Smartlipo MPX Workstation and International Business Drive Top-Line
Growth; Company Posts Eighth Consecutive Quarter of Profitability
WESTFORD, Mass., Oct. 28 /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 three and nine months ended September 30,
2008. Third-Quarter 2008 Financial Results Revenues increased to
$38.2 million for the third quarter of 2008 from $31.5 million for
the third quarter of 2007. Gross profit margin was 64.9% of total
revenues, compared with 65.0% for the same period in 2007. Net
income for the third quarter of 2008 was $3.2 million, or $0.25 per
diluted share, compared with net income of $4.4 million, or $0.34
per diluted share, for the third quarter of 2007. Results for the
third quarter of 2008 include a foreign currency exchange loss of
$0.4 million, compared with a foreign currency exchange gain of
$0.5 million in the third quarter of 2007. Non-GAAP net income,
which excludes stock-based compensation expense and its related
income tax effects, was $4.7 million, or $0.37 per diluted share,
for the third quarter of 2008, compared with non-GAAP net income of
$5.1 million, or $0.40 per diluted share, for the third quarter of
2007. 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 September 30, 2008 and 2007.
"Cynosure posted strong third-quarter results despite challenging
global economic conditions, generating revenue growth of more than
20% over the prior year period and delivering our eighth
consecutive quarter of profitability," said President and Chief
Executive Officer Michael Davin. "While the worldwide financial
contraction clearly has affected the aesthetic industry, our
consistent focus on innovation enabled us to extend our leadership
position. Driving our performance was steady demand for our Elite
workstation for laser hair removal, our Affirm workstations for
anti-aging and Smartlipo MPX, our new 32-watt workstation for laser
body sculpting." "Smartlipo MPX represents our most recent
innovation in an advanced generation of laser systems that combine
the power and performance of dual- wavelength technology with
intelligent energy delivery," Davin continued. "As part of our goal
of driving broad adoption of Smartlipo MPX through industry
luminaries, we are selling the product at a slightly lower price
than originally planned. While that decision contributed to a
decrease in our third-quarter gross margin from the second quarter,
our strategy to rapidly build our installed base has been
successful, particularly among plastic surgeons with high-volume
liposuction practices. Smartlipo MPX accounted for 73% of our total
Smartlipo sales in the third quarter, compared with 46% in the
second quarter." "We continue to invest in and expand our sales and
marketing infrastructure in key regions, including China and
Japan," Davin said. "These efforts are beginning to yield results,
with international product revenue increasing 29% in the third
quarter of 2008 compared with the year-ago period. Our
international expansion is continuing with the scheduled opening
this quarter of a direct sales office in Mexico, marking the
seventh country in which we will have a direct distribution
location." Nine-Month Results For the nine months ended September
30, 2008, revenues increased approximately 30% to $114.2 million
from $87.7 million for the same period in 2007. For the nine months
ended September 30, 2008 gross profit margin increased to 66.2% of
total revenues compared with 63.5% for the same period in 2007. Net
income for the first nine months of 2008 was $12.7 million, or
$0.99 per diluted share, versus $9.2 million, or $0.73 per diluted
share, for the same period in 2007. Non-GAAP net income, which
excludes stock-based compensation expense and its related income
tax effects, was $16.3 million, or $1.27 per diluted share, for the
first nine months of 2008 compared with $12.4 million, or $0.99 per
diluted share, in the first nine months of 2007. Please refer to
the financial reconciliations included in this news release for a
reconciliation of GAAP results to Non-GAAP results for the nine
months ended September 30, 2008 and 2007. Business Outlook "While
our industry is not immune to the current economic turmoil,
Cynosure enters the fourth quarter well positioned operationally
and financially," Davin said. "This year we have maintained our
commitment to profitable growth through innovation. Without
cannibalizing our existing products, we have introduced three new
flagship workstations and two new delivery systems targeted toward
high-growth applications. We have invested in our direct sales and
marketing infrastructure in North America as well as in Europe and
Asia. We continue to maintain a healthy balance sheet, ending the
third quarter with cash, cash equivalents, marketable securities
and long- term investments of $92.7 million and no long-term debt.
