DJO Global Sales Slip 1.8 Percent in Q3

It was a tough (third) quarter for medtech companies.

DJO Global is the latest firm to sacrifice revenue through foreign currency fluctuations in the three months ending Sept. 26. In its most recent earnings report, the company posted a 1.8 percent net sales decrease (to $300 million) and 2.1 percent slide in adjusted EBITDA (to $68.9 million) compared with the same period last year. DJO executives blamed the dropoffs on foreign currency exchange rates, noting that Q3 sales actually rose 1.9 percent and adjusted EBITDA climbed 3.4 percent in the absence of volatile exchange rates.

The Bracing and Vascular segment gains, however, were offset by a 19.1 percent drop in Recovery Sciences segment proceeds (to $59.6 million). DJO management attributed the losses to lower Empi sales, which were impacted by a challenging coverage and reimbursement environment, changes to business processes for Empi products and a restructuring of its sales group. Stagnant growth in Chattanooga rehabilitation equipment sales also contributed to the segment’s poor performance.

“Despite the many year effort by our Empi team to stabilize this business, the Empi business has created a major revenue and EBITDA headwind for the entire company for the last four years,” DJO Global CEO Mike Mogul said. “This has hindered not only the company’s performance but as well our ability to focus and execute in faster growing businesses. We are excited about the past, current and future growth trajectory of DJO Global net of the Empi business and will be working with dispatch to execute these changes.”

Foreign exchange rates caused International segment sales to plummet 11.4 percent to $69.5 million compared with the third quarter of 2014. Excluding the impact of changes in foreign currency exchange rates, net sales rose 2.9 percent.

DJO’s Surgical Implant segment was the breakout star of the quarter, growing sales 58 percent (to $37.7 million). Bone cement products acquired from Zimmer Biomet Holdings Inc. drove revenue, as did strong demand for hip and shoulder devices. Purchased products from Zimmer Biomet contributed $10 million to the segment’s grand total. 

“Our Bracing, Surgical and International segments continue to perform well. Excluding the Recovery Sciences segment, aggregate net sales from our other business segments for the third quarter of 2015 increased by 8.7 percent compared to net sales for the third quarter of 2014,” Mogul said. “The challenging coverage and reimbursement environment, however, has continued to drive the Recovery Sciences business downward, primarily due to lower sales of Empi products. As a result of these ongoing challenges and despite our actions to improve this business over the past few years, we do not expect the sales and profitability of Empi’s products to return to acceptable levels and therefore have developed a plan to exit the Empi business over the next several months.”

The company had cash and cash equivalents of $56.7 million and available liquidity of $144.5 million under its $150 million revolving credit facility as of Sept. 26, according to the earnings report.