SOURCE: ZELTIQ Aesthetics, Inc.

ZELTIQ Aesthetics, Inc.

October 27, 2015 16:01 ET

Zeltiq Announces Third Quarter 2015 Financial Results

34% Year-Over-Year Revenue Growth to $61.2 Million; Increases Full Year 2015 Revenue & Profitability Guidance; Receives FDA Clearance to Treat Submental Fat; Announces Collaboration With Massachusetts General Hospital for Treatment of Acne

PLEASANTON, CA--(Marketwired - October 27, 2015) -

  • 337 systems shipped, compared to 260 systems in third quarter 2014, bringing total system installed base to 4,247 systems
  • 247,298 revenue cycles, up 55% from third quarter 2014
  • Third quarter GAAP net income of $2.1 million, or $0.05 per share
  • Third quarter Adjusted EBITDA of $5.6 million, or 9.2% of total revenue

ZELTIQ®, (NASDAQ: ZLTQ) a medical technology company focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform, today announced financial results for the third quarter 2015.

Mark Foley, President and Chief Executive Officer, said, "I am very pleased with our ongoing, successful execution and our ability to continue to expand and grow the non-invasive fat reduction market which we believe remains in its early stages of evolution. Our third quarter revenue of $61.2M reflects the significant momentum we are experiencing, our expanding leadership position and our ability to continue to penetrate the largely untapped $4 billion non-invasive fat reduction market. In the quarter, over 50% of our revenue came from consumables and our 34% year-over-year total revenue growth was driven by our ninth consecutive quarter of year-over-year account utilization growth. These results and our expectations for the fourth quarter have led us to raise our full year revenue guidance to approximately $252 million."

Mr. Foley continued, "I am also pleased with the progress we continue to make on our strategic initiatives which include new product introductions, expanded indications, increasing brand awareness, shorter treatment times and increasing account utilization. In the third quarter we expanded our direct-to-consumer pilot, continued the successful roll out of our CoolSmooth PRO™ applicator, received FDA clearance to treat submental fat and launched our CoolMini applicator. Early feedback on our CoolMini applicator and its ability to treat submental fat has been very positive and we are excited about the significant new market opportunity CoolMini opens up and its ability to bring new patients into the aesthetic channel. Our CoolSmooth Pro applicator continues to receive positive feedback as more physicians experience the economic and convenience benefits of a shorter treatment time and better practice efficiency. In addition, we remain on track to introduce colder temperatures to our suction-based applicators in 2016 which we believe will enable our practices to reduce treatment times by almost half. Our direct-to-consumer pilot continues to generate positive results and our expansion into seven additional U.S. cities and one international market is having a measurable effect. Lastly, we are pleased to announce that we entered into a collaboration and license agreement with Massachusetts General Hospital (MGH) for the treatment of acne. The agreement provides ZELTIQ with the rights, on an exclusive worldwide basis, to the intellectual property generated from the collaboration. As part of this, we will be paying MGH a 3% royalty for any future products that are commercialized under this agreement. We have confidence that our technology, strategic initiatives, deep pipeline, marketing expertise and compelling practice economics will continue to drive robust top-line growth."

Third Quarter Financial Review

Total revenue for the third quarter 2015 was $61.2 million, consisting of $29.3 million of system revenue and $31.9 million of consumable revenue. This compares to total revenue of $45.7 million, consisting of $24.8 million of system revenue and $20.9 million of consumable revenue for the third quarter 2014. Total revenue cycles shipped increased 55% to 247,298 for the third quarter 2015, compared to 159,116 for the third quarter 2014.

Gross profit was $45.2 million, or 74% of revenue, for the third quarter 2015, compared to gross profit of $33.1 million, or 73% of revenue, for the third quarter 2014. Operating expenses for the third quarter 2015 were $43.2 million, compared to $28.2 million for the third quarter 2014.

Income from operations for the third quarter 2015 was $1.9 million, compared to $5.0 million for the third quarter 2014. Net income for the third quarter 2015 was $2.1 million, or $0.05 per share, compared to $4.8 million for the third quarter 2014, or $0.12 per share. Weighted average diluted shares outstanding was 40.9 million for the third quarter 2015 and 2014.

On a non-GAAP basis, the Company reported adjusted EBITDA of $5.6 million, or 9% of revenue, for the third quarter 2015, compared to $7.9 million, or 17% of revenue, for the third quarter 2014.

Cash and cash equivalents, short-term investments, and long-term investments were $50.5 million as of September 30, 2015 compared to $48.1 million as of September 30, 2014, and $53.1 million as of June 30, 2015.

