Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII), a medical
device company developing and commercializing innovative
interventional treatment systems for vascular disease, today
reported financial results for its fiscal first quarter ended
September 30, 2009.
CSI’s revenue in the first quarter of fiscal 2010 rose to $15.2
million, a 30-percent increase over revenue of $11.6 million in the
first quarter of last fiscal year. The net loss improved 55 percent
to $(6.2) million, or $(0.43) per basic and diluted share, in the
first quarter of fiscal 2010, from $(13.7) million, or $(2.75) per
basic and diluted share, in the year-ago period. The number of
weighted average common shares outstanding increased to 14.5
million from 5.0 million in the first quarter of fiscal 2009,
primarily due to new shares issued in conjunction with the February
2009 reverse merger with Replidyne, Inc., including the conversion
of all preferred stock of the company to common stock. Adjusted
EBITDA, calculated as loss from operations, less depreciation and
amortization and stock-based compensation expense, improved by 70
percent to a loss of $(3.6) million versus a loss of $(11.8)
million in the year-ago period. Cash and cash equivalents remained
strong at $30.8 million and included $3.0 million of net funding
received in conjunction with signing an agreement to establish a
second production facility in Pearland, Texas.
David L. Martin, CSI president and chief executive officer,
said, “Balancing revenue growth with effective expense management
helped drive a substantial reduction in our loss from the fiscal
2009 first quarter, moving CSI toward our goal of profitability.
During the quarter, we focused on driving adoption in existing
accounts, including re-educating physicians on proper clinical
protocols for using the Diamondback 360° to change lesion
compliance in vessels above the knee. As a result, we are seeing
greater product usage in many accounts. These improvements were
offset by seasonal weakness in endovascular procedures, resulting
in revenue slightly below our expected range.”
The number of hospitals using the Diamondback 360® PAD System
rose to 611 by the end of the fiscal 2010 first quarter, a nearly
90-percent increase over a year ago and 55 more than the end of the
fourth quarter of fiscal 2009. Sales of disposable device units
totaled 4,541 units in the first quarter of fiscal 2010 versus
3,636 units in the first quarter of last fiscal year, a 25-percent
increase. Revenue generated from customer reorders continued to
grow, increasing to 92 percent of total revenue for the fiscal 2010
first quarter from 72 percent in last year’s first quarter.
The fiscal first-quarter 2010 gross margin increased to 77
percent from 67 percent in the same period last year, driven by
higher disposable volumes, manufacturing efficiencies, product cost
reductions and shipment of fewer controller units. Operating
expenses decreased 18 percent, due to effective expense management,
the year-earlier write-off of $1.7 million in IPO costs, and
completion and timing of development projects and clinical
studies.
Providing Comprehensive Clinical Data and Tools to Treat
PAD
CSI is committed to providing physicians with clinical data and
endovascular tools to treat PAD. Toward that end, this quarter the
company continued to expand its product portfolio through an
exclusive distribution agreement with Asahi Intecc Co., Ltd., to
market its peripheral guide wire line in the United States. Asahi
peripheral guide wires are especially suited for addressing long,
complex lesions in the leg and complement the plaque removal
capabilities of the Diamondback 360°.
CSI also continued to make progress providing clinical data. At
the Transcatheter Cardiovascular Therapeutics (TCT) conference in
September, Dr. Barry Weinstock, an interventional cardiologist at
Orlando Regional Medical Center, reported data from a retrospective
study evaluating the long-term results of 64 patients from the
pivotal OASIS trial. Outcomes were analyzed out to a mean of 29
months and included maintaining a 100-percent limb salvage rate, an
86-percent freedom from target lesion revascularization (TLR) and
significantly improved ankle-brachial index (ABI) scores by an
average of 0.29 over the baseline.
Also at TCT, Dr. Ragu Patlola, of Regional Acadiana in
Lafayette, Louisiana, presented an abstract on a 150-patient,
randomized, single-center study comparing treatment using the
Diamondback 360˚ with angioplasty in infrapopliteal arteries. The
three-month follow-up results were favorable for the Diamondback
360˚, showing much lower rates for adjunctive stenting (5 percent
vs. 45 percent) and restenosis (15 percent vs. 62.5 percent).
CSI is advancing several clinical studies. COMPLIANCE 360° and
CALCIUM 360˚ are prospective, randomized, multi-center studies that
will evaluate the clinical benefit of modifying plaque and lesion
compliance in leg arteries with the Diamondback 360° (supplemented
by low-pressure balloon inflation, if desired, in CALCIUM 360˚) to
high-pressure balloon inflation. Both studies call for enrolling 50
patients at five U.S. medical centers. CSI also continues working
with the FDA on an IDE application for ORBIT II, a pivotal trial in
the United States to evaluate the safety and effectiveness of the
Diamondback 360° in treating severely calcified coronary
lesions.
