Hayward, Calif.-based Solta posted profits of $644,000, or 1¢ per share, on sales of $33.5 million for the 3 months ended Sept. 30, compared with losses of $2.9 million on a 4.2% sales decline compared with Q3 2012.
Adjusted to exclude 1-time items, per-share losses were -4¢, compared with analysts’ expectations of -3¢. Still, investors had pushed SLTM shares up 4.4% to $1.91 apiece today as of about 12:30 p.m., perhaps reacting to news that Solta hired Piper Jaffrey & Co. to examine "strategic alternatives" even as it puts a plan in place, including layoffs, that aims to cut annual expenses by $12 million.
"A number of factors impacted our third quarter financial results, most important of which was sales force attrition in North America," interim CEO Mark Sieczkarek said in prepared remarks. "Recently, we have been able to add new sales people with strong qualifications in critical North American sales territories and have appointed new sales leadership in both North America and Europe. Our sales strategy in North America includes implementing changes to the sales structure and marketing approach, which we are in the process of doing. We are already beginning to see signs that our strategy is generating results in the 4th quarter."
Solta also said it took out a $40 million, 6-year senior secured loan now that it’s paid off the $8 million it owed Silicon Valley Bank.
"Our new debt agreement will provide working capital necessary to execute our operating plan to regain momentum and growth in the market and build shareholder returns in 2014. Based on planned operating expense reductions, we expect to generate cash in 2014," Sieczkarek said. "To achieve our 2014 objectives, we have implemented cost reductions that included a reduction in work force. We have carefully reviewed the implications of the reductions we have made and are confident that we will be able to maintain our robust product pipeline and continue to bring to market innovative aesthetic products. These changes will improve our financial results next year, while making us a more customer friendly organization."
As for a potential sale, Solta said the investment bank "will assist the board in considering a range of options, which may include strategic partnerships, investors, alliances or a possible sale or merger of the company."
Leerink Swann analyst Richard Newitter said a sale might be Solta’s "best bet" in a note to investors this morning.
"SLTM delivered another quarterly miss, but we continue to believe SLTM’s stock performance is more heavily linked to takeout prospects, which very well may be SLTM’s best option given that a turnaround as a stand-alone – even under new leadership – increasingly looks to us challenging and lengthy," Newitter wrote. "Management continues to acknowledge ‘strategic alternatives’ are on the table, including an outright company sale, and SLTM has engaged a banker to explore its options. After yet another disappointing print, our confidence decreases in mgmt’s ability to ‘right the ship’ and we think the company is likely closer (vs. further away) to putting itself up for sale. Given current valuation levels, risk/reward is to the upside in our view, especially with a takeout scenario in the cards."
reiterated Leerink’s "outperform" rating and lowered its price target for SLTM shares to $3.12 from $3.30.