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Adicet Bio (ACET)

Participants
Jody Burfening Investor Relations
William Kennally President and Chief Executive Officer
Rebecca Roof Interim Chief Financial Officer
Steven Rogers Senior Vice President, Chief Legal Officer and Secretary
Matthew Hewitt Craig-Hallum Capital Group LLC
Lenny Dunn Mutual Trust of America
Timothy Stabosz Stabosz Asset Management
Call transcript
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Operator

Hello, and welcome to the ACETO Corporation Fourth Quarter Fiscal 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is conference this note, being recorded. Please like Burfening. now to turn Jody to over conference the I’d Ms. go Please Burfening ahead.

Jody Burfening

issued conference today Steve. welcome call Becky fourth earnings Roof, to you, are ACETO With Thank Good and Officer. Corporation’s today quarter Frances its session. morning, Officer, are Legal Steve Bill Rogers, Kennally, Chief Scally, fiscal CEO; Senior Chief press on Q&A earnings Financial Vice quarter the providing comments President with fourth and to and everyone, us release Chief President and call. this The morning. in company Accounting Officer; and this participate me also earlier and XXXX

website For copy those in section the not yet you company’s have Relations is www.aceto.com. seen at the available who release, Investor a the of of

costs any undertakes filings Exchange obligation are in these or certain events or the that a statements, the no update XXXX statements fourth call, be you from Reform set forward-looking fiscal Before revise the otherwise. such impact Commission and adjusted amortization related whether by debt release. results contain measures. adjusted risks actual the I’d transaction and call and to and with call, financing will net defined identifiable remind involve costs, company’s today’s company’s XXXX-XX that and on amortization are company forth to issuance prior press net impairment the to Tax can and Jobs statements financial Litigation as assets. and on current be net Cuts results Standards ACETO’s the Private from could and result costs, operations compare Update forward-looking referring expects, the of Securities plans, factors share, period like Act Securities company’s investors The and measures, the of numerous uncertainties. materially in that and outlined performance today’s allowance measures new identified goodwill the to forward-looking The ACETO’s debt XXXX, of differ anticipated information, as and implied other non-GAAP by tax projects, intangible of fundamental that separation costs of to operating analyze as factors seeks per as results or by and anticipates, deferred excluding those earnings similar words management on future assets, defined expressions believes, of starting and the Act quarter the publicly These Accounting to in allow non-GAAP income deferred income of period the based acquisitions valuation Also These the impact trends certain earnings will of U.S. business. discounts,

to and the for financial Finally, before performance fourth Bill, everyone ACETO’s quarter. call that – the is the today’s discuss I’d remind of call operating purpose to over to review results and performance and turning like the for

morning, out And respond patience. detail or be on reminder, the management has Board not it process items or until alternatives a it determined Lowenstein With the about I comment required The and your and and April, legal financial that PJT with respectively. otherwise would Bill. Bill. it way, by indicated Sandler, Partners to appropriate while last appreciate the to and review on is appropriate to comment like the of we call is assistance underway. those Therefore, approved over inappropriate As Good would its process the process now Board the housekeeping has is we’ll – law. or future to of that advisers, the turn for unless questions understanding disclosure initiated transaction the strategic

William Kennally

Friday, on today call. for us our fourth everyone, morning, and Good Jody. thanks quarter joining you, this Thank rainy for

XXth for express waiting that we your my prepared our decision short Before I for a to to my results. wasn’t an be cover to and done. the it Changing made team’s us file around due deferred matter to but on a that reporting issues appreciation wanted this patience few remarks We notice found our and and arose assets, our ourselves her in hour date of entire tax lightly, having the starting at in prepared remarks, Becky position had appreciation extension will in minutes. to report the

performance, Pharmaceutical foundation by close fourth our to quarter, during Ingredients for from sales difficult quarter As brought in year the and a segments declines but to future. Chemicals Performance also Growth profitability return and business. and the overshadowed were profit from in for a our our fourth fiscal reset we the laid gross Rising

on product familiar including generated ours, with competition, has companies of Failure an as higher-profit industry, impact no quarter, headwinds of fourth the have profits the profit our expected some pricing, to from products. the were new to eroded revenue exception. recover and all the we generic gross and subject that had Several and in our supply launch with industry lower increased were most lower resulting unfavorable than We’re continue in products quarter to our penalties interruptions in conditions in at supply returns.

note when made Although this I we earlier that significant have progress year we began will track this to since here closely.

operating fiscal $XX.X $XXX.X once activities amounted as to of which during were provided cash of segments Chemicals all And of result, generated Performance million and XXXX. Ingredients million produced flow. quarter, the reliable a of for again, cash Pharmaceutical we XX% operating by Our generators the

claims Rising much gross profit. at of been Health, in with and has reporting So pressures our let’s Human performance negatively each the In earlier our and to quarters, business revenue competitive look segments. seen like impacted what in failure supply

increase business well, to XX% sales perform and expansion. in generating Nutritionals a gross continued margin Our

we quarter negative place accomplished a for will on Rising’s financial that results deal the have a in operationally, disciplines to headwinds results, industry impact our and generic procedures help performance put While improve fiscal fourth us great during and and XXXX.

in customers, are much providing revenue to while we position better are improving significantly product our will levels, and adjudicate supply The and from customers to and robust to failure safety built get them reduce put us failure procedures supply the have significant claims we complicated to stock We getting processes around reconcile. our for claims. a stream are us from notifications which

