Volcano Reports 22
Percent Increase in Third Quarter Revenues
Company Experiences Strong
Growth Across Core Businesses
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Three of Volcano's
intravascular products: OCT, IVUS and FFR |
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November 5, 2009 -- San
Diego -- Volcano Corporation (Nasdaq: VOLC), a leader in the development,
manufacture and sales of products for the diagnosis and treatment
of coronary and peripheral artery disease, today reported revenues
of $53.9 million for the third quarter of fiscal 2009.
The results for the quarter ended September 30, 2009, represent
an increase of 22 percent over revenues of $44.1 million in the
third quarter of 2008. Revenues for the third quarter of 2009
include $4.6 million from Axsun Technologies, Inc., which Volcano
acquired at the end of 2008, and for which the company recorded
no revenues in the third quarter a year ago. |
For the third quarter of 2009, the company reported a GAAP net loss of $4.0 million, or $0.08 per share, versus GAAP net income of $744,000, or $0.01 per diluted share, in the third quarter of 2008. Weighted average shares for the third quarter of 2009 were 48.5 million.
Excluding stock-based compensation expense of $2.6 million and commissions of $1.4 million paid to a former distributor related to the company's transition to a direct sales initiative in Japan, the company reported non-GAAP net income of $7,000, or $0.00 per diluted share. In the third quarter of 2008, excluding stock-based compensation expense of $2.5 million, the company reported non-GAAP net income of $3.3 million, or $0.06 per diluted share. A reconciliation of the company's GAAP to non-GAAP results is included below.
For the first nine months of 2009, Volcano reported revenues of $156.9 million, a 28 percent increase over revenues of $122.2 million in the same period a year ago. Revenues for the first nine months of 2009 include $12.2 million from Axsun. The company reported a GAAP net loss of $16.9 million, or $0.35 per share, compared with a GAAP net loss of $15.1 million, or $0.32 per share, in the same period year ago. Excluding stock-based compensation expense of $8.2 million and the aforementioned commissions of $1.4 million, Volcano reported a non-GAAP net loss of $7.3 million, or $0.15 per share, in the first nine months of 2009. Excluding in-process research and development costs of $12.4 million related to the Novelis and CardioSpectra transactions, $2.9 million in due diligence, legal and accounting expenses related to an acquisition that was not consummated, and stock-based
compensation expense of $7.0 million, Volcano reported non-GAAP net income of $7.2 million, or $0.14 per diluted share, in the first nine months of 2008.
"In addition to experiencing a very solid financial performance during the quarter, we completed our transition from our distributor relationship with Goodman to a direct sales effort in Japan and had new data demonstrating the value of our offerings presented at the recent Transcatheter Cardiovascular Therapeutics (TCT) meeting," said
Scott Huennekens, president and chief executive officer. "During the quarter, our core intravascular ultrasound (IVUS) disposable sales increased 15 percent year-over-year, including 22 percent in Japan and 16 percent in the U.S. Our total functional measurement (FM) business increased 53 percent, led by year-over-year growth of more than75 percent in both the U.S. and Europe," Huennekens
noted. "In Japan," he continued, "we
have successfully completed our transition program with Goodman
and converted all of their more than 400 accounts. We are also
about halfway through our program to transition customers there
to our s5 family of IVUS consoles. "Data from the key PROSPECT and FAME presentations at TCT demonstrated the value of our IVUS and FM offerings by providing evidence that diagnostic angiography alone is not enough and that the use of our devices can not only enhance patient care, but also have a meaningful impact on the cost of healthcare. We believe this data will help fuel further adoption of our current and future products," Huennekens
concluded.
2009 Guidance
The company reconfirmed prior
guidance for fiscal 2009 and continues to expect revenues for
fiscal 2009 will be in the range of $218-$223 million,
or an increase of 27-30 percent over revenues in 2008. The company continues to expect gross
margin for the full year will be in the range of 59-60 percent, including
additional depreciation of approximately $775,000 through the balance of
the year related to the distributor transition in Japan. Operating expenses
continue to be expected in the range of 67-69 percent, including stock-based
compensation expense of approximately $12.0 million, intangible amortization
of approximately $4.2 million and approximately $3.5 million in Goodman
commissions. The outlook for operating expenses reflects increased spending
in Japan, the expansion of sales and marketing programs in other geographies,
G&A to support the growth of the company and litigation-related expenses.
The company also expects a modest increase in research and development
spending to fund product development programs, clinical trials and regulatory
activities. The company continues to expect to report a GAAP net loss of $0.38-$0.43 per share. Excluding stock-based compensation expense of approximately $12.0 million and Goodman commissions of approximately $3.5 million, the company expects to report a net loss of $0.06-$0.11 per share. The company further noted that as previously reported, additional payments would be due to former CardioSpectra stockholders if one of the specific milestones in the acquisition agreement is met by the end of fiscal 2009 and the company would be required to make a milestone payment of approximately $11.0 million and record a one-time charge to in-process research and development. The impact of this charge, if it were to occur, would increase expectations for the range of loss per share from $0.38-$0.43 per share to $0.61-$0.66 per share. Weighted average shares outstanding at year-end 2009 are expected to
be approximately 48.4 million basic shares and 50.0 million diluted shares.
