Embla Medical (EMBLA) Q2 2017 earnings summary

Executive summary

• Q2 net sales were $144.9m, up 6% in local currency and 3% organically; Easter timing reduced selling days. H1 organic growth was 5%.

• Strong prosthetics growth and higher operating cash generation were offset by lower gross and adjusted EBITDA margins, FX headwinds and acquisition costs.

Financial highlights

• Gross profit was $89.2m versus $89.4m; gross margin was 62% versus 64%, affected by FX, manufacturing costs and product mix.

• Adjusted EBITDA before special items was $27m, or 19% of sales, versus $30m and 22%; Q2 included $2.6m of one-time costs, primarily for Medi Prosthetics.

• EBIT was $19.0m versus $19.9m; net profit was $13.2m versus $14.6m, and diluted EPS was 3.1 US cents versus 3.3 cents.

• H1 net sales were $275.9m versus $253.2m, up 11% in local currency and 5% organically; H1 net profit was $23.4m versus $23.5m.

Outlook and guidance

• FY17 sales growth guidance remained 7%-8% in local currency, including organic growth of 4%-5%.

• FY17 adjusted EBITDA margin guidance was reduced from 19%-20% to 18%-19%; FX at prevailing rates was expected to lower FY margin by ~100 bps versus 2016.

• FY17 capex guidance was ~4% of sales and effective tax rate guidance ~26%; guidance assumed no major operating-currency fluctuations from 24 July rates.

• Touch Bionics restructuring was expected to save ~$1m in H2 2017 and ~$3m annually from 2018; Medi Prosthetics synergies were expected in H2.