Market Newsdesk

February 9, 2021 6:03 am

Sequans Communications Announces Fourth Quarter 2020 and Full Year 2020 Financial Results

Sequans Communications Announces Fourth Quarter 2020 and Full Year 2020 Financial Results

PARIS–(BUSINESS WIRE)–
Sequans Communications S.A. (NYSE: SQNS), a leading developer and provider of 5G/4G chips and modules, today announced financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter and Fully Year 2020 Highlights:

Revenue: Revenue was $15.8 million, an increase of 11.8% compared to the third quarter of 2020 and an increase of 58.4% compared to the fourth quarter of 2019. Full-year revenue for 2020 was $50.9 million, an increase of 65.0% compared to $30.9 million for 2019.

Gross margin: Gross margin was 45.1% compared to 42.0% in the third quarter of 2020, and compared to 51.2% in the fourth quarter of 2019. Full-year gross margin increased from 40.1% in 2019 to 46.1% in 2020.

Operating loss: Operating loss was $5.4 million compared to $5.9 million in the third quarter of 2020 and $4.6 million in the fourth quarter of 2019. Full year operating loss for 2020 was $24.7 million compared to $28.0 million for 2019.

Net loss: Net loss was $11.3 million, or ($0.36) per diluted ADS, compared to $9.0 million, or ($0.30) per ADS, in the third quarter of 2020 and $8.1 million, or ($0.34) per ADS, in the fourth quarter of 2019. Net loss in the fourth quarter of 2020 includes a $0.1 million gain on revaluation of the embedded derivative arising from the amendments to the convertible debt made in March 2020. The revaluation was a $1.5 million gain in the third quarter of 2020. Full year net loss for 2020 was $54.5 million, or ($1.94) per ADS, compared to $36.7 million, or ($1.54) per ADS, for 2019. Net loss for the full year includes a $13.1 million loss on the revaluation of the embedded derivative and a $1.4 million non-cash gain recorded as a result of the amendments to the convertible debt agreements.

Non-IFRS Net loss and diluted loss per ADS: Excluding the non-cash stock-based compensation, the non-cash impact of the fair-value and effective interest adjustments related to the convertible debt with embedded derivatives and other financings, the non-cash impact of convertible debt amendments, and deferred tax benefit or expense related to the convertible debt and other financings, non-IFRS net loss was $8.5 million, or ($0.28) per ADS, compared to $8.4 million, or ($0.28) per ADS in the third quarter of 2020, and $6.8 million, or ($0.29) per ADS, in the fourth quarter of 2019. The non-IFRS net loss includes foreign exchange losses of $1.9 million, or ($0.06) per ADS, in the fourth quarter of 2020 and $0.9 million, or ($0.03) per ADS, in the third quarter of 2020 and a foreign exchange loss of $0.8 million, or ($0.03) per ADS, in the fourth quarter of 2019. Full year non-IFRS net loss for 2020 was $33.0 million, or ($1.17) per ADS, compared to $31.6 million, or ($1.33) per ADS in 2019. Full year non-IFRS net loss for 2020 includes foreign exchange losses of $2.6 million, or ($0.09) per ADS, compared with a foreign exchange gain of $0.1 million, or ($0.00) per ADS, in 2019.

Cash: Cash, cash equivalents and short-term deposits at December 31, 2020 totaled $18.5 million compared to $25.3 million at September 30, 2020.

In millions of US$ except percentages, shares and per share amounts	*Key Metrics*
	Q4 2020		%*		Q3 2020		%*			Q4 2019 ⁽¹⁾		%*			Full year 2020		%*			Full year 2019		%*
Revenue	$15.8				$14.1					$10.0					$50.9					$30.9
Gross profit	7.1		*45.1*	%	5.9		42.0	%		5.1		51.2	%		23.5		46.1	%		12.4
Operating loss	(5.4	)	(34.4	)%	(5.9	)	(41.8	)	%	(4.6	)	(45.7	)	%	(24.7	)	(48.5	)	%	(28.0	)	40.1	%
Net loss	(11.3	)	(71.3	)%	(9.0	)	(63.7	)	%	(8.1	)	(81.4	)	%	(54.5	)	(107.0	)	%	(36.7	)	(90.6	)	%
Diluted earnings per ADS	($0.36	)			($0.30	)				($0.34	)				($1.94	)				($1.54	)	(118.9	)	%
Weighted average number of diluted ADS	31,044,769				30,275,352					23,797,256					28,108,247					23,752,130
Cash flow from (used in) operations	(1.4	)			(7.9	)				16.3										5.1
Cash, cash equivalents and short-term deposits at quarter-end	18.5				25.3					14.1					18.5					14.1
Additional information on non-cash items:
– Non-cash stock-based compensation included in operating result	1.2				0.5					0.5					3.0					1.8
– Non-cash interest on convertible debt and other financing	1.7				1.6					1.3					6.4					4.4
– Non-cash change in the fair value of convertible debt embedded derivative	(0.1	)			(1.5	)				—					13.1					—
– Non-cash impact of convertible debts amendment	—				—					—					(1.4	)				—
– Non-cash impact of deferred tax expense (benefit)	—				—					(0.5	)				0.4					(1.0	)
Non-IFRS diluted earnings per ADS	($0.28	)			($0.28	)				($0.29	)				($1.17	)				($1.33	)

* Percentage of revenue

(1) Updated from the prior earnings release

“We had a strong finish in 2020 and we are off to an excellent start for 2021,” said Georges Karam, CEO of Sequans. “Our fourth quarter revenue growth exceeded our target, even as demand related to portable routers began to return to pre-COVID levels, leading to year-over-year growth of almost 65%. Some of our most important accomplishments in 2020 included the strengthening of our go-to-market capabilities via relationships with new distributors and MCU partners, extending our technology leadership by introducing the second generation of our Monarch platform, and reaching important milestones in our 5G development, which is expected to create another major growth engine for the company. Several of these initiatives are already making a positive contribution and all will help sustain our momentum as time goes on, and support our goal of an average of 50% annual growth for the five-year period beginning in 2020.

“We are entering 2021 with the highest-ever level of backlog, driven by strong demand in the Massive IoT business. Since the end of 2020, we have secured several key Massive IoT design wins within our strong pipeline of developing business which will help offset lower revenue related to portable routers in 2021 and support our long-term growth objectives.”

Q1 2021 Outlook

The following statement is based on management’s current assumptions and expectations and assumes no increase in the severity or duration of the COVID-19 pandemic. This statement is forward-looking and actual results may differ materially.

Overall demand, driven mainly by Massive IoT, continues to be strong and supports the company’s short and long-term growth targets despite the already-anticipated reduction in the portable router business. Management expects Q1 2021 revenue to follow the company’s typical seasonal pattern of a decline compared to Q4; management has decided not to give specific quarterly guidance in view of the potential impact of industry-wide supply chain bottlenecks, which could delay some shipments.

Conference Call and Webcast

Sequans plans to conduct a teleconference and live webcast to discuss the financial results for the fourth quarter of 2020 today, February 9, 2021 at 8:00 a.m. ET /14:00 CET. To participate in the live call, analysts and investors should dial 800-437-2398 or +1 720-452-9102 if outside the U.S. When prompted, provide the event title or access code: 2037577. A live and archived webcast of the call will be available from the Investors section of the Sequans website at www.sequans.com/investors/. An audio replay of the conference call will be available until February 16, 2021 by dialing toll free 888-203-1112 or 719-457-0820 from outside the U.S., using the following access code: 2037577.

Forward Looking Statements

This press release contains projections and other forward-looking statements regarding future events or our future financial performance and potential financing sources. All statements other than present and historical facts and conditions contained in this release, including any statements regarding expected seasonal revenue decline for the first quarter of 2021, long-term revenue goals, future results of operations and financial positions, business strategy and plans, expectations for Massive IoT and Broadband and Critical IoT sales, the ability to continue to operate remotely (as required) at high levels of productivity, increasing backlog of orders, the impact of the coronavirus on our manufacturing operations, supply chain, and on customer demand, the impact of component shortages and manufacturing capacity, and our objectives for future operations, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not rely on or place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. In addition to the risk factors contained in our Form 20-F for the fiscal year ended December 31, 2019, some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: (i) the contraction or lack of growth of markets in which we compete and in which our products are sold, (ii) unexpected increases in our expenses, including manufacturing expenses, (iii) our inability to adjust spending quickly enough to offset any unexpected revenue shortfall, (iv) delays or cancellations in spending by our customers, (v) unexpected average selling price reductions, (vi) the significant fluctuation to which our quarterly revenue and operating results are subject due to cyclicality in the wireless communications industry and transitions to new process technologies, (vii) our inability to anticipate the future market demands and future needs of our customers, (viii) our inability to achieve new design wins or for design wins to result in shipments of our products at levels and in the timeframes we currently expect, (ix) our inability to enter into and execute on strategic alliances, (x) our ability to meet performance milestones under strategic license agreements, (xi) the impact of natural disasters on our sourcing operations and supply chain, (xii) our ability to remediate material weaknesses in our internal controls relating to controls over the accounting and presentation of complex, non-routine and certain other transactions, including certain revenue arrangements, (xiii) the impact of the coronavirus on the ability to operate our business and research, production of our products or demand for our products by customers whose supply chain is impacted or whose operations have been impacted by government shelter-in-place or similar orders, (xiv) the impact of the coronavirus on capital markets and our ability to raise debt and equity financing, and (xv) other factors detailed in documents we file from time to time with the Securities and Exchange Commission. We have not filed our Form 20-F for the year ended December 31, 2020. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the tie we file the Form 20-F.

Use of Non-IFRS/non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements prepared in accordance with IFRS, we disclose certain non-IFRS, or non-GAAP, financial measures. These measures exclude the non-cash stock-based compensation and the non-cash impacts of convertible debt amendments, effective interest adjustments related to the convertible debt with embedded derivatives and other financings, and deferred tax benefit or expense related to the convertible debt and other financings. We believe that these measures can be useful to facilitate comparisons among different companies. These non-GAAP measures have limitations in that the non-GAAP measures we use may not be directly comparable to those reported by other companies. We seek to compensate for this limitation by providing a reconciliation of the non-GAAP financial measures to the most directly comparable IFRS measures in the table attached to this press release.

About Sequans Communications

Sequans Communications S.A. (NYSE: SQNS) is a leading developer and provider of 5G and 4G chips and modules for IoT devices. For 5G/4G massive IoT applications, Sequans provides a comprehensive product portfolio based on its flagship Monarch LTE-M/NB-IoT and Calliope Cat 1 chip platforms, featuring industry-leading low power consumption, a large set of integrated functionalities, and global deployment capability. For 5G/4G broadband and critical IoT applications, Sequans offers a product portfolio based on its Cassiopeia 4G Cat 4/Cat 6 and high-end Taurus 5G chip platforms, optimized for low-cost residential, enterprise, and industrial applications. Founded in 2003, Sequans is based in Paris, France with additional offices in the United States, United Kingdom, Israel, Hong Kong, Singapore, Finland, Taiwan, South Korea, and China.

Visit Sequans online at www.sequans.com; www.facebook.com/sequans; www.twitter.com/sequans

SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Three months ended
	(in thousands of US$, except share and per share amounts)		December 31, 2020			Sept 30, 2020			December 31, 2019 ⁽¹⁾


	Revenue :
		Product revenue	$	12,064		$	11,580		$	5,854
		Other revenue	3,727			2,542			4,112
	Total revenue		15,791			14,122			9,966
	Cost of revenue
		Cost of product revenue	8,183			7,668			4,534
		Cost of other revenue	494			527			332
	Total cost of revenue		8,677			8,195			4,866
	Gross profit		7,114			5,927			5,100
	Operating expenses :
		Research and development	7,938			7,984			5,664
		Sales and marketing	2,003			1,774			1,864
		General and administrative	2,606			2,076			2,124

	Total operating expenses		12,547			11,834			9,652
	Operating loss		(5,433		)	(5,907		)	(4,552		)
	Financial income (expense):
		Interest income (expense), net	(3,643		)	(3,623		)	(3,110		)
		Change in fair value of convertible debt derivative	111			1,522			—
		Foreign exchange gain (loss)	(1,936		)	(885		)	(822		)
	Loss before income taxes		(10,901		)	(8,893		)	(8,484		)
	Income tax expense (benefit)		361			98			(374		)
	Loss		$	(11,262	)	$	(8,991	)	$	(8,110	)
	Attributable to :
		Shareholders of the parent	(11,262		)	(8,991		)	(8,110		)
		Minority interests	—			—			—
	Basic loss per ADS		($0.36		)	($0.30		)	($0.34		)
	Diluted loss per ADS		($0.36		)	($0.30		)	($0.34		)
	Weighted average number of ADS used for computing:
	— Basic		31,044,769			30,275,352			23,797,256
	— Diluted		31,044,769			30,275,352			23,797,256
	(1) Updated from the prior earnings release

SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Twelve months ended Dec 31,
(in thousands of US$, except share and per share amounts)		2020			2019 ⁽¹⁾

Revenue :
	Product revenue	$	37,919		$	21,947
	Other revenue	12,997			8,917
Total revenue		50,916			30,864
Cost of revenue
	Cost of product revenue	25,632			16,703
	Cost of other revenue	1,834			1,782
Total cost of revenue		27,466			18,485
Gross profit		23,450			12,379
Operating expenses :
	Research and development	30,855			23,799
	Sales and marketing	7,912			7,968
	General and administrative	9,369			8,570

Total operating expenses		48,136			40,337
Operating loss		(24,686		)	(27,958		)
Financial income (expense):
	Interest income (expense), net	(14,474		)	(9,593		)
	Change in fair value of convertible debt derivative	(13,129		)	—
	Convertible debt amendment	1,399			—
	Foreign exchange gain (loss)	(2,650		)	71
Loss before income taxes		(53,540		)	(37,480		)
Income tax expense (benefit)		936			(783		)
Loss		$	(54,476	)	$	(36,697	)
Attributable to :
	Shareholders of the parent	(54,476		)	(36,697		)
	Minority interests	—			—
Basic loss per ADS		($1.94		)	($1.54		)
Diluted loss per ADS		($1.94		)	($1.54		)
Weighted average number of ADS used for computing:
— Basic		28,108,247			23,752,130
— Diluted		28,108,247			23,752,130
(1) Updated from the prior earnings release

	SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
		At Dec 31,			At Dec 31,
(in thousands of US$)		2020			2019 ⁽¹⁾
ASSETS
	Non-current assets
	Property, plant and equipment	$	9,187		$	8,858
	Intangible assets	25,312			16,696
	Deposits and other receivables	466			401
	Other non-current financial assets	386			335
	Total non-current assets	35,351			26,290
	Current assets
	Inventories	6,225			6,664
	Trade receivables	17,277			8,390
	Contract assets	537			1,587
	Prepaid expenses	962			901
	Other receivables	3,264			2,253
	Research tax credit receivable	5,232			3,132
	Short-term deposits	10,900			—
	Cash and cash equivalents	7,574			14,098
	Total current assets	51,971			37,025
Total assets		$	87,322		$	63,315
EQUITY AND LIABILITIES
	Equity
	Issued capital, euro 0.02 nominal value, 133,934,090 shares authorized, issued and outstanding at December 31, 2020 (95,587,146 shares at December 31, 2019)	$	3,269		$	2,403
	Share premium	276,560			233,720
	Other capital reserves	46,677			43,656
	Accumulated deficit	(363,209		)	(308,733		)
	Other components of equity	(423		)	(607		)
	Total equity	(37,126		)	(29,561		)
	Non-current liabilities
	Government grant advances, loans and other liabilities	11,203			6,150
	Venture debt	2,172			7,071
	Convertible debt	26,074			23,342
	Convertible debt embedded derivative	12,395			—
	Lease liabilities	4,762			3,204
	Trade payables	851			1,139
	Provisions	1,874			1,905
	Deferred tax liabilities	19			429
	Contract liabilities	2,473			11,572
	Total non-current liabilities	61,823			54,812
	Current liabilities
	Trade payables	15,701			8,834
	Interest-bearing receivables financing	14,228			4,068
	Venture debt	6,104			5,109
	Convertible debt	—			7,329
	Lease liabilities	1,014			900
	Government grant advances and loans	3,867			1,472
	Contract liabilities	13,235			5,812
	Other current liabilities and provisions	8,476			4,540
	Total current liabilities	62,625			38,064
Total equity and liabilities		$	87,322		$	63,315
	(1) Updated from the prior earnings releases; as set forth in the annual report on Form 20-F

SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

			Twelve months ended Dec 31,
(in thousands of US$)			2020			2019 ⁽¹⁾
Operating activities
	Loss before income taxes		$	(53,540	)	$	(37,480	)
	Non-cash adjustment to reconcile income before tax to net cash from (used in) operating activities
		Depreciation and impairment of property, plant and equipment	3,755			4,126
		Amortization and impairment of intangible assets	6,018			4,279
		Share-based payment expense	2,985			1,797
		Increase (Decrease) in provisions	112			(244		)
		Interest expense, net	14,474			9,593
		Change in the fair value of convertible debt embedded derivative	13,129			—
		Convertible debt amendment	(1,399		)	—
		Foreign exchange loss (gain)	2,749			(420		)
		Loss on disposal of property, plant and equipment	6			(22		)
		Bad debt expense	4			515
	Working capital adjustments
		Decrease (Increase) in trade receivables and other receivables	(8,703		)	6,546
		Decrease in inventories	439			1,579
		Decrease (Increase) in research tax credit receivable	(718		)	622
		Increase (Decrease) in trade payables and other liabilities	6,216			(705		)
		Decrease (Increase) in contract liabilities	(4,897		)	14,984
		Increase in government grant advances	270			288
	Income tax paid		(286		)	(365		)
Net cash flow provided by (used in) operating activities			(19,386		)	5,093
Investing activities
	Purchase of intangible assets and property, plant and equipment		(6,566		)	(3,520		)
	Capitalized development expenditures		(7,209		)	(5,626		)
	Sale (purchase) of financial assets		(116		)	(5		)
	Purchase of short-term deposits		(10,900		)	—
	Interest received		29			50
Net cash flow used in investments activities			(24,762		)	(9,101		)
Financing activities
	Proceeds from issue of warrants, exercise of stock options/warrants		32			—
	Public equity offering proceeds, net of transaction costs paid		29,272			—
	Proceeds from issuing of warrants, net of transaction costs paid		—			8,269
	Proceeds (Repayment of) from interest-bearing receivables financing		9,914			(6,227		)
	Proceeds from government loans, net of transaction cost		5,392			7,967
	Proceeds from interest-bearing research project financing		405			1,126
	Proceeds from convertible debt, net of transaction cost		2,050			—
	Payment of lease liabilities		(1,221		)	(1,299		)
	Repayment of interest-bearing research project financing		(355		)	(168		)
	Repayment of government loans		(241		)	(447		)
	Repayment of venture debt		(5,165		)	(801		)
	Interest paid		(2,464		)	(2,401		)
Net cash flows from financing activities			37,619			6,019

SEQUANS COMMUNICATIONS S.A. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)

	Net increase (decrease) in cash and cash equivalents		(6,529		)	2,011
	Net foreign exchange difference		5			1
	Cash and cash equivalents at January 1		14,098			12,086
Cash and cash equivalents at end of the period			7,574			$	14,098
(1) Updated from the prior earnings release

SEQUANS COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US$, except share and per share amounts)			Three months ended
			Dec 31, 2020			Sept 30, 2020			Dec 31, 2019 ⁽³⁾
Net IFRS loss as reported			$	(11,262	)	$	(8,991	)	$	(8,110	)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		1,172			521			517
	Non-cash change in the fair value of convertible debt embedded derivative		(111		)	(1,522		)	—
	Non-cash interest on convertible debt and other financing ⁽²⁾		1,663			1,608			1,265
	Non-cash impact of deferred tax income (loss)		—			—			(489		)
			$	(8,538	)	$	(8,384	)	$	(6,817	)
IFRS basic loss per ADS as reported			($0.36		)	($0.30		)	($0.34		)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		$0.04			$0.02			$0.02
	Non-cash change in the fair value of convertible debt embedded derivative		$0.00			($0.05		)	$0.00
	Non-cash interest on convertible debt and other financing ⁽²⁾		$0.04			$0.05			$0.05
	Non-cash impact of deferred tax income (loss)		$0.00			$0.00			($0.02		)
Non-IFRS basic loss per ADS			($0.28		)	($0.28		)	($0.29		)
IFRS diluted loss per ADS			($0.36		)	($0.30		)	($0.34		)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		$0.04			$0.02			$0.02
	Non-cash change in the fair value of convertible debt embedded derivative		$0.00			($0.05		)	$0.00
	Non-cash interest on convertible debt and other financing ⁽²⁾		$0.04			$0.05			$0.05
	Non-cash impact of deferred tax income (loss)		$0.00			$0.00			($0.02		)
Non-IFRS diluted loss per ADS			($0.28		)	($0.28		)	($0.29		)

	(1) Included in the IFRS loss as follows:
		Cost of product revenue	$	28		$	4		$	4
		Research and development	647			209			136
		Sales and marketing	190			105			100
		General and administrative	307			203			277
	(2) Related to the difference between contractual and effective interest rates
	(3) Updated from the prior earnings release

SEQUANS COMMUNICATIONS S.A. UNAUDITED RECONCILIATION OF NON-IFRS FINANCIAL RESULTS

(in thousands of US$, except share and per share amounts)			Twelve months ended Dec 31,
			2020			2019⁽³⁾
Net IFRS loss as reported			$	(54,476	)	$	(36,697	)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		2,985			1,797
	Non-cash change in the fair value of convertible debt embedded derivative		13,129			—
	Non-cash interest on convertible debt and other financing (2)		6,355			4,358
	Non-cash impact of deferred tax income (loss)		398			(1,018		)
	Non-cash impact of convertible debt amendment		(1,399		)	—
			$	(33,008	)	$	(31,560	)
IFRS basic loss per ADS as reported			($1.94		)	($1.54		)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		$0.11			$0.09
	Non-cash change in the fair value of convertible debt embedded derivative		$0.47			$0.00
	Non-cash interest on convertible debt and other financing ⁽²⁾		$0.23			$0.18
	Non-cash impact of deferred tax income (loss)		$0.01			($0.04		)
	Non-cash impact of convertible debt amendment		($0.05		)	$0.00
Non-IFRS basic loss per ADS			($1.17		)	($1.33		)
IFRS diluted loss per ADS			($1.94		)	($1.54		)
Add back
	Non-cash stock-based compensation expense according to IFRS 2 ⁽¹⁾		$0.11			$0.09
	Non-cash change in the fair value of convertible debt embedded derivative		$0.47			$0.00
	Non-cash interest on convertible debt and other financing ⁽²⁾		$0.23			$0.18
	Non-cash impact of deferred tax income (loss)		$0.01			($0.04		)
	Non-cash impact of convertible debt amendment		($0.05		)	$0.00
Non-IFRS basic loss per ADS			($1.17		)	($1.33		)

	(1) Included in the IFRS loss as follows:
		Cost of product revenue	$	42		$	10
		Research and development	1,394			508
		Sales and marketing	529			282
		General and administrative	1,020			997
	(2) Related to the difference between contractual and effective interest rates
	(3) Updated from the prior earnings release

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209005533/en/

Media Relations: Kimberly Tassin, +1.425.736.0569, [email protected]

Investor Relations: Claudia Gatlin, +1 212.830.9080, [email protected]

KEYWORDS: France Europe

INDUSTRY KEYWORDS: Networks Semiconductor Mobile/Wireless Technology Telecommunications

MEDIA:

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February 9, 2021 6:03 am

WESCO International, Inc. Reports Fourth Quarter and Full Year 2020 Results

WESCO International, Inc. Reports Fourth Quarter and Full Year 2020 Results

Fourth quarter summary:

Net sales of $4.1 billion, up 97% due to the Anixter merger
Operating profit of $93 million; operating margin of 2.2%
- Adjusted operating profit of $172 million; adjusted operating margin of 4.2%
Earnings per diluted share of $0.11
- Adjusted earnings per diluted share of $1.22
Operating cash flow of $125 million
- Free cash flow of 161% of adjusted net income
Leverage of 5.3x; net debt reduction of $109 million

Full year results:

Net sales of $12.3 billion, up 48% due to the Anixter merger
Operating profit of $347 million; operating margin of 2.8%
- Adjusted operating profit of $522 million; adjusted operating margin of 4.2%
Earnings per diluted share of $1.51
- Adjusted earnings per diluted share of $4.37
Operating cash flow of $544 million
- Free cash flow of 251% of adjusted net income
Net debt reduction of $389 million; leverage improvement of 0.4x since Anixter merger

PITTSBURGH–(BUSINESS WIRE)–
WESCO International, Inc. (NYSE: WCC), a leading provider of business-to-business distribution, logistics services and supply chain solutions, announces its results for the fourth quarter and full year 2020.

“Fiscal 2020 will be remembered as one of the most important in WESCO’s history. We completed the transformational acquisition of Anixter, doubling our size and changing our trajectory for years to come. We designed and launched a three-year integration plan which in just six months has delivered synergies in excess of our initial targets,” said John Engel, Chairman, President and CEO. “And at the same time, we delivered operating results during a global pandemic which demonstrate the strength of our franchise, the commitment of our extraordinary team of associates, and position us well for future growth as the economy continues its recovery and the secular trends supporting our future growth generate momentum across our business units.”

“In the six months since completing the acquisition of Anixter we have already reduced net debt by $389 million. We are confident that we will exceed the synergy targets that we’ve set for our three-year plan. The combination of WESCO and Anixter creates cross-selling opportunities, with initiatives underway that have already delivered early successes. We enter 2021 with a record backlog, a new organizational structure, and the strongest management team we’ve fielded during my time with the Company.”

“For 2021, WESCO is exceptionally well positioned to support our customers with an expanded set of products and differentiated services. The efficiencies we capture through our larger scale will combine with growth in electrification, automation, communications and security across our three global business units to drive our performance this year. As such, we expect to outperform in our end markets with sales increasing from 3% to 6% in all three of our business units. We also see our adjusted EBITDA margins expanding to 5.4% to 5.7% and adjusted EPS growing to between $5.50 to $6.00, with free cash flow generation reaching 100% or more of net income.”

The following are results for the three months ended December 31, 2020 compared to the three months ended December 31, 2019:

Net sales were $4.1 billion for the fourth quarter of 2020 compared to $2.1 billion for the fourth quarter of 2019, an increase of 96.7% due to the merger with Anixter that was completed on June 22, 2020, partially offset by the impact of weakened demand from the COVID-19 pandemic. Net sales for the fourth quarter of 2020 were up 4.4% sequentially compared to the third quarter that had an additional three work days.

Cost of goods sold for the fourth quarter of 2020 was $3.4 billion compared to $1.7 billion for the fourth quarter of 2019, and gross profit was $772.0 million and $389.8 million, respectively. As a percentage of net sales, gross profit was 18.7% and 18.6% for the fourth quarter of 2020 and 2019, respectively. Cost of goods sold for the fourth quarter of 2020 includes merger-related fair value adjustments of $15.7 million, as well as an out-of-period adjustment of $23.3 million related to inventory absorption accounting. Adjusted for these amounts, gross profit as a percentage of net sales for the fourth quarter of 2020 was 19.6%.

Selling, general and administrative expenses were $637.9 million, or 15.5% of net sales, for the fourth quarter of 2020, compared to $289.9 million, or 13.8% of net sales, for the fourth quarter of 2019. SG&A expenses for the fourth quarter of 2020 include merger-related costs of $40.1 million. Adjusted for this amount, SG&A expenses were $597.8 million, or 14.5% of net sales, for the fourth quarter of 2020. SG&A expenses for the fourth quarter of 2019 include $3.1 million of merger-related costs.

Operating profit was $92.8 million for the fourth quarter of 2020, compared to $83.8 million for the fourth quarter of 2019. Operating profit as a percentage of net sales was 2.2% for the current quarter, compared to 4.0% for the fourth quarter of the prior year. Operating profit for the fourth quarter of 2020 includes merger-related costs and the out-of-period adjustment described above. Adjusted for these amounts, operating profit was $171.8 million, or 4.2% of net sales. Adjusted for merger-related costs of $3.1 million, operating profit was $86.9 million for the fourth quarter of 2019, or 4.1% of net sales.

Net interest expense for the fourth quarter of 2020 was $74.3 million, compared to $16.4 million for the fourth quarter of 2019. The increase in interest expense was driven by financing activity related to the Anixter merger.

The effective tax rate was a benefit of 4.7% for the fourth quarter of 2020 compared to expense of 22.0% for the fourth quarter of 2019. The lower effective tax rate in the current quarter was primarily due to one-time impacts from the merger with Anixter.

Net income attributable to common stockholders was $5.6 million for the fourth quarter of 2020, compared to $53.1 million for the fourth quarter of 2019. Adjusted for the items mentioned above, net income attributable to common stockholders was $62.4 million for the fourth quarter of 2020.

Earnings per diluted share for the fourth quarter of 2020 was $0.11, based on 51.1 million diluted shares, compared to $1.26 for the fourth quarter of 2019, based on 42.2 million diluted shares. As adjusted, earnings per diluted share for the fourth quarter of 2020 and 2019 was $1.22 and $1.32, respectively.

Operating cash flow for the fourth quarter of 2020 was $125.0 million, compared to $107.7 million for the fourth quarter of 2019. Free cash flow for the fourth quarter of 2020 was $124.0 million, or 161% of adjusted net income, compared to $94.0 million, or 170% of adjusted net income, for the fourth quarter of 2019.

The following are results for the year ended December 31, 2020 compared to the year ended December 31, 2019:

Net sales were $12.3 billion for 2020 compared to $8.4 billion for 2019, an increase of 47.6% due to the merger with Anixter that was completed on June 22, 2020, partially offset by the impact of weakened demand from the COVID-19 pandemic.

Cost of goods sold for 2020 was $10.0 billion and gross profit was $2.3 billion, compared to $6.8 billion and $1.6 billion, respectively, for 2019. As a percentage of net sales, gross profit was 18.9% for both 2020 and 2019. Cost of goods sold for 2020 includes merger-related fair value adjustments of $43.7 million, as well as an out-of-period adjustment of $18.9 million related to inventory absorption accounting. Adjusted for these amounts, gross profit as a percentage of net sales for 2020 was 19.4%.

Selling, general and administrative expenses were $1.9 billion, or 15.1% of net sales, for 2020, compared to $1.2 billion, or 14.0% of net sales, for 2019. SG&A expenses for 2020 include merger-related costs of $132.2 million, as well as a gain on the sale of a U.S. operating branch. of $19.8 million. Adjusted for these amounts, SG&A expenses for 2020 were $1.7 billion, or 14.2% of net sales, reflecting lower sales and the merger with Anixter, partially offset by cost reduction actions taken in response to the COVID-19 pandemic. SG&A expenses for 2019 include $3.1 million of merger-related costs.

Operating profit was $347.0 million for 2020, or 2.8% of net sales, compared to $346.2 million for 2019, or 4.1% of net sales. Operating profit for 2020 includes merger-related costs, merger-related fair value adjustments, the out-of-period adjustment described above and gain on the sale of a U.S. operating branch. Adjusted for these amounts, operating profit was $522.0 million, or 4.2% of net sales. Adjusted for merger-related costs of $3.1 million, operating profit was $349.3 million for 2019, or 4.2% of net sales.

Net interest expense for 2020 was $226.6 million, compared to $65.7 million for 2019. The increase in interest expense was driven by financing activity related to the Anixter merger.

The effective tax rate for 2020 was 18.6%, compared to 21.2% for 2019. The lower effective tax rate in the current year was primarily due to one-time impacts from the merger with Anixter.

Net income attributable to common stockholders was $70.4 million for 2020, compared to $223.4 million for 2019. As adjusted for the items mentioned above, net income attributable to common stockholders was $203.6 million for 2020.

Earnings per diluted share for 2020 was $1.51, based on 46.6 million diluted shares, compared to $5.14 for 2019, based on 43.5 million diluted shares. As adjusted, earnings per diluted share for 2020 and 2019 was $4.37 and $5.20, respectively.

Operating cash flow for 2020 was $543.9 million, compared to $224.4 million for 2019. Free cash flow for 2020 was $586.1 million, or 251% of adjusted net income, compared to $180.3 million, or 80% of adjusted net income, for 2019.

Segment Results

In the third quarter of 2020, in connection with the acquisition of Anixter, the Company identified new segments, which have been organized around three strategic business units consisting of Electrical & Electronic Solutions (“EES”), Communications & Security Solutions (“CSS”) and Utility & Broadband Solutions (“UBS”).

Corporate expenses are incurred to obtain and coordinate financing, tax, information technology, legal and other related services. Segment results include depreciation expense or other allocations related to various corporate assets. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Corporate expenses are not directly identifiable with our reportable segments and are reported in the tables below to reconcile the reportable segments to the consolidated financial statements.

