2014 Annual Meeting
of Stockholders
Dan Moore, President & Chief Executive Officer
September 18, 2014
Safe Harbor Statement
This presentation includes forward‐looking statements.
Forward‐looking statements may be identified by the use of forward‐looking terminology, including “may,”
“believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” and “forecast,” or other similar words.
Statements in this presentation are based on information presently available to us and assumptions that
we believe to be reasonable.
Investors are cautioned that all such statements involve risks and uncertainties.
Forward‐looking statements in this presentation include statements concerning:
• Building stockholder value;
• Achieving consistent sales and profitability targets and growth worldwide;
• Achieving clinical, regulatory, product development and market development projects and goals;
• Evaluating and advancing other medical device and neuroscience opportunities;
• Completing the previously announced stock repurchase program; and
• Fiscal guidance for fiscal year 2015.
Our actual results may differ materially.
For a detailed discussion of the factors that may cause our actual results to differ, please refer to our most
recent filings with the SEC, including our Annual Report on Form 10‐K for the fiscal year ended April 25,
2014.
2
Highlights
FY2014 and FY2015 Q1 Overview
— Sales
— Financials
TOPICS
Strategic Focus Update
FY2015 Guidance
3
Highlight: Building Stockholder Value
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Cyberonics, Inc., the S&P 500 Index, and the S&P Health Care Equipment Index
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
4/24/09
4/30/10
Cyberonics, Inc.
4/29/11
4/27/12
S&P 500
4/26/13
4/25/14
S&P Health Care Equipment
*$100 invested on 4/24/09 in stock or 4/30/09 in index, including reinvestment of dividends. Indexes calculated on month-end basis.
Copyright© 2014 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
4
Highlight: Building Shareholder Value
$310
$285
$260
$235
$ in Millios
$210
$185
$160
$135
$110
$85
$60
$35
$10
($15)
FY08
FY09
Net Sales
FY10
FY11
Income from Operations
FY12
FY13
Loss from Operations
Adjusted non-GAAP income from operations for FY12 and FY14
5
FY14
FY2014 Annual Highlights
• Strong and consistent growth
Net Sales
$282 million
U.S. Epilepsy sales
$224 million
International Epilepsy sales
$55 million
Adjusted Operating Income
$87 million
Adjusted EBITDA
$104 million
Adjusted Earnings per diluted share
$2.04
 11%
 8%
 25% *
 12% **
 10% **
 17% **
* On a constant currency basis, international epilepsy sales revenue increased by 23%
** The company refers and makes comparisons to non-GAAP financial measures in this presentation: adjusted operating income, adjusted EBITDA and adjusted earnings per diluted
share. Investors should consider non-GAAP measures in addition to, and not as a substitute for or superior to, financial performance measures prepared in accordance with GAAP.
Please refer to the attached reconciliation between GAAP and non-GAAP measures for operating income, adjusted EBITDA, and adjusted earnings per share included in this presentation
and in our earnings release dated June 4, 2014.
6
FY2015 Q1 Highlights
• Continued growth and leverage
Net Product Sales
$72 million
U.S.
$59 million
International
$13 million
Operating Income
$22 million
Adjusted EBITDA
$27 million
Adjusted Income per diluted share
•
•
•
$0.53





7%
4%
19%
12% *
12% *
 18% *
Regulatory submission of ProGuardianREST™ System for FDA approval
Vitaria™ generator clinical module submitted (chronic heart failure)
First regulatory approvals for the new manufacturing facility in Costa Rica
* The company refers and makes comparisons to non-GAAP financial measures in this presentation: adjusted income from operations, adjusted EBITDA, adjusted net income and adjusted income per diluted
share. Investors should consider non-GAAP measures in addition to, and not as a substitute for or superior to, financial performance measures prepared in accordance with GAAP. Please refer to the
reconciliation between GAAP and non-GAAP measures for adjusted income from operations, adjusted EBITDA, adjusted net income and adjusted Income per diluted share included in our earnings release dated
August 21, 2014.
7
Sales
8
FY2014 and FY2015 Q1 Net Sales
•
Strong international growth
FY 2014
Q1
U.S.
