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Essential Properties Announces Fourth Quarter 2024 Results

– Fourth Quarter Net Income per Share of $0.30 and AFFO per Share of $0.45 –

– Closed Investments of $333.4 million at an 8.0% Weighted Average Cash Cap Rate –

– Updates 2025 AFFO Guidance to $1.85 to $1.89 per Share –

PRINCETON, N.J.–(BUSINESS WIRE)–
Essential Properties Realty Trust, Inc. (NYSE: EPRT; “Essential Properties” or the “Company”) today announced operating results for the three months and year ended December 31, 2024.

Fourth Quarter 2024 Financial and Operating Highlights:

Operating Results (compared to Fourth Quarter 2023):
•Investments (78 properties)	$ Invested	$333.4 million
	Weighted Avg Cash Cap Rate	8.0%
•Dispositions (24 properties)	Net Proceeds	$60.4 million
	Weighted Avg Cash Cap Rate	7.0%
•Net Income per Share	Decreased by 3%	$0.30
•Funds from Operations (“FFO”) per Share	Increased by 2%	$0.47
•Adjusted Funds from Operations (“AFFO”) per Share	Increased by 7%	$0.45
Debt, Equity & Leverage Update:
•Equity Raised (Gross) – ATM Program (1)	$33.06/share	$78.9 million
•Pro Forma Net Debt to Annualized Adjusted EBITDAre (2)	As of Quarter End	3.8x

Full Year 2024 Financial and Operating Highlights:

Operating Results (compared to 2023):
•Investments (297 properties)	$ Invested	$1.2 billion
	Weighted Avg Cash Cap Rate	8.0%
•Dispositions (46 properties)	Net Proceeds	$94.2 million
	Weighted Avg Cash Cap Rate	6.9%
•Net Income per share	Decreased by 8%	$1.15
•FFO per share	Increased by 6%	$1.89
•AFFO per share	Increased by 6%	$1.74
Debt & Equity Activity:
•Equity Raised (Gross) – Follow-On Offering (March 14, 2024)	$24.75/share	$256.2 million
•Equity Raised (Gross) – ATM Program (1)	$29.52/share	$581.7 million
•New $450mm 2030 Term Loan	Fully swapped rate	4.9%

_________________
1.		All shares were sold on a forward basis and a total of 13,119,110 shares remain unsettled for estimated net proceeds of $380.8 million.
2.		See page 10 for detailed calculation.

Activity Subsequent to Fourth Quarter 2024:

•Investments	$ Invested	$138.1 million
•Dispositions	$ Gross Proceeds	$19.7 million
Debt Activity:
•Amendment to Revolving Credit Facility	Upsized to $1.0 billion; New Fully-Extended Maturity of February 2030

CEO Comments

Commenting on the fourth quarter and full year 2024 results, the Company’s President and Chief Executive Officer, Pete Mavoides, said, “Our differentiated investment strategy continued to deliver excellent results in the fourth quarter, highlighted by healthy portfolio credit trends and strong investment levels at historically attractive cap rates.” Mr. Mavoides continued, “While competition has increased as the capital markets have normalized, our conservative balance sheet and substantial liquidity positions us well to execute in this dynamic marketplace. Reflecting the strong finish to 2024, and a healthy and growing investment pipeline, we have increased the bottom end of our 2025 AFFO per share guidance by $0.01 to an updated range of $1.85 to $1.89.”

Portfolio Highlights

The Company’s investment portfolio as of December 31, 2024 is summarized as follows:

		December 31, 2024
Number of properties		2,104
Weighted average lease term (WALT)		14.0 years
Weighted average rent coverage ratio		3.5x
Number of tenants		413
Number of industries		16
Weighted average occupancy		99.7%
Total square feet of rentable space		22,400,571
Cash ABR – service-oriented or experience-based		93.2%
Cash ABR – properties subject to master lease		66.1%

Portfolio Update

Investments

During the three months ended December 31, 2024, the Company’s $333.4 million of investment activity had a weighted average closing date of November 24, 2024. Additional details about the Company’s investment activity during the three months and year ended December 31, 2024 are summarized as follows:

		Quarter Ended December 31, 2024		Year Ended December 31, 2024
Investments:
Investment volume		$333.4 million		$1.2 billion
Number of transactions		37		145
Property count		78		297
Weighted average cash / GAAP cap rate		8.0%/9.2%		8.0%/9.2%
Weighted average lease escalation		2.0%		2.0%
% Subject to master lease		69%		71%
% Sale-leaseback transactions		100%		97%
% Existing relationship		79%		81%
% Required financial reporting (tenant/guarantor)		100%		100%
WALT		17.7 years		17.5 years

Dispositions

The Company’s disposition activity during the three months and year ended December 31, 2024 is summarized as follows:

		Quarter Ended December 31, 2024		Year Ended December 31, 2024
Dispositions:
Net proceeds		$60.4 million		$94.2 million
Number of properties sold		24		46
Net gain / (loss)		$4.6 million		$6.0 million
Weighted average cash cap rate (excluding vacant properties and sales subject to a tenant purchase option )		7.0%		6.9%

Loan Repayments

Loan repayments to the Company during the three months and year ended December 31, 2024 are summarized as follows:

		Quarter Ended December 31, 2024		Year Ended December 31, 2024
Loan Repayments:
Proceeds—Principal		$1.8 million		$9.5 million
Number of properties		3		17
Weighted average interest rate		8.6%		7.3%

Leverage and Liquidity

On February 6, 2025, the Company amended its Credit Facility which, among other things, increased the capacity under its Revolving Credit Facility to $1.0 billion, incorporated improvements to the rate structure and financial covenants across the Credit Facility, extended the Revolving Credit Facility’s maturity to February 2030, after giving effect to extension options exercisable at the Company’s election, and increased the Revolving Credit Facility’s accordion feature to $1.0 billion.

The Company’s leverage and liquidity as of December 31, 2024 are summarized in the following table.

