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8-K - FORM 8-K - Cardiovascular Systems Inc | c54462e8vk.htm |
Exhibit 99.1
CARDIOVASCULAR SYSTEMS REPORTS FISCAL FIRST-QUARTER 2010 FINANCIAL RESULTS
First-Quarter Net Loss Improves 55 Percent Over Prior Year on
30-Percent Revenue Increase, Gross Margin Improvements and Expense Control
30-Percent Revenue Increase, Gross Margin Improvements and Expense Control
Conference Call Scheduled for Today, November 4, 2009 at 3:45 PM CT (4:45 PM ET)
St. Paul, Minn., November 4, 2009 Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII), a medical
device company developing and commercializing innovative interventional treatment systems for
vascular disease, today reported financial results for its fiscal first quarter ended September 30,
2009.
CSIs revenue in the first quarter of fiscal 2010 rose to $15.2 million, a 30-percent increase over
revenue of $11.6 million in the first quarter of last fiscal year. The net loss improved 55 percent
to $(6.2) million, or $(0.43) per basic and diluted share, in the first quarter of fiscal 2010,
from $(13.7) million, or $(2.75) per basic and diluted share, in the year-ago period. The number of
weighted average common shares outstanding increased to 14.5 million from 5.0 million in the first
quarter of fiscal 2009, primarily due to new shares issued in conjunction with the February 2009
reverse merger with Replidyne, Inc., including the conversion of all preferred stock of the company
to common stock. Adjusted EBITDA, calculated as loss from operations, less depreciation and
amortization and stock-based compensation expense, improved by 70 percent to a loss of $(3.6)
million versus a loss of $(11.8) million in the year-ago period. Cash and cash equivalents remained
strong at $30.8 million and included $3.0 million of net funding received in conjunction with
signing an agreement to establish a second production facility in Pearland, Texas.
David L. Martin, CSI president and chief executive officer, said, Balancing revenue growth with
effective expense management helped drive a substantial reduction in our loss from the fiscal 2009
first quarter, moving CSI toward our goal of profitability. During the quarter, we focused on
driving adoption in existing accounts, including re-educating physicians on proper clinical
protocols for using the Diamondback 360° to change lesion compliance in vessels above the knee. As
a result, we are seeing greater product usage in many accounts. These improvements were offset by
seasonal weakness in endovascular procedures, resulting in revenue slightly below our expected
range.
The number of hospitals using the Diamondback 360® PAD System rose to 611 by the end of
the fiscal 2010 first quarter, a nearly 90-percent increase over a year ago and 55 more than the
end of the fourth quarter of fiscal 2009. Sales of disposable device units totaled 4,541 units in
the first quarter of fiscal 2010 versus 3,636 units in the first quarter of last fiscal year, a
25-percent increase. Revenue generated from customer reorders continued to grow, increasing to 92
percent of total revenue for the fiscal 2010 first quarter from 72 percent in last years first
quarter.
The fiscal first-quarter 2010 gross margin increased to 77 percent from 67 percent in the same
period last year, driven by higher disposable volumes, manufacturing efficiencies, product cost
reductions and shipment of fewer controller units. Operating expenses decreased 18 percent, due to
effective expense management, the year-earlier write-off of $1.7 million in IPO costs, and
completion and timing of development projects and clinical studies.
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November 4, 2009
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Providing Comprehensive Clinical Data and Tools to Treat PAD
CSI is committed to providing physicians with clinical data and endovascular tools to treat PAD.
Toward that end, this quarter the company continued to expand its product portfolio through an
exclusive distribution agreement with Asahi Intecc Co., Ltd., to market its peripheral guide wire
line in the United States. Asahi peripheral guide wires are especially suited for addressing long,
complex lesions in the leg and complement the plaque removal capabilities of the Diamondback 360°.
CSI also continued to make progress providing clinical data. At the Transcatheter Cardiovascular
Therapeutics (TCT) conference in September, Dr. Barry Weinstock, an interventional cardiologist at
Orlando Regional Medical Center, reported data from a retrospective study evaluating the long-term
results of 64 patients from the pivotal OASIS trial. Outcomes were analyzed out to a mean of 29
months and included maintaining a 100-percent limb salvage rate, an 86-percent freedom from target
lesion revascularization (TLR) and significantly improved ankle-brachial index (ABI) scores by an
average of 0.29 over the baseline.
