Syneron Reports Third Quarter 2013 Results Total Revenue of $62.7 Million; Non-GAAP EPS of $0.04

YOKNEAM, Israel, Nov. 13, 2013 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ: ELOS), the leading global aesthetic device company, today announced financial results for the three month and nine month periods ended September 30, 2013.

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

Third Quarter 2013 and Recent Highlights Include:

  • Total revenue of $62.7 million, up 4% y/y  
  • PAD1 segment revenue of $54.6 million, up 3% y/y
  • EBU2 segment revenue of $8.1 million, up 17% y/y
  • Non-GAAP gross margin of 53.1%, down from 55.3% in 3Q12 and up from 50.7% in 2Q13
  • PAD segment non-GAAP operating margin of 6.7%, down from 9.1% in 3Q12
  • Completed UltraShape clinical trial and submitted 510(k) application to FDA
  • Signed global joint venture with Unilever for home beauty devices

Dr. Shimon Eckhouse, Chief Executive Officer of Syneron, commented, "During the third quarter we continued to execute on our strategy to drive growth of our higher margin products in North America, with a particular focus on the non-core segment of the market. We are successfully expanding our sales team under new management and are off to a good start, including double-digit growth from the Syneron product line in North America. We achieved this progress during the first full quarter of operations that included the reduction in work force that we executed during the second quarter. As a result, operating expenses were lower compared to the prior year despite our investments in the sales force and revenue growth.

"We are excited by two positive recent developments for our body shaping product portfolio. In September, we received FDA clearance and CE Mark for VelaShape III, our new non-invasive body shaping platform. The market has reacted positively to its new features and increased power, which allow it to achieve robust results after a single treatment. We expect to begin ramping sales of VelaShape III during the fourth quarter. In the past month, we announced the successful completion of our UltraShape clinical trial, which exceeded the endpoints agreed on with the FDA, and subsequently submitted our application to the FDA for potential clearance in the first half of 2014. If cleared by the FDA, we expect UltraShape will be a significant addition to our body shaping product offering."

Dr. Eckhouse concluded, "Last week, our Syneron Beauty subsidiary agreed to enter a transformational joint venture with Unilever in the home beauty device market. The combined company is well positioned to leverage Syneron's expertise in aesthetic device technology and Unilever's global product and consumer experience to become a leader in this growing market. We are very pleased with this transaction as it allows us to benefit from the growth potential of joint venture in the robust home beauty market, while eliminating the financial demands of building a consumer business. As a result, we will now focus on driving growth of our professional aesthetic device business, building the elure business in Asia, and improving our overall profitability."

Revenue: Third quarter 2013 revenue was $62.7 million, up 4% compared to $60.1 million in the third quarter 2012. The increase was the result of higher PAD segment revenue in North America, Asia-Pacific, China and Latin America, along with growth in the EBU segment, partially offset by lower PAD segment revenue in Europe and Japan. Third 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 third quarter 2012.

PAD segment revenue was $54.6 million, up 3% compared to $53.2 million in the third quarter 2012. EBU segment revenue was $8.1 million, up 17% compared to $6.9 million in the third quarter 2012.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30, 2013:

Gross Margin for the third quarter 2013 was 53.1%, compared to 55.3% in third quarter 2012,primarily due to product and sales channel mix in the PAD segment, along with product mix and higher production costs in the EBU segment. Gross margin for the third quarter 2013 increased sequentially from 50.7% in the second quarter 2013.

Operating Income for the third quarter 2013 was $2.1 million, up 22% compared to $1.7 million in third quarter 2012, representing an operating margin of 3.3% of revenue in the third quarter 2013, compared to 2.8% in the third quarter 2012.

Net Income and Earnings Per Share in the third quarter 2013 was $1.5 million, or $0.04 per share, compared to net income of $1.0 million, or $0.03 per share, in the third quarter 2012.

