PR Newswire | Nov 12, 2020 04:06PM EST

11/12 15:05 CST

BIOLASE Reports Strong Sequential Revenue Growth In Third Quarter 2020Reopening of Dental Practices Drives Sequential Revenue GrowthClinically Proven Product Portfolio Reduces Potential Risk of Infectious Pathogens; Creates Significant Growth Opportunities as Dental Professionals Seek Safer Technologies to Treat Patients FOOTHILL RANCH, Calif., Nov. 12, 2020

FOOTHILL RANCH, Calif., Nov. 12, 2020 /PRNewswire/ -- BIOLASE, Inc. (NASDAQ: BIOL), the global leader in dental lasers, today announced its financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights:

* U.S. laser revenue increased 16% year over year * U.S. consumables and other revenue increased 25% year over year * New customers represented over 90% of U.S. laser sales in the quarter * Total revenue more than doubled sequentially, while down 24% year over year * Operating expenses decreased 24% year over year * Significantly strengthened balance sheet with an $18.0 million equity raise

"Our significantly improved third quarter revenue was driven by several factors, including 95% of dental offices having reopened in the United States, dental procedure levels having reached 70-80% of their pre-Covid-19 levels, and the fact that our product portfolio reduces the risk of infectious pathogens," said Todd Norbe, President and Chief Executive Officer. "Our Epic Hygiene dental laser meets the Centers for Disease Control and Prevention (CDC) guidelines to minimize the risk of COVID-19, while our all-tissue Waterlase dental lasers create 98% less aerosol than traditional dental handpieces, meeting the American Dental Association's recommendation of reduced aerosol production to limit the spread of infectious pathogens, such as COVID-19. These unique attributes meet the rising needs of both dentists and patients as they look for solutions that allow them to provide and receive dental treatment in the safest way possible."

2020 Third Quarter Financial Results

Net revenue for the third quarter of 2020 was $6.5 million, an increase of 124% sequentially from second quarter revenue of $2.9 million, and a decrease of 24% compared to net revenue of $8.6 million for the third quarter of 2019. U.S. laser revenue was $2.7 million in the third quarter of 2020, up 16% when compared to U.S. laser revenue of $2.3 million for the third quarter of 2019. This increase is due to higher average selling prices in the third quarter of 2020 than in 2019. U.S. consumables and other revenue for the third quarter of 2020, which consists of revenue from consumable products such as disposable tips, increased 25% compared to the third quarter of 2019. Outside the U.S., laser revenue declined 64% to $1.0 million for the third quarter of 2020 compared to $2.8 million for the third quarter of 2019.

Gross margin for the third quarter of 2020 was 35%, compared to 34% for the third quarter of 2019. The higher gross margin reflects higher average U.S. selling prices of our lasers and a higher percentage of U.S. sales, partially offset by a decline in revenues relative to our fixed costs. Total operating expenses were $5.9 million for the third quarter of 2020 compared to $7.9 million for the third quarter of 2019, a decrease of approximately 24%. Operating loss for the third quarter of 2020 was $3.7 million, compared to an operating loss of $4.9 million in the third quarter of 2019, a decrease of 25% year over year. Net income for the third quarter of 2020 was $12,000 and less than $0.01 per share before a deemed dividend on preferred stock of $17.4 million, compared to a net loss of $5.5 million, or $0.25 per share, for the third quarter of 2019. Net loss after the deemed dividend was $17.4 million or $0.21 per share for the three months ended September 30, 2020.

Cash, cash equivalents, and restricted cash totaled $19.2 million as of September 30, 2020, and included proceeds from the rights offering completed in July.

Use of Non-GAAP Measures

The Reconciliation of GAAP Net Loss to Adjusted EBITDA 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 Adjusted EBITDA and Adjusted EBITDA per share.

Adjusted EBITDA loss for the third quarter of 2020 was $2.5 million, or $0.03 per share, compared with Adjusted EBITDA loss of $2.7 million, or $0.12 per share, for the third quarter of 2019.

Conference Call Information

BIOLASE, Inc. will host a conference call today at 4:30 p.m. Eastern Time to discuss its operating results for the third quarter ended September 30, 2020, and to answer questions. For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the U.S./Canada is 800-367-2403. For international participants outside the U.S./Canada, the dial-in number is 334-777-6978. For all callers, refer to the Conference ID 9286776. To access the live webcast, visit the Investor Relations section of the BIOLASE website at www.biolase.com and see "Investor Events".

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

About BIOLASE

BIOLASE is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine. BIOLASE's products advance the practice of dentistry and medicine for patients and healthcare professionals. BIOLASE's proprietary laser products incorporate approximately patented 259 and 41 patent-pending technologies designed to provide biologically clinically superior performance with less pain and faster recovery times. BIOLASE's innovative products provide cutting-edge technology at competitive prices to deliver superior results for dentists and patients. BIOLASE's principal products are revolutionary dental laser systems that perform a broad range of dental procedures, including the treatment of periodontitis, and a full line of dental imaging equipment. BIOLASE has sold over 41,500 laser systems to date in over 80 countries around the world. Laser products under development address BIOLASE's core dental market and other adjacent medical and consumer applications.

