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Adicet Bio (ACET)

Participants
Jody Burfening Investor Relations
Bill Kennally President and Chief Executive Officer
Becky Roof Chief Financial Officer
Frances Scally Senior Vice President and Chief Accounting Officer
Steven Siesser Chief Legal Officer
Matt Hewitt Craig-Hallum Capital Group
Timothy Stabosz Private Investor
Bruce Berger Private Investor
Rich Thomson VaRde
Doug O’Bannon Private Investor
Oliver Butt JPMorgan
Call transcript
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Operator

Good morning, ladies and gentlemen and welcome to the ACETO Corporation First Quarter Fiscal 2019 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded. At this time, I would like to turn the conference over to Jody Burfening. Please go ahead, ma’am.

Jody Burfening

Thank you, Denise and good morning everyone and welcome to ACETO Corporation’s first quarter fiscal 2019 earnings conference call. providing CEO this Financial and and Kennally, are Officer. today and President Becky me comments call on Bill With Roof, Chief Frances the Siesser to from Also Q&A who unavailable is and participate due to for Legal, Legal Accounting Scally, Steve Officer, in are is Rogers, Chief Steven with matter. President Chief Senior a and in Officer; personal filling Vice company’s us session the who the its issued press quarter market closed. first after company The release earnings yesterday

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

Before can actual starting the that call, would identified uncertainties. as such these publicly be by Act by anticipate, Exchange Private contain Commission will events a in in you with any or no release. and Securities and implied The are earnings The result the like future quarter to statements the company’s the Reform the by differ today’s from information, projects, revise to expressions words could call company’s that company similar defined or factors expect, forth new first that factors forward-looking obligation seeks I the and outlined set and anticipated update press certain or statements believe, involve Securities filings that of those as plan, risks as XXXX materially XXXX forward-looking numerous forward-looking results undertakes Litigation remind statements whether of otherwise.

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

Bill Kennally

everyone today Thank our and first you for joining morning you, and earnings call. good thank Jody for us quarter

our contributions saw at segment Health, commercialized continued year-over-year an generic from decisions delivering each quarter starting and in because those in posted nutritionals entities increase first the segments. our the driven of lower Performance government a Our and continue performance Pharmaceutical in well, sales foundation the has good owing margin steady XXXX strengths having start Chemicals Rising in new perform Chemicals performance provide and early future Human profit for to Europe. look prune Rising for sales, closer the and continued and Health and revenue regulatory and year, XX% in quarter industry Rising as our durable a laid Ingredients to Taking the given fiscal were of the return our sales by due to to and of and a in to loss Pharmaceutical us Performance to strong the reset from profitability the the mostly sales gross portfolio. our capabilities declines company, fiscal to in at while a of financial contributions Ingredients headwinds. segments to to reporting Human the sourcing business year-over-year with cash measures segments growth gross weather

talked and fiscal to gross about negatively profit which on last recoverable procedures a addition, volume next $X.X customers. portion the impacted And our average we quarter. and selling of In price in failure penalties to inventory also to with of overshadowed We supply by and customers erosion benefit disciplines we supply the increased the for the a million, supply levels. consecutive stock decreased ongoing maybe nice instituted quarter supply increase safety our with our were forward and quarter materialize. operational for Revenue third chain a claims began partners quarter, customer have our of projections to back orders. quarter Failure minimal those this represent from and improvements chain improve see the healthy

this chain worked has in year, control. Earlier the all I supply our we hard now team back Our highly were SKUs and of of the in XX% have areas confident fully am on order. extremely under

the of under back have with portfolio have SKUs. of orders. of X% to we our whittled We expect size, that our And do to since down level some

to However, unforeseen the a immediate what any of see I state in challenges progress barring have am we of more is benefit the to expect can future the product subsequent snapshot made proud in beyond quarters. much present which bottom top today. an line holistic and show we our

portfolio. product Rising the to Turning

market our strong well differentiated selections optimize focusing opportunities. our pipeline return candidates, high efforts to continued We development on and product

As fiscal made the and XXXX, strategic pipeline conditions product technical challenges. development of in and XX to rationalize products unfavorable number a down cut this market reminder, our to during we decision due to

added additional based our age bringing to we XX-month we approved We to products These in four on and XX have fiscal call, ANDAs technical from age to are filed these products queue resolved. from which during ANDAs two and API since other pipeline file added plan two. to personally and favorable also received the FDA. We quarter which and we molecules challenges on molecules reported filed our to launch to our feedback greater recently molecules. were XX in a than launch greater ANDAs XX-month for we we the parked XX two in feedback quarter due added five those product X the category. have pipeline and file, once to due file, plan an We products, our were launch parked total have on than two one development FDA. these issues pipeline Previously, the our our pending molecules and Since restart one products a XX approved last category back We in We current launch. category. launched ANDA when

heard examples and are off bring previously products additional might ability back You this products to discussed back X future. bring of the good discuss the I environment them just shelf. the to for and me parked products the The we monitor continue we in

some For technical in XX plan commercialized partners we fiscal products complexity. XX to portfolio launch still are XXXX, terms diversified of there assuming and manufacturing generic more to

