New Products and Direct Distribution Strategy Drive 42% Sales
Growth WESTFORD, Mass., May 4 /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 quarter ended March 31, 2006. Revenues
for the first quarter increased 42% to $17.1 million from $12.1
million for the first quarter of 2005. Net income increased 169% to
$0.6 million for the first quarter of 2006 from $0.2 million for
the first quarter of 2005. Financial Highlights Cynosure's results
for the first quarter of 2006 include approximately $0.3 million in
stock-based compensation expense and $1.1 million in charges
relating to the write-down of inventory and uncollectable accounts
receivable as a result of the expected termination of two
agreements related to the company's legacy relationship with Sona
MedSpa International. Cynosure did not record similar charges or
stock-based compensation expenses in the 2005 period. Cynosure's
key financial results for the first quarter of 2006 as compared
with the first quarter of 2005 on a GAAP basis and on a non-GAAP
basis that excludes the stock-based compensation and other charges
incurred in the first quarter of 2006 are as set forth below. The
non-GAAP measures are described below and reconciled to the
corresponding GAAP measures in the section below titled "Use of
Non-GAAP Financial Measures." First-Quarter Financials (in
thousands except per share data and percentages) Q1 2006 Q1 2005
Change Q1 2006 Change GAAP GAAP between Q1 Non-GAAP between Q1 2005
GAAP 2005 GAAP and Q1 2006 and Q1 2006 GAAP Non-GAAP Total revenue
$17,139 $12,109 41.5% $17,139 41.5% Gross margin 53.1% 53.6% (50
bps) 57.1% 350 bps Operating income $294 $570 (48.4%) $1,722 202%
Operating margin 1.7% 4.7% (300 bps) 10.1% 540 bps Net income $626
$233 168.7% $1,501 544% Diluted EPS $0.05 $0.03 66.0% $0.12 300%
Cash and investments $63.9 $4.4 1352.3% $63.9 1352.3% "Robust
demand for our laser systems in the United States and Europe,
combined with a strong product mix, enabled us to deliver top-line
growth in excess of 40 percent for the quarter over the same period
last year," said President and Chief Executive Officer Michael
Davin. "Our record revenue resulted from the investment of
significant resources into our direct distribution channel, which
accounted for more than 80 percent of our laser sales in the first
quarter. Our North American sales management team is now complete,
and we expect to achieve our goal of adding 15 new sales
representatives in the first half of the year. We also are pleased
with the performance of our European operations -- in France,
Germany, Spain and the U.K. -- all of which were significant
contributors to our profitable first quarter. "During the quarter,
we benefited from sales of higher margin products that we recently
introduced to the market, including our Apogee Elite(TM)
workstation, the TriActive(TM) LaserDermology(SM) system and the
Cynergy(R) workstation with Multiplex(TM) technology," Davin said.
"The response to these products has been enthusiastic in all three
of our target markets -- traditional and non-traditional physician
users, as well as medi-spas." Charges Related to Sona MedSpa
International Cynosure recorded charges in the first quarter of
2006 to write-down inventory and accounts receivable as a result of
the expected termination of two agreements related to the company's
legacy relationship with Sona MedSpa International, a spa
franchisor. Sona recently notified Cynosure that it was uncertain
that it had the financial resources to honor its commitments to
Cynosure. Two days ago Cynosure sent Sona a notice of default with
respect to Sona's failure to pay Cynosure amounts payable under the
two agreements. The defaults, if not cured in 30 days, are expected
to lead to termination of the agreements. Davin said, "As a result
of the Sona developments, in the first quarter of 2006 we recorded
charges related to the write-down of inventory of $667,000 and
uncollectable accounts receivable of $463,000." However, Davin also
said, "These developments are not likely to have a material effect
on Cynosure's future earnings. Revenue attributable to our legacy
relationship with Sona has decreased from 2% of our total revenue
in 2005 to 0.7% of our total revenue in the first quarter of 2006
and is not part of our core growth strategy." Business Outlook "We
believe we are off to a great start in 2006 as our new product
introductions are gaining traction globally," Davin concluded. "We
are encouraged by the early returns on the investments we have made
in marketing and direct sales. We feel we are in a strong position
to extend our first-quarter momentum throughout 2006, as the trends
in our target markets continue to generate robust demand for our
innovative products." Business Highlights Since the end of the
fourth quarter of 2005, Cynosure: * Launched a new flagship
product, the Cynergy(R) workstation with MultiPlex(TM) technology,
an innovative multi-energy system used in the treatment of
dermatological vascular conditions. Following its recent clearance
from the U.S. Food and Drug Administration, the Cynergy workstation
is the first system to enable the rapid sequential emission of two
wavelengths from the same optical fiber -- a pulse-dye laser and an
Nd:YAG laser -- with a short time delay between the two pulses.
