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Anika Therapeutics(ANIK) - 2024 Q2 - Quarterly Results

Anika Reports Second Quarter 2024 Financial Results Executive Summary & Highlights Anika reported Q2 2024 financial results, highlighting the full market release of the Integrity™ Implant System, revenue in line with expectations with 15% adjusted EBITDA margins, strong international OA Pain Management revenue growth of 17% in H1 2024, and an enhanced capital allocation strategy including a new $40 million share repurchase program - Full market release of Integrity™ Implant System, a hyaluronic acid (HA)-based scaffold for rotator cuff and other tendon repairs, generating significant market demand1 - Delivered revenue in line with expectations with 15% adjusted EBITDA margins1 - Strong first half 2024 international OA Pain Management revenue growth of 17%1 - Enhanced capital allocation strategy with new $40 million share repurchase program announced in May 20241 Second Quarter 2024 Financial Summary Anika's Q2 2024 revenue decreased by 5% to $41.9 million, primarily due to a 9% decrease in OA Pain Management revenue and a 26% decrease in Non-Orthopedic revenue, partially offset by a 7% increase in Joint Preservation and Restoration revenue Second Quarter 2024 Key Financials (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change (%) | | :----- | :------ | :------ | :--------- | | Revenue | $41.9M | $44.3M | -5% | | OA Pain Management Revenue | $26.7M | - | -9% | | Joint Preservation and Restoration Revenue | $13.5M | - | +7% | | Non-Orthopedic Revenue | $1.7M | - | -26% | | Gross Margin | 65% | - | - | | Adjusted Gross Margin | 66% | - | - | | Net Loss | ($0.1)M | ($2.741)M | - | | Net Loss Per Share | ($0.01) | ($0.19) | - | | Adjusted Net Income | $2.5M | - | - | | Adjusted Diluted EPS | $0.17 | - | - | | Adjusted EBITDA | $6.3M | $6.272M | +0.29% | | Cash used for operating activities | $1.1M | - | - | | Cash balance | $62.8M | - | - | CEO Commentary Dr. Cheryl R. Blanchard, President and CEO, expressed satisfaction with Q2 financial performance and progress on the re-focused business strategy towards profitability, highlighting the Integrity Implant System's full market release, strong international OA Pain Management growth, and strategic initiatives for profitability and capital allocation - Full market release of Integrity Implant System in July, with over double the anticipated cases completed during limited market release, demonstrating significant surgeon demand3 - OA Pain Management remains a strong, foundational element, with international growth of 17% in H1 2024 for Cingal, Monovisc, and Orthovisc3 - Re-focused business strategy in 2024 to accelerate profitability, deploy capital to high-returning programs, and explore strategic alternatives, including a new $40 million share repurchase program and cost restructuring3 Strategic Updates Regenerative Solutions Portfolio Expansion Anika expanded its Regenerative Solutions portfolio with the full market release of the Integrity Implant System in July 2024, an HA-based regenerative scaffold, and is on track to file the first Hyalofast modular PMA submission in 2024 for a US launch by 2026 - Full market release of the Integrity Implant System in July 2024, an HA-based regenerative scaffold, with over 300 successful cases completed by more than 60 surgeons during limited market release35 - On track to file the first Hyalofast modular PMA submission in 2024, with final clinical module filing expected in 2025 to support a US product launch by 202635 OA Pain Management Leadership Anika demonstrated leadership in OA Pain Management with 17% growth in international revenue during H1 2024, maintaining US market leadership with Monovisc and Orthovisc while progressing towards Cingal's FDA approval to double the US OA Pain market opportunity - International OA Pain Management revenue grew 17% in the first half of 2024 across Cingal, Monovisc, and Orthovisc, driven by market share gains and new country expansion36 - Maintained US market leadership with Monovisc and Orthovisc, while progressing towards Cingal's FDA approval, which is expected to double the US OA Pain market opportunity to $2 billion36 Re-focused Business Strategy and Capital Allocation Anika completed cost reduction initiatives, achieving $10 million annualized expense reduction and a 73% increase in year-to-date adjusted EBITDA, and announced a new $40 million stock repurchase program - Completed cost reduction initiatives to reduce expenses by $10 million annualized, contributing to an $8.8 million year-to-date adjusted EBITDA, up 73% compared to the same period in 202336 - Announced a new $40 million stock repurchase program, with $15 million being executed under a 10b5-1 plan by June 2025 and the remainder through open market purchases by June 202636 Fiscal 2024 Guidance Fiscal 2024 Guidance Overview Anika reiterated its fiscal 2024 revenue guidance of $168 to $173 million, representing 1% to 4% growth, with adjusted EBITDA expected towards the lower end of the $25 to $30 million range due to product mix Fiscal 2024 Revenue Guidance