RTIX
$2.53
Rti Surgical
$.01
.40%
Earnings Details
3rd Quarter September 2019
Thursday, October 31, 2019 7:00:00 AM
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Summary

RTI Surgical Lowers Guidance

Rti Surgical (RTIX) reported a 3rd Quarter September 2019 loss of $0.01 per share on revenue of $76.1 million.. Revenue grew 10.2% on a year-over-year basis.

The company said it expects 2019 revenue of $305.0 million to $310.0 million. The company's previous guidance was revenue of $325.0 million to $335.0 million and the current consensus estimate is revenue of $323.4 million for the year ending December 31, 2019.

RTI Surgical Inc is a surgical implant company. It processes donated human musculoskeletal and other tissue, including bone, cartilage, tendon, ligament, fascia lata, pericardium, sclera, dermal tissue and bovine and porcine animal tissue..

Results
Reported Earnings
($0.01)
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$76.1 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

RTI Surgical® Announces Third Quarter 2019 Results

Growth Driven By the Addition of coflex® Interlaminar Stabilization® Device and Solid Contribution from OEM Franchise

DEERFIELD, Ill., Oct. 31, 2019 (GLOBE NEWSWIRE) -- RTI Surgical Holdings, Inc. (Nasdaq: RTIX), a global surgical implant company, reported operating results for the third quarter of 2019.

Third Quarter 2019 Highlights:

  • Revenue of $76.1 million, up 10.2% compared to the third quarter of 2018
  • Net Loss of $4.9 million, or $0.06 per common share, inclusive of $5.3 million of non-recurring costs
  • Adjusted EBITDA of $7.1 million, or 9.3% of revenue
  • Revenue and EBITDA guidance updated to reflect current business progress

“RTI Surgical increased revenue by 10 percent in the third quarter of 2019 driven by the addition of coflex and strong performance in our OEM franchise, partially offset by lower than expected revenue contribution from our global spine business,” said Camille Farhat, President and CEO, RTI Surgical. “We remain confident in our long-term strategy and our ability to drive growth in the business.

Farhat continued, “We see early evidence of progress on the implementation of our commercial operating system to drive adoption of our Novel Therapies. We are dedicating resources and focus to rapidly develop and introduce new products for Established Therapies. We remain committed to our efforts to accelerate growth in our global spine business as we continue to invest in differentiation and scale.  We are confident our efforts will result in a return to growth in this business in 2020.”

Third Quarter 2019

RTI’s worldwide revenues for the third quarter of 2019 were $76.1 million, an increase of $7.1 million, or 10.2% compared with $69.1 million during the same period in the prior year.  The third quarter 2019 revenue included $8.2 million global contribution from the acquisition of Paradigm Spine closed on March 9, 2019.  Gross profit for the third quarter of 2019 was $41.5 million, or 54.5% of revenues, a 10.2% increase compared to $37.7 million, or 54.5% of revenues, in the third quarter of 2018.  Gross profit for the third quarter of 2019 included a $2.1 million charge for the purchase accounting step-up of coflex inventory.  Gross profit adjusted for the impact of non-recurring charges was 57.3% of revenue for the third quarter of 2019 compared to 54.5% of revenue for the prior year quarter.

During the third quarter of 2019, RTI incurred $3.2 million in non-recurring pre-tax acquisition and integration costs related primarily to activities to reduce complexity and accelerate growth.

Net loss applicable to common shares was $4.9 million, or $0.06 per fully diluted common share in the third quarter of 2019, compared to net income applicable to common shares of $2.9 million, or $0.04 per fully diluted common share in the third quarter of 2018. As outlined in the reconciliation tables that follow, excluding the impact of non-recurring charges, adjusted net loss applicable to common shares was $1.0 million, or $0.01 per fully diluted common share in the third quarter of 2019.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), for the third quarter of 2019 was $7.1 million, or 9.3% of revenues, compared with $9.1 million, or 13.1% of revenues for the third quarter of 2018.  The decrease in Adjusted EBITDA was primarily driven by incremental operating costs from the acquisition of Paradigm Spine completed in early March of 2019.

Fiscal 2019 Outlook

Based on our recent financial results and current business outlook, the Company has adjusted financial guidance for 2019:

  • The Company expects full year revenues in the range of $305 million to $310 million, a reduction from the previous range of $325 million to $335 million; and
  • The Company expects full year Adjusted EBITDA to be in the range of $30 million to $34 million, compared with the previous range of $36 million to $40 million.

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), using conference ID 3768247. 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.

