Spectranetics Achieves Fourth Quarter Revenue Of $41.9 Million

COLORADO SPRINGS, Colo., Feb. 27, 2014 (GLOBE NEWSWIRE) -- The Spectranetics Corporation (Nasdaq:SPNC) today reported financial results for the quarter and year ended December 31, 2013. Highlights of the quarter (all compared with the quarter ended December 31, 2012) include:
  • Vascular Intervention revenue growth of 23%, led by U.S. peripheral atherectomy revenue growth of 35%
  • Lead Management revenue growth of 6% (5% constant currency1)
  • U.S. revenue increased 12% to $34.5 million; International revenue increased 25% to $7.4 million (22% constant currency)
  • Gross margin reached 75%, up from 73% a year ago

"In the fourth quarter, we extended our track record of double digit revenue growth through strong commercial and operational execution by our team," said President and Chief Executive Officer, Scott Drake. "We are pleased to have achieved the statistical endpoints of the EXCITE ISR adjunct analysis; we anticipate filing our 510(k) within the next 45 days. This is an important milestone toward achieving the in-stent restenosis indication and providing clinical data that changes clinical practice. We are executing on several compelling growth drivers across our business, including lead management market development, meaningful new product launches, pursuit of the ISR indication and expansion of our commercial footprint."

Revenue for the three months ended December 31, 2013 rose 14% to $41.9 million, from $36.8 million in the 2012 period. Vascular Intervention revenue increased 23% to $20.6 million, Lead Management revenue increased 6% (5% constant currency) to $16.3 million, and laser system, service and other revenue increased 8% to $5.1 million.

__________________

1Constant currency is a non-GAAP financial measure. See "Reconciliation of Non-GAAP Financial Measures" later in this release.

Geographically, revenue in the United States was $34.5 million, an increase of 12% from the three months ended December 31, 2012. International revenue totaled $7.4 million, an increase of 25% as reported (22% constant currency), from the three months ended December 31, 2012.

Net income for the three months ended December 31, 2013 was $883,000, or $0.02 per diluted share, compared with net income of $673,000, or $0.02 per diluted share, for the three months ended December 31, 2012. Adjusted EBITDA 2 was $4.6 million for the three months ended December 31, 2013 compared with $3.8 million for the three months ended December 31, 2012. Adjusted EBITDA provides for comparability between periods and represents an additional measure of the operating performance of the business.

Full Year 2013 Financial Results

Revenue for the year ended December 31, 2013 rose 13% to $158.8 million, from $140.3 million for the year ended December 31, 2012. Vascular Intervention revenue increased 12% to $75.6 million, Lead Management revenue increased 13% to $62.5 million, and laser system, service and other revenue increased 16% to $20.7 million.

Geographically, revenue in the United States was $130.1 million, an increase of 11% from the year ended December 31, 2012. International revenue totaled $28.7 million, an increase of 26% as reported (24% constant currency), from the year ended December 31, 2012.

Net loss for the year ended December 31, 2013 was $370,000, or a loss of $0.01 per diluted share, compared with net income of $2.2 million, or $0.06 per diluted share, for the year ended December 31, 2012. Adjusted EBITDA was $13.3 million for the year ended December 31, 2013 compared with $13.1 million for the year ended December 31, 2012.

2014 Outlook

Spectranetics management projects revenue for 2014 to be in the range of $177.5 to $180.0 million, an increase of 12% to 13% over 2013. No revenue is included in our outlook for mechanical tools or the ISR indication. The mechanical tools are pending FDA clearance, and the 510(k) application for the ISR indication will be submitted shortly.

Net loss for 2014 is expected to be in the range of $3.0 - $5.0 million, or $0.07 - $0.12 per share. The investment in the field sales team expansion will contribute to a net loss in the first half of 2014 projected to be in the range of $8.0 - $9.0 million.

The 2014 Adjusted EBITDA projection is anticipated to be in the range of $8.0 - $10.0 million in 2014, compared with Adjusted EBITDA of $11.2 million in 2013. The medical device tax is included in both periods.

