Cyberonics' worldwide net sales increase 5% to $73.4M in Q2 of fiscal 2015

Cyberonics, Inc. (NASDAQ: CYBX) today announced results for the quarter ended October 24, 2014.

Quarterly highlights[1] 

Operating results for the second quarter of fiscal 2015 compared to the second quarter of fiscal 2014, and other achievements, include:

• Worldwide net sales of $73.4 million, an increase of 5%;
• Continued growth in international net sales to $13.5 million, and increased by 13% on a constant currency basis;
• U.S. net sales reached a new high of $59.9 million;
• Record income from operations of $26.3 million, an increase of 20%;
• Net income of $17.3 million, or $0.64 cents per diluted share.
• Adjusted non-GAAP income per diluted share of $0.63 compared with income per diluted share of $0.50, an increase of 26%;
• Continued adoption of AspireSR^® generator in Europe;
• CE Mark approval for the ProGuardianRest™ system;
• Regulatory submission of the AspireSR generator to the U.S. Food and Drug Administration ("FDA");
• Submission of the remaining modules for CE Mark approval of the Vitaria™ generator, which provides Autonomic Regulation Therapy ("ART") for chronic heart failure.

Results and objectives

"Cyberonics delivered increased sales during our second quarter of fiscal 2015," commented Dan Moore, President and Chief Executive Officer. "We achieved record operating income, and on an adjusted non-GAAP basis, record net income and earnings per share. Our U.S. business continues to show sequential growth, and increased net sales by 4% over the comparable quarter in the prior year, reaching a new high of $59.9 million; however, U.S. net sales fell short of our expectations. We estimate that more patients were implanted with a VNS Therapy^® System in the U.S. during the recently completed quarter than in any quarter in the company's history, although new patient implants did not surpass the recent high seen in the second quarter of last fiscal year.

"International sales again showed consistent growth, with unit sales increasing by 11% and net sales increasing to $13.5 million, and by 13% on a constant currency basis. All regions showed solid volume growth for the quarter. The introduction of our AspireSR generator is progressing well. Sales of the AspireSR generator accounted for 12% of all international sales, and more than 30% of unit sales in those countries where it is now available.

"We formally submitted our AspireSR generator for U.S. regulatory approval while continuing a dialogue with FDA. The AspireSR generator is the first closed-loop VNS Therapy System and is an important addition to our product portfolio, as demonstrated in the European launch.

"We continue to make progress on the ProGuardian™ platform, with the regulatory approval of ProGuardianREST system in Europe. We anticipate a limited market launch in the U.K. later in the current fiscal year.

"Following the presentation of the encouraging results of the ANTHEM-HF clinical study of ART for chronic heart failure patients with reduced ejection fraction at the European Society of Cardiology meeting in September, we completed the regulatory submission to obtain a CE Mark. Additionally, we have implanted the first patient in another study, ANTHEM-HFpEF, with the objective of studying the impact of ART for chronic heart failure patients with preserved ejection fraction," concluded Mr. Moore.

Stock Repurchase Update

Cyberonics purchased 280,000 shares on the open market in the second quarter of fiscal 2015.

The Board has authorized a continuation of the stock repurchase program, approving an additional one million shares to the approximately 270,000 shares remaining under the prior authorization as of October 24, 2014. We expect to complete the repurchase of the 1.3 million shares by the end of calendar year 2015.

Fiscal 2015 guidance

Cyberonics is adjusting fiscal 2015 guidance for net sales while maintaining guidance for income from operations, adjusted net income and adjusted diluted earnings per share as follows:

Net sales are now expected to be in the range of $292 million to $298 million (previous guidance of $300 million to $307 million).

The assumptions used in setting this range include:

• Growth of approximately 7%, after adjusting fiscal 2014 for the single-country order of $4.7 million and the final recognition of license revenue of $1.5 million;
• Worldwide unit growth of approximately 7%, also adjusted for the single-country order;
• Low single-digit growth in U.S. new patient implants, an adjustment to our prior assumption of mid-single digit growth;
• Mid-single-digit growth in U.S. replacement implants;
• Continued international sales growth, adjusted, in the low to mid-teens; and
• Euro-dollar exchange rate of $1.26 for the remainder of fiscal 2015, as compared with the prior assumption of a Euro-dollar exchange rate of $1.35.

Gross profit margin is expected to be between 90.5% and 91.0%.

Income from operations is still expected to be in the range of $96 million to $99 million. The company now anticipates an adjusted effective tax rate of between 35% and 35.5% for fiscal 2015, which assumes the renewal of the R & D tax credit.

Adjusted net income for fiscal 2015 is still expected to be in the range of $62 million to $64 million.

The company expects adjusted diluted earnings per share ("EPS") will remain in the range of $2.33 to $2.39.

Please refer to the GAAP and non-GAAP reconciliation table on the last page of this release.

Additional details will be provided during today's conference call and in an investor presentation, which is available in the investor relations section of Cyberonics' corporate website at http://www.cyberonics.com.

Use of non-GAAP financial measures

In this press announcement, management has disclosed financial measurements that present financial information not in accordance with Generally Accepted Accounting Principles ("GAAP"). These measurements are not a substitute for GAAP measurements, although company management uses these measurements as aids in monitoring the company's ongoing financial performance quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies. Adjusted non-GAAP income from operations, adjusted non-GAAP net income and adjusted non-GAAP income per diluted share measure the income from operations, net income and income per diluted share of the company including and excluding items management considers unusual. Management uses and presents these measures because management believes that they facilitate an understanding of the financial impact of unusual items on the company's short- and long-term financial trends. Management also uses adjusted non-GAAP items to forecast and to evaluate the operational performance of the company, as well as to compare results of current periods to prior periods on a consistent basis. Adjusted earnings before interest, tax, depreciation and amortization ("EBITDA") measures the adjusted non-GAAP income from operations of the company and excludes the aforementioned items, as well as non-cash equity compensation and other income (expense) items.

Non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly-titled measures used by other companies. 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.

Second-Quarter Results Webcast and Conference Call Instructions

Cyberonics will host a conference call today, November 20, 2014, beginning at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to review its results of operations for the fiscal year 2015 second quarter, followed by a question and answer session.

SOURCE Cyberonics, Inc.