HEARTWARE INTERNATIONAL INC FRAMINGHAM, Mass., July 31, 2014 /PRNewswire/ -- HeartWare International, Inc. (NASDAQ: HTWR), a leading innovator of less invasive, miniaturized circulatory support technologies that are revolutionizing the treatment of advanced heart failure, today announced revenue of $70.1 million for the second quarter ended June 30, 2014, a 38% increase compared to $50.8 million in revenue for the same period of 2013.
During the second quarter, 674 HeartWare(®) Ventricular Assist Systems were sold globally compared to 523 units in the second quarter of 2013. U.S. revenue, generated through the sale of 338 units during the second quarter of 2014, was $36.9 million, a 47% increase from $25.1 million in the second quarter of 2013. Revenue from international markets was $33.2 million, an increase of 29% from $25.7 million in the second quarter of 2013.
"We are pleased to announce another encouraging quarterly performance, with record sales and more than 300 units in both the U.S. as well as international markets for the second consecutive quarter," said Doug Godshall, President and Chief Executive Officer. "More than 6,000 patients from 40 countries around the globe have received the HeartWare System as a treatment for their advanced heart failure, with patient support extending as long as seven years.
"In addition to our commercial efforts, we continue to make investments to advance our clinical trials, including enrolling the second phase of our destination therapy study in the U.S., moving toward completion of enrollment of our Japan trial and preparing to initiate the clinical evaluation of our next-generation MVAD(®) System," Godshall said. "As we continue to drive these programs forward, our highest internal priority remains addressing and remedying the observations raised by FDA following an inspection at our Miami Lakes, Florida facility earlier this year."
For the six months ended June 30, 2014, revenue increased approximately 36% to $136.6 million, compared to $100.1 million in the first six months of 2013.
Currency fluctuations benefitted revenue growth by approximately 3.1 and 2.6 percentage points in the three and six months ended June 30, 2014, respectively, as compared to the same periods in 2013.
Gross margin percentage improved to 67.3% in the second quarter of 2014, as compared to 62.9% in the second quarter of 2013. The improvement compared to the same period in 2013 primarily reflects efficiencies associated with increased manufacturing throughput, partially offset by a charge of $1.7 million for the extension of a prior field safety corrective action to replace certain older batteries through a voluntary recall initiated yesterday, July 30, 2014.
Total operating expenses for the second quarter of 2014 were $34.2 million, as compared to $41.4 million in the second quarter of 2013. Total operating expenses for the second quarter of 2014 include a $13.7 million reduction in the estimated fair value of the contingent consideration for CircuLite, which was acquired by HeartWare in December 2013.
Research and development expense was $26.9 million for the second quarter of 2014, as compared to $24.2 million in the same period of 2013. Increased development costs are primarily attributable to the acquisition of CircuLite, preparations for human clinical testing for the MVAD(®) System and associated peripherals, and increasing clinical activity.
Selling, general and administrative expenses were $20.9 million in the second quarter of 2014, compared to $17.2 million in the second quarter of 2013. The increase in selling, general and administrative expenses primarily reflects the acquisition of CircuLite, the expansion of sales and marketing activities, increased employee expenses and other administrative expenses.
Net income for the second quarter of 2014 was $8.4 million, or $0.49 per basic and $0.48 per diluted share, compared to a net loss of $12.9 million, or a loss of $0.79 per basic and diluted share, in the second quarter of 2013. Net income for the second quarter of 2014 includes a $13.7 million reduction in the estimated fair value of the contingent consideration for the CircuLite acquisition. This non-recurring benefit was the primary factor resulting in positive net income in the second quarter of 2014. For the six months ended June 30, 2014, the company recorded a net loss of $11.1 million, or a $0.65 loss per basic and diluted share, compared to a $25.9 million net loss, or a loss of $1.66 per basic and diluted share, in the first six months of 2013.
Non-GAAP net loss for the second quarter of 2014 was $0.29 per basic and diluted share, compared to a loss of $0.79 per basic and diluted share in the second quarter of 2013. Non-GAAP net loss for the six months ended June 30, 2014 was $0.99 per basic and diluted share, compared to a loss of $1.65 per basic and diluted share, in the first six months of 2013. See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Income per Common Share."
At June 30, 2014, HeartWare had $184 million of cash, cash equivalents and investments, an increase from $181 million at the end of the first quarter on March 31, 2014.
