K2M Group Holdings, Inc. (Nasdaq:KTWO) (the “Company” or “K2M”), a
global leader of complex spine and minimally invasive solutions
focused on achieving three-dimensional Total Body Balance™, today
reported financial results for its second quarter ended June 30,
2018.
Second Quarter 2018 Financial Summary:
- Total second quarter revenue of $73.6 million, up 12%
year-over-year on a reported basis and 11.3% on a constant currency
basis.
- Domestic second quarter revenue of $54.3 million, up 7%
year-over-year, comprised of:
- U.S. Complex Spine revenue of $21.8 million, up $1.5 million,
or 7%, year-over-year.
- U.S. Minimally Invasive Surgery (MIS) revenue of $8.7 million,
down $0.1 million, or 1%, year-over-year.
- U.S. Degenerative revenue of $23.8 million, up $2.2 million, or
10%, year-over-year.
- International second quarter revenue of $19.3 million, up
29.1% year-over-year on a reported basis and 25.7% on a constant
currency basis.
- Net loss of $10.8 million for the second quarter, compared to a
net loss of $9.1 million in the comparable quarter last year.
- Adjusted EBITDA loss of $2.7 million for the second quarter,
compared to Adjusted EBITDA of $0.6 million in the comparable
quarter last year.
Second Quarter Product Introductions and Strategic
Highlights:
- On April 27, 2018, the Company executed an exclusive agency and
services agreement to replace its then-existing exclusive
distribution agreement with its partner in Spain and Portugal,
Medcomtech, S.A., whereby K2M and Medcomtech extended their
partnership through 2024. Pursuant to the agreement, K2M
acquired Medcomtech’s spine customer contracts and relationships as
well as its K2M product inventory and instrumentation in exchange
for certain outstanding receivables from Medcomtech.
- On April 30, 2018, the Company announced that it hosted more
than 100 international spine surgeons from 10 countries for its
annual Meeting of Minds™ in Chicago, IL, from April 20-21, 2018.
Meeting of Minds, which is the largest of K2M’s comprehensive
medical education programs, offers interactive discussions and case
presentations on the latest issues in spine surgery, including the
latest in cervical deformity correction.
- On May 16, 2018, the Company announced the U.S. commercial
launch of its MOJAVE™ PL 3D Expandable Interbody System. Designed
with K2M’s Lamellar 3D Titanium Technology™, MOJAVE PL 3D
incorporates a porous structure in conjunction with rough surfaces,
with the goal of allowing for bony integration throughout its
endplates. K2M was the first leading spine company to market a
3D-printed titanium interbody device and offers the most
comprehensive portfolio of 3D-printed spinal devices on the
market.
- On May 30, 2018, the Company announced U.S. Food and Drug
Administration (FDA) 510(k) clearance for BACS® Patient-Specific
devices. With the BACS Surgical Planner, surgeons can create
pre-contoured rods, rails, and templates that match the surgeon’s
preoperative plan. This is K2M’s fifth module within the BACS
platform, and its first clearance for patient-specific
devices.
- On June 7, 2018, the Company surpassed its 100th product
milestone with the announcement of FDA 510(k) clearance and
commercial launch of its OZARK™ Cervical Plate Systems, which are
designed for anterior screw fixation to the cervical spine (C2-T1)
in patients with degenerative disease, deformity, tumor, or trauma.
This milestone highlights the depth and breadth of K2M’s 3D spinal
balance portfolio, its cervical solutions offering, and strengthens
the Company’s commitment to improving surgical outcomes for people
living with spinal disease.
- On June 14, 2018, the Company announced the pricing of a
private offering of $75.0 million aggregate principal amount of
3.00% Convertible Senior Notes due 2025.
“Our second quarter total revenue growth of approximately 12%
year-over-year reflects strong trends in both the U.S. and
international markets, and we have increased our fiscal year 2018
revenue guidance expectations accordingly," said Chairman,
President, and Chief Executive Officer, Eric Major. "Summer
deformity season is off to a strong start and, similar to Q1, our
revenue growth in the U.S. this quarter was fueled in part by our
multiple new product launches and the expansion of our distribution
network in 2017 and 2018.”