Also at TCT, Dr. Ragu Patlola, of Regional Acadiana in Lafayette, Louisiana, presented an abstract
on a 150-patient, randomized, single-center study comparing treatment using the Diamondback 360°
with angioplasty in infrapopliteal arteries. The three-month follow-up results were favorable for
the Diamondback 360°, showing much lower rates for adjunctive stenting (5 percent vs. 45 percent)
and restenosis (15 percent vs. 62.5 percent).
CSI is advancing several clinical studies. COMPLIANCE 360° and CALCIUM 360° are prospective,
randomized, multi-center studies that will evaluate the clinical benefit of modifying plaque and
lesion compliance in leg arteries with the Diamondback 360° (supplemented by low-pressure balloon
inflation, if desired, in CALCIUM 360°) to high-pressure balloon inflation. Both studies call for
enrolling 50 patients at five U.S. medical centers. CSI also continues working with the FDA on an
IDE application for ORBIT II, a pivotal trial in the United States to evaluate the safety and
effectiveness of the Diamondback 360° in treating severely calcified coronary lesions.
Outlook
For the second fiscal quarter of 2010 ending December 31, 2009, CSI anticipates revenue in the
range of $15.0 million to $16.0 million, growth of 7 percent to 14 percent over the second quarter
of fiscal 2009, as the company continues its focus on customer education and adoption through
December 2009. Gross profit as a percentage of revenue is expected to be at approximately the same
level as first quarter of fiscal 2010. The company anticipates the net loss to range from $(7.0)
million to $(7.7) million, representing a 12-percent to 20-percent improvement over the second
quarter of fiscal 2009. On an EPS basis, the loss is expected to range from $(0.48) to $(0.52) per
share, based on 14.7 million shares outstanding. The adjusted EBITDA loss for the second quarter of
fiscal 2010 is anticipated to be between $(4.2) million and $(4.9) million, versus a loss of $(6.9)
million in last fiscal years second quarter. The improvements in net loss and adjusted EBITDA are
due to growth in revenue and gross profit at greater rates than the growth in operating expenses
between periods. The net loss and adjusted EBITDA are expected to improve in the second half of
fiscal 2010 as revenue growth accelerates.
Martin continued, Now that proper clinical protocols and related sales tools and training are in
place, we will expand investments for re-educating our customer base, driving deeper adoption
within accounts, advancing our clinical trials, and introducing product enhancements. These
initiatives position us well for significant, profitable growth over the long term and will be
balanced with progress toward profitability. We expect revenue growth in the fiscal 2010 second
half to be stronger than the first half, as our initiatives take hold. Due to the timing of the
effect of our adoption and re-education efforts, we now expect revenue
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November 4, 2009
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growth will be approximately 15 percent to 20 percent for the fiscal year. We will continue to
drive our business toward our first profitable quarter during fiscal 2011, while living within our
cash resources and debt capacity.
About the Diamondback 360® PAD System
CSIs primary product is the Diamondback 360° PAD System, a minimally invasive catheter
system for treating PAD in leg arteries. The Diamondback 360° is highly effective in removing
plaque in vessels both below the knee and above the knee in just a few minutes of treatment time.
Between 8 million and 12 million Americans suffer from PAD, which is caused by the accumulation of
plaque in peripheral arteries (commonly the pelvis or leg) reducing blood flow. Symptoms include
leg pain when walking or at rest, and can lead to tissue loss and eventually limb amputation. More
than 18,000 procedures have been performed to-date using the Diamondback 360° in leading
institutions across the United States.
Conference Call Today at 3:45 PM CT (4:45 PM ET)
Cardiovascular Systems, Inc. will host a live conference call and webcast of its fiscal first
quarter ended September 30, 2009 results today, November 4, 2009, at 3:45 p.m. CT (4:45 p.m. ET).
To access the call, dial (888) 713-4218 and enter 65900739. Please dial in at least 10 minutes
prior to the call. To listen to the live webcast, go to the investor information section of the
companys Web site, www.csi360.com, and click on the webcast icon. A webcast replay will be
available beginning at 7 p.m. CT the same day.
For an audio replay of the conference call, dial (888) 286-8010 and enter access number 72727881.
The audio replay will be available beginning at 8 p.m. CT on Wednesday, November 4, 2009, through 6
p.m. CT on Friday, November 6, 2009.
