Form 8-K ENTELLUS MEDICAL INC For: Nov 01
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2017
ENTELLUS MEDICAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-36814 | 20-4627978 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
| 3600 Holly Lane North, Suite 40 Plymouth, Minnesota |
55447 | |
| (Address of principal executive offices) | (Zip Code) |
(763) 463-1595
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
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. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On November 1, 2017, Entellus Medical, Inc. (“Entellus”) announced its financial results for the quarter ended September 30, 2017. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 of this report (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly provided by specific reference in such a filing.
To supplement its consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”), Entellus uses certain non-GAAP financial measures, certain of which are included in the press release furnished as Exhibit 99.1 to this report. The press release includes non-GAAP adjusted EBITDA, non-GAAP adjusted gross margin and non-GAAP adjusted operating expenses. Entellus’s non-GAAP adjusted EBITDA is calculated by adding back to anticipated net loss charges for interest, provision (benefit) for income taxes, depreciation and amortization expenses, non-cash stock-based compensation expense, acquisition-related expenses, which includes non-cash contingent consideration adjustments and transaction and integration costs associated with business combinations, including Entellus’s recent acquisition of Spirox, Inc. (“Spirox”), and non-cash inventory fair value adjustment. Entellus’s non-GAAP adjusted gross margin is calculated by excluding the recognition of non-cash inventory fair value adjustment in connection with acquisitions, including the recent Spirox acquisition. Entellus’s non-GAAP adjusted operating expenses are calculated by excluding acquisition-related expenses and amortization of intangible assets.
Entellus uses adjusted EBITDA, adjusted gross margin and adjusted operating expenses in making operating decisions because it believes these measures provide meaningful supplemental information regarding its core operational performance and gives the company a better understanding of how it should invest in research and development activities and how it should allocate resources to both ongoing and prospective business initiatives. Entellus uses these measures to help make budgeting and spending decisions, for example, among research and development expenses, selling and marketing expenses, and general and administrative expenses. Additionally, Entellus believes these non-GAAP financial measures facilitate management’s internal comparisons to historical operating results by factoring out potential differences caused by charges not related to its regular, ongoing business, including without limitation, non-cash charges, certain large and unpredictable charges, acquisitions and dispositions, and tax positions.
As described above, Entellus excludes the following items from one or more of its non-GAAP financial measures for the following reasons:
Stock-based compensation expense: Entellus excludes stock-based compensation expense, which is a non-cash charge related to equity awards granted by Entellus. Although stock-based compensation expense is a recurring charge to Entellus’s operations, management has excluded it because it relies on valuations based on future events, such as the market price of Entellus’s common stock, that are difficult to predict and are affected by market factors that are largely not within the control of Entellus. Thus, management believes that excluding stock-based compensation expense facilitates comparisons of Entellus’s operational performance in different periods, as well as with similarly determined non-GAAP financial measures of comparable companies.
Acquisition-related expenses. Entellus excludes acquisition-related expenses, which include, among other expenses, non-cash contingent consideration adjustments and transaction and integration costs associated with business combinations, including the recent Spirox acquisition, from its non-GAAP measures, primarily because they are not reflective of its ongoing operating results and are not used by management to assess the core profitability of its business operations. The contingent consideration adjustments represent accounting adjustments to state contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood and amount of future contingent consideration payments. Transaction and integration costs include legal, tax, severance and other expenses associated with prior and potential future acquisitions that can be highly variable and not representative of ongoing operations. Entellus further believes that excluding these items from its non-GAAP results is useful to investors in that allows for period-over-period comparability.
Non-cash inventory fair value adjustment. Entellus excludes the recognition of non-cash inventory fair value adjustment in connection with acquisitions, including the recent Spirox acquisition, from its non-GAAP measures, primarily because it is not reflective of its ongoing operating results, and is not used by management to assess the core profitability of its business operations. Additionally, because this is a non-cash expense, it does not impact its operational performance, liquidity, or its ability to invest in research and development and to fund acquisitions and capital expenditures. Entellus further believes that excluding this item from its non-GAAP results is useful to investors in that it allows for period-over-period comparability.
