CYNO Cynosure - Class A (MM)

WESTFORD, Mass., Feb. 14 /PRNewswire-FirstCall/ -- Cynosure, Inc. (NASDAQ:CYNO), a leading developer and manufacturer of a broad array of light-based aesthetic treatment systems, today announced financial results for the fourth quarter and year ended December 31, 2005. Fourth-Quarter Financials (in millions except per Fourth Fourth share data and percentages) Quarter 2005 Quarter 2004 Change Total revenue $16.1 $12.2 32% Gross margin 55.9% 49.1% 680 basis pts. Operating income $1.7 $0.1 1937% Operating margin 10.6% 0.7% 990 basis pts. Net income $2.5* $0.8 212% Diluted EPS $0.29* $0.12 142% Cash and cash equivalents $64.6 $4.0 1515% * Includes a $1.3 million deferred income tax benefit. "Cynosure's initial quarter as a public company was very successful from a business perspective," said Cynosure President and Chief Executive Officer Michael Davin. "During the fourth quarter, we continued to record strong growth in revenue, gross margin and net income." Davin continued, "Our success can be attributed to several factors. The first is the strength of our four flagship products, each of which has been introduced to the market during the past 24 months. Sales of these products during the fourth quarter continued to be strong as laser sales in North America and international markets increased 48% and 43%, respectively, over the fourth quarter of 2004. We also continued to benefit from the expansion of our distribution channel as we increased our direct sales force in North America 41% during 2005. We further improved our gross margins due in large part to increased shipments of our new flagship product workstations, ongoing cost control initiatives and our recent shift to a modular manufacturing approach." Business Highlights In recent months, Cynosure has: * Completed a successful initial public offering. The company's 5.75 million share offering, which included a 750,000 share overallotment and 1,000,000 shares that were sold by El.En. S.p.A., yielded net proceeds to Cynosure of approximately $64 million. This provides the company with increased flexibility to pursue its growth initiatives. * Announced the introduction of its new Affirm(TM) product, a multi-energy system for anti-aging, including treatments for wrinkles, skin texture and discoloration. Utilizing a proprietary delivery system, Affirm is the first product to combine multiple energy sources in one platform to provide treatment for wrinkles, micro-rejuvenation and skin discoloration. * Received pre-market approval from the Korea Food and Drug Administration for the Apogee Elite(TM), Cynosure's two-in-one laser hair removal system. Cynosure believes that the potential market opportunity in Korea may exceed 40 million consumers. * Gained Class II medical device license approval from Health Canada to market and sell its laser-based TriActive(TM) LaserDermology(SM) System over the counter in Canada. The TriActive system is Cynosure's flagship product for the temporary reduction in the appearance of cellulite. Full-Year Financials (in millions except per Full Year Full Year share data and percentages) 2005 2004 Change Total revenue $56.3 $41.6 35% Gross margin 54.1% 50.8% 330 basis pts. Operating income $4.6 $1.2 281% Operating margin 8.2% 2.9% 530 basis pts. Net income $4.2* $5.3** -21% Diluted EPS $0.54* $0.92** -41% * Includes a $1.3 million deferred income tax benefit. ** Includes a $3.0 million gain on sale of investment. Davin said, "We accomplished a number of financial milestones in 2005 as our revenue increased 35% year-over-year and our operating margin increased to 8% of revenue. During 2006, we plan to expand Cynosure's growth potential and operating leverage by investing aggressively in our sales and marketing efforts to capitalize on our long-term opportunities both domestically and abroad. We also expect to continue our distinguished record of innovation at Cynosure. "We think the global market for light-based aesthetic lasers has been increasing by 20 percent annually, making it one of today's most dynamic industries. Through our investment in Cynosure's technology and distribution channels, we believe we are positioned to take advantage of this market growth while improving our margins and profitability," Davin concluded. Conference Call Cynosure will host a conference call for investors this morning at 9:00 a.m. ET. On the call, President and Chief Executive Officer Michael Davin and Executive Vice President and Chief Financial Officer Timothy Baker will discuss Cynosure's fourth-quarter and year-end 2005 financial results, as well as its