Procaps Issues Shareholder Letter
Procaps Group (NASDAQ: PROC) CEO José Antonio Vieira issued a shareholder letter addressing the company's current challenges and future strategies. Key points include:
1. An ongoing internal investigation has delayed the filing of audited financial statements.
2. The company secured forbearance agreements with key lenders, providing temporary financial relief of about $20 million.
3. Net revenues for 1H24 were approximately $190 million, a 2% decline from 1H23.
4. Estimated Adjusted EBITDA for 1H24 is between $8-10 million, down from $29 million in 1H23.
5. The company is evaluating non-core assets for potential sale to simplify its portfolio and reduce debt.
6. Procaps is focusing on resolving the internal investigation, reorganizing operations, and improving EBITDA margins.
Il CEO di Procaps Group (NASDAQ: PROC), José Antonio Vieira, ha emesso una lettera ai soci affrontando le attuali sfide dell'azienda e le strategie future. I punti chiave includono:
1. Un'indagine interna in corso ha ritardato la presentazione dei bilanci finanziari auditati.
2. L'azienda ha ottenuto accordi di sospensione con i principali creditori, fornendo un sollievo finanziario temporaneo di circa 20 milioni di dollari.
3. I ricavi netti per il 1H24 sono stati di circa 190 milioni di dollari, una diminuzione del 2% rispetto al 1H23.
4. Si stima che l'EBITDA rettificato per il 1H24 si attesti tra 8 e 10 milioni di dollari, in calo rispetto ai 29 milioni del 1H23.
5. L'azienda sta valutando gli attivi non strategici per una possibile vendita al fine di semplificare il proprio portafoglio e ridurre il debito.
6. Procaps si sta concentrando sulla risoluzione dell'indagine interna, sulla riorganizzazione delle operazioni e sul miglioramento dei margini EBITDA.
El CEO de Procaps Group (NASDAQ: PROC), José Antonio Vieira, emitió una carta a los accionistas abordando los desafíos actuales de la empresa y las estrategias futuras. Los puntos clave incluyen:
1. Una investigación interna en curso ha retrasado la presentación de los estados financieros auditados.
2. La empresa aseguró acuerdos de suspensión con prestamistas clave, proporcionando un alivio financiero temporal de aproximadamente 20 millones de dólares.
3. Los ingresos netos para el 1H24 fueron de aproximadamente 190 millones de dólares, una disminución del 2% en comparación con el 1H23.
4. Se estima que el EBITDA ajustado para el 1H24 se sitúa entre 8 y 10 millones de dólares, en comparación con los 29 millones en el 1H23.
5. La empresa está evaluando activos no esenciales para su posible venta con el fin de simplificar su cartera y reducir la deuda.
6. Procaps se está enfocando en resolver la investigación interna, reorganizar las operaciones y mejorar los márgenes de EBITDA.
Procaps Group (NASDAQ: PROC)의 CEO인 José Antonio Vieira는 회사의 현재 문제와 향후 전략을 다루는 주주 서한을 발송했습니다. 주요 내용은 다음과 같습니다:
1. 진행 중인 내부 조사가 감사 재무 제표 제출을 지연시켰습니다.
2. 회사는 주요 대출자와 유예 계약을 체결하여 약 2천만 달러의 임시 재정 지원을 제공했습니다.
3. 1H24의 순수익은 약 1억 9천만 달러로, 1H23 대비 2% 감소했습니다.
4. 1H24의 조정 EBITDA는 800만 달러에서 1천만 달러 사이로 추정되며, 이는 1H23의 2천9백만 달러에서 감소한 수치입니다.
5. 회사는 포트폴리오를 간소화하고 부채를 줄이기 위해 비핵심 자산의 판매 가능성을 평가하고 있습니다.
6. Procaps는 내부 조사를 해결하고, 운영을 재조직하며, EBITDA 마진을 개선하는 데 집중하고 있습니다.
Le PDG de Procaps Group (NASDAQ: PROC), José Antonio Vieira, a publié une lettre aux actionnaires abordant les défis actuels de l'entreprise et les stratégies futures. Les points clés incluent :
1. Une enquête interne en cours a retardé le dépôt des états financiers audités.
2. L'entreprise a obtenu des accords de report avec des prêteurs clés, offrant un soulagement financier temporaire d'environ 20 millions de dollars.
