairs, and an increase in crewing costs of $2.1 million driven by crew changes and expenses related to COVID-19 and the war in Ukraine. The ownership days for the three months ended September 30, 2022 and 2021 were 4,831 and 4,697, respectively.
Average daily vessel operating expenses excluding one-time, non-recurring expenses related to vessel acquisitions, charges relating to a change in the crewing manager on some of our vessels and discretionary hull upgrades for the three months ended September 30, 2022 were $6,566 as compared to $5,401 for the three months ended September 30, 2021.
Vessel operating expenses for the nine months ended September 30, 2022 and 2021 were $88.2 million and $73.3 million, respectively. Vessel operating expenses increased primarily due to an increase in crewing costs of $7.8 million driven by crew changes and expenses related to COVID-19 and the war in Ukraine, an increase in the cost of lubes, stores and spares of $3.1 million driven by cost inflation and an increase in repair costs of $2.4 million driven by discretionary upgrades and certain unscheduled necessary repairs. The ownership days for the nine months ended September 30, 2022 and 2021 were 14,424 and 13,407, respectively.
Average daily vessel operating expenses excluding one-time, non-recurring expenses related to vessel acquisitions, charges relating to a change in the crewing manager on some of our vessels and discretionary hull upgrades for the nine months ended September 30, 2022 and 2021 were $5,991 and $5,114, respectively.
Charter hire expenses
Charter hire expenses for the three months ended September 30, 2022 were $19.8 million compared to $10.7 million in the comparable quarter in 2021. Charter hire expenses increased $8.3 million primarily due to an increase in chartered-in days and increased $0.7 million due to an increase in charter hire rates due to improvement in the charter hire market. The total chartered-in days for the three months ended September 30, 2022 were 1,000 compared to 563 for the comparable quarter in the prior year.
Charter hire expenses for the nine months ended September 30, 2022 were $63.8 million compared to $25.4 million in the comparable period in 2021. Charter hire expenses increased $20.4 million primarily due to an increase in chartered-in days and increased $18.0 million due to an increase in charter hire rates due to improvement in the charter hire market. The total chartered-in days for the nine months ended September 30, 2022 and 2021 were 3,102 and 1,718, respectively.
The Company currently charters in five Ultramax vessels on a long-term basis as of the charter-in commencement date, with an outstanding option to extend the charter period on one of those vessels.
Depreciation and amortization
Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $15.4 million and $13.6 million, respectively. Total depreciation and amortization expense for the three months ended September 30, 2022 includes $11.9 million of vessel and other fixed asset depreciation and $3.5 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months ended September 30, 2021 were $11.4 million of vessel and other fixed asset depreciation and $2.2 million of amortization of deferred drydocking costs. Depreciation and amortization increased $1.3 million due to the impact of thirteen drydocks completed since the third quarter of 2021 and increased $0.5 million due to an increase in the cost base of our owned fleet due to the capitalization of BWTS on our vessels and the acquisition of three vessels in the second half of 2021, offset in part by the sale of one vessel in the third quarter of 2022.
Depreciation and amortization expense for the nine months ended September 30, 2022 and 2021 was $45.2 million and $39.2 million, respectively. Total depreciation and amortization expense for the nine months ended September 30, 2022 includes $35.5 million of vessel and other fixed asset depreciation and $9.7 million relating to the amortization of deferred drydocking costs. Comparable amounts for the nine months ended September 30, 2021 were $33.0 million of vessel and other fixed asset depreciation and $6.2 million of amortization of deferred drydocking costs. Depreciation and amortization increased $3.5 million due to the impact of 13 drydocks completed since the third quarter of 2021 and increased $2.6 million due to an increase in the cost base of our owned fleet due to the acquisition of nine vessels in 2021 and the capitalization of BWTS on our vessels, offset in part by the sale of one vessel in the third quarter of 2021 and the sale of one vessel in the third quarter of 2022.
General and administrative expenses
General and administrative expenses for the three months ended September 30, 2022 and 2021 were $9.7 million and $7.9 million, respectively. General and administrative expenses include stock-based compensation of $1.4 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively. General and administrative expenses increased $0.7 million due to higher stock-based compensation expense and increased $0.5 million due to an increase in compensation and benefits.
General and administrative expenses for the nine months ended September 30, 2022 and 2021 were $29.6 million and $23.6 million, respectively. General and administrative expenses include stock-based compensation of $4.5 million and $2.2 million for the nine months ended September 30, 2022 and 2021, respectively. General and administrative expenses increased $2.3 million due to higher stock-based compensation expense, increased $1.7 million due to an increase in compensation and benefits, and increased $1.0 million due to higher professional fees.
Other operating expense
Other operating expense for the three months ended September 30, 2022 and 2021 was $2.5 million and $0.8 million, respectively. Other operating expense for the three months ended September 30, 2022 was primarily comprised of costs associated with a corporate transaction that did not materialize. Other operating expense for the three months ended September 30, 2021 was primarily comprised of costs incurred relating to a 2021 U.S. government investigation into an allegation that one of our vessels may have improperly disposed of ballast water that entered the engine room bilges during a repair. The Company posted a surety bond as security for any fines and penalties. Other operating expense consists of expenses incurred relating to this incident, which include legal fees, surety bond expenses, vessel offhire, crew changes and travel costs.
Other operating expense for the nine months ended September 30, 2022 and 2021 was $2.6 million and $2.3 million, respectively. Other operating expense for the nine months ended September 30, 2022 was primarily comprised of costs associated with a corporate transaction that did not materialize. Other operating expense for the nine months ended September 30, 2021 was primarily comprised of costs incurred relating to a 2021 U.S. government investigation into an allegation that one of our vessels may have improperly disposed of ballast water that entered the engine room bilges during a repair. The Company posted a surety bond as security for any fines and penalties. Other operating expense consists of expenses incurred relating to this incident, which include legal fees, surety bond expenses, vessel offhire, crew changes and travel costs.
Interest expense
Interest expense for the three months ended September 30, 2022 and 2021 was $4.2 million and $8.5 million, respectively. Interest expense decreased $1.4 million due to lower effective interest rates and decreased $1.4 million due to lower outstanding principal balances, each as a result of the refinancing of the Company’s debt in the fourth quarter of 2021 and decreased $1.4 million due to lower amortization of debt discounts and deferred financing costs primarily as a result of the Company’s adoption of ASU 2020-06.
Interest expense for the nine months ended September 30, 2022 and 2021 was $13.0 million and $25.6 million, respectively. Interest expense decreased $4.6 million due to lower outstanding principal balances and decreased $4.4 million due to lower effective interest rates, each as a result of the refinancing of the Company’s debt in the fourth quarter of 2021 and decreased $3.8 million due to lower amortization of debt discounts and deferred financing costs primarily as a result of the Company’s adoption of ASU 2020-06.
The Company entered into interest rate swaps in October 2021 to fix the interest rate exposure on the Global Ultraco Debt Facility term loan. As a result of these swaps, which average 87 basis points, the Company’s interest rate exposure is fully fixed insulating the Company from the rising interest rate environment.
Realized and unrealized (gain)/loss on derivative instruments, net
Realized and unrealized gain on derivative instruments, net for the three months ended September 30, 2022 was $11.3 million compared to a realized and unrealized loss on derivative instruments, net of $9.0 million for the three months ended September 30, 2021. The $11.3 million gain is primarily related to $14.3 million in gains earned on our freight forward agreements as a result of the decrease in charter hire rates during the third quarter, offset by $3.0 million in bunker swap losses for the three months ended September 30, 2022. For the three months ended September 30, 2021, the Company had $9.4 million in losses on our freight forward agreements due to the sharp increase in charter hire rates during the third quarter of 2021, offset by $0.4 million in bunker swap gains.
Realized and unrealized gain on derivative instruments, net for the nine months ended September 30, 2022 was $13.3 million compared to a realized and unrealized loss on derivative instruments, net of $45.6 million for the nine months ended September 30, 2021. The $13.3 million gain is primarily attributable to $9.4 million in gains earned on our freight forward agreements as a result of the decrease in charter hire rates during 2022 and $3.9 million in bunker swap gains for the nine months ended September 30, 2022. For the comparable period in the prior year, the Company had $47.9 million in losses on our freight forward agreements due to the sharp increase in charter hire rates in 2021, offset by $2.3 million in bunker swap gains.
The non-cash unrealized gains on forward freight agreements (“FFA”) for the remaining three months of 2022 as of September 30, 2022 amounted to $9.4 million based on 675 net days and the non-cash unrealized losses on FFAs for the calendar year 2023 amounted to less than $0.1 million on 135 net days.
The following table shows our open positions on FFAs as of September 30, 2022:
FFA Period
Number of Days
Average FFA Contract Price
Quarter ending December 31, 2022 – Sell Positions
2,010
$
21,981
Quarter ending December 31, 2022 – Buy Positions
(1,335
)
$
16,461
Year ending December 31, 2023 – Sell Positions
720
$
14,525
Year ending December 31, 2023 – Buy Positions
(855
)
$
14,308
Liquidity and Capital Resources
Nine Months Ended
(In thousands)
September 30, 2022
September 30, 2021
Net cash provided by operating activities
$
242,491
$
120,915
Net cash provided by/(used in) investing activities
4,090
(106,767
)
Net cash (used in)/provided by financing activities
(135,198
)
22,648
Net increase in cash, cash equivalents and restricted cash
111,383
36,796
Cash, cash equivalents and restricted cash at beginning of period
86,222
88,849
Cash, cash equivalents and restricted cash at end of period
$
197,605
$
125,645
Net cash provided by operating activities for the nine months ended September 30, 2022 and 2021 was $242.5 million and $120.9 million, respectively. The increase in cash flows provided by operating activities resulted primarily from the increase in revenues due to higher charter hire rates.
Net cash provided by investing activities for the nine months ended September 30, 2022 was $4.1 million, compared to net cash used in investing activities of $106.8 million in the comparable period in 2021. During the nine months ended September 30, 2022, the Company received net proceeds of $14.9 million from the sale of a vessel and paid $5.7 million for the purchase of ballast water treatment systems (“BWTS”) on our fleet, $4.1 million as an advance for the purchase of a vessel to be delivered in the fourth quarter of 2022, $0.8 million for vessel improvements and $0.3 million for other fixed assets.
Net cash used in financing activities for the nine months ended September 30, 2022 was $135.2 million, compared to net cash provided by financing activities of $22.6 million in the comparable period in 2021. During the nine months ended September 30, 2022, the Company paid $81.6 million in dividends, repaid $37.4 million of the term loan under the Global Ultraco Debt Facility, paid $14.2 million to repurchase a portion of our Convertible Bond Debt and $2.4 million to settle net share equity awards.
As of September 30, 2022, our cash and cash equivalents including noncurrent restricted cash was $197.6 million compared to $86.2 million as of December 31, 2021.
In addition, as of September 30, 2022, we had $100.0 million in an undrawn revolver facility available under the Global Ultraco Debt Facility.
As of September 30, 2022, the Company’s outstanding debt of $354.3 million, which excludes debt discount and debt issuance costs, consisted of $250.2 million under the Global Ultraco Debt Facility and $104.1 million of Convertible Bond Debt.
During September 2022, the Company repurchased $10.0 million in aggregate principal amount of Convertible Bond Debt for $14.2 million in cash and cancelled the repurchased debt. The related amount of Convertible Bond Debt was not converted by the holders and no common shares were issued as a result of the repurchase transactions. The related amount of Convertible Bond Debt would have converted into 296,990 common shares (assuming the conversion occurred as of September 30, 2022). From time to time, the Company may, subject to market condition and other factors and to the extent permitted by law, opportunistically repurchase the Convertible Bond Debt in the open market or through privately negotiated transactions.
We continuously evaluate potential transactions that we believe will be accretive to earnings, enhance shareholder value or are in the best interests of the Company, including without limitation, business combinations, the acquisition of vessels or related businesses, repayment or refinancing of existing debt, the issuance of new securities, share and debt repurchases or other transactions.
Capital Expenditures and Drydocking
Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels, which are expected to enhance the revenue earning capabilities and safety of the vessels.
In addition to acquisitions that we may undertake in future periods, the Company’s other major capital expenditures include funding the Company’s program of regularly scheduled drydocking necessary to comply with international shipping standards and environmental laws and regulations. Although the Company has some flexibility regarding the timing of its drydocking, the costs are relatively predictable. Management anticipates that vessels are to be drydocked every two and a half years for vessels older than 15 years and five years for vessels younger than 15 years. Funding of these requirements is anticipated to be met with cash from operations. We anticipate that this process of recertification will require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period.
