- Conference Call Scheduled for 9 a.m. EDT Today -
EXTON,
Pa., July 27, 2023 /PRNewswire/ -- West
Pharmaceutical Services, Inc. (NYSE: WST) today announced its
financial results for the second-quarter 2023 and updated full-year
2023 financial guidance.
Second-Quarter 2023 Summary (comparisons to prior-year
period)
- Net sales of $753.8 million
declined 2.3%; organic net sales declined 2.5%.
- Reported-diluted EPS of $2.06,
compared to $2.48 in the same period
last year.
- Adjusted-diluted EPS of $2.11,
compared to $2.47 in the same period
last year.
- The Company is raising full-year 2023 net sales guidance to a
new range of $2.970 billion to
$2.995 billion, compared to a prior
range of $2.965 billion to
$2.990 billion.
- The Company is raising full-year 2023 adjusted-diluted EPS
guidance to a new range of $7.65 to
$7.80, compared to a prior range of
$7.50 to $7.65.
"We had a solid first-half of 2023, and with the momentum of our
high-value product capacity expansion projects, we are well
positioned for an even better second-half of the year," said
Eric M. Green, President, Chief
Executive Officer and Chair of the Board. "While COVID-19 related
sales continued to decline as expected, our base Proprietary
Products business again organically grew double digits. We see
continued stability in both near- and long-term demand trends for
our HVP components, devices and systems, and our team members
remain focused on creating value-added solutions for our
customers."
Proprietary Products Segment
Net sales declined by
5.5% to $618.0 million. Organic
net sales (excluding changes in currency translation and impact of
a recent divestiture) also declined by 5.5%. Our decline in
net sales was primarily driven by an expected reduction in COVID-19
related sales. High-value products (components and devices)
represented more than 70% of segment sales in the period led by
customer demand for Westar® components and HVP devices.
The Generics market unit had high-single digit organic net sales
growth, and the Pharma market unit had mid-single digit organic net
sales growth. The Biologics market unit had a double-digit
decline in organic net sales, due to a decline in COVID-19 related
demand. Excluding this COVID-19 impact, the Proprietary
Products segment, as well as the Biologics and Generics market
units, would have had double-digit organic net sales growth.
Contract-Manufactured Products Segment
Net sales grew
by 15.3% to $135.8 million.
Organic net sales grew by 14.3% with currency translation
increasing sales growth by 100 basis points. Segment
performance was led by growth in sales of components associated
with injection-related devices.
Financial Highlights (first six months of
2023)
Operating cash flow was $307.3
million, a decrease of 5.2%. Capital expenditures were
$157.5 million, an increase of 19.4%
over the same period last year. Free cash flow (operating
cash flow minus capital expenditures) was $149.8 million, a decrease of 22.1%.
During the first half of 2023, the Company repurchased 676,070
shares for $233.5 million at an
average share price of $345.33 under
its share repurchase program.
Full-Year 2023 Updated Financial Guidance
- The Company is updating full-year 2023 net sales guidance to be
a new range of $2.970 billion to
$2.995 billion, compared to a prior
range of $2.965 billion to
$2.990 billion.
-
- Organic net sales growth guidance is unchanged and is expected
to be approximately 3% to 4%.
- Net sales guidance assumes COVID-19 related sales of
approximately $60 million, unchanged
from prior guidance.
- Net sales guidance includes an estimated full-year 2023
tailwind of $20 million based on
current foreign currency exchange rates, compared to prior guidance
of $15 million.
- Net sales guidance also includes a reduction of $8 million resulting from a divestiture of a
European facility that produced standard Proprietary Product
components, unchanged from prior guidance.
- Full-year 2023 adjusted-diluted EPS is expected to be in a
range of $7.65 to $7.80, compared to prior guidance range of
$7.50 to $7.65.
-
- Full-year adjusted-diluted EPS guidance range includes an
estimated tailwind of approximately $0.05 based on current foreign currency exchange
rates, compared to prior guidance of $0.02.
- The updated guidance also includes EPS of $0.26 associated with first-half 2023 tax
benefits from stock-based compensation.
