Invacare Reports Results for First Quarter 2022
Invacare reported a 2.4% increase in net sales for 1Q22, totaling $201.0 million, driven by strong demand for mobility and seating products. However, gross profit decreased to 23.7% of net sales, primarily due to rising freight and material costs. The company faces challenges from supply chain disruptions, resulting in an operating loss of $16.6 million and a free cash flow usage of $29.8 million. Despite these obstacles, Invacare reaffirmed its full-year financial guidance, anticipating improved adjusted EBITDA and free cash flow, while continuing strategic restructuring to boost profitability.
- Reported net sales increased by 2.4%, reaching $201.0 million.
- Strong demand for mobility and seating products led to double-digit growth.
- Reaffirmed full-year financial guidance, indicating confidence in future performance.
- Gross profit margin declined by 410 basis points to 23.7% due to increased costs.
- Operating loss of $16.6 million attributed to lower gross profit and higher SG&A expenses.
- Free cash flow usage increased to $29.8 million, indicating cash consumption.
Delivered sales growth driven by mobility & seating and lifestyle products
Reaffirmed full year 2022 financial guidance
Executive Summary
Reflecting on the quarter,
As we work to increase our capability to fulfill strong demand, we continue to experience an adverse impact on cost and availability of inputs. In response, we are streamlining our portfolio to emphasize more clinically valuable products and implementing pricing actions to offset increased costs. Coupled with the introduction of new high value products, we expect these actions to be increasingly impactful throughout the remainder of the year.
As we have successfully done in recent years, we continue to execute transformative actions that will enhance our competitive position. Since the beginning of 2022, we have taken actions to streamline how we operate, which will yield substantial cost savings. In addition, new software is improving the customer experience by making it easier to transact with
Key Metrics (1Q22* versus 1Q21)
-
Reported net sales was
$201.0 million 2.4% . Constant currency net sales(a) increased6.4% . -
Gross profit as a percent of net sales was
23.7% , a decrease of 410 basis points attributable to higher costs, primarily in freight and material, as well as operational inefficiencies from intermittent production stoppages, which more than offset the benefit of price increases. -
SG&A expense increased by
$1.7 million 3.0% , and constant currency SG&A(b) increased by$3.5 million 5.9% primarily related to ERP expenses taken in the quarter that were not capitalized due to a temporary pause in new deployments. -
Operating loss was
$16.6 million -
Adjusted EBITDA(c) loss of
$8.6 million -
Free cash flow(d) usage was
$29.8 million $12.0 million
* Date format is quarter and year in each instance
Commenting on the company's financial results,
1Q22 Segment Results versus 1Q21
(in millions USD) |
|
|
Operating Income (Loss) |
||||||||||||||
|
|
1Q22 |
|
1Q21 |
Reported
|
Constant
|
|
|
1Q22 |
|
|
1Q21 |
|
% Change |
|||
|
$ |
118.1 |
$ |
112.8 |
4.7 |
% |
11.2 |
% |
|
$ |
3.2 |
|
$ |
3.8 |
|
(15.8 |
) % |
|
|
75.3 |
|
76.0 |
(0.9 |
) |
(0.9 |
) |
|
|
(8.3 |
) |
|
(2.4 |
) |
(251.0 |
) |
All Other |
|
7.6 |
|
7.5 |
1.8 |
|
8.2 |
|
|
|
(7.7 |
) |
|
(5.6 |
) |
(37.0 |
) |
Consolidated reported net sales grew year-over-year despite ongoing supply chain challenges. Each region incurred varying levels of disruptions which impacted the timely receipt of inventory, limited the conversion of orders to shipments, and resulted in unfavorable costs. In 1Q22, the company experienced brief but significant Omicron-related impacts, such as short-term absenteeism across its operations and suppliers, causing inefficiencies that affected gross margin. In addition, material and freight costs were significantly higher compared to 1Q21, when input costs were at more normalized levels. The company continues to implement pricing actions, product rationalization, and restructuring actions to improve business results. While such actions continue to trail escalating costs in all regions, we expect increased effectiveness to drive sequential improvement throughout the remainder of 2022.
