New Products and Expanded Distribution Drive Record Operating
Profits WESTFORD, Mass., Feb. 13 /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 and year ended December
31, 2006. Fourth Quarter 2006 Financial Results Revenues increased
52% to a record $24.6 million from $16.1 million for the fourth
quarter of 2005. Gross profit margin increased 380 basis points to
59.7% of total revenues compared with 55.9% for the same period in
2005. Fourth quarter 2006 net income was $1.5 million, or $0.13 per
diluted share, which included approximately $0.9 million in
stock-based compensation expense. Fourth quarter 2005 net income,
which included a $1.3 million deferred income tax benefit, was $2.5
million or $0.29 per diluted share. Non-GAAP net income, which
excludes the stock-based compensation expense and deferred income
tax benefit, was $2.5 million, or $0.21 per diluted share, for the
fourth quarter of 2006 compared with $1.1 million, or $0.12 per
diluted share, in the fourth quarter of 2005. Please refer to the
financial reconciliations included in this news release for a
reconciliation of GAAP results to Non-GAAP results for the three
and 12 months ended December 31, 2006 and 2005. "We delivered an
outstanding quarter, with record top-line growth and gains in
operating profitability," said Cynosure President and Chief
Executive Officer Michael Davin. "Driven by market penetration
across our flagship laser systems, early market adoption of our
newly-launched Affirm(TM) Anti- Aging System and an expanded
distribution platform, Cynosure achieved revenue growth of more
than 50% as compared to the fourth quarter of 2005. Market demand
for the Affirm system has exceeded our expectations for the
quarter. With our continued shift toward higher-margin products and
ongoing operational efficiencies, we generated a substantial
increase in gross margins year over year, even with the royalty
payments that we began to pay in the fourth quarter. "Since its
launch in the third quarter, we believe Affirm has gained
considerable traction in the marketplace," said Davin. "Affirm's
ease of use, versatility and treatment speed set it apart from
competing devices. Our proprietary disposable microlens array,
included with the Affirm system workstation, offers physicians and
clinicians the ability to treat patients more rapidly than
conventional products. With this month's introduction of the 1320nm
Nd:YAG laser for deep heating, the Affirm system now incorporates
three energy sources and represents the most versatile aesthetic
treatment product for anti-aging in the market today. "We believe
our strong fourth quarter results were also due to our strength
across our worldwide distribution channels, coupled with our
success in establishing strategic alliances with recognized leaders
in the aesthetic market," Davin said. "North America sales
accounted for 56% of our laser revenue, while the remaining 44% was
attributable to international markets. We expanded our presence in
China by establishing a wholly-owned subsidiary through a previous
joint venture. In the United Kingdom, we benefited from our
position as the exclusive technology provider for new skin
treatment clinics being opened by sk:n Ltd. "Across our geographic
footprint, we believe our flagship products continue to resonate
with our customers," Davin said. "Our latest entry into the
marketplace -- the Smartlipo(TM) system -- is generating sizeable
interest among the patient population. The addition of the
Smartlipo system to our product suite now enables our customers to
offer a minimally invasive liposuction alternative to patients who
want to remove unwanted fat." Recent Highlights Since the end of
the third quarter of 2006, Cynosure: - Debuted a new 1320nm
wavelength Nd:YAG laser for its flagship Affirm(TM) workstation at
the American Academy of Dermatology's 2007 Annual Meeting. The new
laser complements the range of treatment options now possible on
the Affirm workstation to include tissue tightening as a result of
tissue coagulation, in addition to fractional micro-rejuvenation
and discoloration. - Received FDA clearance and launched its
Smartlipo(TM) system for laser assisted lipolysis, or
LaserBodySculpting(SM), a procedure that disrupts fat cells and
causes coagulation of the tissue leading to skin tightening. The
Company recently signed an exclusive distribution agreement for its
Smartlipo(TM) laser lipolysis system with Eclipse Medical Ltd., a
leading distributor of aesthetic high-tech medical devices and
supplies. Under the three-year agreement, Eclipse Medical will have
exclusive distribution rights for the Smartlipo system in a
four-state region in the southern United States. - Received Class
III medical device license approval from Health Canada to market
and sell its flagship Affirm(TM) laser system in Canada. The Affirm
system is a single platform, multi-energy technology designed for
anti-aging applications, including skin rejuvenation and treatments
for wrinkles, skin texture and discoloration. - Was selected by
American Laser Centers, a leading U.S. provider of laser hair
removal, skin rejuvenation and cellulite reduction therapy, to
provide fractional anti-aging technology through Cynosure's
Affirm(TM) aesthetic workstation. - Strengthened its position in
China's fast-growing aesthetic treatment systems market by
acquiring the remaining 48% interest in Suzhou Cynosure Medical
Devices, Co., a joint venture with Suzhou 66 Vision- Tech Co.,
Ltd., and began operating "Cynosure China," as a wholly owned
subsidiary. - Entered into a patent cross-license agreement with
Palomar Technologies, Inc. to obtain a non-exclusive license to
integrate into the Cynosure product line certain hair removal
technology covered by specified U.S. and foreign patents held by
Palomar. In the cross- license agreement, Palomar obtained a
non-exclusive license under certain U.S. and foreign patents held
by Cynosure. 2006 Financial Results For full-year 2006, revenues
increased 39% to $78.4 million from $56.3 million in 2005.
