CryoLife Reports Second Quarter 2017 Financial Results

ATLANTA, July 24, 2017 /PRNewswire/ --

Second Quarter Highlights:

    --  Revenues Increased Two Percent Year-over-Year to $47.8 Million; Non-GAAP
        Revenues Increased Four Percent Year-over-Year
    --  Gross Margins were 69 Percent
    --  GAAP Net Income was $3.2 Million, or $0.09 Per Fully Diluted Common
        Share;    Non-GAAP Net Income was $4.0 Million, or $0.12 Per Fully
        Diluted Common Share

CryoLife, Inc. (NYSE: CRY), a leading medical device and tissue processing company focused on cardiac surgery, announced today its results for the second quarter and first half of 2017.

Pat Mackin, Chairman, President, and Chief Executive Officer, said, "We had a solid second quarter and exceeded our guidance despite facing certain headwinds in the quarter. On-X, BioGlue and tissue processing all posted revenue growth. This was highlighted by another positive quarter for On-X, particularly in North America where On-X revenue grew 19 percent excluding the OEM business. In tissue processing, we delivered our second consecutive quarter of double-digit growth in cardiac tissue. During the quarter we also initiated the transition to direct sales in Canada, Belgium, the Netherlands and Luxembourg, further expanding our direct operations in Europe. We are on track to achieve our 2017 financial guidance and remain confident our strategy will continue to transform CryoLife into a higher growth, higher margin company."

Revenues for the second quarter of 2017 increased two percent to $47.8 million, compared to $47.1 million for the second quarter of 2016. The increase was primarily driven by increases in tissue processing, BioGlue, On-X and TMR revenues, partially offset by the absence of HeRO revenues. Non-GAAP revenues for the second quarter of 2017 increased four percent compared to the second quarter of 2016. A reconciliation of GAAP to non-GAAP financial metrics is included as part of this press release.

Revenues for the first half of 2017 increased three percent to $92.9 million, compared to $90.1 million for the first half of 2016. The increase was primarily driven by increases in On-X, tissue processing and BioGlue revenues, partially offset by the absence of HeRO and ProCol revenues, and a decrease in TMR revenues. Non-GAAP revenues for the first half of 2017 increased four percent compared to the first half of 2016. A reconciliation of GAAP to non-GAAP financial metrics is included as part of this press release.

GAAP net income for the second quarter of 2017 was $3.2 million, or $0.09 per fully diluted common share, compared to net income of $2.3 million, or $0.07 per fully diluted common share, for the second quarter of 2016. Non-GAAP net income for the second quarter of 2017 was $4.0 million, or $0.12 per fully diluted common share, compared to non-GAAP net income of $4.3 million, or $0.13 per fully diluted common share for the second quarter of 2016.

GAAP net income for the first half of 2017 was $5.4 million, or $0.16 per fully diluted common share, compared to net income of $4.9 million, or $0.15 per fully diluted common share, for the first half of 2016. Non-GAAP net income for the first half of 2017 was $7.2 million, or $0.21 per fully diluted common share, compared to non-GAAP net income of $7.6 million, or $0.23 per fully diluted common share for the first half of 2016.

With the exception of the income tax rate, the Company is reiterating its full year 2017 financial guidance, as summarized below, and expects revenues in the third quarter of 2017 to be between $46.5 million and $47.5 million.


                                     2017 Financial Guidance Summary
                                     -------------------------------

    Total revenues                                                                                               $188 Million - $192 Million

    ---

    Product revenues                                                 Year-over-year mid-single digits % non-GAAP
                                                                                   revenue increase
    ---                                                                            ----------------

    Tissue processing revenues                                        Year-over-year mid-single digits % revenue
                                                                                       increase
    ---                                                                                --------

    Gross margins                                                                                                          Between 68% - 69%

    ---

    R&D expenses                                                                                               $17.0 Million - $19.0 Million

    ---

    Income tax rate                                                                                                                  Mid 10%

    ---

    Non-GAAP income per common share                                                                                           $0.40 - $0.43

    ---

All numbers in the table above are GAAP except where expressly referenced as non-GAAP. The Company does not provide GAAP income per common share on a forward-looking basis because the Company is unable to predict with reasonable certainty business development and acquisition-related expenses, purchase accounting fair value adjustments, and any unusual gains and losses without unreasonable effort. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP.

