Market Newsdesk

METTAWA, Ill., July 27, 2023 (GLOBE NEWSWIRE) — Brunswick Corporation (NYSE: BC), today, released its second quarter 2023 financial results.  A complete and full-text financial results press release is available on the Company’s website at https://ir.brunswick.com.  The results will also be available on the SEC’s website with the Form 8-K filing of the release at http://goo.gl/wJQN1.

The Company will hold a conference call at 10 a.m. CDT/ 11 a.m. EDT, today, July 27, 2023, hosted by David M. Foulkes, chief executive officer, Ryan M. Gwillim, executive vice president and chief financial officer and Neha Clark, senior vice president, enterprise finance.  A copy of the presentation to be used on this call will be available when the results are released as noted above. 

Security analysts and investors wishing to participate via telephone should call 877-900-9524 (No Password Needed).  Callers outside of North America should call 412-902-0029 (No Password Needed) to be connected.  These numbers can be accessed 15 minutes before the call begins, as well as during the call.

To listen via the Internet, go to www.brunswick.com/investors. Please go to the website at least 15 minutes before the call to register, download and install any needed audio software.

A replay of the conference call will be available through 1pm CDT August 3, 2023, by calling 877-660-6853 or 201-612-7415 (Access ID: 13739782).  The replay also will be available at   www.brunswick.com/investors.

About Brunswick Corporation:

Brunswick Corporation (NYSE: BC) is the global leader in marine recreation, delivering innovation that transforms experiences on the water and beyond.  Our unique, technology-driven solutions are informed and inspired by deep consumer insights and powered by our belief that “Next Never Rests™”. Brunswick is dedicated to industry leadership, to being the best and most trusted partner to our many customers, and to building synergies and ecosystems that enable us to challenge convention and define the future. Brunswick is home to more than 60 industry-leading brands. In the category of Marine Propulsion, these brands include, Mercury Marine, Mercury Racing and MerCruiser. Brunswick’s comprehensive collection of parts, accessories, distribution, and technology brands includes Mercury Engine Parts & Accessories, BLA and Land ‘N’ Sea. Our Navico Group and its industry-leading technology brands consist of Lowrance, Simrad, B&G, Mastervolt, RELiON, Attwood and Whale. Our Boat brands are some of the best known in the world, including Boston Whaler, Lund, Sea Ray, Bayliner, Harris Pontoons, Princecraft and Quicksilver. In addition, our service, digital and shared-access businesses include Freedom Boat Club, Boateka and a range of financing, insurance, and extended warranty businesses. While focused primarily on the marine industry, Brunswick also successfully leverages its portfolio of advanced technologies to deliver an exceptional suite of solutions in mobile and industrial applications.  Headquartered in Mettawa, IL, Brunswick has approximately 19,000 employees operating in 27 countries. In 2022, Brunswick was named by Forbes as a World’s Best Employer and as one of America’s Most Responsible Companies by Newsweek, both for the third consecutive year. For more information, visit www.Brunswick.com.

Forward-Looking Statements

Certain statements in this news release are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, estimates, and projections about Brunswick’s business and by their nature address matters that are, to different degrees, uncertain. Words such as “may,” “could,” “should,” “expect,” “anticipate,” “project,” “position,” “intend,” “target,” “plan,” “seek,” “estimate,” “believe,” “predict,” “outlook,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this news release. These risks include, but are not limited to: the effect of adverse general economic conditions, including the amount of disposable income consumers have available for discretionary spending; changes in currency exchange rates; fiscal and monetary policy changes; higher energy and fuel costs; competitive pricing pressures; adverse capital market conditions; actual or anticipated increases in costs, disruptions of supply, or defects in raw materials, parts, or components we purchase from third parties; supplier manufacturing constraints, increased demand for shipping carriers, and transportation disruptions; managing our manufacturing footprint; international business risks, geopolitical tensions or conflicts, sanctions, embargoes, or other regulations; public health emergencies or pandemics, such as the coronavirus (COVID-19) pandemic; adverse weather conditions, climate change events and other catastrophic event risks; our ability to develop new and innovative products and services at a competitive price; loss of key customers; our ability to meet demand in a rapidly changing environment; absorbing fixed costs in production; risks associated with joint ventures that do not operate solely for our benefit; our ability to integrate acquisitions, including Navico, and the risk for associated disruption to our business; our ability to successfully implement our strategic plan and growth initiatives; attracting and retaining skilled labor, implementing succession plans for key leadership, and executing organizational and leadership changes; our ability to identify, complete, and integrate targeted acquisitions; the risk that restructuring or strategic divestitures will not provide business benefits; maintaining effective distribution; dealers and customers being able to access adequate financing; requirements for us to repurchase inventory; inventory reductions by dealers, retailers, or independent boat builders; risks related to the Freedom Boat Club franchise business model; outages, breaches, or other cybersecurity events regarding our technology systems, which have affected and could further affect manufacturing and business operations and could result in lost or stolen information and associated remediation costs; our ability to protect our brands and intellectual property; changes to U.S. trade policy and tariffs; any impairment to the value of goodwill and other assets; product liability, warranty, and other claims risks; legal, environmental, and other regulatory compliance, including increased costs, fines, and reputational risks; changes in income tax legislation or enforcement; managing our share repurchases; and risks associated with certain divisive shareholder activist actions.

Additional risk factors are included in the Company’s Annual Report on Form 10-K for 2022 and in subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and Brunswick does not undertake any obligation to update them to reflect events or circumstances after the date of this news release.

Lee
Gordon —
Vice President – Corporate Communications, Public Relations & Public Affairs
M: (904) 860-8848 | O: (847) 735-4003

EVANSVILLE, Ind., July 27, 2023 (GLOBE NEWSWIRE) — Escalade, Inc. (NASDAQ: ESCA, or the “Company”), a leading manufacturer and distributor of sporting goods and indoor/outdoor recreational equipment, today announced second quarter and year to date results for 2023.

SECOND QUARTER 2023

(As compared to the second quarter 2022)

• Net sales were $67.8 million, a decline of 28.2%
• Operating income was $6.3 million, 23.6% below 2022
• EBITDA totaled $7.7 million, a decline of 25.9%
• Net income of $3.6 million, or $0.26 per diluted share, a decline of $2.0 million
• Cash provided by operations of $8.4 million, an increase of $5.9 million

TWO QUARTERS ENDED JUNE 30, 2023

(As compared to the first half 2022)

• Net sales decreased 25.2% to $124.7 million
• Gross margin declined 410 basis points, to 22.2%
• Operating income decreased 62.8% to $6.4 million
• Net income of $2.7 million, or $0.20 per diluted share vs. $12.3 million, or $0.91 per diluted share for 2022
• Cash provided by operations of $12.9 million vs. cash used of $0.3 million

For the second quarter ended June 30, 2023, Escalade reported net income of $3.6 million, or $0.26 per diluted share, versus net income of $5.7 million, or $0.42 per diluted share for the second quarter in 2022. Total net sales declined 28.2% on a year-over-year basis in the second quarter, due to a combination of reduced post-pandemic consumer demand across most product categories, together with 21 fewer days in the Company’s new reporting calendar, when compared to the year-ago period. Excluding the impact of the change in the Company’s reporting calendar, sales declined 9.5% on a year-over-year basis.

For the two quarters ended June 30, 2023, Escalade reported net income of $2.7 million, or $0.20 per diluted share, versus $12.3 million, or $0.91 per diluted share for the first half of 2022. Total net sales declined 25.2% on a year-over-year basis in the first half of 2023 due mainly to reduced post-pandemic demand, particularly in our archery, basketball, and indoor/outdoor games categories as well as excess inventory levels in the retail channel.

Escalade reported second quarter gross margin of 24.6%, a decline of 50 basis points versus the prior-year quarter, primarily driven by higher-cost inventory, elevated inventory storage and handling costs, and lower operating leverage on a comparably lower revenue base partially offset by improved margins in several categories and expense reductions implemented through the second quarter.

The Company generated $8.4 million of cash flow from operations in the second quarter 2023, compared to $2.5 million for the same quarter in 2022. Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) declined 25.9% to $7.7 million in the second quarter 2023, versus $10.3 million in the prior-year period.

As of June 30, 2023, the Company had total cash and equivalents of $0.6 million, together with $42.4 million of availability on its senior secured revolving credit facility maturing in 2027. At the end of the second quarter 2023, net debt (total debt less cash) was 4.0x trailing twelve-month EBITDA.

Escalade’s Board of Directors has declared a quarterly dividend of $0.15 per share of common stock. The dividend is payable on September 5, 2023 to all shareholders of record at the close of business on August 29, 2023.

Effective January 1, 2023, Escalade transitioned to a conventional twelve-month reporting calendar. The second quarter 2023 had 91 operating days, versus 112 days in the prior year period. Please see the accompanying table in our footnotes for a comparison of the days in each quarter for 2022 and 2023.

MANAGEMENT COMMENTARY

“Recovering from a challenging start to the year and our disappointing first quarter, I am proud that our team demonstrated resilience and delivered strong second quarter results highlighted by substantial growth in cash provided by operations, significant inventory and long-term debt reductions, EBITDA margin expansion, thoughtful expense reductions, and a return to profitability,” stated Walter P. Glazer, Jr., President and CEO of Escalade. “While US retail sales of sporting goods are soft and consumer confidence remains dampened by inflationary headwinds, higher interest rates and a mixed employment outlook, we believe our diverse portfolio of leading recreational brands will continue to resonate with consumers. As we look into the second half of the year, we anticipate continued normalization of wholesale channel inventories which should position us to capitalize on restocking opportunities with our retail partners as we move into the holiday season. Continuing with our strategic direction, we remain highly focused on a combination of cost control, improved working capital management, and balance sheet optimization including the divestiture of our owned facility in Rosarito, Mexico.”

“Sales strengthened relative to our first quarter as we continued to gain momentum through the second quarter,” continued Glazer. “Notably, direct to consumer (DTC) sales have continued to accelerate, with DTC sales up more than 60% versus the comparable April to June period in 2022, driven by a combination of effective marketing campaigns and successful new product launches. In the second quarter, we also continued with strong sales growth in the pickleball category versus year-ago second quarter, despite 19% fewer days this year, driven by growing consumer demand for our Onix brand and leading assortment of innovative paddles, balls, and accessories.”

“Second quarter gross margin declined on a year-over-year basis, but improved significantly compared to the first quarter, due to expense reductions, factory absorption, price discipline, and a more favorable product mix,” continued Glazer. “Looking to the second half of the year, we anticipate margin expansion opportunities as we expect to continue those favorable trends from the second quarter and work through our higher-cost inventory.”

“We remain highly focused on reducing net leverage to within our targeted range of 1.5x to 2.5x,” stated Glazer. “Over the near-term, we will prioritize debt reduction, consistent with our previously stated strategy. During the second half of the year, we expect to materially reduce inventory levels, while closely managing our capital expenditures, thereby positioning us to further reduce net leverage and maintain our stable quarterly cash dividend while supporting our customers and continuing to build our market-leading portfolio of high-quality and beloved brands for our loyal consumer base.”

CONFERENCE CALL

A conference call will be held Thursday, July 27, 2023, at 11:00 a.m. ET to review the Company’s financial results, discuss recent events and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Escalade’s website at www.escaladeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the live teleconference:

Domestic Live:	1-877-407-0792
International Live:	1-201-689-8263

To listen to a replay of the teleconference, which subsequently will be available through August 10, 2023:

Domestic Replay:	1-844-512-2921
International Replay:	1-412-317-6671
Conference ID:	13740128

USE OF NON-GAAP FINANCIAL MEASURES

In addition to disclosing financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), this release contains the non-GAAP financial measure known as “EBITDA.” A reconciliation of this non-GAAP financial measure is contained at the end of this press release. EBITDA is a non-GAAP financial measure that Escalade uses to facilitate comparisons of operating performance across periods. Escalade believes the disclosure of EBITDA provides useful information to investors regarding its financial condition and results of operations. Non-GAAP measures should be viewed as a supplement to and not a substitute for the Company’s U.S. GAAP measures of performance and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or in lieu of an analysis of the Company’s results as reported under U.S. GAAP and should be evaluated only on a supplementary basis.

ABOUT ESCALADE

Founded in 1922, and headquartered in Evansville, Indiana, Escalade designs, manufactures, and sells sporting goods, fitness, and indoor/outdoor recreation equipment.  Our mission is to connect family and friends creating lasting memories. Leaders in our respective categories, Escalade’s brands include Brunswick Billiards®; STIGA® table tennis; Accudart®; RAVE Sports® water recreation; Victory Tailgate® custom games; Onix® pickleball; Goalrilla™ basketball; Lifeline® fitness; Woodplay® playsets; and Bear® Archery. Escalade’s products are available online and at leading retailers nationwide. For more information about Escalade’s many brands, history, financials, and governance please visit www.escaladeinc.com.

