Strong Annual Year-Over-Year Growth in
Revenue of 30%$10 Million in Cash as of March 31,
2018
Sonoma Pharmaceuticals, Inc. (Nasdaq:SNOA), a specialty
pharmaceutical company that develops and markets unique and
effective solutions for the treatment of dermatological conditions
and advanced tissue care, today announced financial results for the
fiscal year 2018 and fourth quarter ended March 31, 2018.
Total revenues of $16.7 million for fiscal year 2018 increased
by $3.8 million, or 30%, as compared to $12.8 million for fiscal
year 2017. Product revenue of $15.7 million for fiscal year 2018,
increased $3.7 million, or 31%, compared to the same period last
year. This increase in product revenue was driven by strong growth
in the United States, up $1.8 million, or 27%, and by higher
international sales, up $1.9 million, or 36%.
Total revenue of $3.7 million for the fourth quarter ended March
31, 2018, was down slightly when compared to $4.0 million for the
same period last year. Product revenues of $3.3 million for the
fourth quarter ended March 31, 2018, were down 14%, or $530,000,
when compared to the same period last year, largely as the result
of lower sales in the United States and rest of world, partly
offset by increases in Europe and Latin America.
“We are pleased to report strong year-over-year revenue growth
for all our product categories. During the last 12 months, we
continued to expand our business with a new set of FDA
approvals for our dermatology and eye care product lines along with
additional market approvals and partnerships for our products
internationally,” said Jim Schutz, Sonoma Pharmceuticals
CEO. “The fourth quarter dermatology market was challenging
for us as we experienced a decline in product revenues due to the
impact of health insurance deductible resets at the beginning of
the calendar year and the impact of increased product
rebates. To manage an ever-changing health insurance
reimbursement marketplace, we are taking steps to reduce the impact
on our revenue growth by working with a home delivery pharmacy
program and advancing relationships with managed care
organizations. In addition, as announced last week, we’re
excited to be partnering in Brazil with NC Group/ U.SK, Brazil’s
largest pharmaceutical company.”
Business Highlights
- Assembled 33 experienced sales representatives and sales
managers, a national sales force, focused exclusively on the
medical dermatology market.
- Selling a robust portfolio of six non-steroidal products for
treatment of atopic and seborrheic dermatitis, surgical procedures,
severe acne, skin repair, descaling and scar management.
- Received FDA clearances to add antimicrobial language to key
dermatology products further increasing our lead as the go-to
non-antibiotic, non-steroidal solutions that provide
early-intervention relief with virtually no side effects or
contraindications.
- Received Brazilian approvals in October 2017 for seven topical,
non-steroidal and non-antibiotic HOCl products for acne, atopic
dermatitis, scar management and post-laser procedures.
- Signed a license and supply agreement in June 2018 with the
largest pharmaceutical company in Brazil, NC Group/U.SK, to
commercialize all seven HOCl products.
- Received approval from United Arab Emirates (UAE) Ministry of
Health & Prevention for seven products addressing the following
indications; daily eyelid hygiene, antimicrobial nasal cleaning,
antiseptic mouth and throat rinse, acne and several anti-fungal
indications.
Results for the Three months Ended March 31,
2018Product revenues in the United States of $1.4 million,
for the three months ended March 31, 2018, decreased by $477,000,
or 26%, as compared to $1.8 million for the three months ended
March 31, 2017. This decrease was mostly the result of lower sales
of the company’s dermatology and animal health care products,
partly offset by an increase in sales of our acute care
products. The decline in the dermatology revenue for the
fourth quarter compared to the same period in prior year was
largely due to lower units shipped as wholesalers reduced their
inventory, higher rebate costs due to impact of health care plan
deductibles and the reset of those deductibles for most plans in
January, along with the growth of high deductible health care
programs.
Product revenue in Latin America for the quarter ended March 31,
2018, was $912,000, up 9% from the same period last year. This
amount reflects the sale of products to Invekra following the
completion of Sonoma’s asset sale to Invekra in October 2016.
Sonoma will continue to supply products to Invekra until Invekra’s
manufacturing facility is operational.
Product revenue in Europe and the rest of the world of $995,000,
for the three months ended March 31, 2018, decreased by
$131,000, or 12%, as compared to $1.1 million for the three months
ended March 31, 2017. This decrease was the result of lower sales
in China and the Middle East, partly offset by higher sales in
Europe, Singapore, Hong Kong and India.
