9% Increase Over Q2 2011; 10% Constant Currency Growth
Raises 2012 Outlook
COLORADO SPRINGS, Colo., July 26, 2012 (GLOBE NEWSWIRE) -- The Spectranetics Corporation (Nasdaq:SPNC) today reported financial results for the three and six months ended June 30, 2012. Highlights of the quarter include (all compared with the quarter ended June 30, 2011):
- Lead Management revenue growth of 18%
- Vascular Intervention revenue growth of 10%, led by peripheral atherectomy growth of 19%
- U.S. revenue grew 10% to $29.2 million; International revenue increased 3% to $5.9 million (10% on a constant currency basis1)
- Gross margin improved to 73% from 71%
"The second quarter of 2012 marks the third consecutive quarter of double digit constant currency revenue growth," said President and Chief Executive Officer Scott Drake. "We completed the limited launch of GlideLight™, our next generation lead extraction product, ahead of schedule and we are now progressing to commercial rollout. Notably, the team's performance through the first half of 2012 resulted in broad-based strength across product lines and geographies, and as a result, we are raising our 2012 revenue outlook."
Net income for the second quarter of 2012 was $636,000, or $0.02 per diluted share, compared with net income of $584,000, or $0.02 per diluted share, for the second quarter of 2011.
| 1Constant currency is a non-GAAP financial measure. See "Reconciliation of Non-GAAP Financial Measures" later in this release. |
Year-To-Date Financial Results
Revenue for the six months ended June 30, 2012 rose 9% (10% on a constant currency basis) to $68.3 million, from $62.6 million in 2011. Vascular Intervention revenue increased 11% to $33.8 million, Lead Management revenue increased 14% to $25.9 million, and laser system, service and other revenue decreased 8% to $8.6 million.
On a geographic basis, revenue in the United States was $57.0 million, an increase of 9% from 2011. International revenue totaled $11.3 million, an increase of 7% (12% on a constant currency basis) from 2011.
Net income during the six months ended June 30, 2012 was $648,000, or $0.02 per diluted share, compared with net income of $430,000 or $0.01 per diluted share, in 2011.
2012 Outlook
Based on strong performance across product lines and geographies in the first half of 2012 as well as expectations for continued strength throughout the remainder of the year, management is raising its 2012 revenue outlook.
Management projects that 2012 revenue will be in the range of $137.0 - $139.5 million, an increase of 8% - 10% from 2011, or 9% - 11% on a constant currency basis. This compares to the previous outlook for revenue in the range of $133.5 - $136.5 million, an increase of 5% - 7% from 2011, or 6% - 8% on a constant currency basis.
Net income is projected to be in the range of $1.5 - $3.0 million, or $0.04 - $0.08 per diluted share. Management expects to continue making investments targeted at future revenue growth.
Conference Call
Management will host an investment community conference call today beginning at 9:00 a.m. Mountain time, 11:00 a.m. Eastern time, to discuss these results and answer questions. Individuals interested in listening to the conference call may do so by dialing (877) 561-2747 for domestic callers, or (973) 409-9689 for international callers, or from the webcast on the investor relations section of the Company's Web site at: www.spectranetics.com.
A 48-hour telephone replay will be available approximately one hour after the conclusion of the call by dialing (855) 859-2056 for domestic callers, or (404) 537-3406 for international callers, and entering reservation code 12360236. The webcast will be available on the Company's Web site for 14 days following the completion of the call.
About Spectranetics
Spectranetics develops, manufactures, markets and distributes single-use medical devices used in minimally invasive procedures within the cardiovascular system. The Company's products are sold in more than 40 countries and are used to treat arterial blockages in the heart and legs, as well as the removal of pacemaker and defibrillator leads.
The Company's Vascular Intervention (VI) products include a range of peripheral and cardiac laser catheters for ablation of occluded arteries above and below the knee and within coronary arteries. The Company also markets aspiration and thrombectomy catheters for the removal of thrombus and support catheters to facilitate crossing of coronary and peripheral arterial blockages.
The Lead Management (LM) product line includes excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads.
For more information, visit www.spectranetics.com.
