BIOLASE Reports 2017 Fourth Quarter And Full-Year Results

IRVINE, Calif., March 14, 2018 /PRNewswire/ -- Biolase, Inc. (NASDAQ:BIOL), the global leader in dental lasers, today reported its financial results for its fourth quarter and year ended December 31, 2017.

Net revenue was $46.9 million in 2017, a decrease of 9% from the prior year; however, despite the decrease, the Company made substantial progress on several key fronts in 2017. It continued its strategy of increasing its focus on obtaining new customers, which resulted in new customers in direct markets buying approximately 80% of the all-tissue laser systems sold during the 2017 fourth quarter.

Driven by increased market acceptance and sales of its new Waterlase Express™ system and while continuing to restructure its sales organization, BIOLASE also produced solid increases in the number of placements of Waterlase® all-tissue lasers in the fourth quarter of 2017 compared to the fourth quarter of 2016 and the third quarter of 2017.

2017 Fourth Quarter Highlights include:

• Worldwide revenue of $12.6 million during the fourth quarter of 2017 decreased $1.2 million, or 8%, from the fourth quarter of 2016
  • Total Waterlase placements increased by 18% over the fourth quarter of 2016
• Worldwide revenue of $12.6 million during the fourth quarter of 2017 increased $1.8 million, or 17%, over the third quarter of 2017
  • Placements of our newest product, Waterlase Express™ increased by 33% over the third quarter of 2017
  • Total Waterlase placements increased by 32% over the third quarter of 2017
• Total operating expenses decreased by $1.2 million, or 12%, over the fourth quarter of 2016
• Bolstered efforts in Southern California to significantly enhance the region's oral health and dental care by increasing awareness and education in laser dentistry
• Continued restructuring of sales team with the appointment of a new sales leader and with enhanced training and development for field-based sales leaders that included a focus on change management
• Completed a rights offering to existing stockholders, with net proceeds of $11.4 million
• Subsequent to December 31, 2017, executed a $6 million credit facility to support the Company's strategic goals of returning BIOLASE to a successful growing, profitable company

President and CEO Harold C. Flynn, Jr. said, "While we are encouraged by our Waterlase growth sequentially, with an increase of 32% in units sold during the fourth quarter of 2017 compared to the third quarter of 2017, we were disappointed with our sales trajectory and have accelerated the pace of change to our sales force. We continued to improve our sales teams both in the U.S. and internationally and expect to see the benefits of these changes resulting in higher revenue during 2018."

As previously announced, the Company is bolstering its efforts in Southern California to significantly enhance the region's oral health and dental care by increasing awareness and education in laser dentistry. The Company is adding local specialists to its staff to offer dentists more support in maximizing the use of their lasers. In addition, the Company plans to offer more educational courses, informational events and community activities to help ensure that dentists and their patients are provided with the latest information in laser dentistry. BIOLASE has also developed a local advisory board of dentistry veterans whose collective expertise should serve as an excellent resource that will help propel Southern California forward.

"We are proud of our developments and contributions to paving the path for minimally invasive and pain free dentistry over the last 30 years and look forward to continuing our support of dentists around the world, starting with those in our backyard, where nearly 10% of the dental practices in the United States are located," said Flynn. "Prioritizing our local community is important to our legacy and our mission as a company. As we continue to build out an enhanced program that delivers essential resources and access to best-in-class products, support and services in Southern California, we will expand our efforts and export our best practices to other locales as well."

2017 Fourth Quarter and Full-Year Financial Results
Net Revenue. Net revenue for the quarter was $12.6 million, compared to net revenue of $13.8 million for the fourth quarter of 2016. The quarter-over-quarter decrease of 8% was primarily driven by decreases in domestic laser systems revenue and domestic imaging revenue, partially offset by increased international laser systems revenue, international imaging revenue, worldwide consumables and other revenue and services revenue. The net revenue for the fourth quarter of 2017 represented a $1.8 million, or 17%, increase over net revenue for the third quarter of 2017.

Net revenue for the year ended December 31, 2017 was $46.9 million, a 9% decrease when compared to net revenue of $51.8 million for the year ended December 31, 2016.

