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Amwell® Announces Results for Third Quarter 2020

• Total active providers of approximately 62,000 at the end of the third quarter increased 930% compared to a year ago
• Total visits of 1,414,000 in the third quarter increased 450% compared to a year ago
• Revenue of $62.6 million in the third quarter increased 80% compared to a year ago
• Announced new products: Amwell Now, Touchpoint Tablet software, and C500 telemedicine cart
• Provides initial 2020 guidance

BOSTON–(BUSINESS WIRE)–Amwell®, (NYSE: AMWL) (the “Company”) a national telehealth leader, today announced financial results for the third quarter ended September 30, 2020.

“We are pleased to announce that third quarter results reflect our business’ momentum and ongoing role in responding to the continued, widespread demand for telehealth infrastructure. Our platform’s unique ability to simplify high-quality, virtual care delivery that supports existing patient-physician relationships differentiates us in the growing market,” said Ido Schoenberg, Chairman and Co-CEO.

Dr. Schoenberg continued, “During the quarter, we expanded the number of entry points to our ecosystem connectivity platform in order to simplify access to telehealth and enhance our partners’ user experience. We now look to end the year with accelerated momentum as our story evolves in the public markets.”

Third quarter 2020 Financial Highlights:

All comparisons, unless otherwise noted, are to the three months ended September 30, 2019.

• Total active providers were ~62,000, compared to ~6,000
• 450% visit growth driven by provider clients accelerated adoption of our platform
• Total visits were ~1,414,000, compared to 255,000
  • Amwell Medical Group™ (AMG) visits were ~378,000 or 27% of total visits, compared to ~159,000 or 62% of total visits
• Total Revenue was $62.6 million, compared to $34.7 million
  • Subscription revenue was $25.8 million, compared to $22.0 million
  • Visit revenue was $28.5 million, compared to $7.2 million
• Gross margin was 32.7%, compared to 45.1% impacted by low margin AMG visit growth during COVID
• Net loss was $(64.6) million, compared to $(24.1) million
• Adjusted EBITDA was $(26.2) million, compared to $(20.3) million
• Cash and Short-term securities as of quarter-end were $1.1 billion

Financial Outlook

For 2020, the company expects:

• Revenue between $235 and $239 million
• Adjusted EBITDA between ($110) million and ($105) million

Quarterly Conference Call Details

The company will host a conference call to review the results today, Thursday, November 12, 2020 at 5:00 p.m. E.T. to discuss its financial results. The call can be accessed via a line audio webcast at https://investors.amwell.com or by dialing 1-883-979-2840 for U.S. participants, or 1-263-384-2051 for international participants, referencing conference ID #4495737. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About Amwell

Amwell is a leading telehealth platform in the United States and globally, connecting and enabling providers, insurers, patients, and innovators to deliver greater access to more affordable, higher quality care. Amwell believes that digital care delivery will transform healthcare. The Company offers a single, comprehensive platform to support all telehealth needs from urgent to acute and post-acute care, as well as chronic care management and healthy living. With over a decade of experience, Amwell powers telehealth solutions for over 2,000 hospitals and 55 health plan partners with over 36,000 employers, covering over 80 million lives. For more information please visit https://business.amwell.com/.

American Well, Amwell, and Amwell Medical Group are registered trademarks or trademarks of American Well Corporation in the United States and other countries. All other trademarks used herein are the property of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements about us and our industry that involve substantial risks and uncertainties and are based on our beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations, financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our beliefs and assumptions only as of the date of this release. These statements, and related risks, uncertainties, factors and assumptions, include, but are not limited to: weak growth and increased volatility in the telehealth market; inability to adapt to rapid technological changes; increased competition from existing and potential new participants in the healthcare industry; changes in healthcare laws, regulations or trends and our ability to operate in the heavily regulated healthcare industry; our ability to comply with federal and state privacy regulations; the significant liability that could result from a cybersecurity breach; and other factors described under ‘Risk Factors’ in the prospectus for our IPO filed with the SEC. These risks are not exhaustive. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Further information on factors that could cause actual results to differ materially from the results anticipated by our forward-looking statements is included in the reports we have filed or will file with the Securities and Exchange Commission. These filings, when available, are available on the investor relations section of our website at investors.amwell.com and on the SEC’s website at www.sec.gov.

CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited)
	September 30, 2020			December 31, 2019
Current assets:
Cash and cash equivalents	$	956,417		$	137,673
Investments		129,914			39,953
Restricted cash		300			—
Accounts receivable ($1,408 and $2,601 from related parties and net of allowances of $1,333 and $686, respectively)		39,962			32,730
Inventories		7,775			3,104
Deferred contract acquisition costs		865			1,130
Prepaid expenses and other current assets		8,408			8,937
Total current assets		1,143,641			223,527
Restricted cash		795			1,143
Property and equipment, net		4,352			2,664
Goodwill		193,877			193,877
Intangible assets, net		57,718			63,535
Operating lease right-of-use asset		8,201			11,944
Deferred contract acquisition costs, net of current portion		2,627			1,639
Other assets		1,126			1,552
Investment in minority owned joint venture		1,690			—
Total assets	$	1,414,027		$	499,881
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	7,670		$	6,504
Accrued expenses and other current liabilities		38,301			27,351
Operating lease liability, current		6,321			6,232
Deferred revenue ($6,325 and $12,912 from related parties, respectively)		54,324			66,490
Total current liabilities		106,616			106,577
Other long-term liabilities		115			309
Operating lease liability, net of current portion		3,056			7,164
Deferred revenue, net of current portion ($275 and $1,385 from related parties, respectively)		7,480			10,896
Total liabilities		117,267			124,946
Commitments and contingencies (Note 12)
Convertible preferred stock, $0.01 par value; no shares authorized, issued or outstanding as of September 30, 2020, and 17,744,445 shares authorized 14,061,508 shares issued and 14,012,935 shares outstanding as of December 31, 2019; aggregate liquidation preference of $0 and $608,449, respectively		—			655,799
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2020, and no shares authorized, issued or outstanding as of December 31, 2019		—			—
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 200,131,318 shares issued and 199,647,646 shares outstanding, 100,000,000 Class B shares authorized, 29,950,326 shares issued and 29,032,042 shares outstanding, 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of September 30, 2020; and 220,000,000 common stock shares authorized, 42,338,679 shares issued and 42,302,845 shares outstanding as of December 31, 2019		2,343			423
Treasury stock, 1,401,956 shares and 35,834 shares as of September 30, 2020 and as of December 31, 2019, respectively		(24,320	)		(158	)
Additional paid-in capital		1,828,395			50,289
Accumulated other comprehensive income		50			250
Accumulated deficit		(532,047	)		(357,927	)
Total American Well Corporation stockholders’ equity (deficit)		1,274,421			(307,123	)
Non-controlling interest		22,339			26,259
Total stockholders’ equity (deficit)		1,296,760			(280,864	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	1,414,027		$	499,881

