Tandem Diabetes Care Reports Second Quarter 2017 Financial Results
"Demand for our next-generation t:slim X2™ Insulin Pump remained high in
the second quarter and we demonstrated strength both commercially and
operationally," said
In
| Three Months Ended | Six Months Ended | ||||||||||||||||
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(in millions) |
2017 | 2016 | 2017 | 2016 | |||||||||||||
| GAAP Sales | $ | 21.3 | $ | 23.0 | $ | 40.3 | $ | 43.0 | |||||||||
| Impact of Technology Upgrade Program | — | — | (1.5 | ) | — | ||||||||||||
| Non-GAAP sales2 | $ | 21.3 | $ | 23.0 | $ | 38.8 | $ | 43.0 | |||||||||
| Pump shipments | 3,427 | 4,582 | 6,243 | 8,624 | |||||||||||||
1) dQ&A
2) GAAP sales are determined in accordance with
Second Quarter 2017 Results
In the second quarter of 2017, the Company showed strong sequential
improvement in pump shipments, sales and gross margin, while continuing
to operate in a highly competitive environment. A total of 3,427 pumps
were shipped in the second quarter of 2017, compared to 2,816 in the
first quarter of 2017, and 4,582 in the second quarter of 2016 when
sales and gross margin benefited from a continuation of high customer
interest in the t:slim G4™ Insulin Pump, which launched in September of
2015 as the Company's first insulin pump featuring continuous glucose
monitoring integration. The second quarter of 2016 also represented the
last period in which all UnitedHealthcare members had full access to
Tandem products. GAAP sales were
For the second quarter of 2017, operating expenses totaled
For the second quarter of 2017, non-GAAP results were consistent with GAAP results.
As of
2017 Guidance
For the year ending
-
Non-GAAP sales are estimated to be in the range of
$100 million to$107 million -
Non-GAAP operating margin is estimated to be in the range of negative
70 percent to negative 65 percent, which includes:
-
Approximately
$11.0 million in non-cash, stock-based compensation expense -
Approximately
$6.0 million to$7.0 million of depreciation and amortization
-
Approximately
It is difficult to estimate or predict the Company's GAAP financial results because it is difficult to estimate the rate of customer utilization of the Technology Upgrade Program. As a result, it is not currently possible for the Company to provide GAAP financial guidance, or to provide a reconciliation of GAAP guidance to non-GAAP guidance, with any degree of certainty. In the future, the Company expects to continue to provide its operating results on both a GAAP and non-GAAP basis. For additional information regarding the Technology Upgrade Program and a reconciliation of the Company's GAAP financial results to its non-GAAP financial results, please see the attached Press Release Exhibit.
Conference Call
The Company will hold a conference call and simultaneous webcast today
at
Use of Non-GAAP Financial Measures
The Company presents certain non-GAAP financial measures in this press
release, including historical and projected non-GAAP sales and operating
margin, to provide information that may assist investors in
understanding its financial results, assessing its prospects for future
performance and allowing for a meaningful comparison of projected
results to historical results. The Technology Upgrade Program discussed
above has created and will continue to create unpredictable GAAP results
for its duration. This is principally due to accounting complexities
associated with the program that are dependent on a number of future
events and variables that are difficult to estimate or predict. Due to
these accounting complexities, and the resulting uncertainty, the
Company is providing guidance for the year ending
These non-GAAP financial measures will be used internally by the Company to analyze its operating performance and prospects for future performance for the duration of the Technology Upgrade Program. The principal limitation of these non-GAAP financial measures is that they do not necessarily reflect, and may not be a good estimate of, the amount that will actually be recorded in the Company's financial statements in accordance with GAAP. The non-GAAP financial information and guidance is not intended to be considered in isolation or as a substitute for, or superior to, financial information and guidance prepared and presented in accordance with GAAP. To the extent the Company utilizes such non-GAAP financial measures in the future, it expects to calculate them using a consistent method from period to period. Because of the difficultly in estimating the accounting impact from the Technology Upgrade Program, the Company cannot provide a reconciliation of non-GAAP financial guidance to GAAP financial guidance with any level of certainty and without unreasonable efforts. However, the Company has provided a reconciliation of its historical GAAP financial results to its historical non-GAAP financial results under the heading "Reconciliation of GAAP versus Non-GAAP Financial Results" in the attached Press Release Exhibit.
