EX-99.1 2 f50414exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
VOLCANO REPORTS 40 PERCENT GROWTH IN QUARTERLY REVENUES
GROWTH DRIVEN BY 78 PERCENT INCREASE IN IVUS SYSTEM SALES
     (SAN DIEGO, CA), November 5, 2008—Volcano Corporation (NASDAQ: VOLC), a leader in the development, manufacturing and sales of products for the diagnosis and treatment of coronary and peripheral artery disease, today reported that revenues for the third quarter of 2008 increased 40 percent over those in the third quarter of 2007.
     For the quarter ended September 30, 2008, Volcano reported revenues of $44.1 million versus revenues of $31.5 million in the same period a year ago. The company said that its financial performance was driven by a 78 percent increase in intravascular ultrasound (IVUS) system revenues and a 29 percent increase in IVUS disposable revenues year-over-year.
     For the third quarter of 2008, the company reported net income on a GAAP basis of $744,000, or $0.01 per diluted share, versus a net loss on a GAAP basis of $652,000 or $0.02 per share, in the third quarter of 2007. Weighted average shares at the end of the quarter were 50.3 million versus 38.7 million a year ago, reflecting the impact of the company’s equity offering that was completed in the fourth quarter of 2007.
     Excluding stock-based compensation expense of $2.5 million, the company reported net income of $3.3 million, or $0.06 per diluted share. In the third quarter of 2007, excluding stock-based compensation expense of $2.0 million, the company reported net income of $1.3 million, or $0.03 per diluted share. A reconciliation of the company’s GAAP and non-GAAP results can be found in today’s earnings news release on the company’s website at www.volcanocorp.com.
     For the first nine months of 2008, Volcano reported revenues of $122.2 million, a 35 percent increase over revenues of $90.6 million in the same period a year ago. On a GAAP basis, the company reported a net loss of $15.1 million, or $0.32 per share, compared with a net loss of $2.8 million, or $0.07 per share, in the same period a year ago. Excluding in-process research and development charges of $12.4 million, $2.9 million in due diligence, legal and accounting expenses related to a proposed acquisition that was not consummated, and stock-based compensation expense of $7.0 million, Volcano reported net income of $7.2 million, or $0.14 per diluted share, in the first nine months of 2008. Excluding stock-based compensation expense of $4.7 million, the company reported net income of $1.9 million, or $0.04 per diluted share, in the first nine months of 2007.
     “We continue to gain market share across all of our businesses and geographies, while realizing gross margin improvement and leveraging our operating expenses. As a result, we achieved profitability on a GAAP basis in the third quarter of 2008, and have raised our outlook for earnings per share for the full year,” said Scott Huennekens, president and chief executive officer.

 

 

     “Through the first nine months of 2008, we have placed 537 of our IVUS consoles versus 420 in the first nine months a year ago, and now have more than 3,700 of our IVUS and Functional Measurement (FM) consoles placed worldwide. Helping to drive our growth is the leading-edge technology offered by our devices and Volcano’s strong sales and market development initiatives. In addition, we are seeing an increasingly favorable environment for percutaneous coronary interventions and an ongoing flow of positive data, including that presented in a number of presentations at the recent Transcatheter Cardiovascular Therapeutics (TCT) meeting,” Huennekens noted.
     “At the same time,” he added, “we continue to be excited about our new product pipeline that will enable us to address markets that are potentially larger than those we are currently serving.”
Guidance for 2008
     The company updated its guidance for fiscal 2008. It now expects that revenues will be at the upper end of its previous range of $164-$168 million, which represents an increase of approximately 27 to 29 percent over full year revenues in 2007. It now expects gross margin to be in the range of 62-63 percent versus prior guidance of 60-61 percent. The company reiterated that it expects operating expenses, including stock-based compensation, due diligence costs recorded in the first quarter, the in-process research and development costs of $12.4 million incurred in the first half of the year, ongoing expenses associated with the development of technology acquired through the Novelis transaction and approximately $3.1 million of intangible amortization, will be 74-76 percent of revenues. For the full year 2008, the company expects that on a GAAP basis it will record a net loss of $0.30-$0.32 per share versus prior guidance of $0.33-$0.37 per share. The company expects to be profitable on a GAAP basis in the fourth quarter of 2008. Excluding stock-based compensation expense of approximately $10.0 million, due diligence and in-process research and development costs, the company expects to report non-GAAP net income of $0.18-$0.20 per diluted share. This compares with prior guidance for non-GAAP net income of $0.14-$0.18 per share. Weighted average shares outstanding at year-end 2008 are expected to be approximately 47.4 million basic shares and 50.4 million shares on a diluted basis.
Conference Call
     The company will hold a conference call at 2 p.m., Pacific Standard Time (5 p.m. Eastern Standard Time) today. The teleconference can be accessed by calling (719) 325-4761, passcode 8632414, or via the company’s website at http://www.volcanocorp.com. Please dial in or access the webcast 10-15 minutes prior to the beginning of the call. A replay of the conference call will be available through November 12 at (719) 457-0820, passcode 8632414, and via the company’s website.

