Market Newsdesk

August 17, 2021 4:04 pm

Jack Henry & Associates, Inc. Reports Fiscal 2021 Results

PR Newswire

MONETT, Mo., Aug. 17, 2021 /PRNewswire/ —

Year summary:

GAAP revenue increased 4% and operating income increased 5% for the fiscal year ended June 30, 2021 compared to the prior fiscal year.
Non-GAAP adjusted revenue increased 6% and non-GAAP adjusted operating income increased 13% for the fiscal year ended June 30, 2021 compared to the prior fiscal year.¹
GAAP EPS was $4.12 per diluted share for the fiscal year ended June 30, 2021, compared to $3.86 for the prior fiscal year.
Cash at June 30, 2021 was $51.0 million and $213.3 million at June 30, 2020.
Debt related to the revolving credit line was $100 million at June 30, 2021 and zero at June 30, 2020.

Fourth quarter summary:

GAAP revenue increased 10% and operating income increased 25% for the quarter compared to the prior-year quarter.
Non-GAAP adjusted revenue increased 10% and non-GAAP adjusted operating income increased 25% for the quarter compared to the prior-year quarter.¹
GAAP EPS was $1.04 per diluted share for the quarter, compared to $0.80 in the prior-year quarter.

Full-year fiscal 2022 guidance:

GAAP revenue $1,902 million to $1,911 million
GAAP EPS $4.53 to $4.60
Non-GAAP revenue $1,866 million to $1,875 million²

Jack Henry & Associates, Inc. (NASDAQ: JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announces results for the fourth quarter and full year of fiscal 2021 and discusses its continued response to the novel coronavirus (COVID-19) pandemic.

According to David Foss, President and CEO, “We are very pleased to report another quarter of record revenue, operating income, and total sales bookings. Among many other successes, our sales teams contracted with 13 new core clients and sold 87 new digital banking systems in the quarter. As we begin the new fiscal year, our sales pipeline remains strong, and we see significant opportunities to continue growing new and existing customer relationships through the successful execution of Jack Henry’s client strategies in digital, lending, payments, and open banking. We are optimistic about the strength of our technology solutions and the ability of our teams to deliver outstanding service in a market that is widely expected to increase technology and digital investments in a recovering economy.”

Operating Results

Revenue, operating expenses, operating income, and net income for the three months and fiscal year ended June 30, 2021, as compared to the three months and fiscal year ended June 30, 2020, were as follows:

Revenue (Unaudited)
(In Thousands)	Three Months Ended June 30,						% Change		Year Ended June 30,						% Change
	2021			2020					2021			2020
Revenue
Services and Support	$	261,697		$	247,235		6	%	$	1,048,206		$	1,051,451		—	%
Percentage of Total Revenue	58		%	60		%			60		%	62		%
Processing	188,590			163,302			15	%	710,019			645,616			10	%
Percentage of Total Revenue	42		%	40		%			40		%	38		%
Total Revenue	$	450,287		$	410,537		10	%	$	1,758,225		$	1,697,067		4	%

¹See tables below reconciling non-GAAP financial measures to GAAP.

²See tables below reconciling fiscal year 2021 GAAP to non-GAAP guidance.

Processing revenue increased for the fourth quarter primarily driven by growth in card processing of 22.3%. Other increases were in remittance revenues and Jack Henry digital. Services and support revenue increased for the fourth quarter primarily driven by growth in data processing and hosting fees of 9.1% and increased software usage fees.
Processing revenue increased for the fiscal year primarily driven by growth in card processing of 11.5%. Other increases were in Jack Henry digital and remittance revenues. Services and support revenue remained consistent when compared to the prior fiscal year, with increases in Jack Henry cloud and public cloud revenues and software usage fees, and offsetting decreases in deconversion fees, pass-through revenues due to COVID-19 limitations,³ and hardware revenue.
For the fourth quarter, core segment revenue increased 4%, payments segment revenue increased 16%, complementary segment revenue increased 7%, and corporate and other segment revenue increased 17%.⁴
For the fiscal year, core segment revenue remained consistent, payments segment revenue increased 7%, complementary segment revenue increased 4%, and corporate and other segment revenue decreased 15%.⁴

Operating Expenses and Operating Income

(Unaudited, In Thousands)	Three Months Ended June 30,						% Change		Year Ended June 30,						% Change
	2021			2020					2021			2020
Cost of Revenue	$	274,918		$	254,835		8	%	$	1,063,399		$	1,008,464		5	%
Percentage of Total Revenue	61		%	62		%			60		%	59		%
Research and Development	28,814			29,902			(4)	%	109,047			109,988			(1)	%
Percentage of Total Revenue	6		%	7		%			6		%	6		%
Selling, General, and Administrative	50,259			49,002			3	%	187,060			197,988			(6)	%
Percentage of Total Revenue	11		%	12		%			11		%	12		%
Total Operating Expenses	353,991			333,739			6	%	1,359,506			1,316,440			3	%
Operating Income	$	96,296		$	76,798		25	%	$	398,719		$	380,627		5	%
Operating Margin	21		%	19		%			23		%	22		%

Cost of revenue increased for the fourth quarter primarily due to higher costs associated with our card processing platform, personnel costs, and operating licenses and fees.
Cost of revenue increased for the fiscal year primarily due to higher costs associated with our card processing platform, personnel costs, and operating licenses and fees, partially offset by travel expense savings as a result of COVID-19 travel limitations³and lower costs related to hardware.
Research and development expense decreased for the fourth quarter and fiscal year primarily due to higher capitalized research and development costs partially offset by an increase in personnel costs.
Selling, general, and administrative expense increased for the fourth quarter primarily due to increased personnel costs and travel expenses partially offset by the change in gain/loss on disposal of assets, net.
Selling, general, and administrative expense decreased for the fiscal year primarily due to travel expense and other savings as a result of COVID-19 limitations and the change in gain/loss on disposal of assets, net, partially offset by increased personnel costs. COVID-19-related savings included our national sales meeting, Jack Henry Annual Conference, and Symitar Education Conference that were all held virtually this year.³

Net Income

(Unaudited, In Thousands, Except Per Share Data)	Three Months Ended June 30,				% Change		Year Ended June 30,				% Change
	2021		2020				2021		2020
Income Before Income Taxes	$	95,683	$	76,673	25	%	$	397,725	$	381,076	4	%
Provision for Income Taxes	18,821		15,328		23	%	86,256		84,408		2	%
Net Income	$	76,862	$	61,345	25	%	$	311,469	$	296,668	5	%
Diluted earnings per share	$	1.04	$	0.80	30	%	$	4.12	$	3.86	7	%

³See “COVID-19 Impact and Response” section below.

⁴See revenue lines of segment break-out tables on pages 4 and 5 below.

Effective tax rates for the fourth quarter of fiscal years 2021 and 2020 were 19.7% and 20.0%, respectively. Effective tax rates for fiscal years 2021 and 2020 were 21.7% and 22.1%, respectively.

According to Kevin Williams, CFO and Treasurer, “For both the fourth fiscal quarter and the full fiscal year, our private cloud, card processing and digital solutions drove our revenue growth. We saw nice operating margin expansion on a non-GAAP basis for both the quarter and full fiscal year. We are very pleased to report our Return on Invested Capital (ROIC) of 21% for the full fiscal year which is up from 20% a year ago. I also want to thank all of our management team and associates for all the contributions during the year to support our customers and continue moving our company forward.”

Non-GAAP Impact of Deconversion Fees and Acquisitions, Divestitures, and Gain/Loss

The table below shows our revenue and operating income (in thousands) for the three months and fiscal year ended June 30, 2021 compared to the three months and fiscal year ended June 30, 2020, excluding the impacts of deconversion fees and acquisitions, divestitures, and gain/loss.

(Unaudited, In Thousands)	Three Months Ended June 30,				% Change		Year Ended June 30,				% Change
	2021		2020				2021		2020

Reported Revenue (GAAP)	$	450,287	$	410,537	10	%	$	1,758,225	$	1,697,067	4	%

Adjustments:
Deconversion fee revenue	(8,231)		(8,530)				(20,635)		(53,914)
Revenue from acquisitions and divestitures	(9)		(1,166)				(9)		(3,574)

Non-GAAP Adjusted Revenue	$	442,047	$	400,841	10	%	$	1,737,581	$	1,639,579	6	%


Reported Operating Income (GAAP)	$	96,296	$	76,798	25	%	$	398,719	$	380,627	5	%

Adjustments:
Operating income from deconversion fees	(7,616)		(6,925)				(18,721)		(48,885)
Operating (income)/loss from acquisitions, divestitures, and gain/loss	209		1,348				(1,786)		3,909

Non-GAAP Adjusted Operating Income	$	88,889	$	71,221	25	%	$	378,212	$	335,651	13	%

The tables below show the segment break-out of revenue and cost of revenue for each period presented, as adjusted for the items above, and include a reconciliation to non-GAAP adjusted operating income presented above.

(Unaudited, In Thousands)	Three Months Ended June 30, 2021
	Core		Payments		Complementary		Corporate and Other		Total
Revenue	$	140,843	$	169,551	$	128,735	$	11,158	$	450,287
Deconversion fees	(3,162)		(1,852)		(3,189)		(28)		(8,231)
Acquisition	—		—		(9)		—		(9)
Non-GAAP Adjusted Revenue	137,681		167,699		125,537		11,130		442,047

Cost of Revenue	61,616		93,170		53,990		66,142		274,918
Non-GAAP adjustments	(129)		(107)		(280)		(3)		(519)
Non-GAAP Adjusted Cost of Revenue	61,487		93,063		53,710		66,139		274,399
Non- GAAP Adjusted Segment Income	$	76,194	$	74,636	$	71,827	$	(55,009)

Research and Development									28,814
Selling, General, and Administrative									50,259
Non-GAAP adjustments unassigned to a segment									(314)
Non-GAAP Total Adjusted Operating Expenses									353,158
Non-GAAP Adjusted Operating Income									$	88,889

(Unaudited, In Thousands)	Three Months Ended June 30, 2020
	Core		Payments		Complementary		Corporate and Other		Total
Revenue	$	135,459	$	145,542	$	120,010	$	9,526	$	410,537
Deconversion fees	(4,318)		(1,933)		(2,173)		(106)		(8,530)
Divestiture	(1,166)		—		—		—		(1,166)
Non-GAAP Adjusted Revenue	129,975		143,609		117,837		9,420		400,841

Cost of Revenue	58,794		83,013		51,588		61,440		254,835
Non-GAAP adjustments	(1,618)		(147)		(387)		(7)		(2,159)
Non-GAAP Adjusted Cost of Revenue	57,176		82,866		51,201		61,433		252,676
Non- GAAP Adjusted Segment Income	$	72,799	$	60,743	$	66,636	$	(52,013)

Research and Development									29,902
Selling, General, and Administrative									49,002
Non-GAAP adjustments unassigned to a segment									(1,960)
Non-GAAP Total Adjusted Operating Expenses									329,620
Non-GAAP Adjusted Operating Income									$	71,221

(Unaudited, In Thousands)	Year Ended June 30, 2021
	Core		Payments		Complementary		Corporate and Other		Total
Revenue	$	564,096	$	642,308	$	505,928	$	45,893	$	1,758,225
Deconversion fees	(7,458)		(6,285)		(6,778)		(114)		(20,635)
Acquisition	—		—		(9)		—		(9)
Non-GAAP Adjusted Revenue	556,638		636,023		499,141		45,779		1,737,581

Cost of Revenue	247,285		353,581		212,627		249,906		1,063,399
Non-GAAP adjustments	(541)		(216)		(738)		(54)		(1,549)
Non-GAAP Adjusted Cost of Revenue	246,744		353,365		211,889		249,852		1,061,850
Non-GAAP Adjusted Segment Income	$	309,894	$	282,658	$	287,252	$	(204,073)

Research and Development									109,047
Selling, General, and Administrative									187,060
Non-GAAP adjustments unassigned to a segment									1,412
Non-GAAP Total Adjusted Operating Expenses									1,359,369
Non-GAAP Adjusted Operating Income									$	378,212

(Unaudited, In Thousands)	Year Ended June 30, 2020
	Core		Payments		Complementary		Corporate and Other		Total
Revenue	$	561,369	$	597,693	$	484,146	$	53,859	$	1,697,067
Deconversion fees	(25,536)		(15,411)		(12,536)		(431)		(53,914)
Divestiture	(3,574)		—		—		—		(3,574)
Non-GAAP Adjusted Revenue	532,259		582,282		471,610		53,428		1,639,579

Cost of Revenue	240,492		319,739		203,963		244,270		1,008,464
Non-GAAP adjustments	(4,516)		(381)		(1,262)		(47)		(6,206)
Non-GAAP Adjusted Cost of Revenue	235,976		319,358		202,701		244,223		1,002,258
Non- GAAP Adjusted Segment Income	$	296,283	$	262,924	$	268,909	$	(190,795)

Research and Development									109,988
Selling, General, and Administrative									197,988
Non-GAAP adjustments unassigned to a segment									(6,306)
Non-GAAP Total Adjusted Operating Expenses									1,303,928
Non-GAAP Adjusted Operating Income									$	335,651

The table below shows our GAAP to non-GAAP guidance for fiscal year ended June 30, 2022. Non-GAAP guidance excludes the impacts of deconversion fee and acquisition and divestiture revenue.

GAAP to Non-GAAP GUIDANCE (In Millions, except per share data)	Annual FY22
	Low			High
REVENUE
GAAP	$	1,902		$	1,911
Growth	8.2		%	8.7		%
Deconversion Fee and Acquisition and Divestiture Revenue	36			36
Non-GAAP Adjusted	$	1,866		$	1,875
Non-GAAP Adjusted Growth*	7.5		%	8.0		%
EPS
GAAP	$	4.53		$	4.60
Growth	10.0		%	11.8		%

*The growth percentages for revenue using non-GAAP numbers for fiscal 2021 are further adjusted by $1.182 to remove revenue associated with the divestiture of the Cruise line of business.

Balance Sheet and Cash Flow Review

At June 30, 2021, cash and cash equivalents decreased to $51.0 million from $213.3 million at June 30, 2020.*
Trade receivables totaled $306.6 million at June 30, 2021 compared to $300.9 million at June 30, 2020.
The Company had $100 million of borrowings at June 30, 2021 and zero at June 30, 2020.*
Total deferred revenue increased to $395.6 million at June 30, 2021, compared to $389.6 million a year ago.
Stockholders’ equity decreased to $1,319.3 million at June 30, 2021, compared to $1,549.7 million a year ago.

* The changes in cash and cash equivalents and borrowings, year over year, were primarily due to the Company’s repurchases of common stock in fiscal 2021 to be held in treasury (see net cash from financing activities below).

The following table summarizes net cash from operating activities:

(Unaudited, In Thousands)	Year Ended June 30,
	2021		2020
Net income	$	311,469	$	296,668
Depreciation	52,515		52,206
Amortization	123,233		119,599
Change in deferred income taxes	16,760		24,581
Other non-cash expenses	18,758		21,618
Change in receivables	(6,112)		10,540
Change in deferred revenue	6,541		(4,871)
Change in other assets and liabilities	(61,035)		(9,809)
Net cash provided by operating activities	$	462,129	$	510,532

The following table summarizes net cash from investing activities:

(Unaudited, In Thousands)	Year Ended June 30,
	2021		2020
Payment for acquisitions, net of cash acquired*	$	(2,300)	$	(30,376)
Capital expenditures	(22,988)		(53,538)
Proceeds from dispositions	—		—
Purchased software	(6,506)		(6,710)
Computer software developed	(128,343)		(117,262)
Purchase of investments	(13,300)		(1,150)
Proceeds from investments	5,000		—
Net cash from investing activities	$	(162,250)	$	(197,906)

*On July 1, 2019, the Company acquired all of the equity interest of DebtFolio, Inc. (“Geezeo”) for $30,376, net of cash acquired. Geezeo is a Boston-based provider of retail and business digital financial management solutions.

The following table summarizes net cash from financing activities:

(Unaudited, In Thousands)	Year Ended June 30,
	2021		2020
Borrowings on credit facilities	$	200,000	$	55,000
Repayments on credit facilities and financing leases	(100,114)		(55,033)
Purchase of treasury stock*	(431,529)		(71,549)
Dividends paid	(133,800)		(127,421)
Net cash from issuance of stock and tax related to stock-based compensation	3,211		6,094
Net cash from financing activities	$	(462,232)	$	(192,909)

*For the year ended June 30, 2021, the Company repurchased common stock and transferred to its treasury 2,800 shares compared to the year ended June 30, 2020, when the Company repurchased common stock and transferred to its treasury 485 shares.

Use of Non-GAAP Financial Information

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting in the United States. GAAP include the standards, conventions, and rules accountants follow in recording and summarizing transactions in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, we have provided certain non-GAAP financial measures, including adjusted revenue, adjusted operating income, adjusted segment income, adjusted cost of revenue, and adjusted operating expenses.

We believe non-GAAP financial measures help investors better understand the underlying fundamentals and true operations of our business. The non-GAAP financial measures presented eliminate one-time deconversion fees and acquisitions, divestitures, and gain/loss, all of which management believes are not indicative of the Company’s operating performance. Such adjustments give investors further insight into our performance. For these reasons, management also uses these non-GAAP financial measures in its assessment and management of the Company’s performance.

Any non-GAAP financial measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. Reconciliations of the non-GAAP financial measures to related GAAP measures are included.

COVID-19 Impact and Response

Since its outbreak in early 2020, COVID-19 has rapidly spread and continues to represent a public health concern. The health, safety, and well-being of our employees and customers is of paramount importance to us. In March 2020, we established an internal task force composed of executive officers and other members of management to frequently assess updates to the COVID-19 situation and recommend Company actions. We offered remote working as a recommended option to employees whose job duties allowed them to work off-site and we suspended all non-essential business travel. This company-wide recommendation extended until July 1, 2021, at which point we began transition to a return to our facilities and normalization of travel activities. Individual decisions on returning to the office were manager-coordinated and based on conversations with specific teams and departments. A large number of our employees requested to remain fully remote or participate in a hybrid approach where they would split their time between remote and in-person working. We have not required employees who return to our facilities to receive vaccinations, but we have provided information on vaccine providers, as well as hosted on-site COVID-19 vaccination clinics at several of our facilities for our employees and their families. On August 3, 2021, we reimplemented our company-wide recommendation for remote work and are encouraging a cautious approach to business travel based on the spread of the Delta variant and increased infection rates. For those employees who are at our facilities, we have introduced enhanced sanitation procedures and we require face masks for both vaccinated and unvaccinated employees. As of August 13, 2021, the majority of our employees were continuing to work remotely either full time or in a hybrid capacity.

Customers

We work closely with our customers who are scheduled for on-site visits to ensure their needs are met while taking necessary safety precautions when our employees are required to be at a customer site. Delays of customer system installations due to COVID-19 have been limited, and we have developed processes to handle remote installations when available. We expect these processes to provide flexibility and value both during and after the COVID-19 pandemic. Even though a substantial portion of our workforce has worked remotely during the outbreak and business travel has been curtailed, we have not yet experienced significant disruption to our operations. We believe our technological capabilities are well positioned to allow our employees to work remotely without materially impacting our business.