milestone million We also still R&D plan payments this fiscal in spend under $X year. just for to

profit in sales, API a reflecting strong X.X% increase increase to a favorable launch. Turning from sold lift on a abroad saw generated Pharmaceutical mix. XX.X% customer Ingredients, gross a we an and new in demand

because one with an of in that U.S., existing Here decreased fiscal of excess increased quarter inventory, which we two. the our created in sales competition off will customer sell

a ingredients agricultural a import Chemicals into our DEA related to issues products compared protection reclassification our issue, to In ran issuance. last year, in reflecting notification normal addition, Specialty in generated regulatory sales on flat gross alert business. of segment, profit In a and three compliance product Performance results gain our our were an Class X the colleagues a India X.X% In teams business, and Protection discussed with industry, a the positive takes increase competitor’s is puts our Chemicals X.X% and another used intelligence a business. have sourcing one competitive that great demand, results drove this advantage China’s from what in China in resulting customer increase shortage. with fuel an Campaign by supply I is primarily the in Blue we market yet previously and from quarter’s product example new a award for driven Sky believe revenue and this

We on plans. the effect September. board that our with our to successfully XX% plans And implemented are our business most in protect to-date, have customers of concerning went tariffs into

to the details higher exposure. the allows them will dependable margin, take on consistent I could in are Performance relationship and aware on by summary, that To administration of have fact imports that demonstrate with Becky last and CFO, product customer products the are quarter’s the in tariffs financial for impact customers results X, will on first we this call and Pharmaceutical to with analysis. the our call, will conducted on our our to analysis focus the over As provide I increase continued Rebecca portfolio XX% development customers. on us XX% to rigorous January through value. volume give likely Roof, to be to you prepared for turn that, the of review a Becky? an increase of lower quarter. enacted mentioned In Chemicals maximize possibility Chinese if we detailed has Ingredients value tariffs And some to more

Becky Roof

Ingredients expenses intense margin supply first gross recorded With of Rising $XXX.X quarter of million or of pressure, fiscal $X.X $X.X increase ongoing million segment sales. of profit failure chemical the amount of the fiscal domestic $XX.X year. million, operating million consists and Rising income the sold adverse share share to to XX.X% charge. were claims. to on FTS sales profit Gross agricultural of abroad an was million for $X year, Gross year increase by with charges. and were and a first million pricing quarter fiscal reported partners. million financial last the reported XXXX, The increase for XX% net with fees XX.X% claims, SG&A expenses a advisors, profit $XX.X decline this in increase million $XX.X failure FTS in polymer flat profit profit Rising first first million $X.X $X.X that gross German quarter million for an million Partially Thank an last fiscal to or period. product expects million fiscal income this XXXX quarter has million for partner, the $X.X year. number XX%. our gross you, compared the $XX.X reflect million of million, XX.X% million sales quarter $XX.X million to the of partner’s $XX.X re-billed and to loss million increase million originally first happens, last year X.X% re-billed a process compared charges. compared Rising of of million the $XX.X XX.X% of in volume offset compared On XXXX. from primarily in compared to Rising combination protection estimates quarter related of and from XXXX approximately to the fees, for compared Human increase lower of last million margin Rising higher Gross the for the an to million $X.X everyone. the additives launches the quarter an that sales the In of the that paid year APIs Chemicals disputed with the approximately million and margin period. to loss year, supply domestic $XXX.X reflect The million If last were was gross million first results $XX.X and this million, in $XX.X primarily compared of prior higher to partially partially last expenses $XX.X of $X.X $X through was a sales $X.X million in could amount period. delayed were XXXX $XX.X million to or first this operating of year. of a XXXX to versus compared quarter these million The increase customer $X.X generic continued largely was an consists and for and costs of positive of to the was to compared claims in to net Gross Approximately in range domestic was per chemicals, $X.X coatings. $X.X of in gross offsetting million by of was APIs. the year prior XXXX was increase of for SG&A reporting sales will I XX.X% million Gross from or in absence gross good claims APIs Net unfavorable with $X XX.X% senior compared to to penalties, subsidiaries such million for Research and primarily for separation partners in last to to reverse of year. billed staff or quarter XXXX. conditions, of margin year $X.X back these the million offset decrease at declines of FTS basis, $XX.X review compared sales legal first $X.X to partners. of in year. sold was results of segment decrease $XX.X expenses its a sales consolidated X.X% increase the per decline were were Performance first abroad. and XX.X% to compared XX.X% the to Health fiscal and variance prior on reflecting were to growth claims. our former last XX%. due remediation $X.X for for $X.X margin sales quarter nutritional as review or year quarter profit segment to adjudication the has first stabilization of specialty in failure X.X% $X.XX professional development Consolidated Sales $XX.X The of Gross additional start customers XX.X% QX first was million Bill due potentially or of sales the fiscal products $X.X was first million, segment XXXX, Rising million Pharmaceutical to credit $X quarter for products, $X.X was negotiations products. retention Rising and for $X.XX sales $XX.X which compared quarter. product of quarter for morning quarter competition million to million on $X.X and the specialty customers profit market in XX.X% supply share an Rising for fees, million, sales respect of it this first lower the the of to mix segment amount our is of of Depending operations primarily continued last for go for for and resulted claims. certain reported FTS an typically the million, corporate of CEO to consolidation up validate Rising $X.X surface of of of the million related $XX.X incurred environmental

million. and balance to of sheet, investments totaled the Turning cash, equivalents as short-term September XXXX, XX, $XX.X cash

