Full Press Release Details
| CryoLife | Gilmartin Group LLC |
| D. Ashley Lee | Greg Chodaczek / Lynn Lewis |
| Executive Vice President, Chief Financial Officer and Chief Operating Officer | Phone: 646-924-1769 investors@cryolife.com |
| Phone: 770-419-3355 |
CryoLife Reports Third Quarter 2018 Results
Third Quarter and Recent Business Highlights:
ATLANTA, GA (October 31, 2018) CryoLife, Inc. (NYSE: CRY), a leading cardiac and vascular surgery company focused on aortic disease, announced today its financial results for the third quarter ended September 30, 2018.
We had a very successful third quarter which included strong revenue growth, market share gains, new account growth and progress on our clinical and R&D programs, said Pat Mackin, Chairman, President, and Chief Executive Officer. Our On-X and JOTEC products continue to gain momentum as our direct salesforce is effectively conveying the differentiating attributes of these products. We expect our business momentum to continue and we are therefore updating our full year guidance. Looking ahead, we have many internal initiatives that we believe can drive substantial future growth. Given our highly experienced leadership team, we are confident we can deliver on our goals and objectives for 2018.
Third Quarter 2018 Financial Results
Total revenues for the third quarter of 2018 increased 47 percent to $64.6 million, compared to $44.0 million for the third quarter of 2017. The increase was primarily driven by $15.0 million in revenues from JOTEC and strong revenue growth from On-X and tissue processing. Non-
GAAP total revenues for the third quarter of 2018 increased 17 percent, compared to the third quarter of 2017, a 17 percent increase on a constant currency basis.
Net income for the third quarter of 2018 was $1.6 million, or $0.04 per fully diluted common share, compared to net income of $1.3 million, or $0.04 per fully diluted common share for the third quarter of 2017. Non-GAAP net income for the third quarter of 2018 was $3.1 million, or $0.08 per fully diluted common share, compared to non-GAAP net income of $3.1 million, or $0.09 per fully diluted common share for the third quarter of 2017.
2018 Financial Outlook
The Company is updating its full-year 2018 financial guidance, as summarized below, and expects total revenues in the fourth quarter of 2018 to be between $66.5 million and $67.5 million.
| Previous | Revised | |
| Total Revenues | $ 256 .0 million - $ 260 .0 million | $ 26 1. 5 million - $26 2. 5 million |
| Gross Margins | 65.5% - 66.5% (includes $3.5 million non-cash charges related to acquired JOTEC inventory and distributor inventory buy backs ) | 65.5% - 66.5% (includes $ 2.8 million non-cash charges related to acquired JOTEC inventory and distributor inventory buy backs ) |
| R&D Expenses | $23.0 million - $25.0 million | $22.0 million - $23.0 million |
| Non-GAAP T ax Rate | Mid 20% (excludes effect of nondeductible transaction costs and the tax effect of stock compensation expenses) | same |
| Non-GAAP EPS | $0.29 - $0.32 (assumes approximately 37.5 million fully diluted shares outstanding and 25% effective tax rate) | $0. 30 - $0.3 3 (assumes approximately 37.5 million fully diluted shares outstanding and 25% effective tax rate) |
All numbers are presented on a GAAP basis except where expressly referenced as non-GAAP. The Company does not provide GAAP income per common share on a forward-looking basis because the Company is unable to predict with reasonable certainty business development and acquisition-related expenses, purchase accounting fair value adjustments, and any unusual gains and losses without unreasonable effort. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP.
The Company's financial guidance for 2018 is subject to the risks identified below.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. Investors should consider this non-GAAP information in addition to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial information may not be the same as similar measures presented by other companies. The Company's non-GAAP revenues include JOTEC revenues for the same nine-month period in 2017 prior to the closing of the acquisition of JOTEC on December 1, 2017. The Company did not own JOTEC during the nine-month period ended September 30, 2017, so the Company is unable to report its GAAP revenue
growth for the nine-month period ended September 30, 2018 compared to the same period in 2017. The Company's other non-GAAP results exclude (as applicable) business development and integration expenses, amortization expense, and inventory basis step-up expense. The Company believes that these non-GAAP presentations provide useful information to investors regarding unusual non-operating transactions, and the operating expense structure of the Company's existing and recently acquired operations, without regard to its on-going efforts to acquire additional complementary products and businesses and the transaction and integration expenses incurred in connection with recently acquired and divested product lines. The Company believes it is useful to exclude certain expenses because such amounts in any specific period may not directly correlate to the underlying performance of its business operations or can vary significantly between periods as a result of factors such as acquisitions, or non-cash expense related to amortization of previously acquired tangible and intangible assets. The Company does, however, expect to incur similar types of expenses in the future, and this non-GAAP financial information should not be viewed as a statement or indication that these types of expenses will not recur.