 

 

Volcano Corporation
     Volcano Corporation (NASDAQ: VOLC) offers a broad suite of devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart disease 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™ tissue characterization and ChromaFlo®. Volcano also provides functional measurement (FM) consoles and single-use pressure and flow guide wires and is developing a line of ultra-high resolution Optical Coherence Tomography (OCT) systems and catheters. Currently, more than 3,700 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-process research and development relates to the costs associated with the May 2008 acquisition of Novelis, Inc., and the December 2007 acquisition of CardioSpectra, Inc., and the acquisition due diligence costs incurred in the first quarter of 2008 related to a proposed acquisition that was not consummated, are not reflective of our core operating activities. 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 note that the non-GAAP financial measures used by the company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance 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 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 2008, market adoption of the company’s technology, the impact of clinical and other technical data, the success and timing of product development and clinical trial programs, growth strategies and market development and product sales. 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 here. 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, quarterly reports on Form 10-Q 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 are made, or to reflect the occurrence of unanticipated events.
Contact Information:
John Dahldorf
Chief Financial Officer
Volcano Corporation
(916) 638-8008
or
Neal B. Rosen
Ruder-Finn
(415) 692-3058

 

 

VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
                 
    September 30,   December 31,
    2008   2007
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 108,662     $ 122,913  
Short-term available-for-sale investments
     68,049       66,205  
Accounts receivable, net
     25,036       27,976  
Inventories, net
     25,698       21,243  
Prepaid expenses and other current assets
     4,965       3,997  
     
Total current assets
     232,410       242,334  
Restricted cash
     360       365  
Property and equipment, net
     19,900       13,692  
Intangible assets, net
     7,439       9,385  
Other non-current assets
     886       798  
     
 
   $ 260,995     $ 266,574  
     
 
                
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 13,139     $ 11,077  
Accrued compensation
     9,502       9,083  
Accrued expenses and other current liabilities
     7,441       6,600  
Deferred revenues
     4,419       5,360  
Current maturities of long-term debt
     58       120  
     
Total current liabilities
     34,559       32,240  
Long-term debt
     49       78  
Deferred license fee
     938       1,125  
Other
     142       194  
     
Total liabilities
     35,688       33,637  
Stockholders’ equity
     225,307       232,937  
     
 
   $ 260,995     $ 266,574  
     

 

 

VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2008     2007     2008     2007  
Revenues
   $ 44,118     $ 31,474     $ 122,242     $ 90,605  
Cost of revenues
     16,581       12,285       45,915       35,466  
 
                        
Gross profit
     27,537       19,189       76,327       55,139  
Operating expenses:
                                
Selling, general and administrative
     19,546       16,005       62,405       44,271  
Research and development
     6,879       4,837       18,823       15,241  
In-process research and development
     —       —       12,407       —  
Amortization of intangibles
     786       751       2,337       2,313  
 
                        
Total operating expenses
     27,211       21,593       95,972       61,825  
 
                        
Operating income (loss)
     326       (2,404 )     (19,645 )     (6,686 )
Interest income
     1,109       1,213       4,206       3,630  
Interest expense
     (2 )     (32 )     (8 )     (193 )
Exchange rate gain (loss)
     (441 )     829       1,091       1,042  
 
                        
Income (loss) before provision for income taxes
     992       (394 )     (14,356 )     (2,207 )
Provision for income taxes
     248       258       707       626  
 
                        
Net income (loss)
   $ 744     $ (652 )   $ (15,063 )   $ (2,833 )
 
                        
Net income (loss) per share — basic
   $ 0.02     $ (0.02 )   $ (0.32 )   $ (0.07 )
 
