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For the quarter ended March 31, 2008, Volcano reported revenues of $36.6 million, a 24 percent increase over revenues of $29.6 million in the same period a year ago. The company said IVUS disposable revenues increased 30 percent versus the first quarter of 2007, reflecting the growth of its installed base and broader IVUS adoption. For the first quarter of 2008, the company reported a net loss on a GAAP basis of $2.3 million, or $0.05 per share. Included in this loss is $2.9 million in due diligence, legal and accounting expenses related to an acquisition that was not consummated. In the first quarter of 2007, the company reported GAAP net income of $1.7 million, or $0.04 per diluted share. Excluding the aforementioned due diligence costs, stock-based compensation expense and in-process research and development expenses totaling $5.1 million, Volcano had non-GAAP net income of $2.8 million, or $0.06 per diluted share. In the first quarter of 2007, excluding stock-based compensation expense of $1.2 million, Volcano had net income of $2.9 million, or $0.07 per diluted share. Weighted average diluted shares at the end of the quarter were 47.0 million versus 41.7 million a year ago, reflecting the impact of the company's equity offering that was completed in the fourth quarter of 2007. A reconciliation of the company's GAAP and non-GAAP results can be found in today's earnings news release on the company's website at http://www.volcanocorp.com. "Volcano began 2008 with strong momentum by generating excellent revenue growth with our IVUS offerings and in our major geographies. Our IVUS disposable revenues were particularly strong, with year-over-year increases of 43 percent in Japan, 23 percent in the U.S. and 27 percent in Europe," said Scott Huennekens, president and chief executive officer. "In addition, we have a solid pipeline of orders from customers awaiting the availability of IVUS systems with new features that we began shipping in the second quarter. Market adoption of IVUS continues to grow, driven by the growing volume of data demonstrating its value, our innovative and industry-leading technology that makes IVUS faster, easier and simpler to use and our effective sales, marketing and distribution programs. In addition, we are benefitting from an increasingly favorable environment for percutaneous coronary intervention (PCI) and stenting procedures," he continued. "During the first quarter, we enhanced our technology advantage with the formal launch in the U.S. and Europe of our Revolution rotational catheter and FFR (fractional flow reserve) on the s5 family of IVUS consoles at the American College of Cardiology meeting. Full market release shipments are expected to begin in the current quarter. We are now the only IVUS company offering both phased array and rotational catheters in a single integrated console. In Japan, we received regulatory approval for the s5 tower last week and are on schedule for the full market release of the Revolution on the s5 family in the third quarter. In addition, we announced a new collaboration with Royal Philips Electronics under which they will resell Volcano-branded s5i IVUS systems and accessories alongside the Philips Allura Xper FD X-ray systems. We will continue to leverage this partnership, as well as those we have established with other leading cath lab equipment and stent companies, in our efforts to increase the rate of integrated lab adoption and win market share." Volcano also said its product development programs remain on track, including the expected commercial launch in the second half of 2009 of its first image-guided therapy offering, a balloon and IVUS on the same catheter. Volcano also expects U.S. and European regulatory approval in the second half of 2009 for its initial Optical Coherence Tomography product incorporating the technology that the company acquired with its purchase of CardioSpectra at the end of 2007. "Our new product initiatives are designed to offer a variety of modalities built around our s5i offering and to position Volcano to address a number of very sizeable therapy markets with innovative platform technologies," Huennekens noted. "We will also continue to explore strategic opportunities that provide offerings for our existing customer base and meet our growth rate, gross margin and valuation objectives," he added. Guidance for 2008 On a GAAP basis, the company expects to report a net loss of approximately $0.06-$0.10 per share. This compares to prior guidance for a net loss of $0.02-$0.04 per share. The decrease in guidance for earnings per share, despite the expected increase in revenues, reflects the due diligence expense, reduced interest income due to declining interest rates, increased sales and marketing expenses related to the revenue increase and increased research and development spending on programs to accelerate the commercialization of new products. The company expects to begin being profitable on a GAAP basis in the fourth quarter. Excluding stock-based compensation expense of approximately $10.0 million, due diligence costs and in-process research and development, Volcano expects to report non-GAAP net income of $0.16-$0.20 per diluted share. This compares with prior guidance for net income on this basis of $0.16-$0.18 per diluted share. Weighted average shares outstanding in 2008 are expected to be approximately 47.7 million basic shares and 50.4 million shares on a diluted basis. Conference