XX, Accrued primarily expenses advance Chinese potential segment liabilities increase of payments in the increase primarily largely Inventory $XXX.X second senior the compared $XXX.X and including XXXX. XXXX. a to at of buildup in attributable largely million, stock of capital, mentioned increased rise million of end. timing XXXX million of compared our to our quarter an Pharmaceutical our total just increases business. Our $XXX.X segment quarters, processed million $X.X $XXX.X payable of advance credit at ramp-up inventory XX, million an to of for to levels debt increase Working increased and $XXX.X sales was tariffs. current in of million quarter increase $XX.X the of Trade June million, The due an Rising an as Ingredients million rebates of $XXX.X of due June as shipments compared fourth inventory facility. to from $XXX.X of as $XXX.X $XX.X The $XXX.X scheduled in Chemicals $XX.X fiscal in of was of XX, million as third million June is Performance million in in million, and includes million debt, I XXXX, Rising, stood deferred inventory safety XX, September other costs. of to Accounts receivables were increase Rising was $XX.X portion under $XXX.X million. for our at million, a financing including due the long-term for a to

the we’ve As goes be expected X. the conducted Bill on XX% increase XXXX if January in mentioned, the impact to analysis impact with respect to to what tariffs, date tariff to is the Chinese of fiscal and an of through the

these related range margin quarters of gross will on we consolidated to on and fiscal For two imported the the for to of in share recently X, China fiscal burden $X.X increased to to If range estimates impact the that our a the January in impact balance the product-by-product margin XX% making calculating certain the from XXXX, $XX,XXX. tariffs. will and first these XXXX. the expect to million imposed that consolidated tariffs $XXX,XXX we of be on expect the customers $XX,XXX manufacturers these made have of regarding basis the our of In ranges, our gross in level goods we assumptions tariffs

our will we intended the is our turn of that from our expect questions. together for for next operating XXXX, operating Turning to the activities in million that $X.X our generated cash assets the previously flow, be with liquid for to believe to quarter I’d months. flows, initiative, first to We needs Operator? fund million fiscal like the XX and cash and cash which provide loans. capital working with $XX.X repaid we for adequate our liquidity announced of over strategic resources us used cash, bank And to alternative retire this operator now debt, to

Operator

first your ahead. go you. Craig-Hallum Matt Group. be Instructions] of Capital will [Operator Thank Please question And Hewitt from

Matt Hewitt

my and morning taking for thank Good questions. you

Bill Kennally

Matt. Hi,

Matt Hewitt

Hi.

you mentioned that that that see sustainable? do Europe beyond it driving opportunity for First obviously up, do I think performance was is primarily that fantastic an long last? you Europe, there a How on being there you can the And how Nutritionals, and think performance business? as and in what’s – is it

Bill Kennally

there particular, in we some thanks number the we it’s have products, driven yes, taken being Matt. question, so And generated business. for pricing some have but of and Well, new a by

nutritional business. will a it the It’s think performer good carry over. I within been So

operation. from European good to So, continue things expect I the fully

Matt Hewitt

And then you That’s are pipeline, all to I shifting the a pipeline. of details there. couple questions of that your on you great. Rising thank for providing the have

off about are that these you had back, First buckets? back you products hadn’t are for products bring had then ANDAs delineate now ANDAs process when been maybe these of or those bringing just your bringing products responses submitted and discontinued been guess the or submitted maybe as I that those talking are all, you if could you approved or is are that you in pipeline, but between have importantly, these previously the back ANDA, what had maybe even had the And me, online more held yet, to on say?

Bill Kennally

So of Matt. it’s a little bit those, of both

to market of But We both based ping have number the we are bucket. you us the ANDA potential in were indefinitely than know but from the that have a have aged that that’s of we greater to from filings an presentation might FDA products just in categories situations, the aged a that product those of our technical of and and/or some number of their categories, online, kind we on parked in challenges in in filings, up foreseen partners. just the effort happen as investor backlog catch XX-month on conditions

a have are status depending either in or where them moved filed we queue. So, into they potential on launch the in status

what So, there. that’s happened essentially

product event and made in situations opportunities some have also fiscal they we see but products to take back is had ready in launched are these out we puts frequently opportunities in have strategically that have have been parked a market. and to this We that takes and products relative go the there to those of XXXX, where decision we

Matt Hewitt

need or you bring And approved process do when so that what you to parked, is you that’s product new that is back, the batches previously to what stability – that provide a process? been essentially

Bill Kennally

No.

based three of products profitability a the think volatility just the and So that of discontinued with on market I we the products. can partner

you alive can’t we keep back As the the can will, doesn’t if in. so necessarily market we pulling long as off we re-up, the product registrations mean get

