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Syneron Reports Third Quarter 2012 Results

Date : 11/07/2012 @ 6:05PM
Source : PR Newswire (US)
Stock : Syneron Medical Ltd. - Ordinary Shares (MM) (ELOS)
Quote : 10.06  0.0 (0.00%) @ 5:40AM
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Syneron Reports Third Quarter 2012 Results

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Syneron Reports Third Quarter 2012 Results

YOKNEAM, Israel, Nov. 7, 2012 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ: ELOS), the leading global aesthetic device company, today announced third quarter 2012 financial results for the three month and nine month periods ended September 30, 2012.

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

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

  • International revenue of $40.8 million, up 8%
  • North America revenue of $19.3 million, up 1%
  • EBU1 segment revenue of $6.9 million, up 37%
  • Non-GAAP gross margin of 55.3%, up from 53.8%
  • PAD2 segment non-GAAP operating margin of 9.1%
  • Non-GAAP EPS of $0.03
  • Cash and investments portfolio of $128.4 million at September 30, 2012

2012 YTD Year-Over-Year Financial Highlights Include:

  • International revenue of $128.2 million up 16%
  • North America revenue of $62.7 million, up 11%
  • EBU segment revenue of $19.9 million, up 42%
  • Non-GAAP gross margin of 54.7%, up from 53.8%, or 52.6% up from 50.7% on a GAAP basis 
  • PAD segment non-GAAP operating margin of 9.6%, or 3.7% on a GAAP basis 
  • Non-GAAP EPS of $0.10

Louis P. Scafuri, Chief Executive Officer of Syneron, commented, "During the third quarter we continued to execute on our strategic initiatives and achieved another quarter of year-over-year revenue growth, improved gross margin, and non-GAAP profitability. In the PAD segment, international sales were solid. In North America, we completed a restructuring of our U.S. sales force in July in order to improve our market coverage and enhance full product line sales, including a focus on body shaping. While this restructuring had a short-term impact on North American sales, it positions us for improved penetration across market segments from the U.S. team. We are off to a solid start in North American in the fourth quarter, and we also expect to benefit from the recent launch of the elos Plus™ next generation multi-platform system in the U.S. and the transition of the UltraShape business to our direct sales and marketing team in Canada. At the end of the quarter we also announced the global launch of the Gentle Pro-U series of upgradeable aesthetic laser systems, providing another driver for our sales force in the fourth quarter."

Mr. Scafuri continued, "In the EBU, we had another good quarter with elure Advanced Skin Brightening, the me home-use hair removal system and the Tanda family of products. We also gained CE Mark for our new dental laser system, the LiteTouch II, and began sales during the quarter. In October, we were pleased to receive FDA clearance for the me home-use, elos based hair removal product, marking the first home-use product cleared by the FDA for all skin types. The commercialization plan for the me system is in place and we are working towards a launch through prestige retail partners and direct to consumer channels in the first quarter of 2013.

"During the third quarter we developed a strategic plan to improve the operating performance of the EBU segment. Our goal is to focus the EBU's growth investments on initiatives that will drive higher margins in order to improve the EBU's contribution to our consolidated financial results. We expect this plan to begin yielding results in the fourth quarter."

Mr. Scafuri concluded, "We are also pleased to have Hugo Goldman join our team as Chief Financial Officer and Jonathan Pearson join as Executive Vice President of Business Development, Topical Products. Both of these additions strengthen our management team and position us to better capitalize on our significant growth opportunities."

Revenue: Third quarter 2012 revenue was $60.1 million, an increase of 5.5% compared to $57.0 million in the third quarter of 2011. The year-over-year revenue growth was driven by ongoing new product adoption and new products in the PAD segment, combined with continued growth in EBU segment revenue.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30, 2012:

Gross Margin for the third quarter 2012 was 55.3%, compared to 53.8% in third quarter 2011, primarily due to a higher production and sales volume and recently implemented costs cutting and efficiency measures, partially offset by a slight year-over-year decline in EBU gross margin.

