Invacare Reports Results for First Quarter 2021
Invacare Corporation (NYSE: IVC) reported a 10.2% decline in net sales for Q1 2021, totaling $196.2 million, primarily due to supply chain disruptions and pandemic-related challenges. Gross profit decreased to 27.8% of net sales, reflecting a 100 basis point drop. The operating loss was $5.7 million, a decline of $15.2 million year-over-year. Despite these challenges, the company anticipates mid-single digit net sales growth for Q2 2021 and reaffirms its full-year guidance for constant currency net sales growth, driven by strong demand and improved supply chain conditions.
- Anticipated mid-single digit constant currency net sales growth for Q2 2021.
- Healthy order book with a backlog expected to convert to net sales in the next two quarters.
- Successful completion of a debt transaction, improving financial flexibility.
- Net sales decreased by 10.2% compared to Q1 2020.
- Operating loss of $5.7 million, down $15.2 million from previous year.
- Gross profit margin shrank to 27.8%, a 100 basis point decrease.
Invacare Corporation (NYSE: IVC) ("Invacare" or the "company") today reported results for the quarter ended March 31, 2021.
Key Metrics (1Q21 versus 1Q20*)
-
Reported net sales decreased
10.2% to$196.2 million , and constant currency net sales(a), which excludes the 1Q20 Dynamic Controls divestiture, decreased14.2% .- Prior year first quarter performance was not impacted by the pandemic.
- Revenue growth in respiratory products was more than offset by lower sales of mobility and seating and lifestyle products, which continue to be impacted by the pandemic, as well as supply chain disruptions which hampered order fulfillment during the quarter.
-
Gross profit as a percent of net sales was
27.8% , a decrease of 100 basis points, attributable to unfavorable manufacturing variances due to supply chain and logistics challenges which temporarily delayed revenues and inefficiencies associated with disrupted production. -
Reported SG&A expense improved by
$2.9 million , or4.7% , and constant currency SG&A(b) improved by$5.1 million , or8.4% , driven primarily by reduced employment costs, lower commercial expenses including reduced commissions on lower net sales. -
Operating loss was
$5.7 million , a decline of$15.2 million , due to lower gross profit as a result of reduced net sales partially offset by reduced SG&A expenses.-
Prior year operating profit included a gain of
$9.6 million from the divestiture of Dynamic Controls.
-
Prior year operating profit included a gain of
-
Adjusted EBITDA(d) was
$1.5 million , a decline of$4.4 million , due to reduced gross profit on lower sales offset by lower SG&A expense. -
Free cash flow(e) usage was
$17.9 million , an increase of$5.9 million . 1Q21 usage included the funding of$8 million one-time payments related to severance costs for German plant consolidation and value added tax payments deferred from 2020, which were previously disclosed, and increases to inventory.
* Date format is quarter and year in each instance
Key Financial Results (1Q21 versus 1Q20)
(in millions USD) |
1Q21 |
|
1Q20 |
|
$ Change
|
|
% Change
|
|
Net Sales |
|
|
|
|
|
|
(10.2)% |
|
Constant Currency Net Sales (1) |
|
|
|
|
|
|
(14.2)% |
|
Gross Profit |
|
|
|
|
|
|
(13.3)% |
|
Gross Profit % of Net Sales |
|
|
|
|
|
|
(100 bps) |
|
SG&A |
|
|
|
|
|
|
|
|
Constant Currency SG&A (1) |
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
-- |
|
Adjusted EBITDA |
|
|
|
|
|
|
(74.8)% |
|
Free Cash Flow Usage |
|
|
|
|
|
|
(49.3)% |
(1) Based on 1Q20 FX rates
Executive Summary
Commenting on 1Q21 results, Matt Monaghan, chairman, president, and chief executive officer, said "We entered 2021 with strong demand for lifestyle and respiratory products and strengthening demand for mobility & seating products. We see these trends continuing into the second quarter. Despite good demand, our first quarter revenues were lower by approximately
Looking forward, I am encouraged as our healthy order book, high backlog, and early second quarter indicators demonstrate that demand remains strong, further establishing that the revenue decline in 1Q21 was temporary in nature. Based on revenues to date through April 2021 and projecting those trends for the full quarter, we anticipate constant currency net sales growth in the mid-single digit range for 2Q21 compared to the prior year. As pandemic related restrictions ease and supply chain disruptions subside, we anticipate significant improvement in our results during the second half of the year, driven by strengthening demand for our products, backlog reduction, fulfillment of pent-up demand, and increased adoption of compelling new products.
