Third Quarter 2018 Net Sales of $194
Million, 13.8% as Reported Growth and 14.4% Constant Currency
Growth
Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial
results for its third quarter ended September 30, 2018 and
increased its 2018 annual guidance. Unless otherwise noted,
all net sales growth rates in this release are stated on a constant
currency basis.
Net sales totaled $194.1 million during the third quarter ended
September 30, 2018, representing 13.8% as reported and 14.4%
constant currency growth, an estimated 150 basis point improvement
versus the second quarter of 2018. Gross margins were 77.2%
during the quarter and were 77.9% 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, stated,
“Our team produced outstanding results across the board in the
third quarter, including over 14% constant currency net sales
growth, fueled by our new product launches, ongoing rollouts and
increased contributions from our sales organization. These
results include continued strong performance in our U.S. upper
extremities business, which grew 19% in the third quarter, driven
by 21% growth in our U.S. shoulder business. We anticipate
that continued penetration of our SIMPLICITI shoulder system, our
ongoing PERFORM Reversed launch and accelerating adoption of our
BLUEPRINT enabling technology will continue to drive market-leading
shoulder sales growth in 2018.”
Palmisano commented, “Our U.S. lower extremities growth rate
accelerated to 12% in the third quarter, driven by approximately
22% growth in total ankle and a return to market growth in our core
lower extremities business. Additionally, the launch of
AUGMENT Injectable is off to a strong start and provided an
excellent boost to the U.S. biologics business, which grew
approximately 11% this quarter, up from 5% in the second quarter of
2018.”
Palmisano further commented, “With the Cartiva acquisition now
closed, we significantly strengthened our market-leading lower
extremities portfolio by adding Cartiva’s highly differentiated
Synthetic Cartilage Implant (SCI), the first and only PMA product
for the treatment of great toe osteoarthritis. Supported by
compelling clinical performance and the only product of its kind
backed by Level I clinical evidence, Cartiva is experiencing rapid
commercial adoption and is well positioned for future growth as it
addresses large markets with significant unmet needs and strong
patient demand. We expect this acquisition to support our
growth prospects in our core lower extremities business throughout
2019 and beyond.”
Net loss from continuing operations for the third quarter of
2018 totaled $35.8 million, or $(0.32) per diluted share.
The company’s net loss from continuing operations for the third
quarter of 2018 included the after-tax impacts of non-cash
interest expense of $12.3 million related to its convertible notes,
an unrealized loss of $3.4 million related to mark-to-market
adjustments on contingent value rights (CVRs) issued in connection
with the BioMimetic acquisition, a $2.2 million U.S. tax
provision within continuing operations recorded as a result of the
year to date pre-tax gain recognized within discontinued operations
due to the previously announced $30.75 million insurance
settlement, $2.0 million of transaction and transition costs
associated with the Cartiva acquisition and non-cash inventory
provisions, and non-cash foreign currency translation charges of
$0.2 million.
The company's third quarter 2018 non-GAAP net loss from
continuing operations, as adjusted for the above items, was $15.5
million. The company's third quarter 2018 non-GAAP adjusted
EBITDA from continuing operations, as defined in the non-GAAP to
GAAP reconciliation provided later in this release, was $20.6
million. The attached financial tables include reconciliations of
all historical non-GAAP measures to the most comparable GAAP
measures.
Cash and cash equivalents totaled $694.9 million as of the end
of the third quarter of 2018. $435 million of this cash
balance was paid out on October 10, 2018 at the close of the
Cartiva acquisition.
Palmisano concluded, “We are increasing our full-year guidance
to reflect both the overperformance in our existing business as
well as the addition of Cartiva. I believe we are set up well
for the remainder of 2018 and next year. Our end markets
remain healthy and fast growing, our gross margins are outstanding,
and our new product pipeline is full of innovative and commercially
impactful products and surgical solutions across all parts of our
business.”
Outlook
Wright today raised its full-year 2018 net sales guidance,
excluding the impact of the Cartiva acquisition, to approximately
$825 million to $828 million, from its previous guidance of
approximately $812 million to $822 million. This guidance
range assumes foreign currency exchange rates for the remainder of
the year that are generally in line with current rates. In
addition, this range implies full-year 2018 constant currency net
sales growth of 11% to 12%, excluding the estimated $9 million
impact of the four fewer selling days in fourth quarter of
2018. Additionally, the company is providing guidance on the
impact of the Cartiva acquisition. From the date of closing,
which was October 10, 2018, Cartiva is anticipated to provide
approximately $7 million of net sales in 2018, resulting in as
reported net sales guidance of $832 million to $835 million.
