Cynosure, Inc. (NASDAQ:CYNO) today reported revenues for the three months ended September 30, 2016 of $106.4 million, an increase of 36 percent from $78.4 million in the third quarter of 2015. Third-quarter 2016 net income of $4.2 million, or $0.17 per diluted share, represented an increase of 29 percent compared with $3.2 million, or $0.14 per diluted share, for the same period of 2015. On a non-GAAP basis, excluding non-cash unrealized foreign exchange measurement gains and losses and amortization of intangibles, third-quarter net income increased 43 percent to $7.0 million, or $0.29 per diluted share, compared with $4.9 million, or $0.21 per diluted share, for the prior-year period.
Operating income for the 2016 third quarter was $8.2 million, compared with third-quarter 2015 operating income of $4.8 million. On a non-GAAP basis, excluding amortization of intangibles, income from operations for the third quarter of 2016 was $10.3 million, compared with $7.1 million for the prior-year period.
Michael Davin, Cynosure President and CEO, said, “We delivered a solid operating and financial performance, generating record third-quarter revenue, profitable sales growth, expanded margins and positive operating cash flow. Product revenue in our North American and international sales channels saw double-digit percentage gains in the third quarter, which marked our 27th consecutive quarter of year-over-year top-line growth.
“SculpSure® has continued to exceed our expectations since we introduced the product in the U.S. for non-invasive fat reduction in the fourth quarter of last year,” Davin said. “Satisfaction among physicians and patients remains very favorable, a point reinforced by the fact that reorders of SculpSure’s PAC keys represented more than 40 percent of total PAC key revenue for the quarter. Consistent with our global distribution strategy, SculpSure is currently being sold through our direct sales force in Europe and Australia as well as select international distributors. We also are in the process of introducing SculpSure to physicians in Canada and through our subsidiary in Korea following recent marketing clearances in those countries.
“International product revenue increased $5.6 million, or 23 percent, in the third quarter of 2016 compared to the prior year period, driven by increased sales from our Asian and European direct offices. In addition to SculpSure, our skin rejuvenation and tattoo products, led by PicoSure®, continued to contribute to the sales growth outside North America – particularly PicoSure in the Asia Pacific region,” Davin said. “PicoSure’s short-pulse technology, enhanced by our proprietary FOCUS™ Lens Array, has proved to deliver an effective clinical result in the Asia market. With the 755 nm PicoSure gaining market acceptance in China, combined with additional anticipated regulatory clearances, we expect that international product revenue will continue to grow year-over-year.”
Third-Quarter 2016 Financial Results
North American product revenue grew 43 percent year-over-year to $58.2 million. International product revenue improved 23 percent to $29.4 million for the quarter. Parts, service and disposables revenue increased 45 percent year-over-year to $18.7 million, primarily reflecting sales of disposable PAC keys associated with SculpSure.
Gross profit for the third quarter of 2016 was $62.8 million, or 59.0 percent of revenue, compared with $44.4 million, or 56.6 percent of revenue, for the same period in 2015. On a non-GAAP basis, excluding non-cash charges related to the amortization of intangibles, gross profit for the third quarter of 2016 increased to $64.3 million, or 60.4 percent of revenue, compared with $46.0 million, or 58.6 percent of revenue, in the prior-year period.
Total GAAP operating expenses for the third quarter of 2016 were $54.6 million, or 51.4 percent of revenue, compared with $39.6 million, or 50.5 percent of revenue, for the same period a year earlier. Sales and marketing expenses for the third quarter of 2016 were $38.1 million, or 35.8 percent of revenue, compared with sales and marketing expenses of $26.8 million, or 34.2 percent of revenue, for the third quarter of 2015. The year-over-year increase was primarily due to sales and marketing costs associated with SculpSure, which was launched toward the end of the third quarter of 2015.
Recent Highlights
- Stephen J. Webber joined Cynosure as Executive Vice President on October 10, 2016. Mr. Webber, a former executive of EMC, will become Chief Financial Officer and Chief Accounting Officer following the filing next month of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.
- Cynosure received approval from the Korean Ministry of Food and Drug Safety to market SculpSure for non-invasive lipolysis of the abdomen and flanks. The product is being marketed through the Company’s wholly owned subsidiary in Seoul.
- Joseph LaBruzzo was named Cynosure’s Senior Vice President of International Sales. A 15-year veteran of the medical device industry, he previously served in senior positions for Ellipse A/S and Cutera. Mr. LaBruzzo will be responsible for the Company’s direct subsidiaries in Europe and Asia as well as third-party distributors covering 120 countries.
Business Outlook
“Our strong operating results and healthy balance sheet have created a solid foundation for us through the first nine months of 2016, and we are well positioned to achieve our strategic and operational goals in the quarters ahead,” Davin said. “We plan to continue to leverage our global distribution network and proven business model to expand the treatment indications and international clearances for our products.”
Third-Quarter 2016 Financial Results Conference Call
In conjunction with the announcement of its third-quarter 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 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 for one year on the Company’s website.
About Cynosure, Inc.
Cynosure develops, manufactures, 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, reduce fat through non-invasive and minimally invasive laser lipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve gynecological health. Cynosure also markets radiofrequency energy-sourced medical devices for precision surgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures, ophthalmology, oral and maxillofacial surgery, podiatry and proctology.
Cynosure’s product portfolio is composed of a broad range of energy sources including Alexandrite, diode, Nd:YAG, picosecond, pulse dye, Q-switched lasers, intense pulsed light and radiofrequency technology. Cynosure sells its products globally under the Cynosure, Palomar, ConBio and Ellman brand names through a direct sales force in the United States, Canada, France, Morocco, Germany, Spain, the United Kingdom, Australia, China, Japan and Korea, and through international distributors in approximately 120 other countries. For corporate or product information, visit Cynosure’s website at www.cynosure.com.