Revised Full Year 2015 Financial Guidance

ZELTIQ is updating its previously stated financial guidance for the full year 2015, provided on its second quarter 2015 earnings conference call:

  • Revenue guidance of approximately $252 million which includes approximately $3 million of currency headwinds; up from prior guidance of $245 million to $247 million
  • Consumable revenue of approximately 50% of total revenue; unchanged from prior guidance
  • Gross profit margin of approximately 71% of total revenue; unchanged from prior guidance
  • Operating expenses of approximately 69% of total revenue; improved from prior guidance of 69% to 70%
  • Stock-based compensation, depreciation, and amortization expense of approximately 7% of total revenue; unchanged from prior guidance
  • Adjusted EBITDA margin of approximately 9% of total revenue; up from prior guidance of 8% to 9%

Additional information regarding ZELTIQ's results and guidance can be found in ZELTIQ's Supplemental Financial and Operational Information schedule by CLICKING HERE or by visiting the Investor Relations section of ZELTIQ's website at www.zeltiq.com.

Use of Non-GAAP Financial Measures

ZELTIQ has supplemented its GAAP net income (loss) with a non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of ZELTIQ, facilitates a more meaningful comparison of results for current periods with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of non-GAAP Adjusted EBITDA to GAAP net income (loss) in the most directly comparable GAAP measure is provided in the schedule below.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. This non-GAAP financial measure 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 ZELTIQ's consolidated financial statements prepared in accordance with GAAP and the reconciliations of the non-GAAP financial measure provided in the schedule below.

Conference Call

ZELTIQ will hold a conference call on Tuesday, October 27, 2015 at 1:30 p.m. PT / 4:30 p.m. ET to discuss the results. The dial-in numbers are (877) 280-7291 for domestic callers and (707) 287-9361 for international callers. The conference ID number is 55676149. A live webcast of the conference call will be available online from the investor relations page of the company's corporate website at www.coolsculpting.com.

A replay of the webcast will remain available on ZELTIQ's website, www.coolsculpting.com, until ZELTIQ releases its fourth quarter 2015 financial results. In addition, a telephonic replay of the call will be available until November 3, 2015. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use the replay conference ID number 55676149.

About ZELTIQ® Aesthetics

ZELTIQ is a medical technology company focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform. ZELTIQ's first commercial product, the CoolSculpting® System, is designed to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. It utilizes patented technology of precisely controlled cooling to reduce the temperature of fat cells in the treated area, which is intended to cause fat cell elimination through a natural biological process known as apoptosis. ZELTIQ developed CoolSculpting to safely, noticeably, and measurably reduce the fat layer.

Forward-Looking Statements

The statements made in this press release regarding ZELTIQ's estimate of the worldwide opportunity of $4B, its belief that CoolMini offers a sizable new market opportunity, its belief that it is on track to introduce colder temperatures to its suction-based applicators in 2016, its belief that such introduction will enable practices to reduce treatment times by almost half, its growth prospects and financial projections for the full year 2015, and its confidence in its recently stated long term financial objectives, are forward-looking statements. The words "believe," "expect," "will", and "guidance" and similar words that denote future events or results identify these forward-looking statements. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond ZELTIQ's control and that could materially affect ZELTIQ's actual business operations and financial performance and condition. Factors that could materially affect ZELTIQ's business operations and financial performance and condition include, but are not limited to: less than anticipated growth in the number of physicians electing to purchase CoolSculpting Systems; patient demand for CoolSculpting procedures may be lower than ZELTIQ expects; product or procedure announcements by competitors may decrease demand for CoolSculpting procedures; ZELTIQ may incorrectly estimate or control its future expenditures; ZELTIQ may incorrectly estimate the timing of new product development and new product launch; ZELTIQ's sales and marketing plans may fail to increase sales as ZELTIQ expects; individual patients may not experience the same results with CoolMini as the average patient in the clinical trials; as well as those other risks and uncertainties set forth in ZELTIQ's Quarterly Report on Form 10-Q for the second quarter ended June 30, 2015, filed with the SEC on July 30, 2015. These forward-looking statements speak only as of the date of this press release. ZELTIQ expressly disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise.

       
 
ZELTIQ Aesthetics, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
       
   September 30,
2015
 December 31,
2014
ASSETS      
CURRENT ASSETS:        
 Cash and cash equivalents  $35,618  $28,649
 Short-term investments   11,235   16,286
 Accounts receivable, net   32,908   21,472
 Inventory   28,783   15,536
 Prepaid expenses and other current assets   8,716   7,060
  Total current assets   117,260   89,003
 Long-term investments   3,620   4,805
 Restricted cash   459   560
 Property and equipment, net   4,770   3,724
 Intangible asset, net   5,255   5,780
 Other assets   147   33
  Total assets  $131,511  $103,905
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
 Accounts payable  $12,159  $5,824
 Accrued and other current liabilities   32,019   21,450
 Deferred revenue   7,198   5,069
 Current portion of capital lease obligations   123   120
  Total current liabilities   51,499   32,463
Long-term deferred revenue   157   622
Long-term capital lease obligations, less current portion   170   262
Other non-current liabilities   568   39
  Total liabilities  $52,394  $33,386
STOCKHOLDERS' EQUITY:        
  Total stockholders' equity   79,117   70,519
  Total liabilities and stockholders' equity  $131,511  $103,905
             
 
 
