CryoLife Reports Second Quarter 2020 Financial Results

July 30, 2020 |

12 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, 2020.

ATLANTA, July 30, 2020 /PRNewswire/ --

Second Quarter and Recent Business Highlights:

Achieved total revenues of $53.8 million in the second quarter 2020 versus $71.1 million in the second quarter of 2019
- Total revenues decreased 24% and decreased 23% on a non-GAAP constant currency basis versus second quarter 2019
Completed $100.0 million convertible debt financing for general corporate purposes, including the repayment of approximately $30.0 million outstanding under the revolving credit facility
Initiated enrollment in PROACT Xa clinical trial
Initiated limited market release of E-vita Open NEO and E-nside and limited relaunch of NEXUS™

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, 2020.

"Despite the disruptions to our business from COVID-19, we posted a solid second quarter and advanced on several of our key initiatives. We believe our business is weathering the pandemic well, as we believe the majority of products in our portfolio are used in procedures that cannot be postponed or delayed for long," commented Pat Mackin, Chairman, President, and Chief Executive Officer. "We saw an improvement in procedure volumes sequentially month to month from April to June with a corresponding increase in revenue growth over those months. Our manufacturing facilities continue to run at near capacity and our supply chain remains largely intact. We have continued to fund R&D programs related to products that we believe will deliver revenue in 2021 and 2022, including our regulatory approvals for U.S. PerClot PMA, BioGlue China and PROACT Mitral. We initiated limited market releases for Evita Open NEO and E-nside, with E-nya anticipated to follow by October, and a limited relaunch of NEXUS. We also initiated enrollment in our PROACT Xa clinical trial. Lastly, we completed a $100.0 million convertible debt financing to use for general corporate purposes, including the repayment of our $30.0 million revolver draw down. We have the financial strength to be opportunistic on the business development front. Given these achievements in the second quarter, we anticipate continued momentum in the second half of 2020 and are optimistic that we will have a strong 2021."

Second Quarter Financial Results
Total revenues for the second quarter of 2020 were $53.8 million, reflecting a decrease of (24%), and (23%) on a non-GAAP constant currency basis, both compared to the second quarter of 2019. Decreases in all product lines reflect the impact of the COVID-19 pandemic on the number of procedures using our products.

Net loss for the second quarter of 2020 was ($3.7) million, or ($0.10) per fully diluted common share, compared to net income of $2.8 million, or $0.07 per fully diluted common share for the second quarter of 2019. Non-GAAP net loss for the second quarter of 2020 was ($835,000), or ($0.02) per fully diluted common share, compared to non-GAAP net income of $4.1 million, or $0.11 per fully diluted common share for the second quarter of 2019.

2020 Financial Outlook
Due to uncertainties resulting from the COVID-19 pandemic, the Company is not issuing 2020 financial guidance at this time.

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 performance for 2020 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 expense, severance expense, amortization expense, inventory basis step-up expense, loss on foreign currency revaluation, stock-based compensation expense, and corporate rebranding 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, 2020 at 4:30 p.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 6, 2020 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The Conference ID for the replay is 13706961.

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 beliefs that our business us weathering the pandemic well; our belief that the majority of products in our portfolio are used in procedures that cannot be postponed or delayed for long; that we are continuing to fund R&D programs for products that will deliver revenue in 2021 and 2022, including our regulatory approvals for U.S. PerClot PMA, BioGlue China and PROACT Mitral; we will relaunch E-nya on a limited basis by October, 2020; we have the financial strength to be opportunistic on the business development front; and we will have continued momentum in the second half of 2020 and a strong 2021. 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, including the continued effects of COVID-19 and government mandates implemented to address the pandemic. 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, 2019. 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,
		2020		2019		2020		2019
Revenues:
Products	$	37,268	$	51,168	$	83,688	$	99,569
Preservation services		16,503		19,971		36,512		39,075
Total revenues		53,771		71,139		120,200		138,644

Cost of products and preservation services:
Products		10,040		14,489		23,080		28,315
Preservation services		7,841		9,684		17,059		19,090
Total cost of products and preservation services		17,881		24,173		40,139		47,405

Gross margin		35,890		46,966		80,061		91,239

Operating expenses:
General, administrative, and marketing		32,288		34,623		71,290		71,143
Research and development		5,522		5,841		11,878		11,389
Total operating expenses		37,810		40,464		83,168		82,532

Operating (loss) income		(1,920)		6,502		(3,107)		8,707

Interest expense		3,652		3,811		7,040		7,705
Interest income		(66)		(233)		(168)		(349)
Other (income) expense, net		(740)		185		2,922		262

(Loss) income before income taxes		(4,766)		2,739		(12,901)		1,089
Income tax benefit		(1,077)		(93)		(2,547)		(1,446)

Net (loss) income	$	(3,689)	$	2,832	$	(10,354)	$	2,535

(Loss) income per common share:
Basic	$	(0.10)	$	0.08	$	(0.27)	$	0.07
Diluted	$	(0.10)	$	0.07	$	(0.27)	$	0.07

Weighted-average common shares outstanding:
Basic		37,520		37,156		37,455		36,968
Diluted		37,520		37,838		37,455		37,789

