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February 28, 2023 7:02 am

Bristol Myers Squibb to Participate in Cowen’s 43rd Annual Health Care Conference

Bristol Myers Squibb to Participate in Cowen’s 43rd Annual Health Care Conference

NEW YORK–(BUSINESS WIRE)–Bristol Myers Squibb (NYSE: BMY) today announced that the company will take part in a fireside chat at Cowen’s 43rd Annual Health Care Conference on Tuesday, March 7, 2023. Samit Hirawat, M.D., Executive Vice President, Chief Medical Officer, Head of Development, will answer questions about the company at 9:50 a.m. ET.

Investors and the general public are invited to listen to a live webcast of the session at http://investor.bms.com. An archived edition of the session will be available later that day.

About Bristol Myers Squibb

Bristol Myers Squibb is a global biopharmaceutical company whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. For more information about Bristol Myers Squibb, visit us at BMS.com or follow us on LinkedIn, Twitter, YouTube, Facebook, and Instagram.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20230228005367/en/

Bristol Myers Squibb

Media:

[email protected]

Investor Relations:

[email protected]

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Biotechnology Pharmaceutical Health Oncology

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February 28, 2023 6:58 am

AutoZone 2nd Quarter Same Store Sales Increase 5.3%; EPS Increases to $24.64

MEMPHIS, Tenn., Feb. 28, 2023 (GLOBE NEWSWIRE) — AutoZone, Inc. (NYSE: AZO) today reported net sales of $3.7 billion for its second quarter (12 weeks) ended February 11, 2023, an increase of 9.5% from the second quarter of fiscal 2022 (12 weeks). Domestic same store sales, or sales for stores open at least one year, increased 5.3% for the quarter.

“We are proud to report solid same store sales growth on top of last year’s 13.8%. We could not have achieved these results without phenomenal contributions from across the organization. Once again, our AutoZoners’ efforts generated double digit domestic Commercial growth and single digit domestic Retail sales growth. We continue to believe the initiatives we have in place position us well for the remainder of our fiscal year,” said Bill Rhodes, Chairman, President and Chief Executive Officer.

For the quarter, gross profit, as a percentage of sales, was 52.3%, a decrease of 69 basis points versus the prior year. The decrease in gross margin was impacted by a 27 basis point ($10 million) non-cash LIFO charge driven primarily by freight costs. The remaining deleverage was driven by supply chain costs and accelerated growth in our Commercial business. Operating expenses, as a percentage of sales, were 34.1% versus last year at 34.4%.

Operating profit increased 6.9% to $670.0 million. Net income for the quarter increased 1.0% over the same period last year to $476.5 million, while diluted earnings per share increased 10.5% to $24.64 from $22.30 in the year-ago quarter.

Under its share repurchase program, AutoZone repurchased 372 thousand shares of its common stock for $906.0 million during the second quarter, at an average price of $2,434 per share. At the end of the second quarter, the Company had $1.8 billion remaining under its current share repurchase authorization.

The Company’s inventory increased 13.9% over the same period last year, driven by inflation and its growth initiatives. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was negative $227 thousand versus negative $198 thousand last year and negative $249 thousand last quarter.

“We remain committed to providing the best place for our customers to shop while being an exceptional place for our AutoZoners to build their careers. For the remainder of fiscal 2023, we will be laser focused on relentless execution, and we will continue to focus our capital on projects that meet or exceed our return on capital targets. We will take nothing for granted as we will continue to focus on our long-term approach of increasing operating earnings and free cash flows while using our balance sheet effectively,” said Rhodes.

During the quarter ended February 11, 2023, AutoZone opened 30 new stores in the U.S., one in Mexico and five in Brazil. As of February 11, 2023, the Company had 6,226 stores in the U.S., 707 in Mexico and 81 in Brazil for a total store count of 7,014.

AutoZone is the leading retailer and distributor of automotive replacement parts and accessories in the Americas. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in the majority of our stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand automotive diagnostic, repair and shop management software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation services.

AutoZone will host a conference call this morning, Tuesday, February 28, 2023, beginning at 10:00 a.m. (ET) to discuss its second quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone’s website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (888) 506-0062, passcode AUTOZONE. In addition, a telephone replay will be available by dialing (877) 481-4010, replay passcode 47607 through March 14, 2023.

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debt to EBITDAR. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company’s comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company’s capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained herein constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “seek,” “may,” “could” and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand, due to changes in fuel prices, miles driven or otherwise; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global coronavirus (“COVID-19”) pandemic; inflation; the ability to hire, train and retain qualified employees; construction delays; failure or interruption of our information technology systems; issues relating to the confidentiality, integrity or availability of information, including due to cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damage to our reputation; challenges in international markets; origin and raw material costs of suppliers; inventory availability; disruption in our supply chain; impact of tariffs; impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the “Risk Factors” section contained in Item 1A under Part 1 of the Company’s Annual Report on Form 10-K for the year ended August 27, 2022, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements. Events described above and in the “Risk Factors” could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information:
Financial: Brian Campbell at (901) 495-7005, [email protected]
Media: David McKinney at (901) 495-7951, [email protected]

AutoZone’s 2nd Quarter Highlights – Fiscal 2023

Condensed Consolidated Statements of Operations
2nd Quarter, FY2023
(in thousands, except per share data)
	GAAP Results
	12 Weeks Ended			12 Weeks Ended
	February 11, 2023			February 12, 2022

Net sales	$	3,690,982		$	3,369,750
Cost of sales		1,760,979			1,584,524
Gross profit		1,930,003			1,785,226
Operating, SG&A expenses		1,260,026			1,158,466
Operating profit (EBIT)		669,977			626,760
Interest expense, net		65,609			42,471
Income before taxes		604,368			584,289
Income tax expense		127,824			112,534
Net income	$	476,544		$	471,755
Net income per share:
Basic	$	25.48		$	23.00
Diluted	$	24.64		$	22.30
Weighted average shares outstanding:
Basic		18,705			20,513
Diluted		19,337			21,158



Year-To-Date 2nd Quarter, FY2023
(in thousands, except per share data)
	GAAP Results
	24 Weeks Ended			24 Weeks Ended
	February 11, 2023			February 12, 2022

Net sales	$	7,676,049		$	7,038,653
Cost of sales		3,751,424			3,328,267
Gross profit		3,924,625			3,710,386
Operating, SG&A expenses		2,531,615			2,329,141
Operating profit (EBIT)		1,393,010			1,381,245
Interest expense, net		123,332			85,755
Income before taxes		1,269,678			1,295,490
Income taxes		253,816			268,500
Net income	$	1,015,862		$	1,026,990
Net income per share:
Basic	$	53.87		$	49.49
Diluted	$	52.12		$	48.03
Weighted average shares outstanding:
Basic		18,856			20,750
Diluted		19,491			21,383


Selected Balance Sheet Information
(in thousands)
	February 11, 2023			February 12, 2022			August 27, 2022

Cash and cash equivalents	$	301,286		$	239,423		$	264,380
Merchandise inventories		5,731,255			5,031,222			5,638,004
Current assets		6,794,805			5,903,770			6,627,984
Property and equipment, net		5,236,129			4,879,079			5,170,419
Operating lease right-of-use assets		2,943,844			2,743,771			2,918,817
Total assets		15,545,142			14,078,473			15,275,043
Accounts payable		7,321,551			6,378,606			7,301,347
Current liabilities		8,614,618			7,684,645			8,588,393
Operating lease liabilities, less current portion		2,854,227			2,641,555			2,837,973
Total debt		7,042,302			5,840,884			6,122,092
Stockholders’ deficit		(4,184,170	)		(3,137,477	)		(3,538,913	)
Working capital		(1,819,813	)		(1,780,875	)		(1,960,409	)

AutoZone’s 2nd Quarter Highlights – Fiscal 2023

Condensed Consolidated Statements of Operations

Adjusted Debt / EBITDAR
(in thousands, except adjusted debt to EBITDAR ratio)	Trailing 4 Quarters
	February 11, 2023			February 12, 2022
Net income	$	2,418,476		$	2,408,925
Add: Interest expense		229,215			188,901
Income tax expense		634,803			630,954
EBIT		3,282,494			3,228,780

Add: Depreciation and amortization		465,905			422,938
Rent expense⁽¹⁾		394,298			354,410
Share-based expense		82,253			62,672
EBITDAR	$	4,224,950		$	4,068,800

Debt	$	7,042,302		$	5,840,884
Financing lease liabilities		290,858			272,719
Add: Rent x 6⁽¹⁾		2,365,788			2,126,460
Adjusted debt	$	9,698,948		$	8,240,063

Adjusted debt to EBITDAR		2.3			2.0

Adjusted Return on Invested Capital (ROIC)
(in thousands, except ROIC)
	Trailing 4 Quarters
	February 11, 2023			February 12, 2022
Net income	$	2,418,476		$	2,408,925
Adjustments:
Interest expense		229,215			188,901
Rent expense⁽¹⁾		394,298			354,410
Tax effect⁽²⁾		(129,691	)		(113,008	)
Adjusted after-tax return	$	2,912,298		$	2,839,228

Average debt⁽³⁾	$	6,278,213		$	5,433,252
Average stockholders’ deficit⁽³⁾		(3,617,143	)		(2,069,346	)
Add: Rent x 6⁽¹⁾		2,365,788			2,126,460
Average financing lease liabilities⁽³⁾		294,337			255,497
Invested capital	$	5,321,195		$	5,745,863

Adjusted After-Tax ROIC		54.7	%		49.4	%

⁽¹⁾ The table below outlines the calculation of rent expense and reconciles rent expense to total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the trailing four quarters ended February 11, 2023 and February 12, 2022

	Trailing 4 Quarters
(in thousands)	February 11, 2023			February 12, 2022
Total lease cost, per ASC 842, for the trailing four quarters	$	498,970		$	442,950
Less: Financing lease interest and amortization		(77,302	)		(62,607	)
Less: Variable operating lease components, related to insurance and common area maintenance		(27,370	)		(25,933	)
Rent expense for the trailing four quarters	$	394,298		$	354,410


⁽²⁾ Effective tax rate over trailing four quarters ended February 11, 2023 and February 12, 2022 was 20.8%
⁽³⁾ All averages are computed based on trailing five quarter balances

Other Selected Financial Information
(in thousands)
	February 11, 2023			February 12, 2022
Cumulative share repurchases ($ since fiscal 1998)	$	31,898,212		$	28,192,426
Remaining share repurchase authorization ($)		1,751,788			957,574

Cumulative share repurchases (shares since fiscal 1998)		153,273			151,586

Shares outstanding, end of quarter		18,467			19,967


	12 Weeks Ended			12 Weeks Ended			24 Weeks Ended		24 Weeks Ended
	February 11, 2023			February 12, 2022			February 11, 2023		February 12, 2022

Depreciation and amortization	$	113,711		$	99,692		$	222,964	$	199,282

Cash flow from operations		354,474			361,816			1,148,061		1,139,746

Capital spending		144,837			105,874			259,234		208,143

AutoZone’s 2nd Quarter Highlights – Fiscal 2023
Condensed Consolidated Statements of Operations
Selected Operating Highlights

Store Count & Square Footage

	12 Weeks Ended				12 Weeks Ended				24 Weeks Ended		24 Weeks Ended
	February 11, 2023				February 12, 2022				February 11, 2023		February 12, 2022
Domestic:
Beginning stores		6,196				6,066				6,168		6,051
Stores opened		30				26				58		41
Stores closed		–				(1	)			–		(1	)
Ending domestic stores		6,226				6,091				6,226		6,091

Relocated stores		1				1				4		4

Stores with commercial programs		5,500				5,233				5,500		5,233

Square footage (in thousands)		41,103				40,037				41,103		40,037

Mexico:
Beginning stores		706				666				703		664
Stores opened		1				3				4		5
Ending Mexico stores		707				669				707		669

Brazil:
Beginning stores		76				53				72		52
Stores opened		5				2				9		3
Ending Brazil stores		81				55				81		55

Total		7,014				6,815				7,014		6,815

Square footage (in thousands)		46,982				45,433				46,982		45,433
Square footage per store		6,698				6,667				6,698		6,667

Sales Statistics
($ in thousands, except sales per average square foot)
	12 Weeks Ended				12 Weeks Ended				Trailing 4 Quarters		Trailing 4 Quarters
Total AutoZone Stores (Domestic, Mexico and Brazil)	February 11, 2023				February 12, 2022				February 11, 2023		February 12, 2022
Sales per average store	$	518			$	486			$	2,399	$	2,282
Sales per average square foot	$	77			$	73			$	359	$	343

Total Auto Parts (Domestic, Mexico and Brazil)
Total auto parts sales	$	3,623,110			$	3,306,223			$	16,590,483	$	15,332,148
% Increase vs. LY		9.6%				15.6%				8.2%		16.5%

Domestic Commercial
Total domestic commercial sales	$	954,584			$	843,889			$	4,475,546	$	3,755,003
% Increase vs. LY		13.1%				32.1%				19.2%		30.2%

Average sales per program per week	$	14.5			$	13.5			$	16.0	$	14.0
% Increase vs. LY		7.4%				28.6%				14.3%		26.1%

All Other, including ALLDATA
All other sales	$	67,872			$	63,527			$	299,144	$	271,012
% Increase vs. LY		6.8%				24.3%				10.4%		17.1%


	12 Weeks Ended				12 Weeks Ended				24 Weeks Ended		24 Weeks Ended
	February 11, 2023				February 12, 2022				February 11, 2023		February 12, 2022
Domestic same store sales		5.3%				13.8%				5.5%		13.7%

Inventory Statistics (Total Stores)
	as of				as of
	February 11, 2023				February 12, 2022
Accounts payable/inventory		127.7%				126.8%

($ in thousands)
Inventory	$	5,731,255			$	5,031,222
Inventory per store		817				738
Net inventory (net of payables)		(1,590,296	)			(1,347,384	)
Net inventory / per store		(227	)			(198	)

	Trailing 5 Quarters
	February 11, 2023				February 12, 2022
Inventory turns		1.5		x		1.6		x

February 28, 2023 6:58 am

ADT Reports Fourth Quarter and Full Year 2022 Results

Continued strong sequential and year-over-year growth in revenue, up

21%

for full year 2022

versus

prior year

Fourth consecutive quarter of record high customer retention and recurring monthly revenue balance

Improving capital efficiency with record revenue payback

Driving momentum into 2023 with expected continued growth in revenue, earnings and cash flows

BOCA RATON, Fla., Feb. 28, 2023 (GLOBE NEWSWIRE) — ADT Inc. (NYSE: ADT), the most trusted brand in smart home and small business security, today reported results for the fourth quarter and full year of 2022.

Financial highlights for the fourth quarter and full year of 2022 are listed below. Variances are on a year-over-year basis unless otherwise noted.

Fourth Quarter
2022

Total revenue of $1.6 billion, up 19% or 8% excluding Solar, and end-of-period recurring monthly revenue (RMR) of $374 million, up 4%
Record high customer retention with gross customer revenue attrition at a record low of 12.5%
Record revenue payback of 2.1 years
GAAP net income of $151 million, or $0.16 per diluted share, up $209 million
Adjusted net income of $92 million, or $0.10 per diluted share, up $118 million
Adjusted EBITDA of $629 million, up $54 million or 9%

Full Year 2022

Total revenue of $6.4 billion, up 21% or 7% excluding Solar
GAAP net income of $173 million, or $0.19 per diluted share, up $513 million
Adjusted net income of $218 million, or $0.24 per diluted share, up $410 million
Adjusted EBITDA of $2,447 million, up $234 million or 11%

“2022 was a very strong year for ADT. We delivered strong results with top-line growth while setting records in customer retention, recurring monthly revenue balance and revenue payback. Our results reflect the progress ADT is making as we shift from a traditional security company towards an innovative business poised for accelerating growth in new markets,” said ADT President and CEO, Jim DeVries. “We concluded the year with positive momentum in our business, along with launching our partnership with State Farm and advancing our strategic relationship with Google. As we advance into 2023 we are forecasting solid growth in revenue, earnings and free cash flow, continuing our positive trajectory across our businesses and demonstrating progress on our 2025 goals.”

BUSINESS HIGHLIGHTS

Foundation for Growth

Continued growth of RMR – The end-of-period RMR balance was $374 million, representing a 4% increase over the prior year period. Approximately 80% of total Consumer and Small Business (CSB) and Commercial revenue was generated from this durable recurring revenue.
Maintaining record customer retention and revenue payback – With strong customer satisfaction, trailing 12-month gross customer revenue attrition was 12.5%, a 60-basis-point improvement versus the prior year period, and revenue payback ended 2022 at 2.1 years.

Innovative Offerings

ADT+ and ADT Self Setup launch – In early 2023, ADT introduced the new ADT+ app and ADT Self Setup line of DIY smart home security products which seamlessly integrate the security and protection of ADT with the helpful convenience of Google Nest. The ADT+ app was named a CES 2023 Innovation Award Honoree and represents a historic shift in home security. ADT Self Setup enables customers to build and customize the perfect DIY system for their smart home or apartment needs.
Enhanced Google offerings – As part of ADT’s partnership with Google, the Company nationally sells, installs, and services a full suite of Google Nest products, including doorbells, cameras, thermostats, and smart displays. During 2022, the attachment rate for the Nest Doorbell was approximately 50% and Nest cameras are currently realizing a 30% increase in cameras per home, helping drive a 26% increase in residential installation revenue per unit as compared to the prior year period.
State Farm home protection partnership and equity investment – In 2022, ADT announced the closing of a $1.2 billion equity investment by State Farm in conjunction with flagship partnership to reimagine the homeownership experience through innovation and the application of smart home technology to detect and mitigate property losses. Exclusive offers to State Farm policy holders in select markets are expected to launch in the second quarter of 2023. In addition to its equity investment, State Farm committed up to $300 million to fund product and technology innovation, customer growth, and marketing activities in connection with the partnership.

Unrivaled Safety

Keeping employees safe with SoSecure Pro – ADT introduced an all-new enterprise mobile safety app, SoSecure PRO. SoSecure PRO enables companies to enhance workplace safety for employees on site and on the go. The app features innovative safety tools like location sharing, SOS Call/Chat or Video, Safety Timer, and Voice Activation, helping companies to keep their employees safe.
Intelligent autonomous security solutions – EvoGuard by ADT Commercial, unveiled at CES in January, is a new suite of intelligent autonomous guarding solutions and services, currently in development, aimed at helping to cost-effectively enhance corporate security programs, while responding to high turnover rates and ongoing labor shortages in the guarding market.

Premium Experience

ADT Virtual Assistance – The Company completed more than one million Virtual Assistance appointments since the program’s launch in 2021. Nearly 40% of ADT service requests in 2022 were virtual, generating high customer satisfaction at a lower cost to the Company while also reducing the Company’s carbon footprint by eliminating thousands of vehicles trips each day. This program is a meaningful contributor to the Adjusted EBITDA margin expansion in the CSB segment.

Progress on our ESG Journey

Giving back in 2022 – In 2022, ADT realigned its charitable giving and volunteerism to focus on creating safer, smarter and more sustainable communities with donations to Requity, a Baltimore-based nonprofit providing vocational education and workforce development, the American Red Cross for Hurricane Ian disaster relief and Habitat for Humanity. In total, ADT donated $850,000 to charity in 2022.
ADT’s first annual CDP Climate Change Disclosure – ADT achieved a CDP score at the “Awareness” level, in line with the North American regional average, including the commercial and consumer services sector.

2023 FINANCIAL OUTLOOK

The Company is providing the following financial guidance for 2023, with all metrics representing an improvement over 2022 performance:

	(in millions)
	Total Revenue		$6,600 – $6,850
	Adjusted EBITDA		$2,525 – $2,625
	Adjusted EPS		$0.30 – $0.40
	Adjusted Free Cash Flow (including interest rate swaps)		$600 – $700
	Adjusted Free Cash Flow		$525 – $625
	See Note (1) for an explanation of why the Company is not providing a quantitative reconciliation of its non-GAAP financial outlook to the corresponding GAAP measures.

TOTAL COMPANY RESULTS
⁽²⁾⁽³⁾

(in millions, except revenue payback, attrition, and per share data)	Three Months Ended December 31,						Twelve Months Ended December 31,
		2022			2021			2022			2021
	GAAP
Total revenue	$	1,645		$	1,381		$	6,395		$	5,307
Net income (loss)	$	151		$	(58	)	$	173		$	(341	)
Net cash provided by (used in) operating activities	$	567		$	494		$	1,888		$	1,650
Net cash provided by (used in) investing activities	$	(324	)	$	(525	)	$	(1,533	)	$	(1,696	)
Net cash provided by (used in) financing activities	$	71		$	(4	)	$	(15	)	$	(128	)
Net income (loss) per share of Common Stock – diluted	$	0.16		$	(0.07	)	$	0.19		$	(0.41	)
Net income (loss) per share of Class B Common Stock – diluted	$	0.16		$	(0.07	)	$	0.19		$	(0.41	)
	Other Measures
Adjusted EBITDA	$	629		$	574		$	2,447		$	2,213
Adjusted Free Cash Flow	$	269		$	176		$	558		$	465
Adjusted Net Income (Loss)	$	92		$	(25	)	$	218		$	(191	)
Adjusted Diluted Net Income (Loss) per share	$	0.10		$	(0.03	)	$	0.24		$	(0.25	)
Trailing twelve-month revenue payback							2.1 years			2.3 years
Trailing twelve-month gross customer revenue attrition								12.5	%		13.1	%
End of period RMR							$	374		$	359

SEGMENT RESULTS
⁽³⁾

CSB

	Three Months Ended December 31,										Twelve Months Ended December 31,
		2022			2021		$ Change		% Change			2022			2021		$ Change		% Change
(in millions)
Monitoring and related services	$	1,024		$	981		$	43	4	%	$	4,050		$	3,873		$	177	5	%
Security installation, product, and other		93			68			25	37	%		329			273			56	21	%
Total CSB revenue	$	1,117		$	1,049		$	68	6	%	$	4,379		$	4,146		$	233	6	%

Adjusted EBITDA	$	581		$	553		$	28	5	%	$	2,315		$	2,111		$	204	10	%
Adjusted EBITDA Margin (as a % of Total CSB Revenue)		52	%		53	%						53	%		51	%

Total CSB revenue was $1,117 million for the fourth quarter and $4,379 million for the full year, up 6% versus the prior year for both periods. This performance was driven primarily by an increase in monitoring and related services (M&S) revenue resulting from higher average pricing, subscriber growth initiatives, and improved customer retention.

CSB Adjusted EBITDA increased 5% to $581 million in the fourth quarter and increased 10% to $2,315 million for the full year 2022. These improvements were driven by higher M&S revenue and improved cost performance. The Company’s Virtual Assistance program allowed ADT to reduce service costs for the full year even as the Company achieved an increase in subscribers and RMR.

Commercial

	Three Months Ended December 31,										Twelve Months Ended December 31,
		2022			2021		$ Change		% Change			2022			2021		$ Change		% Change
(in millions)
Monitoring and related services	$	139		$	122		$	17	14	%	$	539		$	474		$	65	14	%
Security installation, product, and other		189			162			27	17	%		691			639			52	8	%
Total Commercial revenue	$	328		$	284		$	44	15	%	$	1,230		$	1,114		$	116	10	%

Adjusted EBITDA	$	38		$	16		$	22	137	%	$	127		$	96		$	31	32	%
Adjusted EBITDA Margin (as a % of Total Commercial Revenue)		12	%		6	%						10	%		9	%

Total Commercial revenue was $328 million for the fourth quarter and $1,230 million for the full year, up 15% and 10%, respectively, versus prior year. Improvements were driven by an increase in product and service prices as well as strong installation and sales performance.

Commercial Adjusted EBITDA increased 137% to $38 million in the fourth quarter and increased 32% to $127 million for the full year 2022. These improvements were driven by higher revenue, which was partially offset by the impact of cost inflation on materials, labor, and fuel.

Solar

	Three Months Ended December 31,									Twelve Months Ended December 31,
(in millions)		2022			2021		$ Change		% Change		2022			2021		$ Change		% Change
Solar installation, product, and other	$	200		$	47		$	153	N/M	$	786		$	47		$	739	N/M
Total Solar revenue	$	200		$	47		$	153	N/M	$	786		$	47		$	739	N/M

Adjusted EBITDA	$	10		$	6		$	4	N/M	$	5		$	6		$	—	N/M
Adjusted EBITDA Margin (as a % of Total Solar Revenue)		5	%		12	%					1	%		12	%

Note: Sunpro Solar, now referred to as ADT Solar, was acquired on December 8, 2021. M&S revenue is not applicable to
the Solar segment.

Total Solar revenue for the fourth quarter was $200 million and $786 million for the full year. ADT solar installed over 20,000 systems in 2022, an increase of 18% year over year compared to legacy Sunpro.

Solar Adjusted EBITDA was $10 million for the fourth quarter and $5 million for the full year 2022. Full year Adjusted EBITDA was negatively impacted by installation delays associated with a third-party lender’s insolvency in the second quarter and cost inefficiencies from lower install throughput.

BALANCE SHEET, CASH, AND LIQUIDITY

Net cash provided by operating activities during the fourth quarter of 2022 was $567 million with Adjusted Free Cash Flow of $269 million. For the full year of 2022, net cash provided by operating activities was $1,888 million with Adjusted Free Cash Flow of $558 million, up 14% and 20%, respectively, versus the prior year period. The company returned $127 million to shareholders in dividends during 2022.

At the end of the fourth quarter of 2022, the Company had total debt of $9.8 billion with continued improvements in GAAP and adjusted leverage ratios. The Company ended the year with no outstanding revolver borrowings.

On Feb. 10, 2023, the Company provided a partial redemption notice to pay off $600 million of the $700 million ADT Notes due 2023, using the $600 million Term Loan A facility which the Company expects to draw down on March 15, 2023. The Company expects to redeem the remaining $100 million of the ADT Notes due 2023 with cash on hand on or before maturity in June 2023. The Company has no other significant debt maturities remaining in 2023.