Amortization of intangible assets. Entellus excludes the amortization of intangible assets in connection with acquisitions, including the recent Spirox acquisition, from its non-GAAP measures, primarily because it is not reflective of its ongoing operating results, and is not used by management to assess the core profitability of its business operations. Additionally, because this is a non-cash expense, it does not impact its operational performance, liquidity, or its ability to invest in research and development and to fund acquisitions and capital expenditures. Entellus further believes that excluding this item from its non-GAAP results is useful to investors in that it allows for period-over-period comparability.
All of the historical non-GAAP financial measures used in the press release are reconciled to the most directly comparable GAAP measure. With respect to Entellus’s 2017 financial guidance regarding non-GAAP adjusted EBITDA and non-GAAP adjusted gross margins, Entellus cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort due to its inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments as described above. However, Entellus has described how net loss differs qualitatively from its non-GAAP adjusted EBITDA and how GAAP gross margin differs qualitatively from its non-GAAP adjusted gross margin.
Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of Entellus’s non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Entellus’s financial results as determined in accordance with GAAP. Non-GAAP financial measures should only be used to evaluate Entellus’s financial results in conjunction with the corresponding GAAP measures. Accordingly, Entellus qualifies its use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On November 1, 2017, Entellus promoted Michael H. Rosenthal to Chief Operating Officer effective immediately.
Mr. Rosenthal, age 43, currently serves as General Manager, a position he has served since July 13, 2017, when Entellus acquired Spirox, Inc., a medical device company. From May 2015 to July 2017, Mr. Rosenthal served as Chief Strategic and Technology Officer of Spirox, Inc. From December 2012 to May 2015, Mr. Rosenthal served as General Partner of D3DC, LLC, a medical device management company. Mr. Rosenthal holds a B.S. in Mechanical Engineering from Stanford University.
In connection with Mr. Rosenthal’s promotion, Entellus entered into an offer letter with him. Under the offer letter, Mr. Rosenthal will be paid an annual base salary of $340,000, will be eligible to receive an annual bonus with a target bonus equal to 45% of his annual base salary and will be granted an option to purchase 20,000 shares of Entellus common stock and a restricted stock unit award for 10,000 shares of Entellus common stock under the Entellus Medical, Inc. 2015 Incentive Award Plan effective as of the fourth day of the month after his promotion date. The option and restricted stock unit awards will vest in accordance with Entellus’s standard four-year vesting for such awards. There has been no other change to Mr. Rosenthal’s compensation or the other terms of his employment in connection with this promotion.
The foregoing summary description of the offer letter with Mr. Rosenthal does not purport to be complete and is qualified in its entirety by reference to the full text of the offer letter, will be filed as an exhibit to Entellus’s Quarterly Report on Form 10-Q for the period ended September 30, 2017.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit |
Description | |
| 99.1 | Press Release issued November 1, 2017 (furnished herewith) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: November 1, 2017 | ENTELLUS MEDICAL, INC. | |||||
| By: | /s/ Brent A. Moen | |||||
| Name: | Brent A. Moen | |||||
| Title: | Chief Financial Officer | |||||
Exhibit 99.1
ENTELLUS MEDICAL ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS
PLYMOUTH, MN. (November 1, 2017) – Entellus Medical, Inc. (NASDAQ: ENTL), a medical technology company focused on delivering less invasive ENT products, today reported its financial results for the quarter ended September 30, 2017.