The company is raising its full-year 2018 non-GAAP adjusted EBITDA
from continuing operations guidance, as described in the non-GAAP
reconciliation provided later in this release, to a range of $110
million to $116 million from its previous range of $106 million to
$113 million. Cartiva is estimated to be roughly neutral to
2018 non-GAAP adjusted EBITDA on an as reported basis.
The company expects 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 2018 to be a loss of $0.08 to $0.03 per
diluted share.
The company estimates approximately 112.6 million diluted
weighted average ordinary shares outstanding for fiscal year 2018,
and 127.2 million non-GAAP adjusted diluted weighted average
ordinary shares outstanding for the fourth quarter of 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; 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;
mark-to-market adjustments to CVRs; non-cash mark-to-market
derivative adjustments; non-cash gains and losses associated with
foreign currency translation of balances denominated in foreign
currencies; and charges for non-cash amortization expenses, net of
taxes. 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 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 2018 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 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, 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 third quarter of 2018 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 November 7, 2018 through November 14, 2018.
To hear this replay, dial (855) 859-2056 (U.S.) / (404) 537-3406
(Outside U.S.) and enter code 9295624. 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; 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, non-cash loss
on extinguishment of debt, transaction and transition costs, net
gains and losses on mark-to-market adjustments on CVRs and
derivative assets and liabilities, net non-cash gains and losses on
foreign currency translation 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 2018 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,” “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 2018, including net sales from continuing operations,
adjusted EBITDA from continuing operations and adjusted earnings
per share from continuing operations, anticipated continued strong
shoulder sales growth and accelerating adoption of our BLUEPRINT
enabling technology, and the anticipated success of Cartiva’s SCI
and its contribution to growth for our U.S. lower extremities
business for the remainder of 2018 and throughout 2019.
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 2018, failure to achieve the
anticipated financial benefits of the recent Cartiva acquisition,
unanticipated clinical performance issues with Cartiva products or
the introduction of competitive products with clinical performance
attributes that are superior to Cartiva products, failure to
achieve wide market acceptance of the Cartiva products due to
clinical, regulatory, cost, reimbursement or other issues, the
failure of the company’s 2017 U.S. sales force additions to achieve
expected results, delay or failure to drive U.S. lower extremities
or biologics sales to anticipated levels; continued supply
constraints; failure to integrate the legacy Wright and Tornier
businesses and realize net sales synergies and cost savings from
the merger with Tornier or delay in realization thereof; operating
costs and business disruption as a result of the merger, including
adverse effects on employee retention and sales force productivity
and on business relationships with third parties; integration
costs; actual or contingent liabilities; adverse effects of
diverting resources and attention to providing transition services
