Revenues up 63% over the prior year, consumer revenues up 48%, net income up 77%

MONTGOMERYVILLE, Pa.--(BUSINESS WIRE)--November 7, 2012--PhotoMedex, Inc. (NASDAQ and TASE: PHMD) today reported financial results for the three and nine months ended September 30, 2012. Financial highlights of the 2012 third quarter include:

On December 13, 2011 Radiancy, Inc. became a majority owned subsidiary of PhotoMedex in a reverse merger. In accordance with generally accepted accounting principles (GAAP), Radiancy is deemed to be the financial acquirer for financial statement purposes and therefore the related consolidated statements of operations for the periods prior to the merger date do not include activity from the pre-merged PhotoMedex.

Dr. Dolev Rafaeli, PhotoMedex CEO, commented, “We are pleased to deliver another quarter of strong financial results with revenues increasing 63% over last year, gross profit increasing 71% and net income increasing 79%. Revenues for the first nine months of 2012 exceed revenues for all of 2011. Our consumer marketing programs continue to deliver outstanding results, while the steps we have taken to reduce costs, such as using ocean freight more often to deliver products and consolidating manufacturing, have contributed to margin expansion as well.

“Yesterday we reported that sales of no!no! Hair™ once again broke home television shopping sales records in the U.S. at a 24-hour beauty event held this past weekend despite the fact that the Northeast, a major target market, was still suffering from the effects of the recent hurricane. We beat our own record, which was established over this past Fourth of July holiday. The products for this event were shipped in the fourth quarter, while the products for the Fourth of July holiday were shipped in the second quarter.”

Dr. Rafaeli concluded, “In the coming months we are looking forward to expanding our consumer marketing in the U.S. for XTRAC® for the treatment of psoriasis and Neova® to help reverse the effects of sun-damaged skin, and to expanding our international market for the no!no! family of products.”

Revenues for the third quarter of 2012 were $56.7 million, an increase of 63% over the same period last year. Included in this amount is $6.4 million in revenues from pre-merged PhotoMedex. This compares with revenues for the third quarter of 2011 of $34.7 million, which included no revenues from pre-merged PhotoMedex.

Net income for the third quarter of 2012 was $7.5 million or $0.35 per diluted share, which included $1.5 million in stock-based compensation expense and $1.4 million in depreciation and amortization expenses. This compares with net income for the third quarter of 2011 of $4.2 million or $0.32 per diluted share, which included $1.6 million in stock-based compensation expense and $0.1 million in depreciation and amortization expenses.

Revenues for the nine months ended September 30, 2012 were $165.9 million, an increase of 61% over the same period last year. Included in this amount is $20.6 million in revenues from pre-merged PhotoMedex. This compares with revenues for the nine months ended September 30, 2011 of $103.3 million, which included no revenues from pre-merged PhotoMedex.

Net income for the nine months ended September 30, 2012 was $16.6 million or $0.81 per diluted share, which included $4.8 million in stock-based compensation expense, $4.1 million in depreciation and amortization expenses, $5.6 million in expenses for past litigation and $0.7 million in other one-time charges. This compares with net income for the nine months ended September 30, 2011 of $2.3 million or $0.20 per diluted share, which included $16.4 million in stock-based compensation expense, $0.2 million in depreciation and amortization expenses, $0.8 million in expenses for past litigation and $12.4 million in merger-related expenses.

As of September 30, 2012, the Company had cash, cash equivalents and short term investments of $54.8 million. During the 2012 third quarter the Company repurchased 424,244 shares of its common stock in the open market at an average price of $12.59 per share, for a total of $5.3 million.

On a pro forma basis, had the merger been completed on January 1, 2011, revenues for the three months ended September 30, 2011 would have been $42.9 million, gross profit would have been $30.4 million and net income would have been $2.0 million.

Fourth quarter seasonal fluctuations – both positive and negative – for certain international markets are normal and expected for the Company’s consumer business, as compared with the balance of the year. Moreover, management is continuing to evaluate the impact on revenues from the recent hurricane in the Northeast. Management expects revenue for the fourth quarter of 2012 to increase by more than 60% compared with the same quarter of 2011, and to be between $46 million and $48 million.

To supplement PhotoMedex’s consolidated financial statements presented in accordance with GAAP, PhotoMedex provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted income and non-GAAP adjusted income per share.

PhotoMedex’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of PhotoMedex’s current financial performance and to provide further information for comparative purposes.

Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company’s core operating results and business outlook. In addition, PhotoMedex believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:


	(Unaudited)

		Three Months Ended Sept. 30,					Nine months ended Sept. 30,
(ooo's) except per share amounts		2012			2011 *		2012		2011 *

Net Income as reported		$	7,525		$	4,249	$	16,595	$	2,289

Adjustments:
Depreciation and amortization expense			1,402			90		4,176		274
Interest expense, net			(6	)		-		401		-
Income tax expense (benefit)			2,500			1,974		3,605		(1,393	)

EBITDA		$	11,421		$	6,313	$	24,777	$	1,170

Stock-based compensation expense			1,531			1,600		4,819		16,436
Settled Litigation expense			-			680		5,595		798
Merger Related Expenses			-			-		-		12,364
Other one- time expenses			-			-		654		-


Non-GAAP adjusted income		$	12,952		$	8,593	$	35,845	$	30,768
Common Shares outstanding at September 30, 2012			21,477			21,477		21,477		21,477

Non-GAAP adjusted income per share		$	0.60		$	0.40	$	1.67	$	1.43

*As a result of purchase accounting rules, the operating results of the pre-merged PhotoMedex for the three-month and nine -month period ended September 30, 2011 are not included in the consolidated statements of operations for the periods ended September 30, 2011.

PhotoMedex will hold a conference call to discuss the Company’s third quarter 2012 results and answer questions today, November 7, 2012 beginning at 11:00 a.m. Eastern time.

To participate in the conference call, dial toll free 800-862-9098 or International/toll 785-424-1051 (and confirmation code # 6347174) approximately five to 10 minutes prior to the scheduled start time. For the convenience of our Israeli participants, a local/toll free number (180-925-6145) has been set up (the confirmation code remains the same # 6347174). If you are unable to participate, a digital replay of the call will be available from Wednesday, November 7, from 2:00 p.m. ET until 2:00 p.m. ET Wednesday, November 21, 2012 by dialing toll free 888-203-1112 or International/toll 719-457-0820 (Israeli participants may dial 180-924-6038) and using confirmation code # 6347174.

The live broadcast of PhotoMedex, Inc.'s quarterly conference call will be available online by going to www.photomedex.com and clicking on the link to Investor Relations, and at www.streetevents.com. The online replay will be available shortly after the call at those sites.

PhotoMedex is a global skin health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. The company provides proprietary products and services that address skin diseases and conditions including psoriasis, vitiligo, acne, actinic keratosis (a precursor to certain types of skin cancer) and photo damage. Its experience in the physician market provides the platform to expand its skin health solutions to spa markets, as well as traditional retail, online and infomercial outlets for home-use products. As a result of its December 2011 merger with Radiancy Inc., PhotoMedex has added a range of home-use devices under the no!no!™ brand, for various indications including hair removal, acne treatment and skin rejuvenation. The company also offers a professional product line for acne clearance, skin tightening, psoriasis care and hair removal sold to physician clinics and spas.

Some portions of the conference call, particularly those describing PhotoMedex' strategies, operating expense reductions and business plans will contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks, uncertainties and other factors. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements regarding product development, product extensions, product integration or product marketing; any statements regarding continued compliance with government regulations, changing legislation or regulatory environments; any statements of expectation or belief and any statements of assumptions underlying any of the foregoing. In addition, there are risks and uncertainties related to successfully integrating the products and employees of the Company and Radiancy, as well as the ability to ensure continued regulatory compliance, performance and/or market growth. These risks, uncertainties and other factors, and the general risks associated with the businesses of the Company described in the reports and other documents filed with the SEC, could cause actual results to differ materially from those referred to, implied or expressed in the forward-looking statements. The Company cautions readers not to rely on these forward-looking statements. All forward-looking statements are based on information currently available to the Company and are qualified in their entirety by this cautionary statement. The Company anticipates that subsequent events and developments will cause its views to change. The information contained in this conference call speaks as of the date hereof and the Company has or undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.