		December 31, 2024		Pro Forma (1) December 31, 2024
Leverage:
Net debt to Annualized Adjusted EBITDAre		4.6x		3.8x
Liquidity:
Cash and cash equivalents and restricted cash		$45.0 million		$425.8 million
Unused revolving credit facility capacity		$600.0 million		$1.0 billion
Forward equity sales – unsettled		$380.8 million		—
Total available liquidity		$1.0 billion		$1.4 billion
ATM Program:
October 2024 ATM Program initial availability		$750.0 million
Aggregate gross sales under the October 2024 ATM Program		$78.9 million
Availability remaining under the October 2024 ATM Program		$671.1 million

_________________
1.		Pro forma adjustments have been made to reflect: i) the 13,119,110 unsettled shares sold on a forward basis through the Company’s ATM Program as if they had been physically settled for cash on December 31, 2024 and ii) the increase in capacity of the Company’s revolving credit facility following its amendment in February 2025.

Equity Activity

The Company’s equity activity during the three months ended December 31, 2024 is summarized in the following table.

		Primary Offerings				ATM Program				Total
		Shares		Price (Net) (1)		Shares		Price (Net) (1)		Shares		Price (Net) (1)		Net Proceeds (000s)
Forward Shares Unsettled – September 30, 2024		7,828,852		$23.68		15,108,910		$29.34		22,937,762		$27.40		$628,544
Shares Sold – Current Quarter		—		—		2,387,104		32.59		2,387,104		32.59		77,796
Shares Settled – Current Quarter		(7,828,852)		23.68		(4,376,904)		32.01		(12,205,756)		26.67		(325,492)
Forward Shares Unsettled – December 31, 2024		—				13,119,110				13,119,110		$29.03		$380,848

_________________
1.		All prices are inclusive of forward price adjustments as of December 31, 2024.

Guidance

2025 Guidance

The Company has increased the bottom end of its previously-issued 2025 AFFO per share guidance by $0.01 to an updated range of $1.85 to $1.89. The guidance range includes an estimate for investment volume of $900 million to $1.1 billion, and Cash G&A expense of $28 million to $31 million.

Note: The Company does not provide guidance for the most comparable GAAP financial measure, net income, or a reconciliation of the forward-looking non-GAAP financial measure of AFFO to net income computed in accordance with GAAP, because it is unable to reasonably predict, without unreasonable efforts, certain items that would be contained in the GAAP measure, including items that are not indicative of the Company’s ongoing operations, such as, without limitation, potential impairments of real estate assets, net gain/loss on dispositions of real estate assets, changes in allowance for credit losses and stock-based compensation expense. These items are uncertain, depend on various factors, and could have a material impact on the Company’s GAAP results for the guidance period.

Dividend Information

As previously announced, on December 6, 2024, Essential Properties’ board of directors declared a cash dividend of $0.295 per share of common stock for the quarter ended December 31, 2024. The fourth quarter 2024 dividend represents an annualized dividend of $1.18 per share of common stock. The dividend was paid on January 14, 2025 to stockholders of record as of the close of business on December 31, 2024.

Conference Call Information

In conjunction with the release of Essential Properties’ operating results, the Company will host a conference call on Thursday, February 13, 2025 at 10:00 a.m. EST to discuss the results. To access the conference, dial 877-407-9208 (International: 201-493-6784). A live webcast will also be available in listen-only mode by clicking on the webcast link in the Investor Relations section at www.essentialproperties.com.

A telephone replay of the conference call can also be accessed by calling 844-512-2921 (International: 412-317-6671) and entering the access code: 13750834. The telephone replay will be available through February 27, 2025.

A replay of the conference call webcast will be available on our website approximately three hours after the conclusion of the live broadcast. The webcast replay will be available for 90 days. No access code is required for this replay.

Supplemental Materials

The Company’s Supplemental Information—Fourth Quarter 2024 is available on Essential Properties’ website at investors.essentialproperties.com.

About Essential Properties Realty Trust, Inc.

Essential Properties Realty Trust, Inc. is an internally managed REIT that acquires, owns and manages primarily single- tenant properties that are net leased on a long-term basis to companies operating service-oriented or experience-based businesses. As of December 31, 2024, the Company’s portfolio consisted of 2,104 freestanding net lease properties with a weighted average lease term of 14.0 years and a weighted average rent coverage ratio of 3.5x. In addition, as of December 31, 2024, the Company’s portfolio was 99.7% leased to 413 tenants operating 592 different concepts in 16 industries across 49 states.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. When used in this press release, the words “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximately” or “plan,” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and the Company may not be able to realize them. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur as described, or at all.

Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is contained in the company’s Securities and Exchange Commission (the “Commission”) filings, including, but not limited to, the Company’s most recent Annual Report on Form 10-K. Copies of each filing may be obtained from the Company or the Commission. Such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Actual operating results may differ materially from what is expressed or forecast in this press release.

The results reported in this press release are preliminary and not final. There can be no assurance that these results will not vary from the final results reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 that it will file with the Commission.

Essential Properties Realty Trust, Inc.
Consolidated Statements of Operations
		Three months ended December 31,								Year ended December 31,
(in thousands, except share and per share data)		2024				2023				2024				2023
		(Unaudited)				(Unaudited)				(Unaudited)				(Audited)
Revenues:
Rental revenue1,2		$	112,358			$	92,937			$	425,749			$	339,897
Interest on loans and direct financing lease receivables			7,333				4,580				23,409				18,128
Other revenue			17				217				452				1,570
Total revenues			119,708				97,734				449,610				359,595
Expenses:
General and administrative			8,469				7,335				35,161				30,678
Property expenses2			1,313				1,317				4,997				4,663
Depreciation and amortization			32,829				27,440				122,161				102,219
Provision for impairment of real estate			2,587				1,903				14,845				3,548
Change in provision for credit losses			(19	)			(14	)			230				(99	)
Total expenses			45,179				37,981				177,394				141,009
Other operating income:
Gain on dispositions of real estate, net			4,575				4,847				5,977				24,167
Income from operations			79,104				64,600				278,193				242,753
Other (expense)/income:
Loss on debt extinguishment3			—				—				—				(116	)
Interest expense			(23,958	)			(15,760	)			(78,544	)			(52,597	)
Interest income			559				595				3,069				2,011
Other income			—				—				1,548				—
Income before income tax expense			55,705				49,435				204,266				192,051
Income tax expense			157				164				628				636
Net income			55,548				49,271				203,638				191,415
Net income attributable to non-controlling			(174	)			(176	)			(634	)			(708	)
Net income attributable to stockholders		$	55,374			$	49,095			$	203,004			$	190,707
Basic weighted-average shares outstanding			177,425,316				157,561,157				173,855,427				152,140,735
Basic net income per share		$	0.31			$	0.31			$	1.16			$	1.25
Diluted weighted-average shares outstanding			182,326,800				159,196,777				177,115,170				153,521,854
Diluted net income per share		$	0.30			$	0.31			$	1.15			$	1.24