International
Net Product Sales
Net Sales Total
Q3
Q4
56,358 57,882 53,020 58,194
11,047 12,219 13,071 14,009
$67,404 $70,101 $66,091 $72,203
Single Country Order
Licensing Total
Q2
2,100
FY 2015
% Change
Q1
Q1 FY15 vs.
Q1 FY14
58,838
13,166
$72,004
4.4%
19.2% *
6.8%
$72,004
6.8%
$72,004
4.5%
2,646
$67,404 $70,101 $68,191 $74,849
1,468
$68,872 $70,101 $68,191 $74,849
*On a constant currency basis, international sales revenue grew by 14.5%
- Numbers in $000s
- Represents revenue from sales of generators, leads, and other related devices
9
Continued Worldwide Net Product Sales Growth
•
Year-over-year sales increases for the 25th consecutive quarter
$72M
$70.0
Net Product Sales
($ million)
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
Q1
Q2
Q3
Q4
- Represents revenue from sales of generators, leads, and other related devices
10
FY2014 and FY2015 Q1 Unit Sales
•
Strong international growth
FY 2014
U.S.
International
11
% Change
Q1 FY15 vs.
Q1 FY14
Q1
Q2
Q3
Q4
Q1
2,455
899
3,354
2,518
978
3,496
2,259
1,050
3,309
2,482
1,115
3,597
2,500
1,024
3,524
1.8%
13.9%
5.1%
100
126
3,409
3,723
3,524
5.1%
Single Country Order
Unit Sales Total
FY 2015
3,354
3,496
Consistent U.S. ASP Growth for Generators
•
Increase of 3% over Q1 prior year
ASP of U.S. Generators
$20,000
$20,418
$18,000
$16,000
$14,000
$12,000
$10,000
Q1
12
Q2
Q3
Q4
Financial Results
13
FY2014 Financial Results
•
Consistent revenue growth and gross profit margins
FY14 vs. FY13
FY13
FY14
NET SALES
$
282,014 $
254,320
$
27,694
10.9%
GROSS PROFIT
$
254,659 $
232,413
$
22,246
9.6%
90.3%
GROSS PROFIT %
(1.1%)
91.4%
OPERATING EXPENSES
SG&A
$
120,642 $
112,515
$
8,127
7.2%
R&D
$
46,563 $
41,551
$
5,011
12.1%
Litigation
$
7,443
TOTAL OPERATING EXPENSES
$
174,648 $
154,067
$
20,581
13.4%
INCOME FROM OPERATIONS
$
80,012 $
78,346
$
1,665
2.1%
133
3,072
$
(2,939)
79,879 $
75,275
$
4,604
24,988
28,917
$
(3,929)
54,890 $
46,358
$
8,533
18.4%
$0.34
20.5%
OTHER EXPENSE, NET
INCOME BEFORE INCOME TAXES
$
INCOME TAX EXPENSE
NET INCOME
Diluted Income per Share
$
$2.00
$1.66
27,466
28,009
6.1%
(13.6%)
Outstanding Shares
Diluted
- All numbers in $000s except for income per share
14
(543)
(1.9%)
Reconciliation of Non-GAAP Financial Measures for FY2014
FY14
Operating Income
Litigation settlement
$
Adjusted Operating Income
Net Income
Gain on warrants' liability
Impairment of investment
Litigation Settlement
Discrete tax item
Adjusted non-GAAP Net Income
Diluted income per share
Gain on warrants' liability
Impairment of investment
Litigation Settlement
Discrete tax item
Adjusted non-GAAP diluted income per share
15
All numbers in 000s except for earnings per share
FY13
$
$
80,012
7,443
87,455
$
54,890
$
$
4,776
(3,534)
56,133 $
$
$
2.00
$
$
0.17
(0.13)
2.04 $
FY14 vs. FY13
78,346
78,346
$
1,665
2.1%
$
9,108
11.6%
46,358
(1,326)
3,812
$
8,533
18.4%
$
7,289
14.9%
$
0.34
20.5%
$
0.30
17.2%
48,844
1.66
(0.05)
0.13
1.74
FY2015 Q1 Financial Results*
Q1 FY15
Net Sales
Gross Profit
Gross Profit %
Q1 FY14
% Change
$72,004
$68,872
4.5 %
65,594
62,328
5.2 %
91.1%
90.5%
SG&A
R&D
Litigation settlement
33,028
10,563
-
29,306
11,975
7,443
12.7 %
(11.8)%
Total Operating Expenses
43,590
48,724
(10.5)%
Income From Operations
$22,003
$13,604
61.7 %
8,694
4,843
79.5 %
$13,519
$8,674
55.9 %
26,915
27,845
(3.3)%
$0.50
$0.31
61.3 %
Income tax expense
Net Income
Outstanding shares - diluted
Diluted income per share
- All numbers in $000s except for income per share
* Please refer to the reconciliation between GAAP and non-GAAP measures for adjusted income from operations, adjusted
EBITDA, adjusted net income and adjusted income per diluted share included in our earnings release dated August 21, 2014.