Safe Harbor
Certain statements in this news release are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and are provided under the protection of the safe
harbor for forward-looking statements provided by that Act. For example, statements in this press
release regarding (i) the timing of our customer re-education process; (ii) our new facility in
Texas and the related growth; (iii) CSIs clinical trials; (iv) expanding into the interventional
coronary market and the large opportunity in that market; (v) expansion of our product portfolio
through distribution and product development; (vi) anticipated revenue, gross margin, net loss, and
adjusted EBITDA in future periods; (vii) achieving our first profitable quarter and longer term
sustainable, significant, profitable growth; and (viii) cash requirements, are forward looking
statements. These statements involve risks and uncertainties which could cause results to differ
materially from those projected, including but not limited to the potential for unanticipated
delays in enrolling medical centers and patients for clinical trials; dependence on market growth;
the difficulty in accurately predicting product, customer and geographic sales mix; product
development delays; the reluctance of physicians to accept new products; the impact of competitive
products and pricing; dependence on major customers and distribution partners; the difficulty to
successfully manage operating costs; fluctuations in quarterly results; approval of products for
reimbursement and the level of reimbursement; general economic conditions and other factors
detailed from time to time in CSIs SEC reports, including its most recent annual report on Form
10-K and subsequent quarterly reports on Form 10-Q. CSI encourages you to consider all of these
risks, uncertainties and other factors carefully in evaluating the forward-looking statements
contained in this
release. As a result of these matters, changes in facts, assumptions not being realized or other
circumstances, CSIs actual results may differ materially from the expected results discussed in
the forward-looking statements contained in this release. The forward-looking statements made in
this release are made only as of the date of this release, and CSI undertakes no obligation to
update them to reflect subsequent events or circumstances.
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November 4, 2009
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Use of Non-GAAP Financial Measures
To supplement CSIs consolidated condensed financial statements prepared in accordance with U.S.
generally accepted accounting principles (GAAP), CSI uses certain non-GAAP financial measures in
this release. Reconciliations of the non-GAAP financial measures used in this release to the most
comparable U.S. GAAP measures for the respective periods can be found in tables later in this
release immediately following the consolidated statements of operations. Non-GAAP financial
measures have limitations as analytical tools and should not be considered in isolation or as a
substitute for CSIs financial results prepared in accordance with GAAP.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a medical device company focused on
developing and commercializing interventional treatment systems for vascular disease. The companys
Diamondback 360® PAD System treats calcified and fibrotic plaque in arterial vessels
throughout the leg, and addresses many of the limitations associated with existing surgical,
catheter and pharmacological treatment alternatives. In August 2007, the U.S. FDA granted 510(k)
clearance for the use of the Diamondback 360° as a therapy for PAD (peripheral arterial disease),
and CSI commenced a U.S. product launch in September 2007. Since then, more than 600 hospitals
across the United States have adopted the system. For more information visit the companys Web site
at www.csi360.com.
Product Disclosure
The Diamondback 360® PAD System is a percutaneous orbital atherectomy system indicated
for use as therapy in patients with occlusive atherosclerotic disease in peripheral arteries and
stenotic material from artificial arteriovenous dialysis fistulae. The System is contraindicated
for use in coronary arteries, bypass grafts, stents, or where thrombus or dissections are present.
Although the incidence of adverse events is rare, potential events that can occur with atherectomy
include: pain, hypotension, CVA/TIA, death, dissection, perforation, distal embolization, thrombus
formation, hematuria, abrupt or acute vessel closure, or arterial spasm.
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November 4, 2009
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November 4, 2009
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Cardiovascular Systems, Inc.
Consolidated Statements of Operations
(Dollars in Thousands, except per share and share amounts)
Consolidated Statements of Operations
(Dollars in Thousands, except per share and share amounts)
Three Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Revenues |
$ | 15,198 | $ | 11,646 | ||||
Cost of goods sold |
3,488 | 3,881 | ||||||
Gross profit |
11,710 | 7,765 | ||||||
Selling, general and administrative. |
14,856 | 16,424 | ||||||
Research and development |
2,781 | 4,955 | ||||||
Total expenses |
17,637 | 21,379 | ||||||
Loss from operations |
(5,927 | ) | (13,614 | ) | ||||
Other income (expense): |
||||||||
Interest expense |
(371 | ) | (227 | ) | ||||
Interest income |
98 | 142 | ||||||
Total other income (expense) |
(273 | ) | (85 | ) | ||||
Net loss |
$ | (6,200 | ) | $ | (13,699 | ) | ||
Net loss per common share: |
||||||||
Basic and diluted |
$ | (0.43 | ) | $ | (2.75 | ) | ||
Weighted average common shares used
in computation: |
||||||||
Basic and diluted |
14,516,843 | 4,976,884 | ||||||
Stock-based compensation supplemental detail (included in amounts above): | ||||||||
Cost of goods sold |
$ | 129 | $ | 176 | ||||
Selling, general and administrative |
1,811 | 1,384 | ||||||
Research and development |
281 | 112 | ||||||
Totals |
$ | 2,221 | $ | 1,672 | ||||
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November 4, 2009
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Cardiovascular Systems, Inc.
