Syneron Medical's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Syneron Medical Ltd. ( ELOS)

Q4 2011 Earnings Call

February 9, 2012 8:30 am ET

Executives

Dr. Shimon Eckhouse – Chairman

Louis Scafuri – Chief Executive Officer

Asaf Alperovitz – Chief Financial Officer

Analysts

Anthony Vendetti – Maxim Group

Dalton Chandler – Needham & Co.

Jeremy Feffer – Cantor Fitzgerald

Richard Newitter – Leerink Swann

Presentation

Operator

Good day ladies and gentlemen and welcome to the Syneron Medical Fourth Quarter 2011 Results conference call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question and answer session and instructions will follow at that time. If anyone should require assistance, please press star then zero on your touchtone telephone. As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Zach Kubow. Please go ahead, sir.

Zack Kubow – The Ruth Group

Thank you, Operator. I’d like to welcome everyone to Syneron Medical’s Fourth Quarter 2011 conference call, which will also cover the Company’s acquisition of Ultrashape that was announced yesterday. 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 with respect to Syneron’s expectations regarding but not limited to the financial forecast for 2012, the launch of new products, the acquisition and integration of Ultrashape, 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 SEC. These statements are only predictions and Syneron cannot guarantee that they will in fact occur. The Company does not assume 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 fourth 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.

Louis Scafuri

Thank you, Zack, and welcome to Syneron’s Fourth Quarter and Year-End 2011 conference call. The fourth quarter capped off a year of significant accomplishments and growth for the Company. Total revenue grew 20.5% for the year, up to 228 million driven by the strength of our worldwide infrastructure and channel to market capabilities, our strong technology platform, and our unwavering focus on our customers and the patients they serve.

In the past segment, we made several important new product introductions and further strengthened our relationships with our customers and industry key opinion leaders. Yesterday we announced the acquisition of Ultrashape, which further strengthens our PAD segment product portfolio and provides immediate entry into the large and growing market for non-invasive body sculpting.

Ultrashape has developed a best-in-class focused ultrasound system that safely and effectively destroys fat cells. Their technology is highly synergistic with our body contouring products and we believe there is a significant growth opportunity to distribute Ultrashape’s products through our global sales and distribution channels.

In the (inaudible) segment, we formed Syneron Beauty to focus on driving adoption of our home use product and began rolling out elure to key aesthetic physicians in the United States. Overall, we believe we are well positioned to expand our leadership position in the aesthetic industry.

Now let me turn to a review of our fourth quarter financial results and our operational progress, followed by a detailed commentary on the Ultrashape acquisition. Total revenue in the fourth quarter 2011 was a record $61 million, up 14% over the prior year. This represents our sixth consecutive quarter of double-digit year-over-year sales growth. International markets grew 14% during the quarter driven primarily by strong performance in Europe, Middle East and Africa, and strong sales of our recently introduced e2 and eLase products. North American sales grew 14.5% year-over-year with another quarter of strong sales of the GentleLASE Pro. Recurring revenue, which includes service and consumable revenue, grew 8% and represented approximately 29% of the total PAD sales.

While this represents solid consistent financial growth, our top line was affected by several factors. During the quarter, we had a temporary reduction in consumable and service revenue to one of our largest North American customers which underwent a restructuring. This customer has now completed its restructuring and we expect sales to this customer in the first quarter of 2012 to return to historical levels.

In the fourth quarter, we went direct into major markets in the rapidly growing Chinese market and also in the U.K. We’re now in the process of assuming full control of our joint venture in China to capitalize on our recent approval of Syneron products and on the significant and growing demand for aesthetic procedures in the Chinese market. In addition, in December we began commercial manufacturing of the GentleMAX Pro, our next generation multiple wavelength laser workstation that provides best-in-class treatments for permanent hair reduction and treatment of vascular and pigmented lesions. We’ve received very positive feedback on the new GentleMAX Pro, which will be launched during the first quarter of 2012. Our customers are eagerly awaiting its launch and some of them may have delayed their fourth quarter purchases in anticipation of ordering GentleMAX Pro once launched. Our continued top line growth supports our belief that in 2012 we will present strong growth for both our PAD and EBU segments.

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