- Third Quarter Revenues Were $5.7 Million –
-77% Increase Over Q3 2012 as a Result of Merger-
- Net Loss per Share Was $0.18 for the Quarter –
- Excluding Special Items, Net Loss per Share Was $0.17 for the Quarter* -
RALEIGH, N.C., Nov. 6, 2013 (GLOBE NEWSWIRE) -- Baxano Surgical, Inc. (Nasdaq:BAXS), a medical device company focused on designing, developing and marketing minimally invasive products to treat degenerative conditions of the spine affecting the lumbar region, today announced its financial results for the third quarter ended September 30, 2013.
| Comparison of Selected Financial Results (in millions, except per share data) | ||
| Three Months Ended September 30, | ||
| 2013 | 2012 | |
| As reported: | ||
| Total revenue | $5.7 | $3.2 |
| Net loss | (8.0) | (5.9) |
| Net loss per common share | (0.18) | (0.22) |
| Excluding special items*: | ||
| Net loss | (7.4) | (5.3) |
| Net loss per common share | (0.17) | (0.20) |
* See "Reconciliation of GAAP Financial Information to Non-GAAP Financial Information" below.
Revenues were $5.7 million in the third quarter of 2013, representing a 76.7% increase from revenues of $3.2 million in the third quarter of 2012. Domestic revenues were $5.3 million in the third quarter of 2013, compared to $2.9 million in the third quarter of 2012 and international revenues were $0.4 million in the third quarter of 2013, compared to $0.3 million in the third quarter of 2012. Revenue contributed in the third quarter of 2013 by the Baxano, Inc. products, which were acquired on May 31, 2013, was $2.7 million. On a pro forma basis, as if both business had been owned in both periods, revenues would have been flat year over year.
Gross margin was 73.3% in the third quarter of 2013 as compared to 73.8% in the third quarter of 2012. Net loss was $8.0 million in the third quarter of 2013, compared to a net loss of $5.9 million in the third quarter of 2012. Net loss per common share was $0.18 in the third quarter of 2013 compared to a net loss per share of $0.22 in the third quarter of 2012.
Excluding special items, net loss in the third quarter of 2013 was $7.4 million, or $0.17 per common share, compared to net loss excluding special items of $5.3 million, or $0.20 per common share in the third quarter of 2012. Special items of $0.6 million in the third quarter of 2013 consisted of merger and integration expenses related to our merger with Baxano, Inc. and legal fees related to the U.S. Department of Justice investigation related to the subpoena issued in October 2011. Special items in the third quarter of 2012 consisted of expenses of $0.6 million for legal fees related to the U.S. Department of Justice investigation.
Cash and cash-equivalents were $11.6 million as of September 30, 2013.
"Our first full quarter as Baxano Surgical involved significant integration activities and organizational change which we were able to successfully manage while also stabilizing the revenue in the combined business," commented Ken Reali, President and CEO of Baxano Surgical. "We have now laid the foundation needed for growth and leadership in the minimally invasive spine market which is the fastest growing segment in the spinal implant industry."
Baxano Surgical Outlook
For the fourth quarter ending December 31, 2013, the Company targets total revenues in the range of $5.8- $6.5 million. For the full fiscal year 2013, on a pro forma basis for the combined companies, the Company now expects total revenues in the range of $23.2 - $23.9 million versus prior guidance of $23.5 - $25.5 million.
Conference Call
Baxano Surgical will host a conference call today at 4:30 pm Eastern time to discuss its third quarter financial results. To listen to the conference call on your telephone, please dial (877) 312-8823 for domestic callers and (253) 237-1182 for international callers approximately ten minutes prior to the start time. The call will be concurrently webcast. To access the live audio broadcast or the archived recording, use the following link at http://ir.Baxanosurgical.com/events.cfm.