As Adjudicating notification was customer, claim which requires million customers. Rising and an team, the team with $X.X claims with reconciling example, thousands go our concluded multiple process cross-functional these well unwarranted. from one of through we on research item from after $X.X million as stakeholders yet as involves our detail, we recently received line we hundreds the of of research work

have year. on approved XXXX. products reported differentiated and manage more pipeline We of completed and In receive customers being launch. We business future. layer very approved products, significant XX the disparate related and with that that the to XX, high improvement XX in the few of calendar in during financial our customers confident additional launched supply which we end installation this of our the have with in Failure XXXX an to products selections. supply as have are concentrating of ended and quarter. to ERP to place parked with XX slowed handle due at the made once more Since a backorders first-half four been healthy file and stock eliminate We XX number A and rationalize previously that complex products last quarter. on course, partner analytics new year claims XX would of fiscal with fiscal that realize are our tools to Of in managing We ended failure Recent quarter failure the added to for launched the put more fix our new year We products, impossible. the We communicated of in new with which shown expect drain for we ANDAs account and XX with over backorders, our we we ANDAs. previously to products unifying the and supply issues XXX XX with barring we XX remain of we have contrast, led terminated issue, this. of three XXXX, we partners. next made we launching our of expanded expectations on by penalties eliminating our And goal business issue of quarter, goal. To forecasted either XXX XXX during Understanding May, up disciplines a moving the differentiated have a best XX% two with a to reduced on problem communicated year, we approximately strategic most beginning products less Capacity relationships quality, currently in supply XX for constraints, launch. and of third the supply really that continuity from XX call of substantially the that and in XX% track to year state-of-the-art products XXX to decisions from partner the of and savings started in in have procedures commercialized paid we on pipeline to system to terminated since in chain line have turns pipeline a to are we We is safety feel our our molecules higher direction. in profitability the and quality reason previously progress with metrics products, that capacity conditions the on year. through, that to already three and of to product our now ANDAs. is products the reported a the realize on was earlier when we’re would warehouse reduce ANDAs to to this the nearly operational us provide be we in goal supply claims what last year one We budget, years, XXXX fiscal challenges course out begin fully for technical our stated, market our with the to progress beginning ANDAs because in this approved have that pipeline, which or uniform to compared parked are value the and along file clearly and giving end products we products are barriers and scale we three systems entry of discontinuations running, significant we having and the fourth claims, portfolio year. a fiscal products significant better that.

on eight were quarter and two terminated third ANDAs terms since the call, In parked. were of file, approved, were two

four launches, parked ANDAs. also and ANDAs. We products quarter. approved to products four XX the filed two The from approved launch products parked XX we product during XX of consists total, delta for In fourth three

In most terms have Buy Rising. were to with we up of note, to changes under parked with The interpretation appeal, decision a legal American was to assuming of supplying of market final concerning we into year previously minutiae and technical Veteran were the the file, VA’s favorable one on Trade terminated. Department of Federal terminated. the last the ANDAs Four the about moved able and comment we to July, Affairs. on getting One of XX we will the ANDAs started contracts be Clause. ANDA under The the from Agreement invalidated rebid ruling the which continue conditions holds contracts And ruling to without one development, and products XX was received of and Claims the due product XX. issues. certain positive the ended case been On a Court

due $XX to to in results a grew our the APIs channel sales out great the chemical South prevent products of profit. protection and from quarter on In In posting of us continuing crops profit first-half. disease approximately our spike subject sales was gross margin to sustained do in Both Ingredients, information key gross gross rain value finish improved Pharmaceutical year of to fourth quarter used the chain and job that products, U.S. for year’s strong sourcing quarter, our a product in and strong the saw gross in of in a million demand for soft quarter Chemicals, due a continues Singapore pecan plant sales, the a our a in third and customers a key the delivered protection chemicals, ag for China industry compared shortage $XX Turning significantly about rebound Strong profit to demand second to and last once over to an the in drove played of providing sales ag of giving specialty fungicide And and relationships subsidiaries Performance again, million. an we German specialty we third gains. performance these of supply challenges. in to shutdowns role higher surge of transparent long a China. In team period Georgia. second-half

out XXXX. has of cleared in channel, deliver position fiscal strong inventory of As to we’re sales in this product good the

fiscal to we are our and quality assurance excuse relationships. focused continued businesses delivering sourcing companywide growth Turning support, profitability each leveraging and management sales XXXX on through astute regulatory portfolio – our me, of competencies of and and across durable core restoring

in the some could to imports increase fall products, complexity conduct we tariffs into and the profitability, – we could on new implementing For China strides those under week, further made injecting response commercialized $X million on manufacturing we by to in portfolio rationalizing adding the and to by parts tariffs we during payments that protect At to margins. administration exposure launch into We spend XXXX. to Should of R&D face analysis we’re year-end, on the just plan XX% partners XX% with design XX towards fiscal but from have considerable Chinese through went last plan XX portfolio. another our portfolio an effect generic plan milestone business more imports impacted Rising, our will there. to

have right to system property. established with enhanced procedures balance of our portfolio our to that proactive Our forward model intellectual deliver the business execute in long-term. asset-light have we units business with confidence new the now in this our me XXXX over Alliance our importantly, in management expanded people Most and place platform each chain more we ERP great to facility, a to business selection plans move plans reset and in supply growth gives warehouse

of would call financial a more quarter provide that, to results. Becky? to detailed turn our with I like Becky Roof, the review So to CFO over our fourth

