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Synovis Life Technologies Reports 21 Percent Year-over-Year Revenue Growth for Fiscal 2010 Fourth Quarter

^{Published on 2010-12-01 05:20:57 - Market Wire}
 

ST. PAUL, Minn.--([ BUSINESS WIRE ])--Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported its financial results for the fourth quarter and fiscal year ended October 31, 2010.

"Synovisa™ double-digit revenue growth speaks favorably of our people, our products and our markets. We have robust plans in place to continue on a strong growth trajectory in 2011 and beyond a" fueled by our high potential products, particularly Veritas®, the Microsurgical line and our Orthopedic and Wound offerings."

For the 2010 fiscal fourth quarter, net revenue rose to $18.1 million, a 21 percent increase over $15.0 million in the year-ago period. Net income for the fiscal 2010 fourth quarter was $1.5 million, or $0.13 per diluted share, compared to adjusted net income (non-GAAP) of $0.6 million, or $0.05 per diluted share, in the fiscal 2009 fourth quarter. Adjusted fiscal 2009 fourth quarter net income (non-GAAP) excludes the gain on the sale of auction rate securities and the related impact on income taxes. Net income on a GAAP basis for the fiscal 2009 fourth quarter was $3.8 million, or $0.33 per diluted share.

For fiscal 2010, net revenue rose to $68.6 million, up 18 percent from $58.2 million in fiscal 2009. Net income for fiscal 2010 was $4.9 million, or $0.43 per diluted share, compared to adjusted net income (non-GAAP) of $6.6 million, or $0.56 per diluted share, in fiscal 2009. Adjusted fiscal 2009 net income (non-GAAP) excludes certain special charges. Net income on a GAAP basis for fiscal 2009 was $2.7 million, or $0.23 per diluted share. Non-cash stock-based compensation expense was $1.5 million in fiscal 2010 ($0.09 per diluted share after-tax), versus $0.9 million ($0.07 per diluted share after-tax) in fiscal 2009.

aWe are pleased with our overall revenue results. Our growth of 21 percent in the fourth quarter and 18 percent for the year is especially significant in light of the economic climate and the aggressive reaction by healthcare providers to evolving healthcare reform legislation,a said Richard Kramp, Synovis Life Technologies president and chief executive officer. aSynovisa™ double-digit revenue growth speaks favorably of our people, our products and our markets. We have robust plans in place to continue on a strong growth trajectory in 2011 and beyond a" fueled by our high potential products, particularly Veritas^®, the Microsurgical line and our Orthopedic and Wound offerings.a

Kramp continued, aNew management strengthened our Surgical sales and marketing leadership team during the fourth quarter. We are fortunate Jodi Brendel joined Synovis as our vice president of sales and marketing early in the quarter. She has brought on a new leader for our U.S. marketing efforts and a director of international sales and marketing, as well as creating and filling a director of contracts and pricing position. This experienced leadership team has worked swiftly to identify high-priority growth drivers for the Surgical business and is focusing on several opportunities to drive revenue in the short and long term. Our Surgical, Microsurgical, and Orthopedic and Wound groups are launching their growth plans at their respective national sales meetings this quarter. I am optimistic about the opportunities before us and the enthusiasm of our sales professionals.a

Fourth Quarter and Fiscal 2010 Highlights

• Revenue from Veritas rose to $3.7 million in the fourth quarter, a 32 percent increase over the comparable period last year. For the full fiscal year, revenue from Veritas rose to $14.4 million, a 64 percent increase over fiscal 2009. Veritas comprised 21 percent of overall net revenue in fiscal 2010, up from 15 percent in fiscal 2009. Synovis launched Veritas less than four years ago in the breast reconstruction and hernia repair markets, and the product is steadily gaining acceptance.
• Revenue from Microsurgical products totaled $3.1 million in the fourth quarter, a 32 percent increase over the same period last year and a quarterly record. Sales of the Flow Coupler^®, which received FDA marketing clearance in the fiscal second quarter, contributed to Microsurgicala™s sales. For the full year, Microsurgical revenue totaled $11.0 million, a 27 percent increase over fiscal 2009.
• Peri-StripsDry^® (PSD) revenue totaled $5.2 million in the fourth quarter, a 9 percent increase from the year-ago period and also a quarterly record. For the full year, PSD revenue totaled $19.4 million, consistent with fiscal 2009. Peri-Strips has been facing competitive pressure in the marketplace, but PSD revenue has increased sequentially since the fiscal 2010 first quarter.
• Orthopedic and Wound product revenue totaled $685,000 for the fiscal fourth quarter, up 16 percent sequentially from the third quarter. For the year, fiscal 2010 revenue from Orthopedic and Wound products totaled $1.9 million. Orthopedic and Wound was established in July 2009 with the acquisition of substantially all of the assets of Pegasus Biologics, Inc. and its products were re-launched in early January 2010 following approval to manufacture and sell by the California Department of Public Health and the training of the initial members of our sales team. The primary products are the OrthADAPT^® Bioimplant for orthopedic applications and Unite^® Biomatrix for the treatment of chronic wounds.
• SG&A expenses totaled $9.6 million in the fourth quarter, up $0.4 million from the year-ago quarter, primarily due to higher sales and marketing costs.
• Research and development (R&D) expenses totaled $1.3 million in the fourth quarter, up $0.2 million from the year-ago period. R&D investment in Orthopedic and Wound was higher than in previous quarters, due to the development and testing of the PROcuffa" orthopedic product. Synovis expects to launch this arthroscopically delivered device for reinforcement of rotator cuff repairs in the first half of 2011.
• Operating income for the fourth quarter totaled $2.2 million, up 249 percent over operating income of $0.6 million in the year-ago period on higher revenue.