DIVIDEND DECLARATION

Effective Feb. 28, 2023, the Company’s Board of Directors declared a cash dividend of $0.035 per share to holders of the Company’s Common Stock and Class B Common Stock of record as of March 16, 2023. This dividend will be paid on April 4, 2023.

_____________________

(1	)	The Company is not providing a quantitative reconciliation of its 2023 financial outlook for Adjusted EBITDA, Adjusted Diluted Net Income (Loss) per Share (“Adjusted EPS”), Adjusted Free Cash Flow, and Adjusted Free Cash Flow (including interest rate swaps) to net income (loss) and net cash provided by operating activities, which are their respective corresponding GAAP measures, because the Company is unable to reliably predict or estimate these GAAP measures without unreasonable effort due to their dependence on future uncertainties, such as the adjustments or items discussed below under the heading “Non-GAAP Measures.” Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.
(2	)	All variances are year-over-year unless otherwise noted. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted Free Cash Flow (including interest rate swaps), Adjusted Net Income (Loss), Adjusted Diluted Net Income (Loss) per share, and Net Leverage Ratio are non-GAAP measures. Refer to the “Non-GAAP Measures” section for the definitions of these terms and reconciliations to the most comparable GAAP measures. The operating metrics such as Gross Customer Revenue Attrition, Unit Count, RMR, Gross RMR Additions, and Revenue Payback are approximated as there may be variations to reported results in each period due to certain adjustments the Company might make in connection with the integration over several periods of acquired companies that calculated these metrics differently, or otherwise, including periodic reassessments and refinements in the ordinary course of business. These refinements, for example, may include changes due to systems conversion or historical methodology differences in legacy systems.
(3	)	Amounts may not sum due to rounding.

Conference Call

As previously announced, management will host a conference call at 10:00 a.m. ET today to discuss the Company’s fourth quarter and full year 2022 results and lead a question-and-answer session.

Participants may listen to a live webcast through the investor relations website at investor.adt.com. A replay of the webcast will be available on the website within 24 hours of the live event.

Alternatively, participants may listen to the live call by dialing 1-888-660-6144 (domestic) or 1-929-203-0865 (international) and requesting the ADT Fourth Quarter 2022 Earnings Conference Call. An audio replay will be available for two weeks following the call and can be accessed by dialing 1-800-770-2030 (domestic) or 1-647-362-9199 (international) and providing the passcode 5974526.

A slide presentation highlighting the Company’s results will also be available on the Investor Relations section of the Company’s website. From time to time, the Company may use its website as a channel of distribution of material Company information. Financial and other material information regarding the Company is routinely posted on and accessible at investor.adt.com.

About ADT Inc.

ADT provides safe, smart and sustainable solutions for people, homes and businesses. Through innovative products, partnerships and the largest network of smart home, security and rooftop solar professionals in the United States, we empower people to protect and connect what matters most. For more information, visit www.adt.com.

Investor Relations:	Media Relations:
[email protected] Tel: 888-238-8525	[email protected]

Forward-Looking Statements

ADT has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this document are, or could be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to the equity investment by and long term partnership with State Farm and the anticipated impact of these on our business and financial condition, our relationships with other insurance companies, and the market price of our Common Stock; anticipated financial performance, including our ability to achieve our stated guidance metrics and our progress toward our 2025 goals; management’s plans and objectives for future operations; our acquisition of Sunpro Solar, now ADT Solar, and its anticipated impact on our business and financial condition; business prospects; market conditions; our ability to successfully respond to the challenges posed by the COVID-19 Pandemic; our strategic partnership and ongoing relationship with Google; the expected timing of product commercialization with Google or any changes thereto; the expected timing of product commercialization with State Farm or any changes thereto; the successful internal development, commercialization, and timing of our next generation platform and innovative offerings; the successful commercialization of our joint venture with Ford; and other matters. Forward-looking statements can be identified by various words such as “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions. These forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to management. ADT cautions that these statements are subject to risks and uncertainties, many of which are outside of ADT’s control, and could cause future events or results to be materially different from those stated or implied in this document, including among others, factors relating to the achievement of potential benefits of the equity investment by and long term partnership with State Farm, including as a result of restrictions on, or required prior regulatory approval of, various actions by regulated insurers; risks and uncertainties related to ADT’s ability to successfully generate profitable revenue from new and existing partnerships; ADT’s ability to successfully commercialize any joint products with State Farm or with Google; the Company’s ability to successfully utilize the incremental funding committed by State Farm or Google; risks and uncertainties related to the Company’s ability to successfully integrate and operate the ADT Solar business; the Company’s ability to commercialize its joint venture with Ford; the Company’s ability to continuously and successfully commercialize innovative offerings; the Company’s ability to successfully implement an Environmental, Social, and Governance program across the Company; and risk factors that are described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. Any forward-looking statement made in this press release speaks only as of the date on which it is made. ADT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

ADT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)

	Three Months Ended December 31,											Twelve Months Ended December 31,
		2022			2021		$ Change			% Change			2022			2021		$ Change			% Change
Revenue:
Monitoring and related services	$	1,163		$	1,103		$	59		5	%	$	4,589		$	4,348		$	242		6	%
Security installation, product, and other		283			231			52		23	%		1,020			912			108		12	%
Solar installation, product, and other		200			47			153		N/M			786			47			739		N/M
Total revenue		1,645			1,381			264		19	%		6,395			5,307			1,088		21	%
Cost of revenue (exclusive of depreciation and amortization shown separately below):
Monitoring and related services		231			231			—		—	%		918			913			5		1	%
Security installation, product, and other		178			150			28		19	%		620			602			18		3	%
Solar installation, product, and other		119			35			84		N/M			502			35			467		N/M
Total cost of revenue		528			415			113		27	%		2,040			1,550			490		32	%
Selling, general, and administrative expenses		480			445			35		8	%		1,930			1,789			141		8	%
Depreciation and intangible asset amortization		412			491			(79	)	(16	)%		1,694			1,915			(221	)	(12	)%
Merger, restructuring, integration, and other		19			19			—		—	%		22			38			(16	)	(41	)%
Goodwill impairment		—			—			—		—	%		149			—			149		N/M
Operating income (loss)		206			10			196		N/M			560			15			545		N/M
Interest expense, net		(147	)		(110	)		(37	)	34	%		(265	)		(458	)		192		(42	)%
Loss on extinguishment of debt		—			—			—		—	%		—			(37	)		37		N/M
Other income (expense)		96			3			92		N/M			(58	)		8			(66	)	N/M
Income (loss) before income taxes and equity in net earnings (losses) of equity method investee		155			(96	)		251		N/M			237			(471	)		709		N/M
Income tax benefit (expense)		(1	)		38			(39	)	N/M			(60	)		130			(191	)	N/M
Income (loss) before equity in net earnings (losses) of equity method investee		154			(58	)		211		N/M			177			(341	)		518		N/M
Equity in net earnings (losses) of equity method investee		(2	)		—			(2	)	N/M			(5	)		—			(5	)	N/M
Net income (loss)	$	151		$	(58	)	$	209		N/M		$	173		$	(341	)	$	513		N/M

Net income (loss) per share – basic:
Common Stock	$	0.17		$	(0.07	)						$	0.19		$	(0.41	)
Class B Common Stock	$	0.17		$	(0.07	)						$	0.19		$	(0.41	)

Weighted-average shares outstanding – basic:
Common Stock		851			787								848			771
Class B Common Stock		55			55								55			55

Net income (loss) per share – diluted:
Common Stock	$	0.16		$	(0.07	)						$	0.19		$	(0.41	)
Class B Common Stock	$	0.16		$	(0.07	)						$	0.19		$	(0.41	)

Weighted-average shares outstanding – diluted:
Common Stock		922			787								915			771
Class B Common Stock		55			55								55			55

Note: amounts may not sum due to rounding

ADT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

(Unaudited)

	December 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	257	$	24
Restricted cash and restricted cash equivalents		116		9
Accounts receivable, net		597		442
Inventories, net		329		277
Work-in-progress		81		71
Prepaid expenses and other current assets		341		169
Total current assets		1,722		993
Property and equipment, net		376		364
Subscriber system assets, net		3,061		2,868
Intangible assets, net		5,092		5,413
Goodwill		5,819		5,943
Deferred subscriber acquisition costs, net		1,080		850
Other assets		724		463
Total assets	$	17,873	$	16,894

Liabilities and stockholders’ equity
Current liabilities:
Current maturities of long-term debt	$	872	$	118
Accounts payable		487		475
Deferred revenue		403		374
Accrued expenses and other current liabilities		900		737
Total current liabilities		2,661		1,703
Long-term debt		8,957		9,575
Deferred subscriber acquisition revenue		1,645		1,199
Deferred tax liabilities		905		867
Other liabilities		272		301
Total liabilities		14,440		13,646

Total stockholders’ equity		3,433		3,249
Total liabilities and stockholders’ equity	$	17,873	$	16,894

Note: amounts may not sum due to rounding

ADT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT
S OF CASH FLOWS

(in millions)

(Unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
		2022			2021			2022			2021
Cash flows from operating activities:
Net income (loss)	$	151		$	(58	)	$	173		$	(341	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization		412			491			1,694			1,915
Amortization of deferred subscriber acquisition costs		45			35			163			126
Amortization of deferred subscriber acquisition revenue		(68	)		(49	)		(244	)		(172	)
Share-based compensation expense		17			15			67			61
Deferred income taxes		(17	)		(37	)		31			(139	)
Provision for losses on receivables and inventory		45			9			114			38
Loss on extinguishment of debt		—			—			—			37
Goodwill, intangible, and other asset impairments		4			1			155			19
Unrealized (gain) loss on interest rate swap contracts		11			(42	)		(302	)		(158	)
Change in fair value of other financial instruments		(94	)		—			63			—
Other non-cash items, net		22			49			124			149
Changes in operating assets and liabilities, net of effects of acquisitions:
Deferred subscriber acquisition costs		(89	)		(89	)		(394	)		(324	)
Deferred subscriber acquisition revenue		73			75			329			277
Other, net		56			95			(85	)		161
Net cash provided by (used in) operating activities		567			494			1,888			1,650
Cash flows from investing activities:
Dealer generated customer accounts and bulk account purchases		(121	)		(163	)		(622	)		(675	)
Subscriber system asset expenditures		(162	)		(176	)		(735	)		(695	)
Purchases of property and equipment		(41	)		(42	)		(177	)		(168	)
Acquisition of businesses, net of cash acquired		—			(147	)		(13	)		(164	)
Proceeds from sale of business, net of cash sold		—			2			27			2
Other investing, net		—			—			(13	)		4
Net cash provided by (used in) investing activities		(324	)		(525	)		(1,533	)		(1,696	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of expenses		1,180			—			1,180			—
Proceeds from long-term borrowings		70			185			550			1,196
Proceeds from receivables facility		65			136			277			254
Proceeds from opportunity fund		101			—			101			—
Repurchases of common stock		(1,200	)		—			(1,200	)		—
Repayment of long-term borrowings, including call premiums		(77	)		(167	)		(605	)		(1,219	)
Repayment of receivables facility		(40	)		(102	)		(121	)		(130	)
Dividends on common stock		(32	)		(29	)		(127	)		(116	)
Payments on finance leases		(11	)		(10	)		(45	)		(32	)
Payments on interest rate swaps		8			(14	)		(19	)		(56	)
Other financing, net		8			(3	)		(5	)		(24	)
Net cash provided by (used in) financing activities		71			(4	)		(15	)		(128	)
Cash and cash equivalents and restricted cash and restricted cash equivalents:
Net increase (decrease) during the period		314			(35	)		340			(174	)
Beginning balance		60			68			33			208
Ending balance	$	374		$	33		$	374		$	33

Note: amounts may not sum due to rounding

ADT INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(in millions)

(Unaudited)

Revenue by Segment

	Three Months Ended December 31,				Twelve Months Ended December 31,
(in millions)		2022		2021		2022		2021
CSB:
Monitoring and related services	$	1,024	$	981	$	4,050	$	3,873
Security installation, product, and other		93		68		329		273
Total CSB	$	1,117	$	1,049	$	4,379	$	4,146

Commercial:
Monitoring and related services	$	139	$	122	$	539	$	474
Security installation, product, and other		189		162		691		639
Total Commercial	$	328	$	284	$	1,230	$	1,114

Solar:
Solar installation, product, and other	$	200	$	47	$	786	$	47
Total Solar	$	200	$	47	$	786	$	47

Total Revenue	$	1,645	$	1,381	$	6,395	$	5,307

Adjusted EBITDA by Segment

	Three Months Ended December 31,				Twelve Months Ended December 31,
(in millions)		2022		2021		2022		2021
CSB	$	581	$	553	$	2,315	$	2,111
Commercial		38		16		127		96
Solar		10		6		5		6
Total	$	629	$	574	$	2,447	$	2,213

Adjusted EBITDA Margin by Segment

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2022		2021		2022		2021
CSB (as a % of Total CSB Revenue)	52	%	53	%	53	%	51	%
Commercial (as a % of Total Commercial Revenue)	12	%	6	%	10	%	9	%
Solar (as a % of Total Solar Revenue)	5	%	12	%	1	%	12	%

Note: amounts may not sum due to rounding

ADT INC. AND SUBSIDIARIES

NON-GAAP MEASURES

ADT sometimes uses information (“non-GAAP financial measures”) that is derived from the consolidated financial statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under SEC rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

The following information includes definitions of our non-GAAP financial measures used in this release, reasons our management believes these measures are useful to investors regarding our financial condition and results of operations, additional purposes, if any, for which our management uses the non-GAAP financial measures, and limitations to using these non-GAAP financial measures, as well as reconciliations of these non-GAAP financial measures to the most comparable GAAP measures. Each non-GAAP financial measure is presented following the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The limitations of non-GAAP financial measures are best addressed by considering these measures in conjunction with the appropriate GAAP measures. In addition, computations of these non-GAAP measures may not be comparable to other similarly titled measures reported by other companies.

With regard to our financial guidance for 2023, the Company is not providing a quantitative reconciliation for forward-looking Adjusted EBITDA and Adjusted EPS to net income (loss), and Adjusted Free Cash Flow and Adjusted Free Cash Flow (including interest rate swaps) to net cash provided by operating activities, which are the most directly comparable respective GAAP measures. These GAAP measures cannot be reliably predicted or estimated without unreasonable effort due to their dependence on future uncertainties, such as the adjustment of items used in the following reconciliations. Additionally, information about other adjusting items that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.

Adjusted EBITDA, Adjusted EBITDA Margin, and Reconciliation to GAAP Net Income or Loss

We believe the presentation of Adjusted EBITDA provides useful information to investors about our operating profitability adjusted for certain non-cash items, non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures.

We define Adjusted EBITDA as net income or loss adjusted for (i) interest; (ii) taxes; (iii) depreciation and amortization, including depreciation of subscriber system assets and other fixed assets and amortization of dealer and other intangible assets; (iv) amortization of deferred costs and deferred revenue associated with subscriber acquisitions; (v) share-based compensation expense; (vi) merger, restructuring, integration, and other; (vii) losses on extinguishment of debt; (viii) radio conversion costs net of any related incremental revenue earned; and (ix) other income/gain or expense/loss items such as changes in fair value of certain financial instruments, impairment charges, financing and consent fees, or acquisition-related adjustments.

There are material limitations to using Adjusted EBITDA as it does not reflect certain significant items which directly affect our net income or loss (the most comparable GAAP measure).

The Adjusted EBITDA discussion above is also applicable to Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percentage of total revenue.

	Three Months Ended December 31,						Twelve Months Ended December 31,
(in millions)		2022			2021			2022			2021
Net income (loss)	$	151		$	(58	)	$	173		$	(341	)
Interest expense, net		147			110			265			458
Income tax expense (benefit)		1			(38	)		60			(130	)
Depreciation and intangible asset amortization		412			491			1,694			1,915
Amortization of deferred subscriber acquisition costs		45			35			163			126
Amortization of deferred subscriber acquisition revenue		(68	)		(49	)		(244	)		(172	)
Share-based compensation expense		17			15			67			61
Merger, restructuring, integration and other		19			19			22			38
Goodwill impairment⁽¹⁾		—			—			149			—
Loss on extinguishment of debt		—			—			—			37
Change in fair value of other financial instruments⁽²⁾		(94	)		—			63			—
Radio conversion costs, net⁽³⁾		(3	)		40			3			211
Acquisition-related adjustments⁽⁴⁾		(1	)		12			35			13
Other, net⁽⁵⁾		3			(2	)		(4	)		(3	)
Adjusted EBITDA	$	629		$	574		$	2,447		$	2,213

Net income (loss) to total revenue ratio		9	%	(4) %				3	%	(6) %
Adjusted EBITDA Margin (as percentage of Total Revenue)		38	%		42	%		38	%		42	%

Note: amounts may not sum due to rounding

_______________________

(1) Represents a goodwill impairment charge related to the Solar reporting unit in Q3 2022.
(2) In connection with the State Farm investment, amounts represent the change in fair value of a contingent forward purchase contract related to the tender offer during 2022.
(3) Represents net costs associated with replacing cellular technology used in many of our security systems pursuant to a replacement program.
(4) Primarily represents amortization of the customer backlog intangible asset during Q4 2021 and Q1 2022 related to the ADT Solar Acquisition.
(5) During the twelve months ended December 31, 2022, primarily represents the gain on sale of a business.

Free Cash Flow, Adjusted Free Cash Flow, Adjusted Free Cash Flow including interest rate swaps, and Reconciliation to GAAP Net Cash Flows from Operating Activities

We define Free Cash Flow as cash flows from operating activities less cash outlays related to capital expenditures. We define capital expenditures to include accounts purchased through our network of authorized dealers or third parties outside of our authorized dealer network, subscriber system asset expenditures, and purchases of property and equipment. These items are subtracted from cash flows from operating activities because they represent long-term investments that are required for normal business activities.

We define Adjusted Free Cash Flow as Free Cash Flow adjusted for net cash flows related to (i) net proceeds from our consumer receivables facility; (ii) financing and consent fees; (iii) restructuring and integration; (iv) integration-related capital expenditures; (v) radio conversion costs net of any related incremental revenue collected; and (vi) other payments or receipts that may mask our operating results or business trends. Adjusted Free Cash Flow including interest rate swaps reflects Adjusted Free Cash Flow plus net cash settlements on interest rate swaps presented within net cash provided by (used in) financing activities.

We believe the presentations of these non-GAAP measures are appropriate to provide investors with useful information about our ability to repay debt, make other investments, and pay dividends. We believe the presentation of Adjusted Free Cash Flow is also a useful measure of our cash flow attributable to our normal business activities, inclusive of the net cash flows associated with the acquisition of subscribers, as well as our ability to repay other debt, make other investments, and pay dividends. Further, Adjusted Free Cash Flow including interest rate swaps is a useful measure of Adjusted Free Cash Flow inclusive of all cash interest.

There are material limitations to using these non-GAAP measures. These non-GAAP measures adjust for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash available than the most comparable GAAP measure. These non-GAAP measures are not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted.

	Three Months Ended December 31,						Twelve Months Ended December 31,
(in millions)		2022			2021			2022			2021
Net cash provided by (used in) operating activities	$	567		$	494		$	1,888		$	1,650
Net cash provided by (used in) investing activities	$	(324	)	$	(525	)	$	(1,533	)	$	(1,696	)
Net cash provided by (used in) financing activities	$	71		$	(4	)	$	(15	)	$	(128	)

Net cash provided by (used in) operating activities	$	567		$	494		$	1,888		$	1,650
Dealer generated customer accounts and bulk account purchases		(121	)		(163	)		(622	)		(675	)
Subscriber system asset expenditures		(162	)		(176	)		(735	)		(695	)
Purchases of property and equipment		(41	)		(42	)		(177	)		(168	)
Free Cash Flow		243			114			355			112
Net proceeds from receivables facility		25			33			156			123
Financing and consent fees		—			—			—			4
Restructuring and integration payments⁽¹⁾		4			2			17			11
Integration-related capital expenditures		—			1			1			10
Radio conversion costs, net⁽²⁾		(6	)		25			4			198
Other, net⁽³⁾		3			—			24			7
Adjusted Free Cash Flow	$	269		$	176		$	558		$	465
Interest rate swaps presented within financing activities⁽⁴⁾		8			(14	)		(19	)		(56	)
Adjusted Free Cash Flow including interest rate swaps	$	277		$	162		$	539		$	409

Note: amounts may not sum due to rounding

_______________________
(1) During the twelve months ended December 31, 2022, primarily represents CSB restructuring costs and ADT Solar integration costs.
(2) Represents net costs associated with replacing cellular technology used in many of our security systems pursuant to a replacement program.
(3) During the twelve months ended December 31, 2022, primarily represents $16 million of acquisition costs related to the ADT Solar acquisition.
(4) Includes net settlements related to interest rate swaps with an other-than-insignificant financing element at inception, which is presented within net cash provided by (used in) financing activities.

Adjusted Net Income (Loss), Adjusted Diluted Net Income (Loss) per Share, and Reconciliations to GAAP Net Income (Loss) and GAAP Diluted Net Income (Loss) per Share

We define Adjusted Net Income (Loss) as net income (loss) adjusted for (i) merger, restructuring, integration, and other; (ii) losses on extinguishment of debt; (iii) radio conversion costs net of any related incremental revenue earned; (iv) share-based compensation expense; (v) unrealized gains and losses on interest rate swap contracts not designated as hedges; (vi) other income/gain or expense/loss items such as changes in fair value of certain financial instruments, impairment charges, financing and consent fees, or acquisition-related adjustments; and (vii) the impact these adjusted items have on taxes.

Adjusted Diluted Net Income (Loss) per share is Adjusted Net Income (Loss) divided by diluted weighted-average shares outstanding of common stock. In periods of GAAP net loss, diluted weighted-average shares outstanding of common stock does not include the assumed conversion of Class B Common Stock and other potential shares, such as share-based compensation awards, to shares of Common Stock as the results would be anti-dilutive.

We believe Adjusted Net Income (Loss) and Adjusted Diluted Net Income (Loss) per share are benchmarks used by analysts and investors who follow the industry for comparison of its performance with other companies in the industry, although our measures may not be directly comparable to similar measures reported by other companies.

There are material limitations to using these measures, as they do not reflect certain significant items which directly affect our net income (loss) and related per share amounts (the most comparable GAAP measures).

During the third quarter of 2021, Net Income (Loss) before special items was renamed Adjusted Net Income (Loss), and Diluted Net Income (Loss) per share before special items was renamed Adjusted Diluted Net Income (Loss) per share. There has been no change to the calculation of these measures.

	Three Months Ended December 31,						Twelve Months Ended December 31,
(in millions, except per share data)		2022			2021			2022			2021
Net income (loss)	$	151		$	(58	)	$	173		$	(341	)
Merger, restructuring, integration, and other		19			19			22			38
Goodwill impairment⁽¹⁾		—			—			149			—
Loss on extinguishment of debt		—			—			—			37
Change in fair value of other financial instruments⁽²⁾		(94	)		—			63			—
Radio conversion costs, net⁽³⁾		(3	)		40			3			211
Share-based compensation expense		17			15			67			61
Unrealized (gain) loss on interest rate swaps⁽⁴⁾		11			(42	)		(302	)		(158	)
Acquisition-related adjustments⁽⁵⁾		(1	)		12			35			13
Other, net		3			(2	)		(4	)		(3	)
Tax impact on adjustments		(11	)		(9	)		11			(50	)
Adjusted Net Income (Loss)	$	92		$	(25	)	$	218		$	(191	)

Weighted-average shares outstanding – diluted ⁽⁶⁾ :
Common Stock		922			787			915			771
Class B Common Stock		55			55			55			55

Net income (loss) per share – diluted:
Common Stock	$	0.16		$	(0.07	)	$	0.19		$	(0.41	)
Class B Common Stock	$	0.16		$	(0.07	)	$	0.19		$	(0.41	)

Adjusted Diluted Net Income (Loss) per share ⁽⁷⁾	$	0.10		$	(0.03	)	$	0.24		$	(0.25	)

Note: amounts may not sum due to rounding.

_______________________
(1) Represents a goodwill impairment charge related to the Solar reporting unit in Q3 2022.
(2) In connection with the State Farm investment, amounts represent the change in fair value of a contingent forward purchase contract related to the tender offer during 2022.
(3) Represents net costs associated with replacing cellular technology used in many of our security systems pursuant to a replacement program.
(4) Represents the change in the fair value of interest rate swaps not designated as cash flow hedges.
(5) Primarily represents amortization of the customer backlog intangible asset during Q4 2021 and Q1 2022 related to the ADT Solar Acquisition.
(6) Refer to the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for further discussion regarding the computation of diluted weighted-average shares outstanding of common stock.
(7) Calculated as Adjusted Net Income (Loss) divided by diluted weighted-average shares outstanding of Common Stock.

Leverage Rati

os and Reconciliation to GAAP Debt to Net Income (Loss) Leverage Ratio

Net Leverage Ratio is calculated as the ratio of net debt to last twelve months (“LTM”) Adjusted EBITDA. Net debt is calculated as total debt excluding the Receivables Facility, including capital leases, minus cash and cash equivalents. Refer to the discussion on Adjusted EBITDA for descriptions of the differences between Adjusted EBITDA and net income (loss), which is the most comparable GAAP measure. We believe Net Leverage Ratio is a useful measure of the Company’s credit position and progress towards leverage targets. There are material limitations to using Net Leverage Ratio as the Company may not always be able to use cash to repay debt on a dollar-for-dollar basis.

