Fourth Quarter Results Driven by Record Worldwide GreenLight(TM)
Product Revenues, Strong Aesthetic Sales and Significant Increases
in R&D Spending SAN JOSE, Calif., Feb. 23
/PRNewswire-FirstCall/ -- Laserscope (NASDAQ:LSCP), a pioneer in
the development and commercialization of minimally-invasive medical
devices, including medical lasers and advanced fiber-optic delivery
devices, today reported record revenues of $35.0 million for its
fourth quarter ended December 31, 2005, a 19% increase from $29.4
million in the fourth quarter of 2004 and a 15% increase from $30.4
million in the third quarter of 2005. The fourth quarter increase
in revenues was primarily attributable to 35% growth in worldwide
urology revenues, led by record shipments of GreenLight PV(R)
single-use fiber optic delivery devices both domestically and
internationally. Domestic GreenLight PV delivery device sales
totaled 15,221 units in the fourth quarter of 2005 compared with
10,211 units in the fourth quarter of 2004. International
GreenLight PV delivery device sales totaled 5,461 in the fourth
quarter of 2005 compared to 2,269 in the fourth quarter of 2004.
The sequential increase in revenues was primarily attributable to
strong growth in GreenLight PV delivery device sales and a 19%
increase in aesthetic system sales. The worldwide installed base of
GreenLight PV laser systems now stands at more than 775 units, with
over 425 units in the United States and over 350 units outside the
United States. Fourth quarter 2005 operating income was $5.4
million, down slightly from $5.6 million in the fourth quarter of
2004. Fourth quarter 2005 net income increased to $5.9 million, or
$0.26 per fully diluted share, compared to net income of $5.2
million, or $0.23 per fully diluted share, in the same quarter last
year. Gross margins of 59% in the fourth quarter of 2005 remained
consistent with the fourth quarter of 2004 as well as the third
quarter of 2005. Historically, gross profit margin has varied as
sales mix has changed. For example, increases in sales of
GreenLight PV delivery devices will generally raise overall gross
profit margin, whereas increases in sales of products through
distributors in international markets will tend to decrease overall
gross profit margin. Fourth quarter 2005 gross profit was reduced
by approximately $400,000 due to inventory adjustments taken as a
result of a full physical inventory count. Field service activity
related to the upgrade of GreenLight laser systems during the
fourth quarter contributed significantly to these inventory
adjustments. Additionally, as part of a new pricing program for the
GreenLight PV delivery device, in the fourth quarter of 2005 the
Company reduced the retail sales price of GreenLight PV delivery
devices in the U.S. from $875 to $795. The new pricing program for
the GreenLight PV delivery device resulted in a reduction in fourth
quarter gross profit of approximately $400,000. Through engineering
and manufacturing programs the cost of the Company's fiber optic
delivery devices were reduced for 2006. The impact of the new
pricing program and the benefit of these cost savings are reflected
in Laserscope's forward looking guidance. Fourth quarter 2005
research and development ("R&D") expenses grew 62% on an
absolute basis to $2.4 million, or 7% of revenues, compared to $1.5
million, or 5% of revenues, in the fourth quarter of 2004. Research
and development expenses were $2.1 million, or 7% of revenues, in
the third quarter of 2005. The increase in R&D expenses
resulted primarily from new product development and clinical
activities focused on the development of future products and new
clinical applications. Selling, general and administrative
("SG&A") expenses grew approximately 27% to $12.9 million, or
37% of revenues, in the fourth quarter of 2005, compared to $10.2
million, or approximately 35% of revenues, in the fourth quarter of
2004. The increase in SG&A expenses resulted primarily from
higher sales and marketing expenses to support the Company's
current and future growth initiatives and increased sales in the
United States and international markets. Income tax expense was
negative in the fourth quarter of 2005 and relatively low for the
full year due principally to tax loss and tax credit carry forwards
that benefited income tax expenses in 2005. The benefits from these
tax loss and tax credit carry forwards have been fully recognized
in the 2005 results and the Company expects its effective income
tax rate for 2006 to be approximately 40%. Laserscope's balance
sheet remains strong. At December 31, 2005, the Company had no bank
borrowings and a cash position of $30.7 million, up significantly
from $16.0 million at December 31, 2004. Inventories increased
slightly compared to the third quarter of 2005 due to the increase
in sales of GreenLight and aesthetic products. Accounts receivable
increased approximately $2.7 million compared to the third quarter
of 2005 as a result of increased sales. Days sales outstanding in
receivables declined from 68 to 66 days. Full-Year 2005 Results For
the full year ended December 31, 2005, Laserscope reported record
revenues of $127.1 million, compared to $93.8 million for the full
year ended December 31, 2004, a 36% increase. Operating income in
2005 was $23.8 million, compared to $15.4 million in 2004, a 55%
increase. Net income rose 53% in 2005 to $22.6 million, or $0.98
per fully diluted share, compared to $14.7 million, or $0.65 per
fully diluted share, in 2004. Surgical Business Update "Our
surgical business posted strong gains in 2005, driven by our
worldwide sales of GreenLight PV delivery devices which increased
97% in 2005 from 2004. In the fourth quarter of 2005 GreenLight PV
delivery device sales increased 17% from the third quarter. As we
expected, U.S. utilization recovered nicely from the adverse
factors that impacted the domestic surgical market in the September
quarter, and we were especially pleased to see a strong rebound in
sales of GreenLight PV delivery devices in the United States," said
Eric Reuter, President and Chief Executive Officer of Laserscope.
