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Fourth Quarter

• Revenue of $274.2 Million, 1.6% Lower than Last Year Primarily Due to Decline in Pipeline Performance Products Revenue Due to COVID-19 Impact
  
   
• Diluted Earnings Per Share (EPS) of $1.25; Adjusted Diluted EPS¹ of $1.96, 16.0% Higher than Last Year
  

Full Fiscal Year 2020

• Record Revenue of $1,116.3 Million, 7.6% Higher than Last Year Primarily Due to KMG Acquisition; Revenue Increased 1.5% Compared to Full Fiscal Year 2019 Pro Forma Revenue¹ Primarily Due to Growth in CMP Slurries and Higher Wood Treatment Revenue
  
   
• Record Diluted EPS of $4.83, 257.8% Higher than Last Year; Record Adjusted Diluted EPS¹ of $7.47, 11.0% Higher than Last Year
  

AURORA, Ill., Nov. 11, 2020 (GLOBE NEWSWIRE) — CMC Materials, Inc.² (Nasdaq: CCMP), a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies, today reported financial results for its fourth quarter and full fiscal year 2020, which ended September 30, 2020.

Key Highlights

Total revenue decreased 1.6% in the fourth quarter compared to the same quarter last year as stronger demand in CMP slurries and electronic chemicals as well as higher wood treatment revenue were offset by lower revenue in pipeline performance products and CMP pads. Net income for the quarter was $36.9 million compared to a loss of $20.2 million in the prior year primarily due to the impairment charge the company took for its strategic decision to exit the wood treatment business in the prior year. Adjusted EBITDA was $84.0 million, down 1.5% compared with the prior year. Full year revenue was a record and increased 7.6% compared to the last year primarily due to a full year of revenue from the company’s acquisition of KMG Chemicals, Inc. in November of 2018, growth in CMP slurries and higher wood treatment revenue. During the year the company generated $287.3 million in cash flow from operations, and had $257.4 million of cash on hand and $921.4 million in total debt as of the end of the fiscal year. 

“I am proud of our performance, delivering another year of record revenue and profitability despite the challenging and unprecedented environment caused by the COVID-19 pandemic, which demonstrates our strong execution and robust businesses. We are most grateful for the overall well-being of our employees, and I would like to thank our global teams for their dedication to driving our record results,” said David Li, President and CEO of CMC Materials. “In fiscal 2021, we expect to see continued strong demand from our semiconductor customers driven by advanced node transitions to support new technologies including 5G, as well as improving fundamentals and demand from our pipeline customers. We also started the year with the rebranding of our company to CMC Materials, which we believe embodies our focus on delivering innovative, high value, specialty materials to our customers globally.”

¹
_{Refer to financial tables and “Use of Certain GAAP, non-GAAP Adjusted Financial Information” in the press release below for information about these non-GAAP financial measures and reconciliations of these non-GAAP measures to their most comparable GAAP measure.}

²
_{Formerly known as Cabot Microelectronics Corporation until October 1, 2020}

Key Financial Information for the Fourth Quarter

• Revenue was $274.2 million, 1.6% lower than the revenue reported in the same quarter last year. Revenue was down 0.2% compared to the prior quarter primarily due to lower revenue in CMP pads and pipeline performance products, which more than offset higher revenue in CMP slurries and electronic chemicals.
   
• Net income was $36.9 million compared to a loss of $20.2 million last year. Adjusted net income was $58.0 million, 16.1% higher compared to adjusted net income in the prior year. Adjusted net income benefited from lower operating expenses, lower interest expense and lower taxes compared to the same quarter last year.
   
• Diluted EPS was $1.25.  Adjusted diluted EPS was $1.96, 16.0% higher than adjusted diluted EPS in the same quarter last year.
   
• Adjusted EBITDA was $84.0 million, down 1.5% compared to last year.  Adjusted EBITDA margin for the quarter was 30.6%, comparable to adjusted EBITDA margin of 30.6% in the same quarter last year.

Electronic Materials – Revenue was $222.8 million for the quarter, 2.5% higher than revenue in the same quarter last year. Higher revenue in CMP slurries and electronic chemicals more than offset lower revenue in CMP pads. Adjusted EBITDA was $71.4 million, or 32.0% of revenue.

Performance Materials
– Revenue was $51.4 million for the quarter, 16.0% lower than revenue in the same quarter last year, driven primarily by a pandemic-related decline in demand for pipeline performance products. Higher revenue in the wood treatment and QED businesses partially offset this impact. Adjusted EBITDA was $22.4 million, or 43.6% of revenue.

Key Financial Information for the Full Fiscal Year 2020

• Revenue was a record $1,116.3 million, 7.6% higher than the revenue reported in the prior year primarily due to the full year impact of the KMG acquisition. Revenue was 1.5% higher compared to the $1,099.7 million pro forma revenue in the fiscal year 2019 primarily due to higher revenue in CMP slurries and wood treatment products.
   
• Net income was a record $142.8 million, 264.2% higher than the prior year. Adjusted net income was a record $220.8 million, 12.9% higher compared to adjusted net income in the prior year, and 11.3% higher than adjusted pro forma net income last year. The increase compared to adjusted pro forma net income was due primarily to higher revenue, lower operating expenses, and lower interest expense in fiscal year 2020.
   
• Diluted EPS was a record  $4.83, 257.8% higher than the prior year.  Adjusted diluted EPS was a record $7.47, 11.0% higher than adjusted diluted EPS in the prior year and 11.2% higher than adjusted pro forma diluted EPS in the prior year.
   
• Adjusted EBITDA was a record $357.8 million, up 7.3% compared to adjusted EBITDA last year and up 3.6% compared to adjusted pro forma EBITDA in the prior year. Adjusted EBITDA margin was 32.1%, compared to adjusted EBITDA margin of 32.1% and adjusted pro forma EBITDA margin of 31.4% in the prior year.

Guidance for the First Quarter and Full Fiscal Year 2021

With continued uncertainty as to the ongoing macroeconomic environment and the impact of the COVID-19 pandemic on the industries in which the company participates, the company currently expects revenue in the first quarter of fiscal 2021 to be approximately flat to up low single digits compared to the company’s revenue in the fourth quarter. Sequentially, Electronic Materials revenue is expected to be approximately flat to up low single digits and Performance Materials revenue is expected to be approximately flat.

The company currently expects full fiscal year 2021 adjusted EBITDA to be between $358 million and $385 million.

Additional current expectations are provided on slide 9 in the related slide presentation.

RELATED SLIDE PRESENTATION

A slide presentation related to this press release will be available at cmcmaterials.com in the Quarterly Results section of the Investor Relations center at approximately the same time that this press release is issued.

CONFERENCE CALL

CMC Materials’ quarterly earnings conference call will be held at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, November 12.  The conference call will be available via live webcast and replay from the company’s website, cmcmaterials.com, or by phone at (833) 714-0937.  Callers outside the U.S. may dial (778) 560-2685. The conference code for the call is 7063856.  A transcript of the formal comments made during the conference call will also be available in the Investor Relations section of the company’s website.

ABOUT CMC MATERIALS, INC.

CMC Materials, Inc., headquartered in Aurora, Illinois, is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies.  The company’s products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers.  CMC Materials, Inc. is also a leading provider of performance materials to pipeline operators.  The company’s mission is to create value by delivering high-performing and innovative solutions that solve its customers’ challenges.  The company has approximately 2,100 employees globally. For more information about CMC Materials, Inc., visit www.cmcmaterials.com, or contact Colleen Mumford, Vice President, Communications and Marketing, at 630-499-2600.

