EndoChoice Announces First Quarter 2016 Financial Results

ALPHARETTA, Ga., May 4, 2016 /PRNewswire/ -- EndoChoice Holdings, Inc. (NYSE: GI) announced today financial results for the first quarter 2016.

Highlights

• Revenue of $18.5 million, up 10% year-over-year
• Shipped 30 Fuse® Systems including Company records of 29 end-user systems and 19 domestic systems, end-user systems up 45% year-over-year
• Pathology revenue up 37% year-over-year driven by 54% specimen growth and 8% customer growth
• International revenue up 30% year-over-year

Mark Gilreath, Founder and Chief Executive Officer of EndoChoice, said, "The first quarter of 2016 marks a solid start to the year, driven by continued adoption of our broad product portfolio in the GI market. Our sales force expansion and optimization efforts have begun to meaningfully impact results, as our team delivered 29 worldwide Fuse end-user shipments, up 45% year-over-year. We expect this positive momentum will continue, particularly in the second half of the year as our Territory Managers gain increased tenure and new products are introduced. We also had a strong quarter in pathology services and single use products, driven by our growing Fuse installed base, new product and service offerings, and growing effectiveness in selling our complete platform of products."

First Quarter 2016 Financial Review
Total revenue for the first quarter 2016 was $18.5 million, compared to $16.8 million in the first quarter 2015, an increase of 10.2%. First quarter 2016 revenue growth was driven by growth in all business lines: imaging, single use products and pathology. First quarter 2016 total revenue consisted of $5.6 million in Imaging, $8.8 million in Single-Use Products, and $4.1 million in Pathology. This compares to first quarter 2015 total revenue, which consisted of $5.5 million in Imaging, $8.3 million in Single-Use Products, and $3.0 million in Pathology.

During the first quarter 2016, the Company shipped 30 Fuse systems, including 19 domestically, 10 to international end-users, and 1 international demo unit. This compares to the shipment of 26 Fuse systems in the first quarter 2015, including 18 domestic, 2 to international end-users, and 6 international demo units. 

Gross profit was $4.5 million, or 24.5% of revenue, for the first quarter 2016, compared to gross profit of $5.6 million, or 33.3% of revenue, for the first quarter 2015. First quarter 2016 gross margin was negatively impacted by a planned $0.6 million obsolescence charge related to older versions of Fuse inventory and service parts, triggered by pending product design changes, as well as $0.3M in manufacturing scrap incurred during the startup of a new production process. Excluding these items, first quarter 2016 gross margin would have been 29.7%.

Operating expenses for the first quarter 2016 were $20.6 million, compared to $18.0 million for the first quarter 2015, driven by higher sales commission expense on higher revenue, an increase in the number of Territory Managers and Account Managers in our domestic sales force and increased stock based compensation expense of $1.3 million after our initial public offering.  Net loss for the first quarter 2016 was $17.1 million, or ($0.68) per share, compared to a net loss of $15.3 million for the first quarter 2015, or ($1.00) per share. Weighted average basic shares outstanding were 25.0 million for the first quarter 2016.

On a non-GAAP basis, the Company reported an Adjusted EBITDA loss of $11.9 million, or (64.2%) of revenue, for the first quarter 2016, compared to an Adjusted EBITDA loss of $10.5 million, or (62.5%) of revenue, for the first quarter 2015.

Financial Guidance
EndoChoice is reiterating its financial guidance for the full year 2016 which was provided on its fourth quarter and full year 2015 earnings conference call:

• Total revenue in the range of $86.0 million to $93.0 million;
• Gross margin of 37-38%;
• Operating expenses in the range of $76.0 million to $77.5 million;
• Net loss in the range of ($49.0) million to ($50.5) million, or to ($1.95) to ($2.01) per share assuming 25,100,000 weighted average shares outstanding for the year;
• Adjusted EBITDA loss in the range of ($30.0) million to ($31.5) million; and
• Free Cash Flow in the range of ($39.0) million to ($42.0) million after approximately $7.0 million of capital expenditures.

Additional information regarding EndoChoice's results can be found by visiting the Investor Relations section of EndoChoice's website at http://investor.endochoice.com.

Conference Call
EndoChoice will hold a conference call on Wednesday, May 4, 2016 at 9:00 a.m. ET to discuss the results. The dial-in numbers are (877) 328-5344 for domestic callers and (412) 317-5469 for international callers. A live webcast of the conference call will be available on the investor relations section of the Company's website at http://investor.endochoice.com.  

A replay of the call will be available starting on May 4, 2016 through May 11, 2016. To access the replay, dial (877) 344-7529 for domestic callers and (412) 317-0088 for international callers, with the replay access code 10083795. The webcast replay will be available in the investor relations section of the Company's website for 90 days following the completion of the call and a transcript will be posted to the investor relations website.

Forward-Looking Statement
This press release contains "forward-looking statements" as defined under U.S. federal securities laws, including, among other things, statements about our operations and financial performance. Examples of forward-looking statements include, but are not limited to, our projected total revenue, gross margin, operating expense, net loss, Adjusted EBITDA and cash flow for the full year 2016, as well as anticipated product launches in 2016.

Forward-looking statements include all statements that are not historical facts.  Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this press release. Factors that could affect these statements include, but are not limited to, our ability to achieve or sustain profitability; general economic, market, or business conditions; the opportunities that may be presented to and pursued by the Company; conditions in the medical technology industry; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the ability to successfully commercialize our products, including Fuse®; competition from new or existing competitors; and other risks described from time to time in EndoChoice's filings with the Securities and Exchange Commission ("SEC") (including our Form 10-K for the year ended December 31, 2015 and the prospectus filed by EndoChoice with the SEC on June 5, 2015).  The discussion of these risks is specifically incorporated by reference into this press release.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties many of which are beyond our control or are currently unknown to us as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. 

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