Zeltiq Announces Third Quarter 2014 Financial Results

PLEASANTON, CA--(Marketwired - October 28, 2014) - ZELTIQ® (NASDAQ: ZLTQ)

• Total revenue of $45.7 million, up 55% compared to $29.5 million in Q3 2013
• Adjusted EBITDA margin of 17%, up from -3% in Q3 2013
• Net income of $4.8 million, or $0.12 per share, compared to net loss of $2.8 million, or ($0.08) per share, in Q3 2013
• 260 systems shipped, compared to 181 systems in Q3 2013, bringing total system installed base to 2,822 systems
• 159,116 revenue cycles, up 54% from Q3 2013

ZELTIQ® (NASDAQ: ZLTQ), a medical technology company focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform, today announced financial results for the third quarter 2014.

Mark Foley, President and Chief Executive Officer, said, “Our third quarter results reflect the ongoing momentum we are experiencing in the marketplace along with the success we are having in further establishing CoolSculpting as the clear market leader in non-invasive body sculpting. This marks our 5th straight quarter of greater than 50% year-over-year revenue growth and serves to further reinforce our conviction around the large, underpenetrated market for non-invasive fat reduction which we estimate to be a $4 billion worldwide opportunity. We experienced significant growth in both systems and consumables during what is typically a seasonally slower quarter. In addition to our strong 55% year-over-year revenue growth, we were particularly pleased with how well our financial performance translated to the bottom line. Based on our success and increased visibility, we are raising our 2014 full year revenue guidance to $171 million to $173 million as well as our profitability guidance.”

Mr. Foley continued, “We remain very bullish on our long-term growth prospects due to our proprietary, differentiated and leverageable technology combined with a world class sales organization and pioneering marketing initiatives. We remain confident in our ability to deliver on our longer term financial objectives of a greater than 20% revenue CAGR over the next 5 years and 25% to 30% adjusted EBITDA margins as our business reaches scale.”

Third Quarter Financial Review
Total revenue for the third quarter 2014 was $45.7 million, consisting of $24.8 million of system revenue and $20.9 million of consumable revenue. This compares to total revenue of $29.5 million, consisting of $15.9 million of system revenue and $13.6 million of consumable revenue for the third quarter 2013. Total revenue cycles shipped increased 54% to 159,116 for the third quarter 2014, compared to 103,492 for the third quarter 2013.

Gross profit was $33.1 million, or 73% of revenue, for the third quarter 2014, compared to gross profit of $21.2 million, or 72% of revenue, for the third quarter 2013. Operating expenses for the third quarter 2014 were $28.2 million, compared to $24.1 million for the third quarter 2013.

Income from operations for the third quarter 2014 was $5.0 million, compared to a loss from operations of $2.9 million for the third quarter 2013. Net income for the third quarter 2014 was $4.8 million, or $0.12 per share, compared to a net loss of $2.8 million for the third quarter 2013, or ($0.08) per share. Weighted average diluted shares outstanding was 40.9 million for the third quarter 2014, compared to weighted average basic shares outstanding of 36.2 million for the third quarter 2013.

On a non-GAAP basis, the Company reported adjusted EBITDA of positive $7.9 million, or 17% of revenue, for the third quarter 2014, compared to negative $1.0 million, or -3% of revenue, for the third quarter 2013.

Cash and cash equivalents, short-term investments, and long-term investments were $48.1 million as of September 30, 2014 compared to $55.9 million as of September 30, 2013, and $43.3 million as of June 30, 2014.

Revised Full Year 2014 Financial Guidance
ZELTIQ is updating its previously stated financial guidance for the full year 2014, provided on its second quarter 2014 earnings conference call:

• Revenue guidance in the range of $171 million to $173 million; up from prior guidance of $160 million to $165 million
• Consumable revenue between 45% to 50% of total revenue; down from prior guidance of approximately 50%
• Gross profit margin of approximately 71%; up from prior guidance of 70%
• Operating expenses of approximately 73% of total revenue; down from prior guidance of 75%

• Adjusted EBITDA margin of approximately 6%; up from prior guidance of 2%

Additional information regarding ZELTIQ’s results and guidance can be found in ZELTIQ’s Supplemental Financial and Operational Information schedule by CLICKING HERE or by visiting the Investor Relations section of ZELTIQ’s website at www.zeltiq.com.

