Syneron Medical Reports First Quarter 2017 Revenue of $66.9 Million

May 17, 2017

Syneron Medical Ltd. (NASDAQ: ELOS), a leading global aesthetic device company, today announced financial results for the three month period ended March 31, 2017.

 

First Quarter 2017 Financial Highlights:

  • Revenue of $66.9 million, down 2.6% year-over-year
  • Product revenue down 4.2% year-over-year
  • International product revenue grew 7.7% year-over-year while North America product revenue declined 31.7% year-over-year as a result of the sales force reorganization
  • Revenue from emerging products1, which represent the Company's strategic growth drivers, grew 3.5% year-over-year to $14.1 million
  • GAAP net loss per share of $(0.14), compared to GAAP net loss per share of $(0.01) in first quarter of 2016
  • Non-GAAP net loss per share of $(0.05), compared to Non-GAAP net income per share of $0.04 in first quarter of 2016
  • Cash position as of March 31, 2017 of $78.8 million with no debt

Amit Meridor, Chief Executive Officer of Syneron Medical, said, "During the first quarter, our revenue declined due to lower product revenue in North America, primarily due to our sales force reorganization in North America, which has caused some short-term disruption in order to position the business for long-term growth. This disruption also impacted our emerging products, with growth slowing to 4% and representing 21% of total revenue in the quarter. We also had a decline in EMEA product revenue of 13% due to challenges with some of our subsidiaries in countries where we sell direct. These headwinds were partially offset by continued strong double-digit product revenue growth of 18% in the Asia-Pacific region. Late in the quarter, we received CE Mark for CO2RE Intima, making it the first in-office laser procedure now CE marked for the treatment of vaginal atrophy and rejuvenation, and providing a new growth opportunity in EMEA."

Financial Highlights for the First Quarter Ended March 31, 2017:

GAAP Gross Margin for the first quarter 2017 was 51.2%, compared to 51.8% in the first quarter 2016. Non-GAAP gross margin for the first quarter 2017 was 52.3%, compared to 53.2% in the first quarter 2016. This reflects lower total revenue, a higher mix of distributor revenue, and differences in product mix, compared to the first quarter 2016.

GAAP Operating Loss for the first quarter 2017 was $(3.9) million, compared to GAAP operating loss of $(0.3) million in the first quarter 2016. Non-GAAP operating loss for the first quarter 2017 was $(0.5) million, compared to non-GAAP operating income of $1.8 million in the first quarter 2016. GAAP operating margin for the first quarter 2017 was (5.8)%, compared to GAAP operating margin of (0.4)% for the first quarter 2016. Non-GAAP operating margin for the first quarter 2017 was (0.7)%, compared to Non-GAAP operating margin of 2.6% in the first quarter 2016. This decrease reflects lower total revenue, lower gross margin, and the reorganization of the Company's North America sales and marketing team, partially offset by cost efficiencies, and revenue growth from several of the Company's existing international distribution channels.

GAAP Net Loss in the first quarter 2017 was $(4.8) million, or $(0.14) per share, compared to GAAP net loss of $(0.5) million, or $(0.01) per share, in the first quarter 2016. Non-GAAP net loss in the first quarter 2017 was $(1.6) million, or $(0.05) per share, compared to non-GAAP net income of $1.3 million, or $0.04 per share, in the first quarter 2016.

Cash Position As of March 31, 2017, the Company's overall cash position, including cash and cash equivalents, short-term bank deposits and marketable securities, was $78.8 million, compared to $86.4 million as of December 31, 2016, with no debt.

Subsequent Events
On April 2, 2017, Syneron Candela and Apax Partners, a leading global private equity advisory firm, entered into a definitive agreement under which an affiliate of funds advised by Apax Partners will acquire all of the outstanding shares of Syneron Candela for $11.00 per share in cash in a transaction valued at approximately $397 million.

Syneron Candela will hold a Special General Meeting of its shareholders to vote on the adoption and approval of the merger proposal. The Special General Meeting will take place on Thursday, June 15, 2017 at 3:00 p.m. (Israel time), at the Company's executive offices located at Industrial Zone, Tavor Building, P.O.B. 550, Yokneam Illit 20692, Israel. The acquisition is expected to be completed during the third quarter of 2017, subject to Syneron Candela shareholder approval and the satisfaction of other customary closing conditions.

Syneron Candela will not be hosting a first quarter 2017 conference call due to the definitive agreement to be acquired by an affiliate of funds advised by Apax Partners.