Financial impact

Despite the changes and restrictions caused by COVID-19, the overall financial and operational impact on our business has been limited and our liquidity, balance sheet, and business trends remain strong. We experienced positive operating cash flows during fiscal 2021, and we do not expect that to change in the near term. However, we are unable to accurately predict the future impact of COVID-19 due to a number of uncertainties, including further government actions; the duration, severity and recurrence of the outbreak, including the onset of variants of the virus; the speed and effectiveness of vaccine and treatment developments; the speed of economic recovery; the potential impact to our customers, vendors, and employees; and how the potential impact might affect future customer services, processing and installation-related revenue, and processes and efficiencies within the Company directly or indirectly impacting financial results. We will continue to monitor COVID-19 and its possible impact on the Company and to take steps necessary to protect the health and safety of our employees and customers.

Quarterly Conference Call

The Company will hold a conference call on August 18, 2021; at 7:45 a.m. Central Time and investors are invited to listen at www.jackhenry.com.

About Jack Henry & Associates, Inc.®

Jack Henry (NASDAQ: JKHY) is a leading provider of technology solutions primarily for the financial services industry. We are an S&P 500 company that serves approximately 8,400 clients nationwide through three divisions: Jack Henry Banking® supports banks ranging from community banks to multi-billion-dollar institutions; Symitar® provides industry-leading solutions to credit unions of all sizes; and ProfitStars® offers highly specialized solutions to financial institutions of every asset size, as well as diverse corporate entities outside of the financial services industry. With a heritage that has been dedicated to openness, partnership, and user centricity for more than 40 years, we are well-positioned as a driving market force in future-ready digital solutions and payment processing services. We empower our clients and consumers with the human-centered, tech-forward, and insights-driven solutions that will get them where they want to go. Are you future ready? Additional information is available at www.jackhenry.com.

Statements made in this news release that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those discussed in the Company’s Securities and Exchange Commission filings, including the Company’s most recent reports on Form 10-K and Form 10-Q, particularly under the heading “Risk Factors.” Any forward-looking statement made in this news release speaks only as of the date of the news release, and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise.

Condensed Consolidated Statements of Income (Unaudited)
(In Thousands, except per share data)	Three Months Ended June 30,				% Change		Year Ended June 30,				% Change
	2021		2020				2021		2020

REVENUE	$	450,287	$	410,537	10	%	$	1,758,225	$	1,697,067	4	%

EXPENSES
Cost of Revenue	274,918		254,835		8	%	1,063,399		1,008,464		5	%
Research and Development	28,814		29,902		(4)	%	109,047		109,988		(1)	%
Selling, General, and Administrative	50,259		49,002		3	%	187,060		197,988		(6)	%
Total Expenses	353,991		333,739		6	%	1,359,506		1,316,440		3	%

OPERATING INCOME	96,296		76,798		25	%	398,719		380,627		5	%

INTEREST INCOME (EXPENSE)
Interest income	6		86		(93)	%	150		1,137		(87)	%
Interest expense	(619)		(211)		193	%	(1,144)		(688)		66	%
Total	(613)		(125)		390	%	(994)		449		(321)	%

INCOME BEFORE INCOME TAXES	95,683		76,673		25	%	397,725		381,076		4	%

PROVISION FOR INCOME TAXES	18,821		15,328		23	%	86,256		84,408		2	%

NET INCOME	$	76,862	$	61,345	25	%	$	311,469	$	296,668	5	%

Diluted net income per share	$	1.04	$	0.80			$	4.12	$	3.86
Diluted weighted average shares outstanding	74,211		76,849				75,658		76,934

Consolidated Balance Sheet Highlights (Unaudited)
(In Thousands)							June 30,				% Change
							2021		2020
Cash and cash equivalents							$	50,992	$	213,345	(76)	%
Receivables							306,564		300,945		2	%
Total assets							2,336,156		2,428,474		(4)	%

Accounts payable and accrued expenses							$	201,002	$	176,569	14	%
Current and long-term debt							100,193		323		30,920	%
Deferred revenue							395,600		389,622		2	%
Stockholders’ equity							1,319,292		1,549,688		(15)	%

View original content:https://www.prnewswire.com/news-releases/jack-henry–associates-inc-reports-fiscal-2021-results-301357274.html

SOURCE Jack Henry & Associates, Inc.

August 17, 2021 4:04 pm

Marinus Pharmaceuticals Reports Topline Ganaxolone Phase 2 Open-Label Results in Tuberous Sclerosis Complex and Receives FDA Orphan Drug Designation

Marinus Pharmaceuticals Reports Topline Ganaxolone Phase 2 Open-Label Results in Tuberous Sclerosis Complex and Receives FDA Orphan Drug Designation

Primary endpoint showed a median 16.6% reduction in 28-day seizure frequency relative to baseline in tuberous sclerosis complex (TSC) patients (n=23)

Secondary endpoint of 50% responder rate at 30.4%, consistent with the Marigold Phase 3 CDKL5 deficiency disorder trial results

25.2% reduction was observed in focal seizures (n=19), the most common seizure type in TSC patients

Meaningful 50% responder rates in subgroups of highly refractory seizure patients on concomitant medications cannabidiol (n=12) or everolimus (n=11)

Phase 3 planning for TrustTSC trial ongoing with first patient expected to be enrolled in Q4 2021

U.S. Food and Drug Administration (FDA) has granted orphan drug designation to ganaxolone in TSC

Conference call and webcast to be held today at 4:30 p.m. ET

RADNOR, Pa.–(BUSINESS WIRE)–Marinus Pharmaceuticals, Inc. (Nasdaq: MRNS), a pharmaceutical company dedicated to the development of innovative therapeutics to treat seizure disorders, today announced topline data from its open-label Phase 2 trial evaluating safety and efficacy of adjunctive oral ganaxolone treatment in 23 patients with seizures associated with tuberous sclerosis complex (TSC). The primary endpoint showed a median 16.6 percent reduction in 28-day primary endpoint seizure frequency relative to the four-week baseline period, with 30.4 percent of patients achieving a 50 percent or more seizure reduction. During the trial, patients with focal seizures (n=19) showed a median 25.2 percent reduction in focal seizure frequency.

“We believe the totality of the data is encouraging and supports advancing to Phase 3. There was notable activity in focal seizures, a meaningful 50 percent response rate, and consistent results in this refractory patient population, including patients on both cannabidiol and everolimus,” said Joseph Hulihan, M.D., Chief Medical Officer of Marinus. “We look forward to initiating our Phase 3 trial and adding to the body of evidence that supports ganaxolone’s potential as an innovative treatment option for rare epilepsies.”

Data Highlights

Primary endpoint showed a median 16.6 percent reduction in 28-day seizure frequency relative to baseline in TSC patients
Secondary endpoint of 50 percent responder rate at 30.4 percent, consistent with the Marigold Phase 3 CDKL5 deficiency disorder trial of 24.5 percent
Patients with focal seizures (n=19) showed a median 25.2 percent reduction in focal seizure frequency, the most common seizure type in TSC patients
Proportion of patients who achieved at least a 50 percent reduction in TSC-associated seizures was 36.4 percent in patients on concomitant everolimus and 25.0 percent on patients on concomitant cannabidiol
Ganaxolone was generally well-tolerated with somnolence reported as the most common adverse event, consistent with previous trials; in addition, one treatment-related serious adverse event of seizure was reported in the trial

The Phase 2 TSC trial, the CALM trial, was an open-label trial to evaluate the safety and tolerability of adjunctive ganaxolone treatment in patients with seizures associated with TSC. The trial enrolled 23 patients ages 2 to 32 that underwent a four-week baseline period followed by a 12-week treatment period where they received up to 600 mg of ganaxolone (oral liquid suspension) three times a day. Patients who met eligibility criteria were able to continue ganaxolone treatment during a 24-week extension to the trial. The primary endpoint for the trial was percentage change in 28-day TSC-associated seizure frequency during the 12-week treatment period relative to the four-week baseline period. Secondary outcome measures included percentage of patients experiencing a greater than or equal to 50% reduction in 28-day TSC-associated seizure frequency through the end of the 12-week treatment period compared to the 4-week baseline period.

A global Phase 3 randomized, double blind, placebo-controlled trial (TrustTSC) of adjunctive ganaxolone in approximately 160 TSC patients is expected to begin enrollment during Q4 2021. The primary endpoint is percent change in 28-day TSC-associated seizure frequency.

Regulatory Update

The FDA has granted orphan drug designation to ganaxolone for treatment in TSC. The FDA’s Office of Orphan Drug Products grants orphan status to support the development of medicines for rare disorders that affect fewer than 200,000 people in the U.S. Orphan drug designation provides certain benefits, including market exclusivity upon regulatory approval, if received, exemption of FDA application fees and tax credits for qualified clinical trials.

Conference Call and Webcast Details

Marinus will host a conference call and webcast with slides at 4:30 p.m. ET today. Shareholders and other interested parties may participate in the call by dialing (833) 952-1504 (domestic) or +1 2367142114 (international) and referencing conference ID number 4640939. The live webcast can be accessed here and on the investor page of Marinus’ website. A replay will be available on Marinus’ website approximately two hours after completion of the event and will be archived for up to 30 days.

About Tuberous Sclerosis Complex (TSC)

Tuberous sclerosis complex (TSC) is a rare genetic disorder that affects many organs and causes non-malignant tumors in the brain, skin, kidney, heart, eyes, and lungs. The condition is caused by inherited mutations in either the TSC1 gene or the TSC2 gene. TSC occurs with a frequency of 1:6,000 and a mutation is found in 85% of patients. While the disease phenotype can be extremely variable, neurologic manifestations such as epilepsy can be seen in up to 90% of TSC patients. TSC is a leading cause of genetic epilepsy, often occurring in the first year of life as either focal seizures or infantile spasms. There are currently limited approved treatments for TSC.

About Ganaxolone

Ganaxolone, a positive allosteric modulator of GABA_A receptors, is an investigational product being developed in intravenous and oral formulations intended to maximize therapeutic reach to adult and pediatric patient populations in both acute and chronic care settings. Ganaxolone exhibits anti-seizure and anti-anxiety activity via its effects on synaptic and extrasynaptic GABA_A receptors. Ganaxolone has been studied in more than 1,800 pediatric and adult subjects across various indications at therapeutically relevant dose levels and treatment regimens for up to more than two years.

About Marinus Pharmaceuticals

Marinus Pharmaceuticals, Inc. is a pharmaceutical company dedicated to the development of innovative therapeutics to treat seizure disorders. Ganaxolone is a positive allosteric modulator of GABA_A receptors that acts on a well-characterized target in the brain known to have anti-seizure, antidepressant and anti-anxiety effects. Ganaxolone is being developed in IV and oral dose formulations intended to maximize therapeutic reach to adult and pediatric patient populations in both acute and chronic care settings. Marinus completed the first ever Phase 3 pivotal trial in children with CDKL5 deficiency disorder last year, is planning to conduct a Phase 3 trial in tuberous sclerosis complex, and a Phase 3 trial in refractory status epilepticus is ongoing. For more information visit www.marinuspharma.com.

Forward-Looking Statements

To the extent that statements contained in this press release are not descriptions of historical facts regarding Marinus, they are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “may”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “believe”, and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. Examples of forward-looking statements contained in this press release include, among others, statements regarding our expected clinical development plans, enrollment in our clinical trials, trial design, and regulatory communications and submissions for ganaxolone, and the timing thereof, including our plans to begin enrollment in our Phase 3 clinical trial for TSC during Q4 2021; our expectations and beliefs regarding the FDA with respect to our product candidates; and the potential safety and efficacy of ganaxolone, as well as its therapeutic potential in a number of indications.

Forward-looking statements in this press release involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, uncertainties and delays relating to the design, enrollment, completion, and results of clinical trials; unanticipated costs and expenses; early clinical trials may not be indicative of the results in later clinical trials; clinical trial results may not support regulatory approval or further development in a specified indication or at all; actions or advice of regulatory agencies may affect the design, initiation, timing, continuation and/or progress of clinical trials or result in the need for additional clinical trials; our ability to obtain and maintain regulatory approval for our product candidate; our ability to obtain, maintain, protect and defend intellectual property for our product candidates; the potential negative impact of third party patents on our or our collaborators’ ability to commercialize ganaxolone; delays, interruptions or failures in the manufacture and supply of our product candidate; the size and growth potential of the markets for our product candidates, and our ability to service those markets; our cash and cash equivalents may not be sufficient to support our operating plan for as long as anticipated; our expectations, projections and estimates regarding expenses, future revenue, capital requirements, and the availability of and the need for additional financing; our ability to obtain additional funding to support our clinical development programs; our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators; the rate and degree of market acceptance of our product candidates; the potential for Orion to breach its collaboration with us or terminate the collaboration agreement in accordance with its terms; the potential for Orion to recoup a percentage of the upfront fee depending on the additional pre-clinical testing expected to be completed in Q1 2022; the effect of the COVID-19 pandemic on our business, the medical community, regulators and the global economy; and the availability or potential availability of alternative products or treatments for conditions targeted by us that could affect the availability or commercial potential of our product candidate. This list is not exhaustive and these and other risks are described in our periodic reports, including the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed with or furnished to the Securities and Exchange Commission. and available at www.sec.gov. Any forward-looking statements that we make in this press release speak only as of the date of this press release. We assume no obligation to update forward-looking statements whether as a result of new information, future events or otherwise, after the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210817005849/en/

Company

Sasha Damouni Ellis

Vice President, Corporate Affairs & Investor Relations

Marinus Pharmaceuticals, Inc.

484-253-6792

[email protected]

KEYWORDS: United States North America Pennsylvania

INDUSTRY KEYWORDS: Science Biotechnology Research Pharmaceutical Health FDA Mental Health Clinical Trials

MEDIA:

Logo

August 17, 2021 4:04 pm

Cue Biopharma Reports Second Quarter 2021 Results, Recent Data Updates of CUE-101 Phase 1 Dose Escalation and Expansion Study, Platform Progress and Business Highlights

CAMBRIDGE, Mass., Aug. 17, 2021 (GLOBE NEWSWIRE) — Cue Biopharma, Inc. (Nasdaq: CUE), a clinical-stage biopharmaceutical company engineering a novel class of injectable biologics to selectively engage and modulate targeted T cells within the patient’s body, provided a business and clinical progress update for the second quarter 2021.

“During the second quarter 2021, we continued to make significant clinical progress advancing our IL-2 based CUE-100 series, represented by the Phase 1a/1b monotherapy trial of CUE-101 and combination-therapy trial with KEYTRUDA® (pembrolizumab). In addition, we have continued with the development and expansion of our pipeline programs and technology platforms, and also enhanced our capital resources,” said Daniel Passeri, chief executive officer of Cue Biopharma. “Importantly, we recently reported a confirmed partial response (PR) in a patient from our ongoing Phase 1 monotherapy dose escalation trial of CUE-101 and look forward to providing further details on this patient response during the quarterly update call. Our Phase 1 monotherapy dose escalation and expansion study is now in dose expansion and our combination study with pembrolizumab continues in dose escalation. During the call, we will also highlight the development implications for CUE-101 and potential of the CUE-100 series and Immuno-STAT™ platform.”

Kerri-Ann Millar, chief financial officer of Cue Biopharma, added, “We continue to be in a solid financial position and deployed our at-the-market (ATM) common stock facility during the second quarter to extend the anticipated operational runway further into the fourth quarter of 2022.”

Recent News & Business Updates

Reported first patient dosed in the Part B expansion of its CUE-101 Phase 1 monotherapy clinical trial in HPV+ second line and beyond head and neck squamous cell carcinoma (HNSCC), at the recommended Phase 2 dose of 4mg/kg.
Presented preclinical data on CUE-401, the Company’s first autoimmune drug product candidate from the CUE-400 series, at the 2021 Federation of Clinical Immunology Societies (FOCIS) Annual Meeting.

Second Quarter 2021 Financial Results

The Company reported collaboration revenue of approximately $2.7 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively. The increase in collaboration revenue of $1.6 million was primarily due to additional research and development and contract manufacturing activities in preparation of an investigational new drug (IND) filing for its second drug product candidate from the IL-2 based CUE-100 series, CUE-102, planned for the first half of 2022.

Research and development expenses were $8.8 million and $8.1 million for the three months ended June 30, 2021 and 2020, respectively. The increase in research and development expenses of $0.7 million was primarily due to an increase in laboratory and drug substance manufacturing costs and clinical expenses.

General and administrative expenses were $4.3 million and $3.9 million for the three months ended June 30, 2021 and 2020, respectively. The increase in general and administrative expense of $0.4 million was primarily due to an increase in stock-based compensation expense and legal fees incurred in the second quarter of 2021 as compared to the same period in 2020.

Cue Biopharma, Inc.
Selected Consolidated Statement of Operations Data
(in thousands)
		Three Months Ended June 30,
		2021			2020
Collaboration revenue	$	2,739		$	1,075
Operating expenses:
General and administrative		4,280			3,898
Research and development		8,762			8,119
Total operating expenses		13,042			12,017
Loss from operations	$	(10,303	)	$	(10,942	)
Other income:
Interest income, net		24			109
Net Loss	$	(10,279	)	$	(10,833	)
Net loss per common share – basic and diluted	$	(0.33	)	$	(0.38	)
Weighted average common shares outstanding – basic and diluted		31,233,794			28,221,537

Cue Biopharma, Inc.
Selected Consolidated Balance Sheet Data
(in thousands)
		June 30, 2021		December 31, 2020

Cash and cash equivalents	$	73,920	$	74,866
Marketable securities		–		10,003
Total current assets	$	79,677	$	87,527
Working capital	$	63,004	$	71,212
Total assets	$	89,672	$	99,533
Total stockholders’ equity	$	72,910	$	78,911

Webcast Details
Tuesday, August 17, 2021 at 4:30 p.m. EDT
Investors:	877-407-9208
International:	201-493-6784
Conference ID:	13721829
Webcast:	http://public.viavid.com/index.php?id=145891

About Cue Biopharma
Cue Biopharma, a clinical-stage biopharmaceutical company, is engineering a novel class of injectable biologics to selectively engage and modulate targeted T cells directly within the patient’s body to transform the treatment of cancer, infectious disease and autoimmune disease. The company’s proprietary Immuno-STAT™ (Selective Targeting and Alteration of T cells) platform, is designed to harness the body’s intrinsic immune system without the need for ex vivo manipulation.

Headquartered in Cambridge, Massachusetts, the company is led by an experienced management team and independent Board of Directors with deep expertise in immunology and immuno-oncology as well as the design and clinical development of protein biologics.