3. Les revenus nets pour le 1H24 se sont élevés à environ 190 millions de dollars, soit une baisse de 2 % par rapport au 1H23.
4. L'EBITDA ajusté estimé pour le 1H24 se situe entre 8 et 10 millions de dollars, en baisse par rapport à 29 millions de dollars au 1H23.
5. L'entreprise évalue des actifs non essentiels pour une éventuelle vente afin de simplifier son portefeuille et de réduire sa dette.
6. Procaps se concentre sur la résolution de l'enquête interne, la réorganisation des opérations et l'amélioration des marges EBITDA.
Der CEO von Procaps Group (NASDAQ: PROC), José Antonio Vieira, hat einen Brief an die Aktionäre veröffentlicht, in dem er die aktuellen Herausforderungen des Unternehmens und die zukünftigen Strategien anspricht. Die wichtigsten Punkte sind:
1. Eine laufende interne Untersuchung hat die Einreichung der geprüften Finanzberichte verzögert.
2. Das Unternehmen hat Stundungsvereinbarungen mit wichtigen Gläubigern getroffen, die vorübergehende finanzielle Erleichterung von etwa 20 Millionen US-Dollar bieten.
3. Die Nettoumsätze für das 1H24 betrugen etwa 190 Millionen US-Dollar, was einem Rückgang von 2 % im Vergleich zum 1H23 entspricht.
4. Das geschätzte bereinigte EBITDA für das 1H24 liegt zwischen 8 und 10 Millionen US-Dollar, im Vergleich zu 29 Millionen US-Dollar im 1H23.
5. Das Unternehmen evaluiert nicht zugehörige Vermögenswerte für einen möglichen Verkauf, um das Portfolio zu vereinfachen und die Schulden zu reduzieren.
6. Procaps konzentriert sich auf die Lösung der internen Untersuchung, die Reorganisation der Abläufe und die Verbesserung der EBITDA-Margen.
- Procaps outperformed the market with a 5.1% growth rate YTD June 2024, ranking as the second fastest-growing company overall
- Core businesses, particularly Rx and Clinical Specialties lines, have shown resilience
- The company secured forbearance agreements with key lenders, providing temporary financial relief of about $20 million
- Nasdaq granted an extension until November 11, 2024, to file results and regain compliance with listing requirements
- The Luxembourg Court ruled in Procaps' favor, dismissing all claims by Hoche Partners
- Net revenues for 1H24 declined 2% to $190 million from $194 million in 1H23
- Estimated Adjusted EBITDA for 1H24 decreased significantly to $8-10 million from $29 million in 1H23
- Gross debt increased slightly to $285 million as of June 30, 2024, from $282 million a year earlier
- The company is facing operational and macroeconomic challenges, particularly in OTC and Rx segments across Latin America
- Delays in filing audited financial statements due to an ongoing internal investigation
- Cash flow from operations is under pressure, necessitating tight control over Capex and inventory levels
Insights
The shareholder letter reveals significant financial challenges for Procaps. Key points include:
- Net revenues for 1H24 declined
2% to$190 million - Estimated Adjusted EBITDA for 1H24 dropped to
$8-10 million from$29 million in 1H23 - Gross debt stood at
$285 million as of June 30, 2024 - The company entered forbearance agreements covering over
$190 million of indebtedness
These figures indicate severe financial strain, with a sharp decline in profitability. The forbearance agreement and potential asset sales suggest a critical need for debt reduction and liquidity improvement. While the company outperformed market growth, the overall financial picture remains concerning for investors.
The letter highlights several legal and regulatory challenges:
- An ongoing internal investigation into historical accounting practices and related party transactions
- Delayed filing of the 2023 Form 20-F, risking Nasdaq compliance
- A recent legal victory against Hoche Partners in Luxembourg court
- Forbearance agreements with lenders, temporarily pausing debt payments
The internal investigation and delayed filings are particularly concerning, as they could lead to regulatory scrutiny and potential sanctions. The forbearance agreements provide temporary relief but indicate significant financial distress. The court victory against Hoche Partners is a positive development, but the overall legal landscape remains challenging and uncertain for Procaps.
