Q2 2023 Procaps Group SA Earnings Call

[music].

Good day and welcome to the pro cut script business update call and webcast.

Today's conference is being recorded.

Please note that some statements made during this call may contain forward looking statements within the meaning of the private Securities Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.

Any statement that refers to expectations projections and or future events, including financial projections or future market conditions is a forward looking statement.

The company's actual future results could differ materially from those expressed in such forward looking statements due to a variety of risks uncertainties and other factors, including but not limited to those set forth in pro cap script, our SEC filings.

Okay assumes no obligation to update any such forward looking statements.

Please also note that past performance or market information is not a guarantee of future results.

At this time I would like to turn the conference over to Melissa Engineering Investor Relations Director. Please.

Please go ahead.

Thank you Hello, everyone. Thank you for standing by and welcome to the <unk> business update call. We appreciate everyone joining us today.

This conference call is also being webcast and a link to the webcast is available on the protest I our website.

Questions received through the webcast platform will be answered by email.

Please note that we filed dollar earnings release today, which can also be found on the IR website. Please review the disclaimers included in the Investor presentation. During this call non-GAAP financial measures will be discussed and presented we believe non-GAAP disclosures enable investors to better understand Coca.

Our operating performance.

These resorts are things that's our presentation for a reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measures.

Now I would like to turn the call over to protest CEO . Please go ahead.

Thank you Melissa.

Thank you all for joining us today for our second quarter and six months 2023 years Old School improved school.

I wanted to give you an update on how we're doing and where we're headed.

While we faced a tough first half of the year and it is true that we did not do as well as we hoped the measures that we have started implementing later this year are already bearing the results of our full recovery.

We're continuing to work on our value creation and market growth initiatives on our speeding up our plans to make the company better in the medium and long term.

The toughest issue, we have had to deal with easier or the macroeconomic environment and challenge the challenge the entire industry in our region.

We are affected by multiple factors. So it does rising costs and expenses for me inflation.

Interest rates and of course, we're financing reduced orders from pharma companies in our <unk> business.

Due to working capital concerns.

We believe these impacts are temporary and we are taking decisive steps to tackle them adapting our strategies to protect profitability, despite being able to pull through and fully pass all goes to customers on a timely monitor relief should come later in the year.

The steps that we're taking are related to our already announced value creation initiatives.

Additional operational efficiency airports, which will really strengthen and streamline our operations by the end of this year absolutely poorly in 2024.

In our path to full recovery.

We believe third quarters, we'll have a better performance in the second quarter of 2023 very much in line with last year's third quarter, and we strongly believe that the fourth quarter of 2033 would be a very strong quarter.

When we look at the growth there business lines, we have Rx growing approximately 15% in the first half of the year outgrowing the market by quite a good percentage, especially in countries like Colombia, Ecuador, Honduras, Dominican Republic and Panama.

Clinical specialties grew approximately 6% in the same periods when a constant currently basis.

I'm Cassandra region, we have found exiting growth of approximately 26% in the first quarter of 2023 with a new important languages for the second half of the year.

We believe our growth plan, including these new product launches and Rollouts combined with a value creator and initiatives will result in a strong demand of our aggressive plan to reduce expenses and generate the efficiencies will position us for continued growth.

We are focused in the medium to long term committed to refining.

Plans for grade a resilient organization beyond short term hurdles.

Moving on to slide four.

Another important driver for future growth is new products.

Our new product launches have been a key driver for our growth $66 million in revenues for new products in the first half of 2023.

Renewal rate that is a percentage of our revenues going from products launched in the last 36 months was a record of 34% in the first half.

We will continue to prioritize investments in our pipeline and business to realize the value of the near and long term opportunities in front of us.

Ramp up of four programs launched in the last 36 months is performing quite well highlighted several products are just out of the world, which doesn't oncological prostate cancer program on Vodafone extra which is the first ever jewelry, Joe Triple combo for migraine and.

This is just one example, where you can see our own patented technology is playing an important role in on delivery a depreciated drove out to the marketplace.

Now I will pass it over to Melissa who will share a little about our ESG progress.

Thank you prevent and this is why we are going to share a little bit about our ESG initiatives and our competitions.

2023, we celebrated 10 year anniversary of pro cut Foundation.

Quality of life improvement of several communities through education nutritional emotional health is skewed development, we've conducted house any power.

We are also increasing our product portfolio for prioritize conditions. According to the sustainable development goals by United Nations and access to my T Foundation for Latam, such as cardiovascular and oncology.

Another important aspect is that we are also advancing on our packaging innovation initiatives Union gel for example, Ben just mentioned besides plastic demand reduction deploy different environment benefits across the whole supply chain reduces the demand for other packaging materials as well as contribute to deliver treatments.

