Press Release - Publication of 2019 Annual Results
Medacta achieves organic growth of 13.9% significantly above the market and strong profitability equal to 29.5% of Adjusted EBITDA margin.
- Sales increased organically by 13.9% to EUR 310.6 million on a reported currency basis (11.3% on a constant currency basis) significantly above market.
- Strong profitability, adjusted EBITDA increased to EUR 91.5 million, corresponding to an adjusted EBITDA margin of 29.5%.
- Strong start into the 2020 financial year prior to the beginning of coronavirus crisis.
- Countermeasures to limit the impact of the coronavirus taken swiftly. Facilities in Ticino/Switzerland remain operational to date.
- Medacta has historically maintained a moderate net debt ratio. To protect its future cash flow and liquidity, the Board of Directors has proposed not to distribute a dividend for the financial year 2019.
- Conscious of Covid-19 related uncertainties, Medacta withholds financial guidance for 2020. Mid and long-term fundamentals remain unchanged.
CASTEL SAN PIETRO, 6 April 2020 - Francesco Siccardi, CEO of Medacta, says 'During these challenging times, our priority is to protect the health and safety of our employees, customers and patients. The Group Executive Team along with the Board of Directors are working very hard to assess and mitigate the risks and take actions to limit the financial impact of the pandemic on our business.
We expect that orthopaedic patients will generate waiting lists in different markets and, depending on the duration of the deferral of elective surgeries, a recovery could start later in the year. Overall, we are confident that mid and long-term fundamentals have not changed and the encouraging growth we experienced in the first two months of the year will be back after the storm ends and the dust has settled'.
Overview of 2019
Medacta Group SA (Medacta) continued to expand significantly faster than the orthopaedic market, achieving strong organic revenue growth and double-digit expansion. Total revenue increased by EUR 38.0 million, or 13.9%, from EUR 272.6 million in 2018 to EUR 310.6 million in 2019 on a reported currency basis (11.3% on a constant currency basis). The increase was largely due to higher levels of market penetration in existing territories, which in turn led to increased sales volumes of the Hip, Knee, Spine and Shoulder product offerings. Higher levels of market penetration were supported by an expanded direct sales force, which grew through the addition of direct sales representatives and agents, strong Medical Education activities including the successful 9th M.O.R.E. International Symposium, which attracted about 1'500 attendees from all over the world.
|KEY FINANCIAL FIGURES||31.12.2019||31.12.2018|
|Alternative Performance Measures:|
|Adjusted EBITDA margin*||29.5%||32.3%|
|Free Cash Flow||0.6||17.2|
|Adjusted Free Cash Flow**||22.3||33.2|
|Number of employees||1'101||973|
|* Adjusted for IPO costs, one-time tax duty, Fidelity Bonus, provisions on litigations, extraordinary legal expenses, profit on sale of non-strategic asset. |
The reconciliation is provided in the 'Alternative Performance Measures' section of the Management Report. IFRS 16 adoption starting from January 1, 2019 positively impacted our EBITDA, since lease expenses are classified in depreciation of right-of-use assets (Euro 2'964 thousand) and financial costs (Euro 191 thousand). In the comparative period, lease expenses were classified within 'Opex' for a total amount of Euro 2'990 thousand.
|** Please see the 'Alternative Performance Measures' section of the Management Report for the reconciliation of the 'Adjusted Free Cash Flow'. IFRS 16 adoption starting from January 1, 2019 positively impacted our Free Cash Flow, since lease expenses are classified in depreciation of right-of-use assets (Euro 2'964 thousand). In the comparative period, lease expenses were classified within the 'Cash Flow from operating activities' for a total amount of Euro 2'990 thousand.|
Growth in all business lines and regions
The core Joint product line contribution has been robust. The Hip line continued to develop, achieving sales growth of 5.2% at constant currency and reported sales of EUR 163.9 million, and benefit from the AMIS technique. In the Knee product line there was a strong growth of 13.2% at constant currency, with reported sales of EUR 111.7 million, sustained by an integrated proposal of innovative implants, personalized MIKA approach and GMK Single Use Instrumentation. The patient-matched and minimally invasive solution MySpine MIS MC have been the key elements of the positive results of the Spine product line, which showed a good acceleration in the second part of the year with an impressive 23.4% of revenue growth at constant currency and reported sales of EUR 25.3 million. Thanks to the comprehensive product portfolio and a successful deployment strategy, the Shoulder product line was able to reach 147.4% growth rate at constant currency and reported revenue of EUR 9.7 million.