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Forward Looking Statement
This press release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that
concern matters that involve risks and uncertainties that could cause
actual results to differ materially from those anticipated or projected
in the forward-looking statements. These forward-looking statements
include statements regarding, among other things, the impact of the
implementation of the Technology Upgrade Program and the Company's
projected financial results, including its projected non-GAAP sales and
non-GAAP operating margins. The Company's actual results may differ
materially from those indicated in these forward-looking statements due
to numerous risks and uncertainties. For instance, the Company's ability
to achieve its projected financial results for 2017 will be impacted by
the Company's ability to obtain regulatory approval for the t:slim X2
with Dexcom's G5 integration and the timing of any such approvals; the
Company's ability to launch its new t:lock infusion set connector when
anticipated; market acceptance of the Company's new products and
products under development by healthcare providers, third-party payors
and people with diabetes; the potential that newer products that compete
with the Company's products, or other technological breakthroughs for
the monitoring, treatment or prevention of diabetes, may render the
Company's products obsolete or less desirable; and the potential that
negative perceptions regarding our financial stability relative to that
of our competitors, and our ability to sustain our business operations
on a long-term basis, may cause consumers to delay the purchase of our
products or to purchase competitive products. In addition, factors that
will affect the Company's financial results due to the Technology
Upgrade Program include the percentage of customers that choose to
upgrade their pump; the timing of the decision to upgrade their pump;
and the upgrade option chosen by customers. Other risks and
uncertainties include the Company's ability to manufacture products in
commercial quantities at an acceptable cost and in accordance with
quality requirements; the Company's ability to raise additional capital
to support the Company's current operations; the Company's ability to
contract with additional third-party payors for reimbursement of the
Company's products; uncertainty associated with the development and
approval of new products generally; and other risks identified in the
Company's most recent Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, and other documents that the Company files with the
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| GAAP CONDENSED BALANCE SHEETS | |||||||||
| (in thousands) | |||||||||
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| 2017 | 2016 | ||||||||
| (Unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents and short-term investments | $ | 27,794 | $ | 53,538 | |||||
| Restricted cash | - | 2,000 | |||||||
| Accounts receivable, net | 9,029 | 11,172 | |||||||
| Inventory, net | 25,823 | 21,195 | |||||||
| Other current assets | 2,487 | 4,187 | |||||||
| Total current assets | 65,133 | 92,092 | |||||||
| Restricted cash - long-term | 10,000 | - | |||||||
| Property and equipment, net | 21,664 | 18,409 | |||||||
| Other long term assets | 1,746 | 1,891 | |||||||
| Total assets | $ | 98,543 | $ | 112,392 | |||||
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Liabilities and stockholders' deficit |
|||||||||
| Current liabilities: | |||||||||
| Accounts payable, accrued expense and employee-related liabilities | $ | 20,501 | $ | 19,325 | |||||
| Deferred revenue | 3,821 | 5,208 | |||||||
| Other current liabilities | 6,517 | 6,943 | |||||||
| Total current liabilities | 30,839 | 31,476 | |||||||
| Notes payable-long-term | 74,677 | 78,960 | |||||||
| Other long-term liabilities | 11,306 | 7,883 | |||||||
| Total liabilities | 116,822 | 118,319 | |||||||
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Total stockholders' deficit |
(18,279 | ) | (5,927 | ) | |||||
|
Total liabilities and stockholders' deficit |
$ | 98,543 | $ | 112,392 | |||||
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| GAAP CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
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Three Months Ended |
Six Months Ended |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Sales | $ | 21,327 | $ | 22,985 | $ | 40,303 | $ | 43,043 | ||||||||||
| Cost of sales | 13,325 | 14,809 | 25,549 | 27,939 | ||||||||||||||
| Gross profit | 8,002 | 8,176 | 14,754 | 15,104 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Selling, general and administrative | 22,104 | 21,087 | 44,952 | 43,084 | ||||||||||||||
| Research and development | 4,866 | 4,142 | 9,996 | 8,310 | ||||||||||||||
| Total operating expenses | 26,970 | 25,229 | 54,948 | 51,394 | ||||||||||||||
| Operating loss | (18,968 | ) | (17,053 | ) | (40,194 | ) | (36,290 | ) | ||||||||||
| Other income (expense), net: | ||||||||||||||||||
| Interest and other income | 60 | 107 | 119 | 225 | ||||||||||||||
| Interest and other expense | (2,892 | ) | (1,379 | ) | (5,518 | ) | (2,744 | ) | ||||||||||
| Total other expense, net | (2,832 | ) | (1,272 | ) | (5,399 | ) | (2,519 | ) | ||||||||||
| Net loss | $ | (21,800 | ) | $ | (18,325 | ) | $ | (45,593 | ) | $ | (38,809 | ) | ||||||
| Net loss per share, basic and diluted | $ | (0.44 | ) | $ | (0.60 | ) | $ | (1.11 | ) | $ | (1.28 | ) | ||||||
| Weighted average shares used to compute basic and diluted net loss per share | 50,036 | 30,489 | 41,013 | 30,392 | ||||||||||||||
Press Release Exhibit
Summary of Technology Upgrade Program and
Associated
Reconciliation of GAAP versus Non-GAAP Financial Results
Program Overview
In
The t:slim X2 Insulin Pump features new hardware advancements, including
a two-way Bluetooth® wireless technology radio for communicating with
more than one external device at a time. The Company expects these
advancements, together with the Company's future anticipated use of the
Tandem Device Updater to deliver remote software updates for the t:slim
X2, will offer customers a path to new innovations separate from the
typical 4-year insurance pump replacement cycle. The Upgrade Program is
available to eligible customers through
Accounting Treatment Overview
Pursuant to applicable GAAP revenue recognition standards, revenue is recognized when the product is delivered or when an obligation is fulfilled, among other requirements. Under the Upgrade Program, eligible customers will be provided the opportunity to receive a t:slim X2 Insulin Pump at a future date. This creates potential future obligations for the Company that prevent the full recognition of revenue and cost of sales at the time of the customer's initial purchase of an insulin pump, which results in a deferral of revenue and cost of sales on the Company's financial statements. The deferrals will generally be recognized at the earlier of when the obligation for such upgrades and services are fulfilled or when the Upgrade Program expires. Any fees received by the Company under the Upgrade Program and the Company's cost of fulfilling the associated obligation will also be recognized at that time.
