AMRI Announces First Quarter 2015 Results

ALBANY, N.Y., May 5, 2015 /PRNewswire/ -- AMRI (NASDAQ: AMRI) today reported financial and operating results for the first quarter ended March 31, 2015.

Highlights:

  • First quarter contract revenue of $75.1 million, up 47% from 2014
  • First quarter royalties of $6.7 million, down 19% from 2014
  • First quarter adjusted diluted EPS of $0.20 up 25% from $0.16 in 2014, including a $0.03 decrease in EPS from royalties in the current quarter
  • Completed the acquisitions of SSCI/West Lafayette, Ind. and Glasgow UK businesses, broadening our capabilities in analytical and drug product development services
  • Announced closure of Holywell, UK API manufacturing site; transitioning activities to other sites within AMRI
  • AMRI confirms 2015 financial guidance

"We are very pleased with our results this quarter, highlighted by strong growth in our Drug Product business as a result of the acquisitions of OsoBio and our Glasgow UK facility, and solid year-over-year growth in our API business," said William S. Marth, AMRI's president and chief executive officer. "Importantly, contract margins continue to expand across our entire operations as result of the addition of the new businesses, our cost reduction initiatives and further efficiency efforts across our business. We remain confident that these trends will continue through the year and are maintaining our outlook for 2015, which includes full year revenue growth of 40% and adjusted diluted EPS growth of 35% at the midpoint."

First Quarter 2015 Results

Total revenue for the first quarter of 2015 was $81.8 million, an increase of 38% compared to total revenue of $59.3 million reported in the first quarter of 2014.

Total contract revenue for the first quarter of 2015 was $75.1 million, an increase of 47% compared to total contract revenue of $51.0 million reported in the first quarter of 2014. Adjusted contract margins were 23% for the first quarter of 2015, compared with 18% for the first quarter of 2014, driven by the growth of the Drug Product business, increased capacity utilization, and the benefit of cost reduction initiatives and facility optimization. Adjusted contract margins exclude purchase accounting depreciation and amortization that is included under U.S. GAAP.  For a reconciliation of U.S. GAAP contract margins as reported to adjusted contract margins for the 2015 and 2014 reporting periods, please see Table 1 at the end of press release.

Royalty revenue in the first quarter of 2015 was $6.7 million, a decrease of 19% from $8.3 million in the first quarter of 2014 due primarily to lower royalties on Allegra (fexofenadine) products. Royalty revenue for the first quarter of 2015 includes $3.8 million of royalties from the fexofenadine products and $2.9 million from the net sales of certain amphetamine salts sold by Actavis.

Net loss under U.S. GAAP was $(2.2) million, or $(0.07) per diluted share, in the first quarter of 2015, compared to U.S. GAAP net income of $3.5 million, or $0.11 per diluted share for the first quarter of 2014. Net income on an adjusted non-GAAP basis in the first quarter was $6.4 million or $0.20 per diluted share, compared to adjusted net income of $5.1 million or $0.16 per diluted share for 2014. During the first quarter 2015, the company recorded, among other items, $2.5 million of impairment and $1.3 million of restructuring charges related to the company's plan to cease operations at its Holywell, UK facility.

Segment Results

Discovery and Development Services (DDS)









Three Months Ended




March 31,


(Unaudited; $ in thousands)


2015


2014








DDS Contract Revenue


$19,263


$18,990


Cost of Contract Revenue


14,756


15,627


Contract Gross Profit (1)


4,507


3,363


Contract Gross Margin


23%


18%








(1) A portion of the 2014 amounts were reclassified from DDS to API to better align business activities within our reporting segments. 

Discovery and Development Services (DDS) contract revenue for the first quarter of 2015 increased 1% to $19.3 million, compared to $19.0 million the first quarter of 2014, primarily due to an increase in discovery services revenue. DDS gross margins increased to 23% from 18% in the quarter, driven by the benefit of cost reduction initiatives and facility optimization.

Active Pharmaceutical Ingredients (API)













Three Months Ended




March 31,


(Unaudited; $ in thousands)


2015


2014








API Contract Revenue


$37,848


$29,760


Cost of Contract Revenue


28,583


23,245


Contract Gross Profit


9,265


6,515


Contract Gross Margin


24%


22%








Adjusted Contract Gross Profit (1) (2)


9,400


6,515


Adjusted Contract Gross Margin (1) (2)


25%


22%








(1) A portion of the 2014 amounts were reclassified from DDS to API to better align its business activities within our reporting segments. 


(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to adjusted contract gross profit and adjusted contract gross margin as a percentage of contract revenue.

API contract revenue for the first quarter of 2015 increased 27% compared to the same period of 2014 due primarily an increase in API shipments to customers, and the addition of Cedarburg Pharmaceuticals. API adjusted contract margins for the first quarter of 2015 increased to 25% from 22% in the first quarter of 2014, due to the mix of business within the segment.







Drug Product Manufacturing














Three Months Ended




March 31,


(Unaudited; $ in thousands)


2015


2014








DPM Contract Revenue


$ 18,020


$   2,288


Cost of Contract Revenue


14,800


2,738


Contract Gross Profit


3,220


(450)


Contract Gross Margin


18%


(20%)








Adjusted Contract Gross Profit (Loss) (2)


3,367


(450)


Adjusted Contract Gross Margin (2)


19%


(20%)








(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross loss and contract gross margin to adjusted contract gross profit (loss) and adjusted contract gross margin as a percentage of contract revenue.

