Endologix, Inc. (NASDAQ:ELGX), a developer and marketer of
innovative treatments for aortic disorders, today announced
financial results for the second quarter ended June 30,
2018.
The Company reported global revenue of $44.7 million in the
second quarter of 2018, a decrease of 7.9% from $48.6 million in
the second quarter of 2017, as strong growth in AFX® sales in Japan
and Ovation® sales in the U.S. were offset by lower U.S. sales of
AFX®, and softness in the Latin American market. Gross profit of
$29.6 million in the second quarter represented gross margin of
66.2%. Adjusted EBITDA (non-GAAP, defined below) loss totaled $9.3
million for the second quarter of 2018.
John Onopchenko, Chief Executive Officer of Endologix, Inc.,
commented, “Our second quarter results were in line with our
expectations with solid growth from Ovation in the U.S. and AFX® in
Japan, offset by slower sales of AFX® in the U.S. market and
Nellix® in Europe. Looking at the remainder of this year and
beyond, we are taking meaningful and necessary steps to reset our
operational, clinical, and financial priorities in order to
position the Company for long-term success. Collectively, these
initiatives would improve our competitiveness and lower our
cost-to-serve. Our key strategic initiatives include strengthening
the Company’s leadership team, creating a culture of
accountability, focused product and clinical development,
rightsizing and investing in customer and market intelligence
within our commercial organization, and exiting a number of small
international markets.”
“We firmly believe that Endologix has a well differentiated
product portfolio delivering superior clinical outcomes, as
evidenced by a growing body of clinical data related to our Nellix®
and Ovation® products, and we are excited about the opportunities
that lie ahead for our pipeline products, including Alto® and
ChEVAS,” continued Mr. Onopchenko. “Looking forward, we will
continue to build a culture of accountability while using this
reset to strengthen our foundation and position the Company for
profitable growth.”
Financial Results
Global revenue in the second quarter of 2018 was $44.7 million,
a 7.9% decrease from $48.6 million in the second quarter of 2017.
U.S. revenue in the second quarter of 2018 was $30.0 million, a
6.0% decrease from U.S. revenue of $31.9 million in the second
quarter of 2017. International revenue was $14.8 million, an 11.4%
decrease from International revenue of $16.7 million in the second
quarter of 2017. On a constant currency basis, second quarter 2018
International revenue decreased 14.1% over the second quarter of
2017.
Gross profit was $29.6 million in the second quarter of 2018,
which represents a gross margin of 66.2%. This compares to a gross
profit of $32.2 million, or a gross margin of 66.4%, in the second
quarter of 2017.
Total operating expenses increased 12.4% to $45.1 million in the
second quarter of 2018, compared to $40.1 million in the second
quarter of 2017, driven by an increase in general and
administrative expenses related primarily to the CEO transition and
increased legal expense related to the financing and ongoing
litigation.
Net loss for the second quarter of 2018 was $23.9 million, or
$(0.28) per share, compared to a net loss of $16.3 million, or
$(0.20) per share, a year ago. Adjusted Net Loss (non-GAAP, defined
below) totaled $15.6 million, compared to an Adjusted Net Loss of
$8.0 million for the second quarter of 2017. Adjusted EBITDA
(non-GAAP, defined below) loss totaled $9.3 million for the second
quarter of 2018, compared to Adjusted EBITDA loss of $2.3 million
for the second quarter of 2017.
Total cash, cash equivalents, and restricted cash were $37.6
million as of June 30, 2018.
Financial Guidance
After a critical evaluation of the market, as well as the
current business and related trends, the Company is making
significant changes to its strategy, and, as a result, is reducing
its previously issued revenue guidance. The Company now anticipates
2018 revenue in the range of $145 million to $155 million, compared
to the previous range of $170 million to $180 million. The Company
now expects 2018 GAAP loss per share in the range of $(1.04) to
$(1.12), compared to the previous range of $(0.89) to $(0.95).
These loss per share numbers contemplate the impact of
restructuring, but exclude the impact of any financing related
accounting adjustments.
Investor Event
The Company’s management will host an investor briefing on
October 2, 2018 in New York City after the close of market. Full
details will be posted to the “Investors” section of the Company’s
website at www.endologix.com in the
near future.
Conference Call Information
Endologix's management will host a conference call today at 4:30
p.m. ET (1:30 p.m. PT) to discuss its second quarter 2018
results.
To participate in the conference call, dial 877-407-9716
(domestic) or 201-493-6779 (international) and refer to the
passcode 13681567.
This conference call will also be webcast and can be accessed
from the “Investors” section of the Company’s website at
www.endologix.com. The webcast replay
of the call will be available at the same site approximately one
hour after the end of the call.
A recording of the call will also be available from 7:30 p.m. ET
(4:30 p.m. PT) on Thursday, August 9, 2018, until 11:59 p.m. ET
(8:59 p.m. PT) on Thursday, August 16, 2018. To hear this
recording, dial 844-512-2921 (domestic) or 412-317-6671
(international) and enter the passcode 13681567.
