Sirona Dental Systems Management Discusses Q1 2013 Results - Earnings Call Transcript

| About: Sirona Dental (SIRO)

Sirona Dental Systems (NASDAQ:SIRO)

Q1 2013 Earnings Call

February 08, 2013 8:30 am ET

Executives

Joshua Zable - Vice President of Investor Relations

Jost Fischer - Chairman and Chief Executive Officer

Simone Blank - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Director

Jeffrey T. Slovin - President, Chief Operating Officer of U S Operations and Director

Analysts

Ross Taylor - CL King & Associates, Inc., Research Division

Steve Beuchaw - Morgan Stanley, Research Division

John Kreger - William Blair & Company L.L.C., Research Division

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

Scott J. Green - BofA Merrill Lynch, Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Diego Hernandez Diaz

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

Jeremy Feffer - Cantor Fitzgerald & Co., Research Division

Robert P. Jones - Goldman Sachs Group Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Sirona Dental Systems Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Joshua Zable, Vice President of Investor Relations. Please proceed.

Joshua Zable

Thank you, and good morning, everyone. Welcome to our first quarter 2013 conference call. I would 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 statement on Slide 2 of our earnings slide presentation. During today's conference call, we'll make certain predictive statements that reflect our current views about our future performance and financial results. We base 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 program over to Jost Fischer, Chairman and CEO of Sirona Dental Systems.

Jost Fischer

Thanks, Josh. It is my pleasure to welcome all of you to our first quarter 2013 conference call. Joining me today are Jeffrey Slovin, President; and Simone Blank, Executive Vice President and Chief Financial Officer.

I am very pleased to report record results for the first quarter of fiscal 2013. Our 8.6% constant currency revenue growth reflects the power of Sirona's franchise, even though we were capacity constrained with Omnicam production during the quarter.

I am happy to report that the ramp-up phase of manufacturing capacity for the Omnicam is behind us. For the quarter, 3 of our 4 segments had record quarters, with CAD/CAM and Treatment Centers leading our growth, up 16.5% and 8.4%, respectively, on a constant currency basis.

The U.S. performed exceptionally well, up 29%. While we don't expect this level of growth to continue, we are clearly benefiting from our expanded exclusivity arrangement with Patterson. This quarter, we saw strong demand for our Imaging and CAD/CAM products. We also benefited from customers buying ahead of the medical device tax.

International markets were up slightly on a constant currency basis. Our performance in this quarter does not reflect the demand and potential of these markets. We are seeing strong order intake.

Our first quarter was impacted by capacity constraints and the associated prioritization of the U.S., back-end loaded orders and the difficult Imaging comparison. We expect the second quarter to better reflect the success and positive trends we are experiencing in our international markets.

I am pleased to report our multipronged global strategy is working well, very well. And we continue to take market share.

Let me reiterate the key pillars of our successful strategy: We expand our outstanding portfolio of high-tech dental products through continuous innovation and integration of our technologies. We have invested over $290 million in the past 6 years, creating new and enhanced products and solutions for better dentistry to grow and leverage our world-class global sales and service infrastructure. We are active in over 135 countries around the globe. The result of this strategy has led to consistent, robust, organic growth. Expect Sirona's focus to remain unchanged.

It is extremely gratifying for my last quarter as CEO of Sirona, to leave on such a high note, reporting a record first quarter. The company has never been positioned better.

During the quarter, we continued to invest in our sales and service infrastructure around the world and advance the development of our innovative pipeline.

Our hard work and targeted investments have yielded tangible results. I will now turn the call over to Simone who will review our first quarter financials.

Simone Blank

Thank you, Jost. In the first quarter, our revenues increased $14.3 million to $272.4 million, up 5.5% or up 8.6% on a constant currency basis.

The U.S. was up an exceptional 29% and benefited from strong demand for our Imaging and CAD/CAM products, our expanded agreement with Patterson, as well as the impact from the anticipated implementation of the medical device tax in 2013.

Revenues outside the U.S. increased 0.6% constant currency and were impacted by capacity constraints for the Omnicam, the challenging prior year comparison for Imaging and a back-end loaded order intake during the quarter, which we expect will benefit us in the second quarter of fiscal year 2013.

Non-GAAP adjusted EPS of $0.94 increased 9% from prior year.

Moving on to a review of our business segments. Revenues in our CAD/CAM segment increased 13.5% to $95.6 million or up 16.5% on a constant currency basis. CAD/CAM segment revenues benefited from the Omnicam launch and the generally increasing demand for this segment.

During the quarter, we experienced capacity constraints due to the ramp-up of the Omnicam production. Thus, we prioritized shipments to the U.S.

We are pleased to report that the ramp-up phase for the manufacturing of the Omnicam is behind us. Our CAD/CAM segment margin was 70.7% on a similar level to the prior-year period.

