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Lumenis Ltd. Reports Third Quarter Financial Results


November 11, 2014 - Yokneam, Israel

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

Third Quarter 2014 Summary:

  • Revenues of $74.2 million, up 9.4% year-over-year
  • Adjusted EBITDA of $10.2 million, 13.7% of revenues, up 16.4% year-over-year
  • Non-GAAP Net Income of $6.0 million, up 4.2% year-over-year. GAAP Net Income of $5.5 million
  • Non-GAAP Net Income per diluted share of $0.17
  • $1.0 million net cash flow generated from ongoing business activities(1) in the 3-month period ending September 30, 2014

"Our strategy of developing and commercializing innovative new products continues to demonstrate results as we posted our third consecutive quarter of over 9% revenue growth and new products generated over 15% of product revenues," said Mrs. Tzipi Ozer-Armon, Chief Executive Officer. "In our Aesthetics business specifically, strong demand for our new products, ResurFX for non-ablative skin resurfacing and the LightSheer Desire for next generation hair removal, helped generate high double-digit revenue growth. We remain committed to achieving long term, sustainable, and profitable growth and I am confident that our innovative portfolio of existing products and our strong product pipeline will allow us to achieve this objective."

Third Quarter 2014 Financial Results

Total revenue in the third quarter of 2014 was $74.2 million, an increase of 9.4% compared to revenue of $67.8 million last year. On a constant currency basis, total revenue increased 10% year-over-year. Product revenue was $60.8 million, an increase of 10.4% compared to product revenue of $55.0 million last year. Service revenue was $13.4 million, an increase of 4.7% compared to service revenue of $12.8 million last year. Total revenue growth was driven by growth in our Aesthetics and Surgical segments, partially offset by declines in our Ophthalmic segment. By geography, Asia Pacific (APAC) and Europe, the Middle East and Africa (EMEA) posted strong growth. In the Americas, performance was almost flat while Japan declined compared to last year.

Gross profit in the third quarter of 2014 was $39.7 million, an increase of $2.4 million, or 6.3%, compared to $37.3 million last year. Third quarter 2014 GAAP gross margin decreased 150 basis points to 53.5%, compared to 55.0% last year. The decline is mainly attributed to product mix.

(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 $0.2 million IPO related payments.

On a GAAP Basis:

Third quarter 2014 GAAP operating expenses were $32.5 million, an increase of $1.8 million, or 5.9%, compared to operating expenses of $30.7 million last year. The increase in operating expenses year-over-year was mainly driven by increased sales and marketing and general and administrative expenses, offset partially by lower R&D expense compared to last year.

Third quarter 2014 GAAP operating income was $7.1 million, an increase of $0.5 million, or 8.4%, compared to GAAP operating income of $6.6 million last year. Third quarter 2014 GAAP operating margin was 9.6%, compared to 9.7% last year.

Third quarter 2014 GAAP net income was $5.5 million, an increase of $2.1 million, compared to $3.4 million last year. GAAP net income per diluted share was $0.15 in the third quarter of 2014 compared to $0.11 last year, based on 35.8 million and 30.0 million diluted shares outstanding respectively.

On a Non-GAAP Basis:

Third quarter 2014 Non-GAAP operating income was $8.0 million, an increase of $0.8 million, or 11.7%, compared to Non-GAAP operating income of $7.2 million last year. Third quarter 2014 Non-GAAP operating margin was 10.8%, compared to 10.6% last year. Third quarter of 2014, Non-GAAP operating income excludes $0.7 million related to stock based compensation expense and $0.2 million related to litigation expenses.

Third quarter 2014 Adjusted EBITDA was $10.2 million, an increase of $1.5 million, or 16.4%, compared to $8.7 million last year. Adjusted EBITDA margin was 13.7% of revenues compared to 12.9% last year.

Third quarter 2014 Non-GAAP net income was $6.0 million, an increase of $0.3 million, or 4.2%, compared to $5.7 million last year. In addition to the above mentioned adjustments to operating income, third quarter Non-GAAP net income excludes revaluation income of embedded derivatives of approximately $0.5 million in 2014.

Non-GAAP net income per diluted share was $0.17 in the third quarter of 2014 compared to $0.19 last year based on 35.8 million and 30.2 million diluted shares outstanding respectively.

Cash and cash equivalents were $99.1 million as of September 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 and shares options proceeds, $8.9 million cash flow generated from ongoing business activities, partially offset by cash payments to Bank Hapoalim of $15.0 million related to annual loan repayment and $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 $1.2 million.

Updated Full Year 2014 Financial Guidance

For the full year ended December 31, 2014, we expect to report:

  • Revenue in a range of $285 to $287 million, representing an increase of 7% to 8% year-over-year. This compares to a range of $284 million to $287 million previously.
  • Adjusted EBITDA in a range of $29.6 to $30.6 million, representing an increase of 14% to 18% year-over-year. This compares to a range of $29.1 million to $30.6 million previously.
  • 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.