Drydocking costs incurred are deferred and amortized to expense on a straight-line basis over the period through the date of the next scheduled drydocking for those vessels. During the nine months ended September 30, 2022, eight of our vessels completed drydock and we incurred drydocking expenditures of $18.5 million. During the nine months ended September 30, 2021, six of our vessels completed drydock and we incurred drydocking expenditures of $10.7 million.
The following table represents certain information about the estimated costs for anticipated vessel drydockings, BWTS, and vessel upgrades in the next four quarters, along with the anticipated off-hire days:
Projected Costs (1) (in millions)
Quarter Ending
Off-hire Days(2)
BWTS
Drydocks
Vessel Upgrades(3)
December 31, 2022
177
$
0.3
$
1.5
$
—
March 31, 2023
233
0.1
5.4
0.4
June 30, 2023
186
0.7
3.8
0.4
September 30, 2023
193
0.7
4.0
0.4
(1) Actual costs will vary based on various factors, including where the drydockings are performed.
(2) Actual duration of off-hire days will vary based on the age and condition of the vessel, yard schedules and other factors.
(3) Vessel upgrades represents capex relating to items such as high-spec low friction hull paint which improves fuel efficiency and reduces fuel costs, NeoPanama Canal chock fittings enabling vessels to carry additional cargo through the new Panama Canal locks, as well as other retrofitted fuel-saving devices. Vessel upgrades are discretionary in nature and evaluated on a business case-by-case basis.
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table summarizes the Company’s selected condensed consolidated financial and other data for the periods indicated below.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three and Nine Months Ended September 30, 2022 and 2021 (In thousands, except share and per share data)
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Revenues, net
$
185,313
$
183,393
$
568,406
$
409,816
Voyage expenses
40,792
30,273
120,710
81,411
Vessel operating expenses
33,091
28,125
88,213
73,323
Charter hire expenses
19,772
10,724
63,768
25,374
Depreciation and amortization
15,407
13,570
45,241
39,187
General and administrative expenses
9,666
7,948
29,611
23,559
Other operating expense
2,469
792
2,643
2,312
Gain on sale of vessel
(9,336
)
(3,962
)
(9,336
)
(3,962
)
Total operating expenses
111,861
87,470
340,850
241,204
Operating income
73,452
95,923
227,556
168,612
Interest expense
4,236
8,511
13,021
25,561
Interest income
(881
)
(19
)
(1,100
)
(52
)
Realized and unrealized (gain)/loss on derivative instruments, net
(11,293
)
8,991
(13,281
)
45,588
Loss on debt extinguishment
4,173
99
4,173
99
Total other (income)/expense, net
(3,765
)
17,582
2,813
71,196
Net income
$
77,217
$
78,341
$
224,743
$
97,416
Weighted average shares outstanding:
Basic
12,993,450
12,802,401
12,985,329
12,237,288
Diluted
16,201,852
15,936,374
16,219,264
15,354,481
Per share amounts:
Basic net income
$
5.94
$
6.12
$
17.31
$
7.96
Diluted net income
$
4.77
$
4.92
$
13.86
$
6.34
CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2022 and December 31, 2021 (In thousands, except share data and par values)
September 30, 2022
December 31, 2021
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents
$
195,030
$
86,147
Accounts receivable, net of a reserve of $2,192 and $1,818, respectively
33,554
28,456
Prepaid expenses
4,585
3,362
Inventories
26,274
17,651
Collateral on derivatives
1,200
15,081
Fair value of derivative assets – current
18,353
4,669
Other current assets
703
667
Total current assets
279,699
156,033
Noncurrent assets:
Vessels and vessel improvements, at cost, net of accumulated depreciation of $249,384 and $218,670, respectively
876,547
908,076
Advance for vessel purchase
4,125
—
Operating lease right-of-use assets
34,368
17,017
Other fixed assets, net of accumulated depreciation of $1,566 and $1,403, respectively
346
257
Restricted cash – noncurrent
2,575
75
Deferred drydock costs, net
45,881
37,093
Fair value of derivative assets – noncurrent
9,873
3,112
Advances for ballast water systems and other assets
2,577
4,995
Total noncurrent assets
976,292
970,625
Total assets
$
1,255,991
$
1,126,658
LIABILITIES & STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable
$
21,058
$
20,781
Accrued interest
1,635
2,957
Other accrued liabilities
17,012
17,994
Fair value of derivative liabilities – current
611
4,253
Current portion of operating lease liabilities
30,742
15,728
Unearned charter hire revenue
14,794
12,088
Current portion of long-term debt
49,800
49,800
Total current liabilities
135,652
123,601
Noncurrent liabilities:
Global Ultraco Debt Facility, net of debt issuance costs
193,202
229,290
Convertible Bond Debt, net of debt discount and debt issuance costs
103,425
100,954
Noncurrent portion of operating lease liabilities
3,626
1,282
Other noncurrent accrued liabilities
883
265
Total noncurrent liabilities
301,136
331,791
Total liabilities
436,788
455,392
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized, none issued as of September 30, 2022 and December 31, 2021
—
—
Common stock, $0.01 par value, 700,000,000 shares authorized, 13,003,516 and 12,917,027 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
130
129
Additional paid-in capital
964,494
982,746
Accumulated deficit
(162,712
)
(313,495
)
Accumulated other comprehensive income
17,291
1,886
Total stockholders’ equity
819,203
671,266
Total liabilities and stockholders’ equity
$
1,255,991
$
1,126,658
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, 2022 and 2021 (In thousands)
Nine Months Ended
September 30, 2022
September 30, 2021
Cash flows from operating activities:
Net income
$
224,743
$
97,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
35,513
32,951
Amortization of operating lease right-of-use assets
21,083
10,536
Amortization of deferred drydocking costs
9,728
6,236
Amortization of debt discount and debt issuance costs
1,627
5,443
Loss on debt extinguishment
4,173
99
Gain on sale of vessel
(9,336
)
(3,962
)
Net unrealized (gain)/loss on fair value of derivatives
(8,517
)
24,193
Stock-based compensation expense
4,542
2,235
Drydocking expenditures
(18,527
)
(10,737
)
Changes in operating assets and liabilities:
Accounts payable
650
4,639
Accounts receivable
(5,098
)
(10,645
)
Accrued interest
(1,241
)
2,385
Inventories
(8,622
)
(5,467
)
Operating lease liabilities current and noncurrent
(21,076
)
(11,304
)
Collateral on derivatives
13,881
(31,370
)
Fair value of derivatives, other current and noncurrent assets
(183
)
(1,150
)
Other accrued liabilities
(2,332
)
1,898
Prepaid expenses
(1,223
)
(1,455
)
Unearned charter hire revenue
2,706
8,974
Net cash provided by operating activities
242,491
120,915
Cash flows from investing activities:
Purchase of vessels and vessel improvements
(781
)
(109,385
)
Advances for vessel purchases
(4,125
)
(2,200
)
Purchase of scrubbers and ballast water systems
(5,695
)
(4,557
)
Proceeds from hull and machinery insurance claims
—
245
Proceeds from sale of vessel
14,944
9,159
Purchase of other fixed assets
(253
)
(29
)
Net cash provided by/(used in) investing activities
4,090
(106,767
)
Cash flows from financing activities:
Proceeds from New Ultraco Debt Facility
—
16,500
Repayment of Norwegian Bond Debt
—
(4,000
)
Repayment of term loan under New Ultraco Debt Facility
—
(24,258
)
Repayment of revolver loan under New Ultraco Debt Facility
—
(55,000
)
Repayment of revolver loan under Super Senior Facility
—
(15,000
)
Proceeds from revolver loan under New Ultraco Debt Facility
—
55,000
Proceeds from Holdco Revolving Credit Facility
—
24,000
Proceeds from issuance of shares under ATM Offering, net of commissions
—
27,242
Repayment of term loan under Global Ultraco Debt Facility
(37,350
)
—
Repurchase of Convertible Bond Debt
(14,188
)
—
Cash received from exercise of stock options
85
56
Cash used to settle net share equity awards
(2,351
)
(986
)
Equity offerings issuance costs
201
(292
)
Financing costs paid to lenders
(18
)
(614
)
Dividends paid
(81,577
)
—
Net cash (used in)/provided by financing activities
(135,198
)
22,648
Net increase in Cash, cash equivalents and restricted cash
111,383
36,796
Cash, cash equivalents and restricted cash at beginning of period
86,222
88,849
Cash, cash equivalents and restricted cash at end of period
$
197,605
$
125,645
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest
$
12,861
$
17,462
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
$
38,956
$
22,499
Accruals for vessel purchases and vessel improvements included in Other accrued liabilities
$
—
$
500
Accruals for scrubbers and ballast water treatment systems included in Accounts payable and Other accrued liabilities
$
3,916
$
3,259
Accruals for dividends payable included in Other accrued liabilities and Other noncurrent accrued liabilities
$
1,551
$
—
Accrual for issuance costs for ATM Offering included in Other accrued liabilities
$
—
$
104
Accruals for debt issuance costs included in Accounts payable and Other accrued liabilities
$
—
$
509
Supplemental Information – Non-GAAP Financial Measures
This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission (“SEC”). We believe these measures provide important supplemental information to investors to use in evaluating ongoing operating results. We use these measures, together with accounting principles generally accepted in the United States (“GAAP” or “U.S. GAAP”) measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations, that when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our press releases, provide a more complete understanding of factors and trends affecting our business. We strongly encourage you to review all of our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names.
Non-GAAP Financial Measures
(1) Adjusted net income and Adjusted Basic and Diluted net income per share
We define Adjusted net income and Adjusted Basic and Diluted net income per share as Net income and Basic and Diluted net income per share, each under U.S. GAAP, respectively, adjusted to exclude non-cash unrealized losses/(gains) on derivatives and loss on debt extinguishment. The Company utilizes derivative instruments such as FFAs to partially hedge against its underlying long physical position in ships (as represented by owned and third-party chartered-in vessels). The Company does not apply hedge accounting, and, as such, the mark-to-market gains/(losses) on forward hedge positions impact current quarter results, causing timing mismatches in the Condensed Consolidated Statements of Operations. Additionally, we believe that loss on debt extinguishment is not representative of our normal business operations. We believe that Adjusted net income and Adjusted Basic and Diluted net income per share are more useful to analysts and investors in comparing the results of operations and operational trends between periods and relative to other peer companies in our industry. Our Adjusted net income should not be considered an alternative to net income, operating income, cash flows provided by operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. The Company’s calculation of Adjusted net income may not be comparable to those reported by other companies.
The following table presents the reconciliation of Net income, as recorded in the Condensed Consolidated Statements of Operations, to Adjusted net income:
Reconciliation of GAAP Net income to Adjusted net income For the Three and Nine Months Ended September 30, 2022 and 2021 (In thousands, except share and per share data)
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net income
$
77,217
$
78,341
$
224,743
$
97,416
Adjustments to reconcile net income to Adjusted net income:
Unrealized (gain)/loss on derivative instruments
(7,124
)
(6,347
)
(8,517
)
24,193
Loss on debt extinguishment
4,173
99
4,173
99
Adjusted net income
$
74,266
$
72,093
$
220,399
$
121,708
Weighted average shares outstanding:
Basic
12,993,450
12,802,401
12,985,329
12,237,288
Diluted (1)
16,201,852
15,936,374
16,219,264
15,354,481
Per share amounts:
Basic adjusted net income
$
5.72
$
5.63
$
16.97
$
9.95
Diluted adjusted net income(1)
$
4.58
$
4.52
$
13.59
$
7.93
(1) The number of shares used in the calculation of Diluted net income per share and Diluted adjusted net income per share for the three and nine months ended September 30, 2022 and 2021 includes 3,092,230 and 2,906,035, respectively, in dilutive shares related to the Convertible Bond Debt based on the if-converted method in addition to the restricted stock awards, options, and restricted stock units based on the treasury stock method.
(2) EBITDA and Adjusted EBITDA
We define EBITDA as net income under U.S. GAAP adjusted for interest, income taxes, depreciation and amortization.
Adjusted EBITDA is a non-GAAP financial measure that is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance as compared to that of other companies in our industry, without regard to financing methods, capital structure or historical costs basis. Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flows provided by operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. The Company’s calculation of Adjusted EBITDA may not be comparable to those reported by other companies. Adjusted EBITDA represents EBITDA adjusted to exclude the items which represent certain non-cash, one-time and other items such as vessel impairment, gain/(loss) on sale of vessels, impairment of operating lease right-of-use assets, unrealized (gain)/loss on derivatives, loss on debt extinguishment and stock-based compensation expenses that the Company believes are not indicative of the ongoing performance of its core operations.
