Wright Medical Group 's ( WMGI ) second quarter results have no exceptions as the company again posted a broader loss of $24.0 million or 48 cents per share for the quarter compared with $5.8 million or 13 cents in the same quarter of 2013. The loss was also broader than the Zacks Consensus Estimate of 45 cents.
Reported loss was $53.6 million or $1.08 per share in the quarter compared with $15.5 million or 34 cents per share in the second quarter of 2013. The wider loss can be attributable to the company's rising costs and operating expenses.
Wright Medical Group, Inc - Earnings Surprise | FindTheBest
Revenues in the quarter went up 19.5% (both in reported and constant currency) to $72.4 million, missing the Zacks Consensus Estimate of $74 million. The revenue growth was driven by strong growth in foot and ankles product line.
On a geographic basis, international sales were strong with a 28.4% rise in revenues to $23.0 million. Revenues from domestic market grew 15.7% to $49.3 million in the quarter.
Globally, revenues from Foot and Ankle business surged 25.6% to $46.9 million while the same from the Upper Extremity and Biologics product lines went up 22.4% and 7.0% to $7.45 million and $16.2 million, respectively. However, revenues from Other businesses slid 8.0% to $1.9 million in the quarter.
Gross profit rose 13.8% to $52.4 million as the strong revenue growth more than offset the impact of a 37.4% rise in cost of sales to $20.0 million. However, gross margin decreased 360 basis points (bps) to 72.4% from 76.0% a year ago.
Adjusted operating loss nearly tripled to $22.0 million from $7.9 million in the year-ago quarter as operating expenses jumped 37.7% to $81.5 million in the 2014-second quarter. Consequently, adjusted operating (loss) margin rose significantly to 30.4% from 13.0% a year ago.
Adjusted EBITDA (loss) was $11.6 million in the quarter in sharp contrast to EBITDA of $590 thousand in the second quarter of 2013. Adjusted EBITDA (loss) margin was 16.0% compared with EBITDA margin of 1.0% in the 2013-quarter.
WMGI had cash and cash equivalents and marketable securities of $315.1 million as of Jun 30, 2014, up from $175.4 million as of Dec 31, 2013. The increase was driven by the closures of the MicroPort, Solana Surgical and OrthoPro transactions. Long-term obligations rose to $280.3 million from $275.4 million as of Dec 31, 2013.
In the first six months of the year, cash flow from operations deteriorated significantly to the use of $51.6 million from an inflow of $5.8 million a year ago. Capital expenditures more than doubled to $24.3 million from $9.7 million in the year-ago period. Consequently, free cash flow significantly increased to $75.9 million from $4.0 million in the first half of 2013.
For 2014, WMGI reiterated its revenues guidance of $308-$312 million, reflecting a year-over-year rise of 27-29%. The current Zacks Consensus Estimate of $310 million lies within the projected range.
The expected range of revenues incorporates the effect of short-term dis-synergies due to the closure of transactions with MicroPort, Biotech International, Solana Surgical and OrthoPro.
WMGI also reiterated its previously announced adjusted EBITDA (loss) guidance in the range of $20.0 to $15.0 million for 2014. However, the company still expects to exit the year with positive adjusted EBITDA.
For 2014, WMGI anticipates adjusted loss per share, including stock-based compensation, in the range of $1.28-$1.38. The current Zacks Consensus Estimate of a loss of $1.32 lies within the guided range.
Arlington, TN-based WMGI is a global orthopedic device company specializing in the design, manufacture and marketing of reconstructive joint devices and bio-orthopaedic materials.
Despite being a loss-making company, we rely on the company's turnaround outlook for the full year. We are also optimistic about the company's foot and ankle business, which is a consistently stellar performer.
Currently, WMGI retains a Zacks Rank #2 (Buy). Other medical product stocks that are also worth a look include Symmetry Medical, Inc. ( SMA ), Alere Inc. ( ALR ), and Medtronic, Inc. ( MDT ). Symmetry Medical sports a Zacks Rank #1 (Strong Buy), while both Alere and Medtronic carry the same Zacks Rank as WMGI.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportWRIGHT MEDICAL (WMGI): Free Stock Analysis ReportMEDTRONIC (MDT): Free Stock Analysis ReportSYMMETRY MEDICL (SMA): Free Stock Analysis ReportALERE INC (ALR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research