- For the second half of the year, our EPS guidance range assumes
a tax rate of 22% and does not include potential tax benefits from
stock-based compensation. Any tax benefits associated with
stock-based compensation beyond those recorded in the first-half
2023 would provide a positive adjustment to our full-year
adjusted-diluted EPS guidance.
- Full-year 2023 capital spending guidance is unchanged and is
expected to be $350 million. This
includes incremental capital spending to support capacity
expansions at existing HVP facilities.
Second-Quarter 2023 Conference Call
The live
audio-only webcast will be made available via the Company's
Investor Relations website or by clicking here.
To participate in the conference call by asking questions to
Management, please register in advance by clicking here. Upon
registration, all telephone participants will receive the dial-in
number along with a unique PIN number that will be used to access
the call.
Management will refer to a slide presentation during the call,
which will be made available on the day of the call. To view the
presentation, select "Presentations" in the "Investors" section of
the Company's website.
A replay of the conference call and webcast will be available on
the Company's website for 30 days.
Forward-Looking Statements
This release contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements may include such words
as "raising," "positioned," "updating," "expected," "assumes,"
"unchanged," "includes," "would," "provide" and other similar
terminology. These statements reflect management's current
expectations regarding future events and operating performance and
speak only as of the date of this release. There is no
certainty that actual results will be achieved in-line with current
expectations. These forward-looking statements involve a
number of risks and uncertainties. The following are some of
the factors that could cause our actual results to differ
materially from those expressed in or underlying our
forward-looking statements: prevailing economic conditions and
general uncertainties relating thereto that may be unknown and
unforeseeable; customers' changing inventory requirements and
manufacturing plans and customer decisions to move forward with our
new products and product categories; interruptions or weaknesses in
our supply chain, illness in our workforce and access to transport
for our products; disruptions or limitations in the Company's
manufacturing capacity; average profitability, or mix, of the
products we sell; dependence on third-party suppliers and partners;
increased raw material, energy and labor costs; fluctuations in
currency exchange; the ability to meet development milestones with
key customers; and the consequences of other geopolitical events,
including natural disasters, acts of war, and global health
crises. This list of important factors is not all inclusive.
For a description of certain additional factors that could cause
the Company's future results to differ from those expressed in any
such forward-looking statements, see Part I Item 1A, entitled "Risk
Factors," in the Company's Annual Report on Form 10-K for the year
ended December 31, 2022, and other
filings with the United States Securities and Exchange Commission,
including the Company's quarterly reports on Form 10-Q and current
reports on Form 8-K.
Except as required by law or regulation, we undertake no
obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Non-U.S. GAAP Financial Measures
This release contains certain non-GAAP financial measures,
including organic net sales and adjusted-diluted EPS. For the
purpose of aiding the comparison of our year-over-year results, we
may refer to net sales and other financial results excluding the
effects of changes in foreign currency exchange rates.
Organic net sales exclude the impact from acquisitions and/or
divestitures and translate the current-period reported sales of
subsidiaries whose functional currency is other than the U.S.
Dollar at the applicable foreign currency exchange rates in effect
during the comparable prior-year period. We may also refer to
financial results excluding the effects of unallocated items.
The re-measured results excluding effects from currency translation
and excluding the effects of unallocated items are not in
conformity with U.S. generally accepted accounting principles
("U.S. GAAP") and should not be used as a substitute for the
comparable U.S. GAAP financial measures. The non-U.S. GAAP
financial measures are incorporated into our discussion and
analysis as management uses them in evaluating our results of
operations and believes that this information provides users a
valuable insight into our overall performance and financial
position. A reconciliation of these adjusted non-U.S. GAAP
measures to the comparable U.S. GAAP financial measures is included
in the accompanying tables.
