Recent Product Introductions Drive 49% Revenue Growth and Gross
Margin of 66% WESTFORD, Mass., Feb. 12 /PRNewswire-FirstCall/ --
Cynosure, Inc. (NASDAQ:CYNO), a leading developer and manufacturer
of a broad array of light-based aesthetic treatment systems, today
announced record revenues and net income for the quarter and year
ended December 31, 2007. Fourth Quarter 2007 Financial Results
Revenues increased 49% to $36.6 million in the fourth quarter of
2007 from $24.6 million for the fourth quarter of 2006. Gross
profit margin increased more than 600 basis points to 66% of total
revenues compared with 60% for the same period in 2006. Fourth
quarter 2007 net income was $5.3 million, or $0.41 per diluted
share, compared with net income of $1.5 million, or $0.13 per
diluted share, in the fourth quarter of 2006. Non-GAAP net income,
which excludes stock-based compensation expense and its related
income tax effects, was $5.9 million, or $0.46 per diluted share,
for the fourth quarter of 2007. This compares with non-GAAP net
income of $2.5 million, or $0.21 per diluted share, in the fourth
quarter of 2006, which excludes stock-based compensation expense
and its related income tax effects. Please refer to the financial
reconciliations included in this news release for a reconciliation
of GAAP results to non-GAAP results for the three months ended
December 31, 2007 and 2006. "We concluded a banner year in 2007
with another quarter of record financial results, powered by
continued customer demand for our flagship aesthetic laser
systems," said President and Chief Executive Officer Michael Davin.
"Laser product revenue increased 50% in the fourth quarter from the
same period in 2006 led by the success of our Smartlipo(R) laser
lipolysis workstation and our multi-energy Affirm(R) anti-aging
platform, both of which enjoyed a record quarter. In addition, we
achieved a 66% gross margin in the quarter, reflecting our emphasis
on higher-margin products, our strong brand in a competitive
marketplace and efficient execution of our distribution strategy."
"Cynosure's focus on direct distribution continues to yield
positive results," Davin said. "In 2007, we added a total of 20
North American direct sales reps, including a new surgical
specialty sales force to market our Smartlipo workstation in North
America, bringing our total sales force in North America to 66. As
a result, laser product revenue for the quarter from direct
distribution rose 64% year-over-year, and contributed 83% of
product revenue in the fourth quarter compared with 76% of product
revenue in the fourth quarter of 2006. While we plan to continue
our sales force expansion in the quarters ahead, we believe the
groundwork completed during the past year gives us strong momentum
as we begin 2008." Company Introduces Proprietary New Aesthetic
Products at AAD 2008 Cynosure launched a new flagship workstation
and two new product innovations at this month's American Academy of
Dermatology 2008 Annual Meeting in San Antonio: -- Accolade(TM),
Cynosure's sixth flagship product, is a high powered 755 nm,
Q-switched Alexandrite laser for the removal of benign pigmented
lesions, including Nevus of Ota and Nevus of Ito, as well as multi-
color tattoos. Accolade's initial target markets include Japan,
Korea and China. Cynosure expects to begin shipping the Accolade
early in the second quarter of 2008. -- SmartSense(TM) for
Smartlipo(TM) is an intelligent handpiece delivery system for the
Smartlipo. SmartSense provides aesthetic surgeons with more precise
laser power to perform laser lipolysis and offers patients an
enhanced level of safety. SmartSense prevents the laser from firing
once handpiece motion stops, and allows the laser to fire again
once motion resumes. SmartSense is available now. -- Affirm Er
handpiece expands Cynosure's Affirm workstation with a 2940 nm
wavelength, Erbium: YAG laser for ablative skin resurfacing
applications such as the treatment of deep lines and wrinkles.