The following table presents a reconciliation of Net income, as recorded in the Condensed Consolidated Statements of Operations, to EBITDA and Adjusted EBITDA:
Reconciliation of GAAP Net income to EBITDA and Adjusted EBITDA For the Three and Nine Months Ended September 30, 2022 and 2021 (In thousands)
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net income
$
77,217
$
78,341
$
224,743
$
97,416
Adjustments to reconcile net income to EBITDA:
Interest expense
4,236
8,511
13,021
25,561
Interest income
(881
)
(19
)
(1,100
)
(52
)
Income taxes
—
—
—
—
EBIT
80,572
86,833
236,664
122,925
Depreciation and amortization
15,407
13,570
45,241
39,187
EBITDA
95,979
100,403
281,905
162,112
Non-cash, one-time and other adjustments to EBITDA(1)
(10,838
)
(9,433
)
(9,138
)
22,565
Adjusted EBITDA
$
85,141
$
90,970
$
272,767
$
184,677
(1) One-time and other adjustments to EBITDA for the three and nine months ended September 30, 2022 includes stock-based compensation, loss on debt extinguishment, gain on sale of vessel and net unrealized gains on derivative instruments. One-time and other adjustments to EBITDA for the three and nine months ended September 30, 2021 includes stock-based compensation, loss on debt extinguishment, gain on sale of vessel and net unrealized (gains)/losses on derivative instruments.
(3) TCE revenue and TCE
Time charter equivalent (“TCE”) is a non-GAAP financial measure that is commonly used in the shipping industry primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts. The Company defines TCE revenue as revenues, net less voyage expenses and charter hire expenses, adjusted for realized gains/(losses) on FFAs and bunker swaps and defines TCE as TCE revenue divided by the number of owned available days. Owned available days is the number of our ownership days less the aggregate number of days that our vessels are off-hire due to vessel familiarization upon acquisition, repairs, vessel upgrades or special surveys. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. TCE provides additional meaningful information in conjunction with shipping Revenues, net, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their performance. The Company’s calculation of TCE may not be comparable to that reported by other companies. The Company calculates relative performance by comparing TCE against the Baltic Supramax Index (“BSI”) adjusted for commissions and fleet makeup.
The following table presents the reconciliation of Revenues, net, as recorded in the Condensed Consolidated Statements of Operations, to TCE:
Reconciliation of Revenues, net to TCE For the Three and Nine Months Ended September 30, 2022 and 2021 (In thousands, except owned available days and TCE)
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Revenues, net
$
185,313
$
183,393
$
568,406
$
409,816
Less:
Voyage expenses
(40,792
)
(30,273
)
(120,710
)
(81,411
)
Charter hire expenses
(19,772
)
(10,724
)
(63,768
)
(25,374
)
Reversal of one legacy time charter (1)
—
—
—
(854
)
Realized gain/(loss) on FFAs and bunker swaps
4,169
(15,338
)
4,764
(21,395
)
TCE revenue
$
128,918
$
127,058
$
388,692
$
280,782
Owned available days
4,588
4,368
13,599
12,685
TCE
$
28,099
$
29,088
$
28,582
$
22,135
(1) Represents revenues, net of voyage and charter-hire expenses associated with a 2014 charter-in vessel that is not representative of the Company’s current performance.
Glossary of Terms:
Ownership days: We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we recorded during a period.
Chartered-in under operating lease days: We define chartered-in under operating lease days as the aggregate number of days in a period during which we chartered-in vessels. Periodically, the Company charters in vessels on a single trip basis.
Available days: We define available days as the number of our ownership days and chartered-in days less the aggregate number of days that our vessels are off-hire due to vessel familiarization upon acquisition, repairs, vessel upgrades or special surveys and other reasons which prevent the vessel from performing under the relevant charter party such as surveys, medical events, stowaway disembarkation, etc. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
Operating days: We define operating days as the number of available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
Fleet utilization: We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning. Our fleet continues to perform at high utilization rates.
ATM Offering: In March 2021, the Company entered into an at market issuance sales agreement with B. Riley Securities, Inc., BTIG, LLC and Fearnley Securities, Inc., as sales agents, to sell shares of common stock, par value $0.01 per share, of the Company with aggregate gross sales proceeds of up to $50.0 million, from time to time through an “at-the-market” offering program.
Definitions of capitalized terms related to our Indebtedness
Global Ultraco Debt Facility: Global Ultraco Debt Facility refers to the senior secured credit facility entered into by Eagle Bulk Ultraco LLC (“Eagle Ultraco”), a wholly-owned subsidiary of the Company, along with certain of its vessel-owning subsidiaries as guarantors, with the lenders party thereto (the “Lenders”), Credit Agricole Corporate and Investment Bank (“Credit Agricole”), Skandinaviska Enskilda Banken AB (PUBL), Danish Ship Finance A/S, Nordea Bank ABP, Filial I Norge, DNB Markets Inc., Deutsche Bank AG, and ING Bank N.V., London Branch. The Global Ultraco Debt Facility provides for an aggregate principal amount of $400.0 million, which consists of (i) a term loan facility in an aggregate principal amount of $300.0 million and (ii) a revolving credit facility in an aggregate principal amount of $100.0 million. The Global Ultraco Debt Facility is secured by 49 of the Company’s vessels. As of September 30, 2022, $100.0 million of the revolving credit facility remains undrawn.
Convertible Bond Debt: Convertible Bond Debt refers to 5.0% Convertible Senior Notes due 2024 issued by the Company on July 29, 2019 that will mature on August 1, 2024.
New Ultraco Debt Facility: New Ultraco Debt Facility refers to the senior secured credit facility for $208.4 million entered into by Ultraco Shipping LLC, a wholly-owned subsidiary of the Company, as the borrower (the “New Ultraco Debt Facility”), with the Company and certain of its indirectly vessel-owning subsidiaries, as guarantors (the “Guarantors”), the lenders party thereto, the swap banks party thereto, ABN AMRO Capital USA LLC (“ABN AMRO”), Credit Agricole, Skandinaviska Enskilda Banken AB (PUBL) and DNB Markets Inc., as mandated lead arrangers and bookrunners, and Credit Agricole Corporate and Investment Bank, as arranger, security trustee and facility agent. The New Ultraco Debt Facility was refinanced on October 1, 2021.
Norwegian Bond Debt: Norwegian Bond Debt refers to the Senior Secured Bonds issued by Eagle Bulk Shipco LLC, a wholly-owned subsidiary of the Company (“Shipco”), as borrower, certain wholly-owned vessel-owning subsidiaries of Shipco, as guarantors (“Shipco Vessels”), on November 28, 2017 for $200.0 million, pursuant to those certain Bond Terms, dated as of November 22, 2017, by and between Shipco, as issuer, and Nordic Trustee AS, a company existing under the laws of Norway (the “Bond Trustee”). The bonds outstanding under the Norwegian Bond Debt were repaid in full on October 18, 2021 after the expiry of the requisite notice period.
Super Senior Facility: Super Senior Facility refers to the credit facility for $15.0 million, by and among Shipco as borrower, and ABN AMRO, as original lender, mandated lead arranger and agent. During the third quarter of 2021, the Company cancelled the Super Senior Revolving Facility. There were no outstanding amounts under the facility.
Holdco Revolving Credit Facility: Holdco Revolving Credit Facility refers to the senior secured revolving credit facility for $35.0 million, by and among Eagle Bulk Holdco LLC (“Holdco”), a wholly-owned subsidiary of the Company, as borrower, the Company and certain wholly-owned vessel-owning subsidiaries of Holdco, as joint and several guarantors, the banks and financial institutions named therein as lenders and Credit Agricole, as lender, facility agent, security trustee and mandated lead arranger with Nordea Bank ABP, New York Branch. The Holdco Revolving Credit Facility was refinanced on October 1, 2021.
Conference Call Information
As previously announced, members of Eagle Bulk’s senior management team will host a teleconference and webcast at 8:00 a.m. ET on Friday, November 4, 2022, to discuss the third quarter results.
A live webcast of the call will be available on the Investor Relations page of the Company’s website at ir.eagleships.com. To access the call by phone, please register at https://register.vevent.com/register/BIcc27852061574d51b01e45b8dc164b47 and you will be provided with dial-in details. A replay of the webcast will be available on the Investor Relations page of the Company’s website.
About Eagle Bulk Shipping Inc.
Eagle Bulk Shipping Inc. (“Eagle” or the “Company”) is a U.S. based fully integrated, shipowner-operator providing global transportation solutions to a diverse group of customers including miners, producers, traders, and end users. Headquartered in Stamford, Connecticut, with offices in Singapore and Copenhagen, Denmark, Eagle focuses exclusively on the versatile mid-size drybulk vessel segment and owns one of the largest fleets of Supramax/Ultramax vessels in the world. The Company performs all management services in-house (including: strategic, commercial, operational, technical, and administrative) and employs an active management approach to fleet trading with the objective of optimizing revenue performance and maximizing earnings on a risk-managed basis. For further information, please visit our website: www.eagleships.com.
Website Information
We intend to use our website, www.eagleships.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor Relations section. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to following our press releases, filings with the SEC, public conference calls, and webcasts. To subscribe to our e-mail alert service, please click the “Investor Alerts” link in the Investor Relations section of our website and submit your email address. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.
Disclaimer: Forward-Looking Statements
Matters discussed in this release may constitute forward-looking statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements reflect current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. These statements may include words such as “believe,” “estimate,” “project,” “intend,” “expect,” “plan,” “anticipate,” and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, examination of historical operating trends, data contained in our records and other data available from third parties. Although Eagle Bulk Shipping Inc. believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, Eagle Bulk Shipping Inc. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, changes as a result of COVID-19, including the availability and effectiveness of vaccines on a widespread basis and the impact of any mutations of the virus, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in vessel operating expenses, including drydocking and insurance costs, or actions taken by regulatory authorities, ability of our counterparties to perform their obligations under sales agreements, charter contracts, and other agreements on a timely basis, potential liability from future litigation, domestic and international political conditions including the current conflict between Russia and Ukraine, which may impact our ability to retain and source crew, and in turn, could adversely affect our revenue, expenses and profitability, potential disruption of shipping routes due to accidents and political events or acts by terrorists.
Risks and uncertainties are further described in reports filed by Eagle Bulk Shipping Inc. with the SEC.
CONTACT
Company Contact: Frank De Costanzo Chief Financial Officer Eagle Bulk Shipping Inc. Tel. +1 203-276-8100 Email: [email protected]
Media: ICR, Inc. Tel. +1 203-682-8350 ——————————————————————————– Source: Eagle Bulk Shipping Inc.
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, 2022.
Third Quarter 2022 Highlights
Record third quarter advertising revenue
Net revenue up 21% over the prior-year quarter
Net income attributable to common stockholders down 23% over the prior-year quarter
Consolidated adjusted EBITDA up 12% over the prior-year quarter
Operating cash flow up 62% over the prior-year quarter
Free cash flow down 31% over the prior-year quarter
Quarterly cash dividend of $0.025 per share
“Entravision continued to see progress in the third quarter of 2022, with revenue up 21% versus the prior-year period. Adjusted EBITDA also improved double-digits, increasing 12% year-over-year,” said Walter Ulloa, Chairman and Chief Executive Officer. “Entravision’s strength throughout the quarter was again driven by our digital segment, where revenue improved 29% versus the third quarter of 2021. In our television and audio businesses, political ad spend, in particular, continued to perform strongly.”
Mr. Ulloa continued, “Entravision’s solid performance in the third quarter, together with our progress year-to-date, demonstrates the resiliency and growth of our business in a tough macro environment. We continue to strategically expand across the globe and now have operations in 40 countries across five continents in service of more than 7,000 clients. We are thoughtfully positioning our digital teams in emerging economies where Entravision’s unique offerings have a key first-mover advantage and where a critical mass of connected consumers exists alongside a growing advertising industry. We remain optimistic in finding multiple growth opportunities around the world for our digital business and look forward to sharing our progress as we continue to grow and expand globally.”
Quarterly Cash Dividend
The Company announced today that its Board of Directors approved a quarterly cash dividend to shareholders of $0.025 per share on the Company’s Class A, Class B and Class U common stock, in an aggregate amount of approximately $2.1 million. The quarterly dividend will be payable on December 30, 2022 to shareholders of record as of the close of business on December 15, 2022, and the common stock will trade ex-dividend on December 14, 2022. 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.
