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October 28, 2021 4:17 pm

Eastern Bankshares, Inc. Reports Third Quarter 2021 Financial Results

Eastern Bankshares, Inc. Reports Third Quarter 2021 Financial Results

Company Announces Intent to Adopt Share Repurchase Program and Declares Quarterly Cash Dividend

BOSTON–(BUSINESS WIRE)–
Eastern Bankshares, Inc. (the “Company,” or together with its affiliates and subsidiaries, “Eastern”) (NASDAQ Global Select Market: EBC), the stock holding company of Eastern Bank, today announced its 2021 third quarter financial results, the declaration of a quarterly cash dividend of $0.08 per share, and the intent to adopt a share repurchase program. Net income for the third quarter of 2021 was $37.1 million, or $0.22 per share, compared to net income of $34.8 million, or $0.20 per share, reported for the second quarter of 2021. Operating net income* for the third quarter of 2021 was $37.4 million, or $0.22 per share, compared to $37.1 million, or $0.22 per share, reported for the prior quarter.

“Our third quarter financial results continue to demonstrate strong financial performance, and as the economy continues to recover from the pandemic, we remain optimistic about our future and long-term profitability,” said Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank. “In the third quarter, we saw strong loan growth of $175 million excluding PPP loans, or a growth rate of over 8% on an annualized basis, while continuing to demonstrate strong asset quality. As we look to the future, there’s much to be excited about. We believe the combination with Century will solidify our position as the leading community bank here in Boston, and we look forward to continuing the high level of service that Century customers have come to expect. We are especially appreciative of the tremendous commitment our employees have demonstrated to our customers and the communities we serve, and thank them for their extraordinary efforts as our two organizations combine to become one.”

The Company also announced that its Board of Directors has approved a share repurchase program to purchase up to 9,337,900 shares, which represents 5% of the Company’s outstanding shares of common stock over a 12-month period. The authorization is contingent on receipt of approval or non-objection from the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company’s request for non-objection is pending. Assuming receipt of approval or non-objection from the Federal Reserve, the Company does not expect the share repurchases to begin before December 2021.

Rivers continued, “We remain committed to a thoughtful and holistic capital management strategy to deliver value for our shareholders. Our Board’s approval of a share repurchase program, together with our regular quarterly dividends, demonstrates our ability to continue to drive growth and effectively deploy capital while creating shareholder value.”

HIGHLIGHTS FOR THE THIRD QUARTER OF 2021

Operating net income* was $37.4 million in the third quarter, compared to $37.1 million in the prior quarter, and represented a 16% increase from the prior year quarter.
Loans, excluding Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans, grew $175.3 million, or 8% on an annualized basis from the prior quarter. Commercial loans, excluding PPP loans, and residential loans each grew 9% on an annualized basis from the prior quarter.
An improving economic outlook coupled with strong asset quality led to a $1.5 million release of loan loss reserves. Nonperforming loans were $42.1 million, or 0.44% of total loans, at the end of the third quarter compared to $41.7 million, or 0.43% of total loans, at the end of the second quarter.

BALANCE SHEET

Total assets were $17.5 billion at September 30, 2021, representing an increase of $413.8 million, or 2%, from June 30, 2021.

Available for sale securities increased $840.5 million, or 17%, on a consecutive quarter basis, to $5.7 billion, as excess liquidity was deployed into U.S. Agency securities. Cash and equivalents declined $312.5 million to $1.3 billion.
Total loans were $9.5 billion, representing a decrease of $116.5 million, or 1%, as PPP loan forgiveness outpaced new loan originations in the third quarter. Excluding PPP loans, total loans grew $175.3 million, or 2%, from the prior quarter, driven by growth in commercial loans, excluding PPP loans, of $143.9 million and in residential loans of $33.8 million.
Deposits totaled $13.6 billion, representing an increase of $399.5 million, or 3%, from June 30, 2021.
Shareholders’ equity was $3.4 billion, representing a decrease of $1.3 million from the prior quarter. The increase in retained earnings of $23.3 million was more than offset by the decrease in accumulated other comprehensive income of $26.8 million driven by a decrease in the market value of the available for sale investment portfolio.
At September 30, 2021, book value per share was $18.36 and tangible book value per share* was $16.33.

NET INTEREST INCOME

Net interest income was $102.7 million for the third quarter, compared to $104.6 million in the prior quarter, representing a decrease of $1.9 million on a consecutive quarter basis.

Included in net interest income was $5.9 million and $9.3 million of SBA PPP fee accretion net of deferred cost amortization in the third quarter and prior quarter, respectively. During the third quarter, $291.8 million in PPP loans were forgiven by the SBA or otherwise paid down compared to $502.9 million in the prior quarter.
Interest income on available for sale securities increased $1.8 million to $16.2 million in the third quarter as excess cash continued to be deployed into securities. Investment securities averaged $5.2 billion for the third quarter compared to $4.3 billion for the prior quarter, an increase of $905.1 million.
The net interest margin on a fully tax equivalent (“FTE”) basis* was 2.53% for the third quarter, representing a 16 basis points decrease from the prior quarter. The net interest margin continued to be pressured by the low interest rate environment and excess liquidity. The core net interest margin* in Appendix E demonstrates the impact of excess cash and the PPP program.

NONINTEREST INCOME

Noninterest income was $43.2 million for the third quarter, compared to $45.7 million for the prior quarter, representing a decrease of $2.5 million. Noninterest income on an operating basis* was $43.0 million for the third quarter, compared to $41.5 million for the prior quarter, an increase of $1.5 million.

Insurance commissions decreased $1.7 million to $22.0 million in the third quarter, compared to $23.7 million in the prior quarter.
Trust and investment advisory fees increased $0.2 million on a consecutive quarter basis to $6.3 million.
Loan-level interest rate swap income was $0.9 million in the third quarter, compared to losses of $1.2 million in the prior quarter, representing an increase of $2.0 million that was driven by an increase in the fair value of such interest rate swap transactions due to higher market interest rates.
Losses on securities held in rabbi trust accounts were $0.3 million in the third quarter compared to income of $4.2 million in the prior quarter, representing a decrease of $4.5 million primarily due to weaker investment performance in the period as compared to the prior quarter.
The gain on sale of loans held for sale totaled $0.7 million, down $0.1 million from the prior quarter.
Other noninterest income increased $1.5 million in the third quarter, in part due to a $0.5 million gain on a bank owned life insurance policy, combined with other higher miscellaneous income.

Please refer to Appendix B for a reconciliation of operating revenues and expenses*.

NONINTEREST EXPENSE

Noninterest expense was $99.0 million for the third quarter representing a decrease of $8.4 million, primarily driven by lower non-operating expenses* in the third quarter of $5.7 million. Noninterest expense on an operating basis* for the third quarter of 2021 was $97.2 million, compared to $99.9 million in the prior quarter.

Salaries and employee benefits expense was $66.2 million in the third quarter, representing a decrease of $3.0 million from the prior quarter. The decrease was primarily driven by the Company’s lower benefits expense which was $4.5 million lower than the prior quarter. The decrease in benefits expense was attributable to the decreased market value of investments held in rabbi trust accounts by the Company’s defined contribution supplemental executive retirement plan (“DC SERP”).
Data processing expense was $12.2 million in the third quarter, a decrease of $1.4 million from the prior quarter. Professional services expense was $4.0 million, a decrease of $2.4 million from the prior quarter. These decreases were primarily attributed to lower costs associated with the pending acquisition of Century compared with such expenses in the prior quarter.
Marketing expenses were $1.6 million in the third quarter, representing a decrease of $1.9 million from the prior quarter primarily due to a decrease in advertising expense of $1.4 million.
Other noninterest expense increased $0.7 million in the third quarter to $3.7 million.

Please refer to Appendix B for a reconciliation of operating revenues and expenses*.

ASSET QUALITY

The allowance for loan losses was $103.4 million at September 30, 2021, or 1.09% of total loans, compared to $105.6 million or 1.10% of total loans at June 30, 2021. The Company released loan loss reserves totaling $1.5 million in the third quarter, compared to a release of $3.3 million in the prior quarter. The Company followed the incurred loss allowance GAAP accounting model at September 30, 2021 and all preceding periods.

Non-performing loans totaled $42.1 million at September 30, 2021 compared to $41.6 million at the end of the prior quarter. During the third quarter of 2021, the Company recorded total net charge-offs of $0.8 million, or 0.03% of average total loans on an annualized basis compared to $2.1 million and 0.09% in the prior quarter, respectively.

At September 30, 2021, approximately $110.6 million in COVID-19 modified loans remained under modified payment terms, down from $149.8 million at June 30, 2021. The commercial real estate portfolio contained $92.4 million of the remaining COVID-19 modifications at period end, of which $71.5 million or 77% were in the hotel segment.

Please refer to Appendix F for a detailed breakout on COVID-19 related loan modifications.

DIVIDENDS AND SHARE REPURCHASES

The Company’s Board of Directors declared a quarterly cash dividend of $0.08 per common share, payable on December 15, 2021, to shareholders of record as of the close of business on December 3, 2021.

The Company also announced that its Board of Directors has approved a share repurchase program to purchase up to 9,337,900 shares, which represents 5% of the Company’s outstanding shares of common stock over a 12-month period. The authorization is contingent on receipt of approval or non-objection from the Federal Reserve. The Company’s request for non-objection is pending. The Company is unable to predict whether the Federal Reserve will permit the Company to implement the proposed repurchase program in whole or part, whether the Federal Reserve will impose one or more related conditions on the Company, or the timing of such non-objection, if granted. Assuming receipt of approval or non-objection from the Federal Reserve, the Company does not expect the share repurchases to begin before December 2021.

Under the authorization, share repurchases may occur in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Repurchases will be made at management’s discretion from time to time at prices management considers to be attractive and in the best interests of both the Company and its shareholders, subject to the availability of shares, general market conditions, the trading price of the shares, alternative uses for capital, and the Company’s financial performance. Repurchases under this authorization may be suspended, terminated or modified by the Company at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate by management in its discretion. There can be no assurance that the Company will receive the required approval or non-objection for its proposed share repurchase program. The Company is not obligated to repurchase any particular number of shares even if regulatory approval or non-objection is obtained. The proposed repurchase program would be authorized through November 30, 2022, although it may be modified or terminated by the Board of Directors at any time.

CONFERENCE CALL INFORMATION

A conference call and webcast covering Eastern’s third quarter 2021 earnings will be held on Friday, October 29, 2021 at 9:00 a.m. Eastern Time. To join by telephone, participants can call the toll-free dial-in number (833) 233-4460 from within the U.S. or (647) 689-4543 if outside the U.S. and reference conference ID 1389147. The conference call will be simultaneously webcast. Participants may join the webcast on the Company’s Investor Relations website at investor.easternbank.com. A replay of the webcast will be made available on demand on this site.

ABOUT EASTERN BANKSHARES, INC.

Eastern Bankshares, Inc. is the stock holding company for Eastern Bank. Founded in 1818, Boston-based Eastern Bank has more than 110 locations serving communities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island. As of September 30, 2021, Eastern Bank had approximately $17 billion in total assets. Eastern provides banking, investment and insurance products and services for consumers and businesses of all sizes, including through its Eastern Wealth Management division and its Eastern Insurance Group LLC subsidiary. Eastern takes pride in its outspoken advocacy and community support that includes $240 million in charitable giving since 1994. An inclusive company, Eastern employs approximately 1,900 deeply committed professionals who value relationships with their customers, colleagues, and communities. For investor information, visit investor.easternbank.com.

NON-GAAP FINANCIAL MEASURES

*Denotes a non-GAAP financial measure used in this press release.

A non-GAAP financial measure is defined as a numerical measure of the Company’s historical or future financial performance, financial position or cash flows that excludes (or includes) amounts, or is subject to adjustments that have the effect of excluding (or including) amounts that are included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”) in the Company’s statement of income, balance sheet or statement of cash flows (or equivalent statements).

The Company presents non-GAAP financial measures, which management uses to evaluate the Company’s performance, and which exclude the effects of certain transactions that management believes are unrelated to its core business and are therefore not necessarily indicative of its current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into the Company’s core businesses as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

There are items in the Company’s financial statements that impact its financial results, but which management believes are unrelated to the Company’s core business. Accordingly, the Company presents noninterest income on an operating basis, total operating revenue, noninterest expense on an operating basis, operating net income, operating earnings per share, operating return on average assets, operating return on average shareholders’ equity, the operating efficiency ratio, and the ratio of noninterest income to total revenue on an operating basis. Each of these figures excludes the impact of such applicable items because management believes such exclusion can provide greater visibility into the Company’s core business and underlying trends. Such items that management does not consider to be core to the Company’s business include (i) income and expenses from investments held in rabbi trusts, (ii) gains and losses on sales of securities available for sale, net, (iii) gains and losses on the sale of other assets, (iv) rabbi trust employee benefits, (v) impairment charges on tax credit investments and associated tax credit benefits, (vi) expenses indirectly associated with the Company’s initial public offering (“IPO”), (vii) other real estate owned (“OREO”) gains, (viii) merger and acquisition expenses, (ix) the stock donation to the Eastern Bank Foundation (“EBF”, formerly known as the Eastern Bank Charitable Foundation) in connection with the Company’s mutual-to-stock conversion and IPO, and (x) settlement of putative consumer class action litigation matters related to overdraft and non-sufficient funds fees, and associated settlement expenses. The Company does not provide an outlook for its total noninterest income and total noninterest expense because each contains income or expense components, as applicable, such as income associated with rabbi trust accounts and rabbi trust employee benefit expense, which are market-driven, and over which the Company cannot exercise control. Accordingly, reconciliations of the Company’s outlook for its noninterest income on an operating basis and its noninterest expense on an operating basis to an outlook for total noninterest income and total noninterest expense, respectively, cannot be made available without unreasonable effort.

Management also presents the Company’s core net interest margin which excludes the impact of items management determines as being one-time in nature or not indicative of its core operating results. Such items include the impact of excess liquidity in the form of excess cash volume, PPP loans originated in response to the COVID-19 pandemic, and material purchase accounting adjustments. Similarly, management presents certain asset quality metrics excluding PPP loans which it does not consider to be part of the Company’s core portfolios. These metrics include the ratio of total nonperforming loans to total loans excluding PPP loans, the ratio of the allowance for loan losses to total loans excluding PPP loans, and the ratio of annualized net charge-offs to average total loans excluding PPP loans. The Company anticipates that the vast majority of its PPP loans outstanding at September 30, 2021 will be forgiven, and to the extent not forgiven, a PPP loan is intended to be 100% guaranteed by the SBA.

Management also presents tangible assets, tangible shareholders’ equity, tangible book value per share, and the ratio of tangible shareholders’ equity to tangible assets, each of which excludes the impact of goodwill and other intangible assets, as management believes these financial measures provide investors with the ability to further assess the Company’s performance, identify trends in its core business and provide a comparison of its capital adequacy to other companies. The Company included the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.

These non-GAAP financial measures presented in this press release should not be considered an alternative or substitute for financial results or measures determined in accordance with GAAP or as an indication of the Company’s cash flows from operating activities, a measure of its liquidity position or an indication of funds available for its cash needs. An item which management considers to be non-core and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular period. In addition, management’s methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other banking companies to calculate the same or similar performance measures, and accordingly, the Company’s reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other banking companies. Please refer to Appendices A-E for reconciliations of the Company’s GAAP financial measures to the non-GAAP financial measures in this press release.

FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. Forward-looking statements, by their nature, are subject to risks and uncertainties. There are many factors that could cause actual results to differ materially from expected results described in the forward-looking statements.

Certain factors that could cause actual results to differ materially from expected results include developments in the Company’s market relating to the COVID-19 pandemic, including the severity and duration of the associated economic slowdown, adverse developments in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses, increased competitive pressures, changes in the interest rate environment, risks associated with its pending merger with Century, including the possibility that revenue or expense synergies or the other expected benefits of the transaction may not materialize for the Company in the timeframe expected or at all, or may be more costly to achieve; that the transaction may not be timely completed, if at all; that prior to the completion of the transaction or thereafter, the Company’s or Century’s businesses may not perform as expected due to transaction-related uncertainty or other factors; that the Company is unable to successfully implement integration strategies; that closing conditions are not satisfied in a timely manner or at all; reputational risks and the reaction of the companies’ customers to the transaction; the inability to implement onboarding plans and other consequences associated with mergers; and diversion of management time on merger-related issues, as well as general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiary Eastern Bank are engaged, including inflation, interest rates, interest rate sensitivity and liquidity, including the effect of, and changes in, monetary and fiscal policies and laws, such as the interest rate policies of the Board of Governors of the Federal Reserve System; market and monetary fluctuations, including fluctuations due to actual or anticipated changes to federal tax laws; credit quality, including adverse developments in local or regional real estate markets that decrease collateral values associated with existing loans; the failure to obtain the approval or non-objection of the Federal Reserve for the initiation of share repurchases, delays in obtaining such approval or non-objection, or adverse conditions imposed in connection with such approval or non-objection; and the failure of the Company to execute its planned share repurchases. For further discussion of such factors, please see the Company’s most recent Annual Report on Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission (the “SEC”), which are available on the SEC’s website at www.sec.gov.

Further, given the ongoing and dynamic nature of the COVID-19 pandemic, it is difficult to predict what continued effects the COVID-19 pandemic will have on the Company’s business and results of operations. The COVID-19 pandemic and the related local and national economic disruption may result in a continued decline in demand for the Company’s products and services; increased levels of loan delinquencies, problem assets and foreclosures; an increase in the Company’s allowance for loan losses; a decline in the value of loan collateral, including real estate; a greater decline in the yield on the Company’s interest-earning assets than the decline in the cost of the Company’s interest-bearing liabilities; and increased cybersecurity risks, as employees continue to work remotely. You should not place undue reliance on forward-looking statements, which reflect the Company’s expectations only as of the date of this press release. The Company does not undertake any obligation to update forward-looking statements.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS

Certain information in this press release is presented as reviewed by the Company’s management and includes information derived from the Company’s Consolidated Statements of Income, non-GAAP financial measures, and operational and performance metrics. For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	As of and for the three months ended
(Unaudited, dollars in thousands, except per share amounts)	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020

Earnings data
Net interest income	$	102,691		$	104,608		$	100,091		$	103,608		$	98,742
Noninterest income		43,209			45,733			55,212			49,638			47,709
Total revenue		145,900			150,341			155,303			153,246			146,451
Noninterest expense		98,970			107,335			94,049			199,169			109,817
Pre-tax, pre-provision income (loss)		46,930			43,006			61,254			(45,923	)		36,634
(Release of) provision for allowance for loan losses		(1,488	)		(3,300	)		(580	)		900			700
Pre-tax income (loss)		48,418			46,306			61,834			(46,823	)		35,934
Net income (loss)		37,106			34,809			47,663			(44,062	)		28,505
Operating net income (non-GAAP)		37,391			37,097			46,537			31,612			32,322

Per-share data
Earnings (loss) per share	$	0.22		$	0.20		$	0.28		$	(0.26	)	n.a.
Operating earnings per share (non-GAAP)	$	0.22		$	0.22		$	0.27		$	0.18		n.a.
Book value per share	$	18.36		$	18.37		$	18.14		$	18.36		n.a.
Tangible book value per share (non-GAAP)	$	16.33		$	16.33		$	16.12		$	16.34		n.a.

