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Cynosure Reports Financial Results for the First Quarter of 2009

WESTFORD, Mass., May 5 /PRNewswire-FirstCall/ -- Cynosure, Inc. (Nasdaq: CYNO), a leading developer and manufacturer of a broad array of light-based aesthetic treatment systems, today announced financial results for the three months ended March 31, 2009.

First Quarter 2009 Financial Results

Consistent with Cynosure's April 15 announcement, revenues for the three months ended March 31, 2009 were $14.8 million, reflecting the continued effects of the global economic recession and the continued restrictive credit environment in the aesthetic laser industry. Revenues for the comparable period of 2008 were $36.8 million. Gross margin for the first quarter of 2009 was 60.9% of total revenues, compared with 66.3% for the same period of 2008. The quarter-over-quarter decline in gross margin reflected the higher percentage of laser revenue from international markets, which tend to have a lower sales price through third-party distributors than sales made through the North American direct distribution.

Cynosure's net loss for the first quarter of 2009 was $4.0 million, or $0.32 per share, consistent with the anticipated loss range of $3.8 million to $4.3 million the company announced on April 15. For the first quarter of 2008, Cynosure recorded net income of $4.9 million, or $0.38 per diluted share.

"Aesthetic laser capital equipment spending was down significantly in the first quarter of 2009 compared with the same period of 2008, affecting all of our product lines and geographies," said Cynosure President and Chief Executive Officer Michael Davin. "The global recession has restricted credit for many practitioners, and we believe it has discouraged those with borrowing capacity from buying equipment until the economic forecast brightens. The first two months of the first quarter were very slow; however, we were pleased that March order volume picked up slightly. We have continued to reduce expenses in response to our lower revenue levels."

As Cynosure announced last month, in addition to steps it took in the fourth quarter of 2008 the company implemented a number of first quarter cost-cutting measures designed to generate an annualized operating expense savings of between $14 million and $18 million in 2009 compared with 2008 levels. Among these steps, Cynosure reduced its worldwide headcount to 271 employees from 285 at the end of 2008 and further cut planned spending for various programs.

"Although we have moved aggressively to lower costs, we also have focused on retaining the people, technology assets and R&D innovations that we believe are crucial to the long-term success of our company," Davin said. "Our experienced direct sales force, outstanding product portfolio and unique intelligent-delivery systems have helped to establish Cynosure as a leader in the aesthetic industry, and remain vital to our organization as we go forward."

Recent Highlights

  • Physician researchers at the 2009 American Society for Laser Medicine and Surgery Annual Conference presented positive efficacy data from post-marketing studies of Cynosure's Smartlipo MPX(TM) laser lipolysis workstation. The studies demonstrated the ability of the Smartlipo MPX to tighten skin and shrink skin tissue more efficaciously than skin treated with liposuction alone.

  • At the American Academy of Dermatology's 67th Annual Meeting, Cynosure launched the multi-wavelength Elite MPX workstation for vascular treatment, hair removal and skin rejuvenation. The company also introduced two new intelligent delivery systems, SmartSense with ThermaGuide and ThermaView. As the world's first subcutaneous temperature device for laser lipolysis, SmartSense with ThermaGuide enables physicians not only to measure the temperature under the skin, but to set temperature thresholds, thereby controlling energy delivery for a safer procedure. ThermaView is a thermal camera system that provides a heat signature map of temperatures within the treatment area to provide a homogeneous delivery of thermal energy.

  • The United States District Court for the District of Massachusetts issued a favorable set of rulings in a Markman hearing in the company's patent infringement lawsuit against CoolTouch Inc. The purpose of the hearing was to enable the court to determine the meaning and scope of the patent claims if the case proceeds to trial.

Business Outlook

"Despite a challenging first quarter, we remain encouraged about the prospects for the laser aesthetic industry and are committed to taking the steps necessary to manage the business profitably for the long term," Davin said. "Our recent opening of a direct sales office in Korea, the introduction of new products such as Elite MPX, and investments in technological enhancements such as SmartSense with ThermaGuide, are all integral to our long-term growth strategy."