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share amounts) (unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
		2020			2019			2020			2019
Revenue
($14,868, $8,253, $44,028 and $24,404 from related parties, respectively)	$	62,551		$	34,744		$	184,833		$	103,825
Costs and operating expenses:
Costs of revenue, excluding depreciation and amortization of intangible assets		42,116			19,060			118,969			55,060
Research and development		25,275			13,602			57,848			39,169
Sales and marketing		13,758			11,309			39,978			33,951
General and administrative		43,113			14,654			138,537			40,189
Depreciation and amortization expense		2,576			1,868			7,371			5,668
Total costs and operating expenses		126,838			60,493			362,703			174,037
Loss from operations		(64,287	)		(25,749	)		(177,870	)		(70,212	)
Interest income and other income (expense), net		255			1,286			1,410			4,547
Loss before benefit (expense) from income taxes and loss from equity method investment		(64,032	)		(24,463	)		(176,460	)		(65,665	)
Benefit (expense) from income taxes		(78	)		392			(330	)		22
Loss from equity method investment		(486	)		—			(1,250	)		—
Net loss		(64,596	)		(24,071	)		(178,040	)		(65,643	)
Net loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)
Net loss attributable to American Well Corporation	$	(63,081	)	$	(24,015	)	$	(174,120	)	$	(64,759	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.92	)	$	(0.57	)	$	(3.38	)	$	(1.55	)
Weighted-average common shares outstanding, basic and diluted		68,499,106			41,933,597			51,492,988			41,805,929
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale investments		(135	)		(226	)		(415	)		(938	)
Foreign currency translation		37			(59	)		215			(188	)
Comprehensive loss		(64,694	)		(24,356	)		(178,240	)		(66,769	)
Less: Comprehensive loss attributable to non-controlling interest		(1,515	)		(56	)		(3,920	)		(884	)
Comprehensive loss attributable to American Well Corporation	$	(63,179	)	$	(24,300	)	$	(174,320	)	$	(65,885	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share and per share amounts) (unaudited)
	Nine Months Ended September 30,
		2020			2019
Net loss	$	(178,040	)	$	(65,643	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		7,371			5,668
Provisions for doubtful accounts		1,236			621
Amortization of deferred contract acquisition costs		852			797
Amortization of deferred contract fulfillment costs		510			531
Stock-based compensation expense		106,516			8,675
Loss on equity method investment		1,250			—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(8,468	)		11,878
Inventories		(4,671	)		(500	)
Deferred contract acquisition costs		(1,575	)		(1,115	)
Prepaid expenses and other current assets		(1	)		(797	)
Other assets		426			(846	)
Accounts payable		(135	)		13
Accrued expenses and other current liabilities		2,353			553
Other long-term liabilities		(194	)		(902	)
Deferred revenue		(15,364	)		(25,548	)
Net cash used in operating activities		(87,934	)		(66,615	)
Cash flows from investing activities:
Purchases of property and equipment		(3,261	)		(1,098	)
Investment in minority owned joint venture		(2,940	)		—
Purchases of investments		(159,608	)		(78,946	)
Proceeds from sales and maturities of investments		69,132			226,509
Net cash (used in) provided by investing activities		(96,677	)		146,465
Cash flows from financing activities:
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs		146,014			—
Proceeds from exercise of common stock options		4,235			610
Payments for the purchase of treasury stock		(18,417	)		(158	)
Proceeds from issuance of common stock in initial public offering, net of underwriting costs and commissions		772,931			—
Proceeds from issuance of common stock to Google		100,000			—
Payment of deferred offering costs		(1,456	)		—
Net cash provided by financing activities		1,003,307			452
Net increase in cash, cash equivalents, and restricted cash		818,696			80,302
Cash, cash equivalents, and restricted cash at beginning of period		138,816			54,070
Cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372
Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents		956,417			133,277
Restricted cash		1,095			1,095
Total cash, cash equivalents, and restricted cash at end of period	$	957,512		$	134,372
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	138		$	—
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accrued expenses and accounts payable	$	19		$	—
Initial public offering and Google common stock offering costs in accrued expenses	$	3,838		$	—
Treasury stock costs in accrued expenses	$	5,903		$	—

Non-GAAP Financial Measures:

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, of US GAAP, we use adjusted EBITDA, which is a non-U.S GAAP financial measure to clarify and enhance an understanding of past performance. We believe that the presentation of adjusted EBITDA enhances an investor’s understanding of our financial performance. We further believe that adjusted EBITDA is a useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as the primary measure of our performance.

We calculate adjusted EBITDA as net loss adjusted to exclude (i) interest income and other income, net, (ii) tax benefit and expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) initial public offering expenses, (vi) acquisition-related expenses and (vii) other items affecting our results that we do not view as representative of our ongoing operations, including direct and incremental expenses associated with the COVID-19 pandemic.

We believe adjusted EBITDA is a commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term adjusted EBITDA may vary from that of others in our industry. Adjusted EBITDA should not be considered as an alternative to net loss before taxes, net loss, loss per share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.

Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these capital expenditures. Our IPO and acquisition-related expenses, including legal, accounting and other professional expenses, reflect cash expenditures and we expect such expenditures for acquisitions to recur from time to time. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.

In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Adjusted EBITDA should not be considered as an alternative to loss before benefit from income taxes, net loss, earnings per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.

Other than with respect to GAAP Revenue, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation because other deductions (such as  COVID expenses and acquisition related expenses) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP).

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for the three and the nine months ended September 30, 2019 and 2020:

Reconciliation of Adjusted EBITDA to Net Loss (unaudited)
	Three months ended September 30,						Nine months ended September 30,
(in thousands)		2020			2019			2020			2019
Net loss	$	(64,596	)	$	(24,071	)	$	(178,040	)	$	(65,643	)
Add:
Depreciation and amortization		2,576			1,868			7,371			5,668
Interest and other income, net		(255	)		(1,286	)		(1,410	)		(4,547	)
Expense (Benefit) from income taxes		78			(392	)		330			(22	)
Stock-based compensation		34,420			3,604			106,516			8,675
Initial public offering expenses		1,362			—			2,039			6
Acquisition-related expenses		—			—			(48	)		95
COVID-19-related expenses (1)		191			—			5,933			—
Adjusted EBITDA	$	(26,224	)	$	(20,277	)	$	(57,309	)	$	(55,768	)

(1) COVID-19-related expenses include non-recurring provider bonus payments, emergency hosting licensing fees and non-medical provider temporary labor costs related to on-boarding non-AMG providers incurred in response to the initial outbreak of the COVID-19 virus as Amwell attempted to scale quickly to meet unusually high patient and non-AMG provider demand.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006074/en/

Media:

Holly Spring

[email protected]

781.888.8219

Investors:

[email protected]

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Technology Hospitals Other Technology Practice Management Other Health Managed Care Health General Health Data Management

MEDIA:

Posted on November 12, 2020 4:08 pm

PhaseBio Reports Recent Business Highlights and Third-Quarter 2020 Financial Results

PhaseBio Reports Recent Business Highlights and Third-Quarter 2020 Financial Results

Expanded pivotal Phase 3 REVERSE-IT trial of product candidate bentracimab (PB2452) for reversal of antiplatelet effects of ticagrelor into Canada and dosed first patients outside the United States

Resuming enrollment in ongoing Phase 2b trial of pemziviptadil (PB1046) in pulmonary arterial hypertension

MALVERN, Pa. & SAN DIEGO–(BUSINESS WIRE)–PhaseBio Pharmaceuticals, Inc. (Nasdaq: PHAS), a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular and cardiopulmonary diseases, today provided an update on corporate activities and reported third-quarter 2020 financial results.

“In the third quarter, PhaseBio continued to make progress and build momentum on our mission to develop novel treatments for serious cardiovascular diseases, primarily through the growth of our global clinical trial footprint for our lead product candidate bentracimab,” said Jonathan P. Mow, Chief Executive Officer of PhaseBio Pharmaceuticals. “In October, we expanded enrollment of our pivotal Phase 3 REVERSE-IT Trial for bentracimab into Canada where we dosed the first patients outside the United States. With continued widespread use of antiplatelet therapies for patients with acute coronary syndrome, both in the United States and globally, there continues to be a significant unmet need for a novel therapy like bentracimab that has the potential to immediately and sustainably reverse the antiplatelet effects of ticagrelor in patients requiring urgent surgeries or experiencing major bleeding events.”

Mow continued, “We’re also pleased to be resuming enrollment for VIP, our Phase 2b trial of pemziviptadil for patients with pulmonary arterial hypertension (PAH). Looking ahead, we remain focused on delivering on our key clinical development milestones for bentracimab and pemziviptadil in 2021 and will be working in the near term on the preparation of our regulatory filings and commercialization efforts for bentracimab.”

Recent Pipeline and Business Highlights

• Expanded Pivotal Phase 3 REVERSE-IT Trial for Lead Product Candidate Bentracimab into Canada and Dosed First Patients: In October 2020, PhaseBio announced that it had expanded its Phase 3 REVERSE-IT trial for its lead product candidate bentracimab (PB2452) into Canada, where the first patients outside of the United States have now been enrolled and dosed. Bentracimab is a novel, human monoclonal antibody fragment that in earlier trials has shown immediate and sustained reversal of the antiplatelet effects of Brilinta® (ticagrelor). Cardiovascular disease remains a leading cause of mortality in the United States, Canada and globally. The lack of reversal agents for patients taking antiplatelet therapies who require urgent surgery or experience a major bleeding event remains a critical unmet need. The ongoing global Phase 3 trial of bentracimab has been named REVERSE-IT (Rapid and SustainEd ReVERSal of TicagrElor – Intervention Trial).

• Resuming Enrollment in Ongoing Phase 2b Trial of Pemziviptadil (PB1046) in PAH: In October 2020, PhaseBio announced that the ongoing Phase 2b trial of pemziviptadil in patients with PAH, named the VIP trial (Vasoactive Intestinal Peptide in adult patients with pulmonary arterial hypertension), is resuming enrollment after a pause related to the impacts of the COVID-19 pandemic and re-prioritization of drug supply to the VANGARD trial. To date, approximately one-third of the patients targeted for enrollment have completed the initial 16 week protocol, with approximately 90% of these patients electing to enroll in VIP EXTEND (Vasoactive Intestinal Peptide extension trial in adult patients with pulmonary arterial hypertension), the open label extension of the Phase 2b trial. Results from the VIP trial are expected to be reported in the second half of 2021.