Profitability
Return on average assets (1)		0.84	%		0.83	%		1.19	%		(1.11	)%		0.80	%
Operating return on average assets (non-GAAP) (1)		0.86	%		0.89	%		1.15	%		0.79	%		0.90	%
Return on average shareholders’ equity (1)		4.27	%		4.10	%		5.66	%		(5.61	)%		6.65	%
Operating return on average shareholders’ equity (non-GAAP) (1)		4.30	%		4.36	%		5.53	%		4.02	%		7.54	%
Net interest margin (FTE) (1)		2.53	%		2.69	%		2.71	%		2.84	%		3.04	%
Cost of deposits (1)		0.02	%		0.03	%		0.03	%		0.03	%		0.06	%
Fee income ratio		29.62	%		30.42	%		35.55	%		32.39	%		32.58	%
Efficiency ratio		67.83	%		71.39	%		60.56	%		129.97	%		74.99	%
Operating efficiency ratio (non-GAAP)		66.14	%		67.78	%		60.22	%		68.33	%		69.95	%

Balance Sheet (end of period)
Total assets	$	17,461,223		$	17,047,453		$	16,726,795		$	15,964,190		$	15,460,594
Total loans		9,504,562			9,621,075			9,916,475			9,730,525			9,944,241
Total deposits		13,649,964			13,250,433			12,980,875			12,155,784			13,332,585
Total loans / total deposits		70	%		73	%		76	%		80	%		75	%
PPP loans	$	533,965		$	825,784		$	1,238,053		$	1,026,117		$	1,123,493

Asset quality
Allowance for loan losses (“ALLL”)	$	103,398		$	105,637		$	111,080		$	113,031		$	115,432
ALLL / total nonperforming loans (“NPLs”)		245.77	%		253.74	%		252.72	%		261.33	%		257.47	%
Total NPLs / total loans		0.44	%		0.43	%		0.44	%		0.45	%		0.45	%
Total NPLs / total loans (excl. PPP loans) (non-GAAP)		0.47	%		0.47	%		0.51	%		0.50	%		0.51	%
Net charge-offs (NCOs) / average total loans (1)		0.03	%		0.09	%		0.06	%		0.13	%		0.08	%
NCOs / average total loans (excl. PPP loans) (non-GAAP) (1)		0.03	%		0.10	%		0.06	%		0.15	%		0.09	%
Remaining COVID-19 loan modifications (2)	$	110,596		$	149,805		$	178,430		$	332,682		$	701,227

Capital adequacy
Shareholders’ equity / assets		19.64	%		20.12	%		20.25	%		21.47	%		11.08	%
Tangible shareholders’ equity / tangible assets (non-GAAP)		17.85	%		18.30	%		18.42	%		19.58	%		8.87	%

(1) Presented on an annualized basis.
(2) See Appendix F: COVID-19 Related Loan Modifications

EASTERN BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

	As of									Sep 30, 2021 change from
(Unaudited, dollars in thousands)	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021				Sep 30, 2020
ASSETS										△ $		△ %		△ $		△ %
Cash and due from banks	$	78,805		$	58,490		$	69,051		20,315		35	%	9,754		14	%
Short-term investments		1,172,956			1,505,757			2,259,033		(332,801	)	(22	)%	(1,086,077	)	(48	)%
Cash and cash equivalents		1,251,761			1,564,247			2,328,084		(312,486	)	(20	)%	(1,076,323	)	(46	)%
Available for sale securities		5,689,312			4,848,781			2,207,672		840,531		17	%	3,481,640		158	%
Total securities		5,689,312			4,848,781			2,207,672		840,531		17	%	3,481,640		158	%
Loans held for sale		1,757			2,734			4,649		(977	)	(36	)%	(2,892	)	(62	)%
Loans:
Commercial and industrial		1,652,447			1,740,679			2,177,216		(88,232	)	(5	)%	(524,769	)	(24	)%
Commercial real estate		3,825,186			3,775,771			3,652,312		49,415		1	%	172,874		5	%
Commercial construction		243,146			237,927			297,508		5,219		2	%	(54,362	)	(18	)%
Business banking		1,225,538			1,339,852			1,251,573		(114,314	)	(9	)%	(26,035	)	(2	)%
Total commercial loans		6,946,317			7,094,229			7,378,609		(147,912	)	(2	)%	(432,292	)	(6	)%
Residential real estate		1,491,269			1,457,498			1,373,237		33,771		2	%	118,032		9	%
Consumer home equity		848,570			834,938			890,771		13,632		2	%	(42,201	)	(5	)%
Other consumer		218,406			234,410			301,624		(16,004	)	(7	)%	(83,218	)	(28	)%
Total loans		9,504,562			9,621,075			9,944,241		(116,513	)	(1	)%	(439,679	)	(4	)%
Allowance for loan losses		(103,398	)		(105,637	)		(115,432	)	2,239		(2	)%	12,034		(10	)%
Unamortized prem./disc. and def. fees		(23,104	)		(29,739	)		(32,747	)	6,635		(22	)%	9,643		(29	)%
Net loans		9,378,060			9,485,699			9,796,062		(107,639	)	(1	)%	(418,002	)	(4	)%
Federal Home Loan Bank stock, at cost		10,601			10,601			8,805		—		—	%	1,796		20	%
Premises and equipment		44,048			44,733			50,539		(685	)	(2	)%	(6,491	)	(13	)%
Bank-owned life insurance		79,259			79,634			78,058		(375	)	—	%	1,201		2	%
Goodwill and other intangibles, net		379,772			380,402			375,632		(630	)	—	%	4,140		1	%
Deferred income taxes, net		34,135			26,161			19,925		7,974		30	%	14,210		71	%
Prepaid expenses		148,180			145,941			92,473		2,239		2	%	55,707		60	%
Other assets		444,338			458,520			498,695		(14,182	)	(3	)%	(54,357	)	(11	)%
Total assets		17,461,223			17,047,453			15,460,594		413,770		2	%	2,000,629		13	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand		5,484,126			5,399,297			6,312,479		84,829		2	%	(828,353	)	(13	)%
Interest checking accounts		2,693,276			2,656,610			2,207,266		36,666		1	%	486,010		22	%
Savings accounts		1,444,928			1,403,472			1,217,898		41,456		3	%	227,030		19	%
Money market investment		3,802,319			3,544,897			3,315,198		257,422		7	%	487,121		15	%
Certificates of deposit		225,315			246,157			279,744		(20,842	)	(8	)%	(54,429	)	(19	)%
Total deposits		13,649,964			13,250,433			13,332,585		399,531		3	%	317,379		2	%
Borrowed funds:
Federal Home Loan Bank advances		14,172			14,323			14,773		(151	)	(1	)%	(601	)	(4	)%
Escrow deposits of borrowers		15,900			14,119			14,664		1,781		13	%	1,236		8	%
Total borrowed funds		30,072			28,442			29,437		1,630		6	%	635		2	%
Other liabilities		351,895			337,956			385,200		13,939		4	%	(33,305	)	(9	)%
Total liabilities		14,031,931			13,616,831			13,747,222		415,100		3	%	284,709		2	%
Shareholders’ equity:
Common shares		1,868			1,868			—		—		—	%	1,868		—	%
Additional paid-in capital		1,857,165			1,856,241			—		924		—	%	1,857,165		—	%
Unallocated common shares held by the employee stock ownership plan (“ESOP”)		(143,966	)		(145,219	)		—		1,253		(1	)%	(143,966	)	—	%
Retained earnings		1,747,300			1,723,979			1,709,669		23,321		1	%	37,631		2	%
Accumulated other comprehensive income (“AOCI”), net of tax		(33,075	)		(6,247	)		3,703		(26,828	)	429	%	(36,778	)	(993	)%
Total shareholders’ equity		3,429,292			3,430,622			1,713,372		(1,330	)	—	%	1,715,920		100	%
Total liabilities and shareholders’ equity		17,461,223			17,047,453			15,460,594		413,770		2	%	2,000,629		13	%

EASTERN BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
	Three months ended								Three months ended Sep 30, 2021 change from three months ended
(Unaudited, dollars in thousands, except share data)	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020		Jun 30, 2021				Sep 30, 2020

Interest and dividend income:									△ $		△ %		△ $		△ %
Interest and fees on loans	$	86,735		$	90,936		$	90,704	(4,201	)	(5	)%	(3,969	)	(4	)%
Taxable interest and dividends on available for sale securities		14,314			12,457			7,554	1,857		15	%	6,760		89	%
Non-taxable interest and dividends on available for sale securities		1,848			1,857			1,883	(9	)	—	%	(35	)	(2	)%
Interest on federal funds sold and other short-term investments		571			431			372	140		32	%	199		53	%
Total interest and dividend income		103,468			105,681			100,513	(2,213	)	(2	)%	2,955		3	%
Interest expense:
Interest on deposits		736			1,031			1,727	(295	)	(29	)%	(991	)	(57	)%
Interest on borrowings		41			42			44	(1	)	(2	)%	(3	)	(7	)%
Total interest expense		777			1,073			1,771	(296	)	(28	)%	(994	)	(56	)%
Net interest income		102,691			104,608			98,742	(1,917	)	(2	)%	3,949		4	%
(Release of) provision for allowance for loan losses		(1,488	)		(3,300	)		700	1,812		(55	)%	(2,188	)	(313	)%
Net interest income after provision for loan losses		104,179			107,908			98,042	(3,729	)	(3	)%	6,137		6	%
Noninterest income:
Insurance commissions		21,956			23,664			21,884	(1,708	)	(7	)%	72		—	%
Service charges on deposit accounts		5,935			5,708			5,052	227		4	%	883		17	%
Trust and investment advisory fees		6,310			6,074			5,311	236		4	%	999		19	%
Debit card processing fees		3,030			3,170			2,721	(140	)	(4	)%	309		11	%
Interest rate swap income (losses)		881			(1,164	)		1,319	2,045		(176	)%	(438	)	(33	)%
(Losses) income from investments held in rabbi trusts		(289	)		4,216			3,800	(4,505	)	(107	)%	(4,089	)	(108	)%
Gains on sales of mortgage loans held for sale, net		717			848			2,219	(131	)	(15	)%	(1,502	)	(68	)%
Gains on sales of securities available for sale, net		1			1			—	—		—	%	1		—	%
Other		4,668			3,216			5,403	1,452		45	%	(735	)	(14	)%
Total noninterest income		43,209			45,733			47,709	(2,524	)	(6	)%	(4,500	)	(9	)%
Noninterest expense:
Salaries and employee benefits		66,238			69,276			66,593	(3,038	)	(4	)%	(355	)	(1	)%
Office occupancy and equipment		7,960			8,094			8,294	(134	)	(2	)%	(334	)	(4	)%
Data processing		12,191			13,572			11,721	(1,381	)	(10	)%	470		4	%
Professional services		4,024			6,439			5,510	(2,415	)	(38	)%	(1,486	)	(27	)%
Charitable contributions		—			—			—	—		—	%	—		—	%
Marketing		1,598			3,497			1,943	(1,899	)	(54	)%	(345	)	(18	)%
Loan expenses		1,586			1,854			1,554	(268	)	(14	)%	32		2	%
Federal Deposit Insurance Corporation (“FDIC”) insurance		1,056			985			938	71		7	%	118		13	%
Amortization of intangible assets		629			625			699	4		1	%	(70	)	(10	)%
Other		3,688			2,993			12,565	695		23	%	(8,877	)	(71	)%
Total noninterest expense		98,970			107,335			109,817	(8,365	)	(8	)%	(10,847	)	(10	)%
Income before income tax expense		48,418			46,306			35,934	2,112		5	%	12,484		35	%
Income tax expense		11,312			11,497			7,429	(185	)	(2	)%	3,883		52	%
Net income		37,106			34,809			28,505	2,297		7	%	8,601		30	%

Share data:
Weighted average common shares outstanding (1)		172,298,615			172,173,707		n.a.
Earnings per share	$	0.22		$	0.20		n.a.

(1) Shares held by the Company’s ESOP that have not been allocated to employees in accordance with the terms of the ESOP are not deemed outstanding for earnings per share calculations.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

	Nine months ended
(Unaudited, dollars in thousands, except share data)	Sep 30, 2021			Sep 30, 2020			Change

Interest and dividend income:							△ $		△ %
Interest and fees on loans	$	266,310		$	278,385		(12,075	)	(4	)%
Taxable interest and dividends on available for sale securities		36,977			23,332		13,645		58	%
Non-taxable interest and dividends on available for sale securities		5,561			5,709		(148	)	(3	)%
Interest on federal funds sold and other short-term investments		1,434			1,173		261		22	%
Interest and dividends on trading securities		—			6		(6	)	(100	)%
Total interest and dividend income		310,282			308,605		1,677		1	%
Interest expense:
Interest on deposits		2,769			10,245		(7,476	)	(73	)%
Interest on borrowings		123			717		(594	)	(83	)%
Total interest expense		2,892			10,962		(8,070	)	(74	)%
Net interest income		307,390			297,643		9,747		3	%
(Release of) provision for allowance for loan losses		(5,368	)		37,900		(43,268	)	(114	)%
Net interest income after provision for loan losses		312,758			259,743		53,015		20	%
Noninterest income:
Insurance commissions		73,767			72,058		1,709		2	%
Service charges on deposit accounts		17,010			15,514		1,496		10	%
Trust and investment advisory fees		18,047			15,600		2,447		16	%
Debit card processing fees		8,949			7,528		1,421		19	%
Interest rate swap income (losses)		5,122			(3,919	)	9,041		(231	)%
Income from investments held in rabbi trusts		5,773			4,802		971		20	%
Losses on trading securities, net		—			(3	)	3		(100	)%
Gains on sales of mortgage loans held for sale, net		3,044			3,732		(688	)	(18	)%
Gains on sales of securities available for sale, net		1,166			285		881		309	%
Other		11,276			13,138		(1,862	)	(14	)%
Total noninterest income		144,154			128,735		15,419		12	%
Noninterest expense:
Salaries and employee benefits		199,554			191,517		8,037		4	%
Office occupancy and equipment		24,271			25,598		(1,327	)	(5	)%
Data processing		37,892			33,905		3,987		12	%
Professional services		14,611			13,595		1,016		7	%
Charitable contributions		—			3,984		(3,984	)	(100	)%
Marketing		6,786			6,056		730		12	%
Loan expenses		5,287			4,702		585		12	%
FDIC insurance		2,989			2,788		201		7	%
Amortization of intangible assets		1,786			2,102		(316	)	(15	)%
Other		7,178			21,507		(14,329	)	(67	)%
Total noninterest expense		300,354			305,754		(5,400	)	(2	)%
Income before income tax expense		156,558			82,724		73,834		89	%
Income tax expense		36,980			15,924		21,056		132	%
Net income		119,578			66,800		52,778		79	%

Share data:
Weighted average common shares outstanding (1)		172,174,469		n.a.
Earnings per share	$	0.69		n.a.

(1) Shares held by the Company’s ESOP that have not been allocated to employees in accordance with the terms of the ESOP are not deemed outstanding for earnings per share calculations.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN

	As of and for the three months ended
	Sep 30, 2021						Jun 30, 2021						Sep 30, 2020
(Unaudited, dollars in thousands)	Avg. Balance		Interest		Yield / Cost (5)		Avg. Balance		Interest		Yield / Cost (5)		Avg. Balance		Interest		Yield / Cost (5)
Interest-earning assets:
Loans (1):
Commercial	$	6,995,556	$	67,276	3.82	%	$	7,301,745	$	71,747	3.94	%	$	7,314,805	$	69,127	3.76	%
Residential		1,477,891		11,479	3.08	%		1,433,056		11,397	3.19	%		1,390,719		12,269	3.51	%
Consumer		1,055,075		8,803	3.31	%		1,061,900		8,597	3.25	%		1,209,340		10,091	3.32	%
Total loans		9,528,522		87,558	3.65	%		9,796,701		91,741	3.76	%		9,914,864		91,487	3.67	%
Investment securities		5,249,742		16,656	1.26	%		4,344,690		14,778	1.36	%		1,712,928		10,007	2.32	%
Federal funds sold and other short-term investments		1,503,919		570	0.15	%		1,617,741		431	0.11	%		1,462,047		372	0.10	%
Total interest-earning assets		16,282,183		104,784	2.55	%		15,759,132		106,950	2.72	%		13,089,839		101,866	3.10	%
Non-interest-earning assets		1,141,168						1,061,121						1,139,440
Total assets	$	17,423,351					$	16,820,253					$	14,229,279

Interest-bearing liabilities:
Deposits:
Savings	$	1,441,385	$	36	0.01	%	$	1,385,735	$	69	0.02	%	$	1,187,083	$	62	0.02	%
Interest checking		2,687,196		244	0.04	%		2,541,862		253	0.04	%		2,307,972		334	0.06	%
Money market		3,762,855		360	0.04	%		3,523,330		605	0.07	%		3,311,847		1,051	0.13	%
Time deposits		233,145		96	0.16	%		246,801		104	0.17	%		294,025		280	0.38	%
Total interest-bearing deposits		8,124,581		736	0.04	%		7,697,728		1,031	0.05	%		7,100,927		1,727	0.10	%
Borrowings		26,074		41	0.62	%		25,042		42	0.67	%		25,478		44	0.69	%
Total interest-bearing liabilities		8,150,655		777	0.04	%		7,722,770		1,073	0.06	%		7,126,405		1,771	0.10	%
Demand deposit accounts		5,471,906						5,355,170						5,034,474
Other noninterest-bearing liabilities		350,111						335,816						362,073
Total liabilities		13,972,672						13,413,756						12,522,952
Shareholders’ equity		3,450,679						3,406,497						1,706,327
Total liabilities and shareholders’ equity	$	17,423,351					$	16,820,253					$	14,229,279


Net interest income – FTE			$	104,007					$	105,877					$	100,095
Net interest rate spread (2)					2.51	%					2.66	%					3.00	%
Net interest-earning assets (3)	$	8,131,528					$	8,036,362					$	5,963,434
Net interest margin – FTE (4)					2.53	%					2.69	%					3.04	%



(1) Includes non-accrual loans.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Presented on an annualized basis.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN

	As of and for the nine months ended
	Sep 30, 2021						Sep 30, 2020
(Unaudited, dollars in thousands)	Avg. Balance		Interest		Yield / Cost (5)		Avg. Balance		Interest		Yield / Cost (5)
Interest-earning assets:
Loans (1):
Commercial	$	7,203,903	$	208,228	3.86	%	$	6,929,729	$	208,534	4.02	%
Residential		1,435,006		34,150	3.18	%		1,412,268		38,127	3.61	%
Consumer		1,074,039		26,337	3.28	%		1,261,211		34,108	3.61	%
Total loans		9,712,948		268,715	3.70	%		9,603,208		280,769	3.91	%
Investment securities		4,414,582		44,015	1.33	%		1,556,985		30,782	2.64	%
Federal funds sold and other short-term investments		1,619,873		1,434	0.12	%		952,141		1,173	0.16	%
Total interest earning assets		15,747,403		314,164	2.67	%		12,112,334		312,724	3.45	%
Non-interest-earning assets		1,106,967						1,089,473
Total assets	$	16,854,370					$	13,201,807

Interest-bearing liabilities:
Deposits:
Savings	$	1,376,243	$	169	0.02	%	$	1,086,957	$	181	0.02	%
Interest checking		2,541,113		730	0.04	%		2,208,517		1,801	0.11	%
Money market		3,576,648		1,553	0.06	%		3,162,528		6,883	0.29	%
Time deposits		243,621		317	0.17	%		311,462		1,380	0.59	%
Total interest-bearing deposits		7,737,625		2,769	0.05	%		6,769,464		10,245	0.20	%
Borrowings		25,582		123	0.64	%		87,738		717	1.09	%
Total interest-bearing liabilities		7,763,207		2,892	0.05	%		6,857,202		10,962	0.21	%
Demand deposit accounts		5,318,903						4,322,809
Other noninterest-bearing liabilities		347,237						345,869
Total liabilities		13,429,347						11,525,880
Shareholders’ equity		3,425,023						1,675,927
Total liabilities and shareholders’ equity	$	16,854,370					$	13,201,807


Net interest income – FTE			$	311,272					$	301,762
Net interest rate spread (2)					2.62	%					3.24	%
Net interest-earning assets (3)	$	7,984,196					$	5,255,132
Net interest margin – FTE (4)					2.64	%					3.33	%



(1) Includes non-accrual loans.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Presented on an annualized basis.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES ASSET QUALITY – NON-PERFORMING ASSETS (1)

	As of
	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
(Unaudited, dollars in thousands)
Non-accrual loans:
Commercial	$	29,166		$	29,356		$	30,275		$	30,059		$	28,968
Residential		7,185			6,445			8,127			6,815			7,419
Consumer		4,262			4,106			3,873			4,131			4,727
Total non-accrual loans		40,613			39,907			42,275			41,005			41,114
Accruing loans past due 90 days or more:
Commercial		1,171			1,439			1,390			1,959			3,384
Residential		278			277			280			279			326
Consumer		9			9			9			9			9
Total accruing loans past due 90 days or more		1,458			1,725			1,679			2,247			3,719
Total non-performing loans		42,071			41,632			43,954			43,252			44,833
Other real estate owned		—			38			—			—			40
Other non-performing assets:		—			—			—			—			—
Total non-performing assets	$	42,071		$	41,670		$	43,954		$	43,252		$	44,873
Total accruing troubled debt restructured loans	$	34,723		$	38,316		$	39,367		$	41,095		$	39,881
Total non-performing loans to total loans		0.44	%		0.43	%		0.44	%		0.45	%		0.45	%
Total non-performing assets to total assets		0.24	%		0.24	%		0.26	%		0.27	%		0.29	%

(1) Non-performing assets are comprised of NPLs, OREO, and non-performing securities. NPLs consist of non-accrual loans and loans that are more than 90 days past due but still accruing interest. OREO consists of real estate properties, which primarily serve as collateral to secure the Company’s loans, that it controls due to foreclosure.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES ASSET QUALITY – PROVISION, ALLOWANCE, AND NET CHARGE OFFS

	Three months ended
	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
(Unaudited, dollars in thousands)
Average total loans	$	9,528,522		$	9,796,701		$	9,816,788		$	9,796,697		$	9,914,864
Allowance for loan losses, beginning of the period	$	105,637		$	111,080		$	113,031		$	115,432		$	116,636
Charged-off loans:
Commercial and industrial		—			550			—			1,603			140
Commercial real estate		8			—			234			—			—
Commercial construction		—			—			—			—			—
Business banking		867			1,838			1,384			1,433			1,179
Residential real estate		—			—			—			—			—
Consumer home equity		—			—			—			79			22
Other consumer		742			275			364			713			1,077
Total charged-off loans		1,617			2,663			1,982			3,828			2,418
Recoveries on loans previously charged-off:
Commercial and industrial		40			13			9			92			306
Commercial real estate		—			4			—			220			4
Commercial construction		—			—			—			—			—
Business banking		469			291			365			47			91
Residential real estate		88			17			10			9			43
Consumer home equity		63			3			71			100			31
Other consumer		206			192			156			59			39
Total recoveries		866			520			611			527			514
Net loans charged-off (recoveries):
Commercial and industrial		(40	)		537			(9	)		1,511			(166	)
Commercial real estate		8			(4	)		234			(220	)		(4	)
Commercial construction		—			—			—			—			—
Business banking		398			1,547			1,019			1,386			1,088
Residential real estate		(88	)		(17	)		(10	)		(9	)		(43	)
Consumer home equity		(63	)		(3	)		(71	)		(21	)		(9	)
Other consumer		536			83			208			654			1,038
Total net loans charged-off		751			2,143			1,371			3,301			1,904
(Release of) provision for loan losses		(1,488	)		(3,300	)		(580	)		900			700
Total allowance for loan losses, end of period	$	103,398		$	105,637		$	111,080		$	113,031		$	115,432
Net charge-offs to average total loans outstanding during this period (1)		0.03	%		0.09	%		0.06	%		0.13	%		0.08	%
Allowance for loan losses as a percent of total loans		1.09	%		1.10	%		1.12	%		1.16	%		1.16	%
Allowance for loan losses as a percent of nonperforming loans		245.77	%		253.74	%		252.72	%		261.33	%		257.47	%

(1) Presented on an annualized basis.

APPENDIX A: Reconciliation of Non-GAAP Earnings Metrics For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	Three Months Ended
(Unaudited, dollars in thousands, except share data)	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020

Net income (GAAP)	$	37,106		$	34,809		$	47,663		$	(44,062	)	$	28,505
Add:
Noninterest income components:
Losses (income) from investments held in rabbi trusts		289			(4,216	)		(1,846	)		(5,535	)		(3,800	)
Gains on sales of securities available for sale, net		(1	)		(1	)		(1,164	)		(3	)		—
(Gains) losses on sale of other assets		(490	)		(29	)		(18	)		(49	)		71
Noninterest expense components:
Rabbi trust employee benefit (income) expense		(53	)		2,063			986			2,838			1,445
Impairment charge (reversal) on tax credit investments		1,133			(1,419	)		—			3,189			7,590
Indirect IPO costs (1)		—			—			—			—			549
Gain on sale of OREO		(87	)		—			—			(61	)		(546	)
Merger and acquisition expenses		740			3,479			589			90			—
Settlement and expenses for putative consumer class action matters		—			3,325			—			—			—
Stock donation to the EBF		—			—			—			91,287			—
Total impact of non-GAAP adjustments		1,531			3,202			(1,453	)		91,756			5,309
Less net tax benefit (expense) associated with non-GAAP adjustments (2)		1,246			914			(327	)		16,082			1,492
Non-GAAP adjustments, net of tax	$	285		$	2,288		$	(1,126	)	$	75,674		$	3,817
Operating net income (non-GAAP)	$	37,391		$	37,097		$	46,537		$	31,612		$	32,322

Weighted average common shares outstanding during the period (3):
Basic		172,298,615			172,173,707			172,049,044			171,812,535			—
Diluted		172,298,615			172,173,707			172,049,044			171,812,535			—

Earnings (loss) per share, basic	$	0.22		$	0.20		$	0.28		$	(0.26	)	n.a.
Earnings (loss) per share, diluted	$	0.22		$	0.20		$	0.28		$	(0.26	)	n.a.

