DGAP-News: aap: Growth in Q3 and 9M/2018 with sales and EBITDA in line with guidance; Milestone in silver coating technology on way to human study

aap Implantate AG ("aap") achieved sales and EBITDA in line with the guidance in the third quarter of 2018. Sales in the third quarter of 2018 grew by 5% on the corresponding period in the previous year to EUR 2.7 million (Q3/2017: EUR 2.6 million) and were therefore within the forecast of EUR 2.0 million to EUR 3.8 million. EBITDA improved by 6% in the third quarter of 2018 year-on-year to EUR -1.5 million (Q3/2017: EUR -1.6 million) and was thus also in line with the guidance of EUR -1.8 million to EUR -0.9 million. With respect to the nine-month period, sales increased by 2% to EUR 8.2 million (9M/2017: EUR 8.0 million). EBITDA improved by 6% in the first nine months of 2018 compared to the same period of the previous year to EUR -4.6 million (9M/2017: EUR -4.9 million).
 

Q3/2018 and 9M/2018 - Key results and progress
 

- Sales: Trauma sales increase in Q3 and 9M by 7% to EUR 2.8 million and by 6% to EUR 8.2 million respectively

- Earnings: EBITDA improves in Q3 and 9M by 6% to EUR -1.5 million and EUR -4.6 million respectively

- Gross margin and costs: Gross margin^[1] of 80% in Q3 and 78% in 9M remains at a good level, even though temporarily influenced by reduced share of high margin US sales in total sales; slight increase in personnel costs; overall declining trend in other expenses in the nine-month period

- Cash flow and balance sheet: Cash need in 9M/2018 totalling EUR 6.0 million with positive effects of working capital reduction (EUR 0.3 million); cash holdings of EUR 10.3 million^[2] and continued high equity ratio of 83%

- Focus on established markets: Continued positive development in Germany with 8% sales growth in Q3 and 12% in 9M; 28% sales growth in international business (ex-US) in Q3 and 9M mainly driven by Europe, Latin America and South Africa

- LOQTEQ(R): Focus on European approval of polyaxial LOQTEQ(R) systems and development of sterile packaging for implants; additional approval applications submitted to FDA for, inter alia, foot and periprosthetic system

- Silver coating technology: Convincing results of animal study conducted with AO Research Institute Davos are a milestone on the way to a human clinical study; EUR 0.7 million funding from Federal Ministry of Education and Research for preparation of human clinical study; finalisation phase of required validations and documents for submission for approval of human clinical study - start targeted for H1/2019

Q3/2018 and 9M/2018 - Financials
 

Q3 Sales (reported)

Q3 Sales (constant exchange rates)

9M Sales (reported)

9M Sales (constant exchange rates)

Assuming constant US$-EUR exchange rates, year-on-year sales grew by 5% and 3% respectively in the third quarter and the first nine months of 2018.
 

Regarding trauma sales, aap registered in the third quarter and the first nine months of 2018 year-on-year growth of 7% to EUR 2.8 million (Q3/2017: EUR 2.6 million) and 6% to EUR 8.2 million (9M/2017: EUR 7.8 million) respectively. In Germany the company continued the positive development of the previous quarters, increasing sales by 8% in the third quarter and by 12% in the first nine months. In contrast, the sales development in North America in the third quarter and thus in the first nine months fell short of expectations. In this market aap could not sign further contracts with global partners in financial year 2018, and distribution business was temporarily burdened by the loss of certain distributors. In response to the current development of the distribution business in North America the company has strengthened its sales team and has already signed 12 new contracts with distributors in recent months that should be reflected in corresponding sales dynamics in coming quarters. The international region has continued to develop positively: In both the third quarter and in the first nine months aap achieved 28% growth. The background to this positive development was primarily the expansion of business with existing customers and the acquisition of new customers, for example in South Africa, and Chile.
 

EBITDA Q3

EBITDA 9M

Based on the increased total operating performance, a continued good gross margin level and an overall declining trend in other expenses in the nine-month period, EBITDA improved by 6% both in the third quarter and the first nine months of 2018 to EUR -1.5 million (Q3/2017: EUR -1.6 million) and EUR -4,6 Mio. EUR (9M/2017: EUR -4.9 million).
 

Outlook

We are confident that the measures undertaken in North America will be reflected in corresponding sales dynamics again in coming quarters. At the same time we want to continue the positive development in Germany and at the international level. In addition, we are increasingly working on various measures for the step-up strategy implementation to develop aap into a sustainably growing pure player in trauma and to unlock the inherent value of the promising and innovative product and technology base.
 

For the financial year 2018 aap anticipates sales of EUR 10.0 million to EUR 11.7 million and EBITDA of EUR -6.9 million to EUR -5.9 million.
^[1] In terms of sales revenues, changes in inventories of finished goods and work in progress and cost of purchased materials and services.

^[2] In the consolidated balance sheet of 09/30/2018 EUR 7.3 million is stated as cash and cash equivalents, while cash with banks totalling EUR 3.0 million is shown under current and non-current other financial assets as it was pledged to secure financial liabilities respectively cash payments were made to secure bank guarantees granted to third parties.