Cardiovascular Systems, Inc. (CSI®) (NASDAQ: CSII), a medical
device company developing and commercializing innovative
interventional treatment systems for patients with peripheral and
coronary artery disease, today reported financial results for its
second quarter, ended December 31, 2022.
Second Quarter Financial Highlights
CSI’s fiscal 2023 second quarter revenues were $61.5 million,
representing an increase of $2.3 million, or 3.9% compared to the
second quarter last year. Gross profit margin was 70.0%.
Selling, general and administrative expenses were $41.6 million,
an increase of $1.2 million, or 3.1%. Research and development
expenses increased 7.4% to $9.5 million due to the timing of
development activities.
Second-quarter net loss of $7.9 million, or $0.20 per basic and
diluted share, compared favorably to a loss of $9.0 million, or
$0.23 per basic and diluted share in the prior year period. The
Adjusted EBITDA loss increased to $3.7 million from $3.0 million in
the prior year.
As of December 31, 2022, CSI had cash and marketable securities
totaling $132.0 million and no long-term borrowings.
Cancelling Conference Call Scheduled for February 9,
2023
Given the proposed acquisition of CSI by Abbott Laboratories
(NYSE: ABT), CSI will not host the previously scheduled earnings
conference call on February 9, 2023. CSI plans to file its Form
10-Q for the quarterly period ended December 31, 2022 on Thursday,
February 9, 2023.
About Coronary Artery Disease (CAD)
CAD is a life-threatening condition and a leading cause of death
in men and women globally. CAD occurs when a fatty material called
plaque builds up on the walls of arteries that supply blood to the
heart. The plaque buildup causes the arteries to harden and narrow
(atherosclerosis), reducing blood flow. The risk of CAD increases
if a person has one or more of the following: high blood pressure,
abnormal cholesterol levels, diabetes, or family history of early
heart disease. According to the Centers for Disease Control and
Prevention, 18 million people in the United States have CAD, the
most common form of heart disease. Heart disease claims more than
650,000 lives in the United States each year. According to
estimates, arterial calcium is present in 38 percent of patients
undergoing a PCI. Significant calcium contributes to poor stent
delivery, expansion and wall apposition leading to poor outcomes
and higher treatment costs in coronary interventions when
traditional therapies are used, including a significantly higher
occurrence of death and major adverse cardiac events (MACE).
About Peripheral Artery Disease (PAD)
Eighteen to 20 million Americans, most over age 65, suffer from
PAD, which is caused by the accumulation of plaque in peripheral
arteries reducing blood flow. Symptoms include leg pain when
walking or at rest. Left untreated, PAD can lead to severe pain,
immobility, non-healing wounds and eventually limb amputation. With
risk factors such as diabetes and obesity on the rise, the
prevalence of PAD is growing at double-digit rates.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a
medical device company focused on developing and commercializing
innovative solutions for treating vascular and coronary disease.
The company’s orbital atherectomy system treats calcified and
fibrotic plaque in arterial vessels throughout the leg and heart
and addresses many of the limitations associated with existing
surgical, catheter and pharmacological treatment alternatives. For
more information, visit www.csi360 and follow us on LinkedIn and
Twitter.
Safe Harbor
Certain statements in this news release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and are provided under the protection of the
safe harbor for forward-looking statements provided by that Act,
including statements about the proposed transaction with Abbott.
