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August 02, 2016 | San Antonio
Acelity L.P. Inc. Reports Second Quarter and First Half Financial Results for 2016
 

Second Quarter Financial Highlights

  • Revenue for the second quarter of 2016 of $472.4 million, grew 2.3% as reported on a GAAP basis and 2.8% on a constant currency basis, from the prior-year period
  • Revenue from Advanced Wound Therapeutics ("AWT") grew 0.2% as reported on a GAAP basis and 0.8% on a constant currency basis, led by solid volume growth in advanced wound devices compared to the prior-year period
  • Revenue from Regenerative Medicine ("RM") grew 11.0% as reported on a GAAP basis and on a constant currency basis, due primarily to higher volumes associated with breast reconstruction procedures
  • Net loss was $20.1 million, as reported on a GAAP basis, up from $17.6 million net loss in the prior-year period, due primarily to the loss on extinguishment of debt and professional fees related to our second quarter debt transactions
  • Adjusted EBITDA1 of $171.1 million, declined 1.0% as reported from the prior-year period and 0.8% on a constant currency basis, primarily due to investments in our franchise structure and sales force to drive growth

 
Operational Highlights

  • Building strong partnerships with leading plastic surgeons to develop and educate on an innovative breast reconstruction technique resulted in the Regenerative Medicine Team achieving the highest growth rate since 2012. Recent sales initiatives and new product introductions also contributed to strong growth in breast reconstruction procedures.
  • Acelity launched the TIELLE™ Foam Dressing Family in the United States, which includes seven new advanced dressings that can be used on a variety of wounds. This launch is strategically important, allowing the Company to further diversify the business, giving clinicians more efficient and cost effective patient solutions with Acelity’s industry leading AWT portfolio.

 
Joe Woody, President and Chief Executive Officer, commented, “Acelity’s solid financial performance in the second quarter marks our seventh consecutive quarter of organic revenue growth, accomplished by outstanding execution in Regenerative Medicine and strong growth in sales of our Advanced Wound Therapeutics expansion products, such as Prevena and ABThera. With our strategy in place, the results in the first half of 2016 position us to reap the benefits of our investments to broaden and complement our innovative portfolio, reach new markets, distribution channels and patients, and provide valuable solutions to clinicians.”

Results of the second quarter and six months ended June 30, 2016
Acelity second quarter revenue increased 2.3% as reported on a GAAP basis to $472.4 million, compared with $461.6 million for the prior-year period. On a constant currency basis, revenue increased 2.8%.
  

  • AWT revenue was $355.0 million, up 0.2% as reported on a GAAP basis and 0.8% on a constant currency basis, compared to the prior-year period. Growth in AWT revenue was fueled primarily by increased volumes in advanced wound devices during the quarter and double-digit growth in expansion products, led by sales of Prevena™, partially offset by lower average pricing and decreased revenue from advanced wound dressings in international markets.
  • RM revenue was $114.9 million, up 11.0% as reported on a GAAP basis and on a constant currency basis, compared to the prior-year period. The increase in RM revenue was primarily due to double digit growth in revenue related to breast reconstruction procedures in the United States and Strattice growth in Europe, partially offset by lower revenue from hernia repair procedures in the United States.

 
Net loss for the second quarter of 2016 was $20.1 million, as reported on a GAAP basis, compared to $17.6 million in the prioryear period. This increase was primarily due to the loss on debt extinguishment of $10.1 million and professional fees of $6.9 million associated with our debt transactions in the second quarter of 2016, partially offset by foreign currency gains. Adjusted EBITDA for the second quarter of 2016 decreased $1.8 million to $171.1 million compared to $172.9 million in the prior-year period and decreased 0.8% on a constant currency basis. The decline in Adjusted EBITDA was attributable to investments being made in our franchise structure and sales force to drive growth, partially offset by revenue growth and expense savings associated with our integration and business optimization efforts.

Acelity’s revenue for the six months ended June 30, 2016, increased 2.0% as reported on a GAAP basis to $923.8 million, compared with $905.7 million for the prior-year period. On a constant currency basis, revenue increased 2.9%.
 

