Cyberonics Reports Fiscal 2014 Third Quarter Results

Net Product Sales of $68.2 million, 9.4% Increase

Continued Strong International Results

AspireSR™ Generator approved for sale in Europe

Feb 20, 2014, 07:00 ET from Cyberonics, Inc.

HOUSTON, Feb. 20, 2014 /PRNewswire/ -- Cyberonics, Inc. (NASDAQ: CYBX) today announced results for the quarter, and year-to-date, ended January 24, 2014. 

Quarterly highlights

Operating results for the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013, and other achievements, include:

  • Worldwide product net sales of $68.2 million, an increase of 9.4%; 
  • Worldwide unit sales of 3,409, an increase of 6.0%; 
  • Record international net sales of $15.2 million;
  • Record international unit sales of 1,150 units, a 19.8% increase, including the delivery of 100 units as part of a single contract, which accounted for 10.4% of the increase;
  • Income from operations increased to $21.1 million;
  • Income per diluted share of $0.51 compared with income per diluted share of $0.47;
  • Completion of enrollment in E-37 clinical study for the AspireSR generator;
  • Increased investments in both Imthera Medical, Inc. and cerbomed GmbH; and
  • CE Mark approval of the AspireSR generator in Europe.

Fiscal year-to-date highlights1

Operating results for fiscal 2014 year-to-date compared to fiscal 2013 year-to-date include:

  • Worldwide sales of $207.2 million, an increase of 11.4%;
  • Worldwide unit sales of 10,259, an increase of 8.0%;
  • Adjusted non-GAAP income from operations increased by 10.6% to $64.0 million;
  • Adjusted non-GAAP income per diluted share increased by 17.2% to $1.50;
  • Share repurchases of $57 million;
  • EU commercial readiness for the limited launch of AspireSR generator; and
  • Significant progress on the international manufacturing facility in Costa Rica.
  1. The financial and operating results for the thirty-nine weeks ended January 24, 2014 and January 25, 2013 include and exclude certain items for the purposes of non-GAAP comparisons. As discussed below under "Use of Non-GAAP Financial Measures," in this release, the company refers to and makes comparisons with certain non-GAAP financial measures including adjusted non-GAAP income from operations, and adjusted non-GAAP income per diluted share.  Investors should consider non-GAAP measures in addition to, and not as a substitute for or superior to, financial performance measures prepared in accordance with GAAP. Please refer to the attached non-GAAP reconciliation. Numbers may be affected by rounding.

Results and objectives

"In the third quarter of fiscal 2014, the Cyberonics' team delivered continued growth in net sales, operating income and income per diluted share," commented Dan Moore, Cyberonics' President and Chief Executive Officer.  "Although we achieved the highest third quarter net sales, operating and net income, and earnings per share in the company's history, we did not meet our global revenue expectations for the quarter.  International unit sales and revenue, even without the 100-unit sale, reached new records.  Europe continued to deliver double-digit growth and has demonstrated a consistent sales performance over the last three years. Latin America was also strong.

"U.S. sales of $53.0 million were the highest ever recorded in our third quarter, which is traditionally challenging.  This sales performance, however, was below our original expectations.  A combination of external factors, including weather-induced delays in operating room schedules, positioning of holidays in the quarter, and greater than normal turbulence in health insurance markets affected the last four weeks of the quarter in particular.  Despite these challenges, we are maintaining our fiscal year 2014 guidance for net sales in the range of $281 million to $285 million.

"During the third quarter," Mr. Moore continued, "we increased our investments in both Imthera, Inc. and cerbomed GmbH by $4 million and $1.3 million, respectively.  Both these companies are making solid progress toward their objectives.

"Last quarter, we announced the submission of the AspireSR generator for regulatory approval in Europe, and we are pleased to announce that approval has now been granted.  Training for our European sales team has been completed, and we expect to launch within the next few weeks.  Further, we have now completed enrollment in the first phase of our E-37 U.S. clinical study for the AspireSR generator and expect to begin discussions regarding next steps for U.S. approval with the Food and Drug Administration after a thorough review of all of the data generated from both E-36 and E-37.

