- Record quarterly revenues increase 12% to $30.7
million
- GAAP earnings per share increase 9% to
$0.18
- Raising bottom-end of 2014 revenue guidance range to
$123 million from $121 million, representing growth of 12% at new
midpoint
- Raising 2014 GAAP EPS guidance to a range of
$0.73-$0.77, representing growth of 12%-18%
Vascular Solutions, Inc. (Nasdaq:VASC) today reported financial
results for the second quarter ended June 30, 2014. Net revenue
increased 12% to a record quarterly level of $30.7 million from
$27.4 million in the second quarter of 2013. The company's revenue
guidance range for the second quarter was $30.2 million to $31.2
million.
U.S. product sales increased 8% to $25.1 million compared to
$23.3 million in the year-ago second quarter, while international
product sales increased 39% to $5.5 million compared to $4.0
million in the year-ago second quarter.
Gross margin was 66.5% compared to 68.8% in the year-earlier
second quarter. The decrease in the most recent second quarter is
the result of a higher proportion of sales to international markets
through distributors, which carry a lower margin, and approximately
$360,000 in expenses related to the previously announced recall of
the Langston® catheter. Without the Langston
recall expenses, gross margin in the most recent second quarter
would have been approximately 67.7%. Vascular Solutions expects
GAAP gross margin for the remainder of the year in a range of 67.5%
to 68.5%.
Operating income in the second quarter was $5.0 million,
representing an operating margin of 16.4%, an increase from an
operating margin of 16.2% in the year-earlier second quarter.
Adjusted for the overall impact of the Langston recall, operating
income in the second quarter of 2014 would have been approximately
$5.6 million, representing an operating margin of 18.1%.
On a GAAP basis, EPS in the second quarter of 2014 was $0.18, an
increase of 9% from $0.17 in the second quarter of 2013 and within
the company's EPS guidance for the quarter of between $0.18 and
$0.19. Adjusted EPS in the second quarter, excluding the costs
associated with the Langston product recall, was $0.20, an increase
of 22% from the second quarter of 2013.
"During the second quarter, we again achieved a record level of
quarterly revenue while sustaining double-digit revenue growth,"
said Howard Root, Chief Executive Officer of Vascular Solutions.
"Even though we continue to incur substantial legal expenses
related to our intellectual property litigation with Boston
Scientific and our response to the government criminal
investigation of our Vari-Lase® Short Kit product,
we continue to improve our operating margins. We are very pleased
to be on our way toward delivering our 11th consecutive year of
double-digit revenue growth while continuing to grow our
profitability and investing heavily for our future growth and
sustaining our pace of new product innovation."
Second Quarter Revenue by Product Line
Catheter Products. Sales of catheter products,
the company's largest product line, increased 17% during the second
quarter to $20.4 million compared to $17.4 million in the second
quarter of 2013.
Within the catheter products category, sales of the
GuideLiner® catheter were $7.8 million during the
second quarter, an increase of 49% from the $5.2 million in the
year-ago second quarter and an increase of 16% sequentially from
the $6.7 million in the first quarter of 2014. "We are gratified by
the continued strong performance of GuideLiner, which included 42%
growth in the U.S. despite the return to the market of the only
competitive guide extension product in April," Mr. Root said.
"Outside the U.S., our GuideLiner revenues grew 68%, reflecting
continued strong uptake in Japan, where GuideLiner was launched
during January. Even without the contribution from Japan, our
second quarter overseas GuideLiner revenue grew by a very strong
42%, reflecting continued adoption of our pioneering rapid exchange
guide extension technique in challenging interventions."
Other catheter products that contributed significantly to the
year-over-year sales increase in the second quarter were the
Guardian® hemostat valve and related Flamingo™
inflation device; the SuperCross™ microcatheters, which grew 134%,
mainly reflecting the early stages of launch in Japan; the
TwinPass® dual access catheter, which grew 19%;
specialty guidewires for interventional procedures, which grew 16%;
and micro introducer kits, which grew 15%. Second quarter sales of
Pronto® aspiration catheters were $4.6 million, stable on a
sequential basis but down 10% from the year-earlier quarter,
reflecting ongoing heavy price competition in the aspiration
catheter market.
