– Net income from continuing operations of $55
million or $0.29 basic earnings per share for the quarter –
– Completed the acquisition of AAG, further
enhancing our market position in Reverse Mortgage Lending –
– Strengthened the balance sheet including the
issuance of new equity –
– Realigned reporting segments, bringing focus
and clarity to strategic vision –
Finance of America Companies Inc., (“Finance of America” or
the “Company”) (NYSE: FOA), a modern retirement
solutions platform, reported financial results for the quarter
ended March 31, 2023.
First Quarter 2023 Highlights
- For the first quarter 2023, the Company recognized net income
from continuing operations of $55 million or $0.29 basic earnings
per share.
- Completed the American Advisors Group (“AAG”) asset acquisition
and concurrent $30 million equity raise.
- Completed the successful wind down of Mortgage Originations
segment and sale of Commercial Originations platform.
- Entered into definitive agreements for the sale of the Title
Insurance business, expected to close in Q3 2023, and a majority
share of the remainder of the Lender Services platform, expected to
close in Q2 2023.
- Announced the realignment of financial reporting segments
focused on the core strategy of using home equity to offer
innovative solutions that fill gaps in the retirement market.
Graham A. Fleming, Chief Executive Officer commented, “I am
honored to lead Finance of America as we help even more Americans
embrace a modern retirement and understand the value and benefits
of home equity. We have worked diligently for months to streamline
our organization, improve profitability and strengthen the balance
sheet. This quarter’s results are a significant step in that
direction.”
First Quarter Financial Summary of Continuing
Operations
($ amounts in millions, except margin and
per share data)
Variance (%)
Variance (%)
Q1’23
Q4’22
Q1'23 vs Q4'22
Q1’22
Q1'23 vs Q1'22
Funded volume
$
357
$
701
(49)%
$
1,523
(77)%
Total revenue
141
52
171%
46
207%
Total expenses and other, net
83
93
(11) %
104
(20)%
Pre-tax income (loss) from continuing
operations
58
(47
)
223%
(58
)
200%
Net income (loss) from continuing
operations
55
(48
)
215%
(51
)
208%
Adjusted net income (loss)(1)
(15
)
(5
)
(200)%
41
(137)%
Adjusted EBITDA(1)
(12
)
1
(1300)%
64
(119)%
Basic income (loss) per share
$
0.29
$
(0.22
)
232%
$
(0.16
)
281%
Diluted income (loss) per share(2)
$
0.22
$
(0.22
)
200%
$
(0.23
)
196%
Adjusted diluted earnings (loss) per
share(3)
$
(0.08
)
$
(0.03
)
(167)%
$
0.22
(13%
(1) See Reconciliation to GAAP section for a reconciliation of
Adjusted net income (loss) and Adjusted EBITDA to Net income
(loss). (2) Calculated on an if-converted basis except when
anti-dilutive. See Reconciliation to GAAP section for more
detail.
Balance Sheet Highlights
($ amounts in millions)
March 31,
December 31,
Variance (%)
2023
2022
Q1 2023 vs. Q4 2022
Cash and cash equivalents
$
69
$
61
13%
Securitized loans held for investment
(HMBS & nonrecourse)
24,998
18,569
35%
Total assets
26,826
20,873
29%
Total liabilities
26,336
20,468
29%
Total equity
490
405
21%
Total tangible equity(1)
203
108
88%
(1) Total tangible equity calculated as total equity less
intangible assets, net. (All comparisons against December 31,
2022)
- Cash and cash equivalents from continuing operations ended the
first quarter at $69 million. The $8 million increase in cash was
primarily attributable to the equity raise associated with the
closing of the AAG transaction, net of cash utilized to complete
the transaction.
- Securitized loans held for investment (HMBS & nonrecourse)
increased by $6,429 million as a result of the acquisition of
HMBS-backed assets from AAG and the completion of one
securitization of non-agency reverse mortgages during the
quarter.
- Total assets Increased 29% due to the acquisition of assets
from AAG.
- Total liabilities increased $5,868 million primarily due to the
assumption of the HMBS obligations from AAG.
- Total tangible equity increased $95 million to $203 million,
predominantly due to net income from operations, the acquisition of
AAG and the concurrent equity raise.
Segment Results
Retirement Solutions
The Retirement Solutions segment generates revenue and earnings
in the form of net origination gains and origination fees earned on
the origination of reverse mortgage and home improvement loans.
