Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial
results for its second quarter ended June 30, 2019,
updated its 2019 annual guidance and reiterated its long-term
financial targets. Unless otherwise noted, all net sales
growth rates in this release are stated on a constant currency
basis.
Net sales totaled $229.7 million during the second quarter ended
June 30, 2019, representing 11.8% as reported, 13.2% constant
currency, 8.9% pro-forma constant currency and 9.4% organic
constant currency growth. Gross margins were 79.0% during the
second quarter of 2019 and 79.1% on a non-GAAP adjusted
basis. Reconciliations of all historical non-GAAP financial
measures used in this release to the most comparable GAAP measures
can be found in the attached financial tables.
Robert Palmisano, president and chief executive officer,
commented, “Our U.S. upper extremities business delivered another
strong quarter and grew approximately twice the market growth
rate. Additionally, Cartiva performed well in our direct
sales force territories, which grew 29% pro forma in the second
quarter. However, both in total and for Cartiva specifically,
the second quarter fell short of our expectations. The second
quarter Cartiva sales of approximately $8 million were negatively
impacted by a significant drop off in Cartiva sales in the
distributor territories. Our core U.S. lower extremities
business also did not perform as we expected. We have already
implemented several actions to address the unexpected shortfall we
experienced in both of these areas and we have adjusted our annual
guidance accordingly. We believe this is transitory and
remain confident in the growth prospects for the extremities
markets overall, for Cartiva specifically and for our business in
total. Despite this impact, we achieved gross margins of 79%,
adjusted EBITDA margin expansion of approximately 290 basis points
and remain on track to achieve our previously stated financial
goals of double-digit constant currency organic growth and gross
margins in the high 70s% range for the full-year and adjusted
EBITDA margin in excess of 20% for the full fourth quarter of
2019.”
Palmisano continued, “Highlights in the quarter included 16%
sales growth in U.S. shoulders, which is approximately double the
market growth rate and consistent with our growth expectations for
the full-year. We launched our new REVIVE revision shoulder
at the end of the second quarter and that launch is off to a strong
start. We expect the REVIVE launch, along with continued
penetration of our PERFORM reversed glenoid system, SIMPLICITI
shoulder and BLUEPRINT enabling technology will continue to drive
outstanding shoulder sales growth in 2019 and beyond. Based
on our excellent growth, we now expect to be #1 in shoulders
worldwide by the end of this year.”
Palmisano further commented, “The unexpected weakness in our
U.S. lower extremities business was due to a combination of
factors, including the significant reduction in sales by the
Cartiva distributors and disappointing performance in our core foot
products driven by a higher than normal level of sales rep turnover
that occurred in a concentrated period of time mid-quarter.
To address this, we acted quickly and terminated the Cartiva
distributors, and as of August 1, the U.S. Cartiva business has
been transitioned to our direct U.S. lower extremities sales
force. We also adjusted the sales compensation program for
our entire U.S. lower extremities sales team and are increasing the
size of the sales force and aggressively adding experienced
reps. We are confident that the actions we have taken will
improve the growth rates of Cartiva and the whole U.S. lower
extremities business; however it will take some time for the
benefits of these actions to be evident in the sales results, and
we believe our updated guidance takes that timing appropriately
into account.”
Net loss from continuing operations for the second quarter of
2019 totaled $18.9 million or $(0.15) per diluted share. The
company’s net loss from continuing operations for the second
quarter of 2019 included the after-tax impacts of non-cash interest
expense of $12.1 million related to its convertible notes, a $1.7
million loss related to fair value adjustments to contingent
consideration, $0.6 million of transition costs, non-cash
amortization of inventory step-up of $0.4 million associated with
inventory acquired from the Cartiva acquisition, a net gain on
investments of $3.3 million, a $0.8 million gain related to
mark-to-market adjustments on derivative assets and liabilities,
and $2.6 million of tax expense due to a change in tax rates on
income from deferred intercompany transactions.
The company’s second quarter 2019 non-GAAP net loss from
continuing operations, as adjusted for the above items, was $5.7
million. The company’s second quarter 2019 non-GAAP adjusted
EBITDA from continuing operations, as defined in the non-GAAP to
GAAP reconciliation provided later in this release, was $35.3
million. The attached financial tables include reconciliations of
all historical non-GAAP measures to the most comparable GAAP
measures.
Cash and cash equivalents totaled $150.6 million as of the end
of the second quarter of 2019.
Palmisano concluded, “Although we had a setback in our lower
extremities business this quarter, I continue to be optimistic as
we look forward. We remain confident and committed to our
previously stated long-term financial goals of delivering
double-digit constant currency net sales growth, maintaining gross
margins in high 70s% range and achieving non-GAAP adjusted EBITDA
margin in the mid-20% range exiting 2021. With leadership
positions in high-growth markets, truly differentiated products in
all of our market segments, exceptional enabling technologies for
shoulder and total ankle, advanced digital technologies, very high
gross margins and specialized sales forces, we are well positioned
to deliver these goals.”
Outlook
The company is updating its previous net sales guidance range
for full-year 2019 of approximately $954 million to $966 million
and now anticipates net sales for full-year 2019 of approximately
$925 million to $930 million, which includes $30 million from
Cartiva. This guidance assumes foreign currency exchange
rates in line with current rates, which results in a negative
impact of approximately one percentage point as compared to
2018. This range implies full-year 2019 constant currency net
sales growth of 12%, pro-forma constant currency net sales growth
of 9% and organic constant currency net sales growth of
approximately 10%.
