Cyberonics, Inc. (Nasdaq: CYBX) today announced results for the quarter ended July 24, 2009.
Quarterly highlights
Results for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009 include:
- Net sales of $38.5 million, a 14% increase from $33.7 million;
- Income from operations of $6.5 million, an increase of 134% from the $2.8 million reported in the prior year;
- Earnings per diluted share of $0.23 cents compared with $0.08 cents per share;
- U.S. and international epilepsy unit sales increased by 8%, and 15%, respectively.
Net sales
Worldwide net sales for the first quarter of fiscal 2010 were $38.5 million compared to $33.7 million in the comparable period of fiscal 2009, an increase of 14%. On a constant currency basis, the year-over-year sales increase was approximately 17%.
U.S. net product sales increased to $30.9 million, compared with $26.2 million in the comparable period of fiscal 2009, an increase of $4.7 million or 18%.
While overall international unit sales increased by 12% in the first quarter of fiscal 2010, net sales increased by only 1% to $7.2 million due to the negative impact of foreign currency movements. On a constant currency basis, international net sales increased by approximately 14%.
Gross profit
The gross profit for the first quarter of fiscal 2010 represented 86.1% of net sales, slightly higher than the 85.7% in the first quarter of fiscal 2009. This increase is primarily a result of higher prices, increased production volumes and improved manufacturing efficiencies.
Operating expenses
Operating expenses increased by $0.5 million to $26.6 million for the first quarter of fiscal 2010 from the $26.1 million recorded in the comparable period of fiscal 2009 and were materially unchanged from the $26.8 million in the fourth quarter of the recently completed fiscal year.
Expenses for the quarter ended July 24, 2009 included $2.2 million for stock-based compensation, a reduction of $0.4 million from the comparable period of fiscal 2009.
Income from operations
The company reported income from operations of $6.5 million during the first quarter of fiscal 2010, compared with income from operations of $2.8 million in the comparable period of fiscal 2009.
Debt repurchase / other income
During the recently completed quarter, the company repurchased $15.6 million of its outstanding convertible debt for total cash consideration of $13.8 million and recorded a net gain of approximately $1.5 million, including the impact of tax and the accelerated amortization of deferred issuance costs. Since January 2008, the company has retired a total of $85.8 million of debt, including $78.3 million of convertible debt. Convertible debt outstanding as of the date of this release totals $46.7 million.
Net income
The company reported net income of $7.9 million, or $0.23 per diluted share, for the first quarter, compared with a net income of $2.1 million, or $0.08 cents per share, in the first quarter of fiscal 2009.
Balance sheet and cash flow
The company reported operating cash flow of $4.0 million for the quarter ended July 24, 2009. Available cash balances were $56.3 million at quarter end, compared with debt outstanding of $46.7 million.
Results and objectives
"Consistent with our expectations, fiscal 2010 has begun on a positive note, with a double-digit sales increase," commented Dan Moore, Cyberonics' President and Chief Executive Officer. "Again, we achieved strong growth in operating and net income. Our core U.S. epilepsy business showed continued growth, and our international operations posted another solid performance, with international units increasing almost 12% and revenues again exceeding $7 million.
"During the quarter, we made significant progress in obtaining physician input to our development programs, reinforcing Cyberonics as the leader in devices for epilepsy, and rebuilding our credibility. We conducted six meetings with a total of 71 epilepsy physicians during which we provided considerable detail on the enhanced development efforts around seizure detection, seizure recording and responsive stimulation. Two additional educational symposia with epilepsy specialists were held during the quarter, and more than 20 are planned for the fiscal year. Feedback from these and other physician meetings provide important input into our product development process.
"With respect to our international business, unit growth has continued to improve this quarter. We sold the VNS Therapy(TM) System into 41 countries during the quarter, indicative of its widespread acceptance as an important treatment option. We are also pleased to report that the Japanese regulatory authorities have scheduled the audit of our quality system for the first week of September. This represents another important milestone in making VNS Therapy available to Japanese patients with epilepsy.
"With our recent filing of our 2009 proxy statement, we announced that two of our long-standing directors would not be standing for reelection and that the Board would be reduced to seven from the date of our shareholder meeting on September 24. Both Alan Olsen and Michael Strauss have made important and valuable contributions to the company, and we thank them for all of their efforts."
Fiscal 2010 guidance
Cyberonics is reiterating its previously provided net sales guidance of $157 million to $161 million on a constant currency basis, and continues to expect that income from operations will be in the range of $24 million to $27 million.
Additional details will be provided during the upcoming conference call and in the accompanying presentation slides, as described below.
Fiscal Year 2010 First Quarter Results Conference Call Instructions
A conference call to discuss fiscal 2010 first quarter results will be held at 9:00 AM EDT on Thursday, August 20, 2009. To listen to the conference call live by telephone dial 877-313-8035 (if dialing from within the U.S.) or 706-679-4838 (if dialing from outside the U.S.). The conference ID is 21678611; the leader is Dan Moore. Presentation slides will be available on-line at www.cyberonics.com by 8:00 AM EDT on Thursday, August 20, 2009. A replay of the conference call will be available approximately two hours after the completion of the live call by dialing 800-642-1687 (if dialing from within the U.S.) or 706-645-9291 (if dialing outside the U.S.). The replay conference ID access code is 21678611.
The replay will be available for one week on the above number, and subsequently on the Company's website for a period of six months.
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