  • AWT revenue was $694.0 million, up 0.4% as reported on a GAAP basis and 1.5% on a constant currency basis, compared to the prior-year period. Growth in AWT revenue was fueled primarily by increased volumes in advanced wound devices during the period and continued strength in expansion products, partially offset by lower average pricing and decreased revenue from advanced wound dressings in international markets.
  • RM revenue was $224.8 million, up 8.2% as reported on a GAAP basis and 8.4% on a constant currency basis, compared to the prior-year period. The increase in RM revenue was primarily due to strong growth in revenue related to breast reconstruction procedures in the United States and Strattice growth in Europe, partially offset by lower revenue from hernia repair procedures in the United States.

 
Net loss for the six months ended June 30, 2016, was $46.1 million, as reported on a GAAP basis, compared to $22.2 million in the prior-year period. This increase was primarily due to the loss on debt extinguishment of $13.7 million and professional fees of $7.5 million associated with our 2016 debt transactions and a decrease in foreign currency gains compared to the prior-year period. Adjusted EBITDA for the six months ended June 30, 2016, decreased $6.6 million to $332.1 million compared to $338.7 million in the prior-year period and decreased 1.5% on a constant currency basis. The decline in Adjusted EBITDA was attributable to investments being made in our franchise structure and sales force to drive growth, partially offset by revenue growth and expense savings associated with our integration and business optimization efforts.
 
Financial Position
Total cash at June 30, 2016, was $99.2 million. During the first six months of 2016, Acelity used cash of $39.6 million for operations, used cash of $39.5 million in investing activities and generated cash of $88.3 million from financing activities.

The Company executed an “amend and extend” of its USD and EUR Senior Term E-1 Credit Facilities due May 4, 2018, extending approximately $2 billion of the Senior Term Loans to November 4, 2020. Additionally, the Company refinanced a portion of the non-extended USD Senior Term E-1 Loan with the proceeds from the offering of $190.0 million of 7.875% First Lien Secured Notes due 2021. As of June 30, 2016, total long-term debt outstanding was $4.869 billion and our Net Leverage Ratio2 was 6.6x.

Company Structure
Acelity is a leading global medical technology company committed to the development and commercialization of advanced wound care and regenerative medicine solutions. Acelity was formed by uniting the strengths of three organizations, KCI, Systagenix and LifeCell, into our two business segments: Advanced Wound Therapeutics and Regenerative Medicine. Our mission is to change the clinical practice of medicine with solutions that speed healing, reduce complications, create economic value and improve patients’ lives. Acelity is controlled by investment funds advised by Apax Partners LLP and Apax Partners L.P. and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board and certain other co-investors. Unless otherwise noted in this report, the terms “we,” “our” or “Company,” refer to Acelity and its subsidiaries, collectively.
 
Non-GAAP Financial Information
The following provides information regarding non-GAAP financial measures used in this earnings release:

To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. A reconciliation of Adjusted EBITDA to net loss is provided later in this earnings release. In addition, the Company presents certain of its financial results on a constant currency basis in addition to GAAP results. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. In this release, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates.

Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of our business performance and are useful for period-over-period comparisons of the performance of our business. While management believes that these financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies. See "Reconciliation from GAAP to Non-GAAP" included within this release for a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures.

1Adjusted EBITDA excludes the impact of merger-related expenses, foreign currency gains or losses, business optimization expenses and other expenses specified in the reconciliation within this release.
2The Net Leverage Ratio represents Net Debt divided by Consolidated EBITDA for the last twelve months. Net Debt consists of total indebtedness including capital leases and other financing obligations, less cash and cash equivalents up to the greater of $300.0 million or 40% of Consolidated EBITDA for the last twelve months. Consolidated EBITDA, as defined in our senior secured credit agreement, represents Adjusted EBITDA plus “run rate” cost savings.

Click here to download the full Acelity L.P. INC. second quarter financial results for 2016 report:
2016 Q2 Earnings Release Final

For more information, contact: 

 

Maggie Fairchild

Corporate Communications

Phone: +1-210-330-2667

Email: maggie.fairchild@acelity.com

 

Jathan Tucker,

Investor Relations

Phone: +1-210-255-6817

Email: jathan.tucker@acelity.com