The company is updating its full-year 2019 non-GAAP adjusted
EBITDA from continuing operations guidance, as described in the
non-GAAP reconciliation provided later in this release, from $160
million to $170 million and now anticipates non-GAAP adjusted
EBITDA for full-year 2019 of $157 million to $163 million.
The mid-point of this updated guidance represents adjusted EBITDA
margin of approximately 17.3%, in line with the company’s previous
guidance for non-GAAP adjusted EBITDA margin and which with a
normal quarterly cadence, would result in fourth quarter of 2019
non-GAAP adjusted EBITDA margin in excess of 20%.
The company is updating its non-GAAP adjusted earnings per share
from continuing operations, including share-based compensation, as
described in the non-GAAP to GAAP reconciliation provided later in
this release, for full-year 2019 to be $0.15 to $0.20 per diluted
share.
The company estimates approximately 131 million non-GAAP
adjusted diluted weighted average ordinary shares outstanding for
fiscal year 2019.
The company’s organic net sales growth rate reflects net sales
by the legacy Wright business, which does not include net sales of
products obtained through the Cartiva acquisition. The company’s
pro forma net sales growth rate has been adjusted to reflect the
effect on net sales of incremental revenues that would have been
recognized had Cartiva been acquired on January 1, 2018.
The company’s non-GAAP adjusted EBITDA from continuing
operations target is measured by adding back to net loss from
continuing operations charges for interest, income taxes,
depreciation and amortization expenses, non-cash share-based
compensation expense and non-operating income and expense.
Additionally, the company’s adjusted EBITDA from continuing
operations target excludes possible future acquisitions; other
material future business developments; inventory step-up; and due
diligence, transaction and transition costs associated with
acquisitions and divestitures.
The company’s non-GAAP adjusted earnings per share from
continuing operations target is measured by adding back to net loss
from continuing operations non-cash interest expense associated
with the convertible notes; due diligence, transaction and
transition costs associated with acquisitions and divestitures;
gain or loss on investments; mark-to-market adjustments to CVRs;
non-cash mark-to-market derivative adjustments; loss on
modification or extinguishment of debt; non-cash gains and losses
associated with foreign currency translation of balances
denominated in foreign currencies; inventory step-up; contingent
consideration fair value adjustments; and charges for non-cash
amortization expenses, net of taxes and tax expense due to change
in tax rates on income from deferred intercompany transactions.
Note that as a result of the company’s relatively low effective tax
rate due to the valuation allowance impacting a substantial portion
of the company’s income/loss, the company is currently estimating
the tax effect on amortization expense at 0%. Further, this
non-GAAP adjusted earnings per share from continuing operations
target excludes possible future acquisitions and other material
future business developments.
All of the historical non-GAAP financial measures used in this
release are reconciled to the most directly comparable GAAP
measures. With respect to the company’s 2019 financial guidance
regarding non-GAAP adjusted EBITDA from continuing operations and
non-GAAP adjusted earnings per share from continuing operations,
however, the company cannot provide a quantitative reconciliation
to the most directly comparable GAAP measures without unreasonable
effort due to its inability to make accurate projections and
estimates related to certain information needed to calculate some
of the adjustments as described above, including the foreign
currency fluctuations and market driven fair value adjustments to
CVRs, contingent consideration and derivatives. The anticipated
differences between these non-GAAP financial measures and the most
directly comparable GAAP measure are described above
qualitatively.
The company’s anticipated ranges for net sales from continuing
operations, including Cartiva sales, non-GAAP adjusted EBITDA from
continuing operations, and non-GAAP adjusted earnings per share
from continuing operations are forward-looking statements, as are
any other statements that anticipate or aspire to future events or
performance. They are subject to various risks and
uncertainties that could cause the company’s actual results to
differ materially from the anticipated targets. The
anticipated targets are not predictions of the company’s actual
performance. See the cautionary information about
forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this release.
Supplemental Financial Information
To view the second quarter of 2019 supplemental financial
information, visit ir.wright.com. For historical information
on Wright Medical Group N.V. segment reporting changes and non-GAAP
combined pro forma financial information, please refer to the
presentation posted on Wright’s website at ir.wright.com in
the “Financial Information” section.
Internet Posting of Information
Wright routinely posts information that may be important to
investors in the “Investor Relations” section of its website at
www.wright.com. The company encourages investors and
potential investors to consult the Wright website regularly for
important information about Wright.
Conference Call and Webcast
As previously announced, Wright will host a conference call
starting at 3:30 p.m. Central Time today. The live dial-in
number for the call is (844) 295-9436 (U.S.) / (574) 990-1040
(Outside U.S.). The participant passcode for the call is
“Wright.” A simultaneous webcast of the call will be
available via Wright’s corporate website at www.wright.com.
A replay of the call will be available beginning at 5:30 p.m.
Central Time on August 7, 2019 through August 14, 2019.
To hear this replay, dial (855) 859-2056 (U.S.) / (404) 537-3406
(Outside U.S.) and enter code 2648479. A replay of the
conference call will also be available via the internet starting
today and continuing for at least 12 months. To access a
replay of the conference call via the internet, go to the “Investor
Relations - Presentations/Calendar” section of the company’s
corporate website located at www.wright.com.
The conference call may include a discussion of non-GAAP
financial measures. Reference is made to the most directly
comparable GAAP financial measures, the reconciliation of the
differences between the two financial measures, and the other
information included in this release, the Current Report on Form
8-K filed with the U.S. Securities and Exchange Commission (SEC)
today, or otherwise available in the “Investor Relations -
Supplemental Financial Information” section of the company’s
corporate website located at www.wright.com.