                        
Net income (loss) per share — diluted
   $ 0.01     $ (0.02 )   $ (0.32 )   $ (0.07 )
 
                        
Weighted-average shares outstanding — basic
     47,456       38,694       47,236       38,368  
 
                        
Weighted-average shares outstanding — diluted
     50,323       38,694       47,236       38,368  
 
                        

 

 

VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)
                         
    Three Months Ended September 30, 2008  
            Stock-based        
            compensation     Non-GAAP  
    GAAP results     expense     results  
Revenues
   $ 44,118     $ —     $ 44,118  
Cost of revenues
     16,581       (222 )     16,359  
 
                  
Gross profit
     27,537       222       27,759  
Operating expenses:
                        
Selling, general and administrative
     19,546       (1,798 )     17,748  
Research and development
     6,879       (493 )     6,386  
Amortization of intangibles
     786       —       786  
 
                  
Total operating expenses
     27,211       (2,291 )     24,920  
 
                  
Operating income
     326       2,513       2,839  
Interest income
     1,109       —       1,109  
Interest expense
     (2 )     —       (2 )
Exchange rate loss
     (441 )     —       (441 )
 
                  
Income before provision for income taxes
     992       2,513       3,505  
Provision for income taxes
     248       —       248  
 
                  
Net income
   $ 744     $ 2,513     $ 3,257  
 
                  
Net income per share — basic
   $ 0.02     $ 0.05     $ 0.07  
 
                  
Net income per share — diluted
   $ 0.01     $ 0.05     $ 0.06  
 
                  
Weighted-average shares outstanding — basic
     47,456               47,456  
 
                    
Weighted-average shares outstanding — diluted
     50,323               50,323  
 
                    
                         
    Three Months Ended September 30, 2007  
            Stock-based        
            compensation     Non-GAAP  
    GAAP results     expense     results  
Revenues
   $ 31,474     $ —     $ 31,474  
Cost of revenues
     12,285       (181 )     12,104  
 
                  
Gross profit
     19,189       181       19,370  
Operating expenses:
                        
Selling, general and administrative
     16,005       (1,437 )     14,568  
Research and development
     4,837       (359 )     4,478  
Amortization of intangibles
     751       —       751  
 
                  
Total operating expenses
     21,593       (1,796 )     19,797  
 
                  
Operating loss
     (2,404 )     1,977       (427 )
Interest income
     1,213       —       1,213  
Interest expense
     (32 )     —       (32 )
Exchange rate gain
     829       —       829  
 
                  
Income (loss) before provision for income taxes
     (394 )     1,977       1,583  
Provision for income taxes
     258       —       258  
 
                  
Net income (loss)
   $ (652 )   $ 1,977     $ 1,325  
 
                  
Net income (loss) per share — basic
   $ (0.02 )   $ 0.05     $ 0.03  
 
                  
Net income (loss) per share — diluted
   $ (0.02 )   $ 0.05     $ 0.03  
 
                  
Weighted-average shares outstanding — basic
     38,694               38,694  
 
                    
Weighted-average shares outstanding — diluted
     38,694               41,710  
 
                    

 

 

VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)
                                         
    Nine Months Ended September 30, 2008  
            Stock-based                    
            compensation     In-process research     Acquisition due     Non-GAAP  
    GAAP results     expense     and development     diligence costs     results  
Revenues
   $ 122,242     $ —     $ —     $ —     $ 122,242  
Cost of revenues
     45,915       (598 )     —       —       45,317  
 
                              
Gross profit
     76,327       598       —       —       76,925  
Operating expenses:
                                        
Selling, general and administrative
     62,405       (5,094 )     —       (2,878 )     54,433  
Research and development
     18,823       (1,305 )     —       —       17,518  
In-process research and development
     12,407       —       (12,407 )     —       —  
Amortization of intangibles
     2,337       —       —       —       2,337  
 
                              
Total operating expenses
     95,972       (6,399 )     (12,407 )     (2,878 )     74,288  
 
                              
Operating income (loss)
     (19,645 )     6,997       12,407       2,878       2,637  
Interest income
     4,206       —       —       —       4,206  
Interest expense
     (8 )     —       —       —       (8 )
Exchange rate gain
     1,091       —       —       —       1,091  
 
                              
Income (loss) before provision for income taxes
     (14,356 )     6,997       12,407       2,878       7,926  
Provision for income taxes
     707       —       —       —       707  
 
