Procaps Group Delays Filing of Annual Report on Form 20-F

Rhea-AI Summary

Procaps Group (NASDAQ: PROC) has announced a delay in filing its Annual Report on Form 20-F for the fiscal year ended December 31, 2023, due to the need for additional time to review its financial statements related to a 2012 loan. The company expects to file the report before May 15, 2024, and will provide updates accordingly. Despite the delay, Procaps Group anticipates revenue and income growth for the year 2023 compared to 2022.

Positive

• Procaps Group anticipates revenue growth for the year ended December 31, 2023, expected to be between approximately $425 and $433 million, compared to $409.9 million in 2022, primarily due to an increase in sales.

• Income for the year ended December 31, 2023, is expected to be between approximately $50 and $55 million, compared to $42.5 million in 2022, with the difference primarily due to non-cash shares accounting treatment and non-recurring income increase.

Negative

• Procaps Group has delayed filing its Annual Report on Form 20-F for the fiscal year ended December 31, 2023, due to ongoing internal investigation into historical accounting treatment related to a 2012 loan involving related parties.

• The company's Adjusted EBITDA for the year ended December 31, 2023, is expected to show only single-digit growth compared to the previous year, potentially indicating a slower financial performance increase.

Insights

Financial Analyst

The delay in the filing of Procaps Group's Annual Report on Form 20-F captures attention due to the implications it may have on investor confidence and the transparency of the company's financial health. The stated need for additional time to review financial statements, particularly the internal investigation into historical accounting treatment, suggests potential issues with financial reporting standards or compliance. This development may warrant cautious scrutiny, as it could indicate possible restatements of prior financial results, with subsequent impacts on the stock’s valuation. The preliminary financial results, while showing growth in revenue and income, should be approached with caution until finalized figures are available, especially considering the use of non-IFRS measures, which are not standardized and may not be comparable across companies or industries. The impact is mixed, as the growth is a positive sign, but the delay and investigation cast a shadow over these results.

Legal Expert

The announcement of an ongoing internal investigation by the Audit Committee, assisted by external advisors, regarding a 2012 loan involving related parties, presents a legal concern that investors should monitor closely. While the nature of these concerns is not fully disclosed, related-party transactions are often scrutinized for potential conflicts of interest that could affect the integrity of financial reporting. Any findings of irregularities could lead to regulatory scrutiny, potential sanctions, or litigation, which might negatively affect the company's stock performance. Additionally, adherence to the deadline set for the resubmission before May 15, 2024, will be critical for compliance purposes and failure to meet this deadline could have further legal and financial repercussions.

Accounting Expert

The internal investigation into the historical accounting treatment related to a loan involving related parties is noteworthy; this type of review can lead to restatements which may alter investors' perception of the company's past and future financial stability. The preliminary financials indicate growth, yet the reference to non-cash shares and warrants held in escrow, which affect net income, underscores the importance of understanding the quality of earnings. Adjusted EBITDA growth in single digits is generally positive, but without the context of the adjustments made, stakeholders cannot fully gauge the operational performance. Given the unaudited and preliminary nature of these results, they should not be taken at face value, but rather as indicators pending further clarification upon formal filing.

MIAMI & BARRANQUILLA, Colombia--(BUSINESS WIRE)-- Procaps Group (NASDAQ: PROC) (“Procaps” or the “Company”), a leading integrated LatAm healthcare and pharmaceutical services company, today announced that it has determined it is unable to file its Annual Report on Form 20-F for the fiscal year ended December 31, 2023, within the prescribed time period.

Additional time is necessary to prepare and complete the Company’s review of its financial statements for the year ended December 31, 2023, in order for the Company to file its annual report on Form 20-F, including with respect to an ongoing internal investigation initiated by the Company’s Audit Committee with the assistance of external advisors into matters involving the Company’s historical accounting treatment and associated financial statement disclosure related to a 2012 loan in the amount of approximately $2.5 million that involved related parties.

The Company is working diligently to complete its financial statements in order to file its Form 20-F as soon as practicable before May 15, 2024.

The Company expects to hold a business update call in conjunction with the filing of its Form 20-F and Earnings Release and expects to provide a further update regarding the date of the business update call.

Please send all questions to ir@procapsgroup.com. Due to applicable securities laws, the Company is unable to provide further details beyond what is publicly disclosed, and accordingly the Company expects to address submitted questions in its applicable reports and during its conference call once the results are published.

The Company has made preliminary determinations of certain results of operations. Revenue for the year ended December 31, 2023, is currently expected to be between approximately $425 and $433 million, compared to $409.9 million for the year ended December 31, 2022, with the difference primarily due to an increase in sales. Income for the year ended December 31, 2023, is currently expected to be between approximately $50 and $55 million, compared to income of $42.5 million for the year ended December 31, 2022, with the difference primarily due to the accounting treatment for non-cash shares and warrants held in escrow and an increase in non-recurring income.