At a segment level,
SG&A expense increased primarily due to IT expenses being classified as operating costs as a result of a temporary pause in the ERP roll-out in 2022 as restructuring actions are implemented. Previously, these IT costs were being classified as capital expenditures and are included in All Other.
Transforming for the Future
The company recognizes the short-term impact of the macro-economic challenges and supply chain disruptions that the industry is facing. In order to enhance competitiveness and set the company up for long-term success, this transformative time is an opportunity to rethink how to continue evolving the business. To meet future demands, create value, and improve the customer experience, the company anticipates to evolve by executing restructuring actions that are expected to improve the cost structure, lower the cost to serve, and increase profitability in 2022 by:
- Streamlining and reducing unnecessary layers in the organization, resulting in lower cost to service, primarily driven by headcount reductions;
- Improving gross profit through portfolio rationalization in alignment with the changing needs of customers, favorable sales mix, and price increases to offset higher input costs; and
- Optimizing the real estate portfolio including the manufacturing, assembly and distribution footprint to mitigate supply chain challenges and drive reduced costs.
The company expects the majority of these actions to be completed in 2022 and, once complete, result in annual savings of at least
In 1Q22, the company executed actions that are expected to reduce operating expenses and improve profitability. In
In
In the aggregate, strategic actions announced and implemented to date will result in approximately
Full Year 2022 Guidance
As a result of the company participating in growing markets, strong product demand, continued elevated backlog, and with the consideration of the planned restructuring actions to improve profitability, the company reaffirms its financial guidance for the full year 2022, in which the company anticipates:
- Adjusted EBITDA (excluding the benefit of CARES Act loan forgiveness in 2021) and free cash flow to improve compared to the prior year;
- Sequential quarterly improvement for Adjusted EBITDA the balance of the year as the expected strategic actions take effect; and,
- Revenues to be flat or slightly lower compared to the prior year as the product portfolio is further optimized.
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 2022 financial results on
Upcoming Investor Events
-
July 12, 2022 - CJS Securities New Ideas Summer Conference (Greenwich, CT )
About
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 pace of resumption of access to health care, 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, which could impact the demand for the company’s products; global shortages in, or increasing costs for, transportation and logistics services and capacity; the availability and cost of needed products, components or raw materials from the company's 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 or political or geopolitical crises, such as
INVACARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) - (UNAUDITED) |
|||||||
(In thousands, except per share data) |
Three Months Ended |
||||||
|
|
||||||
|
2022 |
|
2021 |
||||
Net sales |
$ |
200,988 |
|
|
$ |
196,202 |
|
Cost of products sold |
|
153,259 |
|
|
|
141,564 |
|
Gross Profit |
|
47,729 |
|
|
|
54,638 |
|
Selling, general and administrative expenses |
|
60,564 |
|
|
|
58,821 |
|
Charges related to restructuring activities |
|
3,790 |
|
|
|
1,552 |
|
Operating Loss |
|
(16,625 |
) |
|
|
(5,735 |
) |
Loss on debt extinguishment including debt finance charges and fees |
|
— |
|
|
|
709 |
|
Interest expense - net |
|
6,252 |
|
|
|
5,730 |
|
Loss Before Income Taxes |
|
(22,877 |
) |
|
|
(12,174 |
) |
Income tax provision |