Cynosure's gross profit margin grew to 58.0% in 2006 from 54.1% for
full-year 2005. In 2006, Cynosure recorded a GAAP net loss of $0.7
million, or $0.06 per diluted share, compared with net income of
$4.2 million, or $0.54 per diluted share, for the same period in
2005. Results for 2006 included a $10.0 million royalty payment to
Palomar, $2.5 million in stock- based compensation expense and a
$1.1 million expense recorded to inventory and uncollectible
accounts receivable resulting from the termination of two
agreements associated with Cynosure's legacy relationship with Sona
MedSpa International. Results for 2005 included a $1.3 million
deferred income tax benefit and $0.5 million in stock-based
compensation expense. On a non-GAAP basis, excluding the effect of
the royalty payment to Palomar, stock-based compensation expense
and the Sona MedSpa-related charges, net income for 2006 was $7.7
million, or $0.63 per diluted share, compared with $2.8 million, or
$0.37 per diluted share, for 2005. Please refer to the financial
reconciliations included in this news release for a reconciliation
of GAAP results to Non-GAAP results for the three and 12 months
ended December 31, 2006 and 2005. Business Outlook "Our success in
2006 was powered by high margin products, a diverse customer base
and an expansive distribution network," Davin concluded. "More than
98% of our 2006 revenue was generated by products introduced in the
past two-and-a-half years, reflecting our commitment to innovate
and transform our clients' businesses by providing solutions for
the latest aesthetic treatments. That philosophy underlies the new
corporate identity and branding initiative we launched this month.
Based on the strength of our established flagship products and the
early market reception to our Affirm and Smartlipo systems, we are
excited about our prospects in 2007." 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 net income and non-GAAP diluted earnings per share.
For the three months ended December 31, 2006, these non-GAAP
measures exclude $863,000 in stock-based compensation expense. For
the 12 months ended December 31, 2006, these non-GAAP measures
exclude charges of $10 million related to the Palomar agreement,
$667,000 related to the write-down of inventory, $463,000 in
uncollectible accounts receivable and $2.5 million in stock-based
compensation expense. 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 non-GAAP data included
at the end of this release. This data 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 competitors' 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 today at 9:00 a.m. ET. On the call,
Michael Davin and Timothy Baker, the company's executive vice
president and chief financial officer, will discuss the
fourth-quarter and full-year 2006 financial results, provide a
business update and discuss the company's growth strategy. Those
who wish to listen to the conference call webcast should visit the
"Investor Relations" section of the company's website at
http://www.cynosure.com/. The live call also can be accessed by
dialing (800) 289-0518 or (913) 981-5532 (confirmation code:
9140300). If you are unable to listen to the live call, the webcast
will be archived on the company's website for 30 days. About
Cynosure, Inc. Cynosure, Inc. develops and markets aesthetic
treatment systems that are used by physicians and other
practitioners to perform non-invasive and minimally invasive
procedures to remove hair, treat vascular lesions, rejuvenate skin
through the treatment of shallow vascular and pigmented lesions,
laser lipolysis and temporarily reduce the appearance of cellulite.