These statements involve risks and uncertainties including, among
others: (i) the occurrence of any event, change or other
circumstance that could give rise to the termination of the
transaction agreement with Abbott; (ii) the failure to obtain the
requisite approval of the transaction by its stockholders; (iii)
the failure to obtain certain required regulatory approvals to the
completion of the proposed transaction or the failure to satisfy
any of the other conditions to the completion of the proposed
transaction; (iv) the effect of the announcement of the proposed
transaction on our ability to retain and hire key personnel and
maintain relationships with our key business partners and
customers, and others with whom we do business, or on our operating
results and businesses generally; (vi) the response of competitors
to the proposed transaction; (vii) risks associated with the
disruption of management’s attention from ongoing business
operations due to the proposed transaction; (viii) the ability to
meet expectations regarding the timing and completion of the
proposed transaction; (ix) significant costs associated with the
proposed transaction; (x) potential litigation relating to the
proposed transaction; and (xi) restrictions during the pendency of
the proposed transaction that may impact our ability to pursue
certain business opportunities. These statements also involve
additional risks and uncertainties that could cause results to
differ materially from those projected, including, but not limited
to, the ongoing COVID-19 pandemic and the impact and scope thereof
on us, our distribution partners, the supply chain and physicians
and facilities, including government actions related to the
COVID-19 outbreak, material delays and cancellations of procedures,
delayed spending by healthcare providers, and distributor and
supply chain disruptions; regulatory developments, clearances and
approvals; approval of our products for distribution outside of the
United States; approval of products for reimbursement and the level
of reimbursement in the U.S. and foreign countries; dependence on
market growth; agreements with third parties to sell their
products; the ability of us and our distribution partners to
successfully launch our products outside of the United States; our
ability to maintain third-party supplier relationships and renew
existing purchase agreements; our ability to maintain our
relationships and agreements with distribution partners; the
experience of physicians regarding the effectiveness and
reliability of the products we sell; the reluctance of physicians,
hospitals and other organizations to accept new products; the
potential for unanticipated delays in enrolling medical centers and
patients for clinical trials; actual clinical trial and study
results; the impact of competitive products and pricing; our
ability to comply with the financial covenants in our loan and
security agreement and to make payments under and comply with the
lease agreement for our corporate headquarters; unanticipated
developments affecting our estimates regarding expenses, future
revenues and capital requirements; the difficulty of successfully
managing operating costs; our ability to manage our sales force
strategy; actual research and development efforts and needs,
including the timing of product development programs; successful
collaboration on the development of new products; agreements with
development partners, advisors and other third parties; the ability
of us and these third parties to meet developmental, contractual
and other milestones; contractual rights and obligations; technical
challenges; our ability to obtain and maintain intellectual
property protection for product candidates; fluctuations in results
and expenses based on new product introductions, sales mix,
unanticipated warranty claims, and the timing of project
expenditures; our ability to manage costs; our actual financial
resources and our ability to obtain additional financing;
investigations or litigation threatened or initiated against us;
court rulings and future actions by the FDA and other regulatory
bodies; international trade developments; the effects of
hurricanes, flooding, and other natural disasters on our business;
the impact of federal corporate tax reform on our business,
operations and financial statements; shutdowns of the U.S. federal
government; the potential impact of any future strategic
transactions; general economic conditions; and other factors
detailed from time to time in CSI’s SEC reports, including its most
recent annual report on Form 10-K and subsequent quarterly reports
on Form 10-Q. CSI encourages you to consider all of these risks,
uncertainties and other factors carefully in evaluating the
forward-looking statements contained in this release. As a result
of these matters, changes in facts, assumptions not being realized
or other circumstances, CSI's actual results may differ materially
from the expected results discussed in the forward-looking
statements contained in this release. The forward-looking
statements made in this release are made only as of the date of
this release, and CSI undertakes no obligation to update them to
reflect subsequent events or circumstances.
Additional Information and Where to Find It
This release has been prepared in respect of the proposed
transaction involving Abbott and CSI, and may be deemed to be
soliciting material relating to the transaction. In connection with
the transaction, CSI will file a proxy statement on Schedule 14A
relating to a special meeting of its stockholders with the
Securities and Exchange Commission (the “SEC”). Additionally, CSI
may file other relevant materials in connection with the
transaction with the SEC. Investors and securityholders of CSI are
urged to read carefully and in their entirety the proxy statement
and any other relevant materials filed or that will be filed with
the SEC when they become available because they contain or will
contain important information about the transaction and related
matters. The definitive proxy statement will be filed with the SEC
and mailed or otherwise made available to the CSI’s
securityholders. Investors and securityholders will be able to
obtain a copy of the proxy statement, as well as other filings
containing information about the transaction that are filed by the
Company with the SEC, free of charge on EDGAR at www.sec.gov or on
the investor relations page of CSI’s website at
investors.csi360.com.
