Syneron Reports Second Quarter 2013 Results

Total Revenue of $68.8 Million; Non-GAAP EPS of $0.02

14 Aug, 2013, 07:05 ET from Syneron Medical Ltd.

YOKNEAM, Israel, Aug. 14, 2013 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ: ELOS), the leading global aesthetic device company, today announced financial results for the three month period ended June 30, 2013. The company also announced the appointment of Erik Dowell to the position of President of the Americas.

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

Second Quarter 2013 and Recent Highlights Include:

  • PAD1 segment revenue of $59.3 million, down 3% y/y and up 10% sequentially
  • EBU2 segment revenue of $9.5 million, up 37% y/y and 28% sequentially
  • Non-GAAP gross margin of 50.7%, down from 55.1% in 2Q12
  • PAD segment non-GAAP operating margin of 7.2%, down from 11.4% in 2Q12 and up from 5.3% in 1Q13
  • Cash and investments portfolio of $117.0 million at June 30, 2013
  • Received Korean MFDS Approval for elure™ Advanced Skin Lightening Products

Dr. Shimon Eckhouse, Chief Executive Officer of Syneron, commented, "When I took over as CEO in April, we began taking action to enhance our leadership team and develop and execute on a strategic plan to drive growth. Our initial focus was and continues to be in the North American market, where we began expanding our sales team to drive top-line growth, with a particular focus on higher margin products for the non-core market. The appointment of Erik Dowell to President of the Americas is an important step in this direction. Erik, who joined Syneron in 2003 as a territory manager, has been a top performer throughout his tenure with Syneron. He was the North American Vice President of Sales until 2010, after which he moved to become the head of our business in Europe, Middle-East and Africa where he built and reorganized our sales channels, increasing our sales from 2010 to 2012 by more than 50%."  

"We have refocused our product strategy and are making progress with our new product launch strategy with launches planned for the second half of 2013. We also remain on track to complete our UltraShape clinical trial and submit before the end of 2013 for regulatory clearance in the U.S. We combined this with a restructuring of our product development teams and reduction in work force which we executed during the second half of the second quarter."

"We achieved strong growth in the EBU during the quarter, primarily driven by the very successful QVC launch on their TSV ("Today's Special Value") events for the me home-use hair removal system and Pearl teeth whitening system in the U.S. We sold a significant number of units of each system in our first TSV events, which was an important achievement for Syneron Beauty and is indicative of the potential future opportunity with QVC and other consumer distribution channels. We also recently received Korean regulatory approval for elure™, which is an important milestone that provides the Company entry into one of the key markets in Asia for topical skin lightening products and are on track to achieve regulatory clearances for elure™ in other key Asian markets."

Revenue: Second quarter 2013 revenue was $68.8 million, up 1% compared to $68.1 million in the second quarter 2012. The increase was the result of higher PAD segment revenue in North America and growth in the EBU segment, partially offset by lower international PAD segment revenue. Second quarter 2013 revenue was negatively impacted by $1.1 million due to the devaluation of the Japanese Yen against the U.S. dollar compared to the second quarter 2012.

PAD segment revenue was $59.3 million, down 3% compared to $61.1 million in the second quarter 2012. EBU segment revenue was $9.5 million, up 37% compared to $6.9 million in the second quarter 2012.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30, 2013:

Gross Margin for the second quarter 2013 was 50.7%, compared to 55.1% in second quarter 2012,primarily due to product and sales channel mix in the PAD segment, along with increased production costs and volume discounting for the Company's QVC launch events for the me home-use hair removal system and Pearl teeth whitening system in the EBU segment.

Operating Income for the second quarter 2013 was $1.1 million, compared to $3.1 million in second quarter 2012, representing an operating margin of 1.6% of revenue in the second quarter 2013, compared to 4.6% in the second quarter 2012.

Net Income and Earnings Per Share in the second quarter 2013 was $0.7 million, or $0.02 per share, compared to net income of $1.9 million, or $0.05 per share, in the second quarter 2012.

