Syneron Reports Second Quarter 2012 Results

Aug 15, 2012 9:10am

All time high revenue of $68.1 million, up 12% Year-Over-Year

YOKNEAM, Israel, Aug. 15, 2012 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ:ELOS), the leading global aesthetic device company, today announced second quarter 2012 financial results for the three month period ended June 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120528/535447 )

Second Quarter 2012 Year-Over-Year Financial Highlights Include:

International revenue of $46.2 million, up 16%
North America revenue of $21.9 million, up 5%
Non-GAAP gross margin of 55.1%, up from 53.1%
PAD¹ segment non-GAAP operating margin of 11.4%
Cash and investments portfolio of $135 million at June 30, 2012

Louis P. Scafuri, Chief Executive Officer of Syneron, commented, "During the second quarter we achieved strong financial results, including our third consecutive quarter with record revenue. Strong PAD segment sales were mainly driven by the international launch of the elos Plus™ next generation multi-platform system and continued strong adoption of the recently launched eLase™, eTwo™, and GentleMax Pro systems. In addition to the strong PAD revenue, we also delivered improved gross margin and further leveraged our operating infrastructure, which translated to an improved operating profit. For the second half of the year, we expect PAD results to benefit from the recently acquired business of UltraShape, the U.S. launch of elos Plus™, and the expected launch of exciting body contouring products that are complementary to our existing portfolio."

Revenue: Second quarter 2012 revenue was $68.1 million, an increase of 12.4% compared to $60.6 million in the second quarter of 2011. This included strong PAD segment revenue growth, which was mainly driven by ongoing new product adoption and new products launched during the quarter. In addition, the Company achieved significant growth in EBU² segment revenue.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30, 2012:

Gross Margin for the second quarter 2012 was 55.1%, compared to 53.1% in second quarter 2011, primarily due to a higher production and sales volume, recently implemented costs cutting and efficiency measures, and year-over-year improvements in EBU gross margin.

Operating Income for the second quarter 2012 was $3.1 million, up from $0.3 million in second quarter 2011, representing 4.6% of revenue in the quarter, compared to 0.5% in second quarter 2011.

The year-over-year increase in non-GAAP operating income was primarily related to the revenue growth, the 200 basis point improvement in gross margin, and improved leverage of the Company's fixed cost base. This was partially offset by an increase in operating expenses associated with the growth in EBU segment revenues. The EBU currently incurs higher relative operating expenses compared to the PAD segment due to start-up costs associated with developing and significant investment in marketing its emerging technologies and products.

Net Income for the second quarter 2012 was $1.9 million, up from $0.2 million in the second quarter of 2011.

Earnings Per Share for the second quarter 2012 were $0.05, up from $0.01 in second quarter 2011.

Net income and earnings per share for the second quarter 2012 are adjusted to exclude the following items, which are detailed in the Company's financial tables:

Amortization of acquired intangible assets of $2.1 million
Stock-based compensation of $1.3 million
Non-recurring costs associated with the voluntary field action regarding the LiteTouch Dental Laser Product in Europe of $0.3 million
Other non-recurring costs of $0.3 million

GAAP Financial Highlights for the Second Quarter Ended June 30, 2012:

Gross Margin for the second quarter 2012 was 53.2%, compared to 51.4% in second quarter 2011, primarily due to higher production and sales volume, recently implemented costs cutting and efficiency measures, and year-over-year improvements in EBU gross margin.

Operating Loss for the second quarter 2012 was $0.9 million, compared to $1.1 million in second quarter 2011.

The decrease in GAAP operating loss was primarily related to the revenue growth, the 180 basis point improvement in gross margin, and improved leverage of the Company's fixed cost base. This was partially offset by an increase in operating expenses associated with the growth in EBU segment revenues. The EBU currently incurs higher relative operating expenses compared to the PAD segment due to start-up costs associated with developing and significant investment in marketing its emerging technologies and products.

Net Loss for the second quarter 2012 was $1.6 million, compared to $0.3 million in second quarter of 2011.

Loss Per Share for the second quarter 2012 was $(0.05), compared to $(0.01) in second quarter 2011.

Cash Position: As of June 30, 2012, the Company's cash and investments portfolio was $135 million.

Asaf Alperovitz, Chief Financial Officer of Syneron, commented, "We achieved strong financial results during the quarter, including record revenue in both the PAD and EBU segments. In the PAD segment, we are successfully leveraging our fixed cost base and implementing expense reduction initiatives, which drove PAD segment non-GAAP operating margin of 11.4%. On a consolidated basis, the strong PAD segment performance drove non-GAAP net income of $1.9 million."