For more information, visit https://www.cuebiopharma.com and follow us on Twitter at https://twitter.com/CueBiopharma.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are intended to be covered by the safe harbor created by those sections. Such forward-looking statements include, but are not limited to, those regarding: the company’s plans to submit an IND for CUE-102; the company’s estimate of the period in which it expects to have cash to fund its operations; the company’s belief that the Immuno-STAT platform stimulates targeted immune modulation through the selective engagement of disease-relevant T cells; and the company’s business strategies, plans and prospects. Forward-looking statements, which are based on certain assumptions and describe the company’s future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms, although not all forward-looking statements contain these identifying words. All statements other than statements of historical facts included in this press release regarding the company’s strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Important factors that could cause the company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the company’s limited operating history, limited cash and a history of losses; the company’s ability to achieve profitability; potential setbacks in the company’s research and development efforts including negative or inconclusive results from its preclinical studies, its ability to secure required U.S. Food and Drug Administration (“FDA”) or other governmental approvals for its product candidates and the breadth of any approved indication; adverse effects caused by public health pandemics, including COVID-19, including possible effects on the company’s trials; negative or inconclusive results from the company’s clinical trials or preclinical studies or serious and unexpected drug-related side effects or other safety issues experienced by participants in clinical trials; delays and changes in regulatory requirements, policy and guidelines including potential delays in submitting required regulatory applications to the FDA; the company’s reliance on licensors, collaborators, contract research organizations, suppliers and other business partners; the company’s ability to obtain adequate financing to fund its business operations in the future; operations and clinical the company’s ability to maintain and enforce necessary patent and other intellectual property protection; competitive factors; general economic and market conditions and the other risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of the company’s most recently filed Annual Report on Form 10-K and any subsequently filed Quarterly Report(s) on Form 10-Q. Any forward-looking statement made by the company in this press release is based only on information currently available to the company and speaks only as of the date on which it is made. The company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Investor Contact

George B. Zavoico, Ph.D.
VP, Investor Relations & Corporate Development
Cue Biopharma, Inc.
[email protected]

Media Contact

Darren Opland, Ph.D.
LifeSci Communications
[email protected]

August 17, 2021 4:04 pm

Cree Reports Financial Results for the Fourth Quarter of Fiscal Year 2021

Cree Reports Financial Results for the Fourth Quarter of Fiscal Year 2021

DURHAM, N.C.–(BUSINESS WIRE)–
Cree, Inc. (Nasdaq: CREE) today announced revenue from continuing operations of $145.8 million for its fourth quarter of fiscal 2021, ended June 27, 2021. This represents a 35% increase compared to revenue from continuing operations of $108.4 million reported for the fourth quarter of fiscal 2020, and a 6% increase compared to the third quarter of fiscal 2021. GAAP net loss from continuing operations for the fourth quarter of fiscal 2021 was $145.2 million, or $1.26 per diluted share, compared to GAAP net loss from continuing operations of $44.2 million, or $0.41 per diluted share, for the fourth quarter of fiscal 2020. On a non-GAAP basis, net loss from continuing operations for the fourth quarter of fiscal 2021 was $26.9 million, or $0.23 per diluted share, compared to non-GAAP net loss from continuing operations for the fourth quarter of fiscal 2020 of $28.9 million, or $0.27 per diluted share.

GAAP net loss for the fourth quarter of fiscal 2021 includes a $73.9 million expense related to a modification of Cree’s long-range plan regarding a portion of its Durham, North Carolina campus originally intended for expanding Cree’s LED production capacity that Cree had considered using to expand the manufacturing footprint for its silicon carbide materials product line. After Cree completes its current ongoing silicon carbide materials production capacity expansion in Durham, Cree now plans on further expansion of its silicon carbide materials production capacity outside of the Durham campus. As a result, the Company has decided it will no longer complete the construction of certain buildings on the Durham campus. The expense was recorded upon an updated valuation of the property.

Additionally, in the fourth quarter of fiscal 2021 subsequent to the sale of the LED Products business unit, Cree liquidated its approximately 3.3% common stock ownership interest in ENNOSTAR and received net proceeds of $66.4 million.

For fiscal year 2021, Cree reported revenue from continuing operations of $525.6 million, which represents a 12% increase when compared to revenue from continuing operations of $470.7 million for fiscal 2020. GAAP net loss from continuing operations was $341.3 million, or $3.04 per diluted share. This compares to a GAAP net loss from continuing operations of $197.6 million, or $1.83 per diluted share, for fiscal 2020. On a non-GAAP basis, net loss from continuing operations for fiscal year 2021 was $104.7 million, or $0.93 per diluted share, compared to non-GAAP net income from continuing operations of $76.6 million, or $0.71 per diluted share, for fiscal 2020.

“We delivered strong revenue during the quarter, as customers are ramping up production earlier and steeper than originally anticipated. We continued to grow and convert opportunities in our device pipeline, further establishing our industry leadership position in silicon carbide,” said Chief Executive Officer, Gregg Lowe. “We are on track to bring the world’s largest silicon carbide fab online in early calendar 2022, which uniquely positions us to capitalize on what we believe to be a multi-decade growth opportunity ahead.”

Business Outlook:

For its first quarter of fiscal 2022, Cree targets revenue in a range of $144 million to $154 million. GAAP net loss is targeted at $78 million to $82 million, or $0.67 to $0.70 per diluted share. Non-GAAP net loss is targeted to be in a range of $25 million to $29 million, or $0.21 to $0.25 per diluted share. Targeted non-GAAP net loss excludes $53 million of estimated expenses, net of tax, related to stock-based compensation expense, amortization or impairment of acquisition-related intangibles, factory optimization restructuring and start-up costs, net accretion on convertible notes, interest income from transaction-related note receivable and project, transformation, transaction and transition costs.

Quarterly Conference Call:

Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fourth quarter results and the fiscal first quarter 2022 business outlook, including significant factors and assumptions underlying the targets noted above.

The conference call will be available to the public through a live audio web broadcast via the Internet. For webcast details, visit Cree’s website at investor.cree.com/events.cfm.

Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available on Cree’s website at investor.cree.com/results.cfm.

About Cree, Inc.

Cree is an innovator of Wolfspeed® power and radio frequency (RF) semiconductors. Cree’s Wolfspeed product families include silicon carbide materials, power-switching devices and RF devices targeted for applications such as electric vehicles, fast charging inverters, power supplies, telecom and military and aerospace.

For additional product and Company information, please refer to www.cree.com.

Non-GAAP Financial Measures:

This press release highlights the Company’s financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges and expenses that are excluded from non-GAAP results. By publishing the non-GAAP measures, management intends to provide investors with additional information to further analyze the Company’s performance, core results and underlying trends. Cree’s management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.

Forward Looking Statements:

The schedules attached to this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause Cree’s actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our plans to grow the Wolfspeed business and our ability to achieve our targets for the first quarter of fiscal 2022 and beyond. Actual results could differ materially due to a number of factors, including but not limited to, risks relating to the ongoing COVID-19 pandemic, including the risk of new and different government restrictions that limit our ability to do business, the risk of infection in our workforce and subsequent impact on our ability to conduct business, the risk that our supply chain or customer demand may be negatively impacted, the risk posed by vaccine resistance and the emergence of fast-spreading variants, the risk that the COVID-19 pandemic will lead to a global recession and the potential for costs associated with our operations during the fiscal 2022 first quarter and future quarters to be greater than we anticipate as a result of all of these factors; issues, delays or complications in completing required transition activities to allow the Company’s now divested LED Products business to operate under the SMART Global Holdings, Inc. (SGH) portfolio of businesses after the closing, including incurring unanticipated costs to complete such activities; the risk that we may not obtain sufficient orders to achieve our targeted revenues; price competition in key markets; the risk that we may experience production difficulties that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs, lower yields and lower margins; our ability to lower costs; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity, including bringing on additional capacity on a timely basis to meet customer demand; the risk that longer manufacturing lead times may cause customers to fulfill their orders with a competitor’s products instead; product mix; risks associated with the ramp-up of production of our new products, and our entry into new business channels different from those in which we have historically operated; risks associated with our factory optimization plan and construction of a new device fabrication facility, including design and construction delays and cost overruns, issues in installing and qualifying new equipment and ramping production, poor production process yields and quality control, and potential increases to our restructuring costs; the risk that we or our channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; the risk that the economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response, may negatively impact demand for our products; risks related to international sales and purchases, including the risk that U.S. government actions with respect to Huawei Technologies Co. and its affiliates or other foreign customers or vendors may have a greater impact on our business and results of operations than our expectations; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the risk that our investments may experience periods of significant market value and interest rate volatility causing us to recognize fair value losses on our investment; the risk posed by managing an increasingly complex supply chain that has the ability to supply a sufficient quantity of raw materials, subsystems and finished products with the required specifications and quality; the risk we may be required to record a significant charge to earnings if our remaining goodwill or amortizable assets become impaired; risks relating to confidential information theft or misuse, including through cyber-attacks or cyber intrusion; our ability to complete development and commercialization of products under development; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with ongoing litigation; the risk that customers do not maintain their favorable perception of our brand and products, resulting in lower demand for our products; the risk that our products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs; risks associated with strategic transactions, including the possibility that we may not realize the full purchase price contemplated in connection with the sale of our former LED Products or Lighting Products business units; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10-K for the fiscal year ended June 28, 2020, and subsequent reports filed with the SEC. These forward-looking statements represent Cree’s judgment as of the date of this release. Except as required under the U.S. federal securities laws and the rules and regulations of the SEC, Cree disclaims any intent or obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

Cree^®and Wolfspeed^® are registered trademarks of Cree, Inc.





CREE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	Three months ended				Fiscal years ended
(in millions of U.S. Dollars, except per share data)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Revenue, net	$145.8		$108.4		$525.6		$470.7
Cost of revenue, net	102.0		79.3		361.0		312.2
Gross profit	43.8		29.1		164.6		158.5
Gross margin percentage	30	%	27	%	31	%	34	%

Operating expenses:
Research and development	45.1		39.5		177.8		152.0
Sales, general and administrative	46.6		46.0		181.6		181.7
Amortization or impairment of acquisition-related intangibles	3.6		3.6		14.5		14.5
Abandonment of long-lived assets	73.9		—		73.9		—
Loss (gain) on disposal or impairment of other assets	0.8		(0.2	)	1.6		1.5
Other operating expense	6.5		10.7		29.1		32.9
Operating loss	(132.7	)	(70.5	)	(313.9	)	(224.1	)
Operating loss percentage	(91	)%	(65	)%	(60	)%	(48	)%

Non-operating expense (income), net	7.4		(26.6	)	26.3		(18.5	)
Loss before income taxes	(140.1	)	(43.9	)	(340.2	)	(205.6	)
Income tax expense (benefit)	5.1		0.3		1.1		(8.0	)
Net loss from continuing operations	(145.2	)	(44.2	)	(341.3	)	(197.6	)
Net (loss) income from discontinued operations	(2.4	)	5.3		(181.2	)	7.0
Net loss	(147.6	)	(38.9	)	(522.5	)	(190.6	)
Net income from discontinued operations attributable to noncontrolling interest	—		0.6		1.4		1.1
Net loss attributable to controlling interest	($147.6	)	($39.5	)	($523.9	)	($191.7	)

Basic and diluted loss per share
Continuing operations	($1.26	)	($0.41	)	($3.04	)	($1.83	)
Net loss attributable to controlling interest	($1.28	)	($0.36	)	($4.66	)	($1.78	)

Weighted average shares – basic and diluted (in thousands)	115,616		108,585		112,346		107,935






CREE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions of U.S. Dollars)	June 27, 2021		June 28, 2020
Assets
Current assets:
Cash, cash equivalents, and short-term investments	$1,154.6		$1,239.7
Accounts receivable, net	95.9		72.4
Inventories	166.6		121.9
Income taxes receivable	6.4		6.6
Prepaid expenses	25.7		26.2
Other current assets	27.9		8.7
Current assets held for sale	1.6		1.3
Current assets of discontinued operations	—		116.0
Total current assets	1,478.7		1,592.8
Property and equipment, net	1,292.3		770.8
Goodwill	359.2		349.7
Intangible assets, net	140.5		156.9
Long-term receivables	138.4		—
Other long-term investments	—		55.9
Deferred tax assets	1.0		1.2
Other assets	35.5		33.6
Long-term assets of discontinued operations	1.2		270.1
Total assets	$3,446.8		$3,231.0

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$381.1		$189.8
Accrued contract liabilities	22.9		14.2
Income taxes payable	0.4		1.2
Finance lease liabilities	5.2		3.6
Other current liabilities	38.6		22.2
Current liabilities of discontinued operations	0.6		60.2
Total current liabilities	448.8		291.2

Long-term liabilities:
Convertible notes, net	823.9		783.8
Deferred tax liabilities	2.5		1.8
Finance lease liabilities – long-term	10.0		11.4
Other long-term liabilities	44.5		43.8
Long-term liabilities of discontinued operations	0.6		9.8
Total long-term liabilities	881.5		850.6

Shareholders’ equity:
Common stock	0.1		0.1
Additional paid-in-capital	3,676.8		3,106.2
Accumulated other comprehensive income	2.7		16.0
Accumulated deficit	(1,563.1	)	(1,039.2	)
Total shareholders’ equity	2,116.5		2,083.1
Noncontrolling interest from discontinued operations	—		6.1
Total equity	2,116.5		2,089.2
Total liabilities and shareholders’ equity	$3,446.8		$3,231.0






CREE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Fiscal years ended
(in millions of U.S. Dollars)	June 27, 2021		June 28, 2020
Operating activities:
Net loss	($522.5	)	($190.6	)
Net (loss) income from discontinued operations	(181.2	)	7.0
Net loss from continuing operations	(341.3	)	(197.6	)
Adjustments to reconcile net loss from continuing operations to cash used in operating activities:
Depreciation and amortization	120.9		97.1
Amortization of debt issuance costs and discount, net of capitalized interest	32.8		26.2
Gain on partial extinguishment of debt	—		(11.0	)
Stock-based compensation	53.2		47.2
Abandonment of long-lived assets	73.9		—
Loss on disposal or impairment of long-lived assets	5.0		4.5
Amortization of premium/discount on investments	6.9		1.7
Realized gain on sale of investments	(0.4	)	(1.5	)
Gain on equity investment	(8.3	)	(14.2	)
Foreign exchange gain on equity investment	(2.2	)	(2.2	)
Deferred income taxes	0.9		(0.5	)
Changes in operating assets and liabilities:
Accounts receivable, net	(23.5	)	(3.2	)
Inventories	(44.6	)	(8.5	)
Prepaid expenses and other assets	(20.0	)	(3.0	)
Accounts payable, trade	21.7		(7.2	)
Accrued salaries and wages and other liabilities	15.3		(24.9	)
Accrued contract liabilities	(2.8	)	5.5
Net cash used in operating activities of continuing operations	(112.5	)	(91.6	)
Net cash (used in) provided by operating activities of discontinued operations	(13.0	)	62.6
Cash used in operating activities	(125.5	)	(29.0	)
Investing activities:
Purchases of property and equipment	(570.5	)	(229.9	)
Purchases of patent and licensing rights	(5.9	)	(4.4	)
Proceeds from sale of property and equipment, including insurance proceeds	2.3		2.6
Purchases of short-term investments	(475.0	)	(821.4	)
Proceeds from maturities of short-term investments	428.3		460.6
Proceeds from sale of short-term investments	51.7		118.0
Reimbursement of property and equipment purchases from long-term incentive agreement	10.7		—
Proceeds from sale of business, net	43.7		—
Proceeds from sale of long-term investment	66.4		—
Net cash used in investing activities of continuing operations	(448.3	)	(474.5	)
Net cash used in investing activities of discontinued operations	(0.3	)	(12.4	)
Cash used in investing activities	(448.6	)	(486.9	)
Financing activities:
Proceeds from long-term debt borrowings	30.0		—
Payments on long-term debt borrowings, including finance lease obligations	(30.4	)	(145.1	)
Proceeds from issuance of common stock	539.7		76.4
Tax withholding on vested equity awards	(36.2	)	(16.9	)
Proceeds from convertible notes	—		575.0
Payments of debt issuance costs	—		(13.6	)
Refunds on incentive-related escrow deposits	1.5		—
Incentive-related refundable escrow deposits	—		(11.5	)
Commitment fee on long-term incentive agreement	(0.5	)	—
Cash provided by financing activities	504.1		464.3
Effects of foreign exchange changes on cash and cash equivalents	0.2		(0.1	)
Net change in cash and cash equivalents	(69.8	)	(51.7	)
Cash and cash equivalents, beginning of period	448.8		500.5
Cash and cash equivalents, end of period	$379.0		$448.8

Cree, Inc.

Non-GAAP Measures of Financial Performance

To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, Cree uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross margin, non-GAAP operating (loss) income, non-GAAP non-operating income (expense), net, non-GAAP net (loss) income from continuing operations, non-GAAP diluted (loss) earnings per share from continuing operations and free cash flow.

Reconciliation to the nearest GAAP measure of all historical non-GAAP measures included in this press release can be found in the tables included with this press release.

Non-GAAP measures presented in this press release are not in accordance with or an alternative to measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cree’s results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate Cree’s results of operations in conjunction with the corresponding GAAP measures.

Cree believes that these non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, enhance investors’ and management’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future, including cash flows available to pursue opportunities to enhance shareholder value. In addition, because Cree has historically reported certain non-GAAP results to investors, the Company believes the inclusion of non-GAAP measures provides consistency in the Company’s financial reporting.

For its internal budgeting process, and as discussed further below, Cree’s management uses financial statements that do not include the items listed below and the income tax effects associated with the foregoing. Cree’s management also uses non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the Company’s financial results.

Cree excludes the following items from one or more of its non-GAAP measures when applicable:

Stock-based compensation expense. This expense consists of expenses for stock options, restricted stock, performance stock awards and employee stock purchases through its Employee Stock Purchase Program. Cree excludes stock-based compensation expenses from its non-GAAP measures because they are non-cash expenses that Cree does not believe are reflective of ongoing operating results.

Amortization or impairment of acquisition-related intangibles. Cree incurs amortization or impairment of acquisition-related intangibles in connection with acquisitions. Cree excludes these items because they arise from Cree’s prior acquisitions and have no direct correlation to the ongoing operating results of Cree’s business.

Abandonment of long-lived assets. In the fourth quarter of fiscal 2021, Cree modified its long-range plan regarding a portion of its Durham, North Carolina campus. As a result, Cree decided it will no longer complete the construction of certain buildings on the Durham campus. The carrying value of the abandoned assets has been reduced to an estimated salvage value. Cree does not believe this expense is reflective of ongoing operating results.

Factory optimization restructuring. In May 2019, the Company started a significant, multi-year factory optimization plan to be anchored by a state-of-the-art, automated 200mm silicon carbide device fabrication facility. In September 2019, the Company announced the intent to build the new fabrication facility in Marcy, New York to complement the factory expansion underway at its U.S. campus headquarters in Durham, North Carolina. As part of the plan, the Company will incur restructuring costs associated with the movement of equipment as well as disposals on certain long-lived assets. Because these charges relate to assets which had been retired prior to the end of their estimated useful lives, Cree does not believe these costs are reflective of ongoing operating results. Similarly, Cree does not consider the realized net losses on sale of assets relating to the restructuring to be reflective of ongoing operating results.

Severance and other restructuring. These costs relate to the Company’s realignment of certain resources as part of the Company’s transition to a more focused semiconductor company. Cree does not believe these costs are reflective of ongoing operating results.

