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Lumenis Ltd. Reports Second Quarter Financial Results


August 4, 2014 - Yokneam, Israel

Lumenis Ltd. (NASDAQ: LMNS), the world's largest medical laser company for surgical, ophthalmic and aesthetic applications, today announced second quarter 2014 financial results.

Second Quarter 2014 Summary:

  • Revenues of $72.5 million, up 9.3% year-over-year
  • Adjusted EBITDA of $7.7 million, up 31.1% year-over-year
  • Non-GAAP Net Income of $4.7 million, up 65.1% year-over-year. GAAP Net Income of $3.5 million
  • Non-GAAP Net Income per diluted share of $0.13, up 36.1% year-over-year
  • $4.8 million net cash flow generated from ongoing business activities (1) in the 3-month period ended June 30, 2014

"We continue to report solid revenue growth year-over-year, driven by the combination of successful sales execution and the early adoption of our newly launched products," said Tzipi Ozer-Armon, Chief Executive Officer. "Our performance in the second quarter is the outcome of both strong fundamentals and improved business activity in all three segments, led by our Aesthetic business. In addition, three of our four geographic regions reported double-digit growth. We also demonstrated continued strong improvement in all profit metrics in the quarter. We remain focused on our well-defined growth strategy of expanding our geographic footprint and introducing new products, and we are confident in our outlook for the rest of 2014."

Second Quarter 2014 Financial Results

Total revenue in the second quarter of 2014 was $72.5 million, an increase of 9.3% compared to revenue of $66.3 million last year. Product revenue was $58.9 million, an increase of 10.6% compared to product revenue of $53.3 million last year. Service revenue was $13.6 million, an increase of 4.2% compared to service revenue of $13.0 million last year. Total revenue growth was driven by all three business segments, with particular strength coming from our Aesthetic segment. By geography, Asia Pacific (APAC), Europe, the Middle East and Africa (EMEA) and Japan posted double-digit growth year-over-year, offset partially by a decrease in sales in the Americas compared to last year.

Second quarter 2014 gross profit was $39.1 million, an increase of $3.8 million, or 10.7%, compared to $35.3 million last year. Second quarter 2014 GAAP gross margin increased 66 basis points to 53.9%, compared to 53.2% last year.

On a GAAP Basis:
Second quarter 2014 GAAP operating expenses were $34.0 million, an increase of $9.7 million, or 39.7%, compared to operating expenses of $24.3 million last year. Second quarter 2013 operating expenses included one-time benefit of approximately $7.1 million related to legal settlements. Excluding the legal settlements benefit, the increase in operating expenses year-over-year was mainly driven by increased investment in sales and marketing and increased general and administrative expenses, including one-time IPO related expenses, offset partially by lower R&D expense compared to last year.

Second quarter 2014 GAAP operating income was $5.1 million, a decrease of $5.9 million, or 53.5%, compared to GAAP operating income of $11.0 million last year. Second quarter 2014 GAAP operating margin was 7.1%, compared to 16.6% last year. Second quarter 2013 GAAP operating profit included the aforementioned one-time benefit related to a legal settlements.

Second quarter 2014 GAAP net income was $3.5 million, a decrease of $5.8 million, compared to $9.4 million last year. GAAP net income per diluted share was $0.10 in the second quarter of 2014 compared to $0.32 last year, based on 35.8 million and 29.5 million diluted shares outstanding respectively.

On a Non-GAAP Basis:
Second quarter 2014 Non-GAAP operating income was $6.1 million, an increase of $1.7 million, or 38.0%, compared to Non-GAAP operating income of $4.4 million last year. Second quarter 2014 Non-GAAP operating margin was 8.4%, compared to 6.6% last year. Second quarter of 2014, Non-GAAP operating income excludes $0.3 million in one-time expense related to our IPO and stock based compensation expense of approximately $0.7 million.

Second quarter 2014 Adjusted EBITDA was $7.7 million, an increase of $1.8 million, or 31.1%, compared to $5.9 million last year. Adjusted EBITDA margin was 10.6% compared to 8.8% last year.

Second quarter 2014 Non-GAAP net income was $4.7 million, an increase of $1.9 million, or 65.1%, compared to $2.9 million last year. In addition to the above mentioned adjustments to operating income, second quarter 2014 Non-GAAP net income excludes revaluation expense of embedded derivatives of $0.2 million.

Second quarter 2014 Non-GAAP net income per diluted share was $0.13 compared to $0.10 last year based on 35.8 million and 29.5 million diluted shares outstanding respectively.

