Catalent, Inc. Reports Fourth Quarter Fiscal 2020 Results
August 31, 2020- Q4’20 revenue of $947.6 million increased 31% as-reported, or 32% in constant currency, compared to Q4’19. On an organic basis, constant currency revenue in Q4’20 grew 22% compared to Q4’19.
- Fiscal 2020 revenue of $3.1 billion increased 23% as-reported, or 24% in constant currency, from the prior year. On an organic basis, constant currency revenue in FY’20 grew 12% from the prior year.
- Net debt leverage of 2.8x as of June 30 vs. 3.8x at March 31, 2020; more than $950 million in cash and cash equivalents on-hand at June 30.
- Awarded more than 50 programs for COVID-19 vaccine and treatment candidates, including three Operation Warp Speed COVID-19 vaccine candidates.
- FY’21 financial guidance range projects revenue growth of 12% to 16% and Adjusted EBITDA growth of 12% to 19%.
SOMERSET, N.J.–(BUSINESS WIRE)–Catalent, Inc. (Read more…) (NYSE: CTLT), the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products, today announced financial results for the fourth quarter and the full fiscal year ended June 30, 2020. On July 30, 2020, Catalent announced preliminary financial results for net revenue, earnings before income taxes, and Adjusted EBITDA (see the non-GAAP reconciliation elsewhere in this release for a discussion of Adjusted EBITDA) for the same periods, which preliminary results are updated by the full financial results announced today.
“Over the last few years, Catalent has made transformative investments that have shifted our technology portfolio to ever-more innovative and in-demand areas of drug development and manufacturing. These investments have positioned us to partner on a wide range of COVID-19 vaccine and treatment candidates, as reflected in more than 50 COVID-19-related program wins, including contracts to manufacture three Operation Warp Speed vaccine candidates,” said John Chiminski, Chair and Chief Executive Officer of Catalent, Inc. He added, “Our fourth quarter results reflect record organic revenue growth significantly above our initial expectations and primarily driven by elevated demand in our Biologics and Oral and Specialty Delivery segments. We achieved these record results even as we took substantial measures to keep our employees safe during the global COVID-19 pandemic. We also continued to take actions to strengthen our balance sheet during the quarter, which reduced our net leverage roughly a full turn to 2.8x, and built our cash position to more than $950 million, positioning us to continue our growth investments.”
Fourth Quarter 2020 Consolidated Results
Fourth quarter 2020 net revenue of $947.6 million increased 31% as reported, or 32% in constant currency, from the $725.7 million reported for the fourth quarter a year ago, partially driven by the acquisitions of the cell and gene therapy businesses as well as the acquisition of Bristol-Myers Squibb’s biologics, sterile, and oral solid dose product manufacturing and packaging facility in Anagni, Italy, and was partially offset by the divestiture of a manufacturing facility located in Braeside, Australia. Overall organic growth of 22% was driven by strong demand in the Biologics and Oral and Specialty Delivery segments, and partially offset by lower activity in the Clinical Supply Services segment.
Fourth quarter 2020 net earnings were $154.2 million. Accounting for the net earnings attributable to preferred shareholders on Catalent’s Series A convertible preferred stock, net earnings attributable to common shareholders were $134.8 million, or $0.86 per basic share, compared to net earnings attributable to common shareholders of $65.7 million, or $0.45 per basic share, in the fourth quarter a year ago.
Fourth quarter 2020 EBITDA from operations, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, was $265.9 million, an increase of $100.5 million from $165.4 million in the fourth quarter a year ago. Fourth quarter 2020 Adjusted EBITDA (see the non-GAAP reconciliation elsewhere in this release for a discussion of this metric) was $267.4 million, or 28.2% of net revenue, compared to $199.4 million, or 27.5% of net revenue, in the fourth quarter a year ago. This represents an increase of 34.1% as reported, and an increase of 35.6% on a constant-currency basis, driven by strong growth in the Biologics and Oral and Specialty Delivery segments.
