- The document outlines Invacare Corporation's 4th quarter and full year 2019 financial performance and 2020 focus areas.
- For 2019, operating loss improved 43.1% due to lower SG&A expenses and actions to streamline operations and expand gross profit margins. Adjusted EBITDA improved $22.1 million.
- For 2020, Invacare will focus on sales growth through new products, cost optimization, and process improvements to drive further profitable growth.
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Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
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Invacare Corporation Fourth Quarter & Full year 2019 results
1. 1Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Invacare Corporation
Fourth Quarter and Full Year
2019 Conference Call Webcast
Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
2. 2Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Forward-Looking Statements
This presentation 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, any statement made regarding the company's future results. Actual results may
differ materially as a result of various risks and uncertainties, including those expressed in the
cautionary statement in the company’s earnings press release for the fourth quarter and full year 2019
posted on www.invacare.com/investorrelations, as well as in the company's annual reports on Form
10-K, quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission.
The company may not be able to predict and may have little or no control over many factors or events
that may influence its future results and, except as required by law, shall have no obligation to update
any forward-looking statements.
Financial results presented are as of December 31, 2019, unless otherwise noted.
3. Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020 3
Agenda
EXECUTIVE SUMMARY
• 2019 FINANCIAL PERFORMANCE
• 2019 TRANSFORMATION PLAN HIGHLIGHTS
• 2020 FOCUS TO DRIVE PROFITABLE GROWTH
4Q19 AND 2019 FULL YEAR PERFORMANCE
FULL YEAR 2020 GUIDANCE
4. 4Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
2019 Financial Performance
❑ Operating loss improved by 43.1%, primarily driven by lower
SG&A expenses, partially offset by higher restructuring costs and
negative foreign exchange
❑ Adjusted EBITDA improved by $22.1 million compared to 2018
driven by:
– Reduced constant currency SG&A expenses by nearly $15
million
– Actions which streamlined business operations and
expanded gross profit by 70 bps, with growth across all
segments
– Significant improvement in North America operating results
❑ Significantly improved free cash flow usage by $44.6 million
compared to 2018 driven by:
– Improved operating results and reduced working capital
– Despite higher capital expenditures compared to prior year
($18.3)
$6.6
($10.4)
$28.7
($20.0)
($10.0)
$0.0
$10.0
$20.0
$30.0
$40.0
Operating Loss Adjusted EBITDA
Operating Loss & Adjusted EBITDA
(in millions)
2019 guidance
($52.7)
($8.1)
($60)
($50)
($40)
($30)
($20)
($10)
$0
2018 2019
Free Cash Flow
(in millions)
2018 2019
2018 2019
2019 guidance
5. 5Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
2019 Transformation Plan Highlights
Process Improvements
Streamlined business operations to reduce
costs and to increase competitiveness
✓ Significantly reduced constant currency
SG&A expenses by nearly $15 million
✓ Substantially mitigated the majority of
tariffs which impacted North America
✓ Completed the transfer of manual
wheelchair production in France, which
is expected to generate pre-tax
annualized cost savings of $3.3 million
✓ Announced the consolidation of two
German facilities into one German
facility by the end of 2020
✓ Engaged in strategic long-term program
to modernize IT infrastructure at no
incremental in-period expense
compared to typical spending
New product introductions and portfolio
adjustments set strong foundation
✓ Consolidated –Lower manufacturing and
