Tandem Diabetes Care Announces 2017 Financial Results
"The fourth quarter marked the strongest sales in Tandem's history, with
80 percent growth in our sequential quarterly pump shipments. This
strong demand for the t:slim X2 Insulin Pump was driven by our
successful launch of integration with Dexcom G5 Mobile CGM and our
unique offering that allows customers to remotely update their pump
software using a personal computer," said
Sales and Pump Shipments1
| Three Months Ended | Twelve Months Ended | |||||||||||||||
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(in millions) |
2017 | 2016 | 2017 | 2016 | ||||||||||||
| GAAP Sales | $ | 40.3 | $ | 28.9 | $ | 107.6 | $ | 84.2 | ||||||||
| Impact of Technology Upgrade Program | (0.3) | (4.1) | (5.0 | ) | 4.3 | |||||||||||
| Non-GAAP Sales1 | $ | 40.0 | $ | 24.8 | $ | 102.6 | $ | 88.5 | ||||||||
| Pump Shipments | 6,950 | 4,418 | 17,061 | 16,938 | ||||||||||||
| 1) |
GAAP sales are determined in accordance with |
"Our growing infusion set sales and an increasing number of pump renewal
opportunities give us confidence going into 2018," said
2017 GAAP Results
GAAP sales grew 28 percent to
Gross margin for the year ended
For the year ended 2017, operating expenses totaled
For the fourth quarter of 2017, operating expenses totaled
2017 Non-GAAP Results
The Company's GAAP results are determined in accordance with
Non-GAAP sales increased 16 percent to
Non-GAAP gross margin for the year ended 2017 was 40 percent compared to 32 percent for the year ended 2016. Non-GAAP gross margin was 44 percent for the fourth quarter of 2017 compared to 31 percent for the same period of 2016.
For the year and quarter ended 2017, non-GAAP operating expenses were
consistent with GAAP. Non-GAAP operating loss for the year ended 2017
totaled
Cash Balance and Liquidity
As of
2018 Guidance
For the year ending
1. Sales are estimated to be in the range of
- Sales for the first quarter of 2018 are estimated to be 18 percent - 19 percent of annual sales
2. Operating margin is estimated to be in the range of negative 40 percent to negative 35 percent, which includes:
-
Approximately
$4.0 million to$5.0 million in non-cash, stock-based compensation expense -
Approximately
$7.0 million to$8.0 million of depreciation and amortization
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 created unpredictable GAAP results for its duration. This was principally due to accounting complexities associated with the program that were dependent on a number of future events and variables that were initially difficult to estimate or predict.
These non-GAAP financial measures are used internally by the Company to analyze its operating performance and prospects for future performance. 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 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. The Company has provided a reconciliation of its GAAP financial results and guidance to its non-GAAP financial results and guidance under the heading "Reconciliation of GAAP versus Non-GAAP Financial Results and Guidance" 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 Company's
projected financial results, including anticipated growth in infusion
set sales and the Company's ability to increase pump sales to renewal
customers, the Company's plan to launch t:slim X2 with Basal-IQ
technology in the summer of 2018, and the Company's ability to leverage
its early infrastructure investments. 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 projected financial results will be
impacted by the Company's ability to obtain regulatory approval for new
products and products under development and the timing of any such
approvals; market acceptance of the Company's existing products and
products under development by physicians 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 the process of purchasing the
Company's products, including insurance verification approval for
individual customers, may delay or prevent the sale of the products.