Recent Highlights and Accomplishments
| • | Revenue of $23.3 million in the third quarter of 2017, an increase of 30.5% over same quarter last year, including $3.1 million as a result of the acquisition of Spirox, Inc., which closed on July 13th |
| • | Announced long-term data at two prominent medical conferences confirming durable relief of nasal obstruction symptoms with the Latera™ implant |
| • | Trained over 300 physicians in cadaveric training labs and other training sessions at the American Academy of Otolaryngology annual meeting in Chicago |
| • | Appointed Michael Rosenthal to newly created position of Chief Operating Officer |
“We are pleased to report strong third quarter results demonstrating traction with our broadening product platform which provides less invasive treatment options for ENT physicians,” said Robert White, President and Chief Executive Officer of Entellus Medical. “As we enter the final months of 2017, we have considerable momentum driven by balanced performance across our business, accomplishments with our clinical programs and our strengthened leadership team.”
Third Quarter 2017 Financial Results
Revenue for the third quarter increased 30.5% to $23.3 million from $17.9 million during the same period of the prior year. The growth in revenue was attributable to contributions from the acquired Latera product and increased sales of capital products and disposable products, including the XprESS family of products.
Gross margin for the third quarter of 2017, as reported, was 71.9%, compared to 74.0% for the same period in 2016. Excluding the impact of the acquisition-related inventory fair value adjustment, non-GAAP adjusted gross margin, as defined later in this release, was 73.3% for the three-month period ended September 30, 2017. Gross margin was impacted by product mix and continued geographic expansion.
Operating expenses for the third quarter of 2017, as reported, were $34.0 million, an increase of 52.9% compared to $22.2 million for the same period of the prior year. Third quarter 2017 operating expenses included $2.3 million of contingent consideration accretion expense, $1.6 million of transaction and integration expenses, and $2.0 million of amortization expense related to acquired intangible assets. Excluding these amounts, third quarter 2017 non-GAAP adjusted operating expenses, as defined later in this release, totaled $28.2 million, an increase of 27.3% over the year-ago period, primarily due to employee-related expenses from the addition of Spirox operations and further expansion of the company’s sales and corporate staff.
Entellus recorded a special income tax benefit related to the Spirox acquisition, totaling $14.9 million during the third quarter of 2017. This acquisition-related, non-cash income tax benefit primarily related to the net deferred tax liability recorded with the Spirox acquisition, which resulted in the reversal of a previously established deferred tax asset valuation allowance.
Net loss for the quarter ended September 30, 2017 was $3.2 million, or $0.13 per share, compared with a net loss of $9.5 million, or $0.50 per share, for the same period of the prior year. This decrease was primarily the result of the special income tax benefit, partially offset by increased operating expenses, as previously mentioned. Adjusted non-GAAP EBITDA, as defined later in this release, was negative $8.1 million for the three-month period ended September 30, 2017.
Entellus ended the third quarter of 2017 with $51.5 million in cash and cash equivalents and $48.0 million of total debt outstanding, including $40.0 million of term loans and $7.9 million of borrowings under its $10.0 million revolving line of credit.
2017 Financial Outlook
Entellus expects full year 2017 revenue, inclusive of anticipated Spirox revenue from July 13 through year end, to be in a range of $92.0 million to $94.0 million, representing growth of 22% to 25% over 2016 revenue. This compares to our previous annual revenue expectations for 2017 of $91.5 million to $94.5 million and previous growth expectations of 22% to 26%. Excluding the impact of purchase accounting relating to the Spirox acquisition, non-GAAP adjusted combined gross margin, as defined later in this release, is expected to be in a range of 72% to 74% for the full year 2017. Full year 2017 non-GAAP adjusted EBITDA, inclusive of Spirox operations and as defined later in this release, is expected to be in a range of negative $23.0 million to negative $25.0 million. This compares to our previous annual non-GAAP adjusted EBITDA expectations, inclusive of Spirox operations, of negative $22.0 million to negative $26.0 million.
Webcast and Conference Call Information
The Company’s management team will host a corresponding conference call beginning today at 3:30 p.m. CT / 4:30 p.m. ET to discuss financial results and recent business developments. Individuals interested in listening to the conference call may do so by dialing (877) 930-5751 for domestic callers or (253) 336-7277 for international callers, using Conference ID: 99375396. To listen to a live webcast or a replay, please visit the investor relations section of the Entellus Medical website at: www.entellusmedical.com.
