ZELTIQ
Feb 29, 2016

ZELTIQ Announces Fourth Quarter and Full Year 2015 Financial Results

Full Year 2015 Revenue of $255.4 Million, up 46% Year-Over-Year; Announces New CoolAdvantage(TM) Family of Applicators With 35 Minute Treatment Times

PLEASANTON, CA -- (Marketwired) -- 02/29/16 --

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 fourth quarter and full year 2015.

Mark Foley, President and Chief Executive Officer, said, "I am very pleased with our ability to deliver another year of significant growth while continuing to penetrate and expand the non-invasive fat reduction market. In 2015, we generated 46% year-over-year revenue growth on top of a very strong 2014. Once again, our results were driven by broad-based execution as we shipped a record number of systems, generated strong year-over-year utilization growth and experienced a significant increase in our international revenue. Our fourth quarter and full year adjusted EBITDA was impacted by higher variable compensation expense due to over performance, accelerated launch of our national direct-to-consumer campaign, inventory write-offs and an increase in certain accounting reserves. In the fourth quarter, we had a very successful launch of our CoolMini™ applicator as we shipped nearly 1,400 units, or $12 million, in add-on applicator revenue. Physician and patient feedback has been very positive and we expect that the CoolMini applicator will enable us to further differentiate CoolSculpting as the leading non-invasive, fat reduction brand and expand our addressable market, particularly with facially focused aesthetic physicians. We also announced the launch of our North America direct-to-consumer campaign which we expect to significantly increase CoolSculpting brand awareness. The campaign will leverage successful learnings from our two direct-to-consumer pilots conducted in 2015 and we are very pleased with the early results from our national roll out. Our international business remains in its early stages of growth and provides us with a significant expansion opportunity going forward. We are very excited about our recently announced hiring of Todd Zavodnick as President, International, as we continue to make great strides in building out our international infrastructure."

Mr. Foley continued, "As I look to 2016 and beyond I am incredibly optimistic about what ZELTIQ and our CoolSculpting technology can achieve. The recently announced CoolMini Stand-Alone system has the potential to enhance physician adoption while further differentiating our unique and proprietary technology. As a company that thrives on innovation we are proud to announce the introduction of our new CoolAdvantage family of applicators which we plan to roll out late in second quarter this year. These next generation applicators will incorporate a shorter, 35 minute treatment time as well as improvements in the overall procedure resulting from a more consistent tissue draw, reduced suction force and an increase in the treated surface area. Longer term, we are building off of our CoolSculpting platform and continue to make good progress with our acne and cellulite programs, each representing large, incremental market opportunities. I believe that ZELTIQ remains in its early stages of growth as we continue to penetrate the non-invasive fat reduction market while expanding our market opportunity through innovation."

Mr. Foley concluded, "I am very excited about our opportunities in 2016 as we look to enhance our brand awareness, introduce new applicators and set ourselves up to capitalize on the large, international opportunity. As well, we are implementing a global tax strategy which involves moving our consumable manufacturing this year and that will result in a significantly lower effective tax rate over the long term. We have modestly adjusted our profitability target for 2016 to account for the investments in our tax structure and international infrastructure. We remain confident in our 2016 full year revenue guidance of approximately $315 million and believe that these investments will be important drivers of competitive advantage and market adoption for years to come."

Fourth Quarter Financial Review

Total revenue for the fourth quarter 2015 was $78.2 million, consisting of $43.2 million of system revenue and $35.0 million of consumable revenue. This compares to total revenue of $50.8 million, consisting of $28.4 million of system revenue and $22.4 million of consumable revenue for the fourth quarter 2014. Total revenue cycles shipped increased 57% to 273,112 for the fourth quarter 2015, compared to 173,895 for the fourth quarter 2014.

Gross profit was $52.4 million, or 67% of revenue, for the fourth quarter 2015, compared to gross profit of $35.9 million, or 71% of revenue, for the fourth quarter 2014. Operating expenses for the fourth quarter 2015 were $50.6 million, compared to $34.3 million for the fourth quarter 2014.

Income from operations for the fourth quarter 2015 was $1.8 million, compared to income from operations of $1.6 million for the fourth quarter 2014. Net income for the fourth quarter 2015 was $40.6 million, or $0.99 per share, compared to net income of $1.3 million, or $0.03 per share for the fourth quarter 2014. Net income was favorably impacted by approximately $38.7 million of which $40.4 million related to the release of the Company's deferred tax assets valuation allowance primarily due to net operating loss carryforwards offset by current period tax expense of $1.7 million. Weighted average diluted shares outstanding was 41.0 million for the fourth quarter 2015, compared to weighted average diluted shares outstanding of 41.4 million for the fourth quarter 2014.

On a non-GAAP basis, the company reported adjusted EBITDA of $5.5 million, or 7.0% of revenue, for the fourth quarter 2015, compared to $4.4 million, or 8.7% of revenue, for the fourth quarter 2014.

