NxStage Reports Second Quarter 2009 Financial Results

Wednesday August 5, 2009

LAWRENCE, Mass., Aug 05, 2009 /PRNewswire-FirstCall via COMTEX/ — NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today announced net revenue for the second quarter of 2009 of $36.4 million, an increase of 15 percent when compared with revenue of $31.6 million for the second quarter of 2008.

The Company’s second quarter performance was driven by systematic growth in Home, solid machine sales in Critical Care, and continued progress in In-Center, even within the current economic environment. Home revenue for the second quarter of 2009 was $15.2 million, an increase of 28 percent when compared with revenues of $11.9 million for the second quarter of 2008. Critical Care and In-Center revenues were $5.2 million and $16.0 million, respectively, for the second quarter of 2009, representing an increase of 20 percent and 4 percent, respectively, when compared with revenue for the second quarter of 2008.

Our second quarter results demonstrate our continued ability to improve key financial metrics including revenue, gross margin, adjusted EBITDA and cash usage, stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical. In addition, we successfully executed against key strategic relationships to further strengthen our financial position and enhance our market position.

Gross margin improved to 24 percent in the second quarter of 2009 as compared to 14 percent in the second quarter of 2008.

Net loss for the second quarter of 2009 was $12.5 million, or ($0.27) per share. Excluding the impact of a $2.0 million pre-tax charge related to terminating the Company’s GE credit facility, recorded as interest expense, the net loss for the second quarter of 2009 was better than the Company’s second quarter guidance for a net loss of $11.5 to $12.5 million. This compares to a net loss of $12.5 million for the second quarter of 2008, which included the benefit of a $2.1 million change in fair value of financial instruments.

Cash and cash equivalents as of June 30, 2009 were $24.5 million. The Company’s cash usage from operations for the second quarter of 2009 was $6.9 million and includes the impact of approximately $1.9 million in fees to terminate the Company’s GE credit facility. Excluding these one-time items, cash usage from operations was $5.0 million.

For the second quarter of 2009, the Company had an Adjusted EBITDA loss of $3.4 million, adjusted for stock-based compensation, deferred revenue recognized and other non-recurring expenses, compared with an Adjusted EBITDA loss of $7.7 million in the second quarter of 2008. These results were better than the Company’s guidance for an Adjusted EBITDA loss of $5.0 to $6.0 million for the second quarter of 2009. (See the exhibits for a reconciliation of this non-GAAP measure.)

The Company also announced that its first UK based patients have started treatment with the NxStage System One. We are pleased with the early results of our first international expansion, stated Burbank. As we build our operational footprint in this region with Kimal, we are seeing strong early interest from providers and patients for our System One. With continued progress and execution, we would expect more meaningful patient additions in 2010.

Guidance:

The Company is maintaining its 2009 full-year guidance for revenues to be between $135 to $145 million, a net loss in the range of $42 to $47 million or ($0.90) to ($1.01) per share, and for an Adjusted EBITDA loss in the range of $13 to $18 million. The Company expects to achieve consolidated gross margins of between 27 percent to 32 percent in the fourth quarter of 2009.

For the third quarter of 2009, the Company is forecasting revenue to be within a range of $32.5 to $34.5 million. This forecast reflects the Company recognizing approximately $2.0 million of third quarter In-Center shipments in the fourth quarter of 2009, in connection with the transition of DaVita’s bloodline distribution from Henry Schein, Inc. to Gambro Renal Products, Inc. At this adjusted revenue level, the Company would expect a net loss in the range of $10.0 to $11.0 million or ($0.21) to ($0.24) per share, and an Adjusted EBITDA loss in the range of $3.0 to $4.0 million for the third quarter of 2009.

This release contains a non-GAAP financial measure, a reconciliation of the Company’s non-GAAP financial measure to its most comparable GAAP financial measure is in the exhibits to this press release.

