Market Newsdesk

August 8, 2023 8:09 am

Bitfarms Reports Second Quarter 2023 Results

– Mines 1,223 BTC and grows HODL 114 BTC to 549 BTC in Q2 2023 –
– Achieves 5.3 EH/s at June 30, 2023, up 10% from March 31, 2023 –
– Sets target of 7.0 EH/s in Q1 2024 –

This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated August 16, 2021 to its short form base shelf prospectus dated August 12, 2021.

TORONTO, Ontario and BROSSARD, Québec, Aug. 08, 2023 (GLOBE NEWSWIRE) — Bitfarms Ltd. (NASDAQ: BITF // TSX: BITF), a vertically integrated global bitcoin company, reported its financial results for the second quarter ended June 30, 2023, with revenue of $35 million, net loss of $25 million, and Adjusted EBITDA* of $8 million. All financial references are in U.S. dollars.

“During the second quarter, we continued our strategy of leading into the next BTC halving responsibly deploying capital to drive greater operating efficiencies in conjunction with geographic expansion and diversification,” said Geoff Morphy, President and CEO of Bitfarms. “With ongoing investments in infrastructure and fleet upgrades, we increased our hashrate by 10% during Q2 2023 to 5.3 EH/s as of June 30, 2023, and as BTC prices continued to recover amidst increases in network difficulty, our low operating cost model drove Adjusted EBITDA* to $8 million, up from $7 million in Q1 2023. Averaging 13.4 BTC mined per day in Q2 2023, we mined a total of 1,223 BTC in the quarter. Continuing to position our company for opportunistic development across multiple jurisdictions, we increased financial liquidity and flexibility by paying down indebtedness and retaining a portion of BTC from production. We added to our BTC holdings each month in Q2 2023, as gross mining profit* of $14 million and gross mining margin* of 42% supported continued HODLing as we added 114 BTC to treasury during the quarter.

“In July, we acquired contracts for up to 150 MW of low-cost, eco-friendly hydropower in Paraguay, which is a highly attractive market with substantial potential for development. Based on our experience, Paraguay has among the lowest build-out costs, quickest project timelines to completion, and a straightforward importation regime. In August we initiated our deployment plan for a new 50 MW farm at Paso Pe in Paraguay with a 30 MW air-cooled facility along with the purchase of 20 MW of MicroBT hydro-cooling miners and containers. As we expect to commission this farm in Q1 2024, we are introducing a target hashrate of 7.0 EH/s by the end of March 2024.

“In Rio Cuarto, Argentina, we ramped production to 29 MW and became a self-importer of miners to reduce costs and simplify the importation process. To support our target of 6.3 EH/s in Q3 2023, we have approximately 7,500 miners en route and in the process of being installed at Rio Cuarto and at Baie-Comeau, Québec.

“In summary, we are projecting 20% sequential growth in our hashrate in Q3 2023 as we execute against our fleet expansion and upgrade plans. With Paso Pe expected to come online in Q1 2024 and as we evaluate other diverse development opportunities, we are poised for further growth,” Morphy concluded.

Financial Highlights for the Quarter ended
June 30, 2023

Total revenue of $35 million, compared to $30 million in Q1 2023, reflecting higher hashrate and average BTC prices, partially offset by a decrease in total BTC produced.
Gross mining profit* and gross mining margin* of $14 million and 42%, respectively, compared to $12 million and 42% in Q1 2023, respectively.
General and administrative (G&A) expenses of $9 million, including non-cash share-based compensation of $2 million, up 10% from Q1 2023.
Operating loss of $25 million, including $10 million in impairment charges, compared to an operating loss of $15 million in Q1 2023, which included a $1 million realized gain on disposition of digital assets and a $3 million reversal of revaluation loss on digital assets.
Net loss of $25 million, or ($0.10) per basic and diluted share, compared to $2 million, or ($0.01) per basic and diluted share, in Q1 2023.
Non-IFRS Adjusted EBITDA* of $8 million, or 22% of revenue, compared to $7 million, or 22% of revenue, in Q1 2023.
The Company mined 1,223 BTC at an average direct cost of production per BTC**** of $15,700, compared to $12,500 in Q1 2023.
Total cash costs of production, including G&A expenses, per BTC were $21,800 in Q2 2023, up from $17,600 in Q1 2023.

Liquidity as of
June 30, 2023

The Company held $31 million in cash and 549 BTC valued at approximately $17 million based upon a BTC price of approximately $30,500 as of June 30, 2023.

Q2 2023
Financing Activities

Sold 1,109 BTC at an average price of $27,900 per BTC for total proceeds of $31 million, a portion of which was used to repay equipment related indebtedness.
Paid down $5 million in equipment related indebtedness, reducing the total outstanding balance to $16 million as of June 30, 2023.
Held $19 million in remaining credits for pre-paid deposits to be applied against future Miner purchase agreements as of June 30, 2023.
Raised $22 million in net proceeds through the Company’s at-the-market equity offering program.

Financing Activities Subsequent to
Q2 2023

Sold production totaling 333 BTC during July 2023, generating proceeds of $10 million.
Added 45 BTC to treasury in July 2023, increasing BTC in custody to 594, representing a total value of $17 million based on a BTC price of $29,200, on July 31, 2023.
To support accretive growth, raised $26 million in net proceeds through the Company’s at-the-market equity offering program during July 2023 through August 7, 2023.

Q2 2023
and Recent Operating Highlights

Operations
- Reached 5.3 EH/s corporate hashrate as of June 30, 2023.
- Averaged 13.4 BTC per day in daily production for Q2 2023.
- Mined 378 BTC in July 2023.
Miners
- Imported and installed approximately 5,100 new M30S Whatsminer miners into Argentina in Q2 2023 which increased capacity over 100% to 29 MW and added approximately 510 PH/s to the Rio Cuarto facility, bringing its total hashrate to approximately 700 PH/s.
- Purchased approximately 12,500 new high efficiency miners with a blended energy efficiency of 30 W/TH at an average direct cost $13.94/TH, with approximately 7,800 miners for deployment to Argentina and approximately 4,700 miners for deployment to Canada, in both cases in Q2 2023.
- Purchased 8 MicroBT 2.4 MW Hydro Containers and 1,920 MicroBT M53S+ Hydro Miners in August for deployment to new Paso Pe farm in Paraguay.
Expansion Strategy
- Became a self-importer of miners in Argentina, reducing the cost and facilitating the importation of miners, and terminated existing contracts with importation brokers, resulting in a $7 million impairment loss on short-term prepaid deposits.
- Purchased Baie-Comeau facility and initiated production in July.
- Acquired two Power Purchase Agreements for up to 150 MW of hydropower in Paraguay in July and initiated deployment plan in August for new 50 MW farm at Paso Pe.

Quarterly Operating Performance

	Q2 2023	Q1 2023	Q2 2022
Total BTC mined	1,223	1,297	1,257
Average Watts/Average TH efficiency**	37	39	39
BTC sold	1,109	1,267	3,357

	As of June 30,	As of March 31,	As of June 30,
	2023	2023	2022
Operating EH/s	5.3	4.8	3.6
Operating capacity (MW)	207	188	160
Hydropower (MW)	178	178	160

Quarterly Average Revenue*** and Cost of Production per BTC****

	Q2 2023		Q1 2023		Q4 2022		Q3 2022		Q2 2022
Avg. Rev***/BTC	$	28,000	$	22,500	$	18,100	$	21,300	$	32,700
Direct Cost****/BTC	$	15,700	$	12,500	$	11,100	$	9,600	$	10,100
Cash Cost/BTC	$	21,800	$	17,600	$	16,800	$	14,500	$	17,200

Conference Call

Management will host a conference call and live webcast with an accompanying presentation today, Tuesday, August 8, 2023, at 11 a.m. ET to review the Company’s financial results and quarterly activity. Following management’s formal remarks there will be a live question-and-answer session, which may include pre-submitted questions.

Participants are asked to preregister for the call through the following link:

Q2 2023 Conference Call

Please note that registered participants will receive their dial in number upon registration and will dial directly into the call without delay. Those without internet access or who are unable to preregister may dial in by calling: 1-866-777-2509 (domestic), 1-412-317-5413 (international). All callers should dial in approximately 10 minutes prior to the scheduled start time and ask to be joined into the Bitfarms call.

The conference call will also be available through a live webcast found here:

Live Webcast

A webcast replay of the call will be available approximately one hour after the end of the call and will be available for one year, at the above webcast link. A telephonic replay of the call will be available through August 16, 2023 and may be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) or Canada (toll free) 855-669-9658 and using access code 4369556. A presentation of the Q2 2023 results will be accessible on Tuesday, August 8, 2023, under the “Investors” section of Bitfarms’ website.

* Gross mining profit, gross mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS financial measures or ratios and
should be read in conjunction with,
and should not be viewed as alternatives to or replacements of measures of operating results and liquidity presented in accordance with IFRS. Readers are referred to the reconciliations of non-IFRS measures included in the Company’s MD&A and at the end of this press release.

** Average Watts represents the energy consumption of Miners

*** Average revenue per BTC is for mining operations only and excludes Volta revenue.

**** Direct Cost of Production per BTC represents the direct cost of Bitcoin based on the total electricity costs divided by the total number of Bitcoin mined.

About Bitfarms Ltd.

Founded in 2017, Bitfarms is a global, publicly traded (NASDAQ/TSX: BITF) Bitcoin mining company. Bitfarms develops, owns, and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation service, and multiple onsite technical repair centers. The Company’s proprietary data analytics system delivers best-in-class operational performance and uptime.

Bitfarms currently has 11 operating farms and 2 farms in development located in four countries: Canada, the United States, Paraguay, and Argentina. Powered by predominantly environmentally friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable, locally based, and often underutilized energy infrastructure.

To learn more about Bitfarms’ events, developments, and online communities:

Website: www.bitfarms.com

https://www.facebook.com/bitfarms/

https://twitter.com/Bitfarms_io

https://www.instagram.com/bitfarms/

https://www.linkedin.com/company/bitfarms/

Glossary of Terms

BTC BTC/day = Bitcoin or Bitcoin per day
EH or EH/s = Exahash or exahash per second
MW or MWh = Megawatts or megawatt hour
PH or PH/s = Petahash or petahash per second
TH or TH/s = Terahash or terahash per second
w/TH = Watts per Terahash
KWh = Kilowatt per hour

Cautionary Statement

Trading in the securities of the Company should be considered highly speculative. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the Toronto Stock Exchange, Nasdaq, or any other securities exchange or regulatory authority accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

This news release contains certain “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) that are based on expectations, estimates and projections as at the date of this news release and are covered by safe harbors under Canadian and United States securities laws. The statements and information in this release regarding projected growth, target hashrate, opportunities relating to the Company’s expansion in Paraguay, Argentina and Quebec, other growth opportunities and prospects, and other statements regarding future growth, plans and objectives of the Company are forward-looking information. Other forward-looking information includes, but is not limited to, information concerning: the intentions, plans and future actions of the Company, as well as Bitfarms’ ability to successfully mine digital currency, revenue increasing as currently anticipated, the ability to profitably liquidate current and future digital currency inventory, volatility of network difficulty and digital currency prices and the potential resulting significant negative impact on the Company’s operations, the construction and operation of expanded blockchain infrastructure as currently planned, and the regulatory environment for cryptocurrency in the applicable jurisdictions.

Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “should”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.

This forward-looking information is based on assumptions and estimates of management of the Company at the time they were made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, risks relating to: the availability of financing opportunities, risks associated with economic conditions, dependence on management and conflicts of interest, the ability to service debt obligations and maintain flexibility in respect of debt covenants; economic dependence on regulated terms of service and electricity rates; the speculative and competitive nature of the technology sector; dependency on continued growth in blockchain and cryptocurrency usage; lawsuits and other legal proceedings and challenges; conflict of interests with directors and management; government regulations and approvals;
the global economic climate; dilution; the Company’s limited operating history; future capital needs and uncertainty of additional financing, including the Company’s ability to utilize the Company’s at-the-market equity offering program (the “ATM Program”) and the prices at which the Company may sell Common Shares in the ATM Program, as well as capital market conditions in general; risks relating to the strategy of maintaining and increasing Bitcoin holdings and the impact of depreciating Bitcoin prices on working capital; the competitive nature of the industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology change; the ability to maintain reliable and economical sources of power to run its cryptocurrency mining assets; the impact of energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; share dilution resulting from the ATM Program and from other equity issuances; and volatile securities markets impacting security pricing unrelated to operating performance. In addition, particular factors that could impact future results of the business of Bitfarms include, but are not limited to: the construction and operation of facilities may not occur as currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the digital currency market; the ability to successfully mine digital currency; revenue may not increase as currently anticipated, or at all; it may not be possible to profitably liquidate the current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on operations; an increase in network difficulty may have a significant negative impact on operations; the volatility of digital currency prices; the anticipated growth and sustainability of hydroelectricity for the purposes of cryptocurrency mining in the applicable jurisdictions; the inability to maintain reliable and economical sources of power for the Company to operate cryptocurrency mining assets; the risks of an increase in the Company’s electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates and the adverse impact on the Company’s profitability; the ability to complete current and future financings, any regulations or laws that will prevent Bitfarms from operating its business; historical prices of digital currencies and the ability to mine digital currencies that will be consistent with historical prices; an inability to predict and counteract the effects of COVID-19 on the business of the Company, including but not limited to the effects of COVID-19 on the price of digital currencies, capital market conditions, restriction on labour and international travel and supply chains; and, the adoption or expansion of any regulation or law that will prevent Bitfarms from operating its business, or make it more costly to do so. For further information concerning these and other risks and uncertainties, refer to the Company’s filings on

www.SEDAR.com

(which are also available on the website of the U.S. Securities and Exchange Commission at

www.sec.gov

), including the annual information form for the year–ended December 31, 2022, filed on March 21, 2023 and the MD&A for three-month period ended June 30, 2023. The Company has also assumed that no significant events occur outside of Bitfarms’ normal course of business. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those expressed in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on any forward-looking information. The Company undertakes no obligation to revise or update any forward-looking information other than as required by law.

Contacts:

LHA Investor Relations

David Barnard
+1 415-433-3777
[email protected]

Actual Agency

Noor Dar
+ 1 516-270-4009
[email protected]

Québec Media: Tact

Louis-Martin Leclerc
+1 418-693-2425
[email protected]

Bitfarms Ltd. Consolidated Financial & Operational Results

	Three months ended June 30,								Six months ended June 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change

Revenues	35,479		41,815		(6,336	)	(15	)%	65,529		82,144		(16,615	)	(20	)%
Cost of revenues	41,519		32,311		9,208		28	%	79,922		55,603		24,319		44	%
Gross (loss) profit	(6,040	)	9,504		(15,544	)	(164	)%	(14,393	)	26,541		(40,934	)	(154	)%
Gross margin ⁽¹⁾	(17	)%	23	%	—		—		(22	)%	32	%	—		—

Operating expenses
General and administrative expenses	9,155		15,392		(6,237	)	(41	)%	17,515		29,235		(11,720	)	(40	)%
Realized loss on disposition of digital assets	—		77,880		(77,880	)	(100	)%	—		77,914		(77,914	)	(100	)%
(Reversal of) revaluation loss on digital assets	—		70,475		(70,475	)	(100	)%	(2,695	)	66,773		(69,468	)	(104	)%
(Gain) loss on disposition of property, plant and equipment	(7	)	948		(955	)	(101	)%	1,559		936		623		67	%
Impairment on short-term prepaid deposits and property, plant and equipment	9,982		—		9,982		100	%	9,982		—		9,982		100	%
Impairment on goodwill	—		17,900		(17,900	)	(100	)%	—		17,900		(17,900	)	(100	)%
Operating loss	(25,170	)	(173,091	)	147,921		(85	)%	(40,754	)	(166,217	)	125,463		(75	)%
Operating margin ⁽¹⁾	(71	)%	(414	)%	—		—		(62	)%	(202	)%	—		—

Net financial income	(182	)	(11,857	)	11,675		(98	)%	(12,370	)	(15,940	)	3,570		(22	)%
Net loss before income taxes	(24,988	)	(161,234	)	136,246		(85	)%	(28,384	)	(150,277	)	121,893		(81	)%

Income tax recovery	(94	)	(19,316	)	19,222		(100	)%	(424	)	(12,878	)	12,454		(97	)%
Net loss	(24,894	)	(141,918	)	117,024		(82	)%	(27,960	)	(137,399	)	109,439		(80	)%

Basic and diluted loss per share (in U.S. dollars)	(0.10	)	(0.70	)	—		—		(0.12	)	(0.69	)	—		—
Change in revaluation surplus – digital assets, net of tax	579		—		579		100	%	2,391		—		2,391		100	%
Total comprehensive loss, net of tax	(24,315	)	(141,918	)	117,603		(83	)%	(25,569	)	(137,399	)	111,830		(81	)%

Gross Mining profit ⁽²⁾	14,329		27,160		(12,831	)	(47	)%	26,514		57,300		(30,786	)	(54	)%
Gross Mining margin⁽²⁾	42	%	66	%	—		—		42	%	71	%	—		—
EBITDA ⁽²⁾	(3,437	)	(138,831	)	135,394		(98	)%	15,487		(111,798	)	127,285		114	%
EBITDA margin ⁽²⁾	(10	)%	(332	)%	—		—		24	%	(136	)%	—		—
Adjusted EBITDA ⁽²⁾	7,672		19,703		(12,031	)	(61	)%	14,241		42,001		(27,760	)	(66	)%
Adjusted EBITDA margin ⁽²⁾	22	%	47	%	—		—		22	%	51	%	—		—

_{nm: not meaningful}

_{(1) Gross margin and Operating margin are supplemental financial ratios; refer to section 9 – Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.}

_{(2) Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA, and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 – Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.}

Bitfarms Ltd.
Reconciliation of Consolidated Net Income (loss) to EBITDA and Adjusted EBITDA

	Three months ended June 30,								Six months ended June 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change

Revenues	35,479		41,815		(6,336	)	(15	)%	65,529		82,144		(16,615	)	(20	)%

Net loss before income taxes	(24,988	)	(161,234	)	136,246		(85	)%	(28,384	)	(150,277	)	121,893		(81	)%
Interest expense	1,023		4,546		(3,523	)	(77	)%	2,643		7,556		(4,913	)	(65	)%
Depreciation expense	20,528		17,857		2,671		15	%	41,228		30,923		10,305		33	%
EBITDA	(3,437	)	(138,831	)	135,394		(98	)%	15,487		(111,798	)	127,285		114	%
EBITDA margin	(10	)%	(332	)%	—		—		24	%	(136	)%	—		—
Share-based payment	2,462		7,927		(5,465	)	(69	)%	4,998		14,032		(9,034	)	(64	)%
Realized loss on disposition of digital assets	—		77,880		(77,880	)	(100	)%	—		77,914		(77,914	)	(100	)%
Impairment on short-term prepaid deposits and property, plant and equipment	9,982		—		9,982		100	%	9,982		—		9,982		100	%
(Reversal of) revaluation loss on digital assets	—		70,475		(70,475	)	(100	)%	(2,695	)	66,773		(69,468	)	(104	)%
Impairment on goodwill	—		17,900		(17,900	)	(100	)%	—		17,900		(17,900	)	(100	)%
Gain on extinguishment of long-term debt and lease liabilities	—		—		—		—		(12,835	)	—		(12,835	)	(100	)%
Gain on disposition of marketable securities	(4,955	)	(19,705	)	14,750		(75	)%	(7,126	)	(30,642	)	23,516		(77	)%
Net financial expenses and other	3,620		4,057		(437	)	(11	)%	6,430		7,822		(1,392	)	(18	)%
Adjusted EBITDA	7,672		19,703		(12,031	)	(61	)%	14,241		42,001		(27,760	)	(66	)%
Adjusted EBITDA margin	22	%	47	%	—		—		22	%	51	%	—		—

_{nm: not meaningful}

Bitfarms Ltd.
Calculation of Gross Mining Profit and Gross Mining Margin

	Three months ended June 30,								Six months ended June 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Gross (loss) profit	(6,040	)	9,504		(15,544	)	(164	)%	(14,393	)	26,541		(40,934	)	(154	)%
Non-Mining revenues (1)	(1,236	)	(767	)	(469	)	61	%	(2,078	)	(1,371	)	(707	)	52	%
Depreciation expense	20,528		17,857		2,671		15	%	41,228		30,923		10,305		33	%
Purchases of electrical components and other	622		260		362		139	%	946		572		374		65	%
Electrician salaries and payroll taxes	455		306		149		49	%	811		635		176		28	%
Gross Mining profit	14,329		27,160		(12,831	)	(47	)%	26,514		57,300		(30,786	)	(54	)%
Gross Mining margin	42	%	66	%	—		—		42	%	71	%	—		—

_{(1) Non-Mining revenues reconciliation:}

	Three months ended June 30,								Six months ended June 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Revenues	35,479		41,815		(6,336	)	(15	)%	65,529		82,144		(16,615	)	(20	)%
Less Mining related revenues for the purpose of calculating gross Mining margin:
Mining revenues	(34,243	)	(41,048	)	6,805		(17	)%	(63,451	)	(80,773	)	17,322		(21	)%
Non-Mining revenues	1,236		767		469		61	%	2,078		1,371		707		52	%

August 8, 2023 8:08 am

Origin Materials and Sustainea Launch Strategic Partnership to Develop 100% Bio-Based Materials

Origin Materials and Sustainea Launch Strategic Partnership to Develop 100% Bio-Based Materials

Sustainea and Origin Materials signed a partnership agreement to develop 100% bio-based PET and polyesters, leveraging Sustainea’s bioMEG and Origin Materials’ bio-based PTA and FDCA

WEST SACRAMENTO, Calif.–(BUSINESS WIRE)–Origin Materials, Inc. (“Origin,” “Origin Materials,” or the “Company”) (NASDAQ: ORGN, ORGNW), the world’s leading carbon negative materials company with a mission to enable the world’s transition to sustainable materials, and Sustainea Bioglycols (“Sustainea”), a joint venture between Braskem (NYSE: BAK) and Sojitz Corporation, today announced a strategic partnership centered on advanced bio-based materials produced using Origin’s technology platform and Sustainea’s bio-based glycol products and market expertise.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230808398713/en/

As part of the partnership, Sustainea signed two multi-year capacity reservation agreements to purchase renewable chemicals from Origin Materials, including bio-based PTA and bio-based FDCA. PTA is a fundamental feedstock for a broad variety of market applications, including PET polyester packaging, textiles, clothing, plastics, car parts, tires, carpeting, and toys. FDCA is a raw material whose commercial applications include surfactants, epoxy resins, and the next-gen polymer PEF (polyethylene furanoate).

“We are thrilled to partner with Sustainea, a joint venture formed by two innovative global companies: Braskem, the largest thermoplastic resin producer in the Americas and a global pioneer in biopolymers, and Sojitz, a Japan-oriented global trading company with wide-ranging market networks and a strong presence in Asia,” said Origin Materials Co-CEO Rich Riley. “Through Sustainea, Braskem and Sojitz aim to be the global leader in bioMEG production. Since bioMEG and bio-PTA are both necessary for making 100% bio-based PET, we are strongly aligned to create a low-carbon future for polymers, including bio-PET and advanced bio-based polymers integrating FDCA. We are excited about this powerful strategic partnership on the cutting edge of renewable materials.”