Operating Income for the third quarter 2012 was $1.7 million, up from $1.2 million in third quarter 2011, representing 2.8% of revenue in the third quarter 2012, compared to 2.2% in the third quarter 2011.

The year-over-year increase in non-GAAP operating income was primarily related to the revenue growth and the 150 basis point improvement in gross margin, 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 was $1.0 million in both the third quarter 2012 and 2011.

Earnings Per Share was $0.03 in both the third quarter 2012 and 2011.

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

  • Amortization of acquired intangible assets of $2.0 million
  • Stock-based compensation of $0.9 million
  • Other non-recurring costs of $1.0 million
  • Income tax adjustment benefit of $0.5 million

GAAP Financial Highlights for the Third Quarter Ended September 30, 2012:

Gross Margin for the third quarter 2012 was 53.2%, compared to 50.6% in third quarter 2011, primarily due to a higher production and sales volume and recently implemented costs cutting and efficiency measures, partially offset by a slight year-over-year decline in EBU gross margin.

Operating Loss for the third quarter 2012 was $2.1 million, compared to $37.0 million in third quarter 2011.

The decrease in GAAP operating loss was primarily related to a one-time payment of $31.0 million in the third quarter 2011 to Palomar in settlement of the litigations against Syneron and Candela and the corresponding increase in legal expenses associated with the Palomar settlement, as well as revenue growth and the 260 basis point improvement in gross margin.

Net Loss for the third quarter 2012 was $2.3 million, compared to $40.1 million in third quarter of 2011.

Loss Per Share for the third quarter 2012 was $(0.06), compared to $(1.14) in third quarter 2011.

Cash Position: As of September 30, 2012, the Company's cash and investments portfolio was $128.4 million.

David Schlachet, interim Chief Financial Officer of Syneron, commented, "We continued to deliver solid operating results in the PAD segment in the third quarter.  PAD segment gross margin reached its highest levels since our merger with Candela, and operating margin remained solid at 9.1% despite the lower than anticipated revenue in North America. On a consolidated basis, we delivered another quarter of non-GAAP profitability and remain well positioned to continue improving our gross margin and leveraging our fixed cost base to achieve an enhanced profitability profile."

Mr. Schlachet added, "We finished the quarter with $128.4 million in cash and investments and no debt. We have the strongest balance sheet in the industry and continue to evaluate potential opportunities to leverage our cash position to enhance our growth trajectory and build value for our shareholders."

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



For the three-months ended




September 30,

% of 

September 30,

% of 

% of 



2012

Revenues 

2011

Revenues 

Change








Revenues













    PAD


$            53,223

88.5%

$            51,973

91.2%

2.4%

    EBU


6,909

11.5%

5,030

8.8%

37.4%








Total revenues

$            60,132

100.0%

$            57,003

100.0%

5.5%















Operating income (loss)













    PAD


$              4,866

9.1%

$              4,839

9.3%

0.6%

    EBU


(3,169)

(45.9%)

(3,593)

(71.4%)

-11.8%








Total operating income

$              1,697

2.8%

$              1,246

2.2%

36.2%

 

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


For the three-months ended



September 30,

% of 

September 30,

% of 

% of 


2012

Revenues 

2011

Revenues 

Change







Revenues












    PAD

$            53,223

88.5%

$            51,943

91.2%

2.5%

    EBU

6,909

11.5%

5,030

8.8%

37.4%







Total revenues

$            60,132

100.0%

$            56,973

100.0%

5.5%













Operating income (loss)












    PAD

$              1,424

2.7%

$           (33,395)

(64.3%)

(104.3%)

    EBU

(3,568)

(51.6%)

(3,593)

(71.4%)

-0.7%







Total operating loss

$             (2,144)

(3.6%)

$           (36,988)

(64.9%)

(94.2%)

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 third 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"Q3 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: 47521925.

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 costsor 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 – 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.

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

 

Syneron Medical Ltd.