About RTI Surgical Holdings, 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, plastic surgery, spine, orthopedic and trauma procedures and are distributed in over 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. Connect with us on LinkedIn and Twitter.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements regarding the impact of operational priorities on costs and their impact on RTI’s financial performance, RTI’s ability to meet its financial and other commitments, the implementation of RTI’s strategic initiatives,  RTI’s ability to expand the number of patients it is able to serve, the impact of the transition from map3® to ViBone®, our growth strategy in spine, the expected integration of, and potential financial impact from various acquisitions, the success of our new product development and commercialization efforts, anticipated financial results, growth rates, future operational improvements, fiscal 2019 guidance and underlying assumptions. 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. The forward-looking statements are not guarantees of future performance and are based on certain assumptions including RTI’s ability to effectively manage expenses and accomplish its goals and strategies, the quality of the new product offerings from RTI, general economic conditions, as well as those within RTI’s industry, RTI’s ability to integrate acquisitions into existing operations, and numerous other factors and risks identified in the Company’s Form 10-K for the fiscal year ended December 31, 2018 and other filings with the 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. We undertake no obligation to update these forward-looking statements except as may be required by law. 

MEDIA AND INVESTOR CONTACT:
Molly Poarch
mpoarch@rtix.com
+1 224 287 2661


RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES 
Condensed Consolidated Statements of Operations 
(Unaudited, in thousands, except share and per share data) 
  
         
 For the Three Months Ended For the Nine Months Ended 
 September 30, September 30, 
  2019   2018   2019   2018  
Revenues$76,129  $69,064  $228,177  $209,639  
Costs of processing and distribution 34,642   31,409   103,941   108,262  
Gross profit 41,487   37,655   124,236   101,377  
         
Expenses:        
Marketing, general and administrative 37,107   29,671   107,983   87,326  
Research and development 4,271   3,606   12,475   10,297  
Severance and restructuring costs -   824   -   1,708  
Gain on acquisition contingency -   -   (1,590)  -  
Asset impairment and abandonments -   104   15   4,748  
Acquisition and integration expenses 3,209   1,941   14,119   2,741  
Cardiothoracic closure business divestiture contingency consideration -   (3,000)  -   (3,000) 
Total operating expenses 44,587   33,146   133,002   103,820  
Operating (loss) income (3,100)  4,509   (8,766)  (2,443) 
Total other expense - net (3,792)  (598)  (8,924)  (2,524) 
(Loss) income before income tax benefit (expense) (6,892)  3,911   (17,690)  (4,967) 
Income tax benefit (expense) 2,040   (807)  4,495   1,646  
Net (loss) income (4,852)  3,104   (13,195)  (3,321) 
Convertible preferred dividend -   (173)  -   (2,120) 
Net (loss) income applicable to common shares$(4,852) $2,931  $(13,195) $(5,441) 
         
Net (loss) income per common share - basic$(0.06) $0.05  $(0.18) $(0.09) 
Net (loss) income per common share - diluted$(0.06) $0.04  $(0.18) $(0.09) 
Weighted average shares outstanding - basic 75,194,036   63,495,952   72,007,860   63,517,958  
Weighted average shares outstanding - diluted 75,194,036   79,284,315   72,007,860   63,517,958  
         



RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Revenues to Adjusted Gross Profit
(Unaudited, in thousands)
 
        
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
  2019  2018  2019  2018
Revenues$76,129 $69,064 $228,177 $209,639
Costs of processing and distribution 34,642  31,409  103,941  108,262
Gross profit, as reported 41,487  37,655  124,236  101,377
Inventory write-off -  -  -  7,582
Inventory purchase price adjustment 2,100  -  5,036  456
Non-GAAP gross profit, adjusted$43,587 $37,655 $129,272 $109,415
Non-GAAP gross profit percentage, adjusted 57.3%  54.5%  56.7%  52.2%
        



RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES 
Reconciliation of Net Loss Applicable to Commons Shares to Adjusted EBITDA 
(Unaudited, in thousands) 
            
            
    For the Three Months Ended For the Nine Months Ended 
    September 30, September 30, 
     2019  2018  2019  2018 
 Net (loss) income applicable to common shares  $(4,852) $2,931 $(13,195) $(5,441) 
  Interest expense, net 3,714  597  8,796  2,192 
  Provision for income taxes (2,040)  807  (4,495)  (1,646) 
  Depreciation 2,898  2,577  8,437  7,824 
  Amortization of intangible assets 1,024  1,149  2,976  2,970 
 EBITDA 744  8,061  2,519  5,899 
 Reconciling items impacting EBITDA        
  Preferred dividend - 0  173  - 0  2,120 
  Non-cash stock based compensation 969  1,080  3,399  3,650 
  Foreign exchange gain (loss) 78  1  128  23 
  Other reconciling items *
        