The Latin American pharmaceutical market is facing significant headwinds:
- Market growth slowed from
6.6% to2.2% YTD June 2024 - Procaps' relevant market segments growth decreased from
6.4% to1% - Procaps outperformed with
5.1% growth, ranking 2nd overall
Despite challenging conditions, Procaps' ability to outperform the market is noteworthy. However, macroeconomic factors such as economic instability, political uncertainty and reduced consumer purchasing power are creating a difficult operating environment. The company's focus on inventory reduction and cost control measures are necessary but may impact short-term growth. The planned evaluation of non-core assets could lead to a more streamlined, focused business model in the long term.
MIAMI and BARRANQUILLA, Colombia, Sept. 03, 2024 (GLOBE NEWSWIRE) -- Procaps Group, S.A. (NASDAQ: PROC) (“Procaps” or the “Company”), a leading integrated LatAm healthcare and pharmaceutical conglomerate, today issued the below letter to shareholders from José Antonio Vieira, CEO of Procaps, addressing the current state of the business and outlining key strategic priorities for the Company.
“Dear Shareholders,
When I began my tenure as CEO of Procaps in January 2024, I made a commitment to formulate a strategic plan that steers Procaps towards consistent growth, optimal cash management, and predictable profitability. I said then that to move forward successfully, we must look back, learn from our mistakes, and address any deficiencies. I believe doing so will better enable us to position the Company going forward. Assessing our business and determining our go-forward strategy in today’s challenging market has been, and will continue to be, a non-linear journey.
I would also like to acknowledge that it has been some time since we last communicated with the market. We understand that our shareholders and the broader market are eager for more frequent updates, especially given the challenges we are currently navigating. Please know that we are fully aware of this need for information and are doing our utmost to keep you informed. However, due to the sensitive and evolving nature of the internal investigation, we must take a careful and thoughtful approach. Rest assured, as soon as appropriate and we have conclusions, we expect to provide comprehensive updates on these matters.
Today, I am providing an update on the current state of our business and outlining the key strategic priorities that will guide our focus and efforts as we look to the future.
I recognize that our Company has near-term objectives we must complete – most notably the previously-announced ongoing internal investigation led by the Audit Committee. I would like to emphasize that we are working diligently with our accounting and legal advisors, in cooperation with our external auditors, to complete the investigation in a timely manner so that we can report audited financial statements to our shareholders.
Let me be clear: I joined Procaps with the intent to bring an agenda of value creation for our stakeholders and that intention remains intact. With over 30 years of pharmaceutical industry experience and deep expertise of the Latin American market, I firmly believe in the long-term potential of the business and intend to chart the right path forward for Procaps to realize this value. While I acknowledge the near- and medium-term challenges our business faces, I remain confident, just as I did when I took this job, that Procaps is a viable organization with concrete growth perspectives and a path to profitability. However, this year our primary focus is on addressing our internal challenges. Our future depends on us concluding this investigation process and filing our audited financial statement with our 2023 20-F. In the meantime, we are working to correct the course where needed, securing financing and implementing our strategic plan.
Recent Developments
Legal action initiated by Hoche Partners
Last month, Hoche Partners initiated legal proceedings against Procaps Group in Luxembourg. The primary claim sought the Luxembourg Court’s intervention to appoint an ad-hoc administrator to supervise or replace the current members of the Audit Committee.
We are pleased to inform you that the Luxembourg Court has ruled entirely in our favor, dismissing all of Hoche’s claims as unfounded. The Court thoroughly examined the arguments from both sides and disregarded the arguments made by Hoche and upheld all the defenses presented by Procaps.
The Court not only rejected Hoche’s claim in its entirety but also ordered Hoche to pay a procedural indemnity of EUR 3,000, which is a notable amount given the nature of summary proceedings in Luxembourg. Hoche retains the right to appeal this decision within 15 days of its official service.
This is a significant step forward in protecting our interests and reinforces our commitment to defending the Company against unfounded claims.