"International demand for the Photo-Selective Vaporization of the
Prostate (PVP) procedure using the GreenLight PV laser system also
continued its upward trend during the fourth quarter, as GreenLight
PV laser system sales and sales of associated delivery devices grew
once again when compared both to the same quarter last year and to
the immediately prior quarter. We are pleased with this trend and
the high level of enthusiasm for the future market opportunity for
the GreenLight product line and PVP procedure from both our direct
international operations personnel as well as our international
distribution partners." About GreenLight(TM) and PVP The primary
market opportunity for the PVP procedure, which is used to treat
enlarged prostate disease called benign prostatic hyperplasia
("BPH"), is to replace the Trans-Urethral Resection of the Prostate
procedure, or TURP. Industry sources and available data indicate
that the number of TURPs performed worldwide likely exceeds one
million procedures each year. Additionally, sources indicate that
the number of men using medical therapy (drugs) to treat their BPH
symptoms is over 2.5 million annually in the United States and
several times this number internationally. The PVP procedure using
the GreenLight PV laser system and GreenLight PV single-use fiber
optic delivery device has been demonstrated to offer a relatively
safe, durable, and clinically efficacious procedure to treat BPH
with minimal side effects that can give patients quick and
substantial relief from their BPH symptoms. PVP uses focused high
power light energy at the 532 nm wavelength applied through a
small, flexible sterile fiber optic delivery device which the
urologist uses to safely, efficiently and virtually bloodlessly
vaporize and immediately remove thin layers of the unwanted
prostatic tissue until the patient's prostatic channel is restored.
A PVP treatment often results in nearly immediate symptom relief
for the patient. PVP is often done on an outpatient basis and
patients often can go home without an in-dwelling catheter the same
day following their surgery. Long term clinical data demonstrates
that PVP offers clinical outcomes equivalent to TURP, the current
"gold-standard", but with a more patient-friendly and substantially
better safety and side-effect profile. Laserscope estimates that
over 100,000 PVP procedures have been performed worldwide since the
GreenLight laser system and PVP procedure were made commercially
available in 2002. In 2005, the Company believes approximately
54,000 PVP procedures were performed in the U.S. and over 19,000
performed internationally. "Our goal has been and continues to be
for the PVP procedure to replace TURP as the standard of care
worldwide. We are now also focused on establishing the PVP
procedure using the GreenLight PV laser system as a preferable
alternative in many cases to other less efficacious surgical
solutions as well as medical therapies, and to begin to take market
share from these other therapies currently in use. Our results in
2005 show that we've achieved marked progress toward replacing the
TURP," said Reuter. "In the United States, there were about 54,000
PVP procedures performed in 2005, which we believe is somewhere
between 20 and 25% of the current TURP market and between 15 and
18% of the overall non-drug surgical treatment market in the U.S.
Although international growth has been strong, we believe
penetration of the TURP market remains under 5% in many of the
largest markets outside the United States. We have not yet received
market approval in Japan which we believe is the second largest
TURP market outside the United States. We believe this opportunity
represents one of several large untapped market opportunities.
Given the significant advantages that the PVP procedure offers the
patient, the physician, and healthcare systems, we believe that PVP
will continue to be adopted as a replacement for TURP for the
foreseeable future. "We have also recently heard anecdotal accounts
from some physicians domestically and internationally of patients
who have chosen to stop medical therapy (drugs) and instead to seek
treatment of their BPH symptoms with the PVP procedure using the
GreenLight PV laser system," continued Mr. Reuter. "Although it is
not clear whether these anecdotal accounts represent a significant
trend, they are consistent with our understanding of the relative
merits in many cases of PVP versus medical therapy. Drugs usually
require daily compliance for the rest of the patient's life. Drug
therapy is expensive, can have side effects, and typically offers
nowhere near the clinical efficacy of the PVP procedure.
