Day: November 3, 2022

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HYOSUNG MAKES STRATEGIC INVESTMENT IN BAKKEN ENERGY

South Korean Industrial Leader Supports Bakken Energy’s Hydrogen Initiatives

BISMARCK, ND, Nov. 02, 2022 (GLOBE NEWSWIRE) — Bakken Energy, an innovative developer of affordable clean hydrogen at scale, announces Hyosung, a South Korean leader in hydrogen development, has joined Bakken Energy as a strategic investor.

Hyosung has recently become known for advancing technologies related to hydrogen vehicles, such as carbon fiber for fuel tanks and hydrogen charging stations. Hyosung operates in various fields, including the chemical industry, industrial machinery, IT, trade, and construction. Founded in 1966, Hyosung is a large family-owned South Korean industrial conglomerate.

“Hyosung believes hydrogen is critical to the decarbonization of heavy industrial sectors and we are committed to activating the hydrogen economy through investment in innovators like Bakken Energy,” said Hyun-joon Cho, Chairman of Hyosung. “Supporting the development of large-scale low-cost clean hydrogen production is a necessary part of advancing hydrogen uses across the globe.”

“Bakken Energy is honored to welcome Hyosung as an investor,” said Bakken Energy Founder and Chairman Steve Lebow. “South Korea is a leader in bringing hydrogen into the mainstream of its mobility market and Hyosung is a big reason for that. With Hyosung on our team Bakken Energy is stronger than ever, and we could not be happier.”

“Hyosung thinks and acts big when it comes to hydrogen, as shown by their decision to build the world’s largest liquid hydrogen facility,” said Mike Hopkins, CEO of Bakken Energy. “The addition of Hyosung to our investor group is a great fit. It supports our path to becoming the largest and lowest cost producer of clean hydrogen in the country.”

This announcement is the next step towards Bakken Energy advancing its hydrogen mission. Most recently, Bakken Energy announced a partnership with Cummins Inc., and Schneider National Carriers Inc., to work together on the design of the Heartland Hydrogen Hub to serve the needs of long-haul trucking.

About Bakken Energy

Bakken Energy is an innovative clean hydrogen company working to become the largest producer of affordable clean hydrogen in the U.S. Its mission is to decarbonize the hard to decarbonize sectors of the economy with affordable clean hydrogen and to develop the future hydrogen economy that leads toward a low-carbon future.

About Hyosung

Founded in 1966, Hyosung has grown as one of the most prestigious conglomerates in Korea with approximately 20,000 employees and 15 billion dollars in combined group revenues (as of 2021). Hyosung engages in textiles, trading, industrial materials, chemicals, power & industrial systems, construction and information & communication businesses, and operates through more than 100 business sites across 29 countries. For more information, visit Hyosung website and follow us on Linkedin.

Alison Ritter
Bakken Energy, LLC 
701-557-7545
aritter@odney.com

GlobeNewswire Distribution ID 8687765

Posted on

Fortinet Reports Third Quarter 2022 Financial Results

Third Quarter 2022 Highlights

  • Product revenue of $468.7 million, up 39% year over year
  • Service revenue of $680.8 million, up 28% year over year
  • Total revenue of $1.15 billion, up 33% year over year
  • Billings of $1.41 billion, up 33% year over year1
  • Deferred revenue of $4.19 billion, up 35% year over year
  • GAAP operating margin of 23.1%
  • Non-GAAP operating margin of 28.3%1
  • GAAP diluted net income per share attributable to Fortinet, Inc. of $0.292
  • Non-GAAP diluted net income per share attributable to Fortinet, Inc. of $0.331,2
  • Cash flow from operations of $483.0 million
  • Free cash flow of $395.2 million1
  • Cash paid for share repurchases of $500.0 million

SUNNYVALE, Calif., Nov. 02, 2022 (GLOBE NEWSWIRE) —  Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, today announced financial results for the third quarter ended September 30, 2022.

“We continued to gain market share in the large addressable and fast-growing cybersecurity industry. Revenue and billings growth of over 30% in the third quarter significantly outpaced industry growth rates,” said Ken Xie, Founder, Chairman, and Chief Executive Officer. “Fortinet’s future growth will be driven by the convergence of security and networking, the industry trend of vendor and product consolidation, the elevated threat environment, and a greater focus on offering services for existing and new customers.”

Financial Highlights for the Third Quarter of 2022

  • Revenue: Total revenue was $1.15 billion for the third quarter of 2022, an increase of 32.6% compared to $867.2 million for the same quarter of 2021.
  • Product Revenue: Product revenue was $468.7 million for the third quarter of 2022, an increase of 39.0% compared to $337.1 million for the same quarter of 2021.
  • Service Revenue: Service revenue was $680.8 million for the third quarter of 2022, an increase of 28.4% compared to $530.1 million for the same quarter of 2021.
  • Billings1: Total billings were $1.41 billion for the third quarter of 2022, an increase of 32.6% compared to $1.06 billion for the same quarter of 2021.
  • Deferred Revenue: Total deferred revenue was $4.19 billion as of September 30, 2022, an increase of 35.0% compared to $3.11 billion as of September 30, 2021.
  • GAAP Operating Income and Margin: GAAP operating income was $265.5 million for the third quarter of 2022, representing a GAAP operating margin of 23.1%. GAAP operating income was $166.4 million for the same quarter of 2021, representing a GAAP operating margin of 19.2%.
  • Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $324.9 million for the third quarter of 2022, representing a non-GAAP operating margin of 28.3%. Non-GAAP operating income was $223.6 million for the same quarter of 2021, representing a non-GAAP operating margin of 25.8%.
  • GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.2: GAAP net income was $231.6 million for the third quarter of 2022, compared to GAAP net income of $163.1 million for the same quarter of 2021. GAAP diluted net income per share was $0.29 for the third quarter of 2022, based on 798.6 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.19 for the same quarter of 2021, based on 838.6 million diluted weighted-average shares outstanding.
  • Non-GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.1,2: Non-GAAP net income was $262.7 million for the third quarter of 2022, compared to non-GAAP net income of $165.9 million for the same quarter of 2021. Non-GAAP diluted net income per share was $0.33 for the third quarter of 2022, based on 798.6 million diluted weighted-average shares outstanding, compared to $0.20 for the same quarter of 2021, based on 838.6 million diluted weighted-average shares outstanding.
  • Cash Flow: Cash flow from operations was $483.0 million for the third quarter of 2022, compared to $398.8 million for the same quarter of 2021.
  • Free Cash Flow1: Free cash flow was $395.2 million for the third quarter of 2022, compared to $329.8 million for the same quarter of 2021.
  • Share Repurchase Program2: During the three and nine months ended September 30, 2022, Fortinet repurchased 10.2 million and 36.0 million shares of its common stock, respectively, at an average price of $49.15 and $55.37 per share, respectively, and for an aggregate purchase price of  $500.0 million and $1.99 billion, respectively. During the three and nine months ended September 30, 2021, Fortinet repurchased 1.8 million and 4.1 million shares of its common stock, respectively, at an average price of $58.81 and $48.59 per share, respectively, and for an aggregate purchase price of $108.8 million and $200.4 million.

Guidance

For the fourth quarter of 2022, Fortinet currently expects:

  • Revenue in the range of $1.275 billion to $1.315 billion
  • Billings in the range of $1.665 billion to $1.720 billion
  • Non-GAAP gross margin in the range of 75.0% to 76.0%
  • Non-GAAP operating margin in the range of 30.0% to 31.0%
  • Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $0.38 to $0.40, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 million.

For the fiscal year 2022, Fortinet currently expects:

  • Revenue in the range of $4.410 billion to $4.450 billion
  • Service revenue in the range of $2.645 billion to $2.655 billion
  • Billings in the range of $5.540 billion to $5.595 billion
  • Non-GAAP gross margin in the range of 75.0% to 76.0%
  • Non-GAAP operating margin in the range of 26.0% to 27.0%
  • Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $1.13 to $1.15, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 800 million to 810 million.

These statements are forward looking and actual results may differ materially. Refer to the Forward-Looking Statements section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Our guidance with respect to non-GAAP financial measures excludes stock-based compensation, amortization of acquired intangible assets and gain on intellectual property matters. We have not reconciled our guidance with respect to non-GAAP financial measures to the corresponding GAAP measures because certain items that impact these measures are uncertain or out of our control, or cannot be reasonably predicted. Accordingly, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort.

