ZELTIQ
Jul 30, 2015

ZELTIQ Announces Second Quarter 2015 Financial Results

37% Year-Over-Year Revenue Growth to $64.4 Million; Increases Full Year 2015 Revenue & Profitability Guidance; Expects to Launch CoolMini(TM) Applicator in Fourth Quarter 2015

PLEASANTON, CA -- (Marketwired) -- 07/30/15 -- ZELTIQ® (NASDAQ: ZLTQ)

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 second quarter 2015.

Mark Foley, President and Chief Executive Officer, said, "The second quarter of 2015 was an exceptionally strong quarter across all areas of our business. We reported over $64 million in revenue, up 37% year-over-year, driven by strong global system placements, an increase in account utilization and the launch of our CoolSmooth Pro applicator. We are very pleased with our second quarter results and the year-over-year growth we generated, particularly when normalized for the revenue and utilization associated with the launch of our initial CoolSmooth applicator in the second quarter of 2014. This performance has led us to once again increase our full year 2015 revenue guidance to a range of $245 million to $247 million."

Mr. Foley continued, "As our sales and marketing teams broaden the adoption and utilization of CoolSculpting, our R&D team is working diligently to ensure we have a strong pipeline to further enhance our position as the market leader in non-invasive fat reduction and to expand the applicability of our cold-based platform. The recent success we have had with CoolSmooth PRO™ and the pending launch of CoolMini™ are two examples of our ability to successfully leverage our technology. The CoolSmooth PRO™ applicator has received exceptional feedback from physicians and patients who are very pleased with the shorter treatment times due to its ability to deliver colder temperatures. We are also on track to launch CoolMini™ during the fourth quarter, designed to treat the submental fat area, or "double chin", and other smaller pockets of fat. Thus far, we have seen very favorable results in our clinical trials as well as excellent outcomes and feedback in our pilot launch in Europe. Of particular note, patients are reporting very high satisfaction following just one or two treatments with little, to no, discomfort or downtime. We are incredibly excited about the significant new market opportunity the submental category provides, as well as its ability to bring new patients into the aesthetic channel. Lastly, we just completed a 3 month brand awareness pilot program across 4 U.S. cities and we are encouraged by the early results. This direct-to-consumer advertising pilot materially increased both the traffic to our website and actual patient treatments in these markets. We believe the ongoing success of our marketing, practice enhancement and brand awareness initiatives, combined with our R&D strategy to leverage our unique, proprietary technology, will lead to sustained high growth and further extend our leadership position in the non-invasive fat reduction category."

Second Quarter 2015 Financial Review
Total revenue for the second quarter 2015 was $64.4 million, consisting of $32.0 million of system revenue and $32.4 million of consumable revenue. This compares to total revenue of $47.1 million, consisting of $25.4 million of system revenue and $21.7 million of consumable revenue for the second quarter 2014. Total revenue cycles shipped increased 52% to 252,642 for the second quarter 2015, compared to 166,116 for the second quarter 2014.

Gross profit was $46.3 million, or 72% of revenue, for the second quarter 2015, compared to gross profit of $33.4 million, or 71% of revenue, for the second quarter 2014. Operating expenses for the second quarter 2015 were $44.7 million, compared to $30.6 million for the second quarter 2014.

Operating income for the second quarter 2015 was $1.7 million, compared to operating income of $2.8 million for the second quarter 2014. Net income for the second quarter 2015 was $1.2 million, or $0.03 per share, compared to net income of $2.8 million for the second quarter 2014, or $0.07 per share.

On a non-GAAP basis, ZELTIQ reported Adjusted EBITDA of positive $5.3 million, or 8.2% of revenue, for the second quarter 2015, compared to $5.6 million, or 12.0% of revenue, for the second quarter 2014.

Cash and cash equivalents, short-term investments, and long-term investments were $53.1 million as of June 30, 2015 compared to $43.3 million as of June 30, 2014, and $44.3 million as of March 31, 2015.

Revised Full Year 2015 Financial Guidance
ZELTIQ is updating its previously stated financial guidance for the full year 2015, provided on its first quarter 2015 earnings conference call

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, and provides an additional 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 on Thursday, July 30, 2015 at 1:30 p.m. PT / 4:30 p.m. ET to discuss the results. The dial-in numbers are (877) 280-7291 for domestic callers and (707) 287-9361 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.coolsculpting.com.

A replay of the webcast will remain available on ZELTIQ's website, www.coolsculpting.com, until ZELTIQ releases its third quarter 2015 financial results. In addition, a telephonic replay of the call will be available until August 6, 2015. 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 82324610.

