CryoLife Reports Second Quarter 2018 Results

ATLANTA, Aug. 6, 2018 /PRNewswire/ -- CryoLife, Inc. (NYSE: CRY), a leading cardiac and vascular surgery company focused on aortic disease, announced today its financial results for the second quarter ended June 30, 2018.

Second Quarter and Recent Business Highlights:

• Total revenues increased 43% to $68.5 million in the second quarter of 2018 compared to the second quarter of 2017
• Non-GAAP total revenues increased 12% in the second quarter of 2018 compared to the second quarter of 2017; Non-GAAP total revenues increased 10% on a constant currency basis
• On-X^® revenues increased 21% in the second quarter of 2018 compared to the second quarter of 2017
• JOTEC^® revenues were $17.2 million in the second quarter of 2018, a 31% increase on a Non-GAAP basis compared to the second quarter of 2017
• Net income was $226,000 or $0.01 per fully diluted common share; Non-GAAP net income was $3.9 million, or $0.10 per fully diluted common share

“We had a very successful second 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 sales force is effectively conveying the attributes of our differentiated products. We expect our business momentum to continue, which has led us to raise our full year revenue guidance. Looking ahead, we have a number of initiatives that can drive substantial future growth. Given our highly experienced leadership team, we are confident we can deliver on our goals and objectives.”

Second Quarter 2018 Financial Results
Revenues for the second quarter of 2018 increased 43% to $68.5 million, compared to $47.8 million for the second quarter of 2017. The increase was primarily driven by $17.2 million in revenues from JOTEC and strong revenue growth from On-X. Non-GAAP total revenues for the second quarter of 2018 increased 12%, compared to the second quarter of 2017, a 10% increase on a constant currency basis.

Net income for the second quarter of 2018 was $226,000, or $0.01 per fully diluted common share, compared to net income of $3.2 million, or $0.09 per fully diluted common share for the second quarter of 2017. Non-GAAP net income for the second quarter of 2018 was $3.9 million, or $0.10 per fully diluted common share, compared to non-GAAP net income of $4.8 million, or $0.14 per fully diluted common share for the second quarter of 2017.

2018 Financial Outlook
The Company is increasing its full-year 2018 total revenues financial guidance, as summarized below, and expects total revenues in the third quarter of 2018 to be between $61.0 million and $63.0 million. Except for total revenues, the Company is reiterating its full year 2018 financial guidance.

 Previous Revised -------- ------- Total Revenues $250.0 million - $256.0 million $256.0 million - $260.0 million -------------- ------------------------------- ------------------------------- Gross Margins 65.5% - 66.5% same (includes $3.5 million non-cash charges related to acquired JOTEC inventory and distributor inventory buy backs) --- ------------------- R&D Expenses $23.0 million - $25.0 million same ------------ ----------------------------- ---- Non-GAAP Tax Rate Mid 20% same (excludes effect of nondeductible transaction costs and the tax effect of stock compensation expenses) --- -------- Non-GAAP EPS $0.29 - $0.32 (assumes approximately 37.5 million fully same 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 six-month period in 2017 prior to the closing of the acquisition of JOTEC on December 1, 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, August 7, 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 August 14, 2018 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The Conference ID for the replay is 13681499.