About Endologix, Inc.
Endologix, Inc. 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 an 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 80%, making it a leading
cause of death in the U.S. For more information,
visit www.endologix.com.
The Nellix® EndoVascular Aneurysm Sealing System has obtained CE
Mark in the EU and is only approved as an investigational device in
the United States. The Ovation Alto® System is only approved as an
investigational device and is not currently approved in any
market.
Cautions Regarding Forward-Looking Statements
Except for historical information contained herein, this press
release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “could,” “may,” “will,”
“believe,” “estimate,” “forecast,” “goal,” “project,” "continue,"
"outlook," “guidance,” "future,” other words of similar meaning and
the use of future dates. Forward-looking statements used in this
press release relate to Endologix’s steps to reset its operational,
clinical, and financial priorities to position it for long-term
success, including anticipated improvement in competitiveness and
reduced cost-to-serve; key strategic initiatives include
strengthening Endologix’s leadership team, focusing product and
clinical development, rightsizing and investing in customer and
market intelligence, and exiting a number of small international
markets; positioning of Endologix’s business for cash flow
breakeven in 2020; prospects for Endologix’s pipeline products,
including Ovation Alto and ChEVAS; positioning Endologix for
profitable growth; Endologix’s reduced 2018 revenue guidance and
its anticipated 2018 GAAP loss per share; and the anticipated
Investor Event, the accuracy of which are necessarily subject to
risks and uncertainties that may cause Endologix’s actual results
to differ materially and adversely from the statements contained
herein. Some of the potential risks and uncertainties that could
cause actual results to differ materially and adversely from
anticipated results include, continued market acceptance,
endorsement and use of Endologix's products, the success of
clinical trials relating to Endologix’s products, product research
and development efforts, uncertainty in the process of obtaining
and maintaining regulatory approval for Endologix's products,
Endologix’s ability to protect its intellectual property rights and
proprietary technologies, and other economic, business, competitive
and regulatory factors. The forward-looking statements contained in
this press release speak only as of the date of this press release.
Endologix undertakes no obligation to update any forward- looking
statements contained in this press release to reflect new
information, events or circumstances after the date they are made,
or to reflect the occurrence of unanticipated events. Please refer
to Endologix's filings with the Securities and Exchange Commission
including its Annual Report on Form 10-K for the year ended
December 31, 2017, and its Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2018 and June 30, 2018 (once
it is filed) for more detailed information regarding these risks
and uncertainties and other factors that may cause actual results
to differ materially from those expressed or implied.
Discussion of Non-GAAP Financial Measures
Endologix's management believes that the non-GAAP measures of
(1) "Adjusted Net Income (Loss)" and (2) “Adjusted EBITDA" enhance
an investor's overall understanding of Endologix's financial and
operating performance and its future prospects by (i) being more
reflective of core operating performance and (ii) being more
comparable with financial results over various periods. Endologix's
management uses these financial measures for strategic decision
making, forecasting future financial results, and evaluating
current period financial and operating performance. The
presentation of non-GAAP financial information is not intended to
be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP.
"GAAP" is generally accepted accounting principles in the United
States.
Adjusted Net Income (Loss) Definition:
(1) "Adjusted Net Income (Loss)" is a non-GAAP measure defined
by Endologix as net income (loss) under GAAP, excluding (to the
extent relevant in a particular reporting period): (i) the fair
value adjustment to the Nellix® acquisition contingent
consideration liability; (ii) interest expense; (iii) foreign
currency (gains) or losses; (iv) legal settlement costs; (v)
contract termination and business acquisition expenses; (vi)
business development expenses, including licensing costs related to
research and development activities; (vii) restructuring and other
transition costs; (viii) fair value adjustment of derivative
liabilities; (ix) inventory step-up amortization; and (x) loss on
extinguishment of debt. Endologix intends to calculate "Adjusted
Net Income (Loss)" in a consistent manner from period to
period.
In the three and six months ended June 30, 2018 and 2017,
this GAAP adjustment to net loss specifically represents: (i) the
fair value adjustment to Nellix® contingent consideration
liability; (ii) interest expense; (iii) foreign currency (gains) or
losses; (iv) restructuring and other transition costs; and (v) loss
on extinguishment of debt.
Adjusted EBITDA Definition:
(2) “Adjusted EBITDA” is a non-GAAP measure defined by Endologix
as “Adjusted Net Income (Loss)” excluding income tax (benefit)
expense, depreciation and amortization expense, and stock-based
compensation expense.
ENDOLOGIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Unaudited
(In thousands, except per share
amounts)
Three Months Ended Six Months Ended June
30, June 30, 2018 2017
2018 2017 Revenue U.S. $ 29,986 $
31,906 $ 59,361 $ 62,795 International 14,754 16,650
27,663 28,373 Total Revenue 44,740 48,556
87,024 91,168 Cost of goods sold 15,136
16,332 29,094 30,302 Gross profit $ 29,604
$ 32,224 $ 57,930 $ 60,866 Operating
expenses: Research and development 6,244 5,734 11,743 11,264
Clinical and regulatory affairs 3,728 2,740 7,299 6,575 Marketing
and sales 21,116 23,781 42,841 49,681 General and administrative
14,022 7,904 24,391 16,777 Restructuring costs — (29 ) 233
137 Total operating expenses 45,110 40,130
86,507 84,434 Loss from operations (15,506 )
(7,906 ) (28,577 ) (23,568 ) Other income (expense) (6,544 ) (5,552
) (11,985 ) (9,850 ) Change in fair value of contingent
consideration related to acquisition (1,800 ) 3,800 (700 ) 2,600
Loss on debt extinguishment — (6,512 ) (2,270 ) (6,512 )
Total other income (expense) (8,344 ) (8,264 ) (14,955 ) (13,762 )
Net loss before income tax expense $ (23,850 ) $ (16,170 ) $
(43,532 ) $ (37,330 ) Income tax expense (26 ) (122 ) (111 ) (276 )
Net loss $ (23,876 ) $ (16,292 ) $ (43,643 ) $ (37,606 ) Other
comprehensive income (loss) foreign currency translation (552 ) 781
(679 ) 1,137 Comprehensive loss $ (24,428 ) $ (15,511
) $ (44,322 ) $ (36,469 ) Basic and diluted net loss per
share $ (0.28 ) $ (0.20 ) $ (0.52 ) $ (0.45 ) Shares used in
computing basic and diluted net loss per share 84,462 83,247
84,112 83,087
Non-GAAP Reconciliations:
Three Months Ended Six Months Ended June 30,
June 30, 2018 2017 2018 2017
Net Loss to Adjusted Net Loss: Net loss $ (23,876 ) $
(16,292 ) $ (43,643 ) $ (37,606 ) Fair value adjustment to Nellix
contingent consideration liability 1,800 (3,800 ) 700 (2,600 )
Interest expense 5,863 5,803 11,670 10,098 Foreign currency (gain)
loss 656 (210 ) 331 (206 ) Restructuring and other transition costs
— (15 ) 233 532 Loss on extinguishment of debt — 6,512
2,270 6,512
(1) Adjusted Net Loss $
(15,557 ) $ (8,002 ) $ (28,439 ) $ (23,270 )
Adjusted Net
Loss to Adjusted EBITDA: Adjusted Net Loss $ (15,557 ) $
(8,002 ) $ (28,439 ) $ (23,270 ) Income tax expense 26 122 111 276
Depreciation and amortization expense 1,939 2,336 3,931 4,649
Stock-based compensation expense 4,265 3,234 7,286
6,188
(2) Adjusted EBITDA $ (9,327 ) $ (2,310
) $ (17,111 ) $ (12,157 )
ENDOLOGIX, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands)
June 30, December 31, 2018 2017
ASSETS Current assets: Cash and cash equivalents $ 35,629 $
57,991 Restricted cash 2,010 2,608 Accounts receivable, net
allowance for doubtful accounts of $623 and $470, respectively.
32,431 32,294 Other receivables 481 418 Inventories 42,800 45,153
Prepaid expenses and other current assets 2,582 4,670
Total current assets 115,933 143,134 Property and
equipment, net 17,703 19,212 Goodwill 120,883 120,927 Intangibles,
net 78,398 80,403 Deposits and other assets 821 1,371
Total assets $ 333,738 $ 365,047
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 13,184 $ 12,351 Accrued payroll 13,479 15,054
Accrued expenses and other current liabilities 16,461 16,002
Current portion of debt 17,752 17,202 Revolving line of credit —
21 Total current liabilities 60,876 60,630
Deferred income taxes 201 201 Deferred rent 7,792 7,724
Other liabilities 2,284 3,877 Contingently issuable common stock
10,000 9,300 Debt 212,959 208,253 Total liabilities
294,112 289,985 Commitments and contingencies
Stockholders’ equity: Convertible preferred stock, $0.001 par
value; 5,000,000 shares authorized. No shares issued and
outstanding. — — Common stock, $0.001 par value; 170,000,000 and
135,000,000 shares authorized, respectively. 85,132,810 and
83,855,824 shares issued, respectively. 84,707,225 and 83,643,585
shares outstanding, respectively. 85 84 Treasury stock, at cost,
425,585 and 212,239 shares, respectively. (3,705 ) (2,942 )
Additional paid-in capital 604,234 594,586 Accumulated deficit
(563,644 ) (520,001 ) Accumulated other comprehensive income 2,656
3,335 Total stockholders’ equity 39,626 75,062
Total liabilities and stockholders’ equity $ 333,738
$ 365,047
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Investors:Endologix, Inc.Vaseem Mahboob, CFO, 949-595-7200
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