Cash and cash equivalents were $111.6 million as of June 30, 2014 compared to $42.8 million as of December 31, 2013. The increase in cash and cash equivalents is primarily due to net proceeds related to our IPO, $8.0 million cash flow generated from ongoing business activities, offset partially by cash payments to Bank Hapoalim B.M of $6.0 million related to the completion of the IPO and achievement of a profitability milestone, as well as to additional IPO-related payments of $1.0 million.

Full Year 2014 Financial Guidance

Following the second quarter results we are raising the guidance for the full year ended December 31, 2014, and we expect to report:

  • Revenue in a range of $284 to $287 million, representing an increase of 7% to 8% year-over-year. This compares to prior revenue guidance of $282 to $285 million.
  • Adjusted EBITDA in a range of $29.1 to $30.6 million, representing an increase of 12% to 18% year-over-year. This compares to prior EBITDA guidance of $28.6 to $30.2 million.
  • Non-GAAP Net Income in a range of $18.1 to $19.6 million, representing an increase of 22% to 32% year-over-year, and Non-GAAP EPS of $0.51 to $0.55. This compares to prior net income guidance of $17.6 to $19.2 million and Non-GAAP EPS guidance of $0.50 to $0.54.

(1): Net cash flow generated from ongoing business activities includes cash flow from operating and investing activities as well as foreign currency translation adjustments related to cash and cash equivalents in the period excluding a total of $7.0 million related to payments to Bank Hapoalim B.M and IPO related payments.

Conference Call

Lumenis will host a conference call on Monday, August 4, 2014 at 5:00 p.m. Eastern Time to discuss its second quarter 2014 financial results. The call will be concurrently webcast. To listen to the conference call on your telephone, please dial the following numbers approximately ten minutes prior to the start of the call: 888-312-3048 for callers based in the United States, 1-80-924-5906 for callers based in Israel and 719-457-1035 for callers based in all other countries. The reservation code for the call is 7955361. To access the live audio webcast or subsequent archived recording, visit the Investor Relations section of Lumenis' website at http://investor.lumenis.com. A telephone replay of the call will be available for 14 days following the call. To listen to the replay, please dial 888-203-1112 for United States-based callers and 719-457-0820 for international callers. The reservation code is 7955361.

About Lumenis

Lumenis is a global leader in the field of minimally-invasive clinical solutions for the Surgical, Ophthalmology and Aesthetic markets, and is a world-renowned expert in developing and commercializing innovative energy-based technologies, including Laser, Intense Pulsed Light (IPL) and Radio-Frequency (RF). For nearly 50 years, Lumenis' ground-breaking products have redefined medical treatments and have set numerous technological and clinical gold-standards. Lumenis has successfully created solutions for previously untreatable conditions, as well as designed advanced technologies that have revolutionized existing treatment methods in each and every one of the verticals we operate in. Our drive for innovation stems from an uncompromising commitment to improving the health and well-being of our patients; addressing new and growing needs of aging populations; and in offering medical professionals cutting-edge solutions that fit seamlessly into the health-economics environment of the 21st century. The world over, we bring Energy to Healthcare. For more information visit: www.lumenis.com

Forward-Looking Statements

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include but are not limited to the Company's plans, objectives and expectations for future operations, including its projected results of operations. Forward-looking statements are often characterized by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "continue," "believe," "should," "intend," "plan," "project" or other similar words, but are not the only way these statements are identified. These forward-looking statements are based upon management's current estimates and projections of future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including those risks discussed under the heading "Risk Factors" in our most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.



LUMENIS LTD. AND SUBSIDIARIES
Total Revenue, By Geography
(unaudited)

(U.S. dollars in Three Months Six Months
thousands) Ended June 30, Ended June 30,
------------------------- -------------------------
2014 2013 Change 2014 2013 Change
-------- -------- ------- -------- -------- -------
Americas $ 21,972 $ 23,228 -5.4% $ 43,517 $ 43,807 -0.7%
APAC 26,891 23,605 13.9% 45,646 40,215 13.5%
EMEA 13,231 11,048 19.8% 27,491 22,451 22.4%
Japan 10,397 8,429 23.3% 21,641 19,948 8.5%
-------- -------- ------- -------- -------- -------
Total Revenues $ 72,491 $ 66,310 9.3% $138,295 $126,421 9.4%


LUMENIS LTD. AND SUBSIDIARIES
Total Revenue, By Segment
(unaudited)

(U.S. dollars in Three Months Six Months
thousands) Ended June 30, Ended June 30,
------------------------- -------------------------
2014 2013 Change 2014 2013 Change
-------- -------- ------- -------- -------- -------
Aesthetic $ 31,484 $ 25,870 21.7% $ 58,048 $ 47,481 22.3%
Surgical 27,023 26,667 1.3% 51,368 49,869 3.0%
Ophthalmic 13,984 13,773 1.5% 28,879 29,071 -0.7%
-------- -------- ------- -------- -------- -------
Total Revenues $ 72,491 $ 66,310 9.3% $138,295 $126,421 9.4%



