Cardiovascular Systems Reports Fiscal 2013 Third-Quarter Financial Results

  Cardiovascular Systems Reports Fiscal 2013 Third-Quarter Financial Results

 Conference Call Scheduled for Today, May 1, 2013, at 3:45 PM CT (4:45 PM ET)

Business Wire

ST. PAUL, Minn. -- May 01, 2013

Cardiovascular Systems, Inc. (Nasdaq: CSII):

  *Revenues of $26.5 million rose 25 percent over the fiscal 2012 third
    quarter, and 5 percent sequentially over the fiscal 2013 second quarter

       *Stealth 360°^® revenues increased to more than 96 percent of total
         device revenues

  *Pivotal 30-day data from ORBIT II coronary study presented at ACC

       *Results exceeded trial’s two primary safety and efficacy endpoints by
         a significant margin
       *PMA submission to treat coronary artery disease completed on March 15

  *Net proceeds of approximately $38 million raised in public offering of
    common stock

Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII), a medical device company
developing and commercializing innovative interventional treatment systems for
vascular disease, today reported financial results for its fiscal third
quarter ended March 31, 2013.

CSI’s third-quarter revenues rose to $26.5 million, a 25-percent gain from
$21.2 million in the third quarter of fiscal 2012. Substantial demand for the
company’s Stealth 360°^® peripheral arterial disease (PAD) System drove
Stealth 360° revenues to more than 96 percent of total device revenues.
Customer reorder revenues remained strong at 96 percent of total revenue.

The fiscal 2013 third-quarter net loss was less than anticipated at $(6.2)
million, or $(0.29) per common share, compared to $(4.2) million, or $(0.23)
per common share, in the fiscal 2012 third quarter. Net loss includes expense
of $(0.5) million, or $(0.02) per common share, from $4.5 million of debt
conversions and valuation changes in a related conversion asset. Adjusted
EBITDA for the quarter was a loss of $(3.3) million, compared to a loss of
$(2.3) million in fiscal 2012. Losses increased from prior-year periods,
primarily due to planned investments of approximately $4.1 million to advance
the ORBIT II coronary clinical trial and prepare for a coronary market launch,
as well as competitive enhancements to sales and marketing, and expansion of
medical education programs.

The company’s third-quarter gross profit margin was 76 percent, similar to the
year-earlier quarter. The favorable effect of increased production volume was
offset by the higher unit cost of the Stealth 360° compared to the predecessor
Diamondback 360° device and by investments to ramp-up CSI’s manufacturing
facility in Texas for added capacity.

In March 2013, CSI raised approximately $38 million in a public offering of
common stock. Proceeds will be primarily used to fund growth investments
including coronary launch preparation, international expansion, clinical
studies, product portfolio expansion and education programs.

David L. Martin, CSI president and chief executive officer, said, “We
continued to achieve significant milestones during the quarter. Our focused
sales strategy and educational initiatives drove rapid adoption of our
easy-to-use technology with PAD physicians in both hospital and office-based
lab settings. This resulted in continued strong quarterly financial results.”

Martin continued, “We also presented pivotal 30-day data from our ORBIT II
study of severely calcified coronary lesions at the 2013 American College of
Cardiology, or ACC, conference. CSI’s mission is to be the primary therapy for
calcified artery disease. Our compelling ORBIT II study results demonstrate
the substantial potential for our orbital atherectomy technology to treat this
most challenging, underserved patient population.

“Building on that success, we submitted a premarket approval, or PMA,
application to the FDA for our orbital atherectomy system to treat calcified
coronary arteries. This marks another major coronary milestone for CSI, as we
drive toward this $1.5 billion market opportunity.”

In the first nine months of fiscal 2013, revenues increased to $75.1 million,
up 26 percent from the fiscal 2012 nine-month period. Gross margin was
comparable to the prior-year period at 77 percent, while operating expenses
rose 31 percent due to planned investments similar to those discussed for the
third quarter, including approximately $12.6 million for the ORBIT II trial
and coronary market preparation. Adjusted EBITDA loss increased by $(3.8)
million to $(9.7) million, while the net loss totaled $(17.2) million, or
$(0.82) per common share, compared to $(12.2) million, or $(0.69) per common
share, in fiscal 2012.