INVESTOR RELATIONS CONTACT

Patrick Griffin
Vice President – Corporate Development & Investor Relations
812-467-1358

FORWARD-LOOKING STATEMENTS 

This report contains forward-looking statements relating to present or future trends or factors that are subject to risks and uncertainties. These risks include, but are not limited to: specific and overall impacts of the COVID-19 global pandemic on Escalade’s financial condition and results of operations; the impact of competitive products and pricing; product demand and market acceptance; new product development; Escalade’s ability to achieve its business objectives; Escalade’s ability to successfully achieve the anticipated results of strategic transactions, including the integration of the operations of acquired assets and businesses and of divestitures or discontinuances of certain operations, assets, brands, and products; the continuation and development of key customer, supplier, licensing and other business relationships; Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel; Escalade’s ability to successfully negotiate the shifting retail environment and changes in consumer buying habits; the financial health of our customers; disruptions or delays in our business operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, labor strikes, natural disasters, public health crises such as the coronavirus pandemic, and other events and circumstances beyond our control; Escalade’s ability to control costs; Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs and other trade restrictions applicable to our products and raw materials, including impacts on the costs of producing our goods, importing products and materials into our markets for sale, and on the pricing of our products; general economic conditions, including inflationary pressures; fluctuation in operating results; changes in foreign currency exchange rates; changes in the securities markets; continued listing of the Company’s common stock on the NASDAQ Global Market; the Company’s inclusion or exclusion from certain market indices; Escalade’s ability to obtain financing and to maintain compliance with the terms of such financing; the availability, integration and effective operation of information systems and other technology, and the potential interruption of such systems or technology; the potential impact of actual or perceived defects in, or safety of, our products, including any impact of product recalls or legal or regulatory claims, proceedings or investigations involving our products; risks related to data security of privacy breaches; the potential impact of regulatory claims, proceedings or investigations involving our products; and other risks detailed from time to time in Escalade’s filings with the Securities and Exchange Commission. Escalade’s future financial performance could differ materially from the expectations of management contained herein. Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of this report.

Escalade, Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited, In Thousands Except Per Share Data)
	Second Quarter Ended								Two Quarters Ended
All Amounts in Thousands Except Per Share Data	June 30, 2023				July 9, 2022				June 30, 2023				July 9, 2022
Net sales	$	67,771			$	94,337			$	124,702			$	166,717
Costs and Expenses
Cost of products sold		51,124				70,613				97,003				122,874
Selling, administrative and general expenses		9,769				14,680				20,052				25,206
Amortization		620				855				1,240				1,425
Operating Income		6,258				8,189				6,407				17,212
Other Income (Expense)
Interest expense		(1,580	)			(948	)			(2,955	)			(1,508	)
Other income		7				29				25				72
Income Before Income Taxes		4,685				7,270				3,477				15,776
Provision for Income Taxes		1,043				1,597				787				3,449
Net Income	$	3,642			$	5,673			$	2,690			$	12,327
Earnings Per Share Data:
Basic earnings per share	$	0.27			$	0.42			$	0.20			$	0.91
Diluted earnings per share	$	0.26			$	0.42			$	0.20			$	0.91
Dividends declared	$	0.15			$	0.15			$	0.30			$	0.30

Consolidated Balance Sheets
(Unaudited, In Thousands)
All Amounts in Thousands Except Share Information	June 30, 2023		December 31, 2022		July 9, 2022
	(Unaudited)		(Audited)		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	577	$	3,967	$	6,195
Receivables, less allowance of $355; $492; and $726; respectively		54,975		57,419		60,011
Inventories		111,676		121,870		130,246
Prepaid expenses		3,925		4,942		7,263
Prepaid income tax		1,518		—		621
TOTAL CURRENT ASSETS		172,671		188,198		204,336
Property, plant and equipment, net		24,261		24,751		28,344
Assets held for sale		2,823		2,823		—
Operating lease right-of-use assets		8,669		9,100		9,318
Intangible assets, net		29,880		31,120		35,353
Goodwill		42,326		42,326		39,226
Other assets		455		400		275
TOTAL ASSETS	$	281,085	$	298,718	$	316,852
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	7,143	$	7,143	$	7,143
Trade accounts payable		14,680		9,414		24,650
Accrued liabilities		9,897		21,320		20,483
Income tax payable		—		71		—
Current operating lease liabilities		1,002		993		676
TOTAL CURRENT LIABILITIES		32,722		38,941		52,952
Other Liabilities:
Long-term debt		76,809		87,738		94,040
Deferred income tax liability		4,516		4,516		4,759
Operating lease liabilities		8,222		8,641		8,660
Other liabilities		407		407		448
TOTAL LIABILITIES		122,676		140,243		160,859
Stockholders’ Equity:
Preferred stock:
Authorized 1,000,000 shares; no par value, none issued
Common stock:
Authorized 30,000,000 shares; no par value, issued and outstanding – 13,736,800; 13,594,407; and 13,590,407; shares respectively		13,737		13,594		13,590
Retained earnings		144,672		144,881		142,403
TOTAL STOCKHOLDERS’ EQUITY		158,409		158,475		155,993
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	281,085	$	298,718	$	316,852

Reconciliation of GAAP Net Income to Non-GAAP EBITDA
(Unaudited, In Thousands)
	Second Quarter Ended						Two Quarters Ended
All Amounts in Thousands	June 30, 2023			July 9, 2022			June 30, 2023			July 9, 2022
Net Income (GAAP)	$	3,642		$	5,673		$	2,690		$	12,327
Interest expense		1,580			948			2,955			1,508
Income tax expense		1,043			1,597			787			3,449
Depreciation and amortization		1,402			2,130			2,798			3,603
EBITDA (Non-GAAP)	$	7,667		$	10,348		$	9,230		$	20,887

Comparison of Fiscal Calendar Days for 2023 and 2022 Quarters
	2023 Days		2022 Days
First Fiscal Quarter	90		84
Second Fiscal Quarter	91		112
Third Fiscal Quarter	92		84
Fourth Fiscal Quarter	92		91
Total Days	365		371

• No new clinical data is required to add PH-ILD indication as per FDA correspondence
• Recertified that YUTREPIA does not infringe any valid patents listed in the Orange Book for Tyvaso
• Preparing for potential launch of YUTREPIA between end of 2023 to mid-2024

MORRISVILLE, N.C., July 27, 2023 (GLOBE NEWSWIRE) — Liquidia Corporation (NASDAQ: LQDA) announced today the submission of an amendment to the tentatively approved new drug application (NDA) for YUTREPIA™ (treprostinil) inhalation powder to add the treatment of pulmonary hypertension associated with interstitial lung disease (PH-ILD). The U.S. Food and Drug Administration (FDA) has previously confirmed in writing that the addition of the PH-ILD indication will not require any new clinical information. Upon acceptance of the amendment, the FDA will confirm the type of resubmission as Class 1 or Class 2. If approved by FDA, YUTREPIA would be indicated for the treatment of both PH-ILD and pulmonary arterial hypertension (PAH). The FDA can grant final approval of the PH-ILD indication in the YUTREPIA label after the new clinical investigation exclusivity granted to Tyvaso® expires on March 31, 2024.

Concurrent with the amendment, Liquidia recertified under 21 U.S.C. 355(b)(2)(A)(iv), also referred to as paragraph IV certification, that the patents listed for Tyvaso® in the FDA’s publication of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, are invalid and/or not infringed by YUTREPIA. All Orange Book patents previously asserted by United Therapeutics have already been found to be invalid or not-infringed as decided by U.S. District Court, confirmed on appeal, or by the Patent Trial and Appeal Board (PTAB), pending appeal.

Dr. Roger Jeffs, Chief Executive Officer of Liquidia, said: “We have submitted this request to ensure that patients may access YUTREPIA for both the PAH and PH-ILD indications as soon as possible. We continue to hear from the community that alternative inhaled products are needed, especially for those patients who may benefit from a low resistance dry powder inhaler that can be easily titrated to optimal therapeutic effect like YUTREPIA. This feedback reinforces our undeterred commitment to deliver on the full potential of YUTREPIA to improve patients’ lives.”

About YUTREPIA™(treprostinil) inhalation powder

YUTREPIA is an investigational, inhaled dry powder formulation of treprostinil delivered through a convenient, low-resistance, palm-sized device. On November 5, 2021, the FDA issued a tentative approval for YUTREPIA, which is indicated for the treatment of pulmonary arterial hypertension (PAH) to improve exercise ability in adult patients with New York Heart Association (NYHA) Functional Class II-III symptoms. The FDA has confirmed that YUTREPIA may add the indication to treat pulmonary hypertension with interstitial lung disease (PH-ILD) without additional clinical studies. YUTREPIA was designed using Liquidia’s PRINT® technology, which enables the development of drug particles that are precise and uniform in size, shape, and composition, and that are engineered for enhanced deposition in the lung following oral inhalation. Liquidia has completed INSPIRE, or Investigation of the Safety and Pharmacology of Dry Powder Inhalation of Treprostinil, an open-label, multi-center phase 3 clinical study of YUTREPIA in patients diagnosed with PAH who are naïve to inhaled treprostinil or who are transitioning from Tyvaso® (nebulized treprostinil). YUTREPIA was previously referred to as LIQ861 in investigational studies.

About pulmonary arterial hypertension (PAH)

Pulmonary arterial hypertension (PAH) is a rare, chronic, progressive disease caused by hardening and narrowing of the pulmonary arteries that can lead to right heart failure and eventually death. Currently, an estimated 45,000 patients are diagnosed and treated in the United States. There is currently no cure for PAH, so the goals of existing treatments are to alleviate symptoms, maintain or improve functional class, delay disease progression, and improve quality of life.

About pulmonary hypertension associated with interstitial lung disease (PH-ILD)

Pulmonary hypertension (PH) associated with interstitial lung disease (ILD) includes a diverse collection of up to 150 different pulmonary diseases, including interstitial pulmonary fibrosis, chronic hypersensitivity pneumonitis, connective tissue disease related ILD, and chronic pulmonary fibrosis with emphysema (CPFE) among others. Any level of PH in ILD patients is associated with poor 3-year survival. A current estimate of PH-ILD prevalence in the United States is greater than 60,000 patients, though population growth in many of these underlying ILD diseases is not yet known due to factors including underdiagnosis and lack of approved treatments until March 2021, when inhaled treprostinil was first approved for this indication.

About Liquidia Corporation

Liquidia Corporation is a biopharmaceutical company focused on the development and commercialization of products in pulmonary hypertension and other applications of its PRINT® Technology. The company operates through its two wholly owned subsidiaries, Liquidia Technologies, Inc. and Liquidia PAH, LLC. Liquidia Technologies has developed YUTREPIA™ (treprostinil) inhalation powder for the treatment of pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). Liquidia Technologies is also developing L606, an investigational liposomal formulation of treprostinil administered twice-daily with a short-duration next-generation nebulizer, for use in North America. Liquidia PAH provides the commercialization for pharmaceutical products to treat pulmonary disease, such as generic Treprostinil Injection. For more information, please visit www.liquidia.com.

Tyvaso® is a registered trademarks of United Therapeutics Corporation.

Cautionary Statements Regarding Forward-Looking Statements

This press release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical facts, including statements regarding our future results of operations and financial position, our strategic and financial initiatives, our business strategy and plans and our objectives for future operations, are forward-looking statements. Such forward-looking statements, including statements regarding clinical trials, clinical studies and other clinical work (including the funding therefor, anticipated patient enrollment, safety data, study data, trial outcomes, timing or associated costs), regulatory applications and related submission contents and timelines, including the potential for final FDA approval of the NDA for YUTREPIA, the timeline or outcome related to appeals arising from our patent litigation in the U.S. District Court for the District of Delaware or inter partes review proceedings conducted at the PTAB, the issuance of patents by the USPTO and our ability to execute on our strategic or financial initiatives, involve significant risks and uncertainties and actual results could differ materially from those expressed or implied herein. The favorable decisions of the PTAB in the IPR for the ’793 patent and of the Court and CAFC in the Hatch-Waxman litigation are not determinative of the outcome of any appeal of those decisions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks discussed in our filings with the SEC, including the impact of the coronavirus (COVID-19) outbreak on our Company and our financial condition and results of operations, as well as a number of uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment and our industry has inherent risks. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Nothing in this press release should be regarded as a representation by any person that these goals will be achieved, and we undertake no duty to update our goals or to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information

Media & Investors:

Jason Adair
Chief Business Officer
919.328.4400
[email protected]

CALGARY, Alberta, July 27, 2023 (GLOBE NEWSWIRE) — Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) generated nearly $2.0 billion in cash from operating activities, approximately $1.9 billion in adjusted funds flow and $897 million in free funds flow in the second quarter of 2023. Total upstream production was approximately 730,000 barrels of oil equivalent per day (BOE/d)¹, reflecting a planned turnaround at Foster Creek and production impacts in the Conventional segment in May and June due to Alberta wildfire activity. Downstream throughput averaged almost 538,000 barrels per day (bbls/d), increasing in the quarter as volumes ramped up following restart work at the Superior and Toledo refineries.

