Embla Medical (EMBLA) Q2 2018 earnings summary

Executive summary

• Q2 sales were $158m, up 9% in USD and 6% organically; H1 sales were $300m, up 4% organically.

• Q2 EBITDA was $32m at a 20% margin, and net profit rose 49% to $19.7m; high-end products supported growth while US Bracing and Supports remained soft.

Financial highlights

• Q2 gross profit was $99m versus $89m; gross margin rose to 63% from 62%. H1 gross profit was $188m, also 63% of sales.

• Q2 EBITDA before special items was $32m versus $27m, with a 20% margin versus 19%; H1 EBITDA before special items was $52m versus $47m.

• Q2 EBIT was $26m versus $19m; net profit was $19.7m versus $13.2m, and diluted EPS was 4.6 cents versus 3.1 cents.

• H1 net profit was $30m versus $23m, up 28%; H1 diluted EPS was 7.0 cents versus 5.4 cents.

• Q2 operating cash generated was $23m, unchanged YoY; H1 operating cash generated was $29m versus $33m.

Outlook and guidance

• FY 2018 guidance was unchanged: 4%-5% organic sales growth, ~19% EBITDA margin before special items, CAPEX ~4% of sales and effective tax rate of 23%-24%.

• Guidance assumes no major currency moves from 24 July 2018 closing rates; FX at current rates was expected to modestly support 2018 EBITDA margin YoY.

• CAPEX was expected to decline in H2 after elevated H1 spending on efficiency initiatives, leasehold improvements and CRM integration.