The gross profit margin was mainly due to a very beneficial product mix. Please keep in mind that the Omnicam carries a similar absolute gross profit to Bluecam, that carries a lower gross profit margin. Omnicam shipments were not at full level in Q1, therefore, the discussed lower gross profit margin on Omnicam had only a limited effect this quarter.

Imaging segment revenues increased 2.7% to $97 million or up 4.9% on a constant currency basis, over a very challenging prior-year comparison where we grew 24.3% on a constant currency basis. Sales were particularly strong in the U.S. where we are seeing the benefits from our expanded exclusivity with Patterson.

We continue to experience robust demand of our 2D and 3D products, and we are pleased with the reception of Schick 33, our new intraoral sensor. Imaging segment gross profit margin was 60.2%, 290 basis points higher than the prior-year period. Margins improved sequentially and benefited from a very favorable product mix.

Treatment Center segment revenues were $53.4 million, up 4.3% and up 8.4% constant currency. Growth in the quarter was driven by our Comfort and standard product lines and was particularly strong in Germany. We continued the above market growth trajectory and are taking market share. Treatment Center gross profit margins decreased 50 basis points to 39.6%. The quarterly development was driven by product mix but remains in line with our 40% margin growth.

Instrument revenues of $26.4 million were down 5.8% and down 2.1% on a constant currency basis. We were sequentially higher but faced a challenging comparison from the prior year.

Instrument segment gross profit margin was 46.2%, down 160 basis points over last year due to product mix. Please remember that product mix can create significant variations in gross profit margins from quarter-to-quarter.

Moving on to a review of the P&L. Gross profit margin was 55.8%, up 200 basis points compared to 53.8% in the prior year. Gross profit margin was impacted by a positive segment and product mix and lower deal-related amortization. Cost of sales included deal-related amortization and depreciation expense of $9 million versus $11.2 million in the prior year.

SG&A expense was $85.8 million, up $12.1 million. SG&A expense includes $7.3 million in expenses for the transition agreement with the departing Chairman and CEO, of which approximately $3.5 million represents cash settlements, and the remaining $3.8 million were noncash revaluation of share-based compensation. Excluding this amount, SG&A expense increased $4.8 million or 6.5%.

During the quarter, we continued to implement our strategy to invest in the expansion of our sales and service infrastructure, to capitalize on opportunities to gain market share and to build up our presence in key markets.

R&D was $14.1 million, $0.8 million above prior year. The increase is mainly driven by the timing of projects.

Net other operating income was $6.9 million. This included a $4.4 million gain from a patent infringement settlement. The income tax provision for the first quarter of fiscal 2013 was $15.2 million. The income tax provision includes the tax expense of $2.2 million from a noncash remeasurement of deferred tax liabilities, resulting from an enacted local trade tax rate increase at our principal German operations. Excluding this item, tax expense for the quarter was $13 million, representing an estimated effective tax rate of 24%.

Net income was $38.3 million, on the same level as the prior-year period.

First quarter 2013 diluted GAAP EPS was $0.68 compared to $0.67 in the prior year. Adjusted non-GAAP earnings per share was $0.94, up from $0.87 in the prior year, an increase of 9% versus the prior year.

As a reminder, adjusted non-GAAP EPS excludes amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets related to past stimulus combinations, gain and loss on foreign currency transactions, gain and loss on derivative instruments, any other cash or noncash items that management does not view as indicative of its ongoing operating performance and any related tax effect.

This quarter, incorporated into our non-GAAP adjusted EPS, is a $3.8 million exclusion, or $2.9 million net of tax, of a noncash compensation expense associated with the transition agreement for the departing Chairman and CEO. Additionally, excluded is a tax expense of $2.2 million from a noncash remeasurement of deferred tax liabilities resulting from an enacted local trade tax rate increase at our principal German operation.

For a reconciliation of GAAP EPS to non-GAAP EPS, please see the earnings press release.

At December 31, 2012, the company had cash and cash equivalents of $124.2 million and total debt of $75.4 million, resulting in net cash of $48.8 million. This compares to net cash of $75.6 million at September 30, 2012.

During the quarter, we bought back around 283,000 shares for over $17 million. There was also a cash payment in connection with the new acquisition of a technology company of $37 million.

Now moving on to guidance. We are reiterating our previously provided fiscal 2013 guidance. For fiscal 2013, we continue to project our constant currency revenue growth to be in the range of 9% to 11%. We expect revenue growth to accelerate specifically in Q2 and Q3, as we are now up to speed on Omnicam production capacity and have the IDS in March. For the full year, we anticipate the segment gross profit margin to be similar to prior year's level. Reported gross profit margin is expected to be higher than the prior year due to the step-down in amortization expense.