The conference call may include forward-looking
statements. See the cautionary information about
forward-looking statements in the “Cautionary Note Regarding
Forward-Looking Statements” section of this release.
About Wright Medical Group N.V.
Wright Medical Group N.V. is a global medical device company
focused on extremities and biologics products. The company is
committed to delivering innovative, value-added solutions improving
the quality of life for patients worldwide. Wright is a
recognized leader of surgical solutions for the upper extremities
(shoulder, elbow, wrist and hand), lower extremities (foot and
ankle) and biologics markets, three of the fastest growing segments
in orthopaedics. For more information about Wright, visit
www.wright.com.
™ and ® denote trademarks and registered trademarks of Wright
Medical Group N.V. or its affiliates, registered as indicated in
the United States, and in other countries. All other
trademarks and trade names referred to in this release are the
property of their respective owners.
Non-GAAP Financial Measures
To supplement the company’s consolidated financial statements
prepared in accordance with U.S. generally accepted accounting
principles, the company uses certain non-GAAP financial measures in
this release. Reconciliations of the historical non-GAAP financial
measures used in this release to the most comparable GAAP measures
for the respective periods can be found in tables later in this
release. Wright’s non-GAAP financial measures include net sales,
excluding the impact of foreign currency; pro-forma constant
currency growth; organic constant currency growth; net income, as
adjusted; EBITDA, as adjusted; gross margin, as adjusted; earnings,
as adjusted; and earnings, as adjusted, per diluted share, in each
case, from continuing operations. The company’s management believes
that the presentation of these measures provides useful information
to investors. These measures may assist investors in
evaluating the company’s operations, period over period. Wright’s
non-GAAP financial measures exclude such items as non-cash interest
expense related to the company’s convertible notes, loss on
modification or extinguishment of debt, transition costs, net gains
and losses on mark-to-market adjustments on CVRs and derivative
assets and liabilities, inventory step-up, contingent consideration
fair value adjustments, gains and losses on investments, and net
non-cash gains and losses on foreign currency translation, net of
tax, and tax expense due to change in tax rates on income from
deferred intercompany transactions, all of which may be highly
variable, difficult to predict and of a size that could have
substantial impact on the company’s reported results of operations
for a period. It is for this reason that the company cannot
provide without unreasonable effort a quantitative reconciliation
to the most directly comparable GAAP measures for its 2019
financial guidance regarding non-GAAP adjusted EBITDA from
continuing operations and non-GAAP adjusted earnings per share from
continuing operations. Management uses the non-GAAP measures in
this release internally for evaluation of the performance of the
business, including the allocation of resources and the evaluation
of results relative to employee performance compensation
targets. Investors should consider non-GAAP financial
measures only as a supplement to, not as a substitute for or as
superior to, measures of financial performance prepared in
accordance with GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “remain on track,”
“plans,” “intend,” “could,” “may,” “will,” “believe,” “estimate,”
“continue,” “guidance,” “future,” other words of similar meaning
and the use of future dates. Forward-looking statements in this
release include, but are not limited to, statements about the
company’s anticipated financial results for 2019, including net
sales, adjusted EBITDA from continuing operations and adjusted
earnings per share from continuing operations, anticipated
continued strong shoulder sales growth together with adoption of
our BLUEPRINT™ enabling technology and the company’s expectation to
be #1 in shoulders by the end of this year, the long-term growth
prospects of our extremities business as a whole, and our Cartiva®
and lower extremities businesses in particular, the success of
actions taken and to be taken to improve the performance of our
Cartiva business and the U.S. lower extremities business as a
whole, and the timing of benefits therefrom, and the company’s
confidence in its ability to achieve its long-term financial
targets. Forward-looking statements by their nature address matters
that are, to different degrees, uncertain. Each forward-looking
statement contained in this release is subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statement. Applicable risks
and uncertainties include, among others, failure to achieve
anticipated financial results for 2019 or long-term financial
targets, failure to recognize the benefits of actions taken to
improve the growth rates of Cartiva and the whole U.S. lower
extremities business on a timely basis or at all, failure to
achieve the anticipated financial benefits of the Cartiva
acquisition, unanticipated clinical performance issues with our
products (including Cartiva products) or the introduction of
competitive products with clinical performance attributes that are
superior to our products (including Cartiva products), failure to
achieve wide market acceptance of our products (including Cartiva
products) due to clinical, regulatory, cost, reimbursement or other
issues, delay or failure to drive U.S. lower extremities or
biologics sales to anticipated levels; continued supply
constraints; actual or contingent liabilities; the adequacy of the
company’s capital resources and need for additional financing; the
timing of regulatory approvals and introduction of new products;
physician acceptance, endorsement, and use of new products; failure
to achieve the anticipated commercial sales of AUGMENT® Bone Graft
and other new products; the effect of regulatory actions, changes
in and adoption of reimbursement rates; product liability claims
and product recalls; pending and threatened litigation; risks
associated with the metal-on-metal master settlement agreements;
ability to obtain the additional insurance proceeds; risks
associated with international operations and expansion;
fluctuations in foreign currency exchange rates; other business
effects, including the effects of industry, economic or political
conditions outside of the company’s control; reliance on
independent distributors and sales agencies; competitor activities;
changes in tax and other legislation; and the risks identified
under the heading “Risk Factors” in Wright’s Annual Report on Form
10-K for the year ended December 30, 2018 filed by Wright with
the SEC on February 27, 2019 and subsequent SEC filings by
Wright, including without limitation its Quarterly Reports on Form
10-Q for the quarters ended March 31, 2019 and June 30,
2019. Investors should not place considerable reliance on the
forward-looking statements contained in this release. Investors are
encouraged to read Wright’s filings with the SEC, available at
www.sec.gov, for a discussion of these and other risks and
uncertainties. The forward-looking statements in this release speak
only as of the date of this release, and Wright undertakes no
obligation to update or revise any of these statements. Wright’s
business is subject to substantial risks and uncertainties,
including those referenced above. Investors, potential investors,
and others should give careful consideration to these risks and
uncertainties.