Gross Profit. Gross profit as a percentage of revenue for the fourth quarter of 2017 was 29%, compared to 39% in the fourth quarter of 2016. Gross profit as a percentage of revenue for the year ended December 31, 2017 was 32%, as compared to 39% for the year ended December 31, 2016.

The declines in gross profit as a percentage of revenue for the fourth quarter and the full year of 2017, compared to the comparable periods from last year, was mainly attributable to promotional introductory pricing of Waterlase Express, unabsorbed fixed costs due to lower revenue, and an increase in imaging revenue, which has lower product distribution margins than laser systems revenue. Gross profit typically fluctuates with product and regional mix, selling prices, product costs and revenue levels.

Operating Expenses. Total operating expenses for the fourth quarter of 2017 were $8.3 million, compared to $9.5 million for the fourth quarter of 2016. Sales and marketing expenses decreased $0.5 million, primarily due to decreased sales commission expense and convention related expenses. General and administrative expenses decreased by $0.3 million, primarily due to decreased patent and legal expenses. Engineering and development expenses decreased by $0.9 million, primarily due to payroll-related, consulting and temporary labor expenses and supplies expense. During the fourth quarter of 2017, the Company recognized a non-cash, pre-tax charge related to the disposal of internally developed software of $0.5 million, primarily due to the decision to cancel future deployments of SAP.

Total operating expenses for the year ended December 31, 2017 were $33.2 million, compared to $35.3 million for the year ended December 31, 2016.

Net Loss and Net Loss Per Share Attributable to Common Stockholders. Net loss and net loss per share attributable to common stockholders for the fourth quarter of 2017 was $3.8 million, or a $0.05 loss per share, compared to a net loss and net loss per share attributable to common stockholders of $4.4 million, or a $0.07 loss per share, for the fourth quarter of 2016. The $0.6 million decrease in net loss in this year's fourth quarter was primarily attributable to a $1.2 million reduction in operating expenses, a $0.5 million increase in non-operating income, net, and an increase in income tax benefit of $0.7 million, partially offset by a reduction of $1.8 million in gross profit.

Net loss for the year ended December 31, 2017 was $16.9 million, or a $0.23 loss per share, compared to a net loss of $15.4 million, or a $0.25 loss per share, for the year ended December 31, 2016. Net loss attributable to common stockholders for the year ended December 31, 2017, which included a deemed dividend on convertible preferred stock of $4.0 million, was $20.8 million, or a $0.28 loss per share, compared to a net loss attributable to common stockholders of $17.6 million, or a $0.29 loss per share, for the year ended December 31, 2016, which included a deemed dividend on convertible preferred stock of $2.2 million.

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 fourth quarter of 2017 totaled $3.1 million, or a loss of $0.04 per share, compared with a non-GAAP net loss of $3.5 million, or a loss of $0.05 per share, during the fourth quarter of 2016. The non-GAAP net loss for the year ended December 31, 2017 totaled $13.6 million, or a loss of $0.18 per share, compared with a non-GAAP net loss of $11.2 million, or a loss of $0.19 per share, for the year ended December 31, 2016.

Liquidity and Capital Resources
As of December 31, 2017, BIOLASE had approximately $22.7 million in working capital. Cash and restricted cash equivalents at the end of 2017 were $11.9 million, as compared to $9.2 million on December 31, 2016 and $4.7 million as of September 30, 2017. Net accounts receivable totaled $10.1 million at December 31, 2017, as compared to $9.8 million at December 31, 2016.

Senior Vice President and CFO John R. Beaver said, "We were very pleased the Company was to close both the $11.4 million (net) rights offering in the fourth quarter along with a $6 million working capital facility in the first quarter of 2018. We are very appreciative of the support and confidence of both our investors and lenders as we continue the transformation of the Company. With our current liquidity, coupled with our borrowing capacity under our new line of credit, we believe we are well positioned to fund the Company's future growth as we progress on the path to achieve positive operating cash flow."

Conference Call
As previously announced, BIOLASE will host a conference call today at 4:30 p.m. Eastern Time to discuss its operating results for the fourth quarter and year ended December 31, 2017, and to answer questions. To listen to the conference call live via telephone, dial 1-877-407-4019 from the U.S. or, for international callers, dial 1-201-689-8337, approximately 10 minutes before the start time. To listen to the conference call live via the Internet, visit the Investors section of the BIOLASE website at www.biolase.com.