Investor Relations

Press Releases

<< Back Printer Friendly Version View printer-friendly version
Conformis Reports Fourth Quarter and Year End 2019 Financial Results

BILLERICA, Mass., March 02, 2020 (GLOBE NEWSWIRE) -- Conformis, Inc. (NASDAQ:CFMS), announced today financial results for the fourth quarter and year ended December 31, 2019.

Q4 Summary

  • Total revenue of $19.9 million, down 10% year-over-year on a reported basis and 9% on a constant currency basis
  • Product revenue of $19.7 million, down 10% year-over-year on a reported and constant currency basis
    • U.S. product revenue of $17.2 million, down 11% year-over-year
    • Rest-of-world product revenue of $2.5 million, up 0.5% year-over-year on a reported basis and 4% on a constant currency basis
  • Royalty revenue of $0.2 million, up 9% year-over-year
  • Gross margin of 49%, flat year-over-year

2019 Summary

  • Total revenue of $77.4 million, down 14% year-over-year on a reported basis, including a royalty settlement of $10.5 million in the third quarter of 2018, and 13% on a constant currency basis
  • Product revenue of $76.6 million, down 3% year-over-year on a reported basis and 2% on a constant currency basis
    • U.S. product revenue of $67.2 million, down 1% year-over-year
    • Rest-of-world product revenue of $9.5 million, down 10% year-over-year on a reported basis and 6% on a constant currency basis
  • Royalty revenue of $0.8 million, down 93% year-over-year, as a result of a one-time royalty settlement of $10.5 million in the third quarter of 2018; excluding the settlement, royalty revenue was up 18% year-over-year.
  • Gross margin of 47%, a decrease of 700 basis points year-over-year due to the royalty settlement in the third quarter of 2018; excluding the royalty settlement, gross margin was flat year-over-year.

2020 Target Revenue Growth Percentage

  • Conformis expects product revenue growth for 2020 to be in the range of 3% - 6%

"The revenue results we are reporting today are consistent with the results reported in our January 14 preliminary announcement. We are encouraged to see a return to growth in our OUS business for the quarter, as well as a sequential improvement in our gross margin.” said Mark Augusti, President and Chief Executive Officer. “In addition, we are proud of the recent announcement regarding our Orthopaedic Data Evaluation Panel (ODEP) 5A rating. The ODEP awarded the Conformis iTotal® CR knee replacement system a '5A' rating based on our strong evidence of implant performance over five years, including low revision rates as indicated in the UK’s National Joint Registry.”

  Three Months Ended
December 31,
Increase/(decrease)
($, in thousands) 2019 2018
Change

Change

Change
        (as reported) (constant currency)
United States $ 17,225   $ 19,410   $ (2,185 )   (11 ) % (11 ) %
Rest of world   2,506     2,494     12       % 4   %
Product revenue   19,731     21,904     (2,173 )   (10 ) % (10 ) %
Royalty revenue   158     145     13     9   % 9   %
Total revenue $ 19,889   $ 22,049   $ (2,160 )   (10 ) % (9 ) %

Fourth Quarter 2019 Financial Results

Total revenue for the three-month period ended December 31, 2019 decreased $2.2 million to $19.9 million, or 10% year-over-year on a reported basis and 9% on a constant currency basis. Total revenue in the fourth quarter of 2019 and 2018 includes royalty revenue of $0.2 million and $0.1 million, respectively, related to patent license agreements.

Product revenue decreased $2.2 million to $19.7 million, or 10% year-over-year on a reported and constant currency basis. U.S. product revenue decreased $2.2 million to $17.2 million, or 11% year-over-year, and rest-of-world product revenue was $2.5 million, flat year-over-year on a reported basis and up 4% on a constant currency basis. Product revenue from sales of iTotal PS decreased $0.5 million to $7.3 million or 6% year-over-year on a reported and constant currency basis. Product revenue from sales of iTotal CR, iDuo and iUni decreased $1.7 million to $11.8 million, or 13% year-over-year on a reported basis and 12% on a constant currency basis. Conformis Hip System sales in the fourth quarter of 2019 were $0.6 million, which were all in the United States.

Total gross profit decreased $1.2 million to $9.7 million, or 49% of revenue, in the fourth quarter of 2019, compared to $10.9 million, or 49% of revenue, in the fourth quarter of 2018. Margin was flat year-over-year.

Total operating expenses decreased $3.8 million to $15.5 million, or 20% year-over-year. This decrease in expenses was driven by reductions in personnel costs and marketing programs and as part of a plan announced at the end of 2018 to reduce cash burn in 2019. In addition, selling costs were lower due to the decrease in revenue.