We last AGM mutual emission fuel and energy consumption.

Lastly, we are working on our capital carbon neutrality strategy and we'll keep you posted on the progress I will now pass it over to Patricia who will comment on our operating results.

Thank you Melissa.

Moving to slide six you can see our top line evolution.

Although the Colombian peso.

Total depreciation since April .

Currency has still been a negative for us in the second quarter compared to last year and because of that but it's important to look at constant currency to evaluate the health of the business.

So excluding this impact on a constant currency basis, we ended with an increase of four 2% in women's for second quarter to increase.

7%.

Which was negatively impacted by CMO or replacing especially for your clients.

St. Louis called cease operation and I think diesel sales in the OTC market.

In addition to this I think it's worth mentioning that in 2000.

Second quarter company.

There was a recognition of social bonds in the amount of approximately $2 $5 million, leading to a higher comparison.

Loan growth was broad based across several therapeutic areas with increased demand for both our Rx on clinical specialties products, which grew 16 and 16% respectively in first half versus first half.

Yes.

As Jeff mentioned, the materials business segments have been negatively impacted by challenging but also fix the partners, resulting in lower inventory levels from their side delaying orders on our site.

We anticipate a few more months of pressure before improving towards the end of the year, where we already have important commitments for new orders.

Colombia was impacted by overall macro conditions in the country that have translated into customers, reducing their purchase orders to improve their working capital exchange rates are now starting to help in the first part of the third quarter bolstering our recovery of the west.

Yes.

And was positively impacted by the rollout of new products and portfolio expansion in several therapeutic areas such as best and just to note on feminine care and strong performance in Nicaragua Luna, but this positive impact was offset by the OTC segment in the suburbs.

Negatively impacting the year over year comparison, we can see the second quarter of 2022 at a higher comparison base as we sold last year.

I thought it was positively impacted by the higher demand and the rollout of new products in the region and increased market share with existing brands.

Finally, our diabetes business segment is in a transition year, we are working on several synergies and focusing our portfolio renewal on internationalization.

Moving to slide seven I would like to give a bit more color on gross book, which was down from last year.

In the quarter and in the first half 'twenty three we saw higher costs.

Less favorable sales mix and lower sales of high margin part of development.

In addition, we had the record mutual exclusive brands in the second quarter of 2000 from two which positively impacted gross profit for the prior period.

Additionally, we were unable to fully pass on higher cost to customer, but we are quickly adopting strategies to protect profitability.

Consolidated contribution margin was impacted by the same reasons above partly offset by lower sales and marketing.

On slide eight we have the breakdown of our operating expenses and adjusted EBITDA.

Looking only at SG&A expenses, there was a decrease of 15, 4% in the quarter and 10, 4% in the first up from three versus the same periods of last year, reflecting already the measures we have taken to improve our furniture looses.

Operator: Good day, and welcome to the Procaps Group Business Update call and webcast. Safe conference is being recorded. Please note that some statements made during this call may contain forward looking statements within the meaning of the private security securities litigation reform act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections, or future events including financial projections or future market conditions is a forward looking statement. The company's actual future results could differ materially from those expressed in such forward looking statements due to a variety of risks and uncertainties and other factors including but not limited to those set forth in Procaps Group's SEC filing. Procaps assumes no obligation to update any such forward looking statements. Please also note that past performance or market information is not a guarantee of future results.

We continue working on the execution of our value creation.

With price increases contract adjustment improvement of our product mix with new launches on containing costs.

Our adjusted EBITDA will be negatively impacted by the effects. We have seen in gross margin on a high comparison base in the second quarter.

Despite these hurdles we're optimistic about our ability to deliver growth in the medium to long term for the time being we're not blind to the challenges. We will continue to work in a disciplined and creative ways to improve our results quarter over quarter.

Turning to slide nine we can take a look at the main items of our balance sheet.

Cash balance for the first half of the year has decreased mainly due to the low results. We had in the fourth quarter 2020, which traditionally is the strongest quarter in the year and the one that provides the cash to induce the lowest month of the year.

In addition, working capital increase in debt service impacted on the overall cash generation.

Our leverage had only a slight increase but the lower adjusted EBITDA combined with a decrease in cash impacted our net leverage target.

Melissa Angelini: At this time I would like to turn the conference over to Melissa Angelini, Investor Relations Director of Procaps. Please go ahead. Thank you. Hello everyone. Thank you for standing by and welcome to the Procaps Business Update call. We appreciate everyone joining us today. This conference call is also being webcast and a link to the webcast is available on the Procaps IR website. The questions received through the webcast platform will be answered by email.

Despite these we are in compliance with our debt agreements, we secured the necessary waivers to continuously separate quarters.

We forecast our cash flow for the next few months, we will continue to work on several initiatives.

