Procaps (PROC) 5 Sep 232023 Q2 Earnings call transcript

Good day, and welcome to the Procaps Group Business Update Call and Webcast. Today's conference is being recorded. Please note that some statements made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections, and/or future events, including financial projections or future market conditions is a forward-looking statement.

The company's actual future results could differ materially from those expressed in such forward-looking statements due to a variety of risks, uncertainties, and other factors, including, but not limited to, those set forth in Procaps Group’s SEC filings. to such obligation looking no assumes update forward any statements. Procap or note results. is that also market past future Please of performance information guarantee not a

this go ahead. conference turn Investor like I Director to Relations Please Melissa Angelini, At the Procaps. for time, would over to

business website. questions received through filed IR everyone. answered disclaimers today. Procaps which on webcast on This by and release the in is being we review call. found can included you. conference earnings the that to Hello, the by a the be The Please welcome presentation. everyone platform webcast, IR the also be Procaps available you email. call the Thank will Please our Thank We website. webcast today, link standing note appreciate for investor and the update us is to joining also

will investor financial comparable understand to and During non-GAAP the to GAAP operating measures We call, the core of reconciliation financial measures investors Procaps be this enable to non-GAAP directly better of most each believe presentation a discussed these for refer disclosures Please measures. non-GAAP presented. performance.

I to would call the to CEO. Now, Please, ahead. go turn Procaps’ Ruben, over like

thank headed. second Melissa, to XXXX we're you joining you, for an for update our you give and Thank conference call. today doing we're quarter where and us months six wanted and all results I on how

that we that plans do make implementing tough term. and creation and the a in measures faced to are last started continuing already recovery. not the first speeding half value is of company results did we long late market true up and our bearing well better and full the of on We're While hoped, our have growth to initiatives year, as our medium the work as we the we year it

and macroeconomic, entire The toughest are this our industry in region. had that environmental we to have the with -- challenge the deal year issue challenge

expenses are due CDMO and these from interest and rising concerns. multiple our such believe capital rates, reduced by working factors affected from are cost business inflation, of to as costs in We orders companies impacts fully on tackle We financing, high them, profitability, pharma or come costs steps are adopting pass to temporary, fulfill despite decisive year. strategies timely protect all later unable being manner. to Relief customers and we to the a in should to taking

third quarter a be our fourth believe announced better The will believe we're recovery, strongly initiatives fully and already much third this steps absolutely which than related very quarter, year's operational we quarter. by strengthen that strong a we have of In and end our additional performance operations efficiency value to that very and to streamline and year second are quarter XXXX path taking will in the our quarters with efforts, full the XXXX. of in line XXXX, last creation would

Specialties will generate launches for value in the important with creation especially we by plan, have When with Dominican XX% first result new of and at half expenses efficiencies good XX% Rx the period on approximately including will Colombia, believe the the combined found a per same and a first percentage, the growth look quite of market we the initiatives a aggressive Clinical like growth X% of basis. approximately us growing demand year. plan approximately we Republic quarter in grew And year, the outgrowing business the excellent in these our to our and rollouts, CASAND Honduras, have in Panama. growth. Ecuador, of region, strong growth lines, countries constant-currency half XXXX the launches continued position We in for reduce second product our of new

resilient a medium focused We to term committed the organization to refining for term, hurdles. plans in beyond long are short

X. Slide to on Moving

growth future our for is driver important new products. Another

product launches products of driver in been key have first the for revenues million half new XXXX. new our growth. $XX Our for in a

percentage coming of that launched first revenues rate in last renewal half. a Our from XX% of is XX our the was months products in a record the

prioritize realize near the to in We to of our opportunities pipeline will long-term front and investments and us. continue business the of in value

see technologies combo and delivering And an for this prostate important migraines. is playing role up Xtra, Ramp the where and differentiated Aludel, our last XX ever just in can a is product Unigel launched products for several an Dolofen patented quite as first which the example is one is products, the triple which marketplace. months well, we highlighted performing such product oncological in cancer own to

Now over will ESG share pass progress. our about little a it will I to who Melissa

Thank you, communities through education, bit about nutritional, are accomplishments. our a of anniversary XXXX, going we of Ruben. foundation quality little improvement that On we and initiatives celebrated and of health, promotes several health empowerment. to share Procaps developments, ESG XX-year life reproductive this skill In slide, emotional

United prioritized by goals and to conditions and the Foundation to cardiovascular for LATAM, portfolio as product sustainable our increasing Medicine also according are Nations such for oncology. access We development

