U.S. Revenue Increases by
33%
Raises Revenue Guidance to $82 Million to
$84 Million
Endologix, Inc. (Nasdaq:ELGX), developer and marketer of innovative
treatments for aortic disorders, today announced financial results
for the three and nine months ended September 30, 2011.
John McDermott, Endologix President and Chief Executive Officer,
said, "We are extremely pleased with our continued strong revenue
growth throughout 2011. The third quarter was highlighted by the
U.S. launch of the AFX™ Endovascular AAA System, which was well
received by both new and existing Endologix customers and was a key
driver of our 25% total and 33% domestic revenue growth achieved in
the quarter. Based on the adoption of AFX, combined with our strong
results in the first nine months of the year, we have raised our
2011 revenue guidance to $82 to $84 million, representing 22% to
25% annual growth."
Mr. McDermott added, "We are also pleased to announce a Cross
License Agreement with Bard Peripheral Vascular. This resolves a
patent dispute that was filed by Bard in August of 2010. Overall,
it was another very good quarter for Endologix and we believe the
Company is well positioned for continued growth."
Financial Results
Total revenue in the third quarter of 2011 was $22.3 million, a
25% increase from $17.9 million in the same quarter of 2010, and a
16% increase from the second quarter of 2011. U.S. revenue was
$20.3 million, a 33% increase compared with $15.2 million in the
third quarter of 2010, and a 22% increase from the second quarter
of 2011. International revenue was $2.0 million, a 25% decrease
compared with $2.6 million in the third quarter of 2010, and a 23%
decrease sequentially from the second quarter of 2011. The decrease
in international revenue was due primarily to the termination of a
European distribution agreement with LeMaitre Vascular, effective
September 1, 2011. This resulted in limited sales of Endologix
products to LeMaitre during the quarter, but positions the company
well for increased sales in several key European markets through
direct sales operations.
Gross profit was $17.5 million in the third quarter of 2011,
which represents a gross margin of 78.3%. This compares with gross
profit of $14.1 million and a gross margin of 78.6% in the third
quarter of 2010.
Total operating expenses were $22.6 million in the third quarter
of 2011, and included $1.3 million for the early termination of the
LeMaitre agreement. Marketing and sales expenses increased to
$12.3 million in the third quarter of 2011 from $8.6 million in the
same period last year. This increase included the ongoing expansion
of the U.S. sales force, the launch of AFX, and the initial costs
associated with building a direct sales organization in Europe.
Research, development and clinical expenses increased to $4.8
million in the third quarter of 2011 from $3.3 million in the same
period last year due primarily to investments in the new Nellix®
Endovascular System and Ventana™ Fenestrated Stent Graft System
product development programs. General and administrative expenses
increased to $4.2 million in the third quarter of 2011, from $2.7
million in the same period last year due to integration costs of
the Nellix business, and higher patent litigation
expenses.
On a GAAP basis, Endologix reported a net loss for the third
quarter of 2011 of $6.6 million, or $(0.12) per share, compared
with a net loss of $0.5 million, or $(0.01) per share, for the
third quarter of 2010. The primary drivers of the increased loss
per share between the third quarter 2011 and third quarter 2010,
are the non-capitalized costs associated with the Nellix
acquisition, and the necessary investment to build the Company's
direct sales force in Europe. The third quarter 2011 loss also
includes a $1.4 million non-cash fair value adjustment related to
the contingent consideration for the Nellix acquisition. On an
adjusted (non-GAAP) basis, excluding the $1.4 million non-cash fair
value adjustment, Endologix reported Adjusted Net Loss for the
third quarter of 2011 of $5.2 million, or $(0.09) per share. The
change in the fair value of the contingent consideration for the
Nellix acquisition is due primarily to the recent increase in
Endologix's stock price, as contingent consideration is solely
payable in Endologix common stock.
Total cash and cash equivalents were $23.9 million as of
September 30, 2011, compared with total cash and cash equivalents
of $38.2 million as of December 31, 2010.
