medical devices - maxim group · 2014-10-02 · believe that there is a huge market opportunity in...

EQUITY RESEARCHINDUSTRY UPDATE

Healthcare

Med

ical

Dev

ices

Companies mentioned:

CUTR BuyTarget Price: $13.00Closing Price: $10.31Market Cap ($M): $148Avg. Daily Volume: 85

CYNO BuyTarget Price: $35.00Closing Price: $22.96Market Cap ($M): $497Avg. Daily Volume: 220

ELOS BuyTarget Price: $16.00Closing Price: $10.48Market Cap ($M): $384Avg. Daily Volume: 59

ZLTQ BuyTarget Price: $30.00Closing Price: $23.47Market Cap ($M): $881Avg. Daily Volume: 736

Anthony Vendetti(212) [email protected]

September 23, 2014

Aesthetic Industry Update Summary

• It is Maxim’s opinion that we are just "scratching the surface" of a hugeupswing in non-invasive cosmetic procedures.

• We believe that there are two major technology breakthroughs that could drivesignificant near-term growth: (1) non-invasive fat removal, and (2) picosecondlasers for the treatment of benign pigmented lesions and tattoo removal.

• Physician revenues are steadily increasing for practices that have embracednon-invasive cosmetic procedures, which should lead to additional capitalequipment and consumable purchases.

Details

Bottom line. Whether waiting for approval, or recently receiving clearance for newproducts and indications, all of our Buy-rated aesthetic companies are going througha catalytic stage that investors should not miss. In this report, we delineate theproducts and opportunity for each company we cover. We believe that our 2014industry outlook of 15.5% y/y product revenue growth is achievable given our recentchannel checks, and an expected rise in FDA-cleared indications in body contouringand picosecond laser technology.

The body contouring market. According to GlobalData, the market for bodycontouring devices is forecasted to reach $700M in the U.S. and $2B worldwideby 2017, and we believe that these numbers may be conservative. In 2013, morethan 11M cosmetic surgical and nonsurgical procedures were performed, totalingover $12B. Of that total, roughly $7B were spent on surgical procedures, andapproximately $5B were spent on nonsurgical procedures. Our recent physicianchannel checks indicate that non-surgical procedures should continue to increaseas a percentage of overall practice revenue. According to Medical Insights and theBody Shaping & Skin Tightening Report 2014, the global non-invasive fat destructionmarket reached $150M at the end of 2013, compared to the $640M body-shapingand skin-tightening market. Finally, according to the Annual Aesthetic PracticeSurvey from 2014, more than 40% of respondents said that they plan to purchasenew equipment in 2014, and almost 45% of these indicated that they would acquirebody-shaping devices.

Tattoo and pigmented lesion opportunity. We are particularly sanguine aboutthe picosecond lasers that are coming to market from CUTR and ELOS, as webelieve that there is a huge market opportunity in tattoo removal and the treatmentof pigmented lesions, which CYNO has demonstrated with the success of PicoSure.According to a 2013 Pew Research study, approximately 36% of people ages 18- 25 have a tattoo, as do 40% of 26 - 40 year-olds. Additionally, Americans spent$1.65B in 2013 on tattoo procedures, with 45M people having at least one tattoo.Moreover, according to the American Society of Dermatological Surgery (ASDS),roughly 50% of people with a tattoo want it removed at some point, with 11% ofpeople getting or having had one removed. Additionally, ASDS indicated that itsmembers performed 96,000 tattoo-removal procedures in 2013, up 52% y/y. Webelieve that the potential market opportunity in tattoo removal could be significantlygreater, since the picosecond technology is a huge advance in the efficacy, speed,and number of required treatments.

SEE PAGES 14 - 17 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS

The aesthetic industry had mixed results in 2Q14. Total revenue in 2Q14 for the four professional

aesthetic companies that we cover increased by approximately 10.6% y/y.

CUTR: 2Q14 results were weak, primarily due to a 19.2% y/y decline in international sales.

Conversely, revenues in the U.S. were up 5.9%, led by an expansion of the salesforce and strong sales of Excel V, as well as early shipments of Excel HR. On August 12, CUTR received FDA clearance for the treatment of benign pigmented lesions for its enlighten product, which should spur

growth in 4Q14 and 2015 (see our update on Cutera below).

CYNO: CYNO reported 2Q14 total revenues of $72.6M, up 44.9% y/y. Importantly, if we include

Palomar revenues for all of 2Q13, revenues are up only 4% y/y. North American sales accounted for 46% of total revenues. Sales in North America would have been up 3% y/y had the company owned Palomar in 2Q13. International sales accounted for 54% (~20% from Asia) and were up 5% on a combined basis. The company indicated that China overtook Japan as its top international market, and it complemented Beijing and Shanghai with a third direct office in Guangzhou.

ELOS: ELOS reported 2Q14 total revenues of $64.6M (which excludes Syneron Beauty, but

includes elure and dental in that quarter and 2Q13), up 6.1% y/y. North American revenues, which accounted for 34% of total revenues, were up 10% y/y and 20% sequentially. In our opinion, the company is executing on previously announced plans that position it for success in the body-sculpting market, including the development of a Body Shaping Business Group and its salesforce expansion.

ZLTQ: Once again, the strongest revenue growth came from ZLTQ, as its technology and business

model continue to translate into well-above-average growth. The company recorded top-line growth of 78.7% y/y for 2Q14 and sold 208 systems in 2Q14, up 52.9% y/y, bringing its total installed base to 2,562, up 48.0% y/y. Additionally, ZLTQ shipped 166,116 cycles, up 47.3% y/y, which reflects the increased utilization of the system. Consumables accounted for 46.1% of revenues in 2Q14.

Industry gross margins improved slightly in 2Q14. For the group, average gross margin increased

by 74 bps y/y, driven by ELOS, which had a strong quarter, with gross margins expanding 352 bp y/y, partially because of its ramp of new, higher-margin product initiatives.

Attractive valuations. The aesthetic companies that we follow trade at an average EV/revenues

multiple of 1.8x our 2015 revenue outlooks, ranging from 0.7x our 2015 revenue estimate for CUTR to 4.6x our 2015 revenue outlook for ZLTQ. However, multiples for the industry remain compressed, with peak industry average multiples of 4.0x - 4.5x achieved in 2005 - 2006. Over the last five years, the EV/revenues multiple for the group has ranged from 0.4x for CUTR to 8.0x for ZLTQ. We expect multiples for the group to expand, as expected new FDA clearances drive higher growth.

Cutera (CUTR - $10.31 - Buy - $35 Price Target)

We believe that CUTR’s picosecond laser, enlighten, a high-performance laser for the removal of benign pigmented lesions and tattoos, as well as its Excel HR hair removal system, should provide significant growth in 2H14 and 2015. Unlike traditional Q-Switch lasers, picosecond lasers could reduce the number of doctor visits for tattoo removal to 3 - 5, from 10 - 20. We believe that, with support from our channel checks, the new laser should commence shipments in 4Q14, and should be a higher-margin and faster treatment product than competitors’ products. Currently, enlighten has CE Mark approval and is selling in Europe, as well as FDA clearance for the treatment of pigmented lesions. We expect CUTR to receive FDA clearance for tattoo removal before the end of 2014.

Cash and investments. The company ended 2Q14 with net cash of $81.6M or $5.73/share with no

debt or long-term investments.

Adjusting 4Q14 and 4Q15 estimates. We are increasing our S&M estimate as a percent of revenue to

36.3%, from 30.8%, in 4Q14 to better reflect the ramp-up of enlighten. We are slightly reducing 4Q15 estimates by lowering revenues to $29.9M, from $30.3M, and lowering the gross margin to 60.6%, from 61.6%. Additionally, we are increasing S&M, R&D, and G&A as a percentage of revenues. The net effect is a reduction of 2015 GAAP EPS to $0.01, from $0.18, and non-GAAP to $0.14, from $0.31.

Introducing 2016 estimates. We are introducing our 2016 revenue, gross margin, and GAAP EPS

estimates for CUTR. Our 2016 projections for the mentioned metrics are $100.0M, up 13.2% y/y; 60.9%, up 90 bp y/y, and $0.33. Our projections imply a 2016 EV/revenues multiple of 0.6x.

Valuation. Shares trade at EV/revenues multiples of 0.7x our 2015 revenue estimate, compared to the

peer average of 1.7x. Our 12-month target price of $13 is based on shares trading at an EV/revenues

2Maxim Group LLC

Medical Devices

multiple of 1.2x our 2015 revenue estimate, below the peer average and supported by our DCF valuation analysis using a 12% cost of equity.

Cynosure (CYNO - $22.96 - Buy - $35 Price Target)

During 3Q14, CYNO announced that it has acquired the assets of privately held Ellman International, Inc. for approximately $13.2M in cash (refer to our note from 9/8/2014). This acquisition broadens its customer base into other specialties and increases its consumable revenues, which may have been a key factor in the deal. However, it is PicoSure that continues to be the driver of the company’s revenues. CYNO is a leader in the space, as it has the only FDA-cleared picosecond device for tattoo removal, which it received on December 4, 2012. CYNO has sold more than 250 PicoSure units worldwide at approximately $200K - $250K per machine. According to Roy Geronemus, M.D., Director of the Laser & Skin Surgery Center of New York, 22 subjects with multicolored and recalcitrant tattoos were treated with PicoSure over a two-week period, with 80% achieving overall tattoo clearance. Moreover, on average, 94% clearance was achieved for blue and green ink. PicoSure is also FDA-cleared for the treatment of acne scars. According to the Society for Investigative Dermatology and the American Academy of Dermatology, acne is the most common skin disorder in the United States, affecting 40M - 50M Americans. By mid-teens, more than 40% of adolescents have acne or acne scarring. Finally, CYNO is working on a non-invasive body contouring platform that it plans to launch in 2015. The company has already met with the FDA and has established a protocol with selected sites to begin clinical treatments.

Cash and investments. CYNO ended 2Q14 with net cash and long-term investments of $123.0M or

$5.50/share (vs. net cash of $102.3M or $4.57/share).