material costs resulted in a 70 bps
improvement in gross profit
✓ Europe – Constant currency net sales
growth of 4.4% mobility and seating
✓ North America - Growth in higher clinical
value products, including powered
mobility, drove a 200 bps gross margin
improvement as several lower-margin
products were discontinued
New products by category that will drive
future sales growth:
✓ Mobility and seating - Power wheelchair
with standing capabilities, and
electromotive power add-on product
(SMOOV)
✓ Lifestyles – bed, lift, sling and mattress
✓ Respiratory – portable oxygen
concentrator with remote control
Product Innovation & Sales Mix Balance Sheet Flexibility
Took actions to improve capital structure
and to strengthen balance sheet
✓ Extended the maturity of nearly $73
million of convertible notes due in 2021
to 2024, at the same interest rate
✓ Reduced total debt outstanding by
repurchasing $16 million in convertible
notes, at a discount to par
✓ Significantly improved free cash flow
6. 6Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
2020 Focus to Drive Profitable Growth
Sales and Product Innovation
― Increase sales of existing products, with growth to accelerate during the seasonally stronger 2nd half
― More effectively commercialize new products which deliver incremental sales at higher margins
― Invest in sales and marketing talent and increase the number of demo units to drive customer
awareness
― Continue to optimize cost structure which make products more competitive in the marketplace
― Capitalize on benefits of a modern IT infrastructure which delivers a robust customer self-service
platform, improves the customer experience, and drives efficiencies that result in incremental sales
Process Improvements
― Realize the full year benefit of plant consolidations into France and other cost optimization actions
previously actioned
― Manage Germany plant consolidation to minimize duplicate costs and business disruption
― Achieve freight costs savings through a 3rd party logistics provider that streamlines operations
― Modernize IT infrastructure which will streamline the business in late 2020 for North America and in
2021 for Europe
7. Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020 7
Agenda
EXECUTIVE SUMMARY
• 2019 FINANCIAL PERFORMANCE
• 2019 TRANSFORMATION PLAN HIGHLIGHTS
• 2020 FOCUS TO DRIVE PROFITABLE GROWTH
4Q19 AND 2019 FULL YEAR PERFORMANCE
FULL YEAR 2020 GUIDANCE
8. 8Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Key Metrics – 4Q19 Consolidated
❑ Constant currency net sales decreased 2.1%, or $5.1 million
‒ Primarily driven by a decline in respiratory products of
$3.3 million
❑ Gross profit increased 130 bps
‒ Primarily as a result of favorable sales mix and lower
material costs
‒ Partially offset by unfavorable manufacturing
variances and foreign exchange
❑ Constant currency SG&A decreased 4.1%
‒ Driven by restructuring actions
‒ Partially offset by an increase in stock compensation
and bonus expense
❑ Operating loss increased by $2.7 million as an
improvement in SG&A was more than offset by an increase
in higher restructuring costs
❑ Free cash flow improved $2.7 million, to $3.8 million
❑ Adjusted EBITDA improved $7.9 million, to $13.9 million
(in millions USD) 4Q19 4Q18 $ Change
Fav/(Unfav)
% Change
Fav/(Unfav)
Reported Net Sales $232.9 $244.6 $(11.7) (4.8)%
Constant Currency Net Sales $239.5 $244.6 $(5.1) (2.1)%
Gross Profit $68.0 $68.2 $(0.3) (0.4)%
Gross Profit % 29.2% 27.9% 130 bps
Reported SG&A $63.0 $66.9 $3.9 5.8%
Constant Currency SG&A $64.2 $66.9 $2.7 4.1%
Operating Loss $(3.8) $(1.1) $(2.7) (246.3)%
Free Cash Flow $3.8 $1.1 $2.7 239.7%
Adjusted EBITDA $13.9 $6.1 $7.9 130.3%
Compared to 4Q18
9. 9Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Key Metrics – 2019 Consolidated
❑ Constant currency net sales decreased 0.9%, or $8.9
million
‒ Mobility and seating sales growth of $10.2 million
was more than offset by a $19.2 million decrease in
