Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII):
- Financial performance rose
significantly over prior-year third quarter:
- Revenues increased 22 percent to
$20.2 million
- Gross profit margin rose to 80
percent, operating expenses declined 3 percent
- Adjusted EBITDA improved 87 percent
to a loss of $(495,000)
- Net loss improved 63 percent to
$(2.4) million, or $(0.15) per share
- Early Stealth 360° results
demonstrate easy set-up; hands-on physician control; and one minute
treatment time, with the same proven safety profile as Diamondback
360°
- Superior COMPLIANCE 360° acute
results over balloon angioplasty show a 360 percent higher
procedural success rate and 91 percent less bailout stenting, with
a p value < 0.0001
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 third quarter ended March
31, 2011.
CSI’s revenues in the third quarter rose to $20.2 million, a
22-percent gain over revenue of $16.5 million in the third quarter
of last fiscal year. Adjusted EBITDA, calculated as loss from
operations, less depreciation and amortization and stock-based
compensation expense, was a loss of $(495,000), a $3.4 million
improvement driven by stronger revenue and gross margins, and
reduced operating expenses.
Net loss was $(2.4) million for the quarter, a 63-percent
improvement over a $(6.5) million net loss in the third quarter of
last year. Net loss per common share was $(0.15) in the fiscal 2011
third quarter, compared to $(0.44) per common share a year
earlier.
David L. Martin, CSI president and chief executive officer,
commented, “In the third quarter, we stayed on course with strong
revenue growth and a marked improvement in profitability as
productivity gains and cost efficiencies held SG&A expenses
flat with last year’s third quarter. Revenue from customer reorders
remained high and usage rates in our targeted accounts rose
substantially — both clear indications that physicians are seeing
the advantages of our therapy in treating peripheral arterial
disease (PAD) and adopting it in their practices. The combination
of our orbital PAD systems’ ease-of-use and an expanding body of
scientifically sound clinical data supporting their safety and
effectiveness, is leading to revenue growth.
“During the quarter, we also announced two exciting developments
related to products and our robust clinical trial program. We
received FDA marketing clearance for our Stealth 360°™ Orbital PAD
System and began a limited market release, which is generating
impressive physician feedback on the product’s ease of use and
effectiveness. At the recent American College of Cardiology
meeting, data from our COMPLIANCE 360°clinical trial showed strong,
superior acute patient outcomes and excellent safety in
above-the-knee procedures using our orbital PAD system compared to
high-pressure balloon angioplasty treatment.”
Revenue from customer reorders rose to 94 percent of total
revenue for the fiscal 2011 third quarter, up from 93 percent in
last year’s third quarter. Gross profit margin rose to 80 percent
from 77 percent in the same period last year, primarily due to
continued product cost reductions and manufacturing efficiencies.
Lower product development expenses, including reduced stock
compensation from stock award forfeitures and estimated refundable
state R&D tax credits, contributed to a 3-percent decrease in
operating expenses compared to the year-ago period.
In the first nine months of fiscal 2011, revenues increased to
$57.1 million, up 22 percent from the same period a year ago. The
gross profit margin improved to 79 percent from 77 percent, while
operating expenses declined 3 percent. Adjusted EBITDA loss
improved by 82 percent to $(2.2) million, while the net loss
improved 56 percent to $(8.6) million, or $(0.55) per common share,
compared to a net loss of $(19.5) million, or $(1.33) last
year.
OPERATING HIGHLIGHTS
510(k) Marketing Clearance for Stealth 360° Received; Limited
Release in Progress
In March, CSI received FDA 510(k) marketing clearance for the
Stealth 360° Orbital PAD System and initiated a limited market
release. The Stealth 360° offers a simpler design with power and
speed controls on the handle that gives physicians hands-on control
device operation. Stealth is as easy to set up as a balloon or
stent, and utilizes CSI’s proven orbital mechanism of action that
protects healthy tissue while removing even the most difficult to
treat plaque throughout the entire leg.
Martin noted: “Initial physician users have been impressed by
the Stealth 360°’s enhanced control and ease of use, simple set-up
and smooth performance in safely treating the entire leg. In these
accounts, we are seeing significant increases in device usage,
including additional physicians who are new to our products. These
encouraging early results support our belief that the Stealth 360°,
combined with our growing wealth of clinical evidence, will be a
game-changer in the future treatment of PAD.”
CSI is introducing the Stealth 360° through a limited market
release to generate valuable feedback from physicians and establish
best practices for device operation. This limited release is
expected to continue through the first quarter of fiscal 2012,
ending September 30, 2011, after which CSI plans to begin a broader
commercial launch.