Adjusting 2015 GAAP EPS estimate. We are adjusting our 2015 GAAP estimate to properly account

for stock-based compensation, which we underestimated in our prior model. Our new 2015 GAAP EPS estimate is $1.02, down from $1.27. Our non-GAAP EPS estimate remains the same at $1.50.

Introducing 2016 estimates. We are introducing our 2016 revenue, gross margin, and GAAP EPS

estimates for CYNO. Our 2016 projections for the mentioned metrics are $345.2M, up 9.2% y/y; 59.9%, up 20 bp y/y; and $1.26, up 23.5% y/y. Our projections imply a 2016 EV/revenues multiple of 1.2x.

Valuation. Shares currently trade at 2015 EV/revenues multiples of 1.3x, compared to the peer average

of 1.7x. Our 12-month target price of $35 is based on shares trading at an EV/revenues multiple of 2.2x our 2015 revenue estimate, a premium to the average multiple that we apply to peers but below its peak multiple of 3.7x, achieved in 2007. We believe that a premium to the group is warranted due to CYNO's higher growth rate compared to its peers and its leadership in product innovation. Our target price is supported by our DCF valuation analysis using a 12% cost of equity.

Syneron Medical (ELOS - $10.48 - Buy - $16 Price Target)

On July 28, 2014, ELOS received CE Mark for its PicoWay dual-wavelength picosecond laser for tattoo removal and the treatment of pigmented lesions. ELOS is scheduled to begin a staged launch of the PicoWay device in the international market during 3Q14 and should receive FDA clearance for PicoWay by the end of 2014. The PicoWay is based on a Candela design, and ELOS plans to market it to its installed base of more than 1,000 physicians that have Candela-dedicated tattoo and pigmented lesion lasers. On April 14, ELOS announced that it received FDA clearance for its UltraShape System for the non-invasive reduction of abdominal circumference via fat cell destruction. ELOS established a Body Shaping Business Group, a dedicated salesforce and Product Development Partners (PDPs), which is expected to reach about 25 dedicated salespeople by year-end. In conclusion, the outlook for 2H14 and 2015 appears bright, with a product pipeline that includes high-margin products, as well as a specialized salesforce focused on the body-sculpting market. For more information, see our note dated 9/18/2014.

Cash and investments. ELOS ended 2Q14 with net cash and long-term investments of $96.4M or

$2.63/share (vs. net cash of $85.7M or $2.34/share).

Valuation. Shares trade at an EV/revenues multiple of 1.1x our 2015 estimate, below the 2015 peer

average of 1.7x. Our 12-month target price of $16 is based on ELOS trading at an EV/revenues multiple of 1.9x our 2015 revenue outlook. We expect multiples to increase, as ELOS continues to expand its salesforce and improve on its current initiatives.

3Maxim Group LLC

Medical Devices

ZELTIQ Aesthetics, Inc. (ZLTQ - $23.47 - Buy - $30 Price Target)

On July 29, ZLTQ announced significantly better-than-expected 2Q14 results, as well as increased guidance, which we believe has led to a 41.5% stock appreciation. On April 14, 2014, the FDA cleared CoolSmooth, ZLTQ's new applicator, for use on the thigh area. ZLTQ indicated that 7.2M people expressed an interest in CoolSculpting as a solution for inner or outer thigh fat. This is in addition to the 13.2M and 7.4M interested in undergoing the CoolSculpting treatment for the abdomen and flanks, respectively. We believe that ZLTQ’s five-step roadmap has been instrumental in driving patients to physician practices. For more information, see our note dated 9/19/2014.

Cash and investments. ZLTQ ended 2Q14 with net cash and long-term investments of $43.3M or

$1.16/share (vs. net cash of $38.8M or $1.04/share) and no debt.

Valuation. Our 12-month target price of $30 is based on ZLTQ trading at an EV/revenues multiple of

5.5x our 2015 revenue outlook. Although at a premium to the current peer average (and above the peak industry average multiples of 4.0x - 4.5x achieved in 2005 - 2006), we believe ZLTQ – as the leader in non-invasive fat removal – has just scratched the surface of a huge market opportunity. Shares currently trade at 4.3x our 2015 EV/revenues multiples, above the peer average of 1.7x. We expect multiples to expand, as ZLTQ continues to grow at above-industry-average rates.

Figure 1: Recent Stock Performance

Aesthetic Industry stock returns as of 9/22/14

Note: Aesthetic Industry returns are a simple average of the five publicly traded aesthetic companies; Source: Thomson One, Bloomberg, and Maxim Group LLC

In our opinion, share prices don’t fully reflect the underlying business fundamentals. Shares of

the four core aesthetic companies under coverage are up an average of 1.1% YTD. We believe that our aesthetic companies under coverage are undervalued relative to the growth opportunities outlined in this report.

Russell 3000

CUTR CYNO LMNS ELOS ZLTQ RUA Aesthetic Industry

1 Month 7.4% 1.4% -3.5% 8.2% 15.8% 2.8% 5.8%

3 Month 10.4% 12.7% -7.5% -2.5% 44.7% 5.2% 11.5%

6 Month -5.4% -20.1% -26.5% -11.9% 26.7% 12.2% -7.4%

1 year 12.6% -1.7% N/A 25.4% 144.5% 21.5% 45.2%

YTD 1.3% -13.8% N/A -14.8% 24.1% 6.8% -0.8%

4Maxim Group LLC

Medical Devices

Note: All market value, enterprise value, revenue, and EBITDA figures are in $U.S. millions; Prices as of 9/22/14; Source: Company reports and Maxim Group estimates.

Current Price Shares Market Enterprise Revenues Revenue Growth EBITDA GAAP EPS Non-GAAP EPS

Company Ticker Rating 9/22/14 (mm) Value Value (EV) 2013A 2014E 2015E '13-'14 '14-'15 2013A 2014E 2015E 2013A 2014E 2015E 2013A 2014E 2015E

Cutera Inc CUTR Buy $10.31 14.2 146.7 65.1 74.6 77.5 88.7 3.9% 14.4% (0.8) (3.0) 10.4 (0.33) (0.41) 0.18 (0.11) (0.23) 0.31

Cynosure Inc CYNO Buy $22.96 22.4 513.7 411.4 226.0 287.0 316.2 27.0% 10.2% 38.8 49.7 62.5 (0.08) 0.68 1.27 0.97 1.18 1.50

Syneron Medical Ltd ELOS Buy $10.48 36.7 384.3 298.6 256.9 242.7 260.1 (5.5% ) 7.2% 15.9 19.2 25.5 0.04 (0.02) 0.08 0.19 0.25 0.34

Zeltiq Aesthetics Inc ZLTQ Buy $23.47 37.4 878.7 839.9 111.6 164.6 196.3 47.5% 19.2% (15.3) 1.0 11.8 (0.53) (0.18) 0.21 (0.42) 0.03 0.32

Lumenis Ltd LMNS NR $8.75 35.3 308.7 308.7 N/A 286.2 309.8 N/A 8.3% N/A 30.5 36.7 N/A 0.53 0.68 N/A 0.53 0.72

Mean 446.4 384.7 167.3 211.6 234.2 18.2% 11.9% 9.6 19.5 29.4 (0.22) 0.12 0.48 0.16 0.35 0.64

Median 384.3 308.7 168.8 242.7 260.1 15.5% 10.2% 15.9 19.2 25.5 (0.08) (0.02) 0.21 0.04 0.25 0.34

Price EV / Revenues EV / EBITDA GAAP P/E Non-GAAP P/E P/B Gross EBIT Latest Net Cash

Company Ticker Target 2013A 2014E 2015E 2013A 2014E 2015E 2013A 2014E 2015E 2013A 2014E 2015E Latest Margin Margin DSO per share

Cutera Inc CUTR $13 0.9x 0.8x 0.7x N/A NM 6.3x N/A N/A 57.3x N/A N/A 33.3x 1.7x 55.5% N/A 41 $5.73

Cynosure Inc CYNO $35 1.8x 1.4x 1.3x 10.6x 8.3x 6.6x N/A 33.8x 18.1x 23.7x 19.5x 15.3x 1.6x 57.7% 10.8% 62 $4.57

Syneron Medical Ltd ELOS $16 1.2x 1.2x 1.1x 18.8x 15.5x 11.7x N/A N/A 131.0x 55.2x 41.9x 30.8x 1.7x 53.1% 3.3% 83 $2.34

Zeltiq Aesthetics Inc ZLTQ $30 7.5x 5.1x 4.3x N/A N/A 71.1x N/A N/A 111.8x N/A N/A 73.3x 14.0x 72.0% N/A 21 $1.04

Lumenis LMNS NR N/A 1.1x 1.0x N/A 10.1x 8.4x 10.1x N/A N/A N/A N/A N/A 14.4x 54.6% 8.9% 56 $3.06

Mean 2.8x 1.9x 1.7x 14.7x 11.3x 20.8x 10.1x 33.8x 79.5x 39.4x 30.7x 38.2x 6.7x 58.6% 7.7% 52 $3.35

Median 1.5x 1.2x 1.1x 14.7x 10.1x 8.4x 10.1x 33.8x 84.5x 39.4x 30.7x 32.0x 1.7x 55.5% 8.9% 56 $3.06

5Maxim Group LLC

Medical Devices

Figure 2: 2Q14 Global Market Share

Global Aesthetic Device Market

Source: Company reports and Maxim Group estimates

Figure 5: 2Q14 U.S. Market Share

North American Aesthetic Device Market


Professional Aesthetic Market (excludes private companies)

Figure 3: 2Q13 Global Market Share



Figure 6: 2Q13 U.S. Market Share



Figure 4: 2013 Global Market Share



Figure 7: 2013 U.S. Market Share



CUTR7% CYNO

32%

ELOS34%

ZLTQ13%

LMNS14%E

CUTR6%

CYNO29%

ELOS21%

ZLTQ21%

LMNS23%E

CUTR8% CYNO

22%

ELOS31%

Solta Medical

21%

ZLTQ7%

LMNS11%E

CUTR5% CYNO

19%

ELOS19%

Solta Medical

17%

ZLTQ19%

LMNS21%E

CUTR7%

CYNO25%

ELOS30%

Solta Medical

19%

ZLTQ8%

LMNS11%E

CUTR 5% CYNO 25%

ELOS 18%

Solta Medical

15%

ZLTQ, 19%

LMNS 21%E

6Maxim Group LLC

Medical Devices

Figure 8: Global Product Revenue

Source: Company reports and Maxim Group estimates; LMNS aesthetic product revenues are estimates based on historical product revenue proportions.