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
To supplement the Company's consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP measures of certain components of financial performance, including net loss, net loss per common share and a pro forma consolidated statement of operations, which are adjusted from results based on GAAP. Although "as adjusted" financial measures are non-GAAP financial measures, the Company believes that the presentation of "as adjusted" financial measures calculated to reflect the Baxano acquisition as if it had occurred at the beginning of 2013 and to exclude "special items" are useful adjuncts to the GAAP "as reported" financial measures. Pro forma adjustments include amortization of intangibles, interest costs associated with Baxano preferred stock and convertible debt, and elimination of intercompany general and administrative expenses. "Special items" consist of merger and integration expenses related to the merger with Baxano, Inc. and charges related to the settlement with the U.S. Department of Justice, including related legal fees. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and the Company's prospects for the future. We believe that providing non-GAAP measures that adjust for the combined historical results of Baxano Surgical and Baxano and for significant non-recurring expenses allows comparison of our core operations from period to period. These non-GAAP measures may be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the most directly comparable GAAP measures.
About Baxano Surgical, Inc.
Baxano Surgical, Inc. is a medical device company focused on designing, developing, and marketing minimally invasive products to treat degenerative conditions of the spine affecting the lumbar region. Baxano Surgical currently markets the AxiaLIF® family of products for single and two level lower lumbar fusion, the VEO® lateral access and interbody fusion system, the iO-Flex® system, a proprietary set of flexible instruments used by surgeons during spinal decompression procedures and the iO-Tome™ instrument, which rapidly and precisely removes bone, specifically the facet joints, which is commonly performed in spinal fusion procedures. Baxano Surgical was founded in May 2000 and is headquartered in Raleigh, North Carolina. For more information, visit www.baxanosurgical.com.
AxiaLIF, VEO and iO-Flex are registered trademarks of Baxano Surgical.
Forward Looking Statements
This press release includes statements that are based on our current beliefs and assumptions. These statements constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict, are beyond our control, and which may cause results to differ materially from expectations. Factors that could cause our results to differ materially from those described include, but are not limited to, the pace of adoption of our product technology by spine surgeons, the outcome of coverage and reimbursement decisions by the government and third party payors, the success of our continuing product development efforts, the effect on our business of existing and new regulatory requirements, our ability to raise additional capital, our ability to comply with our settlement agreement and Corporate Integrity Agreement with certain entities of the U.S. government, stockholder class action lawsuits, and other economic and competitive factors. For a discussion of the most significant risks and uncertainties associated with Baxano Surgical's business, please review the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent reports. You are cautioned not to place undue reliance on these forward looking statements, which are based on Baxano Surgical's expectations as of the date of this press release and speak only as of the date of this press release. We undertake no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.