Webcast and Conference Call Information
The Company will hold a teleconference call and live webcast tomorrow, November 1, 2018 at 8:30 a.m. ET to discuss the results followed by a question and answer session. To listen to the live teleconference, please dial 201-689-8261. A replay of the teleconference will be available through November 8, 2018 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The Conference ID for the replay is 13684106.
The live webcast and replay can be accessed by going to the Investor Relations section of the CryoLife website at www.cryolife.com and selecting the heading Webcasts & Presentations.
About CryoLife, Inc.
Headquartered in suburban Atlanta, Georgia, CryoLife is a leader in the manufacturing, processing, and distribution of medical devices and implantable tissues used in cardiac and vascular surgical procedures focused on aortic repair. CryoLife markets and sells products in more than 100 countries worldwide. For additional information about CryoLife, visit our website, www.cryolife.com.
Forward Looking Statements
Statements made in this press release that look forward in time or that express management's beliefs, expectations, or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made. These statements include our forecasted revenues, gross margins, R&D expenses, non-GAAP income tax rate and non-GAAP earnings per share; and our beliefs that our On-X and JOTEC products continue to gain momentum as our direct salesforce is effectively conveying the differentiating attributes of these products, that we expect our business momentum to continue, that we have many internal initiatives that we believe can drive substantial future growth and that we are confident we can deliver on our goals and objectives for 2018. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These risks and uncertainties include the risk factors detailed in our Securities and Exchange Commission filings, including our Form 10-K for year ended December
31, 2017. CryoLife does not undertake to update its forward-looking statements, whether as a result of new information, future events, or otherwise.
CRYOLIFE, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)
| (Unaudited) | (Unaudited) | ||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| Revenues: | |||||||||||
| Products | $ | 45,152 | $ | 27,029 | $ | 138,063 | $ | 84,519 | |||
| Preservation services | 19,446 | 16,970 | 56,979 | 52,357 | |||||||
| Total revenues | 64,598 | 43,999 | 195,042 | 136,876 | |||||||
| Cost of products and preservation services: | |||||||||||
| Products | 12,459 | 6,220 | 40,166 | 21,196 | |||||||
| Preservation services | 9,425 | 7,917 | 27,083 | 23,401 | |||||||
| Total cost of products and | |||||||||||
| preservation services | 21,884 | 14,137 | 67,249 | 44,597 | |||||||
| Gross margin | 42,714 | 29,862 | 127,793 | 92,279 | |||||||
| Operating expenses: | |||||||||||
| General, administrative, and marketing | 32,871 | 24,756 | 104,946 | 71,016 | |||||||
| Research and development | 5,225 | 4,277 | 16,314 | 13,098 | |||||||
| Total operating expenses | 38,096 | 29,033 | 121,260 | 84,114 | |||||||
| Operating income | 4,618 | 829 | 6,533 | 8,165 | |||||||
| Interest expense | 4,104 | 851 | 11,863 | 2,486 | |||||||
| Interest income | (52) | (64) | (141) | (159) | |||||||
| Other (income) expense, net | (1,542) | 21 | (257) | (70) | |||||||
| Income (loss) before income taxes | 2,108 | 21 | (4,932) | 5,908 | |||||||
| Income tax expense (benefit) | 543 | (1,304) | (2,868) | (803) | |||||||
| Net income (loss) | $ | 1,565 | $ | 1,325 | $ | (2,064) | $ | 6,711 | |||
| Income (loss) per common share: | |||||||||||
| Basic | $ | 0.04 | $ | 0.04 | $ | (0.06) | $ | 0.20 | |||
| Diluted | $ | 0.04 | $ | 0.04 | $ | (0.06) | $ | 0.19 | |||
