Fourth Quarter 2020 Financial Summary
- Revenue in the fourth quarter of 2020 increased 10% year-over-year to
$32.7 million, compared to $29.8 million, due to Joint Preservation and Restoration revenue following the acquisitions of Parcus Medical, LLCand Arthrosurface, Inc., in the first quarter of 2020, offset by lower Joint Pain Management revenue as a result of the COVID environment.
- Gross margin of 51% includes a 16-point negative impact from
$5.2 millionof acquisition-related expenses.
- Net loss was
$15.7 million, or $1.10loss per share, compared to net income of $4.1 million, or $0.28per diluted share, in the prior year. Net loss this quarter included a non-cash charge for goodwill impairment offset by a reduction in the value of contingent consideration, netting to a charge of $11.9 million, or $0.84per diluted share. Adjusted net income1 for the quarter was $1.7 million, or $0.12per diluted share, compared to $6.3 million, or $0.43per diluted share, in the prior year.
- Adjusted EBITDA1 for the quarter was
$4.0 million, compared to $11.1 millionfor the prior year.
- Operating cash flow during the quarter was
$2.6 million. Cash, cash equivalents and investments totaled $98.3 million, compared to $124.8 millionas of September 30, 2020. Anika repaid the remaining $25.0 millionoutstanding under its credit facility in the fourth quarter of 2020.
Fiscal Year 2020 Financial Summary
- Revenue for 2020 increased 14% to
$130.5 millioncompared with $114.6 million, due to Joint Preservation and Restoration revenue following the acquisitions of Parcus Medical and Arthrosurface in the first quarter of 2020, partly offset by lower Joint Pain Management revenue as a result of the COVID environment.
- Gross margin of 53% includes a 13-point negative impact from
$16.9 millionof acquisition-related expenses.
- Net loss of
$24.0 million, or $1.69loss per share, compared to net income of $27.2 million, or $1.89per diluted share, in the prior year. Net loss in 2020 included a non-cash charge for goodwill impairment offset by a reduction in the value of contingent consideration, netting to a charge of $13.8 million, or $0.97per diluted share. Adjusted net income1 for the year was $10.1 million, or $0.71per diluted share, compared to $29.4 million, or $2.05per diluted share.
- Adjusted EBITDA1 was
$23.9 million, compared to $49.2 millionfor the prior year.
- Full year operating cash flow was
1 See description of non-GAAP financial information contained in this release.
“I am very proud of the Anika team and their accomplishments this year given the extraordinarily challenging market and the complicated work environment associated with the COVID pandemic,” said
2020 Business Highlights
- Successfully navigated the business through the COVID-19 pandemic with no significant disruptions delivering quality products and support for our customers and their patients
- Completed transformative acquisitions of Parcus Medical and Arthrosurface, diversifying our portfolio and expanding our market opportunity into the >
$8 billionjoint preservation market.
- Strengthened the senior leadership team and board of directors with nine new additions
- Completed the integration of the
U.S.and international commercial organizations which includes a large network of dedicated distributors
- Launched seven new joint preservation products; received 510(k) clearance for our WristMotion Total Arthroplasty System, which preserves as much natural motion as possible and could help patients avoid joint fusion
- Initiated enrollment in our pilot clinical study for Cingal in the US (our next-generation combination viscosupplement) and resumed enrollment in our clinical trial for Hyalofast for approval in the US (our hyaluronic acid based cartilage regeneration solution); we continue to sell both Cingal and Hyalofast in over 30 countries outside
the United States
Fiscal 2021 Outlook
Due to the continued uncertainty in the global market associated with the impact of the COVID-19 pandemic, the company is not providing detailed financial guidance for 2021 at this time.
Conference Call Information
Anika’s management will hold a conference call and webcast to discuss its financial results and business highlights today,
Non-GAAP Financial Information
Non-GAAP financial measures should be considered supplemental to, and not a substitute for, the Company’s reported financial results prepared in accordance with GAAP. Furthermore, the Company’s definition of non-GAAP measures may differ from similarly titled measures used by others. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, Anika strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety.
Anika presents adjusted EBITDA because management uses it as a supplemental measure in assessing the Company’s operating performance, and the Company believes that it is helpful to investors, securities analysts and other interested parties as a measure of comparative operating performance from period to period. The Company recognizes adjusted EBITDA as a commonly used measure in determining business value and as such, uses it internally to report results. It is also one of the performance metrics that determines management incentive compensation.