GHG advancing besides to energy deploys important packaging deliver as is demands treatments and example, Unigel, packaging other well environment benefits supply different that across chain. the plastic fuel consumption. for that we innovation are reduction, as Ruben initiatives. emissions with our Another Reduces for materials on aspect demand the less also the contributes whole just mentioned,

keep are posted our we'll neutrality the strategy, you and working carbon we Lastly, progress. on on

to I results. who will will on operating now pass it our comment Patricio over

Melissa. Thank you,

Slide see our you top-line evolution. to X, can Moving

of year. April, has is business. currency health Colombian since for And quarter at peso a currency of been look that, important the appreciation negative Although us evaluate has it the to to constant second important still in the to because an had compared last

X.X% first sales constant basis, negatively increase in revenues decrease with and of market US order currency in operations we ended sales especially an for ceased OTC by the X% and a of decrease this on in excluding clients, second impacted to So ‘XX of Salvador. half for was quarter which impact, a related El ‘XX, phasing, CDMO for Rymco

to in think was broad that was there comparison mentioning based million, ‘XX. approximately growth a higher Specialties I XX% brands In second worth in addition of XXXX, half of areas amount recognition quarter base. to leading and the a Rx sales of of XX% therapeutic and $X.X this, for demand with increased respectively grew ’XX both our first in products versus top-line several first which Clinical The half across it's

orders are in just and by rollout lower have already of performance therapeutic Exchange expansion capital. the business impact part orders As challenges and reducing was side, help in translated improve of purchase before our Colombia our new the segment products by care partners, on impacted Nicaragua (ph) also their macro orders. working gastrointestinal their for [Nextgel] inventory was and commitments rest in more We resulting country towards this been the now pressure in mentioned, the of offset and El Honduras, have first anticipate starting of as affected areas the third by negatively positive strong impacted several a improving delaying has was few side. of such positively the quarter, in the but that the on to OTC the in that important portfolio customers Salvador. where in by new and overall we conditions year months feminine end for their impacted to the levels recovery year bolstering rates our segment

last a by see of we quarter increased the share XXXX positively was brands. [Time] brands higher we in existing the comparison year-over-year comparison, the the and impacting new higher demand region rollout second base as market sold that has and (ph) of the year. can Negatively impacted the products

is a segment business in Diabetrics our Finally, year. transition

We are working portfolio several on internationalization. and focusing on synergies renewal and

like to saw sales would which higher in ‘XX, on and development a Slide costs, our less Moving from give services. and more the quarter first in color year. Both a I we to was gross product margin down X, of lower profit, high half sales favorable mix bit last the

sales of In which of prior addition, we second profit period. impacted the quarter in positively XXXX had of the brands the for gross recognition

sales Additionally, expenses. quickly impacted Consolidated we strategies marketing the customers, weren't protect margin to offset adapting by lower on to above, contribution and higher able profitability. reasons we're pass but same is partly by fully cost

we On Slide and have EBITDA. breakdown expenses of operating the X, our adjusted

XX.X% the our half the at only already taken a last year, have reflecting in expenses, quarter was XX.X% Looking versus of we financial decrease first results. to improve of periods in measures the SG&A same ’XX the there and

continue adjustments, improvement We contract launches and the working our of increases, on execution value creation mix of price with initiatives product new costs. with our containing

Despite the the medium higher second Our deliver margin to adjusted by has we ability in quarter impacted hurdles, gross are the long these in effects EBITDA optimistic we term. negatively in XXXX. comparison growth have to seen base and our

to we For being, disciplined blind will results a quarter-over-quarter. as the work in not and to continue the challenges, way we're improve our time creative to

the first the main at in XXXX, balance to take the Turning quarter low which the balance the strongest is one year results lowest to mainly fourth X, cash had The traditionally and in the to of we due of Slide year of provides months sheet. has for the cash quarter year. the endure that a look the the we decreased the can items our half

debt on working addition, In overall service capital increase impacted and the generation. cash

while combined we are only though tough as a impacted but waivers months, doing we’ll the Despite value. maximize these secure decrease continue had lower leverage agreements order a we quarters. business increase this, strategy adjusted cash our to EBITDA our in in as the We our as with and leverage long-term forecast our initiatives to our the work to well allocation with slight necessary net Our increase, generation for targets. debt our cash compliance continue several few cash operations on the priorities in flow capital and next

them tightening economic the and the cash to reducing order in political the at the our for When conditions our risks of half. the the we're look the second we health regulation. plans will therefore could care this if macro that some be estimates. to their How business working affect deteriorate are into pressures our for we pressure capital, The further fulfilling in year the our working changes could during year, Colombia or purchase clients The some environment evolved key risks guidance CDMO see there of continued mitigate. if for

evolves, year. we for of you year estimates will the As the keep abreast our

pass that, will I Ruben. it With back to

for all you Thank participating.

