REPH - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Recro Gainesville First Quarter 2020 Financial Results Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to conference like speakers to now Ms. today, would hand over the your I Investor go Relations, with Styslinger Claudia please ahead Ma'am.

Claudia Styslinger

Good us Lake, Officer. on President and Recro's you Chief am joined for Financial call and Executive Gerri Claudia thank financial discuss Henwood, by is XXXX first morning, to quarter Officer; I This Styslinger, Chief today today's and conference results. joining and Ryan

Ryan, we Following will the Gerri prepared remarks questions. today call and by for open

detailing morning, our recrogainesville.com. March page and XXXX. available we for issued three this The website is release the press Earlier results financial a release at of our Investors operating months XX, on ended the press

we Reform our financial we Provisions including Safe Before that Harbor to that comments, materially constitute Act identified and actual you risks believe, statements the related are cause to similar results remind various intend may make estimate, to Securities Private such upcoming, words by and of the our of defer to will, remarks forecasts statements XXXX, words Litigation expect, begin should, forward-looking formal outlook. as and may, subject meaning. of I'll today statements other plan, forward-looking These anticipate, expectations our can uncertainties and from be pursuant

mix inventory The manufacturing cause those profitability to all increasing move changing not of the defer to factors forward-looking or plans, factors expressed our following materially customers list manufacturing in that some and The the our or in of competition. are Customers statements. from of decisions could actual results important manufacture, or underlying inclusive. our average services, customers new forward products or facing with is

Results Securities factors and and Annual on the Operations guarantees ended risks sections and not are risks on Exchange reports XX, the Gainesville's uncertainties. the Analysis which Condition file Discussion website. certain the and of statements Form SEC's involve are XX-Q, and risk Management's are XX-K year and Financial for fiscal and described of forward-looking of future of available These December on such on the performance any with Report Form Recro XXXX, quarterly in and Any Commission

conference Any of information we events as this any account on future undertake forward-looking this on we no provided we XXXX only to provide obligation of of call call may new XX, the statements is call, this update or and May make day otherwise. on information,

financial company. addition, results forma the information provided operating may that or not be of preliminary to In and is unaudited or project Actual financial differ any may purport does positions pro results materially.

performance measures with the We may first for non-GAAP financial quarter our respect XXXX. certain also financial to discuss

income Specifically, adjusted or amortization taxes, excludes EBITDA adjusted we or standalone and as the interest, which earnings may discuss operating company costs or or EBITDA adjusted as company loss which public public depreciation costs. as before

be business into are these and CDMO our financial in substitute call. discussed GAAP to business. a measures as in to, be on of not give but non-GAAP transparency as greater supplemental included results CDMO financial These understanding non-GAAP management investors our reported earnings believe information addition financial should our for, the this release considered in We evaluating used the performance by helpful measures they in

of have to the measures these We a reconciliation earnings press included measures non-GAAP release. GAAP in financial

to to now Gerri? over like would call Gerri Henwood. the I turn

Gerri Henwood

frontlines COVID-XX to unprecedented joining and challenging us keeping on healthy been helping continue essential navigate everyone. important pandemic. Thank continue you, hope this We good Claudia, and pharmaceutical has more of whom patients. the and as and In customers through of those to product morning, we safe are to today never the our U.S. nearly crisis global this manufacturing all are provide ongoing medicines time we

healthcare Recro company designed outbreak. local are manufacturer are the Georgia category falls time. shelter-in-place orders a essential navigate during State help that to that continue through of COVID-XX to trying the as need initiatives and and pharmaceutical businesses which several this Under operations within undertaken have the We Pennsylvania