ZELTIQ Aesthetics, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
             
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2015  2014  2015  2014
Revenue  $61,202  $45,670  $177,191  $123,706
Cost of revenue   16,041   12,555   48,535   35,231
 Gross profit   45,161   33,115   128,656   88,475
Operating expenses:                
 Research and development   5,464   4,241   17,352   12,861
 Sales and marketing   30,647   19,014   87,253   60,253
 General and administrative   7,115   4,896   22,156   14,843
  Total operating expenses   43,226   28,151   126,761   87,957
Income from operations   1,935   4,964   1,895   518
Interest income, net   13   14   40   47
Other income (expense), net   359   (189)   (508)   (338)
Income before income taxes   2,307   4,789   1,427   227
Provision for income taxes   160   7   231   13
Net income   2,147   4,782   1,196   214
Net income per share, basic  $0.06  $0.13  $0.03  $0.01
Weighted average shares of common stock outstanding used in computing net income per share, basic   38,881,183   37,630,222   38,640,269   37,430,337
Net income per share, diluted  $0.05  $0.12  $0.03  $0.01
Weighted average shares of common stock outstanding used in computing net income per share, diluted   40,860,593   40,926,034   40,724,261   40,781,141
                 
                 
          
ZELTIQ Aesthetics, Inc.  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   Nine Months Ended  
   September 30,  
   2015   2014  
CASH FLOWS FROM OPERATING ACTIVITIES:           
 Net income  $1,196   $214  
 Adjustments to reconcile net income to net cash provided by (used in) operating activities:           
  Depreciation and amortization   1,712    1,350  
  Stock-based compensation   10,261    7,029  
  Deferred income taxes   -    37  
  Amortization of investment premium, net   63    183  
  Provision for doubtful accounts receivable   270    134  
  Provision for excess and obsolete inventory   403    688  
  Loss on disposal and write-off of property and equipment   -    17  
  Changes in operating assets and liabilities:           
   Accounts receivable   (11,773 )  (5,653 )
   Inventory   (13,698 )  (9,684 )
   Prepaid expenses and other assets   (1,794 )  177  
   Deferred revenue, net of deferred costs   1,681    2,426  
   Accounts payable, accrued and other liabilities   17,573    (2,076 )
   Net cash provided by (used in) operating activities   5,894    (5,158 )
CASH FLOWS FROM INVESTING ACTIVITIES:           
 Purchase of investments   (12,079 )  (9,011 )
 Proceeds from sale of investments   -    1,000  
 Proceeds from maturity of investments   18,260    14,968  
 Purchase of property and equipment   (2,332 )  (1,216 )
 Change in restricted cash   94    (252 )
  Net cash provided by investing activities   3,943    5,489  
CASH FLOWS FROM FINANCING ACTIVITIES:           
 Principal payments on capital leases   (89 )  -  
 Proceeds from issuance of common stock upon exercise of stock options and from employee stock purchase plan   4,136    2,714  
 Tax payments related to shares withheld for vested restricted stock units   (6,577 )  (3,774 )
 Tax effect of employee stock plans   26    27  
  Net cash used in financing activities   (2,504 )  (1,033 )
Effect of exchange rate changes on cash and cash equivalents   (364 )  (155 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   6,969    (857 )
CASH AND CASH EQUIVALENTS-Beginning of period   28,649    25,798  
CASH AND CASH EQUIVALENTS-End of period  $35,618   $24,941  
                  
  
  
ZELTIQ Aesthetics, Inc.  
Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation,  
Amortization and Stock-Based Compensation (Adjusted EBITDA)  
(In thousands, except for percentages)  
(Unaudited)  
                  
   Three Months Ended   Nine Months Ended  
   September 30,   September 30,  
Dollars  2015   2014   2015   2014  
 Net income, as reported  $2,147   $4,782   $1,196   $214  
                      
 Adjustments to net income:                     
  Interest income, net and other income (expense), net   (372 )  175    468    291  
  Provision for income taxes   160    7    231    13  
  Depreciation and amortization   650    417    1,712    1,350  
  Stock-based compensation expense   3,028    2,518    10,261    7,029  
   Total adjustments to net income   3,466    3,117    12,672    8,683  
                      
 Adjusted EBITDA  $5,613   $7,899   $13,868   $8,897  
                      
                      
    Three Months Ended    Nine Months Ended  
    September 30,    September 30,  
As a Percentage of Revenue   2015    2014    2015    2014  
 Net income, as reported   3.5 %  10.5 %  0.7 %  0.2 %
                      
 Adjustments to net income:                     
  Interest income, net and other income (expense), net   -0.6 %  0.4 %  0.2 %  0.2 %
  Provision for income taxes   0.3 %  0.0 %  0.1 %  0.0 %
  Depreciation and amortization   1.1 %  0.9 %  1.0 %  1.1 %
  Stock-based compensation expense   4.9 %  5.5 %  5.8 %  5.7 %
   Total adjustments to net income   5.7 %  6.8 %  7.1 %  7.0 %
                      
 Adjusted EBITDA Margin   9.2 %  17.3 %  7.8 %  7.2 %