Consequently, we believe that when presented with the facts
regarding their treatment options -- especially after long-term
treatment with medical therapy -- many men would prefer to have a
single, durable, and substantially more clinically efficacious
procedure to treat their symptoms rather than be dependent on a
lifetime of medical therapy. We believe the relative merits of the
PVP procedure using the GreenLight PV laser system over TURP, other
available surgical solutions and medical therapy for a wide
spectrum of patients enhance the potential long term prospects for
the PVP procedure using our GreenLight products both domestically
and internationally." Aesthetics Business Update "The fourth
quarter represented a strong effort for our aesthetics business,"
said Mr. Reuter. "Revenues grew nicely compared to the third
quarter, allowing us to generate our second highest ever quarterly
aesthetics sales. We have made continued good progress with our
U.S. distribution partner, Henry Schein, Inc., as we continue to
introduce the Henry Schein sales and marketing organization to our
aesthetic product line. This is an ongoing process that is expected
to take several quarters for full implementation. In the fourth
quarter of 2005, we hired a global vice president of sales and
marketing dedicated to our aesthetic products to focus our energies
and drive our growth initiatives in a large and growing worldwide
market for aesthetics products and procedures. We are determined to
return the aesthetic business to market growth rates by the fourth
quarter of 2006. We believe that this past quarter was a good
indication that we have made incremental progress toward achieving
this goal." Full Year 2006 Guidance Full year 2006 revenues and
fully taxed earnings are expected to rise between 20% and 25%
assuming a full income tax rate of 40% is applied to pre-tax income
for both 2006 and 2005. Revenue growth is expected to increase
year-over-year with some slight sequential reduction expected in
the third quarter due to seasonality. This forecast specifically
does not include the impact on the Company of stock-based
compensation expense required under FAS 123R which will decrease
earnings reported in 2006 and beyond. 2006 earnings guidance
includes accommodation for absolute increases of between 50-60% in
R&D spending over 2005 levels to continue funding of key new
product development programs, clinical, and regulatory activities
in both urology and aesthetics. R&D spending during 2006 is
expected to be in the range of 7% to 9% of total revenues. Fully
taxed earnings growth is expected to be weighted toward the second
half of the year. SG&A expenses are expected to rise on an
absolute basis during 2006 as domestic and international
initiatives in sales and marketing are executed. SG&A expenses
are expected to range between 33% to 35% of sales during 2006.
Management will continue to report both domestic and international
GreenLight delivery device sales and system installed base for the
foreseeable future. Special Investor Relations Forum Announced
Laserscope will be holding a special Investor Relations Forum
coinciding with the 2006 American Urological Association Meeting in
May, 2006. At this meeting, Laserscope will be discussing current
and future key strategic research and development initiatives and
additionally will be unveiling the latest new additions to the
Laserscope urology product line. Investors are invited to attend
in-person or via a web-cast which will be announced prior to the
event. Those planning to attend in person should contact
Laserscope's IR representatives as attendance will be limited.
Management Conference Call Management of Laserscope will hold a
conference call today, Thursday, February 23, 2006 at 8:00 am PT /
11:00 am ET to discuss results for the 2005 fourth quarter and full
year. To participate in the call, please dial 800-257-1836
(303-262-2051 for international callers) at least five minutes
prior to the start time. Investors will also have the opportunity
to listen to the conference call live on the Internet through
Laserscope's website at http://www.laserscope.com/. Investors
should go to the website a few minutes early, as it may be
necessary to download audio software to access the conference call.