Matt Hewitt

and Got of back was that – far I but creating there difficult for a length to there was you get in, required it, that. okay. as time was stability just maybe sure wasn’t as that batches thank if if

Bill Kennally

Yes.

in. to related discontinuation, quality to then in if discontinuation, products would no issues just the are that stability reason follow the there issues are to Matt, for So bring impacted obviously the solve back have up, the that only there for if order we to

Matt Hewitt

it that’s you from regarding understood. it Yes, This the along like it got a the the lines. made – here, sound had XX%, purely Yes. is to went something And And decision, failure is it. me like okay, question it’s that financial then down penalties, doesn’t and those comment so to a case. forgive X%, deliver

that am get year. had fiscal You calendar it... is sense, to I mentioned year, a year just or trying this Is

Bill Kennally

Matt. Yes,

problem took of sorry we because because earlier the started supply third second last in first So, products – fiscal fiscal our – the year. quarter in quarter the failure the in to year, charges last

in now that were supply the to where the So with when in then was whittled that back and state team the SKUs our we quarter third our XX% had I the referenced the earlier order great it year, down we on is of earlier which present work due working today. partners, to had under X%, done has

Matt Hewitt

perfect. get by Yes, one down, team and I back obviously me great then more then to your hop queue. maybe will And into for that work

breakout headwind versus you is volume Human related? given the had commented the – of You pricing some can the you that are how related much Health side, facing how on headwinds that much of

Bill Kennally

I one can if you give second. me

volumes to So come our pricing gone has but Rising, have down. specific up,

than one product had we due expected. extent we So, declines that we to competitor have have to price normally an what that a a on higher hit additional would took our large drove

our So, are behind if declines of slightly mix. that’s terms aberration price of and portfolio, our in product you look at market we an the

and of representative have, than greater product if we we this price hit the a market market. example, had by have entry. would that then one be to where commodity-based a So injectable heavier for products the took it’s price portfolio due derm our accelerated with portfolio, declines But the declines or competitive more we been

see to expect are we the but a soften representing predicting there not what the normal that has However, normal I I declines a say close. but on and I beginning to bottoms am yet, been would won’t price normalization, it’s here say basis. –- are will

Matt Hewitt

news. could X% a maybe That the development. positive would If X% you that versus to get of be to facing been we the headwinds back normalized good be not, some would declines just have

keep good work, are doing I you So, a hey, been tough job. alright, good know a but up it’s the fight

Bill Kennally

Appreciate you, coverage. interest and the Matt. Thank

Operator

next the be Stabosz, from Investor. go question And will Please Timothy Private a ahead.

Timothy Stabosz

Good morning, everyone.

Bill Kennally

morning, Timothy. Good

Timothy Stabosz

are banks you my I’m if months, for X press from supplemented question adequately previously is, as about XX,XXX supportive that And in by and of through appreciate announced the point process? of process, to seems XX,XXX me disclosure intended that to this earnings trend own around emphasized to down and our the take seeing and shares the call I only XX% non-generic decide the conference at the alternatives is the in a market to company stability to liquidity generated release the strategic know, initiatives you shares company before the drug the there’s there’s said value you this X% reassurance strategic alternatives like it that is divisions that good subject the this be Street’s this release how your open the now, it’s or in XX,XXX fully the money glad I degree that which strategic gives great XX alternatives retire will debt, opening this language

Becky Roof

a the and the that successful of filed during have Timothy, - process. question the previously me recently waiver banks take it’s have the our waiver company best Becky had this we that that what we executed we indication that to I with fact let that their is A outcome negotiation the as for of support discussed consider very a Roof think we

Timothy Stabosz

yes? a that Is

Becky Roof

That’s a yes.

Timothy Stabosz

supportive? They’re fully

Becky Roof

pretend good them. kind cite demonstrated, just a that’s my I gives think tell negotiate can we taking perspective, and that that speak a of not to a not ask waiver, as from that our yes, any perspective, we I that was support directly indication you would us support for me time of you are runway an to going so it’s from flexibility I speak Let banks. but that that question them the them their would I’m have of indication for to good from my

Timothy Stabosz

we was sign yes, you of what’s I $X.XX the that the dividend, kind bank for the the $X.XX of status you of which that? last dividend appreciate underlying value the that said, dividend dividend, a have assets quarter, thank long a of had a did a keep perhaps time

Bill Kennally

would this we’ll of the paid the but as the board not many in meeting we board that Well there, trade have the for so December and many, stay when the consistent call the a is historically, to approve have dividend, to so consistent decision dividend votes to with that be timing board see I and but following will on years, that tuned expect in and board make decide December.

Timothy Stabosz

going are forward the at Bill, to finally, to trending do we And then or keep anticipate we’re but Okay. to supply, least in not that lower failure you on projection, going current keep I’m asking quarter? going a for

Bill Kennally

Yes.

