NxStage(R) Reports First Quarter 2010 Financial Results

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NxStage(R) Reports First Quarter 2010 Financial Results
 
 
Highlights:

- Total Revenue Increases 20% to $40.4 million

- Home Revenue Increases 33% to $19.0 million

- Gross Margin Improves to 29%, Up 100 bps Sequentially

- Positive Developments in Home Drive Strong Sequential Performance

LAWRENCE, Mass., May 5 /PRNewswire-FirstCall/ -- NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today reported financial results for the first quarter of 2010 ended March  31, 2010, with total revenue above the top end of its guidance range.

Net revenue for first quarter of 2010 increased to $40.4 million compared with revenue of $33.7 million for the first quarter of 2009, representing a 20% increase.  The increase was driven by strong performance of the Company's Home and Critical Care markets, which experienced growth of 33 percent and 36 percent, respectively, when compared with the first quarter of 2009.

Home revenue grew to $19.0 million for the first quarter of 2010 compared with revenues of $14.4 million for the first quarter of 2009.  Critical Care revenue grew to $6.1 million for the first quarter of 2010 compared with revenues of $4.5 million for the first quarter of 2009.  Revenue in the In-Center market, from the Company's Medisystems business, increased to $15.3 million for the first quarter of 2010 compared with revenues of $14.9 million for the first quarter of 2009. 

"The Home market showed strong sequential growth over the fourth quarter of 2009, as a result of systematic execution against our strategic initiatives to further develop the home hemodialysis market with the System One™," stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical, Inc.  "As the only company with a home hemodialysis product cleared for home use by the FDA, and over 3 million treatments, we feel good about our outlook for 2010 and see significant opportunity to continue to grow our top line and improve our bottom line with a lower risk profile than in the past."

NxStage reported a net loss of $9.0 million or ($0.19) per share for the first quarter of 2010 compared with a net loss of $12.2 million or ($0.26) per share for the first quarter of 2009. 

For the first quarter of 2010, the Company had an Adjusted EBITDA loss of $1.3 million, compared with an Adjusted EBITDA loss of $5.7 million in the first quarter of 2009. 

"We remain focused on achieving our goal of breakeven Adjusted EBITDA in the second quarter of 2010, and believe we are on track to meet or exceed our goal of breakeven cash flow 2 to 3 quarters following this milestone," stated Robert S. Brown, Chief Financial Officer of NxStage Medical, Inc.

Guidance:

For the second quarter of 2010, the Company is forecasting revenues to be between $40 and $42 million, a net loss in the range of $8.0 to $9.0 million or ($0.17) to ($0.19) per share, and an Adjusted EBITDA loss in the range of $0.0 to $1.0 million. 

This release contains a non-GAAP financial measure.  A reconciliation of the Company's non-GAAP financial measure to its most comparable GAAP financial measure is in the exhibits to this press release.

Conference Call:

NxStage will also host a conference call today, May 5, 2010 at 9:00 a.m. Eastern Time to discuss its first quarter financial results. To listen to the conference call, please dial 866-788-0540 (domestic) or 857-350-1678 (international).  The passcode is 32266659.   The call will also be webcast LIVE and can be accessed via the investor relations section of the Company's website at www.nxstage.com/ir.cfm.

A replay of the conference call will be available 2 hours after the start of the call through May 19, 2010.  To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 55973465.  An online archive of the conference call can be accessed via the investor relations section of the Company's website at www.nxstage.com/ir.cfm.

About NxStage

NxStage Medical, Inc. (Nasdaq: NXTM) is a medical device company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative products for the treatment of ESRD and acute kidney failure. For more information on NxStage and its products, please visit the company's website at www.nxstage.com.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. Examples of these forward-looking statements include statements as to the anticipated demand for the Company's products, anticipated operating results, including revenues, loss, gross margin and Adjusted EBITDA numbers, expectations regarding achievement of improved and breakeven cash flow, and other expectations as to future operating results. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond NxStage's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements, including market acceptance and demand for NxStage's products, growth in home and/or daily hemodialysis, unanticipated difficulties in achieving operational efficiencies and cost reductions,  changes in reimbursement for home and daily hemodialysis, changes in the regulatory environment, changes in the historical purchasing patterns and preferences of our major customers, including DaVita Inc., and certain other factors that may affect future operating results and which are detailed in NxStage's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the period ended December 31, 2009.