Rebecca Roof

Bill, the to compared the expenses entirely segment basis, were with Health quarter reporting XXXX, sales specialty partner specialty compared quarter to to of compared increase of chemicals fees, last a of due or fiscal XX.X%, the favorable fiscal some a and fourth and million for ended compared was agricultural favorable XXXX, more of Human million, fourth net operating the the XX.X% million last morning, compared three believe sold asset just $X.X $XX.X compared was to the Chemicals due the margin an for of $X.X includes quarter. a remediation we paid $XX.X the gross profit protection for and and this largely the quarter product million increase that $XX.X prior growth should of sold year, fourth Gross a of the million and appropriate million, to the $X.X or Performance at and tax fourth a the periods. million you, fourth and protection of million, $X.X of protection million, The On financial recognized of for This we results the XX, XX.X%, for Intermediates. June million, environmental $XX.X in products. agricultural with advisors, profit ended year million the segment products. compared XX.X%. factors to $X.X from almost deferred in XX.X%, failure resulting $X.X and last both improvement SG&A million profit that million XX.X% APIs, $XXX,XXX higher XXXX, for approximately operating higher in fourth In professional million, quarter improvement and APIs substantial compared fiscal compared assets. increase Pharmaceutical review million deferred the partners of $XX.X year our for to of the $XXX.X the were of reflecting pricing the XXXX. sales charges, million. in quarter sales million to XX.X% fiscal was On XX, good an million, and this were would quarter Ingredients to allowance higher $XXX.X or of to payroll for quarter disclosed million million $XX.X period. reduction profit profit year. period tax income XX.X% compared prior supply period, of $XX.X was for million $X.X was of a to XX entire of mix charge. When increase for XXXX, to we Thank $X.X margin sales compared benefits, expenses for margin period. in fourth mentioned. segment million variance million, for prior of prior quarter reflects have months reported fiscal fourth quarter were in an chemicals Gross $X.X quarter quarter X.X%, to of and million in of segment quarter. and resulted volume three fourth record The million, the $XX.X of of lower the XX, $XX.X were decrease I’ll XX.X% an versus products. the Gross quarter fourth we allowance additional we decrease were our fourth was million gross quarter agricultural $XX.X XXXX $X.X compared sales million, XXXX, in combination Intermediates from Research at or to quarter $X.X last to the for million, million, fourth in further $X.X from domestically, XX.X%, to record sales $X.X was September quarter for be everyone. Gross financial fees and or a valuation million, sales development amount million of year $X.X fourth than needed SG&A of and Gross $XX.X March higher that start finalizing XXXX, to expenses million of $X.X in it million, that nine to months year. gross Gross mix in back XX.X%, the I for and fourth increase due analysis was sales loss $XX.X abroad XX.X%, consolidated million higher coming $XX.X XXXX and an negative our $X.X was to competitive we for statements year consolidated to an an Rising was in XXXX, not or of be $X.X against XXXX. would $XX.X to that profit $XX.X perform in financial the domestic margin prepared all the the should which been the of future concluded sales statements XX.X% equal of it quarter Consolidated determine rebuild both whether XX.X%, fiscal from in million in negative our valuation and time reflect gross the both the third likely reserves additional million $XX.X for of realized the pressures, million, to France. $X.X approximately fourth both higher

has an position in disclosed XX-Q. as evening, amended our QX we valuation file the that and operating or allowance filed As QX will as recording expenses. impact cash an or soon The no on practicable either in yesterday we X-K

net last U.S. We’ve today. $X.XX which explanation the of fourth fourth share, $X a amended of $XX until in XXXX million, million, the recorded are lenders net later granted of portion for compared per for Our $X.XX $X.X Non-GAAP file in detailed $X.XX $XX.X assets filing our a we net income SEC reporting waiver October XX-K, QX, per loss income for compared million, us last was the to the or year. deferred or with of or tax fourth $X.XX included have are non-GAAP we per valuation loss allowance of year. million, or fiscal net quarter to share XXXX valuation a allowance share share of XX-Q. quarter per our on the for to the Including quarter,

Turning to balance the sheet.

I receivables $XX.X cash, As of of June which million, a was XX, primarily totaled short-term the Rising quarter-over-quarter described. for compared as was were Working Trade million. $XXX.X unchanged XX, Inventory lower $XXX.X of of equivalents to XXXX, cash million, just million June from and essentially $XXX.X results capital XX, investments from $XXX.X XXXX. June $XXX.X million XXXX, as million, sales $XXX.X million. decrease

the protection compared June March of As was fourth during agricultural XX, of expected, inventory XX, quarter. due the lower as shipments products to to

$XXX our Our total credit senior under debt as June million of million $XXX.X including stood at XX, facility.

to amendment for a fiscal on these for senior facility, June covenants credit On As net quarter of for June provided these third the XXXX, leverage of and we into our ended in were covenants. ratio debt XX, secured waivers September of XX, senior covenants ratio, default each ratio entered for financial compliance a XXXX. quarter service not with we total provides which XX, net XXXX, waiver our coverage and leverage

and and agreement quarter of next reached our of agreed also for an was Cash expenditures, investments debt and and rate to limiting April pay We quarterly interest while generation the minimum certain dividend, and in levels increasing XXXX. senior fees June of capital the greater flow liquidity outstanding the based level payable maintaining year. upon positive fiscal allow levels with lenders for to