Origin expects to produce bio-based FDCA and bio-based PTA using its patented technology platform, which turns the carbon found in sustainable wood residues into useful products while capturing carbon in the process.

“We are very excited to join forces with Origin on the pathway to a low carbon future,” stated Gustavo Sergi, CEO of Sustainea. “Bringing to the market bioMEG and bioPET has always been our ambition and the partnership with Origin represents an important step towards this goal. The polyester and PET markets grow 3.5 million tons every year, so we have an important mission to develop our operation to supply the industry as soon as possible. From textiles to bottles, our bioMEG and bioPET will be there to be quickly absorbed by the market as a drop-in solution. Finally, these biopolymers are not only bio-based but also fully recyclable. This will contribute to a circular economy and to the reduction of CO₂ emissions.”

About Origin Materials

Headquartered in West Sacramento, Origin Materials is the world’s leading carbon negative materials company. Origin’s mission is to enable the world’s transition to sustainable materials. For over a decade, Origin has developed a platform for turning the carbon found in inexpensive, plentiful, non-food biomass such as sustainable wood residues into useful materials while capturing carbon in the process. Origin’s patented technology platform can help revolutionize the production of a wide range of end products, including clothing, textiles, plastics, packaging, car parts, tires, carpeting, toys, fuels, and more with a ~$1 trillion addressable market. In addition, Origin’s technology platform is expected to provide stable pricing largely decoupled from the petroleum supply chain, which is exposed to more volatility than supply chains based on sustainable wood residues. Origin’s patented drop-in core technology, economics and carbon impact are supported by a growing list of major global customers and investors.

For more information, visit www.originmaterials.com.

About Sustainea Bioglycols

Sustainea is a dynamic and innovative company focused on sustainable chemistry. Established as a joint venture between Braskem and Sojitz Corporation, Sustainea is a company born with the desire to be the global leader in bio-MEG and transform the bottles and textiles market through innovation in renewable chemicals, generating a positive impact for everyone. Sustainea’s business plan includes the construction of three industrial plants with annual production capacity of 700,000 tons of bio-based MEG, with the startup of the first plant in 2027. With a strong emphasis on research and development, Sustainea’s commitment to environmental stewardship and their innovative approach to creating renewable materials aligns perfectly with the goal of developing sustainable alternatives to conventional plastics. Headquartered in the United States, with an office in São Paulo, Brazil, Sustainea has professionals with in-depth knowledge of the chemical industry and renewable chemicals business.

For more information, visit www.sustaineabio.com.

Cautionary Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding Origin Materials’ business strategy, estimated total addressable market, ability to enter new end-markets, ability to develop new product categories, commercial and operating plans, product development plans, and ability to realize the anticipated benefits of the partnership discussed in the press release. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of the management of Origin Materials and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on as, a guarantee, an assurance, a prediction, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Origin Materials. These forward-looking statements are subject to a number of risks and uncertainties, including that Origin Materials may be unable to successfully commercialize its products; the effects of competition on Origin Materials’ business; the uncertainty of the projected financial information with respect to Origin; disruptions and other impacts to Origin’s business as a result of outbreaks such as the COVID-19 pandemic, Russia’s military intervention in Ukraine, the impact of severe weather events, and other global health or economic crises; changes in customer demand; and those factors discussed in the Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission on May 10, 2023, under the heading “Risk Factors,” and other documents Origin Materials has filed, or will file, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Origin Materials presently does not know, or that Origin Materials currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Origin Materials’ expectations, plans, or forecasts of future events and views as of the date of this press release. Origin Materials anticipates that subsequent events and developments will cause its assessments to change. However, while Origin Materials may elect to update these forward-looking statements at some point in the future, Origin Materials specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing Origin Materials’ assessments of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808398713/en/

Origin Materials

Investors:

[email protected]

Media:

[email protected]

Sustainea Bioglycols

Media Sustainea:

[email protected]

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: Recycling Chemicals/Plastics Environment Manufacturing Sustainability Green Technology Other Manufacturing

MEDIA:

Logo

August 8, 2023 8:06 am

ADC Therapeutics Reports Second Quarter 2023 Financial Results and Provides Business Updates

2Q 2023 ZYNLONTA^®
¹
net sales increased 11% year-over-year; Implemented new go-to-market strategy during the quarter to support growth

Operating expenses decreased 20%
²
year-over-year
due to portfolio prioritization
and organizational efficiencies

Pipeline advancing with initial data readouts from the clinical trials of LOTIS-7, ADCT-601 targeting AXL and ADCT-901 targeting KAAG1 expected in 2024

Company to host conference call today at 8:30 a.m. EDT

LAUSANNE, Switzerland, Aug. 08, 2023 (GLOBE NEWSWIRE) — ADC Therapeutics SA (NYSE: ADCT) today reported financial results for the second quarter 2023 and provided business updates.

“We continue to focus on unlocking potential value from multiple ongoing initiatives over the next 12 months,” said Ameet Mallik, Chief Executive Officer of ADC Therapeutics. “During the second quarter, we executed on our corporate and capital allocation strategy that streamlined our processes and prioritized our nearer-term clinical catalysts. We implemented the new commercial go-to-market model, enhanced investment in key pipeline programs, delivered organizational efficiencies and strengthened our capital resources. Our ongoing clinical trials of ZYNLONTA in earlier lines and combinations, as well as our earlier-stage pipeline programs, are expected to deliver key milestones in 2024. We look forward to keeping you updated on our progress.”

Recent Highlights and Developments

ZYNLONTA
^®
(loncastuximab tesirine-lpyl)

ZYNLONTA generated net sales of $19.2 million in the second quarter of 2023, representing an 11% increase over the second quarter of 2022. The growth was partially offset by higher gross-to-net sales deductions due to the new Medicare Part B discarded drug policy effective January 1, 2023 and Group Purchasing Organization (GPO) contracting. Compared to the prior quarter, net sales increased 1.3% and volume increased 3.4%.
The Company’s partner Sobi completed the first European commercial sale of ZYNLONTA with the launch in Germany in the second quarter of 2023. The first commercial sale in the European Union triggered a $75 million milestone payment to the Company from HealthCare Royalty Partners under the royalty purchase agreement.
The Biologics License Application (BLA) for ZYNLONTA submitted by Overland ADCT BioPharma was accepted for filing by the China National Medical Products Administration (NMPA) seeking an indication for relapsed or refractory diffuse large B-cell lymphoma (DLBCL) after two or more lines of systemic therapy. The BLA has been granted priority review by the NMPA.
During the second quarter, the Company’s partner Mitsubishi Tanabe Pharma Corporation (MTPC) initiated the Phase 1/2 bridging study for ZYNLONTA in Japan.
The Company announced its plan to discontinue the Phase 2 LOTIS-9 trial studying ZYNLONTA in combination with rituximab in unfit or frail patients with previously untreated diffuse large B-cell lymphoma (DLBCL). The U.S. Food and Drug Administration (FDA) placed a partial clinical hold on the trial for new patient enrollment but will allow patients already on therapy who are deriving clinical benefit to remain on therapy after being reconsented. Following completion of treatment of any reconsenting patients, the Company will conduct the necessary steps to terminate the trial.
The LOTIS-5 Independent Data Monitoring Committee (IDMC) reviewed unblinded data at a regularly scheduled meeting in late July and noted that the study should proceed as planned. They also recognized that the LOTIS-9 and LOTIS-5 trials target very different patient populations.

Pipeline

ADCT-601 (targeting AXL): Dose escalation is progressing in the Phase 1b trial, and the maximum tolerated dose has not yet been reached. The trial has been amended to focus on patients with non-small cell lung cancer (NSCLC) and patients with sarcoma. The immunohistochemistry (IHC) assay is under final validation.
ADCT-901 (targeting KAAG1): The Phase 1 study protocol amendment to explore different dosing schedules has been finalized and submitted to the FDA and will be submitted shortly to the regulatory authorities in Europe. Once approved by the Institutional Review Board (IRB), the Company plans to advance to the next dosing level. The IHC assay is under final validation.
ADCT-602 (targeting CD22): Dose expansion in the Phase 1 trial in collaboration with MD Anderson Cancer Center is progressing and additional clinical trial sites have been selected.

Guidance

The Company maintains the following guidance based on its current business plan:

ZYNLONTA FY 2023 net product sales expected to grow by a double-digit percentage year-over-year. This includes a gross-to-net increase as compared to 2022 of:
- Approximately 2 to 3 percentage points related to Group Purchasing Organization (GPO) contracting
- Mid to high single-digit percentage points resulting from the Infrastructure Investment and Jobs Act’s requirement for manufacturers of certain single-source drugs separately paid for under Medicare Part B and marketed in single-dose containers to provide annual refunds for discarded drug, effective January 1, 2023
Continued decrease in total operating expenses expected in 2023 and 2024 as compared to 2022 as a result of the implementation of the new corporate strategy
Expected cash runway to the middle of 2025

Upcoming Expected Milestones

ZYNLONTA

Grow ZYNLONTA net sales by a double-digit percentage year-over-year and achieve commercial brand profitability in 2023
Updated data from safety lead-in portion of Phase 3 LOTIS-5 study in 2H 2023
Complete enrollment of the LOTIS-5 study in 2024
Initial safety and efficacy data from the LOTIS-7 study in 2024

Pipeline

ADCT-901 (targeting KAAG1)

Initial data from Phase 1 study in 1H 2024

ADCT-601 (targeting AXL)

Initial data from Phase 1 study in 1H 2024

ADCT-602 (targeting CD22)

Additional data from Phase 1 study in 1H 2024

Second Quarter 2023 Financial Results

Cash and Cash Equivalents

Cash and cash equivalents were $347.5 million as of June 30, 2023, compared to $326.4 million as of December 31, 2022. In June 2023, the Company received a $75.0 million milestone payment from Healthcare Royalty Partners, triggered by the first EU commercial sale. The Company expects its cash runway to extend into the middle of 2025.

Product Revenues

Net product revenues were $19.2 million for the quarter ended June 30, 2023, compared to $17.3 million for the same quarter in 2022. Net product revenues are for U.S. sales of ZYNLONTA. The increase of $1.9 million for the quarter was primarily due to higher sales volume, partially offset by higher gross-to-net deductions.

Research and Development (R&D) Expenses

R&D expenses were $31.9 million for the quarter ended June 30, 2023, compared to $48.5 million for the same quarter in 2022. R&D expenses decreased due to less investment in Cami (camidanlumab tesirine) due to the completion of the Phase 2 study in 2022 and the Company’s decision to seek a partner to progress the program, as well as less investment in other development programs. R&D expenses in the second quarter of 2023 also decreased due to lower share-based compensation expense as a result of fluctuations in the share price, voluntary terminations and the reduction in workforce implemented in May 2023 creating organizational efficiencies. These efficiencies allowed the Company to enhance investments in prioritized portfolio programs.

Selling and Marketing (S&M) Expenses

S&M expenses were $14.5 million for the quarter ended June 30, 2023, compared to $17.7 million for the same quarter in 2022. The decrease in S&M expenses for the quarter was primarily due to lower share-based compensation expense resulting from fluctuations in the share price and award forfeitures in connection with voluntary terminations and the commercial realignment implemented in the second quarter.

General & Administrative Expenses

G&A expenses were $11.4 million for the quarter ended June 30, 2023, compared to $18.2 million for the same quarter in 2022. G&A expenses decreased during the second quarter of 2023 primarily due to lower share-based compensation expense due to fluctuations in the share price, transition of a board member, voluntary terminations and the workforce reduction implemented in May 2023.

Net Loss and Adjusted Net Loss

Net loss was $47.1 million, or a net loss of $0.58 per basic and diluted share, for the quarter ended June 30, 2023. This compares to a net loss of $64.4 million, or a net loss of $0.84 per basic and diluted share, for the same quarter in 2022.

Adjusted net loss was $30.3 million, or an adjusted net loss of $0.37 per basic and diluted share, for the quarter ended June 30, 2023. This compares to an adjusted net loss of $56.3 million, or an adjusted net loss of $0.73 per basic and diluted share, for the same quarter in 2022.

The decrease in net loss and adjusted net loss for the quarter ended June 30, 2023, as compared to the same quarter in 2022, was attributable to lower R&D expenses and higher product revenues during the second quarter of 2023. The decrease in net loss was also attributable to lower share-based compensation expense, partially offset by other financial expense arising from a cumulative catch-up adjustment associated with the valuation of the deferred royalty obligation with Healthcare Royalty Partners recognized in the second quarter of 2023 and from changes in the fair value of our convertible loan derivatives, which was recognized in the second quarter of 2022.

Conference Call Details

ADC Therapeutics management will host a conference call and live audio webcast to discuss second quarter 2023 financial results and provide a company update today at 8:30 a.m. Eastern Time. To access the conference call, please register here. Registrants will receive the dial-in number and unique PIN. It is recommended that you join 10 minutes before the event, though you may pre-register at any time. A live webcast of the call will be available under “Events & Presentations” in the Investors section of the ADC Therapeutics website at ir.adctherapeutics.com. The archived webcast will be available for 30 days following the call.

About ZYNLONTA
^®
(loncastuximab tesirine-lpyl)

ZYNLONTA^® is a CD19-directed antibody drug conjugate (ADC). Once bound to a CD19-expressing cell, ZYNLONTA is internalized by the cell, where enzymes release a pyrrolobenzodiazepine (PBD) payload. The potent payload binds to DNA minor groove with little distortion, remaining less visible to DNA repair mechanisms. This ultimately results in cell cycle arrest and tumor cell death.

The U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) have approved ZYNLONTA (loncastuximab tesirine-lpyl) for the treatment of adult patients with relapsed or refractory (r/r) large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL) not otherwise specified (NOS), DLBCL arising from low-grade lymphoma and also high-grade B-cell lymphoma. The trial included a broad spectrum of heavily pre-treated patients (median three prior lines of therapy) with difficult-to-treat disease, including patients who did not respond to first-line therapy, patients refractory to all prior lines of therapy, patients with double/triple hit genetics and patients who had stem cell transplant and CAR-T therapy prior to their treatment with ZYNLONTA. This indication is approved by the FDA under accelerated approval and in the European Union under conditional approval based on overall response rate and continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial.

ZYNLONTA is also being evaluated as a therapeutic option in combination studies in other B-cell malignancies and earlier lines of therapy.

About ADC Therapeutics

ADC Therapeutics (NYSE: ADCT) is a commercial-stage biotechnology company improving the lives of those affected by cancer with its next-generation, targeted antibody drug conjugates (ADCs). The Company is advancing its proprietary PBD-based ADC technology to transform the treatment paradigm for patients with hematologic malignancies and solid tumors.

ADC Therapeutics’ CD19-directed ADC ZYNLONTA (loncastuximab tesirine-lpyl) is approved by the FDA for the treatment of relapsed or refractory diffuse large b-cell lymphoma after two or more lines of systemic therapy. ZYNLONTA is also in development in combination with other agents. In addition to ZYNLONTA, ADC Therapeutics has multiple ADCs in ongoing clinical and preclinical development.

ADC Therapeutics is based in Lausanne (Biopôle), Switzerland and has operations in London, the San Francisco Bay Area and New Jersey. For more information, please visit https://adctherapeutics.com/ and follow the Company on Twitter and LinkedIn.

ZYNLONTA^® is a registered trademark of ADC Therapeutics SA.

Use of Non-IFRS Financial Measures

In addition to financial information prepared in accordance with IFRS, this document also contains certain non-IFRS financial measures based on management’s view of performance including:

Adjusted net loss
Adjusted net loss per share

Management uses such measures internally when monitoring and evaluating our operational performance, generating future operating plans and making strategic decisions regarding the allocation of capital. We believe that these adjusted financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and facilitate operating performance comparability across both past and future reporting periods. These non-IFRS measures have limitations as financial measures and should be considered in addition to, and not in isolation or as a substitute for, the information prepared in accordance with IFRS. When preparing these supplemental non-IFRS measures, management typically excludes certain IFRS items that management does not believe are indicative of our ongoing operating performance. Furthermore, management does not consider these IFRS items to be normal, recurring cash operating expenses; however, these items may not meet the IFRS definition of unusual or non-recurring items. Since non-IFRS financial measures do not have standardized definitions and meanings, they may differ from the non-IFRS financial measures used by other companies, which reduces their usefulness as comparative financial measures. Because of these limitations, you should consider these adjusted financial measures alongside other IFRS financial measures.

The following items are excluded from adjusted net loss and adjusted net loss per share:

Shared-Based Compensation Expense: We exclude share-based compensation expense from our adjusted financial measures because share-based compensation expense, which is non-cash, fluctuates from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. Share-based compensation expense has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy.

Certain Other Items: We exclude certain other significant items that we believe do not represent the performance of our business, from our adjusted financial measures. Such items are evaluated by management on an individual basis based on both quantitative and qualitative aspects of their nature. While not all-inclusive, examples of certain other significant items excluded from our adjusted financial measures would be: changes in the fair value of derivatives and warrant obligations and the effective interest expense associated with the Facility Agreement with Deerfield and the senior secured term loan facility and the effective interest expense and a cumulative catch-up adjustment associated with the deferred royalty obligation under the royalty purchase agreement with HealthCare Royalty Partners.

See the attached Reconciliation of IFRS Measures to Non-IFRS Measures for explanations of the amounts excluded and included to arrive at the non-IFRS financial measures.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “would”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “seem”, “seek”, “future”, “continue”, or “appear” or the negative of these terms or similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to certain risks and uncertainties that can cause actual results to differ materially from those described. Factors that may cause such differences include, but are not limited to: the success of the Company’s updated corporate strategy including operating efficiencies, capital deployment and portfolio prioritization; the Company’s ability to achieve the 2023 net product sales guidance for ZYNLONTA^® and the decrease in total operating expenses for 2023 and 2024, the expected cash runway into the middle of 2025, the effectiveness of the new commercial go-to-market strategy, competition from new technologies, the Company’s ability to continue to commercialize ZYNLONTA^® in the United States and future revenue from the same; Swedish Orphan Biovitrum AB (Sobi^®) ability to successfully commercialize ZYNLONTA^® in the European Economic Area and market acceptance, adequate reimbursement coverage, and future revenue from the same; approval by the NMPA of the BLA for ZYNLONTA in China submitted by Overland ADCT BioPharma and future revenue from the same, our strategic partners’, including Mitsubishi Tanabe Pharma Corporation, ability to obtain regulatory approval for ZYNLONTA^® in foreign jurisdictions, and the timing and amount of future revenue and payments to us from such partnerships; the Company’s ability to market its products in compliance with applicable laws and regulations; the Company’s expectations regarding the impact of the Infrastructure Investment and Jobs Act; the timing and results of the Company’s or its partners’ research projects or clinical trials including LOTIS 5 and 7, ADCT 901, 601 and 602, the impact, if any, from discontinuation of the LOTIS-9 study, actions by the FDA or foreign regulatory authorities with respect to the Company’s products or product candidates, the timing and outcome of regulatory submissions for the Company’s products or product candidates; the ability to complete clinical trials on expected timelines, if at all; projected revenue and expenses; the Company’s indebtedness, including Healthcare Royalty Management and Blue Owl and Oaktree facilities, and the restrictions imposed on the Company’s activities by such indebtedness, the ability to repay such indebtedness and the significant cash required to service such indebtedness; and the Company’s ability to obtain financial and other resources for its research, development, clinical, and commercial activities. Additional information concerning these and other factors that may cause actual results to differ materially from those anticipated in the forward-looking statements is contained in the “Risk Factors” section of the Company’s Annual Report on Form 20-F and in the Company’s other periodic reports and filings with the Securities and Exchange Commission. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed in or implied by such forward-looking statements. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this document. The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this press release, except as required by law.

ADC Therapeutics SA

Condensed Consolidated Interim Statement of Operations (Unaudited)

(in KUSD except for per share data)

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2023	2022	2023	2022
Product revenues, net	19,197	17,291	38,150	33,789
License revenues and royalties	86	—	125	30,000
Total revenue	19,283	17,291	38,275	63,789

Operating expense
Cost of product sales	(1,319)	(2,266)	(1,909)	(2,795)
Research and development expenses	(31,944)	(48,537)	(71,424)	(97,489)
Selling and marketing expenses	(14,456)	(17,659)	(29,807)	(36,029)
General and administrative expenses	(11,353)	(18,240)	(26,496)	(37,251)
Total operating expense	(59,072)	(86,702)	(129,636)	(173,564)
Loss from operations	(39,789)	(69,411)	(91,361)	(109,775)

Other income (expense)
Financial income	2,372	16	4,547	18,324
Financial expense	(15,857)	(8,801)	(26,145)	(18,018)
Non-operating (expense) income	(453)	12,875	(456)	26,317
Total other (expense) income	(13,938)	4,090	(22,054)	26,623
Loss before taxes	(53,727)	(65,321)	(113,415)	(83,152)
Income tax benefit	6,610	947	6,872	2,117
Net loss	(47,117)	(64,374)	(106,543)	(81,035)

Net loss attributable to:
Owners of the parent	(47,117)	(64,374)	(106,543)	(81,035)

Net loss per share, basic and diluted	(0.58)	(0.84)	(1.31)	(1.05)

ADC Therapeutics SA

Condensed Consolidated Interim Balance Sheet (Unaudited)

(in KUSD)

	June 30, 2023	December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	347,510	326,441
Accounts receivable, net	23,866	72,971
Inventory	19,428	18,564
Other current assets	22,004	28,039
Total current assets	412,808	446,015
Non-current assets
Property, plant and equipment	5,400	3,261
Right-of-use assets	10,971	6,720
Intangible assets	13,536	14,360
Interest in joint venture	28,322	31,152
Deferred tax asset	34,822	26,757
Other long-term assets	1,443	903
Total non-current assets	94,494	83,153

Total assets	507,302	529,168

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	11,691	12,351
Other current liabilities	53,397	73,035
Lease liabilities, short-term	1,632	1,097
Senior secured term loans, short-term	13,861	12,474
Total current liabilities	80,581	98,957
Non-current liabilities
Senior secured term loans, long-term	97,356	97,240
Warrant obligations	535	1,788
Deferred royalty obligation, long-term	299,279	212,353
Deferred gain of joint venture	23,539	23,539
Lease liabilities, long-term	10,762	6,564
Other long-term liabilities	3,839	—
Total non-current liabilities	435,310	341,484

Total liabilities	515,891	440,441

Equity attributable to owners of the parent
Share capital	7,312	7,312
Share premium	1,007,755	1,007,452
Treasury shares	(557)	(679)
Other reserves	164,175	155,683
Cumulative translation adjustments	(46)	(356)
Accumulated losses	(1,187,228)	(1,080,685)
Total equity attributable to owners of the parent	(8,589)	88,727

Total liabilities and equity	507,302	529,168

ADC Therapeutics SA

Reconciliation of IFRS Measures to Non-IFRS Measures (Unaudited)

(in KUSD except for share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

in KUSD

2023

2022

Change

% Change

2023

2022

Change

% Change

Total operating expense

(59,072)

(86,702)

27,630

(32) %

(129,636)

(173,564)

43,928

(25) %

Adjustments:

Share-based compensation expense (i)

1,118

13,818

(12,700)

(92) %

9,192

27,728

(18,536)

(67) %

Adjusted total operating expenses

(57,954)

(72,884)

14,930

(20) %

(120,444)

(145,836)

25,392

(17) %

	Three Months Ended June 30,		Six Months Ended June 30,
in KUSD (except for share and per share data)	2023	2022	2023	2022
Net loss	(47,117)	(64,374)	(106,543)	(81,035)
Adjustments:
Share-based compensation expense (i)	1,118	13,818	9,192	27,728
Convertible loans, derivatives, change in fair value income (ii)	—	(14,455)	—	(30,310)
Senior secured term loans, warrants, change in fair value expense (income) (ii)	39	—	(617)	—
Effective interest expense on convertible loans (iii)	—	3,126	—	6,148
Deerfield warrants obligation, change in fair value income (ii)	(20)	—	(636)	—
Effective interest expense on senior secured term loan facility (iii)	4,480	—	9,020	—
Deferred royalty obligation interest expense (iv)	5,829	5,545	11,575	11,687
Deferred royalty obligation cumulative catch-up adjustment expense (income) (iv)	5,417	—	5,288	(18,288)
Adjusted net loss	(30,254)	(56,340)	(72,721)	(84,070)

Net loss per share, basic and diluted	(0.58)	(0.84)	(1.31)	(1.05)
Adjustment to net loss per share, basic and diluted	0.21	0.11	0.41	(0.04)
Adjusted net loss per share, basic and diluted	(0.37)	(0.73)	(0.90)	(1.09)
Weighted average shares outstanding, basic and diluted	81,471,127	76,911,713	81,140,287	76,866,968

(i)	Share-based compensation expense represents the cost of equity awards issued to our directors, management and employees. The fair value of awards is computed at the time the award is granted, including any market and other performance conditions, and is recognized over the vesting period of the award by a charge to the income statement and a corresponding increase in other reserves within equity. These accounting entries have no cash impact.
(ii)	Change in the fair value of the convertible loan derivatives, senior secured term loan facility warrants and the Deerfield warrant obligation results from the valuation at the end of each accounting period. There are several inputs to these valuations, but those most likely to result in significant changes to the valuations are changes in the value of the underlying instrument (i.e., changes in the price of our common shares) and changes in expected volatility in that price. These accounting entries have no cash impact.
(iii)	Effective interest expense on convertible loans and senior secured term loans relates to the increase in the value of our loans in accordance with the amortized cost method.
(iv)	Deferred royalty obligation interest expense relates to the accretion expense on our deferred royalty obligation pursuant to the royalty purchase agreement with HCR and cumulative catch-up adjustment expense (income) relates to changes in the expected payments to HCR based on a periodic assessment of our underlying revenue projections.

