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Ooma Reports Fiscal First Quarter 2024 Financial Results

SUNNYVALE, Calif.–(BUSINESS WIRE)–
Ooma, Inc. (NYSE: OOMA), a smart communications platform for businesses and consumers, today released financial results for the fiscal first quarter ended April 30, 2023.

Fiscal First Quarter 2024 Financial Highlights:

• Revenue: Total revenue was $56.9 million, up 13% year-over-year. Subscription and services revenue increased to $53.0 million from $46.7 million in the first quarter of fiscal 2023, and was 93% of total revenue, primarily driven by the growth of Ooma Business and the acquisition of OnSIP.
• Net Income/Loss: GAAP net loss was $0.3 million, or $0.01 per basic and diluted share, compared to GAAP net loss of $0.8 million, or $0.03 per basic and diluted share, in the first quarter of fiscal 2023. Non-GAAP net income was $4.0 million, or $0.16 per diluted share, compared to non-GAAP net income of $3.0 million, or $0.12 per diluted share in the prior year period.
• Adjusted EBITDA: Adjusted EBITDA was $4.8 million, compared to $3.9 million in the first quarter of fiscal 2023.

For more information about non-GAAP net income and Adjusted EBITDA, see the section below titled “Non-GAAP Financial Measures” and the reconciliation provided in this release.

“Ooma achieved a solid start to its fiscal 2024 with Q1 revenue increasing to $56.9 million and non-GAAP net income of $4.0 million,” said Eric Stang, chief executive officer of Ooma. “Q1 revenue growth of 13%, year-over-year, was driven by 27% year-over-year growth in business services revenue, which now makes up 56% of total services revenue. As planned, we made progress in Q1 introducing new Office Pro+ features, growing our user base in Europe, expanding our vertical markets and partnerships, and broadening the capabilities and customer adoption of our AirDial POTS replacement solution. Looking forward, we intend to continue to invest in our key strategic initiatives and the development of new partnerships to drive profitable growth.”

Business Outlook:

For the second quarter of fiscal 2024, Ooma expects:

• Total revenue in the range of $57.4 million to $57.9 million.

• GAAP net loss in the range of $0.6 million to $0.9 million and GAAP net loss per share in the range of $0.02 to $0.04.

• Non-GAAP net income in the range of $3.5 million to $3.8 million and non-GAAP net income per share in the range of $0.13 to $0.15.

For the full fiscal year 2024, Ooma expects:

• Total revenue in the range of $235.5 million to $238.5 million.

• GAAP net loss in the range of $0.9 million to $2.9 million, and GAAP net loss per share in the range of $0.04 to $0.12.

• Non-GAAP net income in the range of $14.5 million to $16.5 million, and non-GAAP net income per share in the range of $0.55 to $0.63.

The following is a reconciliation of GAAP net loss to non-GAAP net income and GAAP basic and diluted net loss per share to non-GAAP diluted net income per share guidance for the second fiscal quarter ending July 31, 2023 and the fiscal year ending January 31, 2024 (in millions, except per share data):

		Projected range
		Three Months Ending		Fiscal Year Ending
		July 31, 2023		January 31, 2024
		(unaudited)
GAAP net loss		($0.6)-($0.9)		($0.9)-($2.9)
Stock-based compensation and related taxes		3.7		14.6
Amortization of intangible assets		0.7		2.8
Non-GAAP net income		$3.5-$3.8		$14.5-$16.5
GAAP net loss per share		($0.02)-($0.04)		($0.04)-($0.12)
Stock-based compensation and related taxes		0.14		0.56
Amortization of intangible assets		0.03		0.11
Non-GAAP net income per share		$0.13-$0.15		$0.55-$0.63
Weighted-average number of shares used in per share amounts:
Basic		25.2		25.6
Diluted		26.0		26.3

Conference Call Information:

Ooma will host a conference call and live webcast for analysts and investors today at 5:00 p.m. Eastern time. The news release with the financial results will be accessible from the company’s website prior to the conference call.

Parties in the United States and Canada can access the call by dialing +1 (888) 550-5744, using conference ID 4726540. International parties can access the call by dialing +1 (646) 960-0223, using conference ID 4726540.

The webcast will be accessible on the Events and Presentations page of Ooma’s investor relations website, https://investors.ooma.com, for a period of at least one year. A telephonic replay of the conference call will be available from approximately two hours after the call is completed or about 8:00 p.m. Eastern time on May 23, 2023 until 11:59 p.m. Eastern time Tuesday, May 30, 2023. To access the replay, parties in the United States and Canada should call +1 (800) 770-2030. International parties should call +1 (647) 362-9199.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release and the accompanying tables contain certain non-GAAP financial measures, including: non-GAAP net income, non-GAAP net income per share, non-GAAP gross profit and gross margin, non-GAAP operating income, and Adjusted EBITDA. Adjusted EBITDA represents the net income before interest and other income, income tax provision, depreciation and amortization of capital expenditures, amortization of intangible assets, and stock-based compensation expense and related taxes.

Other non-GAAP financial measures exclude stock-based compensation expense and related taxes, and amortization of intangible assets. Non-GAAP weighted-average diluted shares include the effect of potentially dilutive securities from the company’s stock-based benefit plans.

These non-GAAP financial measures are presented to provide investors with additional information regarding our financial results and core business operations. Ooma considers these non-GAAP financial measures to be useful measures of the operating performance of the company, because they contain adjustments for unusual events or factors that do not directly affect what management considers to be Ooma’s core operating performance and are used by the company’s management for that purpose. Management also believes that these non-GAAP financial measures allow for a better evaluation of the company’s performance by facilitating a meaningful comparison of the company’s core operating results in a given period to those in prior and future periods. In addition, investors often use similar measures to evaluate the operating performance of a company.

Non-GAAP financial measures are presented for supplemental informational purposes only to aid an understanding of the company’s operating results. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. A limitation of the non-GAAP financial measures presented is that the adjustments relate to items that the company generally expects to continue to recognize. The adjustment of these items should not be construed as an inference that the adjusted gains or expenses are unusual, infrequent or non-recurring. Therefore, both GAAP financial measures of Ooma’s financial performance and the respective non-GAAP measures should be considered together. Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure in the tables below.

Disclosure Information

Ooma uses the investor relations section on its website as a means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Ooma’s investor relations website in addition to following Ooma’s press releases, Securities and Exchange Commission (“SEC”) filings, and public conference calls and webcasts.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995. In particular, the financial projections under “Business Outlook” and the statements contained in the quotations of our Chief Executive Officer with respect to expectations regarding the Company’s growth initiatives may constitute forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical facts and generally contain words such as “believes”, “expects”, “may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates”, and other expressions that are predictions of or indicate future events. Although the forward-looking statements contained in this press release are based upon information available at the time the statements are made and reflect management’s good faith beliefs, forward-looking statements inherently involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements to differ materially from anticipated future results. Important factors that could cause actual results to differ materially from expectations include, among others: our inability to attract new customers on a cost-effective basis; our inability to retain customers; our inability to realize expected returns from our investments made in connection with our international expansion efforts and development of new product features; failure to realize AirDial opportunities; intense competition; loss of key retailers and reseller partnerships; our reliance on vendors to manufacture the on-premise appliances and end-point devices we sell; our reliance on third parties for our network connectivity and co-location facilities; our reliance on third parties for some of our software development, quality assurance and operations; our reliance on third parties to provide the majority of our customer service and support representatives; and interruptions to our service. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law.

The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in our filings which we make with the SEC from time to time, including the risk factors contained in our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on April 7, 2023. The forward-looking statements in this press release are based on information available to Ooma as of the date hereof, and Ooma disclaims any obligation to update any forward-looking statements, except as required by law.

About Ooma, Inc.

Ooma (NYSE: OOMA) creates powerful connected experiences for businesses and consumers, delivered from its smart cloud-based SaaS platform. For businesses of all sizes, Ooma provides advanced voice and collaboration features including messaging, intelligent virtual attendants, and video conferencing to help them run more efficiently. For consumers, Ooma’s residential phone service provides PureVoice HD voice quality, advanced functionality and integration with mobile devices. Learn more at www.ooma.com or www.ooma.ca in Canada.

OOMA, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands)
	April 30,				January 31,
		2023				2023
Assets
Current assets:
Cash and cash equivalents	$	27,390			$	24,137
Short-term investments		987				2,723
Accounts receivable, net		8,734				7,131
Inventories		25,320				26,246
Other current assets		13,620				14,368
Total current assets		76,051				74,605
Property and equipment, net		8,448				7,996
Operating lease right-of-use assets		16,887				12,702
Intangible assets, net		9,722				10,463
Goodwill		8,655				8,655
Other assets		17,972				16,584
Total assets	$	137,735			$	131,005
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,872			$	13,462
Accrued expenses and other current liabilities		20,600				26,726
Deferred revenue		16,630				17,216
Total current liabilities		56,102				57,404
Long-term operating lease liabilities		13,987				10,426
Other liabilities		23				31
Total liabilities		70,112				67,861
Stockholders’ equity:
Common stock		5				5
Additional paid-in capital		200,398				195,605
Accumulated other comprehensive loss		(11	)			(23	)
Accumulated deficit		(132,769	)			(132,443	)
Total stockholders’ equity		67,623				63,144
Total liabilities and stockholders’ equity	$	137,735			$	131,005

OOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except share and per share data)
		Three Months Ended
		April 30, 2023				April 30, 2022
Revenue:
Subscription and services		$	53,049			$	46,723
Product and other			3,803				3,614
Total revenue			56,852				50,337
Cost of revenue:
Subscription and services			14,725				13,209
Product and other			6,175				5,176
Total cost of revenue			20,900				18,385
Gross profit			35,952				31,952
Operating expenses:
Sales and marketing			17,990				16,151
Research and development			11,953				10,498
General and administrative			6,617				6,062
Total operating expenses			36,560				32,711
Loss from operations			(608	)			(759	)
Interest and other income, net			415				33
Loss before income taxes			(193	)			(726	)
Income tax provision			(133	)			(40	)
Net loss		$	(326	)		$	(766	)
Net loss per share of common stock:
Basic and diluted		$	(0.01	)		$	(0.03	)
Weighted-average shares of common stock outstanding:
Basic and diluted			25,178,008				24,116,144

OOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
		Three Months Ended
		April 30, 2023				April 30, 2022
Cash flows from operating activities:
Net loss		$	(326	)		$	(766	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense			3,500				3,336
Depreciation and amortization of capital expenditures			1,063				850
Amortization of intangible assets			741				326
Amortization of operating lease right-of-use assets			647				717
Other			(2	)			15
Changes in operating assets and liabilities:
Accounts receivable, net			(1,603	)			1,688
Inventories and deferred inventory costs			965				(493	)
Prepaid expenses and other assets			(755	)			(2,681	)
Accounts payable, accrued expenses and other liabilities			(2,352	)			(1,950	)
Deferred revenue			(594	)			(223	)
Net cash provided by operating activities			1,284				819
Cash flows from investing activities:
Proceeds from maturities and sales of short-term investments			1,750				4,800
Purchases of short-term investments			—				(3,380	)
Capital expenditures			(1,374	)			(1,459	)
Business acquisition, working capital adjustments			300				—
Net cash provided by (used in) investing activities			676				(39	)
Cash flows from financing activities:
Proceeds from issuance of common stock			1,724				1,554
Shares repurchased for tax withholdings on vesting of restricted stock units			(431	)			(348	)
Net cash provided by financing activities			1,293				1,206
Net increase in cash and cash equivalents			3,253				1,986
Cash and cash equivalents at beginning of period			24,137				19,667
Cash and cash equivalents at end of period		$	27,390			$	21,653

OOMA, INC.
Reconciliation of Non-GAAP Financial Measures
(Unaudited, amounts in thousands, except percentages, shares and per share data)
		Three Months Ended
		April 30, 2023				April 30, 2022
Revenue		$	56,852			$	50,337
GAAP gross profit		$	35,952			$	31,952
Stock-based compensation and related taxes			260				248
Amortization of intangible assets			110				73
Non-GAAP gross profit		$	36,322			$	32,273
Gross margin on a GAAP basis			63	%			63	%
Gross margin on a Non-GAAP basis			64	%			64	%
GAAP operating loss		$	(608	)		$	(759	)
Stock-based compensation and related taxes			3,595				3,440
Amortization of intangible assets			741				326
Non-GAAP operating income		$	3,728			$	3,007
GAAP net loss		$	(326	)		$	(766	)
Stock-based compensation and related taxes			3,595				3,440
Amortization of intangible assets			741				326
Non-GAAP net income		$	4,010			$	3,000
GAAP basic and diluted net loss per share		$	(0.01	)		$	(0.03	)
Stock-based compensation and related taxes			0.14				0.14
Amortization of intangible assets			0.03				0.01
Non-GAAP net income per basic share		$	0.16			$	0.12
Non-GAAP net income per diluted share		$	0.16			$	0.12
GAAP weighted-average basic and diluted shares			25,178,008				24,116,144
Non-GAAP weighted-average diluted shares			25,665,906				24,909,140
GAAP net loss		$	(326	)		$	(766	)
Reconciling items:
Interest and other income, net			(415	)			(33	)
Income tax provision			133				40
Depreciation and amortization of capital expenditures			1,063				850
Amortization of intangible assets			741				326
Stock-based compensation and related taxes			3,595				3,440
Adjusted EBITDA		$	4,791			$	3,857

 

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INVESTOR CONTACT:

Matthew S. Robison

Director of IR and Corporate Development

Ooma, Inc.

[email protected]

(650) 300-1480

MEDIA CONTACT:

Mike Langberg

Director of Corporate Communications

Ooma, Inc.

[email protected]

(650) 566-6693

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: VoIP Technology Carriers and Services Telecommunications Software

MEDIA:

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PROG Holdings Announces Build, an Innovative Credit Building Financial Management Tool

Build users can see credit score increases in as little as 60 days

SALT LAKE CITY–(BUSINESS WIRE)–PROG Holdings, Inc. (NYSE:PRG), the fintech holding company for Progressive Leasing, Vive Financial, and Four Technologies, announces Build, a financial technology company that believes everyone should have the opportunity to improve their financial health through credit building products alongside educational financial tools and information.

The Build Credit Builder Account, issued by WebBank, Member FDIC, combines the benefits of an installment loan and a secured savings account to help consumers build both positive credit history and personal savings.

Initially launched in December 2021 to a select group of Progressive Leasing customers, Build is currently available in 16 states, and the Company expects to be able to offer access to consumers in all 50 states and the District of Columbia by the end of 2023.

