HEARTWARE INTERNATIONAL INC FRAMINGHAM, Mass., Feb. 25, 2016 /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 its financial results for the fourth quarter and full-year 2015.
The company reported revenue of $68.1 million for the fourth quarter of 2015, a 7% decrease from revenue of $73.2 million for the fourth quarter of 2014. Fourth quarter revenue reflected a decline of $6.4 million relative to the same period in 2014 due to completion of patient enrollment in the company's ENDURANCE2 Destination Therapy (DT) clinical trial of the HVAD(®) System during the third quarter of 2015 and unfavorable currency changes of $3.4 million. Fourth quarter 2015 revenue decreased 2.4 percentage points on a constant-currency basis compared to the fourth quarter of 2014. For fiscal-year 2015, the company generated revenue of $276.8 million, which was a 1% decrease compared to revenue of $278.4 million in 2014. Fiscal-year 2015 revenue increased 6.3 percentage points on a constant-currency basis compared to fiscal-year 2014.
During the fourth quarter, 720 HVAD Systems were sold globally, contributing to a total of 2,903 units sold in 2015, and representing a 5% increase compared to 2,751 units in 2014. U.S. revenue, generated through the sale of 376 units during the fourth quarter of 2015, was $41.2 million, compared to $41.5 million for the fourth quarter of 2014. Revenue from international markets, derived from the sale of 344 units sold during the fourth quarter of 2015, was $26.9 million, compared to $31.7 million for the fourth quarter of 2014, an increase of 4.3% after adjusting for foreign currency.
"We made substantial progress in expanding our commercial footprint in the past year, adding 55 new hospital centers globally. With a presence in 47 countries, and more than 300 commercial centers, we have an established network of customers from which to grow our business well into the future," said Doug Godshall, President and Chief Executive Officer. "In 2015, we initiated enrollment in LATERAL, our clinical trial to evaluate the thoracotomy implant technique, and we are working toward enrollment completion of this 145-patient study; we presented results from our first DT clinical trial, ENDURANCE, in which our HVAD System achieved the primary endpoint, and soon after, completed enrollment in our supplemental DT cohort, ENDURANCE2, setting the stage for us to submit for the DT indication in mid-2016; we initiated the first human implants of the MVAD(®) System; and we performed significant upgrades to our quality system.
"In 2016, our priorities include fortifying our HVAD System by working toward rollout of new, competitive enhancements and seeking an expanded DT indication; completing our remediation efforts related to the warning letter from FDA; and understanding and resolving the early clinical challenges experienced with our next-generation MVAD System," said Mr. Godshall.
Fourth Quarter and Full-Year 2015 Financial Results
Gross margin percentage was 66.2% in the fourth quarter of 2015, as compared to 68.1% in the fourth quarter of 2014. The decrease compared to the fourth quarter of 2014 was primarily due to the effect of foreign currency exchange rates during the quarter. For the year ended December 31, 2015, gross margin was 62.7%, compared to 66.9% for full-year 2014, primarily as a result of charges aggregating $8.5 million for field actions during the third quarter of 2015.
Selling, general and administrative expenses were $25.2 million for the fourth quarter of 2015, compared to $21.4 million for the fourth quarter of 2014. The increase over the prior year comprised $1.2 million in growth-related expenses, $1.6 million of Valtech transaction expenses, and a $1.0 million lease abandonment charge for the former headquarters of CircuLite, Inc., which HeartWare acquired in 2013.
Research and development expense was $27.4 million for the fourth quarter of 2015, compared to $30.8 million in the same period in 2014. The decrease from the prior year was primarily due to a reduction in aggregate project spending.
Net loss for the fourth quarter of 2015 was $0.9 million, or $0.05 per basic and diluted share, compared to a net loss of $0.9 million, or $0.05 per basic and diluted share, for the fourth quarter of 2014. For the year ended December 31, 2015, the company recorded a net loss of $72.8 million, or a loss of $4.21 per basic and diluted share, compared to a net loss of $19.4 million, or a loss of $1.14 per basic and diluted share, for fiscal-year 2014.
The increase in fiscal 2015 net loss, compared to the fiscal 2014 net loss, primarily included foreign currency effects of $18.1 million, increased impairment and fair value accounting adjustments of $16.0 million, debt extinguishment charges of $16.6 million and $3.4 million of various operating changes.
