AMRI Announces Second Quarter 2016 Results

ALBANY, N.Y., Aug. 4, 2016 /PRNewswire/ -- AMRI (NASDAQ: AMRI) today reported financial and operating results for the second quarter ended June 30, 2016 and provided an update to its outlook for 2016.

Highlights:

• Contract revenue of $116.5 million, up 37% from the second quarter 2015
• Recurring royalty revenue of $4.4 million
• Reported contract margins of 29%; non-GAAP contract margins of 33%
• Reported net loss of ($21.3) million; non-GAAP net income of $12.7 million
• Reported diluted EPS $(0.61); non-GAAP diluted EPS of $0.36
• Adjusted EBITDA of $26.8 million, up 62% from the second quarter 2015
• Updates 2016 outlook to reflect addition of Euticals

"Solid execution of our strategy resulted in a successful quarter with strong revenue driven largely by the contributions of our acquisitions and strong performances in our commercial operations," said William S. Marth, AMRI's president and chief executive officer. Higher margin businesses such as Whitehouse Labs and Gadea, as well as strong results in our DDS and Drug Product businesses significantly enhanced our performance this quarter.  

We are confident that our plan will enable us to meet our outlook for the full year 2016, especially with the addition of Euticals, which brings us compelling strategic benefits and adds to our ability to generate meaningful value for our customers and shareholders longer term."

Second Quarter 2016 Results

Total revenue for the second quarter of 2016 was $120.8 million, an increase of 35%, compared to total revenue of $89.5 million reported in the second quarter of 2015.

Total contract revenue for the second quarter of 2016 was $116.5 million, an increase of 37%, compared to $85.2 million reported in the second quarter of 2015. Contract margins were 29% in the second quarter of 2016, compared with 24% for the second quarter of 2015. Non-GAAP contract margins were 33% for the second quarter of 2016, compared with 26% for the second quarter of 2015. The improvement in contract margins was driven largely by the addition of Gadea Pharmaceuticals.

Recurring royalty revenue in the second quarter of 2016 was $4.4 million, consistent with the second quarter of 2015, and reflects an increase in net sales of amphetamine salts as reported by Allergan, offset by the elimination of royalties on Allegra (fexofenadine) products which ended in the second quarter 2015. Recurring royalty revenue for the second quarter of 2016 includes $3.8 million from the net sales of certain amphetamine salts sold by Allergan and royalties from an API sourced from our business in Spain.

Research and development expense in the second quarter of 2016 was $3.5 million, up from $0.4 million in the second quarter 2015, reflecting increased investment in collaboration agreements and our API portfolio, and the addition of Gadea Pharmaceuticals.

Net loss under U.S. GAAP was $(21.3) million, or $(0.61) per basic and diluted share, in the second quarter of 2016, compared to U.S. GAAP net income of $2.3 million, or $0.07 per basic and diluted share in the second quarter of 2015. Non-GAAP net income in the second quarter of 2016 was $12.7 million or non-GAAP earnings per diluted share of $0.36, compared to non-GAAP net income of $7.4 million or non-GAAP earnings per diluted share of $0.22 for the second quarter of 2015.

Adjusted EBITDA in the second quarter of 2016 was $26.8 million, an increase of $10.3 million or 62% compared to the second quarter 2015.

For a reconciliation of non-GAAP financial measures to U.S. GAAP financial measures for the 2016 and 2015 reporting periods, please see Tables 1, 2 and 3 at the end of this press release.

Year-to-Date Results

Total revenue for the six-month period ended June 30, 2016 was $226.4 million, an increase of 32% compared to total revenue of $171.4 million reported for the six-month period ended 2015.

Contract revenue for the six-month period ended June 30, 2016 was $219.3 million, an increase of 37% compared to $160.4 million reported for the six-month period ended June 30, 2015. Contract margins reported under GAAP were 26% for the six-month period ended June 30, 2016, compared with 23% for the six-month period ended June 30, 2015. Non-GAAP contract margins were 30% for the six-month period ended June 30, 2016, compared with 25% for the six-month period ended June 30, 2015.