Pivotal ORBIT II Coronary Data Presented at ACC 2013
The Featured Clinical Research session presentation by Dr. Jeffrey Chambers of
Metropolitan Heart and Vascular Institute, Minneapolis, demonstrated that
CSI’s technology produced clinical outcomes that exceeded the trial’s two
primary safety and efficacy endpoints by a significant margin — within one of
the most challenging patient populations to treat.

The ORBIT II results showed that at 30 days, patient freedom from major
adverse cardiac events, or MACE, was 89.8 percent and procedural success was
89.1 percent (including in-hospital MACE). Patients had less than 50 percent
residual stenosis 98.6 percent of the time, and 97.7 percent of stents were
successfully delivered.

ORBIT II is evaluating the safety and effectiveness of the company’s orbital
atherectomy technology in treating a problematic subset of patients with
severely calcified coronary lesions and is the first IDE study in history to
seek approval for treating these lesions.

CSI Completes PMA Submission to Treat Coronary Artery Disease
CSI completed submission of its PMA application to the FDA for its orbital
atherectomy system, to treat calcified coronary arteries, on March 15, 2013.
The FDA agreed to a modular PMA process that allowed CSI to submit the first
two modules covering preclinical data and manufacturing/quality systems, while
still collecting, compiling and analyzing the clinical data. CSI has now
submitted the third and final PMA application module, as well as responses to
FDA comments on the first two modules, which were submitted in late 2012.

Fiscal 2013 Fourth-Quarter Outlook
For the fiscal 2013 fourth quarter ending June 30, 2013, CSI anticipates:

  *Revenue growth of 17 percent to 21 percent over the fourth quarter of
    fiscal 2012, to a range of $26.7 million to $27.7 million;
  *Gross profit as a percentage of revenues similar to the third quarter of
    fiscal 2013;
  *Operating expenses 7 percent to 8 percent higher than the third quarter of
    fiscal 2013, including approximately $4.5 million for the ORBIT II trial
    and preparation for a potential coronary market launch in the future;
  *Interest and other expense of approximately $(325,000), excluding the
    potential effect of debt conversions or valuation changes of the related
    conversion option asset; and
  *Net loss in the range of $(6.8) million to $(7.4) million, or loss per
    common share ranging from $(0.28) to $(0.31), assuming 24.2 million
    average shares outstanding, and excluding the potential effect of debt
    conversions or valuation changes of the related conversion option asset.

Martin added, “We continue to make growth investments in preparation for a
coronary launch, as well as in clinical studies and education programs to
further drive PAD adoption. Investing in these opportunities will help us
realize the full potential of our technology, support ongoing attractive
revenue growth and lead us to profitability over the long term.”

Conference Call Today at 3:45 p.m. CT (4:45 p.m. ET)
Cardiovascular Systems, Inc. will host a live conference call and webcast of
its fiscal third-quarter results today, May 1, 2013, at 3:45 p.m. CT (4:45
p.m. ET). To access the call, dial (888) 713-4205 and enter access number
48810662. Please dial in at least 10 minutes prior to the call and wait for
assistance, or dial “0” for the operator. To listen to the live webcast, go to
the investor information section of the company’s website, www.csi360.com, and
click on the webcast icon. A webcast replay will be available beginning at 7
p.m. CT the same day.

For an audio replay of the conference call, dial (888) 286-8010 and enter
access number 46269911. The audio replay will be available beginning at 5:45
p.m. CT on Wednesday, May 1, 2013, through 11 p.m. CT on Wednesday, May 8,
2013.

Use of Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements prepared in
accordance with U.S. generally accepted accounting principles (GAAP), CSI uses
certain non-GAAP financial measures in this release. Reconciliations of the
non-GAAP financial measures used in this release to the most comparable U.S.
GAAP measures for the respective periods can be found in tables later in this
release immediately following the consolidated statements of operations.
Non-GAAP financial measures have limitations as analytical tools and should
not be considered in isolation or as a substitute for CSI's financial results
prepared in accordance with GAAP.

