Tandem Diabetes Care®, Inc. (NASDAQ: TNDM), a medical device
company and manufacturer of the only touchscreen insulin pumps
available in the United States, today reported its financial
results for the quarter ended March 31, 2017.
“Our first quarter results were highlighted by our sales
performance, recognition of our #1 customer support services for
the 4th consecutive year*, and meaningful progress with our new
products in development,” said Kim Blickenstaff, President and
Chief Executive Officer of Tandem Diabetes Care. “These
achievements give us confidence in our ability to accomplish our
key goals for this year, and we remain focused on successfully
executing our business plan and supporting our growing customer
base.”
In July 2016, the Company began offering eligible customers a
Technology Upgrade Program to provide a pathway to ownership of the
new t:slim X2™ Insulin Pump, which launched in October 2016. As
previously announced, because of the accounting treatment of this
program, the Company is now providing selected financial results on
both a GAAP and non-GAAP basis.
Sales and Pump Shipments1
Three Months Ended March 31,
(in
millions)
2017 2016 GAAP sales $ 19.0 $
20.1 Impact of Technology Upgrade Program (1.5 ) —
Non-GAAP sales1 $ 17.5 $ 20.1
Pump shipments 2,816 4,042
1) GAAP sales are determined in accordance
with U.S. Generally Accepted Accounting Principles. Non-GAAP sales
are adjusted for the impact of the Technology Upgrade Program. See
the information under the heading “Use of Non-GAAP Financial
Measures” in this press release, as well as under the heading
“Reconciliation of GAAP versus Non-GAAP Financial Results” in the
attached Press Release Exhibit.
* dQ&A USA Connections Surveys 2013 – 2016
First Quarter 2017 GAAP Results
The Company operated in a highly competitive environment in the
first quarter of 2017. A total of 2,816 pumps were shipped in the
quarter, down 30% from the 4,042 pumps shipped in the same period
of 2016. Sales and gross margin in the first quarter of 2016
benefited from a strong continuation of customer interest in the
t:slim G4, the Company’s first insulin pump featuring continuous
glucose monitoring integration, which was launched in September
2015. GAAP sales declined 5 percent to $19.0 million for the
quarter ended March 31, 2017 compared to $20.1 million for the same
period of 2016. Gross margin for the quarter ended March 31, 2017
was 36 percent compared to 35 percent for the same period of
2016.
For the first quarter of 2017, operating expenses totaled $28.0
million compared to $26.2 million for the same period of 2016. GAAP
operating loss for the first quarter of 2017 was $21.2 million,
compared to $19.2 million for the same period of 2016. GAAP
operating margin for the first quarter of 2017 was negative 112
percent compared to negative 96 percent in the same period last
year. Both operating loss and operating margin for the first
quarter of 2017 included non-cash charges for stock-based
compensation of $3.0 million and depreciation and amortization of
$1.4 million for the first quarter of 2017, compared to stock-based
compensation of $2.8 million and depreciation and amortization of
$1.3 million for the comparable period of 2016.
First Quarter 2017 Non-GAAP Results
Non-GAAP sales, which are adjusted for the impact of the
Technology Upgrade Program, declined 13 percent to $17.5 million
for the quarter ended March 31, 2017 compared to $20.1 million for
2016. Non-GAAP gross margin for the quarter ended March 31, 2017
was 35 percent, adjusted for the impact of the Technology Upgrade
Program, compared to 35 percent for the same period of 2016. Like
the Company’s GAAP results, non-GAAP sales and gross margin in the
first quarter of 2017 were impacted by a highly competitive
environment for the Company’s products. Non-GAAP sales and gross
margin in the first quarter of 2016 also benefited from continued
post-launch interest in the t:slim G4 Pump.
For the first quarter of 2017, non-GAAP operating expenses
totaled $28.0 million compared to $26.2 million for the same period
of 2016. Non-GAAP operating loss for the first quarter of 2017 was
$21.9 million, compared to $19.2 million for the same period of
2016. Non-GAAP operating margin for the first quarter was negative
126 percent compared to negative 96 percent in the same period of
2016. Both non-GAAP operating loss and operating margin included
non-cash charges for stock-based compensation of $3.0 million and
depreciation and amortization of $1.4 million for the first quarter
of 2017, compared to stock-based compensation of $2.8 million and
depreciation and amortization of $1.3 million for the comparable
period of 2016.
Cash Balance and Liquidity
As of March 31, 2017, the Company had $54.0 million in cash,
cash equivalents, short-term investments and restricted cash.