Mr. Alperovitz continued, "In the EBU segment, we had a strong quarter across all the Syneron Beauty home use products and continued to move forward with our plan to reach EBU profitability by expanding direct sales, introducing high margin products and implementing manufacturing and operating cost reduction initiatives. We reached the significant threshold of $1.0 million in quarterly revenue of our skin brightening products and remain on track to receive regulatory approvals for elure in key Asian markets by the end of the year. Overall, we continue to be excited about the long-term prospects for this new, high growth segment of our business."

Unaudited Non-GAAP segment results for the three months ended June 30, 2012 and 2011 (in thousands):

		For the three-months ended
		June 30,	% of	June 30,	% of	% of
		2012	Revenues	2011	Revenues	Change


Revenues

	PAD	$ 61,146	89.8%	$ 54,468	89.9%	12.3%
	EBU	6,925	10.2%	6,115	10.1%	13.2%

Total revenues		$ 68,071	100.0%	$ 60,583	100.0%	12.4%


Operating income (loss)

	PAD	$ 6,977	11.4%	$ 3,235	5.9%	115.7%
	EBU	(3,869)	(55.9%)	(2,951)	(48.3%)	31.1%

Total operating income		$ 3,108	4.6%	$ 284	0.5%	994.4%

Unaudited GAAP segment results for the three months ended June 30, 2012 and 2011 (in thousands):

		For the three-months ended
		June 30,	% of	June 30,	% of	% of
		2012	Revenues	2011	Revenues	Change


Revenues

	PAD	$ 61,146	89.8%	$ 54,439	89.9%	12.3%
	EBU	6,925	10.2%	6,115	10.1%	13.2%

Total revenues		$ 68,071	100.0%	$ 60,554	100.0%	12.4%


Operating income (loss)

	PAD	$ 3,390	5.5%	$ 1,906	3.5%	77.9%
	EBU	(4,282)	(61.8%)	(3,016)	(49.3%)	42.0%

Total operating loss		$ (892)	(1.3%)	$ (1,110)	(1.8%)	(19.6%)

Use of Non-GAAP Measures

This press release provides financial measures for gross margin, operating margin, operating income (loss), net income (loss), earnings (loss) per share, which exclude one-time expenses relating to the mergers with Candela Corporation and Primaeva Medical Inc, an expense charge related to stock-based compensation and amortization, one-time severance and other one-time charges and non-recurring costs, and non-recurring costs associated with the voluntary field action regarding the LiteTouch Dental Laser Product in Europe, and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance because it reflects our ongoing operational results, operating margin, operating income (loss), net income (loss) and earnings (loss) per share. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses non-GAAP measures when evaluating the business internally and, therefore, felt it important to make these non-GAAP adjustments available to investors. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

Conference call

Syneron management will host its second quarter 2012 earnings conference call today at 8:30 a.m. ET. Syneron will be broadcasting live via the Investor Relations section of its website, www.investors.syneron.com. To access the call, enter the Syneron Investor Relations website, then click on the webcast link "Q2 2012 Results Webcast."

Participants are encouraged to log on at least 15 minutes prior to the conference call in order to download the applicable audio software. The call can be heard live or with an on-line replay which will follow. Those interested in participating in the call and the question and answer session should dial 877-844-6886 in the U.S., and 970-315-0315 from overseas. The conference pass code is: 13010078.

About Syneron Medical Ltd.

Syneron Medical Ltd. (NASDAQ: ELOS) is the leading global aesthetic device company with a comprehensive product portfolio and a global distribution footprint. The Company's technology enables physicians to provide advanced solutions for a broad range of medical-aesthetic applications including body contouring, hair removal, wrinkle reduction, rejuvenation of the skin's appearance through the treatment of superficial benign vascular and pigmented lesions, and the treatment of acne, leg veins and cellulite. The Company sells its products under two distinct brands, Syneron and Candela. Founded in 2000, the corporate, R&D, and manufacturing headquarters for Syneron Medical Ltd. are located in Israel. Syneron also has R&D and manufacturing operations in the US. The Company markets, services and supports its products in 90 countries. It has offices in North America, France, Germany, Italy, Portugal, Spain, UK, Australia, China, Japan, and Hong Kong and distributors worldwide.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Any statements contained in this document regarding future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Further, any statements that are not statements of historical fact (including statements containing "believes," "anticipates," "plans," "expects," "may," "will," "would," "intends," "estimates" and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including the risk that the businesses of Syneron and Candela may not be integrated successfully; the risk that the merger transaction with Candela may involve unexpected costs or unexpected liabilities; the risk that synergies from the merger transaction may not be fully realized or may take longer to realize than expected; the risk that disruptions from the merger transaction make it more difficult to maintain relationships with customers, employees, or suppliers; as well as the risks set forth in Syneron Medical Ltd.'s most recent Annual Report on Form 20-F, and the other factors described in the filings that Syneron Medical Ltd. makes with the SEC from time to time. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, Syneron Medical Ltd.'s actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

In addition, the statements in this document reflect the expectations and beliefs of Syneron Medical Ltd. as of the date of this document. Syneron Medical Ltd. anticipates that subsequent events and developments will cause its expectations and beliefs to change. However, while Syneron Medical Ltd. may elect to update these forward-looking statements publicly in the future, it specifically disclaims any obligation to do so. The forward-looking statements of Syneron Medical Ltd. do not reflect the potential impact of any future dispositions or strategic transactions that may be undertaken. These forward-looking statements should not be relied upon as representing Syneron Medical Ltd.'s views as of any date after the date of this document.