  Inventory write-off - 0  - 0  - 0  7,582 
  Inventory purchase price adjustment 2,100  - 0  5,036  456 
  Severance and restructuring costs - 0  824  - 0  1,708 
  Gain on acquisition contingency - 0  - 0  (1,590)  - 0 
  Loss on extinguishment of debt - 0  - 0  - 0  309 
  Asset impairment and abandonments - 0  - 0  - 0  4,515 
  Acquisition and integration expenses 3,209  1,941  14,119  2,741 
  Cardiothoracic closure business divestiture contingency consideration - 0  (3,000)  - 0  (3,000) 
 Adjusted EBITDA$7,100 $9,080 $23,611 $26,003 
 Adjusted EBITDA as a percent of revenues 9.3%  13.1%  10.3%  12.4% 
            
 *See explanations in Use of Non-GAAP Financial Measures section later in this release.     
            



RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES 
Reconciliation of Net Income (Loss) Applicable to Common Shares and Net Income (Loss) Per Diluted Share to 
Adjusted Net Income Applicable to Common Shares and Adjusted Net Income Per Diluted Share 
(Unaudited, in thousands except per share data) 
         
 For the Three Months Ended 
 September 30, 2019 September 30, 2018 
 Net   Net   
 Income (Loss) Amount Income (Loss) Amount 
 Applicable to Per Diluted Applicable to Per Diluted 
 Common SharesShare Common SharesShare 
As reported$(4,852) $(0.06) $2,931  $0.04  
Severance and restructuring costs -   -   824   0.01  
Inventory purchase price adjustment 2,100   0.03   -   -  
Acquisition and integration expenses 3,209   0.04   1,941   0.02  
Cardiothoracic closure business divestiture contingency consideration -   -   (3,000)  (0.04) 
  Tax effect on new tax legislation -   -   (650)  (0.01) 
  Tax effect on adjustments (1,505)  (0.02)  -   -  
Adjusted *$(1,048) $(0.01) $2,046  $0.03  
         
         
 For the Nine Months Ended 
 September 30, 2019 September 30, 2018 
 Net   Net   
 Income (Loss) Amount Income (Loss) Amount 
 Applicable to Per Diluted Applicable to Per Diluted 
 Common SharesShare Common SharesShare 
As reported$(13,195) $(0.18) $(5,441) $(0.09) 
Severance and restructuring costs -   -   1,708   0.03  
Asset impairment and abandonments -   -   4,515   0.07  
Gain on acquisition contingency (1,590)  (0.02)  -   -  
Inventory purchase price adjustment 5,036   0.06   456   0.01  
Loss on extinguishment of debt -   -   309   0.00  
Inventory write-off -   -   7,582   0.12  
Acquisition and integration expenses 14,119   0.16   2,741   0.04  
Cardiothoracic closure business divestiture contingency consideration -   -   (3,000)  (0.05) 
Tax effect on new tax legislation -   -   (650)  (0.01) 
Tax effect on adjustments (4,201)  (0.05)  (3,654)  (0.06) 
Adjusted *$169  $0.00  $4,566  $0.07  
         
         
         
* See explanations in Use of Non-GAAP Financial Measures section later in this release.     
  Amount Per Diluted Share may not foot due to rounding.        
         


 

Use of Non-GAAP Financial Measures

To supplement the Company’s unaudited condensed consolidated financial statements presented on a GAAP basis, the Company discloses certain non-GAAP financial measures that exclude certain amounts, including EBITDA, Adjusted EBITDA and Adjusted Net Income Applicable to Common Shares. The calculation of the tax effect on the adjustments between GAAP net loss applicable to common shares and non-GAAP net income applicable to common shares is based upon our estimated annual GAAP tax rate, adjusted to account for items excluded from GAAP net loss applicable to common shares in calculating Adjusted Net Income Applicable to Common Shares-Diluted. A reconciliation of the non-GAAP financial measures to the corresponding GAAP measures is included in the tables listed above.              

The following are explanations of the adjustments that management excluded as part of the non-GAAP measures for the three and nine months ended September 30, 2019 and 2018. Management removes the amount of these costs including the tax effect on the adjustments from our operating results to supplement a comparison to our past operating performance.

Severance and restructuring costs – These costs relate to the reduction of our organizational structure, primarily driven by simplification of our international operating infrastructure, specifically our distribution model.

Gain on acquisition contingency – The gain on acquisition contingency relates to an adjustment to our estimate of obligation for future milestone payments on the Zyga acquisition.

Asset impairment and abandonments – This adjustment represents an asset impairment and abandonments related to the suspension of the map3® implant.

