BVX Bovie Medical Corp.

Advanced Energy Sales increased 137% year-over-year in Second Quarter 2017, driven by strong J-Plasma® sales.

Bovie Medical Corporation (NYSEMKT:BVX) (the "Company"), a maker of medical devices and supplies and the developer of J-Plasma®, a patented new surgical product, today reported financial results for its second fiscal quarter ended June 30, 2017.

Second Quarter 2017 Financial Summary:

• Total Q2 revenue of $9.8 million, up 5.4% year-over-year.
  • Advanced Energy revenue increased 137% year-over-year to $1.8 million, driven by strong J-Plasma® sales.
  • Domestic Q2 revenue of $8.7 million, up 12.3% year-over-year.
  • International Q2 revenue of $1.1 million, down 29.1% year-over-year.
• Net loss of $1.3 million for the three months ended June 30, 2017, compared to a net loss of $0.5 million in the comparable period last year.

Second Quarter Operating Highlights:

• On May 8, 2017, the Company announced it had received 510K clearance from the FDA for a new J-Plasma® Precise Flex handpiece. The J-Plasma® Precise Flex handpiece is designed to be used in robotic-assisted procedures including those with Intuitive Surgical’s da Vinci Surgical System. The J-Plasma® Precise Flex includes Bovie Medical’s Cool-Coag™ technology that combines the unique benefits of J-Plasma®, namely increased precision with minimal thermal spread, with standard monopolar coagulation and helium spray coagulation capabilities, all in one handpiece.

Management Comments:

“We are excited by our commercial performance during the second quarter, which was marked by growth in our key business segments,” said Robert L. Gershon, Chief Executive Officer. “We reported strong sales growth in both our Advanced Energy and Core business segments, which increased 137% and 9% respectively during the quarter, which was partially offset by a decrease in sales within our OEM business segment.”

“Following a slower start to the year, we were pleased to see strong growth in sales of our J-Plasma® products during the second quarter, which was primarily driven by sales of generators to new plastic surgeon customers and increased hand piece sales in surgical oncology. While we remain in the early stages of driving J-Plasma® sales into our target markets of plastic surgery and surgical oncology, we are encouraged by the consistently positive feedback that we have received from our new customers and continue to believe that the features and benefits of this innovative technology are resonating well within these two areas of the surgeon community. In addition to our commercial progress, we were also pleased to continue delivering upon our commitment to new product innovation in our advanced energy business by obtaining FDA 510(k) clearance for our new J-Plasma® Precise Flex handpiece, which is designed for use in robotic-assisted surgery.”

Mr. Gershon continued: “In light of our recent performance, we are reaffirming our 2017 total revenue guidance.”

Second Quarter 2017 Results:

The following tables represent revenue by reportable segment and by product line:

  Three Months EndedJune 30,   Increase/Decrease   Six Months EndedJune 30,   Increase/Decrease (In thousands) 2017   2016

$Change

 

%Change

2017   2016

$Change

 

 

%Change

Core $ 7,488 $ 6,881 $ 607 8.8 % $ 14,263 $ 13,359 $ 904 6.8 % OEM 498 1,648 (1,150 ) (69.8 )% 1,505 2,589 (1,084 ) (41.9 )% Advanced Energy 1,813   766   1,047   136.7 % 2,420   1,122   1,298   115.7 % Total $ 9,799   $ 9,295   $ 504   5.4 % $ 18,188   $ 17,070   $ 1,118   6.5 %     Three Months EndedJune 30, Increase/Decrease Six Months EndedJune 30, Increase/Decrease (In thousands) 2017 2016

$Change

%Change

2017 2016

$Change

%Change

Electrosurgical $ 6,206 $ 5,078 $ 1,128 22.2 % $ 11,536 $ 9,330 $ 2,206 23.6 % Cauteries 1,873 1,720 153 8.9 % 3,528 3,554 (26 ) (0.7 )% Lighting 948 800 148 18.5 % 1,393 1,306 87 6.7 % Other 772   1,697   (925 ) (54.5 )% 1,731   2,880   (1,149 ) (39.9 )% Total $ 9,799   $ 9,295   $ 504   5.4 % $ 18,188   $ 17,070   $ 1,118   6.5 %

