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Custom Truck One Source, Inc. Reports Continued Strong Results for First Quarter 2023

KANSAS CITY, Mo.–(BUSINESS WIRE)–
Custom Truck One Source, Inc. (NYSE: CTOS), a leading provider of specialty equipment to the electric utility, telecom, rail and other infrastructure-related end markets, today reported financial results for its first quarter ended March 31, 2023.

CTOS First-Quarter Highlights

• Total revenue of $452.2 million, with growth in rental revenue and equipment sales of 8.4% and 32.6%, respectively, compared to the first quarter of 2022 as a result of continued strong demand across our end markets

• Gross profit of $109.7 million, an improvement of $25.2 million, or 29.8%, compared to $84.5 million for the first quarter of 2022

• Adjusted Gross Profit of $150.0 million, an increase of $20.5 million, or 15.9%, compared to $129.5 million for the first quarter of 2022

• Net income of $13.8 million, driven primarily by gross profit growth of $25.2 million, compared to a net loss of $3.3 million in the first quarter of 2022

• Adjusted EBITDA of $105.2 million, an increase of $13.7 million, or 15.0% compared to $91.5 million in the first quarter of 2022

• Further reduction in Net Leverage Ratio from 3.5 at the end of the last quarter to 3.4 as of March 31, 2023

• Increasing Full Year 2023 Revenue and Adjusted EBITDA Guidance

“Our first quarter results represent a great start to the year and reflect continued strong demand across our primary end markets. Achieving these results requires an enormous team effort to deliver the record levels of vehicle production necessary to both add to our fleet and meet the demand for new vehicle sales,” said Ryan McMonagle, Chief Executive Officer of CTOS. “All three of our business segments continued to experience strong year-over-year growth. The demand environment, combined with our expectations of continued improvement in the supply chain and a sustained level of vehicle production, gives us the confidence to improve our outlook for 2023. We continue to believe that our one-stop-shop business model and significant scale provide us with a competitive advantage that allows us to deliver unequaled service to our customers,” McMonagle added.

Summary Actual Financial Results
	Three Months Ended March 31,							Three Months Ended December 31,
(in $000s)		2023			2022				2022
Rental revenue	$	118,288		$	109,145			$	127,829
Equipment sales		301,290			227,186				325,746
Parts sales and services		32,585			30,145				33,149
Total revenue		452,163			366,476				486,724
Gross Profit	$	109,661		$	84,493			$	128,325
Net Income (Loss)	$	13,800		$	(3,273	)		$	30,937
Adjusted EBITDA1	$	105,200		$	91,477			$	124,484
1 – Adjusted EBITDA is a non-GAAP financial measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable financial measure under United States generally accepted accounting principles in the U.S. (“GAAP”) is included at the end of this press release.

Summary Actual Financial Results by Segment

Our results are reported for our three segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”). ERS encompasses our core rental business, inclusive of sales of rental equipment to our customers. TES encompasses our specialized truck and equipment production and sales activities. APS encompasses sales and rentals of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations. Segment performance is presented below for the three months ended March 31, 2023 and 2022 and December 31, 2022.

Equipment Rental Solutions
	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022		2022
Rental revenue	$	113,784		$	105,561		$	123,429
Equipment sales		92,136			59,353			78,472
Total revenue		205,920			164,914			201,901
Cost of rental revenue		29,060			24,791			26,735
Cost of equipment sales		71,081			43,230			57,504
Depreciation of rental equipment		39,512			43,966			39,836
Total cost of revenue		139,653			111,987			124,075
Gross profit	$	66,267		$	52,927		$	77,826

Truck and Equipment Sales
	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022			2022
Equipment sales	$	209,154		$	167,833		$	247,274
Cost of equipment sales		175,044			144,048			202,887
Gross profit	$	34,110		$	23,785		$	44,387

Aftermarket Parts and Services
	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022			2022
Rental revenue	$	4,504		$	3,584		$	4,400
Parts and services revenue		32,585			30,145			33,149
Total revenue		37,089			33,729			37,549
Cost of revenue		26,987			24,950			30,470
Depreciation of rental equipment		818			998			967
Total cost of revenue		27,805			25,948			31,437
Gross profit	$	9,284		$	7,781		$	6,112

Summary Combined Operating Metrics
	Three Months Ended March 31,								Three Months Ended December 31,
(in $000s)		2023				2022				2022
Ending OEC(a) (as of period end)	$	1,457,870			$	1,364,660			$	1,455,820
Average OEC on rent(b)	$	1,214,300			$	1,119,100			$	1,267,600
Fleet utilization(c)		83.6	%			82.5	%			86.3	%
OEC on rent yield(d)		39.6	%			39.1	%			39.5	%
Sales order backlog(e) (as of period end)	$	855,049			$	586,368			$	754,142

(a)		Ending OEC — original equipment cost (“OEC”) is the original equipment cost of units at a given point in time.
(b)		Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period.
(c)		Fleet utilization — total number of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC.
(d)		OEC on rent yield (“ORY”) — a measure of return realized by our rental fleet during a 12-month period. ORY is calculated as rental revenue (excluding freight recovery and ancillary fees) during the stated period divided by the Average OEC on rent for the same period. For period less than 12 months, the ORY is adjusted to an annualized basis.
(e)		Sales order backlog — purchase orders received for customized and stock equipment. Sales order backlog should not be considered an accurate measure of future net sales.

