Cynosure, Inc. (Nasdaq: CYNO) today announced financial results for the three months ended September 30, 2010.
Revenues for the third quarter of 2010 increased to $19.1 million from $17.9 million in the same period of 2009. On a sequential basis, reflecting the traditional seasonality of the July-September period, third-quarter 2010 revenue declined from $21.5 million in the second quarter of 2010.
Net loss for the third quarter of 2010 narrowed to $0.5 million, or $0.04 per basic and diluted share, from a net loss of $1.9 million, or $0.15 per basic and diluted share, for the comparable period of 2009, reflecting the success of Cynosure's continued cost-reduction initiatives.
The company's net loss for the third quarter of 2010 included an income tax provision of $33,000, compared with an income tax benefit of $1.0 million recorded in the third quarter of 2009. The change from a benefit to a provision in the 2010 period was a result of the company's establishment of a valuation allowance in the fourth quarter of 2009 against the company's net domestic deferred tax assets and taxable income generated in foreign jurisdictions.
Fueled by continued operating expense savings, the company reduced its loss from operations in the third quarter of 2010 to $1.0 million, which included stock-based compensation of $900,000. This compares with a loss from operations in the third quarter of 2009 of $3.3 million, which included stock-based compensation of $1.5 million.
"Our international business continues to perform well and delivered a strong third quarter up 27 percent compared with the third quarter of 2009," said Michael Davin, Cynosure's President and Chief Executive Officer. "Our Asian and European subsidiaries, as well as our international distributors, each posted year-over-year revenue gains. International sales accounted for 55 percent of our product revenue in the quarter. Positive results overseas offset the performance of our North American business, which continues to be adversely affected by economic uncertainty and the difficult credit environment. Nevertheless, we were encouraged that average selling prices (ASPs) in North America remained stable in the third quarter and customer service revenue increased."
Gross profit for the third quarter of 2010 was $10.7 million, or 56.1 percent of revenue, compared with 58.4 percent of revenue for the same period in 2009. The change in gross margin from the year-ago period reflects a larger revenue contribution from international markets, particularly the company's third-party distributors, which carry lower ASPs than products sold through direct distribution channels.
Total operating expenses for the third quarter of 2010 decreased $2.1 million, or 16 percent, to $11.7 million from $13.8 million for the same period of 2009. Through the first nine months of 2010, total operating expenses were $38.3 million, down $7.8 million compared with $46.1 million for the comparable period of 2009.
"Cynosure generated positive cash flow from operations for the sixth consecutive quarter in Q3, reflecting our effective balance sheet management and successful cost-reduction initiatives," Davin said. "Operating expenses through the first nine months of the year were 17 percent lower than the same period a year ago, and we have already exceeded our goal of lowering annualized operating expenses by $5 million to $7 million over 2009. Meanwhile, our cash, marketable securities and investments totaled $95.4 million at September 30, 2010, an increase of approximately $3.4 million from December 31, 2009, which includes the effect of purchasing $1.1 million of stock under our previously announced stock repurchase plan."
"During the quarter, we continued to successfully pursue our strategy of expanding our international market presence," Davin said. "In recent months, for example, regulators in Australia approved the dual-wavelength Smartlipo MPX laser body sculpting workstation, while in Canada we received authorization to market our Affinity QS™ workstation to treat multi-color tattoos and pigmented lesions and the Smartlipo Triplex™ for advanced laser lipolysis and high definition body contouring."
"In addition to expanding our overseas offerings, in the third quarter we continued to make excellent progress in our ongoing partnership with Unilever to develop aesthetic products for home use," Davin said. "We have achieved all of the milestones to date and the program remains on schedule for commercialization in 2012."
"From both a financial and an operational perspective, we believe we are in a strong position as we conclude 2010," Davin said. "Driven by international markets, our revenues through the first nine months of the year are 11 percent ahead of the same period in 2009. We have successfully reduced expenses in line with the current economic climate while retaining our focus on developing innovative products supported by proprietary technology."