May 03, 2018
ALACHUA, Fla.–(BUSINESS WIRE)–RTI Surgical, Inc. (Nasdaq:RTIX), a global surgical implant company, reported operating results for the first quarter of 2018.
“2018 is off to a positive start with the acquisition of Zyga at the very beginning of the year and a solid financial performance this quarter,” said Camille Farhat, chief executive officer. “The continued strength of our OEM and International franchises demonstrates the importance of our overall portfolio toward the achievement of our long-term strategic goals. With our senior team in place for the first full quarter, our strategic transformation is accelerating and we continue to deliver on our commitments.”
Farhat added, “Thanks to the hard work of numerous people across the Company, we successfully completed the acquisition of Zyga Technology and are well ahead of plan on the integration. The Zyga team hit the ground running, are a strong cultural fit with RTI and have maintained their focus and positive procedural momentum. In addition to differentiated product technology supported by strong clinical evidence, we gained a tremendous team with many individuals taking broader leadership roles at RTI.”
First Quarter 2018
RTI’s worldwide revenues for the first quarter of 2018 were $69.9 million, comparable with the prior year first quarter. First quarter revenues were driven by growth in the OEM and International lines of business, which were partially offset by declines in Sports and Spine and a $3.2 million reduction from the sale of substantially all the assets of the cardiothoracic closure business completed in August 2017. Gross profit for the first quarter of 2018 was $33.7 million, or 48.2% of revenues, compared to $35.8 million, or 51.2% of revenues, in the first quarter of 2017. 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 2018, RTI incurred non-recurring pre-tax charges to support the ongoing strategic transformation of the business. The company incurred $0.9 million in severance and restructuring charges primarily in support of initiatives to reduce the complexity of its international organizational structure; $0.1 million related to asset impairment and abandonments of certain long-term assets as part of efforts to reduce complexity and improve operational excellence; and $0.8 million in expenses related to the January 2018 acquisition of Zyga Technology to support the acceleration of growth. During the first quarter of 2017, the company incurred $4.4 million of non-recurring pre-tax charges.
Net loss applicable to common shares was $1.9 million, or $0.03 per fully diluted common share in the first quarter of 2018, compared to a net loss applicable to common shares of $2.8 million, or $0.05 per fully diluted common share in the first quarter of 2017. As outlined in the reconciliation tables that follow, excluding the impact of the various non-recurring 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 2018.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), for the first quarter of 2018 was $7.8 million, or 11% of revenues compared with $6.5 million, or 9% of revenues for the first quarter of 2017. The increase in Adjusted EBITDA is primarily driven by the reduction in operating expenses associated with efforts to reduce complexity and increase operational excellence implemented during 2017.
Fiscal 2018 Outlook
Based on our recent financial results and current business outlook, the Company is reiterating financial guidance for 2018, originally issued on January 5, 2018:
- The Company expects full year revenues in the range of $280 million and $290 million.
- The Company expects full year Adjusted EBITDA to be in the range of $32 million to $38 million.
Farhat explained, “As we continue to reduce the complexity of our operations, we remain committed to evaluating our portfolio and exploring partnership opportunities with organizations that are well positioned to be better stewards of selected assets. Our efforts to drive operational excellence focus on implementing lean manufacturing across facilities, as we continue to strengthen the organization and invest in the company. With our senior team in place and now operating efficiently, I am shifting more of my energy towards accelerating growth, by starting to rebuild the R&D pipeline and actively seeking attractive M&A opportunities at logical valuations.”
The Company noted the following assumptions are included in its guidance:
- Relatively stable market conditions and regulatory environment;
- Positive revenue contribution from the acquisition of Zyga Technology – announced January 4, 2018;
- Ongoing positive impact of efforts to reduce complexity and implement operational excellence; and
- Continued marketing of map3® cellular allogeneic bone graft and minimal negative revenue impact related to recent FDA warning letter.
Conference Call
RTI 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). The webcast can be accessed through the investor section of RTI’s website at www.rtix.com. A replay of the conference call will be available on RTI’s website for one month following the call.
About RTI Surgical, 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, general surgery, spine, orthopedic and trauma procedures and are distributed in nearly 50 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.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. In addition, except for historical information, any statements made in this communication about anticipated financial results, growth rates, new product introductions, future operational improvements and results or regulatory actions or approvals or changes to agreements with distributors also are forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties, including the risks described in public filings with the U.S. 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.
| RTI SURGICAL, INC. AND SUBSIDIARIES | ||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||
| (Unaudited, in thousands, except share and per share data) | ||||||||||
| Three months ended | ||||||||||
| March 31, | ||||||||||
| 2018 | 2017 | |||||||||
| Revenues | $ | 69,890 | $ | 69,939 | ||||||
| Costs of processing and distribution | 36,208 | 34,160 | ||||||||
| Gross profit | 33,682 | 35,779 | ||||||||
| Expenses: | ||||||||||
| Marketing, general and administrative | 28,389 | 29,671 | ||||||||
| Research and development | 3,421 | 3,688 | ||||||||
| Severance and restructuring costs | 884 | 4,403 | ||||||||
| Asset impairment and abandonments | 129 | – | ||||||||
| Acquisition and integration expenses | 800 | – | ||||||||
| Total operating expenses | 33,623 | 37,762 | ||||||||
| Operating income (loss) | 59 | (1,983 | ) | |||||||
| Total other expense – net | (775 | ) | (799 | ) | ||||||
| Loss before income tax (provision) benefit | (716 | ) | (2,782 | ) | ||||||
| Income tax (provision) benefit | (249 | ) | 910 | |||||||
| Net loss | (965 | ) | (1,872 | ) | ||||||
| Convertible preferred dividend | (966 | ) | (910 | ) | ||||||
| Net loss applicable to common shares | $ | (1,931 | ) | $ | (2,782 | ) | ||||
| Net loss per common share – basic | $ | (0.03 | ) | $ | (0.05 | ) | ||||
| Net loss per common share – diluted | $ | (0.03 | ) | $ | (0.05 | ) | ||||
| Weighted average shares outstanding – basic | 63,150,009 | 58,495,796 | ||||||||
| Weighted average shares outstanding – diluted | 63,150,009 | 58,495,796 | ||||||||
