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Solta Medical Reports Third Quarter Results

November 1, 2012

HAYWARD, Calif., Nov. 1, 2012 /PRNewswire/ — Solta Medical, Inc. (NASDAQ: SLTM), a global leader in the medical aesthetics market, today announced results for the third quarter ended September 30, 2012. Revenue for the third quarter was $35.0 million, an increase of $7.6 million, or 28%, as compared to the third quarter of 2011. Revenue from Liposonix, the Company’s non-invasive fat reduction system, was $7.0 million, which was generated from shipments of 81 systems and associated consumables. Total product revenue from treatment tips and consumables for the quarter was $16.9 million, representing 48% of total revenue. Revenue from North America and international markets rose year-over-year by 27% and 28%, respectively, and was driven by growth in Liposonix, Thermage, Fraxel, and Clear + Brilliant brands.

“During the third quarter, we successfully executed our strategies to launch Liposonix in several key international markets as well as generate growth from the Thermage, Fraxel, and Clear + Brilliant product lines,” said Stephen J. Fanning, Chairman, President & CEO. “As a result of our efforts, we expanded commercialization of Liposonix to several overseas markets. In total, more than one-half of the Liposonix systems were shipped to international distributors and their customers during the quarter. Over the last several months, we have received important regulatory clearances for Liposonix and Clear + Brilliant in several significant international markets and in Asia, we continued to see strong demand for all our brands as revenue rose year-over-year in the region by 43%. In addition, we generated double digit new system sales growth worldwide for our Thermage and Fraxel brands during the quarter.”

GAAP net loss for the quarter was $2.9 million as compared to GAAP net loss of $1.1 million reported for the third quarter of 2011. Non-GAAP net income for the quarter was $2.0 million or $0.03 per diluted share as compared to non-GAAP net income of $1.5 million, or $0.02 per diluted share for same period last year. Non-GAAP adjusted EBITDA for the quarter was $3.3 million compared to $2.6 million for the same period last year.

GAAP results for the third quarter include a $1.9 million charge for a fair value reassessment of the expected earn out payments associated with the acquisition of Liposonix. The total contingent consideration, which includes expected payments over the next seven years, is $60.4 million, and is shown on the Company’s September 30, 2012 balance sheet as a short-term liability of $22.3 million and a long-term liability of $38.1 million. The Company’s GAAP results for the quarter also include $1.7 million of non-cash amortization and other acquisition related charges, and $1.2 million of non-cash stock based compensation charges. The Company provides non-GAAP financial measures that exclude these charges and expenses. A reconciliation of GAAP to non-GAAP results is provided in the tables included in this release.

“We have produced positive non-GAAP adjusted EBITDA for every quarter over the last three years while investing in organic growth and strategic acquisitions. During this same time period we also generated more than $12 million in cash flow from operations,” said Mr. Fanning. “Our extensive product line offers a breadth of aesthetic solutions and positions Solta for improved operating leverage and operating cash flow, which are key areas of focus for management.”

Financial Outlook for 2012

The company updated its financial outlook for 2012 as follows:

  • The Company reiterated that revenue for the full year 2012 is expected to be in the range of $142 million to $144 million, representing year-over-year revenue growth of 22% to 24%.*
  • Non-GAAP gross margin is now estimated to be in the range of 65% to 67% for the full year 2012 as compared to the Company’s previously issued range of 64% to 67%. Non-GAAP gross margin excludes non-cash amortization charges, non-cash stock based compensation charges, severance costs, and acquisition related adjustments. Non-GAAP gross margin for the nine months ended September 30, 2012 was 66.6%.
  • The outlook for positive non-GAAP adjusted EBITDA for every quarter and for the full-year 2012 remains unchanged. Non-GAAP adjusted EBITDA excludes non-cash amortization charges, non-cash stock based compensation charges, severance costs, and acquisition related adjustments. Non-GAAP adjusted EBITDA for the nine months ended September 30, 2012 was $8.0 million.

* The Company is unable at this time to assess the impact Hurricane Sandy may have on its ability to generate revenue from the Northeast region of the U.S. where the Company has historically derived about 8% of total revenue.