Outlook
For the second fiscal quarter of 2010 ending December 31, 2009,
CSI anticipates revenue in the range of $15.0 million to $16.0
million, growth of 7 percent to 14 percent over the second quarter
of fiscal 2009, as the company continues its focus on customer
education and adoption through December 2009. Gross profit as a
percentage of revenue is expected to be at approximately the same
level as first quarter of fiscal 2010. The company anticipates the
net loss to range from $(7.0) million to $(7.7) million,
representing a 12-percent to 20-percent improvement over the second
quarter of fiscal 2009. On an EPS basis, the loss is expected to
range from $(0.48) to $(0.52) per share, based on 14.7 million
shares outstanding. The adjusted EBITDA loss for the second quarter
of fiscal 2010 is anticipated to be between $(4.2) million and
$(4.9) million, versus a loss of $(6.9) million in last fiscal
year’s second quarter. The improvements in net loss and adjusted
EBITDA are due to growth in revenue and gross profit at greater
rates than the growth in operating expenses between periods. The
net loss and adjusted EBITDA are expected to improve in the second
half of fiscal 2010 as revenue growth accelerates.
Martin continued, “Now that proper clinical protocols and
related sales tools and training are in place, we will expand
investments for re-educating our customer base, driving deeper
adoption within accounts, advancing our clinical trials, and
introducing product enhancements. These initiatives position us
well for significant, profitable growth over the long term and will
be balanced with progress toward profitability. We expect revenue
growth in the fiscal 2010 second half to be stronger than the first
half, as our initiatives take hold. Due to the timing of the effect
of our adoption and re-education efforts, we now expect revenue
growth will be approximately 15 percent to 20 percent for the
fiscal year. We will continue to drive our business toward our
first profitable quarter during fiscal 2011, while living within
our cash resources and debt capacity.”
About the Diamondback 360® PAD System
CSI’s primary product is the Diamondback 360° PAD System, a
minimally invasive catheter system for treating PAD in leg
arteries. The Diamondback 360° is highly effective in removing
plaque in vessels both below the knee and above the knee in just a
few minutes of treatment time. Between 8 million and 12 million
Americans suffer from PAD, which is caused by the accumulation of
plaque in peripheral arteries (commonly the pelvis or leg) reducing
blood flow. Symptoms include leg pain when walking or at rest, and
can lead to tissue loss and eventually limb amputation. More than
18,000 procedures have been performed to-date using the Diamondback
360° in leading institutions across the United States.
Conference Call Today at 3:45 PM CT (4:45 PM ET)
Cardiovascular Systems, Inc. will host a live conference call
and webcast of its fiscal first quarter ended September 30, 2009
results today, November 4, 2009, at 3:45 p.m. CT (4:45 p.m. ET). To
access the call, dial (888) 713-4218 and enter 65900739. Please
dial in at least 10 minutes prior to the call. To listen to the
live webcast, go to the investor information section of the
company’s Web site, www.csi360.com, and click on the webcast
icon. A webcast replay will be available beginning at 7 p.m. CT the
same day.
For an audio replay of the conference call, dial (888) 286-8010
and enter access number 72727881. The audio replay will be
available beginning at 8 p.m. CT on Wednesday, November 4, 2009,
through 6 p.m. CT on Friday, November 6, 2009.
Safe Harbor
Certain statements in this news release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and are provided under the protection of the
safe harbor for forward-looking statements provided by that Act.
For example, statements in this press release regarding (i) the
timing of our customer re-education process; (ii) our new facility
in Texas and the related growth; (iii) CSI’s clinical trials; (iv)
expanding into the interventional coronary market and the large
opportunity in that market; (v) expansion of our product portfolio
through distribution and product development; (vi) anticipated
revenue, gross margin, net loss, and adjusted EBITDA in future
periods; (vii) achieving our first profitable quarter and longer
term sustainable, significant, profitable growth; and (viii) cash
requirements, are forward looking statements. These statements
involve risks and uncertainties which could cause results to differ
materially from those projected, including but not limited to the
potential for unanticipated delays in enrolling medical centers and
patients for clinical trials; dependence on market growth; the
difficulty in accurately predicting product, customer and
geographic sales mix; product development delays; the reluctance of
physicians to accept new products; the impact of competitive
products and pricing; dependence on major customers and
distribution partners; the difficulty to successfully manage
operating costs; fluctuations in quarterly results; approval of
products for reimbursement and the level of reimbursement; general
economic conditions and other factors detailed from time to time in
CSI’s SEC reports, including its most recent annual report on Form
10-K and subsequent quarterly reports on Form 10-Q. CSI encourages
you to consider all of these risks, uncertainties and other factors
carefully in evaluating the forward-looking statements contained in
this release. As a result of these matters, changes in facts,
assumptions not being realized or other circumstances, CSI's actual
results may differ materially from the expected results discussed
in the forward-looking statements contained in this release. The
forward-looking statements made in this release are made only as of
the date of this release, and CSI undertakes no obligation to
update them to reflect subsequent events or circumstances.