The following are results by segment for the three months ended December 31, 2020 compared to the three months ended December 31, 2019:

EES reported net sales of $1.7 billion for the fourth quarter of 2020, compared to $1.2 billion for the fourth quarter of 2019, an increase of 35.2%. Operating profit was $64.2 million for the fourth quarter of 2020, compared to $63.0 million for the fourth quarter of 2019. Adjusted EBITDA was $93.8 million for the fourth quarter of 2020, or 5.6% of net sales, compared to $70.5 million for the fourth quarter of 2019, or 5.7% of net sales.
CSS reported net sales of $1.4 billion for the fourth quarter of 2020, compared to $228.4 million for the fourth quarter of 2019, an increase of 499.5%. Operating profit was $85.4 million for the fourth quarter of 2020, compared to $11.3 million for the fourth quarter of 2019. Adjusted EBITDA was $111.8 million for the fourth quarter of 2020, or 8.2% of net sales, compared to $13.1 million for the fourth quarter of 2019, or 5.7% of net sales.
UBS reported net sales of $1.1 billion for the fourth quarter of 2020, compared to $636.9 million for the fourth quarter of 2019, an increase of 71.3%. Operating profit was $64.2 million for the fourth quarter of 2020, compared to $50.5 million for the fourth quarter of 2019. Adjusted EBITDA was $79.2 million for the fourth quarter of 2020, or 7.3% of net sales, compared to $54.0 million for the fourth quarter of 2019, or 8.5% of net sales.

The following are results by segment for the year ended December 31, 2020 compared to the year ended December 31, 2019:

EES reported net sales of $5.5 billion for 2020, compared to $4.9 billion for 2019, an increase of 12.7%. Operating profit was $260.2 million for 2020, compared to $261.8 million for 2019. Adjusted EBITDA was $294.9 million for 2020, or 5.4% of net sales, compared to $291.5 million for 2019, or 6.0% of net sales.
CSS reported net sales of $3.3 billion for 2020, compared to $909.5 million for 2019, an increase of 265.4%. Operating profit was $217.2 million for 2020, compared to $43.8 million for 2019. Adjusted EBITDA was $289.6 million for 2020, or 8.7% of net sales, compared to $51.1 million for 2019, or 5.6% of net sales.
UBS reported net sales of $3.5 billion for 2020, compared to $2.6 billion for 2019, an increase of 36.1%. Operating profit was $231.7 million for 2020, compared to $184.9 million for 2019. Adjusted EBITDA was $264.6 million for 2020, or 7.5% of net sales, compared to $198.7 million for 2019, or 7.7% of net sales.

Webcast and Teleconference Access

WESCO will conduct a webcast and teleconference to discuss the fourth quarter and full year 2020 earnings as described in this News Release on Tuesday, February 9, 2021, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company’s website at www.wesco.investorroom.com. The call will be archived on this internet site for seven days.

WESCO International, Inc. (NYSE: WCC), a publicly traded FORTUNE 500® company headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions. Pro forma 2020 annual sales were over $16 billion, including Anixter International Inc., which it acquired in June 2020. WESCO offers a best-in-class product and services portfolio of Electrical and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband Solutions. The Company employs over 18,000 people, maintains relationships with approximately 30,000 suppliers, and serves approximately 150,000 customers worldwide. With nearly 1.5 million products, end-to-end supply chain services, and leading digital capabilities, WESCO provides innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates approximately 800 branches, warehouses and sales offices in approximately 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

Forward-Looking Statements

All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding the process to divest certain legacy WESCO businesses in Canada, including the expected length of the process, the expected benefits and costs of the transaction between WESCO and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company’s plans, objectives, expectations and intentions, statements that address the combined company’s expected future business and financial performance, and other statements identified by words such as “anticipate,” “plan,” “believe,” “estimate,” “intend,” “expect,” “project,” “will” and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of WESCO’s management, as well as assumptions made by, and information currently available to, WESCO’s management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of WESCO’s and WESCO’s management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk of any litigation or post-closing regulatory action relating to the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, the risk that problems may arise in successfully integrating the businesses of the companies or that the combined company could be required to divest one or more businesses, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters, health epidemics and other outbreaks, especially the outbreak of COVID-19 since December 2019, which may have a material adverse effect on the combined company’s business, results of operations and financial conditions, the risk that the divesture of certain legacy WESCO businesses in Canada may take longer than expected and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company’s control. Additional factors that could cause results to differ materially from those described above can be found in WESCO’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and WESCO’s other reports filed with the U.S. Securities and Exchange Commission (“SEC”).

WESCO INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollar amounts in thousands, except per share amounts) (Unaudited)

	Three Months Ended
	December 31, 2020					December 31, 2019
Net sales	$	4,128,841				$	2,099,452
Cost of goods sold (excluding depreciation and amortization)	3,356,890			81.3	%	1,709,658			81.4	%
Selling, general and administrative expenses	637,912			15.5	%	289,914			13.8	%
Depreciation and amortization	41,276					16,072
Income from operations	92,763			2.2	%	83,808			4.0	%
Interest expense, net	74,310					16,415
Other, net	(931		)			(194		)
Income before income taxes	19,384			0.5	%	67,587			3.2	%
Provision for income taxes	(904		)			14,893
Net income	20,288			0.5	%	52,694			2.5	%
Net income (loss) attributable to noncontrolling interests	304					(404		)
Net income attributable to WESCO International, Inc.	19,984			0.5	%	53,098			2.5	%
Preferred stock dividends	14,352					—
Net income attributable to common stockholders	$	5,632		0.1	%	$	53,098		2.5	%

Earnings per share attributable to common stockholders	$	0.11				$	1.26
Weighted-average common shares outstanding and common share equivalents used in computing earnings per diluted common share (in thousands)	51,069					42,210

Reportable Segments
Net sales:
Electrical & Electronic Solutions	$	1,668,325				$	1,234,118
Communications & Security Solutions	1,369,201					228,409
Utility & Broadband Solutions	1,091,315					636,925
	$	4,128,841				$	2,099,452
Income from operations:
Electrical & Electronic Solutions	$	64,229				$	63,014
Communications & Security Solutions	85,448					11,334
Utility & Broadband Solutions	64,219					50,500
Corporate	(121,133		)			(41,040		)
	$	92,763				$	83,808

WESCO INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollar amounts in thousands, except per share amounts) (Unaudited)

	Twelve Months Ended
	December 31, 2020					December 31, 2019
Net sales	$	12,325,995				8,358,917
Cost of goods sold (excluding depreciation and amortization)	9,998,329			81.1	%	6,777,456			81.1	%
Selling, general and administrative expenses	1,859,028			15.1	%	1,173,137			14.0	%
Depreciation and amortization	121,600					62,107
Income from operations	347,038			2.8	%	346,217			4.1	%
Interest expense, net	226,591					65,710
Other, net	(2,395		)			(1,554		)
Income before income taxes	122,842			1.0	%	282,061			3.4	%
Provision for income taxes	22,803					59,863
Net income	100,039			0.8	%	222,198			2.7	%
Net loss attributable to noncontrolling interests	(521		)			(1,228		)
Net income attributable to WESCO International, Inc.	100,560			0.8	%	223,426			2.7	%
Preferred stock dividends	30,139					—
Net income attributable to common stockholders	$	70,421		0.6	%	$	223,426		2.7	%

Earnings per share attributable to common stockholders	$	1.51				$	5.14
Weighted-average common shares outstanding and common share equivalents used in computing earnings per diluted common share (in thousands)	46,625					43,487

Reportable Segments
Net sales:
Electrical & Electronic Solutions	$	5,479,760				$	4,860,541
Communications & Security Solutions	3,323,264					909,496
Utility & Broadband Solutions	3,522,971					2,588,880
	$	12,325,995				$	8,358,917
Income from operations:
Electrical & Electronic Solutions	$	260,207				$	261,788
Communications & Security Solutions	217,163					43,835
Utility & Broadband Solutions	231,702					184,931
Corporate	(362,034		)			(144,337		)
	$	347,038				$	346,217

WESCO INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands) (Unaudited)

	December 31, 2020		December 31, 2019
Assets
Current Assets
Cash and cash equivalents	$	449,135	$	150,902
Trade accounts receivable, net	2,466,903		1,187,359
Inventories	2,163,617		1,011,674
Other current assets	426,971		190,476
Total current assets	5,506,626		2,540,411

Goodwill and intangible assets	5,252,664		2,046,315
Other assets	1,120,924		430,909
Total assets	$	11,880,214	$	5,017,635


Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	1,707,329	$	830,478
Short-term borrowings and current portion of long-term debt	528,830		26,685
Other current liabilities	750,298		226,896
Total current liabilities	2,986,457		1,084,059

Long-term debt, net	4,369,953		1,257,067
Other noncurrent liabilities	1,187,415		417,838
Total liabilities	8,543,825		2,758,964

Stockholders’ Equity
Total stockholders’ equity	3,336,389		2,258,671
Total liabilities and stockholders’ equity	$	11,880,214	$	5,017,635

WESCO INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollar amounts in thousands) (Unaudited)

	Twelve Months Ended
	December 31, 2020			December 31, 2019
Operating Activities:
Net income	$	100,039		$	222,198
Add back (deduct):
Depreciation	55,086			26,579
Amortization of intangible assets	66,514			35,528
Deferred income taxes	(33,538		)	13,205
Change in trade receivables, net	47,879			11,453
Change in inventories	203,827			(47,297		)
Change in accounts payable	(54,127		)	23,505
Other, net	158,251			(60,804		)
Net cash provided by operating activities	543,931			224,367

Investing Activities:
Capital expenditures	(56,671		)	(44,067		)
Other⁽¹⁾	(3,678,478		)	(16,733		)
Net cash used in investing activities	(3,735,149		)	(60,800		)

Financing Activities:
Debt borrowings, net⁽²⁾	3,589,904			58,207
Equity activity, net	(3,434		)	(153,049		)
Other⁽³⁾	(105,729		)	(14,924		)
Net cash provided by (used in) financing activities	3,480,741			(109,766		)

Effect of exchange rate changes on cash and cash equivalents	8,710			758

Net change in cash and cash equivalents	298,233			54,559
Cash and cash equivalents at the beginning of the period	150,902			96,343
Cash and cash equivalents at the end of the period	$	449,135		$	150,902

⁽¹⁾		Includes payments to acquire Anixter of $3,707.6 million, net of cash acquired of $103.4 million.

⁽²⁾		Primarily includes the net proceeds from the issuance of senior unsecured notes of $2,815.0 million, as well as borrowings under the Company’s asset-based revolving credit facility and accounts receivable securitization facility. These cash inflows were used to fund the merger with Anixter.

⁽³⁾		Includes approximately $80.2 million of costs associated with the debt financing used to fund a portion of the merger with Anixter, and $30.1 million of dividends paid to holders of Series A preferred stock.

NON-GAAP FINANCIAL MEASURES

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) above, this earnings release includes certain non-GAAP financial measures. These financial measures include pro forma sales, gross profit, adjusted gross profit gross margin, adjusted gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, pro forma adjusted EBITDA, financial leverage, pro forma financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results such as merger-related costs and fair value adjustments, an out-of-period adjustment related to inventory absorption accounting, gain on sale of a U.S. operating branch, and the related income tax effect of such items, allowing investors to more easily compare the Company’s financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Three Months Ended						Twelve Months Ended
Gross Profit:	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019

Net sales	$	4,128,841		$	2,099,452		$	12,325,995		$	8,358,917
Cost of goods sold (excluding depreciation and amortization)	3,356,890			1,709,658			9,998,329			6,777,456
Gross profit	$	771,951		$	389,794		$	2,327,666		$	1,581,461
Adjusted gross profit⁽¹⁾	$	810,909		$	389,794		$	2,390,213		$	1,581,461
Gross margin	18.7		%	18.6		%	18.9		%	18.9		%
Adjusted gross margin⁽¹⁾	19.6		%	18.6		%	19.4		%	18.9		%

Note: Gross profit is a financial measure commonly used within the distribution industry. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales.

⁽¹⁾		Adjusted gross profit and adjusted gross margin exclude the effect of merger-related fair value adjustments to inventory, and an out-of-period adjustment related to inventory absorption accounting totaling $39.0 million and $62.5 million for the three and twelve months ended December 31, 2020, respectively.

	Three Months Ended						Twelve Months Ended
Adjusted Income from Operations:	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019

Income from operations	$	92,763		$	83,808		$	347,038		$	346,217
Merger-related costs	40,107			3,130			132,236			3,130
Merger-related fair value adjustments	15,674			—			43,693			—
Out-of-period adjustment	23,283			—			18,852			—
Gain on sale of asset	—			—			(19,816		)	—
Adjusted income from operations	$	171,827		$	86,938		$	522,003		$	349,347
Adjusted income from operations margin %	4.2		%	4.1		%	4.2		%	4.2		%

	Three Months Ended					Twelve Months Ended
Adjusted Provision for Income Taxes:	December 31, 2020			December 31, 2019		December 31, 2020		December 31, 2019

Provision for income taxes	$	(904	)	$	14,893	$	22,803	$	59,863
Income tax effect of adjustments to income from operations⁽¹⁾	22,264			664		41,817		664
Adjusted provision for income taxes	$	21,360		$	15,557	$	64,620	$	60,527

⁽¹⁾

The adjustments to income from operations have been tax effected at rates of 28.2% and 23.9% for the three and twelve months ended December 31, 2020, respectively, and 21.2% for the three and twelve months ended December 31, 2019.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Three Months Ended						Twelve Months Ended
Adjusted Earnings per Diluted Share:	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019

Adjusted income from operations	$	171,827		$	86,938		$	522,003		$	349,347
Interest expense, net	74,310			16,415			226,591			65,710
Other, net	(931		)	(194		)	(2,395		)	(1,554		)
Adjusted income before income taxes	98,448			70,717			297,807			285,191
Adjusted provision for income taxes	21,360			15,557			64,620			60,527
Adjusted net income	77,088			55,160			233,187			224,664
Net income (loss) attributable to noncontrolling interests	304			(404		)	(521		)	(1,228		)
Adjusted net income attributable to WESCO International, Inc.	76,784			55,564			233,708			225,892
Preferred stock dividends	14,352			—			30,139			—
Adjusted net income attributable to common stockholders	$	62,432		$	55,564		$	203,569		$	225,892

Diluted shares	51,069			42,210			46,625			43,487
Adjusted earnings per diluted share	$	1.22		$	1.32		$	4.37		$	5.20

Note: Income from operations, the provision for income taxes and earnings per diluted share for the three and twelve months ended December 31, 2020 have been adjusted to exclude merger-related costs and fair value adjustments, an out-of-period adjustment related to inventory absorption accounting, gain on sale of a U.S. operating branch, and the related income tax effects. For the three and twelve months ended December 31, 2019, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs and the related income tax effects. These non-GAAP financial measures provide a better understanding of the Company’s financial results on a comparable basis.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Three Months Ended December 31, 2020
EBITDA and Adjusted EBITDA by Segment:	EES			CSS			UBS			Corporate			Total

Net income attributable to common stockholders	$	66,164		$	88,916		$	64,195		$	(213,643	)	$	5,632
Net income attributable to noncontrolling interests	(178		)	—			—			482			304
Preferred stock dividends	—			—			—			14,352			14,352
Provision for income taxes	—			—			—			(904		)	(904		)
Interest expense, net	—			—			—			74,310			74,310
Depreciation and amortization	11,173			13,372			7,227			9,504			41,276
EBITDA	$	77,159		$	102,288		$	71,422		$	(115,899	)	$	134,970
Other, net	(1,757		)	(3,468		)	24			4,270			(931		)
Stock-based compensation expense	141			6			77			2,495			2,719
Merger-related costs	—			—			—			40,107			40,107
Merger-related fair value adjustments	3,716			9,656			2,302			—			15,674
Out-of-period adjustment	14,589			3,273			5,421			—			23,283
Adjusted EBITDA	$	93,848		$	111,755		$	79,246		$	(69,027	)	$	215,822
Adjusted EBITDA margin %	5.6		%	8.2		%	7.3		%				5.2		%

	Three Months Ended December 31, 2019
EBITDA and Adjusted EBITDA by Segment:	EES			CSS			UBS			Corporate			Total

Net income attributable to common stockholders	$	63,612		$	11,334		$	50,500		$	(72,348	)	$	53,098
Net loss attributable to noncontrolling interests	(404		)	—			—			—			(404		)
Provision for income taxes	—			—			—			14,893			14,893
Interest expense, net	—			—			—			16,415			16,415
Depreciation and amortization	7,226			1,703			3,465			3,678			16,072
EBITDA	$	70,434		$	13,037		$	53,965		$	(37,362	)	$	100,074
Other, net	(194		)	—			—			—			(194		)
Stock-based compensation expense	279			19			58			4,465			4,821
Merger-related costs	—			—			—			3,130			3,130
Adjusted EBITDA	$	70,519		$	13,056		$	54,023		$	(29,767	)	$	107,831
Adjusted EBITDA margin %	5.7		%	5.7		%	8.5		%				5.1		%