Non-GAAP net loss for the fourth quarter of 2015 was $9.2 million, or $0.53 per basic and diluted share, compared to a net loss of $6.9 million, or $0.41 per basic and diluted share, for the fourth quarter of 2014. Non-GAAP net loss for the year ended December 31, 2015 was $49.8 million, or $2.89 per basic and diluted share, compared to a net loss of $34.6 million, or $2.03 per basic and diluted share, for fiscal-year 2014. The increased non-GAAP net loss in the fourth quarter and fiscal-year 2015 periods, compared to their respective periods in 2014, was due primarily to the impact of foreign currency changes. See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss Per Common Share."
At December 31, 2015, HeartWare had approximately $244 million of cash, cash equivalents and investments, compared to approximately $249 million at September 30, 2015. Subsequent to the close of 2015, HeartWare extended to Valtech Cardio, Ltd. convertible loans of $31 million, including $30 million pursuant to the termination of the acquisition agreement between the two companies.
Conference Call and Webcast Information
HeartWare will host a conference call and live webcast on Thursday, February 25, 2016 at 8:00 a.m. ET to discuss its financial results and provide a business commentary. The conference 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.
The live webcast will 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 link 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 47 countries. The device is also currently the subject of a U.S. clinical trial for destination therapy. For additional information, please visit www.heartware.com.
HeartWare International, Inc. is a member of the Russell 2000(®), and its securities are publicly traded on The NASDAQ Stock Market.
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 net loss" and "non-GAAP 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, loss on extinguishment of long-term debt, 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: HeartWare's core ventricular assist device business; commercialization of the HeartWare HVAD System; restarting clinical investigation of the MVAD System; submission for U.S. approval of a destination therapy indication; resolution of our Warning Letter; 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.
HEARTWARE, HVAD, MVAD, PAL, SYNERGY, CIRCULITE and HeartWare logos are trademarks of HeartWare, Inc. or its affiliates.
For additional 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 Years Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Revenue, net $68,087 $73,209 $276,843 $278,420
Cost of revenue 23,030 23,349 103,287 92,195
------ ------ ------- ------
Gross profit 45,057 49,860 173,556 186,225
Operating expenses:
Selling, general
and administrative 25,247 21,412 94,594 87,177
Research and
development 27,414 30,801 120,769 119,782
Impairment of
intangible assets 26,849 2,650 26,849 2,650
Change in fair
value of
contingent
consideration (38,110) (9,080) (31,410) (23,260)
------- ------ ------- -------
Total operating
expenses 41,400 45,783 210,802 186,349
Income (loss) from
operations 3,657 4,077 (37,246) (124)
Other expense, net (4,378) (5,096) (34,520) (18,682)
------ ------ ------- -------
Loss before taxes (721) (1,019) (71,766) (18,806)
Income tax
(benefit) expense 205 (103) 1,014 560
--- ---- ----- ---
Net loss $(926) $(916) $(72,780) $(19,366)
===== ===== ======== ========
Net loss per common
share - basic and
diluted $(0.05) $(0.05) $(4.21) $(1.14)
====== ====== ====== ======
Weighted average
shares outstanding
- basic and
diluted 17,327 17,037 17,274 16,992
====== ====== ====== ======
HEARTWARE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31, December 31, 2014
2015
----
ASSETS
Current assets:
Cash and cash equivalents $175,047 $102,946
Short-term investments 68,531 75,535
Accounts receivable, net 35,570 38,041
Inventories 47,686 54,046
Prepaid expenses and other current
assets 2,868 5,975
----- -----
Total current assets 329,702 276,543
Property, plant and equipment, net 15,098 19,036
Other assets, net 112,776 128,234
------- -------
Total assets $457,576 $423,813
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $15,249 $13,322
Other accrued liabilities 45,889 36,589
------ ------
Total current liabilities 61,138 49,911
Convertible senior notes, net 191,062 114,803
