BIOLASE Reports First Quarter 2019 Results

IRVINE, Calif., May 9, 2019 /PRNewswire/ -- BIOLASE, Inc. (NASDAQ: BIOL), the global leader in dental lasers, today reported net revenue of $10.3 million for the first quarter ended March 31, 2019, an increase of 3% compared to the first quarter of 2018.

First Quarter Highlights

    --  U.S. laser revenue increased 18% year over year
    --  U.S. consumables and other revenue increased 4% year over year
    --  Model market laser revenue, which includes Southern California and
        Dallas/Ft. Worth, increased 88% year over year
    --  New customer growth, reduced expenses and a favorable change in product
        mix led to gross margin expansion of almost 400 basis points
    --  Operating expenses decreased 4% year over year

"Our improved results for the first quarter reflect the success of our revenue growth and cost savings initiatives, including continued solid execution of our new commercial marketing efforts to increase awareness and expand adoption of our all tissue Waterlase laser," said Todd Norbe, President and Chief Executive Officer. "We are pleased with the strong success of our two model market campaigns, and we continued to add new customers and increase utilization of our product during the quarter, driving our recurring, higher margin consumables revenue and further improving our gross margin. With this positive momentum and our focus on continued success of our go-to-market initiatives and operational improvements, we continue to feel confident in achieving our goal of becoming EBITDA positive in the fourth quarter of 2019."

2019 First Quarter Financial Results

Net revenue for the first quarter of 2019 was $10.3 million, an increase of 3%, compared to net revenue of $10.0 million for first quarter of 2018. Excluding the non-core imaging business, revenue for the first quarter of 2019 increased 4% to $9.8 million from $9.4 million for the first quarter of 2018. U.S. laser revenue was $2.6 million for the first quarter of 2019, an 18% increase compared to U.S. laser revenue of $2.2 million for the first quarter of 2018. U.S. consumables and other revenue for the first quarter of 2019, which consists of revenue from consumable products such as disposable tips, increased 4% compared to the first quarter of 2018. Outside the U.S., laser revenue declined 4% to $3.4 million for the first quarter of 2019 compared to $3.5 million for the first quarter of 2018, whereas consumables and other revenue increased 4% year over year.

Gross margin for the first quarter of 2019 was 34%, compared to 30% for first 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, including its non-core imaging products which are being phased out from the Company's product offering in the second quarter of 2019. Total operating expenses were $7.9 million for the first quarter of 2019 compared to $8.2 million for the first quarter of 2018, a decrease of over 4%. Operating loss for the first quarter of 2019, was $4.4 million, compared to an operating loss of $5.2 million in the first quarter of 2018, a decrease of 16% year over year. Net loss for the first quarter of 2019 was $4.9 million, or $0.23 per share, compared to a net loss of $5.0 million, or $0.25 per share for the first quarter of 2018.

Cash, cash equivalents, and restricted cash totaled $3.3 million as of March 31, 2019.

Subsequent to the end of the first quarter, on May 7, 2019 the company amended its credit agreement with SWK Funding LLC to increase the total commitment in its term loan from $12.5 million to $15.0 million and to revise certain of the financial covenants. Further details of the amendment will be included in the Company's Form 10-Q filing for the period ended March 31, 2019 to be filed with the SEC.

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 first quarter of 2019 was $3.2 million, or $0.15 per share compared with a non-GAAP net loss of $4.0 million, or $0.20 per share for the first 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 first quarter ended March 31, 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 255 patented and 73 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 the best 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 markets.

For updates and information on Waterlase iPlus®, Waterlase Express(TM), 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 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 and quarterly reports filed 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


                                                                           March 31,



                                                                      2019          2018



      Products and services revenue                                 
        $       10,323        
      $   10,017


      License fees and royalty revenue                                                3                    3




     Net revenue                                                                10,326               10,020



     Cost of revenue                                                             6,804                6,987




     Gross profit                                                                3,522                3,033




     Operating expenses:



     Sales and marketing                                                         3,879                3,891



     General and administrative                                                  2,393                3,037


      Engineering and development                                                 1,424                1,289


      Change in fair value of patent
       litigation settlement liability                                              190




     Total operating expenses                                                    7,886                8,217




     Loss from operations                                                      (4,364)             (5,184)



      Loss (gain) on foreign currency
       transactions                                                                  43                (207)



     Interest expense, net                                                         478                   12



      Non-operating loss (income), net                                              521                (195)





      Loss before income tax provision                                          (4,885)             (4,989)



     Income tax provision                                                           15                   32




     Net loss                                                      
        $      (4,900)       
      $  (5,021)





      Net loss per share attributable to
       common stockholders:



     Basic                                                         
        $       (0.23)       
      $   (0.25)




     Diluted                                                       
        $       (0.23)       
      $   (0.25)



      Shares used in the calculation of
       net loss per share:



     Basic                                                                      21,134               20,469




     Diluted                                                                    21,134               20,469


              
              
                
                  BIOLASE, INC.


