Sirona Dental Systems, Inc. (SIRO)

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Sirona Dental Systems Inc. (SIRO)

F3Q09 Earnings Call

July 31, 2009 8:30 am ET


Jost Fischer - Chairman, Chief Executive Officer, President

Simone Blank - Executive Vice President, Chief Financial Officer

Jeffrey T. Slovin - Executive Vice President, Chief Operating Officer of US Operations

John Sweeney - Vice President of Investor Relations


Brandon - Bank of America - Merrill Lynch

Gregory R. Brash - Sidoti and Co.

John Kreger - William Blair & Co.

Glen Santangelo - Credit Suisse

Ross Taylor - C.L. King & Associates, Inc.

Jeff Johnson - Robert W. Baird & Co.

Tycho Peterson - J.P. Morgan



Good day ladies and gentlemen and welcome to the Sirona Dental Systems third quarter 2009 earnings conference call. (Operator Instructions). I would now like to turn the presentation over to your host for today’s call, Mr. John Sweeney, Vice President of Investor Relations.

John Sweeney

Good morning everyone. Before I turn the call over to Jost Fischer, Chairman, President, and CEO, Sirona Dental Systems, I need to inform you that information in this conference call contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are information of a non-historical nature and are subject to risks and uncertainties that are beyond the company’s ability to control. The matters discussed in this conference call are subject to various factors which could cause actual events and results to differ materially from such statements. Such factors include uncertainties as to future sales volumes of the company's products; the possibility of changing economic, market, and competitive conditions; dependence on product, dependence on key personnel, technological developments, intense competition, market uncertainties, dependence on distributors’ ability to manage growth, dependence on key suppliers; and other risks and uncertainties including those detailed in the company's filings with the Securities and Exchange Commission.

The company undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this conference call. You are cautioned not to place undue reliance on these forward-looking statements which speaks only as of the date of this conference call.

Please note that in today’s call you’ll be presented with additional financial information including non-GAAP financial measures under Section 101 of Reg G of the 1934 Exchange Act. In addition, during today's conference call, management will comment on guidance for fiscal year 2009. Please note that all statements made in connection with the guidance are based on current expectations and actual results could differ materially from such forward-looking statements.

Now, I’d like to turn the call over to Jost Fischer, Chairman, President, and CEO, Sirona Dental Systems.

Jost Fischer

It is my pleasure to welcome all of you to our third quarter 2009 conference call. Joining me today are Simone Blank, Executive Vice President and CFO and Jeffrey Slovin, Executive Vice President and COO of US Operations.

I am pleased to report that fiscal 2009 is progressing as planned. As a result of the solid performance we delivered this quarter, we are reiterating our guidance. This reaffirmation implies continued strong performance for the remainder of fiscal 2009.

There are a few financial highlights from the quarter I want to bring to your attention. First, revenues increased 6.2% constant currency; second, operating income post amortization increased 26%; third, cash flow from operations increased 150% to a record level of $53.5 million. In addition, our pre-cash flow increased to $48.8 million.

Sirona’s results benefited from our strong showing at the IDS in March, which resulted in numerous orders both at the show and in the month following.

During the quarter, our revenue growth was broad-based led by our CAD/CAM and treatment center segments which increased double digits. Our imaging segment declined 9.1% on a constant currency basis which we believe was relatively better performance than the market. Importantly, our new product launches including TENEO and CEREC AC are performing well. TENEO was rapidly becoming the best selling treatment center in its class. The CEREC AC was responsible for delivering the strongest quarter ever for non-US CAD/CAM sales. CEREC continues to draw stellar reviews.

Just last week Dental Products Shopper, a consumer reports for dentists, published a review of the CEREC AC and gave it the rating of 4.9, the highest rating our product has ever received from that publication.

Finally, I note that the difficult global economy is having its impact on the dental market. However, we believe that our ability to innovate and manufacture high technology products that aid dental professionals and their patients make Sirona a formidable competitor in each of its four business segments.

With our history of innovation and investments in research and development, our results clearly demonstrate that we are winning in today’s challenging marketplace.

I will now turn the call to Simone for a review of our results.

Simone Blank

Third quarter revenues were $180.6 million down 3.4% compared to prior year, but up 6.2% constant currency. Our third quarter revenues benefited from our international footprint, orders from the biannual IDS, and the solid contribution from our new product launches. Now, I would like to highlight the quarter’s regional development.

International revenues increased 2.5% or up 17.7% on a constant currency basis. Germany had solid performance after the IDS show with strong growth in treatment centers, CAD/CAM, and imaging. Markets outside of the US and Europe showed solid growth building our sales and service infrastructure in many of these markets. At the European market, that is, excluding Germany had mixed performance with positive results in France, The Netherlands, and Austria while the UK and Spanish markets were weak.

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