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For the quarter ended September 30, 2008, Volcano reported revenues of$44.1 million versus revenues of $31.5 million in the same period a year ago.The company said that its financial performance was driven by a 78 percentincrease in intravascular ultrasound (IVUS) system revenues and a 29 percentincrease in IVUS disposable revenues year-over-year.
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For the third quarter of 2008, the company reported net income on a GAAPbasis of $744,000, or $0.01 per diluted share, versus a net loss on a GAAPbasis of $652,000 or $0.02 per share, in the third quarter of 2007. Weightedaverage shares at the end of the quarter were 50.3 million versus 38.7 milliona year ago, reflecting the impact of the company's equity offering that wascompleted in the fourth quarter of 2007.
Excluding stock-based compensation expense of $2.5 million, the companyreported net income of $3.3 million, or $0.06 per diluted share. In the thirdquarter of 2007, excluding stock-based compensation expense of $2.0 million,the company reported net income of $1.3 million, or $0.03 per diluted share. Areconciliation of the company's GAAP and non-GAAP results can be found intoday's earnings news release on the company's website athttp://www.volcanocorp.com.
For the first nine months of 2008, Volcano reported revenues of $122.2million, a 35 percent increase over revenues of $90.6 million in the sameperiod a year ago. On a GAAP basis, the company reported a net loss of $15.1million, or $0.32 per share, compared with a net loss of $2.8 million, or$0.07 per share, in the same period a year ago. Excluding in-process researchand development charges of $12.4 million, $2.9 million in due diligence, legaland accounting expenses related to a proposed acquisition that was notconsummated, and stock-based compensation expense of $7.0 million, Volcanoreported net income of $7.2 million, or $0.14 per diluted share, in the firstnine months of 2008. Excluding stock-based compensation expense of $4.7million, the company reported net income of $1.9 million, or $0.04 per dilutedshare, in the first nine months of 2007.
"We continue to gain market share across all of our businesses andgeographies, while realizing gross margin improvement and leveraging ouroperating expenses. As a result, we achieved profitability on a GAAP basis inthe third quarter of 2008, and have raised our outlook for earnings per sharefor the full year," said Scott Huennekens, president and chief executiveofficer.
"Through the first nine months of 2008, we have placed 537 of our IVUSconsoles versus 420 in the first nine months a year ago, and now have morethan 3,700 of our IVUS and Functional Measurement (FM) consoles placedworldwide. Helping to drive our growth is the leading-edge technology offeredby our devices and Volcano's strong sales and market development initiatives.In addition, we are seeing an increasingly favorable environment forpercutaneous coronary interventions and an ongoing flow of positive data,including that presented in a number of presentations at the recentTranscatheter Cardiovascular Therapeutics (TCT) meeting," Huennekens noted.
"At the same time," he added, "we continue to be excited about our newproduct pipeline that will enable us to address markets that are potentiallylarger than those we are currently serving."
Guidance for 2008
The company updated its guidance for fiscal 2008. It now expects thatrevenues will be at the upper end of its previous range of $164-$168 million,which represents an increase of approximately 27 to 29 percent over full yearrevenues in 2007. It now expects gross margin to be in the range of 62-63percent versus prior guidance of 60-61 percent. The company reiterated that itexpects operating expenses, including stock-based compensation, due diligencecosts recorded in the first quarter, the in-process research and developmentcosts of $12.4 million incurred in the first half of the year, ongoingexpenses associated with the development of technology acquired through theNovelis transaction and approximately $3.1 million of intangible amortization,will be 74-76 percent of revenues. For the full year 2008, the company expectsthat on a GAAP basis it will record a net loss of $0.30-$0.32 per share versusprior guidance of $0.33-$0.37 per share. The company expects to be profitableon a GAAP basis in the fourth quarter of 2008. Excluding stock-basedcompensation expense of approximately $10.0 million, due diligence and in-process research and development costs, the company expects to report non-GAAPnet income of $0.18-$0.20 per diluted share. This compares with prior guidancefor non-GAAP net income of $0.14-$0.18 per share. Weighted average sharesoutstanding at year-end 2008 are expected to be approximately 47.4 millionbasic shares and 50.4 million shares on a diluted basis.