In addition, the statements in this press release represent NxStage's expectations and beliefs as of the date of this press release. NxStage anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while NxStage may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing NxStage's expectations or beliefs as of any date subsequent to the date of this press release.

Non-GAAP Financial Measure

The Company discloses a non-GAAP financial measure to supplement the Company's consolidated financial statements presented on a GAAP basis. This non-GAAP measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States and may be different from similar non-GAAP financial measures used by other companies. The non-GAAP financial measure disclosed by the Company is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Management uses Adjusted EBITDA (EBITDA adjusted for stock based-compensation, deferred revenue recognized, and other non-cash and non-recurring expenses) to understand operational cash usage.  The Company believes this non-GAAP financial measure provides useful and supplementary information allowing investors greater transparency to one measure used by management.  This non-GAAP financial measure is meant to supplement, and to be viewed in conjunction with, GAAP financial measures.  This non-GAAP financial measure is reconciled to the most comparable GAAP financial measure below.

NxStage Medical, Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)
   

   
   
   
   

   

Three Months Ended
   

   

March 31,
   

   

2010
   
   

2009
   

   
   
   
   

Revenues
   

$40,408
   
   

$  33,735
   

Cost of revenues
   

28,595
   
   

26,680
   

Gross profit
   

11,813
   
   

7,055
   

   
   
   
   

Operating expenses:
   
   
   
   

Selling and marketing
   

8,017
   
   

7,231
   

Research and development
   

3,035
   
   

2,402
   

Distribution
   

3,411
   
   

3,684
   

General and administrative
   

4,938
   
   

4,955
   

Total operating expenses
   

19,401
   
   

18,272
   

Loss from operations
   

(7,588)
   
   

(11,217)
   

   
   
   
   

Other expense:
   
   
   
   

Interest income
   

-
   
   

11
   

Interest expense
   

(1,108)
   
   

(1,035)
   

Other income (expense), net
   

(117)
   
   

93
   

   

(1,225)
   
   

(931)
   

   
   
   
   

Net loss before income taxes
   

(8,813)
   
   

(12,148)
   

   
   
   
   

Provision for income taxes
   

186
   
   

80
   

   
   
   
   

Net loss
   

$ (8,999)
   
   

$(12,228)
   

   
   
   
   

Net loss per share, basic and diluted
   

$   (0.19)
   
   

$    (0.26)
   

   
   
   
   

Weighted-average shares outstanding, basic and diluted
   

46,971
   
   

46,550
   
         


NxStage Medical, Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

(unaudited)
   

   
   

   

March 31,
   
   

December 31,
   

   

2010
   
   

2009
   

ASSETS
   
   
   
   

Current assets:
   
   
   
   

Cash and cash equivalents
   

$   19,086
   
   

$          21,720
   

Accounts receivable, net
   

15,009
   
   

14,238
   

Inventory
   

30,218
   
   

28,117
   

Prepaid expenses and other current assets
   

2,123
   
   

1,227
   

Total current assets
   

66,436
   
   

65,302
   

   
   
   
   

Property and equipment, net
   

9,496
   
   

10,336
   

Field equipment, net
   

20,653
   
   

21,726
   

Deferred cost of revenues
   

29,133
   
   

27,799
   

Intangible assets, net
   

27,509
   
   

28,208
   

Goodwill
   

42,698
   
   

42,698
   

Other assets
   

535
   
   

909
   

   
   
   
   

Total assets
   

$ 196,460
   
   

$        196,978
   

   
   
   
   

   
   
   
   

LIABILITIES AND STOCKHOLDERS’ EQUITY
   
   
   
   

Current liabilities:
   
   
   
   

Accounts payable
   

$   20,562
   
   

$          19,827
   

Accrued expenses
   

10,694
   
   

9,377
   

Current portion of long-term debt
   

58
   
   

61
   

Total current liabilities
   

31,314
   
   

29,265
   

   
   
   
   

Deferred revenue
   

41,555
   
   

38,490
   

Long-term debt
   

38,470
   
   

37,854
   

Other long-term liabilities
   

1,888
   
   