"Product development work continued on both the Centro (formerly referred to as Relay) and ProGuardian platform technologies during the quarter. It now seems likely that regulatory submissions will occur in fiscal 2015.  We plan to determine next steps for the chronic heart failure program once the six-month follow-up results from the ANTHEM-HF study assessing Autonomic Regulation Therapy (ART™) are available in April 2014.  The clinical investigators expect to submit the study data in May for possible presentation at the European Society of Cardiology meeting in September," concluded Mr. Moore.

Stock Repurchase Update

During the recently completed quarter, Cyberonics repurchased 330,000 shares on the open market, leaving 930,000 shares available to be repurchased under the current authorization. This program is expected to be completed by the end of fiscal year 2015.

Fiscal 2014 guidance

Cyberonics is maintaining guidance for the following metrics in fiscal 2014:

  • Net sales are expected to be in the range of $281 million to $285 million.
  • Adjusted non-GAAP income from operations is expected to be in the range of $86 million to $88 million

The company is increasing its fiscal 2014 guidance for the following metrics:

  • Adjusted non-GAAP net income for fiscal 2014 is expected to be in the range from $55 million to $57 million.
  • Adjusted non-GAAP diluted earnings per share (EPS) is expected be in the range from $2.00 to $2.05.

Guidance for income from operations, net income and diluted earnings per share (EPS) was adjusted by $7.4 million, $4.8 million (net of tax) and $0.17 cents per share, respectively, for the litigation settlement recorded in the first quarter of fiscal 2014.

Additional details will be provided during today's conference call and in an investor presentation summarizing the company's third quarter results, which is available in the investor relations section of Cyberonics' corporate website at http://www.cyberonics.com.

Use of non-GAAP financial measures

In this press announcement, management has disclosed financial measurements that present financial information not in accordance with Generally Accepted Accounting Principles (GAAP).  These measurements are not a substitute for GAAP measurements, although company management uses these measurements as aids in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies.  Adjusted non-GAAP income from operations, adjusted non-GAAP net income and adjusted non-GAAP income per diluted share measure the income from operations, net income and income per diluted share of the company excluding unusual items.  Management uses and presents these measures because management believes that such adjustments facilitate an understanding of the financial impact of unusual items on the company's short- and long-term financial trends.  Management also uses adjusted non-GAAP items to forecast and to evaluate the operational performance of the company, as well as to compare results of current periods to prior periods on a consistent basis.  Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) measures the adjusted non-GAAP income from operations of the company and excludes the aforementioned items, as well as non-cash equity compensation and other income (expense) items.

Non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly-titled measures used by other companies.  Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

Please refer to the attached reconciliations between GAAP and non-GAAP financial measures.

Third Quarter Results Webcast and Conference Call Instructions

Cyberonics will host a conference call today, February 20, 2014, beginning at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to review its results of operations for the fiscal year 2014 third quarter, followed by a question and answer session.

The conference call will be available to interested parties through a live audio webcast in the Investor Relations section of Cyberonics' corporate website at http://www.cyberonics.com.  To listen to the conference call live by telephone, dial 877-638-4557 (if dialing from within the U.S.) or 914-495-8522 (if dialing from outside the U.S.).  The conference ID is 25516007. 

Within 24 hours of the webcast, a replay will be available under the "Events & Presentations" section of the Investor Relations portion of the Cyberonics website, where it will be archived and accessible for approximately 12 months.

About Cyberonics, Inc. and the VNS Therapy® System

Cyberonics, Inc. is a medical technology company with core expertise in neuromodulation.  The company developed and markets the VNS Therapy System, which is FDA-approved for the treatment of refractory epilepsy and treatment-resistant depression.  The VNS Therapy System uses an implanted medical device that delivers pulsed electrical signals to the vagus nerve.  Cyberonics offers the VNS Therapy System in selected markets worldwide.

Additional information on Cyberonics and the VNS Therapy System is available at www.cyberonics.com.