Net revenue in the third quarter of 2022 totaled $241.0 million, up 21% from $199.0 million in the prior-year period. Of the overall increase, approximately $42.8 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, neither of which contributed to net revenue in the comparable period ended September 30, 2021. In addition, of the overall increase, approximately $0.1 million was attributable to our audio segment, primarily due to increases in political advertising revenue and local advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $0.8 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television segment revenue was partially offset by increases in political advertising revenue and spectrum usage rights revenue.
Cost of revenue in the third quarter of 2022 totaled $157.1 million, up 26% from $124.3 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 our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, neither of which incurred cost of revenue for us in the comparable period ended September 30, 2021.
Operating expenses in the third quarter of 2022 totaled $49.3 million, up 14% from $43.1 million in the prior-year period. Of the overall increase, approximately $5.9 million was attributable to our digital segment and was primarily due to an increase in expenses associated with the increase in digital advertising revenue, an increase in salary expense and our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, which did not incur operating expenses for us in the comparable period. Additionally, of the overall increase in operating expenses, approximately $0.4 million was attributable to our audio segment primarily due to an increase in expenses associated with the increase in local advertising revenue. The overall increase in operating expenses was partially offset by a decrease of approximately $0.1 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue, partially offset by an increase in rent expense and an increase in bad debt expense.
Corporate expenses in the third quarter of 2022 totaled $9.5 million, up 31% from $7.3 million in the prior-year period. The increase was primarily due to increases in non-cash stock-based compensation and an increase in salaries.
Net revenue for the nine-month period of 2022 totaled $659.9 million, up 25% from $526.3 million in the prior-year period. Of the overall increase, approximately $139.1 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business. In addition, the increase in net revenue in our digital segment was due to our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which contributed to net revenue in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially contributed to net revenue in the comparable period ended September 30, 2021. Additionally, of the overall increase, approximately $2.1 million was attributable to our audio segment, primarily due to increases in political advertising revenue and local advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $7.7 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television segment revenue was partially offset by increases in political advertising revenue and spectrum usage rights revenue.
Cost of revenue for the nine-month period of 2022 totaled $432.0 million, up 36% from $318.1 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 our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which incurred cost of revenue for us in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially incurred cost of revenue for us in the comparable period ended September 30, 2021.
Operating expenses for the nine-month period of 2022 totaled $140.5 million, up 12% from $125.0 million in the prior-year period. Of the overall increase, approximately $15.5 million was attributable to our digital segment and was primarily due to an increase in expenses associated with the increase in digital advertising revenue and an increase in salary expense. In addition, the increase in operating expenses in our digital segment was due to our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which incurred operating expenses for us in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially incurred operating expenses for us in the comparable period ended September 30, 2021. Additionally, of the overall increase in operating expenses, approximately $0.6 million was attributable to our audio segment primarily due to an increase in expenses associated with the increase in local advertising revenue. The overall increase in operating expenses was partially offset by a decrease of approximately $0.6 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue, partially offset by an increase in rent expense and bad debt expense.
Corporate expenses for the nine-month period of 2022 totaled $26.8 million, up 23% from $21.8 million in the prior-year period. The increase was primarily due to increases in non-cash stock-based compensation and an increase in salaries.
Balance Sheet and Related Metrics
Cash and marketable securities as of September 30, 2022 totaled approximately $164.8 million. Total debt under the Company’s credit agreement was $210.0 million. Net of $75 million of cash and marketable securities, total leverage as defined in the Company’s credit agreement was 1.4 times as of September 30, 2022. Net of total cash and marketable securities, total leverage was 0.5 times.
Notice of Conference Call
Entravision Communications Corporation will hold a conference call to discuss its third quarter 2022 results on Thursday, November 3, 2022 at 4:30 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 10171311. 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 leading global advertising, media and ad-tech solutions company connecting brands to consumers by representing top platforms and publishers. Our dynamic portfolio includes digital, television and audio offerings. Digital, our largest revenue segment, is comprised of four business units: our digital sales representation business; Smadex, our programmatic ad purchasing platform; our branding and mobile performance solutions business; and our digital audio business. Through our digital sales representation business, we connect global media companies such as Meta, Twitter, TikTok and Spotify with advertisers in primarily emerging growth markets worldwide. Smadex is our mobile-first demand side platform, enabling advertisers to execute performance campaigns using machine learning. We also offer a branding and mobile performance solutions business, which provides managed services to advertisers looking to connect with global consumers, primarily on mobile devices, and our digital audio business provides digital audio advertising solutions for advertisers in the Americas. In addition to digital, Entravision has 49 television stations and is the largest affiliate group of the Univision and UniMás television networks. Entravision also manages 45 primarily Spanish-language radio stations that feature nationally recognized, Emmy award-winning talent. 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.
IRVING, Texas–(BUSINESS WIRE)– Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and nine months ended September 30, 2022.
Third Quarter 2022 Results
For the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021:
Consolidated
Total revenue increased 1.3% to $66.9 million from $66.0 million;
Total operating expenses increased 50.7% to $75.6 million from $50.2 million;
Operating expenses, excluding stock-based compensation expense, debt modification costs, gains and losses on the sale or disposition of assets, legal settlement, impairments, depreciation expense and amortization expense (1) increased 10.3% to $60.8 million from $55.2 million;
The company had an operating loss of $8.8 million compared to operating income of $15.8 million;
The company recognized $0.1 million in film distribution income from an unconsolidated equity investment;
The company had a net loss of $11.9 million, or $0.44 net loss per share compared to net income of $22.1 million, or $0.81 net income per diluted share;
EBITDA (1) decreased to $(5.7) million from $30.2 million; and
Adjusted EBITDA (1) decreased 78.8% to $2.3 million from $10.8 million.
Broadcast
Net broadcast revenue increased 3.1% to $51.1 million from $49.6 million;
Station Operating Income (“SOI”) (1) decreased 17.9% to $10.0 million from $12.1 million;
Same Station (1) net broadcast revenue increased 3.2% to $51.1 million from $49.5 million; and
Same Station SOI (1) decreased 16.7% to $10.1 million from $12.1 million.
Digital Media
Digital media revenue decreased 4.3% to $10.2 million from $10.6 million; and
Digital Media Operating Income (1) decreased 21.9% to $1.9 million from $2.4 million.
Publishing
Publishing revenue decreased 3.7% to $5.5 million from $5.7 million; and
Publishing Operating Loss (1) was $1.0 million as compared to publishing operating income of $0.5 million.
Included in the results for the quarter ended September 30, 2022 are:
A $7.7 million ($5.7 million, net of tax, or $0.21 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento, and San Francisco;
A $0.1 million loss on the disposal of assets;
A $3.8 million ($2.8 million, net of tax, or $0.10 per share) legal settlement expense; and
A $0.1 million non-cash compensation charge related to the expensing of stock options.
Included in the results for the quarter ended September 30, 2021 are:
A $2.3 million ($1.7 million, net of tax, or $0.06 per share) charge for debt modification costs. On September 10, 2021, the company refinanced $112.8 million of the 2024 Notes by exchanging into $114.7 million (reflecting a call premium of 1.688%) of 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with ASC 470 with $2.3 million of fees paid to third parties included in operating expenses for the period;
A $11.2 million ($8.3 million, net of tax, or $0.30 per diluted share) gain on the forgiveness of PPP loans;
A $0.1 million loss from the early retirement of long-term debt associated with the 2024 Notes;
A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted share) net gain on the disposition of assets relates to a $10.5 million pre-tax gain on the sale of land in Lewisville, Texas, and $0.1 million pre-tax gain on the sale of the Hilary Kramer Financial Newsletter and related assets as well as various other fixed asset disposals; and
A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.
Per share numbers are calculated based on 27,216,787 diluted weighted average shares for the quarter ended September 30, 2022, and 27,280,949 diluted weighted average shares for the quarter ended September 30, 2021.
Year to Date 2022 Results
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:
Consolidated
Total revenue increased 4.8% to $198.2 million from $189.1 million;
Total operating expenses increased 19.2% to $194.6 million from $163.3 million;
Operating expenses, excluding stock-based compensation expense, debt modification costs, gains and losses on the sale or disposition of assets, legal settlement, impairments, depreciation expense and amortization expense (1) increased 9.2% to $176.6 million from $161.6 million;
The company’s operating income decreased 86.4% to $3.5 million from $25.8 million;
The company recognized $4.0 million in film distribution income from an unconsolidated equity investment;
The company had a net loss of $1.0 million, or $0.04 net loss per share compared to net income of $24.7 million, or $0.91 net income per diluted share;
EBITDA (1) decreased 63.6% to $17.0 million from $46.7 million; and
Adjusted EBITDA (1) decreased 24.3% to $20.8 million from $27.5 million.
Broadcast
Net broadcast revenue increased 8.3% to $152.0 million from $140.4 million;
SOI (1) decreased 6.8% to $31.2 million from $33.5 million;
Same station (1) net broadcast revenue increased 8.1% to $151.6 million from $140.2 million; and
Same station SOI (1) decreased 6.7% to $31.3 million from $33.6 million.
Digital media
Digital media revenue increased 2.3% to $31.3 million from $30.6 million; and
Digital media operating income (1) increased 16.7% to $6.2 million from $5.3 million.
Publishing
Publishing revenue decreased 18.0% to $14.8 million from $18.1 million; and
Publishing Operating Loss (1) was $1.6 million compared to publishing operating income of $1.2 million.
Included in the results for the nine months ended September 30, 2022 are:
A $11.7 million ($8.6 million, net of tax, or $0.32 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento and San Francisco;
A $8.5 million ($6.3 million, net of tax, or $0.23 per diluted share) net gain on the disposition of assets relates primarily to the $6.5 million pre-tax gain on the sale of land used in the company’s Denver, Colorado broadcast operations, the $1.8 million pre-tax gain on sale of land used in the company’s Phoenix, Arizona broadcast operations, and $0.5 million pre-tax gain on the sale of the company’s radio stations in Louisville, Kentucky offset by various fixed asset disposals;
A $18,000 loss on the early retirement of long-term debt associated with the 2024 Notes;
A $4.8 million ($3.5 million, net of tax, or $0.13 per share) legal settlement expense;
A $0.1 million ($0.1 million, net of tax) goodwill impairment charge;
A $0.2 million ($0.2 million, net of tax, or $0.01 per share) charge for debt modification costs; and
A $0.2 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options.
Included in the results for the nine months ended September 30, 2021 are:
A $2.3 million ($1.7 million, net of tax, or $0.06 per share) charge for debt modification costs. On September 10, 2021, the company refinanced $112.8 million of the 2024 Notes by exchanging into $114.7 million (reflecting a call premium of 1.688%) of 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with ASC 470 with $2.3 million of fees paid to third parties included in operating expenses for the period;
A $11.2 million ($8.3 million, net of tax, or $0.30 per diluted share) gain on the forgiveness of PPP loans;
A $0.1 million loss from the early retirement of long-term debt associated with the 2024 Notes;
A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted share) net gain on the disposition of assets relating to a $10.5 million pre-tax gain on the sale of land in Lewisville, Texas, a $0.5 million pre-tax gain on the sale of Singing News Magazine and Singing News Radio and a $0.1 million pre-tax gain on the sale of the Hilary Kramer Financial Newsletter and related assets offset by $0.4 million additional loss recorded at closing on the sale of radio station WKAT-AM and FM translator in Miami, Florida and various fixed asset disposals; and
A $0.2 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options.
Per share numbers are calculated based on 27,202,983 diluted weighted average shares for the nine months ended September 30, 2022, and 27,217,382 diluted weighted average shares for the nine months ended September 30, 2021.
Balance Sheet
As of September 30, 2022, the company had $114.7 million outstanding on the 7.125% senior secured notes due 2028 (“2028 Notes”) and $44.7 million outstanding on 6.75% senior secured notes due 2024 (“2024 Notes”).
Acquisitions and Divestitures
The following transactions were completed since July 1, 2022:
On October 1, 2022, the company acquired websites and the related assets of DayTradeSPY for $0.6 million in cash. As part of the purchase agreement, the company may pay up to an additional $1.0 million of cash in contingent earn-out consideration within one-year of the closing date based on the achievement of certain revenue benchmarks.
