HAYWARD, Calif., Nov. 11, 2013 /PRNewswire/ -- Solta Medical, Inc.
(NASDAQ: SLTM), a global leader in the medical aesthetics market,
today announced results for the third quarter ended September 30, 2013 and a number of actions
designed to improve the financial performance of the Company and
improve shareholder returns including:
- A restructuring program projected to reduce annual expenses by
$12 million
- A plan to generate positive cash flow from operations of more
than $8 million during 2014
- The engagement by the Board of Directors of Piper Jaffray
& Co. to advise the Board on strategies to maximize shareholder
value
In addition, Solta reported that terms have been reached on a
new financing agreement to refinance the Company's debt and provide
additional working capital, which is expected to close this month.
And, the Board is continuing to conduct its previously reported
search for a permanent chief executive officer.
Third Quarter Financial Results
Revenue for the third quarter of 2013 was $33.5 million compared with $35.0 million in the third quarter of 2012.
The results reflect lower than planned sales of Fraxel and
Liposonix product lines and higher than planned sales of the
Thermage and Clear+Brilliant product lines. Revenue from VASER
products, which were acquired during the first quarter of 2013,
totaled $4 million in Q3 2013.
Revenue from treatment tips and consumables for the third quarter
of 2013 totaled $17.8 million
compared with $16.9 million in the
third quarter of the prior year. System sales totaled $13.8 million in the third quarter of 2013 versus
$16.2 million in the third quarter of
2012. Revenue in North
America totaled $15.3 million
compared with $15.2 million in the
third quarter a year ago. International revenue was $18.2 million compared with $19.8 million last year. Gross margin for Q3 2013
was $19.0 million and includes
$1.8 million of amortization,
acquisition related charges and stock based compensation
charges. Excluding these charges, the non-GAAP gross profit
for the quarter was approximately $20.8
million or 62.0% of revenue compared with 64.9% on a
non-GAAP basis in the third quarter last year.
GAAP net income for the quarter was $0.6
million as compared to GAAP net loss of $2.9 million reported for the third quarter of
2012. Non-GAAP net loss for the quarter was $3.3 million, or $0.04 per diluted share, as compared to non-GAAP
net income of $2.0 million, or
$0.03 per diluted share for same
period last year. Non-GAAP adjusted EBITDA for the quarter was
$(1.3) million compared to
$3.3 million for the same period last
year.
"A number of factors impacted our third quarter financial
results, most important of which was sales force attrition in
North America," said Mark Sieczkarek, Interim CEO of Solta Medical.
"Recently, we have been able to add new sales people with strong
qualifications in critical North American sales territories and
have appointed new sales leadership in both North America and Europe. Our sales strategy in North America includes implementing changes to
the sales structure and marketing approach, which we are in the
process of doing. We are already beginning to see signs that our
strategy is generating results in the fourth quarter."
Lower average selling prices on systems, primarily on the
Liposonix products, and a higher proportion of international
distributor business affected revenue and the gross margin in the
quarter. The Company's GAAP results for the quarter include
$2.9 million of amortization and
other acquisition related charges, severance expense of
$1.1 million, $0.6 million of non-cash stock based compensation
charges, and an $8.7 million credit
for the fair value reassessment of the expected earn out payments
associated with the acquisitions of Liposonix and Sound Surgical
Technologies. The Company provides non-GAAP financial measures that
exclude these charges and adjustments. A reconciliation of GAAP to
non-GAAP results is provided in the tables included in this
release.
Debt Financing Agreement
The Company has reached agreement on terms with a secured debt
lender for a $40 million financing.
The financing would be in the form of a senior secured loan for a
term of six years. Under the terms of the agreement, the lender
would provide $40 million upon
repayment of the loan with Silicon Valley Bank, which would provide
increased flexibility for the company's operations. The term debt
has interest only payments for the first four years. The Company
expects to complete the financing agreement this month.