“We achieved significant operational milestones across the company over the quarter,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “With all that we have accomplished during the quarter, we’re well positioned for the back half of 2023 and beyond.”

Highlights

• Ramped up throughput at the Toledo Refinery, which is now fully operational. The Superior Refinery is processing crude oil and continues to progress the start-up of its fluid catalytic cracking unit.
• Delivered $575 million to shareholders in the second quarter through buybacks and common share dividends; in addition to the purchase and cancellation of 45.5 million outstanding warrants for $711 million.
• Achieved a major milestone on the West White Rose project as the company completed the concrete pour on the offshore platform’s conical slip.
• Successfully completed a three-week turnaround at the company’s Foster Creek oil sands project.
• Released Cenovus’s 2022 environmental, social and governance (ESG) report, detailing overall sustainability performance and progress on the company’s ESG targets, as well as a new milestone to reduce absolute methane emissions in upstream operations by 80% by year-end 2028, from a 2019 baseline.

Financial, production & throughput summary
(For the period ended June 30)	2023 Q2	2023 Q1	% change	2022 Q2	% change
Financial ($ millions, except per share amounts)
Cash from (used in) operating activities	1,990	(286)		2,979	(33)
Adjusted funds flow2	1,899	1,395	36	3,098	(39)
Per share (basic)2	1.00	0.73		1.57
Per share (diluted)2	0.98	0.71		1.53
Capital investment	1,002	1,101	(9)	822	22
Free funds flow2	897	294	205	2,276	(61)
Excess free funds flow2	505	(499)		2,020	(75)
Net earnings (loss)	866	636	36	2,432	(64)
Per share (basic)	0.45	0.33		1.23
Per share (diluted)	0.44	0.32		1.19
Long-term debt, including current portion	8,534	8,681	(2)	11,228	(24)
Net debt	6,367	6,632	(4)	7,535	(16)
Production and throughput (before royalties, net to Cenovus)
Oil and NGLs (bbls/d)1	608,400	636,200	(4)	614,200	(1)
Conventional natural gas (MMcf/d)	729.4	857.0	(15)	882.2	(17)
Total upstream production (BOE/d) 1	729,900	779,000	(6)	761,500	(4)
Total downstream throughput (bbls/d)	537,800	457,900	17	457,300	18

¹ See Advisory for production by product type.
² Non-GAAP financial measure or contains a non-GAAP financial measure. See Advisory.

Organizational changes

To reflect the further evolution of Cenovus as a company over the past two years, the Board of Directors has approved some role changes on Cenovus’s executive team. Effective September 1, 2023:

• Keith Chiasson (Executive Vice-President, Downstream) will become Cenovus’s Executive Vice-President & Chief Operating Officer, responsible for all aspects of the company’s operations.
• Doreen Cole (Senior Vice-President, Downstream Manufacturing) will join Cenovus’s executive team as Executive Vice-President, Downstream.
• Drew Zieglgansberger (Executive Vice-President, Natural Gas & Technical Services) will become Cenovus’s Executive Vice-President & Chief Commercial Officer, a new role responsible for all commercial arrangements across the company, including strategy, business development, planning and marketing.
• Andrew Dahlin (Executive Vice-President, Corporate & Operations Services) will take on the role of Executive Vice-President, Natural Gas & Technical Services.
• Jeff Hart (Executive Vice-President & Chief Financial Officer) will become Executive Vice-President, Corporate & Operations Services.
• Kam Sandhar (Executive Vice-President, Strategy & Corporate Development) will become Executive Vice-President & Chief Financial Officer and continue to be responsible for Investor Relations.

There are no planned changes to the roles of Susan Anderson, Senior Vice-President, People Services, Rhona DelFrari, Chief Sustainability Officer & Executive Vice-President, Stakeholder Engagement, Gary Molnar, Senior Vice-President, Legal, General Counsel & Corporate Secretary, and Norrie Ramsay, Executive Vice-President, Upstream – Thermal, Major Projects & Offshore.

“These changes reflect the capability and versatility of Cenovus’s exceptional executive team. I have absolute confidence they will continue to generate value for our shareholders,” said McKenzie. “Our executive team structure will now better reflect the size and complexity of the company we are today.”

Board update

The company also announced today that, due to the demands of other commitments, Canning K.N. Fok retired from the Cenovus Board of Directors effective July 26, 2023, and confirms that Mr. Fok will continue to support and assist the company as the CEO of one of its major shareholders. It is expected that, in accordance with the standstill agreements entered into at the time of the Husky Energy transaction, a new director to replace Mr. Fok will be nominated before the end of the year.

“On behalf of the entire Board, I would like to thank Canning for his valuable insights, experience and commitment during his service as a member of the Board,” said Alex Pourbaix, Executive Chair of the Board. “As a director of Cenovus since the Husky Energy transaction, Canning has been a thoughtful and effective contributor to the integration and success of the combined organization.”

Second-quarter results

Operating results



¹

Cenovus’s total revenues were approximately $12.2 billion in the second quarter, in line with $12.3 billion in the first quarter of 2023. Upstream revenues were about $6.8 billion, similar to the previous quarter, and downstream revenues were $7.6 billion, compared with nearly $7.4 billion in the first quarter. Total operating margin³ was $2.4 billion, compared with about $2.1 billion in the first quarter. Upstream operating margin⁴ was approximately $2.3 billion, an increase from $1.7 billion in the prior quarter, primarily driven by a tighter light-heavy differential and lower condensate blending costs, partially offset by lower Brent and West Texas Intermediate (WTI) crude oil prices and decreased production volumes. Downstream operating margin⁴ was $143 million, compared with $391 million in the first quarter. U.S. Manufacturing operating margin was negatively impacted by approximately $170 million due to the cost of processing crude oil purchased in prior periods at higher prices as well as the narrowing of heavy oil differentials.

³
_{Non-GAAP financial measure. Total operating margin is the total of Upstream operating margin plus Downstream operating margin. See Advisory.}

⁴
_{Specified financial measure. See Advisory.}

Total upstream production was 729,900 BOE/d in the second quarter, a decrease from the first quarter as the company experienced production impacts due to Alberta wildfire activity and planned maintenance. Foster Creek production of 167,000 bbls/d, compared with 190,000 bbls/d in the first quarter, reflects a planned three-week turnaround that was completed in the second quarter. Christina Lake production was 234,900 bbls/d, in line with the prior quarter as the company continued to progress its redevelopment and redrill program, including new well pads at both Foster Creek and Christina Lake. Sunrise production was 46,500 bbls/d, in line with first-quarter production of 44,500 bbls/d. At the Lloydminster thermal projects, production increased to 106,200 bbls/d from 99,000 bbls/d in the prior quarter, as the company continued to focus on optimization of the asset.

In response to the Alberta wildfires that began in May and continued into early June, Cenovus shut in several producing conventional fields and processing plants as a precaution. Production in the Conventional segment was 104,600 BOE/d in the second quarter compared with 123,900 BOE/d in the first quarter. No significant damage was identified at any Cenovus assets, and production at all facilities returned to normal rates in late June, with the exception of approximately 5,000 BOE/d to 7,000 BOE/d currently offline at the Rainbow Lake facility due to electric power constraints from a third-party provider. Cenovus estimates the annualized impact to production in the Conventional segment to be approximately 8,000 BOE/d to 10,000 BOE/d, and as a result has revised Conventional production guidance to between 115,000 BOE/d and 130,000 BOE/d.

In the Offshore segment, production was 51,500 BOE/d compared with 65,600 BOE/d in the previous quarter. In Asia Pacific, sales volumes decreased compared with the first quarter as a result of a temporary unplanned outage in China, when an unauthorized vessel travelled into a dedicated pipeline corridor and struck an umbilical line. In Indonesia, sales volumes were higher than the first quarter of 2023, with the MBH and MDA fields continuing to ramp up. In the Atlantic region, production was 5,300 bbls/d compared with 8,900 bbls/d in the first quarter as the company advanced a planned turnaround at the SeaRose floating production, storage and offloading (FPSO) vessel, originally scheduled for the fall, into the first and second quarters. Light crude oil from production at the White Rose field is offloaded from the SeaRose FPSO to tankers and stored at an onshore terminal before shipment to buyers, which results in a timing difference between production and sales. There were no sales volumes in the second quarter due to this timing. The non-operated Terra Nova FPSO remains dockside in Newfoundland and Labrador, as it continues to undergo maintenance as part of its asset life extension program.

In U.S. Manufacturing, crude throughput was 442,500 bbls/d, an increase of 23%, compared with 359,200 bbls/d in the first quarter.  The Superior Refinery introduced crude oil in mid-March and increased throughput throughout the second quarter. Cenovus began restarting the Toledo Refinery in April, ramping up volumes through the second quarter, and the facility is now fully operational. The Toledo and Superior refineries are both producing saleable products. The company’s Lima Refinery continues to deliver strong performance, with 93% utilization achieved in the quarter. At the non-operated Borger Refinery, utilization was impacted by a planned turnaround and temporary unplanned outages. The refinery is now fully operational. The non-operated Wood River Refinery completed a planned turnaround in May and is now fully operational.

Crude utilization in the Canadian Manufacturing segment was 86% with throughput of 95,300 bbls/d, compared with crude utilization and throughput of 89% and 98,700 bbls/d in the first quarter.

Financial results

Second-quarter cash from operating activities, which includes changes in non-cash working capital, was nearly $2.0 billion, compared with cash used in operating activities of $286 million in the first quarter of 2023. Adjusted funds flow was $1.9 billion, compared with $1.4 billion in the prior period, and free funds flow increased to $897 million from $294 million in the first quarter. Second-quarter financial results improved compared with the first quarter, primarily due to higher price realizations in the Oil Sands segment, driven by narrower light-heavy crude oil differentials and lower condensate prices. In addition, Oil Sands segment sales volumes outpaced production by approximately 4,000 BOE/d as the company drew down product inventory built through the first quarter of 2023 and fourth quarter of 2022. These factors were partially offset by higher operating costs in the U.S. Manufacturing segment related to the commissioning and start-up of the Superior and Toledo refineries, as well as planned and unplanned maintenance at Borger. Results in the U.S. Manufacturing segment were lower by approximately $170 million due to the cost of processing crude oil purchased in prior periods at higher prices, in addition to lower sales volumes than production volumes due to inventory build-up at the Lima Refinery and a normal time lag expected on sales with the ramp up of the Toledo and Superior refineries.

Capital investment of $1.0 billion in the second quarter was primarily directed towards sustaining production in the Oil Sands segment, the ongoing construction of the West White Rose project and the Terra Nova asset life extension, in addition to refining reliability initiatives in the U.S. Manufacturing segment and completing rebuild activities at the Superior Refinery.

Net earnings in the second quarter were $866 million, compared with $636 million in the previous quarter. The increase in net earnings was primarily due to higher operating margin and a favourable unrealized foreign exchange gain, partially offset by higher income tax.

Long-term debt, including the current portion, was $8.5 billion at June 30, 2023, compared with $8.7 billion as at March 31, 2023. Net debt was approximately $6.4 billion at June 30, 2023, a decrease of $265 million from March 31, 2023, primarily due to an increase in free funds flow generated in the second quarter of 2023 compared with the prior quarter. The company continues to focus on making progress towards its net debt target of $4.0 billion.

2023 guidance updates

Cenovus has revised its 2023 corporate guidance to reflect the company’s updated outlook for commodity prices, production and operating expenses for the remainder of the year. It is available on cenovus.com under Investors.

Changes to the company’s 2023 guidance include:

• Reducing Conventional output by 10,000 BOE/d to a range of 115,000 BOE/d to 130,000 BOE/d as a result of the production impact from wildfires in Alberta.
• Lowering Lloydminster thermal production by 5,000 bbls/d to a range of 100,000 bbls/d to 110,000 bbls/d, reflecting year-to-date operating performance.
• Adjusting the total production range by 15,000 BOE/d to between 775,000 BOE/d and 795,000 BOE/d.
• Expected cash taxes for 2023 have been lowered at the midpoint by $200 million, to a revised range of $1.1 billion to $1.4 billion for 2023.

In addition, the company has updated Conventional operating expenses and royalties, and revised its commodity price deck and sensitivities. The company continues to execute its capital program and there has been no change to Cenovus’s expected capital investment range of $4.0 billion to $4.5 billion.

Dividend declarations and share purchases

The Board of Directors has declared a quarterly base dividend of $0.14 per common share, payable on September 29, 2023 to shareholders of record as of September 15, 2023. In addition, the Board has declared a quarterly dividend on each of the Cumulative Redeemable First Preferred Shares – Series 1, Series 2, Series 3, Series 5 and Series 7 – payable on October 3, 2023 to shareholders of record as of September 15, 2023 as follows:

Preferred shares dividend summary
	Rate (%)	Amount ($/share)
Share series
Series 1	2.577	0.16106
Series 2	6.293	0.39655
Series 3	4.689	0.29306
Series 5	4.591	0.28694
Series 7	3.935	0.24594

All dividends paid on Cenovus’s common and preferred shares will be designated as “eligible dividends” for Canadian federal income tax purposes. Declaration of dividends is at the sole discretion of the Board and will continue to be evaluated on a quarterly basis.

