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CST: 22/09/2019 09:36:33   

Wright Medical Group N.V. Reports 2018 Fourth Quarter and Full-Year Financial Results and Provides 2019 Annual Guidance

207 Days ago

Fourth Quarter 2018 Net Sales, Including Cartiva, of $238 Million; Full-Year 2018 Net Sales, Including
Cartiva, of $836 Million

Cartiva Revenue of $9.5 Million From October 10, 2018 Closing Date Through Year-End

Fourth Quarter 2018 Net Loss From Continuing Operations of $23 Million; Non-GAAP Adjusted EBITDA
From Continuing Operations of $44 Million

Full-Year 2018 Net Loss From Continuing Operations of $169 Million; Non-GAAP Adjusted EBITDA From
Continuing Operations of $117 Million

Company Provides Full-Year 2019 Net Sales Guidance of $954 Million to $966 Million

 Company Provides Full-Year 2019 Non-GAAP Adjusted EBITDA Guidance of $160 Million to $170 Million

Company Now Anticipates Exceeding 20% Non-GAAP Adjusted EBITDA Margin for Full Fourth Quarter 2019

AMSTERDAM, The Netherlands, Feb. 26, 2019 (GLOBE NEWSWIRE) -- Wright Medical Group N.V. (NASDAQ:WMGI) today reported financial results for its fourth quarter and full-year ended December 30, 2018 and provided 2019 annual guidance.  Unless otherwise noted, all net sales growth rates in this release are stated on a constant currency basis, which includes the negative impact of the four fewer business selling days in the fourth quarter of fiscal year 2018.     

As previously announced, net sales totaled $238.1 million during the fourth quarter ended December 30, 2018, representing 9.4% as reported and 10.3% constant currency growth, including the negative impact of four fewer selling days in the fourth quarter of 2018, which the company estimates to be approximately $9 million or 4.3%.  For the full-year 2018, net sales totaled $836.2 million, representing growth of approximately 12.2% as reported and 11.6% on a constant currency basis, including the negative impact of four fewer selling days in the fourth quarter of 2018.  As stated previously, the company is unable to precisely determine the impact of the four fewer selling days on individual product lines; however, it had a disproportionate impact on the U.S. business.  Gross margins were 79.4% during the fourth quarter of 2018 and were 79.8% on a non-GAAP adjusted basis.  Reconciliations of all historical non-GAAP financial measures used in this release to the most comparable GAAP measures can be found in the attached financial tables.

Robert Palmisano, president and chief executive officer, commented, “As previously reported, our fourth quarter results represent an outstanding performance across all our businesses.  This performance was driven by continued strong shoulder growth in the quarter, which included the ongoing launch of our PERFORM Reversed glenoid and continued contributions from our SIMPLICITI shoulder system.  We anticipate that these products, as well as accelerating adoption of our BLUEPRINT enabling technology and the upcoming launch of our REVIVE revision shoulder system, will continue to drive strong shoulder sales growth in 2019 and beyond.  We also had strong adjusted EBITDA with 210 basis points of EBITDA margin expansion for the full-year and our adjusted gross margins of nearly 80% are some of the best in high-growth medtech.” 

Palmisano further commented, “In our U.S. lower extremities business, we got off to a very strong start with Cartiva revenue of $9.5 million, which exceeded our expectations in the fourth quarter.  On January 1, Cartiva was fully launched with our U.S. lower extremities sales force, including the integration of the former Cartiva distributors that we have chosen to retain.  We also saw continued strong growth in our core products as well as in total ankle.  Our U.S. biologics business continued to be driven by the ongoing roll-out of AUGMENT Injectable.  We intend to continue to focus on strong execution and new product launches throughout 2019.”

Net loss from continuing operations for the fourth quarter of 2018 totaled $22.9 million, or $(0.18) per diluted share.

