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Li-Cycle Reports Second Quarter 2023 Operational and Financial Results; Spoke & Hub Network on Path to Become A Top Global Producer of Key Battery-Grade Materials

Highlights

• Expanded market-leading position and speed to market through growth of Spoke & Hub network in North America and Europe; on path to produce up to 25,000 tonnes of lithium carbonate per year;
• Advanced construction of the Rochester Hub, maintaining start of commissioning in late 2023; successfully received and installed the largest piece of progress equipment on site – video link here;
• Progressed development of European Hub (Portovesme Hub) with Glencore with Definitive Feasibility Study (DFS) expected to be completed by mid-2024;
• Commercialized first European Spoke in Germany, largest in Li-Cycle’s global Spoke network and one of the largest on the continent;
• Signed memorandum of understanding with EVE Energy to collaborate on global sustainable lithium-ion battery recycling solutions; exploring site selection for new Spoke in Hungary;
• Advanced documentation for $375 million Department of Energy (DOE) loan to final stages, with close anticipated in September 2023; and
• Ended June 30, 2023 with cash on hand of $288.8 million.

TORONTO–(BUSINESS WIRE)–Li-Cycle Holdings Corp. (NYSE: LICY) (“Li-Cycle” or the “Company”), an industry leader in lithium-ion battery (LIB) resource recovery and the leading LIB recycler in North America, today announced a business update and financial results for its second quarter ended June 30, 2023.

“During the second quarter, we made significant strides on our strategic objectives, growing and operationalizing our Spoke & Hub network. In Europe, we successfully commenced processing battery materials at our Germany Spoke, our first in Europe, which is expected to become the largest pre-processing facility in our global Spoke network by the end of 2023. We are also progressing our co-development of the Portovesme Hub with Glencore with the DFS on track for completion by mid-2024. In North America, the Rochester Hub remains on schedule to commence commissioning in late 2023,” said Ajay Kochhar, Li-Cycle’s President and Chief Executive Officer.

Mr. Kochhar concluded, “As a result of our continued execution, we have further solidified Li-Cycle’s leadership role as a sustainable and pure-play domestic solutions provider for key battery-grade materials in North America and Europe. When both the Rochester and Portovesme Hubs are in full operation, Li-Cycle is expected to have total lithium carbonate production capacity of up to 25,000 tonnes per year, making Li-Cycle a top global and sustainable producer of lithium carbonate and key battery-grade materials.”

Commercial Arrangements

On July 11, 2023, Li-Cycle and EVE Energy, a leading lithium-ion battery technology company, signed a memorandum of understanding (MOU) to collaborate and explore lithium-ion battery recycling solutions for EVE battery materials. EVE is one of the world’s largest lithium-ion battery cell manufacturers, with global manufacturing facilities and customers that include global automakers.

The MOU includes a framework to explore global sustainable recycling solutions for EVE’s lithium-ion battery materials in the North American market, as well as battery manufacturing scrap generated at EVE’s planned lithium-ion battery cell manufacturing facilities in Hungary and Malaysia. In view of this commercial partnership, Li-Cycle is undertaking a site selection process for a potential new Spoke location in Hungary.

Global Network Expansion

Li-Cycle continued to build upon its significant first mover advantage as a critical domestic source of key battery-grade materials, supported by numerous strategic commercial partnerships and leading patent-protected sustainable technology. With projected Spoke pre-processing capacity of greater than 100,000 tonnes LIB equivalent and Hubs post-processing capacity of 85,000 to 105,000 tonnes of black mass, Li-Cycle is on the path to become the leader in lithium-ion battery resource recovery and a top global and sustainable producer of lithium carbonate (up to 25,000 tonnes of lithium carbonate per year), and key battery materials (e.g., nickel and cobalt), particularly in North America and Europe.

Europe

Along with its joint development partner Glencore, the Company continued to make positive strides in the development of the Portovesme Hub with the DFS work progressing and on schedule to be completed by mid-2024. Leveraging our strategic partnership, the Portovesme site is a strong fit with Li-Cycle’s proprietary process for metallurgical recovery of lithium and critical materials. With speed to market and lower capital intensity, we are developing an expedited flowsheet that requires fewer processing steps to produce lithium carbonate and a mixed hydroxide product (MHP) containing nickel and cobalt.

Subject to a final investment decision, the project would proceed to construction, with commissioning expected to commence in late 2026 to early 2027. Once operational, the Portovesme Hub would have an annual processing capacity of up to 70,000 tonnes per year of black mass, producing approximately 15,000 to 16,500 tonnes of lithium carbonate, as well as up to approximately 18,000 tonnes of nickel, and 2,250 tonnes of cobalt contained in MHP.

On August 1, 2023, Li-Cycle announced the start of operation of line one of its Germany Spoke, with an annual LIB capacity of 10,000 tonnes. The facility, which is the Company’s first in Europe, utilizes Li-Cycle’s patented and environmentally friendly ‘Generation 3’ Spoke technology to directly process all forms of LIBs, including full EV battery packs. The Germany Spoke will be the largest in the Company’s portfolio when fully operational, with a total annual processing capacity of up to 30,000 tonnes of LIB, including two lines of 10,000 tonnes each, in addition to ancillary processing capacity. The Company expects to operationalize the second line in late 2023.

North America

The Rochester Hub achieved significant milestones and remains on schedule to start commissioning in late 2023. Detailed engineering and procurement are nearly complete. Construction activities are progressing on site, with major buildings nearing completion, steel and concrete installation progressing, alongside the start of mechanical and electrical equipment installation. The Company is focused on actively managing the construction labor as part of the Rochester Hub construction budget of $560 million.

Li-Cycle successfully received and installed the largest piece of process equipment at the Rochester Hub, as can be viewed on this link.

Balance Sheet Position

At June 30, 2023, Li-Cycle had cash on hand of $288.8 million. During the quarter, the Company’s capital spend was $78.4 million, primarily driven by the procurement of equipment and construction materials and services for the Rochester Hub.

On February 27, 2023, the Company entered into a conditional commitment with the DOE for a loan of up to $375 million through its Advanced Technology Vehicles Manufacturing Program, in support of the Rochester Hub development. The Company progressed the loan documentation to final stages and is currently on track to execute and close in September 2023.

Financial Results for the Three Months Ended June 30, 2023

Revenues from product sales and recycling services before non-cash fair market value (FMV) adjustments were $5.5 million, which increased from $4.7 million in the same period of 2022. The increase in product revenue was primarily attributable to the higher sales volume, partially offset by a reduction in market prices of cobalt and nickel. Total revenues including FMV adjustments were $3.6 million, compared with nil last year, and included an unfavorable non-cash FMV impact of $1.9 million driven by a decline in cobalt and nickel prices versus an unfavorable FMV impact of $4.7 million last year.

Operating expenses increased to $46.1 million versus $33.3 million in the same period of 2022, driven primarily by higher raw material and supply costs coupled with higher average material costs. In addition, other expenses were higher due to growth in personnel related to the expansion of the Company’s global Spoke network and the construction of the Rochester Hub.

Net loss was $35.3 million, compared to $28.1 million in the same period of 2022, and included a fair value gain on financial instruments of $7.3 million and $7.7 million, respectively.

Adjusted EBITDA¹ loss was $39.7 million, compared to a loss of $30.6 million in the same period of 2022, attributed to higher expenses relating to expansion of the global network, which more than offset increased revenue. Additionally, non-cash share-based compensation decreased to $3.7 million from $4.5 million in the same period of 2022.

Webcast and Conference Call Information

Company management will host a webcast and conference call on Monday, August 14, 2023, at 8:30 a.m. Eastern Time. The related presentation materials for the webcast and conference call will be made available on the Investor Relations section of the Li-Cycle website: https://investors.li-cycle.com/overview/default.aspx. Investors may listen to the conference call live via audio-only webcast or through the following dial-in numbers:

Domestic: (800) 579-2543

International: (203) 518-9814

Participant Code: LICYQ223

Webcast: https://investors.li-cycle.com

A replay of the conference call/webcast will also be made available on the Investor Relations section of the Company’s website at https://investors.li-cycle.com.

About Li-Cycle Holdings Corp.

Li-Cycle (NYSE: LICY) is a leading global lithium-ion battery resource recovery company and North America’s largest pure-play lithium-ion battery recycler, with a rapidly growing presence across Europe. Established in 2016, and with major customers and partners around the world, Li-Cycle is on a mission to recover critical battery-grade materials to create a domestic closed-loop battery supply chain for a clean energy future. The Company leverages its innovative, sustainable, and patent-protected Spoke & Hub Technologies™ to provide a safe, scalable, customer-centric solution to recycle all different types of lithium-ion batteries.

Our Spoke & Hub Technologies™ are based on a hydrometallurgical process that provides an environmentally friendly and cost-effective alternative to pyrometallurgical processing and traditional mining methods. At our Spokes, or pre-processing facilities, we recycle battery manufacturing scrap and end-of-life batteries to produce black mass, a powder-like substance which contains a number of valuable metals, including lithium, nickel, and cobalt. At our Hubs, or post-processing facilities, we will process black mass to produce critical battery-grade materials, including lithium carbonate, nickel sulphate, and cobalt sulphate. For more information, visit https://li-cycle.com/

Non-IFRS Financial Measures
Adjusted EBITDA (loss)
The table below reconciles adjusted EBITDA (loss) to net loss:
	Three months ended						Six months ended
	June 30,						June 30,
Unaudited – $ millions		2023			2022			2023			2022
Net loss	$	(35.3	)	$	(28.1	)	$	(74.7	)	$	(38.2	)
Income Tax		—			—			0.1			—
Depreciation		4.0			2.6			7.7			4.5
Interest expense		3.6			3.9			7.5			7.6
Interest income		(4.2	)		(1.3	)		(9.2	)		(1.5	)
EBITDA		(31.9	)		(22.9	)		(68.6	)		(27.6	)
Non-recurring costs		(0.5	)		—			0.3			—
Fair value (gain) loss on financial instruments1		(7.3	)		(7.7	)		(6.6	)		(22.6	)
Adjusted EBITDA (loss)	$	(39.7	)	$	(30.6	)	$	(74.9	)	$	(50.2	)

1 Fair value (gain) loss on financial instruments relates to convertible debt, and to warrants, which were redeemed and no longer outstanding as of June 30, 2022.

Li-Cycle reports its financial results in accordance with the International Financial Reporting Standards (“IFRS”). The Company makes references to certain non-IFRS measures, including adjusted EBITDA. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of the Company’s results of operations from management’s perspective. Accordingly, it should not be considered in isolation nor as a substitute for the analysis of the Company’s financial information reported under IFRS. Adjusted EBITDA is defined as earnings before depreciation and amortization, interest expense (income), income tax expense (recovery) adjusted for items that are not considered representative of ongoing operational activities of the business and items where the economic impact of the transactions will be reflected in earnings in future periods. Adjustments relate to fair value (gains) losses on financial instruments and certain non-recurring expenses. Foreign exchange (gain) loss is excluded from the calculation of Adjusted EBITDA.

