Cyberonics third quarter net sales increase 16% to $54.5 million

Cyberonics, Inc. (NASDAQ: CYBX) today announced results for the quarter ended January 27, 2012.

Quarterly highlights

Operating results for the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011, and other achievements include:

• Net sales of $54.5 million, a 16% increase from $47.1 million;
• U.S. epilepsy sales increased by 15% to $45.2 million;
• International sales increased by 24%;
• Income from operations of $16.4 million, an increase of 40%;
• Adjusted EBITDA of $20.8 million, an increase of 46%;
• Income per diluted share of $0.34 cents, an increase of 36% from an income per diluted share last year of $0.25 cents;
• FDA and European approval of re-designed AspireHC™ generator; and
• Repayment of $7 million convertible debt.

As discussed below under "Use of Non-GAAP Financial Measures," the company presents in this release a non-GAAP financial measure: Adjusted EBITDA.  Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.  Please refer to the attached reconciliation between GAAP Net Income and non-GAAP Adjusted EBITDA.

Results and objectives

"Our fiscal third quarter's record sales performance was very strong," commented Dan Moore, Cyberonics' President and Chief Executive Officer.  "U.S. epilepsy sales increased by 15% and U.S. unit sales increased by 10%. In January, we received approval from FDA of our redesigned AspireHC™ generator and initiated a limited commercial release.

"International net sales increased to $8.7 million from the $7.1 million recorded in the comparable quarter of fiscal 2011, an increase of 24%, reflecting the excellent performance in Europe.  On a constant currency basis, the percentage increase in sales for the quarter was materially the same.

"Operating income of $16.4 million increased by 40%, and operating cash flow for the quarter totaled $21.1 million, an increase of 59% over the comparable period last year.  Available cash at period end was $78 million, an increase of $8 million from the end of the second quarter, after the $7 million repayment of convertible notes (leaving only $4,000 outstanding) and stock repurchases of $6 million.

"Our growth expectations for both sales and operating income for the fiscal year are improved, and we are increasing our guidance as a result.

"We are pleased that regulatory approvals for the re-designed AspireHC™ generator were received in a timely manner.  Filings to allow the resumption of the AspireSR™ generator E-36 European clinical trial commenced in early February, and we expect to resume enrollment by the end of the fiscal year.  

"The management team hosted an Investor Day on December 8, 2011, which included presentations on our epilepsy development activity, and also outlined our efforts to obtain reimbursement for VNS Therapy for treatment-resistant depression, to evaluate the use of VNS Therapy in chronic heart failure, and to explore other opportunities in neuroscience.  Our efforts in each of these areas continue to move forward, and we remain excited about the future."

Share repurchase update

During the quarter, we repurchased 178,000 shares of common stock on the open market.

Fiscal 2012 guidance

Cyberonics is increasing net sales guidance for fiscal year 2012 to a range from $215 million to $217 million from the previously provided range of $213 million to $216 million.  The company now expects that income from operations for fiscal year 2012 will be in the range from $58 million to $60 million, an increase from the prior guidance of $55 million to $58 million.