Embla Medical (EMBLA) Q2 2019 earnings summary

Executive summary

• Q2 sales were $179m, up 7% organically, 18% in local currency and 13% reported; H1 organic growth was 7%.

• Strong Prosthetics demand supported an increase in FY organic-growth guidance to 5%-6% from 4%-5%.

• Agreement signed to acquire College Park Industries; closing was expected later in 2019, subject to conditions and regulatory review.

Financial highlights

• Q2 gross profit was $115m and gross margin was 64%, versus $99m and 63% a year earlier; margin gains reflected product mix, savings and manufacturing scale.

• Q2 EBITDA was $42m, up 33%; margin was 24% reported and 21% excluding IFRS 16, versus 20% excluding IFRS 16 a year earlier.

• Q2 net profit rose 15% to $23m, or 13% of sales; H1 net profit rose 23% to $37m. Diluted EPS increased 15% to 5.3 US cents.

• H1 sales were $339m, up 13% reported and 7% organically.

Outlook and guidance

• FY organic sales growth guidance increased to 5%-6% from 4%-5%; Prosthetics is expected to grow above market, while Bracing and Supports is expected to track market growth.

• FY EBITDA margin before special items is guided at ~23% including IFRS 16, or ~20% excluding it; CAPEX is guided at 4%-5% of sales and the effective tax rate at 23%-24%.

• Guidance assumes the prevailing economic outlook in key markets and no major fluctuations in major operating currencies from 24 July 2019 closing rates; higher costs and new-business investment are expected in H2.

• French compression-therapy reimbursement changes were expected to stop affecting results in 2019, with growth in the business expected from 2020.