Cautionary Notes – Forward-Looking Statements and Unaudited Results

Certain statements contained in this press release may be considered “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended, Section 21 of the U.S. Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws. Forward-looking statements may generally be identified by the use of words such as “believe”, “may”, “will”, “continue”, “anticipate”, “intend”, “expect”, “should”, “would”, “could”, “plan”, “potential”, “future”, “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Forward-looking statements in this press release include but are not limited to statements about: the expectation that Li-Cycle’s Spoke & Hub Network is on path to become a top global producer of key battery-grade materials and to produce up to 25,000 tonnes of lithium carbonate per year; the expectation that the Germany Spoke, Li-Cycle’s first in Europe, will become the largest pre-processing facility in Li-Cycle’s global Spoke network by the end of 2023; the expectation that the DFS with Glencore is on track for completion by mid-2024; the expectation that the Rochester Hub will commence commissioning in late 2023; the expectation that, when both the Rochester Hub and Portovesme Hub are in full operation, Li-Cycle will have total lithium carbonate production capacity of up to 25,000 tonnes per year, making Li-Cycle a top global and sustainable producer of lithium carbonate and key battery-grade materials; with projected Spoke pre-processing capacity of greater than 100,000 tonnes LIB equivalent and Hub post-processing capacity of 85,000 to 105,000 tonnes of black mass, the expectation that Li-Cycle is on the path to become the leader in lithium-ion battery resource recovery and a top global and sustainable producer of lithium carbonate (up to 25,000 tonnes per year) and key battery materials (e.g., nickel and cobalt), particularly in North America and Europe; the expectation that, subject to a final investment decision, the development of the Portovesme Hub would proceed to construction, with commissioning expected to commence in late 2026 to early 2027; the expectation that, once operational, the Portovesme Hub would have an annual processing capacity of up to 70,000 tonnes per year of black mass, producing approximately 15,000 to 16,500 tonnes of lithium carbonate, as well as up to approximately 18,000 tonnes of nickel, and 2,250 tonnes of cobalt contained in MHP; the expectation that the Germany Spoke, when fully operational, will have a total annual processing capacity of up to 30,000 tonnes of LIB, including two lines of 10,000 tonnes each, in addition to ancillary processing capacity; the expectation that the second line of the Germany Spoke will be operationalized in late 2023; the expectations regarding the Company’s management of the construction labor as part of the Rochester Hub construction budget of $560 million; and the expectation that the DOE loan documentation is on track to be executed and closed in September 2023. These statements are based on various assumptions, whether or not identified in this communication, including but not limited to assumptions regarding the timing, scope and cost of Li-Cycle’s projects; the processing capacity and production of Li-Cycle’s facilities; Li-Cycle’s ability to source feedstock and manage supply chain risk; Li-Cycle’s ability to increase recycling capacity and efficiency; Li-Cycle’s ability to obtain financing on acceptable terms; Li-Cycle’s ability to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners; general economic conditions; currency exchange and interest rates; compensation costs; and inflation. There can be no assurance that such estimates or assumptions will prove to be correct and, as a result, actual results or events may differ materially from expectations expressed in or implied by the forward-looking statements.

These forward-looking statements are provided for the purpose of assisting readers in understanding certain key elements of Li-Cycle’s current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of Li-Cycle’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes and is not intended to serve as, and must not be relied on, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability.

Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Li-Cycle, and are not guarantees of future performance. Li-Cycle believes that these risks and uncertainties include, but are not limited to, the following: Li-Cycle’s inability to economically and efficiently source, recover and recycle lithium-ion batteries and lithium-ion battery manufacturing scrap, as well as third party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for manufacturing waste and end-of-life lithium-ion batteries; Li-Cycle’s inability to successfully implement its global growth strategy, on a timely basis or at all; Li-Cycle’s inability to manage future global growth effectively; Li-Cycle’s inability to develop the Rochester Hub, and other future projects including its Spoke network expansion projects in a timely manner or on budget or that those projects will not meet expectations with respect to their productivity or the specifications of their end products; Li-Cycle’s failure to materially increase recycling capacity and efficiency; Li-Cycle may engage in strategic transactions, including acquisitions, that could disrupt its business, cause dilution to its shareholders, reduce its financial resources, result in incurrence of debt, or prove not to be successful; one or more of Li-Cycle’s current or future facilities becoming inoperative, capacity constrained or if its operations are disrupted; additional funds required to meet Li-Cycle’s capital requirements in the future not being available to Li-Cycle on acceptable terms or at all when it needs them; Li-Cycle expects to continue to incur significant expenses and may not achieve or sustain profitability; problems with the handling of lithium-ion battery cells that result in less usage of lithium-ion batteries or affect Li-Cycle’s operations; Li-Cycle’s inability to maintain and increase feedstock supply commitments as well as securing new customers and off-take agreements; a decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies; decreases in benchmark prices for the metals contained in Li-Cycle’s products; changes in the volume or composition of feedstock materials processed at Li-Cycle’s facilities; the development of an alternative chemical make-up of lithium-ion batteries or battery alternatives; Li-Cycle’s revenues for the Rochester Hub are derived significantly from a single customer; Li-Cycle’s insurance may not cover all liabilities and damages; Li-Cycle’s heavy reliance on the experience and expertise of its management; Li-Cycle’s reliance on third-party consultants for its regulatory compliance; Li-Cycle’s inability to complete its recycling processes as quickly as customers may require; Li-Cycle’s inability to compete successfully; increases in income tax rates, changes in income tax laws or disagreements with tax authorities; significant variance in Li-Cycle’s operating and financial results from period to period due to fluctuations in its operating costs and other factors; fluctuations in foreign currency exchange rates which could result in declines in reported sales and net earnings; unfavorable economic conditions, such as consequences of the global COVID-19 pandemic; natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events; failure to protect or enforce Li-Cycle’s intellectual property; Li-Cycle may be subject to intellectual property rights claims by third parties; Li-Cycle’s failure to effectively remediate the material weaknesses in its internal control over financial reporting that it has identified or if it fails to develop and maintain a proper and effective internal control over financial reporting. These and other risks and uncertainties related to Li-Cycle’s business are described in greater detail in the section entitled “Risk Factors” and “Key Factors Affecting Li-Cycle’s Performance” in its Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and the Ontario Securities Commission in Canada. Because of these risks, uncertainties and assumptions, readers should not place undue reliance on these forward-looking statements. Actual results could differ materially from those contained in any forward-looking statement.

Li-Cycle assumes no obligation to update or revise any forward-looking statements, except as required by applicable laws. These forward-looking statements should not be relied upon as representing Li-Cycle’s assessments as of any date subsequent to the date of this press release.

Li-Cycle Holdings Corp.
Condensed consolidated interim statements of financial position
	June 30,				December 31,
Unaudited $ millions, as at	2023				2022
Assets
Current assets
Cash and cash equivalents	$	288.8			$	517.9
Accounts receivable		0.9				4.3
Other receivables		5.0				10.0
Prepayment and deposits		103.5				95.2
Inventories		2.5				8.3
		400.7				635.7
Non-current assets
Plant and equipment		392.4				210.4
Right-of-use assets		56.7				50.8
Other assets		9.1				4.2
		458.2				265.4
Total assets	$	858.9			$	901.1
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	77.9			$	75.9
Lease liabilities		5.5				5.6
		83.4				81.5
Non-current liabilities
Lease liabilities		53.0				48.3
Deferred revenue		5.4				—
Convertible debt		284.2				272.9
Restoration provisions		2.7				0.4
		345.3				321.6
Total liabilities		428.7				403.1
Equity
Share capital		776.8				772.4
Other reserves		21.2				18.7
Accumulated deficit		(367.5	)			(293.0	)
Accumulated other comprehensive loss		(0.3	)			(0.3	)
Equity attributable to the Shareholders of Li-Cycle Holdings Corp.		430.2				497.8
Non-controlling interest		—				0.2
Total equity		430.2				498.0
Total liabilities and equity	$	858.9			$	901.1

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Li-Cycle Holdings Corp.
Condensed consolidated interim statements of loss and comprehensive loss
Unaudited $ millions except for per share amounts, for the		Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Revenue
Product sales		$	3.1			$	(0.4	)		$	6.2			$	7.3
Recycling services			0.5				0.4				1.0				0.7
			3.6				—				7.2				8.0
Expenses
Employee salaries and benefits			16.0				12.0				30.8				22.3
Share-based compensation			3.7				4.5				6.9				11.5
Office, administrative and travel			6.6				4.2				11.1				7.3
Professional fees			4.6				4.4				7.6				7.6
Raw materials and supplies			5.7				2.7				14.4				3.8
Depreciation			4.0				2.6				7.7				4.5
Plant facilities			2.0				1.0				3.9				1.9
Marketing			0.8				0.8				1.5				1.4
Freight and shipping			0.9				0.9				1.7				1.2
Research and development			0.8				0.4				1.3				0.9
Change in finished goods inventory			1.6				(0.2	)			0.7				—
Other			(0.6	)			—				1.2				—
Operating expenses			46.1				33.3				88.8				62.4
Loss from operations			(42.5	)			(33.3	)			(81.6	)			(54.4	)
Other income (expense)
Interest income			4.2				1.3				9.2				1.5
Interest expense and other costs			(4.3	)			(3.8	)			(8.8	)			(7.9	)
Gain on financial instruments			7.3				7.7				6.6				22.6
			7.2				5.2				7.0				16.2
Net loss before taxes			(35.3	)			(28.1	)			(74.6	)			(38.2	)
Income tax			—				—				0.1
Net loss		$	(35.3	)		$	(28.1	)		$	(74.7	)		$	(38.2	)
Net loss attributable to
Shareholders of Li-Cycle Holdings Corp.		$	(35.2	)		$	(28.1	)		$	(74.6	)		$	(38.2	)
Non-controlling interest			(0.1	)			—				(0.1	)			—
Net loss and comprehensive loss		$	(35.3	)		$	(28.1	)		$	(74.7	)		$	(38.2	)
Loss per common share – basic and diluted		$	(0.20	)		$	(0.17	)		$	(0.42	)		$	(0.23	)

Li-Cycle Holdings Corp.
Condensed consolidated interim statements of cash flows
Unaudited $ millions, for the		Three months ended June 30,				Six months ended June 30,
		2023		2022		2023		2022
Operating activities
Net loss		$ (35.3)		$ (28.1)		$ (74.7)		$ (38.2)
Items not affecting cash
Share-based compensation		3.7		4.5		6.9		11.5
Depreciation		4.0		2.6		7.7		4.5
New right-of-use asset
Foreign exchange (gain) loss on translation		0.2		(0.4)		0.4		(0.1)
Fair value (gain) loss on financial instruments		(7.3)		(7.7)		(6.6)		(22.6)
Interest expense		3.7		3.9		7.7		7.7
Interest paid		(0.8)		(0.4)		(1.8)		(0.9)
Interest received		4.6		1.3		9.9		1.5
Interest income		(4.2)		(1.3)		(9.2)		(1.5)
		(31.4)		(25.6)		(59.7)		(38.1)
Changes in non-cash working capital items
Accounts receivable		2.8		5.3		3.4		(0.6)
Other receivables		0.2		(2.2)		4.3		(2.3)
Prepayments and deposits		(8.8)		(7.5)		(12.1)		(15.3)
Inventory		2.6		(1.9)		5.8		(3.9)
Accounts payable and accrued liabilities		(10.7)		7.8		(7.7)		17.3
Deferred Revenue		5.4		—		5.4		—
Net cash used in operating activities		(39.9)		(24.1)		(60.6)		(42.9)
Investing activities
Purchases of plant and equipment		(57.0)		(36.1)		(163.6)		(53.6)
Prepaid equipment deposits		(21.4)		(28.3)		(1.1)		(27.2)
Net cash used in investing activities		(78.4)		(64.4)		(164.7)		(80.8)
Financing activities
Proceeds from private share issuance, net of share issuance costs		—		49.7		—		49.7
Proceeds from convertible debt		—		198.7		—		198.7
Capital contribution from the holders of non-controlling interest		—		0.3		—		0.3
Purchase of non-controlling interest		(0.4)		—		(0.4)		—
Repayment of lease principal		(1.7)		(1.3)		(3.4)		(2.4)
Net cash (used in) from financing activities		(2.1)		247.4		(3.8)		246.3
Net change in cash and cash equivalents		(120.4)		158.9		(229.1)		122.6
Cash and cash equivalents, beginning of the period		409.2		527.4		517.9		563.7
Cash and cash equivalents, end of the period		$ 288.8		$ 686.3		$ 288.8		$ 686.3

¹Adjusted EBITDA is not a recognized measure under IFRS. See Non-IFRS Financial Measures section of this press release, including for a reconciliation of adjusted EBITDA to net profit (loss).