        
             
                
                  CONSOLIDATED BALANCE SHEETS


      
          
                
                  (In thousands, except per share data)




                                                                                   March 31,  December 31,


                                                                                         2019          2018



                                                                                  (Unaudited)   (Audited)


                  
              
                
                  ASSETS



         Current assets:



         Cash and cash equivalents                                              
              $        2,956  
     $      8,044



         Restricted cash                                                                              312             312


          Accounts receivable, less allowance of $869
           and $850 in 2019 and 
              2018,
           respectively                                                                             11,743          11,112



         Inventory                                                                                 12,023          12,248


          Prepaid expenses and other current assets                                                  1,815           1,591




         Total current assets                                                                      28,849          33,307



         Property, plant and equipment, net                                                         1,733           1,975



         Goodwill                                                                                   2,926           2,926



         Other assets                                                                                 302             308



                                      Total assets                               
              $       33,810  
     $     38,516





                                         LIABILITIES AND STOCKHOLDERS' EQUITY



         Current liabilities:



         Accounts payable                                                       
              $        5,894  
     $      5,953



         Accrued liabilities                                                                        6,713           7,538



         Deferred revenue                                                                           2,513           2,476



                                      Total current liabilities                                     15,120          15,967



         Deferred income taxes, net                                                                    72              77



         Warranty accrual                                                                             577             447



         Other liabilities                                                                            162             100



         Term loan                                                                                 10,906          10,836



                                      Total liabilities                                             26,837          27,427



         Stockholders' equity:


          Preferred stock, par value $0.001 per share


          Common stock, par value $0.001 per share                                                      21              21



         Additional paid-in capital                                                               229,269         228,430


          Accumulated other comprehensive loss                                                       (725)          (670)



         Accumulated deficit                                                                    (221,592)      (216,692)



                                      Total stockholders' equity                                     6,973          11,089



                                      Total liabilities and stockholders' equity 
              $       33,810  
     $     38,516


         
              
                
                  BIOLASE, INC.



       
                
                  CONSOLIDATED STATEMENTS OF CASH FLOWS


      
           
                
                  (Unaudited, in thousands)




                                                                          Three Months Ended


                                                                               March 31,



                                                                                        2019                 2018



                                    Cash Flows from Operating
                                     Activities:



       Net loss                                                                             $
          (4,900)          $
            (5,021)


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


        Depreciation and amortization                                                                    258                         264


        Provision for bad debts, net                                                                      19                         200


        Provision for sales allowance                                                                                                 4


        Amortization of debt discounts                                                                    38


        Amortization of debt issuance costs                                                               49                           7



       Stock-based compensation                                                                         757                         701



       Deferred income taxes                                                                            (5)                          2


        Earned interest income, net                                                                      (1)                        (1)


        Change in fair value of patent
         litigation settlement liability                                                                 190


        Changes in operating assets and
         liabilities:



       Accounts receivable                                                                            (650)                        186



       Inventory                                                                                        225                     (1,103)


        Prepaid expenses and other current
         assets                                                                                          463                        (20)


        Accounts payable and accrued
         liabilities                                                                                 (1,514)                        460



       Deferred revenue                                                                                  37                       (441)



        Net cash and cash equivalents used
         in operating activities                                                                     (5,034)                    (4,762)



                                    Cash Flows from Investing
                                     Activities:


        Purchases of property, plant, and
         equipment                                                                                       (8)                      (102)



        Net cash and cash equivalents used
         in investing activities                                                                         (8)                      (102)



                                    Cash Flows from Financing
                                     Activities:


        Principal payments under capital
         lease obligation                                                                                                          (46)


        Borrowings under lines of credit                                                                                          1,823


        Payments of debt issuance costs                                                                                            (74)


        Payments of equity offering costs                                                                                          (81)


        Proceeds from exercise of stock
         options                                                                                           3                           2



        Net cash and cash equivalents
         provided by financing activities                                                                  3                       1,624



        Effect of exchange rate changes                                                                 (49)                         74



        Decrease in cash, cash equivalents
         and restricted cash                                                                         (5,088)                    (3,166)


        Cash, cash equivalents and
         restricted cash, beginning of
         period                                                                                        8,356                      11,896



        Cash, cash equivalents and
         restricted cash, end of period                                                        $
          3,268             $
            8,730



                                    Supplemental cash flow disclosure:



       Cash paid for interest                                                                   $
          430      
     $


        Cash paid for income taxes                                                                $
          31                $
            24


        Cash paid for operating leases                                                           $
          189      
     $


        Non-cash accrual for capital
         expenditures                                                                             $
          24                 $
            4


        Non-cash right-of-use assets
         obtained in exchange for lease
                obligation                                                                       $
          824      
     $

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


                                                                                March 31,



                                                 2019                  2018

                                                                       ---

        GAAP net loss
         attributable to common
         stockholders                    
              $              (4,900)             
              $ (5,021)


        Deemed dividend on convertible
         preferred stock




       GAAP net loss                    
              $              (4,900)             
              $ (5,021)



       Adjustments:



       Interest expense, net                                        478                                12



       Income tax provision                                          15                                32


        Depreciation and amortization                                258                               264


        Change in fair value of patent
         litigation settlement liability                             190


        Stock-based compensation                                     757                               701



        Non-GAAP net loss                
              $              (3,202)             
              $ (4,012)

                                                                                                        ===



        GAAP net loss
         attributable to common
         stockholders                    
              $               (0.23)             
              $  (0.25)

           per share, basic and diluted


        Deemed dividend on convertible
         preferred stock



        GAAP net loss per share,
         basic and diluted               
              $               (0.23)             
              $  (0.25)



       Adjustments:



       Interest expense, net                                       0.02



       Income tax provision


        Depreciation and amortization                               0.01                              0.01


        Change in fair value of patent
         litigation settlement liability                            0.01


        Stock-based compensation                                    0.04                              0.04



        Non-GAAP net loss per
         share, basic and
         diluted                         
              $               (0.15)             
              $  (0.20)

                                                                                                        ===


     
           
           
           GAAP Net Revenue Less Imaging Systems


        
             
        
               (Unaudited, in thousands)




                                                    Three Months Ended


                                                    March 31,



                        2019               2018

                                           ---

        Net
        revenue     
          $            10,326              
              $   10,020


       Imaging
        systems
        revenue                        (552)                             (583)





        Net
        revenue
        excluding
        imaging
        systems     
          $             9,774              
              $    9,437

                                                                             ===

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SOURCE BIOLASE, Inc.