USE OF CERTAIN GAAP AND NON-GAAP ADJUSTED FINANCIAL INFORMATION

The company’s financial results are provided in accordance with accounting principles generally accepted in the United States of America (GAAP) and using certain non-GAAP financial measures. In particular, the Company presents the following non-GAAP financial measures: adjusted net income, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin, free cash flow, and net debt.  The company has also presented the following non-GAAP pro forma measures: adjusted pro forma EBITDA, adjusted pro forma EBITDA margin, adjusted pro forma net income and adjusted pro forma diluted earnings per share.   Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and excludes certain items that affect comparability from period to period.  Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue.   The non-GAAP pro forma measures present the results as if the company’s acquisition of KMG Chemicals, Inc. (“KMG”)(“Acquisition”), had been included in the company’s results beginning October 1, 2018 and adjusts for certain items that affect comparability from period to period.

The non-GAAP financial measures provided in this press release is a supplement to, and not a substitute for, the company’s financial results presented in accordance with U.S. GAAP.  These non-GAAP financial measures are provided to enhance the investor’s understanding about the company’s ongoing operations.  Specifically, the company believes the impact of the adjustments related to the Acquisition, such as expenses incurred to complete the Acquisition and related integration and acquisition-related amortization expenses, costs of restructuring related to the wood treatment business and related adjustments in fiscal 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs incurred in fiscal 2020 related to the COVID-19 pandemic (“Pandemic”) net of grants received, the effects of Tax Cuts and Jobs Act in December 2017 in the United States (“Tax Act”) and the issued final regulations related to the Tax Act, and in fiscal 2019, impact of fair value adjustments to inventory acquired from KMG, are not indicative of its core operating results and thus presents these certain measures excluding these effects. The presentation of non-GAAP financial measures and non-GAAP pro forma measures is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP.   Reconciliations of non-GAAP measures to their most comparable GAAP measures are included in the financial statements portion of this press release. 

Adjusted EBITDA for the Electronic Materials and Performance Materials segments is presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, this measure is excluded from the definition of non-GAAP financial measures under the SEC Regulation G and Item 10(e) of Regulation S-K.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements, which address a variety of subjects including, for example, future sales and operating results; growth or contraction, and trends in the industries and markets in which the company participates such as the semiconductor, and oil and gas, industries; the acquisition of, investment in, or collaboration with other entities, including the company’s acquisition of KMG, and the expected benefits and synergies of such acquisitions; divestment or disposition, or cessation of investment in certain, of the company’s businesses; new product introductions; development of new products, technologies and markets; product performance; the financial conditions of the company’s customers; the competitive landscape that relates to the company’s business; the company’s supply chain; natural disasters; various economic or political factors and international or national events, including related to global public health crises such as the COVID-19 pandemic, and the enactment of trade sanctions, tariffs, or other similar matters; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property or third party intellectual property; environmental, health and safety laws and regulations, and related compliance; the operation of facilities by the company; the company’s management; foreign exchange fluctuation; the company’s current or future tax rate, including the effects of changes to tax laws in the jurisdictions in which the company operates; cybersecurity threats; financing facilities and related debt, pay off or payment of principal and interest, and compliance with covenants and other terms; and, uses and investment of the company’s cash balance, including dividends and share repurchases, which may be suspended, terminated or modified at any time for any reason by the company, based on a variety of factors. Statements that are not historical facts, including statements about CMC Materials’ beliefs, plans and expectations, are forward-looking statements. Such statements are based on current expectations of CMC Materials’ management and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. For information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to CMC Materials’ filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in CMC Materials’ Annual Report on Form 10-K for the fiscal year ended September 30, 2020 to be filed by November 27, 2020, its Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.  Except as required by law, CMC Materials undertakes no obligation to update forward-looking statements made by it to reflect new information, subsequent events or circumstances.

Contact:

Colleen Mumford
Vice President, Communications and Marketing
CMC Materials, Inc.
(630) 499-2600

CMC MATERIALS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and amounts in thousands, except per share amounts)

	Quarter Ended												Year Ended
	September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Revenue	$	274,207			$	274,727			$	278,645			$	1,116,270			$	1,037,696
Cost of sales	157,144				152,973				165,535				627,669				595,043
Gross profit	117,063				121,754				113,110				488,601				442,653
Operating expenses:
Research, development and technical	14,105				12,165				12,698				52,311				51,707
Selling, general and administrative	54,576				51,847				50,663				217,071				213,078
Asset impairment charges	2,314				—				67,372				2,314				67,372
Total operating expenses	70,995				64,012				130,733				271,696				332,157
Operating income (loss)	46,068				57,742				(17,623		)		216,905				110,496
Interest expense	9,431				10,406				12,703				42,510				45,681
Interest income	81				131				342				670				2,346
Other (expense), net	(110		)		(201		)		(1,158		)		(1,718		)		(4,055		)
Income (loss) before income taxes	36,608				47,266				(31,142		)		173,347				63,106
Provision for income taxes (benefit)	(247		)		12,741				(10,899		)		30,519				23,891
Net income (loss)	$	36,855			$	34,525			$	(20,243	)		$	142,828			$	39,215
Basic earnings (loss) per share	$	1.27			$	1.19			$	(0.70	)		$	4.90			$	1.37
Diluted earnings (loss) per share	$	1.25			$	1.17			$	(0.70	)		$	4.83			$	1.35
Weighted average basic shares outstanding	29,082				29,079				29,084				29,136				28,571
Weighted average diluted shares outstanding	29,520				29,456				29,084				29,580				29,094

CMC MATERIALS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited and amounts in thousands)

	September 30, 2020				September 30, 2019
ASSETS:
Current assets:
Cash and cash equivalents	$	257,354			$	188,495
Accounts receivable, net	134,023				146,113
Inventories	159,134				145,278
Prepaid expenses and other current assets	26,558				28,670
Total current assets	577,069				508,556
Property, plant and equipment, net	362,067				276,818
Other long-term assets	1,437,331				1,476,392
Total assets	$	2,376,467			$	2,261,766
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	49,254			$	54,529
Current portion of long-term debt	10,650				13,313
Accrued expenses, income taxes payable and other current liabilities	121,442				103,618
Total current liabilities	181,346				171,460
Long-term debt, net of current portion	910,764				928,463
Other long-term liabilities	210,044				181,466
Total liabilities	1,302,154				1,281,389
Stockholders’ equity	1,074,313				980,377
Total liabilities and stockholders’ equity	$	2,376,467			$	2,261,766

CMC MATERIALS, INC.

Unaudited Reconciliation of Certain GAAP Financial Measures to Certain Non-GAAP Financial Measures

(Unaudited and amounts in thousands, except per share and percentage amounts)

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
	Three Months Ended								Twelve Months Ended
	September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
GAAP Net income (loss)	$	36,855			$	(20,243	)		$	142,828			$	39,215
Amortization of acquisition related intangibles	21,391				16,685				85,550				59,921
Acquisition and integration-related expenses	3,067				1,601				10,852				34,709
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery	(137		)		5,455				1,078				9,905
Net costs related to restructuring of wood treatment business1	72				1,530				(216		)		1,530
Costs related to Pandemic, net of grants received	500				—				849				—
Charges for fair value write-up of acquired inventory sold	—				—				—				14,869
U.S. tax reform	9				36				47				8,905
Charges related to asset impairment of wood treatment	2,314				67,372				2,314				67,372
Tax effect on adjustments to net income2	(6,092		)		(22,510		)		(22,456		)		(40,742		)
Adjusted Net income	$	57,979			$	49,926			$	220,846			$	195,684

Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share
	Three Months Ended									Twelve Months Ended
	September 30, 2020				September 30, 2019					September 30, 2020					September 30, 2019
GAAP Diluted earnings (loss) per share	$	1.25			$	(0.70	)			$	4.83				$	1.35
Adjustments (net of tax)2 :
Amortization of acquisition related intangibles	0.56				0.45					2.26					1.59
Acquisition and integration-related expenses	0.08				0.05					0.28					1.06
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery	—				0.15					0.03					0.26
Net costs related to restructuring of wood treatment business1	—				0.04					(0.01		)			0.04
Costs related to the Pandemic, net of grants received	0.01				—					0.02					—
Charges for fair value write-up of acquired inventory sold	—				—					—					0.39
Charges related to asset impairment of wood treatment	0.06				1.70					0.06					1.73
U. S tax reform	—				—					—					0.31
Adjusted Diluted earnings per share	$	1.96			$	1.69				$	7.47				$	6.73
GAAP diluted common shares outstanding		29,520				29,084					29,580					29,094
Effect of dilutive securities		—				526					—					—
Adjusted diluted common shares outstanding		29,520				29,610					29,580					29,094

Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit and Gross Margin
	Three Months Ended								Twelve Months Ended
	September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
GAAP Revenue	$	274,207			$	278,645			$	1,116,270			$	1,037,696
Cost of sales	157,144				165,535				627,669				595,043
Gross profit	$	117,063			$	113,110			$	488,601			$	442,653
Gross margin	42.7		%		40.6		%		43.8		%		42.7		%
Adjustments:
Amortization of acquisition related intangibles	3,487				3,247				13,552				12,589
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery	(137)				5,294				1,078				9,494
Net costs related to restructuring of wood treatment business1	72				1,530				(216)				1,530
Costs related to the Pandemic, net of grants received	277				—				506				—
Charges for fair value write-up of acquired inventory sold	—				—				—				14,869
Adjusted gross profit	$	120,762			$	123,181			$	503,521			$	481,135
Adjusted gross margin	44.0		%		44.2		%		45.1		%		46.4		%

Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses
	Three Months Ended								Twelve Months Ended
	September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
GAAP Research, development and technical	$	14,105			$	12,698			$	52,311			$	51,707
GAAP Selling, general, and administrative	54,576				50,663				217,071				213,078
GAAP Asset impairment charges	2,314				67,372				2,314				67,372
Operating expenses	$	70,995			$	130,733			$	271,696			$	332,157
Adjustments3 :
Amortization of acquisition related intangibles	(17,904		)		(13,438		)		(71,998		)		(47,332		)
Acquisition and integration-related expenses	(3,067		)		(1,601		)		(10,852		)		(34,709		)
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery	—				(161		)		—				(411		)
Costs related to the Pandemic, net of grants received	(223		)		—				(343		)		—
Charges related to asset impairment of wood treatment	(2,314		)		(67,372		)		(2,314		)		(67,372		)
Adjusted operating expenses	$	47,487			$	48,161			$	186,189			$	182,333

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and EBITDA Margin
		Three Months Ended								Twelve Months Ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
GAAP Net income (loss)		$	36,855			$	(20,243)			$	142,828			$	39,215
Interest expense		9,431				12,703				42,510				45,681
Interest income		(81)				(342)				(670)				(2,346)
Provision for income taxes (benefit)		(247)				(10,899)				30,519				23,891
Depreciation & amortization		32,221				28,116				127,737				98,592
EBITDA		78,179				9,335				342,924				205,033
EBITDA margin		28.5		%		3.4		%		30.7		%		19.8		%
Adjustments (pre-tax):
Acquisition and integration-related expenses		3,067				1,601				10,852				34,709
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery		(137)				5,455				1,083				9,905
Net costs related to restructuring of wood treatment business1		72				1,530				(221)				1,530
Costs related to the Pandemic, net of grants received		500				—				849				—
Charges for fair value write-up of acquired inventory sold		—				—				—				14,869
Charges related to asset impairment of wood treatment		2,314				67,372				2,314				67,372
Adjusted EBITDA		$	83,995			$	85,293			$	357,801			$	333,418
Adjusted EBITDA margin		30.6		%		30.6		%		32.1		%		32.1		%

Fiscal Year 2021 Guidance Reconciliation 4
	Fiscal Year 2021				Fiscal Year 2021
	Low				High
Net income	$	142,000			$	163,000
Interest expense, net5	39,000				39,000
Provision for income taxes5	40,000				46,000
Depreciation5	52,500				52,500
Amortization	85,000				85,000
Adjusted EBITDA Guidance – Consolidated	$	358,500			$	385,500

Reconciliation of Cash Flow From Operations to Free Cash Flow
	September 30, 2020				September 30, 2019
Net cash provided by operating activities	$	287,284			$	174,981
Less: Capital expenditures	125,839				55,972
Free cash flow	$	161,445			$	119,009
Net cash used in investing activities	$	(124,252	)		$	(1,232,976	)
Net cash provided by (used in) financing activities	$	(97,656	)		$	894,432

Reconciliation of GAAP Debt to Net Debt
	September 30, 2020				September 30, 2019
Total short-term and long-term debt	$	921,414			$	941,776
Less: Cash and cash equivalents	257,354				188,495
Total net debt	$	664,060			$	753,281

¹ Represents adjustments to previously recorded severance liability related to the wood treatment business.
² Tax effect on the adjustments were calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.
³ All the adjustments are related to the Selling, general and administrative expenses.
⁴ This is a reconciliation of our indicated full year net income to our adjusted EBITDA. The amounts above may not reflect certain future charges costs and/or gains that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance, including impairment charges associated with the anticipated closure of our wood treatment business. 
⁵ Amounts represent the mid-point of the current financial guidance provided on November 11, 2020.

SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following Unaudited Pro Forma Condensed Combined Financial Information is presented to illustrate the estimated effects of the company’s acquisition of KMG (the “Acquisition”), which was consummated on November 15, 2018 (the “Acquisition Date”), based on the historical results of operations of CMC Materials and KMG. The following Unaudited Pro Forma Condensed Combined Statements of Income for the twelve months ended September 30, 2019 are based on the historical financial statements of CMC Materials and KMG after giving effect to the Acquisition, and the assumptions and adjustments described in the accompanying notes to these Unaudited Pro Forma Condensed Combined Statements of Income.  

The historical CMC Materials Consolidated Statement of Income for the twelve months ended September 30, 2019 was based upon and should be read in conjunction with, the CMC Materials historical audited consolidated financial statements and accompanying notes as of and for the year ended September 30, 2019 included in CMC Materials Annual Report on Form 10-K filed on November 27, 2019. The historical KMG Consolidated Statements of Income for the twelve months ended September 30, 2019 includes information derived from KMG’s books and records. Prior to the Acquisition, KMG was on a July 31st fiscal year end reporting cycle. These pro forma financials include KMG’s actual pre-acquisition results with the months aligned to CMC Materials’ fiscal periods, and therefore, they do not align with consolidated financial statements included in KMG’s Quarterly or Annual Reports on Form 10-Q or 10-K.

The Unaudited Pro Forma Condensed Combined Statements of Income are presented as if the Acquisition had been consummated on October 1, 2017, the first business day of our 2018 fiscal year, and combine the historical results of CMC Materials and KMG, which is consistent with internal management reporting, after primarily giving effect to the following assumptions and adjustments:

• Application of the acquisition method of accounting;
• Elimination of transaction costs incurred in connection with the Acquisition;
• Adjustments to reflect the new financing arrangements entered into and legacy financing arrangements retired in connection with the Acquisition;
• The exchange of 0.2000 share(s) of Cabot Microelectronics common stock for each share of KMG common stock; and
• Conformance of accounting policies.

The Unaudited Pro Forma Condensed Combined Financial Information was prepared using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the completion of the acquisition. We utilized estimated fair values at the Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. This allocation was completed in the first quarter of fiscal year 2020. 

The Unaudited Pro Forma Condensed Combined financial information has been prepared on the basis of SEC Regulation S-X Article 11 and is not necessarily indicative of the results of operations that would have been realized had the transactions been completed as of the dates indicated, nor are they meant to be indicative of our anticipated combined future results. In addition, the accompanying Unaudited Pro Forma Condensed Combined Statements of Income do not reflect any additional anticipated synergies, operating efficiencies, cost savings, or any integration costs that may result from the Acquisition.

