Invacare readies to 'accelerate'

ELYRIA, Ohio - Invacare reported an adjusted EBITDA of only $5.1 million for the second quarter toward its goal of at least $20 million by the end of 2019, but company officials expect performance to improve in the back half of the year.

“We expect performance to accelerate in the second half of the year due to typical seasonality of sales, the normalization of French production transfer, supply chain initiatives to expand gross margin and realizing the benefit of our cost reductions,” said Matthew Monaghan, chairman, president and CEO, during a conference call to discuss the company's financial results. “As a result, we have full confidence in attaining our guidance of adjusted EBITDA of $20 million in 2019.”

Highlights from Invacare's financial results include an operating loss of $4.5 million for the second quarter of 2019 vs. $6.8 million for the same period last year, driven by reduced SG&A expense and partially offset by lower gross profit, higher restructuring costs and unfavorable foreign exchange; and free cash flow of $300,000 vs. negative $24.6 million, a turnaround made possible by planned reductions in working capital and lower operating loss.

Hiccup in mobility and seating

Invacare reported net sales decreased about 2.6% in the second quarter on a constant currency basis for its mobility and seating segment, the result of the company's decision late last year to discontinue a number of legacy manual products to “renovate and make space in our portfolio,” Monaghan said.

“I don't think we thought we were going to skin our knee with those,” he said. “Turns out, after we had gotten through the inventory of those, it did turn out to be a headwind for us. But we've got great new products in the pipeline, and before too long, we'll have an even stronger replacement.”

That pipeline includes a new sit-to-stand power seating system, the SMOOV manual wheelchair power add-on and a bariatric manual wheelchair.

Invacare's performance in this product category was also impacted by a new power device with a more simplified seating system that turned out to be a lower margin product, Monaghan said.

“That was also a bit of a mix shift for this quarter,” he said. “We think it's temporary; it's a great product. We'd expect that to get back to normal levels as unit sales grow and margin and revenue expand in the following quarters.”

Profit returns to respiratory

Invacare reported net sales decreased 23.5% in the second quarter on a constant currency basis for its respiratory segment, but “profit from the segment is actually up,” Monaghan said.

“You can see the interesting results that despite being down 20% to 30% in the last few quarters, profit from that segment is actually up,” he said. “So we look forward to the market coming back in a more normalized fashion, which we anticipate happens in the second half of this year as fleet owners and operators start planning for the winter flu season. But even if it's late coming back, we expect to continue to strengthen in that marketplace.”