CONTACTS:

Investors

Eugenia Litz
ADC Therapeutics
[email protected]
+44 7879 627205
+1 908-723-2350

Media

Nicole Riley
ADC Therapeutics
[email protected]
+1 862-926-9040

________________

(1) loncastuximab tesirine-lpyl; (2) on a non-IFRS basis or 32% on an IFRS basis including stock-based compensation expense. See reconciliation of IFRS measures to non-IFRS measures in accompanying financial tables.

August 8, 2023 8:04 am

iHeartMedia, Inc. Reports Results for 2023 Second Quarter

iHeartMedia, Inc. Reports Results for 2023 Second Quarter

NEW YORK–(BUSINESS WIRE)–
iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial results for the quarter ended June 30, 2023.

Financial Highlights:¹

Q2 2023 Consolidated Results

Q2 Revenue of $920 million, down 3.6%; slightly better than the guidance range of down mid-single digits
- Excluding Q2 Political Revenue, Q2 Revenue down 1.8%
GAAP Operating loss of $897 million vs. GAAP Operating income of $83 million in Q2 2022, which includes $961 million of non-cash intangible impairment charges
- Non-cash intangible impairment charges were recorded in Q2 2023 primarily driven by the current debt and equity valuations in the marketplace
Consolidated Adjusted EBITDA of $191 million, within guidance range of $180 million to $200 million, compared to $237 million in Q2 2022 and more than double Q1 2023 Adjusted EBITDA
Cash Flows from operating activities of $57 million
Free Cash Flow of $34 million, Free Cash Flow including net proceeds from real estate sales was $39 million

Q2 2023 Digital Audio Group Results

Digital Audio Group Revenue of $261 million up 3%
- Podcast Revenue of $97 million up 13%
- Digital Revenue excluding Podcast of $164 million down 2%
Segment Adjusted EBITDA of $85 million up 7%
- Digital Audio Group Adjusted EBITDA margin of 32.4%

Q2 2023 Multiplatform Group Results

Multiplatform Group Revenue of $596 million down 6%
Segment Adjusted EBITDA of $162 million down 17%
- Multiplatform Group Adjusted EBITDA margin of 27.3%

Continued Proactive Capital Structure Improvement Through Debt Paydown

Cash balance and total available liquidity² of $165 million and $585 million, respectively, as of June 30, 2023
Repurchased $80 million in principal balance of 8.375% Senior Unsecured Notes (at a discount to par) for $57 million in cash; expected to generate approximately $7 million of annualized interest savings
- As of June 30, 2023, since Q2 2022 combined Notes repurchases of $430 million at a discount to par for $372 million cash; in aggregate expected to generate approximately $40 million of annualized interest savings
- Cumulative reduction of the outstanding principal balance of these Notes from $1.45 billion as of March 31, 2022 to approximately $1 billion as of June 30, 2023

Guidance

Q3 Consolidated Revenue expected to decline in the mid-single digits; Q3 Consolidated Revenue excluding the impact of Political expected to decline in the low-single digits³
July Consolidated Revenue down approximately 5%
Q3 Consolidated Adjusted EBITDA⁴ expected to be $195 million to $205 million
Remain committed to long term target of approximately 4x Net Debt to Adjusted EBITDA (“net leverage”)⁴

^{_________________________

1} Unless otherwise noted, all results are based on year over year comparisons.

² Total available liquidity is defined as cash and cash equivalents plus available borrowings under our ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.

³ Included in Q3 2022 GAAP Consolidated Revenue is approximately $34 million of Political Revenue.

⁴ A full reconciliation of forecasted Adjusted EBITDA, net debt and net leverage on a non-GAAP basis to the most-directly comparable GAAP metrics cannot be provided without unreasonable efforts due to the inherent difficulty in forecasting and quantifying with reasonable accuracy significant items required for the reconciliations, including gains or losses on investments, extinguishment of debt, equity in nonconsolidated affiliates, impairment charges, stock based compensation, and restructuring as well as the Company’s cash and cash equivalents balance.

Statement from Senior Management

“We are pleased to report that our second quarter 2023 results reflected Adjusted EBITDA slightly above the midpoint of the guidance range, and more than double the Adjusted EBITDA we generated in the first quarter, and our consolidated revenue were above the guidance range. The continued positive performance of our Digital Audio Group, led by our Podcasting business, and the significantly improved relative performance of our Multiplatform Group during this soft advertising period, are encouraging metrics for us, and we’re seeing indications of improving macroeconomic trends which we expect to have a positive impact for us in the second half of the year, with most of that impact in Q4,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc.

“We continue to see macroeconomic improvements in the advertising marketplace and believe they are an indication that our Multiplatform revenues will continue their quarterly sequential improvement and that our Digital Audio Group revenues will continue to grow in the second half of 2023,” said Rich Bressler, President, COO and CFO of iHeartMedia, Inc. “These improving trends, in combination with our performance in the first and second quarters relative to guidance, along with a presidential election ahead that should generate record political advertising dollars. gives us confidence that if this advertising marketplace recovery continues, we expect to have a strong 2024 with a resumption of our growth story in terms of revenue, profitability and Free Cash Flow generation.”

Consolidated Results of Operations

Second Quarter 2023 Consolidated Results

Our consolidated revenue decreased $34.0 million, or 3.6%, during the three months ended June 30, 2023 compared to the same period of 2022. Digital Audio revenue increased $8.3 million, or 3.3%, driven primarily by continuing increases in demand for podcast advertising. Multiplatform revenue decreased $37.4 million, or 5.9%, primarily resulting from a decrease in broadcast advertising due to a challenging macroeconomic environment, as well as a decline in political advertising. Audio & Media Services revenue decreased $5.3 million primarily due to a decrease in political revenue, partially offset by continued growth in digital revenues.

Consolidated direct operating expenses decreased $10.3 million, or 2.8%, during the three months ended June 30, 2023 compared to the same period of 2022. The decrease was primarily driven by lower digital performance royalty fees including the impact of expenses recorded in 2022 upon the settlement of amounts related to prior years, as well as lower employee compensation as a result of cost savings initiatives. The decrease was partially offset by higher variable content costs resulting from an increase in digital revenue, including third-party digital costs and production costs.

Consolidated Selling, General & Administrative (“SG&A”) expenses increased $14.7 million, or 3.9%, during the three months ended June 30, 2023 compared to the same period of 2022. The increase in Consolidated SG&A expenses was driven primarily by higher variable bonus expense and higher bad debt expense, partially offset by lower sales commissions.

Our consolidated GAAP Operating loss was $897.2 million compared to Operating income of $82.9 million in the second quarter of 2022, primarily resulting from a non-cash impairment charge of $964.5 million mainly due to the impairment of our goodwill and indefinite-lived intangible assets balances.

Adjusted EBITDA decreased to $191.2 million compared to $237.2 million in the prior-year period.

Cash provided by operating activities was $56.8 million, compared to $155.8 million in the prior-year period, and Free Cash Flow was $34.0 million, compared to $106.1 million in the prior-year period primarily due to a decrease in broadcast radio revenue due to a challenging macroeconomic environment, an increase in borrowing rates, and timing of payments.

Business Segments: Results of Operations

Second Quarter 2023 Multiplatform Group Results

(In thousands)	Three Months Ended June 30,						%		Six Months Ended June 30,						%
		2023			2022		Change			2023			2022		Change
Revenue	$	595,944		$	633,300		(5.9	)%	$	1,124,957		$	1,204,460		(6.6	)%
Operating expenses¹		433,542			438,804		(1.2	)%		875,503			876,057		(0.1	)%
Segment Adjusted EBITDA	$	162,402		$	194,496		(16.5	)%	$	249,454		$	328,403		(24.0	)%
Segment Adjusted EBITDA margin		27.3	%		30.7	%				22.2	%		27.3	%

¹ Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.

Revenue from our Multiplatform Group decreased $37.4 million, or 5.9% YoY, primarily as a result of the challenging macroeconomic environment and a decline in political advertising. Broadcast revenue declined $33.4 million, or 7.2% YoY, driven by lower spot revenue and a decrease in political advertising. Networks declined $5.4 million, or 4.2% YoY. Revenue from Sponsorship and Events increased by $0.1 million, or 0.4% YoY.

Operating expenses decreased $5.3 million, or 1.2% YoY, driven primarily by cost savings initiatives and sales commissions, partially offset by higher bad debt expense.

Segment Adjusted EBITDA Margin decreased YoY to 27.3% from 30.7%.

Second Quarter 2023 Digital Audio Group Results

(In thousands)	Three Months Ended June 30,						%		Six Months Ended June 30,						%
		2023			2022		Change			2023			2022		Change
Revenue	$	260,854		$	252,561		3.3	%	$	484,250		$	466,780		3.7	%
Operating expenses¹		176,272			173,678		1.5	%		345,549			335,389		3.0	%
Segment Adjusted EBITDA	$	84,582		$	78,883		7.2	%	$	138,701		$	131,391		5.6	%
Segment Adjusted EBITDA margin		32.4	%		31.2	%				28.6	%		28.1	%

¹ Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.

Revenue from our Digital Audio Group increased $8.3 million, or 3.3% YoY, driven by Podcast revenue which increased by $11.0 million, or 12.8%, YoY, to $96.7 million, driven primarily by increased demand for podcasting from advertisers, partially offset by Digital, excluding Podcast revenue, which declined $2.7 million, or 1.6%, YoY, to $164.1 million, driven by a decrease in COVID-19 related advertisers.

Operating expenses increased $2.6 million, or 1.5% YoY, due to higher variable costs, including third-party digital costs and sales commissions primarily resulting from higher revenue, partially offset by a decrease in performance royalty fees.

Segment Adjusted EBITDA Margin increased YoY to 32.4% from 31.2%.

Second Quarter 2023 Audio & Media Services Group Results

(In thousands)	Three Months Ended June 30,						%		Six Months Ended June 30,						%
		2023			2022		Change			2023			2022		Change
Revenue	$	65,804		$	71,065		(7.4	)%	$	127,155		$	131,922		(3.6	)%
Operating expenses¹		47,305			48,995		(3.4	)%		93,312			93,465		(0.2	)%
Segment Adjusted EBITDA	$	18,499		$	22,070		(16.2	)%	$	33,843		$	38,457		(12.0	)%
Segment Adjusted EBITDA margin		28.1	%		31.1	%				26.6	%		29.2	%

¹ Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.

Revenue from our Audio & Media Services Group decreased $5.3 million, or 7.4% YoY, driven by a decrease in political revenue, partially offset by continued growth in digital-placement revenues.

Operating expenses decreased $1.7 million, or 3.4% YoY, primarily as a result of lower cost of sales due to lower revenues.

Segment Adjusted EBITDA Margin decreased YoY to 28.1% from 31.1%.

GAAP and Non-GAAP Measures: Consolidated

(In thousands)	Three Months Ended June 30,					Six Months Ended June 30,
		2023			2022		2023			2022
Revenue	$	920,014		$	954,005	$	1,731,253		$	1,797,463
Operating income (loss)	$	(897,194	)	$	82,869	$	(946,056	)	$	95,204
Adjusted EBITDA¹	$	191,181		$	237,185	$	284,605		$	382,403
Net income (loss)	$	(882,982	)	$	15,182	$	(1,105,345	)	$	(33,557	)
Cash provided by operating activities²	$	56,772		$	155,801	$	(37,211	)	$	103,589
Free cash flow^1,2	$	33,999		$	106,148	$	(99,149	)	$	31,379
Free cash flow including net proceeds from real estate sales^1,2	$	38,628		$	126,617	$	(94,520.3	)	$	55,214

_________________________
	¹	See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income (loss), (ii) Adjusted EBITDA to Net loss, (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash used for operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow, Free cash flow including net proceeds from real estate sales, Adjusted EBITDA margin, and Net Debt under the Supplemental Disclosure Regarding Non-GAAP Financial Information section in this release.
	²	We made cash interest payments of $93.7 million in the three months ended June 30, 2023, compared to $83.9 million in the three months ended June 30, 2022.

Certain prior period amounts have been reclassified to conform to the 2023 presentation of financial information throughout the press release.

Liquidity and Financial Position

As of June 30, 2023, we had $165.3 million of cash on our balance sheet. For the six months ended June 30, 2023, cash used for operating activities was $37.2 million, cash used for investing activities was $59.3 million and cash used for financing activities was $74.9 million.

Capital expenditures for the six months ended June 30, 2023 were $61.9 million compared to $72.2 million in the six months ended June 30, 2022. Capital expenditures during the six months ended June 30, 2023 decreased primarily due to cost savings initiatives.

As of June 30, 2023, the Company had $5,316.4 million of total debt and $5,151.1 million of Net Debt. The terms of our capital structure include no material maintenance covenants, and there are no material debt maturities prior to 2026, providing structural resilience. During the three months ended June 30, 2023, we repurchased $79.9 million in aggregate principal amount of iHeartCommunications Inc.’s 8.375% Senior Unsecured Notes due 2027, at a discount to par, for $57.0 million in cash.

Cash balance and total available liquidity⁵ were $165.3 million and $585 million, respectively, as of June 30, 2023.

^{_________________________

5} Total available liquidity is defined as cash and cash equivalents plus available borrowings under our ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.

Revenue Streams

The tables below present the comparison of our historical revenue streams (including political revenue) for the periods presented:

(In thousands)	Three Months Ended June 30,						%		Six Months Ended June 30,						%
		2023			2022		Change			2023			2022		Change
Broadcast Radio	$	429,152		$	462,547		(7.2	)%	$	812,390		$	877,789		(7.5	)%
Networks		122,168			127,532		(4.2	)%		230,122			245,090		(6.1	)%
Sponsorship and Events		38,210			38,064		0.4	%		70,797			71,665		(1.2	)%
Other		6,414			5,157		24.4	%		11,648			9,916		17.5	%
Multiplatform Group¹		595,944			633,300		(5.9	)%		1,124,957			1,204,460		(6.6	)%
Digital ex. Podcast		164,147			166,880		(1.6	)%		310,732			312,555		(0.6	)%
Podcast		96,707			85,681		12.9	%		173,518			154,225		12.5	%
Digital Audio Group		260,854			252,561		3.3	%		484,250			466,780		3.7	%
Audio & Media Services Group¹		65,804			71,065		(7.4	)%		127,155			131,922		(3.6	)%
Eliminations		(2,588	)		(2,921	)				(5,109	)		(5,699	)
Revenue, total¹	$	920,014		$	954,005		(3.6	)%	$	1,731,253		$	1,797,463		(3.7	)%

Excluding the impact of political revenue, Revenue from the Multiplatform Group and Consolidated Revenue decreased by 4.5% and 1.8% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, respectively. Excluding the impact of political revenue, Revenue from Audio & Media Services increased by 2.4% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. See the end of this press release for a reconciliation of revenue, excluding political advertising revenue, to revenue.

Conference Call

iHeartMedia, Inc. will host a conference call to discuss results and business outlook on August 8, 2023, at 8:00 a.m. Eastern Time. The conference call number is (888) 330-2446 (U.S. callers) and +1 (240) 789-2732 (International callers) and the passcode for both is 71596. A live audio webcast of the conference call will also be available on the Investors homepage of iHeartMedia’s website investors.iheartmedia.com. After the live conference call, a replay will be available for a period of thirty days. The replay numbers are (800) 770-2030 (U.S. callers) and +1 (647) 362-9199 (International callers) and the passcode for both is 71596. An archive of the webcast will be available beginning 24 hours after the call for a period of thirty days.

About iHeartMedia, Inc.

iHeartMedia (Nasdaq: IHRT) is the number one audio company in the United States, reaching nine out of 10 Americans every month. It consists of three business groups.

With its quarter of a billion monthly listeners, the iHeartMedia Multiplatform Group has a greater reach than any other media company in the U.S. Its leadership position in audio extends across multiple platforms, including more than 860 live broadcast stations in over 160 markets nationwide; its National Sales organization; and the company’s live and virtual events business. It also includes Premiere Networks, the industry’s largest Networks business, with its Total Traffic and Weather Network (TTWN); and BIN: Black Information Network, the first and only 24/7 national and local all news audio service for the Black community. iHeartMedia also leads the audio industry in analytics, targeting and attribution for its marketing partners with its SmartAudio suite of data targeting and attribution products using data from its massive consumer base.

The iHeartMedia Digital Audio Group includes the company’s fast-growing podcasting business –iHeartMedia is the number one podcast publisher in downloads, unique listeners, revenue and earnings – as well as its industry-leading iHeartRadio digital service, available across more than 250 platforms and thousands of devices; the company’s digital sites, newsletters, digital services and programs; its digital advertising technology companies; and its audio industry-leading social media footprint.

The Company’s Audio & Media Services reportable segment includes Katz Media Group, the nation’s largest media representation company, and RCS, the world’s leading provider of broadcast and webcast software.

Certain statements herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors which may cause the actual results, performance or achievements of iHeartMedia, Inc. and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words or phrases “guidance,” “believe,” “expect,” “anticipate,” “estimates,” “forecast” and similar words or expressions are intended to identify such forward-looking statements. In addition, any statements that refer to expectations or other characterizations of future events or circumstances, such as statements about positioning in uncertain economic environment and future economic recovery, driving shareholder value, our expected costs savings and other capital and operating expense reduction initiatives, utilizing new technologies, improving operational efficiency, future advertising demand, trends in the advertising industry, including on other media platforms; strategies and initiatives, expected interest rates and interest expense savings, and our anticipated financial performance, liquidity, and net leverage are forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other important factors, some of which are beyond our control and are difficult to predict. Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to: risks related to weak or uncertain global economic conditions; the impact of COVID-19 or other future public health crises; competition, including increased competition from alternative media platforms and technologies; dependence upon our brand and the performance of on-air talent, program hosts and management; fluctuations in operating costs; technological changes and innovations; shifts in population and other demographics; impact of acquisitions, dispositions and other strategic transactions; risks related to our indebtedness; legislative or regulatory requirements; impact of legislation, ongoing litigation or royalty audits on music licensing and royalties; regulations and concerns regarding privacy and data protection and breaches of information security measures; risks related to our Class A common stock; and regulations impacting our business and the ownership of our securities. Other unknown or unpredictable factors also could have material adverse effects on the Company’s future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof. Additional risks that could cause future results to differ from those expressed by any forward-looking statement are described in the Company’s reports filed with the U.S. Securities and Exchange Commission, including in the section entitled “Part I, Item 1A. Risk Factors” of iHeartMedia, Inc.’s Annual Reports on Form 10-K and “Part II, Item 1A. Risk Factors” of iHeartMedia, Inc.’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

APPENDIX

TABLE 1 – Comparison of operating performance

(In thousands)

Three Months Ended

June 30,

%

Six Months Ended

June 30,

%

2023

2022

Change

2023

2022

Change

Revenue

$

      920,014

$

      954,005

(3.6

)%

$

   1,731,253

$

   1,797,463

(3.7

)%

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

        355,061

        365,382

(2.8

)%

        699,681

        695,906

0.5

%

Selling, general and administrative expenses (excludes depreciation and amortization)

        393,773

        379,057

3.9

%

        796,574

        763,401

4.3

%

Depreciation and amortization

        108,065

        110,788

        216,577

        224,839

Impairment charges

        960,570

               245

        964,517

            1,579

Other operating (income) expense, net

              (261

)

          15,664

                (40

)

          16,534

Operating income (loss)

$

     (897,194

)

$

        82,869

$

     (946,056

)

$

        95,204

Depreciation and amortization

        108,065

        110,788

        216,577

        224,839

Impairment charges

        960,570

               245

        964,517

            1,579

Other operating (income) expense, net

              (261

)

          15,664

                (40

)

          16,534

Restructuring expenses

          10,789

          19,009

          30,243

          30,102

Share-based compensation expense

            9,212

            8,610

          19,364

          14,145

Adjusted EBITDA¹

$

      191,181

$

      237,185

(19.4

)%

$

      284,605

$

      382,403

(25.6

)%

¹

See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income (loss), (ii) Adjusted EBITDA to Net loss, (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash used for operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow, Free cash flow including net proceeds from real estate sales, Adjusted EBITDA margin and Net Debt under the Supplemental Disclosure section in this release.