Building a Solid Credit Foundation

The Build Credit Builder Account is designed to help people utilize regular monthly payments to establish positive credit history. According to the Fair Isaac Corporation, payment history accounts for 35% of an individual’s FICO score.

When a customer opens a Build Credit Builder Account, WebBank creates an installment loan and deposits the proceeds into a secured savings deposit account. Customers can increase their positive credit history by making on-time regular monthly payments on the installment loan. Those payments are reported to all three credit bureaus, Equifax, Experian, and Transunion, helping customers that complete scheduled payments on time achieve credit score increases in as little as 60 days.

After the final payment is made on the installment loan, the loan is reported to the credit bureaus as paid in-full and the associated loan funds, less interest and fees, are provided to the customer. If the account is closed prior to the completion of the loan, the associated loan funds accumulated to that point, less interest and fees, will be provided to the customer at that time.

Furthermore, with a number of Build Credit Builder Account options and repayment periods, consumers can choose the solution that best fits their individual credit building needs.

“Build represents PROG Holdings’ continuing commitment to develop empowering products that fill the gaps in traditional personal finance, credit, and payment options. We understand the needs of today’s consumers and create thoughtfully designed, forward-thinking products to support millions of households in their financial goals,” said Steve Michaels, President and Chief Executive Officer of PROG Holdings. “Build is a potential next step in the financial journey for millions of consumers, including Progressive Leasing customers and applicants, looking to improve their credit scores.”

Unlocking the Possibilities of Tomorrow

Build’s parent company, PROG Holdings, Inc., helps consumers of all financial backgrounds create a better today and unlock the possibilities of tomorrow through financial empowerment using inclusive and easy-to-use financial technologies and products.

The Company’s Progressive Leasing segment helped pioneer the Virtual Lease to Own industry over twenty years ago, and since that time it has helped millions of customers achieve ownership of the goods and products they need through flexible and transparent payment options.

In addition to Build and Progressive Leasing, PROG Holdings’ companies include Vive Financial, an omnichannel provider of second-look revolving credit products, and Four Technologies, provider of Buy Now, Pay Later payment options

“As a leader in building flexible financial and payment solutions that empower consumers, PROG Holdings is thrilled to introduce Build, a credit building tool that can help people across the country reach their personal financial goals,” said Michaels. “When our customers told us that their number one financial goal is to build credit, we saw a significant opportunity to offer access to an inclusive and transparent financial credit builder option within our suite of fintech products.”

For more information about Build, visit https://getbuild.com/.

About Build:

Build is a financial technology company that believes everyone should have the opportunity to improve their financial health through credit building products alongside educational financial tools and information. Issued by WebBank, Member FDIC, the Build Credit Builder Account allows consumers to add payment history to their credit report through regular and timely installment loan payments that are reported to all three major credit bureaus. Build is owned by PROG Holdings, Inc. (NYSE:PRG), a fintech holding company based in Salt Lake City, Utah. More information on Build can be found on getbuild.com.

About PROG Holdings, Inc.

PROG Holdings, Inc. (NYSE:PRG) is a fintech holding company headquartered in Salt Lake City, UT, that provides transparent and competitive payment options and inclusive consumer financial products. The Company owns Progressive Leasing, a leading provider of e-commerce, app-based, and in-store point-of-sale lease-to-own solutions, Vive Financial, an omnichannel provider of second-look revolving credit products, Four Technologies, provider of Buy Now, Pay Later payment options through its platform Four, and Build, provider of personal credit building products. More information on PROG Holdings’ companies can be found at https://www.progholdings.com.

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Investor Contact

John A. Baugh, CFA

VP, Investor Relations

[email protected]

Media Contact

Mark Delcorps

Director, Corporate Communications

[email protected]

KEYWORDS: United States North America Utah

INDUSTRY KEYWORDS: Technology Payments Finance Fintech Banking Other Technology Professional Services Software Internet

MEDIA:

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Hannon Armstrong Sustainable Infrastructure Capital, Inc. Announces Public Offering of Common Stock

ANNAPOLIS, Md.–(BUSINESS WIRE)–
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“HASI,” “we,” “our,” or the “Company”) (NYSE: HASI), a leading investor in climate solutions, today announced that it is commencing a public offering of $300 million of shares of common stock. The Company expects to grant the underwriters a 30-day option to purchase up to $45 million of additional shares of common stock. The Company intends to utilize the net proceeds of this offering for general corporate purposes.

J.P. Morgan, BofA Securities, and Goldman Sachs & Co. LLC are acting as joint book-running managers for the offering.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission (“SEC”) and has become effective. The offering will be made by means of a preliminary prospectus supplement and accompanying prospectus. A copy of the preliminary prospectus supplement and accompanying prospectus related to the offering can be obtained by contacting J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, by telephone at (866) 803-9204 or by email at [email protected], BofA Securities, NC1-022-02-25, 201 North Tryon Street, Charlotte, NC 28255-0001, Attn: Prospectus Department, Email: [email protected] or Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, New York 10282, telephone: 1-866-471-2526, facsimile: 1-212-902-9316, or by emailing [email protected].

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the offered shares, nor shall there be any sale of such shares in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

About HASI

HASI (NYSE: HASI) is a leading climate positive public company that actively partners with clients to deploy real assets that facilitate the energy transition. With more than $10 billion in managed assets, our vision is that every investment improves our climate future.

Forward-Looking Statements

Some of the information in this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this press release, words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “target,” or similar expressions, are intended to identify such forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Forward-looking statements are not predictions of future events. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements include those discussed under the caption “Risk Factors” included in the Company’s Annual Report on Form 10-K (as supplemented by our Form 10-K/A) for the Company’s fiscal year ended December 31, 2022, which was filed with the SEC, as well as in other reports that the Company files with the SEC.

Forward-looking statements are based on beliefs, assumptions and expectations as of the date of this press release. The Company disclaims any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this press release.

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INVESTOR RELATIONS INQUIRIES

Neha Gaddam

[email protected]

410-571-6189

KEYWORDS: United States North America Maryland

INDUSTRY KEYWORDS: Environment Finance Other Energy Environmental Health Professional Services Alternative Energy Sustainability Energy Other Professional Services

MEDIA:

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Farmers National Banc Corp. Declares Quarterly Cash Dividend

CANFIELD, Ohio–(BUSINESS WIRE)–
On May 23, 2023, the Board of Directors of the Farmers National Banc Corp. (NASDAQ: FMNB) declared a quarterly cash dividend of $0.17 per share. The common stock cash dividend will have a record date of June 9, 2023, and is payable to shareholders on June 30, 2023.

ABOUT FARMERS NATIONAL BANC CORP.

Founded in 1887, Farmers National Banc Corp. is a diversified financial services company headquartered in Canfield, Ohio, with $5.1 billion in banking assets. Farmers National Banc Corp.’s wholly-owned subsidiaries are comprised of The Farmers National Bank of Canfield, a full-service national bank engaged in commercial and retail banking with 65 banking locations in Mahoning, Trumbull, Columbiana, Portage, Stark, Wayne, Medina, Geauga and Cuyahoga Counties in Ohio and Beaver, Butler, Allegheny, Jefferson, Clarion, Venango, Clearfield, Mercer, Elk and Crawford Counties in Pennsylvania, and Farmers Trust Company, which operates five trust offices and offers services in the same geographic markets. Total wealth management assets under care at March 31, 2023 are $3.1 billion. Farmers National Insurance, LLC, a wholly-owned subsidiary of The Farmers National Bank of Canfield, offers a variety of insurance products.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230523005740/en/

Amber Wallace

Executive Vice President, Chief Retail/Marketing Officer

330-720-6441

[email protected]

KEYWORDS: Ohio United States North America

INDUSTRY KEYWORDS: Finance Banking Professional Services Asset Management Insurance

MEDIA:

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New Relic Announces Fourth Quarter and Fiscal Year 2023 Results

Fourth quarter total revenue of $242.5 million, up 18% year over year

Focused execution led to consumption revenue of $203.8 million in the quarter, up 55% year over year

Fourth quarter GAAP operating margin increased 4.3 pts, non-GAAP operating margin improved to 10.7%

SAN FRANCISCO–(BUSINESS WIRE)–
New Relic, Inc. (NYSE: NEWR), the all-in-one observability platform for every engineer, announced financial results for the fourth quarter and full fiscal year 2023 ended March 31, 2023.

“We finished the fiscal year with consumption revenue growing in excess of 30% excluding the impact of migrations, with profitability at a new high watermark, and with our innovation leadership recognized broadly. I’m very grateful for such committed customers and all the hard work across the company which made fiscal 2023 a terrific year,” said New Relic CEO Bill Staples. “We look forward to fiscal 2024 and the innovation roadmap, continued customer growth and expansion, and the final chapter of our subscription business which will result in a simpler, more profitable, and high-growth New Relic.”

Fourth Quarter Fiscal Year 2023 Financial Results:

• Revenue: Total revenue was $242.5 million, up 18% from $205.8 million one year ago. Consumption revenue was $203.8 million, up 55% year over year.
• Gross Margin and Non-GAAP Gross Margin⁽¹⁾: Gross margin was 76.7%, compared to 68.9% one year ago, an increase of 7.8 percentage points year over year. Non-GAAP gross margin was 79.0%, compared to 71.0% one year ago, an increase of 8.0 percentage points year over year.
• Operating Income and Non-GAAP Operating Income⁽¹⁾: Loss from operations was $(55.2) million, compared to $(55.7) million one year ago. The fourth quarter included a $31.8 million restructuring charge related to the exit of some of our real estate facilities. Non-GAAP operating income was $26.1 million, compared to $(16.0) million loss one year ago, an increase of $42.0 million year over year.
• Operating Margin and Non-GAAP Operating Margin⁽¹⁾: Operating margin was (22.8%), compared to (27.1%) one year ago, an increase of 4.3 percentage points year over year. Non-GAAP operating margin was 10.7%, compared to (7.8%) one year ago, up 18.5 percentage points year over year.
• Net Income Per Share and Non-GAAP Net Income Per Share⁽¹⁾: Fully diluted net loss per share was $(0.83), compared to $(0.84) one year ago, while non-GAAP fully diluted net income per share was $0.42, compared to $(0.24) loss per share one year ago.

Fiscal Year 2023 Financial Results:

• Revenue: Total revenue was $925.6 million, up 18% from $785.5 million one year ago. Consumption revenue was $707.7 million, up 60% year over year.
• Gross Margin and Non-GAAP Gross Margin⁽¹⁾: Gross margin was 73.4%, compared to 67.4% one year ago, an increase of 6.0 percentage points year over year. Non-GAAP gross margin was 75.9%, compared to 69.4% one year ago, an increase of 6.5 percentage points year over year.
• Operating Income and Non-GAAP Operating Income⁽¹⁾: Loss from operations was $(185.2) million, compared to $(228.6) million one year ago. Non-GAAP operating income was $34.5 million, compared to $(49.1) million one year ago, an increase of $83.6 million year over year.
• Operating Margin and Non-GAAP Operating Margin⁽¹⁾: Operating margin was (20.0%), compared to (29.1%) one year ago, an increase of 9.1 percentage points year over year. Non-GAAP operating margin was 3.7%, compared to (6.3%) one year ago, up 10.0 percentage points year over year.
• Net Income Per Share and Non-GAAP Net Income Per Share⁽¹⁾: Fully diluted net loss per basic share was $(2.67), compared with $(3.88) one year ago, while non-GAAP fully diluted net income per share was $0.63, compared to $(0.78) one year ago.
• Cash, Cash Equivalents and Short-Term Investments: Cash, cash equivalents and short-term investments were $879.8 million as of March 31, 2023.
• Cash Flows From Operating Activities and Free Cash Flow: Cash flows from operating activities was $53.8 million, compared to $3.6 million one year ago, an increase of $50.1 million year over year. Free cash flow was $33.8 million, compared to $(14.8) million one year ago, an increase of $48.6 million year over year.

Recent Business Highlights:

• Landing New Customers — Its product-led growth (PLG) engine again added more than 800 net new paid platform customers during the fourth quarter.
• Recognizing Technology Leadership — GigaOm named New Relic a Leader and Outperformer in the 2023 GigaOm Radar for Cloud Observability Solutions. GigaOm placed New Relic closest to the center and as a leader in innovation, representing the highest overall value to customers.
• First to Market Generative AI Innovations — Launched New Relic Grok, the industry’s first generative AI observability assistant which makes it easier for customers to use more of New Relic’s capabilities, consolidate their data in New Relic, and ingest data more rapidly. First to market with OpenAI GPT integration to instantly monitor performance and cost of applications built with OpenAI’s GPT Series APIs.
• Updating Infrastructure Monitoring to Drive Standardization — New, deeply integrated experience for infrastructure monitoring and APM capabilities helps customers correlate the health and performance of applications and hosts in real-time at one-third the cost of competitors.
• Reaching More Developers — Launched New Relic CodeStream for all core coding languages. As CodeStream delivers insights into software performance all the way down to the code level, it allows more developers to quickly identify issues before they hit production and accelerate engineering velocity.
• Growing its Technology Partner Ecosystem — New Relic continued to grow its technology partner ecosystem, and now offers integrations with 600+ cloud services, open-source tools, and enterprise technologies. Furthermore, New Relic now offers 50+ Azure monitoring quickstarts to make it easier for engineers to instrument their Azure-based stack.
• Committing to Net-Zero — New Relic announced its goal for net-zero greenhouse gas emissions by 2030. New Relic’s GHG emissions targets will be submitted to the Science Based Target initiative (SBTi), joining the more than 2,200 companies worldwide that are leading the transition to a net-zero economy.

Financial Outlook:

New Relic is providing guidance for its fiscal first quarter ending June 30, 2023 as follows:

• Total revenue between $238 million and $240 million, representing year-over-year growth of 10% and 11% respectively.

• Consumption revenue year-over-year growth of approximately 38%.

• Non-GAAP operating income between $26 million and $28 million, representing Non-GAAP operating margins between 11% and 12% respectively⁽²⁾.

• Weighted-average diluted shares used in computing net income per share of approximately 72 million⁽²⁾. Non-GAAP tax rate of approximately 24.5%⁽²⁾.

New Relic is providing guidance for its fiscal year ending March 31, 2024 as follows:

• Total revenue between $1.02 billion and $1.03 billion, representing year-over-year growth of 10% and 11% respectively.

• Consumption revenue year-over-year growth of approximately 30%.

• Non-GAAP operating income between $145 million and $155 million, representing Non-GAAP operating margins between 14% and 15% respectively⁽²⁾.

