Endologix, Inc. (the “Company”) (NASDAQ: ELGX), a developer and
marketer of innovative treatments for aortic disorders, today
announced financial results for the fourth quarter and fiscal year
ended December 31, 2019.
Global revenue in the fourth quarter of 2019 was $35.8 million,
a 3.0% increase from $34.7 million in the fourth quarter of 2018.
For the year ended December 31, 2019, global revenue was $143.4
million, an 8.4% decrease from $156.5 million a year ago.
“I am very pleased with our performance in 2019, as we
accomplished critical operational and financial goals necessary to
help stabilize our business, build a foundation for sustainable
growth, and maintain a path to positive operating cash flow by
year-end 2021,” commented John Onopchenko, Chief Executive Officer
of Endologix, Inc. “Led by recent stability in our AFX business, we
have now achieved two consecutive quarters of year-over-year
revenue growth. Furthermore, we significantly decreased our cash
burn, and our disciplined approach to cost management enabled us to
meaningfully reduce our overall annual operating expenses. We enter
2020 with many critical developments underway, including the
anticipated completion of EVAS2 enrollment, the initiation of
enrollment of our CHEVAS IDE, and the introduction of Alto, all of
which will accelerate the momentum that we generated in 2019. We
have an exciting year ahead of us, and I am confident that
continued execution and commitment to our culture of accountability
will enable us to achieve profitable long-term growth.”
Financial Results
U.S. revenue in the fourth quarter of 2019 was $24.4 million, a
1.5% increase from $24.0 million in the fourth quarter of 2018. For
the year ended December 31, 2019, U.S. revenue was $95.3 million, a
12.6% decrease from $109.1 million a year ago.
International revenue in the fourth quarter of 2019 was $11.4
million, a 6.5% increase from $10.7 million in the fourth quarter
of 2018. On a constant currency basis, international revenue
increased 8.5% compared to the fourth quarter of 2018. For the year
ended December 31, 2019, international revenue was $48.1 million, a
1.4% increase from $47.4 million a year ago. On a constant currency
basis, international revenue increased 4.0% compared to the year
ended December 31, 2018.
Gross profit was $21.8 million in the fourth quarter of 2019,
representing a gross margin of 61.1%. This compares to a gross
profit of $11.4 million, or a gross margin of 32.8%, in the fourth
quarter of 2018.
Gross profit in the fourth quarter of 2018 was negatively
impacted by the approximately $8.7 million write-off of inventory
reserves related to the voluntary recall of Nellix systems.
Excluding this impact, gross margin was 57.8% in the fourth quarter
of 2018. For the year ended December 31, 2019, gross profit was
$91.1 million, representing a gross margin of 63.5%. This compares
to a gross profit of $91.9 million, or a gross margin of 58.7%, for
the year ended December 31, 2018. Excluding the impact of
previously mentioned Nellix inventory reserves, fiscal year 2018
gross margin was 64.3%.
Total operating expenses in the fourth quarter of 2019 were
$31.7 million, a 9.6% decrease from $35.1 million in the fourth
quarter of 2018. Fourth quarter 2019 operating expenses included
$0.4 million of costs associated with restructuring, while fourth
quarter of 2018 operating expenses included $2.0 million of costs
associated with restructuring and contract termination, product
withdrawal, and business acquisition expenses. Excluding these
items, operating expenses decreased 5.4% compared to the fourth
quarter of 2018. For the year ended December 31, 2019, total
operating expenses were $133.6 million, a 16.5% decrease from
$160.1 million a year ago.
Net Loss for the fourth quarter of 2019 was $7.8 million, or
$(0.40) per share, compared to a Net Loss of $26.0 million, or
$(2.65) per share, a year ago. Adjusted Net Loss (non-GAAP measure,
defined below) totaled $8.1 million, compared to an Adjusted Net
Loss of $21.3 million for the fourth quarter of 2018. Adjusted
EBITDA loss (non-GAAP measure, defined below) totaled $5.2 million
for the fourth quarter of 2019, compared to Adjusted EBITDA loss of
$17.0 million a year ago.