to the purchaser of the large joints business; 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 our 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
agreement and the settlement agreement with the three settling
insurers; risks associated with the subsequent metal-on-metal
settlement agreements and ability to obtain the additional new
insurance proceeds contingent thereon; 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 31, 2017 filed by Wright with the SEC on February 28, 2018
and subsequent SEC filings by Wright, including without limitation
its Quarterly Report on Form 10-Q for the quarter ended July 1,
2018 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018 to be filed with the SEC. 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 |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
September 30,
2018 |
|
September 24,
2017 |
Net sales |
$ |
194,106 |
|
|
$ |
170,503 |
|
|
$ |
598,043 |
|
|
$ |
527,387 |
|
Cost of sales |
44,307 |
|
|
38,421 |
|
|
131,004 |
|
|
113,669 |
|
Gross profit |
149,799 |
|
|
132,082 |
|
|
467,039 |
|
|
413,718 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
139,223 |
|
|
131,421 |
|
|
417,297 |
|
|
392,073 |
|
Research and development |
13,829 |
|
|
11,992 |
|
|
42,393 |
|
|
36,971 |
|
Amortization of intangible assets |
5,881 |
|
|
7,178 |
|
|
19,031 |
|
|
21,574 |
|
Total operating expenses |
158,933 |
|
|
150,591 |
|
|
478,721 |
|
|
450,618 |
|
Operating loss |
(9,134 |
) |
|
(18,509 |
) |
|
(11,682 |
) |
|
(36,900 |
) |
Interest expense, net |
19,753 |
|
|
18,978 |
|
|
60,243 |
|
|
55,512 |
|
Other expense, net |
3,902 |
|
|
5,457 |
|
|
75,649 |
|
|
6,875 |
|
Loss from continuing operations before income
taxes |
(32,789 |
) |
|
(42,944 |
) |
|
(147,574 |
) |
|
(99,287 |
) |
Provision (benefit) for income taxes |
3,040 |
|
|
(8,822 |
) |
|
(1,217 |
) |
|
(7,498 |
) |
Net loss from continuing operations |
$ |
(35,829 |
) |
|
$ |
(34,122 |
) |
|
$ |
(146,357 |
) |
|
$ |
(91,789 |
) |
(Loss) income from discontinued operations, net of tax |
(6,696 |
) |
|
(97,748 |
) |
|
10,620 |
|
|
(139,942 |
) |
Net loss |
$ |
(42,525 |
) |
|
$ |
(131,870 |
) |
|
$ |
(135,737 |
) |
|
$ |
(231,731 |
) |
|
|
|
|
|
|
|
|
Net loss from continuing operations per share, basic and
diluted |
$ |
(0.32 |
) |
|
$ |
(0.33 |
) |
|
$ |
(1.35 |
) |
|
$ |
(0.88 |
) |
Net (loss) income from discontinued operations per share, basic and
diluted |
$ |
(0.06 |
) |
|
$ |
(0.93 |
) |
|
$ |
0.10 |
|
|
$ |
(1.34 |
) |
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
$ |
(0.38 |
) |
|
$ |
(1.26 |
) |
|
$ |
(1.25 |
) |
|
$ |
(2.22 |
) |
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding-basic and
diluted |
113,043 |
|
|
104,836 |
|
|
108,348 |
|
|
104,292 |
|
Wright Medical Group
N.V.Consolidated Net Sales
Analysis(dollars in thousands--unaudited)
|
Three months
ended |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
%change |
|
September 30,
2018 |
|
September 24,
2017 |
|
%change |
U.S. |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
57,602 |
|
|
$ |
51,417 |
|
|
12.0 |
% |
|
$ |
173,889 |
|
|
$ |
161,228 |
|
|
7.9 |
% |
Upper extremities |
65,334 |
|
|
54,788 |
|
|
19.2 |
% |
|
203,163 |
|
|
168,280 |
|
|
20.7 |
% |
Biologics |
20,654 |
|
|
18,640 |
|
|
10.8 |
% |
|
59,053 |
|
|
56,547 |
|
|
4.4 |
% |
Sports med & other |
1,975 |
|
|
2,019 |
|
|
(2.2 |
)% |
|
5,828 |
|
|
5,899 |
|
|
(1.2 |
)% |
Total U.S. |
$ |
145,565 |
|
|
$ |
126,864 |
|
|
14.7 |
% |
|
$ |
441,933 |
|
|
$ |
391,954 |
|
|
12.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
13,501 |
|
|
$ |
13,963 |
|
|
(3.3 |
)% |
|
$ |
44,508 |
|
|
$ |
42,372 |
|
|
5.0 |
% |
Upper extremities |
25,681 |
|
|
21,197 |
|
|
21.2 |