Sonoma reported gross profit of $1.3 million, or 36% of total
revenue, during the three months ended March 31, 2018, compared to
a gross profit of $1.9 million, or 48% of total revenue in the same
period in the prior year. The decrease in gross profit, as a
percentage of revenue, was primarily due to Latin America as a
result of higher sales to Invekra at a very low profit margin
and the decline in the higher margin dermatology revenue in the
United States.
Operating expenses minus non-cash expenses during the fourth
quarter of fiscal year 2018 were $5.1 million, up $664,000, or 15%,
as compared to the same period in the prior year. This increase in
operating expenses was mostly due to higher sales, marketing, legal
and administrative expenses in the United States, partly offset by
a decline in Latin American expenses. A key driver to the
growth in operating expenses is the increase in the number of
dermatology sales representatives, compared to the same period last
year.
Loss from operations was $4.7 million, up $1.8 million, compared
to $2.9 million for the same period last year. Operating loss less
non-cash expenses (EBITDA) for the three months ended March 31,
2018, was $3.7 million, compared to $2.4 million for the same
period last year.
As of March 31, 2018, Sonoma had cash and cash
equivalents of $10.1 million, as compared to $8.6 million as of
December 31, 2017.
Results for the Twelve Months Ended March 31,
2018The company reported gross profit of $7.3 million, and
$5.7 million, for the twelve months ended March 31, 2018 and 2017,
respectively. The gross profit as a percentage of total
revenues was 44% for both periods. Total operating expenses
less non-cash expenses of $19 million increased $2.4 million, or
14%, for the twelve months ended March 31, 2018, as compared to the
same period in the prior year. This increase was primarily due to
higher costs of the direct sales force for dermatology.
Operating loss less non-cash expenses (EBITDA) of $11.2
million, for the twelve months ended March 31, 2018, was up
$716,000, compared to $10.5 million for the same period last
year.
Conference CallSonoma’s management will hold a
conference call today to discuss fourth quarter fiscal year 2018
results and answer questions, beginning at 4:30 p.m. EDT.
Individuals interested in participating in the conference call may
do so by dialing 877-303-7607 for domestic callers or 973-638-3203
for international callers. Those interested in listening to the
conference call live via the Internet may do so at
https://edge.media-server.com/m6/p/ufhciggt. Please log on
approximately 10 minutes prior to the presentation in order to
register and download the appropriate software, if any. Also,
participants can download a graphical presentation of the quarterly
results at this same site, which provides greater granular detail
in conjunction with the call.
A telephone replay will be available for seven days following
the conclusion of the call by dialing 855-859-2056 for domestic
callers, or 404-537-3406 for international callers, and entering
conference code 3495907. A webcast replay will be available on the
site at http://ir.sonomapharma.com/events.cfm for one year
following the call.
About Sonoma Pharmaceuticals, Inc.Sonoma is a
specialty pharmaceutical company that develops and markets unique
and effective solutions for the treatment of dermatological
conditions and advanced tissue care. The company’s
products, which are sold throughout the United States and
internationally, have improved outcomes for more than five million
patients globally by reducing infections, itch, pain, scarring
and harmful inflammatory responses. The company's headquarters are
in Petaluma, California, with manufacturing operations in the
United States and Latin America. European marketing and sales
are headquartered in Roermond, Netherlands. More information can be
found at www.sonomapharma.com.
Forward-Looking StatementsExcept for historical
information herein, matters set forth in this press release
are forward-looking within the meaning of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995,
including statements about the commercial and technology progress
and future financial performance of Sonoma Pharmaceuticals,
Inc. and its subsidiaries (the “Company”). These forward-looking
statements are identified by the use of words such as “continue,”
“reduce,” and “expand,” among others. Forward-looking statements in
this press release are subject to certain risks and uncertainties
inherent in the Company’s business that could cause actual results
to vary, including such risks that regulatory
clinical and guideline developments may change, scientific
data may not be sufficient to meet regulatory standards or receipt
of required regulatory clearances or approvals, clinical
results may not be replicated in actual patient
settings, protection offered by the
Company’s patents and patent applications may be challenged,
invalidated or circumvented by its competitors, the available
market for the Company’s products will not be as
large as expected, the Company’s products will not be able to
penetrate one or more targeted markets, revenues will not be
sufficient to meet the Company’s cash needs, fund further
development and clinical studies, as well as uncertainties
relative to varying product formulations and a multitude of diverse
regulatory and marketing requirements in different countries and
municipalities, and other risks detailed from time to time in the
Company’s filings with the Securities and Exchange Commission. The
Company disclaims any obligation to update these forward-looking
statements, except as required by law.
