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Conformis Reports First Quarter 2019 Financial Results

BILLERICA, Mass., May 01, 2019 (GLOBE NEWSWIRE) -- Conformis, Inc. (CFMS), a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell patient specific joint replacement implants designed to fit each patient's unique anatomy, announced today financial results for the first quarter ended March 31, 2019.

Q1 Summary

  • Total revenue of $20.6 million, year-over-year up 5% on a reported basis and 6% on a constant currency basis
  • Product revenue of $20.5 million, year-over-year up 5% on a reported basis and 6% on a constant currency basis
      -- U.S. product revenue of $17.6 million, year-over-year up 10%
      -- Rest of World product revenue of $2.9 million, year-over-year down 16% on a reported basis and 11% on a constant currency basis
  • Royalty revenue of $0.2 million, consistent with prior year
  • Gross margin of 48%, a year-over-year increase of 300 basis points

"Our US growth of 10% represents continued progress in our US commercial performance. Our Rest of World business continues to contract due to reimbursement challenges in Germany,” said Mark Augusti, President and Chief Executive Officer of Conformis, Inc. “Importantly, I am pleased that we significantly reduced our operating expenses as we had previously communicated. This resulted in a meaningful reduction in cash used versus previous quarters.”

     
  Three months ended March 31, Increase/(decrease)
($, in thousands) 2019 2018  $
Change
%
Change
%
Change
         (as reported)  (constant
currency)
  United States $ 17,554   $ 16,027   $ 1,527   10 % 10 %
  Rest of world 2,915   3,456   (541 ) (16 )% (11 )%
Product revenue 20,469   19,483   986   5 % 6 %
Royalty revenue 175   173   2   1 % 1 %
Total revenue $ 20,644   $ 19,656   $ 988   5 % 6 %
                           

First Quarter 2019 Financial Results

Total revenue for the three-month period ended March 31, 2019 increased $1.0 million to $20.6 million, or 5% year-over-year on a reported basis and 6% on a constant currency basis. Total revenue in the first quarter of 2019 and 2018 includes royalty revenue of $0.2 million related to a patent license agreement.

Product revenue increased $1.0 million to $20.5 million, or 5% year-over-year on a reported basis and 6% on a constant currency basis. U.S. product revenue increased $1.5 million to $17.6 million, or 10% year-over-year, and Rest of World product revenue decreased $0.5 million to $2.9 million, or 16% year-over-year on a reported basis and 11% on a constant currency basis.  Product revenue from sales of iTotal PS increased $1.7 million to $7.5 million, or 29% year-over-year on a reported and constant currency basis.  Product revenue from sales of iTotal CR, iDuo and iUni decreased $1.2 million to $12.4 million, or 9% year-over-year on a reported basis and 8% on a constant currency basis.  Conformis Hip System sales in the first quarter of 2019 was $0.5 million, which was all in the U.S.

Total gross profit increased $1.0 million to $9.8 million, or 48% of revenue, in the first quarter of 2019, compared to $8.8 million, or 45% of revenue, in the first quarter of 2018. This 300 basis point increase in gross margin was driven primarily by cost reductions as a result of vertical integration and manufacturing efficiencies.

Total operating expenses decreased $4.8 million to $16.4 million, or 23% year-over-year. This decrease in expenses was driven primarily by reductions in personnel costs, marketing programs and patent litigation expense as part of a plan announced at the end of 2018 to reduce cash burn beginning in 2019.

Net loss was $7.6 million, or $0.12 per basic and diluted share, in the first quarter of 2019, compared to a net loss of $12.0 million, or $0.22 per basic and diluted share, for the same period last year. Net loss in the first quarter of 2019 included foreign currency exchange expense of $0.7 million compared to foreign currency exchange income of $1.1 million in the same period last year.  Net loss per basic and diluted share calculations assume weighted average basic and diluted shares outstanding of 62.8 million for the first quarter of 2019, compared to 54.7 million for the same period last year.

Cash and cash equivalents and investments totaled $18.6 million as of March 31, 2019, compared to $23.6 million as of December 31, 2018.

Note on Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain information regarding the Company's financial results or projected financial results on a non-GAAP "constant currency basis." This information estimates the impact of changes in foreign currency rates on the translation of the Company's current or projected future period financial results as compared to the applicable comparable period. This impact is derived by taking the adjusted current or projected local currency results and translating them into U.S. Dollars based upon the foreign currency exchange rates for the applicable comparable period. It does not include any other effect of changes in foreign currency rates on the Company's results or business. Non-GAAP information is not a substitute for, and is not superior to, information presented on a GAAP basis.