Safe Harbor Statement
This news release contains 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 the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding our expectation of continued growth, growth rates, 2012 outlook including projected revenue and net income, clinical trials and speeding up our pipeline of new products. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties may include greater than anticipated indemnification obligations or other adverse results in connection with any ongoing legal proceeding, or any legal proceeding in which we may become involved, adverse impact to our business of the recently enacted healthcare reform bill and related legislation, continued or worsening adverse conditions in the general domestic and global economic markets and continued volatility and disruption of the credit markets, which, among other things, affects the ability of hospitals and other health care systems to obtain credit and may impede our access to capital, market acceptance of excimer laser atherectomy technology and our lead removal products, increasing price and product competition, increased pressure on expense levels resulting from expanded sales, marketing, product development and clinical activities, uncertain success of our strategic direction, dependence on new product development, intellectual property claims of third parties, availability of inventory from suppliers, adverse outcome of FDA inspections, the receipt of FDA approval to market new products or applications and the timeliness of any approvals, market acceptance of new products or applications, product defects, ability to manufacture sufficient volumes to fulfill customer demand, availability of vendor-sourced components at reasonable prices, unexpected delays or costs associated with any planned improvements to our manufacturing processes, and share price volatility due to the initiation or cessation of coverage, or changes in ratings, by securities analysts. For a further list and description of such risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any anticipated results, performance or achievements, please see our previously filed SEC reports, including those risks set forth in our Annual Report on Form 10-K. We disclaim any intention or obligation to update or revise any financial or other projections or other forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most directly comparable U.S. GAAP measures for the respective periods, and an explanation of our use of these non-GAAP measures, can be found in "Reconciliation of Non-GAAP Financial Measures" immediately following the financial tables. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
-Financial tables follow-
| THE SPECTRANETICS CORPORATION | ||||
| Condensed Consolidated Statements of Operations | ||||
| (000's, except per share data and percentages) | ||||
| (unaudited) | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Revenue | $ 35,035 | $ 32,214 | $ 68,304 | $ 62,636 |
| Cost of products sold | 9,520 | 9,313 | 18,488 | 18,240 |
| Gross profit | 25,515 | 22,901 | 49,816 | 44,396 |
| Gross margin % | 73% | 71% | 73% | 71% |
| Operating expenses: | ||||
| Selling, general and administrative | 20,355 | 17,624 | 40,963 | 34,991 |
| Research, development and other technology | 4,195 | 4,681 | 7,953 | 8,934 |
| Total operating expenses | 24,550 | 22,305 | 48,916 | 43,925 |
| Operating income | 965 | 596 | 900 | 471 |
| Other (expense) income, net | (116) | 67 | (35) | 117 |
| Income before taxes | 849 | 663 | 865 | 588 |
| Income tax expense | (213) | (79) | (217) | (158) |
| Net income | $ 636 | $ 584 | $ 648 | $ 430 |
| Net income per common share: | ||||
| Basic | $ 0.02 | $ 0.02 | $ 0.02 | $ 0.01 |
| Diluted | 0.02 | 0.02 | 0.02 | 0.01 |
| Weighted average shares outstanding: | ||||
| Basic | 34,271 | 33,323 | 34,127 | 33,281 |
| Diluted | 35,529 | 34,327 | 35,324 | 34,186 |
| THE SPECTRANETICS CORPORATION | ||
| Condensed Consolidated Balance Sheets | ||
| (000's) | ||
| 6/30/2012 | 12/31/2011 | |
| (unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 27,659 | $ 39,638 |
| Accounts receivable, net | 19,443 | 18,123 |
| Inventories, net | 9,409 | 8,542 |
| Deferred income taxes, current portion, net | 610 | 610 |
| Other current assets | 2,892 | 2,421 |
| Total current assets | 60,013 | 69,334 |
| Property and equipment, net | 27,503 | 27,249 |
| Goodwill | 13,296 | 11,569 |
| Other assets | 690 | 884 |
| Total assets | $ 101,502 | $ 109,036 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | $ 16,567 | $ 27,960 |
| Non-current liabilities | 1,854 | 1,566 |
| Stockholders' equity | 83,081 | 79,510 |
| Total liabilities and stockholders' equity | $ 101,502 | $ 109,036 |
