Volcano (VOLC) 8-K Volcano Corporation Reports Record Quarterly Revenues; Total Year Revenues Reach $103 Million

Exhibit 99.1

VOLCANO CORPORATION REPORTS RECORD QUARTERLY REVENUES; TOTAL YEAR REVENUES REACH $103
MILLION

     (RANCHO CORDOVA, CA), February 13, 2007—Volcano Corporation (NASDAQ: VOLC), a leading provider of intravascular ultrasound (IVUS) and functional measurement (FM) products designed to enhance the diagnosis and treatment of vascular and structural heart diseases, today announced results for the fourth quarter and all of fiscal 2006.

     For the quarter ended December 31, 2006, Volcano reported record quarterly revenues of $29.5 million, a 20 percent increase over revenues of $24.7 million in the fourth quarter a year ago, and a six percent increase over revenues of $27.8 million in the third quarter of 2006. IVUS disposable revenues in the fourth quarter of 2006 increased 25 percent over the fourth quarter of 2005.

     Volcano reported its second consecutive quarter of profitability on a GAAP basis, with net income of $1.4 million, or $0.04 per diluted share, versus a net loss of $6.9 million, or $1.01 per share, in the same quarter a year ago. The company recorded stock-based compensation expense of $901,000 compared with $494,000 in the fourth quarter of 2005. Excluding stock-based compensation expense, Volcano reported net income of $2.3 million, or $0.06 per diluted share, versus a net loss of $6.4 million, or $0.94 per share, in the fourth quarter of 2005. Weighted average diluted shares outstanding were 38.2 million in the fourth quarter of 2006 versus 6.8 million in the same period a year ago. The increase reflects the conversion of preferred stock to common stock, the exercise of warrants, the company’s initial public offering in June 2006 and the completion of a follow on offering in December 2006.

     For all of fiscal 2006, Volcano reported revenues of $103.0 million, a 12 percent increase over revenues of $91.9 million in fiscal 2005. For the year, IVUS disposable revenues increased 23 percent over 2005. Volcano reported a net loss on a GAAP basis of $8.6 million, or $0.41 per share, compared to a net loss of $15.3 million, or $2.28 per share, in 2005. Excluding a non-recurring, non-cash charge of $1.2 million related to the early extinguishment of debt and stock-based compensation expense of $3.2 million, the company reported a net loss of $4.2 million, or $0.20 per share, compared with a net loss of $13.3 million, or $1.99 per share, in 2005. A reconciliation of the company’s GAAP to non-GAAP results can be found in today’s earnings press release on the company’s website at www.volcanocorp.com

     During the fourth quarter of 2006 Volcano completed an equity offering, selling approximately 4.3 million primary shares — including the underwriters’ overallotment — that generated net proceeds to the company of approximately $67.8 million.

     “Our results for the quarter demonstrate the ability of our s5 family of consoles to both gain market share and increase the utilization of IVUS in the diagnosis and treatment of vascular disease,” said Scott Huennekens, president and chief executive officer of Volcano. “Our consoles facilitate the integration of IVUS in the cath lab, and provide ease of use and enhanced functionality for clinicians. With the launch of our Revolution rotational high frequency catheter, we are now the only company offering the market both phased array and rotational catheters. In addition, the enhancements we have

made to our functional measurement (FM) offerings are broadening our presence in that market as well,” he continued.

     During the quarter, Volcano announced a collaboration with three leading core labs under which the company will provide IVUS catheters free of charge for use in pivotal trials for drug-eluting stents to facilitate the use of IVUS and demonstrate its value in stent optimization. In addition, the company is in the final trial design for the CHECK study, orCarotidHistologyEvaluation andCorrelation to patient worKup that will be a registry of stented carotid artery patients in the United States, Japan and Europe who undergo IVUS imaging of their carotid arteries prior to stenting. Volcano expects to enroll the initial patients in the 300-patient study during 2007.