Recurring royalty revenue for the six-month period ended June 30, 2016 was $7.1 million, a decrease of 36% from $11.0 million for the six-month period ended June 30, 2015 due to the expiration of Allegra (fexofenadine) royalties in the second quarter of 2015. Recurring royalty revenue for the six-month period ended June 30, 2016 includes $6.0 million from the net sales of certain amphetamine salts sold by Allergan and royalties from an API sourced from our business in Spain.

Research and development expense for the six month period ended June 30, 2016 was $6.6 million, up from $0.9 million for the six-month period ended June 30, 2015, due to increased investment in collaboration agreements and our API portfolio, and the addition of Gadea.

Net loss under U.S. GAAP was $(31.3) million, or $(0.90) per basic and diluted share for the six-month period ended June 30, 2016, compared to U.S. GAAP net income of $0.1 million, or $0.00 per basic and diluted share for the six-month period ended June 30, 2015. Non-GAAP net income for the six-month period ended June 30, 2016 was $15.0 million or non-GAAP earnings per diluted share of $0.42, compared to non-GAAP net income of $13.8 million or non-GAAP earnings per diluted share of $0.42 for the six-month period ended June 30, 2015.

Adjusted EBITDA for the six-month period ended June 30, 2016 was $39.8 million, an increase of $7.8 million or 24% compared to the six-month period ended June 30, 2015.

Segment Results

API contract revenue for the second quarter of 2016 increased 64% compared to the second quarter of 2015, primarily due to $28.1 million of incremental revenue from the acquisition of Gadea Pharmaceuticals, partially offset by lower revenue associated with the Holywell, UK site closure. API contract margin excluding royalties, determined under GAAP for the second quarter of 2016 was consistent with the second quarter of 2015. API non-GAAP contract margin excluding royalties for the second quarter of 2016 increased 5 percentage points from 2015, driven by the margins realized on Gadea Pharmaceutical's revenues.

API royalty revenue in the second quarter of 2016 increased $1.8 million over the second quarter of 2015 and includes $3.8 million from the net sales of certain amphetamine salts sold by Allergan. The increase reflects an increase in net sales of amphetamine salts as reported by Allergan and royalties from an API sourced from our business in Spain.

For the six-month period ended June 30, 2016, API contract revenue increased $42.3 million or 54%, due primarily to $48.1 million of incremental revenue from the acquisition of Gadea Pharmaceuticals, partially offset by lower revenue associated with the Holywell, UK site closure.

API contract margin excluding royalties determined under GAAP for the six-month period ended June 30, 2016 was consistent with the six-month period ended June 30, 2015. API non-GAAP contract margin excluding royalties for the six-month period ended June 30, 2016 increased 6 percentage points compared to the six-month period ended June 30, 2015, driven by the margins realized on Gadea Pharmaceuticals' revenues.

 

 

Discovery and Development Services ("DDS") contract revenue for the second quarter of 2016 increased 21% compared to the second quarter of 2015, primarily due to $3.1 million of incremental revenue from the acquisition of Whitehouse Laboratories and organic growth, partially offset by lower revenue associated with our Singapore operations.

DDS contract margin determined under GAAP increased 4 percentage points in the second quarter of 2016 as compared to the second quarter of 2015. DDS non-GAAP contract margin increased 3 percentage points for the second quarter of 2016 as compared to the second quarter of 2015, driven by the margins realized on Whitehouse Laboratories' revenue.

For the first half of 2016, DDS contract revenue increased $9.8 million or 25%, due primarily to $5.8 million of incremental revenue from the acquisition of Whitehouse Laboratories and strong organic growth, partially offset by lower revenue associated with our Singapore operations.

DDS contract margin determined under GAAP for the six-month period ended June 30, 2016 increased 3 percentage points compared with the six-month period ended June 30, 2015. DDS non-GAAP contract margin for the six-month period ended June 30, 2016 increased 4 percentage points from the six-month period ended June 30, 2015, driven by the margins realized on Whitehouse Laboratories' revenues.

 

DPM contract revenue determined under GAAP for the second quarter of 2016 increased 6% compared to the second quarter 2015, due to strong demand at our development and commercial manufacturing facilities, and $2.5 million of contract termination revenue related to the early termination of one of our collaboration arrangements.

DPM contract margin for the second quarter 2016 increased 15 percentage points compared to the second quarter of 2015. DPM non-GAAP contract margin for the second quarter of 2016 increased 13 percentage points compared to the second quarter of 2015, due to $2.5 million of contract termination revenue and enhanced operational efficiencies at our Albuquerque manufacturing facility.

