Advertisement

Topics

Endologix Reports Second Quarter 2017 Financial Results

16:01 EDT 2 Aug 2017 | Businesswire
Endologix, Inc.

Endologix, Inc. (NASDAQ:ELGX), a developer and marketer of innovative treatments for aortic disorders, today announced financial results for the second quarter ended June 30, 2017.

“While we are pleased with the overall results in the second quarter, the recovery in AFX®2 sales in the U.S. has been slower than expected. Ovation® continues to perform nicely and is currently the fastest growing endovascular AAA device in the U.S. market. Enrollment in the ELEVATE clinical study with Ovation Alto™ is on schedule, and we recently filed our clinical study design with the FDA for the Nellix® confirmatory IDE,” commented John McDermott, Endologix’s Chief Executive Officer. “Looking toward the remainder of the year, we will continue our investment in innovative aortic technologies, while also focusing on increasing revenue and our operating efficiencies.”

Financial Results

Global revenue in the second quarter of 2017 was $48.6 million, a 4.7% decrease from $51.0 million in the second quarter of 2016. U.S. revenue in the second quarter of 2017 was $31.9 million, a 12.1% decrease from U.S. revenue of $36.3 million in the second quarter of 2016. International revenue was $16.7 million, a 13.3% increase from International revenue of $14.7 million in the second quarter of 2016. On a constant currency basis, second quarter 2017 International revenue increased 14.8%.

Gross profit was $32.2 million in the second quarter of 2017, which represents a gross margin of 66.4%. This compares to a gross profit of $29.5 million, or a gross margin of 57.8%, in the second quarter of 2016.

Total operating expenses were $40.1 million in the second quarter of 2017, compared to $52.7 million in the second quarter of 2016. Second quarter 2016 operating expenses included $1.9 million of expenses related to the TriVascular merger. Excluding these items, operating expenses in the second quarter of 2017 were $10.7 million lower than in the prior-year period, representing a decline of 20.9%, which was driven primarily by cost synergies related to the TriVascular merger.

Net loss for the second quarter of 2017 was $16.3 million, or $(0.20) per share, compared to a net loss of $66.8 million, or $(0.81) per share, a year ago. Adjusted Net Loss (non-GAAP, defined below) totaled $8.0 million, compared to an Adjusted Net Loss of $16.7 million for the second quarter of 2016. Endologix reported a negative Adjusted EBITDA (non-GAAP, defined below) of $2.3 million for the second quarter of 2017, compared to a negative Adjusted EBITDA of $10.4 million for the second quarter of 2016.

Total cash, cash equivalents, restricted cash, and marketable securities were $94.5 million as of June 30, 2017. On April 3, 2017, the Company entered into an agreement for $170 million in funding through a $120 million six-year secured term loan and a $50 million three-year secured asset-based revolving line of credit. The Company drew the entire principal amount of the term loan on April 3, 2017 and used a portion of the proceeds to repurchase approximately $68 million aggregate principal amount of outstanding 2.25% Convertible Senior Notes due 2018, plus the accrued but unpaid interest thereon, from the holders thereof in privately negotiated transactions. Subsequently, on June 23, 2017, the Company drew $25 million under the aforementioned revolver.

Financial Guidance

As a result of lower than expected AFX2 sales recapture in the U.S. market and sales force attrition, Endologix is reducing its previously issued revenue guidance. The Company now anticipates 2017 revenue in the range of $185 million to $190 million, compared to the previous range of $193 million to $200 million, representing a reported decrease of 2% to 4% compared to 2016. As a result, Endologix now anticipates 2017 GAAP loss per share in the range of $(0.91) to $(0.95), compared to its prior guidance of a GAAP loss per share in the range of $(0.83) to $(0.86). This revised guidance also reflects increased interest expense related to the aforementioned $120 million term loan and $25 million draw under the Company’s revolver. Additionally, Endologix now expects full-year operating expenses of approximately $170 million, compared to the prior guidance range of $170 million to $175 million.

Conference Call Information

Endologix's management will host a conference call today at 4:30 p.m. ET (1:30 p.m. PT) to discuss its second quarter 2017 results.

To participate in the conference call, dial 877-407-9716 (domestic) or 201-493-6779 (international).

This conference call will also be webcast and can be accessed from the “Investors” section of the Company’s website at www.endologix.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

A recording of the call will also be available from 7:30 p.m. ET (4:30 p.m. PT) on Wednesday, August 2, 2017, until 11:59 p.m. ET (8:59 p.m. PT) on Wednesday, August 9, 2017. To hear this recording, dial 844-512-2921 (domestic) or 412-317-6671 (international) and enter the passcode 13666429.

About Endologix

Endologix, Inc. develops and manufactures minimally invasive treatments for aortic disorders. The Company's focus is endovascular stent grafts for the treatment of abdominal aortic aneurysms (AAA). AAA is a weakening of the wall of the aorta, the largest artery in the body, resulting in a balloon-like enlargement. Once AAA develops, it continues to enlarge and, if left untreated, becomes increasingly susceptible to rupture. The overall patient mortality rate for ruptured AAA is approximately 80%, making it a leading cause of death in the U.S. For more information, visit www.endologix.com.