The Company's cash balance at September
30, 2013 was $7.7 million,
compared with $16.3 million at the
end of June 2013 and does not reflect
any impact from the previously referred to financing
agreement. The decrease reflected the net loss in the quarter
as well as an $8.0 million payment of
the outstanding balance on the revolving credit facility with
Silicon Valley Bank. Total debt at the end of the quarter was
approximately $27 million. The
Company will also make a $5 million
contingency payment to Valeant related to the acquisition of
Liposonix in the fourth quarter of 2013. The Company expects
total contingency payments, which are all derived from the
acquisition of Liposonix, to be less than $2
million in 2014.
"Our new debt agreement will provide working capital necessary
to execute our operating plan to regain momentum and growth in the
market and build shareholder returns in 2014. Based on planned
operating expense reductions, we expect to generate cash in 2014,"
continued Mr. Sieczkarek. "Despite the disappointing
financial results in Q3, we have made recent progress in
stabilizing and reinvigorating the North American sales force and
expect to enter 2014 with growing momentum."
Operating Plan
The Company is implementing an operating plan for 2014 that
focuses on driving revenue growth and reducing annual expenses by
$12 million from the expense run rate
for the quarter ended September 30,
2013.
Key objectives for the Plan are:
- Achieve year-over-year revenue growth
- Generate double digit operating profit
- Maximize cash flow from operations
"To achieve our 2014 objectives, we have implemented cost
reductions that included a reduction in work force. We have
carefully reviewed the implications of the reductions we have made
and are confident that we will be able to maintain our robust
product pipeline and continue to bring to market innovative
aesthetic products. These changes will improve our financial
results next year, while making us a more customer friendly
organization," stated Mr. Sieczkarek.
Financial Advisor
Solta's Board of Directors announced that it engaged
Piper Jaffray to act as its
financial advisor in the evaluation of strategic
alternatives. Piper Jaffray
will assist the Board in considering a range of options, which may
include strategic partnerships, investors, alliances or a possible
sale or merger of the company. The Company does not plan to
disclose or comment on developments regarding any strategic
alternatives until further disclosure is deemed appropriate.
Non-GAAP Presentation
To supplement the condensed consolidated financial information
presented on a GAAP basis, management has provided non-GAAP gross
margin, non-GAAP operating income (loss), non-GAAP adjusted EBITDA,
non-GAAP net income (loss) and non-GAAP earnings (loss) per share
measures that exclude the impact of acquisition related
adjustments, severance costs, acquisition related costs, and
stock-based compensation expenses. The Company believes that
these non-GAAP financial measures provide investors with insight
into what is used by management to conduct a more meaningful and
consistent comparison of the Company's ongoing operating results
and trends, compared with historical results. This
presentation is also consistent with the measures management uses
to measure the performance of ongoing operating results against
prior periods and against our internally developed targets.
There are limitations in using these non-GAAP financial measures
because they are not prepared in accordance with GAAP and may be
different from non-GAAP financial measures used by other
companies. These non-GAAP financial measures should not be
considered in isolation or as a substitute for GAAP financial
measures. Investors and potential investors should consider
non-GAAP financial measures only in conjunction with the Company's
consolidated financial statements prepared in accordance with GAAP
and the reconciliation of non-GAAP financial measures attached to
this release.
Conference Call Information
The Company will host a conference call and webcast today,
Monday, November 11, 2013, at
4:30 p.m. Eastern Time (1:30 p.m. Pacific) to discuss the financial
results and current corporate developments. The dial-in number for
the conference call is 877-941-0844 for domestic participants and
480-629-9835 for international participants.
To access the live webcast of the call, go to Solta Medical's
website at www.solta.com and click on Investor Relations. An
archived webcast will also be available at www.solta.com.
About Solta Medical, Inc.