SG&A as a percentage of sales is anticipated to be between 29% and 30% of sales for fiscal 2013. Please keep in mind that we anticipate $3 million to $4 million in expenses associated with the IDS in Q2.

R&D expenses are anticipated to be between 5% to 6% of sales. The estimated effective rate for fiscal 2013, excluding the $2.2 million effect from the aforementioned noncash remeasurement of deferred tax liabilities, to be 24%.

For fiscal 2013, we continue to expect adjusted non-GAAP EPS in the range of $3.33 to $3.43. This represents approximately 10% to 13% growth compared to a fiscal 2012 non-GAAP adjusted EPS calculated on the same basis.

As always, I suggest our investors evaluate our business on an annual basis, as our quarterly progression can vary significantly.

I will now turn the call back to Jost.

Jost Fischer

Thank you, Simone. As we have said many times, our investments over the last years have been, without question, a great success that will yield benefits in the years to come.

Strategy is, be the first mover, provide innovative product to the market, leverage our infrastructure to support our customers and drive short- and long-term organic growth.

Sirona's top line has never been more diversified. For fiscal 2012, our non-U.S, non-European markets represent around 37% of our sales, and even within Europe, we are more diversified than ever before.

11 years ago, our vision was to build a market-leading product portfolio, a powerful brand and a global company. And today, we are proud to have accomplished the goal.

We have made a substantial investment in our global infrastructure build-out and never lost sight that innovation is the hallmark of Sirona. In August, we launched Omnicam, the revolutionary new CAD/CAM camera. Omnicam is lightweight for easy handling, powder-free for convenience and the first color-streaming camera. With Bluecam and Omnicam, we have the 2 best cameras in the market.

Let me remind you, the penetration rates for most of our groundbreaking products are still relatively low. Sirona's technology enables dentists to be more efficient, productive and do better dentistry. It is the combination of our innovation, integration of technology and support for the customer that drives our success.

You often hear me talk about innovation being the hallmark of Sirona, and we have been prolific in the development of cutting-edge products. To further support the best R&D team in dentistry, we designed and built the Center of Innovation, a state-of-the-art, fully-equipped R&D facility to enhance cross functional innovation. With key new products launched in 2012 and a pipeline that is as full as it's ever been, Sirona continues to maintain and extend its technological leadership in the dental space.

After 11 years, I can leave confidently saying that the Sirona brand is strong in every major dental market and represents innovation, quality and leadership. Since I have been with Sirona, sales have more than quadrupled, profitability has consistently improved, and we've nearly tripled the number of employees and transformed Sirona into the global leader in dental technology.

With our best-in-class sales and service infrastructure, we will continue to bring our technology around the world and strengthen Sirona's global brand as the innovator in the industry. And as I look forward, the future is bright for Sirona. The best is yet to come.

As we near the end of our prepared remarks, let me take a moment to talk about the team that will lead you to Sirona's next phase of growth. I'd like to give a special thanks to Simone Blank, my long-term colleague and Chief Financial Officer. Her track record speaks for itself, and Sirona could not have achieved such heights without her many contributions.

As you know, Jeffrey Slovin will take my place, and you should expect a seamless transition, given our close working relationship over the years. Jeff is the ideal candidate to succeed me as Sirona's CEO. He has the necessary experience and stellar reputation within the dental community to take Sirona to the next level.

Since joining Sirona, Jeff has consistently demonstrated excellent judgment and played a major role in improving our operations, targeting our research and development efforts and leading growth initiatives. Jeff has the full support of myself and the board. I'm excited to watch him take Sirona to new heights.

We continue to execute. We have built this company for balanced and sustainable growth, and we are accomplishing that goal.

And before we move to your questions, I would like to thank our outstanding employees and distribution partners, who we believe are unparalleled in the industry. Finally, I'd like to thank the Board of Directors and the investment community for all of their support and confidence throughout these years.

Simone, Jeffrey and I will now address your questions. Operator, please proceed.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question will come from the line of Ross Taylor, CL King.

Ross Taylor - CL King & Associates, Inc., Research Division

Just maybe 2 or 3 quick questions. First, I wonder if you can give any color on what your mix of Omnicam versus Bluecam sales was in the quarter? And whether you expect that might change much now that some of the capacity constraints seem to be -- have gone away?

Jost Fischer

All right, good morning, Ross. This is Jost. Yes, we, of course, have a ramp up in our Omnicam going on, and therefore, the number of Omnicams were moving up throughout the quarter. But there was a very significant and solid demand for our other products in there, including the Bluecam.

