ALACHUA, Fla., Feb. 28, 2019 (GLOBE NEWSWIRE) — RTI Surgical, Inc. (Nasdaq: RTIX), a global surgical implant company, reported operating results for the fourth quarter and full year of 2018.
Fourth Quarter 2018 Highlights:
- Revenue increased to $71.2 million
- Net income of $2.1 million, inclusive of $1.0 million of net non-recurring expenses
- Adjusted EBITDA of $7.7 million, or 11% of revenue
Full Year 2018 Highlights:
- 2018 revenues increased to $280.9 million
- Net loss of $3.4 million, inclusive of $11.0 million of net non-recurring expenses
- Adjusted EBITDA of $33.7 million, or 12% of revenue
- Provides 2019 revenue guidance
“Our fourth quarter and full year 2018 results demonstrate solid financial performance resulting from consistent progress across our key strategic initiatives,” stated Camille Farhat, President and CEO. “We believe the ongoing successful efforts to reduce complexity and drive operational excellence, including significant cost reduction efforts in tissue manufacturing, are providing the foundation to accelerate RTI’s growth. In 2018, we returned OEM to growth and continued to transition customers to long-term partners signaling the strength of our relationships and importance of our products to our partners. Further, the definitive agreement to acquire Paradigm Spine, announced in November 2018 and anticipated to close in early March, will contribute to the formidable platform of differentiated spine implants we established in 2018.”
Farhat continued, “We believe our accomplishments in 2018 have provided an exceptionally strong foundation to support our performance in 2019 and beyond. Our investment in rebuilding the spine pipeline has revitalized our new product development efforts, which we anticipate will serve as a catalyst for organic growth starting in 2020. We will work to continue to reduce the complexity of our business and extend operational excellence throughout the Company to accelerate the growth trajectory of RTI. We expect our performance will be driven by the successful integration of Paradigm, disciplined R&D efforts and the continued exploration of acquisition opportunities. We are excited for the year ahead.”
Fourth Quarter 2018
RTI’s worldwide revenues for the fourth quarter of 2018 were $71.2 million, compared with $70.8 million during the same period in the prior year. Gross profit for the fourth quarter of 2018 was $38.7 million, or 54.4% of revenues, a significant increase compared to $36.3 million, or 51.2% of revenues, in the fourth quarter of 2017.
During the fourth quarter of 2018, RTI incurred non-recurring pre-tax charges to support the ongoing strategic transformation of the business. The Company incurred $2.2 million in acquisition and integration costs related primarily to its potential acquisition of Paradigm Spine LLC. The Company incurred $0.6 million of severance and restructuring charges to complete the rationalization of the international infrastructure and transition distribution to a third-party logistics partner.
Net income applicable to common shares was $2.1 million, or $0.03 per fully diluted common share in the fourth quarter of 2018, compared to net loss applicable to common shares of $8.6 million, or $0.14 per fully diluted common share in the fourth quarter of 2017. As outlined in the reconciliation tables that follow, excluding the impact of the various non-recurring charges, Adjusted Net Income applicable to common shares was $3.0 million, or $0.04 per fully diluted common share in the fourth quarter of 2018 compared to $1.6 million, or $0.03 per fully diluted common share, in the fourth quarter of 2017.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), for the fourth quarter of 2018 was $7.7 million, or 11% of revenues, compared with $9.4 million, or 13% of revenues for the fourth quarter of 2017. The decline in Adjusted EBITDA was primarily driven by increased patent litigation costs and operating expenses resulting from accelerating growth due to incremental operating costs from the acquisition of Zyga Technologies completed in January of 2018, and partially offset by gross margin expansion associated with the efforts to reduce complexity and increase operational excellence initiated during 2017.
Full Year 2018
Worldwide revenues were $280.9 million for the full year 2018, an increase of 0.5 percent compared to revenues of $279.6 million for the full year 2017. Adjusting for the $8.2 million reduction from the sale of substantially all the assets of the Cardiothoracic Closure business completed in August 2017, total revenues increased $9.5 million or 3.5%, driven by growth in both the spine and OEM franchises. Gross profit for the full year 2018 was $140.1 million, or 49.9% of revenues compared to $142.5 million, or 51.0% of revenues in 2017. Adjusting for the $8.2 million of various non-recurring charges, gross profit for the full year 2018 was $148.3 million, or 52.8% of revenues.