Mr. Major continued: “We delivered 7.5% growth in the United
States over the first six months of 2018, driven by solid execution
against our strategic goal of increasing market share by
introducing new and innovative spinal implant solutions like our
first-of-its-kind MOJAVE PL 3D Expandable Interbody System
featuring Lamellar 3D Titanium Technology and our YUKON OCT Spinal
System that can be used with the PALO ALTO Cervical Static
Corpectomy Cage System. Building on the early commercial
traction from recent new product introductions, we announced two
important U.S. regulatory clearances this quarter, our BACS
Patient-Specific devices and our OZARK Cervical Plate Systems, as
we continue to enhance the foundation of growth in the future. To
that end, we remain confident in our ability to drive above-market
growth in the U.S., fueled by our continued focus on leading the
spine surgery market by introducing new and innovative spinal
implant solutions to help surgeons care for patients around the
world who suffer from debilitating spinal pathologies.”
Second Quarter 2018 Financial
Results
|
|
Three Months Ended June
30, |
|
Increase / Decrease |
|
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
|
% Change |
($
in thousands) |
|
|
|
|
|
|
|
(as reported) |
|
(constant currency) |
United
States |
|
$ |
54,325 |
|
|
$ |
50,775 |
|
|
$ |
3,550 |
|
|
7.0% |
|
7.0% |
International |
|
19,255 |
|
|
14,917 |
|
|
4,338 |
|
|
29.1% |
|
25.7% |
Total Revenue Revenue: |
|
$ |
73,580 |
|
|
$ |
65,692 |
|
|
$ |
7,888 |
|
|
12.0% |
|
11.3% |
Total revenue for the second quarter of 2018
increased $7.9 million, or 12.0%, to $73.6 million, compared to
$65.7 million for the second quarter of 2017. Total revenue
increased 11.3% year-over-year on a constant currency basis. The
increase in revenue was primarily driven by higher sales volume
from domestic new surgeon users and newer product offerings, and
increased set investments by our distribution partners in Australia
and Japan.
Revenue in the United States increased $3.6 million, or 7.0%
year-over-year, to $54.3 million, and international revenue
increased $4.3 million, or 29.1% year-over-year, to $19.3 million.
Second quarter 2018 international revenue increased 25.7%
year-over-year on a constant currency basis. Foreign currency
exchange positively impacted second quarter international revenue
by $0.4 million, representing approximately 338 basis points of
2018 international growth year-over-year.
The following table represents domestic revenue by procedure
category:
|
|
Three Months Ended June
30, |
|
Increase / Decrease |
|
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
($
in thousands) |
|
|
|
|
|
|
|
|
Complex
Spine |
|
$ |
21,829 |
|
|
$ |
20,342 |
|
|
$ |
1,487 |
|
|
7.3% |
|
Minimally
Invasive |
|
8,685 |
|
|
8,785 |
|
|
(100 |
) |
|
(1.1)% |
|
Degenerative |
|
23,811 |
|
|
21,648 |
|
|
2,163 |
|
|
10.0% |
|
U.S. Revenue |
|
$ |
54,325 |
|
|
$ |
50,775 |
|
|
$ |
3,550 |
|
|
7.0% |
|
By procedure category, U.S. revenue in the Company’s complex
spine, MIS and degenerative categories represented 40.2%, 16.0% and
43.8% of U.S. revenue, respectively, for the three months ended
June 30, 2018.
Gross profit for the second quarter of 2018 increased 11.1% to
$48.0 million, compared to $43.2 million for the second quarter of
2017. Gross margin was 65.2% for the second quarter of 2018,
compared to 65.7% for the prior year period, primarily due to lower
overall average selling prices during the quarter. Gross profit
includes amortization expense on investments in surgical
instruments of $4.1 million, or 5.5% of sales, for the three months
ended June 30, 2018, compared to $3.6 million, or 5.5% of sales,
for the comparable period last year.
Operating expenses for the second quarter of 2018 increased $7.1
million, or 13.7%, to $58.4 million, compared to $51.3 million for
the second quarter of 2017. The increase in operating expenses was
driven primarily by a $5.2 million increase in sales and marketing
expenses, a $0.9 million increase in research and development
expenses, and a $1.0 million increase in general and administrative
expenses, compared to the comparable period last year.
Loss from operations for the second quarter of 2018 increased
$2.2 million to $10.4 million, compared to a loss from operations
of $8.2 million for the second quarter last year. Loss from
operations included intangible amortization of $0.2 million for the
three months ended June 30, 2018, compared to $2.4 million for the
comparable period last year.
