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8-K - FORM 8-K - SOLTA MEDICAL INCd627159d8k.htm
EX-99.2 - EX-99.2 - SOLTA MEDICAL INCd627159dex992.htm

Exhibit 99.1

 

LOGO

Solta Medical Reports Third Quarter 2013 Results

and Actions Implemented to Improve Shareholder Returns

Restructuring Plan Projected to Reduce Annual Expenses by $12 Million

Expects to Generate More Than $8 Million in Cash Flow from Operations in 2014

Engages Piper Jaffray & Co. as Financial Advisor

Expects to Complete New Debt Financing Agreement

HAYWARD, Calif., November 11, 2013 — Solta Medical, Inc. (NASDAQ: SLTM), a global leader in the medical aesthetics market, today announced results for the third quarter ended September 30, 2013 and a number of actions designed to improve the financial performance of the Company and improve shareholder returns including:

 

    A restructuring program projected to reduce annual expenses by $12 million

 

    A plan to generate positive cash flow from operations of more than $8 million during 2014

 

    The engagement by the Board of Directors of Piper Jaffray & Co. to advise the Board on strategies to maximize shareholder value

In addition, Solta reported that terms have been reached on a new financing agreement to refinance the Company’s debt and provide additional working capital, which is expected to close this month. And, the Board is continuing to conduct its previously reported search for a permanent chief executive officer.

Third Quarter Financial Results

Revenue for the third quarter of 2013 was $33.5 million compared with $35.0 million in the third quarter of 2012. The results reflect lower than planned sales of Fraxel and Liposonix product lines and higher than planned sales of the Thermage and Clear+Brilliant product lines. Revenue from VASER products, which were acquired during the first quarter of 2013, totaled $4 million in Q3 2013. Revenue from treatment

 

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tips and consumables for the third quarter of 2013 totaled $17.8 million compared with $16.9 million in the third quarter of the prior year. System sales totaled $13.8 million in the third quarter of 2013 versus $16.2 million in the third quarter of 2012. Revenue in North America totaled $15.3 million compared with $15.2 million in the third quarter a year ago. International revenue was $18.2 million compared with $19.8 million last year. Gross margin for Q3 2013 was $19.0 million and includes $1.8 million of amortization, acquisition related charges and stock based compensation charges. Excluding these charges, the non-GAAP gross profit for the quarter was approximately $20.8 million or 62.0% of revenue compared with 64.9% on a non-GAAP basis in the third quarter last year.

GAAP net income for the quarter was $0.6 million as compared to GAAP net loss of $2.9 million reported for the third quarter of 2012. Non-GAAP net loss for the quarter was $3.3 million, or $0.04 per diluted share, as compared to non-GAAP net income of $2.0 million, or $0.03 per diluted share for same period last year. Non-GAAP adjusted EBITDA for the quarter was $(1.3) million compared to $3.3 million for the same period last year.

“A number of factors impacted our third quarter financial results, most important of which was sales force attrition in North America,” said Mark Sieczkarek, Interim CEO of Solta Medical. “Recently, we have been able to add new sales people with strong qualifications in critical North American sales territories and have appointed new sales leadership in both North America and Europe. Our sales strategy in North America includes implementing changes to the sales structure and marketing approach, which we are in the process of doing. We are already beginning to see signs that our strategy is generating results in the fourth quarter.”

Lower average selling prices on systems, primarily on the Liposonix products, and a higher proportion of international distributor business affected revenue and the gross margin in the quarter. The Company’s GAAP results for the quarter include $2.9 million of amortization and other acquisition related charges, severance expense of $1.1 million, $0.6 million of non-cash stock based compensation charges, and an $8.7 million

 

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credit for the fair value reassessment of the expected earn out payments associated with the acquisitions of Liposonix and Sound Surgical Technologies. The Company provides non-GAAP financial measures that exclude these charges and adjustments. A reconciliation of GAAP to non-GAAP results is provided in the tables included in this release.

Debt Financing Agreement

The Company has reached agreement on terms with a secured debt lender for a $40 million financing. The financing would be in the form of a senior secured loan for a term of six years. Under the terms of the agreement, the lender would provide $40 million upon repayment of the loan with Silicon Valley Bank, which would provide increased flexibility for the company’s operations. The term debt has interest only payments for the first four years. The Company expects to complete the financing agreement this month.

The Company’s cash balance at September 30, 2013 was $7.7 million, compared with $16.3 million at the end of June 2013 and does not reflect any impact from the previously referred to financing agreement. The decrease reflected the net loss in the quarter as well as an $8.0 million payment of the outstanding balance on the revolving credit facility with Silicon Valley Bank. Total debt at the end of the quarter was approximately $27 million. The Company will also make a $5 million contingency payment to Valeant related to the acquisition of Liposonix in the fourth quarter of 2013. The Company expects total contingency payments, which are all derived from the acquisition of Liposonix, to be less than $2 million in 2014.