Conference Call:

NxStage will also host a conference call today at 9:00 a.m. Eastern Time to discuss its second quarter financial results. To listen to the conference call, please dial 866-730-5765 (domestic) or 857-350-1589 (international). The passcode is 18840646. The call will also be webcast LIVE and can be accessed via the investor relations section of the Company’s website at www.nxstage.com/ir.cfm.

A replay of the conference call will be available 3 hours after the start of the call through August 19, 2009. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 52867664. An online archive of the conference call can be accessed via the investor relations section of the Company’s website at www.nxstage.com/ir.cfm.

About NxStage

NxStage Medical, Inc. (Nasdaq: NXTM) is a medical device company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative products for the treatment of ESRD and acute kidney failure. For more information on NxStage and its products, please visit the company’s website at www.nxstage.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words anticipate, believe, expect, estimate, plan, and similar expressions are generally intended to identify forward-looking statements. Examples of these forward-looking statements include statements as to anticipated operating results, including revenues, loss, gross margin and Adjusted EBITDA numbers, beliefs regarding the value of strategic business relationships and statements regarding anticipated international sales, and other expectations as to future operating results. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond NxStage’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements, including market acceptance and demand for NxStage’s products, growth in home and/or daily hemodialysis, unanticipated difficulties in achieving operational efficiencies and cost reductions, changes in reimbursement for home and daily hemodialysis, changes in the regulatory environment, changes in the historical purchasing patterns and preferences of our major customers, including DaVita Inc., and certain other factors that may affect future operating results and which are detailed in NxStage’s filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the period ended March 31, 2009.

In addition, the statements in this press release represent NxStage’s expectations and beliefs as of the date of this press release. NxStage anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while NxStage may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing NxStage’s expectations or beliefs as of any date subsequent to the date of this press release.

 Contact: Kristen K. Sheppard, Esq. VP, Investor Relations 978-332-5923 ksheppard@nxstage.com 

Non-GAAP Financial Measure

The Company discloses a certain non-GAAP financial measure to supplement the Company’s consolidated financial statements presented on a GAAP basis. This non-GAAP measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States and may be different from similar non-GAAP financial measures used by other companies. The non-GAAP financial measure disclosed by the Company is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Management uses Adjusted EBITDA (EBITDA adjusted for stock based-compensation, deferred revenue recognized, and other non-recurring expenses) to understand operational cash usage. The Company believes the non-GAAP financial measure provides useful and supplementary information allowing investors greater transparency to one measure used by management. The non-GAAP financial measure is meant to supplement, and to be viewed in conjunction with, GAAP financial measures. The non-GAAP financial measure is reconciled to the most comparable GAAP financial measure below.