% |
|
84,412 |
|
|
66,606 |
|
|
26.7 |
% |
Biologics |
6,549 |
|
|
5,193 |
|
|
26.1 |
% |
|
18,388 |
|
|
15,492 |
|
|
18.7 |
% |
Sports med & other |
2,810 |
|
|
3,286 |
|
|
(14.5 |
)% |
|
8,802 |
|
|
10,963 |
|
|
(19.7 |
)% |
Total International |
$ |
48,541 |
|
|
$ |
43,639 |
|
|
11.2 |
% |
|
$ |
156,110 |
|
|
$ |
135,433 |
|
|
15.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
|
|
|
|
|
|
|
Lower extremities |
$ |
71,103 |
|
|
$ |
65,380 |
|
|
8.8 |
% |
|
$ |
218,397 |
|
|
$ |
203,600 |
|
|
7.3 |
% |
Upper extremities |
91,015 |
|
|
75,985 |
|
|
19.8 |
% |
|
287,575 |
|
|
234,886 |
|
|
22.4 |
% |
Biologics |
27,203 |
|
|
23,833 |
|
|
14.1 |
% |
|
77,441 |
|
|
72,039 |
|
|
7.5 |
% |
Sports med & other |
4,785 |
|
|
5,305 |
|
|
(9.8 |
)% |
|
14,630 |
|
|
16,862 |
|
|
(13.2 |
)% |
Total net sales |
$ |
194,106 |
|
|
$ |
170,503 |
|
|
13.8 |
% |
|
$ |
598,043 |
|
|
$ |
527,387 |
|
|
13.4 |
% |
Wright Medical Group
N.V.Supplemental Net Sales
Information(unaudited)
|
Three months ended
September 30, 2018 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% |
(1%) |
(3%) |
9% |
9% |
Upper extremities |
19% |
23% |
21% |
20% |
20% |
Biologics |
11% |
29% |
26% |
15% |
14% |
Sports med & other |
(2%) |
(14%) |
(14%) |
(9%) |
(10%) |
Total net sales |
15% |
13% |
11% |
14% |
14% |
|
Nine months ended
September 30, 2018 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 |
8% |
1% |
5% |
6% |
7% |
Upper extremities |
21% |
20% |
27% |
21% |
22% |
Biologics |
4% |
18% |
19% |
7% |
7% |
Sports med & other |
(1%) |
(25%) |
(20%) |
(16%) |
(13%) |
Total net sales |
13% |
10% |
15% |
12% |
13% |
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 |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
September 30,
2018 |
|
September 24,
2017 |
Net loss from continuing operations, as
reported |
$ |
(35,829 |
) |
|
$ |
(34,122 |
) |
|
$ |
(146,357 |
) |
|
$ |
(91,789 |
) |
Net loss from continuing operations per share, as
reported |
$ |
(0.32 |
) |
|
$ |
(0.33 |
) |
|
$ |
(1.35 |
) |
|
$ |
(0.88 |
) |
Reconciling items: |
|
|
|
|
|
|
|
Non-cash interest expense on convertible notes
1 |
12,326 |
|
|
11,494 |
|
|
36,613 |
|
|
33,743 |
|
Non-cash loss on extinguishment of debt 2 |
— |
|
|
— |
|
|
39,935 |
|
|
— |
|
Derivatives mark-to-market adjustments 2 |
(230 |
) |
|
(199 |
) |
|
34,343 |
|
|
(4,163 |
) |
Transaction and transition costs |
1,952 |
|
|
3,311 |
|
|
4,187 |
|
|
9,485 |
|
Foreign currency translation expense 2 |
238 |
|
|
— |
|
|
2,894 |
|
|
— |
|
CVR mark-to-market adjustments 2 |
3,363 |
|
|
4,485 |
|
|
(3,084 |
) |
|
6,721 |
|
Contingent consideration fair value adjustment
2 |
327 |
|
|
133 |
|
|
1,106 |
|
|
309 |
|
Tax benefit related to realizability of net
operating losses |
— |
|
|
(8,928 |
) |
|
— |
|
|
(8,928 |
) |
U.S. tax provision (benefit) resulting from income
from discontinued operations |
2,216 |
|
|
— |
|
|
(3,967 |
) |
|
— |
|
Tax effect of reconciling items 3 |
106 |
|
|
— |
|
|
965 |
|
|
(70 |
) |
Non-GAAP net loss from continuing operations, as
adjusted |
$ |
(15,531 |
) |
|
$ |
(23,826 |
) |
|
$ |
(33,365 |
) |
|
$ |
(54,692 |
) |
Add back amortization of intangible assets |
5,881 |
|
|
7,178 |
|
|
19,031 |
|
|
21,574 |
|
Adjusted non-GAAP earnings |
$ |
(9,650 |
) |
|
$ |
(16,648 |
) |
|
$ |
(14,334 |
) |
|
$ |
(33,118 |
) |
Weighted-average basic shares outstanding |
113,043 |
|
|
104,836 |
|
|
108,348 |
|
|
104,292 |
|
Adjusted non-GAAP earnings per share |
$ |
(0.09 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.32 |
) |
_______________________________
1 Impacting interest expense, net
2 Impacting other expense, net
3 Determined based upon the effective tax rate in the
jurisdiction in which the expense was incurred.