_________________
1.		Includes contingent rent (based on a percentage of the tenant’s gross sales at the leased property) of $244, $225, $863 and $743 for the three months and year ended December 31, 2024 and 2023, respectively.
2.		Includes reimbursable income or reimbursable expenses from the Company’s tenants of $854, $674, $3,188 and $2,867 for the three months and year ended December 31, 2024 and 2023, respectively.
3.		During the year ended December 31, 2023, includes debt extinguishment costs associated with the full repayment of the Company’s 2024 Term Loan.

Essential Properties Realty Trust, Inc.
Consolidated Balance Sheets
(in thousands, expect share and per share amounts)		December 31, 2024				December 31, 2023
		(Unaudited)				(Audited)
ASSETS
Investments:
Real estate investments, at cost:
Land and improvements		$	1,865,610			$	1,542,302
Building and improvements			3,536,000				2,938,012
Lease incentive			17,903				17,890
Construction in progress			153,789				96,524
Intangible lease assets			94,047				89,209
Total real estate investments, at cost			5,667,349				4,683,937
Less: accumulated depreciation and amortization			(476,827	)			(367,133	)
Total real estate investments, net			5,190,522				4,316,804
Loans and direct financing lease receivables, net			352,066				223,854
Real estate investments held for sale, net			10,018				7,455
Net investments			5,552,606				4,548,113
Cash and cash equivalents			40,713				39,807
Restricted cash			4,265				9,156
Straight-line rent receivable, net			143,435				107,545
Derivative assets			27,714				30,980
Rent receivables, prepaid expenses and other assets, net			29,949				32,660
Total assets		$	5,798,682			$	4,768,261
LIABILITIES AND EQUITY
Unsecured term loans, net of deferred financing costs		$	1,721,114			$	1,272,772
Senior unsecured notes, net			396,403				395,846
Revolving credit facility			—				—
Intangible lease liabilities, net			10,700				11,206
Dividend payable			55,608				47,182
Derivative liabilities			7,585				23,005
Accrued liabilities and other payables			35,145				31,248
Total liabilities			2,226,555				1,781,259
Commitments and contingencies			—				—
Stockholders’ equity:
Preferred stock, $0.01 par value; 150,000,000 authorized; none issued and outstanding as of December 31, 2024 and 2023			—				—
Common stock, $0.01 par value; 500,000,000 authorized; 187,537,592 and 164,635,150 issued and outstanding as of December 31, 2024 and 2023, respectively			1,875				1,646
Additional paid-in capital			3,658,219				3,078,459
Distributions in excess of cumulative earnings			(113,302	)			(105,545	)
Accumulated other comprehensive income			16,886				4,019
Total stockholders’ equity			3,563,678				2,978,579
Non-controlling interests			8,449				8,423
Total equity			3,572,127				2,987,002
Total liabilities and equity		$	5,798,682			$	4,768,261

Essential Properties Realty Trust, Inc.
Reconciliation of Non-GAAP Financial Measures
		Three months ended December 31,								Year ended December 31,
(unaudited, in thousands except per share amounts)		2024				2023				2024				2023
Net income		$	55,548			$	49,271			$	203,638			$	191,415
Depreciation and amortization of real estate			32,786				27,402				121,997				102,103
Provision for impairment of real estate			2,587				1,903				14,845				3,548
Gain on dispositions of real estate, net			(4,575	)			(4,847	)			(5,977	)			(24,167	)
Funds from Operations			86,346				73,729				334,503				272,899
Non-core expense (income)1			—				78				—				(510	)
Core Funds from Operations			86,346				73,807				334,503				272,389
Adjustments:
Straight-line rental revenue, net			(7,403	)			(9,636	)			(38,661	)			(30,375	)
Non-cash interest			1,088				992				4,086				3,187
Non-cash compensation expense			2,622				2,170				10,827				9,192
Other amortization expense			1,066				263				1,802				1,507
Other non-cash adjustments			101				28				1,075				(73	)
Capitalized interest expense			(2,070	)			(665	)			(5,760	)			(2,430	)
Adjusted Funds from Operations		$	81,750			$	66,959			$	307,872			$	253,397
Net income per share2:
Basic		$	0.31			$	0.31			$	1.16			$	1.25
Diluted		$	0.30			$	0.31			$	1.15			$	1.24
FFO per share2:
Basic		$	0.48			$	0.47			$	1.92			$	1.78
Diluted		$	0.47			$	0.46			$	1.89			$	1.77
Core FFO per share2:
Basic		$	0.48			$	0.47			$	1.92			$	1.78
Diluted		$	0.47			$	0.46			$	1.89			$	1.77
AFFO per share2:
Basic		$	0.46			$	0.42			$	1.76			$	1.66
Diluted		$	0.45			$	0.42			$	1.74			$	1.65

_________________
1.		Includes the following during the: i) three months ended December 31, 2023 — $0.1 million of accelerated expense related to the departure of a board member; ii) year ended December 31, 2023 — $0.1 million loss on debt extinguishment, $0.9 million of insurance recovery income and $0.3 million of severance expense and non-cash compensation expense.
2.		Calculations exclude $120, $103, $472 and $407 from the numerator for the three and year ended December 31, 2024 and 2023, respectively, related to dividends paid on unvested restricted share awards and restricted share units.

