Syneron Inc. Reports Third Quarter 2014 Results

YOKNEAM, Israel, Nov. 12, 2014 /PRNewswire/ -- Syneron Medical Ltd. (NASDAQ:ELOS), a leading global aesthetic device company, today announced financial results for the three months period ended September 30, 2014.

Third Quarter 2014 and Third Quarter 2013 on a Pro-Forma[1] (Excluding Syneron Beauty) and Non-GAAP[2] Basis and Recent Highlights:

• Total revenue of $60.3 million, up 8.3% year-over-year.
• North American sales grew 16.3% year-over-year.
• Non-GAAP gross margin of 55.6%, compared to 54.5% in Q3 2013.
• Generated $4.9 million in cash from operations; ended quarter with $100.4 million in cash and cash equivalents, and no debt.
• PicoWay immediate U.S. launch underway following FDA clearance at the end of October
• UltraShape full commercial launch began in October

Revenue[3]: Third quarter 2014 revenue was $60.3 million, up 8.3%, compared to $55.7 million in the third quarter 2013 on a pro forma basis (excluding Syneron Beauty). The increase was the result of growth in the North American and EMEA regions and relatively flat results in the APAC region, partially offset by lower revenue in the LATAM region. Third quarter 2013 reported revenue was $62.7 million (including Syneron Beauty).

Amit Meridor, Chief Executive Officer of Syneron, said, “Third quarter revenue grew 8.3% year-over-year, including strong 16.3% growth in North America. This was driven by the expansion of our sales force, the controlled market release of UltraShape and the addition of the CoolTouch product portfolio. Our third quarter revenue also benefitted from 14.0% growth in the EMEA region, driven by improved macroeconomic conditions and strong execution. We generated $4.9 million in cash, making the third quarter 2014 our second consecutive quarter showing positive cash flow. As a result, we ended the quarter with a strong balance sheet that includes $100.4 million in cash and cash equivalents, and no debt.”

Mr. Meridor added, “We are very excited by the FDA clearance of PicoWay and we are immediately making this cutting-edge product commercially available in the U.S. in November. This expands upon the international launch that began in late October, which has already generated a high level of interest in PicoWay. We believe we are well positioned for continued growth in North America with the full commercial launch of PicoWay and UltraShape and the continued expansion of our sales force, including our new dedicated body shaping team, which will drive our market share in these large market segments.”

Shimon Eckhouse, Active Chairman of Syneron, said, “We are very excited to launch two very important, technologically advanced aesthetic systems in the fourth quarter. UltraShape provides aesthetics practices with a new, highly effective, pain-free option for non-invasive fat destruction. It achieves results in as little as two-weeks and has the ability to precisely target fat for a customized body contouring treatment. In November we received FDA 510(k) clearance for PicoWay, a new picosecond laser system approved for tattoo removal. PicoWay is a dual wavelength laser with the shortest pulsed duration and highest peak power of any aesthetic laser available in the market, making it a powerful new option for tattoo removal in the U.S. We have received very positive feedback regarding its performance since the international launch, which primarily began this October at the 23rd European Academy of Dermatology and Venereology (EADV) Congress in Amsterdam. We believe PicoWay will be well received by our global installed base of Candela customers and potential new customers, making it a significant potential growth driver in the fourth quarter and beyond.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30, 2014[4]:

Gross Margin for the third quarter 2014 was 55.6%, up from 54.5% in the third quarter 2013. The increase in gross margin reflects mainly a more favorable geographic and product mix.

Operating Income for the third quarter 2014 was $2.6 million, down from $2.9 million in the third quarter 2013. This was the result of higher gross margin in the third quarter 2014, offset by the Company’s strategic investments in sales and marketing expenses related to the significant expansion of the Company’s North American sales force, including the establishment of a dedicated body shaping team, along with additional operating expenses from CoolTouch following its acquisition in March 2014. These increased expenses were partially offset by a higher gross margin.