Use of Non-GAAP Financial Measures
ZELTIQ has supplemented its GAAP net income (loss) with a non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP financial measure provides useful supplemental information to management and investors regarding the performance of ZELTIQ, facilitates a more meaningful comparison of results for current periods with previous operating results, and assists management in analyzing future trends, making strategic and business decisions and establishing internal budgets and forecasts. A reconciliation of non-GAAP Adjusted EBITDA to GAAP net income (loss) in the most directly comparable GAAP measure is provided in the schedule below.

There are limitations in using this non-GAAP financial measure because it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. This non-GAAP financial measure 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 ZELTIQ’s consolidated financial statements prepared in accordance with GAAP and the reconciliations of the non-GAAP financial measure provided in the schedule below.

Conference Call
ZELTIQ will hold a conference call today at 1:30 p.m. PT / 4:30 p.m. ET to discuss the results. The dial-in numbers are (877) 280-7291for domestic callers and (707) 287-9361for international callers. A live webcast of the conference call will be available online from the investor relations page of the ZELTIQ’s corporate website at www.coolsculpting.com.

After the live webcast, the call will remain available on ZELTIQ’s website, www.coolsculpting.com, until ZELTIQ releases its fourth quarter 2014 financial results. In addition, a telephonic replay of the call will be available until November 4, 2014. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use the replay conference ID number 17051849.

About ZELTIQ® Aesthetics
ZELTIQ is a medical technology company focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform. ZELTIQ’s first commercial product, the CoolSculpting® System, is designed to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. It utilizes patented technology of precisely controlled cooling to reduce the temperature of fat cells in the treated area, which is intended to cause fat cell elimination through a natural biological process known as apoptosis. ZELTIQ developed CoolSculpting to safely, noticeably, and measurably reduce the fat layer.

Forward-Looking Statements
The statements made in this press release regarding ZELTIQ’s estimate of the worldwide opportunity of $4B, its growth prospects and financial projections for the full year 2014, and its confidence in its recently stated long term financial objectives, are forward-looking statements. The words “believe,” “expect,” “estimate”, “plan”, “will”, and “guidance” and similar words that denote future events or results identify these forward-looking statements. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond ZELTIQ’s control and that could materially affect ZELTIQ’s actual business operations and financial performance and condition. Factors that could materially affect ZELTIQ’s business operations and financial performance and condition include, but are not limited to: less than anticipated growth in the number of physicians electing to purchase CoolSculpting Systems; patient demand for CoolSculpting procedures may be lower than ZELTIQ expects; product or procedure announcements by competitors may decrease demand for CoolSculpting procedures; ZELTIQ may incorrectly estimate or control its future expenditures; ZELTIQ’s sales and marketing plans may fail to increase sales as ZELTIQ expects; as well as those other risks and uncertainties set forth in ZELTIQ’s Quarterly Report on Form 10-Q for the second quarter ended June 30, 2014, filed with the SEC on July 29, 2014. These forward-looking statements speak only as of the date of this press release. ZELTIQ expressly disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise.

