Cardiovascular Systems, Inc. (Nasdaq: CSII):
- Financial performance improved over
prior-year first quarter and aligned with pre-release:
- Revenues increased 3 percent to
$18.7 million
- Operating expenses declined 3
percent
- Adjusted EBITDA loss improved 18
percent to $(1.4) million
- Net loss, including $(0.4) million
of expense related to conversion and valuation changes of
convertible debt, decreased 10 percent to $(3.9) million, or
$(0.22) per common share
- Company expects double-digit revenue
growth for 2012 fiscal year ending June 30, 2012
- Stealth 360°™ PAD System
limited release continues, with over 120 percent sequential rise in
accounts
- Data presented at major medical
meetings supports the safety and efficacy of CSI technology to
address peripheral arterial disease (PAD)
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, 2011.
CSI’s revenues in the first quarter rose to $18.7 million, a 3
percent gain over revenues of $18.2 million in the first quarter of
last fiscal year. Adjusted EBITDA loss improved 18 percent to
$(1.4) million, driven by higher revenues and a 3 percent reduction
in operating expenses.
Net loss was $(3.9) million, or $(0.22) per common share, for
the quarter, a 10 percent reduction from $(4.3) million, or $(0.28)
per common share, in the first quarter of last fiscal year. Net
loss for the current quarter includes $(0.4) million, or $(0.02)
per common share, of expense related to conversion and valuation
changes of convertible debt.
As discussed in CSI’s October 6 announcement, first-quarter
revenue gains were lower than anticipated due to the combined
short-term effects of several factors, primarily high customer
demand for conversion to the new Stealth 360°™ PAD System and
movement by some high-volume physicians from hospitals to
office-based labs. Both of these developments consumed selling time
and temporarily delayed sales as purchases transitioned between
sites and product lines.
David L. Martin, CSI president and chief executive officer,
commented, “High demand for the Stealth 360° drove significant
increases in the product’s sales over the fourth quarter of fiscal
2011, including growth of over 120 percent in the number of Stealth
accounts and a 40 percent increase in devices sold. With only one
set of hands needed for operation, a 90-second procedure time, and
a simplified five crown portfolio, Stealth contrasts starkly with
the predecessor Diamondback 360® product and its 13 crown
configurations. We believe Stealth’s enhancements will accelerate
physician adoption in the future.
“In addition, movement by physicians from hospitals to
office-based labs will broaden access to treatment for the 3
million people diagnosed with PAD annually in the United States and
lead to a higher number of PAD procedures in the long term. We have
an unprecedented wealth of clinical and economic data demonstrating
the safety and effectiveness of our orbital technology in lesions
throughout the leg. Our outcomes and economic data provide
powerful, irrefutable evidence to support the use of our products
for these new office-based labs and physicians.”
Revenue from customer reorders remained similar to last year’s
first quarter at 94 percent of total revenue. Gross profit was also
similar at 77 percent, as manufacturing efficiencies and shipment
of fewer controller units were offset by a higher mix of Stealth
360° sales, which have higher unit costs due to limited initial
production volumes. Also, the ramp up of CSI’s second manufacturing
facility in Texas for additional production capacity has
temporarily increased production costs, but will enhance
efficiencies over time.
OPERATING HIGHLIGHTS
Limited Market Release of Stealth 360° Advances
CSI is introducing its innovative Stealth 360° PAD System
through a limited market release to generate valuable feedback from
physicians, establish best practices for device operation, and
expand adoption within accounts. At the end of the 2012 first
quarter, over 240 customers had purchased the third-generation
system, representing 44 percent of total devices sold during the
quarter. The Stealth 360° offers a simple design with power and
speed controls on the handle to give physicians hands-on control of
device operation and shorter procedure times. Stealth 360° 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.
CSI plans to begin a broader commercial launch of the Stealth
360° in the second half of fiscal 2012.
Studies Presented at Medical Conferences Confirm Advantages
of Orbital PAD Therapy
At the October Vascular Interventional Advances (VIVA) meeting,
CSI presented results from a prospective single-center study that
affirmed the procedural safety and efficacy, as well as the
long-term durability, of the Predator 360® PAD system. Use of CSI’s
orbital plaque removal technology led to durable results, with a
low reintervention rate of 10.9 percent within 12 months and
elimination of the need for bailout stenting. Small, calcified
vessels represent an understudied and challenging treatment
dilemma, and CSI is the only atherectomy company providing
physicians with the clinical and scientific data needed to treat
them.
In addition, data from several CSI studies, including the
six-month follow-up of CSI’s COMPLIANCE 360° randomized study of
above-the-knee severely calcified lesions, and six-month and
two-year follow-up data from the ORBIT I feasibility study for a
coronary application, will be presented at the Transcatheter
Cardiovascular Therapeutics (TCT) conference next week.
Fiscal 2012 Second-Quarter and Full-Year Outlook
Martin said, “We expect increasing year-over-year revenue growth
in future quarters, as the factors affecting the first quarter
subside. We will not be able to make up for the slow start in first
quarter, but do expect to return to double-digit growth for the
full year, with about 10 percent growth for fiscal 2012 over fiscal
year 2011. With the introduction of Stealth 360° and FDA approval
to continue with our ORBIT II coronary trial, CSI is at an
appropriate stage to invest further in sales and marketing and
clinical trials to capitalize on our growth opportunities.
