Feb 17 2016
AMRI (NASDAQ: AMRI) today reported financial and operating results for the fourth quarter and full year ended December 31, 2015 and provided an outlook for 2016.
- Fourth quarter total revenue of $126.4 million, up 46% from 2014; Full year total revenue of $402.4 million, up 45%
- Fourth quarter adjusted contract margins expand to 30%; Full year adjusted contract margins of 26%
- Fourth quarter adjusted EBITDA of $26.7 million; Full year adjusted EBITDA of $75.2 million
- Fourth quarter adjusted diluted EPS of $0.40; Full year adjusted diluted EPS of $0.96
- 2016 Revenue expected to be between $465 to $490 million
- 2016 Adjusted EPS expected to be between $1.00 and $1.10 per diluted share
"Adjusted contract margins" and "Adjusted diluted EPS" are Non-GAAP measurements. See discussion under the heading "Non-GAAP Adjustment Items" in this release.
"Strong performances in each of our businesses led us to finish 2015 with total revenue increasing 45% and adjusted contract margins expanding to 26% for the year," said William S. Marth, AMRI's president and chief executive officer. "Our strong performance demonstrates the effectiveness of our strategy to grow both organically and inorganically, create sustainable revenue and EBITDA, and provide valuable and differentiating services and products for our customers.
2015 was a transformative year for AMRI. We significantly expanded our capabilities in API and drug product and added valuable analytical and testing expertise that our customers are looking for in an increasingly complex regulatory and legal environment. In addition, we expanded our discovery service offerings and continue to advance development programs that will provide us new revenue opportunities.
We have built a sustainable platform for our business and as we enter 2016, we have more visibility on our business than we have ever had in our past. Our priority will be to maximize the value of our acquisitions, continue to drive organic and inorganic growth and deliver the quality, reliable and innovative services and products our customers demand."
Fourth Quarter 2015 Results
Total revenue for the fourth quarter of 2015 was $126.4 million, an increase of 46% compared to total revenue of $86.6 million reported in the fourth quarter of 2014.
Total contract revenue for the fourth quarter of 2015 was $123.0 million, an increase of 52% compared to contract revenue of $80.7 million reported in the fourth quarter of 2014. Adjusted contract margins were 30% for the fourth quarter of 2015, compared with 23% for the fourth quarter of 2014. Margins benefited from recent acquisitions, product mix within the Drug Product segment and the impact of cost reduction initiatives and facility optimization activities.
Royalty revenue in the fourth quarter of 2015 was $3.4 million, a decrease of 43% from $5.9 million in the fourth quarter of 2014, due primarily to lower royalties on Allegra (fexofenadine) products which have ended based on the expiration of the underlying patents. Royalty revenue for the fourth quarter of 2015 includes royalties from the net sales of certain amphetamine salts sold by Actavis and royalties from an API sourced from Spain.
Adjusted EBITDA in the fourth quarter of 2015 was $26.7 million, an increase of 51% from $17.7 million in the fourth quarter 2014.
Net income under U.S. GAAP was $1.8 million, or $0.05 per diluted share, in the fourth quarter of 2015, compared to U.S. GAAP net loss of $(1.9) million, or $(0.06) per share for the fourth quarter of 2014. Net income on an adjusted basis in the fourth quarter of 2015 was $14.1 million, or $0.40 per diluted share, compared to adjusted net income of $9.3 million or $0.28 per diluted share in 2014. For a reconciliation of U.S. GAAP net income (loss), EBITDA and earnings (loss) per diluted share to adjusted net income, EBITDA and earnings per diluted share for the 2015 and 2014 reporting periods, please see Tables 2 and 3 at the end of this press release.
Full Year 2015 Results
Total revenue for the year ended December 31, 2015 was $402.3 million, an increase of 45% compared to total revenue of $276.6 million for the same period in 2014.
Total contract revenue for the full year 2015 was $384.7 million, an increase of 53% compared to contract revenue of $250.7 million for 2014. Adjusted contract margins were 26% for the full year 2015, compared to 20% in 2014.
Royalty revenue for the full year 2015 was $17.6 million, a decrease of 32% from $25.9 million in 2014.
Adjusted EBITDA for the full year 2015 was $75.2 million, an increase of 50% from $50.0 million in 2014.