($ amounts in millions)
Variance (%)
Variance (%)
Q1’23
Q4’22
Q1’23 vs Q4’22
Q1'22
Q1'23 vs Q1'22
Funded volume
$
357
$
701
(49)%
$
1,523
(77)%
Total revenue
26
32
(19)%
110
(76)%
Pre-tax income (loss)
(9)
(13)
(31)%
65
114%
Adjusted net income
2
4
(50)%
54
(96)%
- First quarter revenue declined 19% from fourth quarter 2022 to
$26 million due to lower volumes, partially offset by higher
revenue margins.
Portfolio Management
The Portfolio Management segment generates revenue and earnings
in the form of gain on sale of loans, fair value gains or losses,
interest income, servicing income, fees for underwriting, advisory
and valuation services and other ancillary fees.
($ amounts in millions)
Variance (%)
Variance (%)
Q1’23
Q4’22
Q1’23 vs Q4’22
Q1'22
Q1'23 vs Q1'22
Assets under management
$
26,327
$
20,186
30%
$
19,629
34%
Assets excluding HMBS and non-recourse
obligations
1,329
1,617
(18)%
2,721
(51)%
Total revenue
127
30
323%
(53)
340%
Pre-tax income (loss)
99
3
3200%
(88)
213%
Adjusted net income
4
7
(43)%
7
(43)%
- First quarter 2023 assets under management grew 30% to $26,327
million compared to the prior quarter. This growth is directly
attributable to the acquisition of AAG.
- First quarter revenue was materially impacted by positive fair
value adjustments on assets held for investment and related
liabilities, as we updated model assumptions to account for changes
in market interest rates during the quarter.
Reconciliation to GAAP
($ amounts in millions)(6)
Q1’23
Q4’22
Q1’22
Reconciliation of net income (loss)
from continuing operations to adjusted net income (loss) and
adjusted EBITDA
Net income (loss) from continuing
operations
$
55
$
(48)
$
(50)
Add back: Benefit (provision) for income
taxes
(3)
(1)
8
Net income (loss) from continuing
operations before taxes
58
(47)
(58)
Adjustments for:
Changes in fair value(1)
(94)
12
96
Amortization and impairment of goodwill,
intangibles, and other assets(2)
9
15
9
Share-based compensation(3)
4
4
7
Certain non-recurring costs(4)
2
9
3
Adjusted net income (loss) before
taxes
(21)
(7)
57
(Provision) benefit for income
taxes(5)
6
2
(16)
Adjusted net income (loss)
(15)
(5)
41
Provision (benefit) for income
taxes(5)
(6)
(2)
16
Depreciation
1
1
1
Interest expense on non-funding debt
8
7
7
Adjusted EBITDA
$
(12)
$
1
$
64
OTHER KEY METRICS
Cash paid for income taxes
$
—
$
—
$
—
($ amounts in millions except shares and $
per share)
Q1’23
Q4’22
Q1’22
GAAP PER SHARE MEASURES
Net income (loss) from continuing
operations attributable to controlling interest
$
19
$
(14)
$
(9)
Weighted average outstanding share
count
64,016,845
63,204,118
60,773,891
Basic income (loss) per share from
continuing operations
$
0.29
$
(0.22)
$
(0.16)
If-converted method net earnings (loss)
from continuing operations
42
$
(14)
(43)
Weighted average diluted share count
190,301,012
63,204,118
189,448,936
Diluted earnings (loss) per share from
continuing operations
$
0.22
$
(0.22)
$
(0.23)
NON-GAAP PER SHARE MEASURES
Adjusted net income (loss)
$
(15)
(5)
$
41
Weighted average diluted share count
190,301,012
187,822,266
189,448,936
Adjusted diluted earnings (loss) per
share
$
(0.08)
(0.03)
$
0.22
(1) Changes in fair value include changes in fair value of loans
and securities held for investment and related obligations,
deferred purchase price obligations, warrant liability, and
minority investments. 2) Includes amortization of intangibles
recognized from the business combination with Replay and impairment
charges to goodwill, intangibles, and certain other long lived
assets recognized during the periods presented. (3) Funded 85% by
the non-controlling shareholders. (4) Certain non-recurring costs
relate to various one-time expenses and adjustments that management
believes should be excluded as these do not relate to a recurring
part of the core business operations. These items include certain
one-time charges including amounts recognized for settlement of
legal and regulatory matters, acquisition related expenses and
other one-time charges. (5) We applied an effective combined
corporate tax rate to adjusted consolidated pre-tax income (loss)
for the respective period to determine the tax effect of adjusted
consolidated net income (loss). (6) Totals may not foot due to
rounding.