A replay of the conference call will be available through Thursday,
March 2, 2006 by dialing 800-405-2236 (303-590-3000 for
international callers), and entering passcode 11054215. About
Laserscope Laserscope designs, manufactures, sells and services on
a worldwide basis an advanced line of minimally-invasive medical
products including medical laser systems and related energy
delivery devices for the office, outpatient surgical center, and
hospital markets. More information about Laserscope can be found on
its web site at http://www.laserscope.com/. Safe Harbor Statement
This press release contains forward-looking information within the
meaning of Section 21E of the Securities Exchange Act of 1934, and
is subject to the safe harbor created by this section. These
forward-looking statements include: statements about Laserscope's
future profitability and operating results, competition,
manufacturing and engineering improvements in our existing products
designed to reduce the cost of goods sold, expected continued
momentum of Laserscope's business and growth including new product
offerings, worldwide adoption rates of the PVP procedure using the
GreenLight PV(R) laser system, our ability to compete with similar
product offerings and other therapies for the treatment of BPH,
market penetration opportunities in international markets such as
in Europe and the Asia Pacific region, including Japan, and the
relationship with our distribution partner for aesthetic products,
Henry Schein, Inc. These statements are subject to a number of
risks and uncertainties, including: uncertainties regarding
introduction of new technologies competitive to Laserscope's
products and the degree to which our current and new products are
accepted by customers, which could affect the level of demand for
our products; uncertainties regarding the impact that competitive
products and therapies as well as private and public payer
reimbursement levels for the PVP procedure could have on the
competitiveness of our current pricing programs, which could
adversely impact our financial results; our dependence on sole
source providers for key components and products; risk of
reductions in government and private insurance reimbursement of
hospitals and physicians for health care costs, which may
negatively impact hospitals and physicians decisions to purchase
our products reducing adoption rates and sales growth; risks that
we may be unable to protect adequately the integrity, safety and
proper use of our disposable fiber optic delivery device with the
GreenLight PV(R) laser system, which could result in negative
patient outcomes and reduce our disposable delivery device
recurring revenue stream; risks that patents and licenses that we
hold may be challenged, invalidated or circumvented or that we may
become the subject of intellectual property litigation;
uncertainties regarding our ability to compete with companies that
have significantly greater financial, technical, research and
development, manufacturing and marketing resources than we have;
and uncertainties that new products will receive regulatory
approval in applicable jurisdictions. Actual results may differ
materially due to these and other factors. The matters discussed in
this press release also involve risks and uncertainties described
from time to time in Laserscope's filings with the Securities and
Exchange Commission. In particular, see the Risk Factors described
in Laserscope's most recent Quarterly Report on Form 10-Q and
Annual Report on Form 10-K. Copies of Laserscope's public
disclosure filings with the SEC, including the most recent Annual
Report on Form 10-K and the most recent forms 10-Q are available
upon request from its Investor Relations Department at its website
at http://www.laserscope.com/ and at the SEC's website:
http://www.sec.gov/. Laserscope assumes no obligation to update the
forward-looking information contained in this press release. At
Laserscope: At Financial Relations Board: Eric Reuter, President
& CEO Tricia Ross Analyst/Investor Contact Derek Bertocci, CFO
(617) 520-7064 (408) 943-0636 Laurie Berman, General Information
(310) 854-8315 - Tables to Follow - GreenLight(TM) Delivery Device
Sales (UNITS) 2005 Q1 Q2 Q3 Q4 Year United States 11,792 14,379
12,654 15,221 54,046 International 4,463 4,712 4,985 5,461 19,621
Total 16,255 19,091 17,639 20,682 73,667 2004 Q1 Q2 Q3 Q4 Year
United States 5,018 6,908 7,024 10,211 29,161 International 1,385
1,582 2,967 2,269 8,203 Total 6,403 8,490 9,991 12,480 37,364
LASERSCOPE FINANCIAL SUMMARY (Unaudited) Condensed Consolidated
Statements of Income Three months ended Twelve months ended
(thousands except per December 31, December 31, share amounts) 2005
2004 2005 2004 Net revenues $35,001 $29,430 $127,124 $93,770 Cost
of sales 14,290 12,180 50,421 39,115 Gross margin 20,711 17,250
76,703 54,655 Operating expenses: Research and development 2,412
1,490 7,858 5,217 Selling, general and administrative 12,913 10,189
45,014 34,023 15,325 11,679 52,872 39,240 Operating income 5,386
5,571 23,831 15,415 Interest income (expense) and other, net 126
(57) 545 264 Net income before income taxes 5,512 5,514 24,376
15,679 Provision (benefit) for income taxes (395) 330 1,826 940 Net
income $5,907 $ 5,184 $22,550 $14,739 Basic net income per share
$0.27 $0.24 $1.02 $0.70 Diluted net income per share $0.26 $0.23
$0.98 $0.65 Shares used in basic per share calculations 22,265
21,672 22,142 21,075 Shares used in diluted per share calculations
22,874 22,905 22,917 22,808 Condensed Consolidated Balance Sheets
December 31, December 31, ($ in thousands) 2005 2004 Assets Current
assets: Cash & cash equivalents $30,653 $15,954 Accounts
receivable, net 25,138 20,342 Inventories 27,058 19,446 Prepayments
and other current assets 19,171 1,471 Total current assets 102,020
57,213 Property and equipment, net 8,663 3,457 Other assets 1,087
919 Total assets $111,770 $61,589 Liabilities and Shareholders'
Equity Current liabilities $26,973 $18,647 Capital leases 9 31
Shareholders' equity 84,788 42,911 Total liabilities and
shareholders' equity $111,770 $61,589 DATASOURCE: Laserscope
CONTACT: Eric Reuter, President & CEO, or Derek Bertocci, CFO,
both of Laserscope, +1-408-943-0636; or Analyst/Investor, Tricia
Ross, +1-617-520-7064, or General Information, Laurie Berman,
+1-310-854-8315, both of Financial Relations Board, for Laserscope
Web site: http://www.laserscope.com/
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