Sirona Dental Systems, Inc. (SIRO)

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Sirona Dental Systems, Inc. (SIRO)

F4Q09 Earnings Call

December 4, 2009 8:30 am ET


John Sweeney - Vice President of Investor Relations

Jost Fischer - Chairman, President, and CEO

Simone Blank - Executive Vice President and CFO

Jeffrey Slovin - Executive Vice President and COO of US Operations


Derek Leckow – Barrington Research

Peter Bye – Jefferies & Company

John Kreger – William Blair

Jeff Johnson – Robert Baird

Tycho Peterson – JP Morgan

Larry Marsh – Barclays Capital

Glen Santangelo – Credit Suisse



(Operator Instructions)  Welcome to the Fourth Quarter and Full Year Sirona Dental Systems Conference Call. I would now like to turn call over to Mr. John Sweeney, Vice President of Investor Relations.

John Sweeney

I’d like to remind you an earnings slide deck presentation relating to this conference call is available on our website at Before I turn the call over to Jost Fischer, Chairman, President, and CEO, Sirona Dental Systems, I need to inform you that the 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 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 2010. 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’ll turn the call over to Jost Fischer, Chairman, President, and CEO of Sirona Dental Systems.

Jost Fischer

It is my pleasure to welcome all of you to our fourth quarter and full year 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’m pleased to report that we had a solid performance in fiscal 2009. Despite the challenging global economic environment we posted over 8% constant currency revenue growth in our fourth quarter. Looking at the performance by segment in fiscal 2009. We saw solid growth in CAD/CAM up 9.3% constant currency. Treatment centers and instruments were both flat on a constant currency basis which was better performance then the industry. Lastly, our imaging business was down 5.4% for the year. This was also better performance then what we saw in the market.

Fiscal 2009 was characterized by strong performance at the IDS which resulted in a significant number of orders both during and after the show. We posted strong cash flow growth with operating cash flow up 26.6% to $120 million. We reduced our net debt by $110 million. Furthermore, we capitalized on our successful product launches. The CEREC AC continues to receive excellent reviews from the dental community. Our GALILEOS compact is now the 3D product of choice with general practitioners. TENEO is quickly becoming the gold standard.

Our International revenues increased 1.8% on a constant currency basis with solid performance in Germany. The US was flat for the year. However, I highlight that we finished with exceptionally strong growth of 32% in the fourth quarter driven by an excellent response to the AC and the successful upgrade program.

The weak global economy is impacting the dental market. However, even in the face of these headwinds we were able to grow revenues due to our innovative product offerings. Our products enabled dental professionals to improve their clinical results and to increase the profitability of their practices. Sirona is a formidable competitor in each of its four business segments. With our history of innovation and investment in research and development our results clearly demonstrate our leadership position in today’s challenging marketplace.

I will now turn the call over to Simone who will review our fourth quarter financials.

Simone Blank

In the fourth quarter our revenue increased to $188.2 million benefiting from exceptionally strong US revenue growth which was up 32.1%. US revenues were positively impacted by demand for CEREC AC and the AC upgrade program. International revenues were down 5% on a reported basis but flat constant currency. We saw mixed results in the various countries with strong performance in Japan, Australia and France, and weak performance in Spain, South Korea, and Russia.

Moving on to a review of our business segment performance. Revenues in our CAD/CAM segment increased 35.3% to $66.1 million or up 40.1% on a constant currency basis, driven by continued strong global demand for CEREC AC and our upgrade program in the US. CAD/CAM segment gross profit margin was 67.2% down 110 basis points compared to prior year. Our year over year margin decline was mainly due to the AC trade in program.

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