The Company's financial guidance for 2017 is subject to the risks identified below.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Investors should consider this non-GAAP information in addition to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial information may not be the same as similar measures presented by other companies. The Company's non-GAAP revenues include (as applicable) On-X revenues for the period in 2016 prior to the closing of the acquisition and excludes revenues for the HeRO Graft and ProCol product lines for 2016. The Company's other non-GAAP results exclude (as applicable) business development expenses; gain on sale of business components; amortization expenses; and inventory basis step-up expense. The Company believes that these non-GAAP presentations provide useful information to investors regarding unusual non-operating transactions and the operating expense structure of the Company's existing and recently acquired operations, without regard to its on-going efforts to acquire additional complementary products and businesses and the transaction and integration expenses incurred in connection with recently acquired and divested product lines. The Company believes it is useful to exclude certain expenses because such amounts in any specific period may not directly correlate to the underlying performance of its business operations or can vary significantly between periods as a result of factors such as new acquisitions, or non-cash expense related to amortization of previously acquired tangible and intangible assets. The Company does, however, expect to incur similar types of expenses in the future, and this non-GAAP financial information should not be viewed as a statement or indication that these types of expenses will not recur.

Webcast and Conference Call Information

The Company will hold a teleconference call and live webcast tomorrow at 8:00 a.m. Eastern Time to discuss the results followed by a question and answer session hosted by Mr. Mackin.

To listen to the live teleconference, please dial 201-689-8261 a few minutes prior to 8:00 a.m. A replay of the teleconference will be available July 25 through July 31, and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The conference number for the replay is 13665887.

The live webcast and replay can be accessed by going to the Investor Relations section of the CryoLife website at www.cryolife.com and selecting the heading Webcasts & Presentations.

About CryoLife, Inc.

Headquartered in suburban Atlanta, Georgia, CryoLife is a leader in the manufacturing, processing, and distribution of medical devices and implantable tissues used in cardiac surgical procedures. CryoLife markets and sells products in more than 80 countries worldwide. For additional information about CryoLife, visit our website, www.cryolife.com.

Statements made in this press release that look forward in time or that express management's beliefs, expectations, or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made. These statements include those regarding our financial guidance for 2017 and our ability to keep on track to achieve our 2017 financial guidance and to continue to build CryoLife into a higher growth, higher margin company. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These risks and uncertainties include that the expected benefits of our focus on certain key initiatives may be incorrect or may not be achieved; we may not achieve the growth in core products that we expect; we may not continue to make progress at all or as quickly as we would like on certain items that negatively impacted the fourth quarter of 2016; we may not achieve the financial benefits of moving to direct sales channels in Canada, Belgium, the Netherlands, and Luxembourg and expanding our direct sales operations in Europe; and our business development efforts may not be successful. These risks and uncertainties include the risk factors detailed in our Securities and Exchange Commission filings, including our Form 10-K for the year ended December 31, 2016, and our subsequent filings with the SEC. CryoLife does not undertake to update its forward-looking statements.


                                                   CRYOLIFE, INC. AND SUBSIDIARIES

                                                         Financial Highlights

                                                (In thousands, except per share data)



                                                                                 Three Months Ended                Six Months Ended

                                                                                    June 30,                     June 30,
                                                                                    --------                     --------

                                                                                2017                2016         2017                2016
                                                                                ----                ----         ----                ----

    Revenues:

    Products                                                                            $30,094              $30,045                       $57,490            $57,063

    Preservation services                                                              17,724               17,038                        35,387             33,036

    Total revenues                                                                     47,818               47,083                        92,877             90,099
                                                                                       ------               ------                        ------             ------


    Cost of products and preservation services:

    Products                                                                            6,959                7,698                        14,976             14,701

    Preservation services                                                               7,954                9,084                        15,484             17,476
                                                                                        -----                -----                        ------             ------

    Total cost of products and

    preservation services                                                              14,913               16,782                        30,460             32,177
                                                                                       ------               ------                        ------             ------


    Gross margin                                                                       32,905               30,301                        62,417             57,922
                                                                                       ------               ------                        ------             ------


    Operating expenses:

    General, administrative, and marketing                                             23,389               22,436                        46,260             48,710

    Research and development                                                            4,728                3,279                         8,821              5,888
                                                                                        -----                -----                         -----              -----

    Total operating expenses                                                           28,117               25,715                        55,081             54,598
                                                                                       ------               ------                        ------             ------

                                                                                  --                     --                         --             (7,915)

       Gain from sale of business components

    Operating income                                                                    4,788                4,586                         7,336             11,239
                                                                                        -----                -----                         -----             ------


    Interest expense                                                                      834                  797                         1,635              1,514

    Interest income                                                                      (55)                (18)                         (95)              (30)

    Other (income), net                                                                 (134)                (58)                         (91)             (167)
                                                                                         ----                  ---                           ---               ----


    Income before income taxes                                                          4,143                3,865                         5,887              9,922

    Income tax expense                                                                    980                1,518                           501              5,034
                                                                                          ---                -----                           ---              -----


