Q2 2021 Assertio Holdings Inc Earnings Call

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Hello, and welcome to the certainty of holdings second quarter 2021 financial result conference call. My name is the narrow and I'll be the operator for today's call. At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then 1 on your Touchtone phone I will now turn the call over to Mr of Max Nemmers, Max you may begin.

Good afternoon, and thank you all for joining us today to discuss the survey of the second quarter 2021 financial results. The news release covering our earnings for this period is now available on the Investor page of our website at Investor Day, <unk>, TX Dot com.

I would encourage you to review the release and the accompanying presentation as it is important to today's discussion.

With me today are Dan <unk>, President and Chief Executive Officer, and Paul Schwichtenberg, Senior Vice President and Chief Financial Officer, Dan will open the remarks and provide an overview of the business followed by Paul who will review our financial results. After that we will open the call for your questions.

During this call management will make projections and other forward looking statements regarding our future performance such forward looking statements are not guarantees of future performance and a bulk of risks and uncertainties, including those noted in this afternoon's press release as well as the sort of those filings with the SEC. These and other risks are more fully describe.

And the risk factors section and other sections of our annual report on form 10-K for actual results may differ materially from those projected in the forward looking statements and the <unk>, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law with that I will now turn the call over to Dan Dan. Thanks Max.

And welcome to everyone joining us this afternoon to.

To begin I'd like to welcome Jeff Christiansen, our senior Vice President of commercial who joined US in May and in the short time has already made substantial contributions to the business.

I look forward to working with Jeff to further build out of non personal promotional platform and.

In addition, I'd like to welcome backfill Ensco's Bill rejoined the <unk> team senior Vice President of operations. This week.

Had the pleasure of working with bill in the past of not somewhat better demonstrates our culture of teamwork inclusion on the results.

To get to the punch line, our business is performing better than expected and we're making substantial progress towards our corporate priorities.

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

And as reflected on our increased revenue guidance for the full year.

Our team is fully committed to delivering on our promised restructuring savings and through a combination of solid execution and creative thinking we've been able to accelerate some of our cost savings. All of this has led to our strong operating results for the business this quarter.

A key focus of our management team's efforts this quarter has been to mitigate our legacy legal uncertainties.

Youll see in our release and filings that we've taken a charge of $11.3 million and our second quarter results.

This charge reflects an estimate to resolve 2 separate legal matters.

Unfortunately, there is not much more we can say about the nature of the charge. We would have liked to have been in the position to provide more details here today, but these matters of not come to a complete close at this point and this charge reflects our best estimate at the current time.

However to avoid any potential confusion some of the news in the press recently these matters are unrelated to the settlements recently announced and the nationwide opioid litigation.

I do believe it is a strong testament to the strength of the business debt through a combination of prudent expense management and commercial execution, we're able to still hold firm on the majority of our guidance range for adjusted EBITDA, Despite taking of $11.3 million charge. This quarter that had not been anticipated in any of our prior projections.

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So now that we have built our team accelerated the pace of our synergies begun generating operating cash flow.

Due to the constraints placed on the business from the debt.

And made substantial progress in at least defining the legal uncertainties.

Directing our focus towards the business model.

That's not only building our platform. It also includes business development, we've been far more aggressive in the past few months and generating M&A targets.

As you've likely seen from some of our peers recently there are transactions available on.

The big believer and actions speak louder than words, so I won't say much more we just look forward to delivering on what we've said and hopefully sooner than later and now I'll turn the call over to Paul who will walk through the quarterly results.

Thank you Dan This afternoon I will review the financial highlights from our second quarter of 2021.

As was the case on the last few quarters any references to pro forma results represent product sales as of the xylem merger had been completed on January 1.2020.

Net product sales were $24.8 million for the 3 months ended June 32021, compared to pro forma net product sales of $28.2 million from the <unk>.

Prior year quarter, and $26.4 million last quarter.