Use of Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), CSI uses certain non-GAAP financial measures in
this release. Reconciliations of the non-GAAP financial measures
used in this release to the most comparable U.S. GAAP measures for
the respective periods can be found in tables later in this release
immediately following the consolidated statements of operations.
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
CSI's financial results prepared in accordance with GAAP.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a
medical device company focused on developing and commercializing
interventional treatment systems for vascular disease. The
company’s Diamondback 360® PAD System treats calcified and fibrotic
plaque in arterial vessels throughout the leg, and addresses many
of the limitations associated with existing surgical, catheter and
pharmacological treatment alternatives. In August 2007, the U.S.
FDA granted 510(k) clearance for the use of the Diamondback 360° as
a therapy for PAD (peripheral arterial disease), and CSI commenced
a U.S. product launch in September 2007. Since then, more than 600
hospitals across the United States have adopted the system. For
more information visit the company’s Web site at
www.csi360.com.
Product Disclosure
The Diamondback 360® PAD System is a percutaneous orbital
atherectomy system indicated for use as therapy in patients with
occlusive atherosclerotic disease in peripheral arteries and
stenotic material from artificial arteriovenous dialysis fistulae.
The system is contraindicated for use in coronary arteries, bypass
grafts, stents, or where thrombus or dissections are present.
Although the incidence of adverse events is rare, potential events
that can occur with atherectomy include: pain, hypotension,
CVA/TIA, death, dissection, perforation, distal embolization,
thrombus formation, hematuria, abrupt or acute vessel closure, or
arterial spasm.
Cardiovascular Systems,
Inc.
Consolidated Statements of Operations (Dollars in
Thousands, except per share and share amounts) Three
Months Ended
September 30,
2009 2008
Revenues $ 15,198 $ 11,646 Cost of goods sold
3,488 3,881 Gross
profit
11,710 7,765
Selling, general and administrative 14,856 16,424
Research and development
2,781
4,955 Total expenses
17,637
21,379 Loss from operations
(5,927 )
(13,614 ) Other income (expense):
Interest expense (371 ) (227 ) Interest income
98 142 Total other
income (expense)
(273 )
(85 ) Net loss
$
(6,200 ) $
(13,699 ) Net loss per common share:
Basic and diluted
$ (0.43 )
$ (2.75 )
Weighted average common shares
used in computation:
Basic and diluted
14,516,843
4,976,884 Stock-based compensation
supplemental detail (included in amounts above): Cost of goods
sold $ 129 $ 176 Selling, general and administrative 1,811 1,384
Research and development
281
112 Totals
$ 2,221
$ 1,672
Cardiovascular Systems, Inc.
Consolidated Balance Sheets (Dollars in Thousands)
September 30,
June
30,
2009
2009
ASSETS Current assets Cash and cash equivalents $ 30,754 $
33,411 Accounts receivable, net 8,181 8,474 Inventories 4,082 3,369
Auction rate securities put option 2,800 — Investments 19,900 —
Prepaid expenses and other current assets
1,264
798 Total current assets
66,981 46,052 Auction rate
securities put option — 2,800 Investments — 20,000 Property and
equipment, net 1,636 1,719 Patents, net 1,490 1,363 Other assets
364 436 Total assets
$ 70,471 $
72,370
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities Current maturities of long-term debt $ 25,802 $
25,823 Accounts payable 4,368 4,751 Accrued expenses
5,872 5,600 Total current
liabilities
36,042 36,174
Long-term liabilities Long-term debt, net of current maturities
3,597 4,379 Grant payable 2,975 — Other liabilities
1,219 1,485 Total long-term
liabilities
7,791 5,864
Total liabilities
43,833
42,038 Commitments and contingencies Total
stockholders’ equity
26,638
30,332 Total liabilities and stockholders’ equity
$ 70,471 $
72,370
Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements
prepared in accordance with GAAP, CSI uses a non-GAAP financial
measure referred to as "Adjusted EBITDA" in this release.
Reconciliations of Adjusted EBITDA to the most comparable U.S.
GAAP measure for the respective periods can be found in the table
below. In addition, an explanation of the manner in which CSI's
management uses Adjusted EBITDA to conduct and evaluate its
business, the economic substance behind management's decision to
use Adjusted EBITDA, the substantive reasons why management
believes that Adjusted EBITDA provides useful information to
investors, the material limitations associated with the use of
Adjusted EBITDA and the manner in which management compensates for
those limitations is included following the reconciliation table
below.
