RTI Surgical Holdings, Inc. (Nasdaq: RTIX), a global surgical
implant company, reported operating results for the first quarter
of 2019.
First Quarter 2019 Highlights:
- Revenue of $69.7 million, inclusive of $2.0 million from
acquisition of Paradigm Spine
- Net loss of $9.1 million, inclusive of $9.0 million of net
non-recurring acquisition and integration expenses
- Adjusted EBITDA of $6.6 million, or 10% of revenue
- Completed acquisition of Paradigm Spine and its primary product
the coflex® Interlaminar Stabilization® device
“RTI Surgical experienced a solid start to 2019, completing the
acquisition of Paradigm Spine and making significant progress
integrating the coflex device into our growing and increasingly
differentiated spine portfolio,” said Camille Farhat, President and
CEO, RTI Surgical. “To drive the continued adoption and growth of
coflex and our novel spine products, we are focused on accelerated
reimbursement, physician engagement and sales execution. To that
end, we have restructured and expanded our spine commercial team to
focus on growing our customer base and better supporting our
surgeon customers with enhanced resources and specialized
training.”
Farhat continued, “RTI’s overall performance in the first
quarter of 2019 reflects the continued strategic and operational
progress made towards reducing complexity, driving operational
excellence and accelerating the growth of the company.”
First Quarter 2019
RTI’s worldwide revenues for the first quarter of 2019 were
$69.7 million, compared with $69.9 million during the same period
in the prior year. Gross profit for the first quarter of 2019
was $38.0 million, or 54.5% of revenues, a significant increase
compared to $33.7 million, or 48.2% of revenues, in the first
quarter of 2018. Gross profit for the first quarter of 2018
was impacted by an inventory charge of $1.0 million from the
write-off of inventory related to our international restructuring
and $0.2 million due to the purchase accounting step-up of Zyga
inventory.
During the first quarter of 2019, RTI incurred $9.0 million in
non-recurring pre-tax acquisition and integration costs related
primarily to its acquisition of Paradigm Spine LLC. During the
first quarter of 2018, the company incurred $1.8 million of
non-recurring charges.
Net loss applicable to common shares was $9.1 million, or $0.14
per fully diluted common share in the first quarter of 2019,
compared to net loss applicable to common shares of $1.9 million,
or $0.03 per fully diluted common share in the first quarter of
2018. As outlined in the reconciliation tables that follow,
excluding the impact of the acquisition and integration charges,
Adjusted Net Income applicable to common shares was $0.5 million,
or $0.01 per fully diluted common share in the first quarter of
2019 compared to $0.5 million, or $0.01 per fully diluted common
share, in the first quarter of 2018.
Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA), for the first quarter of 2019 was
$6.6 million, or 10% of revenues, compared with $7.8 million, or
11% of revenues for the first quarter of 2018. The decline in
Adjusted EBITDA was primarily driven by increased patent litigation
costs and operating expenses resulting from accelerating growth due
to incremental operating costs from the acquisition of Paradigm
Spine completed in early March of 2019, and partially offset by
gross margin expansion associated with the efforts to reduce
complexity and increase operational excellence initiated during
2018.
Fiscal 2019 Outlook
Based on our recent financial results and current business
outlook, the Company confirms the following financial guidance for
2019:
- The Company expects full year revenues in the range of
approximately $325 million to $335 million, representing
approximately 15% to 19% growth over the prior year.
- The Company expects full year Adjusted EBITDA to be in the
range of approximately $36 million to $40 million, representing
approximately 7% to 19% growth over the prior year.
The Company noted that guidance is based on the following
assumptions:
- Relatively stable economic and market conditions and regulatory
environment;
- Ongoing positive impacts from efforts to reduce complexity and
implement operational excellence;
- The successful integration of Paradigm Spine which closed in
early March 2019 and a positive EBITDA contribution from Paradigm
Spine;
- Sustained favorable reimbursement from private payors;
and,
- The successful ongoing transition from map3® to ViBone®.
Conference CallRTI will host a
conference call and audio webcast at 9:00 a.m. ET today. The
conference call can be accessed by dialing (877) 383-7419 (U.S.) or
(760) 666-3754 (International), using conference ID 4267595. The
webcast can be accessed through the investor section of RTI’s
website at www.rtix.com/investors. A replay of the conference call
will be available on RTI’s website for one month following the
call.
About RTI Surgical Holdings, Inc.RTI Surgical
is a leading global surgical implant company providing surgeons
with safe biologic, metal and synthetic implants. Committed to
delivering a higher standard, RTI’s implants are used in sports
medicine, plastic surgery, spine, orthopedic and trauma procedures
and are distributed in more than 40 countries. RTI has four
manufacturing facilities throughout the U.S. and Europe. RTI is
accredited in the U.S. by the American Association of Tissue Banks
and is a member of AdvaMed. For more information, please visit
www.rtix.com. Connect with us
on LinkedIn and Twitter.