The historical consolidated financial information has been adjusted in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income to give effect to unaudited pro forma events that are (1) directly attributable to the transaction, (2) factually supportable and (3) are expected to have a continuing impact on the results of operations of the combined company. As a result, under SEC Regulation S-X Article 11, certain non-recurring expenses such as deal costs and compensation expenses related to severance or accelerated stock compensation and certain non-cash costs related to the fair value step-up of inventory are eliminated from pro forma results in the periods presented. Certain recurring historical KMG expenses related to depreciation, amortization, financing costs and costs of sales have been adjusted as if the Acquisition had occurred on October 1, 2017.

The Unaudited Pro Forma Condensed Combined Financial Information, including the related notes included herein, should be read in conjunction with CMC Materials’ Current Report on Form 8-K/A filed on January 30, 2019, as well as our consolidated financial statements included in this release and the historical consolidated financial statements and related notes of CMC Materials and KMG, which are available to the public at the SEC’s website at www.sec.gov.

CMC Materials, Inc.

Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended September 30, 2019

(in thousands, except per share data)

	CMC Materials				KMG Chemicals(1)
	Year Ended  September 30, 2019				October 1, 2018 to November 14, 2018				Presentation Reclassification (2)				Pro Forma Adjustments(3)				Pro Forma Combined
Revenue	$	1,037,696			$	61,978			$	—			$	—			$	1,099,674
Cost of sales	595,043				36,534				4,741				(13,015		)		623,303
Gross profit	442,653				25,444				(4,741		)		13,015				476,371
Operating expenses:
Distribution expenses	—				4,741				(4,741		)		—				—
Research, development and technical	51,707				—				—				—				51,707
Selling, general and administrative expenses	213,078				40,504				—				(31,824		)		221,758
Amortization of intangibles	—				1,943				—				(1,943		)		—
Asset impairment charges	67,372				—				—				(16,186		)		51,186
Total operating expenses	332,157				47,188				(4,741		)		(49,953		)		324,651
Operating income (loss)	110,496				(21,744		)		—				62,968				151,720
Interest expense	45,681				8,537				—				(475		)		53,743
Interest income	2,346				51				—				—				2,397
Derivative fair value gain	—				567				—				(567		)		—
Other (expense), net	(4,055		)		(258		)		—				—				(4,313		)
Income (loss) before income taxes	63,106				(29,921		)		—				62,876				96,061
Provision for income taxes (benefit)	23,891				(3,722		)		—				6,219				26,388
Net income (loss)	$	39,215			$	(26,199	)		$	—			$	56,657			$	69,673
Basic earnings per share	$	1.37															$	2.40
Weighted average basic shares outstanding	28,571																28,979
Diluted earnings per share	$	1.35															$	2.36
Weighted average diluted shares outstanding	29,094																29,502

¹ KMG results that occurred prior to the Acquisition on November 15, 2018.
² Represents the reclassification of KMG distribution expenses from operating expenses to cost of sales, in order to conform with CMC Material’s accounting policies.
³ Certain pro forma adjustments related to depreciation, amortization, financing costs and costs of sales have been made for the October 1, 2018 to September 30, 2019 period assuming that the Acquisition occurred on October 1, 2017. Additionally, nonrecurring pro forma adjustments have been made for deal costs, compensation expenses related to severance or accelerated stock compensation, and the fair value step-up of inventory directly attributable throughout the twelve-month period.

CMC Materials, Inc.

Summary of Unaudited Pro Forma Adjustments

(in thousands)	Year Ended September 30, 2019
Impact to cost of sales:
Depreciation and amortization, net(a)	$	1,855
Inventory step-up(b)	(14,870		)
Impact to cost of sales	$	(13,015	)
Impact to operating expense:
Depreciation and amortization step up(a)	30,689
Asset impairment true up(c)	(16,186		)
Compensation expense(d)	(38,099		)
Deal costs(e)	(24,414		)
Historical KMG amortization in other operating expenses removal(a)	(1,943		)
Impact to operating expense	$	(49,953	)
Derivative fair value gain(f)	(567		)
Interest expense(g)	(475		)

Adjustments included in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income are as follows:

1. Depreciation and amortization expense are adjusted by removing depreciation and amortization associated with legacy KMG assets and assigning a pro forma expense based on the fair value of the assets on the date of the Acquisition. For periods after the date of the Acquisition, there is no pro forma adjustment for Depreciation and actual booked depreciation is reflected on a straight-line basis. Depreciation costs are allocated to costs of sales and selling, general and administrative expenses based on historical KMG allocations. Amortization costs are allocated to costs of sales or selling, general and administrative expense based on the use of the asset, where applicable.
2. Cost of sales is impacted by increased inventory balance caused by the non-cash impact of the step up to fair value of the inventory. The incremental costs of sales driven by the inventory step-up during the period have been removed.
3. During the fiscal year ended September 30, 2019, an impairment charge in the amount of $67.4 million was incurred related to the Wood Treatment business, which was acquired from KMG.  While still within the one-year remeasurement period after the Acquisition Date, it was determined that the facts and circumstances that triggered the impairment were not known, or could have been reasonably known, at the time of the transaction. Further, it was determined that the impairment charge was not directly attributable to the transaction and therefore, would not be wholly removed for purposes of pro forma reporting.  Since the impairment charge taken for September 2019 reported results was based on the actual Acquisition Date while the pro forma financials are based upon an October 1, 2017 acquisition date, the pro forma adjustment of $16.2 million to reduce the impairment charge to $51.2 million for pro forma results is required.  This adjustment reflects the difference between amortization and depreciation expense recognized post-acquisition from the earlier pro forma acquisition date vs. the amortization and depreciation expense recognized in reported results from the actual Acquisition Date. The impairment adjustment is tax effected at 25.3%, which considers the taxing jurisdictions where the impaired assets are held (United States and Mexico) and the period for which the impairment is deemed to have occurred (the twelve months ended September 30, 2019).    
4. Directly attributable and non-recurring compensation expense related to non-recurring retention expenses and stock award vesting directly attributable to the Acquisition are removed for pro forma purposes. For KMG stock awards that were replaced by CMC Material stock awards in connection with the Acquisition, the vesting for on-going service expenses are added as a pro forma adjustment.
5. The elimination of non-recurring deal costs incurred in connection with the Acquisition.
6. As a result of the Acquisition, there were non-recurring costs incurred by KMG as a result of retiring old debt. The costs associated with retiring the old debt facility and other financial instruments are removed for pro forma purposes. These instruments were retired as a result of the Acquisition and are not included in the pro forma results, which are presented as if the Acquisition had occurred on October 1, 2017.
7. Changes in interest expense as a result of financing associated with the Acquisition. The adjustments remove legacy KMG interest costs, including unused revolver fees and adds the costs associated with the new financing facilities as if the Acquisition occurred on October 1, 2017. The calculation of interest expense considers the changing LIBOR rate and uses monthly period end averages from October 1, 2017 to September 30, 2019.

We calculated the income tax effect of the pro forma adjustments using a 21.4% tax rate, which represents the weighted average statutory tax rate for the year ended September 30, 2019.

We calculated the unaudited pro forma weighted average number of diluted shares outstanding by adding the number of shares issued in the Acquisition to the amount disclosed in the historical CMC Quarterly and Annual Reports on Form 10-Q and 10-K. The basic and diluted EPS calculation takes pro forma net income divided by the applicable number of shares outstanding.

Reconciliation of Pro Forma and Non-GAAP Adjusted Pro Forma Information

The company reports its financial results in accordance with U.S. GAAP and pro forma information in accordance with SEC Regulation S-X Article 11.  However, management believes that certain non-GAAP financial measures that reflect the way that management evaluates the business may provide investors with additional information regarding the company’s results, trends and ongoing performance on a comparable basis.   These measures, referred to as,  “adjusted pro forma”, begin with pro forma results that are prepared in accordance with SEC Regulation S-X Article 11 and are then adjusted for the following additional items:

• Removal of amortization of acquisition related intangibles, since management believes that these costs are not indicative of the company’s core operating performance.
• Removal of integration expenses.
• Adjustment for U.S. Tax Reform, which represents a significant item affecting comparability among periods.
• Removal of certain costs related to a warehouse fire at KMG-Bernuth and the restructuring and asset impairment charges of wood treatment business.