Conference Call
The company will hold a conference call at 2 p.m., Pacific Standard Time(5 p.m. Eastern Standard Time) today. The teleconference can be accessed bycalling (719) 325-4761, passcode 8632414, or via the company's website athttp://www.volcanocorp.com. Please dial in or access the webcast 10-15 minutesprior to the beginning of the call. A replay of the conference call will beavailable through November 12 at (719) 457-0820, passcode 8632414, and via thecompany's website.
Volcano Corporation
Volcano Corporation (Nasdaq: VOLC) offers a broad suite of devicesdesigned to facilitate endovascular procedures, enhance the diagnosis ofvascular and structural heart disease and guide optimal therapies. Thecompany's intravascular ultrasound (IVUS) product line includes ultrasoundconsoles that can be integrated directly into virtually any modern cath lab.Volcano IVUS offers unique features, including both single-use phased arrayand rotational IVUS imaging catheters, and advanced functionality options,such as VH(TM) tissue characterization and ChromaFlo(R). Volcano also providesfunctional measurement (FM) consoles and single-use pressure and flow guidewires and is developing a line of ultra-high resolution Optical CoherenceTomography (OCT) systems and catheters. Currently, more than 3,700 VolcanoIVUS and FM systems are installed worldwide, with approximately half of itsrevenues coming from outside the United States. For more information, visitthe company's website at http://www.volcanocorp.com.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial information asdefined by the U.S. Securities and Exchange Commission Regulation G. Pursuantto the requirements of this regulation, a reconciliation of this non-GAAPfinancial information to our financial statements as prepared under generallyaccepted accounting principles in the United States (GAAP) is included in thispress release. Non-GAAP financial measures provide an indication of ourperformance before certain charges. Our management believes that in order toproperly understand our short-term and long-term financial trends, investorsmay wish to consider the impact of these charges. These charges result fromfacts and circumstances that vary in frequency and/or impact on continuingoperations. Our management believes that these items should be excluded whencomparing our current operating results with those of prior periods as stock-based compensation is a non-cash expense, in-process research and developmentrelates to the costs associated with the May 2008 acquisition of Novelis,Inc., and the December 2007 acquisition of CardioSpectra, Inc., and theacquisition due diligence costs incurred in the first quarter of 2008 relatedto a proposed acquisition that was not consummated, are not reflective of ourcore operating activities. In addition, our management uses results ofoperations before certain charges to evaluate the operational performance ofthe company and as a basis for strategic planning. Investors should note thatthe non-GAAP financial measures used by the company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, asthose of other companies. Investors should consider these non-GAAP measures inaddition to, and not as a substitute for, financial performance measures inaccordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking statements within the meaningof the U.S. Private Securities Litigation Reform Act of 1995. Any statementsin this release regarding Volcano's business that are not historical facts maybe considered "forward-looking statements," including statements regarding thecompany's financial guidance for 2008, market adoption of the company'stechnology, the impact of clinical and other technical data, the success andtiming of product development and clinical trial programs, growth strategiesand market development and product sales. Forward-looking statements are basedon management's current preliminary expectations and are subject to risks anduncertainties, which may cause Volcano's results to differ materially andadversely from the statements contained here. Some of the potential risks anduncertainties that could cause actual results to differ from the resultspredicted are detailed in the company's annual report on Form 10-K, quarterlyreports on Form 10-Q and other filings made with the Securities and ExchangeCommission. Undue reliance should not be placed on forward-looking statements,which speak only as of the date they are made. Volcano undertakes noobligation to update any forward-looking statements to reflect newinformation, events or circumstances after the date they are made, or toreflect the occurrence of unanticipated events.