Fourth quarter 2020 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $154.4 million, or $0.90 per diluted share, compared to Adjusted Net Income of $102.9 million, or $0.70 per diluted share, in the fourth quarter a year ago.
Fourth Quarter 2020 Segment Review
Fourth Quarter 2020 Segment Revenue
Net revenue from the Softgel and Oral Technologies segment was $291.2 million for the fourth quarter of fiscal 2020, an insignificant increase as reported, or a 2% increase in constant currency, compared to the fourth quarter a year ago. After excluding the impact of the October 2019 divestiture of the segment’s consumer health manufacturing site in Australia, net revenue increased 7% compared to the three months ended June 30, 2019. The increase primarily relates to demand increases across the segment’s portfolio of prescription products within North America as well as increased demand in the consumer health business across Europe, North America, and Latin America.
Net revenue from the Biologics segment was $357.8 million for the fourth quarter of fiscal 2020, an increase of 102% as reported and in constant currency, compared to the fourth quarter a year ago. The constant-currency growth was driven by robust organic growth in the segment as well as the cell and gene therapy acquisitions and the acquisition of the Anagni facility, part of which is recognized in the Biologics segment. Acquisitions contributed 36 percentage points to the segment’s revenue growth in constant currency. Excluding the effect of acquisitions, the net revenue increase of 66% was driven primarily by strong growth in the gene therapy business, increased volumes in the segment’s U.S. drug product and U.S. drug substance offerings, as well as demand for vaccine services in both the U.S. and Europe driven by the COVID-19 pandemic.
Net revenue from the Oral and Specialty Delivery segment was $218.7 million for the fourth quarter of fiscal 2020, an increase of 22% as reported and 24% in constant currency, over the fourth quarter a year ago. The constant-currency growth was primarily driven by the acquisition of the Anagni facility, part of which is recognized in the Oral and Specialty Delivery segment. Excluding the effect of acquisitions, the net revenue increase of 11% was principally attributable to new product launches in the respiratory and ophthalmic specialty platform.
Net revenue from the Clinical Supply Services segment was $83.6 million for the fourth quarter of fiscal 2020, a decrease of 2% as reported and unchanged in constant currency, compared to the fourth quarter a year ago. The limited growth in the quarter was a result of the disruption of clinical trials due to the COVID-19 pandemic which negatively impacted the manufacturing, packaging, and distribution business, and was partially offset by increased demand for the segment’s storage business.
Fourth Quarter Segment EBITDA (see non-GAAP discussion below)
Softgel and Oral Technologies segment EBITDA was $85.5 million in the fourth quarter of fiscal 2020, an increase of 2% as reported, or 4% in constant currency, compared to the fourth quarter a year ago. After excluding the impact of the October 2019 divestiture of the segment’s consumer health manufacturing site in Australia, segment EBITDA increased 6% compared to the three months ended June 30, 2019. The increase primarily relates to increased demand across the segment’s portfolio of higher-margin prescription product business in North America as well as growth in the consumer health business in Europe, North America, and Latin America.
Biologics segment EBITDA in the fourth quarter of fiscal 2020 was $86.9 million, an increase of 93% as reported and in constant currency compared to the fourth quarter a year ago. The constant-currency growth rate included 6 percentage points from acquisitions. Segment EBITDA without acquisitions increased 87% from the prior-year period, primarily driven by strong end-market demand for U.S. drug product and U.S. drug substance offerings, including new demand related to the COVID-19 pandemic.
Oral and Specialty Delivery segment EBITDA in the fourth quarter of fiscal 2020 was $83.8 million, an increase of 37% as reported, or 38% in constant, compared to the fourth quarter a year ago. The constant-currency growth was partially driven by the acquisition of the Anagni facility, part of which is recognized in the Oral and Specialty Delivery segment. Segment EBITDA without acquisitions increased 29% from the prior-year period, primarily due to favorable product mix in the segment’s respiratory and ophthalmic specialty platform due to new product launches as well as strong end-market demand for oral commercial products in Europe.