WEST PHARMACEUTICAL
SERVICES, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
(in millions, except
per share data)
|
|
|
Three Months
Ended
June
30,
|
Six Months
Ended
June 30,
|
|
|
2023
|
2022
|
2023
|
2022
|
|
Net sales
|
$753.8
|
100 %
|
$771.3
|
100 %
|
$1,470.4
|
100 %
|
$1,491.3
|
100 %
|
|
Cost of goods and
services sold
|
462.4
|
61
|
449.8
|
58
|
907.7
|
62
|
885.2
|
59
|
|
Gross
profit
|
291.4
|
39
|
321.5
|
42
|
562.7
|
38
|
606.1
|
41
|
|
Research and
development
|
16.5
|
2
|
14.4
|
2
|
33.6
|
2
|
29.0
|
2
|
|
Selling, general
and
administrative expenses
|
88.4
|
12
|
81.5
|
11
|
174.4
|
12
|
164.9
|
11
|
|
Other expense (income),
net
|
4.0
|
1
|
(2.8)
|
-
|
16.9
|
1
|
(5.9)
|
-
|
|
Operating
profit
|
182.5
|
24
|
228.4
|
29
|
337.8
|
23
|
418.1
|
28
|
|
Interest (income)
expense, net
|
(2.3)
|
-
|
1.4
|
-
|
(4.9)
|
-
|
3.3
|
-
|
|
Other nonoperating
(income)
expense
|
(0.1)
|
-
|
(0.2)
|
-
|
(0.1)
|
-
|
(0.2)
|
-
|
|
Income before income
taxes
and equity in net income of
affiliated companies
|
184.9
|
24
|
227.2
|
29
|
342.8
|
23
|
415.0
|
28
|
|
Income tax
expense
|
34.8
|
4
|
44.2
|
6
|
58.4
|
4
|
65.4
|
5
|
|
Equity in net income
of
affiliated companies
|
(5.0)
|
(1)
|
(5.5)
|
(1)
|
(10.7)
|
(1)
|
(12.7)
|
(1)
|
|
Net income
|
$155.1
|
21 %
|
$188.5
|
24 %
|
$295.1
|
20 %
|
$362.3
|
24 %
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$2.08
|
|
$2.53
|
|
$3.96
|
|
$4.87
|
|
|
Diluted
|
$2.06
|
|
$2.48
|
|
$3.91
|
|
$4.77
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common
shares
outstanding
|
74.3
|
|
74.4
|
|
74.4
|
|
74.4
|
|
|
Average shares
assuming
dilution
|
75.4
|
|
75.8
|
|
75.5
|
|
75.9
|
|
|
|
|
|
|
|
|
|
|
|
|
WEST PHARMACEUTICAL
SERVICES
REPORTING SEGMENT
INFORMATION
(UNAUDITED)
(in
millions)
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
Net
Sales:
|
2023
|
2022
|
2023
|
2022
|
Proprietary
Products
|
$618.0
|
$653.7
|
$1,201.1
|
$1,255.0
|
Contract-Manufactured
Products
|
135.8
|
117.8
|
269.3
|
236.5
|
Eliminations
|
-
|
(0.2)
|
-
|
(0.2)
|
Consolidated
Total
|
$753.8
|
$771.3
|
$1,470.4
|
$1,491.3
|
|
|
|
|
|
Gross
Profit:
|
|
|
|
|
Proprietary
Products
|
$271.4
|
$302.3
|
$519.2
|
$563.0
|
Contract-Manufactured
Products
|
20.9
|
19.2
|
44.4
|
43.1
|
Unallocated
items
|
(0.9)
|
-
|
(0.9)
|
-
|
Gross
Profit
|
$291.4
|
$321.5
|
$562.7
|
$606.1
|
Gross Profit
Margin
|
38.7 %
|
41.7 %
|
38.3 %
|
40.6 %
|
|
|
|
|
|
Operating Profit
(Loss):
|
|
|
|
|
Proprietary
Products
|
$194.2
|
$233.9
|
$364.9
|
$427.3
|
Contract-Manufactured
Products
|
14.9
|
14.2
|
32.3
|
33.3
|
Stock-based
compensation
expense
|
(7.5)
|
(5.5)
|
(16.0)
|
(11.0)
|
General corporate
costs
|
(19.1)
|
(14.2)
|
(43.4)
|
(31.5)
|
Reported Operating
Profit
|
$182.5
|
$228.4
|
$337.8
|
$418.1
|
Reported
Operating Profit
Margin
|
24.2 %
|
29.6 %
|
23.0 %
|
28.0 %
|
Unallocated
items
|
2.5
|
(1.4)
|
12.1
|
(1.2)
|
Adjusted Operating
Profit
|
$185.0
|
$227.0
|
$349.9
|
$416.9
|
Adjusted
Operating Profit
Margin
|
24.5 %
|
29.4 %
|
23.8 %
|
28.0 %
|
WEST PHARMACEUTICAL
SERVICES
RECONCILIATION OF
NON-U.S. GAAP MEASURES (UNAUDITED)
Please refer to
"Non-U.S. GAAP Financial Measures" for more
information
(in millions, except
per share data)
|
|
Reconciliation of
Reported and Adjusted Operating Profit, Net Income and Diluted
EPS
|
|
Three months ended
June 30, 2023
|
Operating
profit
|
Income
tax
expense
|
Net
income
|
Diluted
EPS
|
Reported (U.S.
