NxStage® Reports Fourth Quarter and Full-Year 2010 Financial Results; Revenue Growth Exceeds Company Guidance

Highlights:
- Full-Year Revenue Increases to $179.2 million, 21% Annual Growth
- Full-Year Home Revenue Increases to $85.8 million, 35% Annual Growth
- Q4'10 Revenue Increases to $49.8 million, up 23% from Q4'09
- Q4'10 Gross Margin Improves to 35%, up from 28% in Q4'09

LAWRENCE, Mass., Feb. 17, 2011 /PRNewswire via COMTEX/ --NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today reported financial results for the three and twelve months ended December 31, 2010, that includes revenue above the top end of its guidance range.

Net revenue for the twelve months ended December 31, 2010 increased 21 percent to $179.2 million compared with revenue of $148.7 million for the full-year 2009. Revenue for the fourth quarter of 2010 increased 23 percent to a record $49.8 million compared with revenue of $40.5 million for the fourth quarter of 2009. The increase in both periods was driven by the Company's solid performance in Home and Critical Care, which experienced annual growth of 35 percent and 26 percent, respectively, over 2009.

Home revenue grew to $85.8 million for the full-year 2010 compared with revenue of $63.5 million for the full-year 2009. Home revenue increased to $23.6 million in the fourth quarter of 2010 compared with revenue of $17.5 million in the fourth quarter of 2009, representing a 34 percent increase.

Critical Care revenue grew to $28.1 million for the full-year 2010 compared with revenue of $22.3 million for the full-year 2009. Revenue in Critical Care increased to $8.6 million in the fourth quarter of 2010, compared with revenue of $7.0 million in the fourth quarter of 2009, representing a 23 percent increase.

Annual revenue from the Company's Medisystems in-center business was $65.4 million for the full-year 2010, compared with revenue of $62.9 million for the full-year 2009. Fourth quarter revenue was $17.6 million, compared with $16.0 million in the fourth quarter of 2009.

"2010 was a year of solid revenue growth for NxStage. Our strong fourth quarter results capped a year in which we successfully executed against our strategic initiatives, made significant progress in the Home, and gained momentum across all three markets," stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical, Inc.

Burbank continued, "We are on a multi-year growth agenda, and I believe that our strategy is right on course. Entering 2011, we have good underlying market fundamentals, a strong balance sheet, a solid operating model, as well as a culture of innovation. We remain confident in our ability to build on our momentum moving forward."

NxStage reported a net loss of $31.7 million or ($0.66) per share for the full-year 2010 compared with a net loss of $43.5 million or ($0.93) per share for the full-year 2009. The Company reported a net loss of $6.3 million or ($0.13) per share for the fourth quarter of 2010 compared with a net loss of $8.7 million or ($0.19) per share for the fourth quarter of 2009.

For the full-year 2010, the Company reported Adjusted EBITDA, adjusted for stock-based compensation, deferred revenue recognized and other non-cash expenses, of $0.5 million, compared with an Adjusted EBITDA loss of $12.7 million for the full-year 2009. For the fourth quarter of 2010, Adjusted EBITDA was $1.5 million compared with an Adjusted EBITDA loss of $1.2 million in the fourth quarter of 2009. (See the exhibits for a reconciliation of this non-GAAP measure.)

Effective January 1, 2011, NxStage adopted Accounting Standards Update (ASU) 2009-13 and ASU 2009-14. Under the new accounting standards, beginning January 1, 2011 revenue from international equipment sales will be recognized upon delivery to distributors rather than ratably over a period of five years. The new accounting standards have been adopted prospectively and therefore, revenue from equipment shipped prior to January 1, 2011 will continue to be recognized ratably.

Guidance:
For the first quarter of 2011, the Company is forecasting revenue to be between $48.0 million and $49.5 million, a net loss in the range of $5.5 to $6.5 million or ($0.10) to ($0.12) per share, and Adjusted EBITDA in the range of $0.5 to $1.5 million.

For the full fiscal year 2011, the Company is forecasting revenue to be between $205 million and $213 million, a net loss in the range of $19 to $23 million or ($0.36) to ($0.43) per share, and Adjusted EBITDA in the range of $6 million to $10 million. The Company expects to achieve consolidated gross margins of between 38 percent to 42 percent in the fourth quarter of 2011.

