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February 17, 2009 -- San Diego -- Volcano Corporation (Nasdaq: VOLC), a leader in the development, manufacturing and sales of products for the diagnosis and treatment of coronary and peripheral artery disease, today reported that revenues for the full year 2008 increased 31 percent over full year 2007 and that revenues for the fourth quarter of 2008 increased 23 percent over revenues in the fourth quarter of 2007.
For the fourth quarter of 2008, the company reported GAAP net income of $1.4 million, or $0.03 per diluted share, versus a net loss on a GAAP basis of $23.7 million, or $0.53 per share, in the same period of 2007. Included in the results for the fourth quarter of 2007 were in-process research and development charges of $26.2 million related to Volcano's acquisition of CardioSpectra, Inc., that was completed in December 2007. Weighted average shares for the fourth quarter of 2008 were 50.3 million versus 44.9 million a year ago, reflecting the impact of the company's equity offering that was completed in the fourth quarter of 2007. Excluding stock-based compensation expense of $2.5 million and in-process research and development charges of $274,000, the company reported net income of $4.2 million, or $0.08 per diluted share, in the fourth quarter of 2008. In the fourth quarter of 2007, excluding stock-based compensation expense of $2.0 million and the in-process research and development charge of $26.2 million, the company reported net income of $4.4 million, or $0.09 per diluted share. 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 www.volcanocorp.com. For the full year 2008, the company reported a GAAP net loss of $13.7 million, or $0.29 per share, versus a GAAP net loss of $26.6 million, or $0.66 per share, in 2007. Excluding in-process research and development charges of $12.7 million, stock-based compensation expense of $9.5 million and $2.9 million in due diligence, legal and accounting expenses related to a proposed acquisition that was not consummated, Volcano reported net income of $11.4 million, or $0.23 per diluted share, in 2008. Excluding in-process research and development charges 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, in 2007. A reconciliation of the company's GAAP and non-GAAP results cane found in today's earnings news release on the company's website at www.volcanocorp.com. The company ended fiscal 2008 with $149.9 million in cash, cash equivalents and short-term available for sale investments. "Volcano concluded 2008 in a very strong manner, executing on our market expansion and technology innovation initiatives, as well as our product pipeline development programs - both through our internal efforts and the three key acquisitions we completed during the year," said Scott Huennekens, president and chief executive officer. "As evidenced by our revenue growth, we continued to increase the market presence of our IVUS offerings, placing 330 IVUS consoles during the quarter versus 177 in the fourth quarter of 2007, or an increase of 86 percent. Importantly, most of these 330 IVUS consoles were multi-modality with FM capability as well. In total, we placed 867 IVUS consoles in 2008 versus 597 in 2007, an increase of 45 percent, and also experienced a commensurate growth in our IVUS disposable revenues, which grew 18 percent versus the fourth quarter of 2007 and 26 percent for the year. In addition, our FM business grew 36 percent in the quarter versus the fourth quarter of 2007. We also achieved gross margin improvement and leveraged our operating expenses, which enabled us to be profitable on a GAAP basis in the quarter. "The patients and company are benefiting," he continued, "from a continuing favorable environment for percutaneous coronary interventions, the proliferation of IVUS and FM integrated systems and the release of positive data, including the recent publication of trial data from FAME (Fractional Flow Reserve vs. Angiography for Multivessel Evaluation) in The New England Journal of Medicine that we believe will be a catalyst for our FM business going forward. "We continue to build out our direct sales force in the U.S. and Europe and implement our direct distribution strategy in Japan. We also achieved significant progress with our future OCT, forward-looking IVUS and image guided therapy offerings designed to complement our multi-modality platform strategy and address markets