_____________________________________

2Adjusted EBITDA is a non-GAAP financial measure. See "Reconciliation of Non-GAAP Financial Measures" later in this release.

Conference Call

Management will host an investment community conference call today beginning at 2:30 p.m. Mountain Time, 4:30 p.m. Eastern Time, to discuss these results and answer questions. Individuals interested in listening to the conference call may dial (877) 561-2747 for domestic callers, or (973) 409-9689 for international callers, or from the webcast on the investor relations section of the Company's Web site at: www.spectranetics.com. The webcast will be available on the Company's Web site for 14 days following the completion of the call.

About Spectranetics

Spectranetics develops, manufactures, markets and distributes single-use medical devices used in minimally invasive procedures within the cardiovascular system. The Company's products are sold in over 40 countries and are used to treat arterial blockages in the heart and legs, and the removal of pacemaker and defibrillator leads.

The Company's Vascular Intervention (VI) products include a range of laser catheters for ablation of blockages in arteries above and below the knee. The Company also markets support catheters to facilitate crossing of peripheral and coronary arterial blockages, and retrograde access and guidewire retrieval devices used in the treatment of peripheral arterial blockages, including chronic total occlusions. The Company markets aspiration and cardiac laser catheters to treat blockages in the heart.

The Lead Management (LM) product line includes excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads.

For more information, visit www.spectranetics.com

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. You can identify these statements because they do not relate strictly to historical or current facts. Such statements may include words such as "anticipate," "will," "estimate," "expect," "look forward," "strive," "project," "intend," "should," "plan," "believe," "hope," "enable," "potential," and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, clinical trials, regulatory or competitive environments, our intellectual property and product development. These forward-looking statements include, but are not limited to, statements regarding our expectation of continued growth and the reasons for that growth, growth rates, and 2014 outlook including projected revenue, net income and Adjusted EBITDA. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements and to note they speak only as of the date of this release. These risks and uncertainties may include market acceptance of excimer laser atherectomy technology and our lead removal products, increasing price and product competition, increased pressure on expense levels resulting from expanded sales, marketing, product development and clinical activities, uncertain success of our strategic direction, dependence on new product development, uncertain success of or delays in our clinical trials, adverse results in any ongoing legal proceeding, or any legal proceeding in which we may become involved, adverse impact to our business of the healthcare reform and related legislation or regulations, including changes in reimbursements, continued or worsening adverse conditions in the general domestic and global economic markets and continued volatility and disruption of the credit markets, which affects the ability of hospitals and other health care systems to obtain credit and may impede our access to capital, intellectual property claims of third parties, availability of inventory from suppliers, adverse outcome of FDA inspections, the receipt of FDA approval to market new products or applications and the timeliness of any approvals, market acceptance of new products or applications, product defects, ability to manufacture sufficient volumes to fulfill customer demand, availability of vendor-sourced components at reasonable prices, unexpected delays or costs associated with any planned improvements to our manufacturing processes, and share price volatility due to the initiation or cessation of coverage, or changes in ratings, by securities analysts. For a further list and description of such risks and uncertainties that could cause our actual results, performance or achievements to materially differ from any anticipated results, performance or achievements, please see our previously filed SEC reports, including those risks set forth in our 2012 Annual Report on Form 10-K. We disclaim any intention or obligation to update or revise any financial or other projections or other forward-looking statements, whether because of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most directly comparable GAAP measures for the respective periods, and an explanation of our use of these non-GAAP measures, can be found in "Reconciliation of Non-GAAP Financial Measures" immediately following the financial tables. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

-Financial tables follow-
THE SPECTRANETICS CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share data and percentages)
(unaudited)
         
