Urologix 2010 fourth quarter net loss decreases 28.9% to $0.04 per share

Aug 25 2010

Highlights:

• Fiscal 2010 revenue up 15.3 percent from prior year
• Fiscal 2010 net loss reduced by 50.9 percent compared to prior year
• Fourth-quarter net loss reduced by 28.9 percent compared to fourth quarter fiscal 2009

Urologix®, Inc. (Nasdaq:ULGX), a medical device company that develops, manufactures and markets minimally invasive Cooled ThermoTherapy™ technology to urologists to provide a durable and effective in-office treatment for patients suffering from benign prostatic hyperplasia (BPH), today reported financial results for its fourth quarter ended June 30, 2010 and for fiscal year 2010.

For the Company's fiscal year 2010 fourth quarter, Urologix posted a net loss of $622,000, or $0.04 per diluted share, on revenue of $3.3 million. Compared to the prior-year fourth quarter, which had a net loss of $875,000 or $0.06 per diluted share, current-year loss was reduced by $253,000. The decrease in net loss as compared to the fourth quarter of fiscal 2009 is primarily due to a decrease in operating expense of $268,000.

Fiscal 2010 fourth-quarter revenue was down 9.3 percent from the $3.6 million reported in the third quarter of this fiscal year and decreased 5.4 percent compared to the same period in the prior year. The 2010 fourth quarter revenue decline compared to third quarter was impacted by two factors: (1) a temporary backorder for the Company's Prostaprobe® product that is utilized by third-party mobile services; and (2) physician uncertainty surrounding Medicare reimbursement due to the disruption of payments during a portion of April and June. The backorder issue has been resolved and Medicare reimbursement payments resumed in late June 2010.

The Company's cash utilization was $62,000 for the quarter ended June 30, 2010. This compares to a cash utilization of $603,000 in the fourth quarter of fiscal 2009, a reduction of $541,000. The Company's cash balance was $5.7 million as of June 30, 2010, which management considers sufficient to fund working capital and capital resource needs beyond fiscal year 2011.

"The fourth quarter demonstrates the continued challenges presented by the lack of clarity in Medicare reimbursement. In addition, we continued to hear from urologists experiencing reduced patient volumes that affected their BPH caseloads as well as other procedures in their urology practices," stated Stryker Warren jr, CEO. "However, in the midst of this uncertainty the Company has focused on the growing realization among our customers of the large number of patients dissatisfied with medical therapy who will avail themselves for a durable, safe, minimally invasive, anesthesia-free procedure in the urologist's office when this alternative is presented. We expect Cooled ThermoTherapy's positioning as a clear alternative to drugs to become our focal point with the urologist."

In the fourth quarter of fiscal year 2010, revenue from catheter sales to direct accounts contributed 38.7 percent of overall revenue as compared to 36.4 percent in the third fiscal quarter. Revenue derived from the Urologix mobile service represented 49.3 percent of overall revenue in the fourth quarter of fiscal 2010 compared to 45.6 percent in the third quarter of fiscal 2010. Third party mobile revenue represented approximately 9.5 percent of overall revenue in the fourth quarter of fiscal 2010 compared with 15.3 percent of revenue in the prior quarter. 

Gross profit for the fiscal 2010 fourth quarter was $1.8 million, or 53.9 percent of revenue, compared to $2.0 million, or 55.0 percent of revenue, for the third quarter and $1.8 million, or 52.3 percent of revenue, in the fourth quarter of fiscal 2009. The decrease in gross margin rate compared to the fiscal 2010 third quarter is primarily the result of unfavorable cost variances due to lower production volumes.

Operating expense decreased $123,000, or 4.8 percent, when compared to the third quarter of fiscal 2010 primarily through the control of general and administrative expense. In spite of decreasing overall operating expense, the Company invested in research and development as spending in this area increased 11.5 percent sequentially.  

For the fiscal year ended June 30, 2010, Urologix reported a net loss of $2.2 million, or $0.15 per diluted share, on revenue of $14.8 million. This compares to a net loss of $4.4 million, or $0.31 per diluted share, on revenue of $12.8 million for fiscal 2009.

The 15.3 percent increase in year-over-year revenue reflects the continuing efforts of the Company to expand the capabilities of its sales force as well as capitalizing on the opportunities in the market generated by difficulties experienced by competitors. Primarily as a result of the increase in units produced, gross margin rate for fiscal year 2010 improved over 5 percentage points from the prior year. The Company also exhibited strong expense management during fiscal year 2010 as overall operating expense decreased $455,000, or 4.2 percent, from fiscal year 2009.

Urologix' cash flow statement reflects the $1.3 million in cash used for operating activities in fiscal 2010 compared to $3.9 million used in the prior year, primarily as a result of the lower net loss. The Company has no debt.

"In this past fiscal year, the Company began to see the growing recognition of high versus low energy microwave therapies as well as the growing body of evidence that BPH drugs are neither the panacea, nor a predictably efficacious, side-effect free treatment for BPH," said Mr. Warren. "While pleased with the year-over-year revenue growth, there remains much to be accomplished in competing effectively with drugs to ensure meaningful momentum in the sustained adoption of our therapy. In that regard, we are particularly impressed and pleased by the urologists who have become much more mindful of the clinical evidence and the role of Cooled ThermoTherapy. For Urologix, these represent very positive attitudes which were not apparent two years ago."