Balance Sheet and Cash Flow

• Cash and investments totaled $61.9 million as of October 31, 2010, or $5.51 per share, compared to $61.0 million sequentially at the end of the third quarter of fiscal 2010 and $60.7 million at the end of fiscal 2009.
• Operating activities provided cash of approximately $3.5 million in the fourth quarter of fiscal 2010 and $7.1 million in fiscal 2010. In fiscal 2009, operating activities provided cash of approximately $2.8 million in the fourth quarter and $9.8 million for the full fiscal year.
• The company used $2.5 million in cash during the fiscal 2010 fourth quarter to repurchase 172,000 shares of its common stock, at an average price of $14.78. For the full fiscal year, the company used $5.1 million in cash to repurchase 386,000 shares at an average price of $13.22.

Looking Ahead

Management believes revenue from historical operations (Surgical and Microsurgical products) will grow approximately 15 percent in fiscal 2011 with gross margins slightly above fiscal 2010 levels, driven by product mix. Operating expenses for historical operations in fiscal 2011 are expected to grow at a rate higher than revenue as a result of expanded sales and marketing programs, key investments in R&D and increased post-market clinical studies. Synovis anticipates that operating margins for historical operations in fiscal 2011 will be in the mid- to high-teens, with lower operating margins expected early in the year and higher operating margins expected in the second half of the year.

Management believes that fiscal 2011 revenue from Orthopedic and Wound will more than double from fiscal 2010, with growth in each successive quarter. Gross margins slightly higher than 50 percent are currently anticipated as the acquired inventory with a stepped-up basis continues to be sold. The fiscal 2011 operating loss from this unit is expected to range from $5 million to $5.5 million, depending on revenue growth.

Conference Call and Webcast

Synovis Life Technologies will host a live webcast of its fiscal fourth-quarter conference call today, Dec. 1, at 10 a.m. CT to discuss the companya™s results. To participate in the conference call, please dial (888) 713-4217 and enter pass code 41404167. Please dial in at least 10 minutes prior to the call.

To access the live webcast, go to the investor information section of the companya™s website, [ www.synovislife.com ], and click on the webcast icon. A webcast replay will be available beginning at noon CT, Wednesday, Dec. 1.

If you prefer to listen to an audio replay of the conference call, dial (888) 286-8010 and enter access number 90191528. The audio replay will be available beginning at 2 p.m. CT on Wednesday, Dec. 1, through 6 p.m. CT on Wednesday, Dec. 8.

About Synovis Life Technologies

Synovis Life Technologies, Inc., a diversified medical device company based in St. Paul, Minn., develops, manufactures and markets biological and mechanical products used by several surgical specialties to facilitate the repair and reconstruction of soft tissue damaged or destroyed by disease or injury. The companya™s products include implantable biomaterials for soft tissue repair, devices for microsurgery and surgical tools a" all designed to reduce risks and/or facilitate critical surgeries, improve patient outcomes and reduce healthcare costs. For additional information on Synovis Life Technologies and its products, visit the companya™s website at [ www.synovislife.com ].

Forward-looking statements contained in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements can be identified by words such as ashoulda, acoulda, amaya, awilla, aexpecta, abelievea, aanticipatea, aestimatea, acontinuea, or other similar expressions. Certain important factors that could cause results to differ materially from those anticipated by the forward-looking statements made herein include the timing of product introductions, the ability of the sales force to grow revenues, the impact of increased competition in various markets Synovis serves, the ability to re-establish the Orthopedic and Wound products in the marketplace, outcomes of clinical and marketing studies as well as regulatory submissions, the number of certain surgical procedures performed, the ability to identify, acquire and successfully integrate suitable acquisition candidates, any operational or financial impact from the current global economic downturn, the impact of recently enacted healthcare reform legislation, as well as other factors found in the Companya™s filings with the SEC, such as the aRisk Factorsa section in Item 1A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2009 and our subsequent Quarterly Reports on Form 10-Q.

The company believes adjusting GAAP basis results to exclude the impact of certain special charges is helpful in analyzing its operating results. There were no special charges in the three and twelve month periods ended October 31, 2010. A reconciliation of GAAP basis results as reported to adjusted results (non-GAAP) for the three months ended October 31, 2009 follows:

A reconciliation of GAAP basis results as reported to adjusted results (non-GAAP) for the twelve months ended October 31, 2009 follows:

The non-GAAP financial measurements are provided to assist in understanding the impact of certain items on Synovisa™ actual results of operations. Management believes this will assist investors in making an evaluation of Synovisa™ performance on a comparable basis by adjusting for these items. Management understands that there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not substitutes for GAAP measures for the purpose of analyzing financial performance. These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. This non-GAAP information should not be construed as an alternative to the reported results, which have been determined in accordance with accounting principles generally accepted in the United States.