Total revenue growth in the second quarter of 2017 was driven by a 136.7% increase in Advanced Energy sales and an 8.8% increase in Core sales, offset partially by a 69.8% decrease in OEM sales. The largest product line contributor to total revenue growth in the second quarter of 2017 was a 22.2% increase in sales of electrosurgical products, driven primarily by Advanced Energy generator sales. Advanced Energy segment sales, nearly all of which are from sales of J-Plasma products, increased approximately $1.0 million to $1.8 million, or 136.7% year-over-year, compared to approximately $0.8 million last year. By product line, sales of electrosurgical, cauteries, lighting and other products represented 63%, 19%, 10% and 8% of total revenue, respectively, for the three months ended June 30, 2017. The OEM sales year-over-year was a result of revised production demand from customers and timing of initial production based on product clearance delays.

  Three Months EndedJune 30,   Increase/Decrease   Six Months EndedJune 30,   Increase/Decrease (In thousands) 2017   2016

$Change

 

%Change

2017   2016

$Change

 

%Change

Domestic $ 8,708 $ 7,757 $ 951 12.3 % $ 15,700 $ 14,372 $ 1,328 9.2 % International 1,091   1,538   (447 ) (29.1 )% 2,488   2,698   (210 ) (7.8 )% Total $ 9,799   $ 9,295   $ 504   5.4 % $ 18,188   $ 17,070   $ 1,118   6.5 %

Total revenue for second quarter 2017 increased $0.5 million, or 5.4%, to $9.8 million, compared to $9.3 million in the second quarter of 2016. Revenue in the United States increased $1.0 million, or 12.3% year-over-year, to $8.7 million, and international revenue decreased $0.4 million, or 29.1% year-over-year, to $1.1 million. The change in international revenue in the second quarter of 2017 was driven by a significant tender in the Core segment which benefitted international revenue results last year and did not recur in the second quarter of 2017.

Gross profit for the second quarter of 2017 increased $0.3 million, or 7.3% year-over-year, to $5.0 million, compared to $4.7 million for second quarter 2016. Gross margin increased approximately 90 basis points year-over-year to 51.5% for the second quarter of 2017, compared to 50.6% last year. The increase in gross margins was attributed to higher margins in the Advanced Energy segment, driven by higher volume and pricing mix on generator sales, as well as higher margins in the Company’s Core segment, due to an improved product and pricing mix. The overall increase in margins was partially offset by lower margins in the Company’s OEM business segment, due to a one time order that occurred during the comparable period last year.

Operating expenses for second quarter 2017 increased $1.1 million, or 21.8% year-over-year, to $6.3 million, compared to $5.2 million for second quarter 2016. The increase in operating expenses was primarily driven by a $0.9 million increase in selling, general and administrative expenses over the comparable period last year.

Loss from operations for the second quarter of 2017 was $1.3 million, compared to a loss from operations of $0.5 million for the comparable period last year.

Net loss attributed to common shareholders for the second quarter of 2017 was $1.3 million, or $0.04 per diluted share, compared to a loss of $0.5 million, or $0.02 per diluted share, for the second quarter of 2016.

As of June 30, 2017, the Company had cash of $11.1 million as compared to $15.2 million as of December 31, 2016. The Company had working capital of $18.5 million as of June 30, 2017 as compared to $21.3 million as of December 31, 2016.

Six Months 2017 Results:

Total revenue for the six months ended June 30, 2017 increased $1.1 million, or 6.5%, to $18.2 million, compared to $17.1 million in the six months ended June 30, 2016. Total revenue growth was driven by a 115.7% increase in Advance Energy sales and a 6.8% increase in Core sales, and was partially offset by a 41.9% decrease in OEM sales.

Net loss attributed to common shareholders for the six months ended June 30, 2017 was $3.0 million, or $0.10 per diluted share, compared to a loss of $2.5 million, or $0.09 per diluted share, for six months ended June 30, 2016.

