EndoChoice Announces Third Quarter 2015 Financial Results

05 Nov, 2015, 07:00 ET from EndoChoice Holdings, Inc.

ALPHARETTA, Ga., Nov. 5, 2015 /PRNewswire/ -- EndoChoice Holdings, Inc. (NYSE:  GI) announced today financial results for the third quarter 2015.

Highlights

  • Total revenue of $18.4 million, up 30% year-over-year (32% in constant currency)
  • Installed base of Fuse®  now exceeds 100 systems
  • Pathology revenue accelerating; 23% growth in specimens processed and 8% growth in number of customers year-over-year
  • International revenue up 188% year-over-year, now 12% of total revenue compared to 5% in Q3 2014
  • Updated full year 2015 financial guidance

Mark Gilreath, Founder and Chief Executive Officer of EndoChoice, said, "We delivered strong results in the third quarter, with total revenue up 30%, a growing Fuse installed base that surpassed 100 units, strong trends in our Pathology business and robust growth in our international territories. Fuse continues to take share from larger competitors, as physicians are increasingly recognizing the benefits of its unique 330 degree view and published data demonstrating 69% more polyps detected than standard 170 degree forward viewing scopes. During the quarter we continued to expand our sales and marketing team, with a goal of reaching 70 sales territories, up from 50, by year-end. As we expand this presence, realize the benefits of a larger installed base, and as the territory managers hired over the past four quarters ramp in productivity, we are confident our market share gains will accelerate as we move into 2016."

David Gill, Chief Financial Officer of EndoChoice, added, "We made continued progress toward profitability in the third quarter, with increased leverage across all expense categories, which declined both in absolute dollars and as a percent of revenues from the second quarter."

Financial Review 
Total revenue for the third quarter 2015 was $18.4 million, compared to $14.2 million in the third quarter 2014, an increase of 30% as reported and an increase of 32% on a constant currency basis. Foreign currency exchange rates negatively impacted third quarter 2015 reported revenue by $0.4 million. Third quarter 2015 revenue growth was driven by Fuse system shipments and strong growth in single use products and pathology revenues. Third quarter 2015 total revenue consisted of $5.6 million of Imaging revenue, $9.1 million of Single-Use Product revenue, and $3.7 million of Pathology revenue. This compares to third quarter 2014 total revenue, which consisted of $2.3 million of Imaging revenue, $8.5 million of Single-Use Product revenue, and $3.4 million of Pathology revenue.

Gross profit was $6.1 million, or 33.4% of revenue, for the third quarter 2015, compared to gross profit of $5.8 million, or 41% of revenue, for the third quarter 2014. On a sequential basis, gross margin decreased almost 2% from 35% in the second quarter 2015 due to fewer Fuse unit sales and decreased leverage of fixed manufacturing costs. Operating expenses for the third quarter 2015 were $16.6 million, compared to $17.5 million for the third quarter 2014, a decrease of 5%. On a sequential basis operating expenses declined $4.8 million from $21.4 million primarily due to lower non-cash stock compensation expenses.

Net loss for the third quarter 2015 was $11.6 million, or ($0.47) per share, compared to a net loss of $14.0 million for the third quarter 2014, or ($1.16) per share. Weighted average basic shares outstanding were 24.7 million for the third quarter 2015.

On a non-GAAP basis, the Company reported Adjusted EBITDA of ($7.3) million, or (40%) of revenue, for the third quarter 2015, compared to ($10.4) million, or (73%) of revenue, for the third quarter 2014 and ($9.6) million or (51%) of revenue for the second quarter 2015.  Cash, cash equivalents and investments were $102.7 million as of September 30, 2015. 

Financial Guidance 
The Company is updating its financial guidance for full year 2015, as follows:

  • Total revenue in the range of $72 million to $74 million;
  • Gross margin in the range of 33% to 34%;
  • Operating expenses in the range of $75 million to $76 million;
  • Net loss in the range of ($60) million to ($61) million, or to ($2.85) to ($2.90) per share assuming 21,080,000 weighted average shares outstanding for the year; and
  • Adjusted EBITDA in the range of ($37) million to ($38) million.

Additional information regarding EndoChoice's results can be found by visiting the Investor Relations section of EndoChoice's website at http://investor.endochoice.com.

Conference Call 
EndoChoice will hold a conference call on Thursday, November 5, 2015 at 9:00 a.m. ET to discuss the results. The dial-in numbers are (866) 328-5344 for domestic callers and (412) 317-5469 for international callers. A live webcast of the conference call will be available on the investor relations section of the Company's website at http://investor.endochoice.com.  

A replay of the call will be available starting on November 5, 2015 through November 13, 2015.  To access the replay, dial (877) 344-7529 for domestic and (412) 317-0088 for international callers, with the replay access code 10074102. The webcast replay will be available in the investor relations section of the Company's website for 90 days following the completion of the call.