Participants in the Solicitation
CSI and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders
of CSI in respect of the transaction. Information about CSI’s
directors and executive officers is set forth in the proxy
statement for CSI’s 2022 Annual Meeting of Stockholders, as
revised, which was filed with the SEC on October 26, 2022, and its
Annual Report on Form 10-K for the fiscal year ended June 30, 2022,
which was filed with the SEC on August 18, 2022. Other information
regarding the participants in the proxy solicitation and a
description of their interests, which may, in some cases, be
different than those of CSI’s stockholders generally, will be
contained in the proxy statement for the Stockholder Meeting and
other relevant materials to be filed with the SEC in respect of the
proposed transaction when they become available.
Product Disclosures:
Peripheral Products
Indications: The Stealth 360® PAD System and Diamondback
360® PAD System are percutaneous orbital atherectomy systems (OAS)
indicated for use as therapy in patients with occlusive
atherosclerotic disease in peripheral arteries and stenotic
material from artificial arteriovenous dialysis fistulae.
Contraindications: The OAS are contraindicated for use in
coronary arteries, bypass grafts, stents or where thrombus or
dissections are present.
Warnings/Precautions: Although the incidence of adverse
events is rare, potential events that can occur with atherectomy
include: pain, hypotension, CVA/TIA, death, dissection,
perforation, distal embolization, thrombus formation, hematuria,
abrupt or acute vessel closure, or arterial spasm.
See the instructions for use for detailed information regarding
the procedure, indications, contraindications, warnings,
precautions, and potential adverse events. For further information
call CSI at 1-877-274-0901 and/or consult CSI’s website at
www.csi360.com.
Caution: Federal law (USA) restricts these devices to
sale by or on the order of a physician.
The Stealth 360® PAD System and Diamondback 360® PAD System
received FDA 510(k) clearance. The Stealth 360® PAD System is CE
Marked.
Coronary Product
Indications: The Diamondback 360® Coronary Orbital
Atherectomy System (OAS) is a percutaneous orbital atherectomy
system indicated to facilitate stent delivery in patients with
coronary artery disease (CAD) who are acceptable candidates for
PTCA or stenting due to de novo, severely calcified coronary artery
lesions.
Contraindications: The OAS is contraindicated when the
ViperWire® guide wire cannot pass across the coronary lesion or the
target lesion is within a bypass graft or stent. The OAS is
contraindicated when the patient is not an appropriate candidate
for bypass surgery, angioplasty, or atherectomy therapy, or has
angiographic evidence of thrombus, or has only one open vessel, or
has angiographic evidence of significant dissection at the
treatment site and for women who are pregnant or children.
Warnings/Precautions: Performing treatment in excessively
tortuous vessels or bifurcations may result in vessel damage; The
OAS was only evaluated in severely calcified lesions, A temporary
pacing lead may be necessary when treating lesions in the right
coronary and circumflex arteries; On-site surgical back-up should
be included as a clinical consideration; Use in patients with an
ejection fraction (EF) of less than 25% has not been evaluated.
See the instructions for use for detailed information regarding
the procedure, indications, contraindications, warnings,
precautions, and potential adverse events. For further information
call CSI at 1-877-274-0901 and/or consult CSI’s website at
www.csi360.com.
Caution: Federal law (USA) restricts these devices to
sale by or on the order of a physician.
The Diamondback 360® Coronary OAS is FDA PMA approved and CE
Marked.
Cardiovascular Systems,
Inc.