| Weighted-average common shares outstanding: | |||||||||||
| Basic | 36,526 | 32,887 | 36,331 | 32,665 | |||||||
| Diluted | 37,610 | 34,057 | 36,331 | 33,851 |
CRYOLIFE, INC. AND SUBSIDIARIES
Financial Highlights
| (Unaudited) | (Unaudited) | ||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| Products: | |||||||||||
| BioGlue and BioFoam | $ | 15,646 | $ | 15,730 | $ | 48,685 | $ | 48,094 | |||
| JOTEC | 15,004 | -- | 46,669 | -- | |||||||
| On-X | 11,298 | 8,326 | 33,495 | 27,048 | |||||||
| CardioGenesis cardiac laser therapy | 1,590 | 1,489 | 4,514 | 5,130 | |||||||
| PerClot | 882 | 886 | 2,822 | 2,641 | |||||||
| PhotoFix | 732 | 598 | 1,878 | 1,606 | |||||||
| Total products | 45,152 | 27,029 | 138,063 | 84,519 | |||||||
| Preservation services: | |||||||||||
| Cardiac tissue | 9,502 | 7,932 | 26,660 | 23,911 | |||||||
| Vascular tissue | 9,944 | 9,038 | 30,319 | 28,446 | |||||||
| Total preservation services | 19,446 | 16,970 | 56,979 | 52,357 | |||||||
| Total revenues | $ | 64,598 | $ | 43,999 | $ | 195,042 | $ | 136,876 | |||
| Revenues: | |||||||||||
| U.S. | $ | 36,516 | $ | 32,208 | $ | 108,123 | $ | 100,454 | |||
| International | 28,082 | 11,791 | 86,919 | 36,422 | |||||||
| Total revenues | $ | 64,598 | $ | 43,999 | $ | 195,042 | $ | 136,876 | |||
| (Unaudited) September 30, | December 31, | ||||||||||
| 2018 | 2017 | ||||||||||
| Cash, cash equivalents, and restricted securities | $ | 35,311 | $ | 40,753 | |||||||
| Total current assets | 173,952 | 179,280 | |||||||||
| Total assets | 569,695 | 589,693 | |||||||||
| Total current liabilities | 30,749 | 42,940 | |||||||||
| Total liabilities | 292,888 | 312,635 | |||||||||
| Shareholders' equity | 276,807 | 277,058 |
CRYOLIFE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Net Income (Loss) and Diluted Income (Loss) per Common Share
(In thousands, except per share data)
| (Unaudited) | (Unaudited) | ||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| GAAP: | |||||||||||
| Income (loss) before income taxes | $ | 2,108 | $ | 21 | $ | (4,932) | $ | 5,908 | |||
| Income tax expense (benefit) | 543 | (1,304) | (2,868) | (803) | |||||||
| Net income (loss) | $ | 1,565 | $ | 1,325 | $ | (2,064) | $ | 6,711 | |||
| Diluted income (loss) per common share: | $ | 0.04 | $ | 0.04 | $ | (0.06) | $ | 0.19 | |||
| Diluted weighted-average common | |||||||||||
| shares outstanding | 37,610 | 34,057 | 36,331 | 33,851 | |||||||
| Reconciliation of income (loss) before income | |||||||||||
| taxes, GAAP to adjusted net income, non-GAAP: | |||||||||||
| Income (loss) before income taxes, GAAP | $ | 2,108 | $ | 21 | $ | (4,932) | $ | 5,908 | |||
| Adjustments: | |||||||||||
| Business development and integration expenses | 1,917 | 2,998 | 6,933 | 4,380 | |||||||
| Amortization expense | 2,707 | 1,140 | 8,195 | 3,423 | |||||||
| Gain on On-X escrow settlement | (2,675) | -- | (2,675) | -- | |||||||
| Inventory basis step-up expense | 62 | 32 | 2,805 | 2,144 | |||||||
| Adjusted income before income taxes, | |||||||||||
| non-GAAP | 4,119 | 4,191 | 10,326 | 15,855 | |||||||
| Income tax expense calculated at 25% pro forma | |||||||||||
| tax rate | 1,030 | 1,048 | 2,582 | 3,964 | |||||||
| Adjusted net income, non-GAAP | $ | 3,089 | $ | 3,143 | $ | 7,744 | $ | 11,891 | |||
| Reconciliation of diluted income (loss) per | |||||||||||
| common share, GAAP to adjusted diluted income per common share, non-GAAP: | |||||||||||
| Diluted income (loss) per common share, GAAP: | $ | 0.04 | $ | 0.04 | $ | (0.06) | $ | 0.19 | |||
| Adjustments: | |||||||||||
| Amortization expense | 0.08 | 0.04 | 0.22 | 0.10 | |||||||
| Business development and integration expenses | 0.05 | 0.09 | 0.19 | 0.13 | |||||||
| Gain on On-X escrow settlement | (0.07) | -- | (0.07) | -- | |||||||
| Inventory basis step-up expense | -- | -- | 0.07 | 0.06 | |||||||
