Syneron Medical CEO Discusses F3Q2011 Results -- Earnings Call Transcript

Syneron Medical Ltd. ( ELOS)

Q2 2011 Earnings Call

August 11, 2011, 11:00 am ET

Executives

Zack Kubow - Ruth Group

Lou Scafuri - CEO

Asaf Alperovitz - CFO

Analysts

Richard Newitter - Leerink Swann

Amit Hazan - Gleacher & Company

Anthony Vendetti - Maxim Group

Dalton Chamber - Needham & Company

Presentation

Good day ladies and gentlemen and welcome to the Syneron Medical Limited second 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 your conference over to your host for today, Mr. Zack Kubow of the Ruth Group. Sir, you may begin.

Zack Kubow

Thank you, operator. I’d like to welcome you to Syneron Medical’s Second Quarter 2011 conference call.

Statements on this call may be forward-looking within the meaning of the US Private Securities Litigation Reform Act of 1995 relating to the company’s future events or future performance, including statements with respect to Syneron’s expectations regarding, but not limited to the financial forecast for 2011, the launch of new products and the maintenance of a 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 second 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.

Lou Scafuri

Thank you, Jack, and welcome to Syneron’s second quarter 2011 conference call. We achieved record revenue in the second quarter and continue to strengthen and expand our industry leadership position and gain market share. Our robust second quarter results clearly reflects the strength of Syneron. Our worldwide channel to market capabilities, market leading technologies and diversified sources of revenue have led to exceptional sales growth and market share expansion. Our results were driven by execution in the global aesthetic marketplace.

During the quarter, we continue to demonstrate positive adoption of our recently launched products, prudent expense management and continue its efforts to enhance overall efficiencies. Our excellent quarter clearly indicates that our strategic initiatives are producing strong results and we are well positioned to out-perform and expand our market leadership.

I will begin today’s call with a quick overview of our strong financial results followed by a review of our operational progress. Total revenue in the second quarter 2011 was $60.6 million, up 24% over the prior year. This represents our fourth consecutive quarter of double-digit, year-over-year sales growth and by far our strongest revenue quarter since we completed the merger with Candela at the beginning of 2010.

Revenue grew 15% in North America and 30% in the international markets year-over-year driven by increased cross-selling, the launch of new products and our ability to selectively deploy resources in high growth markets. We also had another quarter of record sales of consumable and accessories underscored by a 173% year-over-year and 18% sequential growth in consumable sales and Syneron products.

As I have articulated in the past, this is a very positive indicator that our products are being well received by both physicians and their patients. Our financial results for the second quarter include revenue of $6.1 million from our emerging business units or EBU. This is more than double the revenue posted in the first quarter of 2011 and a 559% growth year-over-year. This is the first quarter and in which EBU sales have represented more than 10% of total Syneron revenue, a significant milestone for this segment. We are very pleased with the rapid EBU growth and the diversification that it provides to our overall business.

Non-GAAP gross margin was 52% in the second quarter, up from 48.9% in the prior year reflecting an increased mix of Syneron products and consumables which is driven primarily from increased cross-selling. In our Professional Aesthetic Devices or PAD segments, non-GAAP operating profit was $3.2 million or 5.9% operating margin. Our ability to continue to achieve non-GAAP operating profit in the PAD segment is a result of our focus on increasing sales of higher margin products and effectively leveraging economics of scale. The bottom-line, we achieved our third consecutive quarter of non-GAAP profitability with earnings per share of $0.01. We’re pleased that our consolidated business continues to be profitable and believe that Syneron is uniquely positioned in the industry with growing market leadership in the Professional Aesthetic Device business and high growth emerging business units.

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