In addition, we were pleased to have opportunistically completed a debt transaction during the quarter which strengthened our balance sheet, providing a clear runway to execute our growth strategy for the next few years. As a result, we have continued confidence in our ability to achieve our previously disclosed full year guidance for net sales, Adjusted EBITDA, and free cash flow."
Commenting on the company's financial results, Kathy Leneghan, senior vice president and chief financial officer stated, "Free cash flow usage in the quarter was in line with 1Q20, with the consideration of funding one-time items as previously discussed. The company did a great job managing working capital to offset delayed sales impacted by supply chain disruptions. We also increased our financial flexibility with the issuance of new convertible notes which allowed us to retire nearly all of our 2022 debt and extend the overall debt maturity profile to 2026."
Reaffirms Full Year 2021 Guidance
The company reaffirms its financial guidance for the full year 2021 consisting of:
-
Constant currency net sales growth in the range of
4% to7% ; -
Adjusted EBITDA improvement of
41% , to$45 million ; and, -
Free cash flow of
$5 million .
The company expects restoration of access to healthcare, normalization of the global supply chain, and fulfillment of its excess order backlog, which was elevated at the end of 1Q21, will yield improved financial performance with growth in revenue, profitability and free cash flow for the year.
Based on revenue to date through April 2021 and projecting those trends for the full quarter, constant currency net sales are anticipated to increase in the mid-single digit range for 2Q21 compared to the prior year, as well as improve sequentially throughout the year. This increase is driven by positive trends in each of the segments as order intake continues to strengthen and a portion of the elevated backlog has been shipped and billed to customers. Additionally, the volume and value of mobility and seating quotes in North America are showing clear signs of improvement, a key indicator for future period growth.
1Q21 Segment Results versus 1Q20
(in millions USD) |
Net Sales |
|
Operating Income (Loss) |
||||||||||||||||||||||
|
1Q21 |
1Q20 |
Reported
|
Constant
|
|
1Q21 |
|
1Q20 |
|
% Change |
|||||||||||||||
Europe |
$ |
112.8 |
|
$ |
121.0 |
|
(6.8 |
)% |
(14.8 |
)% |
|
$ |
3.8 |
|
$ |
6.9 |
|
(44.1 |
)% |
||||||
North America |
76.0 |
|
87.0 |
|
(12.6 |
) |
(13.1 |
) |
|
(2.4 |
) |
(2.0 |
) |
(16.1 |
) |
||||||||||
All Other |
7.5 |
|
10.5 |
|
(29.0 |
) |
(16.4 |
) |
|
(5.6 |
) |
(3.6 |
) |
(58.6 |
) |
||||||||||
Globally, net sales continued to be impacted by the pandemic with public health restrictions in certain countries continuing to limit access to healthcare professionals and institutions needed for certain product selections. 1Q20 financial performance was not impacted by the pandemic. In addition, supply chain disruptions related to transportation and logistics, and parts shortages delayed receipt of components which limited conversion of orders to shipments in the quarter.