This delay increases the safety and efficacy of laser treatments. *
Expanded its reach into one of the world's 10 largest markets by
gaining approval for the Cynergy workstation with MultiPlex
technology and the Apogee Elite two-in-one laser hair removal
system from the Korea Food and Drug Administration. * Received
additional FDA clearance for its 585 nm wavelength pulse dye laser
(PDL) used to treat pigmented lesions, cafe au lait birthmarks and
other skin lesions such as scars and warts. This new FDA clearance
is in addition to the approval that Cynosure previously obtained
for the PDL for treatment of vascular lesions, which include port
wine stains, spider veins and the blush of rosacea. * Continued its
support of training for women's healthcare providers by entering
into an agreement with Omnia Education, a wholly owned subsidiary
of US HealthConnect, Inc. Under the terms of the agreement,
Cynosure will provide commercial support for aesthetic procedure
education and training for healthcare providers specifically
focused on women. * Launched its state-of-the-art Affirm(TM) system
at the 26th Annual Meeting of the American Society for Laser
Medicine and Surgery in Boston. Cynosure's newest flagship product,
the Affirm(TM) system, is designed to provide anti-aging treatments
for a diverse range of indications, including wrinkles,
micro-rejuvenation, skin discoloration and skin tightening. Use of
Non-GAAP Financial Measures To supplement Cynosure's consolidated
financial statements presented in accordance with GAAP, this press
release uses the following measures defined as non-GAAP financial
measures by the SEC: non-GAAP total revenue, non-GAAP gross margin,
non-GAAP operating income, non-GAAP operating margin, non-GAAP net
income and non-GAAP diluted earnings per share. These non-GAAP
measures exclude charges related to the write-down of inventory of
$667,000 and uncollectable accounts receivable of $463,000 and
exclude $298,000 in stock- based compensation. The presentation of
this financial information is not intended to be considered in
isolation or as a substitute for the financial information prepared
and presented in accordance with GAAP. In addition, the non-GAAP
financial measures included in this press release may be different
from, and therefore not comparable to, similar measures used by
other companies. Although certain non-GAAP financial measures used
in this release exclude the accounting treatment of stock-based
compensation, these non-GAAP measures should not be relied upon
independently, as they ignore the contribution to our operating
results that is generated by the incentive and compensation effects
of the underlying stock-based compensation programs. For more
information on these non-GAAP financial measures, please see the
table captioned "Reconciliation of GAAP results to Non-GAAP
results" included at the end of this release. The table has more
details of the GAAP financial measures that are most directly
comparable to non-GAAP financial measures and the related
reconciliations between these financial measures. Cynosure's
management believes that these non-GAAP financial measures provide
meaningful supplemental information regarding our performance by
excluding certain expenses and expenditures that may not be
indicative of our core business operating results. Cynosure
believes that both management and investors benefit from referring
to these non-GAAP financial measures in assessing Cynosure's
performance and when planning, forecasting and analyzing future
periods. These non-GAAP financial measures also facilitate
management's internal comparisons to Cynosure's historical
performance and our competitor's operating results. Cynosure
believes that these non-GAAP measures are useful to investors in
allowing for greater transparency with respect to supplemental