Timothy Stabosz

quarter? second the In

Bill Kennally

get me are the yet any or barring nonmaterial paying non-significant we get next but we major of past shortly expect would unforeseen what And event there that anticipate it’s to said me be a are and we’re is level past in to what not or going the supply goal you we’re that I in a to so failure today. have there quite that where heard aware what and issue haven’t this to fraction say the the not that of, I you’ve I heard in is will quarter’s

Timothy Stabosz

July, you’re at can May, that’s alternatives Okay or any anything interest that that and in the question? very a truly to months, being that October, or give not give of is X the that what strategic June, a looking September, can you’re not process whatever August, that you about just timber X about say know reassurance finally months, the I finally, lack it’s it’s or that’s on commenting fact then been, process assets about involved color just general any there indication you more or these what,

Bill Kennally

time So wouldn’t so sure on any the into length at I’ll really it leave the I me leave at look, to comment process it of that’s I that. going you’re guess read I strategic and on that related process, can’t and challenges let right, the

Timothy Stabosz

said understand don’t you what? length I sorry, of the I’m time what

Bill Kennally

don’t think the of sign process, that generally anything the sign we a read the I bad into as So, should length to comment generally we’re or read time you and going a I since on good our wouldn’t don’t timeline. initial announcement that

Timothy Stabosz

Okay very thank you much.

Bill Kennally

appreciate in thank company. interest the Timothy your you

Operator

a The Private next will Berger, ahead. go be Please question from Bruce Investor.

Bruce Berger

I guess minimum and covenants that question you my wondering regarding cash thanks balance was Yes, have the $XX cash, that address can bank I and so the million is to of have way I That’s the I you’re below a question. read if think my first requirement you is the covenant? there it now that with is,

Becky Roof

Yes a is a calculating the cash not plus covenant $XX the Bruce, are $XX is the the million question undrawn covenant, revolver, covenant you and you into the account on million so for that minimum. cash it thank takes balances liquidity the when

Bruce Berger

So, then much close are have availability that gap that covenant? hit how we, or or means how you do you before

Becky Roof

and room in last that would $XX.XXX can compare which you cash which that think if front me don’t I’m is. I sorry, take was how the $XX plus XX, you I have balance much million me on but at was calculation the the the certificate XX, covenant, $XX million in give our Let of to June there September

Bruce Berger

that’s and us of are so turn over I all to stock people so and can quarters? so could payables the will generated using few mean was some indication that receivables, run cash assurances your huge you’re from of concerned there that Okay going cash you’ll a how be would of one how cash is you next cash? I give capital of inventory working significantly be also think down the generating us an reasons draw give your

Becky Roof

X in the in I charges hopes X as increased our order our U.S. due also impact get our capital in used FTS So, caused Rising tariffs we January our that’s the built X sales Rising on QX prior between which that landing the to operations to described, or think in is also largely to approximately hopefully avoid working factors we increase segment our in to inventory mitigate drawdown one, we our future Performance those so and an inventory of to help business to $XX of in better builds, inventory increase what at Chemicals by accounts in increased mitigate the largely cash. inventories an at we unit is in receivable, related million

Bruce Berger

course, a is why that’s that’s do process why release liquidity or will is projections on trying to be have with fund liquidity you any the is you crisis to there trying because business when understand a quarters? what the from stock is basically press is that your down will a next significantly there’s you going forward? the think strategic the down to, a question sense, no operations there the of and just investors is say so concern looking So, company of cash very is what how that few the bad I’m to I’m so the in disclosure let very something there that so we’re how have I Because back whether and not you come road here the at again, a crisis of other about coming settle the liquidity concerning over

Becky Roof

think, had turns correct question? that an I I can I’m exact understand because the if whether you didn’t am you but of I had this paraphrasing if your of what idea or the take we words, So, here rephrase idea around, asked you when was, question I an

Bruce Berger

become when it you must because a when of some cash Yes, cash right, out come consumer have down increases have payables, etcetera. and that not you receivables the idea? a you’ll modeled of balance must inventory, cash? so generator When

Becky Roof

we’re biggest asking cash whether yes is answer how our to the the add that chargebacks we are in impact the our the gross and about to chargebacks provided fact impacted so sales me forecasting in the business for impacted that XX-K, let capital same on have an not of our well when the as increase invoices wholesalers our on cash our so in are goods in to our business, our subjected in pharma through, payment sales generic we answer you that, we more closely. and are we’ve guidance anybody and we said, gross-to-net the is cycle anytime until our is working you have place use than against know and in your is working into it probably go by credit take for and the advance you ahead monitor so a by you have the that’s short question out, this back if Rising about is, that wanted yes, capital providing previously of information that cycle to way model and flat get to modeled but we made this, Well

Bruce Berger

great. would That be

you you you that two I you’re said? Just so think you questions don’t mentioned strategic whatever that is all the what retire transaction through, going if to said debt, want more mind of you specifically

Becky Roof

What is our our and that liquidity our provide expect together believe the our previously our XX flows, retire to to strategic needs for I next strategic with we is working is announced months we alternatives that intended sufficient that liquidity to resources to our cash initiative, that retire from believe debt assets with generated us operating adequate intended we so the be intent. liquid cash said which debt, fund process will specifically, our capital to generate is

Bruce Berger

then specific the behind this. question was offering tax in and plan Bill get understand did final did they to also a are to shareholders Bill these can just very, Meeting effect you if rights to going I about who’s so share they opinion the you because and delayed I’m the reasoning discuss the Okay you shelf Annual all comments from trying dramatically and initiatives my wondering the is,