Debt to Net Income (Loss) Leverage Ratio:

(in millions)	December 31, 2022		December 31, 2021
Total debt (book value)	$	9,829	$	9,693
LTM net income (loss)	$	173	$	(341	)
Debt to net income (loss) leverage ratio	56.9x			(28.4x	)

Net debt and Net Leverage Ratio:

(in millions)	December 31, 2022			December 31, 2021
Revolver	$	—		$	25
First lien term loan		2,730			2,758
First lien notes		5,550			5,550
Receivables facility		355			199
Finance leases		95			93
Other		2			5
Total first lien debt	$	8,732		$	8,630
Second lien notes		1,300			1,300
Total debt ⁽¹⁾	$	10,032		$	9,930

Less:
Cash and cash equivalents		(257	)		(24	)
Receivables Facility		(355	)		(199	)
Net debt	$	9,420		$	9,706

LTM Adjusted EBITDA	$	2,447		$	2,213
Net leverage ratio ⁽²⁾		3.9x			4.4x

Note: amounts may not sum due to rounding

_______________________

(1) Debt instruments are stated at face value.
(2) Beginning Q4 2021, net leverage ratio excludes the Receivables Facility.

February 28, 2023 6:58 am

Warby Parker Announces Fourth Quarter and Full Year 2022 Results

Warby Parker Announces Fourth Quarter and Full Year 2022 Results

2022 net revenue increased 10.6% to $598.1 million

Average revenue per customer increased 6.9% year over year to $263

NEW YORK–(BUSINESS WIRE)–
Warby Parker Inc. (NYSE: WRBY) (the “Company”), a direct-to-consumer lifestyle brand focused on vision for all, today announced financial results for the fourth quarter and full year ended December 31, 2022.

“Our team’s accomplishments in 2022, Warby Parker’s first full year as a public company, reflect our commitment to growing sustainably while taking market share, delivering remarkable customer experiences, and creating impact,” said Co-Founder and Co-CEO Neil Blumenthal. “In the face of economic uncertainty and a depressed consumer environment, we delivered strong Q4 results and aim to bring that same momentum, powered by rigorous discipline, into 2023.”

“As we enter a new year, our team continues to focus on aspects of our business within our control, taking decisive action, and delivering on our value proposition while positioning our brand to continue to outpace industry growth. We’re committed to expanding profitability while making strategic investments in areas of the business that will drive brand awareness and create even more value for our millions of customers,” added Co-Founder and Co-CEO Dave Gilboa.

Fourth Quarter and Full Year 2022 Highlights

Full year net revenue increased $57.3 million, or 10.6%, to $598.1 million compared to full year 2021.
Fourth quarter net revenue increased $13.6 million, or 10.2%, to $146.5 million compared to fourth quarter 2021.
Active Customers increased 3.6% to 2.28 million year over year.
Average Revenue per Customer increased 6.9% year over year to $263.
Q4 2022 GAAP net loss of $20.3 million, a decrease of $25.7 million from the fourth quarter of 2021.
Q4 2022 adjusted EBITDA⁽¹⁾of $8.6 million and an adjusted EBITDA margin⁽¹⁾ of 5.8%, an increase of $15.0 million and 10.6 points from the fourth quarter of 2021.
Second half of 2022 adjusted EBITDA margin⁽¹⁾ of 6.9%, a 4.7 point improvement over 2.2% in the first half of 2022.
Opened 40 new stores during the year, ending 2022 with 200 stores.
Contact lens revenue increased to 7.2% of our business in 2022, up from 4.3% in 2021.
Eye exam revenue increased to 2.9% of our business in 2022, up from 1.7% in 2021.

Fourth Quarter 2022 Financial Results

For the fourth quarter of 2022, compared to the fourth quarter of 2021:

Net revenue increased $13.6 million, or 10.2%, to $146.5 million.
Active Customers increased by 78,000, or 3.6%, to 2.28 million.
Gross profit increased 5.8% to $80.7 million.
Gross margin was 55.1% compared to 57.4% in the prior year. The decline in gross margin was primarily driven by an increase in salary and benefit costs associated with optometrists as we scale our eye exam offering across our fleet, to 150 exam locations, up from 102 in the prior year period, the impact of the growth in the Company’s store count driving higher store occupancy and depreciation costs, and the increased penetration of contact lenses, which carry lower gross margins than eyeglasses, reflecting Warby Parker’s strategy to grow its contact lens offering. This was partially offset by leverage from the Company’s in-house optical laboratory network and the scaling of higher margin progressive lenses.
Selling, general and administrative expenses (“SG&A”) decreased $19.8 million to $102.4 million, or 69.9% of revenue, primarily driven by lower marketing costs, as we have reduced our online advertising spend and are leveraging our expanding retail footprint to drive brand awareness, and lower stock-based compensation costs, which represented 13.6% of revenue compared to 24.6% in Q4 2021. Adjusted SG&A⁽¹⁾ decreased from 67.3% to 55.6% of revenue.
GAAP net loss decreased $25.7 million to $20.3 million, primarily as a result of the decrease in SG&A described above.
Adjusted EBITDA⁽¹⁾ increased $15.0 million to $8.6 million.
Adjusted EBITDA margin⁽¹⁾ increased 10.6 points to 5.8%.

Full Year 2022 Financial Results

For the full year 2022, compared to the full year 2021:

Net revenue increased $57.3 million, or 10.6%, to $598.1 million.
Active Customers increased by 78,000, or 3.6%, to 2.28 million.
Gross profit increased 7.3% to $341.1 million.
Gross margin was 57.0% compared to 58.8% in the prior year. The decline in gross margin was primarily driven by the increased penetration of contact lenses which are sold at a lower margin than glasses, reflecting Warby Parker’s strategy to grow its contact lens offering, increases in store occupancy costs as a percent of revenue primarily due to increased depreciation and rent expense as we grew our store base to 200 stores, and an increase in salary and benefit costs associated with optometrists as we scale our eye exam offering across our fleet, to 150 exam locations, up from 102 in the prior year period. This was partially offset by the scaling of higher margin progressive lenses and leverage from the Company’s in-house optical laboratory network.
SG&A decreased $9.1 million to $452.3 million, or 75.6% of revenue, primarily driven by a decrease in stock-based compensation and related payroll taxes and professional costs incurred in 2021 related to the Company’s direct listing. Adjusted SG&A⁽¹⁾ increased $32.5 million to $348.5 million primarily driven by higher compensation costs, primarily from growth in our retail workforce, increased insurance costs related to operating as a public company, and increased depreciation and amortization costs, mainly related to capitalized software and office build-outs. These decreases were partially offset by a reduction in marketing expenses and Home Try-On program costs. Adjusted SG&A remained flat as a percent of revenue.
GAAP net loss decreased $33.9 million to $110.4 million, primarily as a result of the increase in gross profit and the decrease in SG&A described above.
Adjusted EBITDA⁽¹⁾ increased $2.3 million to $27.2 million.
Adjusted EBITDA margin⁽¹⁾ of 4.5% was flat as compared to 2021, however, the second half of 2022 adjusted EBITDA margin⁽¹⁾ was 6.9%, a 4.7 point improvement over 2.2% in the first half of 2022.

Balance Sheet Highlights

Warby Parker ended 2022 with $208.6 million in cash and cash equivalents.

2023 Outlook

For the full year 2023, Warby Parker is providing the following guidance:

Net revenue of $645 to $660 million, representing growth of 8% to 10% versus full year 2022.
Adjusted EBITDA⁽¹⁾ of approximately $51.5 million, or adjusted EBITDA margin⁽¹⁾ of approximately 7.9%.
40 new store openings bringing the total projected store count at year end to approximately 240.

“We are pleased with our strong fourth quarter performance, in particular the profitability expansion we were able to achieve with an adjusted EBITDA margin of 2.2% in the first half of 2022 up to 6.9% in the second half despite economic headwinds,” said Chief Financial Officer Steve Miller. “Our 2023 outlook reflects our team’s commitment to maintaining discipline across the topline and bottomline while continuing to invest in our omnichannel business model, for example by opening 40 new stores. As we work to capture greater market share while providing vision for all, we’re as committed as ever to delivering value to shareholders,” said Chief Financial Officer Steve Miller.

The guidance and forward-looking statements made in this press release and on our conference call are based on management’s expectations as of the date of this press release.

⁽¹⁾ Please see the reconciliation of non-GAAP financial measures to the most comparable GAAP financial measure in the section titled “Non-GAAP Financial Measures” below.

Webcast and Conference Call

A conference call to discuss Warby Parker’s fourth quarter and full year 2022 results, as well as first quarter and full year 2023 outlook, is scheduled for 8:00 a.m. ET today. To participate, please dial 844-200-6205 from the U.S. or 929-526-1599 from international locations. The conference passcode is 045225. A live webcast of the conference call will be available on the investors section of the Company’s website at investors.warbyparker.com where presentation materials will also be posted prior to the conference call. A replay will be made available online approximately two hours following the live call for a period of 90 days.

Forward-Looking Statements

This press release and the related conference call, webcast and presentation contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, including expectations regarding achieving profitability, delivering stakeholder value, growing market share, and our GAAP and non-GAAP guidance for the quarter ending March 31, 2023 and year ending December 31, 2023; expectations regarding the number of new store openings during the year ending December 31, 2023; management’s plans, priorities, initiatives and strategies; and expectations regarding growth of our business. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantiﬁed. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “toward,” “will,” or “would,” or the negative of these words or other similar terms or expressions. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all.

Forward-looking statements are based on information available at the time those statements are made and are based on current expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management as of that time with respect to future events. These statements are subject to risks and uncertainties, many of which involve factors or circumstances that are beyond our control, that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. These risks and uncertainties include our ability to manage our future growth effectively; our expectations regarding cost of goods sold, gross margin, channel mix, customer mix, and selling, general, and administrative expenses; planned new retail stores in 2023 and going forward; an overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, inflation and government instability; increases in component and shipping costs and changes in supply chain; our ability to compete successfully; our ability to manage our inventory balances and shrinkage; our ability to engage our existing customers and obtain new customers; the growth of our brand awareness; the effects of the ongoing COVID-19 pandemic or a future outbreak of disease or similar public health concern; the effects of seasonal trends on our results of operations; our ability to stay in compliance with extensive laws and regulations that apply to our business and operations; our ability to adequately maintain and protect our intellectual property and proprietary rights; our reliance on third parties for our products, operation and infrastructure; our duties related to being a public benefit corporation; the ability of our Co-Founders and Co-CEOs to exercise significant influence over all matters submitted to stockholders for approval; the effect of our multi-class structure on the trading price of our Class A common stock; and the increased expenses associated with being a public company. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from the Company’s expectations is included in our most recent reports filed with the SEC on Form 10-K and Form 10-Q. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Additional information regarding these and other factors that could affect the Company’s results is included in the Company’s SEC filings, which may be obtained by visiting the SEC’s website at www.sec.gov. Information contained on, or that is referenced or can be accessed through, our website does not constitute part of this document and inclusions of any website addresses herein are inactive textual references only.

Glossary

Active Customer is defined as a unique customer that has made at least one purchase of any product or service in the preceding 12-month period.

Average Revenue per Customer is defined as net revenue for a given period divided by the number of Active Customers as of the end of that same period.

Non-GAAP Financial Measures

We use adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, adjusted cost of goods sold (“adjusted COGS”), adjusted gross profit, and adjusted selling, general, and administrative expenses (“adjusted SG&A”) as important indicators of our operating performance. Collectively, we refer to these non-GAAP financial measures as our “Non-GAAP Measures.” The Non-GAAP Measures, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

Adjusted EBITDA is defined as net income (loss) before interest and other income, taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.

Adjusted net income (loss) is defined as net income (loss) adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs, and as further adjusted for estimated income tax on such adjusted items.

Adjusted earnings (loss) per share is defined as adjusted net income (loss) divided by adjusted weighted average shares outstanding.

Adjusted COGS is defined as cost of goods sold adjusted for stock-based compensation expense and related employer payroll taxes.

Adjusted gross profit is defined as net revenue minus adjusted COGS.

Adjusted SG&A is defined as SG&A adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs.

The Non-GAAP Measures are presented for supplemental informational purposes only. A reconciliation of historical GAAP to Non-GAAP financial information is included under “Selected Financial Information” below.

We have not reconciled our adjusted EBITDA margin guidance to GAAP net income (loss) margin, or net margin, or adjusted EBITDA guidance to GAAP net income (loss) because we do not provide guidance for GAAP net margin or GAAP net income (loss) due to the uncertainty and potential variability of stock-based compensation and taxes, which are reconciling items between GAAP net margin and adjusted EBITDA margin and GAAP net income (loss) and adjusted EBITDA, respectively. Because such items cannot be reasonably provided without unreasonable efforts, we are unable to provide a reconciliation of the adjusted EBITDA margin guidance to GAAP net margin and adjusted EBITDA guidance to GAAP net income (loss). However, such items could have a significant impact on GAAP net margin and GAAP net income (loss).

About Warby Parker

Warby Parker (NYSE: WRBY) was founded in 2010 with a mission to inspire and impact the world with vision, purpose, and style–without charging a premium for it. Headquartered in New York City, the co-founder-led lifestyle brand pioneers ideas, designs products, and develops technologies that help people see, from designer-quality prescription glasses (starting at $95) and contacts, to eye exams and vision tests available online and in its 200 retail stores across the U.S. and Canada.

Warby Parker aims to demonstrate that businesses can scale, do well, and do good in the world. Ultimately, the brand believes in vision for all, which is why for every pair of glasses or sunglasses sold, they distribute a pair to someone in need through their Buy a Pair, Give a Pair program. To date, Warby Parker has worked alongside its nonprofit partners to distribute more than 10 million glasses to people in need.

Selected Financial Information

Warby Parker Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data)

	December 31,
		2022			2021
Assets
Current assets:
Cash and cash equivalents	$	208,585		$	256,416
Accounts receivable, net		1,435			992
Inventory		68,848			57,095
Prepaid expenses and other current assets		15,700			13,477
Total current assets		294,568			327,980

Property and equipment, net		138,628			112,195
Right-of-use lease assets		127,014			—
Other assets		8,497			471
Total assets	$	568,707		$	440,646

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	20,791		$	30,890
Accrued expenses		58,222			60,840
Deferred revenue		25,628			22,073
Current lease liabilities		22,546			—
Other current liabilities		2,370			4,301
Total current liabilities		129,557			118,104

Deferred rent		—			36,544
Non-current lease liabilities		150,832			—
Other liabilities		1,672			—
Total liabilities		282,061			154,648
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value; Class A: 750,000,000 shares authorized at December 31, 2022 and 2021, 96,115,202 and 94,901,623 shares issued and outstanding as of December 31, 2022 and 2021, respectively; Class B: 150,000,000 shares authorized at December 31, 2022 and 2021, 19,223,572 and 18,719,184 shares issued and outstanding as of December 31, 2022 and 2021, respectively, convertible to Class A on a one-to-one basis		12			11
Additional paid-in capital		890,915			779,212
Accumulated deficit		(603,634	)		(493,241	)
Accumulated other comprehensive income		(647	)		16
Total stockholders’ equity		286,646			285,998
Total liabilities and stockholders’ equity	$	568,707		$	440,646

Warby Parker Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share and per share data)

	Three Months Ended December 31,									Year Ended December 31,
		2022			2021			2020			2022			2021			2020
Net revenue	$	146,493		$	132,892		$	112,837		$	598,112		$	540,798		$	393,719
Cost of goods sold		65,842			56,641			47,659			257,050			223,049			161,784
Gross profit		80,651			76,251			65,178			341,062			317,749			231,935

Selling, general, and administrative expenses		102,361			122,146			70,295			452,265			461,410			287,567
Loss from operations		(21,710	)		(45,895	)		(5,117	)		(111,203	)		(143,661	)		(55,632	)

Interest and other (loss) income, net		1,382			105			529			1,307			(347	)		(97	)

Loss before income taxes		(20,328	)		(45,790	)		(4,588	)		(109,896	)		(144,008	)		(55,729	)
Provision for income taxes		(77	)		112			(287	)		497			263			190
Net loss	$	(20,251	)	$	(45,902	)	$	(4,301	)	$	(110,393	)	$	(144,271	)	$	(55,919	)

Deemed dividend upon redemption of redeemable convertible preferred stock	$	—		$	—		$	—		$	—		$	(13,137	)	$	—
Net loss attributable to common stockholders	$	(20,251	)	$	(45,902	)	$	(4,301	)	$	(110,393	)	$	(157,408	)	$	(55,919	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.18	)	$	(0.41	)	$	(0.08	)	$	(0.96	)	$	(2.21	)	$	(1.05	)
Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted		115,713,915			112,501,252			53,671,842			114,942,019			71,249,257			53,033,936

Warby Parker Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)

	Year Ended December 31,
		2022			2021			2020
Cash flows from operating activities
Net loss	$	(110,393	)	$	(144,271	)	$	(55,919	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		31,864			21,551			17,763
Stock-based compensation		98,032			107,148			44,913
Non-cash charitable contribution		3,770			7,757			—
Asset impairment charges		1,647			317			614
Change in operating assets and liabilities:
Accounts receivable, net		(451	)		(392	)		517
Inventory		(11,794	)		(18,624	)		(10,020	)
Prepaid expenses and other assets		(10,287	)		(6,887	)		(67	)
Accounts payable		(7,943	)		(11,114	)		5,898
Accrued expenses		2,748			9,486			16,604
Deferred revenue		3,583			(4,478	)		7,288
Other current liabilities		537			579			763
Deferred rent		—			8,547			2,149
Right-of-use lease assets and current and non-current lease liabilities		7,385			—			—
Other liabilities		1,672			(1,613	)		2,255
Net cash provided by (used in) operating activities		10,370			(31,994	)		32,758
Cash flows from investing activities
Purchases of property and equipment		(60,181	)		(48,513	)		(20,070	)
Net cash used in investing activities		(60,181	)		(48,513	)		(20,070	)
Cash flows from financing activities
Proceeds from stock option and warrant exercises		456			20,035			1,330
Employee tax withholding remitted in connection with exercise or release of equity awards		—			(2,532	)
Proceeds from repayment of related party loans		91			31,612			945
Proceeds from shares issued in connection with ESPP		2,744			—			—
Repurchase of stock		—			(8,085	)		—
Issuance of Series F redeemable convertible preferred stock, net of issuance costs		—			—			124,717
Issuance of Series G redeemable convertible preferred stock, net of issuance costs		—			—			118,944
Payment for Tender Offer		—			(18,031	)		—
Borrowings from Credit Facility		—			—			30,900
Repayment of Credit Facility		—			—			(30,900	)
Net cash provided by financing activities		3,291			22,999			245,936
Effect of exchange rates on cash		(1,311	)		(161	)		37
Net (decrease) increase in cash and cash equivalents		(47,831	)		(57,669	)		258,661
Cash and cash equivalents
Beginning of year		256,416			314,085			55,424
End of year	$	208,585		$	256,416		$	314,085
Supplemental disclosures
Cash paid for income taxes	$	536		$	356		$	230
Cash paid for interest		184			150			466
Cash paid for amounts included in the measurement of lease liabilities		29,647			—			—
Non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses		3,968			4,158			3,150
Related party loans issued in connection with stock option exercises	$	—		$	13,827		$	—

Warby Parker Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)

The following table reconciles adjusted EBITDA and adjusted EBITDA margin to the most directly comparable GAAP measure, which is net loss:

	Three Months Ended December 31,						Year Ended December 31,
		2022			2021			2022			2021
	(unaudited, in thousands)						(unaudited, in thousands)
Net loss	$	(20,251	)	$	(45,902	)	$	(110,393	)	$	(144,271	)
Adjusted to exclude the following:
Interest and other loss, net		(1,382	)		(105	)		(1,307	)		347
Provision for income taxes		(77	)		112			497			263
Depreciation and amortization expense		8,919			6,371			31,864			21,643
Asset impairment charges		138			180			1,647			317
Stock-based compensation expense⁽¹⁾		20,052			32,945			98,655			110,543
Non-cash charitable donations⁽²⁾		500			—			3,770			7,757
Transaction costs⁽³⁾		—			—			—			28,262
Amortization of cloud-based software implementation costs⁽⁴⁾		151			—			247			—
ERP implementation costs⁽⁵⁾		518			—			687			—
Restructuring costs⁽⁶⁾		—			—			1,535			—
Adjusted EBITDA	$	8,568		$	(6,399	)	$	27,202		$	24,861
Adjusted EBITDA margin		5.8	%		(4.8	)%		4.5	%		4.6	%

(1)		Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, and the impact of repurchases of awards from employees. For the three and twelve months ended December 31, 2022, the amount includes $0.2 million and $0.6 million of employer payroll costs, respectively, associated with releases of RSUs and option exercises. For the three and twelve months ended December 31, 2021, the amount includes $1.8 million and $3.4 million of employer payroll costs, respectively, associated with releases of RSUs and option exercises.
(2)		Represents charitable expense recorded in connection with the donation of 178,572 shares of Series A common stock in August 2021 and 178,572 shares of Class A common stock in May 2022 to the Warby Parker Impact Foundation, and a donation of 34,528 shares of Class A common stock to third-party charitable donor advised funds.
(3)		Represents (i) costs directly attributable to the preparation for our Direct Listing and (ii) expenses incurred in connection with the cash tender offer completed in June 2021.
(4)		Represents the amortization of costs capitalized in connection with the implementation of cloud-based software.
(5)		Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning (“ERP”) system which is expected to be live in 2023.
(6)		Represents employee severance and related costs for our restructuring plan that was executed in August 2022.

Warby Parker Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)

The following table reconciles adjusted EBITDA and adjusted EBITDA margin to the most directly comparable GAAP measure, which is net loss:

	Six Months Ended
	June 30, 2022			December 31, 2022
	(unaudited, in thousands)
Net loss	$	(66,299	)	$	(44,094	)
Adjusted to exclude the following:
Interest and other loss, net		(108	)		(1,199	)
Provision for income taxes		586			(89	)
Depreciation and amortization expense		14,605			17,259
Asset impairment charges		412			1,235
Stock-based compensation expense⁽¹⁾		54,244			44,411
Non-cash charitable donations⁽²⁾		3,270			500
Amortization of cloud-based software implementation costs⁽³⁾		—			247
ERP implementation costs⁽⁴⁾		—			687
Restructuring costs⁽⁵⁾		—			1,535
Adjusted EBITDA	$	6,710		$	20,492
Adjusted EBITDA margin		2.2	%		6.9	%

(1)		Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, and the impact of repurchases of awards from employees. For both the six months ended June 30, 2022 and December 31, 2022, the amount includes $0.3 million of employer payroll costs associated with releases of RSUs and option exercises.
(2)		Represents charitable expense recorded in connection with the donation of 178,572 shares of Class A common stock in May 2022 to the Warby Parker Impact Foundation, and a donation of 34,528 shares of Class A common stock to third-party charitable donor advised funds.
(3)		Represents the amortization of costs capitalized in connection with the implementation of cloud-based software.
(4)		Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning (“ERP”) system which is expected to be live in 2023.
(5)		Represents employee severance and related costs for our restructuring plan that was executed in August 2022.

Warby Parker Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)

The following table presents our non-GAAP, or adjusted, financial measures for the periods presented as a percentage of revenue. Each cost and operating expense is adjusted for transaction costs, stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, ERP implementation costs, and restructuring costs.

	Reported						Adjusted						Reported						Adjusted
	Three Months Ended December 31,						Three Months Ended December 31,						Year Ended December 31,						Year Ended December 31,
		2022			2021			2022			2021			2022			2021			2022			2021
	(unaudited, in millions)						(unaudited, in millions)						(unaudited, in millions)						(unaudited, in millions)
Cost of goods sold	$	65.8		$	56.6		$	65.6		$	56.4		$	257.1		$	223.0		$	256.1		$	221.9
% of Revenue		44.9	%		42.6	%		44.8	%		42.5	%		43.0	%		41.2	%		42.8	%		41.0	%

Gross profit	$	80.7		$	76.3		$	80.8		$	76.5		$	341.1		$	317.7		$	342.0		$	318.9
% of Revenue		55.1	%		57.4	%		55.2	%		57.5	%		57.0	%		58.8	%		57.2	%		59.0	%

Selling, general, and administrative expenses	$	102.4		$	122.1		$	81.5		$	89.4		$	452.3		$	461.4		$	348.5		$	316.0
% of Revenue		69.9	%		91.9	%		55.6	%		67.3	%		75.6	%		85.3	%		58.3	%		58.4	%

Net (loss) income	$	(20.3	)	$	(45.9	)	$	0.5		$	(9.0	)	$	(110.4	)	$	(144.3	)	$	(3.7	)	$	1.8
% of Revenue		(13.8	)%		(34.5	)%		0.4	%		(6.8	)%		(18.5	)%		(26.7	)%		(0.6	)%		0.3	%

* Numbers in the table above may not foot due to rounding.