respiratory
‒ Excluding respiratory, net sales increased 1.2%
❑ Gross profit increased 70 bps
‒ Results reflect the effective mitigation of
approximately $5 million of tariffs, leaving less than
$2.0 million of exposure
‒ Lower material and freight costs
❑ Constant currency SG&A improved 5.2%
‒ Driven by restructuring actions
‒ Partially offset by an increase in stock compensation
and bonus expense
❑ Operating loss improved by $7.9 million; impacted by
$8.4 million in higher restructuring costs
❑ Free cash flow improved $44.6 million, to usage of $8.1
million
❑ Adjusted EBITDA improved $22.1 million, to $28.7 million
(in millions USD) 2019 2018 $ Change
Fav/(Unfav)
% Change
Fav/(Unfav)
Reported Net Sales $928.0 $972.3 $(44.4) (4.6)%
Constant Currency Net Sales $963.4 $972.3 $(8.9) (0.9)%
Gross Profit $262.1 $267.7 $(5.6) (2.1)%
Gross Profit % 28.2% 27.5% 70 bps
Reported SG&A $260.1 $281.9 $21.8 7.7%
Constant Currency SG&A $267.3 $281.9 $14.6 5.2%
Operating Loss $(10.4) $(18.3) $7.9 43.1%
Free Cash Flow $(8.1) $(52.7) $44.6 84.7%
Adjusted EBITDA $28.7 $6.6 $22.1 333.9%
Compared to 2018
10. 10Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Segment Performance – Europe
($M) 4Q19 4Q18
% /$∆
YOY
Reported Sales $136.8 $144.0 (4.9%)
Mobility & Seating $64.3 $67.5 (4.7%)
Lifestyles $63.9 $67.2 (5.0%)
Respiratory $4.4 $4.9 (11.3%)
Other $4.3 $4.3 (0.6%)
Operating Income $13.6 $9.1 48.7%
Compared to 4Q18
❑ Constant currency net sales decreased 0.6%
⁻ Driven by minor decreased sales in all product categories
❑ Operating income increased $4.4 million
⁻ Driven by improved gross profit as a result of favorable material,
freight and manufacturing variances
⁻ Reduced SG&A expenses
⁻ Partially offset by lower net sales and unfavorable foreign exchange of
$0.9 million
($M) 2019 2018
% /$∆
YOY
Reported Sales $533.0 $558.5 (4.6%)
Mobility & Seating $249.1 $253.0 (1.5%)
Lifestyles $246.0 $263.3 (6.6%)
Respiratory $19.3 $23.7 (18.9%)
Other $18.7 $18.4 1.2%
Operating Income $36.2 $32.7 10.7%
Compared to Full Year 2018
❑ Constant currency net sales increased 1.2%
⁻ Driven by a 4.4% increase in sales of mobility and seating products
❑ Operating income increased $3.5 million
⁻ Driven by improved gross profit and reduced SG&A expenses
⁻ Partially offset by unfavorable foreign exchange of $3.2 million
4thQuarterFullYear
11. 11Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Segment Performance – North America
($M) 4Q19 4Q18
% /$∆
YOY
Reported Sales $85.3 $87.5 (2.5%)
Mobility & Seating $32.3 $31.4 2.9%
Lifestyles $41.8 $42.0 (0.4%)
Respiratory $10.8 $13.7 (21.0%)
Other $0.4 $0.4 (15.4%)
Operating Loss ($0.3) $(7.4) 96.3%
($M) 2019 2018
% /$∆
YOY
Reported Sales $348.2 $364.6 (4.5%)
Mobility & Seating $122.0 $122.0 0.0%
Lifestyles $173.0 $172.6 0.2%
Respiratory $51.6 $67.8 (23.8%)
Other $1.6 $2.2 (27.8%)
Operating Loss ($7.6) ($32.5) 76.6%
Compared to 4Q18
❑ Constant currency net sales decreased 2.5%
⁻ Mobility and seating net sales growth of 2.8% more than offset by a
20.7% decrease in respiratory products
⁻ Excluding respiratory, net sales increased 0.8%
❑ Gross profit % improved 140 basis points
⁻ Driven by favorable material and freight costs, and improved sales mix
⁻ Partially offset by unfavorable manufacturing variances
❑ Operating loss improved $7.2 million or 96.3%
4thQuarterFullYear
Compared to Full Year 2018
❑ Constant currency net sales decreased 4.3%, or $15.6 million
⁻ Net sales growth in mobility and seating and lifestyles was completely
offset by a $15.9 million decrease in respiratory
⁻ Excluding respiratory, constant currency net sales increased 0.1%
❑ Gross profit % improved 200 basis points
❑ Operating loss improved $24.9 million or 76.6%
12. 12Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Segment Performance – All Other*
All Other Operating Loss* ($8.3) ($0.4) (2,084.8%)
* Includes Asia Pacific, unallocated corporate SG&A and intersegment eliminations.
