CARDIOVASCULAR SYSTEMS, INC. (CSII, Financial) filed Quarterly Report for the period ended 2009-12-31.
Cardiovascular Systems, Inc. has a market cap of $71.4 million; its shares were traded at around $4.86 with a P/E ratio of 9.2 and P/S ratio of 1.2. CSII is in the portfolios of Lee Ainslie of Maverick Capital, George Soros of Soros Fund Management LLC, Stanley Druckenmiller of Duquesne Capital Management, LLC, Stanley Druckenmiller of Duquesne Capital Management, LLC.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $963,000, or 6.4%, from $14.9 million for the three months ended December 31, 2008 to $15.9 million for the three months ended December 31, 2009. The primary reason was increased sales and marketing expenses of $1.5 million, which included the building of our sales team along with additional marketing programs. This was partially offset by a reduction in legal fees of $600,000 and management incentive compensation of $300,000. Selling, general and administrative expenses for the three months ended December 31, 2009 and 2008 includes $1.7 million and $1.3 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses to increase in the future due primarily to the costs associated with expanding our sales and marketing programs and organization to further commercialize our products.
Research and Development Expenses. Research and development expenses decreased by $1.3 million, or 37.1%, from $3.5 million for the three months ended December 31, 2008 to $2.2 million for the three months ended December 31, 2009. Research and development expenses relate to specific projects to improve our product or expand into new markets, such as the development of a new control unit, shaft designs, crown designs, and PAD and coronary clinical trials. The reduction in these expenses related to the decreased numbers and sizes of PAD development projects in calendar 2009, as well as the timing of those projects. Research and development expenses for the three months ended December 31, 2009 and 2008 includes $295,000 and $108,000, respectively, for stock-based compensation. As we continue to expand our product portfolio within the market for the treatment of peripheral arteries and leverage our core technology into the coronary market, we expect to incur research and development expenses for the remainder of the fiscal year at a slightly higher rate than that incurred for the six months ended December 31, 2009, although fluctuations could occur based on the number of projects and studies and the timing of expenditures.
Cost of Goods Sold. Cost of goods sold decreased by $1.0 million, or 12.8%, from $8.0 million for the six months ended December 31, 2008 to $7.0 million for the six months ended December 31, 2009. This decrease in cost of goods sold resulted in an increase to gross margin of 8 percentage points, from 69% for the six months ended December 31, 2008 to 77% for the six months ended December 31, 2009. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, control units, and other ancillary products. The increase in gross margin from the six months ended December 31, 2008 to December 31, 2009 is primarily due to manufacturing efficiencies, product cost reductions, higher production volumes, and shipment of fewer lower margin control units. Cost of goods sold for the six months ended December 31, 2009 and 2008 includes $277,000 and $275,000, respectively, for stock-based compensation.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $605,000, or, 1.9%, from $31.4 million for the six months ended December 31, 2008 to $30.8 million for the six months ended December 31, 2009. The primary reasons for the decrease included increased sales and marketing expenses of $1.2 million, from building our sales team along with additional marketing programs. This was offset by significantly reduced consulting and professional services, contributing $2.6 million, which includes a $1.7 million expense from the write-off of previously capitalized initial public offering costs. Selling, general and administrative expenses for the six months ended December 31, 2009 and 2008 includes $3.5 million and $2.7 million, respectively, for stock-based compensation.
One of our directors and stockholders and two entities who held preferred shares and were also affiliated with two of our directors agreed to act as guarantors of the original term loans. In consideration for the guarantees, we issued the guarantors warrants to purchase an aggregate of 296,539 shares of our common stock at an exercise price of $9.28 per share. As a result of the amendment, the guarantees on the original term loans have been released. The guaranteed term loans and common stock warrants were allocated using the relative fair value method. Under this method, we estimated the fair value of the term loans without the guarantees and calculated the fair value of the common stock warrants using the Black-Scholes method. The relative fair value of the loans and warrants were applied to the loan proceeds of $5.5 million resulting in an assigned value of $3.7 million for the loans and $1.8 million for the warrants. The assigned value of the warrants of $1.8 million is treated as a debt discount. The balance of the debt discount at December 31, 2009 is $0.5 million and is being amortized over the remaining term of the $5.5 million term loan.
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Cardiovascular Systems, Inc. has a market cap of $71.4 million; its shares were traded at around $4.86 with a P/E ratio of 9.2 and P/S ratio of 1.2. CSII is in the portfolios of Lee Ainslie of Maverick Capital, George Soros of Soros Fund Management LLC, Stanley Druckenmiller of Duquesne Capital Management, LLC, Stanley Druckenmiller of Duquesne Capital Management, LLC.
