News: Wright Medical Group N.V. Reports 2015 Third Quarter Financial Results - 1 of 3 - to be Ctd...
AMSTERDAM, The Netherlands, Nov. 04, 2015 (GLOBE NEWSWIRE) -- Wright Medical Group N.V.(NASDAQ:WMGI) today reported financial results for Wright Medical Group, Inc. for its third quarter ended September 30, 2015 and financial results for Tornier N.V. for its third quarter ended September 27, 2015. As previously announced, Wright and Tornier completed their merger on October 1, 2015, subsequent to the end of each company’s third quarter. Certain preliminary, unaudited non-GAAP pro forma financial results for the combined Wright Medical Group N.V. can be found on Wright’s website at ir.wright.com.
Wright Medical Group, Inc. Third Quarter 2015 Highlights
Net sales totaled $80.1 million during the third quarter ended September 30, 2015, representing a 12% increase as reported and 16% increase on a constant currency basis compared to the third quarter of 2014.
Robert Palmisano, president and chief executive officer, commented, “Third quarter results for our legacy Wright business continued to demonstrate the strong growth of our U.S. foot and ankle business and ongoing improvement in our international business. Specifically, our U.S. foot and ankle business grew 24% in the quarter, which was another quarter of significant growth driven by improved sales force execution, medical education and strong contribution from new products, including the ongoing launch of our INFINITY total ankle system, which drove 54% sales growth in U.S. total ankle replacement. In addition, our U.S. commercial launch activities for AUGMENT Bone Graft are off to a positive start following final FDA approval in September. We believe this product, coupled with continued strong growth in our core U.S. foot and ankle business, will continue to fuel positive momentum for the remainder of the year and beyond.”
Palmisano continued, “The close of our merger with Tornier marked a significant milestone for our company, creating the premier, high-growth Extremities and Biologics company uniquely positioned with leading technologies and specialized sales forces in three of the fastest growing areas of orthopaedics – Upper Extremities, Lower Extremities and Biologics. Our focus now is on bringing our organizations together to accelerate our business momentum and minimize disruption, and we have gotten off to a strong start. For the vast majority of the combined company revenue, we anticipate little to no sales force disruption due to integration. Given the relatively low level of revenue that we anticipate will be directly impacted by the sales force integration and the amount of dis-synergy that we have targeted in our plan, we view the downside risk in this area to be low. Like our dis-synergy plan, we view achieving our cost synergy target of $40 million to $45 million in year three as also low risk. We have multiple opportunities to extend our leadership position in shoulder, accelerate our foot and ankle business through market expansion, and increase our biologics business through the launch of AUGMENT Bone Graft in the U.S. In addition, I believe that our increased scale and scope will provide an accelerated path to profitability that will enable us to achieve our goal of adjusted EBITDA margins approaching 20% in three to four years and generate long-term value for our shareholders.”
Net loss from continuing operations for the third quarter of 2015 totaled $62.7 million, or $(1.22) per diluted share, compared to net loss from continuing operations of $49.6 million, or $(0.99) per diluted share, in the third quarter of 2014.
Net loss from continuing operations for the third quarter of 2015 included a $14.6 million unrealized loss related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, a gain of $4.7 million related to mark-to-market adjustments on derivatives, $6.8 million of non-cash interest expense related to the 2017 Convertible Notes and 2020 Convertible Notes, and $19.9 million of transaction and transition costs. Net loss from continuing operations for the third quarter of 2014 included an $18.5 million unrealized loss related to mark-to-market adjustments on CVRs issued in connection with the BioMimetic acquisition, $2.7 million of transaction and transition costs, $2.3 million of non-cash interest expense related to the 2017 Convertible Notes, $1.8 million of contingent consideration fair value adjustments, $1.2 million of costs associated with management changes, an unrealized loss of $1.0 million related to mark-to-market adjustments on derivatives, $0.9 million of patent dispute settlement costs, and $0.5 million of charges associated with distributor conversions and non-competes. These 2014 charges were offset by a $2.8 million U.S. tax benefit within continuing operations recorded as a result of the U.S. pre-tax gain recognized within discontinued operations due to the sale of the OrthoRecon business.
The company's third quarter 2015 net loss from continuing operations, as adjusted for the above items, was$26.1 million, a decline from an adjusted net loss of $17.7 million in 2014, while diluted loss per share, as adjusted, decreased to $(0.51) in the third quarter of 2015 from $(0.35) in the third quarter of 2014. The attached financial tables include a reconciliation of U.S. GAAP to “as adjusted” results.
The company's third quarter 2015 adjusted EBITDA from continuing operations, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was negative $(10.3) million, compared to negative$(5.9) million in the same quarter of the prior year. The attached financial tables include a reconciliation of U.S. GAAP to “as adjusted” results.