($M) 4Q19 4Q18
% /$∆
YOY
Reported Sales $10.8 $13.1 (17.7%)
Mobility & Seating $6.5 $8.6 (24.8%)
Lifestyles $2.6 $2.7 (4.2%)
Respiratory $0.2 $0.3 (30.2%)
Other $1.5 $1.5 1.7%
All Other Operating Loss* ($26.6) ($14.4) (84.6%)
($M) 2019 2018
% /$∆
YOY
Reported Sales $46.7 $49.2 (5.1%)
Mobility & Seating $28.4 $31.3 (9.1%)
Lifestyles $10.8 $10.8 0.0%
Respiratory $1.3 $1.3 (3.5%)
Other $6.2 $5.8 6.2%
Compared to 4Q18
❑ Constant currency net sales decreased 14.5%
⁻ Driven by decreased sales of mobility and seating products due to
payor process changes which temporarily affected funding availability
in New Zealand
❑ Operating loss increased $8.0 million
⁻ Driven by increased SG&A expense related to stock compensation and
bonuses
⁻ Decline in operating profit for the Asia Pacific business driven by
lower net sales and increased SG&A costs
Compared to Full Year 2018
❑ Constant currency net sales increased 0.4%
❑ Operating loss increased $12.2 million
⁻ Driven by increased SG&A expense related to stock compensation and
bonuses
⁻ Decline in operating profit for the Asia Pacific business driven by
lower net sales
4thQuarterFullYear
13. 13Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Selected Balance Sheet Metrics
Free Cash Flow
❑ Free cash flow for 4Q19 improved by $2.7 million driven by stronger operating
results
❑ Free cash flow for 2019 improved by $44.6 million
Debt*
❑ $254 million in convertible debt and $29.2 million of other debt, primarily
financing leases
❑ Convertible debt outstanding decreased $16.0 million due to repurchase of notes,
at a discount to par
❑ The revolving credit facility has been undrawn for the last four fiscal years
Balance Sheet
❑ Cash: $80.1 million as of December 31, 2019
❑ The company believes that continued generation of Adjusted EBITDA driven by
operational performance, cash balances on hand, and expected free cash flow will
support the company’s ongoing transformation plans and enable it to address
future debt maturities
Taxes
❑ The company has a U.S. federal tax loss carryforward in excess of $376 million as
of December 31, 2019
4Q19 4Q18
Free Cash Flow (millions) $3.8 $1.1
Cash Conversion Days 64.0 64.0
$300
$117
$283
$80
$0
$100
$200
$300
$400
Debt* Cash & Equivalents
Debt and Cash
(in millions)
Dec 31, 2018 Dec 31, 2019
* Excludes $18.9 million in operating lease obligations capitalized on the balance sheet as a result of adoption of ASU 2016-02, “Leases”, effective 1/1/2019
2019 2018
Free Cash Flow (millions) ($8.1) ($52.7)
14. Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020 14
Agenda
EXECUTIVE SUMMARY
• 2019 FINANCIAL PERFORMANCE
• 2019 TRANSFORMATION PLAN HIGHLIGHTS
• 2020 FOCUS TO DRIVE PROFITABLE GROWTH
4Q19 AND 2019 FULL YEAR PERFORMANCE
FULL YEAR 2020 GUIDANCE
15. 15Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Full Year 2020 Guidance
For 2020, the company anticipates operating results consisting of:
❑ Constant currency net sales growth of 2-4% for the full year:
‒ Flat sales in 1Q20 compared to 1Q19
‒ Typical seasonal sales growth to begin in later quarters
❑ Adjusted EBITDA of at least $45 million:
‒ Further process improvements and cost reductions to occur
though the year, mostly in the second half
‒ Stock compensation expense similar to 2019
❑ Free cash flow generation of at least $5 million:
‒ Free cash flow usage in 1Q20 similar to 1Q19
‒ Increased working capital to support growth
‒ Higher capital expenditures, including ERP related investments
‒ Cash usage to fund restructuring actions, especially in the second
half related to cost savings
These anticipated operating results are in line with previous guidance for
run-rate Adjusted EBITDA in the range of $85-$105 million by fourth
quarter 2020. The $85-$105 million run-rate is not intended to reflect full
year 2021 guidance, which will be provided during the 4Q20 earnings
release.