Operating earnings per share, basic (non-GAAP)	$	0.22		$	0.22		$	0.27		$	0.18		n.a.
Operating earnings per share, diluted (non-GAAP)	$	0.22		$	0.22		$	0.27		$	0.18		n.a.

Return on average assets (4)		0.84	%		0.83	%		1.19	%		(1.11	)%		0.80	%
Add:
Losses (income) from investments held in rabbi trusts (4)		0.01	%		(0.10	)%		(0.05	)%		(0.14	)%		(0.11	)%
Gains on sales of securities available for sale, net (4)		—	%		—	%		(0.03	)%		—	%		—	%
(Gains) losses on sale of other assets (4)		(0.01	)%		—	%		—	%		—	%		—	%
Rabbi trust employee benefit (income) expense (4)		—	%		0.05	%		0.02	%		0.07	%		0.04	%
Impairment charge (reversal) on tax credit investments (4)		0.03	%		(0.03	)%		—	%		0.08	%		0.21	%
Indirect IPO costs (1) (4)		—	%		—	%		—	%		—	%		0.02	%
Gain on sale of OREO (4)		—	%		—	%		—	%		—	%		(0.02	)%
Merger and acquisition expenses (4)		0.02	%		0.08	%		0.01	%		—	%		—	%
Settlement and expenses for putative consumer class action matters (4)		—	%		0.08	%		—	%		—	%		—	%
Stock donation to the EBF (4)		—	%		—	%		—	%		2.29	%		—	%
Less net tax benefit (expense) associated with non-GAAP adjustments (2) (4)		0.03	%		0.02	%		(0.01	)%		0.40	%		0.04	%
Operating return on average assets (non-GAAP) (4)		0.86	%		0.89	%		1.15	%		0.79	%		0.90	%

Return on average shareholders’ equity (4)		4.27	%		4.10	%		5.66	%		(5.61	)%		6.65	%
Add:
Losses (income) from investments held in rabbi trusts (4)		0.03	%		(0.50	)%		(0.22	)%		(0.70	)%		(0.89	)%
Gains on sales of securities available for sale, net (4)		—	%		—	%		(0.14	)%		—	%		—	%
(Gains) losses on sale of other assets (4)		(0.06	)%		—	%		—	%		(0.01	)%		0.02	%
Rabbi trust employee benefit (income) expense (4)		(0.01	)%		0.24	%		0.12	%		0.36	%		0.34	%
Impairment charge (reversal) on tax credit investments (4)		0.13	%		(0.17	)%		—	%		0.41	%		1.77	%
Indirect IPO costs (1) (4)		—	%		—	%		—	%		—	%		0.13	%
Gain on sale of OREO (4)		(0.01	)%		—	%		—	%		(0.01	)%		(0.13	)%
Merger and acquisition expenses (4)		0.09	%		0.41	%		0.07	%		0.01	%		—	%
Settlement and expenses for putative consumer class action matters (4)		—	%		0.39	%		—	%		—	%		—	%
Stock donation to the EBF (4)		—	%		—	%		—	%		11.62	%		—	%
Less net tax benefit (expense) associated with non-GAAP adjustments (2) (4)		0.14	%		0.11	%		(0.04	)%		2.05	%		0.35	%
Operating return on average shareholders’ equity (non-GAAP) (4)		4.30	%		4.36	%		5.53	%		4.02	%		7.54	%

(1) Reflects costs associated with the Company’s IPO that are indirectly related to the offering and were not recorded as a reduction of capital.
(2) The net tax benefit (expense) associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying the Company’s combined statutory tax rate only to those items included in net taxable income. Additionally, the net tax benefit (expense) for the impairment charge of tax credit investment includes associated tax credit benefits.
(3) Shares held by the Company’s ESOP that have not been allocated to employees in accordance with the terms of the ESOP are not deemed outstanding for earnings per share calculations.
(4) Presented on an annualized basis.

APPENDIX B: Reconciliation of Non-GAAP Operating Revenues and Expenses For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	Three Months Ended
	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
(Unaudited, dollars in thousands)
Net interest income (GAAP)	$	102,691		$	104,608		$	100,091		$	103,608		$	98,742
Add:
Tax-equivalent adjustment (non-GAAP)		1,316			1,269			1,297			1,357			1,353
Fully-taxable equivalent net interest income (non-GAAP)	$	104,007		$	105,877		$	101,388		$	104,965		$	100,095

Noninterest income (GAAP)	$	43,209		$	45,733		$	55,212		$	49,638		$	47,709
Less:
(Losses) income from investments held in rabbi trusts		(289	)		4,216			1,846			5,535			3,800
Gains on sales of securities available for sale, net		1			1			1,164			3			—
Gains (losses) on sale of other assets		490			29			18			49			(71	)
Noninterest income on an operating basis (non-GAAP)	$	43,007		$	41,487		$	52,184		$	44,051		$	43,980

Noninterest expense (GAAP)	$	98,970		$	107,335		$	94,049		$	199,169		$	109,817
Less:
Rabbi trust employee benefit (income) expense		(53	)		2,063			986			2,838			1,445
Impairment charge (reversal) on tax credit investments		1,133			(1,419	)		—			3,189			7,590
Indirect IPO costs (1)		—			—			—			—			549
Gain on sale of OREO		(87	)		—			—			(61	)		(546	)
Merger and acquisition expenses		740			3,479			589			90			—
Settlement and expenses for putative consumer class action matters		—			3,325			—			—			—
Stock donation to the EBF		—			—			—			91,287			—
Noninterest expense on an operating basis (non-GAAP)	$	97,237		$	99,887		$	92,474		$	101,826		$	100,779

Total revenue (GAAP)	$	145,900		$	150,341		$	155,303		$	153,246		$	146,451
Total operating revenue (non-GAAP)	$	147,014		$	147,364		$	153,572		$	149,016		$	144,075

Efficiency ratio (GAAP)		67.83	%		71.39	%		60.56	%		129.97	%		74.99	%
Operating efficiency ratio (non-GAAP)		66.14	%		67.78	%		60.22	%		68.33	%		69.95	%

Noninterest income / total revenue (GAAP)		29.62	%		30.42	%		35.55	%		32.39	%		32.58	%
Noninterest income / total revenue on an operating basis (non-GAAP)		29.25	%		28.15	%		33.98	%		29.56	%		30.53	%


(1) Reflects costs associated with the Company’s IPO that are indirectly related to the offering and were not recorded as a reduction of capital.

APPENDIX C: Reconciliation of Non-GAAP Capital Metrics For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	As of
	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
(Unaudited, dollars in thousands, except share data)
Tangible shareholders’ equity:
Total shareholders’ equity (GAAP)	$	3,429,292		$	3,430,622		$	3,387,045		$	3,428,052		$	1,713,372
Less: Goodwill and other intangibles		379,772			380,402			376,002			376,534			375,632
Tangible shareholders’ equity (non-GAAP)		3,049,520			3,050,220			3,011,043			3,051,518			1,337,740

Tangible assets:
Total assets (GAAP)		17,461,223			17,047,453			16,726,795			15,964,190			15,460,594
Less: Goodwill and other intangibles		379,772			380,402			376,002			376,534			375,632
Tangible assets (non-GAAP)	$	17,081,451		$	16,667,051		$	16,350,793		$	15,587,656		$	15,084,962

Shareholders’ equity to assets ratio (GAAP)		19.64	%		20.12	%		20.25	%		21.47	%		11.08	%
Tangible shareholders’ equity to tangible assets ratio (non-GAAP)		17.85	%		18.30	%		18.42	%		19.58	%		8.87	%

Common shares outstanding		186,758,154			186,758,154			186,758,154			186,758,154			—

Book value per share (GAAP)	$	18.36		$	18.37		$	18.14		$	18.36		n.a.
Tangible book value per share (non-GAAP)	$	16.33		$	16.33		$	16.12		$	16.34		n.a.

APPENDIX D: Reconciliation of Non-GAAP Credit Metrics For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	As of
(Unaudited, dollars in thousands)	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020

Total loans excluding PPP loans:
Total loans (GAAP) (1)	$	9,481,458		$	9,591,336		$	9,883,802		$	9,706,989		$	9,911,494
Less: PPP loans (1)		514,018			799,964			1,210,598			1,007,487			1,098,883
Total loans excluding PPP loans (non-GAAP)	$	8,967,440		$	8,791,372		$	8,673,204		$	8,699,502		$	8,812,611

Total nonperforming loans (NPLs) (GAAP)	$	42,071		$	41,632		$	43,954		$	43,252		$	44,833

Total NPLs / total loans (GAAP)		0.44	%		0.43	%		0.44	%		0.45	%		0.45	%
Total NPLs / total loans (excl. PPP loans) (non-GAAP)		0.47	%		0.47	%		0.51	%		0.50	%		0.51	%

Allowance for loan losses (ALLL) (GAAP)	$	103,398		$	105,637		$	111,080		$	113,031		$	115,432

ALLL / total loans (GAAP)		1.09	%		1.10	%		1.12	%		1.16	%		1.16	%
ALLL / total loans (excl. PPP loans) (non-GAAP)		1.15	%		1.20	%		1.28	%		1.30	%		1.31	%

	As of and for the three months ended
(Unaudited, dollars in thousands)	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020

Average total loans excluding PPP Loans:
Average total loans (GAAP)	$	9,528,522		$	9,796,701		$	9,816,788		$	9,796,697		$	9,914,864
Less: Average PPP loans		649,443			1,073,688			1,131,516			1,076,155			1,091,464
Average total loans excluding PPP loans (non-GAAP)	$	8,879,079		$	8,723,013		$	8,685,272		$	8,720,542		$	8,823,400

Total net loans charged-off (NCOs) (GAAP)	$	751		$	2,143		$	1,371		$	3,301		$	1,904

NCOs / Average total loans (GAAP) (2)		0.03	%		0.09	%		0.06	%		0.13	%		0.08	%
NCOs / Average total loans (excl. PPP loans) (non-GAAP) (2)		0.03	%		0.10	%		0.06	%		0.15	%		0.09	%

(1) Includes unamortized premiums, net of unearned discounts and deferred fees.
(2) Presented on an annualized basis.

Appendix E: Reconciliation of Non-GAAP Core Margin For information on non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures.”

	As of and for the three months ended
	Sep 30, 2021								Jun 30, 2021
(Unaudited, dollars in thousands)	Volume			Interest			Margin Impact (1)		Volume			Interest			Margin Impact (1)

Reported total average interest-earning assets, net interest income, and net interest margin (2)	$	16,282,183		$	104,007		2.53	%	$	15,759,132		$	105,877		2.69	%
Non-GAAP adjustments:
PPP loan volume earning 1%		(649,443	)		(1,688	)	0.06	%		(1,073,688	)		(2,742	)	0.12	%
SBA PPP loan fee accretion, net of deferred origination cost amortization		—			(5,913	)	(0.14	)%		—			(9,258	)	(0.24	)%
Excess cash (3)		(1,178,275	)		(445	)	0.19	%		(1,302,558	)		(357	)	0.23	%
Deferred loan fee income adjustment		—			—		—	%		—			—		—	%
Core margin (Non-GAAP) (4)	$	14,454,465		$	95,961		2.63	%	$	13,382,886		$	93,520		2.80	%

Core margin change from prior quarter							(0.17	)%							(0.09	)%

	Mar 31, 2021								Dec 31, 2020
	Volume			Interest			Margin Impact (1)		Volume			Interest			Margin Impact (1)

Reported total average interest-earning assets, net interest income, and net interest margin (2)	$	15,188,879		$	101,388		2.71	%	$	14,715,494		$	104,965		2.84	%
Non-GAAP adjustments:
PPP loan volume earning 1%		(1,131,516	)		(2,887	)	0.13	%		(1,076,155	)		(2,741	)	0.14	%
SBA PPP loan fee accretion, net of deferred origination cost amortization		—			(8,339	)	(0.22	)%		—			(6,102	)	(0.16	)%
Excess cash (3)		(1,436,783	)		(354	)	0.27	%		(1,996,808	)		(502	)	0.43	%
Deferred loan fee income adjustment		—			—		—	%		—			(3,774	)	(0.10	)%
Core margin (Non-GAAP) (4)	$	12,620,580		$	89,808		2.89	%	$	11,642,531		$	91,846		3.14	%

Core margin change from prior quarter							(0.25	)%

(1) Presented on an annualized basis.
(2) Presented on a fully taxable equivalent basis.
(3) Consists of cash above 2% of average total earning assets at a yield of 0.15% for the three months ended September 30, 2021, 0.11% for the three months ended June 30, 2021 and 0.10% in prior quarters.
(4) Core margin is the margin that results from the combined volume and interest adjustments taken together.

APPENDIX F: COVID-19 Related Loan Modifications

	Remaining COVID-19 Modifications as of March 31, 2021 (1)				Remaining COVID-19 Modifications as of June 30, 2021 (1)				Remaining COVID-19 Modifications as of September 30, 2021 (1)
(Dollars in thousands)	Remaining Modifications		% of Total Loan Balance		Remaining Modifications		% of Total Loan Balance		Remaining Modifications		% of Total Loan Balance

Portfolio
Commercial and industrial	$	22,776	1.1	%	$	18,850	1.1	%	$	4,548	0.3	%
Commercial real estate		127,683	3.5	%		113,301	3.0	%		92,377	2.4	%
Commercial construction		—	—	%		—	—	%		—	—	%
Business banking		11,681	0.8	%		2,102	0.2	%		2,164	0.2	%
Residential real estate		13,754	1.0	%		13,428	0.9	%		9,947	0.7	%
Consumer home equity		1,274	0.2	%		1,124	0.1	%		875	0.1	%
Other consumer		1,262	0.5	%		999	0.4	%		685	0.3	%
Total	$	178,430	1.8	%	$	149,804	1.6	%	$	110,596	1.2	%

(1) Remaining COVID-19 modifications reflect those loans which underwent a modification and have not yet resumed payment. The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due. These modifications with active deferrals met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed troubled debt restructurings.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006192/en/

Investor Contact

Jillian Belliveau

Eastern Bankshares, Inc.

[email protected]

781-598-7920

Media Contact

Andrea Goodman

Eastern Bank

[email protected]

781-598-7847

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Banking Professional Services Finance

MEDIA:

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October 28, 2021 4:16 pm

Banner Acquisition Corp. Announces Separate Trading of its Class A Common Stock and Redeemable Warrants, Commencing October 29, 2021

PR Newswire

LEHI, Utah, Oct. 28, 2021 /PRNewswire/ — Banner Acquisition Corp. (the “Company”) today announced that commencing October 29, 2021, holders of the units (the “Units”) sold in the Company’s initial public offering may elect to separately trade the shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”) and redeemable warrants included in the Units. Each Unit consists of one shares of Class A Common Stock and one-half of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one share of our Class A Common Stock at a price of $11.50 per share, subject to adjustment. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The shares of Class A Common Stock and whole redeemable warrants that are separated will trade on the NASDAQ Stock Market (the “NASDAQ”) under the symbols “BNNR” and “BNNRW,” respectively. Those Units not separated will continue to trade on the NASDAQ under the symbol “BNNRU.” Holders of the Units will need to have their brokers contact American Stock Transfer & Trust Company, LLC, the Company’s transfer agent, in order to separate the holders’ Units into shares of Class A Common Stock and redeemable warrants.

The Units were initially offered by the Company in an underwritten offering. BofA Securities, Inc. acted as sole book running manager and underwriter for the offering.

A registration statement relating to the Units and the underlying securities became effective on September 7, 2021. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities of the Company, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. A copy of the final prospectus relating to the offering may be obtained for free by visiting the U.S. Securities and Exchange Commission (the “SEC”) website at http://www.sec.gov.

ABOUT BANNER ACQUISITION CORP.

Banner Acquisition Corp. is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company intends to seek partnership with family-owned or founder-led businesses and industry-leading, tenured management teams looking to continue their significant ownership in the business that they have built for the long-term.

Banner Acquisition Corp. is sponsored by an affiliate of Banner Ventures and led by Christopher Christensen, who serves as Chairman of the Board, and Tanner Ainge, who serves as Chief Executive Officer and Director.

FORWARD LOOKING STATEMENTS

This press release contains statements that constitute “forward-looking statements.” Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company, including those set forth in the Risk Factors section of the Company’s registration statement and prospectus for the Company’s initial public offering filed with the SEC. Copies are available on the SEC’s website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

View original content to download multimedia:https://www.prnewswire.com/news-releases/banner-acquisition-corp-announces-separate-trading-of-its-class-a-common-stock-and-redeemable-warrants-commencing-october-29-2021-301411473.html

SOURCE Banner Acquisition Corp.

October 28, 2021 4:16 pm

Terex Corporation Announces Third Quarter 2021 Results

– Financial results reflect dynamic operating environment

– EPS more than doubled year-over-year

– Financial outlook updated for full-year 2021

– Continued generating positive quarterly free cash flow

– Continued reduction of leverage by prepayment of term loan in October

PR Newswire

NORWALK, Conn., Oct. 28, 2021 /PRNewswire/ — Terex Corporation (NYSE: TEX) announced third quarter 2021 income from continuing operations of $47.5 million, or $0.67 per share, on net sales of $993.8 million. In the third quarter of 2020, the reported income from continuing operations was $22.0 million, or $0.31 per share, on net sales of $765.6 million.

“End-market demand remains exceptionally strong demonstrated by significant year-over-year growth in orders, backlog and a robust book-to-bill ratio,” said Terex Chairman and Chief Executive Officer John L. Garrison, Jr. “Our ability to meet this high level of demand is constrained by supply chain, labor, freight and logistics challenges. We are driving our suppliers on availability and cost to reduce the impact on our customers and distributors. I am pleased how our team members have worked tirelessly to help overcome these external headwinds.”

Garrison continued, “Our commercial excellence initiatives are demonstrating results, as pricing actions continue to partially offset accelerating cost inflation. Price increases are being clearly communicated with our customers and distributors and we will be implementing further price increases.”

“AWP improved its operating margins despite input cost headwinds. MP had another excellent quarter as it continues its strong execution across its portfolio of businesses,” added Garrison.

We are updating our full-year 2021 EPS outlook to $2.75 to $2.85 on net sales of $3.85 billion reflecting the current environment.

John Sheehan, Senior Vice President and Chief Financial Officer, said, “Aggressive working capital management drove $43 million of free cash flow in the quarter and $183 million of free cash flow year-to-date. Our strong financial results and liquidity enabled us to continue to reduce leverage by prepaying an additional $150 million of term loans in October. Debt prepayments of $429 million year-to-date have reduced leverage, strengthened our balance sheet, and positioned the Company for growth.”

Mr. Garrison concluded, “We will close out full year 2021 with strong backlog, continued cost discipline, and positive free cash flow. We remain confident in our team’s ability to manage through current market conditions and emerge with stronger customer and supplier relationships. We will continue our investments to enable longer-term growth.”

Non-GAAP Measures and Other Items

Results of operations reflect continuing operations. All per share amounts are on a fully diluted basis. A comprehensive review of the quarterly financial performance is contained in the presentation that will accompany the Company’s earnings conference call.

In this press release, Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Terex believes that this non-GAAP information is useful to understanding its operating results and the ongoing performance of its underlying businesses.

The Glossary at the end of this press release contains further details about this subject.

Conference Call

The Company has scheduled a conference call to review the financial results on Friday, October 29, 2021 beginning at 8:30 a.m. ET. John Garrison, Chairman and CEO, will host the call. A simultaneous webcast of this call can be accessed at https://investors.terex.com. Participants are encouraged to access the call 10 minutes prior to the starting time. The call will also be archived in the Event Archive at https://investors.terex.com.

Forward-Looking Statements

Certain information in this press release includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995) regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed in our Annual Report on Form 10-K for the year ending December 31, 2020, and subsequent reports we file with the U.S. Securities and Exchange Commission from time to time, in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies and Uncertainties.” In addition, when included in this press release or in documents incorporated herein by reference, the words “may,” “expects,” “should,” “intends,” “anticipates,” “believes,” “plans,” “projects,” “estimates,” “will” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, among others:

our business has been, and could be further, adversely impacted by global health pandemics such as the outbreak of a new strain of coronavirus (“COVID-19”);
our business is highly competitive and is affected by our cost structure, pricing, product initiatives and other actions taken by competitors;
we are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases;
our operations are subject to a number of potential risks that arise from operating a multinational business, including compliance with changing regulatory environments and political instability;
a material disruption to one of our significant facilities;
our business is sensitive to government spending;
our business is affected by the cyclical nature of markets we serve;
our financial results could be adversely impacted by the United Kingdom’s (“U.K.”) departure from the European Union (“E.U.”);
changes affecting the availability of the London Interbank Offered Rate (“LIBOR”) may have consequences on us that cannot yet reasonably be predicted;
our need to comply with restrictive covenants contained in our debt agreements;
our ability to generate sufficient cash flow to service our debt obligations and operate our business;
our ability to access the capital markets to raise funds and provide liquidity;
the financial condition of suppliers and customers, and their continued access to capital;
exposure from providing financing and credit support for some of our customers;
we may experience losses in excess of recorded reserves;
our business is global and subject to changes in exchange rates between currencies, commodity price changes, regional economic conditions and trade relations;
our retention of key management personnel;
possible work stoppages and other labor matters;
changes in import/export regulatory regimes, imposition of tariffs, escalation of global trade conflicts and unfairly traded imports, particularly from China, could continue to negatively impact our business;
compliance with changing laws and regulations, particularly environmental and tax laws and regulations;
litigation, product liability claims and other liabilities;
our compliance with the United States (“U.S.”) Foreign Corrupt Practices Act and similar worldwide anti-corruption laws;
increased regulatory focus on privacy and data security issues and expanding laws;
our ability to comply with an injunction and related obligations imposed by the U.S. Securities and Exchange Commission (“SEC”);
our ability to successfully implement our strategy:
disruption or breach in our information technology systems and storage of sensitive data; and
other factors.

Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and material factors. The forward-looking statements contained herein speak only as of the date of this press release and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained or incorporated by reference in this press release to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

About Terex

Terex Corporation is a global manufacturer of aerial work platforms and materials processing machinery. The Company designs, builds, and supports products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. The Company’s products are manufactured in North and South America, Europe, Australia, and Asia and sold worldwide. The Company engages with customers through all stages of the product life cycle, from initial specification and financing to parts and service support. Terex uses its website (www.terex.com) to make information available to its investors.

Contact Information

Terex Corporation

Randy Wilson

Director, Investor Relations & Corporate Treasury

203-221-5415

TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in millions, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net sales	$	993.8	$	765.6	$	2,896.7	$	2,289.7
Cost of goods sold		(815.3)		(619.3)		(2,311.2)		(1,899.6)
Gross profit		178.5		146.3		585.5		390.1
Selling, general and administrative expenses		(104.3)		(109.8)		(327.3)		(353.3)
Income (loss) from operations		74.2		36.5		258.2		36.8
Other income (expense)
Interest income		0.6		0.8		2.9		2.5
Interest expense		(12.3)		(15.8)		(40.6)		(50.0)
Loss on early extinguishment of debt		—		—		(27.7)		—
Other income (expense) – net		(1.1)		(0.6)		2.7		(0.1)
Income (loss) from continuing operations before income taxes		61.4		20.9		195.5		(10.8)
(Provision for) benefit from income taxes		(13.9)		1.1		(36.0)		4.9
Income (loss) from continuing operations		47.5		22.0		159.5		(5.9)
Income (loss) from discontinued operations – net of tax		—		(0.1)		—		(1.3)
Gain (loss) on disposition of discontinued operations- net of tax		0.6		(16.1)		2.6		(21.1)
Net income (loss)	$	48.1	$	5.8	$	162.1	$	(28.3)
Basic earnings (loss) per Share:
Income (loss) from continuing operations	$	0.68	$	0.31	$	2.29	$	(0.09)
Income (loss) from discontinued operations – net of tax		—		—		—		(0.02)
Gain (loss) on disposition of discontinued operations – net of tax		0.01		(0.23)		0.04		(0.30)
Net income (loss)	$	0.69	$	0.08	$	2.33	$	(0.41)
Diluted earnings (loss) per Share:
Income (loss) from continuing operations	$	0.67	$	0.31	$	2.25	$	(0.09)
Income (loss) from discontinued operations – net of tax		—		—		—		(0.02)
Gain (loss) on disposition of discontinued operations – net of tax		0.01		(0.23)		0.04		(0.30)
Net income (loss)	$	0.68	$	0.08	$	2.29	$	(0.41)
Weighted average number of shares outstanding in per share calculation
Basic		69.8		69.3		69.7		69.7
Diluted		70.9		69.5		70.8		69.7

TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) (in millions, except par value)

	September 30, 2021		December 31, 2020
	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	553.2	$	665.0
Other current assets		1,452.6		1,213.6
Total current assets		2,005.8		1,878.6
Non-current assets
Property, plant and equipment – net		412.6		406.6
Other non-current assets		649.5		746.6
Total non-current assets		1,062.1		1,153.2
Total assets	$	3,067.9	$	3,031.8

Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt	$	5.7	$	7.6
Other current liabilities		934.1		715.7
Total current liabilities		939.8		723.3
Non-current liabilities
Long-term debt, less current portion		887.7		1,166.2
Other non-current liabilities		189.7		220.8
Total non-current liabilities		1,077.4		1,387.0
Total liabilities		2,017.2		2,110.3

Total stockholders’ equity		1,050.7		921.5
Total liabilities and stockholders’ equity	$	3,067.9	$	3,031.8

TEREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (in millions)

	Nine Months Ended September 30,
	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net income (loss)	$	162.1	$	(28.3)
Depreciation and amortization		37.9		36.3
Changes in operating assets and liabilities and non-cash charges		124.1		80.9
Net cash provided by (used in) operating activities		324.1		88.9
Investing Activities
Capital expenditures		(31.7)		(53.9)
Other investing activities, net		(41.7)		13.9
Net cash provided by (used in) investing activities		(73.4)		(40.0)
Financing Activities
Net cash provided by (used in) financing activities		(348.7)		(80.8)
Effect of exchange rate changes on cash and cash equivalents		(13.9)		4.4
Net increase (decrease) in cash and cash equivalents		(111.9)		(27.5)
Cash and cash equivalents at beginning of period		670.1		540.1
Cash and cash equivalents at end of period	$	558.2	$	512.6

TEREX CORPORATION AND SUBSIDIARIES SEGMENT RESULTS DISCLOSURE (unaudited) (in millions)

	Q3						Year to Date
	2021			2020			2021			2020
			% of			% of			% of			% of
			Net Sales			Net Sales			Net Sales			Net Sales
Consolidated
Net sales	$	993.8		$	765.6		$	2,896.7		$	2,289.7
Income (loss) from operations	$	74.2	7.5%	$	36.5	4.8%	$	258.2	8.9%	$	36.8	1.6%

AWP
Net sales	$	572.5		$	445.0		$	1,644.4		$	1,370.6
Income (loss) from operations	$	34.9	6.1%	$	13.3	3.0%	$	126.7	7.7%	$	2.4	0.2%

MP
Net sales	$	418.7		$	311.3		$	1,237.7		$	890.5
Income (loss) from operations	$	57.1	13.6%	$	40.3	12.9%	$	178.3	14.4%	$	88.7	10.0%

Corp and Other / Eliminations
Net sales	$	2.6		$	9.3		$	14.6		$	28.6
Loss from operations	$	(17.8)	*	$	(17.1)	*	$	(46.8)	*	$	(54.3)	*
* Not a meaningful percentage

GLOSSARY

In an effort to provide investors with additional information regarding the Company’s results, Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures which management believes provides useful information to investors. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. In addition, the Company believes that non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. Terex believes that this non-GAAP information is useful to understanding its operating results and the ongoing performance of its underlying businesses. Management of Terex uses both GAAP and non-GAAP financial measures to establish internal budgets and targets and to evaluate the Company’s financial performance against such budgets and targets.

The amounts described below are unaudited, are reported in millions of U.S. dollars (except share data and percentages), and are as of or for the period ended September 30, 2021, unless otherwise indicated.

2021 Outlook

The Company’s 2021 outlook for earnings per share is a non-GAAP financial measure because it excludes the impact of potential future acquisitions, divestitures, restructuring, and other unusual items. The Company is not able to reconcile this forward-looking non-GAAP financial measure to its most directly comparable forward-looking GAAP financial measures without unreasonable efforts because the Company is unable to predict with a reasonable degree of certainty the exact timing and impact of such items. The unavailable information could have a significant impact on the Company’s full-year 2021 GAAP financial results. This forward looking information provides guidance to investors about the Company’s EPS expectations excluding unusual items that the Company does not believe is reflective of its ongoing operations.

Free Cash Flow

The Company calculates a non-GAAP measure of free cash flow. The Company defines free cash flow as Net cash provided by (used in) operating activities, plus (minus) increases (decreases) in Terex Financial Services finance receivables consisting of sales-type leases and commercial loans (“TFS Assets”), less Capital expenditures, net of proceeds from sale of capital assets. The Company believes that this measure of free cash flow provides management and investors further useful information on cash generation or use in our primary operations. The following table reconciles Net cash provided by (used in) operating activities to free cash flow (in millions):

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Net cash provided by (used in) operating activities	$	54.9	$	324.1
Increase (decrease) in TFS assets	(4.6)		(110.2)
Capital expenditures, net of proceeds from sale of capital assets	(7.8)		(30.5)
Free cash flow	$	42.5	$	183.4

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SOURCE Terex Corporation

October 28, 2021 4:16 pm

Republic Services, Inc. Reports Third Quarter 2021 Results

– Total Revenue Growth of Approximately 14 Percent

– Delivered Earnings Per Share of $1.10 and Adjusted Earnings Per Share of $1.11, an Increase of 11 Percent Over the Prior Year

– Generated Cash Flow from Operations of $2.1 billion and Adjusted Free Cash Flow of $1.4 billion on a Year-to-Date Basis

– Expanded Adjusted EBITDA Margin 10 Basis Points

– Raised 2021 Full-Year Financial Guidance

– Certified as a Great Place to Work® for the Fifth Consecutive Year

PR Newswire

PHOENIX, Oct. 28, 2021 /PRNewswire/ — Republic Services, Inc. (NYSE: RSG) today reported net income of $350.3 million, or $1.10 per diluted share, for the three months ended September 30, 2021, versus $260.0 million, or $0.81 per diluted share, for the comparable 2020 period. Excluding certain benefits and expenses, on an adjusted basis, net income for the three months ended September 30, 2021 was $353.7 million, or $1.11 per diluted share, versus $319.3 million, or $1.00 per diluted share, for the comparable 2020 period.

“We continue to drive outsized revenue growth both organically and through acquisitions,” said Jon Vander Ark, president and chief executive officer. “This year already represents the highest level of investment in acquisitions in over a decade. Our acquisition pipeline remains robust, with broad-based opportunities in the recycling and solid waste business and in our environmental solutions business.”

“During the quarter, we continued to execute on our strategic priorities and delivered results that exceeded our expectations,” added Vander Ark. “Accordingly, we are raising our full-year financial guidance.”

Third-Quarter 2021 Highlights:

Third quarter EPS was $1.10 per share, and adjusted EPS, a non-GAAP measure, was $1.11 per share, an increase of 11 percent over the prior year.
Year-to-date cash provided by operating activities was $2.1 billion, an increase of 12 percent versus the prior year. Adjusted free cash flow, a non-GAAP measure, was $1.4 billion, an increase of 22 percent versus the prior year.
Year-to-date investments in acquisitions were $922 million, or $876 million net of divestitures.
Year-to-date cash returned to shareholders through dividends and share repurchases was $622 million.
Third quarter core price increased revenue by 5.2 percent. Core price consisted of 6.5 percent in the open market and 2.9 percent in the restricted portion of the business.
Third quarter revenue growth from average yield was 3.2 percent and volume increased 4.3 percent.
Third quarter adjusted EBITDA margin, a non-GAAP measure, was 30.4 percent of revenue, which represents a 10 basis point increase over the prior year.
The Company’s average recycled commodity price per ton sold during the third quarter was $230. This represents a sequential increase from the second quarter of $60 per ton and an increase of $131 per ton versus the prior year.
The Company was certified as a Great Place to Work® for the fifth consecutive year.

Raised Full-Year 2021 Financial Guidance

Republic raised its full-year adjusted diluted EPS guidance to $4.10 to $4.13 and its full-year adjusted free cash flow guidance to $1,475 million to $1,500 million.

Please refer to the Information Regarding Forward-Looking Statements section of this document.

Company Declares Quarterly Dividend

Republic announced today that its Board of Directors declared a regular quarterly dividend of $0.46 per share for shareholders of record on January 3, 2022. The dividend will be paid on January 14, 2022.

Presentation of Certain Non-GAAP Measures

Adjusted diluted earnings per share, adjusted net income, adjusted EBITDA, adjusted EBITDA margin and adjusted free cash flow are described in the Reconciliation of Certain Non-GAAP Measures section of this document.

About Republic Services
Republic Services, Inc. is a leader in the U.S. environmental services industry. Through its subsidiaries, the Company provides superior customer experience while fostering a sustainable Blue Planet^® for future generations to enjoy a cleaner, safer and healthier world. For more information, visit RepublicServices.com, or follow us at Facebook.com/RepublicServices, @RepublicService on Twitter or Republic Services on LinkedIn.

SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
AND OPERATING DATA

REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)

	September 30,		December 31,
	2021		2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	40.1	$	38.2
Accounts receivable, less allowance for doubtful accounts and other of $42.3 and $34.7, respectively	1,265.0		1,091.3
Prepaid expenses and other current assets	264.3		392.3
Total current assets	1,569.4		1,521.8
Restricted cash and marketable securities	155.6		149.1
Property and equipment, net	8,938.9		8,726.2
Goodwill	12,736.3		12,046.4
Other intangible assets, net	228.1		173.1
Other assets	800.6		817.4
Total assets	$	24,428.9	$	23,434.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	815.0	$	779.0
Notes payable and current maturities of long-term debt	8.0		168.1
Deferred revenue	381.5		345.6
Accrued landfill and environmental costs, current portion	119.2		114.5
Accrued interest	52.0		54.6
Other accrued liabilities	957.7		820.2
Total current liabilities	2,333.4		2,282.0
Long-term debt, net of current maturities	9,257.0		8,766.1
Accrued landfill and environmental costs, net of current portion	1,793.0		1,694.7
Deferred income taxes and other long-term tax liabilities, net	1,218.8		1,238.8
Insurance reserves, net of current portion	291.7		281.8
Other long-term liabilities	656.1		681.8
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share; 50 shares authorized; none issued	—		—
Common stock, par value $0.01 per share; 750 shares authorized; 319.4 and 318.8 issued including shares held in treasury, respectively	3.2		3.2
Additional paid-in capital	2,801.0		2,741.4
Retained earnings	6,309.4		5,751.8
Treasury stock, at cost; 1.8 and — shares, respectively	(230.7)		(0.1)
Accumulated other comprehensive loss, net of tax	(9.6)		(12.4)
Total Republic Services, Inc. stockholders’ equity	8,873.3		8,483.9
Non-controlling interests in consolidated subsidiary	5.6		4.9
Total stockholders’ equity	8,878.9		8,488.8
Total liabilities and stockholders’ equity	$	24,428.9	$	23,434.0

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	2,933.9	$	2,572.1	$	8,342.2	$	7,580.4
Expenses:
Cost of operations	1,744.0		1,535.4		4,928.0		4,553.3
Depreciation, amortization and depletion	301.3		270.7		886.5		808.4
Accretion	20.8		20.7		61.9		62.4
Selling, general and administrative	299.0		256.1		880.3		795.3
Withdrawal costs – multiemployer pension funds	—		—		—		35.9
Loss (gain) on business divestitures and impairments, net	—		31.5		(0.2)		32.9
Restructuring charges	4.6		9.8		11.2		15.8
Operating income	564.2		447.9		1,574.5		1,276.4
Interest expense	(78.1)		(88.9)		(234.9)		(277.4)
Loss from unconsolidated equity method investments	(15.1)		(8.2)		(44.0)		(30.8)
Loss on extinguishment of debt	—		(34.5)		—		(34.5)
Interest income	0.6		0.5		2.0		4.0
Other (loss) income, net	(0.9)		1.9		0.6		3.7
Income before income taxes	470.7		318.7		1,298.2		941.4
Provision for income taxes	119.9		58.5		319.0		208.1
Net income	350.8		260.2		979.2		733.3
Net income attributable to non-controlling interests in consolidated subsidiary	(0.5)		(0.2)		(1.9)		(1.5)
Net income attributable to Republic Services, Inc.	$	350.3	$	260.0	$	977.3	$	731.8
Basic earnings per share attributable to Republic Services, Inc. stockholders:
Basic earnings per share	$	1.10	$	0.81	$	3.06	$	2.29
Weighted average common shares outstanding	318.6		319.2		319.2		319.3
Diluted earnings per share attributable to Republic Services, Inc. stockholders:
Diluted earnings per share	$	1.10	$	0.81	$	3.06	$	2.29
Weighted average common and common equivalent shares outstanding	319.4		319.7		319.7		319.8
Cash dividends per common share	$	0.460	$	0.425	$	1.310	$	1.235

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
	Nine Months Ended September 30,
	2021		2020
Cash provided by operating activities:
Net income	$	979.2	$	733.3
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization, depletion and accretion	948.4		870.8
Non-cash interest expense	52.4		47.8
Stock-based compensation	49.1		29.0
Deferred tax (benefit) provision	(32.8)		45.7
Provision for doubtful accounts, net of adjustments	18.7		22.0
Loss on extinguishment of debt	—		34.5
Loss on disposition of assets and asset impairments, net	0.5		30.6
Withdrawal costs – multiemployer pension funds	—		4.3
Environmental adjustments	(1.8)		(1.2)
Loss from unconsolidated equity method investments	44.0		30.8
Other non-cash items	(1.5)		(2.9)
Change in assets and liabilities, net of effects from business acquisitions and divestitures:
Accounts receivable	(137.7)		3.4
Prepaid expenses and other assets	105.7		135.0
Accounts payable	99.4		(60.4)
Capping, closure and post-closure expenditures	(41.2)		(39.5)
Remediation expenditures	(32.2)		(39.8)
Other liabilities	87.6		77.0
Payments for retirement of certain hedging relationships	—		(11.4)
Cash provided by operating activities	2,137.8		1,909.0
Cash used in investing activities:
Purchases of property and equipment	(904.2)		(889.0)
Proceeds from sales of property and equipment	10.8		24.8
Cash used in acquisitions and investments, net of cash and restricted cash acquired	(936.3)		(189.9)
Cash received from business divestitures	46.3		32.5
Purchases of restricted marketable securities	(23.8)		(16.9)
Sales of restricted marketable securities	21.9		5.6
Other	(0.3)		—
Cash used in investing activities	(1,785.6)		(1,032.9)
Cash (used in) provided by financing activities:
Proceeds from notes payable and long-term debt, net of fees	4,646.5		2,439.5
Proceeds from issuance of senior notes, net of discount and fees	—		1,626.6
Payments of notes payable and long-term debt	(4,381.8)		(4,101.9)
Premiums paid on extinguishment of debt	—		(34.0)
Issuances of common stock	(7.1)		1.3
Purchases of common stock for treasury	(179.0)		(98.8)
Cash dividends paid	(406.5)		(387.1)
Distributions paid to non-controlling interests in consolidated subsidiary	(1.2)		(0.2)
Contingent consideration payments	(14.4)		(9.7)
Cash used in financing activities	(343.5)		(564.3)
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents	8.7		311.8
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	114.2		177.4
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	122.9	$	489.2

You should read the following information in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2020. All amounts below are in millions and as a percentage of our revenue, except per share data.

REVENUE

The following table reflects our total revenue by line of business for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,								Nine Months Ended June 30,
	2021				2020				2021				2020
Collection:
Residential	$	626.7	21.4	%	$	581.2	22.6	%	$	1,831.3	22.0	%	$	1,723.3	22.8	%
Small-container	871.9		29.7		773.7		30.1		2,525.3		30.3		2,321.8		30.6
Large-container	621.7		21.2		553.1		21.5		1,762.0		21.1		1,606.8		21.2
Other	15.3		0.5		13.1		0.5		44.4		0.5		38.0		0.5
Total collection	2,135.6		72.8		1,921.1		74.7		6,163.0		73.9		5,689.9		75.1
Transfer	395.3				352.4				1,110.4				1,004.8
Less: intercompany	(212.6)				(190.9)				(605.9)				(556.9)
Transfer, net	182.7		6.2		161.5		6.3		504.5		6.0		447.9		5.9
Landfill	657.6				597.3				1,871.6				1,719.6
Less: intercompany	(285.6)				(263.4)				(818.1)				(763.9)
Landfill, net	372.0		12.7		333.9		13.0		1,053.5		12.6		955.7		12.6
Environmental solutions	51.4		1.7		24.1		0.9		110.8		1.3		101.0		1.3
Other:
Recycling processing and commodity sales	119.9		4.1		75.0		2.9		310.6		3.8		216.2		2.9
Other non-core	72.3		2.5		56.5		2.2		199.8		2.4		169.7		2.2
Total other	192.2		6.6		131.5		5.1		510.4		6.2		385.9		5.1
Total revenue	$	2,933.9	100.0	%	$	2,572.1	100.0	%	$	8,342.2	100.0	%	$	7,580.4	100.0	%

The following table reflects changes in components of our revenue, as a percentage of total revenue, for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Average yield	3.2	%	2.6	%	2.7	%	2.7	%
Fuel recovery fees	1.3		(0.9)		0.6		(0.6)
Total price	4.5		1.7		3.3		2.1
Volume	4.3		(3.4)		3.8		(3.7)
Change in workdays	—		—		(0.2)		0.1
Recycling processing and commodity sales	1.6		0.3		1.2		0.1
Environmental solutions	0.2		(1.3)		(0.2)		(0.9)
Total internal growth	10.6		(2.7)		7.9		(2.3)
Acquisitions / divestitures, net	3.5		(0.1)		2.1		0.5
Total	14.1	%	(2.8)	%	10.0	%	(1.8)	%

Core price	5.2	%	4.5	%	4.9	%	4.8	%

Average yield is defined as revenue growth from the change in average price per unit of service, expressed as a percentage. Core price is defined as price increases to our customers and fees, excluding fuel recovery fees, net of price decreases to retain customers. We also measure changes in average yield and core price as a percentage of related-business revenue, defined as total revenue excluding recycled commodities and fuel recovery fees, to determine the effectiveness of our pricing strategies. Average yield as a percentage of related-business revenue was 3.4% and 2.9% for the three and nine months ended September 30, 2021, respectively, and 2.8% for each of the same respective periods in 2020. Core price as a percentage of related-business revenue was 5.4% and 5.1% for the three and nine months ended September 30, 2021, respectively, and 4.8% and 5.1% for the same respective periods in 2020.

