Third Quarter Highlights
- Global revenue up 2.9% versus prior year
- Sequential AFX system sales increase in the U.S.
- Operating cash burn of $4.0M for the quarter
Endologix, Inc. (the “Company”) (NASDAQ: ELGX), a developer and
marketer of innovative treatments for aortic disorders, today
announced financial results for the third quarter ended September
30, 2019.
“Our persistent focus on execution has resulted in improved
performance across the business including AFX2 in the U.S., as
evidenced by our third-quarter results,” commented John Onopchenko,
Chief Executive Officer of Endologix, Inc. “We posted solid
financial results, with the Company returning to annualized growth
while effectively managing our expenses and meaningfully reducing
our quarterly cash burn to less than $5 million. Our U.S. AFX
volumes were up sequentially in the third quarter, and our global
AFX volumes grew double digits year over year. We attribute these
AFX results in the U.S. in large part to the value physicians place
on the strength of our clinical evidence, which encompasses over
60,000 patients as illustrated in our recently released AFX Annual
Clinical Update (2016-2019). Our operational progress to-date has
steadily improved, and we are positioned to build off these results
in the fourth quarter and into 2020.”
Financial Results
Global revenue in the third quarter of 2019 was $35.8 million, a
2.9% increase from $34.8 million in the third quarter of 2018. U.S.
revenue in the third quarter of 2019 was $24.1 million, a 6.2%
decrease from U.S. revenue of $25.7 million in the third quarter of
2018. International revenue was $11.7 million, a 28.7% increase
from International revenue of $9.1 million in the third quarter of
2018. On a constant currency basis, third quarter 2019
International revenue increased 31.5% over the third quarter of
2018.
Gross profit was $23.1 million in the third quarter of 2019,
representing a gross margin of 64.5%. This compares to a gross
profit of $22.6 million, or a gross margin of 65.1%, in the third
quarter of 2018 as lower sales volumes more than offset operational
improvements.
Total operating expenses decreased 12.0% to $33.9 million in the
third quarter of 2019, compared to $38.5 million in the third
quarter of 2018. Operating expenses in the third quarter of 2018
included $2.9 million of restructuring costs; excluding these costs
operating expenses decreased 4.9%.
Net loss for the third quarter of 2019 was $7.8 million, or
$(0.40) per share, compared to a net loss of $10.1 million, or
$(1.19) per share, a year ago. Adjusted Net Loss (non-GAAP, defined
below) totaled $10.5 million, compared to an Adjusted Net Loss of
$13.0 million for the third quarter of 2018. Adjusted EBITDA
(non-GAAP, defined below) loss totaled $5.6 million for the third
quarter of 2019, compared to Adjusted EBITDA loss of $9.3 million
for the third quarter of 2018.
Total cash, cash equivalents, and restricted cash were $47.8
million as of September 30, 2019.
Financial Guidance
The Company reaffirms its previously issued annual guidance and
continues to expect 2019 revenue of at least $140 million. The
Company anticipates revenue for the fourth quarter ending December
31, 2019 in the range of $32.5 million to $35.5 million. The
Company continues to expect 2019 operating expenses in the range of
$130 million to $140 million.
Conference Call Information
The Company's management will host a conference call today at
4:30 p.m. ET (1:30 p.m. PT) to discuss its third quarter 2019
results.
To participate in the conference call, dial 877-407-9716
(domestic) or +1 201-493-6779 (international) and refer to the
passcode 13696025.
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
on Wednesday, November 6, 2019, until 11:59 p.m. ET on Wednesday,
November 13, 2019. To hear this recording, dial 844-512-2921
(domestic) or +1 412-317-6671 (international) and enter the
passcode 13696025.
About Endologix, Inc.
The Company develops and manufactures minimally invasive
treatments for aortic disorders. The Company's focus is in
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 an 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 is not currently approved in any
market.