| Baxano Surgical, Inc. | ||||
| Consolidated Statements of Operations and Comprehensive Loss | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Revenue | $ 5,650 | $ 3,198 | $ 12,627 | $ 10,441 |
| Cost of revenue | 1,506 | 838 | 3,832 | 2,747 |
| Gross profit | 4,144 | 2,360 | 8,795 | 7,694 |
| Operating expenses: | ||||
| Research and development | 1,904 | 1,361 | 4,698 | 3,937 |
| Sales and marketing | 6,764 | 4,453 | 17,722 | 15,124 |
| General and administrative | 2,769 | 1,739 | 6,181 | 4,661 |
| Merger and integration expenses | 530 | -- | 3,426 | -- |
| Charges related to U.S. Government settlement | 32 | 558 | 192 | 1,742 |
| Total operating expenses | 11,999 | 8,111 | 32,219 | 25,464 |
| Operating loss | (7,855) | (5,751) | (23,424) | (17,770) |
| Other expense, net | (104) | (114) | (166) | (146) |
| Net loss | $ (7,959) | $ (5,865) | $ (23,590) | $ (17,916) |
| Other comprehensive loss: | ||||
| Foreign currency translation adjustments | (1) | 1 | (2) | 1 |
| Comprehensive loss | $ (7,960) | $ (5,864) | $ (23,592) | $ (17,915) |
| Net loss per common share - basic and diluted | $ (0.18) | $ (0.22) | $ (0.67) | $ (0.66) |
| Weighted average common shares outstanding - basic and diluted | 45,198 | 27,275 | 35,373 | 27,258 |
| Baxano Surgical, Inc. | ||
| Consolidated Balance Sheets | ||
| (in thousands) | ||
| (Unaudited) | ||
| September 30, | December 31, | |
| 2013 | 2012 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 11,599 | $ 21,541 |
| Restricted cash | 65 | -- |
| Accounts receivable, net | 4,707 | 3,206 |
| Inventory | 7,154 | 5,017 |
| Prepaid expenses and other assets | 645 | 330 |
| Total current assets | 24,170 | 30,094 |
| Property and equipment, net | 3,142 | 2,166 |
| Goodwill | 16,043 | -- |
| Intangible assets, net | 8,088 | -- |
| Other long-term assets | 152 | -- |
| Total assets | $ 51,595 | $ 32,260 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Current portion of long-term debt | $ 796 | $ -- |
| Accounts payable | 2,951 | 2,603 |
| Current portion of accrued expenses related to U.S. Government settlement | 2,748 | 6,792 |
| Accrued expenses | 3,302 | 1,648 |
| Total current liabilities | 9,797 | 11,043 |
| Long-term debt | 1,986 | -- |
| Noncurrent liabilities | 2,857 | 78 |
| Stockholders' equity | ||
| Common stock | 4 | 3 |
| Additional paid-in capital | 199,333 | 159,929 |
| Accumulated other comprehensive income | 15 | 14 |
| Accumulated deficit | (162,397) | (138,807) |
| Total stockholders' equity | 36,955 | 21,139 |
| Total liabilities and stockholders' equity | $ 51,595 | $ 32,260 |
| Baxano Surgical, Inc. | ||||
| Consolidated Statements of Cash Flows | ||||
| (in thousands) | ||||
| (Unaudited) | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Cash flows from operating activities: | ||||
| Net loss | $ (7,959) | $ (5,865) | $ (23,590) | $ (17,916) |
| Adjustments to reconcile net loss to net cash used in operating activities | ||||
| Depreciation and amortization | 660 | 321 | 1,477 | 794 |
| Stock-based compensation | 416 | 302 | 1,036 | 1,062 |
| Provision (reversal of provision) for bad debts | 618 | 10 | 650 | (27) |
| Loss on disposal of fixed assets | -- | 231 | -- | 261 |
| Changes in operating assets and liabilities: | ||||
| (Increase) decrease in accounts receivable | (1,035) | (33) | (584) | 473 |
| Increase in inventory | (282) | (20) | (191) | (638) |
| (Increase) decrease in prepaid expenses | 189 | 144 | (81) | 294 |
| Increase (decrease) in accounts payable | 476 | (946) | (1,140) | (1,134) |
| Increase (decrease) in accrued expenses related to U.S. Government settlement | (640) | 15 | (1,267) | 452 |
| Increase in accrued expenses | 244 | 102 | 714 | 585 |