1 A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures”.
2 All share and per share amounts presented herein have been retroactively adjusted to reflect the five-for-one forward stock split which was effective June 22, 2022.

Conference Call Details

Fortinet will host a conference call today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the earnings results. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet’s website at https://investor.fortinet.com and a replay will be archived and accessible at https://investor.fortinet.com/events-and-presentations.

Fourth Quarter 2022 Conference Participation Schedule:

  • Stifel Midwest One-on-One Growth Conference
    November 10, 2022
  • Wells Fargo TMT Summit
    November 29, 2022
  • Barclays Global Technology, Media & Telecommunications Conference
    December 7, 2022

Members of Fortinet’s management team are expected to present at these conferences and discuss the latest company strategies and initiatives. Fortinet’s conference presentations are expected to be available via webcast on the company’s web site. To access the most updated information, pre-register and listen to the webcast of each event, please visit the Investor Presentation & Events page of Fortinet’s website at https://investor.fortinet.com/events-and-presentations. The schedule is subject to change.

About Fortinet (www.fortinet.com)

Fortinet (NASDAQ: FTNT) makes possible a digital world that we can trust through its mission to protect people, devices and data everywhere. This is why many of the world’s largest enterprises, service providers and government organizations choose Fortinet to securely accelerate their digital journey. The Fortinet Core Platform and Platform Extension products deliver broad, integrated and automated protections across the entire digital attack surface, securing critical devices, data, applications, and connections from the data center to the cloud to the home office. The Fortinet NSE Training Institute, an initiative of Fortinet’s Training Advancement Agenda, provides one of the largest and broadest training programs in the industry to make cyber training and new career opportunities available to everyone. Learn more at https://www.fortinet.com, the Fortinet Blog or FortiGuard Labs.

Copyright © 2022 Fortinet, Inc. All rights reserved. The symbols ® and ™ denote respectively federally registered trademarks and common law trademarks of Fortinet, Inc., its subsidiaries and affiliates. Fortinet’s trademarks include, but are not limited to, the following: Fortinet, the Fortinet logo, FortiGate, FortiOS, FortiGuard, FortiCare, FortiAnalyzer, FortiManager, FortiASIC, FortiClient, FortiCloud, FortiMail, FortiSandbox, FortiADC, FortiAI, FortiAIOps, FortiAntenna, FortiAP, FortiAPCam, FortiAuthenticator, FortiCache, FortiCall, FortiCam, FortiCamera, FortiCarrier, FortiCASB, FortiCentral, FortiCNP, FortiConnect, FortiController, FortiConverter, FortiCWP, FortiDB, FortiDDoS, FortiDeceptor, FortiDeploy, FortiDevSec, FortiEdge, FortiEDR, FortiExplorer, FortiExtender, FortiFirewall, FortiFone, FortiGSLB, FortiGuest, FortiHypervisor, FortiInsight, FortiIsolator, FortiLAN, FortiLink, FortiMoM, FortiMonitor, FortiNAC, FortiNDR, FortiPenTest, FortiPhish, FortiPolicy, FortiPortal, FortiPresence, FortiProxy, FortiRecon, FortiRecorder, FortiSASE, FortiSDNConnector, FortiSIEM, FortiSMS, FortiSOAR, FortiSwitch, FortiTester, FortiToken, FortiTrust, FortiVoice, FortiWAN, FortiWeb, FortiWiFi, FortiWLC, FortiWLM and FortiXDR. Other trademarks belong to their respective owners. Fortinet has not independently verified statements or certifications herein attributed to third parties and Fortinet does not independently endorse such statements. Notwithstanding anything to the contrary herein, nothing herein constitutes a warranty, guarantee, contract, binding specification or other binding commitment by Fortinet or any indication of intent related to a binding commitment, and performance and other specification information herein may be unique to certain environments.

FTNT-F

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding any indications related to future market share gains, guidance and expectations around future financial results, including guidance and expectations for the fourth quarter and full year 2022, statements regarding the momentum in our business and future growth expectations, and any statements regarding our market opportunity and market size, and business momentum. Although we attempt to be accurate in making forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based such that actual results are materially different from our forward-looking statements in this release. Important factors that could cause results to differ materially from the statements herein include the following: general economic risks, including those caused by the COVID-19 pandemic, the war in Ukraine, economic challenges, expectations of a recession or any actual recession, and the effects of increased inflation in certain geographies; significantly heightened supply chain challenges due to the current global environment; negative impacts from the COVID-19 pandemic on sales, billings, revenue, demand and buying patterns, component supply and ability to manufacture products to meet demand in a timely fashion, and costs such as possible increased costs for shipping and components; global economic conditions, country-specific economic conditions, and foreign currency risks; competitiveness in the security market; the dynamic nature of the security market and its products and services; specific economic risks worldwide and in different geographies, and among different customer segments; uncertainty regarding demand and increased business and renewals from existing customers; uncertainties around continued success in sales growth and market share gains; uncertainties in market opportunities and the market size; actual or perceived vulnerabilities in our supply chain, products or services, and any actual or perceived breach of our network or our customers’ networks; longer sales cycles, particularly for larger enterprise, service providers, government and other large organization customers; the effectiveness of our salesforce and failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; risks associated with integrating acquisitions and changes in circumstances and plans associated therewith, including, among other risks, changes in plans related to product and services integrations, product and services plans and sales strategies; sales and marketing execution risks; execution risks around new product development and introductions and innovation; litigation and disputes and the potential cost, distraction and damage to sales and reputation caused thereby or by other factors; cybersecurity threats, breaches and other disruptions; market acceptance of new products and services; the ability to attract and retain personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand for, our products and services in general and by specific customer segments, including those caused by the COVID-19 pandemic; competition and pricing pressure; product inventory shortages for any reason, including those caused by the COVID-19 pandemic, the war in Ukraine and the effects of increased inflation in certain geographies; risks associated with business disruption caused by natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health epidemics and viruses such as the COVID-19 pandemic, and by manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts such as the war in Ukraine, terrorism, wars, and critical infrastructure attacks; tariffs, trade disputes and other trade barriers, and negative impact on sales based on geo-political dynamics and disputes and protectionist policies; any political and government disruption around the world, including the impact of any future shutdowns of the U.S. government; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC), copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.

COVID-19 Impact

While the broader implications of the COVID-19 pandemic on our employees and overall financial performance remain uncertain, we have seen certain impacts on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. Going forward, the situation is uncertain, rapidly changing and hard to predict, and the COVID-19 pandemic may have a material negative impact on our future periods, including our results for the three months ending December 31, 2022, our annual results for 2022, and beyond. To highlight the uncertainty remaining for the three-month period ending December 31, 2022, it should be noted that, due to customer buying patterns and the efforts of our sales force and channel partners to meet or exceed quarterly quotas, we have historically received a substantial portion of each quarter’s sales orders and generated a substantial portion of each quarter’s billings and revenue during the last two weeks of the quarter. Additionally, significantly heightened supply chain challenges are impacting businesses around the globe. If we experience significant changes in our billings growth rates or if we are unable to supply product to meet demand, it will impact product revenue in the current quarter and FortiGuard and FortiCare service revenues in subsequent quarters, as we sell annual and multi-year service contracts that are recognized ratably over the contractual service term. In addition, the broader implications of the pandemic on our business and operations and our financial results, including the extent to which the effects of the pandemic will impact future results and growth in the cybersecurity industry, remain uncertain. The duration and severity of the economic downturn from the pandemic may negatively impact our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources in a material way. As a result, the effects of the pandemic may not be fully reflected in our results of operations until future periods.

Non-GAAP Financial Measures

We have provided in this release financial information that has not been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial and liquidity measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period, less any deferred revenue balances acquired from business combination(s) and adjustment due to adoption of new accounting standard during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment and excluding any significant non-recurring items, such as proceeds from intellectual property matter. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures and net of proceeds from intellectual property matter, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes cash flows from significant non-recurring items, such as proceeds from intellectual property matter, investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation, impairment and amortization of acquired intangible assets, less gain on intellectual property matter and, when applicable, other significant non-recurring items in a given quarter, such as non-recurring gains or losses on litigation-related matters. Non-GAAP operating margin is defined as non-GAAP operating income divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the items noted above so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income instead of operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes the items noted above. Second, the components of the costs that we exclude from our calculation of non-GAAP operating income may differ from the components that peer companies exclude when they report their non-GAAP results of operations. Management accounts for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and diluted net income per share attributable to Fortinet, Inc. We define non-GAAP net income as net income plus the items noted above under non-GAAP operating income and operating margin. In addition, we adjust non-GAAP net income and diluted net income per share for gains or losses on investments in privately held companies, a tax adjustment required for an effective tax rate on a non-GAAP basis and adjustments attributable to non-controlling interests, which differs from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the non-GAAP diluted weighted-average shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a more complete picture of our recurring core business operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required resulting in an effective tax rate on a non-GAAP basis, which often differs from the GAAP tax rate. We believe the non-GAAP effective tax rates we use are reasonable estimates of normalized tax rates for our current and prior fiscal years under our global operating structure. The same limitations described above regarding our use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. We account for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income and diluted net income per share calculated in accordance with GAAP.

