Endologix, Inc. (Nasdaq:ELGX), developer and manufacturer of the
Powerlink� System endoluminal stent graft (ELG) for the minimally
invasive treatment of abdominal aortic aneurysms (AAA), today
announced financial results for the three and six months ended June
30, 2008. �I am enthusiastic about the opportunity at Endologix and
am committed to building a high-growth, profitable business,� said
John McDermott, Endologix President and Chief Executive Officer.
�We are reporting strong second quarter growth, with product
revenue up 48% compared with last year�s second quarter, and see
significant growth prospects throughout the year. Nevertheless,
based on our position midway through 2008, we are refining our
revenue expectation for the full year from a range of $39 million
to $43 million to a range of $37 million to $40 million. Our
revised guidance represents a revenue increase of 38% to 47%,
compared with 2007. Importantly, while second quarter expenses were
impacted by a number of factors, given our current financial
resources, we continue to expect to reach cash flow positive
without the need for an equity financing.� Financial Results Total
product revenue in the second quarter of 2008 was $9.3 million, a
48% increase from $6.3 million in the second quarter of 2007, and
an 11% increase from $8.3 million in the first quarter of 2008.
Domestic product revenue of $7.9 million represented a 47% increase
compared with $5.4 million in the 2007 second quarter, and a 15%
increase from $6.8 million in the 2008 first quarter. International
product revenue was $1.4 million, up 54% compared with $895,000 in
the comparable quarter last year, and down 6% from $1.5 million in
the first quarter of 2008. International sales in the first quarter
of 2008 included an initial stocking order of $278,000 to the
Company�s Japanese distributor Cosmotec, Inc., following the
receipt of Shonin approval for the Powerlink System in February
2008. For the six months ended June 30, 2008, total product revenue
increased by 41% to $17.6 million, compared with $12.5 million for
the six months ended June 30, 2007. Gross profit was $6.7 million
in the second quarter of 2008, which represented gross margin of
72% of total revenue. This compares with $3.7 million and 58%,
respectively, in the second quarter of 2007. Gross profit of $12.5
million was 71% of total revenue for the first half of 2008,
compared with $7.4 million or 59% of total revenue for the first
half of 2007. The gross margin improvement for the three months and
six months ended June 30, 2008 was due primarily to the utilization
of ePTFE graft material produced in-house. Endologix has confirmed
its original 2008 gross margin guidance of 71% to 75%. Total
operating expenses were $10.5 million in the second quarter of
2008, versus $7.6 million in the second quarter of 2007. Marketing
and sales expenses increased by 31% to $6.1 million in the second
quarter of 2008 from $4.7 million in the comparable quarter last
year, and were driven by a 28% increase in the number of covered
sales territories and variable commission payments on the 47%
increase in domestic revenue. Research, development and clinical
expenses for the second quarter of 2008 were $1.8 million, versus
$1.5 million last year, with the increases primarily due to late
stage product development and clinical trial expense related to new
products. General and administrative expenses were $2.6 million
versus $1.4 million last year. The 2008 second quarter general and
administration expense increases were primarily due to $370,000 in
legal fees and $550,000 in costs associated with the CEO
succession, which occurred during the 2008 second quarter. Total
operating expenses for the first six months of 2008 were $20.1
million, versus $16.0 million in the comparable period in 2007.
Marketing and sales expenses increased by 21% to $11.9 million in
the first half of 2008 from $9.9 million in the comparable period
last year driven by a 19% increase in the number of covered sales
territories and variable commission payments on the 41% increase in
domestic revenue. Research, development and clinical expenses for
the first half of 2008 were $3.3 million, versus $3.1 million in
the first half of last year, with the increase explained above.