“Our new debt agreement will provide working capital necessary to execute our operating plan to regain momentum and growth in the market and build shareholder returns in 2014. Based on planned operating expense reductions, we expect to generate cash in 2014,” continued Mr. Sieczkarek. “Despite the disappointing financial results in Q3, we have made recent progress in stabilizing and reinvigorating the North American sales force and expect to enter 2014 with growing momentum.”

 

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Operating Plan

The Company is implementing an operating plan for 2014 that focuses on driving revenue growth and reducing annual expenses by $12 million from the expense run rate for the quarter ended September 30, 2013.

Key objectives for the Plan are:

 

  1. Achieve year-over-year revenue growth

 

  2. Generate double digit operating profit

 

  3. Maximize cash flow from operations

“To achieve our 2014 objectives, we have implemented cost reductions that included a reduction in work force. We have carefully reviewed the implications of the reductions we have made and are confident that we will be able to maintain our robust product pipeline and continue to bring to market innovative aesthetic products. These changes will improve our financial results next year, while making us a more customer friendly organization,” stated Mr. Sieczkarek.

Financial Advisor

Solta’s Board of Directors announced that it engaged Piper Jaffray to act as its financial advisor in the evaluation of strategic alternatives. Piper Jaffray will assist the Board in considering a range of options, which may include strategic partnerships, investors, alliances or a possible sale or merger of the company. The Company does not plan to disclose or comment on developments regarding any strategic alternatives until further disclosure is deemed appropriate.

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

 

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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 host a conference call and webcast today, Monday, November 11, 2013, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific) to discuss the financial results and current corporate developments. The dial-in number for the conference call is 877-941-0844 for domestic participants and 480-629-9835 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 solutions with proven efficacy and safety backed by over 10 years of clinical study and research. The company offers aesthetic energy devices for skin resurfacing and rejuvenation, acne reduction, body contouring and skin tightening, as well as tools and accessories to optimize the latest liposuction techniques. The Solta Medical portfolio includes the well-known brands Thermage®, Fraxel®, Clear + Brilliant®, Liposonix®, Isolaz®, CLARO®, VASERlipo, VASERshape, VASERsmooth, VentX®, PowerX®, TouchView®, and Origins, which collectively make up a comprehensive platform to address a range of aesthetic skin and body issues. More than two and a half

 

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million procedures have been performed with Solta Medical’s products around the world. Solta Medical is headquartered in Hayward, CA with field teams and regional offices worldwide.

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 reduction in annual expenses from the Company’s restructuring program, the amount of positive cash flow from operations in 2014, the expected completion of a new debt financing arrangement, improvements in sales execution in North America, and operational imperatives of the 2014 Operating Plan. 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, 2012, 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.

 

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SOURCE Solta Medical, Inc.

 

CONTACT:   
Investors:   
Jack Glenn    Doug Sherk/Jenifer Kirtland
Chief Financial Officer    EVC Group
510-786-6890    415-568-9349
Financial Media:   
Janine McCargo   
EVC Group   
646-688-0425   

 

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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,  
     2013     2012     2013     2012  

Net revenue

   $ 33,540      $ 35,028      $ 111,260      $ 104,744   

Cost of revenue

     14,491        13,813        44,430        39,738   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     19,049        21,215        66,830        65,006   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

     14,807        12,403        45,870        40,022   

Research and development

     4,701        4,849        15,478        15,167   

General and administrative

     6,246        4,557        19,651        13,832   

Remeasurement of contingent consideration liability

     (8,700     1,900        (21,300     32,600   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     17,054        23,709        59,699        101,621   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     1,995        (2,494     7,131        (36,615

Interest income

     21        3        48        8   

Interest expense

     (877     (377     (2,372     (1,078

Other expense, net

     (144     46        (389     (101
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     995        (2,822     4,418        (37,786

Income tax provision

     351        56        2,546        177   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 644      ($ 2,878   $ 1,872      ($ 37,963
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

        

Basic

   $ 0.01      ($ 0.04   $ 0.02      ($ 0.60
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.01      ($ 0.04   $ 0.02      ($ 0.60
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding used in calculating net income (loss) per share:

        

Basic

     79,791,789        65,947,361        77,171,829        63,017,220   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     81,025,627        65,947,361        78,337,342        63,017,220   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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,  
     2013     2012     2013     2012  

GAAP Gross margin

   $ 19,049      $ 21,215      $ 66,830      $ 65,006   
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP gross margin as % of sales

     57     61     60     62
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjustments to gross margin:

        

GAAP Gross margin

   $ 19,049      $ 21,215      $ 66,830      $ 65,006   

Amortization and other non-cash acquisition related charges

     1,592        1,374        4,811        4,407   

Stock-based compensation

     158        127        438        366   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

