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ENDO REPORTS THIRD-QUARTER 2022 FINANCIAL RESULTS

November 9, 2022
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DUBLIN, Nov. 9, 2022 /PRNewswire/ -- Endo International plc (OTC: ENDPQ) today reported financial results for the third-quarter ended September 30, 2022.

THIRD-QUARTER FINANCIAL PERFORMANCE

(in thousands, except per share amounts)

 

Three Months Ended September 30,

     

Nine Months Ended September 30,

   
 

2022

 

2021

 

Change

 

2022

 

2021

 

Change

Total Revenues, Net

$         541,690

 

$         772,028

 

(30) %

 

$     1,763,063

 

$      2,203,777

 

(20) %

Reported Loss from Continuing
Operations

$        (718,272)

 

$          (49,289)

 

NM

 

$    (2,664,455)

 

$          (12,414)

 

NM

Reported Diluted Weighted Average
Shares

235,160

 

233,578

 

1 %

 

234,719

 

232,487

 

1 %

Reported Diluted Net Loss per Share
from Continuing Operations

$              (3.05)

 

$              (0.21)

 

NM

 

$            (11.35)

 

$              (0.05)

 

NM

Reported Net Loss

$        (722,169)

 

$          (77,207)

 

NM

 

$     (2,679,570)

 

$          (51,183)

 

NM

Adjusted Income from Continuing
Operations (2)(3)

$          111,858

 

$         189,277

 

(41) %

 

$         274,329

 

$         511,315

 

(46) %

Adjusted Diluted Weighted Average
Shares (1)(2)

236,183

 

235,527

 

— %

 

236,372

 

236,538

 

— %

Adjusted Diluted Net Income per
Share from Continuing Operations
(2)(3)

$                0.47

 

$               0.80

 

(41) %

 

$               1.16

 

$               2.16

 

(46) %

Adjusted EBITDA (2)(3)

$          210,816

 

$         386,883

 

(46) %

 

$         681,948

 

$      1,089,298

 

(37) %

__________

(1)

Reported Diluted Net Loss per Share from Continuing Operations is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

(2)

The information presented in the table above includes non-GAAP financial measures such as Adjusted Income from Continuing Operations, Adjusted Diluted Weighted Average Shares, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA. Refer to the "Supplemental Financial Information" section below for reconciliations of certain non-GAAP financial measures to the most directly comparable GAAP financial measures.

(3)

Effective January 1, 2022, these non-GAAP financial measures now include acquired in-process research and development charges which were previously excluded under Endo's legacy non-GAAP policy. This change has been applied retrospectively to all periods presented. Refer to note (15) in the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional discussion.

COMPANY UPDATE

Endo and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code on August 16, 2022, after entering into a restructuring support agreement with holders of more than a majority of Endo's first lien debt on a sale transaction for substantially all of the Company's assets that would reduce outstanding indebtedness, address remaining opioid and other litigation-related claims, and best position Endo for the future.

For additional information about Endo's Chapter 11 proceedings, please review Endo's most recent Quarterly Report on Form 10-Q and other filings with the U.S. Securities and Exchange Commission. Information can also be found on the website of Endo's noticing and claims agent at restructuring.ra.kroll.com/endo.

CONSOLIDATED FINANCIAL RESULTS

Total revenues were $542 million in third-quarter 2022, a decrease of 30% compared to $772 million in third-quarter 2021. This decrease was primarily attributable to decreased revenues from the Sterile Injectables and Branded Pharmaceuticals segments, partially offset by increased revenues from the Generic Pharmaceuticals segment.

Reported loss from continuing operations in third-quarter 2022 was $718 million compared to $49 million in third-quarter 2021. Reported diluted net loss per share from continuing operations in third-quarter 2022 was $3.05 compared to $0.21 in third-quarter 2021. These results were primarily due to higher litigation-related charges in third-quarter 2022 adjusting the Company's estimate of opioid-related liabilities to be consistent with the voluntary trust proposed to be funded by the purchaser, higher asset impairment charges, expenses related to the Chapter 11 reorganization process and decreased revenues, which were partially offset by lower operating expenses and lower interest expense as a result of the Chapter 11 filing. 

