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8-K - FORM 8-K - CYNOSURE INCd677464d8k.htm

Exhibit 99.1

 

LOGO

Contacts:

 

Timothy Baker    Scott Solomon
EVP, COO and CFO    Vice President
Cynosure, Inc.    Sharon Merrill
978-256-4200    617-542-5300
TBaker@cynosure.com    CYNO@investorrelations.com

Cynosure Reports Record Fourth Quarter Revenue of

$74.5 million, up 75% Year-over-Year

Financial Highlights

 

    Non-GAAP net income of $8.7 million, or $0.39 per diluted share, for Q4 2013, excluding acquisition costs

 

    GAAP net income of $7.3 million, or $0.33 per diluted share, for Q4 2013

 

    Revenues for Q4 2013 include $4.0 million royalty revenue from Tria settlement

 

    Full-year revenue of $226 million, up 47% from 2012

 

    $129 million in cash, short-term investments and marketable securities at year-end 2013

 

    $15.4 million of common stock repurchased under previously announced repurchase program during the fourth quarter

 

    Palomar acquisition remains on track to achieve $8 million to $10 million in cost synergies

WESTFORD, MA, February 12, 2014 – Cynosure, Inc. (NASDAQ: CYNO), a leader in laser- and light-based aesthetic treatments for non-invasive and minimally invasive applications, today announced financial results for the three and 12 months ended December 31, 2013. Revenues for the fourth quarter increased 75% to $74.5 million from $42.7 million for the same period of 2012, while revenues for the full year of 2013 were up 47% to $226.0 million from $153.5 million for 2012. The increase partly reflects the acquisition of Palomar Medical Technologies in June 2013.

“Cynosure completed a successful 2013 with a robust fourth quarter highlighted by growth across our products and geographies,” said Michael Davin, the Company’s President and Chief Executive Officer. “Fourth-quarter revenues reflected successful cross-selling of the Cynosure and Palomar aesthetic laser systems by our combined North American sales force, as well as the complementary nature of our international distribution network.


“It has been just over seven months since we acquired Palomar, and our integration is now substantially complete thanks to the skill, energy and dedication of our integration teams,” Davin said. “Since June we have combined key functional areas including Sales, Marketing, Compliance, Quality Assurance, Clinical, Field & Depot Service, Finance, Legal and, most recently, Information Technology. We are currently transitioning the Palomar product line to our contract manufacturing model. We expect this process, along with the expansion of our Westford headquarters to accommodate the Burlington workforce, to be completed by the end of the second quarter of this year.

“The cost and revenue synergies we achieved in the fourth quarter begin to reflect the value we expect to realize from the Palomar acquisition over the long term,” Davin said. “On an adjusted basis, excluding acquisition-related expenses, efficiencies gained through the consolidation helped to generate a fourth-quarter operating margin of 16.4%. On the revenue side, we saw strong demand for bundled systems that offer patients a broader range of aesthetic treatments. New flagship workstations such as PicoSure for the removal of tattoos and benign pigmented lesions, Vectus™ for high-volume hair removal and the versatile Icon™ Aesthetic System continue to perform extremely well.”

Recent Highlights

 

    Sale of Former Palomar Headquarters: Cynosure completed the sale of the former Palomar headquarters in Burlington, MA. Proceeds of the sale, after transaction costs, were approximately $25.1 million. In an agreement with the buyer, Cynosure plans to remain in the building until the end of June 2014.

 

    Settlement of Patent Infringement Lawsuits Against Tria Beauty: Cynosure announced that it will receive $10 million plus future royalty payments under a comprehensive settlement agreement with Tria Beauty, Inc. that ends the patent infringement litigation between Tria and Palomar. Cynosure will pay approximately $2 million of this revenue to Massachusetts General Hospital under an exclusive license agreement between Palomar and Massachusetts General Hospital. Cynosure recognized $4 million of this revenue in the fourth quarter of 2013.

 

    New Regulatory Approvals: Cynosure received marketing authorization for its PicoSure™ Picosecond Laser Workstation in Korea from the country’s Ministry of Food and Drug Safety and in Taiwan from the Taiwan Food and Drug Administration (TFDA). In addition to PicoSure, the TFDA granted marketing authorization to two other Cynosure products: Smartlipo Triplex™ LaserBodySculpting™ Workstation, the industry’s leading laser-assisted lipolysis system designed to disrupt fat cells and tighten tissue through tissue coagulation; and Apogee+, a 755 nm Alexandrite laser for removal of hair and epidural lesions on a wide range of skin types.

