EX-99.1 2 vm7728ex991.txt EXHIBIT 99.1 Exhibit 99.1 VNUS MEDICAL TECHNOLOGIES REPORTS THIRD-QUARTER 2006 RESULTS: 18% UNIT GROWTH IN DISPOSABLE CATHETERS AND DEVICES $11.9 Million Net Revenues, $0.17 Net Loss Per Share SAN JOSE, Calif., Nov. 1 /PRNewswire-FirstCall/ -- VNUS(R) Medical Technologies, Inc. (Nasdaq: VNUS), a leading provider of medical devices for the minimally invasive treatment of peripheral vascular disease, today announced its financial results for the third quarter ended September 30, 2006. Net revenues for the third quarter were $11.9 million, after deferring approximately $600,000 of revenue related to certain RF generator sales, compared with $12.1 million for the third quarter of 2005 and with $13.1 million for the second quarter of 2006. The decrease in net revenues from the prior quarter was due to lower RF generator sales worldwide, partially offset by higher sales of the ClosureRFS(TM) family of devices, the U-Clip(TM) device and other accessory products in the U.S. VNUS began promoting the features and benefits of its new ClosureFast(TM) catheter during the third quarter of 2006. However, a software upgrade, which has not yet been released, is required for the VNUS RF generator to function with the new ClosureFast catheter, which resulted in sales of these RF generators becoming multiple-element arrangements. Presently, the software upgrade is an undelivered element and has no established fair value, requiring the deferral of revenue from the entire sale until the software upgrade is delivered to the customer. VNUS currently plans to deliver the software upgrade in the first quarter of 2007 and the deferred revenue from these sales is expected to be recognized in that quarter. Third-quarter net loss was $2.5 million, compared with net income of $1.7 million for the third quarter of 2005 and with a net loss of $2.2 million for the second quarter of 2006. Net loss per share for the third quarter was $0.17, compared with fully-diluted earnings per share of $0.11 for the third quarter of 2005 and with a net loss per share of $0.15 for the second quarter of 2006. Net loss for the third quarter of 2006 included the effect of a non-cash charge for stock-based compensation of $658,000, as calculated according to the provisions of SFAS 123( R ). This compared with non-cash charges for stock-based compensation of $146,000 for the corresponding quarter of 2005 and $604,000 for the second quarter of 2006. The increase in stock-based compensation in 2006 is primarily due to the adoption of SFAS 123( R ). VNUS' balance sheet at September 30, 2006 included cash, cash equivalents and short-term investments of $69.9 million, approximately $900,000 less than the second quarter of 2006. "Third-quarter unit sales of ClosurePlus(TM) catheters grew by 12% over the prior year, and including sales of our ClosureRFS family of devices, grew 18%," said VNUS President and Chief Executive Officer Brian E. Farley. "Looking forward, we continue to be very pleased by the latest clinical results and the progress we are making with our next-generation product, the ClosureFast catheter, which we expect to launch in the U.S. in the first quarter of 2007. To date, we have treated over 200 limbs, all of which exhibited complete vein occlusion at the latest follow-up ultrasound scan. We attribute this very high rate of preliminary success to the thoughtful design of our ClosureFast catheter and the procedure technique which utilizes a stationary catheter position while delivering a precise dose of thermal energy to close the vein. While stationary, the catheter continuously measures treatment temperature and treats a seven-centimeter-long segment of vein in 20 seconds before being moved to treat the next segment of vein. We believe this technique has the potential to be the most favorable endovenous treatment modality because of its clinical performance, ease of use and procedure speed, as well as mild patient recovery. We are just now starting to receive six-month follow-up scans of the patients treated earlier this year and are pleased to see in this preliminary data that the treated veins remain durably closed." VNUS also announced today its business outlook for the fourth-quarter and full-year 2006. Business Outlook VNUS currently estimates that fourth-quarter 2006 net revenues will range from approximately $12.0 million to $12.4 million, net of an estimated $1.2 million to $1.4 million of RF generator sales that will be deferred. Net loss is estimated to range from approximately $2.6 million to $3.0 million, or a loss of $0.17 to $0.20 per share. The estimated net loss for the fourth quarter includes estimated non-cash stock-based compensation of $600,000 to $650,000. The number of weighted average shares outstanding used to calculate estimated earnings per share for the fourth quarter is currently expected to range from approximately 15.1 million to 15.2 million. VNUS estimates that full-year 2006 net revenues will range from approximately $50.4 million to $50.8 million, net of an estimated $1.8 million to $2.0 million of RF generator sales that will be deferred; gross margin will range from 66% to 67%; sales and marketing expenses will range from $21.8 million to $22.0 million; research and development expenses will range from $7.1 million to $7.4 million; and general and administrative expenses will range from $15.7 million to $15.9 million, including estimates for stock-based compensation expenses of $2.5 million to $2.6 million, restructuring charges associated with the move to new facilities of $847,000, and patent litigation expenses of $2.9 million to $3.1 million. Full-year 2006 net loss is expected to range from