RANCHO CORDOVA, Calif., May 7 /PRNewswire-FirstCall/ -- Volcano Corporation , a leading provider of intravascular ultrasound (IVUS) and functional measurement (FM) products designed to enhance the diagnosis and treatment of vascular and structural heart diseases, today reported that revenues in the first quarter of 2007 increased 49 percent over revenues in the first quarter a year ago.
For the quarter ended March 31, 2007, Volcano reported record revenues of $29.6 million compared with revenues of $19.9 million in the first quarter of 2006. The company said its financial performance was driven by a 33 percent increase in IVUS disposable revenues versus the first quarter of the prior year.
Volcano reported its third consecutive quarter of profitability on a GAAP basis, with net income of $1.7 million, or $0.04 per diluted share, versus a net loss of $6.4 million, or $0.93 per share, in the first quarter a year ago. The company recorded stock-based compensation expense of $1.2 million, versus $689,000 in the same quarter a year ago. Excluding stock-based compensation expense, Volcano recorded net income of $2.9 million, or $0.07 per diluted share, versus a net loss of $5.7 million, or $0.83 per share, in the first quarter of 2006. Weighted-average diluted shares outstanding were 41.7 million in the first quarter of 2007 versus 6.9 million a year ago. The increase reflects the conversion of preferred stock to common stock, the exercise of warrants and the company's equity offerings in June and December of last year. A reconciliation of the company's GAAP to non-GAAP results can be found in today's earnings news release on the company's website at www.volcanocorp.com.
"Volcano had an excellent quarter with strong revenue growth and significant accomplishments that support our long-term growth strategy, including major marketing agreements with leading industry partners. In addition, we saw the continued release of data that portrays the important role that IVUS can play in enhancing the safety and efficacy of stenting and other endovascular procedures," said Scott Huennekens, president and chief executive officer of Volcano.
During the quarter, Volcano announced two strategic transactions designed to support its growth objectives. They included a collaboration with Royal Philips Electronics in which the company's suite of s5i IVUS consoles will be compatible with Philips' Allura Xpder FD cath lab systems. In addition, Volcano and ev3 Inc. announced an exclusive U.S. distribution agreement under which Volcano will be selling ev3's Spider FX, a leading embolic protection device for use in stenting of saphenous vein grafts (SVG's).
"The Philips agreement is important because we are now partnering with another major cath lab equipment provider. The ability to integrate our IVUS technology into their cath lab offerings will enable IVUS to be integrated quickly and seamlessly. In addition, we now have the opportunity to create regional co-marketing agreements with Philips in the U.S., Japan and Europe. Volcano is the only IVUS and functional measurement company with partnerships and safety and compatibility testing verifications with the large angiography companies," Huennekens said.
"The ev3 agreement will not only facilitate the market opportunity for our core offerings, but it also provides another product that can leverage the strong presence of our sales force. Transactions such as these, along with our programs to create product differentiation, are key elements of our growth strategy," he added.
"In addition to the successful implementation of initiatives to increase our presence in current markets, we are also executing on our product development and clinical strategies designed to address future opportunities, including stent optimization, the use of IVUS in conjunction with diagnostic angiography, Intra-Cardiac Echo and vulnerable plaque and applications in the carotid and peripheral arteries," Huennekens noted.
Guidance for 2007
Volcano expects revenues of approximately $125.0 million, which compares to prior revenue guidance of approximately $120.0 million. The company continues to expect gross margin for the year will be 60-61 percent and operating expenses to be 67-69 percent of revenues, as the company intends to accelerate its plan to increase its sales force and to build out its infrastructure to support future growth. The company expects to report a net loss on a GAAP basis of approximately $0.14 per share, compared to prior guidance of $0.15 per share. Weighted average basic shares outstanding are expected to be approximately 38.3 million at year end. Excluding stock-based compensation, Volcano expects to report net income of approximately $0.04 per diluted share, versus prior guidance of $0.03 per diluted share, assuming weighted average diluted shares outstanding at year-end of approximately 41.9 million.
Conference Call
The company will hold a conference call today at 2 p.m. Pacific Daylight Time (5 p.m. Eastern Daylight Time). The teleconference can be accessed by calling (913) 312-1293, passcode 4758002, or via the company's website at www.volcanocorp.com Please dial in or access the website 10-15 minutes prior to the beginning of the call. A replay of the conference call will be available until May 14, at (719) 457-0820, passcode 4758002, and via the company's website.
Volcano Corporation
Volcano Corporation offers a broad suite of devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart diseases and guide optimal therapies. The company's intravascular ultrasound (IVUS) product line includes ultrasound consoles that can be integrated directly into virtually any modern cath lab. Volcano IVUS offers unique features, including both single-use phased array and rotational IVUS imaging catheters, and advanced functionality options, such as VH(TM) IVUS tissue characterization. Volcano also provides functional measurement (FM) consoles and single-use pressure and flow guide wires. Currently, more than 2,600 Volcano IVUS and FM systems are installed worldwide, with approximately half of its revenues coming from outside the United States. For more information, visit the company's website at www.volcanocorp.com
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial information as defined by the U.S. Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, a reconciliation of this non-GAAP financial information to our financial statements as prepared under generally accepted accounting principles in the United States (GAAP) is included in this press release. Non-GAAP financial measures provide an indication of our performance before certain charges. Our management believes that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these charges. These charges result from facts and circumstances that vary in frequency and/or impact on continuing operations. Our management believes that these items should be excluded when comparing our current operating results with those of prior periods as stock- based compensation is a non-cash expense. In addition, our management uses results of operations before these certain charges to evaluate the operational performance of the company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial measures in accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this press release regarding Volcano's business that are not historical facts may be considered "forward-looking statements," including statements regarding the company's financial guidance for 2007, expectations and outcomes regarding current and potential collaborations with other companies, the impact of clinical and other technical data, the safety and efficacy of the company's products, the success and timing of product development and clinical trial programs, market development and product use, and regulatory approvals. Forward-looking statements are based on management's current, preliminary expectations and are subject to risks and uncertainties, which may cause Volcano's 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 from the results predicted are detailed in the company's annual report on Form 10-K and other filings made with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Volcano undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.