|
1,320 |
|
|
|
1,870 |
|
Net Loss |
|
(24,197 |
) |
|
|
(14,044 |
) |
|
|
|
|
||||
Net Loss per Share—Basic |
$ |
(0.69 |
) |
|
$ |
(0.41 |
) |
|
|
|
|
||||
Weighted Average Shares Outstanding—Basic |
|
35,046 |
|
|
|
34,495 |
|
|
|
|
|
||||
Net Loss per Share—Assuming Dilution * |
$ |
(0.69 |
) |
|
$ |
(0.41 |
) |
|
|
|
|
||||
Weighted Average Shares Outstanding—Assuming Dilution |
|
35,419 |
|
|
|
35,210 |
|
__________
* 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) TO ADJUSTED EBITDA(c) |
|||||||
|
Three Months Ended |
||||||
(In thousands) |
|
||||||
|
2022 |
|
2021 |
||||
Net Loss |
$ |
(24,197 |
) |
|
$ |
(14,044 |
) |
Income tax provision |
|
1,320 |
|
|
|
1,870 |
|
Interest expense - net |
|
6,252 |
|
|
|
5,730 |
|
Loss on debt extinguishment including debt finance charges and fees |
|
— |
|
|
|
709 |
|
Operating Loss |
|
(16,625 |
) |
|
|
(5,735 |
) |
Depreciation and amortization |
|
3,942 |
|
|
|
4,079 |
|
EBITDA |
|
(12,683 |
) |
|
|
(1,656 |
) |
Charges related to restructuring activities |
|
3,790 |
|
|
|
1,552 |
|
Stock compensation expense (benefit) |
|
310 |
|
|
|
1,580 |
|
Adjusted EBITDA(c) |
$ |
(8,583 |
) |
|
$ |
1,476 |
|
__________
"Adjusted EBITDA(c)" 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:
The information by segment is as follows:
|
Three Months Ended |
|
|
||||||||
(In thousands) |
|
|
|
||||||||
|
2022 |
|
2021 |
|
Change |
||||||
Revenues from external customers |
|
|
|
|
|
||||||
|
$ |
118,079 |
|
|
$ |
112,775 |
|
|
$ |
5,304 |
|
|
|
75,319 |
|
|
|
75,974 |
|
|
|
(655 |
) |
All Other (sales in |
|
7,590 |
|
|
|
7,453 |
|
|
|
137 |
|
Consolidated |
$ |
200,988 |
|
|
$ |
196,202 |
|
|
$ |
4,786 |
|
|
|
|
|
|
|
||||||
Operating income (loss) |
|
|
|
|
|
||||||
|
$ |
3,225 |
|
|
$ |
3,832 |
|
|
$ |
(607 |
) |
|
|
(8,336 |
) |
|
|
(2,375 |
) |
|
|
(5,961 |
) |
All Other |
|
(7,724 |
) |
|
|
(5,640 |
) |
|
|
(2,084 |
) |
Charges related to restructuring activities |
|
(3,790 |
) |
|
|
(1,552 |
) |
|
|
(2,238 |
) |
Consolidated operating loss |
|
(16,625 |
) |
|
|
(5,735 |
) |
|
|
(10,890 |
) |
Loss on debt extinguishment including debt finance charges and fees |
|
— |
|
|
|
(709 |
) |
|
|
709 |
|
Net interest expense |
|
(6,252 |
) |
|
|
(5,730 |
) |
|
|
(522 |
) |
Loss before income taxes |
$ |
(22,877 |
) |
|
$ |
(12,174 |
) |
|
$ |
(10,703 |
) |
__________
“All Other” consists of operating income (loss) associated with the company's businesses in the
INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENT
The following tables provide net sales changes by segment as reported and as adjusted to exclude the impact of foreign exchange translation (constant currency net sales(a)) for the 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
|
Reported |
|
Foreign Exchange
|
|
Constant
|
|||
|
4.7 |
% |
|
(6.5 |
) % |
|
11.2 |
% |
|
(0.9 |
) |
|
— |
|
|
(0.9 |
) |
All Other (sales in |
1.8 |
|
|
(6.4 |
) |
|
8.2 |
|
Consolidated |
2.4 |
% |
|
(4.0 |
) % |
|
6.4 |
% |
__________
"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 SHEETS |
|||||
|
(unaudited) |
|
|
||
(In thousands) |
|
|
|
||
Assets |
|
|
|
||
Current Assets |
|
|
|
||
Cash and cash equivalents |
$ |
52,337 |
|
$ |
83,745 |
Trade receivables, net |
|
106,377 |
|
|
117,115 |
Installment receivables, net |
|
287 |
|
|
218 |
Inventories, net |
|
147,354 |
|
|
144,274 |
Other current assets |
|
44,127 |
|
|
40,036 |
Total Current Assets |
|
350,482 |
|
|
385,388 |
Other Assets |
|
5,636 |
|
|
5,362 |
Intangibles, net |
|
26,116 |
|
|
26,356 |
Property and Equipment, net |
|
58,940 |
|
|
60,921 |
Finance Lease Assets, net |
|
61,703 |
|
|
63,029 |
Operating Lease Assets, net |
|
11,942 |
|
|
12,600 |
|
|
352,453 |
|
|
355,875 |
Total Assets |
$ |
867,272 |
|
$ |
909,531 |
Liabilities and Shareholders’ Equity |
|
|
|
||
Current Liabilities |
|
|
|
||
Accounts payable |
$ |
121,107 |
|
$ |
130,036 |
Accrued expenses |