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions)

September 30,
2022		 December 31,
2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $               964.0 $           1,319.1
Short-term investments                 739.5              1,194.0
Marketable equity securities                   26.9                   38.6
Accounts receivable—net                 963.2                 807.7
Inventory                 215.8                 175.8
Prepaid expenses and other current assets                   72.8                   65.4
Total current assets              2,982.2              3,600.6
LONG-TERM INVESTMENTS                   84.0                 440.8
PROPERTY AND EQUIPMENT—NET                 889.5                 687.6
DEFERRED CONTRACT COSTS                 480.5                 423.3
DEFERRED TAX ASSETS                 515.5                 342.3
GOODWILL AND OTHER INTANGIBLE ASSETS—NET                 159.0                 188.7
OTHER ASSETS                 225.2                 235.8
TOTAL ASSETS $           5,335.9 $           5,919.1
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $               215.1 $               148.4
Accrued liabilities                 244.8                 197.3
Accrued payroll and compensation                 190.7                 195.0
Deferred revenue              2,129.0              1,777.4
Total current liabilities              2,779.6              2,318.1
DEFERRED REVENUE              2,064.5              1,675.5
INCOME TAX LIABILITIES                   67.8                   79.5
LONG-TERM DEBT                 989.9                 988.4
OTHER LIABILITIES                   56.9                   59.2
Total liabilities              5,958.7              5,120.7
COMMITMENTS AND CONTINGENCIES
EQUITY (DEFICIT):
Common stock                     0.8                     0.8
Additional paid-in capital              1,250.2              1,253.6
Accumulated other comprehensive loss                 (25.5 )                    (4.8 )
Accumulated deficit            (1,860.2 )               (467.9 )
Total Fortinet, Inc. stockholders’ equity (deficit)               (634.7 )                 781.7
Non-controlling interests                   11.9                   16.7
Total equity (deficit)               (622.8 )                 798.4
TOTAL LIABILITIES AND EQUITY (DEFICIT) $           5,335.9 $           5,919.1

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in millions, except per share amounts)

Three Months Ended Nine Months Ended
September 30,
2022		 September 30,
2021		 September 30,
2022		 September 30,
2021
REVENUE:
Product $ 468.7 $ 337.1 $ 1,240.4 $ 876.1
Service 680.8 530.1 1,894.0 1,502.5
Total revenue 1,149.5 867.2 3,134.4 2,378.6
COST OF REVENUE:
Product 185.2 134.3 501.4 341.2
Service 97.8 76.9 286.2 213.5
Total cost of revenue 283.0 211.2 787.6 554.7
GROSS PROFIT:
Product 283.5 202.8 739.0 534.9
Service 583.0 453.2 1,607.8 1,289.0
Total gross profit 866.5 656.0 2,346.8 1,823.9
OPERATING EXPENSES:
Research and development 134.3 107.8 383.5 311.6
Sales and marketing 427.1 347.1 1,230.2 978.0
General and administrative 40.7 35.8 124.7 102.2
Gain on intellectual property matter (1.1 ) (1.1 ) (3.4 ) (3.4 )
Total operating expenses 601.0 489.6 1,735.0 1,388.4
OPERATING INCOME 265.5 166.4 611.8 435.5
INTEREST INCOME 4.6 1.2 8.3 3.5
INTEREST EXPENSE (4.5 ) (4.6 ) (13.5 ) (10.4 )
OTHER EXPENSE—NET (0.9 ) (6.3 ) (19.3 ) (7.5 )
INCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENT 264.7 156.7 587.3 421.1
PROVISION FOR (BENEFIT FROM) INCOME TAXES 27.3 (9.3 ) 21.6 10.4
LOSS FROM EQUITY METHOD INVESTMENT (6.3 ) (2.8 ) (22.9 ) (2.8 )
NET INCOME INCLUDING NON-CONTROLLING INTERESTS 231.1 163.2 542.8 407.9
Less: NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX (0.5 ) 0.1 (0.7 ) 0.1
NET INCOME ATTRIBUTABLE TO FORTINET, INC. $ 231.6 $ 163.1 $ 543.5 $ 407.8
Net income per share attributable to Fortinet, Inc.(a):
Basic $ 0.29 $ 0.20 $ 0.68 $ 0.50
Diluted $ 0.29 $ 0.19 $ 0.67 $ 0.49
Weighted-average shares used to compute net income per share attributable to Fortinet, Inc.(a):
Basic 786.2 817.7 795.0 816.5
Diluted 798.6 838.6 809.8 835.4

(a) All share and per share amounts presented herein have been retroactively adjusted to reflect the five-for-one forward stock split which was effective June 22, 2022.

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)

Nine Months Ended
  September 30,
2022		 September 30,
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including non-controlling interests $             542.8 $             407.9
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation                162.6                154.8
Amortization of deferred contract costs                163.8                126.9
Depreciation and amortization                  77.0                  59.1
Amortization of investment premiums                    3.6                    4.8
Loss from equity method investment                  22.9                    2.8
Other                  21.2                    4.4
Changes in operating assets and liabilities, net of impact of business combinations:
Accounts receivable—net              (162.7 )                130.6
Inventory                (59.7 )                (19.5 )
Prepaid expenses and other current assets                  (7.6 )                (12.5 )
Deferred contract costs              (221.0 )              (201.0 )
Deferred tax assets              (172.0 )                (91.9 )
Other assets                (13.9 )                (15.7 )
Accounts payable                  78.6                (11.8 )
Accrued liabilities                  27.8                  77.0
Accrued payroll and compensation                  (3.2 )                  23.1
Other liabilities                  (0.5 )                  (3.2 )
Deferred revenue                742.8                497.1
Net cash provided by operating activities            1,202.5            1,132.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments              (389.1 )          (1,749.9 )
Sales of investments                    3.0                  82.2
Maturities of investments            1,182.9            1,029.0
Purchases of property and equipment              (250.3 )              (144.6 )
Purchases of investment in privately held company                     —              (160.0 )
Payments made in connection with business combinations, net of cash acquired                     —                (73.4 )
Purchases of marketable equity securities                     —                (42.5 )
Net cash provided by (used in) investing activities                546.5          (1,059.2 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of discount and underwriting fees                     —                989.4
Payments for debt issuance costs                     —                  (2.4 )
Payments of debt assumed in connection with business combination                     —                  (2.2 )
Repurchase and retirement of common stock          (1,991.2 )              (170.0 )
Proceeds from issuance of common stock                  21.7                  20.7
Taxes paid related to net share settlement of equity awards              (132.1 )              (118.9 )
Other                  (1.3 )                  (0.2 )
Net cash provided by (used in) financing activities          (2,102.9 )                716.4
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                  (1.2 )                    0.2
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (355.1 )                790.3
CASH AND CASH EQUIVALENTS—Beginning of period            1,319.1            1,061.8
CASH AND CASH EQUIVALENTS—End of period $             964.0 $          1,852.1

 

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
(Unaudited, in millions, except per share amounts)

Reconciliation of net cash provided by operating activities to free cash flow

Three Months Ended
September 30,
2022		 September 30,
2021
Net cash provided by operating activities $               483.0 $               398.8
Less: Purchases of property and equipment                  (87.8 )                  (69.0 )
Free cash flow $               395.2 $               329.8
Net cash provided by (used in) investing activities $               297.8 $              (307.5 )
Net cash used in financing activities $              (526.6 ) $             (118.7 )

Reconciliation of GAAP operating income to non-GAAP operating income, operating margin, net income attributable to Fortinet, Inc. and diluted net income per share attributable to Fortinet, Inc.