DPM contract revenue for the six-month period ended June 30, 2016 increased 16% compared to the six-month period ended June 30, 2015, due primarily to $2.5 million of contract termination revenue.

DPM contract margin determined under GAAP for the six-month period ended June 30, 2016 increased 6 percentage points compared to the six-month period ended June 30, 2015. Drug Product Manufacturing non-GAAP contract margin for the six-month period ended June 30, 2016 increased 5 percentage points compared to the six-month period ended June 30, 2015, driven by contract termination revenue. 

Liquidity and Capital Resources

At June 30, 2016, AMRI had cash, cash equivalents and restricted cash of $31.4 million, compared to $47.2 million at March 31, 2016. The decrease in cash and cash equivalents for the quarter ended June 30, 2016 was primarily due to the use of $13.3 million for capital expenditures and $5 million of debt paydown, partially offset by cash generated by operating activities of $3.5 million. At December 31, 2015, AMRI had cash, cash equivalents and restricted cash of $52.3 million. The decrease in cash and cash equivalents for the six months ended June 30, 2016 was primarily due to the use of $25 million for capital expenditures and $10.8 million of debt paydown, partially offset by cash generated by operating activities of $15.2 million.

Financial Outlook

AMRI's guidance takes into account a number of factors, including expected financial results for 2016, anticipated tax rates and shares outstanding. The guidance includes the impact from the acquisition of Prime European Therapeuticals S.p.A., ("Euticals"), which closed on July 11, 2016.

AMRI's estimates for full year 2016, including the addition of Euticals, are as follows:

• Full Year 2016 revenue of $590 to $615 million, reflecting approximately $123 million of incremental revenue from Euticals, an increase of 50% at the midpoint, including:
  • DDS revenue growth of 27% to approximately $106 million
  • API revenue growth of 76% to approximately $362 million
  • DPM revenue growth of 10% to approximately $107 million
  • Fine Chemicals revenue of $16 million
  • Royalty revenue of $10 to $11 million
• Non-GAAP contract margin of approximately 29%
• Non-GAAP selling, general and administrative expenses of approximately 14% of revenue
• R&D expense of between $12 and $13 million
• Adjusted EBITDA between $108 and $114 million, an increase of 47% at the midpoint
• Non-GAAP diluted EPS between $1.03 and $1.11, based on an average fully diluted share count of approximately 39 million shares
• Non-GAAP effective tax rate of approximately 30-31%
• Capital expenditures of approximately $48 million

Reflecting the recurring seasonality in AMRI's business and greater contribution from Euticals in the fourth quarter, the Company currently expects the percentage of non-GAAP diluted EPS in the second half of 2016 to be approximately 20% in the third quarter and 80% in the fourth quarter.

Second Quarter Results Conference Call

AMRI will host a conference call and webcast today at 8:30 a.m. ET to discuss second quarter 2016 results. The conference call can be accessed by dialing (866) 208-5728 (domestic calls) or (224) 633-1279 (international calls) at 8:20 a.m. ET and entering passcode 49003667. The webcast and supplementing slides can be accessed on the company's website at www.amriglobal.com.

A replay of the conference call can be accessed for 24 hours at (855) 859-2056 (domestic calls) or (404) 537-3406 (international calls) and entering passcode 49003667. Replays of the webcast can also be accessed for up to 90 days after the call via the investor area of the company's website at http://ir.amriglobal.com.

About AMRIAlbany Molecular Research Inc. (AMRI) is a global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient outcomes and the quality of life for more than two decades. With locations in North America, Europe and Asia, our key business segments include Discovery and Development Services (DDS), Active Pharmaceutical Ingredients (API), and Drug Product Manufacturing (DPM). Our DDS segment provides comprehensive services from hit identification to IND, including expertise with diverse chemistry, library design and synthesis, in vitro biology and pharmacology, drug metabolism and pharmacokinetics, as well as natural products. API supports the chemical development and cGMP manufacture of complex API, including potent and cytotoxic compounds, controlled substances, steroids, hormones, and sterile API. DPM supports development through commercial scale production of complex liquid-filled and lyophilized parenterals, sterile suspensions and ophthalmic formulations