Affirm is designed for the skin rejuvenation market, which is
expected to grow annually by 18 percent to $239 million by 2010,
according to the Millennium Research Group. Shipments of the Affirm
Er laser are expected to begin at the end of the second quarter of
2008. "We continue to focus on introducing proprietary products
that enable our customers to expand their aesthetic practices, and
each of the innovations we unveiled at AAD fulfills that mission,"
Davin said. "Accolade creates new opportunities in the
international markets where we continue to expand. SmartSense is
our first offering of an intelligent delivery system, further
extending our leadership position in laser lipolysis. And the
Affirm Er handpiece broadens the applications of our Affirm
anti-aging workstation as a complete solution to address a
patient's skin rejuvenation needs." 2007 Financial Results Revenues
in 2007 increased approximately 59% to $124.3 million from $78.4
million in 2006. Net income for 2007 was $14.5 million, or $1.15
per diluted share, versus a net loss of $650,000, or $0.06 per
share, in 2006. Non-GAAP net income, which excludes stock-based
compensation expense and its related income tax effects and, for
2006, expenses relating to the termination of two agreements
associated with Cynosure's legacy relationship with Sona MedSpa
International and a royalty settlement and their related income tax
effects, was $18.3 million, or $1.44 per diluted share, in 2007
compared with non-GAAP net income of $7.7 million, or $0.63 per
diluted share, in 2006. Please refer to the financial
reconciliations included in this news release for a reconciliation
of GAAP results to non-GAAP results for the year ended December 31,
2007 and 2006. Cash, cash equivalents and marketable securities at
December 31, 2007 were $86.1 million, compared with $57.2 million
as of December 31, 2006. Business Outlook "A combination of product
innovation and sales force excellence enabled us to deliver an
outstanding year in 2007, and we expect that momentum to continue
in 2008," Davin said. "Bolstered by Affirm and Smartlipo, our
recent product introductions at AAD and new innovations planned for
the coming quarters, we believe we are well positioned to produce
sustained, profitable growth. Our goal is to continue to grow
faster than the aesthetic market in the year ahead." Use of
Non-GAAP Financial Measures To supplement Cynosure's consolidated
financial statements presented in accordance with GAAP, this press
release includes the following measures defined as non-GAAP
financial measures by the SEC: non-GAAP net income and non-GAAP
diluted earnings per share. 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 2007 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) 289-0573 or (913) 312-0980 (confirmation code:
6674831). 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 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, 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, which is 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. Condensed Consolidated Balance
Sheet (Unaudited) (In thousands) December 31, 2007 2006 Assets:
Cash, cash equivalents and marketable securities $86,097 $57,246
Accounts receivable, net 24,124 19,871 Amounts due from related
parties 8 335 Inventories 22,442 17,624 Deferred tax asset, current
portion 4,161 2,604 Prepaid expenses and other current assets 4,425
4,977 Total current assets 141,257 102,657 Property and equipment,
net 7,146 5,662 Other noncurrent assets 1,441 1,247 Total assets
$149,844 $109,566 Liabilities and stockholders' equity: Accounts
payable and accrued expenses $20,790 $17,063 Amounts due to related
parties 2,311 1,052 Short-term loan -- 167 Deferred revenue 3,939
3,476 Capital lease obligations 485 439 Total current liabilities
27,525 22,197 Capital lease obligations, net of current portion 794
1,069 Deferred revenue, net of current portion 421 311 Other
long-term liabilities 226 119 Total stockholders' equity 120,878
85,870 Total liabilities and stockholders' equity $149,844 $109,566
Consolidated Statements of Income (Unaudited) (In thousands, except
per share data) Three Months Ended Year Ended December 31, December
31, 2007 2006 2007 2006 Revenues $36,573 $24,575 $124,315 $78,401
Cost of revenues 12,472 9,905 44,507 32,920 Gross profit 24,101
14,670 79,808 45,481 Operating expenses Selling and marketing
12,611 8,234 42,058 26,213 Research and development 1,869 1,218
6,827 4,673 General and administrative 2,975 2,757 11,346 8,975
Royalty settlement -- -- -- 10,000 Total operating expenses 17,455
12,209 60,231 49,861 Income (loss) from operations 6,646 2,461
19,577 (4,380) Interest income, net 754 516 2,516 2,579 Other
income, net 255 310 695 931 Income (loss) before income taxes 7,655
3,287 22,788 (870) Income tax provision (benefit) 2,349 1,753 8,276
(266) Minority interest in net income of subsidiary -- 4 -- 46 Net
income (loss) $5,306 $1,530 $14,512 $(650) Diluted net income
(loss) per share $0.41 $0.13 $1.15 $(0.06) Diluted weighted average
shares outstanding 12,806 12,193 12,654 11,084 Basic net income
(loss) per share $0.43 $0.14 $1.21 $(0.06) Basic weighted average
shares outstanding 12,381 11,151 11,993 11,084 To supplement our
consolidated financial statements presented in accordance with
GAAP, Cynosure uses the following measures defined as non-GAAP
financial measures by the SEC: non-GAAP gross profit, non-GAAP
income from operations, non-GAAP net income and non-GAAP diluted
earnings per share. 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. 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.