Management Commentary

Total revenue in the first quarter of 2023 was characterized by continued strong customer demand for both rental and new equipment across our end markets. First quarter 2023 rental revenue increased 8.4% to $118.3 million, compared to $109.1 million in the first quarter of 2022, reflecting the continued expansion of our rental fleet, higher utilization and sustained pricing gains. Equipment sales increased 32.6% in the first quarter of 2023 to $301.3 million, compared to $227.2 million in the first quarter of 2022, reflecting continuing improvements in the supply chain and our ability to replenish inventory. Parts sales and service revenue increased 8.1% to $32.6 million, compared to $30.1 million in the first quarter of 2022. On a sequential quarter basis, total first quarter 2023 revenue declined $34.6 million, or 7.1%, primarily due to the lower level of equipment sales. Historically, the fourth fiscal quarter is our seasonally strongest quarter.

In our ERS segment, rental revenue in the first quarter of 2023 was $113.8 million compared to $105.6 million in the first quarter of 2022, a 7.8% increase. Fleet utilization continued to be strong at 83.6% compared to 82.5% in the first quarter of 2022. Total segment gross profit in the first quarter of 2023 was $66.3 million, an increase of 25.2% compared to $52.9 million in the first quarter of 2022. Adjusted Gross Profit in the segment, was $105.8 million in the first quarter of 2023, compared to $96.9 million in the first quarter of 2022, representing 9.2% year-over-year growth. Rental Gross Profit improved to $84.7 million in the first quarter of 2023 compared to $80.8 million in the first quarter of 2022, a 4.9% increase. On a sequential quarter basis, total segment first quarter 2023 revenue increased a modest $4.0 million, or 2.0%, driven by a 17.4% increase in rental equipment sales and offset by the typical seasonal decline in rental demand related to our utility end-markets. Despite the decline, we experienced favorable pricing, with OEC on-rent yield increasing to 39.6% in the first quarter of 2023, up slightly from 39.5% in the fourth quarter of 2022.

Revenue in our TES segment increased 24.6% to $209.2 million in the first quarter of 2023, from $167.8 million in the first quarter of 2022, primarily as a result of continued supply chain improvements and sustained strong customer demand. Gross profit improved by 43.4% to $34.1 million in the first quarter of 2023 compared to $23.8 million in the first quarter of 2022. Gross profit margin for the quarter was 16.3%, up significantly from 14.2% in the first quarter of 2022 and flat to the last quarter. On a sequential quarter basis, total first quarter 2023 revenue declined $38.1 million, or 15.4%, primarily as a result of higher level of product deliveries to customers that occurred at the end of 2022 from the late-year improvements in supply chain bottlenecking as well as the fact that the fourth quarter is seasonally our strongest fiscal quarter. TES continued to see strength in demand as sales order backlog grew to $855.0 million, a 13.4% increase compared to the end of 2022.

APS segment revenue increased 10.0% in the first quarter of 2023 to $37.1 million, compared to $33.7 million in the first quarter of 2022. Growth in demand for parts, tools and accessories sales was augmented by increased tools and accessories rentals in the Parts, Tools and Accessories (“PTA”) division. Gross profit margin in the segment improved to 25.0% in the first quarter of 2023 from 23.1% in the first quarter of 2022. On a sequential quarter basis, total segment first quarter 2023 revenue decreased a modest 1.2%, with a decline in parts and services revenue offset by an increase in tools and accessories rental revenue of 2.4%.

Net income was $13.8 million in the first quarter of 2023 compared to a net loss of $3.3 million for the first quarter of 2022. The improvement in net income (loss) is primarily as a result of the improvement in gross profit detailed above, partially offset by higher interest expense on variable-rate debt and variable-rate floorplan liabilities. On a sequential quarter basis, total first quarter 2023 net income declined $17.1 million for the reasons mentioned above.

Adjusted EBITDA for the first quarter of 2023 was $105.2 million, an increase of 15.0%, compared to $91.5 million for the first quarter of 2022. The increase in Adjusted EBITDA was largely driven by growth in rental revenue and new equipment sales, both of which contributed to margin expansion. The seasonal factors mentioned above contributed to the decline in Adjusted EBITDA by $19.3 million on a sequential quarter basis.

As of March 31, 2023, CTOS had cash and cash equivalents of $32.2 million, current and long-term debt of $1,399.3 million (net of deferred financing fees of $26.6 million), and current and long-term finance lease obligations of $4.0 million. Our Net Debt was $1,397.6 million as of March 31, 2023. Our Net Leverage Ratio, which is net debt divided by Adjusted EBITDA, was 3.4x as of March 31, 2023. Availability under the senior secured credit facility was $284.5 million as of March 31, 2023. For the three months ended March 31, 2023, net OEC increased modestly as our fleet additions were offset by our focus on selling older equipment from our rental fleet at current advantageous residual values. During the three months ended March 31, 2023, CTOS purchased $1.1 million of its common stock under the previously announced stock repurchase program.

2023 Outlook

We are updating our full-year revenue and Adjusted EBITDA guidance for 2023 at this time. We believe ERS will continue to benefit from strong demand from our rental customers as well as for purchases of rental fleet units, particularly older equipment, in 2023. We also expect to further grow our rental fleet (based on net OEC) by mid- to high-single digits. Regarding TES, supply chain improvements, improved inventory levels, and record backlog levels should improve our ability to produce and deliver an even greater number of units in 2023.

2023 Consolidated Outlook
Revenue	$1,635 million	—	$1,755 million
Adjusted EBITDA1	$420 million	—	$440 million
2023 Revenue Outlook by Segment
ERS	$670 million	—	$710 million
TES	$820 million	—	$890 million
APS	$145 million	—	$155 million

1 – CTOS is not able to present a quantitative reconciliation of its forward-looking Adjusted EBITDA for the year ending December 31, 2023 to its most directly comparable GAAP financial measure, net income, because management cannot reliably present a quantitative reconciliation of its forward-looking Adjusted EBITDA for the year ending December 31, 2023 to its most directly comparable GAAP financial measure, net income, because management cannot reliably forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, customer buyout requests on rentals with rental purchase options, income tax expense and changes in fair value of derivative financial instruments. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.