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Email: [email protected]

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SilverBow Resources Announces Transformational Acquisition of Chesapeake’s South Texas Position

Accelerates SilverBow’s Long-Term Strategic Objectives

HOUSTON–(BUSINESS WIRE)–
SilverBow Resources, Inc. (NYSE: SBOW) (“SilverBow” or “the Company”) announced today that it has entered into an agreement (the “Purchase Agreement”) to acquire Chesapeake Energy Corporation’s (“Chesapeake”) oil and gas assets in South Texas (the “Chesapeake South Texas Assets”) for a purchase price of $700 million, comprised of a $650 million upfront cash payment due at closing and an additional $50 million deferred cash payment due 12 months post close, subject to customary adjustments (the “Chesapeake Transaction”). Chesapeake may also receive up to $50 million in additional contingent cash consideration based on future commodity prices.

The Chesapeake Transaction has an effective date of February 1, 2023 and is expected to close by year-end 2023, subject to satisfaction or waiver of certain customary closing conditions, including the accuracy of the representations and warranties of each party, compliance by each party in all material respects with its covenants and the satisfaction of certain consent requirements.

The Chesapeake Transaction is expected to be funded with cash on hand, borrowings under the Company’s First Amended and Restated Senior Secured Revolving Credit Agreement, dated as of April 19, 2017, and amended as of June 22, 2022 (the “Credit Facility”), among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and the Company’s amended second lien notes (“Second Lien Notes”) led by EIG. In conjunction with the Chesapeake Transaction, the Company has secured $425 million of incremental commitments under its Credit Facility from existing and new lenders, which, subject to the closing of the Chesapeake Transaction, will increase lender commitments under the Credit Facility to $1.2 billion, and the Second Lien Notes will be upsized by $350 million, which, subject to the closing of the Chesapeake Transaction, will increase lender commitments under the Second Lien Notes to $500 million and extend the maturity date for the Second Lien Notes to December 15, 2028.

SilverBow plans to hold a conference call to discuss the Chesapeake Transaction at 7:30 a.m. Central Time on Monday, August 14, 2023. Participation details are included within this release.

IMPACT TO SILVERBOW

The estimated impact to SilverBow from the Chesapeake Transaction is described below. SilverBow intends to provide updated guidance in conjunction with the closing of the Chesapeake Transaction.

• Increases expected fourth quarter of 2023 net production to 87,000-99,000 Boe/d (~50% oil/NGLs)

• Adds critical scale with ~$825-$925 million of pro forma next 12 months EBITDA¹
• Free cash flow in 2024 expected to increase by more than 80%, driving material accretion to both cash flow per share and free cash flow per share¹
• Leverage neutral at year-end 2023 with expected 1.0x leverage ratio forecasted by year-end 2024¹

MANAGEMENT COMMENTS

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “SilverBow is well positioned to convert this premium resource into tangible value for its stakeholders. The Chesapeake Transaction transforms SilverBow into the largest public pure-play Eagle Ford operator. This acquisition advances all our long-term strategic objectives, by materially increasing our scale, enhancing our decade-plus high-return inventory, improving our capital efficiency and providing balanced commodity exposure, all while maintaining a strong balance sheet.”

Mr. Woolverton continued, “This acquisition is immediately accretive to all key financial and operating metrics, and offers compelling industrial logic that increases the Company’s size and scale by approximately 50% across a range of metrics. Further, SilverBow’s purchase price is more than fully covered by existing production value, with an estimated $850 million of PDP PV-10 based on strip pricing. The addition of these attractively priced assets is expected to enhance SilverBow’s operational and financial performance and better position the Company for future acquisitions while maintaining balance sheet strength. Upon closing, this will mark SilverBow’s 8th acquisition over the past two years totaling nearly $1.4 billion. We believe the benefits of further consolidation are very compelling, and we strongly believe this is a value-enhancing transaction for SilverBow shareholders.”

CHESAPEAKE SOUTH TEXAS ASSET HIGHLIGHTS

• Adds ~42,000 net acres in Dimmit and Webb counties across the highly prolific, liquids-heavy window of South Texas

• Expected production of ~31,000-33,000 Boe/d (~60% oil/NGLs) for the fourth quarter of 2023

• ~$850 million of Proved Developed Producing (“PDP”) PV-10 reserves value² compared to the $700 million purchase price

• ~300 additional high-confidence drilling locations across the Austin Chalk and Eagle Ford formations which immediately compete for capital

STRATEGIC RATIONALE

• Compelling Strategic Fit & Increased Scale: Substantial industrial logic that significantly increases South Texas scale supporting greater operational efficiency
• Immediately Accretive: Attractively valued at 2.3x NTM EBITDA¹ with a >20% unlevered free cash flow yield^1,3, generating double-digit accretion to key financial metrics
• Supplements High-Return Inventory: Fortifies decade-plus inventory life with Austin Chalk and Eagle Ford locations that immediately compete for capital and provide hydrocarbon optionality
• Enhances Capital Efficiency and Margins: Significantly increases pro forma SilverBow’s free cash flow generation and lowers the pro forma 2024 re-investment rate to ~65%¹
• Maintains Balance Sheet Strength: Conservative pro forma leverage profile and incremental free cash flow generation provides a path to a return of capital strategy
• Positioned for Further Consolidation: Enhanced scale and strong balance sheet positions SilverBow for future South Texas acquisitions where the Company has a tremendous track record of execution excellence

REVISED HEDGE POSITION

To protect the significant financial benefits of the Chesapeake Transaction, SilverBow plans to hedge a significant portion of the Company’s expected volume for the next three years. At a minimum, SilverBow is expected to enter into incremental derivative contracts accounting for 75% of the combined Company’s expected oil and gas PDP volumes for the first two years and 60% for the third year. The incremental hedged amounts are expected to include a combination of swaps and collars over the specified period.

CONFERENCE CALL INFORMATION, INVESTOR PRESENTATION AND OTHER DETAILS

The Company plans to host a conference call to discuss the Chesapeake Transaction at 7:30 a.m. Central Time on Monday, August 14, 2023. To participate in the call, please dial 888-415-4465 (U.S.) or 646-960-0140 (International) and use Conference ID 5410161. A simultaneous webcast of the call may be accessed over the internet by visiting SilverBow’s website at www.sbow.com, clicking on “Investor Relations” and “Events and Presentations”. A replay will be archived and available in the same location after the conclusion of the live event.

SilverBow has posted a transaction presentation under the “Investor Relations” section of the Company’s website. Investors are encouraged to review for additional details and information.

Further terms of the Chesapeake Transaction are set forth in the Purchase Agreement, which will be filed by SilverBow with the Securities and Exchange Commission (“SEC”) and will be available for viewing under www.sec.gov or on the Company’s website.

ADVISORS

Mizuho Securities is serving as financial advisor to SilverBow. Legal advisors for SilverBow include Gibson, Dunn & Crutcher LLP on the Chesapeake Transaction and Vinson & Elkins LLP on the debt financing.

ABOUT SILVERBOW RESOURCES, INC.

SilverBow Resources, Inc. (NYSE: SBOW) is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas in the Eagle Ford Shale and Austin Chalk in South Texas. With over 30 years of history operating in South Texas, the Company possesses a significant understanding of regional reservoirs which it leverages to assemble high quality drilling inventory while continuously enhancing its operations to maximize returns on capital invested. For more information, please visit www.sbow.com. Information on the Company’s website is not part of this release.

FORWARD-LOOKING STATEMENTS

This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent management’s expectations or beliefs concerning future events, and it is possible that the results described in this release will not be achieved. These forward-looking statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this press release, including those regarding our strategy, the anticipated benefits of the Chesapeake Transaction, future productions and reserves, including the present value thereof, of SilverBow and the Chesapeake South Texas Assets, 2023 guidance and preliminary outlook for SilverBow and the Chesapeake South Texas Assets, financial position, including anticipated borrowings and availability under the Credit Facility, well expectations and drilling plans, expected oil and natural gas pricing, capital expenditures, budget, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “budgeted,” “guidance,” “expect,” “may,” “continue,” “predict,” “potential,” “plan,” “project,” “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following risks and uncertainties: further actions by the members of the Organization of the Petroleum Exporting Countries, Russia and other allied producing countries with respect to oil production levels and announcements of potential changes in such levels; risks related to the Chesapeake Transaction, including the timing, cost, financing of and the ability to obtain any necessary consents or approvals for the Chesapeake Transaction; volatility in oil, natural gas and natural gas liquids prices; ability to obtain permits and government approvals; our borrowing capacity, future covenant compliance, cash flow and liquidity, including our ability to satisfy our short- or long-term liquidity needs; asset disposition efforts or the timing or outcome thereof; ongoing and prospective joint ventures, their structures and substance, and the likelihood of their finalization or the timing thereof; the amount, nature and timing of capital expenditures, including future development costs; timing, cost and amount of future production of oil and natural gas; availability of drilling and production equipment or availability of oil field labor; availability, cost and terms of capital; timing and successful drilling and completion of wells; availability and cost for transportation and storage capacity of oil and natural gas; costs of exploiting and developing our properties and conducting other operations; competition in the oil and natural gas industry; general economic and political conditions, including inflationary pressures, further increases in interest rates, a general economic slowdown or recession, instability in financial institutions, political tensions and war (including future developments in the ongoing Russia-Ukraine conflict); the severity and duration of world health events, including health crises and pandemics, related economic repercussions, including disruptions in the oil and gas industry, supply chain disruptions, and operational challenges including remote work arrangements and protecting the health and well-being of our employees; opportunities to monetize assets; our ability to execute on strategic initiatives; effectiveness of our risk management activities, including hedging strategy; counterparty and credit market risk; pending legal and environmental matters, including potential impacts on our business related to climate change and related regulations; actions by third parties, including customers, service providers and shareholders; current and future governmental regulation and taxation of the oil and natural gas industry; developments in world oil and natural gas markets and in oil and natural gas-producing countries; uncertainty regarding our future operating results; and other risks and uncertainties discussed in the Company’s reports filed with the SEC, including its annual report on Form 10-K for the year ended December 31, 2022, its Quarterly Report on Form 10-Q for the three months ended June 30, 2023 and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.

