Tandem Diabetes Care, Inc. (NASDAQ: TNDM), a leading insulin delivery and diabetes technology company, today reported its financial results for the quarter ended June 30, 2020. In addition, the Company provided sales guidance for the year ending December 31, 2020.
"We achieved our highest quarterly sales, successfully completed our first acquisition, and executed multiple meaningful agreements in support of our longer-term objectives in the second quarter," said John Sheridan, president and chief executive officer. "In this challenging global environment, our business has excelled in its commercial, operational and strategic performance."
Second Quarter 2020 Financial Results
Worldwide sales increased 17 percent to $109.2 million in the second quarter, compared to $93.3 million in the second quarter of 2019. Domestic pump shipments increased 15 percent to 14,735 pumps in the second quarter of 2020 from 12,799 pumps in the same period of 2019. Domestic sales were $89.3 million, or an increase of 27 percent compared to $70.4 million in the second quarter of 2019. International pump shipments decreased 53 percent to 3,952 pumps in the second quarter of 2020 from 8,459 pumps in the same period of 2019. International sales were $20.0 million, or a decrease of 13 percent compared to $22.9 million in the second quarter of 2019. Internationally, the second quarter of 2019 benefited from approximately $7.0 million in sales associated with the fulfillment of an order backlog from prior periods.
Gross profit for the second quarter of 2020 increased 9 percent to $54.4 million, compared to $49.9 million for the same period of 2019. Gross margin was 50 percent in the second quarter of 2020 and 54 percent in the same period of 2019. These included a non-cash stock-based compensation charge of $2.2 million in the second quarter of 2020 compared to $1.3 million for the same period of 2019. Royalty expense was $1.7 million in the second quarter of 2020, compared to no royalty expense in the second quarter of 2019. In combination, stock-based compensation and royalty expense represented nearly 4 percent of sales in the second quarter of 2020, and approximately 1 percent of sales for the same period of 2019.
For the second quarter of 2020, operating expenses totaled $66.4 million, compared to $51.8 million for the same period of 2019. Operating expenses included a non-cash charge for stock-based compensation of $14.3 million, compared to stock-based compensation of $11.0 million for the same period of 2019. Operating loss totaled $12.0 million, compared to $1.9 million for the same period of 2019. Operating margin for the second quarter of 2020 was negative 11 percent compared to negative 2 percent for the same period of 2019. For the second quarter of 2020, adjusted EBITDA(1) was $6.6 million or 6 percent of sales, compared to $12.0 million, or 13 percent of sales, for the same period of 2019.
Net loss for the second quarter of 2020 was $27.1 million, which included a $14.3 million non-cash charge for the change in fair value of certain outstanding warrants and $3.2 million of interest expense related to the Company’s convertible debt offering, of which $2.5 million is non-cash. In addition, the Company realized a $2.1 million income tax benefit associated with certain intangible transactions in the second quarter of 2020. This is compared to a net loss of $1.5 million for the second quarter of 2019, which included a $0.4 million non-cash charge for the change in fair value of certain warrants outstanding at that time.
(1) EBITDA is a non-GAAP financial measure defined as net income (loss) excluding income taxes, interest and other non-operating items and depreciation and amortization. Adjusted EBITDA further adjusts for the change in fair value of common stock warrants and non-cash stock-based compensation expense. This definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by the Company to evaluate operating performance, generate future operating plans and make strategic decisions for the allocation of capital. The Company presents Adjusted EBITDA to provide information that may assist investors in understanding its financial results. However, Adjusted EBITDA is not intended to be a substitute for net loss.
Cash Balance and Liquidity
As of June 30, 2020, the Company had $426.3 million in cash, cash equivalents and short-term investments. This represents a $266.1 million increase in the second quarter of 2020 and a $249.8 million increase since December 31, 2019. The increase in cash, cash equivalents and short-term investments includes net proceeds of $244.6 million from the Company’s convertible debt transaction during the quarter.