The following table reflects changes in average yield and volume, as a percentage of total revenue by line of business, for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	Yield		Volume		Yield		Volume		Yield		Volume		Yield		Volume
Collection:
Residential	3.7	%	(0.3)	%	3.1	%	(1.6)	%	3.5	%	(0.4)	%	2.6	%	(1.5)	%
Small-container	3.2	%	5.4	%	3.8	%	(4.8)	%	2.8	%	3.6	%	3.9	%	(4.6)	%
Large-container	4.8	%	3.9	%	1.9	%	(5.4)	%	3.0	%	4.9	%	2.3	%	(6.2)	%
Landfill:
Municipal solid waste	2.2	%	1.3	%	2.3	%	3.3	%	2.4	%	3.4	%	2.7	%	(0.2)	%
Construction and demolition waste	2.2	%	0.8	%	5.4	%	(2.5)	%	2.7	%	2.5	%	5.6	%	4.6	%
Special waste	—	%	16.9	%	—	%	(11.7)	%	—	%	14.7	%	—	%	(11.0)	%

COST OF OPERATIONS

The following table summarizes the major components of our cost of operations for the three and nine months ended September 30, 2021 and 2020 (in millions of dollars and as a percentage of revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Labor and related benefits	$	588.2	20.0	%	$	546.0	21.2	%	$	1,715.4	20.6	%	$	1,617.1	21.3	%
Transfer and disposal costs	228.9		7.8		206.9		8.0		641.3		7.7		594.7		7.9
Maintenance and repairs	273.9		9.3		246.5		9.6		770.9		9.2		726.0		9.6
Transportation and subcontract costs	206.2		7.0		172.7		6.7		565.5		6.8		501.0		6.6
Fuel	100.4		3.4		66.1		2.6		271.7		3.3		204.4		2.7
Disposal fees and taxes	87.0		3.0		79.7		3.1		252.4		3.0		234.0		3.1
Landfill operating costs	61.9		2.1		60.0		2.4		188.2		2.3		190.1		2.5
Risk management	74.8		2.6		48.8		1.9		186.8		2.2		162.3		2.1
Other	122.7		4.2		108.7		4.2		335.8		4.0		334.5		4.4
Subtotal	1,744.0		59.4		1,535.4		59.7		4,928.0		59.1		4,564.1		60.2
Bridgeton insurance recovery	—		—		—		—		—		—		(10.8)		(0.1)
Total cost of operations	$	1,744.0	59.4	%	$	1,535.4	59.7	%	$	4,928.0	59.1	%	$	4,553.3	60.1	%

These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies and of ours for prior periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The following table summarizes our selling, general and administrative expenses for the three and nine months ended September 30, 2021 and 2020 (in millions of dollars and as a percentage of revenue):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Salaries	$	210.1	7.2	%	$	183.4	7.1	%	$	626.9	7.5	%	$	555.8	7.3	%
Provision for doubtful accounts	7.2		0.2		6.1		0.3		18.7		0.2		22.0		0.3
Other	81.7		2.8		66.6		2.6		219.3		2.7		217.5		2.9
Subtotal	$	299.0	10.2	%	$	256.1	10.0	%	$	864.9	10.4	%	$	795.3	10.5	%
Accelerated vesting of compensation expense for CEO transition	$	—	—	%	$	—	—	%	$	15.4	0.2	%	$	—	—	%
Total selling, general and administrative expenses	$	299.0	10.2	%	$	256.1	10.0	%	$	880.3	10.6	%	$	795.3	10.5	%

These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to those of other companies and of ours for prior periods.

RECONCILIATION OF CERTAIN NON-GAAP MEASURES

EBITDA

The following table calculates EBITDA, which is not a measure determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income attributable to Republic Services, Inc.	$	350.3	$	260.0	$	977.3	$	731.8
Net income attributable to noncontrolling interests	0.5		0.2		1.9		1.5
Provision (benefit) for income taxes	119.9		58.5		319.0		208.1
Other (income) loss, net	0.9		(1.9)		(0.6)		(3.7)
Interest income	(0.6)		(0.5)		(2.0)		(4.0)
Interest expense	78.1		88.9		234.9		277.4
Depreciation, amortization and depletion	301.3		270.7		886.5		808.4
Accretion	20.8		20.7		61.9		62.4
EBITDA	$	871.2	$	696.6	$	2,478.9	$	2,081.9

We believe that presenting EBITDA is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash and other costs. EBITDA demonstrates our ability to execute our financial strategy, which includes reinvesting in existing capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit ratings and minimizing debt, paying cash dividends, repurchasing our common stock, and maintaining and improving our market position through business optimization. This measure has limitations. Although depreciation, depletion, amortization and accretion are considered operating costs in accordance with U.S. GAAP, they represent the allocation of non-cash costs generally associated with long-lived assets acquired or constructed in prior years. Our definition of EBITDA may not be comparable to similarly titled measures presented by other companies.

Adjusted Earnings

Reported diluted earnings per share was $1.10 and $3.06 for the three and nine months ended September 30, 2021, respectively, compared to $0.81 and $2.29 for the same respective periods in 2020. During the three and nine months ended September 30, 2021 and 2020, we recorded a number of charges and other expenses and gains that impacted our EBITDA, pre-tax income, net income attributable to Republic Services, Inc. (net income – Republic) and diluted earnings per share. For comparative purposes, certain prior year amounts have been reclassified to conform to current year presentation. The table below sets forth such measures on an adjusted basis to exclude such charges, other expenses and gains:

	Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
					Net		Diluted						Net		Diluted
			Pre-tax		Income –		Earnings				Pre-tax		Income –		Earnings
	EBITDA		Income		Republic		per Share		EBITDA		Income		Republic		per Share
As reported	$	871.2	$	470.7	$	350.3	$	1.10	$	696.6	$	318.7	$	260.0	$	0.81
Loss from unconsolidated equity method investments	15.1		—		—		—		8.2		—		—		—
Loss on extinguishment of debt and other related costs	—		—		—		—		34.5		34.5		25.5		0.08
Restructuring charges	4.6		4.6		3.4		0.01		9.8		9.8		7.2		0.02
Loss on business divestitures and impairments, net	—		—		—		—		31.5		31.5		26.6		0.09
Total adjustments	19.7		4.6		3.4		0.01		84.0		75.8		59.3		0.19
As adjusted	$	890.9	$	475.3	$	353.7	$	1.11	$	780.6	$	394.5	$	319.3	$	1.00


	Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
					Net		Diluted						Net		Diluted
			Pre-tax		Income –		Earnings				Pre-tax		Income –		Earnings
	EBITDA		Income		Republic		per Share		EBITDA		Income		Republic		per Share
As reported	$	2,478.9	$	1,298.2	$	977.3	$	3.06	$	2,081.9	$	941.4	$	731.8	$	2.29
Loss from unconsolidated equity method investments	44.0		—		—		—		30.8		—		—		—
Loss on extinguishment of debt and other related costs	—		—		—		—		34.5		34.5		25.5		0.08
Restructuring charges	11.2		11.2		8.2		0.02		15.8		15.8		11.7		0.04
(Gain) loss on business divestitures and impairments, net ⁽¹⁾	(0.2)		(0.2)		(0.1)		—		32.9		32.9		30.1		0.10
Withdrawal costs – multiemployer pension funds	—		—		—		—		35.9		35.9		26.5		0.08
Accelerated vesting of compensation expense for CEO transition	15.4		15.4		15.4		0.05		—		—		—		—
Bridgeton insurance recovery	—		—		—		—		(10.8)		(10.8)		(8.2)		(0.03)
Total adjustments	70.4		26.4		23.5		0.07		139.1		108.3		85.6		0.27
As adjusted	$	2,549.3	$	1,324.6	$	1,000.8	$	3.13	$	2,221.0	$	1,049.7	$	817.4	$	2.56

(1) The aggregate impact to adjusted diluted earnings per share totals to less than $0.01 for the nine months ended September 30, 2021.

We believe that presenting adjusted EBITDA, adjusted pre-tax income, adjusted net income – Republic, and adjusted diluted earnings per share, which are not measures determined in accordance with U.S. GAAP, provide an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges, costs and recoveries in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted EBITDA, adjusted pre-tax income, adjusted net income – Republic, and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. Further information on each of these adjustments is included below.

Loss on extinguishment of debt. During the three and nine months ended September 30, 2020, we incurred a $34.5 million loss on the early extinguishment of debt related to the redemption of our $600.0 million 5.250% senior notes due November 2021.

Restructuring charges. In 2020, we incurred costs related to the redesign of certain back-office software systems, which continued into 2021. In addition, in July 2020, we eliminated certain back-office support positions in response to a decline in the underlying demand for services resulting from the COVID-19 pandemic.

(Gain) loss on business divestitures and impairments, net. During the nine months ended September 30, 2021, we recorded a net gain on business divestitures and impairments of $(0.2) million. During the three and nine months ended September 30, 2020, we recorded a net loss on business divestitures and impairments of $31.5 million and $32.9 million, respectively.

Withdrawal costs – multiemployer pension funds. During 2020, we recorded charges to earnings for withdrawal events at multiemployer pension funds to which we contribute. As we obtain updated information regarding multiemployer pension funds, the factors used in deriving our estimated withdrawal liabilities will be subject to change, which may adversely impact our reserves for withdrawal costs.

Accelerated vesting of compensation expense for CEO transition. In June 2021, Donald W. Slager retired as Chief Executive Officer (CEO) of Republic Services, Inc. During the nine months ended September 30, 2021, we recognized a charge of $15.4 million related to the accelerated vesting of his compensation awards that were previously scheduled to vest in 2022 and beyond.

Bridgeton insurance recovery. During the nine months ended September 30, 2020, we recognized an insurance recovery related to our closed Bridgeton Landfill in Missouri as a reduction of remediation expenses in our cost of operations.

Adjusted Free Cash Flow

The following table calculates our adjusted free cash flow, which is not a measure determined in accordance with U.S. GAAP, for the nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
	2021		2020
Cash provided by operating activities	$	2,137.8	$	1,909.0
Property and equipment received	(801.3)		(818.7)
Proceeds from sales of property and equipment	10.8		24.8
Cash paid related to withdrawal costs – multiemployer pension funds, net of tax	—		23.4
Restructuring payments, net of tax	8.9		8.8
Divestiture related tax payments	0.1		(2.7)
Cash tax benefit for debt extinguishment	—		(9.1)
Bridgeton insurance recovery, net of tax	—		(26.4)
Adjusted free cash flow	$	1,356.3	$	1,109.1

We believe that presenting adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after certain expenditures or recoveries. It also demonstrates our ability to execute our financial strategy and is a key metric we use to determine compensation. The presentation of adjusted free cash flow has material limitations. Adjusted free cash flow does not represent our cash flow available for discretionary payments because it excludes certain payments that are required or to which we have committed, such as debt service requirements and dividend payments. Our definition of adjusted free cash flow may not be comparable to similarly titled measures presented by other companies.

Purchases of property and equipment as reflected on our consolidated statements of cash flows represent amounts paid during the period for such expenditures. A reconciliation of property and equipment expenditures reflected on our consolidated statements of cash flows to property and equipment received during the period follows for the nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
	2021		2020
Purchases of property and equipment per the unaudited consolidated statements of cash flows	$	904.2	$	889.0
Adjustments for property and equipment received during the prior period but paid for in the following period, net	(102.9)		(70.3)
Property and equipment received during the period	$	801.3	$	818.7

The adjustments noted above do not affect our net change in cash, cash equivalents, restricted cash and restricted cash equivalents as reflected in our consolidated statements of cash flows.

ACCOUNTS RECEIVABLE

As of September 30, 2021 and December 31, 2020, accounts receivable were $1,265.0 million and $1,091.3 million, net of allowance for doubtful accounts of $42.3 million and $34.7 million, respectively, resulting in days sales outstanding of 39.2, or 27.4 days net of deferred revenue, compared to 38.6, or 26.4 days net of deferred revenue, respectively.

CASH DIVIDENDS

In July 2021, we paid a cash dividend of $135.4 million to shareholders of record as of July 1, 2021. As of September 30, 2021, we recorded a quarterly dividend payable of $146.1 million to shareholders of record at the close of business on October 1, 2021, which was paid on October 15, 2021.

SHARE REPURCHASE PROGRAM

During the three months ended September 30, 2021, we repurchased 1.0 million shares of our stock for $123.3 million at a weighted average cost per share of $122.72. As of September 30, 2021, the remaining authorized purchase capacity under our October 2020 repurchase program was $1.8 billion.

2021 FINANCIAL GUIDANCE

Adjusted Diluted Earnings per Share

The following is a summary of anticipated adjusted diluted earnings per share for the year ending December 31, 2021, which is not a measure determined in accordance with U.S. GAAP:

	(Anticipated) Year Ending December 31, 2021
Diluted earnings per share	$4.01 to $4.04
Restructuring charges	0.04
Accelerated vesting of compensation expense for CEO transition	0.05
Adjusted diluted earnings per share	$4.10 to $4.13

We believe that presenting adjusted diluted earnings per share provides an understanding of operational activities before the financial impact of certain items. We use this measure, and believe investors will find it helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges, costs and recoveries in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.

Adjusted Free Cash Flow

Our anticipated adjusted free cash flow for the year ending December 31, 2021, which is not a measure determined in accordance with U.S. GAAP, is calculated as follows:

	(Anticipated) Year Ending December 31, 2021
Cash provided by operating activities	$2,735 to $2,770
Property and equipment received	(1,290 to 1,300)
Proceeds from sales of property and equipment	15
Restructuring payments, net of tax	15
Adjusted free cash flow	$1,475 to $1,500

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “guidance,” “expect,” “will,” “may,” “anticipate,” “plan,” “estimate,” “project,” “intend,” “should,” “can,” “likely,” “could,” “outlook” and similar expressions are intended to identify forward-looking statements. These statements include information about our plans, strategies and prospects. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of our management and are subject to risk and uncertainties that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that the expectations will prove to be correct. Among the factors that could cause actual results to differ materially from the expectations expressed in the forward-looking statements are the effects of the COVID-19 pandemic and actions taken in response thereto, acts of war, riots or terrorism, and the impact of these acts on economic, financial and social conditions in the United States as well as our dependence on large, long-term collection, transfer and disposal contracts. More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2020, particularly under Part I, Item 1A – Risk Factors. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, or to assess the impact such risk factors might have on our business. We undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

View original content to download multimedia:https://www.prnewswire.com/news-releases/republic-services-inc-reports-third-quarter-2021-results-301411326.html

SOURCE Republic Services, Inc.

October 28, 2021 4:16 pm

Vicarious Surgical to Present at the Credit Suisse 30th Annual Healthcare Conference

Vicarious Surgical to Present at the Credit Suisse 30^th Annual Healthcare Conference

WALTHAM, Mass.–(BUSINESS WIRE)–
Vicarious Surgical Inc. (“Vicarious Surgical” or the “Company”) (NYSE: RBOT, RBOT WS), a next-generation robotics technology company seeking to improve patient outcomes as well as both cost and efficiency of surgical procedures, today announced that management will participate in the Credit Suisse 30^th Annual Healthcare Conference. Management is scheduled to present on Thursday, November 11^th at 3:30 p.m. Eastern Time and will participate in virtual investor meetings throughout the day.

A live webcast of the presentation will be accessible to the public on the Company’s website at https://www.vicarioussurgical.com/. An archive of the webcast will be available for replay following the conference.

About Vicarious Surgical

Founded in 2014, Vicarious Surgical is a next generation robotics company developing a disruptive technology with the goals of increasing the efficiency of surgical procedures, improving patient outcomes and reducing healthcare costs. The Company’s novel surgical approach uses a combination of proprietary human-like surgical robots and virtual reality to transport surgeons inside the patient to perform minimally invasive surgery. The Company’s technology was granted Breakthrough Device Designation by the FDA, and Vicarious Surgical believes the Vicarious System is the first surgical robot to receive this designation from the FDA. The Company is led by an experienced team of technologists, medical device professionals and physicians, and is backed by technology luminaries including Bill Gates, Vinod Khosla’s Khosla Ventures, Innovation Endeavors, Jerry Yang’s AME Cloud Ventures, Sun Hung Kai & Co. Ltd and Philip Liang’s E15 VC. The Company is headquartered in Waltham, Mass. Learn more at www.vicarioussurgical.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006179/en/

Investor Contact

Lynn Lewis or Marissa Bych

Gilmartin Group

[email protected]

Press and Media Inquiries:

Jill Gross

Matter Communications

[email protected]

KEYWORDS: Massachusetts United States North America

INDUSTRY KEYWORDS: Medical Devices Health Technology Surgery Other Technology Hardware

MEDIA:

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October 28, 2021 4:15 pm

Eagle Point Income Company Inc. Announces Offering of Common Stock

Eagle Point Income Company Inc. Announces Offering of Common Stock

GREENWICH, Conn.–(BUSINESS WIRE)–
Eagle Point Income Company Inc. (the “Company”) (NYSE: EIC, EICA) today announced that it has commenced an underwritten public offering of its common stock (the “Common Stock”). The public offering price and other terms are to be determined by negotiations between the Company and the underwriter. In addition, the Company plans to grant the underwriter a 30-day option to purchase additional shares of Common Stock on the same terms and conditions to cover over-allotments, if any.

The Common Stock is listed on the New York Stock Exchange under the symbol “EIC.”

B. Riley Securities, Inc. is serving as the Sole Bookrunner for the offering.

Investors should consider the Company’s investment objectives, risks, charges, and expenses carefully before investing. The preliminary prospectus supplement dated October 28, 2021 and the accompanying prospectus dated May 29, 2020, which have been filed with the Securities and Exchange Commission (“SEC”), contain this and other information about the Company and should be read carefully before investing. The information in the preliminary prospectus supplement, the accompanying prospectus and this press release is not complete and may be changed. The preliminary prospectus supplement, the accompanying prospectus and this press release are not offers to sell these securities and are not soliciting an offer to buy these securities in any state where such offer or sale is not permitted.

A shelf registration statement on Form N-2 (Nos. 333-237583 and 811-23384) relating to these securities is on file with and has been declared effective by the SEC. The offering may be made only by means of a prospectus and a related prospectus supplement, copies of which may be obtained by writing B. Riley Securities, Inc., Attention: Prospectus Department, 1300 17th Street North, Suite 1300, Arlington, Virginia 22209, by telephone at (703) 312-9580 or by email at [email protected]; copies may also be obtained for free by visiting EDGAR on the SEC’s website at http://www.sec.gov.

ABOUT EAGLE POINT INCOME COMPANY

The Company is a non-diversified, closed-end management investment company. The Company’s primary investment objective is to generate high current income, with a secondary objective to generate capital appreciation, by investing primarily in junior debt tranches of collateralized loan obligations (“CLOs”). In addition, the Company may invest up to 35% of its total assets (at the time of investment) in CLO equity securities. The Company is externally managed and advised by Eagle Point Income Management LLC.

FORWARD-LOOKING STATEMENTS

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the prospectus and the Company’s other filings with the SEC. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006189/en/

Investor Relations:

ICR

203-340-8510

[email protected]

www.eaglepointincome.com

KEYWORDS: United States North America Connecticut

INDUSTRY KEYWORDS: Professional Services Finance

MEDIA:

October 28, 2021 4:15 pm

RumbleOn to Report Third Quarter 2021 Financial Results on November 15, 2021

RumbleOn to Report Third Quarter 2021 Financial Results on November 15, 2021

DALLAS–(BUSINESS WIRE)–
RumbleOn, Inc (NASDAQ: RMBL), the nation’s largest retailer of powersports vehicles, today announced it will release third quarter 2021 financial results before the market opens on November 15, 2021. On that day management will host a conference call and webcast at 8:30 a.m. ET to discuss the company’s business and financial results.

Third Quarter Conference Call and Webcast Details

What: RumbleOn Third Quarter 2021 Earnings Conference Call

When: Monday, November 15, 2021, at 8:30 a.m. ET

Dial In: To access the conference call via telephone please dial 1-877-407-9716 or 1-201-493-6779 for callers outside the United States and enter the conference ID 13724405

Webcast: A live and archived webcast of the conference call will be accessible from the Investor Relations section of the company’s website at https://investors.rumbleon.com.

About RumbleOn

RumbleOn (NASDAQ: RMBL) is the nation’s largest retailer of powersports vehicles and first omnichannel customer experience in powersports. Whether buying, selling, trading or financing a new or used vehicle, RumbleOn enables dealers and consumers to transact without geographic boundaries in a transparent, fast and friction free experience. The Company uses innovative technology to aggregate and distribute pre-owned vehicles and is disrupting the pre-owned vehicle supply chain by providing dealers with technology solutions such as virtual inventory, and a 24/7 distribution platform. RumbleOn offers customers a truly unique experience, wherever they want to shop, online or in-store. For more information, please visit http://www.rumbleon.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006081/en/

Investor Relations:

The Blueshirt Group

Hilary Sumnicht

[email protected]

KEYWORDS: Texas United States North America

INDUSTRY KEYWORDS: Motor Sports Motorcycles Sports Automotive

MEDIA:

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October 28, 2021 4:15 pm

Gilead Announces Clinical Trial Collaboration With Merck to Evaluate Trodelvy® (sacituzumab govitecan-hziy)in Combination With KEYTRUDA® (pembrolizumab) in Patients With First-Line Metastatic Triple-Negative Breast Cancer

Gilead Announces Clinical Trial Collaboration With Merck to Evaluate Trodelvy^® (sacituzumab govitecan-hziy)in Combination With KEYTRUDA^® (pembrolizumab) in Patients With First-Line Metastatic Triple-Negative Breast Cancer

FOSTER CITY, Calif.–(BUSINESS WIRE)–
Gilead Sciences, Inc. (Nasdaq: GILD) today announced it has entered into a clinical trial collaboration and supply agreement with Merck (known as MSD outside of the United States and Canada) to evaluate the efficacy of Gilead’s Trop-2 targeting antibody-drug conjugate Trodelvy^® (sacituzumab govitecan-hziy) in combination with Merck’s anti-PD-1 therapy, KEYTRUDA^® (pembrolizumab), as a first-line treatment for patients with locally advanced or metastatic triple-negative breast cancer (TNBC).

Under the terms of the agreement, Gilead will sponsor a global Phase 3 clinical trial to evaluate Trodelvy in combination with KEYTRUDA compared to standard of care KEYTRUDA in combination with chemotherapy in first-line patients with locally advanced or metastatic TNBC.

“Trodelvy has already been established as a preferred treatment option in second-line metastatic TNBC,” said Merdad Parsey, MD, PhD, Chief Medical Officer, Gilead Sciences. “Looking ahead, we are excited about the opportunity to advance Trodelvy as a potential treatment for first-line metastatic TNBC. This helps further our ambition of displacing chemotherapy with Trodelvy to improve outcomes for people living with cancer.”

