Endologix, Inc. (the “Company”) (NASDAQ:ELGX), a developer and
marketer of innovative treatments for aortic disorders, today
announced financial results for the fourth quarter and fiscal year
ended December 31, 2018.
Global revenue in the fourth quarter of 2018 was $34.7 million,
a 21.2% decrease from $44.0 million in the fourth quarter of 2017.
For the year ended December 31, 2018, global revenue was
$156.5 million, a 13.6% decrease from $181.2 million a year
ago.
“Our performance in the fourth quarter and second half of the
year reinforces confidence in our strategic planning process and
our ability to implement improvements. The objectives we
accomplished during the second half of 2018 align with those we
laid out during our second quarter earnings call as part of our
strategic reset. As we enter 2019, our single biggest lever will be
a consistent and unwavering application of individual and
company-wide accountability. We will lean heavily on this lever
throughout the year as the critical enabler of consistent delivery
on our commitments to patients, customers, investors, and other
stakeholders. We are determined to sustain the momentum generated
over the last two quarters as we continue to take steps to improve
the Company’s operational and financial footing. While there are
still challenges ahead, the entire Endologix team remains
singularly dedicated to data-driven superior outcomes in the
treatment of AAA,” commented John Onopchenko, Chief Executive
Officer of Endologix, Inc.
Financial Results
U.S. revenue in the fourth quarter of 2018 was $24.0 million, an
18.6% decrease from $29.5 million in the fourth quarter of 2017.
For the year ended December 31, 2018 U.S. revenue was $109.1
million, an 11.5% decrease from $123.2 million a year ago.
International revenue in the fourth quarter of 2018 was $10.7
million, a 26.3% decrease from $14.5 million in the fourth quarter
of 2017. On a constant currency basis, international revenue
decreased 25.1% compared to the fourth quarter of 2017. For the
year ended December 31, 2018, international revenue was $47.4
million, an 18.2% decrease from $57.9 million a year ago. On a
constant currency basis, international revenue decreased 20.0%
compared to the year ended December 31, 2017.
Gross profit was $11.4 million in the fourth quarter of 2018,
representing a gross margin of 32.8%. Gross profit was negatively
impacted by approximately $8.7 million of inventory reserves
related to the voluntary recall of Nellix systems during the
quarter. Excluding this impact, gross margin was 57.8%, compared to
a gross profit of $31.4 million, or a gross margin of 71.3%, in the
fourth quarter of 2017. For the year ended December 31, 2018, gross
profit was $91.9 million, representing a gross margin of 58.7%.
Excluding the impact of previously mentioned Nellix inventory
reserves, fiscal year 2018 gross margin was 64.3%. This compares to
a gross profit of $121.3 million, or a gross margin of 67.0%, for
the year ended December 31, 2017.
Total operating expenses in the fourth quarter of 2018 were
$35.1 million, a 12.9% decrease from $40.3 million in the fourth
quarter of 2017. Fourth quarter 2018 operating expenses included
$2.0 million of costs associated with restructuring and contract
termination, product withdrawal and business acquisition expenses,
while fourth quarter of 2017 operating expenses included $1.2
million of costs associated with restructuring. Excluding these
items, operating expenses decreased 15.3% compared to the fourth
quarter of 2017. For the year ended December 31, 2018, total
operating expenses were $160.1 million, a 1.9% decrease from $163.1
million a year ago.
Net loss for the fourth quarter of 2018 was $26.0 million, or
$(0.26) per share, compared to a net loss of $14.5 million, or
$(0.17) per share, a year ago. Adjusted Net Loss (non-GAAP measure,
defined below) totaled $21.3 million, compared to an Adjusted Net
Loss of $7.0 million for the fourth quarter of 2017. Adjusted
EBITDA (non-GAAP measure, defined below) loss totaled $17.0 million
for the fourth quarter of 2018, compared to Adjusted EBITDA loss of
$2.7 million a year ago.
Net loss for the year ended December 31, 2018 was $79.7 million,
or $(0.91) per share, compared to a net loss of $66.4 million, or
$(0.80) per share, a year ago. Adjusted Net Loss totaled $62.7
million, compared to an Adjusted Net Loss of $39.5 million for the
year ended December 31, 2017. Adjusted EBITDA loss totaled $43.4
million for the year ended December 31, 2018, compared to Adjusted
EBITDA loss of $19.2 million a year ago.
Total cash, cash equivalents and restricted cash were $24.7
million as of December 31, 2018, compared to $60.6 million as
of December 31, 2017.
Financial Guidance
The Company reaffirms its previously issued annual guidance and
continues to expect 2019 revenue of at least $140 million. The
Company anticipates revenue for the first quarter ending March 31,
2019 of approximately $35 million. The Company continues to expect
2019 operating expenses in the range of $130 million to $140
million.
Conference Call Information
The Company's management will host a conference call today at
4:30 p.m. ET (1:30 p.m. PT) to discuss its fourth quarter and
fiscal year 2018 results.