The company’s net loss from continuing operations for the fourth quarter of 2018 included the after-tax impacts of  non-cash interest expense of $12.6 million related to its convertible notes, $7.8 million of transaction and transition costs, a loss of $3.2 million related to mark-to-market adjustments on contingent value rights (CVRs) issued in connection with the BioMimetic acquisition, a loss of $1.6 million related to mark-to-market adjustments on derivative assets and liabilities, a $0.7 million loss related to fair value adjustments to contingent consideration, non-cash amortization of inventory step-up of $0.4 million associated with inventory acquired from the Cartiva acquisition, non-cash foreign currency translation charges of $0.3 million, a $3.8 million U.S. tax provision within continuing operations recorded as a result of the year to date pre-tax gain recognized within discontinued operations due to the previously announced $30.75 million insurance settlement, a $3.6 million tax benefit related to the realizability of deferred tax assets as a result of the Cartiva acquisition, and a tax provision of $2.7 million due to a change in judgment regarding our ability to realize certain deferred tax assets. 

The company's fourth quarter 2018 non-GAAP net income from continuing operations, as adjusted for the above items, was $6.8 million.  The company's fourth quarter 2018 non-GAAP adjusted EBITDA from continuing operations, as defined in the non-GAAP to GAAP reconciliation provided later in this release, was $44.1 million. The attached financial tables include reconciliations of all historical non-GAAP measures to the most comparable GAAP measures.

Cash and cash equivalents totaled $191.4 million as of the end of the fourth quarter of 2018. 

Long-Term Financial Targets

The company now anticipates it will exceed its goal of 20% adjusted EBITDA margin for the full fourth quarter of 2019. 

The company also previously announced new three-year financial targets for 2019 through 2021:

  • Deliver double-digit, constant currency net sales growth each year
  • Maintain adjusted gross margin in the high 70s% range each year
  • Expand adjusted EBITDA margin to the mid-20% range exiting 2021

Palmisano concluded, “We are currently #1 in foot and ankle, and I believe we will be #1 in shoulder soon. Delivering on our long-term financial targets is expected to result in Wright becoming a $1 billion revenue company with double digit top-line growth and an adjusted EBITDA margin in excess of 20% during the course of 2020.  This would represent a company with a best in class combination of size, growth and adjusted EBITDA and gross margins.  I believe our leadership in high-growth markets, combined with specialized sales forces and differentiated technologies, positions us well to achieve these targets and deliver enhanced shareholder value.”

Outlook

The company anticipates net sales for full-year 2019 of approximately $954 million to $966 million, which includes $47 million from Cartiva.  This guidance assumes foreign currency exchange rates in line with current rates, which results in a negative impact of approximately one percentage point as compared to 2018.  In addition, this range implies full-year 2019 constant currency net sales growth of 15% to 17%, pro-forma constant currency net sales growth of 11% to 13% and organic constant currency net sales growth of 10% to 12%.  
           
The company anticipates its full-year 2019 non-GAAP adjusted EBITDA from continuing operations guidance, as described in the non-GAAP reconciliation provided later in this release, to be $160 million to $170 million, which with a normal quarterly cadence, would result in fourth quarter of 2019 non-GAAP adjusted EBITDA margin in excess of 20%.    

The company expects its non-GAAP adjusted earnings per share from continuing operations, including share-based compensation, as described in the non-GAAP to GAAP reconciliation provided later in this release, for full-year 2019 to be $0.17 to $0.25 per diluted share.

The company estimates approximately 131 million non-GAAP adjusted diluted weighted average ordinary shares outstanding for fiscal year 2019.

The company's non-GAAP adjusted EBITDA from continuing operations target is measured by adding back to net loss from continuing operations charges for interest, income taxes, depreciation and amortization expenses, non-cash share-based compensation expense and non-operating income and expense.  Additionally, the company’s adjusted EBITDA from continuing operations target excludes possible future acquisitions; other material future business developments; and due diligence, transaction and transition costs associated with acquisitions and divestitures. 

The company’s non-GAAP adjusted earnings per share from continuing operations target is measured by adding back to net loss from continuing operations non-cash interest expense associated with the convertible notes; due diligence, transaction and transition costs associated with acquisitions and divestitures; mark-to-market adjustments to CVRs; non-cash mark-to-market derivative adjustments; non-cash gains and losses associated with foreign currency translation of balances denominated in foreign currencies; and charges for non-cash amortization expenses, net of taxes. Note that as a result of the company’s relatively low effective tax rate due to the valuation allowance impacting a substantial portion of the company’s income/loss, the company is currently estimating the tax effect on amortization expense at 0%. Further, this non-GAAP adjusted earnings per share from continuing operations target excludes possible future acquisitions and other material future business developments.