2017 Guidance
The Company is reaffirming its annual financial guidance on a
non-GAAP basis. It is difficult to estimate or predict the
Company’s GAAP financial results because it is difficult to
estimate or predict the timing and rate of customer utilization of
the Technology Upgrade Program. As a result, it is not currently
possible for the Company to provide GAAP financial guidance, or to
provide a reconciliation of GAAP guidance to non-GAAP guidance,
with any degree of certainty. In the future, the Company expects to
continue to provide its operating results on both a GAAP and
non-GAAP basis. For additional information regarding the Technology
Upgrade Program and a reconciliation of the Company’s GAAP
financial results to its non-GAAP financial results, please see the
attached Press Release Exhibit.
For the year ending December 31, 2017, the Company is
reaffirming its financial guidance as follows:
- Non-GAAP sales are estimated to be in
the range of $100 million to $107 million
- Non-GAAP operating margin is estimated
to be in the range of negative 70 percent to negative 65 percent,
which includes:
- Approximately $11.0 million in
non-cash, stock-based compensation expense
- Approximately $6.0 million to $7.0
million of depreciation and amortization
Conference Call
The Company will hold a conference call and simultaneous webcast
today at 4:30pm Eastern Time (1:30pm Pacific Time). The link to the
webcast will be available by accessing the Investor Center of the
Tandem Diabetes Care website at http://investor.tandemdiabetes.com,
and will be archived for 30 days. To listen to the conference call
via phone, please dial 855-427-4396 (U.S./Canada) or 484-756-4261
(International) and use the participant code "4168494".
Use of Non-GAAP Financial Measures
The Company presents certain non-GAAP financial measures in this
press release, including historical and projected non-GAAP sales
and operating margin, to provide information that may assist
investors in understanding its financial results, assessing its
prospects for future performance and allowing for a meaningful
comparison of projected results to historical results. The
Technology Upgrade Program discussed above has created and will
continue to create unpredictable GAAP results for its duration.
This is principally due to accounting complexities associated with
the program that are dependent on a number of future events and
variables that are difficult to estimate or predict. Due to these
accounting complexities, and the resulting uncertainty, the Company
is providing guidance for the year ending December 31, 2017 on a
non-GAAP basis, which excludes the impact of the Technology Upgrade
Program.
These non-GAAP financial measures will be used internally by the
Company to analyze its operating performance and prospects for
future performance for the duration of the Technology Upgrade
Program. The principal limitation of these non-GAAP financial
measures is that they do not necessarily reflect, and may not be a
good estimate of, the amount that will actually be recorded in the
Company’s financial statements in accordance with GAAP. The
non-GAAP financial information and guidance is not intended to be
considered in isolation or as a substitute for, or superior to,
financial information and guidance prepared and presented in
accordance with GAAP. To the extent the Company utilizes such
non-GAAP financial measures in the future, it expects to calculate
them using a consistent method from period to period. Because of
the difficultly in estimating the accounting impact from the
Technology Upgrade Program, the Company cannot provide a
reconciliation of non-GAAP financial guidance to GAAP financial
guidance with any level of certainty and without unreasonable
efforts. However, the Company has provided a reconciliation of its
historical GAAP financial results to its historical non-GAAP
financial results under the heading “Reconciliation of GAAP versus
Non-GAAP Financial Results” in the attached Press Release
Exhibit.
About Tandem Diabetes Care, Inc.
Tandem Diabetes Care, Inc. (www.tandemdiabetes.com) is a medical
device company with an innovative, user-centric and integrated
approach to the design, development and commercialization of
products for people with diabetes who use insulin. The Company
manufactures and sells the t:slim X2™ Insulin Pump, the slimmest
and smallest durable insulin pump currently on the market, the
t:flex® Insulin Pump, the first pump designed for people with
greater insulin requirements, and the t:slim G4™ Insulin Pump, the
first continuous glucose monitoring-enabled pump with touchscreen
simplicity. Tandem is based in San Diego, California.
Follow Tandem Diabetes Care on Twitter @tandemdiabetes; use
#tslimX2, #tslimG4, #tflex, #tconnect, and $TNDM.
Follow Tandem Diabetes Care on Facebook at
www.facebook.com/TandemDiabetes.Follow Tandem Diabetes Care on
LinkedIn at https://www.linkedin.com/company/tandemdiabetes.
t:flex and Tandem Diabetes Care are registered trademarks, and
t:slim X2 and t:slim G4 are trademarks of Tandem Diabetes Care,
Inc.