Our business strategy and operations as well as our capital allocation priorities in order to increase the cash generation and maximize our long term button.

When we look at the guidance for the year, we see some risks that we are working to mitigate the political macro environment in Colombia could affect our business if the economic conditions deteriorate or if there are changes in the FERC.

Melissa Angelini: Please note that we filed our earnings release today which can also be found on the IR website. Please review the disclaimers included in the investor presentation. During this call, non-gap financial measures will be discussed and presented. We believe non-gap disclosures enable investors to better understand Procaps core operating performance. Please refer to the investor presentation for a reconciliation of each of these non-gap measures to the most directly comparable gap financial measures.

The continued cash pressures for some of our CMO clients with Brookfield them into further the tightening of the working capital therefore, reducing their purchase orders for the second half.

How these risks on our plants evolve during the year will be key to fulfilling our estimate of a year ago. We will keep you abreast of our estimate for the year.

With that I will pass it back to <unk>.

Ruben Minski: Now I would like to turn the call over to Procaps CEO. Please go ahead. Thank you, Melissa.

Thank you all for participating.

If you one please.

Please remember only four things from this call I will ask you to keep in mind that number one we are conscious very conscious of the temporary horizontals and we're working on them all of them or most importantly, the fundamentals on the demand for the traditional products are as strong as ever.

Ruben Minski: I thank you all for joining us today for our second quarter and six months 2023 results conference call. I wanted to give you an update on how we're doing and where we're headed. When we face the top first half of the year and it is true that we did not do as well as we hoped the measures that we have started implementing late last year are already bearing the results of our full recovery.

We are executing at full speed, our previously announced company wide value creation initiatives.

Send it to the right size of our business to current levels of market demand.

And deliver value for shareholders.

Ruben Minski: We're continuing to work on our value creation and market growth initiatives and speeding up our plans to make the company better in the medium and long term. The topest issue we have had to deal with this year are the macro economic environmental and challenge that challenges the entire industry in a region. We are affected by multiple factors such as rising cost and expenses from inflation, high interest rates and costs of financing, reduce orders from farmer companies in our city owned business due to working capital concerns.

In 2023 in a much stronger operational and financial position.

We are advancing in our CEO search process and I believe we will be able to be ready by year end as we anticipated. Finally, we're always mindful of our low historic liquidity and continue with our buyback program on roller measures to enhance liquidity as well as shareholders.

<unk>.

Thanks for listening.

Welcome any questions that you may have.

Ruben Minski: We believe these impacts are temporary and we are taking decisive steps to tackle them adapting strategies to protect profitability despite being able to fulfill and fully pass all costs to customers on a timely manner. Relief should come later in the year. The steps that we are taking are related to our already announced value creation initiatives and additional operational efficiency efforts which will be strengthening and streamline our operations by the end of this year and absolutely fully in 2024.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If you are using speakerphone, please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question today comes from Kent Oliver.

<unk> capital markets. Please go ahead.

Alright, Thank you and good morning.

Ruben Minski: In our past full recovery, we believe third quarters will have a better performance in the second quarter of 2023, very much in line with last year's third quarter and we strongly believe that the fourth quarter of 2023 will be a very strong quarter. When we look at the growth per business lines, we have Rx growing approximately 15% in the first half of the year out growing the market by a quite a good percentage, especially in countries like Colombia, Ecuador, Honduras, Dominican Republic and Panama.

Can I have a couple of questions.

Yes.

Which I guess I can.

Ask one or two and then go back into queue, but yeah. The first question relates to the working capital accounts.

Most notably accounts receivable, but certainly inventories.

Have you made any progress with either loans.

Since the end of June .

Or is that still.

To come.

Okay.

Ruben Minski: Clinical specialties grow approximately 6% in the same period on a constant currently basis. In Cazan region, we have found excellent growth of approximately 26% in the first quarter of 2023 with a new important launches for the second half of the year. We believe our growth plan, including these new product launches and rollouts, combined with our value creation initiatives will result in strong demand of our aggressive plan to reduce expenses and generate efficiencies with position as per continued growth.

Hi, Ken.

Thank you for your question.

We.

We are we.

We have made advancements, but there have been delays as we mentioned in the press release and knowing the suites.

Yeah.

The pressure that some of our customers have had to reduce their working capital both abroad in the U S. I'll also due to the economic conditions in Colombia have made it harder to.

<unk>.

Full amount that we had anticipated.

Put pressure on our efforts to improve working capital.

Ruben Minski: We are focused in the medium to long-term, committed to refining plans for a resilient organization beyond short-term hurdles.

But we but we are on track I think I mentioned that we have.

We have.

Several initiatives for cash improvement.