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
GAAP
Results		 Adjustments Non-GAAP Results GAAP
Results		 Adjustments Non-GAAP Results
Operating income $ 265.5 $ 59.4 (a) $ 324.9 $ 166.4 $ 57.2 (b) $ 223.6
Operating margin 23.1 % 28.3 % 19.2 % 25.8 %
Adjustments:
Stock-based compensation 55.3 53.5
Amortization of acquired intangible assets 5.2 4.8
Gain on intellectual property matter (1.1 ) (1.1 )
Tax adjustment (27.8 ) (c) (54.2 ) (c)
Adjustments attributable non-controlling interests (0.5 ) (d) (0.2 ) (d)
Net income attributable to Fortinet, Inc. $ 231.6 $ 31.1 $ 262.7 $ 163.1 $ 2.8 $ 165.9
Diluted net income per share attributable to Fortinet, Inc.(e) $ 0.29 $ 0.33 $ 0.19 $ 0.20
Shares used in diluted net income per share attributable to Fortinet, Inc. calculations(e) 798.6 798.6 838.6 838.6

(a) To exclude $55.3 million of stock-based compensation and $5.2 million of amortization of acquired intangible assets, offset by a $1.1 million gain on intellectual property matter in the three months ended September 30, 2022.
(b) To exclude $53.5 million of stock-based compensation and $4.8 million of amortization of acquired intangible assets, offset by a $1.1 million gain on intellectual property matter in the three months ended September 30, 2021.
(c) Non-GAAP financial information is adjusted to an effective tax rate of 17% and 21% in the three months ended September 30, 2022 and 2021, respectively, on a non-GAAP basis, which differs from the GAAP effective tax rate.
(d) Adjustments related to the non-GAAP results attributable to non-controlling interests, which were adjusted to an effective tax rate of 31% for the subsidiary of Alaxala Networks Corporation in the three months ended September 30, 2022 and 2021.
(e) All share and per share amounts presented herein have been retroactively adjusted to reflect the five-for-one forward stock split which was effective June 22, 2022.

Reconciliation of total revenue to total billings

Three Months Ended
September 30,
2022		 September 30,
2021
Total revenue $            1,149.5 $               867.2
Add: Change in deferred revenue                  261.5                  201.0
Less: Deferred revenue balance acquired in business combination                       —                    (4.1 )
Total billings $            1,411.0 $            1,064.1
Investor Contact: Media Contact:
Peter Salkowski John Welton
Fortinet, Inc. Fortinet, Inc.
408-331-4595 408-235-7700
psalkowski@fortinet.com pr@fortinet.com

 


GlobeNewswire Distribution ID 8687908

Posted on

WillScot Mobile Mini Holdings Reports Third Quarter 2022 Results

Commercial Momentum Continues and Divestiture Proceeds Reinvested to Compound Growth

Outperformance in Modular and Storage Segments Fully Offsets Impact of Discontinued Operations

PHOENIX, Nov. 02, 2022 (GLOBE NEWSWIRE) — WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini Holdings” or the “Company”) (Nasdaq: WSC), the North American leader in innovative flexible workspace and portable storage solutions, today announced third quarter 2022 results and provided an update on operations and the current market environment, including the following highlights:

  • Execution across organic and inorganic growth levers in continuing operations resulted in third quarter revenue of $604 million, income from continuing operations of $86 million and Adjusted EBITDA of $251 million. These results exclude our prior Tank and Pump segment, which was divested on September 30th and is reported as discontinued operations in all periods. Including results from discontinued operations, net income was $129 million and Adjusted EBITDA was $264 million.
  • Adjusted EBITDA Margin from continuing operations of 41.6% expanded 270 basis points year-over-year.
  • Generated $210 million of Cash From Operations and $83 million of Free Cash Flow in the quarter, up 61.3% and 6.2% respectively, year-over-year, with Free Cash Flow Margin of 12% over the last twelve months.
  • Closed four acquisitions of regional and local storage and modular companies in Q3 2022 and 13 acquisitions in the last twelve months with consistent pipeline heading into 2023.
  • Returned $197 million to shareholders by repurchasing 5.3 million shares of Common Stock during the quarter, reducing economic share count by 6.4% over the last twelve months as of September 30, 20221.
  • Reduced leverage to 3.4x Net Debt to LTM Adjusted EBITDA.
  • Updated full-year 2022 Adjusted EBITDA outlook range from continuing operations to between $910 million and $930 million, representing 30% to 33% growth versus 2021.

Brad Soultz, Chief Executive Officer of WillScot Mobile Mini Holdings, commented, “Our strong commercial performance continued in the third quarter. Volumes, average monthly rates, and Value Added Products (VAPS) penetration grew, and along with the sequential stabilization of SG&A, resulted in Consolidated Adjusted EBITDA margins of 41.6% expanding by 270 basis points year-over-year and 140 basis points sequentially. As we position for 2023, we are particularly focused on our cross-selling initiatives to continue driving volumes. To support and extend our rate trajectory, we continue to evolve our commercial approach for portable storage units and ground level offices. Our sales team is shifting from transactional to value-based selling as we emphasize our differentiated value proposition with product positioning, best-in-class logistics and customer service, and VAPS. These idiosyncratic growth levers represent powerful tailwinds that give us visibility into lease revenue growth well beyond 2023.”

Soultz continued, “The consistent, compounding growth of our core segments and the successful divestiture of the Tank and Pump segment during the quarter together reduced leverage from 3.7x in Q2 to 3.4x in Q3 and comfortably within our target 3.0x – 3.5x range. The capital from the divestiture is already being redeployed consistent with our capital allocation framework, including re-investment in our Modular and Storage segments, continued M&A, and returns to shareholders.”

Soultz concluded, “With Adjusted EBITDA from continuing operations of $251 million in Q3 and our updated outlook range, we are clearly on track to eclipse the $1 billion Adjusted EBITDA run-rate milestone that we set at our November 2021 Investor Day. I am excited to further focus our team on our core business as we complete an incredibly successful 2022 and look forward to 2023.”

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share data) 2022 2021 2022 2021
Revenue $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634
Income from continuing operations $ 85,728 $ 57,113 $ 200,099 $ 75,278
Adjusted EBITDA2 $ 251,339 $ 179,203 $ 652,529 $ 499,359
Adjusted EBITDA Margin (%)2 41.6 % 38.9 % 40.0 % 38.5 %
Net cash provided by operating activities $ 210,385 $ 130,447 $ 544,238 $ 392,055
Free Cash Flow2,5 $ 83,386 $ 78,493 $ 207,428 $ 251,709
Fully Diluted Shares Outstanding 217,927,725 231,868,397 223,933,319 234,084,800
Free Cash Flow Margin (%)2,5 13.1 % 16.0 % 12.0 % 18.3 %
Return on Invested Capital2 16.3 % 12.7 % 14.2 % 11.1 %
Three Months Ended September 30, Nine Months Ended September 30,
Adjusted EBITDA by Segment (in thousands)2 2022 2021 2022 2021
NA Modular $ 140,673 $ 106,825 $ 372,502 $ 307,741
NA Storage 98,695 59,123 243,282 154,971
UK Storage 11,971 13,255 36,745 36,647
Consolidated Adjusted EBITDA $ 251,339 $ 179,203 $ 652,529 $ 499,359

Third Quarter 2022 Results2

Tim Boswell, President and Chief Financial Officer of WillScot Mobile Mini Holdings, commented, “Our strong commercial execution translated into outstanding financial results and an accelerating run-rate heading into 2023. With the divestiture of our Tank and Pump segment, we are more streamlined and more focused. The results of that segment are reported as discontinued operations in Q3 and all prior periods. From our continuing operations, revenues of $604 million increased by 31%, Adjusted EBITDA of $251 million increased by 40%, and Income from continuing operations of $86 million and diluted EPS from continuing operations of $0.39 increased by 50% and 66%, respectively. Consolidated Adjusted EBITDA margin of 41.6% expanded by 270 basis points, with the predictable compounding effects of pricing and VAPS offsetting inflationary pressures and variable costs in what was our strongest quarter for Modular deliveries since 2019. Our ability to pass through costs effectively was evident across all revenue streams and particularly in our Delivery and Installation services, where margins expanded by 870 basis points year-over-year, and the team is executing multiple initiatives to optimize rates and costs. And most importantly, this good work is all driving cash flows from operations, which increased 61% year-over-year to $210 million, and Free Cash Flow of $83 million increased 6% year-over-year.”