by Product Family | Product Family | 2024 Guidance Range | YoY Growth | | :------------- | :------------------ | :--------- | | Total Revenue | $168 - $173 million | 1% - 4% | | OA Pain Management | $102 - $104 million | 0% - 2% | | Joint Preservation and Restoration | $58 - $60.5 million | 6% - 10% | | Non-Orthopedic | $8 - $8.5 million | -14% - -19% | - Expects 2024 adjusted EBITDA to be towards the lower end of the $25 to $30 million range (approximately 15% adjusted EBITDA margin), driven by lower US OA Pain Management sales offset by stronger international growth7 Company Information Conference Call and Webcast Information Anika's management hosted a conference call and webcast on August 8, 2024, at 5:00 pm ET to discuss financial results and business highlights, with access details provided for the call and replay - Conference call and webcast held on Thursday, August 8, 2024, at 5:00 pm ET to discuss financial results and business highlights8 About Anika Anika Therapeutics, Inc. is a global joint preservation company focused on early intervention orthopedic care, leveraging expertise in hyaluronic acid and implant solutions for minimally invasive products across various orthopedic segments - Anika Therapeutics, Inc. is a global joint preservation company focused on early intervention orthopedic care, headquartered outside of Boston, Massachusetts9 - Core expertise in hyaluronic acid and implant solutions, offering minimally invasive products in Osteoarthritis Pain Management, Regenerative Solutions, Sports Medicine, and Arthrosurface Joint Solutions9 Trademarks This section lists key trademarks owned by Anika Therapeutics, Inc. or its subsidiaries, or licensed for its use, including ANIKA, CINGAL, HYALOFAST, INTEGRITY, MONOVISC, and ORTHOVISC - Key trademarks include ANIKA, CINGAL, HYALOFAST, INTEGRITY, MONOVISC, and ORTHOVISC10 Non-GAAP Financial Information Non-GAAP Measures Definition This section defines Anika's non-GAAP financial measures, including Adjusted Gross Margin, Adjusted EBITDA, and Adjusted Net Income/EPS, clarifying their supplemental nature for internal assessment and investor comparison - Non-GAAP measures are supplemental to GAAP, used for internal performance assessment and executive compensation, and are considered helpful for investors11 - Definitions provided for Adjusted Gross Margin (excluding amortization of acquired assets and non-cash product rationalization charges), Adjusted EBITDA (excluding depreciation, amortization, interest, taxes, stock-based compensation, acquisition-related expenses, goodwill impairment, product rationalization, severance, and shareholder activism costs), and Adjusted Net Income/EPS (excluding acquisition-related expenses, goodwill impairment, product rationalization, stock-based compensation, and software project discontinuation, severance, and shareholder activism costs, all tax-effected)121314 Forward-Looking Statements This section contains cautionary statements regarding forward-looking information, emphasizing that actual results may differ materially from expectations due to various risks and uncertainties, with no obligation to update these statements - Press release contains forward-looking statements subject to significant risks, uncertainties, and other factors16 - Actual results could differ materially due to factors such as successful completion of clinical trials, timely regulatory approvals, commercialization ability, manufacturing efficiency, economic conditions, and ability to achieve growth targets1617 Consolidated Financial Statements (Unaudited) Consolidated Statements of Operations The consolidated statements of operations show Anika's financial performance for Q2 2024 with $41.9 million revenue and a net loss of ($0.088) million, and for H1 2024 with $82.4 million revenue and a net loss of ($4.6) million Consolidated Statements of Operations (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Revenue | $41,921 | $44,302 | $82,444 | $82,226 | | Cost of Revenue | $14,556 | $15,330 | $30,451 | $30,411 | | Gross Profit | $27,365 | $28,972 | $51,993 | $51,815 | | R&D Expenses | $7,398 | $8,914 | $15,562 | $17,314 | | SG&A Expenses | $19,806 | $23,689 | $41,333 | $50,685 | | Total Operating Expenses | $27,204 | $32,603 | $56,895 | $67,999 | | Income (loss) from operations | $161 | ($3,631) | ($4,902) | ($16,184) | | Interest and other income (expense), net | $595 | $561 | $1,187 | $1,100 | | Income (loss) before income taxes | $756 | ($3,070) | ($3,715) | ($15,084) | | Provision for (benefit from) income taxes | $844 | ($329) | $887 | ($1,993) | | Net loss | ($88) | ($2,741) | ($4,602) | ($13,091) | Consolidated Balance Sheets The consolidated balance sheets present Anika's financial position as of June 30, 2024, with total assets decreasing to $262.7 million from $270.6 million at year-end 2023, and cash decreasing to $62.8 million Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $62,822 | $72,867 | | Accounts receivable, net | $33,773 | $35,961 | | Inventories, net | $51,464 | $46,386 | | Total current assets | $155,000 | $163,309 | | Total assets | $262,655 | $270,632 