Pending Transactions
On September 29, 2022, the company entered into an Asset Purchase Agreement (“APA”) to acquire radio station WMYM-AM and an FM translator in Miami, Florida for $5.0 million. The company paid $0.3 million of cash into an escrow account and plans to operate the radio stations under a Time Brokerage Agreement beginning on November 16, 2022.
On September 22, 2022, the company entered into an APA to acquire radio stations WWFE-AM, WRHC-AM and two FM translators in Miami, Florida for $5.0 million.
On June 2, 2021, the company entered into an APA to acquire radio station KKOL-AM in Seattle, Washington for $0.5 million. The company paid $0.1 million of cash into an escrow account and began operating the station under a Local Marketing Agreement on June 7, 2021.
Conference Call Information
Salem will host a teleconference to discuss its results on November 3, 2022 at 4:00 p.m. Central Time. To access the teleconference, please dial (888) 770-7291, and then ask to be joined into the Salem Media Group Third Quarter 2022 call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com. A replay of the teleconference will be available through November 17, 2022 and can be heard by dialing (800) 770-2030, passcode 2413416 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.
Follow us on Twitter @SalemMediaGrp.
Fourth Quarter 2022 Outlook
For the fourth quarter of 2022, the company is projecting total revenue to decrease between 3% and 5% from fourth quarter 2021 total revenue of $69.1 million. This decrease is due largely to the fact that Regnery had an extremely strong fourth quarter in book sales last year. The company is also projecting operating expenses before gains or losses on the sale or disposal of assets, stock-based compensation expense, legal settlement, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (“Recurring Operating Expenses”) to increase between 4% and 7% compared to the fourth quarter of 2021 Recurring Operating Expenses of $58.3 million.
A reconciliation of Recurring Operating Expenses to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. The company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future GAAP financial results.
About Salem Media Group, Inc.
Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc. at www.salemmedia.com, Facebook and Twitter.
Forward-Looking Statements
Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, inflation and other adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem’s reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.
(1) Regulation G
Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.
The company’s presentation of these non-GAAP financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.
Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release. The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, Publishing Operating Income (Loss), and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-GAAP financial measures. The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. These non-GAAP financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.
The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital Media Operating Income as net Digital Media Revenue minus Digital Media Operating Expenses. The company defines Publishing Operating Income (Loss) as net Publishing Revenue minus Publishing Operating Expenses. The company defines EBITDA as net income before interest, taxes, depreciation, and amortization. The company defines Adjusted EBITDA as EBITDA before gains or losses on the disposition of assets, before debt modification costs, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP. The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.
The company defines Same Station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station SOI as Same Station net broadcast revenue less Same Station broadcast operating expenses. Same Station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station operating results for a full calendar year are calculated as the sum of the Same Station-results for each of the four quarters of that year. The company uses Same Station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. The company believes that Same Station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. The company’s presentation of Same Station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.
For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.
The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.
SAN DIEGO, Nov. 03, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its third quarter 2022 financial results. For the third quarter of 2022, Kratos reported Revenues of $228.6 million, Operating Loss of $3.6 million, Net Loss of $8.0 million, Adjusted EBITDA of $20.0 million and a book to bill ratio of 1.1 to 1.0.
Included in Net Loss is a $6.4 million charge, $3.4 million related to certain non-recoverable costs, including rate and cost growth items resulting from an inability to hire the required planned direct labor base, both internally and by our subcontractors, to execute on our backlog, due to a continuing challenging industry environment in both hiring and retaining skilled manufacturing personnel in our C5ISR business and $3 million from non-recoverable indirect cost rate growth resulting from a smaller than planned direct labor base due to delays in customer program execution and awards in our Training Solutions business. We have recorded this charge as the Department of Defense (DoD) position remains that Requests for Equitable Adjustment (REAs) will not be accepted by contractors like Kratos for inflation related and other increased costs, and as Kratos’ contract mix in the C5ISR and Training Solutions businesses is substantially firm fixed price, we are unable to absorb and pass on to our customers such unanticipated costs in our programs, contracts and rate structures and remain competitive, including as certain program execution work has either not yet commenced or has just begun.
Third quarter 2022 Operating Loss includes non-cash stock compensation expense of $6.6 million, and Company-funded Research and Development expense of $9.6 million, primarily reflecting significant ongoing development efforts being made, including in our Space and Satellite business to develop our virtual, software-based OpenSpace ground station solution.
Kratos reported a third quarter 2022 GAAP loss per share of $0.06, which includes the $6.4 million charge noted above, compared to a Net Loss of $2.4 million and a GAAP loss per share of $0.02 for the third quarter of 2021. Adjusted EPS was $0.08 for the third quarter of 2022, compared to $0.09 for the third quarter of 2021.
Third quarter 2022 Revenues of $228.6 million, which increased $28.0 million, or 14.0 percent, from third quarter 2021 Revenues of $200.6 million, were adversely impacted by continuing and increased supply chain disruptions and increased material costs, COVID-related employee absenteeism and increased challenges and costs associated with hiring, obtaining and retaining qualified employees, which resulted in approximately $11.3 million of third quarter 2022 revenues being deferred into future periods, with approximately $5.9 million of associated operating income, including increased inflationary costs. Third quarter 2022 revenues include an aggregate contribution of $30.2 million from the recent acquisitions of Cosmic Advanced Engineered Solutions, Inc. (Cosmic AES), CTT, Inc. (CTT), and the Engineering Division of Southern Research Institute (SRE), organic revenue growth in our C5ISR, Turbine Technologies, Microwave Products, and Rocket Support businesses, primarily offset by reduced volume in our Unmanned Systems and Training Solutions businesses.
Third quarter 2022 Cash Flow Used in Operations was $2.8 million. Free Cash Flow Used in Operations was $15.7 million, after funding $12.9 million of capital expenditures, including in our Unmanned Systems, Space, Satellite and Cyber and Turbine Technologies business areas.
For the third quarter of 2022, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $50.0 million, as compared to $61.3 million in the third quarter of 2021, primarily reflecting reduced tactical drone related activity as compared to 2021. KUS Operating Loss was $0.1 million in the third quarter of 2022 compared to KUS Operating Income of $2.6 million in the third quarter of 2021, reflecting reduced volumes, a less favorable mix of revenues, including an increase in development programs which typically generate lower margins, an increase in SG&A costs of approximately $0.2 million resulting primarily from increased headcount, and an increase of R&D expenses of approximately $1.0 million.
KUS Adjusted EBITDA for the third quarter of 2022 was $2.1 million, compared to third quarter 2021 KUS Adjusted EBITDA of $4.7 million, reflecting reduced volume, increases in certain development programs which typically generate lower margins and increases in SG&A, R&D, supply chain related and employee costs.
KUS’s book-to-bill ratio for the third quarter of 2022 was 1.0 to 1.0 and 1.0 to 1.0 for the last twelve months ended September 25, 2022, with bookings of $221.3 million for the twelve months ended September 25, 2022. Total backlog for KUS at the end of the third quarter of 2022 was $202.4 million compared to $203.3 million at the end of the second quarter of 2022.
For the third quarter of 2022, Kratos’ Government Solutions Segment (KGS) reported Revenues of $178.6 million, compared to Revenues of $139.3 million in the third quarter of 2021. The increased revenues include the aggregate contribution of approximately $30.2 million from the recently acquired Cosmic AES, CTT and SRE, and organic revenue growth in our C5ISR, Turbine Technologies, Microwave Products, and Rocket Support businesses, primarily offset by a reduction of $2.8 million in our Training Solutions business. On a proforma basis, excluding the Training Solutions business, KGS revenues grew organically 8.9 percent or $11.8 million, from $133.1 million in the third quarter of 2021 to $144.9 million in the third quarter of 2022.
KGS reported operating income of $3.3 million in the third quarter of 2022, compared to $14.6 million in the third quarter of 2021. Third quarter 2022 operating income included the charge for non-recoverable costs of $6.4 million in our C5ISR and Training Solutions businesses described above, as well as a $0.6 million charge related to excess Training Solutions facilities.
Kratos’ Space, Satellite and Cyber business generated Revenues of $85.9 million in the third quarter of 2022, compared to $72.0 million in the third quarter of 2021. Excluding revenues generated of $15.6 million from the recent Cosmic AES acquisition, revenues for our Space, Satellite and Cyber business were $70.3 million in the third quarter of 2022, down approximately $1.7 million reflecting the wind-down of a federal services satellite contract in 2021.
Excluding the impact of the $6.4 million charge related to non-recoverable costs and the $0.6 million charge related to excess Training Solutions facilities, third quarter 2022 KGS Adjusted EBITDA was $17.9 million, compared to third quarter 2021 KGS Adjusted EBITDA of $19.1 million.
For the third quarter of 2022, KGS reported a book-to-bill ratio of 1.1 to 1.0, with a book to bill ratio of 1.2 to 1.0 for the twelve months ended September 25, 2022, and bookings of $807.6 million for the twelve months ended September 25, 2022. Included in KGS is Kratos’ Space, Satellite and Cyber business, which reported a book to bill ratio of 1.1 to 1.0 for the third quarter of 2022, and a book to bill ratio of 1.2 to 1.0 for the twelve months ended September 25, 2022. Bookings for the Space, Satellite and Cyber business for the last twelve months ended September 25, 2022, were $406.2 million. KGS’s total backlog at the end of the third quarter of 2022 was $866.6 million, as compared to $846.9 million at the end of the second quarter of 2022.
For the third quarter of 2022, Kratos reported consolidated bookings of $246.5 million and a book-to-bill ratio of 1.1 to 1.0, with consolidated bookings of $1.029 billion and a book-to-bill ratio of 1.2 to 1.0 for the last twelve months ended September 25, 2022. Backlog on September 25, 2022 was $1.07 billion, as compared to $1.05 billion at June 26, 2022, and Kratos’ bid and proposal pipeline was $9.9 billion at September 25, 2022, as compared to $9.9 billion at June 26, 2022. Backlog at September 25, 2022 was comprised of funded backlog of $696.1 million and unfunded backlog of $372.8 million.
Eric DeMarco, Kratos’ President and CEO, said, “In the third quarter, Kratos successfully executed on what we can control in a continued and increasingly difficult operating environment, including a 1.1 to 1.0 book to bill ratio and the recent MACH-TB Hypersonic program award with our partner Dynetics, which could be significant related to Kratos’ Zeus launch systems and Erinyes vehicles. Expected upcoming awards for Kratos include an additional new hypersonic related program award, two new Valkyrie related tactical drone system awards from two new customers for multiple aircraft and a large OpenSpace virtualized satellite system program award.”
Mr. DeMarco continued, “Since our last report to you, we were informed that certain Kratos satellite program related software deliverables expected to be acquired by an existing government customer have been delayed to a future period and we were informed by a customer that funding is no longer available for the continuation of a certain, non-Valkyrie related drone program we have been working on, both which were previously forecast as significant contributors to our fourth quarter 2022 financial forecast. We have also determined that as a result of the continuing incredibly tight labor market for qualified machinists and skilled production personnel, including those with security clearances, that we will not achieve by this fiscal year end our previous forecast net increase headcount target to execute on our backlog and maintain our indirect rates. We have reflected the impact of each of these and other items, including inflation, supply chain, etc., in today’s third quarter financial report and our updated fiscal 2022 forecast.”
Mr. DeMarco concluded, “We have taken action to address these matters, including continuing to incorporate in our new proposals and contract awards cost and rate increases to address the inflationary environment, including specifically as related to higher labor rates and we have adjusted the organization in certain areas to address customer related delays, funding and other issues. By taking these actions now, having a 1.2 to 1.0 LTM book to bill ratio with multiple large, new programs ramping and maintaining a record combined backlog and opportunity pipeline, we continue to forecast future growth for the Company, including base case full year 2023 over 2022 10 percent revenue growth and increased margins, with potential accelerated growth opportunities in the tactical drone, space, satellite, rocket and hypersonic system areas.”
Financial Guidance Our fourth quarter and Fiscal Year 2022 financial guidance we are providing today includes our current forecasted business mix, and our assumptions, including as related to: employee sourcing, hiring and retention; manufacturing, production and supply chain disruptions; and parts shortages and related continued 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 2022 revenues includes assumptions of forecasted execution including the number of new qualified personnel expected to be retained to execute on our programs and contracts, as well as expected contract awards. Our revised Fiscal Year 2022 cash flow guidance also includes continued advanced purchases of inventory in an attempt to mitigate supply chain disruptions, which are not currently expected to be converted to cash through the sales process until the second half of 2023.