Unaudited Condensed Consolidated Statements of Loss

(in thousands, except per share data)












For the three-months ended


For the nine-months ended



September 30,


September 30,


September 30,


September 30,



2012


2011


2012


2011



















Revenues

$            60,132


$            56,973


$           190,862


$           167,310

Cost of revenues 

28,151


28,171


90,468


82,461










Gross profit

31,981


28,802


100,394


84,849










Operating expenses:









Sales and marketing 

18,768


15,964


59,111


47,669


General and administrative

8,235


10,425


25,487


25,751


Research and development

7,206


7,027


21,630


21,551


Other expenses (income), net

(84)


32,374


237


30,583










Total operating expenses

34,125


65,790


106,465


125,554










Loss from operations

(2,144)


(36,988)


(6,071)


(40,705)











Financial Income, net 

378


149


976


923










Loss before taxes on income 

(1,766)


(36,839)


(5,095)


(39,782)










Taxes on income 

526


3,299


2,197


3,823










Loss before non-controlling interest

(2,292)


(40,138)


(7,292)


(43,605)










Net loss attributable to non-controlling interest

-


45


776


851










Loss attributable to Syneron shareholders

$             (2,292)


$           (40,093)


$             (6,516)


$           (42,754)




























Loss per share:

















Basic and Diluted









Loss before non-controlling interest

$               (0.06)


$               (1.14)


$               (0.20)


$               (1.24)


Net loss attributable to non-controlling interest

-


-


0.02


0.02


Net loss attributable to Syneron shareholders

$               (0.06)


$               (1.14)


$               (0.18)


$               (1.22)



















Weighted average shares outstanding:









Basic and Diluted

35,508


35,266


35,437


35,113

 

 

Syneron Medical Ltd.

Condensed Consolidated Balance Sheets

(in thousands)








September 30,


December 31,



2012


2011 (*)



(unaudited)



Assets









Current assets:





Cash and cash equivalents

$              45,461


$              62,319


Short-term bank deposits

20,864


23,771


Available-for-sale marketable securities

49,483


70,463


Trade receivable, net

48,731


43,300


Other accounts receivables and prepaid expenses

10,285


8,891


Inventories, net

42,113


31,169






Total current assets

216,937


239,913






Long-term assets:





Severance pay fund

548


295


Long-term deposits and others 

1,965


2,118


Long-term available-for-sale marketable securities 

12,574


15,590


Investments in affiliated companies

1,200


200


Property and equipment, net

5,729


4,155


Intangible assets, net 

35,485


31,813


Goodwill

25,177


18,867


Deferred taxes

8,886


10,060






Total long-term assets

91,563


83,098






Total assets

$            308,500


$            323,011











Liabilities and Stockholders' Equity









Current liabilities:





Short term bank credit

$                     -


$                1,082


Accounts payable

19,580


21,094


Deferred Revenues

12,420


11,550


Other accounts payable and accrued expenses

43,418


41,704






Total current liabilities

75,418


75,430






Long-term liabilities:





Contingent consideration liability

8,080


2,535


Deferred Revenues

3,361


4,112


Warranty Accruals

498


564


Accrued severance pay

793


496


Deferred taxes

4,359


5,182






Total long-term liabilities

17,091


12,889






Stockholders' equity:

215,991


234,692






Total liabilities and stockholders' equity

$            308,500


$            323,011






 (*)

Derived from audited financial statements




 

 

Syneron Medical Ltd.

 Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)









For the Nine-months ended:




















September 30,


September 30,








2012


2011

Cash flows from operating activities:






Net loss before non-controlling interest


$           (7,292)


$          (43,605)



Adjustments to reconcile net loss to net cash
 used by operating activities:







Non-cash items reported in discontinued operations




-



Share-based compensation 


3,365


2,453



Depreciation and amortization


7,937


7,765



Impairments of intangible assets


780


-



Realized loss, changes in accrued interest and amortization of premium (discount) on marketable securities


(337)


1,144



Impairment of investment in affiliated company


-


969



Revaluation of contingent liability


(580)


(2,625)



Changes in operating assets and liabilities








Trade receivable, net


(5,349)


(2,221)