Net (loss) income	$	(3,689)	$	2,832	$	(10,354)	$	2,535
Other comprehensive income (loss):
Foreign currency translation adjustments		4,434		2,995		(29)		(786)
Comprehensive income (loss)	$	745	$	5,827	$	(10,383)	$	1,749

CryoLife, Inc. and Subsidiaries Financial Highlights (In thousands)

	(Unaudited)				(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Products:
BioGlue	$	12,437	$	17,933	$	29,174	$	35,155
JOTEC		13,174		17,208		28,642		33,162
On-X		10,116		12,410		22,318		24,141
PhotoFix		880		935		1,922		1,665
PerClot		497		784		1,357		1,834
CardioGenesis cardiac laser therapy		164		1,898		275		3,612
Total products		37,268		51,168		83,688		99,569

Preservation services:
Cardiac tissue	$	8,061	$	10,500		18,079		19,430
Vascular tissue		8,396		9,471		18,372		19,645
NeoPatch		46		--		61		--
Total preservation services		16,503		19,971		36,512		39,075

Total revenues	$	53,771	$	71,139	$	120,200	$	138,644

Revenues:
U.S.	$	30,392	$	38,239	$	66,839	$	75,563
International		23,379		32,900		53,361		63,081
Total revenues	$	53,771	$	71,139	$	120,200	$	138,644


	(Unaudited)
	June 30,		December 31,
	2020		2019
Cash, cash equivalents, and restricted securities	$	126,118	$	34,294
Total current assets		287,121		187,390
Total assets		693,254		605,654
Total current liabilities		48,933		45,195
Total liabilities		396,698		319,958
Shareholders' equity		296,556		285,696

CryoLife, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Net (Loss) Income and Diluted (Loss) Income Per Common Share (In thousands, except per share data)

	(Unaudited)				(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2020		2019		2020		2019
*GAAP:*
(Loss) income before income taxes	$	(4,766)	$	2,739	$	(12,901)	$	1,089
Income tax benefit		(1,077)		(93)		(2,547)		(1,446)
Net (loss) income	$	(3,689)	$	2,832	$	(10,354)	$	2,535

Diluted (loss) income per common share	$	(0.10)	$	0.07	$	(0.27)	$	0.07

*Reconciliation of (loss) income before income taxes,*
*GAAP to adjusted net (loss) income, non-GAAP*
(Loss) income before income taxes, GAAP:	$	(4,766)	$	2,739	$	(12,901)	$	1,089
Adjustments:
Amortization expense		3,000		2,557		6,033		5,136
Business development, integration, and severance expense		653		203		1,476		1,312
Corporate rebranding expense		--		--		321		--
Adjusted (loss) income before income taxes,
non-GAAP		(1,113)		5,499		(5,071)		7,537
Income tax (benefit) expense calculated at a
pro forma tax rate of 25%		(278)		1,375		(1,268)		1,884
Adjusted net (loss) income, non-GAAP	$	(835)	$	4,124	$	(3,803)	$	5,653

*Reconciliation of diluted (loss) income per common share, GAAP*
*to adjusted diluted (loss) income per common share, non-GAAP:*
Diluted (loss) income per common share, GAAP:	$	(0.10)	$	0.07	$	(0.27)	$	0.07
Adjustments:
Amortization expense		0.08		0.06		0.16		0.13
Business development, integration, and severance expense		0.02		--		0.04		0.03
Corporate rebranding expense		--		--		0.01		--
Tax effect of non-GAAP adjustments		(0.02)		--		(0.05)		(0.03)
Effect of 25% pro forma tax rate		--		(0.02)		0.01		(0.05)
Adjusted diluted (loss) income per common share,
non-GAAP	$	(0.02)	$	0.11	$	(0.10)	$	0.15

Diluted weighted-average common
shares outstanding		37,520		37,838		37,455		37,789

CryoLife, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Revenues and Adjusted EBITDA (In thousands, except per share data)

	(Unaudited)					(Unaudited)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2020		2019		Growth Rate	2020		2019		Growth Rate
*Reconciliation of total revenues, GAAP to*
*total revenues, non-GAAP:*
Total revenues, GAAP	$	53,771	$	71,139	-24%	$	120,200	$	138,644	-13%
Impact of changes in currency exchange		--		(1,095)			--		(1,723)
Total constant currency revenues, non-GAAP	$	53,771	$	70,044	-23%	$	120,200	$	136,921	-12%


	(Unaudited)				(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
*Reconciliation of net (loss) income, GAAP to*
*adjusted EBITDA, non-GAAP:*
Net (loss) income, GAAP	$	(3,689)	$	2,832	$	(10,354)	$	2,535
Adjustments:
Depreciation and amortization expense		4,743		4,381		9,642		8,731
Interest expense		3,652		3,811		7,040		7,705
Stock-based compensation expense		2,510		2,266		5,074		4,119
Business development, integration, and severance expense		653		203		1,476		1,312
Corporate rebranding expense		--		--		321		--
Interest income		(66)		(233)		(168)		(349)
(Income) loss on foreign currency revaluation		(744)		176		2,919		250
Income tax benefit		(1,077)		(93)		(2,547)		(1,446)
Adjusted EBITDA, non-GAAP	$	5,982	$	13,343	$	13,403	$	22,857