CONFERENCE CALL INFORMATION

The Company has scheduled a conference call at 5:00 P.M. Eastern Time on May 9, 2023, to discuss its first quarter 2023 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1-877-425-9470 or 1-201-389-0878. A replay of the call will be available until midnight, Tuesday, May 16, 2023, by dialing 1-844-512-2921 or 1-412-317-6671 and entering passcode 13737702.

ABOUT CTOS

CTOS is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America, with a differentiated “one-stop-shop” business model. CTOS offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets, including electric lines, telecommunications networks and rail systems. The Company’s coast-to-coast rental fleet of more than 10,000 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, Hi-rail equipment, repair parts, tools and accessories. For more information, please visit investors.customtruck.com.

FORWARD-LOOKING STATEMENTS

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that the Company’s management has made in light of its experience in the industry, as well as the Company’s perceptions of historical trends, current conditions, expected future developments and other factors the Company believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect the Company’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. Important factors, among others, that may affect actual results or outcomes include: increases in labor costs, our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner; our sales order backlog may not be indicative of the level of our future revenues; increases in unionization rate in our workforce; our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries; our inability to attract and retain highly skilled personnel and our inability to retain our senior management; material disruptions to our operation and manufacturing locations as a result of public health concerns, equipment failures, natural disasters, work stoppages, power outages or other reasons; potential impairment charges; any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory; aging or obsolescence of our existing equipment, and the fluctuations of market value thereof; disruptions in our supply chain; our business may be impacted by government spending; we may experience losses in excess of our recorded reserves for receivables; unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required; increases in price of fuel or freight; regulatory technological advancement, or other changes in our core end-markets may affect our customer’s spending; difficulty in integrating acquired businesses and fully realizing the anticipated benefits and cost savings of the acquired businesses, as well as additional transaction and transition costs that we will continue to incur following acquisitions; material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements; the interest of our majority stockholder, which may not be consistent with the other stockholders; our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default; our inability to generate cash, which could lead to a default; significant operating and financial restrictions imposed by our debt agreements; changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows; the phase-out of the London Interbank Offered Rate (“LIBOR”) and uncertainty as to its replacement; disruptions in our information technology systems or a compromise of our system security, limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, and implement strategic initiatives; we are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect cost, manner or feasibility of doing business; we are subject to a series of risks related to climate change; and increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives. For a more complete description of these and other possible risks and uncertainties, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and its subsequent reports filed with the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.

CUSTOM TRUCK ONE SOURCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
	Three Months Ended March 31,								Three Months Ended December 31,
(in $000s except per share data)		2023				2022				2022
Revenue
Rental revenue	$	118,288			$	109,145			$	127,829
Equipment sales		301,290				227,186				325,746
Parts sales and services		32,585				30,145				33,149
Total revenue		452,163				366,476				486,724
Cost of Revenue
Cost of rental revenue		29,899				25,793				27,481
Depreciation of rental equipment		40,330				44,964				40,803
Cost of equipment sales		246,125				187,278				260,391
Cost of parts sales and services		26,148				23,948				29,724
Total cost of revenue		342,502				281,983				358,399
Gross Profit		109,661				84,493				128,325
Operating Expenses
Selling, general and administrative expenses		56,991				53,655				58,599
Amortization		6,672				13,335				6,940
Non-rental depreciation		2,650				3,047				2,112
Transaction expenses and other		3,460				4,648				9,026
Total operating expenses		69,773				74,685				76,677
Operating Income (Loss)		39,888				9,808				51,648
Other Expense
Interest expense, net		29,176				19,156				26,582
Financing and other expense (income)		(3,951	)			(9,080	)			(6,425	)
Total other expense		25,225				10,076				20,157
Income (Loss) Before Income Taxes		14,663				(268	)			31,491
Income Tax Expense (Benefit)		863				3,005				554
Net Income (Loss)	$	13,800			$	(3,273	)		$	30,937
Net Income (Loss) Per Share
Basic	$	0.06			$	(0.01	)		$	0.13
Diluted	$	0.06			$	(0.01	)		$	0.13

CUSTOM TRUCK ONE SOURCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in $000s)	March 31, 2023				December 31, 2022
Assets
Current Assets
Cash and cash equivalents	$	32,218			$	14,360
Accounts receivable, net		167,640				193,106
Financing receivables, net		46,122				38,271
Inventory		714,354				596,724
Prepaid expenses and other		29,462				25,784
Total current assets		989,796				868,245
Property and equipment, net		128,839				121,956
Rental equipment, net		894,557				883,674
Goodwill		703,848				703,827
Intangible assets, net		297,486				304,132
Operating lease assets		28,509				29,434
Other assets		26,348				26,944
Total Assets	$	3,069,383			$	2,938,212
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	126,041			$	87,255
Accrued expenses		70,113				68,784
Deferred revenue and customer deposits		32,360				34,671
Floor plan payables – trade		159,029				136,634
Floor plan payables – non-trade		312,470				293,536
Operating lease liabilities – current		5,220				5,262
Current maturities of long-term debt		5,243				6,940
Current portion of finance lease obligations		852				1,796
Total current liabilities		711,328				634,878
Long-term debt, net		1,394,039				1,354,766
Finance leases		3,142				3,206
Operating lease liabilities – noncurrent		23,932				24,818
Deferred income taxes		29,615				29,086
Derivative, warrants and other liabilities		2,490				3,015
Total long-term liabilities		1,453,218				1,414,891
Commitments and contingencies
Stockholders’ Equity
Common stock		25				25
Treasury stock, at cost		(16,736	)			(15,537	)
Additional paid-in capital		1,524,938				1,521,487
Accumulated other comprehensive loss		(8,605	)			(8,947	)
Accumulated deficit		(594,785	)			(608,585	)
Total stockholders’ equity		904,837				888,443
Total Liabilities and Stockholders’ Equity	$	3,069,383			$	2,938,212

