Anika Therapeutics Inc (ANIK) Q1 2021 Earnings Call Transcript

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Anika Therapeutics Inc (ANIK 0.71%)
Q1 2021 Earnings Call
May 6, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening, ladies and gentlemen, and welcome to Anika's First Quarter 2021 Earnings Conference Call. [Operator Instructions]

I will now turn the call over to Mark Namaroff, Executive Director of Investor Relations and Corporate Communications, please proceed.

Mark Namaroff -- Executive Director of Investor Relations and Corporate Communications

Thank you. Good evening or good afternoon, everyone, and thank you for joining us for Anika's first quarter conference call and webcast. Our first quarter earnings press release was issued after the close of the market today and is available on our Investor Relations website located at www.anika.com, as of the supplementary PowerPoint slides that we'll be using for the discussion today.

With me on the call today is, Dr. Cheryl Blanchard, our President and Chief Executive Officer; and Michael Levitz, Executive Vice President, Chief Financial Officer and Treasurer. During today's call, Cheryl and Mike will review Anika's first quarter 2021 financial results with key business highlights, as well as discuss our view of 2021.

So please take a moment and welcome to slide presentation and I refer to Slide number 2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined by the Securities Exchange Act of 1934. These statements are based on current beliefs and expectations, including statements with respect to the impact of COVID on Anika and are subject to certain risks and uncertainties. The Company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements of future financial data or events occur that differ from our forward-looking statements presented today. Please also see our SEC filings and our most recent Form 10-K and 10-Q for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to a number of adjusted or non-GAAP financial measures, which includes adjusted net income, adjusted EBITDA and adjusted earnings per share, which are used in addition to results presented in accordance with GAAP or Generally Accepted Accounting Principles. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with GAAP financial measures and the reconciliation of GAAP measures they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end -- of the available presentation slides and in our first quarter press release.

And now I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Cheryl Blanchard -- President and Chief Executive Officer

Thanks, Mark. Good evening, everyone, it feels good to start off 2021 with the promise that vaccines and continue to take the measures will start to enable clinicians to perform elective procedures more freely, albeit with COVID restrictions. We continue to recognize there is some ongoing uncertainty as recent history has shown us that people's behavior, vaccine rates and variance will likely continue to cause COVID spikes globally.

That said, now the 2020 is in the rearview mirror, I'm excited that we're positioned for high single-digit to low double-digit revenue growth in 2021 and we're on track to achieve our longer range goals of doubling our revenue by 2024 with the mid-teens compounded growth rate. We're viewing 2021 of the year where we continue our transformational growth strategy, making investments in new products, processes and systems to support the scaling of the business as we continue to emerge from the COVID environment. Today and every day we are focused on our vision and ultimate goal to be the leading joint preservation company helping patients restore active living.

Let me start with the highlights for the first quarter, if you can turn to Slide 3. We began and see procedure rates improved as we progressed through the first quarter that we did experienced some headwinds in Q1 due to the post holiday COVID surge and the series of winter storms in February that impacted the country and industry as a whole.

On the Joint Preservation and Restoration surgical side of the business, revenue increased over 50% from last year with the addition of Arthrosurface and Parcus Medical, which along with organic growth continue to drive the transformative revenue mix shift. In fact Joint Preservation and Restoration represented 36% of total revenues for the quarter, increasing significantly from 20% last year. We're very excited about the progress in our joint preservation business and the integration of Arthrosurface and Parcus into Anika, and we continue to view Joint Preservation and Restoration as a key growth driver.

We see strong global demand for our joint preservation products and believe we have a right to win as orthopedic surgeons view our minimally invasive and regenerative portfolio favorably, particularly in the ambulatory surgical center setting. Our joint pain management business was down 24% from last year's pre-COVID levels, primarily due to ongoing inventory management by our sales and marketing partner J&J Mitek, which continues from 2020 as expected. We are pleased to have a strong partnership with J&J Mitek with the market leading viscosupplement products in the US and to be positioned for continued recovery through 2021.

Overall, our revenue decreased 3% from last year, due to the impact of COVID. On the bottom line, we delivered positive adjusted EBITDA growth for the quarter, lower than last year, due primarily to COVID's impact on volumes, the acquisitions of Parcus and Arthrosurface and the related investments we're making to accelerate our growth in joint preservation. We continue to show a strong financial position with almost $95 million in cash and investments.