Hemostat Products. Sales of hemostat products
(mainly consisting of D-Stat® Dry, D-Stat Flowable, and radial
products) were $6.2 million in the second quarter, an increase of
3% from the year-earlier $6.0 million. Growth in this category was
driven by sales of the Vasc™ Band radial hemostatis device and the
Accumed™ wrist positioning splint for radial catheterizations.
These two products combined contributed just over $1.1 million in
sales during the second quarter, representing an increase of more
than 51% in sales of these radial products.
Vein Products and Services. In the vein
products and services category, second quarter net revenues
increased 5% to $4.0 million from $3.8 million in the year-ago
quarter. Vein product revenue during the second quarter included
$2.0 million from reprocessing for ClosureFAST® radiofrequency
catheters, an increase of 14% compared to $1.8 million in the
year-ago second quarter.
Financial Guidance
For 2014, Vascular Solutions is raising the bottom-end of its
net revenue guidance to $123 million, resulting in a new range of
$123 million to $125 million. The mid-point of the new range
represents an increase of 12% from $110.5 million in 2013.
Previously, the company's revenue guidance range for 2014 was $121
million to $125 million.
Vascular Solutions is also raising its GAAP earnings guidance
for 2014 to a range of $0.73-$0.77 per share, representing an
increase of 12%-18% over the $0.65 reported in 2013. The company's
previous EPS guidance range for 2014 was $0.71-$0.75. Included in
the company's 2014 earnings guidance are $3.8 million in non-cash
stock-based compensation, $1.6 million in amortization of
intangibles, between $1.4 million and $1.5 million for the U.S.
medical device excise tax, and an assumed 36% tax rate.
For the third quarter of 2014, Vascular Solutions is providing
guidance for net revenue of between $30.5 million and $31.5
million, which at the mid-point represents growth of approximately
11% from $28.0 million in the third quarter of 2013. Net earnings
for the third quarter of 2014 on a GAAP basis are projected to be
between $0.19 and $0.20 per fully diluted share, compared to $0.16
in the third quarter of 2013. The company's net earnings guidance
for the third quarter of 2014 includes $800,000 in non-cash
stock-based compensation, $400,000 in amortization of intangibles,
$370,000 for the U.S. medical device excise tax, and an assumed 36%
effective income tax rate.
Cash Flow and Balance Sheet Highlights
Vascular Solutions ended the second quarter of 2014 with just
over $36.0 million in cash and cash equivalents, up from $32.8
million at the end of the March quarter of 2014 and up from $19.7
million at the end of the second quarter a year ago. During the
most recent quarter, the company generated $3.5 million in cash
from operations and used cash of just under $1.0 million for
capital expenditures and just under $500,000 to purchase shares
that vested under outstanding restricted stock awards to satisfy
income tax withholding requirements.
"Vascular Solutions continues to have excellent operating cash
flows, a strong balance sheet, good working capital flexibility,
strong R&D investments to support our future growth objectives,
and a commitment to expanding our revenue opportunities through
tuck-in acquisitions and alliances as attractive opportunities
arise," Mr. Root said.
Conference Call & Webcast Information
Vascular Solutions will host a live webcast starting at 3:30
p.m., Central Time today to discuss the information contained in
this press release. The live webcast may be accessed on the
investor relations portion of the company's website at
www.vasc.com. An audio replay of the call will be available until
Tuesday, July 29, 2014, by dialing 888-203-1112 and entering
conference ID# 1350115. A recording of the call will also be
archived on the Company's website, www.vasc.com, until Tuesday,
July 29, 2014. During the conference call the Company may answer
one or more questions concerning business and financial
developments and trends, the Company's view on earnings forecasts
and new product development and financial matters affecting the
Company, some of the responses to which may contain information
that has not been previously disclosed.
