Tandem Diabetes Care Reports Third Quarter 2017 Financial Results
"Our accomplishments in the third quarter, including the
Between
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
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(in millions) |
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
| GAAP Sales | $ | 27.0 | $ | 12.3 | $ | 67.3 | $ | 55.3 | |||||||||||||||
| Impact of Technology Upgrade Program | (3.3 | ) | 8.4 | (4.8 | ) | 8.4 | |||||||||||||||||
| Non-GAAP sales1 | $ | 23.7 | $ | 20.7 | $ | 62.5 | $ | 63.7 | |||||||||||||||
| Pump shipments | 3,868 | 3,896 | 10,111 | 12,520 | |||||||||||||||||||
| 1) |
GAAP sales are determined in accordance with |
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Third Quarter 2017 GAAP Results
GAAP sales were
For the third quarter of 2017, operating expenses totaled
Third Quarter 2017 Non-GAAP Results
Non-GAAP sales, which are adjusted for the impact of the Technology
Upgrade Program, were
For the third quarter of 2017, non-GAAP operating expenses totaled
Cash and Cash Use
As of
The Company's cash balance as of
2017 Guidance
For the year ending
-
GAAP sales are estimated to be in the range of
$100 million to$105 million ; non-GAAP sales are estimated to be in the range of$95 million to$100 million -
GAAP operating margin is estimated to be in the range of negative 65
percent to negative 60 percent; non-GAAP operating margin is estimated
to be in the range of negative 70 percent to negative 65 percent, both
of which include:
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Approximately
$12.0 million in non-cash, stock-based compensation expense -
Approximately
$5.0 million to$6.0 million of depreciation and amortization
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Approximately
Non-GAAP sales are adjusted for the impact of the Technology Upgrade Program. For additional information regarding the Technology Upgrade Program and a reconciliation of the Company's GAAP financial results and guidance to its non-GAAP financial results and guidance, 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 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. Due to these accounting
complexities, the Company is providing guidance for the year ending
These non-GAAP financial measures are 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. 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 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
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 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; the Company's ability to receive required
regulatory approvals and otherwise complete the transition of
manufacturing operations to our new manufacturing facility when
anticipated; and 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 our products
obsolete or less desirable. 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 | $ | 12,538 | $ | 53,538 | ||||||||||||||
| Restricted cash | - | 2,000 | ||||||||||||||||
| Accounts receivable, net | 10,582 | 11,172 | ||||||||||||||||
| Inventory, net | 29,985 | 21,195 | ||||||||||||||||
| Other current assets | 2,887 | 4,187 | ||||||||||||||||
| Total current assets | 55,992 | 92,092 | ||||||||||||||||
| Restricted cash - long-term | 10,000 | - | ||||||||||||||||
| Property and equipment, net | 20,286 | 18,409 | ||||||||||||||||
| Other long term assets | 1,699 | 1,891 | ||||||||||||||||
| Total assets | $ | 87,977 | $ | 112,392 | ||||||||||||||
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Liabilities and stockholders' deficit |
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| Current liabilities: | ||||||||||||||||||
| Accounts payable, accrued expense and employee-related liabilities | $ | 21,554 | $ | 19,325 | ||||||||||||||
| Deferred revenue | 2,295 | 5,208 | ||||||||||||||||
| Other current liabilities | 5,562 | 6,943 | ||||||||||||||||
| Total current liabilities | 29,411 | 31,476 | ||||||||||||||||
| Notes payable-long-term | 75,596 | 78,960 | ||||||||||||||||
| Other long-term liabilities | 10,928 | 7,883 | ||||||||||||||||
| Total liabilities | 115,935 | 118,319 | ||||||||||||||||
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Total stockholders' deficit |
(27,958 | ) | (5,927 | ) | ||||||||||||||
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Total liabilities and stockholders' deficit |
$ | 87,977 | $ | 112,392 | ||||||||||||||
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| GAAP CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||
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(in thousands, except per share data(1)) |
