Teligent (TLGT) Misses Q1 EPS by 5c, Revenues Miss

Teligent (NASDAQ: TLGT) reported Q1 EPS of ($0.23), $0.05 worse than the analyst estimate of ($0.18). Revenue for the quarter came in at $7.4 million versus the consensus estimate of $7.95 million.

First Quarter 2020 Highlights

• Net Revenues for the first quarter of 2020 decreased to $7.4 million compared to $13.1 million in the same quarter of the prior year. The $5.7 million decrease was driven primarily by a $3.8 million decrease in US Teligent label products relating to lost contract volume and incremental price erosion, a decrease of $1.6 million in Canadian revenues due to supply constraints, and a $.3 million decline in contract manufacturing sales.
• Inventory reserves increased by $1.4 million in the quarter due to lower of cost or market and quality-related adjustments.
• Gross profit was a loss of $1.2 million and we reported a negative gross margin of 16% in the first quarter compared to $5.8 million and 44%, respectively, in the same quarter of the prior year. The decline was driven by the combination of volume reductions, supply constraints and incremental inventory reserves mentioned above.
• Product development and research expenses decreased to $1.8 million in the first quarter of 2020, a 40% decline compared to $3.0 million for the same quarter of the prior year mainly due to the intentional deferral of projects.
• Selling, general and administrative expenses increased to $6.7 million in the first quarter of 2020 compared to $5.5 million reported in the same quarter of the prior year, driven primarily by ongoing legal fees and consulting fees associated with warning letter remediation and pre-approval inspection readiness.
• The current and anticipated future financial performance of the Company have been negatively impacted due to COVID-19. As a consequence, the Company recorded an impairment charge of $8.4 million in the current quarter related to trademarks and technology of $4.9 million and product acquisition costs of $3.5 million. There were no impairment charges recorded in the same quarter of the prior year.
• Net loss for the first quarter of 2020 was $26.8 million compared to a net loss of $8.7 million in the same quarter of the prior year. The incremental loss of $18.1 million is driven by the $5.7 million decline in revenues, $8.4 million of impairment charges, $2.7 million of incremental expenses, and a $1.3 million net non-cash loss due to the change in the Company's derivative liabilities. The net impact of $1.3 million resulted from a non-cash loss of $5.3 million associated with the change in the derivative liability of its Senior Credit Facilities, partially offset by a $4.0 million non-cash gain associated with its May 2023 Series B Senior Unsecured Convertible Notes. The incremental expenses incurred in the current quarter relate to our FDA Warning Letter remediation efforts and our second injectable Prior Approval Supplement submitted to the FDA.

COVID-19 Response Summary

In alignment with the directives in the state of New Jersey, as a Pharmaceutical manufacturing facility, we are considered "essential". We will remain open as long as permitted and conditions remain safe for our employees in order to continue to supply our products to the patients that need them.

Teligent has taken several preventative measures to help ensure business continuity, while maintaining safe and stable operations. We have directed all non-production employees to work from home in accordance with state and local guidelines and have implemented social distancing measures on-site at our manufacturing facility to protect employees and our products. Our employees are provided daily personal protective equipment upon their arrival to our facility and we have implemented temperature monitoring services at our newly established single point of entrance. We have also implemented a bi-weekly sanitization process of the facility. We have adjusted our production schedule to concentrate on high demand or low stock product to help reduce employee concentrations while continuing to focus on our customer demand.

"Our first priority is the health and safety of our employees while positioning our business to manage through these unprecedented times," said Tim Sawyer, Teligent President & CEO. Damian Finio, Teligent CFO added, "as a consequence of current macro-economic factors, we have implemented a variety of significant actions to reduce spending as a means to offset the decline in revenues".

In order to improve the Company’s liquidity as we manage through the impact of COVID-19 on our business we have taken the following actions:

• Beginning May 4th our Executive Leadership Team and all employees with annual salaries exceeding $100,000 accepted a 20% and 15% eight-week reduction in salary, respectively.
• Over the same eight week period, we furloughed a portion of employees at our Buena, NJ manufacturing facility.
• Initiated a company-wide effort to reduce discretionary spending, simplify the organization, and focus on only what’s critically important.
• We applied for and received $3.3 million of proceeds from the U.S. Small Business Administration Paycheck Protection Program (PPP) and plan to balance the employee-related actions previously taken with the needs of the business to ensure the majority of the loan will be forgiven.

Financial Guidance

Due to the uncertainties surrounding the duration and severity of the COVID-19 pandemic and its impact on our business, we are unable to reliably estimate our future financial results and therefore we are not in a position to provide guidance for the remainder of 2020.

However, given the recent relaxing of shelter-in-place guidelines in various states and the actions taken to reduce spending, we anticipate improved top and bottom line financial performance in the second quarter in comparison to the first quarter of 2020.

For earnings history and earnings-related data on Teligent (TLGT) click here.

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