Cash and cash equivalents, short-term investments, and long-term investments were $52.1 million as of December 31, 2015 compared to $49.7 million as of December 31, 2014, and $50.5 million as of September 30, 2015.

Full Year Financial Review

Total revenue for the full year 2015 was $255.4 million, consisting of $130.7 million of system revenue and $124.7 million of consumable revenue. This compares to total revenue of $174.5 million, consisting of $93.0 million of system revenue and $81.5 million of consumable revenue for the full year 2014. Total revenue cycles shipped increased 57% to 980,339 for the full year 2015, compared to 625,186 for the full year 2014.

Gross profit was $181.0 million, or 71% of revenue, for the full year 2015, compared to gross profit of $124.4 million, or 71% of revenue, for the full year 2014. Operating expenses for the full year 2015 were $177.3 million, compared to $122.3 million for the full year 2014.

Income from operations for the full year 2015 was $3.7 million, compared to income from operations of $2.1 million for the full year 2014. Net income for the full year 2015 was $41.8 million, or $1.02 per share, compared to net income of $1.5 million for the full year 2014, or $0.04 per share. Net income was favorably impacted by approximately $38.5 million of which $40.4 million related to the release of the Company's deferred tax assets valuation allowance primarily due to net operating loss carryforwards offset by current period tax expense of $1.9 million. Weighted average diluted shares outstanding was 40.8 million for the full year 2015, compared to weighted average diluted shares outstanding of 41.0 million for the full year 2014.

On a non-GAAP basis, ZELTIQ reported adjusted EBITDA of $19.3 million, or 7.6% of revenue, for the full year 2015, compared to $13.3 million, or 7.6% of revenue, for the full year 2014.

Full Year 2016 Financial Guidance

ZELTIQ is providing financial guidance for the full year 2016, as follows:

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.

Conference Call

ZELTIQ will hold a conference call on Monday, February 29, 2016 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. The conference ID number is 50015275. A live webcast of the conference call will be available online from the investor relations page of ZELTIQ'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 first quarter 2016 financial results. In addition, a telephonic replay of the call will be available until March 7, 2016. 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 50015275.

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.

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 expectation that the CoolMini applicator as well as its newly launched CoolMini Stand-Alone system will further differentiate CoolSculpting as the leading non-invasive, fat reduction brand and expanding its addressable market, the launch of its national direct to consumer campaign in 2016 will significantly increase consumer awareness of its leading technology, belief that the campaign will leverage successful tactics from two direct-to-consumer pilots and enhance its continued focus on core marketing, optimism and potential for its CoolSculpting technology and CoolMini Stand-Alone system, the timing of the launch of the CoolAdvantage line of applicators, its belief that ZELTIQ still has room to grow, as well as the statements regarding its expected 2016 financial results under "Revised Full Year 2016 Financial Guidance", are forward-looking statements. The words "believe," "expect," "optimistic," "potential," "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 may incorrectly estimate the timing of new product development and new product launch; ZELTIQ's sales and marketing plans may fail to increase sales as ZELTIQ expects; individual patients may not experience the same results with CoolMini as the average patient in the clinical trials; as well as those other risks and uncertainties set forth in ZELTIQ's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on October 28, 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)
         
    December 31,
2015
  December 31,
2014
ASSETS            
CURRENT ASSETS:            
  Cash and cash equivalents   $ 35,710   $ 28,649
  Short-term investments     12,867     16,286
  Accounts receivable, net     33,359     21,472
  Inventory     28,095     15,536
  Prepaid expenses and other current assets     11,771     6,994
    Total current assets     121,802     88,937
  Long-term investments     3,490     4,805
  Restricted cash     452     560
  Property and equipment, net     6,969     3,724
  Intangible asset, net     5,092     5,780
  Long-term deferred tax assets     40,475     66
  Other assets     547     33
    Total assets   $ 178,827   $ 103,905
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
CURRENT LIABILITIES:            
  Accounts payable   $ 10,903   $ 5,824
  Accrued and other current liabilities     34,691     21,450
  Deferred revenue     7,682     5,069
  Current portion of capital lease obligations     124     120
    Total current liabilities     53,400     32,463
Long-term deferred revenue     226     622
Long-term capital lease obligations, less current portion     138     262
Other non-current liabilities     761     39
  Total liabilities   $ 54,525   $ 33,386
STOCKHOLDERS' EQUITY:            
    Total stockholders' equity     124,302     70,519
    Total liabilities and stockholders' equity   $ 178,827   $ 103,905
                 
                 
ZELTIQ Aesthetics, Inc.  
Condensed Consolidated Statements of Operations  
(In thousands, except share and per share data)  
(Unaudited)  
                         
