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BIOLASE Reports Second Quarter 2019 Results

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IRVINE, Calif., Aug. 8, 2019 /PRNewswire/ -- BIOLASE, Inc. (NASDAQ:BIOL), the global leader in dental lasers, today reported net revenue of $8.7 million for the second quarter ended June 30, 2019, a decrease of 29% compared to the second quarter of 2018.

BIOLASE Logo (PRNewsfoto/BIOLASE, Inc.)

Second Quarter Highlights

  • New customer growth, reduced expenses and a favorable change in product mix led to gross margin expansion of almost 370 basis points
  • Operating expenses decreased 25% year over year
  • Operating loss decreased 29% year over year
  • U.S. consumables and other revenue increased 2% year over year
  • Model market laser revenue, which includes Southern California and Dallas/Ft. Worth, increased 31% year over year

"Our second quarter performance reflects the impact of changes we made to drive our go-to-market strategy and strengthen the long-term growth prospects and profitability of our business," said Todd Norbe, President and Chief Executive Officer. "We are realigning our direct sales team to achieve these goals and have added new sales talent by actively recruiting through a new assessment process to hire the right personnel.  During the second quarter, we also discontinued our imaging business that was selling at a loss and took steps to hold pricing and eliminate extended payment terms in our international business." 

"At the same time, we saw continued growth in our Model Market revenue, which increased 31% year over year in the second quarter. We had great success with a new go-to-market sales strategy that we rolled out to the pediatric markets in Los Angeles/Orange County and Dallas. For this new program, we increased training and collaboration with the customer that resulted in a more than 60% increase in our customer acquisition. We expect to roll out this initiative in additional select geographic areas in the U.S. in the fourth quarter and are optimistic about this exciting new sales program, which is about putting education first." 

"Through the prudent cost reductions, we were able to reduce our operating expenses by 25% and increase gross margin by almost 370 basis points in the second quarter despite lower revenue. The combination of our revenue-driving initiatives, improved gross margin and operating performance positions us well to being EBITDA positive in the fourth quarter of this year."

2019 Second Quarter Financial Results

Net revenue for the second quarter of 2019 was $8.7 million, a decrease of $3.5 million, compared to net revenue of $12.2 million for the second quarter of 2018. U.S. laser revenue was $2.9 million for the second quarter of 2019, a $1 million decrease compared to U.S. laser revenue of $3.9 million for the second quarter of 2018. U.S. consumables and other revenue for the second quarter of 2019, which consists of revenue from consumable products such as disposable tips, increased 2% compared to the second quarter of 2018. Outside the U.S., laser revenue declined to $2.0 million for the second quarter of 2019 compared to $4.0 million for the second quarter of 2018, primarily due to generating an order backlog from international distributors as we continue to seek more favorable pricing and payment terms.

Gross margin for the second quarter of 2019 was 39%, compared to 35% for second quarter of 2018. The higher gross margin reflects new customer growth, reduced expenses and a favorable change in product mix with an increase in laser sales, which have a higher margin than the Company's other product offerings. Total operating expenses were $6.7 million for the second quarter of 2019 compared to $9.0 million for the second quarter of 2018, a decrease of $2.3 million. Operating loss for the second quarter of 2019, was $3.3 million, compared to an operating loss of $4.7 million for the second quarter of 2018, a decrease of $1.4 million year over year. Net loss for the second quarter of 2019 was $3.9 million, or $0.18 per share, compared to a net loss of $4.9 million, or $0.24 per share for the second quarter of 2018.

Cash, cash equivalents, and restricted cash totaled $4.0 million as of June 30, 2019.

Use of Non-GAAP Measures

The Reconciliation of GAAP Net Loss to Non-GAAP Net Loss table at the end of this news release provides the details of the Company's non-GAAP disclosures and the reconciliation of GAAP net loss and net loss per share to the Company's non-GAAP net loss and net loss per share.

The non-GAAP net loss for the second quarter of 2019 was $2.8 million, or $0.13 per share compared with a non-GAAP net loss of $4.1 million, or $0.20 per share for the second quarter of 2018.

Conference Call Information

BIOLASE, Inc. will host a conference call today at 4:30 p.m. Eastern Time to discuss its operating results for the second quarter ended June 30, 2019, and to answer questions. For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the U.S./Canada is 877-407-4019. For international participants outside the U.S./Canada, the dial-in number is 201-689-8337. For all callers, refer to the Conference ID 13687240. To access the live webcast, visit the Investor Relations section of the BIOLASE website at www.biolase.com and see "Investor Events".

An audio archive of the webcast will be available for 30 days on the Investor Relations section of the BIOLASE website.

