Full Press Release Details
Reports Second Quarter Fiscal 2020 Results
Somerset, N.J. February 3, 2020 Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery
technologies, development, and manufacturing solutions for drugs, biologics, gene therapies, and consumer health products, today announced financial results for the second quarter of fiscal year 2020, which ended December 31, 2019, as well as
its agreement to acquire MaSTherCell Global, Inc., a leading cell therapy development and manufacturing provider with facilities in Belgium and Texas. With the acquisition of MaSTherCell , Catalent is further expanding its advanced biotechnology
platform within its Biologics business. Catalent is issuing a separate press release today that provides further details on this acquisition.
quarter 2020 revenue of $721.4 million increased 16% as reported, or 17% in constant currency, from the $623.0 million reported in the second quarter a year ago, primarily driven by the impact of its gene therapy acquisitions, as well as
organic growth within the Biologics, Softgel and Oral Technologies, and Clinical Supply Services segments, offset by a decline in the Oral and Specialty Delivery segment.
Second quarter 2020 net earnings were $45.5 million. After taking into account the series A preferred
dividend, net earnings attributable to common shareholders were $34.3 million, or $0.23 per basic share, compared to net earnings of $49.0 million, or $0.34 per basic share, in the second quarter a year ago.
Second quarter 2020 EBITDA from operations of $155.3 million, as referenced in the GAAP to non-GAAP
reconciliation provided later in this release, increased $23.9 million from $131.4 million in the second quarter a year ago. Second quarter 2020 Adjusted EBITDA (see the non-GAAP reconciliation for a
discussion of this metric) was $171.0 million, or 23.7% of revenue, compared to $146.0 million, or 23.4% of revenue, in the second quarter a year ago. This represents an increase of 17.1% as reported, and an increase of 16.0% on a
constant-currency basis, with three of the four segments contributing to the growth.
Second quarter 2020 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $72.0 million, or $0.45 per diluted share, compared to Adjusted Net Income of $65.4 million, or $0.45 per diluted share, in the second quarter a year ago.
Our second quarter results were driven by continued growth from the gene therapy, viral vector businesses we acquired in 2019, as well as solid organic
growth in three of our four reporting segments, said John Chiminski, Chair and Chief Executive Officer of Catalent, Inc. We are excited by our pending acquisition of MaSTherCell, a leader in technology-based cell and gene therapy
development and manufacturing, which will complement our growing gene therapy capabilities and help us further deliver on our strategy to mirror our portfolio with the growing number of biologics in the global R&D pipeline. As a result of the
faster growth we are seeing in our Biologics segment, our planned capital investments to support its robust demand, and strategic acquisitions such as the one we are announcing today, we estimate that roughly half of our revenue in 2024 will be
recognized in our Biologics segment, compared to approximately a quarter of our revenue over the last year.
As previously announced, the Company
modestly adjusted its operating segments in the first quarter of fiscal 2020 to better align its internal business unit structure with its Follow the Molecule strategy and the increased focus on its biologics-related offerings. Under the
revised structure, the Company changed the components of three of its four operating segments:
The Company s fourth segment, Clinical Supply Services, was unchanged. The Company s operating
segments are the same as its reporting segments. All prior-period comparative segment information has been restated to reflect the current reportable segments in accordance with Accounting Standards Codification ( ASC ) topic 280,
Second Quarter 2020 Segment Highlights
Segment Revenue Highlights
Softgel and Oral Technologies segment was $267.9 million for the second quarter of fiscal 2020, an increase of 2% as reported, or 3% in constant currency, compared to the second quarter a year ago. After excluding the impact of the October 2019
divestiture of the segment s manufacturing site in Australia, net revenue increased 8% compared to the three months ended December 31, 2018. The growth primarily relates to volume increases across the consumer health portfolio within
Europe as well as increased demand in the prescription product business in North America, which is partially attributable to recently launched products. Revenue in the consumer health business also increased in North America and Latin America, in
part due to the prior year shortage in ibuprofen active pharmaceutical ingredient supply.
Revenue from the Biologics segment was $225.2 million for
the second quarter of fiscal 2020, an increase of 65% as reported, or 66% in constant currency, over the second quarter a year ago. The constant-currency growth was primarily driven by the gene therapy acquisitions, which contributed 56 percentage
points to the segment s revenue growth in constant currency. Excluding the effect of acquisitions, segment revenue growth of 10% was driven primarily by increased end-market demand for the segment s
U.S. drug product offerings, delivered through improved capacity utilization. This was partially offset by decreased volume demand related to the U.S. drug substance product offering, principally due to the fiscal 2019 completion of a limited
duration customer contract for non-cell line clinical manufacturing services.
Revenue from the Oral and Specialty
Delivery segment was $143.2 million for the second quarter of fiscal 2020, a decrease of 7% as reported and in constant currency, over the second quarter a year ago. Growth in orally delivered commercial products was more than offset by
decreased volume in the segment s respiratory and ophthalmic specialty platform due to strong prior-year demand related to an anticipated new product introduction that generated revenue in the year ago quarter but had limited revenue in the
second quarter of 2020.
Revenue from the Clinical Supply Services segment was $87.9 million for the second quarter of fiscal 2020, an increase of 9%
as reported and in constant currency, over the second quarter a year ago. The increase was driven by strong demand in the storage and distribution and manufacturing and packaging businesses.
Segment EBITDA Highlights
Softgel and Oral Technologies segment EBITDA (see the non-GAAP discussion below) was $64.5 million in the second
quarter of fiscal 2020, an increase of 18% as reported, or 19% in constant currency, versus the second quarter a year ago. After excluding the impact of the October 2019 divestiture of the segment s manufacturing site in Australia, segment
EBITDA increased 23% compared to the three months ended December 31, 2018. The increase relates to volume increases across the segment s consumer health portfolio within Europe, as well as increased demand in higher-margin prescription
product business in North America, the latter of which is partially attributable to recently launched products. EBITDA in the consumer health business also increased across North America and Latin America, in part due to the prior-year shortage in
ibuprofen active pharmaceutical ingredient supply.