Warby Parker Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)

The following table reflects a reconciliation of each non-GAAP, or adjusted, financial measure to its most directly comparable financial measure prepared in accordance with GAAP:

	Three Months Ended December 31,						Year Ended December 31,
		2022			2021			2022			2021
	(unaudited, in thousands)						(unaudited, in thousands)
Cost of goods sold	$	65,842		$	56,641		$	257,050		$	223,049
Adjusted to exclude the following:
Stock-based compensation expense⁽¹⁾		195			223			905			1,145
Adjusted cost of goods sold	$	65,647		$	56,418		$	256,145		$	221,904

Gross profit	$	80,651		$	76,251		$	341,062		$	317,749
Adjusted to exclude the following:
Stock-based compensation expense⁽¹⁾		195			223			905			1,145
Adjusted gross profit	$	80,846		$	76,474		$	341,967		$	318,894

Selling, general, and administrative expenses	$	102,361		$	122,146		$	452,265		$	461,410
Adjusted to exclude the following:
Stock-based compensation expense⁽¹⁾		19,857			32,723			97,750			109,398
Non-cash charitable donations⁽²⁾		500			—			3,770			7,757
Transaction costs⁽³⁾		—			—			—			28,262
ERP implementation costs⁽⁴⁾		518			—			687			—
Restructuring costs⁽⁵⁾		—			—			1,535			—
Adjusted selling, general, and administrative expenses	$	81,486		$	89,423		$	348,523		$	315,993

Net loss	$	(20,251	)	$	(45,902	)	$	(110,393	)	$	(144,271	)
Provision for income taxes		(77	)		112			497			263
Loss before income taxes		(20,328	)		(45,790	)		(109,896	)		(144,008	)
Adjusted to exclude the following:
Stock-based compensation expense⁽¹⁾		20,052			32,945			98,655			110,543
Non-cash charitable donations⁽²⁾		500			—			3,770			7,757
Transaction costs⁽³⁾		—			—			—			28,262
ERP implementation costs⁽⁴⁾		518			—			687			—
Restructuring costs⁽⁵⁾		—			—			1,535			—
Adjusted provision for income taxes⁽⁶⁾		(219	)		3,846			1,546			(765	)
Adjusted net income (loss)	$	523		$	(8,999	)	$	(3,703	)	$	1,789

Deemed dividend upon redemption of redeemable convertible preferred stock		—			—			—			(13,137	)
Adjusted net income (loss) attributable to common stock	$	523		$	(8,999	)	$	(3,703	)	$	(11,348	)

Adjusted weighted average shares – diluted		116,614,309			112,501,252			114,942,019			71,249,257
Adjusted diluted loss per share	$	—		$	(0.08	)	$	(0.03	)	$	(0.16	)

(1)		Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, and the impact of repurchases of awards from employees. For the three and twelve months ended December 31, 2022, the amount includes $0.2 million and $0.6 million of employer payroll costs, respectively, associated with releases of RSUs and option exercises. For the three and twelve months ended December 31, 2021, the amount includes $1.8 million and $3.4 million of employer payroll costs, respectively, associated with releases of RSUs and option exercises.
(2)		Represents charitable expense recorded in connection with the donation of 178,572 shares of Series A common stock in August 2021 and 178,572 shares of Class A common stock in May 2022 to the Warby Parker Impact Foundation, and a donation of 34,528 shares of Class A common stock to third-party charitable donor advised funds.
(3)		Represents (i) costs directly attributable to the preparation for our Direct Listing and (ii) expenses incurred in connection with the cash tender offer completed in June 2021.
(4)		Represents internal and external non-capitalized costs related to the implementation of our new ERP system which is expected to be live in 2023.
(5)		Represents employee severance and related costs for our restructuring plan that was executed in August 2022.
(6)		The adjusted provision for income taxes is based on long-term estimated annual effective tax rates of 29.46% in 2022 and 29.94% in 2021. The Company may adjust its adjusted tax rate as additional information becomes available or events occur which may materially affect this rate, including impacts from the rapidly evolving global tax environment, significant changes in our geographic mix, merger and acquisition activity, or changes in our business outlook.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230227006007/en/

Investor Relations:

Brendon Frey, ICR

[email protected]

Media:

Lena Griffin

[email protected]

KEYWORDS: New York United States North America

INDUSTRY KEYWORDS: Fashion Lifestyle Retail Health Consumer Optical

MEDIA:

February 28, 2023 6:58 am

Hayward Holdings Announces Fourth Quarter and Full Year 2022 Financial Results

Hayward Holdings Announces Fourth Quarter and Full Year 2022 Financial Results

FOURTH QUARTER FISCAL 2022 SUMMARY

Net Sales decreased 27% year-over-year to $259.0 million
Net Income decreased 75% year-over-year to $16.0 million
Adjusted EBITDA decreased 50% year-over-year to $53.3 million
GAAP diluted EPS decreased 72% year-over-year to $0.07
Adjusted diluted EPS decreased 61% year-over-year to $0.11

FULL FISCAL YEAR 2022 HIGHLIGHTS

Net Sales decreased 6% year-over-year to $1,314.1 million
Net Income decreased 12% year-over-year to $179.3 million
Adjusted EBITDA decreased 13% year-over-year to $367.6 million
GAAP diluted EPS increased 59% year-over-year to $0.78
Adjusted diluted EPS decreased 28% year-over-year to $0.98

CHARLOTTE, N.C.–(BUSINESS WIRE)–
Hayward Holdings, Inc. (NYSE: HAYW) (“Hayward” or the “Company”), a global designer, manufacturer, and marketer of a broad portfolio of pool and outdoor living technology, today announced financial results for the fourth quarter and full fiscal year ended December 31, 2022.

CEO COMMENTS

“Our fourth quarter performance was consistent with expectations, reflecting the continued reduction of channel inventory days on hand,” said Kevin Holleran, Hayward’s President and Chief Executive Officer. “2022 was characterized by record sell-through of Hayward products as reported by our primary channel partners in the core U.S. market, continued market share gain, and a normalization of channel inventory in the second half. Throughout the year, we took many proactive steps to strengthen Hayward’s position as a premier company in the attractive pool industry, including introducing innovative new solutions and demonstrating agile manufacturing capability. We remained focused on protecting structural gross profit margins through disciplined price actions and manufacturing cost control while funding our growth investments. We successfully executed our enterprise cost reduction program and are on track to deliver the targeted annual SG&A cost savings of $25 million to $30 million in 2023. We expect these actions to drive the Company’s strong financial metrics and provide a solid foundation for future growth.”

FOURTH QUARTER FISCAL 2022 CONSOLIDATED RESULTS

Net sales decreased by 27% to $259.0 million for the fourth quarter of fiscal 2022. The decline in net sales during the quarter was the result of lower volumes, partially offset by favorable pricing and acquisitions. The decline in volume was primarily the result of reduced distribution channel inventory days on hand as supply chain pressure eased and lead times normalized. Macroeconomic uncertainty associated with the rising interest rate environment and geopolitical factors in Europe also contributed to the decline in volume.

Gross profit decreased by 34% to $109.5 million for the fourth quarter of fiscal 2022. Gross profit margin decreased 466 basis points to 42.3%. The decrease in gross margin was principally due to the decline in volume resulting in lower operating leverage, as well as provisioning for slow moving or obsolete inventory.

Selling, general, and administrative (“SG&A”) expenses remained relatively consistent at $60.5 million for the fourth quarter of fiscal 2022 compared to $60.1 million for the fourth quarter of fiscal 2021. As a percentage of net sales, SG&A increased 630 basis points to 23%, compared to the prior-year period of 17% due to the decrease in net sales. Research, development, and engineering expenses were $5.9 million for the fourth quarter of fiscal 2022, or 2% of net sales, as compared to $6.7 million for the prior-year period, or 2% of net sales.

Operating income decreased by 55% to $36.1 million for the fourth quarter of fiscal 2022. The decrease in operating income was driven by lower sales. Operating income as a percentage of net sales (“operating margin”) was 13.9% for the fourth quarter of fiscal 2022, an 864 basis point reduction from the 22.6% operating margin in the fourth quarter of fiscal 2021.

Interest expense, net, increased by approximately 90% to $16.3 million for the fourth quarter of fiscal 2022 primarily as a result of variable rate increases on the term loan, utilization of the ABL revolving credit facility and interest expense on the incremental term loan opened during the fourth quarter of fiscal 2022.

Income tax expense for the fourth quarter of fiscal 2022 was $6.9 million for an effective tax rate of 30.2%, compared to $14.3 million at an effective tax rate of 18.4% for the prior-year period. The decrease was primarily due to the decrease in income from operations as well as a reduced benefit from stock option exercises.

Net income decreased by 75% to $16.0 million for the fourth quarter of fiscal 2022.

Adjusted EBITDA decreased by 50% to $53.3 million for the fourth quarter of fiscal 2022. Adjusted EBITDA margin decreased 943 basis points to 20.6%.

Diluted GAAP EPS decreased by 72% to $0.07 for the fourth quarter of fiscal 2022. Adjusted diluted EPS decreased by 61% to $0.11 for the fourth quarter of fiscal 2022.

FOURTH QUARTER FISCAL 2022 SEGMENT RESULTS

North America

Net sales decreased by 27% to $216.8 million for the fourth quarter of fiscal 2022. The decrease was primarily the result of a decline in volume, partially offset by increases in price and the favorable impact of acquisitions. The decline in volume was primarily the result of reduced distribution channel inventory days on hand as supply chain pressure eased and lead times normalized, as well as macroeconomic uncertainty associated with increasing concerns of an economic slowdown due to the rising interest rate environment. The increase in the net price was due to price increases enacted to offset inflationary pressure, as well as reduced sales rebates to customers for the seasonal year.

Segment income decreased by 56% to $40.8 million for the fourth quarter of fiscal 2022. Adjusted segment income decreased by 54% to $47.2 million.

Europe & Rest of World

Net sales decreased by 23% to $42.2 million for the fourth quarter of fiscal 2022. The decrease was primarily due to a decline in volume as a result of geopolitical factors and macroeconomic uncertainty, unfavorable impact of foreign currency translation, and channel destocking, partially offset by the favorable impact of price increases.

Segment income decreased by 61% to $8.4 million for the fourth quarter of fiscal 2022. Adjusted segment income decreased by 49% to $8.4 million.

FULL FISCAL YEAR 2022 CONSOLIDATED RESULTS

Net sales decreased by 6% to $1,314.1 million for the full fiscal year 2022. The decrease in net sales was primarily the result of lower volumes due to channel inventory corrections after a year of safety stock buildup as supply chain pressures eased and lead times returned to historical levels, even as end-customer demand remained strong for the year despite macroeconomic uncertainty associated with the rising interest rate environment.

Gross profit decreased by 9% to $597.0 million for the full fiscal year 2022. Gross profit margin decreased to 45.4% for the fiscal year 2022, a decrease of 135 basis points compared to the prior full year, primarily due to the decline in volume resulting in lower operating leverage.

Operating income decreased by 10% to $285.6 million for the full fiscal year 2022. The decrease in operating income was driven by the decrease in net sales. Operating margin was 21.7% in the full fiscal year 2022, a 95 basis point reduction from the 22.7% operating margin in the prior full year.

Net income decreased by 12% to $179.3 million for the full fiscal year 2022. Adjusted net income decreased by 17% to $226.1 million compared to the prior fiscal year.

Adjusted EBITDA decreased by 13% to $367.6 million for the full fiscal year 2022 driven primarily by decreased net sales and lower operating leverage. Adjusted EBITDA margin decreased by 211 basis points to 28.0% for the full fiscal year 2022 compared to the prior fiscal year.

Diluted GAAP EPS increased by 59% to $0.78 for the full fiscal year 2022. Adjusted diluted EPS decreased by 28% to $0.98 for the fiscal year 2022.

BALANCE SHEET AND CASH FLOW

As of December 31, 2022, Hayward had cash and cash equivalents of $56.2 million and approximately $211.6 million available for borrowing under its credit facilities. Cash flow from operations for fiscal 2022 of approximately $116 million was a decrease of approximately $73 million from the prior year comparative period as a result of increased cash used for working capital compared to the prior year and a decrease in net income.

COST OPTIMIZATION PROGRAM

During the year ended December 31, 2022 the Company initiated an enterprise cost reduction program to address the current market dynamics and maintain the Company’s strong financial metrics. The initial focus was on a reduction of variable costs with specific attention to eliminating cost inefficiencies in our supply chain and reducing labor in our production cost base. In addition to these variable cost reductions, the Company identified structural selling, general and administrative cost reduction opportunities totaling $25 million to $30 million in 2023, with initial savings of approximately $9 million that were realized in fiscal year 2022.

OUTLOOK

The pool industry remains attractive and continues to benefit from sustainable secular demand trends in outdoor living. Hayward continues to leverage our competitive advantages and drive increasing adoption of our leading SmartPad™ pool equipment products both in new construction and the aftermarket, which represents approximately 80% of our business. Hayward is confident in its long-term outlook for profitable growth and robust cash flow generation, driven by new product innovation, expanding commercial relationships, and operational excellence.

Hayward is introducing 2023 guidance that reflects more challenging macroeconomic conditions and consequently an additional reduction of channel inventory levels. For fiscal year 2023, Hayward expects net sales to decrease 18% to 22%, and Adjusted EBITDA of $265 million to $285 million.

Please see the Forward-Looking Statements section of this release for a discussion of certain risks relevant to Hayward’s outlook.

SHARE REPURCHASE PROGRAM

For the twelve months ended December 31, 2022, Hayward repurchased approximately $343.1 million in common stock under its previously approved share repurchase program up to an aggregate of $450 million of common stock. On July 26, 2022, Hayward’s Board of Directors renewed the initial authorization of the existing repurchase program and authorized Hayward to repurchase up to an aggregate of $450 million of its common stock over the next three years of which $400.0 million remains under the renewed authorization. The repurchase program will continue to be funded by cash on hand and cash generated from operations.

CONFERENCE CALL INFORMATION

Hayward will hold a conference call to discuss the results today, February 28, 2023 at 9:00 a.m. (ET).

To access the live conference call, please register for the call in advance by visiting https://www.netroadshow.com/events/login?show=20c7f7a9&confId=46452. Registration will also be available during the call. After registering, a confirmation e-mail will be sent including dial-in details and a unique access code for entry. To ensure you are connected for the full call please register at least 10 minutes before the start of the call.

Interested investors and other parties can also listen to a webcast of the live conference call by logging onto the Investor Relations section of the company’s website at https://investor.hayward.com/events-and-presentations/default.aspx. An earnings presentation will be posted to the Investor Relations section of the company’s website prior to the conference call.

For those unable to listen to the live conference call, a replay will be available approximately two hours after the call through the archived webcast on the Hayward website or by dialing (866) 813-9403 or (44) 204-525-0658. The access code for the replay is 729609. The replay will be available until 11:59 p.m. Eastern Time on March 14, 2023.

ABOUT HAYWARD HOLDINGS, INC.

Hayward Holdings, Inc. (NYSE: HAYW) is a leading global designer and manufacturer of pool and outdoor living technology. With a mission to deliver exceptional products, outstanding service and innovative solutions to transform the experience of water, Hayward offers a full line of energy-efficient and sustainable residential and commercial pool equipment including pumps, filters, heaters, cleaners, sanitizers, LED lighting, and water features all digitally connected through Hayward’s intuitive IoT-enabled SmartPad™.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”) and releases issued by the Securities and Exchange Commission (the “SEC”). Such forward-looking statements relating to Hayward are based on the beliefs of Hayward’s management as well as assumptions made by, and information currently available to it. These forward-looking statements include, but are not limited to, statements about Hayward’s strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained in or incorporated by reference in this earnings release that are not historical facts. When used in this document, words such as “guidance,” “may,” “will,” “should,” “could,” “intend,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “target,” “predict,” “project,” “seek” and similar expressions as they relate to Hayward are intended to identify forward-looking statements. Hayward believes that it is important to communicate its future expectations to its stockholders, and it therefore makes forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that Hayward is not able to accurately predict or control, and actual results may differ materially from the expectations it describes in its forward-looking statements.

Examples of forward-looking statements include, among others, statements Hayward makes regarding: Hayward’s 2023 guidance; SG&A cost savings; financial position; business plans and objectives; general economic and industry trends; business prospects; future product development and acquisition strategies; growth and expansion opportunities; operating results; and working capital and liquidity. The forward-looking statements in this earnings release are only predictions. Hayward may not achieve the plans, intentions or expectations disclosed in Hayward’s forward-looking statements, and you should not place significant reliance on its forward-looking statements. Hayward has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. Moreover, neither Hayward nor any other person assumes responsibility for the accuracy and completeness of forward-looking statements taken from third-party industry and market reports.

Important factors that could affect Hayward’s future results and could cause those results or other outcomes to differ materially from those indicated in its forward-looking statements include the following: its relationships with and the performance of distributors, builders, buying groups, retailers and servicers who sell Hayward’s products to pool owners; impacts on Hayward’s business from the sensitivity of its business to seasonality and unfavorable economic business and weather conditions; competition from national and global companies, as well as lower-cost manufacturers; Hayward’s ability to develop, manufacture and effectively and profitably market and sell its new planned and future products; its ability to execute on its growth strategies and expansion opportunities; impacts on Hayward’s business from political, regulatory, economic, trade, and other risks associated with operating foreign businesses, including risks associated with geopolitical conflict; its ability to maintain favorable relationships with suppliers and manage disruptions to its global supply chain and the availability of raw materials, including as a result of the COVID-19 pandemic; Hayward’s ability to identify emerging technological and other trends in its target end markets; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; its reliance on information technology systems and susceptibility to threats to those systems, including cybersecurity threats, and risks arising from its collection and use of personal information data; regulatory changes and developments affecting Hayward’s current and future products; volatility in currency exchange rates and interest rates; Hayward’s ability to service its existing indebtedness and obtain additional capital to finance operations and its growth opportunities; Hayward’s ability to establish and maintain intellectual property protection for its products, as well as its ability to operate its business without infringing, misappropriating or otherwise violating the intellectual property rights of others; the impact of material cost and other inflation; Hayward’s ability to attract and retain senior management and other qualified personnel; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits, impact trade agreements and tariffs, or address the impacts of climate change; the outcome of litigation and governmental proceedings; impacts on Hayward’s product manufacturing disruptions, including as a result of catastrophic and other events beyond its control, including risks associated with geopolitical conflict; uncertainties affecting the pace of distribution channel destocking and its impact on sales volumes; Hayward’s ability to realize cost savings from restructuring activities; Hayward’s and its customers’ ability to manage product inventory in an effective and efficient manner; and other factors set forth in “Risk Factors” in Hayward’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Many of these factors are macroeconomic in nature and are, therefore, beyond Hayward’s control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, Hayward’s actual results, performance or achievements may vary materially from those described in this earnings release as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this earnings release are made only as of the date of this earnings release. Unless required by United States federal securities laws, Hayward neither intends nor assumes any obligation to update these forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in Hayward’s expectations.

NON-GAAP FINANCIAL MEASURES

This earnings release includes certain financial measures not presented in accordance with the generally accepted accounting principles in the United States (“GAAP”) including adjusted net income, adjusted basic EPS, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, consolidated segment income, adjusted consolidated segment income, adjusted consolidated segment income margin, adjusted segment income, adjusted segment income margin, net debt and free cash flow. These financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income (loss), segment income or other measures of profitability, performance or financial condition under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. See the appendix for a reconciliation of historical non-GAAP measures to the most directly comparable GAAP measures.

Reconciliation of fiscal 2022 adjusted EBITDA guidance is not being provided, as Hayward does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.


Hayward Holdings, Inc. Unaudited Consolidated Balance Sheets ^{(Dollars in thousands, except per share data)}


	December 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	56,177		$	265,796
Accounts receivable, net of allowances of $3,937 and $2,003, respectively		209,109			208,112
Inventories, net		283,658			233,449
Prepaid expenses		14,981			12,459
Income tax receivable		27,173			—
Other current assets		21,186			30,705
Total current assets		612,284			750,521
Property, plant, and equipment, net of accumulated depreciation of $82,127 and $67,366, respectively		149,828			146,754
Goodwill		932,396			924,264
Trademark		736,000			736,000
Customer relationships, net		230,503			242,854
Other intangibles, net		106,673			103,192
Other non-current assets		107,329			74,885
Total assets	$	2,875,013		$	2,978,470

Liabilities and Stockholders’ Equity
Current liabilities
Current portion of the long-term debt	$	14,531		$	12,155
Accounts payable		54,022			87,445
Accrued expenses and other liabilities		163,283			190,378
Income taxes payable		574			13,886
Total current liabilities		232,410			303,864
Long-term debt, net		1,085,055			973,124
Deferred tax liabilities, net		264,111			262,378
Other non-current liabilities		70,403			69,591
Total liabilities		1,651,979			1,608,957

Stockholders’ equity
Preferred stock, $0.001 par value, 100,000,000 authorized, no shares issued or outstanding as of December 31, 2022 and December 31, 2021		—			—
Common stock $0.001 par value, 750,000,000 authorized; 240,529,150 issued and 211,862,781 outstanding at December 31, 2022; 238,432,216 issued and 233,056,799 outstanding at December 31, 2021		241			238
Additional paid-in capital		1,069,878			1,058,724
Common stock in treasury; 28,666,369 and 5,375,417 at December 31, 2022 and December 31, 2021, respectively		(357,415	)		(14,066	)
Retained earnings		500,222			320,875
Accumulated other comprehensive income		10,108			3,742
Total stockholders’ equity		1,223,034			1,369,513
Total liabilities, redeemable stock, and stockholders’ equity	$	2,875,013		$	2,978,470


Hayward Holdings, Inc. Unaudited Consolidated Statements of Operations ^{(Dollars in thousands, except per share data)}


	Three Months Ended						Twelve Months Ended
	December 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Net sales	$	258,967		$	352,385		$	1,314,136		$	1,401,794
Cost of sales		149,475			186,979			717,101			746,012
Gross profit		109,492			165,406			597,035			655,782
Selling, general, and administrative expense		60,515			60,135			248,812			267,264
Research, development, and engineering expense		5,948			6,680			22,359			22,867
Acquisition and restructuring related (income) expense		(1,337	)		12,578			8,162			15,030
Amortization of intangible assets		8,301			6,485			32,129			32,647
Operating income		36,065			79,528			285,573			317,974
Interest expense, net		16,282			8,557			51,387			50,854
Loss on debt extinguishment		—			—			—			9,418
Other (income) expense, net		(3,107	)		(7,094	)		(51	)		(2,439	)
Total other expense		13,175			1,463			51,336			57,833
Income from operations before income taxes		22,890			78,065			234,237			260,141
Provision for income taxes		6,922			14,344			54,890			56,416
Net income	$	15,968		$	63,721		$	179,347		$	203,725

Earnings per share
Basic	$	0.08		$	0.27		$	0.82		$	0.52
Diluted	$	0.07		$	0.26		$	0.78		$	0.49

Weighted average common shares outstanding
Basic		211,406,214			232,454,438			219,945,024			187,688,087
Diluted		219,958,655			244,514,387			229,726,497			200,574,232


Hayward Holdings, Inc. Unaudited Consolidated Statements of Cash Flows ^{(In thousands)}	Year Ended
	December 31, 2022			December 31, 2021
Cash flows from operating activities
Net income	$	179,347		$	203,725
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		19,246			18,826
Amortization of intangible assets		38,393			38,990
Amortization of deferred debt issuance fees		3,271			4,005
Stock-based compensation		7,948			15,005
Deferred income taxes		(5,345	)		(15,314	)
Allowance for bad debts		1,934			644
Loss on debt extinguishment		—			9,418
Loss on write-off of intangible assets		—			6,319
Loss on disposal of property, plant and equipment		6,128			4,219
Changes in operating assets and liabilities
Accounts receivable		(3,409	)		(70,115	)
Inventories		(35,117	)		(89,660	)
Other current and non-current assets		(40,197	)		(17,161	)
Accounts payable		(36,773	)		18,365
Accrued expenses and other liabilities		(19,482	)		62,121
Net cash provided by operating activities		115,944			189,387

Cash flows from investing activities
Purchases of property, plant, and equipment		(29,625	)		(26,222	)
Purchases of intangibles		—			(914	)
Acquisitions, net of cash acquired		(62,952	)		(21,509	)
Proceeds from sale of property, plant, and equipment		4			25
Proceeds from settlements of investment currency hedge		—			(157	)
Net cash used in investing activities		(92,573	)		(48,777	)

Cash flows from financing activities
Proceeds from issuance of common stock – Initial Public Offering		—			377,400
Costs associated with Initial Public Offering		—			(26,124	)
Purchase of common stock for treasury		(343,349	)		(9,524	)
Proceeds from issuance of long-term debt		129,725			51,659
Debt issuance costs		(8,547	)		(12,551	)
Payments of long-term debt		(10,445	)		(369,644	)
Proceeds from revolving credit facility		150,000			68,000
Payments on revolving credit facility		(150,000	)		(68,000	)
Proceeds from issuance of short term debt		8,119			—
Payments of short term debt		(5,063	)		—
Other, net		320			(259	)
Net cash (used in) provided by financing activities		(229,240	)		10,957

Effect of exchange rate changes on cash and cash equivalents and restricted cash		(3,750	)		(1,065	)
Change in cash and cash equivalents and restricted cash		(209,619	)		150,502
Cash and cash equivalents and restricted cash, beginning of period		265,796			115,294
Cash and cash equivalents and restricted cash, end of period	$	56,177		$	265,796

Supplemental disclosures of cash flow information
Cash paid-interest	$	51,499		$	46,763
Cash paid-income taxes		99,395			62,467
Equipment financed under finance leases		1,603			—

Reconciliations

Consolidated Reconciliations

Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations (Non-GAAP)

Following is a reconciliation from net income to adjusted EBITDA:

(Dollars in thousands)	Three Months Ended						Twelve Months Ended
	December 31,			December 31,			December 31,			December 31,
Net income	$	15,968		$	63,721		$	179,347		$	203,725
Depreciation		5,315			4,730			19,246			18,826
Amortization		9,956			8,087			38,393			38,990
Interest expense		16,282			8,557			51,387			50,854
Income taxes		6,922			14,344			54,890			56,416
Loss on extinguishment of debt		—			—			—			9,418
EBITDA		54,443			99,439			343,263			378,229
Stock-based compensation ^(a)		354			2,636			1,602			19,019
Sponsor management fees^(b)		—			—			—			90
Currency exchange items^(c)		(1,850	)		106			926			4,485
Acquisition and restructuring related expense, net^(d)		(1,337	)		12,578			8,162			15,030
Other^(e)		1,652			(9,056	)		13,622			4,884
Total Adjustments		(1,181	)		6,264			24,312			43,508
Adjusted EBITDA	$	53,262		$	105,703		$	367,575		$	421,737
Adjusted EBITDA margin		20.6	%		30.0	%		28.0	%		30.1	%

(a)		Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. Beginning in the three months ended July 2, 2022, the adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of Hayward’s initial public offering (the “IPO”), whereas in prior periods, the adjustment included stock-based compensation expense for all equity awards. Under the historical presentation, the stock-based compensation adjustment for the three months and twelve months ended December 31, 2022 would have been an expense of $2.2 million and $6.9 million, respectively.

(b)		Represents fees paid to certain of the Company’s controlling stockholders for services rendered pursuant to a 2017 management services agreement. This agreement and the corresponding payment obligation ceased on March 16, 2021, the effective date of the IPO.

(c)		Represents unrealized non-cash losses (gains) on foreign denominated monetary assets and liabilities and foreign currency contracts.