About Peripheral Arterial Disease
As many as 12 million Americans, most over age 65, suffer from PAD, which is
caused by the accumulation of plaque in peripheral arteries (commonly the
pelvis or leg) reducing blood flow. Symptoms include leg pain when walking or
at rest. Left untreated, PAD can lead to severe pain, immobility, non-healing
wounds and eventually limb amputation. With risk factors such as diabetes and
obesity on the rise, the prevalence of PAD is growing at double-digit rates.

Millions of patients with PAD may benefit from treatment with orbital
atherectomy utilizing the Stealth 360° ^ and Diamondback 360°, minimally
invasive catheter systems developed and manufactured by CSI. These systems use
a diamond-coated crown, attached to an orbiting shaft, which sands away plaque
while preserving healthy vessel tissue — a critical factor in preventing
reoccurrences. Balloon angioplasty and stents have significant shortcomings in
treating hard, calcified lesions. Stents are prone to fractures and high
recurrence rates, and treatment of hard, calcified lesions often leads to
vessel damage and suboptimal results.

About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a medical device
company focused on developing and commercializing innovative solutions for
treating vascular and coronary disease. The company’s Orbital Atherectomy
Systems treat calcified and fibrotic plaque in arterial vessels throughout the
leg in a few minutes of treatment time, and address many of the limitations
associated with existing surgical, catheter and pharmacological treatment
alternatives. The U.S. FDA granted 510(k) clearance for the use of the
Diamondback Orbital Atherectomy System in August 2007. To date, nearly 110,000
of CSI’s devices have been sold to leading institutions across the United
States. CSI has also completed its ORBIT II Investigational Device Exemption
clinical trial to evaluate the safety and effectiveness of its orbital
technology in treating coronary arteries. The coronary system is limited by
federal law to investigational use and is currently not commercially available
in the United States.

For more information, visit the company’s website at www.csi360.com.

Safe Harbor
Certain statements in this news release are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and are
provided under the protection of the safe harbor for forward-looking
statements provided by that Act. For example, statements in this press release
regarding (i) CSI’s potential coronary application; (ii) CSI’s ORBIT II trial;
(iii) the anticipated use of proceeds from the public offering of common stock
in March 2013; (iv) the $1.5 billion estimate of the market for a coronary
application; (v) the potential growth and profitability driven by CSI’s
anticipated investments; and (vi) anticipated revenue, gross profit, operating
expenses, interest and other expense, and net loss, are forward-looking
statements.

These statements involve risks and uncertainties which could cause results to
differ materially from those projected, including but not limited to
dependence on market growth; the reluctance of physicians to accept new
products; the effectiveness of the Stealth 360°; actual clinical trial
results; the impact of competitive products and pricing; the difficulty to
successfully manage operating costs; fluctuations in quarterly results; FDA
clearances and approvals; approval of products for reimbursement and the level
of reimbursement; general economic conditions and other factors detailed from
time to time in CSI’s SEC reports, including its most recent annual report on
Form 10-K and subsequent quarterly reports on Form 10-Q. CSI encourages you to
consider all of these risks, uncertainties and other factors carefully in
evaluating the forward-looking statements contained in this release. As a
result of these matters, changes in facts, assumptions not being realized or
other circumstances, CSI's actual results may differ materially from the
expected results discussed in the forward-looking statements contained in this
release. The forward-looking statements made in this release are made only as
of the date of this release, and CSI undertakes no obligation to update them
to reflect subsequent events or circumstances.

Product Disclosure
The Stealth 360°^® PAD System, Diamondback 360^® PAD System and Predator 360^®
PAD System are percutaneous orbital atherectomy systems indicated for use as
therapy in patients with occlusive atherosclerotic disease in peripheral
arteries and stenotic material from artificial arteriovenous dialysis
fistulae. The systems are contraindicated for use in coronary arteries, bypass
grafts, stents or where thrombus or dissections are present. Although the
incidence of adverse events is rare, potential events that can occur with
atherectomy include: pain, hypotension, CVA/TIA, death, dissection,
perforation, distal embolization, thrombus formation, hematuria, abrupt or
acute vessel closure, or arterial spasm.