General and administrative expenses were $4.9 million for the first
half of 2008, versus $3.1 million in the comparable period of last
year. Higher general and administrative expenses in the first half
of 2008 were primarily due to $815,000 in legal fees and $550,000
in costs associated with the CEO succession. Endologix announced
its expectations for total 2008 operating expenses to range from
$39 million to $41 million, from its previous guidance range of $35
million to $39 million. Revised 2008 expense guidance considers
actual results through two quarters, including the CEO succession
impact which is essentially complete, increases in selling expense
related to revenue growth, marketing investments for upcoming
product launches, and a continuation of
higher-than-previously-expected legal fees. Although the legal
matter with Cook Medical, Inc. is on-going, Endologix also
announces that the intellectual property dispute with Dr. Harrison
Lazarus has been resolved. Endologix reported a net loss for the
second quarter of 2008 of $3.8 million, or $0.09 per share,
compared with a net loss of $3.7 million, or $0.09 per share, for
the second quarter of 2007. The net loss for the second quarter of
2008 included $718,000, or $0.02 per share, for stock-based
compensation expense. This compares to $624,000, or $0.02 per
share, for stock-based compensation expense in the second quarter
of 2007. The Company reported a net loss for the six months ended
June 30, 2008 of $7.5 million, or $0.17 per share, compared with a
net loss of $8.2 million, or $0.19 per share, for the six months
ended June 30, 2007. The net loss for the first six months of 2008
included $1.3 million, or $0.03 per share, for stock-based
compensation expense, whereas the net loss for the first six months
of 2007 included $1.1 million, or $0.03 per share, for stock-based
compensation expense. Total cash and cash equivalents at June 30,
2008 were $6.1 million, compared with $9.2 million as of December
31, 2007. Endologix Chief Financial Officer Bob Krist commented,
�We have made good progress in controlling our working capital use
with inventory turnover up by 27%, compared to the prior year, and
worldwide accounts receivable days outstanding currently at 51. �We
also recently extended our $5 million revolving credit facility
with Silicon Valley Bank through July 2010 and added the
availability of up to $3 million in term debt with the bank. We
expect that with our currently available cash, together with this
$8 million of available bank financing, Endologix will have ample
cash and working capital flexibility to execute its business plan
and achieve sustainable positive cash flow from operations in the
first half of 2009,� said Mr. Krist. Mr. McDermott added, �We are
implementing a series of sales initiatives in the second half of
this year to support our growth momentum. These include aligning
our sales territories to concentrate on the most significant growth
opportunities, instituting a new growth-based compensation plan for
our sales representatives, and implementing a more comprehensive
sales training program. We have recently hired a highly qualified
Vice President of Sales in Joe DeJohn, who will be instrumental in
leading these initiatives. �We also plan to launch two new
important products in the next nine months. In the fourth quarter
of 2008, we plan to introduce our 34-millimeter aortic cuffs. These
devices have unique competitive advantages and will allow us to
compete in a new segment of the market, which represents an
estimated 10% to 15% of the AAA procedures. In the first half of
2009, we expect to introduce a new delivery system which makes the
deployment of the Powerlink device very simple and intuitive.�
Conference Call Information Endologix management will host a
conference call to discuss these topics today beginning at 5:00
p.m. Eastern time (2:00 p.m. Pacific time). To participate via
telephone please call (888) 463-4487 from the U.S. or (706)
634-5615 from outside the U.S. A telephone replay will be available
for two days following the completion of the call by dialing (800)
642-1687 from the U.S. or (706) 645-9291 from outside the U.S., and
entering reservation number 55350143. The conference call will be
broadcast live over the internet at www.endologix.com and will be
available for 14 days About Endologix Endologix, Inc. develops and
manufactures minimally invasive treatments for vascular diseases.
Endologix's Powerlink System is an endoluminal stent graft for
treating abdominal aortic aneurysms (AAA). AAA is a weakening of
the wall of the aorta, the largest artery in the body, resulting in
a balloon-like enlargement. Once AAA develops, it continues to
enlarge and, if left untreated, becomes increasingly susceptible to
rupture. The overall patient mortality rate for ruptured AAA is
approximately 75%, making it a leading cause of death in the U.S.
