K2M reported their first quarter 2014 financial results and analysis for the future given the company's initial public offering earlier this year.
Here are five things to know about K2M's first quarter financial report:
1. Total revenue was up 20.4 percent year-over-year, reaching $42.3 million. International revenue grew 34.8 percent and domestic revenue was up 15.2 percent, reaching $29.8 million. The increase was primarily driven by greater sales volume in the United States due to an expanding customer base and product mix changes, attributable to the pull-through of the company's degenerative product portfolio.
2. Complex spine represented 34 percent of the company's United States revenue; minimally invasive surgery was 22 percent; and degenerative solutions were 44 percent. During the first quarter, the company expanded its minimally invasive portfolio with FDA clearance of the CAYMAN Minimally Invasive system. The company has brought 11 devices to the market since 2011 .
3. Operations loss in the first quarter reached $13.7 million, an increase over the $11.7 million from last year. Net loss attributable to stockholders for the first quarter was $15.9 million — down from last year. Operating expenses increased 15 percent in the first quarter, driven primarily by increased sales commissions from increased sales volumes as well as higher employee compensation costs from incremental direct sales employees.
In a NASDAQ CEO Signature Series report, K2M CEO Eric Major said, "Our objective is to continue to deliver 14 percent to 16 percent growth on an annual basis. We've invested heavily. Our losses in the past couple of years was because of that investment in people; our investment in our engineering team our distribution sales force and really to build out and grab market share."
4. K2M reported cash and cash equivalents of $11.1 million when the quarter closed on March 31; however, the company completed its initial public offering in May of approximately $120 million. The company anticipates full year revenue to be in the range of $180 million to $183 million for 2014, representing a 14 percent to 16 percent increase year-over-year. The company expects full year adjusted EBITDA to be in the range of $(9) million to $(11) million.
5. Gross profits increased 14.2 percent to $27.8 million, but the gross margin was down 360 basis points year-over-year to 65.9 percent. The decrease was driven primarily by pricing pressure in the United States and some international markets. Additional changes in the mix of sales between the United States and international markets also contributed to the dip. The company noted amortization of instrument sets increased $0.7 million to $1.7 million during the quarter, which reflects increased inventory purchases that will support revenue growth.
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