CryoLife Reports Second Quarter 2019 Financial Results

July 30, 2019 |

11 min read

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, 2019.

"Our second quarter performance marked another period of consistent growth despite headwinds. We also continued to make important progress advancing our clinical pipeline and R&D programs" said Pat Mackin, Chairman, President, and Chief Executive Officer. "We expect the second half of 2019 to commence the start of a multi-year launch of next generation products into existing and new geographies. This is an exciting time in our history and we are confident we have the right mix of differentiated products supported by our experienced sales organization to take the Company to higher levels of revenue performance."

Second Quarter 2019 Financial
Total revenues for the second quarter of 2019 were $71.1 million, reflecting growth of 4%, and 7% on a non-GAAP constant currency basis, both compared to the second quarter of 2018. The non-GAAP increase was driven by revenue growth from BioGlue, On-X, JOTEC, and tissue processing.

Net income for the second quarter of 2019 was $2.8 million, or $0.07 per fully diluted common share, compared to a net income of $226,000, or $0.01 per fully diluted common share for the second quarter of 2018. Non-GAAP net income for the second quarter of 2019 was $4.1 million, or $0.11 per fully diluted common share, compared to non-GAAP net income of $3.9 million, or $0.10 per fully diluted common share for the second quarter of 2018.

2019 Financial Outlook
CryoLife is reiterating its full-year financial guidance, with total revenues for 2019 expected to be in the range of $280 million to $284 million and non-GAAP earnings per share expected to be between $0.28 and $0.32.

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 2019 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 net income and non-GAAP EBITDA results exclude (as applicable) business development and integration expenses, amortization expense, inventory basis step-up expense, loss on foreign currency revaluation, and stock-based compensation expense. The Company believes that these non-GAAP presentations provide useful information to investors regarding unusual non-operating transactions; 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; and the operating expense structure excluding fluctuations resulting from foreign currency revaluation and stock-based compensation expense. 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 has excluded the impact of changes in currency exchange from certain revenues to evaluate growth rates on a constant currency basis. The Company does, however, expect to incur similar types of expenses and currency exchange impacts 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 later today, July 30, 2019 at 4:30 p.m. EDT 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 7, 2019 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The Conference ID for the replay is 13692463.

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 100 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 belief that we expect the second half of 2019 to commence the start of a multi-year launch of next generation products into existing and new geographies and we have the right mix of differentiated products supported by our experienced sales organization to take the Company to higher levels of revenue performance. 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, 2018. 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,
	2019		2018			2019		2018
Revenues:
Products	$	51,168	$	49,313	$	99,569	$	92,911
Preservation services		19,971		19,183		39,075		37,533
Total revenues		71,139		68,496		138,644		130,444

Cost of products and preservation services:
Products		14,489		13,550		28,315		27,707
Preservation services		9,684		9,095		19,090		17,658
Total cost of products and preservation services		24,173		22,645		47,405		45,365

Gross margin		46,966		45,851		91,239		85,079

Operating expenses:
General, administrative, and marketing		34,623		34,727		71,143		72,075
Research and development		5,841		5,719		11,389		11,089
Total operating expenses		40,464		40,446		82,532		83,164
Operating income		6,502		5,405		8,707		1,915

Interest expense		3,811		4,103		7,705		7,759
Interest income		(233)		(30)		(349)		(89)
Other expense, net		185		1,466		262		1,285

Income (loss) before income taxes		2,739		(134)		1,089		(7,040)
Income tax benefit		(93)		(360)		(1,446)		(3,411)

Net income (loss)	$	2,832	$	226	$	2,535	$	(3,629)

Income (loss) per common share:
Basic	$	0.08	$	0.01	$	0.07	$	(0.10)
Diluted	$	0.07	$	0.01	$	0.07	$	(0.10)

Weighted-average common shares outstanding:
Basic		37,156		36,318		36,968		36,233
Diluted		37,838		37,249		37,789		36,233

CRYOLIFE, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)

	(Unaudited)				(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018			2019		2018
Products:
BioGlue	$	17,933	$	17,069	$	35,155	$	33,039
JOTEC		17,208		17,205		33,162		31,665
On-X		12,410		11,888		24,141		22,197
CardioGenesis cardiac laser therapy		1,898		1,578		3,612		2,924
PerClot		784		968		1,834		1,940
PhotoFix		935		605		1,665		1,146
Total products		51,168		49,313		99,569		92,911

Preservation services:
Cardiac tissue		10,500		9,055		19,430		17,158
Vascular tissue		9,471		10,128		19,645		20,375
Total preservation services		19,971		19,183		39,075		37,533

Total revenues	$	71,139	$	68,496	$	138,644	$	130,444

Revenues:
U.S.	$	38,239	$	36,719	$	75,563	$	71,607
International		32,900		31,777		63,081		58,837
Total revenues	$	71,139	$	68,496	$	138,644	$	130,444