Essential Properties Realty Trust, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)		Three months ended December 31, 2024
Net income		$	55,548
Depreciation and amortization			32,829
Interest expense			23,958
Interest income			(559	)
Income tax expense			157
EBITDA			111,933
Provision for impairment of real estate			2,587
Gain on dispositions of real estate, net			(4,575	)
EBITDAre			109,945
Adjustment for current quarter re-leasing, acquisition and disposition activity1			3,856
Adjustment to exclude other non-core or non-recurring activity2			(784	)
Adjustment to exclude termination/prepayment fees and certain percentage rent3			(93	)
Adjusted EBITDAre – Current Estimated Run Rate			112,924
General and administrative expense			9,360
Adjusted net operating income (“NOI”)			122,284
Straight-line rental revenue, net1			(8,748	)
Other amortization expense			1,066
Adjusted Cash NOI		$	114,602
Annualized EBITDAre		$	439,780
Annualized Adjusted EBITDAre		$	451,696
Annualized Adjusted NOI		$	489,136
Annualized Adjusted Cash NOI		$	458,408

_________________
1.		Adjustment is made to reflect EBITDAre, NOI and Cash NOI as if all re-leasing activity, investments in and dispositions of real estate and loan repayments completed during the three months ended December 31, 2024 had occurred on October 1, 2024.
2.		Adjustment is made to i) exclude non-core adjustments made in computing Core FFO, ii) exclude changes in the Company’s provision for credit losses and iii) eliminate the impact of seasonal fluctuation in certain non-cash compensation expense recorded in the period.
3.		Adjustment excludes lease termination or loan prepayment fees and contingent rent (based on a percentage of the tenant’s gross sales at the leased property) where payment is subject to exceeding a sales threshold specified in the lease, if any.

Essential Properties Realty Trust, Inc.
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except share and per share amounts)		December 31, 2024				Rate		Wtd. Avg. Maturity
Unsecured debt:
February 2027 term loan1		$	430,000			2.5%		2.1 years
January 2028 term loan1			400,000			4.7%		3.1 years
February 2029 term loan1,2			450,000			5.4%		4.2 years
January 2030 term loan1,2			450,000			4.9%		5.0 years
Senior unsecured notes due July 2031			400,000			3.1%		6.5 years
Revolving credit facility3			—			—%		1.1 years
Total unsecured debt			2,130,000			4.1%		4.2 years
Gross debt			2,130,000
Less: cash & cash equivalents			(40,713	)
Less: restricted cash available for future investment			(4,265	)
Net debt			2,085,022
Equity:
Preferred stock			—
Common stock & OP units (188,091,439 shares @ $31.28/share as of 12/31/24)4			5,883,500
Total equity			5,883,500
Total enterprise value (“TEV”)		$	7,968,522
Pro forma adjustments to Net debt and TEV:5
Net debt		$	2,085,022
Less: Unsettled forward equity (13,119,110 shares @ $29.03/share as of 12/31/24)			(380,848	)
Pro forma net debt			1,704,174
Total equity			5,883,500
Common stock — unsettled forward equity (13,119,110 shares @ $31.28/share as of 12/31/24)			410,366
Pro forma TEV		$	7,998,040
Gross Debt / Undepreciated Gross Assets			33.9	%
Net Debt / TEV			26.2	%
Net Debt / Annualized Adjusted EBITDAre		4.6x
Pro Forma Gross Debt / Undepreciated Gross Assets			32.0	%
Pro Forma Net Debt / Pro Forma TEV			21.3	%
Pro Forma Net Debt / Annualized Adjusted EBITDAre		3.8x

_________________
1.		Rates presented for the Company’s term loans are fixed at the stated rates after giving effect to its interest rate swaps plus applicable margin and SOFR premium of 105bps.
2.		Weighted average maturity calculation is made after giving effect to extension options exercisable at the Company’s election.
3.		Prior to its amendment in February 2025, the Company’s revolving credit facility provided a maximum aggregate initial original principal amount of up to $600 million and borrowings bore interest at Term SOFR plus applicable margin and SOFR premium of 95bps. Following its amendment, the Company’s revolving credit facility provides a maximum aggregate initial original principal amount of up to $1.0 billion, includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $1.0 billion, borrowings bear interest at Term SOFR plus applicable margin of 77.5bps and the facility matures in February 2030, after giving effect to extension options exercisable at the Company’s election.
4.		Common stock & OP units as of December 31, 2024, based on 187,537,592 common shares outstanding and 553,847 OP units held by non-controlling interests.
5.		Pro forma adjustments have been made to reflect the unsettled portion of shares sold on a forward basis through the Company’s ATM Program as if they had been physically settled for cash on December 31, 2024.

Non-GAAP Financial Measures and Certain Definitions

The Company’s reported results are presented in accordance with GAAP. The Company also discloses the following non-GAAP financial measures: FFO, Core FFO, AFFO, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA further adjusted to exclude gains (or losses) on sales of depreciable property and real estate impairment losses (“EBITDAre”), adjusted EBITDAre, annualized adjusted EBITDAre, net debt, net operating income (“NOI”) and cash NOI (“Cash NOI”). The Company believes these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

FFO, Core FFO and AFFO

The Company computes FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO is used by management, and may be useful to investors and analysts, to facilitate meaningful comparisons of operating performance between periods and among the Company’s peers primarily because it excludes the effect of real estate depreciation and amortization and net gains and losses on sales (which are dependent on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions).

The Company computes Core FFO by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that it believes are infrequent and unusual in nature and/or not related to its core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of our peers, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Core FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Core FFO include certain transaction related gains, losses, income or expenses or other non-core amounts as they occur.

To derive AFFO, the Company modifies its computation of Core FFO to include other adjustments to GAAP net income related to certain items that it believes are not indicative of the Company’s operating performance, including straight-line rental revenue, non-cash interest, non-cash compensation expense, other amortization expense, other non-cash charges and capitalized interest expense. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. The Company believes that AFFO is an additional useful supplemental measure for investors to consider when assessing the Company’s operating performance without the distortions created by non-cash items and certain other revenues and expenses.

FFO, Core FFO and AFFO do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of FFO, Core FFO and AFFO may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

EBITDA and EBITDAre

The Company computes EBITDA as earnings before interest, income taxes and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. The Company computes EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and real estate impairment losses. The Company presents EBITDA and EBITDAre as they are measures commonly used in its industry and the Company believes that these measures are useful to investors and analysts because they provide supplemental information concerning its operating performance, exclusive of certain non-cash items and other costs. The Company uses EBITDA and EBITDAre as measures of its operating performance and not as measures of liquidity.