 NxStage Medical, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenues $36,398 $31,616 $70,133 $62,621 Cost of revenues 27,581 27,201 54,261 54,188 ------ ------ ------ ------ Gross profit 8,817 4,415 15,872 8,433 ----- ----- ------ ----- Operating expenses: Selling and marketing 7,411 7,263 14,642 14,098 Research and development 2,271 2,362 4,673 4,488 Distribution 3,525 3,335 7,209 6,730 General and administrative 4,749 4,884 9,704 9,699 ----- ----- ----- ----- Total operating expenses 17,956 17,844 36,228 35,015 ------ ------ ------ ------ Loss from operations (9,139) (13,429) (20,356) (26,582) ------ ------- ------- ------- Other expense: Interest income 14 94 25 307 Interest expense (3,337) (1,081) (4,372) (1,891) Change in fair value of financial instruments - 2,086 - 2,086 Other (expense) income, net (14) (144) 79 (293) --- ---- -- ---- (3,337) 955 (4,268) 209 ------ --- ------ --- Net loss before income taxes (12,476) (12,474) (24,624) (26,373) Provision for income taxes 39 60 119 105 -------- -------- -------- -------- Net loss $(12,515) $(12,534) $(24,743) $(26,478) ======== ======== ======== ======== Net loss per share, basic and diluted $(0.27) $(0.32) $(0.53) $(0.70) ====== ====== ====== ====== Weighted-average shares outstanding, basic and diluted 46,575 38,770 46,565 37,772 ====== ====== ====== ====== NxStage Medical, Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) June 30, December 31, 2009 2008 ---- ---- ASSETS Current assets: Cash and cash equivalents $24,455 $26,642 Accounts receivable, net 9,510 11,886 Inventory 28,781 30,862 Prepaid expenses and other current assets 2,123 2,011 ----- ----- Total current assets 64,869 71,401 Property and equipment, net 10,852 12,254 Field equipment, net 25,864 30,445 Deferred cost of revenues 24,017 23,711 Intangible assets, net 29,606 31,004 Goodwill 42,698 42,698 Other assets 1,059 553 ----- --- Total assets $198,965 $212,066 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $14,414 $17,183 Accrued expenses 8,998 10,746 Current portion of long-term debt 59 9,110 -- ----- Total current liabilities 23,471 37,039 Deferred revenue 33,692 29,634 Long-term debt 36,597 21,054 Other long-term liabilities 1,955 1,892 ----- ----- Total liabilities 95,715 89,619 Commitments and contingencies Stockholders' equity: Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; no shares issued and outstanding, as of June 30, 2009 and December 31, 2008 - - Common stock: par value $0.001, 100,000,000 shares authorized; 46,658,515 and 46,548,585 shares issued and outstanding, as of June 30, 2009 and December 31, 2008, respectively 47 47 Additional paid-in capital 360,765 355,266 Accumulated deficit (257,990) (233,247) Accumulated other comprehensive income 428 381 --- --- Total stockholders' equity 103,250 122,447 ------- ------- Total liabilities and stockholders' equity $198,965 $212,066 ======== ======== NxStage Medical, Inc. Cash Flows from Operating Activities (in thousands) (unaudited) Six Months Ended June 30, -------- 2009 2008 ---- ---- Cash flows from operating activities: Net loss $(24,743) $(26,478) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 10,229 9,087 Stock-based compensation 3,877 3,280 Change in fair value of financial instruments - (2,086) Other 1,197 125 Changes in operating assets and liabilities: Accounts receivable 2,494 (1,709) Inventory (2,179) (24,060) Prepaid expenses and other current assets 700 1,048 Accounts payable (2,788) (639) Accrued expenses and other liabilities (144) (1,080) Deferred revenue 672 6,399 --- ----- Net cash used in operating activities $(10,685) $(36,113) ======== ======== NxStage Medical, Inc. Revenues by Segment (in thousands) Three Months Six Months Ended Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- System One segment Home $15,205 $11,850 $29,559 $22,396 Critical Care 5,241 4,385 9,709 8,706 ----- ----- ----- ----- Total System One segment 20,446 16,235 39,268 31,102 In-Center segment 15,952 15,381 30,865 31,519 ------ ------ ------ ------ Total $36,398 $31,616 $70,133 $62,621 ======= ======= ======= ======= NxStage Medical Inc. Non-GAAP Financial Measures (in millions) Three Months Six Months Ended Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Net loss $12.5 $12.5 $24.7 $26.5 Less: Depreciation amortization, interest, and taxes (8.4) (6.0) (14.6) (11.0) Less: Adjusting items* (0.7) 1.2 (1.1) 0.5 ---- ---- ---- ----- Adjusted EBITDA loss $3.4 $7.7 $9.0 $16.0 ==== ==== ==== ===== * Adjusting items include stock-based compensation, deferred revenue recognized and other non-recurring expenses NxStage Medical Inc. Non-GAAP Financial Guidance (in millions) Three Months Ended September 30, 2009 ------------------ Low High Estimate Estimate -------- -------- Net loss $10.0 $11.0 Less: Depreciation amortization, interest, and taxes (6.2) (6.2) Less: Adjusting items* (0.8) (0.8) ---- ---- Adjusted EBITDA loss $3.0 $4.0 ==== ==== * Adjusting items include stock-based compensation, deferred revenue recognized and other non-recurring expenses 

SOURCE NxStage Medical Inc.

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