Before I hand the call over to Mike to review the financial details, I'd like to walk you through how we see the remainder of 2021 shaping up. Please turn to Slide 4. As we look ahead, we remain focused on achieving our stated goal from our 2019 Investor Day of doubling the revenue of the company by 2024 with double-digit adjusted EBITDA growth. We're currently in the process of planning our 2021 Virtual Investor Day scheduled for June 3rd, where we plan to discuss our product portfolio, commercial strategy, R&D pipeline and financial objectives in more detail and with some additional members of our management team also presenting alongside me and Mike. We'll also provide you with more specifics on how we will achieve our 2024 goals.

As a reminder, we now have an $8 billion global market opportunity that goes well beyond the legacy Anika osteoarthritis pain management business and includes regenerative solutions, soft tissue repair for sports medicine, and bone preserving joint technologies. These joint preservation solutions position us well in the faster growing and higher opportunity areas of early intervention orthopedic care, when compared with the more traditional total joint replacement orthopedic markets. We'll continue to leverage our strength with OrthoVisc and MonoVisc remaining as the number one combined choice for osteoarthritis pain management in the US. And these provide strong positive cash flow that support our commercial and innovation investments to grow our business.

Our worldwide commercial organization is now established to deliver our innovative minimally invasive surgical solutions to clinicians., so the patients that rely on our technologies can resume active living faster. And we'll continue to invest in developing meaningful products, including products using our differentiated HA-based regenerative platform to further leverage our commercial organization and joint preservation surgical call point.

With respect to our clinical study efforts, enrollment continues for both the Cingal and Hyalofast US studies with COVID having an ongoing impact, especially outside the US where travel restrictions prevent our clinical team from traveling to support surgeries and other aspects of the clinical trials at those sites. We will continue to give regular updates on these trials and plan to provide more details during our Investor Day in June.

Please refer to Slide 5. As I previously mentioned, with the acquisitions of Arthrosurface and Parcus, our market opportunity has now expanded to over $8 billion over the course of the last 16-months. Let me provide you with some additional detail. The $1 billion market opportunity in the osteoarthritis pain management that is addressed by the legacy Anikavisc [Phonetic] products is the foundation of the business as we continue to sell our market leading OrthoVisc and MonoVisc AJ injectables through J&J Mitek in the United States and through distributors internationally.

Cingal our second-generation combination HA steroid OA pain management product that we sell in over 35 countries outside the US will be a larger growth driver once approved for sale in the US outside of 2024 playing period. In the more than $1 billion regenerative solutions market, our portfolio is also comprised of legacy Anika products. It includes our single stage AJ-based cartilage repair solution Hyalofast that is sold in over 30 countries outside the US today and our HA enhanced solution to treat insufficiency fractures Tactoset released in late 2019.

We're very pleased with the progress we're making both with respect to interest in and sales of Tactoset and in how it is supporting and driving our broad joint preservation portfolio with the surgeons already in our call point. Leveraging our HA technology and expertise in the future joint preservation products in our R&D pipeline will be a key catalyst for growth for Anika in the coming years. This includes Hyalofast once approved for sale in the US, which is also outside for 2024 planning period. The over $2 billion soft tissue repair market in sports medicine, which we entered with our acquisition of Parcus represents a faster growing opportunity that is focused on and leverages the ambulatory surgical center call point as I previously mentioned.

And lastly, the over $4 billion bone preserving joint solution space, which we entered with our acquisition of Arthrosurface, an innovator in bone-sparing joint technologies for more than 20-years, includes addressing areas of unmet need where the osteoarthritis disease process is further progressed and an implant is needed. Our specialized minimally invasive and bone preserving implants treat progressive osteoarthritis in multiple joints, including the shoulder, hand, wrist and elbow and the foot and ankle. The opportunities in this large addressable markets are significant and highlight why we're focused on the early intervention, joint preservation spaces within that larger orthopedic market.

With that, I'd like to turn the call over to Mike to review our first quarter financials and provide some color about the remainder of 2021 and then I'll provide some closing comments. Mike?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Cheryl. I will now walk you through our results for the first quarter of 2021. If you would please turn to Slide 6. Revenue for the first quarter of 2021 was $34.3 million, a decrease of 3% from the first quarter last year. The year-over-year decrease was due primarily to the impact of COVID on sales volumes, offset by the increase in revenue due to the acquisitions of Arthrosurface and Parcus, which both occurred around the end of January last year.