Inventories, net


(11,940)


(2,325)




Other accounts receivables


262


(1,830)




Deferred taxes


1,430


540




Accrued severance pay, net


18


(34)




Accounts payable


(2,466)


3,769




Deferred revenue


160


(2,260)




Accrued warranty accruals


19


(430)




Other accrued liabilities


(5,797)


(643)













Net cash used in operating activities


(19,790)


(39,333)













Cash flows from investing activities:







Purchases of property and equipment


(1,125)


(1,692)



Investments in long-term deposits and others


-


343



Proceeds from the sale or maturity of available-for-sale marketable securities


49,869


115,544



Purchase of available-for-sale marketable securities


(25,549)


(67,225)



Investments in short-term bank deposits, net


2,906


(22,734)



Investments in affiliated company


(1,000)


(761)



Net cash paid in acquisition of subsidiaries


(15,050)


-



Other investing activities


(112)


(41)













Net cash provided by investing activities


9,939


23,434











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


(7,200)


-



Proceeds from exercise of stock options


1,366


3,791













Net cash provided by (used in) financing activities


(6,916)


1,054











Effect of exchange rates on cash and cash equivalents


(91)


863











Net decrease in cash and cash equivalents


(16,858)


(13,982)













Cash and cash equivalents at beginning of period


62,319


63,821













Cash and cash equivalents at end of period


$           45,461


$           49,839

 

 

Syneron Medical Ltd.

Unaudited Non-GAAP Financial Measures and Reconciliation

(in thousands, except per share data)












For the three-months ended


For the nine-months ended



September 30,


September 30,


September 30,


September 30,



2012


2011


2012


2011



















GAAP operating loss

$             (2,144)


$           (36,988)


$             (6,071)


$           (40,705)











Legal settlement costs 

-


33,900


-


33,900


Stock-based compensation

894


929


3,365


2,453


Amortization of intangible assets

1,986


2,037


5,870


6,016


Merger and other non-recurring items

961


1,368


2,335


480










Non-GAAP operating income

$              1,697


$              1,246


$              5,499


$              2,144



























GAAP net loss attributable to Syneron shareholders

$             (2,292)


$           (40,093)


$             (6,516)


$           (42,754)











Legal settlement costs 

-


33,900


-


33,900


Stock-based compensation

894


929


3,365


2,453


Amortization of intangible assets

1,986


2,037


5,870


6,016


Merger and other non-recurring items

961


1,368


2,335


480


Income tax adjustments

(538)


2,827


(1,636)


1,312










Non-GAAP net income attributable to Syneron shareholders
   before non-controlling interest

$              1,011


$                 968


$              3,418


$              1,407



















Income (Loss) per share:

















Basic








GAAP net loss attributable to Syneron shareholders
   before non-controlling interest

$               (0.06)


$               (1.14)


$               (0.18)


$               (1.22)











Legal settlement costs 

-


0.96


-


0.97


Stock-based compensation

0.03


0.03


0.09


0.07


Amortization of intangible assets

0.06


0.06


0.17


0.17


Merger and other non-recurring items

0.03


0.04


0.07


0.01


Income tax adjustments

(0.02)


0.08


(0.05)


0.04










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

$                0.03


$                0.03


$                0.10


$                0.04



















Diluted








GAAP net loss attributable to Syneron shareholders
   before non-controlling interest

$               (0.06)


$               (1.12)


$               (0.18)


$               (1.19)











Legal settlement costs 

-


0.94


-


0.94


Stock-based compensation

0.02


0.03


0.09


0.07


Amortization of intangible assets

0.06


0.06


0.16


0.17


Merger and other non-recurring items

0.03


0.04


0.07


0.01


Income tax adjustments

(0.01)


0.08


(0.05)


0.04










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

$                0.03


$                0.03


$                0.10


$                0.04










Weighted average shares outstanding:


















Basic

35,508


35,266


35,437


35,113











Diluted

35,875


35,901


35,866


35,947

 

SOURCE Syneron Medical Ltd.

Copyright 2012 PR Newswire



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