Full Press Release Details
Group Reports First Quarter 2023 Results
Currency Net Revenues Increased 10% Quarter-over-Quarter in 1Q23, and 22% increase in Adjusted EBITDA, With Strong Demand of RX and Softgel
Portfolios, Offset by Clinical Specialty Covid Portfolio
USA - BARRANQUILLA, COL - June 5, 2023 - Procaps Group, S.A. (NASDAQ: PROC) ("Procaps"), a leading
integrated international healthcare and pharmaceutical services company, today announced its financial results for the three months ended
March 31, 2022 ("1Q23").
are executing on our value creation initiatives and capturing meaningful savings as we build a solid foundation and transition toward
new paths for growth and shareholder value," said Rub n Minski, CEO of Procaps.
| U$ million | 1Q23 | 1Q22 | % | |||||||||
| Net Revenues | 84.2 | 85.6 | -2 | % | ||||||||
| FX Impact on Net Revenues | 10.5 | - | ||||||||||
| Constant Currency Net Revenues | 94.6 | 85.6 | 10 | % | ||||||||
| Gross profit | 46.1 | 47.1 | -2 | % | ||||||||
| Gross margin | 55 | % | 55 | % | -30 bps | |||||||
| Adjusted EBITDA | 9.4 | 9.2 | 2 | % | ||||||||
| FX Impact on Adjusted EBITDA | 1.9 | - | ||||||||||
| Constant Currency Adjusted EBITDA | 11.3 | 9.2 | 22 | % | ||||||||
| Adj. EBITDA margin | 11 | % | 11 | % | 41 bps |
Chief Executive Officer, Ruben Minski, commented:
"The first quarter of 2023 showed strong
signs of recovery after a complex 2022. Although the first quarter is traditionally our weakest quarter, we see already some of the 2022
headwinds starting to subside, which combined with our strong growth in constant currency, is a great indicator about a much improved
2023. We are facing a challenging 2Q23, as the exchange rate presents a drag on our results, and we have a high comparison base from
2Q22, but demand growth is as robust as ever across our Rx products, and our B2B business is receiving new orders that support our belief
that we will have a positive second half of the year.
first quarter of 2023 was highlighted by the launch of new products and the strong ramp up of new products launched in the last 36 months,
with approximately $27 million net sales coming from new products in the first quarter, and the solid demand for our RX portfolio, that
helped to offset decreases in our Clinical Specialty Covid Portfolio.
value-creation initiatives to reduce costs, improve margins and near-term profitability has continued to provide savings above and beyond
our planned goals. Since the beginning of this year, we have been focused on these initiatives, including SG&A efficiency, R&D
and operations optimization, among others. As of March 31st, 2023, total execution of our savings capture rate was approximately 30%.
The goal is to achieve up to $15 million of recurring savings to be realized over the next 18 months.
ahead in 2023, we expect to see continuing challenges and uncertainties, but we believe our aggressive growth plan including new product
launches and rollouts, combined with our value-creation initiatives, on the back of a robust and growing base demand, will position us
to achieve our near and long-term goals," concluded Minski.
R&D expenses, including the amount capitalized as intangible assets, totaled $5.4 million in 1Q23, or 6% of total net revenues in
renewal rate (% of net revenues from new products launched in the last 36 months) was 32% during in 1Q23, delivering approximately $26.8M
in net revenues. Launches depend on registration approval from regulatory agencies, and we could have phasing from quarter to quarter,
depending on the time of these approvals.
have registered over 35 products in the regions where we operate, and we have 65 products in the registration process.
up for products launched during 2022 is strong, highlighted by Aludel (oncology - prostate cancer), Dolofen Flu (OTC), Mentsi and
PapiloCare in Colombia. Geo expansion launches including women's health, cardiovascular, and gastro products are also performing
well according to the ramp up trajectory.
Quarter 2023 Financial Results
revenues totaled $84.2 million in 1Q23, compared to net revenues of $85.6 million for 1Q22, a decrease of 1.7% year-over-year. On a constant
currency basis, net revenues increased 10.5% from 1Q22 to 1Q23, in line with previous preliminary results.
slight decrease is mainly driven by the impact of the devaluation of some local currencies, particularly in Colombia of approximately
$10.5 million, as well as increased prices in raw materials, supplier delivery delays which have led to backorders and a decrease in
sales of the anesthetic's portfolio.
revenue by strategic business segment is shown below:
| U$ million | 1Q23 | %NR | 1Q23* | 1Q22 | %NR | % | %* | |||||||||||||||||||||
| CAN | 9.6 | 11.4 | % | 9.6 | 11.3 | 13.2 | % | -15.1 | % | -14.4 | % | |||||||||||||||||
| CASAND | 16.0 | 19.0 | % | 16.4 | 12.6 | 14.7 | % | 27.5 | % | 30.2 | % | |||||||||||||||||
| Diabetrics | 4.1 | 4.8 | % | 4.9 | 4.6 | 5.4 | % | -11.9 | % | 6.3 | % | |||||||||||||||||
| Nextgel | 25.0 | 29.7 | % | 27.8 | 25.3 | 29.6 | % | -1.5 | % | 9.6 | % | |||||||||||||||||
| Procaps Colombia | 29.6 | 35.1 | % | 36.0 | 31.9 | 37.2 | % | -7.2 | % | 12.8 | % | |||||||||||||||||
| Total Net Revenues | 84.2 | 100.0 | % | 94.6 | 85.6 | 100.0 | % | -1.7 | % | 10.5 | % |
revenues for the CAN business segment were $9.6 million in 1Q23, a decrease of 15.1% versus 1Q22, impacted mainly by a decrease in the
OTC VitalCare in El Salvador. We reinforced our sales force in El Salvador, focusing on opening new distributors for the OTC market.
