ALACHUA, Fla., Feb. 28, 2019 (GLOBE NEWSWIRE) — RTI Surgical, Inc. (Nasdaq: RTIX), a global surgical implant company, reported operating results for the fourth quarter and full year of 2018.
Fourth Quarter 2018 Highlights:
- Revenue increased to $71.2 million
- Net income of $2.1 million, inclusive of $1.0 million of net non-recurring expenses
- Adjusted EBITDA of $7.7 million, or 11% of revenue
Full Year 2018 Highlights:
- 2018 revenues increased to $280.9 million
- Net loss of $3.4 million, inclusive of $11.0 million of net non-recurring expenses
- Adjusted EBITDA of $33.7 million, or 12% of revenue
- Provides 2019 revenue guidance
“Our fourth quarter and full year 2018 results demonstrate solid financial performance resulting from consistent progress across our key strategic initiatives,” stated Camille Farhat, President and CEO. “We believe the ongoing successful efforts to reduce complexity and drive operational excellence, including significant cost reduction efforts in tissue manufacturing, are providing the foundation to accelerate RTI’s growth. In 2018, we returned OEM to growth and continued to transition customers to long-term partners signaling the strength of our relationships and importance of our products to our partners. Further, the definitive agreement to acquire Paradigm Spine, announced in November 2018 and anticipated to close in early March, will contribute to the formidable platform of differentiated spine implants we established in 2018.”
Farhat continued, “We believe our accomplishments in 2018 have provided an exceptionally strong foundation to support our performance in 2019 and beyond. Our investment in rebuilding the spine pipeline has revitalized our new product development efforts, which we anticipate will serve as a catalyst for organic growth starting in 2020. We will work to continue to reduce the complexity of our business and extend operational excellence throughout the Company to accelerate the growth trajectory of RTI. We expect our performance will be driven by the successful integration of Paradigm, disciplined R&D efforts and the continued exploration of acquisition opportunities. We are excited for the year ahead.”
Fourth Quarter 2018
RTI’s worldwide revenues for the fourth quarter of 2018 were $71.2 million, compared with $70.8 million during the same period in the prior year. Gross profit for the fourth quarter of 2018 was $38.7 million, or 54.4% of revenues, a significant increase compared to $36.3 million, or 51.2% of revenues, in the fourth quarter of 2017.
During the fourth quarter of 2018, RTI incurred non-recurring pre-tax charges to support the ongoing strategic transformation of the business. The Company incurred $2.2 million in acquisition and integration costs related primarily to its potential acquisition of Paradigm Spine LLC. The Company incurred $0.6 million of severance and restructuring charges to complete the rationalization of the international infrastructure and transition distribution to a third-party logistics partner.
Net income applicable to common shares was $2.1 million, or $0.03 per fully diluted common share in the fourth quarter of 2018, compared to net loss applicable to common shares of $8.6 million, or $0.14 per fully diluted common share in the fourth 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 $3.0 million, or $0.04 per fully diluted common share in the fourth quarter of 2018 compared to $1.6 million, or $0.03 per fully diluted common share, in the fourth quarter of 2017.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), for the fourth quarter of 2018 was $7.7 million, or 11% of revenues, compared with $9.4 million, or 13% of revenues for the fourth quarter of 2017. 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 Zyga Technologies completed in January of 2018, and partially offset by gross margin expansion associated with the efforts to reduce complexity and increase operational excellence initiated during 2017.
Full Year 2018
Worldwide revenues were $280.9 million for the full year 2018, an increase of 0.5 percent compared to revenues of $279.6 million for the full year 2017. Adjusting for the $8.2 million reduction from the sale of substantially all the assets of the Cardiothoracic Closure business completed in August 2017, total revenues increased $9.5 million or 3.5%, driven by growth in both the spine and OEM franchises. Gross profit for the full year 2018 was $140.1 million, or 49.9% of revenues compared to $142.5 million, or 51.0% of revenues in 2017. Adjusting for the $8.2 million of various non-recurring charges, gross profit for the full year 2018 was $148.3 million, or 52.8% of revenues.
During the year, RTI incurred non-recurring pre-tax charges to support the ongoing strategic transformation of the business. The Company incurred $4.9 million of acquisition and integration costs to support the acquisitions of Zyga Technologies and Paradigm Spine. The Company incurred $2.3 million of severance and restructuring charges to complete the rationalization of the international infrastructure. The Company incurred $4.5 million in asset impairment and abandonment charges related to ending distribution of our map3® implant. Finally, the Company recognized a $3.0 million gain from a cash contingency consideration related to the release of escrow funds held at the close of the Cardiothoracic Closure sale. During 2018, the Company incurred $17.2 million of pre-tax non-recurring charges.
During the third quarter of 2017, RTI completed the sale of substantially all the assets related to its cardiothoracic closure business for total consideration of $54 million, plus an additional $6 million in contingent cash consideration. In conjunction with the sale of the cardiothoracic closure business, the Company recognized a gain of $34.1 million, or $18.2 million after tax.
Net loss applicable to common shares was $3.4 million, or $0.05 per fully diluted common share for the full year 2018, compared to net income applicable to common shares of $2.5 million, or $0.04 per fully diluted common share for the full year 2017. As outlined in the reconciliation tables that follow, excluding the after-tax impact of the non-recurring charges, adjusted net income applicable to common shares was $7.6 million, or $0.12 per fully diluted common share for the full year 2018 compared to $3.1 million, or $0.05 per fully diluted common share, in 2017.
Adjusted EBITDA for the full year 2018 was $33.7 million, or 12% of revenues compared with $32.3 million, or 12% of revenues in 2017.
Fiscal 2019 Outlook
Based on our recent financial results and current business outlook, the Company has developed 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 closing of the acquisition of Paradigm Spine in March 2019 and a positive EBITDA contribution from Paradigm Spine;
- Sustained favorable reimbursement from private payers; and,
- The successful ongoing transition from map3® to ViBone®.
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/investors. A replay of the conference call will be available on RTI’s website for one month following the call.