Wright Medical Group
N.V.Reconciliation of Non-GAAP Adjusted EBITDA to
Net Loss from Continuing
Operations (dollars in
thousands--unaudited)
|
Three months
ended |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
September 30,
2018 |
|
September 24,
2017 |
Net loss from continuing operations |
$ |
(35,829 |
) |
|
$ |
(34,122 |
) |
|
$ |
(146,357 |
) |
|
$ |
(91,789 |
) |
Interest expense, net |
19,753 |
|
|
18,978 |
|
|
60,243 |
|
|
55,512 |
|
Provision (benefit) from income taxes |
3,040 |
|
|
(8,822 |
) |
|
(1,217 |
) |
|
(7,498 |
) |
Depreciation |
14,604 |
|
|
15,000 |
|
|
42,986 |
|
|
42,124 |
|
Amortization |
5,881 |
|
|
7,178 |
|
|
19,031 |
|
|
21,574 |
|
Non-GAAP EBITDA |
$ |
7,449 |
|
|
$ |
(1,788 |
) |
|
$ |
(25,314 |
) |
|
$ |
19,923 |
|
Reconciling items impacting EBITDA: |
|
|
|
|
|
|
|
Non-cash share-based compensation expense |
7,257 |
|
|
5,445 |
|
|
18,336 |
|
|
14,131 |
|
Other expense, net |
3,902 |
|
|
5,457 |
|
|
75,649 |
|
|
6,875 |
|
Transaction and transition costs |
1,952 |
|
|
3,311 |
|
|
4,187 |
|
|
9,485 |
|
Non-GAAP adjusted EBITDA |
$ |
20,560 |
|
|
$ |
12,425 |
|
|
$ |
72,858 |
|
|
$ |
50,414 |
|
Net sales from continuing operations |
194,106 |
|
|
170,503 |
|
|
598,043 |
|
|
527,387 |
|
Non-GAAP adjusted EBITDA margin |
10.6 |
% |
|
7.3 |
% |
|
12.2 |
% |
|
9.6 |
% |
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 |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
September 30,
2018 |
|
September 24,
2017 |
Gross profit from continuing operations, as
reported |
$ |
149,799 |
|
|
$ |
132,082 |
|
|
$ |
467,039 |
|
|
$ |
413,718 |
|
Gross margins from continuing operations, as
reported |
77.2 |
% |
|
77.5 |
% |
|
78.1 |
% |
|
78.4 |
% |
Reconciling items impacting gross profit: |
|
|
|
|
|
|
|
Transaction and transition costs |
1,385 |
|
|
1,310 |
|
|
3,620 |
|
|
1,995 |
|
Non-GAAP gross profit from continuing operations, as
adjusted |
$ |
151,184 |
|
|
$ |
133,392 |
|
|
$ |
470,659 |
|
|
$ |
415,713 |
|
Net sales from continuing operations |
194,106 |
|
|
170,503 |
|
|
598,043 |
|
|
527,387 |
|
Non-GAAP adjusted gross margins from continuing
operations |
77.9 |
% |
|
78.2 |
% |
|
78.7 |
% |
|
78.8 |
% |
Wright Medical Group
N.V.Reconciliation of Other Non-GAAP Financial
Measures to Other As Reported
Results (dollars in
thousands--unaudited)
|
Three months
ended |
|
Nine months
ended |
|
September 30,
2018 |
|
September 24,
2017 |
|
September 30,
2018 |
|
September 24,
2017 |
Net sales |
$ |
194,106 |
|
|
$ |
170,503 |
|
|
$ |
598,043 |
|
|
$ |
527,387 |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense, as
reported |
$ |
139,223 |
|
|
$ |
131,421 |
|
|
$ |
417,297 |
|
|
$ |
392,073 |
|
Selling, general and administrative expense as a percentage of net
sales, as reported |
71.7 |
% |
|
77.1 |
% |
|
69.8 |
% |
|
74.3 |
% |
Reconciling items impacting selling, general and administrative
expense: |
|
|
|
|
|
|
|
Transaction and transition costs - selling, general
and administrative |
567 |
|
|
1,878 |
|
|
567 |
|
|
7,267 |
|
Selling, general and administrative expense, as
adjusted |
$ |
138,656 |
|
|
$ |
129,543 |
|
|
$ |
416,730 |
|
|
$ |
384,806 |
|
Selling, general and administrative expense as a percentage
of net sales, as adjusted |
71.4 |
% |
|
76.0 |
% |
|
69.7 |
% |
|
73.0 |
% |
|
|
|
|
|
|
|
|