Forward-Looking StatementsThis communication
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which may include
statements regarding the continued contribution of the OEM
franchise to RTI’s growth, the impact of operational priorities on
costs and their impact on RTI’s financial performance, RTI’s
ability to meet its commitments, the implementation of RTI’s
strategic initiatives, the acceleration of RTI’s growth, future
performance and organic growth, the reduction in complexity of
RTI’s operations, RTI’s ability to maintain partnerships in the
organ procurement community, RTI’s ability to expand the number of
patients it is able to serve, the impact of the transition from
map3® to ViBone®, our growth strategy in spine, the expected
integration of, and potential impact from, the Paradigm Spine, LLC
acquisition, the integration of Zyga’s operations, the success of
our new product development efforts, anticipated financial results,
growth rates, new product introductions, future operational
improvements, fiscal 2019 guidance and underlying assumptions.
These forward-looking statements are based on management’s current
expectations, estimates and projections about our industry, our
management's beliefs and certain assumptions made by our
management. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such
forward-looking statements. The forward-looking statements are not
guarantees of future performance and are based on certain
assumptions including RTI’s ability to reduce inventory, manage
expenses and accomplish its goals and strategies, the quality of
the new product offerings from RTI, general economic conditions, as
well as those within RTI’s industry, RTI’s ability to integrate
acquisitions into existing operations, and numerous other factors
and risks identified in the Company’s Form 10-K for the fiscal year
ended December 31, 2018 and other filings with the Securities and
Exchange Commission (SEC). Our actual results may differ materially
from the anticipated results reflected in these forward-looking
statements. Copies of the Company's SEC filings may be obtained by
contacting the Company or the SEC or by visiting RTI's website
at www.rtix.com or the SEC's website at www.sec.gov.
We undertake no obligation to update these forward-looking
statements except as may be required by law.
MEDIA AND INVESTOR CONTACT:Molly
Poarchmpoarch@rtix.com+1 224 287 2661
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Condensed Consolidated Statements of
Operations |
(Unaudited, in thousands, except share and per
share data) |
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2019 |
|
|
2018 |
|
Revenues |
$ |
69,741 |
|
|
$ |
69,890 |
|
Costs of processing and
distribution |
31,737 |
|
|
36,208 |
|
Gross profit |
38,004 |
|
|
33,682 |
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
Marketing, general and administrative |
31,883 |
|
|
28,389 |
|
Research
and development |
4,336 |
|
|
3,421 |
|
Severance
and restructuring costs |
- |
|
|
884 |
|
Asset
abandonments |
15 |
|
|
129 |
|
Acquisition and integration expenses |
8,957 |
|
|
800 |
|
Total operating
expenses |
45,191 |
|
|
33,623 |
|
Operating (loss)
income |
(7,187 |
) |
|
59 |
|
Total other expense -
net |
(1,504 |
) |
|
(775 |
) |
Loss before income tax
provision |
(8,691 |
) |
|
(716 |
) |
Income tax
provision |
(396 |
) |
|
(249 |
) |
Net loss |
(9,087 |
) |
|
(965 |
) |
Convertible preferred
dividend |
- |
|
|
(966 |
) |
Net loss applicable to
common shares |
$ |
(9,087 |
) |
|
$ |
(1,931 |
) |
|
|
|
|
|
|
Net loss per common
share - basic |
$ |
(0.14 |
) |
|
$ |
(0.03 |
) |
Net loss per common
share - diluted |
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
Weighted average shares
outstanding - basic |
65,675,203 |
|
|
63,150,009 |
|
Weighted average shares
outstanding - diluted |
65,675,203 |
|
|
63,150,009 |
|
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Reconciliation of Net Loss Applicable to
Commons Shares to Adjusted EBITDA |
(Unaudited, in thousands) |
|
|
|
|
|
|
Three Months |
|
|
Ended March 31, |
|
|
2019 |
|
|
2018 |
|
Net loss applicable to
common shares |
$ |
(9,087 |
) |
|
$ |
(1,931 |
) |
Interest
expense, net |
1,473 |
|
|
824 |
|
Provision
for income taxes |
396 |
|
|
249 |
|
Depreciation |
2,739 |
|
|
2,623 |
|
Amortization of intangible assets |
957 |
|
|
961 |
|
EBITDA |
(3,522 |
) |
|
2,726 |
|
Reconciling items
impacting EBITDA |
|
|
|
|
|
Preferred
dividend |
- |
|
|
966 |
|
Non-cash