1,923
   

   
   
   
   

Total liabilities
   

113,227
   
   

107,532
   

   
   
   
   

Commitments and contingencies
   
   
   
   

Stockholders’ equity:
   
   
   
   

Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2010 and December 31, 2009
   

-
   
   

-
   

Common stock: par value $0.001, 100,000,000 shares authorized; 48,437,666 shares issued as of March 31, 2010 and 46,795,859 shares issued and outstanding as of December 31, 2009
   

48
   
   

47
   

Additional paid-in capital
   

370,082
   
   

365,548
   

Accumulated deficit
   

(285,713)
   
   

(276,714)
   

Accumulated other comprehensive income
   

557
   
   

565
   

Treasury stock, at cost: 174,757 shares as of March 31, 2010
   

(1,741)
   
   

-
   

   
   
   
   

Total stockholders’ equity
   

83,233
   
   

89,446
   

   
   
   
   

Total liabilities and stockholders’ equity
   

$ 196,460
   
   

$        196,978
   
         


NxStage Medical, Inc.

Cash Flows from Operating Activities

(amounts in thousands)

(unaudited)
   

   
   
   
   

   

Three Months Ended
   

   

March 31,
   

   

2010
   
   

2009
   

Cash flows from operating activities:
   
   
   
   

Net loss
   

$ (8,999)
   
   

$(12,228)
   

Adjustments to reconcile net loss to net
   
   
   
   

cash used in operating activities:
   
   
   
   

Depreciation and amortization
   

5,464
   
   

5,119
   

Stock-based compensation
   

2,892
   
   

1,685
   

Other
   

477
   
   

434
   

Changes in operating assets and liabilities:
   
   
   
   

Accounts receivable
   

(766)
   
   

2,223
   

Inventory
   

(6,654)
   
   

(1,640)
   

Prepaid expenses and other assets
   

(556)
   
   

50
   

Accounts payable
   

940
   
   

(462)
   

Accrued expenses and other liabilities
   

2,521
   
   

398
   

Deferred revenue
   

3,065
   
   

669
   

Net cash used in operating activities
   

$ (1,616)
   
   

$  (3,752)
   
         


NxStage Medical Inc.

Revenues by Segment

(amounts in thousands)

(unaudited)
   

   
   
   
   

   

Three Months Ended
   

   

March 31,
   

   

2010
   

2009
   

   
   
   
   

System One segment
   
   
   
   

 Home
   

$ 19,043
   
   

$ 14,354
   

 Critical Care
   

6,059
   
   

4,468
   

    Total System One segment
   

25,102
   
   

18,822
   

In-Center segment
   

15,306
   
   

14,913
   

Total
   

$ 40,408
   
   

$ 33,735
   
         


NxStage Medical Inc.

Non-GAAP Financial Measures

(amounts in millions)

(unaudited)
   

   
   
   
   

   

Three Months Ended
   

   

March 31,
   

   

2010
   

2009
   

   
   
   
   

Net loss
   

$ 9.0
   
   

$ 12.2
   

Less: Depreciation, amortization, interest, and taxes
   

(6.9)
   
   

(6.1)
   

Less: Adjusting items*
   

(0.
   
   

(0.4)
   

   
   
   
   

Adjusted EBITDA loss
   

$ 1.3
   
   

$   5.7
   

   
   
   
   

* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash and non-recurring expenses
   
         


NxStage Medical Inc.

Non-GAAP Financial Guidance

(amounts in millions)

(unaudited)
   

   
   
   
   

   

Three Months Ending
   

   

June 30, 2010
   

   

Low Estimate
   
   

High Estimate
   

   
   
   
   

Net loss
   

$       8.0
   
   

$       9.0
   

Less: Depreciation amortization, interest, and taxes
   

(7.0)
   
   

(7.0)
   

Less: Adjusting items*
   

(1.0)
   
   

(1.0)
   

   
   
   
   

Adjusted EBITDA loss
   

$         -
   
   

$       1.0
   

   
   
   
   

* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash and non-recurring expenses
   
         


Contact:
   

Kristen K. Sheppard, Esq.
   

VP, Investor Relations
   

ksheppard@nxstage.com
   


SOURCE NxStage Medical, Inc.
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