Clinical Supply Services segment EBITDA in the fourth quarter of fiscal 2020 was $21.0 million, a decrease of 8% as reported, or 6% in constant currency, compared to the fourth quarter a year ago. The decrease was as a result of the disruption of clinical trials due to the COVID-19 pandemic, which negatively impacted the manufacturing, packaging, and distribution business, and was partially offset by growth in the segment’s storage business.
Fiscal 2020 Consolidated Results
Fiscal 2020 net revenue of $3,094.3 million increased 23% as reported, or 24% in constant currency, compared to the $2,518.0 million reported in fiscal 2019, primarily driven by the acquisitions of the cell and gene therapy businesses as well as the acquisition of the Anagni facility, and was partially offset by the divestiture of the Braeside facility. Overall organic growth of 12% was driven by growth in all of Catalent’s operating segments, with the largest growth coming from the Biologics segment.
Fiscal 2020 net earnings were $220.7 million. Accounting for the net earnings attributable to preferred shareholders on Catalent’s Series A convertible preferred stock, net earnings attributable to common shareholders were $173.0 million, or $1.16 per basic share, compared to net earnings attributable to common shareholders of $132.0 million, or $0.92 per basic share, in fiscal 2019.
Fiscal 2020 EBITDA from operations, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, was $640.2 million, an increase of $140.4 million from $499.8 million reported in fiscal 2019. Fiscal 2020 Adjusted EBITDA (see the non-GAAP reconciliation elsewhere in this release for a discussion of this metric) was $750.9 million, or 24.3% of net revenue, compared to $599.6 million, or 23.8% of net revenue, in fiscal 2019. This represents an increase of 25.2% as reported, and an increase of 26.9% on a constant-currency basis, with all four operating segments growing Adjusted EBITDA year-over-year.
Fiscal 2020 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $349.8 million, or $2.11 per diluted share, compared to Adjusted Net Income of $264.9 million, or $1.81 per diluted share, in fiscal 2019.
Fiscal 2020 Segment Review
Fiscal 2020 Segment Revenue
Net revenue from the Softgel and Oral Technologies segment was $1,062.0 million for fiscal 2020, an increase of 2% as reported, or 4% in constant currency, compared to fiscal 2019. After excluding the impact of the October 2019 divestiture of the segment’s manufacturing site in Australia, net revenue increased 8% compared to fiscal 2019. The increase primarily relates to demand increases across the segment’s portfolio of prescription products within North America, which is partially attributable to recently launched products. Increased demand for the segment’s portfolio of consumer health products continued, predominantly within Europe.
Net revenue from the Biologics segment was $1,021.6 million for fiscal 2020, an increase of 78% as reported, or 79% in constant currency, compared to fiscal 2019. The constant-currency growth was primarily driven by the cell and gene therapy acquisitions and the acquisition of the Anagni facility (part of which is recognized in this segment). These acquisitions contributed 52 percentage points to the segment’s net revenue growth in constant currency. Excluding the effect of acquisitions, the net revenue increase was driven primarily by strong end-market demand for the segment’s U.S. drug product and U.S. drug substance offerings, with the former being delivered through improved capacity utilization. Additionally, site readiness activities related to COVID-19 vaccine candidate programs across U.S. drug product and U.S. drug substance offerings also contributed to the increase in net revenue. Drug substance growth was partially offset by the fiscal 2019 completion of a limited duration customer contract for non-cell line clinical manufacturing services.
Net revenue from the Oral and Specialty Delivery segment was $675.9 million for fiscal 2020, an increase of 13% as reported, or 14% in constant currency, compared to fiscal 2019. The constant-currency growth was partially driven by the acquisition of the Anagni facility, part of which is recognized in this segment. Excluding the effect of acquisitions, the net revenue increase of 7% was principally attributable to new product launches within the respiratory and ophthalmic specialty platform. Strong end-market demand for prescription oral commercial products across North America and Europe also contributed to the net revenue increase. Net revenue growth was partially offset by a prior-year favorable impact of a one-time up-front license fee and decreased volume in the respiratory and ophthalmic specialty platform, due to strong prior-year demand related to an anticipated new product introduction.