Europe - Constant currency net sales decreased
North America - Constant currency net sales decreased
All Other - Constant currency net sales in the Asia Pacific region decreased
Financial Condition
The company's cash and cash equivalents balances were
Free cash flow usage in 1Q21 was
Conference Call and Webcast
As previously announced, the company will provide a conference call and webcast for investors and other interested parties to review its first quarter 2021 financial results on Thursday, May 6, 2021 at 8:30 AM ET. Those wishing to participate in the live call should dial 888-394-8218, or for international callers 786-789-4776, and enter Conference ID 2946784. A simultaneous webcast of the call will be accessible at https://ctevents.webex.com/ctevents/onstage/g.php?MTID=e548c01978e3d9562b119968f68aae878. A copy of the webcast slide deck will be posted to www.invacare.com/investorrelations prior to the webcast.
A recording of the conference call can be accessed by dialing 888-203-1112 (U.S. and Canada) or 719-457-0820 (international callers) and entering the Conference ID Code 2946784 and PIN 8398, through May 13, 2021. An archive of the webcast presentation will be posted at www.invacare.com/investorrelations 24 hours after the call.
Upcoming Investor Events
- May 25, 2021 - UBS Global Healthcare Conference (virtual)
- June 16, 2021 - IDEAS Investor Conference (virtual)
About Invacare Corporation
Invacare Corporation (NYSE: IVC) ("Invacare" or the "company") is a leading manufacturer and distributor in its markets for medical equipment used in non-acute care settings. At its core, the company designs, manufactures and distributes medical devices that help people to move, breathe, rest, and perform essential hygiene. The company provides clinically complex medical device solutions for congenital (e.g., cerebral palsy, muscular dystrophy, spina bifida), acquired (e.g., stroke, spinal cord injury, traumatic brain injury, post-acute recovery, pressure ulcers) and degenerative (e.g., ALS, multiple sclerosis, chronic obstructive pulmonary disease (COPD), elderly, bariatric) ailments. The company's products are important parts of care for people with a wide range of challenges, from those who are active and involved in work or school each day and may need additional mobility or respiratory support, to those who are cared for in residential care settings, at home and in rehabilitation centers. The company sells its products principally to home medical equipment providers with retail and e-commerce channels, residential care operators, distributors, and government health services in North America, Europe, and Asia Pacific. For more information about the company and its products, visit Invacare's website at www.invacare.com.
This press release contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that describe future outcomes or expectations that are usually identified by words such as “will,” “should,” “could,” “plan,” “intend,” “expect,” “continue,” “forecast,” “believe,” and “anticipate” and include, for example, statements related to the expected effects on the company’s business of the COVID-19 pandemic; sales and free cash flow trends; the impact of contingency plans and cost containment actions; the company’s liquidity and working capital expectations; the company’s future financial results; and similar statements. Actual results may differ materially as a result of various risks and uncertainties, including the duration and scope of the COVID-19 pandemic, the resumption of access to healthcare, including clinics and elective care, and loosening of public health restrictions, or any reimposed restrictions on access to healthcare or tightening of public health restrictions and impact on the demand for the company’s products; the ability of the company to obtain needed raw materials and components from its suppliers; actions that governments, businesses and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps the company takes to reduce operating costs; the inability of the company to sustain profitable sales growth, achieve anticipated improvements in segment operating performance, convert high inventory or accounts receivable levels to cash or reduce its costs to maintain competitive prices for its products; lack of market acceptance of the company's new product innovations; circumstances or developments that may make the company unable to implement or realize the anticipated benefits, or that may increase the costs, of its current and planned business initiatives, such as its new product introductions, commercialization plans, additional investments in sales force and demonstration equipment, product distribution strategy in Europe, supply chain actions and global information technology outsourcing and ERP implementation activities; possible adverse effects on the company's liquidity, including the company's ability to address future debt maturities; adverse changes in government and third-party payor reimbursement levels and practices in the U.S.; adverse impacts of new tariffs or increases in commodity prices or freight and logistics costs; regulatory proceedings or the company's failure to comply with regulatory requirements or receive regulatory clearance or approval for the company's products or operations; adverse effects of regulatory or governmental inspections of the company's facilities at any time and governmental investigations or enforcement actions; exchange rate fluctuations; and those other risks and uncertainties expressed in the cautionary statements and risk factors in the company's annual report on Form 10-K, quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission. The company may not be able to predict and may have little or no control over many factors or events that may influence its future results and, except as required by law, shall have no obligation to update any forward-looking statements.