Figure 9: North American Product Revenue North American Product Revenue includes Canadian revenue

Source: Company reports and Maxim Group estimates; LMNS aesthetic product revenues are estimates based on historical product revenue proportions; CUTR’s numbers are based on U.S. product revenue versus North American product revenue for its competitors.

Global Product Revenues 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

(in millions)

CUTR 40.5 40.0 46.9 11.9 15.2 15.1 17.9 60.1 11.5 15.1 12.5 17.8 56.9 11.8 13.2

Y/Y growth (%) (43.8%) (1.1%) 17.1% 42.9% 34.1% 26.0% 17.3% 28.1% (2.8%) (0.7%) (17.5%) (0.4%) (5.2%) 2.0% (12.5%)

Q/Q growth (%) - - - (22.4%) 27.9% (0.2%) 18.4% - (35.7%) 30.6% (17.1%) 43.0% - (34.2%) 12.1%

CYNO 55.9 62.4 88.4 28.1 32.9 31.0 36.5 128.5 34.1 43.0 50.1 61.0 188.3 49.7 59.6

Y/Y growth (%) (54.7%) 11.6% 41.7% 69.1% 59.2% 37.1% 28.3% 45.5% 21.4% 30.7% 61.6% 67.2% 46.5% 45.7% 38.5%

Q/Q growth (%) - - - (1.2%) 17.2% (5.7%) 17.5% - (6.5%) 26.1% 16.6% 21.6% - (18.5%) 19.9%

ELOS 128.5 134.1 164.0 43.2 46.3 41.5 54.6 185.6 53.8 59.3 54.6 58.8 226.4 56.8 64.6

Y/Y growth (%) (36.2%) 4.4% 22.3% 30.3% 7.0% (2.8%) 21.5% 13.1% 24.5% 28.0% 31.6% 7.7% 22.0% 5.6% 9.0%

Q/Q growth (%) - - - (3.7%) 7.1% (10.4%) 31.5% - (1.4%) 10.1% (7.9%) 7.7% - (3.4%) 13.7%

ZLTQ 1.6 25.5 68.1 17.4 22.3 17.9 18.6 76.2 11.1 13.0 15.9 21.4 61.4 14.5 25.4

Y/Y growth (%) NA NM 167.6% 21.9% 28.3% 1.2% (1.1%) 11.8% (36.3%) (41.7%) (11.3%) 15.0% (19.5%) 30.5% 95.4%

Q/Q growth (%) (7.4%) 27.9% (19.5%) 3.7% (40.4%) 17.2% 22.4% 34.5% - (32.4%) 75.5%

LMNS 76.7 72.4 17.3 E 20.8 E 80.9 21.4 E 25.6 E

Y/Y growth (%) (5.7%) NA NA 11.7% 23.8% 23.1%

Q/Q growth (%) NA 20.2% NA 19.5%

Total Public Companies 350.4 403.2 444.1 144.4 166.4 151.9 183.3 522.7 127.8 151.1 133.1 159.0 533.0 154.1 188.3

Y/Y growth (%) (39.1%) 15.1% 10.1% 33.9% 28.0% 15.6% 17.3% 17.7% (11.5%) (9.2%) (12.4%) (13.2%) 2.0% 20.6% 24.6%

Q/Q growth (%) - - - (7.6%) 15.2% (8.7%) 20.6% - (30.3%) 18.2% (11.9%) 19.5% - (3.1%) 22.2%

North American Product Revenues 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

(in millions)

CUTR 24.3 14.5 18.1 4.8 6.1 6.1 8.0 24.8 4.7 5.9 5.0 8.3 23.9 4.3 6.0

Y/Y growth (%) (32.7%) (40.1%) 24.7% 58.4% 40.2% 27.6% 31.0% 37.0% (1.6%) (2.7%) (17.8%) 4.3% (3.9%) (7.1%) 2.3%

% of total revenue 60% 36% 39% 40% 40% 40% 44% 41% 41% 39% 40% 47% 42% 37% 46%

CYNO 27.9 27.8 39.2 13.6 16.4 15.4 19.5 64.9 16.3 20.7 27.0 32.9 97.0 21.6 27.6

Y/Y growth (%) (67.3%) (0.3%) 41.0% 91.2% 92.1% 54.2% 44.0% 65.6% 20.5% 26.2% 75.2% 69.0% 49.5% 32.3% 33.3%

% of total revenue 50% 45% 44% 48% 50% 50% 53% 50% 48% 48% 54% 54% 52% 37% 46%

ELOS 56.0 46.8 55.9 14.8 14.9 13.3 23.0 66.0 19.3 20.2 17.5 24.7 81.7 19.5 20.8

Y/Y growth (%) (2.0%) (16.4%) 19.6% 35.3% (0.2%) (9.3%) 49.2% 18.0% 29.8% 35.4% 31.6% 7.7% 23.7% 1.5% 3.2%

% of total revenue 44% 35% 34% 34% 32% 32% 42% 36% 36% 34% 32% 42% 34% 34% 32%

ZLTQ 0.0 16.9 50.3 13.0 16.6 13.7 13.3 56.7 16.6 21.2 17.3 27.9 83.0 10.6 20.0

Y/Y growth (%) 198.3% 23.7% 28.8% 9.5% (7.5%) 12.6% 27.6% 27.3% 26.6% 109.2% 46.5% (36.0%) (5.6%)

% of total revenue 74% 75% 75% 76% 72% 74% 83% 80% 59% 78% 74% 74% 79%

LMNS 74.5 16.6 23.2 74.3 21.5 22.0

Y/Y growth (%) NA NA NA (0.3%) 29.5% (5.4%)

% of total revenue 30% 77% 90% 81% 70%

Total Public Companies 169.8 174.1 241.4 69.7 79.7 70.8 90.4 310.6 99.8 109.7 81.2 110.6 425.6 77.6 96.4

Y/Y growth (%) (45.0%) 2.5% 38.7% 46.1% 34.8% 19.9% 19.5% 28.7% 43.3% 37.6% 14.6% 22.3% 37.0% (22.2%) (12.1%)

% of total revenue 48.5% 43.2% 54.4% 48.3% 47.9% 46.6% 49.3% 59.4% 78.1% 72.6% 61.0% 69.6% 79.8% 50.4% 51.2%

7Maxim Group LLC

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Figure 10: Net Cash


Figure 11: Net Cash per Share


Net Cash 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

(in millions)

CUTR 99.6 90.0 88.7 78.9 80.6 80.1 85.6 85.6 88.1 89.6 91.4 83.1 83.1 83.8 81.6

Y/Y growth (%) 2.5% (9.6%) (1.5%) (11.4%) (11.5%) (9.3%) (3.5%) (3.5%) 11.6% 11.2% 14.1% (2.9%) (2.9%) (4.8%) (9.0%)

% of total revenue 186% 169% 147% 125% 103% 103% 95% 111% 138% 115% 136% 93% 111% 129% 115%

CYNO 86.5 86.7 66.3 69.9 71.0 78.7 125.9 125.9 132.3 92.1 97.3 120.3 120.3 121.4 102.3

Y/Y growth (%) 17.7% 0.2% (23.5%) (14.5%) 14.4% 25.3% 89.8% 89.8% 89.4% 29.6% 23.6% (4.5%) (4.5%) (8.3%) 11.2%

% of total revenue 119% 106% 60% 51% 45% 53% 74% 82% 81% 46% 40% 40% 53% 49% 35%

ELOS 191.3 177.1 155.5 133.5 124.4 115.8 128.0 128.0 98.0 83.0 81.1 83.0 83.0 67.0 85.7

Y/Y growth (%) (2.7%) (7.4%) (12.2%) (23.2%) (37.1%) (23.3%) (17.7%) (17.7%) (26.6%) (33.3%) (30.0%) (35.2%) (35.2%) (31.6%) 3.3%

% of total revenue 110% 93% 68% 53% 46% 48% 44% 49% 40% 30% 32% 32% 32% 30% 33%

ZLTQ -4.7 11.1 83.9 75.6 56.4 51.2 45.4 45.4 67.6 42.4 38.6 44.6 44.6 33.0 38.8

Y/Y growth (%) NA (336.4%) 657.4% 934.6% 606.4% 1266.6% (45.8%) (45.8%) (10.6%) (24.9%) (24.6%) (1.8%) (1.8%) (51.2%) (8.4%)

% of total revenue NM 43% 31% 109% 63% 71% 61% 15% 85% 40% 33% 31% 10% 27% 21%

LMNS 42.4 25.3 9.2 97.5 94.5

Y/Y growth (%) NA NA 3% 285% NA

% of total revenue 17% 42% 148% 130%

Net Cash/Share 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

(in millions)

CUTR $7.46 $6.65 $6.42 $5.65 $5.72 $5.67 $6.00 $6.06 $6.11 $6.09 $6.34 $5.93 $5.76 $5.98 $5.73

Y/Y growth (%) 3.4% (10.8%) (3.4%) (13.3%) (13.6%) (11.0%) (5.8%) (5.6%) 8.1% 6.5% 11.8% (1.1%) (5.0%) (2.2%) (5.9%)

CYNO $6.81 $6.84 $5.24 $5.36 $5.35 $5.73 $8.34 $9.13 $7.85 $5.35 $4.36 $5.33 $6.22 $5.38 $4.57

Y/Y growth (%) 18.6% 0.5% (23.4%) (17.5%) 8.6% 14.9% 61.5% 74.2% 46.5% (0.1%) (23.9%) (36.1%) (31.8%) (31.5%) (14.5%)

ELOS1 $6.95 $5.14 $4.40 $3.78 $3.52 $3.26 $3.58 $3.61 $2.75 $2.32 $2.25 $2.27 $2.29 $1.83 $2.34

Y/Y growth (%) (2.7%) (26.1%) (14.4%) (24.2%) (36.1%) (23.8%) (18.8%) (17.9%) (27.1%) (34.0%) (31.1%) (36.5%) (36.5%) (33.5%) 0.9%