Net revenue from the Clinical Supply Services segment was $345.0 million for fiscal 2020, an increase of 7% as reported and 9% in constant currency, compared to fiscal 2019. The increase was driven by strong global demand in the storage and distribution and manufacturing and packaging businesses despite a measured slowdown in the distribution volume in the fourth quarter of fiscal 2020 due to the COVID-19 pandemic.
Fiscal 2020 Segment EBITDA (see non-GAAP discussion below)
Softgel and Oral Technologies segment EBITDA was $256.5 million in fiscal 2020, an increase of 8% as reported, or 10% in constant currency, compared to fiscal 2019. After excluding the impact of the October 2019 divestiture of the segment’s consumer health manufacturing site in Australia, segment EBITDA increased 13% compared to fiscal 2019. The increase primarily relates to elevated demand across the segment’s portfolio of higher-margin prescription product business in North America, as well as in the consumer health business, in line with the strong revenue growth within Europe.
Biologics segment EBITDA in fiscal 2020 was $237.6 million, an increase of 61% as reported, or 62% in constant currency, compared to fiscal 2019. The constant-currency growth was partially driven by the cell and gene therapy acquisitions, as well as the acquisition of the Anagni facility, part of which is recognized in the Biologics segment. These acquisitions contributed 36- percentage points to segment EBITDA in constant currency. Segment EBITDA without acquisitions increased 26% from fiscal 2019, primarily due to increased demand for the U.S. drug product offering as well as site readiness activities related to COVID-19 vaccination programs across the U.S. drug product, and U.S. drug substance offerings. Segment EBITDA growth was partially offset by decreased volume for the U.S. drug substance product offering, predominantly due to the fiscal 2019 completion of a limited duration customer contract for non-cell line clinical manufacturing services, and softening demand for the segment’s European drug product offering.
Oral and Specialty Delivery segment EBITDA in fiscal 2020 was $200.8 million, an increase of 15% as reported, or 16% in constant currency, compared to fiscal 2019. Segment EBITDA without acquisitions increased 10%, primarily due to new product launches across the respiratory and ophthalmic specialty platform. Strong end-market demand for higher-margin oral commercial products across North America and Europe also contributed towards the segment EBITDA increase. EBITDA growth was partially offset by a prior-year favorable impact of a one-time up-front license fee and decreased volume in the respiratory and ophthalmic specialty platform due to strong prior-year demand, related to an anticipated new product introduction.
Clinical Supply Services segment EBITDA in fiscal 2020 was $91.2 million, an increase of 8% as reported, or 10% in constant currency, compared to fiscal 2019, primarily driven by robust global demand in the segment’s storage and distribution and manufacturing and packaging businesses, despite a measured slowdown in distribution volume in the fourth quarter of fiscal 2020 due to the disruption of clinical trials resulting from the COVID-19 pandemic.
Comparison with Preliminary Results
On July 30, 2020, Catalent released an estimate of preliminary results for the fourth quarter and full year of fiscal 2020. Set forth below is a table that compares those preliminary results to the actual results reported today.
|
Preliminary Results vs. Actual Results |
|||||||||
|
(dollars in millions) |
|||||||||
|
Preliminary |
Actual |
Preliminary |
Actual |
||||||
| Net Revenue |
$ |
937-949 |
$ |
947.6 |
$ |
3,084-3,096 |
$ |
3,094.3 |
|
| Earnings before income taxes |
$ |
173-177 |
$ |
179.0 |
$ |
255-259 |
$ |
260.4 |
|
| Adjusted EBITDA |
$ |
262-266 |
$ |
267.4 |
$ |
745-749 |
$ |
750.9 |
|
Additional Financial Information
Fourth quarter 2020 gross margin of 35.3% was the same as in the fourth quarter a year ago. The flat result was primarily attributable to acquisitions with lower margins than the company average, pandemic-related disruptions in the Clinical Supply Services segment, and activity related to site readiness preparations at facilities in the Biologics segment. These dilutive items were partially offset by margin improvement in the Oral and Specialty Delivery and Softgel and Oral Technologies segments.