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 also host a conference call and webcast today, Thursday, November 1, 2012, at 10:30 a.m. Eastern Time (7:30 a.m. Pacific) to discuss the financial results and current corporate developments. The dial-in number for the conference call is 877-941-6009 for domestic participants and 480-629-9819 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, safe, and effective solutions for patients that enhance and expand the practice of medical aesthetics for physicians. The company offers six aesthetic energy devices to address a range of issues, including skin resurfacing and rejuvenation with Fraxel® and Clear + Brilliant(TM), body contouring and skin tightening with Liposonix® and Thermage® and acne reduction with Isolaz® and CLARO(TM). As the innovator and leader in fractional laser technology, Fraxel delivers minimally invasive clinical solutions to resurface aging and sun damaged skin. Using similar fractional laser technology, Clear + Brilliant is a unique, cost-effective treatment to prevent and improve the early signs of photoaging. For body contouring, Liposonix is a non-surgical treatment to reduce waist circumference with advanced high-intensity focused ultrasound (HIFU) technology to permanently destroy targeted fat beneath the skin. Thermage is an innovative, non-invasive radiofrequency procedure for tightening and contouring skin. Isolaz was the first laser or light based system indicated for the treatment of inflammatory acne, comedonal acne, pustular acne, and mild-to-moderate inflammatory acne. CLARO is a personal care acne system that is the first FDA cleared over-the-counter IPL device that uses a powerful combination of both heat and light to clear skin quickly and naturally. More than two million procedures have been performed with Solta Medical’s portfolio of products around the world. For more information about Solta Medical, call 1-877-782-2286 or log on to www.Solta.com.

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 expected continued market acceptance of Liposonix, the ability to improve operating leverage and cash flow, and the financial outlook for 2012. 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, 2011, 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                     Nine Months Ended
                                                        September 30,                         September 30,
                                                          2012                   2011                   2012        2011
                                                          ----                   ----                   ----        ----

    Net revenue                                        $35,028                $27,411               $104,744     $82,816
    Cost of revenue                                     13,813                  9,519                 39,738      28,300

    Gross margin                                        21,215                 17,892                 65,006      54,516
                                                        ------                 ------                 ------      ------

    Operating expenses:
    Sales and marketing                                 12,403                 10,784                 40,022      34,517
    Research and development                             4,849                  3,665                 15,167      10,878
    General and administrative                           4,557                  4,669                 13,832      12,003
    Remeasurement of contingent
     consideration liability                             1,900                   (394)                32,600        (878)

    Total operating expenses                            23,709                 18,724                101,621      56,520
                                                        ------                 ------                -------      ------

    Loss from operations                                (2,494)                  (832)               (36,615)     (2,004)
    Interest income                                          3                     19                      8          52
    Interest expense                                      (377)                   (16)                (1,078)        (90)
    Other income and expense, net                           46                   (306)                  (101)       (188)

    Loss before income taxes                            (2,822)                (1,135)               (37,786)     (2,230)
    Provision for income taxes                              56                     10                    177         146
                                                           ---                    ---                    ---         ---

    Net loss                                           ($2,878)               ($1,145)              ($37,963)    ($2,376)
                                                       =======                =======               ========     =======

    Net loss per share -basic
     and diluted                                        ($0.04)                ($0.02)                ($0.60)     ($0.04)
                                                        ======                 ======                 ======      ======

    Weighted average shares
     outstanding used in
     calculating net loss per
     share:
    Basic and diluted                               65,947,361             60,785,015             63,017,220  60,443,429
                                                    ==========             ==========             ==========  ==========

                                                                                 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,
                                                      2012                                         2011                                          2012          2011
                                                      ----                                         ----                                          ----          ----

    GAAP Gross margin                              $21,215                                      $17,892                                       $65,006       $54,516
                                                   =======                                      =======                                       =======       =======
    GAAP gross margin as %
     of sales                                           61%                                          65%                                           62%           66%
                                                       ===                                          ===                                           ===           ===
    Non-GAAP adjustments to
     gross margin:
    GAAP Gross margin                              $21,215                                      $17,892                                       $65,006       $54,516
    Amortization and other
     non-cash acquisition
     related charges                                 1,374                                          844                                         4,407         2,533
    Stock-based compensation                           127                                          105                                           366           269
    Non-GAAP gross margin                          $22,716                                      $18,841                                       $69,779       $57,318
                                                   =======                                      =======                                       =======       =======
    Non-GAAP gross margin
     as % of sales                                      65%                                          69%                                           67%           69%
                                                       ===                                          ===                                           ===           ===

    GAAP loss from
     operations                                    ($2,494)                                       ($832)                                     ($36,615)      ($2,004)
    Non-GAAP adjustments to
     net income (loss) from
     operations:
    Amortization and other
     non-cash acquisition
     related charges                                 1,729                                        1,128                                         5,475         3,330
    Remeasurement of
     contingent
     consideration liability                         1,900                                         (394)                                       32,600          (878)
    Acquisition-related
     expenses                                           16                                        1,115                                           167         1,235
    Severance expenses
     (credits)                                         (18)                                           -                                             1             -
    Stock-based compensation                         1,204                                          800                                         3,553         2,281
                                                     -----                                          ---                                         -----         -----
    Non-GAAP income from
     operations                                     $2,337                                       $1,817                                        $5,181        $3,964
    Depreciation expenses                              943                                          733                                         2,818         2,278
                                                       ---                                          ---                                         -----         -----
    Non-GAAP Adjusted EBITDA                        $3,280                                       $2,550                                        $7,999        $6,242
                                                    ======                                       ======                                        ======        ======