Total other expense, net for the second quarter of 2018
increased $2.1 million to $3.0 million, compared to $0.9 million
last year. The increase in other expense, net, was primarily
attributable to an unrealized loss of $1.0 million from foreign
currency remeasurement on intercompany payable balances, compared
to unrealized gain of $0.9 million in the second quarter last
year. Other expense, net for the second quarer of 2018 also
included $0.2 million in incremental interest expense related to
the Company’s new convertible notes issued on June 18, 2018.
Net loss for the second quarter of 2018 was $10.8 million, or
$0.25 per diluted share, compared to a loss of $9.1 million, or
$0.21 per diluted share, for the second quarter of 2017.
Six-Months 2018 Financial
Results
|
|
Six Months Ended June
30, |
|
Increase / Decrease |
|
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
|
% Change |
($
in thousands) |
|
|
|
|
|
|
|
(as reported) |
|
(constant currency) |
United
States |
|
$ |
104,216 |
|
|
$ |
96,982 |
|
|
$ |
7,234 |
|
|
7.5% |
|
7.5% |
International |
|
37,240 |
|
|
30,595 |
|
|
6,645 |
|
|
21.7% |
|
17.2% |
Total Revenue |
|
$ |
141,456 |
|
|
$ |
127,577 |
|
|
$ |
13,879 |
|
|
10.9% |
|
9.9% |
For the six months ended June 30, 2018, total
revenue increased $13.9 million, or 10.9%, to $141.5 million,
compared to $127.6 million for the six months ended June 30, 2017.
Total revenue increased 9.9% year-over-year on a constant currency
basis. U.S. revenue increased $7.2 million, or 7.5%, to $104.2
million for the first six months of 2018, compared to $97.0 million
last year. International revenue increased $6.6 million, or 21.7%,
to $37.2 million for the first six months of 2018, compared to
$30.6 million last year. International revenue increased 17.2%
year-over-year on a constant currency basis.
The following represents domestic revenue by
procedure category:
|
|
Six Months Ended June
30, |
|
Increase / Decrease |
($
in thousands) |
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
Complex
Spine |
|
$ |
40,341 |
|
|
$ |
37,478 |
|
|
$ |
2,863 |
|
|
7.6 |
% |
Minimally
Invasive |
|
17,061 |
|
|
16,657 |
|
|
404 |
|
|
2.4 |
% |
Degenerative |
|
46,814 |
|
|
42,847 |
|
|
3,967 |
|
|
9.3 |
% |
U.S. Revenue |
|
$ |
104,216 |
|
|
$ |
96,982 |
|
|
$ |
7,234 |
|
|
7.5 |
% |
Sales in our complex spine, MIS and degenerative
categories represented 38.7%, 16.4% and 44.9% of U.S. revenue,
respectively, for the first six months of 2018.
As of June 30, 2018, cash and equivalents were $66.2 million as
compared to $24.0 million as of December 31, 2017. Our outstanding
long-term indebtedness consisted primarily of the carrying value of
the Convertible Senior Notes maturing in 2036 and 2025 of $91.8
million and the capital lease obligation, net of current
maturities, of $33.2 million. In addition, the Company also had
working capital of $147.5 million and $49.0 million of unused
borrowing capacity under its revolving credit facility, subject to
covenant compliance and conditions of borrowing.
2018 Outlook
- The Company is increasing total revenue expectations for fiscal
year 2018 and now expects total revenue on a reported basis in the
range of $288.0 million to $291.0 million, representing growth of
12% to 13% year-over-year, compared to total revenue of $258.0
million in fiscal year 2017. Its prior revenue guidance
expectations were for total revenue on an as reported basis in a
range of $283.0 million to $287.0 million, representing growth of
10% to 11% year-over-year.
- The Company continues to expect growth in its U.S. business of
approximately 10% to 11% year-over-year in 2018.
- The Company now expects growth in its International business of
approximately 17% to 19% year-over-year in 2018, compared to prior
guidance expectations for growth of approximately 11% to 12%
year-over-year.
- The Company continues to expect currency to have a positive
impact on total revenue in 2018 of approximately $2 million.