Adjusted income from continuing operations in third-quarter 2022 was $112 million compared to $189 million in third-quarter 2021. Adjusted diluted net income per share from continuing operations in third-quarter 2022 was $0.47 compared to $0.80 in third-quarter 2021. These results were primarily driven by decreased revenues, which were partially offset by lower operating expenses.

BRANDED PHARMACEUTICALS SEGMENT

Third-quarter 2022 Branded Pharmaceuticals segment revenues were $204 million, a decrease of 12% compared to $231 million during third-quarter 2021.

Specialty Products revenues decreased 10% to $146 million in third-quarter 2022 compared to $162 million in third-quarter 2021, with sales of XIAFLEX® decreasing 1% to $104 million compared to $106 million in third-quarter 2021. XIAFLEX® third-quarter 2022 revenues were unfavorably impacted by a disruption experienced by our third-party specialty pharmacy provider and challenging market conditions for specialty product office-based elective procedures. Other Specialty Products revenues decreased 58% to $11 million in third-quarter 2022 compared to $26 million in third-quarter 2021, driven primarily by NASCOBAL® and QWO®. Established Products revenues decreased 17% to $57 million in third-quarter 2022 compared to $69 million in third-quarter 2021, driven primarily by ongoing generic competition.

STERILE INJECTABLES SEGMENT

Third-quarter 2022 Sterile Injectables segment revenues were $119 million, a decrease of 65% compared to $344 million during third-quarter 2021. This was primarily attributable to decreased VASOSTRICT® revenues due to lower price and market share resulting from generic competition and lower overall market volumes as COVID-19-related hospitalizations decline.

GENERIC PHARMACEUTICALS SEGMENT

Third-quarter 2022 Generic Pharmaceuticals segment revenues were $201 million, an increase of 16% compared to $174 million during third-quarter 2021. This increase was primarily attributable to revenues from varenicline tablets, the only FDA-approved generic version of Chantix®, which launched during third-quarter 2021, partially offset by competitive pressure on certain other generic products.

INTERNATIONAL PHARMACEUTICALS SEGMENT

Third-quarter 2022 International Pharmaceuticals segment revenues were $18 million, a decrease of 22% compared to $23 million during third-quarter 2021. This decrease was primarily attributable to competitive pressures and the expiration of a product agreement.

CASH AND CASH FLOW

As of September 30, 2022, the Company had approximately $1.1 billion in unrestricted cash. Third-quarter 2022 net cash provided by operating activities was approximately $92 million compared to approximately $62 million provided by operating activities during third-quarter 2021. This increase was primarily attributable to a decrease in net working capital as well as reductions in cash interest and litigation related payments, which were partially offset by a decrease in Adjusted EBITDA.

FINANCIAL GUIDANCE

Due to uncertainties in certain key assumptions including, among others, the timing and amounts of costs or other impacts related to the financial restructuring process, the actions of suppliers and other counterparties as a result of the financial restructuring process, the disruption related to XIAFLEX®'s third-party specialty pharmacy provider, market conditions for specialty product office-based elective procedures and the timing and impact of varenicline competition, the Company is not providing guidance at this time. The Company continues to evaluate the impact of these and other uncertainties on its future results of operations. Those uncertainties are further discussed below under the heading "Cautionary Note Regarding Forward-Looking Statements."

Chantix® is a registered trademark of Pfizer Inc.

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total revenues, net for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

 

Three Months Ended September 30,

 

Percent
Growth

 

Nine Months Ended September 30,

 

Percent
Growth

 

2022

 

2021

   

2022

 

2021

 

Branded Pharmaceuticals:

                     

Specialty Products:

                     

XIAFLEX®

$         104,014

 

$         105,509

 

(1) %

 

$         324,376

 

$         312,266

 

4 %

SUPPRELIN® LA

31,283

 

30,069

 

4 %

 

84,852

 

85,665

 

(1) %

Other Specialty (1)

11,033

 

26,339

 

(58) %

 

50,023

 

74,407

 

