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CryoLife Reports Second Quarter 2017 Financial Results

July 24, 2017 at 5:04 PM EDT

ATLANTA, July 24, 2017 /PRNewswire/ --

Cryolife logo. (PRNewsFoto/CryoLife, Inc.) (PRNewsFoto/CRYOLIFE_ INC_) (PRNewsFoto/CRYOLIFE, INC.)

Second Quarter Highlights:

  • Revenues Increased Two Percent Year-over-Year to $47.8 Million; Non-GAAP Revenues Increased Four Percent Year-over-Year
  • Gross Margins were 69 Percent
  • GAAP Net Income was $3.2 Million, or $0.09 Per Fully Diluted Common Share;    Non-GAAP Net Income was $4.0 Million, or $0.12 Per Fully Diluted Common Share

CryoLife, Inc. (NYSE: CRY), a leading medical device and tissue processing company focused on cardiac surgery, announced today its results for the second quarter and first half of 2017. 

Pat Mackin, Chairman, President, and Chief Executive Officer, said, "We had a solid second quarter and exceeded our guidance despite facing certain headwinds in the quarter.  On-X, BioGlue and tissue processing all posted revenue growth.  This was highlighted by another positive quarter for On-X, particularly in North America where On-X revenue grew 19 percent excluding the OEM business.  In tissue processing, we delivered our second consecutive quarter of double-digit growth in cardiac tissue.  During the quarter we also initiated the transition to direct sales in Canada, Belgium, the Netherlands and Luxembourg, further expanding our direct operations in Europe. We are on track to achieve our 2017 financial guidance and remain confident our strategy will continue to transform CryoLife into a higher growth, higher margin company.

Revenues for the second quarter of 2017 increased two percent to $47.8 million, compared to $47.1 million for the second quarter of 2016.  The increase was primarily driven by increases in tissue processing, BioGlue, On-X and TMR revenues, partially offset by the absence of HeRO revenues.  Non-GAAP revenues for the second quarter of 2017 increased four percent compared to the second quarter of 2016.  A reconciliation of GAAP to non-GAAP financial metrics is included as part of this press release.

Revenues for the first half of 2017 increased three percent to $92.9 million, compared to $90.1 million for the first half of 2016.  The increase was primarily driven by increases in On-X, tissue processing and BioGlue revenues, partially offset by the absence of HeRO and ProCol revenues, and a decrease in TMR revenues.  Non-GAAP revenues for the first half of 2017 increased four percent compared to the first half of 2016.  A reconciliation of GAAP to non-GAAP financial metrics is included as part of this press release.

GAAP net income for the second quarter of 2017 was $3.2 million, or $0.09 per fully diluted common share, compared to net income of $2.3 million, or $0.07 per fully diluted common share, for the second quarter of 2016.  Non-GAAP net income for the second quarter of 2017 was $4.0 million, or $0.12 per fully diluted common share, compared to non-GAAP net income of $4.3 million, or $0.13 per fully diluted common share for the second quarter of 2016. 

GAAP net income for the first half of 2017 was $5.4 million, or $0.16 per fully diluted common share, compared to net income of $4.9 million, or $0.15 per fully diluted common share, for the first half of 2016.  Non-GAAP net income for the first half of 2017 was $7.2 million, or $0.21 per fully diluted common share, compared to non-GAAP net income of $7.6 million, or $0.23 per fully diluted common share for the first half of 2016. 

With the exception of the income tax rate, the Company is reiterating its full year 2017 financial guidance, as summarized below, and expects revenues in the third quarter of 2017 to be between $46.5 million and $47.5 million

2017 Financial Guidance Summary

Total revenues

$188 Million - $192 Million

Product revenues

Year-over-year mid-single digits % non-GAAP
revenue increase

Tissue processing revenues

Year-over-year mid-single digits % revenue
increase

Gross margins

Between 68% - 69%

R&D expenses

$17.0 Million - $19.0 Million

Income tax rate

Mid 10%

Non-GAAP income per common share

$0.40 - $0.43

All numbers in the table above are GAAP 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 2017 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 (as applicable) On-X revenues for the period in 2016 prior to the closing of the acquisition and excludes revenues for the HeRO Graft and ProCol product lines for 2016.  The Company's other non-GAAP results exclude (as applicable) business development expenses; gain on sale of business components; amortization expenses; 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 new 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 at 8:00 a.m. Eastern Time to discuss the results followed by a question and answer session hosted by Mr. Mackin.