Reconciliations for these items are provided below. Amounts in thousands, except per share and percentage amounts.

Unaudited Reconciliation of Pro Forma Net Income to Non-GAAP Adjusted Pro Forma Net Income
	Twelve Months Ended
	September 30, 2019
Pro forma net income	$	69,673
Adjustments (net of tax):
Amortization of acquisition related intangibles	70,913
Integration expenses	1,913
Costs related to KMG-Bernuth warehouse fire	7,683
Costs related to restructuring of wood treatment business	1,075
Charges related to asset impairment of wood treatment business	38,215
U. S tax reform	8,905
Adjusted pro forma net income	$	198,377

Unaudited Reconciliation of Pro Forma Revenue to Non-GAAP Adjusted Pro Forma Gross Profit and Gross Margin
	Twelve Months Ended
	September 30, 2019
Pro forma revenue	$	1,099,674
Cost of sales	623,303
Gross profit and gross margin	476,371			43.3	%
Adjustments:
Amortization of acquisition related intangibles	13,879			1.3	%
Costs related to KMG-Bernuth warehouse fire	9,494			0.9	%
Costs related to restructuring of wood treatment business	1,530			0.1	%
Adjusted pro forma gross profit and adjusted gross margin	$	501,274		45.6	%

Unaudited Reconciliation of Pro Forma Diluted Earnings (Loss) Per Share to Non-GAAP Adjusted Pro Forma Diluted Earnings Per Share
	Twelve Months Ended
	September 30, 2019
Pro forma diluted earnings per share	$	2.36
Adjustments (net of tax)1:
Amortization of acquisition related intangibles	2.40
Integration expenses	0.06
Costs related to KMG-Bernuth warehouse fire	0.26
Costs related to restructuring of wood treatment business	0.04
Charges related to asset impairment of wood treatment business	1.30
U. S tax reform	0.30
Adjusted pro forma diluted earnings per share	$	6.72

¹ Tax effect on the adjustments was calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.

Unaudited Reconciliation of Pro Forma Revenue to Non-GAAP Adjusted Pro Forma EBITDA and EBITDA Margin
	Twelve Months Ended
	September 30, 2019
Pro forma net income	$	69,673
Interest expense	53,743
Interest income	(2,397		)
Depreciation and amortization	132,942
Provision for income taxes	26,388
Pro forma EBITDA and  EBITDA margin	280,349			25.5	%
Adjustments (pre-tax):
Integration expenses	2,465			0.2	%
Costs related to KMG-Bernuth warehouse fire	9,905			0.9	%
Costs related to restructuring of wood treatment business	1,530			0.1	%
Charges related to asset impairment of wood treatment business	51,186			4.7	%
Adjusted pro forma EBITDA and EBITDA margin	$	345,435		31.4	%

NEW YORK, Nov. 11, 2020 (GLOBE NEWSWIRE) — Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, reminds investors that class actions have been commenced on behalf of stockholders of Las Vegas Sands Corporation (NYSE: LVS), Innate Pharma S.A. (NASDAQ: IPHA), JPMorgan Chase & Co. (NYSE: JPM), and First American Financial Corporation (NYSE: FAF). Stockholders have until the deadlines below to petition the court to serve as lead plaintiff. Additional information about each case can be found at the link provided.

Las Vegas Sands Corporation (NYSE: LVS)

Class Period: February 27, 2016 to September 15, 2020

Lead Plaintiff Deadline: December 21, 2020

Las Vegas Sands was founded in 1988 and is based in Las Vegas, Nevada. The Company, together with its subsidiaries, develops, owns, and operates integrated resorts in Asia and the U.S., which offer various amenities.

Las Vegas Sands’ properties include, among others, the Marina Bay Sands resort in Singapore, which operates a casino.

On July 19, 2020, Bloomberg News reported that Las Vegas Sands had settled a lawsuit brought by a former patron, Wang Xi (“Xi”), meeting his demand for a S$9.1 million ($6.5 million) payment. Xi reportedly sued the Marina Bay Sands casino in 2019 to recover S$9.1 million of his funds that the casino allegedly transferred to other patrons from his casino deposit accounts in 2015 without his approval, which triggered a probe into the casino by local authorities. Bloomberg News also reported that the U.S. Department of Justice (“DOJ”) “is also scrutinizing whether anti-money laundering procedures had been breached in the way the Singapore casino handles high rollers.”

On this news, Las Vegas Sands’ stock price fell $1.41 per share, or 2.9%, to close at $47.28 per share on July 20, 2020.

Then, on September 16, 2020, Bloomberg reported that Marina Bay Sands “has hired a law firm to conduct a new investigation into employee transfers of more than $1 billion in gamblers’ money to third parties[.]” The article quoted the Singapore Casino Regulatory Authority (“CRA”) as stating that “there were weaknesses in [Marina Bay Sands’] casino control measures pertaining to fund transfers[.]”

On this news, Las Vegas Sands’ stock price fell $2.18 per share, or 4.2%, to close at $49.67 per share on September 16, 2020.

The complaint, filed on October 22, 2020, alleges that throughout the Class Period defendants made materially false and misleading statements regarding the Company’s business, operational, and compliance policies. Specifically, defendants made false and/or misleading statements and/or failed to disclose that: (i) weaknesses existed in Marina Bay Sands’ casino control measures pertaining to fund transfers; (ii) the Marina Bay Sands’ casino was consequently prone to illicit fund transfers that implicated, among other issues, the transfer of customer funds to unauthorized persons and potential breaches in the Company’s anti-money laundering procedures; (iii) the foregoing foreseeably increased the risk of litigation against the Company, as well as investigation and increased oversight by regulatory authorities; (iv) Las Vegas Sands had inadequate disclosure controls and procedures; (v) consequently, all the foregoing issues were untimely disclosed; and (vi) as a result, the Company’s public statements were materially false and misleading at all relevant times.

For more information on the Las Vegas Sands class action go to: https://bespc.com/cases/LVS

Innate Pharma S.A. (NASDAQ: IPHA)

Class Period: March 10, 2020 to September 8, 2020

Lead Plaintiff Deadline: December 22, 2020

On September 8, 2020, the Company submitted to the SEC a Form 6-K containing a press release summarizing the results of the first half of 2020, ended June 30, 2020 (the “1H2020 Results”). In the 1H2020 Results, defendants abruptly announced a change in the long-touted payment scheme with AstraZeneca.

On this news, Innate’s American Depositary Share (“ADS”) prices dropped $1.62, or over 26.6%, from closing at $6.07 on September 4, 2020, the previous trading day, to open at $4.82 on September 8, 2020, and declined throughout the trading day to close at $4.45.

The complaint, filed on October 23, 2020, alleges that throughout the Class Period defendants made false and/or misleading statements and/or failed to disclose that: (1) Innate touted the results of their various Phase 2 trials as being within expectations; (2) Innate continued to reassure investors that they were eligible for the $100 million payment upon first dosing of Phase 3 trials; (3) Innate failed to timely disclose their renegotiations with AstraZeneca to split the $100 million payment into two $50 million payments, to be partially contingent on performance during the Phase 3 trials; and (4) as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.

For more information on the Innate Pharma class action go to: https://bespc.com/cases/IPHA

JPMorgan Chase & Co. (NYSE: JPM)

Class Period: February 23, 2016 to September 23, 2020

Lead Plaintiff Deadline: December 23, 2020

On November 6, 2018, the Department of Justice announced in a press release that former JPMorgan precious metals trader John Edmonds pled guilty to commodities fraud and a spoofing conspiracy.