extended we you be importantly, recreational to are full executing If in will temporary size value we most we hurdles, market or We're mind value creation our and keep search speed initiatives operational be I ready, as low you always them, to our liquidity liquidity to things from we're the stronger demand announced for ever. levels as program and will much of the a I previously as and products in believe remember company-wide of shareholders and and to of we and CEO please right stock financial measures enhance XXXX and conscious them, our number as deliver in continuing the in that business call. able are very working conscious, our strong fundamentals ask at all are year current four value. mindful end, on position. of buyback as and want, this the We're advancing of And anticipated. our shareholder well one, to at to only other our demand finally, with process

have. Thanks may you for and listening, we welcome questions that any

We will session. today Instructions] from Please go the Capital question [Operator comes now begin Brookline with ahead. Kemp The question-and-answer Markets. Doliver first

Great. morning. of certainly But -- accounts, most of into to and the inventories. with two guess is capital notably couple one Thank the I accounts June, the have working Have end first or but of you question since can good progress either come? I to made back a receivable, Which ask queue. going still and go you, that to then those any or I'm questions. relates

questions. for you your Thank Kim. Hi,

there full their both been capital, conditions Colombia customers the We are have pressure to amount but delays, the anticipated. abroad now in reduce speech. made it had the in in and had release some have that have we US of to and sell that made press the have also due advancements, we mentioned to in economic The as the our working harder

on efforts track. working put So are has But our pressure on improve capital. our that to we

several I sure inventories, those centered of for what I'm or not And those initiatives were and mentioned we that many one of trying I cash think say. have accounts you receivables we improvement. on improve that's if to intend to are and it.

heart question. Thank you. the the to get did That of

what relates question see I turnover kind light. he in the things again. direction good this take the you how stability you're of Board to trying to my Can cast So and a about doesn't talk -- Unfortunately, Board? resigned to some have second Alejandro. with you're

-- to sorry we Yes. We Ruben. excellent This we very resign This is impatient. were an again. were feel that, is see I was question. Alejandro -- he

Board ideas. agree didn't he the to course, a of in agility comments, speeding have good decided it's with the facing impatient, future will them. in of we and we in it Board but in course, leave. Of we're the the but the all of in of a many everyday -- he -- a very his He his in way. the feel we along the the nevertheless, choice very are with great implement in results his. of much in very all good representative very And and got he line We were XXX% that the not did few wanted It's which to way with leave, company, Board confident getting the is very And terms. shape. discussions And

queue? ask question the to me for getting time in there Is you. thank back another before right, All

Go ahead. Kemp. Yes,

Great.

have with US to So, you QX regard operation in since Florida? the progress what made

Kemp. you, Thank

happening we optimistic. have we Miramar, But, R&D gummies, to that that, started -- we months. our, the year, Funtrition, up and one we in early like overly for the has significantly starting but one in preparing process. start the with for the we hopefully can the but year, the very machinery products start in we're from already in already a to other some the all be Softgel, for us of At starting I and and told advanced should and can think by be it's if you're advancing couple have operation sorry, testing, and starting We addition, we we're ramp operations we that up, made, start been the -- we the probably a one there's you the that and was registering providing that possibility impact want helping benefits of be new this on think, running are streamline And an and end during been for the sales, are setting to next start beginning course more us whole for We for don't as organization, ‘XX. meaningfully, of finalizing help significant, and producing we R&D most, going see to third and the is have parties, remember, we has think ‘XX. year sales main to facility year packing the I for was I should probably the

that year it's, which in are the think anticipated. you I starting to to So is see the operations going ‘XX two we bring the benefits

in right. I'll All back queue. you. Very good. get Thank the

comes Instructions] [Operator next a [indiscernible], go The private investor. Please question from ahead.

Hi the on the completion guys, quarter. congratulations of

the the of that quarter is or the optimism to highlight understanding understand can have orders bit indication, Maybe little it's if just improvements Maybe on the that you an to year? give backup last a or guys us just strong a of quarter. going better more us about help expressed based actual kind you contract? maybe of sort you you optimism wanted Just be of in QX, of

we customers. Dimitri. mentioned, our have, I in policies large business orders place. delays -- And these as CDMO some in had the are capital of we Thank already the working of of -- some Okay. because you, but pharma

have a of of portfolio strong last for We year. very orders quarter the the

will we reevaluation that of at will October peso That (ph) also will all -- we that the [reassuring] time. be significant, launches quarter least definitely than of not the And good, the but a and year will third We -- with has be tailwinds the September of the year. higher second very for significantly we been the what had be definitely, in Colombian to for the feel having this we last difference but year. as This, big year’s, in is the quarter. the last going there make will quarter at of last half fourth be mentioned, excellent,

EBITDA incrementally of your sense around terms a business? something in give what fully a Is the will kind of that this in you they us we of us of to give how they're you can can revenue of add two terms facilities, Also, much or Florida of sense expect sort should time? once

here. Hi, Unfortunately, Dimitri. have Patricio not that disclosed information. we

this So tell we you cannot at point.