Forward-looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include all of the estimates under "Financial Outlook" and statements regarding, among other things, the planned integration of the Euticals business and the expected financial impact and synergies, the performance of the Company's previously acquired higher margin businesses, the strength of the company's commercial operations and prospects and the company's momentum and long-term growth. The words "outlook", "guidance", "anticipates", "believes", "expects", "may", "plans", "predicts", "will", "potential" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers should not place undue reliance on these forward-looking statements. The company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the Company may not be able to predict and may not be within the Company's control. Factors that could cause such differences include, but are not limited to, the ability of the Company to successfully integrate the Euticals business and achieve the expected financial results; ongoing headwinds in the U.S. economy which could lead to overall softness in the markets the Company serves; difficulty in raising new capital to support the Company's business and a slowdown in its ability to grow through acquisitions; trends in pharmaceutical and biotechnology companies' outsourcing of manufacturing services and chemical research and development, including softness in these markets; the success of the sales of the products for which the Company receives royalties; the risk that the Company will not be able to replicate either in the short or long term the revenue stream that has historically been derived from the royalties payable under the Allegra® license agreements; the risk that clients may terminate or reduce demand under any strategic or multi-year deal; the Company's ability to enforce its intellectual property and technology rights; the Company's ability to access sources of liquidity to provide for its cash needs, including its debt obligations and capital expenditures; the Company's ability to successfully comply with heightened FDA scrutiny on aseptic fill/finish operations; the results of further FDA inspections; the company's ability to effectively maintain compliance with applicable FDA and DEA regulations; the company's ability to integrate past or future acquisitions, and make such acquisitions accretive to the company's business model; the company's ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company's strategic investments and acquisitions to perform as expected, as well as those risks discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on March 30, 2016 and the company's other SEC filings. The financial guidance offered by senior management with respect to 2016 represents a point-in-time estimate and is based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may cause actual results to differ materially from the guidance provided. The company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.

Non-GAAP Financial MeasuresTo supplement our financial results prepared in accordance with U.S. GAAP, we have presented non-GAAP measures of contract gross profit, contract gross margin, net income, and earnings per diluted share, adjusted to exclude certain charges (and gains when applicable) that relate to specific events or transactions, such as impairment charges, restructuring charges, executive transition costs, business acquisition costs, realized and unrealized gains and losses on hedge transactions related to business acquisitions, non-recurring professional fees, ERP implementation costs, insurance recoveries on business interruption events, and gains on sales of facilities in the 2016 and 2015 periods presented. Management typically excludes these amounts when evaluating our operating performance and believes that the resulting non-GAAP measures provide investors with a consistent basis for comparison across periods and, therefore, are useful to investors in assessing our operating performance.

Our U.S. GAAP measures are also adjusted to exclude certain non-cash charges (and gains when applicable) such as non-cash debt interest and amortization charges, share-based compensation expense, purchase accounting inventory adjustments, and purchase accounting depreciation and amortization for the periods presented for 2016 and 2015. Management typically excludes the amounts described above when evaluating our operating performance and believes that the resulting non-GAAP measures are useful to investors in assessing our operating performance.

We have also presented the non-GAAP measure of adjusted EBITDA, which in addition to the items excluded above, further excludes the impact of interest income and expense, depreciation and amortization expense, and income tax expense or benefit.

We believe presentation of our non-GAAP measures enhances an overall understanding of our historical financial performance because we believe they are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating our financial performance as well as for budgeting and forecasting of future periods. For these reasons, we believe they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for net (loss) income or (loss) income per diluted share, prepared in accordance with U.S. GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are set forth in Tables 1-3.

A reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP reported financial measures has not been included because we are unable to provide such information without the use of unreasonable efforts.  In particular, sufficient information is not available to predict with reasonable certainty the expense related to certain purchase accounting adjustments (inventory, tangible assets and intangible assets) relating to our recent acquisition of Euticals, which closed on July 11, 2016, and any potential restructuring actions that may be initiated as a result of that acquisition.  The disclosure of such reconciliations may imply to our investors a degree of precision in our calculations that is not possible. These amounts are uncertain at this time, depend on a number of factors and could have a material impact on GAAP reported results for the guidance period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE AMRI