Reconciliation of GAAP Income Statement Measures to Non-GAAP Income
Statement Measures (Unaudited) (In thousands, except per share
data) Three Months Ended Year Ended December 31, December 31, 2007
2006 2007 2006 Gross profit $24,101 $14,670 $79,808 $45,481
Non-GAAP adjustments to gross profit: Stock-based compensation 104
3 373 82 Sona - inventory writedown -- -- -- 667 Total Non-GAAP
adjustments to gross profit 104 3 373 749 Non-GAAP Gross profit
$24,205 $14,673 $80,181 $46,230 Three Months Ended Year Ended
December 31, December 31, 2007 2006 2007 2006 Income (loss) from
operations $6,646 $2,461 $19,577 $(4,380) Non-GAAP adjustments to
income (loss) from operations: Stock-based compensation 1,494 863
5,777 2,474 Sona - inventory writedown and provision for doubtful
account -- -- -- 1,130 Royalty settlement -- -- -- 10,000 Total
Non-GAAP adjustments to gross profit 1,494 863 5,777 13,604
Non-GAAP Income from operations $8,140 $3,324 $25,354 $9,224 Three
Months Ended Year Ended December 31, December 31, 2007 2006 2007
2006 Net income (loss) $5,306 $1,530 $14,512 $(650) Non-GAAP
adjustments to net income (loss): Stock-based compensation 1,494
863 5,777 2,474 Sona - inventory writedown and provision for
doubtful account -- -- -- 1,130 Royalty settlement -- -- -- 10,000
Income tax provision from IRS Audit -- -- 702 -- Income tax effect
of non-GAAP adjustments (945) 114 (2,710) (5,296) Total Non-GAAP
adjustments to net income (loss) 549 977 3,769 8,308 Non-GAAP Net
income $5,855 $2,507 $18,281 $7,658 Three Months Ended Year Ended
December 31, December 31, 2007 2006 2007 2006 Diluted net income
(loss) per share $0.41 $0.13 $1.15 $(0.06) Anti-dilutive impact of
higher weighted average shares used to compute Non-GAAP diluted net
income per share -- -- -- 0.01 Stock-based compensation 0.12 0.07
0.46 0.20 Sona - inventory writedown and provision for doubtful
account -- -- -- 0.09 Royalty settlement -- -- -- 0.82 Income tax
provision from IRS Audit -- -- 0.06 -- Income tax effect of
Non-GAAP adjustments (0.07) 0.01 (0.21) (0.44) Total Non-GAAP
adjustments to net income (loss) 0.04 0.08 0.30 0.69 Non-GAAP
Diluted net income per share 0.46 0.21 1.44 0.63 Weighted average
shares used to compute diluted net income (loss) per share 12,806
12,193 12,654 11,084 Weighted average shares used to compute
Non-GAAP diluted net income per share 12,806 12,193 12,654 12,143
DATASOURCE: Cynosure, Inc. CONTACT: Scott Solomon, Vice President,
Sharon Merrill Associates, Inc., +1-617-542-5300, , for Cynosure,
Inc. Web site: http://www.cynosure.com/
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