Obagi Medical Products, Inc. (NASDAQ: OMPI) reported third quarter 2009 net income of $3.0 million, or $0.14 per diluted share, compared with $2.9 million, or $0.13 per diluted share, for the third quarter of 2008.
Net sales were $24.9 million in the third quarter of 2009, a decline of 4% from $26.0 million a year ago. Gross margin was 78.9% in the third quarter of 2009, compared with 80.3% a year ago. This was due primarily to a newly initiated rebate program tied to the use of NuDerm or Condition & Enhance systems in conjunction with cosmetic procedures, which impacted gross margins by 1%, and which has been fully accrued for.
Operating expense declined to $14.7 million, compared with $16.1 million a year ago, and operating income was $4.9 million, or 20% of sales, compared with $4.8 million, or 18% of sales, a year ago.
Business Highlights of the Third Quarter and Subsequent Weeks:
* Added 427 new accounts during the quarter compared to 389 in the second quarter 2009, as a result of the Company’s continued investment in promotional activities. This brings the number of active accounts to 6,130 as of September 30, which is up 9% from a year ago.
* Introduced a second new product for 2009 in select accounts, Refissa Tretinoin Emollient Cream, 0.05% in mid-September. Refissa is FDA-approved for specific use to diminish fine facial wrinkles and fade irregular pigmentation due to sun damage and smooth tactile roughness. The Company plans to position Refissa to be used to further enhance the effectiveness of NuDerm, Condition & Enhance and Obagi-C Rx Systems.
* Launched ELASTIderm successfully in Japan thru Rohto Pharmaceuticals, Obagi’s retail consumer partner, contributing to an increase in approximately $200,000 in licensing fees from the same period in 2008.
* Generated $5.0 million of cash from operations for the third quarter of 2009 bringing the Company’s cash and short-term investment balance to $31.2 million at September 30. No shares were repurchased through the Company’s stock buyback program during the quarter.
Introducing Fourth Quarter 2009 Financial Guidance
Based on current market conditions, continued economic uncertainty and the Company’s historical seasonality pattern, the Company expects revenue for the fourth quarter of 2009 to be between $25.0 and $27.0 million and earnings to be $0.16 – $0.18 per fully diluted share on 22.0 million fully diluted shares outstanding.
Strengthened Balance Sheet and Cash Flow
As of September 30, 2009, the Company was debt free with cash and cash equivalents, including short term investments, totaling $31.2 million, up from $19.9 million at December 31, 2008. Additionally, the Company generated $5.0 million in cash flow from operations during the third quarter of 2009 and $13.9 million since December 31, 2008.
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