Solta Medical, Inc. is a global leader in the medical aesthetics
market providing innovative solutions with proven efficacy and
safety backed by over 10 years of clinical study and research. The
company offers aesthetic energy devices for skin resurfacing and
rejuvenation, acne reduction, body contouring and skin tightening,
as well as tools and accessories to optimize the latest liposuction
techniques. The Solta Medical portfolio includes the well-known
brands Thermage®, Fraxel®,
Clear + Brilliant®, Liposonix®,
Isolaz®, CLARO®,
VASERlipo™, VASERshape™,
VASERsmooth™, VentX®,
PowerX®, TouchView®, and
Origins™, which collectively make up a
comprehensive platform to address a range of aesthetic skin and
body issues. More than two and a half million procedures have been
performed with Solta Medical's products around the world. Solta
Medical is headquartered in Hayward,
CA with field teams and regional offices worldwide.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995, including statements regarding reduction in
annual expenses from the Company's restructuring program, the
amount of positive cash flow from operations in 2014, the expected
completion of a new debt financing arrangement, improvements in
sales execution in North America,
and operational imperatives of the 2014 Operating Plan.
Forward-looking statements are based on management's current,
preliminary expectations and are subject to risks and
uncertainties, which may cause Solta Medical's actual results to
differ materially from the statements contained herein. Factors
that might cause such a difference include the risk that physician
adoption of our systems does not grow, the risk that customers do
not continue to purchase treatment tips, the possibility that the
market for the sale of new products does not develop as expected,
and the risks relating to Solta Medical's ability to achieve its
stated financial goals as a result of, among other things, economic
conditions and consumer and physician confidence causing changes in
consumer and physician spending habits that affect demand for our
products and treatments. Further information on potential risk
factors that could affect Solta Medical's business and its
financial results are detailed in its Form 10-K for the year ended
December 31, 2012, and other reports
as filed from time to time with the Securities and Exchange
Commission. Undue reliance should not be placed on forward-looking
statements, especially guidance on future financial performance,
which speaks only as of the date they are made. Solta Medical
undertakes no obligation to update publicly any forward-looking
statements to reflect new information, events or circumstances
after the date they were made, or to reflect the occurrence of
unanticipated events.
Solta Medical,
Inc.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of
dollars, except share and per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net
revenue
|
$33,540
|
|
$35,028
|
|
$111,260
|
|
$104,744
|
Cost of
revenue
|
14,491
|
|
13,813
|
|
44,430
|
|
39,738
|
|
|
|
|
|
|
|
|
Gross
margin
|
19,049
|
|
21,215
|
|
66,830
|
|
65,006
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Sales and
marketing
|
14,807
|
|
12,403
|
|
45,870
|
|
40,022
|
Research and
development
|
4,701
|
|
4,849
|
|
15,478
|
|
15,167
|
General and
administrative
|
6,246
|
|
4,557
|
|
19,651
|
|
13,832
|
Remeasurement of
contingent consideration liability
|
(8,700)
|
|
1,900
|
|
(21,300)
|
|
32,600
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
17,054
|
|
23,709
|
|
59,699
|
|
101,621
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
1,995
|
|
(2,494)
|
|
7,131
|
|
(36,615)
|
Interest
income
|
21
|
|
3
|
|
48
|
|
8
|
Interest
expense
|
(877)
|
|
(377)
|
|
(2,372)
|
|
(1,078)
|
Other expense,
net
|
(144)
|
|
46
|
|
(389)
|
|
(101)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
995
|
|
(2,822)
|
|
4,418
|
|
(37,786)
|
Income tax
provision
|
351
|
|
56
|
|
2,546
|
|
177
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$644
|
|
($2,878)
|
|
$1,872
|
|
($37,963)
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
Basic
|
$0.01
|
|
($0.04)
|
|
$0.02
|
|
($0.60)
|
Diluted
|
$0.01
|
|
($0.04)
|
|
$0.02
|
|
($0.60)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding used in calculating net income (loss) per
share:
|
|
|
|
|
|
|
|
Basic
|
79,791,789
|
|
65,947,361
|
|
77,171,829
|
|
63,017,220
|
Diluted
|
81,025,627
|
|
65,947,361
|
|
78,337,342
|
|
63,017,220
|
Solta Medical,
Inc.