Forward Looking Statement
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, that concern matters that involve risks and
uncertainties that could cause actual results to differ materially
from those anticipated or projected in the forward-looking
statements. These forward-looking statements include
statements regarding, among other things, the impact of the
implementation of the Technology Upgrade Program, the Company’s
projected financial results, including its projected non-GAAP sales
and non-GAAP operating margins, and the Company’s ability to
execute its business plan and achieve its key goals for 2017. The
Company’s actual results may differ materially from those indicated
in these forward-looking statements due to numerous risks and
uncertainties. For instance, the Company’s ability to achieve its
goals for 2017 will be impacted by the Company’s ability to obtain
regulatory approval for the t:slim X2 with Dexcom’s G5 integration
and the timing of any such approvals; the Company’s ability to
launch its new t:lock infusion set connector when anticipated;
market acceptance of the Company’s new products and products under
development by physicians and people with diabetes; the potential
that newer products that compete with the Company’s products, or
other technological breakthroughs for the monitoring, treatment or
prevention of diabetes, may render the Company’s products obsolete
or less desirable; and the potential that the process of purchasing
the Company’s products, including insurance verification approval
for individual customers, may delay or prevent the sale of the
products. In addition, factors that will affect the Company’s
financial results due to the Technology Upgrade Program are
expected to include the mix of pumps sold; the percentage of
customers that choose to upgrade their pump; the timing of the
decision to upgrade their pump; and the upgrade option chosen by
customers. Other risks and uncertainties include the Company’s
inability to manufacture products in commercial quantities at an
acceptable cost and in accordance with quality requirements; the
Company’s inability to contract with additional third-party payors
for reimbursement of the Company’s products; uncertainty associated
with the development and approval of new products generally;
possible future actions of the FDA or any other regulatory body or
governmental authority; and other risks identified in the Company’s
most recent Annual Report on Form 10-K, Quarterly Report on Form
10-Q, and other documents that the Company files with the
Securities and Exchange Commission. Investors are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this release. Tandem undertakes no
obligation to update or review any forward-looking statement in
this press release because of new information, future events or
other factors.
TANDEM DIABETES CARE, INC.GAAP
CONDENSED BALANCE SHEETS(in thousands)
March 31, December 31,
2017 2016 (Unaudited) Assets Current
assets: Cash and cash equivalents and short-term investments $
44,010 $ 53,538 Restricted cash - 2,000 Accounts receivable, net
7,687 11,172 Inventory, net 23,748 21,195 Other current assets
4,489 4,187 Total current assets 79,934 92,092
Restricted cash - long-term 10,000 - Property and equipment, net
20,927 18,409 Other long term assets 1,853 1,891
Total assets $ 112,714 $ 112,392
Liabilities and stockholders’
equity Current liabilities: Accounts payable, accrued expense
and employee-related liabilities $ 19,004 $ 19,325 Deferred revenue
3,746 5,208 Other current liabilities 6,465 6,943
Total current liabilities 29,215 31,476 Notes
payable-long-term 73,763 78,960 Other long-term liabilities
11,604 7,883 Total liabilities 114,582 118,319 Total
stockholders’ equity (1,868 ) (5,927 ) Total
liabilities and stockholders’ equity $ 112,714 $ 112,392
TANDEM DIABETES CARE, INC.
GAAP CONDENSED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
(Unaudited)
Three Months Ended March 31,
2017 2016 Sales $ 18,977 $ 20,058 Cost of
sales 12,224 13,130 Gross profit (loss) 6,753 6,928
Operating expenses: Selling, general and administrative
22,849 21,997 Research and development 5,130 4,169
Total operating expenses 27,979 26,166 Operating loss
(21,226 ) (19,238 ) Other income (expense), net: Interest
and other income 59 118 Interest and other expense (2,625 )
(1,364 ) Total other expense, net (2,566 )
(1,246 ) Net loss $ (23,792 ) $ (20,484 ) Net loss per
share, basic and diluted $ (0.75 ) $ (0.68 ) Weighted
average shares used to compute basic and diluted net loss per share
31,889 30,294
Press Release Exhibit
Summary of Technology Upgrade Program
andAssociated Reconciliation of GAAP versus Non-GAAP
Financial Results
Program OverviewIn July 2016, Tandem Diabetes Care, Inc.
(“Tandem” or the “Company”) launched a Technology Upgrade Program
(the “Upgrade Program”) as a pathway for its t:slim® and t:slim G4™
Insulin Pump customers to experience the Company’s latest
technology, the t:slim X2™ Insulin Pump platform, under a variable
pricing structure. The Company began shipping the t:slim X2 Insulin
Pump in October 2016 and is no longer offering the t:slim® Insulin
Pump to new customers.
