What: Cardiovascular Systems (NASDAQ:CSII) fell almost 30% today after announcing disappointing earnings on Thursday after the bell.
So what: Revenue collected in the medical-device company's fiscal second quarter came in at $41.4 million, which was 3% below the low-end of management's guidance of revenue between $42.5 million to $44.0 million.
Normally, a slight miss in guidance wouldn't result in such a large decline, but this is the third quarter in a row that Cardiovascular Systems has missed its own guidance. While the first fiscal quarter saw year-over-year growth of 11%, and the prior quarter saw a 22% year-over-year increase -- despite the misses -- the second quarter's miss resulted in a 4% year-over-year decrease in revenue.
Scott Ward, CSI's chairman and interim president and CEO, blamed the lower-than-expected revenue on the company's expanded sales force that's selling both coronary and peripheral applications, which has "been challenging and is affecting our near-term sales performance."
Now what: While investors are rightfully concerned about management's ability to figure out how much of its products the company can sell in a given three-month period, the bigger issue may be Cardiovascular Systems' ability to get to profitability.
The company ended the quarter with $65 million in cash and equivalents in the bank. Ward said that "managing our cash position is a top priority," but also noted that the cash and "debt capacity and the potential to finance our $25 million Minnesota facility" were options to help Cardiovascular Systems become cash-flow positive. Taking on debt is sometimes necessary -- and sometimes even the best choice for a company -- but investors should be more receptive to it when taking on debt comes from a position of strength, not from a company that just reported a fall in revenue.
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