Cyberonics third quarter net sales increase 15.3% to $47.1 million

Mar 2 2011

Cyberonics, Inc. (Nasdaq: CYBX), a global leader in epilepsy management, today announced results for the quarter ended January 28, 2011.  

Quarterly Highlights

Operating results and achievements for the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 include:

• Net sales increased by 15.3% to $47.1 million;
• U.S. net sales increased by 24%;
• U.S. epilepsy unit sales increased by 16%; and
• Income from operations increased by 30% to $11.7 million.

"The third quarter of fiscal year 2011 was another successful quarter for our company, once again demonstrating consistent performance with year-over-year growth in worldwide net product sales attributable to the epilepsy indication increasing by more than 15%," commented Dan Moore, Cyberonics' President and Chief Executive Officer.  "We were particularly pleased with the robust 24% sales growth in our U.S. epilepsy business, which was driven by significantly higher volume and increased average selling prices.

"Net sales in our international business were down 15% when compared with the third quarter of fiscal 2010, although the revenue of $7.1 million is consistent with last quarter.  Several of our international countries performed well during the quarter, however, execution challenges, combined with continuing economic difficulties in some markets, contributed to softness in some key EU countries.  We are increasing our efforts in these countries and expect to be in a position to restore growth in the next fiscal year.  In addition, we continue to make solid progress in Japan where we are focused on physician training and fulfilling patient registry requirements."

The company reported net income of $7.2 million, or $0.25 per diluted share, for the third quarter of fiscal 2011 compared with net income of $8.8 million, or $0.29 cents per diluted share, in the third quarter of fiscal 2010.  The decline in net income for the quarter was attributable to an increase in the effective tax rate from 3% in fiscal 2010 to 38% in fiscal 2011.

The company reported operating cash flow of $13.2 million for the quarter ended January 28, 2011.  Available cash balances were $85.3 million at quarter end, an increase of $17.4 million compared to the end of the second quarter of fiscal 2011.

Moore concluded, "Operationally, this was another very strong quarter for Cyberonics.  We continue to emphasize profitability, as well as sustainable sales growth, as our primary goals, so we were very pleased to see income from operations increase by 30% this quarter to complement our 15% revenue growth.  Recently, we announced FDA approval of our fifth generation generator, the AspireHC™ high capacity generator, which is now in a limited market release.  This approval is further evidence of our product development progress and provides an important platform for future new product introductions, including the AspireSR™ generator with seizure response for which a European clinical trial is planned to start in the first half of calendar 2011.  We expect to continue to drive shareholder value through consistent execution, improved operating leverage and an expanded product portfolio."

Fiscal 2011 Guidance

Cyberonics is increasing its net sales guidance for fiscal year 2011 to the range of $189 million to $191 million on a constant currency basis, as compared to the previously provided range of $187 million to $190 million.  At current average rates, foreign currency exchange rate fluctuations are expected to have a minimal impact on revenue in fiscal 2011 compared to 2010.

In addition, the company now expects that income from operations for fiscal year 2011 will be in the range of $47 million to $50 million, as compared to the previously provided range of $45 million to $48 million.