ZLTQ ($6.01) $11.48 $3.24 $2.22 $1.65 $1.46 $1.27 $1.27 $1.18 $1.18 $1.19 $1.22 $1.22 $0.89 $1.04

Y/Y growth NA (71.7%) (61.7%) (72.6%) (45.8%) (60.8%) (60.8%) (47.1%) (28.6%) (18.3%) (4.2%) (4.2%) (24.6%) (11.6%)

LMNS $1.65 $0.87 $0.36 $3.16 $3.06

Y/Y growth (78.3%) 261.7% N/A

8Maxim Group LLC

Medical Devices

Figure 12: Gross Margins

Gross margin reflects Non-GAAP expenses; Source: Company reports and Maxim Group estimates

Figure 13: Research & Development as % of Total Revenue

R&D as a percent of total revenue reflects Non-GAAP expenses; Source: Company reports and Maxim Group estimates

Figure 14: Days Sales Outstanding


Gross Margins 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

CUTR 60.8% 58.1% 58.0% 51.0% 53.5% 55.4% 57.3% 54.6% 54.5% 57.7% 55.5% 58.6% 56.8% 0.0% 56.5%

y/y change (bps) (222) (272) (7) (525) (423) (129) (301) (340) 352 417 5 126 220 (5,454) (118)

CYNO 55.6% 57.1% 56.7% 57.2% 58.3% 58.3% 58.2% 58.0% 58.3% 58.3% 57.7% 60.4% 58.8% 59.3% 58.0%

y/y change (bps) (1,114) 151 (42) 79 96 169 183 136 117 (1) (56) 218 82 96 (33)

ELOS 46.2% 50.9% 53.2% 53.5% 55.1% 54.7% 53.0% 54.0% 54.9% 50.7% 53.1% 53.7% 53.0% 52.1% 54.2%

y/y change (bps) (3,142) 476 234 3 313 208 (190) 80 145 (447) (157) 76 (100) (280) 352

ZLTQ (41.3%) 51.7% 61.7% 65.6% 67.9% 66.8% 65.5% 66.5% 63.2% 70.1% 72.0% 70.1% 69.4% 70.9% 71.0%

y/y change (bps) NA NM 999 515 649 790 (6) 483 (234) 220 525 454 285 767 88

LMNS 51.0% 53.2% 52.6% 54.0%

y/y change (bps) 160 80

Average 57.8% 61.8% 63.1% 61.4% 62.6% 62.7% 62.3% 62.3% 62.9% 58.0% 61.7% 63.0% 62.5% 47.7% 58.7%

y/y change (bps) (1168) 399 127 (256) (89) 43 (14) (74) 145 (465) (101) 69 23 (1519) 74

Research & Development 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

CUTR 11.1% 11.8% 14.0% 13.2% 8.8% 10.8% 9.0% 10.2% 12.7% 10.9% 11.1% 10.5% 11.4% 15.6% 14.1%

y/y change (bps) 283 64 223 (394) (562) (348) (254) (377) (51) 207 35 150 114 292 327

CYNO 7.9% 8.3% 8.7% 9.1% 8.4% 7.3% 7.2% 8.0% 8.9% 7.1% 8.3% 6.9% 7.7% 9.0% 6.9%

y/y change (bps) 332 33 44 (56) (37) (143) (82) (75) (19) (136) 100 (32) (30) 4 (17)

ELOS 12.3% 13.6% 11.7% 10.2% 11.1% 11.7% 11.1% 11.0% 12.3% 11.5% 11.0% 10.7% 11.4% 10.8% 9.1%

y/y change (bps) 69 123 (182) (238) (63) (32) 19 (74) 218 42 (69) (39) 37 (151) (245)

ZLTQ NA 32.3% 15.4% 19.5% 15.1% 13.7% 18.7% 16.7% 18.8% 14.8% 14.4% 14.5% 15.3% 13.8% 9.2%

y/y change (bps) NA NA (1,690) 354 173 (289) 301 127 (76) (33) 78 (422) (135) (498) (556)

LMNS 6.7% 7.4% 8.4% 8.1% 8.4% 9.5% 6.9%

y/y change (bps) 75 92 112 (122)

Average 13.7% 13.9% 12.6% 12.9% 10.9% 10.4% 9.6% 11.2% 12.3% 10.2% 10.6% 9.1% 10.6% 11.7% 9.2%

y/y change (bps) 244 21 (133) (111) (287) (284) (268) (139) (65) (65) 19 (50) (63) (56) (101)

DSO 2009 2010 2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13 3Q13 4Q13 2013A 1Q14 2Q14

CUTR 23 29 31 26 29 37 36 42 39 35 30 40 47 37 39

y/y change (days) (3) 6 3 0 9 12 10 10 13 6 (7) 4 6 (2) 4

CYNO 59 47 42 39 33 37 37 43 47 69 62 45 59 60 60

y/y change (days) (7) (12) (5) (4) (21) (12) 2 0 8 36 25 8 16 13 (8)

ELOS 92 82 69 73 69 75 63 69 76 74 83 78 77 91 83

y/y change (days) (12) (10) (13) (5) (2) 2 (2) 0 3 5 9 14 8 16 8

ZLTQ 9 26 30 25 36 36 34 27 26 21 26 33 37 27

y/y change (days) 18 17 13 7 7 8 (3) 1 (15) (10) (1) 10 1

LMNS 59 65 60 59 57 58

y/y change (days) (0) (8) (1)

Average 49 46 47 45 44 50 45 52 55 57 56 53 60 61 60

y/y change (days) (11) (3) 1 1 (1) 1 5 5 10 13 6 8 8 6 3

9Maxim Group LLC

Medical Devices

Note: Expenses are modeled on a non-GAAP basis; Source: Company reports and Maxim Group estimates

Cutera IncIncome Statement

(in thousands, except per share data)

2010A 2011A 2012A 2013A 2014E 2015E 2016E

Fiscal year ends Dec 31 1Q13 2Q13 3Q13 4Q13 1Q14A 2Q14A 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E

Revenues

Product and Upgrade revenue $36,180 $42,193 $55,250 $10,333 $13,947 $11,553 $16,805 $52,638 $10,711 $12,166 $12,385 $19,830 $55,092 $12,489 $14,392 $14,379 $23,617 $64,878 $75,753

% of total revenues 67.9% 70.0% 71.5% 64.7% 71.3% 68.7% 75.6% 70.6% 66.2% 68.6% 69.5% 76.9% 71.1% 68.9% 71.3% 71.6% 79.0% 73.5% 75.8%

% change (YoY) 3.7% 16.6% 30.9% (3.6%) 0.1% (16.9%) 0.7% (4.7%) 3.7% (12.8%) 7.2% 18.0% 4.7% 16.6% 18.3% 16.1% 19.1% 17.8% 16.8%

Service revenue 13,231 13,411 17,220 4,444 4,507 4,348 4,390 17,689 4,437 4,553 4,435 4,741 $18,166 $4,543 $4,685 $4,612 $4,898 $18,739 $19,142


% change (YoY) 0.3% 1.4% 28.4% 14.7% 1.6% 1.2% (4.9%) 2.7% (0.2%) 1.0% 2.0% 8.0% 2.7% 2.4% 2.9% 4.0% 3.3% 3.2% 2.2%

Titan and TruSculpt handpiece refills 3,863 4,686 4,807 1,190 1,106 927 1,044 4,267 1,041 1,005 998 1,220 $4,265 $1,098 $1,114 $1,094 $1,367 $4,673 $5,073


% change (YoY) (31.0%) 21.3% 2.6% 5.3% (9.0%) (24.4%) (15.5%) (11.2%) (12.5%) (9.1%) 7.7% 16.9% (0.1%) 5.5% 10.8% 9.6% 12.0% 9.6% 8.6%

Total Operating Revenues $53,274 $60,290 $77,277 $15,967 $19,560 $16,828 $22,239 $74,594 $16,189 $17,724 $17,818 $25,792 $77,523 $18,131 $20,191 $20,085 $29,882 $88,289 $99,968

% change (YoY) (0.8%) 13.2% 28.2% 1.5% (0.2%) (13.4%) (1.3%) (3.5%) 1.4% (9.4%) 5.9% 16.0% 3.9% 12.0% 13.9% 12.7% 15.9% 13.9% 13.2%

Cost of revenue 22,334 25,319 35,079 7,258 8,276 7,492 9,048 32,074 7,171 7,709 7,323 10,317 $32,520 $7,615 $8,016 $7,894 $11,773 $35,298 $39,087

% of total revenue 41.9% 42.0% 45.4% 45.5% 42.3% 44.5% 40.7% 43.0% 44.3% 43.5% 41.1% 40.0% 41.9% 42.0% 39.7% 39.3% 39.4% 40.0% 39.1%

% change (YoY) 6.1% 13.4% 38.5% (5.8%) (9.1%) (13.5%) (5.9%) (8.6%) (1.2%) (6.9%) (2.3%) 14.0% 1.4% 6.2% 4.0% 7.8% 14.1% 8.5% 10.7%

Gross profit 30,940 34,971 42,198 8,709 11,284 9,336 13,191 42,520 9,018 10,015 10,495 15,475 45,003 10,516 12,175 12,192 18,108 52,991 60,880

% change (YoY) (5.2%) 13.0% 20.7% 8.5% 7.6% (13.3%) 2.1% 0.8% 3.5% (11.2%) 12.4% 17.3% 5.8% 16.6% 21.6% 16.2% 17.0% 17.8% 14.9%

Gross margin 58.1% 58.0% 54.6% 54.5% 57.7% 55.5% 59.3% 57.0% 55.7% 56.5% 58.9% 60.0% 58.1% 58.0% 60.3% 60.7% 60.6% 60.0% 60.9%

Operating expenses:

Sales and marketing 23,647 24,711 28,007 6,257 6,972 6,372 7,639 27,240 7,260 7,606 7,608 9,362 31,837 7,434 7,652 7,632 9,652 32,370 33,489