To participate in the conference call, dial 877-407-9716
(domestic) or 201-493-6779 (international) and enter the passcode
13687136.
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 this call will also be available from 7:30 p.m.
ET on Monday, February 25, 2019, until 11:59 p.m. ET on Monday,
March 4, 2019. To hear this recording, dial 844-512-2921 (domestic)
or 412-317-6671 (international) and enter the passcode
13687136.
About Endologix, Inc.
The Company develops and manufactures minimally invasive
treatments for aortic disorders. The Company's focus is in
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 and Ovation
Alto® Abdominal Stent Graft System, the Company's next generation
Ovation system device, are approved only as investigational devices
and are not currently approved for commercial purposes in any
market.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally 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
include all statements other than statements of historical fact
contained in this press release, including statements regarding the
Company’s continued focus on individual and company-wide
accountability to enable to fulfill our commitments to patients,
customers, investors, and other stakeholders; continued improvement
of the Company’s operational and financial footing;; and the
Company’s Q1 2019 and FY 2019 revenue guidance and its anticipated
FY 2019 operating expense, the accuracy of which are necessarily
subject to risks and uncertainties that may cause the Company’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 the Company’s products, the
Company’s continued compliance with its financial covenants and
other operating restrictions under its lending facilities, the
Company’s ability to access the capital markets on terms acceptable
to it or at all, the Company’s abilities to service its
indebtedness and to satisfy and discharge its indebtedness as such
indebtedness comes due, the success of clinical trials relating to
the Company’s products, product research and development efforts,
uncertainty in the process of obtaining and maintaining regulatory
approval for the Company’s products, the Company's ability to
protect its intellectual property rights and proprietary
technologies, the Company’s ability to retain its key executive,
sales and other personnel, and other economic, business,
competitive, and regulatory factors. Forward-looking statements
represent our management’s current expectations and predictions
about trends affecting our business and industry and are based on
information available as of the time such statements are made. The
forward-looking statements contained in this press release speak
only as of the date of this press release. The Company 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 the Company’s
filings with the Securities and Exchange Commission including its
Annual Report on Form 10-K for the year ended December 31,
2017 and subsequent Quarterly Reports on Form 10-Q 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 in the forward-looking
statements.
Discussion of Non-GAAP Financial Measures
The Company’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 the Company’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. These
measures, when used in conjunction with related financial measures
calculated in accordance with generally accepted accounting
principles in the United States (“GAAP”), provide investors with an
additional financial analytical framework that may be useful in
assessing the Company’s financial condition and results of
operations. The Company’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. Furthermore, these measures are not intended
to be liquidity measures. Other companies, including other
companies in the Company’s industry, may not use these measures or
may calculate these measures differently than the Company does,
limiting their usefulness as comparative measures. The Company
intends to calculate these non-GAAP financial measures in a
consistent manner from period to period. A reconciliation of each
of the non-GAAP financial measures to the most directly comparable
GAAP measures has been provided under the heading “Non-GAAP
Reconciliations” in the financial statement tables attached to this
press release.
Adjusted Net Income (Loss) Definition:
(1) “Adjusted Net Income (Loss)” is a non-GAAP measure defined
by the Company as net income (loss) under GAAP, excluding (to the
extent relevant in a particular reporting period): (i)
restructuring and other transition costs; (ii) contract
termination, product withdrawal and business acquisition expenses;
(iii) legal settlement costs; (iv) business development expenses,
including licensing costs related to research and development
activities; (v) inventory step-up amortization; (vi) interest
expense; (vii) foreign currency loss (gain); (viii) fair value
adjustment to Nellix® contingent consideration liability; (ix) fair
value adjustment of derivative liabilities; and (x) loss on debt
extinguishment.
In the three and twelve months ended December 31, 2018 and 2017,
this GAAP adjustment to net loss specifically represents: (i)
restructuring and other transition costs; (ii) contract
termination, product withdrawal and business acquisition expenses;
(iii) interest expense; (iv) foreign currency loss (gain); (v) fair
value adjustment to Nellix® contingent consideration liability;
(vi) fair value adjustment of derivative liabilities; and (vii)
loss on debt extinguishment.