Consolidated Statements of
Operations
(Dollars in Thousands)
(unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2022
2021
2022
2021
Net revenues
$
61,453
$
59,135
$
121,126
$
117,505
Cost of goods sold
18,461
18,073
35,159
32,381
Gross profit
42,992
41,062
85,967
85,124
Expenses:
Selling, general and administrative
41,642
40,402
86,117
82,253
Research and development
9,533
8,873
18,589
18,895
Amortization of intangible assets
345
346
691
650
Total expenses
51,520
49,621
105,397
101,798
Loss from operations
(8,528
)
(8,559
)
(19,430
)
(16,674
)
Other (income) expense, net
(689
)
345
(941
)
712
Loss before income taxes
(7,839
)
(8,904
)
(18,489
)
(17,386
)
Provision for income taxes
49
63
30
199
Net loss
$
(7,888
)
$
(8,967
)
$
(18,519
)
$
(17,585
)
Basic and diluted earnings per share
$
(0.20
)
$
(0.23
)
$
(0.47
)
$
(0.45
)
Basic and diluted weighted average shares
outstanding
39,663,565
39,199,593
39,635,293
39,143,533
Cardiovascular Systems,
Inc.
Consolidated Balance
Sheets
(Dollars in Thousands)
(unaudited)
December 31,
June 30,
2022
2022
ASSETS
Current assets
Cash and cash equivalents
$
59,843
$
66,424
Marketable securities
72,159
93,409
Accounts receivable, net
40,232
39,678
Inventories
41,191
34,567
Prepaid expenses and other current
assets
8,535
7,768
Total current assets
221,960
241,846
Property and equipment, net
30,002
29,035
Intangible assets, net
15,043
15,734
Strategic investments
42,034
33,425
Other assets
2,467
2,637
Total assets
$
311,506
$
322,677
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Accounts payable
$
17,087
$
14,383
Accrued expenses
19,149
23,464
Deferred revenue
525
2,107
Total current liabilities
36,761
39,954
Long-term liabilities
Financing obligation
20,117
20,298
Deferred revenue
3,365
—
Other liabilities
11,874
12,945
Total liabilities
72,117
73,197
Commitments and contingencies
—
—
Total stockholders’ equity
239,389
249,480
Total liabilities and stockholders’
equity
$
311,506
$
322,677
Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements
prepared in accordance with GAAP, CSI uses a non-GAAP financial
measure referred to as "Adjusted EBITDA" in this release.
Reconciliations of these non-GAAP measures to the most
comparable U.S. GAAP measures for the respective periods can be
found in the following tables. In addition, an explanation of the
manner in which CSI's management uses these measures to conduct and
evaluate its business, the economic substance behind management's
decision to use these measures, the substantive reasons why
management believes that these measures provide useful information
to investors, the material limitations associated with the use of
these measures and the manner in which management compensates for
those limitations is included following the reconciliation
tables.
Adjusted EBITDA
(Dollars in Thousands)
(unaudited)
Three Months Ended
Six Months Ended
December 31,
December 31,
2022
2021
2022
2021
Net loss
$
(7,888
)
$
(8,967
)
$
(18,519
)
$
(17,585
)
Less: Other (income) and expense, net
(689
)
345
(941
)
712
Less: Provision for income taxes
49
63
30
199
Loss from operations
(8,528
)
(8,559
)
(19,430
)
(16,674
)
Add: Stock-based compensation
3,547
4,240
7,985
9,912
Add: Depreciation and amortization
1,268
1,287
2,488
2,545
Adjusted EBITDA
$
(3,713
)
$
(3,032
)
$
(8,957
)
$
(4,217
)
Gross Profit and Gross Margin
(Excluding WIRION Recall Charges)
(Dollars in Thousands)
(unaudited)
Three Months Ended
December 31,
2022
2021
Gross profit
$
42,992
$
41,062
Less: WIRION recall charge
—
2,849
Gross profit (excluding WIRION recall
charge)
$
42,992
$
43,911
Three Months Ended
December 31,
2022
2021
Gross margin
70.0
%
69.4
%
Less: WIRION recall charge as a percentage
of net revenues
—
%
4.8
%
Gross margin (excluding WIRION recall
charges)
70.0
%
74.2
%
Use and Economic Substance of Non-GAAP Financial Measures
Used by CSI and Usefulness of Such Non-GAAP Financial Measures to
Investors
CSI uses Adjusted EBITDA as a supplemental measure of
performance and believes this measure facilitates operating
performance comparisons from period to period and company to
company by factoring out potential differences caused by
depreciation and amortization expense and stock-based compensation.