Forbearance Agreement
The combination of non-recurring expenses related to the delay in our financial results, coupled with the broader challenges affecting our performance, has created financial strain on the Company and our debt management strategy. To address this, as previously announced, we have entered into forbearance agreements with our key lenders, which temporarily pauses payments and prevents lenders from enforcing remedies while we work toward a financial solution along with them and our shareholders. The agreement covers over
This agreement provides us with temporary financial relief amounting to approximately
Additionally, it is important to highlight the expected
Internal Investigation and Delayed Audited Results
As we announced in May and July 2024, respectively, the Company has had to delay the filing of its Form 20-F for the fiscal year ended December 31, 2023, and has required additional time to prepare and complete the review of its financial statements. As previously disclosed, an internal investigation led by the Company’s Audit Committee with the assistance of external advisors is ongoing into matters involving the Company’s historical accounting treatment and associated financial statement disclosures related to certain historical related party transactions.
We are working diligently alongside our legal and accounting advisors, in cooperation with our external auditors, to resolve this matter so that we can finalize and report our financial statements as soon as possible.
Additionally, Nasdaq has approved our previously-submitted compliance plan and granted us an extension until November 11, 2024, to file our results and regain compliance with Nasdaq’s listing requirements. While we are making every effort to meet this deadline, the timing of the finalization of our financial statements will remain closely tied to the progress and findings of the ongoing investigation.
Current State of the Business
As we reflect on the current state of the business, we are acutely aware of key challenges that continue to weigh on the Company, which are outlined below.
Operational and Macroeconomic Challenges
We are currently navigating significant operational and macroeconomic challenges that have negatively impacted our performance, particularly in the OTC and prescription drug (Rx) segments across Latin America. The region has experienced a slowdown in market growth due to economic instability, political uncertainty, and reduced consumer purchasing power. Additionally, regulatory challenges, currency devaluations, and inflation have further strained margins and sales volumes, contributing to a modest overall performance with sharp declines in some markets.
In Ecuador, the pharmaceutical market is under pressure due to the country's ongoing economic and societal challenges. These challenges have led to increased pressure on commercial channels to reduce inventory levels, negatively affecting both our CASAND and CDMO segments.
According to IQVIA, market growth in the 11 countries where we operate has slowed from a growth rate of
Despite these challenging market conditions, Procaps has managed to significantly outperform the market. We achieved a
This challenging environment requires strategic adjustments, including tighter inventory management, cost control measures, and a focus on maintaining market share amid slower growth.
Operationally, we have experienced higher year-over-year COGS, slow inventory turnover, and reduced CDMO plant utilization, all of which have applied pressure on our gross margins. Delays in orders and postponed product launches from our customers have continued to put pressure on the business, particularly in our CDMO operations.
Additionally, we have been actively working towards reducing stock-in-trade in some of our markets, which ended 2023 at higher-than-normal levels and has continued to have a significant impact in the first half of the year. This had a strong adverse impact on revenues in our CAN and CASAND regions.
Net revenues for the six months ended June 30, 2024 (“1H24”) were approximately
We currently estimate Adjusted EBITDA for 1H24 to be between
These challenges, combined with increased operational costs and reduced plant utilization, have put considerable pressure on our margins. However, we are actively addressing these issues through targeted cost control measures and operational efficiencies, which we believe will support improved EBITDA margins moving forward. By focusing on optimizing inventory levels and navigating the complexities of markets like Ecuador, we are positioning the company for stronger performance in the future.
Partly compensating the above impacts, our core businesses, particularly our Rx and Clinical Specialties lines, have shown resilience, and we are optimistic that we can maintain their robust growth. Our Clinical Specialties line continues to ramp up from post-pandemic tailwinds, and our Rx segment continues to experience strong demand coupled with launches of new products. I am optimistic that our diverse product portfolio can continue to see meaningful improvements as we further improve our operations.
Cash Flow and Debt Management
As of June 30, 2024, our gross debt stood at approximately
A Time for Transformation
As we look to the future, I, alongside the rest of the management team, are accountable for navigating these challenges and steering the Company towards long-term growth. We are committed to implementing strategies that will enable us to realize the full value of our assets, tap into the strength of our core business, and ultimately drive shareholder value. To that end, our management team has developed certain top priorities that will guide us on our journey forward. While our path ahead may not be linear, we are confident that these initiatives are the right first steps to recalibrating the business and positioning the Company for a positive transformation.
Resolve Internal Investigation and Release 2023 Audited Financials
A top near-term priority is to see through the conclusion of the ongoing internal investigation. As a public company, it is critical that we timely disclose audited financials to our shareholders and the market. We are committed to expeditiously concluding this investigation and resuming timely reporting of our financial statements to our shareholders and the market.