Important Additional Information about This Transaction and Where to find it
In connection with the proposed transaction, Syneron Candela filed a definitive proxy statement on Form 6-K with the SEC on May 15, 2017 and mailed the definitive proxy statement and proxy card to its shareholders on or about the same date. Shareholders of Syneron Candela are urged to read the definitive proxy statement, including any document incorporated therein by reference and the attachments thereto, because they contain important information about Syneron Candela, Apax Partners, the proposed transaction and related matters. Shareholders are urged to carefully read the definitive proxy statement and other relevant materials before making any voting or investment decision with respect to the proposed transaction. The definitive proxy statement may be obtained for free at the SEC's website at www.sec.gov. In addition, the definitive proxy statement is available, without charge, at Syneron Candela's website at http://www.syneron-candela.com.

Use of Non-GAAP Measures:
This press release provides financial measures for gross margin, operating income (loss), operating margin, net income (loss) and net income (loss) per share, which exclude expenses related to stock-based compensation expense, amortization of acquired intangible assets, Apax Partner's deal related costs, and tax benefit, and are therefore not calculated in accordance with Generally Accepted Accounting Principles (GAAP). 

Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance because it reflects our ongoing operational results, operating income (loss), net income (loss) and net income (loss) per share, and exclude the impact of items or trends that are not considered core influences on the results of operations, financial position or cash flows. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. Management uses non-GAAP measures to make operational and investment decisions and to evaluate the Company's performance and, therefore, believes it important to make these non-GAAP adjustments available to investors. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.

About Syneron Candela:
Syneron Candela is a leading global aesthetic device company with a comprehensive product portfolio and a global distribution footprint.  The Company's technology enables physicians to provide advanced solutions for a broad range of medical-aesthetic applications including body contouring, hair removal, wrinkle reduction, tattoo removal, women's intimate wellness treatments, improving the skin's appearance through the treatment of superficial benign vascular and pigmented lesions, and the treatment of acne, leg veins and cellulite. The Company has a wide portfolio of trusted, leading products including UltraShape, VelaShape, GentleLase, VBeam Perfecta, PicoWay, CO2RE, CO2RE Intima, Profound and elōs Plus.

Founded in 2000, the company markets, services and supports its products in 86 countries.  It has offices in North America, France, Germany, Italy, Portugal, Spain, UK, Australia, China, Japan, and Hong Kong and distributors worldwide.

Syneron, the Syneron logo, UltraShape, eMatrix and elos are trademarks of Syneron Medical Ltd. and may be registered in certain jurisdictions. The elos (Electro-Optical Synergy) technology is a proprietary technology of Syneron Medical Ltd. All other names are the property of their respective owners.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including the statement about the anticipated closing of the proposed acquisition of the Company by an affiliate of funds advised by Apax Partners. Such "forward looking statements" involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected.  Achievement of these results by the Company may be affected by many factors, including, but not limited to, risks and uncertainties regarding the ability to close the proposed transaction on the proposed terms and within the anticipated time period, or at all, which is dependent on the parties' ability to satisfy certain closing conditions, including shareholder and regulatory approvals; the risk that the benefits of the potential transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the risk that the Company's business may not perform as expected;  as well as general economic conditions. Additional information regarding these and other factors is contained in the Company's filings with the SEC, including those described in the Company's most recent Annual Report on Form 20-F. The statements made by the Company are based upon management's current expectations and  the Company undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release except as required by law.

1 Emerging Products, which represent the Company's strategic growth drivers, include product and consumable revenue from UltraShape, VelaShape, PicoWay, Profound and CO2RE Intima

Syneron Medical Ltd.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 
 
 
 
 
 

 
 

For the three-months ended

 
 
 

March 31,

 

March 31,

 
 
 

2017

 

2016

 
 
 
 
 
 

 
 
 
 
 
 

Revenues

 

$            66,880

 

$            68,696

Cost of revenues

 

32,661

 

33,081

 
 
 
 
 
 

Gross profit

 

34,219

 

35,615

Operating expenses:

 
 
 
 

 

Sales and marketing

 

24,020

 

22,698

 

General and administrative

 

6,080

 

7,498

 

Research and development

 

6,205

 

5,714

 

Other expenses, net

 

1,765

 

-

 
 
 
 
 
 

Total operating expenses

 

38,070

 

35,910

 
 
 
 
 
 

Operating loss

 

(3,851)

 

(295)

 
 
 
 
 
 

 

Financial income (expenses), net

 

(742)

 

85

 
 
 
 
 
 

Net loss before taxes on income

 

(4,593)

 

(210)

 
 
 
 
 
 

Taxes on income

 

236

 

272

 
 
 
 
 
 

Net loss

 

$             (4,829)