LUMENIS LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)

June 30, December 31,
------------ ------------
U.S. dollars in thousands 2014 2013
-------------------------------------------------------------- ------------

ASSETS
Cash and cash equivalents $ 111,648 $ 42,811
Trade receivables (net of allowance for doubtful
accounts of $2,522 and $2,690 in 2014 and 2013,
respectively) 46,039 42,867
Prepaid Expenses and other receivables 8,791 10,194
Inventories 42,100 36,075
------------ ------------
Total Current Assets 208,578 131,947
------------ ------------
Finished goods used in operations, net 5,536 4,793
Property and equipment, net 8,961 8,094
Goodwill 50,217 50,217
Severance pay fund 3,519 3,875
Other assets 7,199 7,519
------------ ------------
Total Long-Term Assets 75,432 74,498
------------ ------------
TOTAL ASSETS $ 284,010 $ 206,445
------------ ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Restructured debt $ 17,181 $ 17,493
Trade payables 33,910 24,553
Other accounts payable and accrued expenses 38,971 39,413
Deferred revenues and customers advances 20,856 19,057
------------ ------------
Total Current Liabilities 110,918 100,516
------------ ------------
Restructured debt 50,936 52,024
Accrued post-employment benefits 8,745 8,906
Deferred revenues 7,674 8,144
Other liabilities 19,135 19,155
------------ ------------
Total Long-Term Liabilities 86,490 88,229
------------ ------------
TOTAL LIABILITIES 197,408 188,745
------------ ------------
SHAREHOLDERS' EQUITY 86,602 17,700
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 284,010 $ 206,445
------------ ------------



LUMENIS LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
U.S. dollars in thousands
(except per share data) 2014 2013 2014 2013
------------------------------------ ----------- ----------- -----------

Revenues:
Products $ 58,896 $ 53,261 $ 111,502 $ 100,459
Services 13,595 13,049 26,793 25,962
----------- ----------- ----------- -----------
Total Revenues 72,491 66,310 138,295 126,421

Cost of Revenues
Products 26,748 23,979 51,436 46,436
Services 6,669 7,029 13,198 13,997
----------- ----------- ----------- -----------
Total Cost of Revenues 33,417 31,008 64,634 60,433

----------- ----------- ----------- -----------
Gross Profit 39,074 35,302 73,661 65,988

Operating Expenses:
Research and development,
net 4,982 5,368 11,250 10,420
Selling and marketing 22,836 21,055 43,697 40,065
General and
administrative 6,144 4,577 12,016 9,463
Legal settlement, net - (6,692) - (6,692)
----------- ----------- ----------- -----------
Total Operating Expenses 33,962 24,308 66,963 53,256

----------- ----------- ----------- -----------
Operating Income 5,112 10,994 6,698 12,732

Financial expenses, net 847 867 906 1,833
IPO related Bank Cash Fee - - 4,000 -
----------- ----------- ----------- -----------
Total Financial Expenses 847 867 4,906 1,833

Tax expenses 747 762 1,411 1,576
----------- ----------- ----------- -----------
Net Income $ 3,518 $ 9,365 $ 381 $ 9,323
=========== =========== =========== ===========

Net income per common
shares:
Basic $ 0.10 $ 0.32 $ 0.01 $ 0.32
=========== =========== =========== ===========
Diluted $ 0.10 $ 0.32 $ 0.01 $ 0.32
=========== =========== =========== ===========

Weighted-average common
shares outstanding:
Basic 35,596,777 28,982,409 33,242,381 28,982,023
=========== =========== =========== ===========
Diluted 35,796,271 29,451,610 34,006,081 29,439,366
=========== =========== =========== ===========



LUMENIS LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
U.S. dollars in thousands 2014 2013 2014 2013
--------- --------- --------- ---------

Cash flows from operating
activities:
Net income $ 3,518 $ 9,365 $ 381 $ 9,323
Adjustments required to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization 1,609 1,460 3,197 2,712
Compensation related to employees
stock option plan 650 415 1,444 820
Adjustments related to
restructured debt (759) (550) 2,368 (1,283)
Revaluation of financial assets
and other, net (174) 54 122 492
Deferred income taxes, net (134) (76) 457 356
Increase in trade receivables,
net (4,930) (3,001) (2,836) (6,173)
Decrease (increase) in
inventories and finished goods
used in operations (5,700) (201) (8,400) 663
Decrease (increase) in prepaid
expenses and other receivables 1,638 (386) 985 (415)
Increase in trade payables 7,212 1,478 9,009 6,173
Increase (decrease) in other
accounts payables and accrued
expenses (including short and
long-term deferred revenues and
customer advances) (4,662) 3,075 (4,227) 3,010
Increase (decrease) in accrued
post-employment benefits, net 115 (23) 153 123
Increase in other long term
liabilities 633 367 366 866
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities (984) 11,977 3,019 16,667
--------- --------- --------- ---------