Ruben Minski: Moving on to slide four, another important driver for our future growth is New Products. Our new product launches have been a key driver for our growth, $66 million in revenues for new products in the first half of 2023. Our renewal rate, that is a percentage of revenues coming from products launched in the last 36 months, was a record of 34% in the first half.

And one of those or many of those a sensor on it.

Accounts receivables and inventories and we and we intend to improve it.

I'm not sure if that's what you were trying to say.

Alright, Thank you that did get to the heart of the question.

So my second question relates to all the Andhra I see he resigned again.

Ruben Minski: We will continue to prioritize investments in our pipeline and business to realize the value of the near and long-term opportunities in front of us. Ramp-up for products launched in the last 36 months is performing quite well. Highlighted several products such as Alruwell, which is an oncological processing cancer product, and Dolophane extra, which is the first ever unigile triple combo for migrating. And this is just one example where we can see our own patented technologies playing an important role in delivering a differentiated product to the market.

Yes.

Unfortunately, yes.

Just kind of bored turnover it doesn't.

Cash things in a good light can you talk about what you are.

The direction you are trying to take and how to have some stability with the board.

Yes.

That's an excellent question.

This is ruben.

We were starting to see Alejandro resign again.

We were.

We feel that the.

Melissa Angelini: Now I will pass it over to Melissa, who will share a little about our ESG progress. Thank you, Ruben. On this slide, we are going to share a little bit about our ESG initiatives and accomplishments.

He was very inflation of course using.

Using agree 100% with all with the speed at which the board wanted to implement a few.

The ideas and the.

And we were very.

Much.

Melissa Angelini: In 2023, we celebrate a 10-year anniversary of Procaps Foundation that promotes quality of large improvement of several communities, through education, nutritional, emotional health, and still development, reproductive health and empowerment. We are also increasing our product portfolio for prioritized conditions, according to the sustainable development goals by United Nations and Access to Mancipal Nation for Latin, such as cardiovascular and oncology. Another important aspect is that we are also advancing on our packaging innovation initiatives.

In line with many of these comments by ignoring all of them and he got very efficient, but nevertheless.

He has decided to leave <unk> lift of course.

That is in the board.

A few stories.

We will have for him.

And everyday discussions with this.

We feel very confident in the board.

The.

The agility and the way we are facing the future of the company.

Melissa Angelini: Unigile, for example, that Ruben just mentioned, besides plastic demand reduction, deploys different environment benefits across the whole supply chain, reduces the demand for other packaging materials, as well as contributes to the delivered treatments with less GAG emissions, fuel, and energy consumption.

You too.

It is in very good terms.

So in very good shape, and we are getting great results along the way.

Alright, thank you.

Is there a time for me to ask another question before getting back in the queue.

Yes, Ken go ahead, yeah, great. So what progress have you made since Q1 with regard to the.

Melissa Angelini: Lastly, we are working on our capital carbon neutrality strategy, and we will keep you posted on the progress.

Patricio Munoz: I will now pass it over to Patricia, who will comment on our operating results. Thank you, Melissa. Moving to slide clicks, you can see our top line evolution. Although the Colombian peso has had an important appreciation since April, currency has still been a negative for us in the second quarter compared to last year, and because of that, it is important to look at constant currency to evaluate the health of business. So, excluding this impact on a constant currency basis, we ended with an increase of 4.2% in revenues for second quarter, 23, and 7% for first half, 23, which was negatively impacted by CDMO or other facing, especially for U.S, clients, degrees of sales related to the wind cost of the operation, and a degrees of sales in the OTC market in Establo.

U S operation in.

Florida.

Okay.

Thank you Ken.

We have made I think very significant.

We have advanced significantly.

Our operation in Miramar, the one that he is the new facility for accretion for the gun has already started packing operations with third party.

And we're finalizing the setting up of all the machinery and studying we should be starting in a couple of more months at most we should be starting like the testing the ramp up.

Yeah.

And hopefully we can start producing on.

Probably early next year, we think there's a possibility we can start by the end of this year, but we don't want to be overly optimistic.

Patricio Munoz: In addition to this, I think it's worth mentioning that in the second quarter, 22, there was a recognition of sales of grants in the amount of approximately $3.5 million, leading to a higher comparison base. Our headline growth was broad-based, across several therapeutic areas, with increased demand for both our RX and clinical specialty products, which grew 15 and 16%, respectively, in first half, 23 versus 22. So, just mentioned, the net yield business segment has been negatively impacted by challenges that also affect their partners, resulting in lower inventory levels on their side, delaying orders on our side.

But I think we're running on course for that.

The other one for <unk>, if you remember one of the main.

Benefits that I was providing was to help us with.

With RMB.

To start preparing sorry, R&D for the whole organization and that has been happening and it's been helping us streamline that process and in addition, we are registering products and we're advancing to start.

Sales during.