stock based compensation |
1,163 |
|
|
1,280 |
|
Foreign
exchange loss (gain) |
31 |
|
|
(49 |
) |
Other
reconciling items * |
|
|
|
|
|
Inventory
write-off |
- |
|
|
1,023 |
|
Inventory
purchase price adjustment |
- |
|
|
206 |
|
Severance
and restructuring costs |
- |
|
|
884 |
|
Acquisition and integration expenses |
8,957 |
|
|
800 |
|
Adjusted EBITDA |
$ |
6,629 |
|
|
$ |
7,836 |
|
Adjusted EBITDA as a
percent of revenues |
10 |
% |
|
11 |
% |
|
|
|
|
|
|
* See explanations in Use of Non-GAAP Financial Measures
section later in this release. |
|
|
|
|
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Reconciliation of Net Loss Applicable to
Common Shares and Net Loss Per Diluted Share to |
Adjusted Net Income Applicable to Common
Shares and Adjusted Net Income Per Diluted Share |
(Unaudited, in thousands except per share
data) |
|
|
Three Months Ended |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
Net |
|
|
|
|
|
Net |
|
|
|
|
|
(Loss) Income |
|
|
Amount |
|
|
(Loss) Income |
|
|
Amount |
|
|
Applicable to |
|
|
Per Diluted |
|
|
Applicable to |
|
|
Per Diluted |
|
|
Common Shares |
|
|
Share |
|
|
Common Shares |
|
|
Share |
|
As reported |
$ |
(9,087 |
) |
|
$ |
(0.14 |
) |
|
$ |
(1,931 |
) |
|
$ |
(0.03 |
) |
Severance and
restructuring costs |
- |
|
|
- |
|
|
884 |
|
|
0.01 |
|
Inventory purchase
price adjustment |
- |
|
|
- |
|
|
206 |
|
|
0.00 |
|
Inventory
write-off |
- |
|
|
- |
|
|
1,023 |
|
|
0.02 |
|
Acquisition and
integration expenses |
8,957 |
|
|
0.13 |
|
|
800 |
|
|
0.01 |
|
Tax
effect on adjustments |
617 |
|
|
0.01 |
|
|
(493 |
) |
|
(0.01 |
) |
Adjusted * |
$ |
487 |
|
|
$ |
0.01 |
|
|
$ |
489 |
|
|
$ |
0.01 |
|
|
* See
explanations in Use of Non-GAAP Financial Measures section later in
this release. |
Amount Per
Diluted Share may not foot due to rounding. |
Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited condensed
consolidated financial statements presented on a GAAP basis, the
Company discloses certain non-GAAP financial measures that exclude
certain amounts, including EBITDA, Adjusted EBITDA and Adjusted Net
Income Applicable to Common Shares. The calculation of the tax
effect on the adjustments between GAAP net loss applicable to
common shares and non-GAAP net income applicable to common shares
is based upon our estimated annual GAAP tax rate, adjusted to
account for items excluded from GAAP net loss applicable to common
shares in calculating Adjusted Net Income Applicable to Common
Shares-Diluted. A reconciliation of the non-GAAP financial measures
to the corresponding GAAP measures is included in the tables listed
above.
The following are explanations of the
adjustments that management excluded as part of the non-GAAP
measures for the three months ended March 31, 2019 and 2018.
Management removes the amount of these costs including the tax
effect on the adjustments from our operating results to supplement
a comparison to our past operating performance.
Severance and restructuring costs –
These costs relate to the reduction of our organizational
structure, primarily driven by simplification of our international
operating infrastructure, specifically our distribution model. |
|
Inventory purchase price adjustment
– These costs relate to the purchase price effects of acquired Zyga
inventory that was sold during the three months ended March 31,
2018. |
|
Inventory write-off – These costs
relate to an inventory write-off due to the rationalization of our
international distribution infrastructure. |
|
Acquisition and integration
expenses – These costs relate to acquisition and integration
expenses due to the purchase of Paradigm and Zyga in 2019 and 2018,
respectively. |
Material Limitations Associated with the Use of Non-GAAP
Financial Measures
EBITDA, Adjusted EBITDA and Adjusted Net Income Applicable to
Common Shares should not be considered in isolation, or as a
replacement for GAAP measures.
Usefulness of Non-GAAP Financial Measures to Investors
The Company believes that presenting EBITDA, Adjusted EBITDA and
Adjusted Net Income Applicable to Common Shares in addition to the
related GAAP measures provide investors greater transparency to the
information used by management in its financial
decision-making. The Company further believes that providing
this information better enables the Company’s investors to
understand the Company’s overall core performance and to evaluate
the methodology used by management to assess and measure such
performance.