CSI's management uses Adjusted EBITDA to analyze the underlying
trends in CSI's business, assess the performance of CSI's core
operations, establish operational goals and forecasts that are used
to allocate resources and evaluate CSI's performance period over
period and in relation to its competitors' operating results.
Additionally, CSI's management is evaluated on the basis of
Adjusted EBITDA when determining achievement of their incentive
compensation performance targets.
CSI believes that presenting Adjusted EBITDA provides investors
greater transparency to the information used by CSI's management
for its financial and operational decision-making and allows
investors to see CSI's results "through the eyes" of management.
CSI also believes that providing this information better enables
CSI's investors to understand CSI's operating performance and
evaluate the methodology used by CSI's management to evaluate and
measure such performance.
The following is an explanation of each of the items that
management excluded from Adjusted EBITDA and the reasons for
excluding each of these individual items:
-- Stock-based compensation. CSI excludes stock-based
compensation expense from its non-GAAP financial measures primarily
because such expense, while constituting an ongoing and recurring
expense, is not an expense that requires cash settlement. CSI's
management also believes that excluding this item from CSI's
non-GAAP results is useful to investors to understand the
application of stock-based compensation guidance and its impact on
CSI's operational performance, liquidity and its ability to make
additional investments in the company, and it allows for greater
transparency to certain line items in CSI's financial
statements.
-- Depreciation and amortization expense. CSI excludes
depreciation and amortization expense from its non-GAAP financial
measures primarily because such expenses, while constituting
ongoing and recurring expenses, are not expenses that require cash
settlement and are not used by CSI's management to assess the core
profitability of CSI's business operations. CSI's management also
believes that excluding these items from CSI's non-GAAP results is
useful to investors to understand CSI's operational performance,
liquidity and its ability to make additional investments in the
company.
Material Limitations Associated with the Use of Non-GAAP
Financial Measures and Manner in which CSI Compensates for these
Limitations
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
CSI's financial results prepared in accordance with GAAP. Some of
the limitations associated with CSI's use of these non-GAAP
financial measures are:
-- Items such as stock-based compensation do not directly affect
CSI's cash flow position; however, such items reflect economic
costs to CSI and are not reflected in CSI's "Adjusted EBITDA" and
therefore these non-GAAP measures do not reflect the full economic
effect of these items.
-- 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 CSI, limiting the usefulness of those
measures for comparative purposes.
-- CSI's management exercises judgment in determining which
types of charges or other items should be excluded from the
non-GAAP financial measures CSI uses. CSI compensates for these
limitations by relying primarily upon its GAAP results and using
non-GAAP financial measures only supplementally. CSI provides full
disclosure of each non-GAAP financial measure.
-- CSI provides detailed reconciliations of each non-GAAP
measure to its most directly comparable GAAP measure. CSI
encourages investors to review these reconciliations. CSI qualifies
its use of non-GAAP financial measures with cautionary statements
as set forth above.
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version on businesswire.com: https://www.businesswire.com/news/home/20230208005840/en/
Cardiovascular Systems, Inc. Jack Nielsen Vice President,
Investor Relations & Corporate Communications (651) 202-4919
j.nielsen@csi360.com
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