PhotoMedex, Inc. (NASDAQ and TASE:PHMD) today announced financial results for the fourth quarter and full year ended December 31, 2013. Financial highlights include:
Fourth Quarter 2013 (all comparisons are with the fourth quarter of 2012):
- Revenues of $63.5 million, an increase of 16%
- Gross profit of $50.8 million, an increase of 18%
- Net income of $3.2 million, compared with net income of $5.9 million
- Earnings per diluted share of $0.16, compared with earnings per diluted share of $0.27
- Adjusted earnings per diluted share, excluding certain items of $0.28
- Consumer revenues of $53.6 million, an increase of 16%
- Global Direct-to-consumer channel revenues of $39.4 million, an increase of 31%
- Global retail and home shopping channel revenues of $13.6 million, an increase of 10%
- Global Distributor consumer channel revenues of $0.6 million, a decrease of 84%
- XTRAC® psoriasis and vitiligo treatment recurring revenues of $4.7 million, an increase of 80%
- Cash generated from operations of $13.9 million
- Repurchase of $12.0 million or 972,770 shares common stock at an average price of $12.35 per share
- Cash, cash equivalents and short-term investments as of December 31, 2013 of $59.5 million, or $3.04 per diluted share
Full Year 2013 (all comparisons are with the full year 2012):
- Revenues of $224.7 million, an increase of 2% with revenues from all channels; excluding Japan's consumer revenue in both years, revenues increased 6%
- Gross profit of $179.6 million, an increase of 3%
- Net income of $18.4 million, compared with net income of $22.5 million
- XTRAC franchise installed base of 501 sites compared with 361 sites, an increase of 39%
- Earnings per diluted share of $0.89, compared with earnings per diluted share of $1.08
- Adjusted earnings per diluted share, excluding certain items of $1.01
- Consumer revenues excluding Japan of $177.3 million, compared with $169.1 million, represents an increase of 5%
- Optimization of tax planning and management of cash balances between intercompany international subsidiaries via a $10 million line of credit in December 2013, which was repaid after year end
As announced on February 13, 2014, PhotoMedex signed a definitive agreement to acquire all outstanding shares of LCA-Vision Inc. for $5.37 per share in cash, or approximately $106 million. Subject to certain conditions including approval by LCA-Vision shareholders, the transaction is expected to close in the second quarter of 2014. The transaction is expected to be accretive to PhotoMedex's cash EPS in 2014, excluding transaction-related items.
Dr. Dolev Rafaeli, PhotoMedex CEO, commented, “We are reporting record revenues for both the quarter and the year, and we achieved these results without any consumer sales from Japan in the second half of the year. Our North American Media Efficiency Ratio was outstanding during the fourth quarter, with MERs as high as 3.86 during certain weeks. In addition, we were successful in cross-selling Neova products to our direct-to-consumer customers, with consumer sales from this skin care product line up 21% over the third quarter of 2013. Our direct-to-consumer revenues were up 34% on a sequential quarter basis and were up 31% over the prior year. Recently, a clinical study by Emanuele, et al. published in the March 2014 edition of Journal of Drugs in Dermatology about indications for prevention of sun damage associated with skin aging and non-melanoma skin cancerreported that Neova DNA Total Repair and DNA Damage Control ACTIVE SPF 44 were shown to be the most efficient repair and protect product combination among the commercially available products compared. Also, we initiated pre-launch activities for our Kyrobak® product for the treatment of lower back pain, with initial media testing that resulted in positive indications that will be further expanded in the first quarter of 2014.”
Dr. Rafaeli continued, “We have made excellent progress in broadening awareness of XTRAC for the treatment of psoriasis and vitiligo as demonstrated by the 12% sequential increase in treatment revenues and the 80% increase year-over-year. XTRAC is a source of recurring revenues to the treating physician and to PhotoMedex once a patient has been acquired. As a recent endorsement for the efficacy of XTRAC, a clinical study published recently in the Journal of Dermatological Treatment by Dr. John Y. M. Koo, M.D. of the Department of Dermatology, Psoriasis and Skin Treatment Center, University of California, San Francisco and a member of our scientific advisory board and others shows that the XTRAC Velocity excimer laser when used in combination with a topical therapy is as effective as biologics, but without the systemic immune suppression or other potentially harmful side effects for the treatment of moderate to severe psoriasis. We are optimistic for continued rapid growth in the physician recurring revenue side of our business, and look forward to gaining revenue from XTRAC treatments and Neova product sales from the underutilized LasikPlus infrastructure and professional staff, upon completion of our acquisition of LCA-Vision.”
“International expansion is a significant component of our growth strategy for our no!no! brand,” he added. “In the fourth quarter we initiated media testing in Brazil with encouraging results. In addition, we continue to build our brand awareness in Germany and Great Britain and are confident we have the pieces in place for a very successful year ahead with each major business segment making significant contributions to our growth in 2014.”
Reported Financial Results
Revenues for the fourth quarter of 2013 were $63.5 million, an increase of 16% over revenues for the fourth quarter of 2012 of $54.8 million.
Gross profit for the fourth quarter of 2013 was $50.8 million, or 80.0% of sales, compared with gross profit of $43.0 million, or 78.5% of sales, in the prior year's fourth quarter, an increase of 150 basis points.
Net income for the fourth quarter of 2013 was $3.2 million or $0.16 per diluted share, which included $1.2 million in stock-based compensation expense and $1.6 million in depreciation and amortization expenses. This compares with net income for the fourth quarter of 2012 of $5.9 million or $0.27 per diluted share, which included $1.4 million in stock-based compensation expense and $1.4 million in depreciation and amortization expenses.
Revenues for the year ended December 31, 2013 were $224.7 million, an increase of 2% over revenues for the year ended December 31, 2012 of $220.7 million.
Gross profit for 2013 was $179.6 million, or 80.0% of sales, compared with $174.0 million, or 78.9% of sales, for 2012, an increase of 110 basis points. Net income for 2013 was $18.4 million or $0.89 per diluted share, which included $5.0 million in stock-based compensation expense and $6.1 million in depreciation and amortization expenses. This compares with net income for 2012 of $22.5 million or $1.08 per diluted share, which included $6.2 million in stock-based compensation expense and $5.6 million in depreciation and amortization expenses.
As of December 31, 2013, the Company had cash, cash equivalents and short-term investments of $59.5 million. During the 2013 fourth quarter the Company repurchased 972,770 shares of its common stock in the open market at an average price of $12.35 per share, for a total of $12.0 million.
In December 2013 the Company entered into a $15.0 million line of credit with JP Morgan Chase to facilitate repayment of temporary advances from its non-U.S. subsidiaries to comply with certain IRS regulations. The Company took an advance of $10 million against this line at December 31, 2013. The advance was repaid in full after year end.
Non-GAAP Financial Measures
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 measures. 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 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, advertising expenses of $1.4 million for product sales not shipped until 2014, expenses associated with the relocation of corporate headquarters of $0.4 million and inventory valuation allowances of $0.6 million, earnings per diluted share were approximately $0.28 for the fourth quarter and $1.01 for the full year.