Sirona Dental Systems, Inc. (SIRO)
F1Q12 Earnings Call
February 3, 2012 8:30 am ET
John Sweeney - VP, IR
Simone Blank - CFO and EVP
Jost Fischer - Chairman & CEO
Jeffrey Slovin - President and Director
Robert Jones - Goldman Sachs Group, Increase
Brandon Couillard - Jefferies & Company
Steve Beuchaw - Morgan Stanley & Co. LLC
Jonathan Block - SunTrust Robinson Humphrey
Beth Rose - William Blair & Company
Scott Green - Bank of America Merrill Lynch
Larry Marsh - Barclays Capital
Ross Taylor - CL King & Associates
Tycho Peterson - J.P. Morgan
Jeff Johnson - Robert W. Baird & Company
Jeffrey Warshauer - Sidoti & Company, LLC
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I’d now like to turn the presentation over to your host for today’s call Mr. John Sweeney, Vice President of Investor Relations. Please proceed.
Thank you and good morning, everyone. Welcome to our first quarter 2012 conference call. I’d like to remind you that an earnings slide deck presentation relating to this call is available on our website at www.sirona.com.
Before we begin, please take a moment to read the forward-looking statements on slide two of our earnings slide presentation. During today’s conference call we’ll make certain predictive statements that reflect our current views about our performance and financial results. We make these statements on certain assumptions and expectations of future events that are subject to risks and uncertainties. Our most recent Form 10-K lists some of our most important risk factors that could cause actual results to differ from our predictions.
And with that, I’ll now turn the call over to Jost Fischer, Chairman and CEO of Sirona Dental Systems.
Thanks, John. It is my pleasure to welcome all of you to our first quarter 2012 conference call. Joining me today are Jeffery Slovin, President and Simone Blank, Executive Vice President and Chief Financial Officer.
I’m pleased to report solid results for the first quarter of fiscal 2012. We had a very good start to the year with revenues increasing 10.2% on a constant currency basis. This is the third year in a row that we have grown double digits in the first quarter. Sirona has been able to grow strongly even in the phase of tough comparisons. In the quarter, the imaging division was the strongest performer, up 24% constant currency with continued robust sales of our Orthophos 2D and 3D imaging systems.
Sirona’s revenue growth was particularly strong in the Asia Pacific region. This was a direct result of the investments we’ve been making in expanding our sales and service infrastructures in key markets around the world. Our strategy is expected to make a significant contribution to our results in fiscal 2012.
It is important to note that many of the international markets that we’re investing in are growing at materially above the company’s average rate. I’d like to reiterate the two key pillars of our successful strategy at Sirona. One is our portfolio of innovative high-tech dental products that take dentistry to new levels. And the other is our world class global sales and service infrastructure which we continue to expand. We are active in over 135 markets around the globe. These two factors give us a competitive advantage enabling Sirona to deliver consistently strong organic growth.
Before we move to the financials, I note that the “Signs of Caution” in the U.S. and German markets that we commented on in our last conference call have moderated, and we’re feeling incrementally more positive about the rest of the year. As a result, we now expect to achieve revenue growth towards the upper-end of our revenue guidance range of 6% to 8% and today we’re taking up the lower-end of our operating income plus amortization guidance.
I'll now turn the call over to Simone, who will review our first quarter financials.
Thank you, Jost. In the first quarter our revenues increased $22.5 million to $258.1 million, up 9.5% or up 10.2% on a constant currency basis. Our double-digit revenue growth was driven by continued strong performance in international markets, which increased 12.7% or up 13.6% constant currency. Sales were particularly robust in the Asia Pacific region with continued strong trends in the Japanese market. In the United States we had a record quarter with revenues up 2%.
Sirona’s operating income plus amortization declined 4.1% to $66.6 million. The $8.5 million increase in gross profit was more than offset by a $10.3 million increase in SG&A. In the first quarter of last year SG&A was substantially lower as we ratcheted up our investment as we move through fiscal 2011.
The majority of our year-over-year SG&A increase represents the build out of our global sales and service infrastructure that we've been implementing over the past few years and have accelerated more recently. Our general expectation of SG&A of about 30% of sales for the full-year is unchanged.
Moving on to a review of our business segment. Revenues in our CAD/CAM segment increased 1% to $84.2 million or up 1.5% on a constant currency basis. CAD/CAM revenues benefited from very strong growth in non-U.S., non-European markets. CAD/CAM revenues in Germany declined as a result of the very successful trading program in the prior-year period.