Call Volcano
Corporation Use
of Non-GAAP Financial Measures Forward-Looking
Statements
VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
March 31, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $132,572 $122,913
Short-term available-for-sale
investments 55,539 66,205
Accounts receivable, net 25,293 27,976
Inventories 22,399 21,243
Prepaid expenses and other current
assets 3,979 3,997
Total current assets 239,782 242,334
Restricted cash 376 365
Property and equipment, net 14,814 13,692
Intangible assets, net 8,641 9,385
Other non-current assets 804 798
$264,417 $266,574
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $10,051 $11,077
Accrued compensation 8,250 9,083
Accrued expenses and other current
liabilities 6,326 6,600
Deferred revenues 5,796 5,360
Current maturities of long-term debt 58 120
Total current liabilities 30,481 32,240
Long-term debt 78 78
Deferred license fee 1,063 1,125
Other 181 194
Total liabilities 31,803 33,637
Stockholders' equity 232,614 232,937
$264,417 $266,574
VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
2008 2007
Revenues $36,647 $29,579
Cost of revenues 13,629 10,865
Gross profit 23,018 18,714
Operating expenses:
Selling, general and administrative 22,059 12,584
Research and development 5,637 4,688
In-process research and development 175 -
Amortization of intangibles 773 786
Total operating expenses 28,644 18,058
Operating income (loss) (5,626) 656
Interest income 1,833 1,195
Interest expense (4) (89)
Exchange rate gain 1,679 122
Income (loss) before provision for income
taxes (2,118) 1,884
Provision for income taxes 208 210
Net income (loss) $(2,326) $1,674
Net income (loss) per share - basic $(0.05) $0.04
Net income (loss) per share - diluted $(0.05) $0.04
Weighted-average shares outstanding - basic 47,030 37,964
Weighted-average shares outstanding - diluted 47,030 41,685
VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, 2008
In-process Acquisition
Stock-based research due
GAAP compensation and diligence Non-GAAP
results expense development costs results
Revenues $36,647 $- $- $- $36,647
Cost of revenues 13,629 (191) - - 13,438
Gross profit 23,018 191 - - 23,209
Operating expenses:
Selling, general
and
administrative 22,059 (1,501) - (2,878) 17,680
Research and
development 5,637 (369) - - 5,268
In-process
research and
development 175 - (175) - -
Amortization of
intangibles 773 - - - 773
Total operating
expenses 28,644 (1,870) (175) (2,878) 23,721
Operating loss (5,626) 2,061 175 2,878 (512)
Interest income 1,833 - - - 1,833
Interest expense (4) - - - (4)
Exchange rate gain 1,679 - - - 1,679
Income (loss)
before provision
for income taxes (2,118) 2,061 175 2,878 2,996
Provision for
income taxes 208 - - - 208
Net income (loss) $(2,326) $2,061 $175 $2,878 $2,788
Net income (loss)
per share - basic $(0.05) $0.04 $0.00 $0.06 $0.06
Net income (loss)
per share -
diluted $(0.05) $0.04 $0.00 $0.06 $0.06
Weighted-average
shares outstanding
- basic 47,030 47,030
Weighted-average
shares outstanding
- diluted 47,030 49,698
Three Months Ended March 31, 2007
In-process Acquisition
Stock-based research due
GAAP compensation and diligence Non-GAAP
results expense development costs results
Revenues $29,579 $- $- $- $29,579
Cost of revenues 10,865 (112) - - 10,753
Gross profit 18,714 112 - - 18,826
Operating expenses:
Selling, general
and
administrative 12,584 (923) - - 11,661
Research and
development 4,688 (208) - - 4,480
Amortization of
intangibles 786 - - - 786
Total operating
expenses 18,058 (1,131) - - 16,927
Operating income 656 1,243 - - 1,899
Interest income 1,195 - - - 1,195
Interest expense (89) - - - (89)
Exchange rate gain 122 - - - 122
Income before
provision for
income taxes 1,884 1,243 - - 3,127
Provision for
income taxes 210 - - - 210
Net income $1,674 $1,243 $- $- $2,917
Net income per
share - basic $0.04 $0.03 $- $- $0.08
Net income per
share - diluted $0.04 $0.03 $- $- $0.07
Weighted-average
shares outstanding -
basic 37,964 37,964
Weighted-average
shares outstanding -
diluted 41,685 41,685
Use of Non-GAAP Financial Measures
VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(Unaudited)
Q1 '08 Q1 '07 Growth %
IVUS Systems:
United States $3.8 $3.7 1%
Japan 0.9 0.7 32%
Europe 1.2 0.8 47%
Rest of World 0.5 0.6 -15%
Total IVUS Systems $6.4 $5.8 9%
IVUS Disposables:
United States $11.6 $9.4 23%
Japan 8.8 6.1 43%
Europe 4.0 3.2 27%
Rest of World 0.8 0.6 31%
Total IVUS Disposables $25.2 $19.3 30%
FM:
United States $1.9 $1.6 19%
Japan 0.2 0.7 -69%
Europe 1.5 1.2 26%
Rest of World 0.1 0.2 -14%
Total FM $3.7 $3.7 2%
Other 1.3 0.8 71%
Total $36.6 $29.6 24%
Source: Volcano Corporation |