(33) %

Total Specialty Products

$         146,330

 

$         161,917

 

(10) %

 

$         459,251

 

$         472,338

 

(3) %

Established Products:

                     

PERCOCET®

$           25,052

 

$           26,914

 

(7) %

 

$           77,483

 

$           78,695

 

(2) %

TESTOPEL®

9,430

 

11,686

 

(19) %

 

28,331

 

32,314

 

(12) %

Other Established (2)

22,689

 

30,460

 

(26) %

 

62,249

 

82,305

 

(24) %

Total Established Products

$           57,171

 

$           69,060

 

(17) %

 

$         168,063

 

$         193,314

 

(13) %

Total Branded Pharmaceuticals (3)

$         203,501

 

$         230,977

 

(12) %

 

$         627,314

 

$         665,652

 

(6) %

Sterile Injectables:

                     

VASOSTRICT®

$           33,697

 

$         255,697

 

(87) %

 

$         225,217

 

$         676,764

 

(67) %

ADRENALIN®

24,917

 

28,722

 

(13) %

 

85,514

 

88,136

 

(3) %

Other Sterile Injectables (4)

60,079

 

59,234

 

1 %

 

171,161

 

182,098

 

(6) %

Total Sterile Injectables (3)

$         118,693

 

$         343,653

 

(65) %

 

$         481,892

 

$         946,998

 

(49) %

Total Generic Pharmaceuticals (5)

$         201,435

 

$         174,306

 

16 %

 

$         590,756

 

$         522,451

 

13 %

Total International Pharmaceuticals
(6)

$           18,061

 

$           23,092

 

(22) %

 

$           63,101

 

$           68,676

 

(8) %

Total revenues, net

$         541,690

 

$         772,028

 

(30) %

 

$      1,763,063

 

$      2,203,777

 

(20) %

__________

(1)

Products included within Other Specialty include AVEED®, NASCOBAL® Nasal Spray and QWO®.

(2)

Products included within Other Established include, but are not limited to, EDEX®.

(3)

Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2022, and/or any product having revenues in excess of $25 million during any completed quarterly period in 2022 or 2021.

(4)

Products included within Other Sterile Injectables include ertapenem for injection, APLISOL® and others.

(5)

The Generic Pharmaceuticals segment is comprised of a portfolio of products that are generic versions of branded products, are distributed primarily through the same wholesalers, generally have no intellectual property protection and are sold within the U.S. During the three and nine months ended September 30, 2022, varenicline tablets (Endo's generic version of Pfizer Inc.'s Chantix®), which launched in September 2021, made up 15% and 13%, respectively, of consolidated total revenues. During the three months ended September 30, 2022, lubiprostone capsules (the authorized generic of Mallinckrodt plc's Amitiza®), which launched in January 2021, made up 5% of consolidated total revenues. No other individual product within this segment has exceeded 5% of consolidated total revenues for the periods presented.

(6)

The International Pharmaceuticals segment, which accounted for less than 5% of consolidated total revenues for each of the periods presented, includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through Endo's operating company Paladin Labs Inc.

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2022

 

2021

 

2022

 

2021

TOTAL REVENUES, NET

$         541,690

 

$         772,028

 

$      1,763,063

 

$      2,203,777

COSTS AND EXPENSES:

             

Cost of revenues

261,232

 

286,068

 

798,233

 

909,841

Selling, general and administrative

192,221

 

246,864

 

600,212

 

611,657

Research and development

31,885

 

25,616

 

97,803

 

85,024

Acquired in-process research and development

800

 

 

68,700

 

5,000

Litigation-related and other contingencies, net

419,376

 

83,495

 

444,738

 

119,327

Asset impairment charges

150,200

 

42,155

 

1,951,216

 

50,393

Acquisition-related and integration items, net

(1,399)

 

(1,432)

 

(951)

 

(6,357)

Interest expense, net

74,753

 

142,958

 

349,486

 

418,852

Loss on extinguishment of debt

 

 

 

13,753

Reorganization items, net

124,212

 

 

124,212

 

Other income, net

(3,998)

 