CUSTOM TRUCK ONE SOURCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	Three Months Ended March 31,
(in $000s)		2023				2022
Operating Activities
Net income (loss)	$	13,800			$	(3,273	)
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
Depreciation and amortization		52,091				62,500
Amortization of debt issuance costs		2,407				1,326
Provision for losses on accounts receivable		1,872				2,811
Share-based compensation		3,147				3,364
Gain on sales and disposals of rental equipment		(21,320	)			(5,420	)
Change in fair value of derivative and warrants		(525	)			(5,767	)
Deferred tax expense		514				2,849
Changes in assets and liabilities:
Accounts and financing receivables		17,161				(33,520	)
Inventories		(117,580	)			(51,384	)
Prepaids, operating leases and other		(4,987	)			(4,637	)
Accounts payable		35,916				29,869
Accrued expenses and other liabilities		1,328				(5,343	)
Floor plan payables – trade, net		22,395				(13,031	)
Customer deposits and deferred revenue		(2,313	)			(10,115	)
Net cash flow from operating activities		3,906				(29,771	)
Investing Activities
Acquisition of business, net of cash acquired		—				(50,513	)
Purchases of rental equipment		(109,145	)			(45,945	)
Proceeds from sales and disposals of rental equipment		78,626				49,961
Purchase of non-rental property and cloud computing arrangements		(9,429	)			(1,961	)
Net cash flow from investing activities		(39,948	)			(48,458	)
Financing Activities
Proceeds from debt		13,537				75
Share-based payments		228				(6	)
Borrowings under revolving credit facilities		35,000				50,000
Repayments under revolving credit facilities		(10,331	)			(34,844	)
Repayments of notes payable		(2,020	)			(1,872	)
Finance lease payments		(377	)			(2,275	)
Repurchase of common stock		(1,122	)			—
Acquisition of inventory through floor plan payables – non-trade		187,381				140,126
Repayment of floor plan payables – non-trade		(168,447	)			(85,066	)
Net cash flow from financing activities		53,849				66,138
Effect of exchange rate changes on cash and cash equivalents		51				—
Net Change in Cash and Cash Equivalents		17,858				(12,091	)
Cash and Cash Equivalents at Beginning of Period		14,360				35,902
Cash and Cash Equivalents at End of Period	$	32,218			$	23,811

	Three Months Ended March 31,
(in $000s)		2023			2022
Supplemental Cash Flow Information
Interest paid	$	13,130		$	4,865
Income taxes paid		10			—
Non-Cash Investing and Financing Activities
Rental equipment and property and equipment purchases in accounts payable		2,938			—
Rental equipment sales in accounts receivable		621			23,551

CUSTOM TRUCK ONE SOURCE, INC.

NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles (“GAAP”). We utilize these financial measures to manage our business on a day-to-day basis and some of these measures are commonly used in our industry to evaluate performance. We believe these non-GAAP measures provide investors expanded insight to assess performance, in addition to the standard GAAP-based financial measures. The press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described herein, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial performance measure that we use to monitor our results of operations, to measure performance against debt covenants and performance relative to competitors. We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of operating performance, without regard to financing methods or capital structures. We exclude the items identified in the reconciliations of net income (loss) to Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, including the method by which the assets were acquired, and capital structures. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that results will be unaffected by the items excluded from Adjusted EBITDA. Our computation of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

We define Adjusted EBITDA as net income or loss before interest expense, income taxes, depreciation and amortization, share-based compensation, and other items that we do not view as indicative of ongoing performance. Our Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of inventory and used equipment sold. When inventory or equipment is purchased in connection with a business combination, the assets are revalued to their current fair values for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair values of the assets as of the acquisition date, with amortization or depreciation recorded thereafter following applicable accounting policies; however, this may not be indicative of the actual cost to acquire inventory or new equipment that is added to product inventory or the rental fleets apart from a business acquisition. Additionally, the pricing of rental contracts and equipment sales prices for equipment is based on OEC, and we measure a rate of return from rentals and sales using OEC. We also include an adjustment to remove the impact of accounting for certain of our rental contracts with customers containing a rental purchase option that are accounted for under GAAP as a sales-type lease. We include this adjustment because we believe continuing to reflect the transactions as an operating lease better reflects the economics of the transactions given our large portfolio of rental contracts. These, and other, adjustments to GAAP net income or loss that are applied to derive Adjusted EBITDA are specified by our senior secured credit agreements.

Adjusted Gross Profit and Rental Gross Profit. We present total gross profit excluding rental equipment depreciation (“Adjusted Gross Profit”) as a non-GAAP financial performance measure. We also present Rental Gross Profit that excludes rental equipment depreciation as a non-GAAP financial measure. These measures differ from the GAAP definition of gross profit, as we do not include the impact of depreciation expense, which represents non-cash expense. We use these measures to evaluate operating margins and the effectiveness of the cost of our rental fleet.

Net Debt. We present the non-GAAP financial measure “Net Debt,” which is total debt (the most comparable GAAP measure, calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents. We believe this non-GAAP measure is useful to investors to evaluate our financial position.

Net Leverage Ratio. Net Leverage Ratio is a non-GAAP financial performance measure used by management and we believe it provides useful information to investors because it is an important liquidity measure that reflects our ability to service debt. We define net leverage ratio as net debt divided by Adjusted EBITDA.