Ross Taylor - CL King & Associates, Inc., Research Division

Okay. And also, you mentioned your new agreement with Patterson a few times. And can you give any color as to how that's changing how you all are going to market now, if you're impacting or expanding demand? You did mention it a few times, and it sounds like it is being a nice benefit for you.

Jost Fischer

Ross, we put all eggs in one basket in the U.S., expanded our agreement to include our entire product line, extended the exclusivity to 2017. And Patterson has committed to very challenging goals with us, together. And from that point, we now have the full attention of their sales force, and we are pretty well set up in this thing, as you can see by 29% growth evidence in this quarter.

Ross Taylor - CL King & Associates, Inc., Research Division

Okay. And just 2 last questions, quickly. The pull forward in the U.S., how significant do you think that was? And do you think we'll kind of see a pretty dramatic step-down in that growth rate in the next -- here in the March quarter? And I don't know if you gave any color on how some of the European markets performed in the quarter, but just wondered about your sense as to how the economies there might be impacting your business, and that's all of my questions.

Jost Fischer

Okay, right. Talking about the U.S. and the pull forward. Yes, the implementation of the medical tax, certainly, had some pull-forward effect from the end-user side of it, as evidenced by an exceptional 29% growth that we had. So from that prospection [ph] , yes. So do not expect us to have 29% growth next quarter. But I -- we see still very good end-user demand for Sirona products in there. So we're confident, going forward, about the market in the U.S. Second, Europe. Europe remains stable. I think, there is no change in the story. Germany was up for the quarter in this one. So in general, though, you have some weaker countries in Europe, as we evidenced by lower sales in the U.K. and in Spain. But they do not reflect the very big part of our sales. So Europe is stable. Heading into IDS, we think that was a solid performance here.

Operator

The next question will come from the line of Steve Beuchaw, Morgan Stanley.

Steve Beuchaw - Morgan Stanley, Research Division

Hey, Jost, I'll risk sounding a little sentimental and freely admit, I'm going to miss you. I really wish you all the best, and thanks so much for such a terrific run there.

Jost Fischer

Thank you, Steve. I really appreciate it.

Steve Beuchaw - Morgan Stanley, Research Division

I wonder, as we go forward here in 2013, if you could spend a little time thinking about the impact of Omnicam, maybe in a different way than we've talked about? I wonder with Omnicam, do you think any differently about the opportunity for standalone scanners, so scanners without mills. Is there a case -- as the company thinks more and more about integration with Omnicam and other parts of the portfolio, across the entire portfolio, to think more about a different strategy that could include trying to reach out without a mill in the office?

Jost Fischer

Steve, both. First thing, we believe the largest market opportunity is in share site CAD/CAM and in the combination of the technologies with Imaging and the surrounding services that Sirona has to offer, and that is by far the largest opportunity, number one. Number two, camera only, meaning just taking the scan and then delivering this via email to a lab, there is a market for that. The market has not been very strong in the past. Do we see potential there? Yes, we do. But this will not reach the opportunity that we have in share site CAD/CAM.

Steve Beuchaw - Morgan Stanley, Research Division

Very helpful. There was a question asked earlier about Europe and I want to ask the same thing about the U.S. market. We've talked in past quarters about the underlying strength of the U.S. market, how that has reaccelerated. I understand in this quarter, we had a couple of unique items, with Section 179 and the medtech tax. But if you -- could you comment on how you see that market trending, excluding the impact of those onetime items, around the end of the year?

Jost Fischer

Yes, okay. So when we talk about the general market conditions, we feel they are stable. There is stable traffic in the dental offices. When we look further into the technology part of it, I think we have a good market. There is good demand for Sirona products, over and above that year-end frenzy about the med tax that we've seen. So from our point of view, we are very well-positioned in the U.S., and we expect that market for technology to grow for Sirona.

Operator

Your next question comes from the line of John Kreger, William Blair.

John Kreger - William Blair & Company L.L.C., Research Division

Jost, could you just talk a little bit more about the acquisition you made in the quarter? Any sense about what that technology is or what area it's in? And what sort of impact do you expect it to have on the P&L for the rest of the year?

Jost Fischer

Yes, yes, I think, we'll give you a little more detail. It is in the technology area. As you know, we build our technology portfolio and acquisition is part of that build-out. And I think, it's a very exciting opportunity that we will continue to develop and bring to market next year.

John Kreger - William Blair & Company L.L.C., Research Division

Okay. So we can take from that, it's probably losing some money. Will it have a notable impact on R&D spend?

Simone Blank

It is included in our R&D line, that's where it will mainly hit. But no change to our guidance, all included.

Jost Fischer

Yes.

John Kreger - William Blair & Company L.L.C., Research Division

Got it. Should we expect more acquisitions like this in the coming quarters, given you're building cash position?