- The Company now expects total net loss of $38.2 million to
$34.2 million, compared to net loss of $37.1 million in fiscal year
2017, updated to reflect the latest convertible note offering and
other non-cash items.
- The Company continues to expect an Adjusted EBITDA benefit in
the range of $4.0 million to $8.0 million, compared to Adjusted
EBITDA loss of $0.7 million in fiscal year 2017.
Conference Call
Management will host a conference call at 5:00 p.m. Eastern Time
on August 1, 2018 to discuss the results of the second quarter, and
to host a question and answer session. Those who would like to
participate may dial 866-393-4306 (734-385-2616 for international
callers) and provide access code 4666247 approximately 10 minutes
prior to the start of the call. A live webcast of the call will
also be provided on the investor relations section of the Company's
website at http://Investors.K2M.com/.
For those unable to participate, a replay of the call will be
available for two weeks at 855-859-2056 (404-537-3406 for
international callers); access code 4666247. The webcast will be
archived on the investor relations section of the Company's
website.
About K2M Group Holdings, Inc.
K2M Group Holdings, Inc. is a global leader of complex spine and
minimally invasive solutions focused on achieving three-dimensional
Total Body Balance. Since its inception, K2M has designed,
developed, and commercialized innovative complex spine and
minimally invasive spine technologies and techniques used by spine
surgeons to treat some of the most complicated spinal pathologies.
K2M has leveraged these core competencies into Balance ACS, a
platform of products, services, and research to help surgeons
achieve three-dimensional spinal balance across the axial, coronal,
and sagittal planes, with the goal of supporting the full continuum
of care to facilitate quality patient outcomes. The Balance ACS
platform, in combination with the Company's technologies,
techniques and leadership in the 3D-printing of spinal devices,
enables K2M to compete favorably in the global spine surgery
market. For more information, visit www.K2M.com and connect with us
on Facebook, Twitter, Instagram, LinkedIn and YouTube.
Forward-Looking Statements
This press release contains forward-looking statements that
reflect current views with respect to, among other things,
operations and financial performance. Forward-looking
statements include all statements that are not historical facts
such as our statements about our expected financial results and
guidance and our expectations for future business prospects.
In some cases, you can identify these forward-looking statements by
the use of words such as, “outlook,” “guidance,” “believes,”
“expects,” “potential,” “continues,” “may,” “will,” “should,”
“could,” “seeks,” “predicts,” “intends,” “plans,” “estimates,”
“anticipates” or the negative version of these words or other
comparable words.
Such forward-looking statements are subject to various risks and
uncertainties including, among other things: our ability to achieve
or sustain profitability in the future; our ability to demonstrate
to spine surgeons and hospital customers the merits of our products
and to retain their use of our products; pricing pressures and our
ability to compete effectively generally; collaboration and
consolidation in hospital purchasing; inadequate coverage and
reimbursement for our products from third-party payers; lack of
long-term clinical data supporting the safety and efficacy of our
products; dependence on a limited number of third-party suppliers;
our ability to maintain and expand our network of direct sales
employees, independent sales agencies and international
distributors and their level of sales or distribution activity with
respect to our products; proliferation of physician-owned
distributorships in the industry; decline in the sale of certain
key products; loss of key personnel; our ability to enhance our
product offerings through research and development; our ability to
maintain adequate working relationships with healthcare
professionals; our ability to manage expected growth; our ability
to successfully acquire or invest in new or complementary
businesses, products or technologies; our ability to educate
surgeons on the safe and appropriate use of our products; costs
associated with high levels of inventory; impairment of our