TABLE 2 – Statements of Operations

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Revenue

$

920,014

$

954,005

$

1,731,253

$

1,797,463

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

355,061

365,382

699,681

695,906

Selling, general and administrative expenses (excludes depreciation and amortization)

393,773

379,057

796,574

763,401

Depreciation and amortization

108,065

110,788

216,577

224,839

Impairment charges¹

960,570

245

964,517

1,579

Other operating (income) expense, net

(261

)

15,664

(40

)

16,534

Operating income (loss)

(897,194

)

82,869

(946,056

)

95,204

Interest expense, net

98,693

81,494

194,150

160,713

(Gain) loss on investments, net

(6,038

)

9,590

(12,543

)

7,825

Equity in loss of nonconsolidated affiliates

(44

)

(29

)

(4

)

(58

)

Gain on extinguishment of debt

22,902

8,203

27,527

8,203

Other expense, net

(272

)

(2,175

)

(371

)

(2,445

)

Income (loss) before income taxes

(979,339

)

16,964

(1,125,597

)

(51,984

)

Income tax benefit (expense)

96,357

(1,782

)

20,252

18,427

Net income (loss)

(882,982

)

15,182

(1,105,345

)

(33,557

)

Less amount attributable to noncontrolling interest

1,488

781

1,385

624

Net income (loss) attributable to the Company

$

(884,470

)

$

14,401

$

(1,106,730

)

$

(34,181

)

¹

Impairment charges in the six months ended June 30, 2023 includes $595.5 million related to the impairment of Goodwill, $363.6 million related to the impairment of FCC licenses, and $5.5 million related to impairments of right-of-use assets. The right-of-use asset impairments are part of our operating expense-savings initiatives. As previously disclosed, we have taken strategic actions to streamline our real estate footprint and related expenses, resulting in impairment charges due to the write-down of right-of-use assets and related fixed assets, including leasehold improvements. During the three and six months ended June 30, 2022, we recognized non-cash impairment charges of $0.2 million and $1.6 million, respectively, as a result of these cost-savings initiatives.

TABLE 3 – Selected Balance Sheet Information

Selected balance sheet information for June 30, 2023 and December 31, 2022:

(In millions)

June 30, 2023

December 31, 2022

Cash

$

165.3

$

336.2

Total Current Assets

1,336.4

1,472.8

Net Property, Plant and Equipment

649.7

694.8

Total Assets

6,983.8

8,335.9

Current Liabilities (excluding current portion of long-term debt)

730.4

831.2

Long-term Debt (including current portion of long-term debt)

5,316.4

5,414.2

Stockholders’ Equity (Deficit)

(403.5

)

684.5

Supplemental Disclosure Regarding Non-GAAP Financial Information

The following tables set forth the Company’s Adjusted EBITDA, Adjusted EBITDA margin, revenues excluding political advertising revenue, Free Cash Flow and Free cash flow including net proceeds from real estate sales for the three and six months ended June 30, 2023 and 2022, and Net Debt as of June 30, 2023. Adjusted EBITDA is defined as consolidated Operating income adjusted to exclude restructuring expenses included within Direct operating expenses and SG&A expenses, and share-based compensation expenses included within SG&A expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Impairment charges and Other operating (income) expense, net. Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, (Gain) loss on investments, net, Gain on extinguishment of debt, Other expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating income (expense), net, Share-based compensation expense, and restructuring expenses. Restructuring expenses primarily include expenses incurred in connection with cost-saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company’s operations during a normal business cycle. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Revenue.

The Company uses Adjusted EBITDA and Adjusted EBITDA margin, among other measures, to evaluate the Company’s operating performance. Adjusted EBITDA is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe this measure is an important indicator of the Company’s operational strength and performance of its business because it provides a link between operational performance and operating income. It is also a primary measure used by management in evaluating companies as potential acquisition targets.

The Company believes the presentation of these measures is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management. The Company believes it helps improve investors’ ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that have different capital structures or tax rates. In addition, the Company believes this measure is also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry.

Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of the Company’s ability to fund its cash needs. As it excludes certain financial information compared with operating income, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions which are excluded.

We define Free Cash Flow as Cash provided by (used for) operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company’s Consolidated Statements of Cash Flows. We define Free cash flow including net proceeds from real estate sales as Free Cash Flow further adjusted to include proceeds from real estate sales. We use Free Cash Flow and Free cash flow including net proceeds from real estate sales, among other measures, to evaluate the Company’s liquidity and its ability to generate cash flow. We believe that Free Cash Flow and Free cash flow including net proceeds from real estate sales are meaningful to investors because they provide them with a view of the Company’s liquidity after deducting capital expenditures, which are considered to be a necessary component of ongoing operations; and include proceeds from real estate sales in the case of Free cash flow including net proceeds from real estate sales. In addition, we believe that Free Cash Flow and Free cash flow including net proceeds from real estate sales helps improve investors’ ability to compare our liquidity with that of other companies.

Since Free Cash Flow and Free cash flow including net proceeds from real estate sales are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, Cash used for operating activities and may not be comparable to similarly titled measures employed by other companies. Free Cash Flow and Free cash flow including net proceeds from real estate sales is not necessarily a measure of our ability to fund our cash needs.

The Company presents revenue, excluding the effects of political revenue. Due to the cyclical nature of the electoral system and the seasonality of the related political revenue, management believes presenting revenue, excluding the effects of political revenue, provides additional information to investors about the Company’s revenue growth from period to period.

We define Net Debt as Total Debt less Cash and cash equivalents. We define net leverage as Net Debt divided by Adjusted EBITDA. The Company uses net leverage and Net Debt to evaluate the Company’s liquidity. We believe these measures are an important indicator of the Company’s ability to service its long-term debt obligations.

Since these non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, the most directly comparable GAAP financial measures as an indicator of operating performance or liquidity.

As required by the SEC rules, the Company provides reconciliations below to the most directly comparable measures reported under GAAP, including (i) Adjusted EBITDA to Operating income (loss), (ii) Adjusted EBITDA to Net loss, (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash used for operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt.

We have provided forecasted Revenue and Adjusted EBITDA guidance for the quarter ending June 30, 2023 and net leverage guidance for December 31, 2023, which reflects anticipated Adjusted EBITDA for the year ending December 31, 2023 and net debt as of December 31, 2023. Our Earnings Call on August 8, 2023 may present guidance that includes Adjusted EBITDA. A full reconciliation of the forecasted Adjusted EBITDA, net debt and net leverage on a non-GAAP basis to its most-directly comparable GAAP metrics cannot be provided without unreasonable efforts due to the inherent difficulty in forecasting and quantifying with reasonable accuracy significant items required for the reconciliations, including gains or losses on investments, extinguishment of debt, equity in nonconsolidated affiliates, impairment charges, stock based compensation, and restructuring as well as the Company’s cash and cash equivalent balance.

Reconciliation of Operating income (loss) to Adjusted EBITDA

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

Three Months Ended March 31,

2023

2022

2023

2022

2023

Operating income (loss)

$

     (897,194

)

$

        82,869

$

     (946,056

)

$

        95,204

$

       (48,862

)

Depreciation and amortization

         108,065

        110,788

         216,577

        224,839

        108,512

Impairment charges¹

         960,570

               245

         964,517

            1,579

            3,947

Other operating (income) expense, net

              (261

)

          15,664

                (40

)

          16,534

               221

Restructuring expenses

           10,789

          19,009

           30,243

          30,102

          19,454

Share-based compensation expense

             9,212

            8,610

           19,364

          14,145

          10,152

Adjusted EBITDA

$

       191,181

$

      237,185

$

       284,605

$

      382,403

$

        93,424

¹

Impairment charges in the six months ended June 30, 2023 includes $595.5 million related to the impairment of Goodwill, $363.6 million related to the impairment of FCC licenses, and $5.5 million related to impairments of right-of-use assets. The right-of-use asset impairments are part of our operating expense-savings initiatives. As previously disclosed, we have taken strategic actions to streamline our real estate footprint and related expenses, resulting in impairment charges due to the write-down of right-of-use assets and related fixed assets, including leasehold improvements. During the three and six months ended June 30, 2022, we recognized non-cash impairment charges of $0.2 million and $1.6 million, respectively, as a result of these cost-savings initiatives.

Reconciliation of Net income (loss) to EBITDA and Adjusted EBITDA

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

Three Months Ended March 31,

2023

2022

2023

2022

2023

Net income (loss)

$

     (882,982

)

$

        15,182

$

(1,105,345

)

$

       (33,557

)

$

     (222,363

)

Income tax (benefit) expense

         (96,357

)

            1,782

         (20,252

)

         (18,427

)

          76,105

Interest expense, net

          98,693

          81,494

        194,150

        160,713

          95,457

Depreciation and amortization

        108,065

        110,788

        216,577

        224,839

        108,512

EBITDA

$

     (772,581

)

$

      209,246

$

     (714,870

)

$

      333,568

$

        57,711

(Gain) Loss on investments, net

            6,038

           (9,590

)

          12,543

           (7,825

)

            6,505

Gain on extinguishment of debt

         (22,902

)

           (8,203

)

         (27,527

)

           (8,203

)

           (4,625

)

Other expense, net

               272

            2,175

               371

            2,445

                 99

Equity in loss of nonconsolidated affiliates

                 44

                 29

                   4

                 58

                (40

)

Impairment charges

        960,570

               245

        964,517

            1,579

            3,947

Other operating (income) expense, net

              (261

)

          15,664

                (40

)

          16,534

               221

Restructuring expenses

          10,789

          19,009

          30,243

          30,102

          19,454

Share-based compensation expense

            9,212

            8,610

          19,364

          14,145

          10,152

Adjusted EBITDA

$

      191,181

$

      237,185

$

      284,605

$

      382,403

$

        93,424

Reconciliation of Cash Used For Operating Activities to Free Cash Flow and Free cash flow including net proceeds from real estate sales

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Cash used for operating activities

$

56,772

$

155,801

$

(37,211

)

$

103,589

Purchases of property, plant and equipment

(22,773

)

(49,653

)

(61,938

)

(72,210

)

Free cash flow

33,999

106,148

(99,149

)

$

31,379

Net proceeds from real estate sales¹

4,629

20,469

4,629

23,835

Free cash flow including net proceeds from real estate sales

$

38,628

$

126,617

$

(94,520

)

$

55,214

¹

During the three and six months ended June 30, 2023 and 2022, we deployed capital expenditures to accelerate the proactive streamlining of our real estate footprint aimed at reducing our structural cost base. This initiative has succeeded in making certain real estate assets redundant, enabling the Company to sell such assets to partially fund the initiative’s gross capital expenditures.

Reconciliation of Revenue to Revenue excluding Political Advertising

(In thousands)

Three Months Ended

June 30,

%

Change

Six Months Ended

June 30,

%

Change

2023

2022

2023

2022

Consolidated revenue

$

920,014

$

954,005

(3.6

)%

$

1,731,253

$

1,797,463

(3.7

)%

Excluding: Political revenue

(6,172

)

(23,084

)

(9,775

)

(32,247

)

Consolidated revenue, excluding political

$

913,842

$

930,921

(1.8

)%

$

1,721,478

$

1,765,216

(2.5

)%

Multiplatform Group revenue

$

595,944

$

633,300

(5.9

)%

$

1,124,957

$

1,204,460

(6.6

)%

Excluding: Political revenue

(3,852

)

(13,470

)

(7,336

)

(19,135

)

Multiplatform Group revenue, excluding political

$

592,092

$

619,830

(4.5

)%

$

1,117,621

$

1,185,325

(5.7

)%

Digital Audio Group revenue

$

260,854

$

252,561

3.3

%

$

484,250

$

466,780

3.7

%

Excluding: Political revenue

(846

)

(1,397

)

(1,346

)

(2,672

)

Digital Audio Group revenue, excluding political

$

260,008

$

251,164

3.5

%

$

482,904

$

464,108

4.0

%

Audio & Media Group Services revenue

$

65,804

$

71,065

(7.4

)%

$

127,155

$

131,922

(3.6

)%

Excluding: Political revenue

(1,475

)

(8,217

)

(1,093

)

(10,440

)

Audio & Media Services Group revenue, excluding political

$

64,329

$

62,848

2.4

%

$

126,062

$

121,482

3.8

%

Reconciliation of Total Debt to Net Debt

(In thousands)

June 30,

2023

Current portion of long-term debt

$

440

Long-term debt

5,315,955

Total debt

$

5,316,395

Less: Cash and cash equivalents

165,325

Net debt

$

5,151,070

Segment Results

The following tables present the Company’s segment results for the Company for the periods presented:

Segments

(In thousands)

Multiplatform Group

Digital Audio Group

Audio & Media Services Group

Corporate and other reconciling items

Eliminations

Consolidated

Three Months Ended June 30, 2023

Revenue

$

595,944

$

260,854

$

65,804

$

—

$

(2,588

)

$

920,014

Operating expenses⁽¹⁾

433,542

176,272

47,305

74,302

(2,588

)

728,833

Adjusted EBITDA

$

162,402

$

84,582

$

18,499

$

(74,302

)

$

—

$

191,181

Adjusted EBITDA margin

27.3

%

32.4

%

28.1

%

20.8

%

Depreciation and amortization

(108,065

)

Impairment charges

(960,570

)

Other operating expense, net

261

Restructuring expenses

(10,789

)

Share-based compensation expense

(9,212

)

Operating loss

$

(897,194

)

Operating margin

NM

Segments

(In thousands)

Multiplatform Group

Digital Audio Group

Audio & Media Services Group

Corporate and other reconciling items

Eliminations

Consolidated

Three Months Ended June 30, 2022

Revenue

$

633,300

$

252,561

$

71,065

$

—

$

(2,921

)

$

954,005

Operating expenses⁽¹⁾

438,804

173,678

48,995

58,264

(2,921

)

716,820

Adjusted EBITDA

$

194,496

$

78,883

$

22,070

$

(58,264

)

$

—

$

237,185

Adjusted EBITDA margin

30.7

%

31.2

%

31.1

%

24.9

%

Depreciation and amortization

(110,788

)

Impairment charges

(245

)

Other operating expense, net

(15,664

)

Restructuring expenses

(19,009

)

Share-based compensation expense

(8,610

)

Operating income

$

82,869

Operating margin

8.7

%

⁽¹⁾

Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.

Segments

(In thousands)

Multiplatform Group

Digital Audio Group

Audio & Media Services Group

Corporate and other reconciling items

Eliminations

Consolidated

Six Months Ended June 30, 2023

Revenue

$

1,124,957

$

484,250

$

127,155

$

—

$

(5,109

)

$

1,731,253

Operating expenses⁽¹⁾

875,503

345,549

93,312

137,393

(5,109

)

1,446,648

Segment Adjusted EBITDA

$

249,454

$

138,701

$

33,843

$

(137,393

)

$

—

$

284,605

Adjusted EBITDA margin

22.2

%

28.6

%

26.6

%

16.4

%

Depreciation and amortization

(216,577

)

Impairment charges

(964,517

)

Other operating income, net

40

Restructuring expenses

(30,243

)

Share-based compensation expense

(19,364

)

Operating loss

$

(946,056

)

Operating margin

NM

Segments

(In thousands)

Multiplatform Group

Digital Audio Group

Audio & Media Services Group

Corporate and other reconciling items

Eliminations

Consolidated

Six Months Ended June 30, 2022

Revenue

$

1,204,460

$

466,780

$

131,922

$

(5,699

)

$

1,797,463

Operating expenses⁽¹⁾

876,057

335,389

93,465

115,848

(5,699

)

1,415,060

Segment Adjusted EBITDA

$

328,403

$

131,391

$

38,457

$

(115,848

)

$

—

$

382,403

Adjusted EBITDA margin

27.3

%

28.1

%

29.2

%

21.3

%

Depreciation and amortization

(224,839

)

Impairment charges

(1,579

)

Other operating expense, net

(16,534

)

Restructuring expenses

(30,102

)

Share-based compensation expense

(14,145

)

Operating income

$

95,204

Operating margin

5.3

%

⁽¹⁾

Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808394152/en/

Media

Wendy Goldberg

Chief Communications Officer

(212) 377-1105

[email protected]

Investors

Mike McGuinness

EVP, Deputy CFO, and Head of Investor Relations

(212) 377-1336

[email protected]

KEYWORDS: New York United States North America

INDUSTRY KEYWORDS: Podcast TV and Radio Media Advertising Communications Online Events/Concerts Entertainment

MEDIA:

Logo

Posted on August 8, 2023 8:03 am
Sterling Reports Second Quarter 2023 Results

Continued Successful Execution Towards 2023 Goals and Long-Term Strategy

Extended Exclusive Partnership with ID.me Through 2028, Continuing Our Focus on Expanding Identity Verification Solutions

INDEPENDENCE, Ohio, Aug. 08, 2023 (GLOBE NEWSWIRE) — Sterling Check Corp. (NASDAQ: STER) (“Sterling” or “the Company”) a leading global provider of technology-enabled background and identity verification services, today announced financial results for the second quarter ended June 30, 2023.

Second
Quarter
2023
Highlights

All results compared to prior-year period.

Revenues decreased 7.4% year-over-year to $190.4 million, in line with our prior expectations. Organic constant currency revenue decreased 10.1% and inorganic revenue growth was 3.2%.

GAAP net income decreased year-over-year to $0.3 million, or $0.00 (as rounded) per diluted share, compared to GAAP net income of $11.6 million, or $0.12 per diluted share, for the prior year period.

Adjusted EBITDA decreased 11.5% year-over-year to $50.0 million. Adjusted EBITDA Margin decreased 120 bps year-over-year to 26.3% yet exceeded our prior expectations.

Adjusted Net Income decreased 19.4% year-over-year to $26.2 million. Adjusted Earnings Per Share – diluted decreased 15.2% year-over-year to $0.28 per diluted share.

Organic constant currency revenue growth (decline), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share – diluted are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of these measures to their most directly comparable GAAP measures, as applicable.

Josh Peirez, Sterling CEO, said, “The second quarter of 2023 was an encouraging continuation of the first quarter with execution against our goals and solid results at or above our previous expectations. We made further progress on our key focus areas for 2023 and long-term strategy, including driving organic revenues, optimizing our cost profile, and integrating M&A. On the top line, we saw continued success in the revenue drivers within our control with positive trends in growth from new client wins, up-sell / cross-sell, and customer retention. Our full year expectations have been narrowed to reflect our updated expectations for full year base volumes given recent trends. Still, we are excited by our strong tailwinds for the second half of 2023 stemming from ramping new clients, product up-sells, and strengthening win rates. We also continue to expand our industry-leading global capabilities in Identity with the recent extension of our exclusive agreement with ID.me in the U.S. through 2028 and the roll-out of digital identity verification services overseas with Yoti.

“On profitability, we are very pleased with our continued progress, delivering on our cost optimization program during the second quarter and driving margins ahead of our expectations. We expect our ongoing execution in the cost optimization program to drive margin expansion in 2023 even in the absence of full-year revenue growth. Even more importantly, we expect these strategic initiatives centered around focused automation, efficiency, and process re-engineering to result in a stronger, more scalable, and more profitable company for the long-term.”

Second
Quarter
2023
Results

Three Months Ended June 30,

2022 2023 Change

(in thousands, except per share data and percentages)

Revenues $ 205,591 $ 190,384 (7.4) %

Net income $ 11,571 $ 323 (97.2) %

Net income margin 5.6 % 0.2 % (540) bps

Net income per share – diluted $ 0.12 $ 0.00 N/M

Adjusted EBITDA⁽¹⁾ $ 56,472 $ 49,997 (11.5) %

Adjusted EBITDA Margin⁽¹⁾ 27.5 % 26.3 % (120) bps

Adjusted Net Income⁽¹⁾ $ 32,499 $ 26,204 (19.4) %

Adjusted Earnings Per Share – diluted $ 0.33 $ 0.28 (15.2) %

_______________________

N/M—Not meaningful.

(1) Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share – diluted are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of these measures to their most directly comparable GAAP measures.

Revenue for the second quarter of 2023 was $190.4 million, a decrease of $15.2 million, or 7.4%, compared to $205.6 million for the second quarter of 2022, which was a Company record for quarterly revenue. The revenue decrease for the second quarter of 2023 included a 10.1% organic constant currency revenue decrease and 0.5% drag due to the impact of fluctuations in foreign exchange currency rates, partially offset by 3.2% inorganic revenue growth from the acquisitions of Socrates and A-Check. The organic constant currency decrease in revenue was driven by an expected decrease in base business with existing clients due to macro uncertainty, which offset growth of 10% from the combination of new clients and up-sell / cross-sell.

Balance Sheet and Cash Flow

As of June 30, 2023, cash and cash equivalents were $48.8 million and total debt was $501.7 million, compared to cash and cash equivalents of $103.1 million and total debt of $505.5 million as of December 31, 2022. The decrease in cash since December 31, 2022 was primarily driven by the acquisitions of Socrates and A-Check (net purchase price of $48.6 million) and repurchases of Sterling’s common stock ($25.3 million) during the first six months of 2023, which offset growth in free cash flow. Sterling ended the second quarter of 2023 with a net leverage ratio of 2.4x net debt to Adjusted EBITDA. As of June 30, 2023, available borrowings under Sterling’s revolving credit facility, net of letters of credit outstanding, were $193.8 million.

For the six months ended June 30, 2023, Sterling generated net cash provided by operating activities of $32.9 million, compared to $33.3 million for the prior year period. Capital expenditures for the six months ended June 30, 2023 totaled $9.2 million, compared to $10.9 million for the prior year period. For the six months ended June 30, 2023, Sterling had $23.7 million of Free Cash Flow, compared to $22.4 million of Free Cash Flow for the prior year period. The increase in Free Cash Flow compared to the prior year period was primarily driven by an improvement in cash flow from our interest rate hedging program and a decrease in capital expenditures, partially offset by an increase in interest expense.

Free Cash Flow is a non-GAAP measure. Please see the schedule accompanying this earnings release for a reconciliation of Free Cash Flow to net cash provided by operating activities, its most directly comparable GAAP measure.

Full Year
2023
Guidance

Sterling is providing updated guidance for full year 2023 as detailed below. The following forward-looking statements reflect Sterling’s expectations as of today’s date. Actual results may differ materially.

Previous Guidance – May 9, 2023 Updated Guidance – August 8, 2023

(dollars in millions) Amount Year-over-year growth Amount Year-over-year growth

Revenues $760 – $800 (1.0)% – 4.0% $760 – $780 (1.0)% – 1.0%

Adjusted EBITDA $198 – $218 0.0% – 10.0% $198 – $208 0.0% – 5.0%

Adjusted Net Income $106 – $121 0.0% – 14.0% $106 – $114 0.0% – 7.0%

Sterling’s full-year 2023 guidance ranges reflect expectations that recent macroeconomic conditions will continue through the year and the Company’s results improve through the year.

Sterling has not presented a quantitative reconciliation of the forward-looking non-GAAP financial measures “Adjusted EBITDA” and “Adjusted Net Income” to their most directly comparable GAAP financial measure because it is impractical to forecast certain items without unreasonable efforts due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of and the periods in which such items may be recognized.