  Three Months Ended December 31, Twelve Months Ended December 31,
  2013 2012 2013 2012
Revenue   $ 41,920  $ 36,751  $ 158,811  $ 140,285
Cost of products sold  10,359 9,815 41,356 37,927
Gross profit  31,561 26,936 117,455 102,358
Gross margin %  75% 73% 74% 73%
Operating expenses:        
Selling, general and administrative  23,661 20,967 91,750 82,254
Research, development and other technology  5,760 4,712 22,080 16,846
Medical device excise tax  570 2,138
Acquisition-related intangible asset amortization  245 901
Contingent consideration expense  229 867
Intangible asset impairment and change in contingent consideration liability, net  (675) (675)
Acquisition related costs  311 311
Total operating expenses  29,790 25,990 117,061 99,411
Operating income  1,771 946 394 2,947
Other (expense) income, net  (3) 2 16 13
Income before taxes  1,768 948 410 2,960
Income tax expense  885 275 780 734
Net income (loss)  $ 883 $ 673 $ (370) $ 2,226
         
Net income (loss) per common share:        
Basic   $ 0.02  $ 0.02  $ (0.01)  $ 0.06
Diluted  0.02 0.02  (0.01) 0.06
Weighted average shares outstanding:        
Basic  41,108 34,698 38,941 34,377
Diluted  42,741 36,299 38,941 35,767
 
THE SPECTRANETICS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
     
  12/31/2013 12/31/2012
ASSETS    
Current assets:    
Cash and cash equivalents   $ 128,395  $ 37,775
Accounts receivable, net  26,766 19,945
Inventories, net  9,476 9,288
Deferred income taxes, current portion, net  445 313
Other current assets  2,748 2,506
Total current assets  167,830 69,827
Property and equipment, net  28,281 27,006
Goodwill and intangible assets  20,455 13,316
Other assets  591 620
Total assets   $ 217,157  $ 110,769
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities   $ 23,225  $ 20,193
Non-current liabilities  3,932 1,879
Stockholders' equity  190,000 88,697
Total liabilities and stockholders' equity   $ 217,157  $ 110,769
 
THE SPECTRANETICS CORPORATION
Supplemental Financial Information
(Unaudited)
           
Financial Summary 2012 2013
(000's, except laser sales and installed base amounts) 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
           
Disposable products revenue:          
Vascular Intervention revenue   $ 16,684  $ 17,193  $ 18,897  $ 18,956  $ 20,555
Lead Management revenue  15,374 15,079 15,078 16,075 16,286
Total disposable products revenue  32,058 32,272 33,975 35,031 36,841
           
Service and other revenue  2,757 2,878 2,888 2,851 2,795
           
Laser revenue:          
Equipment sales  772 1,381 1,395 906 1,153
Rental fees  1,164 1,144 1,195 975 1,131
Total laser revenue  1,936 2,525 2,590 1,881 2,284
           
Total revenue  36,751 37,675 39,453 39,763 41,920
           
Net income (loss)  673 (959) (728) 434 883
Adjusted EBITDA (1)  3,766 1,812 2,656 4,321 4,554
           
Cash flow generated by (used in) operating activities  5,703 (6,377) 2,048 3,513 5,029
Total cash and cash equivalents at end of quarter  37,775 25,228 119,356 123,570 128,395
           
Laser sales summary:          
Laser sales from inventory  6 8 9 9 5
Laser sales from evaluation/rental units  7 5 5
Total laser sales  6 15 14 9 10
           
(1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to the non-GAAP reconciliation tables following this table for the reconciliation to the most comparable GAAP measure.
           