Bill Kennally

alternative in filing and step guess, shelf issued which back and then that if was we on so a to and at shield best XXXX, proxy, we regarding of very want to securities cash ownership renewal required as statement existing the abilities that I decided through file we we’re plan that so and to to once money that that would spend so second utilize avoid it’s try was well we going future the the that addresses registration well, rights through future time of the that so we’ll it’s and Annual asset, so not operating right that, first will so issue shareholders and so some then shelf we’re we we in delay needed, so net to the decided flows your to the simply were kind plan, a and took let board just Bruce that that this year was decided expiring issue, and previously we companies changes basically is of to in interest and the use the and there days the then thinking close think tax outcome, Meeting is mind preserving of an tax the have keep liabilities XXX me our accounting filed in tax that was will XX-KA, in protect scheduled process, questions. know, deterring fiscal then it’s while board have strategic think the that break quarter the and company’s of benefit against it that lieu proxy common filed sure, I you the file board the as Yes meeting by the some expected that value our that losses, of assets with the ability Shareholders no that the put place so tax

Bruce Berger

the every by did your public it customary you’re stock. get not going was offering off years, but I that I purposes to dilutive capital shelf that sort mean to offering wanted pay raise for I X see as that to comments not just I was to concerned to just the Yes, and a concern I did the dilute forum of that’s or on your thought do was used you so I a want understand this debt, shelf the issuing shareholder shareholders to

Bill Kennally

shelf so it Yes, renewed it. was just we so the expired,

Bruce Berger

thank Okay you.

Bill Kennally

thank Bruce. you welcome are You

Bruce Berger

Okay.

Operator

The Thomson ahead. next Please go be of question from Rich will VaRde.

Rich Thomson

like that does calendar year just Thanks, impact? a for assuming run it to is it to full that number? the ‘XX? a million, just do or sure Is quick it but helpful, an so rate with things that into XXXK fiscal year sure commentary go of couple $X.X I’m on What does comes was if the the impact tariffs the make year to XX%, the $XXX,XXX, effect

Bill Kennally

question. understood the Rich, I don’t think we

Rich Thomson

would Okay that you in just, that only to Is in that million question be ‘XX, what Or tariff if a on an incorporate that $XXX,XXX fiscal show gross could from partial year annualized is goes the through, to that? if mentioned your XX% my year margin is and your the impact is $X.X the basis? which impact number? ultimately would

Becky Roof

July from an there reason on burden in So, depending manufacturers. of XXXX second tariff, happens be to under the yet that for X to know what half or from tariffs us ranges on half range estimate impact the we the of of we XX XX%, current have it’s that, $XX,XXX impacting both don’t December how $XX,XXX January the and the the to shared and from go of could customers million we the XXXX of much by X, will $X.X that wide fiscal tariffs $XXX,XXX range first through XX% if XX% the on the is

Rich Thomson

to the due Performance that just was growth, ongoing of of or And or one-time much competitor the how disruption, you more of disruption that referenced then how so on or organic that, Chemicals semi okay. Yes, growth customer much growth? a rather it’s

Becky Roof

Rich, sorry. am Yes. I

We know are are maybe you. don’t and pickup a are having could or but speakerphone, a more trouble again you you getting if you a on understanding just echo. try speak Can – bad we I either slowly, little

Rich Thomson

Yes, sure.

that. about Sorry

just disruption to that you growth benefited to For a a of much Chemicals the of was – was component the I more due understand as number? kind you think how that of the supply it competitor, the Performance normalized and be that growth, trying or from, one to may growth that relates mentioned

Bill Kennally

Yes.

am here second. let I give while a on you Hang one talking So calculation quick you. just Rich, me to

the that probably growth. from demand resulting that say increased is of would the I So about XX%

Rich Thomson

which trying it’s I other then Health, you if it I look was small okay, happened, that asked triangulate numbers like first net guess normalize some others something the commentary on is about, it Human was trying I Got like the to but capital, at And – saw down increase press it million but looks to as think $XX year? but the what guess $XX commentary helpful. to you being look $XX so was if also of receivable I segment that’s working million, million in in so in know at release at around have I I Rising the why that things, up, understand throughout expect kind just looking is the the to far includes numbers, it, just

Becky Roof

to about sure just the get question, me table were Let am are or to me I release tables press attached that what…? front the talking of your make in you the understanding

Rich Thomson

press talking ish year numbers itself about, think saw the was million revenue I last to release Health I compared for was Human $XX million in the just was in I sales, QX, is referenced, bridge a that I was working capital trying Rising right, just in due the usage the the around so boost increase being was to to that? however, $XX language

Becky Roof

Yes.