Cautions Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally 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
include all statements other than statements of historical fact
contained in this press release, including statements regarding the
Company’s ability to build off the recent operational progress
during the fourth quarter of 2019 and into 2020; the Company’s
reaffirmation of its FY 2019 revenue guidance and its anticipated
FY 2019 operating expense; and the Company’s anticipated Q4 2019
revenue range and operating expense range, the accuracy of which
are necessarily subject to risks and uncertainties that may cause
the Company’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 continued
market acceptance, endorsement and use of the Company’s products,
the Company’s continued compliance with its financial covenants and
other operating restrictions under its lending facilities, the
Company’s ability to access the capital markets on terms acceptable
to it or at all, the Company’s abilities to service its
indebtedness and to satisfy and discharge its indebtedness as such
indebtedness comes due, the success of clinical trials relating to
the Company’s products, product research and development efforts,
reports by third parties in respect of the performance of the
Company’s products, uncertainty in the process of obtaining and
maintaining regulatory approval for the Company’s products, the
Company’s ability to protect its intellectual property rights and
proprietary technologies and to defend itself against third party
intellectual property infringement claims, the Company s ability to
protect its intellectual property rights and proprietary
technologies, the Company’s ability to retain its key executive,
sales and other personnel, and other economic, business,
competitive, and regulatory factors. Forward-looking statements
represent our management’s current expectations and predictions
about trends affecting our business and industry and are based on
information available as of the time such statements are made. The
forward-looking statements contained in this press release speak
only as of the date of this press release. The Company 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 the Company’s
filings with the Securities and Exchange Commission including its
Annual Report on Form 10-K for the year ended December 31, 2018,
and its Quarterly Reports on Form 10-Q for the quarters ended March
31, 2019, June 30, 2019, and September 30, 2019 (once it is filed)
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 in the
forward-looking statements.
Discussion of Non-GAAP Financial Measures
The Company’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 the Company’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. These
measures, when used in conjunction with related financial measures
calculated in accordance with generally accepted accounting
principles in the United States (“GAAP”), provide investors with an
additional financial analytical framework that may be useful in
assessing the Company’s financial condition and results of
operations. The Company’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. Furthermore, these measures are not intended
to be liquidity measures. Other companies, including other
companies in the Company’s industry, may not use these measures or
may calculate these measures differently than the Company does,
limiting their usefulness as comparative measures. The Company
intends to calculate these non-GAAP financial measures in a
consistent manner from period to period. A reconciliation of each
of the non-GAAP financial measures to the most directly comparable
GAAP measures has been provided under the heading “Non-GAAP
Reconciliations” in the financial statement tables attached to this
press release.
Adjusted Net Income (Loss) Definition:
(1) “Adjusted Net Income (Loss)” is a non-GAAP measure defined
by the Company as net income (loss) under GAAP, excluding (to the
extent relevant in a particular reporting period): (i)
restructuring and other transition costs; (ii) contract
termination, product withdrawal and business acquisition expenses;
(iii) legal settlement costs; (iv) business development expenses,
including licensing costs related to research and development
activities; (v) inventory step-up amortization; (vi) interest
expense; (vii) foreign currency loss (gain); (viii) fair value
adjustment to Nellix® contingent consideration liability; (ix) fair
value adjustment of derivative liabilities; and (x) loss on debt
extinguishment.
In the three and nine months ended September 30, 2019 and 2018,
this GAAP adjustment to net loss specifically represents: (i) the
fair value adjustment to Nellix® contingent consideration
liability; (ii) interest expense; (iii) foreign currency losses;
(iv) restructuring and other transition costs; (v) fair value
adjustment of derivative liabilities; and (vi) loss on
extinguishment of debt.
Adjusted EBITDA Definition:
(2) “Adjusted EBITDA” is a non-GAAP measure defined by the
Company 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
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Revenue
U.S.