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Year Ended December 31, 2020
EBITDA and Adjusted EBITDA by Segment:	EES			CSS			UBS			Corporate			Total

Net income attributable to common stockholders	$	262,829		$	217,211		$	231,678		$	(641,297	)	$	70,421
Net loss attributable to noncontrolling interests	(842		)	—			—			321			(521		)
Preferred stock dividends	—			—			—			30,139			30,139
Provision for income taxes	—			—			—			22,803			22,803
Interest expense, net	—			—			—			226,591			226,591
Depreciation and amortization	35,811			37,765			22,380			25,644			121,600
EBITDA	$	297,798		$	254,976		$	254,058		$	(335,799	)	$	471,033
Other, net	(1,780		)	(48		)	24			(591		)	(2,395		)
Stock-based compensation expense	991			59			298			15,366			16,714
Merger-related costs	—			—			—			132,236			132,236
Merger-related fair value adjustments	15,411			22,000			6,282			—			43,693
Out-of-period adjustment	2,325			12,634			3,893			—			18,852
Gain on sale of asset	(19,816		)	—			—			—			(19,816		)
Adjusted EBITDA	$	294,929		$	289,621		$	264,555		$	(188,788	)	$	660,317
Adjusted EBITDA margin %	5.4		%	8.7		%	7.5		%				5.4		%

	Year Ended December 31, 2019
EBITDA and Adjusted EBITDA by Segment:	EES			CSS			UBS			Corporate			Total

Net income attributable to common stockholders	$	264,570		$	43,835		$	184,931		$	(269,910	)	$	223,426
Net loss attributable to noncontrolling interests	(1,228		)	—			—			—			(1,228		)
Provision for income taxes	—			—			—			59,863			59,863
Interest expense, net	—			—			—			65,710			65,710
Depreciation and amortization	28,569			7,155			13,583			12,800			62,107
EBITDA	$	291,911		$	50,990		$	198,514		$	(131,537	)	$	409,878
Other, net	(1,554		)	—			—			—			(1,554		)
Stock-based compensation expense	1,116			77			231			17,638			19,062
Merger-related costs	—			—			—			3,130			3,130
Adjusted EBITDA	$	291,473		$	51,067		$	198,745		$	(110,769	)	$	430,516
Adjusted EBITDA margin %	6.0		%	5.6		%	7.7		%				5.2		%

Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company’s performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before other, net, non-cash stock-based compensation, merger-related costs and fair value adjustments, an out-of-period adjustment related to inventory absorption accounting, and gain on sale of a U.S. operating branch. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Pro Forma⁽¹⁾			Reported
	Twelve Months Ended			Twelve Months Ended
Financial Leverage:	December 31, 2020			December 31, 2019

Net income attributable to common stockholders	$	115,572		$	223,426
Net loss attributable to noncontrolling interests	(521		)	(1,228		)
Preferred stock dividends	30,139			—
Provision for income taxes	55,659			59,863
Interest expense, net	255,842			65,710
Depreciation and amortization	153,499			62,107
EBITDA	$	610,190		$	409,878
Other, net	4,635			(1,554		)
Stock-based compensation	34,733			19,062
Merger-related costs and fair value adjustments	206,748			3,130
Out-of-period adjustment	18,852			—
Gain on sale of asset	(19,816		)	—
Adjusted EBITDA	$	855,342		$	430,516

	December 31, 2020			December 31, 2019
Short-term borrowings and current portion of long-term debt	$	528,830		$	26,685
Long-term debt	4,369,953			1,257,067
Debt discount and debt issuance costs⁽²⁾	88,181			8,876
Fair value adjustments to Anixter Notes due 2023 and 2025⁽²⁾	(1,650		)	—
Total debt	4,985,314			1,292,628
Less: cash and cash equivalents	449,135			150,902
Total debt, net of cash	$	4,536,179		$	1,141,726

Financial leverage ratio	5.3			2.7

⁽¹⁾		Pro forma adjusted EBITDA includes the financial results of the legacy WESCO Utility and Datacom businesses in Canada, which are being divested under a Consent Agreement with the Competition Bureau of Canada.

⁽²⁾		Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage measures the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses, non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, an out-of-period adjustment related to inventory absorption accounting, and gain on the sale of a U.S. operating branch. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA and pro forma adjusted EBITDA gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve month period.

WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in thousands, except per share data) (Unaudited)

	Three Months Ended						Twelve Months Ended
Free Cash Flow:	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019

Cash flow provided by operations	$	124,993		$	107,703		$	543,931		$	224,367
Less: Capital expenditures	(14,109		)	(13,744		)	(56,671		)	(44,067		)
Add: Merger-related expenditures	13,147			—			98,822			—
Free cash flow	$	124,031		$	93,959		$	586,082		$	180,300
Percentage of adjusted net income	161		%	170		%	251		%	80		%

Note: Free cash flow is a measure of liquidity. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund investing and financing activities. For the three and twelve months ended December 31, 2020, the Company paid certain fees, expenses and other costs to consummate the merger with Anixter. Such expenditures have been added back to cash flow provided by operations to determine free cash flow for such periods.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209005561/en/

Will Ruthrauff

Director, Investor Relations and Corporate Communications

(412) 454-4220

http://www.wesco.com

KEYWORDS: United States North America Pennsylvania

INDUSTRY KEYWORDS: Other Energy Utilities Energy Other Transport Technology Logistics/Supply Chain Management Transport Other Technology

MEDIA:

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February 9, 2021 6:03 am

Gartner Reports Fourth Quarter 2020 Financial Results

Gartner Reports Fourth Quarter 2020 Financial Results

Total Contract Value $3.6 billion, +4% YoY FX Neutral

FOURTH QUARTER 2020 HIGHLIGHTS

Revenues: $1.1 billion, -8% as reported; -9% FX neutral.
Net income: $120 million; adjusted EBITDA: $245 million, +13% as reported, +10% FX neutral.
Diluted EPS: $1.33, +77%; adjusted EPS: $1.59, +35%.
Operating cash flow: $260 million; free cash flow: $237 million, +>100%.
Repurchased 0.6 million common shares for $100 million.
Board of Directors increased the share repurchase authorization by $300 million.

FULL YEAR 2020 HIGHLIGHTS

Revenues: $4.1 billion, -3% as reported and FX neutral.
Net income: $267 million; adjusted EBITDA: $818 million, +20% as reported and FX neutral.
Diluted EPS: $2.96, +16%; adjusted EPS: $4.89, +25%.
Operating cash flow: $903 million; free cash flow: $819 million, +97%.
Repurchased 1.2 million common shares for $176 million.

STAMFORD, Conn.–(BUSINESS WIRE)–
Gartner, Inc. (NYSE: IT), the world’s leading research and advisory company, today reported results for the fourth quarter 2020 and provided its financial outlook for the full year 2021. Additional information regarding the Company’s results and 2021 financial outlook are provided in an earnings supplement available on the Company’s Investor Relations website at https://investor.gartner.com.

Gene Hall, Gartner’s Chief Executive Officer, commented, “Gartner delivered strong results in 2020 despite a challenging economic environment. Research resilience continued, we successfully pivoted our conferences to a virtual format, and effective cost management drove outstanding EBITDA and Free Cash Flow. We are well-positioned for 2021 and to drive both double digit top-line growth and margin expansion in the years beyond.”

CONFERENCE CALL INFORMATION

The Company will host a webcast call at 8:00 a.m. Eastern time on Tuesday, February 9, 2021 to discuss the Company’s financial results. The call will be available via the Company’s website at https://investor.gartner.com or by dialing 844-413-7151 (conference ID 1779672). A replay of the webcast will be available on the Company’s website for approximately 30 days following the call.

CONSOLIDATED RESULTS HIGHLIGHTS

(Unaudited; $ in millions, except per share amounts)	Three Months Ended
	December 31,						Inc/(Dec)
	2020		2019		Inc/(Dec)		FX Neutral
GAAP Metrics:
Revenues	$	1,113	$	1,203	(8	)%	(9	)%
Net income		120		68	77	%	na
Diluted EPS		1.33		0.75	77	%	na
Operating cash flow		260		83	>100	%	na

Non-GAAP Metrics:
Adjusted EBITDA	$	245	$	218	13	%	10	%
Adjusted EPS		1.59		1.18	35	%	na
Free cash flow		237		30	>100	%	na

na=not available.

SEGMENT RESULTS HIGHLIGHTS

Global Technology Sales Contract Value (GTS CV): $2.9 billion, +4% YoY FX Neutral
Global Business Sales Contract Value (GBS CV): $0.7 billion, +7% YoY FX Neutral

Our segment results for the three months ended December 31, 2020 were as follows:

(Unaudited; $ in millions)
	Research			Conferences			Consulting
GAAP Metrics:
Revenues	$	926		$	93		$	94
Inc/(Dec)	5		%	(57)		%	(10)		%
Inc/(Dec) – FX neutral	4		%	(58)		%	(12)		%

Gross contribution	$	669		$	73		$	25
Inc/(Dec)	8		%	(37)		%	(15)		%
Contribution margin	72		%	78		%	26		%

Additional details regarding our segment results can be obtained in the earnings supplement and on our webcast call.

Certain financial metrics contained in this Press Release are considered non-GAAP financial measures. Definitions of these non-GAAP financial measures are included in this Press Release under “Non-GAAP Financial Measures” and the related reconciliations are under “Supplemental Information — Non-GAAP Reconciliations.” In this Press Release, some totals may not add due to rounding. The percentage changes are based on the unrounded whole number and recalculation based on millions may yield a different result.

ANNUAL MEETING OF STOCKHOLDERS

Gartner will hold its 2021 Annual Meeting of Stockholders virtually at 10:00 a.m. Eastern time on Thursday, June 3, 2021.

ABOUT GARTNER

Gartner, Inc. (NYSE: IT) is the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission–critical priorities today and build the successful organizations of tomorrow. Our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size. To learn more about how we help decision makers fuel the future of business, visit gartner.com.

FORWARD LOOKING STATEMENTS

Statements contained in this press release regarding the Company’s growth and prospects, projected financial results, long-term objectives, and all other statements in this release other than recitation of historical facts are forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, estimates, uncertainties and other factors that may cause actual results to be materially different, and are currently, or in the future could be, amplified by the COVID-19 pandemic. Such factors include, but are not limited to, the following: uncertainty of the magnitude, duration, geographic reach and impact on the global economy of the COVID-19 pandemic; the current, and uncertain future, impact of the COVID-19 pandemic and governments’ responses to it on our business, growth, reputation, projections, prospects, financial condition, operations, cash flows, and liquidity; the adequacy or effectiveness of steps we take to respond to the crisis, including cost reduction or other mitigation programs; our ability to recover potential claims under our event cancellation insurance; the timing of our Gartner Symposium/Xpo series that normally occurs during the fourth quarter (but was cancelled in 2020 as a result of the COVID-19 pandemic), as well as of our other conferences and meetings; our ability to achieve and effectively manage growth, including our ability to integrate our acquisitions and consummate and integrate future acquisitions; our ability to pay our debt obligations; our ability to maintain and expand our products and services; our ability to expand or retain our customer base; our ability to grow or sustain revenue from individual customers; our ability to attract and retain a professional staff of research analysts and consultants as well as experienced sales personnel upon whom we are dependent; our ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; our ability to carry out our strategic initiatives and manage associated costs; our ability to successfully compete with existing competitors and potential new competitors; our ability to enforce and protect our intellectual property rights; additional risks associated with international operations, including foreign currency fluctuations; the U.K.’s exit from the European Union and its impact on our results; the impact of restructuring and other charges on our businesses and operations; cybersecurity incidents; general economic conditions; changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates and the effect on the credit markets and access to capital; risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies; the impact of changes in tax policy and heightened scrutiny from various taxing authorities globally; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; changes to laws and regulations; and other factors described under “Risk Factors” in our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which can be found on Gartner’s website at https://investor.gartner.com and the SEC’s website at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and Gartner disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

NON-GAAP FINANCIAL MEASURES

Certain financial measures used in this Press Release are not defined by U.S. generally accepted accounting principles (“GAAP”) and as such are considered non-GAAP financial measures. We provide these measures to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. Investors are cautioned that these non-GAAP financial measures may not be defined in the same manner by other companies and, as a result, may not be comparable to other similarly titled measures used by other companies. Also, these non-GAAP financial measures should not be construed as alternatives, or superior, to other measures determined in accordance with GAAP. The non-GAAP financial measures used in this Press Release are defined below.

Adjusted EBITDA and Adjusted EBITDA Margin: Represents GAAP net income (loss) adjusted for: (i) interest expense, net; (ii) tax provision (benefit); (iii) loss on extinguishment of debt, as applicable; (iv) other expense/income, net; (v) stock-based compensation expense; (vi) depreciation, amortization, and accretion; (vii) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues, as applicable; (viii) acquisition and integration charges and certain other non-recurring items; and (ix) gain/loss on divestitures and other similar items, as applicable. Adjusted EBITDA Margin represents Adjusted EBITDA divided by GAAP Revenue. We believe Adjusted EBITDA and Adjusted EBITDA Margin are important measures of our recurring operations as they exclude items not representative of our core operating results.

Adjusted Net Income: Represents GAAP net income (loss) adjusted for the impact of certain items directly related to acquisitions and other non-recurring items. These adjustments include: (i) the amortization of acquired intangibles; (ii) acquisition and integration charges and other non-recurring items; (iii) loss on extinguishment of debt, as applicable; (iv) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues, as applicable; (v) gain/loss on divestitures and other similar items, as applicable; (vi) the non-cash gain/loss on de-designated interest rate swaps and other similar items, as applicable; and (vii) the related tax effect. We believe Adjusted Net Income is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Adjusted EPS: Represents GAAP diluted EPS adjusted for the impact of certain items directly related to acquisitions and other non-recurring items. These adjustments include on a per share basis: (i) the amortization of acquired intangibles; (ii) acquisition and integration charges and other non-recurring items; (iii) loss on extinguishment of debt, as applicable; (iv) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues, as applicable; (v) the gain/loss on divestitures and other similar items, as applicable; (vi) the non-cash gain/loss on de-designated interest rate swaps and other similar items, as applicable; and (vii) the related tax effect, as applicable. We believe Adjusted EPS is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Free Cash Flow: Represents cash provided by operating activities determined in accordance with GAAP less payments for capital expenditures. We believe Free Cash Flow is an important measure of the recurring cash generated by the Company’s core operations that may be available to be used to repay debt obligations, repurchase our stock, invest in future growth through new business development activities, or make acquisitions.

Foreign Currency Neutral (FX Neutral): We provide foreign currency neutral dollar amounts and percentages for our contract values, revenues, certain expenses, and other metrics. These foreign currency neutral dollar amounts and percentages eliminate the effects of exchange rate fluctuations and thus provide a more accurate and meaningful trend in the underlying data being measured. We calculate foreign currency neutral dollar amounts by converting the underlying amounts in local currency for different periods into U.S. dollars by applying the same foreign exchange rates to all periods presented.

SUPPLEMENTAL INFORMATION – NON-GAAP RECONCILIATIONS

The tables below provide reconciliations of certain Non-GAAP financial measures used in this Press Release with the most directly comparable GAAP measure. See “Non-GAAP Financial Measures” above for definitions of these measures.

Reconciliation – GAAP Net Income to Adjusted EBITDA
(Unaudited; $ in millions)
	Three Months Ended December 31,						Year Ended December 31,
	2020			2019			2020		2019
GAAP net income	$	120		$	68		$	267	$	233
Interest expense, net	26			26			114		100
Loss on extinguishment of debt ^(a)	—			—			45		—
Loss from divested operations ^(b)	—			—			—		2
Other (income) expense, net	(4		)	(1		)	6		(8		)
Tax provision	37			43			59		42
Operating income	178			136			490		370
Adjustments:
Stock-based compensation expense ^(c)	6			11			63		69
Depreciation, amortization and accretion ^(d)	57			54			220		212
Acquisition and integration charges and other non-recurring items^(e)	4			17			45		33
Adjusted EBITDA	$	245		$	218		$	818	$	684

(a)		Includes $30.8 million early redemption premium payment and $14.0 million write-off of unamortized deferred financing fees related to the early repayment of the 2025 Senior Notes and the 2016 Credit Agreement.
(b)		Consists of the net loss from divestitures of non-core businesses.
(c)		Consists of charges for stock-based compensation awards.
(d)		Includes depreciation expense, amortization of intangibles and accretion on asset retirement obligations.
(e)		Consists of incremental and directly-related charges related to acquisitions, abandoned office space, workforce reductions and other non-recurring items.