All of the historical non-GAAP financial measures used in this release are reconciled to the most directly comparable GAAP measures. With respect to the company’s 2019 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations, however, the company cannot provide a quantitative reconciliation to the most directly comparable GAAP measures without unreasonable effort due to its inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments as described above, including the foreign currency fluctuations and market driven fair value adjustments to CVRs and derivatives. The anticipated differences between these non-GAAP financial measures and the most directly comparable GAAP measure are described above qualitatively.

The company's anticipated ranges for net sales from continuing operations, non-GAAP adjusted EBITDA from continuing operations, and non-GAAP adjusted earnings per share from continuing operations are forward-looking statements, as are any other statements that anticipate or aspire to future events or performance.  They are subject to various risks and uncertainties that could cause the company's actual results to differ materially from the anticipated targets.  The anticipated targets are not predictions of the company's actual performance.  See the cautionary information about forward-looking statements in the “Cautionary Note Regarding Forward-Looking Statements” section of this release.

Supplemental Financial Information

To view the fourth quarter of 2018 supplemental financial information, visit ir.wright.com.  For historical information on Wright Medical Group N.V. segment reporting changes and non-GAAP combined pro forma financial information, please refer to the presentation posted on Wright’s website at ir.wright.com in the “Financial Information” section.

Internet Posting of Information

Wright routinely posts information that may be important to investors in the “Investor Relations” section of its website at www.wright.com.  The company encourages investors and potential investors to consult the Wright website regularly for important information about Wright.

Conference Call and Webcast

As previously announced, Wright will host a conference call starting at 3:30 p.m. Central Time today.  The live dial-in number for the call is (844) 295-9436 (U.S.) / (574) 990-1040 (Outside U.S.).  The participant passcode for the call is “Wright.”  A simultaneous webcast of the call will be available via Wright’s corporate website at www.wright.com.   

A replay of the call will be available beginning at 5:30 p.m. Central Time on February 26, 2019 through March 5, 2019.  To hear this replay, dial (855) 859-2056 (U.S.) / (404) 537-3406 (Outside U.S.) and enter code 1646189.  A replay of the conference call will also be available via the internet starting today and continuing for at least 12 months.  To access a replay of the conference call via the internet, go to the “Investor Relations - Presentations/Calendar” section of the company’s corporate website located at www.wright.com.

The conference call may include a discussion of non-GAAP financial measures.  Reference is made to the most directly comparable GAAP financial measures, the reconciliation of the differences between the two financial measures, and the other information included in this release, the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) today, or otherwise available in the “Investor Relations - Supplemental Financial Information” section of the company's corporate website located at www.wright.com.

The conference call may include forward-looking statements.  See the cautionary information about forward-looking statements in the “Cautionary Note Regarding Forward-Looking Statements” section of this release.

About Wright Medical Group N.V.

Wright Medical Group N.V. is a global medical device company focused on extremities and biologics products. The company is committed to delivering innovative, value-added solutions improving the quality of life for patients worldwide.  Wright is a recognized leader of surgical solutions for the upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics.  For more information about Wright, visit www.wright.com.

™ and ® denote trademarks and registered trademarks of Wright Medical Group N.V. or its affiliates, registered as indicated in the United States, and in other countries.  All other trademarks and trade names referred to in this release are the property of their respective owners.