The t:slim X2 Insulin Pump features new hardware advancements,
including a two-way Bluetooth® wireless technology radio for
communicating with more than one external device at a time. The
Company expects these advancements, together with the Company’s
future anticipated use of the Tandem Device Updater to deliver
remote software updates for the t:slim X2, will offer customers a
path to new innovations separate from the typical 4-year insurance
pump replacement cycle. The Upgrade Program is available to
eligible customers through September 30, 2017.
Accounting Treatment OverviewPursuant to applicable GAAP
revenue recognition standards, revenue is recognized when the
product is delivered or when an obligation is fulfilled, among
other requirements. Under the Upgrade Program, eligible customers
will be provided the opportunity to receive a t:slim X2 Insulin
Pump at a future date. This creates potential future obligations
for the Company that prevent the full recognition of revenue and
cost of sales at the time of the customer’s initial purchase of an
insulin pump, which results in a deferral of revenue and cost of
sales on the Company’s financial statements. The deferrals will
generally be recognized at the earlier of when the obligation for
such upgrades and services are fulfilled or when the Upgrade
Program expires. Any fees received by the Company under the Upgrade
Program and the Company’s cost of fulfilling the associated
obligation will also be recognized at that time.
Reconciliation of GAAP versus Non-GAAP Financial
ResultsDue to this high degree of accounting complexity, which
is dependent on a number of future events and variables that are
difficult to estimate or predict, the Upgrade Program creates
unpredictable GAAP results for the duration of the Program. To aid
investors in better understanding the Company’s performance and
minimize potential confusion when comparing its current and future
results to historical results, the Company has provided non-GAAP
financial information in the accompanying press release, in
addition to providing GAAP financial information. In the following
tables, the Company has provided a reconciliation of its GAAP
financial results to its non-GAAP financial results, which
illustrates the impact of the Upgrade Program:
For the three months ended March 31, 2017, the impact of the
Upgrade Program was as follows:
Impact of Technology Upgrade Program(1)
(in millions)
GAAP Financial
Results
Deferrals at Initial
Sale1
Recognition of
Deferrals2
Upgrade
Fulfillments3
Non-GAAP Financial
Results
Sales $ 19.0 $ 0.1 $ (1.5 ) $ (0.1 ) $ 17.5 Cost of sales $
12.2 $ — $ (0.4 ) $ (0.4 ) $ 11.5 Gross profit (loss) $ 6.8 $ 0.1 $
(1.1 ) $ 0.3 $ 6.0 Gross margin % 36 % 35 % Operating loss $ (21.2
) $ 0.1 $ (1.1 ) $ 0.3 $ (21.9 ) Operating margin % (112 )% (126 )%
(1) Table may not foot due to rounding
Since the launch of t:slim X2 pump in the fourth quarter of
2016, the Company has fulfilled approximately 2,000 upgrades under
the Technology Upgrade Program, and recorded an incremental $1.1
million cost of sales, net of upgrade fees. As of March 31, 2017,
the Company recorded $3.0 million in deferred revenue and $0.4
million in deferred cost of sales, which will be recognized at the
earlier of when the upgrade obligations are fulfilled or when the
program expires on September 30, 2017.
Non-GAAP Accounting Definitions
1) Deferrals at Initial Sale - The
deferral of initial sales and cost of sales for eligible pump
shipments are summarized in the following table:
Deferral Treatment for Eligible
Shipments on or After July 1, 2016
Product Sales Deferral
Cost of Sales Deferral t:slim Insulin Pump
100% of each sale as a right of return. 100% of the
manufacturing cost as a right of return. t:slim G4 Insulin Pump
A portion of each sale as a guarantee liability.
No deferral.
2) Recognition of Deferrals – This
reflects any changes in subsequent periods for deferrals made at
the time of the initial sale (see Deferrals at Initial Sale above).
It includes recognition of amounts previously deferred when actual
product upgrades occur. It will eventually also include a reversal
of any remaining deferrals when the program expires for customers
who did not elect the upgrade or service options.
3) Upgrade Fulfillments – This
reflects incremental revenue recognized from an upgrade or service
fee, if any, and the cost of sales associated with completing that
upgrade or service. Approximately 2,000 upgrade fulfillments have
occurred since the fourth quarter of 2016, when the t:slim X2
Insulin Pump became available. At that time, the Company commenced
reporting Recognition of Deferrals and Upgrade Fulfillments.
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version on businesswire.com: http://www.businesswire.com/news/home/20170427006539/en/
Tandem Diabetes Care, Inc.Media Contact:Steve
Sabicer, 714-907-6264ssabicer@thesabicergroup.comorInvestor
Contact:Susan Morrison, 858-366-6900
x7005smorrison@tandemdiabetes.com
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