Cardiovascular Systems, Inc. (CSII) reported better-than-expected results for the fourth quarter of fiscal 2009. For the quarter, its loss per share was 40 cents, better than the Zacks Consensus Estimate of 58 cents and the year-ago loss per share of $2.34.
Quarterly results
Sales
Net sales in the quarter increased roughly 59% year over year to $15.7 million. Growth was primarily due to increased adoption of company product the Diamondback 3600. The number of hospitals using the Diamondback 3600 was 556, compared to 183 at the end of the year-ago quarter.
Higher sales of disposable devices also contributed to the total growth in net sales. The number of disposable devices sold in the quarter was 4,700 units, compared to 3,000 units in the year-ago quarter.
Gross margin increased 1,020 basis points year over year to 73.0% in the quarter. Growth can be attributed to higher disposable volumes, product cost reductions, and manufacturing efficiencies.
Selling, general and administrative (SG&A) expenses as a percentage of sales declined 3,140 basis points year over year to 90.4%. The decline was due to higher net sales, which negated the increase in SG&A expenses in absolute dollars.
Research and development (R&D) expenses as a percentage of sales declined 3,670 basis points year over year to 18.0%. The decline was primarily due to timely completion of various projects.
Higher gross margin coupled with lower SG&A and R&D expenses, the latter two being a percentage of sales, helped in reducing the operating loss margin 7,820 basis points year over year to 35.5%.
Fiscal year results
Net sales in the year were $56.5 million, compared to $22.2 million last year. Gross margin was 71.3%, compared to 59.7% last year. The increase in margin was due to higher volume, lower product costs and higher manufacturing efficiencies. Operating loss margin improved 11,140 basis points year over year to 60.6%.
Outlook
Cardiovascular Systems has provided guidance for the next quarter. It expects revenues to range between $15.7 million and $16.5 million. Gross margin should be at the same level or slightly higher than the last quarter margin of 73.0%. Net loss per share should be between 42 cents and 46 cents.
Cardiovascular Systems develops interventional systems for treating vascular diseases. The Diamondback 3600 Orbital Atherectomy System is a minimally invasive catheter system used in the treatment of peripheral arterial disease (PAD).
Cardiovascular Systems was recently transformed into a public company through a merger with Replidyne, Inc. Cardiovascular Systems was short on liquidity and options for going public. On the other hand, Replidyne had liquidity and a common stock, but no prospects for its product. Hence, the merger appears to be a win-win for both these companies. Cardiovascular Systems’ main competitors include Boston Scientific Corporation (BSX), ev3 (EVVV) and The Spectranetics Corporation (SPNC).
The merger with Replidyne injected much-needed cash and gave the company a currency to trade. We believe this will enable the company to see its business model through these difficult times.
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