GAAP)
|
$182.5
|
$34.8
|
$155.1
|
$2.06
|
Unallocated
items:
|
|
|
|
|
Loss on disposal of
plant (1)
|
2.2
|
(0.7)
|
2.9
|
0.04
|
Restructuring and other
charges (2)
|
0.1
|
(0.3)
|
0.4
|
-
|
Amortization of
acquisition-related
intangible assets (3)
|
0.2
|
-
|
0.7
|
0.01
|
Adjusted (Non-U.S.
GAAP)
|
$185.0
|
$33.8
|
$159.1
|
$2.11
|
|
Six months ended
June 30, 2023
|
Operating
profit
|
Income
tax
expense
|
Net
income
|
Diluted
EPS
|
Reported (U.S.
GAAP)
|
$337.8
|
$58.4
|
$295.1
|
$3.91
|
Unallocated
items:
|
|
|
|
|
Loss on disposal of
plant (1)
|
11.6
|
(0.7)
|
12.3
|
0.16
|
Restructuring and other
charges (2)
|
0.1
|
(0.3)
|
0.4
|
-
|
Amortization of
acquisition-related
intangible assets (3)
|
0.4
|
-
|
1.4
|
0.02
|
Adjusted (Non-U.S.
GAAP)
|
$349.9
|
$57.4
|
$309.2
|
$4.09
|
|
Three months ended
June 30, 2022
|
Operating
profit
|
Income
tax
expense
|
Net
income
|
Diluted
EPS
|
Reported (U.S.
GAAP)
|
$228.4
|
$44.2
|
$188.5
|
$2.48
|
Unallocated
items:
|
|
|
|
|
Restructuring and other
charges (2)
|
(1.6)
|
(0.4)
|
(1.2)
|
(0.01)
|
Pension settlement
(4)
|
-
|
0.2
|
0.4
|
0.01
|
Amortization of
acquisition-related
intangible assets (3)
|
0.2
|
-
|
0.7
|
0.01
|
Royalty acceleration
(5)
|
-
|
1.3
|
(1.3)
|
(0.02)
|
Adjusted (Non-U.S.
GAAP)
|
$227.0
|
$45.3
|
$187.1
|
$2.47
|
|
Six months ended
June 30, 2022
|
Operating
profit
|
Income
tax
expense
|
Net
income
|
Diluted
EPS
|
Reported (U.S.
GAAP)
|
$418.1
|
$65.4
|
$362.3
|
$4.77
|
Unallocated
items:
|
|
|
|
|
Restructuring and other
charges (2)
|
(1.6)
|
(0.4)
|
(1.2)
|
(0.01)
|
Pension settlement
(4)
|
-
|
0.3
|
0.9
|
0.01
|
Amortization of
acquisition-related
intangible assets (3)
|
0.4
|
-
|
1.4
|
0.02
|
Royalty acceleration
(5)
|
-
|
1.3
|
(1.3)
|
(0.02)
|
Adjusted (Non-U.S.