(5,955)

 

(22,147)

 

(4,671)

(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX

$       (707,592)

 

$          (47,741)

 

$    (2,648,439)

 

$                 958

INCOME TAX EXPENSE

10,680

 

1,548

 

16,016

 

13,372

LOSS FROM CONTINUING OPERATIONS

$       (718,272)

 

$          (49,289)

 

$    (2,664,455)

 

$          (12,414)

DISCONTINUED OPERATIONS, NET OF TAX

(3,897)

 

(27,918)

 

(15,115)

 

(38,769)

NET LOSS

$       (722,169)

 

$          (77,207)

 

$    (2,679,570)

 

$          (51,183)

NET LOSS PER SHARE—BASIC:

             

Continuing operations

$              (3.05)

 

$              (0.21)

 

$            (11.35)

 

$              (0.05)

Discontinued operations

(0.02)

 

(0.12)

 

(0.07)

 

(0.17)

Basic

$              (3.07)

 

$              (0.33)

 

$            (11.42)

 

$              (0.22)

NET LOSS PER SHARE—DILUTED:

             

Continuing operations

$              (3.05)

 

$              (0.21)

 

$            (11.35)

 

$              (0.05)

Discontinued operations

(0.02)

 

(0.12)

 

(0.07)

 

(0.17)

Diluted

$              (3.07)

 

$              (0.33)

 

$            (11.42)

 

$              (0.22)

WEIGHTED AVERAGE SHARES:

             

Basic

235,160

 

233,578

 

234,719

 

232,487

Diluted

235,160

 

233,578

 

234,719

 

232,487

The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2022 and December 31, 2021 (in thousands):

 

September 30,
2022

 

December 31,
2021

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

$      1,053,892

 

$      1,507,196

Restricted cash and cash equivalents

145,486

 

124,114

Accounts receivable

423,460

 

592,019

Inventories, net

288,914

 

283,552

Other current assets

142,410

 

207,705

Total current assets

$      2,054,162

 

$      2,714,586

TOTAL NON-CURRENT ASSETS

3,952,295

 

6,052,829

TOTAL ASSETS

$      6,006,457

 

$      8,767,415

LIABILITIES AND SHAREHOLDERS' DEFICIT

     

CURRENT LIABILITIES:

     

Accounts payable and accrued expenses, including legal settlement accruals

$         538,730

 

$      1,417,892

Other current liabilities

4,323

 

212,070

Total current liabilities

$         543,053

 

$      1,629,962

LONG-TERM DEBT, LESS CURRENT PORTION, NET

 

8,048,980

OTHER LIABILITIES

43,195

 

332,459

LIABILITIES SUBJECT TO COMPROMISE

9,345,250

 

SHAREHOLDERS' DEFICIT

(3,925,041)

 

(1,243,986)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$      6,006,457

 

$      8,767,415

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2022 and 2021 (in thousands):

 

Nine Months Ended September 30,

 

2022

 

2021

OPERATING ACTIVITIES:

     

Net loss

$    (2,679,570)

 

$          (51,183)

Adjustments to reconcile Net loss to Net cash provided by operating activities:

     

Depreciation and amortization

302,338

 

350,455

Asset impairment charges

1,951,216

 

50,393

Non-cash reorganization items, net

89,197

 

Other, including cash payments to claimants from Qualified Settlement Funds

496,430

 

111,249

Net cash provided by operating activities

$         159,611

 

$         460,914

INVESTING ACTIVITIES:

     

Capital expenditures, excluding capitalized interest

$          (77,865)

 

$          (61,496)

Acquisitions, including in-process research and development, net of cash and restricted cash acquired

(89,520)

 

(5,000)

Proceeds from sale of business and other assets, net

22,378

 

1,357

Other

10,461

 

(5,207)

Net cash used in investing activities

$        (134,546)

 

$          (70,346)

FINANCING ACTIVITIES:

     

Payments on borrowings, including certain adequate protection payments, net (a)

$        (363,486)

 

$          (49,541)

Other

(3,837)

 

(25,995)

Net cash used in financing activities

$       (367,323)

