Conference Call Scheduled for Today, August
6, 2014, at 3:45 PM CT (4:45 PM ET)
Key Financial and Operating Highlights for the Fourth
Quarter:
- Revenues of $39.6 million rose 37
percent from 2013 fourth quarter
- Market expanding Diamondback
360® Coronary and Diamondback 360® 60cm
Peripheral Orbital Atherectomy Systems (OAS) contribute to strong
top-line growth
- Company enrolls first patients in
COAST study
Cardiovascular Systems, Inc. (CSI) (NASDAQ: CSII), a medical
device company developing and commercializing innovative
interventional treatment systems for peripheral and coronary artery
disease, today reported financial results for its fiscal fourth
quarter and year ended June 30, 2014.
The company’s fourth-quarter revenues grew to $39.6 million, a
37 percent gain from $28.8 million in the fourth quarter of fiscal
2013. Customer reorder revenues remained strong at 98 percent of
total revenue.
CSI’s fiscal 2014 fourth-quarter net loss was $(9.6) million, or
$(0.31) per common share, compared to a net loss of $(6.8) million,
or $(0.28) per common share, in the fiscal 2013 fourth quarter.
Adjusted EBITDA for the quarter was a loss of $(5.9) million,
compared to a loss of $(4.3) million a year ago. Losses increased
from the prior year primarily due to planned investments, including
$11.7 million of expenses related to coronary market launch
initiatives, clinical studies and new product development. Expenses
were above guidance due to higher incentive compensation for
performance achievement and expansion of our coronary launch. The
company’s fourth-quarter gross profit margin increased to 77
percent, benefiting from lower device unit costs than in the
prior-year quarter. Excluding net coronary investments, adjusted
EBITDA was positive for the quarter.
Fiscal year 2014 revenues increased to $136.6 million, up 31
percent from the prior fiscal year. Gross margin was somewhat
higher than the prior year at 77 percent. Operating expenses grew
36 percent, again primarily due to planned investments, including
$35.6 million for coronary initiatives. Adjusted EBITDA loss was
$(21.2) million, while the net loss totaled $(35.3) million, or
$(1.25) per common share, compared to $(24.0) million, or $(1.11)
per common share, in fiscal 2013. Excluding net coronary
investments, adjusted EBITDA was positive for the full year.
David L. Martin, CSI’s President and Chief Executive Officer,
said, “CSI made important progress in fiscal 2014 to position the
company for sustained growth via product innovations, clinical
trials and sales force investments. Our strong revenue growth
demonstrates that we are expanding the market by providing
physicians with new tools for patients who were previously
difficult to treat.
“We are pleased with the early adoption of our new Diamondback
360® 60cm Peripheral OAS, designed for tibiopedal access.
Additionally, the controlled launch of our coronary system
continued to gain traction during the fourth quarter, growing
revenue by over 90 percent from the third quarter of this year,
with more than 800 units sold.”
Continued Rollout of Diamondback 360® Coronary
Orbital Atherectomy System (OAS)During the fourth quarter, CSI
continued the controlled commercial launch of its Diamondback 360®
Coronary Orbital Atherectomy System (OAS), with a small team of
dedicated coronary sales representatives in the United States.
Further, given the successful progress in the controlled launch,
CSI has begun training its peripheral arterial disease (PAD) sales
representatives to sell both the Coronary OAS and the company’s
peripheral system. The majority of the PAD sales representatives
are expected to be trained by the end of fiscal year 2015. Since
the coronary launch in October 2013, nearly 1,400 patients have
been treated using CSI’s unique technology.
Diamondback 360® 60cm OAS LaunchIn March,
CSI secured FDA clearance for its Diamondback 360® 60cm Peripheral
OAS. This new device, with its low profile and short length, allows
physicians to gain access through the foot or ankle to treat PAD in
the small vessels located below the knee.
According to Martin, “This device further demonstrates the
unique capabilities of our orbital technology and CSI’s commitment
to provide physicians new options for treating the most difficult
patients. Products like the low-profile, tibiopedal device expand
the market by treating severely ill patients who were previously
underserved.”
First Patients Enrolled in COAST StudyIn June, the
company announced that the first patient was enrolled in its
Coronary Orbital Atherectomy System Trial (COAST) trial. Taking
place in the United States and Japan, COAST is designed to assess
the safety and efficacy, as well as economic outcomes, of CSI’s new
micro crown OAS in treating severely calcified coronary lesions in
patients suffering from coronary artery disease (CAD). A total of
100 patients will be enrolled at up to 15 U.S. sites and five sites
in Japan.
According to Martin, “COAST is an important trial for CSI as we
seek to simultaneously demonstrate that our second generation
Coronary OAS is safe and effective and improves economic outcomes
in a very sick patient population. If successful, this trial may
also help secure commercial approval in Japan, a large and
underserved CAD market.”