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

BIOLASE(r), Waterlase(r) and Waterlase iPlus(r) are registered trademarks of BIOLASE, Inc.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements, as that term is defined in the Private Litigation Reform Act of 1995, that involve significant risks and uncertainties, including statements, predictions, or expectations regarding BIOLASE's revenue during the third quarter of 2020. Forward-looking statements can be identified through the use of words such as may," "might," "will," "intend," "should," "could," "can," "would," "continue," "expect," "believe," "anticipate," "estimate," "predict," "outlook," "potential," "plan," "seek," and similar expressions and variations or the negatives of these terms or other comparable terminology. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect BIOLASE's current expectations and speak only as of the date of this release. Actual results may differ materially from BIOLASE's current expectations depending upon a number of factors. These factors include, among others, the coronavirus (COVID-19) and the effects of the outbreak and actions taken in connection therewith, adverse changes in general economic and market conditions, competitive factors including but not limited to pricing pressures and new product introductions, uncertainty of customer acceptance of new product offerings and market changes, risks associated with managing the growth of the business, and those other risks and uncertainties that are described in the "Risk Factors" section of BIOLASE's annual report filed on Form 10-K filed with the Securities and Exchange Commission. Except as required by law, BIOLASE does not undertake any responsibility to revise or update any forward-looking statements.

Tables to Follow

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net revenue $ 6,539 $ 8,646 $ 14,260 $ 27,617

Cost of revenue 4,265 5,677 9,692 17,746

Gross profit 2,274 2,969 4,568 9,871

Operating expenses:

Sales and marketing 2,678 3,515 7,475 10,665

General and 2,300 3,210 7,446 8,114administrative

Engineering and 963 1,126 2,644 3,665development

Total operating expenses 5,941 7,851 17,565 22,444

Loss from operations (3,667) (4,882) (12,997) (12,573)

(Gain) loss on foreign (53) 19 68 68currency transactions

Interest expense, net 568 551 1,782 1,559

Other (income) expense, (4,209) - (4,209) -net

Non-operating loss (3,694) 570 (2,359) 1,627

Income (loss) before tax 27 (5,452) (10,638) (14,200)provision

Income tax provision 15 26 49 68

Net income (loss) $ 12 $ (5,478) $ (10,687) $ (14,268)

Net income (loss) $ 12 $ (5,478) $ (10,687) $ (14,268)

Deemed dividend onconvertible preferred (17,378) - (17,378) -stock

Net loss per shareattributable to common $ (17,366) $ (5,478) $ (28,065) $ (14,268)stockholders:

Basic $ (0.21) $ (0.25) $ (0.56) $ (0.66)

Diluted $ (0.21) $ (0.25) $ (0.56) $ (0.66)

Shares used in thecalculation of net lossper share:

Basic 81,341 21,898 50,366 21,545

Diluted 81,341 21,898 50,366 21,545

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

September December 31, 30,

2020 2019

(Unaudited) (Audited)

ASSETS

Current assets:

Cash and cash equivalents $ 18,847 $ 5,789

Restricted cash 312 312

Accounts receivable, less allowance of $3,837 and 3,393 8,760$2,531 in 2020 and 2019, respectively

Inventory 12,592 10,995

Prepaid expenses and other current assets 903 1,163

Total current assets 36,047 27,019

Property, plant and equipment, net 742 1,193

Goodwill 2,926 2,926

Right of use asset 2,061 276

Other assets 220 433

Total assets $ 41,996 $ 31,847

LIABILITIES, REDEEMABLE PREFERRED STOCK AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 2,592 $ 5,332

Accrued liabilities 4,279 4,744

Deferred revenue, current portion 1,616 2,237

Term loan (net of discount) 12,946 13,466

Total current liabilities 21,433 25,779

Deferred revenue 412 358

Warranty accrual 204 245

Other liabilities 1,097 1,119

Non current lease liability 1,859 4

Non current term loans 3,140 -

Total liabilities 28,145 27,505

Redeemable preferred stock:

Series E Preferred stock, par value $0.001 per $ - $ 3,965share

Total redeemable preferred stock - 3,965

Stockholders' equity:

Series F Preferred Stock, par value $0.001 per 141 -share

Common stock, par value $0.001 per share 93 31

Additional paid-in capital 259,385 235,594

Accumulated other comprehensive loss (534) (701)

Accumulated deficit (245,234) (234,547)

Total stockholders' equity 13,851 377

Total liabilities, redeemable preferred stock and $ 41,996 $ 31,847stockholders' equity

