Financial

K2M Group Holdings, Inc. Reports First Quarter 2018 Financial Results and Updates Fiscal Year 2018 Outlook

LEESBURG, Va., May 01, 2018 (GLOBE NEWSWIRE) — K2M Group Holdings, Inc. (Nasdaq:KTWO) (the “Company” or “K2M”), a global leader of complex spine and minimally invasive solutions focused on achieving three-dimensional Total Body Balance, today reported financial results for its first quarter ended March 31, 2018.

First Quarter 2018 Financial Summary:

  • Total first quarter revenue of $67.9 million, up 10% year-over-year on a reported basis and 8% on a constant currency basis.
  • Domestic first quarter revenue of $49.9 million, up 8% year-over-year, comprised of:
    • U.S. Complex Spine growth of 8% year-over-year
    • U.S. Minimally Invasive Surgery (MIS) growth of 6% year-over-year
    • U.S. Degenerative growth of 9% year-over-year
  • International first quarter revenue of $18.0 million, up 15% year-over-year, and 9% on a constant currency basis.
  • Net loss of $11.4 million for the first quarter, compared to a net loss of $10.9 million in the comparable quarter last year.
  • Adjusted EBITDA loss of $3.0 million for the first quarter, compared to Adjusted EBITDA loss of $336,000 in the comparable quarter last year.

First Quarter Product Introductions and Strategic Highlights:

  • On February 26, 2018, the Company announced the licensure of its BACS® Data Management tool to the International Spine Study Group Foundation (ISSGF) for collecting spine patient data, including patient reported outcome measures (PROMs), as part of the ISSGF’s globally recognized research studies.
  • On March 14, 2018, the Company announced the commercial launch of the YUKON  OCT Spinal System at the 34th Annual Meeting of the American Association of Neurological Surgeons/Congress of Neurological Surgeons Section on Disorders of the Spine and Peripheral Nerves (AANS/CNS). At the meeting, the Company also showcased Balance ACS® or (BACS), a comprehensive platform that applies three-dimensional solutions across the entire clinical care continuum to help drive quality outcomes for spine patients.
  • On March 29, 2018, the Company announced the appointment of Lane Major as Chief Operating Officer, a new position within K2M.

Highlights Subsequent to Quarter-End:

  • On April 27, 2018, the Company executed an exclusive agency and services agreement to replace its existing exclusive distribution agreement with its partner in Spain and Portugal, Medcomtech, S.A., whereby Medcomtech and K2M extended their partnership through 2024.  Pursuant to the agreement, K2M acquired Medcomtech’s spine customer contracts and relationships and its existing K2M product inventory and instrumentation in exchange for certain outstanding receivables from Medcomtech.

    In addition, Medcomtech will transition from a stocking-based distributor to a commission-based independent sales agency, and K2M will become responsible for and assume risk of billing, collections and inventory management for Medcomtech’s business related to K2M products while Medcomtech will remain focused on sales, marketing and market development activities for these products.  Beginning in May, revenue generated by K2M in Spain and Portugal will reflect its supplier relationships at the hospital level as opposed to its prior wholesale relationship with Medcomtech.  We believe this revised relationship with Medcomtech represents an opportunity to improve the growth and gross margin profile for Spain and Portugal going forward.

“Our first quarter total revenue growth of approximately 10% year-over-year reflect solid trends in the U.S. and stronger-than-expected demand in international markets,” said Chairman, President, and Chief Executive Officer, Eric Major. “We delivered approximately 8% growth in the United States in Q1—at the high-end of our growth expectations—driven by solid execution against our strategic goal of increasing market share by introducing new and innovative spinal implant solutions like our first-of-its-kind MOJAVE PL 3D Expandable Interbody System featuring Lamellar 3D Titanium Technology and our YUKON OCT Spinal System that can be used with the PALO ALTO Cervical Static Corpectomy Cage System, the first and only static corpectomy cage in the world to receive a cervical 510(k) clearance.”

Mr. Major continued, “We have increased our fiscal year 2018 revenue guidance expectations to a new range of $283 million to $287 million based on our improved revenue outlook for Spain.  We remain confident in our ability to drive above-market growth in the U.S., fueled by our continued focus on leading the spine market by introducing new and innovative spinal implant solutions to help surgeons care for patients around the world who suffer from debilitating spinal pathologies.”

 

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Drue De Angelis

Drue is Managing Partner for The De Angelis Group, Executive Search firm exclusively for the Ortho & Spine industry.

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