"We are reinstating the sales guidance we set at the beginning of 2020 based on the continued strong worldwide demand for our t:slim X2 insulin pump," said Leigh Vosseller, executive vice president and chief financial officer. "While being mindful of the unpredictable nature of the current pandemic, our confidence in the remainder of this year is supported by the positive feedback from users of our Control-IQ technology and its scaling international launch, as well as UnitedHealthcare’s recent decision to include Tandem as a network provider."
For the year ending December 31, 2020, the Company is reinstating its sales guidance estimated to be in the range of $450 million to $465 million, which includes international sales of approximately $70 million to $75 million. This represents an annual sales growth of 24 percent to 28 percent compared to 2019.
Non-GAAP Financial Measures
Certain non-GAAP financial measures are presented in this press release, including adjusted EBITDA, to provide information that may assist investors in understanding the Company’s financial results and assessing its prospects for future performance. We believe these non-GAAP financial measures are important indicators of our operating performance because they exclude items that are unrelated to, and may not be indicative of, our core operating results. These non-GAAP financial measures, as we calculate them, may not necessarily be comparable to similarly titled measures of other companies and may not be appropriate measures for comparing the performance of other companies relative to the Company. These non-GAAP financial results are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. To the extent we utilize such non-GAAP financial measures in the future, we expect to calculate them using a consistent method from period to period. A reconciliation of each of the GAAP financial measures to the most directly comparable non-GAAP financial measures has been provided under the heading "Reconciliation of GAAP versus Non-GAAP Financial Results" in the financial statement tables attached to this press release. Consistent with SEC regulations, we have not provided a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures in reliance on the "unreasonable efforts" exception set forth in the applicable regulations, because there is substantial uncertainty associated with predicting any future adjustments that we may make to our GAAP financial measures in calculating our non-GAAP financial measures.
The Company will hold a conference call and simultaneous webcast today at 4:30pm Eastern Time (1:30pm Pacific Time). The link to the webcast will be available by accessing the Events & Presentations tab in the Investor Center of the Tandem Diabetes Care website at http://investor.tandemdiabetes.com, and will be archived for 30 days. To listen to the conference call via phone, please dial 855-427-4396 (U.S./Canada) or 484-756-4261 (International) and use the participant code "1996138."
About Tandem Diabetes Care, Inc.
Tandem Diabetes Care, Inc. (www.tandemdiabetes.com) is a medical device company dedicated to improving the lives of people with diabetes through relentless innovation and revolutionary customer experience. The Company takes an innovative, user-centric approach to the design, development and commercialization of products for people with diabetes who use insulin. Tandem’s flagship product, the t:slim X2 insulin pump, is capable of remote software updates using a personal computer and features integrated continuous glucose monitoring. Tandem is based in San Diego, California.
Tandem Diabetes Care is a registered trademark and t:slim X2 and Control-IQ are trademarks of Tandem Diabetes Care, Inc.
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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, the anticipated scaled international launch of Control-IQ and the Company’s ability to continue to sustain our existing business operations during the COVID-19 pandemic. 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 market acceptance of the Company’s existing products and products under development by physicians and people with diabetes; the Company’s ability to establish and sustain operations to support international sales, including expansion into additional geographies; changes in reimbursement rates or insurance coverage for the Company’s products; the Company’s ability to meet increasing operational and infrastructure requirements from higher customer interest and a larger base of existing customers; the Company’s ability to complete the development and launch new products when anticipated; the potential that newer products, or other technological breakthroughs for the monitoring, treatment or prevention of diabetes, may render the Company’s products obsolete or less desirable; the depth and duration of the evolving COVID-19 pandemic, and the global response thereto; reliance on third-party relationships, such as outsourcing and supplier arrangements; global economic conditions; 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 Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Tandem undertakes no obligation to update or review any forward-looking statement in this press release because of new information, future events or other factors.
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