Not quite profitable, IPO star K2M cashes out investors with $177M in 2015

K2M's Serengeti complex minimally invasive retractor system--Courtesy of K2M

Spinal implant player K2M ($KTWO) has raised $17 million for itself, while letting shareholders sell $85 million worth of shares, in its latest offering. This is the second follow-on for the company since its May 2014 IPO; last time around this February the company garnered $92 million for selling shareholders and $38 million for its own needs.

The devicemaker still operates at a loss, so it may need to fill its own coffers more urgently soon than to reward its backers. During the second quarter, it estimated a preliminary net loss of $6.5 million to $8.5 million on about $55.9 million to $56.4 million of revenue for the quarter. Still, that's down from a net loss of $17.7 million during the same quarter a year prior.

K2M has previously said that it expects to achieve profitability in the near-term, with an anticipated positive adjusted EBITDA in 2016 and positive net income on a GAAP basis in 2017.

Investors and the company are cashing in on a share price that has climbed since the IPO that raised $132 million at a share price of $15. The latest offering priced at $22.60 per share, while the prior one was at $18.75 per share.

Wall Street reeled in K2M's share price by about 6% in early trading on the July 8 news that the financing closed, a downward move that's typical for financings and insider sales.

Most of the selling shareholder shares came from one investor--Welsh, Carson, Anderson & Stowe (WCAS), which held 44.5% of the company, or 17.6 million shares.

After the offering, even if the full 900,000 overallotment from the selling shareholders is exercised, WCAS will have 14 million shares, or 34.6% of the company. Ferrer Freeman also sold 2.3 million shares. These two investors were also the selling shareholders in February; prior to that offering, WCAS held almost 60% of the company while Ferrer Freeman had about 6%.

In 2015, K2M expects to be on track for 15% to 17% revenue growth, with an adjusted EBITDA in the range of negative $2 million to positive $2 million. It anticipates gaining 5 to 8 annual 510(k) clearances across its three spinal businesses: complex, minimally invasive and degenerative.

"Our capacity for organic growth and market share gains by leveraging our pipeline of innovative products and expanding our distribution capabilities around the world and our appreciation for the need to drive strong profitability over the next few years," summed up K2M President and CEO Eric Major on a May earnings call.

- here is the release

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