• Weighted-average diluted shares used in computing net income per share of approximately 75 million⁽²⁾. Non-GAAP tax rate of approximately 24.5%⁽²⁾.

Conference Call Information:

New Relic will host a conference call at 2:00 p.m. PT / 5:00 p.m. ET to review the financial results and business outlook with the investment community. A live webcast and replay of the event will be available on the New Relic Investor Relations website at http://ir.newrelic.com.

What:		New Relic fourth quarter of fiscal year 2023 results conference call
When:		May 23, 2023 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time
Online Registration:		https://events.q4inc.com/attendee/989640133

Participation at Upcoming Investor Conferences:

New Relic announced that members of its management team will participate in the following investor conferences:

Event: TD Cowen’s 51st Annual Technology, Media and Telecom Conference

Date: Wednesday, May 31, 2023, at 6:05 a.m. PT / 9:05 a.m. ET

Details: Fireside chat and one-on-one meetings (David Barter, CFO)

Event: Baird 2023 Global Consumer, Technology & Services Conference

Date: Tuesday, June 6, 2023, at 5:30 a.m. PT / 8:30 a.m. ET

Details: Fireside chat and one-on-one meetings (David Barter, CFO)

The live webcasts of the fireside chat presentations will be accessible under the “Events & Presentations” section of the New Relic investor relations page at http://ir.newrelic.com. Following the events, replays will be made available at the same location.

_______

(1) This press release uses non-GAAP financial metrics that are adjusted for the impact of various GAAP items. See the section titled “Non-GAAP Financial Measures” and the tables entitled “Reconciliation from GAAP to Non-GAAP Results” below for details.

(2) New Relic has not reconciled its expectations as to non-GAAP income from operations or non-GAAP net income per diluted share to their most directly comparable GAAP measures as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense, lawsuit litigation cost and other expense, employer payroll taxes on equity incentive plans and gain or loss from lease modification. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to New Relic’s results computed in accordance with GAAP.

About New Relic

As a leader in observability, New Relic empowers engineers with a data-driven approach to planning, building, deploying, and running great software. New Relic delivers the only unified data platform that empowers engineers to get all telemetry—metrics, events, logs, and traces—paired with powerful full stack analysis tools to help engineers do their best work with data, not opinions. Delivered through the industry’s first usage-based consumption pricing that’s intuitive and predictable, New Relic gives engineers more value for the money by helping improve planning cycle times, change failure rates, release frequency, and mean time to resolution. This helps the world’s leading brands including adidas Runtastic, American Red Cross, Australia Post, Banco Inter, Chegg, GoTo Group, Ryanair, Sainsbury’s, Signify Health, TopGolf, and World Fuel Services (WFS) improve uptime, reliability, and operational efficiency to deliver exceptional customer experiences that fuel innovation and growth. https://newrelic.com.

Forward-Looking Statements

This press release and the earnings call referencing this press release contain “forward-looking” statements, as that term is defined under the federal securities laws, including but not limited to statements regarding: (a) our innovation pipeline and anticipated impact on our future business and financial results; (b) the expected timing and results of our conversion of customers to our consumption plans; (c) the impact of our product launches and integrations, including New Relic Grok and others, and our expectations for availability, benefits, and customer adoption; (d) our expectations for the results of our broader platform and technology partnership initiatives, including availability on Azure Native and integration of features; (e) our net-zero goal and the anticipated impacts thereof; (f) our expectations regarding future financial performance, including our revenue outlook, and our underlying assumptions about demand, customer behavior, and our positioning for growth and continued profitability; (g) our plans and intentions to win new customers, expand existing relationships, and further expand our platform; (h) our commitment to certain initiatives and strategic plans and our ability to accomplish them, including our areas of focus and plans for growth; (i) our outlook on financial results for the first quarter and the full year of fiscal 2024, including as to total revenue, consumption revenue, and expected year-over-year growth for each, non-GAAP operating income and non-GAAP operating margin, and non-GAAP net income per diluted share, and the drivers and various factors related thereto; and (j) our expectations for the impact of macroeconomic factors on our business and financial results. These forward-looking statements are based on New Relic’s current assumptions, expectations, and beliefs and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause New Relic’s actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to, New Relic’s ability to determine optimal prices for its products and the potential challenges presented by New Relic’s evolving pricing models; the effect of the macroeconomic factors on New Relic’s business and on global economies and financial markets generally; unfavorable movements in foreign currency exchange rates; New Relic’s ability to generate sufficient revenue to achieve and sustain profitability, particularly in light of its significant ongoing expenses; New Relic’s short operating history in an evolving industry; New Relic’s ability to manage its significant recent growth; the dependence of New Relic’s business on its customers remaining on its platform and increasing their spend with New Relic; New Relic’s ability to develop enhancements to its products, increase adoption and usage of its products and introduce new products that achieve market acceptance; the dependence on customers expanding their use of New Relic’s products beyond the current predominant use cases; New Relic’s ability to expand its marketing and sales capabilities and increase sales of its solutions; privacy concerns, including changes in privacy laws and regulations, which could result in additional cost and liability to New Relic or inhibit sales; New Relic’s ability to effectively compete in intensely competitive markets and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, requirements or preferences; fluctuation of New Relic’s quarterly results; New Relic’s dependence on lead generation strategies to drive sales and revenue; interruptions or performance problems associated with New Relic’s technology and infrastructure; New Relic’s dependence on SaaS technologies and related services from third parties; defects or disruptions in New Relic’s products; estimates or judgments relating to New Relic’s critical accounting policies; the expense and complexity of New Relic’s ongoing and planned investments in cloud hosting providers and expenditures on transitioning its services and customers from its data center hosting facilities to public cloud providers; risks associated with international operations; New Relic’s ability to protect its intellectual property rights; risks related to the acquisition and integration of businesses or technologies; risks related to sales to government entities and highly regulated organizations; certain risks associated with incurring indebtedness; and other “Risk Factors” set forth in New Relic’s most recent filings with the Securities and Exchange Commission (the “SEC”).

Further information on these and other factors that could affect New Relic’s financial results and the forward-looking statements in this press release and in the earnings call referencing this press release is included in the filings New Relic makes with the SEC from time to time, particularly under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and subsequent filings. Copies of these documents may be obtained by visiting New Relic’s Investor Relations website at http://ir.newrelic.com or the SEC’s website at www.sec.gov.

All information provided in this press release and in the earnings call is as of the date hereof and New Relic assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Non-GAAP Financial Measures

New Relic discloses the following non-GAAP financial measures in this press release and the earnings call referencing this press release: non-GAAP income (loss) from operations, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share and free cash flow. New Relic uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate New Relic’s financial performance. In addition, New Relic’s bonus plan for eligible employees and executives is based in part on non-GAAP income (loss) from operations. New Relic believes these non-GAAP financial measures are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. New Relic’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on New Relic’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

New Relic defines non-GAAP income (loss) from operations, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and non-GAAP net income (loss) per basic share as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense, (2) amortization of stock-based compensation capitalized in software development costs, (3) the amortization of purchased intangibles, (4) employer payroll tax expense on equity incentive plans, (5) amortization of debt discount and issuance costs, (6) the transaction costs related to acquisitions, (7) lawsuit litigation cost and other expense, and (8) restructuring charges. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by weighted-average shares used to compute net income (loss) per share, basic and diluted, with the number of weighted-average shares decreased to reflect the anti-dilutive impact of the capped call transactions entered into in connection with the 0.50% Convertible Senior Notes due 2023 issued in May 2018. New Relic defines free cash flow as GAAP cash from operations, minus capital expenditures and minus capitalized software. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing New Relic’s operating performance due to the following factors:

Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs. New Relic utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of purchased intangibles. New Relic views amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period.

Employer payroll tax expense on equity incentive plans. New Relic excludes employer payroll tax expense on equity incentive plans as these expenses are tied to the exercise or vesting of underlying equity awards and the price of New Relic’s common stock at the time of vesting or exercise. As a result, these taxes may vary in any particular period independent of the financial and operating performance of New Relic’s business.

Amortization of debt discount and issuance costs. Following New Relic’s adoption of ASU No. 2020-06, Accounting for Convertible Instruments and Contract on an Entity’s Own Equity, the expense for the amortization of debt issuance costs (including those attributable to New Relic’s convertible senior notes due in 2023) is a non-cash item, and New Relic believes the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.

Transaction costs related to acquisitions. New Relic may from time to time incur direct transaction costs related to acquisitions. New Relic believes it is useful to exclude such charges because it does not consider such amounts to be part of the ongoing operation of New Relic’s business.

Lawsuit litigation cost and other expense. New Relic may from time to time incur charges or benefits related to litigation that are outside of the ordinary course of New Relic’s business. New Relic believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of New Relic’s business and because of the singular nature of the claims underlying the matter.

Restructuring charges. In April 2021, New Relic commenced a restructuring plan to realign its cost structure to better reflect significant product and business model innovation. In August 2022, New Relic commenced a restructuring plan to realign its cost structure with its business needs as New Relic moved to focus its resources on top priorities, and in March 2023, New Relic approved a new restructuring plan in connection with the reduction of its global real estate footprint in line with its Flex First philosophy. As a result of each of these restructuring plans, New Relic incurred charges of approximately $39.1 million and $12.6 million for the twelve months ended March 31, 2023 and 2022, respectively. For the quarter ended March 31, 2023, New Relic incurred restructuring charges of approximately $31.8 million consisting primarily of real estate lease terminations and other associated costs. New Relic believes it is appropriate to exclude the restructuring charges because they are not indicative of New Relic’s future operating results.

Anti-dilutive impact of capped call transactions. In connection with the issuance of its convertible senior notes due in 2023, New Relic entered into capped call transactions to offset potential dilution from the embedded conversion feature in the notes. Although New Relic cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, New Relic does reflect the anti-dilutive impact of the capped call transactions in non-GAAP net loss per share, basic and diluted, to provide investors with useful information in evaluating the financial performance of the company on a per share basis.

Additionally, New Relic’s management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

Operating Metrics

Active Customer Accounts. New Relic defines an Active Customer Account at the end of any period as an individual account, as identified by a unique account identifier, aggregated at the parent hierarchy level, for which New Relic has recognized any revenue in the fiscal quarter. The number of Active Customer Accounts that is reported as of a particular date is rounded down to the nearest hundred.

Number of Active Customer Accounts with Revenue Greater than $100,000. As a measure of New Relic’s ability to scale with its customers and attract large enterprises to its platform, New Relic counts the number of Active Customer Accounts for which it has recognized greater than $100,000 in revenue in the trailing 12-months.

Percentage of Revenue from Active Customer Accounts Greater than $100,000. New Relic also looks at its percentage of overall revenue it receives from its Active Customer Accounts with revenue greater than $100,000 in any given quarter as an indicator of its relative performance when selling to New Relic’s large customer relationships or its smaller revenue accounts.

Net Revenue Retention Rate (“NRR”). NRR monitors the growth in use of New Relic’s platform by its existing active customer accounts and allows New Relic to measure the health of its business and future growth prospects. To calculate NRR, New Relic first identifies the cohort of Active Customer Accounts that were Active Customer Accounts in the same quarter of the prior fiscal year. Next, New Relic identifies the measurement period as the 12-month period ending with the period reported and the prior comparison period as the corresponding period in the prior year. NRR is the quotient obtained by dividing the revenue generated from a cohort of Active Customer Accounts in the measurement period by the revenue generated from that same cohort in the prior comparison period.

New Relic is a registered trademark of New Relic, Inc.

All product and company names herein may be trademarks of their registered owners.

New Relic, Inc.
Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
		Three Months Ended March 31,								Fiscal Year Ended March 31,
		2023				2022				2023				2022
Revenue		$	242,492			$	205,752			$	925,626			$	785,521
Cost of revenue			56,391				63,960				246,383				256,279
Gross profit			186,101				141,792				679,243				529,242
Operating expenses:
Research and development			72,539				58,396				275,299				211,856
Sales and marketing			104,015				100,424				400,115				394,027
General and administrative			64,760				38,719				189,072				151,912
Total operating expenses			241,314				197,539				864,486				757,795
Loss from operations			(55,213	)			(55,747	)			(185,243	)			(228,553	)
Other income (expense):
Interest income			6,101				625				14,321				2,862
Interest expense			(1,195	)			(1,239	)			(4,943	)			(4,921	)
Other expense			(256	)			(523	)			(66	)			(1,170	)
Loss before income taxes			(50,563	)			(56,884	)			(175,931	)			(231,782	)
Income tax provision (benefit)			1,894				(493	)			2,896				323
Net loss		$	(52,457	)		$	(56,391	)		$	(178,827	)		$	(232,105	)
Net loss and adjustment attributable to redeemable non-controlling interest			(4,770	)			878				(1,419	)			(18,297	)
Net loss attributable to New Relic		$	(57,227	)		$	(55,513	)		$	(180,246	)		$	(250,402	)
Net loss attributable to New Relic per share, basic and diluted		$	(0.83	)		$	(0.84	)		$	(2.67	)		$	(3.88	)
Weighted-average shares used to compute net loss per share, basic and diluted			68,791				65,780				67,614				64,592

New Relic, Inc.
Supplemental Revenue Disaggregation
(In thousands; unaudited)
		Three Months Ended March 31,						Fiscal Year Ended March 31,
		2023			2022			2023			2022
Subscription		$	38,716		$	74,381		$	217,887		$	343,315
Consumption			203,776			131,371			707,739			442,206
Total revenue		$	242,492		$	205,752		$	925,626		$	785,521

New Relic, Inc.
Consolidated Balance Sheets
(In thousands, except par value; unaudited)
		March 31, 2023				March 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	625,727			$	268,695
Short-term investments			254,085				559,984
Accounts receivable, net of allowances of $3,121 and $3,073, respectively			234,287				226,182
Prepaid expenses and other current assets			17,747				29,447
Deferred contract acquisition costs			14,962				24,058
Total current assets			1,146,808				1,108,366
Property and equipment, net			48,509				68,368
Restricted cash			5,795				5,775
Goodwill			172,298				163,677
Intangible assets, net			11,603				15,636
Deferred contract acquisition costs, non-current			8,558				10,463
Lease right-of-use assets			19,678				50,465
Other assets, non-current			5,759				4,916
Total assets		$	1,419,008			$	1,427,666
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities:
Accounts payable		$	29,452			$	32,545
Accrued compensation and benefits			37,552				37,023
Other current liabilities			39,424				36,098
Convertible senior notes, current			500,044				–
Deferred revenue			370,987				398,754
Lease liabilities			10,928				11,103
Total current liabilities			988,387				515,523
Convertible senior notes, non-current			–				497,663
Lease liabilities, non-current			38,384				49,809
Deferred revenue, non-current			3,800				108
Other liabilities, non-current			24,897				20,173
Total liabilities			1,055,468				1,083,276
Redeemable non-controlling interest			23,105				21,686
Stockholders’ equity:
Common stock, $0.001 par value			69				66
Treasury stock – at cost (260 shares)			(263	)			(263	)
Additional paid-in capital			1,311,615				1,114,221
Accumulated other comprehensive loss			(7,432	)			(8,012	)
Accumulated deficit			(963,554	)			(783,308	)
Total stockholders’ equity			340,435				322,704
Total liabilities, redeemable non-controlling interest and stockholders’ equity		$	1,419,008			$	1,427,666