Worldwide Installed Base Summary:          
Laser sales from inventory  6 8 9 9 5
Rental placements  30 20 28 27 29
Evaluation placements  6 11 11 4 9
Laser placements during quarter  42 39 48 40 43
Buy-backs/returns during quarter  (24) (25) (23) (26) (18)
Net laser placements during quarter  18 14 25 14 25
Total lasers placed at end of quarter  1,066 1,080 1,105 1,119 1,144

Reconciliation of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures in this release. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures for the respective periods can be found in the tables below. An explanation of the manner in which our management uses these non-GAAP measures to conduct and evaluate our business and the reasons management believes these non-GAAP measures provide useful information to investors are provided following the reconciliation tables.
THE SPECTRANETICS CORPORATION
Reconciliation of revenue by geography to non-GAAP revenue by geography
on a constant currency basis
(in thousands, except percentages)
(unaudited)
             
  Three Months Ended    
  December 31, 2013 December 31, 2012 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
United States   $ 34,493 $ —   $ 34,493  $ 30,819 12% 12%
International  7,427 (185) 7,242 5,932 25% 22%
Total revenue   $ 41,920  $ (185)  $ 41,735  $ 36,751 14% 14%
             
             
  Twelve Months Ended      
  December 31, 2013 December 31, 2012 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
United States   $ 130,126 $ —   $ 130,126  $ 117,436 11% 11%
International  28,685 (370) 28,315 22,849 26% 24%
Total revenue   $ 158,811  $ (370)  $ 158,441  $ 140,285 13% 13%
 
Reconciliation of revenue by product line to non-GAAP revenue by product line
on a constant currency basis (in thousands, except percentages) (unaudited)
       
  Three Months Ended    
  December 31, 2013 December 31, 2012 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
Vascular Intervention   $ 20,555  $ (66)  $ 20,489  $ 16,684 23% 23%
Lead Management  16,286 (129) 16,157 15,374 6% 5%
Laser System, Service & Other  5,079 10 5,089 4,693 8% 8%
Total revenue   $ 41,920  $ (185)  $ 41,735  $ 36,751 14% 14%
             
  Twelve Months Ended    
  December 31, 2013 December 31, 2012 Change
  Revenue, as reported Foreign exchange impact as compared to prior period Revenue on a constant currency basis Revenue, as reported As reported Constant currency basis
Vascular Intervention   $ 75,601  $ (85)  $ 75,516  $ 67,336 12% 12%
Lead Management  62,518 (263) 62,255 55,186 13% 13%
Laser System, Service & Other  20,692 (22) 20,670 17,763 16% 16%
Total revenue   $ 158,811  $ (370)  $ 158,441  $ 140,285 13% 13%
 
THE SPECTRANETICS CORPORATION
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(in thousands)
(unaudited)
           
           
  December 31, 2012 March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013
Net income (loss), as reported   $ 673  $ (959)  $ (728)  $ 434  $ 883
Income tax expense (benefit)  275 (575) 64 406 885
Interest expense (income), net  4 (6) 1 (2)
Depreciation and amortization  2,507 2,454 2,369 2,463 2,419
Acquisition-related intangible asset amortization (1)  164 246 246 245
EBITDA  3,455 1,088 1,945 3,550 4,430
           
Medical device excise tax (2)  522 509 537 570
Contingent consideration expense (1)  202 202 234 229
Intangible asset impairment and change in contingent consideration liability, net (1)  (675)
Acquisition-related costs (3)  311
Adjusted EBITDA   $ 3,766  $ 1,812  $ 2,656  $ 4,321  $ 4,554
 
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(in thousands)
(unaudited)
     
  Twelve Months Ended
  December 31, 2013 December 31, 2012
Net (loss) income, as reported   $ (370)  $ 2,226
Income tax expense  780 734
Interest income, net  (3) (8)
Depreciation and amortization  9,705 9,854
Acquisition-related intangible asset amortization (1)  901
EBITDA  11,013 12,806
     
Medical device excise tax (2)  2,138
Contingent consideration expense (1)  867
Intangible asset impairment and change in contingent consideration liability, net (1)  (675)
Acquisition-related costs (3)  311
Adjusted EBITDA   $ 13,343  $ 13,117
 
Reconciliation of 2014 Projected Net Loss and 2013 Net Loss to EBITDA
and Adjusted EBITDA
(in thousands)
(unaudited)
       
