Syneron Medical Ltd (ELOS)

[midastouch017]

Syneron Medical Reports 2005 Second Quarter Results
Thursday August 4, 7:30 am ET
Company confirms recent increase in revenue guidance to $84-85m for 2005


YOKNEAM, ISRAEL--(MARKET WIRE)--Aug 4, 2005 --
Highlights of second quarter 2005:
-- Total revenues grew over 50%.
-- Over 400 units were sold in the second quarter, raising the world wide
installed base to over 3000 units.
-- FDA cleared the VelaSmooth(TM) and granted the device a new product
code, confirming its unique position in the aesthetic device market.
-- Investment in dental laser market opens new strategic business
opportunities for Syneron.
Syneron Medical Ltd. (NasdaqNM:ELOS - News), an innovator in the development, marketing and sales of elos(TM) combined-energy medical aesthetic devices, today reported revenues of $20.1 million for its second quarter of 2005, a 50.6% increase from $13.4 million reported in the second quarter of 2004. The increase in revenues was attributable to strong sales across all platforms and the introduction of new platforms: the Comet(TM) system for fast hair removal toward the end of the first quarter of 2005 and the VelaSmooth(TM) system for reduction in the appearance of cellulite at the end of the second quarter of 2005. Gross margins in the second quarter of 2005 were 86.8%. Second quarter operating income grew 40.1% on a proforma basis (excluding expenses for the Thermage settlement) to $8.9 million, from $6.3 million in the second quarter of 2004. Second quarter 2005 net income was $9.2 million proforma, a 43.7% rise compared to the 6.4 million net income reported in Q2 2004. On a US GAAP basis, including the costs of the Thermage settlement, operating income for the second quarter of 2005 was $6.5 million, with net income of $6.9 million. Earnings per diluted share, on a proforma basis for the second quarter of 2005, were $0.34, while on a GAAP basis, earnings per diluted share were $0.25.

R&D expenditure rose to $1.3 million, equivalent to 6.2% of revenues in the second quarter of 2005 compared to $0.5 million, or 3.8% of revenues in the second quarter of 2004. The higher R&D expenditure reflects the continued investment of Syneron in the development of new products and applications, such as non-invasive fat treatment, as well as the expansion of our elos technology product line into applications performed by (non-MD) professionals specializing in aesthetic treatments.

Selling and marketing expenses rose 39.7% to $6.6 million, compared to 4.7 million in Q2 2004. Approximately $0.6 million of the increased selling and marketing expenditures were spent on preparations for the launch of the VelaSmooth, including clinical studies, the establishment of three training centers, development of training courses and promotional and marketing materials.

The Thermage settlement resulted in a one-time charge to Syneron of $2.37 million for legal and settlement expenses. The settlement removed all future legal liabilities or costs to Syneron and gave Syneron a license to relevant Thermage patents, while securing Syneron's exclusive patent rights over its proprietary elos technology.

"Robust sales in the second quarter were driven by a strong sales effort to get the products out to new customers' world wide," commented Moshe Mizrahy, CEO of Syneron. "Sales rose strongly across all markets for Syneron. North America accounted for $12 million, or 59% of total sales, with $8.1, or 41% of sales outside North America. Looking to new future markets, in the second quarter we initiated strategic partnerships in China, India and Russia, with the view of establishing a strong position for Syneron in three emerging markets for aesthetic devices which have enormous growth potential.

"We are confirming the increase in our revenue guidance to $84-85 million from $78-80 million, which we announced on June 30," said Mr. Mizrahy. "This increase in guidance was based on our initial assessment of sales for the Vela, which is showing very strong demand worldwide."

Continuing on Syneron's growth plans, Dr. Shimon Eckhouse, Chairman of Syneron, said, "Our business strategy is driven by an effort to utilize our technologies and market position in new and innovative applications, while maintaining our commitment to the levels of profitability we have obtained as a result of the elos technology. The increase in R&D and the investment in the dental laser venture are the first steps in the evolution of Syneron from a company focused on doctors dealing with aesthetic facial and skin treatments to a company developing products for a broader market base. Our business strategy consists of four central components: strengthening our leadership position in our core business of FotoFacial RF skin treatment; establishing a new segment in the medical aesthetic field for body shaping and body sculpturing treatments; developing a complete product line for the spa and the Non-MD professionals; and developing a complete dental laser line of products through our Light Instruments investment."

Syneron's financial position remains strong. At June 30, 2005, the cash position was $104.5 million compared with $93.4 million on December 31, 2004. Shareholders' equity increased to $110.4 million from $94.4 at year-end 2004.

Conference call

Syneron Management will host a conference call to discuss the results and quarterly highlights at 10:00am ET today, August 4, 2005. Investors and other interested parties may access a live webcast through Syneron's web site at www.syneron.com. Please login at least 10 minutes prior to the conference call in order to download the applicable audio software. Following the conclusion of the call, a replay of the webcast will be available within 24 hours at the Company's web site.
http://biz.yahoo.com/iw/050804/092402.html

Dubi