UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
ABIOMED, INC.
(Exact name of registrant as specified in its charter)
|
DELAWARE |
|
04-2743260 |
|
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading symbol |
Name of each exchange on which registered |
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Common Stock, $0.01 par value |
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The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 25, 2019,
TABLE OF CONTENTS
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Item 1. |
3 |
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Condensed Consolidated Balance Sheets as of June 30, 2019 and March 31, 2019 |
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Condensed Consolidated Statements of Operations for the three months ended June 30, 2019 and 2018 |
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Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2019 and 2018 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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37 |
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EXPLANATORY NOTES
Pending Trademarks and Registered Marks
Throughout this quarterly report on Form 10-Q (the “Report”), we refer to various trademarks, service marks and trade names that we use in our business. ABIOMED, IMPELLA, IMPELLA 2.5, IMPELLA 5.0, IMPELLA LD, IMPELLA CP, IMPELLA RP, and IMPELLA CONNECT are registered trademarks of ABIOMED, Inc., and are registered in the U.S. and certain foreign countries. IMPELLA BTR, IMPELLA 5.5, IMPELLA ECP, CVAD StudyTM and SMARTASSIST are pending trademarks of ABIOMED, Inc. Other trademarks and service marks appearing in this Report are the property of their respective holders.
Company References
Throughout this Report, “ABIOMED, Inc.,” the “Company,” “we,” “us” and “our” refer to ABIOMED, Inc. and its consolidated subsidiaries.
Where You Can Find More Information
We make available, free of charge on our website located at www.abiomed.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after filing such reports with or furnishing such reports to the U.S. Securities and Exchange Commission (the “SEC”). We also use our website for the distribution of Company information. The information we post on our website may be deemed to be material information. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not incorporated by reference into this Report.
2
PART I. FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
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June 30, 2019 |
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March 31, 2019 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable securities |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term marketable securities |
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Property and equipment, net |
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Goodwill |
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In-process research and development |
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Long-term deferred tax assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Other current liabilities |
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- |
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Total current liabilities |
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Contingent consideration |
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Long-term deferred tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 12) |
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Stockholders' equity: |
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Class B Preferred Stock, $ |
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Authorized - |
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Common stock, $ |
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Authorized - and |
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Outstanding - at March 31, 2019 |
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Additional paid in capital |
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Retained earnings |
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Treasury stock at cost - March 31, 2019 |
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( |
) |
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( |
) |
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Accumulated other comprehensive loss |
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( |
) |
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( |
) |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
3
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
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For the Three Months Ended June 30, |
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2019 |
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2018 |
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Revenue |
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$ |
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$ |
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Costs and expenses: |
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Cost of revenue |
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Research and development |
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Selling, general and administrative |
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Income from operations |
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Other income: |
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Investment income, net |
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Other income, net |
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Income before income taxes |
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Income tax provision (benefit) |
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( |
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Net income |
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$ |
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$ |
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Basic net income per share |
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$ |
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$ |
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Basic weighted average shares outstanding |
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Diluted net income per share |
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$ |
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$ |
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Diluted weighted average shares outstanding |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
4
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)
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For the Three Months Ended June 30, |
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2019 |
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2018 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation gains (losses) |
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( |
) |
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Net unrealized gains (losses) on marketable securities |
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Other comprehensive income (loss) |
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( |
) |
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Comprehensive income |
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$ |
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$ |
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|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
5
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands, except share data)
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For the Three Months Ended June 30, 2019 |
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Common Stock |
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Treasury Stock |
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Shares |
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Par value |
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Shares |
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Amount |
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Additional Paid in Capital |
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Retained Earnings |
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Accumulated Other Comprehensive Income (Loss) |
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Total Stockholders' Equity |
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Balance, March 31, 2019 |
|
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$ |
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$ |
( |
) |
|
$ |
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$ |
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$ |
( |
) |
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$ |
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Restricted stock units issued |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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— |
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— |
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Return of common stock to pay withholding taxes on restricted stock |
|
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( |
) |
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( |
) |
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( |
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— |
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— |
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— |
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( |
) |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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|
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— |
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Balance, June 30, 2019 |
|
|
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$ |
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|
|
|
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$ |
( |
) |
|
$ |
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$ |
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$ |
( |
) |
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$ |
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For the Three Months Ended June 30, 2018 |