Conference Call Information
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) 457-2658,
passcode 2641790, or via the company's website at http://www.volcanocorp.com. Please dial in or access the webcast 10-15 minutes prior to the beginning of the call. A replay of the conference call will be available through November 12, at (719) 457-0820, passcode 2641790, and via the company's website.
About Volcano Corporation
Volcano Corporation (NASDAQ:
VOLC) offers a broad suite of devices designed to facilitate endovascular
procedures, enhance the diagnosis of vascular and structural heart disease
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(R) IVUS tissue characterization
and ChromaFlo(R). Volcano also provides functional measurement (FM) consoles
and single-use pressure and flow guide wires and is developing a line
of ultra-high resolution Optical Coherence Tomography (OCT) and Forward-Looking
IVUS systems and catheters. Currently more than 4,700 Volcano IVUS and
FM systems are installed worldwide, and more than half of Volcano's revenues
are derived from outside the United States. Through its wholly-owned
subsidiary, Axsun Technologies, Volcano also develops and manufactures
optical monitors, lasers and optical engines used in telecommunications,
spectroscopy and other industrial applications. These products are sold
to a variety of customers, including Nokia Siemens, Ericsson, Alcatel-Lucent
and HuaWei Technologies. For more information, visit the company's website
at http://www.volcanocorp.com.
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 factors and circumstances that vary in frequency
and/or impact on continuing operations. Our management believes that these
items are not reflective of our core operating activities and should be
excluded when comparing our current operating results with those of prior
periods, including in-process research and development in the second quarter
of 2008 related to the costs associated with the May 2008 acquisition of
Novelis, Inc., and the December 2007 acquisition of CardioSpectra, Inc.,
the acquisition due diligence costs incurred in the first quarter of 2008
related to a proposed acquisition that was not consummated and the commissions
paid under the Distribution Termination Agreement related to our termination
of a distributor relationship with Goodman Co., Ltd. in July 2009. In addition,
stock-based compensation is a non-cash expense. Finally, our management
uses results of operations before certain charges to evaluate the operational
performance of the company and as a basis for strategic planning and for
forecasting and planning future periods. 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 those 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 and are encouraged to review the related GAAP financial measures
and the reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measure as detailed below. 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 press 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 2009, market adoption
of the company's technology, the impact of clinical and other technical data,
the timing and impact of the company's transition to a direct sales force
in Japan, including impact on revenue, expenses and income, growth strategies,
achievement of product development milestones, market development and product
sales. 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 are made, or to reflect the occurrence of unanticipated
events.
VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2009 2008
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $48,512 $100,949
Short-term available-for-sale investments 80,308 48,941
Accounts receivable, net 38,923 41,795
Inventories 36,457 28,936
Prepaid expenses and other current assets 5,492 5,869
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Total current assets 209,692 226,490
Restricted cash 553 327
Property and equipment, net 44,752 30,007
Intangible assets, net 12,624 15,636
Goodwill 931 842
Other non-current assets 2,041 2,177
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$270,593 $275,479
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $15,532 $14,867
Accrued compensation 12,841 12,690
Accrued expenses and other current liabilities 9,737 10,745
Deferred revenues 4,913 4,833
Short-term debt - 151
Current maturities of long-term debt 40 57
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Total current liabilities 43,063 43,343
Long-term debt 9 34
Deferred revenues 2,028 1,914
Other 1,110 456
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Total liabilities 46,210 45,747
Stockholders' equity 224,383 229,732
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$270,593 $275,479
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VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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2009 2008 2009 2008
---- ---- ---- ----
Revenues $53,852 $44,118 $156,853 $122,242
Cost of revenues 21,778 16,581 64,913 45,915
------ ------ ------ ------
Gross profit 32,074 27,537 91,940 76,327
Operating expenses:
Selling, general and
administrative 28,272 19,546 79,805 62,405
Research and development 9,181 6,879 27,816 18,823
In-process research and
development - - - 12,407
Amortization of intangibles 1,058 786 3,163 2,337
----- --- ----- -----
Total operating expenses 38,511 27,211 110,784 95,972
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Operating (loss) income (6,437) 326 (18,844) (19,645)
Interest income 142 1,109 640 4,206