   $ 20,799      $ 22,716      $ 72,079      $ 69,779   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin as % of sales

     62     65     65     67
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP income (loss) from operations

   $ 1,995      ($ 2,494   $ 7,131      ($ 36,615

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

        

Amortization and other non-cash acquisition related charges

     2,651        1,729        7,521        5,475   

Remeasurement of contingent consideration liability

     (8,700     1,900        (21,300     32,600   

Acquisition-related expenses

     250        16        2,154        167   

Severance expenses (credits)

     1,083        (18     1,699        1   

Stock-based compensation

     596        1,204        3,034        3,553   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP income (loss) from operations

   ($ 2,125   $ 2,337      $ 239      $ 5,181   

Depreciation expenses

     841        943        2,570        2,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Adjusted EBITDA

   ($ 1,284   $ 3,280      $ 2,809      $ 7,999   
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP net income (loss)

   $ 644      ($ 2,878   $ 1,872      ($ 37,963

Non-GAAP adjustments to net income (loss):

        

Amortization and other non-cash acquisition related charges

     2,651        1,729        7,521        5,475   

Remeasurement of contingent consideration liability

     (8,700     1,900        (21,300     32,600   

Acquisition-related expenses

     250        16        2,154        167   

Severance expenses (credits)

     1,083        (18     1,699        1   

Stock-based compensation

     596        1,204        3,034        3,553   

Acquisition-related income tax expense

     223        —          2,303        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss)

   ($ 3,253   $ 1,953      ($ 2,717   $ 3,833   
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP basic net (income) loss per share

   $ 0.01      ($ 0.04   $ 0.02      ($ 0.60

Non-GAAP adjustments to basic income (loss) per share:

        

Amortization and other non-cash acquisition related charges

   $ 0.03      $ 0.03      $ 0.10      $ 0.09   

Remeasurement of contingent consideration liability

   ($ 0.11   $ 0.02      ($ 0.28   $ 0.51   

Acquisition-related expenses

   $ 0.00      $ 0.00      $ 0.03      $ 0.00   

Severance expenses (credits)

   $ 0.02      ($ 0.00   $ 0.02      $ 0.00   

Stock-based compensation

   $ 0.01      $ 0.02      $ 0.04      $ 0.06   

Acquisition-related income tax expense

   $ 0.00      $ 0.00      $ 0.03      $ 0.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP basic net income (loss) per share

   ($ 0.04   $ 0.03      ($ 0.04   $ 0.06   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP diluted net income (loss) per share

   ($ 0.04   $ 0.03      ($ 0.04   $ 0.06   
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP weighted average shares outstanding used in calculating basic net income (loss) per share

     79,791,789        65,947,361        77,171,829        63,017,220   
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP weighted average shares outstanding used in calculating diluted net income (loss) per share

     81,025,627        65,947,361        78,337,342        63,017,220   

Adjustments for dilutive potential common stock

     (1,233,838     5,636,830        (1,165,513     5,258,069   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding used in calculating non-GAAP diluted net income (loss) per share

     79,791,789        71,584,191        77,171,829        68,275,289   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Solta Medical, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of dollars, except share and per share data)

(unaudited)

 

     September 30,     December 31,  
     2013     2012  
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 7,674      $ 38,097   

Accounts receivable, net

     20,331        20,570   

Inventories

     22,414        16,611   

Prepaid expenses and other current assets

     5,767        8,476   
  

 

 

   

 

 

 

Total current assets

     56,186        83,754   

Property and equipment, net

     7,215        6,401   

Purchased intangible assets, net

     56,044        42,428   

Goodwill

     103,981        96,620   

Other assets

     948        520   
  

 

 

   

 

 

 

Total assets

   $ 224,374      $ 229,723   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Liabilities:

    

Accounts payable

   $ 7,929      $ 7,283   

Accrued liabilities

     13,656        17,343   

Current portion of contingent consideration liability

     7,839        21,400   

Current portion of deferred revenue

     3,953        3,985   

Short-term borrowings

     694        8,345   

Customer deposits

     1,067        637   
  

 

 

   

 

 

 

Total current liabilities

     35,138        58,993   

Deferred revenue, net of current portion

     744        683   

Term loan, net of current portion

     25,954        18,063   

Non-current tax liabilities

     4,818        2,478   

Contingent consideration liability

     21,500        38,500   

Other liabilities

     253        899   
  

 

 

   

 

 

 

Total liabilities

     88,407        119,616   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock, $0.001 par value:

    

100,000,000 shares authorized 79,838,671 and 68,795,987 shares issued and outstanding at September 30, 2013 and December 31, 2012

     80        69   

Additional paid-in capital

     244,467        220,489   

Accumulated deficit

     (108,580     (110,451
  

 

 

   

 

 

 

Total stockholders’ equity

     135,967        110,107   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 224,374      $ 229,723   
  

 

 

   

 

 

 

 

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