(d)		Adjustments in the fiscal quarter ended December 31, 2022 include a $2.4 million gain resulting from the release of certain reserves associated with the exit of an early-stage product line discontinued in 2021, partially offset by separation costs associated with a reduction-in-force. Adjustments in the fiscal quarter ended December 31, 2021 include $9.9 million of business restructuring related costs associated with the exit of an early-stage product line acquired in 2018, and $2.6 million severance and retention costs associated with the relocation of our Corporate headquarters.

		Adjustments in the year ended December 31, 2022 primarily include $5.0 million of costs associated with the relocation of the Corporate headquarters, $2.9 million separation costs associated with a reduction-in-force, and $1.9 million transaction costs associated with the acquisition of the specialty lighting business of Halco Technologies, LLC (“Specialty Lighting Business”), partially offset by a $2.4 million gain resulting from the release of certain reserves associated with the exit of an early-stage product line discontinued in 2021.

		Adjustments in the year ended December 31, 2021 primarily include $9.9 million of business restructuring related costs associated with the exit of an early-stage product line acquired in 2018, $3.0 million severance and relocation costs associated with the relocation of our Corporate headquarters, and $2.1 million of business restructuring related costs associated with the exit of redundant manufacturing and distribution facilities.

(e)		Adjustments in the fiscal quarter ended December 31, 2022 primarily includes a $0.7 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, $0.7 million of transitional expenses incurred to enable go-forward public company regulatory compliance, and other immaterial items. Adjustments in the fiscal quarter ended December 31, 2021 primarily include $12.8 million income related to the property damage and business interruption as a result of the fire incident in our manufacturing and administrative facilities in Yuncos, Spain as well as $2.5 million of operating losses associated with the early-stage product line mentioned above, and other immaterial items.

		Adjustments in the year ended December 31, 2022 include $5.5 million of expenses associated with the discontinuation of a product joint development agreement, a $3.3 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, $2.3 million of transitional expenses incurred to enable go-forward public company regulatory compliance, $1.4 million of costs incurred related to the selling stockholder offering of shares in May 2022, which are reported in SG&A in our consolidated statements of operations, $0.9 million of expenses related to the Corporate headquarters transition, $0.2 million bad debt reserves related to certain customers impacted by the conflict in Russia and Ukraine, and other immaterial items, partially offset by subsequent collections and $1.1 million of gains resulting from an insurance policy reimbursement related to the fire incident in our manufacturing and administrative facilities in Yuncos, Spain.

		Adjustments in the year ended December 31, 2021 primarily include $7.4 million net insurance settlement proceeds which reflects an incurred property damage loss of $5.4 million, recorded in the second quarter, offset by an insurance policy reimbursement of $12.8 million received in the fourth quarter for the aforementioned property loss as well as the consequential business interruption loss amount caused by the fire incident in Yuncos Spain, a $4.0 million legal reserve and fees, $4.0 million of operating losses related to the early-stage product line acquired in 2018 mentioned above, $1.9 million related to debt refinancing, $1.0 million related to our IPO, and other immaterial items.

Adjusted Net Income and Adjusted EPS Reconciliation (Non-GAAP)

Following is a reconciliation of net income to adjusted net income and earnings per share to adjusted earnings per share:

(Dollars in thousands, except per share data)	Three Months Ended						Twelve Months Ended
	December 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Net income	$	15,968		$	63,721		$	179,347		$	203,725
Tax adjustments ^(a)		1,164			(6,799	)		(2,676	)		(6,799	)
Other adjustments and amortization:
Stock-based compensation ^(b)		354			2,636			1,602			19,019
Sponsor management fees^(c)		—			—			—			90
Currency exchange items^(d)		(1,850	)		106			926			4,485
Acquisition and restructuring related expense, net^(e)		(1,337	)		12,578			8,162			15,030
Other^(f)		1,652			(9,056	)		13,622			4,884
Total other adjustments		(1,181	)		6,264			24,312			43,508
Loss on extinguishment of debt		—			—			—			9,418
Amortization		9,956			8,087			38,393			38,990
Tax effect ^(g)		(2,207	)		(3,887	)		(15,379	)		(22,519	)

Certain transactional-related adjustments ^(h):
Interest savings		—			—			—			6,443
Acquisitions		—			744			2,761			3,823
Tax effect ^(g)		—			(151	)		(678	)		(2,774	)
Adjusted net income	$	23,700		$	67,979		$	226,080		$	273,815

Weighted average number of common shares outstanding, basic		211,406,214			232,454,438			219,945,024			187,688,087
Weighted average number of common shares outstanding, diluted		219,958,655			244,514,387			229,726,497			200,574,232

Basic EPS	$	0.08		$	0.27		$	0.82		$	0.52
Diluted EPS	$	0.07		$	0.26		$	0.78		$	0.49

Adjusted basic EPS ⁽ⁱ⁾	$	0.11		$	0.29			1.03			1.46
Adjusted diluted EPS ⁽ⁱ⁾	$	0.11		$	0.28			0.98			1.37

(a)		Tax adjustments for the three and twelve months ended December 31, 2022 reflect a normalized tax rate of 25.2% and 24.6% compared to our effective tax rate of 30.2% and 23.4%, respectively. Our effective tax rate for the three months ended December 31, 2022 includes a 4% impact from withholding taxes related to the repatriation of foreign earnings and 1% impact associated with share-based compensation activity. Our effective tax rate for the twelve months ended December 31, 2022 includes a (0.9)% impact of the revaluation of deferred tax liabilities as a result of state tax law changes, (0.6)% impact from the exercise of stock options and a (0.1)% impact from return to provision items, partially offset by a 0.4% impact from withholding taxes related to the repatriation of foreign earnings. Tax adjustments for the three and twelve months ended December 31, 2021 reflect a normalized tax rate of 20.4% and 24.3% compared to our effective tax rate of 18.4% and 21.7%, respectively. Our effective tax rate for the three and twelve months ended December 31, 2021 includes the tax impacts associated with reversal of certain valuation allowances, the impact associated with share-based compensation activity and the impact of our exit of an early-stage product line phased out in 2021. The impact to the effective tax rate of the aforementioned items on the three- months ended December 31, 2021 were (1.1%), (0.7)% and (0.2)%, respectively. The impact to the effective tax rate of the aforementioned items on the twelve months ended December 31, 2021 were (1.4%), (0.9)% and (0.3)%, respectively.

(b)		Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. Beginning in the three months ended July 2, 2022, the adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO, whereas in prior periods, the adjustment included stock-based compensation expense for all equity awards. Under the historical presentation, the stock-based compensation adjustment for the three months and twelve months ended December 31, 2022 would have been an expense of $2.2 million and $6.9 million, respectively.

(c)		Represents fees paid to certain of the Company’s controlling stockholders for services rendered pursuant to a 2017 management services agreement. This agreement and the corresponding payment obligation ceased on March 16, 2021, the effective date of the IPO.

(d)		Represents unrealized non-cash losses (gains) on foreign denominated monetary assets and liabilities and foreign currency contracts.

(e)		Adjustments in the fiscal quarter ended December 31, 2022 include a $2.4 million gain resulting from the release of certain reserves associated with the exit of an early-stage product line discontinued in 2021, partially offset by separation costs associated with a reduction-in-force.

		Adjustments in the fiscal quarter ended December 31, 2021 include $9.9 million of business restructuring related costs associated with the exit of an early-stage product line acquired in 2018, and $2.6 million severance and retention costs associated with the relocation of our Corporate headquarters.

		Adjustments in the year ended December 31, 2022 primarily include $5.0 million of costs associated with the relocation of the Corporate headquarters, $2.9 million separation costs associated with a reduction-in-force, and $1.9 million transaction costs associated with the acquisition of the Specialty Lighting Business, partially offset by a $2.4 million gain resulting from the release of certain reserves associated with the exit of an early-stage product line discontinued in 2021.

		Adjustments in the year ended December 31, 2021 primarily include $9.9 million of business restructuring related costs associated with the exit of an early-stage product line acquired in 2018, $3.0 million severance and relocation costs associated with the relocation of our Corporate headquarters, and $2.1 million of business restructuring related costs associated with the exit of redundant manufacturing and distribution facilities.

(f)		Adjustments in the fiscal quarter ended December 31, 2022 primarily includes a $0.7 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, $0.7 million of transitional expenses incurred to enable go-forward public company regulatory compliance, and other immaterial items.

		Adjustments in the fiscal quarter ended December 31, 2021 primarily include $12.8 million income related to the property damage and business interruption as a result of the fire incident in our manufacturing and administrative facilities in Yuncos, Spain as well as $2.5 million of operating losses associated with the early-stage product line mentioned above, and other immaterial items.

		Adjustments in the year ended December 31, 2022 include $5.5 million of expenses associated with the discontinuation of a product joint development agreement, a $3.3 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, $2.3 million of transitional expenses incurred to enable go-forward public company regulatory compliance, $1.4 million of costs incurred related to the selling stockholder offering of shares in May 2022, which are reported in SG&A in our consolidated statements of operations, $0.9 million of expenses related to the Corporate headquarters transition, $0.2 million bad debt reserves related to certain customers impacted by the conflict in Russia and Ukraine, and other immaterial items, partially offset by subsequent collections and $1.1 million of gains resulting from an insurance policy reimbursement related to the fire incident in our manufacturing and administrative facilities in Yuncos, Spain.

		Adjustments in the year ended December 31, 2021 primarily include $7.4 million net insurance settlement proceeds which reflects an incurred property damage loss of $5.4 million, recorded in the second quarter, offset by an insurance policy reimbursement of $12.8 million received in the fourth quarter for the aforementioned property loss as well as the consequential business interruption loss amount caused by the fire incident in Yuncos Spain, a $4.0 million legal reserve and fees, $4.0 million of operating losses related to the early-stage product line acquired in 2018 mentioned above, $1.9 million related to debt refinancing, $1.0 million related to our IPO, and other immaterial items.

(g)		The tax effect represents the immediately preceding adjustments at the normalized tax rates as discussed in footnote (a) above.

(h)		The adjustments for the three and twelve months ended December 31, 2021 represent adjustments related to the acquisition of the Specialty Lighting Business as if the acquisition had occurred at the beginning of the period and adjustments related to interest savings from repayment in full of our Second Lien Term Facility and partial repayment of our First Lien Credit Agreement as if such payments had occurred at the beginning of the period.

(i)		For the twelve months ended December 31, 2021, adjusted net income used in the computation of adjusted basic and diluted EPS does not include certain IPO related items impacting net income attributable to common stockholders used as the numerator of the GAAP basic and diluted EPS computations, including a deemed dividend to Class A shareholders of $85.5 million and dividends to Class C shareholders of $41 thousand. Including these items in the calculation of adjusted EPS would result in adjusted basic and diluted EPS of $0.90 and $0.84 per share, respectively.

Segment Reconciliations

Following is a reconciliation from income from operations before income taxes to consolidated segment income and segment income to adjusted segment income for the North America (“NAM”) and Europe & Rest of World (“E&RW”) segments:

(Dollars in thousands)	Three Months Ended									Three Months Ended
	December 31, 2022									December 31, 2021
	Total			NAM			E&RW			Total			NAM			E&RW
Net sales	$	258,967		$	216,809		$	42,158		$	352,385		$	297,574		$	54,811
Gross profit		109,492			93,130			16,362			165,406			142,197			23,209
Gross profit margin %		42.3	%		43.0	%		38.8	%		46.9	%		47.8	%		42.3	%

Income from operations before income taxes	$	22,890								$	78,065
Expenses not allocated to segments
Corporate expense, net		6,142									15,642
Acquisition and restructuring related expense		(1,337	)								12,578
Amortization of intangible assets in selling, general, and administrative expense		8,301									6,485
Interest expense, net		16,282									8,557
Loss on debt extinguishment		—									—
Other (income) expense, net		(3,107	)								(7,094	)
Segment income	$	49,171		$	40,773		$	8,398		$	114,233		$	92,866		$	21,367
Segment income margin %		19.0	%		18.8	%		19.9	%		32.4	%		31.2	%		39.0	%
Depreciation	$	4,809		$	4,614		$	195		$	4,395		$	4,218		$	177
Amortization		1,656			1,656			—			1,612			1,611			1
Stock-based compensation ^(a)		(617	)		(566	)		(51	)		1,327			1,323			4
Other ^(b)		568			716			(148	)		(2,043	)		3,114			(5,157	)
Total adjustments		6,416			6,420			(4	)		5,291			10,266			(4,975	)
Adjusted segment income	$	55,587		$	47,193		$	8,394		$	119,524		$	103,132		$	16,392
Adjusted segment income margin %		21.5	%		21.8	%		19.9	%		33.9	%		34.7	%		29.9	%

(a)		Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. Beginning in the three months ended July 2, 2022, the adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO, whereas in prior periods, the adjustment included stock-based compensation expense for all equity awards. Under the historical presentation, the stock-based compensation adjustment for the fiscal quarter ended December 31, 2022 would have been an expense of $0.5 million and $0.1 million for NAM and E&RW, respectively.

(b)		Adjustments in the fiscal quarter ended December 31, 2022 for NAM includes a $0.7 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business. The fiscal quarter ended December 31, 2021 primarily includes operating losses of approximately $2.5 million which relate to an early-stage product line acquired in 2018 that was phased out in 2021.

		Adjustments in the fiscal quarter ended December 31, 2022 for E&RW includes collections of previously reserved bad debt expense related to certain customers impacted by the conflict in Russia and Ukraine. The fiscal quarter ended December 31, 2021 primarily includes $5.4 million insurance proceeds associated with the fire incident in our Spain facility.

(Dollars in thousands)	Twelve Months Ended									Twelve Months Ended
	December 31, 2022									December 31, 2021
	Total			NAM			E&RW			Total			NAM			E&RW
Net sales	$	1,314,136		$	1,108,859		$	205,277		$	1,401,794		$	1,160,850		$	240,944
Gross profit		597,035			514,855			82,180			655,782			558,950			96,832
Gross profit margin %		45.4	%		46.4	%		40.0	%		46.8	%		48.2	%		40.2	%

Income from operations before income taxes	$	234,237								$	260,141
Expenses not allocated to segments
Corporate expense, net		30,151									53,430
Acquisition and restructuring related expense		8,162									15,030
Amortization of intangible assets in selling, general, and administrative expense		32,129									32,647
Interest expense, net		51,387									50,854
Loss on debt extinguishment		—									9,418
Other (income) expense, net		(51	)								(2,439	)
Segment income	$	356,015		$	308,627		$	47,388		$	419,081		$	359,886		$	59,195
Segment income margin %		27.1	%		27.8	%		23.1	%		29.9	%		31.0	%		24.6	%
Depreciation	$	17,815		$	17,049		$	766		$	17,891		$	16,871		$	1,020
Amortization		6,265			6,265			—			6,352			6,351			1
Stock-based compensation ^(a)		(434	)		(494	)		60			9,231			8,641			590
Other ^(b)		9,534			9,332			202			4,948			4,665			283
Total adjustments		33,180			32,152			1,028			38,422			36,528			1,894
Adjusted segment income	$	389,195		$	340,779		$	48,416		$	457,503		$	396,414		$	61,089
Adjusted segment income margin %		29.6	%		30.7	%		23.6	%		32.6	%		34.1	%		25.4	%

(a)		Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. Beginning in the three months ended July 2, 2022, the adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO, whereas in prior periods, the adjustment included stock-based compensation expense for all equity awards. Under the historical presentation, the stock-based compensation adjustment for the twelve months ended December 31, 2022 would have been an expense of $0.6 million and $0.2 million for NAM and E&RW, respectively.

(b)		Adjustments in the year ended December 31, 2022 for NAM include $5.5 million of expenses associated with the discontinuation of a product joint development agreement and a $3.3 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, and other immaterial items.

		Adjustments in the year ended December 31, 2021 for NAM include non-recurring severance expenses, retention bonuses, legal fees, and the operating losses of approximately $4.0 million related to an early-stage product line acquired in 2018 that was phased out in 2021.

		Adjustments in the year ended December 31, 2022 for E&RW include $0.2 million bad debt reserves related to certain customers impacted by the conflict in Russia and Ukraine partially offset by subsequent collections.

		Adjustments in the year ended December 31, 2021 for E&RW include $5.4 million of costs related to a fire at our manufacturing and administrative facilities in Yuncos Spain incurred in the second quarter of 2021 that were offset by the insurance proceeds received in the fourth quarter of 2021.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230228005470/en/

Media Relations:

Tanya McNabb

[email protected]

Investor Relations:

Kevin Maczka

[email protected]

KEYWORDS: United States North America North Carolina

INDUSTRY KEYWORDS: Professional Services Finance

MEDIA:

February 28, 2023 6:58 am

Sonic Automotive Announces Promotion of Angela Broadway to Chief Human Resources Officer

Sonic Automotive Announces Promotion of Angela Broadway to Chief Human Resources Officer

Broadway becomes the Company’s first CHRO

CHARLOTTE, N.C.–(BUSINESS WIRE)–Sonic Automotive, Inc. (“Sonic’’ or the “Company”) (NYSE:SAH), a Fortune 500 Company and one of the nation’s largest automotive retailers, today announced the promotion of Angela Broadway to Chief Human Resources Officer (CHRO), effective February 8, 2023.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230228005404/en/

Angela Broadway, Chief Human Resources Officer, Sonic Automotive, Inc. (Photo: Business Wire)

Angela Broadway joined Sonic Automotive in April 2006 and served in several human resources roles at the regional and corporate levels within the company, including the Director of Human Resources for EchoPark Automotive from 2015 to 2018 during the Company’s launch of the used vehicle subsidiary. In 2018, Angela was promoted to Vice President of Human Resources and was named the company’s Senior Vice President of Human Resources in February 2022 with responsibility for all human resources operations within Sonic Automotive and EchoPark Automotive. She becomes the Company’s first CHRO.

“Angela has made an amazing impact on our company with her commitment to and passion for creating an exceptional teammate experience,” said David B. Smith, Chairman and Chief Executive Officer of Sonic Automotive. “Since becoming the leader of our human resources department in 2018, she’s led our team to implement new and improved programs to support the careers and families of over 10,000 teammates who make our company successful. We are thrilled to have Angela as our CHRO.”

“I couldn’t be prouder of the work Angela has accomplished since taking the lead of our human resources team, taking our benefits, training, and talent management programs to new heights,” said Jeff Dyke, President of Sonic Automotive. “She’s also launched some fantastic programs for our teammates, such as our Women’s Leadership Program and our Diversity and Inclusion Council. Her knowledge of our operations, deep experience in the human resources field, and commitment to creating an environment where our teammates thrive makes her a perfect fit for our Company’s first CHRO.”

“We’re grateful to have Angela Broadway’s leadership and expertise on our team,” said Heath Byrd, Chief Financial Officer of Sonic Automotive, Inc. “She’s a change agent who has made an impact on our company over the past 17 years and I look forward to seeing us continue creating an exceptional teammate experience under her leadership as CHRO.”

Angela’s depth of experience in the areas of HR operations, benefits, compliance, recruiting, and performance management, coupled with her knowledge of our people and systems, has enabled her to lead the Company’s focus on creating an environment focused on providing an exceptional teammate experience. Prior to joining Sonic Automotive, Angela worked for ADP from 1994 to 2004 and Compass Group from 2004 to 2006. She has a Bachelor of Science in Business Management from UNC-Charlotte and an MBA from Strayer University with a concentration in Human Resources.

“Sonic Automotive has been a wonderful place to work and fulfilled my passion for people over the past 17 years,” said Angela Broadway, Chief Human Resources Officer of Sonic Automotive, Inc. “It’s an honor to serve the over 10,000 teammates at Sonic Automotive and EchoPark Automotive as our Company’s CHRO and work with our leadership team to continue creating an exceptional teammate experience for our teammates and their families.”

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, North Carolina, is on a quest to become the most valuable automotive retailer and service brand in America. Our Company culture thrives on creating, innovating, and providing industry-leading guest experiences, driven by strategic investments in technology, teammates, and ideas that ultimately fulfill ownership dreams, enrich lives, and deliver happiness to our guests and teammates. As one of the largest automotive retailers in America, we are committed to delivering on this goal while pursuing expansive growth and taking progressive measures to be the leader in this category. Our new platforms, programs, and people are set to drive the next generation of automotive experiences. More information about Sonic Automotive can be found at www.sonicautomotive.com and ir.sonicautomotive.com.

About EchoPark Automotive

EchoPark Automotive is one of the fastest growing and most comprehensive retailers of nearly new pre-owned vehicles in America today. Our rapid growth plan is expected to bring our unique business model to 90% of the U.S. population by 2025, utilizing one of the most innovative technology-enabled sales strategies in our industry. Our approach provides a personalized and proven guest-centric buying process that consistently delivers award winning guest experiences and superior value to car buyers nationwide, with savings of up to $3,000 versus the competition. We believe EchoPark is on pace to become the #1 retailer in the nearly new pre-owned vehicle market by 2025, and is already making its mark by earning the 2021 Consumer Satisfaction Award from DealerRater, expanding its Owner Experience Centers, developing an all-new digital ecommerce platform and focusing on growing its brand nationwide. EchoPark’s mission is in its name: Every Car deserves a Happy Owner. This drives the car buying experience for guests and differentiates EchoPark from the competition. More information about EchoPark Automotive can be found at www.echopark.com.

Forward-Looking Statements

Included herein are forward-looking statements, including statements regarding anticipated future pre-owned vehicle sales projections, and future population coverage. There are many factors that affect management’s views about future events and trends of the Company’s business. These factors involve risks and uncertainties that could cause actual results or trends to differ materially from management’s views, including, without limitation, economic conditions in the markets in which we operate, new and used vehicle industry sales volume, anticipated future growth in our EchoPark Segment, the success of our operational strategies, the rate and timing of overall economic expansion or contraction, and the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other reports and information filed with the Securities and Exchange Commission (the “SEC”). The Company does not undertake any obligation to update forward-looking information, except as required under federal securities laws and the rules and regulations of the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230228005404/en/

For Further Information, Please Contact:

Sonic Automotive Investor Inquiries

Heath Byrd, Executive Vice President and Chief Financial Officer

Danny Wieland, Vice President, Investor Relations

[email protected]

Sonic Automotive Press Inquiries

Sonic Automotive Media Relations

[email protected]

KEYWORDS: United States North America North Carolina

INDUSTRY KEYWORDS: Human Resources Aftermarket Automotive General Automotive Specialty Professional Services Other Automotive Retail Online Retail

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Angela Broadway, Chief Human Resources Officer, Sonic Automotive, Inc. (Photo: Business Wire)

February 28, 2023 6:58 am

TransUnion to Present at the 2023 RBC Capital Markets Global Financial Institutions Conference

CHICAGO, Feb. 28, 2023 (GLOBE NEWSWIRE) — TransUnion (NYSE: TRU) today announced that Todd Cello, Executive Vice President, Chief Financial Officer, will present at the RBC Capital Markets Global Financial Institutions Conference on Tuesday, March 7, 2023. The presentation is scheduled to begin at 8:20 a.m. CT (9:20 a.m. ET). A live webcast of the presentation will be made available on the TransUnion Investor Relations website at http://www.transunion.com/tru. A replay will also be available on the company’s website following the conclusion of the presentation.

About TransUnion (NYSE:TRU)

TransUnion is a global information and insights company with over 12,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business

E-mail [email protected]

Telephone 312-985-2860

February 28, 2023 6:54 am

Kontoor Brands Reports 2022 Fourth Quarter and Full Year Results; Provides 2023 Outlook

Kontoor Brands Reports 2022 Fourth Quarter and Full Year Results; Provides 2023 Outlook

Fourth Quarter 2022 Highlights

Revenue of $732 million increased 7 percent (9 percent in constant currency) compared to Q4’21
Reported EPS of $0.91 compared to Q4’21 reported EPS of $0.75; adjusted EPS of $0.88 compared to Q4’21 adjusted EPS of $0.88
As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.48 per share, payable on March 20, 2023, to shareholders of record at the close of business on March 10, 2023

Full Year 2022 Highlights

Revenue of $2.63 billion increased 6 percent (8 percent in constant currency) compared to FY’21
Reported EPS of $4.31 compared to FY’21 reported EPS of $3.31; adjusted EPS of $4.49 compared to FY’21 adjusted EPS of $4.28
Through a combination of share repurchases and dividend payouts, the Company returned a total of $166 million to shareholders during 2022

Full Year 2023 Financial Outlook

Revenue is expected to increase at a low-single digit percentage compared to FY’22
EPS is expected to be in the range of $4.55 to $4.75

GREENSBORO, N.C.–(BUSINESS WIRE)–
Kontoor Brands, Inc. (NYSE: KTB), a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands, Wrangler^® and Lee^®, today reported financial results for its fourth quarter and full year ended December 31, 2022.

“We finished 2022 strong, as fourth quarter revenue and EPS came in significantly above our plan. Despite unprecedented macroeconomic challenges, we are delivering on many of our long-term goals, with 2022 revenue and earnings ahead of our Investor Day targets. I want to thank our teams around the world for navigating these near-term external pressures, while setting the foundation for Kontoor’s long-term future success,” said Scott Baxter, President, Chief Executive Officer and Chair of Kontoor Brands.

“Even as we anticipate macro headwinds to persist through the year, we begin 2023 from a position of strength. We expect our strategic investments in talent, demand creation and innovation to support continued share gains in our core business, while also driving diversified, accretive growth across DTC channels, categories and international markets. Kontoor’s powerful combination of sustained profitability, robust balance sheet, and flexible capital allocation optionality should continue to yield superior returns for all stakeholders,” added Baxter.

This release refers to “adjusted” amounts from 2022 and 2021 and “constant currency” amounts, which are further described in the Non-GAAP Financial Measures section below. All per share amounts are presented on a diluted basis. Unless otherwise noted, “reported” and “constant currency” amounts are the same.

Fourth Quarter 2022 Income Statement Review

Revenue was $732 million, a 7 percent increase (9 percent increase in constant currency) over the same period in the prior year. Revenue increases were primarily driven by strength in domestic wholesale and Digital, somewhat offset by decreases in International with the continued impacts of lockdowns and restrictions in China weighing on the quarter.