About Entellus Medical, Inc.
Entellus is a medical technology company focused on delivering superior patient and physician experiences through products designed for less invasive treatments. Entellus products are used for the treatment of adult and pediatric patients with chronic and recurrent sinusitis, patients with nasal airway obstruction, as well as adult patients with persistent Eustachian tube dysfunction. The Entellus platform of products provides safe, effective and easy-to-use solutions intended to enable treatment of patients in more cost-effective sites of care. Entellus’s product lines including the XprESS™ ENT Dilation System, Latera™ Absorbable Nasal Implant, MiniFESS™ Surgical Instruments, XeroGel Nasal Dressing and FocESS™ Imaging & Navigation combine to enable ENT physicians to conveniently and comfortably perform a broad range of procedures in the most cost effective and efficient site of care. Entellus is committed to broadening its product portfolio with high-quality and purposeful innovations for the global ENT market.
Non-GAAP Financial Measures
To supplement its consolidated financial statements prepared in accordance with United States generally accepted accounting principles (GAAP), Entellus uses certain non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, gross margin, as adjusted and operating expenses, as adjusted. The company’s management believes that the presentation of adjusted EBITDA, adjusted gross margin and adjusted operating expenses provides useful information to investors. These measures may assist investors in evaluating the company’s operations, period over period. The company’s non-GAAP adjusted EBITDA is calculated by adding back to net loss charges for interest, income taxes, depreciation and amortization expenses, non-cash stock-based compensation, acquisition-related expenses consisting of non-cash contingent consideration adjustments associated with business combinations and transaction and integration-related expenses, and non-cash inventory fair value adjustment. The company’s non-GAAP adjusted gross margin is calculated by excluding the recognition of non-cash inventory fair value adjustment in connection with acquisitions, including the Spirox acquisition. The company’s non-GAAP adjusted operating expenses are calculated by excluding acquisition-related expenses and non-cash amortization of intangible assets. Reconciliations of the historical non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. With respect to the company’s 2017 financial guidance regarding non-GAAP adjusted EBITDA and non-GAAP adjusted gross margins, and non-GAAP adjusted operating expenses, the company cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort due to its inability to make accurate projections and estimates related to certain information needed to calculate some of the adjustments as described above. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of Entellus’s non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures should only be used to evaluate the company’s financial results in conjunction with the corresponding GAAP measures.
Forward-Looking Statements
All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “expect,” “anticipate,” “plan,” “could,” “may,” “intend,” “will,” “continue,” “future,” “outlook,” other words of similar meaning and the use of future dates. Forward-looking statements in this release include Entellus’s financial guidance for full year 2017 and its expectations regarding the near and long-term growth potential of its business. These forward-looking statements are based on the current expectations of Entellus’s management and involve known and unknown risks and uncertainties that may cause Entellus’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, failure to achieve the revenues, cost savings, earnings, growth prospects and any or other synergies expected from the acquisition of Spirox or delays in realization thereof; delays and challenges in integrating Spirox’s business and operations; operating costs and business disruption following the acquisition, including adverse effects on employee retention and on business relationships with third parties, including physicians, providers, distributors and vendors; Entellus’s future operating results and financial performance; adequate levels of coverage or reimbursement for procedures using the company’s products; competition; ability to expand, manage and
maintain its direct sales organization and market and sell its products in the United States and internationally; risks and uncertainties involved in its international operations; the compliance of its products and activities with the laws and regulations of the countries in which they are marketed; failure or delay in obtaining FDA or other regulatory approvals or the effect of FDA or other regulatory actions; risk of product recalls, product liability claims and litigation and inadequate insurance coverage relating thereto; and intellectual property disputes. Other factors that could cause actual results to differ materially from those contemplated in this press release can be found under the caption “Risk Factors” in the company’s Securities and Exchange Commission (SEC) reports, including its Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent Quarterly Reports on Form 10-Q, including its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which the company intends to file with the SEC. Entellus undertakes no obligation to update or revise any forward-looking statements, even if subsequent events cause its views to change.