Net loss under U.S. GAAP for the full year 2015 was $(2.3) million, or $(0.07) per diluted share, compared to U.S. GAAP net loss of $(3.3) million, or $(0.10) per diluted share in 2014. Net income on an adjusted basis in the full year 2015 was $33.0 million or $0.96 per diluted share, compared to adjusted net income of $21.1 million or $0.65 per diluted share in 2014, an increase of 48%. Adjusted net income in 2015 includes an $7.2 million decline in royalty income and $20.0 million of income from operations acquired during 2015.
For a reconciliation of U.S. GAAP net income (loss), EBITDA and earnings (loss) per diluted share as reported to adjusted net income, EBITDA and earnings per diluted share for the 2015 and 2014 reporting periods, please see Tables 2 and 3 at the end of this press release.
Segment Results
Discovery and Development Services (DDS) contract revenue for the fourth quarter of 2015 increased $4.8 million or 25% compared to the fourth quarter of 2014, primarily due to $4.2 million of incremental revenue from the acquisition of SSCI in February 2015. DDS adjusted gross margins increased 6 percentage points in the fourth quarter of 2015, driven by margins realized on SSCI revenues and higher capacity utilization resulting from previous cost reduction initiatives.
For the full year 2015, DDS contract revenue increased $15.4 million or 21% primarily due to $14.9 million of incremental SSCI revenues. DDS adjusted gross margins increased 8 percentage points, driven by the margins realized on SSCI revenues, as well as the benefits of cost reduction initiatives and facility optimization.
API contract revenue for the fourth quarter of 2015 increased $24.3 million or 52% compared to the third quarter of 2014 primarily due to $23.6 million of incremental revenue from the acquisition of Gadea Pharmaceuticals in July 2015. API adjusted contract margin for the fourth quarter of 2015 increased 5 percentage points, driven by the margins realized on Gadea's revenues, offset by product mix within the business.
For the full year 2015, API contract revenue increased $58.4 million or 40%, due to $41.4 million of incremental revenue from the acquisition of Gadea, as well as organic growth in our business. API adjusted gross margins increased 7 percentage points in 2015, due to the addition of Gadea and the mix of business within the segment.
Drug Product Manufacturing contract revenue for the fourth quarter of 2015 increased $13.2 million or 89% compared to the fourth quarter 2014, and includes $4.1 million of revenue from the Glasgow facility that was acquired in January 2015 and increased commercial product and services revenue in our existing businesses. Drug Product adjusted contract margins for the fourth quarter of 2015 increased 16 percentage points, reflecting increased contribution from the Burlington facility and the addition of the Glasgow business.
For the full year 2015, Drug Product contract revenue increased $60.3 million, due primarily to increased commercial product and services revenue and the addition of $15.6 million in revenue from Glasgow. Drug Product adjusted gross margins improved 14 percentage points, due primarily to the addition of the Glasgow business and increased profitability at our Burlington facility.
Liquidity and Capital Resources
At December 31, 2015, AMRI had cash, cash equivalents and restricted cash of $52.3 million, compared to $82.4 million at September 30, 2015. The decrease in cash and cash equivalents for the quarter ended December 31, 2015 was primarily due to the use of $54 million for the acquisition of Whitehouse Laboratories in December 2015 and $12.3 million in capital expenditures, offset by a $30 million draw on our line of credit to partially fund the Whitehouse Labs acquisition and cash generated by operating activities of $5.0 million.
At December 31, 2015, total debt was $421.5 million and proforma debt to trailing EBITDA ratio was 4.3 times. Total common shares outstanding, net of treasury shares, were 35,617,218 at December 31, 2015.
Financial Outlook
AMRI's guidance takes into account a number of factors, including expected financial results for 2016, anticipated tax rates and shares outstanding. Please refer to the investor presentation included on the Investor Relations page of our website at: ir.amriglobal.com for further information on our full year 2016 guidance.
AMRI estimates the following for full year 2016:
- Full Year 2016 revenue of $465 to $490 million, an increase of 19% at the midpoint, including
- DDS revenue growth of over 20% to approximately $104 million
- API revenue growth of 27% to approximately $260 million
- Drug Product revenue growth of 8% to approximately $105 million
- Adjusted contract margin of approximately 30%
- Adjusted selling, general and administrative expenses of approximately 15% of revenue
- R&D of approximately $9 million
- Adjusted EBITDA between $91 and $97 million, an increase of 25% at the midpoint
- Adjusted diluted EPS is expected to be between $1.00 and $1.10, based on an average fully diluted share count of between 37 and 38 million shares
- Effective tax rate of between 29% and 30%
- Capital expenditures of approximately $45 million