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Sirona Dental Systems, Inc. (SIRO)

F3Q2011 Earnings Call

August 5, 2011 8:30 am ET


John Sweeney – VP, IR

Jost Fischer – Chairman, President and CEO

Simone Blank – EVP and CFO


Glen Santangelo – Credit Suisse

Robert Jones – Goldman Sachs

Brandon Couillard – Jefferies & Company

Elliot Feldman – Barclays Capital

John Kreger – William Blair

Ethan Roth – WJB Capital

Jonathan Block – SunTrust

Scott Green – Bank of America/Merrill Lynch

Jeff Johnson – Robert Baird

Tycho Peterson – JPMorgan



Good day ladies and gentlemen and welcome to the third quarter 2011 Sirona Dental earnings conference call. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session after the prepared remarks. (Operator Instructions)

And as a reminder this conference call is being recorded for replay purposes.

I would now like to hand the call off to Mr. John Sweeney, Vice President of Investor Relations for Sirona. You may proceed sir.

John Sweeney

Thank you. Good morning, everyone. Welcome to our third quarter fiscal 2011 conference call. I’d like to remind you that an earnings slide deck presentation relating to the call is available on our website at

Before we begin, please take a moment to read the forward-looking statements on slide 2 of our earnings slide presentation. During today’s call we will make certain predictive statements that reflect our current views about our future performance and financial results. Those statements and certain assumptions and expectations of future events are subject to risks and uncertainties our most recent Form 10-K gives some of our most important risk factors that could cause actual results to differ from our predictions.

And with that, I will now turn the call, the program over to Jost Fischer, Chairman and CEO of Sirona Dental Systems.

Jost Fischer

Thanks John. It is my pleasure to welcome all of you to our third quarter 2011 conference call. Joining me today are Jeffery Slovin, President and Simone Blank, Executive Vice President and CFO. I’m very pleased to report another quarter of strong revenue and profit growth for the company. We had record revenues in the quarter benefiting from our innovative product line, robust order levels at the International Dental Show and Sirona’s ongoing initiatives to build out its global sales and service infrastructure.

Revenues increased 34% to $245 million, driven by Sirona’s best-in-class products and our full pipeline of innovative new offerings. Robust order levels out of the International Dental Show in Cologne in March of this year. As previously communicated, this was the best IDS show ever and we are delighted with the response. And last the expansion of our sales and service infrastructure around the world affording us the ability to address the many exciting global opportunities, which exist.

We have been effective in building out our global footprint in various markets but our work is not yet done. Given the underlying momentum in our business we have accelerated investments in markets where we see opportunity for faster penetration and continued market share gains. These investments are paying dividend.

Looking at our business by segment, the Imaging segment saw the highest growth up 37.6% or 29.6% constant currency with particularly strong demand for our ORTHOPHOS 2D and 3D panoramic unit. Treatment Centers also increased 37.6% up 22.1% constant currency benefiting from strong order intake at the IDS and robust order levels in non-European international markets.

CAD CAM increased 31.5% up 23.8% constant currency, with strong growth in Germany and other international markets. U.S. CAD CAM revenues benefited from shipments made in anticipation of the (Inaudible) upgrade program. Instrument increased 26% up 12.3% constant currency.

Gross profit increased 34.7% to $126.8 million. We are having a very successful year in Germany bolstered by an excellent performance at the IDS and our trade up program for CAD CAM earlier in the year. Additionally, sales in this market are benefiting from a positive economic environment so taking it all together we are performing at a very high level in Germany.

Moving on, our solid performance is a direct result of our unrelented [ph] commitment to research and development which has enabled Sirona to create products that have changed the face of dental treatment. Our investments both in innovation and expanding our international sales and service infrastructure are money well spend and explain why we have been growing as an above market rate and continue to take market share. We are pleased that our strong momentum had continued into the fourth quarter and we are increasing our guidance for fiscal 2011 today.

Now, I will turn the call over to Simone who will review our third quarter financials and update you on our guidance.

Simone Blank

Thank you, Jost. In the third quarter, our revenues increased $62.3 million to a record level of $244.7 million, up 34.1% or 24% on a constant currency basis. This robust revenue growth was driven by continued strong performance in international markets, which increased 45.6% of 29.5% constant currency with particularly strong growth in Germany, Asia Pacific and the Middle East.

In the United States, revenues increased 11.8%. Operating income plus amortization increased 33.5% to $60.4 million, driven by our strong sales performance. Moving on to a review of our business segments, revenues in our CAD CAM segment increased 31.5% to $83.2 million, up 23.8% on a constant currency basis. CAD CAM revenues benefited from robust growth in international markets and in particular a very solid result in Germany with a large number of orders coming from the IDS.

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