Assertio Holdings Inc (ASRT) 2021 Q2 法說會逐字稿

Hello, and welcome to the 30th Holding Second Quarter 2021 Financial Results Conference Call. My name is Sandra, and I'll be the operator for today's call. (Operator Instructions). I will now turn the call over to Mr. Max Nemmers. Max, you may now begin.

Good afternoon and thank you all for joining us today to discuss Assertio Second Quarter 2021 financial results. The news release covering our earnings for this period is now available on the Investor page of our website at investor.assertio.com. I would encourage you to review the release and the accompanying presentation as is as important to today's discussion. With me today are Dan Peisert, President and Chief Executive Officer, and Paul Schwichtenberg, Senior Vice President and Chief Financial Officer. Dan will open the remarks and provide an overview of the business, followed by Paul, who will review our financial results, after that we will open the call for your questions.

During this call, management will make projections and other forward-looking statements regarding our future performance. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in this afternoon's press release as well as Assertio filings with the SEC. These and other risks are more fully described in the Risk Factors section and other sections of our annual report on Form 10-K. Our actual results may differ materially from those projected in the forward-looking statements and Assertio specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. With that, I will now turn the call over to Dan. Dan?

Thank you, Max, and welcome to everyone joining us this afternoon. To begin, I'd like to welcome Jeff Christensen, our Senior Vice President of Commercial, who joined us in May and in this short time has already made substantial contributions to the business. I look forward to working with Jeff to further build out our nonpersonal promotional platform.

In addition, I'd like to welcome back Bill Iskos, Bill rejoined the Assertio team, Senior Vice President of Operations this week, I've had the pleasure of working with Bill in the past have not met someone who better demonstrates our culture of teamwork, inclusion and results. To get to the punch line, our business is performing better than expected, and we're making substantial progress towards our corporate priorities.

As Paul will go into details in a minute, our net product sales this quarter were $24.8 million. The resilience of our portfolio is extremely encouraging. And to generate this result, we had made the conscious effort to shift the distribution model for IndusInd, which did impact sales this quarter has bolstered our confidence in our promotional model and is reflected in our increased revenue guidance for the full year.

Our team is fully committed to delivering on our promised restructuring savings and through a combination of solid execution and creative thinking, we've been able to accelerate some of our cost savings. All of this has led to a strong operating result for the business this quarter. A key focus of our management team's efforts this quarter has been to mitigate our legacy legal uncertainties, you'll see in our release and filings that we've taken a charge of $11.3 million in our second quarter results.

This charge reflects an estimate to resolve two separate legal matters. Unfortunately, there's not much more we can say about the nature of the charge. We would have liked to have been in a position to provide more details here today, but these matters have not come to a complete close at this point, and this charge reflects our best estimate at the current time, however, to avoid any potential confusion some of the news in the press recently, these matters are unrelated to the settlements recently announced in the nationwide opioid litigation.

I do believe it is a strong testament to the strength of the business that through a combination of prudent expense management and commercial execution, we're able to still hold firm on the majority of our guidance range for adjusted EBITDA despite taking an $11.3 million charge this quarter that had not been anticipated in any of our prior projections. So now that we have built our team, accelerated the pace of our synergies, begun generating operating cash flow, reduce the constraints placed on the business from the debt and made substantial progress in at least defining the legal uncertainties.

We're directing our focus towards the business model. That's not only building our platform. It also includes business development. We've been far more aggressive in the past few months in generating M&A targets as you've likely seen from some of our peers recently, there are transactions available. I'm a big believer in actions speak louder than words. So I won't say much more. We just look forward to delivering on what we've said and hopefully sooner than later. And now I'll turn the call over to Paul, who will walk through the quarterly results.

Thank you, Dan. This afternoon, I will review the financial highlights from our second quarter of 2021. As was the case in the last few quarters, any references to pro forma results represent product sales as if the Zyla merger had been completed on January 1, 2020, net product sales were $24.8 million for the three months ended June 30, 2021, compared to pro forma net product sales of $28.2 million from the prior year quarter and $26.4 million last quarter.