|
97,967 |
|
|
102,971 |
Current taxes payable |
|
4,147 |
|
|
3,914 |
Current portion of long-term debt |
|
2,815 |
|
|
3,107 |
Current portion of finance lease obligations |
|
3,056 |
|
|
3,009 |
Current portion of operating lease obligations |
|
4,110 |
|
|
4,217 |
Total Current Liabilities |
|
233,202 |
|
|
247,254 |
Long-Term Debt |
|
309,054 |
|
|
305,022 |
Long-Term Obligations - Finance Leases |
|
62,689 |
|
|
63,736 |
Long-Term Obligations - Operating Leases |
|
7,764 |
|
|
8,234 |
Other Long-Term Obligations |
|
65,255 |
|
|
66,796 |
Shareholders’ Equity |
|
189,308 |
|
|
218,489 |
Total Liabilities and Shareholders’ Equity |
$ |
867,272 |
|
$ |
909,531 |
INVACARE CORPORATION AND SUBSIDIARIES RECONCILIATION FROM NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES TO FREE CASH FLOW(d) |
|||||||
|
Three Months Ended |
||||||
(In thousands) |
|
||||||
|
2022 |
|
2021 |
||||
Net cash used by operating activities |
$ |
(27,698 |
) |
|
$ |
(13,760 |
) |
Plus: |
|
|
|
||||
Sales of property and equipment |
|
5 |
|
|
|
23 |
|
Less: |
|
|
|
||||
Purchases of property and equipment |
|
(2,131 |
) |
|
|
(4,118 |
) |
Free Cash Flow(d) (usage) |
$ |
(29,824 |
) |
|
$ |
(17,855 |
) |
__________
"Free Cash Flow(d) is a non-GAAP financial measure, which is defined at the end of this press release.
Definitions of Non-GAAP Financial Measures
(a) "Constant currency net sales" is a non-GAAP financial measure, which is defined as net sales excluding the impact of foreign currency translation. The current year's functional 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. The "Business Segments
(b) "Constant Currency SG&A" is a non-GAAP financial measure, which is defined as selling, general and administrative ("SG&A") expense excluding the impact of foreign currency translation. The current period's functional constant currency SG&A expenses are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's SG&A expenses to calculate the constant currency SG&A expenses change.
(c) "Adjusted EBITDA" is a non-GAAP financial measure, which is defined as earnings before interest, taxes, depreciation and amortization and calculated as net loss plus: income taxes, interest expense-net, net gain or loss on convertible debt derivatives, net gain or loss on debt extinguishment including debt finance charges and fees, asset write-downs related to intangible assets, impairment of goodwill, net gain on sale of business, and depreciation and amortization, as further adjusted to exclude charges related to restructuring activities, stock compensation expense and gain on CARES Act forgiveness. It should be noted that the company's definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies and financial analysts calculate Adjusted EBITDA in the same manner. The company believes that this financial measure provides meaningful information which is used by financial analysts and others in the company's industry to evaluate the performance of the company. This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation of Net Income (Loss) to Adjusted EBITDA” table included in this press release.
(d) "Free cash flow" is a non-GAAP financial measure, which is defined as net cash provided (used) by operating activities less purchases of property and equipment plus proceeds from sales of property and equipment. The company believes that this financial measure provides meaningful information for evaluating the overall financial performance of the company and its ability to repay debt or make future investments. This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation from Net Cash Provided (Used) by Operating Activities to Free Cash Flow” table included in this press release.
View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005896/en/
INVESTOR CONTACT:
loislee@invacare.com
440-329-6435
Source:
FAQ
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