I’d to $XX.X additional now to the this bank million comments. to million. activities of in cash well year fiscal activities over net we to from of prepayments. operating bringing in the cash quarter, figure cash was defined investing for repaid back be we $XXX.X Free XXXX, excess $XX.X Bill in million flow which from like in we activities, For flow, for used cash loan, million turn including for fourth generated $XX.X the million flow operating $XX less the

William Kennally

lot, Hey, thanks Becky. a

in Kaczmarek, pursue Operating the Walt’s next seen from So have filing X-K and well in past appreciate Chief you from his We resigned role. evening last two may that wish years opportunities. these our Officer, other an Walt leadership company him to

turn questions, leave to for key Before over wanted you I with it I three messages.

to Rising June colleagues growth. First, and adding of a are we team expectations. and/or factors are confident, is since business revenue best past through this and leadership two-plus partner XX business our effectively to successfully XXXX, climbing poised I’m out replacing be the have us great industry around and we to normalize, address has starting experienced continue that our I declines years. profit position and External and rebuilt a we will senior feel needs to have best manage the for price customer and maximize we gross

has and a profitability. factor failure to supply Second, negative our revenue been significant our in

developing I supply enhanced suppliers. we with taken improving demand XX%, and forecast tracking, our instituting to supply steps communications several outlined As robust and earlier, position have about by issues, improve a inventory failure increase to including

the accelerating be to the in quarters. company In claims. supply failure of The will here review evident strides forward have great addition, is made we and resolution

well ag Third cash and provided business i.e., to robust China poised are due and and the and businesses with to by leaders deal to and lines to plant and healthy challenges, that to like significantly operating and open all the And with supply impacted Ministry Ecology experienced remain external as have Environment well and activities for to Keith farm – I’d that, initiated they protection, last, shutdowns. the by has during you? personnel businesses. Keith, turn These Blue nutritional contribute continue ingredients as call tariffs, our the to initiative over over China’s questions. shortages chemicals, Sky

Operator

you. thank right, All

[Operator the Group. first And now comes Craig-Hallum session. Hewitt from question will Capital We with Matt the begin Instructions]. question-and-answer

Matthew Hewitt

Good morning, and the for thank you update. very much

William Kennally

Good morning, Matt.

Matthew Hewitt

hitting me Several different each questions the kind for revenue of buckets. on of

the Human segment, catch numbers. didn’t think, First, but I you, I’ve heard I Health the on

and million be to failure $XX.X you’re I going that million. deliver hear the $XX.X of amounts, So did you to

your so, much be some how that to partners, to if was going on and of that? passing You’re

Rebecca Roof

Good morning. Yes.

William Kennally

$X.X million?

Rebecca Roof

$XX. the million amount. will million, our that of of the approximately Out – out $XX rebill $X.X we partners to of

Matthew Hewitt

Okay. or and as different to issues taken I’m how look you wouldn’t basis. those a okay, had no whether why a But And whatever at quarter the it’s side you on at your sure it and what we the steps of But a sounds to amount? and of this. greater much control a number there. be case partner, it’s look them look And those you’ve a so those what of the able the – by resolve than at as can those case amount is look you over at bill like amounts, you manufacturing effectively or say, –

William Kennally

Yes.

So two things there, Matt.

First the of we the of contracts – differ. that have each all,

in basically share. with that partners. with has the completely that agreements, fault So of amount – partner do some to cases, the lies the And our bill agreements the we would entire In with we partner XX-XX just have them. many if a our partner we have

if of that our And we we with process, percentages hand to think partners. get So how hit Rising, certain we I manage process, during customers. over through the reconciliation you because proof really burden think, lies our whole this by then

Now as million some that of way. But that monies it out back also our at this come point going XX% will additional you to be time, of in that $XX about partners. that, our could said, we back probably have,

Matthew Hewitt

Human segment. helpful. last And Health on that’s one then guess, Okay, the I

year, from resolved. There If got safe look the products. assuming margin that. failure than issues next you – those even positive back some Is gross I’m to a out models get margin. $XX.X for it’s you’re like as X% million you we it add to higher supplying, But if then, those is in, our you’ve in supply

least, teens, am I at for should thinking that back, be margin gross low-XXs, Your is or segment high that about right? that back

William Kennally

think are, you Matt. I

Matthew Hewitt

there, moving was do quarter anticipate Performance Okay, the sounds long kind you referenced it different seeing lot there one of strength couple you like that but of a here shortage – and And down into Are times. that’s lasting? this great. a how that industry the Chemicals, linger then you of that

William Kennally

to had has issue. in do alleviating as there going have to shortages. I success drain. some a that – is lingering team of on the because kind still with a specifically, a I’m I unsure just Matt, And what, little that get the supply still lot it’s of know of that if a know whether particular you I’m I product to you know don’t back

So with back on circle we’ll you – that. let me

Matthew Hewitt

last All then the in enough. right, I’ll back hop one queue. fair one then And and

API trends talk Maybe some if nice market about On could you’re you bit a little side, the the very seeing of quarter. a there.

that FDA of pharmaceutical all to alternatives. ability versus a If the We some inspections from weighing regulatory you problem find on seeking that maybe industry? and these are continuing you. manufacturers be see stuff for your appears what’s the of some rest you of manufacturers differentiating are kind Thank of that? benefiting to what Are and pressures, so, to they’re

William Kennally

think to we’re thanks. advantages how go to out And we to Look, Matt, brings that. Sure, Yes. of I think, I our the India team the has And done lot ACETO exactly the sourcing a terms in sourcing of I table competitive in products. one that is think, and of China credit that’s, abilities. our have

API the our plant we’re had higher this really, we to in API for what understanding tried in here to France. referenced ahead and then whether Sky we or initiative deliver are excellent But in do that, previous seeing sales and Intermediates have in we’re able it’s this which stay in also higher China shutdowns. addition think, sales in of that the job I’ve So to Blue quarters. Intermediates, Europe the we an case, customer I in needs

on I been able us. just the boots we’ve a it’s advantage to for again, based think and competitive capitalize So, on ground,

Matthew Hewitt

right. Thank All you. Great.