     In addition, the company announced today a distribution agreement with Johnson & Johnson K.K. Medical Company, appointing Cordis Endovascular Systems Japan as a distributor of IVUS products for use in peripheral and endovascular procedures in Japan. Cordis has served as a sub-distributor for Volcano’s IVUS products in these markets for a number of years.

     “Volcano has had an excellent year, marked by the introduction of industry-leading technology, the development of important partnerships, and meaningful progress in our clinical trials,” Huennekens noted.

     “In addition to increasing our presence in the IVUS and FM markets during 2007, we will continue to lay the groundwork for future growth through market opportunities such as stent optimization, IVUS and angiography co-registration, IVUS during diagnostic angiographies, Intra-Cardiac Echo, vulnerable plaque and applications in the carotid and peripheral arteries,” he continued.

Guidance for 2007

     Volcano expects revenues of approximately $120.0 million in 2007. Gross margin for the year is expected to be 60-61 percent and operating expenses to be 68-69 percent of revenues. The company expects to report a net loss on a GAAP basis of approximately $0.15 per share, assuming weighted average basic shares outstanding at year-end of approximately 37.7 million. Excluding stock-based compensation, Volcano expects to report net income of $0.03 per share assuming weighted average diluted shares outstanding at year-end of approximately 41.9 million.

Conference Call

     The company will hold a conference call today at 2 p.m., Pacific Standard Time (5 p.m. Eastern Standard Time). The teleconference can be accessed by calling (913) 981-4913, passcode 9414794, or via the company’s website at www.volcanocorp.com. Please dial in or access the website 10-15 minutes prior to the beginning of the call. A replay of the conference call will be available until February 20 at (719) 457-0820, passcode 9414794, and via the company’s website.

Volcano Corporation

     Volcano Corporation (VOLC), which completed its IPO in June 2006, offers a broad suite of devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart diseases and guide optimal therapies. The company’s intravascular ultrasound (IVUS) product line includes ultrasound consoles that can be integrated directly into virtually any modern cath lab and single-use phased array and rotational IVUS imaging catheters. Volcano also has unique advanced functionality options, such as tissue characterization—which we refer to as VH—and IVUS and angiography co-registration. Volcano also provides functional measurement (FM) consoles and single-use pressure and flow guide wires. Currently, more than 2,500 Volcano IVUS and FM systems are installed worldwide, with approximately half of its revenues coming from outside the United States. For more information, visit the company’s website at www.volcanocorp.com

Use of Non-GAAP Financial Measures

     This press release includes certain non-GAAP financial information as defined by the U.S. Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, a reconciliation of this non-GAAP financial information to our financial statements as prepared under generally accepted accounting principles in the United States (GAAP) is included in this press release. Non-GAAP financial measures provide an indication of our performance before certain charges. Our management believes that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these charges. These charges result from facts and circumstances that vary in frequency and/or impact on continuing operations. Our management believes that these items should be excluded when comparing our current operating results with those of prior periods as the write-off of deferred debt issuance costs, which results from the repayment of certain debt in connection with our initial public offering, will not impact future operating results, and stock-based compensation is a non-cash expense. In addition, our management uses results of operations before these certain charges to evaluate the operational performance of the company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial measures in accordance with GAAP.

Forward-Looking Statements

     This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Statements in this press release regarding Volcano’s business that are not historical facts may be “forward-looking statements” that involve risks and uncertainties. Specifically, statements regarding the company’s financial guidance for 2007, expectations and outcomes regarding product development and clinical trial programs, market development and product use, regulatory approvals and current and potential partnerships are forward-looking statements involving risks and uncertainties. Forward-looking statements are based on management’s current, preliminary expectations and are subject to risks and uncertainties, which may cause Volcano’s results to differ materially from the statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ from the results predicted are detailed in the company’s 10-Q, most recent Registration Statement on Form S-1 and other filings made with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Volcano undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

Contact Information:

John Dahldorf
Chief Financial Officer
Volcano Corporation
(916) 638-8008
or
Neal B. Rosen
Kalt Rosen & Co.
(415) 397-2686

VOLCANO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)