 

$          (75,536)

Effect of foreign exchange rate

(4,674)

 

238

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH
AND RESTRICTED CASH EQUIVALENTS

$       (346,932)

 

$         315,270

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, BEGINNING OF PERIOD

1,631,310

 

1,385,000

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, END OF PERIOD

 

$     1,284,378

 

$      1,700,270

__________

(a)

Beginning during the third quarter of 2022, Endo became obligated to make certain adequate protection payments as a result of the Chapter 11 proceedings, which are currently being accounted for as a reduction of the carrying amount of the related debt instruments and presented as financing cash outflows. Some or all of the adequate protection payments may later be recharacterized as interest expense and/or as operating cash outflows depending upon certain developments in the Chapter 11 proceedings, which could result in increases in interest expense and/or decreases in operating cash flows in future periods that may be material. Please refer to Endo's most recent Quarterly Report on Form 10-Q for further discussion.

SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of the Company's non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

As previously communicated, in response to views expressed by the U.S. Securities and Exchange Commission, the Company has, effective January 1, 2022, revised its definition of its adjusted financial measures to no longer exclude Acquired in-process research and development charges (representing the research and development costs it had previously labeled as "Upfront and milestone payments to partners"). As a result of this change, the Company's adjusted financial measures now reflect the impact of those transactions. The inclusion of the impact of these transactions, which may occur from time to time, could result in significant, but temporary, fluctuations in both Endo's GAAP and Non-GAAP financial measures in the period(s) in which they are incurred. These charges also are not indicative of the underlying performance of Endo's operations during the period. This change was applied retrospectively to all periods presented herein. Refer to footnote (15) in the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional discussion.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2022 and 2021 (in thousands):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2022

 

2021

 

2022

 

2021

Net loss (GAAP)

$        (722,169)

 

$          (77,207)

 

$    (2,679,570)

 

$          (51,183)

Income tax expense

10,680

 

1,548

 

16,016

 

13,372

Interest expense, net

74,753

 

142,958

 

349,486

 

418,852

Depreciation and amortization (1)

96,114

 

106,402

 

298,514

 

328,126

EBITDA (non-GAAP)

$       (540,622)

 

$         173,701

 

$    (2,015,554)

 

$         709,167

Amounts related to continuity and separation benefits,
cost reductions and strategic review initiatives (2)

44,029

 

19,829

 

139,025

 

58,632

Certain litigation-related and other contingencies, net (3)

419,376

 

83,495

 

444,738

 

119,327

Certain legal costs (4)

8,052

 

38,842

 

31,322

 

82,961

Asset impairment charges (5)

150,200

 

42,155

 

1,951,216

 

50,393

Acquisition-related and integration costs (6)

 

3

 

 

414

Fair value of contingent consideration (7)

(1,399)

 

(1,435)

 

(951)

 

(6,771)

Loss on extinguishment of debt (8)

 

 

 

13,753

Share-based compensation (1)

5,371

 

7,800

 

13,021

 

22,237

Other income, net (9)

(3,998)

 

(5,955)

 

(22,147)

 

(4,671)

Reorganization items, net (10)

124,212

 

 

124,212

 

Other (11)

1,698

 

530

 

1,951

 

5,087

Discontinued operations, net of tax (12)

3,897

 

27,918

 

15,115

 

38,769

Adjusted EBITDA (non-GAAP) (15)

$         210,816

 

$         386,883

 

$         681,948

 

$     1,089,298

Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of the Company's Loss from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and nine months ended September 30, 2022 and 2021 (in thousands):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2022

 

2021

 

2022

 

2021

Loss from continuing operations (GAAP)

$       (718,272)

 

$          (49,289)

 

$    (2,664,455)

 

$          (12,414)

Non-GAAP adjustments:

             

Amortization of intangible assets (13)

84,042

 

91,901

 

261,844

 

281,101

Amounts related to continuity and separation benefits,
cost reductions and strategic review initiatives (2)

44,029

 

19,829

 

139,025

 

58,632

Certain litigation-related and other contingencies, net
(3)

419,376

 

83,495

 