  Twelve Months Ended
  Projected Range  
  December 31, 2014 December 31, 2014 December 31, 2013
Net loss, GAAP   $ (5,000)  $ (3,000)  $ (370)
Income tax expense  900 900 780
Interest income, net  (3)
Depreciation and amortization  11,300 11,300 9,705
Acquisition-related intangible asset amortization (1)  600 600 901
EBITDA  7,800 9,800 11,013
       
Contingent consideration expense (1)  200 200 867
Intangible asset impairment and change in contingent consideration liability, net (1)  (675)
Adjusted EBITDA   $ 8,000  $ 10,000  $ 11,205
       
__________________      
       
1)  Acquisition-related intangible asset amortization relates to intangible assets acquired from Upstream Peripheral Technologies Ltd. ("Upstream") in January 2013. Contingent consideration expense represents the accretion of the estimated contingent consideration liability related to amounts payable to Upstream in 2014, 2015 and 2016, primarily based on sales of the products acquired. At the acquisition date, we recorded a contingent consideration liability, representing the estimated fair value of the future contingent payments we expected to make at that time. As of December 31, 2013, based on our assessment that we are not likely to generate the level of revenues from sales of the Upstream products that we anticipated at the acquisition date, we remeasured the contingent consideration liability to its fair value and reduced it by approximately $5.2 million. As a result of lower projected revenues for these products, we reviewed the recoverability of the intangible assets acquired. This review resulted in an impairment charge of approximately $4.5 million related to those assets, based on their revised fair value using current cash flow assumptions. Although we have lowered our revenue expectations, we continue to expect these products to have a positive effect on future profitability. Further, we believe these products are important niche products that strategically complement and complete our crossing solutions chronic total occlusion (CTO) portfolio.
       
2)  The medical device excise tax, which was included as part of the Patient Protection and Affordable Care Act and which took effect on January 1, 2013, represents 2.3% of a majority of our U.S. sales. During 2013, the medical device excise tax is shown in the reconciliation of net income to Adjusted EBITDA to provide for comparability with 2012 results. Beginning in 2014, we will no longer add back the medical device excise tax in our calculation of Adjusted EBITDA.
       
3)  In the fourth quarter of 2012, we incurred $0.3 million in legal and other costs related to acquiring certain product lines from Upstream. Further information regarding this matter is in our 2012 Annual Report on Form 10-K.

Management uses the non-GAAP financial measures as supplemental measures to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used in allocating resources and evaluate our performance period over period and in relation to our competitors' operating results.

The impact of foreign exchange rates is highly variable and difficult to predict. We use a constant currency basis to show the impact from foreign exchange rates on current period revenue compared to prior period revenue using the prior period's foreign exchange rates. In order to properly understand the underlying business trends and performance of our ongoing operations, we believe that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from our revenue.

We believe that presenting the non-GAAP financial measures used in this release provides investors greater transparency to the information used by our management for financial and operational decision-making and allows investors to see our results "through the eyes" of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by management to evaluate and measure such performance.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Some limitations associated with using these non-GAAP financial measures are provided below:
  • Management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures used.  
  • Depreciation and amortization expense, while not requiring cash settlement, are ongoing and recurring expenses and have a material impact on GAAP net income and reflect economic costs to us not reflected in Adjusted EBITDA. The intangible asset impairment, while not requiring cash settlement, reflects an economic cost to us not reflected in Adjusted EBITDA.  
  • Items such as the contingent consideration expense, acquisition-related costs, and the medical device excise tax excluded from Adjusted EBITDA can have a material impact on cash flows, GAAP net income, and net income per share and reflect economic costs to us not reflected in Adjusted EBITDA.  
  • Revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of changes in foreign currency exchange rates, which may have a material impact on GAAP revenue.  
  • Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
CONTACT: COMPANY CONTACT         The Spectranetics Corporation         Guy Childs, Chief Financial Officer         (719) 633-8333                  INVESTOR CONTACT         Westwicke Partners         Lynn Pieper         (415) 202-5678         lynn.pieper@westwicke.com

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