Given the macroeconomic environment, we have adopted a cautious
near-term outlook. However, the sentiment of our sales force in the
field remains decidedly positive and we continue to see significant
upside opportunity for our technology over the long term." 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 third
quarter 2008 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 (877) 407-5790 or (201)
689- 8328. 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, liquefy and remove
unwanted fat through 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/. Forward-Looking Statements 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. Consolidated Statements of Income
(In thousands, except per share data) Three Months Ended Nine
Months Ended September 30, September 30, 2008 2007 2008 2007
(unaudited) (unaudited) Revenues $38,209 $31,533 $114,167 $87,742
Cost of revenues 13,396 11,045 38,645 32,035 Gross profit 24,813
20,488 75,522 55,707 Operating expenses Selling and marketing
13,911 10,310 41,190 29,447 Research and development 1,992 1,468
5,606 4,958 General and administrative 3,983 3,143 11,108 8,371
Total operating expenses 19,886 14,921 57,904 42,776 Income from
operations 4,927 5,567 17,618 12,931 Interest income, net 549 661
1,977 1,762 Other (expense) income, net (425) 356 9 440 Income
before income taxes 5,051 6,584 19,604 15,133 Income tax provision
1,888 2,207 6,912 5,927 Net income $3,163 $4,377 $12,692 $9,206
Diluted net income per share $0.25 $0.34 $0.99 $0.73 Diluted
weighted average shares outstanding 12,854 12,751 12,806 12,604
Basic net income per share $0.25 $0.36 $1.01 $0.78 Basic weighted
average shares outstanding 12,642 12,281 12,542 11,863 Condensed
Consolidated Balance Sheet (In thousands) September 30, December
31, 2008 2007 (unaudited) Assets: Cash, cash equivalents and
marketable securities $72,893 $86,097 Accounts receivable, net
39,503 24,124 Amounts due from related parties 37 8 Inventories
26,178 22,442 Deferred tax asset, current portion 4,681 4,161
Prepaid expenses and other current assets 3,290 4,425 Total current
assets 146,582 141,257 Property and equipment, net 8,518 7,146
Long-term investments 19,785 - Other noncurrent assets 1,442 1,441
Total assets $176,327 $149,844 Liabilities and stockholders'
equity: Accounts payable and accrued expenses $25,007 $20,790
Amounts due to related parties 4,503 2,311 Deferred revenue 4,527
3,939 Capital lease obligations 422 485 Total current liabilities
34,459 27,525 Capital lease obligations, net of current portion 499
794 Deferred revenue, net of current portion 465 421 Other
long-term liabilities 491 226 Total stockholders' equity 140,413
120,878 Total liabilities and stockholders' equity $176,327
$149,844 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 (In
thousands, except per share data) Three Months Ended Nine Months
Ended September 30, September 30, 2008 2007 2008 2007 (unaudited)
(unaudited) Gross profit $24,813 $20,488 $75,522 $55,707 Non-GAAP
adjustments to gross profit: Stock-based compensation 145 100 411
269 Total Non-GAAP adjustments to gross profit 145 100 411 269
Non-GAAP Gross profit $24,958 $20,588 $75,933 $55,976 Three Months
Ended Nine Months Ended September 30, September 30, 2008 2007 2008
2007 (unaudited) (unaudited) Income from operations $4,927 $5,567
$17,618 $12,931 Non-GAAP adjustments to income from operations:
Stock-based compensation 2,096 1,436 5,663 4,283 Total Non-GAAP
adjustments to income from operations 2,096 1,436 5,663 4,283
Non-GAAP Income from operations $7,023 $7,003 $23,281 $17,214 Three
Months Ended Nine Months Ended September 30, September 30, 2008
2007 2008 2007 (unaudited) (unaudited) Net income $3,163 $4,377
$12,692 $9,206 Non-GAAP adjustments to net income: Stock-based
compensation 2,308 1,436 5,875 4,283 Income tax provision from IRS
Audit - - - 702 Income tax effect of non-GAAP adjustments (762)
(680) (2,261) (1,765) Total Non-GAAP adjustments to net income
1,546 756 3,614 3,220 Non-GAAP Net income $4,709 $5,133 $16,306
$12,426 Three Months Ended Nine Months Ended September 30,
September 30, 2008 2007 2008 2007 (unaudited) (unaudited) Diluted
net income per share $0.25 $0.34 $0.99 $0.73 Stock-based
compensation 0.18 0.11 0.46 0.34 Income tax provision from IRS
Audit - - - 0.06 Income tax effect of Non-GAAP adjustments (0.06)
(0.05) (0.18) (0.14) Total Non-GAAP adjustments to net income 0.12
0.06 0.28 0.26 Non-GAAP Diluted net income per share 0.37 0.40 1.27
0.99 Weighted average shares used to compute diluted net income per
share 12,854 12,751 12,806 12,604 Weighted average shares used to
compute Non-GAAP diluted net income per share 12,854 12,751 12,806
12,604 DATASOURCE: Cynosure, Inc. CONTACT: Scott Solomon, Vice
President of Sharon Merrill Associates, Inc., +1-617-542-5300, ,
for Cynosure, Inc. Web site: http://www.cynosure.com/
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