444,738

 

119,327

Certain legal costs (4)

8,052

 

38,842

 

31,322

 

82,961

Asset impairment charges (5)

150,200

 

42,155

 

1,951,216

 

50,393

Acquisition-related and integration costs (6)

 

3

 

 

414

Fair value of contingent consideration (7)

(1,399)

 

(1,435)

 

(951)

 

(6,771)

Loss on extinguishment of debt (8)

 

 

 

13,753

Reorganization items, net (10)

124,212

 

 

124,212

 

Other (11)

(5,111)

 

(6,401)

 

(22,958)

 

661

Tax adjustments (14)

6,729

 

(29,823)

 

10,336

 

(76,742)

Adjusted income from continuing operations (non-GAAP)
(15)

$         111,858

 

$         189,277

 

$         274,329

 

$         511,315

Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):

Three Months Ended September 30, 2022

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin %

 

Total
operating
expenses

 

Operating
expense
to
revenue
%

 

Operating
(loss)
income
from
continuing
operations

 

Operating
margin
%

 

Other non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted net
(loss)
income per
share from
continuing
operations
(16)

Reported (GAAP)

$  541,690

 

$  261,232

 

$  280,458

 

51.8 %

 

$  793,083

 

146.4 %

 

$  (512,625)

 

(94.6) %

 

$  194,967

 

$  (707,592)

 

$    10,680

 

(1.5) %

 

$  (718,272)

 

$       (3,897)

 

$  (722,169)

 

$      (3.05)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (13)

 

(84,042)

 

84,042

     

     

84,042

     

 

84,042

 

     

84,042

 

 

84,042

   

Amounts related to
continuity and separation
benefits, cost reductions
and strategic review
initiatives (2)

 

(2,809)

 

2,809

     

(41,220)

     

44,029

     

 

44,029

 

     

44,029

 

 

44,029

   

Certain litigation-related
and other contingencies,
net (3)

 

 

     

(419,376)

     

419,376

     

 

419,376

 

     

419,376

 

 

419,376

   

Certain legal costs (4)

 

 

     

(8,052)

     

8,052

     

 

8,052

 

     

8,052

 

 

8,052

   

Asset impairment
charges (5)

 

 

     

(150,200)

     

150,200

     

 

150,200

 

     

150,200

 

 

150,200

   

Fair value of contingent
consideration (7)

 

 

     

1,399

     

(1,399)

     

 

(1,399)

 

     

(1,399)

 

 

(1,399)

   

Reorganization items, net
(10)

 

 

     

     

     

(124,212)

 

124,212

 

     

124,212

 

 

124,212

   

Other (11)

 

(125)

 

125

     

(1,570)

     

1,695

     

6,806

 

(5,111)

 

     

(5,111)

 

 

(5,111)

   

Tax adjustments (14)

 

 

     

     

     

 

 

(6,729)

     

6,729

 

 

6,729

   

Discontinued operations,
net of tax (12)

 

 

     

     

     

 

 

     

 

3,897

 

3,897

   

After considering items
(non-GAAP) (15)

$  541,690

 

$  174,256

 

$  367,434

 

67.8 %

 

$  174,064

 

32.1 %

 

$    193,370

 

35.7 %

 

$    77,561

 

$    115,809

 

$      3,951

 

3.4 %

 

$    111,858

 

$             —

 

$    111,858

 

$       0.47

 

Three Months Ended September 30, 2021

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin %

 

Total
operating
expenses

 

Operating
expense
to
revenue
%

 

Operating
income
from
continuing
operations

 

Operating
margin
%

 

Other non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted net
(loss)
income per
share from
continuing
operations
(16)

Reported (GAAP)

$  772,028

 

$  286,068

 

$  485,960

 

62.9 %

 

$  396,698

 

51.4 %

 

$      89,262

 

11.6 %

 

$  137,003

 

$    (47,741)

 

$      1,548

 

(3.2) %

 

$    (49,289)

 

$     (27,918)

 

$    (77,207)

 

$      (0.21)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (13)

 

(91,901)

 

91,901

     

     

91,901

     