While we we've pharmaceutical measures instituted to appropriate taking to personnel to protocols products remotely. safety requiring committed protect necessary end we're the work employees. also customers, our of to essential that our providing To remain health and

continuing locations, essential and support in operations social critical For measures our those order ensure at to we employees implemented have continuing work to health of provide to products. our the protective other while strict distancing employees

remote [ph] campuses CDMO observe auditors areas to practices closed outside With continue compliance by implemented facilities while our business and have video. visitors key documents to travel and allowing and other staff GMP and that and

continually we've the and responding In crisis. an from ensure national updated to internal our sources addition, also local assembled operations force the international guidance address are to to task COVID-XX appropriately

On supply maintain to remain functions customers. products production, of us operational to and shipping our a allow front, the our products customer supply to continuous service

are remains suppliers and remotely We date to keep supply as to our up service to our our available team with chain communicating customer partners our customers and and distribution needed. is operating regularly assist

adverse activity had has the commercial unforeseen world general. pandemic and economy in on both COVID-XX effects The

XXXX results our As a respect our result, million. of financial to and first have been $XX.X was performance, affected. adversely revenue quarter specific operations our With business

pandemic improved have There has our to remains and new the extent Nevertheless, our believe financial uncertain will that which in solid overall so and is we we scope and seen pandemic an efforts continue a uncertain. effectiveness. to progress our business results duration and of the business impact the foundation

affected, effects of for direct will describe moment. prospects indirect are a in are the areas in XXXX there COVID-XX However, the pandemic which on and I certain and business

by than addition, of product our more Recro products partner sold competing reenter In it a and had the share market one back a predicted. took

it the market in as effects we shift as the indirect $XX for million. of million partner, and believe the direct to to product prudent by believe XXXX guidance in we are COVID-XX the $XX impacts, is caused of our be we result share to the well make our range now for revise a As revenue

stability encapsulation our supplies, clinical activities of double-blind direct-to-patient of in over trials, therapeutic trials offerings et as We testing cetera. packaging clinical service and trial expanding of drugs include such shipping quarter more of this with are supplies, to regimens for associated materials

have great senior growing a track growth service a We Business service of Bill the We with these and of offerings team at along new that very recruit the solid RGD with to the fortunate and facility business offerings. senior infrastructure sites area, the in catalyze record Hirschman. team believe Development been these Head leadership in at Bill, for will both service

believe COVID-XX still meaningful development [ph] to future pandemic. the the services to efforts tech our the with team has in us gives development brought immediate but some we and the seen financial environment items/products line impact commercial customers COVID-XX two the These economically that's added existing business of future us smaller, improved, of the by rationalizing inspired

their reduce financings, been Similarly, We've some impact needed staffing, to to with made to timing in in QX of plans important their we trials, we changes priorities development impacts assess without to cetera. revisions of potential capabilities the staffing opportunities has customers timing to felt the have move as revisit development as for due et COVID-XX continue on reducing early COVID-XX costs services and product forward.

candidates. call [indiscernible]. engaged believe by the group recruit but is operations that full-time is We situation separation Board The this with intends encouraged noted take evaluating on investor a are over to Baudax CEO conference made full and to in the the our and we development to Recro. evolving the progress finally, we've process of Board as And visibility associated Bio, our and Recro be made of Recro [indiscernible], and prudent business QX continues

With now that, detail more the call to Ryan? over I'll the for turn financials. Ryan on

Ryan Lake

outlining and morning Form our full Good press I'll a XX-Q earlier results, morning everyone. this key some release Gerri. highlights. Thanks our Since just review we the issued financial of

had we Care the a business' the XXXX operations approximately as continuing December all our results and Acute business XX, million. $XX.X cash XX, March presented. discontinued of equivalents are is excluded Acute of periods for As of cash as Care presented XXXX, operations from Because

of our by inventory our one purchases and [ph] of Revenues product XXXX market reduced generated recognized customers the by first partners of XXXX. manufacturing partners decreased $X.X that to commercial the compared on primarily $XX.X sales million commercial contract in of decrease for sales to of two our competitor prior-year and their to to million $XX first the from for was quarter driven hand. million resulted the due to quarter royalties The reentry due of remaining both division from were a slowed

