Volcano Reports 35
Percent Increase
in Quarterly Revenues
IVUS Disposable Revenues
Increase 46 Percent
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February 12, 2008 -- San Diego --
Volcano Corporation (Nasdaq: VOLC), a leading provider of intravascular ultrasound
(IVUS) and functional measurement (FM) products designed to enhance
the diagnosis and treatment of coronary and peripheral vascular disease,
today reported results for the fourth quarter and full year 2007.
For the quarter ended December 31, 2007, Volcano reported revenues of $40.0 million, a record quarter for the company, and a 35 percent increase over revenues of $29.5 million in the same period a year ago. Revenues for all of 2007 were $130.6 million, a 27 percent increase over revenues of $103.0 million in fiscal 2006. For the fourth quarter of 2007, the company reported a net loss on a GAAP basis of $23.7 million, or $0.53 per share. Included in these results is a $26.2 million charge related to in-process research and development incurred with the company's acquisition of
CardioSpectra, Inc., which occurred in December 2007. Excluding this charge, the company would have had net income of $2.4 million, or $0.05 per diluted share. Volcano reported net income on a GAAP basis of $1.4 million, or $0.04 per diluted share, in the fourth quarter of 2006. Excluding the one-time charge related to the CardioSpectra acquisition and stock-based compensation expense of $2.0 million, the company reported net income of $4.4 million, or $0.09 per diluted share, in the fourth quarter of 2007. Excluding stock-based compensation expense of $901,000, the company reported net income of $2.3 million, or $0.06 per diluted share, in the fourth quarter of 2006, or an increase of 90 percent. Weighted average diluted shares in the quarter were 47.8 million versus 38.2 million a year ago, reflecting the impact of the company's public offering of common stock that was
completed in October 2007. The company ended 2007 with $189.1 million in cash, cash equivalents and short-term available-for-sale investments. This compares with $95.5 million at the end of 2006. The difference between the two periods reflects the net proceeds of $122.8 million from the company's stock offering in October 2007, and the $25.2 million cash payment related to the CardioSpectra acquisition in December 2007. "Volcano has continued to demonstrate very strong revenue growth throughout 2007, driven by our growing installed base of IVUS consoles and increased IVUS disposable revenues. Total IVUS console placements in 2007 were 597, an increase of 48 percent versus 404 IVUS console placements in 2006. IVUS disposable revenues in the quarter increased 46 percent versus the same quarter a year ago, including a 28 percent increase in the U.S.," noted
Scott Huennekens,
president and chief executive officer of Volcano. "This growth in our IVUS business occurred despite a sluggish global PCI market. We believe the ease of use and integration provided by our s5 family of consoles, along with a growing volume of data demonstrating the value of IVUS in stenting procedures, is driving our increased market presence in the IVUS arena," he added. "We are encouraged by what appear to be recent favorable trends in stenting procedures and believe this will further the growth of our IVUS offerings," he
continued. Last week, the company announced it received 510(k) clearance and a CE Mark for its Revolution rotational IVUS catheter and functional flow reserve (FFR) technology on its s5 family of IVUS consoles, enabling the commercial launch of these offerings in the United States and Europe. The company also expects to have regulatory approval for the
Rotational catheter on new s5 consoles in Japan by the second quarter. The company has also recently announced three new partnership agreements. The first is with Cordis Europe that will enable Cordis to offer their customers Volcano IVUS for use in Cypher drug-eluting stent procedures. The second was a marketing agreement with Siemens in Japan under which Siemens will begin selling their Artis and angio systems with the s5i IVUS console. In addition, the company announced a collaboration with General Electric in Japan that will enable GE to offer its INNOVA angiographic systems with Volcano's s5i integrated IVUS technology. "We are also excited about the potential of our CardioSpectra acquisition and its Optical Coherence Tomography (OCT) technology as a complement to our IVUS offerings. Our product development program for this technology is on track and we hope to have our first
offering in this area available for launch in the United States and Europe next year," Huennekens
said. "We continue to implement both market development and clinical strategies that we expect to not only broaden the use of IVUS, but also increase our share of the IVUS market," Huennekens said. "Our growth strategy for the year has several key elements, including the launch of our Revolution catheter and FFR on s5 platforms and our console placement programs. We will also continue to capitalize on our partnerships with industry leaders and expand our direct sales force and marketing efforts. Additionally, we are launching two significant clinical trials to augment our already active clinical efforts. Finally, we will explore potential strategic opportunities that can enhance our technology offerings and drive revenue growth. We look forward to a very exciting and successful 2008," he
concluded. For the full year 2007, Volcano reported a net loss of $26.6 million, or $0.66 per share. This compares with a net loss of $8.6 million, or $0.41 per share, in 2006. Included in the results for 2006 is a write-off of $1.2 million, or $0.06 per share, related to deferred debt issuance costs as a result of the company's initial public offering. Excluding the in-process research and development charge of $26.2 million and stock-based compensation expense of $6.7 million, Volcano reported net income of $6.3 million, or $0.15 per diluted share, for 2007. Excluding stock-based compensation expense of $3.2 million, and the write-off of $1.2 million, the company reported a net loss of $4.2 million, or $0.20 per share, in 2006-a net improvement of $10.5 million. Guidance
for 2008
The company said it expects 2008 revenues will be in the range of approximately
$158-$162 million, an increase of approximately 21-24 percent over 2007. Gross
margin for 2008 is expected to be in the range of 60-61 percent, although the
company expects to exit 2008 with margins in the range of 63-64 percent. Operating
expenses, including stock-based compensation expense and approximately $3.1
million of intangible amortization, are expected to be 64-65 percent of revenues.