 

91,901

 

     

91,901

 

 

91,901

   

Amounts related to
continuity and separation
benefits, cost reductions
and strategic review
initiatives (2)

 

10,259

 

(10,259)

     

(30,088)

     

19,829

     

 

19,829

 

     

19,829

 

 

19,829

   

Certain litigation-related
and other contingencies,
net (3)

 

 

     

(83,495)

     

83,495

     

 

83,495

 

     

83,495

 

 

83,495

   

Certain legal costs (4)

 

 

     

(38,842)

     

38,842

     

 

38,842

 

     

38,842

 

 

38,842

   

Asset impairment
charges (5)

 

 

     

(42,155)

     

42,155

     

 

42,155

 

     

42,155

 

 

42,155

   

Acquisition-related and
integration costs (6)

 

 

     

(3)

     

3

     

 

3

 

     

3

 

 

3

   

Fair value of contingent
consideration (7)

 

 

     

1,435

     

(1,435)

     

 

(1,435)

 

     

(1,435)

 

 

(1,435)

   

Other (11)

 

(525)

 

525

     

     

525

     

6,926

 

(6,401)

 

     

(6,401)

 

 

(6,401)

   

Tax adjustments (14)

 

 

     

     

     

 

 

29,823

     

(29,823)

 

 

(29,823)

   

Discontinued operations,
net of tax (12)

 

 

     

     

     

 

 

     

 

27,918

 

27,918

   

After considering items
(non-GAAP) (15)

$  772,028

 

$  203,901

 

$  568,127

 

73.6 %

 

$  203,550

 

26.4 %

 

$    364,577

 

47.2 %

 

$  143,929

 

$    220,648

 

$    31,371

 

14.2 %

 

$    189,277

 

$             —

 

$    189,277

 

$       0.80

 

 

Nine Months Ended September 30, 2022

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin %

 

Total
operating
expenses

 

Operating
expense
to
revenue
%

 

Operating
(loss)
income
from
continuing
operations

 

Operating
margin
%

 

Other non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted net
(loss)
income per
share from
continuing
operations
(16)

Reported (GAAP)

$  1,763,063

 

$  798,233

 

$  964,830

 

54.7 %

 

$  3,161,718

 

179.3 %

 

$  (2,196,888)

 

(124.6) %

 

$  451,551

 

$  (2,648,439)

 

$    16,016

 

(0.6) %

 

$  (2,664,455)

 

$     (15,115)

 

$  (2,679,570)

 

$    (11.35)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (13)

 

(261,844)

 

261,844

     

     

261,844

     

 

261,844

 

     

261,844

 

 

261,844

   

Amounts related to
continuity and separation
benefits, cost reductions
and strategic review
initiatives (2)

 

(23,653)

 

23,653

     

(115,372)

     

139,025

     

 

139,025

 

     

139,025

 

 

139,025

   

Certain litigation-related
and other contingencies,
net (3)

 

 

     

(444,738)

     

444,738

     

 

444,738

 

     

444,738

 

 

444,738

   

Certain legal costs (4)

 

 

     

(31,322)

     

31,322

     

 

31,322

 

     

31,322

 

 

31,322

   

Asset impairment charges (5)

 

 

     

(1,951,216)

     

1,951,216

     

 

1,951,216

 

     

1,951,216

 

 

1,951,216

   

Fair value of contingent
consideration (7)

 

 

     

951

     

(951)

     

 

(951)

 

     

(951)

 

 

(951)

   

Reorganization items, net
(10)

 

 

     

     

     

(124,212)

 

124,212

 

     

124,212

 

 

124,212

   

Other (11)

 

(375)

 

375

     

(1,570)

     

1,945

     

24,903

 

(22,958)

 

     

(22,958)

 

 

(22,958)

   

Tax adjustments (14)

 

 

     

     

     

 

 

(10,336)

     

10,336

 

 

10,336

   

Discontinued operations,
net of tax (12)

 

 

     

     

     

 

 

     

 

15,115

 

15,115

   

After considering items
(non-GAAP) (15)

$  1,763,063

 