Project, transformation and transaction costs. The Company has incurred professional services fees and other costs associated with completed and potential acquisitions and divestitures, as well as internal transformation programs focused on optimizing the Company’s administrative processes. Cree excludes these items because Cree believes they are not reflective of the ongoing operating results of Cree’s business.

Factory optimization start-up costs. As part of the factory optimization plan, the Company has incurred and will incur start-up costs. Cree does not believe these costs are reflective of ongoing operating results. In fiscal 2022, these costs will include an estimated $80.0 million of start-up and pre-production related costs associated with the Company ramping production at its new device fabrication facility in Marcy, New York.

Non-restructuring related executive severance. The Company has incurred costs in conjunction with the termination of key executive personnel. Cree excludes these items because Cree believes they have no direct correlation to the ongoing operating results of Cree’s business.

Transition service agreement costs. As a result of the sale of the Lighting Products business unit, the Company is providing certain information technology services under a transition services agreement which will not be reimbursed. Cree excludes the costs of these services because Cree believes they are not reflective of the ongoing operating results of Cree’s business.

Net changes in fair value of our ENNOSTAR (formerly Lextar) investment. In January 2021, Lextar Electronics Corporation (Lextar) completed its previously announced restructuring under a holding company named ENNOSTAR Inc. (ENNOSTAR) with EPISTAR Corporation via a share swap pursuant to which the Company received 0.275 shares of common stock of ENNOSTAR for each of share of Lextar common stock. The Company’s common stock ownership investment in ENNOSTAR was accounted for utilizing the fair value option. As such, changes in fair value were recognized in income, including fluctuations due to the exchange rate between the New Taiwan Dollar and the United States Dollar. Cree excludes the impact of these gains or losses from its non-GAAP measures because they are non-cash impacts that Cree does not believe are reflective of ongoing operating results. Additionally, Cree excludes the impact of dividends received on its ENNOSTAR investment as Cree does not believe it is reflective of ongoing operating results. From March 29, 2021 to April 16, 2021, the Company liquidated its common stock ownership interest in ENNOSTAR.

Interest income on transaction-related note receivable. In connection with the completed sale of the LED Products business unit to SGH and its wholly owned acquisition subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART), the Company received an unsecured promissory note issued to the Company by SGH in the amount of $125 million (the Purchase Price Note). Interest income on the Purchase Price Note is excluded because Cree believes it is not reflective of the ongoing operating results of Cree’s business.

Gain on partial debt extinguishment. In April 2020, the Company issued $575 million in convertible notes (the 2026 Notes) and used a portion of the net proceeds from the offering to repurchase approximately $150 million of the $575 million of convertible notes previously issued by the Company in August 2018 (the 2023 Notes). This repurchase resulted in a gain on extinguishment of convertible notes. Cree excludes this item because Cree believes it is not reflective of the ongoing operating results of Cree’s business.

Accretion on convertible notes, net of capitalized interest. The issuance of the Company’s convertible senior notes in August 2018 and April 2020 results in interest accretion on the convertible notes’ issue costs and discount. Cree considers these items as either limited in term or having no impact on the Company’s cash flows, and therefore has excluded such items to facilitate a review of current operating performance and comparisons to the Company’s past operating performance.

Loss (gain) on arbitration proceedings. In the third quarter of fiscal 2020, the Company won an arbitration proceeding for which we were awarded damages for a claim by us against a contract manufacturer. The arbitration victory resulted in a cash settlement beyond the legal fees incurred and was recognized as a gain in other income. Additionally, a small legal settlement was paid in the fourth quarter of fiscal 2020. Cree excludes these items because Cree believes it is not reflective of the ongoing operating results of Cree’s business.

Loss on Wafer Supply Agreement. In connection with the completed sale of the LED Products business unit to SMART, the Company entered into a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply CreeLED with certain silicon carbide materials and fabrication services for up to four years. Cree excludes the financial impact of this agreement because Cree believes it is not reflective of the ongoing operating results of Cree’s business.

Income tax adjustment. This amount reconciles GAAP tax (benefit) expense to a calculated non-GAAP tax (benefit) expense utilizing a non-GAAP tax rate. The non-GAAP tax rate estimates an appropriate tax rate if the listed non-GAAP items were excluded. This reconciling item adjusts non-GAAP net (loss) income from continuing operations to the amount it would be if the calculated non-GAAP tax rate was applied to non-GAAP (loss) income before income taxes.

Cree may incur some of these same expenses, including income taxes associated with these expenses, in future periods. In addition to the non-GAAP measures discussed above, Cree also uses free cash flow as a measure of operating performance and liquidity. Free cash flow represents operating cash flows from continuing operations less net purchases of property and equipment and patent and licensing rights. Cree considers free cash flow to be an operating performance and a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property and equipment, a portion of which can then be used to, among other things, invest in Cree’s business, make strategic acquisitions and strengthen the balance sheet. A limitation of the utility of free cash flow as a measure of operating performance and liquidity is that it does not represent the residual cash flow available to the company for discretionary expenditures, as it excludes certain mandatory expenditures such as debt service.






CREE, INC. Reconciliation of GAAP to Non-GAAP Measures (in millions of U.S. Dollars, except per share amounts and percentages) (unaudited)

Non-GAAP Gross Margin

	Three months ended				Fiscal years ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
GAAP gross profit	$43.8		$29.1		$164.6		$158.5
GAAP gross margin percentage	30	%	27	%	31	%	34	%
Adjustments:
Stock-based compensation expense	3.2		2.9		14.4		10.0
Factory optimization restructuring	—		0.5		1.0		0.5
Non-GAAP gross profit	$47.0		$32.5		$180.0		$169.0
Non-GAAP gross margin percentage	32	%	30	%	34	%	36	%




Non-GAAP Operating Loss

	Three months ended				Fiscal years ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
GAAP operating loss	($132.7	)	($70.5	)	($313.9	)	($224.1	)
GAAP operating loss percentage	(91	)%	(65	)%	(60	)%	(48	)%
Adjustments:
Stock-based compensation expense:
Cost of revenue, net	3.2		2.9		14.4		10.0
Research and development	2.0		2.0		8.7		8.0
Sales, general and administrative	7.7		7.0		30.1		30.8
Total stock-based compensation expense	12.9		11.9		53.2		48.8
Amortization or impairment of acquisition-related intangibles	3.6		3.6		14.5		14.5
Abandonment of long-lived assets	73.9		—		73.9		—
Factory optimization restructuring	0.9		5.3		8.6		9.0
Severance and other restructuring	—		(0.2	)	3.4		0.6
Project, transformation and transaction costs	4.0		1.4		10.7		12.2
Factory optimization start-up costs	2.0		4.5		8.0		9.5
Non-restructuring related executive severance	—		—		2.8		2.1
Transition service agreement costs	—		4.1		5.0		14.8
Total adjustments to GAAP operating loss	97.3		30.6		180.1		111.5
Non-GAAP operating loss	($35.4	)	($39.9	)	($133.8	)	($112.6	)
Non-GAAP operating loss percentage	(24	)%	(37	)%	(25	)%	(24	)%




Non-GAAP Non-Operating (Expense) Income, net

	Three months ended				Fiscal years ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
GAAP non-operating (expense) income, net	($7.4	)	$26.6		($26.3	)	$18.5
Adjustments:
Net changes in the fair value of ENNOSTAR (formerly Lextar) investment	0.8		(24.4	)	(10.5	)	(16.4	)
Interest income on transaction-related note receivable	(1.4	)	—		(1.4	)	—
Gain on partial debt extinguishment	—		(11.0	)	—		(11.0	)
Accretion on convertible notes, net of capitalized interest	6.7		9.0		32.8		26.2
Loss (gain) on arbitration proceedings	—		0.1		—		(7.9	)
Loss on Wafer Supply Agreement	0.7		—		0.8		—
Non-GAAP non-operating (expense) income, net	($0.6	)	$0.3		($4.6	)	$9.4




Non-GAAP Net Loss

	Three months ended				Fiscal years ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
GAAP net loss from continuing operations	($145.2	)	($44.2	)	($341.3	)	($197.6	)
Adjustments:
Stock-based compensation expense	12.9		11.9		53.2		48.8
Amortization or impairment of acquisition-related intangibles	3.6		3.6		14.5		14.5
Abandonment of long-lived assets	73.9		—		73.9		—
Factory optimization restructuring	0.9		5.3		8.6		9.0
Severance and other restructuring	—		(0.2	)	3.4		0.6
Project, transformation and transaction costs	4.0		1.4		10.7		12.2
Factory optimization start-up costs	2.0		4.5		8.0		9.5
Non-restructuring related executive severance	—		—		2.8		2.1
Transition service agreement costs	—		4.1		5.0		14.8
Net changes in the fair value of ENNOSTAR (formerly Lextar) investment	0.8		(24.4	)	(10.5	)	(16.4	)
Interest income on transaction-related note receivable	(1.4	)	—		(1.4	)	—
Gain on partial debt extinguishment	—		(11.0	)	—		(11.0	)
Accretion on convertible notes, net of capitalized interest	6.7		9.0		32.8		26.2
Loss (gain) on arbitration proceedings	—		0.1		—		(7.9	)
Loss on Wafer Supply Agreement	0.7		—		0.8		—
Total adjustments to GAAP net loss from continuing operations before provision for income taxes	104.1		4.3		201.8		102.4
Income tax adjustment – benefit (expense)	14.2		11.0		34.8		18.6
Non-GAAP net loss from continuing operations	($26.9	)	($28.9	)	($104.7	)	($76.6	)

Non-GAAP earnings per share from continuing operations
Non-GAAP diluted loss per share from continuing operations	($0.23	)	($0.27	)	($0.93	)	($0.71	)

Non-GAAP weighted average shares (in thousands)	115,616		108,585		112,346		107,935




Free Cash Flow

	Three months ended				Fiscal years ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Net cash used in operating activities from continuing operations	($53.6	)	($26.7	)	($112.5	)	($91.6	)
Less: PP&E spending, net of reimbursements from long-term incentive agreement	(165.8	)	(63.0	)	(559.8	)	(229.9	)
Less: Patents spending	(2.3	)	(1.6	)	(5.9	)	(4.4	)
Total free cash flow	($221.7	)	($91.3	)	($678.2	)	($325.9	)




CREE, INC. Business Outlook Unaudited GAAP to Non-GAAP Reconciliation

		Three Months Ended
(in millions of U.S. Dollars)		September 26, 2021
GAAP net loss outlook range		($82) to ($78)
Adjustments:
Stock-based compensation expense		18
Amortization or impairment of acquisition-related intangibles		4
Factory optimization restructuring and start-up costs		14
Accretion on convertible notes, net of capitalized interest		5
Interest income on transaction-related note receivable		(2)
Project, transformation, transaction and transition costs		3
Total adjustments to GAAP net loss before provision for income taxes		42
Income tax adjustment		11
Non-GAAP net loss outlook range		($29) to ($25)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210817005839/en/

Tyler Gronbach

Cree, Inc.

Vice President, Investor Relations

Phone: 919-407-4820

[email protected]

KEYWORDS: United States North America North Carolina

INDUSTRY KEYWORDS: Other Manufacturing Technology Mobile/Wireless Semiconductor Other Technology Telecommunications Manufacturing Hardware Electronic Design Automation

MEDIA:

Logo

August 17, 2021 4:04 pm

CDK Global, Inc. Reports Fourth Quarter and Fiscal Year 2021 Results

10th Consecutive Quarter of Auto Site Growth; Initiates Fiscal 2022 Guidance with Accelerating Revenue Growth

HOFFMAN ESTATES, Ill., Aug. 17, 2021 (GLOBE NEWSWIRE) — CDK Global, Inc. (NASDAQ: CDK) today announced financial results for its fiscal 2021 fourth quarter and year ended June 30, 2021.

“CDK closed out the year strong, with a tenth consecutive quarter of year-over-year growth in auto sites,” said Brian Krzanich, CDK chief executive officer. “The investments we have made in our product and service offerings are resonating with our customers, and we are excited to have added Roadster to the CDK family in the fourth quarter as we continue to enhance the product offerings we have to help drive customer success.”

“We saw a continued strength in our core business metrics and financial results in the quarter,” said Eric Guerin, CDK chief financial officer. “We had solid growth in both revenue and earnings in the quarter. Given the momentum in the business, we are well positioned for the coming year and are initiating fiscal 2022 guidance which shows accelerating revenue growth.”

Fourth Quarter and Fiscal 2021 Results

CDK Global, Inc.

($ in million except per share)

Q4 2021

Change from
Q4 2020

FY2021

Change from
FY2020

Revenue

420.1

+12

1,673.2

GAAP Earnings before income taxes

57.0

-25

284.7

-24

Non-GAAP Adjusted earnings before income taxes

113.9

+19

439.2

-4

GAAP Diluted earnings attributable to CDK per share

0.40

8.44

+396

Non-GAAP Adjusted diluted earnings attributable to CDK per share

0.66

+12

2.57

-7

GAAP effective tax rate

36.3

1,880 bps

33.2

410 bps

Non-GAAP effective tax rate

26.1

260 bps

26.1

160 bps

GAAP Net earnings attributable to CDK

49.4

1,034.3

+398

GAAP Net earnings attributable to CDK margin

11.8

-30 bps

61.8

4,910 bps

Non-GAAP Adjusted EBITDA

161.0

650.3

-4

Non-GAAP Adjusted EBITDA margin

38.3

-240 bps

38.9

-240 bps

The non-GAAP results and guidance presented in this press release represent non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are provided in the tables at the end of this press release.

Fiscal 2022 Annual Guidance

The fiscal 2022 guidance is provided on both a GAAP and Non-GAAP basis.


	CDK Global, Inc. – GAAP BASIS ($ in million except per share)	FY 2022 GAAP GUIDANCE

	Revenue	$1,780 – $1,820
	GAAP Diluted earnings attributable to CDK per share	$1.95 – $2.15
	GAAP Net earnings attributable to CDK	$235 – $265
	GAAP Effective tax rate	27.5% – 28.5%


	CDK Global, Inc. – Non-GAAP BASIS ($ in million except per share)	FY 2022 ADJ. GUIDANCE

	Revenue	$1,780 – $1,820
	Non-GAAP Adjusted diluted earnings attributable to CDK per share	$2.70 – $2.90
	Non-GAAP Adjusted EBITDA	$655 – $685
	Non-GAAP Adjusted effective tax rate	25.5% – 26.5%

Website Schedules

Other financial information, including financial statements and supplementary schedules presented on a GAAP and adjusted basis, and the schedule of quarterly revenue have been updated for the fourth quarter ended June 30, 2021 and will be posted to the CDK Investor Relations website, https://investors.cdkglobal.com in the “Financial Information” section.

Webcast and Conference Call

An analyst conference call will be held today, Tuesday, August 17, 2021 at 4:00 p.m. CT. A live webcast of the call will be available on a listen-only basis. To listen to the webcast, go to the CDK Investor Relations website, https://investors.cdkglobal.com and click on the webcast icon. A supplemental slide presentation will be available to download and print about 30 minutes before the webcast at the CDK Investor Relations website at https://investors.cdkglobal.com. CDK financial news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website.

About CDK Global

CDK Global (NASDAQ: CDK) is a leading provider of integrated data and technology solutions to the automotive, heavy truck, recreation and heavy equipment industries. Focused on enabling end-to-end, omnichannel retail commerce through open, agnostic technology, CDK Global provides solutions to dealers and original equipment manufacturers, serving approximately 15,000 retail locations in North America. CDK’s solutions connect people with technology by automating and integrating all parts of the dealership and buying process, including the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles. Visit cdkglobal.com.

Safe Harbor for Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Security Litigation Reform Act of 1995. All statements regarding the Company’s business outlook, including the Company’s GAAP and adjusted fiscal 2022 guidance; other plans; objectives; forecasts; goals; beliefs; business strategies; future events; business conditions; results of operations; financial position and business outlook and trends; and other information, may be forward-looking statements. Words such as “might,” “will,” “may,” “could,” “should,” “estimates,” “expects,” “continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future,” “assumes,” and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed, or implied by, these forward-looking statements.

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: the Company’s expectations regarding the continuing impacts on the Company’s business of the outbreak of the COVID-19 pandemic; the Company’s success in obtaining, retaining and selling additional services to customers; the pricing of the Company’s products and services; overall market and economic conditions, including interest rate and foreign currency trends, and technology trends; adverse global economic conditions and credit markets and volatility in the countries in which we do business; auto sales and related industry changes; competitive conditions; changes in regulation; changes in technology, security breaches, interruptions, failures and other errors involving the Company’s systems; availability of skilled technical employees/labor/personnel; the impact of new acquisitions and divestitures; employment and wage levels; availability of capital for the payment of debt service obligations or dividends or the repurchase of shares; any changes to the Company’s credit ratings and the impact of such changes on financing costs, rates, terms, debt service obligations, access to capital market and working capital needs; the impact of the Company’s indebtedness, access to cash and financing, and ability to secure financing, or financing at attractive rates; the onset of or developments in litigation involving contract, intellectual property, competition, shareholder, and other matters, and governmental investigations; and the ability of the Company’s significant stockholders and their affiliates to significantly influence the Company’s decisions or cause it to incur significant costs.

There may be other factors that may cause the Company’s actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements. The Company gives no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on its results of operations and financial condition. You should carefully read the factors described in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), including those discussed under “Part I, Item 1A. Risk Factors” in its Annual Report on Form 10-K for a description of certain risks that could, among other things, cause the Company’s actual results to differ from any forward-looking statements contained herein. These filings can be found on the Company’s website at https://investors.cdkglobal.com and the SEC’s website at www.sec.gov.

All forward-looking statements speak only as of the date of this press release even if subsequently made available by the Company on its website or otherwise. The Company disclaims any obligation to update or revise any forward-looking statements that may be made to reflect new information or future events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

Investor Relations Contact:	Media Contact:
Taze Rowe 847.485.4012 [email protected]	Tony Macrito 630.805.0782 [email protected]


CDK Global, Inc. Consolidated Statements of Operations (In millions, except per share amounts)

	Three Months Ended						Fiscal Year Ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenue	$	420.1		$	376.7		$	1,673.2		$	1,639.0

Expenses:
Cost of revenue	221.3			201.7			875.0			800.6
Selling, general and administrative expenses	97.1			79.6			360.9			338.7
Litigation provision	—			—			12.0			—
Total expenses	318.4			281.3			1,247.9			1,139.3

Operating earnings	101.7			95.4			425.3			499.7

Interest expense	(23.4		)	(35.0		)	(124.6		)	(144.1		)
Loss on extinguishment of debt	(23.4		)	—			(25.6		)	—
Loss from equity method investment	(2.5		)	(2.7		)	(27.3		)	(2.7		)
Other income, net	4.6			18.4			36.9			21.1

Earnings before income taxes	57.0			76.1			284.7			374.0

Provision for income taxes	(20.7		)	(13.3		)	(94.5		)	(108.8		)

Net earnings from continuing operations	36.3			62.8			190.2			265.2
Net earnings (loss) from discontinued operations	15.7			(16.0		)	852.8			(50.7		)
Net earnings	52.0			46.8			1,043.0			214.5
Less: net earnings attributable to noncontrolling interest	2.6			1.2			8.7			7.0
Net earnings attributable to CDK	$	49.4		$	45.6		$	1,034.3		$	207.5

Net earnings (loss) attributable to CDK per share – basic:
Continuing operations	$	0.27		$	0.51		$	1.48		$	2.13
Discontinued operations	0.13			(0.13		)	7.00			(0.42		)
Total net earnings attributable to CDK per share – basic	$	0.40		$	0.38		$	8.48		$	1.71

Net earnings (loss) attributable to CDK per share – diluted:
Continuing operations	$	0.27		$	0.50		$	1.48		$	2.12
Discontinued operations	0.13			(0.13		)	6.96			(0.42		)
Total net earnings attributable to CDK per share – diluted	$	0.40		$	0.37		$	8.44		$	1.70

Weighted-average common shares outstanding:
Basic	122.0			121.6			121.9			121.6
Diluted	123.1			122.1			122.6			122.1

The International Business is presented as discontinued operations and prior year amounts associated with the International Business have been reclassified as such. For additional information refer to Form 10-K, Item 8 of Part II, “Financial Statements and Supplementary Data,” Note 1 – Basis of Presentation and Note 4 – Discontinued Operations.