Metastatic TNBC has the worst survival rate among breast cancer subtypes, and there is an urgent need for new therapies that improve patient outcomes. Trodelvy is an antibody-drug conjugate that specifically targets Trop-2 expressing cells to enable local delivery of a cytotoxic payload that selectively kills the targeted cells. The combination of Trodelvy with an immune-stimulating agent such as KEYTRUDA could provide a novel regimen in first-line metastatic TNBC.

The Trodelvy U.S. Prescribing Information has a BOXED WARNING for severe or life-threatening neutropenia and severe diarrhea; see below for Important Safety Information.

The combination of Trodelvy and KEYTRUDA has not been approved by any regulatory agency in any treatment setting. The safety and efficacy of this combination is under investigation and has not been established.

KEYTRUDA^® is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc., Kenilworth, NJ, USA.

About Triple-Negative Breast Cancer (TNBC)

TNBC is the most aggressive type of breast cancer and accounts for approximately 15% of all breast cancers. TNBC is diagnosed more frequently in younger and premenopausal women and is more prevalent in Black and Hispanic women. TNBC cells do not have estrogen and progesterone receptors and have limited human epidermal growth factor receptor 2 (HER2). Due to the nature of TNBC, effective treatment options are extremely limited compared with other breast cancer types. TNBC has a higher chance of recurrence and metastases than other breast cancer types. The average time to metastatic recurrence for TNBC is approximately 2.6 years compared with 5 years for other breast cancers, and the relative five-year survival rate is much lower. Among women with metastatic TNBC, the five-year survival rate is 12%, compared with 28% for those with other types of metastatic breast cancer.

About Trodelvy

Trodelvy (sacituzumab govitecan-hziy) is a first-in-class antibody and topoisomerase inhibitor conjugate directed to the Trop-2 receptor, a protein overexpressed in multiple types of epithelial tumors, including metastatic TNBC and metastatic urothelial cancer (UC), where high expression is associated with poor survival and relapse. Beyond the approvals of Trodelvy in the United States, it is also approved in Australia, Canada, Great Britain and Switzerland for adults with metastatic TNBC. Trodelvy is also under multiple regulatory reviews worldwide, including the EU, as well as in Singapore and China through our partner Everest Medicines. Trodelvy continues to be developed for potential use in other TNBC and metastatic UC populations and is also being developed as an investigational treatment for hormone receptor-positive/human epidermal growth factor receptor 2-negative (HR+/HER2-) metastatic breast cancer and metastatic non-small cell lung cancer. Additional evaluation across multiple solid tumors is also underway.

In the United States, Trodelvy is indicated for the treatment of:

Adult patients with unresectable locally advanced or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for metastatic disease.
Adult patients with locally advanced or metastatic UC who have previously received a platinum-containing chemotherapy and either programmed death receptor-1 (PD-1) or programmed death-ligand 1 (PD-L1) inhibitor.

U.S. Important Safety Information for Trodelvy

BOXED WARNING: NEUTROPENIA AND DIARRHEA

Severe or life-threatening neutropenia may occur. Withhold Trodelvy for absolute neutrophil count below 1500/mm³ or neutropenic fever. Monitor blood cell counts periodically during treatment. Consider G-CSF for secondary prophylaxis. Initiate anti-infective treatment in patients with febrile neutropenia without delay.

Severe diarrhea may occur. Monitor patients with diarrhea and give fluid and electrolytes as needed. Administer atropine, if not contraindicated, for early diarrhea of any severity. At the onset of late diarrhea, evaluate for infectious causes and, if negative, promptly initiate loperamide. If severe diarrhea occurs, withhold Trodelvy until resolved to ≤Grade 1 and reduce subsequent doses.

CONTRAINDICATIONS

Severe hypersensitivity reaction to Trodelvy.

WARNINGS AND PRECAUTIONS

Neutropenia: Severe, life-threatening, or fatal neutropenia can occur and may require dose modification. Neutropenia occurred in 61% of patients treated with Trodelvy. Grade 3-4 neutropenia occurred in 47% of patients. Febrile neutropenia occurred in 7%. Withhold Trodelvy for absolute neutrophil count below 1500/mm³ on Day 1 of any cycle or neutrophil count below 1000/mm³ on Day 8 of any cycle. Withhold Trodelvy for neutropenic fever.

Diarrhea: Diarrhea occurred in 65% of all patients treated with Trodelvy. Grade 3-4 diarrhea occurred in 12% of patients. One patient had intestinal perforation following diarrhea. Neutropenic colitis occurred in 0.5% of patients. Withhold Trodelvy for Grade 3-4 diarrhea and resume when resolved to ≤Grade 1. At onset, evaluate for infectious causes and if negative, promptly initiate loperamide, 4 mg initially followed by 2 mg with every episode of diarrhea for a maximum of 16 mg daily. Discontinue loperamide 12 hours after diarrhea resolves. Additional supportive measures (e.g., fluid and electrolyte substitution) may also be employed as clinically indicated. Patients who exhibit an excessive cholinergic response to treatment can receive appropriate premedication (e.g., atropine) for subsequent treatments.

Hypersensitivity and Infusion-Related Reactions: Serious hypersensitivity reactions including life-threatening anaphylactic reactions have occurred with Trodelvy. Severe signs and symptoms included cardiac arrest, hypotension, wheezing, angioedema, swelling, pneumonitis, and skin reactions. Hypersensitivity reactions within 24 hours of dosing occurred in 37% of patients. Grade 3-4 hypersensitivity occurred in 2% of patients. The incidence of hypersensitivity reactions leading to permanent discontinuation of Trodelvy was 0.3%. The incidence of anaphylactic reactions was 0.3%. Pre-infusion medication is recommended. Observe patients closely for hypersensitivity and infusion-related reactions during each infusion and for at least 30 minutes after completion of each infusion. Medication to treat such reactions, as well as emergency equipment, should be available for immediate use. Permanently discontinue Trodelvy for Grade 4 infusion-related reactions.

Nausea and Vomiting: Nausea occurred in 66% of all patients treated with Trodelvy and Grade 3 nausea occurred in 4% of these patients. Vomiting occurred in 39% of patients and Grade 3-4 vomiting occurred in 3% of these patients. Premedicate with a two or three drug combination regimen (e.g., dexamethasone with either a 5-HT3 receptor antagonist or an NK1 receptor antagonist as well as other drugs as indicated) for prevention of chemotherapy-induced nausea and vomiting (CINV). Withhold Trodelvy doses for Grade 3 nausea or Grade 3-4 vomiting and resume with additional supportive measures when resolved to Grade ≤1. Additional antiemetics and other supportive measures may also be employed as clinically indicated. All patients should be given take-home medications with clear instructions for prevention and treatment of nausea and vomiting.

Increased Risk of Adverse Reactions in Patients with Reduced UGT1A1 Activity: Patients homozygous for the uridine diphosphate-glucuronosyl transferase 1A1 (UGT1A1)*28 allele are at increased risk for neutropenia, febrile neutropenia, and anemia and may be at increased risk for other adverse reactions with Trodelvy. The incidence of Grade 3-4 neutropenia was 67% in patients homozygous for the UGT1A1*28, 46% in patients heterozygous for the UGT1A1*28 allele and 46% in patients homozygous for the wild-type allele. The incidence of Grade 3-4 anemia was 25% in patients homozygous for the UGT1A1*28 allele, 10% in patients heterozygous for the UGT1A1*28 allele, and 11% in patients homozygous for the wild-type allele. Closely monitor patients with known reduced UGT1A1 activity for adverse reactions. Withhold or permanently discontinue Trodelvy based on clinical assessment of the onset, duration and severity of the observed adverse reactions in patients with evidence of acute early-onset or unusually severe adverse reactions, which may indicate reduced UGT1A1 function.

Embryo-Fetal Toxicity: Based on its mechanism of action, Trodelvy can cause teratogenicity and/or embryo-fetal lethality when administered to a pregnant woman. Trodelvy contains a genotoxic component, SN-38, and targets rapidly dividing cells. Advise pregnant women and females of reproductive potential of the potential risk to a fetus. Advise females of reproductive potential to use effective contraception during treatment with Trodelvy and for 6 months after the last dose. Advise male patients with female partners of reproductive potential to use effective contraception during treatment with Trodelvy and for 3 months after the last dose.

ADVERSE REACTIONS

In the ASCENT study (IMMU-132-05), the most common adverse reactions (incidence ≥25%) were fatigue, neutropenia, diarrhea, nausea, alopecia, anemia, constipation, vomiting, abdominal pain, and decreased appetite. The most frequent serious adverse reactions (SAR) (>1%) were neutropenia (7%), diarrhea (4%), and pneumonia (3%). SAR were reported in 27% of patients, and 5% discontinued therapy due to adverse reactions. The most common Grade 3-4 lab abnormalities (incidence ≥25%) in the ASCENT study were reduced neutrophils, leukocytes, and lymphocytes.

In the TROPHY study (IMMU-132-06), the most common adverse reactions (incidence ≥25%) were diarrhea, fatigue, neutropenia, nausea, any infection, alopecia, anemia, decreased appetite, constipation, vomiting, abdominal pain, and rash. The most frequent serious adverse reactions (SAR) (≥5%) were infection (18%), neutropenia (12%, including febrile neutropenia in 10%), acute kidney injury (6%), urinary tract infection (6%), and sepsis or bacteremia (5%). SAR were reported in 44% of patients, and 10% discontinued due to adverse reactions. The most common Grade 3-4 lab abnormalities (incidence ≥25%) in the TROPHY study were reduced neutrophils, leukocytes, and lymphocytes.

DRUG INTERACTIONS

UGT1A1 Inhibitors: Concomitant administration of Trodelvy with inhibitors of UGT1A1 may increase the incidence of adverse reactions due to potential increase in systemic exposure to SN-38. Avoid administering UGT1A1 inhibitors with Trodelvy.

UGT1A1Inducers: Exposure to SN-38 may be substantially reduced in patients concomitantly receiving UGT1A1 enzyme inducers. Avoid administering UGT1A1 inducers with Trodelvy.

Please see full Prescribing Information, including BOXED WARNING.

About Gilead Sciences

Gilead Sciences, Inc. is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people. The company is committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis and cancer. Gilead operates in more than 35 countries worldwide, with headquarters in Foster City, California.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks, uncertainties and other factors, including Gilead’s ability to realize the anticipated benefits from this clinical trial collaboration and supply agreement; difficulties or unanticipated expenses in connection with the collaboration and the potential effects on Gilead’s revenues and earnings; Gilead’s ability to initiate, progress or complete clinical trials involving Trodelvy within currently anticipated timelines or at all, including a Phase 3 trial evaluating Trodelvy in combination with KEYTRUDA as a first-line treatment for metastatic TNBC; the possibility of unfavorable results from ongoing or additional trials involving Trodelvy; Gilead’s ability to receive regulatory approvals in a timely manner or at all, including additional regulatory approvals of Trodelvy for the treatment of TNBC, HR+/HER2- metastatic breast cancer, metastatic UC, metastatic non-small cell lung cancer and other solid tumors, and the risk that any such approvals may be subject to significant limitations on use; and any assumptions underlying any of the foregoing. These and other risks, uncertainties and other factors are described in detail in Gilead’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, as filed with the U.S. Securities and Exchange Commission. These risks, uncertainties and other factors could cause actual results to differ materially from those referred to in the forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and are cautioned not to place undue reliance on these forward-looking statements. All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation and disclaims any intent to update any such forward-looking statements.

U.S. Prescribing Information for Trodelvy including BOXED WARNING, is available at www.gilead.com.

Trodelvy, Gilead and the Gilead logo are trademarks ofGilead Sciences, Inc., or its related companies.

For more information about Gilead, please visit the company’s website at www.gilead.com, follow Gilead on Twitter (@GileadSciences) or call Gilead Public Affairs at 1-800-GILEAD-5 or 1-650-574-3000.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006064/en/

Jacquie Ross, Investors

(650) 358-1054

Nathan Kaiser, Media

(650) 522-1853

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: Oncology Health Hospitals Clinical Trials Pharmaceutical Biotechnology

MEDIA:

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October 28, 2021 4:15 pm

Hercules Capital Reports Third Quarter 2021 Financial Results

Hercules Capital Reports Third Quarter 2021 Financial Results

Record Q3 Total Gross Debt and Equity Commitments of $719.6 Million

Record Q3 Total Gross Fundings of $431.1 Million

Record Year-to-Date Total Gross Debt and Equity Commitments of $1.69 Billion

Record Year-to-Date Total Gross Fundings of $1.07 Billion

Record Undistributed Earnings Spillover of $181.7 Million, or $1.57⁽¹⁾ per Ending Shares Outstanding

Increased the Company’s Quarterly Base Cash Distribution to $0.33 per Share

Closed Public Offering of $325.0 Million 2.625% Notes due 2026

Q3 2021 Financial Achievements and Highlights

Net Investment Income “NII” of $38.1 million, or $0.33 per share
Total Investment Income of $70.2 million
Record total gross new debt and equity commitments of $719.6 million
- Record net Hercules’ debt and equity commitments of $619.9 million⁽²⁾
Record total gross fundings of $431.1 million
- Record net Hercules’ fundings of $371.5 million⁽²⁾
Unscheduled early principal repayments or “early loan repayments” of $318.9 million
$818.4 million of available liquidity, subject to existing terms and covenants
12.0% Return on Average Equity “ROAE” (NII/Average Equity)
5.7% Return on Average Assets “ROAA” (NII/Average Assets)
GAAP leverage of 106.4% and regulatory leverage of 101.6%⁽³⁾
Net Asset Value “NAV” of $11.54, a slight decrease of 1.5% from Q2 2021
12.7% GAAP Effective Yield and 11.4% Core Yield⁽⁴⁾, a non-GAAP measure

Year-to-date ending September 30, 2021 Financial Highlights

NII of $109.6 million, or $0.95 per share
- Total investment income of $208.5 million
Record total gross new equity and debt commitments of $1.69 billion, an increase of 62.5% year-over-year
- Record total gross fundings of $1.07 billion, an increase of 69.5% year-over-year
Net debt investment portfolio growth of $163.2 million
Unscheduled early loan repayments of $678.3 million

Footnotes:

$1.58 per Weighted Average Shares Outstanding
Net Hercules’ commitments and fundings are net of what was assigned to or directly committed or funded by the external funds “Adviser Funds” managed by Hercules Adviser LLC “Hercules Adviser” during the quarter
Regulatory leverage represents debt-to-equity ratio, excluding the Company’s Small Business Administration “SBA” debentures
Core Yield excludes early loan repayments and one-time fees, and includes income and fees from expired commitments

PALO ALTO, Calif.–(BUSINESS WIRE)–Hercules Capital, Inc. (NYSE: HTGC) (“Hercules” or the “Company”), the largest and leading specialty financing provider to innovative venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms, today announced its financial results for the third quarter ended September 30, 2021.

“Hercules’ leadership position, scale and brand reputation as the largest nonbank provider of venture and growth stage debt solutions, combined with a healthy capital markets environment, has created unprecedented deal opportunities in our core verticals with both new and existing portfolio companies,” stated Scott Bluestein, chief executive officer and chief investment officer of Hercules. “Our robust origination performance continued through Q3 2021 enabling Hercules to set new annual commitments and funding records of $1.69 billion and $1.07 billion year-to-date, respectively, with a quarter to go in the year.”

Bluestein added, “With our debt investment portfolio at $2.3 billion, at cost, combined with the size of our pipeline and record earnings spillover of nearly $182 million, or $1.57 per share, the Board has made the decision to increase our quarterly base distribution to $0.33 per share and has also declared a supplemental distribution of $0.07 per share for the third quarter. Furthermore, our most recent offering of 2.625% Notes exemplifies our active balance sheet management as we continue to lower our average cost of debt capital over the coming year. Our strong origination activity throughout 2021 has given us the opportunity to fund growth in both our public portfolio as well as our private funds. Given these factors and the overall continued strength of the VC ecosystem, we believe Hercules is exceptionally well positioned heading into Q4 and allowing us to remain focused on delivering strong total shareholder returns.”

Q3 2021 Review and Operating Results

Debt Investment Portfolio

Hercules delivered total gross new debt and equity commitments totaling $719.6 million and gross new fundings totaling $431.1 million.

During the third quarter, Hercules realized early loan repayments of $318.9 million, which along with normal scheduled amortization of $24.2 million, resulted in total debt repayments of $343.1 million.

The new debt investment origination and funding activities lead to a net debt investment portfolio increase of $23.9 million during the third quarter, on a cost basis.

The Company’s total investment portfolio, (at cost and fair value) by category, quarter-over-quarter is highlighted below:

Total Investment Portfolio: Q3 2021 to Q2 2021

				Equity & Other
(in millions)	Debt			Investments			Warrants			Total Portfolio
Balances at Cost at 6/30/21	$	2,238.8		$	135.1		$	25.1		$	2,399.0
New fundings^(a)		424.9			4.3			1.9			431.1
Fundings assigned to or directly funded by Adviser Funds		(59.1	)		—			(0.5	)		(59.6	)
Principal payments received on investments		(24.2	)		—			—			(24.2	)
Early payoffs^(b)		(318.9	)		—			—			(318.9	)
Net changes attributed to conversions, liquidations, and fees		1.2			(2.6	)		(0.6	)		(2.0	)
Net activity during Q3 2021		23.9			1.7			0.8			26.4
Balances at Cost at 9/30/21	$	2,262.7		$	136.8		$	25.9		$	2,425.4


Balances at Value at 6/30/21	$	2,243.4		$	231.0		$	46.7		$	2,521.1
Net activity during Q3 2021		23.9			1.7			0.8			26.4
Net change in unrealized appreciation (depreciation)		(3.7	)		(27.3	)		(4.6	)		(35.6	)
Total net activity during Q3 2021		20.2			(25.6	)		(3.8	)		(9.2	)
Balances at Value at 9/30/21	$	2,263.6		$	205.4		$	42.9		$	2,511.9

(a) New fundings amount includes $283K associated with revolver loans during Q3 2021.
(b) Early payoffs include $2.7M paydown on revolvers during Q3 2021.

Debt Investment Portfolio Balances by Quarter

(in millions)	Q3 2021	Q2 2021	Q1 2021	Q4 2020	Q3 2020

Ending Balance at Cost	$2,262.7	$2,238.8	$2,182.0	$2,099.5	$2,283.7

Weighted Average Balance	$2,193.0	$2,192.0	$2,119.0	$2,246.0	$2,217.0

Debt Investment Portfolio Composition by Quarter

(% of debt investment portfolio)	Q3 2021	Q2 2021	Q1 2021	Q4 2020	Q3 2020

First Lien Senior Secured	80.8%	82.1%	82.7%	84.2%	85.5%

Floating Rate w/Floors	95.9%	96.8%	96.8%	96.9%	97.9%

Effective Portfolio Yield and Core Portfolio Yield (“Core Yield”)

The effective yield on Hercules’ debt investment portfolio was 12.7% during Q3 2021, as compared to 12.7% for Q2 2021. The Company realized $318.9 million of early loan repayments in Q3 2021 compared to $167.9 million in Q2 2021, or an increase of 89.9%. Effective yields generally include the effects of fees and income accelerations attributed to early loan repayments, and other one-time events. Effective yields are materially impacted by the elevated or reduced levels of early loan repayments and derived by dividing total investment income by the weighted average earning investment portfolio assets outstanding during the quarter, which excludes non-interest earning assets such as warrants and equity investments.

Core yield, a non-GAAP measure, was 11.4% during Q3 2021, within the Company’s expected range of 11.0% to 12.0%, and decreased slightly compared to 11.5% in Q2 2021. Hercules defines core yield as yields that generally exclude any benefit from income related to early repayments attributed to the acceleration of unamortized income and prepayment fees and includes income from expired commitments.

Income Statement

Total investment income decreased slightly to $70.2 million for Q3 2021, compared to $70.3 million in Q3 2020. The slight decrease is primarily attributable to an increase in total fee income offset by a decrease in interest income between periods.

Non-interest and fee expenses were $18.7 million in Q3 2021 versus $15.0 million for Q3 2020. The increase was due to higher variable compensation, stock-based compensation and general and administrative expenses, due primarily to an increase in excise tax expenses.

Interest expense and fees were $14.7 million in Q3 2021, compared to $16.6 million in Q3 2020. The decrease was due to a lower weighted-average borrowings between periods.

The Company had a weighted average cost of borrowings comprised of interest and fees, of 4.9% in Q3 2021, as compared to 5.1% for Q3 2020. The decrease is primarily due to lower average higher-cost borrowings between periods.

NII – Net Investment Income

NII for Q3 2021 was $38.1 million, or $0.33 per share, based on 114.8 million basic weighted average shares outstanding, compared to $38.7 million, or $0.34 per share, based on 113.5 million basic weighted average shares outstanding in Q3 2020. The decrease is primarily attributable to a slight decrease in total investment income and a slight increase in the total net operating costs between periods.

Continued Credit Discipline and Strong Credit Performance

Hercules’ net cumulative realized gain/(loss) position, since its first origination activities in October 2004 through September 30, 2021, (including net loan, warrant and equity activity) on investments, totaled ($65.1) million, on a GAAP basis, spanning 17 years of investment activities.

When compared to total net new debt investment commitments during the same period of over $12.6 billion, the total realized gain/(loss) since inception of ($65.1) million represents approximately 52 basis points “bps,” or 0.52%, of cumulative debt commitments, or an effective annualized loss rate of 3.0 bps, or 0.03%.

Realized Gains/(Losses)

During Q3 2021, Hercules had net realized gains of $21.1 million comprised of gross realized gains of $25.0 million due to the sale of equity and warrant investments, offset by ($3.9) million of gross realized losses primarily due to the loss on debt extinguishment and the write-off of one debt investment.

Unrealized Appreciation/(Depreciation)

During Q3 2021, Hercules recorded ($35.6) million of net unrealized depreciation on our debt, equity and warrant investments, primarily attributable to ($23.6) million of unrealized depreciation due to the reversal of unrealized appreciation upon acquisition or liquidation of our equity and warrant investments, and ($8.3) million of net unrealized depreciation attributable to valuation movements on the equity, warrant portfolio, and investment fund portfolio.

