DGAP-News: aap Implantate AG

aap Implantate AG ("aap") achieved sales and EBITDA in line with the guidance in the third quarter of 2017, thereby reaching its financial targets. The company posted sales of EUR 2.6 million (Q3/2016: EUR 2.9 million) in the reporting period which were thus within the forecast corridor of EUR 1.8 million and EUR 3.0 million. EBITDA improved in the third quarter of 2017 by 11% year-on-year to EUR -1.6 million (Q3/2016: EUR -1.8 million) and were thereby likewise in line with the guidance of EUR -1.8 million and EUR -1.2 million. In the first nine months of the current financial year aap realised sales of EUR 8.0 million (9M/2016 like-for-like: EUR 8.1 million^[1]), while EBITDA improved by 8% to EUR -4.9 million (9M/2016: EUR -5.3 million).

Q3/2017 and 9M/2017 - Key results and progress

- Sales: Trauma sales +11% in Q3 to EUR 2.6 million (Q3/2016: EUR 2.3 million) and +13% in 9M to EUR 7.8 million (9M/2016 like-for-like: EUR 6.9 million¹)

- Earnings: Recurring EBITDA +12% in Q3 to EUR -1.3 million (Q3/2016: EUR -1.5 million) and +27% in 9M to EUR -3.7 million (9M/2016: EUR -5.0 million)

- Gross margin and costs: Significantly higher gross margin than in previous year (Q3 and 9M) due to higher sales share in established markets and trauma sales growth; decrease in personnel costs (Q3 and 9M) as a result of personnel measures implemented in 2016

- Cash flow and balance sheet: Cash need in 9M/2017 totalled EUR 5.4 million with positive effects of working capital reduction (EUR 0.4 million); cash holdings of EUR 19.1 million^[2] and a further high equity ratio of 84%

- Focus on established markets: North America and DACH region as growth drivers; sales in North America +14% in Q3 and +23% in 9M and sales in DACH region +8% in 9M

- LOQTEQ(R): Completion of development activities in connection with the aap foot system and other polyaxial LOQTEQ(R) systems

- Silver coating technology: Focus on preparation of the clinical study for CE and FDA approval

- Voluntary public share buyback offer: Purchase of approx. 2.25 million shares followed by withdrawal and capital reduction leads to cash outflow of around EUR 3.4 million

Q3/2017 and 9M/2017 - Financials

Q3 Sales

9M Sales

Trauma sales developed especially pleasing. Here, aap achieved double-digit growth rates both in the third quarter and the nine-month period. In the third quarter of 2017 trauma sales increased by 11% compared to the corresponding period in the last year to EUR 2.6 million (Q3/2016: EUR 2.3 million) and in the first nine months by 13% to EUR 7.8 million (9M/2016 like-for-like: EUR 6.9 million). Growth drivers were, in particular, the strategically important core markets North America and the DACH region. While sales in North America were up by 14% in the third quarter and by 23% in the first nine months, the DACH region posted an 8% increase in the nine-month period. This reflects the progress achieved in the targeted distribution focus on established markets such as North America, the DACH region and further European countries. The decline in other sales revenues in the quarter and the nine-month period results from the previous year's divestments (aap Joints and aap Biomaterials) and the consequent loss of sales revenues realized with these companies.

Q3 EBITDA

*Includes costs of evaluating strategic options, costs of "Quality First" project, costs of share buyback programme and risk provision for voluntary product recalls
**Includes costs of early termination of long-term licence agreement

EBITDA 9M

*Includes risk provision for voluntary product recalls, costs of "Quality First" project, costs of evaluating strategic options, costs of share buyback programme, costs for personnel measures and recertification costs in connection with the disposal of aap Joints GmbH
**Includes Q2/2016 initial sales revoked in Q4/2016, costs for personnel measures, costs of early termination of long-term licence agreement and recertification costs in connection with the disposal of aap Joints GmbH

EBITDA was burdened both in the third quarter and the first nine months of 2017 and in the same periods of the previous year by one-time effects, so a comparison based on Recurring EBITDA (EBITDA without one-time effects) makes sense. Adjusted for the above-mentioned one-time effects, recurring EBITDA improved by 12% in the third quarter of 2017 to EUR -1.3 million (Q3/2016: EUR -1.5 million) and by 27% in the first nine months of the current financial year to EUR -3.7 million (9M/2016: EUR -5.0 million). This reflects the aimed development: a focus on established markets with higher profit margins and simultaneous a disciplined cost management to improve operational performance. These areas of activity are of central significance for the management in the financial year 2017.

Outlook for FY/2017
Against the background of the results realised in the year to date and the outlook for the fourth quarter, aap expects sales and EBITDA to be at the lower end of the guidance for financial year 2017.

^[1] Like-for-like 9M/2016 sales of EUR 8.1 million are based on reported sales of EUR 8.8 million taking into account initial sales invoiced in Q2/2016 and revoked in course of drawing up the annual financial statements for 2016; like-for-like trauma sales of EUR 6.9 million in 9M/2016.

^[2] In the consolidated balance sheet of 09/30/2017 EUR 14.9 million is stated as cash and cash equivalents, while cash with banks totalling EUR 4.2 million is shown under current and non-current other financial assets as it was pledged to secure financial liabilities respectively cash payments were made to secure bank guarantees granted to third parties.