Reconciliation – GAAP Net Income to Adjusted Net Income and Adjusted EPS (Unaudited; $ in millions, except per share amounts)
	Three Months Ended December 31,
	2020						2019
	Amount			Per Share			Amount			Per Share
GAAP net income	$	120		$	1.33		$	68		$	0.75
Acquisition and other adjustments:
Amortization of acquired intangibles ^(a)	30			0.34			32			0.36
Acquisition and integration charges and other non-recurring items ^{(b), (c)}	5			0.05			18			0.20
Gain on de-designated interest rate swaps ^(h)	(3		)	(0.03		)	—			—
Tax impact of adjustments ⁽ⁱ⁾	(9		)	(0.10		)	(12		)	(0.13		)
Adjusted net income and Adjusted EPS ^(j)	$	143		$	1.59		$	106		$	1.18

	Year Ended December 31,
	2020						2019
	Amount			Per Share			Amount			Per Share
GAAP net income	$	267		$	2.96		$	233		$	2.56
Acquisition and other adjustments:
Amortization of acquired intangibles ^(a)	125			1.39			130			1.43
Acquisition and integration charges and other non-recurring items ^{(b), (c)}	53			0.59			39			0.43
Loss on extinguishment of debt ^(d)	45			0.50			—			—
Loss from sale of divested operations ^(e)	—			—			2			0.02
Gain on sale of an equity security ^(f)	—			—			(9		)	(0.10		)
Amortization of deferred swap losses from de-designation ^(g)	10			0.11			—			—
Gain on de-designated interest rate swaps ^(h)	(2		)	(0.02		)	—			—
Tax impact of adjustments ⁽ⁱ⁾	(58		)	(0.64		)	(40		)	(0.44		)
Adjusted net income and Adjusted EPS ^(j)	$	440		$	4.89		$	355		$	3.90

(a)		Consists of non-cash amortization charges from acquired intangibles.
(b)		Consists of incremental and directly-related charges related to acquisitions, abandoned office space, workforce reductions and other non-recurring items.
(c)		Includes the amortization and write-off of deferred financing fees, which are recorded in Interest expense, net in the Company’s accompanying Condensed Consolidated Statements of Operations and in the Adjusted EBITDA table above.
(d)		Includes $30.8 million early redemption premium payment and $14.0 million write-off of unamortized deferred financing fees related to the early repayment of the 2025 Senior Notes and the 2016 Credit Agreement.
(e)		Consists of the net loss from divestitures of non-core businesses.
(f)		Represents a realized pretax gain related to a minority equity investment that the Company sold in 2019. Such gain was recorded in Other income/expense, net in the Company’s accompanying Condensed Consolidated Statements of Operations and in the Adjusted EBITDA table above.
(g)		Consists of the non-cash loss on de-designated interest rate swaps as a result of the prepayment of $787.9 million under the 2016 Credit Agreement Term Loan A facility and the repayment of all amounts outstanding under the 2016 Credit Agreement revolving credit facility in June 2020.
(h)		Represents the fair value adjustment for interest rate swaps after de-designation.
(i)		The blended effective tax rates on the adjustments were approximately 28% and 24% for the three months ended December 31, 2020 and 2019, respectively, and 25% for the years ended December 31, 2020 and 2019.
(j)		Adjusted EPS was calculated based on 90.1 million and 90.6 million diluted shares for the three months ended December 31, 2020 and 2019, respectively, and 90.0 million and 91.0 million diluted shares for the years ended December 31, 2020 and 2019, respectively.

Reconciliation – GAAP Cash Provided by Operating Activities to Free Cash Flow
(Unaudited; $ in millions)
	Three Months Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019
GAAP cash provided by operating activities	$	260		$	83		$	903		$	565
Cash paid for capital expenditures	(23		)	(53		)	(84		)	(149		)
Free cash flow (a)	$	237		$	30		$	819		$	416

(a)

Previously reported free cash flow added back cash paid for acquisition, integration, and other non-recurring items. These items totaled $10 million and $45 million and previously reported free cash flow was $40 million and $462 million for the three months and year ended December 31, 2019, respectively.

GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; $ in millions, except per share data)
	Three Months Ended
	December 31,
	2020			2019
Revenues:
Research	$	925.6		$	882.1
Conferences	93.2			217.4
Consulting	94.0			103.9
Total revenues	1,112.8			1,203.4
Costs and expenses:
Cost of services and product development	351.5			450.9
Selling, general and administrative	526.1			557.5
Depreciation	25.9			21.4
Amortization of intangibles	30.4			32.2
Acquisition and integration charges	0.8			5.3
Total costs and expenses	934.7			1,067.3
Operating income	178.1			136.1
Interest expense, net	(26.4		)	(26.1		)
Other income, net	4.4			0.6
Income before income taxes	156.1			110.6
Provision for income taxes	36.5			42.9
Net income	$	119.6		$	67.7

Net income per share:
Basic	$	1.34		$	0.76
Diluted	$	1.33		$	0.75
Weighted average shares outstanding:
Basic	89,339			89,428
Diluted	90,081			90,561

Source: Gartner, Inc.

Gartner-IR

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David Cohen

GVP, Investor Relations, Gartner

+1 203.316.6631

Kathleen Persaud

Director, Investor Relations, Gartner

+1 203.316.1672

[email protected]

KEYWORDS: United States North America New York Connecticut

INDUSTRY KEYWORDS: Consulting Professional Services Science Other Professional Services Research

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February 9, 2021 6:03 am

Tilray® Announces Agreement with Grow Pharma to Import and Distribute Medical Cannabis Products in the United Kingdom

Tilray® Announces Agreement with Grow Pharma to Import and Distribute Medical Cannabis Products in the United Kingdom

Grow Pharma will distribute Tilray’s GMP-certified medical cannabis products across the UK

New UK agreement gives doctors and patients access to a sustainable supply of Tilray’s pharmaceutical-grade medical cannabis products

NANAIMO, British Columbia–(BUSINESS WIRE)–
Tilray Inc. (NASDAQ: TLRY), a global pioneer in cannabis research, cultivation, production, and distribution, today announced it has established an agreement with Grow Pharma to import and distribute Tilray’s medical cannabis products into the United Kingdom (UK). This agreement allows Tilray to provide authorized UK patients in need with a locally maintained supply of medical cannabis solutions.

Tilray expects to have a range of GMP-certified, medical cannabis products available for patients in the UK by March 2021. Patients looking to use medical cannabis will have access to Tilray products in the UK by obtaining prescriptions through private practice or the National Health Service (NHS).

Brendan Kennedy, Tilray’s Chief Executive Officer, said, “This partnership with Grow Pharma provides patients in need access to a sustained supply of GMP-certified, high-quality medical cannabis and is an important step in improving access in the UK. Tilray will continue to advocate for reasonable patient access to medical cannabis in Europe and countries around the world.”

Sascha Mielcarek, Managing Director of Tilray Europe, said, “As demand continues to ramp up in the UK, Tilray is well-positioned to be a leading supplier of medical cannabis products. Regulations are progressing as more and more countries across Europe are recognizing the benefits of medical cannabis and its potential to improve patients’ quality of life. We’re pleased to reaffirm our commitment to delivering medical cannabis to patients in the UK and look forward to offering a variety of GMP-certified, pharmaceutical-grade products in the coming months.”

Pierre van Weperen, Chief Executive Officer of Grow Pharma, said, “We’re proud to join forces with Tilray and provide patients in need with a secure and sustainable supply of the highest-quality medical cannabis products in the UK.”

About Grow Pharma

Grow Pharma is a leading UK medical cannabis distributor, part of the Grow Group. Grow Group PLC exists to unlock the medical potential of cannabis for those who need it though three business units: Grow Pharma, Grow Trading and Grow Biotech. Grow Pharma works with the producers of the best cannabis-based medicines and helps them introduce their products in new markets like the U.K. and Ireland, creating long-term value for them and offering solutions for patients. The Grow Pharma team also focuses on supporting clinics and individual healthcare professionals and through our partnership with IPS Specials Pharma we work with the best importer, distributor and pharmacy in the country to deliver the medication to patients. Ultimately, all Grow Group activities are aimed at improving patient access to cannabis medicines. https://growgroupplc.com

About Tilray®

Tilray is a global pioneer in the research, cultivation, production, and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in 17 countries spanning five continents.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws, or collectively, forward-looking statements. Forward-looking statements in this press release may be identified by the use of words such as, “may”, “would”, “could”, “will”, “likely”, “expect”, “anticipate”, “believe, “intend”, “plan”, “forecast”, “project”, “estimate”, “outlook” and other similar expressions. Forward-looking statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions, and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, including assumptions in respect of current and future European market conditions, the current and future regulatory environment and future approvals and permits. Actual results, performance, or achievement could differ materially from that expressed in, or implied by, any forward-looking statements in this press release, and, accordingly, you should not place undue reliance on any such forward-looking statements, and they are not guarantees of future results. Please see the heading “Risk Factors” in Tilray’s Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on November 9, 2020, for a discussion of the material risk factors that could cause actual results to differ materially from the forward-looking information. Tilray does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

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Tilray Global:

Berrin Noorata

[email protected]

To request an interview opportunity:

Media

Amy Bonwick

647-515-3748

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Ranjit Dhatt

647-890-2445

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Investors

Raphael Gross

203-682-8253

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KEYWORDS: North America Canada

INDUSTRY KEYWORDS: Alternative Medicine Health Other Science General Health Research Science Pharmaceutical

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February 9, 2021 6:03 am

Moody’s Analytics Tops Four Categories, Finishes #2 Overall in CeFPro™ Fintech Leaders Report

Moody’s Analytics Tops Four Categories, Finishes #2 Overall in CeFPro™ Fintech Leaders Report

NEW YORK–(BUSINESS WIRE)–
Moody’s Analytics has earned the top ranking in four categories in the new Center for Financial Professionals (CeFPro) Fintech Leaders 2021 report:

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210209005319/en/

» #1: Balance Sheet Risk

» #1: Credit Risk

» #1: Model Risk

» #1: Stress Testing

As a result of these wins we finished #2 in the report’s Top 50 Overall Ecosystem Rankings, up from #5 last year.

“Addressing uncertainty is an elemental challenge for all of our customers, irrespective of the specific parts of their business we support. That was the case before the pandemic and is even more so now,” said Jacob Grotta, Head of Banking Solutions at Moody’s Analytics. “We’re proud that our customers choose Moody’s Analytics to identify and understand sources of risk so they can make their best possible business decisions. We’re also very pleased by our performance in this year’s Fintech Leaders report, with our #2 overall position confirming the value of Moody’s Analytics interconnected solutions.”

“This is an outstanding achievement by Moody’s Analytics,” said Andreas Simou, Managing Director of CeFPro. “CeFPro’s Fintech Leaders report is based on responses from the end-users in the industry, which in turn reflect the diverse offerings of Moody’s Analytics across a number of categories.”

CeFPro’s research and analysis team surveyed finance, technology, operations, risk, legal, and compliance professionals to decide the category rankings. Votes and follow-up interviews by CeFPro’s Fintech Leaders Advisory Board followed, with final review by the managing director of CeFPro. The overall rankings were based on votes cast for individual categories.

Learn more about the Center for Financial Professionals.

These wins add to the industry recognition for Moody’s Analytics, which in 2020 totaled more than 70 awards.

Moody’s Analytics, Moody’s, and all other names, logos, and icons identifying Moody’s Analytics and/or its products and services are trademarks of Moody’s Analytics, Inc. or its affiliates. Third-party trademarks referenced herein are the property of their respective owners.

About Moody’s Analytics

Moody’s Analytics provides financial intelligence and analytical tools to help business leaders make better, faster decisions. Our deep risk expertise, expansive information resources, and innovative application of technology help our clients confidently navigate an evolving marketplace. We are known for our industry-leading and award-winning solutions, made up of research, data, software, and professional services, assembled to deliver a seamless customer experience. We create confidence in thousands of organizations worldwide, with our commitment to excellence, open mindset approach, and focus on meeting customer needs. For more information about Moody’s Analytics, visit our website or connect with us on Twitter and LinkedIn.

Moody’s Analytics, Inc. is a subsidiary of Moody’s Corporation (NYSE: MCO). Moody’s Corporation reported revenue of $4.8 billion in 2019, employs approximately 11,400 people worldwide and maintains a presence in more than 40 countries.

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JUSTIN BURSZTEIN

Moody’s Analytics Communications

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Moody’s Analytics Media Relations

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February 9, 2021 6:03 am

Willis Towers Watson Reports Solid Fourth Quarter and Full Year 2020 Earnings

For the year, cash flows from operating activities were $1.8 billion, up 64% compared to $1.1 billion in the prior year
For the year, free cash flow almost doubled to $1.6 billion compared to $835 million in the prior year
Revenue
¹
increased 3% for both the quarter and the year
Organic revenue growth of 2% for both the quarter and the year
Diluted Earnings per Share were $3.66 for the quarter, down 12% over prior year
Diluted Earnings per Share were $7.65 for the year, down 5% over prior year
Adjusted Diluted Earnings per Share were $5.23 for the quarter, up 7% over prior year
Adjusted Diluted Earnings per Share were $11.70 for the year, up 7% over prior year

ARLINGTON, Va. and LONDON, Feb. 09, 2021 (GLOBE NEWSWIRE) — Willis Towers Watson (NASDAQ: WLTW) (the “Company”), a leading global advisory, broking and solutions company, today announced financial results for the fourth quarter and full year ended December 31, 2020.

“Our performance in the fourth quarter provided a strong finish to a good year in a difficult environment,” said John Haley, Willis Towers Watson’s chief executive officer. “We produced solid margins, almost doubled free cash flow, and delivered remarkable adjusted EPS growth. The results reflect the strong dedication and adaptability of our colleagues and their commitment to the values that underpin our Company. I couldn’t be prouder of Willis Towers Watson’s accomplishments to date and I look forward to our continued momentum in 2021 as we move toward our planned combination with Aon.”

Company Highlights

Cash flows from operating activities for the year ended December 31, 2020 were $1.8 billion, up 64% compared to $1.1 billion for the prior year. Free cash flow for the year ended December 31, 2020 was $1.6 billion, up 86% compared to $835 million for the prior year. The increase in cash flows from operations as compared to the prior year was primarily due to positive cash flows from our improved working capital for the year ended December 31, 2020 as compared to December 31, 2019. During the year ended December 31, 2020, the Company had no share repurchase activity.

Revenue was $2.76 billion for the fourth quarter of 2020, an increase of 3% (1% increase constant currency and 2% increase organic) as compared to $2.69 billion for the same period in the prior year.

For the year ended December 31, 2020, revenue was $9.35 billion, an increase of 3% (4% increase constant currency and 2% increase organic) as compared to $9.04 billion for the same period in the prior year.

Income from operations for the fourth quarter of 2020 was $587 million, or 21.2% of revenue, a decrease of 430 basis points compared to the same period in the prior year. Adjusted operating income was $820 million, or 29.7% of revenue, down 40 basis points compared to the same period in the prior year. Net income attributable to Willis Towers Watson for the fourth quarter of 2020 was $476 million, a decrease of 13% from $544 million for the same period in the prior year. For the quarter, diluted earnings per share were $3.66, down 12% from $4.18 for the same period in the prior year. For the quarter, adjusted diluted earnings per share were $5.23, up 7% from $4.90 for the same period in the prior year. Net income attributable to Willis Towers Watson and diluted earnings per share for the fourth quarter of 2020 included pre-tax $45 million of transaction and integration expenses mostly related to the pending business combination with Aon plc and $50 million of provisions for significant litigation. The U.S. GAAP tax rate for the quarter was 19.7%, and the adjusted income tax rate for the quarter used in calculating adjusted diluted earnings per share was 17.8%.

For the year ended December 31, 2020, income from operations was $1.2 billion, or 12.6% of revenue, a decrease of 210 basis points compared to the prior year. Adjusted operating income was $1.9 billion, or 20.1% of revenue, down 20 basis points compared to the prior year. Net income attributable to Willis Towers Watson for the year ended December 31, 2020 was $996 million, a decrease of 5% from $1.04 billion for the prior year. For the year ended December 31, 2020, diluted earnings per share were $7.65, down 5% from $8.02 for the prior year. For the year ended December 31, 2020, adjusted diluted earnings per share were $11.70, up 7% from $10.96 for the prior year. Net income attributable to Willis Towers Watson and diluted earnings per share for the year ended December 31, 2020 included pre-tax $110 million of transaction and integration expenses mostly related to the pending business combination with Aon plc and $65 million of provisions for significant litigation. For the year ended December 31, 2020, the U.S. GAAP tax rate was 23.8%, and the adjusted income tax rate used in calculating adjusted diluted earnings per share was 20.8%.