% change (YoY) 1.7% 4.5% 13.3% (14.3%) 0.3% (6.8%) 10.4% (2.7%) 16.0% 9.1% 19.4% 22.6% 16.9% 2.4% 0.6% 0.3% 3.1% 1.7% 3.5%

Research and development 6,274 8,443 7,911 2,020 2,128 2,337 2,334 8,819 2,520 2,507 2,281 2,270 9,577 2,248 2,383 2,330 2,630 9,590 9,797


% change (YoY) 5.0% 34.6% (6.3%) (2.4%) 23.4% 11.9% 15.1% 11.5% 24.8% 17.8% (2.4%) (2.8%) 8.6% (10.8%) (5.0%) 2.2% 15.9% 0.1% 2.2%

General and administrative 7,468 8,342 9,386 1,928 2,005 1,856 2,818 8,607 2,266 2,044 2,085 2,115 8,510 2,212 2,241 2,169 2,570 9,192 9,397


% change (YoY) (2.9%) 11.7% 12.5% (26.6%) (21.1%) (13.2%) 35.5% (8.3%) 17.5% 1.9% 12.3% (25.0%) (1.1%) (2.4%) 9.6% 4.1% 21.5% 8.0% 2.2%

Total operating expenses 37,389 41,496 45,304 10,205 11,105 10,565 12,791 44,666 12,046 12,157 11,974 13,747 49,924 11,894 12,276 12,132 14,851 51,153 52,683

Operating Income (EBIT) (6,449) (6,525) (3,106) (1,496) 179 (1,229) 400 (2,146) (3,028) (2,142) (1,479) 1,728 (4,921) (1,378) (101) 60 3,257 1,838 8,197

% change (YoY) 51.0% 1.2% (52.4%) NM NM NM NM NM NM NM 20.3% NM NM NM NM NM 88.5% NM NM EBIT margin NM NM NM NM 0.9% NM 1.8% NM NM NM NM 6.7% NM NM NM 0.3% 10.9% 2.1% 8.2%

Other income (expense):

Interest and other 583 614 497 135 75 140 105 455 80 138 146 111 474 83 145 151 116 495 509

Income (loss) before taxes (EBT) (5,866) (5,911) (2,609) (1,361) 254 (1,089) 505 (1,691) (2,948) (2,004) (1,333) 1,839 (4,447) (1,295) 44 211 3,373 2,333 8,707

Income taxes (benefit) 2 243 218 -18 90 -169 43 (54) 37 44 55 75 211 75 75 75 75 300 1,741

Implied tax rate NM NM NM 1.3% 35.4% 15.5% 8.5% 3.2% NM NM NM 4.1% NM NM NM 35.5% 2.2% 12.9% 20.0%10.0% 10.0%

Net income (loss)2

($5,868) ($6,154) ($2,827) ($1,343) $164 ($920) $462 ($1,637) ($2,985) ($2,048) ($1,388) $1,764 ($4,658) ($1,370) ($31) $136 $3,298 $2,033 $6,965

% change (YoY) NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 87.0% NM 243%

Net margin NM NM NM NM 0.8% NM 2.1% NM NM NM NM 6.8% NM NM NM 0.7% 11.0% 2.3% 7.0%

Non-GAAP wtd avg dil shares outstanding1

13,538 13,806 14,114 14,408 14,723 14,541 14,016 14,421 14,021 14,231 14,181 14,231 14,166 14,381 14,416 14,481 14,566 14,666 15,166

Non-GAAP Diluted EPS2

($0.43) ($0.45) ($0.20) ($0.09) $0.01 ($0.06) $0.03 ($0.11) ($0.21) ($0.14) ($0.10) $0.12 ($0.33) ($0.10) $0.00 $0.01 $0.23 $0.14 $0.46

% change (YoY) NM NM NM NM NM NM NM NM NM NM NM 300% NM NM NM NM 91.7% NM 229%

GAAP Diluted EPS2

($0.78) ($0.73) ($0.46) ($0.15) ($0.04) ($0.11) ($0.02) ($0.33) ($0.26) ($0.19) ($0.14) $0.08 ($0.51) ($0.14) ($0.04) ($0.02) $0.20 $0.01 $0.33

% change (YoY) NM NM NM NM NM 83.3% NM NM NM NM 27.3% NM 54.9% NM NM NM 150% NM NM

10Maxim Group LLC

Medical Devices

Note: expenses are modeled on a Non-GAAP basis; Non-GAAP EPS excludes stock-based comp and non-recurring items; Source: Company reports and Maxim Group estimates

Cynosure, Inc.Income Statement (Pro-forma)

(in thousands, except per share data)

Fiscal year ends Dec 31 1Q13 2Q13 3Q13 4Q13 1Q14A 2Q14A 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E

Revenues

Product Revenue $55,859 $62,357 $88,362 $128,534 $34,117 $43,022 $50,147 $60,985 $188,271 $49,700 $59,596 $55,204 $68,359 $232,859 $51,136 $73,470 $61,841 $75,888 $262,335 $286,597

% change Y/Y (54.7%) 11.6% 41.7% 45.5% 21.4% 30.7% 61.6% 67.2% 46.5% 45.7% 38.5% 10.1% 12.1% 23.7% 2.9% 23.3% 12.0% 11.0% 12.7% 9.2%

North America Product Revenue $27,876 $27,788 $39,183 $64,899 $16,337 $20,738 $27,025 $32,922 $97,022 $21,609 $27,635 $29,538 $36,873 $115,655 $23,045 $32,720 $33,437 $40,560 $129,762 $141,960

% change Y/Y (67.3%) (0.3%) 41.0% 65.6% 20.5% 26.2% 75.2% 69.0% 49.5% 32.3% 33.3% 9.3% 12.0% 19.2% 6.6% 18.4% 13.2% 10.0% 12.2% 9.4%

Int'l Product Revenue $27,983 $34,569 $49,179 $63,635 $17,780 $22,284 $23,122 $28,063 $91,249 $28,091 $31,961 $25,665 $31,487 $117,204 $28,091 $40,750 $28,404 $35,328 $132,573 $144,637

% change Y/Y (26.4%) 23.5% 42.3% 29.4% 22.3% 35.1% 48.1% 65.1% 43.4% 58.0% 43.4% 11.0% 12.2% 28.4% 0.0% 27.5% 10.7% 12.2% 13.1% 9.1%

Parts, Accessaries & Service Sales $16,966 $19,418 $22,240 $24,959 $6,573 $7,069 $9,373 $9,552 $32,567 $10,366 $11,584 $10,320 $11,489 43,759 $10,262 $13,984 $11,362 $13,695 49,303 53,839

% change Y/Y 14.9% 14.5% 14.5% 12.2% 8.2% 6.3% 55.0% 54.3% 51.2% 57.7% 63.9% 10.1% 20.3% 34.4% (1.0%) 20.7% 10.1% 19.2% 12.7% 9.2%

Royalty revenue NA NA NA NA NA NA $1,172 $4,000 $5,172 $1,938 $1,393 $6,700 $2,100 $12,131 $2,000 $1,500 $500 $500 4,500 4,770

% of total revenues NA NA NA NA NA NA NA NA 0.5% 3.1% 1.9% 9.3% 2.6% 4.2% 3.2% 1.7% 0.7% 0.6% 1.4% 1.4%

% change Y/Y NA NA NA NA NA NA NA NA NA NA NA 472% (47.5%) 135% NA NA (92.5%) (76.2%) 132% 6%

Total Operating Revenues $72,825 $81,775 $110,602 $153,493 $40,690 $50,091 $60,692 $74,537 $226,010 $62,004 $72,573 $72,223 $81,948 $288,749 $63,398 $88,954 $73,703 $90,083 $316,139 $345,206

% change Y/Y (47.9%) 12.3% 35.3% 38.8% 19.1% 26.6% 63.7% 74.7% 47.2% 52.4% 44.9% 19.0% 9.9% 27.8% 2.2% 22.6% 2.0% 9.9% 9.5% 9.2%

Cost of revenue 32,361 35,100 47,937 64,441 16,949 20,892 25,648 $29,549 $93,038 $25,234 $30,505 $29,178 $33,599 $118,516 $25,676 $35,937 $29,629 $36,033 $127,276 $138,428

% of total revenue 44.4% 42.9% 43.3% 42.0% 41.7% 41.7% 42.3% 41.9% 41.2% 41.8% 40.5% 40.4% 41.0% 41.0% 40.5% 40.4% 40.2% 40.0% 40.3% 40.1%

% change Y/Y (32.8%) 8.5% 36.6% 34.4% 15.8% 26.6% 65.9% 65.6% 44.4% 48.9% 46.0% 13.8% 13.7% 27.4% 1.8% 17.8% 1.5% 7.2% 7.4% 8.8%

Gross profit 40,464 46,675 62,665 89,052 23,741 29,199 35,044 44,988 132,972 36,770 42,068 43,045 48,350 170,233 37,722 53,017 44,075 54,050 188,863 206,779

Gross margin 55.6% 57.1% 56.7% 58.0% 58.3% 58.3% 57.7% 60.4% 58.8% 59.3% 58.0% 59.6% 59.0% 59.0% 59.5% 59.6% 59.8% 60.0% 59.7% 59.9%

Operating expenses:

Sales and marketing 36,413 31,103 38,313 46,688 12,379 14,231 17,364 20,149 64,123 $20,122 $20,867 $20,656 $22,126 83,771 $19,907 $23,813 $19,826 $23,241 86,788 93,551

% of total revenues 50.0% 38.0% 34.6% 30.4% 30.4% 28.4% 28.6% 27.0% 28.4% 32.5% 29.2% 28.6% 27.0% 29.0% 31.4% 26.8% 26.9% 25.8% 27.5% 27.1%

% change Y/Y (27.3%) (14.6%) 23.2% 21.9% 9.1% 22.0% 55.0% 61.5% 37.3% 62.5% 46.6% 19.0% 9.8% 30.6% (1.1%) 14.1% (4.0%) 5.0% 3.6% 7.8%

Research and development 5,781 6,762 9,634 12,224 3,640 3,536 5,033 5,123 17,332 5,574 4,999 5,489 5,572 21,634 5,642 5,871 5,307 5,675 22,495 23,474