that are potentially larger than those we currently serve. The first of the new forward-looking IVUS devices is expected to be introduced later this year," Huennekens noted. Guidance for 2009 For its base IVUS and FM businesses, the company expects revenues of $203-$207 million, an increase of 18-21 percent over IVUS and FM revenues in 2008. Gross margin for its IVUS and FM business is expected to be in the range of 63-64 percent. Operating expenses related to its IVUS and FM businesses, including stock-based compensation expense and approximately $3.2 million of intangible amortization, are expected to be 63-64 percent of revenues. These expectations reflect increased SG&A spending to build out the company's presence in Japan to support its direct distribution strategy, the build out of its sales force in the U.S. and Europe, infrastructure spending and a modest increase in research and development spending to fund product development programs, clinical trials and regulatory activities. Revenues attributable to Axsun Technologies, Inc., which the company acquired at the end of 2008 and will operate as a wholly-owned subsidiary, are expected to be in the range of $15-$16 million, with approximately 85 percent generated by Axsun's industrial segment. Gross margin at Axsun is expected to be in the range of 24-25 percent. Operating expenses are expected to be 44-45 percent of revenues. Major spending at Axsun during 2009 will include research and development programs to develop lower cost platforms and new devices and systems for medical imaging applications, as well as market development initiatives. On a consolidated basis, Volcano expects total revenues in fiscal 2009 of $218-$223 million, an increase of 27-30 percent over revenues in 2008. Gross margin is expected to be in the range of 60-62 percent, reflecting the dilutive effect of the Axsun business. Operating expenses, including stock-based compensation expense of approximately $13.3 million and approximately $4.1 million of intangible amortization, is expected to be 62-63 percent of revenues. On a GAAP basis, the company expects to report a net loss of $0.05-$0.08 per share. Based on the expected timing for investments in the company described earlier and the anticipated growth trajectory for revenues, the company expects to show a GAAP net loss in the first half of 2009, and GAAP net income in the second half of 2009. Excluding stock-based compensation expense of approximately $13.3 million, Volcano expects to report net income of $0.19-$0.21 per diluted share. The company expects that operating income in 2009, excluding stock-based compensation expense, due diligence costs and in-process research and development expenses, will be roughly double the $5.4 million of 2008. The company said that excluding stock-based compensation expense, in-process research and development and acquisition due diligence costs, it expects results on a per diluted share basis will be impacted roughly $0.02-$0.04 per share versus the net income of $0.23 per diluted share of 2008, due primarily to the contributions of interest income and the exchange rate gain in 2008 that are not expected to occur in 2009. The company said that weighted average shares outstanding at year-end 2009 are expected to be approximately 48.2 million basic shares and 50.5 million diluted shares. Conference Call Volcano Corporation Use of Non-GAAP Financial Measures Forward-Looking Statements
VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
December 31,
-------------
2008 2007
---- ----
Assets
Current assets:
Cash and cash equivalents $100,949 $122,913
Short-term available-for-sale investments 48,941 66,205
Accounts receivable, net 41,795 27,976
Inventories 28,936 21,243
Prepaid expenses and other current assets 5,869 3,997
----- -----
Total current assets 226,490 242,334
Restricted cash 327 365
Property and equipment, net 30,007 13,692
Intangible assets, net 15,636 9,385
Other non-current assets 2,177 798
----- ---
$274,637 $266,574
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $14,867 $11,077
Accrued compensation 12,690 9,083
Accrued expenses and other current
liabilities 9,903 6,600
Deferred revenues 5,872 5,360
Short-term debt 151 -
Current maturities of long-term debt 57 120
--- ---
Total current liabilities 43,540 32,240
Long-term debt 34 78
Deferred license fee 875 1,125
Other 456 194
--- ---
Total liabilities 44,905 33,637
Stockholders' equity 229,732 232,937