Cenovus’s shareholder returns framework has a target of returning 50% of excess free funds flow to shareholders for quarters where the ending net debt is between $9.0 billion and $4.0 billion. In the second quarter, the company bought approximately 14 million shares under its normal course issuer bid (NCIB), delivering $310 million in returns to shareholders. In June, Cenovus reached separate agreements with each of Hutchison Whampoa Europe Investments S.à r.l. (HWEI) and L.F. Investments S.à r.l. (LFI) to purchase for cancellation all of the warrants held by HWEI and LFI, respectively, representing an aggregate of 45,484,672 warrants (CVE.WT), for a total of $711 million. The company has negotiated payment terms that provide flexibility to work within its shareholder returns framework, and at its discretion Cenovus has the option to pay the aggregate warrant purchase price of $711 million through the remainder of 2023, within each quarter’s excess free funds flow, with full payment being made no later than January 5, 2024. In the second quarter, the company elected to direct excess free funds flow to its NCIB program, and as a result no payment was made to either HWEI or LFI as part of the warrant purchases.

2023 planned maintenance

The following table provides details on planned maintenance activities at Cenovus assets through the remainder of 2023 and anticipated production or throughput impacts.

2023 planned maintenance
Potential quarterly production/throughput impact (Mbbls/d)
	Q3	Q4
Upstream
Lloydminster Thermals	1 – 2	–
Downstream
U.S. Manufacturing	10 – 12	55 – 65

Sustainability

During the quarter, Cenovus released its 2022 ESG report, updating progress the company made towards targets in its five ESG focus areas: climate & greenhouse gas (GHG) emissions, water stewardship, biodiversity, Indigenous reconciliation and inclusion & diversity. Cenovus also announced a milestone to reduce absolute methane emissions in its upstream operations by 80% by year-end 2028, from a 2019 baseline. This is a key milestone towards the company’s target to reduce absolute GHG emissions by 35% by year-end 2035 as Cenovus builds toward its long-term ambition of achieving net zero emissions from operations by 2050.

The ESG report shows continued progress in several areas, including reducing absolute methane emissions in upstream operations by 32% from 2021 levels, and 59% between 2019 and 2022. The company also spent $395 million, or the equivalent of more than $1 million each day in 2022, with Indigenous businesses in areas such as engineering and construction services. Building on this work, Cenovus has now achieved its target of spending at least $1.2 billion with Indigenous businesses between 2019 and year-end 2025. The company continues to seek additional opportunities to expand the scope of work it does with Indigenous communities and businesses in the areas that it operates.

In addition, Cenovus has achieved its aspiration to have at least 40% representation from designated groups (defined as women, Indigenous peoples, persons with disabilities and members of visible minorities) among non-management members of the Board of Directors by year-end 2025. Cenovus recognizes and embraces the benefits of having a diverse Board, with a Board Diversity Policy committing it to seeking highly qualified directors and to consider diversity when determining the best composition for the Board.

Conference call today

9 a.m. Mountain Time (11 a.m. Eastern Time)

Cenovus will host a conference call today, July 27, 2023, starting at 9 a.m. MT (11 a.m. ET).
To join the conference call without operator assistance, please register here approximately 5 minutes in advance to receive an automated call-back when the session begins.

Alternatively, you can dial 888-664-6383 (toll-free in North America) or 416-764-8650 to reach a live operator who will join you into the call. A live audio webcast will also be available and will be archived for approximately 90 days.

Advisory

Basis
of
Presentation

Cenovus reports financial results in Canadian dollars and presents production volumes on a net to Cenovus before royalties basis, unless otherwise stated. Cenovus prepares its financial statements in accordance with International Financial Reporting Standards (IFRS).

Barrels
of
Oil Equiva
lent

Natural gas volumes have been converted to barrels of oil equivalent (BOE) on the basis of six thousand cubic feet (Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil compared with natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is not an accurate reflection of value.

Product types

Product type by operating segment
	Three months ended June 30, 2023
Oil Sands
Bitumen (Mbbls/d)	554.6
Heavy crude oil (Mbbls/d)	17.0
Conventional natural gas (MMcf/d)	12.9
Total Oil Sands segment production (MBOE/d)	573.8
Conventional
Light crude oil (Mbbls/d)	4.8
Natural gas liquids (Mbbls/d)	18.0
Conventional natural gas (MMcf/d)	491.4
Total Conventional segment production (MBOE/d)	104.6
Offshore
Light crude oil (Mbbls/d)	5.3
Natural gas liquids (Mbbls/d)	8.7
Conventional natural gas (MMcf/d)	225.1
Total Offshore segment production (MBOE/d)	51.5
Total upstream production (MBOE/d)	729.9

Forward‐looking
Information

This news release contains certain forward‐looking statements and forward‐looking information (collectively referred to as “forward‐looking information”) within the meaning of applicable securities legislation about Cenovus’s current expectations, estimates and projections about the future of the company, based on certain assumptions made in light of the company’s experiences and perceptions of historical trends. Although Cenovus believes that the expectations represented by such forward‐looking information are reasonable, there can be no assurance that such expectations will prove to be correct.

Forward‐looking information in this document is identified by words such as “anticipate”, “continue”, “deliver”, “expect”, “estimate”, “focus”, “milestone”, “position”, “progress”, “target” and “will” or similar expressions and includes suggestions of future outcomes, including, but not limited to, statements about: performance for the rest of 2023 and beyond; Cenovus’s five ESG focus areas, commitments, targets and ambition, including the governance, strategies, plans and milestones for achieving them; reducing absolute net equity-based scope 1 and 2 GHG emissions by 35% by year-end 2035 from 2019 levels including reducing absolute methane emissions in upstream operations by 80% by year-end 2028 and long-term ambition to achieve net zero GHG emissions from operations by 2050; achieving net debt of $4.0 billion; generating value for shareholders; progressing the start-up of the fluid catalytic cracking unit at the Superior Refinery; the redevelopment and redrill program at Christina Lake and Foster Creek; ongoing construction of the West White Rose project and the Terra Nova asset life extension; planned turnaround activities; dividend payments; excess free funds flow under the shareholder returns framework; and revised 2023 corporate guidance.

Developing forward‐looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Cenovus and others that apply to the industry generally. The factors or assumptions on which the forward‐looking information in this news release are based include, but are not limited to: the allocation of free funds flow to reducing net debt; commodity prices, inflation and supply chain constraints; Cenovus’s ability to produce on an unconstrained basis; Cenovus’s ability to access sufficient insurance coverage to pursue development plans; Cenovus’s ability to deliver safe and reliable operations and demonstrate strong governance; and the assumptions inherent in Cenovus’s revised 2023 Guidance available on cenovus.com.

The risk factors and uncertainties that could cause actual results to differ materially from the forward‐looking information in this news release include, but are not limited to: the accuracy of estimates regarding commodity production and operating expenses, inflation, taxes, royalties, capital costs and currency and interest rates; risks inherent in the operation of Cenovus’s business; and risks associated with climate change and Cenovus’s assumptions relating thereto and other risks identified under “Risk Management and Risk Factors” and “Advisory” in Cenovus’s Management’s Discussion and Analysis (MD&A) for the year ended December 31, 2022.

Except as required by applicable securities laws, Cenovus disclaims any intention or obligation to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. Events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward‐looking information. For additional information regarding Cenovus’s material risk factors, the assumptions made, and risks and uncertainties which could cause actual results to differ from the anticipated results, refer to “Risk Management and Risk Factors” and “Advisory” in Cenovus’s MD&A for the periods ended December 31, 2022 and June 30, 2023, and to the risk factors, assumptions and uncertainties described in other documents Cenovus files from time to time with securities regulatory authorities in Canada (available on SEDAR at sedar.com, on EDGAR at sec.gov and Cenovus’s website at cenovus.com).

Specified Financial Measures

This news release contains references to certain specified financial measures that do not have standardized meanings prescribed by IFRS. Readers should not consider these measures in isolation or as a substitute for analysis of the company’s results as reported under IFRS. These measures are defined differently by different companies and, therefore, might not be comparable to similar measures presented by other issuers. For information on the composition of these measures, as well as an explanation of how the company uses these measures, refer to the Specified Financial Measures Advisory located in Cenovus’s MD&A for the period ended June 30, 2023 (available on SEDAR at sedar.com, on EDGAR at sec.gov and on Cenovus’s website at cenovus.com) which is incorporated by reference into this news release.

Upstream Operating Margin and Downstream Operating Margin

Upstream Operating Margin and Downstream Operating Margin, and the individual components thereof, are included in Note 1 to the interim Consolidated Financial Statements.

Total Operating Margin

Total Operating Margin is the total of Upstream Operating Margin plus Downstream Operating Margin.

	Upstream (1)							Downstream (1)							Total
($ millions)	Q2 2023			Q1 2023		Q2 2022		Q2 2023			Q1 2023		Q2 2022		Q2 2023			Q1 2023		Q2 2022
Revenues
Gross Sales	7,399			7,415		11,685		7,561			7,368		10,719		14,960			14,783		22,404
Less: Royalties	637			596		1,582		—			—		—		637			596		1,582
	6,762			6,819		10,103		7,561			7,368		10,719		14,323			14,187		20,822
Expenses
Purchased Product	885			1,069		1,461		6,581			6,222		8,919		7,466			7,291		10,380
Transportation and Blending	2,750			2,994		3,238		—			—		—		2,750			2,994		3,238
Operating	883			1,029		1,010		843			754		866		1,726			1,783		1,876
Realized (Gain) Loss on Risk Management	(13	)		16		563		(6	)		1		87		(19	)		17		650
Operating Margin	2,257			1,711		3,831		143			391		847		2,400			2,102		4,678

_{(1)   
Found
in Note 1 of the June 30, 2023, or March 31, 2023, interim Consolidated Financial Statements.}

Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow

The following table provides a reconciliation of cash from (used in) operating activities found in Cenovus’s Consolidated Financial Statements to Adjusted Funds Flow, Free Funds Flow and Excess Free Funds Flow. Adjusted Funds Flow per Share – Basic and Adjusted Funds Flow per Share – Diluted are calculated by dividing Adjusted Funds Flow by the respective basic or diluted weighted average number of common shares outstanding during the period and may be useful to evaluate a company’s ability to generate cash.

	Three Months Ended
($ millions)	June 30, 2023			March 31, 2022			June 30, 2022
Cash From (Used in) Operating Activities (1)	1,990			(286	)		2,979
(Add) Deduct:
Settlement of Decommissioning Liabilities	(41	)		(48	)		(27	)
Net Change in Non-Cash Working Capital	132			(1,633	)		(92	)
Adjusted Funds Flow	1,899			1,395			3,098
Capital Investment	1,002			1,101			822
Free Funds Flow	897			294			2,276
Add (Deduct):
Base Dividends Paid on Common Shares	(265	)		(200	)		(207	)
Dividends Paid on Preferred Shares	(9	)		(18	)		(8	)
Settlement of Decommissioning Liabilities	(41	)		(48	)		(27	)
Principal Repayment of Leases	(76	)		(70	)		(75	)
Acquisitions, Net of Cash Acquired	(4	)		(465	)		(1	)
Proceeds From Divestitures	3			8			112
Payment on Divestiture of Assets	—			—			(50	)
Excess Free Funds Flow	505			(499	)		2,020

_{(1)   
Found
in the June 30, 2023, or the March 31, 2023,
interim
Consolidated Financial Statements.}

Cenovus Energy Inc.

Cenovus Energy Inc. is an integrated energy company with oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. The company is focused on managing its assets in a safe, innovative and cost-efficient manner, integrating environmental, social and governance considerations into its business plans. Cenovus common shares and warrants are listed on the Toronto and New York stock exchanges, and the company’s preferred shares are listed on the Toronto Stock Exchange. For more information, visit cenovus.com.

Find Cenovus on Facebook, Twitter, LinkedIn, YouTube and Instagram.

Cenovus contacts

Investors	Media
Investor Relations general line 403-766-7711	Media Relations general line 403-766-7751

PITTSBURGH, July 27, 2023 (GLOBE NEWSWIRE) — Coherent Corp. (NYSE: COHR), a global leader in materials, networking, and lasers, announced today that the company will release its financial results for the quarter and fiscal year ended June 30, 2023, in a press release posted on Coherent’s website at coherent.com/company/investor-relations after market close on August 15. Coherent’s management will host a conference call to discuss these results on August 16 at 9:00 a.m. ET.

Individuals wishing to listen to the live webcast of the call can access the event at the company’s website by visiting coherent.com/company/investor-relations/financial-webcasts or via this link. The call will be recorded and a replay will be available to interested parties for a limited time.

About Coherent

Coherent empowers market innovators to define the future through breakthrough technologies, from materials to systems. We deliver innovations that resonate with our customers in diversified applications for the industrial, communications, electronics, and instrumentation markets. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and distribution facilities worldwide. For more information, please visit us at coherent.com.