Conference Call

As previously announced, Conformis will conduct a webcast today at 4:30 PM Eastern Time. Management will discuss financial results and strategic matters. The webcast will be live at https://edge.media-server.com/m6/p/hw48x3ry and at the investor relations section of the company's website at ir.conformis.com.

The online archive of the webcast will be available on the company's website for 30 days.

About Conformis, Inc.

Conformis is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, or customized, to fit each patient's unique anatomy. Conformis offers a broad line of customized knee and hip implants and customized pre-sterilized, single-use instruments delivered to the hospital. In clinical studies, Conformis iTotal CR knee replacement system demonstrated superior clinical outcomes, including better function and greater patient satisfaction, compared to traditional, off-the-shelf implants.  Conformis owns or exclusively in-licenses issued patents and pending patent applications that cover customized implants and customized patient-specific instrumentation for all major joints.

For more information, visit www.conformis.com. To receive future releases in e-mail alerts, sign up at ir.conformis.com.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this press release about our future expectations, plans and prospects, including statements about the anticipated timing of our product launches, and our financial position and results, total revenue, product revenue, gross margin, operations, as well as other statements containing the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," or "would" and similar expressions, constitute forward-looking statements within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. We may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual financial results could differ materially from the projections disclosed in the forward-looking statements we make as a result of a variety of risks and uncertainties, including risks related to our estimates and expectations regarding our revenue, gross margin, expenses, revenue growth and other results of operations, and the other risks and uncertainties described in the "Risk Factors" sections of our public filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent our views as of the date hereof. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

CONTACT:
Investor contact
ir@conformis.com
(781) 374-5598


 
CONFORMIS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share data)
 
  Three Months Ended
March 31,
  2019 2018
     
Revenue    
Product $ 20,469   $ 19,483  
Royalty 175   173  
Total revenue 20,644   19,656  
Cost of revenue 10,813   10,869  
Gross profit 9,831   8,787  
     
Operating expenses    
Sales and marketing 8,181   10,411  
Research and development 2,912   4,694  
General and administrative 5,329   6,140  
Total operating expenses 16,422   21,245  
Loss from operations (6,591 ) (12,458 )
     
Other income and expenses    
Interest income 107   140  
Interest expense (453 ) (735 )
Foreign currency exchange transaction (loss) income (653 ) 1,085  
Total other (expenses) income, net (999 ) 490  
Loss before income taxes (7,590 ) (11,968 )
Income tax provision (9 ) 33  
     
Net loss $ (7,581 ) $ (12,001 )
     
Net loss per share    
Basic and diluted $ (0.12 ) $ (0.22 )
Weighted average common shares outstanding    
Basic and diluted 62,849,335   54,741,828  


 
CONFORMIS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
     
  March 31, 2019 December 31, 2018
Assets  (unaudited)  
Current Assets    
Cash and cash equivalents $ 18,616   $ 16,380  
Investments   7,245  
Accounts receivable, net 12,992   13,244  
Royalty receivable 148   145  
Inventories 9,561   9,534  
Prepaid expenses and other current assets 1,477   1,408  
Total current assets 42,794   47,956  
Property and equipment, net 14,156   14,439  
Operating lease right-of-use assets 6,678    
Other Assets    
Restricted cash 462   462  
Intangible assets, net 83   109  
Other long-term assets 17   17  
Total assets $ 64,190   $ 62,983  
     
Liabilities and stockholder's equity    
Current liabilities    
Accounts payable $ 4,443   $ 3,445  
Accrued expenses 7,122   7,930  
Operating lease liabilities 1,427    
Current portion of long-term debt 1,250    
Total current liabilities 14,242   11,375  
Other long-term liabilities   616  
Long-term debt, less debt issuance costs 13,567   14,792  
Operating lease liabilities 5,994    
Total liabilities 33,803   26,783  
Stockholders' equity    
Preferred stock, $0.00001 par value:    
Authorized: 5,000,000 shares authorized at March 31, 2019 and December 31, 2018; no shares issued and outstanding as of March 31, 2019 and December 31, 2018    
Common stock, $0.00001 par value:    
Authorized: 200,000,000 shares authorized at March 31, 2019 and December 31, 2018; 67,880,664 and 65,290,879 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 1   1  
Additional paid-in capital 514,484   513,336  
Accumulated deficit (483,248 ) (475,667 )
Accumulated other comprehensive loss (850 ) (1,470 )
Total stockholders' equity 30,387   36,200  
Total liabilities and stockholders' equity $ 64,190   $ 62,983