Net income and earnings per share for the third quarter 2013 are adjusted to exclude the following items, which are detailed in the Company's financial tables:

  • Amortization of acquired intangible assets of $1.7 million
  • Stock-based compensation of $1.0 million
  • Other non-recurring costs of $0.5 million
  • Income tax adjustment of $0.4 million

GAAP Financial Highlights for the Third Quarter Ended September 30, 2013:

Gross Margin for the third quarter 2013 was 50.9%, compared to 53.2% in third quarter 2012, primarily due to product and sales channel mix in the PAD segment, along with product mix and higher production costs in the EBU segment. Gross margin for the third quarter 2013 increased sequentially from 48.3% in the second quarter 2013.

Operating Loss for the third quarter 2013 was $1.1 million, compared to $2.1 million in third quarter 2012.

Net Loss for the third quarter 2013 was $1.3 million, compared to $2.3 million in third quarter 2012.

Loss Per Share for the third quarter 2013 was $0.04, compared to $0.06 in the third quarter 2012.

Cash Position: As of September 30, 2013, the Company's cash and investments portfolio was $110.3 million.

Hugo Goldman, Chief Financial Officer of Syneron, said, "Our third quarter results reflect cost reduction and efficiency initiatives that we implemented in the second quarter. These initiatives contributed to a year-over-year and sequential decline in operating expenses even though we continued to invest in expanding our sales force in North America. We ended the quarter with $110.3 million in cash and investments, and with the anticipated closing of our joint venture with Unilever, we expect our professional business going forward to be cash flow positive from operations. After the close of the third quarter we reached a settlement with the Israeli tax authorities which resulted in the conclusion of our Israeli tax audits for the years 2007-2011. As part of this settlement, we agreed to pay approximately $4 million which will allow us to free up "trapped profits". The positive effect of this settlement on the fourth quarter will be reflected in our 2013 year-end financial statements."

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



For the three-months ended




September 30,

% of 

September 30,

% of 

% of 



2013

Revenues 

2012

Revenues 

Change















Revenues













     PAD

$            54,582

87.1%

$            53,223

88.5%

2.6%

     EBU

8,082

12.9%

6,909

11.5%

17.0%








Total revenues

$            62,664

100.0%

$            60,132

100.0%

4.2%















Operating income (loss)













     PAD

$              3,681

6.7%

$              4,866

9.1%

(24.4%)

     EBU

(1,617)

(20.0%)

(3,169)

(45.9%)

49.0%








Total operating income

$              2,064

3.3%

$              1,697

2.8%

21.6%

 


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



For the three-months ended




September 30,

% of 

September 30,

% of 

% of 



2013

Revenues 

2012

Revenues 

Change















Revenues













     PAD

$            54,582

87.1%

$            53,223

88.5%

2.6%

     EBU

8,082

12.9%

6,909

11.5%

17.0%








Total revenues

$            62,664

100.0%

$            60,132

100.0%

4.2%















Operating income (loss)













     PAD

$              1,204

2.2%

$              1,424

2.7%

(15.4%)

     EBU

(2,330)

(28.8%)

(3,568)

(51.6%)

34.7%








Total operating loss

$             (1,126)

(1.8%)

$             (2,144)

(3.6%)

47.5%

 

Syneron Medical Ltd.

Unaudited Non-GAAP Financial Measures and Reconciliation

















For the three-months ended




September 30, 2013


September 30, 2012




EBU


PAD


Total


EBU


PAD


Total






























GAAP operating income (loss) 

$             (2,330)


$                1,204


$             (1,126)


$             (3,568)


$                1,424


$             (2,144)

















Stock-based compensation

103


876


979


115


779


894



Amortization of intangible assets

398


1,274


1,672


312


1,674


1,986



Other non-recurring items

212


327


539


(28)


989


961
















Non-GAAP operating income (loss)

$             (1,617)


$                3,681


$              2,064


$             (3,169)


$                4,866


$              1,697


























































Syneron Medical Ltd.