GAAP)
|
$416.9
|
$66.6
|
$362.1
|
$4.77
|
|
|
(1)
|
During the three and
six months ended June 30, 2023, the Company recorded expense
of $2.2 million and $11.6 million, respectively, within
other expense (income), as a result of the sale of one of the
Company's manufacturing facilities within the Proprietary Products
segment. The transaction closed during the second quarter of
2023.
|
|
|
(2)
|
Restructuring and other
charges of $0.1 million for both the three and six months ended
June 30, 2023, represents the net impact of an inventory write down
of $0.9 million within cost of goods and services sold and a
$0.8 million benefit within other expense (income) for revised
severance estimates in connection with its 2022 restructuring plan.
During the three and six months ended June 30, 2022, the
Company recorded a benefit within other expense (income) of
$1.6 million for restructuring and severance related costs in
connection with its 2020 plan related to revised severance
estimates.
|
|
|
(3)
|
During the three and
six months ended June 30, 2023 and 2022, the Company recorded
$0.2 million and $0.4 million, respectively, of
amortization expense within operating profit associated with an
intangible asset acquired during the second quarter of 2020. During
the three and six months ended June 30, 2023 and 2022, the
Company recorded $0.5 million and $1.0 million,
respectively, of amortization expense in association with an
acquisition of increased ownership interest in Daikyo.
|
|
|
(4)
|
The Company recorded a
pension settlement charge within other nonoperating (income)
expense, as it determined that normal-course lump-sum payments for
our U.S. qualified defined benefit pension plan exceeded the
threshold for settlement accounting.
|
|
|
(5)
|
During the three and
six months ended June 30, 2022, the Company increased its
expected tax benefit related to the prepayment of future royalties
from one of its subsidiaries by $1.3 million.
|
WEST PHARMACEUTICAL
SERVICES
RECONCILIATION OF
NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED)
Please refer to
"Non-U.S. GAAP Financial Measures" for more
information
(in millions, except
per share data)
|
|
Reconciliation of
Net Sales to Organic Net Sales (6 and 7)
|
|
Three months ended
June 30, 2023
|
Proprietary
|
CM
|
Eliminations
|
Total
|
Reported net sales
(U.S. GAAP)
|
$618.0
|
$135.8
|
$-
|
$753.8
|
Effect of changes in
currency translation rates
|
(3.2)
|
(1.2)
|
-
|
(4.4)
|
Organic net sales
(Non-U.S. GAAP) (6)
|
$614.8
|
$134.6
|
$-
|
$749.4
|
|
Six months ended
June 30, 2023
|
Proprietary
|
CM
|
Eliminations
|
Total
|
Reported net sales
(U.S. GAAP)
|
$1,201.1
|
$269.3
|
$-
|
$1,470.4
|
Effect of changes in
currency translation rates
|
14.6
|
1.1
|
-
|
15.7
|
Organic net sales
(Non-U.S. GAAP) (6)
|
$1,215.7
|
$270.4
|
$-
|
$1,486.1
|
|
Three months ended
June 30, 2022
|
Proprietary
|
CM
|
Eliminations
|
Total
|
Reported net sales
(U.S. GAAP)
|
$653.7
|
$117.8
|
$(0.2)
|
$771.3
|
Effect of divestitures
and/or acquisitions
|
(3.1)
|
-
|
-
|
(3.1)
|
Net sales excluding
divestiture (Non-U.S.
GAAP) (7)
|
$650.6
|
$117.8
|
$(0.2)
|
$768.2
|
|
Six months ended
June 30, 2022
|
Proprietary
|
CM
|
Eliminations
|
Total
|
Reported net sales
(U.S. GAAP)
|
$1,255.0
|
$236.5
|
$(0.2)
|
$1,491.3
|
Effect of divestitures
and/or acquisitions
|
(3.1)
|
-
|
-
|
(3.1)
|
Net sales excluding
divestiture (Non-U.S.