($52.7)
($8.1)
$5.0
($60)
($40)
($20)
$0
$20
Free Cash Flow
(in millions)
2018 2019 2020 Estimate
$6.6
$28.7
$45.0
$0
$10
$20
$30
$40
$50
Adjusted EBITDA
(in millions)
2018 2019 2020 Estimate
16. Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020 16
THANK YOU FOR YOUR TIME
Q&A
18. 18Invacare 4Q19 Earnings Release Conference Call Webcast Slides – February 10, 2020
Reconciliation of Non-GAAP Performance Metrics to GAAP
Financial Measures
Non-GAAP Financial Measures
Some of the information in this presentation is derived from the company’s
consolidated financial data but not presented in its financial statements
prepared in accordance with U.S. generally accepted accounting principles
(GAAP). Certain of these data are considered “non-GAAP financial
measures” under Securities and Exchange Commission rules. These non-
GAAP financial measures supplement the company’s GAAP disclosures and
should not be considered an alternative to the GAAP measure. The
reconciliations to their most directly comparable GAAP financial measures
are included in Appendix A. The company uses non-GAAP financial
measures including the following:
❑ “Adjusted EBITDA”, which is EBITDA plus equity compensation and
charges related to restructuring activities.
❑ “Adjusted net loss”, which is defined as net loss before income taxes net
of adjusted income taxes.
❑ “Constant currency net sales”, which is net sales excluding the impact of
foreign currency translation.
❑ “Constant currency SG&A”, which is SG&A excluding the impact of
foreign currency translation.
❑ “EBITDA”, which is net loss from continuing operations plus: income
taxes, interest expense-net, net gain or loss on debt extinguishment
including debt financing charges and fees, net gain or loss on
convertible debt derivatives, gain/loss on sale of business, asset write-
downs related to intangible assets, and depreciation and amortization.
❑ “Free cash flow”, which is net cash (used) provided by operating
activities less purchases of property and equipment plus proceeds,
including the advances from sales of property and equipment.
(Dollars in millions) 4Q18 FY18 4Q19 FY19
Net Loss (1.2) (43.9) (18.7) (53.3)
Income Taxes 0.7 9.8 2.0 9.3
Loss Before Taxes (0.6) (34.1) (16.7) (44.0)
Interest Expense* 7.3 28.3 12.9 35.2
Interest Income (0.1) (0.5) (0.1) (0.4)
Net Gain on Convertible Debt Derivatives (7.8) (12.0) 0.0 (1.2)
Operating Loss (1.1) (18.3) (3.8) (10.4)
Operating Loss (1.1) (18.3) (3.8) (10.4)
Depreciation and Amortization** 4.2 16.1 4.4 16.2
EBITDA 3.1 (2.2) 0.5 5.7
Restructuring Charges 1.8 3.5 8.2 11.8
Stock Compensation 1.2 5.3 5.2 11.1
Adjusted EBITDA 6.1 6.6 13.9 28.7
Net Cash Provided by (Used) in Operating Activities 3.1 (46.4) 7.5 2.7
Plus: Sales of Property and Equipment, incl. advances (0.0) 3.6 0.0 (0.1)
Less: Purchases of Property and Equipment (2.0) (9.8) (3.7) (10.9)
Free Cash Flow 1.1 (52.7) 3.8 (8.1)
Reported Net Sales % Change -2.3% 0.6% -4.8% -4.6%
Less: Foreign Exchange Impact -2.3% 2.4% -2.7% -3.7%
Less: Impact of Divested Entities 0.0% 0.0% 0.0% 0.0%
Constant Currency Sales % Change 0.0% -1.8% -2.1% -0.9%
Reported SG&A % Change -7.9% -5.0% -5.8% -7.7%
Less: Foreign Exchange Impact -1.4% 1.7% -1.7% -2.5%
Less: Impact of Divested Entities 0.0% 0.0% 0.0% 0.0%
Constant Currency SG&A % Change -6.5% -6.7% -4.1% -5.2%
* Includes loss to debt extinguishment including financing charges and fees
** Includes asset write downs related to intangible assets