Conference Call Details

Sterling will hold a conference call to discuss the second quarter of 2023 financial results today, August 8, 2023 at 8:30 AM Eastern Time.

To register for the conference call, please visit Sterling’s investor relations website at https://investor.sterlingcheck.com under “News & Events”. Participants may also access the conference call by dialing 1-833-470-1428 (U.S.) or 1-929-526-1599 (outside the U.S.) and using conference code 402363 approximately ten minutes before the start of the call. A live audio webcast of the conference call, together with related presentation materials, will also be available on Sterling’s investor relations website at https://investor.sterlingcheck.com under “News & Events”.

A replay, along with the related presentation materials, will be available after the conclusion of the call on Sterling’s investor relations website under “News & Events” or by dialing 1-866-813-9403, access code 698314. The telephone replay will be available through Tuesday, August 22, 2023.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and it is intended that all forward-looking statements that we make will be subject to the safe harbor protections created thereby. Forward-looking statements can be identified by forward-looking terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “will” or “would,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements that address guidance, outlook, targets, market trends or projections about the future, and statements regarding Sterling’s expectations, beliefs, plans, strategies, objectives, prospects or assumptions, or statements regarding future events or performance, contained in this release are forward-looking statements. Sterling has based these forward-looking statements on current expectations, assumptions, estimates and projections. Such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond Sterling’s control. These and other important factors, including those discussed more fully elsewhere in this release and in the Company’s filings with the Securities and Exchange Commission, particularly Sterling’s most recently filed Annual Report on Form 10-K and Sterling’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements, or could affect Sterling’s share price. The forward-looking statements contained in this release are not guarantees of future performance and actual results of operations, financial condition, and liquidity, and the development of the industry in which Sterling operates, may differ materially from the forward-looking statements contained in this release. Any forward-looking statement made in this release speaks only as of the date of such statement. Except as required by law, Sterling does not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this release.

Non-GAAP Financial Information

This report contains “non-GAAP financial measures,” which are financial measures that are not calculated and presented in accordance with GAAP.

Specifically, Sterling makes use of the non-GAAP financial measures “organic constant currency revenue growth (decline)”, “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Net Income,” “Adjusted Earnings Per Share” and “Free Cash Flow” to assess the performance of its business.

Organic constant currency revenue growth (decline) is calculated by adjusting for inorganic revenue growth (decline), which is defined as the impact to revenue growth (decline) in the current period from merger and acquisition (“M&A”) activity that has occurred over the past twelve months, and converting the current period revenue at foreign currency exchange rates consistent with the prior period. For the three and six months ended June 30, 2022 and 2023, we have provided the impact of revenue from the acquisitions of Employment Background Investigations, Inc. (“EBI”) in November 2021 and Socrates and A-Check during the first quarter of 2023. We present organic constant currency revenue growth (decline) because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance; however, it has limitations as an analytical tool, and you should not consider such a measure either in isolation or as a substitute for analyzing our results as reported under GAAP. In particular, organic constant currency revenue growth (decline) does not reflect M&A activity or the impact of foreign currency exchange rate fluctuations.

Adjusted EBITDA is defined as net income (loss) adjusted for provision (benefit) for income taxes, interest expense, depreciation and amortization, stock-based compensation, transaction expenses related to the IPO, one-time public company transition expenses and costs associated with financing transactions, M&A activity, optimization and restructuring, technology transformation costs, foreign currency (gains) and losses and other costs affecting comparability. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue for the applicable period. We present Adjusted EBITDA and Adjusted EBITDA Margin because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management and our board of directors use Adjusted EBITDA and Adjusted EBITDA Margin to evaluate the factors and trends affecting our business to assess our financial performance and in preparing and approving our annual budget and believe they are helpful in highlighting trends in our core operating performance. Further, our executive incentive compensation is based in part on components of Adjusted EBITDA. Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools and should not be considered in isolation or as substitutes for our results as reported under GAAP. Adjusted EBITDA excludes items that can have a significant effect on our profit or loss and should, therefore, be considered only in conjunction with net income (loss) for the period. Because not all companies use identical calculations, these measures may not be comparable to other similarly titled measures of other companies.

Adjusted Net Income is a non-GAAP profitability measure. Adjusted Net Income is defined as net income (loss) adjusted for amortization of acquired intangible assets, stock-based compensation, transaction expenses related to the IPO, one-time public company transition expenses and costs associated with financing transactions, M&A activity, optimization and restructuring, technology transformation costs, and certain other costs affecting comparability, adjusted for the applicable tax rate. Adjusted Earnings Per Share is defined as Adjusted Net Income divided by diluted weighted average shares for the applicable period. We present Adjusted Net Income and Adjusted Earnings Per Share because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding certain material non-cash items and unusual items that we do not expect to continue at the same level in the future. Our management believes that the inclusion of supplementary adjustments to net income (loss) applied in presenting Adjusted Net Income provide additional information to investors about certain material non-cash items and about items that we do not expect to continue at the same level in the future. Adjusted Net Income and Adjusted Earnings Per Share have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP.

Free Cash Flow is defined as Net Cash provided by (used in) Operating Activities minus purchases of property and equipment and purchases of intangible assets and capitalized software. We present Free Cash Flow because we believe it provides cash available for strategic measures, after making necessary capital investments in property and equipment to support ongoing business operations, and provides investors with the same measures that management uses as the basis for making resource allocation decisions. Free Cash Flow has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Historically, we presented Adjusted Free Cash Flow, defined as Net Cash provided by (used in) Operating Activities minus purchases of property and equipment and purchases of intangible assets and capitalized software and reflecting adjustments for one-time, cash, non-operating expenses related to the IPO. As there are no adjustments related to the IPO for the three and six months ended June 30, 2022 and 2023, nor in the subsequent periods from such dates, management believes that Free Cash Flow is a more relevant measure.

About Sterling

Sterling—a leading provider of background and identity services—offers background and identity verification to help over 50,000 clients create people-first cultures built on foundations of trust and safety. Sterling’s tech-enabled services help organizations across all industries establish great environments for their workers, partners, and customers. With operations around the world, Sterling conducted more than 110 million searches in the twelve months ended December 31, 2022.

Contacts

Investors
Judah Sokel
[email protected]

Media
Angela Stelle
[email protected]

CONSOLIDATED FINANCIAL STATEMENTS

STERLING CHECK CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands, except share and per share data) 2022 2023 2022 2023

REVENUES $ 205,591 $ 190,384 $ 397,563 $ 369,658

OPERATING EXPENSES:

Cost of revenues (exclusive of depreciation and
amortization below) 107,576 102,056 208,532 196,810

Corporate technology and production systems 12,539 11,428 25,091 23,380

Selling, general and administrative 41,886 44,910 84,219 92,361

Depreciation and amortization 19,872 16,120 40,028 31,242

Impairments and disposals of long-lived assets 612 7,039 612 7,145

Total operating expenses 182,485 181,553 358,482 350,938

OPERATING INCOME 23,106 8,831 39,081 18,720

OTHER EXPENSE (INCOME):

Interest expense, net 6,619 8,990 12,955 17,598

Loss (gain) on interest rate swaps 32 — (296 ) —

Other income (508 ) (397 ) (862 ) (809 )

Total other expense, net 6,143 8,593 11,797 16,789

INCOME BEFORE INCOME TAXES 16,963 238 27,284 1,931

Income tax provision (benefit) 5,392 (85 ) 9,477 1,017

NET INCOME $ 11,571 $ 323 $ 17,807 $ 914

Unrealized gain (loss) on hedged transactions, net of tax (benefit) expense of $0, $(1,671), $0 and $144, respectively — 4,751 — (408 )

Foreign currency translation adjustments, net of tax of $0, $0, $0 and $0, respectively (3,483 ) 955 (3,200 ) 1,637

Total other comprehensive (loss) income (3,483 ) 5,706 (3,200 ) 1,229

COMPREHENSIVE INCOME $ 8,088 $ 6,029 $ 14,607 $ 2,143

Net income per share attributable to stockholders

Basic $ 0.12 $ 0.00 $ 0.19 $ 0.01

Diluted $ 0.12 $ 0.00 $ 0.18 $ 0.01

Weighted average number of shares outstanding

Basic 94,024,970 92,723,901 93,996,553 92,800,279

Diluted 99,344,563 94,498,666 99,265,668 94,924,080

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, June 30,

(in thousands, except share and per share amounts) 2022 2023

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 103,095 $ 48,817

Accounts receivable (net of allowance of $3,200 and $3,194 as of December 31, 2022 and June 30, 2023, respectively) 139,579 151,274

Insurance receivable 921 3,421

Prepaid expenses 13,433 11,795

Other current assets 13,654 24,847

Total current assets 270,682 240,154

Property and equipment, net 10,341 7,354

Goodwill 849,609 878,696

Intangible assets, net 241,036 251,031

Deferred income taxes 4,452 4,642

Operating leases right-of-use asset 20,084 7,514

Other noncurrent assets, net 11,050 11,212

TOTAL ASSETS $ 1,407,254 $ 1,400,603

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable $ 38,372 $ 40,017

Litigation settlement obligation 4,165 6,013

Accrued expenses 67,047 58,118

Current portion of long-term debt 7,500 11,250

Operating leases liability, current portion 3,717 4,069

Other current liabilities 12,939 13,712

Total current liabilities 133,740 133,179

Long-term debt, net 493,990 486,882

Deferred income taxes 23,707 31,531

Long-term operating leases liability, net of current portion 16,835 10,182

Other liabilities 2,336 7,942

Total liabilities $ 670,608 $ 669,716

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:

Preferred stock ($0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding) — —

Common stock ($0.01 par value; 1,000,000,000 shares authorized; 97,765,120 shares issued and 96,717,883 shares outstanding as of December 31, 2022; 99,810,027 shares issued and 96,758,662 shares outstanding as of June 30, 2023) 76 96

Additional paid-in capital 942,789 960,781

Common stock held in treasury (1,047,237 and 3,051,365 shares as of December 31, 2022 and June 30, 2023, respectively) (14,859 ) (40,773 )

Accumulated deficit (186,448 ) (185,534 )

Accumulated other comprehensive loss (4,912 ) (3,683 )

Total stockholders’ equity 736,646 730,887

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,407,254 $ 1,400,603

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

June 30,

(in thousands) 2022 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 17,807 $ 914

Adjustments to reconcile net income to net cash provided by operations

Depreciation and amortization 40,028 31,242

Deferred income taxes 3,409 188

Stock-based compensation 11,131 17,401

Impairments and disposals of long-lived assets 612 7,145

Provision for bad debts 659 459

Amortization of financing fees 218 539

Amortization of debt discount 959 392

Deferred rent (146 ) 1,023

Unrealized translation (gain) loss on investment in foreign subsidiaries (1,220 ) 108

Changes in fair value of derivatives (4,102 ) —

Interest rate swap settlements — 585

Changes in operating assets and liabilities

Accounts receivable (36,451 ) (7,399 )

Insurance receivable — (2,500 )

Prepaid expenses (702 ) 2,251

Other assets (3,180 ) (8,650 )

Accounts payable 14,249 1,314

Litigation settlement obligation — 1,848

Accrued expenses (8,610 ) (10,515 )

Other liabilities (1,382 ) (3,447 )

Net cash provided by operating activities 33,279 32,898

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment (3,266 ) (593 )

Purchases of intangible assets and capitalized software (7,616 ) (8,589 )

Acquisitions, net of cash acquired — (48,641 )

Proceeds from disposition of property and equipment 9 125

Net cash used in investing activities (10,873 ) (57,698 )

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of common stock 814 611

Repurchases of common stock — (25,342 )

Payments of initial public offering issuance costs (225 ) —

Cash paid for tax withholding on vesting of restricted shares — (572 )

Payments of long-term debt (3,231 ) (3,750 )

Payment of contingent consideration for acquisition (215 ) (305 )

Payments of finance lease obligations (1 ) —

Net cash used in financing activities (2,858 ) (29,358 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,735 ) (120 )

NET CHANGE IN CASH AND CASH EQUIVALENTS 17,813 (54,278 )

CASH AND CASH EQUIVALENTS

Beginning of period 47,998 103,095

Cash and cash equivalents at end of period $ 65,811 $ 48,817

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for

Interest, net of capitalized amounts of $150 and $189 for the six months ended
      June 30, 2022 and 2023, respectively $ 17,225 $ 20,239

Income taxes 9,531 9,703

Noncash investing activities

Purchases of property and equipment in accounts payable and accrued expenses 222 165

Noncash purchase price of business combinations — 4,706

RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASURES

The following table reconciles revenue growth (decline), the most directly comparable GAAP measure, to organic constant currency revenue growth (decline) for the three and six months ended June 30, 2023. For the three and six months ended June 30, 2023, we have provided the impact of revenue from the acquisitions of Socrates and A-Check.

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2023

Reported revenue decline (7.4) % (7.0) %

Inorganic revenue growth(1) 3.2 % 2.4 %

Impact from foreign currency exchange(2) (0.5) % (0.7) %

Organic constant currency revenue decline (10.1) % (8.7) %

_______________

(1) Impact to revenue growth (decline) in the current period from M&A activity that has occurred over the past twelve months.
(2) Impact to revenue growth (decline) in the current period from fluctuations in foreign currency exchange rates.

The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted EBITDA for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

2022 2023 2022 2023

(dollars in thousands)

Net income $ 11,571 $ 323 $ 17,807 $ 914

Income tax provision (benefit) 5,392 (85 ) 9,477 1,017

Interest expense, net 6,619 8,990 12,955 17,598

Depreciation and amortization 19,872 16,120 40,028 31,242

Stock-based compensation 6,023 9,358 11,131 17,401

Transaction expenses(1) 1,894 3,133 3,782 8,259

Restructuring(2) 836 11,490 1,182 14,763

Technology transformation(3) 4,537 179 8,299 3,412

Loss (gain) on interest rate swaps(4) 32 — (296 ) —

Other(5) (304 ) 489 (257 ) 946

Adjusted EBITDA $ 56,472 $ 49,997 $ 104,108 $ 95,552

Adjusted EBITDA Margin 27.5 % 26.3 % 26.2 % 25.8 %

_______________

(1) Consists of transaction expenses related to M&A, associated earn-outs, costs related to the preparation of the IPO, one-time public company transition expenses and fees associated with financing transactions. For the three months ended June 30, 2022, costs consisted primarily of $1.1 million of one-time public company transition expenses and $0.8 million in costs related to M&A. For the three months ended June 30, 2023, costs consisted primarily of $1.9 million of M&A related costs for the acquisitions of Socrates and A-Check and $1.2 million of costs to support the secondary public offering in June 2023. For the six months ended June 30, 2022, costs consisted primarily of $2.6 million of one-time public company transition expenses and $1.1 million in costs related to M&A. For the six months ended June 30, 2023, costs consisted primarily of $4.6 million of M&A related costs for the acquisitions of Socrates and A-Check, $1.2 million of M&A costs for the EBI acquisition primarily due to the acceleration of contract costs related to the completion of the EBI platform migration, and $2.5 million of registration statement costs, costs to support the secondary public offering in June 2023, one-time public company transition expenses and expenses related to executing our interest rate swap.
(2) Consists of restructuring-related costs, including executive recruiting and severance charges, and lease termination costs and disposal of fixed assets related to our real estate consolidation efforts. Beginning in 2020, we began executing a virtual-first strategy, closing offices and reducing office space globally. In 2022, we began executing on a restructuring program to realign senior leadership and functions with the goal of elevating our go-to-market strategy and accelerating our technology and product innovation. At the end of 2022, we also launched Project Nucleus which we expect to drive meaningful cost savings and efficiency gains in our cost of revenues. For the three months ended June 30, 2022, costs consisted of $0.8 million in expenses related to our real estate consolidation program primarily related to the exit of EBI’s office. For the three months ended June 30, 2023, costs consisted of $8.9 million in connection with executing against our real estate consolidation program which included a $5.3 million impairment charge on right-of-use assets, $1.9 million of accelerated rent and facilities costs, and $1.7 million of fixed asset disposals. The remaining $2.6 million consists of restructuring-related charges to support our strategy refresh and the execution of Project Nucleus. For the six months ended June 30, 2022, costs consisted of $1.2 million in expenses related to our real estate consolidation program, primarily due to the exit of EBI’s office. For the six months ended June 30, 2023, costs consisted of $9.2 million of real estate consolidation costs and $5.5 million of restructuring-related charges.
(3) Includes costs related to technology modernization, as well as costs related to decommissioning of on-premise production systems and redundant fulfillment systems of acquired companies and the migration to our platform. We believe that these costs are discrete and non-recurring in nature, as they relate to a one-time restructuring and decommissioning of our on-premise production systems and corporate technological infrastructure and the move to a managed service provider, decommissioning redundant fulfillment systems and modernizing internal functional systems. As such, they are not normal, recurring operating expenses and are not reflective of ongoing trends in the cost of doing business. The significant majority of these are related to the last two phases of Project Ignite, a three-phase strategic investment initiative launched in 2019 to create an enterprise-class global platform, with the remainder related to an investment made to modernize internal functional systems in preparation for our public company infrastructure. Phase two of Project Ignite was completed in 2022 and phase three of Project Ignite was completed in the first quarter of 2023. For the three months ended June 30, 2022, investment related to Project Ignite was $3.7 million and the remaining $0.8 million related to costs for decommissioning of the on-premise production system and decommissioning of the redundant fulfillment system of EBI and migrating onto our platform. For the three months ended June 30, 2023, $0.2 million related to decommissioning of the redundant production and fulfillment systems of A-Check and the redundant fulfillment systems of Socrates. For the six months ended June 30, 2022, investment related to Project Ignite was $6.9 million and the remaining $1.3 million related to costs for decommissioning of the on-premise production system and decommissioning of the redundant fulfillment system of EBI and migrating onto our platform. For the six months ended June 30, 2023, investment related to the conclusion of Project Ignite was $3.1 million and the remaining $0.3 million related to costs for decommissioning of the on-premise production system and decommissioning of the redundant fulfillment system of EBI and migrating onto our platform and decommissioning costs of the A-Check and Socrates systems.
(4) Consists of gains or losses on historical non-designated derivative interest rate swaps. See Part I. Item 3. “Quantitative and Qualitative Disclosures about Market Risk— Interest Rate Risk” in our Form 10-Q for the quarterly period ended June 30, 2023 for additional information on interest rate swaps.
(5) Consists of gains or losses on foreign currency transactions and impairment of capitalized software.

The following table presents the calculation of Net income margin and Adjusted EBITDA Margin for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

2022 2023 2022 2023

(dollars in thousands)

Net income $ 11,571 $ 323 $ 17,807 $ 914

Adjusted EBITDA 56,472 49,997 104,108 95,552

Revenues 205,591 190,384 397,563 369,658

Net income margin 5.6 % 0.2 % 4.5 % 0.2 %

Adjusted EBITDA Margin 27.5 % 26.3 % 26.2 % 25.8 %

The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income and Adjusted Earnings Per Share for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

2022 2023 2022 2023

(in thousands, except per share amounts)

Net income $ 11,571 $ 323 $ 17,807 $ 914

Income tax provision (benefit) 5,392 (85 ) 9,477 1,017

Income before income taxes 16,963 238 27,284 1,931

Amortization of acquired intangible assets 13,363 10,625 27,127 20,686

Stock-based compensation 6,023 9,358 11,131 17,401

Transaction expenses(1) 1,894 3,133 3,782 8,259

Restructuring(2) 836 11,490 1,182 14,763

Technology transformation(3) 4,537 179 8,299 3,412

Loss (gain) on interest rate swaps(4) 32 — (296 ) —

Other(5) (304 ) 489 (257 ) 946

Adjusted Net Income before income tax effect 43,344 35,512 78,252 67,398

Income tax effect(6) 10,845 9,308 21,352 17,908

Adjusted Net Income $ 32,499 26,204 $ 56,900 49,490

Net Income per share – basic $ 0.12 $ 0.00 $ 0.19 $ 0.01

Net Income per share – diluted $ 0.12 $ 0.00 $ 0.18 $ 0.01

Adjusted Earnings Per Share – basic 0.35 0.28 0.61 0.53

Adjusted Earnings Per Share – diluted 0.33 0.28 0.57 0.52

_______________

(1) Consists of transaction expenses related to M&A, associated earn-outs, investor management fees, costs related to the preparation of the IPO, one-time public company transition expenses and fees associated with financing transactions.
(2) Consists of restructuring-related costs, including executive recruiting and severance charges, and lease termination costs and disposal of fixed assets related to our real estate consolidation efforts. Beginning in 2020, we began executing a virtual-first strategy, closing offices and reducing office space globally. In 2022, we began executing on a restructuring program to realign senior leadership and functions with the goal of elevating our go-to-market strategy and accelerating our technology and product innovation. At the end of 2022, we also launched Project Nucleus which we expect to drive meaningful cost savings and efficiency gains in our cost of revenues.
(3) Includes costs related to technology modernization and acquisition-related technology integration and migration efforts. We believe that these costs are discrete and non-recurring in nature, as they relate to a one-time restructuring and decommissioning of our on-premise production systems and corporate technological infrastructure and the move to a managed service provider, decommissioning redundant fulfillment systems and modernizing internal functional systems. As such, they are not normal, recurring operating expenses and are not reflective of ongoing trends in the cost of doing business. The significant majority of these are related to the last two phases of Project Ignite, with the remainder related to an investment made to modernize internal functional systems in preparation for our public company infrastructure.
(4) Consists of gains or losses on historical non-designated derivative interest rate swaps. See Part I. Item 3. “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk” in our Form 10-Q for the quarterly period ended June 30, 2023 for additional information on interest rate swaps.
(5) Consists of gains or losses on foreign currency transactions and impairment of capitalized software.
(6) Normalized effective tax rates of 25.0% and 26.2% have been used to compute Adjusted Net Income for the three months ended June 30, 2022 and 2023, respectively. Normalized effective tax rates of 27.3% and 26.6% have been used to compute Adjusted Net Income for the six months ended June 30, 2022 and 2023, respectively. As of December 31, 2022, we had net operating loss carryforwards of approximately $16.3 million for federal income tax purposes and deferred tax assets of approximately $6.3 million related to state and foreign income tax loss carryforwards available to reduce future income subject to income taxes. The amount of actual cash taxes we pay for federal, state, and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rate shown above.