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Condensed Consolidated Revenues |
(Unaudited, in thousands) |
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Revenues: |
(In thousands) |
Spine |
$ |
20,005 |
|
$ |
19,263 |
Sports |
13,779 |
|
13,435 |
OEM |
28,991 |
|
30,120 |
International |
6,966 |
|
7,072 |
Total
revenues |
$ |
69,741 |
|
$ |
69,890 |
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Condensed Consolidated Balance
Sheets |
(Unaudited, in thousands) |
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
Assets |
|
|
|
|
|
|
Cash |
|
$ |
6,043 |
|
|
$ |
10,949 |
|
Accounts receivable -
net |
|
55,670 |
|
|
48,351 |
|
Inventories - net |
|
114,365 |
|
|
107,471 |
|
Prepaid and other
assets |
|
9,860 |
|
|
8,791 |
|
Total
current assets |
|
185,938 |
|
|
175,562 |
|
|
|
|
|
|
|
|
Property, plant and
equipment - net |
|
79,235 |
|
|
77,954 |
|
Goodwill |
|
308,345 |
|
|
59,798 |
|
Other assets - net |
|
50,208 |
|
|
47,872 |
|
Total
assets |
|
$ |
623,726 |
|
|
$ |
361,186 |
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Accounts
payable |
|
$ |
23,315 |
|
|
$ |
26,309 |
|
Accrued expenses and
other current liabilities |
|
29,817 |
|
|
29,591 |
|
Total
current liabilities |
|
53,132 |
|
|
55,900 |
|
|
|
|
|
|
|
|
Deferred revenue |
|
1,535 |
|
|
744 |
|
Long-term
liabilities |
|
266,642 |
|
|
54,692 |
|
Total
liabilities |
|
321,309 |
|
|
111,336 |
|
|
|
|
|
|
|
|
Preferred stock |
|
66,272 |
|
|
66,226 |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
Common
stock and additional paid-in capital |
|
490,339 |
|
|
428,338 |
|
Accumulated other comprehensive loss |
|
(7,663 |
) |
|
(7,270 |
) |
Accumulated deficit |
|
(246,531 |
) |
|
(237,444 |
) |
Total
stockholders' equity |
|
236,145 |
|
|
183,624 |
|
Total
liabilities and stockholders' equity |
|
$ |
623,726 |
|
|
$ |
361,186 |
|
RTI SURGICAL HOLDINGS, INC. AND
SUBSIDIARIES |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited, in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Ended March 31, |
|
|
2019 |
|
|
2018 |
|
Cash flows from
operating activities: |
|
|
|
|
|
Net loss |
$ |
(9,087 |
) |
|
$ |
(965 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
Depreciation and amortization expense |
3,696 |
|
|
3,584 |
|
Stock-based compensation |
1,163 |
|
|
1,280 |
|
Amortization of deferred revenue |
(1,292 |
) |
|
(1,217 |
) |
Other
items to reconcile to net cash used in operating activities |
(10,165 |
) |
|
(4,131 |
) |
Net cash
used in operating activities |
(15,685 |
) |
|
(1,449 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
Purchases
of property, plant and equipment |
(3,477 |
) |
|
(2,118 |
) |
Patent
and acquired intangible asset costs |
(328 |
) |
|
(330 |
) |
Acquisition of Zyga Technology |
- |
|
|
(21,000 |
) |
Acquisition of Paradigm Spine |
(99,921 |
) |
|
- |
|
Net cash
used in investing activities |
(103,726 |
) |
|
(23,448 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
Proceeds
from long-term obligations |
115,000 |
|
|
20,000 |
|
Payments
of debt issuance costs |
(729 |
) |
|
- |
|
Payments
on long-term obligations |
- |
|
|
(5,125 |
) |
Other
financing activities |
284 |
|
|
1,394 |
|
Net cash
provided by financing activities |
114,555 |
|
|
16,269 |
|
Effect of exchange rate
changes on cash and cash equivalents |
(50 |
) |
|
59 |
|
Net decrease in cash
and cash equivalents |
(4,906 |
) |
|
(8,569 |
) |
Cash and cash
equivalents, beginning of period |
10,949 |
|
|
22,381 |
|
Cash and cash
equivalents, end of period |
$ |
6,043 |
|
|
$ |
13,812 |
|
RTI Surgical (NASDAQ:RTIX)
Historical Stock Chart
From Aug 2024 to Sep 2024
RTI Surgical (NASDAQ:RTIX)
Historical Stock Chart
From Sep 2023 to Sep 2024