| Tax effect of non-GAAP adjustments | (0.02) | (0.04) | (0.10) | (0.07) | |||||||
| Effect of 25% pro forma tax rate | -- | (0.04) | (0.04) | (0.07) | |||||||
| Adjusted diluted income per common share, | |||||||||||
| non-GAAP: | $ | 0.08 | $ | 0.09 | $ | 0.21 | $ | 0.34 | |||
| Diluted weighted-average common | |||||||||||
| shares outstanding | 37,610 | 34,057 | 37,351 | 33,851 |
CRYOLIFE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Revenues; Gross Margin; General, Administrative, and Marketing
(In thousands, except per share data)
| (Unaudited) | (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2018 | 2017 | Growth Rate | 2018 | 2017 | Growth Rate | ||||||||
| Reconciliation of total revenues, GAAP | |||||||||||||
| to total revenues, non-GAAP: | |||||||||||||
| Total revenues, GAAP | $ | 64,598 | $ | 43,999 | 47% | $ | 195,042 | $ | 136,876 | 42% | |||
| Plus: JOTEC pre-acquisition revenues | -- | 11,339 | -- | 36,439 | |||||||||
| Total revenues, non-GAAP | $ | 64,598 | $ | 55,338 | 17% | $ | 195,042 | $ | 173,315 | 13% | |||
| Impact of changes in currency exchange | -- | (203) | -- | 3,625 | |||||||||
| Total constant currency revenues, non-GAAP | $ | 64,598 | $ | 55,135 | 17% | $ | 195,042 | $ | 176,940 | 10% | |||
| (Unaudited) | (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Reconciliation of gross margin %, | |||||||||||||
| GAAP to gross margin %, | |||||||||||||
| non-GAAP: | |||||||||||||
| Total revenues, GAAP | $ | 64,598 | $ | 43,999 | $ | 195,042 | $ | 136,876 | |||||
| Gross margin, GAAP | $ | 42,714 | $ | 29,862 | $ | 127,793 | $ | 92,279 | |||||
| Gross margin %, GAAP | 66% | 68% | 66% | 67% | |||||||||
| Gross margin, GAAP | $ | 42,714 | $ | 29,862 | $ | 127,793 | $ | 92,279 | |||||
| Plus: Inventory basis step- up | |||||||||||||
| expense | 62 | 32 | 2,805 | 2,144 | |||||||||
| Gross margin, non-GAAP | $ | 42,776 | $ | 29,894 | $ | 130,598 | $ | 94,423 | |||||
| Gross margin %, non-GAAP | 66% | 68% | 67% | 69% | |||||||||
| (Unaudited) | (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Reconciliation of general, | |||||||||||||
| administrative, and marketing, | |||||||||||||
| GAAP to general, administrative, | |||||||||||||
| and marketing, non-GAAP: | |||||||||||||
| General, administrative, and marketing, | |||||||||||||
| GAAP | $ | 32,871 | $ | 24,756 | $ | 104,946 | $ | 71,016 | |||||
| Less: Business development and | |||||||||||||
| integration expenses | (1,917) | (2,998) | (6,933) | (4,380) | |||||||||
| General, administrative, and | |||||||||||||
| marketing, non-GAAP | $ | 30,954 | $ | 21,758 | $ | 98,013 | $ | 66,636 |
CRYOLIFE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Net Income (Loss) to Adjusted EBITDA
| (Unaudited) | (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Reconciliation of net income (loss), | |||||||||||||
| GAAP to adjusted EBITDA, non-GAAP: | |||||||||||||
| Net income (loss), GAAP | $ | 1,565 | $ | 1,325 | $ | (2,064) | $ | 6,711 | |||||
| Adjustments: | |||||||||||||
| Interest income | (52) | (64) | (141) | (159) | |||||||||
| Interest expense | 4,104 | 851 | 11,863 | 2,486 | |||||||||
| Income tax expense (benefit) | 543 | (1,304) | (2,868) | (803) | |||||||||
| Depreciation and amortization expense | 4,530 | 2,331 | 13,636 | 6,683 | |||||||||
| Loss (gain) on foreign currency revaluation | 683 | 21 | 2,141 | (78) | |||||||||
| Business development and integration expenses | 1,917 | 2,998 | 6,933 | 4,380 | |||||||||
| Gain on On-X escrow settlement | (2,675) | -- | (2,675) | -- | |||||||||
| Inventory basis step-up expense | 62 | 32 | 2,805 | 2,144 | |||||||||
| Stock-based compensation expense | 1,565 | 1,856 | 4,685 | 5,652 | |||||||||
| Adjusted EBITDA, non-GAAP | $ | 12,242 | $ | 8,046 | $ | 34,315 | $ | 27,016 |