Tornier Reports First Quarter 2015 Results

Tornier Reports First Quarter 2015 Results and Provides Updated 2015 Outlook
  • Upper extremity constant currency growth of 14.0% led by Aequalis Ascend® Flex™
  • Total extremities constant currency revenue growth of 9.2%
  • Adjusted gross margin increased by 220 basis points to 77.3%

AMSTERDAM, The Netherlands, May 5, 2015 (GLOBE NEWSWIRE) — Tornier N.V. (Nasdaq:TRNX), a global medical device company focused on providing surgical solutions to orthopaedic extremity specialists, reported today its financial results for the first quarter ended March 29, 2015.

Revenue for the first quarter of 2015 was $88.1 million compared to first quarter 2014 revenue of $89.0 million, a decrease of 1.0% as reported and an increase of 6.2% in constant currency. Foreign currency exchange rates negatively impacted first quarter 2015 reported revenue by $6.5 million.

First quarter 2015 revenue of Tornier’s extremities product categories totaled $74.8 million compared to $72.0 million during the prior year period, an increase of 3.9% as reported and 9.2% in constant currency.

Dave Mowry, President and Chief Executive Officer of Tornier, commented, “Our first quarter results were consistent with our expectations. The strength of our upper extremities continues to lead our performance, driven by our competitively superior team of specialist sales representatives, innovative technologies and our deep new product pipeline. In our lower extremities business, we continued to execute on long-term sales education and training initiatives, which will position this team for improved productivity, but we experienced anticipated distraction from our previously announced merger with Wright Medical Group, Inc. We continue to be committed to our transaction with Wright and look forward to a combined organization that can deliver accelerated revenue growth and profitability.”

Mr. Mowry continued, “In March, we received FDA clearance for the Simpliciti® Shoulder System, making Tornier the first-to-market in the United States with an ultra-short stem, bone sparing, total shoulder arthroplasty system. There was significant interest in Simpliciti at the recent American Academy of Orthopedic Surgeons annual meeting, particularly as a potential option for younger, more active patients that have not been good candidates for traditional systems. We look forward to initiating a limited user release this quarter and ramping up to a full market launch by the end of this year.”

The Company’s first quarter 2015 adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $10.4 million, or 11.8% of reported revenue, compared to $9.5 million, or 10.7% of revenue, in the same quarter of the prior year.

First Quarter 2015 Revenue Highlights

Extremities

  • Revenue from the upper extremities joints and trauma category was $57.4 million, an increase of 14.0% in constant currency over the same quarter in 2014. This growth was led by the Aequalis Ascend family of shoulder joint replacement products, which continued to gain global surgeon acceptance.
  • Revenue from Tornier’s lower extremities joints and trauma category in the first quarter of 2015 reached $13.9 million, a decrease of 4.7% in constant currency. This reflects continued growth from the Company’s total ankle arthroplasty systems, offset by lower sales of core foot fixation products. As anticipated, distractions from the Company’s pending merger with Wright impacted results in all segments of the Company’s lower extremities business.
  • Revenue from the sports medicine and biologics product category was $3.5 million in the first quarter of 2015, a decrease of 3.9% in constant currency over the same quarter in 2014, reflecting a decline in the Company’s soft tissue anchor and biologics products.

Large Joints

Constant currency revenue from large joints and other products decreased 6.1% in the first quarter of 2015, reflecting anticipated deceleration in Europe and a challenging comparison to the prior year period, which benefitted from the launch of new minimally invasive hip instrumentation.

Geographic Revenue

On a geographic basis as compared to the first quarter of 2014, Tornier’s international revenue decreased 10.1% as reported and increased 6.5% in constant currency, representing 40% of reported global revenue. Revenue in the United States increased by 6.0% and represented 60% of reported global revenue.

Fiscal Year 2015 Outlook

The following guidance assumes Tornier continues to be a standalone business for the full year of 2015. This guidance does not include the effects from any product line divestitures nor revenue or cost synergies or dis-synergies from the proposed merger with Wright, but it does anticipate some impact from distraction related to the announcement of the pending merger, particularly in the lower extremities business.