 

    Stock Buyback: During the fourth quarter of 2013, Cynosure purchased $15.4 million of common stock under its previously announced $25 million share repurchase program.


Business Outlook

“We believe we are well positioned for 2014 and beyond,” Davin said. “Our integration is largely complete, our products are performing well and we have multiple R&D projects, including flagship products, energy delivery systems and technology enhancements, slated for introduction over the next two years. Adding to this momentum, we have a very strong balance sheet and are well on our way toward achieving the targeted $8 million to $10 million in synergies from the Palomar acquisition in 2014.”

Fourth-Quarter Financial Results Conference Call

In conjunction with the announcement of its fourth-quarter and year-end 2013 financial results, Cynosure will host a conference call for investors and analysts at 9:00 a.m. ET today. On the call, Michael Davin and Timothy Baker, the Company’s Executive Vice President, Chief Operating Officer and Chief Financial Officer, will discuss Cynosure’s financial results and provide a business overview. Those who wish to listen to the conference call webcast should visit the “Investors” section of the Company’s website at www.cynosure.com. The live call can also be accessed by dialing (877) 709-8155 or (201) 689-8881. If you are unable to listen to the live call, the webcast will be archived on the Company’s website.

About Cynosure, Inc.

Cynosure develops and markets aesthetic treatment systems that enable plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, liquefy and remove unwanted fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus and ablate sweat glands. Cynosure’s product portfolio is composed of a broad range of energy sources including Alexandrite, diode, Nd: YAG, picosecond, pulse dye, and Q-switched lasers and intense pulsed light. Cynosure sells its products globally under the Cynosure, Palomar and ConBio brand names through a direct sales force in the United States, Canada, Mexico, France, Germany, Spain, the United Kingdom, Australia, China, Japan and Korea, and through international distributors in approximately 100 other countries. For corporate or product information, visit Cynosure’s website at www.cynosure.com.


Forward-Looking Statements

Any statements in this press release about future expectations, plans and prospects for Cynosure, Inc., including statements relating to the transition of the Palomar product line to Cynosure’s contract manufacturing model, Cynosure’s expansion of its Westford headquarters, research and development projects, anticipated synergies from the Palomar acquisition, the receipt of payments in connection with the Tria Beauty settlement agreement, 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 market price of Cynosure’s stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company’s cash flows from operations, levels of demand for procedures performed with Cynosure products and for Cynosure products themselves, Cynosure’s ability to achieve anticipated synergies in calendar 2014, competition in the aesthetic laser industry, general business and economic conditions, effects of acquisitions that Cynosure has made or may make, Cynosure’s ability to develop and commercialize new products, Cynosure’s reliance on sole source suppliers, the inability to accurately predict the timing or outcome of regulatory decisions, and economic, market, technological and other factors discussed in Cynosure’s most recent Annual Report on Form 10-K and subsequently filed Quarterly Report on Form 10-Q for the third quarter of 2013, 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, although 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.


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Consolidated Statements of Income (Unaudited)

 

(In thousands, except per share data)

 

     Three Months Ended December 31,      Twelve Months Ended December 31,  
     2013     2012      2013     2012  

Revenues

   $ 74,537      $ 42,669       $ 226,010      $ 153,493   

Cost of revenues

     29,865        17,878         95,730        64,567   
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     44,672        24,791         130,280        88,926   

Operating expenses

         

Selling and marketing

     20,149        12,693         64,347        47,543   

Research and development

     5,123        3,192         17,473        12,972   

Amortization of intangible assets acquired

     1,166        342         2,114        1,368   

General and administrative

     9,984        4,325         52,173        14,910   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     36,422        20,552         136,107        76,793   

Income (loss) from operations

     8,250        4,239         (5,827     12,133   

Interest (expense) income, net

     (103     21         (23     60   

Other (expense) income, net

     (5     223         313        532   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

     8,142        4,483         (5,537     12,725   

Income tax provision (benefit)

     793        444         (3,890     1,764   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 7,349      $ 4,039       $ (1,647   $ 10,961   
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted net income (loss) per share

   $ 0.33      $ 0.27       $ (0.09   $ 0.79   
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted weighted average shares outstanding

     22,565        15,101         19,325        13,792   
  

 

 

   

 

 

    

 

 

   

 

 

 

Basic net income (loss) per share

   $ 0.33      $ 0.28       $ (0.09   $ 0.83   
  

 

 

   

 

 

    

 

 

   

 

 

 

Basic weighted average shares outstanding

     22,052        14,555         19,325        13,189   
  

 

 

   

 

 

    

 

 

   

 

 

 


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Condensed Consolidated Balance Sheet

 

(In thousands)