Safe harbor statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements can be identified by the use of forward-looking terminology, including "may," "believe," "will," "expect," "anticipate," "estimate," "plan," "intend," "forecast," or other similar words.  Statements contained in this press release are based on information presently available to us and assumptions that we believe to be reasonable.  We are not assuming any duty to update this information if those facts change or if we no longer believe the assumptions to be reasonable. Investors are cautioned that all such statements involve risks and uncertainties, including without limitation, statements concerning completing product development work, conducting and completing clinical studies, and applying for and obtaining regulatory approvals and financial guidance for fiscal 2014.  Our actual results may differ materially.  Important factors that may cause actual results to differ include, but are not limited to: continued market acceptance of VNS Therapy and sales of our products; the development and satisfactory completion of clinical trials and/or market test and/or regulatory approval of new products, including VNS Therapy for the treatment of other indications; satisfactory completion of the post-market registry required by the U.S. Food and Drug Administration as a condition of approval for the treatment-resistant depression indication; adverse changes in coverage or reimbursement amounts by third-parties; intellectual property protection and potential infringement claims; maintaining compliance with government regulations and obtaining necessary government approvals for new products and indications; product liability claims and potential litigation; reliance on single suppliers and manufacturers for certain components; the accuracy of management's estimates of future expenses and sales; the potential identification of material weaknesses in our internal controls over financial reporting; and other risks detailed from time to time in our filings with the Securities and Exchange Commission (SEC).  For a detailed discussion of these and other cautionary statements, please refer to our most recent filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 26, 2013 and our Quarterly Report on Form 10Q for the fiscal quarters ended July 26, 2013 and October 25, 2013.

Contact information Greg Browne, CFO Cyberonics, Inc. 100 Cyberonics Blvd. Houston, TX 77058 Main:  (281) 228-7262 Fax:  (281) 218-9332 ir@cyberonics.com

 

CYBERONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the Thirteen Weeks Ended

For the Thirty-Nine Weeks Ended

January 24, 2014

January 25, 2013

January 24, 2014

January 25, 2013

Net sales

$

68,191,414

$

62,700,033

$

207,164,890

$

185,976,849

Cost of sales

6,460,148

5,367,218

19,930,287

15,548,199

Gross profit

61,731,266

57,332,815

187,234,603

170,428,650

Operating expenses:

Selling, general and administrative

29,427,340

26,646,935

88,367,536

82,539,731

Research and development

11,201,876

10,244,322

34,830,490

30,006,041

Litigation settlement

-

-

7,442,847

-

Total operating expenses

40,629,216

36,891,257

130,640,873

112,545,772

Income from operations

21,102,050

20,441,558

56,593,730

57,882,878

Interest income

55,715

21,129

144,797

40,634

Interest expense

(16,619)

(12,271)

(16,778)

(101,043)

Other income (expense), net

(34,932)

(118,487)

(206,405)

(2,907,464)

Income before income taxes

21,106,214

20,331,929

56,515,344

54,915,005

Income tax expense

7,206,351

7,148,435

20,053,093

20,089,574

Net income

$

13,899,863

$

13,183,494

$

36,462,251

$

34,825,431

Basic income per share

$

0.52

$

0.48

$

1.34

$

1.26

Diluted income per share

$

0.51

$

0.47

$

1.32

$

1.24

Shares used in computing basic income per share

26,964,861

27,736,639

27,250,740

27,626,387

Shares used in computing diluted income per share

27,279,153

28,124,433

27,569,276

28,045,437

 

CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited except where indicated)

January 24, 2014

April 26, 2013

(Audited)

ASSETS

Current Assets

Cash and cash equivalents

$

91,600,036

$

120,708,572

Short-term investments

25,003,806

15,000,000

Accounts receivable, net

42,114,762

39,450,113

Inventories

18,083,321

17,718,454

Deferred tax assets

14,382,521

10,297,991

Other current assets

6,532,167

4,183,213

Total Current Assets

197,716,613

207,358,343

Property, plant and equipment, net

38,376,351

28,555,742

Intangible assets, net

11,949,952

9,219,999

Long-term investments

15,944,427

10,588,202

Deferred tax assets

4,555,927

7,825,286

Other assets

638,723

495,738

Total Assets

$

269,181,993

$

264,043,310

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payables and accrued liabilities

$

23,989,116

$

29,025,478

Total Current Liabilities

23,989,116

29,025,478

Long-term Liabilities

4,945,954

5,449,604

Total Liabilities

28,935,070

34,475,082

Total Stockholders' Equity

240,246,923

229,568,228

              Total Liabilities and Stockholders' Equity

$

269,181,993

$

264,043,310

 

CYBERONICS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Thirty-Nine Weeks Ended

January 24, 2014

January 25, 2013

Cash Flow From Operating Activities:

Net income

$

36,462,251

$

34,825,431

Non-cash items included in net income:

Depreciation

3,180,707

2,807,785

Amortization

969,047

633,229

Stock-based compensation

8,392,443

9,109,422

Deferred income tax

(1,053,779)