goodwill and intangible assets; disruptions to our corporate
headquarters and operations facilities or critical information
technology systems or those of our suppliers, distributors or
surgeon users; our ability to ship a sufficient number of our
products to meet demand; our ability to strengthen our brand;
fluctuations in insurance cost and availability; our ability to
remediate the material weaknesses in our IT general controls; our
ability to comply with extensive governmental regulation within the
United States and foreign jurisdictions; our ability to maintain or
obtain regulatory approvals and clearances within the United States
and foreign jurisdictions; voluntary corrective actions by us or
our distribution or other business partners or agency enforcement
actions; recalls or serious safety issues with our products;
enforcement actions by regulatory agencies for improper marketing
or promotion; misuse or off-label use of our products; delays or
failures in clinical trials and results of clinical trials; legal
restrictions on our procurement, use, processing, manufacturing or
distribution of allograft bone tissue; negative publicity
concerning methods of tissue recovery and screening of donor
tissue; costs and liabilities relating to environmental laws and
regulations; our failure or the failure of our agents to comply
with fraud and abuse laws; U.S. legislative or Food and Drug
Administration regulatory reforms; adverse effects associated with
the exit of the United Kingdom from the European Union; adverse
effects of medical device tax provisions; potential tax changes in
jurisdictions in which we conduct business; our ability to generate
significant sales; potential fluctuations in sales volumes and our
results of operations over the course of a fiscal year; uncertainty
in future capital needs and availability of capital to meet our
needs; our level of indebtedness and the availability of borrowings
under our credit facility; restrictive covenants and the impact of
other provisions in the indenture governing our convertible senior
notes and our credit facility; worldwide economic instability; our
ability to protect our intellectual property rights; patent
litigation and product liability lawsuits; damages relating to
trade secrets or non-competition or non-solicitation agreements;
risks associated with operating internationally; fluctuations in
foreign currency exchange rates; our ability to comply with the
Foreign Corrupt Practices Act and similar laws; increased costs and
additional regulations and requirements as a result of being a
public company; our ability to implement and maintain effective
internal control over financial reporting; potential volatility in
our stock price; our lack of current plans to pay cash dividends;
potential dilution by the future issuances of additional common
stock in connection with our incentive plans, acquisitions or
otherwise; anti-takeover provisions in our organizational documents
and our ability to issue preferred stock without shareholder
approval; potential limits on our ability to use our net operating
loss carryforwards; and other risks and uncertainties, including
those described under the section entitled “Risk Factors” in our
most recent Annual Report on Form 10-K filed with the SEC, as such
factors may be updated from time to time in our periodic filings
with the SEC, which are accessible on the SEC’s website at
www.sec.gov. Accordingly, there are or will be important
factors that could cause actual outcomes or results to differ
materially from those indicated in these statements. These
factors should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are included
in this release and our filings with the SEC.
We operate in a very competitive and challenging environment.
New risks and uncertainties emerge from time to time, and it is not
possible for us to predict all risks and uncertainties that could
have an impact on the forward-looking statements contained in this
release. We cannot assure you that the results, events and
circumstances reflected in the forward-looking statements will be
achieved or occur, and actual results, events or circumstances
could differ materially from those described in the forward-looking
statements.
The forward-looking statements made in this press release relate
only to events as of the date on which the statements are made. We
undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law. We may
not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Unless
specifically stated otherwise, our forward-looking statements do
not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures, investments or other
strategic transactions we may make.
Investor Contact:Westwicke Partners on behalf
of K2M Group Holdings, Inc.Mike Piccinino,
CFA443-213-0500K2M@westwicke.com
K2M GROUP HOLDINGS,
INC.CONSOLIDATED BALANCE
SHEETS(Unaudited)(In Thousands,
Except Share and Per Share Data) |
|
|
|
June 30, |
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
66,230 |
|
|
$ |
23,964 |
|
Accounts receivable, net |
|
54,464 |
|
|
50,474 |
|
Inventory, net |
|
80,112 |
|
|
71,424 |
|
Prepaid expenses and other current assets |
|
6,175 |
|
|
7,842 |
|
Total current assets |
|
206,981 |
|
|
153,704 |
|
Property,
plant and equipment, net |
|
47,194 |
|
|
49,200 |
|
Surgical
instruments, net |
|
29,281 |
|
|
26,250 |
|
Goodwill |
|
121,814 |
|
|
121,814 |
|
Intangible
assets, net |
|
19,209 |
|
|
18,899 |
|
Other
assets |
|
4,102 |
|
|
3,260 |
|
Total assets |
|
$ |
428,581 |
|
|
$ |
373,127 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Current maturities under capital lease obligation |
|
$ |
1,201 |
|
|
$ |
1,122 |
|
Accounts payable |
|
24,925 |
|
|
20,495 |
|
Accrued expenses |
|
21,796 |
|
|
22,233 |
|
Accrued payroll liabilities |
|
11,571 |
|
|
10,214 |
|
Total current liabilities |
|
59,493 |
|
|
54,064 |
|
Convertible
senior notes |
|
91,766 |
|
|
39,176 |
|
Capital
lease obligation, net of current maturities |
|
33,191 |
|
|
33,812 |
|
Deferred
income taxes, net |
|
672 |
|
|
3,360 |
|
Other
liabilities |
|
340 |
|
|
316 |
|
Total liabilities |
|
185,462 |
|
|
130,728 |
|
Stockholders’ equity: |
|
|
|
|
Common stock, $0.001 par value, 750,000,000 shares
authorized; 43,626,848 and 43,389,576 shares issued and 43,602,255
and 43,373,611shares outstanding, respectively |
|
43 |
|
|
43 |
|
Additional paid-in capital |
|
514,840 |
|
|
491,012 |
|
Accumulated deficit |
|
(271,413 |
) |
|
(249,221 |
) |
Accumulated other comprehensive income |
|
164 |
|
|
876 |
|
Treasury stock, at cost, 24,593 and 15,965 shares,
respectively |
|
(515 |
) |
|
(311 |
) |
Total stockholders’ equity |
|
243,119 |
|
|
242,399 |
|
Total liabilities and stockholders’ equity |
|
$ |
428,581 |
|
|
$ |
373,127 |
|
K2M GROUP HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
Thousands, Except Share and Per Share Data) |
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenue |
|
$ |
73,580 |
|
|
$ |
65,692 |
|
|
$ |
141,456 |
|
|
$ |
127,577 |
|
Cost of
revenue |
|
25,624 |
|
|
22,522 |
|
|
50,043 |
|
|
44,001 |
|
Gross profit |
|
47,956 |
|
|
43,170 |
|
|
91,413 |
|
|
83,576 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
6,463 |
|
|
5,560 |
|
|
12,123 |
|
|
10,810 |
|
Sales and marketing |
|
36,417 |
|
|
31,242 |
|
|
69,149 |
|
|
61,716 |
|
General and administrative |
|
15,472 |
|
|
14,524 |
|
|
30,554 |
|
|
28,278 |
|
Total operating expenses |
|
58,352 |
|
|
51,326 |
|
|
111,826 |
|
|
100,804 |
|
Loss from operations |
|
(10,396 |
) |
|
(8,156 |
) |
|
(20,413 |
) |
|
(17,228 |
) |
Other
expense, net: |
|
|
|
|
|
|
|
|
|
|
Foreign currency transaction (loss) gain |
|
(956 |
) |
|
874 |
|
|
(478 |
) |
|
847 |
|
Interest expense |
|
(2,083 |
) |
|
(1,731 |
) |
|
(3,865 |
) |
|
(3,463 |
) |
Total other
expense, net |
|
(3,039 |
) |
|
(857 |
) |
|
(4,343 |
) |
|
(2,616 |
) |
Loss before
income taxes |
|
(13,435 |
) |
|
(9,013 |
) |
|
(24,756 |
) |
|
(19,844 |
) |
Income tax
(benefit) expense |
|
(2,641 |
) |
|
46 |
|
|
(2,564 |
) |
|
88 |
|
Net
loss |
|
$ |
(10,794 |
) |
|
$ |
(9,059 |
) |
|
$ |
(22,192 |
) |
|
$ |
(19,932 |
) |
Net loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.25 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.47 |
) |
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
43,160,085 |
|
|
42,641,585 |
|
|
43,139,720 |
|
|
42,434,311 |
|
K2M GROUP HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In
Thousands) |
|
|
|
Six Months Ended June
30, |
|
|
2018 |
|
2017 |
Operating activities |
|
|
|
|
Net
loss |
|
$ |
(22,192 |
) |
|
$ |
(19,932 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
11,358 |
|
|
14,614 |
|
Provision for inventory reserves |
|
2,208 |
|
|
2,192 |
|
Provision for allowance for doubtful accounts |
|
(750 |
) |
