Wright Medical Group Reports 2016 Fourth Quarter And Full-Year Financial Results And Provides 2017 Guidance

Full-Year 2016 Net Sales of $690 Million As Reported Exceeds High-End Of Company’s Previously Provided 2016 Guidance Range

Fourth Quarter 2016 Net Sales From Continuing Operations of $193 Million As Reported

Fourth Quarter 2016 Net Loss From Continuing Operations of $30 Million; Non-GAAP Adjusted EBITDA From Continuing Operations of Positive $23 Million

Company Provides Full-Year 2017 Net Sales Guidance of $755 Million to $765 Million

AMSTERDAM, The Netherlands, Feb. 21, 2017 (GLOBE NEWSWIRE) -- Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial results for its fourth quarter and full-year ended December 25, 2016 and provided 2017 guidance.  

As a result of the previously announced sale of the large joints (hip/knee) business to Corin Orthopaedics Holdings Limited (Corin), this business which was previously reported as a separate reporting segment is now reported as discontinued operations. In addition, as a result of the merger between Wright Medical Group, Inc. and Tornier N.V. on October 1, 2015, legacy Wright’s historical results of operations replaced legacy Tornier’s historical results of operations for all periods prior to the merger and the results of the two legacy businesses have been consolidated only from that date forward in accordance with United States generally accepted accounting principles (GAAP). This release and Wright’s website at ir.wright.com contain certain unaudited non-GAAP combined pro forma financial results for Wright Medical Group N.V. which give effect to the merger as if it had occurred on the first day of fiscal 2015. In addition, following the closing of the merger, Wright adopted legacy Tornier’s fiscal calendar, which resulted in four fewer calendar days for the fourth quarter of 2015 than under the legacy Wright fiscal calendar.  Additionally, the Wright business conformed its methodology for recognizing revenue to legacy Tornier's methodology. The attached financial tables include a reconciliation of U.S. GAAP to these non-GAAP financial measures.

Net sales from continuing operations totaled $193.0 million during the fourth quarter ended December 25, 2016, representing 16% as reported growth.  On a same sales day and constant currency basis and excluding the impact of conforming Wright’s methodology for recognizing revenue in the fourth quarter of 2015, non-GAAP pro-forma global net sales grew 12%.  Gross margins from continuing operations were 73.8% during the quarter ended December 25, 2016 and were 77.6% on a non-GAAP adjusted basis.  Reconciliations of all historical non-GAAP financial measures used in this release to the most comparable GAAP measures can be found in the attached financial tables.

Robert Palmisano, president and chief executive officer, commented, “We had a very good fourth quarter, and our full-year results reflect the continued strong underlying growth and positive momentum in all three of our high-growth businesses and our leadership positions in these markets.  Our pro forma constant currency global sales growth of 12%, despite an estimated 3% headwind from dis-synergies, was an acceleration from the third quarter of 2016, and combined with earlier than anticipated progress on capturing cost synergies, resulted in net sales and positive adjusted EBITDA results that exceeded our expectations.  We drove significant overperformance on the top and bottom line in 2016, and we believe we are well positioned to continue driving high sales growth rates and EBITDA margin expansion.”

Palmisano continued, “Highlights in the quarter included strong contributions from our SIMPLICITI shoulder system and the ongoing rollout of AUGMENT and the INFINITY total ankle replacement system, which for the fourth quarter drove 14% sales growth in U.S. shoulder replacement, 29% sales growth in U.S. biologics and 23% sales growth in U.S. total ankle replacement.”

Palmisano further commented, “Our 2017 guidance assumes continued strong underlying constant currency growth, driven by successfully executing our SIMPLICITI and AUGMENT new product launches, launching the PERFORM Reverse Shoulder and expanding the U.S. sales force in order to realize our full potential.  We believe that the positive progress we saw in the fourth quarter is setting us up well for continued strong revenue growth and significant margin expansion in 2017 and beyond.”

Net loss from continuing operations for the fourth quarter of 2016 totaled $30.0 million, or $(0.29) per diluted share.

The company’s net loss from continuing operations for the fourth quarter of 2016 included the after-tax effects of $6.8 million of inventory step-up amortization, $8.4 million of transaction and transition costs, a gain of $1.8 million related to mark-to-market adjustments on derivatives, $10.8 million of non-cash interest expense related to its convertible notes, and a $0.3 million unrealized gain related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, as well as a $5.6 million tax benefit representing the deferred tax effects associated with the acquired Tornier operations.

The company's fourth quarter 2016 non-GAAP net loss from continuing operations, as adjusted for the above items, was $13.8 million.  The company's fourth quarter 2016 non-GAAP adjusted EBITDA from continuing operations, as defined in the non-GAAP to GAAP reconciliation provided later in this release, was $22.7 million. The attached financial tables include reconciliations of all historical non-GAAP measures to the most comparable GAAP measures.

Cash, cash equivalents and restricted cash totaled $412.3 million as of the end of the fourth quarter of 2016.  This amount includes $150 million classified as restricted cash on the company’s balance sheet that is held in escrow to fund a portion of the metal-on-metal hip litigation Master Settlement Agreement (MSA).  The company currently estimates the opt-in rate for the MSA to be in excess of 98%, which is well above the 95% requirement.

Palmisano concluded, “With the significant progress made in 2016, we are a stronger business that is now well positioned and completely focused on the high-growth extremities and biologics markets.  While I am very pleased with what we accomplished in 2016, we are nowhere close to meeting our full potential, and we continue to have great opportunities for revenue growth and cash improvement.  I believe we are positioned well for future success and achieving our key financial goals of mid-teens constant currency net sales growth, gross margins in the high 70% range and non-GAAP adjusted EBITDA margins of approximately 20% three to four years post the close of the merger.”  

Outlook

The company anticipates net sales for full-year 2017 of approximately $755 million to $765 million, representing an as reported growth rate of 9% to 11%.  This range assumes:

• a negative impact from foreign currency exchange rates as compared to 2016 of approximately 2%;
• $10 million of net sales dis-synergies resulting from customers lost over the course of 2016 due to the sales force integrations;
• approximately $3 million of dis-synergies from the anticipated divestiture of the international Salto ankle business; and 
• a positive impact of approximately 1% due to four extra selling days in the fourth quarter of 2017. 

The midpoint of this net sales guidance range assumes constant currency growth of approximately 13%, excluding the negative impacts of revenue dis-synergies and Salto divestiture of 2%, and the approximately 1% positive impact of the extra selling days.  Additionally, the company anticipates the second half of the year to grow faster than the first half of the year as it realizes the benefits from its new product launches and sales force expansion.