With reference to the below disclosures regarding the use of non-IFRS measures, the Company currently expects Adjusted EBITDA for the year ended December 31, 2023, to be in single-digit growth in comparison with Adjusted EBITDA for the year ended December 31, 2022.

The unaudited financial information set out above is preliminary and subject to potential adjustments, which could result in material differences from this preliminary unaudited financial information.

About Procaps Group

Procaps Group, S.A. (“Procaps”) (NASDAQ: PROC) is a leading developer of pharmaceutical and nutraceutical solutions, medicines, and hospital supplies that reach more than 50 countries in all five continents. Procaps has a direct presence in 13 countries in the Americas and more than 5,000 employees working under a sustainable model. Procaps develops, manufactures, and markets over-the-counter (OTC) pharmaceutical products, prescription pharmaceutical drugs (Rx), nutritional supplements, and high-potency clinical solutions.

For more information, visit www.procapsgroup.com or Procaps’ investor relations website investor.procapsgroup.com.

Forward-Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, the Company’s expectations as to the outcome of its preparation and review of its financial statements and preliminary determinations of certain financial results.

These forward-looking statements involve risks and uncertainties, and actual results could vary materially from these forward-looking statements. Factors that may cause future results to differ materially from management’s current expectations include, among other things, the discovery of additional information relevant to the review of the Company’s financial statements; the conclusions of management (and the timing of the conclusions) concerning matters relating to the Company’s financial statements; the timing of the review by, and the conclusions of, the Company’s independent registered public accounting firm regarding the Company’s financial statements; the possibility that errors may be identified; and the risk that the completion and filing of the Form 20-F will take longer than expected. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-IFRS Financial Measures

The Company’s management uses and discloses Adjusted EBITDA and other measures which represent “non-IFRS” financial information to assess its operating performance across periods and for business planning purposes. The Company’s management believes the presentation of these non-IFRS financial measures is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business. These non-IFRS measures are not meant to be considered in isolation or as a substitute for financial information presented in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board and should be viewed as supplemental and in addition to our financial information presented in accordance with IFRS.

The Company’s management defines EBITDA as profit (loss) for the period before interest expense, net, income tax expense and depreciation and amortization. The Company’s management defines Adjusted EBITDA as EBITDA further adjusted to exclude certain isolated costs incurred as a result of the COVID-19 pandemic, certain transaction costs incurred in connection with the business combination (“Business Combination”) with Union Acquisition Corp. II, certain listing expenses incurred in connection with the Business Combination, certain costs related to business transformation initiatives, certain foreign currency translation adjustments and certain other finance costs, and other nonrecurring nonoperational or unordinary items as the Company may deem appropriate from time to time. We also report Adjusted EBITDA as a percentage of net revenue as an additional measure so investors may evaluate our Adjusted EBITDA margins. Neither EBITDA or Adjusted EBITDA are presented in accordance with generally accepted accounting principles or IFRS and are non-IFRS financial measures.

Because the Company has not yet completed the preparation and review of its financial statements and because of the forward-looking nature of the estimated Adjusted EBITDA presented above, the Company does not have specific quantifications of the amounts that would be required to provide a reconciliation of income, the most directly comparable financial measure calculated and presented in accordance with IFRS to Adjusted EBITDA for the year ended December 31, 2023. The Company believes there is a degree of variability with respect to certain of the IFRS measures and certain adjustments made to arrive at the relevant non-IFRS measure that precludes the Company from providing an accurate preliminary estimate of an IFRS to non-IFRS reconciliation without unreasonable effort or expense.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501416819/en/

Investor Contact:

Melissa Angelini

ir@procapsgroup.com

investor.procapsgroup.com

Source: Procaps Group, S.A.

FAQ

Why did Procaps Group delay filing its Annual Report on Form 20-F for the fiscal year ended December 31, 2023?

Procaps Group delayed the filing due to the need for additional time to review its financial statements related to a 2012 loan.

What is the expected revenue for Procaps Group for the year ended December 31, 2023?

Procaps Group anticipates revenue to be between approximately $425 and $433 million, compared to $409.9 million in 2022.

What is the expected income for Procaps Group for the year ended December 31, 2023?

Procaps Group expects income to be between approximately $50 and $55 million, compared to $42.5 million in 2022.

What is the reason behind the difference in income for Procaps Group in 2023 compared to 2022?

The difference in income is primarily due to the accounting treatment for non-cash shares and warrants held in escrow, and an increase in non-recurring income.

What is the expected growth in Adjusted EBITDA for Procaps Group for the year ended December 31, 2023?

The company expects single-digit growth in Adjusted EBITDA compared to the year ended December 31, 2022.