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 expectations as to the timing of the launch of the CoolMini Applicator, ZELTIQ's revised financial guidance for full year 2015, the expected benefits that ZELTIQ believes it will obtain from the launch of CoolMini, and ZELTIQ's belief that the success of its marketing, practice enhancement and brand awareness initiatives, combined with its R&D strategy to leverage its technology, will lead to sustained high growth and further extend its leadership position in the non-invasive fat reduction category, are forward-looking statements. The words "pending," "will", "expect", "on track", "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 cause actual results to differ from those contemplated by these forward-looking statements 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; technical difficulties may arise in obtaining regulatory clearance of CoolMini™; patients or physicians may not view the benefits of CoolSculpting procedures at colder temperatures to be the same as ZELTIQ does; as well as those other risks and uncertainties set forth in ZELTIQ's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on April 30, 2015. 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)
June 30,
2015
December 31,
2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 37,306 $ 28,649
Short-term investments 11,404 16,286
Accounts receivable, net 30,700 21,472
Inventory 18,372 15,536
Prepaid expenses and other current assets 6,239 7,060
Total current assets 104,021 89,003
Long-term investments 4,363 4,805
Restricted cash 563 560
Property and equipment, net 4,186 3,724
Intangible asset, net 5,430 5,780
Other assets 147 33
Total assets $ 118,710 $ 103,905
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,340 $ 5,824
Accrued liabilities 26,981 21,450
Deferred revenue 8,027 5,069
Current portion of capital lease obligations 122 120
Total current liabilities 43,470 32,463
Long-term deferred revenue 313 622
Long-term capital lease obligations, less current portion 201 262
Other non-current liabilities 476 39
Total liabilities $ 44,460 $ 33,386
STOCKHOLDERS' EQUITY:
Total stockholders' equity 74,250 70,519
Total liabilities and stockholders' equity $ 118,710 $ 103,905
ZELTIQ Aesthetics, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Revenue $ 64,431 $ 47,061 $ 115,989 $ 78,036
Cost of revenue 18,116 13,660 32,494 22,676
Gross profit 46,315 33,401 83,495 55,360
Operating expenses:
Research and development 5,809 4,350 11,889 8,620
Sales and marketing 32,199 21,052 56,605 41,239
General and administrative 6,654 5,234 15,042 9,947
Total operating expenses 44,662 30,636 83,536 59,806
Income (loss) from operations 1,653 2,765 (41 ) (4,446 )
Interest income, net 13 14 26 33
Other expense, net (445 ) (83 ) (865 ) (149 )
Income (loss) before income taxes 1,221 2,696 (880 ) (4,562 )
Income tax expense (benefit) 43 (73 ) 71 6
Net income (loss) 1,178 2,769 (951 ) (4,568 )
Net income (loss) per share, basic $ 0.03 $ 0.07 $ (0.02 ) $ (0.12 )
Weighted average shares of common stock outstanding used in computing net income (loss) per share, basic 38,649,873 37,440,537 38,517,817 37,328,738
Net income (loss) per share, diluted $ 0.03 $ 0.07 $ (0.02 ) $ (0.12 )
Weighted average shares of common stock outstanding used in computing net income (loss) per share, diluted 41,641,660 40,597,275 38,517,817 37,328,738
ZELTIQ Aesthetics, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (951 ) $ (4,568 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 1,062 932
Stock-based compensation 7,233 4,511
Deferred income taxes - 38
Amortization (accretion) of investment premium (discount), net 44 126
Provision for doubtful accounts receivable 158 145
Provision for excess and obsolete inventory 253 325
Loss on disposal and write-off of property and equipment - 17
Changes in operating assets and liabilities:
Accounts receivable (9,414 ) (3,781 )
Inventory (2,994 ) (9,781 )
Prepaid expenses and other assets 707 2,022
Deferred revenue, net of deferred costs 2,645 2,099
Accounts payable, accrued and other non-current liabilities 8,487 (2,416 )
Net cash provided by (used in) operating activities 7,230 (10,331 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments (6,024 ) (4,513 )
Proceeds from sale of investments - 1,000
Proceeds from maturity of investments 11,310 10,634
Purchase of property and equipment (1,188 ) (770 )
Change in restricted cash 1 (1 )
Net cash provided by investing activities 4,099 6,350
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases (59 ) -
Proceeds from issuance of common stock upon exercise of stock options and from employee stock purchase program 2,816 1,587
Tax payments related to shares withheld for vested restricted stock units (5,599 ) (3,247 )
Tax effect of employee stock plans 17 15
Net cash used in financing activities (2,825 ) (1,645 )
Effect of exchange rate changes on cash and cash equivalents 153 90
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,657 (5,536 )
CASH AND CASH EQUIVALENTS--Beginning of period 28,649 25,798
CASH AND CASH EQUIVALENTS--End of period $ 37,306 $ 20,262
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 Six Months Ended
June 30, June 30,
Dollars 2015 2014 2015 2014
Net income (loss), as reported $ 1,178 $ 2,769 $ (951 ) $ (4,568 )
Adjustments to net income (loss):
Interest income, net and other expense, net 432 69 839 116
Income tax expense (benefit) 43 (73 ) 71 6
Depreciation and amortization 550 476 1,062 932
Stock-based compensation expense 3,083 2,406 7,233 4,511
Total adjustments to net income (loss) 4,108 2,878 9,205 5,565
Adjusted EBITDA $ 5,286 $ 5,647 $ 8,254 $ 997
Three Months Ended Six Months Ended
June 30, June 30,
As a Percentage of Revenue 2015 2014 2015 2014
Net income (loss), as reported 1.8 % 5.9 % -0.8 % -5.8 %
Adjustments to net income (loss):
Interest income, net and other expense, net 0.7 % 0.1 % 0.7 % 0.1 %
Income tax expense (benefit) 0.1 % -0.1 % 0.1 % 0.0 %
Depreciation and amortization 0.8 % 1.0 % 0.9 % 1.2 %
Stock-based compensation expense 4.8 % 5.1 % 6.2 % 5.8 %
Total adjustments to net income (loss) 6.4 % 6.1 % 7.9 % 7.1 %
Adjusted EBITDA Margin 8.2 % 12.0 % 7.1 % 1.3 %

Source: ZELTIQ Aesthetics, Inc.

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