Syneron Medical Ltd (ELOS)

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Syneron Medical Reports Record 2005 Third Quarter Results, Increased Guidance and Management Changes

Thursday November 3, 6:22 am ET

68% Increase in Revenue and Doubling of Net Income Confirms Syneron Strengthening Competitive Advantage in the Medical Aesthetic Sector


YOKNEAM, ISRAEL--(MARKET WIRE)--Nov 3, 2005 -- Syneron Medical Ltd. (NasdaqNM:ELOS - News), an innovator in the development, marketing and sales of elos(TM) combined-energy medical aesthetic devices, today reported results for the third quarter and first nine months of 2005, as well as management changes for the next phase of its corporate growth strategy.

Revenue for the third quarter of 2005 rose 68% to $25 million, compared to $14.9 million reported in the third quarter of 2004. The VelaSmooth(TM) played a significant role in the growth of North American sales. Also contributing to the strong rise in sales was the active promotion of bundled sales in the U.S. during the third quarter of 2005, which contributed to a 40-50% increase in the average transaction size. North America accounted for 66% of total sales from July to September.

Operating expenses rose 27.6% during the third quarter of 2005 to $8.3 million, compared to $6.5 million a year ago. The limited rise in operating expenses reflects the leveraged effect of the sharp rise in sales, given the efficiencies of Syneron's cost structure, as well as lower marketing and sales costs in the third quarter of 2005.

Third quarter operating income doubled to $13.6 million, from $6.7 million in the third quarter of 2004. Operating margins rose to 54% in the third quarter, compared to 45% in the third quarter last year. Third quarter 2005 net income rose to $14.6 million, compared to $7.3 million net income reported in Q3 2004. The net income margin rose from 49% in Q3 2004 to 58% in Q3 2005. Earnings per diluted share were $0.53 in Q3 2005, compared with $0.29 in Q3 2004.

Revenue for the nine months to September 30, 2005 rose 57.6% to $63.7 million, compared to $40.4 million reported in the first nine months of 2004. Operating expenses for the first nine months of 2005 on a pro forma basis (excluding expenses for the secondary offering and the Thermage settlement) were $24.5 million, compared to $17.5 million recorded in the same period in 2004. Nine-month operating income grew 68.2% on a pro forma basis to $30.8 million, from $18.3 million in the first nine months of 2004. Nine-month net income was $32.5 million pro forma, compared to the $19.1 million net income reported in the same period the previous year. On a US GAAP basis, including the costs of the Thermage settlement and secondary offering, operating expenses for the first nine months of 2005 were $28 million, operating income for the nine months was $27.3 million, with net income of $29 million. Earnings per diluted share, on a pro forma basis for the first nine months of 2005, were $1.18, while on a GAAP basis, earnings per diluted share were $1.05.

Commenting on the results, Moshe Mizrahy, CEO, said, "The results for the third quarter clearly reflect the success of our efforts to create the most competitive and diversified product portfolio for use by medical aesthetic professionals. At the most basic level, our success derives from the competitive advantage of the elos technology which enables us to produce the safest, most effective equipment in the industry, as discussed in some 40 peer-reviewed articles, with maximum manufacturing efficiencies. At a higher level, our success also reflects the achievements of individuals and groups within Syneron, such as the sales and marketing management which developed and implemented marketing strategies that capitalize on the competitive advantages of Syneron's broad product portfolio."

Syneron is raising revenue guidance for 2005 to $91-92 million from $84-85 million.

Syneron's financial position remains strong. In the third quarter, Syneron generated cash of $13.5 million from operations and $2.6 million from exercise of options and interest, for a total cash position on September 30, 2005 of $118.5 million, with no debt. Shareholders' equity was $125.7 million at the end of the third quarter.

Management Changes

Looking forward to the next phase of its strategic corporate development, Syneron is today announcing changes in its senior management. The changes include the transition of responsibility as Chief Executive from Moshe Mizrahy, who has been instrumental in the rapid growth of Syneron since its inception and for Syneron's highly successful first year as a public company, to David Schlachet, currently CFO of Syneron, and the appointment of Shimon Eckhouse as active chairman.

Commenting on the management transition, Shimon Eckhouse said, "Moshe Mizrahy's skills with managing early-stage companies and developing Syneron's markets have been instrumental in achieving worldwide market recognition of the competitive advantages of our elos(TM) technology and Syneron's wide portfolio of medical aesthetic platforms. Looking to the next phase of Syneron's strategic development, David Schlachet brings broad senior managerial experience and extensive experience in implementing M&A strategies, having served as the chairman and CEO of several large publicly traded companies, as well as specific experience in the medical technology sector having been a managing partner of an Israeli venture fund specializing in medical devices and biotechnology and as Vice President of the Weizmann Institute of Science in Israel."

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