Adjusted Net Income by Segment (Continuing
Operations)
For the three months ended March 31,
2023 All values in $ millions(6)
Retirement
Solutions
Portfolio
Management
Corporate &
Other
FOA
Pre-tax income (loss)
$
(9
)
$
99
$
(32
)
$
58
Adjustments for:
Changes in fair value(1)
—
(93
)
(1
)
(94
)
Amortization and impairment of goodwill,
intangibles, and other assets(2)
9
—
—
9
Share-based compensation(3)
2
—
2
4
Certain non-recurring costs(4)
1
—
1
2
Adjusted net income (loss) before
taxes
$
3
$
6
$
(30
)
$
(21
)
(Provision) benefit for income
taxes(5)
(1
)
(2
)
8
6
Adjusted net Income (loss)
$
2
$
4
$
(22
)
$
(15
)
Weighted average
diluted share count
190,301,012
190,301,012
190,301,012
190,301,012
Adjusted diluted earnings (loss) per
share
$
0.01
$
0.02
$
(0.12
)
$
(0.08
)
For the three months ended December 31,
2022
All values in $ millions(6)
Retirement
Solutions
Portfolio
Management
Corporate &
Other
FOA
Pre-tax income (loss)
$
(13
)
$
3
$
(37
)
$
(47
)
Adjustments for:
Changes in fair value(1)
—
6
6
12
Amortization and impairment of goodwill,
intangibles, and other assets(2)
13
—
2
15
Share-based compensation(3)
1
—
2
4
Certain non-recurring costs(4)
4
—
5
9
Adjusted net income (loss) before
taxes
$
5
$
9
$
(22
)
$
(7
)
(Provision) benefit for income
taxes(5)
(1
)
(2
)
6
2
Adjusted net Income (loss)
$
4
$
7
$
(16
)
$
(5
)
Weighted average
diluted share count
187,822,266
187,822,266
187,822,266
187,822,266
Adjusted diluted earnings (loss) per
share
$
0.02
$
0.04
$
(0.09
)
$
(0.03
)
For the three months ended March 31,
2022
All values in $ millions(6)
Retirement
Solutions
Portfolio
Management
Corporate &
Other
FOA
Pre-tax income (loss)
$
65
$
(88
)
$
(36
)
$
(58
)
Adjustments for:
Changes in fair value(1)
—
96
—
96
Amortization and impairment of goodwill,
intangibles, and other assets(2)
9
—
—
9
Share-based compensation(3)
2
1
4
7
Certain non-recurring costs(4)
(3
)
1
6
3
Adjusted net income (loss) before
taxes
$
73
$
10
$
(26
)
$
57
(Provision) benefit for income
taxes(5)
(19
)
(3
)
7
(16
)
Adjusted net Income (loss)
$
54
$
7
$
(19
)
$
41
Weighted average
diluted share count
189,448,936
189,448,936
189,448,936
189,448,936
Adjusted diluted earnings (loss) per
share
$
0.28
$
0.04
$
(0.10
)
$
0.22
(1) Changes in fair value include changes in fair value of loans
and securities held for investment and related obligations,
deferred purchase price obligations, warrant liability, and
minority investments. (2) Includes amortization of intangibles
recognized from the business combination with Replay and impairment
charges to goodwill, intangibles, and certain other long lived
assets recognized during the periods presented. (3) Funded 85% by
the non-controlling shareholders. (4) Certain non-recurring costs
relate to various one-time expenses and adjustments that management
believes should be excluded as these do not relate to a recurring
part of the core business operations. These items include certain
one-time charges including amounts recognized for settlement of
legal and regulatory matters, acquisition related expenses and
other one-time charges. (5) We applied an effective combined
corporate tax rate to adjusted consolidated pre-tax income (loss)
for the respective period to determine the tax effect of adjusted
consolidated net income (loss). (6) Totals may not foot due to
rounding.