Contact

Paul Silverstein
Vice President, Investor Relations & Corporate Communications
[email protected]

Completed acquisition of Bed Bath & Beyond brand and other intellectual property

Executing a transformative re-branding, supported by strong balance sheet

SALT LAKE CITY, July 27, 2023 (GLOBE NEWSWIRE) — Overstock.com, Inc. (NASDAQ:OSTK) today reported financial results for the quarter ended June 30, 2023.

Second Quarter 2023 Financial Highlights

•	Total net revenue was $422 million, a decrease of 20% year-over-year
•	Gross profit of $94 million, or 22.4% of total net revenue
•	Operating loss of $4 million
•	Net loss of $73 million
•	Diluted net loss per share of $1.63; Adjusted diluted net loss per share (non-GAAP) of $0.02
•	Adjusted EBITDA (non-GAAP) of $8 million, which represents 2.0% of net revenue
•	Cash and cash equivalents totaled $343 million at the end of the second quarter

“The acquisition of the Bed Bath & Beyond brand is the beginning of a new phase of growth for us,” said Overstock CEO Jonathan Johnson. “The successful launch and early performance of our Bed Bath & Beyond business in Canada has been encouraging. The Bed Bath & Beyond brand is strong. In Canada, customers want to buy – and are comfortable buying – from the new Bed Bath & Beyond website.”

“We are optimistic about our future with this new brand in the U.S.,” continued Johnson. “The combination of a highly recognized and much-loved consumer home brand and our asset-light operating model should meaningfully grow and scale our business in the U.S. and Canada. We know there is work to be done to win Bed Bath & Beyond customers and retain our existing loyal customers through this transition. We have the right strategies, the right action plan, and the right people in key positions to execute this transformation. The entire organization is focused on ensuring the success of the Bed Bath & Beyond U.S. launch, still targeted for early August.”

“The team continued to execute well during the second quarter,” Johnson stated. “As we navigated an intensely competitive environment well with our asset-light business model, we were able to provide smart value to our customers, improve our year-over-year revenue trend, and deliver another quarter of positive adjusted EBITDA. Our balance sheet remains strong with over $300 million in net cash, setting us up well to execute the transformative re-branding of our furniture and home furnishings e-commerce business. We look forward to providing an update on our re-branding efforts and our second quarter 2023 performance during our earnings call.”

Second Quarter 2023 Operational Metrics*

•	Active customers of 4.6 million, a decrease of 29% year-over-year
•	Last Twelve Months (LTM) net revenue per active customer of $361, a decrease of 1% year-over-year
•	Orders delivered of 1.8 million, a decrease of 16% year-over-year
•	Average order value of $234, a decrease of 5% year-over-year
•	Orders per active customer of 1.56, a decrease of 5% year-over-year
•	Orders placed on a mobile device were 51% of gross merchandise sales

*Certain terms, such as active customers, LTM net revenue per active customer, orders delivered, average order value, and orders per active customer are defined under “Supplemental Operational Data” below.

Earnings Webcast and Replay Information

Overstock will hold a conference call and webcast to discuss its second quarter 2023 financial results on Thursday, July 27, 2023 at 8:30 a.m. ET. To access the live webcast and presentation slides, go to http://investors.overstock.com. To participate in the conference call via telephone, please register at the link available at http://investors.overstock.com/events. Registrants will receive dial-in information and a unique PIN to access the live call. Questions may be emailed in advance of the call to [email protected].

A replay of the conference call will be available at http://investors.overstock.com starting two hours after the live call has ended.

About Overstock.com

Overstock.com, Inc. (NASDAQ:OSTK) is an online furniture and home furnishings retailer and technology-focused innovator based in Salt Lake City, Utah. Overstock.com, Inc. owns the Bed Bath & Beyond brand and other intellectual property related to the brand. Our leading e-commerce website sells a broad range of new home products at low prices, including furniture, décor, area rugs, bedding and bath, home improvement, and more. The online shopping site features millions of products that tens of millions of customers visit each month. Overstock regularly posts information about the Company and other related matters on the Newsroom and Investor Relations pages on its website, Overstock.com.

Bed Bath & Beyond, Beyond, Welcome Rewards, Overstock, and Overstock.com are trademarks of Overstock.com, Inc. Other service marks, trademarks and trade names which may be referred to herein are the property of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This press release and the July 27, 2023 conference call and webcast to discuss our financial results may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends, market conditions, the impact of our national marketing campaign, and other factors that could impact our results of operations. You should not place undue reliance on any forward-looking statements, which speak only as of the date they were made. We undertake no obligation to update any forward-looking statements as a result of any new information, future developments, or otherwise. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including but not limited to, macroeconomic changes, including higher inflation and higher interest rates, and difficulties we may have with our fulfillment partners, supply chain, access to products, shipping costs, competition, attraction/retention of employees, search engine optimization results, and/or payment processors. Other risks and uncertainties include, among others, negative economic consequences of global conflict, problems with our infrastructure, including cyber-attacks or data breaches affecting us, adverse tax, regulatory or legal developments, any restrictions on the use of “cookies” or other tracking technologies, any negative business impacts associated with our evolving business practices including our use of our newly acquired Bed Bath & Beyond brand and other intellectual property related to the brand, our exit from non-home categories, and whether our partnership with Pelion Venture Partners will be able to achieve its objectives. More information about factors that could potentially affect our financial results are included in our Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 24, 2023, in our Form 10-Q for the quarter ended March 31, 2023, which was filed with the SEC on May 2, 2023, and in our subsequent filings with the SEC. The Forms 10-K, 10-Q, and our subsequent filings with the SEC identify important factors that could cause our actual results to differ materially from those contained in or contemplated by our projections, estimates and other forward-looking statements.

Contacts Investor Relations: Lavesh Hemnani [email protected]

Media Relations: Sarah Factor [email protected]

Overstock.com, Inc. Consolidated Balance Sheets (Unaudited) (in thousands, except per share data)
	June 30, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	342,891			$	371,263
Restricted cash		185				194
Accounts receivable, net		19,122				17,693
Inventories		6,313				6,526
Prepaids and other current assets		20,369				18,833
Total current assets		388,880				414,509
Property and equipment, net		109,949				109,906
Deferred tax assets, net		52,941				41,439
Intangible assets, net		25,583				9
Goodwill		6,160				6,160
Equity securities		208,476				296,317
Operating lease right-of-use assets		4,985				7,460
Other long-term assets, net		13,578				2,746
Total assets	$	810,552			$	878,546
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	86,016			$	75,130
Accrued liabilities		62,603				63,614
Unearned revenue		43,379				44,480
Operating lease liabilities, current		3,108				4,410
Other current liabilities		2,029				3,508
Total current liabilities		197,135				191,142
Long-term debt, net		34,219				34,476
Operating lease liabilities, non-current		2,319				3,626
Other long-term liabilities		3,713				3,476
Total liabilities		237,386				232,720
Stockholders’ equity:
Preferred stock, $0.0001 par value, authorized shares – 5,000, issued and outstanding – none		—				—
Common stock, $0.0001 par value, authorized shares – 100,000
Issued shares – 51,455 and 51,102
Outstanding shares – 45,202 and 44,951		5				5
Additional paid-in capital		995,904				982,718
Accumulated deficit		(257,629	)			(173,829	)
Accumulated other comprehensive loss		(514	)			(522	)
Treasury stock at cost – 6,253 and 6,151		(164,600	)			(162,546	)
Total stockholders’ equity		573,166				645,826
Total liabilities and stockholders’ equity	$	810,552			$	878,546

Overstock.com, Inc. Consolidated Statements of Operations (Unaudited) (in thousands, except per share data)
	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Net revenue	$	422,211			$	528,122			$	803,351			$	1,064,159
Cost of goods sold		327,839				407,017				619,266				817,842
Gross profit		94,372				121,105				184,085				246,317
Operating expenses
Sales and marketing		49,242				57,940				96,290				116,453
Technology		27,706				30,542				58,252				63,531
General and administrative		21,673				21,081				42,156				42,337
Total operating expenses		98,621				109,563				196,698				222,321
Operating income (loss)		(4,249	)			11,542				(12,613	)			23,996
Interest income (expense), net		3,059				115				5,618				(10	)
Other expense, net		(80,673	)			(1,981	)			(88,062	)			(2,095	)
Income (loss) before income taxes		(81,863	)			9,676				(95,057	)			21,891
Provision (benefit) for income taxes		(8,370	)			2,529				(11,257	)			4,621
Net income (loss)	$	(73,493	)		$	7,147			$	(83,800	)		$	17,270
Net income (loss) per share of common stock:
Basic	$	(1.63	)		$	0.12			$	(1.86	)		$	0.33
Diluted	$	(1.63	)		$	0.12			$	(1.86	)		$	0.33
Weighted average shares of common stock outstanding:
Basic		45,200				43,072				45,134				43,062
Diluted		45,200				43,159				45,134				43,221

Overstock.com, Inc. Consolidated Statements of Cash Flows (Unaudited) (in thousands)
		Six months ended June 30,
			2023				2022
Cash flows from operating activities:
Net income (loss)		$	(83,800	)		$	17,270
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			10,501				8,350
Non-cash operating lease cost			2,554				2,736
Stock-based compensation to employees and directors			12,065				9,334
(Increase) decrease in deferred tax assets, net			(11,502	)			2,622
Loss from equity method securities			87,820				2,583
Other non-cash adjustments			(186	)			(114	)
Changes in operating assets and liabilities:
	Accounts receivable, net		(1,429	)			(1,504	)
	Inventories		213				(529	)
	Prepaids and other current assets		(907	)			2,318
	Other long-term assets, net		(1,537	)			(943	)
	Accounts payable		11,992				(6,104	)
	Accrued liabilities		(3,369	)			(8,339	)
	Unearned revenue		(1,101	)			(2,833	)
	Operating lease liabilities		(2,779	)			(2,850	)
	Other long-term liabilities		237				(175	)
	Net cash provided by operating activities		18,772				21,822
Cash flows from investing activities:
Disbursement for notes receivable			(10,000	)			—
Purchase of intangible assets			(22,832	)			—
Purchase of equity securities			—				(11,420	)
Capital distribution from investment			—				1,162
Expenditures for property and equipment			(12,048	)			(6,406	)
Other investing activities, net			445				(505	)
Net cash used in investing activities			(44,435	)			(17,169	)
Cash flows from financing activities:
Repurchase of shares			—				(60,077	)
Payments of taxes withheld upon vesting of employee stock awards			(2,054	)			(3,482	)
Other financing activities, net			(664	)			(1,673	)
Net cash used in financing activities			(2,718	)			(65,232	)
Net decrease in cash, cash equivalents, and restricted cash			(28,381	)			(60,579	)
Cash, cash equivalents, and restricted cash, beginning of period			371,457				503,366
Cash, cash equivalents, and restricted cash, end of period		$	343,076			$	442,787

Supplemental Operational Data

We measure our business using operational metrics, in addition to the financial metrics shown above and the non-GAAP financial measures explained below. We believe these metrics provide investors with additional information regarding our financial results and provide key performance indicators to track our progress. These indicators include changes in customer order patterns and the mix of products purchased by our customers.

Active customers represent the total number of unique customers who have made at least one purchase during the prior twelve-month period. This metric captures both the inflow of new customers and the outflow of existing customers who have not made a purchase during the prior twelve-month period.

LTM net revenue per active customer represents total net revenue in a twelve-month period divided by the total number of active customers for the same twelve-month period.

Orders delivered represents the total number of orders delivered in any given period, including orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and in those circumstances, we estimate delivery dates based on historical data.

Average order value is defined as total net revenue in any given period divided by the total number of orders delivered in that period.

Orders per active customer is defined as orders delivered in a twelve-month period divided by active customers for the same twelve-month period.

The following table provides our key operating metrics:
(in thousands, except for LTM net revenue per active customer, average order value and orders per active customer)

	Three months ended June 30,
		2023			2022
Active customers		4,621			6,490
LTM net revenue per active customer	$	361		$	365
Orders delivered		1,803			2,138
Average order value	$	234		$	247
Orders per active customer		1.56			1.65

Non-GAAP Financial Measures and Reconciliations

We are providing certain non-GAAP financial measures in this release and related earnings conference call, including adjusted diluted earnings (loss) per share, adjusted EBITDA, and free cash flow. We use these non-GAAP measures internally in analyzing our financial results and we believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance in the same manner as our management and board of directors. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures in this earnings release. These non-GAAP financial measures should be used in addition to and in conjunction with the results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted diluted earnings (loss) per share is a non-GAAP financial measure that is calculated as net income (loss) less the income or losses recognized from our equity method securities, net of related tax. We believe that this adjustment to our net income (loss) before calculating per share amounts for the current period presented provides a useful comparison between our operating results from period to period.

Adjusted EBITDA is a non-GAAP financial measure that is calculated as income (loss) before depreciation and amortization, stock-based compensation, interest and other income (expense), provision (benefit) for income taxes, and special items. We believe the exclusion of certain benefits and expenses in calculating adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring.

