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ZELTIQ Announces Second Quarter 2014 Financial Results

Increases Full Year 2014 Revenue Guidance to $160 - $165 Million

PLEASANTON, CA -- (Marketwired) -- 07/29/14 -- ZELTIQ (NASDAQ: ZLTQ)

  • Total revenue of $47.1 million, up 79% compared to $26.3 million in Q2 2013
  • Adjusted EBITDA margin of 12%
  • 208 systems shipped, compared to 136 systems in Q2 2013, bringing total system installed base to 2,562 systems
  • 166,116 revenue cycles, up 63% from Q2 2013

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 2014.

Mark Foley, President and Chief Executive Officer, said, "Our second quarter success was driven by increasing CoolSculpting® momentum and awareness and can also be attributed to the sales and marketing investments we made in the first quarter, a strong trade show presence and robust customer adoption of our newest applicator, CoolSmooth™. We delivered record quarterly revenue of over $47 million, or nearly 80% year-over-year growth, while also maintaining strong selling price and a 71% gross margin. In addition, we reported earnings per share of $0.07 and achieved 12% adjusted EBITDA margin. The strength in our business was well balanced across both systems and consumables, as we further expanded our installed base while also increasing our account utilization. These outstanding financial and operational results further validate the strength of our CoolSculpting platform and our strategic decision to invest in our sales and marketing initiatives that have expanded our leadership position in the large, growing and underpenetrated market for non-invasive body contouring. We remain excited about the potential in 2014 and our increased confidence has led us to significantly raise full year 2014 revenue guidance to $160 million to $165 million, or 43% to 48% year-over-year growth and to guide to a full year positive adjusted EBITDA margin."

Mr. Foley continued, "As we look to the second half of 2014 and beyond, we believe we have the right strategy in place for robust revenue growth and continued improvements in profitability and cash generation. We remain bullish on our ability to place systems and drive strong utilization for the next several years as we further penetrate the growing non-invasive body contouring market. As well, we are beginning to see the benefits of our various programs through our positive utilization trends from our high margin consumable revenue business. And finally, we believe that our R&D product pipeline can deliver a steady cadence of new products and possibly new therapeutic applications based on our proprietary controlled cooling technology."

Second Quarter Financial Review
Total net revenue for the second quarter 2014 was $47.1 million, consisting of $25.4 million of system revenue and $21.7 million of consumable revenue. This compares to total net revenue of $26.3 million, consisting of $13.0 million of system revenue and $13.4 million of consumable revenue for the second quarter 2013. Total revenue cycles shipped increased 63% to 166,116 for the second quarter 2014, compared to 101,657 for the second quarter 2013.

Gross profit was $33.4 million, or 71% of revenue, for the second quarter 2014, compared to gross profit of $18.5 million, or 70% of revenue, for the second quarter 2013. Operating expenses for the second quarter 2014 were $30.6 million, compared to $22.1 million for the second quarter 2013.

Income from operations for the second quarter 2014 was $2.8 million, compared to a loss from operations of $3.7 million for the second quarter 2013. Net income for the second quarter 2014 was $2.8 million, or $0.07 per share, compared to a net loss of $3.6 million for the first quarter 2013, or ($0.10) per share. Weighted average diluted shares outstanding was 40.6 million for the second quarter 2014, compared to weighted average basic shares outstanding of 36.0 million for the second quarter 2013.

Cash and cash equivalents, short-term investments, and long-term investments were $43.3 million as of June 30, 2014 compared to $52.5 million as of June 30, 2013, and $41.2 million as of March 31, 2014.

Revised Full Year 2014 Financial Guidance
ZELTIQ is updating its previously stated financial guidance for the full year 2014, provided on its first quarter 2014 earnings conference call:

  • Revenue guidance in the range of $160 million to $165 million; up from prior guidance of $137 million to $140 million
  • Consumable revenue of approximately 50% of total revenue; unchanged from prior guidance
  • Gross profit margin of approximately 70%; unchanged from prior guidance
  • Operating expenses of approximately 75% of total revenue; down from prior guidance of 80%
  • Adjusted EBITDA margin of approximately positive 2%; up from prior guidance of negative (3%)

Additional information regarding our results and guidance can be found in our Supplemental Financial and Operational Information schedule by CLICKING HERE or by visiting the Investor Relations section of our 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, 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.