Patricio Munoz: We anticipate a few more months of pressure before improving towards the end of the year, where we already have important commitments for new orders. Cascolombia was impacted by overall macro-conditions in the country that have translated in customers with using their purchase orders to improve their working capital. Exchange rates are now starting to help in the first part of the third quarter, both during our recovery for the rest of the year. And was positively impacted by the rollout of new products and portfolio expansion in several therapeutic areas, such as gastrointestinal and fell in care, and stroke performance in the caravan will do that.

During the year totaled four we already have some sales, but probably meaningfully given us see an impact as we have what we told from the beginning in the year 2004.

I think 24 is the union, which youre going to see the two operations starting to bring the benefits that we anticipated.

Alright, very good thank you I'll get back in the queue.

As a reminder, if you have a question. Please press star one to be joined into the question queue.

Patricio Munoz: But this positive impact was observed by the OTC segment in the third quarter. Negatively impacted in the year-over-year comparison, we can see that the second quarter 2022 has a higher comparison rate as we saw Brian's last year. Brian was positively impacted by the higher demand and the rollout of new products in the region and the increased market share of existing brands.

The next question comes from Dmitry <unk>, a private investor. Please go ahead.

Hi, guys congratulations on the completion of the quarter.

Just wanted to maybe.

Maybe it'll be more so.

Backup or better understanding at the optimism you have improved.

Patricio Munoz: Finally, at Diabetic Business segment, each in a transition year, we are working on several synergies and focusing on portfolio renewal and internationalization.

Improvements in Q4, you highlight it's going to be a strong quarter.

Maybe just give us indications.

That's based on actual orders or contra.

Patricio Munoz: With this light seven, I would like to give a bit more color on our growth profit, which was down from last year. Both in the quarter and in the first of 23, we saw higher costs and less favorable sales mix and lower sales of high margin growth development services. In addition, we had the recognition of sales of brands in the second quarter 2022, which positively impacted growth profits for the prior period.

Contracts, maybe just kind of if you could help us understand.

The optimism that you guys expressed about the last quarter of the year.

Great. Thank you Dmitry.

We have.

As we mentioned.

The CVR more business had some delay.

Delays in orders because of their working capital.

Patricio Munoz: Additionally, we weren't able to fully pass on higher cost to customers, but were quickly adapting strategies to protect profitability. Also, we added contribution margin is impacted by the same reasons above, partly of state by lower sales and margin expected.

Policies of some of our large pharma customers.

And but these are already in place.

We have a very strong portfolio of orders for the last quarter of the year. We also feel that we will be having all the detail.

Patricio Munoz: On slide eight, we have the breakdown of our operating expenses and adjust delivery costs. Looking only at SDNA expenses, there was a decrease of 15.4% in the quarter and 10.4% in the first up 23 versus the fifth period of last year, reflecting already the measures we have taken to improve our financial resources. We continue working on the execution of our valuation initiatives with price increases, counter-adjustment, improvement of our product mix with new launches and continuing costs.

The reevaluation of the Colombian peso at that time.

On the debt.

Definitely we will be there will be launches in September and October of this year, there will be significant.

Yes.

The four.

Reassuring the second half of the year SP exited.

In the last quarter. This estimation, we mentioned the third quarter will be good but not.

Patricio Munoz: Our adjusted EBITDA has been negatively impacted by the effects we have streaming growth margin and higher comparison rates in the second quarter 2022. Despite these hurdles, we are optimistic about our ability to deliver growth in the medium to long term. For the time being, as we're not blind to the challenges, we will continue to work in a disciplined and creative way to improve our results quarter to quarter.

Significantly higher than last years fourth quarter is definitely going to make a very very big differences with what we had last year.

Okay.

Also.

In terms of the two Florida.

Can you give us a sense of sort of what should we expect in terms of revenue, we're going to be done once theyre fully around town.

Patricio Munoz: Turning to slide nine, we can take a look at the main items of our balance sheet. Our cash balance for the first half of the year has decreased mainly due to the low results we had in the fourth quarter 2022, which traditionally is the strongest quarter in the year and the one that provides the cash to endure the lowest amounts of the year. In addition, working capital increase and debt service impacted on the overall cash generation. Our leverage had only a slight increase, but the lower adjusted EBITDA combined with a decrease in cash impacted our net leverage targets.

It's something that you can kind of give us a sense.

And how much that will add incrementally to your business.

Hi, Dmitry.

But this appear.

Currently we have not disclosed.

That information so we cannot tell you at this point.

I think once it's producing at both facilities are producing or selling that they're going to be part of the of the disclosure of both.

All of the businesses of the business segments and.