-- once therefore, of not -- are the part we, and more segments business of it's to selling, right the think of have businesses set both aside. But given going we'll information. producing be the both that we and that that facilities be -- producing of the I they're that we of disclosure able talk to that and cannot now,

estimate. that cannot about sorry that. give I you So I’m

I If the grow the you sort question, What of landscape? M&A, you Are to you you kind are inorganically? ask active? guys you can us? thinking about can seeing? accretive how just of What help some any last potentially deals on What's updates tell

I very strategy changed that moment from a also Dimitri. our we became the and intent question, public. would not That's good has say the

a tight a year, So we and it. the EBITDA that our this had for definitely can have the intend creation value grow our we're we want the or cash back would say think debt to and last that we that plans, last executing year of we we do focus is leverage the in strategy cash, part the part improving is to to inorganically. and so recovering setback I given initiatives, capacity. our It do efficiency position, of our regain getting I

we're the we moment, able this be looking marginal. right still only not So do it, but to at now could market, very at very,

back wait ‘XX in until are the So steam. I when full year think to it's more we reasonable

And my question. last

little a kind with about about That in Maybe Are expand comment bit. thinking if presentation. the was you your comment increasing shares. a had that? last You the can that you liquidity of of

Yeah.

end priority, of the think be fact It's I the doing I in I there days, be we lower. help of that that was doing the be liquidity have despite program that we still not but June, couple it's the might of think the the albeit buyback. despite think but by sense it been we without it or liquidity missing or that that low a been order so that think of June. it's We need of program fact in small. would We helpful slow-moving it to given the even program executing need takes cash, a we to even worse continue end from I have been some liquidity think our good since, to

Other take say, discussing or let's can more boutique the we the investors. base that, story measures get other, a is we investment bolster smaller to of that have market, us importantly attend they so to trying to get presence more more conference try coverage, try been help to with to in want bank that and our broader more

investor very that an -- IPO, the have We base the since that much changed did de-SPACing. we hasn't was

more So of to convince therefore, that think take more instead investors, potential I the company. able we the and liquidity do trading story the and its and shareholders sorry, turn, it will and enhance will that, or be in the need to

that the get taking to probably we market, that that are in investors. think more to get thing last than will anticipated. circle optimistic a our and And help we us just also promise recover we liquidity the It's to So longer virtuous also more we'll we results try and there. it's to as we fulfill I

Thank you.

The Brookline comes Capital Markets. from Please ahead. next Doliver question go Kemp with

you. Thank

agreement a the significant highlight changes agreement. the Could prior signed new your in you recently agreements? over You debt

we and left cash. syndicated ending as We about and to more year a the Kemp. work, bit, were left, only in million, year constrained had you a we with running before few roughly We $XX amortizations Yes, months know, a was facility a close have four-zero.

Colombian $XX that a renegotiated roughly million. are roughly we The $XX negotiating loan but we club in pesos, deal syndicated amount million. into So for

also debt put higher into tied it this So other cost we debts deal. and all together club --

strategy with benefit So amortizations is forward think but order maturity period, moment is, -- important The that we about now, plans. next sure improved terms, net some it extend get to can with and to but of in first, back is, the back at profitability, a to we think our numbers, we need to our I into financing. start to our would pushed years after our to the the phase our it Right it. we say do get for was debt, reduce then extend this needed were our grace we order was with and that I put something the most gave then numbers, us, to us to six leverage, make we able new continue

be clear, June to sheet decrease? shown debt, the so to And the Okay. short-term at the is of end balance going just on

Yes.

-- okay. you'll Because

Yes. term the debt still increase. short be long-term but will There’ll debt, Correct. Correct.

what's And -- good estimate the in the debt short short-term term? a for near

of of would I say, short-term $XXX million rough. roughly $XXX a probably, debt million term, debt, with Near long-term

Okay. Thank you.

Thank concludes today's you This concludes and call attending for our question-and-answer session conference our presentation. today.

You may now disconnect.