Therefore, we still plan to increase operating expenses in fiscal
2012 to enhance future growth; however, the increase has been
reduced due to lower revenue projections. As a result, we
anticipate that our net loss in the second quarter of fiscal 2012
will be similar to the first quarter of this year. We expect to
resume progress toward profitability in the second half of fiscal
2012 and achieve our stated goal of positive net income in the
fourth quarter, excluding the potential effect of conversions or
valuation changes of convertible debt.”
For the fiscal 2012 second quarter ending December 31, 2011, CSI
anticipates:
- Revenues in the range of $19.5 million
to $20.5 million, or growth of 4 percent to 9 percent, over the
second quarter of fiscal 2011.
- Gross profit as a percentage of revenue
similar to first quarter of fiscal 2012.
- Growth in operating expenses of about 8
percent to 9 percent from the first quarter of fiscal 2012.
- Interest and other expense of about
$(300,000), excluding the potential effect of conversions or
valuation changes of convertible debt.
- Net loss in the range of $(3.3) million
to $(3.9) million, or loss per common share ranging from $(0.19) to
$(0.22), assuming 17.8 million average shares outstanding, and
excluding the potential effect of conversions or valuation changes
of convertible debt.
- Adjusted EBITDA loss between $(1.5)
million and $(2.1) 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 first-quarter results today, November 2,
2011, at 3:45 p.m. CT (4:45 p.m. ET). To access the call, dial
(888) 679-8034 and enter access number 34910559. Please dial in at
least 10 minutes prior to the call and wait for assistance, or dial
“0” for the operator. 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 60916706. The audio replay will be
available beginning at 8 p.m. CT on Wednesday, November 2, 2011,
through 6 p.m. CT on Friday, November 4, 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 — 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 Predator 360® 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 55,000
PAD procedures have been performed using the Diamondback 360° and
Stealth 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
orbital technology in treating coronary arteries. The coronary
system is limited by federal law to investigational use 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 and future growth; (ii) anticipated
accelerated physician adoption of our products and higher number of
PAD procedures; (iii) anticipated efficiencies from the Texas
manufacturing facility; (iv) the expected broader commercial launch
of the Stealth 360° in the second half of fiscal 2012; (v) CSI’s
clinical trials; (vi) the market and expansion opportunity provided
by a coronary application and (vii) 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°™ PAD System, Diamondback 360® PAD System and
Predator 360® 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
September
30,
2011 2010
Revenues
$ 18,660 $ 18,165 Cost of goods sold
4,346
4,141 Gross profit
14,314 14,024
Selling, general and administrative 15,350 15,496 Research and
development
2,064
2,422 Total expenses
17,414
17,918 Loss from operations
(3,100 ) (3,894 ) Interest and other expense, net
(759 ) (374
) Net loss
$ (3,859
) $ (4,268 )
Net loss per common share:
Basic and diluted
$ (0.22 )
$ (0.28 )
Weighted average common shares used in
computation:
Basic and diluted
17,486,941
15,369,157 Cardiovascular
Systems, Inc. Consolidated Balance Sheets (Dollars in
Thousands) (unaudited)
September 30,
June 30,
2011 2011 ASSETS Current assets Cash and cash
equivalents $ 22,676 $ 21,159 Accounts receivable, net
11,762 13,254 Inventories 7,055 5,818 Prepaid expenses and other
current assets
1,212
797 Total current assets
42,705
41,028 Property and equipment, net 2,271
2,383 Patents, net 2,422 2,314 Other assets
906
1,033 Total assets
$
48,304 $ 46,758
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities Current maturities of long-term debt $
3,905 $ 3,813 Accounts payable 5,203 5,181 Deferred grant incentive
647 647 Accrued expenses
5,340
5,545 Total current liabilities
15,095 15,186 Long-term
liabilities Long-term debt, net of current maturities 8,443 8,331
Deferred grant incentive 1,315 1,497 Other liabilities
106 109 Total long-term
liabilities
9,864
9,937 Total liabilities
24,959
25,123 Commitments and contingencies
Total stockholders’ equity
23,345
21,635 Total liabilities and stockholders’ equity
$ 48,304 $
46,758
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 ended
September 30, 2011
2010 Device
revenue $ 16,548 $ 16,063
Other product revenue 2,112
2,102 Total revenue $ 18,660
$ 18,165
Device units sold 5,286
5,342
New customers 41
56
Reorder revenue % 94 %
95 %
Cardiovascular
Systems, Inc. Adjusted EBITDA (Dollars in
Thousands) (unaudited)
Projected Range Three Months Ended
Three Months Ending Sept. 30,
Dec. 31, 2011 2011 2010
High Low Loss from operations $ (3,100
) $ (3,894 ) $ (3,000 ) $ (3,600 ) Add: Stock-based compensation
1,456
1,989
1,300
1,300
Add: Depreciation and amortization
221
164
200
200
Adjusted EBITDA $ (1,423 ) $ (1,741 )
$ (1,500 ) $ (2,100 )
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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