VASCULAR SOLUTIONS, INC. |
CONDENSED STATEMENTS OF
EARNINGS |
(In thousands, except per share
data) |
|
|
|
|
|
|
Three Months Ended June
30, |
Six Months Ended June 30, |
|
2014 |
2013 |
2014 |
2013 |
|
(unaudited) |
(unaudited) |
|
|
|
|
|
Revenue: |
|
|
|
|
Product revenue |
$30,606 |
$27,294 |
$60,451 |
$53,271 |
License and collaboration
revenue |
71 |
59 |
133 |
147 |
Total revenue |
30,677 |
27,353 |
60,584 |
53,418 |
|
|
|
|
|
Product costs and operating expenses: |
|
|
|
|
Cost of goods
sold |
10,283 |
8,538 |
19,867 |
17,235 |
Collaboration
expenses |
20 |
8 |
31 |
8 |
Research and
development |
3,228 |
3,482 |
6,518 |
6,887 |
Clinical and
regulatory |
1,275 |
1,099 |
2,575 |
2,262 |
Sales and
marketing |
7,344 |
6,784 |
15,080 |
13,756 |
General and
administrative |
2,731 |
2,269 |
5,590 |
4,509 |
Medical device
excise taxes |
353 |
339 |
698 |
656 |
Amortization of
purchased technology and intangibles |
412 |
392 |
823 |
759 |
Operating earnings |
5,031 |
4,442 |
9,402 |
7,346 |
|
|
|
|
|
Interest expense |
-- |
(3) |
-- |
(6) |
Foreign exchange gain/(loss) |
(1) |
4 |
1 |
(9) |
Earnings before income taxes |
5,030 |
4,443 |
9,403 |
7,331 |
|
|
|
|
|
Income tax expense |
(1,825) |
(1,635) |
(3,400) |
(2,398) |
Net earnings |
$3,205 |
$2,808 |
$6,003 |
$4,933 |
|
|
|
|
|
Net earnings per share - basic |
$0.19 |
$0.17 |
$0.36 |
$0.31 |
Weighted average shares used in calculating -
basic |
16,807 |
16,246 |
16,761 |
16,167 |
Net earnings per share - diluted |
$0.18 |
$0.17 |
$0.34 |
$0.29 |
Weighted average shares used in calculating -
diluted |
17,589 |
16,855 |
17,585 |
16,771 |
|
VASCULAR SOLUTIONS, INC. |
CONDENSED BALANCE SHEETS |
(In thousands) |
|
|
|
|
June 30, 2014 (unaudited) |
December 31, 2013 (note) |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$36,046 |
$30,785 |
Accounts receivable, net |
15,697 |
14,481 |
Inventories |
15,596 |
14,002 |
Prepaid expenses and other |
3,184 |
2,472 |
Current portion of deferred tax
assets |
6,000 |
6,000 |
Total current assets |
76,523 |
67,740 |
Property, plant and equipment, net |
16,920 |
16,187 |
Goodwill |
10,510 |
10,532 |
Intangible assets, net |
11,108 |
11,943 |
Deferred tax assets, net of current portion
and liabilities |
2,056 |
1,739 |
Total assets |
$117,117 |
$108,141 |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Total current liabilities |
$12,432 |
$11,385 |
|
|
|
Long-term deferred revenue and contingent
consideration, net of current portion |
304 |
406 |
|
|
|
Shareholders' equity: |
|
|
Total shareholders' equity |
104,381 |
96,350 |
Total liabilities and
shareholders' equity |
$117,117 |
$108,141 |
|
|
|
Note: Derived from the audited financial
statements at that date. |
|
|
|
VASCULAR SOLUTIONS, INC. |
NON-GAAP RECONCILIATION OF
ADJUSTED EARNINGS |
(Unaudited, in thousands except
per-share data and percentages) |
|
|
|
|
|
|
Three Months Ended June 30, 2014 |
Langston Recall (a) Adjustments |
|
Non-GAAP Adjusted |
|
|
|
|
|
Revenue |
$30,677 |
$300 |
(b) |
$30,977 |
Cost of goods sold |
10,283 |
(261) |
(c) |
10,022 |
Gross profit |
20,394 |
561 |
|
20,955 |
|
|
|
|
|
Operating earnings |
5,031 |
561 |
|
5,592 |
|
|
|
|
|
Gross margin |
66.5% |
|
|
67.7% |
Operating margin |
16.4% |
|
|
18.1% |
|
|
|
|
|
EPS - current period |
$0.18 |
$0.02 |
(d) |
$0.20 |
|
|
|
|
|
|
|
|
|
(a) On May 23, 2014, Vascular Solutions, Inc.
