HEARTWARE INTERNATIONAL INC FRAMINGHAM, Mass., July 30, 2015 /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 total revenue of $73.6 million for the quarter ended June 30, 2015 compared to $70.1 million for the quarter ended June 30, 2014. Currency fluctuations impacted revenue growth by approximately $6.0 million, or nine percentage points, during the three months ended June 30, 2015, as compared to the same period in 2014. Total revenues increased 13% on a constant-currency basis compared to the same period in 2014.
During the second quarter, a total of 773 HeartWare HVAD(®) Systems were sold globally, which represented an increase of 15% from 674 units sold in the second quarter of 2014. U.S. revenue, generated through the sale of 391 units during the second quarter of 2015, was $42.9 million. International revenue, generated through the sale of 382 units during the second quarter of 2015, was $30.7 million.
"We are pleased to report another quarter of solid financial results and achievement of record revenue and units sold during the second quarter, with particular strength in the U.S. market," said Doug Godshall, President and Chief Executive Officer. "In addition to this strong financial performance, we were pleased to have recently begun patient enrollment in our MVAD(®) System CE Mark trial, a significant accomplishment for the company and an important step forward for this innovative, new device.
"We also made significant strides operationally during the quarter. We presented data from our ENDURANCE Destination Therapy trial of HVAD in which the study achieved the primary endpoint, we obtained approval to market the HeartWare HVAD System as a bridge to transplantation in Canada, and we made continued progress with the supplemental destination therapy study, ENDURANCE 2, which is currently 98% enrolled, with full enrollment expected to be completed soon," Mr. Godshall added.
For the six months ended June 30, 2015, total revenue increased approximately five percent to $143.6 million, compared to $136.6 million for the same period in 2014. Total revenue increased 13% on a constant-currency basis compared to the first six months of 2014.
Gross margin percentage declined to 65.7% during the second quarter of 2015, from 67.3% in the second quarter of 2014. The net decline included 2.6 percentage points related to foreign exchange rates changes, which was partially offset by volume and efficiency improvements.
Total operating expenses for the second quarter of 2015 were $56.2 million, compared to $34.2 million for the second quarter of 2014 and $55.3 million for the first quarter of 2015. Total operating expenses for the second quarter of 2015 included a $2.2 million net increase in fair value of the contingent purchase consideration for CircuLite. This compared to the second quarter of 2014, in which total operating expenses included a $13.7 million reduction in the estimated fair value of the contingent consideration.
Research and development expense was $31.7 million for the second quarter of 2015, compared to $26.9 million for the same period in 2014. This increase in R&D expense was primarily attributable to increased clinical and regulatory expenses and quality system improvements.
Selling, general and administrative expenses were $22.2 million for the second quarter of 2015, compared to $20.9 million for the second quarter of 2014. The increase in SG&A expenses was primarily attributable to increased employee headcount and other administrative expenses to support HeartWare's growth.
Other expense for the second quarter of 2015 included a $16.6 million loss in connection with the partial extinguishment in May 2015 of the company's 2017 convertible notes.
Net loss for the second quarter of 2015 was $27.4 million, or a loss of $1.59 per basic and diluted share, compared to net income of $8.4 million, or $0.49 per basic and $0.48 per diluted share, for the second quarter of 2014. Non-GAAP net loss for the second quarter of 2015 was $8.1 million, or a loss of $0.47 per basic and diluted share, compared to a non-GAAP net loss of $4.9 million, or a loss of $0.29 per basic and diluted share, for the second quarter of 2014.
For the six months ended June 30, 2015, the company recorded a net loss of $41.9 million, or a loss of $2.43 per basic and diluted share, compared to a net loss of $11.1 million, or a loss of $0.65 per basic and diluted share, for the six months ended June 30, 2014. Non-GAAP net loss for the six months ended June 30, 2015 was $17.5 million, or a loss of $1.02 per basic and diluted share, compared to a non-GAAP net loss of $16.8 million, or a loss of $0.99 per basic and diluted share, for the six months ended June 30, 2014.
Items impacting comparability of operating results for the three- and six-month periods ended June 30, 2015 to the same periods in 2014 include purchase accounting amortization, restructuring charges, contingent consideration adjustments and loss on extinguishment of long-term debt, as described later in this news release under "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."
At June 30, 2015, HeartWare had $252 million of cash, cash equivalents and investments, which included $76 million in net proceeds from a convertible note exchange and issuance executed during the second quarter. In the second quarter, the company had positive operating cash flow of approximately $5 million.
Conference Call and Webcast Information
HeartWare will host a conference call on Thursday, July 30, 2015 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 Investors 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 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 46 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 trademarks of HeartWare, Inc. or its affiliates.
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 a substitute for measures of 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 news 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 HVAD System and introduction of the MVAD System; timing, progress and outcomes of clinical trials; regulatory 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.