Sonoma Pharmaceuticals™ is a trademark or registered trademark
of Sonoma Pharmaceuticals, Inc. All other trademarks and service
marks are the property of their respective
owners.
Media and Investor
Contact:
Sonoma Pharmaceuticals,
Inc.Bob MillerCFO(925) 787-6218
SONOMA PHARMACEUTICALS, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS(In thousands, except share and per share
amounts)
|
|
March 31 |
|
|
|
2018 |
|
|
2017 |
|
ASSETS |
|
(Unaudited) |
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
10,066 |
|
|
$ |
17,461 |
|
Accounts
receivable, net |
|
|
1,537 |
|
|
|
2,108 |
|
Inventories |
|
|
2,865 |
|
|
|
2,221 |
|
Prepaid
expenses and other current assets |
|
|
1,547 |
|
|
|
616 |
|
Current
portion of deferred consideration, net of discount |
|
|
239 |
|
|
|
237 |
|
Total
current assets |
|
|
16,254 |
|
|
|
22,643 |
|
Property
and equipment, net |
|
|
1,136 |
|
|
|
1,239 |
|
Deferred
consideration, net of discount, less current portion |
|
|
1,322 |
|
|
|
1,497 |
|
Other
assets |
|
|
494 |
|
|
|
80 |
|
Total
assets |
|
$ |
19,206 |
|
|
$ |
25,459 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
1,272 |
|
|
$ |
1,255 |
|
Accrued
expenses and other current liabilities |
|
|
1,406 |
|
|
|
1,302 |
|
Deferred
revenue |
|
|
147 |
|
|
|
345 |
|
Deferred
revenue Invekra |
|
|
59 |
|
|
|
176 |
|
Current
portion of long-term debt |
|
|
230 |
|
|
|
123 |
|
Current
portion of capital leases |
|
|
147 |
|
|
|
74 |
|
Taxes
payable |
|
|
– |
|
|
|
13 |
|
Total
current liabilities |
|
|
3,261 |
|
|
|
3,288 |
|
Long-term deferred
revenue Invekra |
|
|
443 |
|
|
|
527 |
|
Long-term debt, less
current portion |
|
|
32 |
|
|
|
45 |
|
Long-term capital
leases, less current portion |
|
|
144 |
|
|
|
168 |
|
Total
liabilities |
|
|
3,880 |
|
|
|
4,028 |
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
Convertible preferred stock, $0.0001 par value; 714,286 shares
authorized, none issued and outstanding at March 31, 2018 and March
31, 2017, respectively |
|
|
– |
|
|
|
– |
|
Common
stock, $0.0001 par value; 12,000,000 shares authorized at March 31,
2018 and March 31, 2017, 6,171,736 and 4,289,322 shares issued and
outstanding at March 31, 2018 and March 31, 2017, respectively |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
176,740 |
|
|
|
168,709 |
|
Accumulated deficit |
|
|
(157,440 |
) |
|
|
(143,101 |
) |
Accumulated other comprehensive loss |
|
|
(3,975 |
) |
|
|
(4,178 |
) |
Total
stockholders’ equity |
|
|
15,326 |
|
|
|
21,431 |
|
Total
liabilities and stockholders’ equity |
|
$ |
19,206 |
|
|
$ |
25,459 |
|
SONOMA PHARMACEUTICALS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME(In thousands, except
per share amounts) (Unaudited)
|
|
|
Three Months EndedMarch
31, |
|
Year EndedMarch 31, |
|
|
|
2018 |
|
|
2017 |
|
2018 |
|
|
2017 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
3,269 |
|
|
$ |
3,799 |
|
$ |
15,663 |
|
|
$ |
11,957 |
|
Service |
|
|
386 |
|
|
|
230 |
|
|
995 |
|
|
|
868 |
|
Total
revenues |
|
|
3,655 |
|
|
|
4,029 |
|
|
16,658 |
|
|
|
12,825 |
|
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
2,140 |
|
|
|
1,912 |
|
|
8,669 |
|
|
|
6,419 |
|
Service |
|
|
183 |
|
|
|
170 |
|
|
679 |
|
|
|
738 |
|
Total
cost of revenues |
|
|
2,323 |
|
|
|
2,082 |
|
|
9,348 |
|
|
|
7,157 |
|
Gross profit |
|
|
1,332 |
|
|
|
1,947 |
|
|