New Relic, Inc.
Consolidated Statements of Cash Flows
(In thousands; unaudited)
		Fiscal Year Ended March 31,
		2023				2022
Cash flows from operating activities:
Net loss attributable to New Relic:		$	(180,246	)		$	(250,402	)
Net loss and adjustment attributable to redeemable non-controlling interest		$	1,419			$	18,297
Net loss:		$	(178,827	)		$	(232,105	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			63,380				86,065
Stock-based compensation expense			160,015				153,039
Amortization of debt discount and issuance costs			2,381				2,357
Loss on facilities exit			10,840				–
Non-cash charges related to restructuring activities			23,840				–
Other			3,555				1,429
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable, net			(9,356	)			(53,319	)
Prepaid expenses and other assets			8,493				(5,796	)
Deferred contract acquisition costs			(14,417	)			(2,345	)
Lease right-of-use assets			11,442				8,294
Accounts payable			(3,634	)			9,745
Accrued compensation and benefits and other liabilities			11,733				19,564
Lease liabilities			(11,600	)			(6,898	)
Deferred revenue			(24,075	)			23,594
Net cash provided by operating activities			53,770				3,624
Cash flows from investing activities:
Purchases of property and equipment			(3,114	)			(5,778	)
Proceeds from sale of property and equipment			2,198				1,001
Cash paid for acquisition, net of cash acquired			(7,508	)			(7,192	)
Purchases of short-term investments			(50,373	)			(301,068	)
Proceeds from sale and maturity of short-term investments			355,556				305,942
Capitalized software development costs			(16,878	)			(12,662	)
Net cash provided by (used in) investing activities			279,881				(19,757	)
Cash flows from financing activities:
Proceeds from employee stock purchase plan			13,593				12,272
Proceeds from exercise of employee stock options			9,808				31,868
Net cash provided by financing activities			23,401				44,140
Net increase in cash, cash equivalents and restricted cash			357,052				28,007
Cash, cash equivalents and restricted cash at beginning of period			274,470				246,463
Cash, cash equivalents and restricted cash at end of period		$	631,522			$	274,470

New Relic, Inc.
Reconciliation from GAAP to Non-GAAP Results
(In thousands, except per share data; unaudited)
		Three Months Ended March 31,								Fiscal Year Ended March 31,
		2023				2022				2023				2022
Reconciliation of gross profit and gross margin:
GAAP gross profit		$	186,101			$	141,792			$	679,243			$	529,242
Plus: Stock-based compensation			1,256				1,285				5,307				5,042
Plus: Amortization of purchased intangibles			2,383				2,291				11,433				7,649
Plus: Amortization of stock-based compensation capitalized in software development costs			560				722				4,077				2,402
Plus: Employer payroll tax on employee equity incentive plans			87				75				253				243
Plus: Restructuring charges (1)			1,268				–				1,675				–
Non-GAAP gross profit		$	191,655			$	146,165			$	701,988			$	544,578
GAAP gross margin			76.7	%			68.9	%			73.4	%			67.4	%
Non-GAAP adjustments			2.3	%			2.1	%			2.5	%			2.0	%
Non-GAAP gross margin			79.0	%			71.0	%			75.9	%			69.4	%
Reconciliation of operating expenses:
GAAP research and development		$	72,539			$	58,396			$	275,299			$	211,856
Less: Stock-based compensation expense			(15,141	)			(12,127	)			(57,846	)			(48,355	)
Less: Employer payroll tax on employee equity incentive plans			(845	)			(571	)			(1,694	)			(1,432	)
Less: Restructuring charges (1)			(2,173	)			–				(3,608	)			–
Non-GAAP research and development		$	54,380			$	45,698			$	212,151			$	162,069
GAAP sales and marketing		$	104,015			$	100,424			$	400,115			$	394,027
Less: Stock-based compensation expense			(13,466	)			(11,367	)			(49,479	)			(48,986	)
Less: Employer payroll tax on employee equity incentive plans			(550	)			(374	)			(1,038	)			(944	)
Less: Restructuring charges (1)			(5,973	)			–				(9,731	)			(10,925	)
Non-GAAP sales and marketing		$	84,026			$	88,683			$	339,867			$	333,172
GAAP general and administrative		$	64,760			$	38,719			$	189,072			$	151,912
Less: Stock-based compensation expense			(14,739	)			(10,711	)			(47,383	)			(50,656	)
Less: Transaction costs related to acquisitions			–				–				(929	)			(361	)
Less: Lawsuit litigation cost and other expense			–				69				(88	)			10
Less: Employer payroll tax on employee equity incentive plans			(430	)			(339	)			(1,158	)			(1,292	)
Less: Restructuring charges (1)			(22,435	)			–				(24,045	)			(1,194	)
Non-GAAP general and administrative		$	27,156			$	27,738			$	115,469			$	98,419
Reconciliation of income (loss) from operations and operating margin:
GAAP loss from operations		$	(55,213	)		$	(55,747	)		$	(185,243	)		$	(228,553	)
Plus: Stock-based compensation expense			44,602				35,490				160,015				153,039
Plus: Amortization of purchased intangibles			2,383				2,291				11,433				7,649
Plus: Transaction costs related to acquisitions			–				–				929				361
Plus: Amortization of stock-based compensation capitalized in software development costs			560				722				4,077				2,402
Plus: Lawsuit litigation cost and other expense			–				(69	)			88				(10	)
Plus: Employer payroll tax on employee equity incentive plans			1,912				1,359				4,143				3,911
Plus: Restructuring charges (1)			31,849				–				39,059				12,119
Non-GAAP income (loss) from operations		$	26,093			$	(15,954	)		$	34,501			$	(49,082	)
GAAP operating margin			(22.8	%)			(27.1	%)			(20.0	%)			(29.1	%)
Non-GAAP adjustments			33.5	%			19.3	%			23.7	%			22.8	%
Non-GAAP operating margin			10.7	%			(7.8	%)			3.7	%			(6.3	%)
Reconciliation of net income (loss):
GAAP net loss		$	(52,457	)		$	(56,391	)		$	(178,827	)		$	(232,105	)
Plus: Stock-based compensation expense			44,602				35,490				160,015				153,039
Plus: Amortization of purchased intangibles			2,383				2,291				11,433				7,649
Plus: Transaction costs related to acquisitions			–				–				929				361
Plus: Amortization of stock-based compensation capitalized in software development costs			560				722				4,077				2,402
Plus: Lawsuit litigation cost and other expense			–				(69	)			88				(10	)
Plus: Employer payroll tax on employee equity incentive plans			1,912				1,359				4,143				3,911
Plus: Amortization of debt discount and issuance costs			558				591				2,381				2,357
Plus: Restructuring charges (1)			31,849				–				39,059				12,119
Non-GAAP net income (loss)		$	29,407			$	(16,007	)		$	43,298			$	(50,277	)
Non-GAAP net income (loss) per share:
Basic		$	0.43			$	(0.24	)		$	0.64			$	(0.78	)
Diluted		$	0.42			$	(0.24	)		$	0.63			$	(0.78	)
Shares used in non-GAAP per share calculations:
Basic			68,791				65,780				67,614				64,592
Diluted			70,184				65,780				68,300				64,592
(1) For the fiscal year ended March 31, 2022, restructuring related charge for the stock-based compensation expense of $0.5 million was included on its respective line items. There was no corresponding expense for the fiscal year ended March 31, 2023.

New Relic, Inc.
Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow
(In thousands; unaudited)
		Three Months Ended March 31,								Fiscal Year Ended March 31,
		2023				2022				2023				2022
Net cash provided by operating activities		$	73,035			$	49,952			$	53,770			$	3,624
Capital expenditures			(340	)			(2,601	)			(3,114	)			(5,778	)
Capitalized software development costs			(4,684	)			(3,256	)			(16,878	)			(12,662	)
Free cash flows (Non-GAAP)		$	68,011			$	44,095			$	33,778			$	(14,816	)
Net cash provided by (used in) investing activities		$	36,981			$	(36,642	)		$	279,881			$	(19,757	)
Net cash provided by financing activities		$	8,905			$	9,558			$	23,401			$	44,140

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230522005781/en/

Investor Contact

Ingo Friedrichowitz

New Relic, Inc.

[email protected]

Media Contact

Kerry Baker

New Relic, Inc

[email protected]

KEYWORDS: California United States North America

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Bowflex Parent, Nautilus, Inc. Reports Fourth Quarter and Full Year Fiscal 2023 Results

Direct Segment Net Sales of $139 Million Up 16% versus Pre-pandemic Fiscal 2020

Reaches 508K JRNY® Members During Q4 Fiscal 2023, Up 56% versus Q4 Fiscal 2022

Adjusted EBITDA Loss Reduced by 26% versus Q4 Fiscal 2022

Provides Fiscal Year 2024 Guidance; Expects to Achieve Significant Year-over-Year Improvement in Adjusted EBITDA Loss in Full Year Fiscal 2024

VANCOUVER, Wash.–(BUSINESS WIRE)–
Bowflex Parent, Nautilus, Inc. (NYSE: NLS) today reported its unaudited operating results for the fiscal 2023 fourth quarter and year ended March 31, 2023.

Management Comments

“We’re pleased to deliver fourth quarter and full year results that exceeded our expectations, reflecting the strength of our Direct segment and continued momentum on JRNY® as we execute on our long-term transformation under our North Star strategy,” said Jim Barr, Nautilus, Inc. Chief Executive Officer. “We took deliberate steps throughout fiscal 2023 that enabled us to exit the year with a significantly improved inventory position and streamlined cost structure. Subsequent to quarter end, we further strengthened our balance sheet and monetized the value of certain non-core assets, enhancing our ability to manage through the current environment. These actions, coupled with our asset-light, semi-variable operating model, position us well to drive future profitable growth.”

Mr. Barr continued, “The continued demand we see for our equipment in our Direct business gives us conviction in the sustainability of the shift to at-home fitness. Furthermore, we are capitalizing on consumer preferences for connected fitness thanks to our investments in our differentiated digital offering. We will continue to take the necessary actions that best position us to operate more efficiently, drive free cash flow, and return to profitability.”

Total Company Results

To gauge sales growth against more “normalized” or pre-pandemic results, in addition to showing results for periods ending March 31, 2022 and 2023, we think it is helpful to investors to provide sales results for the fourth fiscal quarter and full fiscal year ended March 31, 2023 as compared to the pre-pandemic three-month and twelve-month periods ended March 31, 2020.

Fiscal Fourth Quarter Ended March 31, 2023 Compared to Fiscal Fourth Quarter Ended March 31, 2022

• Net sales were $68.4 million, compared to $119.7 million, a decline of 42.9% versus last year. Net sales are down 19.2%, when compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in October 2020. The sales decline versus last year was driven primarily by the return to pre-pandemic demand. The net sales decrease compared to fiscal 2020 was due to decreased demand.

• Gross profit was $10.7 million, compared to $21.0 million last year. Gross profit margins were 15.6% compared to 17.5% last year. The 1.9 ppt decrease in gross margins was primarily due to increased discounting driven by the decision to exit Nautilus branded products (-3 ppts), higher outbound freight (-2 ppts), unfavorable logistics overhead (-2 ppts), and reduced investment in JRNY^® (-1 ppt), offset by lower landed product costs (+5 ppts) driven by lower inbound freight and lower factory costs. Excluding Nautilus branded products, gross profit margin would have been 20.3%.

• Operating expenses were $28.2 million compared to $42.9 million last year. The decrease of $14.7 million, or 34.3%, was primarily due to a $10.3 million decrease in media spending, a $3.9 million decrease in personnel expenses, a $1.8 million decrease in contracted services, a $0.8 million decrease in other variable selling and marketing expenses due to decreased sales and a $0.4 decrease in other costs, offset by $2.5 million in restructuring related charges. Total advertising expenses were $4.9 million this year versus $15.2 million last year.

• Operating loss was $17.5 million compared to an operating loss of $21.9 million last year, primarily driven by lower operating expenses.

• Income tax expense from continuing operations was $0.8 million this year compared to a $4.7 million tax benefit last year. The income tax expense in the current year was primarily a result of activities in foreign jurisdictions and the recording of a $4.8 million valuation allowance. The effective tax rate was (3.9)% this year compared to 20.5% last year.

• Loss from continuing operations was $20.9 million, or $0.66 per diluted share, compared to a loss of $18.2 million, or $0.58 per diluted share, last year, driven by higher income tax expense.

• Net loss was $20.9 million, or $0.66 per diluted share, compared to net loss of $18.2 million or $0.58 per diluted share, last year.

• The following non-GAAP measures exclude the impact of acquisition and other related costs¹ and restructuring and exit charges¹ for the three months ended March 31, 2023.
  • Adjusted operating expenses were $25.4 million compared to $42.1 million last year. The $16.7 million, or 39.7%, decrease was primarily due to a $10.3 million decrease in media spending, a $3.9 million decrease in personnel expenses, a $1.8 million decrease in contracted services, and a $0.8 million decrease in other variable selling and marketing expenses due to decreased sales.

  • Adjusted operating loss was $14.7 million compared to $21.1 million last year, primarily driven by lower operating expenses.

  • Adjusted EBITDA loss from continuing operations was $12.6 million compared to $16.9 million last year. Excluding Nautilus branded products, Adjusted EBITDA loss would have been $10.6 million.

^{1 See “Reconciliation of Non-GAAP Financial Measures” for more information}

Fiscal Year Ended March 31, 2023 Compared to Fiscal Year Ended March 31, 2022

• Net sales were $286.8 million, compared to $589.5 million, a decline of 51.3% versus last year. Net sales are up 3.3% when compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in October 2020. The sales decline versus last year was driven primarily by the return to pre-pandemic demand and pre-pandemic sales discounting practices, as our typical sales discounts were largely unnecessary during the pandemic period.