• Discontinued VANGARD Clinical Trial to Evaluate Pemziviptadil in Hospitalized COVID-19 Patients: In October 2020, PhaseBio announced that after a strategic review of the VANGARD Phase 2 clinical trial, which included an assessment of the rapidly evolving COVID-19 treatment landscape, feedback from the U.S. Food and Drug Administration (FDA) and an interim analysis of the VANGARD trial data, the company elected to discontinue the VANGARD trial and refocus resources on its core pipeline programs. Importantly, pemziviptadil was generally well tolerated, and there was no adverse safety signal reported in the VANGARD trial. In addition, an independent data safety monitoring board did not identify any safety concerns related to pemziviptadil.

• SFJ Financing and Co-Development Agreement Update: From execution of the Co-Development Agreement through September 30, 2020, SFJ Pharmaceuticals has funded or reimbursed $31.7 million of clinical trial costs and other expenses of the initial $90 million commitment under the agreement towards the development of bentracimab, leaving $58.3 million of funding remaining available to support the bentracimab Phase 3 program through the end of 2021. PhaseBio is eligible to receive up to an additional $30 million of funding if specific, pre-defined clinical development milestones for bentracimab are met.

Third-Quarter 2020 Financial Results

• Cash and cash equivalents at September 30, 2020 were $39.4 million, compared to $74.0 million at December 31, 2019. The decrease reflects cash used in operating activities.

• Net loss for the quarter was $25.1 million, compared to a net loss of $11.4 million for the prior-year period.

• Research and development expense increased to $17.4 million, as compared to $9.0 million for the same period in 2019, driven by an increase in manufacturing, clinical and nonclinical development activities related to bentracimab and pemziviptadil.

• General and administrative expense increased to $3.1 million, compared to $2.8 million for prior-year period, primarily due to increases in professional services, personnel, and insurance-related expenses.

About PhaseBio

PhaseBio Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular and cardiopulmonary diseases. The company’s pipeline includes: bentracimab (PB2452), a novel reversal agent for the antiplatelet therapy ticagrelor; pemziviptadil (PB1046), a once-weekly vasoactive intestinal peptide receptor agonist for the treatment of pulmonary arterial hypertension; and PB6440, an oral agent for the treatment of resistant hypertension. PhaseBio’s proprietary elastin-like polypeptide technology platform enables the development of therapies with potential for less-frequent dosing and improved pharmacokinetics, including pemziviptadil, and drives both internal and partnership drug-development opportunities.

PhaseBio is located in Malvern, PA, and San Diego, CA. For more information, please visit www.phasebio.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “expects,” “intends,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements.

Forward-looking statements include statements concerning or implying the conduct or timing of our clinical trials and our research, development and regulatory plans for our product candidates, the potential for these product candidates to receive regulatory approval from the FDA or equivalent foreign regulatory agencies, whether, if approved, these product candidates will be successfully distributed and marketed and the success of our collaboration with SFJ, including whether we will receive all of the contemplated funding under the co-development agreement. Forward-looking statements are based on management’s current expectations and are subject to various risks and uncertainties that could cause actual results to differ materially and adversely from those expressed or implied by such forward-looking statements. Accordingly, these forward-looking statements do not constitute guarantees of future performance, and you are cautioned not to place undue reliance on these forward-looking statements.

Risks regarding our business are described in detail in our Securities and Exchange Commission (“SEC”) filings, including in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which we intend to file shortly hereafter. These forward-looking statements speak only as of the date hereof, and PhaseBio Pharmaceuticals, Inc. disclaims any obligation to update these statements except as may be required by law.

PhaseBio Pharmaceuticals, Inc.
Condensed Balance Sheets
(in thousands)
(unaudited)
		September 30, 2020		December 31, 2019
Assets:
Cash and cash equivalents		$ 39,353		$ 74,025
Other receivables, prepaid expenses and other current assets		10,595		4,798
Property and equipment, net		6,164		1,924
Operating lease right-of-use assets		2,038		1,715
Other non-current assets		57		32
Total assets		$ 58,207		$ 82,494
Liabilities and stockholders’ equity:
Current portion of long-term debt		$ 5,341		$ 2,378
Accounts payable, accrued expenses and other current liabilities		6,029		6,101
Long-term debt, net		8,117		12,326
Operating lease liabilities, net		1,667		1,508
Development derivative liability		32,224		—
Other long-term liabilities		477		203
Stockholders’ equity		4,352		59,978
Total liabilities and stockholders’ equity		$ 58,207		$ 82,494

PhaseBio Pharmaceuticals, Inc.
Condensed Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2020			2019			2020			2019
Revenue:
Grant revenue		$ —			$ 241			$ 320			$ 1,097
Revenue under collaborative agreement		—			—			—			500
Total revenue		—			241			320			1,597
Operating expenses:
Research and development		17,416			9,028			49,721			22,530
General and administrative		3,076			2,803			9,477			7,523
Total operating expenses		20,492			11,831			59,198			30,053
Loss from operations		(20,492	)		(11,590	)		(58,878	)		(28,456	)
Other (expense) income		(4,651	)		199			(9,312	)		540
Net loss		$ (25,143	)		$ (11,391	)		$ (68,190	)		$ (27,916	)
Net loss per common share, basic and diluted		$ (0.86	)		$ (0.40	)		$ (2.36	)		$ (1.03	)
Weighted average common shares outstanding, basic and diluted		29,243,181			28,719,932			28,941,669			27,065,774

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006073/en/

Investor Contact:

John Sharp

PhaseBio Pharmaceuticals, Inc.

Chief Financial Officer

(610) 981-6506

[email protected]

Media Contact:

Will Zasadny

Canale Communications, Inc.

[email protected]

619-961-8848

KEYWORDS: California Pennsylvania United States North America

INDUSTRY KEYWORDS: Biotechnology FDA Health Pharmaceutical Clinical Trials

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Griffon Corporation Announces Annual and Fourth Quarter Results

NEW YORK–(BUSINESS WIRE)–
Griffon Corporation (“Griffon” or the “Company”) (NYSE:GFF) today reported results for the fiscal year and fourth quarter ended September 30, 2020.

Fiscal 2020, revenue totaled $2.4 billion, a 9% increase from the $2.2 billion in the prior year, with organic growth of 8%.

Fiscal 2020, Income from continuing operations totaled $53.4 million, or $1.19 per share, compared to $45.6 million, or $1.06 per share, in the prior year. Current year Adjusted income from continuing operations was $73.0 million, or $1.62 per share compared to $46.3 million, or $1.08 per share, in the prior year, a 50% increase (see the Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations for details).

Fiscal 2020 Adjusted EBITDA from continuing operations totaled $236 million, increasing 18% from the prior year of $200 million. Adjusted EBITDA excluding unallocated amounts (primarily corporate overhead) in 2020 and 2019 of $47 million and $46 million, respectively, totaled $283 million in 2020, increasing 15% from the prior year of $246 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure).

Fourth quarter revenue of $661 million increased 15% compared to the prior year fourth quarter revenue of $574 million with organic growth of 14%.

Fourth quarter Income from continuing operations totaled $20.1 million, or $0.41 per share, compared to $16.3 million, or $0.37 per share, in the prior year quarter. Current year fourth quarter Adjusted income from continuing operations was $21.5 million, or $0.44 per share compared to $17.3 million, or $0.40 per share, in the prior year fourth quarter, a 10% increase (see the Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations for details).

Fourth quarter Adjusted EBITDA from continuing operations totaled $63 million, increasing 8% from the prior year quarter of $59 million. Adjusted EBITDA excluding unallocated amounts (primarily corporate overhead) in both 2020 and 2019 of $12 million totaled $75 million in 2020, increasing 7% from the prior year of $71 million.

Ronald J. Kramer, Chairman and Chief Executive Officer, commented, “Griffon performed exceptionally well in our fiscal fourth quarter despite the difficult operating conditions caused by the pandemic. Our ongoing efforts to improve operating performance delivered an 8% increase in organic revenue, an 18% increase in EBITDA and a 50% increase in EPS. We are pleased that the momentum we experienced in our businesses before the pandemic continued though the entire fiscal year despite the challenges we all faced. We are very proud of our performance and thankful to our global workforce for their incredible contribution. In addition to our strong operating results, Griffon strengthened its balance sheet through the refinancing of our bonds, extending maturities to 2028, and adding $178 million of cash through a common stock offering. Our financial strength positions us well to both deal with uncertainties and take advantage of opportunities that may present themselves.”

