Syneron Medical Ltd. (ELOS)

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Syneron Medical Ltd. (ELOS)

Q1 2011 Earnings Call

May 19, 2011 8:30 am ET

Executives

Shimon Eckhouse – Chairman of the Board

Louis Scafuri – Chief Executive Officer

Asaf Alperovitz – Chief Financial Officer

Analysts

Rich Newitter – Leerink Swan

Amit Hazan – Gleacher & Company

Anthony Vendetti – Maxim Group

Dalton Chandler – Needham & Company

Presentation

Operator

Good day ladies and gentlemen. Welcome to the Syneron Q1 2011 Results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require operator assistance, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Carol Ruth. You may begin.

Carol Ruth

Thank you, Operator. I’d like to welcome you to Syneron Medical’s First Quarter 2011 conference call.

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 2011, the launch of new products 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 Securities and Exchange Commission. 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 first 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. Lou?

Lou Scafuri

Thank you, Carol, and welcome to Syneron’s first quarter 2011 conference call. During the first quarter we continued to successfully execute on our growth strategy. This included launching several new products in both our professional aesthetic devices and emerging business unit segments and leveraging the broad distribution across selling capabilities of the Syneron and Candela sales channels.

We also further strengthened our customer relationships, particularly in the core market, by demonstrating the strong clinical results and science that are the foundation of all of our products. This has allowed us to maintain the positive momentum that we built during 2010 and further enhance our position as the clear leader in the esthetic device market.

I’ll begin today’s call with a brief review of our strong financial results followed by an operational update of some recent company highlights.

We achieved first quarter 2011 revenue of $49.8 million, up 16% over the prior year. This represents our third consecutive quarter of double-digit year-over-year sales growth, underscoring the strategic benefit of the combination of Syneron and Candela and our ability to grow incremental value from the combined company. Revenue grew 13% in North America and 18% in international markets. Importantly, we achieved record sales of consumables and accessories. Consumable sales from the Syneron product line grew 252% year-over-year and 36% sequentially. This demonstrates that our products are being well-received by physicians and patients alike and provide a positive outlook for future growth in our recurring revenue, high margin business model.

Non-GAAP gross margin was 53.5%, up from 47.4% in the prior year, reflecting an increased mix of Syneron products and the strong consumable business margins I just mentioned. In our professional aesthetic devices, or PAD segment, non-GAAP operating profit was $3.2 million or 6.8% operating margin, demonstrating our continued ability to drive an increased mix of higher margin products, capitalize on efficiencies, and effectively leverage our worldwide infrastructure.

During the quarter, we combined our focus on prudent expense management in our PAD business with new product launch initiatives in our emerging business units. This resulted in our second consecutive quarter of non-GAAP profitability with earnings per share of $0.01, demonstrating our ability to manage the business to drive revenue growth and sustained profitability.

Over the last several months, Syneron has had a dominant presence at all of the major aesthetic industry trade conferences, including the American Academy of Dermatology, the American Society of Laser Medicine and Surgery, and the Aesthetic Meeting 2011 hosted by the American Society for Aesthetic Plastic Surgery. One of the Company’s major initiatives has been to highlight evidence-based clinical results and significant scientific innovations that are synonymous with both the Syneron and Candela products. We believe that focusing on these two key initiatives benefits us further by enhancing existing customer relationships as well as driving cross-selling opportunities.

Syneron and Candela products are firmly positioned as best-in-class, innovative solutions amongst many of the key opinion leaders in dermatology, plastic surgery, and in other medical fields. Our products were featured on the podium in presentations by many thought-leading physicians at these conferences and we have seen a very strong interest in all of our new products.

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