Consolidated Balance Sheets
(Dollars in Thousands)
Consolidated Balance Sheets
(Dollars in Thousands)
September 30, | June 30, | |||||||
2009 | 2009 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 30,754 | $ | 33,411 | ||||
Accounts receivable, net |
8,181 | 8,474 | ||||||
Inventories |
4,082 | 3,369 | ||||||
Auction rate securities put option |
2,800 | | ||||||
Investments |
19,900 | | ||||||
Prepaid expenses and other current assets |
1,264 | 798 | ||||||
Total current assets |
66,981 | 46,052 | ||||||
Auction rate securities put option |
| 2,800 | ||||||
Investments |
| 20,000 | ||||||
Property and equipment, net |
1,636 | 1,719 | ||||||
Patents, net |
1,490 | 1,363 | ||||||
Other assets |
364 | 436 | ||||||
Total assets |
$ | 70,471 | $ | 72,370 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Current maturities of long-term debt |
$ | 25,802 | $ | 25,823 | ||||
Accounts payable |
4,368 | 4,751 | ||||||
Accrued expenses |
5,872 | 5,600 | ||||||
Total current liabilities |
36,042 | 36,174 | ||||||
Long-term liabilities |
||||||||
Long-term debt, net of current maturities |
3,597 | 4,379 | ||||||
Grant payable |
2,975 | | ||||||
Other liabilities |
1,219 | 1,485 | ||||||
Total long-term liabilities |
7,791 | 5,864 | ||||||
Total liabilities |
43,833 | 42,038 | ||||||
Commitments and contingencies |
||||||||
Total stockholders equity |
26,638 | 30,332 | ||||||
Total liabilities and stockholders equity |
$ | 70,471 | $ | 72,370 | ||||
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November 4, 2009
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November 4, 2009
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Non-GAAP Financial Measures
To supplement CSIs consolidated condensed financial statements prepared in accordance with GAAP,
CSI uses a non-GAAP financial measure referred to as Adjusted EBITDA in this release.
Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP measure for the respective
periods can be found in the table below. In addition, an explanation of the manner in which CSIs
management uses Adjusted EBITDA to conduct and evaluate its business, the economic substance behind
managements decision to use Adjusted EBITDA, the substantive reasons why management believes that
Adjusted EBITDA provides useful information to investors, the material limitations associated with
the use of Adjusted EBITDA and the manner in which management compensates for those limitations is
included following the reconciliation table below.
Cardiovascular Systems, Inc.
Supplemental Sales Information
(Dollars in Thousands)
Supplemental Sales Information
(Dollars in Thousands)
Three Months Ended | ||||||||||||||||||||||||||||
Revenue Components: | March 2008 | June 2008 | Sept. 2008 | Dec. 2008 | March 2009 | June 2009 | Sept. 2009 | |||||||||||||||||||||
Devices |
$ | 6,867 | $ | 9,000 | $ | 10,664 | $ | 12,853 | $ | 13,694 | $ | 14,095 | $ | 13,640 | ||||||||||||||
Other |
787 | 892 | 982 | 1,151 | 1,421 | 1,600 | 1,558 | |||||||||||||||||||||
Total revenue |
$ | 7,654 | $ | 9,892 | $ | 11,646 | $ | 14,004 | $ | 15,115 | $ | 15,695 | 15,198 | |||||||||||||||
Device units sold |
2,328 | 3,063 | 3,636 | 4,368 | 4,558 | 4,692 | 4,541 | |||||||||||||||||||||
Customers, at
quarter end |
106 | 183 | 283 | 400 | 487 | 556 | 611 |
Cardiovascular Systems, Inc.