Mr. Kramer added, “We continue to evaluate ways to further increase operating efficiency and last month we expanded the AMES next-generation initiative to include AMES’ global operations. By adding new geographies and expanding locations, we expect to increase annual cash savings by an additional $30 to $35 million annually. We are relentless in our focus on driving long-term shareholder value and are excited about our future.”

Segment Operating Results

Consumer and Professional Products (“CPP”)

CPP revenue in 2020 was $1.14 billion, increasing $139 million, or 14% compared to 2019. This was primarily from a 12% increase in volume, due to increased consumer demand for home improvement initiatives across most of our geographic regions supplemented by COVID-19 stay at home orders, favorable price and mix of 1% and an incremental 2% revenue contribution from the Apta acquisition, partially offset by an unfavorable impact of foreign exchange of 1%. Organic growth was 12%.

CPP Adjusted EBITDA for 2020 was $104 million, increasing $13 million, or 15% compared to 2019, primarily driven by increased revenue as noted above, partially offset by increased tariffs, COVID-19 related inefficiencies and direct costs, and an unfavorable foreign exchange impact of 1%. Adjusted EBITDA margin of 9.1% in 2020 remained consistent with the prior year. Direct COVID-19 related expenses totaled approximately $5.0 million for the year.

CPP revenue in the current quarter was $294 million, increasing $72 million, or 32% from the prior year quarter. This was primarily from a 30% increase in volume, due to increased consumer demand for home improvement initiatives across most of our geographic regions supplemented by COVID-19 stay at home orders and an incremental 3% revenue contribution from the Apta acquisition, partially offset by unfavorable mix of 1%. Organic growth in the quarter was 29%.

CPP Adjusted EBITDA in the current quarter was $20 million, increasing $2 million, or 14% from the prior year quarter due to the benefit of increased revenue, partially offset by COVID-19 related expenses. Adjusted EBITDA margin was 6.8% in the fourth quarter of 2020 compared to 7.9% in the prior year quarter, impacted by inefficiencies and direct costs related to COVID-19, facility consolidations and distribution inefficiencies in supplying areas affected by natural disasters. Direct COVID-19 related expenses totaled approximately $2.5 million for the quarter.

Strategic Initiative

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and in October 2020, CPP broadened this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES global operations will be consolidated to optimize facilities footprint and talent. Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include AMES’ global operations will extend the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30-$35 million (increased from $15-$20 million) and a reduction in inventory of $30-$35 million (increased from $20-$25 million), both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65 million (increased from $35 million) and capital investments of approximately $65 million (increased from $40 million). The one-time charges are comprised of $46 million of cash charges, which includes $26 million of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20 million of facility and lease exit costs. The remaining $19 million are non-cash charges, primarily related to asset write-downs.

In addition to the growth, efficiency and competitive benefits, the AMES strategic initiative is intended to drive operating margin improvement and increased free cash flow.

In connection with this initiative, during the year ended September 30, 2020, CPP incurred pre-tax restructuring and other related exit costs approximating $13.7 million, comprised of cash charges of approximately $9.0 million ($5.7 million for one-time termination benefits and other personnel-related costs and $3.3 million for facility exit costs) and non-cash, asset-related charges of $4.7 million. Capital expenditures related to the initiative were $6.7 million through the year ended September 30, 2020.

Home and Building Products (“HBP”)

HBP revenue in 2020 was $927 million, increasing $54 million, or 6%, compared to 2019, with 4% from volume and 2% from favorable mix and pricing.

HBP Adjusted EBITDA in 2020 was $154 million, increasing $33 million, or 28%, compared to 2019. The favorable variance resulted from the increased revenue noted above and general operational efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs. Adjusted EBITDA margin was 16.6% in 2020 compared to 13.8% in 2019. Direct COVID-19 related expenses totaled approximately $2.0 million in fiscal 2020.

HBP revenue in the current quarter was $257 million, increasing $15 million, or 6% from the prior year quarter, with 4% from volume, and 2% from favorable mix and pricing.

HBP Adjusted EBITDA in the current quarter was $43 million, increasing $8 million, or 23% from the prior year quarter, primarily from the increased revenue noted above and general operational efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs. Adjusted EBITDA margin was 16.7% in the current quarter compared to 14.4% in the prior year quarter. Direct COVID-19 related expenses totaled approximately $0.3 million for the fourth quarter of 2020.

Defense Electronics (“DE”)

DE revenue in 2020 was $341 million, increasing $6 million, or 2% compared to 2019, primarily due to increased deliveries and volume on airborne and ground communications systems, as well as airborne surveillance systems, partially offset by reduced volume on Multi-Mode airborne maritime surveillance radar systems.

DE Adjusted EBITDA for 2020 was $25 million, decreasing $10 million, or 28% from 2019, primarily due to program inefficiencies associated with certain radar programs, unfavorable program mix and increased operating expenses primarily due to bid and proposal activities and timing of research and development initiatives, partially offset by program efficiencies within airborne intercommunication surveillance systems. Adjusted EBITDA margin was 7.4% in 2020 compared to 10.5% in the prior year. Direct COVID-19 related expenses totaled approximately $1.0 million in fiscal 2020.

DE revenue in the current quarter totaling $109 million remained consistent with the prior year quarter.

DE Adjusted EBITDA in the current quarter was $12 million, decreasing $6 million from the prior year quarter, primarily due to program inefficiencies associated with certain radar systems and unfavorable program mix. Adjusted EBITDA margin was 11.3% in the fourth quarter of 2020 compared to 16.5% in the prior year quarter. Direct COVID-19 related expenses totaled approximately $0.3 million for the fourth quarter of 2020.

Contract backlog was $380 million at September 30, 2020, compared to $389 million at September 30, 2019, with 67% expected to be fulfilled in the next 12 months. During the year, Telephonics was awarded several new contracts and received incremental funding on existing contracts approximating $332 million, which translates into a book to bill ratio of approximately 1.0.

In September 2020, Telephonics initiated a Voluntary Employee Retirement Plan, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities. The combined actions are expected to incur severance charges of approximately $4.5 million with $2.1 million recognized in the fourth quarter, and the balance to be recognized in the first quarter of 2021. At the conclusion of these actions, headcount is expected to be reduced by approximately 90 people. In addition, during fiscal 2020 Telephonics commenced a facility project to consolidate three Long Island based facilities into two company owned facilities with a total cost of approximately $4.0 million primarily comprised of capital expenditures in 2021.

Taxes

The Company reported pretax income from continuing operations for the years ended September 30, 2020 and 2019 and recognized effective income tax rates of 35.4% and to 36.8%, respectively. Excluding discrete and certain other tax provisions, net and items that affect comparability, the effective tax rates for the years ended September 30, 2020 and 2019 were 32.2% and 34.3%, respectively.

Balance Sheet and Capital Expenditures

At September 30, 2020, the Company had a net debt position of $829 million, with cash and cash equivalents of $218 million and total debt outstanding of $1.05 billion, with $370 million available for borrowing under the revolving credit facility subject to certain loan covenants. Capital expenditures were $49 million for the year ended September 30, 2020.

Equity

In August 2020, Griffon Corporation completed a Public Offering of 8,700,000 shares of its common stock for total net proceeds of $178.2 million. The Company used a portion of the net proceeds to repay $50 million of outstanding borrowings under its Credit Agreement.

As of September 30, 2020, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations in fiscal 2020.

Conference Call Information

The Company will hold a conference call today, November 12, 2020, at 4:30 PM ET.

The call can be accessed by dialing 1-877-407-0792 (U.S. participants) or 1-201-689-8263 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 13713041. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.

A replay of the call will be available starting on Thursday, November 12, 2020 at 7:30 PM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 13713041. The replay will be available through November 26, 2020 at 11:59 PM ET.

Forward-looking Statements

“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; Griffon’s ability to achieve expected savings from cost control, restructuring, integration and disposal initiatives; the ability to identify and successfully consummate, and integrate, value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of defense budget cuts or other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost or lack of availability of raw materials such as resin, wood and steel, components or purchased finished goods, including the impact from tariffs; changes in customer demand or loss of a material customer at one of Griffon’s operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in Griffon’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon’s operating companies; and possible terrorist threats and actions and their impact on the global economy; the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers; Griffon’s ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, changes in tax law. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Griffon Corporation

Griffon Corporation is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon conducts its operations through three reportable segments:

• Consumer and Professional Products conducts its operations through AMES. Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

• Home and Building Product conducts its operations through Clopay. Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

• Defense Electronics conducts its operations through Telephonics, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.