The decline in sales versus the prior year quarter on a pro forma basis is driven by lower volume on discontinued and non-promoted brands as well as spreads. Spreads volume continues to be impacted by the prior year commercial coverage change. However, the current quarter net sales reflect lower patient assistance costs, which is driving the increase versus the prior quarter, Indusind net sales in the second quarter reflected channel inventory adjustments related to a change in distribution strategy that will drive increased profitability in the future.

The impact of this change was $1.5 million. Combined, Cambia and Zipsor net sales were flat to the prior quarter. Overall portfolio net sales were down 6% versus the first quarter, primarily due to the $1.5 million impact of the distribution model change on Indusind. And in addition, absent this change, portfolio, net sales would have been flat to the first quarter results. Please refer to our 10-Q for a specific product level information.

Net sales information adjusted EBITDA for the second quarter was a loss of 505,000 compared to income of $15.7 million in the first quarter, excluding the impact of the 2021 one-time legal matters, adjusted EBITDA was $10.8 million in the second quarter versus $10.7 million in the first quarter of 2021.

Our adjusted operating expenses, which reflect selling, general and administrative expenses in the second quarter were $22.8 million versus $7.3 million in the first quarter. This amount includes the legal reserve of $11.3 million. As was mentioned on prior earnings calls, the primary focus for the company is to proactively work to mitigate legal uncertainties, and this adjustment aligns with that priority. Excluding the 2021 onetime legal matters, adjusted operating expenses for the quarter were $11.5 million, which are down 800,000 or 6% versus the first quarter adjusted operating expenses of $12.3 million.

In 2021, we expected to achieve $40 million of cost savings and ultimately $45 million in annual savings beginning in 2022. Through the first half of 2021, we are ahead of our expected cost savings, and this has allowed us to maintain the low end of our EBITDA guidance despite the legal reserve recorded in the second quarter. Net loss for the second quarter was $14.2 million compared to the first quarter net income of $4.5 million. As stated previously, the current quarter is impacted by the legal reserve of $11.3 million and a charge of $2.2 million for the change in fair value of contingent consideration.

On March 31, 2021, our senior secured debt balance was $75.5 million, which will not mature until Q1 of 2024. On May 3, the company paid scheduled interest and principal of $10 million, ending cash on June 30, 2021 was 54.4 million. The change in cash of 6.6 million from the March 31, 2021 balance of $61 million is primarily attributable to the principal and interest payment of $10 million, partially offset by $3.4 million of positive cash flow generated by the business. As we stated last quarter, with the additional cash on the balance sheet, we are looking to accelerate potential investments in 2021.

Lastly, our updated annual guidance for 2021 is as follows, product net sales of $91 to $96 million, reflecting a favorable response to our refined commercial platform and the actual results for the first half of 2021 adjusted EBITDA of $34 million to $37 million, reflecting higher revenue and cost savings versus previous expectations and the legal reserve taken in the second quarter.

Overall, we're once again, pleased with the quarter results. We continue to see the positive impact of our product portfolio revenue and lower expenses on EBITDA and cash flow. Looking ahead, we will continue to focus on our organizational priorities that will help position Assertio for long-term sustainable growth. And now I'll turn the call back over to Max.

Thank you, Paul. And operator, can we open up the lines for questions, please.

Absolutely thank you. We will now begin the question-and-answer session. (Operator Instructions) Waiting on standby for any questions. And we have, it looks like that caller has dropped. I'm not showing any questions at this time.

Okay. So I'll conclude, as I said last quarter, results could not have been possible without the great work of our team. Once again, I thank you all. [We remain committed to creating value for our stakeholders. (inaudible). Thank you for joining this afternoon and have a good evening.

Thank you, and thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.