--Tables Follow--
Wright Medical Group
N.V.Condensed Consolidated Statements of
Operations (dollars in thousands,
except per share data--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Net sales |
$ |
229,734 |
|
|
$ |
205,400 |
|
|
$ |
459,861 |
|
|
$ |
403,937 |
|
Cost of sales |
48,338 |
|
|
45,558 |
|
|
94,655 |
|
|
86,697 |
|
Gross profit |
181,396 |
|
|
159,842 |
|
|
365,206 |
|
|
317,240 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
152,112 |
|
|
140,826 |
|
|
305,418 |
|
|
278,074 |
|
Research and development |
18,756 |
|
|
14,665 |
|
|
35,728 |
|
|
28,564 |
|
Amortization of intangible assets |
7,862 |
|
|
6,009 |
|
|
15,449 |
|
|
13,150 |
|
Total operating expenses |
178,730 |
|
|
161,500 |
|
|
356,595 |
|
|
319,788 |
|
Operating income (loss) |
2,666 |
|
|
(1,658 |
) |
|
8,611 |
|
|
(2,548 |
) |
Interest expense, net |
19,995 |
|
|
20,678 |
|
|
39,690 |
|
|
40,490 |
|
Other (income) expense,
net |
(1,831 |
) |
|
72,747 |
|
|
11,064 |
|
|
71,747 |
|
Loss from continuing operations before income taxes |
(15,498 |
) |
|
(95,083 |
) |
|
(42,143 |
) |
|
(114,785 |
) |
Provision (benefit) for income
taxes |
3,434 |
|
|
(4,462 |
) |
|
7,045 |
|
|
(4,257 |
) |
Net loss from continuing operations |
$ |
(18,932 |
) |
|
$ |
(90,621 |
) |
|
$ |
(49,188 |
) |
|
$ |
(110,528 |
) |
Income (loss) from
discontinued operations, net of tax |
1,120 |
|
|
22,923 |
|
|
(5,225 |
) |
|
17,316 |
|
Net loss |
$ |
(17,812 |
) |
|
$ |
(67,698 |
) |
|
$ |
(54,413 |
) |
|
$ |
(93,212 |
) |
|
|
|
|
|
|
|
|
Net loss from continuing
operations per share, basic and diluted |
$ |
(0.15 |
) |
|
$ |
(0.85 |
) |
|
$ |
(0.39 |
) |
|
$ |
(1.04 |
) |
Net income (loss) from
discontinued operations per share, basic and diluted |
$ |
0.01 |
|
|
$ |
0.21 |
|
|
$ |
(0.04 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
Net loss per share, basic and
diluted |
$ |
(0.14 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.88 |
) |
|
|
|
|
|
|
|
|
Weighted-average number of
shares outstanding-basic and diluted |
126,267 |
|
|
106,095 |
|
|
126,040 |
|
|
106,000 |
|
|
Wright Medical Group
N.V.Consolidated Net Sales
Analysis(dollars in thousands--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
%change |
|
June 30, 2019 |
|
July 1, 2018 |
|
%change |
U.S. |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
66,832 |
|
|
$ |
59,464 |
|
|
12.4 |
% |
|
$ |
138,140 |
|
|
$ |
116,287 |
|
|
18.8 |
% |
Upper extremities |
80,146 |
|
|
70,171 |
|
|
14.2 |
% |
|
161,873 |
|
|
137,829 |
|
|
17.4 |
% |
Biologics |
23,588 |
|
|
20,234 |
|
|
16.6 |
% |
|
46,228 |
|
|
38,399 |
|
|
20.4 |
% |
Sports med & other |
1,980 |
|
|
1,706 |
|
|
16.1 |
% |
|
4,072 |
|
|
3,853 |
|
|
5.7 |
% |
Total
U.S. |
$ |
172,546 |
|
|
$ |
151,575 |
|
|
13.8 |
% |
|
$ |
350,313 |
|
|
$ |
296,368 |
|
|
18.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
16,983 |
|
|
$ |
15,680 |
|
|
8.3 |
% |
|
$ |
32,534 |
|
|
$ |
31,007 |
|
|
4.9 |
% |
Upper extremities |
31,154 |
|
|
29,137 |
|
|
6.9 |
% |
|
60,619 |
|
|
58,731 |
|
|
3.2 |
% |
Biologics |
6,331 |
|
|
6,582 |
|
|
(3.8 |
)% |
|
10,869 |
|
|
11,839 |
|
|
(8.2 |
)% |
Sports med & other |
2,720 |
|
|
2,426 |
|
|
12.1 |
% |
|
5,526 |
|
|
5,992 |
|
|
(7.8 |
)% |
Total
International |
$ |
57,188 |
|
|
$ |
53,825 |
|
|
6.2 |
% |
|
$ |
109,548 |
|
|
$ |
107,569 |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
83,815 |
|
|
$ |
75,144 |
|
|
11.5 |
% |
|
$ |
170,674 |
|
|
$ |
147,294 |
|
|
15.9 |
% |
Upper extremities |
111,300 |
|
|
99,308 |
|
|
12.1 |
% |
|
222,492 |
|
|
196,560 |
|
|
13.2 |
% |
Biologics |
29,919 |
|
|
26,816 |
|
|
