Press Release | Newsroom | Medtronic | HeartWare International Reports $73.2 Million In Fourth Quarter 2014 Revenue; 38% Increase From Fourth Quarter 2013

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HeartWare International Reports $73.2 Million In Fourth Quarter 2014 Revenue; 38% Increase From Fourth Quarter 2013
- U.S. revenue of $41.5 million, up 60% and International revenue of $31.7 million, up 17%, compared to fourth quarter of 2013
- Revenue for 2014 increased 34% to $278.4 million, from $207.9 million in 2013
- Conference call today at 8:00 a.m. U.S. ET -

FRAMINGHAM, Mass., Feb. 26, 2015 /PRNewswire/ -- HeartWare International, Inc. (NASDAQ: HTWR), a leading innovator of less invasive, miniaturized circulatory support technologies that are revolutionizing the treatment of advanced heart failure, today announced revenue of $73.2 million for the fourth quarter ended December 31, 2014, a 38% increase compared to $53.1 million in revenue for the same period of 2013.  For the fiscal year 2014, the company generated revenue of $278.4 million, a 34% increase compared to revenue of $207.9 million in 2013. 

During the fourth quarter, 737 HeartWare® Ventricular Assist Systems were sold globally, compared to 524 units in the fourth quarter of 2013.  U.S. revenue, generated through the sale of 382 units during the fourth quarter of 2014, was $41.5 million, a 60% increase from $25.9 million in the fourth quarter of 2013.  Revenue from international markets, derived through the sale of 355 units, was $31.7 million, an increase of 17% from $27.1 million in the fourth quarter of 2013.  Currency fluctuations offset total revenue performance in the fourth quarter by approximately $1.9 million, or 3.7 percentage points, compared to the fourth quarter of 2013.

"With record unit sales in the fourth quarter contributing to more than 2,750 units sold globally during 2014, as well as the addition of more than 50 hospital centers around the world, we continue to be encouraged by the growing adoption of the HeartWare System," said Doug Godshall, President and Chief Executive Officer.  "During the year, we completed enrollment in our Japan bridge-to-transplant study, ramped enrollment in the supplemental cohort of our U.S. Destination Therapy study, advanced our technology pipeline, made significant upgrades to our quality systems, improved our gross margin, and concluded the year by initiating the submission process for our CE Marking Trial Application for our next-generation MVAD® System."

"Looking ahead, 2015 promises to be a busy year as we initiate our MVAD® System CE Marking trial, file our MVAD trial protocol in the U.S., complete enrollment in our destination therapy trial, present initial clinical data evaluating the HeartWare System as a destination therapy, and advance our HVAD® LATERAL study evaluating the thoracotomy implant technique," Godshall added. 

Gross margin percentage improved to 68.1% in the fourth quarter of 2014, as compared to 63.6% in the fourth quarter of 2013.  The improvement compared to the same period in 2013 primarily reflects efficiencies associated with increased manufacturing throughput.  For the year ended December 31, 2014, gross margin improved four points over the same period in 2013.

Total operating expenses for the fourth quarter of 2014 were $45.8 million, as compared to $53.3 million in the fourth quarter of 2013.  Total operating expenses for the fourth quarter of 2014 include a $9.1 million reduction in the estimated fair value of future contingent consideration payments for CircuLite as a result of the Company's decision to replace CircuLite's Synergy micro pump with a version of HeartWare's MVAD for future development and commercialization.  Also related to this decision, HeartWare recognized an impairment charge of $2.7 million with respect to in-process R&D acquired from CircuLite in connection with the 2013 acquisition. Total operating expenses for 2014 were $186.3 million, a four percent increase from the same period in 2013.

Research and development expense was $33.5 million for the fourth quarter of 2014, which compared to $30.3 million in the same period in 2013.  The $3.2 million net increase was comprised of a $1.2 million increase in project spending, a $3.0 million increase as a result of FDA warning letter remediation costs, and a decrease of $1.0 million in non-recurring impairment charges compared to the fourth quarter of 2013.

Selling, general and administrative expenses were $21.4 million in the fourth quarter of 2014, compared to $23.0 million in the fourth quarter of 2013 which included approximately $2.9 million of CircuLite acquisition and severance expenses.  Net of these prior-year expenses, selling, general and administrative expenses increased as a result of revenue growth.

Net loss for the fourth quarter of 2014 was $0.9 million, or $0.05 per basic and diluted share, compared to a net loss of $22.0 million, or a loss of $1.33 per basic and diluted share, in the fourth quarter of 2013.  Net loss for the fourth quarter of 2014 includes the benefit of the $9.1 million contingent consideration fair value adjustment and the $2.7 million in-process R&D charge which are discussed above.  For the fiscal year ended December 31, 2014, the company recorded a net loss of $19.4 million, or a loss of $1.14 per basic and diluted share, compared to a $59.3 million net loss, or a loss of $3.69 per basic and diluted share, in fiscal year 2013.