	December 31,
	2006		2005
Assets
Current assets:
Cash and cash equivalents	$	77,738	$	15,219
Short term investments available for sale		17,787		—
Accounts receivable, net		21,575		16,001
Inventories		13,423		10,155
Prepaid expenses and other current assets		2,208		1,416
Total current assets		132,731		42,791
Restricted cash		352		309
Property and equipment, net		9,333		9,885
Intangible assets, net		11,946		14,645
Other non-current assets		363		838
	$	154,725	$	68,468
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	8,209	$	11,119
Accrued compensation		5,993		4,437
Accrued expenses and other current liabilities		5,292		4,955
Deferred revenues		2,675		2,173
Current maturities of long-term debt		1,654		3,114
Total current liabilities		23,823		25,798
Long-term debt		66		27,236
Deferred license fee from a related party		1,375		1,625
Other		279		217
Total liabilities		25,543		54,876
Convertible preferred stock		—		63,060
Stockholders’ equity (deficit)		129,182		(49,468	)
	$	154,725	$	68,468

VOLCANO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Revenues	$	29,531		$	24,702		$	103,048		$	91,900
Cost of revenues		11,467			15,007			41,715			47,843
Gross profit		18,064			9,695			61,333			44,057
Operating expenses:
Selling, general and administrative		12,587			9,959			47,614			35,365
Research and development		4,088			4,496			16,923			15,119
Amortization of intangibles		785			772			3,117			3,052
Total operating expenses		17,460			15,227			67,654			53,536
Operating income (loss)		604			(5,532	)		(6,321	)		(9,479	)
Interest expense		(103	)		(1,312	)		(4,013	)		(5,311	)
Interest and other income (expense), net		957			(52	)		2,029			(401	)
Income (loss) before provision for income taxes		1,458			(6,896	)		(8,305	)		(15,191	)
Provision for income taxes		25			21			298			70
Net income (loss)	$	1,433		$	(6,917	)	$	(8,603	)	$	(15,261	)
Net income (loss) per share — basic	$	0.04		$	(1.01	)	$	(0.41	)	$	(2.28	)
Net income (loss) per share — diluted	$	0.04		$	(1.01	)	$	(0.41	)	$	(2.28	)
Weighted-average shares outstanding — basic		34,079			6,834			21,113			6,693
Weighted-average shares outstanding — diluted		38,155			6,834			21,113			6,693

VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)

	Three Months Ended December 2006
				Stock-based
				compensation			Non-GAAP
	GAAP results			expense			results
Revenues	$	29,531		$	—		$	29,531
Cost of revenues		11,467			(109	)		11,358
Gross profit		18,064			109			18,173
Operating expenses:
Selling, general and administrative		12,587			(558	)		12,029
Research and development		4,088			(234	)		3,854
Amortization of intangibles		785			—			785
Total operating expenses		17,460			(792	)		16,668
Operating income		604			901			1,505
Interest expense		(103	)		—			(103	)
Interest and other income, net		957			—			957
Income before provision for income taxes		1,458			901			2,359
Provision for income taxes		25			—			25
Net income	$	1,433		$	901		$	2,334
Net income per share — basic	$	0.04		$	0.03		$	0.07
Net income per share — diluted	$	0.04		$	0.02		$	0.06
Weighted-average shares outstanding — basic		34,079						34,079
Weighted-average shares outstanding — diluted		38,155						38,155

	Three Months Ended December 2005
				Stock-based
				compensation			Non-GAAP
	GAAP results			expense			results
Revenues	$	24,702		$	—		$	24,702
Cost of revenues		15,007			(65	)		14,942
Gross profit		9,695			65			9,760
Operating expenses:
Selling, general and administrative		9,959			(254	)		9,705
Research and development		4,496			(175	)		4,321
Amortization of intangibles		772			—			772
Total operating expenses		15,227			(429	)		14,798
Operating income (loss)		(5,532	)		494			(5,038	)
Interest expense		(1,312	)		—			(1,312	)
Interest and other income, net		(52	)		—			(52	)
Income (loss) before provision for income taxes		(6,896	)		494			(6,402	)
Provision for income taxes		21			—			21
Net income (loss)	$	(6,917	)	$	494		$	(6,423	)
Net income (loss) per share — basic	$	(1.01	)	$	0.07		$	(0.94	)
Net income (loss) per share — diluted	$	(1.01	)	$	0.07		$	(0.94	)
Weighted-average shares outstanding — basic		6,834						6,834
Weighted-average shares outstanding — diluted		6,834						6,834