Bob Krist, Chief Financial Officer, said, "We continue to
achieve robust revenue growth while investing in new products and
expanding our sales forces. Operating expenses net of the Nellix
acquisition, the LeMaitre early termination payment and incremental
litigation costs increased by less than the 25% rate of sales
growth in the third quarter over last year. Other than an increase
in revenue guidance, we remain on track with our financial forecast
for 2011 and continue to have ample cash resources to execute on
our growth strategy."
Financial Guidance
Based on the results for the first nine months of 2011, the
Company increased its full year 2011 revenue guidance and
reiterated its full year 2011 earnings per share guidance. The
Company now anticipates 2011 revenue to be in the range of $82
million to $84 million, up from the previous guidance range of $78
million to $82 million, and representing annual growth of 22% to
25%. For the full year 2011, the Company expects to generate a net
loss of between $0.25 to $0.30 per share which includes ongoing
investments in the U.S. sales force, building a direct sales force
in Europe, research and development and clinical initiatives, and
litigation expenses. Not included in the earnings per share
guidance are potential adverse litigation outcomes, acquisition
related charges, and other business development transactions
(including the $1.3 million charge related to the Company's early
termination agreement with LeMaitre
Vascular).
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 (877)
407-0789 from the U.S. or (201) 689-8562 from outside the U.S. A
telephone replay will be available for seven days following the
completion of the call by dialing (877) 870-5176 from the U.S. or
(858) 384-5517 from outside the U.S., and entering pin number
381361. The conference call will be broadcast live over the
Internet at www.endologix.com and will be available for 30
days.
About Endologix
Endologix, Inc. (the "Company") develops and manufactures
minimally invasive treatments for aortic disorders. The Company's
focus is endovascular stent grafts for the treatment of 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. The Nellix® Endovascular System and Ventana™
Fenestrated Stent Graft System are investigational
devices.
Except for historical information contained herein, this news
release contains forward-looking statements, including with respect
to 2011 financial guidance, the launch and market acceptance of new
products, planned investments in research and development and sales
and marketing activities, the integration of Nellix's technology,
the progress of clinical trial initiatives, the establishment of a
direct sales force in Europe, and litigation expenses, 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 the success of sales efforts for the Company's existing
products and related new products, product research and development
efforts, unexpected litigation expenses 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, 2010, 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.
Adjusted Net Earnings (Loss) and Adjusted Net Earnings
(Loss) per Share Definitions:
"Adjusted Net Earnings (Loss)" is a non-GAAP measure defined by
Endologix as GAAP Net Earnings (Loss) excluding all effects arising
from the application of GAAP purchase accounting treatment of
Endologix' acquisition of Nellix, Inc. ("Nellix"), which was
completed on December 10, 2010. In the three and nine months ended
September 30, 2011, the effect includes the fair value adjustment
to the liability for contingent payments to the former shareholders
of Nellix in the form of Endologix common stock.
In future periods, Adjusted Net Earnings (Loss) may continue to
exclude fair value adjustments to the liability for contingent
payments to the former shareholders of Nellix in the form of
Endologix common stock as the probability of achieving the payment
milestones changes and the value of Endologix common stock varies.
The corresponding charge or credit will flow through the earnings
statement. The adjustment may also include the amortization of
capitalized In Process Research & Development (IPR&D) as a
charge to cost of goods sold as the products resulting from the
Nellix technology are commercialized.
"Adjusted Net Earnings (Loss) per Share" is a non-GAAP measure
defined by Endologix as Adjusted Net Earnings (Loss) divided by
average diluted or non-diluted shares outstanding,
respectively.
Management believes that the "Adjusted Net Earnings (Loss)" and
"Adjusted Net Earnings (Loss) Per Share" measures enhance an
investor's overall understanding of Endologix's financial
performance and future prospects by being more reflective of
Endologix's core operational activities and more comparable with
the results of the Company over various periods. Management uses
these financial measures internally for strategic decision making,
forecasting future results and evaluating current performance.