All forward-looking statements speak only as of the date of this news release. You should not place undue reliance on these forward-looking statements. The Company’s capital budget, operating plan, service cost outlook and development plans are subject to change at any time. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this release are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. The risk factors and other factors noted herein and in the Company’s SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to publicly release the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, except as required by law.

(Footnotes)

1. Reference to non-GAAP financial measure(s), the definitions of which appear at the end of this release

2. Based on management’s estimates of reserve volumes and values based on a 2/1/23 effective date and NYMEX strip pricing as of 8/4/23

3. Unlevered free cash flow yield is estimated by dividing the Chesapeake South Texas asset EBITDA minus CAPEX for the referenced time period by the purchase price (excluding contingent payments)

(Definition of Non-GAAP Measures as Calculated by the Company) (Unaudited)

The following non-GAAP measures are presented in this news release as SilverBow believes these metrics and performance measures are widely used by the investment community, including investors, research analysts and others, to evaluate and useful in comparing investments among upstream oil and gas companies in making investment decisions or recommendations. These measures, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the related GAAP measure or any other measure of a company’s financial or operating performance presented in accordance with GAAP. These measures may not be comparable to similarly titled measures of other companies.

EBITDA: The Company presents EBITDA attributable to common stockholders in addition to reported net income (loss) in accordance with GAAP. EBITDA is calculated as net income (loss) plus (less) depreciation, depletion and amortization, accretion of asset retirement obligations, interest expense, impairment of oil and natural gas properties, net losses (gains) on commodity derivative contracts, amounts collected (paid) for commodity derivative contracts held to settlement, income tax expense (benefit); and share-based compensation expense. EBITDA excludes certain items that SilverBow believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. EBITDA is used by the Company’s management and by external users of SilverBow’s financial statements, such as investors, commercial banks and others, to assess the Company’s operating performance as compared to that of other companies, without regard to financing methods, capital structure or historical cost basis. It is also used to assess SilverBow’s ability to incur and service debt and fund capital expenditures. EBITDA should not be considered an alternative to net income (loss), operating income (loss), cash flows provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Company has provided forward-looking next 12 months EBITDA estimate; however, SilverBow is unable to provide a quantitative reconciliation of this forward-looking non-GAAP measure to the most directly comparable forward-looking GAAP measure because the items necessary to estimate such forward-looking GAAP measure are not accessible or estimable at this time without unreasonable efforts. The reconciling items in future periods could be significant.

Free Cash Flow, Free Cash Flow Yield and Free Cash Flow per Share: Free cash flow is calculated as EBITDA (defined above) plus (less) monetized derivative contracts, cash interest expense, capital expenditures and current income tax (expense) benefit. The Company believes that free cash flow is useful to investors and analysts because it assists in evaluating SilverBow’s operating performance, and the valuation, comparison, rating and investment recommendations of companies within the oil and gas industry. Free cash flow yield is calculated by taking free cash flow divided by the market capitalization of the Company at a given date. Free cash flow per share is calculated by taking free cash flow divided by the number of common shares outstanding of the Company at a given date. SilverBow uses this information as one of the bases for comparing its operating performance with other companies within the oil and gas industry. Free cash flow should not be considered an alternative to net income (loss), operating income (loss), cash flows provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. The Company has provided forward-looking free cash flow, free cash flow yield and free cash flow per share estimates; however, SilverBow is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measure because the items necessary to estimate such forward-looking GAAP measure are not accessible or estimable at this time without unreasonable efforts. The reconciling items in future periods could be significant.

Total Debt to EBITDA (Leverage Ratio): Leverage Ratio is calculated as total debt, defined as long-term debt excluding unamortized discount and debt issuance costs, divided by EBITDA (defined above) for the most recently completed 12-month period. The Company has provided a forward-looking Leverage Ratio estimate; however, SilverBow is unable to provide a quantitative reconciliation of this forward-looking non-GAAP measure to the most directly comparable forward-looking GAAP measure because the items necessary to estimate such forward-looking GAAP measure are not accessible or estimable at this time without unreasonable efforts. The reconciling items in future periods could be significant.

PV-10: PV-10 is a non-GAAP measure that represents the estimated future net cash flows from estimated proved reserves discounted at an annual rate of 10 percent before giving effect to income taxes. PV-10 is most comparable to the Standardized Measure which represents the discounted future net cash flows of the after-tax estimated future cash flows from estimated proved reserves discounted at an annual rate of 10 percent, determined in accordance with GAAP. The Company uses non-GAAP PV-10 value as one measure of the value of its estimated proved reserves and to compare relative values of proved reserves amount exploration and production companies without regard to income taxes. Management believes PV-10 value is a useful measure for comparison of proved reserve values among companies because, unlike standardized measure, it excludes future income taxes that often depend principally on the characteristics of the owner of the reserves rather than on the nature, location and quality of the reserves themselves. The Company has provided a PV-10 estimate; however, SilverBow is unable to provide a quantitative reconciliation of this non-GAAP measure to the most directly comparable GAAP measure because the items necessary to estimate such GAAP measure are not accessible or estimable at this time without unreasonable efforts. The reconciling items in future periods could be significant.

Re-Investment Rate: Re-investment rate is calculated as capital expenditures divided by the sum of capital expenditures and free cash flow (defined above) for a given time period. SilverBow believes that re-investment rate is useful to investors because it reflects the magnitude of capital needed to be invested back into the Company’s operations, relative to the total potential cash flows to which stakeholders could have received. Within the oil and gas industry, shale development typically requires substantial, ongoing capital investments to sustain production due to the nature of high-decline rates in shale wells. SilverBow uses re-investment rate to supplement its analysis of future capital investments to the business against returns for stakeholders. Re-investment rate could vary in definition from company to company, and a higher or lower measure does not necessarily indicate better or worse; therefore re-investment rate should not be considered an alternative to operating income (loss), cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities or any other measure of financial performance or liquidity presented in accordance with GAAP.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230814274368/en/

Jeff Magids

Vice President of Finance & Investor Relations

(281) 874-2700, (888) 991-SBOW

KEYWORDS: Texas United States North America

INDUSTRY KEYWORDS: Oil/Gas Energy

MEDIA:

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Rockwell Medical Announces Second Quarter 2023 Results

• Net sales for the six months ended June 30, 2023 was $37.7 million, an 8% increase over $34.8 million for the same period in 2022.
• Gross profit for the six months ended June 30, 2023 was $3.6 million, a 260% increase over $1.0 million for the same period in 2022. Gross margin for the six months ended June 30, 2023 was approximately 10%, a 233% increase over 3% for the same period in 2022.
• Subsequent to the second quarter of 2023, Rockwell Medical acquired a profitable and fully automated hemodialysis concentrates business from Evoqua Water Technologies. The acquisition significantly expands Rockwell Medical’s geographic footprint, customer base, and product offerings. At the time of the transaction, Evoqua generated annual revenue of $18 million and $3.3 million in annual EBITDA. Along with synergies, Rockwell Medical expects this business to deliver 20% to 22% EBITDA margin to the Company.
• With the completion of the Evoqua hemodialysis concentrates business acquisition, Rockwell Medical increased its 2023 net sales guidance from between $78.0 million and $82.0 million to between $82.0 million and $86.0 million; and is increasing 2023 gross profit guidance from between $7.0 million and $9.0 million to between $8.0 million and $10.0 million.
• Rockwell Medical expects to achieve profitability from operations in the fourth quarter of 2023 and going forward.

WIXOM, Mich.–(BUSINESS WIRE)–
Rockwell Medical, Inc. (the “Company”) (Nasdaq: RMTI), a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products to dialysis providers worldwide, today announced financial results and business updates for the three and six months ended June 30, 2023.

“In just over a year, we have made great strides in increasing revenue, reducing expenses, and driving the Company towards profitability,” said Mark Strobeck, Ph.D., Rockwell Medical’s President and CEO. “By acquiring Evoqua Water Technologies’ profitable, revenue-generating hemodialysis concentrates business, we now expect to be profitable in the fourth quarter of 2023 and going forward. This puts Rockwell Medical in a stronger, more stable financial position to further enhance shareholder value and pursue additional growth opportunities.”

FINANCIAL HIGHLIGHTS

• Net sales for the six months ended June 30, 2023 were $37.7 million, which represents an 8% increase over $34.8 million for the same period in 2022. Overall, product revenue for the six months ended June 30, 2023 was $36.1 million compared to product revenue of $33.1 million for the three months ended June 30, 2022, an increase of $3.0 million. Net sales for the three months ended June 30, 2023 were $18.1 million compared to net sales of $19.7 million for the three months ended March 31, 2023 and $18.7 million for the second quarter in 2022. The difference between first quarter 2023 net sales and second quarter 2023 net sales is a result of product revenue recognition timing.

• Gross profit for the six months ended June 30, 3023 was $3.6 million, a 278% increase over $1.0 million for the same period in 2022. Gross profit increased by $2.6 million primarily due to restructuring of supply contracts, onboarding of new customers, increased pricing to other customers, and recognition of the remaining deferred revenue related to the termination of the Baxter distribution agreement. Gross profit for the three months ended June 30, 2023 was $1.0 million compared to gross profit of $2.6 million for the three months ended March 31, 2023 and $1.7 million for the second quarter of 2022. The difference between first quarter 2023 gross profit and second quarter 2023 gross profit is a result of product revenue recognition timing.

• For the six months ended June 30, 2023, Rockwell’s net loss was $5.1 million compared to $12.1 million for the same period in 2022. For the three months ended June 30, 2023, Rockwell’s net loss was $3.3 million, or $0.18** per share, compared with a net loss of $5.0 million, or $0.43** per share for the same period in 2022.

• Cash and cash equivalents and investments available-for-sale at June 30, 2023 was $14.9 million compared to cash and cash equivalents and investments available-for-sale of $16.8 million at March 31, 2023 and $21.5 million at December 31, 2022. On July 10, 2023, which was after the end of the second quarter of 2023, Rockwell received gross proceeds of approximately $13.8 million from the exercise of warrants, which the Company used to fund the Evoqua hemodialysis concentrates business acquisition. Rockwell acquired from Evoqua substantially all of the assets related to Evoqua’s business of manufacturing, marketing, distributing, and selling hemodialysis concentrates products in powder and liquid form for $11.0 million up front in cash plus approximately $1.2 million for the estimated inventory amount. Following the close of the Evoqua transaction and taking into account the exercised warrants, Rockwell had approximately $16.2 million in cash and cash equivalents and investments available-for-sale on a pro forma basis.

Financial Highlights

	Three Months Ended June 30								Six Months Ended June 30
(In Thousands, Except Per Share Amounts)	2023				2022				2023				2022
Net Sales	$	18,080			$	18,682			$	37,748			$	34,806
Gross Profit		1,033				1,745				3,632				960
Net Loss		(3,305	)			(4,967	)			(5,055	)			(12,128	)
Adjusted EBITDA*		(2,257	)			(3,363	)			(3,234	)			(10,028	)
Basic and Diluted Net Loss per Share **	$	(0.18	)		$	(0.43	)		$	(0.27	)		$	(1.20	)

* See reconciliation to GAAP financial measures in the tables below.

** See the “Loss Per Share” section in Note 3 on Form 10-Q filed August 14, 2023 for more details on what is included in the basic and diluted net loss per share calculation.