Portfolio Asset Quality

As of September 30, 2021, the weighted average grade of the debt investment portfolio, at cost, improved to 1.92, compared to 1.93 as of June 30, 2021, based on a scale of 1 to 5, with 1 being the highest quality. Hercules’ policy is to generally adjust the credit grading down on its portfolio companies as they approach their expected need for additional growth equity capital to fund their respective operations for the next 9-14 months. Various companies in the Company’s portfolio will require additional rounds of funding from time to time to maintain their operations.

Additionally, Hercules may selectively downgrade portfolio companies, from time to time, if they are not meeting the Company’s financing criteria, or underperforming relative to their respective business plans.

As of September 30, 2021, grading of the debt investment portfolio at fair value, excluding warrants and equity investments, was as follows:

Credit Grading (at Fair Value), Q3 2021 – Q3 2020 ($ in millions)
	Q3 2021			Q22021			Q12021			Q42020			Q32020
Grade 1 – High	$	692.1	30.6%	$	637.2	28.4%	$	497.5	22.8%	$	411.0	19.6%	$	406.5	17.9%
Grade 2	$	1,103.8	48.8%	$	1,192.7	53.1%	$	1,240.7	56.8%	$	1,027.9	49.1%	$	1,053.1	46.5%
Grade 3	$	458.2	20.2%	$	403.8	18.0%	$	426.2	19.5%	$	621.3	29.7%	$	772.3	34.1%
Grade 4	$	8.3	0.4%	$	8.4	0.4%	$	20.4	0.9%	$	25.3	1.2%	$	26.7	1.2%
Grade 5 – Low	$	1.1	0.0%	$	1.3	0.1%	$	0.2	0.0%	$	8.9	0.4%	$	5.9	0.3%

Weighted Avg. (at Cost)		1.92			1.93			2.01			2.16			2.22

Non-Accruals

Non-accruals remained the same as a percentage of the overall investment portfolio in the third quarter of 2021. As of September 30, 2021, the Company had three (3) debt investments on non-accrual with an investment cost and fair value of approximately $23.9 million and $8.7 million, respectively, or 1.0% and 0.3% as a percentage of the Company’s total investment portfolio at cost and value, respectively.

Compared to June 30, 2021, the Company had three (3) debt investments on non-accrual with an investment cost and fair value of approximately $23.0 million and $7.7 million, respectively, or 1.0% and 0.3% as a percentage of the total investment portfolio at cost and value, respectively.

	Q3 2021	Q2 2021	Q1 2021	Q4 2020	Q3 2020

Total Investments at Cost	$2,425.4	$2,399.0	$2,403.8	$2,315.4	$2,505.8

Loans on non-accrual as a % of Total Investments at Value	0.3%	0.3%	0.3%	0.5%	0.3%

Loans on non-accrual as a % of Total Investments at Cost	1.0%	1.0%	1.0%	1.3%	0.9%

Liquidity and Capital Resources

The Company ended Q3 2021 with $818.4 million in available liquidity, including $235.9 million in unrestricted cash and cash equivalents, and $582.5 million in available credit facilities and SBA debentures, subject to existing terms and advance rates and regulatory and covenant requirements.

On July 1, 2021, the Company fully redeemed the aggregate outstanding $75.0 million of principal and $0.6 million of accrued interest pursuant to the redemption terms of the April 2025 Notes Indenture. The Company recognized a realized loss of $1.5 million due to the extinguishment of the debt.

In September 2021, the Company closed an underwritten public offering of $325.0 million in aggregate principal amount of 2.625% notes due 2026 (the “Notes”). The Notes are unsecured and bear interest at a rate of 2.625% per year, payable semiannually and will mature on September 16, 2026, and may be redeemed in whole or in part at any time or from time to time at the Company’s option at par, plus a “make-whole” premium, if applicable. The proceeds from the offering were used to redeem the aggregate outstanding principal and accrued interest of the 2027 and 2028 Asset-Backed Notes.

Bank Facilities

As of September 30, 2021, there were no outstanding borrowings under the Hercules’ $400.0 million committed credit facility with Union Bank as Agent and no outstanding borrowings under the Hercules’ $75.0 million committed credit facility with Wells Fargo Capital Finance.

Leverage

As of September 30, 2021, Hercules’ GAAP leverage ratio, including its SBA debentures, was 106.4%. Hercules’ regulatory leverage, or debt-to-equity ratio, excluding its SBA debentures, was 101.6% and net regulatory leverage, a non-GAAP measure (excluding cash of approximately $235.9 million), was 84.0%. Hercules’ net leverage ratio, including its SBA debentures, was 88.8%. The leverage ratios in Q3 2021 do not reflect the impact of the redemption of the 2027 and 2028 Asset-Backed Notes which occurred subsequent to quarter end.

Available Unfunded Commitments – Representing 11.1% of Total Assets

The Company’s unfunded commitments and contingencies consist primarily of unused commitments to extend credit in the form of loans to select portfolio companies. A portion of these unfunded contractual commitments are dependent upon the portfolio company reaching certain milestones in order to gain access to additional funding. Furthermore, the credit agreements the Company enters into with its portfolio companies contain customary lending provisions that allow us relief from funding obligations for previously made commitments. In addition, since a portion of these commitments may also expire without being drawn, unfunded contractual commitments do not necessarily represent future cash requirements.

As of September 30, 2021, the Company had $309.9 million of available unfunded commitments at the request of the portfolio company and unencumbered by any milestones, including undrawn revolving facilities, representing 11.1% of Hercules’ total assets. This decreased from the previous quarter of $327.3 million of available unfunded commitments or 12.7% of Hercules’ total assets.

Existing Pipeline and Signed Term Sheets

After closing $719.6 million in new debt and equity commitments in Q3 2021, Hercules has pending commitments of $377.4 million in signed non-binding term sheets outstanding as of October 25, 2021. Since the close of Q3 2021 and as of October 25, 2021, Hercules has closed new gross debt and equity commitments of $125.0 million and funded $50.3 million.

Signed non-binding term sheets are subject to satisfactory completion of Hercules’ due diligence and final investment committee approval process as well as negotiations of definitive documentation with the prospective portfolio companies. These non-binding term sheets generally convert to contractual commitments in approximately 90 days from signing and some portion may be assigned or allocated to or directly originated by private funds managed by Hercules Adviser prior to or after closing. It is important to note that not all signed non-binding term sheets are expected to close and do not necessarily represent future cash requirements or investments.

Net Asset Value

As of September 30, 2021, the Company’s net assets were $1.34 billion, compared to $1.36 billion at the end of Q2 2021. NAV per share decreased 1.5% to $11.54 on 115.9 million outstanding shares of common stock as of September 30, 2021, compared to $11.71 on 115.9 million outstanding shares of common stock as of June 30, 2021. The decrease in NAV per share was primarily attributed to the net change in unrealized depreciation between periods.

Interest Rate Sensitivity

Hercules has an asset sensitive debt investment portfolio with 95.9% of its debt investment portfolio being priced at floating interest rates as of September 30, 2021, with a Prime or LIBOR-based interest rate floor, combined with 100% of its outstanding debt borrowings bearing fixed interest rates, leading to higher net investment income sensitivity.

Based on Hercules’ Consolidated Statement of Assets and Liabilities as of September 30, 2021, the following table shows the approximate annualized increase/(decrease) in components of net income resulting from operations of hypothetical base rate changes in interest rates, such as Prime Rate, assuming no changes in Hercules’ debt investments and borrowings. These estimates are subject to change due to the impact from active participation in the Company’s equity ATM program and any future equity offerings.

(in thousands)	Interest			Interest			Net			EPS⁽²⁾
Basis Point Change	Income⁽¹⁾			Expense			Income
(75)	$	(49	)	$	(11	)	$	(38	)	$	–
(50)	$	(49	)	$	(11	)	$	(38	)	$	–
(25)	$	(38	)	$	(11	)	$	(27	)	$	–
25	$	3,920		$	28		$	3,892		$	0.03
50	$	7,840		$	56		$	7,784		$	0.07
75	$	11,760		$	84		$	11,676		$	0.10
100	$	15,730		$	111		$	15,619		$	0.14
200	$	32,869		$	223		$	32,646		$	0.28

⁽¹⁾		Source: Hercules Capital Form 10-Q for Q3 2021
⁽²⁾		EPS calculated on basic weighted shares outstanding of 114,805. Estimates are subject to change due to impact from active participation in the Company’s equity ATM program and any future equity offerings.

Existing Equity and Warrant Portfolio

Equity Portfolio

Hercules held equity positions in 71 portfolio companies with a fair value of $204.4 million and a cost basis of $135.6 million as of September 30, 2021. On a fair value basis, 52.9% or $108.6 million is related to existing public equity positions.

Warrant Portfolio

Hercules held warrant positions in 94 portfolio companies with a fair value of $42.9 million and a cost basis of $25.9 million as of September 30, 2021. On a fair value basis, 33.4% or $14.3 million is related to existing public warrant positions.

Portfolio Company IPO and M&A Activity

As of October 25, 2021 year-to-date, Hercules has had 33 portfolio companies complete or announce an IPO or M&A event, which is comprised of: 13 IPOs, 13 M&A events and seven (7) portfolio companies that have registered for the IPOs, or have entered into definitive agreements to go public via a merger or special purpose acquisition company, or “SPAC.”

IPO Activity in Q3 2021 and YTD Q4 2021

As of October 25, 2021, Hercules held debt, warrant or equity positions in three (3) portfolio companies that have completed their IPOs and seven (7) companies that have registered for their IPOs or have entered into definitive agreements to go public via a merger or SPAC, including:

Completed:

In August 2021, Hercules’ portfolio company Rocket Lab (NASDAQ: RKLB), a developer of launch and space systems, completed its reverse merger initial public offering with Vector Acquisition Corp. (NASDAQ: VACQ), a SPAC. Hercules initially committed $100.0 million in venture debt financing beginning in June 2021.
In September 2021, Nerdy (NYSE: NRDY), the parent company of Hercules’ portfolio company Varsity Tutors, a technology developer of an online tutoring platform, completed its reverse merger initial public offering with TPG Pace Tech Opportunities (NYSE: PACE), a SPAC. Hercules initially committed $50.0 million in venture debt financing beginning in August 2019 and currently holds 100,000 shares of common stock as of September 30, 2021.
In September 2021, Hercules’ portfolio company VELO3D (NYSE: VLD), a developer of metal laser sintering printing machines intended to offer 3D printing, completed its reverse merger initial public offering with Jaws Spitfire Acquisition Corp. (NYSE: SPFR), a SPAC. Hercules initially committed $12.5 million in venture debt financing beginning in May 2021.

In Registration or SPAC:

In October 2021, Hercules’ portfolio company SeatGeek, a global technology ticketing marketplace and live entertainment technology platform, announced it has entered into a definitive agreement for a reverse merger initial public offering with RedBall Acquisition Corp. (NYSE: RBAC), a SPAC with a focus on sports, media and data analytics. Hercules initially committed $60.0 million in venture debt financing in June 2019 and currently holds warrants for 1,379,761 shares of common stock as of September 30, 2021.
In September 2021, Hercules’ portfolio company Intuity Medical, a commercial-stage medical technology and digital health company focused on developing comprehensive solutions to improve the health and quality of life of people with diabetes, announced it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission for an initial public offering. Intuity intends to list its common stock on the Nasdaq Global Select Market under the stock symbol “POGO.” Hercules initially committed $30.0 million in venture debt financing beginning in December 2017 and currently hold warrants for 3,076,323 of Preferred Series B-1 stock as of September 30, 2021.
In July 2021, Hercules’ portfolio company Gelesis Inc., a biotherapeutics company advancing superabsorbent hydrogels to treat excess weight and metabolic disorders, announced it has entered into a definitive agreement for a reverse merger initial public offering with Capstar Special Purpose Acquisition Corp. (NYSE: CPSR), a SPAC. Upon completion of the merger, the combined company will be listed on the New York Stock Exchange under the ticker symbol “GLS.” Hercules initially committed $3.0 million in venture debt financing in August 2008 and currently holds 227,013 shares of common stock, 243,432 shares of Preferred Series A-1 stock and 191,626 shares of Preferred Series A-2 stock as of September 30, 2021.
In July 2021, Hercules’ portfolio company Nextdoor, a provider of a social network that connects neighbors, announced it has entered into a definitive agreement for a reverse merger initial public offering with Khosla Ventures Acquisition Co. II (NASDAQ: KVSB), a SPAC. Upon completion of the merger, the combined company will be listed on the New York Stock Exchange under the ticker symbol “KIND.” Hercules currently holds 328,190 shares of common stock as of September 30, 2021.
In July 2021, Hercules’ portfolio company Planet Labs, an earth data and analytics company, announced it has entered into a definitive agreement for a reverse merger initial public offering with dMY Technology Group IV Inc. (NYSE: DMYQ), a SPAC. Upon completion of the merger, the combined company will be listed on the New York Stock Exchange under the ticker symbol “PL.” Hercules initially committed $25.0 million in venture debt financing beginning in June 2019 and currently holds warrants for 357,752 shares of common stock as of September 30, 2021.
In May 2021, Hercules’ portfolio company Valo Health LLC, a technology company using human-centric data and artificial intelligence powered computation to transform the drug discovery and development process, announced it has entered into a definitive agreement for a reverse merger initial public offering with Khosla Ventures Acquisition Co. (NASDAQ: KVAC), a SPAC. Upon completion of the merger, the combined company will be listed on the Nasdaq Global Select Market under the ticker symbol “VH.” Hercules initially committed $20.0 million in venture debt financing beginning in June 2020 and currently holds 510,308 shares of Preferred Series B stock and warrants for 102,216 shares of common stock as of September 30, 2021.
In March 2021, Hercules’ portfolio company Pineapple Energy, LLC, a U.S. operator and consolidator of residential solar, battery storage and grid services solutions, announced that it entered into a definitive merger agreement with Communications Systems, Inc. (NASDAQ: JCS), and IoT intelligent edge products and services company. Upon closing, CSI will commence doing business as Pineapple Energy, and expects shares of the combined company to continue to trade on the Nasdaq Global Select Market under the new ticker symbol “PEGY.” Hercules initially committed $12.3 million in venture debt financing beginning in December 2010 and currently holds 17,647 shares of Class A Units as of September 30, 2021.

There can be no assurances that companies that have yet to complete their IPOs will do so or that pending merger announcements will close.

M&A Activity in Q3 2021 and YTD Q4 2021

In October 2021, Hercules’ portfolio company Tapjoy, Inc., a mobile performance-based advertising platform that drives deep engagement and monetization opportunities for app developers, announced that they have entered into an agreement to be acquired by ironSource (NYSE: IS), a leading business platform for the App Economy, for approximately $400.0 million in cash. Hercules initially committed $20.0 million in venture debt financing beginning in July 2014 and currently holds warrants for 748,670 shares of Preferred Series D stock as of September 30, 2021.
In October 2021, Hercules’ portfolio company OneLogin, Inc., a leader in Unified Access Management, announced that they have been acquired by One Identity, an industry leader in Privileged Access Management, Identity Governance Administration, and Active Directory Management and Security. Terms of the acquisition were not disclosed. Hercules initially committed $40.0 million in venture debt financing beginning in February 2016 and currently holds warrants for 381,620 shares of common stock as of September 30, 2021.
In October 2021, Hercules’ portfolio company Clarabridge, a global leader in Customer Experience Management (CEM) for the world’s top brands, was acquired by Qualtrics (NASDAQ: XM), the leader and creator of the Experience Management (XM) category, for $1.125 billion in stock. Hercules initially committed $40.0 million in venture debt financing beginning in March 2017.
In September 2021, Hercules’ portfolio company Sapphire Digital, Inc., the healthcare industry’s leading platform for provider selection, patient access, price transparency, and digital consumer navigation, announced that they entered into a definitive agreement to be acquired by Zelis, a leading payments company in healthcare. Terms of the acquisition were not disclosed. Hercules initially committed $15.0 million in venture debt financing beginning in May 2017 and currently holds warrants for 2,812,500 shares of common stock as of September 30, 2021.
In September 2021, Hercules’ portfolio company EnvisageTechnologies, the leader in unified training, compliance, and performance software for public safety, was acquired Vector Solutions, the leading provider of industry-focused software solutions for training, workforce management and risk communications. Hercules initially committed $12.0 million in venture debt financing beginning in March 2020.

Subsequent Events

1. As of October 25, 2021, Hercules has:

Funded $50.3 million to new and existing commitments since the close of the third quarter 2021.
Pending commitments (signed non-binding term sheets) of $377.4 million.

The table below summarizes the Company’s year-to-date closed and pending commitments as follows:

Closed Commitments and Pending Commitments (in millions)
January 1 – September 30, 2021 Closed Commitments^(a)(c)	$1,691.4
Q4 2021 Closed Commitments (as of October 25, 2021)^(a)(c)	$125.0
Year-to-Date Closed Commitments	$1,816.4
Q4 2021 Pending Commitments (as of October 25, 2021)^(b)	$377.4
Year-to-Date 2021 Closed and Pending Commitments^(c)	$2,193.8

Notes:

Closed Commitments may include renewals of existing credit facilities and equity commitments. Not all Closed Commitments result in future cash requirements. Commitments generally fund over the two succeeding quarters from close.
Not all pending commitments (signed non-binding term sheets) are expected to close and do not necessarily represent any future cash requirements.
Gross commitments before assignments to or direct originations by the Adviser Funds.

2. On October 20, 2021, the Company fully redeemed the aggregate outstanding $289.2 million of principal and $1.1 million of accrued interest and fees pursuant to the redemption terms of the 2027 Asset-Backed and 2028 Asset-Backed Notes Indentures. The Company accelerated recognition of $2.7 million of debt issuance costs associated with the extinguishment of the debt in the fourth quarter, which would represent a $0.02 per share realized loss impact using the Company’s weighted average shares for the most recent quarter.

Conference Call

Hercules has scheduled its third quarter 2021 financial results conference call for October 28, 2021 at 2:00 p.m. PT (5:00 p.m. ET). To listen to the call, please dial (877) 304-8957 (or (408) 427-3709 internationally) and reference Conference ID: 9145314 if asked, approximately 10 minutes prior to the start of the call. A taped replay will be made available approximately three hours after the conclusion of the call and will remain available for seven days. To access the replay, please dial (855) 859-2056 or (404) 537-3406 and enter the passcode 9145314.

About Hercules Capital, Inc.

Hercules Capital, Inc. (NYSE: HTGC) is the leading and largest specialty finance company focused on providing senior secured venture growth loans to high-growth, innovative venture capital-backed companies in a broad variety of technology, life sciences and sustainable and renewable technology industries. Since inception (December 2003), Hercules has committed more than $12.8 billion to over 540 companies and is the lender of choice for entrepreneurs and venture capital firms seeking growth capital financing. Companies interested in learning more about financing opportunities should contact [email protected], or call 650.289.3060.

Hercules Capital, through its wholly owned subsidiary, Hercules Adviser LLC (“Hercules Adviser”), also maintains an asset management business through which it manages investments for external parties (“Adviser Funds”). Hercules Adviser is registered as an investment adviser under the Investment Advisers Act of 1940.

Hercules’ common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol “HTGC.” In addition, Hercules has one retail bond issuance of 6.25% Notes due 2033 (NYSE: HCXY).

Category: Earnings

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act.

The information disclosed in this press release is made as of the date hereof and reflects Hercules’ most current assessment of its historical financial performance. Actual financial results filed with the SEC may differ from those contained herein due to timing delays between the date of this release and confirmation of final audit results. These forward-looking statements are not guarantees of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements including, without limitation, the risks, uncertainties, including the uncertainties surrounding the current market volatility, and other factors the Company identifies from time to time in its filings with the SEC. Although Hercules believes that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this release are made as of the date hereof, and Hercules assumes no obligation to update the forward-looking statements for subsequent events.

HERCULES CAPITAL, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollars in thousands, except per share data)

	September 30, 2021		December 31, 2020
Assets
Investments:
Non-control/Non-affiliate investments (cost of $2,330,982 and $2,175,651, respectively)	$	2,436,307	$	2,288,338
Control investments (cost of $81,020 and $65,257, respectively)		65,835		57,400
Affiliate investments (cost of $13,387 and $74,450, respectively)		9,712		8,340
Total investments in securities, at value (cost of $2,425,389 and $2,315,358, respectively)		2,511,854		2,354,078
Cash and cash equivalents		235,851		198,282
Restricted cash		13,509		39,340
Interest receivable		17,859		19,077
Right of use asset		7,373		9,278
Other assets		4,762		3,942
Total assets	$	2,791,208	$	2,632,997

Liabilities
Debt (net of debt issuance costs)⁽¹⁾	$	1,408,701	$	1,286,638
Accounts payable and accrued liabilities		37,098		36,343
Operating lease liability		7,877		9,312
Total liabilities	$	1,453,676	$	1,332,293

Net assets consist of:
Common stock, par value		116		115
Capital in excess of par value		1,166,725		1,158,198
Total distributable earnings		170,691		133,391
Total net assets	$	1,337,532	$	1,291,704
Total liabilities and net assets	$	2,791,208	$	2,623,997

Shares of common stock outstanding ($0.001 par value, 200,000,000 authorized)		115,925		114,726
Net asset value per share	$	11.54	$	11.26

(1) The Company’s SBA Debentures, February 2025 Notes, June 2025 Notes, 2033 Notes, 2022 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible Notes, July 2024 Notes, March 2026 A and B Notes, and September 2026 Notes as each term is defined herein, are presented net of the associated debt issuance costs for each instrument.

