Gross Margin Increases Sequentially to 58.4% as ASPs Remain Stable;
Company Generates $3.6 Million Cash from Operations WESTFORD,
Mass., Oct. 27 /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, 2009.
Third Quarter 2009 Financial Results Revenues for the three months
ended September 30, 2009 were $17.9 million, compared with $38.2
million for the same period of 2008 and $20.8 million for the
second quarter of 2009. The decrease in revenues from the third
quarter of 2008 reflected the downturn in global economic
conditions and the effects of a highly restrictive credit
environment in North America. The decrease in sequential revenue
reflected the typical seasonality of the third quarter. Gross
margin for the third quarter of 2009 was 58.4% of total revenues,
compared with 64.9% for the same period of 2008 and 58.0% for the
second quarter of 2009. The lower gross margin from the year-ago
period reflects a higher percentage of laser revenue from
international markets, where sales prices tend to be lower than in
North America. The 40-basis-point increase in gross margin from the
second quarter of 2009 resulted from a higher percentage of laser
revenue from North America, as well as stable average selling
prices across Cynosure's distribution network. Total operating
expenses decreased 31% to $13.8 million for the third quarter of
2009 from $19.9 million for the same period of 2008, as the company
maintained its focus on reducing costs in response to the current
economic climate. On a sequential basis, the company reduced
operating expenses by 15% from $16.2 million for the second quarter
of 2009. Net loss for the third quarter of 2009 was $1.9 million,
or $0.15 per basic and diluted share, compared with net income of
$3.2 million, or $0.25 per diluted share, for the third quarter of
2008 and a net loss of $2.3 million, or $0.18 per basic and diluted
share, for the second quarter of 2009. "While consumer demand for
aesthetic procedures appears to be regaining momentum and
participation in our training programs is strong, limited access to
credit remains a key hurdle for practitioners across the industry,"
said President and Chief Executive Officer Michael Davin. "Many
physicians continue to encounter a restrictive lending environment
and a lengthy credit approval process. We are continuing to work
directly with the lending community to assist our customers -- the
majority of whom are physicians -- with securing financing. The
positive news we take from the current environment is that, as
credit begins to ease, we believe the underlying demand is there to
support the industry's return to growth. Despite the challenges of
the economic climate, margins increased slightly on a sequential
basis, which underscores the stability of our ASPs." "In what
traditionally has been the weakest quarter for the aesthetic
industry, we were encouraged by the continued progress during the
third quarter of 2009 of our international business, particularly
in the Asia Pacific region," Davin said. "The initiatives we have
taken to establish and grow our direct distribution in countries
such as Korea and China, and to introduce new products there, are
yielding positive results. International revenue accounted for 45%
of total laser revenue in the quarter, compared with 29% for the
third quarter of 2008 and 53% for the second quarter of this year."