Other long-term liabilities 16,884 50,565
Stockholders' equity 188,492 208,534
------- -------
Total liabilities and
stockholders' equity $457,576 $423,813
======== ========
Reconciliation to Constant-Currency
Revenue Growth (unaudited) (see
explanation below)
(in thousands)
Three Months Ended
December 31, Reported $ chg Reported % chg FX impact Constant Currency $ chg Constant Currency % chg
------------------- -------------- -------------- --------- ----------------------- -----------------------
2015 2014
---- ----
Total U.S. Revenue 41,160 41,534 (374) -0.9% - (374) -0.9%
Total Int'l Revenue 26,927 31,675 (4,748) -15.0% 3,377 (1,371) -4.3%
------ ------ ------ ----- ----- ------ ----
Total Revenue 68,087 73,209 (5,122) -7.0% 3,377 (1,745) -2.4%
====== ====== ====== ==== ===== ====== ====
Years Ended December
31, Reported $ chg Reported % chg FX impact Constant Currency $ chg Constant Currency % chg
--------------------- -------------- -------------- --------- ----------------------- -----------------------
2015 2014
---- ----
Total U.S. Revenue 161,848 151,335 10,513 6.9% - 10,513 6.9%
Total Int'l Revenue 114,995 127,085 (12,090) -9.5% 19,226 7,136 5.6%
------- ------- ------- ---- ------ ----- ---
Total Revenue 276,843 278,420 (1,577) -0.6% 19,226 17,649 6.3%
======= ======= ====== ==== ====== ====== ===
Constant-currency changes in the
tables above take into
consideration the foreign
exchange rates in effect during
the three- and twelve-month
periods ended December 31, 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 Years Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ----
GAAP net loss $(926) $(916) $(72,780) $(19,366)
GAAP net loss per
common share - basic
and diluted $(0.05) $(0.05) $(4.21) $(1.14)
Adjustments:
Amortization of
purchased intangible
assets and goodwill (a)
-Selling, general and
administrative 84 84 5,136 337
-Research and
development 327 348 1,309 1,069
Impairment of
intangible assets (b) 26,849 2,650 26,849 2,650
Acquisition-related
transaction costs (c) 1,557 - 5,623 -
Contingent
consideration
adjustments (d) (38,110) (9,080) (31,410) (23,260)
Loss on
extinguishment of
long-term debt (e) - - 16,588 -
Restructuring costs (f)
-Selling, general and
administrative 1,001 (27) 1,437 2,962
-Research and
development - - 2,212 1,053
--- --- ----- -----
Total adjustments (8,292) (6,025) 22,945 (15,189)
Non-GAAP net loss $(9,218) $(6,941) $(49,835) $(34,555)
======= ======= ======== ========
Non-GAAP net loss
per common share -
basic and diluted $(0.53) $(0.41) $(2.89) $(2.03)
Shares used in
computing non-GAAP
net loss per common
share - basic and
diluted 17,327 17,037 17,274 16,992
====== ====== ====== ======
(a) Represents amortization of purchased
intangible assets related to
CircuLite and WorldHeart during the
three and twelve months ended
December 31, 2015 and 2014.
(b) Represents impairment of purchased
intangible assets related to
CircuLite.
(c) Represents transaction costs
associated with the terminated
business combination with Valtech.
(d) Represents the change in fair value
of contingent consideration
associated with the acquisition of
CircuLite in December 2013.
(e) Represents the loss on
extinguishment of 3.5% convertible
notes.
(f) Represents certain restructuring
costs incurred during the three and
twelve months ended December 31,
2015 and 2014 as follows (in
thousands):
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Charges
related to
CircuLite
acquisition:
Lease exit
charge for
former N.J.
corporate
offices $1,001 $15 $1,465 $1,725
Lease exit
charge for
Aachen,
Germany
office - - 139 -
Contract
termination
costs - - 338 688
Employee
severance - (29) 598 588
Abandoned
fixed assets - - 1,137 655
--- --- ----- ---
Total 1,001 (14) 3,677 3,656
Lease exit
charge for
HeartWare's
former
Massachusetts
corporate
offices $ - $(13) $(28) $359
Total
restructuring
costs $1,001 $(27) $3,649 $4,015
====== ==== ====== ======
The terms "non-GAAP net loss" and "non-GAAP
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, loss on extinguishment of
long-term debt, 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.
4) We exclude loss on extinguishment of
long-term debt from this measure
because these charges, unlike other
core business costs, are the result
of infrequent and irregular events.
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SOURCE HeartWare International, Inc.