                              
Net income (loss)
   $ (15,063 )   $ 6,997     $ 12,407     $ 2,878     $ 7,219  
 
                              
Net income (loss) per share — basic
   $ (0.32 )   $ 0.15     $ 0.26     $ 0.06     $ 0.15  
 
                              
Net income (loss) per share — diluted
   $ (0.32 )   $ 0.14     $ 0.25     $ 0.06     $ 0.14  
 
                              
Weighted-average shares outstanding — basic
     47,236                               47,236  
 
                                    
Weighted-average shares outstanding — diluted
     47,236                               49,859  
 
                                    
                                         
    Nine Months Ended September 30, 2007  
            Stock-based                    
            compensation     In-process research     Acquisition due     Non-GAAP  
    GAAP results     expense     and development     diligence costs     results  
Revenues
   $ 90,605     $ —     $ —     $ —     $ 90,605  
Cost of revenues
     35,466       (434 )     —       —       35,032  
 
                              
Gross profit
     55,139       434       —       —       55,573  
Operating expenses:
                                        
Selling, general and administrative
     44,271       (3,486 )     —       —       40,785  
Research and development
     15,241       (783 )     —       —       14,458  
Amortization of intangibles
     2,313       —       —       —       2,313  
 
                              
Total operating expenses
     61,825       (4,269 )     —       —       57,556  
 
                              
Operating loss
     (6,686 )     4,703       —       —       (1,983 )
Interest income
     3,630       —       —       —       3,630  
Interest expense
     (193 )     —       —       —       (193 )
Exchange rate gain
     1,042       —       —       —       1,042  
 
                              
Income (loss) before provision for income taxes
     (2,207 )     4,703       —       —       2,496  
Provision for income taxes
     626       —       —       —       626  
 
                              
Net income (loss)
   $ (2,833 )   $ 4,703     $ —     $ —     $ 1,870  
 
                              
Net income (loss) per share — basic
   $ (0.07 )   $ 0.12     $ —     $ —     $ 0.05  
 
                              
Net income (loss) per share — diluted
   $ (0.07 )   $ 0.11     $ —     $ —     $ 0.04  
 
                              
Weighted-average shares outstanding — basic
     38,368                               38,368  
 
                                    
Weighted-average shares outstanding — diluted
     38,368                               41,739  
 
                                    
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-process research and development relates to the costs associated with the May 2008 acquisition of Novelis, Inc. and the December 2007 acquisition of CardioSpectra, Inc., and the acquisition due diligence costs incurred in the first quarter of 2008 related to a proposed acquisition that was not consummated, are not reflective of our core operating activities. 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 note that the non-GAAP financial measures used by the company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. 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)
                                                 
    Q3 ’08   Q3 ’07   Growth %   YTD Q3 ’08   YTD Q3 ’07   Growth
         
IVUS Systems:
                                                
United States
   $ 5.6     $ 3.4       62 %   $ 15.3     $ 11.0       40 %
Japan
     2.5       0.5       376 %     4.9       1.8       172 %
Europe
     1.8       1.5       24 %     5.4       3.5       50 %
Rest of World
     0.7       0.5       38 %     1.9       1.7       14 %
         
Total IVUS Systems
   $ 10.6     $ 5.9       78 %   $ 27.5     $ 18.0       52 %
 
                                                
IVUS Disposables:
                                                
United States
   $ 13.0     $ 10.1       30 %   $ 37.6     $ 28.8       31 %
Japan
     8.9       7.5       18 %     24.7       20.3       22 %
Europe
     4.6       3.0       51 %     13.0       9.0       44 %
Rest of World
     0.7       0.5       27 %     2.2       1.6       35 %
         
Total IVUS Disposables
   $ 27.2     $ 21.1       29 %   $ 77.5     $ 59.7       30 %
 
                                                
FM:
                                                
United States
   $ 2.3     $ 1.4       63 %   $ 6.3     $ 4.5       40 %
Japan
     0.5       0.2       186 %     0.9       1.1       -16 %
Europe
     1.7       1.5       19 %     5.1       4.1       24 %
Rest of World
     0.4       0.2       94 %     0.8       0.6       43 %
         
Total FM
   $ 4.9     $ 3.3       51 %   $ 13.1     $ 10.3       28 %
 
                                                
Other
     1.4       1.2       25 %     4.1       2.6       56 %
         
Total
   $ 44.1     $ 31.5       40 %   $ 122.2     $ 90.6       35 %