Fiscal 2015 First-Quarter OutlookFor the fiscal 2015
first quarter ending September 30, 2014, CSI anticipates:
- Revenue growth of 33 percent to 37
percent over the first quarter of fiscal 2014, to a range of $39.5
million to $40.7 million;
- Gross profit as a percentage of
revenues of 77.5 percent to 78.0 percent;
- Operating expenses approximately 4
percent to 5 percent higher than the fourth quarter of fiscal 2014,
primarily to advance the coronary commercial launch, clinical
studies, and product development, as well as the timing of sales
meetings and conferences; and
- Net loss in the range of $(10.3)
million to $(11.0) million, or loss per common share ranging from
$(0.33) to $(0.35), assuming 31.3 million average shares
outstanding.
Concluded Martin, “As we look to fiscal 2015, our top priorities
are to continue achieving high growth in PAD—expanding that market
with our unique, low-profile orbital technology and wealth of
clinical data—and successfully broadening our commercial launch in
the CAD market. Our ability to expand these markets by treating
previously underserved patients is expected to drive adoption of
our systems, providing continued attractive growth for CSI.”
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 fourth-quarter results today, August
6, 2014, at 3:45 p.m. CT (4:45 p.m. ET). To access the call, dial
(888) 679-8034 and enter access number 56131688. 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 33941614. The audio replay will be
available beginning at 5:45 p.m. CT on Wednesday, August 6, 2014,
through 10:59 p.m. CT on Wednesday, August 13, 2014.
Use of Non-GAAP Financial MeasuresTo 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 Artery Disease (PAD)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
orbital atherectomy utilizing the Stealth 360 and Diamondback 360
Peripheral Orbital Atherectomy Systems, minimally invasive catheter
systems developed and manufactured by CSI. These systems use a
diamond-coated crown, attached to an orbiting shaft, 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 Coronary Artery Disease (CAD)CAD is a
life-threatening condition and a leading cause of death in men and
women in the United States. CAD occurs when a fatty material called
plaque builds up on the walls of arteries that supply blood to the
heart. The plaque buildup causes the arteries to harden and narrow
(atherosclerosis), reducing blood flow. The risk of CAD increases
if a person has one or more of the following: high blood pressure,
abnormal cholesterol levels, diabetes, or family history of early
heart disease. According to the American Heart Association, 16.3
million people in the United States have been diagnosed with CAD,
the most common form of heart disease. Heart disease claims more
than 600,000 lives in the United States each year. According to
estimates, significant arterial calcium is present in nearly 40
percent of patients undergoing a percutaneous coronary intervention
(PCI). Significant calcium contributes to poor outcomes and higher
treatment costs in coronary interventions when traditional
therapies are used, including a significantly higher occurrence of
death and major adverse cardiac events (MACE).
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 Orbital Atherectomy
Systems treat calcified and fibrotic plaque in arterial vessels
throughout the leg and heart 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
Orbital Atherectomy System for the treatment of PAD in August 2007.
In October 2013, the company received FDA approval for the use of
the Diamondback Orbital Atherectomy System in coronary arteries. To
date, over 157,000 of CSI’s devices have been sold to leading
institutions across the United States. For more information, visit
the company’s website at www.csi360.com.
Safe HarborCertain 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 coronary launch strategy and timeline; (ii)
expanded adoption and usage of CSI’s coronary technology by
prominent hospitals and physicians; (iii) CSI’s new Diamondback
360® 60cm Peripheral OAS device; (iv) the COAST trial, including
the number of patients expected to be enrolled, and the potential
to secure commercial approval in Japan; (v) anticipated revenue,
gross profit, operating expenses, and net loss; (vi) the market
expansion from CSI’s Orbital Atherectomy Systems; (vii) CSI’s top
priorities in fiscal 2015; and (viii) potential future growth of
CSI, 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 dependence on
market growth; the reluctance of physicians and hospitals to accept
new products; the effectiveness of the Stealth 360 and the
Diamondback 360 Coronary OAS; actual clinical trial and study
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 Disclosures:
Peripheral ProductsThe 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.
Coronary ProductIndications: The Diamondback 360®
Coronary Orbital Atherectomy System (OAS) is a percutaneous orbital
atherectomy system indicated to facilitate stent delivery in
patients with coronary artery disease (CAD) who are acceptable
candidates for PTCA or stenting due to de novo, severely calcified
coronary artery lesions.
Contraindications: The OAS is contraindicated when the
ViperWire guide wire cannot pass across the coronary lesion or the
target lesion is within a bypass graft or stent. The OAS is
contraindicated when the patient is not an appropriate candidate
for bypass surgery, angioplasty, or atherectomy therapy, or has
angiographic evidence of thrombus, or has only one open vessel, or
has angiographic evidence of significant dissection at the
treatment site and for women who are pregnant or children.
