Vascular Solutions Reports Second Quarter Results
- 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%
MINNEAPOLIS, July 22, 2014 (GLOBE NEWSWIRE) -- 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.
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