Medacta achieved balanced geographic sales growth in all key markets. Europe registered 7.9% growth rate at constant currency and reported sales of EUR 136.1 million, primarily driven by Italy and Germany. North America market realized an overall good performance showing 13.2% growth rate at constant currency and reported revenue of EUR 95.5 million. The U.S. remains one of Medacta's strategic markets and a key focus for 2020. Asia-Pacific delivered the strongest result among all geographic areas, reaching 13.3% revenue growth at constant currency and EUR 66.9 million of reported revenue. This good result is attributable to a well-executed marketing strategy capable of generating noticeable acceleration mainly in the second part of the year.
High CORE Gross Profit margin of 73.0%
The CORE Gross Profit (adjusted for the Fidelity Bonus for employees) increased by 11.2%, from EUR 204.0 million in the previous year to EUR 226.9 million in the reporting period.1 The CORE Gross Profit margin, equal to 73.0%, decreased by 1.8% in comparison to the previous year. 1 This was primarily due to expected price reductions in certain European countries, higher raw material prices, higher royalties and incremental depreciation given the investments made on new instruments to sustain future growth, not sufficiently counterbalanced by positive effects on average selling prices deriving from revenue geographic mix and product mix.
Adjusted EBITDA surges to EUR 91.5 million
The Adjusted EBITDA amounted to EUR 91.5 million, 4.1% increase compared to a year ago. The adjustments, in the amount of EUR 38.2 million, include mainly one-time expenses associated with the IPO, Fidelity Bonus, extraordinary legal costs, stamp duty and accrued provisions on litigation.1 The Adjusted EBITDA corresponds to a margin of 29.5%, compared to 32.3% in the previous year. The reduction in profitability was mainly due to the combined effect of expected increasing core business expenses and revenue growth rate slightly slower than expected. Higher costs were incurred particularly in association with the listing and the strengthening of corporate functions as well as in marketing and research activities.
Solid Balance Sheet
Medacta's Balance Sheet remains robust, with total assets of EUR 412.6 million and an equity ratio of 29.9% at the end of the reporting period. The Adjusted Free Cash Flow generated in 2019 amounted to EUR 22.3 million after significant investments in new instruments and Research & Development to sustain the future growth of Medacta.1
Long-term value creation continues
The orthopaedics market is characterized by continuous technological changes, frequent new product introductions and evolving industry standards resulting from technological advances and scientific discoveries. In this complex environment, Medacta creates long-term value with its strategic focus on innovation, education and healthcare sustainability. Innovation is based on three pillars: complete and profound knowledge of the human body, continuous investments in long and short-term research and development (R&D) and adoption of cutting-edge technologies. Education is the indispensable tool to transforming innovation into concrete benefits for patients, surgeons and healthcare systems. As such, around 1'250 surgeons, on top of the 9th M.O.R.E. International Symposium, attended educational events and participated in more than 750 surgeon-to-surgeon visits in the year under review. As a result, Medacta's innovative products and surgical procedures improve patient well-being, facilitate the work of the customer surgeons and increase the sustainability of the healthcare system by improving efficiency while reducing surgical costs.
We are constantly monitoring the impact of the Covid-19 and how the pandemic is affecting our business. The health and safety of our employees, customers and patients are our number one priority and Medacta is working very hard to assess and mitigate any risks, taking all the actions needed to limit the impact of the pandemic. Over 270 Headquarters employees have been working remotely since March 9, and we have adopted all Government guidance and more, including social distancing, hand sanitizer, daily temperature measurement and masks, amongst others. As a MedTech company compliant with Government requirements, and thanks to the swiftly countermeasures taken by Management, our facilities in Ticino/Switzerland remain operational to date.
From a business perspective, starting from March 2020 we have seen a severe reduction of elective surgeries in several countries, including Italy, Switzerland, France, Australia, and we anticipate more countries to follow. Marketing, Medical Education and other costs have been reduced substantially due to travel restrictions and we introduced cost containment measures, including short time work wherever appropriate. Also, we are using all the available Government support, in Switzerland and in all the markets in which Medacta operates with its subsidiaries, to offset labour costs whenever possible.
To further protect our cash flow, the Board of Directors decided not to propose to the Annual General Meeting any distribution of dividend for the 2019 financial year.
Sales for the first two months of 2020 were very strong and in line with management expectations, recording constant currency growth in the low to mid-teens range. March was heavily affected by the Covid-19 impact, reducing constant currency growth rate for Q1 to low single digit. Given the uncertainties brought by the widespread outbreak of Covid-19 and the inability to forecast the future development, we are not in a position to provide a short-term outlook. However, we expect, orthopaedic patients will generate waiting lists in different countries and, depending on the duration of the deferral of elective surgeries, in several of Medacta's markets, a recovery could start later in 2020 and partially in 2021. Overall, we do not believe that mid or long-term fundamentals have changed.