|
NON-GAAP
RECONCILIATION OF GROSS MARGIN, OPERATING INCOME (LOSS), EBITDA,
NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE
|
(in
thousands, except share and per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
GAAP Gross
margin
|
$19,049
|
|
$21,215
|
|
$66,830
|
|
$65,006
|
GAAP gross margin as
% of sales
|
57%
|
|
61%
|
|
60%
|
|
62%
|
Non-GAAP adjustments
to gross margin:
|
|
|
|
|
|
|
|
GAAP Gross
margin
|
$19,049
|
|
$21,215
|
|
$66,830
|
|
$65,006
|
Amortization and
other non-cash acquisition related charges
|
1,592
|
|
1,374
|
|
4,811
|
|
4,407
|
Stock-based
compensation
|
158
|
|
127
|
|
438
|
|
366
|
Non-GAAP gross
margin
|
$20,799
|
|
$22,716
|
|
$72,079
|
|
$69,779
|
Non-GAAP gross margin
as % of sales
|
62%
|
|
65%
|
|
65%
|
|
67%
|
|
|
|
|
|
|
|
|
GAAP income (loss)
from operations
|
$1,995
|
|
($2,494)
|
|
$7,131
|
|
($36,615)
|
Non-GAAP adjustments
to net income (loss) from operations:
|
|
|
|
|
|
|
|
Amortization and
other non-cash acquisition related charges
|
2,651
|
|
1,729
|
|
7,521
|
|
5,475
|
Remeasurement of
contingent consideration liability
|
(8,700)
|
|
1,900
|
|
(21,300)
|
|
32,600
|
Acquisition-related
expenses
|
250
|
|
16
|
|
2,154
|
|
167
|
Severance expenses
(credits)
|
1,083
|
|
(18)
|
|
1,699
|
|
1
|
Stock-based
compensation
|
596
|
|
1,204
|
|
3,034
|
|
3,553
|
Non-GAAP income
(loss) from operations
|
($2,125)
|
|
$2,337
|
|
$239
|
|
$5,181
|
Depreciation
expenses
|
841
|
|
943
|
|
2,570
|
|
2,818
|
Non-GAAP Adjusted
EBITDA
|
($1,284)
|
|
$3,280
|
|
$2,809
|
|
$7,999
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
$644
|
|
($2,878)
|
|
$1,872
|
|
($37,963)
|
Non-GAAP adjustments
to net income (loss):
|
|
|
|
|
|
|
|
Amortization and
other non-cash acquisition related charges
|
2,651
|
|
1,729
|
|
7,521
|
|
5,475
|
Remeasurement of
contingent consideration liability
|
(8,700)
|
|
1,900
|
|
(21,300)
|
|
32,600
|
Acquisition-related
expenses
|
250
|
|
16
|
|
2,154
|
|
167
|
Severance expenses
(credits)
|
1,083
|
|
(18)
|
|
1,699
|
|
1
|
Stock-based
compensation
|
596
|
|
1,204
|
|
3,034
|
|
3,553
|
Acquisition-related
income tax expense
|
223
|
|
—
|
|
2,303
|
|
—
|
Non-GAAP net income
(loss)
|
($3,253)
|
|
$1,953
|
|
($2,717)
|
|
$3,833
|
|
|
|
|
|
|
|
|
GAAP basic net
(income) loss per share
|
$0.01
|
|
($0.04)
|
|
$0.02
|
|
($0.60)
|
Non-GAAP adjustments
to basic income (loss) per share:
|
|
|
|
|
|
|
|
Amortization and
other non-cash acquisition related charges
|
$0.03
|
|
$0.03
|
|
$0.10
|
|
$0.09
|
Remeasurement of
contingent consideration liability
|
($0.11)
|
|
$0.02
|
|
($0.28)
|
|
$0.51
|
Acquisition-related
expenses
|
$0.00
|
|
$0.00
|
|
$0.03
|
|
$0.00
|
Severance expenses
(credits)
|
$0.02
|
|
($0.00)
|
|
$0.02
|
|
$0.00
|
Stock-based
compensation
|
$0.01
|
|