Research & development expense, as
reported |
$ |
13,829 |
|
|
$ |
11,992 |
|
|
$ |
42,393 |
|
|
$ |
36,971 |
|
Research & development expense as a percentage of net sales, as
reported |
7.1 |
% |
|
7.0 |
% |
|
7.1 |
% |
|
7.0 |
% |
Reconciling items impacting research & development
expense: |
|
|
|
|
|
|
|
Transaction and transition costs - research &
development |
— |
|
|
122 |
|
|
— |
|
|
222 |
|
Research & development expense, as
adjusted |
$ |
13,829 |
|
|
$ |
11,870 |
|
|
$ |
42,393 |
|
|
$ |
36,749 |
|
Research & development expense as a percentage of net
sales, as adjusted |
7.1 |
% |
|
7.0 |
% |
|
7.1 |
% |
|
7.0 |
% |
Wright Medical Group
N.V.Condensed Consolidated Balance
Sheets(dollars in thousands--unaudited)
|
September 30,
2018 |
|
December 31,
2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
694,903 |
|
|
$ |
167,740 |
|
Accounts receivable, net |
122,595 |
|
|
130,610 |
|
Inventories |
179,494 |
|
|
168,144 |
|
Prepaid expenses and other current assets 1 |
326,743 |
|
|
100,400 |
|
Total current assets |
1,323,735 |
|
|
566,894 |
|
|
|
|
|
Property, plant and equipment, net |
221,175 |
|
|
212,379 |
|
Goodwill and intangible assets, net |
1,130,966 |
|
|
1,164,663 |
|
Other assets 1 |
163,419 |
|
|
184,788 |
|
Total assets |
$ |
2,839,295 |
|
|
$ |
2,128,724 |
|
|
|
|
|
Liabilities and shareholders' equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
45,057 |
|
|
$ |
41,831 |
|
Accrued expenses and other current liabilities
1 |
506,322 |
|
|
314,558 |
|
Current portion of long-term obligations 1 |
514,930 |
|
|
58,906 |
|
Total current liabilities |
1,066,309 |
|
|
415,295 |
|
Long-term obligations 1 |
586,582 |
|
|
836,208 |
|
Other liabilities 1 |
227,906 |
|
|
288,525 |
|
Total liabilities |
1,880,797 |
|
|
1,540,028 |
|
|
|
|
|
Shareholders' equity |
958,498 |
|
|
588,696 |
|
Total liabilities and shareholders' equity |
$ |
2,839,295 |
|
|
$ |
2,128,724 |
|
___________________________
1 As of September 30, 2018, the closing
price of our ordinary shares was greater than 130% of the 2021
Notes conversion price for 20 or more of the 30 consecutive trading
days preceding the quarter-end; and, therefore, the holders of the
2021 Notes may convert the notes during the succeeding quarterly
period. Due to the ability of the holders of the 2021 Notes to
convert the notes during this period, the carrying value of the
2021 Notes and the fair value of the 2021 Notes Conversion
Derivative were classified as current liabilities, and the fair
value of the 2021 Notes Hedges were classified as current assets as
of September 30, 2018. The respective balances were classified as
long-term as of December 31, 2017. Additionally, the holders of the
2020 Notes will have the ability to begin converting their 2020
Notes beginning August 15, 2019 through their maturity. Due to the
ability of the holders of the 2020 Notes to convert within the next
year, the carrying value of the 2020 Notes and the fair value of
the 2020 Notes Conversion Derivative were classified as current
liabilities, and the fair value of the 2020 Notes Hedges were
classified as current assets as of September 30, 2018. The
respective balances were classified as long-term as of December 31,
2017.
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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