Griffon evaluates performance and allocates resources based on operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Adjusted EBITDA to Income before taxes from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES OPERATING HIGHLIGHTS (in thousands)
	(Unaudited) For the Three Months Ended September 30,								For the Year Ended September 30,
REVENUE	2020				2019				2020				2019
Consumer and Professional Products	$	294,316			$	222,692			$	1,139,233			$	1,000,608
Home and Building Products	256,939				242,025				927,313				873,640
Defense Electronics	109,418				109,447				340,976				335,041
Total consolidated net sales	$	660,673			$	574,164			$	2,407,522			$	2,209,289
ADJUSTED EBITDA
Consumer and Professional Products	$	19,985			$	17,526			$	104,053			$	90,677
Home and Building Products	42,996				34,878				153,631				120,161
Defense Electronics	12,383				18,103				25,228				35,104
Total	75,364				70,507				282,912				245,942
Unallocated amounts, excluding depreciation*	(12,044		)		(11,797		)		(47,013		)		(46,302		)
Adjusted EBITDA	63,320				58,710				235,899				199,640
Net interest expense	(16,695		)		(16,537		)		(65,791		)		(67,260		)
Depreciation and amortization	(15,342		)		(15,676		)		(62,409		)		(61,848		)
Restructuring charges	(4,619		)		—				(15,790		)		—
Loss from debt extinguishment	—				—				(7,925		)		—
Acquisition contingent consideration	1,733				1,646				1,733				1,646
Acquisition costs	—				—				(2,960		)		—
Income before taxes from continuing operations	$	28,397			$	28,143			$	82,757			$	72,178
* Primarily Corporate Overhead

	For the Three Months Ended September 30,								For the Year Ended September 30,
DEPRECIATION and AMORTIZATION	2020				2019				2020				2019
Segment:
Consumer and Professional Products	$	8,138			$	8,141			$	32,788			$	32,289
Home and Building Products	4,386				4,651				18,361				18,334
Defense Electronics	2,659				2,741				10,645				10,667
Total segment depreciation and amortization	15,183				15,533				61,794				61,290
Corporate	159				143				615				558
Total consolidated depreciation and amortization	$	15,342			$	15,676			$	62,409			$	61,848

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data)
	(Unaudited) Three Months Ended September 30,								Twelve Months Ended September 30,
	2020				2019				2020				2019
Revenue	$	660,673			$	574,164			$	2,407,522			$	2,209,289
Cost of goods and services	486,203				415,706				1,766,096				1,625,815
Gross profit	174,470				158,458				641,426				583,474
Selling, general and administrative expenses	128,624				113,654				486,398				447,163
Income from continuing operations	45,846				44,804				155,028				136,311
Other income (expense)
Interest expense	(16,737		)		(16,732		)		(66,544		)		(68,066		)
Interest income	42				195				753				806
Loss from debt extinguishment, net	—				—				(7,925		)		—
Other, net	(754		)		(124		)		1,445				3,127
Total other expense, net	(17,449		)		(16,661		)		(72,271		)		(64,133		)
Income before taxes from continuing operations	28,397				28,143				82,757				72,178
Provision for income taxes	8,306				11,892				29,328				26,556
Income from continuing operations	$	20,091			$	16,251			$	53,429			$	45,622
Discontinued operations:
Income from operations of discontinued businesses	—				(50		)		—				(11,050		)
Provision from income taxes	—				106				—				(2,715		)
Income (loss) from discontinued operations	—				(156		)		—				(8,335		)
Net income (loss)	$	20,091			$	16,095			$	53,429			$	37,287
Income from continuing operations	$	0.44			$	0.40			$	1.25			$	1.11
Income (loss) from discontinued operations	—				—				—				(0.20		)
Basic earnings (loss) per common share	$	0.44			$	0.39			$	1.25			$	0.91
Weighted-average shares outstanding	45,903				41,071				42,588				40,934
Income from continuing operations	$	0.41			$	0.37			$	1.19			$	1.06
Income (loss) from discontinued operations	—				—				—				(0.20		)
Diluted income (loss) per common share	$	0.41			$	0.37			$	1.19			$	0.87
Weighted-average shares outstanding	48,526				43,540				45,015				42,888
Net income (loss)	$	20,091			$	16,095			$	53,429			$	37,287
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	6,094				(4,517		)		5,601				(8,460		)
Pension and other post retirement plans	(14,264		)		(23,607		)		(11,784		)		(23,055		)
Gain (loss) on cash flow hedge	1,285				(75		)		7				(289		)
Total other comprehensive income (loss), net of taxes	(6,885		)		(28,199		)		(6,176		)		(31,804		)
Comprehensive income (loss), net	$	13,206			$	(12,104	)		$	47,253			$	5,483

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
	At September 30, 2020				At September 30, 2019
CURRENT ASSETS
Cash and equivalents	$	218,089			$	72,377
Accounts receivable, net of allowances of $17,758 and $7,881	348,124				264,450
Contract assets, net of progress payments of $24,175 and $11,259	84,426				105,111
Inventories	413,825				442,121
Prepaid and other current assets	46,897				40,799
Assets of discontinued operations	2,091				321
Total Current Assets	1,113,452				925,179
PROPERTY, PLANT AND EQUIPMENT, net	343,964				337,326
OPERATING LEASE RIGHT-OF-USE ASSETS	161,627				—
GOODWILL	442,643				437,067
INTANGIBLE ASSETS, net	355,028				356,639
OTHER ASSETS	32,897				15,840
ASSETS OF DISCONTINUED OPERATIONS	6,406				2,888
Total Assets	$	2,456,017			$	2,074,939
CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	9,922			$	10,525
Accounts payable	232,107				250,576
Accrued liabilities	171,572				124,665
Current portion of operating lease liabilities	31,848				—
Liabilities of discontinued operations	3,797				4,333
Total Current Liabilities	449,246				390,099
LONG-TERM DEBT, net	1,037,042				1,093,749
LONG-TERM OPERATING LEASE LIABILITIES	136,054				—
OTHER LIABILITIES	126,510				109,997
LIABILITIES OF DISCONTINUED OPERATIONS	7,014				3,331
Total Liabilities	1,755,866				1,597,176
COMMITMENTS AND CONTINGENCIES – See Note 14
SHAREHOLDERS’ EQUITY
Preferred stock, par value $0.25 per share, authorized 3,000 shares, no shares issued	—				—
Common stock, par value $0.25 per share, authorized 85,000 shares, issued shares of 83,739 and 82,775, respectively.	20,935				20,694
Capital in excess of par value	583,008				519,017
Retained earnings	607,518				568,516
Treasury shares, at cost, 27,610 common shares and 35,969 common shares	(413,493		)		(536,308		)
Accumulated other comprehensive loss	(72,092		)		(65,916		)
Deferred compensation	(25,725		)		(28,240		)
Total Shareholders’ Equity	700,151				477,763
Total Liabilities and Shareholders’ Equity	$	2,456,017			$	2,074,939