|
50 |
|
Stock-based compensation expense |
|
3,139 |
|
|
2,880 |
|
Accretion of discounts and amortization of issuance costs of
Convertible Notes |
|
1,319 |
|
|
1,109 |
|
Deferred income taxes |
|
(2,688 |
) |
|
— |
|
Other |
|
36 |
|
|
3 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
(9,748 |
) |
|
(2,924 |
) |
Inventory |
|
(8,351 |
) |
|
(3,523 |
) |
Prepaid expenses and other assets |
|
1,912 |
|
|
(5,583 |
) |
Accounts payable, accrued expenses, and accrued payroll
liabilities |
|
5,953 |
|
|
2,929 |
|
Net cash
used in operating activities |
|
(17,804 |
) |
|
(8,185 |
) |
Investing activities |
|
|
|
|
|
Purchase of
surgical instruments |
|
(9,763 |
) |
|
(6,442 |
) |
Purchase of
property, plant and equipment |
|
(1,600 |
) |
|
(2,571 |
) |
Changes in
cash restricted for leasehold improvements |
|
— |
|
|
61 |
|
Purchase of
intangible assets |
|
(42 |
) |
|
(50 |
) |
Net cash
used in investing activities |
|
(11,405 |
) |
|
(9,002 |
) |
Financing activities |
|
|
|
|
|
Borrowings
on bank line of credit |
|
18,000 |
|
|
— |
|
Payments on
bank line of credit |
|
(18,000 |
) |
|
— |
|
Payments
under capital lease |
|
(542 |
) |
|
(469 |
) |
Proceeds
from issuances of convertible senior notes due 2025, net of
issuance costs |
|
72,000 |
|
|
— |
|
Issuances
and exercise of stock-based compensation plans, net of income
tax |
|
320 |
|
|
8,322 |
|
Net cash
provided by financing activities |
|
71,778 |
|
|
7,853 |
|
Effect of
exchange rate changes on cash and cash equivalents |
|
(303 |
) |
|
369 |
|
Net change
in cash and cash equivalents |
|
42,266 |
|
|
(8,965 |
) |
Cash and
cash equivalents at beginning of period |
|
23,964 |
|
|
45,511 |
|
Cash and
cash equivalents at end of period |
|
$ |
66,230 |
|
|
$ |
36,546 |
|
|
|
|
|
|
Significant non-cash investing activities |
|
|
|
|
Assets
acquired in business combination |
|
$ |
5,236 |
|
|
$ |
— |
|
Additions
to property, plant and equipment |
|
$ |
150 |
|
|
$ |
500 |
|
Reductions
to property, plant and equipment from earned grant incentives |
|
$ |
(395 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Significant non-cash financing activities |
|
|
|
|
|
|
|
|
Convertible
senior notes due 2025 issuance costs |
|
$ |
564 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
Income taxes |
|
$ |
160 |
|
|
$ |
131 |
|
Interest |
|
$ |
1,241 |
|
|
$ |
1,124 |
|
K2M GROUP HOLDINGS,
INC.Reconciliation of GAAP to Non-GAAP
Measures(Unaudited) (In
Thousands)
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measures of
revenue in constant currency, Adjusted Gross Profit, and Adjusted
EBITDA.
The Company presents these non-GAAP measures because it believes
these measures are useful indicators of the Company’s operating
performance. Management uses these non-GAAP measures
principally as a measure of the Company's operating performance and
believes that these measures are useful to investors because they
are frequently used by analysts, investors and other interested
parties to evaluate companies in the Company’s industry. The
Company also believes that these measures are useful to its
management and investors as a measure of comparative operating
performance from period to period.
Constant currency information compares results between periods
as if exchange rates had remained constant period-to-period.
We calculate constant currency by converting the prior-year results
using current-year foreign currency exchange rates.
Adjusted Gross Profit represents Gross Profit less amortization
expense of surgical instruments. The Company presents
Adjusted Gross Profit because it believes it is a useful measure of
the Company's gross profit and operating performance because the
measure is not burdened by the timing impact of instrument
purchases and related amortization.
Adjusted EBITDA represents net loss plus interest expense,
income tax (benefit) expense, depreciation and amortization,
stock-based compensation expense, transaction expenses associated
with our Spanish business combination and foreign currency
transaction (gain) loss.
The Company presents Adjusted EBITDA because it believes it is a
useful indicator of the Company’s operating performance.
Management uses Adjusted EBITDA principally as a measure of the
Company’s operating performance and for planning purposes,
including the preparation of the Company’s annual operating budget
and financial projections.