11.6 |
% |
|
57,097 |
|
|
50,238 |
|
|
13.7 |
% |
Sports med & other |
4,700 |
|
|
4,132 |
|
|
13.7 |
% |
|
9,598 |
|
|
9,845 |
|
|
(2.5 |
)% |
Total net
sales |
$ |
229,734 |
|
|
$ |
205,400 |
|
|
11.8 |
% |
|
$ |
459,861 |
|
|
$ |
403,937 |
|
|
13.8 |
% |
|
Wright Medical Group
N.V.Reconciliation of Non-GAAP Combined Organic
and Pro Forma Net Sales to Net Sales(dollars in
thousands--unaudited)
|
Three months ended June 30, 2019 |
|
Legacy Wright (organic) |
|
Standalone Cartiva |
|
Wright Medical Group N.V. |
U.S. |
|
|
|
|
|
Lower extremities |
$ |
60,168 |
|
|
$ |
6,664 |
|
|
$ |
66,832 |
|
Upper extremities |
80,146 |
|
|
— |
|
|
80,146 |
|
Biologics |
23,588 |
|
|
— |
|
|
23,588 |
|
Sports med & other |
1,980 |
|
|
— |
|
|
1,980 |
|
Total
U.S. |
$ |
165,882 |
|
|
$ |
6,664 |
|
|
$ |
172,546 |
|
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
$ |
15,776 |
|
|
$ |
1,207 |
|
|
$ |
16,983 |
|
Upper extremities |
31,154 |
|
|
— |
|
|
31,154 |
|
Biologics |
6,331 |
|
|
— |
|
|
6,331 |
|
Sports med & other |
2,720 |
|
|
— |
|
|
2,720 |
|
Total
International |
$ |
55,981 |
|
|
$ |
1,207 |
|
|
$ |
57,188 |
|
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
$ |
75,944 |
|
|
$ |
7,871 |
|
|
$ |
83,815 |
|
Upper extremities |
111,300 |
|
|
— |
|
|
111,300 |
|
Biologics |
29,919 |
|
|
— |
|
|
29,919 |
|
Sports med & other |
4,700 |
|
|
— |
|
|
4,700 |
|
Total net
sales |
$ |
221,863 |
|
|
$ |
7,871 |
|
|
$ |
229,734 |
|
|
|
|
|
|
|
|
Three months ended July 1, 2018 |
|
Standalone Wright Medical Group N.V. |
|
Standalone Cartiva |
|
Non-GAAP combined pro forma |
U.S. |
|
|
|
|
|
Lower extremities |
$ |
59,464 |
|
|
$ |
7,676 |
|
|
$ |
67,140 |
|
Upper extremities |
70,171 |
|
|
— |
|
|
70,171 |
|
Biologics |
20,234 |
|
|
— |
|
|
20,234 |
|
Sports med & other |
1,706 |
|
|
— |
|
|
1,706 |
|
Total
U.S. |
$ |
151,575 |
|
|
$ |
7,676 |
|
|
$ |
159,251 |
|
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
$ |
15,680 |
|
|
$ |
327 |
|
|
$ |
16,007 |
|
Upper extremities |
29,137 |
|
|
— |
|
|
29,137 |
|
Biologics |
6,582 |
|
|
— |
|
|
6,582 |
|
Sports med & other |
2,426 |
|
|
— |
|
|
2,426 |
|
Total
International |
$ |
53,825 |
|
|
$ |
327 |
|
|
$ |
54,152 |
|
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
$ |
75,144 |
|
|
$ |
8,003 |
|
|
$ |
83,147 |
|
Upper extremities |
99,308 |
|
|
— |
|
|
99,308 |
|
Biologics |
26,816 |
|
|
— |
|
|
26,816 |
|
Sports med & other |
4,132 |
|
|
— |
|
|
4,132 |
|
Total net
sales |
$ |
205,400 |
|
|
$ |
8,003 |
|
|
$ |
213,403 |
|
|
|
|
|
|
Three months ended June 30, 2019 |
|
Non-GAAP organic and combined pro forma constant currency
net sales growth/(decline) |
|
Legacy Wright (organic) constant currency |
|
Standalone Cartiva |
|
Non-GAAP combined pro forma constant currency |
U.S. |
|
|
|
|
|
Lower extremities |
1.2 |
% |
|
N/A |
|
(0.5 |
)% |
Upper extremities |
14.2 |
% |
|
N/A |
|
14.2 |
% |
Biologics |
16.6 |
% |
|
N/A |
|
16.6 |
% |
Sports med & other |
16.1 |
% |
|
N/A |
|
16.1 |
% |
Total
U.S. |
9.4 |
% |
|
N/A |
|
8.3 |
% |
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
5.2 |
% |
|
N/A |
|
10.6 |
% |
Upper extremities |
12.6 |
% |
|
N/A |
|
12.6 |
% |
Biologics |
(0.6 |
)% |
|
N/A |
|
(0.6 |
)% |
Sports med & other |
18.6 |
% |
|
N/A |
|
18.6 |
% |
Total
International |
9.1 |
% |
|
N/A |
|
10.7 |
% |
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
2.0 |
% |
|
N/A |
|
1.7 |
% |
Upper extremities |
13.8 |
% |
|
N/A |
|
13.8 |
% |
Biologics |
12.4 |
% |
|
N/A |
|
12.4 |
% |
Sports med & other |
17.6 |
% |
|
N/A |
|
17.6 |
% |
Total net
sales |
9.4 |
% |
|
N/A |