• Gross profit was $52.0 million, compared to $148.5 million last year. Gross profit margins were 18.1% compared to 25.2% last year. The 7.1 ppt decrease in gross profit margins was primarily due to increased discounting given our heavy inventory position and the decision to exit Nautilus branded products (-5 ppts), unfavorable logistics overhead absorption (-3 ppts), deleverage of JRNY^® COGs (-2 ppts), and increased outbound freight (-1 ppt), offset by lower landed product costs, driven by lower inbound freight and lower factory costs (+4 ppts). Excluding Nautilus branded products, gross profit margin would have been 20.1%.

• Operating expenses were $145.3 million compared to $173.8 million last year. The decrease of $28.5 million, or 16.4%, was primarily due to a $38.3 million decrease in media spending, a $9.9 million decrease due to savings in other operating expenses, a $7.4 million decrease in other variable selling and marketing expenses due to decreased sales, and a $4.7 million prior year loss contingency for a legal settlement, offset by a goodwill and intangible impairment charge of $27.0 million, $2.5 million in restructuring related charges and a $2.3 million increase in JRNY^® investments. Total advertising expenses were $23.2 million versus $61.5 million last year.

• Operating loss was $93.4 million, or a negative 32.6% operating margin, compared to an operating loss of $25.3 million, or a negative 4.3% operating margin last year, primarily due to lower gross profit and higher operating expenses, including a goodwill and intangible impairment charge of $27.0 million and a $2.5 million restructuring charge.

• Income tax expense from continuing operations was $9.4 million this year compared to a $6.0 million tax benefit last year. The income tax expense in the current year was primarily the result of the $25.4 million deferred tax asset valuation allowance recorded in fiscal 2023. The effective tax rate was (9.5)% this year compared to 21.3% last year.

• Loss from continuing operations was $107.5 million, or $3.40 per diluted share, compared to a loss of $22.2 million, or $0.72 per diluted share, last year. The decrease in loss from continuing operations was primarily due to lower gross profit and higher operating expenses as discussed in more detail above.

• Net loss was $105.4 million, compared to a net loss of $22.4 million last year. Net loss per diluted share was $3.34, compared to net loss per diluted share of $0.72 last year. The decrease in net loss was primarily due to lower gross profit and higher operating expenses as discussed in more detail above.

• The following non-GAAP measures exclude the impact of non-cash impairment charges¹ related to the carrying value of our goodwill and intangible assets and restructuring and exit charges¹ for the twelve months ended March 31, 2023 and the impact of legal settlement¹ and acquisition and other related costs¹ for the twelve months ended March 31, 2022.
  • Adjusted operating expenses were $113.6 million compared to $166.7 million last year. The $53.2 million, or 31.9%, decrease was primarily due to a $38.3 million decrease in media spending, a $9.9 million decrease in other operating expenses, a $7.4 million decrease in other variable selling and marketing expenses due to decreased sales, and a $4.7 million prior year loss contingency for a legal settlement, offset by a $2.3 million increase in JRNY^® investments.

  • Adjusted operating loss was $61.6 million compared to a loss of $18.2 million last year, driven by lower gross profit.

  • Adjusted EBITDA¹ loss from continuing operations was $46.6 million (versus guidance of Adjusted EBITDA² loss of about $50.0 million) compared to Adjusted EBITDA¹ loss of $3.3 million last year. Excluding Nautilus branded products, Adjusted EBITDA loss would have been $43.5 million.

^{1 See “Reconciliation of Non-GAAP Financial Measures” for more information}

^{2 We provided Adjusted EBITDA guidance, rather than net income guidance, due to the inherent unpredictability of forecasting certain types of expenses such as stock-based compensation and income tax expenses, which affect net income but not Adjusted EBITDA. We were unable to reasonably estimate the impact of such expenses, if any, on net income. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation. Accordingly, we did not provide a reconciliation of projected net income to projected Adjusted EBITDA}

JRNY^® Update

• As of March 31, 2023, Members of JRNY^®, the Company’s personalized connected fitness platform, reached 508,000, representing approximately 56% growth versus the same quarter last year. Of these Members, 156,000 were Subscribers, representing approximately 41% growth over the same period last year. The Company defines JRNY^® Members as all individuals who have a JRNY^® account and/or subscription, which includes Subscribers, their respective associated users, and users who consume free content. The Company defines Subscribers as a person or household who paid for a subscription, are in a trial, or have requested a “pause”‘ to their subscription for up to three months.

• Earlier this year, the Company introduced an innovative feature set to its adaptive fitness platform with the launch of JRNY^® with Motion Tracking, which pairs repetition tracking, form guidance, and adaptive weight targets, along with its extensive library of personalized cardio, strength, and whole-body workouts. Members can now access these features on their mobile device or tablet within their existing membership and without the need for additional equipment.

• The Company also recently introduced new pricing tiers: JRNY^® Mobile-Only, made just for mobile device or tablet users at a lower price point, and JRNY^® All-Access, which allows Members to take advantage of JRNY^®’s features across their mobile devices, tablets, and Bowflex^® products with built-in touchscreens.

• JRNY® learns with each use by assessing Members’ fitness levels and recommends workouts based on their abilities and the workout experiences they favor, creating an adaptive and personalized fitness plan that Members can stick to for long-term success. Leveraging proprietary technology and machine learning expertise from the Company’s acquisition of VAY, these new features are enhancing value within the JRNY^® platform, which the Company believes will continue to drive membership growth.

Segment Results

Fiscal Fourth Quarter Ended March 31, 2023 Compared to Fiscal Fourth Quarter Ended March 31, 2022

Direct Segment

• Direct segment sales were $41.6 million, compared to $59.8 million, a decline of 30.4% versus last year, and down 11.7%, compared to the same period in fiscal 2020. The net sales decrease compared to last year was primarily driven by the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices. The net sales decrease compared to fiscal 2020 was due to decreased demand.

• Cardio sales declined 28.8% versus last year and were down 22.3% compared to the same period in fiscal 2020. Lower cardio sales this quarter versus last year were primarily driven by lower bike demand. Strength product sales declined 33.3% versus last year and increased 22.0% compared to the same period in fiscal 2020. Lower strength sales this quarter versus last year were primarily driven by lower demand for SelectTech^® weights.

• As of March 31, 2023, the Direct segment’s backlog totaled $0.5 million. This amount represents unfulfilled consumer orders net of current promotional programs and sales discounts.

• Gross profit margin was 21.0% versus 19.3% last year. The 1.7 ppt increase in gross margin was primarily driven by: lower product costs (+3 ppts) and decreased other costs (+1 ppt), offset by increased discounting (-2 ppts) and higher outbound freight (-1 ppt). Gross profit was $8.7 million, a decrease of 24.2% versus last year.

• Segment contribution loss was $5.4 million, or 12.9% of sales, compared to segment contribution loss of $11.7 million, or 19.5% of sales last year. The improvement was primarily driven by decreased media spend and lower operating expenses, as explained above. Advertising expenses were $4.9 million compared to $15.2 million for the same period last year.

Retail Segment

• Retail segment sales were $26.2 million, compared to $58.7 million, a decline of 55.4% versus last year, and down 28.5% compared to the same period in fiscal 2020 excluding sales related to the Octane brand. Retail segment sales outside the United States and Canada were up 3.6% versus last year. The net sales decrease compared to last year was primarily driven by the return to pre-pandemic seasonal demand. The net sales decrease compared to fiscal 2020 was due to decreased demand.

• Cardio sales declined 35.4% versus last year and were down 45.2% compared to the same period in fiscal 2020, excluding sales related to the Octane brand. Lower cardio sales this quarter were primarily driven by lower bike demand. Strength product sales declined 68.4% versus last year and increased 19.2% compared to the same period in fiscal 2020. Lower strength sales this quarter were primarily driven by lower demand for SelectTech^® weights.

• As of March 31, 2023, the Retail segment’s backlog totaled $11.5 million. This amount represents customer orders for future shipments and are net of contractual rebates and consideration payable to applicable Retail customers.

• Gross profit margin was 5.0% versus 14.0% last year. The 9.0 ppt decrease in gross margin was primarily due to unfavorable logistics overhead absorption (-5 ppts), a prior year release of a special warranty (-3 ppts), increase in inventory adjustments (-1 ppt) and increased other costs (-1 ppt), partially offset by lower product costs (+1 ppt). Gross profit was $1.3 million, a decrease of 84.3% versus last year.

• Segment contribution loss was $4.7 million, or 18.1% of sales, compared to segment contribution income of $0.7 million, or 1.2% of sales, last year. The decrease was primarily driven by lower gross profit due to lower sales as explained above.

Comparison of Segment Results for the Fiscal Year Ended March 31, 2023 to the Fiscal Year Ended March 31, 2022

Direct Segment

• Direct segment sales were $139.3 million, compared to $221.7 million, a decline of 37.2%, versus 2022 and $120.1 million, an increase of 16.0% compared to fiscal 2020. The net sales decrease compared to last year was primarily driven by the return to pre-pandemic seasonal demand and higher sales discounting practices. The net sales increase compared to fiscal 2020 was due to increased demand.

• Cardio sales declined 27.0% versus last year and were flat compared to fiscal 2020. Lower cardio sales were primarily driven by lower bike demand. Strength product salesdeclined 51.3% versus last year and increased 74.7% compared to fiscal 2020. Lower strength sales this year were primarily driven by lower demand for SelectTech^® weights.

• Gross profit margin was 20.6% versus 30.7% last year. The 10.1 ppt decrease in gross margin was primarily due to increased discounting given the heavy inventory position and the decision to exit Nautilus branded products (-6 ppts), deleverage of JRNY^® COGs (-2 ppts), unfavorable logistics overhead absorption (-2 ppts) and increased other costs (-1 ppt), partially offset by lower outbound freight (+1 ppt). Gross profit was $28.7 million, a decrease of 57.9% versus last year.

• Segment contribution loss was $29.6 million, or 21.3% of sales, compared to segment contribution loss of $15.7 million, or 7.1% of sales last year. The decline was primarily driven by lower gross profit as explained above, offset by decreased media spend. Advertising expenses were $23.2 million compared to $61.5 million last year.

Retail Segment

• Retail segment sales were $144.1 million, compared to $364.1 million, a decline of 60.4% versus last year and $154.3 million, a decrease of 6.6%, compared to fiscal 2020, excluding sales related to the Octane brand. Retail segment sales outside the United States and Canada were down 69.7% versus last year. The net sales decrease compared to last year was primarily driven by the return to pre-pandemic seasonal demand, lower cardio sales and higher sales discounting. The net sales decrease compared to fiscal 2020 was due to decreased demand.

• Cardio sales declined 70.2% versus last year and were down 41.1% compared to fiscal 2020, excluding sales related to the Octane brand. Lower cardio sales this year were primarily driven by lower bike demand. Strength product sales declined by 47.2% versus last year and increased 68.5% compared to fiscal 2020. Lower strength sales this year were primarily driven by lower demand for SelectTech^® weights.

• Gross profit margin was 13.8% versus 21.0% last year. The 7.2 ppt decrease in gross profit margin was primarily driven by unfavorable logistics overhead absorption (-4 ppts), increased discounting given our heavy inventory position and the decision to exit Nautilus branded products (-3 ppts) and increased other costs (-1 ppt), partially offset by lower product costs (+1 ppt) driven by lower inbound freight and lower factory costs. Gross profit was $19.9 million, a decrease of 74.0% versus last year.

• Segment contribution loss was $5.7 million, or 4.0% of sales, compared to segment contribution income of $44.8 million, or 12.3% of sales, last year. The decline was primarily driven by lower gross profit as explained above.

Balance Sheet and Other Key Highlights as ofMarch 31, 2023:

• Cash and Liquidity:
  • Cash and restricted cash were $18.3 million compared to cash and restricted cash of $14.2 million as of March 31, 2022. The increase was primarily driven by faster inventory turns and extended vendor payment terms.

  • Debt and other borrowings were $27.9 million compared to $29.4 million as of March 31, 2022.

  • $14.9 million was available for borrowing under the Wells Fargo Asset Based Lending Revolving Facility (“Facility”) compared to $65.8 million as of March 31, 2022.

  • Free Cash Flow¹, defined as net cash provided by (used in) operating activities minus capital expenditures, was $6.2 million for the fiscal year ended March 31, 2023 compared to negative $79.6 million for the fiscal year ended March 31, 2022.

• Inventory was $46.6 million, down 58% compared to $111.2 million as of March 31, 2022. The year-over-year decrease in inventory was driven by faster turns of inventory on-hand and lower inventory in-transit. About 6% of inventory as of March 31, 2023 was in-transit.

• Trade receivables were $21.5 million, compared to $61.5 million as of March 31, 2022. The decrease in trade receivables was primarily driven by lower sales in the fourth quarter of fiscal 2023.

• Trade payables were $29.4 million, compared to $53.2 million as of March 31, 2022. The decrease in trade payables of $23.8 million was driven by strong inventory management as the Company sold through existing inventory and minimized purchases to end the year with inventory more in line with projected revenue.

• Capital expenditures totaled $12.6 million for the twelve months ended March 31, 2023.

• As noted in the pre-announcement of results for the fourth quarter of fiscal 2023, as of May 2, 2023, cash and restricted cash was $19 million while total borrowings were $18 million.

^{1 See “Reconciliation of Non-GAAP Financial Measures” for more information}

Forward Looking Guidance

The following forward-looking statements reflect the Company’s full fiscal year 2024 expectations as of May 23, 2023 and are subject to risks and uncertainties.

Full Year Fiscal 2024

• The Company expects full year net revenue to be in the range of $270 million to $300 million, with the second half of the year representing 60% to 65% of full year net revenue. The Company expects Q1 to be the lowest revenue quarter of the year, and as a % of full year sales, to be lower than last year. Finally, given the sale of the Nautilus Brand, the Company expects royalty revenue to be $1.8 million.

• The Company expects full year Adjusted EBITDA¹ of between $15 million loss to break-even.

• The Company is targeting JRNY^® Members to be approximately 625,000 at March 31, 2024.