7,310 |
|
|
|
5,668 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
|
476 |
|
|
|
350 |
|
|
1,575 |
|
|
|
1,576 |
|
Selling,
general and administrative |
|
|
5,605 |
|
|
|
4,509 |
|
|
19,924 |
|
|
|
17,066 |
|
Total
operating expenses |
|
|
6,081 |
|
|
|
4,859 |
|
|
21,499 |
|
|
|
18,642 |
|
Loss from
operations |
|
|
(4,749 |
) |
|
|
(2,912 |
) |
|
(14,189 |
) |
|
|
(12,974 |
) |
Interest expense |
|
|
(9 |
) |
|
|
(1 |
) |
|
(40 |
) |
|
|
(3 |
) |
Interest income |
|
|
173 |
|
|
|
14 |
|
|
258 |
|
|
|
22 |
|
Other income (expense),
net |
|
|
(178 |
) |
|
|
(258 |
) |
|
(357 |
) |
|
|
18 |
|
Loss from continuing
operations before income taxes |
|
|
(4,763 |
) |
|
|
(3,157 |
) |
|
(14,328 |
) |
|
|
(12,937 |
) |
Income tax benefit |
|
|
– |
|
|
|
228 |
|
|
– |
|
|
|
4,268 |
|
Loss from continuing
operations |
|
|
(4,763 |
) |
|
|
(2,929 |
) |
|
(14,328 |
) |
|
|
(8,669 |
) |
Income from
discontinued operations (net of tax) |
|
|
– |
|
|
|
493 |
|
|
– |
|
|
|
17,943 |
|
Net (loss) income |
|
$ |
(4,763 |
) |
|
$ |
(2,436 |
) |
$ |
(14,328 |
) |
|
$ |
9,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share: basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.93 |
) |
|
$ |
(0.69 |
) |
$ |
(3.16 |
) |
|
$ |
(2.05 |
) |
Discontinued operations |
|
|
– |
|
|
|
0.12 |
|
|
– |
|
|
|
4.25 |
|
|
|
$ |
(0.93 |
) |
|
$ |
(0.57 |
) |
$ |
(3.16 |
) |
|
$ |
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number
of shares used in per share calculations: basic and diluted |
|
|
5,134 |
|
|
|
4,224 |
|
|
4,530 |
|
|
|
4,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
(loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(4,763 |
) |
|
$ |
(2,436 |
) |
$ |
(14,328 |
) |
|
$ |
9,274 |
|
Foreign currency
translation adjustments |
|
|
425 |
|
|
|
493 |
|
|
203 |
|
|
|
(324 |
) |
Comprehensive (loss) income |
|
$ |
(4,338 |
) |
|
$ |
(1,943 |
) |
$ |
(14,125 |
) |
|
$ |
8,950 |
|
SONOMA PHARMACEUTICALS, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES(In
thousands) (Unaudited)
|
|
Three Months EndedMarch
31, |
|
|
Year EndedMarch
31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
(1) Loss from
operations minus non-cash expenses (EBITDA): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP loss from
operations as reported |
|
$ |
(4,749 |
) |
|
$ |
(2,912 |
) |
|
$ |
(14,189 |
) |
|
$ |
(12,974 |
) |
Non-cash
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
908 |
|
|
|
413 |
|
|
|
2,500 |
|
|
|
2,243 |
|
Depreciation and
amortization |
|
|
124 |
|
|
|
70 |
|
|
|
490 |
|
|
|
248 |
|
Non-GAAP loss from
operations minus non-cash expenses (EBITDA) |
|
$ |
(3,717 |
) |
|
$ |
(2,429 |
) |
|
$ |
(11,199 |
) |
|
$ |
(10,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Net loss
minus non-cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss) income
as reported |
|
$ |
(4,763 |
) |
|
$ |
(2,436 |
) |
|
$ |
(14,328 |
) |
|
$ |
9,274 |
|
Non-cash
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
908 |
|
|
|
413 |
|
|
|
2,500 |
|
|
|
2,243 |
|
Depreciation and
amortization |
|
|
124 |
|
|
|
70 |
|
|
|
490 |
|
|
|
248 |
|
Non-GAAP net (loss)
income minus non-cash expenses |
|
$ |
(3,731 |
) |
|
$ |
(1,953 |
) |
|
$ |
11,338 |
|
|
$ |
11,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Operating
expenses minus non-cash expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses
as reported |
|
$ |
6,081 |
|
|
$ |
4,859 |
|
|
$ |
21,499 |
|
|
$ |
18,642 |
|
Non-cash
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
(875 |
) |
|
|
(362 |
) |
|
|
(2,331 |
) |
|
|
(1,995 |
) |
Depreciation and
amortization |
|
|
(57 |
) |
|
|
(12 |
) |
|
|
(211 |
) |
|
|
(42 |
) |
Non-GAAP operating
expenses minus non-cash expenses |
|
$ |
5,149 |
|
|
$ |
4,485 |
|
|
$ |
18,957 |
|
|
$ |
16,605 |
|
(1) Loss from operations minus non-cash expenses (EBITDAS) is a
non-GAAP financial measure. The Company defines operating loss
minus non-cash expenses as GAAP reported operating loss minus
operating depreciation and amortization, and operating stock-based
compensation. The Company uses this measure for the purpose of
modifying the operating loss to reflect direct cash related
transactions during the measurement period.
(2) Net loss minus non-cash expenses is a non-GAAP financial
measure. The Company defines net loss minus non-cash expenses as
GAAP reported net loss minus depreciation and amortization,
stock-based compensation, and non-cash foreign exchange transaction
losses. The Company uses this measure for the purpose of modifying
the net loss to reflect only those expenses to reflect direct cash
transactions during the measurement period.
(3) Operating expenses minus non-cash expenses is a non-GAAP
financial measure. The Company defines operating expenses minus
non-cash expenses as GAAP reported operating expenses minus
operating depreciation and amortization, and operating stock-based
compensation. The Company uses this measure for the purpose of
identifying total operating expenses involving cash transactions
during the measurement period.
SONOMA PHARMACEUTICALS, INC. AND
SUBSIDIARIESPRODUCT RELATED REVENUE
SCHEDULES(In thousands) (Unaudited)
The following table shows the Company’s product
revenues by geographic region:
|
|
Three Months EndedMarch
31, |
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
$ Change |
|
|
% Change |
|
United States |
|
$ |
1,362 |
|
|
$ |
1,839 |
|
|
$ |
(477 |
) |
|
|
(26% |
) |
Latin America |
|
|
912 |
|
|
|
834 |
|
|
|
78 |
|
|
|
9% |
|
Europe and Rest of the
World |
|
|
995 |
|
|
|
1,126 |
|
|
|
(131 |
) |
|
|
(12% |
) |
Total |
|
$ |
3,269 |
|
|
$ |
3,799 |
|
|
$ |
(530 |
) |
|
|
(14% |
) |
|
|
Year Ended March 31, |
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
$ Change |
|
|
% Change |
|
United States |
|
$ |
8,372 |
|
|
$ |
6,580 |
|
|
$ |
1,792 |
|
|
|
27% |
|
Latin America |
|
|
3,007 |
|
|
|
1,299 |
|
|
|
1,708 |
|
|
|
131% |
|
Europe and Rest of the
World |
|
|
4,284 |
|
|
|
4,078 |
|
|
|
206 |
|
|
|
5% |
|
Total |
|
$ |
15,663 |
|
|
$ |
11,957 |
|
|
$ |
3,706 |
|
|
|
31% |
|
In connection with the Company’s sale of its
Latin America business to Invekra, product related revenues were
reclassified from continuing operations to discontinued
operations. The amounts were classified in the prior periods
as Latin America sales. The amounts reclassified are as
follows:
|
|
|
Year Ended March 31, |
|
|
|
|
2018 |
|
|
2017 |
|
Product revenues
|
|
|
$ |
– |
|
|
$ |
2,693 |
|
Product license fees
and royalties
|
|
|
|
– |
|
|
|
412 |
|
Total product related
revenues |
|
|
$ |
– |
|
|
$ |
3,105 |
|
Sonoma Pharmaceuticals (NASDAQ:SNOA)
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