On a GAAP basis, the company expects to report a net loss of approximately $0.02-$0.04 per share, although Volcano expects to begin being profitable on a GAAP basis in the fourth quarter. Excluding stock-based compensation expense of approximately $10.2 million, Volcano expects to report net income of $0.16 to $0.18 per diluted share. Weighted average shares outstanding in 2008 are expected to be approximately 47.4 million basic shares and 50.1 million shares on a diluted basis.
Conference Call
The company will hold a conference call at 2 p.m., Pacific Standard
Time, (5 p.m., Eastern Standard Time) today. The teleconference can be accessed
by calling (719) 325-4886, passcode 2432162, or via the company's website at
http://www.volcanocorp.com. Please dial in or access the website 10-15 minutes
prior to the beginning of the call. A replay of the conference call will be
available until February 19 at (719) 457-0820, passcode 2432162, and via the
company's website. Volcano Corporation
Volcano Corporation (Nasdaq: VOLC)
offers a broad suite of devices designed to facilitate endovascular procedures,
enhance the diagnosis of vascular diseases and guide optimal therapies. The
company's intravascular ultrasound (IVUS) product line includes ultrasound
consoles that can be integrated directly into virtually any modern cath lab.
Volcano IVUS offers unique features, including both single-use phased array
and rotational IVUS imaging catheters, and advanced functionality options,
such as VH(TM) IVUS tissue characterization and ChromaFlo(R). Volcano also
provides functional measurement (FM) consoles and single-use pressure and
flow guide wires. Currently, more than 3,200 Volcano IVUS and FM systems
are installed worldwide, with approximately half of its revenues coming from
outside the United States. For more information, visit the company's website
at http://www.volcanocorp.com. Use of Non-GAAP Financial Measures
This
press release includes certain non-GAAP financial information as defined
by the U.S. Securities and Exchange Commission Regulation G. Pursuant to
the requirements of this regulation, a reconciliation of this non-GAAP
financial information to our financial statements as prepared under generally
accepted accounting principles in the United States (GAAP) is included
in this press release. Non-GAAP financial measures provide an indication
of our performance before certain charges. Our management believes that
in order to properly understand our short-term and long-term financial
trends, investors may wish to consider the impact of these charges. These
charges result from facts and circumstances that vary in frequency and/or
impact on continuing operations. Our management believes that these items
should be excluded when comparing our current operating results with those
of prior periods as the write-off of deferred debt issuance costs, which
resulted from the repayment of certain debt in connection with our initial
public offering, will not impact future operating results, stock-based
compensation is a non-cash expense, and in-process research and development
relates to the costs
associated with the December 2007 acquisition of CardioSpectra, Inc. In addition,
our management uses results of operations before certain charges to evaluate
the operational performance of the company and as a basis for strategic
planning. Investors should note that the non-GAAP financial measures used
by the company may not be the same non-GAAP financial measures, and may
not be calculated in the same manner, as that of other companies. Investors
should consider these non-GAAP measures in addition to, and not as a substitute
for, financial performance measures in accordance with GAAP. Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Any statements in this news release regarding Volcano's business that
are not historical facts may be considered "forward-looking
statements," including statements regarding the company's financial guidance
for 2008, regulatory approvals and the impact of obtaining regulatory approvals,
market adoption of the company's technology, the impact of clinical and other
technical data, the safety and efficacy of the company's products, the success
and timing of product development and clinical trial programs, growth strategies
and market development and products sales and use and merger and acquisition
activities. Forward-looking statements are based on management's current preliminary
expectations and are subject to risks and uncertainties, which may cause Volcano's
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 from the results predicted are detailed in the company's annual report
on Form 10-K, quarterly reports on Form 10-Q and other filings made with the
Securities and Exchange Commission. Undue reliance should not be placed on forward-looking
statements, which speak only as of the date they are made. Volcano undertakes
no obligation to update any forward-looking statements to reflect new information,
events or circumstances after the date they were made, or to reflect the occurrence
of unanticipated events.
VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
December 31, December 31,
2007 2006
Assets
Current assets:
Cash and cash equivalents $122,913 $77,738
Short-term available-for-sale investments 66,205 17,787
Accounts receivable, net 27,976 21,575
Inventories 21,243 13,423
Prepaid expenses and other current
assets 3,997 2,208
Total current assets 242,334 132,731
Restricted cash 365 352
Property and equipment, net 13,692 9,333
Intangible assets, net 9,385 11,946
Other non-current assets 798 363
$266,574 $154,725
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $11,077 $8,209
Accrued compensation 9,083 5,993
Accrued expenses and other current
liabilities 6,600 5,292
Deferred revenues 5,360 2,675
Current maturities of long-term debt 120 1,654
Total current liabilities 32,240 23,823
Long-term debt 78 66
Deferred license fee 1,125 1,375
Other 194 279
Total liabilities 33,637 25,543
Stockholders' equity 232,937 129,182
$266,574 $154,725
VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenues $40,009 $29,531 $130,614 $103,048
Cost of revenues 16,093 11,467 51,559 41,715
Gross profit 23,916 18,064 79,055 61,333
Operating expenses:
Selling, general and
administrative 18,360 12,587 62,631 47,614
Research and development 5,074 4,088 20,315 16,923
In-process research
and development 26,188 - 26,188 -
Amortization of intangibles 754 785 3,067 3,117
Total operating expenses 50,376 17,460 112,201 67,654
Operating income (loss) (26,460) 604 (33,146) (6,321)
Interest expense (6) (103) (199) (4,013)
Interest and other income, net 2,621 957 7,293 2,029
Income (loss) before provision
for income taxes (23,845) 1,458 (26,052) (8,305)
Provision (benefit) for income
taxes (102) 25 524 298
Net income (loss) $(23,743) $1,433 $(26,576) $(8,603)
Net income (loss) per share -
basic $(0.53) $0.04 $(0.66) $(0.41)
Net income (loss) per share -
diluted $(0.53) $0.04 $(0.66) $(0.41)
Weighted-average shares
outstanding - basic 44,939 34,079 40,024 21,113
Weighted-average shares
outstanding - diluted 44,939 38,155 40,024 21,113
VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)
Three Months Ended December 31, 2007
In-process
Stock-based research Non-
GAAP compensation and GAAP
results expense development results
Revenues $40,009 $- $- $40,009
Cost of revenues 16,093 (187) - 15,906
Gross profit 23,916 187 - 24,103
Operating expenses:
Selling, general and
administrative 18,360 (1,433) - 16,927
Research and development 5,074 (368) - 4,706
In-process research and
development 26,188 - (26,188) -
Amortization of intangibles 754 - - 754
Total operating expenses 50,376 (1,801) (26,188) 22,387
Operating income (loss) (26,460) 1,988 26,188 1,716
Interest expense (6) - - (6)
Interest and other income,
net 2,621 - - 2,621
Income (loss) before provision
for income taxes (23,845) 1,988 26,188 4,331
Benefit for income taxes (102) - - (102)
Net income (loss) $(23,743) $1,988 $26,188 $4,433
Net income (loss) per share -
basic $(0.53) $0.04 $0.58 $0.10
Net income (loss) per share -
diluted $(0.53) $0.04 $0.55 $0.09
Weighted-average shares
outstanding - basic 44,939 44,939
Weighted-average shares
outstanding - diluted 44,939 47,802
Three Months Ended December 31, 2006
In-process
Stock-based research Non-
GAAP compensation and GAAP
results expense development results
Revenues $29,531 $- $- $29,531
Cost of revenues 11,467 (109) - 11,358
Gross profit 18,064 109 - 18,173
Operating expenses:
Selling, general and
administrative 12,587 (558) - 12,029
Research and development 4,088 (234) - 3,854
Amortization of intangibles 785 - - 785
Total operating expenses 17,460 (792) - 16,668
Operating income 604 901 - 1,505
Interest expense (103) - - (103)
Interest and other income, net 957 - - 957
Income before provision for
income taxes 1,458 901 - 2,359
Provision for income taxes 25 - - 25
Net income $1,433 $901 $- $2,334
Net income per share - basic $0.04 $0.03 $- $0.07
Net income per share - diluted $0.04 $0.02 $- $0.06
Weighted-average shares
outstanding - basic 34,079 34,079
Weighted-average shares
outstanding - diluted 38,155 38,155
VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)
Twelve Months Ended December 31, 2007
Write-off
of
deferred In-process
Stock-based debt research Non-
GAAP compensation issuance and GAAP
results expense costs development results
Revenues $130,614 $- $- $- $130,614
Cost of revenues 51,559 (621) - - 50,938
Gross profit 79,055 621 - - 79,676
Operating expenses:
Selling, general