Non-GAAP Financial Measures  

To supplement the company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles, the company uses certain non-GAAP financial measures in this release. Reconciliations of the historical non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. Wright’s non-GAAP financial measures include net sales, excluding the impact of foreign currency; net income, as adjusted; EBITDA, as adjusted; gross margin, as adjusted; earnings, as adjusted; and earnings, as adjusted, per diluted share, in each case, from continuing operations. The company's management believes that the presentation of these measures provides useful information to investors.  These measures may assist investors in evaluating the company's operations, period over period. Wright’s non-GAAP financial measures exclude such items as non-cash interest expense related to the company's convertible notes, non-cash loss on extinguishment of debt, transaction and transition costs, net gains and losses on mark-to-market adjustments on CVRs and derivative assets and liabilities, and net non-cash gains and losses on foreign currency translation, all of which may be highly variable, difficult to predict and of a size that could have substantial impact on the company's reported results of operations for a period.  It is for this reason that the company cannot provide without unreasonable effort a quantitative reconciliation to the most directly comparable GAAP measures for its 2019 financial guidance regarding non-GAAP adjusted EBITDA from continuing operations and non-GAAP adjusted earnings per share from continuing operations. Management uses the non-GAAP measures in this release internally for evaluation of the performance of the business, including the allocation of resources and the evaluation of results relative to employee performance compensation targets.  Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plans,” “intend,” “could,” “may,” “will,” “believe,” “estimate,” “continue,” “guidance,” “future,” other words of similar meaning and the use of future dates. Forward-looking statements in this release include, but are not limited to, statements about the company’s anticipated financial results for 2019, including net sales, adjusted EBITDA from continuing operations and adjusted earnings per share from continuing operations, anticipated continued strong shoulder sales growth and accelerating adoption of our BLUEPRINT enabling technology, the anticipated success of Cartiva’s SCI and its contribution to growth for our U.S. lower extremities business, the upcoming launch of our REVIVE revision shoulder system, strong execution and new product launches during 2019 and new long-term financial targets. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Each forward-looking statement contained in this release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, failure to achieve anticipated financial results for 2019 or long-term financial targets, failure to achieve the anticipated financial benefits of the Cartiva acquisition, unanticipated clinical performance issues with our products (including Cartiva products) or the introduction of competitive products with clinical performance attributes that are superior to our products (including Cartiva products), failure to achieve wide market acceptance of our products (including Cartiva products) due to clinical, regulatory, cost, reimbursement or other issues, delay or failure to drive U.S. lower extremities or biologics sales to anticipated levels; continued supply constraints; actual or contingent liabilities; adverse effects of diverting resources and attention to providing transition services to the purchaser of the large joints business; the adequacy of the company’s capital resources and need for additional financing; the timing of regulatory approvals and introduction of new products; physician acceptance, endorsement, and use of new products; failure to achieve the anticipated commercial sales of AUGMENT® Bone Graft and other new products; the effect of regulatory actions, changes in and adoption of reimbursement rates; product liability claims and product recalls; pending and threatened litigation; risks associated with the metal-on-metal master settlement agreements; ability to obtain the additional insurance proceeds; risks associated with international operations and expansion; fluctuations in foreign currency exchange rates; other business effects, including the effects of industry, economic or political conditions outside of the company’s control; reliance on independent distributors and sales agencies; competitor activities; changes in tax and other legislation; and the risks identified under the heading “Risk Factors” in Wright’s Annual Report on Form 10-K for the year ended December 31, 2017 and subsequent Quarterly Reports on Form 10-Q previously filed with the SEC and Wright’s Annual Report on Form 10-K for the year ended December 30, 2018 to be filed by Wright with the SEC. Investors should not place considerable reliance on the forward-looking statements contained in this release. Investors are encouraged to read Wright’s filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this release speak only as of the date of this release, and Wright undertakes no obligation to update or revise any of these statements. Wright’s business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.
           

--Tables Follow--

 


Wright Medical Group N.V.
Condensed Consolidated Statements of Operations
 (dollars in thousands, except per share data--unaudited)

  Three months ended   Fiscal year ended
  December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Net sales $ 238,147     $ 217,602     $ 836,190     $ 744,989  
Cost of sales 49,149     47,278     180,153     160,947  
Gross profit 188,998     170,324     656,037     584,042  
Operating expenses:              
Selling, general and administrative 160,664     133,149     577,961     525,222  
Research and development 16,749     13,144     59,142     50,115  
Amortization of intangible assets 7,699     6,822     26,730     28,396  
Total operating expenses 185,112     153,115     663,833     603,733  
Operating income (loss) 3,886     17,209     (7,796 )   (19,691 )
Interest expense, net 20,004     19,132     80,247     74,644  
Other expense (income), net 6,148     (1,305 )   81,797     5,570  
Loss from continuing operations before income taxes (22,266 )   (618 )   (169,840 )   (99,905 )
Provision (benefit) for income taxes 681     (27,470 )   (536 )   (34,968 )
Net (loss) income from continuing operations $ (22,947 )   $ 26,852     $ (169,304 )   $ (64,937 )
(Loss) income from discontinued operations, net of tax $ (10,821 )   $ 2,281     $ (201 )   $ (137,661 )
Net (loss) income $ (33,768 )   $ 29,133     $ (169,505 )   $ (202,598 )
               