Medacta's Annual Report 2019 can be downloaded via this link: https://www.medacta.com/EN/financial-reports
Webcast today at 3:00 pm (CEST)
Medacta Group SA will present its Annual Results 2019 during a webcast today at 3:00 pm (CEST). The results call will be headed by Francesco Siccardi (CEO) and Corrado Farsetta (CFO).
The conference will be held in English.
For participants to the conference call (slides only): https://webcasts.eqs.com/medacta20200406/no-audio
Dial-in numbers for conference call function only:
Switzerland: +41 44 580 6522
Germany: +49 692 0174 4220
UK: +44 203 009 2470
US: +1 877 423 0830
Code PIN participants: 82985923#
- 19 May 2020 Annual General Meeting
- 22 July 2020 Publication of 2020 Half-Year unaudited top-line figures
- 7 September 2020 Half-year results 2020
Medacta Group SA
Corrado Farsetta, CFO
Phone: +41 91 696 60 60
Medacta is an international company specializing in the design and production of innovative orthopaedic products and the development of accompanying surgical techniques for joint replacement, spine surgery, and sports medicine. Established in 1999 in Switzerland, Medacta's products and surgical techniques are characterized by innovation. Medacta is a pioneer in developing new offerings on the basis of minimally invasive surgical techniques, in particular its Anterior Minimally Invasive Surgery ('AMIS') technique for hip replacements. Medacta has leveraged its orthopaedic expertise and comprehensive understanding of the human body to develop the sophisticated 'MySolutions' technology, which offers surgeons highly personalized pre-operative planning and implant placement methodologies by creating advanced personalized kinematic models and 3D planning tools for use in hip, knee, shoulder and spine procedures.
This press release has been prepared by Medacta Group SA ('Medacta' and together with its subsidiaries, 'we', 'us' or the 'Group'). The information contained in the press release does not purport to be comprehensive. Please refer to the Medacta 2019 Annual Report available on our website at https://www.medacta.com/EN/investors.
This press release has been prepared by Medacta and includes forward-looking information and statements concerning the outlook for our business. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance. These expectations, estimates and projections are generally identifiable by statements containing words such as 'expects,' 'believes,' 'estimates,' 'targets,' 'plans,' 'outlook' or similar expressions.
There are numerous risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this press release. Currently, it is very difficult to provide a meaningful prediction on how the Swiss governmental action in response to the ongoing outbreak of a novel coronavirus disease (COVID-19) will affect the Medacta's operations and how long such measures will remain in place. The COVID-19 outbreak has caused, and may continue to cause, economic instability and a significant decrease of total economic output in the affected areas and globally. The impact of the COVID-19 outbreak on the general economic environment in the markets in which Medacta operates remain uncertain and could be significant. In addition, other important factors that could cause such differences include: changes in the global economic conditions and the economic conditions of the regions and markets in which the Group operates; changes in healthcare regulations (in particular with regard to medical devices); the development of our customer base; the competitive environment in which the Group operates; manufacturing or logistics disruptions; the impact of fluctuations in foreign exchange rates; and such other factors as may be discussed from time to time. Although we believe that our expectations reflected in any such forward-looking statement are based upon reasonable assumptions, we can give no assurance that those expectations will be achieved.
Alternative Performance Measures
This press release contains certain financial measures of historical performance that are not defined or specified by IFRS, such as 'constant currency', 'EBITDA', 'Adjusted EBITDA' or 'CORE EBITDA', 'Free Cash Flow', 'Adjusted Free Cash Flow', 'Net Debt' and 'Leverage'. Reconciliation of these measures as well as 'CORE' financial measures is provided in the 'Alternative Performance Measures' (APM) section of our 2019 annual report. These Alternative Performance Measures (APM) should be regarded as complementary information to, and not as a substitute for, the IFRS beginning performance measures. For definitions of APM, together with reconciliations to the most directly reconcilable IFRS line items, please refer section headed 'Alternative Performance Measures' of the 2019 annual report.
The 2019 annual report is available at https://www.medacta.com/EN/financial-reports.
 Alternative Performance Measures: This press release contains certain financial measures of historical performance that are not defined or specified by IFRS, such as 'constant currency', 'EBITDA', 'Adjusted EBITDA' or 'CORE EBITDA', 'Free Cash Flow', 'Adjusted Free Cash Flow', 'Net Debt' and 'Leverage'. Reconciliation of these measures as well as 'CORE' financial measures is provided in the 'Alternative Performance Measures' (APM) section of the 2019 annual report. These Alternative Performance Measures (APM) should be regarded as complementary information to, and not as a substitute for the IFRS beginning performance measures. For definitions of APM, together with reconciliations to the most directly reconcilable IFRS line items, please refer section headed 'Alternative Performance Measures' of the 2019 annual report. The 2019 annual report is available at https://www.medacta.com/EN/financial-reports