Conference Call

Lumenis will host a conference call on Tuesday, November 11, 2014 at 5:00 p.m. Eastern Time to discuss its third 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: 888-437-9445 for callers based in the United States, 1-80-924-5906 for callers based in Israel and 719-325-2455 for callers based in all other countries. The reservation code for the call is 7078121. Please dial in approximately ten minutes prior to start time. 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 7078121. A replay of the webcast will be available on the investor relations page of the company's website.

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 our 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 U.S. 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)

(USD$, thousands) Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2014 2013 Change 2014 2013 Change
-------- -------- ------ -------- -------- ------
Americas 23,710 23,853 -0.6% 67,227 67,660 -0.6%
APAC 27,389 22,962 19.3% 73,035 63,177 15.6%
EMEA 14,129 11,133 26.9% 41,620 33,584 23.9%
Japan 8,964 9,893 -9.4%* 30,605 29,841 2.6%
-------- -------- ------ -------- -------- ------
Total Revenues 74,192 67,841 9.4% 212,487 194,262 9.4%
(*) -5.2% on a constant currency basis


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

(USD$, thousands) Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ------------------------
2014 2013 Change 2014 2013 Change
-------- -------- -------- -------- -------- ------
Aesthetic 30,892 25,457 21.3% 88,940 72,938 21.9%
Surgical 28,215 26,038 8.4% 79,583 75,907 4.8%
Ophthalmic 15,085 16,346 -7.7%** 43,964 45,417 -3.2%
-------------------- -------- -------- -------- -------- -------- ------
Total Revenues 74,192 67,841 9.4% 212,487 194,262 9.4%
(**) -6.4% on a constant currency basis


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

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

Revenues:
Products $ 60,785 $ 55,041 $ 172,287 $ 155,500
Services 13,407 12,800 40,200 38,762
----------- ----------- ----------- -----------
Total Revenues 74,192 67,841 212,487 194,262

Cost of Revenues
Products 27,632 24,219 79,068 70,655
Services 6,892 6,306 20,090 20,303
----------- ----------- ----------- -----------
Total cost of Revenues 34,524 30,525 99,158 90,958
Gross profit 39,668 37,316 113,329 103,304
----------- ----------- ----------- -----------

Operating expenses:
Research and development,
net 5,066 5,787 16,316 16,207
Selling and marketing 21,706 19,596 65,403 59,661
General and administrative
(**) 5,764 5,351 17,780 14,814
Legal settlement, net - - - (6,692)
----------- ----------- ----------- -----------
Total Operating expenses 32,536 30,734 99,499 83,990
----------- ----------- ----------- -----------
Operating income: 7,132 6,582 13,830 19,314

Financial expenses, net 847 2,645 1,753 4,478
IPO related Bank Cash Fee - - 4,000 -
----------- ----------- ----------- -----------
Total Financial Expenses 847 2,645 5,753 4,478
Tax expenses 761 569 2,172 2,145
----------- ----------- ----------- -----------
Net Income $ 5,524 $ 3,368 $ 5,905 $ 12,691
=========== =========== =========== ===========


Net income per common
shares:
Basic $ 0.15 $ 0.12 $ 0.17 $ 0.44
=========== =========== =========== ===========
Diluted $ 0.15 $ 0.11 $ 0.17 $ 0.43
=========== =========== =========== ===========

Weighted-average common
shares outstanding:
Basic 35,705,211 28,982,409 34,071,931 28,982,338
=========== =========== =========== ===========
Diluted 35,825,320 30,007,295 34,621,101 29,628,863
=========== =========== =========== ===========

(**) General and administrative expenses for the nine months ended September
30, 2014, include IPO related expenses in the amount of $1,194.


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

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

ASSETS
Cash and cash equivalents $ 99,127 $ 42,811
Trade receivables (net of allowance for
doubtful accounts of $2,210 and $2,690 at
September 30, 2014 and December 31, 2013,
respectively). 44,557 42,867
Prepaid Expenses and other receivables 10,177 10,194
Inventories 41,491 36,075
------------- -------------

Total Current Assets 195,352 131,947
------------- -------------


Finished goods used in operations, net 6,090 4,793

Property and equipment, net 8,771 8,094

Goodwill 50,217 50,217

Severance pay fund 3,204 3,875

Other assets 7,094 7,519
------------- -------------

Total Long-term assets 75,376 74,498
------------- -------------

TOTAL ASSETS $ 270,728 $ 206,445
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Restructured debt 17,004 17,493
Trade payables 30,600 24,553
Other accounts payable and accrued expenses 37,264 39,413
Deferred revenues and customers advances 20,609 19,057
------------- -------------

Total current liabilities 105,477 100,516
------------- -------------

Restructured debt 35,567 52,024
Accrued post-employment benefits 8,068 8,906
Deferred revenues 8,109 8,144
Other liabilities 19,085 19,155
------------- -------------

Total long-term liabilities 70,829 88,229
------------- -------------
TOTAL LIABILITIES 176,306 188,745
============= =============

SHAREHOLDERS' EQUITY 94,422 17,700
------------- -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 270,728 $ 206,445
============= =============


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


Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
U.S. dollars in thousands 2014 2013 2014 2013
-------- -------- -------- --------