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
Revenue   $ 78,225     $ 50,772     $ 255,416     $ 174,478  
Cost of revenue     25,840       14,833       74,375       50,064  
  Gross profit     52,385       35,939       181,041       124,414  
Operating expenses:                                
  Research and development     5,557       5,335       22,909       18,196  
  Sales and marketing     38,204       23,325       125,458       83,579  
  General and administrative     6,824       5,672       28,980       20,515  
    Total operating expenses     50,585       34,332       177,347       122,290  
Income from operations     1,800       1,607       3,694       2,124  
Interest income, net     18       16       58       63  
Other income (expense), net     87       (88 )     (420 )     (425 )
Income before income taxes     1,905       1,535       3,332       1,762  
Provision for (benefit from) income taxes     (38,701 )     218       (38,470 )     231  
Net income     40,606       1,317       41,802       1,531  
                                 
Net income per share, basic   $ 1.04     $ 0.03     $ 1.08     $ 0.04  
                                 
Weighted average shares of common stock outstanding used in computing net income per share, basic     39,093,825       37,958,395       38,754,643       37,563,590  
                                 
Net income per share, diluted   $ 0.99     $ 0.03     $ 1.02     $ 0.04  
                                 
Weighted average shares of common stock outstanding used in computing net income per share, diluted     40,966,744       41,434,178       40,795,646       40,996,972  
                                 
                                 
ZELTIQ Aesthetics, Inc.  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Year Ended  
    December 31,  
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 41,802     $ 1,531  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
    Depreciation and amortization     2,423       1,824  
    Stock-based compensation     13,219       9,383  
    Deferred income tax benefit     (40,405 )     (19 )
    Amortization of investment premium, net     89       221  
    Provision for doubtful accounts receivable     859       324  
    Provision for excess and obsolete inventory     270       853  
    Loss on disposal and write-off of property and equipment     6       46  
    Changes in operating assets and liabilities:                
      Accounts receivable     (12,920 )     (11,219 )
      Inventory     (12,941 )     (6,898 )
      Prepaid expenses and other assets     (5,338 )     (2,419 )
      Deferred revenue     2,254       2,908  
      Accounts payable, accrued and other liabilities     18,425       2,609  
      Net cash provided by (used in) operating activities     7,743       (856 )
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchase of investments     (16,024 )     (13,444 )
  Proceeds from sale of investments     -       1,000  
  Proceeds from maturity of investments     20,654       21,393  
  Purchase of property and equipment     (4,279 )     (2,340 )
  Change in restricted cash     94       (252 )
      Net cash provided by investing activities     445       6,357  
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Principal payments on capital leases     (120 )     -  
  Proceeds from issuance of common stock upon exercise of stock options and from employee stock purchase plan     6,628       4,319  
  Tax payments related to shares withheld for vested restricted stock units     (8,283 )     (6,594 )
  Tax effect of employee stock plans     1,357       87  
      Net cash used in financing activities     (418 )     (2,188 )
Effect of exchange rate changes on cash and cash equivalents     (709 )     (462 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     7,061       2,851  
CASH AND CASH EQUIVALENTS -- Beginning of period     28,649       25,798  
CASH AND CASH EQUIVALENTS -- End of period   $ 35,710     $ 28,649  
                 
                 
ZELTIQ Aesthetics, Inc.  
Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation,  
Amortization and Stock-Based Compensation (Adjusted EBITDA)  
(In thousands, except for percentages)  
(Unaudited)  
                         
    Three Months Ended     Year Ended  
    December 31,     December 31,  
Dollars   2015     2014     2015     2014  
  Net income, as reported   $ 40,606     $ 1,317     $ 41,802     $ 1,531  
                                   
  Adjustments to net income:                                
    Interest income, net and other income (expense), net     (105 )     72       362       362  
    Provision for (benefit from) income taxes     (38,701 )     218       (38,470 )     231  
    Depreciation and amortization     711       474       2,423       1,824  
    Stock-based compensation expense     2,958       2,354       13,219       9,383  
      Total adjustments to net income     (35,137 )     3,118       (22,466 )     11,800  
                                   
  Adjusted EBITDA   $ 5,469     $ 4,435     $ 19,336     $ 13,331  
                                 
                         
    Three Months Ended     Year Ended  
    December 31,     December 31,  
As a Percentage of Revenue   2015     2014     2015     2014  
  Net income, as reported     51.9 %     2.6 %     16.4 %     0.9 %
                                   
  Adjustments to net income:                                
    Interest income, net and other income (expense), net     -0.1 %     0.2 %     0.1 %     0.2 %
    Provision for (benefit from) income taxes     -49.5 %     0.4 %     -15.1 %     0.1 %
    Depreciation and amortization     0.9 %     0.9 %     1.0 %     1.0 %
    Stock-based compensation expense     3.8 %     4.6 %     5.2 %     5.4 %
      Total adjustments to net income     -44.9 %     6.1 %     -8.8 %     6.7 %
                                   
  Adjusted EBITDA Margin     7.0 %     8.7 %     7.6 %     7.6 %

Source: ZELTIQ Aesthetics, Inc.

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