% change Y/Y (10.4%) 17.0% 42.5% 26.9% 16.7% 6.2% 86.1% 67.0% 41.8% 53.1% 41.4% 9.1% 8.8% 24.8% 1.2% 17.4% (3.3%) 1.8% 4.0% 4.4%

Amortization of intangibles 830 1,368 214 283 451 1,166 2,114 713 713 713 713 2,852 711 712 711 712 2,846 2,762

% of total revenues NA NA 0.8% 0.9% 0.5% 0.6% 0.7% 1.6% 0.9% 1.1% 0.8% 0.8% 0.8% 1.0% 0.8% 0.8% 0.8% 0.8% 0.9% 0.8%

% change Y/Y NA NA NA 64.8% (37.4%) NA 31.9% 240.9% 55% 233% 152% 58% (39%) 35% (0%) (0%) (0%) (0%) (0.2%) (2.9%)

General and administrative 12,405 10,012 11,550 14,077 3,841 3,929 5,633 6,305 19,708 5,458 5,211 5,633 5,900 22,203 5,389 5,515 5,528 5,945 22,377 23,440


% change Y/Y (17.2%) (19.3%) 15.4% 21.9% 19.7% 18.7% 71.8% 47.3% 40.0% 42.1% 32.6% 0.0% (6.4%) 12.7% (1.3%) 5.8% (1.9%) 0.8% 0.8% 4.7%

Total operating expenses 54,598 47,877 60,327 74,357 20,074 21,979 28,481 32,743 103,277 31,867 31,790 32,491 34,312 130,460 31,649 35,911 31,372 35,574 134,506 143,227


% change Y/Y (23.7%) (12.3%) 26.0% 23.3% 11.4% 17.9% 62.5% 62.4% 38.9% 58.7% 44.6% 14.1% 4.8% 26.3% (0.7%) 13.0% (3.4%) 3.7% 3.1% 6.5%

Operating Income (EBIT) (14,133) (1,202) 2,338 14,695 3,667 7,220 6,563 12,245 29,695 4,903 10,278 10,554 14,038 39,773 6,073 17,105 12,703 18,476 54,357 63,552

% change Y/Y (170.7%) NM NM 529% 141.1% 63% 60% 162.8% 102.1% 33.7% 42.4% 60.8% 14.6% 33.9% 23.9% 66.4% 20.4% 31.6% 36.7% 16.9%

EBIT margin NM NM 2.1% 9.6% 9.0% 14.4% 10.8% 16.4% 13.1% 7.9% 14.2% 14.6% 17.1% 13.8% 9.6% 19.2% 17.2% 20.5% 17.2% 18.4%


Interest income (expense), net 523 163 125 60 32 23 25 (103) (23) (349) (343) (343) (343) (1,378) (384) (384) (384) (384) (1,536) (1,689)

Gain on sale of investment - - - - - - - - - - - - - - - - - - - -

Other (expense) income, net 693 (225) (201) 532 (357) (46) 721 (5) 313 66 213 (285) (350) (355) 66 (408) (284) (353) (979) (1,057)

Income (loss) before taxes (EBT) (12,917) (1,264) 2,262 15,287 3,342 7,197 7,309 12,137 29,985 4,620 10,148 9,926 13,345 38,039 5,755 16,314 12,035 17,739 51,842 60,805

Income taxes (benefit) (4,650) 722 994 2,164 592 2,159 2,047 3,398 8,196 374 3,044 2,978 4,004 10,399 1,957 5,547 4,092 6,031 17,626 20,674

Implied tax rate 36.0% NM 43.9% 14.2% 17.7% 30.0% 28.0% 28.0% 27.3% 8.1% 30.0% 30.0% 30.0% 27.3% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%

Minority interest in income from subsidiary - - - - - - - - - - - - - - - - - - - -

Net income (loss)2

(8,268) (1,986) 1,268 13,123 2,750 5,038 5,262 8,739 21,789 4,246 7,104 6,948 9,342 27,640 3,798 10,767 7,943 11,707 34,216 40,132

% change Y/Y (157.3%) (76.0%) (163.8%) 935.1% 104% 54% 28% 99.0% 66.0% 54.4% 41.0% 32.0% 6.9% 26.9% (10.5%) 51.6% 14.3% 25.3% 23.8% 17.3%

Net margin NM NM 1.1% 8.5% 6.8% 10.1% 8.7% 11.7% 9.6% 6.8% 9.8% 9.6% 11.4% 9.6% 6.0% 12.1% 10.8% 13.0% 10.8% 11.6%

Diluted wtd avg shares outstanding1

12,709 12,667 12,655 13,790 16,860 17,221 22,331 22,565 19,325 22,568 22,373 22,423 22,423 22,447 22,568 22,718 22,868 22,868 22,756 23,056

Adjusted Diluted EPS2

($0.65) ($0.16) $0.10 $0.95 $0.16 $0.29 $0.23 $0.39 $1.13 $0.19 $0.32 $0.31 $0.42 $1.23 $0.17 $0.47 $0.35 $0.51 $1.50 $1.74

% change Y/Y (158%) NM NM 850% 60.0% 16.0% (23.3%) 34.5% 18.9% 18.8% 10.3% 34.8% 7.7% 8.8% (10.5%) 46.9% 12.9% 21.4% 22.0% 16.0%

GAAP Diluted EPS2

($1.79) ($0.44) ($0.23) $0.77 $0.07 ($0.54) ($0.06) $0.33 ($0.09) $0.03 $0.20 $0.22 $0.33 $0.78 $0.01 $0.32 $0.26 $0.42 $1.02 $1.26

% change Y/Y NM (75.4%) NM (435%) NM NM NM 37.5% NM (57.1%) NM NM 0.0% NM (67%) NM NM 27.3% 30.8% 23.5%

2013A2009A 2010A 2011A 2012A 2014E 2015E 2016E

11Maxim Group LLC

Medical Devices


Syneron Medical Ltd.

Income Statement 2010-2015E

($ in thousands)

Fiscal Year ends December 31 1Q13 2Q13 3Q13 4Q13A 1Q14A 2Q14A 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E

Professional Aesthetic Devices (PAD) $185,625 $208,280 $236,516 $53,811 $59,268 $54,582 $58,784 $226,445 $56,813 $64,618 $57,748 $63,487 $242,665 $61,188 $69,464 $61,097 $68,390 $260,139 $278,349

% of total revenue 97.9% 91.2% 89.7% 87.9% 86.2% 87.1% 91.4% 88.1% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Y/Y Chg. 8.5% 12.2% 13.6% (4.8%) (3.1%) 2.6% (10.4%) (4.3%) 5.6% 7.7% 5.8% 8.0% 7.2% 7.7% 7.5% 5.8% 7.7% 7.2% 7.0%

Emerging Business Units (EBU) $3,904 $20,041 $27,106 $7,393 $9,497 $8,082 $5,498 $30,470 NA NA NA NA NA NA NA NA NA NA NA

% of total revenue 2.1% 8.8% 10.3% 12.1% 13.8% 12.9% 8.6% 11.9% NA NA NA NA NA NA NA NA NA NA NA

Y/Y Chg. 30.3% 413.4% 35.3% 20.9% 37.1% 17.0% (23.2%) 12.4% NA NA NA NA NA NA NA NA NA NA NA

Total revenue $189,528 $228,321 $263,622 $61,204 $68,765 $62,664 $64,282 $256,915 $56,813 $64,618 $57,748 $63,487 $242,665 $61,188 $69,464 $61,097 $68,390 $260,139 $278,349

Y/Y Chg. 8.8% 20.5% 15.5% (2.3%) 1.0% 4.2% (11.7%) (2.5%) (7.2%) (6.0%) (7.8%) (1.2%) (5.5%) 7.7% 7.5% 5.8% 7.7% 7.2% 7.0%

Cost of Revenues 93,047 106,752 121,137 27,576 33,933 29,380 29,733 120,622 27,188 29,609 26,564 28,823 112,184 28,269 31,745 28,044 30,981 119,038 126,927

Gross Profit 96,481 121,569 142,485 33,628 34,832 33,284 34,549 136,293 29,625 35,009 31,184 34,664 130,482 32,919 37,719 33,054 37,409 141,101 151,422

Gross Margin 50.9% 53.2% 54.0% 54.9% 50.7% 53.1% 53.7% 53.0% 52.1% 54.2% 54.0% 54.6% 53.8% 53.8% 54.3% 54.1% 54.7% 54.2% 54.4%

Research and development, net 25,711 26,807 28,990 7,549 7,920 6,895 6,852 29,216 6,147 5,858 5,833 6,031 23,869 6,486 6,412 6,476 6,596 25,970 27,000

% of total revenue 13.6% 11.7% 11.0% 12.3% 11.5% 11.0% 10.7% 11.4% 10.8% 9.1% 10.1% 9.5% 9.8% 10.6% 9.2% 10.6% 9.6% 10.0% 9.7%

Y/Y Chg. 19.7% 4.3% 8.1% 18.6% 4.9% (2.0%) (14.8%) 0.8% (18.6%) (26.0%) (15.4%) (12.0%) (18.3%) 5.5% 9.4% 11.0% 9.4% 8.8% 4.0%

Sales and Marketing 55,089 63,906 74,019 19,959 21,574 18,441 20,696 80,670 17,040 19,132 17,613 18,284 72,069 18,540 20,700 18,574 19,559 77,373 81,834

% of total revenue 29.1% 28.0% 28.1% 32.6% 31.4% 29.4% 32.2% 31.4% 30.0% 29.6% 30.5% 28.8% 29.7% 30.3% 29.8% 30.4% 28.6% 29.7% 29.4%

Y/Y Chg. (17.3%) 16.0% 15.8% 6.7% 10.3% 5.3% 13.5% 9.0% (14.6%) (11.3%) (4.5%) (11.7%) (10.7%) 8.8% 8.2% 5.5% 7.0% 7.4% 5.8%

General and Administrative 21,496 26,558 28,275 5,252 4,224 5,884 5,473 20,833 4,824 6,861 6,064 5,841 23,589 5,262 5,821 5,743 5,403 22,229 23,381