Boswell continued, “With the close of the Tank and Pump divestiture, we reduced leverage to 3.4x, which when combined with the expected predictable growth of our cash flows heading into 2023 gives us extraordinary capital allocation flexibility. In the third quarter, we continued to invest organically in storage fleet, modular refurbishments, and VAPS. We invested $105 million in acquisitions. And we repurchased $197 million of our common stock in Q3, reducing our economic share count by 6.4% over the last twelve months.”

Boswell concluded, “Given our performance year to date and excluding results from the divested Tank and Pump segment, we are raising our full year guidance for our continuing operations to $2.22 billion to $2.27 billion of revenue and $910 million to $930 million of Adjusted EBITDA. For reference, comparable guidance including the Tank and Pump segment for all of 2022 would have been $955 million to $980 million of Adjusted EBITDA. Importantly, acquisitions and outperformance in the third quarter in our core Modular and Storage segments completely offset the earnings divested with the Tank and Pump segment, such that we believe that our run-rate heading into 2023 is unchanged but with a more streamlined portfolio and a superior revenue mix. As we moderate organic capital expenditures heading into Q4 and 2023, we remain on track to achieve our $500M Free Cash Flow run-rate. And we remain incredibly convicted in our $1B portfolio of idiosyncratic growth drivers that we discussed at our November 2021 Investor Day and equally confident in the consistent execution by our team in all operating environments.”

Consolidated Q3 2022 Results

  • Revenue of $604.2 million increased by 31.1% year-over-year due to organic revenue growth levers in the business and due to the impact of acquisitions. Recent acquisitions contributed approximately $22.4 million to total revenues.
  • Adjusted EBITDA of $251.3 million increased by 40.2% year-over-year and Consolidated Adjusted EBITDA margin of 41.6% increased by 270 basis points year-over-year due to strong pricing and volume trends and an 870 basis point expansion of delivery and installation margins, partially offset by increased variable leasing costs from higher activity levels, as well as continuing inflationary pressures.
  • Including results from discontinued operations, Adjusted EBITDA was $264.4 million.

NA Modular

  • Revenue of $375.4 million increased by 25.5% year-over-year.
    • Average modular space monthly rental rate increased $157 year-over-year, or 18.8%, to $991.
    • Average modular space units on rent increased 3,146 units year-over-year, or 3.7%, to 87,364. Units on rent have grown 5.1% year-to-date from 12/31/2021 to 9/30/2022, which has been split evenly between organic growth and via acquisition.
    • Value Added Products (VAPS) average monthly rate, a component of average modular space monthly rental rate above, increased $56 year-over-year, or 24%, to $287. For delivered units over the last 12 months, VAPS average monthly rate increased $57 year-over-year, or 15%, to $439.
  • Adjusted EBITDA of $140.7 million increased by 31.8% year-over-year and Adjusted EBITDA Margin of 37.5% expanded by 176 basis points.

NA Storage

  • Revenue of $202.6 million increased by 51.3% year-over-year.
    • Average portable storage monthly rental rate increased $42 year-over-year, or 27.1%, to $197.
    • Average portable storage units on rent increased by 38,823 units year-over-year, or 28.3%, to 175,946. Of this increase, approximately 19,000 of the units on rent increase was driven by organic volume growth. The remainder of the increase was driven by the acquisition of approximately 20,000 average units on rent from Q4 2021 to Q3 2022.
  • Adjusted EBITDA of $98.7 million increased by 66.9% year-over-year and Adjusted EBITDA Margin of 48.7% expanded by 455 basis points.

UK Storage

  • Revenue of $26.2 million decreased 6.8% year-over-year and Adjusted EBITDA of $12.0 million decreased by 9.8%, driven entirely by the weakening of the British Pound relative to the US Dollar. In local currency, revenue increased 9.1% year-over-year, driven by a 13.6% increase in portable storage average monthly rental rates and an 8.4% increase in average portable storage units on rent, and Adjusted EBITDA increased by 5.7% year-over-year.

Tank and Pump (Discontinued Operations)

  • Completed divestiture of Tank and Pump segment effective September 30, 2022. Earnings from the Tank and Pump segment are reported as discontinued operations in the third quarter of 2022 and all prior periods. Proceeds from the sale, valued at approximately $323 million, were used to reduce the outstanding balance on our asset backed revolving credit facility and pay off related capital leases. The divestiture resulted in a one-time gain on sale of discontinued operations of $34.0 million in the quarter.

Capitalization and Liquidity Update2

As of September 30, 2022:

  • Repurchased 5.3 million shares of Common Stock for $197 million in the third quarter 2022, contributing to a 6.4% reduction in our economic share count over the last twelve months.
  • Maintained $1.1 billion of excess availability under the asset-backed revolving credit facility; a flexible covenant structure and expected free cash flow acceleration will provide ample liquidity to fund multiple capital allocation priorities.
  • As of September 30, 2022, weighted average interest rate was approximately 4.75% and annual cash interest expense based on the current debt structure and benchmark rates was approximately $142 million.
  • No debt maturities prior to 2025.
  • Reduced leverage to 3.4x last twelve months Adjusted EBITDA from continuing operations of $852 million, within our target range of 3.0x to 3.5x, while supporting strong organic demand, executing four tuck-in transactions, and repurchasing shares.

2022 Outlook 2, 3, 4

This guidance is subject to risks and uncertainties, including those described in “Forward-Looking Statements” below.

$M 2021 Results
Including T&P		 Previous ‘ 22 Outlook
Including T&P for FY’22		 Current ’22 Outlook
Including T&P for FY’22		 2021 Results
Excluding T&P		 Current ’22 Outlook
Excluding T&P for FY’22
Revenue $1,895 $2,200 – $2,300 $2,340 – $2,400 $1,784 $2,220 – $2,270
Adjusted EBITDA2,3 $740 $900 – $940 $955 – $980 $699 $910 – $930
Net CAPEX3,4 $237 $325 – $375 $390 – $435 $221 $370 – $410

1 – Assumes common shares outstanding plus treasury stock method from warrants outstanding as of September 30, 2022 versus September 30, 2021 and the closing stock price of $40.33 on September 30, 2022.
2 – Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Free Cash Flow Margin, and Return on Invested Capital are non-GAAP financial measures. Further information and reconciliations for these non-GAAP measures to the most directly comparable financial measure under generally accepted accounting principles in the US (“GAAP”) are included at the end of this press release.
3 – Information reconciling forward-looking Adjusted EBITDA and Net CAPEX to GAAP financial measures is unavailable to the Company without unreasonable effort and therefore no reconciliation to the most comparable GAAP measures is provided.
4 – Net CAPEX is a non-GAAP financial measure. Please see the non-GAAP reconciliation tables included at the end of this press release.
5 – Free Cash Flow incorporates results from discontinued operations. For comparability, reported revenue is adjusted to include results from discontinued operations to calculate Free Cash Flow Margin.