Reorganize Internal Operations
We are committed to running this business in an efficient manner that enables us to nimbly navigate our dynamic industry. The way we are structured must enable us to meet our customers’ ever-changing needs and position us to do so in a cost-efficient manner. I, and the rest of the management team, have already taken a fresh look at the way we are organized and our cost drivers to optimize the way we operate and allocate resources. We expect to implement significant changes to help us navigate industry headwinds, such as rising costs of supplies and increased competition, to ultimately drive margin expansion and cost savings over the long-term.
Evaluation of Non-Core Assets
Over the past seven months, I have spent a great amount of time with the management team gaining an in-depth understanding of each of Procaps’ business and products. Our portfolio is currently diverse and complex. Each business has different margin profiles, trends in customer behavior, specific macro headwinds, and different long-term outlooks.
As a result, we have been evaluating in detail our non-core assets, assessing their recent performance, future outlook, and fit within our overall portfolio. As a result, we have decided to explore alternatives, including the potential sale, of certain non-core assets or underperforming businesses, which should enable us to simplify our portfolio, strengthen our financial position, and reduce debt. We believe this will ultimately help enhance our free cash flow and provide added operational flexibility to invest in parts of the business that can drive long-term growth. We expect to carry out this plan during the following 12 to 18 months and expect to share updates as appropriate.
Debt Reduction and EBITDA Margin Improvement
We are exploring various alternatives to obtain additional financing, to bring a sustainable cash position which we believe will allow the Company the necessary flexibility to pursue key initiatives and further invest in higher growth segments with stronger margins, such as prescription pharmaceutical drugs (Rx).
With the measures above we want to demonstrate that we are focused on reducing our debt burden and improving our EBITDA margins through operational efficiencies, cost control measures, and strategic asset sales where necessary. We expect that our ongoing restructuring efforts will support these goals, allowing us to optimize cash flow and invest in high-growth segments.
The Path Forward
Overall, while the organization has challenges to overcome, we believe there is also reason to have confidence in the future of Procaps. We aim to continue building upon our market leadership in high-impact therapeutic areas, as evidenced by our business development efforts to expand our oncology portfolio and ongoing in-house R&D investments. As we continue to navigate an evolving healthcare landscape with favorable Rx dynamics, we are confident that the foundation we have built in differentiated BGx and commercialization will position us to unlock the full potential of our strong business and accelerate our long-term growth.
We are committed to working harder than ever to deliver the changes needed to help Procaps reach its potential. While the path forward will be non-linear, I am confident in the value we can drive for the Company’s shareholders over the long-term. We appreciate your patience on this path and will continue to provide updates with you as appropriate as we make progress.
Sincerely,
José Antonio Vieira
CEO of Procaps Group”
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
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 nearly 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.
Investor Contact:
Melissa Angelini
ir@procapsgroup.com
+1 754 260-6476
investor.procapsgroup.com
Forward-Looking Statements
This press release includes "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. Forward-looking statements may be identified by the use of words such as "forecast," "intend," "seek," "target," "anticipate," "believe," "expect," "estimate," "plan," "outlook," “goal,” “objective,” “will,” “may,” “should,” “can,” “project” and other similar expressions that predict or indicate future events, objectives, results or trends or that are not statements of historical matters. Such forward-looking statements include, without limitation, projected financial information, the Company’s expectations about the timing of completion of the internal investigation and filing of the 2023 20-F, the Company’s statements regarding seeking additional financing, statements related to the Company’s plans, outlook and strategy, other Company initiatives and objectives or forecasts related to the Company’s business, performance and industry. These forward-looking statements involve substantial risks and uncertainties, or assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, 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 internal investigation; the conclusions of management (and the timing of the conclusions) concerning matters relating to the internal investigation; the timing of the review by, and the conclusions of, the Company’s independent registered public accounting firm regarding the internal investigation and the Company’s financial statements; the possibility that errors may be identified; the risk that the completion and filing of the Form 20-F will take longer than expected; the inability to successfully implement or execute on the Company’s strategic objectives or initiatives or to obtain financing; changes in applicable laws or regulations; the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; the inability of the Company to execute on its expense reductions plans or growth initiatives; and other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission ("SEC") by the Company. 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.