Free cash flow is a non-GAAP financial measure that is calculated as net cash provided by or used in operating activities reduced by expenditures for property and equipment. We believe free cash flow is a useful measure to evaluate the cash impact of the operations of the business including purchases of property and equipment which are a necessary component of our ongoing operations.

The following table reflects the reconciliation of adjusted diluted loss per share to diluted loss per share (in thousands, except per share data):

	Three months ended June 30,
		2023
	Diluted EPS				Less: equity method income (loss) 1				Adjusted Diluted EPS
Numerator:
Net loss attributable to common stockholders	$	(73,493	)		$	(72,703	)		$	(790	)
Denominator:
Weighted average shares of common stock outstanding—diluted		45,200				45,200				45,200
Net loss per share of common stock:
Diluted	$	(1.63	)		$	(1.61	)		$	(0.02	)

1 Inclusive of estimated tax impact

The following table reflects the reconciliation of adjusted EBITDA to net income (loss) (in thousands):

	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Net income (loss)	$	(73,493	)		$	7,147			$	(83,800	)		$	17,270
Depreciation and amortization		4,516				4,043				10,501				8,350
Stock-based compensation		6,270				4,695				12,065				9,334
Interest (income) expense, net		(3,059	)			(115	)			(5,618	)			10
Other expense, net		80,673				1,981				88,062				2,095
Provision (benefit) for income taxes		(8,370	)			2,529				(11,257	)			4,621
Special items (see table below)		1,697				475				1,697				528
Adjusted EBITDA	$	8,234			$	20,755			$	11,650			$	42,208
Special items:
Brand integration and related costs	$	1,086			$	—			$	1,086			$	—
Restructuring costs		611				—				611				—
Special legal charges and other		—				475				—				528
	$	1,697			$	475			$	1,697			$	528

The following table reflects the reconciliation of free cash flow to net cash provided by operating activities (in thousands):

	Six months ended June 30,
		2023				2022
Net cash provided by operating activities	$	18,772			$	21,822
Expenditures for property and equipment		(12,048	)			(6,406	)
Free cash flow	$	6,724			$	15,416

MOOREFIELD, W. Va., July 27, 2023 (GLOBE NEWSWIRE) — Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the second quarter of 2023, showcasing strong core operating performance marked by notable strength in its net interest margin. The Company’s continued success underscores its position as a reliable partner in the financial services industry, reflecting a sound strategy and solid operational execution.

The Company, which serves commercial and individual clients across West Virginia, the Washington D.C. metropolitan area, Virginia, Kentucky, the Eastern Shore of Maryland and Delaware through Summit Community Bank, Inc., reported net income applicable to common shares of $7.98 million, or $0.54 per diluted share, for the second quarter of 2023, as compared to $13.9 million, or $1.08 per diluted share, for the first quarter of 2023 and $11.8 million, or $0.92 per diluted share, for the second quarter of 2022. Lower earnings in Q2 2023 were driven primarily by significant acquisition-related expenses attributable to the acquisition of PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc. (“PSB”) and by higher provision for credit losses recorded on purchased non-credit deteriorated (“non-PCD”) loans from PSB and on a nonperforming commercial real estate participation loan.

“We are pleased to report strong core performance in second quarter of 2023, characterized by significant revenue growth, an improved net interest margin and strategic balance sheet expansion,” noted H. Charles Maddy III, President, and Chief Executive Officer of Summit Financial Group. “The completion of our acquisition of PSB Holding Corp. and Provident State Bank, Inc. is an important milestone for Summit, as it expanded our footprint to the Eastern Shore of Maryland and Delaware, providing exciting growth opportunities in new markets,” continued Mr. Maddy.

“Our net interest margin (NIM) increased by 6 basis points from the linked quarter, driven by higher yields on interest-earning assets and effective management of funding costs,” said Mr. Maddy. Furthermore, our loan portfolio showed positive momentum, with total core loan portfolio, excluding acquired loans, increasing 6 percent on an annualized basis during the quarter, and over 9 percent since June 30, 2022″ noted Mr. Maddy.

“Despite the recent acquisition, our efficiency ratio remains below 48 percent, near its all-time record low, affirming our long tradition of optimizing operational performance,” continued Mr. Maddy. “As we move forward, Summit remains steadfast in our growth strategy and optimistic about our future. Our solid financial foundation, coupled with a talented team, positions us well to create long-term value for our shareholders through organic growth and strategic initiatives,” concluded Mr. Maddy.

Key Highlights for the Second Quarter of 2023

• The Company completed its acquisition, effective April 1, 2023, of PSB headquartered in Preston, Maryland, expanding its footprint in the Eastern Shore of Maryland and Delaware.
• Net interest margin (“NIM”) increased 6 basis points to 3.89 percent from the linked quarter and by 23 basis points from the prior-year quarter. This increase was primarily driven by increased yields on interest-earning assets. However, it was partially offset by higher costs of deposits and other funding sources.
• Summit’s core deposits grew 12.9 percent during the second quarter of 2023 as result of the PSB acquisition. Excluding acquired deposits, Summit’s core deposits decreased 2.6 percent during Q2 2023.
• Total loans, excluding acquired loans, mortgage warehouse lines of credit, and PPP lending, increased 1.53 percent (6.12 percent annualized) during the second quarter of 2023 and 9.2 percent since June 30, 2022.  
• The Company’s provision for credit losses totaled $8.00 million in the second quarter of 2023 compared to $1.5 million in the linked quarter. Included in the Company’s Q2 2023 provision for credit losses was $3.01 million to establish an allowance on non-PCD loans acquired from PSB in accordance with the Current Expected Credit Loss (“CECL”) accounting standard and $3.66 million to recognize an allowance on a nonperforming commercial real estate loan participation.
• Total non-interest expense increased by 55.2 percent to $27.3 million. This increase is largely attributed to the acquisition of PSB including $4.16 million of acquisition-related expenses. Consequently, our annualized non-interest expense ratio increased to 2.41 percent of average assets from 1.97 percent in the previous quarter and 1.91 percent in the same quarter last year. Excluding acquisition-related expenses, annualized non-interest expense would have been 2.05 percent of average assets for Q2 2023.
• The Company achieved an efficiency ratio of 47.90 percent compared to 48.00 percent in the linked quarter and 47.45 percent in the prior-year quarter.
• Nonperforming assets (“NPAs”) increased to 0.35 percent of total assets at period end, up 4 basis points during the quarter but down 8 basis points from the prior-year quarter.

PSB Acquisition

On April 1, 2023, Summit completed its acquisition of PSB. Accordingly, PSB’s results of operations are included in Summit’s consolidated results of operation from the date of acquisition, and therefore Summit’s second quarter and first half 2023 results reflect increased levels of average balances, income and expense compared to its second quarter and first half 2022 results.

Upon acquisition, PSB had total assets of $568.3 million, loans amounting to $381.5 million, and deposits totaling $498.0 million. Through the first half of 2023, the acquisition-related expenses totaled $4.49 million, with $4.16 million of the costs being incurred in the second quarter.

Results from Operations

Net interest income totaled $40.3 million in the second quarter of 2023, marking an increase of 30.2 percent from the prior-year second quarter and 17.9 percent from the linked quarter. NIM for the first quarter 2023 was 3.89 percent compared to 3.83 percent for the linked quarter and 3.66 percent for the prior-year quarter.

Summit recorded an $8.0 million provision for credit losses in the second quarter of 2023, which includes $3.01 million to establish an allowance on non-PCD loans acquired from PSB in accordance with the CECL accounting standard and $3.66 million to provide an allowance to reflect a nonperforming loan participation with a regional bank secured by a shopping complex at the fair value of its collateral. The provision for credit losses was $1.5 million for the linked quarter and $2.0 million in the second quarter of 2022.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for second quarter 2023 was $5.42 million compared to $4.39 million for the linked quarter and $3.86 million for the comparable period of 2022. The Company recorded realized securities losses on debt securities of $211,000 in the second quarter of 2023 and $59,000 in the linked quarter. In addition, the Company recognized net gains on equity investments of $150,000 in the second quarter 2023 compared to $45,000 in the linked quarter.

Mortgage origination revenue decreased to $169,000 in the second quarter of 2023 compared to $171,000 in the linked quarter and $317,000 for the year-ago period reflecting continuing negative impact of higher interest rates on demand for new mortgage loans.

Excluding gains and losses from debt securities and equity investments, the combined revenue from net interest income and non-interest income for Q2 2023 rose to $45.8 million. This represents an increase of 18.7 percent from $38.6 million in the linked quarter and a substantial 28.0 percent growth from $35.8 million recorded in the second quarter of 2022.

Total noninterest expense increased to $27.3 million in the second quarter of 2023, up 40.9 percent from $19.4 million in the linked quarter and up 55.2 percent from $17.6 million for the prior-year second quarter. These increases are primarily due to the operational costs of the recently acquired PSB and acquisition-related expenses of $4.16 million in Q2 2023.

Salary and benefit expenses of $12.2 million in the second quarter of 2023 increased from $10.8 million for the linked quarter and $10.0 million from the prior-year second quarter. This increase was primarily due to the PSB acquisition and higher group health insurance premiums.

Acquisition-related expenses consisting of contract termination costs, executive and employee severance benefits and legal and consulting fees, were $4.16 million for Q2 2023 compared to $331,000 for the linked quarter and $4,000 for Q2 2022.

Other expenses were $3.64 million for Q2 2023 were higher compared to $2.97 million for the linked quarter and $2.36 million in the year-ago period, principally as result of the PSB acquisition.

Summit’s efficiency ratio was 47.90 percent in the second quarter of 2023, marginally higher than the 47.45 percent for the second quarter of 2022 and down compared to 48.00 percent in the linked quarter. Non-interest expense to average assets was 2.41 percent in the second quarter of 2023 compared to 1.97 percent in the linked quarter and 1.91 percent in the year-ago quarter.

Balance Sheet

As of June 30, 2023, total assets were $4.6 billion, an increase of $635.6 million, or 16.2 percent since December 31, 2022. Excluding acquired PSB assets, total assets increased by $71.1 million, or 1.8 percent since December 31, 2022.

Total loans net of unearned fees increased to $3.6 billion as of June 30, 2023, from $3.1 billion at December 31, 2022, and increased 19.3 percent from the second quarter of 2022. Total loans, excluding those related to mortgage warehouse lending, PPP lending and acquired loans, reached $3.1 billion on June 30, 2023. This represents an increase of 1.53 percent (or 6.12 percent when annualized) during the quarter just ended.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, increased 13.3 percent (26.6 percent annualized) during second quarter to $2.3 billion as of June 30, 2023.

Residential real estate and consumer lending totaled $731.9 million on June 30, 2023, reflecting an increase of 19.3 percent (38.6 percent annualized) during the second quarter.

As of June 30, 2023, PPP balances were paid down to zero and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $118.8 million compared to $130.4 million as of December 31, 2022, and $171.4 million at the year-ago period end.

Deposits totaled $3.7 billion on June 30, 2023, a 13.2 percent increase during the second quarter. Core deposits increased 12.9 percent during the second quarter 2023 to $3.6 billion. Excluding acquired deposits, core deposits decreased $82.7 million, or 2.6 percent during the second quarter 2023. Adjusted uninsured deposits (excluding uninsured public deposits otherwise secured or collateralized as required by law) were 31.9 percent of total deposits at June 30, 2023 compared to 29.8 percent at year-end 2022 and 25.6 percent at the year-ago period end.

Total shareholders’ equity was $413.2 million as of June 30, 2023, compared to $354.5 million at December 31, 2022. During the second quarter 2023, Summit issued 1,880,732 common shares at a fair value of $39.0 million as consideration in conjunction with the PSB acquisition. Summit paid a quarterly common dividend of $0.20 per share in the second quarter of 2023.

Tangible Book Value Per Share (“TBVPS”) decreased by $0.97 to $21.93 during the second quarter of 2023, representing a 4.3 percent decrease. This decline was primarily influenced by the acquisition of PSB, which represented TBVPS dilution of $1.52 resulting from the transaction’s issuance of 1,880,732 common shares and its creation of intangible assets of $15.6 million. Summit had 14,672,147 outstanding common shares at June 30, 2023, compared to 12,783,646 at year-end 2022.  

As announced in the first quarter of 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit’s common stock, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the second quarter of 2023, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

The Company recorded net loan charge-offs (“NCOs”) of $3.8 million during the second quarter 2023, representing 0.50 percent of average loans annualized, compared to net loan recoveries of $63,000, representing (0.01) percent of average loans annualized, in the first quarter of 2023. NCOs of $159,000 represented 0.02 percent of average loans annualized in the year-ago period.