The following table reconciles net income per share, the most directly comparable GAAP measure, to Adjusted Earnings Per Share for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands, except share and per share amounts) 2022 2023 2022 2023

Net income $ 11,571 $ 323 $ 17,807 $ 914

Less: Undistributed amounts allocated to participating securities — — — —

Undistributed income allocated to stockholders $ 11,571 $ 323 $ 17,807 $ 914

Weighted average number of shares outstanding – basic 94,024,970 92,723,901 93,996,553 92,800,279

Weighted average number of shares outstanding – diluted 99,344,563 94,498,666 99,265,668 94,924,080

Net income per share – basic $ 0.12 $ 0.00 $ 0.19 $ 0.01

Net income per share – diluted $ 0.12 $ 0.00 $ 0.18 $ 0.01

Adjusted Net Income $ 32,499 $ 26,204 $ 56,900 $ 49,490

Less: Undistributed amounts allocated to participating securities — — — —

Undistributed income allocated to stockholders $ 32,499 $ 26,204 $ 56,900 $ 49,490

Weighted average number of shares outstanding – basic 94,024,970 92,723,901 93,996,553 92,800,279

Weighted average number of shares outstanding – diluted 99,344,563 94,498,666 99,265,668 94,924,080

Adjusted Earnings Per Share – basic $ 0.35 $ 0.28 $ 0.61 $ 0.53

Adjusted Earnings Per Share – diluted $ 0.33 $ 0.28 $ 0.57 $ 0.52

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

2022 2023 2022 2023

Net income per share – diluted $ 0.12 $ 0.00 $ 0.18 $ 0.01

Adjusted Net Income adjustments per share

Income tax expense 0.05 $ 0.00 0.09 0.01

Amortization of acquired intangible assets 0.13 0.11 0.27 0.22

Stock-based compensation 0.06 0.10 0.11 0.18

Transaction expenses(1) 0.02 0.04 0.04 0.09

Restructuring(2) 0.01 0.12 0.01 0.16

Technology transformation(3) 0.05 0.00 0.09 0.03

Loss (gain) on interest rate swaps(4) 0.00 — 0.00 —

Other(5) 0.00 0.01 0.00 0.01

Income tax effect(6) (0.11 ) (0.10 ) (0.22 ) (0.19 )

Adjusted Earnings Per Share – diluted $ 0.33 $ 0.28 $ 0.57 $ 0.52

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:

Weighted average number of shares outstanding – diluted (GAAP) 99,344,563 94,498,666 99,265,668 94,924,080

Options not included in weighted average number of shares outstanding – diluted (GAAP) (using treasury stock method) — — — —

Weighted average number of shares outstanding – diluted (non-GAAP) (using treasury stock method) 99,344,563 94,498,666 99,265,668 94,924,080

_______________

(1) Consists of transaction expenses related to M&A, associated earn-outs, investor management fees, costs related to the preparation of the IPO, one-time public company transition expenses and fees associated with financing transactions.
(2) Consists of restructuring-related costs, including executive recruiting and severance charges, and lease termination costs and disposal of fixed assets related to our real estate consolidation efforts. Beginning in 2020, we began executing a virtual-first strategy, closing offices and reducing office space globally. In 2022, we began executing on a restructuring program to realign senior leadership and functions with the goal of elevating our go-to-market strategy and accelerating our technology and product innovation. At the end of 2022, we also launched Project Nucleus which we expect to drive meaningful cost savings and efficiency gains in our cost of revenues.
(3) Includes costs related to technology modernization and acquisition-related technology integration and migration efforts. We believe that these costs are discrete and non-recurring in nature, as they relate to a one-time restructuring and decommissioning of our on-premise production systems and corporate technological infrastructure and the move to a managed service provider, decommissioning redundant fulfillment systems and modernizing internal functional systems. As such, they are not normal, recurring operating expenses and are not reflective of ongoing trends in the cost of doing business. The significant majority of these are related to the last two phases of Project Ignite, with the remainder related to an investment made to modernize internal functional systems in preparation for our public company infrastructure.
(4) Consists of gains or losses on historical non-designated derivative interest rate swaps. See Part I. Item 3. “Quantitative and Qualitative Disclosures about Market Risk— Interest Rate Risk” in our Form 10-Q for the quarterly period ended June 30, 2023 for additional information on interest rate swaps.
(5) Consists of gains or losses on foreign currency transactions and impairment of capitalized software.
(6) Normalized effective tax rates of 25.0% and 26.2% have been used to compute Adjusted Net Income for the three months ended June 30, 2022 and 2023, respectively. Normalized effective tax rates of 27.3% and 26.6% have been used to compute Adjusted Net Income for the six months ended June 30, 2022 and 2023, respectively. As of December 31, 2022, we had net operating loss carryforwards of approximately $16.3 million for federal income tax purposes and deferred tax assets of approximately $6.3 million related to state and foreign income tax loss carryforwards available to reduce future income subject to income taxes. The amount of actual cash taxes we pay for federal, state, and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rate shown above.

For further detail, see the footnotes to Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023.

The following table reconciles net cash flow provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the three and six months ended June 30, 2022 and 2023.

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands) 2022 2023 2022 2023

Net cash provided by operating activities $ 29,834 $ 21,616 $ 33,279 $ 32,898

Purchases of intangible assets and capitalized software (3,874 ) (4,469 ) (7,616 ) (8,589 )

Purchases of property and equipment (1,771 ) (453 ) (3,266 ) (593 )

Free Cash Flow $ 24,189 $ 16,694 $ 22,397 $ 23,716

Posted on August 8, 2023 8:01 am
Cellebrite Appoints Thomas E. Hogan as Executive Chairman of the Board

Seasoned Technology Leader to Partner with CEO Yossi Carmil
to Further Company Growth and Strategic Priorities

TYSONS CORNER, Va. and PETAH TIKVA, Israel, Aug. 08, 2023 (GLOBE NEWSWIRE) — Cellebrite DI Ltd. (Nasdaq: CLBT), a global leader in Digital Intelligence (DI) solutions for the public and private sectors, announced today that proven industry veteran, Thomas E. Hogan has been appointed Executive Chairman of the Board.

Based in Austin, Texas, Hogan brings a remarkable 40+ year track record of exceptional shareholder returns, client impact, and employee growth. He has significant expertise in strategic M&A, sales and marketing, international operations, and talent acquisition and development. During his career Tom has led numerous acquisitions totally nearly $8B including marquis targets such as Mercury Interactive and Opsware. His career includes over a decade as both a private and publicly held software CEO as well as senior executive posts ranging from late stage private to mega-cap public companies.

“Tom’s experience will be invaluable as we scale Cellebrite, extend our market leading digital intelligence solutions, and ultimately enable justice across the globe. I am excited to partner closely with Tom as we navigate our next chapter of growth and global impact,” said Yossi Carmil, CEO, Cellebrite.

“I look forward to my new partnership with Yossi, Haim Shani and the entire Cellebrite board, and the talented men and women across Cellebrite, as we build upon the impressive momentum of the company. I am especially enthused about the mission-driven purpose of this organization and our opportunity to better equip law enforcement and judicial systems worldwide,” said Thomas E. Hogan, Executive Chairman of the Board.

Hogan previously served as chairman and CEO of Kony, Inc, President and CEO of Vignette (VIGN), executive vice president of sales and marketing for Hewlett Packard, executive vice president of software for HP, executive vice president of CSC, chief sales officer at Siebel Systems, and most recently as a Operating Managing Director at Vista Equity Partners. He has held numerous public and private board positions including directorships at Citrix, Gainsight, Pluralsight, Drift, Vignette, Kony, Vastera, and Inforte. Tom holds a Masters in Management from Northwestern University and a B.S. in Biomedical Engineering from the University of Illinois.

Cellebrite’s current non-executive chairman, Haim Shani, will remain an active member of the board. Haim will leverage his extensive experience as the former CEO of NICE, the former Director General of the Israel Ministry of Finance, and his current role as founder and general manager of Israel Growth Partners, to further strengthen contributions from the Cellebrite board.

“On behalf of the entire Cellebrite board, I am pleased to welcome Tom to the Cellebrite team. Getting to know Tom as the head of the search committee and working with Yossi the past four years, I believe their combined strengths deliver the best leadership team in the industry. While I am passing the torch of chairman duties to Tom, I will continue to contribute as an active member of the Cellebrite board and look forward to working closely with Tom and the Cellebrite management team as we continue our journey,” said Haim Shani, former Cellebrite chairman.

About Cellebrite

Cellebrite’s (Nasdaq: CLBT) mission is to enable its customers to protect and save lives, accelerate justice, and preserve privacy in communities around the world. We are a global leader in Digital Intelligence solutions for the public and private sectors, empowering organizations in mastering the complexities of legally sanctioned digital investigations by streamlining intelligence processes.

Trusted by thousands of leading agencies and companies worldwide, Cellebrite’s Digital Intelligence platform and solutions transform how customers collect, review, analyze and manage data in legally sanctioned investigations. To learn more visit us at www.cellebrite.com, https://investors.cellebrite.com, or follow us on Twitter at @Cellebrite.

Caution Regarding Forward-Looking Statements

This document includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “forecast,” “intend,” “seek,” “target,” “anticipate,” “believe,” “could,” “continue,” “expect,” “estimate,” “may,” “plan,” “outlook,” “future” and “project” and other similar expressions that predict, project or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include estimated financial information. Such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects, and other aspects of the business of Cellebrite are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to: Cellebrite’s ability to develop technologically advanced solutions and successfully integrate with the software solutions used by customers; acceptance of solutions by customers; errors, failures, defects or bugs in solutions; a failure to maintain sales and marketing personnel productivity or hire, integrate and retain additional sales and marketing personnel; the impact of the global COVID-19 pandemic; the impact of competition on pricing and on Cellebrite’s market share; sub-optimal results from products due to misuse by customers; Cellebrite’s failure to maintain and enhance its reputation and brand; inaccuracy of the estimates of Cellebrite’s market opportunity and forecasts of market growth; changes to packaging and licensing models that adversely affect the ability to attract or retain customers; failure to manage future growth effectively; failure to introduce new solutions and add-ons; issues in the use of artificial intelligence resulting in reputational harm or liability; the need for additional capital to support the growth of Cellebrite’s business; a failure to maintain the security of operations and the integrity of software solutions; the impact of government budgeting cycles and appropriations, early termination, audits, investigations, sanctions and penalties; a decline in government budgets, changes in spending or budgetary priorities, or delays in contract awards; a failure to adequately obtain, maintain, protect and enforce Cellebrite’s intellectual property or infringement of the intellectual property rights of others; perceptions or court or regulatory decisions that Cellebrite’s solutions violate privacy rights; the use of solutions by customers in a way that is, or that is perceived to be, incompatible with human rights; failure to comply with laws regarding privacy, data protection and security, technology protection, sanctions, export controls and other matters; and other factors, risks and uncertainties set forth in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Annual Report on form 20-F filed with the SEC on March 29, 2022 and in other documents filed by Cellebrite with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge at www.sec.gov. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, in this communication or elsewhere. Cellebrite undertakes no obligation to update its forward-looking statements, whether as a result of new information, future developments, or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

Cellebrite Contacts

Media

Victor Cooper

Sr. Director of Corporate Communications + Content Operations

[email protected]

+1 404.804.5910

Investors

Andrew Kramer

VP, Investor Relations

[email protected]

+1 973.206.7760

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/774b7b9d-8b12-4bd0-9ff6-ad1b46feb3e0

Posted on August 8, 2023 7:56 am
Ironwood Pharmaceuticals Reports Second Quarter 2023 Results; Raises Full Year 2023 LINZESS® U.S. Net Sales and Ironwood Revenue Guidance

Ironwood Pharmaceuticals Reports Second Quarter 2023 Results; Raises Full Year 2023 LINZESS^® U.S. Net Sales and Ironwood Revenue Guidance

– LINZESS (Iinaclotide) EUTRx prescription demand growth increased 9% year-over-year; LINZESS U.S. net sales of $270 million, an increase of 9% year-over-year –

– Expands clinical utility of LINZESS with FDA approval for pediatric patients ages 6-17 years-old suffering from functional constipation (FC) –

– Strengthens GI development portfolio with acquisition of VectivBio Holding AG and its lead investigational asset, apraglutide, for the potential treatment of short bowel syndrome with intestinal failure –

– Completes STARS Phase III clinical trial enrollment; now expects topline data in March of 2024 –

BOSTON–(BUSINESS WIRE)–Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD), a GI-focused healthcare company, today reported its second quarter 2023 results and updated its full year 2023 financial guidance.

“We made significant progress towards the goal of becoming the leading GI healthcare company, as the second quarter was truly transformative for Ironwood,” said Tom McCourt, chief executive officer of Ironwood. “LINZESS continued its strong momentum with another quarter of impressive performance. As a result, we are raising our full-year 2023 U.S. net sales and Ironwood revenue guidance. Furthermore, we are thrilled that in June the FDA approved LINZESS for the treatment of pediatric patients ages 6 to 17 years-old with functional constipation, expanding its clinical utility and adding another potential growth driver for the brand. Also in the second quarter, we strengthened our GI portfolio with the acquisition of VectivBio, including its lead investigational asset, apraglutide, which we believe is poised to become the new standard of care for patients with short bowel syndrome with intestinal failure if successfully developed and approved, with the potential to achieve $1 billion in peak net sales. Looking ahead, we are excited about continuing to maximize LINZESS, advance our clinical programs, strengthen our financial position, and grow Ironwood’s leadership within GI.”

Second Quarter 2023 Financial Highlights¹(in thousands, except for per share amounts)

2Q 2023

2Q 2022

Total revenues

$107,382

$97,231

Total operating expenses²

1,190,521

41,576

GAAP net income (loss)²

(1,089,478)

37,080

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc.²

(1,062,187)

37,080

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share – basic

(6.84)

0.24

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share – diluted

(6.84)

0.21

Adjusted EBITDA²

(1,034,182)

56,015

Non-GAAP net income (loss)²

(1,041,325)

37,761

Non-GAAP net income (loss) per share – basic

(6.71)

0.24

Non-GAAP net income (loss) per share – diluted

(6.71)

0.21

1.

Refer to the Reconciliation of GAAP Results to Non-GAAP Financial Measures table and to the Reconciliation of GAAP Net Income to Adjusted EBITDA table at the end of this press release. Refer to Non-GAAP Financial Measures for additional information.

2.

Includes a one-time charge of approximately $1.1 billion related to acquired in-process research and development from the acquisition of VectivBio in the second quarter of 2023.

Second Quarter 2023 Corporate Highlights

U.S. LINZESS

Prescription Demand: Total LINZESS prescription demand in the second quarter of 2023 was 47 million LINZESS capsules, a 9% increase compared to the second quarter of 2022, per IQVIA.

U.S. Brand Collaboration: LINZESS U.S. net sales are provided to Ironwood by its U.S. partner, AbbVie Inc. (“AbbVie”). LINZESS U.S. net sales were $269.7 million in the second quarter of 2023, a 9% increase compared to $248.4 million in the second quarter of 2022.

Ironwood and AbbVie share equally in U.S. brand collaboration profits. See the LINZESS U.S. Commercial Collaboration table at the end of the press release.

– LINZESS commercial margin was 71% in the second quarter of 2023, compared to 69% in the second quarter of 2022. See the U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

– Net profit for the LINZESS U.S. brand collaboration, net of commercial and research and development (“R&D”) expenses, was $180.3 million in the second quarter of 2023, compared to $163.8 million in the second quarter of 2022. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

Collaboration Revenue to Ironwood: Ironwood recorded $104.8 million in collaboration revenue in the second quarter of 2023 related to sales of LINZESS in the U.S., an 11% increase compared to $94.5 million for the second quarter of 2022. See U.S. LINZESS Commercial Collaboration table at the end of the press release.

U.S. LINZESS Full Brand Collaboration

(in thousands, except for percentages)

Three Months Ended

June 30,

2023

2022

LINZESS U.S. net sales as reported by AbbVie

$269,686

$248,351

AbbVie & Ironwood commercial costs, expenses and other discounts

78,998

76,363

Commercial margin

71%

69%

AbbVie & Ironwood R&D Expenses

10,356

8,214

Total net profit on sales of LINZESS

180,332

163,774

Full brand margin

67%

66%

FDA Approval of New Indication for LINZESS

In June 2023, Ironwood announced that the U.S. Food and Drug Administration (“FDA”) approved LINZESS as a once-daily treatment for pediatric patients ages 6-17 years-old suffering from functional constipation. LINZESS is the first and only FDA-approved prescription therapy for functional constipation in this patient population.

Acquisition of VectivBio Holding AG (“VectivBio”)

On June 29, 2023, Ironwood completed a tender offer to purchase outstanding ordinary shares of VectivBio (the “VectivBio Shares”) at a price per share of $17.00, net to the shareholders of VectivBio in cash, without interest and subject to any applicable withholding taxes. The aggregate consideration paid by Ironwood to acquire the shares accepted for payment was approximately $1.2 billion. Ironwood financed the acquisition through proceeds from the borrowings under a revolving credit facility entered into in connection with the transaction, cash on hand, and cash of VectivBio.

As of June 30, 2023, Ironwood holds 98% of the outstanding VectivBio Shares. Ironwood intends to effect a squeeze-out merger under Swiss law to acquire the remaining outstanding VectivBio Shares in the second half of 2023. The remaining outstanding VectivBio Shares are expected to be settled by Ironwood in cash.

Workforce Reductions and Restructuring

In April 2023, Ironwood reduced its workforce by approximately 10% of its headquarters-based personnel in an effort to further strengthen the operational efficiency of the organization. The workforce reduction was substantially completed during the second quarter of 2023.

In June 2023, Ironwood commenced the elimination of certain positions in connection with the VectivBio acquisition. The majority of the eliminations were initiated in June 2023 and the remaining eliminations are expected to be substantially completed during the third quarter of 2023.

Pipeline Updates

Apraglutide

Ironwood is advancing apraglutide, a next-generation, synthetic peptide glucagon-like peptide-2 (“GLP-2”) analog which Ironwood is developing for short bowel syndrome with intestinal failure (“SBS-IF”), a severe malabsorptive condition. Ironwood believes apraglutide has the potential to be the new standard of care for the treatment of SBS-IF based on its potency and pharmacological properties. Ironwood is conducting a Phase III clinical trial, STARS, designed to evaluate clinical benefit for both SBS-IF stoma and colon-in-continuity patients with unique convenience of weekly dosing. Enrollment is completed and topline results are now expected in March of 2024.

Ironwood is also conducting a Phase II proof-of-concept clinical trial, STARGAZE, to evaluate apraglutide in patients with steroid-refractory gastrointestinal acute Graft versus Host Disease (aGvHD), a life-threatening condition that occurs when immune cells from the donor attack a recipient’s healthy cells after an allogeneic hematopoietic stem cell transplant. Ironwood expects data for the STARGAZE Phase II clinical trial in the first quarter of 2024.

CNP-104

Ironwood has a collaboration and license option agreement with COUR Pharmaceuticals Development Company, Inc. (“COUR”). This agreement grants Ironwood an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104 (“CNP-104”), a tolerizing immune modifying nanoparticle, for the treatment of primary biliary cholangitis (“PBC”), a rare autoimmune disease targeting the liver. If successful, CNP-104 has the potential to be the first approved PBC disease modifying therapy.

COUR is currently conducting a clinical study for CNP-104 evaluating the safety, tolerability, pharmacodynamic effects and efficacy of CNP-104 in PBC patients, with early data assessing T-cell response from patients enrolled in the clinical study expected in the second half of 2023, which Ironwood believes will inform timing of topline data.

IW-3300

Ironwood is currently advancing IW-3300, a guanylate cyclase-C agonist being developed for the potential treatment of visceral pain conditions, such as interstitial cystitis / bladder pain syndrome (“IC/BPS”) and endometriosis.Ironwood is continuing the Phase II proof of concept study in IC/BPS.

Second Quarter 2023 Financial Results

Total Revenues. Total revenues in the second quarter of 2023 were $107.4 million, compared to $97.2 million in the second quarter of 2022.

– Total revenues in the second quarter of 2023 consisted of $104.8 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $2.6 million in royalties and other revenue. Total revenues in the second quarter of 2022 consisted of $94.5 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $2.7 million in royalties and other revenue.

Operating Expenses. Operating expenses in the second quarter of 2023 were $1,190.5 million, which includes a one-time charge of $1,090.4 million of acquired IPR&D (“IPR&D”) from the acquisition of VectivBio, compared to $41.6 million in the second quarter of 2022.

– Operating expenses in the second quarter of 2023 consisted of $52.5 million in selling, general and administrative (“SG&A”) expenses, and $34.6 million in research and development (“R&D”) expenses, $13.0 million in restructuring expenses and approximately $1.1 billion in acquired in-process research and development. Operating expenses in the second quarter of 2022 consisted of $30.1 million in SG&A expenses and $11.5 million in R&D expenses.

Interest Expense and Other Financing Costs. Interest expense was $1.8 million in the second quarter of 2023, in connection with Ironwood’s convertible senior notes and revolving credit facility. Interest expense recorded in the second quarter of 2023 included $1.3 million in cash expense and $0.5 million in non-cash expense. Interest expense was $2.2 million in the second quarter of 2022, in connection with Ironwood’s convertible senior notes. Interest expense recorded in the second quarter of 2022 included $1.7 million in cash expense and $0.5 million in non-cash expense.

Interest and Investment Income. Interest and investment income was $8.8 million in the second quarter of 2023. Interest and investment income was $1.0 million in the second quarter of 2022.

Loss on Derivatives. Ironwood recorded a loss on derivatives of $0.7 million in the second quarter of 2022 as a result of the change in fair value of its convertible note hedges and note hedge warrants. Ironwood’s note hedge warrants and convertible note hedges terminated unexercised upon expiration in April 2023 and June 2022, respectively.

Income Tax Expense. Ironwood recorded $13.3 million of income tax expense in the second quarter of 2023, the majority of which was non-cash, as Ironwood continues to utilize net operating losses to offset taxable income for federal purposes and in many states. Ironwood recorded $16.7 million of income tax expense in the second quarter of 2022.

GAAP Net Income (Loss) Attributable to Ironwood. GAAP net loss was ($1,062.2) million, or ($6.84) per share (basic and diluted) in the second quarter of 2023, which includes a one-time charge of ($1,090.4) million of acquired IPR&D from the acquisition of VectivBio, compared to GAAP net income of $37.1 million, or $0.24 per share (basic) and $0.21 per share (diluted) in the second quarter of 2022.

Non-GAAP Net Income (Loss). Non-GAAP net loss was ($1,041.3) million, or ($6.71) per share (basic and diluted) in the second quarter of 2023, which includes a one-time charge of ($1,090.4) million of acquired IPR&D from the acquisition of VectivBio, compared to non-GAAP net income of $37.8 million, or $0.24 per share (basic) and $0.21 (diluted) in the second quarter of 2022.

– Non-GAAP net income excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s 2022 Convertible Notes, amortization of acquired intangible assets, restructuring expenses and acquisition-related costs, all net of tax effect. See Non-GAAP Financial Measures below.

Adjusted EBITDA. Adjusted EBITDA was ($1,034.2) million in the second quarter of 2023, which includes a one-time charge of ($1,090.4) million of acquired IPR&D from the acquisition of VectivBio, compared to $56.0 million in the second quarter of 2022.

– Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, acquisition-related costs, net interest expense, income taxes, depreciation and amortization, and acquisition-related costs, from GAAP net income. See Non-GAAP Financial Measures below.

Cash Flow Highlights. Ironwood ended the second quarter of 2023 with $175.3 million of cash and cash equivalents, compared to $656.2 million of cash and cash equivalents at the end of 2022.

– Ironwood generated approximately $35.0 million in cash from operations in the second quarter of 2023, compared to $61.4 million in cash from operations in the second quarter of 2022.