CUSTOM TRUCK ONE SOURCE, INC. ADJUSTED EBITDA RECONCILIATION (unaudited)
	Three Months Ended March 31,								Three Months Ended December 31,
(in $000s)		2023				2022				2022
Net income (loss)	$	13,800			$	(3,273	)		$	30,937
Interest expense		22,363				17,445				21,432
Income tax expense (benefit)		863				3,005				554
Depreciation and amortization		52,090				62,500				52,362
EBITDA		89,116				79,677				105,285
Adjustments:
Non-cash purchase accounting impact (1)		7,199				9,026				8,268
Transaction and integration costs (2)		3,460				4,648				9,026
Sales-type lease adjustment (3)		2,803				529				1,411
Share-based payments (4)		3,147				3,364				2,771
Change in fair value of derivative and warrants (5)		(525	)			(5,767	)			(2,277	)
Adjusted EBITDA	$	105,200			$	91,477			$	124,484

Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and further adjusted for non-cash purchase accounting impact, transaction and process improvement costs, including business integration expenses, share-based payments, the change in fair value of derivative instruments, sales-type lease adjustment, and other special charges that are not expected to recur. This non-GAAP measure is subject to certain limitations.

(1)		Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment and inventory acquired received a purchase accounting step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to our credit agreement.
(2)		Represents transaction and process improvement costs related to acquisitions of businesses, including post-acquisition integration costs, which are recognized within operating expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses. These expenses are presented as adjustments to net income (loss) pursuant to our ABL Credit Agreement.
(3)		Represents the adjustment for the impact of sales-type lease accounting for certain leases containing rental purchase options (or “RPOs”), as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. This adjustment is made pursuant to our credit agreement.

	Three Months Ended March 31,								Three Months Ended December 31,
(in $000s)		2023				2022				2022
Equipment sales	$	(24,172	)		$	(12,237	)		$	14,518
Cost of equipment sales		23,225				10,370				14,509
Gross profit		(947	)			(1,867	)			9
Interest income		(3,428	)			(2,888	)			4,303
Rentals invoiced		7,178				5,284				5,723
Sales-type lease adjustment	$	2,803			$	529			$	1,411

(4)		Represents non-cash share-based compensation expense associated with the issuance of stock options and restricted stock units.
(5)		Represents the credit to earnings for the change in fair value of the liability for private warrants.

Reconciliation of Adjusted Gross Profit (unaudited)
The following table presents the reconciliation of Adjusted Gross Profit:
	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022			2022
Revenue
Rental revenue	$	118,288		$	109,145		$	127,829
Equipment sales		301,290			227,186			325,746
Parts sales and services		32,585			30,145			33,149
Total revenue		452,163			366,476			486,724
Cost of Revenue
Cost of rental revenue		29,899			25,793			27,481
Depreciation of rental equipment		40,330			44,964			40,803
Cost of equipment sales		246,125			187,278			260,391
Cost of parts sales and services		26,148			23,948			29,724
Total cost of revenue		342,502			281,983			358,399
Gross Profit		109,661			84,493			128,325
Add: depreciation of rental equipment		40,330			44,964			40,803
Adjusted Gross Profit	$	149,991		$	129,457		$	169,128

Reconciliation of ERS Segment Adjusted Gross Profit and Rental Gross Profit (unaudited)
The following table presents the reconciliation of ERS segment Adjusted Gross Profit:
	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022			2022
Revenue
Rental revenue	$	113,784		$	105,561		$	123,429
Equipment sales		92,136			59,353			78,472
Total revenue		205,920			164,914			201,901
Cost of Revenue
Cost of rental revenue		29,060			24,791			26,735
Cost of equipment sales		71,081			43,230			57,504
Depreciation of rental equipment		39,512			43,966			39,836
Total cost of revenue		139,653			111,987			124,075
Gross profit		66,267			52,927			77,826
Add: depreciation of rental equipment		39,512			43,966			39,836
Adjusted Gross Profit	$	105,779		$	96,893		$	117,662

The following table presents the reconciliation of ERS Rental Gross Profit:

	Three Months Ended March 31,						Three Months Ended December 31,
(in $000s)		2023			2022			2022
Rental revenue	$	113,784		$	105,561		$	123,429
Cost of rental revenue		29,060			24,791			26,735
Rental Gross Profit	$	84,724		$	80,770		$	96,694

Reconciliation of Net Debt (unaudited)
The following table presents the reconciliation of Net Debt:
(in $000s)	March 31, 2023
Current maturities of long-term debt	$	5,243
Current portion of finance lease obligations		852
Long-term debt, net		1,394,039
Finance leases		3,142
Deferred financing fees		26,559
Less: cash and cash equivalents		(32,218	)
Net Debt	$	1,397,617

Reconciliation of Net Leverage Ratio (unaudited)
The following table presents the reconciliation of the Net Leverage Ratio:
(in $000s)	Twelve Months Ended March 31, 2023
Net Debt (as of period end)	$	1,397,617
Divided by: Adjusted EBITDA	$	406,701
Net Leverage Ratio		3.44

 

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INVESTOR CONTACT

Brian Perman, Vice President, Investor Relations

(844) 403-6138

[email protected]

KEYWORDS: Missouri United States North America

INDUSTRY KEYWORDS: Rail Technology Utilities Transport Telecommunications Energy

MEDIA:

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Rocket Lab Announces First Quarter 2023 Financial Results, Issues Guidance For Continued Growth In Second Quarter 2023

LONG BEACH, Calif.–(BUSINESS WIRE)–
Rocket Lab USA, Inc. (Nasdaq: RKLB) (“Rocket Lab” or “the Company”), a global leader in launch services and space systems, today shared the financial results for fiscal first quarter 2023, ended March 31, 2023.