Adjusted EBITDA is a non-GAAP financial measure and should not
be considered as an alternative to net loss as a measure of
financial performance or cash flows from operations as a measure of
liquidity, or any other performance measure derived in accordance
with GAAP and it should not be construed as an inference that the
Company’s future results will be unaffected by unusual or
non-recurring items. In addition, Adjusted EBITDA is not
intended to be a measure of free cash flow for management’s
discretionary use, as it does not reflect certain cash requirements
such as tax payments, debt service requirements, capital
expenditures and certain other cash costs that may recur in the
future. Adjusted EBITDA contains certain other limitations,
including the failure to reflect the Company’s cash expenditures,
cash requirements for working capital needs and cash costs to
replace assets being depreciated and amortized. In evaluating
Adjusted EBITDA, you should be aware that in the future the Company
may incur expenses that are the same as or similar to some of the
adjustments in this presentation. The Company’s presentation
of Adjusted EBITDA should not be construed to imply that the
Company’s future results will be unaffected by any such
adjustments. Management compensates for these limitations by
primarily relying on its GAAP results in addition to using Adjusted
EBITDA supplementally. The Company’s definition of Adjusted
EBITDA is not necessarily comparable to other similarly titled
captions of other companies due to different methods of
calculation.
The following table presents reconciliations of gross profit to
adjusted gross profit and net loss to Adjusted EBITDA for the
periods presented.
K2M GROUP HOLDINGS,
INC.RECONCILIATION OF GAAP TO NON-GAAP
MEASURES(Unaudited)(In
Thousands) |
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Reconciliation from Gross Profit to Adjusted Gross
Profit |
|
|
|
|
|
|
|
|
Gross
profit |
|
$ |
47,956 |
|
|
$ |
43,170 |
|
|
$ |
91,413 |
|
|
$ |
83,576 |
|
Surgical instrument amortization |
|
4,068 |
|
|
3,605 |
|
|
7,930 |
|
|
7,069 |
|
Adjusted
gross profit (a Non-GAAP Measure) |
|
$ |
52,024 |
|
|
$ |
46,775 |
|
|
$ |
99,343 |
|
|
$ |
90,645 |
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Reconciliations from Net Loss to Adjusted
EBITDA |
|
|
Net
loss |
|
$ |
(10,794 |
) |
|
|
$ |
(9,059 |
) |
|
|
$ |
(22,192 |
) |
|
|
$ |
(19,932 |
) |
|
Interest expense |
|
2,083 |
|
|
|
1,731 |
|
|
|
3,865 |
|
|
|
3,463 |
|
|
Income tax (benefit) expense |
|
(2,641 |
) |
|
|
46 |
|
|
|
(2,564 |
) |
|
|
88 |
|
|
Depreciation and amortization |
|
5,812 |
|
|
|
7,419 |
|
|
|
11,358 |
|
|
|
14,614 |
|
|
Stock-based compensation expense |
|
1,688 |
|
|
|
1,339 |
|
|
|
3,139 |
|
|
|
2,880 |
|
|
Spanish transaction expenses |
|
220 |
|
|
|
— |
|
|
|
220 |
|
|
|
— |
|
|
Foreign currency transaction loss (gain) |
|
956 |
|
|
|
(874 |
) |
|
|
478 |
|
|
|
(847 |
) |
|
Adjusted
EBITDA (a Non-GAAP Measure) |
|
$ |
(2,676 |
) |
|
|
$ |
602 |
|
|
|
$ |
(5,696 |
) |
|
|
$ |
266 |
|
|
The following table presents a reconciliation of net loss to
Adjusted EBITDA for our 2018 guidance:
|
|
Year EndedDecember
31, |
|
|
2018 |
Net
loss |
|
$ |
(36,200) |
|
Interest expense |
|
12,000 |
|
Income tax expense |
|
(2,600) |
|
Depreciation and amortization |
|
22,600 |
|
Stock-based compensation expense |
|
10,000 |
|
Spanish transaction expenses |
|
200 |
|
Foreign currency transaction gain |
|
— |
|
Adjusted
EBITDA |
|
$ |
6,000 |
|
|
|
|
|
|
The reconciliation assumes the mid-point of the net loss and
Adjusted EBITDA ranges and the mid-point of each component of the
reconciliation, corresponding to the Adjusted EBITDA guidance of
$4.0 million to $8.0 million for 2018.
K2M GROUP HOLDINGS, INC. (NASDAQ:KTWO)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
K2M GROUP HOLDINGS, INC. (NASDAQ:KTWO)
Gráfica de Acción Histórica
De May 2023 a May 2024