| THE SPECTRANETICS CORPORATION | |||||
| Supplemental Financial Information | |||||
| (Unaudited) | |||||
| Financial Summary | 2011 | 2012 | |||
| (000's, except laser sales and installed base amounts) | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr |
| Disposable products revenue: | |||||
| Vascular Intervention revenue | $ 15,848 | $ 15,860 | $ 15,877 | $ 16,411 | $ 17,420 |
| Lead Management revenue | 11,505 | 11,800 | 11,893 | 12,368 | 13,526 |
| Total disposable products revenue | 27,353 | 27,660 | 27,770 | 28,779 | 30,946 |
| Service and other revenue | 2,544 | 2,517 | 2,541 | 2,659 | 2,515 |
| Laser revenue: | |||||
| Equipment sales | 1,024 | 719 | 909 | 591 | 409 |
| Rental fees | 1,293 | 1,231 | 1,304 | 1,240 | 1,165 |
| Total laser revenue | 2,317 | 1,950 | 2,213 | 1,831 | 1,574 |
| Total revenue | 32,214 | 32,127 | 32,524 | 33,269 | 35,035 |
| Net income | 584 | 109 | 355 | 12 | 636 |
| Non-GAAP adjusted net income excluding special items (1) | N/A | 935 | 1,310 | N/A | N/A |
| Cash flow generated by (used in) operating activities | 3,212 | 338 | 3,051 | (4,713) | 423 |
| Total cash and current investment securities | 35,655 | 36,154 | 39,638 | 27,000 | 27,659 |
| Laser sales summary: | |||||
| Laser sales from inventory | 6 | 4 | 5 | 3 | 2 |
| Laser sales from evaluation/rental units | 2 | 3 | 3 | — | 1 |
| Total laser sales | 8 | 7 | 8 | 3 | 3 |
| (1) Non-GAAP adjusted net income excluding special items is a non-GAAP financial measure. Please refer to the non-GAAP reconciliation tables following this table for the reconciliation of the third and fourth quarters of 2011. There were no special items reported in the second quarter of 2011 or the first and second quarters of 2012. | |||||
| Worldwide Installed Base Summary: | |||||
| Laser sales from inventory | 6 | 4 | 5 | 3 | 2 |
| Rental placements | 20 | 19 | 21 | 15 | 18 |
| Evaluation placements | 3 | 6 | 4 | 7 | 8 |
| Laser placements during quarter | 29 | 29 | 30 | 25 | 28 |
| Buy-backs/returns during quarter | (16) | (10) | (13) | (13) | (14) |
| Net laser placements during quarter | 13 | 19 | 17 | 12 | 14 |
| Total lasers placed at end of quarter | 975 | 994 | 1,011 | 1,023 | 1,037 |
Reconciliation of Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures in this release. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures for the respective periods can be found in the tables below. An explanation of the manner in which our management uses these non-GAAP measures to conduct and evaluate our business and the reasons why management believes that these non-GAAP measures provide useful information to investors is provided following the reconciliation tables.
| THE SPECTRANETICS CORPORATION | ||||||
| Reconciliation of revenue by geography to non-GAAP revenue by geography | ||||||
| on a constant currency basis | ||||||
| (000's, except percentages) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| June 30, 2012 | June 30, 2011 | Change | ||||
|
Revenue, as reported |
Foreign exchange impact as compared to prior period |
Revenue on a constant currency basis |
Revenue, as reported |
As reported |
Constant currency basis |
|
| United States | $ 29,163 | $ — | $ 29,163 | $ 26,487 | 10% | 10% |
| International | 5,872 | 419 | 6,291 | 5,727 | 3% | 10% |
| Total revenue | $ 35,035 | $ 419 | $ 35,454 | $ 32,214 | 9% | 10% |
| Six Months Ended | ||||||
| June 30, 2012 | June 30, 2011 | Change | ||||
|
Revenue, as reported |
Foreign exchange impact as compared to prior period |
Revenue on a constant currency basis |
Revenue, as reported |
As reported |
Constant currency basis |
|
| United States | $ 56,991 | $ — | $ 56,991 | $ 52,047 | 9% | 9% |
| International | 11,313 | 522 | 11,835 | 10,589 | 7% | 12% |
| Total revenue | $ 68,304 | $ 522 | $ 68,826 | $ 62,636 | 9% | 10% |
| THE SPECTRANETICS CORPORATION | ||||
| Reconciliation of Net Income to Non-GAAP Adjusted Net Income Excluding Special Items and | ||||
| Net Income per Diluted Share to Non-GAAP Adjusted Net Income Excluding Special Items | ||||
| per Diluted Share | ||||
| (000's, except per share data) | ||||
| (unaudited) | ||||
|
Three Months Ended September 30, 2011 |
Three Months Ended December 31, 2011 |
|||
| Net income |
Per diluted share (1) |
Net income |
Per diluted share (1) |
|
| Net income, as reported | $ 109 | $ 0.00 | $ 355 | $ 0.01 |
| Litigation charge (2) | 596 | 0.02 | — | — |
| Federal investigation legal and accrued indemnification costs (3) | — | — | (370) | (0.01) |
| Settlement costs -- license agreement dispute (4) | — | — | 1,821 | 0.05 |
| Litigation-related interest expense (2) | 230 | 0.01 | — | — |
| Decrease in valuation allowance against deferred tax asset (5) | — | — | (496) | (0.01) |