Biologics segment EBITDA in the second quarter of fiscal 2020 was $63.0 million, an increase of
61% as reported and in constant currency. The constant-currency growth was driven by the gene therapy acquisitions, which contributed 49 percentage points to segment EBITDA in constant currency. Excluding the impact of these acquisitions, segment
EBITDA increased 12% from the prior-year period, primarily due to the increase in end-market demand for the segment s U.S. drug product offering, which was partially offset by the decreased volume demand
related to the U.S. drug substance product offering, mostly due to the fiscal 2019 completion of a limited-duration customer contract for non-cell line clinical manufacturing services.
Oral and Specialty Delivery segment EBITDA in the second quarter of fiscal 2020 was $33.1 million, a decrease of 28% on both a reported and
constant-currency basis. The decrease is primarily related to decreased volume and unfavorable product mix in the segment s respiratory and ophthalmic specialty platform due to strong prior-year demand related to an anticipated new product
introduction, and was partially offset by growth in orally-delivered commercial products
Clinical Supply Services segment EBITDA in the second quarter of
fiscal 2020 was $24.0 million, an increase of 14% as reported, or 15% in constant currency, primarily due to strong demand in the segment s storage and distribution and manufacturing and packaging businesses.
Additional Financial Highlights
gross margin of 32.2% decreased 10 basis points as-reported, from 32.3% in the second quarter a year ago. The decrease was primarily attributable to the drug substance declines within the Biologics segment,
due to the fiscal 2019 completion of a limited-duration customer contract for non-cell-line clinical manufacturing services, partially offset by the gene therapy acquisitions and margin improvement in the
Softgel and Oral Technologies segment.
Backlog for the Clinical Supply Services segment, defined as estimated future service revenues from work not yet
completed under signed contracts, was $390 million as of December 31, 2019, a 4.5% increase compared to backlog as of September 30, 2019. The segment recorded net new business wins of $104 million during the second quarter, which
is a decrease of 2.3% compared to the net new business wins recorded in the same period of prior year. The segment s trailing-twelve-month book-to-bill ratio was
Balance Sheet and Liquidity
As of December 31, 2019, Catalent had $2.9 billion in total debt, and $2.7 billion in total debt net of cash and short-term investments, which
is closely aligned with the net debt as of September 30, 2019. Catalent s total net leverage ratio as of December 31, 2019 was 4.2x. On a pro forma basis for the May 2019 Paragon Bioservices acquisition, Catalent s total net
leverage ratio as of December 31, 2019 would have been 4.0x; an improvement compared to the pro forma total net leverage ratio of 4.5x at the time of the Paragon acquisition announcement.
Fiscal Year 2020 Outlook
The Company is raising its
previously issued financial guidance, primarily to account for the January 1, 2020 closing of the long-pending acquisition of Bristol-Myers Squibb s biologics, sterile, and oral solid dose product manufacturing and packaging facility in
Anagni, Italy. For fiscal 2020, the Company now expects:
The Company s management will host
a webcast to discuss the results at 8:15 a.m. ET today. Catalent invites all interested parties to listen to the webcast, which will be accessible through Catalent s website at http://investor.catalent.com. A supplemental slide
presentation will also be available in the Investors section of Catalent s website prior to the start of the webcast. The webcast replay, along with the supplemental slides, will be available for 90 days in the Investors
section of Catalent s website at www.catalent.com.
About Catalent, Inc.
Catalent, Inc. (NYSE: CTLT) is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics,
gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial
product supply. Catalent employs more than 13,000 people, including approximately 2,400 scientists, at more than 35 facilities across four continents and in fiscal 2019 generated over $2.5 billion in annual revenue. Catalent is headquartered in
Somerset, N.J. For more information, please visit www.catalent.com.
Non-GAAP Financial Measures
Use of EBITDA from operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA
Management measures operating performance based on consolidated earnings from operations before interest expense, expense/(benefit) for income taxes, and
depreciation and amortization ( EBITDA from operations ). EBITDA from operations is not defined under U.S. GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is
subject to important limitations.
The Company believes that the presentation of EBITDA from operations enhances an investor s
understanding of its financial performance. The Company believes this measure is a useful financial metric to assess its operating performance from period to period by excluding certain items that it believes are not representative of its core
business and uses this measure for business planning purposes.
In addition, given the significant investments that Catalent has made in the past in
property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of its cost structure. The Company believes that EBITDA from operations will provide investors with a useful tool for assessing the comparability
between periods of its ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. The Company presents EBITDA from operations
in order to provide supplemental information that it considers relevant for the readers of the Consolidated Financial Statements, and such information is not meant to replace or supersede U.S. GAAP measures. The Company s definition of EBITDA
from operations may not be the same as similarly titled measures used by other companies.
Catalent evaluates the performance of its segments based on
segment earnings before other (income)/expense, impairments, restructuring costs, interest expense, income tax expense/(benefit), and depreciation and amortization ( segment EBITDA ). Moreover, under the Company s credit agreement,
its ability to engage in certain activities, such as incurring certain additional indebtedness, making certain investments and paying certain dividends, is tied to ratios based on Adjusted EBITDA, which is not defined under U.S. GAAP and is subject
to important limitations. Adjusted EBITDA is the covenant compliance measure used in the credit agreement governing debt incurrence and restricted payments. Because not all companies use identical calculations, the Company s presentation of
Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
Management also measures operating performance based on