Patricio Munoz: Despite these, we're in compliance with our debt agreements, as we secured the necessary waivers to continue through this tougher quarter. We forecast our cash flow for the next few months. We'll continue to work on several initiatives with doing our business strategy and operations, as well as our capital allocation priorities in order to increase the cash generation and maximize our long-term body.

And therefore, we'll be able to talk more and set that aside but right now we cannot we have not given that information. So I cannot give you that.

That estimate.

And if I can ask a last question just any update on M&A sort of how are you guys thinking about potentially some accretive deals to do.

Kind of help you grow inorganically, what's the landscape what are you seeing are you active.

Patricio Munoz: When we look at the guidance for the year, we see some risks that we're working to mitigate.

What can you tell us.

That's also a very good question Dmitry.

Patricio Munoz: The political macroenvironment in Colombia could affect our business if the economic conditions deteriorate or if there are changes in the health care regulation. The continued crash cash pressures for some of our CDMO clients could pressure them into further the tightening of the working capital, therefore reducing their purchase orders for the second half. How these risks and our plans evolve during the year will be key to fulfilling our estimate.

I would say that the.

Yeah.

The intent.

Our strategy has not changed from the moment, we became public. So we do want to grow Inorganically. It is it is a part of our strategy and we intend to do it I would say given given the setback that we had in the last part of last year and that we have.

Patricio Munoz: At the year of all, we will keep your rest of our estimates for the year, here.

Recovering and we have a tight cash.

I think the focus for this year is definitely executing the efficiency plans the value creation initiatives getting back getting back to our cash position.

Ruben Minski: With that, I will pass it back to Ruben.

Ruben Minski: Thank you all for participating. If you want to please remember only four things from this call, I will ask you to keep in mind that number one we are conscious, very conscious of the temporary hurdles and we are working on them, all of them, for most importantly the fundamentals and the demand for the traditional products are as strong as ever. We are executing at full speed our previously announced company wide-value creation initiatives extended to the right size of our business to current levels of market demand and deliver value to our shareholders and in 2023 in a much stronger operational and financial position.

Improving our EBITDA, so that we can regain our debt our leverage capacity.

So we're.

We're still looking at the market, but right now at this very very moment, we could not be able to do it only marginal.

So I think it's more reasonable to wait until the EBIT 24, when we are back.

In full steam.

And my last question can you add a comment about increasing liquidity of the shares are you thinking about that I was kind of your last comment my presentation, maybe if you can expand on that a little bit.

Yes.

Ruben Minski: We are advancing in our CEO search process and I believe we will be able to be ready at your end as we anticipate it. And finally we are always mindful of our low stock liquidity and continue with our buyback program and other measures to enhance liquidity as well as shareholder volume.

We we have been executing since I think it was end of June I might be missing by a couple of things, but I think by the end of June the program of the buyback.

It's been a slow moving program given that we have low liquidity, but I think it's been helpful. In the sense that without that program priority the liquidity would be even worse or even lower.

Ruben Minski: Thanks for listening and we welcome any questions that you may have.

We think we need to continue doing it. Despite the fact that it's not so good on that despite the fact that it takes some of our cash we think we need to still be doing there in order to help our liquidity, albeit small.

Operator: We will now begin the question and answer session. To ask a question you may press star than one on your touchstone phone. If you are using a speaker's phone please pick up your handset before pressing the keys.

The other measures that we want to take it but we have been discussing with other yeah.

Operator: If at any time your question has been addressed and you would like to withdraw your question please press star than two. At this time we will pause from entirely to assemble our roster.

Let's say.

Let's say more boutique or smaller investment bank, so that they can help us bolster.

Our presence in the market try to get more coverage.

I tried to attend more confidence and more importantly, trying to get the story to a broader base of investors.

Kent Oliver: The first question today comes from Kent Oliver with Bookline Capital Market.

Patricio Munoz: Please go ahead. Great. Thank you and good morning. I have a couple of questions which I can ask one or two and then go back in the queue. But the first question relates to the working capital accounts most notably accounts are receivable but certainly inventories. Have you made any progress with either of those since the end of June or is that still to come?

We have an investor base that was very positive.

It hasnt changed that much since we did the IPO despite the disposal.

So therefore, I think we do need to take the story I'm convinced more shareholders and that sort of more potential investors and Doug will instead.

Alright.

In its turn who will be able to enhance the trading and the liquidity of the company. So so we are optimistic that we'll get there. It's just it's taking us longer than we anticipated.

Probably the last thing as we would cover our results and we fulfill our promise to the market I think that will also help in a virtuous circle.

To try to also to get more liquidity and more emphasis.

Patricio Munoz: Thank you for your questions. We have made advancements but there have been delays as we mentioned in the press release and now in the speech. The pressure that some of our customers have had to reduce their working capital both abroad in the US and also due to the economic conditions in Colombia have made it harder to fill the full amount that we had anticipated. So that has put pressure on our efforts to improve our working capital.

