rti surgical
TRANSCRIPT
Executive summaryRTISurgicalInc.• Thecompanyhasawelldiversifiedproductportfolioinacompetitivemarket• Inordertocompete,overthelast4-5yearsthecompanyhastakenon~$79Mofdebttofundcapitalexpenditures• Thestrategyhasadded$100Minsalesandpromisinggrowth;however,thecompanymayfacemorecompetitiveheadwindsatanewscale• ArecentresignationoftheCEOandtheinvolvementofanactivistcouldhelpthecompanyreduceitsdebtandconsolidateitsmarketposition• RTIisapromisingenterprisethatneedshelptorestructureitsbalancesheet
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Overview
RTISurgical,Inc.isengagedinproducingorthopedicandothersurgicalimplantsthatrepairandpromotethenaturalhealingofhumanboneandotherhumantissues.Thebusinessprimarilyconsistsofsixcategories,suchasspine,sportsmedicine,ortho-fixation,bonegraftsubstitutesandgeneralorthopedic(BGSandgeneralorthopedic),dentalandsurgicalspecialties. 3
RTISurgicalInc.(NASDAQ:RTIX)
Product lines
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Cardiothoracic(13,6024.8%)Cardiothoracicimplantsofferincreasedstabilityandflexibilityforsternalclosures,ranging fromroutineclosurestocomplex,high-riskclosures.
Extremities($42,28315.0%)Usedinsurgicalproceduressuchaschronicwoundsandfillingofbonevoiddefects.
Spine($76,96827.3%)RTIprovidessurgeonswithavarietyofbiologic, metalandsynthetic-basedimplantsforuseinspinalsurgery.ImplantsincludeallograftandPEEK-OPTIMA® (fromInvibio®BiomaterialsSolutions) spacersalongwithspinalstabilizationdevicesusedprimarily incervicalandthoracolumbar fusionprocedures.
2015Revenueinthousands andpercentageoftotalrevenue
Product lines cont.
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Orthobiologics ($79,20628.1%)Orthobiologics includebiologicandsynthetic-basedmoldableandflowable bonevoidfillers,chipsandcubesandcellularallogeneicbonegrafts.
SportsMedicine($46,73516.5%)RTIofferssurgeonsbiologicoptions forsofttissue,woundandbonegraftneedsusedinsurgicalproceduressuchasligamentreconstruction,meniscustransplantationandosteochondral resurfacing.
SurgicalSpecialties($23,4998.3%)Theseimplantsareusedinsurgeriessuchasherniaorothercomplexabdominalwallrepaircasesandpostmastectomybreastreconstruction.
2015Revenueinthousands andpercentageoftotalrevenue
Top institutional holders
Paradigm CapitalManagement 8.77%GlenCapitalPartnersLLC8.36%DimensionalFundAdvisorsLP6.49%Krensavage AssetManagement,LLC6.29%
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Krensavage ismanagedbyMichaelKrensavage thatinvestsinhealthcarestocksandtakesactivistpositioned.Recently,thefirmhasengaged inaproxycontestwithRTISurgicaltoreduceitsspending andappointnewboardmembers.
Financial comparisons
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8/29/16 RTIX GMED KTWO
Market Cap $193.95M $2.2B $684.86M
Enterprise Value $255.64M $1.85B $707.87M
P/E 46.76 18.95 16.80
P/S 0.70 3.98 3.05
P/B 1.06 2.84 2.56
EV/Revenue 0.92 3.35 3.16
EV/EBITDA 7.24 9.48 -69.72
Recent news: resignation of CEO
• August15,2016• ALACHUA,Fla.--(BUSINESSWIRE)--RTISurgicalInc.(“RTI”or“thecompany”)(Nasdaq:RTIX),aleadingglobalsurgicalimplantcompany,todayannouncedthatBrianK.HutchisonhasinformedtheRTIboardofdirectorsthathehasdecidedtoretirefromhispositionaspresidentandchiefexecutiveofficerandstepdownfromtheboardofdirectors.HutchisonhasagreedtoremaininhiscurrentrolestoassisttheRTIboardandmanagementteamwithanorderlytransitiontoanewleader.RTI’sboardiscommencingasearchforthechiefexecutiveofficerposition.
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Quick conclusion
• Thecurrentbusinessshowsstronggrowthandhassomecompetitiveadvantages.• Thestrategicplanembarkedon5yearsagohasdiversifiedandbroadentheproductportfoliosinspineandorthopedics.• However,mismanagementofnetworkingcapitalandrisingdebtlevelshasthepotentialtoguideRTItowardsapathofvaluedestruction.• AlongwithKrensavage,anotheractivistcanhelpthecompanymanageitsfinancesresponsiblyoverthenext3yearstoconsolidateitsbalancesheetandgainavaluationsimilartoitspeers.
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