Joint Preservation and Restoration revenues rose 55% to $12.2 million in the quarter from Q1 of last year, primarily due to the full quarter results from Arthrosurface and Parcus and 3% organic growth over last year's pre-COVID numbers as the impact of COVID begins to lift and reflective of the early progress we are making in the market.

Joint pain management revenues decreased 24% to $19.3 million in the quarter, primarily on the impact of COVID for in-office injectables and associated ordering patterns. As a reminder, J&J Mitek had purchased the pre-COVID levels through the second quarter of last year and had expected to leaner inventories down to historic levels by the end of the fourth quarter. However, due to the post holiday COVID headwinds, they still have higher than normal inventory at year-end. And this continue to impact our purchases from us through the first quarter of this year. At the same time, our royalties this quarter from J&J Mitek, which are based on their end-user sales were back in line with the first quarter of 2020 consistent with our expectation that US viscosupplement are stabilized.

As Cheryl mentioned, as a result of the acquisitions of Arthrosurface and Parcus and continued momentum for our Joint Preservation and Restoration products, our overall revenue mix continued to shift in the first quarter with joint preservation revenue increasing to 36% of Anika's total revenue, up significantly from the same period last year.

Other product revenue of $2.8 million was up, compared to $2 million last year, due to the sale of legacy wound care products. As a reminder, our other product family sales are through distributors and can be lumpy on the quarterly basis. Our gross margin in the first quarter was 61%, which includes an unfavorable 12 point impact or $4.1 million of non-cash acquisition accounting related amortization, and fair value step up expenses that is associated with Arthrosurface and Parcus. Gross margins improved 1 point, compared to Q1 of last year based on favorable cost variances as both periods included the non-cash acquisition accounting related expenses.

From a spending standpoint, while we continue to manage our operating expenses prudently. We are intentionally investing in product development, processes and systems to meet our growth objectives. Our research and development and SG&A expenses together totaled $24.5 million in the first quarter, up from $20.5 million in the same period of 2020, primarily reflecting the acquisitions of Arthrosurface and Parcus, increased incentive-based compensation, as well as additional spending to support future growth, such as investments in our commercial and related support organizations.

During the first quarter, we also recorded a net benefit of $0.8 million to reduce the fair value of our contingent consideration liability associated with the acquisitions of Arthrosurface and Parcus, due primarily to a decrease likelihood that certain milestones will be met. As a reminder, we evaluate the estimated fair value of contingent consideration every quarter and in the first quarter of last year Anika recorded a benefit of $24.5 million based on its initial reduction in estimated contingent consideration as COVID was unfolding.

Our effective tax rate for the quarter was a benefit of 134%, compared to an effective tax rate of 21% in the same period last year, primarily due to the effect of the change in the estimated fair value of contingent consideration. Our net income for the quarter was $2.8 million or $0.20 per diluted share, compared to net income of $5.8 million or $0.40 per diluted share in the first quarter of last year.

Excluding the non-cash charges discussed earlier and other adjustments described both in our earnings release and our online earnings presentation, we achieved adjusted net income of $800,000 or $0.06 per diluted share, compared to $6.5 million or $0.45 per diluted share in the same period last year. We generated adjusted EBITDA in the first quarter of $4.8 million, compared with $9.5 million for the first quarter of last year. Similar to last quarter, the decrease in profitability was primarily due to the unfavorable COVID impact, as well as the addition of Arthrosurface and Parcus and incremental investments supporting our future growth.

Lastly, with regards to our cash flow and capital structure. Our balance sheet remains strong with $94.6 million in cash and investments at the end of the first quarter. We have a remaining contingent consideration liability valued at $30.6 million associated with the acquisitions of Arthrosurface and Parcus, of which $24.8 million is included within current liabilities. We had net cash used for operating activities of $2.4 million during the quarter, due primarily to timing of customer collections in certain tax payments.

Please turn to Slide 7. Now I would like to review our directional outlook for 2021. As we discussed last quarter due to the continued uncertainty associated with COVID in the global market. We are not providing full detailed financial guidance for the quarter and year at this time. At the same time, we would like to share with you qualitative and directionally quantitative insights into our expectations for the year. We continue to believe that market trends are point to a recovery in the second half of 2021, depending on the timing and nature in the United States and globally of vaccine rollouts, the potential for additional COVID spike and other dynamics such as COVID variance. These dynamics remain very fluid and could have a material impact on our results and expectations.