^{1The Company provides Adjusted EBITDA guidance, rather than net income guidance, due to the inherent unpredictability of forecasting certain types of expenses such as stock-based compensation and income tax expenses, which affect net income but not Adjusted EBITDA. The Company is unable to reasonably estimate the impact of such expenses, if any, on net income. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation. Accordingly, the Company does not provide a reconciliation of projected net income to projected Adjusted EBITDA}

Conference Call

Nautilus will discuss our fiscal 2023 fourth quarter ended March 31, 2023 operating results during a live conference call and webcast on Tuesday, May 23, 2023 at 1:30 p.m. Pacific Time. The conference call can be accessed by calling (877) 425-9470 in North America. International callers may dial (201) 389-0878. Please note that there will be presentation slides accompanying the earnings call. The slides will be displayed live on the webcast and will be available to download via the webcast player or at http://www.nautilusinc.com/events. The webcast will be archived online within two hours after completion of the call and will be available for six months. Participants from the Company will include Jim Barr, Chief Executive Officer and Aina Konold, Chief Financial Officer.

A telephonic playback will be available from 4:30 p.m. PT, May 23, 2023 through 8:59 p.m. PT, June 6, 2023. Participants can dial (844) 512-2921 in North America and international participants can dial (412) 317-6671 to hear the playback. The passcode for the playback is 13737579.

About Nautilus, Inc.

Nautilus, Inc. (NYSE:NLS) is a global leader in digitally connected home fitness solutions. The Company’s brand family includes Bowflex^®, Nautilus^®, Schwinn^®, and JRNY^®, its digital fitness platform. With a broad selection of exercise bikes, cardio equipment, and strength training products, Nautilus, Inc. empowers healthier living through individualized connected fitness experiences and in doing so, envisions building a healthier world, one person at a time.

Headquartered in Vancouver, Washington, the Company’s products are sold direct to consumer on brand websites and through retail partners and are available throughout the U.S. and internationally. Nautilus, Inc. uses the investor relations page of its website (www.nautilusinc.com/investors) to make information available to its investors and the market.

Forward-Looking Statements

This press release includes forward-looking statements (statements which are not historical facts) within the meaning of the Private Securities Litigation Reform Act of 1995, including: projected, targeted or forecasted financial, operating results and capital expenditures, including but not limited to net sales growth rates, gross margins, operating expenses, operating margins, anticipated demand for the Company’s new and existing products, statements regarding the Company’s prospects, resources or capabilities; planned investments, strategic initiatives and the anticipated or targeted results of such initiatives; the effects of the COVID-19 pandemic on the Company’s business; and planned operational initiatives and the anticipated cost-saving results of such initiatives. All of these forward-looking statements are subject to risks and uncertainties that may change at any time. Factors that could cause Nautilus, Inc.’s actual expectations to differ materially from these forward-looking statements also include: weaker than expected demand for new or existing products; our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs; risks associated with current and potential delays, work stoppages, or supply chain disruptions, including shipping delays due to the severe shortage of shipping containers; an inability to pass along or otherwise mitigate the impact of raw material price increases and other cost pressures, including unfavorable currency exchange rates and increased shipping costs; experiencing delays and/or greater than anticipated costs in connection with launch of new products, entry into new markets, or strategic initiatives; our ability to hire and retain key management personnel; changes in consumer fitness trends; changes in the media consumption habits of our target consumers or the effectiveness of our media advertising; a decline in consumer spending due to unfavorable economic conditions; risks related to the impact on our business of the COVID-19 pandemic or similar public health crises; softness in the retail marketplace; availability and timing of capital for financing our strategic initiatives, including being able to raise capital on favorable terms or at all; changes in the financial markets, including changes in credit markets and interest rates that affect our ability to access those markets on favorable terms and the impact of any future impairment. Additional assumptions, risks and uncertainties are described in detail in our registration statements, reports and other filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in our Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. Such filings are available on our website or at www.sec.gov. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent developments, events, or circumstances.

RESULTS OF OPERATIONS INFORMATION

The following summary contains information from our consolidated statements of operations for the three and twelve month periods ended March 31, 2023 and 2022 (unaudited and in thousands, except per share amounts):

	Three Months Ended March 31,								Twelve Months Ended March 31,
	2023				2022				2023				2022
Net sales	$	68,419			$	119,724			$	286,773			$	589,534
Cost of sales		57,740				98,741				234,819				441,077
Gross profit		10,679				20,983				51,954				148,457
Operating expenses:
Selling and marketing		12,012				23,570				51,505				99,204
General and administrative		8,157				12,428				42,474				51,783
Research and development		5,507				6,904				21,822				22,786
Goodwill and intangible impairment charge		—				—				26,965				—
Restructuring and exit charges		2,549				—				2,549				—
Total operating expenses		28,225				42,902				145,315				173,773
Operating loss		(17,546	)			(21,919	)			(93,361	)			(25,316	)
Other expense, net		(2,593	)			(984	)			(4,768	)			(2,914	)
Loss from continuing operations before income taxes		(20,139	)			(22,903	)			(98,129	)			(28,230	)
Income tax expense (benefit)		786				(4,705	)			9,359				(6,026	)
Loss from continuing operations		(20,925	)			(18,198	)			(107,488	)			(22,204	)
(Loss) income from discontinued operations, net of income taxes		(12	)			(16	)			2,089				(227	)
Net loss	$	(20,937	)		$	(18,214	)		$	(105,399	)		$	(22,431	)
Basic loss per share from continuing operations	$	(0.66	)		$	(0.58	)		$	(3.40	)		$	(0.72	)
Basic income per share from discontinued operations		—				—				0.06				—
Basic net loss per share	$	(0.66	)		$	(0.58	)		$	(3.34	)		$	(0.72	)
Diluted loss per share from continuing operations	$	(0.66	)		$	(0.58	)		$	(3.40	)		$	(0.72	)
Diluted income per share from discontinued operations		—				—				0.06				—
Diluted net loss per share	$	(0.66	)		$	(0.58	)		$	(3.34	)		$	(0.72	)
Shares used in per share calculations:
Basic		31,836				31,256				31,585				31,029
Diluted		31,836				31,256				31,585				31,029
Select Metrics:
Gross margin		15.6	%			17.5	%			18.1	%			25.2	%
Selling and marketing % of net sales		17.6	%			19.7	%			18.0	%			16.8	%
General and administrative % of net sales		11.9	%			10.4	%			14.8	%			8.8	%
Research and development % of net sales		8.0	%			5.8	%			7.6	%			3.9	%
Operating loss % of net sales		(25.6	) %			(18.3	) %			(32.6	) %			(4.3	) %

SEGMENT INFORMATION

The following table presents certain comparative information by segment and major product lines within each business segment for the three and twelve months ended March 31, 2023 and 2022 (unaudited and in thousands):

	Three Months Ended March 31,								Change
	2023				2022				$				%
Net sales:
Direct net sales:
Cardio products(1)	$	27,860			$	39,156			$	(11,296	)		(28.8	)%
Strength products(2)		13,743				20,616				(6,873	)		(33.3	)%
Direct		41,603				59,772				(18,169	)		(30.4	)%
Retail net sales:
Cardio products(1)		14,880				23,020				(8,140	)		(35.4	)%
Strength products(2)		11,284				35,711				(24,427	)		(68.4	)%
Retail		26,164				58,731				(32,567	)		(55.5	)%
Royalty		652				1,221				(569	)		(46.6	)%
Consolidated net sales	$	68,419			$	119,724			$	(51,305	)		(42.9	)%
Gross profit:
Direct	$	8,730			$	11,519			$	(2,789	)		(24.2	)%
Retail		1,297				8,243				(6,946	)		(84.3	)%
Royalty		652				1,221				(569	)		(46.6	)%
Consolidated gross profit	$	10,679			$	20,983			$	(10,304	)		(49.1	)%
Gross margin:
Direct		21.0	%			19.3	%			170		basis points
Retail		5.0	%			14.0	%			(900	)	basis points
Contribution:
Direct	$	(5,382	)		$	(11,655	)		$	6,273			53.8	%
Retail		(4,726	)			730				(5,456	)		(747.4	)%
Royalty		652				1,221				(569	)		(46.6	)%
Consolidated contribution	$	(9,456	)		$	(9,704	)		$	248			2.6	%
Reconciliation of consolidated contribution to loss from continuing operations:
Consolidated contribution	$	(9,456	)		$	(9,704	)		$	248			2.6	%
Amounts not directly related to segments:
Operating expenses		(8,090	)			(12,215	)			4,125			33.8	%
Other expense, net		(2,593	)			(984	)			(1,609	)		(163.5	)%
Income tax expense		(786	)			4,705				(5,491	)		(116.7	)%
Loss from continuing operations	$	(20,925	)		$	(18,198	)		$	(2,727	)		(15.0	)%
(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

	Twelve Months Ended March 31,								Change
	2023				2022				$				%
Net sales:
Direct net sales:
Cardio products(1)	$	93,889			$	128,550			$	(34,661	)		(27.0	)%
Strength products(2)		45,400				93,176				(47,776	)		(51.3	)%
Direct		139,289				221,726				(82,437	)		(37.2	)%
Retail net sales:
Cardio products(1)		62,225				208,991				(146,766	)		(70.2	)%
Strength products(2)		81,888				155,078				(73,190	)		(47.2	)%
Retail		144,113				364,069				(219,956	)		(60.4	)%
Royalty		3,371				3,739				(368	)		(9.8	)%
Consolidated net sales	$	286,773			$	589,534			$	(302,761	)		(51.4	)%
Gross profit:
Direct	$	28,664			$	68,117			$	(39,453	)		(57.9	)%
Retail		19,919				76,601				(56,682	)		(74.0	)%
Royalty		3,371				3,739				(368	)		(9.8	)%
Consolidated gross profit	$	51,954			$	148,457			$	(96,503	)		(65.0	)%
Gross margin:
Direct		20.6	%			30.7	%			(1,010	)	basis points
Retail		13.8	%			21.0	%			(720	)	basis points
Contribution:
Direct	$	(29,626	)		$	(15,711	)		$	(13,915	)		(88.6	) %
Retail		(5,720	)			44,831				(50,551	)		(112.8	) %
Royalty		3,371				3,739				(368	)		(9.8	) %
Consolidated contribution	$	(31,975	)		$	32,859			$	(64,834	)		(197.3	) %
Reconciliation of consolidated contribution to loss from continuing operations:
Consolidated contribution	$	(31,975	)		$	32,859			$	(64,834	)		(197.3	)%
Amounts not directly related to segments:
Operating expenses		(61,386	)			(58,175	)			(3,211	)		(5.5	)%
Other expense, net		(4,768	)			(2,914	)			(1,854	)		(63.6	)%
Income tax expense		(9,359	)			6,026				(15,385	)		(255.3	)%
Loss from continuing operations	$	(107,488	)		$	(22,204	)		$	(85,284	)		(384.1	)%
(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

BALANCE SHEET INFORMATION

The following summary contains information from our consolidated balance sheets as of March 31, 2023 and March 31, 2022 (unaudited and in thousands):

	As of
	March 31, 2023			March 31, 2022
Assets
Cash	$	17,362		$	12,872
Restricted cash		950			1,339
Trade receivables, net of allowances		21,489			61,454
Inventories		46,599			111,190
Prepaids and other current assets		8,033			14,546
Other current assets – restricted		—			3,887
Income taxes receivable		1,789			1,998
Total current assets		96,222			207,286
Property, plant and equipment, net		32,789			32,129
Operating lease right-of-use assets		19,078			23,620
Goodwill		—			24,510
Other intangible assets, net		6,787			9,304
Deferred income tax assets, non-current		554			8,760
Income taxes receivable, non-current		5,673			5,673
Other assets		2,429			2,763
Total assets	$	163,532		$	314,045
Liabilities and Shareholders’ Equity
Trade payables	$	29,378		$	53,165
Accrued liabilities		15,575			29,386
Operating lease liabilities, current portion		4,427			4,494
Finance lease liabilities, current portion		122			119
Warranty obligations, current portion		2,564			4,968
Income taxes payable, current portion		328			839
Debt payable, current portion, net of unamortized debt issuance costs		1,642			2,243
Total current liabilities		54,036			95,214
Operating lease liabilities, non-current		16,380			20,926
Finance lease liabilities, non-current		282			395
Warranty obligations, non-current		703			1,248
Income taxes payable, non-current		2,316			4,029
Deferred income tax liabilities, non-current		253			—
Other non-current liabilities		1,978			1,071
Debt payable, non-current, net of unamortized debt issuance costs		26,284			27,113
Shareholders’ equity		61,300			164,049
Total liabilities and shareholders’ equity	$	163,532		$	314,045

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Non-GAAP Presentation

Nautilus presents non-GAAP financial measures as a complement to results provided in accordance with GAAP, and the non-GAAP financial measures should not be regarded as a substitute for GAAP.

In addition to disclosing its financial results determined in accordance with GAAP, Nautilus has presented in this release certain non-GAAP financial measures, which exclude the impact of certain items (as further described below). Management believes these measures are also useful to investors as these are the same metrics that management uses to evaluate past performance and prospects for future performance. Nautilus strongly encourages investors to review all its financial statements and publicly filed reports in their entirety and to not rely on any single financial measure to evaluate the Company’s performance.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. We define free cash flow as net cash provided by (used in) operating activities minus capital expenditures. We believe that, when viewed with our GAAP results, free cash flow provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We believe free cash flow provides useful additional information to users of our financial information and is an important metric because it represents a measure of how much cash we have available for discretionary and non-discretionary items after the deduction of capital expenditures. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.

Adjusted Results

In addition to disclosing the comparable GAAP results, Nautilus has presented its operating expenses and operating (loss) income on an adjusted basis to exclude certain non-recurring items, including the non-cash charge related to goodwill and intangible asset impairment⁽¹⁾, the legal settlement⁽²⁾, acquisition and other related costs⁽³⁾ and restructuring and exit charges⁽⁴⁾. The Company believes that excluding these items, which are inconsistent in amount and frequency, supplements the GAAP information with a measure that can be used to assess the sustainability of the Company’s operating performance. Nautilus has also presented EBITDA from continuing operations on an adjusted basis, excluding the aforementioned items for similar reasons.

Adjusted EBITDA from Continuing Operations

Nautilus has also presented EBITDA from continuing operations on an adjusted basis, to exclude the non-cash charge related to goodwill and intangible asset impairment⁽¹⁾, the legal settlement⁽²⁾, acquisition and other related costs⁽³⁾, restructuring and exit charges⁽⁴⁾, depreciation and amortization, stock-based compensation and certain other net expenses. The Company believes that EBITDA is an important measure as it allows the company to evaluate past performance and prospects for future performance. The Company believes the exclusion of stock-based compensation expense provides for a better comparison of operating results to prior periods and to peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions, and the variety of award types. The Company excludes other expenses, net that are the result of factors and can vary significantly from one period to the next. We believe that exclusion of such other expenses are useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

We do not reconcile non-GAAP financial measures on a forward-looking basis as it is impractical to do so without unreasonable effort.