 

     December 31,
2013
     December 31,
2012
 
     (Unaudited)         

Assets:

     

Cash, cash equivalents and marketable securities

   $ 93,655       $ 86,057   

Short-term investments and related financial instruments

     26,633         40,617   

Accounts receivable, net

     36,587         17,970   

Inventories

     54,098         32,906   

Deferred tax asset, current portion

     9,341         783   

Prepaid expenses and other current assets

     6,891         5,149   
  

 

 

    

 

 

 

Total current assets

     227,205         183,482   

Property and equipment, net

     26,445         8,207   

Long-term marketable securities

     8,804         20,071   

Goodwill and intangibles, net

     150,362         21,748   

Other noncurrent assets

     1,678         1,061   
  

 

 

    

 

 

 

Total assets

   $ 414,494       $ 234,569   
  

 

 

    

 

 

 

Liabilities and stockholders’ equity:

     

Accounts payable and accrued expenses

   $ 50,893       $ 25,547   

Amounts due to related parties

     1,268         1,896   

Deferred revenue

     9,163         6,319   

Capital lease obligations

     286         322   
  

 

 

    

 

 

 

Total current liabilities

     61,610         34,084   

Capital lease obligations, net of current portion

     14,957         432   

Deferred revenue, net of current portion

     1,010         281   

Other long-term liabilities

     8,565         2,265   

Total stockholders’ equity

     328,352         197,507   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 414,494       $ 234,569   
  

 

 

    

 

 

 


LOGO

To supplement our consolidated financial statements presented in accordance with GAAP, Cynosure uses non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP EPS. 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. The non-GAAP financial measures included in this press release exclude costs associated with the acquisition of Palomar, for the three and twelve months ended December 31, 2013. This exclusion may be different from, and therefore not comparable to, similar measures used by other companies.

Cynosure’s management believes that the non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding the acquisition-related costs that may not be indicative of our core business operating results. Cynosure believes that both management and investors benefit from referring to the non-GAAP financial measures in assessing Cynosure’s performance and when planning, forecasting and analyzing future periods. The non-GAAP financial measures also facilitate management’s internal comparisons to Cynosure’s historical performance and our competitors’ operating results. Cynosure believes that the non-GAAP measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in our 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 Dec 31,      Twelve Months Ended Dec 31,  
     2013     2012      2013     2012  

Gross profit

   $ 44,672      $ 24,791       $ 130,280      $ 88,926   
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP adjustments to gross profit:

         

Costs associated with the acquisition of Palomar

     316        —           2,679        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-GAAP adjustments to gross profit

     316        —           2,679        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP gross profit dollars

   $ 44,988      $ 24,791       $ 132,959      $ 88,926   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Three Months Ended Dec 31,      Twelve Months Ended Dec 31,  
     2013     2012      2013     2012  

Income (loss) from operations

   $ 8,250      $ 4,239       $ (5,827   $ 12,133   
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP adjustments to income (loss) from operations:

         

Costs associated with the acquisition of Palomar

     3,995        —           35,030        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-GAAP adjustments to income (loss) from operations

     3,995        —           35,030        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP income from operations

   $ 12,245      $ 4,239       $ 29,203      $ 12,133   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Three Months Ended Dec 31,      Twelve Months Ended Dec 31,  
     2013     2012      2013     2012  

Net income (loss)

   $ 7,349      $ 4,039       $ (1,647   $ 10,961   
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP adjustments to net income (loss):

         

Costs associated with the acquisition of Palomar

     3,995        —           35,030        —     

Income tax effect of Non-GAAP adjustments

     (2,605     —           (12,236     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-GAAP adjustments to net income (loss)

     1,390        —           22,794        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP net income

   $ 8,739      $ 4,039       $ 21,147      $ 10,961   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Three Months Ended Dec 31,      Twelve Months Ended Dec 31,  
     2013     2012      2013     2012  

Diluted net income (loss) per share

   $ 0.33      $ 0.27       $ (0.09   $ 0.79   
  

 

 

   

 

 

    

 

 

   

 

 

 

Costs associated with the acquisition of Palomar

     0.18        —           1.76        —     

Income tax effect of Non-GAAP adjustments

     (0.12     —           (0.62     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total Non-GAAP adjustments to net income (loss)

     0.06        —           1.15        —     

Non-GAAP diluted net income per share

   $ 0.39      $ 0.27       $ 1.06      $ 0.79   
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average shares used to compute basic and diluted net income per share

     22,052        14,555         19,325        13,189   
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average shares used to compute Non-GAAP diluted net income per share

     22,565        15,101         19,884        13,792