operations as adjusted EBITDA quarter XXXX XXXX. first adjusted XXXX, standalone Cost $X.X loss for $X.X million the of quarter million, the $XX.X $XX.X was million was was quarter million as of for sales first of from CDMO operating continuing negative million. was the Operating compared from For historical $X.X first losses was million. the negative of EBITDA to and $X.X adjusted

with the $X.X The and force production manufacturing commercial million was to volumes, volumes. a mix associated in to due commercial increase of resulting lower from variances reduction approximately primarily million related $X.X including revised product

this million year related offset XXXX. costs sales. our increase public reduction fiscal partially primarily development of which by inventory development Annual an general in and estimated to development $X.X XXXX new of quarter in million were lower costs capabilities. from in in Change to are quarter was business first force for XXXX. compared be million of of to contract The formulation for and expansion expenses $X.X $X.X the related $X were decrease company higher savings administrative the million to first and Selling,

the of of same interest XXXX $X.X million for The was amortization and compared period. to the due the costs. was financing prior on loan to $X.X of $X.X senior Athyrium higher related principal expense the secured balance the for first quarter increase million primarily million Net year term

operations company's Recro first per $X.XX net periods first results a share operations the for loss per and of a XXXX to excluded discontinued reported The million $X.X loss XXXX. For the are of of $X net from businesses $X.XX quarter of compared the presented. Acute net million related all loss diluted share the to diluted Care loss or quarter for or continuing include net XXXX

customers customer order of to of forces, coupled access competition, in to unexpected with result current company's and impact along improvement beliefs growing these existing increased and events COVID-XX million and having resulting believe potential and XXXX. that our of We estimations business estimations is with contracts, be expect market million product business XXXX COVID-XX, on revenue existing timing into development for indirect respect new takes direct inventory patterns, of range new experience a decisions to lowered timings the related as generation. and customer impacts revenue the are with timings, the well and consideration operating now rebalancing, which to impacts We and expectations of $XX and market customers customer our with as in competition new services diversifying our $XX

range to to to be $XX million adjusted adjusted be operating as expect the to EBITDA in expected standalone is adjusted $X million million. as million. be million $XX operating as range EBITDA CDMO income in $XX XXXX range of $XX the be for million and of $X million historical in the the to the income to million We in our to to of $XX of range the $XX and

I back will closing comments. call now to Gerri turn for the Gerri?

Gerri Henwood

to would committed you, our their Thank business In we that shareholders Ryan. our reiterate our steadfastly I employees like suppliers, and and closing, partners. remain to customers, families,

are while are potential, long-term We the delivering committed priorities focused this and through to and strategic on executing on evolving business on prudently economic the situation. managing rapidly Recro's upside

to I'd Operator? for now open questions. the like call

Operator

[Operator Oppenheimer. you. Leland question with first comes Instructions] Thank Gershell And from our

is open. line Your

Leland Gershell

Good morning questions. my taking for Gerri. Thanks

Gerri Henwood

Leland. Hey

Leland Gershell

competitive as in year? we the And then your quarter-to-quarter understand the terms thanks. and a the sense and cadence XXXX we could think through two, versus how for get in of you might want occurred how should I or that of that way that give kind competition element us expectations rest have to goes what year I as through – that of be of COVID-XX QX, unexpected about followup the a COVID-XX competition

Gerri Henwood

Sure.