The decline in sales versus the prior year quarter on a pro forma basis is driven by lower volume on the discontinued and non promoted brands as well as spreads <unk> volume continues to be impacted by the prior year commercial coverage changed.

The current quarter net sales reflect lower patient assistance costs, which is driving the increase versus the prior quarter.

And it's the net sales in the second quarter reflect the channel inventory adjustment related to a change in distribution strategy that will drive.

The increased profitability in the future.

The impact of this change was $1.5 million.

Combined cambium that sort of net sales were flat to the prior quarter.

Overall portfolio of net sales were down 6% versus the first quarter, primarily due to the $1.5 million impact of the distribution model change on in December.

And since the exchange portfolio of net sales would have been flat to the first quarter results.

Please refer to our 10-Q for a specific product level of net sales information.

Adjusted EBITDA for the second quarter was a loss of 505000 compared the income of $15.7 million in the first quarter.

Excluding the impact of the 2021 onetime legal matters adjusted EBITDA was $10.8 million in the second quarter versus $10.7 million in the first quarter of 2021.

Our adjusted.

Adjusted operating expenses, which reflect selling general and administrative expenses in the second quarter were $22.8 million versus $7.3 million in the first quarter.

This amount includes the legal reserve of $11.3 million.

As we've mentioned on prior earnings calls the primary focus for the company is to proactively work to mitigate legal uncertainties and the adjust.

The adjustment aligns with the priority.

Excluding the 2021 onetime legal matters adjusted operating expenses for the quarter were $11.5 million, which are down 800000, or 6% versus the first quarter adjusted operating expenses of $12.3 million.

In 2021, we expected to achieve $40 million of cost savings.

And ultimately $45 million in annual savings beginning in 2022.3.

Through the first half of 2021, we are ahead of our expected cost savings.

And this has allowed us to maintain the low end of our EBITDA guidance. Despite the legal reserve recorded in the second quarter.

Net loss for the second quarter was $14.2 million compared to the first quarter net income of $4.5 million.

As stated previously the current quarters impacted by the legal reserve of $11.3 million.

On the charge of $2.2 million for the change in fair value of contingent consideration.

On March 31, 2021, our senior secured debt balance was $75.5 million, which will not matured.

Q1 of 2024.

On May 3 of the company paid the scheduled interest and principal of $10 million.

Ending cash on June 32021 was $54.4 million the change in cash of $6.6 million from the March 31, 2021 balance of $61 million is primarily attributable to the principal and interest payment of $10 million.

Partially offset by $3.4 million of positive cash flow generated by the business.

As we stated last quarter with the additional cash on the balance sheet, we are looking to accelerate potential.

Potential investments in 2021.

Lastly, our updated annual guidance for 2021 is as follows.

Product net sales of $91 million to $96 million, reflecting a favorable response to our refined commercial platform and the actual results for the first half of 2021.

Adjusted EBITDA of $34 million to $37 million, reflecting higher revenue and cost savings.

Versus previous expectations and the legal reserve taken in the second quarter.

Overall were once again pleased with the quarter results, we continue to see the positive impact.

Of our product portfolio revenue and lower expenses on EBITDA and cash flow.

Looking ahead, we will continue to focus on our organizational priorities that will help position the scenario for long term sustainable growth.

And now I will turn the call back over to Max.

Thank you Paul operator can we open up the lines for questions. Please.

After a thank you we will now begin the question answer session. If you have a question. Please press Star then 1 on your Touchtone phone you are using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question. Please press Star then 1 on your Touchtone phone.

Leading on standby for any questions.

And we have all of it.

Looks like the color has dropped I am not showing any questions at this time.

Okay.

As I said last quarter of results could not have been possible without the great work of our team once again I. Thank you all on the market, we remain committed for creating value for our stakeholders.

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I'll look forward to updating you on our progress towards our priority for future quarters. Thank.

Thank you for joining this afternoon and have a good evening.

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

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