Compliance 360° Study Demonstrates Efficacy, Safety in
Above-the-Knee Procedures
Acute data from the prospective, randomized COMPLIANCE 360°
clinical trial was presented at the American College of Cardiology
meeting in early April. The study directly compared the Diamondback
360® Orbital PAD System versus balloon angioplasty in treating
above-the-knee PAD.
COMPLIANCE 360° acute results showed that the Diamondback 360°
can achieve far superior acute results in treating
calcium-containing plaque by improving lesion compliance through
differential sanding, without the need for stent placement. Data
showed the Diamondback 360° achieved better luminal gain and
improved lesion compliance, with a 360-percent higher procedural
success rate than high-pressure balloon angioplasty and 91 percent
less bailout stenting. The Diamondback’s unique differential
sanding safely removes calcified plaque, reducing the need for
high-pressure balloon angioplasty and stenting.
Martin said, “The acute results of this study provide a clear
indication of the superior safety and effectiveness of treatments
using our Diamondback 360° systems compared to high-pressure
balloon angioplasty. We are definitely raising the standard of care
for PAD patients.”
The COMPLIANCE 360° study enrolled 50 patients at nine U.S.
sites. Patients will have clinical follow up at one, six and 12
months. Longer-term results will be reported as they become
available.
Fiscal 2011 Fourth-Quarter Outlook
Management anticipates that the transition to the Stealth 360°
product line, which began a limited market release in March 2011,
will limit the rate of revenue growth until a broader commercial
launch begins. While revenue growth is anticipated, at this point
CSI does not expect to achieve the level of revenue necessary to
reach profitability in the fourth quarter of fiscal 2011.
For the fiscal 2011 fourth quarter ending June 30, 2011, CSI
anticipates:
- Revenue in the range of $21.0 million
to $22.0 million, or growth of 17 percent to 22 percent over the
fourth quarter of fiscal 2010;
- Gross profit as a percentage of revenue
at approximately the same level as the fiscal 2011 third
quarter;
- Total operating expenses similar to the
fiscal 2011 third quarter;
- Interest and other expense of about
$(350,000), excluding the potential effect of conversions or
valuation changes of convertible debt;
- Net loss in the range of $(0.8) million
to $(1.4) million, or loss per common share ranging from $(0.05) to
$(0.09), assuming 16.2 million average shares outstanding; and
- Adjusted EBITDA earnings between $1.0
million and $0.4 million.
Conference Call Today at 3:45 p.m. CT (4:45 p.m. ET)
Cardiovascular Systems, Inc. will host a live conference call
and webcast of its fiscal third-quarter results today, May 4, 2011,
at 3:45 p.m. CT (4:45 p.m. ET). To access the call, dial (888)
713-4218 and enter access number 61587023. Please dial in at least
10 minutes prior to the call and wait for operator assistance, or
dial “0” for operator assistance. To listen to the live webcast, go
to the investor information section of the company’s website,
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 71171713. The audio replay will be
available beginning at 8 p.m. CT on Wednesday, May 4, 2011, through
6 p.m. CT on Friday, May 6, 2011.
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 Peripheral Arterial Disease
As many as 12 million Americans, most over age 65, 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. Left untreated, PAD can
lead to severe pain, immobility, non-healing wounds and eventually
limb amputation. With risk factors such as diabetes and obesity on
the rise, the prevalence of PAD is growing at double-digit
rates.
Millions of patients with PAD may benefit from treatment with
the Stealth 360° and Diamondback 360°, minimally invasive catheter
systems developed and manufactured by CSI. These systems use a
diamond-coated crown, attached to a guide wire, which sands away
plaque while preserving healthy vessel tissue, or medial integrity
— a critical factor in preventing reoccurrences. Balloon
angioplasty and stents have significant shortcomings in treating
hard, calcified lesions. Stents are prone to fractures and high
recurrence rates, and treatment of hard, calcified lesions often
leads to vessel damage and suboptimal results.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a
medical device company focused on developing and commercializing
innovative solutions for treating vascular and coronary disease.
The company’s Stealth 360°™, Diamondback 360® and Diamondback
Predator 360® Orbital PAD Systems treat calcified and fibrotic
plaque in arterial vessels throughout the leg in a few minutes of
treatment time, and address many of the limitations associated with
existing surgical, catheter and pharmacological treatment
alternatives. The U.S. FDA granted 510(k) clearance for the use of
the Diamondback 360° in August 2007 and for the Stealth 360° in
March 2011. To date, more than 46,000 PAD procedures have been
performed using the Diamondback 360° in leading institutions across
the United States.