me generally of let that magnitude of the first about So impact incremental. talk

in providing months couple and believe guided time guidance back had the January we the that data market guidance. have didn't we were out. perfect and fourth the that We've we time put some on in we that end of So we in hand quarter had that had last the the previously year of the was of the at Mylan at data the we

from which We XX% guidance. XX% The we market that segment direct saw impact and really Mylan coming our the expectations of in projected believe been accounts currently That neighborhood higher vis-à-vis than predicted somewhere level by impact in had of of was COVID-XX probably balance effects. the our of with them to participation indirect expected. for that we partner the

an that impact to just we year. have The indirect a and have at received full-year basis time customers and next smaller additional notifications being would that product two will on on effects those lines different and deal decided recent with year very those us this are this impact some

decision-making impact have also are committed on that put the commit buy part the them we'll about or on where I there on right they final you of timing environment We in about a heavily is who the timing to and concerned ready impacted believe know, to of believe event. customers been, development an sort and or now are

people business customers to detailed evolve. in things because to companies through way The working concerned we But they're have people to are been environment a of number about this to development just how the and very a willing those time. operational hard support do will can to initiate help not them and respond I this think whatever very

impacts the I have other smaller was it of to change combined lines effects guidance. these to us the and so that our with And business timing where think majority the caused product that development

Leland Gershell

know and companies of of year? this see hit QX, of the QX can sense us reversed it the to QX, year, through Should for of largest with we more it – QX Okay, reduction has would for you many been resumption as being the about with in think how you year be an provide QX normalcy the in workforce increase the as kind any occurring, throughout staff? end think other we you

Gerri Henwood

Yes, questions. good

So world and CDMO as this rely so fluctuate orders you those can in intrinsically. know, on you orders customer the

what force there to we've where easy impact. chart guidance that so see first well did reflects in perfectly for reduction that certainly We the it a quarter we're say a in We not think in And impact. our here is reflected bigger financials. the to going full-year identified is was in

possibly take of can quickly quite other we're sets that to as and There as place reductions possible. implement endeavoring is those

the those for the addition Some necessary some that about of of in development smaller because were and business. product the delays expenses side Those second business to third to two in have likely of some although on discontinuation that possible quarter, made could in the of to incurred be think those would lines further development the it's fourth. impacts

and COVID help in could could - customers perfect hard ball certainly be that year. if crystal the I get But second our much be be a hear things. that variety to secure about had other our is know a given you wanting I think And calm regard half progress going which is that We're hope that to more Americans business the certainty we good open think operations that there all for see acting be about case. prudent or how I would front, way. in see and exactly same are in certainly many us what that and the trying we opinions We recrudescence we in hear, the is development a up. won't to the to probably initiate on of own things suspect many, to recurrence of could of as it

can't we doesn't you the environment, best would and tried but take that on into that, normal perfectly looks against have but explicit guidance cadence, the think that to So it plausible the COVID lay variations I do seen account range. our I we that can and make the predict within of impact on, quarter-by-quarter, say have that easy the quarter-to-quarter we to which year give

Leland Gershell

I if then may. and – one follow-up Then Okay.

impacted wanted presumably terms credence? the In quarter talking and the of terms ask a existing through what rest in we you've was your business of which the similarly as year the to be to time, new contributor new about Thanks. as would financials to some been of I for business, new business extent go in

Gerri Henwood

Thank you.

for in on do to go the the to, was up a And was middle of March, through about business to and versus cetera. It we modest I target it thought for sign what I because quarter. contributor began about, quarter of customers with So, want the this, slowed expecting et initiate we would into first third what ready were month this, we as did quarter. am get say think ahead I through, new the part the get

to we've for vulnerable our think hoped addition the is tent, or customers business. of on from in look had soon a an sort based quarter quarter, and that's we that are be that initiated. for higher again, And had guidance were of feedback reflected number reduction but because in we second at second customers As new for who and those not the number to that's area think to we full-year expectations I that already under

to We want that take these think is time feel about fact do There it return. that business, more the projects. as they will the to they projects those initiate will customers does comfortable

to so our there being to some but certain activities would came customers. of be all activities for those extent, types necessarily undertaken And customers back, for the of for if not time happen,

on comfortable extent So get they depends more comfortable, easily more we and a on that. lot how when re-embark people can get to what

But been in to think including There customers facilities, quite recognizable in, names. the new by positively the business, of of were we the have reinforced I some number capabilities, to terms traction that. coming a

So that is have company long-term. the seen can I it optimistic but work are augurs availability we in still immediately, to the be for of the year. that us as all of But of well think good don't that that of in more a you've disappointing that the included portion calendar

Leland Gershell

much. very you Thank

Gerri Henwood

Thanks Leland.