Additional information can be found on Endologix�s Web site at
www.endologix.com. Except for historical information contained
herein, this news release contains forward-looking statements,
specifically with respect to 2008 financial guidance, new product
approvals by the U.S. Food and Drug Administration, market
introductions of new products, and achievement of positive cash
flow and profitability, the accuracy of which are necessarily
subject to risks and uncertainties, all of which are difficult or
impossible to predict accurately and many of which are beyond the
control of Endologix. Many factors may cause actual results to
differ materially from anticipated results including sales efforts,
product development efforts, and other economic, business,
competitive and regulatory factors. The Company undertakes no
obligation to update its forward looking statements. Please refer
to the Company�s Annual Report on Form 10-K for the year ended
December 31, 2007, and the company�s other filings with the
Securities and Exchange Commission, for more detailed information
regarding these risks and other factors that may cause actual
results to differ materially from those expressed or implied.
ENDOLOGIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS �
(In thousands, except per share amounts) (Unaudited) � Three Months
Ended June 30, Six Months Ended June 30, � 2008 � � 2007 � � 2008 �
� 2007 � Revenue: Domestic Product Revenue $ 7,881 $ 5,363 $ 14,730
$ 10,480 Non � U.S. Product Revenue � 1,380 � � 895 � � 2,848 � �
2,028 � Total Product Revenue: � 9,261 � � 6,258 � � 17,578 � �
12,508 � License revenue � 12 � � 60 � � 24 � � 118 � Total revenue
9,273 6,318 17,602 12,626 Cost of product revenue � 2,554 � � 2,638
� � 5,085 � � 5,217 � Gross profit $ 6,719 � $ 3,680 � $ 12,517 � $
7,409 � Gross profit as a % of total revenue 72 % 58 % 71 % 59 %
Operating expenses: Research, development and clinical $ 1,798 $
1,455 $ 3,296 $ 3,059 Marketing and sales 6,144 4,686 11,944 9,878
General and administrative � 2,599 � � 1,446 � � 4,871 � � 3,067 �
Total operating expenses � 10,541 � � 7,587 � � 20,111 � � 16,004 �
Loss from operations $ (3,822 ) $ (3,907 ) $ (7,594 ) $ (8,595 )
Other income: Interest income 60 194 140 442 Total other � 60 � �
194 � � 140 � � 442 � Net loss � ($3,762 ) � ($3,713 ) � ($7,454 )
� ($8,153 ) Basic and diluted net loss per share � ($0.09 ) �
($0.09 ) � ($0.17 ) � ($0.19 ) Shares used in computing basic and
diluted net loss per share � 42,976 � � 42,728 � � 42,964 � �
42,716 � � ENDOLOGIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS �
(In thousands, except per share amounts) (Unaudited) � June 30,
2008 December 31, 2007 ASSETS Current assets: Cash and cash
equivalents $ 5,602 $ 8,728 Restricted cash equivalents 500 500
Accounts receivable, net 4,967 4,527 Other receivables 11 234
Inventories 7,179 8,054 Other current assets � 308 � � 581 � Total
current assets 18,567 22,624 Property and equipment, net 3,487
3,771 Goodwill 4,631 4,631 Intangibles, net 8,211 8,913 Other
assets � 104 � � 104 � Total Assets $ 35,000 � $ 40,043 �
LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities: Accounts
payable and accrued expenses $ 5,006 � $ 4,259 � Current
liabilities 5,006 4,259 Long-term liabilities � 1,077 � � 1,109 �
Total liabilities � 6,083 � � 5,368 � � Stockholders� equity:
Common stock, $.001 par value; 60,000,000 shares authorized, and
44,124,000 and 43,453,000 shares issued, and 43,629,000 and
42,958,000 outstanding 44 43 Additional paid-in capital 168,518
166,912 Accumulated deficit (139,192 ) (131,738 ) � Treasury stock
at cost, 495,000 (661 ) (661 ) Accumulated other comprehensive
income � 208 � � 119 � Total stockholders� equity � 28,917 � �
34,675 � Total Liabilities and Stockholders� Equity $ 35,000 � $
40,043 � �
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