business outlook and growth strategy. Those who wish to listen to the conference call webcast should visit the "Investors" section of the company's website at http://www.cynosurelaser.com/. The live call also can be accessed by dialing (888) 349-5690 or (706) 643-3945 (conference ID: 4272062) prior to the start of the call. If you are unable to listen to the live call, the webcast will be archived on the company's website. About Cynosure, Inc. Cynosure, Inc. develops and markets aesthetic laser treatment systems that are used by physicians and other practitioners to perform non-invasive procedures to remove hair, treat vascular lesions, rejuvenate skin through the treatment of shallow vascular and pigmented lesions and temporarily reduce the appearance of cellulite. Cynosure's products include a broad range of laser and other light-based energy sources, including Alexandrite, pulse-dye, Nd:YAG and diode lasers, as well as intense pulsed light. Cynosure was founded in 1991. For corporate or product information, contact Cynosure at 800-886-2966, or visit http://www.cynosurelaser.com/. Safe Harbor Any statements in this press release about future expectations, plans and prospects for Cynosure, Inc., including statements about the company's expectations future financial performance and market growth, as well as other statements containing the words "believes," "anticipates," "plans," "expects," "will" and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including Cynosure's history of operating losses, its reliance on sole source suppliers, competition in the aesthetic laser industry, economic, market, technological and other factors discussed in Cynosure's Registration Statement on Form S-1, as amended, filed with the SEC. In addition, the forward-looking statements included in this press release represent Cynosure's views as of the date of this press release. Cynosure anticipates that subsequent events and developments will cause its views to change. However, while Cynosure may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Cynosure's views as of any date subsequent to the date of this press release. Contact: Jason Fredette Vice President Sharon Merrill Associates, Inc. 617-542-5300 Condensed Consolidated Statements of Income (In thousands, except per share data) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 (Unaudited) Revenues $16,141 $12,226 $56,262 $41,633 Cost of revenues 7,119 6,220 25,843 20,465 Gross profit 9,022 6,006 30,419 21,168 Operating expenses Selling and marketing 5,059 3,924 17,230 12,590 Research and development 858 939 3,173 3,139 General and administrative 1,314 1,031 4,999 4,092 Stock-based compensation 80 28 406 136 Total operating expenses 7,311 5,922 25,808 19,957 Income from operations 1,711 84 4,611 1,211 Gain on sale of investment - - - 3,019 Other income (expense), net 3 289 (279) 854 Income before income taxes and minority interest 1,714 373 4,332 5,084 Income tax (benefit) provision (827) (402) 102 (276) Minority interest in net income of subsidiary 12 21 70 64 Net income $2,529 $754 $4,160 $5,296 Diluted net income per share $0.29 $0.12 $0.54 $0.92 Diluted weighted average shares outstanding 8,814 6,503 7,715 5,773 Basic net income per share $0.34 $0.12 $0.64 $0.93 Basic weighted average shares outstanding 7,395 6,205 6,522 5,700 Condensed Consolidated Balance Sheets (In thousands) December 31, 2005 2004 Assets: Cash and cash equivalents $64,646 $4,028 Accounts receivable, net 13,552 8,410 Amounts due from related parties 72 - Inventories 14,140 9,871 Deferred tax asset, current portion 1,804 - Prepaid expenses and other current assets 737 962 Total current assets 94,951 23,271 Property and equipment, net 4,424 3,733 Long-term investment 257 257 Other noncurrent assets 536 740 Total assets $100,168 $28,001 Liabilities and stockholders' equity: Short-term loan $161 $205 Accounts payable and accrued expenses 10,682 10,219 Amounts due to related parties 960 1,203 Deferred revenue 3,626 848 Capital lease obligations 295 118 Total current liabilities 15,724 12,593 Capital lease obligations, net of current portion 814 476 Deferred revenue, net of current portion 123 - Other long-term liabilities 42 Minority interest in consolidated subsidiary 314 292 Total stockholders' equity 83,151 14,640 Total liabilities and stockholders' equity $100,168 $28,001 First Call Analyst: FCMN Contact: DATASOURCE: Cynosure, Inc. CONTACT: Jason Fredette, Vice President of Sharon Merrill Associates, Inc. for Cynosure, Inc., +1-617-542-5300 Web site: http://www.cynosurelaser.com/

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