Net Loss for the year ended December 31, 2019 was $64.8 million,
or $(3.84) per share, compared to a Net Loss of $79.7 million, or
$(9.07) per share, a year ago. Adjusted Net Loss totaled $36.9
million, compared to an Adjusted Net Loss of $62.7 million for the
year ended December 31, 2018. Adjusted EBITDA loss totaled $23.9
million for the year ended December 31, 2019, compared to Adjusted
EBITDA loss of $43.4 million a year ago.
Total cash, cash equivalents and restricted cash were $42.8
million as of December 31, 2019, compared to $24.7 million as of
December 31, 2018.
Fiscal Year 2020 Financial Guidance
The Company expects 2020 revenue of at least $145 million and
anticipates 2020 operating expenses to be approximately $130
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 fourth quarter and
fiscal year 2019 results.
To participate in the conference call, dial 888-254-3590
(domestic) or +1 323-994-2093 (international) and refer to the
passcode 2044596.
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, February 19, 2020, until 11:59 p.m. ET on Wednesday,
February 26, 2020. To hear this recording, dial 844-512-2921
(domestic) or 412-317-6671 (international) and enter the passcode
2044596.
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 and Ovation
Alto® Abdominal Stent Graft System, the Company's next generation
Ovation system device, are approved only as investigational devices
and are not currently approved for commercial purposes in any
market.
Cautionary Note 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
maintaining a path to being operating cash flow positive by year
end 2021; upcoming anticipated completion of EVAS2 enrollment,
initiation of enrollment of the Company's CHEVAS IDE, and the
introduction of Alto (and the acceleration of the Company’s
momentum resulting therefrom); the Company’s confidence that
continued execution and commitment to its culture of accountability
will enable it to achieve, profitable, long-term growth; and the
Company’s FY 2020 revenue guidance and its anticipated FY 2020
operating expense, 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, 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, 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
management’s current expectations and predictions about trends
affecting the Company's 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
subsequent Quarterly Reports on Form 10-Q 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 twelve months ended December 31, 2019 and 2018,
this GAAP adjustment to net loss specifically represents: (i)
restructuring and other transition costs; (ii) contract
termination, product withdrawal and business acquisition expenses;
(iii) interest expense; (iv) foreign currency loss (gain); (v) fair
value adjustment to Nellix® contingent consideration liability;
(vi) fair value adjustment of derivative liabilities; and (vii)
loss on debt extinguishment.
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 AND COMPREHENSIVE LOSS
Unaudited
(In thousands, except per
share amounts)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue
U.S.
$
24,401
$
24,033
$
95,316
$
109,093
International
11,350
10,660
48,054
47,380
Total Revenue
35,751
34,693
143,370
156,473
Cost of goods sold
13,922
23,327
52,284
64,550
Gross profit
21,829
11,366
91,086
91,923
Gross margin
61.1
%
32.8
%
63.5
%
58.7
%
Operating expenses:
Research and development
4,317
4,013
18,104
20,793
Clinical and regulatory affairs
2,972
3,344
14,036
13,851
Marketing and sales
15,887
16,942
64,673
76,855
General and administrative
8,092
8,756
35,984
43,477
Restructuring costs
419
138
838
3,270
Contract termination, product withdrawal
and business acquisition expenses
—
1,869
—
1,869
Total operating expenses
31,687
35,062
133,635
160,115
Loss from operations
(9,858
)
(23,696
)
(42,549
)