Other risks and uncertainties include the Company's inability to
manufacture products in commercial quantities at an acceptable cost and
in accordance with quality requirements; the Company's inability 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; possible future actions of the
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| GAAP CONDENSED BALANCE SHEETS | ||||||||||
| (in thousands) | ||||||||||
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| 2017 | 2016 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents and short-term investments | $ | 14,179 | $ | 53,538 | ||||||
| Restricted cash | - | 2,000 | ||||||||
| Accounts receivable, net | 20,793 | 11,172 | ||||||||
| Inventory, net | 26,993 | 21,195 | ||||||||
| Other current assets | 2,191 | 4,187 | ||||||||
| Total current assets | 64,156 | 92,092 | ||||||||
| Restricted cash - long-term | 10,000 | - | ||||||||
| Property and equipment, net | 19,631 | 18,409 | ||||||||
| Other long-term assets | 1,559 | 1,891 | ||||||||
| Total assets | $ | 95,346 | $ | 112,392 | ||||||
| Liabilities and stockholders' deficit | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable, accrued expense, and employee-related liabilities | $ | 22,470 | $ | 19,325 | ||||||
| Deferred revenue | 2,526 | 5,208 | ||||||||
| Other current liabilities | 11,089 | 6,943 | ||||||||
| Total current liabilities | 36,085 | 31,476 | ||||||||
| Notes payable—long-term | 76,541 | 78,960 | ||||||||
| Other long-term liabilities | 11,868 | 7,883 | ||||||||
| Total liabilities | 124,494 | 118,319 | ||||||||
| Total stockholders' deficit | (29,148 | ) | (5,927 | ) | ||||||
| Total liabilities and stockholders' deficit | $ | 95,346 | $ | 112,392 | ||||||
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| GAAP CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Sales | $ | 40,294 | $ | 28,912 | $ | 107,601 | $ | 84,248 | ||||||||||||
| Cost of sales | 22,827 | 18,847 | 63,507 | 60,656 | ||||||||||||||||
| Gross profit | 17,468 | 10,065 | 44,094 | 23,592 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Selling, general and administrative | 21,299 | 19,067 | 86,377 | 82,834 | ||||||||||||||||
| Research and development | 5,751 | 4,344 | 20,661 | 18,809 | ||||||||||||||||
| Total operating expenses | 27,050 | 23,411 | 107,038 | 101,643 | ||||||||||||||||
| Operating loss | (9,582 | ) | (13,346 | ) | (62,944 | ) | (78,051 | ) | ||||||||||||
| Total other expense, net | (1,815 | ) | (1,491 | ) | (10,081 | ) | (5,411 | ) | ||||||||||||
| Loss before taxes | (11,397 | ) | (14,837 | ) | (73,025 | ) | (83,462 | ) | ||||||||||||
| Provision for income tax expense (benefit) | 8 | (15 | ) | 8 | (15 | ) | ||||||||||||||
| Net loss | $ | (11,405 | ) | $ | (14,822 | ) | $ | (73,033 | ) | $ | (83,447 | ) | ||||||||
| Net loss per share, basic and diluted | $ | (1.23 | ) | $ | (4.80 | ) | $ | (12.87 | ) | $ | (27.30 | ) | ||||||||
| Weighted average shares used to compute basic and diluted net loss per share | 9,263 | 3,087 | 5,677 | 3,057 | ||||||||||||||||
Press Release Exhibit
Summary of Technology Upgrade Program and Associated Reconciliation of GAAP versus Non-GAAP Financial Results
Program Overview
In
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 were provided the opportunity to receive, at a future date, a
t:slim X2 Insulin Pump, or as of
Reconciliation of GAAP versus Non-GAAP Financial Results and Guidance
Due to this high degree of accounting complexity, the Upgrade Program created unpredictable GAAP results for its duration. To aid investors in better understanding the Company's performance and minimize potential confusion when comparing its current results to historical results and expected future 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 and guidance to its non-GAAP financial results and guidance, which illustrates the impact of the Upgrade Program.