Forward-Looking Statement 
This press release contains "forward-looking statements" as defined under U.S. federal securities laws, including, among other things, statements about our operations and financial performance. Examples of forward-looking statements include, but are not limited to, our projected total revenue, gross margin, operating expense, net loss and Adjusted EBITDA for the full year 2015.

Forward-looking statements include all statements that are not historical facts.  Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this press release. Factors that could affect these statements include, but are not limited to, our ability to achieve or sustain profitability; general economic, market, or business conditions; the opportunities that may be presented to and pursued by the Company; conditions in the medical technology industry; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the ability to successfully commercialize our products, including Fuse®; competition from new or existing competitors; and other risks described from time to time in EndoChoice's filings with the Securities and Exchange Commission ("SEC") (including the prospectus filed by EndoChoice with the SEC on June 5, 2015).  The discussion of these risks is specifically incorporated by reference into this press release.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections.  Except as required by law, we disclaim any obligation to update any forward-looking statements for any reason after the date of this press release.

Use of Non-GAAP Financial Measures 
The Company has supplemented its GAAP net loss with a non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of EndoChoice, and provides an additional meaningful comparison of results for current periods with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of the GAAP net loss to EBITDA and Adjusted EBITDA is provided in the schedule below.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. This non-GAAP financial measure should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with EndoChoice's consolidated financial statements prepared in accordance with GAAP and the reconciliation of the non-GAAP financial measure provided in the schedule below.

About EndoChoice: 
Based near Atlanta, EndoChoice (NYSE: GI) is a medtech company focused on the manufacturing and commercialization of platform technologies including endoscopic imaging systems, devices and infection control products and pathology services for specialists treating a wide range of gastrointestinal conditions, including colon cancer. EndoChoice leverages its direct sales organization to serve more than 2,500 customers in the United States and works with distribution partners in 30 countries. The Company was founded in 2008 and has rapidly developed a broad and innovative product portfolio, which includes the Full Spectrum Endoscopy System (Fuse®).  EndoChoice, Fuse, and Full Spectrum Endoscopy are registered trademarks of EndoChoice Holdings, Inc.

Company Contact:   David Gill, Chief Financial Officer  david.gill@endochoice.com      678-585-1040

Investor Contacts:  Nick Laudico or Zack Kubow  The Ruth Group  646-536-7030 / 7020  nlaudico@theruthgroup.com  zkubow@theruthgroup.com

 

EndoChoice Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

in thousands (except share and per share data)

September 30, 2015

December 31, 2014

Assets:

Current assets:

Cash and cash equivalents

$           47,796

$          13,761

Short-term investments

25,761

Receivables, net

8,399

8,379

Inventories

15,532

13,637

Deferred tax assets

242

970

Prepaid expenses and other current assets

4,042

2,363

Total current assets

101,772

39,110

Property and equipment, net

9,172

9,668

Long-term investments

29,167

Intangible assets, net

14,395

16,655

Goodwill

19,989

20,301

Deposits and other long-term assets

716

1,075

Total assets

$         175,211

$          86,809

Liabilities and Stockholders' Equity:

Current liabilities:

Accounts payable

$             6,688

$            5,127

Accrued expenses and other current liabilities

9,559

8,328

Current portion of deferred rent

195

55

Deferred revenue

787

1,278

Total current liabilities

17,229

14,788

Long-term debt, net of discount

42,617

38,939

Deferred rent, less current portion

342

607

Deferred tax liabilities

3,758

4,147

Other long-term liabilities

1,128

2,089

Total liabilities

65,074

60,570

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value per share; 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2015 and December 31, 2014

Common stock, $0.001 par value; 150,000,000 shares authorized; 24,793,841 shares issued and outstanding at September 30, 2015; 14,467,219 shares issued and outstanding at December 31, 2014

25

14

Additional paid-in capital

255,976

125,404

Accumulated deficit

(143,504)

(97,165)

Accumulated other comprehensive loss

(2,360)

(2,014)

Total stockholders' equity

110,137

26,239

Total liabilities and stockholders' equity

$         175,211

$          86,809

 

EndoChoice Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

Three Months Ended September 30,

Nine Months Ended September 30,

in thousands (except share and per share data)

2015

2014

2015

2014

Net revenues:

GI equipment and supplies

$      14,684

$      10,723

$      43,764

$      33,648

GI pathology services

3,679

3,446

9,989

9,449

Net revenues

18,363

14,169

53,753

43,097

Cost of revenues:

GI equipment and supplies

10,804

7,122

31,782

21,665

GI pathology services

1,418

1,256

3,718

3,956

Cost of revenues

12,222

8,378

35,500

25,621

Gross profit

6,141

5,791

18,253

17,476

Operating expenses:

Research and development

3,938

5,750

13,787

16,823

Sales and marketing

6,923

6,661

22,723

19,964

General and administrative

5,033

4,272

17,394

11,924

Amortization of intangible assets

690

818

2,067

3,179

Operating expenses

16,584

17,501

55,971

51,890

Operating loss

(10,443)

(11,710)

(37,718)

(34,414)

Other income (expense):

Other income (expense)

360

(948)

(1,271)

(1,225)

Interest expense

(1,163)

(1,151)

(4,257)

(2,240)

Loss on early retirement of debt

(2,282)

Total other expense

(803)

(2,099)

(7,810)

(3,465)

Net loss before income taxes

(11,246)

(13,809)

(45,528)

(37,879)

Income tax expense

(332)

(218)

(811)

(734)

Net loss

(11,578)

(14,027)

(46,339)

(38,613)

Other comprehensive income (loss):

Foreign currency translation adjustments

(1,413)

(2,783)

(357)

(2,806)

Change in fair value of available-for-sale securities

11

11

Other comprehensive loss

(1,402)

(2,783)

(346)

(2,806)

Comprehensive loss

$    (12,980)

$    (16,810)

$    (46,685)

$    (41,419)

Net loss per share attributable to common stockholders, basic and diluted

$        (0.47)

$        (1.16)

$        (2.34)

$        (3.20)

Weighted average shares of common stock used to compute net loss per share attributable to common stockholders, basic and diluted

24,738,893

12,091,882

19,820,453

12,081,123

 

 

EndoChoice Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

in thousands

2015

2014

Cash flows from operating activities:

Net loss

$    (46,339)

$    (38,613)

Adjustments to reconcile net loss to net cash used in operations:

Depreciation and amortization

6,055

6,524

Loss on disposal of fixed assets

372

260

Non-cash interest expense and discount amortization

565

117

Amortization (accretion) of premium (discount) on investment securities, net

195

Change in fair value of warrant liability

435

Provision for doubtful accounts

872

325

Unrealized foreign currency loss

545

625

Deferred taxes

327

364

Stock-based compensation

4,230

15

Loss on early retirement of debt

2,282

Loss on impairment of property and equipment

912

Changes in certain working capital components and other assets and liabilities:

Accounts receivable

(971)

735

Inventories

(2,350)

(2,629)

Prepaid expenses and other current assets

(1,755)

(1,040)

Other assets

459

(993)

Accounts payable, accrued expenses, and other liabilities

3,031

1,089

Net cash used in operations

(31,135)

(33,221)

Cash flows from investing activities:

Capital expenditures

(4,977)

(8,193)

Purchases of investment securities

(55,352)

Net cash used in investing activities

(60,329)

(8,193)

Cash flows from financing activities:

Borrowings on line of credit

18,800

Payments on line of credit

(20,993)

Proceeds from term loan

43,000

40,000

Principal payments on term loan

(40,000)

Prepayment and end of term fees for early retirement of debt

(2,306)

Payments for debt financing fees

(417)

(506)

Principal payments on capital leases

(55)

Proceeds from issuance of member units, net

31,000

141

Proceeds from issuance of common stock, net of issuance costs

94,186

Proceeds from option exercises

71

Net cash provided by financing activities

125,534

37,387

Effect of exchange rate changes on cash and cash equivalents

(35)

1

Net increase (decrease) in cash and cash equivalents

34,035

(4,026)

Cash and cash equivalents, beginning of period

13,761

8,040

Cash and cash equivalents, end of period

$      47,796

$        4,014

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest, net of capitalized interest

$        2,492

$        2,124

Income taxes

$             43

$            —

 

 

EndoChoice Holdings, Inc.

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

in thousands

2015

2014

2015

2014

Net loss

$    (11,578)

$    (14,027)

$    (46,339)

$    (38,613)

Adjustments to net loss:

Interest expense

1,163

1,151

4,257

2,240

Income tax expense

332

218

811

734

Depreciation and amortization

2,028

2,243

6,055

6,524

EBITDA(1)

$      (8,055)

$    (10,415)

$    (35,216)

$    (29,115)

Stock-based compensation expense

729

5

4,230

15

Warrant liability mark-to-market adjustment

435

Loss on early retirement of debt

2,282

Adjusted EBITDA(2)

$      (7,326)

$    (10,410)

$    (28,269)

$    (29,100)

(1) We define EBITDA as net loss plus interest expense, income tax expense, and depreciation and amortization.

(2) We define adjusted EBITDA as net loss plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, warrant liability mark-to-market adjustments, and loss on early retirement of debt.

 

SOURCE EndoChoice Holdings, Inc.



RELATED LINKS

http://investor.endochoice.com