Medicrea Reports Third Quarter 2019 Financial Results - Seite 2

(1):	Earnings before interest depreciation and amortization

(2):

After IFRS 16 "Leases" adjustments applicable since January 1, 2019

Sales for the third quarter of 2019 amounted to € 8.2 million, up 20% (+17% at constant exchange rates) versus the third quarter of 2018, on a comparable basis, driven mainly by strong sales growth of +22% in the United States, the primary market for Medicrea and main gross margin contributor. Cumulative sales at the end of September 2019 amounted to € 24.3 million and increased by +13% on a comparable basis compared to the same period last year (+10% on a constant currency basis). As a reminder, at the beginning of 2019, the Group discontinued two non-strategic distribution activities of bone substitutes and surgical material repairs that had contributed € 2.6 million to revenue from January to September 2018.

Gross margin increased to 82% in the third quarter of 2019 and 79% on a cumulative basis, a remarkable increase of 9 points compared to the end of September 2018. This high rate is the result of a combination of several factors: the change in the sales mix with 60% of sales generated in the United States in the 3^rd quarter, compared to 54% in the 1^st half of 2019, better industrial efficiencies boosted by a decrease in subcontracting, and a favorable exchange rate effect linked to the strengthening of the dollar. The Group has thus achieved its highest level of gross margin since the transfer of its plant to Lyon in early 2017, and approaches the normative threshold of 80%.

Operating expenses amounted to € 23.7 million over the first 9 months of the year, a decrease of € 0.7 million at constant exchange rates compared to the same period last year excluding sales commissions in the United States. The increased revenue in the United States led to an increase in commissions (+€ 1 million at constant exchange rates compared to the end of September 2018).

Operating income before interest depreciation and amortization (EBITDA), after taking into account IFRS 16 changes, was positive at € 2.1 million at the end September 2019 while at break even for the same period in 2018. Given these elements, operating income improved by €1.3 million at -€4.6 million at the end of Q3 2019.

Share-based payments arising from free shares and stock options granted in the last quarter of 2018 amounted to €1.5 million (no cash impact).

The cost of net financial debt increased by € 2.3 million directly related to the $ 30 million bond issued in December 2018 and to a new $6 million stake drawn in September. It includes the interest expense itself for the period (€2.5 million) and an unrealized foreign exchange loss of €1.4 million related to the revaluation of the nominal value of the loan following the strengthening of the dollar. The evolution of the euro/dollar exchange rate over the coming quarters is likely to have a significant impact on the cost of financial debt, both upward and downward, as the Group has not yet been able to hedge the exchange rate and interest rate risk on its dollar borrowings. As an illustration, the change in euro/dollar parity at October 31, 2019 generates an unrealized exchange gain of € 0,7 million in October, cutting down by half the unrealized exchange loss accounted at the end of September.