VOLCANO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) March 31, December 31 2007 2006 Assets Current assets: Cash and cash equivalents $54,385 $77,738 Short term investments available for sale 42,484 17,787 Accounts receivable, net 22,725 21,575 Inventories 15,157 13,423 Prepaid expenses and other current assets 2,189 2,208 Total current assets 136,940 132,731 Restricted cash 354 352 Property and equipment, net 10,043 9,333 Intangible assets, net 11,187 11,946 Other non-current assets 695 363 $159,219 $154,725 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $8,957 $8,209 Accrued compensation 6,203 5,993 Accrued expenses and other current liabilities 4,556 5,292 Deferred revenues 3,480 2,675 Current maturities of long- term debt 1,557 1,654 Total current liabilities 24,753 23,823 Long-term debt 44 66 Deferred license fee 1,313 1,375 Other 258 279 Total liabilities 26,368 25,543 Stockholders' equity 132,851 129,182 $159,219 $154,725 VOLCANO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2007 2006 Revenues $29,579 $19,872 Cost of revenues 10,865 8,220 Gross profit 18,714 11,652 Operating expenses: Selling, general and administrative 12,584 11,645 Research and development 4,688 4,553 Amortization of intangibles 786 774 Total operating expenses 18,058 16,972 Operating income (loss) 656 (5,320) Interest expense (89) (1,312) Interest and other income, net 1,317 291 Income (loss) before provision for income taxes 1,884 (6,341) Provision for income taxes 210 33 Net income (loss) $1,674 $(6,374) Net income (loss) per share - basic $0.04 $(0.93) Net income (loss) per share - diluted $0.04 $(0.93) Weighted-average shares outstanding - basic 37,964 6,891 Weighted-average shares outstanding - diluted 41,685 6,891 VOLCANO CORPORATION RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS (in thousands, except per share data) (Unaudited) Three Months Ended March 2007 Stock-based GAAP compensation Non-GAAP results expense results Revenues $29,579 $- $29,579 Cost of revenues 10,865 (112) 10,753 Gross profit 18,714 112 18,826 Operating expenses: Selling, general and administrative 12,584 (923) 11,661 Research and development 4,688 (208) 4,480 Amortization of intangibles 786 - 786 Total operating expenses 18,058 (1,131) 16,927 Operating income 656 1,243 1,899 Interest expense (89) - (89) Interest and other income, net 1,317 - 1,317 Income before provision for income taxes 1,884 1,243 3,127 Provision for income taxes 210 - 210 Net income $1,674 $1,243 $2,917 Net income per share - basic $0.04 $0.03 $0.08 Net income per share - diluted $0.04 $0.03 $0.07 Weighted-average shares outstanding - basic 37,964 37,964 Weighted-average shares outstanding - diluted 41,685 41,685 Three Months Ended March 2006 Stock-based GAAP compensation Non-GAAP results expense results Revenues $19,872 $- $19,872 Cost of revenues 8,220 (68) 8,152 Gross profit 11,652 68 11,720 Operating expenses: Selling, general and administrative 11,645 (506) 11,139 Research and development 4,553 (115) 4,438 Amortization of intangibles 774 - 774 Total operating expenses 16,972 (621) 16,351 Operating income (loss) (5,320) 689 (4,631) Interest expense (1,312) - (1,312) Interest and other income, net 291 - 291 Income (loss) before provision for income taxes (6,341) 689 (5,652) Provision for income taxes 33 - 33 Net income (loss) $(6,374) $689 $(5,685) Net income (loss) per share - basic $(0.93) $0.10 $(0.83) Net income (loss) per share - diluted $(0.93) $0.10 $(0.83) Weighted-average shares outstanding - basic 6,891 6,891 Weighted-average shares outstanding - diluted 6,891 6,891
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial information as defined by the U.S. Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, a reconciliation of this non-GAAP financial information to our financial statements as prepared under generally accepted accounting principles in the United States (GAAP) is included in this press release. Non-GAAP financial measures provide an indication of our performance before certain charges. Our management believes that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these charges. These charges result from facts and circumstances that vary in frequency and/or impact on continuing operations. Our management believes that these items should be excluded when comparing our current operating results with those of prior periods as stock- based compensation is a non-cash expense. In addition, our management uses results of operations before certain charges to evaluate the operational performance of the company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures in accordance with GAAP.
VOLCANO CORPORATION REVENUE SUMMARY (in millions) (Unaudited) Q1 '07 Q1 '06 IVUS Systems: United States $3.7 $0.7 Japan 0.7 0.3 Europe 0.8 0.5 Rest of World 0.6 0.5 Total IVUS Systems $5.8 $2.0 IVUS Disposables: United States $9.4 $7.6 Japan 6.1 4.5 Europe 3.2 2.1 Rest of World 0.6 0.3 Total IVUS Disposables $19.3 $14.5 FM: United States $1.6 $1.3 Japan 0.7 0.5 Europe 1.2 0.9 Rest of World 0.2 0.1 Total FM $3.7 $2.8 Other 0.8 0.6 Total $29.6 $19.9
Volcano CorporationCONTACT: John Dahldorf, Chief Financial Officer of Volcano Corporation,+1-916-638-8008; or Neal B. Rosen of Kalt Rosen Group/Ruder-Finn West,+1-415-692-3058, for Volcano Corporation
Web site: http://www.volcanocorp.com//
