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Cardiovascular Systems' (CSII) Q1 Loss Wider Than Expected

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Cardiovascular Systems' (CSII) Q1 Loss Wider Than Expected

Cardiovascular Systems (CSII) sees strength in Coronary device and peripheral device segments in Q1.

Cardiovascular Systems, Inc. CSII reported loss per share of 9 cents in first-quarter fiscal 2019 compared with the year-ago loss of 6 cents.

The reported figure was wider than the Zacks Consensus Estimate of a loss of 6 cents.

Net Sales

Cardiovascular Systems recorded revenues of $56.3 million in the fiscal first quarter, marking a 13.3% year-over-year increase. The top line steered past the Zacks Consensus Estimate by 0.6%.

Segment Details

Coronary device revenues increased over 30% year over year to $15 million. Meanwhile, peripheral device revenues rose 8% to $41.2 million on a year-over-year basis. The company continued to see strong adoption of its Orbital Atherectomy System (OAS). Also, Cardiovascular Systems is progressing well with its objective to introduce OAS globally.

Margin

Gross margin in the reported quarter was 81.2%, down 30 basis points (bps) year over year due to the full-market launch of coronary balloons and peripheral guidewires along with rising revenues from international distributors.

Cardiovascular Systems, Inc. Price, Consensus and EPS Surprise

 

Cardiovascular Systems, Inc. Price, Consensus and EPS Surprise | Cardiovascular Systems, Inc. Quote

Meanwhile, selling and administrative (SG&A) expenses rose 14.8% to $41.2 million and research and development (R&D) expenses were up 17.6% to $7.4 million. As a result, adjusted operating expenses rose 15.4% to $48.7million.

Loss from operations came in at around $3 million, compared with a loss of $1.8 million in the year-ago period.

Financial position

The company exited first-quarter fiscal 2019 with cash and cash equivalents of $113.4 million, compared with $116.3 million at the end of fiscal 2018.

Outlook

Cardiovascular Systems reiterated its fiscal 2019 guidance. The company expects revenues in the range of $240-$250 million for fiscal 2019. The current Zacks Consensus Estimate for fiscal 2019 revenues is pegged at $244.2 million, within the company's guidance.

Moreover, the company expects gross profit to account for 80% of revenues in fiscal 2019.

The company expects to incur net loss of 1-2% of revenues in fiscal 2019. The current Zacks Consensus Estimate is pegged at a loss of 10 cents.

Our Take

Cardiovascular Systems exited first-quarter fiscal 2019 on a mixed note. However, the company witnessed year-over-year increase in both Coronary device and peripheral device segments. Overall, revenues grew year over year on segmental strength. The company is putting efforts in product innovation through R&D investments.  Cardiovascular Systems also announced the first global commercial use of its minimally-invasive Stealth 360Peripheral OAS in Hong Kong in the quarter.

Further, management seems to be upbeat about the exclusive international distribution agreement with OrbusNeich to sell its coronary and peripheral OAS outside the United States and Japan. According to management, the company saw the strongest quarterly growth in the first quarter of fiscal 2019 in the last 18 months.

On the flip side, Cardiovascular Systems faces cut-throat competition in the niche space.

Zacks Rank & Key Picks

Cardiovascular Systems has a Zacks Rank #5 (Strong Sell). 

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical ISRG, Stryker Corporation SYK and Merit Medical Systems, Inc. MMSI. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted earnings per share of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted earnings per share of $1.69, steering past the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted earnings per share of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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