EBITDA and EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, the Company’s computation of EBITDA and EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

Net Debt

The Company calculates its net debt as its gross debt (defined as total debt plus net deferred financing costs on its secured borrowings) less cash and cash equivalents and restricted cash available for future investment. The Company believes excluding cash and cash equivalents and restricted cash available for future investment from gross debt, all of which could be used to repay debt, provides an estimate of the net contractual amount of borrowed capital to be repaid, which it believes is a beneficial disclosure to investors and analysts.

NOI and Cash NOI

The Company computes NOI as total revenues less property expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income or loss. Cash NOI further excludes non-cash items included in total revenues and property expenses, such as straight-line rental revenue and other amortization and non-cash charges. The Company believes NOI and Cash NOI provide useful information because they reflect only those revenue and expense items that are incurred at the property level and present such items on an unlevered basis.

NOI and Cash NOI are not measures of financial performance under GAAP. You should not consider the Company’s NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Additionally, the Company’s computation of NOI and Cash NOI may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.

Adjusted EBITDAre / Adjusted NOI / Adjusted Cash NOI

The Company further adjusts EBITDAre, NOI and Cash NOI i) based on an estimate calculated as if all investment and disposition activity that took place during the quarter had occurred on the first day of the quarter, ii) to exclude certain GAAP income and expense amounts that the Company believes are infrequent and unusual in nature and iii) to eliminate the impact of lease termination or loan prepayment fees and contingent rental revenue from its tenants which is subject to sales thresholds specified in the lease. The Company then annualizes these estimates for the current quarter by multiplying them by four, which it believes provides a meaningful estimate of the Company’s current run rate for all investments as of the end of the current quarter. You should not unduly rely on these measures, as they are based on assumptions and estimates that may prove to be inaccurate. The Company’s actual reported EBITDAre, NOI and Cash NOI for future periods may be significantly less than these estimates of current run rates.

Cash ABR

Cash ABR means annualized contractually specified cash base rent in effect as of the end of the current quarter for all of the Company’s leases (including those accounted for as direct financing leases) commenced as of that date and annualized cash interest on its mortgage loans receivable as of that date.

Cash Cap Rate

Cash Cap Rate means annualized contractually specified cash base rent for the first full month after investment or disposition divided by the purchase or sale price, as applicable, for the property.

GAAP Cap Rate

GAAP Cap Rate means annualized rental income computed in accordance with GAAP for the first full month after investment divided by the purchase price, as applicable, for the property.

Rent Coverage Ratio

Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250212966130/en/

Investor/Media:

Essential Properties Realty Trust, Inc.

Robert W. Salisbury, CFA

Senior Vice President, Head of Capital Markets

609-436-0619

[email protected]

KEYWORDS: United States North America New Jersey

INDUSTRY KEYWORDS: REIT Finance Professional Services Commercial Building & Real Estate Construction & Property

MEDIA:

Logo

Quantum Reports Fiscal Third Quarter 2025 Financial Results

Execution on Business Transformation Drives Significant Year-Over-Year Improvements

Takes Initial Step on Path Toward Becoming Debt-Free

SAN JOSE, Calif.–(BUSINESS WIRE)–Quantum Corporation (Nasdaq: QMCO) (“Quantum” or the “Company”), a leader in solutions for AI and unstructured data, announced today financial results for its fiscal third quarter 2025 ended December 31, 2024.

Fiscal Third Quarter 2025 Financial Summary

• Revenue increased to $72.6 million

• Subscription ARR was up 29% year-over-year at $21.3 million

• GAAP gross profit increased to $31.8 million, or gross margin of 43.8%

• GAAP net loss was $71.4 million, or ($14.56) per share, which included a non-cash adjustment of $61.6 million to the fair market value of warrant liabilities

• Adjusted non-GAAP net loss was $4.0 million, or ($0.81) per share

• Adjusted EBITDA was $4.7 million, a $5 million improvement sequentially

“Third quarter revenue increased sequentially and was above the midpoint of guidance, as recent bookings momentum and customer wins were converted into realized sales,” commented Jamie Lerner, Chairman and CEO of Quantum. “As clear evidence of the benefits from our self-help actions, this quarter we achieved positive adjusted EBITDA of $4.7 million, well above our expectations, and generated improving free cash flow. Contributing to these results was gross margin expanding 230 basis points sequentially to almost 44%, combined with a significant reduction in operating expenses.

“A fundamental component of our overall business transformation has been significantly reducing the company’s outstanding debt toward achieving financial independence and eliminating the associated costly burdens of interest and fees. Consistent with this objective, we recently entered into a standby equity purchase agreement with a new financial partner that solidifies access to additional capital and liquidity. We believe this strategic transaction will facilitate both a stronger balance sheet and lower cost structure through a staged reduction of the company’s outstanding debt, while also providing increased flexibility to execute on and accelerate our ongoing growth initiatives.

”Also during the quarter, we continued to gain traction with the success of our new DXi data protection appliances, which provide one of the most competitive solutions in their market. Recent notable wins included a multi-million dollar installed base refresh at a top European retailer as well as new business at a multinational technology manufacturing company. Additionally, we extended the momentum with our ActiveScale solution at new and existing customers, including a 7-figure win with a Japanese research institute and a prominent cloud service provider during the quarter. Our Myriad product also continues to be at the forefront of innovation as we collaborated with a leader in the advancement of AI currently fusing quantum computing-inspired algorithms and AI/ML to tackle problems once deemed unsolvable.

“In summary, this quarter represented tangible evidence of improved financial performance from our ongoing business transformation and operational efficiency initiatives over the past year. Although there is still additional work to be done in order to deliver consistently improving results, we believe we are on the right path toward achieving this goal. As we take additional steps to drive higher quality revenue and reduce the company’s debt, we believe Quantum is well positioned to deliver increasing profitability and cash flow in the coming years.”

Fiscal Third Quarter 2025 vs. Prior Fiscal Year Quarter

Revenue for the fiscal third quarter of 2025 was $72.6 million, compared to $71.9 million in the fiscal third quarter of 2024. GAAP gross profit in the third quarter of 2025 was $31.8 million, or 43.8% of revenue, compared to $29.2 million, or 40.6% of revenue, in the prior fiscal year quarter.