During the year, RTI incurred non-recurring pre-tax charges to support the ongoing strategic transformation of the business. The Company incurred $4.9 million of acquisition and integration costs to support the acquisitions of Zyga Technologies and Paradigm Spine. The Company incurred $2.3 million of severance and restructuring charges to complete the rationalization of the international infrastructure. The Company incurred $4.5 million in asset impairment and abandonment charges related to ending distribution of our map3® implant. Finally, the Company recognized a $3.0 million gain from a cash contingency consideration related to the release of escrow funds held at the close of the Cardiothoracic Closure sale. During 2018, the Company incurred $17.2 million of pre-tax non-recurring charges.
During the third quarter of 2017, RTI completed the sale of substantially all the assets related to its cardiothoracic closure business for total consideration of $54 million, plus an additional $6 million in contingent cash consideration. In conjunction with the sale of the cardiothoracic closure business, the Company recognized a gain of $34.1 million, or $18.2 million after tax.
Net loss applicable to common shares was $3.4 million, or $0.05 per fully diluted common share for the full year 2018, compared to net income applicable to common shares of $2.5 million, or $0.04 per fully diluted common share for the full year 2017. As outlined in the reconciliation tables that follow, excluding the after-tax impact of the non-recurring charges, adjusted net income applicable to common shares was $7.6 million, or $0.12 per fully diluted common share for the full year 2018 compared to $3.1 million, or $0.05 per fully diluted common share, in 2017.
Adjusted EBITDA for the full year 2018 was $33.7 million, or 12% of revenues compared with $32.3 million, or 12% of revenues in 2017.
Fiscal 2019 Outlook
Based on our recent financial results and current business outlook, the Company has developed the following financial guidance for 2019:
- The Company expects full year revenues in the range of approximately $325 million to $335 million, representing approximately 15% to 19% growth over the prior year.
- The Company expects full year Adjusted EBITDA to be in the range of approximately $36 million to $40 million, representing approximately 7% to 19% growth over the prior year.
The Company noted that guidance is based on the following assumptions:
- Relatively stable economic and market conditions and regulatory environment;
- Ongoing positive impacts from efforts to reduce complexity and implement operational excellence;
- The successful closing of the acquisition of Paradigm Spine in March 2019 and a positive EBITDA contribution from Paradigm Spine;
- Sustained favorable reimbursement from private payers; and,
- The successful ongoing transition from map3® to ViBone®.
Conference Call
RTI will host a conference call and audio webcast at 9:00 a.m. ET today. The conference call can be accessed by dialing (877) 383-7419 (U.S.) or (760) 666-3754 (International). The webcast can be accessed through the investor section of RTI’s website at www.rtix.com/investors. A replay of the conference call will be available on RTI’s website for one month following the call.
About RTI Surgical, 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 more than 40 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, including the statements made in this communication about the continued contribution of the OEM franchise to RTI’s growth, the impact of operational priorities on costs and their impact on RTI’s financial performance, RTI’s ability to meet its commitments, the implementation of RTI’s strategic initiatives, the acceleration of RTI’s growth, future performance and organic growth, the reduction in complexity of RTI’s operations, RTI’s ability to maintain partnerships in the organ procurement community, 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 closing of, and potential impact from, the Paradigm Spine, LLC acquisition, the integration of Zyga’s operations, the success of our new product development efforts, anticipated financial results, growth rates, new product introductions, future operational improvements, and fiscal 2019 guidance. 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 reduce inventory, 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, 2017 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.
Important Additional Information and Where to Find It
In connection with the proposed acquisition of Paradigm Spine, LLC, Bears Holding Sub, Inc. filed a registration statement on Form S-4/A with the SEC on January 18, 2019. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WAS FILED AS A PART OF THE REGISTRATION STATEMENT BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final proxy statement/prospectus were mailed to stockholders of the Company beginning on February 7, 2019. Investors and security holders are able to obtain the documents free of charge at the SEC’s website, www.sec.gov, from the Company at its website, www.rtix.com, or by contacting the Company’s Investor Relations at (847) 530-0249.
Participants in Solicitation
The Company and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed acquisition of Paradigm Spine, LLC. Information concerning the Company’s participants is set forth in the proxy statement, filed March 26, 2018, for the Company’s 2018 annual meeting of stockholders as filed with the SEC on Schedule 14A. Additional information regarding the interests of such participants in the solicitation of proxies in respect of the proposed transaction were included in the registration statement on Form S-4/A filed with the SEC on January 18, 2019, the proxy statement/prospectus, filed February 7, 2019, for the Company’s special meeting of stockholders as filed with the SEC on Schedule 14A, and other relevant materials filed with the SEC.