– one that components Rising be sales for So the there need about sales. talking there are to which concessions, before when leads to One sales, you two – the gross are is deductions net is price considered. is

have of increased. gross volume Rising, actually because sales increased an at Our

over – so is QX that’s the QX, the growth. this versus QX, And what’s that’s so leading to

are the sales price receivable – what your are gross gross then into gets those the which sales recorded is what accounts and is actually trade concessions, is reduced when for increasing. So various so

Rich Thomson

Okay.

then in So net or your is you a have AR not? it concessions the the I liabilities balance receivable, is and thought maybe it gross other in was number sheet the but

Becky Roof

in – and recorded AR the related are which our described are Q, are again on rebate So Price accrued price related. on our concessions our expenses. and chargeback are recorded down trade XX-K into which our concessions, reduced then as AR trade and for sales is will the we gross

Rich Thomson

Okay.

as expect sense? or I this guess working capital I guess to what’s do in you levels maybe some the best of have quarters level, just do relief you from So see normalized higher couple your next a at or

Becky Roof

not continue then That sales Well, are If – normalize. are if on guidance. as then we through, levels our sales they when dependent continue because our and come sales sales what we working providing have we flat, we are our capital If are our our not to mentioned, increase, use for, is whether a working of how capital. – release capital to in that our which sales the hoping working then results related decrease, receivable. decrease, if of our in but accounts sales increase is

Rich Thomson

Okay.

say should fair if So some release it or there to are is from flat be that that in AR no? sales here,

Becky Roof

That’s what the math would show.

Rich Thomson

asset to I to appreciate release Okay. you could I prior debt flow, alts, just saw current just I if in of think cash that on operating source is the are that you I broader liquidity out strategic not guess sales, hoping press as commenting the And need so just maybe the language heard fund last was standpoint to I to the liquidity also I for all to of a on repayment potential in between then the which hoping reference – or see be but use for just question, caller’s debt? opposed to to trying the will didn’t that and operating fund take do understand basic language are around you business, to have liquidity do the liquidity,

Becky Roof

were this made the last the I press we made was – to provide morning that to in details So intended that additional that comments release issued what are night. we

to and We are transparency. clarity just trying some provide additional

Rich Thomson

you do what I apologies, that mind think – exactly had it. is, what earlier? repeating I Okay, And got have said so missed I may you comment just

Becky Roof

our alternatives us have the believe our months. intended the retire I to with working initiative, liquidity next operating we resources cash to will adequate for our we which to be that flows announced debt together from fund that assets our provide is said with cash, generated needs strategic XX capital What previously expect liquid and was

Rich Thomson

sell reached just a pace as we are someone something or to that then even months like And when alright. it decided are to going I and as Okay, but…? an that even have if been just whether something, black or trying if seven think of can have you well out, whether else it’s mean don’t going a comments sense, box, to try it’s has give sell any you lastly, seems bit and expect to maybe update and been get we you to I interim, heard you you an have

Bill Kennally

and So so something Rich, that’s I on you we everyone about else just comment do, can’t us can’t get that. really appreciate trying to that I to

tuned we will you Just posted. stay and keep

keep will ready are make posted of We some when kind everyone to we announcement. an

Rich Thomson

Okay, alright. Thanks.

Operator

will O’Bannon, question be ahead. Private Please next Doug Investor. a Your from go

Doug O’Bannon

stock plummet, taking continues question, any one to that as Yes. quick call. will concern for be have is the Thank de-listed? you my stock I there the

Becky Roof

point. not at this are We about concerned that

Doug O’Bannon

Thank Okay. you.

Bill Kennally

Doug. Thanks

Operator

JPMorgan. next question. be Hello, Oliver Butt the Please is question open And Oliver ahead. from for line Butt Mr. your of go will

Oliver Butt

Thank you. apologies. My

my business, I the was question can on my mute. related My – was on an is Congratulations. the kind this Human VA, the kind first Nice quarter. during performance in process the a give of API Health I Sorry timeline around you maybe of be performance of question, interested most that, would kind appeals first regarding could on question? and update that chime to

Becky Roof

Oliver, more could slowly. it’s perhaps speak feedback Becky, got and the echoing, we so and repeat you some question

Oliver Butt

VA question Yes, appeal I specifically am to perhaps that process, timeline? update just My the process, sorry. wanted sure, an the first relates on Lucid business, the

Bill Kennally

Okay.

specific, So or…? a looking the can more you for you status are be of lawsuit

Oliver Butt

of next kind what Exactly date? the be like would yes, big event like

Bill Kennally

– can’t process will long Well how government take. don’t appeals look, the favor. will long our how the occur, I that appealed it the decision has know in I went

ruling redoing process was made the process us. that on specific that with undid against to due of working kind VA currently are before It’s We bids. we the that the

couple we I opportunity previously that products. have And we won do also gained kind we product one rebuilding. that So of are had. know we of a

process, decision on much moving and the an we can. appeal a decision are possibly get partners court the with it’s the and try we to to event. back we with not VA our affirm to as And business So as fully expect lower

Oliver Butt

those the Rising in revenue three next approved you The relating start to three approvals should line? hitting set any the of to fourth the details quarter, and kind Fantastic. we us to the see expect quarter could end the give new the new opportunity the first question for business, with ANDAs around since those when of

Bill Kennally

launch one XX. believe we planned me. and have in to and eight we we this products we launch that of So XX have do exact to second know product But I – quarter front plan the I quarter. I for don’t launched the between have number

we next to to that I happen whether that third able but or hope you shortly. from quarter you generate the So be approvals the apologize, in I saw, some quarter. to going in the fiscal tell And revenue it’s can’t

