NxStage Medical, Inc. Q1 2010 Earnings Call Transcript

NxStage Medical, Inc. Q1 2010 Earnings Call Transcript
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NxStage Medical, Inc. (NXTM)

Q1 2010 Earnings Call

May 5, 2010 09:00 am ET

Executives

Kristen Sheppard - VP, IR

Jeff Burbank - President & CEO

Robert Brown - CFO

Analyst

s

Joshua Zable - Natixis

Bill Plovanic - Canaccord Adams

Ben Andrew - William Blair

Kim Gailun - JPMorgan

Suraj Kalia - Rodman & Renshaw

Bill Plovanic - Canaccord Adams

Kevin Ellich - RBC Capital Markets

Presentation

Operator

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Good day, ladies and gentlemen and welcome to the NxStage Medical First Quarter 2010 Financial Results Conference Call. My name is Gina and I will be your operator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I’d now like to turn the presentation over to your host for today’s call Miss Kirsten Sheppard with NxStage Medical. Please go ahead.

Kirsten Sheppard

Thank you and good morning. Welcome to NxStage Medical’s first quarter 2010 conference call. With me here today are Jeff Burbank, NxStage’s CEO, and Robert Brown our CFO.

For your convenience a replay of this call will be available shortly after the conclusion for two weeks. In addition, the press release for the first quarter and recording of this call will be archived on our website under the Investor information section.

Before starting I would like to remind you that statements, we make on this call which are not purely historical regarding the company’s or our intentions, beliefs, expectations and strategies for the future are forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements may include topics such as the results of our operations, growth of the home and more frequent hemodialysis market in general, market adoption and the demand for our products. Our expectations regarding cash flow and relationships with key customers leads us to the expected impact of current economic conditions on our business anticipated improvements in the operating efficiencies, gross margins, product quality, cash use and financial guidance for the future.

Because such statements deal with future events they are subject to various risks and uncertainties and actual results may differ materially from these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our SEC filings including our annual report of Form 10-K for the year ended December 31, 2009.

In addition, any forward-looking statements made on this call represents the company’s views only as of today and should not be relied upon as representing our views as of subsequent dates.

Future events and developments may cause these expectations to change and while we may like to update forward-looking statements at some point in the future, the company disclaims any obligation to do so and therefore you should not rely on these forward-looking statements as representing our views on any dates subsequent to today.

Now, I’d like to hand the call over to our CEO, Jeff Burbank.

Jeff Burbank

Thank you, Kirsten. Good morning everyone. We had a strong start to 2010 with solid performance in all three of our markets. First quarter revenues of 40.4 million increased 20% from the prior year and came in essentially flat with Q4, which beat our expectations for a lower quarter.

In additional Home continued to show strong growth increasing 33% over the prior year period and 9% sequentially. I’ll go into detailed results in each of our three markets shortly. We are pleased with how we are able to keep driving improvements in our financial and operating fundamentals. Gross margins improved to 29%, compared to 21% in the first quarter of 2009, and 28% in the fourth quarter. This continues our goal to make between a 100 and 300 basis point improvement each quarter.

Our net loss narrowed to 9 million and our adjusted EBITDA loss was 1.3 million, both at the better end of our guidance. Similar to last quarter, cash flow benefited from our success in selling previously rented System One equipment to customers. We have been more successful than we planned with these sales, now more than half of our patients are on own versus rented machines as a result of our execution on machine sales as well as good expense management and gross margin improvements. We use less cash for the quarter than expected. While we still have a lot of work to do we are confirming our outlook for 2010.

We remain confident that we are well positioned to deliver continued sequential improvements in our business fundamentals. We also remain focused on achieving our goal of breakeven adjusted EBITDA for the second quarter of 2010, and believe we are on track to meet or exceed our goal of breakeven cash flow two to three quarters after that.

Now let’s turn to performance within our three markets. I’ll start with the home; strength in the home was driven by systematic execution against our four key drivers, going deep, clinical data, product enhancements and reimbursement. In addition many of the positive developments we highlighted in Q4 continued into Q1.

First on our go deep strategy, we continue to see performance improvement in Q1, this carry through our metrics, centers with greater than 10 patients grew 12% sequentially and 39% over 2009.

Centers with greater than 20 patients grew 3% sequentially and 61% over 2009. We continue to see increases in market where we have greater than 5% penetration and lastly we use some new flexibility in added centers areas where we thought we were underserved.

Second, we had continued success in leveraging our clinical data more specifically our FREEDOM results. To date our FREEDOM study is demonstrating meaningful data regarding the clinical and quality life benefits possible with daily home hemodialysis using NxStage System One. This includes 30% reduction in depressive symptoms as measured by the back depression inventory. Greater than 85% reduction in recovery tie, that translates the one waking day per week or 52 days per year.

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