Conference Call

Cynosure will host a conference call for investors today at 9:00 a.m. ET. On the call, Michael Davin and Timothy Baker, the company's Executive Vice President and Chief Financial Officer, will discuss the company's first quarter 2009 financial results and provide a business outlook.

Those who wish to listen to the conference call webcast should visit the "Investor Relations" section of the company's website at The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. If you are unable to listen to the live call, the webcast will be archived on the company's website.

About Cynosure, Inc.

Cynosure, Inc. develops and markets aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and pigmented lesions, rejuvenate the skin, liquefy and remove unwanted fat through laser lipolysis and temporarily reduce the appearance of cellulite. Cynosure's products include a broad range of laser and other light-based energy sources, including Alexandrite, pulsed dye, Nd:YAG and diode lasers, as well as intense pulsed light. Cynosure was founded in 1991.

For corporate or product information, contact Cynosure at 800-886-2966, or visit

Forward-Looking Statements

Any statements in this press release about future expectations, plans and prospects for Cynosure, Inc., including statements about the company's ability to reduce expenses and its expectations regarding future financial performance, 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 global economic recession and its effects on the aesthetic laser industry, Cynosure's history of operating losses, its reliance on sole source suppliers, the inability to accurately predict the timing or outcome of regulatory decisions, changes in consumer preferences, competition in the aesthetic laser industry, economic, market, technological and other factors discussed in Cynosure's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, 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, while 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.

    Scott Solomon
    Vice President
    Sharon Merrill Associates, Inc.

    Consolidated Statements of Income (Unaudited)
    (In thousands, except per share data)

                                    Three Months Ended March 31,
                                        2009         2008
                                        ----         ----

    Revenues                          $14,816      $36,763
    Cost of revenues                    5,800       12,371
                                        -----       ------
    Gross profit                        9,016       24,392

    Operating expenses
      Selling and marketing            10,530       13,194
      Research and development          1,741        1,812
      General and administrative        3,880        3,487
                                        -----        -----

    Total operating expenses           16,151       18,493

    (Loss) income from operations      (7,135)       5,899

      Interest income, net                265          801
      Other (expense) income, net         (56)         553
                                          ---          ---

    (Loss) income before income
     taxes                             (6,926)       7,253

      Income tax (benefit)
       provision                       (2,905)       2,383
                                       ------        -----

    Net (loss) income                 $(4,021)      $4,870
                                      =======       ======

    Diluted net (loss) income
     per share                         $(0.32)       $0.38
                                       ======        =====
    Diluted weighted Average
     shares outstanding                12,701       12,768
                                       ======       ======

    Basic net (loss) income
     per share                         $(0.32)       $0.39
                                       ======        =====
    Basic weighted average shares
     outstanding                       12,701       12,471
                                       ======       ======

    Condensed Consolidated Balance Sheet (Unaudited)
    (In thousands)
                                     March 31,  December 31,
                                       2009         2008
                                       ----         ----
      Cash, cash
       equivalents and
       marketable securities          $69,492      $74,369
      Accounts receivable, net         17,749       25,156
      Amounts due from
       related parties                     43           40
      Inventories                      29,751       30,248
      Deferred tax asset,
       current portion                  6,828        6,825
      Prepaid expenses and
       other current assets             6,936        4,331
                                        -----        -----
    Total current assets              130,799      140,969
      Property and
       equipment, net                   8,979        8,422
      Long-term investments
       and related financial
       instruments                     19,258       21,082
      Other noncurrent assets           2,709        2,649
                                        -----        -----
    Total assets                     $161,745     $173,122
                                     ========     ========

    Liabilities and stockholders'
      Accounts payable and
       accrued expenses               $15,313      $20,697
      Amounts due to Related
       parties                          3,122        6,083
      Deferred revenue                  4,547        4,296
      Capital lease obligations           368          398
                                          ---          ---
    Total current liabilities          23,350       31,474