Net income and earnings per share for the second quarter 2013 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
  • Other non-recurring costs of $2.4 million, mainly comprised of $1.7 million reduction in force expenses related to cost reduction initiatives
  • Income tax adjustment of $0.7 million

GAAP Financial Highlights for the Second Quarter Ended June 30, 2013:

Gross Margin for the second quarter 2013 was 48.3%, compared to 53.2% in second quarter 2012, primarily due to product and sales channel mix in the PAD segment, along with increased production costs and volume discounting for the Company's QVC launch events for the me home-use hair removal system and Pearl teeth whitening system in the EBU segment.

Operating Loss for the second quarter 2013 was $4.6 million, compared to $0.9 million in second quarter 2012.

Net Loss for the second quarter 2013 was $4.3 million, compared to $1.6 million in second quarter 2012.

Loss Per Share for the second quarter 2013 was $0.12, compared to $0.05 in the second quarter 2012.

Cash Position: As of June 30, 2013, the Company's cash and investments portfolio was $117.0 million.

Hugo Goldman, Chief Financial Officer of Syneron, said, "Gross margin in the second quarter was affected by a proportional increase in sales of lower gross margin products. We are implementing a plan to increase sales of our higher margin Syneron products. Our cost reduction initiatives that were completed near the end of June are not yet fully reflected in our second quarter run rate, with the full effect expected to be reflected in our second half results. In the EBU we spent additional capital to rapidly produce products, in order to meet the strong demand from the TSV events for the me and Pearl systems, as well as expenses related to the marketing efforts in the U.S. associated with the QVC launches. As a result, EBU gross margin and operating margin were negatively impacted in the second quarter. Looking to second half of the year, we continue to expect EBU losses to narrow and that we will reach our goal of breakeven operating results by the end of 2013.

"We ended the quarter with $117 million in cash and investments available to support our strategic growth initiatives. We continue to have a strong balance sheet with no debt."

Unaudited Non-GAAP segments results for the three months ended June 30, 2013 and 2012 (in thousands):

For the three-months ended

June 30,

% of 

June 30,

% of 

% of 

2013

Revenues 

2012

Revenues 

Change

Revenues

PAD

$            59,268

86.2%

$            61,146

89.8%

(3.1%)

EBU

9,497

13.8%

6,925

10.2%

37.1%

Total revenues

$            68,765

100.0%

$            68,071

100.0%

1.0%

Operating income (loss)

PAD

$              4,281

7.2%

$              6,977

11.4%

(38.6%)

EBU

(3,167)

(33.3%)

(3,869)

(55.9%)

18.1%

Total operating income

$              1,114

1.6%

$              3,108

4.6%

(64.2%)

Unaudited GAAP segments results for the three months ended June 30, 2013 and 2012 (in thousands):

For the three-months ended

June 30,

% of 

June 30,

% of 

% of 

2013

Revenues 

2012

Revenues 

Change

Revenues

PAD

$            59,268

86.2%

$            61,146

89.8%

(3.1%)

EBU

9,497

13.8%

6,925

10.2%

37.1%

Total revenues

$            68,765

100.0%

$            68,071

100.0%

1.0%

Operating income (loss)

PAD

$                (632)

(1.1%)

$              3,758

6.1%

(116.8%)

EBU

(4,004)

(42.2%)

(4,650)

(67.1%)

13.9%

Total operating loss

$             (4,636)

(6.7%)

$                (892)

(1.3%)

(419.7%)

 

Syneron Medical Ltd.

Unaudited Non-GAAP Financial Measures and Reconciliation

For the three-months ended

June 30, 2013

June 30, 2012

EBU

PAD

Total

EBU

PAD

Total

GAAP operating loss

$             (4,004)

$                  (632)

$             (4,636)

$             (4,650)

$                3,758

$                (892)

Stock-based compensation

111

1,194

1,305

65

1,213

1,278

Amortization of intangible assets

398

1,665

2,063

368

1,685

2,053

Other non-recurring items

328

2,054

2,382

348

321

669

Non-GAAP operating income (loss)

$             (3,167)

$                4,281

$              1,114

$             (3,869)

$                6,977

$              3,108

Syneron Medical Ltd.

