09.11.2022 14:30:00

ENDO REPORTS THIRD-QUARTER 2022 FINANCIAL RESULTS

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

(PRNewsfoto/Endo International plc)

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


Operating
expenses


Cost of revenues


Operating
expenses

Continuity and separation benefits

$             12,499


$             45,635


$           (13,827)


$             12,660

Accelerated depreciation

2,164


1,660


17,322


5,008

Other, including strategic review initiatives

8,990


68,077


6,512


30,957

Total

$             23,653


$           115,372


$             10,007


$             48,625

 


The amounts in the tables above include adjustments related to previously announced restructuring activities, certain continuity and transitional compensation arrangements, certain other cost reduction initiatives and certain strategic review initiatives.



(3)

To exclude adjustments to accruals for litigation-related settlement charges.



(4)

To exclude amounts related to opioid-related legal expenses. The amount during the nine months ended September 30, 2022 reflects the recovery of certain previously-incurred opioid-related legal expenses.



(5)

Adjustments for asset impairment charges included the following (in thousands):

 


Three Months Ended September 30,


Nine Months Ended September 30,


2022


2021


2022


2021

Goodwill impairment charges

$             97,000


$                    —


$        1,845,000


$                    —

Other intangible asset impairment charges

53,200



103,153


7,811

Property, plant and equipment impairment charges



3,063


427

Disposal group impairment charges


42,155



42,155

Total

$           150,200


$             42,155


$        1,951,216


$             50,393

 

(6)

To exclude integration costs.



(7)

To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which the Company could incur, related contingent obligations.



(8)

To exclude the loss on the extinguishment of debt associated with the Company's March 2021 refinancing transactions.



(9)

To exclude Other income, net per the Condensed Consolidated Statements of Operations.



(10)

Amounts relate to the net expense or income recognized during Endo's bankruptcy proceedings required to be presented as Reorganization items, net under Accounting Standards Codification Topic 852, Reorganizations.



(11)

The "Other" rows included in each of the above reconciliations of GAAP financial measures to non-GAAP financial measures (except for the reconciliations of Net loss (GAAP) to Adjusted EBITDA (non-GAAP)) include the following (in thousands):

 


Three Months Ended September 30,


2022


2021


Cost of revenues


Operating
expenses


Other non-
operating
expenses


Cost of revenues


Operating
expenses


Other non-
operating
expenses

Foreign currency impact
related to the re-
measurement of
intercompany debt
instruments

$                    —


$                    —


$             (6,220)


$                    —


$                    —


$             (2,036)

Other miscellaneous

125


1,570


(586)


525



(4,890)

Total

$                  125


$               1,570


$              (6,806)


$                  525


$                    —


$              (6,926)

 


Nine Months Ended September 30,


2022


2021


Cost of revenues


Operating
expenses


Other non-
operating
expenses


Cost of revenues


Operating
expenses


Other non-
operating
expenses

Foreign currency impact
related to the re-
measurement of
intercompany debt
instruments

$                    —


$                    —


$             (7,114)


$                    —


$                    —


$                  466

Debt modification costs





3,879


Other miscellaneous

375


1,570


(17,789)


1,176


30


(4,890)

Total

$                  375


$               1,570


$           (24,903)


$               1,176


$               3,909


$             (4,424)

 


The "Other" row included in the reconciliations of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) primarily relates to the items enumerated in the foregoing "Cost of revenues" and "Operating expenses" columns.



(12)

To exclude the results of the businesses reported as discontinued operations, net of tax.



(13)

To exclude amortization expense related to intangible assets.



(14)

Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.



(15)

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. Amounts of Acquired in-process research and development charges included within these non-GAAP financial measures are set forth in the table below (in thousands):

 


Three Months Ended September 30,


Nine Months Ended September 30,


2022


2021


2022


2021

Acquired in-process research and development charges

$                  800


$                    —


$             68,700


$               5,000

 

(16)

Calculated as income or loss from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):

 


Three Months Ended September 30,


Nine Months Ended September 30,


2022


2021


2022


2021

GAAP

235,160


233,578


234,719


232,487

Non-GAAP Adjusted

236,183


235,527


236,372


236,538

Non-GAAP Financial Measures

The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses that these are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted EBITDA and non-GAAP adjusted net income from continuing operations and its components (unlike GAAP net income from continuing operations and its components) may not be comparable to the calculation of similar measures of other companies. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance.

Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts of which could be significant.

See Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo's non-GAAP financial measures.

About Endo

Endo (OTC: ENDPQ) is a specialty pharmaceutical company committed to helping everyone we serve live their best life through the delivery of quality, life-enhancing therapies. Our decades of proven success come from passionate team members around the globe collaborating to bring treatments forward. Together, we boldly transform insights into treatments benefiting those who need them, when they need them. Learn more at endo.com or connect with us on LinkedIn.

Cautionary Note Regarding Forward-Looking Statements

Certain information in this press release may be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation, including, but not limited to, statements with respect to financial guidance, the restructuring support agreement and the sale transaction, the Chapter 11 proceedings and recognition proceedings, and any other statements that refer to Endo's expected, estimated or anticipated future results or that do not relate solely to historical facts. Statements including words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "plan," "will," "may," "look forward," "intend," "guidance," "future," "potential" or similar expressions are forward-looking statements. All forward-looking statements in this communication reflect the Company's current views as of the date of this communication about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to it and on assumptions it has made. Actual results may differ materially and adversely from current expectations based on a number of factors, including, among other things, the following: the timing, impact or results of any pending or future litigation, investigations, proceedings or claims, including opioid, tax and antitrust related matters; actual or contingent liabilities; settlement discussions or negotiations; the Company's liquidity, financial performance, cash position and operations; the Company's strategy; risks and uncertainties associated with Chapter 11 proceedings; the negative impacts on the Company's businesses as a result of filing for and operating under Chapter 11 protection; the time, terms and ability to confirm a sale of the Company's businesses under Section 363 of the U.S. Bankruptcy Code; the adequacy of the capital resources of the Company's businesses and the difficulty in forecasting the liquidity requirements of the operations of the Company's businesses; the unpredictability of the Company's financial results while in Chapter 11 proceedings; the Company's ability to discharge claims in Chapter 11 proceedings; negotiations with the holders of the Company's indebtedness and its trade creditors and other significant creditors; risks and uncertainties with performing under the terms of the restructuring support agreement and any other arrangement with lenders or creditors while in Chapter 11 proceedings; the Company's ability to conduct business as usual; the Company's ability to continue to serve customers, suppliers and other business partners at the high level of service and performance they have come to expect from the Company; the Company's ability to continue to pay employees, suppliers and vendors; the ability to control costs during Chapter 11 proceedings; adverse litigation; the risk that the Company's Chapter 11 Cases may be converted to cases under Chapter 7 of the Bankruptcy Code; the Company's ability to secure operating capital; the Company's ability to take advantage of opportunities to acquire assets with upside potential; the Company's ability to execute on its strategic plan to pursue, evaluate and close an asset sale of the Company's businesses pursuant to Section 363 of the U.S. Bankruptcy Code; the impact of competition, including the loss of exclusivity and generic competition for VASOSTRICT®; Endo's ability to satisfy judgments or settlements or pursue appeals including bonding requirements; Endo's ability to adjust to changing market conditions; Endo's ability to attract and retain key personnel; supply chain interruptions or difficulties; changes in competitive or market conditions; changes in legislation or regulatory developments; Endo's ability to obtain and maintain adequate protection for Endo's intellectual property rights; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction, and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; Endo's ability to integrate any newly acquired products into Endo's portfolio and achieve any financial or commercial expectations; the impact that known and unknown side effects may have on market perception and consumer preference for Endo's products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of any strategic initiatives; unfavorable publicity regarding the misuse of opioids; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; Endo's ability to advance its strategic priorities, develop its product pipeline and continue to develop the market for QWO®, XIAFLEX® and other branded and unbranded products; and Endo's ability to obtain and successfully manufacture, maintain and distribute a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including consumer confidence and debt levels, inflation, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, the impact of and response to the ongoing COVID-19 pandemic and the impact of continued economic volatility, can materially affect Endo's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements, except as required to do so by law.

Additional information concerning risk factors, including those referenced above, can be found in press releases issued by Endo, as well as Endo's public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada, including the discussion under the heading "Risk Factors" in Endo's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q or other filings with the U.S. Securities and Exchange Commission. Copies of Endo's press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department at relations.investor@endo.com.

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/endo-reports-third-quarter-2022-financial-results-301672328.html

SOURCE Endo International plc

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