Total GAAP operating expenses in the fiscal third quarter of 2025 were $35.6 million, or 49.1% of revenue, compared to $35.4 million, or 49.2% of revenue, in the fiscal third quarter of 2024. Selling, general and administrative expenses were $26.6 million, compared to $26.1 million in the prior fiscal year quarter. Research and development expenses in the fiscal third quarter of 2025 were $7.7 million, compared to $8.8 million in the prior fiscal year quarter. Non-GAAP operating expenses in the third quarter of 2025 were $30.1 million, compared to $32.0 million in the fiscal third quarter of 2024.

GAAP net loss in the third quarter of fiscal 2025 was $71.4 million, or ($14.56) per share, which included a $61.6 million loss related to the adjustment to the fair market value of warrants liabilities and a positive $2.3 million non-cash intercompany foreign currency adjustment, compared to a GAAP net loss of $9.9 million, or ($2.08) per share, in the prior fiscal year quarter. Excluding the income statement impact of the warrants, stock compensation, restructuring charges, and other non-recurring costs, non-GAAP adjusted net loss in the quarter was $4.0 million, or ($0.81) per share, compared to an adjusted net loss of $8.5 million, or ($1.79) per share, in the fiscal third quarter of 2024.

Adjusted EBITDA in fiscal third quarter 2025 was $4.7 million, compared to ($2.6) million in the third quarter of fiscal year 2024, and an approximately $5.0 million improvement sequentially.

For a reconciliation of GAAP to non-GAAP financial results, please see the financial reconciliation tables below.

Liquidity and Debt (as of December 31, 2024)

• Cash, cash equivalents and restricted cash were $20.6 million, compared to $24.5 million as of December 31, 2023.

• Total interest expense for the third quarter was $6.8 million, compared to $3.9 million for the same period a year ago.

• Outstanding term loan debt, excluding debt issuance costs, was $105.9 million, compared to $87.3 million as of December 31, 2023. Outstanding borrowings on revolving credit facility were $37.5 million, compared to $32.0 million as of December 31, 2023.

Purchase Agreement

The Company has been exploring several strategic and financial initiatives to pay down and eliminate its current outstanding debt, which would also help to lower the cost structure, including lowering interest expense and other fees the Company has incurred.

On February 11, 2025, the Company’s registration statement on Form S-1 registering up to approximately 2.3 million shares for resale of shares issued or to be issued and sold to YA II PN, Ltd. (a fund managed by Yorkville Advisors Global, LP.) pursuant to the standby equity purchase agreement (the “Purchase Agreement”) was declared effective by the Securities and Exchange Commission. The Purchase Agreement provides Quantum with the flexibility to support ongoing operations and accelerate growth initiatives with no more than approximately 1.15 million shares of common stock of the Company issuable under the Purchase Agreement until shareholder approval is obtained. There is no obligation for Quantum to sell any shares under the Purchase Agreement, and the Company retains control over both timing and volume of any future issuances.

Guidance

For the fiscal fourth quarter of 2025, the Company expects the following guidance:

• Revenue of $66 million, plus or minus $2.0 million

• Non-GAAP adjusted basic net loss per share of ($1.16), plus or minus $0.05

• Adjusted EBITDA of approximately $1.7 million

This assumes an effective annual tax rate of negative 3%; non-GAAP adjusted net loss per share assumes an average basic share count of approximately 5.8 million in the fiscal fourth quarter of 2025.

Conference Call and Webcast

Management will host a live conference call today, February 12, 2025, at 5:00 p.m. ET (2:00 p.m. PT) to discuss these results. The conference call will be accessible by dialing 866-424-3436 (U.S. Toll-Free) or +1-201-689-8058 (International) and entering conference ID 13751306. This conference call will be broadcast live over the Internet with a slide presentation and can be accessed by all interested parties on the investor relations section of the Company’s website at investors.quantum.com under the events and presentations tab.

A telephone replay of the conference call will be available approximately two hours after the conference call and will be available through February 26, 2025. To access the replay dial 1-877-660-6853 and enter the conference ID 13751306 at the prompt. International callers should dial +1-201-612-7415 and enter the same conference ID. Following the conclusion of the live call, a replay of the webcast will be available on the Company’s website at www.quantum.com for at least 90 days.

About Quantum

Quantum delivers end-to-end data management solutions designed for the AI era. With over four decades of experience, our data platform has allowed customers to extract the maximum value from their unique, unstructured data. From high-performance ingest that powers AI applications and demanding data-intensive workloads, to massive, durable data lakes to fuel AI models, Quantum delivers the most comprehensive and cost-efficient solutions. Leading organizations in life sciences, government, media and entertainment, research, and industrial technology trust Quantum with their most valuable asset – their data. Quantum is listed on Nasdaq (QMCO). For more information visit www.quantum.com.

Quantum and the Quantum logo are registered trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners.

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results, including for the fourth fiscal quarter of 2025; the anticipated benefits of the Purchase Agreement; our belief that we are well positioned to deliver increasing profitability and cash flow in the coming years; and our focus, goals, opportunities and strategy.