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 90 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; our On-X and JOTEC products are continuing to gain momentum as our direct sales force is effectively conveying the attributes of our differentiated products; our expectation that our business momentum will continue; we have a number of internal initiatives that can drive substantial future growth; and given our highly experienced leadership team, we are confident we can deliver on our goals and objectives. 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. These risks and uncertainties also include that our beliefs may be incorrect regarding the benefits of the On-X and JOTEC acquisitions, including that these acquisitions provide us with product portfolios that are technologically and clinically differentiated and offer strong competitive advantages, substantially enhance our growth potential and ability to drive profitable growth, strengthen our direct sales force, significantly accelerate our going direct strategy, increase our cross-selling opportunities, and significantly enhance our R&D capabilities and pipeline; they also include that our projections of markets sizes and revenue growth rates for our four main product lines, clinical trial timelines and clearance or approval times for new products or new indications may be incorrect or may change over time. As with most acquisitions, the successful integration of JOTEC’s business with ours may take longer and prove more costly than expected, and we may experience currently unforeseen difficulties related to the JOTEC products and our combined sales forces’ ability to successfully market them; we may not be able to secure the anticipated financial and operational benefits of the acquisition as soon as anticipated, or at all. We may also inherit unforeseen risks and uncertainties related to JOTEC’s business, particularly if the information received by CryoLife during the due diligence phase of this transaction was incomplete or inaccurate. 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 Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- Revenues: Products $49,313 $30,094 $92,911 $57,490 Preservation services 19,183 17,724 37,533 35,387 Total revenues 68,496 47,818 130,444 92,877 ------ ------ ------- ------ Cost of products and preservation services: Products 13,550 6,959 27,707 14,976 Preservation services 9,095 7,954 17,658 15,484 ----- ----- ------ ------ Total cost of products and preservation services 22,645 14,913 45,365 30,460 ------ ------ ------ ------ Gross margin 45,851 32,905 85,079 62,417 ------ ------ ------ ------ Operating expenses: General, administrative, and marketing 34,727 23,389 72,075 46,260 Research and development 5,719 4,728 11,089 8,821 ----- ----- ------ ----- Total operating expenses 40,446 28,117 83,164 55,081 ------ ------ ------ ------ Operating income 5,405 4,788 1,915 7,336 ----- ----- ----- ----- Interest expense 4,103 834 7,759 1,635 Interest income (30) (55) (89) (95) Other expense (income), net 1,466 (134) 1,285 (91) ----- ---- ----- --- (Loss) income before income taxes (134) 4,143 (7,040) 5,887 Income tax (benefit) expense (360) 980 (3,411) 501 ---- --- ------ --- Net income (loss) $226 $3,163 $(3,629) $5,386 ==== ====== ======= ====== Income (loss) per common share: Basic $0.01 $0.09 $(0.10) $0.16 ===== ===== ====== ===== Diluted $0.01 $0.09 $(0.10) $0.16 ===== ===== ====== ===== Weighted-average common shares outstanding: Basic 36,318 32,664 36,233 32,552 Diluted 37,249 33,814 36,233 33,739 

 CRYOLIFE, INC. AND SUBSIDIARIES Financial Highlights (In thousands) (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- Products: BioGlue and BioFoam $17,069 $16,683 $33,039 $32,364 JOTEC 17,205 -- 31,665 -- On-X 11,888 9,862 22,197 18,722 CardioGenesis cardiac laser therapy 1,578 2,056 2,924 3,641 PerClot 968 936 1,940 1,755 PhotoFix 605 557 1,146 1,008 Total products 49,313 30,094 92,911 57,490 ------ ------ ------ ------ Preservation services: Cardiac tissue 9,055 8,477 17,158 15,979 Vascular tissue 10,128 9,247 20,375 19,408 ------ ----- ------ ------ Total preservation services 19,183 17,724 37,533 35,387 ------ ------ ------ ------ Total revenues $68,496 $47,818 $130,444 $92,877 ======= ======= ======== ======= Revenues: U.S. $36,719 $34,712 $71,607 $68,246 International 31,777 13,106 58,837 24,631 ------ ------ ------ ------ Total revenues $68,496 $47,818 $130,444 $92,877 ======= ======= ======== ======= 

 (Unaudited) December 31, June 30, 2018 2017 ---- ---- Cash, cash equivalents, and restricted securities $25,719 $40,753 Total current assets 169,698 179,280 Total assets 570,448 589,693 Total current liabilities 34,121 42,940 Total liabilities 298,961 312,635 Shareholders’ equity 271,487 277,058 