Cardiovascular Systems, Inc.
Consolidated Statements of Operations
(Dollars in Thousands, except per share and share amounts)
(unaudited)
                                                
                 Three Months Ended                Nine Months Ended
                 March 31,                         March 31,
                 2013            2012             2013            2012
Revenues         $ 26,474         $ 21,205         $ 75,076         $ 59,583
Cost of goods     6,241          5,132          17,453         14,038     
sold
Gross profit      20,233         16,073         57,623         45,545     
                                                                    
Selling,
general and        21,650           16,809           62,091           47,892
administrative
Research and      3,993          2,985          11,270         8,133      
development
Total expenses    25,643         19,794         73,361         56,025     
Loss from          (5,410     )     (3,721     )     (15,738    )     (10,480    )
operations
Interest and
other             (809       )    (470       )    (1,458     )    (1,705     )
(expense)
income
Net loss         $ (6,219     )   $ (4,191     )   $ (17,196    )   $ (12,185    )
                                                                    
Net loss per
common share:
Basic and        $ (0.29      )   $ (0.23      )   $ (0.82      )   $ (0.69      )
diluted
                                                                    
Weighted
average common
shares used in
computation:
Basic and         21,488,879     17,977,819     20,857,124     17,746,558 
diluted
                                                                                 

Cardiovascular Systems, Inc.
Consolidated Balance Sheets
(Dollars in Thousands)
(unaudited)
                                                      
                                             March 31,   June 30,
                                             2013        2012

ASSETS
                                                         
Current assets
Cash and cash equivalents                    $  69,932   $ 35,529
Accounts receivable, net                        15,187     13,644
Inventories                                     6,796      7,061
Prepaid expenses and other current assets      778       1,536
Total current assets                           92,693    57,770
Property and equipment, net                     2,532      2,163
Patents, net                                    3,066      2,635
Other assets                                   742       556
Total assets                                 $  99,033   $ 63,124

LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                         
Current liabilities
Current maturities of long-term debt         $  4,928    $ 4,678
Accounts payable                                6,183      5,610
Deferred grant incentive                        176        302
Accrued expenses                               8,668     7,262
Total current liabilities                      19,955    17,852
Long-term liabilities
Long-term debt, net of current maturities       8,851      12,842
Other liabilities                              242       241
Total long-term liabilities                    9,093     13,083
Total liabilities                              29,048    30,935
Commitments and contingencies
Total stockholders’ equity                     69,985    32,189
Total liabilities and stockholders’ equity   $  99,033   $ 63,124
                                                           

Cardiovascular Systems, Inc.
Supplemental Sales Information
(Dollars in Thousands)
(unaudited)
                                         
                       Three months ended  Nine months ended
                      March 31,           March 31,
                      2013      2012     2013     2012
                                               
Device revenue         $23,135   $18,800  $65,863  $52,842
Other product revenue  3,339     2,405    9,213    6,741
Total revenue          $26,474   $21,205  $75,076  $59,583
                                               
Device units sold      7,314     5,894    20,810   16,689
                                               
New customers          50        41       132      123
                                               
Reorder revenue %      96%       96%      97%      95%
                                                    

Non-GAAP Financial Measures

To supplement CSI's consolidated condensed financial statements prepared in
accordance with GAAP, CSI uses a non-GAAP financial measure referred to as
"Adjusted EBITDA" in this release.

Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP measure
for the respective periods can be found in the table below. In addition, an
explanation of the manner in which CSI's management uses Adjusted EBITDA to
conduct and evaluate its business, the economic substance behind management's
decision to use Adjusted EBITDA, the substantive reasons why management
believes that Adjusted EBITDA provides useful information to investors, the
material limitations associated with the use of Adjusted EBITDA and the manner
in which management compensates for those limitations is included following
the reconciliation table below.

