Syneron Medical Ltd. (
Q3 2011 Earnings Call
November 10, 2011 8:30 AM ET
Zack Kubow – The Ruth Group, IR
Lou Scafuri – Chief Executive Officer
Asaf Alperovitz – Chief Financial Officer
Shimon Eckhouse – Chairman
Rich Newitter – Leerink Swann
Anthony Vendetti – Maxim Group
Dalton Chandler – Needham
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Good day, ladies and gentlemen. And welcome to the Syneron Medical Third Quarter 2011 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)
As a reminder, this conference is being recorded. I would now like to turn the call over to your host Zack Kubow. Please go ahead, sir.
Thank you, Operator. I’d like to welcome you to Syneron Medical’s third quarter 2011 conference call.
Statements on this call may be forward-looking within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, relating to the company’s future events or future performance, including statements respect to Syneron’s expectations regarding, but not limited to the financial forecast for 2011, the launch of new products and the maintenance of leadership position in core and non-core markets.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in any forward-looking statements.
These risks may include, but are not limited to the risk factors set forth under the heading Risk Factors in Syneron’s annual report on Form 20-F filed with the SEC. These factors are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission.
These statements are only predictions and Syneron cannot guarantee that they will in fact occur. The company does not assure any obligation to update the forward-looking statements discussed in today’s conference call
Finally, this presentation includes non-GAAP financial measures. Syneron provides reconciliation information at the end of the third quarter results press release on the Investor Relations page at www.syneron.com.
Speaking on the call today are Syneron’s CEO, Lou Scafuri; and Syneron’s CFO, Asaf Alperovitz. Shimon Eckhouse, Syneron’s Chairman of the Board is also on the call and will be available for questions during the Q&A portion at the conclusion of management’s prepared remarks.
Now, I’d like to turn the call over to Lou.
Thank you, Zack. And welcome to Syneron’s third quarter 2011 conference call. During the third quarter we continued to execute on our strategic growth and profitability initiatives further positioning Syneron for ongoing industry leadership.
We achieved several important milestones including the settlement of Syneron and Candela’s patent litigation with Palomar and setting the stage to the launch of two exciting next generation products.
We also demonstrated progress in the PAD segment and continued to invest in the growth of our emerging business units. Together it was another strong quarter that is indicative of our momentum in the marketplace and highlights the success of the company’s strategic vision.
I’ll begin today’s call with a quick overview of our financial results followed by a review of our operational progress. Total revenue in the third quarter 2011 was $57 million, up 28% over the prior year. This represents our fifth consecutive quarter of double-digit year-over-year sales growth and an acceleration of our growth rate from the second quarter 2011.
This strong topline performance was especially significant in light of the typical summer month seasonality in the third quarter and the ongoing macroeconomic uncertainty worldwide.
We were able to achieve strong results in spite of these headwinds because of our unmatched global channel of marketing capabilities including continued cross selling, strong brand recognition, trusted scientific innovation and unrelenting focus on our customers and the patients we serve.
International markets grew 29% during the quarter led by growth across all geographies. We expect this momentum to continue as we have a solid combination of strong partners, market acceptance and relationships with key thought leaders on a global basis.
North America also presented a significant revenue growth of 27% year-over-year. This was driven by strong sales of Syneron and Candela products, particularly the recently launched GentleLASE PRO and increased sales of consumables driven by the utilization of the Syneron product line.
Consumable revenue increased 53% year-over-year demonstrating that our products are being well received by physicians and their patients. Overall recurring revenue, which also includes service revenue grew 22%, represented approximately of 32% of total PAD sales.
EBU revenue in the quarter was $5 million up nearly 500% compared to the prior year and representing 9% of this quarter’s revenues. Non-GAAP gross margin was 52.6% in the quarter, up from 52.3% in the prior year.
In our Professional Aesthetic Devices or PAD segment, non-GAAP operating income was $4.8 million or 9.3% operating margin. This is a very positive indicator that we are successfully increasing gross margin and managing operating expenses.
On the bottom line we achieved our fourth consecutive quarter of non-GAAP profitability with earnings per share of $0.03. This demonstrates our ability to effectively balance the growth of the profitable PAD segment with our investments in the rapidly expanding EBU segment.
Turning now to an operational update, I want to first highlight two new very exciting next generation products. In October we launched the new eTwo platform which brings together two of Syneron’s most innovative and successful applications in a single system for non-invasive fractional skin resurfacing and wrinkle reduction.