initiated a voluntary nationwide recall of its Langston dual lumen
catheters. As a result of the recall, during the second
quarter of 2014 the Company estimates reduced Langston product
revenue of $300,000 and additional costs of approximately $360,000
related to scrap, product returns and freight associated with
recalling the product. The Company resumed shipping the
Langston catheters at the end of June 2014. |
|
|
|
|
(b) Estimated revenue lost in the second
quarter of 2014 due to the Langston product recall |
|
|
|
|
(c) Reflects $360,000 of Langston product
recall costs less $99,000 in cost of goods sold not incurred due to
the revenue lost in the second quarter |
|
|
|
|
(d) Reflects $300,000 of estimated lost
revenue and $360,000 of recall costs, after tax at an assumed rate
of 36% |
About Vascular Solutions
Vascular Solutions, Inc. is an innovative medical device company
that focuses on developing unique clinical solutions for coronary
and peripheral vascular procedures. The company's product line
consists of more than 80 products and services in three categories:
catheter products, hemostat products and vein
products. Vascular Solutions delivers its products and
services to interventional cardiologists, interventional
radiologists, electrophysiologists and vein specialists through its
direct U.S. sales force and international independent distributor
network.
All listed trademarks are the property of Vascular Solutions,
Inc. with the exception of ClosureFAST, which is a registered
trademark of Covidien LP Limited Partnership.
Safe Harbor for Forward-Looking Statements
The information in this press release contains forward-looking
statements that involve risks and uncertainties. Those statements
include expectations about our future revenues, gross margin,
operating margins, non-cash stock-based compensation expense,
amortization of intangibles, U.S. medical device excise tax, income
tax rate, and earnings per share. Our actual results could differ
materially from those anticipated in these forward-looking
statements. Important factors that may cause such differences
include those discussed in our Annual Report on Form 10-K for the
year ended December 31, 2013 and other recent filings with the
Securities and Exchange Commission. The risks and uncertainties
include, without limitation, risks associated with the need for
adoption of our new products, exposure to intellectual property
claims and costs of intellectual property litigation, current or
future government investigations, significant variability in
quarterly results, exposure to possible product liability claims,
the development of new products by others, constraints or
interruptions in production from key suppliers, doing business in
international markets, the availability of third party
reimbursement, the mix of our revenues between products we
manufacture and sell in the United States, products we sell
internationally, service reviews and sales of purchased finished
goods, and actions by the FDA.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, we are reporting
non-GAAP financial results including revenues, gross margin,
operating income and earnings per share adjusted for the effects of
the Langston product recall. We believe that these non-GAAP
measures provide meaningful insight to investors by adjusting for
unusual and unpredictable events and allowing investors to evaluate
our financial performance without the effects of such
events. We use these non-GAAP measures to assess our operating
performance and to compare results between periods. The method we
use to produce non-GAAP results is not in accordance with GAAP and
may differ from the methods used by other companies. Non-GAAP
results should not be regarded as a substitute for corresponding
GAAP measures but instead should be utilized as a supplemental
measure of operating performance in evaluating our business.
Non-GAAP measures do have limitations in that they do not reflect
certain items that may have a material impact upon our reported
financial results. As such, these non-GAAP measures presented
should be viewed in conjunction with both our financial statements
prepared in accordance with GAAP and the reconciliation of the
supplemental non-GAAP financial measures to the comparable GAAP
results provided for the specific period presented, which is
attached to this release.
For further information, connect to www.vasc.com.
CONTACT: Vascular Solutions, Inc.
James Hennen, CFO
JHennen@vasc.com
(763) 656-4352
Phil Nalbone, VP
PNalbone@vasc.com
(763) 656-4371
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