approximately $7.7 million to $8.1 million, or a loss of $0.51 to $0.54 per share. This outlook assumes approximately 15.0 million to 15.2 million weighted average shares outstanding for the full year. Today's Teleconference VNUS plans to host its regular quarterly teleconference today at 2:00 p.m. PST / 5:00 p.m. EST. This call will be webcast live and as a replay on the company's website at http://ir.vnus.com/. A phone replay will be available for one week after the live call at (719) 457-0820, code number 4894460. About VNUS Medical Technologies, Inc. VNUS is a leading provider of medical devices for the minimally invasive treatment of peripheral vascular disease, including venous reflux, a progressive condition caused by incompetent vein valves in the leg. VNUS sells the Closure(R) system, which consists of a proprietary radiofrequency (RF) generator and proprietary disposable endovenous catheters and devices to treat diseased veins through the application of temperature-controlled RF energy. For more information, please visit the corporate website at www.vnus.com. Forward-Looking Statements In addition to statements of historical facts or statements of current conditions, VNUS has made forward-looking statements in this press release. Words such as "expects," "estimates", "assumes" and "believes," or variations of such words and similar expressions, are intended to identify such forward-looking statements in this press release, including the statements regarding the outlook for VNUS' business and revenue and net income forecasts. Actual results may differ materially from current expectations based on a number of factors affecting VNUS' business, including, among other things, changing competitive, market and regulatory conditions; customer and physician preferences; changes in reimbursement levels established by governmental and third-party payors; the ability of VNUS to protect its patent position; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; and overall economic and market conditions. The reader is cautioned not to unduly rely on these forward-looking statements. VNUS expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. Additional information concerning these and other risk factors can be found in press releases issued by VNUS and VNUS' periodic public filings with the Securities and Exchange Commission (SEC), including its Quarterly Report on Form 10-Q filed with the SEC on August 11, 2006 and its Annual Report on Form 10-K filed with the SEC on March 14, 2006. Copies of VNUS' press releases and additional information about VNUS are available on the corporate website at www.vnus.com. VNUS MEDICAL TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)

Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Net revenues $ 11,919 $ 12,129 $ 38,359 $ 35,635 Cost of revenues (1) 4,345 2,915 12,524 8,790 Gross profit 7,574 9,214 25,835 26,845 Operating Expenses Sales and marketing (1) 5,279 4,991 16,614 14,403 Research and development (1) 1,871 783 5,155 2,687 General and administrative (1) 3,861 2,124 11,873 6,044 Total operating expenses 11,011 7,898 33,642 23,134 (Loss) income from operations (3,437) 1,316 (7,807) 3,711 Interest and other income 926 458 2,498 1,204 (Loss) income before taxes (2,511) 1,774 (5,309) 4,915 Provision for income taxes 13 121 13 341 Net (loss) income before cumulative effect of change in accounting principle (2,524) 1,653 (5,322) 4,574 Cumulative effect of change in accounting principle - - (73) - Net (loss) income after cumulative effect of accounting change $ (2,524) $ 1,653 $ (5,249) $ 4,574 Net (loss) income per share Basic (Loss) income per share before cumulative effect of change in accounting principle $ (0.17) $ 0.11 $ (0.35) $ 0.31 Cumulative effect of change in accounting principle, net of tax - - (0.00) - Basic net (loss) income per share $ (0.17) $ 0.11 $ (0.35) $ 0.31 Diluted (Loss) income per share before cumulative effect of change in accounting principle $ (0.17) $ 0.11 $ (0.35) $ 0.29 Cumulative effect of change in accounting principle, net of tax - - (0.00) - Diluted net (loss) income per share $ (0.17) $ 0.11 $ (0.35) $ 0.29 Shares used in computing net (loss) income per share Basic 15,064 14,786 15,014 14,585 Diluted 15,064 15,611 15,014 15,624 (1) Includes the following charges for deferred stock-based compensation: Cost of revenues $ 56 $ 16 $ 127 $ 51 Sales and marketing 268 57 735 174 Research and development 64 13 180 44 General and administrative 270 60 826 203

VNUS MEDICAL TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September 30, December 31, 2006 2005 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 45,467 $ 46,797 Short-term investments 24,459 25,718 Accounts receivable, net 7,201 6,448 Inventories, net 2,610 2,915 Prepaid expenses and other current assets 1,031 1,265 Total current assets 80,768 83,143 Property and equipment, net 4,441 1,363 Other assets 786 833 Total assets $ 85,995 $ 85,339 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,920 $ 1,233 Accrued liabilities 6,375 4,548 Total current liabilities 8,295 5,781 Other liabilities 1,348 36 Total liabilities 9,643 5,817 Stockholders' equity: Common stock 15 15 Additional paid-in capital 117,618 117,924 Deferred stock-based compensation (222) (2,544) Accumulated other comprehensive loss 13 (50) Accumulated deficit (41,072) (35,823) Total stockholders' equity 76,352 79,522 Total liabilities and stockholders' equity $ 85,995 $ 85,339 SOURCE VNUS Medical Technologies, Inc. -0- 11/01/2006 /CONTACT: Tim Marcotte, Vice President, Finance and Administration, Chief Financial Officer of VNUS Medical Technologies, Inc., +1-408-360-7499, or ir@vnus.com/ /Web site: http://www.vnus.com /