Well, now we know where most of the sales in the aesthetic-laser industry went. Syneron (NASDAQ:ELOS) posted top-line revenue growth of 36% in the first quarter.
The Motley Fool Rule Breakers recommendation showed no sign of an industry slowdown, which was feared when rival Candela (NASDAQ:CLZR) posted a greater than 8% drop in sales and Cutera (NASDAQ:CUTR) had a meltdown that led to fairly anemic growth compared to prior quarters. Syneron's efforts were quite robust, as it continued to steal market share.
While Palomar Medical Technologies (NASDAQ:PMTI) also had a strong quarter, it received a significant boost from royalties. Because Syneron's technology is different than that used by Palomar, it has no fear of becoming a target of one of its rival's infringement lawsuits. And when you compare product sales at the two companies, Syneron easily outpaces Palomar. It is quickly establishing itself as a premier provider of aesthetic lasers, both here and abroad, which the company attributes to its investment in its sales and marketing teams.
The North American market accounts for more than half of Syneron's total revenue, and it saw a 33% increase this quarter. One out of every 10 aesthetic-laser procedures is performed at American Laser Center locations, and Syneron is in the catbird seat as their sole provider. Still, sales and marketing expenses were significantly higher than last year, and while they declined sequentially from the fourth quarter, they comprise a large chunk of the expenses Syneron realized. That, however, contributed to the laser maker's top-line growth.
It was those investments that appeared to knock back profits this quarter, as they came in 3% lower on a GAAP basis. Syneron prefers to look at pro forma results, which would exclude some one-time events and stock-based compensation. While I might have difficulty accepting the exclusion of stock-option grants from the equation, non-GAAP results were actually 8% higher than last year at $0.40 per share.
Before we get too excited, though, the company has guided to 20% revenue growth for the year. That means that going forward, we'll find some quarters with significantly lower results than what we've become accustomed to. Like its competitors, Syneron wants to diversify its revenue stream through greater sales of consumables, as well as entering the consumer market.
Proctor & Gamble (NYSE:PG), it seems, wants to corner the market on home-use lasers. While it has partnered with Syneron to develop such a product, it has also signed agreements with BioLase (NASDAQ:BLTI), and its subsidiary Gillette is teaming up with Palomar. Though these products are still a ways off, when they come to fruition, the consumer-products giant will be firmly entrenched in the market.
Syneron has a large pile of cash to throw at different markets. It says it wants to use the money to make strategic investments and acquisitions. The company is based in Israel, and it primarily looks at small Israel-based companies that complement its business, but it is not opposed to making a larger acquisition or looking abroad for targets.
With a lot of irons in the fire, Syneron continues to hone in on building its reputation. It notes that 25% of its business comes from referrals. Consumer vanity remains at the heart of the industry, and Syneron has shown that it is alive and well. Trading at a discount to its rivals, Syneron makes for an interesting investment that could continue to burnish its name in the market.
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Fool contributor Rich Duprey owns shares of Candela but does not have a financial interest in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