Summit’s allowance for loan credit losses was $45.7 million on June 30, 2023, $40.8 million at the end of the linked quarter, and $35.1 million on June 30, 2022. As of June 30, 2023, the allowance for loan credit losses stood at 1.29 percent of total loans, reflecting a slight increase compared to the rate of 1.26 percent recorded as of December 31, 2022. The allowance for loan credit losses was increased by $1.50 million in Q2 2023 as result of purchased credit deteriorated loans from PSB. In terms of the allowance’s coverage, it represented 402.8 percent of nonperforming loans at June 30, 2023, in contrast to the figure of 497.2 percent at the prior year-end, December 31, 2022.

Summit’s allowance for credit losses on unfunded loan commitments was $7.33 million as of June 30, 2023, compared to $6.57 million at the end of the linked quarter. The allowance for credit losses on unfunded loan commitments increased $760,000 during the most recent quarter. The acquisition of PSB resulted in an increase to the allowance for credit losses on unfunded loan commitments of $235,000, while the remaining increase was principally the result of a change in the mix of our unfunded commitments.  Construction loan commitments, which on average have a higher historical loss ratio than do other loans, increased, while our mortgage warehouse unfunded lines of credit, which carry a lower loss factor, decreased.

As of March 31, 2023, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, totaled $16.1 million, or 0.32 percent of assets, compared to NPAs of $12.9 million, or 0.33 percent of assets at year-end 2022.

About the Company

Summit Financial Group, Inc. is the $4.6 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, Kentucky, Eastern Shore of Maryland and Delaware. Summit’s focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummitBank.com and 53 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ: SMMF), headquartered in West Virginia’s Eastern Panhandle in Moorefield, is available at SummitFGI.com.

Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), Summit’s management uses, and this press release contains or references, certain non-GAAP financial measures, such as tangible common equity/tangible assets; efficiency ratio; return on average tangible equity and return on average tangible common equity. Summit believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which facilitate comparisons with the performance of others in the financial services industry. Although Summit believes that these non-GAAP financial measures enhance investors’ understanding of Summit’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.

Forward-Looking Statements

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 pandemic, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q2 2023 vs Q2 2022
		For the Quarter Ended						Percent
Dollars in thousands		6/30/2023			6/30/2022			Change
Statements of Income
	Interest income
	Loans, including fees	$	54,413		$	32,766		66.1	%
	Securities		6,247			2,752		127.0	%
	Other		203			45		351.1	%
	Total interest income		60,863			35,563		71.1	%
	Interest expense
	Deposits		17,851			2,622		580.8	%
	Borrowings		2,699			1,976		36.6	%
	Total interest expense		20,550			4,598		346.9	%
	Net interest income		40,313			30,965		30.2	%
	Provision for credit losses		8,000			2,000		300.0	%
	Net interest income after provision
	for credit losses		32,313			28,965		11.6	%
	Noninterest income
	Trust and wealth management fees		854			745		14.6	%
	Mortgage origination revenue		169			317		-46.7	%
	Service charges on deposit accounts		1,943			1,674		16.1	%
	Bank card revenue		1,987			1,618		22.8	%
	Net gains/(losses) on equity investments		150			(669	)	-122.4	%
	Net realized losses on debt securities		(211	)		(289	)	-27.0	%
	Bank owned life insurance and annuity income		431			331		30.2	%
	Other income		100			129		-22.5	%
	Total noninterest income		5,423			3,856		40.6	%
	Noninterest expense
	Salaries and employee benefits		12,156			10,030		21.2	%
	Net occupancy expense		1,528			1,258		21.5	%
	Equipment expense		2,361			1,791		31.8	%
	Professional fees		471			507		-7.1	%
	Advertising and public relations		264			165		60.0	%
	Amortization of intangibles		999			355		181.4	%
	FDIC premiums		742			190		290.5	%
	Bank card expense		951			810		17.4	%
	Foreclosed properties expense, net of (gains)/losses		48			141		-66.0	%
	Acquisition-related expense		4,163			4		n/m
	Other expenses		3,641			2,358		54.4	%
	Total noninterest expense		27,324			17,609		55.2	%
	Income before income taxes		10,412			15,212		-31.6	%
	Income taxes		2,203			3,198		-31.1	%
	Net income		8,209			12,014		-31.7	%
	Preferred stock dividends		225			225		n/a
	Net income applicable to common shares	$	7,984		$	11,789		-32.3	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q2 2023 vs Q2 2022
		For the Quarter Ended						Percent
		6/30/2023			6/30/2022			Change
Per Share Data
	Earnings per common share
	Basic	$	0.54		$	0.92		-41.3	%
	Diluted	$	0.54		$	0.92		-41.3	%
	Cash dividends per common share	$	0.20		$	0.18		11.1	%
	Common stock dividend payout ratio		35.7	%		19.5	%	83.1	%
	Average common shares outstanding
	Basic		14,668,923			12,754,724		15.0	%
	Diluted		14,703,636			12,810,174		14.8	%
	Common shares outstanding at period end		14,672,147			12,763,422		15.0	%
Performance Ratios
	Return on average equity		7.99	%		14.48	%	-44.8	%
	Return on average tangible equity (C)(E)		10.86	%		18.28	%	-40.6	%
	Return on average tangible common equity (D)(E)		11.37	%		19.35	%	-41.2	%
	Return on average assets		0.73	%		1.30	%	-43.8	%
	Net interest margin (A)		3.89	%		3.66	%	6.3	%
	Efficiency ratio (B)		47.90	%		47.45	%	0.9	%

NOTES

(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

(E) — See Non-GAAP Financial Measures for additional information relating to the calculation of this item.

    

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary (unaudited)
2023 vs 2022
		For the Six Months Ended						Percent
Dollars in thousands		6/30/2023			6/30/2022			Change
Statements of Income
	Interest income
	Loans, including fees	$	99,897		$	62,991		58.6	%
	Securities		11,066			5,374		105.9	%
	Other		375			91		312.1	%
	Total interest income		111,338			68,456		62.6	%
	Interest expense
	Deposits		31,851			4,349		632.4	%
	Borrowings		4,984			3,587		38.9	%
	Total interest expense		36,835			7,936		364.2	%
	Net interest income		74,503			60,520		23.1	%
	Provision for credit losses		9,500			3,950		140.5	%
	Net interest income after provision
	for credit losses		65,003			56,570		14.9	%
	Noninterest income
	Trust and wealth management fees		1,665			1,503		10.8	%
	Mortgage origination revenue		340			656		-48.2	%
	Service charges on deposit accounts		3,335			3,074		8.5	%
	Bank card revenue		3,555			3,109		14.3	%
	Net gains/(losses) on equity investments		195			(297	)	n/a
	Net realized losses on debt securities, net		(270	)		(442	)	-38.9	%
	Bank owned life insurance and annuity income		767			615		24.7	%
	Other income		222			183		21.3	%
	Total noninterest income		9,809			8,401		16.8	%
	Noninterest expense
	Salaries and employee benefits		22,963			19,731		16.4	%
	Net occupancy expense		2,861			2,499		14.5	%
	Equipment expense		4,391			3,634		20.8	%
	Professional fees		847			869		-2.5	%
	Advertising and public relations		434			337		28.8	%
	Amortization of intangibles		1,342			734		82.8	%
	FDIC premiums		1,072			580		84.8	%
	Bank card expense		1,648			1,524		8.1	%
	Foreclosed properties expense, net of (gains)/losses		62			51		21.6	%
	Acquisition-related expense		4,494			33		n/m
	Other expenses		6,609			4,817		37.2	%
	Total noninterest expense		46,723			34,809		34.2	%
	Income before income taxes		28,089			30,162		-6.9	%
	Income taxes		5,779			6,455		-10.5	%
	Net income		22,310			23,707		-5.9	%
	Preferred stock dividends		450			450		0.0	%
	Net income applicable to common shares	$	21,860		$	23,257		-6.0	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary (unaudited)
2023 vs 2022
		For the Six Months Ended						Percent
		6/30/2023			6/30/2022			Change
Per Share Data
	Earnings per common share
	Basic	$	1.59		$	1.82		-12.6	%
	Diluted	$	1.59		$	1.82		-12.6	%
	Cash dividends per common share	$	0.40		$	0.36		11.1	%
	Common stock dividend payout ratio		25.1	%		19.8	%	27.1	%
	Average common shares outstanding
	Basic		13,731,594			12,750,037		7.7	%
	Diluted		13,772,592			12,805,873		7.5	%
	Common shares outstanding at period end		14,672,147			12,763,422		15.0	%
Performance Ratios
	Return on average equity		11.53	%		14.34	%	-19.6	%
	Return on average tangible equity (C) (E)		14.78	%		18.15	%	-18.6	%
	Return on average tangible common equity (D) (E)		15.52	%		18.87	%	-17.8	%
	Return on average assets		1.05	%		1.30	%	-19.2	%
	Net interest margin (A)		3.86	%		3.64	%	6.0	%
	Efficiency ratio (B)		47.95	%		48.42	%	-1.0	%

NOTES

(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income applicable to common shares + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

(E) — See Non-GAAP Financial Measures for additional information relating to the calculation of this item.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
Statements of Income
	Interest income
	Loans, including fees	$	54,413		$	45,485		$	43,589		$	38,784		$	32,766
	Securities		6,247			4,819			4,181			3,497			2,752
	Other		203			171			70			170			45
	Total interest income		60,863			50,475			47,840			42,451			35,563
	Interest expense
	Deposits		17,851			14,000			10,194			6,140			2,622
	Borrowings		2,699			2,286			3,293			2,198			1,976
	Total interest expense		20,550			16,286			13,487			8,338			4,598
	Net interest income		40,313			34,189			34,353			34,113			30,965
	Provision for credit losses		8,000			1,500			1,500			1,500			2,000
	Net interest income after provision
	for credit losses		32,313			32,689			32,853			32,613			28,965
	Noninterest income
	Trust and wealth management fees		854			811			750			725			745
	Mortgage origination revenue		169			171			286			538			317
	Service charges on deposit accounts		1,943			1,392			1,526			1,550			1,674
	Bank card revenue		1,987			1,568			1,513			1,639			1,618
	Net gains/(losses) on equity investments		150			45			280			283			(669	)
	Net realized losses on debt securities		(211	)		(59	)		(24	)		(242	)		(289	)
	Bank owned life insurance and annuity income		431			336			367			229			331
	Other income		100			122			167			165			129
	Total noninterest income		5,423			4,386			4,865			4,887			3,856
	Noninterest expense
	Salaries and employee benefits		12,156			10,807			10,532			10,189			10,030
	Net occupancy expense		1,528			1,333			1,328			1,301			1,258
	Equipment expense		2,361			2,030			1,769			1,851			1,791
	Professional fees		471			376			386			372			507
	Advertising and public relations		264			170			280			276			165
	Amortization of intangibles		999			343			351			354			355
	FDIC premiums		742			330			352			292			190
	Bank card expense		951			696			679			726			810
	Foreclosed properties expense, net of (gains)/losses		48			15			159			26			141
	Acquisition-related expenses		4,163			331			81			–			4
	Other expenses		3,641			2,968			2,932			3,834			2,358
	Total noninterest expense		27,324			19,399			18,849			19,221			17,609
	Income before income taxes		10,412			17,676			18,869			18,279			15,212
	Income tax expense		2,203			3,575			3,783			3,856			3,198
	Net income		8,209			14,101			15,086			14,423			12,014
	Preferred stock dividends		225			225			225			225			225
	Net income applicable to common shares	$	7,984		$	13,876		$	14,861		$	14,198		$	11,789

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
Per Share Data
	Earnings per common share
	Basic	$	0.54		$	1.09		$	1.16		$	1.11		$	0.92
	Diluted	$	0.54		$	1.08		$	1.16		$	1.11		$	0.92
	Cash dividends per common share	$	0.20		$	0.20		$	0.20		$	0.20		$	0.18
	Common stock dividend payout ratio		36.7	%		18.1	%		16.9	%		17.7	%		19.1	%
	Average common shares outstanding
	Basic		14,668,923			12,783,851			12,775,703			12,766,473			12,754,724
	Diluted		14,703,636			12,830,102			12,837,637			12,835,670			12,810,174
	Common shares outstanding at period end		14,672,147			12,786,404			12,783,646			12,774,645			12,763,422
Performance Ratios
	Return on average equity		7.99	%		15.55	%		17.50	%		17.05	%		14.48	%
	Return on average tangible equity (C)(E)		10.86	%		19.10	%		21.75	%		21.33	%		18.28	%
	Return on average tangible common equity (D)(E)		11.37	%		20.10	%		22.96	%		22.20	%		19.00	%
	Return on average assets		0.73	%		1.43	%		1.54	%		1.51	%		1.30	%
	Net interest margin (A)		3.89	%		3.83	%		3.80	%		3.84	%		3.66	%
	Efficiency ratio (B)		47.90	%		48.00	%		46.40	%		47.95	%		47.45	%