Net income for the fourth quarter of 2020 was $483 million, or 17.5% of revenue, a decrease from net income of $551 million, or 20.5% of revenue for the same period in the prior year. Adjusted EBITDA for the fourth quarter of 2020 was $967 million, or 35.0% of revenue, an increase from Adjusted EBITDA of $930 million, or 34.6% of revenue for the same period in the prior year.

For the year ended December 31, 2020, net income was $1.02 billion, or 10.9% of revenue, a decrease from net income of $1.07 billion, or 11.9% of revenue for the prior year. Adjusted EBITDA for the year ended December 31, 2020 was $2.5 billion, or 26.4% of revenue, an increase from Adjusted EBITDA of $2.3 billion, or 25.4% of revenue for the prior year.

¹ The revenue amounts included in this release are presented on a U.S. GAAP basis except where stated otherwise. The segment discussion is on an organic basis.

Risks and Uncertainties Related to the COVID-19 Pandemic

The extent to which COVID-19 continues to impact our business and financial position will depend on future developments, which are difficult to predict, including the severity and scope of the COVID-19 pandemic as well as the types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures. We continue to expect that the COVID-19 pandemic will negatively impact our revenue and operating results for 2021. During 2020, the COVID-19 pandemic had a negative impact on revenue growth, particularly in our businesses that are discretionary in nature, but otherwise it generally did not have a material impact on our overall results. Some of our discretionary, project-based businesses saw a reduction in demand, and additional negative impacts on our revenue and operating results may lag behind the developments thus far related to the COVID-19 pandemic. In light of the effects on our own business operations and those of our clients, suppliers and other third parties with whom we interact, the Company has considered, and will continue to consider, the impact of COVID-19 on our business, as appropriate taking into account our business resilience and continuity plans, financial modeling and stress testing of liquidity and financial resources. For additional information on the risks posed by COVID-19, see additional disclosures in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Fourth Quarter 2020 Segment Highlights

Human Capital & Benefits

The Human Capital & Benefits (HCB) segment had revenue of $865 million, flat (2% decrease constant currency and 1% decrease organic) compared to the prior-year fourth quarter. On an organic basis, Talent and Rewards revenue declined primarily because of a difference in timing as well as the global impact of COVID-19 having negatively impacted demand. Technology and Administrative Solutions revenue increased, having benefited from a softer comparative. Retirement revenue was materially flat as reduced de-risking activity in North America was mostly offset by increased project work in Western Europe and Great Britain. Health and Benefits revenue declined nominally, as continued expansion of our client portfolio for benefits management appointments outside of North America was offset by a decline in North America, which had a strong comparable. The HCB segment had an operating margin of 31.3%, as compared to 30.1% for the prior-year fourth quarter.

Corporate Risk & Broking

The Corporate Risk & Broking (CRB) segment had revenue of $888 million, an increase of 1% (1% decrease constant currency and 1% decrease organic) from $877 million in the prior-year fourth quarter. On an organic basis, North America led the segment with new business generation alongside strong renewals. The increase was partially offset by a decline in Western Europe, which was primarily due to the impact of COVID-19 on certain insurance lines. Revenue decreased in Great Britain and International primarily due to a change in the remuneration model for certain lines of business. This change, which is neutral to operating income, results in lower revenue and an equal reduction to salaries and benefits expense. Absent this change, Great Britain and International revenue would have decreased modestly, due to headwinds from one-time, non-recurring placements in the prior year in the construction and natural resource insurance lines coupled with reductions in airline-volume driven commissions. The CRB segment had an operating margin of 32.3%, as compared to 30.3% for the prior-year fourth quarter.

Investment, Risk & Reinsurance

The Investment, Risk & Reinsurance (IRR) segment had revenue of $292 million, a decrease of 7% (9% decrease constant currency and 1% increase organic) from $314 million in the prior-year fourth quarter. On an organic basis, Reinsurance led the segment’s revenue growth, driven by new business wins and favorable renewal factors. The growth was partially offset by declines in other businesses with pressure on discretionary work having negatively impacted both Insurance Consulting and Technology and Investments. Wholesale revenue declined as a result of headwinds across certain coverage lines coupled with a strategic shift in its operating model. In September 2020, the Company sold its Max Matthiessen business. The IRR segment had an operating margin of 11.0%, as compared to 9.1% for the prior-year fourth quarter.

Benefits Delivery & Administration

The Benefits Delivery & Administration (BDA) segment had revenue of $693 million, an increase of 16% (16% increase constant currency and 16% increase organic) from $595 million in the prior-year fourth quarter. BDA’s organic revenue increase was led by Individual Marketplace, primarily by TRANZACT. TRANZACT generated $279 million of revenue for the three months ended December 31, 2020. Benefits Outsourcing revenue also grew, driven by its expanded client base. The BDA segment had an operating margin of 50.7%, as compared to 52.4% for the prior-year fourth quarter.

Conference Call

The Company will host a live webcast and conference call to discuss the financial results for the fourth quarter. It will be held on Tuesday, February 9, 2021, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet at www.willistowerswatson.com. The replay of the call will be available shortly after the live call for a period of three months. A telephonic replay of the call will also be available for 24 hours at 404-537-3406, conference ID 3871978.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has more than 46,000 employees and services clients in more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

Willis Towers Watson Non-GAAP Measures

In order to assist readers of our consolidated financial statements in understanding the core operating results that Willis Towers Watson’s management uses to evaluate the business and for financial planning, we present the following non-GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted Operating Income/Margin, (4) Adjusted EBITDA/Margin, (5) Adjusted Net Income, (6) Adjusted Diluted Earnings Per Share, (7) Adjusted Income Before Taxes, (8) Adjusted Income Taxes/Tax Rate and (9) Free Cash Flow.

We believe that these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating performance, and in the case of free cash flow, our liquidity results.

Within these measures referred to as ‘adjusted’, we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they are expected to be part of our full-year results. These items include the following:

Restructuring costs and transaction and integration expenses – Management believes it is appropriate to adjust for restructuring costs and transaction and integration expenses when they relate to a specific significant program with a defined set of activities and costs that are not expected to continue beyond a defined period of time, or significant acquisition-related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when the incurrence of these costs will have concluded.
Gains and losses on disposals of operations – Adjustment to remove the gain or loss resulting from disposed operations.
Pension settlement and curtailment gains and losses – Adjustment to remove significant pension settlement and curtailment gains and losses to better present how the Company is performing.

Abandonment of long-lived asset – Adjustment to remove the depreciation expense resulting from internally-developed software that was abandoned prior to being placed into service.
Provisions for significant litigation – We will include provisions for litigation matters which we believe are not representative of our core business operations. These amounts are presented net of insurance recovery receivables.

Tax effect of the CARES Act – Relates to the incremental tax expense impact, primarily from the Base Erosion and Anti-Abuse Tax (“BEAT”), generated from electing certain income tax provisions of the CARES Act.
Tax effects of internal reorganization – Relates to the U.S. income tax expense resulting from the completion of internal reorganizations of the ownership of certain businesses that reduced the investments held by our U.S.-controlled subsidiaries.

We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant currency and organic information provides valuable supplemental information regarding our comparable results, consistent with how we evaluate our performance internally.

We consider Constant Currency Change, Organic Change, Adjusted Operating Income/Margin, Adjusted EBITDA/Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Income Before Taxes, Adjusted Income Taxes/Tax Rate and Free Cash Flow to be important financial measures, which are used to internally evaluate and assess our core operations and to benchmark our operating and liquidity results against our competitors. These non-GAAP measures are important in illustrating what our comparable operating and liquidity results would have been had we not incurred transaction-related and non-recurring items. Our non-GAAP measures and their accompanying definitions are presented as follows:

Constant Currency Change – Represents the year-over-year change in revenue excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the prior year revenue, translated at the current year monthly average exchange rates, to the current year as reported revenue, for the same period. We believe constant currency measures provide useful information to investors because they provide transparency to performance by excluding the effects that foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency exchange markets.

Organic Change – Excludes the impact of fluctuations in foreign currency exchange rates, as described above and the period-over-period impact of acquisitions and divestitures on current-year revenue. We believe that excluding transaction-related items from our U.S. GAAP financial measures provides useful supplemental information to our investors, and it is important in illustrating what our core operating results would have been had we not included these transaction-related items, since the nature, size and number of these translation-related items can vary from period to period.

Adjusted Operating Income/Margin – Income from operations adjusted for amortization, restructuring costs, transaction and integration expenses and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted operating income margin is calculated by dividing adjusted operating income by revenue. We consider adjusted operating income/margin to be important financial measures, which are used internally to evaluate and assess our core operations and to benchmark our operating results against our competitors.

Adjusted EBITDA/Margin – Net Income adjusted for provision for income taxes, interest expense, depreciation and amortization, restructuring costs, transaction and integration expenses, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted EBITDA Margin is calculated by dividing adjusted EBITDA by revenue. We consider adjusted EBITDA/margin to be important financial measures, which are used internally to evaluate and assess our core operations, to benchmark our operating results against our competitors and to evaluate and measure our performance-based compensation plans.

Adjusted Net Income – Net Income Attributable to Willis Towers Watson adjusted for amortization, restructuring costs, transaction and integration expenses, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results and the related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of calculating adjusted diluted earnings per share.

Adjusted Diluted Earnings Per Share – Adjusted Net Income divided by the weighted-average number of shares of common stock, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our operating results against our competitors.

Adjusted Income Before Taxes – Income from operations before income taxes adjusted for amortization, restructuring costs, transaction and integration expenses, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate.

Adjusted Income Taxes/Tax Rate – Provision for income taxes adjusted for taxes on certain items of amortization, restructuring costs, transaction and integration expenses, gains and losses on disposals of operations, the tax effects of internal reorganizations, and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adjusted income tax rate. Management believes that the adjusted income tax rate presents a rate that is more closely aligned to the rate that we would incur if not for the reduction of pre-tax income for the adjusted items and the tax effects of internal reorganizations, which are not core to our current and future operations.

Free Cash Flow – Cash flows from operating activities less cash used to purchase fixed assets and software for internal use. Free Cash Flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures. Management believes that free cash flow presents the core operating performance and cash-generating capabilities of our business operations.

These non-GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our condensed consolidated financial statements.

Reconciliations of these measures are included in the accompanying tables with the following exception.

The Company does not reconcile its forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information, such as foreign currency impacts necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure, is available to the Company without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The Company provides non-GAAP financial measures that it believes will be achieved, however it cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.

Willis Towers Watson Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements and other forward-looking statements in this document by words such as “may”, “will”, “would”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend”, “continue”, or similar words, expressions or the negative of such terms or other comparable terminology. These statements include, but are not limited to, such things as our outlook, the impact of the COVID-19 pandemic on our business, our pending business combination with Aon plc, future capital expenditures, ongoing working capital efforts, future share repurchases, financial results (including our revenue), the impact of changes to tax laws on our financial results, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, our ability to successfully manage ongoing organizational and technology changes, including investments in improving systems and processes, and plans and references to future successes, including our future financial and operating results, plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Willis Towers Watson’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained herein, including the following: the risks relating to or arising from our pending business combination with Aon plc announced in March 2020, including, among others, our ability to consummate the transaction, including on the terms of the business combination agreement, on the anticipated timeline, and/or with the required regulatory approvals; our ability to successfully establish, execute and achieve our global business strategy as it evolves; the risk that the COVID-19 pandemic substantially and negatively impacts the demand for our products and services and cash flows, and/or continues to materially impact our business operations, including increased demand on our information technology resources and systems and related risks of cybersecurity breaches or incidents; changes in demand for our services, including any decline in consulting services, defined benefit pension plans or the purchasing of insurance; changes in general economic, business and political conditions, including changes in the financial markets; significant competition that we face and the potential for loss of market share and/or profitability; the impact of seasonality and differences in timing of renewals; the failure to protect client data or breaches of information systems or insufficient safeguards against cybersecurity breaches or incidents; the risk of increased liability or new legal claims arising from our new and existing products and services, and expectations, intentions and outcomes relating to outstanding litigation; the risk that the Stanford bar order may be challenged in other jurisdictions, and the risk that the charge related to the Stanford settlement may not be deductible; the risk of substantial negative outcomes on existing litigation or investigation matters; changes in the regulatory environment in which we operate, including, among other risks, the impact of pending competition law and regulatory investigations; various claims, government inquiries or investigations or the potential for regulatory action; our ability to make divestitures or acquisitions and our ability to integrate or manage such acquired businesses; our ability to successfully hedge against fluctuations in foreign currency rates; our ability to integrate direct-to-consumer sales and marketing solutions with our existing offerings and solutions; successfully manage ongoing organizational changes, including investments in improving systems and processes; disasters or business continuity problems; the impact of Brexit; risks relating to the U.S. 2020 election, including a potential increase in the corporate tax rate; our ability to successfully enhance our billing, collection and other working capital efforts, and thereby increase our free cash flow; the potential impact of the anticipated replacement of LIBOR; our ability to properly identify and manage conflicts of interest; reputational damage, including from association with third parties; reliance on third-party services; the loss of key employees; our ability to effectively apply technology, data and analytics changes for internal operations, maintaining industry standards and meeting client preferences; changes and developments in the insurance industry; the ability to comply with complex and evolving regulations related to data privacy and cyber security; doing business internationally, including the impact of exchange rates; compliance with extensive government regulation; the risk of sanctions imposed by governments, or changes to associated sanction regulations; changes and developments in the United States healthcare system, including those related to Medicare and any policy changes from the new Presidential administration and legislative actions from the current U.S. Congress; the inability to protect our intellectual property rights, or the potential infringement upon the intellectual property rights of others; the laws of Ireland being different from the laws of the United States and potentially affording less protections to the holders of our securities; fluctuations in our pension assets and liabilities; our capital structure, including indebtedness amounts, the limitations imposed by the covenants in the documents governing such indebtedness and the maintenance of the financial and disclosure controls and procedures of each; our ability to obtain financing on favorable terms or at all; adverse changes in our credit ratings; the impact of recent changes to U.S. tax laws, including on our effective tax rate, and the enactment of additional, or the revision of existing, state, federal, and/or foreign regulatory and tax laws and regulations and any policy changes from the new Presidential administration and legislative actions from the current U.S. Congress; U.S. federal income tax consequences to U.S. persons owning at least 10% of our shares; changes in accounting principles, estimates or assumptions; fluctuation in revenue against our relatively fixed or higher than expected expenses; and our holding company structure potentially preventing us from being able to receive dividends or other distributions in needed amounts from our subsidiaries. These factors also include those described under “Risk Factors” in the company’s most recent 10-K filing and subsequent filings filed with the SEC, including definitive additional materials, the merger proxy statement and other filings generally applicable to significant transactions and related integrations that are or will be filed with the SEC. Copies are available online at http://www.sec.gov or www.willistowerswatson.com.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against relying on these forward-looking statements.

Contact

INVESTORS

Claudia De La Hoz | [email protected]

WILLIS TOWERS WATSON

Supplemental Segment Information

(In millions of U.S. dollars)
(Unaudited)

REVENUE
							Components of Revenue Change⁽ⁱ⁾
	Three Months Ended December 31,				As Reported		Currency		Constant Currency		Acquisitions/		Organic
	2020		2019		% Change		Impact		Change		Divestitures		Change

Human Capital & Benefits	$	865	$	865	0	%	2	%	(2	)%	0	%	(1	)%
Corporate Risk & Broking		888		877	1	%	2	%	(1	)%	0	%	(1	)%
Investment, Risk & Reinsurance		292		314	(7	)%	2	%	(9	)%	(11	)%	1	%
Benefits Delivery & Administration		693		595	16	%	0	%	16	%	0	%	16	%
Segment Revenue		2,738		2,651	3	%	2	%	2	%	(1	)%	3	%
Reimbursable expenses and other		26		39
Revenue	$	2,764	$	2,690	3	%	2	%	1	%	(1	)%	2	%

							Components of Revenue Change⁽ⁱ⁾
	Years Ended December 31,				As Reported		Currency		Constant Currency		Acquisitions/		Organic
	2020		2019		% Change		Impact		Change		Divestitures		Change

Human Capital & Benefits	$	3,278	$	3,298	(1	)%	0	%	(1	)%	0	%	0	%
Corporate Risk & Broking		2,977		2,946	1	%	0	%	1	%	0	%	1	%
Investment, Risk & Reinsurance		1,651		1,637	1	%	0	%	1	%	(3	)%	4	%
Benefits Delivery & Administration		1,359		1,035	31	%	0	%	31	%	21	%	10	%
Segment Revenue		9,265		8,916	4	%	0	%	4	%	2	%	2	%
Reimbursable expenses and other		87		123
Revenue	$	9,352	$	9,039	3	%	0	%	4	%	2	%	2	%

⁽ⁱ⁾ Components of revenue change may not add due to rounding

SEGMENT OPERATING INCOME
⁽ⁱ⁾

	Three Months Ended December 31,
	2020		2019

Human Capital & Benefits		271		261
Corporate Risk & Broking		287		266
Investment, Risk & Reinsurance		33		28
Benefits Delivery & Administration		351		311
Segment Operating Income	$	942	$	866


	Years Ended December 31,
	2020		2019

Human Capital & Benefits	$	853	$	848
Corporate Risk & Broking		630		578
Investment, Risk & Reinsurance		457		420
Benefits Delivery & Administration		320		244
Segment Operating Income	$	2,260	$	2,090

⁽ⁱ⁾Segment operating income excludes certain costs, including amortization of intangibles, restructuring costs, transaction and integration expenses, certain litigation provisions, and to the extent that the actual expense based upon which allocations are made differs from the forecast/budget amount, a reconciling item will be created between internally-allocated expenses and the actual expenses reported for U.S. GAAP purposes.