    Net income                                                                           $3,163               $2,347                        $5,386             $4,888
                                                                                         ======               ======                        ======             ======


    Income per common share:

    Basic                                                                                 $0.09                $0.07                         $0.16              $0.15
                                                                                          =====                =====                         =====              =====

    Diluted                                                                               $0.09                $0.07                         $0.16              $0.15
                                                                                          =====                =====                         =====              =====


    Weighted-average common shares outstanding:

    Basic                                                                              32,664               32,010                        32,552             31,519

    Diluted                                                                            33,814               32,764                        33,739             32,270


                                                      CRYOLIFE, INC. AND SUBSIDIARIES

                                                           Financial Highlights

                                                              (In thousands)



                                                                                      Three Months Ended         Six Months Ended

                                                                                           June 30,                  June 30,
                                                                                           --------                  --------

                                                                                                    2017                      2016             2017    2016
                                                                                                    ----                      ----             ----    ----

    Products:
                                                                                                                               
    $                                   
    $
    BioGlue and BioFoam                                                                                  $16,683                            16,187          $32,364             31,503

    On-X                                                                                           9,862                             9,554          18,722              16,269

    CardioGenesis cardiac laser therapy                                                            2,056                             1,860           3,641               3,844

    PerClot                                                                                          936                             1,042           1,755               2,033

    PhotoFix                                                                                         557                               490           1,008                 871

    HeRO Graft                                                                                        --                              912              --              2,325

    ProCol                                                                                            --                               --             --                218

              Total products                                                                      30,094                            30,045          57,490              57,063
                                                                                                  ------                            ------          ------              ------


    Preservation services:

    Cardiac tissue                                                                                 8,477                             7,548          15,979              13,976

    Vascular tissue                                                                                9,247                             9,490          19,408              19,060
                                                                                                   -----                             -----          ------              ------

    Total preservation services                                                                   17,724                            17,038          35,387              33,036
                                                                                                  ------                            ------          ------              ------


    Total revenues                                                                                       $47,818                           $47,083          $92,877            $90,099
                                                                                                         =======                           =======          =======            =======


    Revenues:

       U.S.                                                                                              $34,712                           $34,198          $68,246            $66,436

    International                                                                                 13,106                            12,885          24,631              23,663
                                                                                                  ------                            ------          ------              ------

    Total revenues                                                                                       $47,818                           $47,083          $92,877            $90,099
                                                                                                         =======                           =======          =======            =======



                                                                                           June 30,                December 31,

                                                                                                    2017                      2016
                                                                                                    ----                      ----


    Cash, cash equivalents, and restricted securities                                                    $53,248                           $57,341

    Total current assets                                                                         152,211                           147,233

    Total assets                                                                                 322,221                           316,140

    Total current liabilities                                                                     25,771                            30,102

    Total liabilities                                                                            103,160                           107,157

    Shareholders' equity                                                                         219,061                           208,983


                                                            CRYOLIFE, INC. AND SUBSIDIARIES

                                                          Reconciliation of GAAP to Non-GAAP

                                                    Net Income and Diluted Income per Common Share

                                                         (In thousands, except per share data)



                                                                                         Three Months Ended                Six Months Ended

                                                                                            June 30,                         June 30,
                                                                                            --------                         --------

                                                                                        2017                2016             2017                2016
                                                                                        ----                ----             ----                ----

    GAAP:

    Income before income taxes                                                                   $4,143                   $3,865                         $5,887                $9,922

    Income tax expense                                                                            980                    1,518                            501                 5,034
                                                                                                  ---                    -----                            ---                 -----

    Net income                                                                                   $3,163                   $2,347                         $5,386                $4,888
                                                                                                 ======                   ======                         ======                ======


    Diluted income per common share:                                                              $0.09                    $0.07                          $0.16                 $0.15
                                                                                                  =====                    =====                          =====                 =====


    Diluted weighted-average common

    shares outstanding                                                                         33,814                   32,764                         33,739                32,270



    Reconciliation of income before income

    taxes, GAAP to net income, non-GAAP:


    Income before income taxes, GAAP                                                             $4,143                   $3,865                         $5,887                $9,922

    Adjustments:

    Business development expenses                                                               1,094                    1,067                          1,382                 6,635

    Gain on sale of business components                                                   --                       --                           --              (7,915)

    Amortization expense                                                                        1,141                    1,156                          2,283                 2,118

    Acquisition inventory basis step-up expense                                                    63                      902                          2,112                 1,467

    Income before income taxes, non-GAAP                                                        6,441                    6,990                         11,664                12,227


