Invacare Corp. (IVC) Misses Q4 EPS by 43c, Revenues Miss

Invacare Corp. (NYSE: IVC) reported Q4 EPS of ($0.56), $0.43 worse than the analyst estimate of ($0.13). Revenue for the quarter came in at $232.9 million versus the consensus estimate of $241.26 million.

Fourth Quarter 2019 Results

• Reported net sales decreased 4.8% to $232.9 million, and constant currency net sales(a) decreased $5.1 million, or 2.1%, compared to 4Q18*, primarily driven by a $3.3 million decline in respiratory products.
• Gross profit increased 130 basis points to 29.2% compared to 4Q18, with growth across all segments, primarily as a result of favorable sales mix and lower material costs partially offset by unfavorable manufacturing variances and foreign exchange.
• Reported SG&A decreased by 5.8% and constant currency SG&A(b) decreased 4.1%, or $2.7 million, driven primarily by previously announced restructuring actions, partially offset by an increase in stock compensation and bonus expense compared to 4Q18.
• Operating loss was $3.8 million compared to a loss of $1.1 million in 4Q18, as a reduction of $3.9 million in SG&A expenses was more than offset by $6.4 million of incremental restructuring costs related to previously announced actions.
• GAAP loss per share was $0.56 compared to $0.04 in 4Q18. GAAP loss per share included $5.9 million or $0.17 per share related to debt extinguishment including debt finance charges and fees, as well as higher restructuring charges of $6.4 million or $0.19 per share. In addition, 4Q18 GAAP loss per share included a benefit of $7.8 million or $0.23 per share related to gain on convertible debt derivatives. Excluding these items, GAAP loss per share improved $0.07 compared to 4Q18.
• Adjusted net loss per share(c) was $0.28 and included $0.24 per share in restructuring costs, compared to 4Q18 adjusted net loss per share of $0.16, which included $0.05 per share in restructuring costs. Excluding restructuring costs, adjusted net loss per share improved $0.07 compared to 4Q18.
• Adjusted EBITDA(d) was $13.9 million, an improvement of $7.9 million compared to 4Q18, driven by lower SG&A expenses, favorable sales mix and lower material costs partially offset by foreign exchange.
• The company generated positive free cash flow(e) of $3.8 million, an improvement of $2.7 million from 4Q18, due primarily to improved operating results.
• As previously announced, the company strengthened its balance sheet by effectively extending the maturity of $72.9 million of Convertible Senior Notes through an exchange of notes due in 2021 for notes due in 2024, with the same interest rate.

2019 Annual Summary

Reflecting on 2019, Matt Monaghan, chairman, president and chief executive officer, commented, "As we celebrate the 40th anniversary of Invacare this year, it is a fitting time to reflect on our transformation and how we are positioning the company for sustainable, long-term success. I am very pleased with Invacare's progress over the past five years and, in particular, what we accomplished last year. In 2019, we significantly improved operating results and free cash flow, achieved our annual guidance, and strengthened our balance sheet. In particular, we substantially streamlined our business which reduced constant currency SG&A expenses by nearly $15 million, mitigated the significant majority of the impact of tariffs, re-invigorated our product pipeline and are preparing to introduce innovative new products in every category in the coming year.

While I am encouraged by our continued progress, we didn't achieve everything we had set out to do in 2019, as net sales growth fell short of our expectations. To reach our full potential, we know we need profitable sales growth in 2020 and have many actions underway to do that. In addition, we are focusing on key strategic initiatives that will continue to streamline business operations, increase efficiencies and improve our competitive position. We have all of the necessary building blocks in place for a successful 2020 and I am confident in our ability to deliver sustained and improved performance."

Full Year 2020 Guidance

For the full year 2020, the company expects operating results in line with its previous guidance for run-rate Adjusted EBITDA in the range of $85-$105 million by year-end 2020, consisting of:

• Constant currency net sales growth of 2-4%;
• Adjusted EBITDA of at least $45 million; and
• Free cash flow generation of at least $5 million.

The company expects constant currency net sales growth in 2020 in combination with what is expected to be a typical year of seasonal sales variance by quarter. As a result, sales are expected to be flat in 1Q20 over prior year with growth coming in later quarters, amplified by new product introductions expected to be impactful in the second half of the year.

For earnings history and earnings-related data on Invacare Corp. (IVC) click here.

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