Net (loss) income from continuing operations per share, basic $ (0.18 )   $ 0.26     $ (1.50 )   $ (0.62 )
Net (loss) income from continuing operations per share, diluted $ (0.18 )   $ 0.25     $ (1.50 )   $ (0.62 )
               
Net (loss) income per share, basic $ (0.27 )   $ 0.28     $ (1.51 )   $ (1.94 )
Net (loss) income per share, diluted $ (0.27 )   $ 0.27     $ (1.51 )   $ (1.94 )
               
Weighted-average number of shares outstanding-basic 125,323     105,195     112,592     104,531  
Weighted-average number of shares outstanding-diluted 125,323     106,578     112,592     104,531  
 


Wright Medical Group N.V.
Consolidated Net Sales Analysis
(dollars in thousands--unaudited)

  Three months ended
  December 30, 2018   December 31, 2017
  Legacy Wright   Standalone Cartiva   Wright Medical
Group N.V.
  Wright Medical
Group N.V.
U.S.              
Lower extremities $ 67,679     $ 9,167     $ 76,846     $ 66,816  
Upper extremities 78,151         78,151     71,685  
Biologics 24,024         24,024     21,814  
Sports med & other 2,584         2,584     2,242  
Total U.S. $ 172,438     $ 9,167     $ 181,605     $ 162,557  
               
International              
Lower extremities $ 15,922     $ 319     $ 16,241     $ 16,101  
Upper extremities 30,048         30,048     28,093  
Biologics 7,369         7,369     6,784  
Sports med & other 2,884         2,884     4,067  
Total International $ 56,223     $ 319     $ 56,542     $ 55,045  
               
Global              
Lower extremities $ 83,601     $ 9,486     $ 93,087     $ 82,917  
Upper extremities 108,199         108,199     99,778  
Biologics 31,393         31,393     28,598  
Sports med & other 5,468         5,468     6,309  
Total net sales $ 228,661     $ 9,486     $ 238,147     $ 217,602  


  Fiscal year ended
  December 30, 2018   December 31, 2017
  Legacy Wright   Standalone Cartiva   Wright Medical
Group N.V.
  Wright Medical
Group N.V.
U.S.              
Lower extremities $ 241,568     $ 9,167     $ 250,735     $ 228,044  
Upper extremities 281,314         281,314     239,965  
Biologics 83,077         83,077     78,361  
Sports med & other 8,412         8,412     8,141  
Total U.S. $ 614,371     $ 9,167     $ 623,538     $ 554,511  
               
International              
Lower extremities $ 60,430     $ 319     $ 60,749     $ 58,473  
Upper extremities 114,460         114,460     94,699  
Biologics 25,757         25,757     22,276  
Sports med & other 11,686         11,686     15,030  
Total International $ 212,333     $ 319     $ 212,652     $ 190,478  
               
Global              
Lower extremities $ 301,998     $ 9,486     $ 311,484     $ 286,517  
Upper extremities 395,774         395,774     334,664  
Biologics 108,834         108,834     100,637  
Sports med & other 20,098         20,098     23,171  
Total net sales $ 826,704     $ 9,486     $ 836,190     $ 744,989  


Wright Medical Group N.V.
Supplemental Net Sales Information
(unaudited)

    Three months ended December 30, 2018 net sales growth/(decline)
    U.S. 
as 
reported

  Int'l
constant
currency

  Int'l
as 
reported

  Global
constant
currency

  Global 
as 
reported

Product line                              
Lower extremities   15 %   4 %   1 %   13 %   12 %
Upper extremities   9 %   11 %   7 %   10 %   8 %
Biologics   10 %   11 %   9 %   10 %   10 %
Sports med & other   15 %   (27 %)   (29 %)   (12 %)   (13 %)
Total net sales   12 %   6 %   3 %   10 %   9 %


    Fiscal year ended December 30, 2018 net sales growth/(decline)
    U.S. 
as 
reported