and administrative 62,631 (4,919) - - 57,712
Research and
development 20,315 (1,151) - - 19,164
In-process research
and development 26,188 - - (26,188) -
Amortization of
intangibles 3,067 - - - 3,067
Total operating
expenses 112,201 (6,070) - (26,188) 79,943
Operating income (loss) (33,146) 6,691 - 26,188 (267)
Interest expense (199) - - - (199)
Interest and other
income, net 7,293 - - - 7,293
Income (loss) before
provision for income
taxes (26,052) 6,691 - 26,188 6,827
Provision for income
taxes 524 - - - 524
Net income (loss) $(26,576) $6,691 $- $26,188 $6,303
Net income (loss) per
share - basic $(0.66) $0.17 $- $0.65 $0.16
Net income (loss) per
share - diluted $(0.66) $0.15 $- $0.61 $0.15
Weighted-average shares
outstanding - basic 40,024 40,024
Weighted-average shares
outstanding - diluted 40,024 43,270
Twelve Months Ended December 31, 2006
Write-off
of
deferred In-process
Stock-based debt research Non-
GAAP compensation issuance and GAAP
results expense costs development results
Revenues $103,048 $- $- $- $103,048
Cost of revenues 41,715 (348) - - 41,367
Gross profit 61,333 348 - - 61,681
Operating expenses:
Selling, general
and administrative 47,614 (2,238) - - 45,376
Research and
development 16,923 (609) - - 16,314
Amortization of
intangibles 3,117 - - - 3,117
Total operating
expenses 67,654 (2,847) - - 64,807
Operating income
(loss) (6,321) 3,195 - - (3,126)
Interest expense (4,013) - 1,246 - (2,767)
Interest and other
income, net 2,029 - - - 2,029
Loss before provision
for income taxes (8,305) 3,195 1,246 - (3,864)
Provision for income
taxes 298 - - - 298
Net loss $(8,603) $3,195 $1,246 $- $(4,162)
Net loss per share -
basic and diluted $(0.41) $0.15 $0.06 $- $(0.20)
Weighted-average shares
outstanding - basic
and diluted 21,113 21,113
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial information as
defined by the U.S. Securities and Exchange Commission Regulation G.
Pursuant to the requirements of this regulation, a reconciliation of this
non-GAAP financial information to our financial statements as prepared
under generally accepted accounting principles in the United States
(GAAP) is included in this press release. Non-GAAP financial measures
provide an indication of our performance before certain charges. Our
management believes that in order to properly understand our short-term
and long-term financial trends, investors may wish to consider the impact
of these charges. These charges result from facts and circumstances that
vary in frequency and/or impact on continuing operations. Our management
believes that these items should be excluded when comparing our current
operating results with those of prior periods as the write-off of
deferred debt issuance costs, which resulted from the repayment of
certain debt in connection with our initial public offering, will not
impact future operating results, stock-based compensation is a non-cash
expense, and in-process research and development relates to the costs
associated with the December 2007 acquisition of CardioSpectra, Inc. In
addition, our management uses results of operations before certain
charges to evaluate the operational performance of the company and as a
basis for strategic planning. Investors should note that the non-GAAP
financial measures used by the company may not be the same non-GAAP
financial measures, and may not be calculated in the same manner, as that
of other companies. Investors should consider these non-GAAP measures in
addition to, and not as a substitute for, financial performance measures
in accordance with GAAP.
VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(Unaudited)
YTD Q4 YTD Q4
Q4 '07 Q4 '06 Growth % '07 '06 Growth
IVUS Systems:
United States $5.8 $3.5 67% $16.8 $10.7 58%
Japan 1.3 2.2 -42% 3.1 5.5 -44%
Europe 1.5 1.5 -5% 5.1 4.1 24%
Rest of World 0.2 0.2 -1% 1.9 1.8 2%
Total IVUS Systems $8.8 $7.4 18% $26.9 $22.1 21%
IVUS Disposables:
United States $11.4 $8.9 28% $40.2 $32.8 22%
Japan 10.1 5.8 75% 30.3 22.4 35%
Europe 3.8 2.5 50% 12.8 9.3 38%
Rest of World 0.6 0.5 20% 2.2 1.8 28%
Total IVUS Disposables $25.9 $17.7 46% $85.5 $66.3 29%
FM:
United States $1.8 $1.5 22% $6.3 $5.6 13%
Japan 0.3 0.9 -64% 1.4 1.9 -25%
Europe 1.7 1.2 40% 5.8 4.0 45%
Rest of World 0.3 0.2 57% 0.8 0.5 52%
Total FM $4.1 $3.8 8% $14.3 $12.0 19%
Other 1.2 0.6 113% 3.9 2.6 49%
Total $40.0 $29.5 35% $130.6 $103.0 27%
Source: Volcano Corporation
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