CDK Global, Inc. Consolidated Balance Sheets (In millions)

	June 30,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	157.0		$	80.8
Accounts receivable, net	236.4			242.0
Other current assets	168.9			148.4
Assets held for sale	—			214.4
Total current assets	562.3			685.6
Property, plant and equipment, net	71.8			96.7
Other assets	448.7			418.3
Goodwill	1,297.1			999.5
Intangible assets, net	332.7			229.5
Long-term assets held for sale	—			424.5
Total assets	$	2,712.6		$	2,854.1

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Current maturities of long-term debt and finance lease liabilities	$	7.1		$	20.7
Accounts payable	29.0			34.3
Accrued expenses and other current liabilities	188.1			188.3
Litigation liabilities	34.0			57.0
Accrued payroll and payroll-related expenses	81.5			52.5
Deferred revenue	28.6			44.6
Liabilities held for sale	—			129.4
Total current liabilities	368.3			526.8
Long-term liabilities:
Debt and finance lease liabilities	1,586.5			2,655.1
Deferred income taxes	111.4			76.4
Deferred revenue	40.4			39.4
Liabilities held for sale	—			40.6
Other liabilities	111.1			96.5
Total liabilities	$	2,217.7		$	3,434.8

Stockholders’ Equity (Deficit):
Preferred stock	—			—
Common stock	1.6			1.6
Paid-in capital	715.1			687.9
Retained earnings	1,997.4			1,045.5
Treasury stock, at cost	(2,306.0		)	(2,305.2		)
Accumulated other comprehensive income (loss)	72.7			(25.9		)
Total CDK stockholders’ equity (deficit)	480.8			(596.1		)
Noncontrolling interest	14.1			15.4
Total stockholders’ equity (deficit)	494.9			(580.7		)
Total liabilities and stockholders’ equity (deficit)	$	2,712.6		$	2,854.1


CDK Global, Inc. Consolidated Statements of Cash Flows (In millions)

	Fiscal Year Ended
	June 30,
	2021			2020
Cash Flows from Operating Activities:
Net earnings	$	1,043.0		$	214.5
Less: net earnings (loss) from discontinued operations	852.8			(50.7		)
Net earnings from continuing operations	190.2			265.2
Adjustments to reconcile net earnings from continuing operations to cash flows provided by operating activities, continuing operations:
Depreciation and amortization	98.7			91.7
Asset impairment	4.1			—
Loss on extinguishment of debt	25.6			—
Loss from equity method investment	27.3			2.7
Deferred income taxes	30.8			4.9
Stock-based compensation expense	43.0			19.2
Other	6.9			23.1
Changes in assets and liabilities, net of effect from acquisitions of businesses:
Accounts receivable	13.8			(27.0		)
Other assets	(65.2		)	(47.3		)
Accounts payable	(6.3		)	(3.9		)
Accrued expenses and other liabilities	(27.4		)	(1.0		)
Net cash flows provided by operating activities, continuing operations	341.5			327.6
Net cash flows provided by (used in) operating activities, discontinued operations	(124.8		)	47.5
Net cash flows provided by operating activities	216.7			375.1

Cash Flows from Investing Activities:
Capital expenditures	(20.6		)	(17.1		)
Capitalized software	(74.8		)	(57.0		)
Acquisitions of businesses, net of cash acquired	(359.5		)	—
Investment in certificates of deposit	—			(12.0		)
Proceeds from maturities of certificates of deposit	—			12.0
Purchases of investments	(5.0		)	(20.0		)
Net cash flows used in investing activities, continuing operations	(459.9		)	(94.1		)
Net cash flows provided by (used in) investing activities, discontinued operations	1,380.9			(14.2		)
Net cash flows provided by (used in) investing activities	921.0			(108.3		)

Cash Flows from Financing Activities:
Net (repayments of) proceeds from revolving credit facility	(15.0		)	15.0
Repayments of long-term debt and finance lease liabilities	(1,098.5		)	(271.2		)
Dividends paid to stockholders	(73.0		)	(72.9		)
Repurchases of common stock	(12.1		)	—
Proceeds from exercises of stock options	2.5			6.2
Withholding tax payments for stock-based compensation awards	(5.0		)	(6.2		)
Dividend payments to noncontrolling owners	(10.0		)	(6.7		)
Payments of debt financing costs	(2.7		)	(3.7		)
Acquisition-related payments	—			(5.3		)
Net cash flows used in financing activities, continuing operations	(1,213.8		)	(344.8		)
Net cash flows used in financing activities, discontinued operations	—			(1.1		)
Net cash flows used in financing activities	(1,213.8		)	(345.9		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash, including cash classified in current assets held for sale	21.1			(9.8		)

Net change in cash, cash equivalents, and restricted cash, including cash classified in current assets held for sale	(55.0		)	(88.9		)
Net change in cash classified in current assets held for sale	134.9			42.1
Net change in cash, cash equivalents and restricted cash	79.9			(46.8		)

Cash, cash equivalents, and restricted cash, beginning of period	97.3			144.1
Cash, cash equivalents, and restricted cash, end of period	$	177.2		$	97.3

CDK Global, Inc.

Consolidated Non-GAAP Financial Results

(In millions, except per share amounts)
(Unaudited)

As described below under the Non-GAAP Financial Measures section of this press release, we incorporated the following additional adjustments in our calculations of non-GAAP financial measures where management has deemed it appropriate to better reflect our underlying operations. These adjustments are inconsistent in amount and frequency and do not directly reflect our underlying operations. Therefore, management believes that excluding such information provides us with a better understanding of our ongoing operating performance across periods.

	Three Months Ended											Fiscal Year Ended
	June 30,						Change					June 30,						Change
	2021			2020			$			%		2021			2020			$			%
Revenue (a)	$	420.1		$	376.7		$	43.4		12	%	$	1,673.2		$	1,639.0		$	34.2		2	%

Earnings before income taxes (a)	$	57.0		$	76.1		$	(19.1	)	(25	)%	$	284.7		$	374.0		$	(89.3	)	(24	)%
Margin %	13.6		%	20.2		%	-660 bps					17.0		%	22.8		%	-580 bps
Stock-based compensation expense	11.3			6.0								43.0			19.2
Amortization of acquired intangible assets	5.2			3.9								17.6			15.3
Transaction and integration-related costs	1.5			1.0								5.1			9.5
Legal and other expenses related to regulatory and competition matters	0.7			2.8								16.3			19.4
Business process modernization program	4.7			4.1								14.1			16.1
Workplace optimization expenses	7.4			—								7.4			—
Officer transition expense	—			—								1.1			—
Net adjustments related to loss from equity method investment	2.7			2.2								24.3			2.2
Loss on extinguishment of debt	23.4			—								25.6			—
Adjusted earnings before income taxes (a) (b)	$	113.9		$	96.1		$	17.8		19	%	$	439.2		$	455.7		$	(16.5	)	(4	)%
Adjusted margin %		27.1	%		25.5	%	160 bps						26.2	%		27.8	%	-160 bps

	Three Months Ended										Fiscal Year Ended
	June 30,						Change				June 30,						Change
	2021			2020			$		%		2021			2020			$			%
Provision for income taxes (a)	$	20.7		$	13.3		$	7.4	56	%	$	94.5		$	108.8		$	(14.3	)	(13	)%
Effective tax rate	36.3		%	17.5		%					33.2		%	29.1		%
Income tax effect of pre-tax adjustments	9.7			4.9							28.0			19.9
Income tax effect for foreign earnings previously deemed indefinitely reinvested	—			4.4							—			(2.7		)
Change in deferred tax valuation allowance	(0.7		)	—							(7.7		)	(14.8		)
Impact of U.S tax reform	—			—							—			0.3
Adjusted provision for income taxes (a) (b)	$	29.7		$	22.6		$	7.1	31	%	$	114.8		$	111.5		$	3.3		3	%
Adjusted effective tax rate		26.1	%		23.5	%						26.1	%		24.5	%

	Three Months Ended										Fiscal Year Ended
	June 30,						Change				June 30,						Change
	2021			2020			$		%		2021			2020			$			%
Net earnings	$	52.0		$	46.8		$	5.2	11	%	$	1,043.0		$	214.5		$	828.5		386	%
Less: net earnings attributable to noncontrolling interest	2.6			1.2							8.7			7.0
Net earnings attributable to CDK	$	49.4		$	45.6		$	3.8	8	%	$	1,034.3		$	207.5		$	826.8		398	%
Net (earnings) loss from discontinued operations	(15.7		)	16.0							(852.8		)	50.7
Stock-based compensation expense	11.3			6.0							43.0			19.2
Amortization of acquired intangible assets (c)	5.1			3.8							17.2			14.9
Transaction and integration-related costs	1.5			1.0							5.1			9.5
Legal and other expenses related to regulatory and competition matters (c)	0.7			2.7							16.3			19.3
Business process modernization program	4.7			4.1							14.1			16.1
Workplace optimization expenses	7.4			—							7.4			—
Officer transition expense	—			—							1.1			—
Net adjustments related to loss from equity method investment	2.7			2.2							24.3			2.2
Loss on extinguishment of debt	23.4			—							25.6			—
Income tax effect on pre-tax adjustments	(9.7		)	(4.9		)					(28.0		)	(19.9		)
Income tax effect for foreign earnings previously deemed indefinitely reinvested	—			(4.4		)					—			2.7
Change in deferred tax valuation allowance	0.7			—							7.7			14.8
Impact of U.S tax reform	—			—							—			(0.3		)
Adjusted net earnings attributable to CDK (a) (b) (c)	$	81.5		$	72.1		$	9.4	13	%	$	315.3		$	336.7		$	(21.4	)	(6	)%

	Three Months Ended										Fiscal Year Ended
	June 30,						Change				June 30,						Change
	2021			2020			$		%		2021			2020			$			%
Diluted earnings attributable to CDK per share	$	0.40		$	0.37		$	0.03	8	%	$	8.44		$	1.70		$	6.74		396	%
Net (earnings) loss from discontinued operations	(0.13		)	0.13							(6.96		)	0.42
Stock-based compensation expense	0.09			0.05							0.35			0.16
Amortization of acquired intangible assets (c)	0.04			0.03							0.14			0.12
Transaction and integration-related costs	0.01			0.01							0.04			0.08
Legal and other expenses related to regulatory and competition matters (c)	0.01			0.03							0.13			0.15
Business process modernization program	0.04			0.03							0.12			0.13
Workplace optimization expenses	0.06			—							0.06			—
Officer transition expense	—			—							0.01			—
Net adjustments related to loss from equity method investment	0.02			0.02							0.20			0.02
Loss on extinguishment of debt	0.19			—							0.21			—
Income tax effect on pre-tax adjustments	(0.08		)	(0.04		)					(0.23		)	(0.16		)
Income tax effect for foreign earnings previously deemed indefinitely reinvested	—			(0.04		)					—			0.02
Change in deferred tax valuation allowance	0.01			—							0.06			0.12
Adjusted diluted earnings attributable to CDK per share (a) (b) (c)	$	0.66		$	0.59		$	0.07	12	%	$	2.57		$	2.76		$	(0.19	)	(7	)%

Weighted-average common shares outstanding:
Diluted	123.1			122.1							122.6			122.1

	Three Months Ended										Fiscal Year Ended
	June 30,						Change				June 30,						Change
	2021			2020			$		%		2021			2020			$			%
Net earnings attributable to CDK	$	49.4		$	45.6		$	3.8	8	%	$	1,034.3		$	207.5		$	826.8		398	%
Margin %	11.8		%	12.1		%	-30 bps				61.8		%	12.7		%	4,910 bps
Net earnings attributable to noncontrolling interest	2.6			1.2							8.7			7.0
Net (earnings) loss from discontinued operations	(15.7		)	16.0							(852.8		)	50.7
Provision for income taxes	20.7			13.3							94.5			108.8
Interest expense	23.4			35.0							124.6			144.1
Depreciation and amortization	27.6			25.0							98.7			91.7
Stock-based compensation expense	11.3			6.0							43.0			19.2
Transaction and integration-related costs	1.5			1.0							5.1			9.5
Legal and other expenses related to regulatory and competition matters	0.7			2.8							16.3			19.4
Business process modernization program	4.7			4.1							14.1			16.1
Workplace optimization expenses	7.4			—							7.4			—
Officer transition expense	—			—							1.1			—
Net adjustments related to loss from equity method investment	4.0			3.3							29.7			3.3
Loss on extinguishment of debt	23.4			—							25.6			—
Adjusted EBITDA (a) (b)	$	161.0		$	153.3		$	7.7	5	%	$	650.3		$	677.3		$	(27.0	)	(4	)%
Adjusted margin %	38.3		%	40.7		%	-240 bps					38.9	%	41.3		%	-240 bps

	Fiscal Year Ended
	June 30,
	2021			2020
Net cash flows provided by operating activities	$	216.7		$	375.1
Net cash flows provided by (used in) operating activities – discontinued operations	124.8			(47.5		)
Capital expenditures	(20.6		)	(17.1		)
Capitalized software	(74.8		)	(57.0		)
Change in restricted cash	(3.7		)	(6.8		)
Free cash flow from continuing operations (a) (b)	$	242.4		$	246.7

(a) Excludes amounts attributable to discontinued operations.

(b) Refer to the Non-GAAP Financial Measures section of this press release for additional information on our non-GAAP adjustments.

(c) The portion of expense related to noncontrolling interest has been removed from amortization of acquired intangible assets for the periods presented.

CDK Global, Inc.

Revenue Disaggregation

(In millions)

The following table presents revenue by category:

	Three Months Ended								Fiscal Year Ended
	June 30,				Change				June 30,				Change
	2021		2020		$		%		2021		2020		$			%
Subscription	$	329.6	$	305.1	$	24.5	8	%	$	1,313.9	$	1,306.0	$	7.9		1	%
On-site license and installation	4.6		3.3		1.3		39	%	9.2		10.8		(1.6		)	(15	)%
Transaction	48.6		34.4		14.2		41	%	174.9		155.0		19.9			13	%
Other	37.3		33.9		3.4		10	%	175.2		167.2		8.0			5	%
Total Revenue	$	420.1	$	376.7	$	43.4	12	%	$	1,673.2	$	1,639.0	$	34.2		2	%

CDK Global, Inc.

Consolidated Fiscal 2022 Guidance

(In millions, except per share amounts)
(Unaudited)

As described below under the Non-GAAP Financial Measures section of this press release, the fiscal 2022 guidance is provided on both a GAAP and a Non-GAAP basis. The table below includes these adjustments for fiscal 2022 guidance.

	Fiscal 2022
	Point Estimate (a)			Guidance
Revenue (b)	$	1,800		$1,780 – $1,820

Earnings before income taxes (b)	358
Stock-based compensation expense	64
Amortization of acquired intangible assets	26
Transaction and integration-related costs	2
Legal and other expenses related to regulatory and competition matters	10
Business process modernization program	6
Net adjustments related to loss from equity method investment	6
Adjusted earnings before income taxes (b)(c)	$	472

	Fiscal 2022
	Point Estimate (a)			Guidance
Provision for income taxes (b)	$	100
Effective tax rate	27.9		%	27.5% – 28.5%
Income tax effect of pre-tax adjustments	23
Adjusted provision for income taxes (b)(c)	$	123
Adjusted effective tax rate	26.1		%	25.5% – 26.5%

	Fiscal 2022
	Point Estimate (a)			Guidance
Net earnings	$	258
Less: net earnings attributable to noncontrolling interest	8
Net earnings attributable to CDK	$	250		$235 – $265
Stock-based compensation expense	64
Amortization of acquired intangible assets	26
Transaction and integration-related expenses	2
Legal and regulatory expenses related to competition matters	10
Business process modernization program	6
Net adjustments related to loss from equity method investment	6
Income tax effect of pre-tax adjustments	(23		)
Adjusted net earnings attributable to CDK (b)(c)	$	341



	Fiscal 2022
	Point Estimate (a)			Guidance
Diluted net earnings attributable to CDK per share	$	2.05		$1.95 – $2.15
Stock-based compensation expense	0.53
Amortization of acquired intangible assets	0.21
Transaction and integration-related expenses	0.02
Legal and regulatory expenses related to competition matters	0.08
Business process modernization program	0.05
Net adjustments related to loss from equity method investment	0.05
Income tax effect of pre-tax adjustments	(0.19		)
Adjusted diluted net earnings attributable to CDK per share (b)(c)	$	2.80		$2.70 – $2.90

	Fiscal 2022
	Point Estimate (a)			Guidance
Revenue (b)	$	1,800		$1,780 – $1,820

Net earnings attributable to CDK	$	250		$235 – $265
Margin	13.9		%
Net earnings attributable to noncontrolling interest	8
Provision for income taxes	100
Interest expense	88
Depreciation and amortization	130
Stock-based compensation expense	64
Transaction and integration-related costs	2
Legal and other expenses related to regulatory and competition matters	10
Business process modernization program	6
Net adjustments related to loss from equity method investment	12
Adjusted EBITDA (b)(c)	$	670		$655 – $685
Adjusted margin	37.2		%

(a) The point estimates are arbitrary amounts in the guidance ranges provided and are not meant to represent CDK’s forecast of actual results. They are used solely to provide a means to reconcile each non-GAAP guidance range to the most directly comparable GAAP measure in dollars and percentages, where applicable.

(b) Excludes amounts attributable to discontinued operations.

(c) Refer to the Non-GAAP Financial Measures section of this press release for additional information on our non-GAAP adjustments.

CDK Global, Inc.

Performance Metrics

(Unaudited)

CDK management regularly reviews the following key performance measures to evaluate business results and make operating and strategic decisions. These measures are intended to provide directional information regarding trends in our subscription revenue. The following table summarizes these measures for certain subscription revenue.