16
Reconciliation of Non-GAAP Financial Measures
Q1 FY15
Q1 FY14
Income from operations
Litigation settlement
License fee
Adjusted non-GAAP income from operations
$22,003
$13,604
7,443
(1,468)
$19,579
61.7%
Net income
Income tax adjustment
Benefit assumed from extension of R&D tax credit
Litigation settlement, net of tax
License fee, net of tax
Adjusted non-GAAP net income
$13,519
588
217
$8,674
55.9%
4,776
(921)
$12,529
14.3%
Diluted income per share
Income tax adjustment
Benefit assumed from extension of R&D tax credit
Litigation settlement, net of tax
License fee, net of tax
Adjusted non-GAAP diluted income per share
$0.50
0.02
0.01
$22,003
$14,324
$0.53
- All numbers in $000s except for income per share
17
% change
12.4%
$0.31
61.3%
0.17
(0.03)
$0.45
17.8%
FY2008 – FY2015 Sales and Operating Income*
$310
$285
FY2015 Guidance
Sales = $300m - $307m
OI = $96m - $99m
$260
$235
$ in Millios
$210
$185
$160
$135
$110
$85
$60
$35
$10
($15)
FY08
FY09
FY10
Net Sales
FY11
FY12
Income from Operations
FY13
Loss from Operations
*Adjusted non-GAAP income from operations for FY2012 and FY2014
**Mid-point guidance
18
FY14
FY15 **
Strategic Focus
19
FY2014 Goals – Results
Build shareholder value through:
Continued leadership in epilepsy medical devices
Consistent sales & profitability growth worldwide

Achieving clinical & product development milestones
EU regulatory approval of the AspireSR® generator
Enrollment completed for AspireSR® E-37 clinical study
Evaluating & advancing other neuroscience opportunities
Apnex asset purchase (obstructive sleep apnea)
Increased investments in Imthera™ & cerbomed
20
FY2015 Goals Update
Build shareholder value through:
 Continued leadership in epilepsy medical devices
 Consistent sales and profitability growth worldwide
Achieving clinical and product development milestones
 ProGuardianREST™ regulatory submissions
Centro™ generator regulatory submissions
AspireSR® generator U.S. regulatory progress
Evaluating and advancing other neuroscience opportunities
Vitaria™ generator regulatory submission in Europe
21
Other Cyberonics Neuroscience Initiatives
• Other VNS Therapy indications
— Chronic Heart Failure (CHF)
• Other neuroscience opportunities
— ImThera for OSA
24 agreements with 19 partners
22
Fiscal FY2015 Guidance
23
Net Sales
$300 million - $307 million
Income from Operations
$96 million - $99 million
Adjusted Net Income
$62 million - $64 million
Adjusted EPS
$2.33 - $2.39
24
Investment
Thesis
25
LEADERSHIP
• Consistently met goals
• Investing for global growth
STRATEGY
• Focus on epilepsy market potential
• Disciplined investing in other device opportunities
INNOVATION
• Fueling growth through product development
• Advancing patient care through innovation
• Diversifying the epilepsy portfolio
COMMERCIALIZATION
• Experienced team and strong track record
• Accelerating new patient growth
• Significant recurring revenue
EXPERIENCE
• Strong patient satisfaction
• >100,000 implants and >500,000 years of patient experience
• >3,000 physicians using VNS Therapy®
FINANCIAL HIGHLIGHTS
• Leveraging the income statement for consistent growth
• Strong balance sheet
• Focus on shareholder value
Q&A
26