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ENDOLOGIX,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
Unaudited |
(In thousands, except
per share amounts) |
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Three Months Ended September
30, |
Nine Months Ended September
30, |
|
2011 |
2010 |
2011 |
2010 |
Revenue: |
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|
|
U.S. revenue |
$ 20,320 |
$ 15,246 |
$ 52,280 |
$ 40,023 |
International revenue |
1,982 |
2,628 |
7,745 |
7,985 |
Total revenue: |
22,302 |
17,874 |
60,025 |
48,008 |
Cost of goods sold |
4,829 |
3,822 |
13,352 |
10,795 |
Gross profit |
$ 17,473 |
$ 14,052 |
$ 46,673 |
$ 37,213 |
Operating expenses: |
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|
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Research & development |
$ 3,628 |
$ 2,650 |
$ 12,812 |
$ 6,302 |
Clinical and regulatory
affairs |
1,179 |
688 |
2,994 |
1,737 |
Marketing and sales |
12,331 |
8,567 |
33,201 |
23,134 |
General and administrative |
4,184 |
2,673 |
11,087 |
6,957 |
Distribution contract
termination |
1,300 |
— |
1,730 |
— |
Total operating expenses |
22,622 |
14,578 |
61,824 |
38,130 |
Loss from operations |
$ (5,149) |
$ (526) |
$ (15,151) |
$ (917) |
Other income (expense) |
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Other income (expense) |
(54) |
60 |
87 |
(154) |
Change in fair value of
contingent consideration related to acquisition |
(1,400) |
— |
(10,000) |
— |
Total other income
(expense) |
(1,454) |
60 |
(9,913) |
(154) |
Net loss |
$ (6,603) |
$ (466) |
$ (25,064) |
$ (1,071) |
Basic and diluted net loss per share |
$ (0.12) |
$ (0.01) |
$ (0.44) |
$ (0.02) |
Shares used in computing basic and diluted
net loss per share |
56,961 |
48,842 |
56,365 |
48,390 |
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Non-GAAP Reconciliation –Net Loss to
Adjusted Net Loss and Adjusted Net Loss per Share: |
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Net loss |
$ (6,603) |
$ (380) |
$ (25,065) |
$ (1,071) |
Fair value adjustment to the liability for
contingent payments to the former Nellix shareholders
(non-cash) |
1,400 |
— |
10,000 |
— |
Adjusted net loss |
$ (5,203) |
$ (380) |
$ (15,065) |
$ (1,071) |
Adjusted net loss per share |
$ (0.09) |
$ (0.01) |
$ (0.27) |
$ (0.01) |
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ENDOLOGIX,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
Unaudited |
(In
thousands) |
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September 30,
2011 |
December 31,
2010 |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ 23,872 |
$ 38,191 |
Accounts receivable, net |
16,267 |
12,212 |
Other receivables |
311 |
515 |
Inventories |
15,379 |
8,350 |
Other current assets |
1,228 |
560 |
Total current assets |
57,057 |
59,828 |
Property and equipment, net |
3,414 |
2,429 |
Goodwill |
27,073 |
27,073 |
Intangibles, net |
43,795 |
44,863 |
Other assets |
182 |
182 |
Total assets |
$ 131,521 |
$ 134,375 |
LIABILITIES AND STOCKHOLDERS'
EQUITY |
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Current liabilities: |
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Accounts payable and accrued
expenses |
$ 15,128 |
$ 11,243 |
Current liabilities |
15,128 |
11,243 |
Long term liabilities: |
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Other long term
liabilities |
1,041 |
1,029 |
Contingently issuable common
stock |
38,200 |
28,200 |
Long term liabilities |
39,241 |
29,229 |
Total liabilities |
54,369 |
40,472 |
Stockholders' equity: |
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Common stock, $0.001 par value;
75,000 shares authorized, and 58,120 and 56,896 shares issued, and
57,625 and 56,401 outstanding |
58 |
57 |
Additional paid-in capital |
238,329 |
230,017 |
Accumulated deficit |
(160,574) |
(135,510) |
Treasury stock at cost, 495
shares |
(661) |
(661) |
Total stockholders' equity |
77,152 |
93,903 |
Total liabilities and
stockholders' equity |
$ 131,521 |
$ 134,375 |
CONTACT: COMPANY CONTACT:
Endologix, Inc.
John McDermott, CEO
(949) 595-7200
www.endologix.com
INVESTOR CONTACTS:
The Ruth Group
Nick Laudico (646) 536-7030
Zack Kubow (646) 536-7020
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