Embla Medical (EMBLA) Q3 2017 earnings summary

Executive summary

• Q3 sales were USD 139M, up 5% in local currency and 3% organically; adjusting for fewer working days, organic growth was 4%. 9M sales were USD 415M, up 9% in local currency and 4% organically.

• Prosthetics led growth, while flat Bracing & Supports sales and currency pressure on profitability tempered results.

Financial highlights

• Q3 gross profit was USD 87M, with gross margin steady at 63%; adjusted EBITDA was USD 25M versus USD 24M, and reported EBITDA was USD 22M.

• Q3 net profit was USD 11M versus USD 13M; diluted EPS was 2.6 US cents versus 3.0.

• 9M adjusted EBITDA was USD 73M, or 17% of sales, up 8% in local currency; net profit was USD 35M.

• 9M operating cash generated was USD 56M versus USD 60M; Q3 cash generated was USD 23M versus USD 27M, reflecting higher working-capital investment and slightly lower operating profit.

Outlook and guidance

• FY2017 guidance was unchanged: local-currency sales growth of 7%–8%, organic growth of 4%–5%, and EBITDA margin before special items of 18%–19%.

• FY2017 capex was expected at ~4% of sales and the effective tax rate at ~26%; guidance assumed no major currency fluctuations from 23 October closing rates.

• At current FX rates, 2017 EBITDA margin was expected to be negatively affected by ~90 bps versus 2016.

• Touch Bionics restructuring was expected to reduce full-year operating expenses by ~USD 3M, including ~USD 1M in H2 2017, with the full-year effect in 2018.