% of total revenue 11.3% 11.6% 10.7% 8.6% 6.1% 9.4% 8.5% 8.1% 8.5% 10.6% 10.5% 9.2% 9.7% 8.6% 8.4% 9.4% 7.9% 8.5% 8.4%

Y/Y Chg. 13.2% 23.5% 6.5% (32.4%) (42.1%) (11.3%) (16.7%) (26.3%) (8.1%) 62.4% 3.1% 6.7% 13.2% 9.1% (15.2%) (5.3%) (7.5%) (5.8%) 5.2%

Operating Expenses 102,296 117,271 131,284 32,760 33,718 31,220 33,021 130,719 28,011 31,851 29,509 30,156 119,527 30,288 32,933 30,793 31,558 125,572 132,216

Income (loss) from operations (5,815) 4,298 11,201 868 1,114 2,064 1,528 5,574 1,614 3,158 1,675 4,508 10,954 2,631 4,786 2,261 5,851 15,529 19,206

Y/Y Chg. nm nm 161% 25.1% (64%) 21.6% (73.2%) (50.2%) 86% 183% (19%) 195% 96.5% 63.0% 51.6% 35.0% 29.8% 41.8% 23.7%

Operating Margin NM 1.9% 4.2% 1.4% 1.6% 3.3% 2.4% 2.2% 2.8% 4.9% 2.9% 7.1% 4.5% 4.3% 6.9% 3.7% 8.6% 6.0% 6.9%

Financial income, net 761 1,050 927 (228) (147) 77 324 26 164 (155) 172 172 354 166 (160) 179 179 364 375

% of average cash 0.4% 0.6% 0.7% (0.8%) (0.6%) 0.4% 1.6% 0.0% 0.9% (0.8%) 0.7% 0.6% 0.4% 0.2% (0.2%) 0.2% 0.2% 0.3% 0.3%

Income (Loss) before taxes EBT (5,054) 5,348 12,128 640 967 2,141 1,852 5,600 1,778 3,003 1,847 4,680 11,308 2,797 4,626 2,440 6,030 15,893 19,581

Tax (provision) benefit 3,380 3,827 5,609 88 297 620 (2,214) (1,209) 450 517 462 1,156 2,585 727 1,203 634 1,568 4,132 5,091

Tax Rate NM NM 46.2% 13.8% 30.7% 29.0% NM NM 25.3% 17.2% 25.0% 24.7% 22.9% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0%

Non-Controlling Interest 1,799 955 998 80 20 - 60 160 - - 92 234 326 120 199 105 259 683 842

% of EBT (35.6%) 17.9% 8.2% 12.5% 2.1% 0.0% 5.0% 2.9% 5.0% 5.0% 5.0% 5.0% 2.9% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%

Net income (loss) (6,635) 2,476 7,517 632 690 1,521 4,126 6,969 1,328 2,486 1,478 3,758 9,049 2,190 3,623 1,910 4,721 12,444 15,332

Y/Y Chg. NM NM 204% 15% (63%) 50.4% 0.6% (7.3%) 110% 260% (3%) (9%) 29.8% 64.9% 45.7% 29.3% 25.7% 37.5% 23.2%

Net Margin NM 1.1% 2.9% 1.0% 1.0% 2.4% 6.4% 2.7% 2.3% 3.8% 2.6% 5.9% 3.7% 3.6% 5.2% 3.1% 6.9% 4.8% 5.5%

Pro forma diluted O/S 34,483 35,351 35,475 35,621 35,786 36,064 36,523 36,204 36,653 36,670 36,695 36,720 36,685 36,685 36,685 36,685 36,685 36,685 36,835

Non-GAAP EPS (pro forma) ($0.19) $0.07 $0.21 $0.02 $0.02 $0.04 $0.11 $0.19 $0.04 $0.07 $0.04 $0.10 $0.25 $0.06 $0.10 $0.05 $0.13 $0.34 $0.42

Y/Y Chg. NM NM 200% 0.0% NM 33.3% 0.0% (10%) 100.0% 250% 0.0% NM 31.6% 50.0% 42.9% 25.0% 30.0% 36.0% 23.5%

GAAP EPS (including FAS-123R) ($0.74) ($1.35) ($0.04) ($0.07) ($0.12) ($0.04) $0.27 $0.04 ($0.03) ($0.01) ($0.03) $0.03 ($0.02) $0.00 $0.04 ($0.01) $0.06 $0.08 $0.16

Y/Y Chg. NM NM NM NM NM NM NM NM NM NM NM (88.9%) NM NM NM NM 100% NM 100%

2015E 2016E2010 2011 2012 2013A 2014E

12Maxim Group LLC

Medical Devices


Zeltiq Aesthetics Inc.

Income Statement 2011-2015E

($ in thousands)

Fiscal Year ends December 31 2011 2012 1Q 13A 2Q 13A 3Q 13A 4Q 13A 2013A 1Q 14A 2Q 14A 3Q 14E 4Q 14E 2014E 1Q 15E 2Q 15E 3Q 15E 4Q 15E 2015E 2016E

Systems Revenues 46,552 39,145 11,082 12,988 15,900 21,389 61,359 14,461 25,383 18,546 22,636 81,026 18,140 25,632 22,930 27,614 94,315 94,058

% of total revenue 68.3% 51.4% 55.5% 49.3% 54.0% 59.7% 55.0% 46.7% 53.9% 47.0% 48.0% 49.2% 46.7% 51.6% 49.0% 45.2% 48.1% 40.6%

Y/Y Chg. 120.7% (15.9%) 22.8% 8.3% 86.9% 122.4% 56.7% 30.5% 95.4% 16.6% 5.8% 32.1% 25.4% 1.0% 23.6% 22.0% 16.4% (0.3%)

Procedure Fees 21,592 37,049 8,900 13,350 13,565 14,452 50,267 16,514 21,678 20,904 24,492 83,588 20,689 24,018 23,849 33,414 101,969 137,881

% of total revenue 31.7% 48.6% 44.5% 46.0% 40.3% 45.0% 53.3% 46.1% 53.0% 52.0% 50.8% 53.3% 48.4% 51.0% 54.8% 51.9% 59.4%

Y/Y Chg. 394.4% 71.6% 6.2% 30.0% 44.0% 60.9% 35.7% 85.6% 62.4% 54.1% 69.5% 66.3% 25.3% 10.8% 14.1% 36.4% 22.0% 35.2%

Revenues $68,144 $76,194 $19,982 $26,338 $29,465 $35,841 $111,626 $30,975 $47,061 $39,450 $47,128 $164,614 $38,828 $49,649 $46,778 $61,028 $196,284 $231,939

Y/Y Chg. 0.0% 11.8% 14.8% 18.3% 64.4% 92.7% 46.5% 55.0% 78.7% 33.9% 31.5% 47.5% 25.4% 5.5% 18.6% 29.5% 19.2% 18.2%

Cost of Revenues 26,101 25,507 7,348 7,878 8,236 10,727 34,189 9,016 13,660 11,677 13,761 48,115 11,221 14,150 12,864 16,844 55,079 64,711

% of total revenue 38.3% 33.5% 36.8% 29.9% 28.0% 29.9% 30.6% 29.1% 29.0% 29.6% 29.2% 29.9% 28.9% 28.5% 27.5% 27.6% 28.2% 27.9%

Y/Y Chg. 112.3% (2.3%) 22.6% 10.2% 38.4% 67.3% 34.0% 22.7% 73.4% 41.8% 28.3% 40.7% 24.5% 3.6% 10.2% 22.4% 14.5% 17.5%

Gross Profit 42,043 50,687 12,634 18,460 21,229 25,114 77,437 21,959 33,401 27,772 33,367 116,499 27,607 35,499 33,914 44,184 141,205 167,228

Gross Margin 61.7% 66.5% 63.2% 70.1% 72.0% 70.1% 69.4% 70.9% 71.0% 70.4% 70.8% 70.8% 71.1% 71.5% 72.5% 72.4% 71.9% 72.1%Operating expenses

Research and development 10,488 12,694 3,749 3,898 4,257 5,187 17,091 4,270 4,350 4,892 5,891 19,403 4,892 5,015 5,192 5,123 20,222 21,802

% of total revenue 15.4% 16.7% 18.8% 14.8% 14.4% 14.5% 15.3% 13.8% 9.2% 12.4% 12.5% 11.8% 12.6% 10.1% 11.1% 8.4% 10.1% 9.4%

Y/Y Chg. 10.3% 15.7% 73.8% 49.2% 34.6% 13.9% 11.6% 14.9% 13.6% 13.5% 14.6% 15.3% 6.1% (13.0%) 4.2% 7.8%

Sales and marketing 28,953 51,168 12,542 14,625 15,487 20,531 63,185 20,187 21,052 20,829 22,150 84,219 20,307 24,725 21,986 24,594 91,613 105,764

% of total revenue 42.5% 67.2% 62.8% 55.5% 52.6% 57.3% 56.6% 65.2% 44.7% 52.8% 47.0% 51.2% 52.3% 49.8% 47.0% 40.3% 46.7% 45.6%

Y/Y Chg. (13.5%) 2.6% 42.3% 78.0% 23.5% 61.0% 43.9% 34.5% 7.9% 33.3% 0.6% 17.4% 5.6% 11.0% 8.8% 15.4%

General and administrative 11,299 16,866 3,808 3,626 4,374 4,701 16,509 4,713 5,234 5,010 4,619 19,576 4,582 5,362 4,865 4,832 19,641 20,875

% of total revenue 16.6% 22.1% 19.1% 13.8% 14.8% 13.1% 14.8% 15.2% 11.1% 12.7% 9.8% 11.9% 11.8% 10.8% 10.4% 7.9% 10.0% 9.0%

Y/Y Chg. (1.2%) (35%) 16.3% 27.2% (2.1%) 23.8% 44.3% 14.5% (1.8%) 18.6% (2.8%) 2.4% (2.9%) 4.6% 0.3% 6.3%

Total O perating Expenses 50,740 80,728 20,099 22,149 24,118 30,419 96,785 29,170 30,636 30,731 32,660 123,197 29,781 35,102 32,043 34,549 131,476 148,441