Finance of America Companies
Inc. and Subsidiaries Selected Financial Information
Condensed Consolidated Statements of Financial Condition
(In thousands, except share data) (Unaudited)
March 31, 2023
December 31, 2022
(Unaudited)
ASSETS
Cash and cash equivalents
$
69,313
$
61,149
Restricted cash
228,302
179,764
Loans held for investment, subject to HMBS
related obligations, at fair value
16,623,561
11,114,100
Loans held for investment, subject to
nonrecourse debt, at fair value
8,374,827
7,454,638
Loans held for investment, at fair
value
736,968
907,998
Loans held for sale, at fair value
77,494
173,984
MSR, at fair value, $988 and $60,562
subject to nonrecourse MSR financing liability, respectively
13,713
95,096
Fixed assets and leasehold improvements,
net
10,610
9,131
Intangible assets, net
287,822
297,119
Other assets, net
251,929
266,316
Assets of discontinued operations
151,450
313,360
TOTAL ASSETS
$
26,825,989
$
20,872,655
LIABILITIES AND EQUITY
HMBS related obligations, at fair
value
$
16,407,629
$
10,996,755
Nonrecourse debt, at fair value
8,032,552
7,343,177
Other financing lines of credit
1,113,367
1,327,634
Payables and other liabilities
306,717
173,732
Notes payable, net (includes amounts due
to related parties of $56,580 and $46,790, respectively)
408,990
399,402
Liabilities related to assets of
discontinued operations
66,302
227,114
TOTAL LIABILITIES
26,335,557
20,467,814
EQUITY
Class A Common Stock, $0.0001 par value;
6,000,000,000 shares authorized; 89,838,531 and 67,681,856 shares
issued, respectively, and 85,580,031 and 63,423,356 shares
outstanding, respectively
9
6
Class B Common Stock, $0.0001 par value;
1,000,000 shares authorized; 15 and 14 shares issued and
outstanding, respectively
—
—
Additional paid-in capital
926,910
888,488
Accumulated deficit
(631,241
)
(634,295
)
Accumulated other comprehensive loss
(209
)
(273
)
Noncontrolling interest
194,963
150,915
TOTAL EQUITY
490,432
404,841
TOTAL LIABILITIES AND EQUITY
$
26,825,989
$
20,872,655
Finance of America Companies
Inc. and Subsidiaries Selected Financial Information
Condensed Consolidated Statements of Operations (In
thousands, except share data)
Q1'23
Q4'22
Q1'22
(Unaudited)
(Unaudited)
(Unaudited)
REVENUES
Gain (loss) on sale and other income from
loans held for sale, net
$
(12,426
)
$
(8,781
)
$
6,221
Net fair value gains (losses) on mortgage
loans and related obligations
176,394
94,868
6,960
Fee income
6,352
9
55,173
Net interest expense:
Interest income
2,091
718
1,184
Interest expense
(31,556
)
(34,611
)
(23,480
)
Net interest expense
(29,465
)
(33,893
)
(22,296
)
TOTAL REVENUES
140,855
52,203
46,058
EXPENSES
Salaries, benefits, and related
expenses
40,814
43,253
59,099
Occupancy, equipment rentals, and other
office related expenses
1,909
1,650
2,189
General and administrative expenses
41,054
42,713
46,115
TOTAL EXPENSES
83,777
87,616
107,403
IMPAIRMENT OF GOODWILL, INTANGIBLES,
AND OTHER ASSETS
—
(5,728
)
—
OTHER, NET
936
(5,612
)
2,984
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
58,014
(46,753
)
(58,361
)
Provision (benefit) for income taxes
2,532
1,133
(7,722
)
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS
55,482
(47,886
)
(50,639
)
NET LOSS FROM DISCONTINUED
OPERATIONS
(40,890
)
(134,124
)
(13,356
)
NET INCOME (LOSS)
14,592
(182,010
)
(63,995
)
Noncontrolling interest
$
11,538
$
(124,987
)
$
(55,502
)
NET INCOME (LOSS) ATTRIBUTABLE TO
CONTROLLING INTEREST
$
3,054
$
(57,023
)
$
(8,493
)
EARNINGS PER SHARE
Basic weighted average shares
outstanding
64,016,845
63,204,118
60,773,891
Basic net income (loss) per
share from continuing operations
$
0.29
$
(0.22
)
$
(0.16
)
Basic net income (loss) per
share from discontinued operations
$
(0.24
)
$
(0.68
)
$
0.02
Diluted weighted average
shares outstanding
190,301,012
63,204,118
189,448,936
Diluted net income (loss) per
share from continuing operations
$
0.22
$
(0.22
)
$
(0.23
)
Diluted net loss per share
from discontinued operations
$
(0.15
)
$
(0.68
)
$
(0.07
)
Webcast and Conference Call
Management will host a webcast and conference call on Monday,
May 8th at 5:00 pm Eastern Time to discuss the Company’s results
for the first quarter ended March 31, 2023. A copy of this press
release will be posted prior to the call under the “Investors”
section on Finance of America’s website at
https://www.financeofamerica.com/investors.
