CryoLife Reports Third Quarter 2019 Financial Results

October 30, 2019 |

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 third quarter ended September 30, 2019.

ATLANTA, Oct. 30, 2019 /PRNewswire/ --

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

Third Quarter and Recent Business Highlights:

Total revenues were $67.9 million in the third quarter of 2019, reflecting year over year growth of 5% and a 6% increase on a non-GAAP constant currency basis, both compared to the third quarter of 2018
- On-X^® revenues increased 12%, and 12% on a non-GAAP constant currency basis, both compared to the third quarter of 2018
- JOTEC^® revenues increased 5%, and 9% on a non-GAAP constant currency basis, both compared to the third quarter of 2018
Net loss was ($134,000), or $0.00 per fully diluted common share; non-GAAP net income was $2.2 million, or $0.06 per fully diluted common share

CryoLife, Inc.,(NYSE: CRY), a leading cardiac and vascular surgery company focused on aortic disease, announced today its financial results for the third quarter ended September 30, 2019.

"Our third quarter results were in line with our expectations, and through the first three quarters of 2019 we have delivered constant currency growth of 8% relative to the same period last year," said Pat Mackin, Chairman, President, and Chief Executive Officer. "The anticipated effects from continued currency headwinds and temporary issues with TMR handpiece supply in the US are causing us to lower our full year top line guidance. We believe the upcoming launch of three next-generation JOTEC products in the EU combined with the recent addition of NEXUS, manufacturing improvements at JOTEC, and the anticipated commencement of the PROACT Xa trial position us well for 2020 and beyond."

Third Quarter 2019 Financial Results
Total revenues for the third quarter of 2019 were $67.9 million, reflecting growth of 5%, and 6% on a non-GAAP constant currency basis, both compared to the third quarter of 2018. The increase was driven by revenue growth from On-X, JOTEC, and tissue processing.

Net loss for the third quarter of 2019 was ($134,000), or $0.00 per fully diluted common share, compared to a net income of $1.6 million, or $0.04 per fully diluted common share for the third quarter of 2018. Net loss for the third quarter of 2019 includes $1.2 million in business development expenses. Non-GAAP net income for the third quarter of 2019 was $2.2 million, or $0.06 per fully diluted common share, compared to non-GAAP net income of $3.1 million, or $0.08 per fully diluted common share for the third quarter of 2018.

2019 Financial Outlook
CryoLife expects total revenues for 2019 to be in the range of $276.5 million to $278.5 million. This compares to the previous expected range of $280.0 million to $284.0 million for the year, with the change due to the effects of foreign currency and a lack of availability of TMR handpieces in the fourth quarter of 2019. Non-GAAP earnings per share are still expected to be between $0.28 and $0.32 for the full year.

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, October 30, 2019 at 5:30 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 November 6, 2019 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The Conference ID for the replay is 13695440.

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 revenue and non-GAAP earnings per share guidance, and our beliefs that the effects of our TMR handpiece supply in the US are temporary and that the upcoming launch in the EU of three of our next-generation JOTEC products, combined with the recent addition in the EU of NEXUS, manufacturing improvements at JOTEC, and anticipated commencement of the PROACT Xa trial position us well for 2020 and beyond." 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				Nine Months Ended
	September 30,				September 30,
		2019		2018		2019		2018
Revenues:
Products	$	47,484	$	45,152	$	147,053	$	138,063
Preservation services		20,397		19,446		59,472		56,979
Total revenues		67,881		64,598		206,525		195,042

Cost of products and preservation services:
Products		12,706		12,459		41,021		40,166
Preservation services		9,953		9,425		29,043		27,083
Total cost of products and preservation services		22,659		21,884		70,064		67,249

Gross margin		45,222		42,714		136,461		127,793

Operating expenses:
General, administrative, and marketing		34,259		32,871		105,402		104,946
Research and development		6,259		5,225		17,648		16,314
Total operating expenses		40,518		38,096		123,050		121,260

Operating income		4,704		4,618		13,411		6,533

Interest expense		3,555		4,104		11,260		11,863
Interest income		(259)		(52)		(608)		(141)
Other expense, net		2,400		(1,542)		2,662		(257)

(Loss) income before income taxes		(992)		2,108		97		(4,932)
Income tax (benefit) expense		(858)		543		(2,304)		(2,868)

Net (loss) income	$	(134)	$	1,565	$	2,401	$	(2,064)

(Loss) income per common share:
Basic	$	0.00	$	0.04	$	0.06	$	(0.06)
Diluted	$	0.00	$	0.04	$	0.06	$	(0.06)

Weighted-average common shares outstanding:
Basic		37,255		36,526		37,065		36,331
Diluted		37,255		37,610		37,850		36,331

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

	(Unaudited)				(Unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Products:
BioGlue	$	15,679	$	15,646	$	50,834	$	48,685
JOTEC		15,774		15,004		48,936		46,669
On-X		12,610		11,298		36,751		33,495
CardioGenesis cardiac laser therapy		1,354		1,590		4,966		4,514
PerClot		980		882		2,814		2,822
PhotoFix		1,087		732		2,752		1,878
Total products		47,484		45,152		147,053		138,063