On October 1, 2022, the U.S. Federal Government began operating under a Continuing Resolution Authorization (CRA) through at least December 16, 2022, with no Federal Fiscal 2023 Budget or DoD budget being in place. Under a CRA, federal spending and its composition is substantially held consistent with the previous year’s budget, with no new contract awards, no increased production or spending on existing programs and no transition from development to production contracts, or from low-rate initial production to full rate production being allowed, all of which may impact Kratos and our current fourth quarter and fiscal 2023 financial expectations. The longer a CRA period is extended, the greater the impact on the industry, our customers and Kratos.
Throughout the third and fourth quarter of 2022, our industry and Kratos continue to experience the effects of continuing supply chain disruptions and significant cost increases and inflation, including on our employees, consultants, subcontractors, vendors, suppliers, customers, etc., and an acute labor shortage of qualified personnel, including those requiring security clearances, to perform on programs and contracts.
We expect this difficult operating environment and its impact on the industry, our operations and our ability to forecast to continue for the foreseeable future. Following is our fourth quarter and revised full year 2022 guidance along with a reconciliation from our full year 2022 guidance provided in August 2022 to our current guidance range.
Management will discuss the Company’s third quarter 2022 financial results, as well as its fourth quarter and full year 2022 guidance 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) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technologies for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training and combat systems and next generation turbo jet and turbo fan engine development. For more information go to 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 2022 revenues, R&D, operating income, depreciation, amortization, stock based compensation expense, and Adjusted EBITDA, and full year 2022 operating cash flow, capital expenditures and other investments, and free cash flow use, 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, the Company’s expectation of ramp on projects and that investments in its business 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, demand for its products and services, including the Company’s alignment with today’s National Security requirements, 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 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, 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 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 on 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 U.S. 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 UAS and UGS 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 (CMMC); risks relating to the ongoing conflict in Ukraine; 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 competition 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; 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 26, 2021, 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 earnings per share (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 including 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 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.
*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 (benefit), 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.
CARLSBAD, Calif.–(BUSINESS WIRE)–Nov. 3, 2022– Lineage Cell Therapeutics, Inc. (NYSE American and TASE: LCTX), a clinical-stage biotechnology company developing allogeneic cell therapies for unmet medical needs, today announced that it will report its third quarter 2022 financial and operating results on Thursday, November 10, 2022, following the close of the U.S. financial markets. Lineage management will also host a conference call and webcast on Thursday, November 10, 2022, at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time to discuss its third quarter 2022 financial and operating results and to provide a business update.
Interested parties may access the conference call by dialing (800) 715-9871 from the U.S. and Canada and should request the “Lineage Cell Therapeutics Call” or provide conference ID number5262180. A live webcast of the conference call will be available online in the Investors section of Lineage’s website. A replay of the webcast will be available on Lineage’s website for 30 days and a telephone replay will be available through November 17, 2022, by dialing (800) 770-2030 from the U.S. and Canada and entering conference ID number 5262180.
About Lineage Cell Therapeutics, Inc.
Lineage Cell Therapeutics is a clinical-stage biotechnology company developing novel cell therapies for unmet medical needs. Lineage’s programs are based on its robust proprietary cell-based therapy platform and associated in-house development and manufacturing capabilities. With this platform Lineage develops and manufactures specialized, terminally differentiated human cells from its pluripotent and progenitor cell starting materials. These differentiated cells are developed to either replace or support cells that are dysfunctional or absent due to degenerative disease or traumatic injury or administered as a means of helping the body mount an effective immune response to cancer. Lineage’s clinical and preclinical programs are in markets with billion dollar opportunities and include five allogeneic (“off-the-shelf”) product candidates: (i) OpRegen, a retinal pigment epithelial cell therapy in development for the treatment of geographic atrophy secondary to age-related macular degeneration, is being developed under a worldwide collaboration with Roche and Genentech, a member of the Roche Group; (ii) OPC1, an oligodendrocyte progenitor cell therapy in Phase 1/2a development for the treatment of acute spinal cord injuries; (iii) VAC2, a dendritic cell therapy produced from Lineage’s VAC technology platform for immuno-oncology and infectious disease, currently in Phase 1 clinical development for the treatment of non-small cell lung cancer; (iv) ANP1, an auditory neuronal progenitor cell therapy for the potential treatment of auditory neuropathy; and (v) PNC1, a photoreceptor neural cell therapy for the potential treatment of vision loss due to photoreceptor dysfunction or damage. For more information, please visit www.lineagecell.com or follow the company on Twitter @LineageCell.
TORONTO–(BUSINESS WIRE)– Sierra Metals Inc. (TSX: SMT) (BVL or Bolsa de Valores de Lima: SMT) (NYSE AMERICAN: SMTS) (“Sierra Metals” or “the Company”) announces the filing at the BVL by its subsidiary, Sociedad Minera Corona S.A. (“Corona”) of its unaudited Financial Statements and the Management’s Discussion and Analysis (“MD&A”) for the third quarter of 2022 (“Q3 2022”).
The Company holds an 81.8% interest in Corona. The unaudited Financial Statements and MD&A can be viewed at:
To search for the Company’s financial statements, enter the following parameters in the empty fields:
Empresa: Sociedad Minera Corona S.A. Periodo: 2022 and Trimestre III
Sierra Metals will be releasing its Q3 2022 consolidated financial statements on Monday November 14th, 2022, with an investor conference call taking place on Tuesday November 15th, 2022.
About Sierra Metals
Sierra Metals Inc. is a diversified Canadian mining company with Green Metal exposure including copper production and base metal production with precious metals byproduct credits, focused on the production and development of its Yauricocha Mine in Peru, and Bolivar and Cusi Mines in Mexico. The Company is focused on increasing production volume and growing mineral resources. The Company has large land packages at all three mines with several prospective regional targets providing longer-term exploration upside and mineral resource growth potential.
The Company’s Common Shares trade on the Toronto Stock ESxchange and the Bolsa de Valores de Lima under the symbol “SMT” and on the NYSE American Exchange under the symbol “SMTS”.
For further information regarding Sierra Metals, please visit www.sierrametals.com.
This press release contains forward-looking information within the meaning of Canadian and United States securities legislation. Forward-looking information relates to future events or the anticipated performance of Sierra and reflect management’s expectations or beliefs regarding such future events and anticipated performance based on an assumed set of economic conditions and courses of action. In certain cases, statements that contain forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, or “will be taken”, “occur” or “be achieved” or the negative of these words or comparable terminology. By its very nature forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual performance of Sierra to be materially different from any anticipated performance expressed or implied by such forward-looking information.
Forward-looking information is subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking information, including, without limitation, the risks described under the heading “Risk Factors” in the Company’s annual information form dated March 16, 2022 for its fiscal year ended December 31, 2021 and other risks identified in the Company’s filings with Canadian securities regulators and the United States Securities and Exchange Commission, which filings are available at www.sedar.com and www.sec.gov, respectively.
The risk factors referred to above are not an exhaustive list of the factors that may affect any of the Company’s forward-looking information. Forward-looking information includes statements about the future and is inherently uncertain, and the Company’s actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors. The Company’s statements containing forward-looking information are based on the beliefs, expectations, and opinions of management on the date the statements are made, and the Company does not assume any obligation to update such forward-looking information if circumstances or management’s beliefs, expectations or opinions should change, other than as required by applicable law. For the reasons set forth above, one should not place undue reliance on forward-looking information.
Expects Fiscal 2023 Adjusted EBITDA1 to be in a range of $75 million to $80 million
Expects to Generate Free Cash Flow1 in Excess of $75 million in Fiscal Year 2023; Representing a More Than $135 Million Improvement as Compared to the Prior Year
(1 Refer to “Definitions of Non-GAAP Financial Measures” and the tables attached at the end of this press release for reconciliation of non-GAAP results to applicable GAAP results.)
JERICHO, N.Y.–(BUSINESS WIRE)– 1-800-FLOWERS.COM, Inc. (NASDAQ: FLWS), a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships, today reported results for its Fiscal 2023 first quarter ended October 2, 2022.
Fiscal 2023 First Quarter Highlights
Total consolidated revenues decreased 1.9% to $303.6 million, compared with total consolidated revenues of $309.4 million in the prior year period.
Gross profit margin for the quarter was 33.4%, compared with 40.6% in the prior year period.
Operating expenses were 47.0% of total sales, as compared with 47.1% in the prior year period.
Net loss for the quarter was $33.7 million, or $(0.52) per share, compared with a net loss of $13.2 million, or $(0.20) per share in the prior year period.
Adjusted EBITDA loss1 for the quarter was $28.0 million, as compared to an Adjusted EBITDA loss1 of $5.3 million in the prior year period.
Chris McCann, CEO of 1-800-FLOWERS.COM, Inc., said, “Our first quarter results were slightly better than our expectations, benefitting from the strength in our Gourmet Foods and Gift Baskets business. During the quarter, we saw consumers purchasing fewer everyday gifts as they responded to the significant macro-inflationary pressures affecting their discretionary spending. However, as we look out to the holiday season and the balance of our fiscal year, we are cautiously optimistic that consumers will spend during the major gift giving holiday occasions, while we anticipate they will remain guarded on their spending otherwise.”
“Coming into Fiscal 2023, we expected a challenging macroeconomic backdrop to affect our performance during the first quarter. However, we expect to see a stabilization of our business during our second quarter and improvement during the second half of our fiscal year, as we cycle against the sharp inflationary period of a year ago. After growing revenues 77% since Fiscal 2019, we anticipate revenues to decline slightly in Fiscal 2023. The impact of this revenue decline on our earnings is partially mitigated by our initiatives to operate more efficiently, coupled with the decline that we are seeing in ocean freight costs. We expect the reduction of these costs to begin to provide a margin benefit in the second half of this fiscal year, and even more so next year.”
McCann added, “As a result of our decision to increase inventories of non-perishable items last fiscal year and the actions that we have taken over the last few years to operate more efficiently, we expect to generate more than $75 million in Free Cash Flow1 in Fiscal 2023. This represents an improvement of more than $135 million compared with last year.”
First Quarter 2023 Financial Results
Total consolidated revenues decreased 1.9% to $303.6 million, compared with total consolidated revenues of $309.4 million in the prior year period. Excluding contributions from Vital Choice® and Alice’s Table®, which were acquired in October 2021 and December 2021, respectively, total revenue for the quarter declined 3.6%, compared with the prior year period.
Gross profit margin for the quarter was 33.4%, a decline of 720 basis points, compared with 40.6% in the prior year period, primarily reflecting significantly increased costs for labor, shipping and commodities in the current year period. Operating expenses were 47.0% of total sales, as compared with 47.1% in the prior year period, primarily reflecting lower marketing costs, as the Company shifted its advertising investments to lower cost, higher return on investment areas of the marketing funnel, partially offset by higher depreciation associated with the Company’s automation and technology projects.
As a result, the Adjusted EBITDA loss1 was $28.0 million, as compared to an Adjusted EBITDA loss1 of $5.3 million in the prior year period. Net loss for the quarter was $33.7 million, or $(0.52) per share, compared with a net loss of $13.2 million, or $(0.20) per share, and an Adjusted Net Loss1 of $12.9 million, or $(0.20) per share, in the prior year period.
Segment Results:
The Company provides selected financial results for its Gourmet Foods and Gift Baskets, Consumer Floral and Gifts, and BloomNet segments in the tables attached to this release and as follows:
Gourmet Foods and Gift Baskets: Revenues for the quarter increased 11.0% to $108.2 million, compared with $97.5 million in the prior year period, reflecting the contributions of Vital Choice and improved wholesale product demand. Gross profit margin was 23.2%, compared with 35.0% in the prior year period, primarily reflecting increased commodities and transportation costs, as well as product mix reflecting the sharp sales increase in the lower-margin wholesale channel. As a result, segment contribution margin1 was a loss of $18.7 million, compared with a loss of $7.7 million a year ago.
Consumer Floral and Gifts: Revenues decreased 10.5% to $162.2 million, compared with $181.2 million in the prior year period. Gross profit margin decreased to 38.2%, compared with 41.9% in the prior year period, primarily due to increased transportation and commodity costs. Segment contribution margin1 was $10.8 million, compared with $19.2 million the prior year.
BloomNet: Revenues for the quarter increased 8.2% to $33.4 million, compared with $30.8 million in the prior year period. Gross profit margin decreased to 43.4%, compared with 50.0% in the prior year period, primarily due to product mix and higher shipping costs. Segment contribution margin1 was $9.5 million, compared with $10.9 million in the prior year period.