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended

September 30,

2020 2019

Cash Flows from Operating Activities:

Net loss $ (10,687) $ (14,268)

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

Depreciation and amortization 527 754

Provision for bad debts 1,263 1,243

Provision for sales returns 87 -

Amortization of discounts on lines of credit 123 103

Amortization of debt issuance costs 240 130

Change in fair value of warrants (5,850) -

Issuance costs for common stock warrants 1,640 -

Earned interest income - 2

Stock-based compensation 2,367 1,974

Deferred income taxes - (6)

Changes in operating assets and liabilities:

Accounts receivable 4,017 1,393

Inventory (1,597) 711

Prepaid expenses and other current assets 430 1,011

Accounts payable and accrued liabilities (3,445) (1,157)

Deferred revenue (562) 36

Net cash and cash equivalents used in operating (11,447) (8,074)activities

Cash Flows from Investing Activities:

Purchases of property, plant, and equipment (78) (138)

Net cash and cash equivalents used in investing (78) (138)activities

Cash Flows from Financing Activities:

Proceeds from the issuance of common stock 6,912 -

Proceeds from the issuance of Series F Convertible 2,700 -Preferred Stock

Proceeds from the issuance of July 2020 Warrants 15,300 -

Payments of equity offering costs (1,281) (50)

Payments of warrant issuance costs (1,640) -

Borrowings on other long-term loans 3,140 -

Borrowings under term loan - 2,500

Principal payment on term loan (700) -

Borrowings on credit facility 3,000 -

Repayment of credit facility (3,000) -

Proceeds from the exercise of common stock warrants 46 -

Payment of debt issuance costs (75) (38)

Proceeds from exercise of stock options - 4

Net cash and cash equivalents provided by financing 24,402 2,416activities

Effect of exchange rate changes 181 (157)

Decrease in cash, cash equivalents and restricted cash 13,058 (5,953)

Cash, cash equivalents and restricted cash, beginning 6,101 8,356of period

Cash, cash equivalents and restricted cash, end of $ 19,159 $ 2,403period

Supplemental cash flow disclosure:

Cash paid for interest $ 1,438 $ 1,315

Cash paid for income taxes $ 21 $ 19

Cash paid for operating leases $ 417 $ 414

Non-accrual for accrual for equity offering costs $ - $ 191

Non-cash accrual for capital expenditures $ - $ 4

Non-cash settlement of performance award liability $ 151 $ -

Non-cash right-of-use assets obtained in exchange for $ 2,037 $ 824lease obligation

Deemed dividend on preferred stock $ 17,378 $ -

Warrants issued in connection with debt instruments $ 67 $ 209

Non-GAAP Disclosure

In addition to the financial information prepared in conformity with generally accepted accounting principles in the U.S. ("GAAP"), this press release includes certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results and that, in some respects, these non-GAAP financial measures are more indicative of the Company's ongoing core operating performance than their GAAP equivalents. In 2019, the Company revised its non-GAAP financial measures to include the change in allowance for doubtful accounts in an effort to better align its Adjusted EBITDA with its loan covenants and how management evaluates business performance.

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

BIOLASE, INC.

Reconciliation of GAAP Net Loss to Adjusted EBITDA

(Unaudited)

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

GAAP net loss attributable $ (17,366) $ (5,478) $ (28,065) $ (14,268)to common stockholders

Deemed dividend onconvertible preferred 17,378 - 17,378 -stock

GAAP net income (loss) $ 12 $ (5,478) $ (10,687) $ (14,268)

Adjustments:

Interest expense, net 568 551 1,782 1,559

Income tax provision 15 26 49 68

Depreciation and 46 268 527 754amortization

Change in allowance for 256 1,131 1,263 1,243doubtful accounts

Stock-based compensation 847 770 2,367 1,974

Other (income) expense, (4,209) - (4,209) -net

Adjusted EBITDA $ (2,465) $ (2,732) $ (8,908) $ (8,670)

GAAP net loss attributableto common stockholders $ (0.21) $ (0.25) $ (0.56) $ (0.66) per share, basic anddiluted

Deemed dividend onconvertible preferred 0.21 - 0.35 -stock

GAAP net income (loss) per $ 0.00 $ (0.25) $ (0.21) $ (0.66)share, basic and diluted

Adjustments:

Interest expense, net 0.01 0.03 0.04 0.07

Income tax provision - - - -

Depreciation and - 0.01 0.01 0.03amortization

Change in allowance for - 0.05 0.02 0.06doubtful accounts

Stock-based compensation 0.01 0.04 0.04 0.09

Other (income) expense, (0.05) - (0.08) -net

Adjusted EBITDA per share, $ (0.03) $ (0.12) $ (0.18) $ (0.41)basic and diluted

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SOURCE BIOLASE, Inc.