The first quarter demonstrated organic growth in our Joint Preservation and Restoration revenues, as compared to our pre-COVID results in the first quarter of last year. As a result of growing momentum as the impact of COVID lifts. For the full-year 2021, we expect Joint Preservation and Restoration revenue growth in the upper 20% to low 30% growth over 2020. We also continue to believe our Joint Pain Management business is stabilizing and the market is showing gradual signs of recovery. We therefore expect low single-digit percent growth in 2021 Joint Pain Management revenues over 2020.

In other revenues outside of our main product families, we have seen better performance during the first quarter than we expect for the rest of the year, due to the timing of sales of some legacy products. And we continue to expect other revenue for the year to decline mid single-digits, that's compared to 2020.

On a total company basis, based on the strong double-digit growth in Joint Preservation, gradual recovery in Joint Pain Management and lower other legacy product revenues, we therefore expect revenues in 2021 to grow between the high single-digits and low double-digits percent, as compared to 2020, consistent with the directional guidance we provided on our last earnings call in March.

With regards to gross margin, consistent with what we laid out on the March call, we expect gross margins to remain fairly consistent between 2020 and '21, excluding the impact of Arthrosurface and Parcus acquisition related expenses, which continue into 2021. And non-recurring charges, such as those we incurred in the second quarter of last year.

With regards to spending, as we mentioned in 2021 we are increasing our investment in commercial infrastructure and capabilities, including people, systems and processes that support our transformation and will enable us to scale, as we grow. We also will continue to invest in research and development according to the product pipeline we've discussed and will discuss further at our Investor Day in June.

Further as the restrictions associated with COVID lift, we expect marketing and sales-related expenses to increase accordingly. Overall, as we invest ahead of growth in support of our longer-term growth and profitability targets. We expect operating expenses to increase over 2020 as a percentage of revenue. We remain laser focused on our multi-year transformative growth targets and on track for doubling our 2019 revenues by 2024 and delivering double-digit adjusted EBITDA growth off of our 2019 base of profitability.

I will now turn the call back over to Cheryl.

Cheryl Blanchard -- President and Chief Executive Officer

Thanks, Mike. Please turn to Slide 8. In closing, we continue to execute on our strategy and invest in infrastructure that will allow us to efficiently scale business. We believe that we have unique growth opportunities in the early intervention orthopedic space and the ability to leverage our proprietary HA technology into new and innovative products for Joint Preservation and Regenerative solutions.

As Mike described, we view the progress we're making and we'll continue to make in 2021 as the first step in the process to grow the company beyond the legacy HA viscosupplement franchise. Anika now has the product, the sales channel, the people and the new product pipeline to continue to generate substantial shareholder value in the years to come.

Before I take questions, I'd like to take the opportunity to thank the team at Anika. We have a very dedicated group of folks that have worked diligently to bring our great products to customers during COVID through hard work and by carefully following safety protocols, a big thank you to the Anika team.

Thank you all very much for your attention and support of Anika. We look forward to seeing you at our Investor Day on June 3rd. We're happy to take your questions now.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jim Sidoti with Sidoti & Company.

Jim Sidoti -- Sidoti & Company -- Analyst

Hi, good evening. Glad to hear, you guys are doing well. First question I had was on J&J, you mentioned in your script that inventory with high going into Q1, because of COVID. Any update on where that is at the start of Q2?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Hi, Jim, it's Mike. Yes, we did see inventories continuing into the first quarter, but we -- that wasn't that big of a surprise we alluded to that a bit as we are coming out of last year given the storms and the COVID spike at the end of the year. It does not as you noticed, we didn't change our expectations for the year and so we continue to expect low single-digit growth. I -- we don't expect the inventories are going to be as big of an impact as we go forward here. So we're not giving guidance, as I said for the quarters, because just giving COVID and the uncertainty related to it. But from a full-year perspective, absolutely nothing has changed from year-end and the guidance has remained the same.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. And I know you don't want to get too specific and I'm not going to push your full-year, but historically, Q2 is generally up from Q1, I know you said you had some other product sales that might not be coming in -- as high in the rest of the year. So do you think that's enough to change that trend? And you think since 2021 Q2 should be at least as high as Q1?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, Jim, this is Mike again. So one of the things that we've tried to do here is recognize the COVID dynamics and signal that we do expect the second half to be bigger than the first half just as COVID is expected to lift further in the second half. That being said, there are normal dynamics, where the second quarter is generally bigger than the first quarter and that's been the historic pattern, we don't expect that to be different this year.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. And then on the operating expenses, R&D looks well about -- well, I would expect it to be as you know, it's a little bit higher. Is that the new base level that $18 million? Is that what we should assume going forward?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

I'm sorry, Jim. Could you repeat the question.