In 2020, adjusted EBITDA is defined by the Company as GAAP net income excluding depreciation and amortization, interest and other income (expense), income taxes, stock-based compensation expense, acquisition related costs, non-cash charges related to goodwill impairment and changes in the fair value of contingent consideration associated with the Company’s recent acquisitions as a result of the COVID pandemic, in-process research and development (IPR&D) write-offs, and product rationalization charges associated with certain non-core legacy products.
Adjusted Net Income and Adjusted EPS
In addition to adjusted EBITDA, the Company is reporting its fourth quarter 2020 results with respect to adjusted net income (net loss) and adjusted diluted Earnings (loss) per Share (EPS) with respect to adjusted net income. The Company believes that adjusted net income and adjusted diluted EPS also provide additional useful information for investors as they assess the Company’s operating performance, as they are measures that the Company evaluates regularly when assessing its own performance. Adjusted net income and adjusted diluted EPS are not calculated identically by all companies, and therefore the Company’s measurements of adjusted net income and adjusted diluted EPS may not be comparable to similarly titled measures reported by other companies. Adjusted net income is defined by the Company as GAAP net income excluding acquisition related expenses, inclusive of the impact of purchase accounting, on a tax effected basis, as well as certain IPR&D write-offs and the non-cash product rationalization charges associated with certain non-core legacy products. In the context of adjusted net income, the impact of purchase accounting includes amortization of inventory step up and intangible assets recorded as part of purchase accounting for acquisition transactions. The amortized assets contribute to revenue generation, and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions in 2020 and beyond, including in-process research and development, developed technology, customer relationships and acquired tradenames. As a result of COVID, the Company is also specifically excluding the impacts of goodwill impairment charges and changes in the fair value in contingent consideration associated with the acquisition transactions, each on a tax effected basis. Adjusted diluted EPS is defined by the Company as GAAP diluted EPS excluding acquisition related expenses and the impact of purchase accounting, each on a tax-adjusted per share basis, as well as certain IPR&D write-offs and the non-cash product rationalization charges associated with certain non-core legacy products. Again, the Company is also specifically excluding the impacts of goodwill impairment charges and changes in the fair value in contingent consideration associated with the acquisition transactions, each on a tax effected basis if applicable. The Company is reporting this financial measure to the Board of Directors in order to facilitate an appropriate assessment of the Company’s performance and the impact of the COVID pandemic.
A reconciliation of adjusted EBITDA to net income, adjusted net income to net income and adjusted diluted EPS to diluted EPS, the most directly comparable financial measures calculated and presented in accordance with GAAP, is shown in the tables at the end of this release.
This press release may contain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning the Company's expectations, anticipations, intentions, beliefs or strategies regarding the future which are not statements of historical fact, including those statements in the last sentence of the paragraph following the section captioned “Fiscal Year 2020 Financial Summary” related to potential future revenues and profitability. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks, uncertainties, and other factors. The Company's actual results could differ materially from any anticipated future results, performance, or achievements described in the forward-looking statements as a result of a number of factors including, but not limited to, (i) the Company's ability to successfully commence and/or complete clinical trials of its products on a timely basis or at all; (ii) the Company's ability to obtain pre-clinical or clinical data to support domestic and international pre-market approval applications, 510(k) applications, or new drug applications, or to timely file and receive FDA or other regulatory approvals or clearances of its products; (iii) that such approvals will not be obtained in a timely manner or without the need for additional clinical trials, other testing or regulatory submissions, as applicable; (iv) the Company's research and product development efforts and their relative success, including whether we have any meaningful sales of any new products resulting from such efforts; (v) the cost effectiveness and efficiency of the Company's clinical studies, manufacturing operations, and production planning; (vi) the strength of the economies in which the Company operates or will be operating, as well as the political stability of any of those geographic areas; (vii) future determinations by the Company to allocate resources to products and in directions not presently contemplated; (viii) the Company's ability to successfully commercialize its products, in the U.S. and abroad; (ix) the Company's ability to provide an adequate and timely supply of its products to its customers; and (x) the Company's ability to achieve its growth targets. Additional factors and risks are described in the Company's periodic reports filed with the Securities and Exchange Commission, and they are available on the SEC's website at www.sec.gov. Forward-looking statements are made based on information available to the Company on the date of this press release, and the Company assumes no obligation to update the information contained in this press release.