Cardiovascular Systems, Inc.
Supplemental Sales Information (Dollars in Thousands)
Three Months Ended Revenue March
June
Sept.
Dec.
March
June
Sept.
Components: 2008
2008
2008 2008
2009 2009
2009
Devices
$ 6,867 $ 9,000
$ 10,664 $ 12,853
$ 13,694 $ 14,095
$
13,640 Other 787
892 982
1,151
1,421 1,600
1,558 Total revenue
$ 7,654 $ 9,892
$ 11,646 $ 14,004
$ 15,115 $
15,695
$
15,198
Device units
sold
2,328
3,063
3,636
4,368
4,558
4,692
4,541
Customers, at
quarter end
106
183
283
400
487
556
611
Cardiovascular Systems, Inc. Adjusted EBITDA
(Dollars in Thousands)
Projected Range Three Months Ended
Three Months Ending Sept. 30,
Dec. 31, 2009 2009
2008 High Low Loss from
operations $ (5,927 ) $ (13,614 ) $ (6,800 ) $ (7,500 )
Add: Stock-based
compensation
2,221
1,672
2,400
2,400
Add: Depreciation and
amortization
136
95
200
200
Adjusted EBITDA $ (3,570 ) $ (11,847 )
$ (4,200 )
$ (4,900 )
Use and Economic Substance of Non-GAAP Financial Measures
Used by CSI and Usefulness of Such Non-GAAP Financial Measures to
Investors
CSI uses Adjusted EBITDA as a supplemental measure of
performance and believes this measure facilitates operating
performance comparisons from period to period and company to
company by factoring out potential differences caused by
depreciation and amortization expense and non-cash charges such as
stock based compensation. CSI's management uses Adjusted EBITDA to
analyze the underlying trends in CSI's business, assess the
performance of CSI's core operations, establish operational goals
and forecasts that are used to allocate resources and evaluate
CSI's performance period over period and in relation to its
competitors' operating results. Additionally, CSI's management is
evaluated on the basis of Adjusted EBITDA when determining
achievement of their incentive compensation performance
targets.
CSI believes that presenting Adjusted EBITDA provides investors
greater transparency to the information used by CSI's management
for its financial and operational decision-making and allows
investors to see CSI's results "through the eyes" of management.
CSI also believes that providing this information better enables
CSI's investors to understand CSI's operating performance and
evaluate the methodology used by CSI's management to evaluate and
measure such performance.
The following is an explanation of each of the items that
management excluded from Adjusted EBITDA and the reasons for
excluding each of these individual items:
-- Stock-based compensation. CSI excludes stock-based
compensation expense from its non-GAAP financial measures primarily
because such expense, while constituting an ongoing and recurring
expense, is not an expense that requires cash settlement. CSI's
management also believes that excluding this item from CSI's
non-GAAP results is useful to investors to understand the
application of SFAS 123R and its impact on CSI's operational
performance, liquidity and its ability to make additional
investments in the company, and it allows for greater transparency
to certain line items in CSI's financial statements.
-- Depreciation and amortization expense. CSI excludes
depreciation and amortization expense from its non-GAAP financial
measures primarily because such expenses, while constituting
ongoing and recurring expenses, are not expenses that require cash
settlement and are not used by CSI's management to assess the core
profitability of CSI's business operations. CSI's management also
believes that excluding these items from CSI's non-GAAP results is
useful to investors to understand CSI's operational performance,
liquidity and its ability to make additional investments in the
company.
Material Limitations Associated with the Use of Non-GAAP
Financial Measures and Manner in which CSI Compensates for these
Limitations
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
CSI's financial results prepared in accordance with GAAP. Some of
the limitations associated with CSI's use of these non-GAAP
financial measures are:
-- Items such as stock-based compensation do not directly affect
CSI's cash flow position; however, such items reflect economic
costs to CSI and are not reflected in CSI's "Adjusted EBITDA" and
therefore these non-GAAP measures do not reflect the full economic
effect of these items.
-- Non-GAAP financial measures are not based on any
comprehensive set of accounting rules or principles and therefore
other companies may calculate similarly titled non-GAAP financial
measures differently than CSI, limiting the usefulness of those
measures for comparative purposes.
-- CSI's management exercises judgment in determining which
types of charges or other items should be excluded from the
non-GAAP financial measures CSI uses.
CSI compensates for these limitations by relying primarily upon
its GAAP results and using non-GAAP financial measures only
supplementally. CSI provides full disclosure of each non-GAAP
financial measure CSI uses and detailed reconciliations of each
non-GAAP measure to its most directly comparable GAAP measure. CSI
encourages investors to review these reconciliations. CSI qualifies
its use of non-GAAP financial measures with cautionary statements
as set forth above.
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