Jim Sidoti -- Sidoti & Company -- Analyst

[Technical Issues] one-time expense in the SG&A expense was $18 million, a good baseline for SG&A expense going forward?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

I'm sorry, I didn't hear. Thank you. In terms of the SG&A spending, one of the things we saw from Q3 to Q4 is Q4 was little bit lighter than Q3. And there was just in timing at year-end based upon incentive compensation accruals. And so if you look at the trend from going forward to Q1, there was generally normal growth. There was one item in the first quarter that you'll see also in our 10-Q related to a write-off of a legacy system impairment of about $800,000 that impacted G&A in the first quarter.

So apart from that, when you start to look at the trend through last year. I think it's fairly straightforward. The things that are in there driving SG&A growth are the things we talked about, the investment in the team last year with COVID incentive compensation was not at a 100% and so there was a lot of adjustments is clearly was evolving last year. And so, but I think if you put those things aside, there's really nothing different than what we've been saying in terms of these trends.

I did just want to clarify something I want to make sure I answered your last question effectively, because I think you were referring to specifically J&J between the first quarter and second quarter. And we do expect that to be up. On an overall basis, one of the things we called out in our prepared remarks is that other revenue was unusually high in the first quarter, we do expect that to go back down. We sold a good amount of legacy products in the quarter and so we expect that to go down in line with our full-year guidance. So, Q1 was unusually high as it relates to other, but for the rest of the business the normal seasonality applies, subject of course to COVID.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay, and then the last one for me is on inventory, it's down about $3 million in the quarter, sales were up. Is that a function of the -- your quality inventory being sold off? Or is there some other dynamic there?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

There's really nothing unusual going on in inventory. There is really nothing unusual there from a trend perspective. One of the things that we've been trying to do is just make sure that we have adequate inventory to meet demand, but there is a different mix and different things that are happening from quarter-to-quarter. So nothing unusual on the inventory side.

Jim Sidoti -- Sidoti & Company -- Analyst

Alright. Thank you.

Operator

We'll take our next question from Mike Petusky with Barrington Research.

Mike Petusky -- Barrington Research -- Analyst

Hi guys.

Cheryl Blanchard -- President and Chief Executive Officer

Hi, Mike, how are you today?

Mike Petusky -- Barrington Research -- Analyst

Doing great, thanks. Few questions, I guess, Cheryl, I may have missed this at the outset, but did you speak at all to your estimates in terms of patient volumes for sort of the key parts of your business. What you're hearing out there? What you're estimating in terms of relative to pre-COVID levels?

Cheryl Blanchard -- President and Chief Executive Officer

You're just talking about surge in activity, purchasing product...

Mike Petusky -- Barrington Research -- Analyst

Well, I guess both on the Pain Management and sort of on the surgeon side?

Cheryl Blanchard -- President and Chief Executive Officer

Yes. Yes, let me speak to that. So what we're seeing a definite recovery globally, but kind of moderated by COVID and especially in different countries and different regions where we are seeing COVID spikes happen over time. I think, if I could speak to the US for a second, I think that there is a pretty strong trend of both surgeries and injections that we see coming back and that's why we say we feel better about seeing increases in the second half of the year, pending any different COVID dynamics. We do see that the surgical side of the business is recovering a bit more quickly than the injection side, I think the surgeons are focused on their more urgent patients and getting their surgical activities back, and so they tend to be more focused on that then be injections. But there is definitely a solid return on both fronts. So I think we are very optimistic about seeing results continuing to improve into the second half of the year, again sort of with that COVID moderation not knowing what could happen going forward.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

And one of the dynamics that we saw in the numbers, it was very encouraging to see the organic growth in Joint Preservation and Restoration and so that was nice to see those numbers at or above pre-COVID levels. And on the Pain Management side, as I mentioned in my prepared remarks that the royalties were in line with where they were in Q1 of last year. So it's hard to say whether what the trend is, you know, will some of that pent-up from the last quarter or not or how is that going to go, but it's definitely an encouraging sign to see these things moving in this direction and it's consistent with what we've laid out for the year.