BUSINESS HIGHLIGHTS

• Rockwell Medical entered into three-year co-promotion services agreement with B. Braun Medical Inc. As part of the agreement, Rockwell Medical designated B. Braun as an independent, non-exclusive representative to promote the Company’s hemodialysis concentrates products to dialysis providers in the United States, with a focus on the west coast. All terms of the sale of any Rockwell Medical product, including price, delivery schedule, and terms and conditions, are set by Rockwell Medical, in the Company’s sole discretion. All orders will be directed to, and processed by, Rockwell Medical. B. Braun will receive a fee for any sales generated by its promotional efforts.

• Rockwell Medical was added to the Russell Microcap Index.

• Rockwell Medical expanded its international footprint for its hemodialysis concentrates products through several multi-year distribution and user agreements. New geographies include the United Arab Emirates, Chile, St. Lucia, Costa Rica, and Grenada. Rockwell has a large and growing international business and currently sells its hemodialysis concentrates products in 29 countries throughout North America, South America, Asia and Africa.

• Rockwell Medical’s subsidiary, Rockwell Transportation (DOT #685854) received the highest safety rating by the Federal Motor Carrier Safety Administration (“FMCSA”), an Operating Administration within the U.S. Department of Transportation. Safety ratings are based on an evaluation of a motor carrier’s compliance with the safety fitness standard as described in 49 CFR 385, Appendix B.

• During and subsequent to the second quarter of 2023, Rockwell undertook workforce and cost reductions as part of its continued business restructuring.

• On July 10, 2023, Rockwell Medical acquired the hemodialysis concentrates business from Evoqua. Under the terms of the agreement, Rockwell Medical acquired Evoqua’s concentrates business which includes all contracts, all intellectual property, all U.S. Food and Drug Administration 510(k) clearances, and all assets primarily associated with, and related to, Evoqua’s concentrates business nationwide, including liquid and powder bicarbonate and liquid acid. Evoqua’s operations are fully automated and afford Rockwell the potential to manufacture its hemodialysis concentrates products at a lower cost and add significant capacity to the Company’s production line. By assuming responsibility for Evoqua’s concentrates customer contracts, Rockwell has further expanded its footprint in the United States and assumed a larger market share of the already growing hemodialysis concentrates market. Additionally, the Company is now the leading supplier of liquid bicarbonate products to dialysis centers in the United States.

2023 GUIDANCE

With the addition of Evoqua’s hemodialysis concentrates business, which closed on July 10, 2023, and after evaluating the expected synergies between Rockwell Medical’s and Evoqua’s hemodialysis concentrates businesses and product lines, the Company updates its 2023 guidance as follows:

• Net Sales — The Company increased its 2023 net sales guidance from between $78.0 million and $82.0 million to between $82.0 million and $86.0 million. Rockwell Medical anticipates that third quarter 2023 net sales will be between $21.0 million and $23.0 million.
• Gross Profit — The Company is increasing its 2023 gross profit guidance from between $7.0 million and $9.0 million to between $8.0 million and $10.0 million.
• Profitability — Since Rockwell Medical announced its updated business strategy in November 2022, the Company provided guidance that it expected to achieve profitability in 2024. Rockwell Medical is updating its guidance on profitability and now expects the Company to be profitable in the fourth quarter 2023 and going forward.

	Initial 2023 Guidance	Updated 2023 Guidance
Net Sales	$78.0 Million to $82.0 Million	$82.0 Million to $86.0 Million
Gross Profit	$7.0 Million to $9.0 Million	$8.0 Million to $10.0 Million

CONFERENCE CALL AND WEBCAST DETAILS

Date: Monday, August 14, 2023

Time: 8:00am ET

Live Number: (888) 660-6347 // (International) 1 (929) 201-6594

Conference Call ID: 4944610

Webcast and Replay: www.RockwellMed.com/Results

Speakers:

• Mark Strobeck, Ph.D. — President and Chief Executive Officer; and

• Paul McGarry, CPA — SVP, Finance and Chief Accounting Officer.

Format: Discussion of second quarter 2023 operational and financial results followed by Q&A.

About Rockwell Medical

Rockwell Medical, Inc. (Nasdaq: RMTI) is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide. Rockwell Medical’s mission is to provide dialysis clinics and the patients they serve with the highest quality products supported by the best customer service in the industry. Rockwell is focused on innovative, long-term growth strategies that enhance its products, its processes, and its people, enabling the Company to deliver exceptional value to the healthcare system and provide a positive impact on the lives of hemodialysis patients. Hemodialysis is the most common form of end-stage kidney disease treatment and is typically performed at freestanding outpatient dialysis centers, hospital-based outpatient centers, skilled nursing facilities, or in a patient’s home. Rockwell Medical’s products are vital to vulnerable patients with end-stage kidney disease, and the Company is relentless in providing unmatched reliability and customer service. Rockwell Medical is the second largest supplier of acid and bicarbonate concentrates for dialysis patients in the United States and intends to become the leading global supplier of hemodialysis concentrates. Certified as a Great Place to Work^® in 2023, Rockwell Medical is Driven to Deliver Life-Sustaining Dialysis Solutions^TM. For more information, visit www.RockwellMed.com.

Forward-Looking Statements

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws. Words such as, “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “could,” “can,” “would,” “develop,” “plan,” “potential,” “predict,” “forecast,” “project,” “intend,” “look forward to,” “remain confident,” “guidance,” or the negative of these terms, and similar expressions, or statements regarding intent, belief, or current expectations, are forward looking statements. There can be no assurance that: Rockwell Medical will grow its hemodialysis concentrates business and further improve its performance; Rockwell Medical will be able to enhance the economics in its current customer agreements; Rockwell Medical will add new long-term supply agreements with new customers and will transition Baxter customers; Rockwell Medical will achieve its projected total net sales and gross profit for 2023; Rockwell Medical will be able to achieve planned cost savings to operate its concentrates business profitability or achieve the other components of its strategy; Rockwell Medical will achieve profitability in the fourth quarter of 2023; Rockwell Medical will expand into new product categories and markets; Rockwell Medical will be successful in evaluating potential business development opportunities; that Rockwell Medical will realize benefits from the Baxter transition; Rockwell Medical will successfully integrate the Evoqua hemodialysis concentrates business and realize synergies and cost savings from that acquisition; or Rockwell Medical’s future cash balance will be sufficient to fund operations going forward. While Rockwell Medical believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties (including, without limitation, those set forth in Rockwell Medical’s SEC filings), many of which are beyond our control and subject to change. Actual results could be materially different. Risks and uncertainties include but are not limited to those risks more fully discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022, as such description may be amended or updated in any subsequent reports filed with the SEC. Rockwell Medical expressly disclaims any obligation to update our forward-looking statements, except as may be required by law.

Non-GAAP Financial Measures

To supplement the Company’s financial results presented on a U.S. generally accepted accounting principles (“GAAP”) basis, the Company has included information about non-GAAP measures of EBITDA and adjusted EBITDA as useful operating metrics. The Company believes that the presentation of these non-GAAP financial measures, when viewed with results under GAAP and the accompanying reconciliation, provides supplementary information to analysts, investors, lenders, and the Company’s management in assessing the Company’s performance and results from period to period. The Company uses these non-GAAP measures internally to understand, manage and evaluate the Company’s performance. These non-GAAP financial measures should be considered in addition to, and not a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.

Financial Tables Follow

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
	June 30,			December 31,
	2023			2022
	(Unaudited)
Cash and Cash Equivalents	$	14,865		$	21,492
Total Assets	$	38,037		$	46,635
Total Liabilities	$	28,509		$	32,529
Total Stockholders’ Equity	$	9,528		$	14,106
Common Stock Outstanding		16,795,673			12,163,673
Common stock and common stock equivalents*		32,033,132			31,356,373
*Common stock and common stock equivalents:
Common stock		16,795,673			12,163,673
Common stock warrants (pre-funded)		1,793,000			6,300,000
Common stock and pre-funded stock warrants		18,588,673			18,463,673
Preferred stock converted		1,363,636			1,363,636
Options to purchase common stock		1,570,599			1,206,905
Restricted stock awards		891			891
Restricted stock units		313,065			125,000
Common stock warrants		10,196,268			10,196,268
Total common stock and common stock equivalents		32,033,132			31,356,373

Our capital structure as of August 14, 2023, which includes the Warrant Exercise and Reload Warrant transaction executed on July 10, 2023 is as follows:

Common Stock Outstanding:
Total Outstanding Common Stock	28,489,663
Common Stock Equivalents Outstanding:
Options and unvested RSU’s	1,884,555
Preferred Stock – convertible to common at $11 per share	1,363,636
Warrants
– Armistice Warrant Reload – strike $5.13 per share – exp. Dec 2027	3,750,000
– All other warrants	295,278
Total Common Stock equivalents	7,293,469
Total – Fully Diluted Shares	35,783,132

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Shares and Per Share Amounts)
		Three Months Ended June 30, 2023				Three Months Ended June 30, 2022				Six Months Ended June 30, 2023				Six Months Ended June 30, 2022
Net Sales		$	18,080			$	18,682			$	37,748			$	34,806
Cost of Sales			17,047				16,937				34,116				33,846
Gross Profit (Loss)			1,033				1,745				3,632				960
Research and Product Development			167				926				445				2,494
Selling and Marketing			530				526				1,028				981
General and Administrative			3,295				4,775				6,545				8,592
Operating Loss			(2,959	)			(4,482	)			(4,386	)			(11,107	)
Other (Expense) Income
Realized Gain on Investments			—				—				—				4
Interest Expense			(395	)			(485	)			(782	)			(1,025	)
Interest Income			49				—				113				—
Total Other Expense			(346	)			(485	)			(669	)			(1,021	)
Net Loss		$	(3,305	)		$	(4,967	)		$	(5,055	)		$	(12,128	)
Basic and Diluted Net Loss per Share		$	(0.18	)		$	(0.43	)		$	(0.27	)		$	(1.20	)
Basic and Diluted Weighted Average Shares Outstanding			18,496,640				11,591,768				18,480,248				10,076,415

Reconciliation to GAAP Financial Measures
Adjusted EBITDA
		Three Months Ended June 30								Six Months Ended June 30
(in thousands)			2023				2022				2023				2022
Net Loss		$	(3,305	)		$	(4,967	)		$	(5,055	)		$	(12,128	)
Income taxes			—				—				—				—
Interest expense, net			303				393				603				837
Depreciation and amortization			262				232				512				462
EBITDA			(2,740	)			(4,342	)			(3,940	)			(10,829	)
One time severance costs			171				884				201				884
Stock-based compensation			312				95				505				(83	)
Adjusted EBITDA		$	(2,257	)		$	(3,363	)		$	(3,234	)		$	(10,028	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230814958807/en/

Heather R. Hunter

SVP, Chief Corporate Affairs Officer

(248) 432-1362

[email protected]

KEYWORDS: United States North America Michigan

INDUSTRY KEYWORDS: Medical Supplies Manufacturing Health Other Transport General Health Transport Other Science Other Manufacturing Logistics/Supply Chain Management Packaging Science

MEDIA:

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Coinbase Accelerates International Expansion with Official Launch in Canada

Integration of Interac e-Transfers makes cryptocurrencies easily accessible to millions of Canadian customers

TORONTO–(BUSINESS WIRE)–
Today, Coinbase announced its Canadian expansion with a series of new offerings that demonstrate its commitment to Canada as a priority Go Deep market.