The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure for the three and twelve month periods ended March 31, 2023 and 2022 (unaudited and in thousands):

	Three Months Ended March 31,								Twelve Months Ended March 31,
	2023				2022				2023				2022
Net cash provided by (used in) operating activities	$	30,626			$	25,017			$	18,846			$	(66,566	)
Purchase of property, plant and equipment		(1,921	)			(3,914	)			(12,618	)			(13,050	)
Free cash flow	$	28,705			$	21,103			$	6,228			$	(79,616	)
Net loss	$	(20,937	)		$	(18,214	)		$	(105,399	)		$	(22,431	)
Free cash flow as percentage of net loss		137.1	%			115.9	%			5.9	%			(354.9	)%

The following table presents a reconciliation of operating expenses, the most directly comparable GAAP measure, to Adjusted operating expenses for the three and twelve month periods ended March 31, 2023 and 2022 (unaudited and in thousands):

	Three Months Ended March 31,								Twelve Months Ended March 31,
	2023				2022				2023				2022
Operating expenses	$	28,225			$	42,902			$	145,315			$	173,773
Goodwill and intangible impairment charge(1)		—				—				(26,965	)			—
Legal settlement(2)		276				—				276				(4,665	)
Acquisition and other related costs(3)		(540	)			(770	)			(2,483	)			(2,448	)
Restructuring and exit charges(4)		(2,549	)			—				(2,549	)			—
Adjusted operating expenses	$	25,412			$	42,132			$	113,594			$	166,660

The following table presents a reconciliation of operating loss, the most directly comparable GAAP measure, to Adjusted operating loss for the three and twelve month periods ended March 31, 2023 and 2022 (unaudited and in thousands):

	Three Months Ended March 31,								Twelve Months Ended March 31,
	2023				2022				2023				2022
Operating loss	$	(17,546	)		$	(21,919	)		$	(93,361	)		$	(25,316	)
Goodwill and intangible impairment charge(1)		—				—				26,965				—
Legal settlement(2)		(276	)			—				(276	)			4,665
Acquisition and other related costs(3)		540				770				2,483				2,448
Restructuring and exit charges(4)		2,549				—				2,549				—
Adjusted operating loss	$	(14,733	)		$	(21,149	)		$	(61,640	)		$	(18,203	)

The following table presents a reconciliation of loss from continuing operations, the most directly comparable GAAP measure, to Adjusted EBITDA from continuing operations for the three and twelve month periods ended March 31, 2023 and 2022 (unaudited and in thousands):

	Three Months Ended March 31,								Twelve Months Ended March 31,
	2023				2022				2023				2022
Loss from continuing operations	$	(20,925	)		$	(18,198	)		$	(107,488	)		$	(22,204	)
Other expense, net		2,593				984				4,768				2,914
Income tax expense (benefit) from continuing operations		786				(4,705	)			9,359				(6,026	)
Depreciation and amortization		3,147				2,628				11,103				8,615
Stock-based compensation expense		(964	)			1,651				3,909				6,262
Goodwill and intangible impairment charge(1)		—				—				26,965				—
Legal settlement(2)		(276	)			—				(276	)			4,665
Acquisition and other related costs(3)		540				770				2,483				2,448
Restructuring and exit charges(4)		2,549				—				2,549				—
Adjusted loss before interest, taxes, depreciation, and amortization (Adjusted EBITDA) from continuing operations	$	(12,550	)		$	(16,870	)		$	(46,628	)		$	(3,326	)

⁽¹⁾ Goodwill and intangible impairment charge

In accordance with ASC 350 — Intangibles — Goodwill and Other, an entity is required to perform goodwill and indefinite-lived trade names impairment valuations annually, or sooner if triggering events are identified. We observed continued market volatility including significant declines in our market capitalization during the three month period ended June 30, 2022, which we identified as a triggering event. In response to the triggering event, we performed an interim evaluation and a market capitalization reconciliation during the first quarter of fiscal 2023, which resulted in non-cash goodwill and indefinite-lived intangible assets impairment charges.

⁽²⁾ Legal Settlement

Legal settlement is a loss contingency accrual related to a legal settlement for a class action lawsuit related to advertisement of our treadmills.

⁽³⁾ Acquisition and other related costs

On September 17, 2021, we acquired VAY AG (“VAY”) for aggregate purchase consideration of approximately $27.0 million. We accounted for the transaction as a business combination. Acquisition and other costs are reflected in general and administrative costs and consist of acquisition related closing costs and a contingent consideration arrangement. The contingent consideration arrangement requires the Company to recognize $3.9 million compensatory expense over an 18 month service period.

⁽⁴⁾ Restructuring and exit charges

In February 2023, we restructured our cost structure to align with lower revenue. In addition to ending relationships with outsourced contractors, we executed a reduction in our workforce of approximately 15%. Restructuring and exit charges include involuntary employee termination benefits and other exit costs.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230523006033/en/

Investor Relations:

John Mills

ICR, LLC

646-277-1254

[email protected]

Media:

John Fread

Nautilus, Inc

360-859-5815

[email protected]

Robin Rootenberg

Action Mary

925-464-8030

[email protected]

KEYWORDS: United States North America Washington

INDUSTRY KEYWORDS: Home Goods Sports Health Specialty Other Sports Fitness & Nutrition Biking/Cycling Retail

MEDIA:

Posted on May 23, 2023 4:10 pm

Immunome Publishes Preclinical Research Demonstrating that Inhibition of IL-38 Using an Antibody Leads to Anti-Tumor Activity

Immunome Publishes Preclinical Research Demonstrating that Inhibition of IL-38 Using an Antibody Leads to Anti-Tumor Activity

EXTON, Pa.–(BUSINESS WIRE)–Immunome, Inc. (Nasdaq: IMNM), a biopharmaceutical company utilizing a proprietary human memory B cell platform to discover and develop antibody therapeutics to improve patient care, today announced the publication of data highlighting efficacy of its preclinical IL-38 blocking antibody, titled “IL-38 blockade induces anti-tumor immunity by abrogating tumor-mediated suppression of early immune activation,” in the peer-reviewed journal mAbs. The data in the article demonstrates that antibody-based targeting of IL-38 reactivates the immunostimulatory anti-tumor mechanisms within the tumor microenvironment in preclinical testing.

“Although immune checkpoint inhibitors have transformed how we treat cancer, these therapies are only effective in a small subset of patients. This highlights a significant need for continued innovation in this space,” said Matthew Robinson, Ph.D., Chief Technology Officer of Immunome. “Our Discovery Engine identified IL-38 as a potentially interesting immuno-oncology target. Based on our work highlighting the antitumor activity associated with targeting this novel cytokine and its marked expression across a range of cancers, including head and neck, lung, gastroesophageal, and others, we believe targeting IL-38 could benefit a number of patients.”

Key highlights from the study are:

• IL-38 is expressed across all stages of disease in a range of tumors of high unmet medicalneed

• An anti-IL-38 antibody, identified by Immunome, inhibits tumor growth in two in-vivo preclinical cancer models

• Treatment in these models with the IL-38 blocking antibody resulted in increased levels of intra-tumoral chemokines

• Animals whose tumors fully resolved, when rechallenged, are resistant to tumor growth, suggesting the induction of immunological memory

Purnanand Sarma, Ph.D., President and Chief Executive Officer of Immunome, added, “These initial preclinical results support both the continued development and the approach we have taken in our patent filings for our anti-IL-38 program. We remain committed to leveraging the full power of our technology platform to continue advancing new and potentially transformative options for cancer patients.”

About Immunome

Immunome is a biopharmaceutical company that utilizes its proprietary human memory B cell platform to discover and develop antibody therapeutics to improve patient care. The company’s focus is on discovering and developing therapeutics in oncology internally and in collaboration with our partners. For more information, please visit www.immunome.com or follow us on Twitter and LinkedIn.

About Immunome’s Discovery Engine

Immunome’s proprietary Discovery Engine identifies novel therapeutic antibodies and their targets through an unbiased interrogation of human memory B cells, highly educated components of the immune system, isolated from patients. Memory B cells are key elements in the human immune system response to disease as they produce specific, high-affinity antibodies that bind to cancer antigens or pathogens. Immunome’s Discovery Engine incorporates high-throughput screening to enable efficient, unbiased, broad, and deep functional evaluation of patient memory B cell repertoires to identify antibodies directed at novel targets. The functional data we generate differentiates our approach from those that use deep sequencing of B cells to identify dominant clones that are common within and across patients and assumes genomic dominance is a hallmark of therapeutic utility.

Forward-Looking Statements

This press release contains “forward-looking statements” intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include, without limitation, express or implied statements that are not historical fact regarding matters such as: Immunome’s ability to achieve anticipated discovery, development and commercial milestones; the timing and results of preclinical studies and clinical trials; regulatory submissions and actions; translation of preclinical data into clinical safety and efficacy; and therapeutic potential and benefits of, and possible need and demand for, Immunome’s programs and development candidates. Forward-looking statements may be identified by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “suggest,” “can,” “may,” “will,” “could,” “should,” “seek,” “potential” and similar words, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Immunome’s current expectations and involve risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied in the statements due to a number of factors, including, but not limited to Immunome’s ability to execute on its R&D strategy; Immunome’s ability to fund operations and raise capital; Immunome’s reliance on vendors; the competitive landscape; the fact that research and development data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and the additional risks and uncertainties set forth more fully under the caption “Risk Factors” in Immunome’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 16, 2023, and elsewhere in Immunome’s other filings and reports with the SEC. Forward-looking statements contained in this announcement are made as of this date, and Immunome undertakes no duty to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. In this press release, we may discuss our current and potential future product candidates that have not yet completed clinical trials or been approved for marketing by the U.S. Food and Drug Administration or other governmental authority, including expectations about their therapeutic potential and benefits thereof. No representation is made as to the safety or effectiveness of these current or potential future product candidates for the use for which such product candidates are being studied.

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Media Contact

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KEYWORDS: United States North America Pennsylvania

INDUSTRY KEYWORDS: Oncology Health Clinical Trials Research Science Pharmaceutical Biotechnology

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Posted on May 23, 2023 4:09 pm

Agilent Reports Second-Quarter Fiscal Year 2023 Financial Results

Agilent Reports Second-Quarter Fiscal Year 2023 Financial Results

Delivers solid results; adjusts full-year guidance in an increasingly challenging market

Highlights:

• Revenue of $1.72 billion represents 6.8% reported growth year-over-year; and up 9.5% on a core⁽¹⁾ basis.

• GAAP net income of $302 million with earnings per share (EPS) of $1.02, up 12% from the second quarter of 2022.

• Non-GAAP⁽²⁾ net income of $377 million with EPS of $1.27, up 12% from the second quarter of 2022.

• Full-year revenue is now expected to be in the range of $6.93 billion to $7.03 billion, representing reported growth of 1.2% to 2.7% and core⁽¹⁾ growth of 3.0% to 4.5%. Fiscal year 2023 non-GAAP⁽³⁾ EPS is now estimated to be in the range of $5.60 to $5.65.

• Third-quarter revenue is expected to be in the range of $1.640 billion to $1.675 billion with non-GAAP⁽³⁾ EPS of $1.36 to $1.38.

SANTA CLARA, Calif.–(BUSINESS WIRE)–
Agilent Technologies Inc. (NYSE: A) today reported revenue of $1.72 billion for the second quarter ended April 30, 2023, an increase of 6.8% compared to the second quarter of 2022 and up 9.5% on a core⁽¹⁾ basis.

Second-quarter GAAP net income was $302 million, or $1.02 per share. This compares with $274 million, or 91 cents per share, in the second quarter of fiscal year 2022. Non-GAAP⁽²⁾ net income was $377 million, or $1.27 per share during the quarter, compared with $340 million or $1.13 per share during the second quarter a year ago.

“In an increasingly challenging market environment, the Agilent team delivered solid results in the second quarter,” said Agilent President and CEO Mike McMullen. “Revenues of $1.72 billion are up 9.5 percent core⁽¹⁾ with growth across all end markets and regions. Our results are driven by an innovative and broad portfolio, a differentiated customer experience, and outstanding execution.”

Financial Highlights

Life Sciences and Applied Markets Group

Agilent’s Life Sciences and Applied Markets Group (LSAG) reported second-quarter revenue of $968 million, a year-over-year increase of 8% (up 10% on a core⁽¹⁾ basis). LSAG’s operating margin for the quarter was 27.3%.

Agilent CrossLab Group

The Agilent CrossLab Group (ACG) reported second-quarter revenue of $387 million, a year-over-year increase of 10% (up 13% on a core⁽¹⁾ basis). ACG’s operating margin for the quarter was 26.6%.

Diagnostics and Genomics Group

The Diagnostics and Genomics Group (DGG) reported second-quarter revenue of $362 million, a year-over-year increase of 1% (up 3% on a core⁽¹⁾ basis). DGG’s operating margin for the quarter was 20.2%.

Full Year and Third-Quarter Outlook

Reflecting increased market uncertainties, full-year revenue is now expected to be in the range of $6.93 billion to $7.03 billion, representing reported growth of 1.2% to 2.7% and core⁽¹⁾ growth of 3.0% to 4.5%. Fiscal year 2023 non-GAAP⁽³⁾ EPS guidance is now estimated to be in the range of $5.60 to $5.65.

The outlook for third-quarter revenue is expected to be in a range of $1.640 billion to $1.675 billion. Third-quarter non-GAAP⁽³⁾ earnings guidance is expected to be in the range of $1.36 to $1.38 per share.

The outlook is based on forecasted currency exchange rates.

Conference Call

Agilent’s management will present additional details regarding the company’s second-quarter 2023 financial results on a conference call with investors today at 1:30 p.m. PDT. This event will be broadcast live online in listen-only mode. To listen to the webcast, select the “Q2 2023 Agilent Technologies Inc. Earnings Conference Call” link on the Agilent Investor Relations website. The webcast will remain on the company site for 90 days.

About Agilent Technologies

Agilent Technologies Inc. (NYSE: A) is a global leader in analytical and clinical laboratory technologies, delivering insights and innovation that help our customers bring great science to life. Agilent’s full range of solutions includes instruments, software, services, and expertise that provide trusted answers to our customers’ most challenging questions. The company generated revenue of $6.85 billion in fiscal 2022 and employs 18,000 people worldwide. Information about Agilent is available at www.agilent.com. To receive the latest Agilent news, subscribe to the Agilent Newsroom. Follow Agilent on LinkedIn and Facebook.