Jost Fischer

Yes, first of all, we have a fourfold acquisition strategy. We look at everything. We are very disciplined about that. And I think, there will be no change with the new CEO, at least, as he has hinted that. So from my perspective, we look at everything. We're very disciplined, and that's where we are.

John Kreger - William Blair & Company L.L.C., Research Division

Great. And then just one follow-up question about IDS, and this is a little bit speculative. But we've heard some people say that they think there could be other digital scanners coming that could be competitive to CEREC if you look out to this IDS show. Do you think that'll be the case? Do you expect that we're going to have more entities competing for that growing category?

Jost Fischer

So, John, first of all, let's put that into perspective. Sirona is continuing to define the market for CAD/CAM, very clearly. We are very well-positioned for the future, and we just brought Omnicam to market. So I think, from a positioning, this couldn't be better. We have seen products going in and out in this category before, they have not succeeded really in the past. So from what we have seen, from our point of view, we don't think any product out there seemed to be a threat for Sirona. We are confident that we have the 2 best cameras on the market, Bluecam and Omnicam, period. That's how we look at the market. On the pricing, if you dig a little deeper, as we understand, advertised lower prices are not necessarily lower cost for the dentist when other fees are added. So from an apples-to-apples comparison, also the pricing side doesn't seem to worry us at this point in time. Of course, John, I mean, this is a very attractive category. We've been growing double-digit for years. You can expect competitors to try to enter this space. But as they found out, that's not going to be so easy. But in fact, our position has improved over last year. So from that perspective, we're very confident where we are today.

Jeffrey T. Slovin

John, I would encourage you to come to the IDS, where's Sirona shows its best.

Operator

Your next question will come from the line of Jeff Johnson, Robert W. Baird.

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

Jost, I gave you all the congratulations last quarter, I'll just repeat them again this quarter. It's been great working with you over the years and best of luck to you. First question, just want to start of the medtech tax. Have you, across your product lines starting January 1, did you take your prices up to Patterson, I guess, selling into the U.S. and do those seem to be sticking at this point, Jost?

Jost Fischer

Yes, yes, absolutely. We took up the prices to include the medical device tax, as we said, and a little more. So from that point of view, they are established and sticking at this point.

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

Okay. And I know Patterson then turned around and raised the price even higher on Omnicam to $136,900 [ph], I think, is what I'm hearing in the field. Would you expect to see, Jost, some discounting off that pretty quickly here, starting in Chicago, as you've often had over the years? Or are the features on Omnicam enough at this point, you think you can hold closer to list on those ASPs?

Jost Fischer

Look at, in general, when you have a new product out there, there is no reason to have big discounts on them when you launch them. And of course, we won't comment on anything that comes up from our partners point of view. That's true, but we raised the prices, that shows you the strength of the demand within the market. And I think that's good for -- from our point of view.

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

All right, great. And then, Simone, maybe if I could just get a couple of clarifying questions here on things. In the acquisition information you provided, there's a settlement of balances. Does that mean there were some sort of relationship here previously, and does that impact anything going forward from a revenue or cost standpoint? And then any update on the April 20 -- 2011 acquisition? I think, we're getting close to seeing something from that, should we expect to see something from that here, shortly?

Simone Blank

Okay. First question, first. The line that you relate to refers to that new acquisition. There was a prepayment a year before on that opportunity, so that adds to it, right, it's just not in that quarter. So in total, the cash out has been a little bit higher. And the second part of the question, related to the acquisition that we did in 2011. Yes, absolutely. We said that we expect to see something in the first half of fiscal '13, and I encourage you to come to the IDS.

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

Fair enough. I guess, Jost, I would ask you, you've capitalized quite a bit of R&D with that project. So I know you don't launch products on calls. I think, you've chastised me about 300 times on that before. But I would assume if you capitalize that kind of R&D cost, this has to be a decently sized new product coming out from that.

Jost Fischer

Just come and see, March 15. Yes, it's going to be in the technology area, Jeff, that's certainly...

Operator

The next question will come from the line of Jonathan Block, Stifel, Nicolaus.

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

I asked about the Imaging gross margin last quarter, but they really continue to impress and came in above our expectations. So anything with better price stabilization or mix, or if you're getting a better deal on the Patterson exclusivity? Can you talk to the moving parts there that brought the gross margins back above 60%?

Jost Fischer

60%, 60%.

Simone Blank

Yes, I'll take that question. Obviously, we're very pleased with this quarter's margins, and yes, they were up sequentially. It is mix, right, like we've elaborated to many times, we had very favorable mix in the quarter. Keep in mind that, that can vary from quarter-to-quarter. So -- but we always said, like if it's a very favorable mix, we can get to the 60%. If the mix is a little bit more average, it's slightly below that, as we've seen last year as we move through the quarters.