Cynosure's products include a broad range of laser and other
light-based energy sources, including Alexandrite, pulsed 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.cynosure.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, the inability to accurately
predict the timing or outcome of regulatory decisions, timing of
the company's international launch of the Affirm system, changes in
consumer preferences, competition in the aesthetic laser industry,
economic, market, technological and other factors discussed in
Cynosure's most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q, which are filed with the Securities and
Exchange Commission. 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 and unaudited) Three Months Ended Year Ended December 31,
December 31, 2006 2005 2006 2005 (unaudited) Revenues $24,575
$16,141 $78,401 $56,262 Cost of revenues 9,905 7,119 32,920 25,843
Gross profit 14,670 9,022 45,481 30,419 Operating expenses Selling
and marketing 8,234 5,087 26,213 17,506 Research and development
1,218 868 4,673 3,199 General and administrative 2,757 1,356 8,975
5,103 Royalty settlement - - 10,000 - Total operating expenses
12,209 7,311 49,861 25,808 Income (loss) from operations 2,461
1,711 (4,380) 4,611 Interest income (expense), net 516 129 2,579 89
Other income (expense), net 310 (125) 931 (368) Income (loss)
before income taxes 3,287 1,715 (870) 4,332 Income tax provision
(benefit) 1,753 (827) (266) 102 Minority interest in net income of
subsidiary 4 12 46 70 Net income (loss) $1,530 $2,530 $(650) $4,160
Diluted net income (loss) per share $0.13 $0.29 $(0.06) $0.54
Diluted weighted average shares outstanding 12,193 8,814 11,084
7,715 Basic net income (loss) per share $0.14 $0.34 $(0.06) $0.64
Basic weighted average shares outstanding 11,151 7,395 11,084 6,522
Non-GAAP data Gross Profit $14,670 $9,022 $45,481 $30,419 Sona -
inventory writedown - - 667 - Stock-based compensation 3 26 82 63
Non-GAAP Gross Profit 14,673 9,048 46,230 30,482 Operating
Expenses: 12,209 7,311 49,861 25,808 Sona - provision for doubtful
account - - (463) - Royalty settlement - - (10,000) - Stock-based
compensation (860) (80) (2,392) (406) Non-GAAP Operating Expenses
11,349 7,231 37,006 25,402 Non-GAAP Income from Operations 3,324
1,817 9,224 5,080 Interest income (expense), net and other income
826 4 3,510 (279) Non-GAAP Income before income taxes 4,150 1,821
12,734 4,801 Non-GAAP provision for income taxes 1,639 719 5,030
1,896 Minority Interest 4 12 46 70 Non-GAAP Net income $2,507
$1,090 $7,658 $2,835 Non-GAAP diluted net income per share $0.21
$0.12 $0.63 $0.37 Diluted weighted average shares outstanding
12,193 8,814 12,143 7,715 Condensed Consolidated Balance Sheet (In
thousands and unaudited) December 31, 2006 2005 Assets: Cash, cash
equivalents and marketable securities $57,246 $64,646 Accounts
receivable, net 19,871 13,552 Amounts due from related parties 335
72 Inventories 17,624 14,140 Deferred tax asset, current portion
2,604 1,804 Prepaid expenses and other current assets 4,977 737
Total current assets 102,657 94,951 Property and equipment, net
5,662 4,424 Other noncurrent assets 1,247 793 Total assets $109,566
$100,168 Liabilities and stockholders' equity: Short-term loan $167
$161 Accounts payable and accrued expenses 17,063 10,682 Amounts
due to related parties 1,052 960 Deferred revenue 3,476 3,626
Capital lease obligations 439 295 Total current liabilities 22,197
15,724 Capital lease obligations, net of current portion 1,069 814
Deferred revenue, net of current portion 311 123 Other long-term
liabilities 119 42 Minority interest in consolidated subsidiary -
314 Total stockholders' equity 85,870 83,151 Total liabilities and
stockholders' equity $109,566 $100,168 DATASOURCE: Cynosure, Inc.
CONTACT: Scott Solomon, Vice President of Sharon Merrill
Associates, Inc., +1-617-542-5300, or , for Cynosure, Inc. Web
site: http://www.cynosure.com/
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