Rocket Lab founder and CEO, Peter Beck, said: “Rocket Lab started the year strong with three successful Electron missions in the first quarter across our global launch facilities and to date, remains the only commercial U.S. small launch vehicle to successfully deliver satellites to orbit in 2023. At a time when we’re starting to see a contraction of available small rockets, we’re also seeing an increase in launch bookings for Electron launches in 2023 and beyond from new and returning customers across government and commercial sectors. The development of our larger rocket Neutron is continuing at pace with launch and testing facilities expanded, engine hardware being printed at our headquarters in Long Beach, and vehicle hardware in production for upcoming structural tests throughout the year that we expect will keep the program on track. Space Systems also continues its strong performance, with the majority of our products supporting customer missions across several launches in the quarter, and major program milestones reached on Photon spacecraft build programs for government and commercial customers.”

First Quarter 2023 Business Highlights:

• Delivered financial results that exceeded the high end of prior guidance for revenue and gross margin.

• Launched three successful Electron missions in the first quarter for commercial constellation operators HawkEye 360, Capella Space, and BlackSky.

• Successfully completed the Company’s first launch from its U.S. launch site, Rocket Lab Launch Complex 2, at the Virginia Spaceport Authority’s Mid-Atlantic Regional Spaceport on January 24, 2023. The mission deployed three satellites for radio frequency geospatial analytics provider HawkEye 360.

• Successfully completed the Company’s fastest turnaround between launches to date – just seven days between its 34^th Electron launch, “Stronger Together”, from Rocket Lab Launch Complex 2 in Virginia on March 16, 2023, and its 35^th Electron launch, “The Beat Goes On”, from Rocket Lab Launch Complex 1 in New Zealand on March 24, 2023.

• Rocket Lab remains the only U.S. commercial small launch provider to successfully deliver satellites to orbit in 2023.

• Secured a multi-mission contract with Capella Space to launch four more dedicated launches on Electron in 2023.

• Achieved programmatic milestones for the Company’s two Photon spacecraft to support NASA’s ESCAPADE mission to Mars, and for the Photon spacecraft for a Varda Space Industries’ mission to manufacture high-value products in zero gravity. Both Photon programs include Rocket Lab star trackers, reaction wheels, solar panels, flight software, and radios – demonstrating the value and strength of the Company’s vertical integration and in-house supply chain.

Business Highlights Since March 31, 2023:

• Successfully deployed two satellites to space for NASA’s TROPICS mission on the first of two dedicated launches on Electron for the constellation scheduled in May 2023.

• Secured another NASA mission to Electron’s 2023 launch manifest with its Starling mission. Rocket Lab was selected by NASA to launch the Starling mission on an expedited timeline due to long delays and uncertainty with the mission’s original launch provider.

• Signed multiple new launch contracts on Electron for 2023 for undisclosed commercial satellite customers previously manifested on another small launch vehicle, demonstrating Electron’s strong position as a reliable and dependable ride to orbit for small satellite operators.

• Introduced Rocket Lab’s new HASTE launch vehicle, a suborbital testbed launch vehicle derived from the Company’s Electron rocket to provide reliable, high-cadence flight test opportunities to support the development of advanced hypersonic systems technology.

• Announced that the Company will fly a pre-launched 3D printed Rutherford engine on an upcoming mission in Q3’23, a major step in evolving the Electron launch vehicle into a reusable rocket.

Second Quarter 2023 Guidance

For the second quarter of 2023, Rocket Lab expects:

• Revenue between $60 million and $63 million.

• Launch Services revenue of approximately $23 million.

• Space Systems revenue of between $37 million to $40 million.

• GAAP Gross Margins between 14% to 16%.

• Non-GAAP Gross Margins between 22% to 24%.

• GAAP Operating Expenses between $55 million to $57 million.

• Non-GAAP Operating Expenses between $41 million to $43 million.

• Expected Interest Expense (Income), net $1 million.

• Adjusted EBITDA loss of $22 million to $24 million.

• Basic Shares Outstanding of 480 million.

See “Use of Non-GAAP Financial Measures” below for an explanation of our use of Non-GAAPfinancial measures, and the reconciliation of historical Non-GAAP measures to the comparable GAAP measures in the tables attached to this press release.We have not provided a reconciliation for the forward-looking Non-GAAP Gross Margin, Non-GAAP Operating Expenses or Adjusted EBITDA expectations for Q2 2023 described above because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount and timing of adjustments that are used to calculate these non-GAAP financial measures, particularly related to stock-based compensation and its related tax effects. Stock-based compensation is currently expected to range from $14 million to $15 million in Q2 2023.

Conference Call Information

Rocket Lab will host a conference call for investors at 1:30 p.m. PT (4:30 p.m. ET) today to discuss these business highlights and financial results for our first quarter, to provide our outlook for the second quarter, and other updates.

The live webcast and a replay of the webcast will be available on Rocket Lab’s Investor Relations website: https://investors.rocketlabusa.com/events-and-presentations/events

About Rocket Lab

Founded in 2006, Rocket Lab is an end-to-end space company with an established track record of mission success. We deliver reliable launch services, satellite manufacture, spacecraft components, and on-orbit management solutions that make it faster, easier and more affordable to access space. Headquartered in Long Beach, California, Rocket Lab designs and manufactures the Electron small orbital launch vehicle and the Photon satellite platform and is developing the Neutron launch vehicle for large spacecraft and constellation deployment. From its first orbital launch in January 2018 to date, Rocket Lab’s Electron launch vehicle has become the second most frequently launched U.S. rocket annually and has delivered 161 satellites to orbit for private and public sector organizations, enabling operations in national security, scientific research, space debris mitigation, Earth observation, climate monitoring, and communications. Rocket Lab’s Photon spacecraft platform has been selected to support NASA missions to the Moon and Mars, as well as the first private commercial mission to Venus. Rocket Lab has three launch pads at two launch sites, including two launch pads at a private orbital launch site located in New Zealand and a third launch site in Virginia, USA. To learn more, visit www.rocketlabusa.com.