Unaudited Non-GAAP Financial Measures and Reconciliation

For the six-months ended

June 30, 2013

June 30, 2012

EBU

PAD

Total

EBU

PAD

Total

GAAP operating loss

$             (6,955)

$                  (281)

$             (7,236)

$             (9,450)

$                5,523

$             (3,927)

Stock-based compensation

190

2,136

2,326

105

2,366

2,471

Amortization of intangible assets

770

2,927

3,697

704

3,180

3,884

Other non-recurring items

823

2,372

3,195

867

507

1,374

Non-GAAP operating income (loss)

$             (5,172)

$                7,154

$              1,982

$             (7,774)

$              11,576

$              3,802

 

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 expenses related to stock-based compensation, amortization of intangible assets, one-time severance, other non-recurring items such as costs associated with the voluntary field action regarding the LiteTouch Dental Laser Product in Europe, and income tax adjustment, 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 2013 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 2013 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: 19915329.

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 U.S. 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. Forward-looking statements in this press release include the anticipated timetable for completion of clinical trials for UltraShape and elure™;the success of our cost reduction initiatives to be reflected in our second half results and the expectation that EBU losses will narrow and that we will reach breakeven operating results by the end of 2013. 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 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.

 

Syneron Medical Ltd.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

For the three-months ended

For the six-months ended

June 30,

June 30,

June 30,

June 30,

2013

2012

2013

2012

Revenues

$            68,765

$            68,071

$           129,969

$           130,730

Cost of revenues 

35,583

31,855

64,371

62,317

Gross profit

33,182

36,216

65,598

68,413

Operating expenses:

Sales and marketing 

21,874

20,606

42,179

40,343

General and administrative

7,499

8,450

14,163

17,252

Research and development

8,220

7,731

15,949

14,424

Other expenses

225

321

543

321

Total operating expenses

37,818

37,108

72,834

72,340

Operating loss

(4,636)

(892)

(7,236)

(3,927)

Financial Income (expenses), net 

(147)

109

(375)

598

Loss before taxes on income (tax benefit)

(4,783)

(783)

(7,611)

(3,329)

Taxes on income (tax benefit)

(415)

1,166

(720)

1,671

Loss before non-controlling interest

(4,368)

(1,949)

(6,891)

(5,000)

Net loss attributable to non-controlling interest

20

340

100

776

Loss attributable to Syneron shareholders

$             (4,348)

$             (1,609)

$             (6,791)

$             (4,224)

Loss per share:

Basic and Diluted

Loss before non-controlling interest

$               (0.12)

$               (0.06)

$               (0.19)

$               (0.14)

Net loss attributable to non-controlling interest

-

0.01

-

0.02

Net loss attributable to Syneron shareholders

$               (0.12)

$               (0.05)

$               (0.19)

$               (0.12)

Weighted average shares outstanding:

Basic and Diluted

35,786

35,382

35,704

35,355

 

 

Syneron Medical Ltd.

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2013

2012 (*)

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$              35,010

$              66,359

Short-term bank deposits

17,317

20,520

Available-for-sale marketable securities

30,650

41,136

Trade receivable, net

56,138

50,023

Other accounts receivables and prepaid expenses

12,341

12,563

Inventories

41,346

36,862

Total current assets

192,802

227,463

Long-term assets:

Severance pay fund

663

600

Long-term deposits and others 

1,768

1,879

Long-term available-for-sale marketable securities 

33,994

7,966

Investments in affiliated companies

1,000

1,000

Property and equipment, net

7,264

6,148

Intangible assets, net 

26,727

30,433

Goodwill

25,219

25,219

Deferred taxes

17,582

18,390

Total long-term assets

114,217

91,635

Total assets

$            307,019

$            319,098

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$              23,549

$              19,926

Deferred revenues

11,704

11,986

Other accounts payable and accrued expenses

38,005

49,889

Total current liabilities

73,258

81,801

Long-term liabilities:

Contingent consideration liability

7,230

6,750

Deferred revenues

4,101

3,924

Warranty accruals

687

708

Accrued severance pay

755

691

Deferred taxes

2,689

3,095

Total long-term liabilities

15,462

15,168

Stockholders' equity:

218,299

222,129

Total liabilities and stockholders' equity

$            307,019

$            319,098

 (*)