U.S. revenue was $605 million, increasing 16 percent over the same period in the prior year, with gains in both the Wrangler and Lee brands. U.S. wholesale increased 17 percent compared to the fourth quarter 2021, including strength in U.S. digital wholesale which increased 66 percent compared to last year. These gains were augmented by continued strength in U.S. own.com revenue, which increased 19 percent compared to the same period last year.

International revenue was $127 million, a 20 percent decrease (12 percent decrease in constant currency) over the same period in the prior year. China decreased 33 percent (25 percent decrease in constant currency) compared to the fourth quarter 2021, driven by impacts from the COVID lockdowns and restrictions in the region. Europe decreased 15 percent (4 percent decrease in constant currency) over the same period last year, with wholesale pressures more than offsetting constant currency gains in DTC.

Wrangler brand global revenue was $509 million, a 15 percent increase (16 percent increase in constant currency) from the same period in the prior year. Wrangler U.S. revenue increased 19 percent compared to the same period last year, primarily driven by increased shipments in U.S. wholesale, with broad-based channel and category strength including Western, Outdoor, Workwear and T-shirts. Wrangler international revenue decreased 17 percent (9 percent decrease in constant currency) compared to the fourth quarter 2021, with gains in DTC more than offset by decreases in wholesale channels.

Lee brand global revenue was $219 million, a 6 percent decrease (3 percent decrease in constant currency) from the same period in the prior year. Lee U.S. revenue increased 5 percent compared to the same period last year, primarily driven by Digital. Globally, non-denim categories such as T-shirts experienced significant year-over-year gains in the quarter. Lee international revenue decreased 21 percent (13 percent decrease in constant currency) compared to the fourth quarter 2021, driven primarily by reductions in China due to the impact of COVID restrictions.

Other global revenue was $4 million, a 19 percent decrease compared to the same period in the prior year.

Gross margin decreased 200 basis points to 40.8 percent of revenue compared to the same period last year. Compared to adjusted gross margin in the fourth quarter 2021, gross margin decreased 180 basis points. Higher inflationary pressures on input costs, inventory provisions and impacts from production downtime, as well as foreign currency, primarily drove the decline. The decline was partially offset by strategic pricing and channel mix, as well as moderating transitory costs such as air freight.

Selling, General & Administrative (SG&A) expenses were $214 million in the fourth quarter. Adjusted SG&A expenses were $213 million, or 29.1 percent of revenue, decreasing 290 basis points compared to the same period in the prior year. As expected, tight controls of discretionary expenses as well as lower compensation costs and a decrease in credit loss provisions were somewhat offset by higher distribution expenses, and an increase in strategic investments in IT.

Operating income was $85 million on a reported basis and $86 million on an adjusted basis. Adjusted operating margin of 11.7 percent increased 110 basis points compared to adjusted operating margin during the same period in the prior year. Benefits from tight expense controls, lower compensation costs and strategic pricing more than offset higher inflationary pressures on input costs, inventory provisions and impacts from production downtime.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was $95 million on a reported basis and $93 million on an adjusted basis. Adjusted EBITDA margin of 12.7 percent increased 60 basis points compared to adjusted EBITDA margin during the same period in the prior year.

Earnings per share was $0.91 on a reported basis and $0.88 on an adjusted basis compared to reported EPS of $0.75 and adjusted EPS of $0.88, in the same period last year.

Full Year 2022 Income Statement Review

Revenue was $2.63 billion, a 6 percent increase (8 percent increase in constant currency) over the prior year. Revenue increases were primarily driven by strength in Digital, including own.com and digital wholesale, as well as strength in U.S. wholesale. These gains were somewhat offset by a decrease in non-U.S. wholesale with the continued impacts of lockdowns and restrictions in China weighing on the year.

U.S. revenue was $2.07 billion, increasing 11 percent over last year, with gains in both the Wrangler and Lee brands. U.S. wholesale increased 11 percent compared to 2021, including strength in digital wholesale which increased 23 percent compared to last year. These gains were augmented by continued strength in U.S. own.com revenue which increased 23 percent compared to 2021.

International revenue was $557 million, an 8 percent decrease (1 percent decrease in constant currency) over the prior year. China decreased 23 percent (20 percent decrease in constant currency) compared to 2021, driven by the impacts of COVID lockdowns and restrictions in the region. Europe decreased 5 percent (a 7 percent increase in constant currency) over the prior year, with DTC driving the constant currency gains.

Wrangler brand global revenue was $1.75 billion, an 11 percent increase (12 percent increase in constant currency) from the prior year, driven by U.S. wholesale and global Wrangler own.com which increased 25 percent. Wrangler U.S. revenue increased 13 percent compared to last year, with broad-based channel and category strength including Western, Outdoor, Workwear and T-shirts. U.S. Wrangler.com increased 27 percent compared to last year. Wrangler international revenue decreased 1 percent (8 percent increase in constant currency) compared to 2021.

Lee brand global revenue was $874 million, a 1 percent decrease (1 percent increase in constant currency) from the prior year. Lee U.S. revenue increased 7 percent compared to last year, primarily driven by Digital. Globally, non-denim categories such as T-shirts experienced significant year-over-year gains. U.S. Lee.com increased 13 percent compared to last year. Lee international revenue decreased 12 percent (6 percent decrease in constant currency) from 2021, driven primarily by the reductions in China due to the impact of COVID lockdowns.

Other global revenue was $11 million, a 17 percent decrease compared to the prior year.

Gross margin was 43.1 percent of revenue, a decrease of 160 basis points compared to 2021 reported gross margin and a 150 basis point decrease compared to 2021 adjusted gross margin. Higher inflationary pressures on input costs, inventory provisions and foreign currency primarily drove the decline. The decline was partially offset by strategic pricing and Digital own.com mix.

Selling, General & Administrative (SG&A) expenses were $778 million on a reported basis and $762 million on an adjusted basis in 2022. As a percent of revenue, adjusted SG&A was 29.0 percent, decreasing 140 basis points compared to adjusted SG&A during the prior year. Increased strategic investments and distribution expenses were more than offset by tight controls of discretionary expenses as well as lower compensation costs.

Operating income was $357 million on a reported basis and $372 million on an adjusted basis. Adjusted operating margin of 14.1 percent decreased 10 basis points compared to adjusted operating margin in the prior year. Benefits from tight expense controls, lower compensation costs and strategic pricing were more than offset by higher inflationary pressures on input costs and inventory provisions.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was $390 million on a reported basis and $402 million on an adjusted basis. Adjusted EBITDA margin of 15.3 percent decreased 30 basis points compared to adjusted EBITDA margin during the prior year.

Earnings per share was $4.31 on a reported basis and $4.49 on an adjusted basis compared to reported EPS of $3.31 and adjusted EPS of $4.28, in the prior year.

December 31, 2022, Balance Sheet and Liquidity Review

The Company ended fiscal 2022 with $59 million in cash and cash equivalents, and approximately $0.8 billion in long-term debt.

As of December 31, 2022, the Company had no outstanding borrowings under the Revolving Credit Facility and $488 million available for borrowing against this facility.

As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.48 per share, payable on March 20, 2023, to shareholders of record at the close of business on March 10, 2023. With a combination of share repurchases and payout of the dividend, the Company returned a total of $166 million to shareholders during 2022.

Inventory at the end of fiscal 2022 was $597 million, up 64 percent compared to the prior-year period and 30 percent compared to pre-pandemic 2019 levels. Year-end inventory sequentially improved by $81 million from the third quarter of 2022. Approximately 90 percent of inventory at the end of the year was core product. The Company is taking proactive actions and expects inventory to return to more normalized levels in mid-2023.

2023 Outlook

The Company’s strategic initiatives are working as evidenced by fourth quarter and full year 2022 results. Although the impacts from near-term macroeconomic factors are uncertain, the Company remains focused on execution to deliver continued strong share gains in the U.S. and to drive structural gross margin improvement in accretive categories, channels and geographies. Accordingly, the Company remains confident in its strategy and expects to continue investing in its brands and capabilities in support of longer-term profitable revenue growth and anticipates robust cash generation as inventory normalizes in 2023.

Thus, the Company is providing its 2023 guidance including the following:

Revenue is expected to increase at a low-single digit percentage over 2022 with growth fairly balanced between the first and second half. The Company expects first half growth to be driven by the U.S. with continued momentum in POS, share gains and Digital, somewhat tempered by softness in China as the region continues to recover from COVID lockdowns and restrictions. During the second half of 2023, the Company assumes macro consumer demand conditions to be more challenged in the U.S., with the China market more fully reopening.

Gross margin is expected to be in the range of 43.5 percent to 44.0 percent, increasing 40 to 90 basis points compared to gross margin of 43.1 percent in 2022. Expected increases from continued structural mix shifts to accretive channels such as Digital and International, lower inflationary pressures on input costs and higher AURs, are anticipated to be somewhat offset by impacts from production downtime. The Company expects gross margin benefits to be more second half weighted, driven by geographic and DTC mix, lower production downtime and reduced input cost pressures.

SG&A investments will continue to be made in the Company’s brands and capabilities in support of longer-term profitable revenue growth, including demand creation, DTC, and International expansion, as well as planned normalization of compensation expenses. Compared to adjusted SG&A in 2022, the Company expects full year SG&A to increase at a mid-single digit percentage, with second half investments anticipated to be stronger than in the first half.

EPS is expected to be in the range of $4.55 to $4.75. Due primarily to gross margin, the Company expects EPS on a dollar basis to be more weighted to the second half of 2023.

Capital Expenditures are expected to be in the range of $35 million to $40 million, primarily to support growth in owned brick and mortar stores, manufacturing, distribution and IT projects.

The Company expects an effective tax rate of 20 percent to 21 percent. Interest expense is expected to be in the range of $33 million to $38 million. Other Expense is expected to be in the range of $5 million to $10 million. Average shares outstanding are expected to be approximately 57 million, excluding the impact of additional share repurchases.

Webcast Information

Kontoor Brands will host its fourth quarter and full year 2022 conference call beginning at 8:30 a.m. Eastern Time today, February 28, 2023. The conference will be broadcast live via the Internet, accessible at https://www.kontoorbrands.com/investors. For those unable to listen to the live broadcast, an archived version will be available at the same location.

Non-GAAP Financial Measures

Adjusted Amounts – This release refers to “adjusted” amounts. Adjustments during 2022 represent charges related to the globalization of the Company’s operating model and relocation of the European headquarters. Adjustments during 2021 primarily represent costs associated with the Company’s global ERP implementation and information technology infrastructure build-out. Additional information regarding adjusted amounts is provided in notes to the supplemental financial information included with this release.

Constant Currency – This release refers to “reported” amounts in accordance with GAAP, which include translation and transactional impacts from changes in foreign currency exchange rates. This release also refers to “constant currency” amounts, which exclude the translation impact of changes in foreign currency exchange rates.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are presented in the supplemental financial information included with this release that identifies and quantifies all reconciling adjustments and provides management’s view of why this non-GAAP information is useful to investors. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be viewed in addition to, and not as an alternate for, reported results under GAAP. The non-GAAP measures used by the Company in this release may be different from similarly titled measures used by other companies.

About Kontoor Brands

Kontoor Brands, Inc. (NYSE: KTB) is a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands: Wrangler^® and Lee^®. Kontoor designs, manufactures and distributes superior high-quality products that look good and fit right, giving people around the world the freedom and confidence to express themselves. Kontoor Brands is a purpose-led organization focused on leveraging its global platform, strategic sourcing model and best-in-class supply chain to drive brand growth and deliver long-term value for its stakeholders. For more information about Kontoor Brands, please visit www.KontoorBrands.com.

Forward-Looking Statements

Certain statements included in this release and attachments are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” “may” and other words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as required under the U.S. federal securities laws. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to: macroeconomic conditions, including inflation, rising interest rates, recessionary concerns, distress in global credit markets and foreign currency exchange rates, as well as ongoing global supply chain disruptions, labor challenges, the COVID-19 pandemic and geopolitical events, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on the Company’s business, results of operations, financial condition and cash flows (including future uncertain impacts); the level of consumer demand for apparel; supply chain and shipping disruptions, which could continue to result in shipping delays, an increase in transportation costs and increased product costs or lost sales; reliance on a small number of large customers; the COVID-19 pandemic continues to negatively affect the Company’s business and could continue to result in supply chain disruptions, reduced consumer traffic and purchasing, closed factories and stores, and reduced workforces (including future uncertain effects); intense industry competition; the ability to accurately forecast demand for products; the Company’s ability to gauge consumer preferences and product trends, and to respond to constantly changing markets; the Company’s ability to maintain the images of its brands; increasing pressure on margins; e-commerce operations through the Company’s direct-to-consumer business; the financial difficulty experienced by the retail industry; possible goodwill and other asset impairment; the ability to implement the Company’s business strategy; the stability of manufacturing facilities and foreign suppliers; fluctuations in wage rates and the price, availability and quality of raw materials and contracted products; the reliance on a limited number of suppliers for raw material sourcing and the ability to obtain raw materials on a timely basis or in sufficient quantity or quality; disruption to distribution systems; seasonality; unseasonal or severe weather conditions; the Company’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; ability to properly collect, use, manage and secure consumer and employee data; foreign currency fluctuations; disruption and volatility in the global capital and credit markets and its impact on the Company’s ability to obtain short-term or long-term financing on favorable terms; the impact of climate change and related legislative and regulatory responses; legal, regulatory, political and economic risks; changes to trade policy, including tariff and import/export regulations; compliance with anti-bribery, anti-corruption and anti-money laundering laws by the Company and third-party suppliers and manufacturers; changes in tax laws and liabilities; the costs of compliance with or the violation of national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters; continuity of members of management; labor relations; the ability to protect trademarks and other intellectual property rights; the ability of the Company’s licensees to generate expected sales and maintain the value of the Company’s brands; the Company maintaining satisfactory credit ratings; restrictions on the Company’s business relating to its debt obligations; volatility in the price and trading volume of the Company’s common stock; anti-takeover provisions in the Company’s organizational documents; and fluctuations in the amount and frequency of our share repurchases.

Many of the foregoing risks and uncertainties will be exacerbated by any continued worsening of the global business and economic environment. More information on potential factors that could affect the Company’s financial results are described in detail in the Company’s most recent Annual Report on Form 10-K and in other reports and statements that the Company files with the SEC.


KONTOOR BRANDS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended December						%		Twelve Months Ended December						%
(Dollars in thousands, except per share amounts)		2022			2021		Change			2022			2021		Change
Net revenues	$	731,608		$	681,091		7	%	$	2,631,444		$	2,475,916		6	%
Costs and operating expenses
Cost of goods sold		432,886			389,632		11	%		1,497,076			1,368,190		9	%
Selling, general and administrative expenses		214,089			222,813		(4	)%		777,703			824,747		(6	)%
Total costs and operating expenses		646,975			612,445		6	%		2,274,779			2,192,937		4	%
Operating income		84,633			68,646		23	%		356,665			282,979		26	%
Interest expense		(9,804	)		(12,312	)	(20	)%		(34,919	)		(38,900	)	(10	)%
Interest income		324			456		(29	)%		1,352			1,480		(9	)%
Other income (expense), net		1,225			114		975	%		(3,962	)		(959	)	313	%
Income before income taxes		76,378			56,904		34	%		319,136			244,600		30	%
Income taxes		24,773			12,994		91	%		73,643			49,177		50	%
Net income	$	51,605		$	43,910		18	%	$	245,493		$	195,423		26	%
Earnings per common share
Basic	$	0.93		$	0.77				$	4.40		$	3.40
Diluted	$	0.91		$	0.75				$	4.31		$	3.31
Weighted average shares outstanding
Basic		55,485			56,972					55,744			57,394
Diluted		56,666			58,804					56,962			59,086

Basis of presentation for all financial tables within this release: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 each year. For presentation purposes herein, all references to periods ended December 2022 and December 2021 correspond to the 13-week and 52-week fiscal periods ended December 31, 2022 and January 1, 2022, respectively. References to December 2022 and December 2021 relate to the balance sheets as of December 31, 2022 and January 1, 2022, respectively. Amounts herein may not recalculate due to the use of unrounded numbers.


KONTOOR BRANDS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)	December 2022		December 2021
ASSETS
Current assets
Cash and cash equivalents	$	59,179	$	185,322
Accounts receivable, net		225,858		289,800
Inventories		596,836		362,957
Prepaid expenses and other current assets		100,396		72,579
Total current assets		982,269		910,658
Property, plant and equipment, net		104,465		105,155
Operating lease assets		51,029		54,950
Intangible assets, net		13,361		14,638
Goodwill		209,627		212,213
Deferred income taxes		67,282		74,876
Other assets		154,228		160,534
TOTAL ASSETS	$	1,582,261	$	1,533,024
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	7,280	$	249
Current portion of long-term debt		10,000		—
Accounts payable		206,262		214,204
Accrued liabilities		196,989		217,164
Operating lease liabilities, current		19,898		24,195
Total current liabilities		440,429		455,812
Operating lease liabilities, noncurrent		31,506		32,993
Deferred income taxes		6,919		5,572
Other liabilities		70,031		99,192
Long-term debt		782,619		791,317
Commitments and contingencies
Total liabilities		1,331,504		1,384,886
Total equity		250,757		148,138
TOTAL LIABILITIES AND EQUITY	$	1,582,261	$	1,533,024


KONTOOR BRANDS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Twelve Months Ended December
(In thousands)		2022			2021
OPERATING ACTIVITIES
Net income	$	245,493		$	195,423
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		37,126			36,599
Stock-based compensation		21,891			38,516
Other, including working capital changes		(220,925	)		13,324
Cash provided by operating activities		83,585			283,862
INVESTING ACTIVITIES
Property, plant and equipment expenditures		(18,375	)		(10,551	)
Capitalized computer software		(10,022	)		(26,322	)
Other		(1,721	)		(2,498	)
Cash used by investing activities		(30,118	)		(39,371	)
FINANCING ACTIVITIES
Borrowings under revolving credit facility		163,000			—
Repayments under revolving credit facility		(163,000	)		—
Proceeds from issuance of senior notes		—			400,000
Payment of deferred financing costs		(298	)		(8,010	)
Repayments of term loans		—			(523,000	)
Repurchases of Common Stock		(62,494	)		(75,462	)
Dividends paid		(103,661	)		(95,081	)
Shares withheld for taxes, net of proceeds from issuance of Common Stock		(11,700	)		(1,951	)
Other		7,246			(562	)
Cash used by financing activities		(170,907	)		(304,066	)
Effect of foreign currency rate changes on cash and cash equivalents		(8,703	)		(3,241	)
Net change in cash and cash equivalents		(126,143	)		(62,816	)
Cash and cash equivalents – beginning of period		185,322			248,138
Cash and cash equivalents – end of period	$	59,179		$	185,322


KONTOOR BRANDS, INC.
Supplemental Financial Information
Business Segment Information
(Unaudited)

	Three Months Ended December						% Change		% Change Constant Currency ^(a)
(Dollars in thousands)		2022			2021		% Change		% Change Constant Currency ^(a)
Segment revenues:
Wrangler	$	509,277		$	443,600		15	%	16	%
Lee		218,628			232,917		(6	)%	(3	)%
Total reportable segment revenues		727,905			676,517		8	%	9	%
Other revenues ^(b)		3,703			4,574		(19	)%	(19	)%
Total net revenues	$	731,608		$	681,091		7	%	9	%
Segment profit:
Wrangler	$	95,124		$	80,152		19	%	19	%
Lee		19,219			15,722		22	%	27	%
Total reportable segment profit	$	114,343		$	95,874		19	%	20	%
Corporate and other expenses		(28,158	)		(27,375	)	3	%	3	%
Interest expense		(9,804	)		(12,312	)	(20	)%	(20	)%
Interest income		324			456		(29	)%	(18	)%
(Loss) profit related to other revenues ^(b)		(327	)		261		(225	)%	(230	)%
Income before income taxes	$	76,378		$	56,904		34	%	36	%

	Twelve Months Ended December						% Change		% Change Constant Currency ^(a)
(Dollars in thousands)		2022			2021		% Change		% Change Constant Currency ^(a)
Segment revenues:
Wrangler	$	1,745,805		$	1,575,231		11	%	12	%
Lee		874,366			887,052		(1	)%	1	%
Total reportable segment revenues		2,620,171			2,462,283		6	%	8	%
Other revenues ^(b)		11,273			13,633		(17	)%	(17	)%
Total net revenues	$	2,631,444		$	2,475,916		6	%	8	%
Segment profit:
Wrangler	$	321,173		$	294,153		9	%	10	%
Lee		121,056			128,305		(6	)%	(3	)%
Total reportable segment profit	$	442,229		$	422,458		5	%	6	%
Corporate and other expenses		(88,932	)		(140,960	)	(37	)%	(35	)%
Interest expense		(34,919	)		(38,900	)	(10	)%	(10	)%
Interest income		1,352			1,480		(9	)%	1	%
(Loss) profit related to other revenues^(b)		(594	)		522		(214	)%	(216	)%
Income before income taxes	$	319,136		$	244,600		30	%	31	%

^(a) Refer to constant currency definition on the following pages.

^(b)We report an “Other” category in order to reconcile segment revenues and segment profit to the Company’s operating results, but the Other category does not meet the criteria to be considered a reportable segment. Other primarily includes sales and licensing of Rock & Republic^®, other company-owned brands and private label apparel. Other also included sales of third-party branded merchandise at company-owned outlet stores through the first quarter of 2021, after which they were discontinued.


KONTOOR BRANDS, INC.
Supplemental Financial Information
Business Segment Information – Constant Currency Basis (Non-GAAP)
(Unaudited)

	Three Months Ended December 2022
	As Reported			Adjust for Foreign
(In thousands)	under GAAP			Currency Exchange			Constant Currency
Segment revenues:
Wrangler	$	509,277		$	4,633		$	513,910
Lee		218,628			7,310			225,938
Total reportable segment revenues		727,905			11,943			739,848
Other revenues		3,703			1			3,704
Total net revenues	$	731,608		$	11,944		$	743,552
Segment profit:
Wrangler	$	95,124		$	309		$	95,433
Lee		19,219			786			20,005
Total reportable segment profit	$	114,343		$	1,095		$	115,438
Corporate and other expenses		(28,158	)		(30	)		(28,188	)
Interest expense		(9,804	)		(16	)		(9,820	)
Interest income		324			52			376
(Loss) profit related to other revenues		(327	)		(12	)		(339	)
Income before income taxes	$	76,378		$	1,089		$	77,467

	Twelve Months Ended December 2022
	As Reported			Adjust for Foreign
(In thousands)	under GAAP			Currency Exchange			Constant Currency
Segment revenues:
Wrangler	$	1,745,805		$	18,202		$	1,764,007
Lee		874,366			23,887			898,253
Total reportable segment revenues		2,620,171			42,089			2,662,260
Other revenues		11,273			15			11,288
Total net revenues	$	2,631,444		$	42,104		$	2,673,548
Segment profit:
Wrangler	$	321,173		$	1,643		$	322,816
Lee		121,056			3,507			124,563
Total reportable segment profit	$	442,229		$	5,150		$	447,379
Corporate and other expenses		(88,932	)		(2,753	)		(91,685	)
Interest expense		(34,919	)		(27	)		(34,946	)
Interest income		1,352			137			1,489
(Loss) profit related to other revenues		(594	)		(11	)		(605	)
Income before income taxes	$	319,136		$	2,496		$	321,632

Constant Currency Financial Information

The Company is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.

To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not as an alternative for, reported results under GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.


KONTOOR BRANDS, INC.
Supplemental Financial Information
Reconciliation of Adjusted Financial Measures – Quarter-to-Date (Non-GAAP)
(Unaudited)

	Three Months Ended December
(In thousands, except for per share amounts)		2022			2021

Cost of goods sold – as reported under GAAP	$	432,886		$	389,632
Restructuring & separation costs ^(a)		—			1,392
Adjusted cost of goods sold	$	432,886		$	391,024


Selling, general and administrative expenses – as reported under GAAP	$	214,089		$	222,813
Restructuring & separation costs ^(a)		(869	)		(4,770	)
Adjusted selling, general and administrative expenses	$	213,220		$	218,043


Interest expense – as reported under GAAP	$	(9,804	)	$	(12,312	)
Financing costs ^(b)		—			4,655
Other adjustments ^(c)		—			(445	)
Adjusted interest expense	$	(9,804	)	$	(8,102	)


Other income, net – as reported under GAAP	$	1,225		$	114
Restructuring & separation benefits ^(a)		(2,983	)		—
Other adjustments ^(c)		—			445
Adjusted other (expense) income, net	$	(1,758	)	$	559


Diluted earnings per share – as reported under GAAP	$	0.91		$	0.75
Restructuring & separation (benefits) costs ^(a)		(0.03	)		0.07
Financing costs ^(b)		—			0.06
Adjusted diluted earnings per share	$	0.88		$	0.88


Net income – as reported under GAAP	$	51,605		$	43,910
Income taxes		24,773			12,994
Interest expense		9,804			12,312
Interest income		(324	)		(456	)
EBIT	$	85,858		$	68,760


EBITDA	$	95,157		$	78,684
Restructuring & separation (benefits) costs ^(a)		(2,114	)		3,378
Other adjustments ^(c)		—			445
Adjusted EBITDA	$	93,043		$	82,507

Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. See “Notes to Supplemental Financial Information – Reconciliation of Adjusted Financial Measures” at the end of this document. Amounts herein may not recalculate due to the use of unrounded numbers.