Highlight of Business Operations:
Cost of Goods Sold. Cost of goods sold decreased by $638,000, or 15.4%, from $4.2 million for the three months ended December 31, 2008 to $3.5 million for the three months ended December 31, 2009. This decrease in cost of goods sold resulted in an increase to gross margin of 7 percentage points, from 70% for the three months ended December 31, 2008 to 77% for the three months ended December 31, 2009. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, control units, and other ancillary products. The increase in gross margin from the three months ended December 31, 2008 to December 31, 2009 is primarily due to manufacturing efficiencies, product cost reductions, and shipment of fewer lower margin control units. Cost of goods sold for the three months ended December 31, 2009 and 2008 includes $148,000 and $100,000, respectively, for stock-based compensation. We expect that gross margin will stay fairly consistent in the future as sales volumes increase, although quarterly fluctuations could occur based on timing of new product introductions, sales mix, pricing changes, or other unanticipated circumstances.Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $963,000, or 6.4%, from $14.9 million for the three months ended December 31, 2008 to $15.9 million for the three months ended December 31, 2009. The primary reason was increased sales and marketing expenses of $1.5 million, which included the building of our sales team along with additional marketing programs. This was partially offset by a reduction in legal fees of $600,000 and management incentive compensation of $300,000. Selling, general and administrative expenses for the three months ended December 31, 2009 and 2008 includes $1.7 million and $1.3 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses to increase in the future due primarily to the costs associated with expanding our sales and marketing programs and organization to further commercialize our products.
Research and Development Expenses. Research and development expenses decreased by $1.3 million, or 37.1%, from $3.5 million for the three months ended December 31, 2008 to $2.2 million for the three months ended December 31, 2009. Research and development expenses relate to specific projects to improve our product or expand into new markets, such as the development of a new control unit, shaft designs, crown designs, and PAD and coronary clinical trials. The reduction in these expenses related to the decreased numbers and sizes of PAD development projects in calendar 2009, as well as the timing of those projects. Research and development expenses for the three months ended December 31, 2009 and 2008 includes $295,000 and $108,000, respectively, for stock-based compensation. As we continue to expand our product portfolio within the market for the treatment of peripheral arteries and leverage our core technology into the coronary market, we expect to incur research and development expenses for the remainder of the fiscal year at a slightly higher rate than that incurred for the six months ended December 31, 2009, although fluctuations could occur based on the number of projects and studies and the timing of expenditures.
Cost of Goods Sold. Cost of goods sold decreased by $1.0 million, or 12.8%, from $8.0 million for the six months ended December 31, 2008 to $7.0 million for the six months ended December 31, 2009. This decrease in cost of goods sold resulted in an increase to gross margin of 8 percentage points, from 69% for the six months ended December 31, 2008 to 77% for the six months ended December 31, 2009. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, control units, and other ancillary products. The increase in gross margin from the six months ended December 31, 2008 to December 31, 2009 is primarily due to manufacturing efficiencies, product cost reductions, higher production volumes, and shipment of fewer lower margin control units. Cost of goods sold for the six months ended December 31, 2009 and 2008 includes $277,000 and $275,000, respectively, for stock-based compensation.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $605,000, or, 1.9%, from $31.4 million for the six months ended December 31, 2008 to $30.8 million for the six months ended December 31, 2009. The primary reasons for the decrease included increased sales and marketing expenses of $1.2 million, from building our sales team along with additional marketing programs. This was offset by significantly reduced consulting and professional services, contributing $2.6 million, which includes a $1.7 million expense from the write-off of previously capitalized initial public offering costs. Selling, general and administrative expenses for the six months ended December 31, 2009 and 2008 includes $3.5 million and $2.7 million, respectively, for stock-based compensation.
One of our directors and stockholders and two entities who held preferred shares and were also affiliated with two of our directors agreed to act as guarantors of the original term loans. In consideration for the guarantees, we issued the guarantors warrants to purchase an aggregate of 296,539 shares of our common stock at an exercise price of $9.28 per share. As a result of the amendment, the guarantees on the original term loans have been released. The guaranteed term loans and common stock warrants were allocated using the relative fair value method. Under this method, we estimated the fair value of the term loans without the guarantees and calculated the fair value of the common stock warrants using the Black-Scholes method. The relative fair value of the loans and warrants were applied to the loan proceeds of $5.5 million resulting in an assigned value of $3.7 million for the loans and $1.8 million for the warrants. The assigned value of the warrants of $1.8 million is treated as a debt discount. The balance of the debt discount at December 31, 2009 is $0.5 million and is being amortized over the remaining term of the $5.5 million term loan.
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