(68,192
)
Other expense, net
(8,175
)
(8,844
)
(34,590
)
(28,165
)
Change in fair value of contingent
consideration related to acquisition
800
2,800
1,700
7,100
Loss on debt extinguishment
—
—
(11,756
)
(2,270
)
Change in fair value of derivative
liabilities
8,173
3,792
17,713
12,097
Total other income (expense), net
798
(2,252
)
(26,933
)
(11,238
)
Net loss before income taxes
(9,060
)
(25,948
)
(69,482
)
(79,430
)
Income tax (expense) benefit
1,230
(7
)
4,725
(284
)
Net loss
$
(7,830
)
$
(25,955
)
$
(64,757
)
$
(79,714
)
Comprehensive loss, net of taxes:
Net loss
$
(7,830
)
$
(25,955
)
$
(64,757
)
$
(79,714
)
Other comprehensive loss on foreign
currency translation
(653
)
(100
)
(772
)
(747
)
Comprehensive loss
$
(8,483
)
$
(26,055
)
$
(65,529
)
$
(80,461
)
Basic and diluted net loss per share
$
(0.40
)
$
(2.65
)
$
(3.84
)
$
(9.07
)
Shares used in computing basic and diluted
net loss per share
19,509
9,803
16,850
8,790
Non-GAAP Reconciliations:
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Net Loss to Adjusted Net Loss
Net loss
$
(7,830
)
$
(25,955
)
$
(64,757
)
$
(79,714
)
Restructuring and other transition
costs
433
406
852
3,710
Contract termination, product withdrawal
and business acquisition expenses
—
1,869
—
1,869
Interest expense
9,099
8,763
34,973
27,658
Foreign currency (gain) loss
(878
)
247
(330
)
711
Fair value adjustment to Nellix®
contingent consideration liability
(800
)
(2,800
)
(1,700
)
(7,100
)
Fair value adjustment of derivative
liabilities
(8,173
)
(3,792
)
(17,713
)
(12,097
)
Loss on extinguishment of debt
$
—
$
—
$
11,756
$
2,270
(1) Adjusted Net Loss
$
(8,149
)
$
(21,262
)
$
(36,919
)
$
(62,693
)
Adjusted Net Loss to Adjusted
EBITDA:
Adjusted Net Loss
$
(8,149
)
$
(21,262
)
$
(36,919
)
$
(62,693
)
Income tax (benefit) expense
(1,230
)
7
(4,725
)
284
Depreciation and amortization
1,626
2,063
$
6,890
7,982
Stock-based compensation
2,555
2,219
10,849
11,030
(2) Adjusted EBITDA
$
(5,198
)
$
(16,973
)
$
(23,905
)
$
(43,397
)
ENDOLOGIX, INC.
CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands, except share
and per share amounts)
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
41,560
$
23,531
Restricted cash
1,200
1,200
Accounts receivable, net of allowance for
doubtful accounts of $1,317 and $802, respectively
22,392
20,651
Other receivables
282
329
Inventories
26,405
30,399
Prepaid expenses and other current
assets
1,864
2,821
Total current assets
93,703
78,931
Property and equipment, net
13,152
16,033
Goodwill
120,814
120,848
Other intangible assets, net
72,603
76,163
Deposits and other assets
1,124
1,095
Operating lease right-of-use assets
5,768
—
Total assets
$
307,164
$
293,070
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
14,024
$
10,986
Accrued payroll
18,232
14,627
Accrued expenses and other current
liabilities
12,931
13,314
Current portion of debt
10,606
—
Total current liabilities
55,793
38,927
Deferred income taxes
150
150
Deferred rent
—
8,065
Operating lease liabilities
11,621
—
Derivative liabilities
940
4,012
Other liabilities
2,244
1,992
Contingently issuable common stock
500
2,200
Debt
172,060
198,078
Total liabilities
243,308
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 shares authorized, 18,190,054 and 10,387,926 shares
issued, respectively, 18,098,464 and 10,345,367 shares outstanding,
respectively
18
10
Treasury stock, at cost, 91,590 and 42,559
shares, respectively
(4,235
)
(4,026
)
Additional paid-in capital
730,729
640,789
Accumulated deficit
(664,472
)
(599,715
)
Accumulated other comprehensive income
1,816
2,588
Total stockholders’ equity
63,856
39,646
Total liabilities and stockholders’
equity
$
307,164
$
293,070
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200219005899/en/
INVESTOR CONTACT: Endologix, Inc. Vaseem Mahboob, CFO (949)
595-7200
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