NOTES

(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

(E) — See Non-GAAP Financial Measures for additional information relating to the calculation of this item.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
Assets
	Cash and due from banks	$	23,341		$	16,488		$	16,469		$	16,141		$	17,921
	Interest bearing deposits other banks		39,902			54,328			28,248			29,510			31,680
	Debt securities, available for sale		512,038			431,933			405,201			383,965			368,049
	Debt securities, held to maturity		95,200			95,682			96,163			96,640			97,116
	Equity investments		30,818			29,867			29,494			20,314			19,905
	Other investments		16,014			12,696			16,029			18,105			18,329
	Loans, net		3,506,880			3,059,099			3,043,919			3,038,377			2,941,813
	Property held for sale		4,742			5,128			5,067			5,193			5,319
	Premises and equipment, net		60,967			54,491			53,981			54,628			55,034
	Goodwill and other intangible assets, net		76,423			61,807			62,150			62,502			62,856
	Cash surrender value of life insurance policies and annuities		84,790			72,019			71,640			71,216			71,073
	Derivative financial instruments		39,951			34,758			40,506			42,179			31,452
	Other assets		61,204			49,111			47,825			48,529			42,252
	Total assets	$	4,552,270		$	3,977,407		$	3,916,692		$	3,887,299		$	3,762,799
Liabilities and Shareholders’ Equity
	Deposits	$	3,735,034		$	3,299,846		$	3,169,879		$	3,108,072		$	2,975,304
	Short-term borrowings		232,150			140,150			225,999			273,148			291,447
	Long-term borrowings and
	subordinated debentures, net		123,776			123,660			123,543			123,427			123,311
	Other liabilities		48,136			44,205			42,741			40,978			38,846
	Total liabilities		4,139,096			3,607,861			3,562,162			3,545,625			3,428,908
	Preferred stock and related surplus		14,920			14,920			14,920			14,920			14,920
	Common stock and related surplus		130,227			90,939			90,696			90,345			90,008
	Retained earnings		276,762			271,712			260,393			248,084			236,438
	Accumulated other comprehensive income (loss)		(8,735	)		(8,025	)		(11,479	)		(11,675	)		(7,475	)
	Total shareholders’ equity		413,174			369,546			354,530			341,674			333,891
	Total liabilities and shareholders’ equity	$	4,552,270		$	3,977,407		$	3,916,692		$	3,887,299		$	3,762,799
	Book value per common share	$	27.14		$	27.73		$	26.57		$	25.58		$	24.99
	Tangible book value per common share (A)(C)	$	21.93		$	22.90		$	21.70		$	20.69		$	20.07
	Tangible common equity to tangible assets (B)(C)		7.2	%		7.5	%		7.2	%		6.9	%		6.9	%

NOTES

(A)   – Tangible book value per share = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / Common shares outstanding.

(B)   – Tangible common equity to tangible assets = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / (Total assets – Intangible assets).

(C)   — See Non-GAAP Financial Measures for additional information relating to the calculation of this item.

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands		6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Commercial		$	511,457	$	498,268	$	501,844	$	512,771	$	455,202
Mortgage warehouse lines			118,785		86,240		130,390		194,740		171,399
Commercial real estate
Owner occupied			566,447		469,560		467,050		473,298		502,152
Non-owner occupied			1,193,927		1,036,358		1,004,368		960,627		963,646
Construction and development
Land and development			117,371		102,351		106,362		104,437		106,840
Construction			309,709		290,556		282,935		248,564		211,955
Residential real estate
Conventional			483,998		395,312		386,874		382,203		377,980
Jumbo			117,219		111,475		92,103		87,449		79,803
Home equity			86,050		70,167		71,986		72,756		71,136
Consumer			44,429		36,531		35,372		35,116		33,816
Other			3,169		3,117		3,534		3,166		2,947
Total loans, net of unearned fees			3,552,561		3,099,935		3,082,818		3,075,127		2,976,876
Less allowance for loan credit losses			45,681		40,836		38,899		36,750		35,063
Loans, net		$	3,506,880	$	3,059,099	$	3,043,919	$	3,038,377	$	2,941,813
Unfunded loan commitments		$	957,278	$	907,757	$	925,657	$	889,854	$	876,157

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands		6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Core deposits
Non-interest bearing checking		$	679,139	$	552,716	$	553,616	$	619,067	$	600,791
Interest bearing checking			2,024,341		1,886,011		1,743,299		1,475,643		1,238,368
Savings			512,129		462,631		496,751		582,922		645,099
Time deposits			375,860		278,410		294,630		338,668		386,562
Total core deposits			3,591,469		3,179,768		3,088,296		3,016,300		2,870,820
Brokered time deposits			54,399		71,451		32,790		32,778		32,767
Other non-core time deposits			89,166		48,627		48,793		58,994		71,717
Total deposits		$	3,735,034	$	3,299,846	$	3,169,879	$	3,108,072	$	2,975,304
Estimated uninsured deposits (A)		$	1,189,908	$	933,703	$	946,188	$	757,038	$	762,466
(A) – Excludes uninsured public funds otherwise secured or collateralized as required by law

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.7	%	8.9	%	8.6	%	8.2	%	8.2	%
	Tier 1 Risk-based Capital	9.5	%	9.8	%	9.5	%	9.2	%	9.2	%
	Total Risk-based Capital	13.3	%	14.0	%	13.5	%	13.1	%	13.3	%
	Tier 1 Leverage	8.4	%	8.7	%	8.5	%	8.4	%	8.4	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.3	%	11.9	%	11.6	%	11.3	%	11.4	%
	Tier 1 Risk-based Capital	11.3	%	11.9	%	11.6	%	11.3	%	11.4	%
	Total Risk-based Capital	12.5	%	13.1	%	12.6	%	12.2	%	12.4	%
	Tier 1 Leverage	9.9	%	10.6	%	10.4	%	10.3	%	10.4	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Gross loan charge-offs	$	4,174		$	164		$	250		$	265		$	306
	Gross loan recoveries		(346	)		(227	)		(249	)		(257	)		(147	)
	Net loan charge-offs	$	3,828		$	(63	)	$	1		$	8		$	159
	Net loan charge-offs to average loans (annualized)		0.50	%		-0.01	%		0.00	%		0.00	%		0.02	%
	Allowance for loan credit losses	$	45,681		$	40,836		$	38,899		$	36,750		$	35,063
	Allowance for loan credit losses as a percentage
	of period end loans		1.29	%		1.32	%		1.26	%		1.19	%		1.18	%
	Allowance for credit losses on
	unfunded loan commitments (“ULC”)	$	7,332		$	6,572		$	6,947		$	7,597		$	7,792
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.81	%		0.72	%		0.75	%		0.85	%		0.89	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	254		$	402		$	93		$	347		$	345
	Commercial real estate		5,970			1,700			1,750			1,860			2,703
	Residential construction and development		772			813			851			902			1,053
	Residential real estate		4,298			4,322			5,117			6,083			6,799
	Consumer		46			65			12			8			37
	Total nonperforming loans		11,340			7,302			7,823			9,200			10,937
	Foreclosed properties
	Commercial real estate		297			297			297			297			440
	Commercial construction and development		2,187			2,187			2,187			2,332			2,332
	Residential construction and development		2,161			2,293			2,293			2,293			2,293
	Residential real estate		97			351			290			271			254
	Total foreclosed properties		4,742			5,128			5,067			5,193			5,319
	Other repossessed assets		–			–			–			–			–
	Total nonperforming assets	$	16,082		$	12,430		$	12,890		$	14,393		$	16,256
	Nonperforming loans to period end loans		0.32	%		0.24	%		0.25	%		0.30	%		0.37	%
	Nonperforming assets to period end assets		0.35	%		0.31	%		0.33	%		0.37	%		0.43	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
	Commercial	$	1,006	$	463	$	3,168	$	1,329	$	989
	Commercial real estate		513		1,000		641		1,550		4,084
	Construction and development		161		3,459		317		236		821
	Residential real estate		4,933		2,311		6,231		2,824		3,452
	Consumer		389		252		253		216		196
	Other		17		13		22		4		14
	Total	$	7,019	$	7,498	$	10,632	$	6,159	$	9,556

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2023 vs Q1 2023 vs Q2 2022 (unaudited)
	Q2 2023								Q1 2023								Q2 2022
	Average			Earnings /		Yield /			Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	3,516,306		$	54,374	6.20	%		$	3,087,068		$	45,421	5.97	%		$	2,902,370		$	32,721	4.52	%
Tax-exempt (2)		4,144			49	4.74	%			6,086			81	5.40	%			5,127			57	4.46	%
Securities
Taxable		428,039			4,900	4.59	%			314,004			3,412	4.41	%			297,701			1,765	2.38	%
Tax-exempt (2)		209,931			1,705	3.26	%			216,430			1,781	3.34	%			178,043			1,249	2.81	%
Interest bearing deposits other banks
and Federal funds sold		35,218			203	2.31	%			34,330			171	2.02	%			37,757			45	0.48	%
Total interest earning assets		4,193,638			61,231	5.86	%			3,657,918			50,866	5.64	%			3,420,998			35,837	4.20	%
Noninterest earning assets
Cash & due from banks		23,588								17,387								16,351
Premises & equipment		60,872								54,112								55,449
Intangible assets		80,445								62,024								63,058
Other assets		212,104								190,533								165,788
Allowance for loan credit losses		(44,312	)							(39,507	)							(33,232	)
Total assets	$	4,526,335							$	3,942,467							$	3,688,412
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits		1,985,134			13,423	2.71	%			1,819,505			10,796	2.41	%		$	1,189,324		$	1,274	0.43	%
Savings deposits		528,694			2,000	1.52	%			480,207			1,917	1.62	%			672,353			689	0.41	%
Time deposits		513,236			2,428	1.90	%			389,252			1,287	1.34	%			517,360			659	0.51	%
Short-term borrowings		207,418			1,212	2.34	%			166,365			824	2.01	%			207,227			696	1.35	%
Long-term borrowings and
subordinated debentures		123,843			1,487	4.82	%			123,599			1,462	4.80	%			123,263			1,280	4.17	%
Total interest bearing liabilities		3,358,325			20,550	2.45	%			2,978,928			16,286	2.22	%			2,709,527			4,598	0.68	%
Noninterest bearing liabilities
Demand deposits		706,391								557,209								605,724
Other liabilities		50,863								43,508								41,307
Total liabilities		4,115,579								3,579,645								3,356,558
Shareholders’ equity – preferred		14,920								14,920								14,920
Shareholders’ equity – common		395,836								347,902								316,934
Total liabilities and
shareholders’ equity	$	4,526,335							$	3,942,467							$	3,688,412
NET INTEREST EARNINGS				$	40,681							$	34,580							$	31,239
NET INTEREST MARGIN						3.89	%							3.83	%							3.66	%
(1) -For purposes of this table, nonaccrual loans are included in average loan balances.
(2) – Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $368,000, $391,000, and $274,000 for Q2 2023,
Q1 2023 and Q2 2022, respectively.

   

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2023 vs YTD 2022 (unaudited)
	YTD 2023								YTD 2022
	Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	3,302,776		$	99,794	6.09	%		$	2,837,467		$	62,900	4.47	%
Tax-exempt (2)		5,109			130	5.13	%			5,248			115	4.42	%
Securities
Taxable		371,330			8,312	4.51	%			308,872			3,420	2.23	%
Tax-exempt (2)		213,162			3,486	3.30	%			179,252			2,473	2.78	%
Interest bearing deposits other banks
and Federal funds sold		34,641			375	2.18	%			55,222			91	0.33	%
Total interest earning assets		3,927,018			112,097	5.76	%			3,386,061			68,999	4.11	%
Noninterest earning assets
Cash & due from banks		20,231								17,781
Premises & equipment		57,511								55,746
Intangible assets		71,285								63,242
Other assets		201,267								154,200
Allowance for loan losses		(41,925	)							(32,849	)
Total assets	$	4,235,387							$	3,644,181
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,903,945		$	24,219	2.57	%		$	1,162,346		$	1,739	0.30	%
Savings deposits		504,392			3,917	1.57	%			686,157			1,262	0.37	%
Time deposits		451,774			3,715	1.66	%			529,791			1,348	0.51	%
Short-term borrowings		187,159			2,036	2.19	%			173,914			1,068	1.24	%
Long-term borrowings and
subordinated debentures		123,656			2,948	4.81	%			123,234			2,519	4.12	%
		3,170,926			36,835	2.34	%			2,675,442			7,936	0.60	%
Noninterest bearing liabilities
Demand deposits		630,390								596,365
Other liabilities		47,150								41,779
Total liabilities		3,848,466								3,313,586
Shareholders’ equity – preferred		14,920								14,920
Shareholders’ equity – common		372,001								315,675
Total liabilities and
shareholders’ equity	$	4,235,387							$	3,644,181
NET INTEREST EARNINGS				$	75,262							$	61,063
NET INTEREST MARGIN						3.86	%							3.64	%
(1) -For purposes of this table, nonaccrual loans are included in average loan balances.
(2) – Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $759,000 and $543,000 for the
YTD 2023 and YTD 2022 periods, respectively.

Contact: Robert S. Tissue, Executive Vice President & CFO
Telephone: (304) 530-0552
Email: [email protected]