Conference Call
ZELTIQ will hold a conference call today 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.

After the live webcast, the call will remain available on ZELTIQ's website, www.coolsculpting.com, until ZELTIQ releases its third quarter 2014 financial results. In addition, a telephonic replay of the call will be available until August 5, 2014. 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 76290408.

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 belief that continued building on key strategic initiatives will drive its long term success, its expectation of an increase in demand for system sales over the course of 2014, its belief regarding the potential for 2014 and its financial guidance for 2014 are forward-looking statements. The words "believe," "expect," "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's sales and marketing plans may fail to increase sales as ZELTIQ expects; as well as those other risks and uncertainties set forth in ZELTIQ's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014, filed with the SEC on April 30, 2014. 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)

                                               June 30,       December 31,
                                                 2014             2013
                                           ---------------- ----------------
  Cash and cash equivalents                $         20,262 $         25,798
  Short-term investments                             18,565           18,840
  Accounts receivable, net                           13,908           10,221
  Inventory                                          18,555            8,406
  Prepaid expenses and other current
   assets                                             2,256            4,368
                                           ---------------- ----------------
    Total current assets                             73,546           67,633
  Long-term investments                               4,467           11,442
  Restricted cash                                       334              331
  Property and equipment, net                         2,289            2,158
  Intangible asset, net                               6,130            6,481
  Other assets                                           71                9
                                           ---------------- ----------------
    Total assets                           $         86,837 $         88,054
                                           ================ ================

  Accounts payable                         $          3,302 $          5,165
  Accrued liabilities                                18,519           18,364
  Deferred revenue                                    3,792            1,674
                                           ---------------- ----------------
    Total current liabilities                        25,613           25,203
Other non-current liabilities                           175              275
                                           ---------------- ----------------
    Total liabilities                      $         25,788 $         25,478
                                           ---------------- ----------------
    Total stockholders' equity                       61,049           62,576
                                           ---------------- ----------------
    Total liabilities and stockholders'
     equity                                $         86,837 $         88,054
                                           ================ ================

                          ZELTIQ Aesthetics, Inc.
               Condensed Consolidated Statement of Operations
              (In thousands, except share and per share data)

                            Three Months Ended         Six Months Ended
                           June 30,     June 30,     June 30,     June 30,
                             2014         2013         2014         2013
                         -----------  -----------  -----------  -----------
Revenue                  $    47,061  $    26,338  $    78,036  $    46,320
Cost of revenue               13,660        7,878       22,676       15,226
                         -----------  -----------  -----------  -----------
  Gross profit                33,401       18,460       55,360       31,094
                         -----------  -----------  -----------  -----------
Operating expenses:
  Research and
   development                 4,350        3,898        8,620        7,647
  Sales and marketing         21,052       14,625       41,239       27,167
  General and
   administrative              5,234        3,626        9,947        7,434
                         -----------  -----------  -----------  -----------
    Total operating
     expenses                 30,636       22,149       59,806       42,248
                         -----------  -----------  -----------  -----------
Income (loss) from
 operations                    2,765       (3,689)      (4,446)     (11,154)
Interest income, net              14           19           33           43
Other (expense) income,
 net                             (83)         106         (149)          72
                         -----------  -----------  -----------  -----------
Income (loss) before
 provision for income
 taxes                         2,696       (3,564)      (4,562)     (11,039)
(Benefit from) provision
 for income taxes                (73)          43            6           50
                         -----------  -----------  -----------  -----------
Net income (loss)              2,769       (3,607)      (4,568)     (11,089)
                         ===========  ===========  ===========  ===========
Net income (loss) per
 share, basic            $      0.07  $     (0.10) $     (0.12) $     (0.31)
                         ===========  ===========  ===========  ===========
Weighted average shares
 of common stock
 outstanding used in
 computing net income
 (loss) per share, basic  37,440,537   36,045,346   37,328,738   35,968,144
                         ===========  ===========  ===========  ===========
Net income (loss) per
 share, diluted          $      0.07  $     (0.10) $     (0.12) $     (0.31)
                         ===========  ===========  ===========  ===========
Weighted average shares
 of common stock
 outstanding used in
 computing net income
 (loss) per share,
 diluted                  40,597,275   36,045,346   37,328,738   35,968,144
                         ===========  ===========  ===========  ===========