The Nellix® EndoVascular Aneurysm Sealing System has obtained CE Mark in the EU and is only approved as an investigational device in the United States. The Ovation Alto® System is only approved as an investigational device and currently not approved in any market.

Cautions Regarding Forward-Looking Statements

Except for historical information contained herein, this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” "continue," "outlook," “guidance,” "future,” other words of similar meaning and the use of future dates. Forward-looking statements used in this press release include, but are not limited to, statements regarding anticipated growth opportunities for Endologix’s existing products and potential future products, the progress and results of clinical trials, Endologix’s ability to obtain regulatory approval of its existing products and potential future products, Endologix’s ability to increase revenue through sales of its existing products and potential future products, and 2017 financial guidance, the accuracy of which are necessarily subject to risks and uncertainties that may cause Endologix’s actual 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 materially and adversely from anticipated results include Endologix’s ability to continue integrating the businesses and operations of, and to realize the expected benefits of its merger with, TriVascular, continued market acceptance, endorsement and use of Endologix's products, the success of clinical trials relating to Endologix’s products, product research and development efforts, uncertainty in the process of obtaining regulatory approval for Endologix's products, risks associated with international operations, including currency exchange rate fluctuations, Endologix’s ability to protect its intellectual property rights and proprietary technologies, and other economic, business, competitive and regulatory factors. Undue reliance should not be placed upon the forward-looking statements contained in this press release, which speak only as of the date of this press release. Endologix undertakes no obligation to update any forward- looking statements contained in this press release to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events. Please refer to Endologix's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2016, for more detailed information regarding these risks and uncertainties and other factors that may cause actual results to differ materially from those expressed or implied.

Discussion of Non-GAAP Financial Measures

Endologix's management believes that the non-GAAP measures of (1) "Adjusted Net Income (Loss)" and (2) “Adjusted EBITDA" enhance an investor's overall understanding of Endologix's financial and operating performance and its future prospects by (i) being more reflective of core operating performance and (ii) being more comparable with financial results over various periods. Endologix's management uses these financial measures for strategic decision making, forecasting future financial results, and evaluating current period financial and operating performance. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

"GAAP" is generally accepted accounting principles in the United States.

Adjusted Net Income (Loss) Definition:

(1) "Adjusted Net Income (Loss)" is a non-GAAP measure defined by Endologix as net income (loss) under GAAP, excluding: (i) the fair value adjustment to the Nellix® acquisition contingent consideration; (ii) interest expense; (iii) foreign currency (gains) or losses; (iv) legal settlement costs; (v) contract termination and business acquisition expenses; (vi) business development expenses, including licensing costs related to research and development activities; (vii) restructuring and other transition costs; (viii) fair value adjustment of derivative liabilities; (ix) inventory step-up amortization; and (x) loss on extinguishment of debt.

In the three and six months ended June 30, 2017, this GAAP adjustment to net loss specifically represents: (i) the fair value adjustment to Nellix contingent consideration liability; (ii) interest expense; (iii) foreign currency (gains) or losses; (iv) restructuring and other transition costs; and (v) loss on extinguishment of debt.

In the three and six months ended June 30, 2016, this GAAP adjustment to net loss specifically represents: (i) the fair value adjustment to Nellix contingent consideration liability; (ii) interest expense; (ii) foreign currency (gains) or losses; (iii) legal settlement costs; (iv) contract termination and business acquisition expenses; (v) restructuring and other transition costs; (vi) fair value adjustment of derivative liabilities; and (vii) inventory step-up amortization.

In future periods, Adjusted Net Income (Loss) will continue to exclude: (i) the fair value adjustments to the Nellix contingent consideration liability; (ii) interest expense; (iii) foreign currency (gains) or losses; (iv) legal settlement costs; (v) contract termination and business acquisition expenses; (vi) business development expenses; (vii) restructuring and other transition costs; (viii) fair value adjustment of derivative liabilities; (ix) inventory step-up amortization; (x) loss on extinguishment of debt; and (xi) other non-recurring expenses or income, as described by Endologix.

Adjusted EBITDA Definition:

(2) “Adjusted EBITDA” is a non-GAAP measure defined by Endologix as “Adjusted Net Income (Loss)” excluding income tax (benefit) expense, depreciation and amortization expense, and stock-based compensation expense.

       

ENDOLOGIX, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 Unaudited

(In thousands, except per share amounts)