Drug Product Manufacturing contract revenue for the first quarter of 2015 increased $15.7 million over the same period of 2014, reflecting the addition of Oso Biopharmaceuticals Manufacturing (OsoBio) acquired in July 2014 and the Glasgow, UK-based injectable drug product formulation business acquired in January 2015. Drug Product adjusted contract margins for the first quarter of 2015 increased to 19% compared to (20%) in the same period of 2014, driven by the addition of the Glasgow and OsoBio businesses.

Liquidity and Capital Resources

At March 31, 2015, AMRI had cash, cash equivalents and restricted cash of $32.2 million, compared to $51.0 million at December 31, 2014. The decrease in cash and cash equivalents for the quarter ended March 31, 2015 was primarily due to the use of $59.3 million to acquire the SSCI/West Lafayette, Ind. and Glasgow, UK businesses and $4.1 million used for capital expenditures, which were offset by $4.4 million in cash generated from operations and $39 million from borrowings on our long-term debt. Total common shares outstanding, net of treasury shares, were 33,104,229 at March 31, 2015.

Financial Outlook

AMRI's outlook for 2015 is as follows:

  • Full year contract revenue is expected to be between $335 and $370 million, an increase of 40% at the midpoint, including
    • DDS revenue of approximately $98 million
    • API revenue of approximately $162 million
    • Drug Product revenue of approximately $92 million
  • Adjusted contract margins of approximately 25%
  • Royalty revenue of between $13 and $14 million, including approximately $4 million of Allegra royalties, which expire fully in the third quarter 2015
  • Adjusted selling, general and administrative (SG&A) expenses at approximately 17% of contract revenue
  • Adjusted EBITDA between $59 and $65 million, up 34% at the midpoint
  • Adjusted diluted EPS is expected to be between $0.80 and $0.90, compared to $0.63 in 2014, based on an average fully diluted share count of approximately 33 million shares
  • Ratio of total revenue and adjusted diluted EPS in the first and second half of 2015 is expected to be 45% and 55%, respectively
  • Capital expenditures of between $24 and $26 million
  • Effective tax rate of approximately 33%

Beginning in the second quarter 2015, AMRI will implement an updated non-GAAP definition, which will include the impact of cash interest expense and exclude the impact of non-cash stock-based compensation, both of which had previously been excluded and included, respectively in the Company's calculations of these non-GAAP financial measures. These changes will redefine non-GAAP cost of contract revenue, SG&A, interest expense, net income, and EBITDA financial measures from the existing non-GAAP definition. We believe these financial measures provide investors with appropriate non-GAAP measurements that emphasize the cash earnings potential of the business and better reflect the underlying financial performance of the business.

The updated non-GAAP definition does not impact AMRI's 2015 financial outlook as previously disclosed. To ensure that operating results can be evaluated on a comparable basis, historic non-GAAP reported operating results will be adjusted to match this new definition.  In conjunction with this change, AMRI will provide adjusted non-GAAP financial results in line with the updated non-GAAP definition for full year 2014.  This supplemental document is available at the Investor Relations page of the company's website at www.amriglobal.com. This change does not impact any prior period financial statements presented on a GAAP basis.

First Quarter Results Conference Call

AMRI will host a conference call and webcast today at 8:30 a.m. ET to discuss first quarter 2015 results. The conference call can be accessed by dialing (866) 208-5728 (domestic calls) or (224) 633-1279 (international calls) at 8:20 a.m. ET and entering passcode 30238095. The webcast and supplementing slides can be accessed on the company's website at www.amriglobal.com.

A replay of the conference call can be accessed for 24 hours beginning at 11:30 a.m. ET at (855) 859-2056 (domestic calls) or (404) 537-3406 (international calls) and entering passcode 30238095. Replays of the webcast can also be accessed for up to 90 days after the call via the investor area of the company's website at http://ir.amriglobal.com.

About AMRI

Albany Molecular Research Inc. (AMRI) is a global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient outcomes and the quality of life for more than two decades. With locations in North America, Europe and Asia, our key business segments include Discovery and Development Solutions (DDS), Active Pharmaceutical Ingredients (API), and Drug Product Manufacturing. Our DDS segment provides comprehensive services from hit identification to IND, including expertise with diverse chemistry, library design and synthesis, in vitro biology and pharmacology, drug metabolism and pharmacokinetics, as well as natural products. API Manufacturing supports the chemical development and cGMP manufacture of complex API, including potent, controlled substances, biologics, peptides, steroids, and cytotoxic compounds. Drug Product Manufacturing supports development through commercial scale production of complex liquid-filled and lyophilized parenteral formulations. For more information about AMRI, please visit our website at www.amriglobal.com or follow us on Twitter (@amriglobal).

Forward-looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the company's estimates of revenue, contract revenue, adjusted EBITDA, adjusted diluted earnings per share, and all information and other statements regarding the estimates of results  and financial outlook for 2015, statements made by the company's Chief Executive Officer, statements under the caption "Financial Outlook," statements regarding the strength of the company's business and prospects, statements regarding the impact of recent acquisition activity, and statements concerning the company's momentum and long-term growth, including expected results for 2015. Readers should not place undue reliance on our forward-looking statements. The company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the company may not be able to predict and may not be within the company's control.

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