Interest expense (1) (2) (4) (8)
Exchange rate gain (loss) 2,419 (441) 2,162 1,091
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(Loss) income before provision
for income taxes (3,877) 992 (16,046) (14,356)
Provision for income taxes 121 248 833 707
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Net (loss) income $(3,998) $744 $(16,879) $(15,063)
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Net (loss) income per share:
Basic $(0.08) $0.02 $(0.35) $(0.32)
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Diluted $(0.08) $0.01 $(0.35) $(0.32)
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Shares used in calculating net
loss per share:
Basic 48,506 47,456 48,293 47,236
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Diluted 48,506 50,323 48,293 47,236
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VOLCANO CORPORATION
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
(in thousands, except per share data)
(Unaudited)
Three Nine
Months Ended Months Ended
September 30, September 30,
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2009 2008 2009 2008
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GAAP operating (loss) income $(6,437) $326 $(18,844) $(19,645)
Stock-based compensation 2,597 2,513 8,162 6,997
In-process research and
development - - - 12,407
Acquisition due-diligence
costs - - - 2,878
Commissions paid under
Distributor Termination
Agreement 1,408 - 1,408 -
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Non-GAAP operating (loss)
income $(2,432) $2,839 $(9,274) $2,637
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GAAP net (loss) income $(3,998) $744 $(16,879) $(15,063)
Stock-based compensation 2,597 2,513 8,162 6,997
In-process research and
development - - - 12,407
Acquisition due-diligence
costs - - - 2,878
Commissions paid under
Distributor Termination
Agreement 1,408 - 1,408 -
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Non-GAAP net income (loss) $7 $3,257 $(7,309) $7,219
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GAAP net (loss) income per
share-basic $(0.08) $0.02 $(0.35) $(0.32)
Stock-based compensation 0.05 0.05 0.17 0.15
In-process research and
development - - - 0.26
Acquisition due-diligence
costs - - - 0.06
Commissions paid under
Distributor Termination
Agreement 0.03 - 0.03 -
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Non-GAAP net income (loss) per
share-basic $0.00 $0.07 $(0.15) $0.15
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Shares used in calculating net
income (loss) per share-
basic 48,506 47,456 48,293 47,236
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GAAP net (loss) income per
share-diluted $(0.08) $0.01 $(0.35) $(0.32)
Stock-based compensation 0.05 0.05 0.17 0.14
In-process research and
development - - - 0.25
Acquisition due-diligence
costs - - - 0.06
Commissions paid under
Distributor Termination
Agreement 0.03 - 0.03 -
Adjustment to shares used in
calculating net income per
share - - - 0.01
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Non-GAAP net income (loss) per
share-diluted $0.00 $0.06 $(0.15) $0.14
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Shares used in calculating net
income (loss) per share-
diluted 50,599 50,323 48,293 49,859
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VOLCANO CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FORWARD LOOKING GUIDANCE
(in thousands, except per share data)
(Unaudited)
2009
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Guidance Range
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From To
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GAAP net loss per share-basic
and diluted $(0.38) $(0.43)
Stock-based compensation 0.25 0.25
Commissions paid under
Distributor Termination
Agreement 0.07 0.07
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Non-GAAP net loss per share-
basic and diluted $(0.06) $(0.11)
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Shares used in calculating net
loss per share-basic and
diluted 48,400 48,400
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VOLCANO CORPORATION
REVENUE SUMMARY
(in millions)
(Unaudited)
Three Nine
months ended Percentage months ended Percentage
September 30, Change September 30, Change
------------- ----------- ------------- -----------
2008 2008
to to
2009 2008 2009 2009 2008 2009
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Medical segment:
IVUS systems:
United
States $5.6 $5.6 1% $16.7 $15.3 9%
Japan 0.1 2.5 (94) 1.5 4.9 (70)
Europe 2.1 1.8 14 5.8 5.4 9
Rest of
world 0.6 0.7 (15) 2.1 1.9 9
--- --- --- ---
Total IVUS
systems $8.4 $10.6 (20) $26.1 $27.5 (5)
IVUS disposables:
United
States $15.1 $13.0 16% $44.4 $37.6 18%
Japan 10.8 8.9 22 31.8 24.7 29
Europe 4.6 4.6 0 13.6 13.0 4
Rest of
world 0.8 0.7 10 2.4 2.2 9
--- --- --- ---
Total IVUS
disposables $31.3 $27.2 15 $92.2 $77.5 19
FM:
United
States $4.1 $2.3 76% $11.7 $6.3 86%
Japan 0.2 0.5 (64) 0.9 0.9 (3)
Europe 3.1 1.7 77 7.7 5.1 51
Rest of
world 0.2 0.4 (41) 0.9 0.8 6
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Total FM $7.6 $4.9 53 $21.2 $13.1 61
Other 2.4 1.4 67% 6.2 4.1 50%
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Sub-total
medical
segment $49.7 $44.1 13 $145.7 $122.2 19
Telecom segment 4.2 - - 11.2 - -
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Total $53.9 $44.1 22 $156.9 $122.2 28
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Source: Volcano
Corporation
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