Thank you.

The next question comes from Ken <unk> with Brookline capital markets. Please go ahead.

Thank you.

We recently signed a new debt agreement.

Could you highlight the significant changes.

In the agreement over a year prior agreements.

Yes.

We were we.

Where.

Running close to ending the syndicated facility, we had before was roughly $40 million foreseeable.

Patricio Munoz: But we are on track. I think I mentioned that we have several initiatives for cash improvement and one of those or many of those are center on accounts receivables and inventories and we intend to improve it. I'm not sure if that's what you were trying to say. I think you that did get to the heart of the question.

We only have about a year left.

A year and a few more months left.

With Amortizations.

We work.

No a constraining cash so we were negotiated that syndicated loan into a club deal.

For roughly $60 million the amount were negotiated and prolonged the vessels, but roughly $60 million. So we also tied other that's higher cost debt.

Kent Oliver: So my second question relates to Alejandro. I see he resigned again.

And put it all together into this disc.

This club deal so, but I would say the most important benefit for US is that we were able to extend it.

Ruben Minski: Unfortunately, this kind of board turnover doesn't cast things in a good light. Can you talk about the direction you're trying to take and how to have some stability with the board?

The new maturity was pushed forward two six years with amortization after a grace period, but it gives us it gave us.

<unk>.

Put some order into our debt.

The extended terms.

Yeah.

And I think the strategies at.

Ruben Minski: Yes, that's an excellent question. This is Ruben.

At this moment is we need to make sure we get back to our numbers get back to our profitability, we reduced our net leverage.

Ruben Minski: We were sorry to see Alejandro resigned again. We feel that he was very impatient. Of course, he didn't agree 100% with all the speed in which the board wanted to implement the fuel. Ideas. And we were very much in line with many of his comments, but not in all of them. And he got very impatient, but nevertheless, he decided to leave. He did leave, of course, a representative in the board of his choice.

And then with improved number then we can start to think about the next phase of our over financing right now or something but.

Needed to do in order to.

Continue with our plan.

Okay, and just to be clear so the short term debt.

As shown on the balance sheet.

The end of June .

He is going to decrease yes, because you will.

Okay, Yes, correct correct, there's still being short term debt, but the long term debt will increase correct.

In the short term.

What's a good estimate for the short term debt.

Ruben Minski: And we will have in every day discussions with this. We feel very confident in the board that the agility and the way we're facing the future of the company. It is in very good terms. It's in very good shape. And we are doing great results along the way.

Term.

Yeah.

Near term probably.

Kent Oliver: All right. Thank you.

I'd say.

$100 million of short term debt.

We run.

Roughly $180 million of long term debt.

Okay. Thank you.

This concludes our question and answer session and concludes our conference call today.

Kent Oliver: Is there time for me to ask another question before getting back in the queue? Yes, go ahead. Yep.

You for attending today's presentation you may now disconnect.

Kent Oliver: Great.

Okay.

Ruben Minski: So what progress have you made since Q1 with regard to the US operation in Florida? Thank you, Cam. We have made, I think, very significant. We have advanced significantly our operation in in Miramar, the one that is the new facility for contrition for the gummies. Has already started packing operations for third party. And we are finalizing the setting up of all the machinery and studying. We should be starting in a couple more months.

[music].

Ruben Minski: At most, we should be starting like the testing, the ramp up. And hopefully we can start producing and probably early next year. We think there's a possibility we can start by the end of this year, but we don't want to be overly optimistic. But I think we're running on course for that. And for the other one for software. If you remember, one of the main benefits that that was providing was to help us with R&D and to start preparing, sorry, R&D for the whole organization.

Ruben Minski: And that has been happening and it's been helping us streamline that process. And in addition, we are registering products and we're advancing to start sales during the year 24. We already have something, but probably meaningfully, you're going to see an impact as we talk from the beginning in the year 24.

Kent Oliver: So I think 24 is the year in which you are going to see the two operations starting to bring the benefits of the year. All right. Very good. Thank you. I'll get back in the queue. As a reminder, if you have a question, please press star 7-1 to be joined into the question queue.

Demetri General: The next question comes from Demetri General, a private investor. Please go ahead. Hi, guys, glad congratulations on the completion of the quarter.

Ruben Minski: Just wanted to maybe get a little bit more backup or better understanding of the optimism you have of improvement in queue 4. Your highlight is going to be a strong quarter. Maybe you give us an indication that that's based on actual orders or contracts. Maybe you can help us understand the optimism that you guys expressed about the last quarter of the year. Thank you, Demetri. We have, as we mentioned, the CDMO business had some delays in orders because of the working capital, policies of some of our large farmer customers.

