Pacific Current Group First Half 2023 Earnings

Pacific Current Group Limited operates as an asset management firm, offering investment management, strategic planning, compensation structuring and trading solutions.

The Company's first-half 2023 results were adversely impacted by COVID-related restrictions that impact travel retail in Asia, as well as tightening of retailer inventories in mainland China and Hainan. However, management anticipates sequential improvement and a gradual recovery to occur during the second half of 2023.

Revenues

Revenue in the first half of fiscal 2023 increased 3% as reported and 2% organic. Excluding foreign currency translation and a $26 million contribution from Intersect ENT's acquisition (which is reported under Specialty Therapies division of Neuroscience portfolio), organic growth was at 4%.

The Cardiovascular Portfolio, comprised of Cardiac Rhythm & Heart Failure, Structural Heart & Aortic and Coronary & Peripheral Vascular divisions, posted an organic increase of 1% as the company continues to reap benefits from its Aible(tm) ecosystem and strong demand for CRHF product availability. Both businesses experienced their best performance since inception with low single digit increases across both businesses.

Patient Monitoring experienced its best quarter of the year, driven by sales of Nellcor(tm) pulse oximetry and improved product availability for Perioperative Complications. The company recently announced plans to separate its Respiratory Interventions and Patient Monitoring business units, which it expects to be completed by mid-year 2024.

Medical Surgical, which supplies ventilators, saw its sales decline 7% as reported and organically by 2%, due to low-single digit declines in SI and RGR. Excluding the negative impact from ventilator sales due to COVID-19 related demand in 2017 as well as sales to China due to volume-based procurement (VBP) tenders, Medical Surgical generated an organic gain of 3% due to strong Micra(tm) transcatheter pacemaker sales growth.

Overall, revenue in the first half of fiscal 2023 increased 4% due to strong performances across Cardiovascular, Neuroscience, and Diabetes markets outside the U.S. However, foreign currency exchange rates as of February 1 would adversely impact fourth quarter revenue by approximately $165 million to $215 million if these remain unchanged. As such, we are increasing our diluted non-GAAP EPS guidance from $5.25 to $5.30 to account for this estimated 21 cent unfavorable impact due to foreign currency rates as of February 1.

Diluted Earnings Per Share

Diluted earnings per share (EPS) in the first half of 2023 totaled AU$0.20, down from AU$0.62 during the same period last year. This decline was mainly due to higher income from operations - including a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share) related to acquisition-related items - as well as lower interest expense.

Adjusted net income was $112 million, down $9 million from the prior year due to higher interest expense and foreign currency losses that were partially offset by improved sales growth and gross margin expansion.

Net sales and organic revenue increased 9% and 17%, respectively, from the same period last year to $4.7 billion and AU$6.9 billion, due primarily to growth in the Company's Pharmaceutical segment. The increase was primarily driven by brand and specialty pharmaceutical sales growth partially offset by foreign currency translation effects and a slower pace of new product introductions.

Operating profit in the Pharmaceutical segment increased 7% year-over-year to $464 million, driven by higher contributions from brand and specialty pharmaceutical sales growth, lower generics program costs, as well as fewer supply chain disruptions. Overall costs, including research and development and manufacturing, rose 8% to $1.7 billion during this quarter.

Net income declined substantially due to a $114 million charge related to changes in accounting estimates related to new, tentative and ratified labor agreements that were recorded during the quarter. This change negatively impacted adjusted net income by $55 million during this time frame; without it, adjusted diluted EPS rose from $0.80 in the prior year quarter to $3.06 this time around.

We exclude the impact of European regulatory initiative-related costs from our current and prior-year adjusted diluted EPS results, as these charges represent a one-time expense to develop processes and systems to ensure initial conformance with the European Union Medical Device Regulation and In Vitro Diagnostic Medical Device Regulation (collectively referred to as "New EU Medical Device Regulations"), which represent an unprecedented change to the existing regulatory framework.

Adjusted Earnings Per Share

PFG's earnings per share (EPS) is an important indicator of financial performance that should be taken into account alongside GAAP results. Adjusted EPS, which is a non-GAAP measure, excludes restructuring charges and related costs, actuarial gains or losses on pension and postretirement plans, unrealized mark-to-market gains or losses on outstanding commodity hedges, loss on extinguishment of debt and impairment charges.

Management believes that exclusion of such items enhances the comparability of year-to-year results and gives investors a better insight into the Company's operating results. Furthermore, management uses these measures to assess its ongoing financial performance as well as trends in underlying operating results.

For the first half of fiscal 2023, Adjusted EBITDA increased 56.2% to $663.5 million compared to the prior year period due to higher net sales and improved working capital. Diluted EPS rose 15% to $1.02 per share from $0.86 in the prior year period.

Adjusted EBITDA excludes transaction and deal related activities, the cost of certain strategic business decisions, restructuring expenses and noncash impairment charges. These adjusted amounts are reconciled to the most directly comparable GAAP measure in this earnings release's financial statements.

This measure helps the Company assess its operating performance and trends in underlying operating results, as well as its capacity for generating cash from operations. Furthermore, this metric helps it evaluate its business strategy and decide whether to pursue new opportunities or make modifications to current activities.

VF has implemented numerous cost saving initiatives across the Company, which will result in continued run rate savings through fiscal 2023. These efforts are mainly motivated by corporate actions and restructuring expenses as well as a transformation initiative for our Asia-Pacific regional operations.

These initiatives have been successful in decreasing the costs of production, distribution and sales. These measures are expected to result in an overall reduction of $10 billion from the Company's cost structure by fiscal 2025.

The Company forecasts net sales between $57 billion and $59 billion for fiscal 2023, as well as Adjusted EBITDA between $1.27 billion and $1.35 billion during that same period. Diluted EPS for 2023 will range from $3.66 to $3.69 per share based on 307 million weighted average shares outstanding, the Company predicts.

Net Loss

An interesting nugget: here is a list of the top 10 PAC stockholders as of this writing. The top 3 stockholders remain active while the rest have left for now - taking laurances. At present, PAC remains at the top with its storied footprint in Australia and huge presence in the US. Notable name holders include both these notable teeters as well as some below them.