Cyberonics Inc. (CYBX: 18.09 0.00 0.00%) has reported a strong third quarter in fiscal 2010. Earnings per share were 26 cents, beating both the Zacks Consensus Estimate of 25 cents and the year-ago earnings of 15 cents.
Sales
Total revenues in the quarter increased 16% year over year to $40.8 million. Excluding a favorable foreign currency translation, net sales increased 14% year over year.
On a geographic basis, the U.S. contributed roughly 78% to total revenues and increased 12% year over year. International revenues increased 34% year over year.
Margins
Cyberonics reported an expansion in margins in the third quarter. Gross margin increased 190 basis points (bps) year over year to 87.9%. Growth was primarily due to higher production volumes, higher average selling prices due to a favorable product mix and greater manufacturing efficiencies. Operating margin increased 790 bps year over year to 22.1%.
Balance Sheet & Cash Flow
Cyberonics ended the quarter with cash and cash equivalents of $54.7 million. The company had an outstanding debt of $22.5 million at the end of the reported quarter. Cash flow from operations was $27.5 million in the first nine months of the year, an increase of roughly 50% year over year.
Outlook
Cyberonics expects total revenues in fiscal 2010 to range between $162 million and $164 million, up from the previous guidance of $159 million to $162 million. Operating income is expected in the range of $32 million to $34 million, compared to the prior guidance of $28 million to $30 million.
Cyberonics is a neuromodulation company that develops and markets the VNS Therapy System for the treatment of refractory epilepsy and treatment-resistant depression. VNS Therapy improves a patient’s quality of life by minimizing seizure reduction.
Presently, we have a ‘Neutral’ recommendation on Cyberonics.
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