Unaudited Non-GAAP Financial Measures and Reconciliation

















For the nine-months ended




September 30, 2013


September 30, 2012




EBU


PAD


Total


EBU


PAD


Total






























GAAP operating income (loss) 

$             (9,285)


$                   923


$             (8,362)


$           (13,018)


$                6,947


$             (6,071)

















Stock-based compensation

293


3,012


3,305


220


3,145


3,365



Amortization of intangible assets

1,168


4,201


5,369


1,016


4,854


5,870



Other non-recurring items

1,035


2,699


3,734


839


1,496


2,335
















Non-GAAP operating income (loss)

$             (6,789)


$              10,835


$              4,046


$           (10,943)


$              16,442


$              5,499


 

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 third 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 "Q3 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: 78126203.

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.


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.

 

 

Syneron Medical Ltd.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)












For the three-months ended


For the nine-months ended



September 30,


September 30,


September 30,


September 30,



2013


2012


2013


2012



















Revenues

$            62,664


$            60,132


$           192,633


$           190,862

Cost of revenues 

30,751


28,151


95,122


90,468










Gross profit

31,913


31,981


97,511


100,394










Operating expenses:









Sales and marketing 

19,260


18,768


61,439


59,111


General and administrative

6,445


8,235


20,608


25,487


Research and development

7,007


7,206


22,956


21,630


Other expenses (income)

327


(84)


870


237










Total operating expenses

33,039


34,125


105,873


106,465










Operating loss

(1,126)


(2,144)


(8,362)


(6,071)











Financial Income (expenses), net 

77


378


(298)


976










Loss before taxes on income (tax benefit)

(1,049)


(1,766)


(8,660)


(5,095)










Taxes on income (tax benefit)

227


526


(493)


2,197










Loss before non-controlling interest

(1,276)


(2,292)


(8,167)


(7,292)










Net loss attributable to non-controlling interest

-


-


100


776










Loss attributable to Syneron shareholders

$             (1,276)


$             (2,292)


$             (8,067)


$             (6,516)




























Loss per share:

















Basic and Diluted









Loss before non-controlling interest

$               (0.04)


$               (0.06)


$               (0.23)


$               (0.20)


Net loss attributable to non-controlling interest

-


-


-


0.02


Net loss attributable to Syneron shareholders

$               (0.04)


$               (0.06)


$               (0.23)


$               (0.18)



















Weighted average shares outstanding:









Basic and Diluted

36,064


35,508


35,826


35,437

 

 

 

Syneron Medical Ltd.

Condensed Consolidated Balance Sheets

(in thousands)








September 30,


December 31,



2013


2012 (*)



(Unaudited)



Assets









Current assets:





Cash and cash equivalents

$              30,743


$              66,359


Short-term bank deposits

15,010


20,520


Available-for-sale marketable securities

35,298


41,136


Trade receivable, net

56,826


50,023


Other accounts receivables and prepaid expenses

13,353


12,563


Inventories

46,116


36,862






Total current assets

197,346


227,463






Long-term assets:





Severance pay fund

617


600


Long-term deposits and others 

2,006


1,879


Long-term available-for-sale marketable securities 

29,288


7,966


Investment in affiliated company

1,000


1,000


Property and equipment, net

7,182


6,148


Intangible assets, net 

25,072


30,433


Goodwill

25,219


25,219


Deferred taxes

17,697


18,390






Total long-term assets

108,081


91,635






Total assets

$            305,427


$            319,098











Liabilities and Stockholders' Equity









Current liabilities:





Accounts payable

$              21,126


$              19,926


Deferred revenues

12,594


11,986


Other accounts payable and accrued expenses

38,158


49,889






Total current liabilities

71,878


81,801






Long-term liabilities:





Contingent consideration liability

7,557


6,750


Deferred revenues

3,428


3,924


Warranty accruals

705


708


Accrued severance pay

699


691


Deferred taxes

2,486


3,095






Total long-term liabilities

14,875


15,168






Stockholders' equity:

218,674


222,129






Total liabilities and stockholders' equity

$            305,427


$            319,098






 (*)

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,









2013



2012

Cash flows from operating activities:








Net loss before non-controlling interest



$             (8,167)