To listen to the live teleconference, please dial 201-689-8261 a few minutes prior to 8:00 a.m.  A replay of the teleconference will be available July 25 through July 31, and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415.  The conference number for the replay is 13665887.

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 surgical procedures.  CryoLife markets and sells products in more than 80 countries worldwide.  For additional information about CryoLife, visit our website, www.cryolife.com

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 those regarding our financial guidance for 2017 and our ability to keep on track to achieve our 2017 financial guidance and to continue to build CryoLife into a higher growth, higher margin company.    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 that the expected benefits of our focus on certain key initiatives may be incorrect or may not be achieved; we may not achieve the growth in core products that we expect; we may not continue to make progress at all or as quickly as we would like on certain items that negatively impacted the fourth quarter of 2016; we may not achieve the financial benefits of moving to direct sales channels in Canada, Belgium, the Netherlands, and Luxembourg and expanding our direct sales operations in Europe; and our business development efforts may not be successful.  These risks and uncertainties include the risk factors detailed in our Securities and Exchange Commission filings, including our Form 10-K for the year ended December 31, 2016, and our subsequent filings with the SEC. CryoLife does not undertake to update its forward-looking statements.

 

CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands, except per share data)




Three Months Ended


Six Months Ended


June 30,


June 30,


2017


2016


2017


2016

Revenues:












Products

$

30,094


$

30,045


$

57,490


$

57,063

Preservation services


17,724



17,038



35,387



33,036

Total revenues


47,818



47,083



92,877



90,099













Cost of products and preservation services:












Products


6,959



7,698



14,976



14,701

Preservation services


7,954



9,084



15,484



17,476

Total cost of products and












preservation services


14,913



16,782



30,460



32,177













Gross margin


32,905



30,301



62,417



57,922













Operating expenses:












General, administrative, and marketing


23,389



22,436



46,260



48,710

Research and development


4,728



3,279



8,821



5,888

Total operating expenses


28,117



25,715



55,081



54,598

 

   Gain from sale of business components


--



--



--



(7,915)

Operating income


4,788



4,586



7,336



11,239













Interest expense


834



797



1,635



1,514

Interest income


(55)



(18)



(95)



(30)

Other (income), net


(134)



(58)



(91)



(167)













Income before income taxes


4,143



3,865



5,887



9,922

Income tax expense


980



1,518



501



5,034













Net income

$

3,163


$

2,347


$

5,386


$

4,888













Income per common share:












Basic

$

0.09


$

0.07


$

0.16


$

0.15

Diluted

$

0.09


$

0.07


$

0.16


$

0.15













Weighted-average common shares outstanding:












Basic


32,664



32,010



32,552



31,519

Diluted


33,814



32,764



33,739



32,270














 

 

 

CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands)




Three Months Ended


Six Months Ended


June 30,


June 30,


2017


2016


2017


2016

Products:












BioGlue and BioFoam

$

16,683


$

16,187


$

32,364


$

31,503

On-X


9,862



9,554



18,722



16,269

CardioGenesis cardiac laser therapy


2,056



1,860



3,641



3,844

PerClot


936



1,042



1,755



2,033

PhotoFix


557



490



1,008



871

HeRO Graft


--



912



--



2,325

ProCol


--



--



--



218

          Total products


30,094



30,045



57,490



57,063













Preservation services:












Cardiac tissue


8,477



7,548



15,979



13,976

Vascular tissue


9,247



9,490



19,408



19,060

Total preservation services


17,724



17,038



35,387



33,036













Total revenues

$

47,818


$

47,083


$

92,877


$

90,099













Revenues:












   U.S.