Important Note Regarding Preliminary, Unaudited Estimates and Non-IFRS Measures
Please note that the preliminary, unaudited results estimates for the six months ended June 30, 2024 included in this release were prepared by the Company’s management in connection with the preparation of the Company’s financial statements and are based upon preliminary operating results estimated based on information available as of the date hereof, and include a number of subjective judgments and assumptions. Additional items that may require adjustments to the Company’s preliminary estimated financial information may be identified and could result in material changes to the Company’s preliminary estimated results. The Company’s independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to the preliminary estimated financial information, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Further, these preliminary estimated results are not a comprehensive statement or estimate of the Company’s financial condition or operating results for six months ended June 30, 2024. These preliminary estimated results should not be viewed as a substitute for complete financial statements prepared in accordance with IFRS. In addition, the preliminary estimated financial information is not necessarily indicative of the results to be achieved for any future period. Accordingly, investors are cautioned not to place undue reliance on this preliminary estimated financial information.
Because we have not yet completed our closing process and because of the forward-looking nature of the estimated Adjusted EBITDA ranges presented above for the 1H2024, we do not have specific quantifications of the amounts that would be required to provide a reconciliation of income (loss), the most directly comparable financial measure calculated and presented in accordance with IFRS to Adjusted EBITDA for 1H2024. We believe that 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 us from providing an accurate preliminary estimate of an IFRS to non-IFRS reconciliation without unreasonable effort or expense. As a result, we believe that providing estimates of the amounts that would be required to reconcile the ranges of our expected Adjusted EBITDA for 1H2024 would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.
The Company is not able to reconcile its forward-looking non-IFRS estimates without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted, which could have a material impact on its future IFRS financial results.
Use of Non-IFRS Financial Measures
Our management uses and discloses EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net Debt-to-Adjusted EBITDA ratio, Contribution Margin and net revenue on a constant currency basis, which are non-IFRS financial information to assess our operating performance across periods and for business planning purposes. We believe 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.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Net Debt-to- Adjusted EBITDA ratio
We define EBITDA as profit (loss) for the period before interest expense, net, income tax expense and depreciation and amortization. We define 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 (“Union”), 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. None of EBITDA, Adjusted EBITDA or Adjusted EBITDA margin are presented in accordance with generally accepted accounting principles (“GAAP”) or IFRS and are non-IFRS financial measures.
We use EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Net Debt-to-Adjusted EBITDA ratio for operational and financial decision-making and believe these measures are useful in evaluating our performance because they eliminate certain items that we do not consider indicators of our operating performance. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt-to-Adjusted EBITDA ratio are also used by many of our investors and other interested parties in evaluating our operational and financial performance across reporting periods. We believe that the presentation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt-to- Adjusted EBITDA ratio provides useful information to investors by allowing an understanding of key measures that we use internally for operational decision-making, budgeting, evaluating acquisition targets, and assessing our operating performance.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Net Debt-to- Adjusted EBITDA ratio are not recognized terms under IFRS and should not be considered as a substitute for net income (loss), cash flows from operating activities, or other income or cash flow statement data. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under IFRS. We strongly encourage investors to review our financial statements in their entirety and not to rely on any single financial measure.
Because non-IFRS financial measures are not standardized, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Net Debt-to-Adjusted EBITDA ratio, as defined by us, may not be comparable to similarly titled measures reported by other companies. It, therefore, may not be possible to compare our use of these non-IFRS financial measures with those used by other companies.
| Adjusted EBITDA Reconciliation | ||
| U$ million | 1H23 | |
| Net Income | 33.6 | |
| Financial expenses | 5.1 | |
| Income tax | 13.2 | |
| D&A | 8.0 | |
| EBITDA | 59.9 | |
| FX translation adjustments1 | (14.4 | ) |
| Transaction expenses2 | (19.3 | ) |
| Other expenses3 | 3.0 | |
| Adjusted EBITDA | 29.2 | |
| Adjusted EBITDA margin | 15.1 | % |
FAQ
What is Procaps Group's current financial situation as of September 2024?
Why has Procaps Group (PROC) delayed filing its 2023 financial statements?
What strategic priorities has Procaps Group (PROC) outlined for the future?
How has Procaps Group (PROC) performed compared to the market in 2024?