Non-GAAP net loss for the fourth quarter of 2014 was $6.9 million, or $0.41 per basic and diluted share, compared to a loss of $15.2 million, or $0.92 per basic and diluted share in the fourth quarter of 2013.  Non-GAAP net loss for 2014 was $34.6 million, or $2.03 per basic and diluted share, compared to a loss of $51.9 million, or $3.23 per basic and diluted share, in 2013.  See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."

At December 31, 2014, HeartWare had $179.7 million of cash, cash equivalents and investments, a $1.8 million reduction from the end of the third quarter 2014.  

Conference Call and Webcast Information
HeartWare will host a conference call on Thursday, February 26, 2015 at 8:00 a.m., U.S. Eastern Time to discuss its financial results, highlights from the fourth quarter and the company's business outlook.  The call may be accessed by dialing 1-877-407-0789 five minutes prior to the scheduled start time and referencing "HeartWare."  Callers outside the U.S. should dial +1-201-689-8562.

A live webcast of the call will also be available in the Investor section of the company's website (http://ir.heartware.com/).  A replay of the conference call will be available through the above weblink immediately following completion of the call.

About HeartWare International
HeartWare International develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients suffering from advanced heart failure.  The HeartWare® Ventricular Assist System features the HVAD® pump, a small full-support circulatory assist device designed to be implanted next to the heart, avoiding the abdominal surgery generally required to implant competing devices. The HeartWare System is approved in the United States for the intended use as a bridge to cardiac transplantation in patients who are at risk of death from refractory end-stage left ventricular heart failure, has received CE Marking in the European Union and has been used to treat patients in 41 countries. The device is also currently the subject of a U.S. clinical trial for destination therapy. For additional information, please visit the Company's website at www.heartware.com.

HeartWare International, Inc. is a member of the Russell 2000® and its securities are publicly traded on The NASDAQ Stock Market.

HEARTWARE, HVAD, MVAD, PAL, SYNERGY, CIRCULITE and HeartWare logos are registered trademarks of HeartWare, Inc.

Use of Non-GAAP Financial Measures 
HeartWare management supplements its GAAP financial reporting with certain non-GAAP financial measures for financial and operational decision making.  For example, we use "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" to refer to GAAP loss per share excluding certain adjustments such as amortization of intangible assets, impairment charges, purchase accounting and acquisition related transaction costs, and restructuring and severance costs.  These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended.  Management believes that providing this additional information enhances investors' understanding of the financial performance of the Company's operations and increases comparability of its current financial statements to prior periods.  Non-GAAP measures should not be considered as a substitute for measures in accordance with financial performance in accordance with GAAP, and they should be reviewed in comparison with their most directly comparable GAAP financial results.  Reconciliations of HeartWare's GAAP to non-GAAP financial measures are provided at the end of this release under "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."

Forward-Looking Statements 
This announcement contains forward-looking statements that are based on management's beliefs, assumptions and expectations and on information currently available to management.  All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to the commercialization of the HeartWare® Ventricular Assist System, progress and outcomes of clinical trials, regulatory and quality compliance, research and development activities and our ability to take advantage of acquired and pipeline technology.  Management believes that these forward-looking statements are reasonable as and when made.  However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made.  HeartWare does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules and regulations of the Securities and Exchange CommissionHeartWare may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements.  Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described in Part I, Item 1A. "Risk Factors" in HeartWare's Annual Report on Form 10-K filed with the Securities and Exchange CommissionHeartWare may update risk factors from time to time in Part II, Item 1A "Risk Factors" in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other filings with the Securities and Exchange Commission.

For further information: 
Christopher Taylor 
HeartWare International, Inc. 
Email: ctaylor@heartware.com 
Phone: +1 508 739 0864

- Tables to Follow-

 

HEARTWARE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)










Three Months Ended

December 31,


Year Ended

December 31,


2014


2013


2014


2013









Revenue, net

$   73,209


$   53,054


$    278,420


$    207,929

Cost of revenue

23,349


19,293


92,195


76,468

Gross profit

49,860


33,761


186,225


131,461









Operating expenses:








Selling, general and administrative

21,412


22,976


87,177


76,524

Research and development

33,451


30,281


122,432


102,483

Change in fair value of contingent consideration

(9,080)



(23,260)


Total operating expenses

45,783


53,257


186,349


179,007









Income (loss) from operations

4,077


(19,496)


(124)


(47,546)









Other expense, net

(5,096)


(1,926)


(18,682)