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Free Cash Flow Margin, Return on Invested Capital, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Income From Continuing Operations Excluding Gain/Loss from Warrants, and Net CAPEX. Adjusted EBITDA is defined as net income (loss) plus net interest (income) expense, income tax expense (benefit), depreciation and amortization adjusted to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations, including net currency gains and losses, goodwill and other impairment charges, restructuring costs, costs to integrate acquired companies, costs incurred related to transactions, non-cash charges for stock compensation plans, gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities, and other discrete expenses. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Free Cash Flow is defined as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Free Cash Flow Margin is defined as Free Cash Flow divided by revenue. Return on Invested Capital is defined as adjusted earnings before interest and amortization divided by net assets. Adjusted earnings before interest and amortization is the sum of income (loss) before income tax expense, net interest (income) expense, amortization adjusted for non-cash items considered non-core to business operations including net currency (gains) losses, goodwill and other impairment charges, restructuring costs, costs to integrate acquired companies, non-cash charges for stock compensation plans, gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities, and other discrete expenses, reduced by our estimated statutory tax rate. Given we are not a significant US taxpayer due to our current tax attributes, we include estimated taxes at our current statutory tax rate of approximately 25%. Net assets is total assets less goodwill and intangible assets, net and all non-interest bearing liabilities and is calculated as a five quarter average. Adjusted Gross Profit is defined as gross profit plus depreciation of rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Income From Continuing Operations Excluding Gain/Loss from Warrants is defined as income from continuing operations plus or minus the change in the fair value of the common stock warrant liability. Net CAPEX is defined as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, “Total Capital Expenditures”), less proceeds from the sale of rental equipment and proceeds from the sale of property, plant and equipment (collectively, “Total Proceeds”), which are all included in cash flows from investing activities. The Company believes that Adjusted EBITDA and Adjusted EBITDA margin are useful to investors because they (i) allow investors to compare performance over various reporting periods on a consistent basis by removing from operating results the impact of items that do not reflect core operating performance; (ii) are used by our board of directors and management to assess our performance; (iii) may, subject to the limitations described below, enable investors to compare the performance of the Company to its competitors; (iv) provide additional tools for investors to use in evaluating ongoing operating results and trends; and (v) align with definitions in our credit agreement. The Company believes that Free Cash Flow and Free Cash Flow Margin are useful to investors because they allow investors to compare cash generation performance over various reporting periods and against peers. The Company believes that Return on Invested Capital provides information about the long-term health and profitability of the business relative to the Company’s cost of capital. The Company believes that Adjusted Gross Profit and Adjusted Gross Profit Percentage are useful to investors because they allow investors to assess gross profit excluding non-cash expenses, which provides useful information regarding our results of operations and assists in analyzing the underlying performance of our business. The Company believes that Income from Continuing Operations Excluding Gain/Loss from Warrants is useful to investors because it removes the impact of stock market volatility from our operational results. The Company believes that the presentation of Net CAPEX provides useful information to investors regarding the net capital invested into our rental fleet and plant, property and equipment each year to assist in analyzing the performance of our business. Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. These non-GAAP measures should not be considered in isolation from, or as an alternative to, financial measures determined in accordance with GAAP. Other companies may calculate Adjusted EBITDA and other non-GAAP financial measures differently, and therefore the Company’s non-GAAP financial measures may not be directly comparable to similarly-titled measures of other companies. For reconciliation of the non-GAAP measures used in this press release (except as explained below), see “Reconciliation of Non-GAAP Financial Measures” included in this press release.

Information reconciling forward-looking Adjusted EBITDA to GAAP financial measures is unavailable to the Company without unreasonable effort. We cannot provide reconciliations of forward-looking Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the Company without unreasonable effort. Although we provide a range of Adjusted EBITDA that we believe will be achieved, we cannot accurately predict all the components of the Adjusted EBITDA calculation. The Company provides Adjusted EBITDA guidance because we believe that Adjusted EBITDA, when viewed with our results under GAAP, provides useful information for the reasons noted above.

Conference Call Information
WillScot Mobile Mini Holdings will host a conference call and webcast to discuss its third quarter 2022 results and outlook at 10 a.m. Eastern Time on Thursday, November 3, 2022. To access the live call by phone, use the following link: https://register.vevent.com/register/BI099db532a3254e9db65c846dcc68cbdb. You will be provided with dial-in details after registering. To avoid delays, we recommend that participants dial into the conference call 15 minutes ahead of the scheduled start time.  A live webcast will also be accessible via the “Events & Presentations” section of the Company’s investor relations website www.willscotmobilemini.com. Choose “Events” and select the information pertaining to the WillScot Mobile Mini Holdings Third Quarter 2022 Conference Call. Additionally, there will be slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software. For those unable to listen to the live broadcast, an audio webcast of the call will be available for 12 months on the Company’s investor relations website.

About WillScot Mobile Mini Holdings

WillScot Mobile Mini Holdings trades on the Nasdaq stock exchange under the ticker symbol “WSC.” Headquartered in Phoenix, Arizona, the Company is a leading business services provider specializing in innovative flexible workspace and portable storage solutions. WillScot Mobile Mini services diverse end markets across all sectors of the economy from a network of approximately 260 branch locations and additional drop lots throughout the United States, Canada, Mexico, and the United Kingdom.

Forward-Looking Statements
This press release contains forward-looking statements (including the guidance/outlook contained herein) within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature. Certain of these forward-looking statements include statements relating to: our pipeline, acceleration of our run rate, acceleration toward and the timing of our achievement of our three to five year milestones, growth and acceleration of cash flow, drive higher returns on invested capital, and Adjusted EBITDA margin expansion. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although the Company believes that these forward-looking statements are based on reasonable assumptions, they are predictions and we can give no assurance that any such forward-looking statement will materialize. Important factors that may affect actual results or outcomes include, among others, our ability to acquire and integrate new assets and operations; our ability to achieve planned synergies related to acquisitions; our ability to successfully execute our growth strategy, manage growth and execute our business plan; our estimates of the size of the markets for our products; the rate and degree of market acceptance of our products; the success of other competing modular space and portable storage solutions that exist or may become available; rising costs and inflationary pressures adversely affecting our profitability; potential litigation involving our Company; general economic and market conditions impacting demand for our products and services and our ability to benefit from an inflationary environment; our ability to maintain an effective system of internal controls; and such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our Form 10-K for the year ended December 31, 2021), which are available through the SEC’s EDGAR system at www.sec.gov and on our website. Any forward-looking statement speaks only at the date which it is made, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Additional Information and Where to Find It

Additional information can be found on the company’s website at www.willscotmobilemini.com.

Contact Information
Investor Inquiries: Media Inquiries:
Nick Girardi Jessica Taylor
investors@willscotmobilemini.com jetaylor@willscotmobilemini.com

WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data) 2022 2021 2022 2021
Revenues:
Leasing and services revenue:
Leasing $ 447,535 $ 342,599 $ 1,226,206 $ 965,894
Delivery and installation 132,837 91,910 341,027 252,914
Sales revenue:
New units 9,901 15,370 26,232 35,915
Rental units 13,900 11,168 38,874 40,911
Total revenues 604,173 461,047 1,632,339 1,295,634
Costs:
Costs of leasing and services:
Leasing 111,898 77,967 288,774 222,747
Delivery and installation 95,680 74,221 256,130 209,963
Costs of sales:
New units 6,007 11,175 15,469 24,322
Rental units 7,097 5,468 21,123 22,441
Depreciation of rental equipment 69,159 52,990 192,228 165,027
Gross profit 314,332 239,226 858,615 651,134
Expenses:
Selling, general and administrative 145,444 127,346 445,319 356,651
Other depreciation and amortization 17,066 16,459 50,895 51,793
Lease impairment expense and other related charges — 601 254 2,328
Restructuring costs — 1,856 (86 ) 11,956
Currency losses, net 236 127 247 196
Other (income) expense, net (2,526 ) 1,475 (7,642 ) 202
Operating income 154,112 91,362 369,628 228,008
Interest expense 38,165 29,006 102,362 87,793
Fair value loss on common stock warrant liabilities — — — 26,597
Loss on extinguishment of debt — — — 5,999
Income from continuing operations before income tax 115,947 62,356 267,266 107,619
Income tax expense from continuing operations 30,219 5,243 67,167 32,341
Income from continuing operations 85,728 57,113 200,099 75,278
Discontinued operations:
Income from discontinued operations before income tax 10,802 5,391 24,488 14,255
Income tax expense from discontinued operations 1,986 1,401 5,496 3,612
Gain on sale of discontinued operations 34,049 — 34,049 —
Income from discontinued operations 42,865 3,990 53,041 10,643
Net income $ 128,593 $ 61,103 $ 253,140 $ 85,921
Earnings per share from continuing operations:
Basic $ 0.40 $ 0.25 $ 0.91 $ 0.33
Diluted $ 0.39 $ 0.24 $ 0.89 $ 0.32
Earnings per share from discontinued operations:
Basic $ 0.20 $ 0.02 $ 0.24 $ 0.05
Diluted $ 0.20 $ 0.02 $ 0.24 $ 0.05
Earnings per share:
Basic $ 0.60 $ 0.27 $ 1.15 $ 0.38
Diluted $ 0.59 $ 0.26 $ 1.13 $ 0.37
Weighted average shares:
Basic 213,636,876 225,998,202 219,312,260 227,557,664
Diluted 217,927,725 231,868,397 223,933,319 234,084,800