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| (Unaudited) | ||||||||||||||||||||||||
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Three Months Ended
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Nine Months Ended
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Sales | $ | 27,003 | $ | 12,293 | $ | 67,306 | $ | 55,336 | ||||||||||||||||
| Cost of sales | 15,131 | 13,870 | 40,680 | 41,809 | ||||||||||||||||||||
| Gross profit (loss) | 11,872 | (1,577 | ) | 26,626 | 13,527 | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling, general and administrative | 20,125 | 20,683 | 65,077 | 63,768 | ||||||||||||||||||||
| Research and development | 4,914 | 6,154 | 14,910 | 14,464 | ||||||||||||||||||||
| Total operating expenses | 25,039 | 26,837 | 79,987 | 78,232 | ||||||||||||||||||||
| Operating loss | (13,167 | ) | (28,414 | ) | (53,361 | ) | (64,705 | ) | ||||||||||||||||
| Other income (expense), net: | ||||||||||||||||||||||||
| Interest and other income | 60 | 34 | 179 | 258 | ||||||||||||||||||||
| Interest and other expense | (2,928 | ) | (1,434 | ) | (8,445 | ) | (4,177 | ) | ||||||||||||||||
| Total other expense, net | (2,868 | ) | (1,400 | ) | (8,266 | ) | (3,919 | ) | ||||||||||||||||
| Net loss | $ | (16,035 | ) | $ | (29,814 | ) | $ | (61,627 | ) | $ | (68,624 | ) | ||||||||||||
| Net loss per share, basic and diluted | $ | (3.09 | ) | $ | (9.73 | ) | $ | (13.79 | ) | $ | (22.52 | ) | ||||||||||||
| Weighted average shares used to compute basic and diluted net loss per share | 5,190 | 3,063 | 4,468 | 3,047 | ||||||||||||||||||||
| (1) |
The issued and outstanding shares of common stock have been restated
for all periods presented to reflect the effects of the 1-for-10
reverse stock split, which was effective on |
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Press Release Exhibit
Summary of Technology Upgrade Program and Associated Reconciliation of GAAP versus Non-GAAP Financial Results and Guidance
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 anticipated use of the Tandem Device Updater to deliver future remote software updates for the t:slim X2 Pump, will offer customers a path to new innovations separate from the typical 4-year insurance pump replacement cycle.
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 ended
| Impact of Technology Upgrade Program* | ||||||||||||||||||||||||||||||
| (in millions) |
GAAP Financial Results |
Deferrals at Initial Sale1 |
Recognition of Deferrals2 |
Upgrade Fulfillments3 |
Non-GAAP Financial Results |
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| Sales | $ | 27.0 | $ | — | $ | (3.0 | ) | $ | (0.3 | ) | $ | 23.7 | ||||||||||||||||||
| Cost of sales | 15.1 | — | (0.4 | ) | (0.3 | ) | 14.4 | |||||||||||||||||||||||
| Gross profit (loss) | $ | 11.9 | $ | — | $ | (2.6 | ) | $ | — | $ | 9.3 | |||||||||||||||||||
| Gross margin % | 44 | % | 39 | % | ||||||||||||||||||||||||||
| Operating loss | $ | (13.2 | ) | $ | — | $ | (2.6 | ) | $ | — | $ | (15.8 | ) | |||||||||||||||||
| Operating margin % | (49 | )% | (66 | )% | ||||||||||||||||||||||||||
* Table may not foot due to rounding
For the nine months ended
| Impact of Technology Upgrade Program* | ||||||||||||||||||||||||||||||
| (in millions) |
GAAP Financial Results |
Deferrals at Initial Sale1 |
Recognition of Deferrals2 |
Upgrade Fulfillments3 |
Non-GAAP Financial Results |
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| Sales | $ | 67.3 | $ | 0.2 | $ | (4.5 | ) | $ | (0.5 | ) | $ | 62.5 | ||||||||||||||||||
| Cost of sales | 40.7 | — | (0.8 | ) | (0.8 | ) | 39.1 | |||||||||||||||||||||||
| Gross profit (loss) | $ | 26.6 | $ | 0.2 | $ | (3.7 | ) | $ | 0.3 | $ | 23.4 | |||||||||||||||||||
| Gross margin % | 40 | % | 37 | % | ||||||||||||||||||||||||||
| Operating loss | $ | (53.4 | ) | $ | 0.2 | $ | (3.7 | ) | $ | 0.3 | $ | (56.6 | ) | |||||||||||||||||
| Operating margin % | (79 | )% | (90 | )% | ||||||||||||||||||||||||||
* 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 3,000 upgrades under the
Technology Upgrade Program. As of
For the year ended
| (in millions) | GAAP Guidance |
Impact of Technology Upgrade Program |
Non-GAAP Guidance |
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| Sales |
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| Operating Margin % | (65)% - (60)% | (70)% - (65)% | |||||||||||||||
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 3,000 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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or
Investor
Contact:
smorrison@tandemdiabetes.com
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