PHOTOMEDEX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
(ooo's) except per share amounts	2012			2011*			2012			2011*

Revenues	$	56,681		$	34,745		$	165,860		$	103,333

Cost of revenues		11,281			8,142			34,870			20,054
Gross profit		45,400			26,603			130,990			83,279

Operating expenses:
Selling and marketing		28,285			15,468			85,188			45,505
General and administrative		6,231			4,540			22,593			36,279
Research and development and engineering		628			281			2,146			700
		35,144			20,289			109,927			82,484
Operating income		10,256			6,314			21,063			795
Interest and other financing income (expense), net		(231	)		(91	)		(862	)		101

Income before taxes expense		10,025			6,223			20,201			896

Income tax expense (benefit)		2,500			1,974			3,606			(1,393	)

Net income ¹	$	7,525		$	4,249		$	16,595		$	2,289

Net income per share:
Basic	$	0.35		$	0.34		$	0.83		$	0.21
Diluted	$	0.35		$	0.32		$	0.81		$	0.20

Shares used in computing net income per share:
Basic		21,206			12,342			20,001			10,952
Diluted		21,753			13,183			20,549			11,671

¹ Includes: depreciation and amortization		1,402			90			4,176			274

Share-based compensation expense		1,531			1,600			4,819			16,436

*As a result of purchase accounting rules, the operating results of the pre-merged PhotoMedex for the three-month and nine-month period ended September 30, 2011 are not included in the above consolidated statements of operations for the periods ended September 30, 2011.


PHOTOMEDEX, INC. CONSOLIDATED STATEMENTS OF REVENUES (UNAUDITED)

	For the three months ended:
	September 30, 2012		June 30, 2012		September 30, 2011
Consumer:
Direct	$	30,001	$	33,696	$	18,614
Distributors		9,388		7,007		8,492
Retailer and home shopping channels		10,249		9,761		6,526
sub-total		49,638		50,464		33,632

Physician Recurring
XTRAC treatments		2,173		1,977		-
Skin care		1,907		2,135		-
Other		1,041		1,162		-
sub-total		5,121		5,274		-

Professional		1,922		3,168		1,113

Total Revenues	$	56,681	$	58,906	$	34,745


PHOTOMEDEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)


		September 30, 2012		December 31, 2011
	Assets
	Cash, cash equivalents, and short-term investments	$	54,807	$	16,549
	Accounts receivable, net		20,516		12,393
	Inventories		23,962		19,208
	Other current assets		22,228		13,690
	Property and equipment, net		5,993		5,324
	Other non-current assets		75,150		78,399
	Total Assets	$	202,656	$	145,563

	Liabilities and Stockholders' Equity
	Accounts payable and accrued liabilities	$	29,004	$	26,900
	Other current liabilities		4,381		1,948
	Bank and lease notes payable		17		2,232
	Other liabilities		3,794		2,405
	Stockholders' equity		165,460		112,078
	Total Liabilities and Stockholders' Equity	$	202,656	$	145,563


PHOTOMEDEX, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2012			2011			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,525		$	4,249		$	16,595		$	2,289

Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization		1,402			90			4,176			274
Provision for doubtful accounts		1,313			570			3,404			2,378
Deferred income taxes		904			943			(332	)		(5,162	)
Stock-based compensation		1,531			1,600			4,817			16,436
Changes in assets and liabilities:
(Increase) decrease in--
Current Assets		80			2,730			(23,647	)		(7,964	)
Current liabilities		(4,058	)		(13,749	)		6,018			2,789
Net cash provided by (used in) operating activities		8,697			(3,567	)		11,031			11,040

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds (investment) in short-term deposits		(18,000	)		6,000			(18,000	)		14,500
Lasers placed in service		(1,180	)		-			(2,129	)		-
Purchases of PP&E, net		(60	)		(136	)		(277	)		(229	)
Other		29			(38	)		(34	)		(110	)
Net cash (used in) provided by investing activities		(19,211	)		5,826			(20,440	)		14,161

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options/issuance of securities		148			9			37,800			9
Repayments of debt		(108	)		-			(2,457	)		-
Open market purchase of common stock		(5,342	)		-			(5,342	)		-
Net cash (used in) provided by financing activities		(5,302	)		9			30,001			9
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(263	)		-			(337	)		-
NET INCREASE IN CASH AND CASH EQUIVALENTS		(16,079	)		2,268			20,258			25,210
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		52,886			30,523			16,549			7,581

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	36,807		$	32,791		$	36,807		$	32,791

*As a result of purchase accounting rules, the operating results of the pre-merged PhotoMedex for nine- months ended September 30, 2011 are not included in the above condensed statements of cash flows for the period ended September 30, 2011.

CONTACT:
LHA
Kim Sutton Golodet, 212-838-3777
Kgolodetz@lhai.com
or
Bruce Voss, 310-691-7100
Bvoss@lhai.com
@LHA_IR_PR
or
PhotoMedex, Inc.
Dennis McGrath, 215-619-3287
Chief Financial Officer
info@photomedex.com