$           (7,292)



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









Non-cash items reported in discontinued operations









Share-based compensation 



3,305



3,365



Depreciation and amortization



7,882



7,937



Impairments of intangible assets



-



780



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



812



(337)



Revaluation of contingent liability



807



(580)



Changes in operating assets and liabilities










Trade receivable, net



(7,068)



(5,349)




Inventories



(10,078)



(11,940)




Other accounts receivables



(875)



262




Deferred taxes



83



1,430




Accounts payable



1,333



(2,466)




Deferred revenue



344



160




Accrued warranty accruals



(131)



19




Other accrued liabilities



(6,464)



(5,797)















Net cash used in operating activities



(18,217)



(19,790)















Cash flows from investing activities:









Purchases of property and equipment



(2,930)



(1,125)



Proceeds from the sale or maturity of marketable securities



34,178



49,869



Purchase of marketable securities



(50,510)



(25,549)



Proceeds from short-term bank deposits, net



5,513



2,906



Investments in affiliated company



-



(1,000)



Net cash paid in acquisition of subsidiaries



-



(15,050)



Other investing activities



(118)



(112)















Net cash provided by (used in) investing activities



(13,867)



9,939













Cash flows from financing activities:









Short term bank credit, net



-



(1,082)



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



(5,156)



(7,200)



Proceeds from exercise of stock options



3,121



1,366















Net cash used in financing activities



(2,035)



(6,916)













Effect of exchange rates on cash and cash equivalents



(1,497)



(91)













Net decrease in cash and cash equivalents



(35,616)



(16,858)















Cash and cash equivalents at beginning of period



66,359



62,319















Cash and cash equivalents at end of period



$            30,743



$           45,461

 

 

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,



2013


2012


2013


2012



















GAAP operating loss

$             (1,126)


$             (2,144)


$             (8,362)


$             (6,071)











Stock-based compensation

979


894


3,305


3,365


Amortization of intangible assets

1,672


1,986


5,369


5,870


Other non-recurring items

539


961


3,734


2,335










Non-GAAP operating income

$              2,064


$              1,697


$              4,046


$              5,499



























GAAP net Loss attributable to Syneron shareholders

$             (1,276)


$             (2,292)


$             (8,067)


$             (6,516)











Stock-based compensation

979


894


3,305


3,365


Amortization of intangible assets

1,672


1,986


5,369


5,870


Other non-recurring items

539


961


3,734


2,335


Income tax adjustments

(393)


(538)


(1,498)


(1,636)










Non-GAAP net Income attributable to Syneron shareholders
  

$              1,521


$              1,011


$              2,843


$              3,418



















Income (Loss) per share:

















Basic








GAAP net Loss per share attributable to Syneron shareholders 
  

$               (0.04)


$               (0.06)


$               (0.23)


$               (0.18)











Stock-based compensation

0.03


0.03


0.09


0.09


Amortization of intangible assets

0.05


0.06


0.15


0.17


Other non-recurring items

0.01


0.03


0.10


0.07


Income tax adjustments

(0.01)


(0.02)


(0.04)


(0.05)










Non-GAAP net Income per share attributable to Syneron shareholders 
 

$                0.04


$                0.03


$                0.08


$                0.10



















Diluted








GAAP net Loss attributable to Syneron shareholders 
  

$               (0.04)


$               (0.06)


$               (0.22)


$               (0.18)











Stock-based compensation

0.03


0.02


0.09


0.09


Amortization of intangible assets

0.05


0.06


0.15


0.16


Other non-recurring items

0.01


0.03


0.10


0.07


Income tax adjustments

(0.01)


(0.01)


(0.04)


(0.05)










Non-GAAP net Income per share attributable to Syneron shareholders 
 

$                0.04


$                0.03


$                0.08


$                0.10










Weighted average shares outstanding:


















Basic

36,064


35,508


35,826


35,437











Diluted

36,196


35,875


36,058


35,866

 

 

 

SOURCE Syneron Medical Ltd.



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