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial information asdefined by the U.S. Securities and Exchange Commission Regulation G. Pursuantto the requirements of this regulation, a reconciliation of this non-GAAPfinancial information to our financial statements as prepared under generallyaccepted accounting principles in the United States (GAAP) is included in thispress release. Non-GAAP financial measures provide an indication of ourperformance before certain charges. Our management believes that in order toproperly understand our short-term and long-term financial trends, investorsmay wish to consider the impact of these charges. These charges result fromfacts and circumstances that vary in frequency and/or impact on continuingoperations. Our management believes that these items should be excluded whencomparing our current operating results with those of prior periods as stock-based compensation is a non-cash expense, in-process research and developmentrelates to the costs associated with the May 2008 acquisition of Novelis, Inc.and the December 2007 acquisition of CardioSpectra, Inc., and the acquisitiondue diligence costs incurred in the first quarter of 2008 related to aproposed acquisition that was not consummated, are not reflective of our coreoperating activities. In addition, our management uses results of operationsbefore certain charges to evaluate the operational performance of the companyand as a basis for strategic planning. Investors should note that the non-GAAPfinancial measures used by the company may not be the same non-GAAP financialmeasures, and may not be calculated in the same manner, as those of othercompanies. Investors should consider these non-GAAP measures in addition to,and not as a substitute for, financial performance measures in accordance withGAAP.VOLCANO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) September 30, December 31, 2008 2007 Assets Current assets: Cash and cash equivalents $108,662 $122,913 Short-term available-for-sale investments 68,049 66,205 Accounts receivable, net 25,036 27,976 Inventories, net 25,698 21,243 Prepaid expenses and other current assets 4,965 3,997 Total current assets 232,410 242,334 Restricted cash 360 365 Property and equipment, net 19,900 13,692 Intangible assets, net 7,439 9,385 Other non-current assets 886 798 $260,995 $266,574 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $13,139 $11,077 Accrued compensation 9,502 9,083 Accrued expenses and other current liabilities 7,441 6,600 Deferred revenues 4,419 5,360 Current maturities of long-term debt 58 120 Total current liabilities 34,559 32,240 Long-term debt 49 78 Deferred license fee 938 1,125 Other 142 194 Total liabilities 35,688 33,637 Stockholders' equity 225,307 232,937 $260,995 $266,574 VOLCANO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenues $44,118 $31,474 $122,242 $90,605 Cost of revenues 16,581 12,285 45,915 35,466 Gross profit 27,537 19,189 76,327 55,139 Operating expenses: Selling, general and administrative 19,546 16,005 62,405 44,271 Research and development 6,879 4,837 18,823 15,241 In-process research and development - - 12,407 - Amortization of intangibles 786 751 2,337 2,313 Total operating expenses 27,211 21,593 95,972 61,825 Operating income (loss) 326 (2,404) (19,645) (6,686) Interest income 1,109 1,213 4,206 3,630 Interest expense (2) (32) (8) (193) Exchange rate gain (loss) (441) 829 1,091 1,042 Income (loss) before provision for income taxes 992 (394) (14,356) (2,207) Provision for income taxes 248 258 707 626 Net income (loss) $744 $(652) $(15,063) $(2,833) Net income (loss) per share - basic $0.02 $(0.02) $(0.32) $(0.07) Net income (loss) per share - diluted $0.01 $(0.02) $(0.32) $(0.07) Weighted-average shares outstanding - basic 47,456 38,694 47,236 38,368 Weighted-average shares outstanding - diluted 50,323 38,694 47,236 38,368 VOLCANO