2017 Outlook:

For the fiscal year 2017, the Company expects:

• Total revenue in the range of $38.3 million to $40.3 million, representing growth of 5% to 10% year-over-year, compared to total revenue of $36.6 million in fiscal year 2016.
  • The Company expects total revenue growth to be driven by:
    • Core sales growth in the range of approximately 5% to 11% year-over-year, as compared to growth in the range of approximately 4% to 8% year-over-year previously,
    • Advanced Energy sales growth in the range of approximately 90% to 95% year-over-year, as compared to growth in the range of approximately 60% to 80% year-over-year previously,
    • OEM sales decline in the range of approximately 50% to 55% year-over-year, as compared to declines in the range of approximately 25% to 35% year-over-year previously.
  • Adjusted EBITDA loss in a range of $1.2 million to $1.4 million, compared to Adjusted EBITDA loss of $2.2 million in fiscal year 2016.

Conference Call Details:

Management will host a conference call at 4:30 p.m. Eastern Time on August 2, 2017 to discuss the results of the quarter and host a question and answer session. To listen to the call by phone, interested parties within the U.S. may dial 844-507-6493 (or 647-253-8641 for international callers) and provide access code 51614469. Participants should ask for the Bovie Medical Corporation Call. A live webcast of the call will be accessible via the Investor Relations section of the Company’s website and at: https://event.on24.com/wcc/r/1462925/FFFEFCC2DEDC4963062FDE9C9430032A

A telephonic replay will be available approximately two hours after the end of the call through August 16, 2017. The replay can be accessed by dialing 800-585-8367 for U.S. callers or 416-621-4642 for International callers and using the replay access code: 51614469. The webcast will be archived on the Investor Relations section of the Company's website.

About Bovie Medical Corporation:

Bovie Medical Corporation is a leading maker of medical devices and supplies as well as the developer of J-Plasma®, a patented plasma-based surgical product for cutting, coagulation and ablation of soft tissue. J-Plasma® utilizes a helium ionization process to produce a stable, focused beam of plasma that provides surgeons with greater precision, minimal invasiveness and an absence of conductive currents through the patient during surgery. The new J-Plasma® handpieces with Cool-Coag™ technology deliver the precision of helium plasma energy, the power of traditional monopolar coagulation and the efficiency of plasma beam coagulation - enabling thin-layer ablation and dissection and fast coagulation with a single instrument, minimizing instrument exchange and allowing a surgeon to focus on their patient and their procedures. With Cool-Coag technology, the new J-Plasma handpieces can deliver three distinctly different energy modalities - further increasing the utility and versatility of the J-Plasma system. Bovie Medical Corporation is also a leader in the manufacture of a range of electrosurgical products and technologies, marketed through both private labels and the Company’s own well-respected brands (Bovie®, IDS™ and DERM™) to distributors worldwide. The Company also leverages its expertise through original equipment manufacturing (OEM) agreements with other medical device manufacturers. For further information about the Company’s current and new products, please refer to the Investor Relations section of Bovie Medical Corporation at www.boviemed.com.

Cautionary Statement on Forward-Looking Statements:

Certain matters discussed in this release and oral statements made from time to time by representatives of the Company may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many of these factors are beyond the Company's ability to control or predict. Important factors that may cause actual results to differ materially and that could impact the Company and the statements contained in this release can be found in the Company's filings with the Securities and Exchange Commission including the Company's Report on Form 10-K for the year ended December 31, 2016 and subsequent Form 10-Q filings. For forward-looking statements in this release, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.

   

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except per share data)

  Three Months EndedJune 30, Six Months EndedJune 30, 2017   2016 2017   2016 Sales $ 9,799 $ 9,295 $ 18,188 $ 17,070 Cost of sales 4,757   4,595   8,920   9,048   Gross profit 5,042 4,700 9,268 8,022 Other costs and expenses: Research and development 696 592 1,405 1,259 Professional services 480 396 870 753 Salaries and related costs 2,243 2,200 4,703 4,300 Selling, general and administrative 2,929   2,022   5,333   4,213   Total other costs and expenses 6,348   5,210   12,311   10,525   Loss from operations (1,306 ) (510 ) (3,043 ) (2,503 ) Interest expense, net (36 ) (50 ) (67 ) (88 ) Change in fair value of derivative liabilities 38   41   126   128   Total other income (loss), net 2   (9 ) 59   40   Loss before income taxes (1,304 ) (519 ) (2,984 ) (2,463 ) Income tax expense 4   —   9   —   Net loss $ (1,308 ) $ (519 ) $ (2,993 ) $ (2,463 )   Loss per share Basic $ (0.04 ) $ (0.02 ) $ (0.10 ) $ (0.09 ) Diluted $ (0.04 ) $ (0.02 ) $ (0.10 ) $ (0.09 )   Weighted average number of shares outstanding - basic 30,860 27,051 30,860 27,051 Weighted average number of shares outstanding - dilutive 30,860 27,051 30,860 27,051    