– The acquisition of VectivBio was funded through proceeds from a revolving credit agreement, cash on hand and cash of VectivBio.

Ironwood 2023 Financial Guidance. Ironwood is increasing its 2023 U.S. LINZESS net sales and total revenue growth guidance and updating its adjusted EBITDA financial guidance.

Prior 2023 Guidance

Updated 2023 Guidance

U.S. LINZESS Net Sales Growth

3% to 5%

6% to 8%

Total Revenue

$420 to $435 million

$435 to $450 million

Adjusted EBITDA¹

>$250 million

~ ($900) million²

Includes a one-time charge of

approximately $1.1 billion from

acquisition of VectivBio

¹Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization, and acquisition-related costs from GAAP net income.

²Updated 2023 adjusted EBITDA guidance includes a one-time charge of approximately $1.1 billion related to acquired in-process research and development from the acquisition of VectivBio in the second quarter of 2023. For purposes of this guidance, Ironwood has assumed that it will not incur material expenses related to additional business development activities in 2023.

Non-GAAP Financial Measures

Ironwood presents non-GAAP net income and non-GAAP net income per share to exclude the impact, net of tax effects, of net gains and losses on derivatives related to Ironwood’s 2022 Convertible Notes that are required to be marked-to-market, restructuring expenses, and acquisition-related costs. Non-GAAP adjustments are further detailed below:

The gains and losses on the derivatives related to Ironwood’s 2022 Convertible Notes were highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period.

Restructuring expenses are considered to be a non-recurring event as they are associated with distinct operational decisions. Included in restructuring expenses are costs associated with exit and disposal activities.

Acquisition-related costs in connection with the acquisition of VectivBio are considered to be non-recurring and include direct and incremental costs associated with the acquisition and integration of VectivBio to the extent such costs were not classified as capitalizable transaction costs attributed to the cost of net assets acquired through acquisition accounting.

Ironwood also presents adjusted EBITDA, a non-GAAP measure, as well as guidance on adjusted EBITDA. Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization, and acquisition-related costs from GAAP net income. The adjustments are made on a similar basis as described above related to non-GAAP net income, as applicable.

Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of non-GAAP net income and non-GAAP net income per share to GAAP net income and GAAP net income per share, respectively, and for a reconciliation of adjusted EBITDA to GAAP net income, please refer to the tables at the end of this press release.

Ironwood does not provide guidance on GAAP net income or a reconciliation of expected adjusted EBITDA to expected GAAP net income because, without unreasonable efforts, it is unable to predict with reasonable certainty the non-GAAP adjustments used to calculate adjusted EBITDA. These adjustments are uncertain, depend on various factors and could have a material impact on GAAP net income for the guidance period.

Conference Call Information

Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time on Tuesday, August 8, 2023 to discuss its second quarter 2023 results and recent business activities. Individuals interested in participating in the call should dial (888) 330-2384 (U.S. and Canada) or (240) 789-2701 (international) using conference ID number and event passcode 4671230. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 11:30 a.m. Eastern Time on August 8, 2023, running through 11:59 p.m. Eastern Time on August 22, 2023. To listen to the replay, dial (800) 770-2030 (U.S. and Canada) or (647) 362-9199 (international) using conference ID number 4671230. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals (Nasdaq: IRWD), an S&P SmallCap 600® company, is a leading global gastrointestinal (GI) healthcare company on a mission to advance the treatment of GI diseases and redefine the standard of care for GI patients. We are pioneers in the development of LINZESS® (linaclotide), the U.S. branded prescription market leader for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC). LINZESS is also approved for the treatment of functional constipation in pediatric patients ages 6-17 years-old. Ironwood is also advancing apraglutide, a next-generation, long-acting synthetic GLP-2 analog being developed for rare gastrointestinal diseases, including short bowel syndrome with intestinal failure (SBS-IF) as well as several earlier stage assets. Building upon our history of GI innovation, we keep patients at the heart of our R&D and commercialization efforts to reduce the burden of GI diseases and address significant unmet needs.

Founded in 1998, Ironwood Pharmaceuticals is headquartered in Boston, Massachusetts, and has additional operations in Basel, Switzerland.

We routinely post information that may be important to investors on our website at www.ironwoodpharma.com. In addition, follow us on Twitter and on LinkedIn.

About LINZESS (linaclotide)

LINZESS® is the #1 prescribed brand in the U.S. for the treatment of adult patients with irritable bowel syndrome with constipation (“IBS-C”) or chronic idiopathic constipation (“CIC”), based on IQVIA data. LINZESS is a once-daily capsule that helps relieve the abdominal pain, constipation, and overall abdominal symptoms of bloating, discomfort and pain associated with IBS-C, as well as the constipation, infrequent stools, hard stools, straining, and incomplete evacuation associated with CIC. LINZESS relieves constipation in children and adolescents aged 6 to 17 years with functional constipation. The recommended dose is 290 mcg for IBS-C patients and 145 mcg for CIC patients, with a 72 mcg dose approved for use in CIC depending on individual patient presentation or tolerability. In children with functional constipation aged 6 to 17 years, the recommended dose is 72 mcg.

LINZESS is not a laxative; it is the first medicine approved by the FDA in a class called GC-C agonists. LINZESS contains a peptide called linaclotide that activates the GC-C receptor in the intestine. Activation of GC-C is thought to result in increased intestinal fluid secretion and accelerated transit and a decrease in the activity of pain-sensing nerves in the intestine. The clinical relevance of the effect on pain fibers, which is based on nonclinical studies, has not been established.

In the United States, Ironwood and AbbVie co-develop and co-commercialize LINZESS for the treatment of adults with IBS-C or CIC. In Europe, AbbVie markets linaclotide under the brand name CONSTELLA® for the treatment of adults with moderate to severe IBS-C. In Japan, Ironwood’s partner, Astellas, markets linaclotide under the brand name LINZESS for the treatment of adults with IBS-C or CIC. Ironwood also has partnered with AstraZeneca for development and commercialization of LINZESS in China, and with AbbVie for development and commercialization of linaclotide in all other territories worldwide.

LINZESS Important Safety Information

INDICATIONS AND USAGE

LINZESS® (linaclotide) is indicated for the treatment of both irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC) in adults and functional constipation (FC) in children and adolescents 6 to 17 years of age. It is not known if LINZESS is safe and effective in children with FC less than 6 years of age or in children with IBS-C less than 18 years of age.

IMPORTANT SAFETY INFORMATION

WARNING: RISK OF SERIOUS DEHYDRATION IN PEDIATRIC PATIENTS LESS THAN 2 YEARS OF AGE

LINZESS is contraindicated in patients less than 2 years of age. In nonclinical studies in neonatal mice, administration of a single, clinically relevant adult oral dose of linaclotide caused deaths due to dehydration.

Contraindications

LINZESS is contraindicated in patients less than 2 years of age due to the risk of serious dehydration.

LINZESS is contraindicated in patients with known or suspected mechanical gastrointestinal obstruction.

Warnings and Precautions

LINZESS is contraindicated in patients less than 2 years of age. In neonatal mice, linaclotide increased fluid secretion as a consequence of age-dependent elevated guanylate cyclase (GC-C) agonism, which was associated with increased mortality within the first 24 hours due to dehydration. There was no age dependent trend in GC-C intestinal expression in a clinical study of children 2 to less than 18 years of age; however, there are insufficient data available on GC-C intestinal expression in children less than 2 years of age to assess the risk of developing diarrhea and its potentially serious consequences in these patients.

Diarrhea

In adults, diarrhea was the most common adverse reaction in LINZESS-treated patients in the pooled IBS-C and CIC double-blind placebo-controlled trials. The incidence of diarrhea was similar in the IBS-C and CIC populations. Severe diarrhea was reported in 2% of 145 mcg and 290 mcg LINZESS-treated patients and in <1% of 72 mcg LINZESS-treated CIC patients.

In children and adolescents 6 to 17 years of age, diarrhea was the most common adverse reaction in 72 mcg LINZESS-treated patients in the FC double-blind placebo-controlled trial. Severe diarrhea was reported in <1% of 72 mcg LINZESS treated patients. If severe diarrhea occurs, dosing should be suspended and the patient rehydrated.

Common Adverse Reactions (incidence ≥2% and greater than placebo)

In IBS-C or CIC adult patients: diarrhea, abdominal pain, flatulence, and abdominal distension.

In FC pediatric patients: diarrhea.

Please see full Prescribing Information including Boxed Warning: http://www.allergan.com/assets/pdf/linzess_pi

LINZESS® and CONSTELLA® are registered trademarks of Ironwood Pharmaceuticals, Inc. Any other trademarks referred to in this press release are the property of their respective owners. All rights reserved.

Forward-Looking Statements

This press release contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including statements about Ironwood’s ability to execute on its mission; Ironwood’s strategy, business, financial position and operations; Ironwood’s ability to drive growth and profitability; the demand, development, commercial availability and commercial potential of linaclotide, including pursuing highly differentiated GI assets to add to our portfolio, and the drivers, timing, impact and results thereof; the potential indications for, and benefits of, linaclotide; our financial performance and results, and guidance and expectations related thereto; LINZESS prescription demand growth, LINZESS U.S. net sales growth, total revenue and adjusted EBITDA in 2023; our ability to develop apraglutide and the expected timing of receiving data from the apraglutide clinical trials; the commercial potential of apraglutide, including potential peak net sales, and the potential of apraglutide to become the standard of care for patients with SBS-IF; the potential of CNP-104 to be the first PBC disease modifying therapy and the expected timing of receiving data from the clinical study for CNP-104 in PBC patients and the results thereof, and the belief that this will inform timing of topline data; our plan to advance IW-3300 including the timing and results thereof; our plans for completing statutory squeeze-out merger, and the expected timing thereof. These forward-looking statements speak only as of the date of this press release, and Ironwood undertakes no obligation to update these forward-looking statements. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include those related to the effectiveness of development and commercialization efforts by us and our partners; preclinical and clinical development, manufacturing and formulation development of linaclotide, apraglutide, CNP-104, IW-3300, and our product candidates; the risk that clinical programs and studies, including for the linaclotide pediatric program, apraglutide, IW-3300 and CNP-104, may not progress or develop as anticipated, including that studies are delayed or discontinued for any reason, such as safety, tolerability, enrollment, manufacturing, economic or other reasons; the risk that findings from our completed nonclinical and clinical studies may not be replicated in later studies; the risk that we or our partners are unable to obtain, maintain or manufacture sufficient LINZESS or our product candidates, or otherwise experience difficulties with respect to supply or manufacturing; the efficacy, safety and tolerability of linaclotide and our product candidates; the risk that the commercial and therapeutic opportunities for LINZESS or our product candidates are not as we expect; decisions by regulatory and judicial authorities; the risk we may never get additional patent protection for linaclotide and other product candidates, that patents for linaclotide or other products may not provide adequate protection from competition, or that we are not able to successfully protect such patents; the risk that we are unable to manage our expenses or cash use, or are unable to commercialize our products as expected; the risk that the development of any of our linaclotide pediatric programs, apraglutide, CNP-104 and/or IW-3300 are not successful or that any of our product candidates is not successfully commercialized; outcomes in legal proceedings to protect or enforce the patents relating to our products and product candidates, including abbreviated new drug application litigation; the risk that financial and operating results may differ from our projections; developments in the intellectual property landscape; challenges from and rights of competitors or potential competitors; the risk that our planned investments do not have the anticipated effect on our company revenues; developments in accounting guidance or practice; Ironwood’s or AbbVie’s accounting practices, including reporting and settlement practices as between Ironwood and AbbVie; the risk that we are unable to manage our expenses or cash use, or are unable to commercialize our products as expected; the impact of the COVID-19 pandemic; and the risks listed under the heading “Risk Factors” and elsewhere in Ironwood’s Annual Report on Form 10-K for the year ended December 31, 2022, and in our subsequent Securities and Exchange Commission filings.

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)

June 30,

2023

December 31,

2022

Assets

Cash and cash equivalents

$

175,321

$

656,203

Accounts receivable, net

118,990

115,458

Prepaid expenses and other current assets

22,500

7,715

Restricted cash

788

1,250

Total current assets

317,599

780,626

Restricted cash, net of current portion

510

485

Accounts receivable, net of current portion

–

14,589

Property and equipment, net

5,876

6,288

Operating lease right-of-use assets

13,319

14,023

Intangible assets, net

4,096

–

Deferred tax assets

257,900

283,661

Other assets

3,920

847

Total assets

$

603,220

$

1,100,519

Liabilities and Stockholders’ Equity

Accounts payable

$

3,505

$

483

Accrued research and development costs

20,122

5,258

Accrued expenses and other current liabilities

79,585

16,700

Current portion of operating lease liabilities

3,095

3,065

Current portion on convertible senior notes

199,083

–

Note hedge warrants

–

19

Total current liabilities

305,390

25,525

Operating lease liabilities, net of current portion

15,598

16,599

Convertible senior notes, net of current portion

197,974

396,251

Revolving credit facility

400,000

–

Other liabilities

31,035

9,766

Total stockholders’ equity (deficit)

(346,777)

652,378

Total liabilities and stockholders’ equity (deficit)

$

603,220

$

1,100,519

Condensed Consolidated Statements of Income

(In thousands, except per share amounts)

(unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Revenues

Collaborative arrangements revenue

$

107,382

$

97,231

$

211,443

$

194,760

Total revenues

107,382

97,231

211,443

194,760

Operating expenses:

Research and development

34,577

11,452

47,424

22,274

Selling, general and administrative

52,484

30,124

83,601

58,985

Restructuring expenses

13,011

–

13,011

–

Acquired in-process research and development

1,090,449

–

1,090,449

–

Total operating expenses

1,190,521

41,576

1,234,485

81,259

Income (loss) from operations

(1,083,139)

55,655

(1,023,042)

113,501

Other income (expense):

Interest expense and other financing costs

(1,840)

(2,207)

(3,367)

(4,548)

Interest and investment income

8,757

1,018

16,029

1,248

Gain (loss) on derivatives

–

(681)

19

49

Other income (expense), net

6,917

(1,870)

12,681

(3,251)

Income (loss) before income taxes

(1,076,222)

53,785

(1,010,361)

110,250

Income tax expense

(13,256)

(16,705)

(33,403)

(34,369)

GAAP net income (loss)

(1,089,478)

37,080

(1,043,764)

75,881

Less: GAAP net income (loss) attributable to noncontrolling interests

(27,291)

–

(27,291)

–

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc.

$

(1,062,187)

$

37,080

$

(1,016,473)

$

75,881

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share—basic

($6.84)

$

0.24

($6.56)

$

0.49

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share—diluted

($6.84)

$

0.21

($6.56)

$

0.42

Reconciliation of GAAP Results to Non-GAAP Financial Measures

(In thousands, except per share amounts) (unaudited)

A reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

GAAP net income (loss)¹

$

(1,089,478)

$

37,080

$

(1,043,764)

$

75,881

Adjustments:

Mark-to-market adjustments on the derivatives related to convertible notes, net

0

681

(19)

(49)

Amortization of acquired intangible assets

4

–

4

–

Restructuring expenses

13,011

–

13,011

–

Acquisition-related costs

35,681

–

35,681

–

Tax effect of adjustments

(543)

–

(543)

–

Non-GAAP net income (loss)¹

$

(1,041,325)

$

37,761

$

(995,630)

$

75,832

A reconciliation between basic net income per share on a GAAP basis and on a non-GAAP basis is as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share – basic

$

(6.84)

$

0.24

$

(6.56)

$

0.49

Plus: GAAP net income (loss) attributable to noncontrolling interests – basic

$

(0.18)

–

$

(0.18)

–

Adjustments to GAAP net income (loss) per share (as detailed above)

0.31

–

0.31

–

Non-GAAP net income per share (loss) – basic

$

(6.71)

$

0.24

$

(6.43)

$

0.49

Weighted average number of common shares used to calculate net income per share — basic

155,367

153,304

154,912

155,550

A reconciliation between diluted net income per share on a GAAP basis and on a non-GAAP basis is as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

GAAP net income (loss) attributable to Ironwood Pharmaceuticals, Inc. per share – diluted

$

(6.84)

$

0.24

$

(6.56)

$

0.49

Plus: GAAP net income (loss) attributable to noncontrolling interests – diluted

$

(0.18)

–

$

(0.18)

–

Adjustments to GAAP net income per share (loss) (as detailed above)

0.31

–

0.31

–

Non-GAAP net income per share (loss) – diluted

$

(6.71)

$

0.21

$

(6.43)

$

0.42

Weighted average number of common shares used to calculate net income per share — diluted

155,367

184,876

154,912

187,315

¹ GAAP and non-GAAP net loss for three months ended June 30, 2023 and for six months ended June 30, 2023 include a one-time charge of approximately $1.1 billion related to acquired in-process research and development from the acquisition of VectivBio in the second quarter of 2023

Reconciliation of GAAP Net Income to Adjusted EBITDA

(In thousands)

(unaudited)

A reconciliation of GAAP net income to adjusted EBITDA:

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

GAAP net income (loss)¹

$

(1,089,478)

$

37,080

$

(1,043,764)

$

75,881

Adjustments:

Mark-to-market adjustments on the derivatives related to convertible notes, net

0

681

(19)

(49)

Restructuring expenses

13,011

–

13,011

–

Interest expense

1,840

2,207

3,367

4,548

Interest and investment income

(8,757)

(1,018)

(16,029)

(1,248)

Income tax expense

13,256

16,705

33,403

34,369

Depreciation and amortization

265

360

551

715

Acquisition-related costs

35,681

–

35,681

–

Adjusted EBITDA¹

$

(1,034,182)

$

56,015

$

(973,799)

$

114,216

¹ GAAP net loss and adjusted EBITDA for three months ended June 30, 2023 and for six months ended June 30, 2023 includes a one-time charge of approximately $1.1 billion related to acquired in-process research and development from the acquisition of VectivBio in the second quarter of 2023.

U.S. LINZESS Commercial Collaboration¹

Revenue/Expense Calculation

(In thousands)

(unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

LINZESS U.S. net sales as reported by AbbVie²

$

269,686

$

248,351

$

519,900

$

480,685

AbbVie & Ironwood commercial costs, expenses and other discounts³

78,998

76,363

145,406

137,379

Commercial profit on sales of LINZESS

$

190,688

$

171,988

$

374,494

$

343,306

Commercial Margin⁴

71%

69%

72%

71%

Ironwood’s share of net profit

95,344

85,994

187,247

171,653

Reimbursement for Ironwood’s commercial expenses

9,407

8,458

19,135

17,118

Ironwood’s collaborative arrangement revenue

$

104,751

$

94,452

$

206,382

$

188,771

¹ Ironwood collaborates with AbbVie on the development and commercialization of linaclotide in North America. Under the terms of the collaboration agreement, Ironwood receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S. The purpose of this table is to present calculations of Ironwood’s share of net profit (loss) generated from the sales of LINZESS in the U.S. and Ironwood’s collaboration revenue/expense; however, the table does not present the research and development expenses related to LINZESS in the U.S. that are shared equally between the parties under the collaboration agreement. Please refer to the table at the end of this press release for net profit for the U.S. LINZESS brand collaboration with AbbVie.

² LINZESS net sales are recognized using AbbVie’s revenue recognition accounting policies and reporting conventions. As a result, certain rebates and discounts are classified as LINZESS U.S. commercial costs, expenses and other discounts within Ironwood’s calculation of collaborative arrangements revenue.

³ Includes certain discounts recognized and cost of goods sold incurred by AbbVie; also includes commercial costs incurred by AbbVie and Ironwood that are attributable to the cost-sharing arrangement between the parties.

⁴ Commercial margin is defined as commercial profit on sales of LINZESS as a percent of total LINZESS U.S. net sales.

US LINZESS Full Brand Collaboration¹

Revenue/Expense Calculation

(In thousands)

(unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

LINZESS U.S. net sales as reported by AbbVie²

$

269,686

$

248,351

$

519,900

$

480,685

AbbVie & Ironwood commercial costs, expenses and other discounts³

78,998

76,363

145,406

137,379

AbbVie & Ironwood R&D Expenses⁴

10,356

8,214

19,006

16,380

Total net profit on sales of LINZESS

$

180,332

$

163,774

$

355,488

$

326,926

¹ Ironwood collaborates with AbbVie on the development and commercialization of linaclotide in North America. Under the terms of the collaboration agreement, Ironwood receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S. The purpose of this table is to present calculations of the total net profit (loss) generated from the sales of LINZESS in the U.S., including the commercial costs and expenses and the research and development expenses related to LINZESS in the U.S. that are shared equally between the parties under the collaboration agreement.

² LINZESS net sales are recognized using AbbVie’s revenue recognition accounting policies and reporting conventions. As a result, certain rebates and discounts are classified as LINZESS U.S. commercial costs, expenses and other discounts within Ironwood’s calculation of collaborative arrangements revenue.

³ Includes certain discounts recognized and cost of goods sold incurred by AbbVie; also includes commercial costs incurred by AbbVie and Ironwood that are attributable to the cost-sharing arrangement between the parties.

⁴ R&D expenses related to LINZESS in the U.S. are shared equally between Ironwood and AbbVie under the collaboration agreement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808149704/en/

Investors:

Greg Martini, 617-374-5230

[email protected]

Matt Roache, 617-621-8395

[email protected]

Media:

Beth Calitri, 978-417-2031

[email protected]

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Biotechnology Other Health Health Pharmaceutical Clinical Trials

MEDIA:

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Posted on August 8, 2023 7:54 am
Lantronix Announces CFO/Interim CEO Featured at CG 43rd Annual Growth Conference Aug. 10, 2023

IRVINE, Calif., Aug. 08, 2023 (GLOBE NEWSWIRE) — Lantronix Inc. (the “Company”) (NASDAQ: LTRX), a global provider of secure turnkey solutions for the Industrial Internet of Things (IoT) and the Intelligent IT market, today announced its participation in the 43rd Annual Growth Conference hosted by Canaccord Genuity on Aug. 10, 2023.

Lantronix CFO and Interim CEO Jeremy Whitaker will be holding one-on-one meetings with investors as well as presenting at 12:00 p.m. Pacific Time at the InterContinental Hotel in Boston. A webcast of the presentation will be available here.

About Lantronix

Lantronix Inc. is a global provider of secure turnkey solutions for the Internet of Things (IoT) and Remote Environment Management (REM), offering Software as a Service (SaaS), connectivity services, engineering services and intelligent hardware.

Lantronix enables its customers to accelerate time to market and increase operational up-time and efficiency by providing reliable, secure and connected Intelligent Edge IoT and Remote Management Gateway solutions.

Lantronix’s products and services dramatically simplify the creation, development, deployment and management of IoT and IT projects across Robotics, Automotive, Wearables, Video Conferencing, Industrial, Medical, Logistics, Smart Cities, Security, Retail, Branch Office, Server Room and Datacenter applications. For more information, visit the Lantronix website.