Contact
Lynn Pieper Lewis
415-937-5402
Entellus Medical, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue |
$ | 23,329 | $ | 17,880 | $ | 64,575 | $ | 53,512 | ||||||||
| Cost of goods sold |
6,555 | 4,648 | 17,287 | 13,107 | ||||||||||||
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| Gross profit |
16,774 | 13,232 | 47,288 | 40,405 | ||||||||||||
| Gross margin |
71.9 | % | 74.0 | % | 73.2 | % | 75.5 | % | ||||||||
| Operating expenses |
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| Selling and marketing |
18,457 | 15,364 | 49,743 | 41,857 | ||||||||||||
| Research and development |
4,653 | 2,047 | 8,881 | 5,832 | ||||||||||||
| General and administrative |
5,043 | 4,698 | 13,964 | 12,183 | ||||||||||||
| Amortization of intangible assets |
1,957 | 109 | 2,313 | 111 | ||||||||||||
| Acquisition-related expenses |
3,865 | — | 5,059 | 300 | ||||||||||||
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| Total operating expenses |
33,975 | 22,218 | 79,960 | 60,283 | ||||||||||||
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| Loss from operations |
(17,201 | ) | (8,986 | ) | (32,672 | ) | (19,878 | ) | ||||||||
| Other expense, net |
(921 | ) | (499 | ) | (1,825 | ) | (1,500 | ) | ||||||||
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| Loss before income tax expense |
(18,122 | ) | (9,485 | ) | (34,497 | ) | (21,378 | ) | ||||||||
| Income tax benefit (expense) |
14,882 | (34 | ) | 14,876 | (34 | ) | ||||||||||
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| Net loss |
$ | (3,240 | ) | $ | (9,519 | ) | $ | (19,621 | ) | $ | (21,412 | ) | ||||
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| Net loss per share, basic and diluted |
$ | (0.13 | ) | $ | (0.50 | ) | $ | (0.87 | ) | $ | (1.14 | ) | ||||
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| Weighted average common shares used to compute net loss per share, basic and diluted |
24,944 | 18,855 | 22,595 | 18,827 | ||||||||||||
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Entellus Medical, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| September 30, 2017 |
December 31, 2016 |
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| Assets |
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| Current assets |
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| Cash and cash equivalents |
$ | 51,452 | $ | 21,417 | ||||
| Short-term investments |
— | 10,845 | ||||||
| Accounts receivable, net |
18,320 | 13,556 | ||||||
| Inventories |
8,618 | 7,226 | ||||||
| Prepaid expenses and other current assets |
2,300 | 1,862 | ||||||
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| Total current assets |
80,690 | 54,906 | ||||||
| Property and equipment, net |
8,317 | 6,487 | ||||||
| Intangible assets, net |
89,630 | 9,840 | ||||||
| Goodwill |
62,772 | 477 | ||||||
| Other non-current assets |
427 | 379 | ||||||
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| Total assets |
$ | 241,836 | $ | 72,089 | ||||
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| Liabilities and stockholders’ equity |
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| Current liabilities |
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| Accounts payable |
$ | 3,821 | $ | 2,796 | ||||
| Accrued expenses |
12,929 | 13,005 | ||||||
| Current portion of contingent consideration |
17,426 | — | ||||||
| Line of credit |
7,943 | — | ||||||
| Current portion of long-term debt |
— | 9,118 | ||||||
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| Total current liabilities |
42,119 | 24,919 | ||||||
| Long-term liabilities |
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| Long-term debt, less current portion |
39,671 | 10,766 | ||||||
| Contingent consideration, net of current portion |
35,493 | — | ||||||
| Other non-current liabilities |
273 | 959 | ||||||
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| Total liabilities |
117,556 | 36,644 | ||||||
| Total stockholders’ equity |
124,280 | 35,445 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 241,836 | $ | 72,089 | ||||
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Entellus Medical, Inc.
Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2017 |
September 30, 2016 |
September 30, 2017 |
September 30, 2016 |
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| Net Loss (GAAP) |
$ | (3,240 | ) | $ | (9,519 | ) | $ | (19,621 | ) | $ | (21,412 | ) | ||||
| Non-GAAP Adjustments |
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| Income tax (benefit) expense |
(14,882 | ) | 34 | (14,876 | ) | 34 | ||||||||||
| Interest expense |
1,018 | 562 | 2,029 | 1,686 | ||||||||||||
| Depreciation and amortization |
2,668 | 585 | 4,113 | 1,312 | ||||||||||||
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| Non-GAAP EBITDA |
$ | (14,436 | ) | $ | (8,338 | ) | $ | (28,355 | ) | $ | (18,380 | ) | ||||
| Reconciling items impacting EBITDA: |
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| Stock-based compensation expenses |
2,171 | 1,536 | 5,892 | 4,060 | ||||||||||||
| Acquisition-related expenses (1) |
3,865 | — | 5,059 | 300 | ||||||||||||
| Inventory fair value adjustment (2) |
326 | 42 | 326 | 53 | ||||||||||||
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| Non-GAAP adjusted EBITDA |
$ | (8,074 | ) | $ | (6,760 | ) | $ | (17,078 | ) | $ | (13,967 | ) | ||||
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| (1) | Valuation adjustment of contingent consideration plus transaction and integration costs related to the Spirox (2017) and Xerogel (2016) acquisitions. |
| (2) | Recognition of inventory fair value adjustment related to the Spirox and XeroGel acquisitions. |
Entellus Medical, Inc.
Reconciliation of Gross Margin to Non-GAAP Adjusted Gross Margin
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2017 |
September 30, 2016 |
September 30, 2017 |
September 30, 2016 |
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| Gross Profit, as reported |
$ | 16,774 | $ | 13,232 | $ | 47,288 | $ | 40,405 | ||||||||
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| Gross Margin, as reported |
71.9 | % | 74.0 | % | 73.2 | % | 75.5 | % | ||||||||
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| Reconciling items affecting gross margin: |
326 | 42 | 326 | 53 | ||||||||||||
| Non-GAAP adjusted Gross Profit |
$ | 17,100 | $ | 13,274 | $ | 47,614 | $ | 40,458 | ||||||||
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| Non-GAAP adjusted gross margin |
73.3 | % | 74.2 | % | 73.7 | % | 75.6 | % | ||||||||
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| (1) | Recognition of inventory fair value adjustment related to the Spirox (2017) and XeroGel (2016) acquisitions. |
Entellus Medical, Inc.
Reconciliation of Operating Expenses to Non-GAAP Adjusted Operating Expenses
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2017 |
September 30, 2016 |
September 30, 2017 |
September 30, 2016 |
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| Operating Expenses (GAAP) |
$ | 33,975 | $ | 22,218 | $ | 79,960 | $ | 60,283 | ||||||||
| Non-GAAP Adjustments |
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| Amortization of intangible assets (1) |
(1,957 | ) | (109 | ) | (2,313 | ) | (111 | ) | ||||||||
| Acquisition-related expenses (2) |
(3,865 | ) | — | (5,059 | ) | (300 | ) | |||||||||
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| Non-GAAP Adjusted Operating Expenses |
$ | 28,153 | $ | 22,109 | $ | 72,588 | $ | 59,872 | ||||||||
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| (1) | Amortization of intangible assets acquired in the Spirox (2017) and Xerogel (2016) acquisitions. |
| (2) | Valuation adjustment of contingent consideration plus transaction and integration costs related to the Spirox and Xerogel acquisitions. |