Procaps Group Reports Third Quarter and Nine Months 2022 Results

Rhea-AI Summary

Procaps Group reported a 15% increase in constant currency net revenues year-over-year for the first nine months of 2022, totaling $309 million, with a 3% increase in 3Q22 revenues at $110 million. Strong demand for RX, OTC, and CDMO products contributed to an impressive 61% gross margin. The company launched over 140 products in 2022 and is on track to finalize the Grupo Somar acquisition by year-end. However, ongoing currency devaluation led to an $8 million revenue loss in 3Q22. The company anticipates challenges from global economic conditions but remains optimistic about growth in 2023.

Positive

• Net revenues grew by 15% year-over-year in 9M22, reaching $309 million.
• 3Q22 revenues increased by 3% year-over-year, totaling $110 million.
• Gross profit for 3Q22 rose by 9% year-over-year, achieving a gross margin of 61%.
• Over 140 product launches in 2022, indicating strong demand.
• Plans for closing the Grupo Somar acquisition by year-end to expand market reach.

Negative

• Currency devaluation negatively impacted revenues by $8 million in 3Q22 and $16 million for 9M22.
• Macroeconomic challenges could hinder growth prospects towards the end of 2022.

Constant currency Net Revenues Increased by 15% year-over-year in the 9M22 and by 11% in the 3Q22, signaling a strong demand across our businesses

MIAMI and BARRANQUILLA, Colombia, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Procaps Group S.A. (NASDAQ: PROC) (“Procaps”), a leading integrated LatAm healthcare and pharmaceutical conglomerate, today announced its financial results for the three months ended September 30, 2022 (“3Q22”) and the nine months ended September 30, 2022 (“9M22”).

“Demand remains robust for RX and consumer health products as well as for all our CDMO products, and gross margin remained strong despite the challenging macro scenario we have been facing. We have continued to invest and prepare the company for the organic and inorganic growth that is about to come, and we expect to see continued revenue growth and improved operating leverage,” said Rubén Minski, CEO of Procaps.

Highlights 9M22 & 3Q22

Product Development & Market Expansion

• Capacity expansion plans in the United States continue as planned with the ongoing construction of the new gummy manufacturing facility in Florida
• Commencement of operations of West Palm Beach facility providing R&D services
• Renewal rate of 24% in 9M22
• 140+ products launched during 9M22 in the regions where we operate
• Expected to close Grupo Somar acquisition before year-end
  

Financial Highlights

• Net revenues totaled $110 million for 3Q22, an increase of 3% vs.3Q21, and an increase of 11% on a constant currency basis, thanks to the positive performance of RX, OTC and CDMO products. Net revenues totaled $309 million in 9M22, a 9% increase vs. 9M21, and an increase of 15% on a constant currency basis.
• Gross profit for 3Q22 increased by 9% vs. 3Q21, totaling $68 million, with a 61% gross margin, and a 17% increase in 9M22 vs. 9M21, amounting to $187 million.

	3Q22		3Q21	Δ%			9M22		9M21	Δ%
Net Revenues	110		107	3	%		308		283	9	%
FX Impact on Net Revenues	(8	)	-	-7	%		(16	)	-	-5	%
Constant Net Revenues	118		107	11	%		325		283	15	%

Management Commentary

Procaps Chief Executive Officer, Ruben Minski, commented:

“The third quarter was highlighted by our ongoing pace of innovative new products launches and product rollouts to new regions, as well as increased demand and market share for existing products. Despite macroeconomic headwinds and the depreciation of some local currencies, we continued to make significant progress on our strategy of building an integrated healthcare organization that will capture the benefits of our organic and inorganic growth.

“The cadence of new product launches and product rollouts to new regions combined to deliver 11% revenue growth on a constant currency basis during the quarter compared to 3Q21, supported by product development and new launches. With our strong focus on continuous innovation and internationalization, we continue to expand our portfolio within selected therapy areas and geographies. We have launched over 40 products in Colombia during the first nine months of 2022 and continuing with our geo expansion, we have launched approximately 100 products in the rest of the region, in the same period.

“We are delivering double-digit growth on a constant currency basis, and those results support our belief that we are making the necessary investment in our business and that the key drivers and competitive advantages are in place to execute our long-term strategy, despite currency headwinds.

“Looking ahead, we continue to expect to close on our Grupo Somar acquisition by the end of the year which will represent a significant step forward for our regional consolidation strategy, expanding our reach in Mexico. Our West Palm Beach facility pipeline of RX product development has been growing as expected, and we have a positive perspective for the next twelve months.

“In summary, while we are experiencing headwinds in the second half of this year, we believe we are well positioned to build significant momentum in 2023 as we drive growth, expand our portfolio and continue to focus on our roll-up strategy – all with the goal of building sustainable value for our shareholders over the long-term. I look forward to driving new momentum towards the realization of Procaps’s significant potential,” said Minski.

Procaps Chief Financial Officer, Patricio Vargas, commented:

“We ended the third quarter of 2022 with revenue increase of 11% over the same period of the previous year on a constant currency basis, and 15% in the first nine months, driven by multiple therapeutic areas across the company. We believe our ongoing discipline in the execution of our growth strategy, combined with the soundness of our core business operations, will position us for continued growth as the macroeconomic environment normalizes.