 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 Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- GAAP: (Loss) income before income taxes $(134) $4,143 $(7,040) $5,887 Income tax (benefit) expense (360) 980 (3,411) 501 ---- --- ------ --- Net income (loss) $226 $3,163 $(3,629) $5,386 ==== ====== ======= ====== Diluted income (loss) per common share: $0.01 $0.09 $(0.10) $0.16 ===== ===== ====== ===== Diluted weighted-average common shares outstanding 37,249 33,814 36,233 33,739 Reconciliation of (loss) income before income taxes, GAAP to adjusted net income, non-GAAP: (Loss) income before income taxes, GAAP $(134) $4,143 $(7,040) $5,887 Adjustments: Business development and integration expenses 1,294 1,094 5,016 1,382 Amortization expense 2,753 1,141 5,488 2,283 Inventory basis step-up expense 1,273 63 2,743 2,112 Adjusted income before income taxes, non-GAAP 5,150 6,441 6,207 11,664 Income tax expense calculated at 25% pro forma tax rate 1,288 1,610 1,552 2,916 ----- ----- ----- ----- Adjusted net income, non-GAAP $3,862 $4,831 $4,655 $8,748 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: $0.01 $0.09 $(0.10) $0.16 Adjustments: Business development and integration expenses 0.03 0.03 0.13 0.04 Amortization expense 0.07 0.03 0.14 0.06 Inventory basis step-up expense 0.03 -- 0.07 0.06 Tax effect of non-GAAP adjustments (0.03) (0.01) (0.08) (0.04) Effect of 25% pro forma tax rate (0.01) -- (0.04) (0.03) ----- --- ----- ----- Adjusted diluted income per common share, non-GAAP: $0.10 $0.14 $0.12 $0.25 Diluted weighted-average common shares outstanding 37,249 33,814 37,152 33,739 

 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 Six Months Ended June 30, June 30, -------- -------- 2018 2017 Growth 2018 2017 Growth Rate Rate --- --- ---- Reconciliation of total revenues, GAAP to total revenues, non-GAAP: Total revenues, GAAP $68,496 $47,818 43% $130,444 $92,877 40% Plus: JOTEC pre-acquisition -- 13,094 -- 25,101 revenues Total revenues, non-GAAP $68,496 $60,912 12% $130,444 $117,978 11% ------- ------- -------- -------- Impact of changes in currency exchange -- 1,639 -- 3,827 --- ----- --- ----- Total constant currency $68,496 $62,551 10% $130,444 $121,805 7% revenues, non-GAAP (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- Reconciliation of gross margin %, GAAP to gross margin %, non-GAAP: Total revenues, GAAP $68,496 $47,818 $130,444 $92,877 Gross margin, GAAP $45,851 $32,905 $85,079 $62,417 Gross margin %, GAAP 67% 69% 65% 67% Gross margin, GAAP $45,851 $32,905 $85,079 $62,417 Plus: Inventory basis step- up expense 1,237 63 2,743 2,112 ----- --- ----- ----- Gross margin, non-GAAP $47,088 $32,968 $87,822 $64,529 ======= ======= ======= ======= Gross margin %, non-GAAP 69% 69% 67% 69% (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- Reconciliation of general, administrative, and marketing, GAAP to general, administrative, and marketing, non-GAAP General, administrative, and marketing, GAAP $34,727 $23,389 $72,075 $46,260 Less: Business development and integration expenses (1,294) (1,094) (5,016) (1,382) General, administrative, and marketing, non-GAAP $33,433 $22,295 $67,059 $44,878 ======= ======= ======= ======= 

 CRYOLIFE, INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Net Income (Loss) to Adjusted EBITDA (In thousands) (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2018 2017 2018 2017 ---- ---- ---- ---- Reconciliation of net income (loss), GAAP to adjusted EBITDA, non-GAAP: Net income (loss), GAAP $226 $3,163 $(3,629) $5,386 Adjustments: Depreciation and amortization expense 4,730 2,184 9,106 4,352 Income tax (benefit) expense (360) 980 (3,411) 501 Interest income (30) (55) (89) (95) Interest expense 4,103 834 7,759 1,635 Loss (gain) on foreign currency 1,477 45 1,458 (99) revaluation Inventory basis step-up expense 1,237 63 2,743 2,112 Business development and integration 1,294 1,094 5,016 1,382 expenses Stock-based compensation expense 1,872 2,001 3,120 3,796 ----- ----- ----- ----- Adjusted EBITDA, non-GAAP $14,549 $10,309 $22,073 $18,970 ======= ======= ======= ======= 

Contacts:

 CryoLife Gilmartin Group LLC D. Ashley Lee Greg Chodaczek / Lynn Lewis Executive Vice President, Chief Financial Officer Phone: 646-924-1769 and Chief Operating Officer investors@cryolife.com Phone: 770-419-3355 

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SOURCE CryoLife, Inc.

Company Codes: NYSE:CRY