"On the product development front, our funded development agreement
with Unilever Ltd. to develop light-based devices for the home use
personal care market moved forward in the quarter and we are
pleased with our achievements to date," Davin continued. "Our
development partnership is a project we believe will take two to
three years to bring to commercialization. In Unilever we have an
outstanding partner with the consumer marketing and distribution
expertise to make this initiative a success." Recent Highlights --
At the Plastic Surgery 2009 meeting, Cynosure introduced the
Smartlipo Triplex(TM), the world's first laser lipolysis
workstation featuring three wavelengths that combine to deliver
high-powered fat absorption and tissue tightening through tissue
coagulation. Smartlipo Triplex adds a 1440 nm wavelength to the MPX
generation of the product, and employs Cynosure's patented
MultiPlex technology to combine the benefits of multiple
wavelengths in a single laser output. -- Cynosure announced two key
regulatory approvals in the Asia Pacific region. The company
received approval to market its Smartlipo MPX(TM)
LaserBodySculpting(SM) Workstation in Korea and its Affirm(TM)
Anti-Aging Workstation in the People's Republic of China. -- The
company named Paul B. Cardarelli to the new position of Vice
President of Business Development. Cardarelli is responsible for
day-to-day management of Cynosure's funded development agreement
with Unilever Ltd. Nine-Month Results For the nine months ended
September 30, 2009, revenues were $53.6 million compared with
$114.2 million for the same period in 2008. Gross profit margin for
the first nine months of 2009 decreased to 58.9% of total revenues,
compared with 66.2% for the same period in 2008. Net loss for the
first nine months of 2009 was $8.3 million, or $0.65 per basic and
diluted share, compared with net income of $12.7 million, or $0.99
per diluted share, for the same period in 2008. Business Outlook
"We are on track to achieve our target operating expense savings of
between $14 million and $18 million for 2009," Davin said. "The
cost-reduction program we implemented beginning in early 2009 has
enabled us to cut operating expenses by $11.8 million -- more than
20% -- through the first nine months of the year, compared with the
same period in 2008. At the same time, we maintained our strong
balance sheet, with cash, cash equivalents and investments
increasing $1.9 million for the quarter ended September 30, 2009 to
$90.5 million. "Although obtaining credit for capital equipment
purchases remains difficult for many practitioners, we are
encouraged by the level of activity and interest we are seeing in
North America and continuing international traction, particularly
in Asia. In the near term, the lending environment may continue to
create challenges for the company and our industry, but our balance
sheet and drive to sustain technology leadership in applications
such as LaserBodySculpting give us a high level of confidence for
the quarters ahead," Davin concluded. 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 company's
financial results and provide a business outlook. 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 can also 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 and pigmented lesions,
rejuvenate the skin, 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, 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.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 ability to achieve
targeted operating expense savings, and expectations for increased
industry demand, 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 the global economic recession and its effects on
the aesthetic laser industry, 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 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) Three Months Nine Months Ended September 30, Ended
September 30, 2009 2008 2009 2008 ---- ---- ---- ---- (unaudited)
(unaudited) Revenues $17,937 $38,209 $53,566 $114,167 Cost of
revenues 7,460 13,396 21,997 38,645 ----- ------ ------ ------
Gross profit 10,477 24,813 31,569 75,522 Operating expenses Selling
and marketing 8,743 13,911 29,696 41,190 Research and development
1,564 1,992 5,001 5,606 General and administrative 3,511 3,983
11,440 11,108 ----- ----- ------ ------ Total operating expenses
13,818 19,886 46,137 57,904 (Loss) income from operations (3,341)
4,927 (14,568) 17,618 Interest income, net 83 549 454 1,977 Other
income (expense), net 371 (425) 705 9 --- ---- --- - (Loss) income