Through its partnership with Peoples Trust Company, part of Peoples Group, Coinbase is now providing access to Interac e-Transfers® * to 100% of Canadian Coinbase users, making it secure and simpler than ever to move money in and out of your account. This will make cryptocurrencies more accessible to millions of Canadians.

Interac availability was the most requested feature by Canadian users, and today’s news demonstrates Coinbase’s plan to build a platform that is for Canadians, by Canadians. Depositing funds to Coinbase using Interac is free and almost instant. In the last month, over 50% of deposits have been made through Interac e-transfer.

Starting today, Canadian Coinbase users can also maximize the full potential of crypto with the best of Coinbase through membership with Coinbase One. Free for all users for 30 days, Canadians now have access to zero trading fees, boosted staking rewards, priority 24/7 support, and more.

“Canada is well positioned to be a global leader in the cryptoeconomy thanks to the high levels of crypto awareness, a passionate local tech ecosystem, and the progress towards a strong regulatory framework,” said Nana Murugesan, Vice President, International and Business Development, Coinbase. “As Coinbase’s next Go Deep Market, we are making significant investments to help Canadians access the benefits of cryptocurrency.”

Coinbase sees Canada as its next Go Deep Market. Canada is the second-most crypto-aware country across Coinbase’s international markets, and an Ontario Securities Commission survey found that over 30 per cent of Canadians said they will buy cryptocurrency within the year, more than double those who say they currently own crypto assets. This presents a significant opportunity for growth in the Canadian market.

These announcements are the latest of several commitments Coinbase has made to grow in Canada.

• In March, Coinbase signed an enhanced Pre-Registration Undertaking (PRU), and continues working with regulators and policymakers on a strong digital currency regulatory framework for Canadians.

• Hired Lucas Matheson as Coinbase’s Canadian Country Director. Lucas is passionate about the potential of cryptocurrencies to transform the financial landscape and wants to help make cryptocurrencies more accessible in Canada.

• Built a tech hub with almost 200 full-time employees who are helping build Coinbase products. This makes Canada Coinbase’s largest tech hub outside the U.S. Coinbase is also one of Canada’s largest crypto employers.

• Coinbase Ventures has been active across Canada, investing in several Canadian start-ups to promote local innovation and entrepreneurship, and develop technology that will advance the global crypto economy. Canadian portfolio companies include Dapper Labs, Minerva AI, Axelar, Horizon Blockchain Games, and Zapper.

“At Coinbase, our mission is to update the financial system and bring greater economic freedom to the world,” said Lucas Matheson, Canada Country Director, Coinbase. “We’re thrilled to be leading this push and helping drive innovation in Canada’s financial system.”

Supporting Quote From Peoples Group

“Peoples Group is pleased to partner with industry leader Coinbase, to enable this money movement tool for their Canadian customers and expand payment possibilities,” said David Furlong, Chief Operating Officer of Peoples Group.

About Coinbase

Coinbase is building the cryptoeconomy – a more fair, accessible, efficient, and transparent financial system enabled by crypto. Coinbase started in 2012 with the radical idea that anyone, anywhere, should be able to send and receive Bitcoin easily and securely. Today, Coinbase offers a trusted and easy-to-use platform for accessing the broader cryptoeconomy.

About Peoples Group

Peoples Group has been providing a tailored suite of financial solutions and delivering world-class customer interactions, since 1985. We have grown substantial market share in the insured commercial lending space and are the leading issuer of prepaid payment cards as well as an innovative merchant acquirer. We are an entrepreneurial organization that excels at customizing solutions to fit the needs of our clients. As a trusted partner of many FinTechs, we have a proven track record of giving them the tools and guidance to realize their success.

For more information, please visit peoplesgroup.com

* Interac e-Transfer is a registered trademark of Interac Corp. Used under license.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230814475027/en/

For media inquiries please contact:

Amit Shilton, Senior Director, Corporate and Technology

Agnostic

[email protected]

KEYWORDS: California United States North America Canada

INDUSTRY KEYWORDS: Mobile/Wireless Networks Internet Professional Services Fintech Data Management Payments Electronic Commerce Apps/Applications Technology Cryptocurrency Finance

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Sonida Senior Living, Inc. Announces Second Quarter 2023 Results

DALLAS–(BUSINESS WIRE)–
Sonida Senior Living, Inc. (the “Company,” “we,” “our,” or “us”) (NYSE: SNDA) announced results for the second quarter ended June 30, 2023.

“The Company’s consistent occupancy and revenue growth year-over-year and the additional financial flexibility created by successful agreements with our two largest lending partners enable us to continue building on our strong operational momentum and prepare for strategic expansion,” said Brandon Ribar, CEO and President. “Demand for senior housing continues to accelerate, and inventory supply remains slow. With our strong, stable leadership across the portfolio and dedication to operational excellence, Sonida is well positioned to serve the growing aging population and drive significant operating income growth for the Company.”

Second Quarter Highlights

• Weighted average occupancy for the Company’s consolidated portfolio increased 120 basis points to 83.9% year-over-year.

• Resident revenue increased $5.0 million, or 9.5% year-over-year.

• Net loss for the second quarter was $12.2 million.

• Adjusted EBITDA, a non-GAAP measure, was $7.5 million for Q2 2023, an increase of 78.0% year-over-year.

• Net cash provided by operating activities was $5.5 million year-to-date as compared to a use of cash of $2.1 million for the same period in 2022.

• Results for the Company’s consolidated portfolio of communities:
  • Q2 2023 vs. Q2 2022:
    • Revenue Per Available Unit (“RevPAR”) increased 9.9% to $3,300.

    • Revenue Per Occupied Unit (“RevPOR”) increased 8.3% to $3,932.

    • Community Net Operating Income, a non-GAAP measure, increased $2.9 million. Adjusted Community Net Operating Income, a non-GAAP measure, which excludes $0.4 million and $0.5 million of state grant revenue received in Q2 2023 and Q2 2022, respectively, was $13.5 million and $10.6 million for Q2 2023 and Q2 2022, respectively.

    • Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin (non-GAAP measures with the latter adjusted for non-recurring state grant revenue) were 23.8% and 23.2%, for Q2 2023, respectively, and were 20.4% and 19.6% for Q2 2022, respectively.

  • Q2 2023 vs. Q1 2023:
    • RevPAR increased 0.5% to $3,300.

    • RevPOR increased 0.6% to $3,932.

    • Community Net Operating Income increased $0.2 million. Adjusted Community Net Operating Income, excluding $0.4 million and $2.0 million of state grant revenue received in Q2 2023 and Q1 2023, respectively, was $13.1 million and $11.4 million for Q2 2023 and Q1 2023, respectively.

    • Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin (adjusted for non-recurring state grant revenue) were 23.8% and 23.2% for Q2 2023, respectively, and 23.7% and 20.9% for Q1 2023, respectively.

SONIDA SENIOR LIVING, INC. SUMMARY OF CONSOLIDATED FINANCIAL RESULTS THREE MONTHS ENDED JUNE 30, 2023 (in thousands)
	Three Month Ended June 30,								Three Month Ended March 31,
	2023				2022				2023
Consolidated results
Resident revenue (1)	$	56,960			$	51,996			$	56,606
Management fees		531				600				505
Operating expenses		44,662				41,510				43,808
General and administrative expenses		6,574				9,439				7,063
Gain (loss) on extinguishment of debt		—				—				36,339
Income (loss) before provision for income taxes (1)		(12,159	)			(7,410	)			24,214
Net income (loss) (1)		(12,212	)			(7,410	)			24,145
Adjusted EBITDA (1) (2)		7,538				4,236				7,794
Net cash provided by (used in) operating activities		2,288				(1,380	)			3,249
Community net operating income (NOI) (2)		13,549				10,642				13,402
Community net operating income margin (2)		23.8	%			20.4	%			23.7	%
Weighted average occupancy		83.9	%			82.7	%			84.0	%
(1) Includes $0.4 million, $0.5 million, and $2.0 million of state grant revenue received in Q2 2023, Q2 2022, and Q1 2023, respectively.
(2) Adjusted EBITDA, Community Net Operating Income, and Community Net Operating Income Margin are financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). See “Reconciliation of Non-GAAP Financial Measures” for the Company’s definition of such measures, reconciliations to the most comparable GAAP financial measures, and other information regarding the use of the Company’s non-GAAP financial measures.

Results of Operations

Three months ended June 30, 2023 as compared to three months ended June 30, 2022

Revenues

Resident revenue for the three months ended June 30, 2023 was $57.0 million as compared to $52.0 million for the three months ended June 30, 2022, an increase of $5.0 million, or 9.5%. The increase in revenue was primarily due to increased occupancy and increased average rent rates.

Expenses

Operating expenses for the three months ended June 30, 2023 were $44.7 million as compared to $41.5 million for the three months ended June 30, 2022, an increase of $3.2 million, or 7.7%. The increase is primarily due to a $2.3 million increase in labor and employee-related expenses and $0.9 million in other expenses.

General and administrative expenses for the three months ended June 30, 2023 were $6.6 million as compared to $9.4 million for the three months ended June 30, 2022, representing a decrease of $2.8 million. This decrease is primarily due to a $1.6 million decrease in stock-based compensation expense from the prior period and a $1.2 million net decrease in recurring corporate expenses.

The Company reported a net loss of $12.2 million for the three months ended June 30, 2023, compared to net loss of $7.4 million for the three months ended June 30, 2022. A major factor impacting the comparison of net loss for the three months ended June 30, 2023 and June 30, 2022 includes federal grants received of $9.1 million in Q2 2022.

Adjusted EBITDA for the three months ended June 30, 2023 was $7.5 million compared to $4.2 million for the three months ended June 30, 2022. See “Reconciliation of Non-GAAP Financial Measures” below.

Six months ended June 30, 2023 as compared to six months ended June 30, 2022

Revenues

Resident revenue for the six months ended June 30, 2023 was $113.6 million as compared to $102.8 million for the six months ended June 30, 2022, an increase of $10.8 million, or 10.5%. The increase in revenue was primarily due to increased occupancy and increased average rent rates.

Expenses

Operating expenses for the six months ended June 30, 2023 were $88.5 million as compared to $83.4 million for the six months ended June 30, 2022, an increase of $5.1 million, or 6.1%. The increase is primarily due to a $3.6 million increase in labor and employee-related expenses, a $0.4 million increase in service contracts, a $0.5 million increase in computer software/internet costs and $0.6 million increase in other expenses.

General and administrative expenses for the six months ended June 30, 2023 were $13.6 million as compared to $17.7 million for the six months ended June 30, 2022, representing a decrease of $4.1 million. This decrease is primarily due to a $2.6 million decrease in stock-based compensation expense from the prior year period and a $1.5 million net decrease in recurring corporate expenses.

The Company reported a net income of $11.9 million for the six months ended June 30, 2023 compared to a net loss of $24.1 million for the six months ended June 30, 2022, primarily due to the $36.3 million of gain on extinguishment of debt during the three months ended March 31, 2023.