 

$                (482)

 
 
 
 
 
 

Net loss per share:

 
 
 
 

 
 
 
 
 
 

Basic and diluted

 
 
 
 

 

Net loss per share

 

$               (0.14)

 

$               (0.01)

 
 
 
 
 
 

Weighted average shares outstanding:

 
 
 
 

 

Basic and diluted

 

34,899

 

34,842

 
 
 
 
 
 

 

Syneron Medical Ltd.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 
 
 
 
 
 

 
 
 

March 31,

 

December 31,

 
 
 

2017

 

2016 (*)

 
 
 
 
 
 

Assets

 
 
 
 

 
 
 
 
 
 

Current assets:

 
 
 
 

 

Cash and cash equivalents

 

$              44,373

 

$              56,756

 

Short-term bank deposits

 

331

 

326

 

Available-for-sale marketable securities

 

8,543

 

10,817

 

Trade receivable, net

 

55,105

 

57,337

 

Other accounts receivables and prepaid expenses

 

14,213

 

12,587

 

Inventories

 

55,388

 

47,376

 
 
 
 
 
 

Total current assets

 

177,953

 

185,199

 
 
 
 
 
 

Long-term assets:

 
 
 
 

 

Severance pay fund

 

446

 

479

 

Long-term deposits and others

 

296

 

312

 

Long-term available-for-sale marketable securities

 

25,518

 

18,522

 

Investment in affiliated company

 

16,709

 

15,730

 

Property and equipment, net

 

12,835

 

12,529

 

Deferred tax assets, net

 

17,868

 

17,640

 

Intangible assets, net

 

7,655

 

8,516

 

Goodwill

 

18,258

 

18,258

 
 
 
 
 
 

Total long-term assets

 

99,585

 

91,986

 
 
 
 
 
 

Total assets

 

$            277,538

 

$            277,185

 
 
 
 
 
 

 
 
 
 
 
 

Liabilities and stockholders' equity

 
 
 
 

 
 
 
 
 
 

Current liabilities:

 
 
 
 

 

Trade payable

 

$              22,445

 

$              22,659

 

Deferred revenues

 

13,789

 

12,838

 

Other accounts payable and accrued expenses

 

30,209

 

28,976

 
 
 
 
 
 

Total current liabilities

 

66,443

 

64,473

 
 
 
 
 
 

Long-term liabilities:

 
 
 
 

 

Deferred revenues

 

2,730

 

2,939

 

Warranty accruals

 

1,810

 

1,794

 

Accrued severance pay

 

496

 

559

 
 
 
 
 
 

Total long-term liabilities

 

5,036

 

5,292

 
 
 
 
 
 

Stockholders' equity:

 

206,059

 

207,420

 
 
 
 
 
 

Total liabilities and stockholders' equity

 

$            277,538

 

$            277,185

 
 
 
 
 
 

 (*)

Derived from audited financial statements

 
 
 
 

 

Syneron Medical Ltd.

 Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 
 
 
 
 
 
 

For the three-months ended

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

March 31,

 

March 31,

 
 
 
 
 
 
 
 

2017

 

2016

Cash flows from operating activities:

 
 
 
 
 

 

Net loss

 
 

$       (4,829)

 

$          (482)

 
 

Adjustments to reconcile net loss to net cash used in operating
activities:

 
 
 
 

 
 

Share-based compensation

 
 

757

 

933

 
 

Depreciation and amortization

 
 

2,305

 

2,003

 
 

Realized loss, changes in accrued interest and amortization
of premium on marketable securities

 

73

 

334

 
 

Changes in operating assets and liabilities:

 
 
 
 
 

 
 
 

Trade receivable, net

 
 

2,856

 

(4,914)

 
 
 

Inventories

 
 

(7,758)

 

(1,001)

 
 
 

Other accounts receivables and prepaid expenses

 

(1,246)

 

928

 
 
 

Deferred taxes

 
 

(171)

 

(125)

 
 
 

Trade payable

 
 

(921)

 

(414)

 
 
 

Deferred revenues

 
 

569

 

377

 
 
 

Accrued warranty accruals

 
 

(361)

 

(542)

 
 
 

Other accounts payable and accrued expenses

 

1,390

 

(5,026)

 
 
 
 
 
 
 
 
 
 
 
 
 

Net cash used in operating activities

 
 

(7,336)

 

(7,929)

 
 
 
 
 
 
 
 
 
 
 
 
 

Cash flows from investing activities:

 
 
 
 
 

 
 

Purchases of property and equipment

 
 

(1,027)

 

(994)

 
 

Purchases of Intangible asset

 
 