	For the three months ended
	September 30, 2019 (a)		December 31, 2019 (a)		March 31, 2020 (a)		June 30, 2020 (a)		September 30, 2020		December 31, 2020		March 31, 2021		June 30, 2021
Automotive
DMS Customer Sites (b)	8,957		8,974		8,948		8,951		8,966		8,997		9,042		9,062
Avg Revenue Per Site (c)	$	8,723	$	8,858	$	9,009	$	8,034	$	8,902	$	9,005	$	9,153	$	9,250

Adjacencies
DMS Customer Sites (b)	5,775		5,802		5,793		5,768		5,804		5,854		5,930		5,963
Avg Revenue Per Site (c)	$	1,733	$	1,764	$	1,784	$	1,661	$	1,799	$	1,822	$	1,849	$	1,883

Total CDK
DMS Customer Sites (b)	14,732		14,776		14,741		14,719		14,770		14,851		14,972		15,025
Avg Revenue Per Site (c)	$	5,984	$	6,076	$	6,171	$	5,533	$	6,114	$	6,179	$	6,268	$	6,326

(a) Average revenue per Dealer Management System (DMS) customer site has been updated for fiscal 2020 to reflect budgeted foreign exchange rates for fiscal 2021.

(b) DMS Customer Sites (end of period) – We track the number of retail customer sites with an active DMS that sell vehicles in the automotive and adjacent markets as an indicator of our opportunity set for generating subscription revenue. We consider a DMS to be active if we have billed a subscription fee for that solution during the last billing cycle in the period presented in the table. Adjacent markets include heavy truck dealerships that provide vehicles to the over-the-road trucking industry, recreation dealerships in the motorcycle, powersports, marine, and recreational vehicle industries, and heavy equipment dealerships in the agriculture and construction equipment industries.

(c) Average Revenue Per DMS Customer Site (monthly average for period) – Average revenue per DMS customer site is an indicator of the scope of adoption of our solutions by DMS customers. We monitor changes in this metric to measure the effectiveness of our strategy to deepen our relationships with our current customer base through upgrading and expanding solutions. We calculate average revenue per DMS customer site by dividing subscription revenue generated from our solutions, in an applicable quarterly period by the monthly average number of DMS customer sites in the same period, divided by three. The metric includes monthly billing directly associated with the reported DMS sites inclusive of DMS monthly fees, layered applications and data integration fees and excludes (i) subscription revenue generated from customers not included in our DMS customer site count and (ii) subscription revenue related to certain installation and training activities that is deferred then recognized as revenue over the life of the contract.

Non-GAAP Financial Measures

We disclose certain financial measures for our consolidated results based on accounting principles generally accepted in the United States of America (“GAAP”) and a non-GAAP basis. The non-GAAP financial measures disclosed should be viewed in addition to, and not as an alternative to, results prepared in accordance with GAAP. Our use of each of the following non-GAAP financial measures may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures, or reconcile them to the most directly comparable GAAP financial measures, in the same way.

Non-GAAP Financial Measure	Most Directly Comparable GAAP Financial Measure
Adjusted earnings before income taxes	Earnings before income taxes
Adjusted provision for income taxes	Provision for income taxes
Adjusted net earnings attributable to CDK	Net earnings attributable to CDK
Adjusted diluted earnings attributable to CDK per share	Diluted earnings attributable to CDK per share
Adjusted EBITDA	Net earnings attributable to CDK
Adjusted EBITDA margin	Net earnings attributable to CDK margin
Free cash flow from continuing operations	Net cash flows provided by operating activities

We use adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share, adjusted EBITDA and adjusted EBITDA margin internally to evaluate our performance on a consistent basis. These measures adjust for the impact of certain items that we believe are inconsistent in amount and frequency and do not directly reflect our underlying operations. By adjusting for these items, we believe we have more precise inputs for use as factors in (i) our budgeting process, (ii) financial and operational decisions, (iii) evaluations of ongoing operating performance on a consistent period-to-period basis and relative to our competitors, (iv) target leverage calculations, (v) debt covenant calculations, and (vi) incentive-based compensation decisions.

We believe our non-GAAP financial measures are helpful to users of the financial statements because they (i) provide investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permit investors to view performance using the same tools that management uses, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our ongoing operating results on a consistent basis. We believe that the presentation of these non-GAAP financial measures, when considered in addition to the corresponding most directly comparable GAAP financial measures and the reconciliations to those measures disclosed below, provides investors with a better understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

Adjusted Earnings before Income Taxes

Management has excluded the following items from adjusted earnings before income taxes for the periods presented:

Stock-based compensation expense included in cost of revenue and selling, general and administrative expenses.
Amortization of acquired intangible assets consists of non-cash amortization of intangible assets such as customer lists, purchased software, and trademarks acquired in connection with business combinations. We exclude the impact of amortization of acquired intangible assets because these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into our budgeting process, financial and operational decision making, target leverage calculations, and determination of incentive based pay.
Transaction and integration-related costs include: (i) legal, accounting, outside service fees, and other costs incurred in connection with assessment and integration of acquisitions and other strategic business opportunities; and (ii) post-close adjustments to acquisition-related contingent consideration, included in cost of revenue and selling, general and administrative expenses.
Legal and other expenses, related to regulatory and competition matters included in selling, general and administrative expenses, and litigation liabilities.
Business process modernization program designed to improve the way we do business for our customers through best-in-class product offerings, processes, governance and systems. The business process modernization program includes a comprehensive redesign in the way we go to market, including the quoting, contracting, fulfilling, and invoicing processes, and the systems and tools we use. The program is an investment to implement holistic business reform, including the design and implementation of a new ERP system. The expense is included in cost of revenue and selling, general and administrative expenses.
Workplace optimization expenses primarily include costs associated with the divestiture of non-strategic facilities as a result of assessing the post-COVID-19 pandemic real estate requirements to support our business operations During fiscal 2021, we recorded $4.5 million of operating lease and fixed asset impairment charges, and $2.9 million of employee-related termination costs. These expenses are included in cost of revenue and selling, general and administrative expenses in our Consolidated Statements of Operations.
Officer transition expense includes severance expense in connection with officer departures included in cost of revenue and selling, general and administrative expenses.
Net adjustments related to loss from equity method investment includes certain portions of earnings attributable to an equity interest owned by CDK and in fiscal year 2021, a $14.5 million impairment of an equity method investment included in loss from equity method investment.
Loss on extinguishment of debt related to the write-off of unamortized debt financing cost as a result of the repayment of indebtedness.

Adjusted Provision for Income taxes

Management has excluded the following items from adjusted provision for income taxes for the periods presented:

Income tax effect of pre-tax adjustments calculated at applicable statutory rates net of applicable permanent differences.
True-up of income tax expense for cumulative withholding tax associated with historical foreign earnings that are no longer considered indefinitely reinvested as of March 31, 2020. The change in assertion was made in response to the uncertainty related to the COVID-19 pandemic and its potential impact on CDK’s liquidity needs.
In fiscal 2021, a valuation allowance on a deferred tax asset for the tax basis difference of an equity method investment that is not expected to be realized. In fiscal 2020, a valuation allowance associated with a deferred tax asset for a capital loss carryforward which we do not expect to utilize.
In fiscal 2020, a one-time tax benefit for an adjustment of an accrual for foreign withholding taxes related to undistributed earnings as a result of the Tax Reform Act.

Adjusted Net Earnings Attributable to CDK and Adjusted Diluted Net Earnings Attributable to CDK per Share

For each respective presentation, management has excluded earnings (loss) from discontinued operations, net of taxes associated with the Company’s divestiture of the Digital Marketing Business which closed on April 21, 2020 and the sale of the International Business which closed on March 1, 2021, in addition to the items described above for adjusted earnings before income taxes and adjusted provision for income taxes from adjusted net earnings attributable to CDK and adjusted diluted net earnings attributable to CDK per share.

The portion of expense related to noncontrolling interest has been removed from amortization of acquired intangible assets and legal and other expenses related to regulatory and competition matters for the applicable periods.

Adjusted EBITDA

In addition to the items described above for adjusted earnings before income taxes, management has excluded the following items from net earnings attributable to CDK in order to calculate adjusted EBITDA for the periods presented:

Net earnings attributable to noncontrolling interest included in the financial statements.
Provision for income taxes included in the financial statements.
Interest expense included in the financial statements.
Depreciation and amortization expense included in the financial statements.

Amortization of acquired intangible assets is captured in depreciation and amortization expense. Net adjustments related to loss from equity method investment includes depreciation and amortization, attributable to an equity interest owned by CDK.

Free Cash Flow

We also review free cash flow from continuing operations as a measure of our ability to generate additional cash from our business operations. Free cash flow from continuing operations is defined as cash flow from operating activities less net cash flows used in operating activities attributable to discontinued operations, amounts paid for capital expenditures and capitalized software and change in restricted cash. Free cash flow from continuing operations should be considered in addition to, rather than as a substitute for consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. The change in restricted cash is funds held for clients before remittance to agencies for titling and registration services on behalf of those clients.

August 17, 2021 4:04 pm

Cheniere Energy, Inc. Announces Pricing of $750 Million Senior Secured Notes due 2039 by Cheniere Corpus Christi Holdings, LLC

Cheniere Energy, Inc. Announces Pricing of $750 Million Senior Secured Notes due 2039 by Cheniere Corpus Christi Holdings, LLC

HOUSTON–(BUSINESS WIRE)–
Cheniere Energy, Inc. (“Cheniere”) (NYSE American: LNG) announced today that its wholly owned subsidiary, Cheniere Corpus Christi Holdings, LLC (“CCH”), has priced its previously announced offering of $750 million principal amount of Senior Secured Notes due 2039 (the “CCH 2039 Notes”). The CCH 2039 Notes will bear interest at a rate of 2.742% per annum and will mature on December 31, 2039, with a weighted average life of approximately 12.5 years. The CCH 2039 Notes are priced at par and the closing of the offering is expected to occur on August 24, 2021. The CCH 2039 Notes will be fully amortizing according to a fixed sculpted amortization schedule with semi-annual payments of principal and interest.

CCH intends to use the proceeds from the offering to prepay a portion of the principal amount currently outstanding under CCH’s term loan credit facility (the “CCH Credit Facility”). The CCH 2039 Notes will be secured by a first priority security interest in substantially all of the assets of CCH and its subsidiaries and by a pledge of all of the equity interests in CCH and will rank pari passu in right of payment with all existing and future senior secured indebtedness of CCH, including borrowings under the CCH Credit Facility, its outstanding senior secured notes and its obligations under its working capital facility.

The offer of the CCH 2039 Notes has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and the CCH 2039 Notes may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act. This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale of these securities would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Forward-Looking Statements

This press release contains certain statements that may include “forward-looking statements” within the meanings of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical or present facts or conditions, included herein are “forward-looking statements.” Included among “forward-looking statements” are, among other things, (i) statements regarding Cheniere’s financial and operational guidance, business strategy, plans and objectives, including the development, construction and operation of liquefaction facilities, (ii) statements regarding expectations regarding regulatory authorizations and approvals, (iii) statements expressing beliefs and expectations regarding the development of Cheniere’s LNG terminal and pipeline businesses, including liquefaction facilities, (iv) statements regarding the business operations and prospects of third parties, (v) statements regarding potential financing arrangements, (vi) statements regarding future discussions and entry into contracts, (vii) statements relating to the amount and timing of share repurchases, and (viii) statements regarding the COVID-19 pandemic and its impact on our business and operating results. Although Cheniere believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Cheniere’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in Cheniere’s periodic reports that are filed with and available from the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Cheniere does not assume a duty to update these forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210817005857/en/

Cheniere Contacts

Investors

Randy Bhatia 713-375-5479

Media Relations

Eben Burnham-Snyder 713-375-5764

Jenna Palfrey 713-375-5491

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS: Oil/Gas Energy

MEDIA:

Logo

August 17, 2021 4:04 pm

Agios Announces FDA Acceptance and Priority Review of New Drug Application for Mitapivat for Treatment of Adults with Pyruvate Kinase Deficiency

— PDUFA Date Set for February 17, 2022 —

CAMBRIDGE, Mass., Aug. 17, 2021 (GLOBE NEWSWIRE) — Agios Pharmaceuticals, Inc. (NASDAQ: AGIO), a leader in the field of cellular metabolism developing and delivering innovative treatments for genetically defined diseases, today announced that the U.S. Food and Drug Administration (FDA) has accepted the company’s New Drug Application (NDA) for mitapivat for the treatment of adults with pyruvate kinase (PK) deficiency. The NDA was granted a Priority Review designation and has been given a Prescription Drug User Fee Act (PDUFA) action date of February 17, 2022, accelerating the review time from 10 months to six months from the day of filing acceptance. The FDA’s Priority Review designation is given to investigational medicines that treat a serious condition and offer significant improvements in safety or effectiveness.

“The acceptance of our NDA for mitapivat with priority review represents an important milestone on the path to expeditiously deliver the first potentially disease-modifying therapy for people with PK deficiency, a chronic, lifelong hemolytic anemia characterized by serious complications affecting multiple organs,” said Sarah Gheuens, M.D., Ph.D., senior vice president of clinical development and incoming chief medical officer at Agios. “We look forward to working with the FDA during the review process and will continue to execute on our global strategy to ensure we are well positioned to rapidly deliver mitapivat to patients and healthcare providers upon approval.”

Agios also submitted a marketing authorization application (MAA) to the European Medicines Agency (EMA) in June 2021 for mitapivat as a potential treatment for adults with PK deficiency. As announced on the company’s second quarter 2021 earnings call, the MAA passed validation which triggered the start of the MAA review procedure.

The NDA and MAA submissions are based on results from two pivotal studies, ACTIVATE and ACTIVATE-T, conducted in not regularly transfused and regularly transfused adults with PK deficiency, respectively. A full analysis of these data – including patient-reported outcomes (PRO) – was recently presented at the European Hematology Association (EHA) Virtual Congress. An extension study for adults with PK deficiency previously enrolled in ACTIVATE or ACTIVATE-T is ongoing and designed to evaluate the long-term safety, tolerability and efficacy of treatment with mitapivat.

Mitapivat is not currently approved for use in any country.

About PK Deficiency

Pyruvate kinase (PK) deficiency is a rare, inherited disease that presents as chronic hemolytic anemia, which is the accelerated destruction of red blood cells. The inherited mutations in PKR genes cause a deficit in energy within the red blood cell, as evidenced by lower PK enzyme activity, a decline in adenosine triphosphate (ATP) levels and a build-up of upstream metabolites, including 2,3-DPG (2,3-diphosphoglycerate).

PK deficiency is associated with serious complications, including gallstones, pulmonary hypertension, extramedullary hematopoiesis, osteoporosis and iron overload and its sequelae, which can occur regardless of the degree of anemia or transfusion burden. PK deficiency can also cause quality of life problems, including challenges with work and school activities, social life and emotional health. Current management strategies for PK deficiency, including red blood cell transfusions and splenectomy, are associated with both short- and long-term risks. There are no currently approved therapies for PK deficiency. For more information, please visit www.knowpkdeficiency.com.

Agios, in partnership with PerkinElmer Genomics, launched the Anemia ID program to offer no-cost genetic testing to eligible patients in the U.S with suspected hereditary anemias, including PK deficiency. The program was created in response to feedback from patients, advocates and physicians about the need for improved diagnosis to inform disease management decisions. To learn more, please visit www.AnemiaID.com.

Agios also launched the myAgios^® patient support services program for people living with pyruvate kinase (PK) deficiency and their caregivers. After enrolling in the program, patients and caregivers are connected with a dedicated Patient Support Manager (PSM) with a clinical background to provide tailored support, educational resources and opportunities to connect with other patients and caregivers in the community. To learn more or enroll, please visit www.myagios.com.

About Agios

Agios is focused on discovering and developing novel investigational medicines to treat genetically defined diseases through scientific leadership in the field of cellular metabolism. The company’s most advanced drug candidate is a first-in-class pyruvate kinase R (PKR) activator, mitapivat, that is currently being evaluated for the treatment of three distinct hemolytic anemias. In addition to its active late-stage clinical pipeline, Agios has multiple novel, investigational therapies in clinical and preclinical development. For more information, please visit the company’s website at www.agios.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those regarding Agios’ expectations for the FDA’s review of its NDA for mitapivat. The words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “plans,” “will,” “outlook” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are subject to numerous important factors, risks and uncertainties that may cause actual events or results to differ materially from Agios’ current expectations and beliefs. For example, the FDA’s acceptance of Agios’s NDA for mitapivat does not represent evaluation of the efficacy and safety of mitapivat, and is not a guarantee of approval. Management’s expectations and, therefore, any forward-looking statements in this press release could also be affected by risks and uncertainties relating to a number of other important factors, including: risks associated with the regulatory review process generally; the risk that the FDA may determine that the data included in the NDA are insufficient for approval and that the Company must conduct additional clinical trials, or nonclinical or other studies, before mitapivat can be approved; the risk that the results of previously conducted studies involving mitapivat will not be repeated or observed in ongoing or future studies or following commercial launch, if mitapivat is approved; and risks associated with the Company’s dependence on third parties with respect to regulatory matters for mitapivat. These and other risks are described in greater detail under the caption “Risk Factors” included in Agios’ public filings with the Securities and Exchange Commission, or SEC. While the list of factors presented here is considered representative, this list should not be considered to be a complete statement of all potential risks and uncertainties. Any forward-looking statements contained in this communication are made only as of the date hereof, and we undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so other than as may be required by law.

Contacts

Investors:

1AB
Steve Klass
[email protected]

Media:

Jessi Rennekamp, 857-209-3286
Director, Corporate Communications
[email protected]

August 17, 2021 4:04 pm

Krispy Kreme Reports Strong Second Quarter 2021 Results, Demonstrates Power of Omni-Channel Strategy

Krispy Kreme Reports Strong Second Quarter 2021 Results, Demonstrates Power of Omni-Channel Strategy

Net Revenue Growth of 43% and Organic Growth of 23%

Adjusted EBITDA Growth of 78%

Provides 2021 Guidance and Long-Term Financial Outlook

CHARLOTTE, N.C.–(BUSINESS WIRE)–
Krispy Kreme, Inc. (NASDAQ: DNUT) (“Krispy Kreme” or the “Company”) today reported financial results for the second quarter ended July 4, 2021 and issued full-year and long-term guidance. The Company reported 43% net revenue growth and organic growth of 23%, following strong performance across all business segments. On a two-year stack basis, organic revenues grew 16% since 2019.

“These results show the ongoing success from the implementation of our growth strategy,” said Mike Tattersfield, CEO of Krispy Kreme. “Our continued delivery of organic revenue growth and Adjusted EBITDA ahead of our expectations demonstrates that our omni-channel approach is working. The second quarter saw great continued momentum in the U.S. and Canada, enhanced by strong ongoing recovery in International. As a result, we are confident in our short and long-term growth targets as we continue to execute on our strategy, providing awesome fresh doughnuts as we become the most loved sweet treat brand in the world.”