Unaudited Segment Operating Data

Comparison of Three Months Ended September 30, 2022 and 2021

Three Months Ended September 30, 2022
(in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Total
Revenue $ 375,364 $ 202,645 $ 26,164 $ 604,173
Gross profit $ 156,852 $ 141,035 $ 16,445 $ 314,332
Adjusted EBITDA $ 140,673 $ 98,695 $ 11,971 $ 251,339
Capital expenditures for rental equipment $ 81,052 $ 41,246 $ 4,605 $ 126,903
Average modular space units on rent 87,364 18,052 8,569 113,985
Average modular space utilization rate 67.8 % 73.7 % 71.5 % 68.9 %
Average modular space monthly rental rate $ 991 $ 746 $ 391 $ 907
Average portable storage units on rent 556 175,946 27,794 204,296
Average portable storage utilization rate 63.1 % 88.8 % 89.7 % 88.9 %
Average portable storage monthly rental rate $ 227 $ 197 $ 88 $ 182
Three Months Ended September 30, 2021
(in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Total
Revenue $ 299,051 $ 133,897 $ 28,099 $ 461,047
Gross profit $ 127,854 $ 92,496 $ 18,876 $ 239,226
Adjusted EBITDA $ 106,825 $ 59,123 $ 13,255 $ 179,203
Capital expenditures for rental equipment $ 31,789 $ 11,920 $ 11,649 $ 55,358
Average modular space units on rent 84,218 16,316 9,298 109,832
Average modular space utilization rate 67.6 % 77.6 % 83.4 % 70.1 %
Average modular space monthly rental rate $ 834 $ 602 $ 454 $ 767
Average portable storage units on rent 493 137,123 25,632 163,248
Average portable storage utilization rate 48.0 % 83.2 % 89.1 % 83.9 %
Average portable storage monthly rental rate $ 179 $ 155 $ 90 $ 145

Comparison of Nine Months Ended September 30, 2022 and 2021

Nine Months Ended September 30, 2022
(in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Total
Revenue $ 1,022,720 $ 529,347 $ 80,272 $ 1,632,339
Gross profit $ 439,573 $ 367,585 $ 51,457 $ 858,615
Adjusted EBITDA $ 372,502 $ 243,282 $ 36,745 $ 652,529
Capital expenditures for rental equipment $ 221,111 $ 95,699 $ 21,824 $ 338,634
Average modular space units on rent 86,310 18,223 8,470 113,003
Average modular space utilization rate 67.5 % 74.7 % 72.0 % 68.9 %
Average modular space monthly rental rate $ 936 $ 673 $ 409 $ 853
Average portable storage units on rent 498 161,331 27,612 189,441
Average portable storage utilization rate 56.5 % 86.0 % 89.8 % 86.4 %
Average portable storage monthly rental rate $ 201 $ 184 $ 92 $ 171
Nine Months Ended September 30, 2021
(in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Total
Revenue $ 854,657 $ 357,439 $ 83,538 $ 1,295,634
Gross profit $ 356,992 $ 240,836 $ 53,306 $ 651,134
Adjusted EBITDA $ 307,741 $ 154,971 $ 36,647 $ 499,359
Capital expenditures for rental equipment $ 120,288 $ 24,165 $ 22,645 $ 167,098
Average modular space units on rent 84,589 16,371 9,256 110,216
Average modular space utilization rate 67.6 % 78.5 % 83.8 % 70.2 %
Average modular space monthly rental rate $ 790 $ 570 $ 428 $ 727
Average portable storage units on rent 9,566 118,598 25,284 153,448
Average portable storage utilization rate 64.1 % 78.0 % 90.0 % 78.7 %
Average portable storage monthly rental rate $ 129 $ 152 $ 86 $ 140

WillScot Mobile Mini Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data) September 30, 2022 December 31, 2021
Assets
Cash and cash equivalents $ 15,442 $ 12,699
Trade receivables, net of allowances for credit losses at September 30, 2022 and December 31, 2021 of $56,127 and $46,160, respectively 439,309 368,856
Inventories 44,873 32,092
Prepaid expenses and other current assets 39,691 36,539
Assets held for sale – current 951 32,854
Total current assets 540,266 483,040
Rental equipment, net 3,227,735 2,946,008
Property, plant and equipment, net 311,526 282,247
Operating lease assets 225,955 235,344
Goodwill 1,064,582 1,078,699
Intangible assets, net 431,291 451,928
Other non-current assets 8,909 10,797
Assets held for sale – non-current — 285,536
Total long-term assets 5,269,998 5,290,559
Total assets $ 5,810,264 $ 5,773,599
Liabilities and equity
Accounts payable $ 160,262 $ 110,270
Accrued expenses 123,300 95,592
Accrued employee benefits 53,477 65,927
Deferred revenue and customer deposits 212,005 159,612
Operating lease liabilities – current 51,971 51,103
Current portion of long-term debt 13,497 11,968
Liabilities held for sale – current — 23,173
Total current liabilities 614,512 517,645
Long-term debt 2,935,800 2,676,985
Deferred tax liabilities 385,854 337,784
Operating lease liabilities – non-current 174,777 184,199
Other non-current liabilities 18,182 15,737
Liabilities held for sale – non-current — 44,486
Long-term liabilities 3,514,613 3,259,191
Total liabilities 4,129,125 3,776,836
Commitments and contingencies
Preferred Stock: $0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at September 30, 2022 and December 31, 2021 — —
Common Stock: $0.0001 par, 500,000,000 shares authorized and 211,243,820 and 223,939,527 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 22 22
Additional paid-in capital 3,112,076 3,616,902
Accumulated other comprehensive loss (93,009 ) (29,071 )
Accumulated deficit (1,337,950 ) (1,591,090 )
Total shareholders’ equity 1,681,139 1,996,763
Total liabilities and shareholders’ equity $ 5,810,264 $ 5,773,599

Reconciliation of Non-GAAP Financial Measures

In addition to using GAAP financial measurements, we use certain non-GAAP financial information that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends.

We evaluate business segment performance on Adjusted EBITDA, a non-GAAP measure that excludes certain items as described below. We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company.

We also regularly evaluate gross profit by segment to assist in the assessment of the operational performance of each operating segment. We consider Adjusted EBITDA to be the more important metric because it more fully captures the business performance of the segments, inclusive of indirect costs.

We also evaluate Free Cash Flow, a non-GAAP measure that provides useful information concerning cash flow available to fund our capital allocation alternatives.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before income tax expense (benefit), net interest (income) expense, depreciation and amortization adjusted for certain items considered non-core to our business operations including net currency (gains) losses, goodwill and other impairment charges, restructuring costs, transaction costs, costs to integrate acquired companies, non-cash charges for stock compensation plans, gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities, and other discrete expenses.

  • Currency (gains) losses, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency gains (losses) are unrealized and attributable to financings due to and from affiliated companies.
  • Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment.
  • Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee termination costs.
  • Transaction costs including legal and professional fees and other transaction specific related costs.
  • Costs to integrate acquired companies, including outside professional fees, non-capitalized costs associated with system integrations, non-lease branch and fleet relocation expenses, employee training costs, and other costs required to realize cost or revenue synergies.
  • Non-cash charges for stock compensation plans.
  • Gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities.
  • Other expense includes consulting expenses related to certain one-time projects, financing costs not classified as interest expense, and gains and losses on disposals of property, plant, and equipment.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing the Company’s results as reported under US GAAP. Some of these limitations are:

  • Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs;
  • Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
  • Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
  • Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
  • Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
  • other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations.

The following table provides unaudited reconciliations of Income from continuing operations to Adjusted EBITDA:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Income from continuing operations $ 85,728 $ 57,113 $ 200,099 $ 75,278
Income tax expense from continuing operations 30,219 5,243 67,167 32,341
Loss on extinguishment of debt — — — 5,999
Fair value loss on common stock warrant liabilities — — — 26,597
Interest expense 38,165 29,006 102,362 87,793
Depreciation and amortization 86,225 69,449 243,123 216,820
Currency losses, net 236 127 247 196
Restructuring costs, lease impairment expense and other related charges — 2,457 168 14,284
Transaction costs — 303 35 1,147
Integration costs 3,902 8,242 13,182 23,206
Stock compensation expense 7,180 6,157 22,628 14,305
Other (316 ) 1,106 3,518 1,393
Adjusted EBITDA from continuing operations 251,339 179,203 652,529 499,359
Adjusted EBITDA from discontinued operations 13,048 10,946 37,016 29,870
Adjusted EBITDA including discontinued operations $ 264,387 $ 190,149 $ 689,545 $ 529,229