INVACARE CORPORATION AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) - (UNAUDITED) |
||||||||
(In thousands, except per share data) |
Three Months Ended |
|||||||
|
March 31 |
|||||||
|
2021 |
|
2020 |
|||||
Net sales |
$ |
196,202 |
|
|
$ |
218,440 |
|
|
Cost of products sold |
141,564 |
|
|
155,452 |
|
|||
Gross Profit |
54,638 |
|
|
62,988 |
|
|||
Selling, general and administrative expenses |
58,821 |
|
|
61,738 |
|
|||
Gain on sale of business |
— |
|
|
(9,590 |
) |
|||
Charges related to restructuring activities |
1,552 |
|
|
1,392 |
|
|||
Operating Income (Loss) |
(5,735 |
) |
|
9,448 |
|
|||
Loss on debt extinguishment including debt finance charges and fees |
709 |
|
|
— |
|
|||
Interest expense - net |
5,730 |
|
|
6,616 |
|
|||
Earnings (Loss) Before Income Taxes |
(12,174 |
) |
|
2,832 |
|
|||
Income tax provision |
1,870 |
|
|
2,100 |
|
|||
Net Income (Loss) |
(14,044 |
) |
|
732 |
|
|||
|
|
|
|
|||||
Net Income (Loss) per Share—Basic |
$ |
(0.41 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|||||
Weighted Average Shares Outstanding—Basic |
34,495 |
|
|
33,784 |
|
|||
|
|
|
|
|||||
Net Income (Loss) per Share—Assuming Dilution * |
$ |
(0.41 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|||||
Weighted Average Shares Outstanding—Assuming Dilution |
35,210 |
|
|
33,853 |
|
|||
__________
* Net loss per share assuming dilution calculated using weighted average shares outstanding - basic for periods in which there is a loss.
INVACARE CORPORATION AND SUBSIDIARIES |
||||||||
RECONCILIATION OF NET INCOME (LOSS) PER SHARE |
||||||||
TO ADJUSTED NET LOSS PER SHARE(c) |
||||||||
(In thousands, except per share data) |
Three Months Ended |
|||||||
|
March 31 |
|||||||
|
2021 |
|
2020 |
|||||
Net Income (Loss) per share - assuming dilution* |
$ |
(0.41 |
) |
|
$ |
0.02 |
|
|
Weighted average shares outstanding- assuming dilution |
34,495 |
|
|
33,853 |
|
|||
Net Income (Loss) |
(14,044 |
) |
|
732 |
|
|||
Income tax provision |
1,870 |
|
|
2,100 |
|
|||
Income (Loss) Before Income Taxes |
(12,174 |
) |
|
2,832 |
|
|||
Convertible debt discount amortization and accretion |
870 |
|
|
2,732 |
|
|||
Gain on sale of business |
— |
|
|
(9,590 |
) |
|||
Loss on debt extinguishment including debt finance charges and fees |
709 |
|
|
— |
|
|||
Adjusted Loss Before Income Taxes |
(10,595 |
) |
|
(4,026 |
) |
|||
Adjusted Income Taxes |
1,870 |
|
|
3,088 |
|
|||
Adjusted Net Loss(f) |
$ |
(12,465 |
) |
|
$ |
(7,114 |
) |
|
|
|
|
|
|||||
Weighted Average Shares Outstanding - Assuming Dilution |
34,495 |
|
|
33,784 |
|
|||
Adjusted Net Loss per Share(c) - Assuming Dilution* |
$ |
(0.36 |
) |
|
$ |
(0.21 |
) |
|
__________
"Adjusted net loss per share" and "adjusted net loss" are non-GAAP financial measures, which are defined at the end of this press release.
