Imaging revenues, which included both cone beam and CAD/CAM, totaled approximately $1.6 million, or 8.6% of net revenue, during the 2012 fourth quarter as compared to $138,000, or 1.0% of net revenue, for the prior year quarter.
Gross profit as a percentage of net revenue was 46.6% as compared to 42.2% for the prior year quarter. This quarter-over-quarter increase was primarily due to higher unit sales of WaterLase systems, diode laser systems, and imaging systems, increased consumables, and increased license fees and royalty revenue, combined with decreased costs of revenues as service and warranty expenses continue to decline as manufacturing processes and quality continue to improve.
Operating expenses totaled $7.7 million, or 40.4% of net sales, as compared to $7.5 million, or 56.9% of net sales, in the 2011 fourth quarter. The increased sales and marketing expense is primarily a result of sales commissions accrued on higher system revenues as well as higher payroll and consulting costs associated with the development of our direct sales force in North America and an increase in convention costs, which were offset by a decrease in the cost of supplies.
General and administrative expenses decreased to $1.8 million during the 2012 fourth quarter as compared to $2.0 million for the prior year quarter.
Engineering and development totaled $1.0 million during the 2012 fourth quarter, essentially flat with the prior year quarter.
As a result, net income for the 2012 fourth quarter totaled $1.0 million, or $0.03 per share, compared to a net loss of $2.0 million, or a loss of $0.06 per share, for the 2011 fourth quarter.
After removing interest expense of $99,000, non-cash depreciation and amortization expenses of $140,000, and non-cash stock-based, other equity instruments, and other non-cash compensation expense of $383,000, the 2012 fourth quarter resulted in non-GAAP net income of $1.7 million, or $0.05 per share, compared with a non-GAAP net loss of $1.3 million, or ($0.04) per share, for the 2011 fourth quarter.
2012 Financial Results
GAAP net revenue for the year ended December 31, 2012, totaled $57.4 million, compared with net revenue of $48.9 million in the prior year. Domestic revenues were $40.6 million, or 70.7% of net revenue, for 2012 compared to $32.8 million, or 67.1% of net revenue, for 2011. International revenues for 2012 were $16.8 million, or 29.3% of net revenue compared to $16.1 million, or 32.9% of net revenue for 2011.
Adjusting for the inventory re-purchased in connection with the Schein termination agreement, non-GAAP adjusted revenue for 2012 was $58.5 million, which was the midpoint of our initial annual revenue guidance for 2012. This represents an increase of $9.6 million, or 19.7% as compared to net revenue of $48.9 million for 2011. When excluding both the 2012 inventory re-purchased in connection with the Schein termination agreement, which was offset against our 2012 second quarter, and the 2011 non-recurring event of equipment sales to Schein for irrevocable purchase orders of $5.9 million; non-GAAP adjusted revenue for 2012 represents a 36.1% increase over non-GAAP adjusted revenue for the prior year, which was in line with our guidance of 36%.
The number of WaterLase systems sold during 2012 increased by 37.1% as compared to the prior year, primarily due to increased sales of WaterLase iPlus systems and sales of MD Turbo systems, including 100% of the equipment that the Company re-purchased in connection with the Schein termination agreement.
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