These forward-looking statements may be identified by the use of terms and phrases such as “anticipates”, “believes”, “can”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “plans”, “projects”, “targets”, “will”, and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters and other statements regarding matters that are not historical are forward-looking statements. Investors are cautioned that these forward-looking statements relate to future events or our future performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: risks related to the need to address the many challenges facing our business; the impact macroeconomic and inflationary conditions on our business, including potential disruptions to our supply chain, employees, operations, sales and overall market conditions; the competitive pressures we face; risks associated with executing our strategy; the distribution of our products and the delivery of our services effectively; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; estimates and assumptions related to the cost (including any possible disruption of our business) and the anticipated benefits of the transformation and restructuring plans, including equity and debt financing options; the outcome of any claims and disputes; the ability to meet stock exchange continued listing standards; risks related to our ability to implement and maintain effective internal control over financial reporting in the future; and other risks that are described herein, including but not limited to the items discussed in “Risk Factors” in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K filed with the SEC on June 28, 2024, and any subsequent reports filed with the SEC. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
	December 31, 2024				March 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	20,381			$	25,692
Restricted cash		222				168
Accounts receivable, net of allowance for credit losses of $99 and $22, respectively		61,373				67,788
Manufacturing inventories		18,861				17,753
Service parts inventories		1,884				9,783
Prepaid expenses		2,569				2,186
Other current assets		8,538				8,414
Total current assets		113,828				131,784
Property and equipment, net		11,268				12,028
Goodwill		12,969				12,969
Intangible assets, net		509				1,669
Right-of-use assets		8,670				9,425
Other long-term assets		20,812				19,740
Total assets	$	168,056			$	187,615
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	34,704			$	26,087
Accrued compensation		11,702				18,214
Deferred revenue, current portion		69,916				78,511
Term debt		98,609				82,496
Revolving credit facility		37,500				26,604
Warrant liabilities		34,005				4,046
Other accrued liabilities		19,108				13,986
Total current liabilities		305,544				249,944
Deferred revenue, net of current portion		35,350				38,176
Operating lease liabilities		9,067				9,621
Other long-term liabilities		13,150				11,372
Total liabilities		363,111				309,113
Stockholders’ deficit
Preferred stock, 20,000 shares authorized; no shares issued and outstanding		—				—
Common stock, $0.01 par value; 225,000 shares authorized; 5,307 and 4,792 shares issued and outstanding		53				48
Additional paid-in capital		740,521				708,027
Accumulated deficit		(933,160	)			(827,380	)
Accumulated other comprehensive loss		(2,469	)			(2,193	)
Total stockholders’ deficit		(195,055	)			(121,498	)
Total liabilities and stockholders’ deficit	$	168,056			$	187,615

QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts, unaudited)
	Three Months Ended December 31,								Nine Months Ended December 31,
	2024				2023				2024				2023
Revenue:
Product	$	38,610			$	37,113			$	116,389			$	138,635
Service and subscription		31,615				32,771				90,383				94,229
Royalty		2,326				2,042				7,592				7,235
Total revenue		72,551				71,926				214,364				240,099
Cost of revenue:
Product		30,922				30,044				93,251				105,214
Service and subscription		9,874				12,701				33,954				37,329
Total cost of revenue		40,796				42,745				127,205				142,543
Gross profit		31,755				29,181				87,159				97,556
Operating expenses:
Sales and marketing		12,448				14,244				39,321				45,800
General and administrative		14,142				11,893				49,186				34,833
Research and development		7,683				8,763				24,255				28,828
Restructuring charges		1,342				497				2,916				3,164
Total operating expenses		35,615				35,397				115,678				112,625
Loss from operations		(3,860	)			(6,216	)			(28,519	)			(15,069	)
Other income (expense), net		967				(1,419	)			(408	)			(2,049	)
Interest expense		(6,840	)			(3,937	)			(16,761	)			(10,992	)
Change in fair value of warrant liabilities		(61,630	)			2,213				(56,414	)			7,341
Loss on debt extinguishment		—				—				(3,003	)			—
Net loss before income taxes		(71,363	)			(9,359	)			(105,105	)			(20,769	)
Income tax provision		70				510				675				1,573
Net loss	$	(71,433	)		$	(9,869	)		$	(105,780	)		$	(22,342	)
Net loss per share – basic and diluted	$	(14.56	)		$	(2.08	)		$	(21.90	)		$	(4.74	)
Weighted average shares – basic and diluted		4,907				4,751				4,831				4,717
Net loss		(71,433	)		$	(9,869	)			(105,780	)		$	(22,342	)
Foreign currency translation adjustments, net		(1,077	)			1,465				(276	)			994
Total comprehensive loss	$	(72,510	)		$	(8,404	)		$	(106,056	)		$	(21,348	)

QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
	Nine Months Ended December 31,
	2024				2023
Operating activities
Net loss	$	(105,780	)		$	(22,342	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		4,440				7,593
Amortization of debt issuance costs		3,704				1,948
Loss on debt extinguishment		3,003				—
Provision for product and service inventories		1,165				3,328
Stock-based compensation		2,376				3,741
Paid in kind interest		3,515				1,401
Change in fair value of warrant liabilities		56,408				(7,340	)
Other non-cash		(281	)			1,609
Changes in assets and liabilities:
Accounts receivable, net		6,337				12,616
Manufacturing inventories		(2,347	)			(3,099	)
Service parts inventories		7,972				(1,520	)
Prepaid expenses		(382	)			394
Accounts payable		9,405				(13,226	)
Accrued compensation		(6,512	)			(425	)
Deferred revenue		(11,421	)			(4,780	)
Other current assets		(124	)			(1,698	)
Other non-current assets		1,367				(1,532	)
Other current liabilities		5,369				569
Other non-current liabilities		1,441				2,036
Net cash used in operating activities		(20,345	)			(20,727	)
Investing activities
Purchases of property and equipment		(4,324	)			(5,025	)
Net cash used in investing activities		(4,324	)			(5,025	)
Financing activities
Borrowings of long-term debt, net of debt issuance costs		25,000				14,083
Repayments of long-term debt		(14,092	)			(4,497	)
Borrowings of credit facility		311,135				318,223
Repayments of credit facility		(302,628	)			(303,671	)
Net cash provided by financing activities		19,415				24,138
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(3	)			(12	)
Net change in cash, cash equivalents and restricted cash		(5,257	)			(1,626	)
Cash, cash equivalents, and restricted cash at beginning of period		25,860				26,175
Cash, cash equivalents, and restricted cash at end of period	$	20,603			$	24,549
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows:
Cash and cash equivalents		20,381			$	24,377
Restricted cash, current		222				172
Cash and cash equivalents at the end of period	$	20,603			$	24,549
Supplemental disclosure of cash flow information
Cash paid for interest	$	8,841			$	9,154
Cash paid for income taxes, net	$	1,798			$	1,136
Non-cash transactions
Purchases of property and equipment included in accounts payable	$	88			$	164
Paid-in-kind interest	$	3,515			$	1,401

NON-GAAP FINANCIAL MEASURES

To provide investors with additional information regarding our financial results, we have presented certain non-GAAP financial measures in this press release, including non-GAAP adjusted net loss, adjusted EBITDA and non-GAAP operational expenses.