Acquisition and integration expenses – These costs relate to acquisition and integration expenses due to the purchase of Paradigm and Zyga in 2019 and 2018, respectively.

Inventory write-off – These costs relate to an inventory write-off due to the rationalization of our international distribution infrastructure.

Inventory purchase price adjustment – These costs relate to the purchase price effects of acquired Paradigm and Zyga, respectively, inventory that was sold during the nine months ended September 30, 2019 and 2018, respectively.

Loss on extinguishment of debt – This adjustment represents costs relating to refinancing our debt.

Cardiothoracic closure business divestiture contingency consideration – This adjustment represents the remaining cash contingency consideration received from the sale of substantially all of the assets of our Cardiothoracic closure business to A&E Advanced Closure Systems, LLC (a subsidiary of A&E Medical Corporation).

Tax effect on new tax legislation – This adjustment represents charges relating to the Tax Cuts and Jobs Act tax legislation which was enacted on December 22, 2017.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA and Adjusted Net Income Applicable to Common Shares should not be considered in isolation, or as a replacement for GAAP measures.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that presenting EBITDA, Adjusted EBITDA and Adjusted Net Income Applicable to Common Shares in addition to the related GAAP measures provide investors greater transparency to the information used by management in its financial decision-making.  The Company further believes that providing this information better enables the Company’s investors to understand the Company’s overall core performance and to evaluate the methodology used by management to assess and measure such performance.


RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES 
Condensed Consolidated Revenues 
(Unaudited, in thousands) 
         
         
 For the Three Months Ended For the Nine Months Ended 
 September 30, September 30, 
  2019  2018  2019  2018 
Revenues:  
 Spine$23,661 $20,741 $70,337 $58,938 
 Sports 12,704  12,271  40,507  39,896 
 OEM 32,341  30,092  93,815  91,382 
 International 7,423  5,960  23,518  19,423 
  Total revenues$76,129 $69,064 $228,177 $209,639 
         



RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES 
Condensed Consolidated Balance Sheets 
(Unaudited, in thousands) 
  
   September 30, December 31, 
    2019   2018  
Assets      
  Cash  $2,950  $10,949  
  Accounts receivable - net   56,556   48,351  
  Inventories - net   130,913   107,471  
  Prepaid and other assets   8,631   8,791  
  Total current assets   199,050   175,562  
       
  Non-current inventories - net   18,345   - 0  
  Property, plant and equipment - net   81,206   77,954  
  Goodwill   236,547   59,798  
  Other assets - net   52,583   47,872  
  Total assets  $587,731  $361,186  
       
Liabilities and Stockholders' Equity      
  Accounts payable  $17,800  $26,309  
  Accrued expenses and other current liabilities   33,815   29,591  
  Total current liabilities   51,615   55,900  
       
  Deferred revenue   1,134   744  
  Long-term liabilities   235,127   54,692  
  Total liabilities   287,876   111,336  
       
  Preferred stock   66,364   66,226  
       
Stockholders' equity:      
  Common stock and additional paid-in capital   492,520   428,338  
  Accumulated other comprehensive loss   (8,390)  (7,270) 
  Accumulated deficit   (250,639)  (237,444) 
  Total stockholders' equity   233,491   183,624  
  Total liabilities and stockholders' equity $587,731  $361,186  
       



RTI SURGICAL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
    
    
 For the Nine Months Ended
 September 30,
  2019   2018 
Cash flows from operating activities:   
Net loss$(13,195) $(3,321)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:   
Depreciation and amortization expense 11,413   10,794 
Stock-based compensation 3,399   3,650 
Amortization of deferred revenue (3,772)  (3,652)
  Other items to reconcile to net cash   
  used in operating activities (10,554)  6,536 
Net cash (used in) provided by operating activities (12,709)  14,007 
Cash flows from investing activities:   
Purchases of property, plant and equipment (10,882)  (7,106)
Patent and acquired intangible asset costs (1,786)  (2,798)
Acquisition of Zyga Technology -   (21,000)
Acquisition of Paradigm Spine (99,692)  - 
Net cash used in investing activities (112,360)  (30,904)
Cash flows from financing activities:   
Proceeds from long-term obligations 118,000   74,425 
Payments of debt issuance costs (729)  - 
Payments on long-term obligations (500)  (71,171)
Other financing activities 395   1,299 
Net cash provided by financing activities 117,166   4,553 
Effect of exchange rate changes on cash and cash equivalents (96)  (15)
Net decrease in cash and cash equivalents (7,999)  (12,359)
Cash and cash equivalents, beginning of period 10,949   22,381 
Cash and cash equivalents, end of period$2,950  $10,022 
    

 

 

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Source: RTI Surgical Holdings, Inc.