Endologix, Inc. (the “Company”) (NASDAQ: ELGX), a developer and
marketer of innovative treatments for aortic disorders, today
announced financial results for the first quarter ended
March 31, 2019.
“Our first quarter financial and operational performance
provides us with a solid foundation to accomplish our goals for the
rest of 2019, as we continue to execute against our strategic plan
and regain credibility and traction in the marketplace,” commented
John Onopchenko, Chief Executive Officer of Endologix, Inc. “We
recently addressed the vast majority of our near-term debt
maturities while increasing our liquidity position, allowing us to
move forward with a singular focus on maintaining consistent
delivery against our commitments. Those commitments include
producing compelling evidence that demonstrates improved patient
outcomes and supports the introduction of innovative products. I am
very proud of what the team has accomplished thus far in 2019, and
I strongly believe our evolving culture of accountability will
allow us to maintain this level of focus and performance going
forward.”
Financial Results
Global revenue in the first quarter of 2019 was $35.6 million, a
15.8% decrease from $42.3 million in the first quarter of 2018.
U.S. revenue in the first quarter of 2019 was $22.8 million, a
22.4% decrease from $29.4 million in the first quarter of 2018.
International revenue in the first quarter of 2019 was $12.8
million, a 0.7% decrease from $12.9 million in the first quarter of
2018. On a constant currency basis, international revenue increased
2.7% compared to the first quarter of 2018.
Gross profit was $23.2 million in the first quarter of 2019,
representing a gross margin of 65.2%. This compares to a gross
profit of $28.3 million, or a gross margin of 67.0%, in the first
quarter of 2018.
Total operating expenses in the first quarter of 2019 were $35.2
million, a 15.0% decrease from $41.4 million in the first quarter
of 2018.
Net loss for the first quarter of 2019 was $22.0 million, or
$(2.12) per share, compared to a net loss of $19.8 million, or
$(2.36) per share, a year ago. Adjusted Net Loss (non-GAAP measure,
defined below) totaled $11.7 million, compared to an Adjusted Net
Loss of $12.9 million for the first quarter of 2018. Adjusted
EBITDA (non-GAAP measure, defined below) loss totaled $7.6 million
for the first quarter of 2019, compared to Adjusted EBITDA loss of
$7.8 million a year ago.
Total cash, cash equivalents and restricted cash were $10.9
million as of March 31, 2019, compared to $24.7 million as of
December 31, 2018.
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 second quarter ending June 30,
2019 of approximately $36 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 first quarter 2019
results.
To participate in the conference call, dial 855-327-6838
(domestic) or 631-891-4304 (international) and refer to the
passcode 10006610.
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
on Thursday, May 2, 2019, until 11:59 p.m. ET on Thursday, May 9,
2019. To hear this recording, dial 844-512-2921 (domestic) or
412-317-6671 (international) and enter the passcode 10006610.
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 efforts to accomplish its goals for the rest of 2019;
execution of the Company’s strategic plan and efforts to regain
credibility and traction in the marketplace; the Company’s focus on
maintaining consistent delivery against its commitments; 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,
2018 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 months ended March 31, 2019 and 2018, this GAAP
adjustment to net loss specifically represents: (i) restructuring
and other transition costs; (ii) interest expense; (iii) foreign
currency loss (gain); (iv) fair value adjustment to Nellix®
contingent consideration liability; (v) fair value adjustment of
derivative liabilities; and (vi) 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)
Three Months Ended March 31, 2019
2018 Revenue U.S. $ 22,786 $ 29,375 International 12,820
12,909 Total Revenue 35,606 42,284 Cost of goods sold
12,407 13,958 Gross profit 23,199 28,326
Operating expenses: Research and development 4,787 5,499
Clinical and regulatory affairs 3,785 3,571 Marketing and sales
16,786 21,725 General and administrative 9,416 10,369 Restructuring
costs 419 233 Total operating expenses 35,193
41,397 Loss from operations (11,994 ) (13,071 ) Other income
(expense) (8,172 ) (5,441 ) Change in fair value of contingent
consideration related to acquisition 200 1,100 Loss on debt
extinguishment — (2,270 ) Change in fair value of derivative
liabilities (2,023 ) — Total other expense, net (9,995 )
(6,611 ) Net loss before income taxes (21,989 ) (19,682 ) Income
tax expense (39 ) (85 ) Net loss $ (22,028 ) $ (19,767 )
Comprehensive loss, net of taxes: Net loss $ (22,028 ) $ (19,767 )
Other comprehensive income (loss) foreign currency translation (598
) (127 ) Comprehensive loss $ (22,626 ) $ (19,894 ) Basic
and diluted net loss per share $ (2.12 ) $ (2.36 )
Shares used in computing basic and diluted
net loss per share
10,374
8,371
Non-GAAP Reconciliations:
Three Months Ended March 31, 2019 2018 Net
Loss to Adjusted Net Loss: Net loss $ (22,028 ) $ (19,767 )
Restructuring and other transition costs 419 233 Interest expense
8,490 5,807 Foreign currency loss (gain) (400 ) (325 ) Fair value
adjustment to Nellix® contingent consideration liability (200 )
(1,100 ) Fair value adjustment of derivative liabilities 2,023 —
Loss on debt extinguishment — 2,270
(1) Adjusted
Net Loss $ (11,696 ) $ (12,882 )
Adjusted Net Loss to
Adjusted EBITDA: Adjusted Net Loss $ (11,696 ) $ (12,882
) Income tax expense (benefit) 39 85 Depreciation and amortization
expense 1,735 1,992 Stock-based compensation expense 2,362
3,021
(2) Adjusted EBITDA $ (7,560 ) $ (7,784 )
ENDOLOGIX, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands, except share and per
share amounts)
March 31, 2019 December 31, 2018
ASSETS Current assets: Cash and cash equivalents $ 9,696 $
23,531 Restricted cash 1,200 1,200 Accounts receivable, net of
allowance for doubtful accounts of $669 and $802, respectively
25,991 20,651 Other receivables 337 329 Inventories 30,202 30,399
Prepaid expenses and other current assets 2,535 2,821
Total current assets 69,961 78,931 Property and
equipment, net 15,236 16,033 Goodwill 120,815 120,848 Other
intangible assets, net 75,302 76,163 Deposits and other assets
2,392 1,095 Operating lease right-of-use assets 5,787 —
Total assets $ 289,493 $ 293,070
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 14,923 $ 10,986 Accrued payroll 13,173 14,627
Accrued expenses and other current liabilities 16,057 13,314
Total current liabilities 44,153 38,927
Deferred income taxes 150 150 Deferred rent — 8,065 Operating lease
liabilities 11,976 — Derivative liabilities 6,035 4,012 Other
liabilities 2,317 1,992 Contingently issuable common stock 2,000
2,200 Debt 203,482 198,078 Total liabilities 270,113
253,424 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 170,000,000 shares authorized,respectively,
10,390,524 and 10,387,926 shares issued, respectively, and
10,347,806 and10,345,367 shares outstanding, respectively
10 10 Treasury stock, at cost, 42,718 and 42,559 shares,
respectively (4,027 ) (4,026 ) Additional paid-in capital 643,151
640,789 Accumulated deficit (621,744 ) (599,715 ) Accumulated other
comprehensive income 1,990 2,588 Total stockholders’
equity 19,380 39,646 Total liabilities and
stockholders’ equity $ 289,493 $ 293,070
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INVESTOR CONTACT:Endologix, Inc.Vaseem Mahboob, CFO(949)
595-7200
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