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Years Ended September 30,
	2020				2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES – CONTINUING OPERATIONS:
Net income	$	53,429			$	37,287			$	125,678
Net (income) loss from discontinued operations	—				8,335				(92,423		)
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation and amortization	62,409				61,848				55,803
Stock-based compensation	17,580				15,914				19,610
Asset impairment charges – restructuring	4,692				—				—
Provision for losses on accounts receivable	1,332				535				96
Amortization of deferred financing costs and debt discounts	3,661				5,393				5,219
Loss from debt extinguishment	7,925				—				—
Deferred income tax	2,095				(2,222		)		(17,633		)
(Gain)/ loss on sale/disposal of assets and investments	(287		)		(179		)		290
Change in assets and liabilities, net of assets and liabilities acquired:
(Increase) decrease in accounts receivable and contract assets	(62,366		)		8,279				2,681
(Increase) decrease in inventories	34,080				(24,938		)		(52,122		)
Increase in prepaid and other assets	(13,582		)		(4,285		)		(2,285		)
Increase in accounts payable, accrued liabilities and income taxes payable	25,044				7,638				11,078
Other changes, net	1,017				353				2,200
Net cash provided by operating activities – continuing operations	137,029				113,958				58,192
CASH FLOWS FROM INVESTING ACTIVITIES – CONTINUING OPERATIONS:
Acquisition of property, plant and equipment	(48,998		)		(45,361		)		(50,138		)
Acquired business, net of cash acquired	(10,531		)		(9,219		)		(430,932		)
Investment purchases	(130		)		(149		)		—
Proceeds (payments) from sale of business	—				(9,500		)		474,727
Insurance proceeds (payments)	—				(10,604		)		8,254
Proceeds from sale of property, plant and equipment	352				280				663
Net cash provided by (used in) investing activities – continuing operations	(59,307		)		(74,553		)		2,574
CASH FLOWS FROM FINANCING ACTIVITIES – CONTINUING OPERATIONS:
Proceeds from issuance of common stock	178,165				—				—
Dividends paid	(14,529		)		(13,676		)		(49,797		)
Purchase of shares for treasury	(7,479		)		(1,478		)		(45,605		)
Proceeds from long-term debt	1,240,080				201,748				443,058
Payments of long-term debt	(1,308,915		)		(218,248		)		(300,993		)
Change in short-term borrowings	—				(366		)		144
Financing costs	(17,384		)		(1,090		)		(7,793		)
Contingent consideration for acquired businesses	(1,733		)		(1,686		)		—
Other, net	(15		)		(180		)		51
Net cash provided by (used) in financing activities – continuing operations	68,190				(34,976		)		39,065
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities	(3,021		)		(2,123		)		(45,624		)
Net cash provided by (used in) investing activities	444				—				(10,762		)
Net cash used in financing activities	—				—				(22,541		)
Net cash used in discontinued operations	(2,577		)		(2,123		)		(78,927		)
Effect of exchange rate changes on cash and equivalents	2,377				313				1,173
NET INCREASE IN CASH AND EQUIVALENTS	145,712				2,619				22,077
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	72,377				69,758				47,681
CASH AND EQUIVALENTS AT END OF PERIOD	$	218,089			$	72,377			$	69,758
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	63,139			$	63,334			$	59,793
Cash paid for taxes	21,016				25,339				32,140

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss on debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable. Griffon believes this information is useful to investors. The following tables provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per common share from continuing operations to Adjusted earnings per common share from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO ADJUSTED INCOME FROM CONTINUING OPERATIONS (in thousands, except per share data)
	For the Three Months Ended September 30,								For the Twelve Months Ended September 30,
	2020				2019				2020				2019
Income from continuing operations	$	20,091			$	16,251			$	53,429			$	45,622
Adjusting items:
Restructuring charges	4,619				—				15,790				—
Loss from debt extinguishment	—				—				7,925				—
Acquisition costs	—				—				2,960				—
Acquisition contingent consideration	(1,733		)		(1,646		)		(1,733		)		(1,646		)
Tax impact of above items	(840		)		313				(5,984		)		313
Discrete and other certain tax (benefits) provisions	(594		)		2,334				654				2,035
Adjusted income from continuing operations	$	21,543			$	17,252			$	73,041			$	46,324
Earnings per common share from continuing operations	$	0.41			$	0.37			$	1.19			$	1.06
Adjusting items, net of tax:
Restructuring charges	0.07				—				0.26				—
Loss from debt extinguishment	—				—				0.14				—
Acquisition costs	—				—				0.05				—
Acquisition contingent consideration	(0.03		)		(0.03		)		(0.03		)		(0.03		)
Discrete and other certain tax (benefits) provisions	(0.01		)		0.05				0.01				0.05
Adjusted earnings per share from continuing operations	$	0.44			$	0.40			$	1.62			$	1.08
Weighted-average shares outstanding (in thousands)	48,526				43,540				45,015				42,888

Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006067/en/

Company Contact:

Brian G. Harris

SVP & Chief Financial Officer

Griffon Corporation

(212) 957-5000

Investor Relations Contact:

Michael Callahan

Managing Director

ICR Inc.

(203) 682-8311

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Posted on November 12, 2020 4:08 pm

Montrose Environmental Group Announces Third Quarter 2020 Results

Montrose Environmental Group Announces Third Quarter 2020 Results

– Focused Execution and Resilient Demand Drive Solid Third Quarter Results –

– Increases Full Year 2020 Growth Outlook –

IRVINE, Calif.–(BUSINESS WIRE)–
Montrose Environmental Group, Inc. (the “Company,” “Montrose” or “MEG”) (NYSE: MEG) today announced results for the third quarter ended September 30, 2020 and an updated full year 2020 outlook.

Third Quarter 2020 Highlights

• Total revenue of $84.7 million increased 47.0% compared to the prior year quarter
• Net loss of $30.7 million compared to a net loss of $6.7 million in the prior year quarter, primarily due to non-cash fair value adjustments and non-capitalizable IPO expenses
• Adjusted EBITDA¹ of $16.7 million increased 107.3% compared to the prior year quarter
• Adjusted EBITDA margin¹ improved to 19.7% compared to 14.0% in the prior year quarter

First Nine Months 2020 Highlights

• Total revenue of $219.5 million increased 32.2% compared to the prior year period
• Net loss of $58.8 million compared to a net loss of $12.2 million in the prior year period, primarily due to non-cash fair value adjustments and non-capitalizable IPO expenses
• Adjusted EBITDA¹ of $36.2 million grew 74.5% compared to the prior year period
• Adjusted EBITDA margin¹ expanded 400 basis points year-over-year to 16.5%

“Demand for our environmental solutions, particularly organic demand, accelerated in the third quarter and allowed us to deliver strong results and maintain momentum,” stated Vijay Manthripragada, Montrose’s Chief Executive Officer. “We recognize the significant sacrifices and efforts of our team members around the world who have helped colleagues and clients navigate multiple natural disasters and the COVID-19 pandemic. I am proud of and thankful for my entire team, who continue to deliver solid results despite all of the challenges 2020 has put forth. We believe Montrose’s performance remains resilient because of the world’s enduring focus on better environmental stewardship and because of the commitment of our employees. As we look to the balance of 2020, we expect to deliver on our upwardly revised full year 2020 outlook.”

(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the appendix to this release for a discussion of these measures, including how they are calculated and the reasons why we believe they provide useful information to investors, and a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure.

Third Quarter 2020 Results

Total revenue in the third quarter of 2020 increased 47.0% to $84.7 million, compared to $57.6 million in the prior year quarter. Excluding discontinued services, which contributed no revenue in the third quarter 2020 and $4.5 million in the third quarter 2019, total revenue increased 59.5%. The increases in revenues in the Measurement and Analysis segment and in the Remediation and Reuse segment were primarily driven by organic growth. Revenues in the Assessment, Permitting and Response segment increased significantly, mainly due to the acquisition of CTEH in April 2020. Growth in all segments was impacted by COVID-19, primarily in the form of delays in project start dates, partially offset by COVID-19 related project work performed by CTEH.

Net loss was $30.7 million, compared to a net loss of $6.7 million in the prior year quarter. The year-over-year change was primarily attributable to an increase in net expenses from fair value adjustments to certain financial instruments and contingent earn-out payments, as well as from professional fees associated with the Company’s initial public offering.

Adjusted EBITDA¹ increased to $16.7 million, compared to $8.1 million in the prior year quarter. The increase in Adjusted EBITDA¹ was primarily driven by higher revenues and favorable shifts in business mix. Adjusted EBITDA margin¹ improved 570 basis points to 19.7%, compared to 14.0% in the prior year quarter, mainly due to business mix, operating leverage at the segment level and temporary cost containment measures in response to COVID-19.

First Nine Months 2020 Results

Total revenue in the first nine months of 2020 increased 32.2% to $219.5 million, compared to $166.0 million in the prior year period. Excluding discontinued services, which generated revenues of $3.8 million and $15.5 million in the 2020 and 2019 periods, respectively, total revenue increased 43.3%. Increased revenues in the Measurement and Analysis segment and in the Remediation and Reuse segment were attributable to organic growth and acquisitions. Growth in the Assessment, Permitting and Response segment is primarily due to the acquisition of CTEH.

Net loss was $58.8 million, compared to a net loss of $12.2 million in the prior year period. The year-over-year difference in net loss primarily reflected an increase in net expenses from fair value adjustments to certain financial instruments and contingent earn-out payments, as well as from professional fees associated with the Company’s initial public offering.

Adjusted EBITDA¹ increased 74.5% to $36.2 million, compared to $20.7 million in the prior year period. The increase in Adjusted EBITDA¹ was primarily due to higher revenues and favorable shifts in business mix. Adjusted EBITDA margin¹ improved 400 basis points to 16.5%, compared to 12.5% in the prior year period.

