PhotoMedex, Inc. (NasdaqGS and TASE:PHMD) reports financial results for the three months ended March 31, 2014 and announces LCA-Vision stockholder approval of PhotoMedex's previously announced acquisition of all outstanding shares of LCA-Vision, a leading provider of laser vision correction services under the LasikPlus brand.
Financial highlights of the first quarter of 2014 include the following (all comparisons are with the first quarter of 2013 and all figures quoted are GAAP unless stated otherwise):
- Revenues of $50.1 million, a decrease of 12%
- Non-GAAP adjusted income per diluted share of $0.23
- Gross profit of $39.7 million, a decrease of 12%
- Net loss of $0.3 million or ($0.02) per share, compared with net income of $7.2 million per $0.34 per diluted share
- Consumer revenues of $40.9 million, a decrease of 17%
- Global Direct-to-consumer channel revenues of $30.8 million, a decrease of 3%
- Global retail and home shopping channel revenues of $9.5 million, a decrease of 22%
- Global Distributor consumer channel revenues of $0.6 million, a decrease of 88%
- NEOVA consumer revenues of $1.2 million, an increase of 67%
- XTRAC® psoriasis and vitiligo treatment recurring revenues of $4.4 million, an increase of 72%
- Cash, cash equivalents and short-term investments as of March 31, 2014 of $48.1 million, or $2.57 per diluted share
"Our acquisition of LCA-Vision was approved by their stockholders at a special meeting held on May 7, 2014, and we look forward to welcoming the LCA-Vision team to PhotoMedex over the coming weeks," said Dolev Rafaeli, CEO of PhotoMedex. "LCA-Vision has a world-class staff, professional direct-to-consumer marketing channel, deep sector expertise and strong customer satisfaction that we believe will heighten PhotoMedex's position as a leader across multiple geographies and medical markets. Our new colleagues at LCA-Vision are unmatched in their ability to manage a consumer medical procedure from initial patient inquiry through to surgery. LasikPlus centers and staff, who deal one-on-one with patients, are ideally suited for expanding procedures beyond LASIK, refractive lens and cataract surgery to include XTRAC laser treatments for dermatologic disorders including psoriasis and vitiligo, as well as utilizing the patient interaction for dispensing additional clinical brands.
"We are also looking forward to combining and applying the two marketing platforms towards enhancing the LasikPlus business to allow for further patient acquisition," he added. "During the months that have passed since we signed the definitive agreement, our management teams have studied and evaluated the upcoming challenges and have prepared detailed work plans. These plans, we believe, will enable a quick integration of the companies while taking advantage of strategic business opportunities."
Reported Financial Results
Revenues for the first quarter of 2014 were $50.1 million, a decrease of 12% compared with revenues for the first quarter of 2013 of $57.2 million.
Net loss for the first quarter of 2014 was $0.3 million or ($0.02) per share, which included $1.3 million in stock-based compensation expense and $1.6 million in depreciation and amortization expense. This compares with net income for the first quarter of 2013 of $7.2 million or $0.34 per diluted share, which included $1.3 million in stock-based compensation expense and $1.4 million in depreciation and amortization expense.
PhotoMedex did not repurchase any shares of its common stock during the first quarter of 2014.
As of March 31, 2014 the Company had cash, cash equivalents and short-term investments of $48.1 million or $2.57 per diluted share, compared with $59.5 million as of December 31, 2013.
"Our base business performed largely on plan during the quarter despite severe domestic weather that resulted in retail and clinic closures. Our bottom-line results reflect the impact of a number of special charges. In addition to the weather's impact on retail sales, the decline in consumer revenues for the quarter was mainly due to the absence of distributor sales in Japan," said Dr. Rafaeli. "XTRAC adjusted treatment revenues were up 72% compared with the first quarter of 2013 as our direct-to-patient advertising is having a clear impact. We continue to evolve our patient outreach into a finely tuned model that we are perfecting over time."
A study published in the May 2014 issue of the Journal of the American Academy of Dermatology titled "Cost of prevalent psoriasis" reported on data from 2,986 adults enrolled in a health plan who had two or more diagnoses of psoriasis. The study highlighted the financial burden biologics place on the cost of healthcare, indicating that biologic therapies (without reference to further complications caused by side effects covered in their accompanying FDA warning labels) add three times more cost to the healthcare plan's treatment of such patients compared with phototherapy treatment such as XTRAC.
"Advertising for Kyrobak® for lower back pain launched in late December and is performing per plan while media spend is scaling up. First quarter sales exceeded $0.6 million and have increased to an average run rate of more than $0.1 million per week since mid-March. We completed an IRB-approved clinical study conducted in New York City of 16 subjects. The study's primary endpoint of assessing pain showed a statistically significant average decrease of 57% in pain score from pre- to post-treatment, and 83% of subjects achieved clinically significant change in their ODI (Oswestry Disability Index) score. We expect the results of this study will be published in a peer-reviewed medical journal."
He added, "International markets represent additional growth opportunities for our no!no! brand. Building upon media testing we conducted late last year in Brazil, we made further progress during the first quarter and now have a presence in leading retailers in Sao Paulo such as Fast Shop, Magazine Luiza and OnOfre, including where possible our own points of sale. In addition, we have launched our own direct-to-consumer activity via www.meunono.com.br and a call center, and other online retailers. During April we launched a direct retail presence in Hong Kong via our own points of sale, and last week we launched our direct presence in Colombia with products available in leading retailers such as Flabella, Jumbo, Sentry, Panamerica and Fedco. We are pleased about the possibilities these international activities represent for the future while our consumer business in Great Britain and Germany enjoyed a combined 50% year-over-year increase in revenues."
A reconciliation of non-GAAP financial measures to GAAP financial measures, and a presentation of the most directly comparable GAAP financial measures are included below.
To supplement PhotoMedex's consolidated financial statements presented in accordance with GAAP, PhotoMedex provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted income and non-GAAP adjusted income per share.
PhotoMedex's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of PhotoMedex's current financial performance and to provide further information for comparative purposes.
Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company's core operating results and business outlook. In addition, PhotoMedex believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:
Excluding certain litigation expenses of $0.8 million and acquisition-related expenses of $1.0 million, adjusted non-GAAP income per diluted share was $0.23 for the first quarter of 2014.
PhotoMedex will hold a conference call to discuss the Company's first quarter 2014 results and answer questions today beginning at 11:00 a.m. Eastern time.