Conference Call and Webcast Information
HeartWare will host a conference call on Thursday, July 31, 2014 at 8:00 a.m., U.S. Eastern Daylight Time to discuss its financial results, highlights from the second quarter and the company's business outlook. The call may be accessed by dialing 1-877-407-0789 five minutes prior to the scheduled start time and referencing "HeartWare." Callers outside the U.S. should dial +1-201-689-8562.
A live webcast of the call will also be available in the Investor section of the company's website (http://ir.heartware.com/). A replay of the conference call will be available through the above weblink immediately following completion of the call.
About HeartWare International
HeartWare International develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat Class IIIB / IV patients suffering from advanced heart failure. The HeartWare(®) Ventricular Assist System features the HVAD(®) pump, a small full-support circulatory assist device designed to be implanted next to the heart, avoiding the abdominal surgery generally required to implant competing devices. The HeartWare System is approved in the United States for the intended use as a bridge to cardiac transplantation in patients who are at risk of death from refractory end-stage left ventricular heart failure, has received CE Marking in the European Union and has been used to treat patients in 40 countries. The device is also currently the subject of a U.S. clinical trial for destination therapy. For additional information, please visit the Company's website at www.heartware.com.
HeartWare International, Inc. is a member of the Russell 2000(®) and its securities are publicly traded on The NASDAQ Stock Market.
HEARTWARE, HVAD, MVAD, PAL, SYNERGY, CIRCULITE and HeartWare logos are registered trademarks of HeartWare, Inc.
Use of Non-GAAP Financial Measures
HeartWare management supplements its GAAP financial reporting with certain non-GAAP financial measures for financial and operational decision making. For example, we use "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" to refer to GAAP loss per share excluding certain adjustments such as amortization of intangible assets, impairment charges, purchase accounting and acquisition related transaction costs, and restructuring and severance costs. These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. Management believes that providing this additional information enhances investors' understanding of the financial performance of the Company's operations and increases comparability of its current financial statements to prior periods. Non-GAAP measures should not be considered as a substitute for measures in accordance with financial performance in accordance with GAAP, and they should be reviewed in comparison with their most directly comparable GAAP financial results. Reconciliations of HeartWare's GAAP to non-GAAP financial measures are provided at the end of this release under "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."
Forward-Looking Statements
This announcement contains forward-looking statements that are based on management's beliefs, assumptions and expectations and on information currently available to management. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to the commercialization of the HeartWare(®) Ventricular Assist System, progress of clinical trials and post-approval studies, regulatory status and quality compliance, research and development activities and our ability to take advantage of acquired and pipeline technology. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. HeartWare does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules and regulations of the Securities and Exchange Commission. HeartWare may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described in Part I, Item 1A. "Risk Factors" in HeartWare's Annual Report on Form 10-K filed with the Securities and Exchange Commission. HeartWare may update risk factors from time to time in Part II, Item 1A "Risk Factors" in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other filings with the Securities and Exchange Commission.
For further information:
Christopher Taylor
HeartWare International, Inc.