$  512,361

 

$  1,250,702

 

70.9 %

 

$  618,451

 

35.1 %

 

$    632,251

 

35.9 %

 

$  352,242

 

$    280,009

 

$      5,680

 

2.0 %

 

$    274,329

 

$             —

 

$    274,329

 

$       1.16

 

Nine Months Ended September 30, 2021

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin %

 

Total
operating
expenses

 

Operating
expense
to revenue
%

 

Operating
income from
continuing
operations

 

Operating
margin %

 

Other non-
operating
expense,
net

 

Income from
continuing
operations
before
income tax

 

Income tax
expense

 

Effective
tax rate

 

(Loss)
income from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted net
(loss)
income per
share from
continuing
operations
(16)

Reported (GAAP)

$  2,203,777

 

$  909,841

 

$  1,293,936

 

58.7 %

 

$  865,044

 

39.3 %

 

$    428,892

 

19.5 %

 

$  427,934

 

$          958

 

$    13,372

 

1,395.8 %

 

$    (12,414)

 

$     (38,769)

 

$    (51,183)

 

$      (0.05)

Items impacting
comparability:

                                                             

Amortization of 
intangible assets (13)

 

(281,101)

 

281,101

     

     

281,101

     

 

281,101

 

     

281,101

 

 

281,101

   

Amounts related to
continuity and separation
benefits, cost reductions
and strategic review
initiatives (2)

 

(10,007)

 

10,007

     

(48,625)

     

58,632

     

 

58,632

 

     

58,632

 

 

58,632

   

Certain litigation-related
and other contingencies,
net (3)

 

 

     

(119,327)

     

119,327

     

 

119,327

 

     

119,327

 

 

119,327

   

Certain legal costs (4)

 

 

     

(82,961)

     

82,961

     

 

82,961

 

     

82,961

 

 

82,961

   

Asset impairment
charges (5)

 

 

     

(50,393)

     

50,393

     

 

50,393

 

     

50,393

 

 

50,393

   

Acquisition-related and
integration costs (6)

 

 

     

(414)

     

414

     

 

414

 

     

414

 

 

414

   

Fair value of contingent
consideration (7)

 

 

     

6,771

     

(6,771)

     

 

(6,771)

 

     

(6,771)

 

 

(6,771)

   

Loss on extinguishment
of debt (8)

 

 

     

     

     

(13,753)

 

13,753

 

     

13,753

 

 

13,753

   

Other (11)

 

(1,176)

 

1,176

     

(3,909)

     

5,085

     

4,424

 

661

 

     

661

 

 

661

   

Tax adjustments (14)

 

 

     

     

     

 

 

76,742

     

(76,742)

 

 

(76,742)

   

Discontinued operations,
net of tax (12)

 

 

     

     

     

 

 

     

 

38,769

 

38,769

   

After considering items
(non-GAAP) (15)

$  2,203,777

 

$  617,557

 

$  1,586,220

 

72.0 %

 

$  566,186

 

25.7 %

 

$ 1,020,034

 

46.3 %

 

$  418,605

 

$    601,429

 

$    90,114

 

15.0 %

 

$    511,315

 

$             —

 

$    511,315

 

$       2.16

Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the non-GAAP financial measures for the three and nine months ended September 30, 2022 and 2021 are as follows:

(1)

Depreciation and amortization and Share-based compensation amounts per the Adjusted EBITDA reconciliations do not include amounts reflected in other lines of the reconciliations, including Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives.

   

(2)

Adjustments for amounts related to continuity and separation benefits, cost reductions and strategic review initiatives included the following (in thousands):

 

 

Three Months Ended September 30,

 

2022

 

2021

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Continuity and separation benefits

$               2,401

 

$             11,662

 

$           (16,106)

 

$               4,823

Accelerated depreciation

 

 

5,128

 

1,223

Other, including strategic review initiatives

408

 

29,558

 

719

 

24,042

Total

$               2,809

 

$             41,220

 

$           (10,259)

 

$             30,088

 

 

Nine Months Ended September 30,

 

2022

 

2021

 

Cost of revenues