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2019 |
|
Legacy Wright (organic) |
|
Standalone Cartiva |
|
Wright Medical Group N.V. |
U.S. |
|
|
|
|
|
Lower extremities |
$ |
123,031 |
|
|
$ |
15,109 |
|
|
$ |
138,140 |
|
Upper extremities |
161,873 |
|
|
— |
|
|
161,873 |
|
Biologics |
46,228 |
|
|
— |
|
|
46,228 |
|
Sports med & other |
4,072 |
|
|
— |
|
|
4,072 |
|
Total
U.S. |
$ |
335,204 |
|
|
$ |
15,109 |
|
|
$ |
350,313 |
|
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
$ |
30,536 |
|
|
$ |
1,998 |
|
|
$ |
32,534 |
|
Upper extremities |
60,619 |
|
|
— |
|
|
60,619 |
|
Biologics |
10,869 |
|
|
— |
|
|
10,869 |
|
Sports med & other |
5,526 |
|
|
— |
|
|
5,526 |
|
Total
International |
$ |
107,550 |
|
|
$ |
1,998 |
|
|
$ |
109,548 |
|
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
$ |
153,567 |
|
|
$ |
17,107 |
|
|
$ |
170,674 |
|
Upper extremities |
222,492 |
|
|
— |
|
|
222,492 |
|
Biologics |
57,097 |
|
|
— |
|
|
57,097 |
|
Sports med & other |
9,598 |
|
|
— |
|
|
9,598 |
|
Total net
sales |
$ |
442,754 |
|
|
$ |
17,107 |
|
|
$ |
459,861 |
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended July 1, 2018 |
|
Standalone Wright Medical Group N.V. |
|
Standalone Cartiva |
|
Non-GAAP combined pro forma |
U.S. |
|
|
|
|
|
Lower extremities |
$ |
116,287 |
|
|
$ |
16,287 |
|
|
$ |
132,574 |
|
Upper extremities |
137,829 |
|
|
— |
|
|
137,829 |
|
Biologics |
38,399 |
|
|
— |
|
|
38,399 |
|
Sports med & other |
3,853 |
|
|
— |
|
|
3,853 |
|
Total
U.S. |
$ |
296,368 |
|
|
$ |
16,287 |
|
|
$ |
312,655 |
|
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
$ |
31,007 |
|
|
$ |
623 |
|
|
$ |
31,630 |
|
Upper extremities |
58,731 |
|
|
— |
|
|
58,731 |
|
Biologics |
11,839 |
|
|
— |
|
|
11,839 |
|
Sports med & other |
5,992 |
|
|
— |
|
|
5,992 |
|
Total
International |
$ |
107,569 |
|
|
$ |
623 |
|
|
$ |
108,192 |
|
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
$ |
147,294 |
|
|
$ |
16,910 |
|
|
$ |
164,204 |
|
Upper extremities |
196,560 |
|
|
— |
|
|
196,560 |
|
Biologics |
50,238 |
|
|
— |
|
|
50,238 |
|
Sports med & other |
9,845 |
|
|
— |
|
|
9,845 |
|
Total net
sales |
$ |
403,937 |
|
|
$ |
16,910 |
|
|
$ |
420,847 |
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2019 |
|
Non-GAAP organic and combined pro forma constant currency
net sales growth/(decline) |
|
Legacy Wright (organic) constant currency |
|
Standalone Cartiva |
|
Non-GAAP combined pro forma constant currency |
U.S. |
|
|
|
|
|
Lower extremities |
5.8 |
% |
|
N/A |
|
4.2 |
% |
Upper extremities |
17.4 |
% |
|
N/A |
|
17.4 |
% |
Biologics |
20.4 |
% |
|
N/A |
|
20.4 |
% |
Sports med & other |
5.7 |
% |
|
N/A |
|
5.7 |
% |
Total
U.S. |
13.1 |
% |
|
N/A |
|
12.0 |
% |
|
|
|
|
|
|
International |
|
|
|
|
|
Lower extremities |
4.0 |
% |
|
N/A |
|
8.3 |
% |
Upper extremities |
9.9 |
% |
|
N/A |
|
9.9 |
% |
Biologics |
(4.3 |
)% |
|
N/A |
|
(4.3 |
)% |
Sports med & other |
(1.6 |
)% |
|
N/A |
|
(1.6 |
)% |
Total
International |
6.0 |
% |
|
N/A |
|
7.2 |
% |
|
|
|
|
|
|
Global |
|
|
|
|
|
Lower extremities |
5.4 |
% |
|
N/A |
|
5.0 |
% |
Upper extremities |
15.2 |
% |
|
N/A |
|
15.2 |
% |
Biologics |
14.6 |
% |
|
N/A |
|
14.6 |
% |
Sports med & other |
1.3 |
% |
|
N/A |
|
1.3 |
% |
Total net
sales |
11.2 |
% |
|
N/A |
|
10.8 |
% |
|
|
|
|
|
|
|
|
Wright Medical Group
N.V.Supplemental Net Sales
Information(unaudited)
|
|
|
Three months ended June 30, 2019 net sales
growth/(decline) |
|
U.S. as reported |
Int’l constant currency |
Int’l as reported |
Global constant currency |
Global as reported |
Product
line |
|
|
|
|
|
Lower extremities |
12 |
% |
13 |
% |