Preservation services:
Cardiac tissue		11,304		9,502		30,734		26,660
Vascular tissue		9,093		9,944		28,738		30,319
Total preservation services		20,397		19,446		59,472		56,979

Total revenues	$	67,881	$	64,598	$	206,525	$	195,042

Revenues:
U.S.	$	37,981	$	36,516	$	113,548	$	108,123
International		29,900		28,082		92,977		86,919
Total revenues	$	67,881	$	64,598	$	206,525	$	195,042

	(Unaudited)
	September 30,		December 31,
	2019		2018
Cash, cash equivalents, and restricted securities	$	37,177	$	42,236
Total current assets		181,354		179,168
Total assets		592,602		571,091
Total current liabilities		42,190		34,523
Total liabilities		315,101		296,024
Shareholders' equity		277,501		275,067

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				Nine Months Ended
	September 30,				September 30,
		2019		2018		2019		2018
*GAAP:*
(Loss) income before income taxes	$	(992)	$	2,108	$	97	$	(4,932)
Income tax (benefit) expense		(858)		543		(2,304)		(2,868)
Net (loss) income	$	(134)	$	1,565	$	2,401	$	(2,064)

Diluted (loss) income per common share:	$	0.00	$	0.04	$	0.06	$	(0.06)

*Reconciliation of (loss) income before income taxes,*
*GAAP to adjusted net income, non-GAAP*
(Loss) income before income taxes, GAAP	$	(992)	$	2,108	$	97	$	(4,932)
Adjustments:
Business development and integration expenses		1,250		1,917		2,562		6,933
Amortization expense		2,660		2,707		7,796		8,195
Gain on On-X escrow settlement		--		(2,675)		--		(2,675)
Inventory basis step-up expense		--		62		--		2,805
Adjusted income before income taxes,
non-GAAP		2,918		4,119		10,455		10,326
Income tax expense calculated at a
pro forma tax rate of 25%		730		1,030		2,614		2,582
Adjusted net income, non-GAAP	$	2,188	$	3,089	$	7,841	$	7,744

*Reconciliation of diluted (loss) income per common share, GAAP*
*to adjusted diluted income per common share, non-GAAP:*
Diluted income (loss) per common share, GAAP:	$	0.00	$	0.04	$	0.06	$	(0.06)
Adjustments:
Business development and integration expenses		0.03		0.05		0.06		0.19
Amortization expense		0.07		0.08		0.20		0.22
Gain on On-X escrow settlement		--		(0.07)		--		(0.07)
Inventory basis step-up expense		--		--		--		0.07
Tax effect of non-GAAP adjustments		(0.02)		(0.02)		(0.05)		(0.10)
Effect of 25% pro forma tax rate		(0.02)		--		(0.06)		(0.04)
Adjusted diluted income per common share,
non-GAAP:	$	0.06	$	0.08	$	0.21	$	0.21

Diluted weighted-average common
shares outstanding		37,940		37,610		37,850		37,351

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

	(Unaudited)					(Unaudited)
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018		Growth Rate	2019		2018		Growth Rate
*Reconciliation of total revenues, GAAP to*
*total revenues, non-GAAP:*
Total revenues, GAAP	$	67,881	$	64,598	5%	$	206,525	$	195,042	6%
Impact of changes in currency exchange		--		(701)			--		(3,775)
Total constant currency revenues, non-GAAP	$	67,881	$	63,897	6%	$	206,525	$	191,267	8%

*Reconciliation of total On-X revenues, GAAP to*
*total On-X revenues, non-GAAP:*
Total On-X revenues, GAAP	$	12,610	$	11,298	12%	$	36,751	$	33,495	10%
Impact of changes in currency exchange		--		(46)			--		(214)
Total constant currency On-X revenues, non-GAAP	$	12,610	$	11,252	12%	$	36,751	$	33,281	10%

*Reconciliation of total JOTEC revenues, GAAP, to*
*total JOTEC revenues, non-GAAP:*
Total JOTEC revenues, GAAP	$	15,774	$	15,004	5%	$	48,936	$	46,669	5%
Impact of changes in currency exchange		--		(496)			--		(2,780)
Total constant currency JOTEC revenues, non-GAAP	$	15,774	$	14,508	9%	$	48,936	$	43,889	11%

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

	(Unaudited)				(Unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
*Reconciliation of net (loss) income, GAAP to*
*adjusted EBITDA, non-GAAP:*
Net (loss) income, GAAP	$	(134)	$	1,565	$	2,401	$	(2,064)
Adjustments:
Depreciation and amortization expense		4,526		4,530		13,257		13,636
Income tax (benefit) expense		(858)		543		(2,304)		(2,868)
Interest income		(259)		(52)		(608)		(141)
Interest expense		3,555		4,104		11,260		11,863
Gain on On-X escrow settlement		--		(2,675)		--		(2,675)
Inventory basis step-up expense		--		62		--		2,805
Business development and integration expenses		1,250		1,917		2,562		6,933
Loss on foreign currency revaluation		2,419		683		2,669		2,141
Stock-based compensation expense		2,462		1,565		6,581		4,685
Adjusted EBITDA, non-GAAP	$	12,961	$	12,242	$	35,818	$	34,315