To listen to the audio webcast of the conference call, please
visit the “Investors” section of the Company's website at
https://www.financeofamerica.com/investors. The conference call can
also be accessed by dialing the following:
- 1-833-470-1428 (Domestic)
- 1-929-526-1599 (International)
- Conference ID: 604853
Replay
A replay of the call will also be available on the Company's
website approximately two hours after the conclusion of the
conference call through May 22, 2023. To access the replay, dial
1-866-813-9403 (United States) or 1-929-458-6194 (International).
The replay pin number is 970165. The replay can also be accessed on
the “Investors” section of the Company's website at
https://www.financeofamerica.com/investors.
About Finance of America
Finance of America (NYSE: FOA) is a modern retirement solutions
platform that provides customers with access to an innovative range
of retirement offerings centered on the home, including reverse
mortgages and home improvement loans as well as home-sharing
services. In addition, FOA offers capital markets and portfolio
management capabilities to optimize distribution to investors. FOA
is headquartered in Plano, Texas. For more information, please
visit www.financeofamerica.com.
Forward-Looking Statements
This release includes “forward-looking statements” within the
meaning of the “safe harbor” provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are not historical facts or statements of current
conditions, but instead represent only management’s beliefs
regarding future events, many of which, by their nature, are
inherently uncertain and outside of the Company’s control. It is
possible that our actual results, financial condition and liquidity
may differ, possibly materially, from the anticipated results,
financial condition and liquidity in these forward-looking
statements. The Company’s actual results may differ from its
expectations, estimates, and projections and, consequently, you
should not rely on these forward-looking statements as predictions
of future events. Words such as “expect,” “estimate,” “project,”
“budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,”
“will,” “could,” “should,” “believes,” “predicts,” “potential,”
“continue,” and similar expressions (or the negative versions of
such words or expressions) are intended to identify such
forward-looking statements. The Company cautions readers not to
place undue reliance upon any forward-looking statements, which are
current only as of the date of this release. Results for any
specified quarter are not necessarily indicative of the results
that maybe expected for the full year or any future period. The
Company does not undertake or accept any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements to reflect any change in its expectations or any change
in events, conditions, or circumstances on which any such statement
is based, except as required by law. All subsequent written and
oral forward-looking statements concerning the Company or other
matters and attributable to the Company or any person acting on its
behalf are expressly qualified in their entirety by the cautionary
statements above. Readers are cautioned not to place undue reliance
upon any forward-looking statements, which speak only as of the
date made. A number of important factors exist that could cause
future results to differ materially from historical performance and
these forward-looking statements. Factors that might cause such a
difference include, but are not limited to: the transformation of
our business from a vertically-integrated, diversified lending
platform to a focused, reverse mortgage lending business; our
ability to obtain sufficient capital and liquidity to meet the
financing and operational requirements of our business, and our
ability to comply with our debt agreements and pay down our
substantial debt; our recently closed acquisition of American
Advisors Group and sale of our Commercial Originations business, as
well as the proposed sale of our Incenter subsidiaries and their
respective expected benefits and increased liquidity, anticipated
cost savings, financial and accounting impact, and timing; our
ability to successfully and timely integrate the business of
American Advisors Group into the legacy business of the Company;
the possibility that the Company may be adversely affected by other
economic, business and/or competitive factors in our business
markets and worldwide financial markets, including a sustained
period of higher interest rates and increased instability in the
banking sector as a result of several recent bank failures; our
ability to respond to significant changes in prevailing interest
rates, and to develop a profitable business; our ability to manage
disruptions in the secondary home loan market, including the
mortgage-backed securities market; our ability to finance and
recover costs of our reverse servicing operations; our ability to
manage changes in our licensing status, business relationships, or
servicing guidelines with Ginnie Mae, HUD or other governmental
entities; our geographic market concentration if the economic
conditions in our current markets should decline or as a result of
natural disasters; our use of estimates in measuring or determining
the fair value of the majority of our assets and liabilities, which
may require us to write down the value of these assets or write up
the value of these liabilities if they prove to be incorrect; our
ability to manage various legal proceedings and compliance matters,
federal or state governmental examinations and enforcement
investigations we are subject to from time to time, including
consumer protection laws applicable to reverse mortgage lenders,
which may be highly complex and slow to develop, and results are
difficult to predict or estimate; our ability to prevent cyber
intrusions and mitigate cyber risks; our ability to compete with
national banks, which are not subject to state licensing and
operational requirements; our holding company status and dependency
on distributions from Finance of America Equity Capital LLC; our
“controlled company” status under New York Stock Exchange rules,
which exempts us from certain corporate governance requirements and
affords stockholders fewer protections; and our common stock
trading history has been characterized by low trading volume, which
may result in an inability to sell your shares at a desired price,
if at all.