Cash used in operating activities for the nine months ended September 30, 2020 was $3.9 million, compared to cash provided by operating activities of $12.5 million in the prior year period. The change between periods mainly reflects higher contingent earnout payments of $6.4 million, non-capitalized IPO-related costs of $6.8 million, higher interest payments of $6.7 million, and an increase in working capital investments of $6.3 million to support the acceleration of project work into the second half 2020. Excluding acquisition-related contingent earnout payments and the non-capitalized IPO-related costs, which are not part of recurring operations, cash flow provided by operating activities decreased $3.2 million, primarily due to higher working capital caused by significantly higher quarter over quarter growth in revenues when compared to the prior year.

Liquidity and Capital Resources

In July 2020, Montrose completed its initial public offering of common stock, raising proceeds of approximately $161.3 million, net of underwriting discounts and commissions and other offering-related expenses. In connection with the offering, the Company used $131.8 million of the proceeds and newly issued shares of common stock to redeem all outstanding shares of its Series A-1 preferred stock, and used approximately $9.8 million of the proceeds to pay IPO related expenses, with the remaining $19.6 million available for general corporate purposes and acquisitions.

At September 30, 2020, Montrose had total debt, net of deferred debt issuance costs, of $176.5 million and $88.4 million of liquidity, including $38.4 million of cash and $50.0 million of availability on its revolving credit facility. As of September 30, 2020, the Company’s leverage ratio, which includes the impact of acquisition-related contingent earnout payments that may become payable in cash, was 2.9 times. Excluding contingent earnout payments of $9.6 million related to CTEH estimated 2021 earnings, an amount which may vary given the environmental emergency response nature of their work, the Company’s leverage ratio was 2.7 times. As of September 30, 2020, the Company had 24,955,430 outstanding shares of common stock.

In October 2020, Montrose improved its borrowing costs through the repricing of its $175.0 million term loan facility which matures in 2025. The interest rate spread on the term loan was reduced by 50 basis points to LIBOR, with a 1.00% floor, plus 4.50%, compared to the prior rate of LIBOR, with a 1.00% floor, plus 5.00%.

Full Year 2020 Outlook

On the strength of resilient demand for the Company’s services through the first nine months of 2020, the Company is on track to deliver on its expectation for annual revenue growth in excess of 20% for the full year 2020. The Company is raising the low end of its previously provided full year Adjusted EBITDA¹ outlook, which it now expects to be in the range of $50 million to $55 million, reflecting year-over-year growth of approximately 68% at the mid-point. The Company now expects Adjusted EBITDA margin¹ to be in the range of 16.5% to 17.5% for the full year 2020, compared to a prior range of 16.0% to 17.5%. Because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, the Company’s business is better assessed based on yearly results.

Webcast and Conference Call

The Company’s senior management will host a webcast and conference call on Thursday, November 12, 2020 at 5:00 p.m. Eastern time to discuss third quarter financial results. Their prepared remarks will be followed by a question and answer session. A live webcast of the conference call will be available in the Investors section of the Montrose website at www.montrose-env.com. The conference call will also be accessible by dialing 1-877-407-9208 (Domestic) and 1-201-493-6784 (International). For those who are unable to listen to the live broadcast, an audio replay of the conference call will be available on the Montrose website for 30 days.

About Montrose

Montrose is a leading environmental services company focused on supporting commercial and government organizations as they deal with the challenges of today, and prepare for what’s coming tomorrow. With 1,700 employees across 70 locations around the world, Montrose combines deep local knowledge with an integrated approach to design, engineering, and operations, enabling the Company to respond effectively and efficiently to the unique requirements of each project. From comprehensive air measurement and laboratory services to regulatory compliance, emergency response, permitting, engineering, and remediation, Montrose delivers innovative and practical solutions that keep its clients on top of their immediate needs – and well ahead of the strategic curve. For more information, visit www.montrose-env.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of words such as “intend,” “expect”, and “may”, and other similar expressions that predict or indicate future events or that are not statements of historical matters. Forward-looking statements are based on current information available at the time the statements are made and on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Further, many of these factors are, and may continue to be, amplified by the COVID-19 pandemic. Additional factors or events that could cause actual results to differ may also emerge from time to time, and it is not possible for the Company to predict all of them. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s filings with the Securities and Exchange Commission, including its final prospectus dated July 22, 2020, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

MONTROSE ENVIRONMENTAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2020				2019				2020				2019
REVENUES		$	84,705			$	57,623			$	219,502			$	165,978
COST OF REVENUES (exclusive of depreciation and amortization shown below)			51,828				39,804				142,115				116,248
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE			24,442				12,656				64,810				35,464
FAIR VALUE CHANGES IN BUSINESS ACQUISITIONS CONTINGENT CONSIDERATION			13,404				256				17,387				(670	)
DEPRECIATION AND AMORTIZATION			9,740				7,412				27,084				20,262
LOSS FROM OPERATIONS			(14,709	)			(2,505	)			(31,894	)			(5,326	)
OTHER EXPENSE
Other expense			(9,637	)			(2,460	)			(17,534	)			(3,639	)
Interest expense—net			(3,043	)			(2,130	)			(10,896	)			(4,590	)
Total other expenses—net			(12,680	)			(4,590	)			(28,430	)			(8,229	)
LOSS BEFORE EXPENSE (BENEFIT) FROM INCOME TAXES			(27,389	)			(7,095	)			(60,324	)			(13,555	)
INCOME TAXES EXPENSE (BENEFIT)			3,348				(412	)			(1,563	)			(1,308	)
NET LOSS		$	(30,737	)		$	(6,683	)		$	(58,761	)		$	(12,247	)
EQUITY ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION			80				(20	)			27				3
COMPREHENSIVE LOSS			(30,657	)			(6,703	)			(58,734	)			(12,244	)
ACCRETION OF REDEEMABLE SERIES A-1 PREFERRED STOCK			(6,542	)			(5,030	)			(17,601	)			(14,341	)
REDEEMABLE SERIES A-1 PREFERRED STOCK DEEMED DIVIDEND			(24,341	)			—				(24,341	)			—
CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK DIVIDEND			(2,870	)			—				(2,870	)			—
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS			(64,490	)			(11,713	)			(103,573	)			(26,588	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING— BASIC AND DILUTED			21,554				8,718				13,669				8,640
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS— BASIC AND DILUTED		$	(2.99	)		$	(1.34	)		$	(7.58	)		$	(3.08	)

MONTROSE ENVIRONMENTAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands, except share data)
		September 30,				December 31,
		2020				2019
ASSETS
CURRENT ASSETS:
Cash and restricted cash		$	38,377			$	6,884
Accounts receivable—net			44,785				45,927
Contract assets			35,441				13,605
Prepaid and other current assets			8,585				6,823
Total current assets			127,188				73,239
NON-CURRENT ASSETS:
Property and equipment—net			34,559				27,036
Goodwill			274,309				127,058
Other intangible assets—net			162,201				102,549
Other assets			4,081				1,956
TOTAL ASSETS		$	602,338			$	331,838
LIABILITIES, REDEEMABLE SERIES A-1 PREFERRED STOCK, CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities		$	33,897			$	29,585
Accrued payroll and benefits			17,957				11,032
Warrant option			—				16,878
Business acquisitions contingent consideration, current			49,170				8,614
Current portion of long-term debt			5,034				7,143
Total current liabilities			106,058				73,252
NON-CURRENT LIABILITIES:
Business acquisitions contingent consideration, long-term			9,742				379
Other non-current liabilities			3,431				—
Deferred tax liabilities—net			1,936				3,530
Contingent put option			—				7,100
Conversion option			18,059				—
Long-term debt—net of deferred financing fees			171,417				145,046
Total liabilities			310,643				229,307
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SERIES A-1 PREFERRED STOCK $0.0001 PAR VALUE—
Authorized, issued and outstanding shares: 0 and 12,000 at September 30, 2020 and December 31, 2019, respectively; aggregate liquidation preference of $0 and $141,898 at September 30, 2020 and December 31, 2019, respectively			—				128,822
CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK $0.0001 PAR VALUE—
Authorized, issued and outstanding shares: 17,500 and 0 at September 30, 2020 and December 31, 2019, respectively; aggregate liquidation preference of $182.2 million and $0 at September 30, 2020 and December 31, 2019, respectively.			152,928				—
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.000004 par value; authorized shares: 190,000,000 and 25,000,000 at September 30, 2020 and December 31, 2019; issued and outstanding shares: 24,893,122 and 8,370,107 at September 30, 2020 and December 31, 2019, respectively.			—				—
Additional paid-in-capital			261,945				38,153
Accumulated deficit			(123,165	)			(64,404	)
Accumulated other comprehensive loss			(13	)			(40	)
Total stockholders’ equity (deficit)			138,767				(26,291	)
TOTAL LIABILITIES, REDEEMABLE SERIES A-1 PREFERRED STOCK, CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	602,338			$	331,838