Operator

comes with from you. And Hong Janney. our Thank question Esther next

Your line open. is

Esther Hong

Thanks questions. Hi, good morning. for taking our

Gerri Henwood

Sure. Esther. Good morning

Esther Hong

morning. good Hi,

commercial So was mix behind Thanks. manufacturing and the the lines product products so key three additional commercial the assumptions key revenue What contribution few what for royalty behind regarding with partners any the to streams the guidance, the the and customers? revised are discontinuations details by R&D?

Gerri Henwood

two we literally that first, were last in the parties. with release press and that part from of it. and I is preparing mean, information came start don't the the as discontinuations. have detail the quite the every We of those question I'll So queue,

made said those discontinuations. That to on there us to-date. the would confirmed, be have We those but from clients have an be this to what product impact quarter following based assumptions are assumptions remains that

be those - they mix, others were have us the as are not We have contributory by as in themselves but will they and to big we that missed.

have of on the in we we by do talked In would I a by that say about product, you of and this product of inventory split-outs But with the as know don't that manufacturing with the reports. that we hand, in quarterly impact customers amount not usually still terms year that the the call many had a K for our they had quarter as significant revenue did left need one manufacturing batches. and did because first

Royalty been higher beyond share our expected us, about normal. I and had relatively somewhat change partner reflected in income we but the that, market say talked by were than would that that was that by splits that

Esther Hong

Okay, Thank you. great.

Gerri Henwood

Esther. Thanks

Operator

comes from question Thank you. Jacob And Stephens. Johnson with our next

Your line is open.

Jacob Johnson

I the Can internal then think Hi, or guess for Gerri, thanks. in candidates external an should discuss is first this the some candidate? CEO. of and a recruiting key looking you permanent we mentioned being you question, criteria of Board

Gerri Henwood

limit looking who shown and a the years. I'm business. by the what significant being is will record they're X that of to ready and with have they're a CDMOs, not over larger I run track with the operations in and is for for I that's their by positive all who dive and think experience of looking is search be there had someone And experience what to So who into somebody been running number Board, last can growth acquisitions, has had but and that has disclose because obviously committee experience

like in of what that months that candidates get them out. coming think may to so to a another someone that for leaning currently able position, has in be be externally wouldn't is caliber. hopeful way Often like it now, I to conclusion will some that and to which the both time I comment they like on it's Board coming they're but The considered transition internally to they're take and it

that in and prepared party other it such this to fully happened the are with until is has take fully over they're happy reins. and ready the transition business We

Jacob Johnson

rest And then should terms helpful. one throughout we the gross on trending question what's year? of in guidance, assumed That's in it. them updated just guidance the Got margins? How of think the about

Gerri Henwood

Ryan?

Ryan Lake

from kind Yes, gross a low we're mean I range. looking of the perspective, XX% at margin

Jacob Johnson

for Thanks the it. taking Got questions.

Operator

the at I'm you. Thank time. questions this closing to I'd like back remarks. Gerri call no showing further turn for now to

Gerri Henwood

everyone Thanks us operator. today. you, joining Thank for

to footing for fundamentally in but that believe level disappointed get form are of poised there business that a with a coming return change months. a this guidance, a and future. services. It not about former be with people have to projects the pent distant clearer We we healthy this very positive We will forward much uncertainty we will believe up But business. for have is associated There others demand current resolving, pandemic growth. be in Thank the we believe solid are to convey and moving like and are too that you think will is will the on this over very that day. is great

Operator

Ladies and participating. today's you gentlemen, Thank conference concludes for call. this

disconnect. now great a have may You day. Everyone

Societal CDMO (SCTL) 11 May 202020 Q1 Earnings call transcript