NxStage Medical second-quarter net revenue increases 21% to $44.0 million

NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today reported record financial results for the second quarter of 2010 ended June 30, 2010, with total revenue above the top end of its guidance range.

Net revenue for the second quarter of 2010 increased to $44.0 million, an increase of 21 percent when compared with revenue of $36.4 million for the second quarter of 2009.  The increase was driven by strong performance across the Company's three markets: Home, Critical Care and In-Center.

The Company delivered its third straight quarter of record sequential growth in its Home market with revenue of $20.8 million for the second quarter of 2010, representing an increase of 37 percent when compared with revenue of $15.2 million for the second quarter of 2009. Critical Care revenue grew to $6.7 million for the second quarter of 2010, representing an increase of 27 percent when compared with revenues of $5.2 million for the second quarter of 2009.  Revenue in the In-Center market, from the Company's Medisystems business, increased to $16.5 million for the second quarter of 2010.  

"Q2 was another great quarter in all respects: we delivered record revenue with all three of our markets outperforming, and Home delivering the strongest growth; achieved positive cash flow; and, continued operational execution across all our markets," stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical.  "With a strong first half of the year and continuing momentum, we are increasing our projections for sequential growth in Home and raising our revenue guidance for 2010 to a range of revenues between $170 and $175 million."

NxStage reported a net loss of $8.3 million, or ($0.17) per share, for the second quarter of 2010 compared with a net loss of $12.5 million, or ($0.27) for the second quarter of 2009.

For the second quarter of 2010, NxStage increased gross margins to 31%, a sequential increase of 200 basis points, and achieved positive cash flow of $1.0 million.  The Company had an Adjusted EBITDA loss of $0.2 million, adjusted for stock-based compensation, deferred revenue recognized and other non-recurring expenses, for the second quarter of 2010, compared with an Adjusted EBITDA loss of $3.4 million in the second quarter of 2009.  (See the exhibits for a reconciliation of this non-GAAP measure.)

NxStage also announced an amended and restated National Service Provider Agreement with DaVita Inc, the leading home hemodialysis service provider.  This Agreement covers the use of NxStage’s products for home hemodialysis in the United States, and is intended to support the continued and collaborative expansion of patient access to home hemodialysis therapy with the System One.

“DaVita has made substantial investments in building its home hemodialysis capabilities over recent years under our previous Agreement, and I believe we have much that we can accomplish as partners in the coming years,” continued Mr. Burbank. “The Agreement includes a performance-based rebate payable in warrants. This is an elegant structure for achieving significant performance targets. To earn value, DaVita has to significantly increase patient access to NxStage home hemodialysis, and our share price must simultaneously increase. We are delighted to have created a unique relationship structure that can create value for both of our businesses as we collaborate to expand patient access to this life-changing therapy.”

Guidance:

For the third quarter of 2010, the Company is forecasting revenue to be within a range of $43 to $45 million.  At this revenue level, the Company would expect a net loss in the range of $7.5 to $8.5 million or ($0.15) to ($0.18) per share, and Adjusted EBITDA in the range of $0 to $0.5 million for the third quarter of 2010.  

Supported by its strong performance in the first half of 2010, the Company now anticipates revenue for the 2010 fiscal year to be in a range of $170 to $175 million, compared with its prior guidance for revenues to be in a range of $163 to $170 million.  The Company is maintaining its guidance for a net loss in the range of $28 to $33 million or ($0.60) to ($0.71) per share, and for Adjusted EBITDA to be in the range of a positive $1 million to a loss of $3.0 million for the 2010 fiscal year.  The Company expects to achieve consolidated gross margins of between 33 percent to 37 percent in the fourth quarter of 2010.