Syneron Inc. Reports Second Quarter 2012 Results

YOKNEAM, Israel, Aug. 15, 2012 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ:ELOS), the leading global aesthetic device company, today announced second quarter 2012 financial results for the three month period ended June 30, 2012.

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

Second Quarter 2012 Year-Over-Year Financial Highlights Include:

• International revenue of $46.2 million, up 16%
• North America revenue of $21.9 million, up 5%
• Non-GAAP gross margin of 55.1%, up from 53.1%
• PAD¹ segment non-GAAP operating margin of 11.4%
• Cash and investments portfolio of $135 million at June 30, 2012

Louis P. Scafuri, Chief Executive Officer of Syneron, commented, "During the second quarter we achieved strong financial results, including our third consecutive quarter with record revenue. Strong PAD segment sales were mainly driven by the international launch of the elos Plus next generation multi-platform system and continued strong adoption of the recently launched eLase, eTwo, and GentleMax Pro systems. In addition to the strong PAD revenue, we also delivered improved gross margin and further leveraged our operating infrastructure, which translated to an improved operating profit. For the second half of the year, we expect PAD results to benefit from the recently acquired business of UltraShape, the U.S. launch of elos Plus, and the expected launch of exciting body contouring products that are complementary to our existing portfolio."

Revenue: Second quarter 2012 revenue was $68.1 million, an increase of 12.4% compared to $60.6 million in the second quarter of 2011. This included strong PAD segment revenue growth, which was mainly driven by ongoing new product adoption and new products launched during the quarter. In addition, the Company achieved significant growth in EBU² segment revenue.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30, 2012:

Gross Margin for the second quarter 2012 was 55.1%, compared to 53.1% in second quarter 2011, primarily due to a higher production and sales volume, recently implemented costs cutting and efficiency measures, and year-over-year improvements in EBU gross margin.

Operating Income for thesecond quarter 2012 was $3.1 million, up from $0.3 million in second quarter 2011, representing 4.6% of revenue in the quarter, compared to 0.5% in second quarter 2011.

The year-over-year increase in non-GAAP operating income was primarily related to the revenue growth, the 200 basis point improvement in gross margin, and improved leverage of the Company's fixed cost base. This was partially offset by an increase in operating expenses associated with the growth in EBU segment revenues. The EBU currently incurs higher relative operating expenses compared to the PAD segment due to start-up costs associated with developing and significant investment in marketing its emerging technologies and products.

Net Income for the second quarter 2012 was $1.9 million, up from $0.2 million in the second quarter of 2011.

Earnings Per Share for the second quarter 2012 were $0.05, up from $0.01 in second quarter 2011.

Net income and earnings per share for the second quarter 2012 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
• Non-recurring costs associated with the voluntary field action regarding the LiteTouch Dental Laser Product in Europe of $0.3 million
• Other non-recurring costs of $0.3 million

GAAP Financial Highlights for the Second Quarter Ended June 30, 2012:

Gross Margin for the second quarter 2012 was 53.2%, compared to 51.4% in second quarter 2011, primarily due to higher production and sales volume, recently implemented costs cutting and efficiency measures, and year-over-year improvements in EBU gross margin.

Operating Loss for thesecond quarter 2012 was $0.9 million, compared to $1.1 million in second quarter 2011.

The decrease in GAAP operating loss was primarily related to the revenue growth, the 180 basis point improvement in gross margin, and improved leverage of the Company's fixed cost base. This was partially offset by an increase in operating expenses associated with the growth in EBU segment revenues. The EBU currently incurs higher relative operating expenses compared to the PAD segment due to start-up costs associated with developing and significant investment in marketing its emerging technologies and products.

Net Loss for the second quarter 2012 was $1.6 million, compared to $0.3 million in second quarter of 2011.

Loss Per Share for the second quarter 2012 was $(0.05), compared to $(0.01) in second quarter 2011.

Cash Position: As of June 30, 2012, the Company's cash and investments portfolio was $135 million.

Asaf Alperovitz, Chief Financial Officer of Syneron, commented, "We achieved strong financial results during the quarter, including record revenue in both the PAD and EBU segments. In the PAD segment, we are successfully leveraging our fixed cost base and implementing expense reduction initiatives, which drove PAD segment non-GAAP operating margin of 11.4%. On a consolidated basis, the strong PAD segment performance drove non-GAAP net income of $1.9 million."

Mr. Alperovitz continued, "In the EBU segment, we had a strong quarter across all the Syneron Beauty home use products and continued to move forward with our plan to reach EBU profitability by expanding direct sales, introducing high margin products and implementing manufacturing and operating cost reduction initiatives. We reached the significant threshold of $1.0 million in quarterly revenue of our skin brightening products and remain on track to receive regulatory approvals for elure in key Asian markets by the end of the year. Overall, we continue to be excited about the long-term prospects for this new, high growth segment of our business."

Unaudited Non-GAAP segment results for the three months ended June 30, 2012 and 2011 (in thousands):