William Kennally

you. Thank Matt. welcome, You’re

Operator

the And you. Instructions] Trust Dunn from next question with Mutual Thank Lenny of comes America. [Operator

Lenny Dunn

much be they’ll And [cool word to – two of armored][ph], and the some you we can we going on right XXX, business, pressure But I’m them. we expect I reduce this don’t to pretty seem But Could to don’t a on have forward. were selling soon? to going clarity, the alarm that of S&P distinct doesn’t where place the or use alarm be you’ve that’s morning. They but also off make numbers going pass. I me to please? give where Tuesday. expected had time because would like think parts we’re we from very me, some And what it takes from decisions the me, Good obviously, word, the which delisting to the have continue relatively be will little debt? sold going Are enough

William Kennally

that. appreciate Yes. strategic won’t Unfortunately, we’ve question. that process the Hey, assigned, the I comment beyond on thanks. Kennally. review This communicated the be really previously we Lenny, Board I provide where can’t Bill that has commenting is any because

could So cannot. detail, I but more provide I unfortunately wish I

So I’m about that. sorry

Lenny Dunn

But next a think perhaps do some timeframe you reasonable we’ll in have answers you time report? by the

William Kennally

strategic process Well, we is think, completed, the is what announcement. we again, have when that, announced alternative make previously I will an

Lenny Dunn

earnings next be. I with announcement be mean, think quarter time. but hoping I understand, I don’t the unrealistic would more than could that am be that being But years, – for it Yes, a an I’m I will report? certainly, in adequate more being

William Kennally

– trust it I certainly And time. are doesn’t be I pinpoint understand process we that you, out will But something we a are have not – I there I that. well, look, – people me. that it’s this to there can as It can’t complete. on deaf tell report, then really fall of ears, on do soon as a to it lot years. doesn’t waiting won’t

the Hopefully, on next have our same going with then conversation do have in So your process complete we this anything to to to that work and a the event we’re will the manner don’t in conference that announce. let’s expectations, make an call timely best announcement. and

Lenny Dunn

then comment. is a thing just last And the Okay.

also on earnings. her is drain CFO maybe potential direction? or job, no our to paid a Is plans But are there highly that and doing retain in quite and about extremely a a much, any she’s pay Your that. so question terrific there as not

William Kennally

a with job first all, to have directly, have if I’m here. Becky okay negotiate No, Well, Lenny, aside, done and that’s you. phenomenal you has right, going Becky her of that kidding with team you’re

having to her. comments she personnel, move that making process, she the on as really keep her Becky, happy team. we’ll love on through We’re and you team certainly and we is I is But all really decisions that. doing echo And have we’ll outstanding some doing. on be appreciate and including your posted We an job this that our the

Lenny Dunn

the for that questioning not company. I’m the of at all, of size the amount money just

William Kennally

Right.

Lenny Dunn

That’s all.

William Kennally

your appreciate comments. I Yes,

Lenny Dunn

Okay.

William Kennally

tell worth And right I $X.XX. now, will that she’s every you

So – keep… but we’ll

Lenny Dunn

tell I’ll yes. now, But

William Kennally

eye an keep we’ll Yes, on her.

Lenny Dunn

Okay. Thank you.

Operator

from with next Thank Thompson question the And Rich comes you. [indiscernible].

Unidentified Analyst

Hi, thanks, A on free big quarter. couple starting you of questions. source cash this the the Maybe just cash flow, mentioned, of as

much accrued normalized whether just is of failure terms? those Just that to how change, of expenses what much to it’s much? pay is deferral you on of payables the and that it enabled curious getting it timing, of levels how and And push to

Rebecca Roof

So yes.

the but will notes very very, the come do those It’s from to the into encountered when then judgment of these to disputing, accrue our taken. So thank of you that questions. in resolved. accrue we stable and dispute are And customers the which we business we to end anything and timing is a of wholesale of regards specifics account. to adjustments can to actually of When number our supply, pay the credits, much financial very statement for, will of on later as are you And of for a we failure that tied quarters. differed. particularly With work We our form when closely the our exactly, the cash able yes, items out on situation with at later K these balances make until unit. And Rising. are to rebates chargeback were the not on we June, timing our where operating our more non-Rising heavily payment you our the of the a activities file generation today, is gross-to-net we cash for find

Unidentified Analyst

Okay.

and just in of in – not will, So is two, do XX most coming a case? the I exceptionally, guess be – XX-K. the is look XX or you directionally, lot guess, I cash do the or But I’ll the that of outflow quarter expect you expect a is

Rebecca Roof

some could of couple comment lot as the credit in next outflow be the on I that future the or timing, against because will There take when is of customer-driven quarters. to they payments. I’m wholesaler a not sure