| Net cash used in operating activities | (7,313) | (5,739) | (22,976) | (15,794) |
| Cash flows from investing activities: | ||||
| Purchases of property and equipment | (764) | (436) | (1,376) | (1,793) |
| Acquisition, net of cash received | -- | -- | (2,685) | -- |
| Sales and maturities of investments | -- | -- | -- | 6,027 |
| Restricted cash classification change | 75 | -- | 13 | -- |
| Net cash provided by (used in) investing activities | (689) | (436) | (4,048) | 4,234 |
| Cash flows from financing activities: | ||||
| Net proceeds from issuance of common stock | -- | -- | 17,075 | -- |
| Proceeds from exercise of stock options | -- | -- | 9 | 68 |
| Net cash provided by financing activities | -- | -- | 17,084 | 68 |
| Effect of exchange rate changes on cash and cash equivalents | (1) | 1 | (2) | 1 |
| Net decrease in cash and cash equivalents | (8,003) | (6,174) | (9,942) | (11,491) |
| Cash and cash equivalents, beginning of period | 19,602 | 33,407 | 21,541 | 38,724 |
| Cash and cash equivalents, end of period | $ 11,599 | $ 27,233 | $ 11,599 | $ 27,233 |
| Baxano Surgical, Inc. | ||||
| Pro Forma Condensed Consolidated Statement of Operations | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Nine Months | Baxano Inc. | Nine Months | ||
| Ended Sept. 30, | Results Prior to | Pro Forma | Ended Sept. 30, | |
| 2013 As Reported | the Merger (1) | Adjustments (2) | 2013 Pro Forma | |
| Revenue | $ 12,627 | $ 4,725 | $ -- | $ 17,352 |
| Cost of revenue | 3,832 | 1,662 | 25 | 5,519 |
| Gross profit | 8,795 | 3,063 | (25) | 11,833 |
| Operating expenses: | ||||
| Research and development | 4,698 | 1,318 | 4 | 6,020 |
| Sales and marketing | 17,722 | 5,437 | 4 | 23,163 |
| General and administrative | 6,181 | 939 | 227 | 7,347 |
| Merger and integration expenses | 3,426 | 3,054 | -- | 6,480 |
| Charges related to U.S. Government settlement | 192 | -- | -- | 192 |
| Total operating expenses | 32,219 | 10,748 | 235 | 43,202 |
| Operating loss | (23,424) | (7,685) | (260) | (31,369) |
| Other expense, net | (166) | (702) | 548 | (320) |
| Net loss | $ (23,590) | $ (8,387) | $ 288 | $ (31,689) |
| Net loss per common share - basic and diluted | $ (0.67) | $ (0.70) | ||
| Weighted average common shares outstanding - basic and diluted (3) | 35,373 | 45,181 | ||
| (1) includes the results of operations for Baxano Inc. for January through May 2013. The Merger was effective on May 31, 2013. |
| (2) pro forma adjustments reflect the amortization of intangible assets and depreciation on the fair value of the fixed assets acquired in the merger less the elimination of interest on Baxano Inc. debt not assumed by Baxano Surgical, Inc. |
| (3) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented. |
| Baxano Surgical, Inc. | ||||
| Pro Forma Condensed Consolidated Statement of Operations | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Baxano Inc. | ||||
| Results for the | ||||
| Three Months | Three Months | Three Months | ||
| Ended Sept. 30, | Ended Sept. 30, | Pro Forma | Ended Sept. 30, | |
| 2012 As Reported | 2012 | Adjustments (1) | 2012 Pro Forma | |
| Revenue | $ 3,198 | $ 2,416 | $ -- | $ 5,614 |
| Cost of revenue | 838 | 883 | 15 | 1,736 |
| Gross profit | 2,360 | 1,533 | (15) | 3,878 |
| Operating expenses: | ||||
| Research and development | 1,361 | 1,319 | 3 | 2,683 |
| Sales and marketing | 4,453 | 4,000 | 3 | 8,456 |
| General and administrative | 1,739 | 496 | 136 | 2,371 |
| Merger and integration expenses | -- | -- | -- | -- |
| Charges related to U.S. Government settlement | 558 | -- | -- | 558 |
| Total operating expenses | 8,111 | 5,815 | 142 | 14,068 |
| Operating loss | (5,751) | (4,282) | (157) | (10,190) |
| Other expense, net | (114) | (204) | 113 | (205) |
| Net loss | $ (5,865) | $ (4,486) | $ (44) | $ (10,395) |