Adjusted EBITDA
(Dollars in Thousands)
Adjusted EBITDA
(Dollars in Thousands)
Projected Range | ||||||||||||||||
Three Months Ended | Three Months Ending | |||||||||||||||
Sept. 30, | Dec. 31, 2009 | |||||||||||||||
2009 | 2008 | High | Low | |||||||||||||
Loss from operations |
$ | (5,927 | ) | $ | (13,614 | ) | $ | (6,800 | ) | $ | (7,500 | ) | ||||
Add: Stock-based
compensation |
2,221 | 1,672 | 2,400 | 2,400 | ||||||||||||
Add: Depreciation
and amortization |
136 | 95 | 200 | 200 | ||||||||||||
Adjusted EBITDA |
$ | (3,570 | ) | $ | (11,847 | ) | $ | (4,200 | ) | $ | (4,900 | ) | ||||
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November 4, 2009
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Use and Economic Substance of Non-GAAP Financial Measures Used by CSI and Usefulness of Such
Non-GAAP Financial Measures to Investors
CSI uses Adjusted EBITDA as a supplemental measure of performance and believes this measure
facilitates operating performance comparisons from period to period and company to company by
factoring out potential differences caused by depreciation and amortization expense and non-cash
charges such as stock based compensation. CSIs management uses Adjusted EBITDA to analyze the
underlying trends in CSIs business, assess the performance of CSIs core operations, establish
operational goals and forecasts that are used to allocate resources and evaluate CSIs performance
period over period and in relation to its competitors operating results. Additionally, CSIs
management is evaluated on the basis of Adjusted EBITDA when determining achievement of their
incentive compensation performance targets.
CSI believes that presenting Adjusted EBITDA provides investors greater transparency to the
information used by CSIs management for its financial and operational decision-making and allows
investors to see CSIs results through the eyes of management. CSI also believes that providing
this information better enables CSIs investors to understand CSIs operating performance and
evaluate the methodology used by CSIs management to evaluate and measure such performance.
The following is an explanation of each of the items that management excluded from Adjusted EBITDA
and the reasons for excluding each of these individual items:
Stock-based compensation. CSI excludes stock-based compensation expense from its non-GAAP
financial measures primarily because such expense, while constituting an ongoing and recurring
expense, is not an expense that requires cash settlement. CSIs management also believes that
excluding this item from CSIs non-GAAP results is useful to investors to understand the
application of SFAS 123R and its impact on CSIs operational performance, liquidity and its ability
to make additional investments in the company, and it allows for greater transparency to certain
line items in CSIs financial statements.
Depreciation and amortization expense. CSI excludes depreciation and amortization expense from
its non-GAAP financial measures primarily because such expenses, while constituting ongoing and
recurring expenses, are not expenses that require cash settlement and are not used by CSIs
management to assess the core profitability of CSIs business operations. CSIs management also
believes that excluding these items from CSIs non-GAAP results is useful to investors to
understand CSIs operational performance, liquidity and its ability to make additional investments
in the company.
Material Limitations Associated with the Use of Non-GAAP Financial Measures and Manner in which CSI
Compensates for these Limitations
Non-GAAP financial measures have limitations as analytical tools and should not be considered in
isolation or as a substitute for CSIs financial results prepared in accordance with GAAP. Some of
the limitations associated with CSIs use of these non-GAAP financial measures are:
Items such as stock-based compensation do not directly affect CSIs cash flow position; however,
such items reflect economic costs to CSI and are not reflected in CSIs Adjusted EBITDA and
therefore these non-GAAP measures do not reflect the full economic effect of these items.
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November 4, 2009
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Non-GAAP financial measures are not based on any comprehensive set of accounting rules or
principles and therefore other companies may calculate similarly titled non-GAAP financial measures
differently than CSI, limiting the usefulness of those measures for comparative purposes.
CSIs management exercises judgment in determining which types of charges or other items should
be excluded from the non-GAAP financial measures CSI uses.
CSI compensates for these limitations by relying primarily upon its GAAP results and using non-GAAP
financial measures only supplementally. CSI provides full disclosure of each non-GAAP financial
measure CSI uses and detailed reconciliations of each non-GAAP measure to its most directly
comparable GAAP measure. CSI encourages investors to review these reconciliations. CSI qualifies
its use of non-GAAP financial measures with cautionary statements as set forth above.
Contacts:
For Cardiovascular Systems Inc.
|
Padilla Speer Beardsley: | |
Investor Relations
|
Marian Briggs | |
(651) 259-2800
|
(612) 455-1742 | |
investorrelations@csi360.com
|
mbriggs@psbpr.com | |
Nancy A. Johnson | ||
(612) 455-1745 | ||
njohnson@psbpr.com |
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