before income taxes (2,887) 5,051 (13,409) 19,604 Income tax
(benefit) provision (972) 1,888 (5,149) 6,912 ---- ----- ------
----- Net (loss) income $(1,915) $3,163 $(8,260) $12,692 =======
====== ======= ======= Diluted net (loss) income per share $(0.15)
$0.25 $(0.65) $0.99 ====== ===== ====== ===== Diluted weighted
average shares outstanding 12,712 12,854 12,708 12,806 ======
====== ====== ====== Basic net (loss) income per share $(0.15)
$0.25 $(0.65) $1.01 ====== ===== ====== ===== Basic weighted
average shares outstanding 12,712 12,642 12,708 12,542 ======
====== ====== ====== 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 Nine Months
Ended September 30, Ended September 30, 2009 2008 2009 2008 ----
---- ---- ---- Gross profit $10,477 $24,813 $31,569 $75,522 -------
------- ------- ------- Non-GAAP adjustments to gross profit:
Stock-based compensation 120 145 383 411 --- --- --- --- Total
Non-GAAP adjustments to gross profit 120 145 383 411 --- --- ---
--- Non-GAAP Gross profit $10,597 $24,958 $31,952 $75,933 =======
======= ======= ======= Three Months Nine Months Ended September
30, Ended September 30, 2009 2008 2009 2008 ---- ---- ---- ----
(Loss) income from operations $(3,341) $4,927 $(14,568) $17,618
------- ------ -------- ------- Non-GAAP adjustments to (loss)
income from operations: Stock-based compensation 1,464 2,096 5,110
5,663 ----- ----- ----- ----- Total Non-GAAP adjustments to (loss)
income from operations 1,464 2,096 5,110 5,663 ----- ----- -----
----- Non-GAAP (Loss) income from operations $(1,877) $7,023
$(9,458) $23,281 ======= ====== ======= ======= Three Months Nine
Months Ended September 30, Ended September 30, 2009 2008 2009 2008
---- ---- ---- ---- Net (loss) income $(1,915) $3,163 $(8,260)
$12,692 ------- ------ ------- ------- Non-GAAP adjustments to net
(loss) income: Stock-based compensation 1,464 2,308 5,110 5,875
Income tax effect of Non-GAAP adjustments (460) (762) (2,162)
(2,261) ---- ---- ------ ------ Total Non-GAAP adjustments to net
(loss) income 1,004 1,546 2,948 3,614 ----- ----- ----- -----
Non-GAAP Net (loss) income $(911) $4,709 $(5,312) $16,306 =====
====== ======= ======= Three Months Nine Months Ended September 30,
Ended September 30, 2009 2008 2009 2008 ---- ---- ---- ---- Diluted
net (loss) income per share $(0.15) $0.25 $(0.65) $0.99 ------
----- ------ ----- Stock-based compensation 0.12 0.18 0.40 0.46
Income tax effect of Non-GAAP adjustments $(0.04) (0.06) (0.17)
(0.18) ------ ----- ----- ----- Total Non-GAAP adjustments to net
(loss) income $0.08 0.12 $0.23 0.28 ----- ---- ----- ---- Non-GAAP
Diluted net (loss) income per share $(0.07) $0.37 $(0.42) 1.27
====== ===== ====== ==== Weighted average shares used to compute
diluted net (loss) income per share 12,712 12,854 12,708 12,806
====== ====== ====== ====== Weighted average shares used to compute
Non-GAAP diluted net (loss) income per share 12,712 12,854 12,708
12,806 ====== ====== ====== ====== Condensed Consolidated Balance
Sheet (Unaudited) ------------------------------------------------
(In thousands) September 30, December 31, 2009 2008 ---- ----
(unaudited) Assets: Cash, cash equivalents and marketable
securities $69,953 $74,369 Short-term investments and related
financial instruments 18,587 - Accounts receivable, net 14,975
25,156 Amounts due from related parties 49 40 Inventories 25,724
30,248 Deferred tax asset, current portion 6,871 6,825 Prepaid
expenses and other current assets 7,857 4,331 ----- ----- Total
current assets 144,016 140,969 Property and equipment, net 10,080
8,422 Long-term investments and related financial instruments 2,005
21,082 Other noncurrent assets 2,906 2,649 ----- ----- Total assets
$159,007 $173,122 ======== ======== Liabilities and stockholders'
equity: Accounts payable and accrued expenses $14,071 $20,697
Amounts due to related parties 1,944 6,083 Deferred revenue 3,990
4,296 Capital lease obligations 299 398 --- --- Total current
liabilities 20,304 31,474 Capital lease obligations, net of current
portion 231 436 Deferred revenue, net of current portion 504 407
Other long-term liabilities 429 451 --- --- Total stockholders'
equity 137,539 140,354 ------- ------- Total liabilities and
stockholders' equity $159,007 $173,122 ======== ========
DATASOURCE: Cynosure, Inc. CONTACT: Scott Solomon, Vice President,
Sharon Merrill Associates, Inc., for Cynosure, Inc.,
+1-617-542-5300, Web Site: http://www.cynosure.com/
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