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Solta Medical To Acquire Sound Surgical Technologies

HAYWARD, Calif., Jan. 29, 2013 /PRNewswire/ -- Solta Medical, Inc. (NASDAQ: SLTM), a global leader in the medical aesthetics market, today announced it has entered into a definitive agreement to acquire privately-held Sound Surgical Technologies LLC. Under the terms of the agreement, Solta will acquire Louisville, Colorado-based Sound Surgical for $25.5 million in Solta common stock and $5.0 million in cash. Excluding acquisition and integration related charges, the transaction is expected to be accretive to Solta Medical's quarterly earnings within twelve months.

In addition to the payments due at closing, Sound Surgical unit holders are entitled to receive up to $9.5 million of contingent payments that would be paid in Solta common stock based on revenue from Sound Surgical products in 2013. The proposed transaction becomes increasingly accretive to Solta Medical as Sound Surgical achieves the higher end of the revenue range. Approximately three-quarters of Sound Surgical unit holders have entered into staggered lock-up agreements ranging up to 270 days. Solta Medical expects to close the transaction during the first quarter of 2013.

Sound Surgical's unaudited revenue for the year ended December 31, 2012 rose over 40% from 2011 to approximately $23 million and the company generated EBITDA of over $2 million for the year. Sound Surgical markets leading surgical and non-invasive body shaping products utilizing ultrasound technology. Sound Surgical's VASER Lipo® system uses ultrasound waves to selectively emulsify fatty tissue prior to extraction from the body. By emulsifying targeted fat cells, VASER technology allows physicians to perform fat extraction with less tearing of the surrounding tissues, thus reducing blood loss, pain and bruising. Studies comparing VASER Lipo with traditional tumescent liposuction procedures show reduced post-operative pain and improved patient recovery. The VASER Lipo system received initial FDA clearance in 2002. Additional Sound Surgical product lines used in surgical body shaping applications include VASER smooth™, PowerX®, and Origins™. Sound Surgical's non-invasive VASER® Shape system targets cellulite by heating fatty tissue in conjunction with lymphatic massage.

"Sound Surgical provides Solta with a complementary, diversified product portfolio targeting the over $500 million body contouring market segment and the transaction meets our key acquisition criteria," said Stephen J. Fanning, Chairman, President and CEO.  "In combination with our rapidly growing Liposonix product line, the acquisition presents significant cross-selling opportunities to plastic surgeons and dermatologists, as well as expanded international sales potential.  Sound Surgical generated over 40% revenue growth during 2012 and we believe there is room to build on their market momentum this year while generating a bottom line contribution to Solta.  We welcome the Sound Surgical team to Solta and look forward to the contributions of David Holthe, Manager and Chairman of the Management Committee of Sound Surgical, as he will join our Board of Directors on closing of the transaction."

"Solta has demonstrated a unique ability within our industry to build brands, create cross-selling opportunities and foster international adoption," said Daniel S. Goldberger, CEO of Sound Surgical.  "We believe that by combining our sales organization with Solta's, we will enhance market penetration of our highly differentiated technologies with plastic surgeons and dermatologists.  Our team looks forward to becoming part of Solta Medical."

"We are pleased that Dan Goldberger has agreed to stay on as a consultant for a period of six months upon close of the transaction to help ensure a smooth integration process," said Mr. Fanning.

Solta Medical also provided the following information on unaudited preliminary financial results for the fourth quarter and the twelve months ended December 31, 2012:
  • Revenue for the fourth quarter in the range of $39.5 million to $40.0 million. Revenue for the twelve months ended December 31, 2012 in the range of $144.2 million to $144.7 million which exceeds the company's previously issued guidance of $142 million to $144 million.
  • GAAP and non-GAAP gross margin for the fourth quarter in the range of 60% to 61% and 64% to 65%, respectively.
  • GAAP and non-GAAP operating income for the fourth quarter to be in the range of $0.6 million to $0.9 million and $3.0 million to $3.3 million, respectively.
  • Cash as of December 31, 2012 was $38.1 million and the company had additional cash resources available through an $8 million revolving credit facility with Silicon Valley Bank. The company recently agreed to an amendment with Silicon Valley Bank to expand this credit facility to $12 million.

The company provides non-GAAP financial measures that exclude amortization and other acquisition related charges, non-cash stock based compensation charges, and charges for the fair value reassessment of acquisition related contingent liabilities.

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