Net loss was $5.4 million, or $0.08 per basic share, in the fourth quarter of 2019, compared to a net loss of $9.9 million, or $0.16 per basic share, for the same period last year. Net loss in the fourth quarter of 2019 included foreign currency exchange income of $0.9 million compared to foreign currency exchange expense of $0.6 million in the same period last year. Net loss per basic share calculations assume weighted average basic shares outstanding of 65.5 million for the fourth quarter of 2019, compared to 60.8 million for the same period last year.

  Twelve Months Ended December 31, Increase/(decrease)
($, in thousands) 2019   2018   $
Change
  %
Change
%
Change
                    (as reported) (constant currency)
United States $ 67,151     $ 68,062     $ (911 )   (1 ) % (1 ) %
Rest of world 9,498     10,565     (1,067 )   (10 ) % (6 ) %
Product revenue 76,649     78,627     (1,978 )   (3 ) % (2 ) %
Royalty revenue 780     11,162     (10,382 )   (93 ) % (93 ) %
Total revenue $ 77,429     $ 89,789     $ (12,360 )   (14 ) % (13 ) %

Fiscal Year 2019 Financial Results

Total revenue for the twelve-month period ended December 31, 2019 decreased $12.4 million to $77.4 million, or 14% year-over-year on a reported basis and 13% on a constant currency basis. Total revenue includes royalty revenue of $0.8 million for the year ended 2019 and $11.2 million for the year ended 2018 related to patent license agreements. The decrease in royalty revenue is primarily due to the royalty settlement of $10.5 million from Smith & Nephew in the third quarter of 2018.

Product revenue decreased $2.0 million to $76.6 million, or 3% year-over-year on a reported basis and 2% on a constant currency basis. U.S. product revenue decreased $0.9 million to $67.2 million, or 1% year-over-year, and rest-of-world product revenue decreased $1.1 million to $9.5 million, or 10% year-over-year on a reported basis and 6% on a constant currency basis. Product revenue from sales of iTotal PS increased $2.7 million to $28.5 million or 10% year-over-year on a reported and 11% on a constant currency basis. Product revenue from sales of iTotal CR, iDuo and iUni decreased $5.9 million to $46.1 million, or 11% year-over-year on a reported and constant currency basis. Conformis Hip System sales for 2019 were $2.0 million, which were all in the United States.

Total gross profit decreased $11.7 million to $36.7 million, or 47% of revenue, in 2019, compared to $48.5 million, or 54% of revenue, in 2018. This 700 basis point decrease in gross margin year-over-year was driven by the $10.5 million royalty settlement in the third quarter of 2018.

Total operating expenses decreased $25.3 million to $61.9 million, or 29% year-over-year. Of this decrease in expenses, $13.7 million was driven by reductions in personnel costs, marketing programs and patent litigation expense as part of a plan announced at the end of 2018 to reduce cash burn in 2019, and $3.0 million was driven by variable costs such as expenses related to commission and revenue share. The remaining $8.6 million reduction in expense was due to the third quarter of 2018 non-cash write-off of $1.9 million of unused manufacturing equipment and a non-cash write-off of $6.7 million related to impairment of goodwill.

Net loss was $28.5 million, or $0.44 per basic share for 2019, compared to a net loss of $43.4 million, or $0.74 per basic share, for 2018. Net loss included foreign currency exchange expense of $0.7 million in 2019, compared to foreign currency exchange expense of $1.9 million in 2018. Net loss per basic share calculations assume weighted average basic shares outstanding of 64.1 million for 2019, compared to 58.9 million for 2018.

As of December 31, 2019, cash and cash equivalents and investments totaled $26.4 million, compared to $23.6 million as of December 31, 2018.

Note on Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain information regarding the Company's financial results or projected financial results on a non-GAAP "constant currency basis." This information estimates the impact of changes in foreign currency rates on the translation of the Company's current or projected future period financial results as compared to the applicable comparable period. This impact is derived by taking the adjusted current or projected local currency results and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable period. It does not include any other effect of changes in foreign currency rates on the Company's results or business. Non-GAAP information is not a substitute for, and is not superior to, information presented on a GAAP basis. Company management uses these non-GAAP results internally to measure operational performance.

Conference Call

As previously announced, Conformis will conduct a webcast today at 4:30 PM Eastern Time. Management will discuss financial results and strategic matters. The webcast will be live at https://edge.media-server.com/mmc/p/4n3s4un4 and at the investor relations section of the company's website at ir.conformis.com.

The online archive of the webcast will be available on the Company's website for 30 days.

About Conformis, Inc.

Conformis is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture, and sell joint replacement implants that are individually sized and shaped, which we refer to as personalized, individualized, or sometimes as customized, to fit each patient's unique anatomy. Conformis offers a broad line of sterile, personalized knee and hip implants and single-use instruments delivered to hospitals. In clinical studies, Conformis iTotal CR knee replacement system demonstrated superior clinical outcomes, including better function and greater patient satisfaction, compared to traditional, off-the-shelf implants. Conformis owns or exclusively in-licenses issued patents and pending patent applications that cover personalized implants and patient-specific instrumentation for all major joints.