Cash and cash equivalents and marketable securities totaled $254.4 million as of the end of the third quarter of 2015, an increase of $24.5 million compared to the end of the fourth quarter of 2014, which was driven by completion of the 2020 convertible debt offering, offset by the Augment® Bone Graft approval CVR milestone payment and merger-related expenses.
Tornier N.V. Third Quarter 2015 Highlights
Tornier’s revenue for the third quarter of 2015 was $74.9 million compared to third quarter 2014 revenue of$76.7 million, a decrease of 2% as reported and an increase of 4% in constant currency. Foreign currency exchange rates negatively impacted third quarter 2015 reported revenue by $4.7 million.
Third quarter 2015 revenue of Tornier's extremities product categories totaled $66.1 million compared to$65.8 million during the prior year period, an increase of 0.5% as reported and an increase of 5% in constant currency.
Revenue from the upper extremities joints and trauma category was $52.6 million, an increase of 13% in constant currency over the same quarter in 2014. Growth was led by the Aequalis Ascend® family of shoulder joint replacement products, which continued to gain global surgeon acceptance. The consistent performance of the Tornier upper extremity joints and trauma category demonstrates the success of the company's strategy to deliver superior products with a differentiated sales force.
Revenue from Tornier's lower extremity joints and trauma category in the third quarter of 2015 was $10.9 million, a decrease of 18% in constant currency. As anticipated, distractions from the merger with Wright impacted Tornier’s lower extremities business.
Revenue from Tornier’s sports medicine and biologics product category was $2.7 million in the third quarter of 2015, a decrease of 4% in constant currency over the same quarter in 2014, reflecting a decline in Tornier’s soft tissue anchor and biologics products.
Tornier’s third quarter 2015 adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $6.1 million, or 8.1% of reported revenue, compared to $4.0 million, or 5.3% of reported revenue, in the same quarter of the prior year.
Palmisano further commented, “Tornier’s third quarter performance highlights the strong momentum in its legacy upper extremities business, driven by an innovative product portfolio and clinically superior sales team. Tornier’s U.S. upper extremity growth of 15% was approximately twice the market rate, driven by the AEQUALIS ASCEND FLEX shoulder system and the U.S. launch of the SIMPLICITI shoulder system, which is now in full market release. As expected, the legacy Tornier lower extremities business experienced distractions related to our merger. However, with the merger now closed, we can focus on leveraging the strengths of both companies and believe we have a very attractive combination of products and people to drive long-term growth and profitability for the combined business.”
The company today provided its pro forma full-year 2015 guidance for Wright Medical Group N.V., which includes anticipated financial results for both the legacy Wright and Tornier businesses giving effect to the merger as if it had occurred on the first day of each fiscal year. This combined guidance includes the impact of conforming the combined company’s fiscal calendars; the full-year impact of the divestiture of certain Tornier lower extremities products to Integra LifeSciences; and anticipated revenue dis-synergies and cost synergies related to the merger for 2015. As a result of conforming the combined company’s fiscal calendars, the legacy Wright business will have four fewer selling days in the fourth quarter of 2015.
The company anticipates pro forma net sales for 2015 of approximately $636 million to $642 million.
The company anticipates 2015 pro forma adjusted EBITDA from continuing operations, as described in the GAAP to non-GAAP reconciliation provided later in this release, of negative $(13.0) million to negative$(17.0) million.
Underlying this guidance is the assumption that prior to the impact of conforming the combined company’s fiscal calendars and the impact of anticipated revenue dis-synergies, the legacy Wright U.S. foot and ankle business will continue to grow in the high teens, the legacy Tornier U.S. upper extremity business will continue to grow in the mid-teens, and the legacy Wright international business growth rates will continue to accelerate, in each case on a constant currency basis compared to fourth quarter of 2014.
The company estimates approximately 103.7 million ordinary shares outstanding for the fourth quarter of 2015.
The company continues to anticipate sales dis-synergies in the first 12 to 18 months following the close of the merger to be in the range of $25 million to $30 million and cost synergies in the range of $40 million to $45 million to be fully realized by the third year after completion of the merger. Expense synergy opportunities include: public company expenses, overlapping support function and systems costs, as well as process and vendor consolidation opportunities across the business.
The company's pro forma adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; non-cash interest expense associated with the 2017 and 2020 Convertible Notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; impairment charges, mark-to-market adjustments to the CVRs and non-cash mark-to-market derivative adjustments; charges associated with the February 2015 refinancing of its convertible debt; and the instrument use tax refund. Further, this adjusted EBITDA target excludes any expenses, earnings or losses related to Wright’s divested OrthoRecon business and Tornier’s divested foot and ankle products.