    GAAP net loss                                  ($2,878)                                     ($1,145)                                     ($37,963)      ($2,376)
    Non-GAAP adjustments to
     net loss:
    Amortization and other
     non-cash acquisition
     related charges                                 1,729                                        1,128                                         5,475         3,330
    Remeasurement of
     contingent
     consideration liability                         1,900                                         (394)                                       32,600          (878)
    Acquisition-related
     expenses                                           16                                        1,115                                           167         1,235
    Severance expenses
     (credits)                                         (18)                                           -                                             1             -
    Stock-based compensation                         1,204                                          800                                         3,553         2,281
                                                     -----                                          ---                                         -----         -----
    Non-GAAP net income                             $1,953                                       $1,504                                        $3,833        $3,592
                                                    ======                                       ======                                        ======        ======

    GAAP basic net loss per
     share                                          ($0.04)                                      ($0.02)                                       ($0.60)       ($0.04)
    Non-GAAP adjustments to
     basic loss per share:
    Amortization and other
     non-cash acquisition
     related charges                                 $0.03                                        $0.02                                         $0.09         $0.06
    Remeasurement of
     contingent
     consideration liability                         $0.02                                       ($0.01)                                        $0.51        ($0.02)
    Acquisition-related
     expenses                                        $0.00                                        $0.02                                         $0.00         $0.02
    Severance expenses
     (credits)                                      ($0.00)                                       $0.00                                         $0.00         $0.00
    Stock-based compensation                         $0.02                                        $0.01                                         $0.06         $0.04
    Non-GAAP basic net
     income per share                                $0.03                                        $0.02                                         $0.06         $0.06
                                                     =====                                        =====                                         =====         =====

    Non-GAAP diluted net
     income per share                                $0.03                                        $0.02                                         $0.06         $0.06
                                                     =====                                        =====                                         =====         =====

    GAAP weighted average
     shares outstanding used
     in calculating basic
     net loss per share                         65,947,361                                   60,785,015                                    63,017,220    60,443,429
                                                ==========                                   ==========                                    ==========    ==========

    GAAP weighted average
     shares outstanding used
     in calculating diluted
     net loss per share                         65,947,361                                   60,785,015                                    63,017,220    60,443,429
    Adjustments for dilutive
     potential common stock                      5,636,830                                    2,389,684                                     5,258,069     3,669,537
    Weighted average shares
     outstanding used in
     calculating non-GAAP
     diluted net income per
     share                                      71,584,191                                   63,174,699                                    68,275,289    64,112,966
                                                ==========                                   ==========                                    ==========    ==========

                                                                    Solta Medical, Inc.
                                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (in thousands of dollars, except share and per share data)
                                                                        (unaudited)

                                                                             September 30,                  December 31,
                                                                                                  2012                       2011
                                                                                                  ----                       ----

                                                                           ASSETS
    Current assets:
    Cash and cash equivalents                                                                  $38,547                    $17,417
    Accounts receivable                                                                         16,665                     13,282
    Inventories                                                                                 16,446                     16,524
    Prepaid expenses and other current assets                                                    7,856                      8,626

    Total current assets                                                                        79,514                     55,849
    Property and equipment, net                                                                  6,353                      6,818
    Purchased intangible assets, net                                                            44,158                     49,352
    Goodwill                                                                                    96,620                     96,620
    Other assets                                                                                   684                        659
                                                                                                   ---                        ---

    Total assets                                                                              $227,329                   $209,298
                                                                                              ========                   ========

                                                          LIABILITIES AND STOCKHOLDERS' EQUITY
    Liabilities:
    Accounts payable                                                                            $6,134                     $5,767
    Accrued liabilities                                                                         15,829                     16,126
    Current portion of contingent consideration
     liability                                                                                  22,300                          -
    Current portion of deferred revenue                                                          3,965                      4,521
    Short-term borrowings                                                                        7,054                      7,441
    Customer deposits                                                                              849                        610

    Total current liabilities                                                                   56,131                     34,465
    Deferred revenue, net of current portion                                                       557                        824
    Term loan, net of current portion                                                           20,698                     16,959
    Non-current tax liabilities                                                                  3,010                      2,975
    Contingent consideration liability                                                          38,100                     27,800
    Other  liabilities                                                                             107                         92

    Total liabilities                                                                          118,603                     83,115
                                                                                               -------                     ------

    Stockholders' equity:
    Common stock, $0.001 par value:
    100,000,000 shares authorized
    68,543,122, and 61,130,740 shares issued and
     outstanding at September 30, 2012 and
     December 31, 2011                                                                              69                         61
    Additional paid-in capital                                                                 219,063                    198,565
    Accumulated deficit                                                                       (110,406)                   (72,443)

    Total stockholders' equity                                                                 108,726                    126,183
                                                                                               -------                    -------

    Total liabilities and stockholders' equity                                                $227,329                   $209,298
                                                                                              ========                   ========

SOURCE Solta Medical, Inc.


Source: PR Newswire