Adjusted EBITDA Definition:
(2) “Adjusted EBITDA” is a non-GAAP measure defined by the
Company 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 AND COMPREHENSIVE LOSS Unaudited (In
thousands, except per share amounts) Quarter
Ended Year Ended December 31, December
31, 2018 2017 2018
2017 Revenue U.S. $ 24,033 $ 29,537 $ 109,093 $ 123,209
International 10,660 14,466 47,380 57,948
Total Revenue 34,693 44,003 156,473 181,157 Cost of goods
sold 23,327 12,647 64,550 59,828 Gross
profit 11,366 31,356 91,923 121,329
Operating expenses: Research and development 4,013 4,478 20,793
21,019 Clinical and regulatory affairs 3,344 3,166 13,851 12,952
Marketing and sales 16,942 21,183 76,855 92,400 General and
administrative 8,756 10,192 43,477 35,301 Restructuring costs 138
1,242 3,270 1,477 Contract termination, product withdrawal and
business acquisition expenses 1,869 — 1,869 —
Total operating expenses 35,062 40,261 160,115
163,149 Loss from operations (23,696 ) (8,905 )
(68,192 ) (41,820 ) Other expense, net (8,844 ) (5,913 ) (28,165 )
(21,427 ) Change in fair value of contingent consideration related
to acquisition 2,800 (500 ) 7,100 2,900 Loss on debt extinguishment
— — (2,270 ) (6,512 ) Change in fair value of derivative
liabilities 3,792 — 12,097 — Total
other expense, net (2,252 ) (6,413 ) (11,238 ) (25,039 ) Net loss
before income taxes (25,948 ) (15,318 ) (79,430 ) (66,859 ) Income
tax (expense) benefit (7 ) 797 (284 ) 459 Net loss $
(25,955 ) $ (14,521 ) $ (79,714 ) $ (66,400 ) Comprehensive
loss, net of taxes: Net loss $ (25,955 ) $ (14,521 ) $ (79,714 ) $
(66,400 ) Other comprehensive (loss) income on foreign currency
translation (100 ) 478 (747 ) 1,847 Comprehensive
loss $ (26,055 ) $ (14,043 ) $ (80,461 ) $ (64,553 ) Basic
and diluted net loss per share $ (0.26 ) $ (0.17 ) $ (0.91 ) $
(0.80 ) Shares used in computing basic and diluted net loss per
share 98,030 83,621 87,900 83,325
Non-GAAP Reconciliations:
Quarter Ended Year Ended December 31,
December 31, 2018 2017 2018 2017
Net Loss to Adjusted Net Loss: Net loss $ (25,955 ) $
(14,521 ) $ (79,714 ) $ (66,400 ) Restructuring and other
transition costs 406 1,242 3,710 1,871 Contract termination,
product withdrawal and business acquisition expenses 1,869 — 1,869
— Interest expense 8,763 5,945 27,658 22,064 Foreign currency loss
(gain) 247 (118 ) 711 (678 ) Fair value adjustment to Nellix®
contingent consideration liability (2,800 ) 500 (7,100 ) (2,900 )
Fair value adjustment of derivative liabilities (3,792 ) — (12,097
) — Loss on debt extinguishment — — 2,270
6,512
(1) Adjusted Net Loss $ (21,262 ) $ (6,952 ) $
(62,693 ) $ (39,531 )
Adjusted Net Loss to Adjusted
EBITDA: Adjusted Net Loss $ (21,262 ) $ (6,952 ) $
(62,693 ) $ (39,531 ) Income tax expense (benefit) 7 (797 ) 284
(459 ) Depreciation and amortization expense 2,063 2,177 7,982
9,111 Stock-based compensation expense 2,219 2,843
11,030 11,644
(2) Adjusted EBITDA $ (16,973 )
$ (2,729 ) $ (43,397 ) $ (19,235 )
ENDOLOGIX,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (In thousands, except share and per share
amounts) December 31, December
31, 2018 2017 ASSETS Current assets: Cash
and cash equivalents $ 23,531 $ 57,991 Restricted cash 1,200 2,608
Accounts receivable, net of allowance for doubtful accounts of $802
and $470, respectively 20,651 32,294 Other receivables 329 418
Inventories 30,399 45,153 Prepaid expenses and other current assets
2,821 4,670 Total current assets 78,931
143,134 Property and equipment, net 16,033 19,212 Goodwill
120,848 120,927 Other intangible assets, net 76,163 80,403 Deposits
and other assets 1,095 1,371 Total assets $ 293,070
$ 365,047
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable $ 10,986 $ 12,351
Accrued payroll 14,627 15,054 Accrued expenses and other current
liabilities 13,314 16,002 Current portion of debt — 17,202
Revolving line of credit — 21 Total current
liabilities 38,927 60,630 Deferred income taxes 150
201 Deferred rent 8,065 7,724 Derivative liabilities 4,012 — Other
liabilities 1,992 3,877 Contingently issuable common stock 2,200
9,300 Debt 198,078 208,253 Total liabilities 253,424
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, 103,879,246 and 83,855,824 shares issued,
respectively, 103,453,661 and 83,643,585 shares outstanding,
respectively 104 84 Treasury stock, at cost, 425,585 and 212,239
shares, respectively (4,026 ) (2,942 ) Additional paid-in capital
640,695 594,586 Accumulated deficit (599,715 ) (520,001 )
Accumulated other comprehensive income 2,588 3,335
Total stockholders’ equity 39,646 75,062 Total
liabilities and stockholders’ equity $ 293,070 $ 365,047
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Investors:Endologix, Inc.Vaseem Mahboob, CFO(949) 595-7200
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