On August 20, 2019, the Department of Justice announced that another JPMorgan employee, Christian Trunz, pled guilty to spoofing charges, and had done so with the knowledge and consent of his supervisors.

On September 23, 2020, Bloomberg reported that the Company was nearing a settlement to resolve the spoofing charges.

On this news, shares of JPMorgan stock fell $2.04 per share, or 2%, to close at $92.74 per share on September 23, 2020.

On September 29, 2020, the Commodity Futures Trading Commission (“CFTC”) formally announced that it had ordered JPMorgan to pay $920 million to settle the spoofing and manipulation charges. According to the order, the Company failed to monitor its employees and ignored multiple red flags. The Company also provided the CFTC with misleading information.

The complaint, filed on October 24, 2020, alleges that throughout the Class Period defendants made false and/or misleading statements and/or failed to disclose that: (1) traders at the Company, with the knowledge and consent of their superiors, manipulated the precious metals market by “spoofing,” or placing fake orders to generate the appearance of market demand; (2) the Company had insufficient controls and compliance protocols to enable it to identify and stop the misconduct; (3) the Company’s earnings in the physical commodity market were, at least in part, ill-gotten; (4) such conduct would result in enhanced regulatory scrutiny; (5) the Company provided misleading information to CFTC investigators at early stages of the investigation into the misconduct; (6) resolution of the governmental investigation into the Company would result in a record-breaking $920 million fine; and (7) as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.

For more information on the JPMorgan securities class action case go to: https://bespc.com/cases/JPM

First American Financial Corporation (NYSE: FAF)

Class Period: February 17, 2017 to October 22, 2020

Lead Plaintiff Deadline: December 24, 2020

On May 24, 2019, KrebsOnSecurity.com (“KrebsOnSecurity”), a noted cybersecurity blog, reported a massive data exposure by First American in which approximately 885 million customer files were exposed by First American.

On this news, shares of First American fell $3.46, or over 6%, to close at $51.80 per share on May 25, 2019.

On October 22, 2020, First American filed a quarterly report on Form 10-Q with the SEC, announcing that the Company had received a Wells Notice regarding its massive security breach.

On this news the price of First American shares fell approximately $4.83 per share, or 9%, to close at $46.75 per share on October 22, 2020.

The complaint, filed on October 25, 2020, alleges that throughout the Class Period defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company failed to implement basic security standards to protect its customers’ sensitive personal information and data; (2) the Company faced a heightened risk of cybersecurity failure due to its automation and efficiency initiatives; and (3) as a result, defendants’ public statements were materially false and misleading at all relevant times.

For more information on the First American Financial class action go to: https://bespc.com/cases/FAF

About
Bragar
Eagel
& Squire, P.C.:

Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York and California. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.

Contact Information:

Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Melissa Fortunato, Esq.
Marion Passmore, Esq.
(212) 355-4648
[email protected]
www.bespc.com

Not for distribution to United States newswire services or for dissemination in the United States.

VANCOUVER, British Columbia, Nov. 11, 2020 (GLOBE NEWSWIRE) — WestKam Gold Corp. (TSX-V: WKG) (the “Company” or “WestKam”), announces that it has completed the closing of its non-brokered $0.12/unit private placement previously announced on September 28, 2020, and has issued 8,125,331 units for gross proceeds of $975,039.72.   In connection with this private placement, the Company paid a total of $7,912.80 and issued a total of 65,940 warrants as finder’s fees. Each finder’s warrant is exercisable for one common share at a price of $0.20 for 5 years.   All securities issued under this financing are subject to a hold period expiring March 11, 2021, in accordance with applicable securities laws and the policies of the TSX Venture Exchange.

WestKam is also very pleased to announce the appointment of Mr. Catalin Kilofliski to the Board of Directors of the Company as an independent director.   Mr. Kilofliski has over 25 years of senior leadership and extensive expertise in mining, senior management, capital markets and corporate development within several publicly listed junior exploration companies. Most recently, he has served as the Director Corporate Development for TSX.V listed Tudor Gold Corp and was instrumental in growing the company from $30 million to over $500 million in market capitalization. Prior to that, he was the CEO of TSX Listed Canarc Resource Corp. Before that position, he worked for TSX listed Aurcana Corporation and Selwyn Resources Ltd. as Director Corporate Development. In the last decade, Mr. Kilofliski helped raise over $300M in equity, debt and JV capital and was instrumental in creating significant shareholder value for various junior mining companies.   Mr. Kilofliski’s academic background includes earning a BA degree in Business Administration and Finance from the University of Economics, Bucharest, Romania.

The Company also announces that Mr. Peter Jensen has resigned as a director of the Company. The Company would like to thank Mr. Jensen for his contributions to the Company and wish him well in his future endeavours.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States of America.


The securities have not been and will not be registered under the United States Securities Act of 1933 (the “1933 Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons (as defined in the 1933 Act) unless registered under the 1933 Act and applicable state securities laws, or an exemption from such registration is available.

A
bout
WestKam
Gold Corp.

WestKam is a Canadian gold exploration company focused on developing the Bonaparte Gold Project near Kamloops, British Columbia. Additional information can be found on the Company’s website at www.westkamgold.com.

ON BEHALF OF THE BOARD OF DIRECTORS

“Matthew Wayrynen”
                        
Matthew Wayrynen, President & CEO

WestKam Gold Corp. Suite 900, 570 Granville Street Vancouver, BC V6C 3P1		Contact:		Investor Relations [email protected] www.westkamgold.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the


TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-looking information


All statements included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements involve numerous assumptions made by the Company based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will prove inaccurate, certain of which are beyond the Company’s control. Readers should not place undue reliance on forward-looking statements. Except as required by law, the Company does not intend to revise or update these forward-looking statements after the date hereof or revise them to reflect the occurrence of future unanticipated events

Generates positive free cash flow and maintains strong cash position through Q3
Strong system-wide sales recovery with more than 70% sequential increase vs Q2
Same store sales benefitted from average cheque growth vs prior year
Advancement of strategic agenda continues with North American launch of all-new Freshii app,
rollout of dinner plates in Canada and a new streamlined operating model in the US
Continued deployment of significant investment funds to support franchisees (as announced in Q2 2020)
CPG business completes successful Q3 launch with ONroute travel hubs

TORONTO, Nov. 11, 2020 (GLOBE NEWSWIRE) — Health and wellness brand Freshii Inc. (TSX: FRII) (“Freshii” or, the “Company”) today announced financial results for the third quarter ended September 27, 2020 (“Q3 2020”).

“Although the rolling phases of the COVID-19 pandemic have continued to present significant hurdles for the restaurant industry, we are pleased that our Freshii locations maintained the majority of their Q2 and early Q3 sales recovery through the balance of the third quarter,” said Matthew Corrin, Chairman and Chief Executive Officer of Freshii. “Despite pandemic related challenges, we have continued to execute against our strategic agenda and make sound investments to support our franchisees, all while taking prudent steps to actively manage the Company’s cash position. We recently successfully introduced the North American market to our new Freshii ordering app, with future phases to include an enhanced loyalty program and a white-label delivery option for Freshii guests. We are encouraged by early download and digital sales trends and look forward to leveraging our new digital platform to continue to remove friction and increase personalization for our guests. We have also continued to invest in the expansion of our share of the dinner daypart, with the recent launch of chef-inspired Plates in Q4, including a selection of proteins and healthy sides, across our Canadian network. We remain optimistic about the opportunity to continue to grow our omnichannel health and wellness brand and are pleased by the results of our Q3 rollout with ONroute travel hubs and the subsequent extension of that partnership.”