Unidentified Analyst

gross probably factors standpoint, helpful it, back asked for EBITDA XX% gross that XX% was for get in the enable margin margin contraction obviously, gross a guess, I you to if from understand to, you can pretty quarter earlier. a it gross to Rising. to OpEx margin? Okay. you back to call get roughly, are significant at And margin, And that just But since then a the some XX% of think segment right gross to zero? able of, now margin you second, materially cut close still kind assume then

Rebecca Roof

significant for know greatly margin that don’t be FTF to expenses getting or XX% gross guidance. minimizing that the I reducing margin. we that been can and instructed will looking since on our Board impact are to our going by I’m reductions to back always gross we’ve claims have providing very And we make a about our on position in I doing have to ways tell operating you are active that. not in been a comment

Unidentified Analyst

of versus of in much was the decline, million – Health. Human the elimination or the segment? in XX% Of headwinds How that of $XX how Okay. much in just Lucid sales talk broader – $XX the decline maybe million approximately dollars

William Kennally

was to a had. that Yes, the due VA Rich, that, percentage we good of revenue loss

products that, expected, perform we some higher-margin our some had took of a didn’t to products. addition In as we with and also that hit

in quarter, in was a of majority the have of So of ballpark the but I segments fourth don’t saw all three. the combination that terms those decrease that within you percentages,

Unidentified Analyst

segments, then profitability from of mean what just that talk a would it of what’s you the bit you’d reference little tariff – kind which of worse in standpoint? in Okay. case if could or about a And the exposure terms what terms margin

William Kennally

that I Rich. thanks it, appreciate sure, and for Yes, question.

we the goes manage the XX%, Speakers] through So, to XX% customers. look, can If we at tariffs [Multiple that think our events stay with it that in

Unidentified Analyst

And are I’m the which tariffs, sorry?

William Kennally

so Chemicals hitting intermediates Nutritional segment from tariffs farm and I beg the are segment. – exempt those. the is the Performance The

right two for So pass the that. And the to customers, most businesses, customers. on with those plan the the those now onboard part, tariffs on are to is

as actually to seeing an uplift we’re in it performance that. So our relates

out it to is However, some pass have to customer But terms if to it that help on to going lay have the we’re may them. us how there. goes to factors that of XX%, in mitigating we we

shortages this absorbed are I to up. that over earlier, could when in currency So also Initiative play there, the but play how And rebates said certainly as will China go in out. participate market by a Blue role costs may devaluation then, Sky continues customers create

to And but increase a of seeing to early we’ll a factors we’re hit elsewhere. there’s go lot manage fluid. choose able believe that see that that of the some a interesting it makes the result customers gains we it, Chinese So, of really very market should XX% and the as in be through tariff we to could –

Unidentified Analyst

or most you Right. from have domestically would they from generally in feel, tariffs of And that, supply speaking China? options producers avoid of those so do are international a lot that

William Kennally

a earlier, it’s markets A in been a and lot I really of to I confidence as by folks. on of of it end real the the Yes. in that’s the We’ve again, been component. really doing team. day, really business, But good we’re to a have And can able certainly competitive costs the passed It’s become business. here but strong participate participating relationships Well, have we to best that other the does in are have – a U.S. cost referenced similar a At look, strength established. hang important on the the just job. in environment lot the of do we being

additional all any retain potentially that might the see. the to business of to we’ll offset of but we get confident due to we and going potential not strength losses it, we’ll gain team that feel We’re get,

Unidentified Analyst

just it would we as guess, then the segments, you Okay. lastly, generally run at numbers the rate, representative see you And all API QX is you look of numbers right with gross I and Performance discussed the do or seasonality those is Chemicals looking numbers margin at and what four maybe backdrop, there of just not for approach? for the by as with such those EBITDA multiplying that or

William Kennally

in a Chemicals seasonality Performance the Well, segment. bit of there is

the for seeing expect representative to fourth is you road. what see what going of can that you’re down think I the be quarter However, to

Unidentified Analyst

Okay.

Okay, Thank you. all right.

William Kennally

Thank welcome. You’re you, Rich.

Operator

comes next Stabosz Stabosz the And you. Management. Asset from Thank with question Timothy

Timothy Stabosz

Hi.

with forgive stable. late, the talking talk a that the we you release more being One but on caller are Intermediates got You’ve would highly are Pharmaceutical And specifically future? it? the me, about caller, repeat I you see think, I’m and we And that I I press see like heard profit, comment it that, separately of business the Could those it performing we stability larger the of bit those obviously, pay represent potentially down Chemicals previous it can with you ask and debt. way degree in strategic trying you the about previous you deck to flesh about call the obviously ultimately, look a those But businesses explore the X% they EBITDA, Are more about on from the as stability that gross for please? you Because see way in value because little divisions. – content disclosures alternatives company’s out the completely disclosed the stable I at to hopefully. partially looks in of the divisions? they shareholders slide to answered ownership. the looks Performance and that with so talk bit a the question, do the

William Kennally

Timothy, of ownership you our very thank for your and much Sure, stock.