Email: ctaylor@heartware.com
Phone: +1 508 739 0864
- Tables to Follow-
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2014 2013 2014 2013
---- ---- ---- ----
Revenue, net $70,131 $50,836 $136,603 $100,075
Cost of revenue 22,955 18,866 45,870 37,646
------ ------ ------ ------
Gross profit 47,176 31,970 90,733 62,429
Operating expenses:
Selling, general
and
administrative 20,948 17,217 45,180 33,704
Research and
development 26,913 24,188 59,504 46,330
Change in fair
value of
contingent
consideration (13,700) - (10,560) -
------- --- ------- ---
Total operating
expenses 34,161 41,405 94,124 80,034
Income (loss) from
operations 13,015 (9,435) (3,391) (17,605)
Other expense, net (4,651) (3,499) (7,689) (8,288)
Net income (loss) $8,364 $(12,934) $(11,080) $(25,893)
====== ======== ======== ========
Net income (loss) per common share:
Basic $0.49 $(0.79) $(0.65) $(1.66)
===== ====== ====== ======
Diluted $0.48 $(0.79) $(0.65) $(1.66)
===== ====== ====== ======
Weighted average shares outstanding:
Basic 16,989 16,370 16,962 15,619
====== ====== ====== ======
Diluted 17,305 16,370 16,962 15,619
====== ====== ====== ======
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, 2014 December 31,
2013
----
ASSETS
Current assets:
Cash and cash equivalents $146,595 $162,880
Short-term investments 36,104 37,596
Accounts receivable, net 36,487 28,052
Inventories 45,692 40,876
Prepaid expenses and other
current assets 7,780 11,205
----- ------
Total current assets 272,658 280,609
Property, plant and equipment,
net 19,843 18,562
Other assets, net 129,710 130,656
------- -------
Total assets $422,211 $429,827
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,794 $17,914
Other accrued liabilities 35,348 35,276
------ ------
Total current liabilities 47,142 53,190
Convertible senior notes, net 110,849 107,125
Other long-term liabilities 60,431 70,905
Stockholders' equity 203,789 198,607
------- -------
Total liabilities and
stockholders' equity $422,211 $429,827
======== ========
Reconciliation of GAAP to Non-GAAP Net Income (Loss) per Common Share (unaudited) (see explanation of adjustments below) (in thousands, except per share data)
Three Months Ended June
30, Six Months Ended June 30,
------------------------ -------------------------
2014 2013 2014 2013
---- ---- ----
GAAP net income
(loss) $8,364 $(12,934) $(11,080) $(25,893)
GAAP net income
(loss) per common
share:
Basic $0.49 $(0.79) $(0.65) $(1.66)
Diluted $0.48 $(0.79) $(0.65) $(1.66)
Adjustments:
Amortization of
purchased
intangible assets (a)
-Selling, general
and administrative 84 50 168 100
-Research and
development 247 - 474 -
Acquisition-related
contingent
consideration
adjustments (b) (13,700) - (10,560) -
Restructuring costs (c)
-Selling, general
and administrative 38 - 3,064 -
-Research and
development 72 - 1,098 -
--- --- ----- ---
Total adjustments (13,259) 50 (5,756) 100
Non-GAAP adjusted
net loss $(4,895) $(12,884) $(16,836) $(25,793)
======= ======== ======== ========
Non-GAAP adjusted
net loss per common
share - basic and
diluted $(0.29) $(0.79) $(0.99) $(1.65)
====== ====== ====== ======
Shares used in
computing non-GAAP
adjusted net loss
per common share -
basic and diluted 16,989 16,370 16,962 15,619
====== ====== ====== ======
(a) Represents amortization of
purchased intangible assets
related to CircuLite and
WorldHeart during the three and
six months ended June 30, 2014,
and WorldHeart during the three
and six months ended June 30,
2013.
(b) Represents the change in
fair value of contingent
consideration associated with
the acquisition of CircuLite in
December 2013.
(c) Represents certain
restructuring costs incurred
during the three and six months
ended June 30, 2014,
respectively, as follows (in
thousands):
Q2 YTD
--- ---
Lease exit charge (recovery) for
HeartWare's former Mass.
corporate offices $(57) $471
Charges related to CircuLite
acquisition:
Lease exit charge for former
N.J. corporate offices 14 1,690
Contract termination costs - 688
Employee severance 153 684
Abandoned fixed assets - 629
--- ---
Total $167 $3,691
---- ------
Total Restructuring costs $110 $4,162
==== ======
The terms "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" refer to GAAP net income (loss) and GAAP net income (loss) per common share excluding certain adjustments such as amortization of purchased intangible assets, impairment charges, purchase accounting and acquisition-related transaction costs, and restructuring and severance costs as follows:
1. We exclude amortization of purchased intangible assets and periodic
impairment charges related to long-lived assets from this measure because
such charges do not represent what our management believes are the costs
of developing, producing, supporting and selling our products and the
costs to support our internal operating structure.
2. We exclude purchase accounting adjustments and acquisition-related costs
from this measure because they occur as a result of specific events and
are not reflective of our internal investments and the ongoing costs to
support our operating structure. Purchase accounting adjustments include
contingent consideration fair market value adjustments.
3. We exclude restructuring and severance costs from this measure because
they tend to occur as a result of specific events such as acquisitions,
divestitures, repositioning our business or other unusual events that
could make comparisons of long-range trends difficult and are not
reflective of our internal investments and the costs to support our
operating structure.
SOURCE HeartWare International, Inc.