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $9,994 | $9,860 | | Accrued expenses and other current liabilities | $16,127 | $21,199 | | Total current liabilities | $26,121 | $31,059 | | Total stockholders' equity | $210,338 | $212,265 | | Total liabilities and stockholders' equity | $262,655 | $270,632 | Reconciliation of Non-GAAP Financial Measures (Unaudited) Reconciliation of GAAP Gross Profit to Adjusted Gross Profit This section reconciles GAAP Gross Profit to Adjusted Gross Profit, showing Q2 2024 Adjusted Gross Profit at $27.5 million (66% margin) compared to GAAP Gross Profit of $27.4 million (65% margin), primarily due to acquisition-related intangible asset amortization Reconciliation of GAAP Gross Profit to Adjusted Gross Profit (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Gross Profit | $27,365 | $28,972 | $51,993 | $51,815 | | Product rationalization related charges | - | - | $472 | - | | Acquisition related intangible asset amortization | $154 | $1,561 | $311 | $3,123 | | Adjusted Gross Profit | $27,519 | $30,533 | $52,776 | $54,938 | | Unadjusted Gross Margin | 65% | 65% | 63% | 63% | | Adjusted Gross Margin | 66% | 69% | 64% | 67% | Reconciliation of GAAP Net Income to Adjusted EBITDA This section reconciles GAAP Net Loss to Adjusted EBITDA, with Q2 2024 Adjusted EBITDA at $6.3 million, and H1 2024 Adjusted EBITDA significantly increasing to $8.8 million from $5.1 million in the prior year Reconciliation of GAAP Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net loss | ($88) | ($2,741) | ($4,602) | ($13,091) | | Interest and other (income) expense, net | ($595) | ($561) | ($1,187) | ($1,100) | | Provision for (benefit from) income taxes | $844 | ($329) | $887 | ($1,993) | | Depreciation and amortization | $1,889 | $1,764 | $3,755 | $3,528 | | Stock-based compensation | $3,891 | $4,150 | $7,481 | $7,867 | | Product rationalization | - | - | $472 | - | | Arbitration settlement | - | - | - | $3,250 | | Acquisition related intangible asset amortization | $169 | $1,787 | $366 | $3,574 | | Discontinuation of software development project | ($1,404) | - | ($1,404) | - | | Severance costs | - | - | $839 | - | | Costs of shareholder activism | $1,584 | $2,202 | $2,185 | $3,033 | | Adjusted EBITDA | $6,290 | $6,272 | $8,792 | $5,068 | Reconciliation of GAAP Net Income to Adjusted Net Income and Adjusted Diluted EPS This section reconciles GAAP Net Loss and Diluted EPS to their adjusted counterparts, showing Q2 2024 Adjusted Net Income of $2.5 million and Adjusted Diluted EPS of $0.17, significantly higher than GAAP figures Reconciliation of GAAP Net Income to Adjusted Net Income (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | | Net loss | ($88) | ($2,741) | ($4,602) | ($13,091) | | Product rationalization, tax effected | - | - | $514 | - | | Arbitration settlement, tax effected | - | - | - | $2,800 | | Share-based compensation, tax effected | $2,393 | $3,712 | $8,154 | $6,779 | | Acquisition related intangible asset amortization, tax effected | $103 | $1,598 | $398 | $3,080 | | Discontinuation of software development project, tax effected | ($864) | - | ($1,530) | - | | Severance costs, tax effected | - | - | $914 | - | | Costs of shareholder activism, tax effected | $975 | $1,970 | $2,381 | $2,613 | | Adjusted net income | $2,519 | $4,539 | $6,229 | $2,181 | Reconciliation of GAAP Diluted EPS to Adjusted Diluted EPS | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | | Diluted net loss per share | ($0.01) | ($0.19) | ($0.31) | ($0.89) | | Product rationalization, tax effected | - | - | $0.03 | - | | Arbitration settlement, tax effected | - | - | - | $0.19 | | Share-based compensation, tax effected | $0.16 | $0.25 | $0.55 | $0.46 | | Acquisition related intangible asset amortization, tax effected | $0.01 | $0.11 | $0.03 | $0.21 | | Discontinuation of software development project, tax effected | ($0.06) | - | ($0.10) | - | | Severance costs, tax effected | - | - | $0.06 | - | | Costs of shareholder activism, tax effected | $0.07 | $0.14 | $0.16 | $0.18 | | Adjusted diluted net income per share | $0.17 | $0.31 | $0.42 | $0.15 | Revenue by Product Family (Unaudited) Revenue by Product Family Breakdown This section details Anika's revenue breakdown by product family, showing Q2 2024 total revenue decreased by 5% to $41.9 million, primarily due to a 9% decline in OA Pain Management revenue, while Joint Preservation and Restoration revenue increased by 7% Revenue by Product Family (in thousands) | Product Family | Q2 2024 | Q2 2023 | $ Change (QoQ) | % Change (QoQ) | H1 2024 | H1 2023 | $ Change (YoY) | % Change (YoY) | | :-------------------------------- | :------ | :------ | :------------- | :------------- | :------ | :------ | :------------- | :------------- | | OA Pain Management | $26,658 | $29,334 | $(2,676) | -9% | $50,976 | $51,967 | $(991) | -2% | | Joint Preservation and Restoration | $13,554 | $12,660 | $894 | 7% | $27,395 | $26,113 | $1,282 | 5% | | Non-Orthopedic | $1,709 | $2,308 | $(599) | -26% | $4,073 | $4,146 | $(73) | -2% | | Total Revenue | $41,921 | $44,302 | $(2,381) | -5% | $82,444 | $82,226 | $218 | 0% |