CSI has also commenced its ORBIT II Investigational Device
Exemption clinical trial to evaluate the safety and effectiveness
of its Diamondback 360° System in treating coronary arteries. The
coronary system is under clinical investigation and is currently
not commercially available in the United States.
For more information, visit the company’s website at
www.csi360.com.
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) CSI’s
future profitability; (ii) anticipated sustainable revenue growth;
(iii) the expected benefits of the Stealth 360°, including as a
game-changer in the future treatment of peripheral arterial
disease; (iv) the expected full commercial launch of the Stealth
360°; (v) CSI’s clinical trials; and (vi) anticipated revenue,
gross profit, operating expenses, interest and other expense, net
loss and adjusted EBITDA in future periods, 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 reluctance of physicians to accept
new products; the effectiveness of the Stealth 360°; actual
clinical trial results; the impact of competitive products and
pricing; the difficulty to successfully manage operating costs;
fluctuations in quarterly results; FDA clearances and approvals;
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.
Product Disclosure
The Stealth 360°™ Orbital PAD System, Diamondback 360® Orbital
PAD System and Diamondback Predator 360® Orbital PAD System are
percutaneous orbital atherectomy systems indicated for use as
therapy in patients with occlusive atherosclerotic disease in
peripheral arteries and stenotic material from artificial
arteriovenous dialysis fistulae. The systems are 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)
(unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
2011
2010 2011
2010 Revenues $
20,152 $ 16,519 $ 57,073 $ 46,814 Cost of goods sold
3,949 3,847
12,063 10,850 Gross
profit
16,203 12,672
45,010 35,964
Selling, general and administrative 16,415 16,382
46,597 47,150 Research and development
1,780
2,459 6,316
7,421 Total expenses
18,195 18,841
52,913 54,571 Loss
from operations (1,992 ) (6,169 ) (7,903 ) (18,607 )
Interest and other income (expense)
(392
) (349 )
(739 ) (896
) Net loss
$ (2,384
) $ (6,518 )
$ (8,642 ) $
(19,503 )
Net loss per common share:
Basic and diluted
$ (0.15 )
$ (0.44 ) $
(0.55 ) $ (1.33
)
Weighted average common shares used in
computation:
Basic and diluted
16,146,667
14,878,859 15,778,287
14,681,014
Cardiovascular Systems, Inc.
Consolidated Balance Sheets
(Dollars in Thousands)
(unaudited)
March 31, June 30, 2011
2010 ASSETS Current assets Cash and cash equivalents
$ 18,618 $ 23,717 Accounts receivable, net 13,342 9,394 Inventories
4,865 4,319 Prepaid expenses and other current assets
727 1,048 Total current assets
37,552 38,478 Property and
equipment, net 2,220 1,964 Patents, net 2,192 1,712 Other assets
1,762 568 Total assets
$ 43,726 $
42,722
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities Current maturities of long-term debt $ 3,723 $
2,302 Accounts payable 4,488 3,353 Deferred grant incentive 717
1,181 Accrued expenses
6,519
6,569 Total current liabilities
15,447 13,405 Long-term
liabilities Long-term debt, net of current maturities 9,598 8,985
Deferred grant incentive 1,741 2,208 Other liabilities
112 409 Total long-term
liabilities
11,451 11,602
Total liabilities
26,898
25,007 Commitments and contingencies Total
stockholders’ equity
16,828
17,715 Total liabilities and stockholders’ equity
$ 43,726 $
42,722
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)
(unaudited)
Three months endedMarch
31,
Nine months endedMarch
31,
2011 2010 2011
2010 Device
revenue $ 17,639 $ 14,486 $ 50,099 $ 41,466
Other product revenue
2,513
2,033 6,974 5,348
Total revenue $ 20,152 $ 16,519 $ 57,073 $
46,814 Device units sold
5,816 4,870 16,662
13,860 New customers
57 52 181 155
Reorder revenue % 94 % 93 %
93 % 92 %
Cardiovascular Systems, Inc.
Adjusted EBITDA
(Dollars in Thousands)
(unaudited)
Actual
Projected Range
Three Months EndedMarch 31,
Nine Months EndedMarch 31,
Three Months EndingJune 30, 2011
2011 2010
2011 2010 High
Low Loss from operations $ (1,992 ) $ (6,169 ) $
(7,903 ) $ (18,607 ) $ (500 ) $ (1,100 ) Add: Stock-based
compensation
1,316
2,122
5,221
6,460
1,300
1,300
Add: Depreciation and amortization
181
156
518
435
200
200
Adjusted EBITDA $ (495 ) $ (3,891 ) $ (2,164 ) $ (11,712 ) $
1,000 $ 400
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 stock-based compensation guidance 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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