Cardiovascular Systems, Inc.
Adjusted EBITDA
(Dollars in Thousands)
(unaudited)
                         
                          Actual
                           Three Months Ended       Nine Months Ended
                           March 31,                 March 31,
                           2013        2012        2013         2012
Loss from operations       $ (5,410 )  $ (3,721 )   $ (15,738 )  $ (10,480 )
Add: Stock-based             1,876        1,200        5,316         3,919
compensation
Add: Depreciation and       241       228       688        676     
amortization
Adjusted EBITDA            $ (3,293 )  $ (2,293 )  $ (9,734  )  $ (5,885  )
                                                                             

Use and Economic Substance of Non-GAAP Financial Measures Used by CSI and
Usefulness of Such Non-GAAP Financial Measures to Investors

CSI uses Adjusted EBITDA as a supplemental measure of performance and believes
this measure facilitates operating performance comparisons from period to
period and company to company by factoring out potential differences caused by
depreciation and amortization expense and non-cash charges such as stock based
compensation. CSI's management uses Adjusted EBITDA to analyze the underlying
trends in CSI's business, assess the performance of CSI's core operations,
establish operational goals and forecasts that are used to allocate resources
and evaluate CSI's performance period over period and in relation to its
competitors' operating results. Additionally, CSI's management is evaluated on
the basis of Adjusted EBITDA when determining achievement of their incentive
compensation performance targets.

CSI believes that presenting Adjusted EBITDA provides investors greater
transparency to the information used by CSI's management for its financial and
operational decision-making and allows investors to see CSI's results "through
the eyes" of management. CSI also believes that providing this information
better enables CSI's investors to understand CSI's operating performance and
evaluate the methodology used by CSI's management to evaluate and measure such
performance.

The following is an explanation of each of the items that management excluded
from Adjusted EBITDA and the reasons for excluding each of these individual
items:

-- Stock-based compensation. CSI excludes stock-based compensation expense
from its non-GAAP financial measures primarily because such expense, while
constituting an ongoing and recurring expense, is not an expense that requires
cash settlement. CSI's management also believes that excluding this item from
CSI's non-GAAP results is useful to investors to understand the application of
stock-based compensation guidance and its impact on CSI's operational
performance, liquidity and its ability to make additional investments in the
company, and it allows for greater transparency to certain line items in CSI's
financial statements.

-- Depreciation and amortization expense. CSI excludes depreciation and
amortization expense from its non-GAAP financial measures primarily because
such expenses, while constituting ongoing and recurring expenses, are not
expenses that require cash settlement and are not used by CSI's management to
assess the core profitability of CSI's business operations. CSI's management
also believes that excluding these items from CSI's non-GAAP results is useful
to investors to understand CSI's operational performance, liquidity and its
ability to make additional investments in the company.

Material Limitations Associated with the Use of Non-GAAP Financial Measures
and Manner in which CSI Compensates for these Limitations

Non-GAAP financial measures have limitations as analytical tools and should
not be considered in isolation or as a substitute for CSI's financial results
prepared in accordance with GAAP. Some of the limitations associated with
CSI's use of these non-GAAP financial measures are:

-- Items such as stock-based compensation do not directly affect CSI's cash
flow position; however, such items reflect economic costs to CSI and are not
reflected in CSI's "Adjusted EBITDA" and therefore these non-GAAP measures do
not reflect the full economic effect of these items.

-- Non-GAAP financial measures are not based on any comprehensive set of
accounting rules or principles and therefore other companies may calculate
similarly titled non-GAAP financial measures differently than CSI, limiting
the usefulness of those measures for comparative purposes.

-- CSI's management exercises judgment in determining which types of charges
or other items should be excluded from the non-GAAP financial measures CSI
uses.

CSI compensates for these limitations by relying primarily upon its GAAP
results and using non-GAAP financial measures only supplementally. CSI
provides full disclosure of each non-GAAP financial measure CSI uses and
detailed reconciliations of each non-GAAP measure to its most directly
comparable GAAP measure. CSI encourages investors to review these
reconciliations. CSI qualifies its use of non-GAAP financial measures with
cautionary statements as set forth above.

Contact:

Cardiovascular Systems, Inc.
Investor Relations, 651-259-2800
investorrelations@csi360.com
or
Padilla Speer Beardsley Inc.
Marian Briggs, 612-455-1742
mbriggs@padillaspeer.com
or
Matt Sullivan, 612-455-1709
msullivan@padillaspeer.com
 
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