 ZELTIQ Aesthetics, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) September 30, December 31, 2014 2013 ------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 24,941 $ 25,798 Short-term investments 19,157 18,840 Accounts receivable, net 15,679 10,221 Inventory 18,181 8,406 Prepaid expenses and other current assets 4,378 4,368 ------------- ------------ Total current assets 82,336 67,633 Long-term investments 3,976 11,442 Restricted cash 574 331 Property and equipment, net 2,691 2,158 Intangible asset, net 5,955 6,481 Other assets 84 9 ------------- ------------ Total assets $ 95,616 $ 88,054 ============= ============ LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,655 $ 5,165 Accrued liabilities 19,203 18,364 Deferred revenue 4,084 1,674 ------------- ------------ Total current liabilities 26,942 25,203 Other non-current liabilities 165 275 ------------- ------------ Total liabilities $ 27,107 $ 25,478 ------------- ------------ STOCKHOLDERS’ EQUITY: Total stockholders’ equity 68,509 62,576 ------------- ------------ Total liabilities and stockholders’ equity $ 95,616 $ 88,054 ============= ============ ZELTIQ Aesthetics, Inc. Condensed Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2014 2013 2014 2013 ------------- ------------- ------------- ------------- Revenue $ 45,670 $ 29,465 $ 123,706 $ 75,785 Cost of revenue 12,555 8,236 35,231 23,462 ------------- ------------- ------------- ------------- Gross profit 33,115 21,229 88,475 52,323 ------------- ------------- ------------- ------------- Operating expenses: Research and development 4,241 4,257 12,861 11,904 Sales and marketing 19,014 15,487 60,253 42,654 General and administrative 4,896 4,374 14,843 11,808 ------------- ------------- ------------- ------------- Total operating expenses 28,151 24,118 87,957 66,366 ------------- ------------- ------------- ------------- Income (loss) from operations 4,964 (2,889) 518 (14,043) Interest income, net 14 17 47 60 Other (expense) income, net (189) 90 (338) 162 ------------- ------------- ------------- ------------- Income (loss) before income taxes 4,789 (2,782) 227 (13,821) Income tax expense 7 29 13 79 ------------- ------------- ------------- ------------- Net income (loss) 4,782 (2,811) 214 (13,900) ============= ============= ============= ============= Net income (loss) per share, basic $ 0.13 $ (0.08) $ 0.01 $ (0.39) ============= ============= ============= ============= Weighted average shares of common stock outstanding used in computing net income (loss) per share, basic 37,630,222 36,206,008 37,430,337 36,048,303 ============= ============= ============= ============= Net income (loss) per share, diluted $ 0.12 $ (0.08) $ 0.01 $ (0.39) ============= ============= ============= ============= Weighted average shares of common stock outstanding used in computing net income (loss) per share, diluted 40,926,034 36,206,008 40,781,141 36,048,303 ============= ============= ============= ============= ZELTIQ Aesthetics, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended September 30, September 30, 2014 2013 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 214 $ (13,900) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,350 1,273 Stock-based compensation 7,029 4,097 Deferred income taxes 37 46 Amortization (accretion) of investment premium (discount), net 183 270 Provision for (recovery of) doubtful accounts receivable 134 (12) Provision for excess and obsolete inventory 688 273 Loss on disposal and write-off of property and equipment 17 2 Changes in operating assets and liabilities: Accounts receivable (5,653) 507 Inventory (9,684) 2,180 Prepaid expenses and other assets 177 (376) Deferred revenue, net of deferred costs 2,426 (151) Accounts payable, accrued and other non- current liabilities (2,076) 2,831 ------------- ------------- Net cash used in operating activities (5,158) (2,960) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (9,011) (24,158) Proceeds from sale of investments 1,000 10,550 Proceeds from maturity of investments 14,968 17,396 Purchase of property and equipment (1,216) (415) Change in restricted cash (252) 140 ------------- ------------- Net cash provided by investing activities 5,489 3,513 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon exercise of stock options 2,714 854 Tax payments related to shares withheld for vested restricted stock units (3,774) (64) Tax effect of employee stock plans 27 - ------------- ------------- Net cash (used in) provided by financing activities (1,033) 790 ------------- ------------- Effect of exchange rate on cash and cash equivalents (155) - ------------- ------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (857) 1,343 CASH AND CASH EQUIVALENTS--Beginning of period 25,798 22,876 ------------- ------------- CASH AND CASH EQUIVALENTS--End of period $ 24,941 $ 24,219 ============= ============= 

 ZELTIQ Aesthetics, Inc. Reconciliation of Net Income (Loss) to Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (Adjusted EBITDA) (In thousands, except for percentages) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, Dollars 2014 2013 2014 2013 ------------- ------------- ------------- ------------- Net income (loss), as reported $ 4,782 $ (2,811) $ 214 $ (13,900) Adjustments to net income (loss): Interest income and other (expense) income, net 175 (107) 291 (222) Income tax expense 7 29 13 79 Depreciation and amortization 417 423 1,350 1,273 Stock-based compensation expense 2,518 1,498 7,029 4,097 ------------- ------------- ------------- ------------- Total adjustments to net income (loss) 3,117 1,843 8,683 5,227 Adjusted EBITDA $ 7,899 $ (968) $ 8,897 $ (8,673) ============= ============= ============= ============= Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, As a Percentage of Revenue 2014 2013 2014 2013 ------------- ------------- ------------- ------------- Net income (loss), as reported 10.5% -9.5% 0.2% -18.3% Adjustments to net income (loss): Interest income and other (expense) income, net 0.4% -0.4% 0.2% -0.3% Income tax expense 0.0% 0.1% 0.0% 0.1% Depreciation and amortization 0.9% 1.4% 1.1% 1.7% Stock-based compensation expense 5.5% 5.1% 5.7% 5.4% ------------- ------------- ------------- ------------- Total adjustments to net income (loss) 6.8% 6.2% 7.0% 6.9% Adjusted EBITDA Margin 17.3% -3.3% 7.2% -11.4% ============= ============= ============= ============= 

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