LEWISVILLE, Texas–(BUSINESS WIRE)–Orthofix International N.V. (NASDAQ:OFIX) today reported its financial results for the second quarter ended June 30, 2015, including net sales of $101.0 million, diluted earnings per share from continuing operations of $0.21 and adjusted diluted earnings per share of $0.36.
“I am pleased with our second quarter results and the improving outlook for our business reflected in our higher guidance. While I believe this quarter demonstrates that we have put the right strategies in place and are making good progress, we need to continue to execute against our plan to drive similar or better results going forward,” said President and Chief Executive Officer, Brad Mason.
Second Quarter Financial Results
The following table provides net sales and constant currency net sales growth by strategic business unit (“SBU”) for the three months ended June 30, 2015 and 2014, respectively:
| Three Months Ended June 30, | ||||||||||||||||
| Constant | ||||||||||||||||
|
|
Reported | Currency | ||||||||||||||
|
(Unaudited, U.S. Dollars, in thousands) |
2015 | 2014 | Growth | Growth | ||||||||||||
| BioStim | $ | 40,703 | $ | 39,513 | 3 | % | 3 | % | ||||||||
| Biologics | 15,274 | 13,853 | 10 | % | 10 | % | ||||||||||
| Extremity Fixation | 25,594 | 27,303 | (6 | )% | 12 | % | ||||||||||
| Spine Fixation | 19,383 | 20,316 | (5 | )% | (4 | )% | ||||||||||
| Total net sales | $ | 100,954 | $ | 100,985 | (0 | )% | 5 | % | ||||||||
Net sales were flat at $101.0 million compared to the same prior year period; however, net sales increased by approximately 5.0% on a constant currency basis. Net sales increased in our BioStim and Biologics SBUs due primarily to continued expansion of our sales channels and improving execution of our commercial strategies. Net sales in our Extremity Fixation SBU decreased 6.3% (an increase of 11.8% on a constant currency basis) compared to the same prior year period. The increase in constant currency terms was primarily due to cash collections from customers. Net sales in our Spine Fixation SBU decreased 4.6% year-over-year; however, second quarter sales grew 19.0% sequentially over the first quarter, highlighting the success of the team and strategies that were put in place late last year.
Gross margin was 78.3% compared to 74.8% for the same prior year period. Gross profit increased $3.4 million to $79.0 million, compared to $75.6 million in the same prior year period, primarily due to the effects of foreign exchange rates and lower charges for inventory shrinkage in 2015 when compared to the same period of 2014. In the second quarter of 2014, we incurred $1.9 million of charges for inventory shrinkage as a result of physical counts of our field inventory as part of the remediation activities that followed our Original Restatement.
Total net margin (gross profit less sales and marketing expenses) was $36.1 million, or 35.8% of net sales, an increase of 7.6% from $33.6 million, or 33.2% of net sales, in the second quarter of 2014. The increase in net margin was driven by the increase in gross profit offset somewhat by the planned increase in sales management and field-based education and training personnel.
Operating expenses increased by $5.2 million to $74.1 million, compared to $68.9 million in the prior year period. The increase in operating expenses was primarily a result of an increase in general and administrative expenses as the Company invested in its infrastructure, an increase in share-based compensation, costs related to legal judgment, and an increase in professional fees and personnel costs within our finance department as part of our internal control remediation efforts. Operating income was $4.9 million for the quarter compared to $6.7 million in the second quarter of 2014.
Adjusted EBITDA from continuing operations, which excludes share-based compensation, foreign exchange impact, strategic investments, restatements and related costs, infrastructure investments, legal judgment, and gain on sale of assets, was $17.2 million or 17.1% of net sales for the quarter, compared to $16.2 million or 16.1% of net sales in the same prior year period.
Net income from continuing operations for the quarter was $4.1 million, or $0.21 per diluted share, compared to net income of $3.3 million, or $0.18 per diluted share, in the same prior year period.
Adjusted net income from continuing operations for the quarter was $6.8 million, or $0.36 per diluted share, compared to adjusted net income from continuing operations of $4.6 million, or $0.25 per diluted share, in the same prior year period.
As of June 30, 2015, cash and cash equivalents were $55.9 million compared to $71.2 million, which includes restricted cash, as of December 31, 2014. As of June 30, 2015, the Company had no outstanding indebtedness and borrowing capacity of $100 million. The Company’s current credit facility expires August 30, 2015, and the Company is currently in negotiations to renew the credit facility, which it expects to have completed prior to the expiration of the current facility.
Fiscal 2015 Outlook
The fiscal year 2015 outlook below assumes constant currency exchange rates from those currently prevailing:
| Previous Quarter | Current Quarter | ||||
| 2015 Outlook | 2015 Outlook | ||||
| Net Sales |
$385 million — $390 million |
$390 million — $395 million1 |
|||
| Adjusted EBITDA |
$55 million — $58 million |
$57 million — $60 million2 |
|||
1 Represents a year over year increase of 0.6% to 1.9% on a constant currency basis and a decrease of 3.1% to 1.8% on a reported basis.
2 Represents a year over year decrease of 13.0% to 8.4% on a constant currency basis and a decrease of 12.8% to 8.3% on a reported basis.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company’s financial results for the second quarter 2015. Interested parties may access the conference call by dialing (888) 510-1765 in the U.S. and (719) 325-2432 outside the U.S., and referencing the conference ID 7192399. A replay of the call will be available for two weeks by dialing (888) 203-1112 in the U.S. and (719) 457-0820 outside the U.S., and entering the conference ID 7192399. A webcast of the conference call may be accessed by going to the Company’s website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.
About Orthofix
Orthofix International N.V. is a diversified, global medical device company focused on improving patients’ lives by providing superior reconstructive and regenerative orthopedic and spine solutions to physicians worldwide. Headquartered in Lewisville, Texas, the Company has four strategic business units that include BioStim, Biologics, Extremity Fixation and Spine Fixation. Orthofix products are widely distributed via the Company’s sales representatives, distributors and its subsidiaries. In addition, Orthofix is collaborating on research and development activities with leading clinical organizations such as the Musculoskeletal Transplant Foundation and the Texas Scottish Rite Hospital for Children. For more information, please visit www.orthofix.com.