-

 

(150)

 
 

Proceeds from the sale or maturity of marketable securities

 

5,702

 

13,279

 
 

Purchase of marketable securities

 
 

(10,504)

 

(6,531)

 
 

Proceeds from short-term bank deposits, net

 
 

(5)

 

15

 
 

Investment in affiliated company

 
 

(980)

 

(1,088)

 
 

Other investing activities

 
 

16

 

9

 
 
 
 
 
 
 
 
 
 
 
 
 

Net cash provided by (used in) investing activities

 
 

(6,798)

 

4,540

 
 
 
 
 
 
 
 
 
 
 

Cash flows from financing activities:

 
 
 
 
 

 
 

Repurchase of shares from shareholders

 
 

-

 

(3,925)

 
 

Proceeds from exercise of stock options

 
 

1,755

 

-

 
 
 
 
 
 
 
 
 
 
 
 
 

Net cash provided by (used in) financing activities

 
 

1,755

 

(3,925)

 
 
 
 
 
 
 
 
 
 
 

Effect of exchange rates on cash and cash equivalents

 
 

(4)

 

(222)

 
 
 
 
 
 
 
 
 
 
 

Net decrease in cash and cash equivalents

 
 

(12,383)

 

(7,536)

 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and cash equivalents at beginning of period

 
 

56,756

 

56,330

 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and cash equivalents at end of period

 
 

$      44,373

 

$      48,794

 

Syneron Medical Ltd.

Reconciliation of unaudited GAAP to Non GAAP financial measures

(in thousands, except per share data)

 
 
 
 
 
 
 

 
 

For the three-months ended

 
 
 

March 31,

 
 

March 31,

 
 
 

2017

 
 

2016

 
 
 
 
 
 
 

 
 
 
 
 
 
 

GAAP gross profit

 

$            34,219

 
 

$            35,615

 
 
 
 
 
 
 

 

Stock-based compensation

 

67

 
 

47

 

Amortization of intangible assets

 

724

 
 

900

 
 
 
 
 
 
 

Non-GAAP gross profit

 

$            35,010

 
 

$            36,562

 
 
 
 
 
 
 

 
 
 
 
 
 
 

GAAP operating loss

 

$             (3,851)

 
 

$                (295)

 
 
 
 
 
 
 

 

Stock-based compensation

 

757

 
 

933

 

Amortization of intangible assets

 

866

 
 

1,173

 

APAX's deal related costs

 

1,765

 
 

-

 
 
 
 
 
 
 

Non-GAAP operating income (loss)

 

$                (463)

 
 

$              1,811

 
 
 
 
 
 
 

   before non-controlling interest

 
 
 
 
 

GAAP net loss

 

$             (4,829)

 
 

$                (482)

 
 
 
 
 
 
 

 

Stock-based compensation

 

757

 
 

933

 

Amortization of intangible assets

 

866

 
 

1,173

 

APAX's deal related costs

 

1,765

 
 

-

 

Tax benefit

 

(170)

 
 

(298)

 
 
 
 
 
 
 

Non-GAAP net income (loss)

 

$             (1,611)

 
 

$              1,326

 
 
 
 
 
 
 

Net income (Loss) per share:

 
 
 
 
 

Basic

 
 
 
 
 

GAAP net loss per share

 

$               (0.14)

 
 

$               (0.01)

 
 
 
 
 
 
 

 

Stock-based compensation

 

0.02

 
 

0.03

 

Amortization of intangible assets

 

0.03

 
 

0.03

 

APAX's deal related costs

 

0.05

 
 

-

 

Tax benefit

 

(0.01)

 
 

(0.01)

 
 
 
 
 
 
 

Non-GAAP net income (loss) per share

 

$               (0.05)

 
 

$                0.04

 
 
 
 
 
 
 

Diluted

 
 
 
 
 

GAAP net loss per share

 

$               (0.14)

 
 

$               (0.01)

 
 
 
 
 
 
 

 

Stock-based compensation

 

0.02

 
 

0.03

 

Amortization of intangible assets

 

0.03

 
 

0.03

 

APAX's deal related costs

 

0.05

 
 

-

 

Tax benefit

 

(0.01)

 
 

(0.01)

 
 
 
 
 
 
 

Non-GAAP net income (loss) per share

 

$               (0.05)

 
 

$                0.04

 
 
 
 
 
 
 

Weighted average shares outstanding:

 
 
 
 
 

 
 
 
 
 
 
 

 

Basic

 

34,899

 
 

34,842

 
 
 
 
 
 
 

 

Diluted

 

34,899

 
 

35,021

 

 

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