BOVIE MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands, except share and per share data)

  June 30, 2017

December 31, 2016

ASSETS Current assets: Cash and cash equivalents $ 10,292 $ 14,456 Restricted cash 779 779 Trade accounts receivable, net of allowance of $186 and $118 4,929 4,733 Inventories, net 7,582 6,158 Prepaid expenses and other current assets 538   413   Total current assets 24,120 26,539 Property and equipment, net 6,240 6,449 Brand name and trademark 1,510 1,510 Purchased technology and license rights, net 217 215 Goodwill 185 185 Deposits 66 109 Other assets 218   103   Total assets $ 32,556   $ 35,110     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,077 $ 1,606 Accrued payroll 416 419 Accrued vacation 375 404 Current portion of mortgage note payable 239 239 Accrued and other liabilities 2,511   2,604   Total current liabilities 5,618 5,272 Mortgage note payable, net of current portion 2,575 2,694 Note payable 140 140 Deferred rents 11 14 Deferred tax liability 564 564 Derivative liabilities 77   203   Total liabilities 8,985 8,887 STOCKHOLDERS' EQUITY Series B convertible preferred stock, $0.001 par value; 3,588,139 authorized and 975,639 issued and outstanding as of June 30, 2017 and December 31, 2016 1 1 Common stock, $0.001 par value; 40,000,000 shares authorized; 31,002,832 issued and 30,859,753 outstanding as of June 30, 2017 and December 31, 2016 31 31 Additional paid-in capital 49,966 49,625 Accumulated deficit (26,427 ) (23,434 ) Total stockholders' equity 23,571   26,223   Total liabilities and stockholders' equity $ 32,556   $ 35,110    

BOVIE MEDICAL CORPORATIONRECONCILIATION OF GAAP NET INCOME/(LOSS) RESULTS TO NON-GAAP ADJUSTED EBITDA/(LOSS)(Unaudited) (In thousands)

Use of Non-GAAP Financial Measures

We present these non-GAAP measures because we believe these measures are useful indicators of our operating performance. Our management uses these non-GAAP measures principally as a measure of our operating performance and believes that these measures are useful to investors because they are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We also believe that these measures are useful to our management and investors as a measure of comparative operating performance from period to period.

The Company has presented the following non-GAAP financial measures in this press release: adjusted EBITDA. The Company defines adjusted EBITDA as its reported net income/(loss) (GAAP) plus income tax expense, interest expense, net, depreciation and amortization, stock-compensation expense, and changes in value of derivative liabilities.

  Three Months EndedJune 30,   Six Months EndedJune 30, 2017   2016 2017   2016 Net loss GAAP Basis $ (1,308 ) $ (519 ) $ (2,993 ) $ (1,944 ) Interest expense, net 36 50 67 88 Income tax expense 4 — 9 — Depreciation and amortization 178 173 356 355 Stock based compensation 182 184 341 360 Change in fair value of derivative liabilities (38 ) (41 ) (126 ) (128 ) Adjusted EBITDA (946 ) (153 ) (2,346 ) (1,269 )

The following unaudited table presents a reconciliation of net loss to Adjusted EBITDA for our 2017 guidance:

  Year Ended 2017 Net loss GAAP Basis $ (2,900 ) Interest expense, net 145 Income tax expense — Depreciation and amortization 720 Stock based compensation 720 Change in fair value of derivative liabilities —   Adjusted EBITDA (1,315 )

The reconciliation assumes the mid-point of the Adjusted EBITDA loss range and the midpoint of each component of the reconciliation, corresponding to guidance of $1.2 million to $1.4 million for 2017.

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Investor Relations Contact:Westwicke Partners on behalf of Bovie Medical CorporationMike Piccinino, CFA443-213-0500investor.relations@boviemed.com