Cash flows from operating
activities:
Net income $ 5,524 $ 3,368 $ 5,905 $ 12,691
Adjustments required to reconcile
income to net cash provided by
operating activities:
Depreciation and amortization 2,124 1,771 5,321 4,483
Compensation related to employees
stock option plan 666 570 2,109 1,390
Adjustments related to restructured
debt (810) 677 1,558 (606)
Revaluation of financial assets and
other, net 484 (76) 607 193
Deferred income taxes, net 202 298 659 877
Decrease (increase) in trade
receivables, net 669 1,150 (2,167) (5,023)
Decrease (increase) in inventories
and finished goods used in
operations (1,831) (378) (10,231) 285
Increase in prepaid expenses and
other receivables (1,366) (613) (381) (1,028)
Increase (decrease) in trade
payables (3,150) 78 5,859 6,251
Increase (decrease) in other
accounts payables and accrued
expenses (including short and long-
term deferred revenues and customer
advances) 465 (719) (3,762) 2,291
Increase (decrease) in accrued post-
employment benefits, net (63) 109 90 232
Increase (decrease) in other long
term liabilities (377) 369 (11) 1,235

-------- -------- -------- --------
Net cash provided by operating
activities 2,537 6,604 5,556 23,271

Cash flows from investing
activities:
Purchase of property and equipment (893) (1,039) (3,049) (2,549)
Investment in short & Long term bank
deposits (234) - (344) -
Proceeds from maturity of short &
Long term bank deposits 78 - 86 159
-------- -------- -------- --------
Net cash used in investing
activities (1,049) (1,039) (3,307) (2,390)

Cash flows from financing
activities:
Issuance of share capital, net (521) - 67,295 -
Proceeds from exercise of share
options 2,238 - 2,273 12
Repayments of long-term loans from
bank (15,000) (10,266) (15,000) (10,266)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities (13,283) (10,266) 54,568 (10,254)

Foreign currency translation
adjustments related to Cash and
cash equivalents (726) 439 (501) 143

Increase (decrease) in cash and cash
equivalents (12,521) (4,262) 56,316 10,770
Cash and cash equivalents at the
beginning of the period 111,648 42,135 42,811 27,103
Cash and cash equivalents at the end
of the period $ 99,127 $ 37,873 $ 99,127 $ 37,873
======== ======== ======== ========

Supplemental information and
disclosures of non-cash investing
and financing activities:
Issuance costs by utilizing
prepayments - - 311 -
======== ======== ======== ========
Purchase of property and equipment 254 - 254 -
======== ======== ======== ========
Receivables for options exercised 371 - 371 -
======== ======== ======== ========


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 Ended Nine Months Ended September 30, September 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 $ 39,668 $ 37,316 $ 113,329 $ 103,304Stock-based compensation 39 27 121 99Non-recurring items - (185) - (185) ----------- ----------- ----------- -----------Non-GAAP Gross Profit $ 39,707 $ 37,158 $ 113,450 $ 103,218 =========== =========== =========== =========== Table of Reconciliation from GAAP Operating Income to Non-GAAP OperatingIncome and Adjusted EBITDA----------------------------------------------------------------------------GAAP Operating Income $ 7,132 $ 6,582 $ 13,830 $ 19,314Stock-based compensation 666 570 2,109 1,390Legal settlement 250 - 250 (6,977)IPO related expenses - - 1,194 -Other Non-recurring items - 54 - 145 ----------- ----------- ----------- -----------Non GAAP Operating Income 8,048 7,206 17,383 13,872Depreciation and Amortization 2,124 1,532 5,321 4,244 ----------- ----------- ----------- -----------Adjusted EBITDA (Non- GAAP) $ 10,172 $ 8,738 $ 22,704 $ 18,116 =========== =========== =========== =========== Table of Reconciliation from GAAP Net Income to Non-GAAP Net Income----------------------------------------------------------------------------GAAP Net Income $ 5,524 $ 3,368 $ 5,905 $ 12,691Stock-based compensation 666 570 2,109 1,390Legal settlements 250 - 250 (6,977)IPO related expenses - - 1,194 -One-time payment to Bank Hapoalim BM - 1,397 4,000 1,397Revaluation of embedded derivatives and other non-recurring items (487) 377 (598) 929 ----------- ----------- ----------- -----------Non-GAAP Net Income $ 5,953 $ 5,712 $ 12,860 $ 9,430 =========== =========== =========== =========== Table Comparing GAAP Diluted Net Income Per Common Share to Non-GAAP DilutedNet Income Per Common Share----------------------------------------------------------------------------GAAP diluted net income per common share $ 0.15 $ 0.11 $ 0.17 $ 0.43 =========== =========== =========== ===========Non-GAAP diluted net income per common share $ 0.17 $ 0.19 $ 0.37 $ 0.32 =========== =========== =========== ===========Shares used in computing GAAP diluted net income per common share 35,825,320 30,007,295 34,621,101 29,628,863 =========== =========== =========== ===========Shares used in computing Non-GAAP diluted net income per common share 35,840,567 30,243,638 34,683,111 29,786,477 =========== =========== =========== =========== 

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