Ruben Minski: But these are already in place. We have a very strong portfolio of orders for the last quarter of the year. We also feel that we will be having all the tailwinds of the reevaluation economy and peso at that time. And definitely there will be launches in September and October of this year that will be significant for the, for we are ensuring the second half of the year has been excellent. As at least in the last quarter, this as mentioned, we mentioned the third quarter will be good, but not significantly going to be higher than last year. But the fourth quarter is definitely going to make a very big difference with what we had last year. Okay.

Patricio Munoz: Also, Dem, in terms of the two Florida facilities, can you give us a sense of what you respect in terms of revenue or maybe that once they're fully around time? Is it something that we can kind of give us a sense of how much they will add, incrementally to your business?

Patricio Munoz: Hi, Dimitri. Partition here. Unfortunately, we have not disclosed that information, so we cannot tell you at this point. I think once it's producing, both facilities are producing and selling, they're going to be part of the disclosure of both of the businesses, of the business segment. And therefore, we'll be able to talk more and set that aside. But right now, we have not given that information, so I cannot give you that estimate.

Ruben Minski: If I can ask a last question, just any update on M&A, sort of how you guys thinking about potentially some creative views to kind of help you grow, you know, organically. What's the landscape? What are you seeing? Are you active? What can you tell us? Those are very good questions, Dimitri. I would say the intent on our strategy has not changed from the moment we became public. So we do want to grow in organically, it is a part of our strategy and we intend to do it.

Ruben Minski: I would say given the setback that we had in the last part of last year and that we're recovering and we have a tight cash, I think the focus for this year is definitely executing the efficiency plans, the value creation initiatives, getting back to our cash position, improving our EBITDA so that we can regain our debt or leverage capacity. So we're still looking at the market, but right now at this very, very moment we could not be able to do it only marginal.

Ruben Minski: So I think it's more reasonable to win until the year 24 when we are back in full swing.

Kent Oliver: In my last question, you had a comment about increasing liquidity shares, are you thinking about that?

Ruben Minski: I was going to give last comment on the presentation, maybe if you can expand with that a little bit. Yeah, we have been executing since I think it was end of June, I may be missing back a couple of days, but I think from the end of June, the program of the buy back, it's been a slow moving program given that we have low liquidity, but I think it's been helpful in the sense that without that program probably the liquidity would be even worse or even lower.

Ruben Minski: We think we need to continue doing it despite the fact that it's not so good or despite the fact that it takes some of our cash, we think we need to still be doing there in order to how that liquidity will be small.

Ruben Minski: Other measures that we want to take is that we have been discussing with other, let's say, more boutique or smaller investment banks so that they can help us bolster our presence in the market, try to get more coverage, try to attend more conference, and more importantly, try to get the story to a broader base of investors. We have an investor base that hasn't changed that much since we did the IPO, despite the disfacking, so therefore I think we do need to take the story and convince more shareholders and that more potential investors and that will instead, in its turn, it will be able to enhance the trading and the liquidity of the company.

Ruben Minski: So we are optimistic that we'll get there, it's just taking us longer than we anticipate. And probably the last thing as we recover results and we fulfill our promise to the market, I think that will also help in a virtuous circle to try to also get more liquidity and more investors.

Kent Oliver: The next question comes from Kent Oliver with Brookline Capital Market. Let's go ahead. Thank you. You recently signed a new debt agreement. Could you highlight the significant changes? in the agreement over your prior agreements? Yes, Kim. We were running close to ending the syndicated facility we had before was roughly $40 million for Sewell. We only had about a year left, a year and a few months left, with the motivations and we were, as you know, a constraint in cash.

Kent Oliver: So we were negotiated that syndicated loan into a club deal for roughly $60 million. The amount we're negotiating in Colombian pesos but roughly $60 million. So we also tied other debts higher cost debt and put it all together into this club deal. So but I would say the most important benefit for us is that we were able to extend it.

Patricio Munoz: The new materiality was pushed forward to six years with the motivations after a great period but it gave us first put some order into our debt extended terms and I think the strategy is at this moment we need to make sure we get back to our numbers, get back to our profitability, we reduce our net leverage and then with improved numbers, then we can start to think about the next phase of our financing. Right now was something that we needed to do in order to continue with our plan.

Patricio Munoz: Okay and you know, just to be clear, so the short-term debt shown on the balance sheet at the end of June is going to decrease because you'll, okay, yes, correct, correct, there's still the short-term debt but the long-term debt will increase, correct. And the short, what's a good estimate for the short-term debt here, Charm? Here, Charm probably I would say a hundred million dollars of short-term debt with roughly 180 million dollars of long-term debt, right? Okay, thank you.

Operator: This concludes our question and answer session and concludes our conference call today. Thank you for attending today's presentation.

Operator: You may now disconnect.