Financial Highlights for the
Third
Quarter

• Same-store sales growth was (26.8%) for Q3 2020;
• Net closures of 10 locations during Q3 2020, comprised of 14 closures and 4 openings;
• System-wide sales were $27.5 million in Q3 2020, compared to $49.2 million for the 13-week period ended September 29, 2019 (“Q3 2019”), representing a decrease of $21.7 million or 44%;
• Royalty revenue and coordination fees totaled $3.0 million for Q3 2020, a decrease of $1.8 million or 37% compared to Q3 2019;
• Net loss was $0.2 million for Q3 2020, compared to net loss of $0.4 million in Q3 2019;
• Adjusted EBITDA was $0.4 million for Q3 2020, compared to $1.7 million for Q3 2019; and
• Free cash flow was $0.3 million for Q3 2020, compared to $1.5 million for Q3 2019.

2020 Strategic Pillars

The Company has outlined 3 strategic pillars for 2020 to help accelerate its short-term recovery and position the brand for long-term growth:

1. Focus on Core Business
2. Digital and Delivery Acceleration
3. Develop Dinner as a Second Daypart

Focus on
Core Business

In Q3 2020 and into the current quarter, the Company has continued to invest in the long-term success of its franchised restaurant network. Following on from the successful completion of a Canada-wide rollout of our new elevated chicken in the prior quarter, the Company has recently begun in-market testing of an all-new superfood smoothie lineup that includes brand new flavours like Banana Nut Crunch and Spurilina as well as a reimagination of Freshii classics like Tropical Mango and Strawberrii-Banana. We intend to continue to innovate, test and rollout new menu items that customer data indicates are of interest to our guests in the coming periods. Additionally, the Company has rolled out a streamlined menu in a number of its locations, as further discussed below.

Digital and Delivery Acceleration

Following on from the completion in the prior quarter of the rollout of both UberEats and Doordash partnerships across 90% of serviceable locations across North America, the Company has now also completed the phase 1 launch of its new, frictionless mobile app. In the coming periods, the Company plans to introduce a new loyalty program and white-label delivery functionality to the app, which we expect to further strengthen the online connection we have with our guests.

Develop Dinner as a Second Daypart

Freshii continues to see an increase in the dinner daypart as a percentage of sales as compared to pre-COVID-19 periods. In late October following a successful market test, Freshii has now completed a limited time only cross-Canada launch of the Company’s new dinner plates platform, complete with family meal options and sides and available for dine in, takeout or delivery. We remain excited about dinner as a second daypart opportunity and intend to continue to invest in this area.

Franchisee Incremental Investment Program

As the Company announced last quarter, Freshii is funding an investment program to help accelerate the sales recovery of our restaurants. Through this fund, we will be supporting our restaurant network in the following areas:

• the launch and adoption of Freshii’s new mobile app;
• incremental marketing and loyalty investments;
• the implementation of an enhanced customer experience program; and
• direct support for restaurants that have been more significantly impacted by COVID-19 by reducing their supply chain delivery costs.

The Company has begun to deploy these amounts, partially funded by the Company’s cost management initiatives to continue to support our franchise partners and enable our brand to emerge from the COVID-19 pandemic with momentum.

Freshii CPG
Extends Partnership
with
ONroute

In addition to continuing to work with its current retail partners, including Walmart Canada, Shell, Air Canada and others, following a successful 23-site summer 2020 launch, Freshii and ONroute intend to extend their partnership going forward. The Company remains committed to investing-in and growing its CPG business line.

Cost Base Management
and Liquidity

We have maintained a strong stable cash position through the pandemic to date, with $31.2 million (C$41.8 million) on hand as at September 27, 2020. We are committed to maintaining adequate liquidity and financial flexibility throughout the COVID-19 pandemic, while also investing in strategic priorities across both our restaurant and CPG divisions. We intend to continue to make efforts in order to maintain our strong cash position in the coming quarters while continuing to reinvest for growth in our restaurant and CPG divisions.

The Company also continues to assist franchise partners in managing their restaurant level cost base. To that end, the Company has introduced to many of its franchise locations a limited, more streamlined, menu, that allows for improvement in food, labour and operational costs. Assisting our restaurants in managing costs, while still delivering the quality service and products that our guests have come to expect, is key to protecting franchise partner profitability as the COVID-19 pandemic continues to challenge consumer traffic.

Investor Conference Call 

The Company will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Thursday, November 12, 2020, to review financial results for the third quarter ended September 27, 2020.

Date:	Thursday November 12, 2020
Time:	8:30 a.m. Eastern Time
Dial-In #:	1-877-425-9470 U.S. & Canada
	1-201-389-0878 International

Alternatively, the conference call will be webcast on the investor relations section of Freshii’s corporate website at www.freshii.inc. For those unable to participate, an audio replay will be available from 11:30 a.m. Eastern Time on Thursday November 12, 2020 through Thursday November 19, 2020. To access the replay, please call 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 13712435. A web-based archive of the conference call will also be available at the above website.

About Freshii

Eat. Energize. That’s the Freshii mantra. Freshii is a health and wellness brand on a mission to help citizens of the world live better by making healthy eating convenient and affordable. With a diverse and completely customizable menu of breakfast, soups, salads, wraps, bowls, burritos, frozen yogurt, juices, and smoothies served in an eco-friendly environment, Freshii caters to every taste and dietary preference.

Since it was founded in 2005, Freshii has grown to operate 420 restaurants in 15 countries around the world. Now, guests can energize with Freshii’s menu anywhere from cosmopolitan cities and fitness clubs to sports arenas and airplanes. 

Inquire about how to join the Freshii family: https://www.freshii.com/ca/en-ca/franchise. 
Learn more about investing in Freshii: http://www.freshii.inc.
Find your nearest Freshii: http://www.freshii.com.
Follow Freshii on Twitter and Instagram: @freshii

Non-IFRS Measures and Industry Metrics

This news release makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the restaurant industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA on a constant currency basis”, “free cash flow”, “free cash flow conversion” and “Adjusted Net Income”. This news release also makes reference to “system-wide sales”, “system-wide stores”, and “same-store sales growth” which are commonly used operating metrics in the restaurant industry but may be calculated differently by other companies in the restaurant industry. These non-IFRS measures and restaurant industry metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including restaurant industry metrics in the evaluation of companies in the restaurant industry. Our management also uses non-IFRS measures and restaurant industry metrics, in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation. For a: (i) detailed definition of each of the non-IFRS measures and industry metrics referred to; and (ii) reconciliation of these non-IFRS measures refer to the Company’s Management’s Discussion and Analysis dated November 11, 2020, which is available on SEDAR at www.sedar.com.

Forward-Looking Information

Certain information in this news release contains forward-looking information and forward-looking statements which reflect the current view of management with respect to the Company’s objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities, including statements relating to store count, same-store sales growth, the recovery of the Company’s franchise system, that healthy eating trends will continue, the effectiveness of the Company’s 2020 strategic pillars, the timelines for and effectiveness of new menu rollouts (including streamlined menus), the rollout of the Company’s new app and any future phases of the rollout, the Company’s plans with respect to its Franchisee Incremental Investment Program, the ability of the Company to scale its new operating model, the ability of the Company to generally maintain its existing cash position and to reinvest, the growth of and investment in the dinner daypart, the Company’s plans with respect to its CPG business line and partnership with ONroute, and the extent of the expected impact of the COVID-19 pandemic and associated government regulation on Freshii’s business, operations and financial performance. Wherever used, the words “may”, “will”, “anticipate”, “intend”, “estimate”, “expect”, “plan”, “believe”, “lead”, “continue”, “plan”, “design”, “likely” and similar expressions identify forward-looking information and forward-looking statements. Forward-looking information and forward-looking statements should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the information in this news release containing forward-looking information or forward-looking statements is qualified by these cautionary statements. In particular, the Company notes that the dynamic nature of the COVID-19 pandemic and the events and circumstances resulting from or associated with that pandemic mean that management can offer no assurance such forward-looking information or forward-looking statements will occur or be accurate in the circumstances.