Currency devaluation during the last few months in some of our markets negatively impacted our 3Q22 revenues by $8 million compared to the third quarter of 2021 and by $16 million in the first nine months of the year compared to the same period in the prior year.

“Our gross margin remains robust at 61% both for the 3Q22 as well as for the 9M22, positively impacted by the portfolio mix during the third quarter.

To address the specific headwinds, we have been facing in these past months, we have been proactive in seeking out new ways to strengthen our multi-prong growth strategy that we expect will continue to deliver growth in our core markets with strong cash generation to the bottom line.

“Our strategy going forward will continue to prioritize high value uses for our capital, with an emphasis on reinvesting in our business by funding our internal R&D and innovation initiatives. With our substantial efforts to establish the necessary building blocks for growth, including our recent acquisition announcement, I’m confident that we are well positioned to achieve our near and long-term goals.

“Looking to 4Q22 and 2023, we expect to see continuing challenges and uncertainties, such as a possible recession in the United States and Europe, supply chain disruptions, and the continued depreciation of the currencies in the markets where we operate.

Despite these possibilities, we believe the diversified nature of our businesses, our efforts to meet these challenges, and ongoing expansion at every level of the Company, position us to combat potential challenges ahead and to continue our growth. The mid-term outlook for growth is positively driven by our product pipeline which is paramount to sustain our growth,” concluded Vargas.

Please check Procaps investor relations website for full Earning Release details, at:
https://investor.procapsgroup.com/financials/quarterly-reports

Conference Call Information:

The Company expects to host a conference call and webcast at 04 p.m. Eastern time, on November 16, 2022.
To access the call, please use the following information:

Date: Wednesday, November 16, 2022
Time: 04 p.m. ET
Toll Free dial-in number: 1-844-204-8586
Toll/International dial-in number: 1-412-317-6346
Procaps HD Phone: https://bit.ly/PROCHDPHONE
Conference ID: Procaps Group

The conference call will be broadcast live and available for replay at https://bit.ly/Procaps3Q22 and via the investor relations section of Procaps’ website.

Investor Contact:

Melissa Angelini
ir@procapsgroup.com
+1 754 260-6476

About Procaps Group

Procaps Group, S.A. ("Procaps”) (NASDAQ: PROC) is a 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 5,300 employees working under a sustainable model. Procaps develops, manufactures, and markets over the counter (OTC) pharmaceutical products and prescription pharmaceutical drugs (Rx), nutritional supplements and high-potency clinical solutions. For more information, visit www.procapsgroup.com or Procaps Group’s investor relations website investor.procapsgroup.com.

Forward-Looking Statements

This press release contains "forward-looking statements." Forward-looking statements may be identified by the use of words such as "forecast," "intend," "seek," "target," "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include expectations related to the timing and completion of the acquisition of Grupo Somar; expectations related to the integration of Grupo Somar and Procaps’ presence in Mexico; estimated percentage of total revenues of the combined companies to be generated by Grupo Somar following the consummation of the acquisition; expectations regarding the pipeline of Rx products; expectations regarding the construction of a new gummy manufacturing facility; expectation regarding the increase in Procaps’ product development capabilities due to the operation of the West Palm Beach facility; expectations regarding a recession in the United States and Europe, depreciation of currencies in markets where we operate and supply chain disruptions; expectations regarding the launch of the Diabetrics solution in in El Salvador, Peru, and Mexico; and expectations regarding Procaps’ roll-up strategy and a multi-prong growth strategy of innovative pharmaceutical solutions and new expansion initiatives. Such forward-looking statements concerning revenues, earnings, performance, strategies, synergies, prospects and other aspects of the businesses of Procaps are based on current expectations that are subject to risks and uncertainties. Several factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this press release, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. We cannot assure you that the forward-looking statements in this press release will prove to be accurate. These forward-looking statements are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among others, the ability to recognize the anticipated benefits of the acquisition of the Grupo Somar , the impact of COVID-19 on Procaps’ business, costs related to the acquisition and integration of the Grupo Somar, changes in applicable laws or regulations, the possibility that Procaps may be adversely affected by other economic, business, and/or competitive factors, and other risks and uncertainties, including those included under the header “Risk Factors” in Procaps’ annual report on Form 20-F filed with the U.S. Securities and Exchange Commission (“SEC”), as well as Procaps’ other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Accordingly, you should not put undue reliance on these statements.

FAQ

What were Procaps Group's net revenues for 3Q22?

Procaps Group reported net revenues of $110 million for 3Q22, a 3% increase year-over-year.

How much did Procaps' revenues grow in 9M22?

Procaps' net revenues grew by 15% year-over-year in the first nine months of 2022, totaling $309 million.

What is the expected impact of the Grupo Somar acquisition on Procaps?

The acquisition of Grupo Somar is expected to enhance Procaps' market reach in Mexico and support its regional consolidation strategy.

What challenges is Procaps facing in the current financial environment?

Procaps is facing challenges such as currency devaluation, potential recession impacts, and supply chain disruptions.

What gross margin did Procaps achieve in 3Q22?

Procaps achieved a gross margin of 61% for 3Q22.