For the three months and twelve months ended
|
Impact of Technology Upgrade Program (three months ended
|
||||||||||||||||||||||||
| (in millions) |
GAAP |
Deferrals at |
Recognition of |
Upgrade |
Non-GAAP |
|||||||||||||||||||
| Sales | $ | 40.3 | $ | - | $ | (0.1 | ) | $ | (0.2 | ) | $ | 40.0 | ||||||||||||
| Cost of sales | $ | 22.8 | - | - | (0.4 | ) | $ | 22.4 | ||||||||||||||||
| Gross profit (loss) | $ | 17.5 | $ | - | $ | (0.1 | ) | $ | 0.2 | $ | 17.6 | |||||||||||||
| Gross margin % | 43 | % | 44 | % | ||||||||||||||||||||
| Operating loss | $ | (9.6 | ) | $ | - | $ | (0.1 | ) | $ | 0.2 | $ | (9.5 | ) | |||||||||||
| Operating margin % | (24 | )% | (24 | )% | ||||||||||||||||||||
* Table may not foot due to rounding
|
Impact of Technology Upgrade Program (twelve months ended
|
||||||||||||||||||||||||
| (in millions) |
GAAP |
Deferrals at |
Recognition of |
Upgrade |
Non-GAAP |
|||||||||||||||||||
| Sales | $ | 107.6 | $ | 0.2 | $ | (4.6 | ) | $ |
(0.6 |
) | $ |
102.6 |
||||||||||||
| Cost of sales | $ | 63.5 | $ | - | $ | (0.8 | ) | $ | (1.1 | ) | $ | 61.6 | ||||||||||||
| Gross profit (loss) | $ | 44.1 | $ | 0.2 | $ | (3.8 | ) | $ |
0.5 |
$ |
41.0 |
|||||||||||||
| Gross margin % | 41 | % | 40 | % | ||||||||||||||||||||
| Operating loss | $ | (62.9 | ) | $ | 0.2 | $ | (3.8 | ) | $ |
0.5 |
$ | (66.1 | ) | |||||||||||
| Operating margin % | (58 | )% | (64 | )% | ||||||||||||||||||||
* Table may not foot due to rounding
For the three months and twelve months ended
|
Impact of Technology Upgrade Program (three months ended
|
||||||||||||||||||||||||
| ($ amounts in millions) |
GAAP |
Deferrals at |
Recognition of |
Upgrade |
Non-GAAP |
|||||||||||||||||||
| Sales | $ | 28.9 | $ | 1.4 | $ | (5.4 | ) | $ | (0.1 | ) | $ | 24.8 | ||||||||||||
| Cost of sales | $ | 18.8 | $ | 0.3 | $ | (1.0 | ) | $ | (1.1 | ) | $ | 17.0 | ||||||||||||
| Gross profit (loss) | $ | 10.1 | $ | 1.1 | $ | (4.4 | ) | $ | 1.0 | $ | 7.8 | |||||||||||||
| Gross margin % | 35 | % | 31 | % | ||||||||||||||||||||
| Operating loss | $ | (13.3 | ) | $ | 1.1 | $ | (4.4 | ) | $ | 1.0 | $ | (15.7 | ) | |||||||||||
| Operating margin % | (46 | )% | (63 | )% | ||||||||||||||||||||
* Table may not foot due to rounding
|
Impact of Technology Upgrade Program (twelve months ended
|
||||||||||||||||||||||||
| ($ amounts in millions) |
GAAP |
Deferrals at |
Recognition of |
Upgrade |
Non-GAAP |
|||||||||||||||||||
| Sales | $ | 84.2 | $ | 9.8 | $ | (5.4 | ) | $ | (0.1 | ) | $ | 88.5 | ||||||||||||
| Cost of sales | $ | 60.7 | $ | 1.8 | $ | (1.0 | ) | $ | (1.1 | ) | $ | 60.4 | ||||||||||||
| Gross profit (loss) | $ | 23.6 | $ | 8.0 | $ | (4.4 | ) | $ | 1.0 | $ | 28.1 | |||||||||||||
| Gross margin % | 28 | % | 32 | % | ||||||||||||||||||||
| Operating loss | $ | (78.1 | ) | $ | 8.0 | $ | (4.4 | ) | $ | 1.0 | $ | (73.5 | ) | |||||||||||
| Operating margin % | (93 | )% | (83 | )% | ||||||||||||||||||||
* Table may not foot due to rounding
Since the launch of the t:slim X2 Pump in the fourth quarter of 2016,
the Company has fulfilled approximately 3,300 upgrades under the
Technology Upgrade Program. The majority of deferred sales and cost of
sales were recognized as of
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 and 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 3,300 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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Media Contact:
ssabicer@thesabicergroup.com
or
Investor
Contact:
smorrison@tandemdiabetes.com
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