The company is reporting solid first-quarter earnings, with revenue rising 4 percent to $69.9 million and delivered double-digit revenue growth across its direct business, including its spine, surgical specialties and cardiothoracic segments. RTI also reported continued strong performance in its International business, with revenue growth in Europe and Asia-Pacific. The Commercial/other business continues to see signs of stabilization despite a decline in revenues.
Under the leadership of Camille Farhat, who assumed the CEO position on March 15, RTI’s management is implementing a series of actions to return the company to sustainable profitable growth. These initiatives include improving execution, reducing costs and directing resources to those businesses, products and markets with the greatest growth potential. The initial phase of the company’s restructuring program remains on target to yield annualized savings of approximately $8 million, starting in the second quarter.
“I am pleased that our initial strategic initiatives are taking hold, as evidenced by two consecutive quarters of improving performance. While these results are a positive sign, we still have significant work ahead of us,” said Farhat. “We are in the early stages of what will be a long-term transformation of the company. Our current focus is on cost reduction, disciplined execution and targeted innovation to better position RTI’s operating platform for growth and profitability.”
RTI reported a net loss applicable to common shares of $2.8 million in the first quarter of 2017, or 5 cents per fully diluted common share, primarily due to a previously disclosed pre-tax charge for severance-related expenses totaling $4.4 million. Excluding these charges, adjusted net income applicable to common shares was $139,000. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) were $6.5 million.
Domestic revenue totaled $63.3 million, an increase of 3 percent, and International revenue was $6.6 million, an increase of 8 percent when compared to the first quarter of 2016. The increase in domestic revenue was primarily due to strong performance in the domestic direct business. The increase in International revenues was mainly driven by growth in Asia, primarily in Spine, and in Europe, primarily in Biologics.
Direct revenue was $43.8 million for the first quarter of 2017, an increase of 13 percent compared to the first quarter of 2016, with double-digit growth reported in RTI’s spine, surgical specialties and cardiothoracic direct business segments. Commercial/other revenues were $26.1 million for the first quarter of 2017, a decline of 9 percent compared to the first quarter of 2016, partly due to lower orders in RTI’s OEM trauma business. Commercial/other revenues continue to stabilize on a sequential basis.
Spine sales jumped 19 percent to $20.3 million, while sports medicine and orthopedics revenue rose 3 percent to $12.9 million. Surgical specialties sales skyrocketed 75.3 percent to $1.78 million, and cardiothoracic proceeds swelled 24.3 percent to $3.2 million.
“Longer-term, we are completing a thorough evaluation of RTI, its businesses, markets and products. Although we are in the initial phases of this evaluation, there are three central themes that standout: 1) continue investment in our spine business and build scale, 2) increase investment in our commercial business to drive innovation and create new growth opportunities, and, 3) improve margins of our tissue-based implants," Farhat said. "We have a fierce dedication to meeting our customers’ needs. I am confident that we are on the right path toward setting up RTI for long-term profitable growth and improved cash flow generation.”
RTI’s focus for 2017 will remain squarely on disciplined execution, targeted innovation, and ongoing implementation of strategic actions to achieve profitable growth across each of its business lines and geographies. The company has developed its guidance based on its ongoing restructuring and operational improvement program, its current business profile and existing market conditions.
Within this context, based on first quarter results, RTI expects full year revenues for 2017 to be between $274 million and $285 million, in line with prior communication, with direct revenues anticipated to grow mid-to-high single digits on a percentage basis compared to 2016, while commercial/other revenues are expected to be relatively flat to low single-digit decline on a percentage basis.
RTI Surgical is a global surgical implant company providing surgeons with biologic, metal and synthetic implants. RTI’s implants are used in sports medicine, general surgery, spine, orthopedic, trauma and cardiothoracic procedures and are distributed in nearly 50 countries. The company is headquartered in Alachua, Fla., and has four manufacturing facilities throughout the United States and Europe.