8 |
% |
12 |
% |
12 |
% |
Upper extremities |
14 |
% |
13 |
% |
7 |
% |
14 |
% |
12 |
% |
Biologics |
17 |
% |
(1 |
)% |
(4 |
%) |
12 |
% |
12 |
% |
Sports med & other |
16 |
% |
19 |
% |
12 |
% |
18 |
% |
14 |
% |
Total net sales |
14 |
% |
11 |
% |
6 |
% |
13 |
% |
12 |
% |
|
Six months ended June 30, 2019 net sales
growth/(decline) |
|
U.S. as reported |
Int’l constant currency |
Int’l as reported |
Global constant currency |
Global as reported |
Product
line |
|
|
|
|
|
Lower extremities |
19 |
% |
10 |
% |
5 |
% |
17 |
% |
16 |
% |
Upper extremities |
17 |
% |
10 |
% |
3 |
% |
15 |
% |
13 |
% |
Biologics |
20 |
% |
(4 |
)% |
(8 |
%) |
15 |
% |
14 |
% |
Sports med & other |
6 |
% |
(2 |
)% |
(8 |
%) |
1 |
% |
(3 |
%) |
Total net sales |
18 |
% |
8 |
% |
2 |
% |
15 |
% |
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
Wright Medical Group
N.V.Reconciliation of Adjusted Non-GAAP Earnings
Per Share to Net Loss from Continuing Operations Per
Share (dollars in thousands, except
per share data--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Net loss from
continuing operations, as reported |
$ |
(18,932 |
) |
|
$ |
(90,621 |
) |
|
$ |
(49,188 |
) |
|
$ |
(110,528 |
) |
Weighted-average diluted shares outstanding |
126,267 |
|
|
106,095 |
|
|
126,040 |
|
|
106,000 |
|
Net loss from
continuing operations per share, as reported |
$ |
(0.15 |
) |
|
$ |
(0.85 |
) |
|
$ |
(0.39 |
) |
|
$ |
(1.04 |
) |
Reconciling items: |
|
|
|
|
|
|
|
Non-cash interest expense on convertible notes 1 |
12,133 |
|
|
12,275 |
|
|
24,398 |
|
|
24,287 |
|
Net loss on exchange or extinguishment of debt 2 |
— |
|
|
39,935 |
|
|
14,274 |
|
|
39,935 |
|
Derivatives mark-to-market adjustments 2 |
(816 |
) |
|
32,879 |
|
|
(1,812 |
) |
|
34,573 |
|
Inventory step-up amortization |
352 |
|
|
— |
|
|
704 |
|
|
— |
|
Transition costs |
597 |
|
|
1,325 |
|
|
1,021 |
|
|
2,235 |
|
Foreign currency translation expense 2 |
24 |
|
|
1,893 |
|
|
(276 |
) |
|
2,656 |
|
CVR mark-to-market adjustments 2 |
— |
|
|
(2,523 |
) |
|
(420 |
) |
|
(6,447 |
) |
Contingent consideration fair value adjustment 2 |
1,652 |
|
|
365 |
|
|
2,028 |
|
|
779 |
|
Tax expense due to change in tax rates on income from deferred
intercompany transactions 3 |
2,566 |
|
|
— |
|
|
5,132 |
|
|
— |
|
Gain on investments, net 2 |
(3,266 |
) |
|
— |
|
|
(3,266 |
) |
|
— |
|
U.S. tax benefit resulting from income from discontinued operations
3 |
— |
|
|
(6,183 |
) |
|
— |
|
|
(6,183 |
) |
Tax effect of reconciling items 4 |
(5 |
) |
|
1,069 |
|
|
(10 |
) |
|
859 |
|
Non-GAAP net loss from
continuing operations, as adjusted |
$ |
(5,695 |
) |
|
$ |
(9,586 |
) |
|
$ |
(7,415 |
) |
|
$ |
(17,834 |
) |
Add back amortization of intangible assets |
7,862 |
|
|
6,009 |
|
|
15,449 |
|
|
13,150 |
|
Adjusted non-GAAP
earnings |
$ |
2,167 |
|
|
$ |
(3,577 |
) |
|
$ |
8,034 |
|
|
$ |
(4,684 |
) |
Adjusted non-GAAP weighted-average diluted shares outstanding
5 |
128,616 |
|
|
106,095 |
|
|
128,401 |
|
|
106,000 |
|
Adjusted non-GAAP
earnings per share |
$ |
0.02 |
|
|
$ |
(0.03 |
) |
|
$ |
0.06 |
|
|
$ |
(0.04 |
) |
_______________________________
1 Impacting interest expense, net.
2 Impacting other (income) expense, net.
3 Impacting provision from income taxes.
4 Determined based upon the effective tax rate in the
jurisdiction in which the expense was incurred.
5 Adjusted non-GAAP weighted-average diluted shares
outstanding includes common stock equivalents of 2.3 million and
2.4 million for the three and six months ended June 30, 2019,
respectively, based on the income position of our adjusted non-GAAP
earnings.