HERCULES CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Investment income:
Interest income
Non-control/Non-affiliate investments	$	62,239		$	64,403		$	185,497		$	192,408
Control investments		1,072			740			2,900			2,117
Affiliate investments		1			232			3			609
Total interest income		63,312			65,375			188,400			195,134
Fee income
Commitment, facility and loan fee income
Non-control/Non-affiliate investments		5,179			2,985			13,845			10,692
Control investments		20			5			43			15
Total commitment, facility and loan fee income		5,199			2,990			13,888			10,707
One-time fee income
Non-control/Non-affiliate investments		1,682			1,974			6,223			6,085
Total one-time fee income		1,682			1,974			6,223			6,085
Total fee income		6,881			4,964			20,111			16,792
Total investment income		70,193			70,339			208,511			211,926
Operating expenses:
Interest		13,069			14,807			42,309			44,415
Loan fees		1,674			1,824			6,694			5,268
General and administrative
Legal expenses		314			673			1,268			2,563
Tax expenses		2,395			994			5,579			3,028
Other expenses		3,771			3,624			10,481			11,622
Total general and administrative		6,480			5,291			17,328			17,213
Employee compensation
Compensation and benefits		8,898			7,181			27,051			22,575
Stock-based compensation		3,320			2,522			8,990			7,477
Total employee compensation		12,218			9,703			36,041			30,052
Total gross operating expenses		33,441			31,625			102,372			96,948
Expenses allocated to the Adviser Subsidiary		(1,337	)		—			(3,474	)		—
Total net operating expenses		32,104			31,625			98,898			96,948
Net investment income		38,089			38,714			109,613			114,978
Net realized gain (loss) and change in unrealized appreciation (depreciation):
Net realized gain (loss)
Non-control/Non-affiliate investments		22,813			(48,501	)		78,444			(41,393	)
Affiliate investments		—			—			(62,143	)		—
Loss on debt extinguishment		(1,702	)		—			(1,702	)		—
Total net realized gain (loss)		21,111			(48,501	)		14,599			(41,393	)
Net change in unrealized appreciation (depreciation)
Non-control/Non-affiliate investments		(31,759	)		54,299			(10,662	)		19,483
Control investments		(3,774	)		646			(7,327	)		(4,563	)
Affiliate investments		(118	)		(2,111	)		64,220			(12,416	)
Total net unrealized appreciation (depreciation)		(35,651	)		52,834			46,231			2,504
Total net realized gain (loss) and change in unrealized appreciation (depreciation):		(14,540	)		4,333			60,830			(38,889	)
Net increase (decrease) in net assets resulting from operations	$	23,549		$	43,047		$	170,443		$	76,089

Net investment income before investment gains and losses per common share:
Basic	$	0.33		$	0.34		$	0.95		$	1.03
Change in net assets resulting from operations per common share:
Basic	$	0.20		$	0.38		$	1.47		$	0.68
Diluted	$	0.20		$	0.38		$	1.46		$	0.67
Weighted average shares outstanding:
Basic		114,805			113,489			114,590			111,342
Diluted		116,239			113,744			115,550			111,590
Distributions paid per common share:
Basic	$	0.39		$	0.32		$	1.15		$	1.04

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006057/en/

Michael Hara

Investor Relations and Corporate Communications

Hercules Capital, Inc.

650-433-5578

[email protected]

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: Professional Services Finance

MEDIA:

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October 28, 2021 4:15 pm

agilon health Reports Third Quarter 2021 Results

agilon health Reports Third Quarter 2021 Results

Revenue growth of 47%, driven by 43% growth in Medicare Advantage membership

Total membership growth of 83%, including Medicare Advantage and Direct Contracting

Raised 2021 guidance for membership, revenue, and Adjusted EBITDA

2022 total membership expected to grow 45%+, with 40%+ growth in Medicare Advantage

LONG BEACH, Calif.–(BUSINESS WIRE)–
agilon health, inc. (NYSE: AGL), the company transforming health care for seniors by empowering primary-care physicians to focus on the entire health of their patients, announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Results:

Total revenue of $459 million increased 47% from 2020, driven by 43% growth in Medicare Advantage membership and 15% growth in same geography membership.
Total members live on the agilon platform increased 83% on a year-over-year basis to 236,500 as of September 30, including 184,100 Medicare Advantage members and 52,400 attributed Direct Contracting beneficiaries.
Net loss of $36 million, compared to a net loss of $12 million in 2020.
Medical Margin of $43 million, compared to $51 million in 2020. The year-over-year change in part reflects the impact from COVID on healthcare utilization in the prior year quarter.
Adjusted EBITDA of negative $14 million, compared to positive $2 million in 2020.

“Our third quarter performance and updated guidance demonstrates the power of our constantly improving platform and high touch, high visibility partnership model to shape the healthcare journey of senior patients and deliver predictable, quality outcomes,” said Steve Sell, Chief Executive Officer. “With the continued momentum of the agilon network, we expect our total membership in 2022 will increase by more than 45%, as we foresee faster growth in new and existing geographies. We are excited to support the continued expansion of a high-value primary-care model in a growing number of geographies, which will positively impact patients, physicians and communities.”

Outlook for Fiscal Year 2021:

	Year Ending December 31, 2021
	Updated Guidance		Previous Guidance
	Low	High	Low	High
Ending MA Members	185,000	186,000	184,000	185,000
Ending DCE Members¹	50,000	52,000	>50,000	>50,000
Total revenues ($M)	$1,820	$1,825	$1,810	$1,820
Adjusted EBITDA ($M)²	($40)	($37)	($41)	($38)

¹agilon’s partnered Direct Contracting Entities (DCEs) are not consolidated within its financial results. Previous guidance for DCE membership reflects attributed beneficiaries disclosed by management as of June 30, 2021.

²We have not reconciled guidance for Adjusted EBITDA to net income (loss), the most comparable GAAP measure, and have not provided forward-looking guidance for net income (loss), because of the uncertainty around certain items that may impact net income (loss), including stock-based compensation, that are not within our control or cannot be reasonably predicted.

Platform Membership Details

Total members live on the agilon platform as of September 30, 2021 was 236,500, an increase of 83% from 2020. Total members live on the platform includes 184,100 Medicare Advantage members and 52,400 attributed Direct Contracting beneficiaries.

agilon’s consolidated Medicare Advantage membership increased 43% from 2020, driven by contributions from new geographies and growth within same geographies. Same geography membership growth was 15%, reflecting broad-based growth across markets and strong retention. Average Medicare Advantage membership during the third quarter 2021 was approximately 184,000, an increase of 43% from 2020.

Preliminary Membership Outlook for 2022

agilon health expects total members live on the platform will increase by over 45% on a year-over-year basis during 2022, including over 40% growth for Medicare Advantage members and 60% growth for attributed Direct Contracting beneficiaries. Based on our 2021 outlook for Medicare Advantage and Direct Contracting members, we expect over 340,000 members will be live on the agilon platform in 2022.

For Medicare Advantage, agilon anticipates 2022 ending membership will be over 260,000, supported by the addition of 50,000 members from six new geographies and low-to-mid-teens growth within same geographies. agilon’s membership outlook for Medicare Advantage in part reflects progress with new geography implementations, including health plan contracting, and contributions from additional groups joining the agilon network within same geographies.

For Direct Contracting, agilon expects seven additional physician groups with 30,000-35,000 attributed beneficiaries will participate in the program starting in January, bringing total attributed beneficiaries to 80,000-85,000.

Webcast and Conference Call:

agilon health will host a conference call and webcast to discuss third quarter 2021 results on Friday, October 29, 2021 at 8:30 AM Eastern Time. The conference call and webcast can be accessed by dialing (844) 200-6205 for U.S. participants, or +1 (929) 526-1599 for international participants, and referencing participant code 122631, or visiting the “Events & Presentations” section of https://investors.agilonhealth.com. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call.

About agilon health

agilon health is transforming health care for seniors by empowering primary-care physicians to focus on the entire health of their patients. Through our partnerships and our platform, agilon is leading the nation in creating the system we need – one built on the value of care, not the volume of fees. We honor the independence of local physicians and serve as their partners so they can be the doctors they trained to be. agilon provides the capital, data, payor relationships, executive experience and contract support that allow physician groups to take on the risk of total care for their most vulnerable patients. The result: healthier communities, and doctors who can devote the right amount of time with the patients who need it most. With rapidly growing appeal, agilon is scaled to grow and is here to help our nation’s best independent physician groups have a sustained, thriving future. Together, we are reinventing primary care. For more information about agilon health, visit www.agilonhealth.com and connect with us on Twitter, Instagram, LinkedIn and YouTube.

Forward-Looking Statements

Statements in this release that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should,” and other comparable and derivative terms or the negatives thereof. Examples of forward-looking statements include, among other things: (i) statements regarding timing, outcomes and other details relating to current, pending or contemplated new markets, new partnership structures, financing activities, dispositions, or other transactions discussed in this release; and (ii) statements regarding growth opportunities, ability to deliver sustainable long-term value, business environment, long term opportunities and strategic growth plan including without limitation with respect to expected revenue and net income, total and average membership, Adjusted EBITDA, and other financial projections and assumptions, as well as comparable statements included in other sections of this release. Forward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could significantly affect our future financial condition and results of operations. While forward-looking statements reflect our good faith belief and assumptions we believe to be reasonable based upon current information, we can give no assurance that our expectations or forecasts will be attained. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this release, and such forward-looking statements are subject to known and unknown risks and uncertainties that are difficult to predict. These risks and uncertainties that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, but are not limited to: our history of net losses, and our ability to achieve or maintain profitability in an environment of increasing expenses; our ability to identify and develop successful new geographies, physician partners and payors, or to execute upon our growth initiatives; our ability to execute our operation strategies or to achieve results consistent with our historical performance; our expectation that our expenses will increase in the future and the risk that medical expenses incurred on behalf of members may exceed the amount of medical revenues we receive; our ability to secure contracts with Medicare Advantage payors or to secure Medicare Advantage at favorable financial terms; our ability to recover startup costs incurred during the initial stages of development of our physician partner relationships and program initiatives; significant reductions in our membership; challenges for our physician partners in the transition to a Total Care Model; inaccuracies in the estimates and assumptions we use to project the size, revenue or medical expense amounts of our target market; the spread of, and response to, the novel coronavirus, or COVID-19, and the inability to predict the ultimate impact on us; security breaches, loss of data or other disruptions to our data platforms; the impact of devoting significant attention and resources to the provision of certain transition services in connection with the disposition of our California operations; our subsidiaries’ lack of performance or ability to fund their operations, which could require us to fund such losses; our dependence on a limited number of key payors; the limited terms of our contracts with payors and that they may not be renewed upon their expiration; our reliance on our payors for membership attribution and assignment, data and reporting accuracy and claims payment; our dependence on physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts; our dependence on physician partners to accurately, timely and sufficiently document their services and potential False Claims Act or other liability if any diagnosis information or encounter data are inaccurate or incorrect; reductions in reimbursement rates or methodology applied to derive reimbursement from, or discontinuation of, federal government healthcare programs, from which we derive substantially all of our total revenue; statutory or regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, and their impact on government funding, program coverage and reimbursements; regulatory proposals directed at containing or lowering the cost of healthcare and our participation in such proposed models; the impact on our revenue of CMS modifying the methodology used to determine the revenue associated with MA members; our substantial indebtedness and the potential that we may incur additional indebtedness; and risks related to other factors discussed under “Risk Factors” in our Registration Statement on Form S-1. Except as required by law, we do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.

agilon health, inc. Consolidated Balance Sheets In thousands, except share and per share data

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,081,601		$	106,795
Restricted cash and equivalents		14,302			28,383
Receivables, net		342,500			144,555
Prepaid expenses and other current assets, net		14,463			9,639
Current assets held for sale and discontinued operations, net		—			4,825
Total current assets		1,452,866			294,197
Property and equipment, net		6,462			6,456
Intangible assets, net		58,147			60,468
Goodwill		41,540			41,540
Other assets, net		126,105			43,700
Total assets	$	1,685,120		$	446,361
LIABILITIES, CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Medical claims and related payables	$	288,121		$	162,868
Accounts payable and accrued expenses		129,660			97,244
Current portion of long-term debt		5,000			3,041
Current liabilities held for sale and discontinued operations		—			3,682
Total current liabilities		422,781			266,835
Long-term debt, net of current portion		44,628			64,665
Other liabilities		90,272			90,091
Total liabilities		557,681			421,591

Commitments and contingencies

Contingently redeemable common stock, $0.01 par value: 76,201 shares issued and outstanding at December 31, 2020		—			309,500

Stockholders’ equity (deficit):
Common stock, $0.01 par value: 2,000,000 shares authorized; 391,548 and 249,374 shares issued and outstanding, respectively		3,915			2,494
Additional paid-in capital		2,024,764			263,966
Accumulated deficit		(900,956	)		(551,190	)
Total agilon health, inc. stockholders’ equity (deficit)		1,127,723			(284,730	)
Noncontrolling interests		(284	)		—
Total stockholders’ equity (deficit)		1,127,439			(284,730	)
Total liabilities, contingently redeemable common stock and stockholders’ equity (deficit)	$	1,685,120		$	446,361

agilon health, inc. Consolidated Statements of Operations In thousands, except per share data (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Medical services revenue	$	457,646		$	311,734		$	1,367,736		$	894,043
Other operating revenue		967			950			2,937			3,283
Total revenues		458,613			312,684			1,370,673			897,326
Expenses:
Medical services expense		414,202			260,933			1,217,039			728,949
Other medical expenses		29,454			26,325			86,809			79,512
General and administrative		34,683			30,368			114,001			91,200
Stock-based compensation expense		11,960			1,558			287,980			4,734
Depreciation and amortization		3,915			3,344			10,923			9,861
Total expenses		494,214			322,528			1,716,752			914,256
Income (loss) from operations		(35,601	)		(9,844	)		(346,079	)		(16,930	)
Other income (expense):
Other income (expense), net		(269	)		(469	)		4,034			(421	)
Interest expense		(867	)		(1,953	)		(5,306	)		(6,182	)
Income (loss) before income taxes		(36,737	)		(12,266	)		(347,351	)		(23,533	)
Income tax benefit (expense)		(256	)		(35	)		(707	)		(74	)
Income (loss) from continuing operations		(36,993	)		(12,301	)		(348,058	)		(23,607	)
Discontinued operations:
Income (loss) before income taxes		1,117			584			(1,781	)		(11,845	)
Income tax benefit (expense)		(82	)		(110	)		(211	)		(385	)
Total discontinued operations		1,035			474			(1,992	)		(12,230	)
Net income (loss)		(35,958	)		(11,827	)		(350,050	)		(35,837	)
Noncontrolling interests’ share in (earnings) loss		115			—			284			—
Net income (loss) attributable to common shares	$	(35,843	)	$	(11,827	)	$	(349,766	)	$	(35,837	)

Net income (loss) per common share, basic and diluted
Continuing operations	$	(0.09	)	$	(0.04	)	$	(0.95	)	$	(0.07	)
Discontinued operations	$	—		$	—		$	(0.01	)	$	(0.04	)
Weighted average shares outstanding, basic and diluted		391,229			324,563			365,018			324,068

agilon health, inc. Condensed Consolidated Statements of Cash Flows In thousands, except per share data (unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	(350,050	)	$	(35,837	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		11,032			10,346
Stock-based compensation expense		287,980			4,918
Loss on debt extinguishment		1,590			—
Loss (income) from equity method investments		(2,080	)		(33	)
Release of indemnification assets		—			280
Other noncash items		(111	)		(276	)
Changes in operating assets and liabilities		(47,623	)		(19,263	)
Net cash provided by (used in) operating activities		(99,262	)		(39,865	)
Cash flows from investing activities:
Purchase of property and equipment, net		(3,164	)		(1,257	)
Purchase of intangible assets		(6,794	)		(533	)
Investment in loans receivable and other		(76,613	)		(2,308	)
Proceeds from repayment of loans receivable		1,312			1,065
Proceeds from sale of business and property, net of cash divested		(2,644	)		1,825
Net cash provided by (used in) investing activities		(87,903	)		(1,208	)
Cash flows from financing activities:
Proceeds from initial public offering		1,170,942			—
Proceeds from other equity issuances, net		—			33,590
Proceeds from exercise of stock options		1,606			814
Repurchase of shares, net		—			(6,742	)
Proceeds from the issuance of long-term debt		100,000			—
Equity and debt issuance costs and other		(9,928	)		—
Repayments of long-term borrowings and other		(118,647	)		(2,281	)
Net cash provided by (used in) financing activities		1,143,973			25,381
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents		956,808			(15,692	)
Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of period		135,178			139,152
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of period		3,917			6,460
Cash, cash equivalents and restricted cash and equivalents, beginning of period		139,095			145,612
Cash, cash equivalents and restricted cash and equivalents from continuing operations, end of period		1,095,903			126,493
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, end of period		—			3,427
Cash, cash equivalents and restricted cash and equivalents, end of period	$	1,095,903		$	129,920

agilon health, inc. Key Operating Metrics In thousands (unaudited)

*MEDICAL MARGIN*

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Medical services revenue	$	457,646		$	311,734		$	1,367,736		$	894,043
Medical services expense		(414,202	)		(260,933	)		(1,217,039	)		(728,949	)
Medical margin	$	43,444		$	50,801		$	150,697		$	165,094

Medical margin represents the amount earned from medical services revenue after medical services expenses are deducted. Medical services expense represents costs incurred for medical services provided to our members. As our platform matures over time, we expect medical margin to increase in absolute dollars. However, medical margin per member per month (PMPM) may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to medical margin PMPM.

*GENERAL AND ADMINISTRATIVE COSTS, INCLUDING PLATFORM SUPPORT COSTS*

	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021		2020
Platform support costs	$	33,547		$	25,398	$	92,622	$	74,141
Geography entry costs⁽¹⁾		2,704			1,959		12,711		6,338
Severance and related costs		856			825		5,098		3,516
Management fees⁽²⁾		—			452		433		1,135
Other⁽³⁾		(2,424	)		1,734		3,137		6,070
General and administrative	$	34,683		$	30,368	$	114,001	$	91,200

_______________
(1)		Represents physician incentive expense related to surplus sharing and other direct medical expenses incurred to improve care for our members in our live geographies. Excludes costs in geographies that are in implementation and are not yet generating revenue.
(2)		Represents management fees and other expenses paid to Clayton Dubilier & Rice, LLC (“CD&R”). In connection with our initial public offering, we terminated our consulting agreement with CD&R, effective April 16, 2021. We were not charged a fee in connection with the termination of this agreement.
(3)		Includes changes in non-cash accruals for unasserted claims and contingent liabilities.

Our platform support costs, which include regionally-based support personnel and other operating costs to support our geographies, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows. Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance and legal functions.

agilon health, inc. Non-GAAP Financial Measures In thousands (unaudited)

*NETWORK CONTRIBUTION*

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Income (loss) from operations	$	(35,601	)	$	(9,844	)	$	(346,079	)	$	(16,930	)
Other operating revenue		(967	)		(950	)		(2,937	)		(3,283	)
Other medical expenses		29,454			26,325			86,809			79,512
Other medical expenses—live geographies⁽¹⁾		(25,977	)		(24,377	)		(78,794	)		(75,420	)
General and administrative		34,683			30,368			114,001			91,200
Stock-based compensation expense		11,960			1,558			287,980			4,734
Depreciation and amortization		3,915			3,344			10,923			9,861
Network contribution	$	17,467		$	26,424		$	71,903		$	89,674

_______________
(1)		Represents physician incentive expense related to surplus sharing and other direct medical expenses incurred to improve care for our members in our live geographies. Excludes costs in geographies that are in implementation and are not yet generating revenue. For the three months ended September 30, 2021 and 2020, costs incurred in implementing geographies were $3.5 million and $1.9 million, respectively. For the nine months ended September 30, 2021 and 2020, costs incurred in implementing geographies were $8.0 million and $4.1 million, respectively.

*ADJUSTED EBITDA*

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	(35,958	)	$	(11,827	)	$	(350,050	)	$	(35,837	)
(Income) loss from discontinued operations, net of income taxes		(1,035	)		(474	)		1,992			12,230
Interest expense		867			1,953			5,306			6,182
Income tax expense (benefit)		256			35			707			74
Depreciation and amortization		3,915			3,344			10,923			9,861
Geography entry costs⁽¹⁾		6,181			3,907			20,726			10,430
Severance and related costs		856			825			5,098			3,516
Management fees⁽²⁾		—			452			433			1,135
Stock-based compensation expense		11,960			1,558			287,980			4,734
EBITDA adjustments related to equity method investments⁽³⁾		1,655			—			2,307			—
Other⁽⁴⁾		(2,712	)		1,734			2,651			6,070
Adjusted EBITDA	$	(14,015	)	$	1,507		$	(11,927	)	$	18,395

_______________
(1)		Represents direct geography entry costs, including investments to develop and expand our platform, physician incentive expense, employee-related expenses and marketing. For the three months ended September 30, 2021 and 2020, (i) $3.5 million and $1.9 million, respectively, are included in other medical expenses and (ii) $2.7 million and $2.0 million, respectively, are included in general and administrative expenses. For the nine months ended September 30, 2021 and 2020, (i) $8.0 million and $4.1 million, respectively, are included in other medical expenses and (ii) $12.7 million and $6.3 million, respectively, are included in general and administrative expenses.
(2)		Represents management fees and other expenses paid to CD&R. In connection with our initial public offering, we terminated our consulting agreement with CD&R, effective April 16, 2021. We were not charged a fee in connection with the termination of this agreement.
(3)		Includes direct geography entry costs of $1.2 million for the three and nine months ended September 30, 2021.
(4)		Includes changes in non-cash accruals for unasserted claims and contingent liabilities.

In addition to providing results that are determined in accordance with GAAP, we present network contribution and Adjusted EBITDA, which are non-GAAP financial measures.

We define network contribution as medical services revenue less the sum of: (i) medical services expense and (ii) other medical expenses excluding costs incurred in implementing geographies. Other medical expenses consist of physician incentive expense related to surplus sharing and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of our Total Care Model as it includes all medical services expense associated with our members’ care as well as partner incentive and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective geography.

We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization expense, (v) geography entry costs, (vi) share-based compensation expense, (vii) severance and related costs, and (viii) certain other items that are not considered by us in the evaluation of ongoing operating performance. We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis.

Income (loss) from operations is the most directly comparable GAAP measure to network contribution. Net income (loss) is the most directly comparable GAAP measure to Adjusted EBITDA.

We believe network contribution and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our live geographies by eliminating items that are variable in nature and not considered by us in the evaluation of ongoing operating performance, allowing comparison of our recurring core business operating results over multiple periods. We also believe network contribution and Adjusted EBITDA provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making. We believe network contribution and Adjusted EBITDA or similarly titled non-GAAP measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance. Other companies may calculate network contribution and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics. As a result, our presentation of network contribution and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006034/en/

Investor Contact

Matthew Gillmor

VP, Investor Relations

[email protected]

Media Contact

Claire Mulhearn

VP, Corporate Communications

[email protected]

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: Professional Services Health Consumer Insurance Seniors Managed Care

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