Company Guidance
The Company is providing the following guidance for Fiscal 2023. While the highly unpredictable nature of the current macro economy makes it difficult to forecast in this environment, the Company anticipates that after growing revenues 77% over the past two fiscal years, revenues will decline slightly in Fiscal 2023 on lower consumer confidence and cautious spending behavior. The Company anticipates that the combination of the investments it has made – and continues to make – in its business platform, along with strategic pricing programs and moderation of cost inputs, will enable it to gradually improve gross margins and bottom-line results during the latter half of the current fiscal year. Additionally, this guidance assumes the restoration of 100% bonus payout in Fiscal 2023, compared with a limited bonus payout in Fiscal 2022.
Full Year Fiscal 2023 Guidance
Total revenues to decline in the mid-single digit range on a percentage basis as compared with the prior year;
Adjusted EBITDA1 to be in a range of $75 million to $80 million; and
Free Cash Flow1 to exceed $75 million.
Conference Call:
The Company will conduct a conference call to discuss the above details and attached financial results today, Thursday, November 3, at 8:00 a.m. (ET). The conference call will be webcast from the Investors section of the Company’s website at www.1800flowersinc.com. A recording of the call will be posted on the Investors section of the Company’s website within two hours of the call’s completion. A telephonic replay of the call can be accessed beginning at 2:00 p.m. (ET) today, through November 10, 2022, at: (US) 1-877-344-7529; (Canada) 855-669-9658; (International) 1-412-317-0088; enter conference ID #: 5253715. If you have any questions regarding the above information, please contact the Investor Relations office at [email protected].
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. Non-GAAP financial measures referred to in this document are either labeled as “non-GAAP” or designated as such with a “1”. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Selected Financial Information below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. Reconciliations for forward-looking figures would require unreasonable efforts at this time because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including, for example, those related to compensation, tax items, amortization or others that may arise during the year, and the Company’s management believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, Non-Qualified Plan Investment appreciation/depreciation, and for certain items affecting period-to-period comparability. See Selected Financial Information for details on how EBITDA and Adjusted EBITDA were calculated for each period presented. The Company presents EBITDA and Adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and Adjusted EBITDA as factors to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA and Adjusted EBITDA to determine its interest rate and to measure compliance with certain covenants. EBITDA and Adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Some of the limitations are: (a) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the Company’s working capital needs; (b) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA and Adjusted EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company’s performance.
Segment Contribution Margin
We define Segment Contribution Margin as earnings before interest, taxes, depreciation, and amortization, before the allocation of corporate overhead expenses. See Selected Financial Information for details on how Segment Contribution Margin was calculated for each period presented. When viewed together with our GAAP results, we believe Segment Contribution Margin provides management and users of the financial statements meaningful information about the performance of our business segments. Segment Contribution Margin is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of Segment Contribution Margin is that it is an incomplete measure of profitability as it does not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as Operating Income and Net Income.
Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share:
We define Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share as Net Income (Loss) and Net Income (Loss) Per Common Share adjusted for certain items affecting period-to-period comparability. See Selected Financial Information below for details on how Adjusted Net Income (Loss) Per Common Share and Adjusted or Comparable Net Income (Loss) Per Common Share were calculated for each period presented. We believe that Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share are meaningful measures because they increase the comparability of period-to-period results. Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP Net Income (Loss) and Net Income (Loss) Per Common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.
Free Cash Flow:
We define Free Cash Flow as net cash provided by operating activities less capital expenditures. The Company considers Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free Cash Flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies. Since Free Cash Flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. A limitation of the utility of Free Cash Flow as a measure of financial performance is that it does not represent the total increase or decrease in the Company’s cash balance for the period.
1-800-FLOWERS.COM, Inc. is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Stock Yards® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. 1-800-FLOWERS.COM, Inc. was recognized among the top 5 on the National Retail Federation’s 2021 Hot 25 Retailers list, which ranks the nation’s fastest-growing retail companies, and was named to the Fortune 1000 list in 2022. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS. For more information, visit 1800flowersinc.com or follow @1800FLOWERSInc on Twitter.
FLWS–COMP FLWS-FN
Special Note Regarding Forward Looking Statements:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified using statements that include words such as “estimate,” “expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “forecast,” “likely,” “will,” “target” or similar words or phrases. These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including, but not limited to, statements regarding the Company’s ability to achieve its guidance for full year Fiscal 2023; the impact of the Covid-19 pandemic on the Company; its ability to leverage its operating platform and reduce its operating expense ratio; its ability to sell through existing inventories; its ability to successfully integrate acquired businesses and assets; its ability to successfully execute its strategic initiatives; its ability to cost effectively acquire and retain customers; the outcome of contingencies, including legal proceedings in the normal course of business; its ability to compete against existing and new competitors; its ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; its ability to reduce promotional activities and achieve more efficient marketing programs; and general consumer sentiment and industry and economic conditions that may affect levels of discretionary customer purchases of the Company’s products. The Company undertakes no obligation to publicly update any of the forward-looking statements, whether because of new information, future events or otherwise, made in this release or in any of its SEC filings. Consequently, you should not consider any such list to be a complete set of all potential risks and uncertainties. For a more detailed description of these and other risk factors, refer to the Company’s SEC filings, including the Company’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
Note: The following tables are an integral part of this press release without which the information presented in this press release should be considered incomplete.
(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.
(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.
BRENTWOOD, Tenn., Nov. 02, 2022 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today its financial results for the third quarter of 2022.
Damon T. Hininger, CoreCivic’s President and Chief Executive Officer, said, “We are pleased to continue executing on our capital allocation strategy of reducing debt while also returning capital to shareholders through our share repurchase program. Since the initial repurchase program was authorized by our board earlier this year, we have repurchased over 5% of our outstanding shares, or a total of 6.6 million shares at a cost of $74.5 million, and have authorization under the program to repurchase $150.5 million more in shares of our common stock.
Hininger continued, “The resiliency of our cash flows has allowed us to execute our share repurchase program while reducing our outstanding debt balances by nearly $250 million so far this year, reducing our future interest expense and improving our long-term cost of borrowing. Our financial results for the third quarter were in-line with our expectations, and we continued producing stable financial results in a challenging labor market and while occupancy restrictions implemented during the COVID-19 pandemic remained largely in place. We have increased staffing levels at certain facilities in anticipation of increased occupancy levels, and are poised to accept additional residential populations as such occupancy restrictions are removed. Our financial results also continue to be negatively impacted in the short-term by our La Palma Correctional Center’s transition to a new state contract award that commenced in April 2022. We believe our operating and capital allocation strategies have positioned us well to return to earnings growth once the transition at our La Palma Correctional Center is complete, which we expect to occur near the end of this year, and as the remaining occupancy restrictions caused by the pandemic are removed.”
Financial Highlights – Third Quarter 2022
Total revenue of $464.2 million
CoreCivic Safety revenue of $423.2 million
CoreCivic Community revenue of $26.4 million
CoreCivic Properties revenue of $14.6 million
Net Income of $68.3 million
Diluted earnings per share of $0.58
Adjusted Diluted EPS of $0.08
Funds From Operations per diluted share of $0.28
Normalized Funds From Operations per diluted share of $0.29
Adjusted EBITDA of $68.4 million
Third Quarter 2022 Financial Results Compared With Third Quarter 2021
Net income in the third quarter of 2022 totaled $68.3 million, or $0.58 per diluted share, compared with net income in the third quarter of 2021 of $30.0 million, or $0.25 per diluted share. Adjusted for special items, adjusted net income in the third quarter of 2022 was $9.7 million, or $0.08 per diluted share (Adjusted Diluted EPS), compared with adjusted net income in the third quarter of 2021 of $33.7 million, or $0.28 per diluted share. Special items for each period are presented in detail in the calculation of Adjusted Diluted EPS in the Supplemental Financial Information following the financial statements presented herein, and for the third quarter of 2022 reflect, most notably, a gain on sale of real estate assets of $83.8 million, including $77.5 million for the sale of our McRae Correctional Facility, which was consummated in August 2022.
The decline in adjusted per share amounts was primarily the result of transitioning to a new contract with the state of Arizona at our 3,060-bed La Palma Correctional Center in Arizona, the non-renewal of contracts in 2021 with the United States Marshals Service (USMS) at the 1,033-bed Leavenworth Detention Center in Kansas and the 600-bed West Tennessee Detention Facility, and the expiration of a managed-only contract with Marion County, Indiana at the Marion County Jail, which the County replaced with a newly constructed facility. We expect the transition at the La Palma facility to be complete near the end of 2022. Our renewal rate on owned and controlled facilities remained high at 95% over the previous five years. We believe our renewal rate on existing contracts remains high due to a variety of reasons including the aged and constrained supply of available beds within the U.S. correctional system, our ownership of the majority of the beds we operate, the value our government partners place in the wide range of recidivism-reducing programs we offer to those in our care, and the cost effectiveness of the services we provide.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $147.9 million in the third quarter of 2022, compared with $95.7 million in the third quarter of 2021. Adjusted EBITDA was $68.4 million in the third quarter of 2022, compared with $100.9 million in the third quarter of 2021. Adjusted EBITDA decreased from the prior year quarter primarily due to the previously mentioned transition of offender populations at our La Palma Correctional Center, which resulted in a reduction in EBITDA of $11.8 million, and the aforementioned non-renewal of contracts at three facilities that collectively resulted in a reduction in EBITDA of $2.7 million from the third quarter of 2021 to the third quarter of 2022. Now that the contract with U.S. Immigration & Customs Enforcement (ICE) at our La Palma Correctional Center has expired, we expect average daily populations from ICE at our other facilities in Arizona to increase in the fourth quarter of 2022, including particularly at our Eloy Detention Center. We also achieved higher staffing levels and incurred $5.6 million more in temporary incentives than in the prior year quarter to attract and retain facility staff in the challenging labor market. We believe these investments in staffing are preparing us to manage the increased number of residents we anticipate at our facilities once the remaining occupancy restrictions caused by the pandemic are removed.
Funds From Operations (FFO) was $33.3 million, or $0.28 per diluted share, in the third quarter of 2022, compared to $54.9 million, or $0.45 per diluted share, in the third quarter of 2021. Normalized FFO, which excludes special items, was $33.9 million, or $0.29 per diluted share, in the third quarter of 2022, compared with $58.6 million, or $0.48 per diluted share, in the third quarter of 2021. Normalized FFO was negatively impacted by the same factors that affected Adjusted EBITDA.
Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to net income, the most directly comparable GAAP measure.
Asset Dispositions
During the second quarter of 2022, we entered into an agreement with the Georgia Building Authority (GBA) to sell our 1,978-bed McRae Correctional Facility located in McRae, Georgia, and reported in our Safety segment, for a sale price of $130.0 million. The sale was completed on August 9, 2022, resulting in a gain on sale of $77.5 million. We currently have a management contract with the Federal Bureau of Prisons (BOP) at the McRae facility, which expires November 30, 2022. As previously disclosed, we do not expect the BOP to renew the contract upon its expiration. In connection with the sale, we entered into an agreement with the GBA to lease the facility through November 30, 2022 to allow us to fulfill our obligations to the BOP.
During July 2022, we sold our Stockton Female Community Corrections Facility and our Long Beach Community Corrections Center, both located in California and reported in our Properties segment. The sale of these properties to a third party generated net sales proceeds of $10.9 million, resulting in a gain on sale of $2.3 million. During July 2022, we also sold an undeveloped parcel of land, generating net proceeds of $4.8 million and resulting in a gain on sale of $4.2 million.
In September 2022, we entered into a Letter of Intent with a third-party for the sale of our Roth Hall Residential Reentry Center and the Walker Hall Residential Reentry Center, both located in Philadelphia, Pennsylvania and reported in our Properties segment, for a gross sales price of $6.3 million. Also in October 2022, we entered into an agreement with a third-party for the sale of our idled Oklahoma City Transitional Center, reported in our Community segment, for a gross sales price of $1.0 million. The buyer intends to redevelop the property for an alternative use. We recognized an impairment charge of $3.5 million during the third quarter of 2022 associated with this facility, based on its estimated net realizable value less costs to sell. These sales are subject to customary closing conditions. If consummated, we expect to use the net proceeds from these sales for general corporate purposes, including for our share repurchase program and/or for additional debt reduction.