*$ in millions, except per share data*	Q2 2021	% vs 2020	% vs 2019	First Half 2021	% vs 2020
Net Revenue	$349.2	42.6%	49.8%	$671.0	32.6%
Organic Revenue Growth^{(1) (2) (4)}	$55.0	22.5%	15.7%	$76.8	15.2%
GAAP Net Income/(Loss)	$(15.0)	(28.3)%	(69.6)%	$(15.4)	32.1%
Adjusted Net Income⁽²⁾	$20.5	254.1%	199.1%	$38.1	125.5%
Adjusted EBITDA⁽²⁾	$52.4	77.8%	64.5%	$98.8	49.9%
Adjusted EBITDA Margin⁽²⁾	15.0%	+300bps	+130bps	14.7%	+170bps
GAAP Diluted EPS	$(0.13)	(30.0)%	–	$(0.16)	15.8%
Adjusted Diluted EPS⁽²⁾	$0.13	225.0%	–	$0.25	108.3%
Global Points of Access⁽³⁾	9,575	69.9%	58.5%	–	–
*Notes:* *Organic revenue growth negatively impacted by $27.1 million in Q2 2021 and $57.9 million in the first half of 2021 due to exit of the legacy wholesale business.* *Non-GAAP figures – please refer to Reconciliation of Non-GAAP Financial Measures.* *Does not include legacy DSD doors as it only includes “fresh” points of access.* *Organic Revenue Growth “% vs 2019” figures are calculated as a two-year stack.*

Second Quarter Consolidated Results

Krispy Kreme’s second quarter results showcased strong, accelerating growth compared to both before and throughout COVID-19. Organic revenue grew 22.5% in the quarter, up from a 6.7% decline in the second quarter of 2020 and from 3.1% growth in the second quarter of 2019. Organic revenue growth was driven by our International segment, which performed stronger than prior to the COVID-19 pandemic, as well as by the ongoing transformation of our U.S. and Canada business into a fully-implemented Hub and Spoke model (each as defined below).

Adjusted Net Income grew 254.1% to $20.5 million in the quarter. We saw a GAAP net loss of $15.0 million, largely driven by initial public offering (“IPO”) costs, related-party interest expense, and incremental tax expenses associated with the United Kingdom corporate tax rate change and limitation of executive compensation expense deduction as a result of the IPO. Adjusted EBITDA grew 77.8% to $52.4 million, and Adjusted EBITDA margin of 15.0% also increased from 12.0% the previous year. GAAP diluted loss per share was $0.13 for the second quarter of 2021, with Adjusted Diluted EPS increasing to $0.13 from $0.04 in the second quarter of 2020.

Key Growth Drivers: Our second quarter in 2021 illustrates the continued and successful execution of our growth algorithm, centered on three key elements that combine to drive growth on both the top and bottom lines:

Increasing frequency through marketing, innovation, and ecommerce. Year to date, our marketing and innovation generated over 16.3 billion media impressions in the U.S. alone, largely driven by the success of our vaccine program and innovative product rollouts. In addition, ecommerce comprised 19% of total company shop sales, representing strong progress as we continue to expand our ecommerce platforms.

Increasing availability of our fresh doughnuts through new points of access as we execute on our omni-channel strategy. In the first half of the year alone, we have added 1,300 global points of access, driven by the transition from our legacy wholesale business to Delivered Fresh Daily (“DFD”). We continue to focus on adding approximately 800 to 1,000 points of access per year as we execute our omni-channel strategy.

Increasing profitability, largely driven by ongoing recovery in the mature International business and the continued application of the Hub and Spoke model in the U.S. and Canada. In the second quarter, we grew our Adjusted EBITDA margin by 300bps to 15.0%, and we are investing in additional labor and delivery routes in order to expand our points of access through DFD and other channels.

Second Quarter Business Update

Executing on our Transformation: Our transformation is driven by the implementation of an omni-channel strategy to reach more consumers where they are and drive revenue growth, and this strategy is supported by a capital-efficient Hub and Spoke distribution model that provides a route to market and powers profitability. Our Hot Light Theater Shops and Doughnut Factories serve as centralized production facilities (“Hubs”). From these Hubs, we deliver doughnuts to our fresh shops and DFD doors (“spokes”) through an integrated network of company-operated delivery routes, ensuring quality and freshness. Since the end of 2020, we have increased our Spokes per Hub in the U.S. and Canada to 45 from 37, and in International to 71 from 65.

In order to measure the effectiveness of our Hub and Spoke model, we use “Sales per Hub” on a trailing twelve month basis, which includes all revenue generated from a Hub and its associated spokes. In the U.S. and Canada, we reached average Sales per Hub of $3.6 million, up from $3.5 million in the full year 2020 and up from $3.2 million at the beginning of our transformation in 2019. In our International markets, where the Hub and Spoke model is most developed, Sales per Hub at the end of the second quarter was $8.0 million, up from $6.4 million in the full year 2020 and $8.3 million at the end of the second quarter of 2019. As we further extend the Hub and Spoke model into existing and new markets around the world, we expect to see this measure continue to grow.

Growing our Points of Access: We continue to add quality points of access across our network as we convert markets into fully implemented Hub and Spoke models. As of July 4, 2021, we had 9,575 global points of access, with approximately 1,726 Krispy Kreme and Insomnia Cookies branded shops and 7,849 DFD doors. 73% of our global system is currently controlled and operated by the Company. We plan to continue adding new locations and expanding our ecommerce and delivery platform in order to extend the availability of our products. For the first time, as of today, 100% of our doughnuts in U.S. and Canada are delivered fresh.

Growing the Branded Sweet Treat Line: Our Branded Sweet Treat Line continues to gain momentum as production ramps up, in-store merchandising improves, and store count grows. As a result, Branded Sweet Treats in the second quarter demonstrated strong sequential growth, which we expect to continue in the quarters ahead. Branded Sweet Treat item velocities are strong, leading to the addition of new grocery customers and expansion of shelf-spaces, number of items carried, and increased merchandising opportunities with current customers. In addition, higher volumes create production efficiencies that further our ability to sell into new channels and customers, and this virtuous cycle makes us confident in the line’s continued growth in the quarters ahead.

Continued Strength of Insomnia Cookies: Insomnia Cookies’ digital-first approach continues to drive strong performance, supporting meaningful organic growth. In the quarter, Insomnia Cookies opened its CookieLab flagship shop in Philadelphia, which is an extension of Insomnia Cookies’ R&D lab, designed for sweet treat lovers of all ages to enjoy cookie innovation and customization. As of today, Insomnia Cookies has opened 200 cookie shops, demonstrating the brand’s continued growth across the country.

Second Quarter Market Segment Results

U.S. and Canada: In U.S. and Canada, GAAP net revenue grew to $230.9 million from $184.3 million the previous year, driven by a combination of franchise acquisitions and organic growth of 3.9%. Growth was driven by the expansion of our DFD network, higher DFD sales per door, continued distribution growth of our Branded Sweet Treat Line, including recent expansion to new customers, and the strong performance of Insomnia Cookies. As we continue our transformation and implementation of the Hub and Spoke model, the transition to DFD from our legacy wholesale business continues to drive strong results. Excluding the impact of exiting the legacy wholesale business, U.S. and Canada organic growth was 18.6%.

U.S. and Canada Adjusted EBITDA grew to $28.3 million from $27.6 million the previous year, with the efficiency benefits of the DFD expansion, improving traffic in New York City, and Insomnia Cookies all contributing positively. When compared to the second quarter of 2020, at the height of the pandemic when our lobbies were sometimes closed, labor costs have increased, impacting overall EBITDA growth. As we continue to expand our Hub and Spoke model in more cities, we are also hiring more employees or “Krispy Kremers” than ever before, as we take on newly-acquired shops, add routes and transition to DFD.

International: In International, GAAP net revenue grew to $89.2 million from $34.4 million the previous year, with organic growth of 125.9%. Organic growth in the quarter was driven by restrictions being lifted in the United Kingdom, where COVID-19 had led to a nearly complete closure of the business in the prior year, as well as a strong DFD and ecommerce performance. Australia, New Zealand, Ireland, and Mexico also contributed to organic growth while lapping the second quarter of 2020, which was heavily impacted by COVID-19 disruptions.

International Adjusted EBITDA grew to $23.7 million from $1.6 million the previous year, driven primarily by strong revenue growth relative to the prior year, when our network was impacted by COVID-19 related closures. Revenue growth significantly outpaced expense growth, leading to higher margins consistent with these more established Hub and Spoke markets. We expect the International segment to continue contributing to strong EBITDA performance as the markets have rebounded well to match or exceed their performance prior to the pandemic.

Market Development: In Market Development, GAAP net revenue grew to $29.0 million from $26.3 million the previous year, with organic growth of 17.0%. GAAP net revenue growth was driven mainly by the acquisition of Krispy Kreme Japan in the fourth quarter of 2020, while organic growth was primarily driven by improved market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.

Market Development Adjusted EBITDA grew to $9.9 million from $7.9 million the previous year, driven by improved market conditions around the world.

IPO & Capital Structure

As of August 8, 2021, we have $118.7 million of cash, $738.7 million of bank debt, and $26.0 million of other debt-like items, for a total net debt of $646.0 million. The current share count is 167,112,953. With the proceeds of the IPO, our total net leverage ratio (defined below) is 3.6x, in line with our expectations, largely due to the payoff of a $500 million term loan facility.

On July 1, 2021, we successfully completed our IPO, in which we issued 29.4 million shares of common stock. Net proceeds of $460 million were received after the end of the second quarter and used primarily to pay down debt and reduce leverage. Subsequently, on August 2, 2021, our underwriters exercised their over-allotment option in part and purchased an additional 3.5 million shares, generating additional net proceeds of approximately $56 million, bringing total net IPO proceeds to $516 million. Because the IPO proceeds were paid after the end of the second quarter of 2021, there was a higher temporary net debt balance at the end of the quarter. However, the $345 million of related party notes were eliminated prior to the IPO and the majority of IPO proceeds received were utilized to pay down debt, which puts us in a favorable leverage position to continue our growth journey.

Financial Outlook

Krispy Kreme introduced the following guidance for the full year 2021:

Net Revenue of $1.34 billion to $1.38 billion (growth of 19.4% to 23.0%)
Organic Revenue growth of 10% to 12%
Adjusted EBITDA of $178 million to $185 million (growth of 22.4% to 27.2%)
Adjusted Net Income of $62 million to $68 million (growth of 46.4% to 60.6%)

The Company also introduced the following long-term outlook:

Organic Revenue growth of 9% to 11%
Adjusted EBITDA growth of 12% to 14%
Adjusted Net Income growth of 18% to 22%

We anticipate exceeding these long-term targets in the full year 2022.

We expect total net leverage to be under 3.0x in the next 12 months. In accordance with our dividend policy, we expect to pay an initial cash dividend of $0.035 per share for the quarter ending October 3, 2021. Thereafter, we expect to maintain a stable quarterly dividend until we reach our long-term net leverage policy of 2.0x.

Definitions

The following definitions apply to terms used throughout this press release:

Global Points of Access: Reflect all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, DFD doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments.
Hubs: Reflect locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period.
Sales Per Hub: Sales per Hub, also known as Fresh Revenues per Average Hub with Spokes, is calculated as the simple average of the number of Hubs with Spokes at the end of the current period and the number of Hubs with Spokes at the end of the prior year period, adjusted for the pro rata period of acquired Hubs with Spokes outstanding following the acquisition date. Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes during the period.
Fresh Revenues from Hubs with Spokes: Fresh revenues include product sales generated from our Doughnut Shop business (including ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the fresh revenues derived from those Hubs currently producing product for other shops and/or DFD doors, but excluding fresh revenues derived from those Hubs not currently producing product for other shops and/or DFD doors.
Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted EBITDA.

Conference Call

Krispy Kreme will host a public conference call at 5:00 PM Eastern Time today to discuss its results for the second quarter of 2021. The call can be accessed via webcast on the Company’s Investor Relations website at investors.krispykreme.com. An audio replay and transcript of the call will be made available on the Investor Relations website within 24 hours following the call.

About Krispy Kreme

Headquartered in Charlotte, N.C., Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in 30 countries through its unique network of doughnut shops, partnerships with leading retailers, and a rapidly growing ecommerce and delivery business. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities and the planet. Connect with Krispy Kreme Doughnuts at www.KrispyKreme.com, or on one of its many social media channels, including www.Facebook.com/KrispyKreme, and www.Twitter.com/KrispyKreme.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Non-GAAP Measures

This press release includes certain non-GAAP financial measures including organic revenue growth, Adjusted EBITDA, Adjusted Net Income, Fresh Revenue from Hubs with Spokes and Fresh Revenue per Average Hub, which differ from results using U.S. Generally Accepted Accounting Principles (“GAAP”). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto filed with the SEC.

To the extent that the Company provides guidance, it does so only on a non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as net income and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.


Krispy Kreme, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts and number of shares)

	Quarter Ended				Two Quarters Ended
	July 4, 2021 (13 weeks)		June 28, 2020 (13 weeks)		July 4, 2021 (26 weeks)		June 28, 2020 (26 weeks)
Net revenues
Product sales	$	341,223	$	236,608	$	654,808	$	488,144
Royalties and other revenues	7,963		8,364		16,187		18,044
Total net revenues	349,186		244,972		670,995		506,188
Product and distribution costs	85,017		68,958		165,014		137,106
Operating expenses	157,877		104,221		305,418		220,000
Selling, general and administrative expense	60,930		41,487		110,467		82,569
Marketing expenses	10,052		8,575		19,559		16,689
Pre-opening costs	1,752		2,863		3,143		6,300
Other (income)/expenses, net	(761)		1,339		(4,006)		2,510
Depreciation and amortization expense	25,194		18,097		48,595		37,184
Operating income/(loss)	9,125		(568)		22,805		3,830
Interest expense, net	9,793		9,711		18,042		18,355
Interest expense — related party	4,821		5,566		10,387		11,132
Other non-operating income, net	(416)		(2,660)		(858)		(112)
Loss before income taxes	(5,073)		(13,185)		(4,766)		(25,545)
Income tax expense/(benefit)	9,923		(1,500)		10,608		(2,912)
Net loss	(14,996)		(11,685)		(15,374)		(22,633)
Net income attributable to noncontrolling interest	2,146		945		4,829		1,512
Net loss attributable to Krispy Kreme, Inc.	$	(17,142)	$	(12,630)	$	(20,203)	$	(24,145)
Net loss per share:
Common stock — Basic	$	(0.13)	$	(0.10)	$	(0.16)	$	(0.19)
Common stock — Diluted	$	(0.13)	$	(0.10)	$	(0.16)	$	(0.19)
Weighted average shares outstanding:
Basic	132,351,087		124,987,370		128,669,228		124,987,370
Diluted	132,351,087		124,987,370		128,669,228		124,987,370


Krispy Kreme, Inc. Segment Reporting (In thousands) (Unaudited)

	Quarter Ended				Two Quarters Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
*Net revenues:*
U.S. and Canada	$	230,918	$	184,255	$	453,388	$	354,705
International	89,237		34,412		155,743		95,071
Market Development	29,031		26,305		61,864		56,412
Total net revenues	$	349,186	$	244,972	$	670,995	$	506,188

(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company
Total net revenues in second quarter of fiscal 2021	$	230,918		$	89,237		$	29,031		$	349,186
Total net revenues in second quarter of fiscal 2020	184,255			34,412			26,305			244,972
Total Net Revenues Growth	46,663			54,825			2,726			104,214
Total Net Revenues Growth %	25.3		%	159.3		%	10.4		%	42.5		%
Impact of acquisitions	(39,429)			—			1,750			(37,679)
Impact of foreign currency translation	—			(11,499)			$	—		(11,499)
Organic Revenue Growth	$	7,234		$	43,326		$	4,476		$	55,036
Organic Revenue Growth %	3.9		%	125.9		%	17.0		%	22.5		%

(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company
Total net revenues in first two quarters of fiscal 2021	$	453,388		$	155,743		$	61,864		$	670,995
Total net revenues in first two quarters of fiscal 2020	354,705			95,071			56,412			506,188
Total Net Revenues Growth	98,683			60,672			5,452			164,807
Total Net Revenues Growth %	27.8		%	63.8		%	9.7		%	32.6		%
Impact of acquisitions	(71,134)			—			(390)			(71,524)
Impact of foreign currency translation	—			(16,462)			$	—		(16,462)
Organic Revenue Growth	$	27,549		$	44,210		$	5,062		$	76,821
Organic Revenue Growth %	7.8		%	46.5		%	9.0		%	15.2		%

(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company
Total net revenues fiscal 2020	$	782,717		$	230,185		$	109,134		$	1,122,036
Total net revenues fiscal 2019	587,522			223,115			148,771			959,408
Total Net Revenues Growth	195,195			7,070			(39,637)			162,628
Total Net Revenues Growth %	33.2		%	3.2		%	-26.6		%	17.0		%
Impact of acquisitions	(121,671)			(42,811)			35,053			(129,429)
Impact of foreign currency translation	—			(906)			$	—		(906)
Impact of 53rd week	(15,615)			(3,287)			(1,603)			(20,505)
Organic Revenue Growth	$	57,909		$	(39,934)		$	(6,187)		$	11,789
Organic Revenue Growth %	9.9		%	-17.9		%	-4.2		%	1.2		%


Krispy Kreme, Inc. Condensed Consolidated Balance Sheets (In thousands, except number of shares)

	As of
	(Unaudited) July 4, 2021		January 3, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	37,377	$	37,460
Marketable securities	744		1,048
Restricted cash	82		23
Accounts receivable, net	49,207		74,351
Inventories	38,500		38,519
Prepaid expense and other current assets	20,911		12,692
Total current assets	$	146,821	$	164,093
Property and equipment, net	415,319		395,255
Goodwill	1,095,369		1,086,546
Other intangible assets, net	1,003,948		998,014
Operating lease right of use asset, net	414,096		399,688
Other assets	18,027		17,399
Total assets	$	3,093,580	$	3,060,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	538,985	$	41,245
Current operating lease liabilities	46,763		45,675
Accounts payable	156,564		148,645
Accrued liabilities	165,826		124,951
Structured payables	139,748		137,319
Total current liabilities	$	1,047,886	$	497,835
Long-term debt, less current portion	626,417		785,810
Related party notes payable	—		344,581
Noncurrent operating lease liabilities	390,962		376,099
Deferred income taxes, net	150,687		144,866
Other long-term obligations and deferred credits	55,822		63,445
Total liabilities	$	2,271,774	$	2,212,636
Commitments and contingencies
Shareholders’ Equity:
Common stock, $0.01 par value; 300,000,000 and 174,500,000 shares authorized as of July 4, 2021 and January 3, 2021, respectively; 163,595,516 and 124,987,370 shares issued and outstanding as of July 4, 2021 and January 3, 2021, respectively	1,636		1,250
Additional paid-in capital	1,362,875		845,499
Subscription receivable	(471,250)		—
Shareholder note receivable	(3,827)		(18,660)
Accumulated other comprehensive income/(loss), net of income tax	1,304		(1,208)
Retained deficit	(162,399)		(142,197)
Total shareholders’ equity attributable to Krispy Kreme, Inc.	728,339		684,684
Noncontrolling interest	93,467		163,675
Total shareholders’ equity	821,806		848,359
Total liabilities and shareholders’ equity	$	3,093,580	$	3,060,995