| Net loss per common share - basic and diluted | $ (0.22) | $ (0.23) | ||
| Weighted average common shares outstanding - basic and diluted (2) | 27,275 | 45,126 | ||
| (1) pro forma adjustments reflect the amortization of intangible assets and depreciation on the fair value of the fixed assets acquired in the merger less the elimination of interest on Baxano Inc. debt not assumed by Baxano Surgical, Inc. |
| (2) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented. |
| Baxano Surgical, Inc. | ||||
| Pro Forma Condensed Consolidated Statement of Operations | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Baxano Inc. | ||||
| Results for the | ||||
| Nine Months | Nine Months | Nine Months | ||
| Ended Sept. 30, | Ended Sept. 30, | Pro Forma | Ended Sept. 30, | |
| 2012 As Reported | 2012 | Adjustments (1) | 2012 Pro Forma | |
| Revenue | $ 10,441 | $ 6,371 | $ -- | $ 16,812 |
| Cost of revenue | 2,747 | 2,370 | 46 | 5,163 |
| Gross profit | 7,694 | 4,001 | (46) | 11,649 |
| Operating expenses: | ||||
| Research and development | 3,937 | 4,116 | 8 | 8,061 |
| Sales and marketing | 15,124 | 12,798 | 8 | 27,930 |
| General and administrative | 4,661 | 1,555 | 408 | 6,624 |
| Merger and integration expenses | -- | -- | -- | -- |
| Charges related to U.S. Government settlement | 1,742 | -- | -- | 1,742 |
| Total operating expenses | 25,464 | 18,469 | 424 | 44,357 |
| Operating loss | (17,770) | (14,468) | (470) | (32,708) |
| Other expense, net | (146) | (487) | 256 | (377) |
| Net loss | $ (17,916) | $ (14,955) | $ (214) | $ (33,085) |
| Net loss per common share - basic and diluted | $ (0.66) | $ (0.73) | ||
| Weighted average common shares outstanding - basic and diluted (2) | 27,258 | 45,109 | ||
| (1) pro forma adjustments reflect the amortization of intangible assets and depreciation on the fair value of the fixed assets acquired in the merger less the elimination of interest on Baxano Inc. debt not assumed by Baxano Surgical, Inc. |
| (2) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented. |
| Reconciliation of GAAP Financial Information to Non-GAAP Financial Information | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| GAAP net loss | $ (7,959) | $ (5,865) | $ (23,590) | $ (17,916) |
| Special items: | ||||
| Merger and integration expenses | 530 | -- | 3,426 | -- |
| Charges related to U.S. Government settlement | 32 | 558 | 192 | 1,742 |
| Net loss excluding special items | $ (7,397) | $ (5,307) | $ (19,972) | $ (16,174) |
| GAAP net loss per share | $ (0.18) | $ (0.22) | $ (0.67) | $ (0.66) |
| Special items: | ||||
| Merger and integration expenses | 0.01 | -- | 0.10 | -- |
| Charges related to U.S. Government settlement | -- | 0.02 | 0.01 | 0.06 |
| Net loss excluding special items | $ (0.17) | $ (0.20) | $ (0.56) | $ (0.60) |
| Shares used in computing GAAP and non-GAAP loss per share | 45,198 | 27,275 | 35,373 | 27,258 |
| Reconciliation of Pro Forma Financial Information to Non-GAAP Financial Information | ||||
| (in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Pro forma net loss | $ (7,959) | $ (10,395) | $ (31,689) | $ (33,085) |
| Special items: | ||||
| Merger and integration expenses | 530 | -- | 6,480 | -- |
| Charges related to U.S. Government settlement | 32 | 558 | 192 | 1,742 |
| Pro forma net loss excluding special items | $ (7,397) | $ (9,837) | $ (25,017) | $ (31,343) |
| Pro forma net loss per share | $ (0.18) | $ (0.23) | $ (0.70) | $ (0.73) |
| Special items: | ||||
| Merger and integration expenses | 0.01 | -- | 0.14 | -- |
| Charges related to U.S. Government settlement | -- | 0.01 | -- | 0.04 |
| Pro forma net loss excluding special items | $ (0.17) | $ (0.22) | $ (0.56) | $ (0.69) |
| Shares used in computing pro forma and pro forma non-GAAP loss per share | 45,170 | 45,126 | 45,181 | 45,109 |