+ FORWARD LOOKING STATEMENTS

This press release may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in this press release, including statements regarding our expectations of financial results for the second quarter of 2023, strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. Words such as, but not limited to, “anticipate,” “aim,” “believe,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “suggest,” “strategy,” “target,” “will,” “would,” and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are based on Rocket Lab’s current expectations and beliefs concerning future developments and their potential effects. These forward-looking statements involve a number of risks, uncertainties (many of which are beyond Rocket Lab’s control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release, including risks related to delays and disruptions in expansion efforts; our dependence on a limited number of customers; the harsh and unpredictable environment of space in which our products operate which could adversely affect our launch vehicle and spacecraft; increased congestion from the proliferation of low Earth orbit constellations which could materially increase the risk of potential collision with space debris or another spacecraft and limit or impair our launch flexibility and/or access to our own orbital slots; increased competition in our industry due in part to rapid technological development and decreasing costs; technological change in our industry which we may not be able to keep up with or which may render our services uncompetitive; average selling price trends; failure of our launch vehicles, spacecraft and components to operate as intended either due to our error in design in production or through no fault of our own; launch schedule disruptions; supply chain disruptions, product delays or failures; design and engineering flaws; launch failures; natural disasters and epidemics or pandemics; changes in governmental regulations including with respect to trade and export restrictions, or in the status of our regulatory approvals or applications; or other events that force us to cancel or reschedule launches, including customer contractual rescheduling and termination rights; risks that acquisitions may not be completed on the anticipated time frame or at all or do not achieve the anticipated benefits and results; and the other risks detailed from time to time in Rocket Lab’s filings with the Securities and Exchange Commission (the “SEC”), including under the heading “Risk Factors” in Rocket Lab’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 7, 2023, and elsewhere. There can be no assurance that the future developments affecting Rocket Lab will be those that we have anticipated. Except as required by law, Rocket Lab is not undertaking any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Notes to Editor: All dollar amounts in this press release are expressed in U.S. dollars, unless otherwise stated.

+ USE OF NON-GAAP FINANCIAL MEASURES

We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (“GAAP”) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Reconciliation of the non-GAAP financial information to the corresponding GAAP measures for the historical periods disclosed are included at the end of the tables in this press release. We have not provided a reconciliation for forward-looking non-GAAP financial measures because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount and timing of adjustments that are used to calculate these non-GAAP financial measures, particularly related to stock-based compensation and its related tax effects. The following definitions are provided:

+ ADJUSTED EDITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Such items are excluded from net income or loss to determine Adjusted EBITDA. Management believes this measure provides investors meaningful insight into results from ongoing operations.

+ OTHER NON-GAAP FINANCIAL MEASURES

Non-GAAP gross profit, research and development, net, selling, general and administrative, operating expenses, operating loss and total other income (expense), net, further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Such items are excluded from the applicable GAAP financial measure. Management believes these non-GAAP measures provide investors meaningful insight into results from ongoing operations.

ROCKET LAB U.S.A., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (unaudited; in thousands, except share and per share data)
		Three Months Ended March 31,
		2023				2022
Revenues		$	54,895			$	40,703
Cost of revenues			48,538				36,968
Gross profit			6,357				3,735
Operating expenses:
Research and development, net			23,905				13,477
Selling, general and administrative			28,469				23,078
Total operating expenses			52,374				36,555
Operating loss			(46,017	)			(32,820	)
Other income (expense):
Interest expense, net			(685	)			(2,989	)
Gain (loss) on foreign exchange			134				(20	)
Change in fair value of liability classified warrants			—				13,482
Other income, net			1,477				26
Total other income, net			926				10,499
Loss before income taxes			(45,091	)			(22,321	)
Provision for income taxes			(526	)			(4,388	)
Net loss		$	(45,617	)		$	(26,709	)
Net loss per share attributable to Rocket Lab USA, Inc.:
Basic and diluted		$	(0.10	)		$	(0.06	)
Weighted-average common shares outstanding:
Basic and diluted			476,199,710				456,495,288

ROCKET LAB U.S.A., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2023 AND DECEMBER 31, 2022 (unaudited; in thousands, except share and per share values)
		March 31, 2023
		(unaudited)				December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	208,365			$	242,515
Marketable securities, current			190,357				229,276
Accounts receivable, net			50,690				36,572
Contract assets			12,558				9,451
Inventories			98,453				92,279
Prepaids and other current assets			63,203				52,201
Assets held for sale			11,630				—
Total current assets			635,256				662,294
Non-current assets:
Property, plant and equipment, net			95,981				101,514
Intangible assets, net			76,495				79,692
Goodwill			71,020				71,020
Right-of-use assets – operating leases			34,839				35,239
Right-of-use assets – finance leases			15,458				15,614
Marketable securities, non-current			47,920				9,193
Restricted cash			3,337				3,356
Deferred income tax assets, net			3,500				3,898
Other non-current assets			7,102				7,303
Total assets		$	990,908			$	989,123
Liabilities and Stockholders’ Equity
Current liabilities:
Trade payables		$	22,852			$	12,084
Accrued expenses			8,678				8,723
Employee benefits payable			12,333				8,634
Contract liabilities			125,635				108,344
Current installments of long-term borrowings			2,934				2,906
Other current liabilities			24,863				22,249
Total current liabilities			197,295				162,940
Non-current liabilities:
Long-term borrowings, excluding current installments			100,724				100,043
Non-current operating lease liabilities			33,870				34,266
Non-current finance lease liabilities			15,478				15,568
Deferred tax liabilities			170				95
Other non-current liabilities			3,353				3,005
Total liabilities			350,890				315,917
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity:
Common stock, $0.0001 par value; authorized shares: 2,500,000,000; issued and outstanding shares: 478,153,075 and 475,356,517 at March 31, 2023 and December 31, 2022, respectively			48				48
Additional paid-in capital			1,125,976				1,112,977
Accumulated deficit			(486,572	)			(440,955	)
Accumulated other comprehensive income			566				1,136
Total stockholders’ equity			640,018				673,206
Total liabilities and stockholders’ equity		$	990,908			$	989,123