16,388,319

Deferred license revenue amortization

(1,467,869)

(1,120,476)

Impairment of investment

-

4,058,768

Gain on warrant liability

-

(1,325,574)

Other

27,994

154,629

Changes in operating assets and liabilities:

Accounts receivable, net

(2,255,045)

(6,225,989)

Inventories

(197,717)

(3,044,106)

Other current and non-current assets

(2,368,733)

722,709

Other current and non-current liabilities

(3,941,016)

(1,278,862)

Net cash provided by operating activities

37,748,283

55,705,285

Cash Flow From Investing Activities:

Short-term investments

(9,994,250)

(15,000,000)

Equity investments

(5,356,225)

(2,588,200)

Intangible asset purchases

(3,789,000)

(2,500,000)

Purchases of property, plant and equipment

(12,960,959)

(6,515,509)

Net cash used in investing activities

(32,100,434)

(26,603,709)

Cash Flow From Financing Activities:

Proceeds from exercise of options for common stock

8,283,999

8,969,626

Cash settlement of stock units

(936,115)

-

Purchase of treasury stock

(59,306,059)

(20,105,481)

Realized excess tax benefit

17,157,916

2,040,699

Net cash used in financing activities

(34,800,259)

(9,095,156)

Effect of exchange rate changes on cash and cash equivalents

43,874

(129,525)

Net increase (decrease) in cash and cash equivalents

(29,108,536)

19,876,895

Cash and cash equivalents at beginning of period

120,708,572

96,654,275

Cash and cash equivalents at end of period

$

91,600,036

$

116,531,170

 

 

RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES

(Unaudited)

The following tables set forth the reconciliation between U.S. GAAP and our non-GAAP financial measures for net income and diluted income per share (unaudited):

For the Thirteen Weeks Ended

For the Thirty-Nine Weeks Ended

January 24, 2014

January 25, 2013

January 24, 2014

January 25, 2013

Net income

$

13,899,863

$

13,183,494

$

36,462,251

$

34,825,431

Gain on warrants'  liability (1)

-

-

-

(1,325,574)

Impairment of investment (2)

-

-

-

2,472,601

Litigation settlement

-

-

4,776,075

-

Adjusted non-GAAP net income

$

13,899,863

$

13,183,494

$

41,238,326

$

35,972,458

Diluted income per share

$

0.51

$

0.47

$

1.32

$

1.24

Gain on warrants' liability (1)

-

-

-

(0.05)

Impairment of investment (2)

-

-

-

0.09

Litigation settlement

-

-

0.17

-

Adjusted non-GAAP diluted income per share (3)

$

0.51

$

0.47

$

1.50

$

1.28

(1)

Gain on warrants' liability with no tax effect.

(2)

The impairment relates to our investment in the convertible debt instrument of NeuroVista, net of tax.

(3)

Numbers may be affected by rounding.

The following table sets forth the reconciliation between income from operations and adjusted non-GAAP income from operations (unaudited):

For the Thirteen Weeks Ended

For the Thirty-Nine Weeks Ended

January 24, 2014

January 25, 2013

January 24, 2014

January 25, 2013

Income from operations

$

21,102,050

$

20,441,558

$

56,593,730

$

57,882,878

Litigation settlement

-

-

7,442,847

-

Adjusted non-GAAP income from operations

$

21,102,050

$

20,441,558

$

64,036,577

$

57,882,878

The following table sets forth the reconciliation between adjusted non-GAAP  net income and our non-GAAP financial measure for adjusted EBITDA (unaudited):

Adjusted non-GAAP net income

$

13,899,863

$

13,183,494

$

41,238,326

$

35,972,458

Interest (income) expense, net

(39,096)

(8,858)

(128,019)

60,409

Other expense, net

34,932

116,375

206,405

174,270

Depreciation and amortization

1,443,125

1,123,427

4,149,754

3,441,014

Equity based compensation

2,643,075

2,263,234

8,392,443

9,109,422

Income tax expense – adjusted for non-GAAP items

7,206,351

7,148,435

22,719,865

21,675,741

Adjusted EBITDA

$

25,188,250

$

23,826,107

$

76,578,774

$

70,433,314

 

SOURCE Cyberonics, Inc.



RELATED LINKS

http://www.cyberonics.com