Significant Transactions

Fannie Mae Loan Modification

On June 29, 2023, the Company entered into a binding forbearance agreement with the Federal National Mortgage Association (“Fannie Mae”) and (“Fannie Forbearance”) for all 37 of its encumbered communities, effective as of June 1, 2023. Under the Fannie Forbearance, Fannie Mae agreed to forbear on its legal and equitable remedies otherwise available under the community loan agreements and mortgages and Master Credit Facility (“MCF”) in connection with reduced debt service payments made by the Company during the Fannie Forbearance period, which expires on October 1, 2023. The Fannie Forbearance is the first of a two-step process to modify all existing mortgage agreements with Fannie Mae under a proposed loan modification agreement, as defined in the Fannie Forbearance (“Loan Modification Agreement”). The terms outlined in the agreed upon term sheet accompanying the Fannie Forbearance will be included in the proposed subsequent Loan Modification Agreement. In the second step, the Company and Fannie Mae have agreed to exercise commercially reasonable efforts to enter into the Loan Modification Agreement for each of their existing mortgage agreements before October 1, 2023. The execution of the Loan Modification Agreement is subject to certain conditions, including Sonida continuing to perform under the Forbearance Agreement, the completion of the definitive documentation, and the absence of any other events of default under the community mortgages and MCF. The forbearance and subsequent loan modification provide the Company with additional financial flexibility and increases its liquidity position.

Under the terms of the Fannie Forbearance and anticipated Loan Modification Agreement, the mortgage principal payments on 18 community mortgages, ranging from July 2024 to December 2026, will be extended to December 2026. The remaining 19 communities under the MCF have existing maturities in December 2028. The Company will not be required to make scheduled principal payments due under the 18 community mortgages and 19 communities under the MCF through the revised maturity date of December 2026 and 36 months from June 1, 2023, respectively. The monthly interest rate will be reduced by a 1.5% weighted average on all 37 communities for 12 months.

Ally Loan Amendment

On June 29, 2023 and concurrent with the Fannie Forbearance, the Company executed a second amendment (“Ally Amendment”) to its refinance facility (“Ally Term Loan”) and limited payment guaranty with Ally Bank (“Second Amended and Restated Limited Payment Guaranty”) with terms that include a waiver of its current $13.0 million liquid assets requirement through June 30, 2024. During the waiver period (June 30, 2023 through July 1, 2024, the “Waiver Period”), a new and temporary liquid assets minimum threshold will be established at $6.0 million and measured weekly. Beginning on July 1, 2024, a new liquid assets requirement of $7.0 million will be effective, with such threshold increasing $1.0 million per month through the earlier of the release of the Waiver Period or December 31, 2024. In addition, the Company must replace its current $2.3 million interest rate cap (“IRC”) on the $88.1 million notional value of the Ally Term Loan at a 2.25% SOFR strike rate once the current IRC expires on November 30, 2023. On July 3, the Company funded the $2.3 million interest rate cap reserve to Ally Bank.

Conversant Equity Commitment

In connection with the Fannie Forbearance and Ally Amendment signed on June 29, 2023, the Company entered into a $13.5 million equity commitment agreement (“Equity Commitment”) with Conversant Dallas Parkway (A) LP and Conversant Dallas Parkway (B) LP, (together “Conversant”) for a term of 18 months. The Equity Commitment had a commitment fee of $675,000 payable through the issuance of 67,500 shares of common stock of the Company. Sonida shall have the right, but not the obligation, to utilize Conversant’s equity commitment and may draw on the commitment in whole or in part. The Company made a $6.0 million equity draw on July 3, 2023 in exchange for 600,000 shares of common stock of the Company.

The foregoing description of the Fannie Forbearance, the Ally Amendment, Second Amended & Restated Limited Payment Guaranty, and Equity Commitment and related transactions contemplated do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Fannie Forbearance, the Ally Amendment, Second Amended and Restated Limited Payment Guaranty, and Equity Commitment which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to the Company’s Form 8-K filed on July 5, 2023, incorporated herein by reference.

Liquidity and Capital Resources

Cash flows

The table below presents a summary of the Company’s net cash provided by (used in) operating, investing, and financing activities (in thousands):

	Six months ended June 30,
	2023				2022
Net cash provided by (used in) operating activities	$	5,537			$	(2,070	)
Net cash used in investing activities		(9,355	)			(24,491	)
Net cash used in financing activities		(6,304	)			(19,946	)
Decrease in cash and cash equivalents	$	(10,122	)		$	(46,507	)

In addition to $7.2 million of unrestricted cash on hand as of June 30, 2023, our future liquidity will depend in part upon our operating performance, which will be affected by prevailing economic conditions, including those related to the COVID-19 pandemic, and financial, business and other factors, some of which are beyond our control. Principal sources of liquidity are expected to be cash flows from operations, proceeds from debt refinancings or loan modifications, proceeds from the issuance of common or preferred stock, COVID-19 or related relief grants from various state agencies, and/or proceeds from the sale of owned assets. In June 2023, the Company entered into the Fannie Forbearance, the Ally Amendment, Second Amended and Restated Limited Payment Guaranty, and the Equity Agreement, as disclosed above. These transactions are expected to provide additional financial flexibility to the Company and increase its liquidity position. In March 2022, the Company completed the refinancing of certain existing mortgage debt, which was further amended in December 2022 and June 2023.

The Company has implemented plans, which include strategic and cash-preservation initiatives, designed to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its second quarter 2023 financial statements are issued. While the Company’s plans are designed to provide it with adequate liquidity to meet its financial obligations, the remediation plan is dependent on conditions and matters that may be outside of the Company’s control, and no assurance can be given that certain options will be available on terms acceptable to the Company, or at all. If the Company is unable to successfully execute all of the planned initiatives or if the plan does not fully mitigate the Company’s liquidity challenges, the Company’s operating plans and resulting cash flows along with its cash and cash equivalents and other sources of liquidity may not be sufficient to fund operations for the 12-month period following the date the financial statements are issued.

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings and modifications, purchases and sales of assets and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.

Recent changes in the current economic environment, and other future changes, could result in decreases in the fair value of assets, slowing of transactions, and the tightening of liquidity and credit markets. These impacts could make securing debt or refinancings for the Company or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. The Company’s actual liquidity and capital funding requirements depend on numerous factors, including its operating results, its capital expenditures for community investment, and general economic conditions, as well as other factors described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 30, 2023 and “Item. 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 14, 2023.

Conference Call Information

The Company will host a conference call with senior management to discuss the Company’s financial results for the three months ended June 30, 2023, on Monday August 14, 2023, at 12:30 p.m. Eastern Time. To participate, dial 877-407-0989 (no passcode required). A link to the simultaneous webcast of the teleconference will be available at: https://www.webcast-eqs.com/register/sonidaseniorliving_q22023_en/en.

For the convenience of the Company’s shareholders and the public, the conference call will be recorded and available for replay starting August 15, 2023 through August 29, 2023. To access the conference call replay, call 877-660-6853, passcode 13740287. A transcript of the call will be posted in the Investor Relations section of the Company’s website.

About the Company

Dallas-based Sonida Senior Living, Inc. is a leading owner-operator of independent living, assisted living and memory care communities and services for senior adults. As of June 30, 2023, the Company operated 72 communities, with capacity for approximately 8,000 residents across 18 states, which provide comfortable, safe, affordable environment where residents can form friendships, enjoy new experiences and receive personalized care from dedicated team members who treat them like family. For more information, visit www.sonidaseniorliving.com or connect with the Company on Facebook, Twitter or LinkedIn.

Definitions of RevPAR and RevPOR

RevPAR, or average monthly revenue per available unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

RevPOR, or average monthly revenue per occupied unit, is defined by the Company as resident revenue for the period, divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

Safe Harbor

This release contains forward-looking statements which are subject to certain risks and uncertainties that could cause our actual results and financial condition of Sonida Senior Living, Inc. (the “Company,” “we,” “our” or “us”) to differ materially from those indicated in the forward-looking statements, including, among others, the risks, uncertainties and factors set forth under “Item. 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023 and “Item. 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 14, 2023, and also include the following: the impact of COVID-19, including the actions taken to prevent or contain the spread of COVID-19, the transmission of its highly contagious variants and sub-lineages and the development and availability of vaccinations and other related treatments, or another epidemic, pandemic or other health crisis; the Company’s ability to generate sufficient cash flows from operations, additional proceeds from debt financings or refinancings, and proceeds from the sale of assets to satisfy its short- and long-term debt obligations and to make capital improvements to the Company’s communities; increases in market interest rates that increase the cost of certain of our debt obligations; increased competition for, or a shortage of, skilled workers, including due to the COVID-19 pandemic or general labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to extend or refinance its existing debt as such debt matures, including the Company’s ability to complete the modifications to its loan agreements; the Company’s compliance with its debt agreements, including certain financial covenants and the risk of cross-default in the event such non-compliance occurs; the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all; the risk of oversupply and increased competition in the markets which the Company operates; the Company’s ability to improve and maintain controls over financial reporting and remediate the identified material weakness discussed in its recent Quarterly and Annual Reports filed with the SEC; the departure of the Company’s key officers and personnel; the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes; risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; and changes in accounting principles and interpretations.

For information about Sonida Senior Living, visit www.sonidaseniorliving.com

Sonida Senior Living, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data)
	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
Revenues:
Resident revenue	$	56,960			$	51,996			$	113,566			$	102,830
Management fees		531				600				1,036				1,228
Managed community reimbursement revenue		5,363				7,041				10,325				14,063
Total revenues		62,854				59,637				124,927				118,121
Expenses:
Operating expense		44,662				41,510				88,470				83,439
General and administrative expense		6,574				9,439				13,637				17,712
Depreciation and amortization expense		9,927				9,671				19,808				19,249
Managed community reimbursement expense		5,363				7,041				10,325				14,063
Total expenses		66,526				67,661				132,240				134,463
Other income (expense):
Interest income		188				2				382				3
Interest expense		(8,558	)			(7,920	)			(17,425	)			(15,523	)
Gain (loss) on extinguishment of debt, net		—				—				36,339				(641	)
Gain on sale of assets, net		—				—				251				—
Other income (expense), net		(117	)			8,532				(179	)			8,669
Income (loss) before provision for income taxes		(12,159	)			(7,410	)			12,055				(23,834	)
Provision for income taxes		(53	)			—				(122	)			(254	)
Net income (loss)		(12,212	)			(7,410	)			11,933				(24,088	)
Dividends on Series A convertible preferred stock		—				(1,134	)			—				(2,267	)
Undeclared dividends on Series A convertible preferred stock		(1,230	)			—				(2,428	)			—
Undistributed net income allocated to participating securities		—				—				(1,419	)			—
Net income (loss) attributable to common stockholders	$	(13,442	)		$	(8,544	)		$	8,086			$	(26,355	)
Weighted average common shares outstanding — basic		6,381				6,358				6,374				6,350
Weighted average common shares outstanding — diluted		6,381				6,358				6,856				6,350
Basic net income (loss) per common share	$	(2.11	)		$	(1.34	)		$	1.27			$	(4.15	)
Diluted net income (loss) per common share	$	(2.11	)		$	(1.34	)		$	1.18			$	(4.15	)