Warnings/Precautions: Performing treatment in excessively
tortuous vessels or bifurcations may result in vessel damage; The
OAS was only evaluated in severely calcified lesions, A temporary
pacing lead may be necessary when treating lesions in the right
coronary and circumflex arteries; On-site surgical back-up should
be included as a clinical consideration; Use in patients with an
ejection fraction (EF) of less than 25% has not been evaluated. See
the instructions for use before performing Diamondback 360 Coronary
OAS procedures for detailed information regarding the procedure,
indications, contraindications, warnings, precautions, and
potential adverse events. For further information call CSI at
1-877-274-0901 and/or consult CSI’s website at www.csi360.com.
Caution: Federal law (USA) restricts this device to sale
by or on the order of a physician.
Micro Crown OASCSI has commenced its COAST
Investigational Device Exemption clinical trial to evaluate the
safety and effectiveness of its new micro crown orbital technology
in treating coronary arteries. This new system is limited by
federal law to investigational use and is currently not
commercially available in the United States or Japan.
Cardiovascular Systems, Inc. Consolidated
Statements of Operations (Dollars in Thousands)
(unaudited) Three Months
Ended Year Ended June 30, June 30,
2014 2013 2014
2013 Revenues $ 39,564 $ 28,821 $ 136,612 $ 103,897
Cost of goods sold 9,115 6,929
31,041 24,382 Gross profit 30,449 21,892
105,571 79,515 Expenses: Selling, general and administrative 33,727
24,627 117,994 86,718 Research and development 6,276
3,946 21,066 15,216 Total
expenses 40,003 28,573 139,060
101,934 Loss from operations (9,554 ) (6,681 )
(33,489 ) (22,419 ) Interest and other, net (74 )
(160 ) (1,801 ) (1,618 ) Net loss and comprehensive
loss $ (9,628 ) $ (6,841 ) $ (35,290 ) $ (24,037 ) Net loss
and comprehensive loss per common share: Basic and Diluted $ (0.31
) $ (0.28 ) $ (1.25 ) $ (1.11 ) Weighted average common
shares used in computation: Basic and Diluted 30,959,038
24,181,465 28,295,758
21,685,932
Cardiovascular Systems, Inc.
Consolidated Balance Sheets (Dollars in Thousands)
(unaudited) June 30,
June 30, 2014 2013 ASSETS Current
assets Cash and cash equivalents $ 126,592 $ 67,897 Accounts
receivable, net 21,383 14,730 Inventories 12,890 6,243 Prepaid
expenses and other current assets 1,846 959 Total
current assets 162,711 89,829 Property and equipment, net 15,297
2,999 Patents, net 3,823 3,219 Debt conversion option and other
assets 70 850 Total assets $ 181,901 $ 96,897
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
Short-term borrowings $ 2,400 $ 5,095 Accounts payable 12,699 7,230
Deferred grant incentive 59 156 Accrued expenses 14,571
9,932 Total current liabilities 29,729 22,413 Long-term
liabilities Long-term debt, net of current maturities - 7,472 Other
liabilities 117 180 Total long-term liabilities
117 7,652 Total liabilities 29,846 30,065 Commitments
and contingencies Total stockholders' equity 152,055
66,832 Total liabilities and stockholders' equity $ 181,901
$ 96,897
Cardiovascular Systems, Inc.
Supplemental Sales Information (Dollars in Thousands)
(unaudited) Three Months
Ended Year Ended June 30, June 30,
2014 2013 2014
2013 Device revenue: PAD $ 31,883 $ 25,375 $ 115,418 $
91,238 CAD 3,023 - 4,996
- Total device revenue 34,906 25,375 120,414 91,238
Other product revenue 4,658 3,446
16,198 12,659 Total revenue $ 39,564
$ 28,821 $ 136,612 $ 103,897
Device units sold: PAD 10,525 8,138 37,873 28,948 CAD 822
- 1,385 - Total
device units sold 11,347 8,138
39,258 28,948 New customers: PAD 54 59
208 191 CAD 35 - 68 - Combined
53
59 208 191 Reorder revenue % 98 % 96 % 97 % 97 %
Non-GAAP Financial MeasuresTo 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
on the next page. 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.
Cardiovascular Systems, Inc. Adjusted EBITDA
(Dollars in Thousands) (unaudited)
Three Months Ended Year Ended June
30, June 30, 2014 2013
2014 2013 Loss from
operations $ (9,554 ) $ (6,681 ) $ (33,489 ) $ (22,419 ) Add:
Stock-based compensation 3,246 2,126 10,928 7,442 Add: Depreciation
and amortization 387 285 1,369
973 Adjusted EBITDA $ (5,921 ) $ (4,270 ) $
(21,192 ) $ (14,004 )
Use and Economic Substance of Non-GAAP Financial Measures
Used by CSI and Usefulness of Such Non-GAAP Financial Measures to
InvestorsCSI 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
LimitationsNon-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.
Cardiovascular Systems, Inc.Jack Nielsen,
651-202-4919j.nielsen@csi360.comorPadillaCRTMarian Briggs,
612-455-1742marian.briggs@padillacrt.comorMatt Sullivan,
612-455-1709matt.sullivan@padillacrt.com
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