  • The Company is increasing the bottom end of its full year constant currency guidance for extremities product categories revenue, with constant currency revenue now expected to be in the range of $304 to $312 million, representing growth in constant currency of 6.0% to 8.8% over last year. This growth is expected to be driven primarily by strength in upper extremities.
  • For the full year 2015, the Company is updating its reported and constant currency revenue guidance to reflect deceleration in the large joint business and changes in foreign currency exchange rates, which is now anticipated to have a negative impact of approximately $25 million dollars on full year reported revenue, as compared to the Company’s prior estimate of $21 million dollars. As a result, 2015 reported revenue is projected to be in the range of $334.0 to $344.0 million, representing a change of (3.2)% to (0.3)% over last year, and 2015 constant currency revenue is projected to be in the range of $359.0 to $369.0 million, representing a change in constant currency of 4.1% to 7.0% over last year.
  • The Company is updating its 2015 earnings per share guidance, with earnings per share expected to be in the range of a loss of $(0.60) to $(0.40) per share.
  • The Company expects 2015 adjusted EBITDA guidance to be in the range of $35 to $38 million, or 10.5% to 11.0% of reported revenue.

Forward-Looking Statements

Statements contained in this release that relate to future, not past, events are forward-looking statements under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on current expectations of future events and often can be identified by words such as “believe,” “expect,” “should,” “project,” “anticipate,” “intend,” “will,” “can,” “may,” “could,” “continue,” “outlook,” “guidance,” “future, “look forward”, other words of similar meaning or the use of future dates.  Examples of forward-looking statements in this release include Tornier’s financial guidance for the full year 2015 and Tornier’s expectations for improved sales force productivity, accelerated revenue growth and profitability for the combined company post-merger and the timing of the commercial launch of Simpliciti.   Forward-looking statements by their nature address matters that are, to different degrees, uncertain.  Uncertainties and risks may cause Tornier’s actual results to be materially different than those expressed in or implied by Tornier’s forward-looking statements.  For Tornier, such uncertainties and risks include, among others,  risks relating to Tornier’s proposed merger with Wright Medical Group, Inc., including the timing of the transaction; uncertainties as to whether Tornier shareholders and Wright shareholders will approve the transaction; the risk that competing offers will be made; the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction, or the terms of such approval; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, customers, vendors and other business partners; the risk that shareholder litigation in connection with the transaction may delay the merger or result in significant costs of defense, indemnification and liability; other business effects, including the effects of industry, economic or political conditions outside of Wright’s or Tornier’s control; the failure to realize synergies and cost-savings from the transaction or delay in realization thereof; the businesses of Wright and Tornier may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption following completion of the transaction, including adverse effects on employee retention and on Wright’s and Tornier’s respective business relationships with third parties; transaction costs; actual or contingent liabilities; the adequacy of the combined company’s capital resources; and other risks and uncertainties, including Tornier’s future operating results and financial performance; Tornier’s reliance on its independent sales agencies and distributors to sell its products and the effect on its business and operating results of agency and distributor changes, transitions to direct selling models in certain geographies and the recent transition of its U.S. sales channel towards focusing separately on upper and lower extremity products; fluctuations in foreign currency exchange rates; the effect of global economic conditions; the European sovereign debt crisis and austerity measures; risks associated with Tornier’s international operations and expansion; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; the effect of regulatory actions, changes in and adoption of reimbursement rates and product recalls; competitor activities; Tornier’s manufacturing capacity; Tornier’s leverage and access to credit under its credit agreement; and changes in tax and other legislation. More detailed information on these and other factors that could affect Tornier’s actual results are described in Tornier’s filings with the U.S. Securities and Exchange Commission, including its most recently filed annual report on Form 10-K for the fiscal year ended December 28, 2014 and subsequent quarterly report on Form 10-Q.  Tornier undertakes no obligation to update its forward-looking statements.