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. And then, Simone, I think this one's for you. The non-GAAP on the print was $0.94, but there were some moving parts and I just want to make sure I got my arms around them. It looks like you might have had about, in and around, a $0.05 from legal that you called out. But also, you expensed or you didn't back out of the non-GAAP, it looks like $3.5 million of the total $7.3 million in the CEO transition. So when you sort of -- am I right, is the first question. And then two, is if you net those 2 items off of one another, is it sort of plus 1, if you would? So maybe true apples-to-apples, would be a $0.93 non-GAAP versus The Street numbers?

Simone Blank

I mean, the $0.01 conclusion is correct. So if you would back out the $3.5 million cash portion of the transition agreement and the income that we had from the settlement of the litigation, then that would have a $0.01 impact benefit, so $0.93. However, we didn't do that because we consider that to be operational.

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then this one was just a little bit curious. On the tax benefit that you called out, in the press release, it seemed like some of it may have alluded to the uncertainty around 179, but some of it was also med device tax, can you talk to that? I mean, were the end-users really cognizant of the pending tax and they got more aggressive because of the 2% in change [ph] ? Or was it more their uncertainty around 179, greater uncertainty, if you would, around fiscal cliff than maybe in the past years, and that accelerated some purchases?

Jost Fischer

I would say the medical tax implementation had the biggest positive effect on that. I think, the people were saying, "Hey, I'm thinking about buying, why not get it early?" So I think there was an effect of a pull forward, as I said earlier. And from a general point of view, that was end-user demand, and we expect in the U.S., for Technology Products, this to continue in Q2 and Q3 for us.

Jeffrey T. Slovin

I think the sales force did a good job of educating the dentists. And I think, we saw that in the end-user demand, clearly.

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

Okay, and then the last question, if I can slip in, because you just touched on it. Amongst the sales force, are they doing a good job of educating the potential customers on all the hidden costs, if you would, of these lower prices? Just like you said, when you actually peel back the onion, if you would, it's a lot of times very much the same on a monthly payment, after they put these things over in the 5- or the 7-year note, et cetera. So do you think reps are out there doing a good job of explaining all these hidden costs to the end-user?

Jost Fischer

Yes, sure, Jonathan. And I alluded to these hidden costs from other products out there. I think, they do, actually, educate their customers about the total cost of ownership in there. And more and more dentists are even asking about it, not accepting a low prices or low price if there are strings attached. So from that point of view, I think, that will unravel even further as we go forward. We're not concerned about that.

Operator

Your next question will come from the line of Scott Green, Bank of America Merrill Lynch.

Scott J. Green - BofA Merrill Lynch, Research Division

Could you tell us what constant currency CAD/CAM sales growth would've been, absent the capacity constraints?

Jost Fischer

Not really, that's an academic question, I would say. First of all, what I can say is, hey, we had a ramp-up, the ramp-up was done pretty professionally. I think, we finished a little ahead of schedule from that perspective. We have a lot of orders in there that we could not fulfill, we cannot fulfill in Q2. So from there -- from that perspective, we are, I think, as you see evidenced by 16-point-plus percent, we don't worry about economics here, could we have done more.

Scott J. Green - BofA Merrill Lynch, Research Division

Okay. Could you tell us what percentage of the CAD/CAM sales were Bluecam versus Omnicam?

Jost Fischer

No, we don't give this level of detail, but rising Omnicam numbers throughout the quarter.

Scott J. Green - BofA Merrill Lynch, Research Division

All right. And can you update us on in what countries you're selling Omnicam and where you're still waiting for approvals and when you expect to receive those approvals?

Jost Fischer

Yes, we sell Omnicam currently in Europe, Australia and North America. This is where Omnicam has been introduced. Then we have some other countries that we are waiting for clearance, which typically could take between 12 and 18 months after launch, which are Japan, China, Brazil, Korea. So from that perspective, we will see this earliest at the end of our fiscal.

Scott J. Green - BofA Merrill Lynch, Research Division

Okay. And lastly, are there any potential growth opportunities associated with the closer relationship between Patterson and A-dec for Sirona?

Jost Fischer

So first of all, that's a question relating to 2 other companies. First of all, we are very happy with our relationship that we have with Patterson, a; b, we're trying to unlock the full potential, and as you see through the quarters, we have been growing consistently in the U.S. with Patterson. And if we see additional opportunities in other areas here, we will grab them. So from that perspective, we are happy with where we are.

Operator

Your next question will come from the line of Tycho Peterson, JPMorgan.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

First one, just on margins. I know you've touched on some of this to various degrees, but now that you've got Omnicam ramping, can you just talk about how you think about the gross margin trajectory for the remainder of the year and kind of go forward?