Sonida Senior Living, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share amounts)
	June 30, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	7,203			$	16,913
Restricted cash		13,417				13,829
Accounts receivable, net		7,586				6,114
Prepaid expenses and other assets		5,008				4,099
Derivative assets		1,600				2,611
Total current assets		34,814				43,566
Property and equipment, net		606,069				615,754
Other assets, net		1,226				1,948
Total assets	$	642,109			$	661,268
Liabilities and Equity
Current liabilities:
Accounts payable	$	10,005			$	7,272
Accrued expenses		36,008				36,944
Current portion of notes payable, net of deferred loan costs		88,636				46,029
Deferred income		4,142				3,419
Federal and state income taxes payable		61				—
Other current liabilities		554				653
Total current liabilities		139,406				94,317
Notes payable, net of deferred loan costs and current portion		547,381				625,002
Other liabilities		77				113
Total liabilities		686,864				719,432
Commitments and contingencies
Redeemable preferred stock:
Series A convertible preferred stock, $0.01 par value; 41 shares authorized, 41 shares issued and outstanding as of June 30, 2023 and December 31, 2022		45,978				43,550
Shareholders’ deficit:
Authorized shares – 15,000 as of June 30, 2023 and December 31, 2022; none issued or outstanding, except Series A convertible preferred stock as noted above		—				—
Authorized shares – 15,000 as of June 30, 2023 and December 31, 2022; 7,178 and 6,670 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		72				67
Additional paid-in capital		294,320				295,277
Retained deficit		(385,125	)			(397,058	)
Total shareholders’ deficit		(90,733	)			(101,714	)
Total liabilities, redeemable preferred stock and shareholders’ deficit	$	642,109			$	661,268

Sonida Senior Living, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Six Months Ended June 30,
	2023				2022
Cash flows from operating activities:
Net income (loss)	$	11,933			$	(24,088	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,808				19,249
Amortization of deferred loan costs		788				519
Gain on sale of assets, net		(251	)			—
Write-off of other assets		—				535
Unrealized loss on interest rate cap, net		1,103				45
(Gain) loss on extinguishment of debt		(36,339	)			641
Provision for bad debt		334				522
Non-cash stock-based compensation expense		1,503				4,067
Other non-cash items		(1	)			4
Changes in operating assets and liabilities:
Accounts receivable, net		(1,807	)			(1,387	)
Prepaid expenses and other assets		1,316				700
Other assets, net		294				(301	)
Accounts payable and accrued expense		6,100				(2,524	)
Federal and state income taxes payable		61				(421	)
Deferred income		723				352
Other current liabilities		(28	)			17
Net cash provided by (used in) operating activities		5,537				(2,070	)
Cash flows from investing activities:
Acquisition of new communities		—				(12,342	)
Capital expenditures		(9,698	)			(12,149	)
Proceeds from sale of assets		343				—
Net cash used in investing activities		(9,355	)			(24,491	)
Cash flows from financing activities:
Proceeds from notes payable		—				80,000
Repayments of notes payable		(5,893	)			(94,247	)
Purchase of common stock		—				(219	)
Dividends paid on Series A convertible preferred stock		—				(2,985	)
Purchase of interest rate cap		—				(258	)
Deferred loan costs paid		(327	)			(2,180	)
Other financing costs		(84	)			(57	)
Net cash used in financing activities		(6,304	)			(19,946	)
Decrease in cash and cash equivalents and restricted cash		(10,122	)			(46,507	)
Cash, cash equivalents, and restricted cash at beginning of period		30,742				92,876
Cash, cash equivalents, and restricted cash at end of period	$	20,620			$	46,369

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This earnings release contains the financial measures (1) Community Net Operating Income and Adjusted Community Net Operating Income, (2) Community Net Operating Income Margin and Adjusted Community Net Operating Income Margin, (3) Adjusted EBITDA, (4) Revenue per Occupied Unit (RevPOR) and (5) Revenue per Available Unit (RevPAR), all of which are not calculated in accordance with U.S. GAAP. Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting the Company’s performance and liquidity. However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, or revenue. Investors are cautioned that amounts presented in accordance with the Company’s definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner. Investors are urged to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

Community Net Operating Income and Consolidated Community Net Operating Income Margin are non-GAAP performance measures for the Company’s consolidated owned portfolio of communities that the Company defines as net income (loss) excluding: general and administrative expenses (inclusive of stock-based compensation expense), interest income, interest expense, other income/expense, provision for income taxes, settlement fees and expenses, revenue and operating expenses from the Company’s disposed properties; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and impacts the comparability of performance between periods. For the periods presented herein, such other items include depreciation and amortization expense, gain(loss) on extinguishment of debt, gain(loss) on disposition of assets, long-lived asset impairment, and loss on non-recurring settlements with third parties. The Community Net Operating Income Margin is calculated by dividing Community Net Operating Income by community resident revenue. Adjusted Community Net Operating Income and Adjusted Community Net Operating Income Margin are further adjusted to exclude the impact from non-recurring state grant funds received.

The Company believes that presentation of Community Net Operating Income, Community Net Operating Income Margin, Adjusted Community Net Operating Income, and Adjusted Community Net Operating Income Margin as performance measures are useful to investors because (i) they are one of the metrics used by the Company’s management to evaluate the performance of our core consolidated owed portfolio of communities, to review the Company’s comparable historic and prospective core operating performance of the consolidated owned communities, and to make day-to-day operating decisions; (ii) they provide an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance, and impacts the comparability of performance between periods.

Community Net Operating Income, Net Community Operating Income Margin, Adjusted Community Net Operating Income, and Adjusted Community Net Operating Income Margin have material limitations as a performance measure, including: (i) excluded general and administrative expenses are necessary to operate the Company and oversee its communities; (ii) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (iii) excluded depreciation, amortization, and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities, and other assets and may be indicative of future needs for capital expenditures; and (iv) the Company may incur income/expense similar to those for which adjustments are made, such as gain (loss) on debt extinguishment, gain(loss) on disposition of assets, loss on settlements, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

(in thousands)	Three Months Ended June 30,								Three Months Ended March 31,
	2023				2022				2023
Consolidated Community Net Operating Income
Net income (loss)	$	(12,212	)		$	(7,410	)		$	24,145
General and administrative expenses		6,574				9,439				7,063
Depreciation and amortization expense		9,927				9,671				9,881
Interest income		(188	)			(2	)			(194	)
Interest expense		8,558				7,920				8,867
Gain on extinguishment of debt		—				—				(36,339	)
Gain on sale of assets, net		—				—				(251	)
Other (income) expense (1)		117				(8,532	)			62
Provision for income taxes		53				—				69
Settlement fees and expenses, net (2)		559				39				404
Other taxes		161				(483	)			(305	)
Consolidated community net operating income		13,549				10,642				13,402
Resident revenue	$	56,960			$	51,996			$	56,606
Consolidated community net operating income margin		23.8	%			20.4	%			23.7	%
COVID-19 state relief grants (3)		411				524				2,037
Adjusted community net operating income	$	13,138			$	10,118			$	11,365
Adjusted community net operating income margin		23.2	%			19.6	%			20.8	%
(1) Includes $9.1 million federal relief funds received for Q2 2022.
(2) Settlement fees and expenses relate to non-recurring settlements with third parties for contract terminations, insurance claims, and related fees.
(3) COVID-19 relief revenue are grants and other funding received from third parties to aid in the COVID-19 response and includes state relief funds received.

ADJUSTED EBITDA (UNAUDITED)

Adjusted EBITDA is a non-GAAP performance measures that the Company defines as net income (loss) excluding: depreciation and amortization expense, interest income, interest expense, other expense/income, provision for income taxes; and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, or organizational restructuring items that management does not consider as part of the Company’s underlying core operating performance and impacts the comparability of performance between periods. For the periods presented herein, such other items include stock-based compensation expense, provision for bad debts, gain (loss) on extinguishment of debt, gain on sale of assets, long-lived asset impairment, casualty losses, and transaction and conversion costs.

The Company believes that presentation of Adjusted EBITDA’s impact as a performance measure is useful to investors because it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to the Company’s financing and capital structure and other items that management does not consider as part of the Company’s underlying core operating performance and that management believes impact the comparability of performance between periods.

Adjusted EBITDA has material limitations as a performance measure, including: (i) excluded interest is necessary to operate the Company’s business under its current financing and capital structure; (ii) excluded depreciation, amortization and impairment charges may represent the wear and tear and/or reduction in value of the Company’s communities and other assets and may be indicative of future needs for capital expenditures; and (iii) the Company may incur income/expense similar to those for which adjustments are made, such as bad debts, gain(loss) on sale of assets, or gain(loss) on debt extinguishment, non-cash stock-based compensation expense and transaction and other costs, and such income/expense may significantly affect the Company’s operating results.

(In thousands)	Three Months Ended June 30,								Three Months Ended March 31,
	2023				2022				2023
Adjusted EBITDA
Net income (loss)	$	(12,212	)		$	(7,410	)		$	24,145
Depreciation and amortization expense		9,927				9,671				9,881
Stock-based compensation expense		601				2,240				902
Provision for bad debt		96				416				238
Interest income		(188	)			(2	)			(194	)
Interest expense		8,558				7,920				8,867
Gain on extinguishment of debt, net		—				—				(36,339	)
Gain on sale of assets, net		—				—				(251	)
Other (income) expense, net (1)		117				(8,532	)			62
Provision for income taxes		53				—				69
Casualty losses (2)		456				(114	)			—
Transaction and conversion costs (3)		130				47				414
Adjusted EBITDA	$	7,538			$	4,236			$	7,794
(1) Includes COVID-19 relief revenue and grants received from federal relief funds of $9.1 million for Q2 2022.
(2) Casualty losses relate to non-recurring insured claims for unexpected events.
(3) Transaction and conversion costs relate to legal and professional fees incurred for transactions, restructure projects, or related projects.

SUPPLEMENTAL INFORMATION
	Second Quarter
(Dollars in thousands)		2023				2022			Increase (decrease)				First Quarter 2023				Sequential increase (decrease)
Selected Operating Results
I. Consolidated community portfolio
Number of communities		62				62				—				62				—
Unit capacity		5,753				5,774				(21	)			5,749				4
Weighted average occupancy (1)		83.9	%			82.7	%			1.2	%			84.0	%			(0.1	)%
RevPAR	$	3,300			$	3,002			$	298			$	3,282			$	18
RevPOR	$	3,932			$	3,629			$	303			$	3,909			$	23
Consolidated community net operating income	$	13,549			$	10,642			$	2,907			$	13,402			$	147
Consolidated community net operating income margin (3)		23.8	%			20.4	%			3.4	%			23.7	%			0.1	%
Consolidated community net operating income, net of general and administrative expenses (2)	$	7,576			$	3,443			$	4,133			$	7,241			$	335
Consolidated community net operating income margin, net of general and administrative expenses (2)		13.3	%			6.6	%			6.7	%			12.8	%			0.5	%
II. Consolidated Debt Information
(Excludes insurance premium financing)
Total variable rate mortgage debt (4)	$	137,253			$	130,261				N/A			$	137,453				N/A
Total fixed rate debt	$	499,078			$	540,714				N/A			$	500,721				N/A
(1) Weighted average occupancy represents actual days occupied divided by total number of available days during the quarter.
(2) General and administrative expenses exclude stock-based compensation expense in order to remove the fluctuation in fair value due to market volatility.
(3) Includes $0.4 million, $0.5 million, and $2.0 million of state grant revenue received in Q2 2023, Q2 2022, and Q1 2023, respectively. Excluding the grant revenue, Q2 2023 consolidated community NOI margin was 23.2%.
(4) As of June 30, 2023, the entire balance of our outstanding variable-rate debt obligations were covered by interest rate cap agreements.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230814447134/en/

Investor Contact: Kevin J. Detz, Chief Financial Officer, at 972-308-8343

Press Contact: [email protected].

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS: Health Consumer Other Construction & Property Residential Building & Real Estate Seniors Managed Care Construction & Property

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