About BIOLASE

BIOLASE is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine and also markets, sells, and distributes dental imaging equipment, including three-dimensional CAD/CAM intra-oral scanners and digital dentistry software. BIOLASE's products advance the practice of dentistry and medicine for patients and healthcare professionals. BIOLASE's proprietary laser products incorporate approximately 153 patented and 80 patent-pending technologies designed to provide biologically clinically superior performance with less pain and faster recovery times. BIOLASE's innovative products provide cutting-edge technology at competitive prices to deliver superior results for dentists and patients. BIOLASE's principal products are revolutionary dental laser systems that perform a broad range of dental procedures, including cosmetic and complex surgical applications, and a full line of dental imaging equipment. BIOLASE has sold over 39,600 laser systems to date in over 80 countries around the world. Laser products under development address BIOLASE's core dental market and other adjacent medical and consumer applications.

For updates and information on Waterlase iPlus®, Waterlase Express™, and laser dentistry, find BIOLASE online at www.biolase.com, Facebook at www.facebook.com/biolase, Twitter at www.twitter.com/biolaseinc, Instagram at www.instagram.com/waterlase_laserdentistry, and LinkedIn at www.linkedin.com/company/biolase.

BIOLASE®, Waterlase® and Waterlase iPlus® are registered trademarks of BIOLASE, Inc.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements, as that term is defined in the Private Litigation Reform Act of 1995, that involve significant risks and uncertainties, including statements regarding the anticipated roll out of new go-to-market sales strategies, the Company's efforts to achieve its goal of becoming EBITDA positive. Forward-looking statements can be identified through the use of words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "should," and variations of these words or similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect BIOLASE's current expectations and speak only as of the date of this release. Actual results may differ materially from BIOLASE's current expectations depending upon a number of factors. These factors include, among others, adverse changes in general economic and market conditions, competitive factors including but not limited to pricing pressures and new product introductions, uncertainty of customer acceptance of new product offerings and market changes, risks associated with managing the growth of the business, and those other risks and uncertainties that are described, from time-to-time, in the "Risk Factors" section of BIOLASE's annual reports filed on Form 10-K with the Securities and Exchange Commission. Except as required by law, BIOLASE does not undertake any responsibility to revise or update any forward-looking statements.

Tables to Follow

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


























Three Months Ended


Six Months Ended


June 30


June 30,


2019


2018


2019


2018

Net revenue

$

8,645


$

12,154


$

18,971


$

22,174

Cost of revenue


5,265



7,846



12,070



14,833

Gross profit


3,380



4,308



6,901



7,341

Operating expenses:












Sales and marketing


3,272



4,657



7,151



8,548

General and administrative


2,511



2,969



4,903



6,006

Engineering and development


1,124



1,361



2,549



2,650

Change in fair value of patent litigation settlement liability


(190)







Total operating expenses


6,717



8,987



14,603



17,204

Loss from operations


(3,337)



(4,679)



(7,702)



(9,863)

Loss (gain) on foreign currency transactions


5



187



48



(20)

Interest expense, net


529



35



1,007



47

Non-operating loss


534



222



1,055



27

Loss before income tax provision


(3,871)



(4,901)



(8,757)



(9,890)

Income tax provision


28



10



42



42

Net loss

$

(3,899)


$

(4,911)


$

(8,799)


$

(9,932)













Net loss per share attributable to common stockholders:












Basic

$

(0.18)


$

(0.24)


$

(0.41)


$

(0.48)

Diluted

$

(0.18)


$

(0.24)


$

(0.41)


$

(0.48)

Shares used in the calculation of net loss per share:












Basic


21,595



20,538



21,366



20,504

Diluted


21,595



20,538



21,366



20,504

 

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)








June 30,


December 31,


2019


2018


(unaudited)


(unaudited)

ASSETS






Current assets:






Cash and cash equivalents

$

3,720


$

8,044

Restricted cash


312



312

Accounts receivable, less allowance of $952 and $850 in 2019 and 2018, respectively


9,740



11,112

Inventory


12,334



12,248

Prepaid expenses and other current assets


952



1,591

Total current assets


27,058



33,307

Property, plant and equipment, net


1,585



1,975

Goodwill


2,926



2,926

Other assets


793



308

Total assets

$

32,362


$

38,516







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






Accounts payable

$

5,878


$

5,953

Accrued liabilities


4,899



7,538

Deferred revenue


2,513



2,476

Total current liabilities


13,290



15,967

Deferred income taxes, net


72



77

Warranty accrual


735



447

Other liabilities


1,145



100

Term loan


13,328



10,836

Total liabilities


28,570



27,427

Stockholders' equity:






Preferred stock, par value $0.001 per share




Common stock, par value $0.001 per share


22



21

Additional paid-in capital


229,972



228,430

Accumulated other comprehensive loss


(711)



(670)

Accumulated deficit


(225,491)



(216,692)

Total stockholders' equity


3,792



11,089

Total liabilities and stockholders' equity

$

32,362


$

38,516

 

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)








Six Months Ended


June 30,


2019


2018

Cash Flows from Operating Activities:






Net loss

$

(8,799)


$

(9,932)

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:






Depreciation and amortization


529



509

Provision for bad debts


111



230

Provision for sales allowance




59

Amortization of debt discounts


109



17

Amortization of debt issuance costs


86



25

Stock-based compensation


1,204



1,258

Deferred income taxes


(5)



2

Earned interest income, net




(1)

Changes in operating assets and liabilities:






Accounts receivable


1,263



(504)

Inventory


(86)



(1,769)

Prepaid expenses and other current assets


644



105

Accounts payable and accrued liabilities


(1,720)



2,074

Deferred revenue


37



(418)

Net cash and cash equivalents used in operating activities


(6,627)



(8,345)

Cash Flows from Investing Activities:






Purchases of property, plant, and equipment


(125)



(110)

Net cash and cash equivalents used in investing activities


(125)



(110)

Cash Flows from Financing Activities:






Principal payments under capital lease obligation




(46)

Borrowings under lines of credit




1,823

Payments under line of credit




(1,823)

Borrowings under term loan


2,500



Payments of debt issuance costs


(38)



(87)

Payments of equity offering costs




(138)

Proceeds from exercise of stock options


4



2

Net cash and cash equivalents provided by (used in) financing activities


2,466



(269)

Effect of exchange rate changes


(38)



(26)

Decrease in cash, cash equivalents and restricted cash


(4,324)



(8,750)

Cash, cash equivalents and restricted cash, beginning of period


8,356



11,896

Cash, cash equivalents and restricted cash, end of period

$

4,032


$

3,146

Supplemental cash flow disclosure:






Cash paid for interest

$

831


$

Cash paid for income taxes

$

12


$

15

Cash paid for operating leases

$

414


$

Non-cash accrual for capital expenditures

$

17


$

Non-cash right-of-use assets obtained in exchange for lease obligation

$

824


$

Warrants issued in connection with debt instruments

$

209


$

Non-GAAP Disclosure

In addition to the financial information prepared in conformity with generally accepted accounting principles in the U.S. ("GAAP"), this press release includes certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results and that, in some respects, these non-GAAP financial measures are more indicative of the Company's ongoing core operating performance than their GAAP equivalents.

Non-GAAP net loss is defined as net loss before interest, taxes, depreciation and amortization, and stock-based compensation. Management uses non-GAAP net loss in its evaluation of the Company's core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by the Company may be different from similarly named non-GAAP financial measures used by other companies.

BIOLASE, INC.

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss

(Unaudited)

(In thousands, except per share data)






Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

GAAP net loss attributable to common stockholders

$

(3,899)


$

(4,911)


$

(8,799)


$

(9,932)

Deemed dividend on convertible preferred stock








GAAP net loss

$

(3,899)


$

(4,911)


$

(8,799)


$

(9,932)

Adjustments:












Interest expense, net


529



35



1,007



47

Income tax provision


28



10



42



42

Depreciation and amortization


268



246



529



509

Change in fair value of patent litigation settlement liability


(190)







Stock-based compensation


447



557



1,204



1,258

Non-GAAP net loss

$

(2,817)


$

(4,063)


$

(6,017)


$

(8,076)













GAAP net loss attributable to common stockholders per share, basic and diluted

$

(0.18)


$

(0.24)


$

(0.41)


$

(0.48)

Deemed dividend on convertible preferred stock








GAAP net loss per share, basic and diluted

$

(0.18)


$

(0.24)


$

(0.41)


$

(0.48)

Adjustments:












Interest expense, net


0.03





0.05



Income tax provision








Depreciation and amortization


0.01



0.01



0.02



0.02

Change in fair value of patent litigation settlement liability


(0.01)







Stock-based compensation


0.02



0.03



0.06



0.06

Non-GAAP net loss per share, basic and diluted

$

(0.13)


$

(0.20)


$

(0.28)


$

(0.40)

 

BIOLASE, INC.

GAAP Net Revenue Less Imaging Systems

(Unaudited, in thousands)














Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net revenue

$

8,645


$

12,154


$

18,971


$

22,174

Imaging systems revenue


(63)



(371)



(615)



(954)

Net revenue excluding imaging systems

$

8,582


$

11,783


$

18,356


$

21,220

 

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SOURCE BIOLASE, Inc.

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