SEGMENT OPERATING MARGINS

	Three Months Ended December 31,
	2020		2019
Human Capital & Benefits	31.3	%	30.1	%
Corporate Risk & Broking	32.3	%	30.3	%
Investment, Risk & Reinsurance	11.0	%	9.1	%
Benefits Delivery & Administration	50.7	%	52.4	%

	Years Ended December 31,
	2020		2019
Human Capital & Benefits	26.0	%	25.7	%
Corporate Risk & Broking	21.2	%	19.6	%
Investment, Risk & Reinsurance	27.7	%	25.7	%
Benefits Delivery & Administration	23.5	%	23.6	%

RECONCILIATIONS OF SEGMENT OPERATING INCOME TO INCOME FROM OPERATIONS BEFORE INCOME TAXES

	Three Months Ended December 31,
	2020			2019

Segment Operating Income	$	942		$	866
Amortization		(114	)		(121	)
Restructuring costs ⁽ⁱ⁾		(24	)		—
Transaction and integration expenses ⁽ⁱⁱ⁾		(45	)		(1	)
Provision for significant litigation ⁽ⁱⁱⁱ⁾		(50	)		—
Unallocated, net ^(iv)		(122	)		(57	)
Income from Operations		587			687
Interest expense		(60	)		(62	)
Other income, net		75			50
Income from operations before income taxes	$	602		$	675

	Years Ended December 31,
	2020			2019

Segment Operating Income	$	2,260		$	2,090
Amortization		(462	)		(489	)
Restructuring costs ⁽ⁱ⁾		(24	)		—
Transaction and integration expenses ⁽ⁱⁱ⁾		(110	)		(13	)
Provision for significant litigation ⁽ⁱⁱⁱ⁾		(65	)		—
Unallocated, net ^(iv)		(416	)		(259	)
Income from Operations		1,183			1,329
Interest expense		(244	)		(234	)
Other income, net		399			227
Income from operations before income taxes	$	1,338		$	1,322

⁽ⁱ⁾ Restructuring costs relate to minor restructuring activities carried out by various business lines throughout the Company.
⁽ⁱⁱ⁾ Includes transaction costs related to the proposed Aon combination and TRANZACT acquisition in 2019.
⁽ⁱⁱⁱ⁾ In the fourth quarter of 2020, the Company agreed in principle to settle both the federal litigation and the Delaware litigation associated with the 2016 Willis/Towers Watson merger for aggregate payments of $90 million. The Company subsequently filed definitive settlement agreements with both courts in January 2021. We described this litigation in the Company’s Periodic Report on Form 10-Q for the quarter ended September 30, 2020, and we will provide an update regarding the settlements in the Company’s 2020 Annual Report on Form 10-K. As a result of the settlements, the Company increased its provision for such litigation (net of insurance and other recoveries) from $15 million to $65 million during the fourth quarter of 2020. The settlements are contingent upon final approval by the courts in both the federal litigation and the Delaware litigation. The Company agreed to the settlements and the payment of the settlement amounts to eliminate the distraction, burden, expense and uncertainty of further litigation. Further, in reaching the settlements, the parties understood and agreed that there is no admission of liability or wrongdoing by the Company or any of the other defendants.
⁽ⁱ^v⁾ Includes certain costs, primarily related to corporate functions which are not directly related to the segments, and certain differences between budgeted expenses determined at the beginning of the year and actual expenses that we report for U.S. GAAP purposes.

WILLIS TOWERS WATSON

Reconciliations of Non-GAAP Measures

(In millions of U.S. dollars, except per share data)
(Unaudited)

RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON TO ADJUSTED DILUTED EARNINGS PER SHARE

	Three Months Ended December 31,
		2020			2019

Net Income attributable to Willis Towers Watson	$	476		$	544
Adjusted for certain items:
Amortization		114			121
Restructuring costs		24			—
Transaction and integration expenses		45			1
Provision for significant litigation ⁽ⁱ⁾		50			—
Loss on disposal of operations		2			2
Tax effect on certain items listed above ⁽ⁱⁱ⁾		(53	)		(31	)
Tax effect of the CARES Act		23			—
Adjusted Net Income	$	681		$	637

Weighted-average shares of common stock, diluted		130			130

Diluted Earnings Per Share	$	3.66		$	4.18
Adjusted for certain items: ⁽ⁱⁱⁱ⁾
Amortization		0.87			0.93
Restructuring costs		0.18			—
Transaction and integration expenses		0.35			0.01
Provision for significant litigation ⁽ⁱ⁾		0.38			—
Loss on disposal of operations		0.02			0.02
Tax effect on certain items listed above ⁽ⁱⁱ⁾		(0.41	)		(0.24	)
Tax effect of the CARES Act		0.18			—
Adjusted Diluted Earnings Per Share	$	5.23		$	4.90

	Years Ended December 31,
		2020			2019

Net Income attributable to Willis Towers Watson	$	996		$	1,044
Adjusted for certain items:
Abandonment of long-lived asset		35			—
Amortization		462			489
Restructuring costs		24			—
Transaction and integration expenses		110			13
Provision for significant litigation ⁽ⁱ⁾		65			—
(Gain)/loss on disposal of operations		(81	)		2
Tax effect on certain items listed above ⁽ⁱⁱ⁾		(149	)		(121	)
Tax effect of the CARES Act		61			—
Adjusted Net Income	$	1,523		$	1,427

Weighted-average shares of common stock, diluted		130			130

Diluted Earnings Per Share	$	7.65		$	8.02
Adjusted for certain items: ⁽ⁱⁱⁱ⁾
Abandonment of long-lived asset		0.27			—
Amortization		3.55			3.75
Restructuring costs		0.18			—
Transaction and integration expenses		0.84			0.10
Provision for significant litigation ⁽ⁱ⁾		0.50			—
(Gain)/loss on disposal of operations		(0.62	)		0.02
Tax effect on certain items listed above ⁽ⁱⁱ⁾		(1.14	)		(0.93	)
Tax effect of the CARES Act		0.47			—
Adjusted Diluted Earnings Per Share	$	11.70		$	10.96

⁽ⁱ⁾ In the fourth quarter of 2020, the Company agreed in principle to settle both the federal litigation and the Delaware litigation associated with the 2016 Willis/Towers Watson merger for aggregate payments of $90 million. The Company subsequently filed definitive settlement agreements with both courts in January 2021. We described this litigation in the Company’s Periodic Report on Form 10-Q for the quarter ended September 30, 2020, and we will provide an update regarding the settlements in the Company’s 2020 Annual Report on Form 10-K. As a result of the settlements, the Company increased its provision for such litigation (net of insurance and other recoveries) from $15 million to $65 million during the fourth quarter of 2020. The settlements are contingent upon final approval by the courts in both the federal litigation and the Delaware litigation. The Company agreed to the settlements and the payment of the settlement amounts to eliminate the distraction, burden, expense and uncertainty of further litigation. Further, in reaching the settlements, the parties understood and agreed that there is no admission of liability or wrongdoing by the Company or any of the other defendants.
⁽ⁱⁱ⁾The tax effect was calculated using an effective tax rate for each item.
⁽ⁱⁱⁱ⁾ Per share values and totals may differ due to rounding.

RECONCILIATIONS OF NET INCOME TO ADJUSTED EBITDA

	Three Months Ended December 31,
		2020				2019

Net Income	$	483	17.5	%	$	551	20.5	%
Provision for income taxes		119				124
Interest expense		60				62
Depreciation		70				69
Amortization		114				121
Restructuring costs		24				—
Transaction and integration expenses		45				1
Provision for significant litigation ⁽ⁱ⁾		50				—
Loss on disposal of operations		2				2
Adjusted EBITDA and Adjusted EBITDA Margin	$	967	35.0	%	$	930	34.6	%

	Years Ended December 31,
		2020					2019

Net Income	$	1,020		10.9	%	$	1,073	11.9	%
Provision for income taxes		318					249
Interest expense		244					234
Depreciation ⁽ⁱⁱ⁾		308					240
Amortization		462					489
Restructuring costs		24					—
Transaction and integration expenses		110					13
Provision for significant litigation ⁽ⁱ⁾		65					—
(Gain)/loss on disposal of operations		(81	)				2
Adjusted EBITDA and Adjusted EBITDA Margin	$	2,470		26.4	%	$	2,300	25.4	%

⁽
ⁱ
⁾ In the fourth quarter of 2020, the Company agreed in principle to settle both the federal litigation and the Delaware litigation associated with the 2016 Willis/Towers Watson merger for aggregate payments of $90 million. The Company subsequently filed definitive settlement agreements with both courts in January 2021. We described this litigation in the Company’s Periodic Report on Form 10-Q for the quarter ended September 30, 2020, and we will provide an update regarding the settlements in the Company’s 2020 Annual Report on Form 10-K. As a result of the settlements, the Company increased its provision for such litigation (net of insurance and other recoveries) from $15 million to $65 million during the fourth quarter of 2020. The settlements are contingent upon final approval by the courts in both the federal litigation and the Delaware litigation. The Company agreed to the settlements and the payment of the settlement amounts to eliminate the distraction, burden, expense and uncertainty of further litigation. Further, in reaching the settlements, the parties understood and agreed that there is no admission of liability or wrongdoing by the Company or any of the other defendants.
⁽ⁱⁱ⁾ Includes abandonment of long-lived asset of $35 million for the year ended December 31, 2020.

RECONCILIATIONS OF INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME

	Three Months Ended December 31,
		2020				2019

Income from operations	$	587	21.2	%	$	687	25.5	%
Adjusted for certain items:
Amortization		114				121
Restructuring costs		24				—
Transaction and integration expenses		45				1
Provision for significant litigation ⁽ⁱ⁾		50				—
Adjusted operating income	$	820	29.7	%	$	809	30.1	%

	Years Ended December 31,
		2020				2019

Income from operations	$	1,183	12.6	%	$	1,329	14.7	%
Adjusted for certain items:
Abandonment of long-lived asset		35				—
Amortization		462				489
Restructuring costs		24				—
Transaction and integration expenses		110				13
Provision for significant litigation ⁽ⁱ⁾		65				—
Adjusted operating income	$	1,879	20.1	%	$	1,831	20.3	%

RECONCILIATIONS OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE

	Three Months Ended December 31,
		2020			2019
Income from operations before income taxes	$	602		$	675

Adjusted for certain items:
Amortization		114			121
Restructuring costs		24			—
Transaction and integration expenses		45			1
Provision for significant litigation ⁽ⁱ⁾		50			—
Loss on disposal of operations		2			2
Adjusted income before taxes	$	837		$	799

Provision for income taxes	$	119		$	124
Tax effect on certain items listed above ⁽ⁱⁱ⁾		53			31
Tax effect of the CARES Act		(23	)		—
Adjusted income taxes	$	149		$	155

U.S. GAAP tax rate		19.7	%		18.3	%
Adjusted income tax rate		17.8	%		19.4	%

	Years Ended December 31,
		2020			2019
Income from operations before income taxes	$	1,338		$	1,322

Adjusted for certain items:
Abandonment of long-lived asset		35			—
Amortization		462			489
Restructuring costs		24			—
Transaction and integration expenses		110			13
Provision for significant litigation ⁽ⁱ⁾		65			—
(Gain)/loss on disposal of operations		(81	)		2
Adjusted income before taxes	$	1,953		$	1,826

Provision for income taxes	$	318		$	249
Tax effect on certain items listed above ⁽ⁱⁱ⁾		149			121
Tax effect of the CARES Act		(61	)		—
Adjusted income taxes	$	406		$	370

U.S. GAAP tax rate		23.8	%		18.8	%
Adjusted income tax rate		20.8	%		20.3	%

RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES TO FREE CASH FLOW

	Years Ended December 31,
		2020			2019
Cash flows from operating activities	$	1,774		$	1,081
Less: Additions to fixed assets and software for internal use		(223	)		(246	)
Free Cash Flow	$	1,551		$	835

WILLIS TOWERS WATSON

Condensed Consolidated Statements of Income

(In millions of U.S. dollars, except per share data)
(Unaudited)

	Three Months Ended December 31,						Years Ended December 31,
	2020			2019			2020			2019
Revenue	$	2,764		$	2,690		$	9,352		$	9,039

Costs of providing services
Salaries and benefits		1,419			1,340			5,507			5,249
Other operating expenses		505			472			1,758			1,719
Depreciation		70			69			308			240
Amortization		114			121			462			489
Restructuring costs		24			—			24			—
Transaction and integration expenses		45			1			110			13
Total costs of providing services		2,177			2,003			8,169			7,710

Income from operations		587			687			1,183			1,329

Interest expense		(60	)		(62	)		(244	)		(234	)
Other income, net		75			50			399			227

INCOME FROM OPERATIONS BEFORE INCOME TAXES		602			675			1,338			1,322

Provision for income taxes		(119	)		(124	)		(318	)		(249	)

NET INCOME		483			551			1,020			1,073

Income attributable to non-controlling interests		(7	)		(7	)		(24	)		(29	)

NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON	$	476		$	544		$	996		$	1,044


Earnings per share
Basic earnings per share	$	3.67		$	4.20		$	7.68		$	8.05
Diluted earnings per share	$	3.66		$	4.18		$	7.65		$	8.02

Weighted-average shares of common stock, basic		130			129			130			130
Weighted-average shares of common stock, diluted		130			130			130			130

WILLIS TOWERS WATSON

Condensed Consolidated Balance Sheets

(In millions of U.S. dollars, except share data)
(Unaudited)

	December 31,			December 31,
	2020			2019
ASSETS
Cash and cash equivalents	$	2,089		$	887
Fiduciary assets		15,160			13,004
Accounts receivable, net		2,555			2,621
Prepaid and other current assets		497			525
Total current assets		20,301			17,037
Fixed assets, net		1,014			1,046
Goodwill		11,204			11,194
Other intangible assets, net		3,043			3,478
Right-of-use assets		902			968
Pension benefits assets		971			868
Other non-current assets		1,096			835
Total non-current assets		18,230			18,389
TOTAL ASSETS	$	38,531		$	35,426
LIABILITIES AND EQUITY
Fiduciary liabilities	$	15,160		$	13,004
Deferred revenue and accrued expenses		2,161			1,784
Current debt		971			316
Current lease liabilities		152			164
Other current liabilities		888			802
Total current liabilities		19,332			16,070
Long-term debt		4,664			5,301
Liability for pension benefits		1,405			1,324
Deferred tax liabilities		561			526
Provision for liabilities		407			537
Long-term lease liabilities		918			964
Other non-current liabilities		312			335
Total non-current liabilities		8,267			8,987
TOTAL LIABILITIES		27,599			25,057
COMMITMENTS AND CONTINGENCIES
EQUITY ⁽ⁱ⁾
Additional paid-in capital		10,748			10,687
Retained earnings		2,434			1,792
Accumulated other comprehensive loss, net of tax		(2,359	)		(2,227	)
Treasury shares, at cost, 17,519 shares in 2020 and 2019, and 40,000 shares, €1 nominal value, in 2019		(3	)		(3	)
Total Willis Towers Watson shareholders’ equity		10,820			10,249
Non-controlling interests		112			120
Total Equity		10,932			10,369
TOTAL LIABILITIES AND EQUITY	$	38,531		$	35,426

(i) Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 128,964,579 (2020) and 128,689,930 (2019); Outstanding 128,964,579 (2020) and 128,689,930 (2019); (b) Ordinary shares, €1 nominal value; Authorized and Issued 40,000 shares in 2019; and (c) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2020 and 2019.

