HeartWare’s total revenues increase 13% to $73.6 million in second quarter 2015

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 total revenue of $73.6 million for the quarter ended June 30, 2015 compared to $70.1 million for the quarter ended June 30, 2014. Currency fluctuations impacted revenue growth by approximately $6.0 million, or nine percentage points, during the three months ended June 30, 2015, as compared to the same period in 2014. Total revenues increased 13% on a constant-currency basis compared to the same period in 2014.

During the second quarter, a total of 773 HeartWare HVAD^® Systems were sold globally, which represented an increase of 15% from 674 units sold in the second quarter of 2014. U.S. revenue, generated through the sale of 391 units during the second quarter of 2015, was $42.9 million. International revenue, generated through the sale of 382 units during the second quarter of 2015, was $30.7 million.

"We are pleased to report another quarter of solid financial results and achievement of record revenue and units sold during the second quarter, with particular strength in the U.S. market," said Doug Godshall, President and Chief Executive Officer. "In addition to this strong financial performance, we were pleased to have recently begun patient enrollment in our MVAD^® System CE Mark trial, a significant accomplishment for the company and an important step forward for this innovative, new device.

"We also made significant strides operationally during the quarter. We presented data from our ENDURANCE Destination Therapy trial of HVAD in which the study achieved the primary endpoint, we obtained approval to market the HeartWare HVAD System as a bridge to transplantation in Canada, and we made continued progress with the supplemental destination therapy study, ENDURANCE 2, which is currently 98% enrolled, with full enrollment expected to be completed soon," Mr. Godshall added.

For the six months ended June 30, 2015, total revenue increased approximately five percent to $143.6 million, compared to $136.6 million for the same period in 2014. Total revenue increased 13% on a constant-currency basis compared to the first six months of 2014.

Gross margin percentage declined to 65.7% during the second quarter of 2015, from 67.3% in the second quarter of 2014. The net decline included 2.6 percentage points related to foreign exchange rates changes, which was partially offset by volume and efficiency improvements.

Total operating expenses for the second quarter of 2015 were $56.2 million, compared to $34.2 million for the second quarter of 2014 and $55.3 million for the first quarter of 2015. Total operating expenses for the second quarter of 2015 included a $2.2 million net increase in fair value of the contingent purchase consideration for CircuLite. This compared to the second quarter of 2014, in which total operating expenses included a $13.7 million reduction in the estimated fair value of the contingent consideration.

Research and development expense was $31.7 million for the second quarter of 2015, compared to $26.9 million for the same period in 2014. This increase in R&D expense was primarily attributable to increased clinical and regulatory expenses and quality system improvements.

Selling, general and administrative expenses were $22.2 million for the second quarter of 2015, compared to $20.9 million for the second quarter of 2014. The increase in SG&A expenses was primarily attributable to increased employee headcount and other administrative expenses to support HeartWare's growth.

Other expense for the second quarter of 2015 included a $16.6 million loss in connection with the partial extinguishment in May 2015 of the company's 2017 convertible notes.

Net loss for the second quarter of 2015 was $27.4 million, or a loss of $1.59 per basic and diluted share, compared to net income of $8.4 million, or $0.49 per basic and $0.48 per diluted share, for the second quarter of 2014. Non-GAAP net loss for the second quarter of 2015 was $8.1 million, or a loss of $0.47 per basic and diluted share, compared to a non-GAAP net loss of $4.9 million, or a loss of $0.29 per basic and diluted share, for the second quarter of 2014.

For the six months ended June 30, 2015, the company recorded a net loss of $41.9 million, or a loss of $2.43 per basic and diluted share, compared to a net loss of $11.1 million, or a loss of $0.65 per basic and diluted share, for the six months ended June 30, 2014. Non-GAAP net loss for the six months ended June 30, 2015 was $17.5 million, or a loss of $1.02 per basic and diluted share, compared to a non-GAAP net loss of $16.8 million, or a loss of $0.99 per basic and diluted share, for the six months ended June 30, 2014.

Items impacting comparability of operating results for the three- and six-month periods ended June 30, 2015 to the same periods in 2014 include purchase accounting amortization, restructuring charges, contingent consideration adjustments and loss on extinguishment of long-term debt, as described later in this news release under "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss per Common Share."

At June 30, 2015, HeartWare had $252 million of cash, cash equivalents and investments, which included $76 million in net proceeds from a convertible note exchange and issuance executed during the second quarter. In the second quarter, the company had positive operating cash flow of approximately $5 million.

Conference Call and Webcast Information
HeartWare will host a conference call on Thursday, July 30, 2015 at 8:00 a.m., U.S. Eastern Daylight Time to discuss its financial results, highlights from the second quarter and the company's business outlook.