(11,298)

Loss before taxes

(1,019)


(21,422)


(18,806)


(58,844)

Income tax (benefit) expense

(103)


626


560


467

Net loss

$    (916)


$    (22,048)


$  (19,366)


$  (59,311)









Net loss per common share -








     basic and diluted

$       (0.05)


$       (1.33)


$      (1.14)


$      (3.69)









Weighted average shares outstanding -








     basic and diluted

17,037


16,574


16,992


16,066









 

HEARTWARE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)




December 31,
2014


December 31,
2013





ASSETS




Current assets:




Cash and cash equivalents

$          102,946


$          162,880

Short-term investments

75,535


37,596

Accounts receivable, net

38,041


28,052

Inventories

54,046


40,876

Prepaid expenses and other current assets

5,975


11,205

Total current assets

276,543


280,609

Property, plant and equipment, net

19,036


18,562

Other assets, net

128,234


130,656

Total assets

$        423,813


$        429,827





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$            13,322


$            17,914

Other accrued liabilities

36,589


35,276

Total current liabilities

49,911


53,190

Convertible senior notes, net

114,803


107,125

Other long-term liabilities

50,565


70,905

Stockholders' equity

208,534


198,607

Total liabilities and stockholders' equity

$          423,813


$          429,827

 

Reconciliation of GAAP to Non-GAAP Net Loss per Common Share (unaudited) (see explanation of adjustments below) (in thousands, except per share data)













Three Months Ended

December 31,


Year Ended

December 31,



2014


2013


2014


2013










GAAP net loss


$   (916)


$   (22,048)


$   (19,366)


$   (59,311)










GAAP net loss per common share – basic and diluted


$     (0.05)


$       (1.33)


$       (1.14)


$       (3.69)










Adjustments:









  Amortization and impairment of purchased intangible assets and goodwill

(a)








        -Selling, general and administrative


84


28


337


28

        -Research and development


2,998


3,806


3,719


3,868

  Acquisition-related transaction costs

(b)


2,349



2,849

  Contingent consideration adjustments

(c)

(9,080)



(23,260)


  Restructuring costs

(d)








        -Selling, general and administrative


(22)


649


2,962


649

        -Research and development




1,032


Total adjustments


(6,020)


6,832


(15,210)


7,394










Non-GAAP adjusted net loss


$   (6,936)


$  (15,216)


$   (34,576)


$  (51,917)










Non-GAAP adjusted net loss per common share – basic and diluted


$       (0.41)


$      (0.92)


$       (2.03)


$      (3.23)










Shares used in computing non-GAAP adjusted net loss per common share – basic and diluted


17,037


16,574


16,992


16,066





(a)

Represents amortization of purchased intangible assets related to CircuLite and WorldHeart.

(b)

Represents transaction costs associated with the acquisition of CircuLite in December 2013.

(c)

Represents the change in fair value of contingent consideration associated with the acquisition of CircuLite in December 2013.

(d)

Represents certain restructuring costs, as follows (in thousands):







Three Months Ended

December 31,


Year Ended

December 31,



2014


2013


2014


2013










Lease exit charge for HeartWare's

former Massachusetts corporate offices


$   (13)



$   359











Charges related to CircuLite acquisition:









  Lease exit charge for former N.J.      

  corporate offices


16



1,730


  Contract termination costs




688


  Employee severance


(25)


649


588


649

  Abandoned fixed assets




629


      Total


(9)


649


3,635


649










Total restructuring costs


$   (22)


$  649


$  3,994


$  649

The terms "non-GAAP adjusted net loss" and "non-GAAP adjusted net loss per common share" refer to GAAP net loss and GAAP net loss per common share excluding certain adjustments such as amortization of purchased intangible assets, impairment charges, purchase accounting and acquisition-related transaction costs, and restructuring and severance costs as follows:

  1. We exclude amortization of purchased intangible assets and periodic impairment charges related to long-lived assets from this measure because such charges do not represent what our management believes are the costs of developing, producing, supporting and selling our products and the costs to support our internal operating structure.
  2. We exclude purchase accounting adjustments and acquisition-related costs from this measure because they occur as a result of specific events and are not reflective of our internal investments and the ongoing costs to support our operating structure.  Purchase accounting adjustments include contingent consideration fair value adjustments.
  3. We exclude restructuring and severance costs from this measure because they tend to occur as a result of specific events such as acquisitions, divestitures, repositioning our business or other unusual events that could make comparisons of long-range trends difficult and are not reflective of our internal investments and the costs to support our operating structure.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/heartware-international-reports-732-million-in-fourth-quarter-2014-revenue-38-increase-from-fourth-quarter-2013-300041866.html

SOURCE HeartWare International, Inc.

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