WILLIS TOWERS WATSON

Condensed Consolidated Statements of Cash Flows

(In millions of U.S. dollars)
(Unaudited)

	Years Ended December 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$	1,020		$	1,073
Adjustments to reconcile net income to total net cash from operating activities:
Depreciation		308			240
Amortization		462			489
Non-cash lease expense		146			148
Net periodic benefit of defined benefit pension plans		(196	)		(135	)
Provision for doubtful receivables from clients		29			9
Provision for/(benefit from) deferred income taxes		99			(72	)
Share-based compensation		90			74
Net (gain)/loss on disposal of operations		(81	)		2
Non-cash foreign exchange (gain)/loss		(6	)		26
Other, net		(17	)		17
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:
Accounts receivable		72			(261	)
Fiduciary assets		(1,774	)		(365	)
Fiduciary liabilities		1,774			365
Other assets		(205	)		(269	)
Other liabilities		191			(264	)
Provisions		(138	)		4
Net cash from operating activities		1,774			1,081

CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to fixed assets and software for internal use		(223	)		(246	)
Capitalized software costs		(63	)		(59	)
Acquisitions of operations, net of cash acquired		(69	)		(1,329	)
Net proceeds from sale of operations		212			17
Other, net		(17	)		3
Net cash used in investing activities		(160	)		(1,614	)

CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Net payments on revolving credit facility		—			(131	)
Senior notes issued		282			997
Proceeds from issuance of other debt		—			1,100
Debt issuance costs		(2	)		(13	)
Repayments of debt		(327	)		(995	)
Repurchase of shares		—			(150	)
Proceeds from issuance of shares		16			45
Payments of deferred and contingent consideration related to acquisitions		(12	)		(57	)
Cash paid for employee taxes on withholding shares		(14	)		(15	)
Dividends paid		(346	)		(329	)
Acquisitions of and dividends paid to non-controlling interests		(28	)		(55	)
Other, net		(3	)		—
Net cash (used in)/from financing activities		(434	)		397

INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		1,180			(136	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		21			(2	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR ⁽ⁱ⁾		895			1,033
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR ⁽ⁱ⁾	$	2,096		$	895

(i) As a result of the acquired TRANZACT collateralized facility, cash, cash equivalents and restricted cash included $7 million and $8 million of restricted cash at December 31, 2020 and 2019, respectively, which is included within prepaid and other current assets on our consolidated balance sheets. There were no restricted cash amounts held at December 31, 2018.

PDF available: http://ml.globenewswire.com/Resource/Download/6bda52c4-a5a8-4e8f-945a-2f5295d7b224

February 9, 2021 6:03 am

Halliburton Labs Announces Inaugural Group of Companies

Halliburton Labs Announces Inaugural Group of Companies

Enexor BioEnergy, Momentum Technologies and OCO Inc. join clean tech accelerator program

HOUSTON–(BUSINESS WIRE)–
Halliburton Labs today announced the inaugural group of companies selected to participate in its collaborative environment where entrepreneurs, academics, and investors come together to advance cleaner, affordable energy. Enexor BioEnergy, Momentum Technologies and OCO Inc. will have access to Halliburton’s deep business and technical expertise, facilities and network to accelerate their respective offerings.

“We are excited to welcome a strong group of companies who have demonstrated promising innovation and are working to solve important clean energy challenges,” said Dale Winger, managing director of Halliburton Labs. “We look forward to collaborating with these companies and providing world-class industrial capabilities and expertise to help them achieve further scale.”

Enexor BioEnergy manufactures an on-site, renewable energy solution to help solve the world’s organic and plastic waste problems. The company’s patented bioenergy system converts almost any organic, plastic or biomass waste in any combination, into affordable, renewable power and thermal energy. “We are seeing tremendous inbound customer demand for Enexor’s renewable energy solution from across the world,” said Lee Jestings, founder and CEO of Enexor BioEnergy. “We are honored to join Halliburton Labs. Their broad global network and deep manufacturing expertise will assist Enexor in meeting its significant worldwide demand while making a significantly positive environmental impact. This is a major step forward in our worldwide launch.”

Momentum Technologies works with lithium battery recyclers and manufacturers to recover critical materials from waste for reuse. Developed in partnership with the U.S. Department of Energy, Momentum’s patented MSX technology efficiently recovers pure critical materials from spent lithium batteries, rare earth permanent magnets and other valuable waste products. MSX allows Momentum to build processing plants where the waste is generated, eliminating shipping costs and associated carbon emissions. “Halliburton Labs is the ideal environment to scale our cutting-edge lithium battery recycling technology. We are excited to tap into Halliburton’s Labs engineering and supply chain expertise and global business network to accelerate Momentum to the forefront,” said Preston Bryant, CEO of Momentum Technologies.

OCO Inc. transforms carbon dioxide, water, and zero carbon electricity into a hydrogen-rich platform chemical that can be used to make a wide variety of zero-carbon chemicals, materials, and fuels. OCO’s process is highly carbon negative and much less expensive than existing fossil-based processes and feedstocks. “The valuable industrial expertise and network of Halliburton Labs will support our build, deployment, and demonstration of a full-size commercial grade system, the next step on our commercialization journey towards an industrial scale plant,” said Todd Brix, Founder and CEO of OCO Inc.

ABOUT HALLIBURTON LABS

Halliburton Labs is a collaborative environment where entrepreneurs, academics, investors and industrial labs join to advance cleaner, affordable energy. Located at Halliburton Company’s headquarters in Houston, Texas, Halliburton Labs provides access to world-class facilities, operational expertise, practical mentorship and financing opportunities in a single location to help participants scale their business. Visit the company’s website at www.halliburtonlabs.com. Connect with Halliburton Labs on Twitter, LinkedIn and Instagram. Halliburton Labs is a wholly owned subsidiary of Halliburton Company.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209005279/en/

For Investors:

Abu Zeya

Investor Relations

[email protected]

281-871-2688

For News Media:

William Fitzgerald

External Affairs

[email protected]

281-871-5267

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS: Oil/Gas Alternative Energy Energy Environment Utilities

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February 9, 2021 6:03 am

Nature Medicine Publishes First Study Utilizing NanoString’s GeoMx Digital Spatial Profiler Whole Transcriptome Atlas

Nature Medicine Publishes First Study Utilizing NanoString’s GeoMx Digital Spatial Profiler Whole Transcriptome Atlas

Whole Transcriptome Atlas Demonstrates the Role of Immune Evasion in Fusion-Driven Malignant Sarcomas

SEATTLE–(BUSINESS WIRE)–
NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for discovery and translational research, today announced the publication of a study in the journal Nature Medicine thatused NanoString’s GeoMx® Digital Spatial Profiler (DSP) and the new Whole Transcriptome Atlas (WTA) to profile sarcoma tissue. The research was led by a team from the Broad Institute in Cambridge, Massachusetts. The paper, entitled “Opposing immune and genetic mechanisms shape oncogenic programs in synovial sarcoma,” can be found here.(https://www.nature.com/articles/s41591-020-01212-6)

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210209005225/en/

Nature Medicine publishes first peer-reviewed study using GeoMx DSP with next generation sequencing readout. (Photo: Business Wire)

In this work, researchers used the unique segmentation capability of the GeoMx Digital Spatial Profiler to subdivide regions within the tumors into distinct immune and tumor compartments and interrogate them using the GeoMx Whole Transcriptome Atlas. The use of high-plex spatial profiling allowed researchers to observe a negative correlation between the core oncogenic program and immune response, which may ultimately provide insights that lead to the development of novel immunotherapies for synovial sarcomas.

“The ability to segment and interrogate distinct segments with a high-plex platform allowed us to delineate the spatial connection between the malignant cells’ states and their microenvironment in the intact tissue,” stated Livnat Jerby-Arnon, Assistant Professor at Stanford University and Chan Zuckerberg Biohub Investigator. “The scope of the GeoMx Whole Transcriptome Atlas was particularly important because it allowed us to explore the spatial distribution of hundreds of genes from readily available FFPE samples.”

“We’re proud to highlight the first peer reviewed publication demonstrating the unique capabilities of our GeoMx Whole Transcriptome Atlas for spatial analysis,” said Brad Gray, NanoString’s president and chief executive officer. “The launch of our WTA assay will expand our spatial portfolio beyond focused panels, opening up vast new opportunities in biological research.”

The GeoMx Digital Spatial Profiler enables researchers to rapidly and quantitatively characterize tissue morphology with a high-throughput, high-plex RNA and protein profiling system that preserves samples for future analyses. NanoString and its collaborators have published DSP data in more than 38 peer-reviewed papers and presented DSP data in numerous abstracts at major scientific meetings, demonstrating the utility of DSP technology to address a wide range of biological questions with robust performance in a broad variety of sample types, including Formalin-Fixed Paraffin-Embedded (FFPE) tissue.

About NanoString Technologies, Inc.

NanoString Technologies is a leading provider of life science tools for translational research. The company’s nCounter® Analysis System is used in life sciences research and has been cited in more than 4,000 peer-reviewed publications. The nCounter Analysis System offers a cost-effective way to easily profile the expression of hundreds of genes, proteins, miRNAs, or copy number variations, simultaneously with high sensitivity and precision, facilitating a wide variety of basic research and translational medicine applications, including biomarker discovery and validation. The company’s GeoMx Digital Spatial Profiler enables highly-multiplexed spatial profiling of RNA and protein targets in a variety of sample types, including FFPE tissue sections.

For more information, please visit www.nanostring.com.

NanoString, NanoString Technologies, the NanoString logo, GeoMx, and nCounter are trademarks or registered trademarks of NanoString Technologies, Inc. in various jurisdictions.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209005225/en/

Doug Farrell

Vice President, Investor Relations & Corporate Communications

[email protected]

Phone: 206-602-1768

KEYWORDS: United States North America Washington

INDUSTRY KEYWORDS: Research Technology Genetics Software Biotechnology Health Data Management Science Oncology Other Science

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Nature Medicine publishes first peer-reviewed study using GeoMx DSP with next generation sequencing readout. (Photo: Business Wire)

Posted on February 9, 2021 6:03 am
Akur8 and Xceedance Announce Strategic Partnership

Delivery of state-of-the-art pricing solutions to insurers is a key objective of the new relationship.

PARIS and BOSTON, Feb. 09, 2021 (GLOBE NEWSWIRE) — Akur8 and Xceedance today announced a strategic partnership to deliver best-in-class actuarial and analytics solutions to insurance organizations.

The partnership between Xceedance and Akur8 provides an opportunity for insurers to gather extensive insights from internal or external data sources, enrich rate-making processes, and gain access to advanced actuarial expertise. By leveraging modern technology from Akur8 and industry proficiency from Xceedance, insurers can realize immediate and tangible improvements in operational performance. Benefits to insurers include increased rate-making process efficiency, faster time-to-market, and enhanced governance and compliance in the rating process, as well as top-line and bottom-line growth potential.

“Akur8 is excited to join forces with Xceedance, a leading and recognized expert in the actuarial services landscape,” said Samuel Falmagne, CEO at Akur8. “By combining our resources, we can deliver a strong actuarial value proposition to insurance organizations — leveraging our unique ratemaking platform and top-notch actuarial expertise from Xceedance.”

The unique Akur8 insurance pricing platform leverages an innovative combination of proprietary machine learning (ML) algorithms and transparent artificial intelligence (AI) — which allows actuarial and predictive modelling teams to significantly increase speed-to-accuracy, without sacrificing auditability and control.

“The Akur8 platform is distinctive in the pricing landscape, with an innovative approach to incorporating data science in the ratemaking process,” said Matthew Duke, chief actuary, head of global actuarial and analytics services at Xceedance. “Automation of critical steps in the predictive modelling process significantly reduces time-to-market, while maintaining high levels of precision and transparency. The Akur8 solution, combined with actuarial and analytics services from Xceedance, creates a powerful offering for insurance organizations worldwide.”

Technology enablement is a key focus for the Xceedance actuarial and analytics services team. By combining its offerings with strategic partnerships globally, Xceedance supplies a comprehensive suite of technology-driven solutions to insurers and reinsurers of all sizes. Companies with actuarial and analytics infrastructure can benefit from a streamlined deployment, while organizations with limited resources can access those solutions via advisory and consulting services from Xceedance.

About Akur8

Akur8
is transforming insurance pricing with Transparent AI. Our proprietary ML algorithms automate rate making while preserving control and transparency throughout the process. We replace the manual processes of legacy solutions and the need to build and maintain large codebases through custom R/Python developments, while maintaining an output that is understandable & auditable, unlike black-box ML.

About Xceedance

Xceedance
is a global provider of strategic consulting and managed services, technology, and data sciences to insurance organizations. The company helps insurers launch products, drive operations, implement intelligent technology, deploy advanced analytics, and achieve business process optimization. The experienced insurance professionals at Xceedance enable insurers worldwide to enhance policyholder service, enter new markets, boost workflow productivity, and improve profitability.

Media Contacts:

Astrid Noel (for Akur8)
+33 (0)7 68 24 93 27
[email protected]

Jennifer Overhulse, St. Nick Media (for Xceedance)
+1 859 803 6597
[email protected]

Posted on February 9, 2021 6:03 am
Canaan Inc. Announces Resignation of Chief Financial Officer

BEIJING, China, Feb. 09, 2021 (GLOBE NEWSWIRE) — Canaan Inc. (NASDAQ: CAN) (“Canaan” or the “Company”), a leading high-performance computing solutions provider, today announced that Mr. Quanfu Hong has resigned from the Chief Financial Officer position, effective February 9, 2021, for personal reasons. Mr. Tong He will become acting Chief Financial Officer immediately.

Mr. He has been the Company’s Director of Finance since July 2020 and has extensive experience in finance and accounting. Prior to joining the Company, Mr. He served as Chief Financial Officer and assistant to the general manager at Diankeyun (Beijing) Technology Co., Ltd, deputy chief financial officer at IReader Technology Co Ltd. (SHSE: 603533), and Head of Business Unit Finance at Lenovo Group Limited (HKSE: 0992). Mr. He obtained a master degree in commerce finance in Australia.

Mr. Nangeng Zhang, Chairman and Chief Executive of Canaan, commented, “Speaking on behalf of the Company and the board, I would like to thank Mr. Hong for his valuable service and contributions to the Company. We wish him the best for his future endeavors. I would also like to thank Mr. He for accepting the acting CFO role and continuing to provide us with his managerial know-how. With his demonstrated expertise in accounting and finance, Mr. He should be able to ensure a smooth transition and move our operations continuously forward.”

About Canaan Inc.
Established in 2013, Canaan Inc. provides high-performance computing solutions to efficiently solve complex problems. In 2016, Canaan successfully initiated the production of its first 16nm chip and passed the test to receive China’s national high-tech enterprise certification. In 2018, Canaan achieved major technological breakthroughs to launch the K210, the world’s first-ever RISC-V-based edge artificial intelligence (AI) chip, which is now widely used for access control in situations such as smart door locks and more. Canaan Inc. is currently focused on the research and development of advanced technology, including such areas as AI chips, AI algorithms, AI architectures, system on a chip (SoC) integration and chip integration. Using the AI chip as its base, Canaan Inc. has established an intellectual value chain. Canaan Inc. also provides a suite of AI service solutions and is able to tailor these solutions to the needs of its partners. For more information, please visit: investor.canaan-creative.com.

Safe Harbor Statement

This announcement contains forward−looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward−looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Canaan Inc.’s strategic and operational plans, contain forward−looking statements. Canaan Inc. may also make written or oral forward−looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”) on Forms 20−F and 6−K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Canaan Inc.’s beliefs and expectations, are forward−looking statements. Forward−looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward−looking statement, including but not limited to the following: the Company’s goals and strategies; the Company’s future business development, financial condition and results of operations; the expected growth of the Bitcoin industry and the price of Bitcoin; the Company’s expectations regarding demand for and market acceptance of its products, especially its Bitcoin mining machines; the Company’s expectations regarding maintaining and strengthening its relationships with production partners and customers; the Company’s investment plans and strategies, fluctuations in the Company’s quarterly operating results; competition in its industry in China; and relevant government policies and regulations relating to the Company and cryptocurrency. Further information regarding these and other risks is included in the Company’s filings with the SEC, including its registration statement on Form F−1, as amended, and its annual reports on Form 20−F. All information provided in this press release and in the attachments is as of the date of this press release, and Canaan Inc. does not undertake any obligation to update any forward−looking statement, except as required under applicable law.

Investor Relations Contact

Canaan Inc.
Mr. Shaoke Li
Email: [email protected]

ICR Inc.
Jack Wang
Tel: +1 (347) 396-3281
Email: [email protected]

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