  Int'l
constant
currency

  Int'l
as 
reported

  Global
constant
currency

  Global 
as 
reported

Product line                              
Lower extremities   10 %   2 %   4 %   8 %   9 %
Upper extremities   17 %   18 %   21 %   17 %   18 %
Biologics   6 %   16 %   16 %   8 %   8 %
Sports med & other   3 %   (25 %)   (22 %)   (15 %)   (13 %)
Total net sales   12 %   9 %   12 %   12 %   12 %





Wright Medical Group N.V.
Reconciliation of Adjusted Non-GAAP Earnings Per Share to Net (Loss) Income from Continuing Operations Per Share
 (dollars in thousands, except per share data--unaudited)

  Three months ended   Fiscal year ended
  December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Net (loss) income from continuing operations, as reported $ (22,947 )   $ 26,852     $ (169,304 )   $ (64,937 )
Weighted-average diluted shares outstanding 125,323     106,578     112,592     104,531  
Net (loss) income from continuing operations per share, as reported (0.18 )   0.25     (1.50 )   (0.62 )
Reconciling items:              
Inventory step-up amortization 352         352      
Non-cash interest expense on convertible notes 1 12,573     11,746     49,186     45,489  
Non-cash loss on extinguishment of debt 2         39,935      
Derivatives mark-to-market adjustments 2 1,591     (634 )   35,934     (4,797 )
Transaction and transition costs 7,826     2,915     12,013     12,400  
Incentive and indirect tax projects 3     (9,774 )       (9,774 )
Foreign currency translation expense 2 338         3,232      
CVR mark-to-market adjustments 2 3,224     (1,401 )   140     5,320  
Contingent consideration fair value adjustment 2 683     (228 )   1,789     81  
Tax provision due to a change in judgment regarding our ability to realize certain deferred tax assets 4 2,675         2,675      
Tax benefit related to realizability of deferred tax assets as a result of the Cartiva acquisition 4 (3,614 )       (3,614 )    
Tax law reform 4     (8,255 )       (8,255 )
Tax benefit related to realizability of net operating losses 4     (16,037 )       (24,965 )
U.S. tax provision (benefit) resulting from income from discontinued operations 4 3,774         (193 )    
Tax effect of reconciling items 5 277     (1,728 )   1,242     (1,798 )
Non-GAAP net income (loss) from continuing operations, as adjusted $ 6,752     $ 3,456     $ (26,613 )   $ (51,236 )
Add back amortization of intangible assets 7,699     6,822     26,730     28,396  
Adjusted non-GAAP earnings $ 14,451     $ 10,278     $ 117     $ (22,840 )
Adjusted non-GAAP weighted-average diluted shares outstanding 6 127,202     106,578     113,959     104,531  
Adjusted non-GAAP earnings per share $ 0.11     $ 0.10     $ 0.00     $ (0.22 )

_______________________________

1          Impacting interest expense, net.
2          Impacting other expense (income), net.
3          Incentive and indirect tax projects include $0.6 million of other income and $0.2 million of interest income.
4          Impacting provision (benefit) from income taxes.
5          Determined based upon the effective tax rate in the jurisdiction in which the expense was incurred.
6          Adjusted non-GAAP weighted-average diluted shares outstanding includes common stock equivalents of 1.9 million and 1.4 million for the three and twelve months ended December 30, 2018, based on the income position of our adjusted non-GAAP earnings.




Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted EBITDA to Net (Loss) Income from Continuing Operations
 (dollars in thousands--unaudited)

  Three months ended   Fiscal year ended
  December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Net (loss) income from continuing operations $ (22,947 )   $ 26,852     $ (169,304 )   $ (64,937 )
Interest expense, net 20,004     19,132     80,247     74,644  
Provision (benefit) for income taxes 681     (27,470 )   (536 )   (34,968 )
Depreciation 16,511     14,708     59,497     56,832  
Amortization 7,699     6,822     26,730     28,396  
Non-GAAP EBITDA $ 21,948     $ 40,044     $ (3,366 )   $ 59,967  
Reconciling items impacting EBITDA:              
Non-cash share-based compensation expense 7,784     5,262     26,120     19,393  
Other expense (income), net 6,148     (1,305 )   81,797     5,570  
Inventory step-up amortization 352         352      
Transaction and transition costs 7,826     2,915     12,013     12,400  
Incentive and indirect tax projects     (8,965 )       (8,965 )
Non-GAAP adjusted EBITDA $ 44,058     $ 37,951     $ 116,916     $ 88,365  
Net sales from continuing operations 238,147     217,602     836,190     744,989  
Non-GAAP adjusted EBITDA margin 18.5 %   17.4 %   14.0 %   11.9 %
 