Simone Blank

Sure, yes, absolutely. Yes, as you know, the quarterly progression can vary significantly. We had a very beneficial mix for Q1. And that, as a general comment on how do we see it throughout the year, obviously, on the CAD/CAM gross profit margin side, we had a very nice margin in the first quarter, 70.7%. And the Omnicam in this quarter had a more limited impact as you can imagine, as we were ramping up the manufacturing capacity. So that would change as we move through the rest of the year. In general, the situation is unchanged. Omnicam has a higher sales price, higher cost, however, with that, the same or similar absolute gross profit than Bluecam, but obviously, mathematically, a lower gross profit margin. And as I mentioned, as we move through the rest of the year, that ratio of Omnicam out of total CAD/CAM sales will increase. And also, we expect, in the second half of this year, to have a trade-up program, where you probably remember that trade-up programs tend to have lower gross profit margin. And so that will impact the second half.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Okay, that's helpful. And then to your comments earlier on the Imaging business, I mean, can you just talk about how much the upgrade is from 2D to 3D on ORTHOPHOS, is starting to kind of play into the mix dynamics?

Simone Blank

It's in there, but it's not material.

Jost Fischer

It will take years before we see material pickup here.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Okay. And then on FX, can you just talk about your latest thoughts on impact to the P&L for the remainder of the year?

Simone Blank

In the first quarter, obviously, you saw we had some headwinds, reported growth for revenues was 5.5%, with 8.6% constant currency. As always, as our top line is about 40% to 50% euro-denominated, cost about 70%, our operating income relatively unimpacted. You know that any revaluation of short-term assets and liabilities will exclude from the EPS calculation that we've put out there. So our revenue guidance is constant currency. So by definition, obviously, it excludes impacts. And as I mentioned, our operating income line is relatively unimpacted, and we exclude the revaluation of assets and liabilities from the adjusted non-GAAP EPS calculation.

Operator

Your next question will come from the line of Glen Santangelo, Crédit Suisse.

Diego Hernandez Diaz

This is actually Diego, filling in for Glen. And so, just looking at today's results, you mentioned a strong order intake going into the end of the quarter and continued sales momentum in 2Q. And I was just kind of curious if there is particular strength in one product line or is it across all products?

Jost Fischer

First of all, yes, it's across-the-board, while we have good momentum into Q2, specifically, of course, the ramp up of our production in Omnicam will have an effect that will be bigger in Q2 than it was in Q1. But in general, we are pleased with how our total business is progressing.

Diego Hernandez Diaz

Okay. And if I can just follow that up, if we think about the typical seasonality. Fiscal second quarter is typically weaker ahead of IDS and how does that play into the whole effect?

Jost Fischer

That's exactly how the pattern in the past was. But Q2 will be impacted by the ramp up of our Omnicam, so the effect will not be the same.

Operator

Your next question will come from the line of Brandon Couillard, Jefferies.

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

Jost, could you speak to the Schick 33 uptake so far? Is that stimulating a replacement cycle demand? Do you believe you're capturing share? And then could you just give us a comment on how demand is fairing between intraoral and the extraoral side of the product line?

Jost Fischer

So first of all, Schick 33 is a winner. There's no doubt about it. The best sensor out in the market, way ahead of anybody else. And that shows, that shows in the sales numbers, that shows in the enthusiasm of our sales force out there. We're pretty optimistic, also going forward, it's still early days here with this product. On the other hand, I think we gained market share, and we have gained market share in the last quarter and we expect that to continue. So from that perspective: a, it's not only a replacement but also new user sales that we're addressing with this product.

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

And then Simone, on the balance sheet, we saw a sequential uptick in both inventory and accounts receivables. On the AR side, is that simply a function of the late first quarter order strength, late in the period? And then how should we expect inventory to trend going forward with Omnicam production ramping and as we get through IDS?

Simone Blank

Yes, you nailed it. On the accounts receivable, this is -- the progression was in the quarter. If you look at our provision for doubtful accounts, it's down, right, the DSO in normal ranges. So it's the typical progression that -- this progression that we have seen in that quarter. On the inventory, I would say, if you look at the level of sales, then the level of inventory is actually improving. And I mean, the turns are improving. And so this is due to the growth in the business general. There's nothing wrong with the inventory otherwise.

Operator

Your next question will come from the line of Jeremy Feffer, Cantor Fitzgerald.

Jeremy Feffer - Cantor Fitzgerald & Co., Research Division

Jost, congratulations on a stellar tenure and we wish you all the best going forward. Well deserved. I wanted to come back on the Omnicam side, and I wanted to sort of shift to the other part of the strategy, and that's this new multitiered strategy with now Bluecam moving -- I don't want to say down-market but at least focused more in the mid-tier. And I want to get some color on how that's been driving adoption among the mid-tier customers?