For more information, visit www.conformis.com. To receive future releases in e-mail alerts, sign up at http://ir.conformis.com/.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this press release about our future expectations, plans and prospects, including statements about the anticipated timing of our product launches, and our financial position and results, total revenue, product revenue, gross margin, operations and growth, as well as other statements containing the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," or "would" and similar expressions, constitute forward-looking statements within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. We may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual financial results could differ materially from the projections disclosed in the forward-looking statements we make as a result of a variety of risks and uncertainties, including risks related to our estimates and expectations regarding our revenue, gross margin, expenses, revenue growth and other results of operations; and the other risks and uncertainties described in the "Risk Factors" sections of our public filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent our views as of the date hereof. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

CONFORMIS, INC. AND SUBSIDIARIES  
Consolidated Statements of Operations  
(in thousands, except share and per share data)  
             
  Three Months Ended December 31,   Twelve Months Ended December 31,
  2019 2018   2019 2018
    (unaudited)     (unaudited) 
           
Revenue                                  
Product $ 19,731     $ 21,904       $ 76,649     $ 78,627    
Royalty 158     145       780     11,162    
Total revenue 19,889     22,049       77,429     89,789    
Cost of revenue 10,233     11,181       40,692     41,304    
Gross profit 9,656     10,868       36,737     48,485    
                                   
Operating expenses                                  
Sales and marketing 7,283     9,682       28,514     38,955    
Research and development 3,055     3,458       12,457     16,869    
General and administrative 5,112     6,098       20,895     24,622    
Goodwill impairment               6,731    
Total operating expenses 15,450     19,238       61,866     87,177    
Loss from operations (5,794 )   (8,370 )     (25,129 )   (38,692 )  
                                   
Other income and expenses                                  
Interest income 74     184       330     659    
Interest expense (579 )   (1,067 )     (2,942 )   (3,356 )  
Foreign currency exchange transaction (loss) income 876     (630 )     (692 )   (1,915 )  
Total other (expenses) income, net 371     (1,513 )     (3,304 )   (4,612 )  
Loss before income taxes (5,423 )   (9,883 )     (28,433 )   (43,304 )  
Income tax provision 10     (13 )     45     61    
                                 
Net loss $ (5,433 )   $ (9,870 )     $ (28,478 )   $ (43,365 )  
                                   
Net loss per share                                  
Basic and diluted $ (0.08 )   $ (0.16 )     $ (0.44 )   $ (0.74 )  
Weighted average common shares outstanding                                  
Basic and diluted 65,520,222     60,848,875       64,122,455     58,886,333    


CONFORMIS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
       
  December 31, 2019   December 31, 2018
Assets  (unaudited)    
Current Assets      
Cash and cash equivalents $ 26,394       $ 16,380  
Investments       7,245  
Accounts receivable, net 11,066       13,244  
Royalty receivable 165       145   
Inventories 12,074       9,534  
Prepaid expenses and other current assets 2,815       1,408  
Total current assets 52,514       47,956  
Property and equipment, net 13,356       14,439  
Operating lease right-of-use assets 5,853       —   
Other Assets      
Restricted cash 462       462  
Intangible assets, net       109  
Other long-term assets 211       17  
Total assets $ 72,396       $ 62,983  
       
Liabilities and stockholder's equity      
Current liabilities      
Accounts payable $ 6,920       $ 3,445  
Accrued expenses 7,135       7,930  
Operating lease liabilities 1,469          
Advance on research and development 2,331          
Total current liabilities 17,855       11,375  
Other long-term liabilities 1,500       616  
Contract liability 12,000          
Long-term debt, less debt issuance costs 19,623       14,792  
Operating lease liabilities 5,071          
Total liabilities 56,049       26,783  
Commitments and contingencies          
Stockholders' equity      
Preferred stock, $0.00001 par value:      
Authorized: 5,000,000 shares authorized at December 31, 2019 and December 31, 2018; no shares issued and outstanding as of December 31, 2019 and December 31, 2018          
Common stock, $0.00001 par value:      
Authorized: 200,000,000 shares authorized at December 31, 2019 and December 31, 2018; 70,427,400 and 65,290,879 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively 1         1  
Additional paid-in capital 521,356       513,336  
Accumulated deficit (504,145     (475,667
Accumulated other comprehensive loss (865     (1,470
)
Total stockholders' equity 16,347       36,200  
Total liabilities and stockholders' equity $ 72,396       $ 62,983  

 

CONTACT:
Investor Relations
ir@conformis.com
(781) 374-5598

Form fit function.png

Source: Conformis, Inc.