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,

2013

2012

Cash flows from operating activities:

Net loss before non-controlling interest

$           (6,891)

$           (5,000)

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

Non-cash items reported in discontinued operations

Share-based compensation 

2,326

2,471

Depreciation and amortization

5,484

5,139

Impairments of intangible assets

-

225

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

584

(366)

Revaluation of contingent liability

480

96

Changes in operating assets and liabilities

Trade receivable, net

(6,835)

(8,896)

Inventories

(5,579)

(6,760)

Other accounts receivables

211

831

Deferred taxes

401

2,243

Accounts payable

4,048

930

Deferred revenue

238

685

Accrued warranty accruals

108

328

Other accrued liabilities

(6,477)

(6,954)

Net cash used in operating activities

(11,902)

(15,028)

Cash flows from investing activities:

Purchases of property and equipment

(2,591)

(883)

Proceeds from the sale or maturity of marketable securities

31,103

43,129

Purchase of marketable securities

(47,485)

(16,907)

Proceeds from (investments in) short-term bank deposits, net

3,203

(2,006)

Investments in affiliated company

-

(1,000)

Net cash paid in acquisition of subsidiaries

-

(15,050)

Other investing activities

(133)

(127)

Net cash provided by (used in) investing activities

(15,903)

7,156

Cash flows from financing activities:

Short term bank credit, net

-

(1,082)

Acquisition of shares held by non-controlling  shareholders of  a subsidiary

(5,000)

(5,000)

Proceeds from exercise of stock options

3,121

1,055

Net cash used in financing activities

(1,879)

(5,027)

Effect of exchange rates on cash and cash equivalents

(1,665)

(457)

Net decrease in cash and cash equivalents

(31,349)

(13,356)

Cash and cash equivalents at beginning of period

66,359

62,319

Cash and cash equivalents at end of period

$           35,010

$           48,963

 

 

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,

2013

2012

2013

2012

GAAP operating loss

$             (4,636)

$                (892)

$             (7,236)

$             (3,927)

Stock-based compensation

1,305

1,278

2,326

2,471

Amortization of intangible assets

2,063

2,053

3,697

3,884

Other non-recurring items

2,382

669

3,195

1,374

Non-GAAP operating income

$              1,114

$              3,108

$              1,982

$              3,802

GAAP net Loss attributable to Syneron shareholders

$             (4,348)

$             (1,609)

$             (6,791)

$             (4,224)

Stock-based compensation

1,305

1,278

2,326

2,471

Amortization of intangible assets

2,063

2,053

3,697

3,884

Other non-recurring items

2,382

669

3,195

1,374

Income tax adjustments

(712)

(535)

(1,105)

(1,098)

Non-GAAP net Income attributable to Syneron shareholders

$                 690

$              1,856

$              1,322

$              2,407

Income (Loss) per share:

Basic

GAAP net Loss per share attributable to Syneron shareholders

$               (0.12)

$               (0.05)

$               (0.19)

$               (0.12)

Stock-based compensation

0.04

0.04

0.07

0.07

Amortization of intangible assets

0.06

0.06

0.10

0.11

Other non-recurring items

0.07

0.02

0.09

0.04

Income tax adjustments

(0.02)

(0.02)

(0.03)

(0.03)

Non-GAAP net Income per share attributable to Syneron shareholders 

$                0.02

$                0.05

$                0.04

$                0.07

Diluted

GAAP net Loss attributable to Syneron shareholders 

$               (0.12)

$               (0.04)

$               (0.19)

$               (0.12)

Stock-based compensation

0.04

0.04

0.06

0.07

Amortization of intangible assets

0.06

0.06

0.10

0.11

Other non-recurring items

0.07

0.02

0.09

0.04

Income tax adjustments

(0.02)

(0.01)

(0.03)

(0.03)

Non-GAAP net Income per share attributable to Syneron shareholders

$                0.02

$                0.05

$                0.04

$                0.07

Weighted average shares outstanding:

Basic

35,786

35,382

35,704

35,355

Diluted

36,011

35,869

36,037

35,885

 

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.

SOURCE Syneron Medical Ltd.



RELATED LINKS

http://www.syneron-candela.com