GAAP) (7)
|
$1,251.9
|
$236.5
|
$(0.2)
|
$1,488.2
|
|
|
(6)
|
Organic net sales
exclude the impact from acquisitions and/or divestitures and
translate the current-period reported sales of subsidiaries whose
functional currency is other than the U.S. Dollar at the applicable
foreign currency exchange rates in effect during the comparable
prior-year period.
|
|
|
(7)
|
Net sales excluding
divestiture represents the 2022 comparative sales figure used in
our organic sales growth calculation to eliminate the impact of our
2023 divestiture.
|
WEST PHARMACEUTICAL
SERVICES
RECONCILIATION OF
NON-U.S. GAAP FINANCIAL MEASURES (UNAUDITED)
Please refer to
"Non-U.S. GAAP Financial Measures" for more
information
(in millions, except
per share data)
|
|
Reconciliation of
Reported-Diluted EPS Guidance to Adjusted-Diluted EPS
Guidance
|
|
|
2022 Actual
|
2023
Guidance
|
% Change
|
Reported-diluted EPS
(U.S. GAAP)
|
$7.73
|
$7.45 to
$7.60
|
(3.6%) to
(1.7%)
|
Restructuring and other
charges
|
0.29
|
-
|
|
Pension
settlement
|
0.42
|
-
|
|
Amortization of
acquisition-related
intangible assets
|
0.04
|
0.04
|
|
Cost investment
activity
|
0.05
|
-
|
|
Royalty
acceleration
|
(0.02)
|
-
|
|
Tax law
changes
|
0.07
|
-
|
|
Loss on disposal of
plant
|
-
|
0.16
|
|
Adjusted-diluted EPS
(Non-U.S.
GAAP) (8)
|
$8.58
|
$7.65 to
$7.80
|
(10.8%) to
(9.1%)
|
|
Notes:
|
|
See "Full-year 2023
Financial Guidance" and "Non-U.S. GAAP Financial Measures" in
today's press release for additional information regarding
adjusted-diluted EPS.
|
|
|
(8)
|
We have opted not to
forecast 2023 tax benefits from stock-based compensation in
upcoming quarters, as they are out of the Company's control.
Instead, we recognize the benefits as they occur. In the
first-half of 2023, tax benefits associated with stock-based
compensation increased adjusted-diluted EPS by $0.26. Any
future tax benefits associated with stock-based compensation that
we receive in 2023 would provide a positive adjustment to our
full-year EPS guidance. In full-year 2022, tax benefits
associated with stock-based compensation increased adjusted-diluted
EPS by $0.22.
|
WEST PHARMACEUTICAL
SERVICES
CASH FLOW
ITEMS
(UNAUDITED)
(in
millions)
|
|
|
Six Months Ended June
30,
|
|
2023
|
2022
|
Depreciation and
amortization
|
$65.7
|
$59.7
|
Operating cash
flow
|
$307.3
|
$324.3
|
Capital
expenditures
|
$157.5
|
$131.9
|
Free cash
flow
|
$149.8
|
$192.4
|
WEST PHARMACEUTICAL
SERVICES
FINANCIAL
CONDITION
(UNAUDITED)
(in
millions)
|
|
|
As of
June 30,
2023
|
As of
December 31,
2022
|
Cash and cash
equivalents
|
$796.3
|
$894.3
|
Accounts receivable,
net
|
$534.4
|
$507.4
|
Inventories
|
$449.4
|
$414.8
|
Accounts
payable
|
$218.0
|
$215.4
|
Debt
|
$207.8
|
$208.9
|
Equity
|
$2,746.7
|
$2,684.9
|
Working
capital
|
$1,362.6
|
$1,400.5
|
Trademark Notices
Trademarks and registered trademarks are the property of West
Pharmaceutical Services, Inc., in the
United States and other jurisdictions, unless noted
otherwise.
Daikyo®, Daikyo Crystal
Zenith® and Daikyo CZ® are registered
trademarks of Daikyo Seiko, Ltd. Daikyo Crystal Zenith
technologies are licensed from Daikyo Seiko, Ltd.
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SOURCE West Pharmaceutical Services, Inc.