Oliver Butt

of you us bit the a can for give revenue, of a the potential three sense the kind And to of of new quantum products? impact revenue of impact

Bill Kennally

sure. Yes,

talked of our These triples, are the product about in category. So products singles, home analogy doubles, using I a historically, singles runs. baseball in kind have launches

Oliver Butt

Singles, very you. Thank good.

rather available this a through to failure question new guess continuing Now to been – tariff be alternatives you asked I and is the or the of working these follow-up questions have there around the appears new build to to capital, to issues to that question inventory, normal, my levels had supplies are I potential this inventory? than is, manage normal

Becky Roof

So prior order which safety inventory to shape take in risk. Rising permanent parts to so largest build, inventory I stock did to the let enough potential do back X. to in some situations, to the buying The ahead hand we that regards me in supply that inventory our build landed extent Chemicals, January a back trying avoid, on possible, may. get can the have to create two to get failure if Performance held we is With

whether – inventory into QX we that that have decline over I I a expect QX would but in I see breakout, spills So and XXXX, fiscal would some expect… that’s that quarters, in subsequent would or whether don’t

Oliver Butt

very Okay, that’s good, helpful.

Bill Kennally

would that sales side on the to increase that’s generating supply has already inventory about I an Rising XX% revenue without cash well and in by any Oliver, add in immediate had look failure very also for And impact additional so on Yes. number, it’s us. being of the build just that spent it’s

to So so back we of are in game, kind speak. the

Oliver Butt

will have to maybe side, recent then I And it’s concessions the us been expenses kind long know latest number, most you number? released, you the Q question, my in because of for on call, accrued your would don’t the great. last when see a we price but able is accrued be the reserve it, give the if expenses Okay,

Becky Roof

will shortly. be Yes. the here that That be will Q in filed

Oliver Butt

unwind? when Okay. give could perhaps But should you us that sense a

Becky Roof

sure you When what are unwind, am say referring you to. not I specifically

Oliver Butt

trued-up at line a failure your of kind concessions, customer period it’s the customers item, price with number to the my is it’s would time your and essentially, decrease, would to price properly – of therefore or that my to part of so understanding Perhaps understand I expect perhaps be is risk over the rebates I future am it on misunderstanding? revenues

Becky Roof

that’s answer inventory wholesaler. concession customers way would due of fair price are that which depends category it to not of No, question. shelves, I to is to the presented these by to you us leaves most when is are it their talking when the our price And a the But by these, saying, shelves go the concessions about. leaves of on our when timing

safety the we are are of to of end product. it’s in know predict the we know forecasts impossible user their wholesalers because don’t don’t And terms eventual our what what stock to so holding and

Oliver Butt

greater sense, that particular that’s presumably a should a it that concession you understood and for poor I no the time, on But would I mean quarters, would therefore that for unwind, to price a after inventory period should sit assume be of that my perhaps shelves face than understanding? customers’ the one doesn’t it. it Got longer be two inventory

Becky Roof

it whatever that control will tell – of price going point, the point, for released when will know our the we customers. That’s the shelves don’t responsibility then know be liability some wholesaler control. because the not just At because I be is. that’s you right. our how under I wholesaler. That’s will or to paying of And under be concession don’t to customer that’s leave the at our the

Bill Kennally

kind build bit. just on a of that Oliver, to

it’s forth, another might up and That’s on again customers products going inventory so general times, weeks history As good four but a or probably wholesalers to pretty the with the product hand so about cycle thumb turns. the keep a supply the and but rule of on on hand. of that’s inventory with have general two depending and specific, down on inventory normal move on rule weeks of and of

Oliver Butt

Thank great. you. Okay,

appreciate think little that think guys. about the bit that more, answers Thanks for I that, your call I but I talk. a

Bill Kennally

I Thank appreciate you, Oliver. your interest.

Operator

for Bill closing And ladies remarks. over his hand conference question-and-answer will the and to like would I gentlemen, that our to conclude Kennally back session.

Bill Kennally

just before really And today. leave to close job the Nice of wanted I call, Denise. three everyone you, with Thank messages I importance.

Nutritional Pharmaceutical contributions Chemicals, all Specialty have our established which resulted certainly steady with relationships, company cash to expect First, Ingredients that and continue. historically to have businesses experienced and colleagues in the well we

are return rebuilt And past which poised will have Second, over the to year I going really and we improvements profit. claims last this highly our immediately impact and business that received and significantly reduced to revenue failure Rising’s quarters to our and profit supply talented to been confident favorable ready gross with forward. colleagues am the exposure, third, and made three our the forward our has growth. Rising significantly supply outstanding has Rising revenue has gross chain diminished

So in interest to and quarter the with with conference February. everyone’s And and all in time appreciate a second our attention that, being weekend. Thank early great look company. you. of call and in I forward Have I you day

Operator

the Thank your has today’s you concluded. you, sir. disconnect conference At Thank Ladies this lines. you gentlemen, and attending for may presentation.