ROCKET LAB U.S.A., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (unaudited; in thousands)
		For the Three Months Ended March 31,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(45,617	)		$	(26,709	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			7,033				6,088
Stock-based compensation expense			14,036				11,958
Loss on disposal of assets			5				5
Amortization of debt issuance costs and discount			709				690
Noncash lease expense			988				731
Noncash income associated with liability-classified warrants			—				(13,482	)
Change in the fair value of contingent consideration			300				2,500
Accretion of marketable securities purchased at a discount			(1,147	)			—
Deferred income taxes			420				(1,558	)
Changes in operating assets and liabilities:
Accounts receivable, net			(14,116	)			(5,644	)
Contract assets			(3,109	)			(3,668	)
Inventories			(6,712	)			(9,132	)
Prepaids and other current assets			(10,035	)			(1,071	)
Other non-current assets			103				772
Trade payables			11,305				805
Accrued expenses			403				(3,245	)
Employee benefits payables			1,294				475
Contract liabilities			17,292				10,652
Other current liabilities			2,305				4,266
Non-current lease liabilities			(891	)			(783	)
Other non-current liabilities			49				11
Net cash used in operating activities			(25,385	)			(26,339	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and software			(12,674	)			(6,242	)
Cash paid for acquisitions, net of acquired cash and restricted cash			—				(65,588	)
Purchases of marketable securities			(76,394	)			—
Maturities of marketable securities			78,099				—
Net cash used in investing activities			(10,969	)			(71,830	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and public warrants			771				1,379
Proceeds from Employee Stock Purchase Plan			1,202				1,025
Proceeds from sale of employees restricted stock units to cover taxes			3,078				20,841
Minimum tax withholding paid on behalf of employees for restricted stock units			(1,915	)			(8,756	)
Payment of contingent consideration			(1,000	)			—
Finance lease principal payments			(78	)			(45	)
Net cash provided by financing activities			2,058				14,444
Effect of exchange rate changes on cash and cash equivalents			127				(574	)
Net decrease in cash and cash equivalents and restricted cash			(34,169	)			(84,299	)
Cash and cash equivalents, and restricted cash, beginning of period			245,871				692,075
Cash and cash equivalents, and restricted cash, end of period		$	211,702			$	607,776

ROCKET LAB U.S.A., INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (unaudited; in thousands)
The tables provided below reconcile the non-GAAP financial measures Adjusted EBITDA, Non-GAAP gross profit, Non-GAAP research and development, net, Non-GAAP selling, general and administrative, Non-GAAP operating expenses, Non-GAAP operating loss and Non-GAAP total other income (expense), net with the most directly comparable GAAP financial measures. See above for additional information on the use of these non-GAAP financial measures.
		Three Months Ended March 31,
		2023				2022
NET LOSS		$	(45,617	)		$	(26,709	)
Depreciation			3,713				3,193
Amortization			3,320				2,895
Stock-based compensation expense			14,036				11,958
Transaction costs			165				375
Interest expense, net			685				2,989
Change in fair value of liability classified warrants			—				(13,482	)
Change in fair value of contingent consideration			300				2,500
Performance reserve escrow			1,838				1,895
Amortization of inventory step-up			—				2,002
Provision for income taxes			526				4,388
(Gain) loss on foreign exchange			(134	)			20
Accretion of marketable securities purchased at a discount			(1,165	)			—
Loss on disposal of assets			5				5
Employee retention credit			(3,841	)			—
ADJUSTED EBITDA		$	(26,169	)		$	(7,971	)

		Three Months Ended March 31,
		2023				2022
GAAP Gross profit		$	6,357			$	3,735
Stock-based compensation			3,813				3,335
Amortization of purchased intangibles			1,710				565
Amortization of inventory step-up			—				2,002
Performance reserve escrow			57				114
Employee retention credit			(2,130	)			—
Non-GAAP Gross profit		$	9,807			$	9,751
Non-GAAP Gross margin			17.9	%			24.0	%
GAAP Research and development, net		$	23,905			$	13,477
Stock-based compensation			(5,022	)			(5,026	)
Amortization of purchased intangibles			(9	)			(1,632	)
Employee retention credit			631				—
Non-GAAP Research and development, net		$	19,505			$	6,819
GAAP Selling, general and administrative		$	28,469			$	23,078
Stock-based compensation			(5,201	)			(3,597	)
Amortization of purchased intangibles			(1,434	)			(598	)
Transaction costs			(165	)			(375	)
Performance reserve escrow			(1,781	)			(1,781	)
Change in fair value of contingent consideration			(300	)			(2,500	)
Employee retention credit			1,080				—
Non-GAAP Selling, general and administrative		$	20,668			$	14,227
GAAP Operating expenses		$	52,374			$	36,555
Stock-based compensation			(10,223	)			(8,623	)
Amortization of purchased intangibles			(1,443	)			(2,230	)
Transaction costs			(165	)			(375	)
Performance reserve escrow			(1,781	)			(1,781	)
Change in fair value of contingent consideration			(300	)			(2,500	)
Employee retention credit			1,711				—
Non-GAAP Operating expenses		$	40,173			$	21,046
GAAP Operating loss		$	(46,017	)		$	(32,820	)
Total non-GAAP adjustments			15,651				21,525
Non-GAAP Operating loss		$	(30,366	)		$	(11,295	)
GAAP Total other income (expense), net		$	926			$	10,499
Change in fair value of liability classified warrants			—				(13,482	)
(Gain) loss on foreign exchange			(134	)			20
Non-GAAP Total other income (expense), net		$	792			$	(2,963	)

 

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