CORPORATION RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS (in thousands, except per share data) (Unaudited) Three Months Ended September 30, 2008 Stock-based GAAP compensation Non-GAAP results expense results Revenues $44,118 $- $44,118 Cost of revenues 16,581 (222) 16,359 Gross profit 27,537 222 27,759 Operating expenses: Selling, general and administrative 19,546 (1,798) 17,748 Research and development 6,879 (493) 6,386 Amortization of intangibles 786 - 786 Total operating expenses 27,211 (2,291) 24,920 Operating income 326 2,513 2,839 Interest income 1,109 - 1,109 Interest expense (2) - (2) Exchange rate loss (441) - (441) Income before provision for income taxes 992 2,513 3,505 Provision for income taxes 248 - 248 Net income $744 $2,513 $3,257 Net income per share - basic $0.02 $0.05 $0.07 Net income per share - diluted $0.01 $0.05 $0.06 Weighted-average shares outstanding - basic 47,456 47,456 Weighted-average shares outstanding - diluted 50,323 50,323 Three Months Ended September 30, 2007 Stock-based GAAP compensation Non-GAAP results expense results Revenues $31,474 $- $31,474 Cost of revenues 12,285 (181) 12,104 Gross profit 19,189 181 19,370 Operating expenses: Selling, general and administrative 16,005 (1,437) 14,568 Research and development 4,837 (359) 4,478 Amortization of intangibles 751 - 751 Total operating expenses 21,593 (1,796) 19,797 Operating loss (2,404) 1,977 (427) Interest income 1,213 - 1,213 Interest expense (32) - (32) Exchange rate gain 829 - 829 Income (loss) before provision for income taxes (394) 1,977 1,583 Provision for income taxes 258 - 258 Net income (loss) $(652) $1,977 $1,325 Net income (loss) per share - basic $(0.02) $0.05 $0.03 Net income (loss) per share - diluted $(0.02) $0.05 $0.03 Weighted-average shares outstanding - basic 38,694 38,694 Weighted-average shares outstanding - diluted 38,694 41,710 VOLCANO CORPORATION RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS (in thousands, except per share data) (Unaudited) Nine Months Ended September 30, 2008 Stock- In- based process Acquisition compensa- research due Non- GAAP tion and diligence GAAP results expense development costs results Revenues $122,242 $- $- $- $122,242 Cost of revenues 45,915 (598) - - 45,317 Gross profit 76,327 598 - - 76,925 Operating expenses: Selling, general and administrative 62,405 (5,094) - (2,878) 54,433 Research and development 18,823 (1,305) - - 17,518 In-process research and development 12,407 - (12,407) - - Amortization of intangibles 2,337 - - - 2,337 Total operating expenses 95,972 (6,399) (12,407) (2,878) 74,288 Operating income (loss) (19,645) 6,997 12,407 2,878 2,637 Interest income 4,206 - - - 4,206 Interest expense (8) - - - (8) Exchange rate gain 1,091 - - - 1,091 Income (loss) before provision for income taxes (14,356) 6,997 12,407 2,878 7,926 Provision for income taxes 707 - - - 707 Net income (loss) $(15,063) $6,997 $12,407 $2,878 $7,219 Net income (loss) per share - basic $(0.32) $0.15 $0.26 $0.06 $0.15 Net income (loss) per share - diluted $(0.32) $0.14 $0.25 $0.06 $0.14 Weighted-average shares outstanding - basic 47,236 47,236 Weighted-average shares outstanding - diluted 47,236 49,859 Nine Months Ended September 30, 2007 Stock- In- based process Acquisition compensa- research due Non- GAAP tion and diligence GAAP results expense development costs results Revenues $90,605 $- $- $- $90,605 Cost of revenues 35,466 (434) - - 35,032 Gross profit 55,139 434 - - 55,573 Operating expenses: Selling, general and administrative 44,271 (3,486) - - 40,785 Research and development 15,241 (783) - - 14,458 Amortization of intangibles 2,313 - - - 2,313 Total operating expenses 61,825 (4,269) - - 57,556 Operating loss (6,686) 4,703 - - (1,983) Interest income 3,630 - - - 3,630 Interest expense (193) - - - (193) Exchange rate gain 1,042 - - - 1,042 Income (loss) before provision for income taxes (2,207) 4,703 - - 2,496 Provision for income taxes 626 - - - 626 Net income (loss) $(2,833) $4,703 $- $- $1,870 Net income (loss) per share - basic $(0.07) $0.12 $- $- $0.05 Net income (loss) per share - diluted $(0.07) $0.11 $- $- $0.04 Weighted-average shares outstanding - basic 38,368 38,368 Weighted-average shares outstanding - diluted 38,368 41,739
SOURCE Volcano Corporation