All of these factors are difficult to predict, contain
uncertainties that may materially affect actual results and may be
beyond our control. New factors emerge from time to time, and it is
not possible for our management to predict all such factors or to
assess the effect of each such new factor on our business. Although
we believe that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions
could be inaccurate, and any of these statements included herein
may prove to be inaccurate. Given the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by us or any other person that the results or
conditions described in such statements, or our objectives and
plans will be achieved. Please refer to Risk Factors included in
our Annual Report on Form 10-K for the year ended December 31,
2022, filed with the Securities and Exchange Commission (the “SEC”)
on March 16, 2023, for further information on these and other risk
factors affecting us, as such factors may be amended and updated
from time to time in the Company’s subsequent periodic filings with
the SEC, which are accessible on the SEC’s website at
www.sec.gov.
Non-GAAP Financial Measures
The Company’s management evaluates performance of the Company
through the use of certain measures that are not prepared in
accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”), including Adjusted Net Income, Adjusted EBITDA, and
Adjusted Diluted Earnings per Share.
We define Adjusted Net Income as net income adjusted for change
in fair value of loans and securities held for investment due to
assumption changes, change in fair value of deferred purchase price
obligations (including earnouts and TRA obligations), warrant
liability, and minority investments, amortization and other
impairments, equity based compensation, and certain non-recurring
costs.
We define Adjusted EBITDA as Adjusted Net Income (defined above)
adjusted for taxes, interest on non-funding debt and
depreciation.
We define Adjusted Diluted Earnings Per Share as Adjusted Net
Income (defined above) divided by our weighted average diluted
share count, which includes our issued and outstanding Class A
Common Stock shares plus Finance of America Equity Capital LLC’s
Class A LLC units owned by our noncontrolling interests on an
if-converted basis.
The presentation of non-GAAP measures is used to enhance
investors’ understanding of certain aspects of our financial
performance. This discussion is not meant to be considered in
isolation, superior to, or as a substitute for the directly
comparable financial measures prepared in accordance with GAAP.
Management believes these key financial measures provide an
additional view of our performance over the long-term and provide
useful information that we use in order to maintain and grow our
business.
These non-GAAP financial measures should not be considered as an
alternate to (i) net income (loss) or any other performance
measures determined in accordance with GAAP or (ii) operating cash
flows determined in accordance with GAAP. Adjusted Net Income,
Adjusted EBITDA, and Adjusted Diluted Earnings per Share have
important limitations as analytical tools and should not be
considered in isolation or as a substitute for analysis of our
results as reported under GAAP. Some of the limitations of these
metrics relate to the variability of: (i) cash expenditures for
future contractual commitments; (ii) cash requirements for working
capital needs; (iii) cash requirements for certain tax payments;
and (iv) all non-cash income/expense items.
Because of these limitations, Adjusted Net Income, Adjusted
EBITDA, and Adjusted Diluted Earnings per Share should not be
considered as measures of discretionary cash available to us to
invest in the growth of our business or distribute to stockholders.
We compensate for these limitations by relying primarily on our
GAAP results and using our non-GAAP financial measures only as a
supplement. Users of our interim unaudited consolidated financial
statements are cautioned not to place undue reliance on our
non-GAAP financial measures, which are not necessarily indicative
of the results that may be expected for any future period or for
the full year.
A reconciliation of our forward-looking Adjusted Diluted
Earnings per Share outlook to GAAP Earnings per Share and Net
Income cannot be provided without unreasonable effort because of
the inherent difficulty of accurately forecasting the occurrence
and financial impact of the various adjusted items necessary for
such reconciliation that have not yet occurred, are out of our
control, or cannot be reasonably predicted. For the same reasons,
the company is unable to assess the probable significance of the
unavailable information, which could have a material impact on its
future GAAP financial results.
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