Forward-Looking Statements

This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Agilent’s growth prospects, business, financial results, revenue, and non-GAAP earnings guidance for Q3 and fiscal year 2023 and future amortization of intangibles. These forward-looking statements involve risks and uncertainties that could cause Agilent’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, unforeseen changes in the strength of Agilent’s customers’ businesses; unforeseen changes in the demand for current and new products, technologies, and services; unforeseen changes in the currency markets; customer purchasing decisions and timing; and the risk that Agilent is not able to realize the savings expected from integration and restructuring activities. In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross-margin pressures; the risk that its cost-cutting initiatives will impair its ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties and global economic conditions on its operations, its markets and its ability to conduct business; the ability to improve asset performance to adapt to changes in demand; the ability of its supply chain to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; the ability of Agilent to successfully integrate recent acquisitions; the ability of Agilent to successfully comply with certain complex regulations; and other risks detailed in Agilent’s filings with the Securities and Exchange Commission, including its quarterly report on Form 10-Q for the fiscal quarter ended January 31, 2023. Forward-looking statements are based on the beliefs and assumptions of Agilent’s management and on currently available information. Agilent undertakes no responsibility to publicly update or revise any forward-looking statement.

(1) Core revenue growth excludes the impact of currency and acquisitions and divestitures within the past 12 months. Core revenue is a non-GAAP measure. Reconciliations between GAAP revenue and core revenue for Q2 fiscal year 2023 are set forth on page 6 of the attached tables along with additional information regarding the use of this non-GAAP measure. Core revenue growth rate as projected for Q3 fiscal year 2023 and full fiscal year 2023 excludes the impact of currency and acquisitions and divestitures within the past 12 months. Most of the excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy and could differ materially. Therefore, no reconciliation to GAAP amounts has been provided for the projection.

(2) Non-GAAP net income and non-GAAP earnings per share primarily exclude the impacts of intangibles amortization, transformational initiatives, acquisition and integration costs and net loss on equity securities. Agilent also excludes any tax benefits or expenses that are not directly related to ongoing operations, and which are either isolated or are not expected to occur again with any regularity or predictability. A reconciliation between non-GAAP net income and GAAP net income is set forth on page 4 of the attached tables along with additional information regarding the use of this non-GAAP measure.

(3) Non-GAAP earnings per share as projected for Q3 fiscal year 2023 and full fiscal year 2023 exclude primarily the estimated impacts of non-cash intangibles amortization, transformational initiatives, and acquisition and integration costs. Agilent also excludes any tax benefits or expenses that are not directly related to ongoing operations, and which are either isolated or are not expected to occur again with any regularity or predictability. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy and could differ materially. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $38 million per quarter.

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
	Three Months Ended								Six Months Ended
	April 30,								April 30,
	2023				2022				2023				2022
Net revenue	$	1,717			$	1,607			$	3,473			$	3,281
Costs and expenses:
Cost of products and services		793				746				1,581				1,510
Research and development		126				115				249				232
Selling, general and administrative		415				386				834				803
Total costs and expenses		1,334				1,247				2,664				2,545
Income from operations		383				360				809				736
Interest income		12				1				21				2
Interest expense		(24	)			(21	)			(49	)			(42	)
Other income (expense), net		6				(7	)			6				(44	)
Income before taxes		377				333				787				652
Provision for income taxes		75				59				133				95
Net income	$	302			$	274			$	654			$	557
Net income per share:
Basic	$	1.02			$	0.92			$	2.21			$	1.86
Diluted	$	1.02			$	0.91			$	2.20			$	1.84
Weighted average shares used in computing net income per share:
Basic		296				299				296				300
Diluted		297				301				297				302
The preliminary income statement is estimated based on our current information.
Page 1

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY
				April 30,				October 31,
				2023				2022
ASSETS
Current assets:
	Cash and cash equivalents			$	1,175			$	1,053
	Accounts receivable, net				1,401				1,405
	Inventory				1,103				1,038
	Other current assets				270				282
		Total current assets			3,949				3,778
Property, plant and equipment, net					1,184				1,100
Goodwill					3,980				3,952
Other intangible assets, net					798				821
Long-term investments					186				195
Other assets					695				686
		Total assets		$	10,792			$	10,532
LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable			$	479			$	580
	Employee compensation and benefits				359				455
	Deferred revenue				519				461
	Short-term debt				—				36
	Other accrued liabilities				309				329
		Total current liabilities			1,666				1,861
Long-term debt					2,733				2,733
Retirement and post-retirement benefits					97				97
Other long-term liabilities					515				536
		Total liabilities			5,011				5,227
Total Equity:
	Stockholders’ equity:
	Preferred stock; $0.01 par value; 125 million
		shares authorized; none issued and outstanding at April 30, 2023 and October 31, 2022			—				—
	Common stock; $0.01 par value, 2 billion
		shares authorized; 295 million shares at April 30, 2023
		and 295 million shares at October 31, 2022, issued and outstanding			3				3
	Additional paid-in-capital				5,360				5,325
	Retained earnings				700				324
	Accumulated other comprehensive loss				(282	)			(347	)
		Total stockholders’ equity			5,781				5,305
			Total liabilities and stockholders’ equity	$	10,792			$	10,532
The preliminary balance sheet is estimated based on our current information.
Page 2

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
					Six Months Ended
					April 30,				April 30,
					2023				2022
Cash flows from operating activities:
	Net income				$	654			$	557
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization					138				164
	Share-based compensation					68				71
	Deferred taxes					(1	)			19
	Excess and obsolete inventory related charges					15				10
	Net loss on equity securities					14				62
	Change in fair value of contingent consideration					1				(25	)
	Other non-cash expense, net					2				9
	Changes in assets and liabilities:
		Accounts receivable, net				49				(108	)
		Inventory				(71	)			(124	)
		Accounts payable				(101	)			54
		Employee compensation and benefits				(110	)			(144	)
		Other assets and liabilities				36				(7	)
Net cash provided by operating activities (a)						694				538
Cash flows from investing activities:
	Investments in property, plant and equipment					(133	)			(139	)
	Payment to acquire equity securities					(1	)			(3	)
	Payment in exchange for convertible note					(5	)			(1	)
	Proceeds from sale of equity securities					5				6
	Proceeds from convertible note					4				—
	Acquisition of businesses and intangible assets, net of cash acquired					(51	)			(18	)
Net cash used in investing activities						(181	)			(155	)
Cash flows from financing activities:
	Issuance of common stock under employee stock plans					35				27
	Payment of taxes related to net share settlement of equity awards					(52	)			(64	)
	Payment of dividends					(133	)			(126	)
	Proceeds from revolving credit facility					175				—
	Repayment of revolving credit facility					(175	)			—
	Proceeds from issuance of commercial paper					1,412				575
	Repayment of commercial paper					(1,447	)			(400	)
	Payment for contingent consideration					(62	)			—
	Payments for repurchase of common stock					(160	)			(681	)
Net cash used in financing activities						(407	)			(669	)
Effect of exchange rate movements						16				(16	)
Net increase (decrease) in cash, cash equivalents and restricted cash						122				(302	)
Cash, cash equivalents and restricted cash at beginning of period						1,056				1,490
Cash, cash equivalents and restricted cash at end of period					$	1,178			$	1,188
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
	Cash and cash equivalents				$	1,175			$	1,186
	Restricted cash, included in other assets					3				2
	Total cash, cash equivalents and restricted cash				$	1,178			$	1,188
(a) Cash payments included in operating activities:
	Income tax paid, net of refunds received				$	128			$	134
	Interest payments, net of capitalized interest				$	44			$	40
The preliminary cash flow is estimated based on our current information.
Page 3

AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
				Three Months Ended												Six Months Ended
				April 30,												April 30,
				2023					2022							2023					2022
				Net Income		Diluted EPS			Net Income			Diluted EPS				Net Income		Diluted EPS			Net Income			Diluted EPS
GAAP net income				$	302	$	1.02		$	274		$	0.91			$	654	$	2.20		$	557		$	1.84
	Non-GAAP adjustments:
		Intangible amortization			38		0.12			50			0.17				74		0.25			101			0.34
		Transformational initiatives			5		0.02			9			0.03				12		0.04			13			0.04
		Acquisition and integration costs			5		0.02			8			0.03				7		0.02			15			0.05
		Change in fair value of contingent consideration			—		—			(28	)		(0.09	)			1		—			(25	)		(0.08	)
		Business exit and divestiture costs			—		—			7			0.02				—		—			7			0.02
		Net loss on equity securities			4		0.01			16			0.05				16		0.06			61			0.20
		Other			8		0.03			—			—				11		0.04			—			—
		Adjustment for taxes (a)			15		0.05			4			0.01				8		0.03			(21	)		(0.07	)
Non-GAAP net income				$	377	$	1.27		$	340		$	1.13			$	783	$	2.64		$	708		$	2.34
(a) The adjustment for taxes excludes tax benefits that management believes are not directly related to on-going operations and which are either isolated, temporary or cannot be expected to occur again with any regularity or predictability such as windfall benefits on stock compensation and the impact of R&D capitalization under section 174 of the Tax Cuts and Jobs Act of 2017. For the three and six months ended April 30, 2023, management used a non-GAAP effective tax rate of 13.75%. For the three months ended April 30, 2022, management used a non-GAAP effective tax rate of 13.92%. For the six months ended April 30, 2022, management used a non-GAAP effective tax rate of 14.00%.
We provide non-GAAP net income and non-GAAP net income per share amounts in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to amortization of intangibles, transformational initiatives, acquisition and integration costs, change in fair value of contingent consideration, business exit and divestiture costs and net loss on equity securities.
	Transformational initiatives include expenses associated with targeted cost reduction activities such as manufacturing transfers including costs to move manufacturing, small site consolidations, legal entity and other business reorganizations, insourcing or outsourcing of activities. Such costs may include move and relocation costs, one-time termination benefits and other one-time reorganization costs. Included in this category are also expenses associated with company programs to transform our product lifecycle management (PLM) system, human resources and financial systems.
	Acquisition and integration costs include all incremental expenses incurred to effect a business combination. Such acquisition costs may include advisory, legal, accounting, valuation, and other professional or consulting fees. Such integration costs may include expenses directly related to integration of business and facility operations, the transfer of assets and intellectual property, information technology systems and infrastructure and other employee-related costs.
	Change in fair value of contingent consideration represents changes in the fair value estimate of acquisition-related contingent consideration.
	Business exit and divestiture costs include costs associated with business divestitures.
	Net loss on equity securities relates to the realized and unrealized mark-to-market adjustments for our marketable and non-marketable equity securities.
	Other includes certain legal costs and settlements, environment compliance costs related to a prior acquisition and acceleration of share-based compensation expense in addition to other miscellaneous adjustments.
Our management uses non-GAAP measures to evaluate the performance of our core businesses, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results “through the eyes” of management in addition to seeing our GAAP results. This information facilitates our management’s internal comparisons to our historical operating results as well as to the operating results of our competitors.
Our management recognizes that items such as amortization of intangibles can have a material impact on our cash flows and/or our net income. Our GAAP financial statements including our statement of cash flows portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance.
Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
The preliminary non-GAAP net income and diluted EPS reconciliation is estimated based on our current information.
Page 4

AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
Quarter-over-Quarter
Life Sciences and Applied Markets Group
		Q2’23				Q2’22
Revenue		$	968			$	896
Gross Margin, %			59.9	%			59.0	%
Income from Operations		$	264			$	228
Operating margin, %			27.3	%			25.5	%
Diagnostics and Genomics Group
		Q2’23				Q2’22
Revenue		$	362			$	358
Gross Margin, %			51.8	%			56.0	%
Income from Operations		$	73			$	91
Operating margin, %			20.2	%			25.5	%
Agilent CrossLab Group
		Q2’23				Q2’22
Revenue		$	387			$	353
Gross Margin, %			47.0	%			47.1	%
Income from Operations		$	103			$	87
Operating margin, %			26.6	%			24.6	%
Income from operations reflect the results of our reportable segments under Agilent’s management reporting system which are not necessarily in conformity with GAAP financial measures. Income from operations of our reporting segments exclude, among other things, charges related to amortization of intangibles, transformational initiatives, acquisition and integration costs, change in fair value of contingent consideration and business exit and divestiture costs.
Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
The preliminary segment information is estimated based on our current information.
Page 5

AGILENT TECHNOLOGIES, INC.
RECONCILIATIONS OF REVENUE BY SEGMENT
EXCLUDING ACQUISITIONS, DIVESTITURES AND THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions)
(Unaudited)
PRELIMINARY
	Year-over-Year
	GAAP
					Year-over-Year
GAAP Revenue by Segment	Q2’23		Q2’22		% Change
Life Sciences and Applied Markets Group	$	968	$	896	8.0%
Diagnostics and Genomics Group		362		358	1.1%
Agilent CrossLab Group		387		353	9.8%
Agilent	$	1,717	$	1,607	6.8%
	Non-GAAP (excluding Acquisitions & Divestitures)						Year-over-Year at Constant Currency (a)
					Year-over-Year		Year-over-Year	Percentage Point Impact from Currency		Current Quarter Currency Impact (b)
Non GAAP Revenue by Segment	Q2’23		Q2’22		% Change		% Change
Life Sciences and Applied Markets Group	$	965	$	896	7.6%		10.5%	-3 ppts		$	(25	)
Diagnostics and Genomics Group		362		358	1.1%		3.3%	-2 ppts			(8	)
Agilent CrossLab Group		387		353	9.8%		13.2%	-3 ppts			(12	)
Agilent (Core)	$	1,714	$	1,607	6.6%		9.5%	-3 ppts		$	(45	)
We compare the year-over-year change in revenue excluding the effect of recent acquisitions and divestitures and foreign currency rate fluctuations to assess the performance of our underlying business.
(a) The constant currency year-over-year growth percentage is calculated by recalculating all periods in the comparison period at the foreign currency exchange rates used for accounting during the last month of the current quarter and then using those revised values to calculate the year-over-year percentage change.
(b) The dollar impact from the current quarter currency impact is equal to the total year-over-year dollar change less the constant currency year-over-year change.
The preliminary reconciliation of GAAP revenue adjusted for recent acquisitions and divestitures and impact of currency is estimated based on our current information.
Page 6

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230523005975/en/

Investor Contact:

Parmeet Ahuja

+1 408-345-8948

[email protected]

Media Contact:

Tom Beermann

+1 408-553-2914

[email protected]

KEYWORDS: United States North America California

INDUSTRY KEYWORDS: Health Technology Health Technology Other Science Software Science Biotechnology

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