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Common Stock |
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Treasury Stock |
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Shares |
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Par value |
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Shares |
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Amount |
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Additional Paid in Capital |
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Retained Earnings |
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Accumulated Other Comprehensive Income (Loss) |
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Total Stockholders' Equity |
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Balance, March 31, 2018 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Restricted stock units issued |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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— |
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— |
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Stock issued to directors |
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— |
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— |
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— |
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— |
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— |
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Return of common stock to pay withholding taxes on restricted stock |
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( |
) |
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( |
) |
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( |
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— |
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— |
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— |
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( |
) |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive (loss) |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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|
( |
) |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance, June 30, 2018 |
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$ |
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|
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$ |
( |
) |
|
$ |
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|
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$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
6
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
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For the Three Months Ended June 30, |
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2019 |
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2018 |
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Operating activities: |
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Net income |
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$ |
|
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Bad debt (recoveries) expense |
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( |
) |
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Stock-based compensation |
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Write-down of inventory and other |
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Accretion on marketable securities |
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( |
) |
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( |
) |
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Change in fair value of other investments |
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( |
) |
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— |
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Deferred tax provision |
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( |
) |
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Change in fair value of contingent consideration |
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( |
) |
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Other non-cash operating activities |
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— |
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Changes in assets and liabilities: |
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Accounts receivable |
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Inventories |
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( |
) |
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( |
) |
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Prepaid expenses and other assets |
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|
( |
) |
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( |
) |
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Accounts payable |
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( |
) |
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Accrued expenses and other liabilities |
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|
( |
) |
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|
( |
) |
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Deferred revenue |
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( |
) |
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( |
) |
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Net cash provided by operating activities |
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Investing activities: |
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Purchases of marketable securities |
|
|
( |
) |
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|
( |
) |
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Proceeds from the sale and maturity of marketable securities and other |
|
|
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Purchases of other investments and intangible assets |
|
|
( |
) |
|
|
( |
) |
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Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Net cash (used for) provided by investing activities |
|
|
( |
) |
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Financing activities: |
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Proceeds from the exercise of stock options |
|
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Taxes paid related to net share settlement upon vesting of stock awards |
|
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( |
) |
|
|
( |
) |
|
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
|
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
|
|
|
|
Property and equipment in accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease liabilities |
|
|
|
|
|
|
— |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
7
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data)
Note 1. Nature of Business
ABIOMED, Inc. (the “Company” or “ABIOMED”) is a provider of mechanical circulatory support devices and offers a continuum of care to heart failure patients. The Company develops, manufactures and markets proprietary products that are designed to enable the heart to rest, heal and recover by improving blood flow and/or performing the pumping function of the heart. The Company’s products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by cardiac surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures.
Note 2. Basis of Preparation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial reporting and in accordance with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 that has been filed with the SEC.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments that are necessary for a fair presentation of results for the interim periods presented. The results of operations for any interim period may not be indicative of results for the full fiscal year or any other subsequent period.
There have been no changes in the Company’s significant accounting policies for the three months ended June 30, 2019 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 that has been filed with the SEC.
Recently Adopted Accounting Pronouncements
Effective April 1, 2019, the Company adopted the Financial Accounting Standards Board, or FASB standard update ASU 2016-02 (“Topic 842”), “Leases,” which requires lessees with lease arrangements exceeding a one-year term, to record a right-of-use asset and lease obligation on the balance sheet, whether operating or financing, and related lease expenses for operating leases and amortization and interest expense for financing leases in the statement of operations. Additional information and disclosures required by this standard are contained in “Note 8. Leases.”
Recently Issued Accounting Pronouncements Not Yet Effective
In June 2016, the FASB issued ASU 2016-13 (“Topic 326”), “Financial Instruments-Credit Losses”. This new guidance will require financial instruments to be measured at amortized cost, and accounts receivables to be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. ASU 2016-13 is effective for annual reporting periods beginning after December 31, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. ASU 2016-13 will become effective for the Company in fiscal 2021.
In January 2017, the FASB issued ASU 2017-04, (“Topic 350”), “Intangibles - Goodwill and Other.” The new guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which required companies to estimate the implied fair value of goodwill and recognize an impairment charge by the amount in which the carrying value exceeds the implied fair value. Under the new guidance, if the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge will be recorded, even if the difference is attributable to the fair value of other assets in the reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. ASU 2017-04 will become effective for the Company in fiscal 2021.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820).” which modifies the disclosure requirements on fair value measurements. The Company has investments accounted for and disclosed under Topic 820 and will modify disclosures as applicable to conform with the new guidance. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company does not expect the adoption of this standard and the required disclosure changes to have a material impact on its consolidated financial statements. ASU 2018-13 will become effective for the Company in fiscal 2021.