                          ZELTIQ Aesthetics, Inc.
               Condensed Consolidated Statement of Cash Flows
                               (In thousands)
                                                    Six Months Ended
                                                June 30,        June 30,
                                                  2014            2013
                                             --------------  --------------
  Net loss                                   $       (4,568) $      (11,089)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    Depreciation and amortization                       932             850
    Stock-based compensation                          4,511           2,599
    Deferred income tax provision (benefit)              38             (20)
    Amortization (accretion) of investment
     premium (discount), net                            126             177
    Provision for doubtful accounts
     receivable                                         145              (3)
    Provision for excess and obsolete
     inventory                                          325             162
    Loss on disposal and write-off of
     property and equipment                              17               2
    Changes in operating assets and
      Accounts receivable                            (3,781)           (406)
      Inventory                                      (9,781)          1,093
      Prepaid expenses and other assets               2,022             150
      Deferred revenue, net of deferred
       costs                                          2,099            (268)
      Accounts payable, accrued and other
       non-current liabilities                       (2,416)            517
                                             --------------  --------------
      Net cash used in operating activities         (10,331)         (6,236)
                                             --------------  --------------
  Purchase of investments                            (4,513)        (19,093)
  Proceeds from sale of investments                   1,000          10,550
  Proceeds from maturity of investments              10,634          13,586
  Purchase of property and equipment                   (770)           (306)
  Change in restricted cash                              (1)            145
                                             --------------  --------------
      Net cash provided by investing
       activities                                     6,350           4,882
                                             --------------  --------------
  Proceeds from issuance of common stock
   upon exercise of stock options                     1,587             602
  Tax payments related to shares withheld
   for vested restricted stock units                 (3,247)            (62)
  Tax effect of employee stock plans                     15               -
                                             --------------  --------------
      Net cash (used in) provided by
       financing activities                          (1,645)            540
                                             --------------  --------------
Effect of exchange rate on cash and cash
 equivalents                                             90               -
                                             --------------  --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS            (5,536)           (814)
 period                                              25,798          22,876
                                             --------------  --------------
CASH AND CASH EQUIVALENTS-End of period      $       20,262  $       22,062
                                             ==============  ==============

                          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)

                               Three Months Ended       Six Months Ended
                              June 30,    June 30,    June 30,    June 30,
Dollars                         2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
  Net income (loss), as
   reported                  $    2,769  $   (3,607) $   (4,568) $  (11,089)

  Adjustments to net income
    Interest income and
     other (expense) income,
     net                             69        (125)        116        (115)
    (Benefit from) provision
     for income taxes               (73)         43           6          50
    Depreciation and
     amortization                   476         422         932         850
    Stock-based compensation
     expense                      2,406       1,480       4,511       2,599
                             ----------  ----------  ----------  ----------
      Total adjustments to
       net income (loss)          2,878       1,820       5,565       3,384

  Adjusted EBITDA            $    5,647  $   (1,787) $      997  $   (7,705)
                             ==========  ==========  ==========  ==========

                               Three Months Ended       Six Months Ended
                              June 30,    June 30,    June 30,    June 30,
As a Percentage of Revenue      2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
  Net income (loss), as
   reported                         5.9%      -13.7%       -5.8%      -23.9%

  Adjustments to net income
    Interest income and
     other (expense) income,
     net                            0.1%       -0.5%        0.1%       -0.2%
    (Benefit from) provision
     for income taxes              -0.1%        0.2%        0.0%        0.1%
    Depreciation and
     amortization                   1.0%        1.6%        1.2%        1.8%
    Stock-based compensation
     expense                        5.1%        5.6%        5.8%        5.6%
                             ----------  ----------  ----------  ----------
      Total adjustments to
       net income (loss)            6.1%        6.9%        7.1%        7.3%

  Adjusted EBITDA Margin           12.0%       -6.8%        1.3%      -16.6%
                             ==========  ==========  ==========  ==========

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