Net Income and Earnings Per Share in the third quarter 2014 were $0.9 million, or $0.03 per share, compared to net income of $2.5 million, or $0.07 per share in the third quarter 2013. Net income and earnings per share in the third quarter 2014 decreased by $0.9 million due to changes in foreign currency exchange rates compared to the U.S. dollar.

Neutralized for the foreign currency impact, third quarter 2014 non-GAAP earnings per share would have been $0.05.

Net income and earnings per share for the third quarter 2014 are adjusted to exclude the following items, which are detailed in the Company’s financial tables presented at the end of this press release:

• Amortization of acquired intangible assets of $1.8 million
• Stock-based compensation of $1.1 million
• Re-measurement of contingent consideration of $0.5 million
• Non-recurring and other legal fees of $0.4 million
• Income tax positive adjustment of $0.5 million

GAAP Financial Highlights for the Third Quarter Ended September 30, 2014:

Gross Margin for the third quarter 2014 was 53.6%, up from 50.9% in the third quarter 2013. The increase in gross margin was primarily due to favorable geographic and product mix.

Operating Loss for the third quarter 2014 was ($1.1) million, same as in the third quarter 2013.

Operating Margin for the third quarter 2014 was (1.8%), same as in the third quarter 2013. This was the result of higher gross margin in the third quarter 2014, offset by the Company’s strategic investments in sales and marketing expenses related to the significant expansion of the Company’s North American sales force, including the establishment of a dedicated body shaping team, along with additional operating expenses from CoolTouch following its acquisition in March 2014.

Net Loss and Loss Per Share in the third quarter 2014 was ($2.3) million, or ($0.06) per share, compared to net loss of ($1.3) million, or ($0.04) per share, in the third quarter 2013. Net income and earnings per share in the third quarter 2014 decreased by $0.9 million, or approximately $0.02 per share, due to changes in foreign currency exchange rates compared to the U.S. dollar. Neutralized for the foreign currency impact, third quarter 2014 GAAP loss per share would have been ($0.04).

Cash Position: As of September 30, 2014, the Company’s cash and cash equivalents were $100.4 million, compared to $96.4 million as of June 30, 2014.

Hugo Goldman, Chief Financial Officer of Syneron, said, “During the third quarter we delivered revenue growth, gross margin expansion and our second consecutive quarter of generating cash from operations along with $0.03 in non-GAAP earnings per share. We achieved this while also making investments in the expansion of our North American sales force, including the establishment of our dedicated body shaping team to drive growth of the UltraShape system, and the integration of the CoolTouch business. We also benefitted from our continued focus on managing working capital, which has led to improvements in collection and a reduction in our day’s sales outstanding. All together, we believe we are well positioned to drive improved revenue growth and margin expansion.”

Use of Non-GAAP Measures and Pro-Forma Financials
This press release provides financial measures for gross margin, operating margin, operating income (loss), net income (loss) and earnings (loss) per share, which exclude expenses related to stock-based compensation, amortization of intangible assets, re-measurement of contingent consideration, other non-recurring items such as costs associated with the voluntary field action regarding the LiteTouch Dental Laser Product in Europe, legal settlement and related costs, impairment of intangible assets 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, believes 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.

In addition, this press release provides pro forma financials that exclude revenues from Syneron Beauty following its de-consolidation as of December 8, 2013 in various comparable periods. A reconciliation of the comparable periods that include revenues from Syneron Beauty is contained in the accompanying financial tables.

Conference call and Presentation Slides
Syneron management will host its third quarter 2014 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. The webcast will include presentation slides regarding the third quarter results to accompany management’s prepared remarks. To access the call, enter the Syneron Investor Relations website, then click on the webcast link “Q3 2014 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 877-280-2342 in the U.S., and 646-254-3367 from overseas. The conference pass code is: 6927789.

About Syneron Medical Ltd.
Syneron Medical Ltd. (NASDAQ: ELOS) is a 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 86 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.