Corporate Update

 

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3rd Quarter 2016 Highlights:

  • Revenue Increased 23 Percent Year-over-Year to $45.3 Million; Non-GAAP Revenues Increased Six Percent Year-over-Year
  • Gross Margins Increased to 66 Percent; Non-GAAP Gross Margins Increased to 67 Percent
  • GAAP Net Income was $3.0 Million, or $0.09 Per Fully Diluted Common Share; Non-GAAP Net Income was $4.4 Million, or $0.13 Per Fully Diluted Common Share

 

 

We posted strong financial and operating results in the third quarter by executing on our core goals and objectives. These results demonstrate that our decision to expand the sales team through the acquisition of On-X and focus on the cardiac surgery market is facilitating cross-selling opportunities and broadening awareness of our On-X valves, as anticipated. Our results were strengthened by our initiative to transition to a direct sales model in several key markets in Europe. We also made solid progress advancing our other 2016 key initiatives. The enhancements to our tissue processing operations are improving our ability to meet the strong demand for our tissue products, particularly for vascular tissue, which represents a near-term growth opportunity. In addition, we expect to resume enrollment in the PerClot IDE trial during the fourth quarter of 2016, keeping us on track for potential FDA approval for this product in the first half of 2019. Looking forward, we expect to finish the year with a solid fourth quarter and deliver meaningful revenue growth and additional margin expansion in 2017.

Revenues for the third quarter of 2016 increased 23 percent to $45.3 million, compared to $36.7 million for the third quarter of 2015. The increase was primarily driven by the acquisition of On-X Life Technologies (On-X) in January 2016, along with revenue increases in BioGlue and cardiac tissues. Non-GAAP revenues for the third quarter of 2016 increased six percent compared to the third quarter of 2015. A reconciliation of GAAP financial metrics to non-GAAP financial metrics is included as part of this press release.

Revenues for the first nine months of 2016 increased 28 percent to $135.4 million, compared to $106.1 million for the first nine months of 2015. The increase was primarily driven by the acquisition of On-X, along with revenue increases in BioGlue and in cardiac and vascular tissues. Non-GAAP revenues for the first nine months of 2016 increased eight percent compared to the first nine months of 2015.

GAAP net income for the third quarter of 2016 was $3.0 million, or $0.09 per basic and fully diluted common share, compared to net income of $2.1 million, or $0.08 per basic and $0.07 per fully diluted common share, for the third quarter of 2015. Non-GAAP net income for the third quarter of 2016 was $4.4 million, or $0.13 per fully diluted common share, compared to non-GAAP net income of $3.3 million, or $0.11 per fully diluted common share for the third quarter of 2015.

GAAP net income for the first nine months of 2016 was $7.9 million, or $0.24 per basic and fully diluted common share, compared to net income of $1.4 million, or $0.05 per basic and fully diluted common share, for the first nine months of 2015. Non-GAAP net income for the first nine months of 2016 was $12.0 million, or $0.36 per fully diluted common share, compared to non-GAAP net income of $4.7 million, or $0.16 per fully diluted common share for the first nine months of 2015.

Based on its financial results through the first nine months of 2016 and the current business outlook, the Company is raising its 2016 financial guidance as summarized below.

2016 Financial Guidance Summary
Previous Revised
Total revenues $180 million – $182 million
Year-over-year mid to upper single digit % non-GAAP revenue increase
$181 million – $182.5 million
Year-over-year mid to upper single digit % non-GAAP revenue increase
Product revenues Year-over-year mid to upper single digit % non-GAAP revenue increase Same
Tissue processing revenues Year-over-year mid-single digit % revenue increase Same
Gross margins Approximately 64% Approximately 65%
R&D expenses $13.0 million – $15.0 million $14.0 million – $15.0 million
Non-GAAP adjusted income per common share $0.32 – $0.34 $0.43 – $0.45

We continue to see the significant benefits of the initiatives that we have implemented in the last two years, none of which would have been successful without the dedication, commitment and hard work of our employees. Thank you once again for all you do in helping to improve patients’ lives and for making this quarter another successful one.

Very truly yours,

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J. Patrick Mackin

Chairman, President & CEO

 

Forward-looking Statements

Statements made in this update that look forward in time or that express management’s beliefs, expectations, or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations.  These statements include those regarding the timing of patient enrollment in our PerClot IDE clinical trial and the potential market opportunity for PerClot. The risks and uncertainties affecting these statements include that there is no guarantee that the FDA will approve the surgical version of PerClot for distribution in the U.S. in accordance with our expected timeframe, or at all; our PerClot and other clinical trials are subject to a number of risks, including unanticipated reactions or results, delays, and cost overages, and PerClot and other trials may ultimately be unsuccessful; there is no guarantee that we will be able to attain the levels of revenue and profitability that we anticipate for PerClot; as part of our patent litigation against Medafor, Inc. regarding PerClot (the “Medafor Litigation”), we have been enjoined from selling, marketing, and distributing PerClot in the U.S.; there is no guarantee that we will ultimately prevail in the Medafor Litigation, and if we do not prevail, we will continue to be prohibited from selling PerClot in the U.S., or we may have to pay substantial royalties to sell PerClot in the U.S. until Medafor’s patent expires. These risks and uncertainties include the risk factors detailed in our Securities and Exchange Commission filings, including our Form 10-K for the year ended December 31, 2014 and our subsequent filings with the SEC. CryoLife does not undertake to update its forward-looking statements.