$
24,118
$
25,699
$
70,915
$
85,060
International
11,657
9,057
36,704
36,720
Total Revenue
35,775
34,756
107,619
121,780
Cost of goods sold
12,701
12,129
38,362
41,223
Gross profit
$
23,074
$
22,627
$
69,257
$
80,557
Operating expenses:
Research and development
4,645
5,037
13,787
16,780
Clinical and regulatory affairs
3,632
3,208
11,064
10,507
Marketing and sales
16,080
17,072
48,786
59,913
General and administrative
9,547
10,330
27,892
34,721
Restructuring costs
—
2,899
419
3,132
Total operating expenses
33,904
38,546
101,948
125,053
Loss from operations
(10,830
)
(15,919
)
(32,691
)
(44,496
)
Other income (expense)
(8,907
)
(7,336
)
(26,415
)
(19,321
)
Change in fair value of contingent
consideration related to acquisition
1,000
5,000
900
4,300
Loss on debt extinguishment
—
—
(11,756
)
(2,270
)
Change in fair value of derivative
liabilities
10,691
8,305
9,540
8,305
Total other income (expense), net
2,784
5,969
(27,731
)
(8,986
)
Net loss before income taxes
$
(8,046
)
$
(9,950
)
$
(60,422
)
$
(53,482
)
Income tax benefit (expense)
281
(166
)
3,495
(277
)
Net loss
$
(7,765
)
$
(10,116
)
$
(56,927
)
$
(53,759
)
Other comprehensive income (loss) foreign
currency translation
(109
)
32
(119
)
(647
)
Comprehensive loss
$
(7,874
)
$
(10,084
)
$
(57,046
)
$
(54,406
)
Basic and diluted net loss per share
$
(0.40
)
$
(1.19
)
$
(3.57
)
$
(6.37
)
Shares used in computing basic and diluted
net loss per share
19,244
8,523
15,953
8,445
Non-GAAP Reconciliations:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Net Loss to Adjusted Net Loss:
Net loss
$
(7,765
)
$
(10,116
)
$
(56,927
)
$
(53,759
)
Fair value adjustment to Nellix contingent
consideration liability
(1,000
)
(5,000
)
(900
)
(4,300
)
Interest expense
8,527
7,225
25,874
18,895
Foreign currency loss
426
133
548
464
Restructuring and other transition
costs
—
3,071
419
3,304
Fair value adjustment of derivative
liabilities
(10,691
)
(8,305
)
(9,540
)
(8,305
)
Loss on extinguishment of debt
—
—
11,756
2,270
(1) Adjusted Net Loss
$
(10,503
)
$
(12,992
)
$
(28,770
)
$
(41,431
)
Adjusted Net Loss to Adjusted
EBITDA:
Adjusted Net Loss
$
(10,503
)
$
(12,992
)
$
(28,770
)
$
(41,431
)
Income tax (benefit) expense
(281
)
166
(3,495
)
277
Depreciation and amortization expense
1,789
1,988
5,264
5,919
Stock-based compensation expense
3,410
1,525
$
8,294
8,811
(2) Adjusted EBITDA
$
(5,585
)
$
(9,313
)
$
(18,707
)
$
(26,424
)
ENDOLOGIX, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands)
September 30,
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
46,587
$
23,531
Restricted cash
1,200
1,200
Accounts receivable, net of allowance for
doubtful accounts of $1,315 and $802, respectively
21,658
20,651
Other receivables
229
329
Inventories
30,877
30,399
Prepaid expenses and other current
assets
2,058
2,821
Total current assets
102,609
78,931
Property and equipment, net
13,691
16,033
Goodwill
120,770
120,848
Other intangible assets, net
73,494
76,163
Deposits and other assets
1,293
1,095
Operating lease right-of-use assets
5,660
—
Total assets
$
317,517
$
293,070
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
11,779
$
10,986
Accrued payroll
18,732
14,627
Accrued expenses and other current
liabilities
15,791
13,314
Total current liabilities
46,302
38,927
Deferred income taxes
150
150
Deferred rent
—
8,065
Operating lease liabilities
11,640
—
Derivative liabilities
9,112
4,012
Other liabilities
2,235
1,992
Contingently issuable common stock
1,300
2,200
Debt
176,993
198,078
Total liabilities
247,732
253,424
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,
170,000,000 and 170,000,000 shares authorized, respectively,
17,942,961 and 10,387,926 shares issued, respectively, and
17,881,146 and 10,345,367 shares outstanding, respectively
18
10
Treasury stock, at cost, 61,815 and 42,559
shares, respectively
(4,154
)
(4,026
)
Additional paid-in capital
728,094
640,789
Accumulated deficit
(656,642
)
(599,715
)
Accumulated other comprehensive income
2,469
2,588
Total stockholders’ equity
69,785
39,646
Total liabilities and stockholders’
equity
$
317,517
$
293,070
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version on businesswire.com: https://www.businesswire.com/news/home/20191106005932/en/
INVESTORS: Endologix, Inc. Vaseem Mahboob, CFO (949)
595-7200
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