% of total revenue 74.5% 106% 101% 84.1% 81.9% 84.9% 86.7% 94% 65.1% 77.9% 69.3% 74.8% 77% 70.7% 68.5% 56.6% 67.0% 64%

Y/Y Chg. (7.6%) (4%) 41.1% 62.6% 19.9% 45.1% 38.3% 27.4% 7.4% 27.3% 2.1% 14.6% 4.3% 5.8% 6.7% 12.9%

O perating Income (EBIT) (8,697) (30,041) (7,465) (3,689) (2,889) (5,305) (19,348) (7,211) 2,765 (2,959) 707 (6,698) (2,174) 397 1,871 9,635 9,729 18,787

Y/Y Chg. (32.7%) NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 93.1%

EBIT Margin NM NM NM NM NM NM NM NM 5.9% NM 1.5% NM NM 0.8% 4.0% 15.8% 5.0% 8.1%


Interest Expense (93) 125 24 19 17 20 80 19 14 12 16 61 19 19 17 16 71 107

% of total debt 30.0% NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

Other income (expense), net (765) (87) (34) 106 90 (59) 103 (66) (83) (83) (83) (315) (66) (82) (82) 81 (321) (337)

Earning (Loss) before taxes (EBT) (9,555) (30,003) (7,475) (3,564) (2,782) (5,344) (19,165) (7,258) 2,696 (3,030) 640 (6,952) (2,221) 334 1,806 9,732 9,651 18,556

Provision for income taxes 48 140 7 43 29 61 140 79 (73) (55) (50) (99) (400) 60 325 1,752 1,737 3,340

Implied rate 0 0 (0.1%) (1.2%) (1.0%) 1.0% (0.7%) (0.2%) 0.6% 0.6% 0.6% 1.4% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%

Net Gain (Loss) (9,603) (30,143) (7,482) (3,607) (2,811) (5,405) (19,305) (7,337) 2,769 (2,975) 690 (6,853) (1,822) 274 1,481 7,980 7,914 15,216

Cumulative dividends on preferred stock (5,099) - - - - - - - - - - - - - - - - -

GAAP Net Income (14,702) (30,143) (7,482) (3,607) (2,811) (5,405) (19,305) (7,337) 2,769 (2,975) 690 (6,853) (1,822) 274 1,481 7,980 7,914 15,216

Y/Y Chg. NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 92.3%

Basic and Diluted Shares Outstanding 7,506 34,776 35,890 36,045 36,206 36,686 36,209 37,216 37,441 37,616 37,716 37,497 37,216 37,466 37,641 37,741 37,516 38,016

GAAP EPS ($1.96) ($0.87) ($0.21) ($0.10) ($0.08) ($0.15) ($0.53) ($0.20) $0.07 ($0.08) $0.02 ($0.18) ($0.05) $0.01 $0.04 $0.21 $0.21 $0.40

Y/Y Chg. NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 90.5%

Non-GAAP EPS ($6.28) ($0.78) ($0.19) ($0.08) ($0.05) ($0.10) ($0.42) ($0.16) $0.14 ($0.02) $0.07 $0.03 ($0.02) $0.03 $0.06 $0.24 $0.32 $0.50

Y/Y Chg. NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 243% NM 56.3%

13Maxim Group LLC

Medical Devices

DISCLOSURES

Oct 2011 Jan 2012 Apr 2012 Jul 2012 Oct 2012 Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014

18

16

14

12

10

8

6

Closing Price Target Price

Cutera Inc Rating History as of 09/22/2014

Buy:$9.0011/08/11

Buy:$10.0002/14/12

Buy:$12.0004/23/12

Buy:$16.0002/12/13

Buy:$14.0005/07/13

Buy:$13.0011/05/13

powered by: BlueMatrix


40

35

30

25

20

15

10

5


Cynosure Inc Rating History as of 09/22/2014

Buy:$22.0002/15/12

Buy:$26.0004/23/12

Buy:$33.0007/25/12

Buy:$39.0010/24/12

Buy:$35.0005/07/14



20

18

16

14

12

10

8

6


Syneron Medical Ltd. Rating History as of 09/22/2014

Buy:$16.0008/15/13


14Maxim Group LLC

Medical Devices


35

30

25

20

15

10

5

0


ZELTIQ Aesthetics Inc Rating History as of 09/22/2014

I:Buy:$7.0005/08/13

Buy:$9.0008/01/13

Buy:$12.0009/18/13

Buy:$16.0010/31/13

Buy:$25.0001/21/14

Buy:$30.0007/30/14


Maxim Group LLC Ratings Distribution As of: 09/22/14

% of CoverageUniverse with Rating

% of Rating for which FirmProvided Banking Services

in the Last 12 months

BuyFundamental metrics and/or identifiable catalysts exist such that weexpect the stock to outperform its relevant index over the next 12 months.

82% 33%

HoldFundamental metrics are currently at, or approaching, industry averages.Therefore, we expect this stock to neither significantly outperform norunderperform its relevant index over the next 12 months.

17% 18%

SellFundamental metrics and/or identifiable catalysts exist such that weexpect the stock to underperform its relevant index over the next 12months.

*See valuation section for company specific relevant indices

2% 0%

I, Anthony Vendetti, attest that the views expressed in this research report accurately reflect my personal views about the subject security andissuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressedin this research report.

The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors,including the firm’s total revenues, a portion of which is generated by investment banking activities.

Maxim Group makes a market in Cutera Inc, Cynosure Inc, Syneron Medical Ltd. and ZELTIQ Aesthetics Inc

Maxim Group received compensation for investment banking services from Syneron Medical Ltd. in the past 12 months.

Maxim Group expects to receive or intends to seek compensation for investment banking services from Cutera Inc, Cynosure Inc,Syneron Medical Ltd. and ZELTIQ Aesthetics Inc in the next 3 months.

CUTR: For Cutera, Inc., we use the Russell 3000 Index (RAY) as its relevant index.CYNO: For Cynosure, Inc., we use the Russell 3000 Index (RAY) as its relevant index.ELOS: For Syneron Medical, Inc., we use the Russell 3000 Index (RAY) as its relevant index.ZLTQ: For Zeltiq Aesthetics, Inc., we use the Russell 3000 Index (RAY) as its relevant index.

Valuation MethodsCUTR: Our 12-month target price for Cutera Inc. is based on EV/revenues multiples compared to its peers and is supported by our DCF valuationanalysis.CYNO: Our 12-month target price for Cynosure Inc. is based on EV/revenues multiples compared to its peers and is supported by our DCFvaluation analysis.

15Maxim Group LLC

Medical Devices

ELOS: Our 12-month target price for Syneron Medical, Inc. is based on EV/revenues multiples compared to its peers and is supported by ourDCF valuation analysis.ZLTQ: Our 12-month target price for Zeltiq Aesthetics Inc. is based on EV/revenues multiple comparisons and is supported by a 10-yeardiscounted cash-flow analysis.

Price Target and Investment RisksCUTR: Aside from general market and economic risks, other risks particular to our Cutera, Inc. price target and rating include: (1) if Cutera isunable to roll out new products, it may not meet our revenue estimates; (2) penetration of the podiatrist market with the company’s GenesisPluscould be more difficult than we anticipate; (3) growth of the company’s GenesisPlus and cosmeceuticals business could slow; and (4) if Cuteramisses revenue estimates or its margins contract, it may fall short of our EPS estimates, potentially causing the stock price to decline.CYNO: Aside from general market and other economic risks, risks particular to our Cynosure, Inc. price target and rating include: (1) any large-scale distributions by El.En. could pressure the stock price; (2) Cynosure’s sales and earnings could be negatively impacted if it and El.En. wereto change or end its distribution agreement; (3) the integration of recent acquisitions could distract management, or synergies may not be realized;and (4) if the company misses our revenue and EPS estimates, and/or Street consensus during any given time period, the stock price could benegatively impacted.ELOS: Aside from general market and economic risks, other risks particular to our Syneron Medical Ltd. price target and recommendation include:(1) sales of the company’s products fail to meet our expectations; (2) the release of some of the company’s new products could be delayed; (3)integration of acquisitions could take longer than expected and distract management; and (4) Syneron misses our revenue and EPS estimates.ZLTQ: Aside from general market and other economic risks, risks particular to our Zeltiq Aesthetics Inc. price target and recommendation include:(1) the lack of a diversified revenue stream makes ZLTQ particularly susceptible to a decline in sales of the CoolSculpting system and procedures;(2) demand for professional devices is highly correlated with consumer confidence, disposable income, macroeconomic growth, and the availabilityof credit; a slowdown in economic growth or a tightening of credit markets could negatively impact the company’s performance; (3) financial resultsmay vary and fluctuate, leading to difficulties to forecast future revenues due to uncertain competition in the market; (4) further FDA clearancesand approvals are required for the CoolSculpting System; (5) data from well-designed controlled studies may be needed to better determine howwell CoolSculpting works; and (6) the company may need to diversify internationally in order to remain competitive.

RISK RATINGS

Risk ratings take into account both fundamental criteria and price volatility.

Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balancesheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility:Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with thepossibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors.

High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cashflow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price Volatility: The price volatility ofcompanies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individualinvestors.

Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cashflow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average.

Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positivecash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.

DISCLAIMERS

Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk andmore volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not besuitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred toherein, based on their specific investment objectives, financial status and risk tolerance.

This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidentialfor the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, withoutthe prior written consent of Maxim Group, LLC (“Maxim”).

Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makesno representation as to their accuracy or completeness. The aforementioned sentence does not apply to the disclosures required by NASD Rule2711. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability doesnot apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon insubstitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with,and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analyticalmethods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention ofany recipient of this report.

16Maxim Group LLC

Medical Devices

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, ismade regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publicationby Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall aswell as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of suchsecurities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securitiesrecommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligationsof any insured depository institution; and 3) are subject to investment risks, including the possible loss of principal invested. Indeed, in the caseof some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to paymore money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

17Maxim Group LLC

Medical Devices

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medical devices - maxim group · 2014-10-02 · believe that there is a huge market opportunity in...

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