The following table presents unaudited reconciliations of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the Tank and Pump business for the three and nine months ended September 30, 2022 and 2021, respectively.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Income from discontinued operations before income tax $ 10,802 $ 5,391 $ 24,488 $ 14,255
Interest expense 144 195 512 584
Depreciation and amortization 3,096 5,828 14,248 16,993
Restructuring costs, lease impairment expense and other related charges — — — 2
Integration costs — 5 — 5
Stock compensation expense (221 ) 102 18 175
Other (773 ) (575 ) (2,250 ) (2,144 )
Adjusted EBITDA from discontinued operations $ 13,048 $ 10,946 $ 37,016 $ 29,870

Income From Continuing Operations Excluding Gain/Loss from Warrants

We define Income from Continuing Operations Excluding Gain/Loss from Warrants as income from continuing operations plus or minus the impact of the change in the fair value of the common stock warrant liability. Management believes that the presentation of our financial statements excluding the impact of the mark-to-market adjustment provides useful information regarding our results of operations and assists in the review of our actual operating performance. The following table provides unaudited reconciliations of Income from Continuing Operations to Income from Continuing Operations Excluding Gain/Loss from Warrants:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Income from continuing operations $ 85,728 $ 57,113 $ 200,099 $ 75,278
Fair value loss on common stock warrant liabilities — — — 26,597
Income from Continuing Operations Excluding Gain/Loss from Warrants $ 85,728 $ 57,113 $ 200,099 $ 101,875

Adjusted EBITDA Margin

Adjusted EBITDA Margin is a non-GAAP measure defined as Adjusted EBITDA divided by Revenue. Management believes that the presentation of Adjusted EBITDA Margin provides useful information to investors regarding the performance of our business. The following table provides unaudited reconciliations of Adjusted EBITDA Margin:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Adjusted EBITDA (A) $ 251,339 $ 179,203 $ 652,529 $ 499,359
Revenue (B) 604,173 461,047 1,632,339 1,295,634
Adjusted EBITDA Margin (A/B) 41.6 % 38.9 % 40.0 % 38.5 %
Income from continuing operations (C) $ 85,728 $ 57,113 $ 200,099 $ 75,278
Income from Continuing Operations Margin (C/B) 14.2 % 12.4 % 12.3 % 5.8 %

Free Cash Flow and Free Cash Flow Margin

Free Cash Flow is a non-GAAP measure. Free Cash Flow is defined as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Free Cash Flow Margin is defined as Free Cash Flow divided by Total Revenue including discontinued operations. Management believes that the presentation of Free Cash Flow and Free Cash Flow Margin provides useful additional information concerning cash flow available to fund our capital allocation alternatives.

The following table provides unaudited reconciliations of Free Cash Flow and Free Cash Flow Margin:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Net cash provided by operating activities $ 210,385 $ 130,447 $ 544,238 $ 392,055
Purchases of rental equipment and refurbishments (135,076 ) (60,374 ) (360,465 ) (178,191 )
Proceeds from sale of rental equipment 17,183 11,597 52,263 42,034
Purchases of property, plant and equipment (10,000 ) (3,386 ) (30,253 ) (20,836 )
Proceeds from the sale of property, plant and equipment 894 209 1,645 16,647
Free Cash Flow (A) $ 83,386 $ 78,493 $ 207,428 $ 251,709
Revenue from continuing operations (B) $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634
Revenue from discontinued operations 33,988 29,505 96,356 81,343
Total Revenue including discontinued operations (C) 638,161 490,552 1,728,695 1,376,977
Free Cash Flow Margin (A/C) 13.1 % 16.0 % 12.0 % 18.3 %
Net cash provided by operating activities (D) $ 210,385 $ 130,447 $ 544,238 $ 392,055
Net cash provided by operating activities margin (D/B) 34.8 % 28.3 % 33.3 % 30.3 %

Adjusted Gross Profit and Adjusted Gross Profit Percentage

Adjusted Gross Profit is a non-GAAP measure defined as gross profit plus depreciation of rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by Revenue. Adjusted Gross Profit and Adjusted Gross Profit Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measures derived in accordance with GAAP. In addition, our measurement of Adjusted Gross Profit and Adjusted Gross Profit Percentage may not be comparable to similarly titled measures of other companies. Our management believes that the presentation of Adjusted Gross Profit and Adjusted Gross Profit Percentage provides useful information to investors regarding our results of operations because it assists in analyzing the performance of our business.

The following table provides unaudited reconciliations of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Revenue (A) $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634
Gross profit (B) $ 314,332 $ 239,226 $ 858,615 $ 651,134
Depreciation of rental equipment 69,159 52,990 192,228 165,027
Adjusted Gross Profit (C) $ 383,491 $ 292,216 $ 1,050,843 $ 816,161
Gross Profit Percentage (B/A) 52.0 % 51.9 % 52.6 % 50.3 %
Adjusted Gross Profit Percentage (C/A) 63.5 % 63.4 % 64.4 % 63.0 %

Net CAPEX

Net Capital Expenditures (“Net CAPEX”) is defined as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively “Total Capital Expenditures”), less proceeds from sale of rental equipment and proceeds from the sale of property, plant and equipment (collectively “Total Proceeds”), which are all included in cash flows from investing activities. Our management believes that the presentation of Net CAPEX provides useful information to investors regarding the net capital invested into our rental fleet and property, plant and equipment each year to assist in analyzing the performance of our business. The following table provides unaudited reconciliations of Net CAPEX:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Total purchases of rental equipment and refurbishments $ (135,076 ) $ (60,374 ) $ (360,465 ) (178,191 )
Total proceeds from sale of rental equipment 17,183 11,597 52,263 42,034
Net CAPEX for Rental Equipment (117,893 ) (48,777 ) (308,202 ) (136,157 )
Purchase of property, plant and equipment (10,000 ) (3,386 ) (30,253 ) (20,836 )
Proceeds from sale of property, plant and equipment 894 209 1,645 16,647
Net CAPEX $ (126,999 ) $ (51,954 ) $ (336,810 ) $ (140,346 )

Return on Invested Capital

Return on Invested Capital is defined as adjusted earnings before interest and amortization divided by net assets. Adjusted earnings before interest and amortization is the sum of income (loss) before income tax expense, net interest (income) expense, amortization adjusted for non-cash items considered non-core to business operations including net currency (gains) losses, goodwill and other impairment charges, restructuring costs, costs to integrate acquired companies, non-cash charges for stock compensation plans, gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities, and other discrete expenses, reduced by estimated taxes. Given we are not a significant US taxpayer due to our current tax attributes, we include estimated taxes at our current statutory tax rate of approximately 25%. Net assets is total assets less goodwill, and intangible assets, net and all non-interest bearing liabilities. Denominator is calculated as a four quarter average for year-to-date metrics and two quarter average for quarterly metrics.

The following table provides unaudited reconciliations of Return on Invested Capital. Average Invested Capital and Adjusted EBITDA related to our prior Tank and Pump Division has been excluded prospectively from July 1, 2022 only and prior periods have not been adjusted.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Total Assets $ 5,810,264 $ 5,644,181 $ 5,810,264 $ 5,644,181
Goodwill (1,064,582 ) (1,178,290 ) (1,064,582 ) (1,178,290 )
Intangible assets, net (431,291 ) (467,289 ) (431,291 ) (467,289 )
Total Liabilities (4,129,125 ) (3,687,597 ) (4,129,125 ) (3,687,597 )
Long Term Debt 2,935,800 2,598,300 2,935,800 2,598,300
Net Assets excluding interest bearing debt and goodwill and intangibles $ 3,121,066 $ 2,909,305 $ 3,121,066 $ 2,909,305
Average Invested Capital (A) $ 3,147,195 $ 2,882,975 $ 3,117,986 $ 2,853,939
Adjusted EBITDA $ 251,339 $ 190,149 $ 676,497 $ 529,229
Depreciation (79,851 ) (68,490 ) (234,644 ) (213,196 )
Adjusted EBITA (B) $ 171,488 $ 121,659 $ 441,853 $ 316,033
Statutory Tax Rate (C) 25 % 25 % 25 % 25 %
Estimated Tax (B*C) $ 42,872 $ 30,415 $ 110,463 $ 79,008
Adjusted earnings before interest and amortization (D) $ 128,616 $ 91,244 $ 331,390 $ 237,025
ROIC (D/A), annualized 16.3 % 12.7 % 14.2 % 11.1 %
Operating income (E) $ 154,112 $ 96,948 $ 383,682 $ 242,847
Total Assets (F) $ 5,810,264 $ 5,644,181 $ 5,810,264 $ 5,644,181
Operating income / Total Assets (E/F), annualized 10.5 % 6.9 % 8.7 % 5.8 %

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