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$274,637 $266,574
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VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------- --------------
2008 2007 2008 2007
---- ---- ---- ----
Revenues $49,253 $40,009 $171,495 $130,614
Cost of revenues 18,378 16,093 64,293 51,559
------ ------ ------ ------
Gross profit 30,875 23,916 107,202 79,055
Operating expenses:
Selling, general and
administrative 21,964 18,360 84,369 62,631
Research and development 7,867 5,074 26,690 20,315
In-process research and
development 274 26,188 12,681 26,188
Amortization of intangibles 788 754 3,125 3,067
--- --- ----- -----
Total operating expenses 30,893 50,376 126,865 112,201
------ ------ ------- -------
Operating income (loss) (18) (26,460) (19,663) (33,146)
Interest income 622 2,211 4,828 5,841
Interest expense (105) (6) (113) (199)
Exchange rate gain 718 410 1,809 1,452
Other, net 54 - 54 -
--- --- --- ---
Income (loss) before
(benefit from) provision
for income taxes 1,271 (23,845) (13,085) (26,052)
(Benefit from) provision for
income taxes (87) (102) 620 524
--- ---- --- ---
Net income (loss) $1,358 $(23,743) $(13,705) $(26,576)
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Net income (loss) per
share - basic $0.03 $(0.53) $(0.29) $(0.66)
===== ====== ====== ======
Net income (loss) per
share - diluted $0.03 $(0.53) $(0.29) $(0.66)
===== ====== ====== ======
Shares used in calculating
net income (loss) per share
- basic 47,793 44,939 47,376 40,024
====== ====== ====== ======
Shares used in calculating
net income (loss) per share
- diluted 50,286 44,939 47,376 40,024
====== ====== ====== ======
VOLCANO CORPORATION
Reconciliation of GAAP Results to Non-GAAP Results
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------- --------------
2008 2007 2008 2007
---- ---- ---- ----
GAAP operating loss $(18) $(26,460) $(19,663) $(33,146)
Stock-based compensation 2,541 1,988 9,537 6,691
In-process research and
development 274 26,188 12,681 26,188
Acquisition due-diligence
costs - - 2,878 -
--- --- ----- ---
Non-GAAP operating income
(loss) $2,797 $1,716 $5,433 $(267)
====== ====== ====== =====
GAAP net income (loss) $1,358 $(23,743) $(13,705) $(26,576)
Stock-based compensation 2,541 1,988 9,537 6,691
In-process research and
development 274 26,188 12,681 26,188
Acquisition due-diligence
costs - - 2,878 -
--- --- ----- ---
Non-GAAP net income $4,173 $4,433 $11,391 $6,303
====== ====== ======= ======
GAAP net income (loss) per
share - basic $0.03 $(0.53) $(0.29) $(0.66)
Stock-based compensation 0.05 0.04 0.20 0.17
In-process research and
development 0.01 0.58 0.27 0.65
Acquisition due-diligence
costs - - 0.06 -
--- --- ---- ---
Non-GAAP net income per share -
basic $0.09 $0.10 $0.24 $0.16
===== ===== ===== =====
Shares used in calculating net
income per share - basic 47,793 44,939 47,376 40,024
====== ====== ====== ======
GAAP net income (loss) per
share - diluted $0.03 $(0.53) $(0.29) $(0.66)
Stock-based compensation 0.04 0.04 0.19 0.15
In-process research and
development 0.01 0.55 0.25 0.61
Acquisition due-diligence
costs - - 0.06 -
Adjustment to shares used in
calculating net income per
share - 0.03 0.02 0.05
--- ---- ---- ----
Non-GAAP net income
per share - diluted $0.08 $0.09 $0.23 $0.15
===== ===== ===== =====
Shares used in calculating net
income per share - diluted 50,286 47,802 49,954 43,270
====== ====== ====== ======
VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(Unaudited)
Q4 '08 Q4 '07 Growth % YTD Q4 '08 YTD Q4 '07 Growth %
------ ------ -------- ---------- ---------- --------
IVUS Systems:
United States $6.8 $5.8 17% $22.2 $16.8 32%
Japan 0.8 1.3 -35% 5.7 3.1 86%
Europe 2.9 1.5 92% 8.2 5.1 62%
Rest of World 0.8 0.2 288% 2.7 1.9 43%
--- --- --- --- --- ---
Total IVUS Systems $11.3 $8.8 28% $38.8 $26.9 44%
IVUS Disposables:
United States $14.3 $11.4 26% $52.0 $40.2 29%
Japan 11.3 10.1 12% 36.0 30.3 19%
Europe 4.1 3.8 9% 17.1 12.8 34%
Rest of World 0.7 0.6 17% 2.9 2.2 30%
--- --- --- --- --- ---
Total IVUS
Disposables $30.4 $25.9 18% $108.0 $85.5 26%
FM:
United States $3.1 $1.8 70% $9.4 $6.3 49%
Japan 0.4 0.3 18% 1.3 1.4 -8%
Europe 1.9 1.7 13% 7.0 5.8 21%
Rest of World 0.2 0.3 -33% 1.0 0.8 20%
--- --- --- --- --- ---
Total FM $5.6 $4.1 36% $18.7 $14.3 30%
Other 2.0 1.2 54% 6.0 3.9 56%
--- --- --- --- --- ---
Total $49.3 $40.0 23% $171.5 $130.6 31%
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Source: Volcano Corporation |