MONTROSE ENVIRONMENTAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
			Nine Months Ended September 30,
			2020						2019
OPERATING ACTIVITIES:
Net loss			$		(58,761		)		$	(12,247	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Provision for bad debt					6,445					590
Depreciation and amortization					27,084					20,262
Stock-based compensation expense					3,439					3,577
Fair value changes in the contingent put option					(19,240		)			—
Fair value changes in the compound embedded option					27,420					—
Fair value changes in business acquisitions contingent consideration					17,387					(670	)
Fair value changes in the warrant options					9,312					4,059
Deferred income taxes					(1,563		)			(1,308	)
Cloud computing costs					(2,350		)			(247	)
Other					1,170					97
Changes in operating assets and liabilities—net of acquisitions:
Accounts receivable and contract assets					(7,736		)			(2,732	)
Prepaid expenses and other current assets					(1,349		)			(179	)
Accounts payable and other accrued liabilities					(4,829		)			(95	)
Accrued payroll and benefits					6,084					1,440
Payment of contingent consideration and other assumed purchase price obligations					(6,390		)			—
Net cash (used in) provided by operating activities					(3,877		)			12,547
INVESTING ACTIVITIES:
Purchases of property and equipment					(5,366		)			(2,765	)
Proprietary software development					(370		)			(6	)
Proceeds from net working capital adjustment related to acquisitions					2,819					—
Cash paid for acquisitions—net of cash acquired					(173,923		)			(81,370	)
Net cash used in investing activities					(176,840		)			(84,141	)
FINANCING ACTIVITIES:
Proceeds from line of credit					104,390					149,744
Payments on line of credit					(201,980		)			(69,744	)
Proceeds from term loans					175,000					—
Repayment of term loan					(49,297		)			—
Payment of contingent consideration and other purchase price obligations					(6,004		)			(1,136	)
Repayment of capital leases					(2,257		)			(1,304	)
Proceeds from issuance of common stock in connection with initial public offering, net of issuance costs					161,288					—
Payments of deferred offering costs					(2,925		)			(29	)
Debt issuance costs					(4,866		)			(417	)
Debt extinguishment costs					(351		)			—
Proceeds from issuance of common stock					171					139
Issuance of convertible and redeemable Series A-2 preferred stock and warrant					173,664					—
Redemption of the Series A-1 Preferred Stock					(131,821		)			—
Dividend payment to the Series A-2 shareholders					(2,870		)			—
Exercise of warrant options					25					—
Net cash provided by financing activities					212,167					77,253
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH					31,450					5,659
Foreign exchange impact on cash balance					43					(5	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of year					6,884					2,489
End of period			$		38,377				$	8,143
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest			$		9,368				$	2,689
Cash paid for income tax			$		171				$	878
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Series A-1 preferred stock deemed dividend—net of return from holders			$		24,341				$	—
Series A-1 preferred stock dividend paid in common shares			$		26,801				$	—
Accrued purchases of property and equipment			$		486				$	932
Property and equipment acquired under capital leases			$		1,753				$	2,757
Accretion of the redeemable series A-1 preferred stock to redeemable value			$		17,601				$	14,341
Common stock issued to acquire new businesses			$		25,000				$	4,047
Acquisitions unpaid contingent consideration			$		58,912				$	5,401
Offering costs included in accounts payable and other accrued liabilities			$		1,237				$	—

Non-GAAP Financial Information

In addition to our results under GAAP, in this release we also present certain other supplemental financial measures of financial performance that are not required by, or presented in accordance with, GAAP, including Adjusted EBITDA and Adjusted EBITDA margin. We calculate Adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense and acquisition-related costs, as set forth in greater detail in the table below. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenues for a given period.

Adjusted EBITDA and Adjusted EBITDA margin are two of the primary metrics used by management to evaluate our financial performance and compare it to that of our peers, evaluate the effectiveness of our business strategies, make budgeting and capital allocation decisions and in connection with our executive incentive compensation. These measures are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe they are helpful in highlighting trends in our operating results because they allow for more consistent comparisons of financial performance between periods by excluding gains and losses that are non-operational in nature or outside the control of management, as well as items that may differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments.

These non-GAAP measures do, however, have certain limitations and should not be considered as an alternative to net income (loss) or any other performance measure derived in accordance with GAAP. Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items for which we may make adjustments. In addition, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly titled measures used by other companies in our industry or across different industries, and other companies may not present these or similar measures. Management compensates for these limitations by using these measures as supplemental financial metrics and in conjunction with our results prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single measure and to view Adjusted EBITDA and Adjusted EBITDA margin in conjunction with the related GAAP measures.

Additionally, we have provided estimates regarding Adjusted EBITDA and Adjusted EBITDA margin for 2020. These projections account for estimates of revenue, operating margins and corporate and other costs. However, we cannot reconcile our projection of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, without unreasonable efforts because of the unpredictable or unknown nature of certain significant items excluded from Adjusted EBITDA and the resulting difficulty in quantifying the amounts thereof that are necessary to estimate net income (loss). Specifically, we are unable to estimate for the future impact of certain items, including income tax (expense) benefit, stock-based compensation expense, fair value changes and the accounting for the issuance of the Series A-2 preferred stock. We expect the variability of these items could have a significant impact on our reported GAAP financial results.

Montrose Environmental Group, Inc. Reconciliation of Net Loss to Adjusted EBITDA (in thousands) (unaudited)
	For the Three Months							For the Nine Months
	Ended September 30							Ended September 30
(in thousands)	2020			2019				2020			2019
Net loss	($	30,737	)	($	6,683	)		($	58,761	)	($	12,247	)
Interest expense		3,043			2,130				10,896			4,590
Income tax benefit		3,348			(412	)			(1,563	)		(1,308	)
Depreciation and amortization		9,740			7,412				27,084			20,262
EBITDA	($	14,606	)	$	2,447			($	22,344	)	$	11,297
Stock-based compensation (1)		1,149			1,055				3,439			3,577
Start-up losses and investment in new services (2)		602			438				1,283			608
Acquisition costs (3)		6			1,278				3,767			2,350
Fair value changes in warrant, contingent put and compound embedded options (4)		9,710			2,510				17,492			4,059
Fair value changes in business acquisitions contingent consideration (5)		13,404			256				17,387			(670	)
Discontinued Service Lines (6)		30			37				7,526			(632	)
IPO Preparation Costs (7)		6,378			20				6,908			105
Other adjustments (8)		33			19				699			27
Adjusted EBITDA	$	16,706		$	8,060			$	36,157		$	20,721

(1)		Represents non-cash stock-based compensation expenses related to option awards issued to employees and restricted stock grants issued to directors.
(2)		Represents start-up losses related to losses incurred on (i) the expansion of lab testing methods and lab capacity, including into new geographies, (ii) expansion of our Canadian testing capacity in advance of new regulations, (iii) expansion into Europe in advance of projects driven by new regulations and (iv) expansion of our Remediation business line into new geographies.
(3)		Acquisition costs include financial and tax diligence, consulting, legal, valuation, accounting and travel costs and acquisition-related incentives related to our acquisition activity.
(4)		Amount relates to changes in various financial options, which include the fair value of the contingent put option attached to the Series A-1 preferred stock, the warrant options attached to the Series A-1 and Series A-2 preferred stock, and changes in fair value of the Series A-2 preferred stock compound embedded derivative.
(5)		Reflects the difference between the expected settlement value of acquisition related earn-out payments at the time of the closing of acquisitions and the expected (or actual) value of earn-outs at the end of the relevant period.
(6)		Represents (earnings) loss from the Discontinued Service Lines. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors that Affect Our Business and Our Results” in our Quarterly Report on Form 10-Q filed with the SEC on November 12, 2020.
(7)		Represents expenses incurred by us to prepare for the Company’s initial public offering, as well as costs from IPO-related bonuses.
(8)		Other adjustments which include a purchase accounting fair value adjustment to the carrying value of deferred revenue related to the ECT2 acquisition as of the date of acquisition, non-operational charges incurred as a result of lease abandonments, and non-capitalizable expenses associated with the issuance of the Series A-2 Preferred Stock.

 

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