Fiscal 2020 gross margin of 31.8% decreased 10 basis points as-reported, from 31.9% in fiscal 2019. The decrease was primarily attributable to acquisitions in which the businesses acquired had lower margins than the company average, as well as from a decrease in margin within the Biologics segment, due in part to the fiscal 2019 completion of a limited-duration customer contract for non-cell-line clinical manufacturing services. These items were partially offset by margin improvement in the Softgel and Oral Technologies segment.
Backlog for the Clinical Supply Services segment, defined as estimated future service revenues from work not yet completed under signed contracts, was $425 million as of June 30, 2020, compared to backlog of $396 million as of March 31, 2020 and $366 million as of June 30, 2019. The segment recorded net new business wins of $104 million during the fourth quarter of fiscal 2020, an increase of 10% compared to the net new business wins recorded in the fourth quarter of the prior year. For fiscal 2020, the segment recorded net new business wins of $397 million, an increase of 3% compared to the net new business wins recorded in the prior year. The segment’s trailing-twelve-month book-to-bill ratio was 1.1x.
Balance Sheet and Liquidity
As of June 30, 2020, Catalent had $3.0 billion in total debt, and $2.1 billion in total debt net of cash and short-term investments, compared to $2.6 billion in total net debt as of March 31, 2020 and June 30, 2019. The current debt structure does not include any significant maturity until 2026.
Catalent’s net leverage ratio as of June 30, 2020 was 2.8x, compared to 3.8x at March 31, 2020 and 4.4x at June 30, 2019.
Fiscal Year 2021 Outlook
Catalent is introducing financial guidance for fiscal 2021. The guidance ranges assume no major external change to the current status of the COVID-19 pandemic and its current effect on the business and does not assume the receipt by any of our current customers of any regulatory authority approvals for COVID-19 vaccine candidates (but does include take-or-pay arrangements in executed contracts). The guidance ranges set forth below are broader than in recent years due to the increased uncertainty introduced by the COVID-19 pandemic.
- Net Revenue in the range of $3.45 billion to $3.60 billion, representing year-on-year growth of 12% to 16%;
- Adjusted EBITDA in the range of $840 million to $890 million, representing year-on-year growth of 12% to 19%;
- Adjusted Net Income in the range of $390 million to $435 million, representing year-on-year growth of 11% to 24%; and
- A fully diluted share count in the range of 178 million to 180 million shares on a weighted-average basis, counting the Series A convertible preferred shares as-if converted.
Earnings Webcast
The Company’s management will host a webcast to discuss the results at 8:15 a.m. ET today. Catalent invites all interested parties to listen to the webcast, which will be accessible through Catalent’s website at http://investor.catalent.com. A supplemental slide presentation will also be available in the “Investors” section of Catalent’s website prior to the start of the webcast. The webcast replay, along with the supplemental slides, will be available for 90 days in the “Investors” section of Catalent’s website at www.catalent.com.
About Catalent, Inc.
Catalent, Inc. (NYSE: CTLT) is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs more than 13,900 people, including approximately 2,400 scientists, at more than 40 facilities across four continents and in fiscal 2020 generated over $3 billion in annual revenue. Catalent is headquartered in Somerset, N.J. For more information, please visit www.catalent.com.
Non-GAAP Financial Measures
Use of EBITDA from operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA
Management measures operating performance based on consolidated earnings from operations before interest expense, expense/(benefit) for income taxes, and depreciation and amortization, adjusted for the income or loss attributable to non-controlling interests (“EBITDA from operations”). EBITDA from operations is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations.
Catalent believes that the presentation of EBITDA from operations enhances an investor’s understanding of its financial performance. Catalent believes this measure is a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and uses this measure for business planning purposes.
In addition, given the significant investments that Catalent has made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of its cost structure.
Contacts
Catalent, Inc.
Paul Surdez
732-537-6325
[email protected]