Syneron, the Syneron logo, eMatrix and elos are trademarks of Syneron Medical Ltd. and may be registered in certain jurisdictions. The elos (Electro-Optical Synergy) technology is a proprietary technology of Syneron Medical Ltd. All other names are the property of their respective owners.

1 – PAD: Professional Aesthetic Device segment, which includes the results of the Syneron and Candela device businesses.

2 – EBU: Emerging Business Units. Products in the EBU include me home-use hair removal system, elure Advanced Skin Brightening products, Tanda LED systems, Light Instruments' dental laser devices along with pipeline products that include Fluorinex teeth whitening and fluorination.

Syneron Medical Ltd.
Unaudited Condensed Consolidated Statements of Loss
(in thousands, except per share data)

		For the three-months ended		For the six-months ended
		June 30,	June 30,		June 30,	June 30,
		2012	2011		2012	2011


Revenues		$ 68,071	$ 60,554		$ 130,730	$ 110,337
Cost of revenues		31,855	29,417		62,317	52,996

Gross profit		36,216	31,137		68,413	57,341

Operating expenses:
	Sales and marketing	20,606	18,409		40,343	32,999
	General and administrative	8,450	8,072		17,252	15,326
	Research and development	7,731	8,156		14,424	14,524
	Other expenses	321	(2,390)		321	(1,791)

Total operating expenses		37,108	32,247		72,340	61,058

Loss from operations		(892)	(1,110)		(3,927)	(3,717)

Other income:
	Financial Income, net	109	416		598	750
	Other income	-	-		-	24

	Total other income	109	416		598	774

Loss before taxes on income		(783)	(694)		(3,329)	(2,943)

Taxes on income		1,166	54		1,671	524

Loss before non-controlling interest		(1,949)	(748)		(5,000)	(3,467)

Net loss attributable to non-controlling interest		340	464		776	806

Loss attributable to Syneron shareholders		$ (1,609)	$ (284)		$ (4,224)	$ (2,661)



Loss per share:

Basic and Diluted
	Loss before non-controlling interest	$ (0.06)	$ (0.02)		$ (0.14)	$ (0.10)
	Net loss attributable to non-controlling interest	0.01	0.01		0.02	0.02
	Net loss attributable to Syneron shareholders	$ (0.05)	$ (0.01)		$ (0.12)	$ (0.08)


Weighted average shares outstanding:
	Basic and Diluted	35,382	35,152		35,355	35,035

Syneron Medical Ltd.
Condensed Consolidated Balance Sheets
(in thousands)

		June 30,	December 31,
		2012	*2011 ()**
		(unaudited)
Assets

Current assets:
	Cash and cash equivalents	$ 48,963	$ 62,319
	Short-term bank deposits	25,767	23,771
	Available-for-sale marketable securities	49,643	70,463
	Trade receivable, net	51,970	43,300
	Other accounts receivables and prepaid expenses	7,512	8,891
	Inventories, net	36,988	31,169

Total current assets		220,843	239,913

Long-term assets:
	Severance pay fund	537	295
	Long-term deposits and others	2,029	2,118
	Long-term available-for-sale marketable securities	10,588	15,590
	Investments in affiliated companies	1,200	200
	Property and equipment, net	5,861	4,155
	Intangible assets, net	37,575	31,813
	Goodwill	25,627	18,867
	Deferred taxes	8,340	10,060

Total long-term assets		91,757	83,098

Total assets		$ 312,600	$ 323,011


Liabilities and Stockholders' Equity

Current liabilities:
	Short term bank credit	$ -	$ 1,082
	Accounts payable	22,779	21,094
	Deferred Revenues	12,973	11,550
	Other accounts payable and accrued expenses	42,486	41,704

Total current liabilities		78,238	75,430

Long-term liabilities:
	Contingent consideration liability	8,756	2,535
	Deferred Revenues	3,221	4,112
	Warranty Accruals	528	564
	Accrued severance pay	758	496
	Deferred taxes	4,626	5,182

Total long-term liabilities		17,889	12,889

Stockholders' equity:		216,473	234,692

Total liabilities and stockholders' equity		$ 312,600	$ 323,011

(*)	Derived from audited financial statements

Syneron Medical Ltd.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

				For the six-months ended:

				June 30,	June 30,
				2012	2011
Cash flows from operating activities:
	Net loss before non-controlling interest			$ (5,000)	$ (3,467)
		Adjustments to reconcile net loss to net cash used by operating activities:
		Share-based compensation		2,471	1,524
		Depreciation and amortization		5,139	5,164
		Impairments of intangible assets		225	-
		Realized loss, changes in accrued interest and amortization of premium (discount) on marketable securities		(366)	(509)
		Revaluation of contingent liability		96	(2,541)
		Changes in operating assets and liabilities
			Trade receivable, net	(8,896)	(4,817)
			Inventories, net	(6,760)	(787)
			Other accounts receivables	831	641
			Deferred taxes	2,243	(257)
			Accrued severance pay, net	(6)	(2)
			Accounts payable	930	(255)
			Deferred revenue	685	(39)
			Accrued warranty accruals	328	(418)
			Other accrued liabilities	(6,948)	(727)

Net cash used in operating activities				(15,028)	(6,490)

Cash flows from investing activities:
		Purchases of property and equipment		(883)	(1,339)
		Investments in long-term deposits and others		-	(770)
		Proceeds from the sale or maturity of available-for-sale marketable securities		43,129	61,235
		Purchase of available-for-sale marketable securities		(16,907)	(39,798)
		Investments in short-term deposits, net		(2,006)	(15,238)
		Investments in affiliated company		(1,000)	-
		Net cash paid in acquisition of subsidiaries		(15,050)	-
		Other investing activities		(127)	(22)

Net cash provided by investing activities				7,156	4,068

Cash flows from financing activities:
		Short term bank credit, net		(1,082)	(2,737)
		Acquisition of shares held by non-controlling shareholders of a subsidiary		(5,000)	-
		Proceeds from exercise of stock options		1,055	3,745

Net cash provided by (used in) financing activities				(5,027)	1,008

Effect of exchange rates on cash and cash equivalents				(456)	397

Net decrease in cash and cash equivalents				(13,356)	(1,017)

Cash and cash equivalents at beginning of period				62,319	63,821

Cash and cash equivalents at end of period				$ 48,963	$ 62,804

Syneron Medical Ltd.
Unaudited Non-GAAP Financial Measures and Reconciliation
(in thousands, except per share data)

		For the three-months ended		For the six-months ended
		June 30,	June 30,		June 30,	June 30,
		2012	2011		2012	2011


GAAP operating loss		$ (892)	$ (1,110)		$ (3,927)	$ (3,717)

	Stock-based compensation	1,278	854		2,471	1,524
	Amortization of intangible assets	2,053	2,036		3,884	3,979
	Merger and other non-recurring items	669	(1,496)		1,374	(888)

Non-GAAP operating income		$ 3,108	$ 284		$ 3,802	$ 898


before non-controlling interest
GAAP net loss attributable to Syneron shareholders		$ (1,609)	$ (284)		$ (4,224)	$ (2,661)

	Stock-based compensation	1,278	854		2,471	1,524
	Amortization of intangible assets	2,053	2,036		3,884	3,979
	Merger and other non-recurring items	669	(1,496)		1,374	(888)
	Income tax adjustments	(535)	(901)		(1,098)	(1,515)

Non-GAAP net income attributable to Syneron shareholders before non-controlling interest		$ 1,856	$ 209		$ 2,407	$ 439


Income (Loss) per share:

Basic
GAAP net loss attributable to Syneron shareholders before non-controlling interest		$ (0.05)	$ (0.01)		$ (0.12)	$ (0.08)

	Stock-based compensation	0.04	0.02		0.07	0.04
	Amortization of intangible assets	0.06	0.06		0.11	0.11
	Merger and other non-recurring items	0.02	(0.04)		0.04	(0.03)
	Income tax adjustments	(0.02)	(0.03)		(0.03)	(0.04)

Non-GAAP net income per share attributable to Syneron shareholders operations before non-controlling interest		$ 0.05	$ 0.01		$ 0.07	$ 0.01


Diluted
GAAP net loss attributable to Syneron shareholders before non-controlling interest		$ (0.04)	$ (0.01)		$ (0.12)	$ (0.07)

	Stock-based compensation	0.04	0.02		0.07	0.04
	Amortization of intangible assets	0.06	0.06		0.11	0.11
	Merger and other non-recurring items	0.02	(0.04)		0.04	(0.02)
	Income tax adjustments	(0.01)	(0.03)		(0.03)	(0.04)

Non-GAAP net income per share attributable to Syneron shareholders operations before non-controlling interest		$ 0.05	$ 0.01		$ 0.07	$ 0.01

Weighted average shares outstanding:

	Basic	35,382	35,152		35,355	35,035

	Diluted	35,869	35,916		35,885	35,842

SOURCE Syneron Medical Ltd.