Mike Petusky -- Barrington Research -- Analyst

When you guys talk about the longer-term goal toward '24 and you talk about sort of mid-teen topline growth to get there. How much of that mid-teens top line growth assumes, sort of, new product introductions and revenue coming from, sort of, that channel. Because I mean you guys, I think you long something like seven new products in Joint Preservation area in '20, obviously you're going to continue to launch new products between now and '24. I mean, how -- I guess what's the assumption or a general range of assumption around how much is sort of from what you've already got? And then how much is stuff that's still in development?

Cheryl Blanchard -- President and Chief Executive Officer

Yes, it's a great question. I would tell you, if you look first of all, at the first couple of years here we've got ahead of us that, that's going to be primarily around commercial execution and commercial excellence of products that we already have, some of which we've only just recently launched. So, they haven't really hit the sweet spot of their growth curve yet. And then we will continue to launch products on the Joint Preservation side with regenerative solutions, with sports medicine, with bone preserving implants. And so that -- I would say new products that we haven't launched yet, we'll probably start to show up more in the numbers in the out years toward 2024.

But you'll recall, we just launched Tactoset in late 2019 and then COVID hit. And we launched a number of products. Last year, we talked about launching the risk product this year, because we received [Indecipherable] K-clearance last year. So we do have some recent product launches and a great portfolio of existing products that are really going to drive the next couple of years of growth and then as we continue to launch products, those are going to definitely have a significant impact in, sort of, 2023, 2024 timeframe.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

And the only thing I would add to that is just -- I think it's fair for folks to recognize [Indecipherable] noticed a change now that we're in sports medicine, where there is just a different cadence of an increased cadence of smaller product launches. I think in the past, we've talked about these big new products and how big the contribution we're going to have, but the 16 products we launched in the latter half of last year, I think it's more indicative of -- they may not have individually as large of an impact, but they really demonstrate the innovation that we're focused on.

Cheryl Blanchard -- President and Chief Executive Officer

Yes, that tend to have shorter innovation cycle times and so you tend to have quicker turns on new product development with those. The Regenerative solutions, when those get launched they tend to have a different product lifecycle curve and take a little bit more time for adoption with potentially greater upside. So it's a mix that will see through 2024.

Mike Petusky -- Barrington Research -- Analyst

Okay, I guess a question for Mike. The cash flow from ops basically round numbers you guys, sort of, had about $2.5 million of positive free cash -- positive cash flow from ops and overall for $2 million of free cash flow in the first quarter. And then second quarter you sort of gave all that back and then some? I guess my question is what's your feeling about generating positive free cash flow -- free cash flow in the second half? Thanks.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, I mean, I think we demonstrated last year that we even during the challenges COVID last year, we generated positive free cash flow and we expect to do the same this year. You saw it in the first quarter, we had positive adjusted EBITDA of $4.8 million and I think that's a pretty good indicator. There was some timing in the first quarter, we had some tax payments and some other payments in timing of collections. But we definitely expect to continue to be generating positive cash flow -- positive free cash flow.

What we have said is that we are reinvesting some of that this year, I think, rental amount to fund the growth for the future. And so as we make that transformation 2021 is really a key year for us and continuing what the company started last year in this pivot more toward the joint preservation space. So we are making incremental investments. We are taking some of that free cash flow, reinvesting it, but we still are in a position where we expect positive free cash flow for the year.

Mike Petusky -- Barrington Research -- Analyst

All right, very good, thanks.

Cheryl Blanchard -- President and Chief Executive Officer

Thanks, Mike.

Operator

We have no further questions at this time, I would like to turn the conference back to Cheryl Blanchard for any additional or closing remarks.

Cheryl Blanchard -- President and Chief Executive Officer

Right. I'd like to thank everybody for your interest in Anika and for joining today and have a great evening.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Mark Namaroff -- Executive Director of Investor Relations and Corporate Communications

Cheryl Blanchard -- President and Chief Executive Officer

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Jim Sidoti -- Sidoti & Company -- Analyst

Mike Petusky -- Barrington Research -- Analyst

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