	(Unaudited)
	June 30,		December 31,
	2019		2018

Cash, cash equivalents, and restricted securities	$	40,255	$	42,236
Total current assets		188,557		179,168
Total assets		597,123		571,091
Total current liabilities		37,468		34,523
Total liabilities		314,970		296,024
Shareholders' equity		282,153		275,067

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,
	2019		2018		2019		2018
*GAAP:*
Income (loss) before income taxes	$	2,739	$	(134)	$	1,089	$	(7,040)
Income tax benefit		(93)		(360)		(1,446)		(3,411)
Net income (loss)	$	2,832	$	226	$	2,535	$	(3,629)

Diluted income (loss) per common share:	$	0.07	$	0.01	$	0.07	$	(0.10)

*Reconciliation of income (loss) before income*
*taxes, GAAP to adjusted net income,*
*non-GAAP:*
Income (loss) before income taxes, GAAP	$	2,739	$	(134)	$	1,089	$	(7,040)
Adjustments:
Business development and integration expenses		203		1,294		1,312		5,016
Amortization expense		2,557		2,753		5,136		5,488
Inventory basis step-up expense		--		1,237		--		2,743
Adjusted income before income taxes,
non-GAAP		5,499		5,150		7,537		6,207
Income tax expense calculated at a
pro forma tax rate of 25%		1,375		1,288		1,884		1,552
Adjusted net income, non-GAAP	$	4,124	$	3,862	$	5,653	$	4,655

*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:	$	0.07	$	0.01	$	0.07	$	(0.10)
Adjustments:
Business development and integration expenses		--		0.03		0.03		0.13
Amortization expense		0.06		0.07		0.13		0.14
Inventory basis step-up expense		--		0.03		--		0.07
Tax effect of non-GAAP adjustments		--		(0.03)		(0.03)		(0.08)
Effect of 25% pro forma tax rate		(0.02)		(0.01)		(0.05)		(0.04)
Adjusted diluted income per common share,
non-GAAP:	$	0.11	$	0.10	$	0.15	$	0.12

Diluted weighted-average common
shares outstanding		37,838		37,249		37,789		37,152

CRYOLIFE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Revenues
(In thousands, except per share data)


	(Unaudited)					(Unaudited)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019		2018		Growth Rate	2019		2018		Growth Rate
*Reconciliation of total revenues, GAAP to*
*total revenues, non-GAAP:*
Total revenues, GAAP	$	71,139	$	68,496	4%	$	138,644	$	130,444	6%
Impact of changes in currency exchange		--		(1,738)			--		(3,074)
Total constant currency revenues, non-GAAP	$	71,139	$	66,758	7%	$	138,644	$	127,370	9%

*Reconciliation of total BioGlue revenues, GAAP to*
*total BioGlue revenues, non-GAAP:*
Total BioGlue revenues, GAAP	$	17,933	$	17,069	5%	$	35,155	$	33,039	6%
Impact of changes in currency exchange		--		(295)			--		(517)
Total constant currency BioGlue revenues, non-GAAP	$	17,933	$	16,774	7%	$	35,155	$	32,522	8%

*Reconciliation of total On-X revenues, GAAP to*
*total On-X revenues, non-GAAP:*
Total On-X revenues, GAAP	$	12,410	$	11,888	4%	$	24,141	$	22,197	9%
Impact of changes in currency exchange		--		(91)			--		(168)
Total constant currency On-X revenues, non-GAAP	$	12,410	$	11,797	5%	$	24,141	$	22,029	10%

*Reconciliation of total JOTEC revenues, GAAP, to*
*total JOTEC revenues, non-GAAP:*
Total JOTEC revenues, GAAP	$	17,208	$	17,205	0%	$	33,162	$	31,665	5%
Impact of changes in currency exchange		--		(1,299)			--		(2,284)
Total constant currency JOTEC revenues, non-GAAP	$	17,208	$	15,906	8%	$	33,162	$	29,381	13%

CRYOLIFE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Adjusted EBITDA
(In thousands, except per share data)


	(Unaudited)				(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
*Reconciliation of net income (loss), GAAP*
*to adjusted EBITDA, non-GAAP:*
Net income (loss), GAAP	$	2,832	$	226	$	2,535	$	(3,629)
Adjustments:
Depreciation and amortization expense		4,381		4,730		8,731		9,106
Income tax benefit		(93)		(360)		(1,446)		(3,411)
Interest income		(233)		(30)		(349)		(89)
Interest expense		3,811		4,103		7,705		7,759
Inventory basis step-up expense		--		1,237		--		2,743
Business development and integration expenses		203		1,294		1,312		5,016
Loss on foreign currency revaluation		176		1,477		250		1,458
Stock-based compensation expense		2,266		1,872		4,119		3,120
Adjusted EBITDA, non-GAAP	$	13,343	$	14,549	$	22,857	$	22,073

Contacts:

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

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SOURCE CryoLife, Inc.

Company Codes: NYSE:CRY

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