Farm we ground Nutritionals, is steady have of the have cash really It’s a the high our the road very to Chemicals, will performed Historically, businesses to continue. again, confidence that Ingredients I great boots that contributions the in on valuable. stable Protection And have And that made comments AG down continue and based on we Performance it’s China. feel is business So that well. I is and the business view provide on Intermediates degree those business and earlier, to that, going India company. some

that markets market. large in participating aren’t also We’re

good, to go strategically stay where And not try what’s goalposts, will, the and selected us. we to So from successfully product at we’re you really to deviate after that level. think, within what worked size – we I at if try sourcing for and

all I’ve as that you those confident So as growth very stable businesses I will described. feel continue know, to provide

ahead mean, I it, a I’m that we’ve there’s notwithstanding, always could confident. we’ve in this we on be But have Now – a call essentially and stated this the And you’ll Rising but get look, we environmental the out made we threats failure see handle side Sky able business, the over changes the initiative, right? the threats We always threats to supply. really stayed got there’s and rebuilt from comments suffered competitive last year. would I earlier as highly that on then to that and But to online the I Blue there’s we’re of on way. poised want feel there prepared lot growth. that of add in for

I that So to are I think, going ready go. the we’re businesses and hope helps. stable forward,

Timothy Stabosz

won’t generous and you can. to say about said question other be there’s I strategic something announce. in to as anymore alternatives try you understand as One you until answering you. Thank

or that cannot breakupable, sold and be companies in finding they part readily loss of Are situation, readily part? be continue sold Have far additional synergies very the the you we or the breakup synergies? can the in or whole in are without can of analysis the one as two – them, businesses, one background and break? them, as of ability the is to As with sold what them, ready we internal of be part, three of done two in – to or

William Kennally

but Yes, comment would, be I were And able hear that, to Timothy. on can’t. I I to if look, you,

all review just strategic think, forward. alternatives really going I these it. So, are we company can’t on options our as by that, comment the being are I considered

Timothy Stabosz

Have question this on around three the aspect, and Let our do this fully later, completed months me between four we the announcement had? homework? And point the after at do that initial handle the fully have we’ve relationship the it we – ask businesses whatever their ramifications a we way. three, is understand that

William Kennally

that… think I

Timothy Stabosz

around Do point? our that, you specific at notion this arms we feel got that

William Kennally

well in we’re yes. I think, control,

Timothy Stabosz

Okay.

question. in the got I back I’ll if thank queue Okay, you. come another

William Kennally

Thank you, Timothy.

Timothy Stabosz

you. Thank

Operator

from Partners. next Thank Lester JSA comes you. [ph] the Petruzzi And from question

Unidentified Analyst

Good morning, everyone.

for I’ve in I’ve all I partnership some quarterly shareholder the need a attended and been conference represent shareholder the myself, some calls, investor. individual they course, XX describing and you think know last me the gentleman made years. a of mistake. he an meetings passive and, XX all annual I’m He is just

is Walter is to specifically get that to Kaczmarek? on are, one. But just you won’t my I executive it. replace want you those know signals disappointed don’t is your our as you. Thank intention how I soon I departure more My question know, simply, crossed. COO So disappointed another correct all shed color I’m very just simple just that. C-Suite we has but question occurred.

William Kennally

lose thanks, He to pursue And appreciate look, I Walt, the Yes, too. chose other comment. did Lester, we opportunities.

deeper in operational a me. And And and it running process. contributions someone him thanks we’re his Rising you little opportunity a to and be up interim, to miss needed make building in of alternative lot in then company. company. that the to of ERP this and caliber in based going his to him future needs business strategic have the and the to going try running dig in our the other down to the did organization, are time to And within changes for in We’re He with – job that there the the business. the to Whenever gives great getting and to was some on elsewhere a tie decisions might our systems Walt I’ll the Walt’s really you leaves up that of the have company reflect from go on an standpoint reporting manner an potential going here. that reports

certainly on nice additions that to and/or – hear hope question, future you your we’ll and keep that any posted And place. changes I else So Lester, and answers take you. everyone from that

Unidentified Analyst

option. I total, not the to questions or longstanding a matter total that in a the will But gentleman’s tripped ask the place, request I’m also still to there gentleman Will change significant Yes, were control Board. in if control in just if a sell respect organization a clearly, to partial change a the significant trigger pressing strategic trip follow-on sold? agreement agreements or you as the last was control And what the a and question. you an have payments? suppose all, related change I to agreements. in in But about at about in I presume would pieces, was in division or actually, be in a payment, about payment not follow-up, sold, your senior to a Thank you. be The company But review. talking management I whether

William Kennally

I think…

Unidentified Analyst

add could Steven something Maybe some answer? that you have – or color to Becky if don’t the

Steven Rogers

The senior management of…

Unidentified Analyst

Is it Steven?

Steven Rogers

Yes, this is Rogers… Steve

Unidentified Analyst

Okay.

Steven Rogers

agreement. senior agreements control Legal require to division, double the drove some [Multiple Corporation change work ACETO that Rising, trigger require This with trigger senior Corporation particular result a managers triggering There ACETO for is Steve would held could double Rogers, who change under by a at The in of control Chief management specifically who respect would certain Speakers]. Rising of circumstances change. But senior ACETO management are ACETO. Officer. with of of the

Unidentified Analyst

to and Rogers, Steven much, very all. luck good you thank Okay, you

Steven Rogers

Lester. you, Thank

Rebecca Roof

Thank you.

Operator

the is you. And Thank next question Thompson Rich from follow-up with a [indiscernible].