VOLCANO CORPORATION
RECONCILIATION OF GAAP AND NON-GAAP OPERATING RESULTS
(in thousands, except per share data)
(Unaudited)

				Twelve Months Ended December 2006
				Stock-based			Write-off of
				compensation			deferred debt
	GAAP results			expense			issuance costs		Non-GAAP results
Revenues	$	103,048		$	—		$	—	$	103,048
Cost of revenues		41,715			(348	)		—		41,367
Gross profit		61,333			348			—		61,681
Operating expenses:
Selling, general and administrative		47,614			(2,238	)		—		45,376
Research and development		16,923			(609	)		—		16,314
Amortization of intangibles		3,117			—			—		3,117
Total operating expenses		67,654			(2,847	)		—		64,807
Operating income (loss)		(6,321	)		3,195			—		(3,126	)
Interest expense		(4,013	)		—			1,246		(2,767	)
Interest and other income, net		2,029			—			—		2,029
Income (loss) before provision for income taxes		(8,305	)		3,195			1,246		(3,864	)
Provision for income taxes		298			—			—		298
Net income (loss)	$	(8,603	)	$	3,195		$	1,246	$	(4,162	)
Net income (loss) per share — basic	$	(0.41	)	$	0.15		$	0.06	$	(0.20	)
Net income (loss) per share — diluted	$	(0.41	)	$	0.15		$	0.06	$	(0.20	)
Weighted-average shares outstanding - basic		21,113								21,113
Weighted-average shares outstanding - diluted		21,113								21,113

				Twelve Months Ended December 2005
				Stock-based			Write-off of
				compensation			deferred debt
	GAAP results			expense			issuance costs		Non-GAAP results
Revenues	$	91,900		$	—		$	—	$	91,900
Cost of revenues		47,843			(258	)		—		47,585
Gross profit		44,057			258			—		44,315
Operating expenses:
Selling, general and administrative		35,365			(1,267	)		—		34,098
Research and development		15,119			(423	)		—		14,696
Amortization of intangibles		3,052			—			—		3,052
Total operating expenses		53,536			(1,690	)		—		51,846
Operating income (loss)		(9,479	)		1,948			—		(7,531	)
Interest expense		(5,311	)					—		(5,311	)
Interest and other income (expense), net		(401	)		—			—		(401	)
Income (loss) before provision for income taxes		(15,191	)		1,948			—		(13,243	)
Provision for income taxes		70			—			—		70
Net income (loss)	$	(15,261	)	$	1,948		$	—	$	(13,313	)
Net income (loss) per share — basic	$	(2.28	)	$	0.29		$	—	$	(1.99	)
Net income (loss) per share — diluted	$	(2.28	)	$	0.29		$	—	$	(1.99	)
Weighted-average shares outstanding - basic		6,693								6,693
Weighted-average shares outstanding - diluted		6,693								6,693

Use of Non-GAAP Financial Measures

This press release includes certain non-GAAP financial information as defined by the U.S. Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, a reconciliation of this non-GAAP financial information to our financial statements as prepared under generally accepted accounting principles in the United States (GAAP) is included in this press release. Non-GAAP financial measures provide an indication of our performance before certain charges. Our management believes that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these charges. These charges result from facts and circumstances that vary in frequency and/or impact on continuing operations. Our management believes that these items should be excluded when comparing our current operating results with those of prior periods as the write-off of deferred debt issuance costs, which resulted from the repayment of certain debt in connection with our initial public offering, will not impact future operating results, and stock-based compensation is a non-cash expense. In addition, our management uses results of operations before certain charges to evaluate the operational performance of the company and as a basis for strategic planning. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures in accordance with GAAP.