On a constant currency basis, net revenues decreased 14.4% in the period.
RX Clinical Specialties portfolio grew approximately 27% in 1Q23.
America South and Andean Region (CASAND)
revenues for the CASAND business segment totaled $ 16.0 million in 1Q23, an increase of 27.5% when compared to 1Q22, mainly due to the
positive performance of new products launched in the regionand sales increase in the existing product portfolio. On a constant currency
basis, net revenues increased by 30.2% in the quarter.
Farma portfolio grew 24%, RX Clinical Specialties grew 23%. OTC portfolio grew 24%.
net revenues totaled $4.1 million, a decrease of 11.9% when compared with 1Q22, mainly impacted by currency devaluation of approximately
a constant currency basis, net revenues increased by 6.3%.
have launched in El Salvador and Ecuador, and we recently received approval in Mexico to launch diabetrics products, which we expect
revenues for the Nextgel business segment were $25.0 million in 1Q23, a slight decrease of 1.5% versus 1Q22, impacted mainly by currency
devaluation of approximately $2.8 million. On a constant currency basis, net revenues increased by 9.6%.
constant currency quarter increase is mainly due to: (i) an increase in product development services with the commencement of operations
of the West Palm Beach facility and the sales of certain product registrations, (ii) the increase in sales of gummy products, (iii) an
increase of sales from products with current partners, offset by the change of manufacturing site of dronabinol, the ongoing bioequivalence
test for progesterone, and order phasing from some of our US clients that will have a positive effect in the second half of the year.
revenues for the Procaps Colombia segment totaled $29.6 million in 1Q23, a decrease of 7.2% versus 1Q22, impacted by the currency devaluation
of approximately $6.4 million, and the slower pace of sales of the most relevant Clinical Specialties products for the ICU, due to higher
than usual inventory cycles in the distributors resulting from less severe hospitalizations from Covid.
a constant currency basis, net revenues increased by 12.8% from 2021 to 2022 due to the positive performance of RX Farma Procaps and
OTC VitalCare business units, offset by the decrease in sales of the Clinical Specialties portfolio.
RX Farma Procaps grew approximately 25% in sales in 1Q23 and the OTC VitalCare business unit grew approximately 23% in sales, primarily
due to the demand increase of its leading brands in the market as well as the positive roll out of new products.
profit decreased 2.3%, to $46.1 million in 1Q23, compared to $47.1 million in 1Q22. On a constant currency basis, gross profit increased
| U$ million | 1Q23 | 1Q22 | % | |||||||||
| Net Revenues | 84.2 | 85.6 | -1.7 | % | ||||||||
| COGS | (38.1 | ) | (38.5 | ) | -1.1 | % | ||||||
| Gross Profit | 46.1 | 47.1 | -2.3 | % | ||||||||
| Gross Margin | 54.7 | % | 55.0 | % | -30.0 bps |
profit is negatively impacted by currency devaluation.
margin was 54.7% in 1Q23 and gross margin for 2022 was 55.0%, a decrease of 30.0 bps compared to 1Q22, impacted mainly by lower net revenues.
expenses totaled $38.8 million in 1Q23, a decrease of 1.9% versus 1Q22, mainly due to the decrease in administrative expenses benefitted
by the roll out of the value creation initiatives.
totaled $42.8 million in 1Q23, a decrease of 4.3% versus 4Q21, representing 50.8% of total net revenues. On a constant currency basis,
SG&A increased 6.4% in the quarter.
| U$ million | 1Q23 | %NR | 1Q22 | %NR | % | |||||||||||||||
| Sales and marketing expenses | (20.7 | ) | 24.6 | % | (20.2 | ) | 23.5 | % | 2.5 | % | ||||||||||
| Administrative expenses | (22.1 | ) | 26.3 | % | (24.6 | ) | 28.7 | % | -9.9 | % | ||||||||||
| Other expenses | 4.0 | -4.7 | % | 5.1 | -6.0 | % | -22.8 | % | ||||||||||||
| Total Operational Expenses | (38.8 | ) | 46.1 | % | (39.6 | ) | 46.2 | % | -1.9 | % |
and marketing expenses totaled $20.7 million in 1Q23, an increase of 2.5% versus 1Q22, mainly due to the return of events and commercial
efforts COVID-19 pandemic continue to lessen, the efforts in CASAND to support top line growth, and the pre-operative expenses related
to the West Palm Beach plant.
expenses totaled $22.1 million in 1Q23, a decrease of 9.9% versus 1Q22, mainly driven by the execution of the Value Creation Initiatives
implemented from February 2023 onwards.
