Catalent(CTLT) - 2023 Q1 - Quarterly Report

Part I. Financial Information This section provides the company's unaudited financial statements and management's discussion and analysis for the quarter Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Q1 FY23 vs Q1 FY22, including key statements and notes, following a segment reorganization - Effective July 1, 2022, the company reorganized its operating structure from four segments into two new reportable segments: (i) Biologics and (ii) Pharma and Consumer Health All prior-period comparative segment information has been restated to reflect this change[36][37][38] Consolidated Statements of Operations This table presents the unaudited consolidated statements of operations, detailing key financial performance metrics for Q1 FY23 and Q1 FY22 Consolidated Statements of Operations (Unaudited) | Financial Metric | Three Months Ended Sep 30, 2022 (in millions) | Three Months Ended Sep 30, 2021 (in millions) | | :--- | :--- | :--- | | Net revenue | $1,022 | $1,025 | | Gross margin | $258 | $324 | | Operating earnings | $60 | $138 | | Net earnings | $0 | $93 | | Diluted EPS | $0.00 | $0.49 | Consolidated Balance Sheets This table provides the unaudited consolidated balance sheet highlights, including assets, liabilities, and equity as of September 30, 2022, and June 30, 2022 Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | September 30, 2022 (in millions) | June 30, 2022 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $281 | $449 | | Total current assets | $2,698 | $2,916 | | Total assets | $10,205 | $10,507 | | Total current liabilities | $943 | $1,072 | | Long-term obligations, less current portion | $4,098 | $4,171 | | Total liabilities | $5,505 | $5,712 | | Total shareholders' equity | $4,700 | $4,795 | Consolidated Statements of Cash Flows This table outlines the unaudited consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended Sep 30, 2022 (in millions) | Three Months Ended Sep 30, 2021 (in millions) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(92) | $163 | | Net cash used in investing activities | $(116) | $(167) | | Net cash provided by financing activities | $74 | $1,082 | | Net (decrease) increase in cash and cash equivalents | $(168) | $1,073 | Notes to Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, including segment revenue, EBITDA, and post-quarter acquisition details Net Revenue by Segment and Activity (Q1 FY23 vs Q1 FY22) | (in millions) | Biologics | Pharma and Consumer Health | Total | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30, 2022 | | | | | Manufacturing & commercial product supply | $94 | $292 | $386 | | Development services & clinical supply | $429 | $207 | $636 | | Total | $523 | $499 | $1,022 | | Three Months Ended Sep 30, 2021 | | | | | Manufacturing & commercial product supply | $134 | $276 | $410 | | Development services & clinical supply | $414 | $201 | $615 | | Total | $548 | $477 | $1,025 | Segment EBITDA Reconciliation | (in millions) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Biologics | $113 | $167 | | Pharma and Consumer Health | $108 | $99 | | Sub-Total | $221 | $266 | | Unallocated costs | $(87) | $(56) | | Depreciation and amortization | $(99) | $(81) | | Interest expense, net | $(32) | $(26) | | Income tax expense | $(3) | $(10) | | Net earnings | $0 | $93 | - In October 2022, subsequent to the quarter end, the Company acquired Metrics Contract Services for $475 million in cash, funded by a $500 million drawdown from its senior secured revolving credit facility Metrics is an oral solids development and manufacturing business[120] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY23 financial results, noting constant currency revenue growth driven by acquisitions, offset by organic decline and margin pressure Results of Operations This section analyzes operational performance, highlighting changes in revenue, gross margin, and earnings on a constant currency basis, impacted by organic decline and acquisitions Q1 FY23 vs Q1 FY22 Performance Summary (Constant Currency) | Metric (in millions) | Q1 FY23 | Q1 FY22 | Constant Currency Change $ | Constant Currency Change % | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $1,022 | $1,025 | $45 | 4% | | Gross margin | $258 | $324 | $(54) | (16)% | | Operating earnings | $60 | $138 | $(71) | (52)% | | Net earnings | $0 | $93 | $(94) | (100)% | - Organic revenue decreased by 1% primarily due to a significant decline in demand for COVID-19 related programs This was partially offset by 5% inorganic growth from acquisitions, including RheinCell, Bettera Wellness, and a Princeton facility[136][138][139] - Gross margin, as a percentage of revenue, decreased by 630 basis points on a constant-currency basis to 25.2% This was primarily due to lower levels of utilization across the network, an unfavorable product mix, and the impact from remediation-related activities at the Brussels facility[140] Segment Review This section reviews Biologics and Pharma and Consumer Health segment performance, detailing revenue and EBITDA changes and their key drivers Biologics Segment Performance (Constant Currency) | Metric | YoY Change % | | :--- | :--- | | Net Revenue | (2)% | | Segment EBITDA | (33)% | - The Biologics segment's decline was driven by a significant drop in demand for COVID-19 related programs and lower network utilization, partially offset by strong growth in non-COVID programs, particularly in cell and gene therapy[155][156] Pharma and Consumer Health Segment Performance (Constant Currency) | Metric | YoY Change % | | :--- | :--- | | Net Revenue | 11% | | Segment EBITDA | 20% | - The Pharma and Consumer Health segment's growth was driven by a 10% increase in revenue from the Bettera Wellness acquisition and a 1% organic increase from clinical development services[157][159] Liquidity and Capital Resources This section discusses the company's cash flow from operations, available credit facilities, and significant post-quarter financing for acquisitions - Cash used in operations was $92 million, a significant reversal from the $163 million in cash provided by operations in the prior-year period The change was primarily due to lower operating earnings and unfavorable working capital changes[164][165] - As of September 30, 2022, the company had a $725 million revolving credit facility, with $75 million drawn and $4 million in letters of credit outstanding[160] - Subsequent to the quarter, the company drew down an additional $500 million from its revolving credit facility to fund the $475 million acquisition of Metrics[161] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its quantitative and qualitative disclosures about market risks since its Annual Report on Form 10-K for the fiscal year ended June 30, 2022 - As of September 30, 2022, there has been no material change in the company's market risk information from the Fiscal 2022 10-K[182] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of September 30, 2022 No material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[184] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[185] Part II. Other Information This section covers other important information, including legal proceedings, risk factors, and a list of exhibits filed with the report Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business Management does not currently believe that the outcome of any such litigation will have a material adverse effect on the company's consolidated financial statements - The company is subject to legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect on its financial statements[187] Risk Factors The company states there has been no material change to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2022, other than those mentioned in the report's forward-looking statements section - There has been no material change to the risk factors disclosed in the company's Fiscal 2022 10-K[190] Exhibits This section lists all exhibits accompanying the Form 10-Q filing, including various corporate governance documents and certifications