Adjusted EBITDA is a non-GAAP financial measure defined by us as net loss before interest expense, net, provision for income taxes, depreciation and amortization expense, stock-based compensation expense, restructuring charges, amortization of acquisition-related intangible assets, loss on debt extinguishment, non-recurring project costs, including restatement and debt-related matters and fair value of warrants adjustments.

“GAAP net loss” as referred to in this press release represents “Net loss attributable to common stockholders”. Non-GAAP adjusted net income (loss) is a non-GAAP financial measure defined by us as net loss before restructuring charges, stock-based compensation expense, amortization of acquisition-related intangible assets, loss on debt extinguishment, non-recurring project costs, including restatement and debt-related matters and fair value of warrants adjustments. We calculate adjusted net income (loss) per basic and diluted share using the above-referenced definition of adjusted net income (loss).

We have provided below reconciliations of adjusted EBITDA to adjusted net income (loss), non-GAAP gross profit and non-GAAP operational expenses, to the most directly comparable U.S. GAAP financial measures. We have presented adjusted EBITDA because it is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business performance. For example, in the quarter ended June 30, 2024, we excluded the costs associated with the restatement of financial statements for fiscal year 2022, fiscal year 2023 and associated quarters, and the first fiscal quarter of 2024. We do not believe these expenses are reasonably likely to reoccur in the foreseeable future and do not believe it is indicative of our ongoing operations; accordingly, we have excluded the impact from our non-GAAP results. We believe adjusted net income (loss) and adjusted net income (loss) per basic and diluted share serve as appropriate measures to be used in evaluating the performance of our business and help our investors better compare our operating performance over multiple periods. Accordingly, we believe that the use of non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Our use of non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are as follows:

• Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.

• Adjusted EBITDA does not reflect: (1) interest and tax payments that may represent a reduction in cash available to us; (2) capital expenditures, future requirements for capital expenditures or contractual commitments; (3) changes in, or cash requirements for, working capital needs; (4) the potentially dilutive impact of stock-based compensation expense; (5) potential future costs related to our long-term debt; (6) potential future restructuring expenses; (7) potential future costs related to business acquisitions; (8) gain (loss) on debt extinguishment, (9) and acquisition-related amortization of intangibles assets from business combinations, or (10) fair market adjustments related to the Company’s warrants.

• Adjusted net income (loss) does not reflect: (1) potential future restructuring activities; (2) the potentially dilutive impact of stock-based compensation expense; (3) potential future costs related to our long-term debt; (4) potential future costs related to business acquisitions; (5) gain (loss) on debt extinguishment; (6) acquisition-related amortization of intangibles assets from business combinations; or (7) fair market adjustments related to the Company’s warrants.

Other companies, including companies in our industry, may calculate non-GAAP financial measures differently, which reduces its usefulness as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA and adjusted net income (loss) along with other U.S. GAAP-based financial performance measures, including various cash flow metrics and our U.S. GAAP financial results.

In addition, this press release includes forward-looking non-GAAP adjusted earnings or net loss per share and adjusted EBITDA, each a non-GAAP measure used to describe our expected performance. We have not presented a reconciliation of these anticipated non-GAAP measures to our most comparable GAAP financial measures, because the reconciliation could not be prepared without unreasonable effort. The information necessary to prepare the reconciliations is not available on a forward-looking basis and cannot be accurately predicted. The unavailable information could have a significant impact on the calculation of the comparable GAAP financial measure.

The tables below reconcile the non-GAAP financial measures of adjusted EBITDA, net income, diluted EPS, operating expenses and gross margin with the most directly comparable GAAP financial measures (in thousands, unaudited).

Adjusted EBITDA
	Three Months Ended December 31,								Nine Months Ended December 31,
(in thousands)	2024				2023				2024				2023
GAAP net loss	$	(71,433	)		$	(9,878	)		$	(105,780	)		$	(22,351	)
Provision for income taxes		70				510				675				1,573
Interest expense, net		6,984				3,937				17,146				10,993
Depreciation expense		1,737				1,466				5,007				4,639
Amortization of acquisition-related intangible assets		233				832				1,160				2,954
Stock-based compensation expense		735				905				2,376				3,736
Fair value of warrants adjustments​		61,630				(2,213	)			56,414				(7,341	)
Restructuring charges​		1,845				496				4,455				3,163
Loss on debt extinguishment		—				—				3,003				—
Debt costs		592				—				1,819				—
Non-recurring project costs​		2,322				1,343				15,050				3,196
Adjusted EBITDA	$	4,715			$	(2,602	)		$	1,325			$	562

Non-GAAP adjusted net loss and net loss per share
	Three Months Ended December 31,								Nine Months Ended December 31,
(in thousands)	2024				2023				2024				2023
GAAP net loss	$	(71,433	)		$	(9,878	)		$	(105,780	)		$	(22,351	)
Amortization of acquisition-related intangible assets​		233				832				1,160				2,954
Fair value of warrants adjustments​		61,630				(2,213	)			56,414				(7,341	)
Stock-based compensation expense​		735				905				2,376				3,736
Restructuring charges		1,845				496				4,455				3,163
Loss on debt extinguishment		—				—				3,003				—
Non-recurring interest expense		116				—				356				—
Debt costs		592				—				1,819				—
Non-recurring project costs		2,322				1,343				15,050				2,790
Adjusted net loss	$	(3,960	)		$	(8,515	)		$	(21,147	)		$	(17,049	)
​​Adjusted net loss per share – basic and diluted	$	(0.81	)		$	(1.79	)		$	(4.38	)		$	(3.61	)
Weighted average shares – basic and diluted		4,907				4,751				4,831				4,717

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250212387842/en/

Investor Relations Contacts:

Shelton Group

Leanne K. Sievers | Brett L. Perry

P: 214-272-0070

E: [email protected]

KEYWORDS: United States North America California

INDUSTRY KEYWORDS: Software Networks Other Defense Internet Contracts Hardware Data Management Technology Defense Security Audio/Video Telecommunications

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