    Income tax expense calculated at 38% normalized

    tax rate                                                                                    2,448                    2,656                          4,432                 4,646
                                                                                                -----                    -----                          -----                 -----

    Net income, non-GAAP                                                                         $3,993                   $4,334                         $7,232                $7,581


    Reconciliation of diluted income per

    common share, GAAP to diluted income per

    common share, non-GAAP:


    Diluted income per common share, GAAP:                                                        $0.09                    $0.07                          $0.16                 $0.15

    Adjustments:

    Business development expenses                                                                0.03                     0.03                           0.04                  0.20

    Gain on sale of business components                                                   --                       --                           --               (0.24)

    Amortization expense                                                                         0.03                     0.03                           0.07                  0.06

    Acquisition inventory basis step-up expense                                           --                     0.03                          0.06                  0.04

    Tax effect of non-GAAP adjustments                                                         (0.02)                  (0.03)                        (0.07)               (0.02)

    Effect of 38% normalized tax rate                                                 (0.01)                       --                       (0.05)                 0.04
                                                                                       -----                       ---                        -----                  ----

    Diluted income per common share,

     non-GAAP:                                                                                    $0.12                    $0.13                          $0.21                 $0.23


    Diluted weighted-average common

    shares outstanding                                                                         33,814                   32,764                         33,739                32,270


                                                           CRYOLIFE, INC. AND SUBSIDIARIES

                                                          Reconciliation of GAAP to Non-GAAP

                                            Revenues; Gross Margin; General, Administrative, and Marketing

                                                        (In thousands, except per share data)



                                                              Three Months Ended                                     Six Months Ended

                                                                 June 30,                                                June 30,
                                                                 --------                                                --------

                                                            2017                      2016         Growth Rate                           2017                    2016  Growth Rate
                                                            ----                      ----         -----------                           ----                    ----  -----------

    Reconciliation of total revenues, GAAP

    to total revenues, non-GAAP:

    Total revenues, GAAP                                             $47,818                                  $47,083           2%                             $92,877                      $90,099 3%

    Plus: On-X pre acquisition revenues                       --                                      --                                                  --                       1,627

    Less: HeRO revenues                                       --                                   (912)                                                  --                     (2,325)

    Less: ProCol revenues                                     --                                      --                                                  --                       (218)
                                                             ---                                     ---                                                 ---                        ----

    Total revenues, non-GAAP                                         $47,818                                  $46,171           4%                             $92,877                      $89,183 4%
                                                                     =======                                  =======                                          =======                      =======



                                                            Three Months Ended                                                           Six Months Ended

                                                                 June 30,                                                                 June 30,
                                                                 --------                                                                 --------

                                                            2017                      2016                                               2017                    2016
                                                            ----                      ----                                               ----                    ----

    Reconciliation of gross margin %,

    GAAP to gross margin %,

    non-GAAP:

    Total revenues, GAAP                                             $47,818                                  $47,083                                          $92,877                      $90,099

    Gross margin, GAAP                                               $32,905                                  $30,301                                          $62,417                      $57,922

    Gross margin %, GAAP                                     69%                                     64%                                                 67%                         64%


    Gross margin, GAAP                                               $32,905                                  $30,301                                          $62,417                      $57,922

    Plus: Acquisition inventory basis step-

    up expense                                                63                                      902                                                2,112                        1,467
                                                             ---                                      ---                                                -----                        -----

    Gross margin, non-GAAP                                           $32,968                                  $31,203                                          $64,529                      $59,389
                                                                     =======                                  =======                                          =======                      =======

    Gross margin %, non-GAAP                                 69%                                     66%                                                 69%                         66%


                                                            Three Months Ended                                                        Six Months Ended

                                                                 June 30,                                                                 June 30,
                                                                 --------                                                                 --------

                                                            2017                      2016                                               2017                    2016
                                                            ----                      ----                                               ----                    ----

    Reconciliation of general,

    administrative, and marketing,

    expense, GAAP to general,

    administrative, and marketing,

    expense, non-GAAP

    General, administrative, and marketing

    Expense, GAAP                                                    $23,389                                  $22,436                                          $46,260                      $48,710

    Less: Business development

    expenses                                             (1,094)                                 (1,067)                                             (1,382)                     (6,635)

    General, administrative, and

    marketing expense,

    non-GAAP                                                         $22,295                                  $21,369                                          $44,878                      $42,075
                                                                     =======                                  =======                                          =======                      =======


    Contacts:


    CryoLife                                              The Ruth Group

    D. Ashley Lee                                         Zack Kubow

    Executive Vice President, Chief Financial Officer and 646-536-7020
    Chief Operating Officer
    Phone: 770-419-3355                                   zkubow@theruthgroup.com

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