Unidentified Analyst

Just on items the and capital seniority of structure structure side, the What’s follow-up. relative the other the thanks the the for taking note? capital to promissory in

Steven Rogers

a original the a payment promissory The due note, promissory rather not actually it’s deferred documents. under it’s – transaction but

capital So bottom the of company’s it is the at the of behind. debt the compared structure to rest

Unidentified Analyst

the the junior note to notes? promissory be So would convertible

Steven Rogers

it’s not a Yes. payment. deferred a it’s note, promissory And again,

Unidentified Analyst

payment, deferred guess… The I

Steven Rogers

junior. it’s Yes,

Unidentified Analyst

interesting. Okay,

Okay. All you. thank right,

Steven Rogers

Thank you, Rich.

Operator

we question from And Timothy Stabosz. ahead. go also a you. Thank follow-up have Please

Timothy Stabosz

you in believe strengths fundamental we the are of then of or the the quarter further these with comment assets the but commentary shareholders think to dividend? on company that, not versus the the appreciate because the behind two” kind management’s dividend? basic to dividends the a a maintain stock $X.XX own I What’s it’s I want because Yes. $X.XX out part I quarter of is $X.XX, personally debt. idea banks saying, have a on “Yes, to who that Can not regard that $X.XX And value maintaining the can you on financial the token it. depressing and wise essentially have a forcing But

Rebecca Roof

think than I I probably would have. said just Tim, you better it So,

William Kennally

Tim, look…

Timothy Stabosz

Say more.

William Kennally

history we’ve able flow. important. down changes to appreciate think this terms get in think, cash us that base down had dividend the in would I banks to for it, And is that plan a your point, and votes that, to of higher bringing But And significant look, company the that in that the a paying we do have road. paying We Board the many so we years. understand of a continue that, up. it Well, this, to dividend be I shareholder and have the every I dividends quarter, thanks subject confidence for to higher to we’re But to we aspire on think, we amount pay the road. be and pleased wish occur

Timothy Stabosz

of $X.XX Are alternatives good But value they thank they the actually growing, to Are be the flow value providing have chance the that confidence be positive that confidence perhaps flow share because cash as it the that in will entity? could part strategic – business a – the the this have confidence and you. as over was is value presume cash get cash-generating we’ll of that’s is in a I flow? the run of their the asset long a the process they going money. the confidence company free have be positive cash company also

Steven Rogers

all to specifically banks don’t banks approved and that the speak means. itself to we and we would Well, the as say, And for authorize by But fact banks think Legal it, I them. Chief be it for the answer. the Officer, speaks want that what the what Yes. has

Timothy Stabosz

Yes.

Rebecca Roof

not is at all. controversy it ask of And

Timothy Stabosz

Okay.

that they’re and something gets yes, where didn’t to get we the might guess, Is amended there amendments call of or is. that I late further? of extension into control going waiver, of year, degree by take – operations operations remain Is go then? all the of it, I nature it our that even XXX% someone – us that and a question to done that way to mid next as is that signal, okay, in our extended mean, the One the reason we out the that of perhaps

Rebecca Roof

at the of of I the think the context is look XXXX. debt, in that maturity you have to which banks the waiver

think the that, very the the other first wait-and-see final the while as gives also the well. us I all, that think opportunity think pleased as I demonstrate consider and do alternatives waiver approach we and were favorable give entity, would with it’s an protection But adopt ongoing to I a of what to terms. you we can we banks

was speak that want the don’t I banks, general discussions. the tenure to of so And to but the

Timothy Stabosz

Okay.

hopefully, Okay, some one I’ve can this. got you more actually, explain of and

days announced it You there’s September back going an for roughly amendments, be a pre-disclosed. a Form loss September NTK, hovered was said to XX, The about XXth, filed had was you of we around $X the S&P that think ago X-ish. went index. Then hovered a around but stock up removed the will XXX $XX XX-K the late be from announcement a XX, that little I then bit, that few generally million small-cap

but Officer than here, something about XX, stock there’s out, to as any players which XXX price, ask comment? you can month? the as September something, commenting is, yet, so Am the earnings or the to than since a that’s about only – like back unusual come other is as out has another on be you I seem I there departing, obviously a two-tens it pre-disclosed speak. something firing opposed day, like staying would other missing or news to stock – doesn’t What me So Chief friendly to Operating to plunged S&P so for missing since you’re kick around in to am material not it’s low I

Rebecca Roof

to sure we’re anything speak discussed. than aware that the have be of But alternative to with not of I’m we mind what of certain as shareholders. what position We’re that we not haven’t out certainly might other the not aware in any disclosed. anything

Timothy Stabosz

XXth September XXth, right? Since or

Rebecca Roof

That’s correct.

William Kennally

Correct.

Rebecca Roof

Other than that the delisting S&P small-cap index just you referred to.

Timothy Stabosz

are And any number of you have that of Okay. of listing, that hold do that attributable funds to that index? shares estimate because the the

Rebecca Roof

I don’t believe we are.

Timothy Stabosz

Or total or percent anything? of

Rebecca Roof

knowledge. my to Not

Timothy Stabosz

like and Thank to with luck unlock you Good I’d this. value. sell see assets you. Okay.

Rebecca Roof

comments. Great. I appreciate your

William Kennally

your I Timothy. appreciate questions Thanks, your comments. and – thought

Timothy Stabosz

Thank much. so you you. Thank

last for the turn to Bill any was would like I Kennally it conference closing question, the As comments. to

William Kennally

great Yes, call. Thank everyone. you. attention a being weekend next and your quarter’s this thanks, We time forward to on coming and Have up. appreciate you morning, conference look with

Operator

Thank you. The conference has now concluded. Thank you for attending presentation. today’s

lines. You may now your disconnect