Debt Repayments
During the third quarter of 2022, we reduced our debt balance by $109.1 million, net of the change in cash. We purchased $3.6 million of our 4.625% Senior Notes in open market purchases, reducing the outstanding balance of the 4.625% Senior Notes to $166.5 million. The 4.625% Senior Notes mature in May 2023, which we currently expect to repay with cash on hand and capacity under our $250.0 million Revolving Credit Facility, which remains undrawn. We also purchased $33.5 million of our 8.25% Senior Notes in open market purchases, reducing the outstanding balance of the 8.25% Senior Notes to $641.5 million. Beyond the maturity of our 4.625% Senior Notes in May 2023, we have no other maturities until the 8.25% Senior Notes mature in April 2026.
Share Repurchases
On August 2, 2022, our Board of Directors authorized an increase in our share repurchase program of up to an additional $75.0 million in shares of our common stock. As a result of the increased authorization, the aggregate authorization under our share repurchase program increased from the original authorization of up to $150.0 million in shares of our common stock to up to $225.0 million in shares of our common stock. Through November 1, 2022, we have repurchased 6.6 million shares of our common stock at an aggregate purchase price of $74.5 million, excluding fees, commissions and other costs related to the repurchases.
We currently have $150.5 million remaining under the Board authorized share repurchase program. Additional repurchases of common stock will be made in accordance with applicable securities laws and may be made at management’s discretion within parameters set by the Board of Directors from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate us to purchase any particular amount of our common stock. The authorization for the share repurchase program may be terminated, suspended, increased or decreased by our Board in its discretion at any time.
2022 Financial Guidance
Based on current business conditions, we are providing the following update to our financial guidance for the full year 2022:
Guidance Full Year 2022
Prior Guidance Full Year 2022
Net Income
$110.1 million – $114.1 million
$106.6 million – $118.2 million
Adjusted Net Income
$55.5 million – $59.5 million
$52.0 million – $60.0 million
Diluted EPS
$0.93 – $0.96
$0.89 – $0.99
Adjusted Diluted EPS
$0.47 – $0.50
$0.44 – $0.50
FFO per diluted share
$1.22 – $1.26
$1.19 – $1.26
Normalized FFO per diluted share
$1.28 – $1.32
$1.25 – $1.32
EBITDA
$375.6 million – $378.1 million
$375.2 million – $386.2 million
Adjusted EBITDA
$301.5 million – $304.0 million
$299.0 million – $305.0 million
During 2022, we expect to invest $82.5 million to $86.0 million in capital expenditures, consisting of $33.5 million to $34.0 million in maintenance capital expenditures on real estate assets, $30.0 million to $32.0 million for capital expenditures on other assets and information technology, and $19.0 million to $20.0 million for facility renovations.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the third quarter of 2022. Interested parties may access this information through our website at http://ir.corecivic.com/ under “Financial Information” of the Investors section. We do not undertake any obligation and disclaim any duties to update any of the information disclosed in this report.
Management may meet with investors from time to time during the fourth quarter of 2022. Written materials used in the investor presentations will also be available on our website beginning on or about November 11, 2022. Interested parties may access this information through our website at http://ir.corecivic.com/ under “Events & Presentations” of the Investors section.
Conference Call, Webcast and Replay Information
We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) on Thursday, November 3, 2022, which will be accessible through the Company’s website at www.corecivic.com under the “Events & Presentations” section of the “Investors” page.
Please note there is a new process to access the live call for those who wish to ask questions. To participate via telephone and join the call live, please register in advance here https://register.vevent.com/register/BId5639495ba264dd3b66eae4d5db8ced1. Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and a unique passcode.
About CoreCivic
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Forward-Looking Statements
This press release contains statements as to our beliefs and expectations of the outcome of future events that are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) changes in government policy (including the United States Department of Justice, or DOJ, not renewing contracts as a result of President Biden’s Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, or the Private Prison EO) (two agencies of the DOJ, the United States Federal Bureau of Prisons and the United States Marshals Service utilize our services), legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, and the impact of any changes to immigration reform and sentencing laws (our company does not, under longstanding policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an individual’s incarceration or detention); (ii) our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances; (iii) changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds; (iv) general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy; (v) fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations; (vi) the duration of the federal government’s denial of entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of COVID-19, a policy known as Title 42 (On April 1, 2022, the Center for Disease Control and Prevention, or CDC, terminated Title 42, and began preparing for a resumption of regular migration at the United States southern border, effective May 23, 2022; however, on April 25, 2022, a judge issued a temporary restraining order blocking the termination of Title 42 and on May 20, 2022, ruled that the administration violated administrative law when it announced that it planned to cease Title 42.); (vii) government and staff responses to staff or residents testing positive for COVID-19 within public and private correctional, detention and reentry facilities, including the facilities we operate; (viii) restrictions associated with COVID-19 that disrupt the criminal justice system, along with government policies on prosecutions and newly ordered legal restrictions that affect the number of people placed in correctional, detention, and reentry facilities, including those associated with a resurgence of COVID-19; (ix) whether revoking our REIT election, effective January 1, 2021, and our revised capital allocation strategy can be implemented in a cost effective manner that provides the expected benefits, including facilitating our planned debt reduction initiative and planned return of capital to shareholders; (x) our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom; (xi) our ability to have met and maintained qualification for taxation as a REIT for the years we elected REIT status; and (xii) the availability of debt and equity financing on terms that are favorable to us, or at all. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time with the Securities and Exchange Commission.
CoreCivic takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services.
Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share metrics are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company’s results of operations and are used to review and assess operating performance of the Company and its properties and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis that is used by management.
FFO, in particular, is a widely accepted non-GAAP supplemental measure of performance of real estate companies, grounded in the standards for FFO established by the National Association of Real Estate Investment Trusts (NAREIT). NAREIT defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis. EBITDA, Adjusted EBITDA, and Normalized FFO are useful as supplemental measures of performance of the Company’s properties because such measures do not take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company’s tax provisions and financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company’s properties, management believes that assessing performance of the Company’s properties without the impact of depreciation or amortization is useful. The Company may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary or ordinary component of the ongoing operations of the Company. Normalized FFO excludes the effects of such items. The Company calculates Adjusted Net Income by adding to GAAP Net Income expenses associated with the Company’s debt repayments and refinancing transactions, and certain impairments and other charges that the Company believes are unusual or non-recurring to provide an alternative measure of comparing operating performance for the periods presented.
Other companies may calculate Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO differently than the Company does, or adjust for other items, and therefore comparability may be limited. Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO and, where appropriate, their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company’s operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company’s consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.
Entry List for Round 3 Revealed, along with how to watch all of the action
MIAMI, Nov. 02, 2022 (GLOBE NEWSWIRE) — Motorsport Games Inc. (NASDAQ: MSGM) (“Motorsport Games”) announces today that Round 3 of the Le Mans Virtual Series descends on the track for the 6 Hours of Spa. The legendary Circuit de Spa-Francorchamps in Belgium has long been at the top of the “favourites” list for drivers throughout the world. This round – the third of the 2022-23 Le Mans Virtual Series – has enticed some big names to the entry list, which is revealed HERE. The Le Mans Virtual Series is a joint venture between the Automobile Club de l’Ouest (“ACO”) and Motorsport Games.
Two-time F1 World Champion Max Verstappen will compete in the #1 Team Redline LMP entry (Verstappen/Rietveld/Benecke) for the first time this season, and he will be joined by R8G Esports Team Owner and INDYCAR star Romain Grosjean who will be driving the #18 R8G Esports LMP car (Grosjean/Hemmingsen/Ozyildorim) on the increasingly-strong grid.
LMP Championship leaders Floyd Vanwall-Burst (Viscaal/Simončič/Pedersen) will be looking to stretch out its narrow 2-point advantage over Team Redline, while in the hotly-contested GTE category the Oracle Red Bull Racing team (Kasdorp/Siebel/Jordan) will be planning to put its disastrous Monza showing into the background and return its Porsche to its Bahrain-winning form. BMW Team Redline and SF Velas Esports (Ferrari) are close behind and all the manufacturer-led teams will have their eye on victory.
The race takes place on the rFactor 2 platform on the virtual, fast and technically challenging 4.35 mile/7km long Circuit de Spa-Francorchamps. Full, uninterrupted coverage will begin from 12:30 pm (GMT) on Saturday, November 5th. Expect some fireworks, hot track action and maybe some rain, a probability at Spa in the real world, whatever the season!
A total of 40 cars will battle it out in two different classes – 24 in LMP, with all competitors using an ORECA 07 LMP2 model, and 16 in GTE with teams having a choice of Ferrari, BMW, Porsche and Aston Martin Vantage models. Manufacturer support also comes to teams representing Alpine and Mercedes AMG.
Qualifying is on Friday, November 4th and all race action can be followed on the FIA WEC, Le Mans and TraxionGG’s YouTube channels, on twitch.tv/traxiongg, and on multiple social media channels.
For further media information contact Fiona Miller, Miller Media & Communications, on +44 7770 371332 or [email protected]
About Le Mans Virtual Series Le Mans Virtual Series is a global, elite esports series made up of five rounds which bring together endurance racing and sim racing’ top teams to compete on some of the world’s most famous racetracks. International FIA-licensed real-world drivers are teamed up with elite esports squads to take on endurance classics for a total prize fund of US$250,000, culminating in the prestigious 24 Hours of Le Mans Virtual. Le Mans Virtual Series is a joint venture between leading racing game developer, publisher and esports ecosystem provider of official motorsport racing series throughout the world, Motorsport Games, and the Automobile Club de l’Ouest (ACO) – the creator and organizer of the world-famous 24 Hours of Le Mans and promoter of the FIA World Endurance Championship (FIA WEC).
Round 1
8 Hours of Bahrain, Bahrain
September 17, 2022
Round 2
4 Hours of Monza, Italy
October 8, 2022
Round 3
6 Hours of Spa, Belgium
November 5, 2022
Round 4
500 Miles of Sebring, USA
December 3, 2022
Round 5
24 Hours of Le Mans Virtual
January 14/15, 2023
About Motorsport Games Motorsport Games, a Motorsport Network company, is a leading racing game developer, publisher and esports ecosystem provider of official motorsport racing series throughout the world. Combining innovative and engaging video games with exciting esports competitions and content for racing fans and gamers, Motorsport Games strives to make the joy of racing accessible to everyone. The Company is the officially licensed video game developer and publisher for iconic motorsport racing series across PC, PlayStation, Xbox, Nintendo Switch and mobile, including NASCAR, INDYCAR, 24 Hours of Le Mans and the British Touring Car Championship (“BTCC”), as well as the industry leading rFactor 2 and KartKraft simulations. RFactor 2 also serves as the official sim racing platform of Formula E, while also powering Formula 1™ centers through a partnership with Kindred Concepts. Motorsport Games is an award-winning esports partner of choice for 24 Hours of Le Mans, Formula E, BTCC, the FIA World Rallycross Championship and the eNASCAR Heat Pro League, among others. Motorsport Games is building a virtual racing ecosystem where each product drives excitement, every esports event is an adventure and every story inspires.
Forward-Looking Statements: Certain statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements in this press release that are not statements of historical fact may be deemed forward-looking statements. Words such as “continue,” “will,” “may,” “could,” “should,” “expect,” “expected,” “plans,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, statements concerning the timing, participants and expected benefits of the 2022-23 Le Mans Virtual Series. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of Motorsport Games and are difficult to predict. Examples of such risks and uncertainties include, without limitation: difficulties, delays in or unanticipated events that may impact the timing and expected benefits of the Le Mans Virtual Series, such as due to unexpected changes in the event participants, as well as less than anticipated participation in or viewership of the Le Mans Virtual Series events. Factors other than those referred to above could also cause Motorsport Games’ results to differ materially from expected results. Additional factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements can be found in Motorsport Games’ filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, its Quarterly Reports on Form 10-Q filed with the SEC during 2022, as well as in its subsequent filings with the SEC. Motorsport Games anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Motorsport Games assumes no obligation, and it specifically disclaims any intention or obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law. Forward-looking statements speak only as of the date they are made and should not be relied upon as representing Motorsport Games’ plans and expectations as of any subsequent date. Additionally, the business and financial materials and any other statement or disclosure on, or made available through, Motorsport Games’ website or other websites referenced or linked to this press release shall not be incorporated by reference into this press release.
Website and Social Media Disclosure: Investors and others should note that we announce material financial information to our investors using our investor relations website (ir.motorsportgames.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media and blogs, to communicate with our investors and the public about our company and our products. It is possible that the information we post on our websites, social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the websites, social media channels and blogs, including the following (which list we will update from time to time on our investor relations website):