The company's anticipated ranges for pro forma net sales and adjusted EBITDA 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 “Safe-Harbor Statement” section of this press release. In addition, while pro forma data gives effect to the merger as if it had occurred on the first day of each fiscal year and enhances comparability of financial information between periods, pro forma data is not indicative of the results that actually would have been obtained if the merger had occurred as of the beginning of the fiscal year.
Supplemental Financial Information
To view the third quarter of 2015 supplemental financial information, visit ir.wright.com. For updated information on Wright Medical Group N.V. revenue reporting changes and preliminary, combined non-GAAP pro forma historical financials, including third quarter of 2015, 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 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 866-318-8617 (U.S.) / 617-399-5136 (International). 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 conference call by telephone will be available starting at 5:30 p.m. Central Time today and continuing through November 11, 2015. To hear this replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 88327442. 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 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 press release, the Current Report on Form 8-K filed with the SEC today, or otherwise available in the “Investor Relations - Supplemental Financial Information” section of the company's 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 press release.
Wright Medical Group N.V. is a global medical device company focused on Extremities and Biologics. The company is committed to delivering innovative, value-added solutions improving quality of life for patients worldwide and is a recognized leader of surgical solutions for the upper extremity (shoulder, elbow, wrist and hand), lower extremity (foot and ankle) and biologics markets, three of the fastest growing segments in orthopedics. For more information about Wright, visit www.wright.com.
Wright®, INFINITY®, Augment®, Tornier®, Aequalis®, Aequalis Ascend®, Aequalis Ascend® Flex™, and Simpliciti® are trademarks of Wright Medical Group N.V. and its subsidiaries, 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 (GAAP), the company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this press release. Wright’s non-GAAP financial measures, include net sales, excluding the impact of foreign currency; operating income, as adjusted; net income, as adjusted; EBITDA, as adjusted; net income, as adjusted, per diluted share; effective tax rate, as adjusted; and free cash flow. Tornier’s non-GAAP financial measures include revenues on a constant currency basis; EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net loss; adjusted net loss per share; adjusted free cash flow; adjusted gross margin; adjusted gross margin percentage; adjusted operating expenses; and adjusted operating expenses as a percentage of revenue. In addition, the company uses pro forma net sales and pro forma adjusted EBITDA as non-GAAP financial measures in its financial guidance for 2015. 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 costs associated with distributor conversions and non-competes, non-cash interest expense related to the company's 2017 Convertible Notes and 2020 Convertible Notes, write-off of the pro rata unamortized deferred financing costs and debt discount associated with the 2017 Convertible Notes, net gains and losses on mark-to-market adjustments on and settlements of derivative assets and liabilities, mark-to-market adjustments on CVRs, transaction and transition costs, 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. Tornier’s non-GAAP financial measures exclude such items as amortization of inventory step-up from acquisition; acquisition, integration and distribution transition costs; reversal of contingent consideration liability; instrument use tax refund; restructuring charges; merger-related costs; and reversal of valuation allowance from acquisition, 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. Management uses these measures 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 these 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.
This press 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,” “forecast,” “goal,” “project,” "continue," "outlook," “guidance,” "future,” other words of similar meaning and the use of future dates. Forward-looking statements in this press release include, but are not limited to, statements about the company’s anticipated financial results for 2015, including pro forma net sales and pro forma adjusted EBITDA from continuing operations; anticipated cost synergies and dis-synergies, the timing thereof and level of risk of achievement; the company’s expectations regarding the sales growth of its legacy Wright U.S. foot and ankle business, legacy Tornier U.S. upper extremity business, and legacy Wright international business; the benefits of its recently completed merger with Tornier; and the company’s anticipated growth opportunities, path to profitability and adjusted EBITDA margin goal and ability to generate long-term value for shareholders. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Each forward-looking statement contained in this press 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, the failure to integrate the businesses and realize synergies and cost-savings from the recently completed merger transaction or delay in realization thereof; operating costs and business disruption as a result of the transaction, including adverse effects on employee retention and sales force productivity and on business relationships with third parties; transaction and integration costs; actual or contingent liabilities; the adequacy of the company’s capital resources; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; failure to achieve the anticipated benefits from approval of Augment® Bone Graft; 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 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 Medical Group, Inc.’s Annual Report on Form 10-K, which was filed with the SEC on February 26, 2015, and Tornier’s Annual Report on Form 10-K, which was filed with the SEC on February 24, 2015, as well as both companies’ subsequent Quarterly Reports on Form 10-Q and other information filed by each company with the SEC and a Quarterly Report on Form 10-Q for the quarter ended September 27, 2015 to be filed by Wright with the SEC. Investors should not place considerable reliance on the forward-looking statements contained in this press release. You are encouraged to read Wright’s and Tornier’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 press 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.
Investors & Media:
Wright Medical Group N.V.
Julie D. Tracy
Chief Communications Officer
(901) 290-5817 (office)