Wright Medical Group
N.V.Reconciliation of Non-GAAP Adjusted EBITDA to
Net Loss from Continuing
Operations (dollars in
thousands--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Net loss from
continuing operations |
$ |
(18,932 |
) |
|
$ |
(90,621 |
) |
|
$ |
(49,188 |
) |
|
$ |
(110,528 |
) |
Interest expense, net |
19,995 |
|
|
20,678 |
|
|
39,690 |
|
|
40,490 |
|
Provision (benefit) from
income taxes |
3,434 |
|
|
(4,462 |
) |
|
7,045 |
|
|
(4,257 |
) |
Depreciation |
16,172 |
|
|
13,883 |
|
|
31,673 |
|
|
28,382 |
|
Amortization |
7,862 |
|
|
6,009 |
|
|
15,449 |
|
|
13,150 |
|
Non-GAAP
EBITDA |
$ |
28,531 |
|
|
$ |
(54,513 |
) |
|
$ |
44,669 |
|
|
$ |
(32,763 |
) |
Reconciling items impacting
EBITDA: |
|
|
|
|
|
|
|
Non-cash share-based compensation expense |
7,623 |
|
|
6,061 |
|
|
15,244 |
|
|
11,079 |
|
Other (income) expense, net |
(1,831 |
) |
|
72,747 |
|
|
11,064 |
|
|
71,747 |
|
Inventory step-up amortization |
352 |
|
|
— |
|
|
704 |
|
|
— |
|
Transition costs |
597 |
|
|
1,325 |
|
|
1,021 |
|
|
2,235 |
|
Non-GAAP adjusted
EBITDA |
$ |
35,272 |
|
|
$ |
25,620 |
|
|
$ |
72,702 |
|
|
$ |
52,298 |
|
Net sales from continuing operations |
229,734 |
|
|
205,400 |
|
|
459,861 |
|
|
403,937 |
|
Non-GAAP adjusted
EBITDA margin |
15.4 |
% |
|
12.5 |
% |
|
15.8 |
% |
|
12.9 |
% |
|
Wright Medical Group
N.V.Reconciliation of Non-GAAP Adjusted Gross
Margins to Gross Margins from Continuing
Operations (dollars in
thousands--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Gross profit from
continuing operations, as reported |
$ |
181,396 |
|
|
$ |
159,842 |
|
|
$ |
365,206 |
|
|
$ |
317,240 |
|
Gross margins from
continuing operations, as reported |
79.0 |
% |
|
77.8 |
% |
|
79.4 |
% |
|
78.5 |
% |
Reconciling items impacting
gross profit: |
|
|
|
|
|
|
|
Inventory step-up amortization |
352 |
|
|
— |
|
|
704 |
|
|
— |
|
Transition costs |
— |
|
|
1,326 |
|
|
— |
|
|
2,236 |
|
Non-GAAP gross profit
from continuing operations, as adjusted |
$ |
181,748 |
|
|
$ |
161,168 |
|
|
$ |
365,910 |
|
|
$ |
319,476 |
|
Net sales from continuing operations |
229,734 |
|
|
205,400 |
|
|
459,861 |
|
|
403,937 |
|
Non-GAAP adjusted
gross margins from continuing operations |
79.1 |
% |
|
78.5 |
% |
|
79.6 |
% |
|
79.1 |
% |
|
Wright Medical Group
N.V.Reconciliation of Other Non-GAAP Financial
Measures to Other As Reported
Results (dollars in
thousands--unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Net
sales |
$ |
229,734 |
|
|
$ |
205,400 |
|
|
$ |
459,861 |
|
|
$ |
403,937 |
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense, as reported |
$ |
152,112 |
|
|
$ |
140,826 |
|
|
$ |
305,418 |
|
|
$ |
278,074 |
|
Selling, general and
administrative expense as a percentage of net sales, as
reported |
66.2 |
% |
|
68.6 |
% |
|
66.4 |
% |
|
68.8 |
% |
Reconciling items impacting
selling, general and administrative expense: |
|
|
|
|
|
|
|
Transition costs |
597 |
|
|
— |
|
|
1,021 |
|
|
— |
|
Selling, general and
administrative expense, as adjusted |
$ |
151,515 |
|
|
$ |
140,826 |
|
|
$ |
304,397 |
|
|
$ |
278,074 |
|
Selling, general and
administrative expense as a percentage of net sales, as
adjusted |
66.0 |
% |
|
68.6 |
% |
|
66.2 |
% |
|
68.8 |
% |
|
Wright Medical Group
N.V.Condensed Consolidated Balance
Sheets(dollars in thousands--unaudited)
|
June 30, 2019 |
|
December 30, 2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
150,574 |
|
|
$ |
191,351 |
|
Accounts receivable, net |
139,680 |
|
|
141,019 |
|
Inventories |
194,720 |
|
|
180,690 |
|
Prepaid expenses and other current assets |
294,568 |
|
|
90,172 |
|
Total current assets |
779,542 |
|
|
603,232 |
|
|
|
|
|
Property, plant and equipment, net |
239,734 |
|
|
224,929 |
|
Goodwill and intangible assets, net |
1,537,490 |
|
|
1,551,286 |
|
Other assets |
205,918 |
|
|
314,954 |
|
Total assets |
$ |
2,762,684 |
|
|
$ |
2,694,401 |
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
43,949 |
|
|
$ |
48,359 |
|
Accrued expenses and other current liabilities |
395,106 |
|
|
217,081 |
|
Current portion of long-term obligations |
417,911 |
|
|
201,686 |
|
Total current liabilities |
856,966 |
|
|
467,126 |
|
Long-term obligations |
727,348 |
|
|
913,441 |
|
Other liabilities |
272,340 |
|
|
381,375 |
|
Total liabilities |
1,856,654 |
|
|
1,761,942 |
|
|
|
|
|
Shareholders’ equity |
906,030 |
|
|
932,459 |
|
Total liabilities and shareholders’ equity |
$ |
2,762,684 |
|
|
$ |
2,694,401 |
|
Investors & Media:
Julie D. Dewey Sr. Vice President, Chief Communications
OfficerWright Medical Group N.V.(901)
290-5817julie.dewey@wright.com
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