This release contains a non-GAAP financial measure; a reconciliation of the Company's non-GAAP financial measure to its most comparable GAAP financial measure is in the exhibits to this press release.

Conference Call:
NxStage will also host a conference call at 9:00 a.m. Eastern Time on Thursday, February 17, 2011 to discuss its fourth quarter and year-end 2010 financial results. To listen to the conference call, please dial 866-804-6927 (domestic) or 857-350-1673 (international). The passcode is 25783380. The call will also be webcast LIVE and can be accessed via the investor relations section of the Company's website at www.nxstage.com/ir.cfm.

A replay of the conference call will be available 2 hours after the start of the call through February 24, 2011. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 70668341. An online archive of the conference call can be accessed via the investor relations section of the Company's website at www.nxstage.com/ir.cfm.

About NxStage
NxStage Medical, Inc. (Nasdaq: NXTM) is a medical device company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative products for the treatment of ESRD and acute kidney failure. For more information on NxStage and its products, please visit the company's website at www.nxstage.com.

Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. Examples of these forward-looking statements include statements as to the anticipated demand for the Company's products, anticipated operating results, including revenue, loss, gross margin and Adjusted EBITDA numbers, expectations with respect to market momentum of further product innovation, and other expectations as to future operating results. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond NxStage's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements, including market acceptance and demand for NxStage's products, growth in home and/or daily hemodialysis, unanticipated difficulties in achieving operational efficiencies and cost reductions, changes in reimbursement for home and daily hemodialysis, changes in the regulatory environment, changes in the historical purchasing patterns and preferences of our major customers, including DaVita Inc., and certain other factors that may affect future operating results and which are detailed in NxStage's filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the period ended September 30, 2010.

In addition, the statements in this press release represent NxStage's expectations and beliefs as of the date of this press release. NxStage anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while NxStage may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing NxStage's expectations or beliefs as of any date subsequent to the date of this press release.

Contact:
Kristen K. Sheppard, Esq.
VP, Investor Relations
ksheppard@nxstage.com

Non-GAAP Financial Measure
The Company discloses a certain non-GAAP financial measure to supplement the Company's consolidated financial statements presented on a GAAP basis. This non-GAAP measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States and may be different from similar non-GAAP financial measures used by other companies. The non-GAAP financial measure disclosed by the Company is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Management uses Adjusted EBITDA (EBITDA adjusted for stock based-compensation, deferred revenue recognized, and other non-cash expenses) to understand cash generated from or used in operations. The Company believes the non-GAAP financial measure provides useful and supplementary information allowing investors greater transparency to one measure used by management. The non-GAAP financial measure is meant to supplement, and to be viewed in conjunction with, GAAP financial measures. The non-GAAP financial measure is reconciled to the most comparable GAAP financial measure below.

NxStage Medical, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)










Three Months Ended

Twelve Months Ended


December 31,


December 31,


2010


2009


2010


2009









Revenues

$49,769


$40,510


$179,218


$148,676

Cost of revenues

32,177


29,063


121,091


111,812

Gross profit

17,592


11,447


58,127


36,864









Operating expenses:








Selling and marketing

9,132


7,956


34,166


30,047

Research and development

3,531


2,434


12,900


9,814

Distribution

3,920


3,442


14,751


13,918

General and administrative

6,170


5,020


22,774


19,532

Total operating expenses

22,753


18,852


84,591


73,311

Loss from operations

(5,161)


(7,405)


(26,464)


(36,447)









Other expense:








Interest income

3


3


3


35

Interest expense

(1,165)


(1,020)


(4,597)


(6,522)

Other income (expense), net

242


(288)


114


(268)


(920)


(1,305)


(4,480)


(6,755)









Net loss before income taxes

(6,081)


(8,710)


(30,944)


(43,202)









Provision for income taxes

212


(33)


768


265









Net loss

$ (6,293)


$ (8,677)


$ (31,712)


$ (43,467)









Net loss per share, basic and diluted

$ (0.13)


$ (0.19)


$ (0.66)


$ (0.93)









Weighted-average shares outstanding, basic and diluted

50,233


46,704


48,188


46,627

NxStage Medical, Inc.

