Catalent(US:CTLT)2023-12-07 16:00Financial Performance - Net revenue for the three months ended September 30, 2023, was $982 million, a decrease of 6% compared to $1,022 million for the same period in 2022[193]. - Gross margin decreased to $169 million, down 37% from $258 million year-over-year[193]. - Net revenue decreased by $58 million, or 6%, excluding the impact of foreign exchange, compared to the three months ended September 30, 2022[208]. - Biologics segment net revenue decreased by $81 million, or 15%, primarily due to a decline in demand for COVID-19 related programs[237]. - Pharma and Consumer Health segment net revenue increased by $35 million, or 7%, driven by acquisitions[220]. - Gross margin decreased by $94 million, or 37%, with a percentage of revenue dropping to 17.0% from 25.2% year-over-year[210]. - The company reported a net loss of $759 million for the three months ended September 30, 2023[218]. - Segment EBITDA for the Biologics segment decreased by 57% to $49 million, while the Pharma and Consumer Health segment's EBITDA decreased by 10% to $101 million[214]. - Biologics Segment EBITDA decreased by $64 million, or 57%, compared to the same period in 2022, primarily due to a decline in demand for COVID-19 related programs[238]. - Pharma and Consumer Health net revenue increased by $23 million, or 4%, but decreased 1% organically, driven by a decline in consumer health products[239]. Expenses and Charges - Goodwill impairment charges amounted to $689 million for the three months ended September 30, 2023, with no charges reported in the same period of the previous year[193][185]. - Selling, general, and administrative expenses rose by $7 million, or 3%, compared to the same period last year, driven by operational enhancements and incremental expenses from acquisitions[195]. - Interest expense increased by 80% to $58 million for the three months ended September 30, 2023, compared to $32 million in the same period of 2022[193]. - Interest expense increased by $26 million, or 80%, to $58 million due to higher interest rates and increased borrowing[228]. Assets and Liabilities - Total assets decreased to $10,023 million as of September 30, 2023, down from $10,777 million as of June 30, 2023[175]. - Total prepaid expenses and other increased to $779 million as of September 30, 2023, compared to $633 million as of June 30, 2023[178]. - The company had $509 million in available borrowing capacity under its revolving credit facility as of September 30, 2023[222]. - The company has increased borrowings on its revolving credit facility to $670 million, which is expected to meet liquidity needs for at least the next 12 months[252]. - As of September 30, 2023, the company had $872 million of euro-denominated debt outstanding, qualifying as a hedge of a net investment in European operations[247]. Cash Flow - For the three months ended September 30, 2023, cash used in operations was $70 million, a decrease from $92 million in the same period in 2022[253]. - Cash used in investing activities decreased to $84 million from $116 million year-over-year, primarily due to reduced acquisition of property and equipment[254]. - Cash provided by financing activities increased to $98 million from $74 million, driven by a $13 million increase in net borrowings[255]. Strategic Initiatives - The company plans to close its San Francisco facility as part of its restructuring efforts, with costs under evaluation[180]. - The company is focused on expanding its capabilities in new treatment modalities and market segments through investments in state-of-the-art facilities[183]. - The company plans to complete the remediation of identified material weaknesses in internal controls over financial reporting by the third quarter of fiscal 2024[270]. Risks and Challenges - The company is subject to economic and political risks, including inflation and global supply chain disruptions, which could affect profitability and operational procedures[42]. - The company has a substantial level of indebtedness, which may limit its ability to raise additional capital and increase exposure to interest rate risks[14]. - The company’s interest expense on variable-rate debt may continue to rise due to potential interest rate increases aimed at combating inflation[44]. - The company is no longer eligible to use the Form S-3 registration statement, which could impair its capital-raising activities[29]. - The company’s stock price has historically been volatile, and future sales of common stock could lead to a decline in market price[28]. - The company may face litigation and government investigations that could impact its business and financial condition[12]. Governance and Compliance - The company has identified material weaknesses in its internal controls over financial reporting, which could lead to future material misstatements in financial statements and affect timely reporting obligations[16]. - The company anticipates increasing focus from investors and stakeholders on environmental, social, and governance (ESG) matters, which may impact business strategies and operations[22]. - The company may pursue acquisitions to complement or expand its business, but such transactions carry significant risks related to integration and realization of anticipated benefits[24]. Operational Efficiency - The company produced approximately 70 billion unit doses annually for nearly 8,000 customer products, representing about 1 in every 26 unit doses taken globally[183]. - The company is utilizing advanced information and communication systems to enhance operational efficiency, but risks associated with cybersecurity remain a concern[43]. - The company continues to evaluate hedging opportunities for foreign currency in the future, although currently, no forward foreign currency exchange contracts are in use[262].