40% Top-Line Sequential Growth from First Quarter Driven by Strengthening International Performance;

Company Announces Stock Repurchase Program

WESTFORD, Mass., July 28 /PRNewswire-FirstCall/ -- Cynosure, Inc. (Nasdaq: CYNO), a leading developer and manufacturer of a broad array of light-based aesthetic treatment systems, today announced financial results for the three months ended June 30, 2009.

Second Quarter 2009 Financial Results

Revenues for the three months ended June 30, 2009 were $20.8 million, compared with $39.2 million in the same period of 2008 and $14.8 million in the first quarter of 2009. The decline from the second quarter of 2008 reflected the ongoing global economic recession and the continued restrictive credit environment in the aesthetic laser industry. The increase from the first quarter of 2009 reflected a strengthening international market coupled with a slight improvement in the North American markets. Gross margin for the second quarter of 2009 was 58.0% of total revenues, compared with 67.1% for the same period of 2008 and 60.9% in the first quarter of 2009. The decline in gross margin in the second quarter of this year compared with the second quarter of 2008 and the first quarter of 2009 reflected a higher percentage of laser revenue from international distribution, where the company's products tend to have lower sales prices.

Cynosure reported a net loss for the second quarter of 2009 of $2.3 million, or $0.18 per basic and diluted share, compared with net income of $4.7 million, or $0.36 per diluted share, in the second quarter of 2008, and a net loss of $4.0 million, or $0.32 per basic and diluted share, in the first quarter of 2009.

"An increased contribution from international markets helped to offset the continued challenges in North America in the second quarter," said Cynosure's President and Chief Executive Officer Michael Davin. "International markets accounted for 53% of total laser revenue in the second quarter from 30% in the same period of 2008 and 43% in the first quarter of 2009. We believe this increased contribution helps to validate the strategic investments we have made to enhance our overseas infrastructure and broaden our global footprint. In addition, second quarter international laser revenue increased 87% from the first quarter, led in part by a strong contribution from our recently established direct subsidiary in Korea."

"In North America, laser sales increased 24% over the first quarter of the year, yet the market remained challenging," Davin said. "We believe this stemmed from the inability of practitioners to obtain credit for capital equipment purchases, coupled with continued macroeconomic pressures on discretionary spending and purchasing decisions. We are working directly with the lending community to explore options to assist customers who have been unable to secure financing in today's challenging credit environment."

"Despite lower sales compared with the second quarter of 2008, our North American pricing remained stable in the second quarter compared with Q1 of 2009 and Q4 of 2008," Davin continued. "Although the higher contribution of international laser revenue contributed to the decrease in our overall margins, our domestic margins remained consistent with the first quarter of 2009."

Recent Highlights

• Cynosure signed a multi-year, funded cooperative agreement with Unilever Ltd. to develop and commercialize light-based devices targeting the emerging home use personal care market. The initial focus of this development agreement will be on the skin rejuvenation market.
• The company introduced the multi-wavelength Smartlipo MPX 46-watt workstation, the latest and most powerful advance in Cynosure's platform of minimally invasive workstations for LaserBodySculpting. The 46-watt workstation enables a physician to liquefy and remove larger areas of unwanted fat in about half the time required by the original 32-watt Smartlipo MPX system.
  

Six-Month Results

For the six months ended June 30, 2009, revenues decreased approximately 53% to $35.6 million from $76.0 million for the same period in 2008. For the six months ended June 30, 2009, gross profit margin decreased to 59.2% of total revenues, compared with 66.8% for the same period in 2008. Net loss for the first half of 2009 was $6.3 million, or $0.50 per basic and diluted share, compared with net income of $9.5 million, or $0.75 per diluted share, for the same period in 2008.

"Through the first six months of 2009 we have reduced expenses by approximately 15% compared with first six months of 2008, largely through the cost-reduction efforts we put in place early this year," Davin said. "We remain on track to achieve our previously stated goal of annualized operating expense savings of between $14 million and $18 million in 2009. We were cash flow neutral in the second quarter and maintained our cash, cash equivalents and short-term investments balance of approximately $89 million. As a result of solid execution from our sales and finance teams, we substantially reduced our days sales outstanding to 75 days as of June 30 from 108 days as of March 31."

Business Outlook

"We are encouraged by some of the positive signs that we experienced in the second quarter," Davin said. "A number of regions in our recently expanded international distribution network delivered solid performance. Our latest product introduction -- the Smartlipo MPX 46-watt workstation -- and recent product enhancements, such as ThermaGuide and ThermaView, have received an enthusiastic response from the marketplace. Attendance at our workshops and webinars has been strong. While economic uncertainty continues to hinder our domestic revenue performance, we believe we will see an improvement in our U.S. sales once credit loosens and more practitioners are able to obtain financing."

"Despite the challenging environment, we remain unwavering in our commitment to technology and leading the industry through innovation," Davin said. "We continue to invest in our R&D pipeline and have several promising programs underway. In addition, our funded development agreement with Unilever has commenced, and we have taken the first steps toward creating a light-based skin rejuvenation device for the over-the-counter market."

"Although the third quarter traditionally has been the weakest for the aesthetic industry, we are hopeful that the macroeconomic environment will begin to stabilize as we move through the balance of 2009," Davin said. "We continue to carefully manage our business, with the goal to be cash flow neutral for the year. In addition, we are excited about our long-term prospects. We believe we have the global presence, product portfolio, distribution strength and brand reputation to extend our leadership position in the aesthetic industry."

Company Announces Share Repurchase Plan

Cynosure also announced today that its Board of Directors has authorized the repurchase of up to $10 million of the company's common stock from time to time on the open market or in privately negotiated transactions.

"At current levels, we believe the company's stock is attractively valued," Davin said. "This action reflects our ongoing commitment to improving the investment value of our stock while at the same time growing our business."

The timing and amount of any shares repurchased will be determined by the company's management based on its evaluation of market conditions and other factors.