KONTOOR BRANDS, INC.
Supplemental Financial Information
Reconciliation of Adjusted Financial Measures – Year-to-Date (Non-GAAP)
(Unaudited)

	Twelve Months Ended December
(In thousands, except for per share amounts)		2022			2021

Cost of goods sold – as reported under GAAP	$	1,497,076		$	1,368,190
Restructuring & separation costs ^(a)		—			2,662
Adjusted cost of goods sold	$	1,497,076		$	1,370,852


Selling, general and administrative expenses – as reported under GAAP	$	777,703		$	824,747
Restructuring & separation costs ^(a)		(15,609	)		(71,820	)
Adjusted selling, general and administrative expenses	$	762,094		$	752,927


Interest expense – as reported under GAAP	$	(34,919	)	$	(38,900	)
Financing costs ^(b)		—			4,655
Other adjustments ^(c)		—			(1,888	)
Adjusted interest expense	$	(34,919	)	$	(36,133	)


Other expense, net – as reported under GAAP	$	(3,962	)	$	(959	)
Restructuring & separation benefits ^(a)		(2,983	)		—
Other adjustments ^(c)		—			1,888
Adjusted other (expense) income, net	$	(6,945	)	$	929


Diluted earnings per share – as reported under GAAP	$	4.31		$	3.31
Restructuring & separation costs ^(a)		0.18			0.92
Financing costs ^(b)		—			0.06
Adjusted diluted earnings per share	$	4.49		$	4.28


Net income – as reported under GAAP	$	245,493		$	195,423
Income taxes		73,643			49,177
Interest expense		34,919			38,900
Interest income		(1,352	)		(1,480	)
EBIT	$	352,703		$	282,020


Depreciation and amortization – as reported under GAAP	$	37,126		$	36,599
Restructuring & separation costs ^(a)		—			(2,823	)
Adjusted depreciation and amortization	$	37,126		$	33,776


EBITDA	$	389,829		$	318,619
Restructuring & separation costs ^(a)		12,626			66,335
Other adjustments ^(c)		—			1,888
Adjusted EBITDA	$	402,455		$	386,842


KONTOOR BRANDS, INC.
Supplemental Financial Information
Summary of Select GAAP and Non-GAAP Measures
(Unaudited)

	Three Months Ended December
	2022						2021
(Dollars in thousands, except per share amounts)	GAAP			Adjusted			GAAP			Adjusted

Net revenues	$	731,608		$	731,608		$	681,091		$	681,091

Gross margin	$	298,722		$	298,722		$	291,459		$	290,067
As a percentage of total net revenues		40.8	%		40.8	%		42.8	%		42.6	%

Selling, general and administrative expenses	$	214,089		$	213,220		$	222,813		$	218,043
As a percentage of total net revenues		29.3	%		29.1	%		32.7	%		32.0	%

Operating income	$	84,633		$	85,502		$	68,646		$	72,024
As a percentage of total net revenues		11.6	%		11.7	%		10.1	%		10.6	%
Earnings per share – diluted	$	0.91		$	0.88		$	0.75		$	0.88

Net income	$	51,605		$	49,816		$	43,910		$	51,499
Income taxes		24,773			24,448			12,994			13,438
Interest expense		9,804			9,804			12,312			8,102
Interest income		(324	)		(324	)		(456	)		(456	)
EBIT	$	85,858		$	83,744		$	68,760		$	72,583

Depreciation and amortization	$	9,299		$	9,299		$	9,924		$	9,924

EBITDA	$	95,157		$	93,043		$	78,684		$	82,507
As a percentage of total net revenues		13.0	%		12.7	%		11.6	%		12.1	%

	Twelve Months Ended December
	2022						2021
(Dollars in thousands, except per share amounts)	GAAP			Adjusted			GAAP			Adjusted

Net revenues	$	2,631,444		$	2,631,444		$	2,475,916		$	2,475,916

Gross margin	$	1,134,368		$	1,134,368		$	1,107,726		$	1,105,064
As a percentage of total net revenues		43.1	%		43.1	%		44.7	%		44.6	%

Selling, general and administrative expenses	$	777,703		$	762,094		$	824,747		$	752,927
As a percentage of total net revenues		29.6	%		29.0	%		33.3	%		30.4	%

Operating income	$	356,665		$	372,274		$	282,979		$	352,137
As a percentage of total net revenues		13.6	%		14.1	%		11.4	%		14.2	%
Earnings per common share – diluted	$	4.31		$	4.49		$	3.31		$	4.28

Net income	$	245,493		$	255,608		$	195,423		$	253,097
Income taxes		73,643			76,154			49,177			65,316
Interest expense		34,919			34,919			38,900			36,133
Interest income		(1,352	)		(1,352	)		(1,480	)		(1,480	)
EBIT	$	352,703		$	365,329		$	282,020		$	353,066

Depreciation and amortization	$	37,126		$	37,126		$	36,599		$	33,776

EBITDA	$	389,829		$	402,455		$	318,619		$	386,842
As a percentage of total net revenues		14.8	%		15.3	%		12.9	%		15.6	%


KONTOOR BRANDS, INC.
Supplemental Financial Information
Disaggregation of Revenue
(Unaudited)

	Three Months Ended December 2022
	Revenues – As Reported

(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	420,004	$	119,674	$	3,478	$	543,156
Non-U.S. Wholesale		39,990		53,610		—		93,600
Direct-to-Consumer		49,283		45,344		225		94,852
Total	$	509,277	$	218,628	$	3,703	$	731,608

Geographic revenues
U.S.	$	463,595	$	137,601	$	3,703	$	604,899
International		45,682		81,027		—		126,709
Total	$	509,277	$	218,628	$	3,703	$	731,608

	Twelve Months Ended December 2022
	Revenues – As Reported

(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	1,423,757	$	460,799	$	9,903	$	1,894,459
Non-U.S. Wholesale		183,714		266,201		903		450,818
Direct-to-Consumer		138,334		147,366		467		286,167
Total	$	1,745,805	$	874,366	$	11,273	$	2,631,444

Geographic revenues
U.S.	$	1,542,593	$	521,636	$	10,370	$	2,074,599
International		203,212		352,730		903		556,845
Total	$	1,745,805	$	874,366	$	11,273	$	2,631,444


KONTOOR BRANDS, INC.
Supplemental Financial Information
Disaggregation of Revenue
(Unaudited)

	Three Months Ended December 2021
	Revenues – As Reported

(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	350,542	$	111,047	$	3,593	$	465,182
Non-U.S. Wholesale		49,149		68,348		966		118,463
Direct-to-Consumer		43,909		53,522		2		97,433
Other		—		—		13		13
Total	$	443,600	$	232,917	$	4,574	$	681,091

Geographic revenues
U.S.	$	388,384	$	130,852	$	3,608	$	522,844
International		55,216		102,065		966		158,247
Total	$	443,600	$	232,917	$	4,574	$	681,091

	Twelve Months Ended December 2021
	Revenues – As Reported

(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	1,269,718	$	420,720	$	9,979	$	1,700,417
Non-U.S. Wholesale		186,355		301,332		2,854		490,541
Direct-to-Consumer		119,158		165,000		21		284,179
Other		—		—		779		779
Total	$	1,575,231	$	887,052	$	13,633	$	2,475,916

Geographic revenues
U.S.	$	1,370,916	$	487,214	$	10,779	$	1,868,909
International		204,315		399,838		2,854		607,007
Total	$	1,575,231	$	887,052	$	13,633	$	2,475,916


KONTOOR BRANDS, INC.
Supplemental Financial Information
Summary of Select Revenue Information
(Unaudited)

	Three Months Ended December
		2022		2021	2022 to 2021
(Dollars in thousands)	As Reported under GAAP				% Change Reported		% Change Constant Currency
Wrangler U.S.	$	463,595	$	388,384	19	%	19	%
Lee U.S.		137,601		130,852	5	%	5	%
Other		3,703		3,608	3	%	3	%
Total U.S. revenues	$	604,899	$	522,844	16	%	16	%

Wrangler International	$	45,682	$	55,216	(17	)%	(9	)%
Lee International		81,027		102,065	(21	)%	(13	)%
Other		—		966	(100	)%	(100	)%
Total International revenues	$	126,709	$	158,247	(20	)%	(12	)%

Global Wrangler	$	509,277	$	443,600	15	%	16	%
Global Lee		218,628		232,917	(6	)%	(3	)%
Global Other		3,703		4,574	(19	)%	(19	)%
Total revenues	$	731,608	$	681,091	7	%	9	%

	Twelve Months Ended December
		2022		2021	2022 to 2021
(Dollars in thousands)	As Reported Under GAAP				% Change Reported		% Change Constant Currency
Wrangler U.S.	$	1,542,593	$	1,370,916	13	%	13	%
Lee U.S.		521,636		487,214	7	%	7	%
Other		10,370		10,779	(4	)%	(4	)%
Total U.S. revenues	$	2,074,599	$	1,868,909	11	%	11	%

Wrangler International	$	203,212	$	204,315	(1	)%	8	%
Lee International		352,730		399,838	(12	)%	(6	)%
Other		903		2,854	(68	)%	(68	)%
Total International revenues	$	556,845	$	607,007	(8	)%	(1	)%

Global Wrangler	$	1,745,805	$	1,575,231	11	%	12	%
Global Lee		874,366		887,052	(1	)%	1	%
Global Other		11,273		13,633	(17	)%	(17	)%
Total revenues	$	2,631,444	$	2,475,916	6	%	8	%

Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on a constant currency basis, which is a non-GAAP financial measure. See “Business Segment Information – Constant Currency Basis (Non-GAAP)” for additional information on constant currency financial calculations.

KONTOOR BRANDS, INC.

Supplemental Financial Information

Reconciliation of Adjusted Financial Measures – Notes (Non-GAAP)

(Unaudited)

Notes to Supplemental Financial Information – Reconciliation of Adjusted Financial Measures

Management uses non-GAAP financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, adjusted EBITDA is a key financial measure for the Company’s shareholders and financial leaders, as the Company’s debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company’s compliance with debt covenants. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be considered supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies.

^(a) During the three months ended December 2022, restructuring and separation benefits included a $2.6 million pension curtailment gain, $0.4 million of other employee-related benefits and $0.9 million of other costs. During the twelve months ended December 2022, restructuring and separation costs included $13.7 million of severance and employee-related benefit costs, a $2.6 million pension curtailment gain, $0.4 million of other employee-related benefits and $1.9 million of other costs. All restructuring and separation costs during the year ended December 2022 are attributable to the globalization of the Company’s operating model and relocation of the European headquarters. During the three and twelve months ended December 2021, restructuring and separation costs primarily related to the Company’s global ERP system and information technology infrastructure build-out, as well as strategic actions taken by the Company to exit certain company-owned outlet stores and transition our India business to a licensed model. Total restructuring and separation adjustments resulted in a corresponding tax impact of $(0.3) million and $(0.7) million for the three months ended December 2022 and December 2021, respectively, and $2.5 million and $15.0 million for the twelve months ended December 2022 and December 2021, respectively.

^(b)Financing costs related to expenses incurred to amend the Company’s senior secured credit facility and to issue $400.0 million of senior notes. These adjustments had a corresponding tax impact of $1.1 million for the three and twelve months ended December 2021.

^(c)Other adjustments have been made for the three and twelve months ended December 2021 to remove the funding fees related to the accounts receivable sale arrangement, as they are treated as interest expense in the calculation of adjusted EBITDA for debt compliance purposes. Management believes these funding fees are not material to evaluating the overall results of the Company and thus has discontinued this adjustment effective in the first quarter of 2022.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230228005152/en/

Investors:

Eric Tracy, (336) 332-5205

Vice President, Corporate Finance and Investor Relations

[email protected]

Media:

Julia Burge, (336) 332-5122

Director, External Communications

[email protected]

KEYWORDS: North Carolina United States North America

INDUSTRY KEYWORDS: Fashion Online Retail Retail Manufacturing Specialty Textiles

MEDIA:

Logo

February 28, 2023 6:54 am

nVent Announces Quarterly Cash Dividend

nVent Announces Quarterly Cash Dividend

LONDON–(BUSINESS WIRE)–
nVent Electric plc (NYSE: NVT) announced today that it will pay a regular quarterly cash dividend of US$0.175 per ordinary share on May 12, 2023, to shareholders of record at the close of business on April 28, 2023.

About nVent

nVent is a leading global provider of electrical connection and protection solutions. We believe our inventive electrical solutions enable safer systems and ensure a more secure world. We design, manufacture, market, install and service high performance products and solutions that connect and protect some of the world’s most sensitive equipment, buildings and critical processes. We offer a comprehensive range of enclosures, electrical connections and fastening and thermal management solutions across industry-leading brands that are recognized globally for quality, reliability and innovation. Our principal office is in London and our management office in the United States is in Minneapolis. Our robust portfolio of leading electrical product brands dates back more than 100 years and includes nVent CADDY, ERICO, HOFFMAN, RAYCHEM, SCHROFF and TRACER. Learn more at www.nvent.com.

nVent, CADDY, ERICO, HOFFMAN, RAYCHEM, SCHROFF and TRACER are trademarks owned or licensed by nVent Services GmbH or its affiliates.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward looking statements. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “forecasts,” “should,” “would,” “positioned,” “strategy,” “future,” “are confident,” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. All projections in this press release are also forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include adverse effects on our business operations or financial results, including due to the overall global economic and business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions; competition and pricing pressures in the markets we serve, including the impacts of tariffs; volatility in currency exchange rates, interest rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; inability to mitigate material and other cost inflation; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; increased risks associated with operating foreign businesses, including risks associated with the conflict between Russia and Ukraine and related sanctions; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the impact of the novel coronavirus 2019 (“COVID-19”) pandemic; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. All forward-looking statements speak only as of the date of this press release. nVent assumes no obligation, and disclaims any obligation, to update the information contained in this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230227005952/en/

Investor Contact

Tony Riter

Vice President, Investor Relations

nVent

763.204.7750

[email protected]

Media Contact

Stacey Wempen

Director, External Communications

nVent

763.204.7857

[email protected]

KEYWORDS: Europe United States United Kingdom North America Minnesota

INDUSTRY KEYWORDS: Technology Construction & Property Engineering Other Energy Utilities Manufacturing Building Systems Energy Hardware

MEDIA:

February 28, 2023 6:53 am

APi Group Reports Fourth Quarter and Fiscal Year 2022 Financial Results

APi Group Reports Fourth Quarter and Fiscal Year 2022 Financial Results

-Reported net revenues increased by approximately 53% and 66% in the fourth quarter and full year, respectively-

-Net revenues increased on an organic basis by approximately 6% and 12% in the fourth quarter and full year, respectively-

-Reported and adjusted gross margin expansion of 255 and 319 basis points, respectively, in the fourth quarter-

-Reported diluted earnings per share of $0.04 and adjusted diluted earnings per share of $0.36 in the fourth quarter-

-Reported net income of $22 million and adjusted net income of $98 million in the fourth quarter-

-Net debt to adjusted EBITDA decreased to 3.1x as of the end of the fourth quarter-

NEW BRIGHTON, Minn.–(BUSINESS WIRE)–
APi Group Corporation (NYSE: APG) (“APG”, “APi” or the “Company”) today reported its financial results for the three months and year ended December 31, 2022.

Fourth Quarter 2022 Highlights:

Reported net revenues increased by 53.1% or $591 million to $1.7 billion compared to $1.1 billion in the prior year period, driven by revenue from acquisitions and strong organic growth in Safety Services
Net revenues increased on an organic basis by 5.8% compared to the prior year period, driven by continued growth in inspection, service, and monitoring revenue in Safety Services
Reported gross margin was 27.2%, representing a 255 basis point increase compared to prior year period reported gross margin of 24.6%. Adjusted gross margin was 27.8%, representing a 319 basis point increase compared to prior year period adjusted gross margin of 24.6%. Reported and adjusted gross margin expansion were driven by acquisitions in Safety Services, an improved mix of inspection, service and monitoring revenue and improved productivity in Specialty Services
Reported net income was $22 million, representing a $7 million increase from prior year period reported net income of $15 million driven by accretion from acquisitions in Safety Services and strong organic growth in Safety Services. Reported diluted EPS was $0.04, representing a $0.79 increase from prior year period
Adjusted net income was $98 million and adjusted diluted EPS was $0.36, representing a $0.07 increase from prior year period driven by accretion from acquisitions in Safety Services and strong organic growth in Safety Services
Adjusted EBITDA increased by 59.1% or $68 million to $183 million compared to $115 million in the prior year period, driven by acquisitions and strong organic growth in Safety Services
Adjusted EBITDA margin was 10.7%, representing a 40 basis point increase compared to prior year period adjusted EBITDA margin of 10.3%, driven by an improved mix of inspection, service and monitoring revenue and leverage on higher volumes

Fiscal Year 2022 Highlights:

Reported net revenues increased by 66.4% or $2.6 billion to $6.6 billion compared to $3.9 billion in the prior year period, driven by revenue from acquisitions in Safety Services and strong organic growth in Safety and Specialty Services
Net revenues increased on an organic basis by 12.2% compared to the prior year period, driven by continued growth in inspection, service and monitoring revenue in Safety Services as well as general market recovery in Safety and Specialty Services compared to the prior year period which was negatively impacted by the COVID-19 pandemic
Reported gross margin was 26.1%, representing a 230 basis point increase compared to prior year period reported gross margin of 23.8%. Adjusted gross margin was 26.8%, representing a 288 basis point increase compared to prior year period adjusted gross margin of 24.0%. Reported and adjusted gross margin expansion were driven by acquisitions in Safety Services, an improved mix of inspection, service, and monitoring revenue, and improved productivity in Specialty Services
Reported net income was $73 million, representing a $26 million increase from prior year period reported net income of $47 million driven by accretion from acquisitions in Safety Services and strong organic growth in Safety and Specialty Services. Reported diluted EPS was $0.10, representing a $0.77 increase from prior year period
Adjusted net income was $358 million and adjusted diluted EPS was $1.33, representing a $0.30 increase from prior year period driven by accretion from acquisitions in Safety Services and strong organic growth in Safety and Specialty Services
Adjusted EBITDA increased by 65.4% or $266 million to $673 million compared to $407 million in the prior year period, driven by acquisitions in Safety Services and strong organic growth in Safety and Specialty Services
Adjusted EBITDA margin was 10.3%, consistent with prior year period adjusted EBITDA margin of 10.3%, driven by an improved mix of inspection, service and monitoring revenue and leverage on higher volumes, offset by supply chain disruptions, inflation and mix from completed acquisitions causing downward pressure on margins

Russ Becker, APi’s President and Chief Executive Officer stated: “2022 was a year of record financial results for APi. We delivered record net revenues, record adjusted EBITDA and record adjusted earnings per share in a challenging macro environment. We believe this once again demonstrates the stability of APi’s recurring revenue, services focused business model, our ability to mitigate margin pressures that exist on a macro basis, and the ongoing execution of our strategy by our talented team members. Their ongoing leadership efforts continue to demonstrate that our leaders are a competitive advantage and help drive shareholder value.

Chubb continues to perform in-line with our expectations and delivered solid organic growth in 2022, despite macro headwinds. The integration is occurring swiftly, savings are significant, and we continue to be energized by the opportunities in front of us as the world’s leading life safety and security services provider.

We entered 2023 with positive momentum on many fronts. Our backlog remains strong and was up approximately 9% as of December 2022 compared to the end of December 2021. We are confident that our focus on growing statutorily-required, higher margin, inspection, service and monitoring revenue, combined with our robust backlog and variable cost structure positions us well to prosper even if the macro environment continues to be volatile. We remain focused on being disciplined on project and customer selection and will continue to focus our efforts on growing the acyclical, recurring service revenue aspects of our portfolio.”

APi Co-Chair James E. Lillie added: “APi’s continued strong performance in the fourth quarter was the culmination of what was another outstanding year for APi in 2022. APi’s double-digit growth in organic net revenues, combined with the acquisition of Chubb and the Company’s ability to offset macro headwinds, allowed APi to produce record earnings and generate substantial free cash flow.

As reflected in the guidance we gave last week for 2023, we have strong momentum balanced across our global platform. Our leaders continue to build on historically strong execution, continue to mitigate macro challenges and are staying focused on operational excellence. APi will continue to remain agile, focused and adaptive as needed to create sustainable shareholder value by focusing on our long-term value creation targets. These include solid organic growth, target adjusted free cash flow conversion of 80%, adjusted EBITDA margin of 13%+ by 2025 and target net leverage ratio of 2.0 to 2.5x, which we expect to achieve near year-end 2023 supplemented by our recent $200 million reduction in our term loan debt. Everyone is excited about the opportunities in the year ahead and our ability to execute on our strategic plan.”

Conference Call

APi will hold a webcast/dial-in conference call to discuss its financial results at 8:30 a.m. (Eastern Time) on Tuesday, February 28, 2023. Participants on the call will include Russell A. Becker, President and Chief Executive Officer; Kevin S. Krumm, Executive Vice President and Chief Financial Officer; and James E. Lillie and Sir Martin E. Franklin, Co-Chairs.

To listen to the call by telephone, please dial 800-343-4136 or 203-518-9843 and provide Conference ID 6468507. You may also attend and view the presentation (live or by replay) via webcast by accessing the following URL:

https://event.on24.com/wcc/r/4080924/F6495ADA7A66BD3125466D65A5B318AC

A replay of the call will be available shortly after completion of the live call/webcast via telephone at 800-723-2156 or 402-220-2660 or via the webcast link above.

About APi:

APi is a global, market-leading business services provider of life safety, security and specialty services with a substantial recurring revenue base and over 500 locations worldwide. APi provides statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We have a winning leadership culture driven by entrepreneurial business leaders to deliver innovative solutions for our customers. More information can be found at www.apigroupcorp.com.

Forward-Looking Statements and Disclaimers

Certain statements in this announcement are forward-looking statements which are based on the Company’s expectations, intentions and projections regarding the Company’s future performance, anticipated events or trends and other matters that are not historical facts, including expectations regarding: (i) the Company’s long-term targets, goals and strategies, including its pricing, focus on growing inspection, service and monitoring revenue, strong spend controls, and disciplined project and customer selection; (ii) the Company’s outlook and expected 2023 financial performance and ability to execute on long-term goals; and (iii) the expected benefits of the acquisition of the Chubb fire and security business. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including: (i) economic conditions, competition and other risks that may affect the Company’s future performance, inflationary pressures and other macroeconomic factors on the Company’s business, markets, supply chain, customers and workforce, on the credit and financial markets, on the alignment of expenses and revenues and on the global economy generally; (ii) supply chain constraints and interruptions, and the resulting increases in the cost, or reductions in the supply, of the materials commodities and labor the Company uses in its business and for which the Company bears the risk of such increases; (iii) failure to realize the anticipated benefits of the acquisition of the Chubb fire and security business; (iv) changes in applicable laws or regulations; (v) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (vi) the impact of the conflict between Russia and Ukraine; and (vii) other risks and uncertainties. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

This press release contains non-U.S. GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company uses certain non-U.S. GAAP financial measures that are included in this press release and the additional financial information both in explaining its results to shareholders and the investment community and in its internal evaluation and management of its businesses. The Company’s management believes that these non-U.S. GAAP financial measures and the information they provide are useful to investors since these measures (a) permit investors to view the Company’s performance using the same tools that management uses to evaluate the Company’s past performance, reportable business segments and prospects for future performance, (b) permit investors to compare the Company with its peers and (c) determine certain elements of management’s incentive compensation. Specifically:

The Company’s management believes that adjusted gross profit, adjusted selling, general and administrative (“SG&A”) expenses, adjusted net income, and adjusted earnings per share, which are non-GAAP financial measures that exclude business transformation and other expenses for the integration of acquired businesses, the impact and results of businesses classified as assets held-for-sale and businesses divested, and one-time and other events such as impairment charges, restructuring costs, transaction and other costs related to acquisitions, amortization of intangible assets, net COVID-19 relief, non-service pension benefit, severance related costs related to corporate leadership changes and certain tax benefits from the acquisition of APi Group, Inc. (the “APi Acquisition”) are useful because they provide investors with a meaningful perspective on the current underlying performance of the Company’s core ongoing operations.

The Company also presents organic changes in net revenues on a consolidated basis or segment specific basis to provide a more complete understanding of underlying revenue trends by providing net revenues on a consistent basis as it excludes the impacts of material acquisitions, completed divestitures, and changes in foreign currency from year-over-year comparisons on reported net revenues, calculated as the difference between the reported net revenues for the current period and reported net revenues for the current period converted at the prior year average monthly exchange rates (excluding acquisitions and divestitures). The remainder is divided by the prior year net revenues, excluding the impacts of material acquisitions and completed divestitures.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. The Company supplements the reporting of its consolidated financial information with certain non-U.S. GAAP financial measures, including EBITDA and adjusted EBITDA, which is defined as EBITDA excluding the impact of certain non-cash and other specifically identified items (“adjusted EBITDA”). Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenues. The Company believes these non-U.S. GAAP measures provide meaningful information and help investors understand the Company’s financial results and assess its prospects for future performance. The Company uses EBITDA and adjusted EBITDA to evaluate its performance, both internally and as compared with its peers, because it excludes certain items that may not be indicative of the Company’s core operating results. Consolidated EBITDA is calculated in a manner consistent with segment EBITDA, which is a measure of segment profitability.

The Company presents free cash flow, adjusted free cash flow and adjusted free cash flow conversion, which are liquidity measures used by management as factors in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures. Free cash flow is defined as cash provided by (used in) operating activities less capital expenditures. Adjusted free cash flow is defined as cash provided by (used in) operating activities plus or minus events including, but not limited to, transaction and other costs related to acquisitions, business transformation and other expenses for the integration of acquired businesses, payments on acquired liabilities, payments made for restructuring programs, impacts of businesses classified as assets held-for-sale and businesses divested, and one-time and other events such as COVID-19 related payroll tax deferral and relief items. Adjusted free cash flow conversion is defined as adjusted free cash flow as a percentage of adjusted EBITDA.

The Company calculates its leverage ratio in accordance with its debt agreements which include different adjustments to EBITDA from those included in the adjusted EBITDA numbers reported externally.

While the Company believes these non-U.S. GAAP measures are useful in evaluating the Company’s performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with U.S. GAAP. Additionally, these non-U.S. GAAP financial measures may differ from similar measures presented by other companies. A reconciliation of these non-U.S. GAAP financial measures is included later in this press release.