 
 

Wright Medical Group N.V.
Reconciliation of Non-GAAP Adjusted Gross Margins to Gross Margins from Continuing Operations
 (dollars in thousands--unaudited)

  Three months ended   Fiscal year ended
  December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Gross profit from continuing operations, as reported $ 188,998     $ 170,324     $ 656,037     $ 584,042  
Gross margins from continuing operations, as reported 79.4 %   78.3 %   78.5 %   78.4 %
Reconciling items impacting gross profit:              
Inventory step-up amortization 352         352      
Transaction and transition costs 801     1,100     4,421     3,095  
Non-GAAP gross profit from continuing operations, as adjusted $ 190,151     $ 171,424     $ 660,810     $ 587,137  
Net sales from continuing operations 238,147     217,602     836,190     744,989  
Non-GAAP adjusted gross margins from continuing operations 79.8 %   78.8 %   79.0 %   78.8 %
 
 
 

Wright Medical Group N.V.
Reconciliation of Other Non-GAAP Financial Measures to Other As Reported Results
 (dollars in thousands--unaudited)

  Three months ended   Fiscal year ended
  December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Net sales $ 238,147     $ 217,602     $ 836,190     $ 744,989  
               
Selling, general and administrative expense, as reported $ 160,664     $ 133,149     $ 577,961     $ 525,222  
Selling, general and administrative expense as a percentages of net sales, as reported 67.5 %   61.2 %   69.1 %   70.5 %
Reconciling items impacting selling, general and administrative expense:              
Transaction and transition costs - selling, general and administrative 7,025     1,746     7,592     9,014  
Incentive and indirect tax projects     (8,965 )       (8,965 )
Selling, general and administrative expense, as adjusted $ 153,639     $ 140,368     $ 570,369     $ 525,173  
Selling, general and administrative expense as a percentage of net sales, as adjusted 64.5 %   64.5 %   68.2 %   70.5 %
               
Research & development expense, as reported $ 16,749     $ 13,144     $ 59,142     $ 50,115  
Research & development expense as a percentages of net sales, as reported 7.0 %   6.0 %   7.1 %   6.7 %
Reconciling items impacting research & development expense:              
Transaction and transition costs - research & development     69         291  
Research & development expense, as adjusted $ 16,749     $ 13,075     $ 59,142     $ 49,824  
Research & development expense as a percentage of net sales, as adjusted 7.0 %   6.0 %   7.1 %   6.7 %
 
 
 


Wright Medical Group N.V.
Condensed Consolidated Balance Sheets
(dollars in thousands--unaudited)

  December 30, 2018   December 31, 2017
Assets      
Current assets:      
Cash and cash equivalents $ 191,351     $ 167,740  
Accounts receivable, net 141,019     130,610  
Inventories 180,690     168,144  
Prepaid expenses and other current assets 90,172     100,400  
Total current assets 603,232     566,894  
       
Property, plant and equipment, net 224,929     212,379  
Goodwill and intangible assets, net 1,551,286     1,164,663  
Other assets 314,954     184,788  
Total assets $ 2,694,401     $ 2,128,724  
       
Liabilities and shareholders' equity      
Current liabilities:      
Accounts payable $ 48,359     $ 41,831  
Accrued expenses and other current liabilities 217,081     314,558  
Current portion of long-term obligations 201,686     58,906  
Total current liabilities 467,126     415,295  
Long-term obligations 913,441     836,208  
Other liabilities 381,375     288,525  
Total liabilities 1,761,942     1,540,028  
       
Shareholders' equity 932,459     588,696  
Total liabilities and shareholders' equity $ 2,694,401     $ 2,128,724  

Investors & Media: 

Julie D. Dewey                                                                                                         
Sr. Vice President, Chief Communications Officer
Wright Medical Group N.V.
(901) 290-5817
julie.dewey@wright.com

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