Krispy Kreme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

	Two Quarters Ended
	July 4, 2021 (26 weeks)		June 28, 2020 (26 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(15,374)	$	(22,633)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	48,595		37,184
Deferred income taxes	7,995		(2,601)
Loss on extinguishment of debt	1,700		—
Impairment and lease termination charges	1,126		1,693
Loss/(gain) on disposal of property and equipment	148		(1,164)
Share-based compensation	10,658		6,141
Change in accounts and notes receivable allowances	110		717
Inventory write-off	776		—
Other	(425)		(76)
Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments:	1,536		(5,325)
Net cash provided by operating activities	56,845		13,936
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment	(52,842)		(44,133)
Proceeds from disposals of assets	147		2,793
Acquisition of shops and franchise rights from franchisees, net of cash acquired	(33,888)		212
Principal payments received from loans to franchisees	45		362
Purchases of held-to-maturity debt securities	—		(55)
Maturities of held-to-maturity debt securities	277		116
Net cash used for investing activities	(86,261)		(40,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt	540,000		263,097
Repayment of long-term debt and lease obligations	(541,353)		(97,496)
Payment of financing costs	(1,700)		—
Proceeds from structured payables	140,598		135,222
Payments on structured payables	(138,100)		(97,530)
Capital contribution by shareholders	120,932		—
Proceeds from sale of noncontrolling interest in subsidiary	53,256		17,592
Distribution to shareholders	(34,364)		(19)
Payments for repurchase and retirement of common stock	(102,698)		—
Distribution to noncontrolling interest	(6,018)		(5,612)
Net cash provided by financing activities	30,553		215,254
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,161)		249
Net (decrease)/increase in cash, cash equivalents and restricted cash	(24)		188,734
Cash, cash equivalents and restricted cash at beginning of period	37,483		35,450
Cash, cash equivalents and restricted cash at end of period	$	37,459	$	224,184
Supplemental schedule of non-cash investing and financing activities:
Accrual for property and equipment	$	1,381	$	6,105
Stock issuance under shareholder notes	446		—
Common stock issuance under subscription receivable in connection with initial public offering, net of underwriting discounts and issuance costs	459,685		—
Accrual for distribution to shareholders	(7,970)		—
Accrual for repurchase and retirement of common stock	(35,803)		—
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	37,377	$	224,050
Restricted cash	82		134
Total cash, cash equivalents and restricted cash	$	37,459	$	224,184


Krispy Kreme, Inc. Supplemental Information

	Global Points of Access⁽¹⁾
	Quarter Ended		Fiscal Year Ended
	July 4, 2021	June 28, 2020	January 3, 2021
*U.S. and Canada: ⁽²⁾*
Hot Light Theater Shops	237	176	229
Fresh Shops	56	45	47
Cookie Shops	199	175	184
DFD doors ⁽³⁾	5,067	1,923	4,137
Total	5,559	2,319	4,597
*International:*
Hot Light Theater Shops	28	27	28
Fresh Shops	354	354	348
DFD doors	2,264	1,657	1,986
Total	2,646	2,038	2,362
*Market Development: ⁽³⁾*
Hot Light Theater Shops	113	168	119
Fresh Shops	739	705	732
DFD doors ⁽²⁾	518	405	465
Total	1,370	1,278	1,316
Total global (as defined)	9,575	5,635	8,275
Total Hot Light Theater Shops	378	371	376
Total Fresh Shops	1,149	1,104	1,127
Total Cookie Shops	199	175	184
Total Shops	1,726	1,650	1,687
Total DFD Doors	7,849	3,985	6,588
Total global points of access (as defined)	9,575	5,635	8,275

1.		Excludes Branded Sweet Treat Line distribution points and legacy wholesale business doors.
2.		Includes points of access that were acquired from franchisees in the United States during the first quarter of fiscal 2021 and the second half of fiscal 2020. These points of access were previously included in the Market Development segment.
3.		DFD doors for both the U.S. and Canada and Market Development segments exclude legacy wholesale doors, which have been declining consistent with our strategy to evolve our legacy wholesale business to focus on the new DFD model and our new Branded Sweet Treat Line. As of July 4, 2021 legacy wholesale doors for the U.S. and Canada and the Market Development segments were substantially eliminated.
4.		Includes locations in Japan, which were acquired in December 2020 and are now Company-owned. As of the end of July 4, 2021, there were three Hot Light Theater Shops, 46 Fresh Shops and 53 DFD doors in Japan operating. As of the end of January 3, 2021, there were three Hot Light Theater Shops, 40 Fresh Shops and 24 DFD doors in Japan operating. All remaining points of access in the Market Development segment relate to our franchisee business.

	Hubs
	Quarter Ended		Fiscal Year Ended
	July 4, 2021	June 28, 2020	January 3, 2021
*U.S. and Canada:*
Hot Light Theater Shops ⁽¹⁾	233	175	226
Doughnut Factories	5	7	5
Total	238	182	231
Hubs with Spokes	114	88	113
*International:*
Hot Light Theater Shops ⁽¹⁾	25	27	27
Doughnut Factories	12	9	9
Total	37	36	36
Hubs with Spokes	37	36	36
*Market Development:*
Hot Light Theater Shops ⁽¹⁾	112	165	116
Doughnut Factories	26	25	26
Total	138	190	142
Total Hubs	413	408	409

Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a spoke location that produces hot doughnuts.


Krispy Kreme, Inc. Reconciliation of Non-GAAP Financial Measures (In thousands)

	Quarter Ended						Two Quarters Ended
(in thousands)	July 4, 2021		June 28, 2020		June 30, 2019		July 4, 2021		June 28, 2020
Net income/(loss)	$	(14,996)	$	(11,685)	$	(8,842)	$	(15,374)	$	(22,633)
Interest expense, net	9,793		9,711		11,776		18,042		18,355
Interest expense — related party⁽¹⁾	4,821		5,566		5,693		10,387		11,132
Income tax expense/(benefit)	9,923		(1,500)		1,478		10,608		(2,912)
Depreciation and amortization expense	25,194		18,097		14,766		48,595		37,184
Share-based compensation	8,290		2,970		1,741		10,658		6,141
Employer payroll taxes related to share-based compensation	841		—		—		841		—
Other non-operating income, net⁽²⁾	(416)		(2,660)		(40)		(858)		(112)
New York City flagship Hot Light Theater Shop opening⁽³⁾	—		1,667		194		—		4,239
Strategic initiatives⁽⁴⁾	—		5,661		1		—		9,274
Acquisition and integration expenses⁽⁵⁾	223		812		2,650		2,375		4,423
Shop closure expenses⁽⁶⁾	—		2,786		—		—		2,786
Restructuring and severance expenses⁽⁷⁾	1,336		—		341		1,336		—
IPO-related expenses⁽⁸⁾	6,727		—		—		10,203		—
Other⁽⁹⁾	657		(1,956)		2,083		1,983		(1,964)
Adjusted EBITDA	$	52,393	$	29,469	$	31,841	$	98,796	$	65,913

	Quarter Ended						Two Quarters Ended
(in thousands)	July 4, 2021		June 28, 2020		June 30, 2019		July 4, 2021		June 28, 2020
Net income/(loss)	$	(14,996)	$	(11,685)	$	(8,842)	$	(15,374)	$	(22,633)
Interest expense — related party⁽¹⁾	4,821		5,566		5,693		10,387		11,132
Share-based compensation	8,290		2,970		1,741		10,658		6,141
Employer payroll taxes related to share-based compensation	841		—		—		841		—
Other non-operating income, net⁽²⁾	(416)		(2,660)		(40)		(858)		(112)
New York City flagship Hot Light Theater Shop opening⁽³⁾	—		1,667		194		—		4,239
Strategic initiatives⁽⁴⁾	—		5,661		1		—		9,274
Acquisition and integration expenses⁽⁵⁾	223		812		2,650		2,375		4,423
Shop closure expenses⁽⁶⁾	—		2,786		—		—		2,786
Restructuring and severance expenses⁽⁷⁾	1,336		—		341		1,336		—
IPO-related expenses⁽⁸⁾	6,727		—		—		10,203		—
Other⁽⁹⁾	657		(1,956)		2,083		1,983		(1,964)
Amortization of acquisition related intangibles⁽¹⁰⁾	7,627		6,192		4,687		15,076		12,572
KKI Term Loan Facility interest and debt issuance costs⁽¹¹⁾	2,341		—		—		2,341		—
Tax impact of adjustments⁽¹²⁾	(798)		(3,573)		(4,632)		(4,820)		(8,967)
Tax specific adjustments⁽¹³⁾	3,816		—		1,400		3,947		—
Loss on extinguishment of debt⁽¹⁴⁾	—		—		1,567		—		—
Adjusted net income	$	20,469	$	5,780	$	6,843	$	38,095	$	16,891
Net income attributable to noncontrolling interest	(2,146)		(945)		N/A		(4,829)		(1,512)
Adjusted net income attributable to Krispy Kreme, Inc.	18,323		4,835		N/A		33,266		15,379
Adjustment to adjusted net income attributable to common shareholders	(424)		(253)		N/A		(417)		(150)
Adjusted net income attributable to common shareholders – Basic	17,899		4,582		N/A		32,849		15,229
Additional income attributed to noncontrolling interest due to subsidiary potential common shares	(120)		(18)		N/A		(145)		(27)
Adjusted net income attributable to common shareholders – Diluted	17,779		4,564		N/A		32,704		15,202
Basic weighted average common shares outstanding	132,351,087		124,987,370		N/A		128,669,228		124,987,370
Dilutive effect of outstanding common stock options and RSUs	3,507,228		2,921,671		N/A		3,384,547		2,871,797
Diluted weighted average common shares outstanding	135,858,315		127,909,041		N/A		132,053,775		127,859,167
Adjusted net income per share attributable to common shareholders:
Basic	$	0.14	$	0.04	N/A		$	0.26	$	0.12
Diluted	$	0.13	$	0.04	N/A		$	0.25	$	0.12

1.		Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.
2.		Primarily foreign translation gains and losses in each period.
3.		Consists of pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.
4.		The quarter and two quarters ended June 28, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.
5.		Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition-related activities for the applicable period.
6.		Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
7.		The quarter ended July 4, 2021 consists of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses. The quarter ended June 30, 2019 consists of severance and related benefits costs associated with our hiring of a new global management team.
8.		Includes consulting and advisory fees incurred in connection with preparation for the Company’s IPO.
9.		The quarter and two quarters ended July 4, 2021 consist primarily of legal expenses incurred for the period. The quarter and two quarters ended June 28, 2020 consists primarily of a gain on the sale of land. The quarter ended June 30, 2019 consists of lease impairment expenses related to our Winston-Salem office location incurred in connection with our Corporate headquarters relocation to Charlotte, North Carolina.
10.		Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
11.		Includes interest expense of $0.6 million and debt issuance costs of $1.7 million incurred and recognized as expenses in the quarter ended July 4, 2021 in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO.
12.		Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and two quarters ended July 4, 2021 also include the impact of disallowed executive compensation expense incurred in connection with the IPO.
13.		The quarter and two quarters ended July 4, 2021 consist primarily of the effect of the U.K. 2023 statutory tax rate change from 19.0% to 25.0% on existing temporary differences. The quarter ended June 30, 2019 consists of valuation allowances associated with tax attributes primarily attributable to incremental costs removed from the calculation of Adjusted Net Income.
14.		Consists of the write-off of debt issuance costs in connection with the refinancing of the 2016 credit facility.

	Quarter Ended				Two Quarters Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
*Segment Adjusted EBITDA:*
U.S. and Canada	$	28,285	$	27,551	$	55,848	$	49,188
International	23,673		1,618		39,021		12,811
Market Development	9,858		7,880		20,749		18,585
Corporate	(9,423)		(7,580)		(16,822)		(14,671)
Total Adjusted EBITDA	$	52,393	$	29,469	$	98,796	$	65,913

	Trailing Four Quarters Ended		Fiscal Year Ended
(in thousands, unless otherwise stated)	July 4, 2021		January 3, 2021		December 29, 2019
*U.S. and Canada:*
Revenues	$	881,400	$	782,717	$	587,522
Non-Fresh Revenues ⁽¹⁾	(82,271)		(128,619)		(112,051)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes ⁽²⁾	(389,762)		(323,079)		(271,067)
Sales from Hubs with Spokes	409,367		331,019		204,404
Sales per Average Hub with Spokes (millions)	3.6		3.5		3.2

*International:*
Sales from Hubs with Spokes ⁽³⁾	$	290,857	$	230,185	$	223,115
Sales per Average Hub with Spokes (millions)	8.0		6.4		8.3

1.		Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues.
2.		Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes.
3.		Total International net revenues is equal to sales from Hubs with Spokes for that business segment.

	Quarter Ended									Two Quarters Ended
(in thousands except percentages)	July 4, 2021			June 28, 2020			June 30, 2019			July 4, 2021			June 28, 2020
Total net revenues – current year	$	349,186		$	244,972		$	233,030		$	670,995		$	506,188
Total net revenues – prior year	244,972			233,030			198,101			506,188			459,652
Total Net Revenues Growth	104,214			11,942			34,929			164,807			46,536
Total Net Revenues Growth %	42.5		%	5.1		%	17.6		%	32.6		%	10.1		%
Impact of acquisitions	(37,679)			(28,889)			(32,511)			(71,524)			(62,137)
Impact of foreign currency translation	(11,499)			1,240			3,718			(16,462)			2,939
Organic Revenue Growth	$	55,036		$	(15,707)		$	6,136		$	76,821		$	(12,662)
Organic Revenue Growth %	22.5		%	-6.7		%	3.1		%	15.2		%	-2.8		%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210817005841/en/

Investor Contact:

The One Nine Three Group for Krispy Kreme, Inc.

Tristan Peniston-Bird: [email protected]

Media Contact:

The One Nine Three Group for Krispy Kreme, Inc.

Frank Thomas: [email protected]

KEYWORDS: United States North America North Carolina

INDUSTRY KEYWORDS: Retail Restaurant/Bar Food/Beverage

MEDIA:

Logo

August 17, 2021 4:03 pm

Starboard Issues Statement in Response to Recent Materials Published by Box

PR Newswire

NEW YORK, Aug. 17, 2021 /PRNewswire/ — Starboard Value LP (together with its affiliates, “Starboard” or “we”), one of the largest stockholders of Box, Inc. (“Box” or the “Company”) (NYSE: BOX), with an ownership stake of approximately 8.6% of the Company’s outstanding shares, today provided the following statement in response to recent materials published by Box.

“Starboard has been consistent in its view that change is needed at Box to ensure improved accountability for delivering results, enhanced compensation and governance practices, and stockholder-friendly capital allocation policies, and we believe there is a severe need for direct representation for common stockholders on the Board of Directors (the “Board”). We have focused our campaign on the opportunities we see to create substantial long-term value at Box for our collective interests as owners of the Company.

We are disappointed, but unfortunately not surprised, by the Company’s decision to resort to unfounded disparaging remarks in its latest attempt to maintain the status quo. We would note that when we have seen these kinds of desperate actions in the past, this type of rhetoric is typically driven by hired advisors and not generally from members of management or the Board. Unfortunately, this seems to be evidence of the Board once again abdicating its responsibility and/or showing a lack of sophistication.

We know our fellow stockholders are more sophisticated and understand the issues and merits of the situation. We would highlight that Box barely attempted to dispute our statements regarding the blatantly false and misleading claims included in the Company’s investor presentation and, in fact, filed a revised version of one of its misleading and incorrect slides earlier today. We would also note that Box has still not addressed the clear and serious questions around the preferred equity financing and the Board’s decision to allow KKR, a ~$400 billion investment firm, to syndicate 70% of the transaction, likely for a fee, while only retaining a $150 million investment in Box. KKR’s investment represents an amount less than half the size of Starboard’s common stock investment in Box. Box has also failed to reasonably address many serious questions about the Company’s poor compensation and governance practices, other than by taking further reactive actions in an attempt to appease stockholders in the midst of this election.

The Company’s tactics during this contest and its poor performance for years should only confirm that stockholders need representation on the Board. Despite Box asking stockholders to support the status quo due to one or two quarters of mild improvement in certain trends, we would point out that Box has had a long history of false starts only to disappoint again in future quarters. As RBC Capital Markets stated in its equity research report on August 12, 2021:

“Proxy fight seems like the most likely reason for the release of preliminary results. To recap, activist investor Starboard has nominated three new directors to the board to replace three Box directors (including CEO Aaron Levie on, at least, a temporary basis). We echo many of Starboard’s concerns in our recent initiation, namely on execution, and believe Box could benefit from greater oversight and board leadership.”

We remain open to working with Box, and, if elected, our nominees remain committed to constructively engaging with management and the Board to create long-term value for the benefit of all stockholders. Do not be fooled by the Company’s rhetoric, our interests are completely aligned with yours.

We appreciate the support received from our fellow stockholders to date and urge all stockholders to vote FOR Starboard’s slate of director nominees on the WHITE proxy card today.”

About Starboard Value LP
Starboard Value LP is a New York-based investment adviser with a focused and differentiated fundamental approach to investing primarily in publicly traded U.S. companies. Starboard seeks to invest in deeply undervalued companies and actively engage with management teams and boards of directors to identify and execute on opportunities to unlock value for the benefit of all shareholders.

Investor contacts:

[email protected]

www.starboardvalue.com

Okapi Partners

Bruce H. Goldfarb/Patrick McHugh
(855) 208-8901

View original content:https://www.prnewswire.com/news-releases/starboard-issues-statement-in-response-to-recent-materials-published-by-box-301357291.html

SOURCE Starboard Value LP

August 17, 2021 4:03 pm

Flushing Bank Leases New Elmhurst Branch Location

UNIONDALE, N.Y., Aug. 17, 2021 (GLOBE NEWSWIRE) — Flushing Financial Corporation (the “Company”) (Nasdaq: FFIC), the parent holding company for Flushing Bank (the “Bank”), announced that the Bank has leased a new Elmhurst location, at 85-15 Queens Boulevard, Elmhurst, NY. This new full-service location is anticipated to open in the fall of 2021.

John R. Buran, President and CEO of Flushing Bank, stated: “This new Elmhurst location will expand our presence in Queens and showcase our Universal Banker model with unique Video Banker services. Our highly efficient Universal Banker model provides our customers with a superior experience by combining innovative technology with our highly skilled staff. We are excited to continue our planned expansion of this new way to bank and anticipate continued positive customer reaction. Flushing Bank has a long history of serving multicultural markets in the New York area as evidenced by the fact that our employees speak over 20 languages. Our employees at this Elmhurst location will reflect the diversity of the community and speak several of its primary languages. As a community bank, we believe it is important to give back to the community and demonstrate our commitment by sponsoring cultural events and local organizations through financial and volunteer support. We look forward to build upon this commitment to serve the individuals, families, and businesses of Elmhurst and the surrounding communities.”

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank^®, a New York State—chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the Bank’s experienced lending teams create mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking^®, which offers competitively priced deposit products to consumers nationwide, and BankPurely^®, an eco-friendly, healthier lifestyle community brand.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at FlushingBank.com

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

Contact:

Maria A. Grasso
Senior Executive Vice President, Chief Operating Officer
Flushing Bank
718-961-5400