Reconciliation of GAAP versus Non-GAAP Financial Results
Due to this high degree of accounting complexity, which is dependent on a number of future events and variables that are difficult to estimate or predict, the Upgrade Program creates unpredictable GAAP results for the duration of the Program. To aid investors in better understanding the Company's performance and minimize potential confusion when comparing its current and future results to historical results, the Company has provided non-GAAP financial information in the accompanying press release, in addition to providing GAAP financial information. In the following tables, the Company has provided a reconciliation of its GAAP financial results to its non-GAAP financial results, which illustrates the impact of the Upgrade Program:
For the three months ended
| Impact of Technology Upgrade Program* | ||||||||||||||||||||||
| (in millions) |
GAAP |
Deferrals at |
Recognition |
Upgrade |
Non-GAAP |
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| Sales | $ | 21.3 | $ | — | $ | — | $ | — | $ | 21.3 | ||||||||||||
| Cost of sales | 13.3 | — | — | (0.1 | ) | 13.2 | ||||||||||||||||
| Gross profit (loss) | $ | 8.0 | $ | — | $ | — | $ | 0.1 | $ | 8.1 | ||||||||||||
| Gross margin % | 38 | % | 38 | % | ||||||||||||||||||
| Operating loss | $ | (19.0 | ) | $ | — | $ | — | $ | 0.1 | $ | (18.9 | ) | ||||||||||
| Operating margin % | (89 | )% | (89 | )% | ||||||||||||||||||
|
* Table may not foot due to rounding |
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For the six months ended
| Impact of Technology Upgrade Program* | ||||||||||||||||||||||
| (in millions) |
GAAP |
Deferrals at |
Recognition |
Upgrade |
Non-GAAP |
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| Sales | $ | 40.3 | $ | 0.1 | $ | (1.5 | ) | $ | (0.1 | ) | $ | 38.8 | ||||||||||
| Cost of sales | 25.5 | - | (0.4 | ) | (0.5 | ) | 24.7 | |||||||||||||||
| Gross profit (loss) | $ | 14.8 | $ | 0.1 | $ | (1.1 | ) | $ | 0.4 | $ | 14.1 | |||||||||||
| Gross margin % | 37 | % | 36 | % | ||||||||||||||||||
| Operating loss | $ | (40.2 | ) | $ | 0.1 | $ | (1.1 | ) | $ | 0.4 | $ | (40.8 | ) | |||||||||
| Operating margin % | (100 | )% | (105 | )% | ||||||||||||||||||
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* Table may not foot due to rounding |
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Since the launch of t:slim X2 pump in the fourth quarter of 2016, the
Company has fulfilled approximately 2,300 upgrades under the Technology
Upgrade Program, and recorded an incremental
Non-GAAP Accounting Definitions
1) Deferrals at Initial Sale - The deferral of initial sales and cost of sales for eligible pump shipments are summarized in the following table:
|
Deferral Treatment for Eligible Shipments on or After |
|
| Sales Deferral | Cost of Sales Deferral |
| 100% of each sale classified as a right of return. A portion of each sale classified as a guarantee liability. | 100% of the manufacturing cost for each sale classified as a right of return. No deferral for each sale classified as a guarantee liability. |
2) Recognition of Deferrals - This reflects any changes in subsequent periods for deferrals made at the time of the initial sale (see Deferrals at Initial Sale above). It includes recognition of amounts previously deferred when actual product upgrades occur. It will eventually also include a reversal of any remaining deferrals when the program expires for customers who did not elect the upgrade or service options.
3) Upgrade Fulfillments - This reflects incremental revenue recognized from an upgrade or service fee, if any, and the cost of sales associated with completing that upgrade or service. Approximately 2,300 upgrade fulfillments have occurred since the fourth quarter of 2016, when the t:slim X2 Insulin Pump became available. At that time, the Company commenced reporting Recognition of Deferrals and Upgrade Fulfillments.
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Contact:
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