Consolidated Balance Sheets

(amount in thousands, except share data)

(unaudited)




December 31,


December 31,


2010


2009

ASSETS




Current assets:




Cash and cash equivalents

$ 104,339


$ 21,720

Accounts receivable, net

14,107


14,238

Inventory

34,950


28,117

Prepaid expenses and other current assets

2,084


1,227

Total current assets

155,480


65,302





Property and equipment, net

8,290


10,336

Field equipment, net

13,660


21,726

Deferred cost of revenues

40,081


27,799

Intangible assets, net

25,412


28,208

Goodwill

42,698


42,698

Other assets

473


909





Total assets

$ 286,094


$ 196,978









LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$ 16,811


$ 19,827

Accrued expenses

19,537


9,377

Current portion of long-term debt

43


61

Total current liabilities

36,391


29,265





Deferred revenues

55,366


38,490

Long-term debt

40,454


37,854

Other long-term liabilities

1,754


1,923





Total liabilities

133,965


107,532





Commitments and contingencies




Stockholders' equity:




Undesignated preferred stock: par value $0.001, 5,000,000shares authorized; no shares issued and outstanding as of December 31, 2010 and 2009

-


-

Common stock: par value $0.001, 100,000,000shares authorized; 54,043,317 shares issued as of December 31, 2010 and 46,795,859shares issued and outstanding as of December 31, 2009

53


47

Additional paid-in capital

465,642


365,548

Accumulated deficit

(308,426)


(276,714)

Accumulated other comprehensive income

85


565

Treasury stock, at cost: 325,104 shares as of December 31, 2010

(5,225)


-





Total stockholders' equity

152,129


89,446





Total liabilities and stockholders' equity

$ 286,094


$ 196,978

NxStage Medical, Inc.

Cash Flows from Operating Activities

(amounts in thousands)

(unaudited)






Twelve Months Ended


December 31,


2010


2009

Cash flows from operating activities:




Net loss

$ (31,712)


$ (43,467)

Adjustments to reconcile net loss to net




cash provided by (used in) operating activities:




Depreciation and amortization

22,379


20,778

Stock-based compensation

15,351


9,226

Other

2,319


2,690

Changes in operating assets and liabilities:




Accounts receivable

235


(2,208)

Inventory

(28,744)


(9,209)

Prepaid expenses and other assets

(877)


1,513

Accounts payable

(2,781)


2,568

Accrued expenses and other liabilities

10,065


(119)

Deferred revenues

16,876


5,071

Net cash provided by (used in) operating activities

$ 3,111


$ (13,157)

NxStage Medical, Inc.

Revenues by Segment

(amounts in thousands)










Three Months Ended


Twelve Months Ended


December 31,


December 31,


2010


2009


2010


2009









System One segment








Home

$ 23,558


$ 17,547


$ 85,762


$ 63,461

Critical Care

8,565


6,959


28,093


22,340

Total System One segment

32,123


24,506


113,855


85,801

In-Center segment

17,646


16,004


65,363


62,875

Total

$ 49,769


$ 40,510


$ 179,218


$ 148,676

























NxStage Medical, Inc.

Non-GAAP Financial Measures

(amounts in millions)

(unaudited)










Three Months Ended


Twelve Months Ended


December 31,


December 31,


2010

2009

2010

2009









Net loss

$ (6.3)


$ (8.7)


$ (31.7)


$ (43.5)

Less: Depreciation, amortization, interest, and taxes

6.7


6.7


27.7


27.9

Less: Adjusting items*

1.1


0.8


4.5


2.9









Adjusted EBITDA gain (loss)

$ 1.5


$ (1.2)


$ 0.5


$ (12.7)









* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash expenses

NxStage Medical, Inc.

Non-GAAP Financial Guidance

(amounts in millions)










Three Months Ended


Twelve Months Ended


March 31, 2011


December 31, 2011


High
Estimate


Low
Estimate


High
Estimate


Low
Estimate









Net loss

$ (5.5)


$ (6.5)


$ (19.0)


$ (23.0)

Less: Depreciation, amortization, interest, and taxes

7.3


7.3


30.2


30.2

Less: Adjusting items*

(0.3)


(0.3)


(1.2)


(1.2)









Adjusted EBITDA gain

$ 1.5


$ 0.5


$ 10.0


$ 6.0









* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash expenses

Source
NxStage Medical, Inc.