Learn more at the Lantronix blog, which features industry discussion and updates. Follow Lantronix on Twitter, view our YouTube video library or connect with us on LinkedIn.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Any statements set forth in this news release that are not entirely historical and factual in nature, including without limitation statements related to our solutions, technologies and products, are forward-looking statements. These forward-looking statements are based on our current expectations and are subject to substantial risks and uncertainties that could cause our actual results, future business, financial condition or performance to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this news release. The potential risks and uncertainties include, but are not limited to, such factors as the effects of negative or worsening regional and worldwide economic conditions or market instability on our business, including effects on purchasing decisions by our customers; the impact of the COVID-19 outbreak on our employees, supply and distribution chains and the global economy; cybersecurity risks; changes in applicable U.S. and foreign government laws, regulations and tariffs; our ability to successfully implement our acquisitions strategy or integrate acquired companies; difficulties and costs of protecting patents and other proprietary rights; the level of our indebtedness, our ability to service our indebtedness and the restrictions in our debt agreements; and any additional factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the Securities and Exchange Commission (the “SEC”) on Sept. 11, 2022, including in the section entitled “Risk Factors” in Item 1A of Part I of such report, as well as in our other public filings with the SEC. Additional risk factors may be identified from time to time in our future filings. The forward-looking statements included in this release speak only as of the date hereof, and we do not undertake any obligation to update these forward-looking statements to reflect subsequent events or circumstances.

© 2023 Lantronix, Inc. All rights reserved. Lantronix is a registered trademark. Other trademarks and trade names are those of their respective owners.

Lantronix Media Contact:
Gail Kathryn Miller
Corporate Marketing &
Communications Manager
[email protected]
949-212-0960

Lantronix Analyst and Investor Contact:
Jeremy Whitaker
Chief Financial Officer
[email protected]
949-450-7241

Lantronix Sales:

[email protected]

Americas +1 (800) 422-7055 (US and Canada) or +1 949-453-3990
Europe, Middle East and Africa +31 (0)76 52 36 744
Asia Pacific + 852 3428-2338
China + 86 21-6237-8868
Japan +81 (0) 50-1354-6201

Posted on August 8, 2023 7:52 am
Angel Oak Mortgage REIT, Inc. Reports Second Quarter 2023 Financial Results

Angel Oak Mortgage REIT, Inc. Reports Second Quarter 2023 Financial Results

Company focuses on growth after successful portfolio de-risking and repositioning

ATLANTA–(BUSINESS WIRE)–Angel Oak Mortgage REIT, Inc. (NYSE: AOMR) (the “Company,” “we,” and “our”),a leading real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market, today reported financial results for the quarter ended June 30, 2023.

Second Quarter Highlights

Q2 2023 GAAP net loss of ($3.7) million, or $(0.15) per diluted share of common stock.

Q2 2023 Distributable Earnings of $(3.9) million, or $(0.16) per diluted share of common stock.

GAAP book value of $9.34 per share of common stock as of June 30, 2023.

Economic book value of $13.16 per share of common stock as of June 30, 2023.

Declared dividend of $0.32 per share of common stock, payable on August 31, 2023, to common stockholders of record as of August 22, 2023.

“We are pleased to have accelerated purchases of newly originated, higher-coupon loans in the second quarter, which we expect to have a compounding positive effect on net interest income and securitization execution going forward. We believe our results in the first half of the year have demonstrated the resilience and adaptability of our business model, and now our focus is on growth,” said Sreeni Prabhu, Chief Executive Officer and President of Angel Oak Mortgage REIT. “Credit continues to perform well across the portfolio, and we will remain judicious with our approach and diligent in credit selection as we expand new purchases. Though the macroeconomic landscape remains uncertain, our improved balance sheet and increased liquidity have positioned the Company for success. As we head into the second half of the year, our emphasis is on executing our growth strategy and delivering attractive returns for our shareholders.”

Second Quarter Portfolio and Investment Activity

In June 2023, the Company priced AOMT 2023-4, an approximately $284.5 million scheduled unpaid principal balance securitization backed by a pool of residential mortgage loans, all of which were contributed by the Company. The securitization reduced the Company’s whole loan warehouse debt by approximately 45.6% versus the end of Q1 2023, bringing the total reduction in the Company’s whole loan warehouse debt since the end of Q3 2022 to approximately 73.7%.

The securitization released over $35 million of capital, which the Company has begun to deploy towards loan purchasing activity and liquidity enhancement.

Since the end of Q1 2023, AOMR has purchased and locked for purchase approximately $50 million of newly-originated loans as of today’s date that carry a weighted average loan coupon of 8.4%, a weighted average original loan-to-value ratio of 72%, and a weighted average original FICO score of 754.

Capital Markets Activity

Executed the AOMT 2023-4 securitization with a $284.5 million scheduled unpaid principal balance.

As of June 30, 2023, the Company was party to three financing lines which permit borrowings in an aggregate amount of up to $929 million.

Our total financing capacity as of June 30, 2023 stands at $929 million of which approximately $234 million is drawn, leaving capacity of approximately $695 million for new loan purchases.

Balance Sheet

Target assets totaled $2.03 billion as of June 30, 2023.

Held residential mortgage whole loans with fair value of $296.5 million as of June 30, 2023.

Recourse debt to equity ratio was 2.5x as of June 30, 2023. As of today’s date, our recourse debt to equity ratio was 1.2x, reflecting the maturity of US Treasury repurchase agreements on July 13, 2023.

Dividend

On August 8, 2023, the Company declared a dividend of $0.32 per share of common stock for the second quarter of 2023. The dividend is payable on August 31, 2023 to common stockholders of record as of August 22, 2023.

Conference Call and Webcast Information

The Company will host a live conference call and webcast today, August 8, 2023 at 8:30 a.m. Eastern time. To listen to the live webcast, go to the Investors section of the Company’s website at www.angeloakreit.com at least 15 minutes prior to the scheduled start time in order to register and install any necessary audio software.

To Participate in the Telephone Conference Call:

Dial in at least 15 minutes prior to start time.

Domestic: 1-844-826-3033

International: 1-412-317-5185

Conference Call Playback:

Domestic: 1-844-512-2921

International: 1-412-317-6671

Passcode: 10179283

The playback can be accessed through August 22, 2023.

Non-GAAP Metrics

Distributable Earnings is a non‑GAAP measure and is defined as net income (loss) allocable to common stockholders as calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), excluding (1) unrealized gains and losses on our aggregate portfolio, (2) impairment losses, (3) extinguishment of debt, (4) non-cash equity compensation expense, (5) the incentive fee earned by our Manager, (6) realized gains or losses on swap terminations and (7) certain other nonrecurring gains or losses. We believe that the presentation of Distributable Earnings provides investors with a useful measure to facilitate comparisons of financial performance among our REIT peers, but has important limitations. We believe Distributable Earnings as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, Distributable Earnings should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP. Our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our Distributable Earnings may not be comparable to similar measures presented by other REITs.

Distributable Earnings Return on Average Equity is a non-GAAP measure and is defined as annual or annualized Distributable Earnings divided by average total stockholders’ equity. We believe that the presentation of Distributable Earnings Return on Average Equity provides investors with a useful measure to facilitate comparisons of financial performance among our REIT peers, but has important limitations. Additionally, we believe Distributable Earnings Return on Average Equity provides investors with additional detail on the Distributable Earnings generated by our invested equity capital. We believe Distributable Earnings Return on Average Equity as described above helps evaluate our financial performance without the impact of certain transactions but is of limited usefulness as an analytical tool. Therefore, Distributable Earnings Return on Average Equity should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP. Our methodology for calculating Distributable Earnings Return on Average Equity may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our Distributable Earnings Return on Average Equity may not be comparable to similar measures presented by other REITs.

Economic book value is a non-GAAP financial measure of our financial position. To calculate our economic book value, the portions of our non-recourse financing obligation held at amortized cost are adjusted to fair value. These adjustments are also reflected in our end of period total stockholders’ equity. Management considers economic book value to provide investors with a useful supplemental measure to evaluate our financial position as it reflects the impact of fair value changes for our legally held retained bonds, irrespective of the accounting model applied for GAAP reporting purposes. Economic book value does not represent and should not be considered as a substitute for book value per share of common stock or stockholders’ equity, as determined in accordance with GAAP, and our calculation of this measure may not be comparable to similarly titled measures reported by other companies.

Forward-Looking Statements

This press release contains certain forward-looking statements that are subject to various risks and uncertainties, including, without limitation, statements relating to the performance of the Company’s investments. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” or by the negative of these words and phrases or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe existing or future plans and strategies, contain projections of results of operations, liquidity and/or financial condition, or state other forward-looking information. The Company’s ability to predict future events or conditions or their impact or the actual effect of existing or future plans or strategies is inherently uncertain. Although the Company believes that such forward-looking statements are based on reasonable assumptions, actual results and performance in the future could differ materially from those set forth in or implied by such forward-looking statements. You are cautioned not to place undue reliance on these forward‐looking statements, which reflect the Company’s views only as of the date of this press release. Additional information concerning factors that could cause actual results and performance to differ materially from these forward-looking statements is contained from time to time in the Company’s filings with the Securities and Exchange Commission. Except as required by applicable law, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward‐looking statements. The Company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

About Angel Oak Mortgage REIT, Inc.

Angel Oak Mortgage REIT, Inc. is a real estate finance company focused on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market. The Company’s objective is to generate attractive risk-adjusted returns for its stockholders through cash distributions and capital appreciation across interest rate and credit cycles. The Company is externally managed and advised by an affiliate of Angel Oak Capital Advisors, LLC, which, collectively with its affiliates, is a leading alternative credit manager with a vertically integrated mortgage origination platform. Additional information about the Company is available at www.angeloakreit.com

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(in thousands, except for share and per share data)

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

INTEREST INCOME, NET

Interest income

$

23,763

$

29,702

$

47,503

$

56,811

Interest expense

17,311

13,271

34,252

23,441

NET INTEREST INCOME

6,452

16,431

13,251

33,370

REALIZED AND UNREALIZED GAINS (LOSSES), NET

Net realized gain (loss) on mortgage loans, derivative contracts, RMBS, and CMBS

(4,169

)

12,718

(15,012

)

39,133

Net unrealized gain (loss) on trading securities, mortgage loans, debt at fair value option, and derivative contracts

379

(73,985

)

10,569

(154,166

)

TOTAL REALIZED AND UNREALIZED GAINS (LOSSES), NET

(3,790

)

(61,267

)

(4,443

)

(115,033

)

EXPENSES

Operating expenses

2,214

2,977

4,418

6,723

Operating expenses incurred with affiliate

607

838

1,073

1,838

Due diligence and transaction costs

21

519

21

1,182

Stock compensation

207

968

748

1,839

Securitization costs

1,027

–

1,910

2,019

Management fee incurred with affiliate

1,493

2,006

3,015

3,879

Total operating expenses

5,569

7,308

11,185

17,480

INCOME (LOSS) BEFORE INCOME TAXES

(2,907

)

(52,144

)

(2,377

)

(99,143

)

Income tax benefit

781

–

781

(3,457

)

NET INCOME (LOSS)

$

(3,688

)

$

(52,144

)

$

(3,158

)

$

(95,686

)

Preferred dividends

–

(4

)

–

(8

)

NET INCOME (LOSS) ALLOCABLE TO COMMON STOCKHOLDERS

$

(3,688

)

$

(52,148

)

$

(3,158

)

$

(95,694

)

Other comprehensive income (loss)

(242

)

11,235

14,562

(1,752

)

TOTAL COMPREHENSIVE INCOME (LOSS)

$

(3,930

)

$

(40,913

)

$

11,404

$

(97,446

)

Basic earnings (loss) per common share

$

(0.15

)

$

(2.13

)

$

(0.13

)

$

(3.90

)

Diluted earnings (loss) per common share

$

(0.15

)

$

(2.13

)

$

(0.13

)

$

(3.90

)

Weighted average number of common shares outstanding:

Basic

24,686,881

24,458,015

24,674,875

24,549,977

Diluted

24,686,881

24,458,015

24,674,875

24,549,977

Angel Oak Mortgage REIT, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except for share and per share data)

As of:

June 30, 2023

December 31, 2022

ASSETS

Residential mortgage loans – at fair value

$

296,529

$

770,980

Residential mortgage loans in securitization trusts – at fair value

1,241,994

1,027,442

Commercial mortgage loans – at fair value

9,589

9,458

RMBS – at fair value

459,972

1,055,338

CMBS – at fair value

6,853

6,111

U.S. Treasury securities – at fair value

299,581

—

Cash and cash equivalents

59,140

29,272

Restricted cash

9,577

10,589

Principal and interest receivable

9,836

17,497

Unrealized appreciation on TBAs and interest rate futures contracts – at fair value

3,294

14,756

Other assets

17,418

4,767

Total assets

$

2,413,783

$

2,946,212

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Notes payable

$

233,970

$

639,870

Non-recourse securitization obligation, collateralized by residential mortgage loans in securitization trusts

1,211,441

1,003,485

Securities sold under agreements to repurchase

340,701

52,544

Due to broker

390,380

1,006,022

Accrued expenses

1,372

1,288

Accrued expenses payable to affiliate

1,055

2,006

Interest payable

705

2,551

Management fee payable to affiliate

1,483

1,967

Total liabilities

$

2,181,107

$

2,709,733

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $0.01 par value. As of June 30, 2023: 350,000,000 shares authorized, 24,924,886 shares issued and outstanding. As of December 31, 2022: 350,000,000 shares authorized, 24,925,357 shares issued and outstanding.

249

249

Additional paid-in capital

476,127

475,379

Accumulated other comprehensive income

(6,565

)

(21,127

)

Retained (deficit) earnings

(237,135

)

(218,022

)

Total stockholders’ equity

$

232,676

$

236,479

Total liabilities and stockholders’ equity

$

2,413,783

$

2,946,212

Angel Oak Mortgage REIT, Inc.

Reconciliation of Net Income (Loss) to Distributable Earnings

(Unaudited)

(in thousands, except for share and per share data)

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

(in thousands)

Net income (loss) allocable to common stockholders

$

(3,688

)

$

(52,148

)

$

(3,158

)

$

(95,694

)

Adjustments:

Net unrealized (gains) losses on derivatives

(12,179

)

24,692

12,357

9,366

Net unrealized (gains) losses on trading securities

3,882

—

2,277

—

Net unrealized (gains) losses on residential loans in securitization trusts and non-recourse securitization obligation

4,777

10,266

11,104

40,476

Net unrealized (gains) losses on residential loans

3,278

38,538

(36,159

)

103,125

Net unrealized (gains) losses on commercial loans

(136

)

489

(147

)

985

Non-cash equity compensation expense

207

968

748

1,839

Distributable Earnings

$

(3,859

)

$

22,805

$

(12,978

)

$

60,097

Angel Oak Mortgage REIT, Inc.

Reconciliation of Stockholders’ Equity Including Economic Book Value Adjustments

and Economic Book Value per Common Share

(Unaudited)

(in thousands, except for share and per share data)

June 30, 2023

March 31, 2023

December 31, 2022

GAAP total stockholders’ equity

$

232,676

$

244,378

$

236,479

Adjustments:

Fair value adjustment for securitized debt held at amortized cost

95,326

89,284

90,348

Stockholders’ equity including economic book value adjustments

$

328,002

$

333,662

$

326,827

Number of shares of common stock outstanding at period end

24,924,886

24,925,357

24,925,357

Book value per share of common stock

$

9.34

$

9.80

$

9.49

Economic book value per share of common stock

$

13.16

$

13.39

$

13.11

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808904351/en/

Investors:

[email protected]

855-502-3920

Media:

Bernardo Soriano, Gregory FCA for Angel Oak Mortgage, Inc.

914-656-3880

[email protected]

Company Contact:

KC Kelleher, Head of Corporate Finance & Investor Relations

404-528-2684

[email protected]

KEYWORDS: Georgia United States North America

INDUSTRY KEYWORDS: Construction & Property Professional Services REIT Finance

MEDIA:

Posted on August 8, 2023 7:43 am
Praxis Precision Medicines Announces Positive Data from Randomized Withdrawal Sub-Study and Long-Term Extension of Essential1 Study for Ulixacaltamide

Patients dosed with ulixacaltamide up to 14 weeks showed maintained or improved efficacy results, as measured by mean changes in the modified Activities of Daily Living 11 (mADL11
¹
)

Patients withdrawing from ulixacaltamide to placebo experienced worsening in mADL11

Sub-study execution confirmed design features for the upcoming Phase 3 program expected to initiate in Q4 2023

BOSTON, Aug. 08, 2023 (GLOBE NEWSWIRE) — Praxis Precision Medicines, Inc. (NASDAQ: PRAX), a clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system (CNS) disorders characterized by neuronal excitation-inhibition imbalance, today announced further data from two additional analyses of the Essential1 study for ulixacaltamide. Ulixacaltamide is a differentiated and highly selective small molecule inhibitor of T-type calcium channels designed to block abnormal neuronal burst firing in the Cerebello-Thalamo-Cortical (CTC) circuit correlated with tremor activity and being developed for Essential Tremor.

“We were extremely happy to see the OLE and randomized withdrawal results providing further support of the potential durable benefit and safety profile of ulixacaltamide,” said Marcio Souza, president and chief executive officer of Praxis. We believe the randomized withdrawal sub-study confirmed the robustness of the Phase 3 design and, together with the 14-week data from the OLE of Essential1, reinforce the assumptions used for our upcoming Phase 3 program. We look forward to sharing more about these data and our Phase 3 program details at our upcoming R&D portfolio day in early October.”

Open-Label Extension

Following completion of the initial 8-week double-blind treatment phase in Essential1, eligible patients had the option to continue their access to ulixacaltamide in an open-label extension (OLE) phase. Participants who continued to the OLE phase remained blinded for a 6-week lead-in period.

There was no change to the overall safety results through 14 weeks of treatment.

65 patients who completed the double-blinded portion of Essential1 were eligible to participate in the OLE² and completed the week 14 assessment.

Patients who were eligible and continued on ulixacaltamide (n= 39) experienced an additional mean improvement in mADL11¹ of 1.7 points from 3.09 at Week 8 (95% CI: 0.98, 5.2) to 4.81 (95% CI: 2.38, 7.23) after 14 weeks of treatment.

Patients who switched from placebo during the double-blind phase of Essential1 to ulixacaltamide treatment during the OLE 6-week lead-in (n= 26) experienced mean improvement in mADL11 of 3.15 points, from 1.21 at Week 8 (95% CI: -1.04, 3.46) to 4.36 (95% CI: 1.68, 7.05).

Randomized Withdrawal Sub-Study

Following the announcement of the Essential1 study topline results, Praxis amended the open-label protocol to further assess the criteria to be used in the upcoming randomized withdrawal Phase 3 study. In this sub-study, patients were re-randomized in a blinded fashion to either receive placebo or continue to receive ulixacaltamide. Twenty-one patients who completed assessments at week 14 of the OLE were eligible to participate in the blinded sub-study. Patients were evaluated weekly over a total of 6 weeks, with 11 patients assigned to ulixacaltamide and 10 to placebo for the initial 3-week period, crossing over to either placebo or ulixacaltamide for an additional 3-week period. Blinded rescue was triggered for patients on placebo if loss in the mADL11 exceeded 2 points at any timepoint.

Patients who switched from ulixacaltamide to placebo experienced an average loss of effect in their mADL11 per week of 47% (mean loss of effect of – 1.15 points/week), compared to 6% improvement in global mean change per week (mean improvement of 0.16 points/week) for the periods receiving ulixacaltamide. In addition, 10 patients assigned to placebo met the rescue criteria to restart ulixacaltamide.

85% of the patients who received ulixacaltamide (17 of 20) and 52% who received placebo maintained their mADL11 within 3 points compared to baseline, confirming the definition of patient stability to be used in the Phase 3 program.

No new safety signals emerged and there was no change to the overall safety results observed in the 8-week double-blind treatment phase.

The results from the sub-study supported a number of proposed design elements for the upcoming Phase 3 randomized withdrawal study, including the responder criteria and feasibility of rescuing patients with ulixacaltamide. Additional study design elements will be discussed in more detail at an upcoming R&D portfolio event in early October.

About Essential Tremor
Essential Tremor (ET) is the most common movement disorder, affecting roughly seven million people in the United States alone, including approximately two million diagnosed patients. ET is characterized by involuntary rhythmic movement in the upper limbs, with or without tremor in other body locations such as the head, vocal cords, or legs. These tremors significantly disrupt daily living and are progressive in nature, with increases in tremor severity and amplitude commonly observed over the course of the disease. There is only one approved pharmacotherapy for ET, propranolol, a beta blocker approved by the FDA in 1967, that offers limited efficacy and poor tolerability and that is contraindicated for comorbidities that affect a significant share of the ET population. Other beta blockers and anti-convulsants are used off-label, though similarly are characterized by limited efficacy and tolerability. For these reasons, approximately 40% of patients who seek pharmacotherapy treatment for ET discontinue within two years.

About Praxis

Praxis Precision Medicines is a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for CNS disorders characterized by neuronal excitation-inhibition imbalance. Praxis is applying genetic insights to the discovery and development of therapies for rare and more prevalent neurological disorders through our proprietary small molecule platform, Cerebrum™, and antisense oligonucleotide (ASO) platform, Solidus™, using our understanding of shared biological targets and circuits in the brain. Praxis has established a diversified, multimodal CNS portfolio including multiple programs across movement disorders and epilepsy, with four clinical-stage product candidates. For more information, please visit www.praxismedicines.com and follow us on Facebook, LinkedIn and Twitter.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and other federal securities laws, including express or implied statements regarding Praxis’ future expectations, plans and prospects, including, without limitation, statements regarding the clinical development of ulixacaltamide, as well as other statements containing the words “anticipate,” “believe,” “continue,” “could,” “endeavor,” “estimate,” “expect,” “anticipate,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would” and similar expressions that constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995.

The express or implied forward-looking statements included in this press release are only predictions and are subject to a number of risks, uncertainties and assumptions, including, without limitation: uncertainties inherent in clinical trials; expectations regarding the impact of clinical trial results on future trials; the expected timing of clinical trials and submissions for regulatory approval or review by governmental authorities; regulatory approvals to conduct trials; and other risks concerning Praxis’ programs and operations as described in its Annual Report on Form 10-K for the year ended December 31, 2022, its Quarterly Reports on Form 10-Q and other filings made with the Securities and Exchange Commission. Although Praxis’ forward-looking statements reflect the good faith judgment of its management, these statements are based only on information and factors currently known by Praxis. As a result, you are cautioned not to rely on these forward-looking statements. Any forward-looking statement made in this press release speaks only as of the date on which it is made. Praxis undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

¹ mADL11 comprises 11 elements of the TETRAS Activities of Daily Living, excluding social impact, individually scored
² All patients eligible to participate in the OLE were enrolled in Essential1 under version 4 of clinical protocol

Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/f3818106-d493-4252-812b-9c515fb1520c
https://www.globenewswire.com/NewsRoom/AttachmentNg/f38b9ea9-a25f-4d4e-b82f-92660c6c6a82

Investor Contact Praxis Precision Medicines [email protected] 857-702-9452 Media Contact Ian Stone Canale Communications [email protected] 619-849-5388

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