8
Note 3. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding are calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities include stock options, restricted stock units, performance-based stock awards and shares to be purchased under the Company’s employee stock purchase plan.
|
|
|
For the Three Months Ended June 30, |
|
|||||
|
Basic Net Income Per Share |
|
|
2019 |
|
|
|
2018 |
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - basic |
|
$ |
|
|
|
$ |
|
|
|
|
|
For the Three Months Ended June 30, |
|
|||||
|
Diluted Net Income Per Share |
|
|
2019 |
|
|
|
2018 |
|
|
Net income |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic |
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
Weighted average shares - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - diluted |
|
$ |
|
|
|
$ |
|
|
For the three months ended June 30, 2019, approximately
For the three months ended June 30, 2018, approximately
Note 4. Revenue Recognition
Adoption of Topic 606, Revenue from Contracts with Customers
The Company adopted Topic 606 on April 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The adoption of Topic 606 did not have a material impact on the Company’s consolidated balance sheet, statement of operations, stockholders’ equity or cash flows as of the adoption date or for the three months ended June 30, 2019.
The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the FASB, in applying Topic 606: (1) the Company accounts for amounts collected from customers for sales and other taxes, net of related amounts remitted to tax authorities; (2) the Company does not adjust the promised amount of consideration for the effects of a significant financing component because, at contract inception, the Company expects the period between the time when the Company transfers a promised good or service to the customer and the time when the customer pays for that good or service will be one year or less; (3) the Company expenses costs to obtain a contract as they are incurred if the expected period of benefit, and therefore the amortization period, is one year or less; (4) the Company accounts for shipping and handling activities that occur after control transfers to the customer as a fulfillment cost rather than an additional promised service and these fulfillment costs are recorded as selling, general and administrative expenses; (5) the Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; and (6) the Company does not disclose the transaction price allocated to unsatisfied performance obligations when the original expected contract duration is one year or less.
The Company generates revenue primarily from the sale of Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella RP and Impella AIC products. The Company also earns revenue from preventative maintenance service contracts and maintenance calls.
9
The Company determines revenue recognition through the following steps:
|
|
• |
Identification of the contract, or contracts, with a customer |
|
|
• |
Identification of the performance obligation in the contract |
|
|
• |
Determination of the transaction price |
|
|
• |
Allocation of the transaction price to the performance obligation in the contract |
|
|
• |
Recognition of revenue when, or as, a performance obligation is satisfied |
Identification of contracts and performance obligations
The Company accounts for a contract with a customer when there is an approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. The Company's performance obligations consist mainly of transferring control of products and services identified in the contracts, purchase orders or invoices. For each contract, the Company considers the obligation to transfer products and services to the customer, each of which are distinct, to be performance obligations.
Transaction price and allocation to performance obligations
Transaction prices of products or services are typically based on contracted rates with customers and there is only variable consideration in limited instances. To the extent that the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount, depending on the circumstances, to which the Company expects to be entitled. An expected value method may be an appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar characteristics whereas the most likely amount method may be an appropriate estimate of the amount of variable consideration if the contract has only two possible outcomes. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. Sales and other taxes collected on behalf of third parties are excluded from revenue.
The Company does not provide for rights of return to customers on product sales and, therefore, does not record a provision for returns. Customers typically have a limited time frame to notify the Company of any defective or non-conforming products. The Company’s limited warranty provision is accounted for using the cost accrual method and is recognized as expense when products are sold and is not considered a separate performance obligation.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.
Revenue Recognition
Revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer.
Product revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract.
Service revenue is generally recognized over time as the services are rendered to the customer based on the extent of progress towards completion of the performance obligation. The Company recognizes service revenue over the term of the service contract. Services are expected to be transferred to the customer throughout the term of the contract and the Company believes recognizing revenue ratably over the term of the contract best depicts the transfer of value to the customer. Revenue generated from preventative maintenance calls is recognized at a point in time when the services are provided to the customer.
Revenue from the sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale and shipment of product or service provided has been incurred. The Company performs a review of each specific customer's credit worthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively.
10
Disaggregation of Revenue
The Company generally sells most of its products and services through a direct sales force in the U.S., Germany and Japan and through direct sales or distribution agreements in other international markets (e.g., certain other European markets, Canada, Latin America, and Asia-Pacific). Revenue is disaggregated from contracts between product revenue and service and other revenue and by geography, which the Company believes best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors.
The following table disaggregates the Company’s revenue by products and services:
|
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
(in $000's) |
|
|||||
|
Impella product revenue |
|
$ |
|
|
|
$ |
|
|
|
Service and other revenue |
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
The following table disaggregates the Company’s revenue by geographical location:
|
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
(in $000's) |
|
|||||
|
U.S. revenue |
||||||||