Contact:
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,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
Revenue, net $73,569 $70,131 $143,590 $136,603
Cost of revenue 25,228 22,955 47,268 45,870
------ ------ ------ ------
Gross profit 48,341 47,176 96,322 90,733
Operating expenses:
Selling, general and
administrative 22,247 20,948 44,176 45,180
Research and
development 31,702 26,913 62,969 59,504
Change in fair value
of contingent
consideration 2,240 (13,700) 4,340 (10,560)
----- ------- ----- -------
Total operating
expenses 56,189 34,161 111,485 94,124
Income (loss) from
operations (7,848) 13,015 (15,163) (3,391)
Other expense, net (19,239) (4,298) (26,228) (7,114)
------- ------ ------- ------
Loss before taxes (27,087) 8,717 (41,391) (10,505)
Income tax expense 306 353 537 575
--- --- --- ---
Net income (loss) $(27,393) $8,364 $(41,928) $(11,080)
======== ====== ======== ========
Net income (loss) per common share:
Basic $(1.59) $0.49 $(2.43) $(0.65)
====== ===== ====== ======
Diluted $(1.59) $0.48 $(2.43) $(0.65)
====== ===== ====== ======
Weighted average shares outstanding:
Basic 17,269 16,989 17,232 16,962
====== ====== ====== ======
Diluted 17,269 17,305 17,232 16,962
====== ====== ====== ======
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, December 31,
2014
2015
----
ASSETS
Current assets:
Cash and cash equivalents $181,222 $102,946
Short-term investments 69,574 75,535
Accounts receivable, net 35,648 38,041
Inventories 50,571 54,046
Prepaid expenses and other current
assets 6,276 5,975
----- -----
Total current assets 343,291 276,543
Property, plant and equipment, net 17,005 19,036
Other assets, net 130,354 128,234
------- -------
Total assets $490,650 $423,813
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,071 $13,322
Other accrued liabilities 32,416 36,589
------ ------
Total current liabilities 43,487 49,911
Convertible senior notes, net 186,565 114,803
Other long-term liabilities 52,823 50,565
Stockholders' equity 207,775 208,534
------- -------
Total liabilities and stockholders'
equity $490,650 $423,813
======== ========
Reconciliation to Constant Currency Revenue Growth (unaudited) (see explanation below)
(dollars in thousands)
Three Months Ended Reported Reported FX Constant Constant
June 30, $ change % change impact Currency Currency
$ change % change
--- -------- --------
2015 2014
---- ----
Total U.S. Revenue $42,922 $36,945 $5,977 16.2% - $5,977 16.2%
Total Int'l Revenue 30,647 33,186 (2,539) -7.7% 5,994 3,455 10.4%
------ ------ ------ ---- ----- ----- ----
Total Revenue $73,569 $70,131 $3,438 4.9% $5,994 $9,432 13.4%
======= ======= ====== === ====== ====== ====
Six Months Ended Reported Reported FX Constant Constant
June 30, $ change % change impact Currency Currency
$ change % change
--- -------- --------
2015 2014
---- ----
Total U.S. Revenue $85,111 $70,733 $14,378 20.3% - $14,378 20.3%
Total Int'l Revenue 58,479 65,870 (7,391) -11.2% 10,965 3,574 5.4%
------ ------ ------ ----- ------ ----- ---
Total Revenue $143,590 $136,603 $6,987 5.1% $10,965 $17,952 13.1%
======== ======== ====== === ======= ======= ====
Constant currency changes
in the tables above
reflect the foreign
exchange rates in effect
during the three- and
six-month periods ended
June 30, 2015 and 2014.
Reconciliation of GAAP to Non-GAAP Net Loss per Common Share (unaudited) (see explanation of adjustments below)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ----
GAAP net (loss) income $(27,393) $8,364 $(41,928) $(11,080)
GAAP net (loss) income per common
share:
Basic $(1.59) $0.49 $(2.43) $(0.65)
Diluted $(1.59) $0.48 $(2.43) $(0.65)
Adjustments:
Amortization and
impairment of
purchased intangible
assets and goodwill (a)
-Selling, general and
administrative 84 84 168 168
-Research and development 327 247 654 474
Contingent
consideration
adjustments (b) 2,240 (13,700) 4,340 (10,560)
Loss on extinguishment
of long-term debt (c) 16,588 - 16,588 -
Restructuring costs (d)
-Selling, general and
administrative (44) 38 423 3,064
-Research and development 49 72 2,213 1,098
--- --- ----- -----
Total adjustments 19,244 (13,259) 24,386 (5,756)
Non-GAAP adjusted net loss $(8,149) $(4,895) $(17,542) $(16,836)
======= ======= ======== ========
Non-GAAP adjusted net loss per
common share - basic and diluted $(0.47) $(0.29) $(1.02) $(0.99)
Shares used in computing non-GAAP
adjusted net loss per common share
- basic and diluted 17,269 16,989 17,232 16,962
====== ====== ====== ======
(a) Represents amortization of purchased
intangible assets related to
CircuLite and World Heart during the
three and six months ended June 30,
2015 and 2014.
(b) Represents the change in fair value of
contingent consideration associated
with the acquisition of CircuLite in
December 2013.
(c) Represents the loss on extinguishment
of 3.5% convertible notes.
(d) Represents certain restructuring costs
incurred during the three and six
months ended June 30, 2015 and 2014
as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ----
Lease exit
charge for
HeartWare's $(30) $(57) $(28) $471
former
Massachusetts
corporate
offices
Charges
related to
CircuLite
acquisition:
Lease exit
charge for
former N.J. (14) 14 451 1,690
corporate
offices
Lease exit
charge for
Aachen,
Germany
office - - 139 -
Contract
termination
costs 29 - 340 688
Employee
severance - 153 598 684
Abandoned
fixed assets 20 - 1,136 629
--- --- ----- ---
Total 35 167 2,664 3,691
Total
restructuring
costs $5 $110 $2,636 $4,162
=== ==== ====== ======
The terms "non-GAAP adjusted net loss" and "non-GAAP
adjusted net loss per common share" refer to GAAP net
loss/income and GAAP net loss/income 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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/heartware-international-reports-736-million-in-second-quarter-2015-revenue-driven-by-strong-global-unit-growth-300121024.html
SOURCE HeartWare International, Inc.