$0.02
|
|
$0.04
|
|
$0.06
|
Acquisition-related
income tax expense
|
$0.00
|
|
$0.00
|
|
$0.03
|
|
$0.00
|
Non-GAAP basic net
income (loss) per share
|
($0.04)
|
|
$0.03
|
|
($0.04)
|
|
$0.06
|
|
|
|
|
|
|
|
|
Non-GAAP diluted net
income (loss) per share
|
($0.04)
|
|
$0.03
|
|
($0.04)
|
|
$0.06
|
|
|
|
|
|
|
|
|
GAAP weighted average
shares outstanding used in calculating basic net income (loss) per
share
|
79,791,789
|
|
65,947,361
|
|
77,171,829
|
|
63,017,220
|
|
|
|
|
|
|
|
|
GAAP weighted average
shares outstanding used in calculating diluted net income (loss)
per share
|
81,025,627
|
|
65,947,361
|
|
78,337,342
|
|
63,017,220
|
Adjustments for
dilutive potential common stock
|
(1,233,838)
|
|
5,636,830
|
|
(1,165,513)
|
|
5,258,069
|
Weighted average
shares outstanding used in calculating non-GAAP diluted net income
(loss) per share
|
79,791,789
|
|
71,584,191
|
|
77,171,829
|
|
68,275,289
|
Solta Medical,
Inc.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands of
dollars, except share and per share data)
(unaudited)
|
|
|
September
30,
2013
|
|
December
31,
2012
|
|
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$7,674
|
|
$38,097
|
Accounts receivable,
net
|
20,331
|
|
20,570
|
Inventories
|
22,414
|
|
16,611
|
Prepaid expenses and
other current assets
|
5,767
|
|
8,476
|
|
|
|
|
Total current
assets
|
56,186
|
|
83,754
|
Property and
equipment, net
|
7,215
|
|
6,401
|
Purchased intangible
assets, net
|
56,044
|
|
42,428
|
Goodwill
|
103,981
|
|
96,620
|
Other
assets
|
948
|
|
520
|
|
|
|
|
Total
assets
|
$224,374
|
|
$229,723
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Liabilities:
|
|
|
|
Accounts
payable
|
$7,929
|
|
$7,283
|
Accrued
liabilities
|
13,656
|
|
17,343
|
Current portion of
contingent consideration liability
|
7,839
|
|
21,400
|
Current portion of
deferred revenue
|
3,953
|
|
3,985
|
Short-term
borrowings
|
694
|
|
8,345
|
Customer
deposits
|
1,067
|
|
637
|
|
|
|
|
Total current
liabilities
|
35,138
|
|
58,993
|
Deferred revenue, net
of current portion
|
744
|
|
683
|
Term loan, net of
current portion
|
25,954
|
|
18,063
|
Non-current tax
liabilities
|
4,818
|
|
2,478
|
Contingent
consideration liability
|
21,500
|
|
38,500
|
Other
liabilities
|
253
|
|
899
|
|
|
|
|
Total
liabilities
|
88,407
|
|
119,616
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.001
par value:
|
|
|
|
100,000,000 shares
authorized 79,838,671 and
68,795,987 shares issued and outstanding at September 30, 2013 and
December 31, 2012
|
80
|
|
69
|
Additional paid-in
capital
|
244,467
|
|
220,489
|
Accumulated
deficit
|
(108,580)
|
|
(110,451)
|
|
|
|
|
Total stockholders'
equity
|
135,967
|
|
110,107
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$224,374
|
|
$229,723
|
SOURCE Solta Medical, Inc.