    Capital lease
     obligations, net of
     current portion                      355          436
    Deferred revenue, net
     of current portion                   324          407
    Other long-term liabilities           452          451
                                          ---          ---
    Total stockholders' equity        137,264      140,354
                                      -------      -------
    Total liabilities and
     stockholders' equity            $161,745     $173,122
                                     ========     ========

    To supplement our consolidated financial statements presented
    in accordance with GAAP, Cynosure uses the following measures defined as
    non-GAAP financial measures by the SEC: non-GAAP gross profit, non-GAAP
    income from operations, non-GAAP net income and non-GAAP diluted earnings
    per share.  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. In
    addition, the non-GAAP financial measures included in this press release
    may be  different from, and therefore not comparable to, similar measures
    used by other companies.  Although certain non-GAAP financial measures
    used in his release exclude the accounting treatment of stock-based
    compensation, these non-GAAP measures should not be relied upon
    independently as they ignore the contribution to our operating results
    that is generated by the incentive and compensation effects of the
    underlying stock-based compensation programs.

    Cynosure's management believes that these non-GAAP financial measures
    provide meaningful supplemental information regarding our performance by
    excluding certain expenses and expenditures that may not be indicative of
    our core business operating results. Cynosure believes that both
    management and investors benefit from referring to these non-GAAP
    financial measures in assessing Cynosure's performance and when
    planning, forecasting and analyzing future periods. These non-GAAP
    financial measures also facilitate management's internal comparisons to
    Cynosure's historical performance and our competitors' operating results.
    Cynosure  believes that these non-GAAP measures are useful to investors
    in allowing for greater transparency with respect to supplemental
    information used by management in its financial and operational decision

    Reconciliation of GAAP Income Statement Measures to Non-GAAP
     Income Statement Measures (Unaudited)
    (In thousands, except per share data)

                              Three Months Ended March 31,
                                    2009       2008
                                    ----       ----

    Gross profit                  $9,016      $24,392
                                  ------      -------
    Non-GAAP adjustments
     to gross profit:
      Stock-based compensation       121          129
                                     ---          ---
      Total Non-GAAP
       adjustments to gross
       profit                        121          129
                                     ---          ---
    Non-GAAP Gross profit         $9,137      $24,521
                                  ======      =======

                              Three Months Ended March 31,
                                    2009       2008
                                    ----       ----
     (Loss) income from
      operations                 $(7,135)      $5,899
                                 -------       ------
    Non-GAAP adjustments to
     (loss) income from
      Stock-based compensation     1,825       1,687
                                   -----       -----
      Total Non-GAAP
       adjustments to (loss)
       income from operations      1,825       1,687
                                   -----       -----
    Non-GAAP (Loss) income
     from operations             $(5,310)     $7,586
                                  =======      ======

                              Three Months Ended March 31,
                                    2009       2008
                                    ----       ----

    Net (loss) income            $(4,021)     $4,870
                                 -------      ------
    Non-GAAP adjustments to
      net (loss) income:
      Stock-based compensation     1,825       1,687
      Income tax effect of
       Non-GAAP adjustments       (1,068)       (843)
                                  ------        ----
      Total Non-GAAP
       adjustments to net
       (loss) income                 757         844
                                     ---         ---
    Non-GAAP Net (loss)
     income                      $(3,264)     $5,714
                                 =======      ======

                             Three Months Ended March 31,
                                   2009       2008
                                   ----       ----
    Diluted net (loss) income
     per share                    $(0.32)      $0.38
                                   ------      -----

      Stock-based compensation     $0.14        0.13

      Income tax effect of
       Non-GAAP adjustments       $(0.08)      (0.07)
                                   ------      -----
      Total Non-GAAP
       adjustments to net
       (loss) income               $0.06        0.06
                                   -----        ----
    Non-GAAP Diluted net
     (loss) income per share      $(0.26)       0.44
                                   ======       ====
    Weighted average shares
      used to compute diluted
      net (loss) income per
      share                       12,701      12,768
                                  ======      ======
    Weighted average shares
     used to compute Non-GAAP
     diluted net (loss) income
     per share                    12,701      12,768
                                  ======      ======

SOURCE Cynosure, Inc.
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All rights reserved

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