information used by management in its financial and operational
decision making. 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 first quarter 2006 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 Cynosure's website at http://www.cynosurelaser.com/. The live
call also can be accessed by dialing (866) 323-7221 or (706)
643-0228 (conference ID: 7760386) 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 and future financial
performance, 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 Annual Report on Form 10-K, 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: Scott Solomon Vice
President Sharon Merrill Associates, Inc. 617-542-5300 Consolidated
Statements of Income (In thousands, except per share data) Three
Months Ended March 31, 2006 2005 (Unaudited) Revenues $17,139
$12,109 Cost of revenues 8,032 5,618 Gross profit 9,107 6,491
Operating expenses Selling and marketing 5,458 3,866 Research and
development 1,209 863 General and administrative 2,146 1,192 Total
operating expenses 8,813 5,921 Income from operations 294 570
Interest income (expense), net 652 (11) Other income (expense), net
130 (135) Income before income taxes 1,076 424 Income tax provision
436 172 Minority interest in net income of subsidiary 14 19 Net
income $626 $233 Diluted net income per share $0.05 $0.03 Diluted
weighted average shares outstanding 12,178 7,034 Basic net income
per share $0.06 $0.04 Basic weighted average shares outstanding
11,031 6,243 Consolidated Statements of Income (In thousands,
except per share data) Reconciliation of GAAP Results to Non-GAAP
Results March 31, 2006 Stock- GAAP based Sona Non-GAAP compensation
Revenues $17,139 $ - $ - $17,139 Cost of revenues 8,032 (6) (667)
7,359 Gross profit 9,107 6 667 9,780 Operating expenses Selling and
marketing 5,458 (74) - 5,384 Research and development 1,209 (68) -
1,141 General and administrative 2,146 (150) (463) 1,533 Total
operating expenses 8,813 (292) (463) 8,058 Income from operations
294 298 1,130 1,722 Interest income (expense), net 652 - - 652
Other income (expense), net 130 - - 130 Income before income taxes
1,076 298 1,130 2,504 Income tax provision 436 107 446 989 Minority
interest in net income of subsidiary 14 - - 14 Net income $626 $191
$684 $1,501 Diluted net income per share $0.05 $0.01 $0.06 $0.12
Diluted weighted average shares outstanding 12,178 12,178 12,178
12,178 Basic net income per share $0.06 $0.02 $0.06 $0.14 Basic
weighted average shares outstanding 11,031 11,031 11,031 11,031
Condensed Consolidated Balance Sheet (In thousands) March 31,
December 31, 2006 2005 (Unaudited) Assets: Cash, cash equivalents
and marketable securities $63,868 $64,646 Accounts receivable, net
13,229 13,552 Amounts due from related parties 91 72 Inventories
15,689 14,140 Deferred tax asset, current portion 2,235 1,804
Prepaid expenses and other current assets 843 737 Total current
assets 95,955 94,951 Property and equipment, net 4,403 4,424 Other
noncurrent assets 789 793 Total assets $101,147 $100,168
Liabilities and stockholders' equity: Short-term loan $162 $161
Accounts payable and accrued expenses 11,415 10,682 Amounts due to
related parties 1,485 960 Deferred revenue 2,150 3,626 Capital
lease obligations 314 295 Total current liabilities 15,526 15,724
Capital lease obligations, net of current portion 855 814 Deferred
revenue, net of current portion 201 123 Other long-term liabilities
63 42 Minority interest in consolidated subsidiary 330 314 Total
stockholders' equity 84,172 83,151 Total liabilities and
stockholders' equity $101,147 $100,168 DATASOURCE: Cynosure, Inc.
CONTACT: Scott Solomon, Vice President of Sharon Merrill
Associates, Inc., for Cynosure, Inc., +1-617-542-5300, Web site:
http://www.cynosurelaser.com/
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