$

34,712


$

34,198


$

68,246


$

66,436

International


13,106



12,885



24,631



23,663

Total revenues

$

47,818


$

47,083


$

92,877


$

90,099


























June 30,


December 31,



2017


2016









Cash, cash equivalents, and restricted securities

$

53,248


$

57,341


Total current assets


152,211



147,233


Total assets


322,221



316,140


Total current liabilities


25,771



30,102


Total liabilities


103,160



107,157


Shareholders' equity


219,061



208,983




















 

 

 

CRYOLIFE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP

Net Income and Diluted Income per Common Share

(In thousands, except per share data)




    Three Months Ended


    Six Months Ended


June 30,


June 30,


2017


2016


2017


2016

GAAP:












Income before income taxes

$

4,143


$

3,865


$

5,887


$

9,922

Income tax expense


980



1,518



501



5,034

Net income

$

3,163


$

2,347


$

5,386


$

4,888













Diluted income per common share:

$

0.09


$

0.07


$

0.16


$

0.15













Diluted weighted-average common












shares outstanding


33,814



32,764



33,739



32,270

























Reconciliation of income before income












taxes, GAAP to net income, non-GAAP:
























Income before income taxes, GAAP

$

4,143


$

3,865


$

5,887


$

9,922

Adjustments:












Business development expenses


1,094



1,067



1,382



6,635

Gain on sale of business components


--



--



--



(7,915)

Amortization expense


1,141



1,156



2,283



2,118

Acquisition inventory basis step-up expense


63



902



2,112



1,467

Income before income taxes, non-GAAP


6,441



6,990



11,664



12,227













Income tax expense calculated at 38% normalized












tax rate


2,448



2,656



4,432



4,646

Net income, non-GAAP

$

3,993


$

4,334


$

7,232


$

7,581













Reconciliation of diluted income per












common share, GAAP to diluted income per












common share, non-GAAP:
























Diluted income per common share, GAAP:

$

0.09


$

0.07


$

0.16


$

0.15

Adjustments:












Business development expenses


0.03



0.03



0.04



0.20

Gain on sale of business components


--



--



--



(0.24)

Amortization expense


0.03



0.03



0.07



0.06

Acquisition inventory basis step-up expense


--



0.03



0.06



0.04

Tax effect of non-GAAP adjustments


(0.02)



(0.03)



(0.07)



(0.02)

Effect of 38% normalized tax rate


(0.01)



--



(0.05)



0.04

Diluted income per common share,












 non-GAAP:

$

0.12


$

0.13


$

0.21


$

0.23













Diluted weighted-average common












shares outstanding


33,814



32,764



33,739



32,270













 

 

 

CRYOLIFE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP

Revenues; Gross Margin; General, Administrative, and Marketing

(In thousands, except per share data)




    Three Months Ended


Six Months Ended


June 30,


June 30,


2017


2016

Growth Rate


2017


2016

Growth Rate

Reconciliation of total revenues, GAAP














to total revenues, non-GAAP:














Total revenues, GAAP

$

47,818


$

47,083

2%


$

92,877


$

90,099

3%

Plus: On-X pre acquisition revenues


--



--




--



1,627


Less: HeRO revenues


--



(912)




--



(2,325)


Less: ProCol revenues


--



--




--



(218)


Total revenues, non-GAAP

$

47,818


$

46,171

4%


$

92,877


$

89,183

4%






























Three Months Ended



      Six Months Ended



June 30,



June 30,



2017


2016



2017


2016


Reconciliation of gross margin %,














GAAP to gross margin %,














non-GAAP:














Total revenues, GAAP

$

47,818


$

47,083



$

92,877


$

90,099


Gross margin, GAAP

$

32,905


$

30,301



$

62,417


$

57,922


Gross margin %, GAAP


69%



64%




67%



64%
















Gross margin, GAAP

$

32,905


$

30,301



$

62,417


$

57,922


Plus: Acquisition inventory basis step-














up expense


63



902




2,112



1,467


Gross margin, non-GAAP

$

32,968


$

31,203



$

64,529


$

59,389


Gross margin %, non-GAAP


69%



66%




69%



66%

















Three Months Ended



Six Months Ended



June 30,



June 30,



2017


2016



2017


2016


Reconciliation of general,














administrative, and marketing,














expense, GAAP to general,














administrative, and marketing,














expense, non-GAAP














General, administrative, and marketing














Expense, GAAP

$

23,389


$

22,436



$

46,260


$

48,710


Less: Business development














expenses


(1,094)



(1,067)




(1,382)



(6,635)


General, administrative, and














marketing expense,














non-GAAP

$

22,295


$

21,369



$

44,878


$

42,075
















 

 

Contacts:




CryoLife       

D. Ashley Lee                                                

Executive Vice President, Chief Financial Officer and
Chief Operating Officer 
Phone: 770-419-3355

The Ruth Group

Zack Kubow

646-536-7020

zkubow@theruthgroup.com

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SOURCE CryoLife, Inc.