Jost Fischer

It's a little early to tell at this point, Jeremy. But what we -- I mean, the big headline is CAD/CAM for everyone, meaning we have like the top end filled with Omnicam and the middle range with Bluecam. So people that want to get into this from a lower price point, they want to go in there. But clearly, when we look at the U.S. at this point in time, there's a big concentration on Omnicam, which is very natural. We expected that. But there is -- the strategy will show its teeth during the course of the year, but more towards the end than at this point.

Jeremy Feffer - Cantor Fitzgerald & Co., Research Division

Okay. And then just shifting to cash usage. You had some commentary on potential future acquisition strategy. But I noticed now you're roughly about $15 million left in your repurchase authorization. I know you're not making any announcements today, but I'm wondering, is that still going to be a part of your cash usage strategy going forward?

Jost Fischer

Yes, we had this, as you see, and we've executed on it in the last quarter. Simone, was that 283,000 shares we bought?

Simone Blank

Yes, about.

Jost Fischer

Okay, so from that perspective, this is an active part of our capital deployment strategy. Simone, maybe, you want to add something to this?

Simone Blank

No, I think that's it.

Operator

Our final question will come from the line of Robert Jones, Goldman Sachs.

Robert P. Jones - Goldman Sachs Group Inc., Research Division

I just actually wanted to go back more broadly to the to the discussion around the supply of Omnicam. Obviously, there was a lot of talk last quarter, and actually, throughout the quarter about concerns for supply constraints around the product. Clearly, based on the results this morning that, certainly, didn't seem to be the case. Has there been a demand planning issue around this? Or did the product, your ability to meet demand changed late in the quarter? Just trying to reconcile a lot of the comments that we heard, specifically with the results this morning.

Jost Fischer

Sure. First of all, we had a record quarter in CAD/CAM, so there's nothing to add to this. Number two, we had a ramp-up, professionally done. Everyone from our team was supporting it and performing on it, our suppliers were educated. We're done, we're even a little ahead of schedule as we speak here in February. So from that perspective, no issues, no nothing. One of the best ramp-ups I have seen over all these years. So from that perspective, very good, professionally. And the stuff is working out there. We haven't had any complaints out from users that have these machines. So everything -- and you can look at the blogs out there, everybody is raving about what he's got.

Robert P. Jones - Goldman Sachs Group Inc., Research Division

No, I totally... no, I said I totally appreciate that. I guess, that what I was more confused on is it just seemed like, coming out of last quarter, there was a lot more concern around your ability to meet -- I mean, there's no question the demand is there. Just it seemed like there was more of a concern in the marketplace coming from you guys that there was going to be an inability or a lack of ability to meet that demand. And it seems today, based on the results, clearly, that was not the case.

Jeffrey T. Slovin

I think the issue is that we had -- not an issue, the good thing is we had solid demand from our other products like in Bluecam.

Jost Fischer

Exactly, exactly. So there is no point. Of course, first of all, we have Omnicam not in every market as of today, so Bluecam is selling. There is no doubt about it. The other products are selling, and we have good momentum in our CAD/CAM world, because we believe also that the hype around Omnicam launch helps us to penetrate the market even further. We see a lot of interest in CAD/CAM products from the market, a lot more than 1 year or 2 years ago. And we think we can capitalize on that going forward, whether this is Omnicam or Bluecam, depending on what the customer decides what he wants to take. But clearly, one thing is we have more orders in Omnicam than we have fulfilled so far.

Robert P. Jones - Goldman Sachs Group Inc., Research Division

Got it, okay. And then just one quick one on the guidance, particularly on the revenue side. Obviously, it looks like you're pretty much already at the bottom end of the range and you're calling for accelerating growth throughout the year, if I heard you correctly. So I guess, just may be helpful as we think about the next 3 quarters, what are some of the major swing factors, even qualitatively, that you're thinking about, that could kind of either keep you from moving through that range or keep you somewhere within the bottom end of that range even?

Simone Blank

I mean, look, we just confirmed our guidance. We think this is pretty good. We were pleased with Q1. As you mentioned, we were up 8.6% constant currency. Our guidance is 9% to 11% constant currency on the top line. And we see good momentum into 2Q, but as we've said many times, IDS years are more difficult to forecast and also, we have a more difficult comp in Q4.

Operator

This concludes our question-and-answer portion for today. I would now like to turn the call back to Jost Fischer for closing remarks.

Jost Fischer

I am really overwhelmed, gentlemen. Thank you for joining us today. I look forward to listening to Jeffrey and Simone update you on our next quarterly conference call in May. And for everyone, bye-bye.

Operator

Thank you, again, ladies and gentlemen. This concludes today's presentation. You may now disconnect. Have a great day.

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