*Net loss per share assuming dilution and adjusted net loss per share(c) assuming dilution are calculated using weighted average shares outstanding - basic for periods in which there is a loss.
INVACARE CORPORATION AND SUBSIDIARIES |
||||||||
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA(d) |
||||||||
|
Three Months Ended |
|||||||
(In thousands) |
March 31 |
|||||||
|
2021 |
|
2020 |
|||||
Net Income (Loss) |
$ |
(14,044 |
) |
|
$ |
732 |
|
|
Income tax provision |
1,870 |
|
|
2,100 |
|
|||
Interest expense - net |
5,730 |
|
|
6,616 |
|
|||
Loss on debt extinguishment including debt finance charges and fees |
709 |
|
|
— |
|
|||
Operating Income (Loss) |
(5,735 |
) |
|
9,448 |
|
|||
Gain on sale of business |
— |
|
|
(9,590 |
) |
|||
Depreciation and amortization |
4,079 |
|
|
3,407 |
|
|||
EBITDA |
(1,656 |
) |
|
3,265 |
|
|||
Charges related to restructuring activities |
1,552 |
|
|
1,392 |
|
|||
Stock compensation expense |
1,580 |
|
|
1,200 |
|
|||
Adjusted EBITDA(d) |
$ |
1,476 |
|
|
$ |
5,857 |
|
|
__________
"Adjusted EBITDA(d)" is a non-GAAP financial measure, which is defined at the end of this press release.
INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENTS (UNAUDITED)
The company operates in two primary business segments: North America and Europe with each selling the company's primary product categories, which includes: lifestyle, mobility and seating and respiratory therapy products. Sales in Asia Pacific, which do not meet the quantitative criteria for determining reportable segments, are reported in All Other and include products similar to those sold in North America and Europe. Intersegment revenue for reportable segments was
The information by segment is as follows:
|
Three Months Ended |
|
|
|||||||||
(In thousands) |
March 31 |
|
|
|||||||||
|
2021 |
|
2020 |
|
Change |
|||||||
Revenues from external customers |
|
|
|
|
|
|||||||
Europe |
$ |
112,775 |
|
|
$ |
120,968 |
|
|
$ |
(8,193 |
) |
|
North America |
75,974 |
|
|
86,971 |
|
|
(10,997 |
) |
||||
All Other (sales in Asia Pacific) |
7,453 |
|
|
10,501 |
|
|
(3,048 |
) |
||||
Consolidated |
$ |
196,202 |
|
|
$ |
218,440 |
|
|
$ |
(22,238 |
) |
|
|
|
|
|
|
|
|||||||
Operating income (loss) |
|
|
|
|
|
|||||||
Europe |
$ |
3,832 |
|
|
$ |
6,850 |
|
|
$ |
(3,018 |
) |
|
North America |
(2,375 |
) |
|
(2,045 |
) |
|
(330 |
) |
||||
All Other |
(5,640 |
) |
|
(3,555 |
) |
|
(2,085 |
) |
||||
Charge related to restructuring activities |
(1,552 |
) |
|
(1,392 |
) |
|
(160 |
) |
||||
Gain on sale of business |
— |
|
|
9,590 |
|
|
(9,590 |
) |
||||
Consolidated operating income (loss) |
(5,735 |
) |
|
9,448 |
|
|
(15,183 |
) |
||||
Loss on debt extinguishment including debt finance charges and fees |
(709 |
) |
|
— |
|
|
(709 |
) |
||||
Net interest expense |
(5,730 |
) |
|
(6,616 |
) |
|
886 |
|
||||
Earnings (loss) before income taxes |
$ |
(12,174 |
) |
|
$ |
2,832 |
|
|
$ |
(15,006 |
) |
|
|
|
|
|
|
|
|||||||
__________
“All Other” consists of operating income (loss) associated with the company's businesses in the Asia Pacific region and unallocated corporate selling, general and administrative ("SG&A") expenses and intersegment eliminations, which do not meet the quantitative criteria for determining reportable segments.
INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENT NET SALES (UNAUDITED)
The following tables provide net sales changes by segment as reported and as adjusted to exclude the impact of foreign exchange translation and divestitures (constant currency net sales(a)) for the three-month periods referenced below. The current year constant currency net sales are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's sales to calculate the constant currency net sales change.
Three months ended March 31, 2021 compared to March 31, 2020:
|
Reported |
|
Foreign Exchange
|
|
Divestiture Impact |
|
Constant Currency |
|||||
Europe |
(6.8 |
)% |
|
8.0 |
% |
|
— |
% |
|
(14.8 |
)% |
|
North America |
(12.6 |
) |
|
0.5 |
|
|
— |
|
|
(13.1 |
) |
|
All Other (sales in Asia Pacific) |
(29.0 |
) |
|
14.1 |
|
|
(26.7 |
) |
|
(16.4 |
) |
|
Consolidated |
(10.2 |
)% |
|
5.3 |
% |
|
(1.3 |
)% |
|
(14.2 |
)% |
|
__________
"Constant currency net sales(a)" is a non-GAAP financial measure, which is defined at the end of this press release.
INVACARE CORPORATION AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) |
||||||||
(In thousands) |
March 31,
|
|
December 31,
|
|||||
Assets |
|
|
|
|||||
Current Assets |
|
|
|
|||||
Cash and cash equivalents |
$ |
86,052 |
|
|
$ |
105,298 |
|
|
Trade receivables, net |
99,773 |
|
|
108,588 |
|
|||
Installment receivables, net |
239 |
|
|
379 |
|
|||
Inventories, net |
132,394 |
|
|
115,484 |
|
|||
Other current assets |
35,483 |
|
|
44,717 |
|
|||
Total Current Assets |
353,941 |
|
|
374,466 |
|
|||
Other Assets |
5,643 |
|
|
5,925 |
|
|||
Intangibles, net |
28,066 |
|
|
27,763 |
|
|||
Property and Equipment, net |
57,793 |
|
|
56,243 |
|
|||
Finance Lease Assets, net |
69,096 |
|
|
64,031 |
|
|||
Operating Lease Assets, net |
14,053 |
|
|
15,092 |
|
|||
Goodwill |
407,726 |
|
|
402,461 |
|
|||
Total Assets |
$ |
936,318 |
|
|
$ |
945,981 |
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|||||
Current Liabilities |
|
|
|
|||||
Accounts payable |
$ |
93,111 |
|
|
$ |
85,424 |
|
|
Accrued expenses |
112,278 |
|
|
126,273 |
|
|||
Current taxes payable |
2,470 |
|
|
3,359 |
|
|||
Current portion of long-term debt |
4,840 |
|
|
5,612 |
|
|||
Current portion of finance lease obligations |
3,584 |
|
|
3,405 |
|
|||
Current portion of operating lease obligations |
5,610 |
|
|
6,313 |
|
|||
Total Current Liabilities |
221,893 |
|
|
230,386 |
|
|||
Long-Term Debt |
283,750 |
|
|
239,441 |
|
|||
Long-Term Obligations - Finance Leases |
68,346 |
|
|
63,137 |
|
|||
Long-Term Obligations - Operating Leases |
8,356 |
|
|
8,697 |
|
|||
Other Long-Term Obligations |
71,272 |
|
|
70,474 |
|
|||
Shareholders’ Equity |
282,701 |
|
|
333,846 |
|
|||
Total Liabilities and Shareholders’ Equity |
$ |
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FAQ
What were Invacare's net sales for Q1 2021?
How did gross profit change in Q1 2021 for Invacare?
What is the anticipated sales growth for Invacare in Q2 2021?
What contributed to Invacare's operating loss in Q1 2021?
What is Invacare's outlook for the remainder of 2021?