| Non-GAAP adjusted net income excluding special items | $ 935 | $ 0.03 | $ 1,310 | $ 0.04 |
| 1) Per share amounts may not add due to rounding. Per diluted share is calculated based on the fully diluted weighted average shares outstanding for all periods. The fully diluted weighted average shares were 34,390,829 for the three months ended September 30, 2011 and 34,631,377 for the three months ended December 31, 2011. | ||||
| 2) In the third quarter of 2011, the Dutch Court of Appeal issued a ruling in favor of Cardiomedica S.p.A., requiring us to pay $0.6 million plus $0.2 million of interest to Cardiomedica. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011. | ||||
| 3) Following the indictment in the third quarter of 2010 of three former employees with whom we have indemnification agreements, we accrued a $6.5 million charge to record our estimated liability related thereto. In the fourth quarter of 2011, we reversed $0.4 million of the original accrual based on developments in these proceedings, including the conclusion of the trial of two of the defendants and the dismissal of charges against a third defendant. Further information regarding this matter is included in our Annual Report on Form 10-K for the year ended December 31, 2011. | ||||
| 4) In January 2012, we entered into a Termination and Mutual Release ("Agreement") with Medtronic, Inc. The Agreement terminated the License Agreement between us and Medtronic dated February 28, 1997. Under the Agreement, we paid Medtronic $3.0 million in January 2012. We had accrued royalty expenses in the amount of $1.2 million prior to the settlement; therefore, the amount of $1.8 million was recorded as settlement costs—license agreement dispute. The Agreement includes a mutual release and no further royalty expenses will be incurred subsequent to the effective date of the Agreement. | ||||
| 5) In the fourth quarter of 2011, we entered into a strategic tax transaction with the approval of the Dutch tax authority that effectively extended the life of a portion of a net operating loss (NOL) carryforward in the Netherlands, which had previously been scheduled to expire on December 31, 2011 and which had previously been fully reserved. As a result, we recorded a $0.5 million tax benefit representing our estimate of the actual utilization of the extended deduction in future years. | ||||
Management uses the non-GAAP financial measures as supplemental measures to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used in allocating resources and evaluate our performance period over period and in relation to our competitors' operating results.
The impact of foreign exchange rates is highly variable and difficult to predict. We use a constant currency basis to show the impact from foreign exchange rates on current period revenue compared to prior period revenue using the prior period's foreign exchange rates. In order to properly understand the underlying business trends and performance of our ongoing operations, we believe that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from our revenue.
We believe that presenting the non-GAAP financial measures used in this release provides investors greater transparency to the information used by our management for financial and operational decision-making and allows investors to see our results "through the eyes" of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by management to evaluate and measure such performance.
Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Some of the limitations associated with our use of these non-GAAP financial measures are provided below:
-
Management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures used.
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Items such as the federal investigation legal and accrued indemnification costs, the license agreement termination charge and the litigation charge and related interest that are excluded from net income and net income per share can have a material impact on cash flows, GAAP net income and net income per share and reflect economic costs to us that are not reflected in non-GAAP adjusted net income and non-GAAP adjusted net income per share.
-
The decrease in the valuation allowance against the deferred tax assets represents a change in the value of assets. The benefit associated with this change in value is not included in our non-GAAP net income or non-GAAP net income per share.
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Revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of foreign exchange, which may have a material impact on GAAP revenue.
- 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 we do, limiting the usefulness of those measures for comparative purposes.