 
Three Months Ended Six Months Ended
June 30, June 30,
2017     2016 2017     2016
Revenue
U.S. $ 31,906 $ 36,283 $ 62,795 $ 66,151
International 16,650   14,691   28,373   27,189  
Total Revenue 48,556   50,974   91,168   93,340  
Cost of goods sold 16,332   21,515   30,302   35,940  
Gross profit $ 32,224   $ 29,459   $ 60,866   $ 57,400  
Operating expenses:
Research and development 5,734 7,714 11,264 15,559
Clinical and regulatory affairs 2,740 4,022 6,575 7,905
Marketing and sales 23,781 28,824 49,681 56,742
General and administrative 7,904 10,210 16,777 20,156
Restructuring costs (29 ) 790 137 8,114
Settlement costs 4,650
Contract termination and business acquisition expenses   1,127     5,905  
Total operating expenses 40,130   52,687   84,434   119,031  
Loss from operations (7,906 ) (23,228 ) (23,568 ) (61,631 )
Other income (expense) (5,552 ) (4,323 ) (9,850 ) (8,399 )
Change in fair value of contingent consideration related to acquisition 3,800 (100 ) 2,600 (100 )
Loss on debt extinguishment (6,512 ) (6,512 )
Change in fair value of derivative liabilities   (38,743 )   (43,831 )
Total other income (expense) (8,264 ) (43,166 ) (13,762 ) (52,330 )
Net loss before income tax expense $ (16,170 ) $ (66,394 ) $ (37,330 ) $ (113,961 )
Income tax expense (122 ) (443 ) (276 ) (546 )
Net loss $ (16,292 ) $ (66,837 ) $ (37,606 ) $ (114,507 )
Other comprehensive income (loss) foreign currency translation 781 1,019 1,137 914
Comprehensive loss $ (15,511 ) $ (65,818 ) $ (36,469 ) $ (113,593 )
 
Basic and diluted net loss per share $ (0.20 ) $ (0.81 ) $ (0.45 ) $ (1.44 )
Shares used in computing basic and diluted net loss per share 83,247   82,072 83,087   79,368
 
               
Non-GAAP Reconciliations:
 
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Net Loss to Adjusted Net Loss:
Net loss $ (16,292 ) $ (66,837 ) $ (37,606 ) $ (114,507 )
Fair value adjustment to Nellix contingent consideration liability (3,800 ) 100 (2,600 ) 100
Interest expense 5,803 3,815 10,098 7,597
Foreign currency (gain) loss (210 ) 541 (206 ) 810
Settlement costs 4,650
Contract termination and business acquisition expenses 1,127 5,905
Restructuring and other transition costs (15 ) 1,162 532 8,743
Fair value adjustment of derivative liabilities 38,743 43,831
Inventory step-up amortization 4,645 6,822
Loss on extinguishment of debt 6,512     6,512    
(1) Adjusted Net Loss $ (8,002 ) $ (16,704 ) $ (23,270 ) $ (36,049 )
 
Adjusted Net Loss to Adjusted EBITDA:
Adjusted Net Loss $ (8,002 ) $ (16,704 ) $ (23,270 ) $ (36,049 )
Income tax expense (benefit) 122 443 276 546
Depreciation and amortization 2,336 1,995 4,649 4,227
Stock-based compensation expense 3,234   3,886   6,188   6,768  
(2) Adjusted EBITDA $ (2,310 ) $ (10,380 ) $ (12,157 ) $ (24,508 )
 
       

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

 
June 30, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 81,641 $ 26,120
Restricted cash 2,877 2,001
Marketable securities 10,000 20,988
Accounts receivable, net allowance for doubtful accounts of $994 and $1,037, respectively. 33,118 34,430
Other receivables 390 1,787
Inventories 43,555 41,160
Prepaid expenses and other current assets 4,235   3,359  
Total current assets 175,816   129,845  
Property and equipment, net 21,300 23,265
Goodwill 120,845 120,711
Intangibles, net 82,570 84,511
Deposits and other assets 1,536   1,352  
Total assets $ 402,067   $ 359,684  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 11,030 $ 13,237
Accrued payroll 16,933 19,997
Accrued expenses and other current liabilities 10,001 11,668
Revolving line of credit 24,297    
Total current liabilities 62,261   44,902  
Deferred income taxes 879 879
Deferred rent 7,859 7,949
Other liabilities 4,194 3,783
Contingently issuable common stock 9,600 12,200
Debt 220,520   177,178  
Total liabilities 305,313   246,891  
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.
Common stock, $0.001 par value; 135,000,000 shares authorized. 83,638,895 and 82,986,244 shares issued, respectively. 83,426,656 and 82,774,005 shares outstanding, respectively. 84 83
Treasury stock, at cost, 212,239 shares. (2,942 ) (2,942 )
Additional paid-in capital 588,194 567,765
Accumulated deficit (491,207 ) (453,601 )
Accumulated other comprehensive income 2,625   1,488  
Total stockholders’ equity 96,754   112,793  
Total liabilities and stockholders’ equity $ 402,067   $ 359,684  

Investors:
Endologix, Inc.
Vaseem Mahboob, 949-595-7200
CFO

NEXT ARTICLE

More From BioPortfolio on "Endologix Reports Second Quarter 2017 Financial Results"

Quick Search
Advertisement
 

Relevant Topics

The Top 100 Pharmaceutical Companies
Top 10 biotech and pharmaceutical companies worldwide based on market value in 2015 2015 ranking of the global top 10 biotech and pharmaceutical companies based on revenue (in billion U.S. dollars) Johnson & Johnson, U.S. 74...

Mergers & Acquisitions
Commercial and market reports on mergers and acquisitions in the biotechnology, pharmaceutical, medical device and life-science industries. Mergers and acquisitions (abbreviated M&A;) is an aspect of corporate strategy, corporate finance and manageme...