Cash flows from investing
activities:
Purchase of property and
equipment (1,237) (872) (2,156) (1,510)
Investment in short & Long term
bank deposits (110) - (110) -
Proceeds from maturity of short &
Long term bank deposits 8 159 8 159
--------- --------- --------- ---------
Net cash used in investing
activities (1,339) (713) (2,258) (1,351)
--------- --------- --------- ---------

Cash flows from financing
activities:
Issuance of share capital, net (1,036) - 67,816 -
Proceeds from exercise of share
options - - 35 12
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (1,036) - 67,851 12
--------- --------- --------- ---------

Foreign currency translation
adjustments related to Cash and
cash equivalents 138 25 225 (296)

Increase (decrease) in cash and
cash equivalents (3,221) 11,289 68,837 15,032
Cash and cash equivalents at the
beginning of the period 114,869 30,846 42,811 27,103
Cash and cash equivalents at the
end of the period $ 111,648 $ 42,135 $ 111,648 $ 42,135

Supplemental information and
disclosures of non-cash
investing and financing
activities:
Issuance costs by utilizing
prepayments - - 311 -
Accrued issuance costs - - 521 -
Purchase of property and
equipment 444 425 444 425

Use of Non-GAAP Financial Measures:

The Company has presented the following non-GAAP financial measures in this press release: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, adjusted EBITDA, non-GAAP net income per share and adjusted EBITDA margin. The Company defines non-GAAP operating income as its reported operating income (GAAP) excluding stock-compensation expense, one-time charges and other non-recurring operating costs and expenses. The Company defines adjusted EBITDA as its non-GAAP net income before financial expenses, net, taxes on income, and excluding depreciation and amortization expense. The Company defines its non-GAAP net income to exclude non-recurring or unusual expenses.

 LUMENIS LTD. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Results (Unaudited) Three Months Six Months Ended June 30, Ended June 30, ------------------------ ------------------------(U.S. dollars in thousands) 2014 2013 2014 2013------------------------------------ ----------- ----------- ----------- Table of Reconciliation from GAAP Gross Profit to Non-GAAP Gross Profit---------------------------------------------------------------------------GAAP Gross Profit $ 39,074 $ 35,302 $ 73,661 $ 65,988Stock-based compensation 36 34 82 72------------------------------------------------- ------------------------Non-GAAP Gross Profit $ 39,110 $ 35,336 $ 73,743 $ 66,060================================================= ======================== Table of Reconciliation from GAAP Operating Income to Non-GAAP OperatingIncome and Adjusted EBITDA---------------------------------------------------------------------------GAAP Operating Income $ 5,112 $ 10,994 $ 6,698 $ 12,732Stock-based compensation 650 415 1,443 820Legal settlement - (7,097) - (6,977)IPO related expenses 314 - 1,194 -Other Non-Recurring items - 90 - 90------------------------------------------------- ------------------------Non GAAP Operating Income 6,076 4,402 9,335 6,665Depreciation and Amortization 1,609 1,460 3,197 2,712------------------------------------------------- ------------------------Adjusted EBITDA (Non- GAAP) $ 7,685 $ 5,862 $ 12,532 $ 9,377================================================= ======================== Table of Reconciliation from GAAP Net Income to Non-GAAP Net Income---------------------------------------------------------------------------GAAP Net Income $ 3,518 $ 9,365 $ 381 $ 9,323Stock-based compensation 650 415 1,443 820Legal settlements - (7,097) - (6,977)IPO related expenses 314 - 1,194 -One-time payment to Bank Hapoalim BM - - 4,000 -Revaluation of embedded derivatives and other non-recurring items 228 170 (111) 552------------------------------------------------- ------------------------Non-GAAP Net Income $ 4,710 $ 2,853 $ 6,907 $ 3,718================================================= ======================== Table Comparing GAAP Diluted Net Income Per common Share to Non-GAAPDiluted Net Income Per Common Share---------------------------------------------------------------------------GAAP diluted net income per common share $ 0.10 $ 0.32 $ 0.01 $ 0.32 ======================== ========================Non-GAAP diluted net income per common share $ 0.13 $ 0.10 $ 0.20 $ 0.13 ======================== ========================Shares used in computing GAAP diluted net income per common share 35,796,271 29,451,610 34,006,081 29,439,366 ======================== ========================Shares used in computing Non-GAAP diluted net income per common share 35,803,771 29,510,757 34,009,831 29,557,616 ======================== ======================== 

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