Other expenses are related mainly to the
impact of exchange rate differences and the non-recurring severance payment related to the Value Creation Initiatives.
Margin is determined by subtracting sales and marketing expenses from gross profit. Procaps views Contribution Margin as an important
measure to understand each business segment's performance.
| U$ million | 1Q23 | %NR | 1Q23* | 1Q22 | %NR | % | %* | |||||||||||||||||||||
| CAN | 2.8 | 10.6 | % | 2.8 | 2.1 | 7.9 | % | 31.3 | % | 31.6 | % | |||||||||||||||||
| CASAND | 6.5 | 24.8 | % | 6.7 | 4.9 | 18.2 | % | 33.4 | % | 35.8 | % | |||||||||||||||||
| Diabetrics | (0.5 | ) | -1.9 | % | (0.5 | ) | (0.1 | ) | -0.3 | % | 494.9 | % | 496.7 | % | ||||||||||||||
| Nextgel | 8.4 | 32.0 | % | 9.6 | 10.2 | 37.9 | % | -17.5 | % | -5.6 | % | |||||||||||||||||
| Procaps Colombia | 9.1 | 34.4 | % | 11.6 | 9.8 | 36.2 | % | -7.0 | % | 19.3 | % | |||||||||||||||||
| Total Contribution Margin | 26.3 | 100.0 | % | 30.2 | 26.9 | 100.0 | % | -2.1 | % | 12.3 | % |
contribution margin was positive affected by value creation initiatives.
contribution margin was mainly a result of higher sales and the mix of products sold, impacted by increase in commercial efforts.
contribution margin was impacted by the change in our portfolio product mix.
contribution margin was impacted mainly by operational expenses due to the hiring of additional personnel as part of the initiation of
operations at the West Palm Beach facility.
Colombia contribution margin impacted mainly due to higher sales and marketing expenses and logistics expenses, offset by the mix of
EBITDA1 totaled $9.4 million in 1Q23, an increase of 2.0% versus 1Q22, with a 11.1% margin, an increase of 40.6 bps from 1Q22.
| U$ million | 1Q23 | 1Q22 | % | |||||||||
| Net Income | 6.6 | 16.4 | n.a. | |||||||||
| Financial expenses | (1.6 | ) | (14.6 | ) | -88.7 | % | ||||||
| Income tax | 2.3 | 5.7 | -60.2 | % | ||||||||
| D&A | 3.7 | 3.5 | 5.9 | % | ||||||||
| EBITDA | 10.9 | 11.0 | -0.9 | % | ||||||||
| FX translation adjustments 1 | (3.9 | ) | (5.2 | ) | -24.1 | % | ||||||
| Transaction expenses 2 | - | 2.4 | n.a. | |||||||||
| Other expenses 3 | 2.4 | 1.0 | 147.1 | % | ||||||||
| Adjusted EBITDA | 9.4 | 9.2 | 2.0 | % | ||||||||
| Adjusted EBITDA margin | 11.1 | % | 10.7 | % | 40.6 bps |
financial expenses totaled an income of $1.6 million in 1Q23, impacted by the net fair value gain of the Procaps ordinary shares held
in escrow and warrants liabilities, which is a non-cash item. Excluding this effect, net financial expenses totaled $9.5 million, mostly
impacted by interest expense ($8.8 million in 2022).
| U$ million | 1Q23 | 1Q22 | % | |||||||||
| Banking expenses and fees | (0.4 | ) | (0.4 | ) | 1.4 | % | ||||||
| Others financial expenses | (0.3 | ) | (0.1 | ) | 98.7 | % | ||||||
| Net fair value gain of warrants liabilities | 3.9 | 1.7 | 128.3 | % | ||||||||
| Net fair value gain of shares held in escrow | 7.2 | 18.5 | -61.1 | % | ||||||||
| Interest expenses | (8.8 | ) | (5.1 | ) | 72.6 | % | ||||||
| Net Financial Expenses | 1.6 | 14.6 | -88.7 | % |
reported net income of $11.1 million for 1Q23 and $16.4 million for 1Q22. Non-cash items totaled $11.2 million in 1Q23 compared to $20.2
| U$ million | 1Q23 | %NR | 1Q22 | %NR | % | |||||||||||||||
| EBIT | 7.2 | 8.6 | % | 7.5 | 8.8 | % | -4.0 | % | ||||||||||||
| Net Financial Expenses | 1.6 | 2.0 | % | 14.6 | 17.0 | % | -88.7 | % | ||||||||||||
| EBT | 8.9 | 10.6 | % | 22.1 | 25.8 | % | -59.8 | % | ||||||||||||
| Income Tax | (2.3 | ) | -2.7 | % | (5.7 | ) | -6.6 | % | n.a. | |||||||||||
| Net Income | 6.6 | 7.9 | % | 16.4 | 19.2 | % | -59.7 | % |