Forward-looking information and forward-looking statements are based on information available to management at the time they are made, underlying estimates, opinions and assumptions made by management and management’s current belief with respect to future strategies, prospects, events, performance and results. These estimates, opinions and assumptions include that the COVID-19 pandemic and associated government regulation, expected consumer behaviour and other matters will not have a materially different impact on the business, operations or financial performance than currently anticipated by management, the continued availability of food commodities used by Freshii locations at stable prices, the availability and timely receipt of funds expected by management to be received in connection with applicable government relief programs, that Freshii will be able to continue to effectively assist its franchise partners , that the recovery and re-opening of the economies (including the dates upon which various regions are permitting restaurants to reopen for dine-in service) in Canada and the United States and elsewhere will occur in the manner and on the timelines anticipated by management, the continued access by the Company and its franchise partners to a pool of suitable workers at reasonable wage levels, that the foreign exchange rates may continue to fluctuate (in particular, that the value of the Canadian dollar will continue to fluctuate against the US dollar and other currencies), that the recovery of Freshii’s franchise system occurs on the timelines and in the manner anticipated, that healthy eating trends continue in the manner anticipated, that the Company’s 2020 strategic pillars, the timelines for new menu rollouts, the rollout of the Company’s new app and any future phases of the rollout, the Company’s partnership with ONroute and investment in its CPG business line, the implementation of the Company’s Franchisee Incremental Investment Program, the anticipated growth in the dinner daypart and the development of strategies to drive down costs with franchise partners and cost control activities at the corporate level will each have the anticipated effect on the Company’s business, operations and financial performance and will proceed on the timelines and in the manner currently anticipated by management, and are subject to inherent risks and uncertainties surrounding future expectations generally, including that such estimates, opinions and assumptions may not be accurate, particularly given the dynamic nature of the COVID-19 pandemic and the events and circumstances resulting from or associated with that pandemic. Such risks and uncertainties include, but are not limited to, those described in “Forward-Looking Statements” which are described in the Company’s Management’s Discussion and Analysis dated November 11, 2020 and in the Company’s other filings, which are available on SEDAR at www.sedar.com.

Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and forward-looking statements and are cautioned not to place undue reliance on such information and statements. The Company does not undertake to update any such forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.

 

Selected Quarterly
Consolidated Information

The following table summarizes our results of operations for the 13 and 39 week periods ended September 27, 2020 and September 29, 2019, respectively:

	For the 13 weeks ended
(in thousands)	September 27, 2020									September 29, 2019
		Amount				Percent of Total Revenue				Amount				Percent of Total Revenue
Revenue
Franchise revenue		$	3,324				93	%		$	5,178				88	%
Company-owned store revenue			233				7				679				12
Total revenue			3,557				100				5,857				100
Costs and expenses
Cost of sales			249				7				599				10
Selling, general and administrative			2,930				82				3,561				62
Depreciation and amortization			693				19				1,243				21
Share based compensation expense			507				14				498				9
Total costs and expenses			4,379				122				5,901				102
Income before interest, foreign exchange & income taxes			(822	)			(22	)			(44	)			(2	)
Interest income, net			32				1				(33	)			(1	)
Foreign exchange loss (gain)			158				4				(71	)			(1	)
Income before income tax expense			(1,012	)			(27	)			60				–
Income tax expense			(820	)			(23	)			475				8
Net loss			(192	)			(5	)			(415	)			(8	)
Currency translation adjustment			642				18				(413	)			(7	)
Comprehensive income (loss)		$	450				13	%		$	(828	)			(14	%)

	For the 39 weeks ended
(in thousands)	September 27, 2020									September 29, 2019
		Amount				Percent of Total Revenue				Amount				Percent of Total Revenue
Revenue
Franchise revenue		$	9,848				92	%		$	14,826				88	%
Company-owned store revenue			852				8				1,952				12
Total revenue			10,700				100				16,778				100
Costs and expenses
Cost of sales			788				7				1,743				10
Selling, general and administrative			10,110				94				10,735				65
Depreciation and amortization			2,906				27				2,182				13
Share based compensation expense			1,636				15				1,157				7
Total costs and expenses			15,440				143				15,817				95
Income before interest, foreign exchange & income taxes			(4,740	)			(43	)			961				5
Interest income, net			(8	)			–				(117	)			(1	)
Foreign exchange loss (gain)			(169	)			(2	)			155				1
Income before income tax expense			(4,563	)			(41	)			923				5
Income tax expense			(1,360	)			(13	)			802				5
Net loss			(3,203	)			(30	)			121				–
Currency translation adjustment			(869	)			(8	)			860				5
Comprehensive income (loss)		$	(4,072	)			(38	%)		$	981				6	%

The following table summarizes our Consolidated Statement of Balance Sheet Information as at September 27, 2020 and December 29, 2019:

(in thousands)		As at September 27, 2020				As at December 29, 2019
Cash		$	31,234			$	31,615
Total assets			49,258				53,046
Equity			31,324				33,921

The following table shows our cash flows information for the 39 week periods ended September 27, 2020 and September 29, 2019, respectively:

	For the 39 weeks ended
(in thousands)		September 27, 2020				September 29, 2019
Net cash provided by operations		$	808			$	3,484
Net cash used in investing			(356	)			(755	)
Net cash used in financing			(246	)			(368	)
Net increase (decrease) in cash		$	206			$	2,361

The following table reconciles EBITDA, Adjusted EBITDA, free cash flow, free cash flow conversion, Adjusted Net Income to the most directly comparable IFRS financial performance measure:

	For the 13 weeks ended								For the 39 weeks ended
(in thousands)		September 27, 2020				September 29, 2019				September 27, 2020				September 29, 2019
Net loss		$	(192	)		$	(415	)		$	(3,203	)		$	121
Interest income, net			32				(33	)			(8	)			(117	)
Income tax expense			(820	)			475				(1,360	)			802
Depreciation and amortization			693				1,243				2,906				2,182
EBITDA			(287	)			1,270				(1,665	)			2,988
Adjustments:
Share-based compensation expense(1)			507				498				1,636				1,157
Foreign exchange (gain) loss			158				(71	)			(169	)			155
Other costs(2)			–				–				1,577				412
Adjusted EBITDA			378				1,697				1,379				4,712
Constant currency remeasurement			–				(4	)			–				(34	)
Adjusted EBITDA on a constant currency basis		$	378			$	1,693			$	1,379			$	4,678
Less capital expenditures			55				148				393				515
Free cash flow		$	323			$	1,549			$	986			$	4,197
Free cash flow conversion			85.4	%			91.3	%			71.5	%			89.1	%
Net loss			(192	)			(415	)			(3,203	)			121
Adjustments:
Share-based compensation expense(1)			507				498				1,636				1,157
Foreign exchange (gain) loss			158				(71	)			(169	)			155
Other costs(2)			–				–				1,577				412
Related tax effects(3)			(176	)			(113	)			(807	)			(457	)
Adjusted Net Income (Loss)		$	297			$	(101	)		$	(966	)		$	1,388

Notes:
(1)     In the 39 week periods ended September 27, 2020 and September 29, 2019, the Company granted RSUs to executive officers, management, employees, and non-management directors of the Company in conjunction with an annual employee grant.
(2)     For the 39 week period ended September 27, 2020, represents an accrual for accounting purposes of certain professional fees associated with one-time investments in the Company’s growth strategy. See also “Selling, General and Administrative” in “Results of Operations” section in the Company’s related Management Discussion and Analysis, available on www.sedar.com. For the 39 week period ended September 29, 2019, represents expenses related to severance costs to employees previously employed by the Company.
(3)     Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.

The Company’s condensed consolidated interim financial statements for the 13 and 39 week periods ended September 27, 2020 and the relevant Management’s Discussion and Analysis documents, are available under the Company’s profile on SEDAR at www.sedar.com.

For further information contact:
Investor Relations
[email protected]
1.866.337.4265

Source: Freshii Inc.