APi Group Corporation
Condensed Consolidated Statements of Operations (GAAP)
(Amounts in millions, except per share data)
(Unaudited)

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2022			2021			2022			2021
Net revenues	$	1,703		$	1,112		$	6,558		$	3,940
Cost of revenues		1,240			838			4,844			3,001
Gross profit		463			274			1,714			939
Selling, general, and administrative expenses		414			224			1,552			803
Operating income		49			50			162			136
Interest expense, net		37			17			125			60
(Gain) loss on extinguishment of debt, net		—			—			(5	)		9
Non-service pension benefit		(10	)		—			(42	)		—
Investment income and other, net		(4	)		—			(9	)		(12	)
Other expense, net		23			17			69			57
Income before income taxes		26			33			93			79
Income tax provision		4			18			20			32
Net income	$	22		$	15		$	73		$	47
Net income attributable to common shareholders:
Accrued stock dividend on Series A Preferred Stock		—			(184	)		—			(184	)
Stock dividend on Series B Preferred Stock		(11	)		—			(44	)		—
Net income attributable to common shareholders	$	11		$	(169	)	$	29		$	(137	)
Net income per common share
Basic	$	0.04		$	(0.75	)	$	0.10		$	(0.67	)
Diluted		0.04			(0.75	)		0.10			(0.67	)
Weighted average shares outstanding
Basic		234			225			233			206
Diluted		267			225			266			206


APi Group Corporation
Condensed Consolidated Balance Sheets (GAAP)
(Amounts in millions)
(Unaudited)

	December 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	605	$	1,188
Restricted cash		2		302
Accounts receivable, net		1,313		767
Inventories		163		69
Contract assets		459		217
Prepaid expenses and other current assets		110		83
Total current assets		2,652		2,626
Property and equipment, net		407		326
Operating lease right of use assets		222		101
Goodwill		2,382		1,106
Intangible assets, net		1,784		882
Deferred tax assets		108		73
Pension and post-retirement assets		392		—
Other assets		144		45
Total assets	$	8,091	$	5,159
Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity
Current liabilities:
Short-term and current portion of long-term debt	$	206	$	1
Accounts payable		490		236
Accrued liabilities		689		360
Contract liabilities		463		243
Operating and finance leases		73		27
Total current liabilities		1,921		867
Long-term debt, less current portion		2,583		1,766
Pension and post-retirement obligations		40		—
Operating and finance leases		166		79
Deferred tax liabilities		340		43
Other noncurrent liabilities		117		81
Total liabilities		5,167		2,836
Total redeemable convertible preferred stock		797		—
Total shareholders’ equity		2,127		2,323
Total liabilities, redeemable convertible preferred stock, and shareholders’ equity	$	8,091	$	5,159

APi Group Corporation
Condensed Consolidated Statements of Cash Flows (GAAP)
(Amounts in millions)
(Unaudited)
	For the Year Ended December 31,
	2022			2021
Cash flows from operating activities:
Net income	$	73		$	47
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		304			202
Restructuring charges, net of cash paid		22			—
Deferred taxes		(47	)		6
Share-based compensation expense		18			12
Profit-sharing expense		15			15
Non-cash lease expense		67			31
Net periodic pension benefit		(35	)		—
(Gain) loss on extinguishment of debt, net		(5	)		9
Other, net		3			7
Pension contributions		(34	)		—
Changes in operating assets and liabilities, net of effects of acquisitions		(111	)		(147	)
Net cash provided by operating activities		270			182

Cash flows from investing activities:
Acquisitions, net of cash acquired		(2,839	)		(86	)
Purchases of property and equipment		(79	)		(55	)
Proceeds from sales of property, equipment, held for sale assets, and businesses		17			20
Net cash used in investing activities		(2,901	)		(121	)

Cash flows from financing activities:
Proceeds from long-term borrowings		1,104			650
Payments on long-term borrowings		(34	)		(321	)
Repurchases of long-term borrowings		(30	)		—
Payments of debt issuance costs		(29	)		(11	)
Repurchases of common stock		(44	)		—
Proceeds from equity issuances		797			676
Payments of acquisition-related consideration		(5	)		(74	)
Restricted shares tendered for taxes		(3	)		(3	)
Net cash provided by financing activities		1,756			917
Effect of foreign currency exchange rate on cash, cash equivalents, and restricted cash		(9	)		(2	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(884	)		976
Cash, cash equivalents, and restricted cash, beginning of period		1,491			515
Cash, cash equivalents, and restricted cash, end of period	$	607		$	1,491

APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Organic change in net revenues (non-GAAP)
(Amounts in millions)
(Unaudited)

Organic change in net revenues

	For the Three Months Ended December 31, 2022
	Net revenues
	change			Acquisitions and			Foreign currency			Organic change in
	(as reported)			divestitures, net (a)			translation (b)			net revenues (c)
Safety Services		111.1	%		94.8	%		(1.8	)%		18.1	%
Specialty Services		(8.9	)%			─		(0.4	)%		(8.5	)%
Consolidated		53.1	%		48.4	%		(1.1	)%		5.8	%
										.

	For the Year Ended December 31, 2022
	Net revenues
	change			Acquisitions and			Foreign currency			Organic change in
	(as reported)			divestitures, net (a)			translation (b)			net revenues (c)
Safety Services		120.0	%		104.3	%		(1.4	)%		17.1	%
Specialty Services		6.4	%			─		(0.2	)%		6.7	%
Consolidated		66.4	%		55.0	%		(0.8	)%		12.2	%

Notes:
	(a)	Adjustment to exclude net revenues from material acquisitions from their respective dates of acquisition until the first year anniversary from date of acquisition and net revenues from divestitures for all periods for businesses divested as of December 31, 2022.
	(b)	Represents the effect of foreign currency on reported net revenues excluding material acquisitions, calculated as the difference between the reported net revenues for the current period and reported net revenues for the current period converted at the prior year average monthly exchange rates.
	(c)	Organic change in net revenues provides a consistent basis for a year-over-year comparison in net revenues as it excludes the impacts of material acquisitions, divestitures, and the impact of changes due to foreign currency translation.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Gross profit and adjusted gross profit (non-GAAP)
SG&A and adjusted SG&A (non-GAAP)
(Amounts in millions)
(Unaudited)

Adjusted gross profit

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Gross profit (as reported)		$	463		$	274		$	1,714		$	939
Adjustments to reconcile gross profit to adjusted gross profit:
Backlog amortization	(a)		8			—			30			5
Inventory step-up	(b)		—			—			9			—
Restructuring costs	(c)		3			—			7			—
Adjusted gross profit		$	474		$	274		$	1,760		$	944

Net revenues		$	1,703		$	1,112		$	6,558		$	3,940
Adjusted gross margin			27.8	%		24.6	%		26.8	%		24.0	%

Adjusted SG&A

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Selling, general, and administrative expenses (“SG&A”) (as reported)		$	414		$	224		$	1,552		$	803
Adjustments to reconcile SG&A to adjusted SG&A:
Amortization of intangible assets	(d)		(54	)		(32	)		(197	)		(122	)
Contingent consideration and compensation	(e)		(1	)		2			(9	)		7
Business process transformation expenses	(f)		(8	)		(10	)		(22	)		(35	)
Acquisition expenses	(g)		—			(8	)		(26	)		(24	)
Recent acquisition transition expenses	(h)		(32	)		—			(95	)		—
Integration and reorganization expenses	(i)		—			—			(9	)		—
Restructuring costs	(c)		(9	)		—			(23	)		—
Divested businesses	(j)		—			—			—			(1	)
COVID-19 relief at international subsidiaries, net	(k)		2			—			2			—
Corporate executive reorganization	(l)		—			—			—			(6	)
Adjusted SG&A expenses		$	312		$	176		$	1,173		$	622

Net revenues		$	1,703		$	1,112		$	6,558		$	3,940
Adjusted SG&A as a % of net revenues			18.3	%		15.8	%		17.9	%		15.8	%

Notes:
	(a)	Adjustment to reflect the addback of amortization expense related to backlog intangible assets.
	(b)	Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.
	(c)	Adjustment to reflect the elimination of expenses associated with restructuring programs.
	(d)	Adjustment to reflect the addback of amortization expense.
	(e)	Adjustment to reflect the elimination of the expense, or reversal of previously recorded expense, attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur.
	(f)	Adjustment to reflect the elimination of non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002.
	(g)	Adjustment to reflect the elimination of potential and completed acquisition-related expenses.
	(h)	Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group.
	(i)	Adjustment to reflect the elimination of expenses related to the integration and reorganization of newly acquired businesses.
	(j)	Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale.
	(k)	Adjustment to reflect the elimination of income in international subsidiaries related to COVID-19 relief, net of severance costs.
	(l)	Adjustment to reflect the elimination of costs related to non-recurring severance related costs resulting from corporate leadership changes.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
EBITDA and adjusted EBITDA (non-GAAP)
(Amounts in millions)
(Unaudited)

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Net income (as reported)		$	22		$	15		$	73		$	47
Adjustments to reconcile net income to EBITDA:
Interest expense, net			37			17			125			60
Income tax provision			4			18			20			32
Depreciation and amortization			79			48			304			202
EBITDA		$	142		$	98		$	522		$	341
Adjustments to reconcile EBITDA to adjusted EBITDA:
Contingent consideration and compensation	(a)		1			(2	)		9			(7	)
Non-service pension benefit	(b)		(10	)		—			(42	)		—
Inventory step-up	(c)		—			—			9			—
Business process transformation expenses	(d)		8			10			22			35
Acquisition expenses	(e)		—			9			26			26
Recent acquisition transition expenses	(f)		32			—			95			—
Integration and reorganization expenses	(g)		—			—			9			—
Restructuring costs	(h)		12			—			30			—
(Gain) loss on extinguishment of debt, net	(i)		—			—			(5	)		9
Divested businesses	(j)		—			—			—			(1	)
COVID-19 relief at international subsidiaries, net	(k)		(2	)		—			(2	)		(2	)
Corporate executive reorganization	(l)		—			—			—			6
Adjusted EBITDA		$	183		$	115		$	673		$	407

Net revenues		$	1,703		$	1,112		$	6,558		$	3,940
Adjusted EBITDA as a % of net revenues			10.7	%		10.3	%		10.3	%		10.3	%

Notes:
	(a)	Adjustment to reflect the elimination of the expense, or reversal of previously recorded expense, attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur.
	(b)	Adjustment to reflect the elimination of non-service pension benefit, which consists of interest cost, expected return on plan assets and amortization of actuarial gains/losses of the pension programs assumed as part of the Chubb acquisition.
	(c)	Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.
	(d)	Adjustment to reflect the elimination of non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002.
	(e)	Adjustment to reflect the elimination of potential and completed acquisition-related expenses.
	(f)	Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group.
	(g)	Adjustment to reflect the elimination of expenses related to the integration and reorganization of newly acquired businesses.
	(h)	Adjustment to reflect the elimination of expenses associated with restructuring programs.
	(i)	Adjustment to reflect the elimination of (gain)/loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt.
	(j)	Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale.
	(k)	Adjustment to reflect the elimination of miscellaneous income in international subsidiaries related to COVID-19 relief, net of severance costs.
	(l)	Adjustment to reflect the elimination of costs related to non-recurring severance related costs resulting from corporate leadership changes.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Income (loss) before income tax, net income (loss) and EPS and
Adjusted income before income tax, net income (loss) and EPS (non-GAAP)
(Amounts in millions, except per share data)
(Unaudited)

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Income before income tax provision (as reported)		$	26		$	33		$	93		$	79
Adjustments to reconcile income before income tax provision to adjusted income before income tax provision:
Amortization of intangible assets	(a)		62			32			227			127
Contingent consideration and compensation	(b)		1			(2	)		9			(7	)
Non-service pension benefit	(c)		(10	)		—			(42	)		—
Inventory step-up	(d)		—			—			9			—
Business process transformation expenses	(e)		8			10			22			35
Acquisition expenses	(f)		—			13			26			30
Recent acquisition transition expenses	(g)		32			—			95			—
Integration and reorganization expenses	(h)		—			—			9			—
Restructuring costs	(i)		12			—			30			—
(Gain) loss on extinguishment of debt, net	(j)		—			—			(5	)		9
Divested businesses	(k)		—			—			—			(1	)
COVID-19 relief at international subsidiaries, net	(l)		(2	)		—			(2	)		(2	)
Corporate executive reorganization	(m)		—			—			—			6
Adjusted income before income tax provision		$	129		$	86		$	471		$	276

Income tax provision (as reported)		$	4		$	18		$	20		$	32
Adjustments to reconcile income tax provision to adjusted income tax provision:
Income tax provision adjustment	(n)		27			2			93			26
Adjusted income tax provision		$	31		$	20		$	113		$	58

Adjusted income before income tax provision			129			86		$	471		$	276
Adjusted income tax provision			31			20			113			58
Adjusted net income		$	98		$	66		$	358		$	218

Diluted weighted average shares outstanding (as reported)			267			225			266			206
Adjustments to reconcile diluted weighted average shares outstanding to adjusted diluted weighted average shares outstanding:
Dilutive impact of shares from GAAP net loss	(o)		—			—			—			1
Dilutive impact of Series A Preferred Stock	(p)		4			4			4			4
Adjusted diluted weighted average shares outstanding			271			229			270			211

Adjusted diluted EPS		$	0.36		$	0.29		$	1.33		$	1.03

Notes:
	(a)	Adjustment to reflect the addback of pre-tax amortization expense related to intangible assets.
	(b)	Adjustment to reflect the elimination of the expense, or reversal of previously recorded expense, attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur.
	(c)	Adjustment to reflect the elimination of non-service pension benefit, which consists of interest cost, expected return on plan assets and amortization of actuarial gains/losses of the pension programs assumed as part of the Chubb acquisition.
	(d)	Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.
	(e)	Adjustment to reflect the elimination of non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002.
	(f)	Adjustment to reflect the elimination of potential and completed acquisition-related expenses.
	(g)	Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group.
	(h)	Adjustment to reflect the elimination of integration and reorganization expenses associated with acquisitions.
	(i)	Adjustment to reflect the elimination of expenses associated with restructuring programs.
	(j)	Adjustment to reflect the elimination of (gain)/loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt.
	(k)	Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale.
	(l)	Adjustment to reflect the elimination of miscellaneous income at international subsidiaries related to COVID-19 relief, net of severance costs.
	(m)	Adjustment to reflect the elimination of costs related to non-recurring severance related costs resulting from corporate leadership changes.
	(n)	Adjustment to reflect an adjusted effective cash tax rate of 24% for the three months and year ended December 31, 2022 and 21% for the year ended December 31, 2021 applied to resulting adjusted pre-tax income inclusive of the adjustments shown above. The adjustment for the three months ended December 31, 2021 is the amount required to adjust the year period to 21%.
	(o)	Adjustment to add the dilutive impact of options, RSUs, and warrants which were anti-dilutive and excluded from the diluted weighted average shares outstanding (as reported).
	(p)	Adjustment for the three months and year ended December 31, 2022 and 2021 reflects addition of the dilutive impact of 4 million shares associated with the deemed conversion of Series A Preferred Stock.


APi Group Corporation
Adjusted Segment Financial Information (non-GAAP)
(Amounts in millions)
(Unaudited)

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022 (a)			2021 (a)			2022 (a)			2021 (a)
Safety Services
Net revenues		$	1,201		$	569		$	4,575		$	2,080
Adjusted gross profit			389			176			1,432			655
Adjusted EBITDA			158			77			559			291

Adjusted gross margin			32.4	%		30.9	%		31.3	%		31.5	%
Adjusted EBITDA as a % of net revenues			13.2	%		13.5	%		12.2	%		14.0	%

Specialty Services
Net revenues		$	510		$	560		$	2,030		$	1,907
Adjusted gross profit			85			98			328			289
Adjusted EBITDA			53			66			210			195

Adjusted gross margin			16.7	%		17.5	%		16.2	%		15.2	%
Adjusted EBITDA as a % of net revenues			10.4	%		11.8	%		10.3	%		10.2	%

Total net revenues before corporate and eliminations	(b)	$	1,711		$	1,129		$	6,605		$	3,987
Total adjusted EBITDA before corporate and eliminations	(b)		211			143			769			486
Adjusted EBITDA as a % of net revenues before corporate and eliminations	(b)		12.3	%		12.7	%		11.6	%		12.2	%

Corporate and Eliminations
Net revenues		$	(8	)	$	(17	)	$	(47	)	$	(47	)
Adjusted EBITDA			(28	)		(28	)		(96	)		(79	)

Total Consolidated
Net revenues		$	1,703		$	1,112		$	6,558		$	3,940
Adjusted gross profit			474			274			1,760			944
Adjusted EBITDA			183			115			673			407

Adjusted gross margin			27.8	%		24.6	%		26.8	%		24.0	%
Adjusted EBITDA as a % of net revenues			10.7	%		10.3	%		10.3	%		10.3	%

Notes:
	(a)	Information derived from non-GAAP reconciliations included elsewhere in this press release.
	(b)	Calculated from results of the Company’s operating segments shown above, excluding Corporate and Eliminations.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Adjusted Segment Financial Information (non-GAAP)
(Amounts in millions)
(Unaudited)

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Safety Services
Safety Services EBITDA		$	132		$	74		$	492		$	287
Adjustments to reconcile EBITDA to adjusted EBITDA:
Contingent consideration and compensation	(a)		1			—			5			2
Non-service pension benefit	(b)		(10	)		—			(42	)		—
Inventory step-up	(c)		—			—			9			—
Business process transformation expenses	(d)		1			2			3			3
Recent acquisition transition expenses	(e)		24			—			57			—
Integration and reorganization expenses	(f)		—			—			7			—
Restructuring costs	(g)		12			—			30			—
COVID-19 relief at international subsidiaries, net	(h)		(2	)		—			(2	)		(2	)
Acquisition expenses	(j)		—			1			—			1
Safety Services adjusted EBITDA		$	158		$	77		$	559		$	291

Specialty Services
Specialty Services EBITDA		$	53		$	68		$	206		$	205
Adjustments to reconcile EBITDA to adjusted EBITDA:
Contingent consideration and compensation	(a)		—			(2	)		4			(9	)
Divested businesses	(i)		—			—			—			(1	)
Specialty Services adjusted EBITDA		$	53		$	66		$	210		$	195

Corporate and Eliminations
Corporate and Eliminations EBITDA		$	(43	)	$	(44	)	$	(176	)	$	(151	)
Adjustments to reconcile EBITDA to adjusted EBITDA:
Business process transformation expenses	(d)		7			8			19			32
Acquisition expenses	(j)		—			8			26			25
Recent acquisition transition expenses	(e)		8			—			38			—
Integration and reorganization expenses	(f)		—			—			2			—
(Gain) loss on extinguishment of debt, net	(k)		—			—			(5	)		9
Corporate executive reorganization	(l)		—			—			—			6
Corporate and Eliminations adjusted EBITDA		$	(28	)	$	(28	)	$	(96	)	$	(79	)

Notes:
	(a)	Adjustment to reflect the elimination of the expense, or reversal of previously recorded expense, attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur.
	(b)	Adjustment to reflect the elimination of non-service pension benefit, which consists of interest cost, expected return on plan assets and amortization of actuarial gains/losses of the pension programs assumed as part of the Chubb acquisition.
	(c)	Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.
	(d)	Adjustment to reflect the elimination of non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002.
	(e)	Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group.
	(f)	Adjustment to reflect the elimination of integration and reorganization expenses associated with acquisitions.
	(g)	Adjustment to reflect the elimination of expenses associated with restructuring programs.
	(h)	Adjustment to reflect the elimination of miscellaneous income in international subsidiaries related to COVID-19 relief, net of severance costs.
	(i)	Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale.
	(j)	Adjustment to reflect the elimination of potential and completed acquisition-related expenses.
	(k)	Adjustment to reflect the elimination of (gain) loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt.
	(l)	Adjustment to reflect the elimination of costs related to non-recurring severance related costs resulting from corporate leadership changes.

APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Adjusted Segment Financial Information (non-GAAP)
(Amounts in millions)
(Unaudited)

	For the Three Months Ended December 31, 2022										For the Three Months Ended December 31, 2021
	*As Reported*			*Adjustments*				*As Adjusted*			*As Reported*			*Adjustments*		*As Adjusted*
Safety Services
Net revenues	$	1,201		$	—			$	1,201		$	569		$	—	$	569
Cost of revenues		823			(8	)	(a)		812			393			—		393
					(3	)	(b)
Gross profit	$	378		$	11			$	389		$	176		$	—	$	176
Gross margin		31.5	%						32.4	%		30.9	%				30.9	%

Specialty Services
Net revenues	$	510		$	—			$	510		$	560		$	—	$	560
Cost of revenues		425			—				425			462			—		462
Gross profit	$	85		$	–			$	85		$	98		$	—	$	98
Gross margin		16.7	%						16.7	%		17.5	%				17.5	%

Corporate and Eliminations
Net revenues	$	(8	)	$	—			$	(8	)	$	(17	)	$	—	$	(17	)
Cost of revenues		(8	)		—				(8	)		(17	)		—		(17	)

Total Consolidated
Net revenues	$	1,703		$	—			$	1,703		$	1,112		$	—	$	1,112
Cost of revenues		1,240			(8	)	(a)		1,229			838			—		838
					(3	)	(b)
Gross profit	$	463		$	11			$	474		$	274		$	—	$	274
Gross margin		27.2	%						27.8	%		24.6	%				24.6	%

Notes:
	(a)	Adjustment to reflect the addback of amortization expense related to backlog intangible assets.
	(b)	Adjustment to reflect the elimination of expenses associated with restructuring programs.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Adjusted Segment Financial Information (non-GAAP)
(Amounts in millions)
(Unaudited)

	For the Year Ended December 31, 2022										For the Year Ended December 31, 2021
	*As Reported*			*Adjustments*				*As Adjusted*			*As Reported*			*Adjustments*				*As Adjusted*
Safety Services
Net revenues	$	4,575		$	—			$	4,575		$	2,080		$	—			$	2,080
Cost of revenues		3,186			(27	)	(a)		3,143			1,426			(1	)	(a)		1,425
					(9	)	(b)
					(7	)	(c)
Gross profit	$	1,389		$	43			$	1,432		$	654		$	1			$	655
Gross margin		30.4	%						31.3	%		31.4	%						31.5	%

Specialty Services
Net revenues	$	2,030		$	—			$	2,030		$	1,907		$	—			$	1,907
Cost of revenues		1,705			(3	)	(a)		1,702			1,622			(4	)	(a)		1,618
Gross profit	$	325		$	3			$	328		$	285		$	4			$	289
Gross margin		16.0	%						16.2	%		14.9	%						15.2	%

Corporate and Eliminations
Net revenues	$	(47	)	$	—			$	(47	)	$	(47	)	$	—			$	(47	)
Cost of revenues		(47	)		—				(47	)		(47	)		—				(47	)

Total Consolidated
Net revenues	$	6,558		$	—			$	6,558		$	3,940		$	—			$	3,940
Cost of revenues		4,844			(30	)	(a)		4,798			3,001			(5	)	(a)		2,996
					(9	)	(b)
					(7	)	(c)
Gross profit	$	1,714		$	46			$	1,760		$	939		$	5			$	944
Gross margin		26.1	%						26.8	%		23.8	%						24.0	%

Notes:
	(a)	Adjustment to reflect the addback of amortization expense related to backlog intangible assets.
	(b)	Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.
	(c)	Adjustment to reflect the elimination of expenses associated with restructuring programs.


APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
Free cash flow and adjusted free cash flow and conversion (non-GAAP)
(Amounts in millions)
(Unaudited)

		For the Three Months Ended December 31,						For the Year Ended December 31,
		2022			2021			2022			2021
Net cash provided by operating activities	(a)	$	188		$	114		$	270		$	182
Less: Purchases of property and equipment	(a)		(19	)		(12	)		(79	)		(55	)
Free cash flow		$	169		$	102		$	191		$	127
Add (deduct): Cash payments (sources) related to following items:
Contingent compensation	(b)	$	—		$	1		$	3		$	20
Pension contributions	(c)		—			—			27			—
Business process transformation expenses	(d)		8			10			22			35
Acquisition costs	(e)		1			7			35			24
Recent acquisition transition expenses	(f)		31			—			95			—
Integration and reorganization expenses	(g)		2			—			14			—
Restructuring payments	(h)		2			—			8			—
COVID-19 relief at international subsidiaries, net	(i)		(2	)		—			(2	)		(2	)
Payroll tax deferral	(j)		11			19			11			19
Payments on acquired liabilities	(k)		8			—			8			—
Adjusted free cash flow		$	230		$	139		$	412		$	223

Adjusted EBITDA	(l)	$	183		$	115		$	673		$	407
Adjusted free cash flow conversion			125.7	%		120.9	%		61.2	%		54.8	%

Notes:
	(a)	Operating cash flows and purchases of property and equipment for the year ended December 31, 2022 and 2021 are as reported. Amounts for the three months ended December 31, 2021 and 2022 are calculated as the year ended less the amounts reported for the nine months ended September 30, 2022 and 2021, respectively.
	(b)	Adjustment to reflect the elimination of deferred payments to prior owners of acquired businesses not expected to continue or recur.
	(c)	Adjustment to reflect the elimination of initial pension contribution payment related to the Chubb acquisition not expected to continue or recur.
	(d)	Adjustment to reflect the elimination of operating cash used for non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002.
	(e)	Adjustment to reflect the elimination of potential and completed acquisition-related costs.
	(f)	Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group.
	(g)	Adjustment to reflect the elimination of integration and reorganization expenses associated with newly acquired businesses.
	(h)	Adjustment to reflect payments made for restructuring programs.
	(i)	Adjustment to reflect the elimination of cash received in international subsidiaries for COVID-19 relief, net of severance costs paid, not expected to continue or recur.
	(j)	Adjustment reflects the elimination of operating cash for the impact of the Coronavirus Aid Relief and Economic Security (CARES) Act. During the first quarter of 2020, the CARES Act was passed, allowing the Company to defer the payment of the employer’s share of Social Security taxes until December 2021 and December 2022. In December 2021 and 2022, payments were made on a portion of the amount deferred in 2020.
	(k)	Adjustment to reflect the elimination of the impact of payments made on acquired liabilities, which are not expected to continue or recur.
	(l)	Adjusted EBITDA derived from non-GAAP reconciliations included elsewhere in this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230227005966/en/

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