Obagi Medical Products, Inc. Q1 2010 Earnings Call Transcript

Obagi Medical Products, Inc. Q1 2010 Earnings Call Transcript
Publish date:

Obagi Medical Products, Inc. (OMPI)

Q1 2010 Earnings Call

May 06, 2010 09:00 am ET


Ina McGuinness - IR

Steve Carlson - CEO and President

Preston Romm - CFO


Anup Mehta - Canaccord

Larry Neibor - Robert W. Baird

Aaron Mishel - Thomas Weisel Partners

Scott Henry - Roth Capital

Jose Haresco - Brean Murray



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Greetings and welcome to the Obagi Medical Products first quarter 2010 earnings conference call. (Operator Instructions). It is now my pleasure to introduce your host Ina McGuinness. Thank you Ms. McGuinesss you may begin.

Ina McGuinness

Thank you, operator. This is Ina McGuiness of ICR. Earlier this morning Obagi Medical Products released financial results for the first quarter ended March 2010. If you have not received press release it is available on the investor relation section of the Obagi Medical Products website at www.obagi.com.

This call is being webcast and a replay will be available on the company’s website for 30 days. Before we begin we would like to remind you that today’s remarks contain forward-looking statements within the meaning of federal securities laws. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them. We refer you to the risk factors contained in Obagi Medical Products’ SEC filings for more details and discussions of the factors that could cause actual results to differ materially from those projected in any forward-looking statements.

All the information provided in today’s call is as of the date of the live broadcast, Thursday, May 6, 2010, and Obagi Medical Products assumes no obligation to update any such information.

Participating in today’s call from the company are President and Chief Executive Officer, Steve Carlson, and Chief Financial Officer and EVP of Finance, Operations, and Administration, Preston Romm.

With that, I’d like to turn the call over to Steve Carlson. Steve.

Steve Carlson

Good morning everyone and welcome to our conference call. We are very pleased with our first quarter results which demonstrates continued solid sales trend with revenue growth nearly 14% to $25.7 million and net income nearly tripling to $1.9 million or $0.09 per share year-over-year.

Our strong performance during the first quarter validates initial signs of a slight economic recovery and a promising potential future of the broader esthetic market. As a result of improving consumer confidence and new marketing initiatives almost all of our product lines achieved high double digit sales increases.

We are encouraged by the progress we made on both international and domestic fronts and believe our investments in high quality products with proven subsidiary efficacy will continue to cause patients at the Obagi systems and products is better and much more affordable option for their skincare and more highly price procedures.

With that as background let me review our first quarter performance by geographies and product lines. Our international revenues for the first quarter increased approximately 17% year-over-year to $4 million fuelled by robust growth in the far eastern Europe. Our new distribution partner in Japan Cutera commenced shipments to Japan in February and we are pleased with the initial results.

Licensing fees for the quarter were up 30.3% to $989,000 due to timing of new product releases through our Japanese consumer partner Rohto Pharmaceuticals. Sales from our US business increased 13.1% to $21.0

million year-over-year. During the quarter we also added 387 new domestic accounts, an increase of over 11% compared to 350 million accounts in the previous quarter and yet an 18% increase from 329 accounts a year ago.

As of March 31 we had 6367 active accounts at 10% increase from a year ago. Our performance price specific product lines were as follows. Nu-Derm, Condition & Enhance had an increase of 8% versus a year ago with sales of $12.9 million for the first quarter. Reorder rates for Condition & Enhance were high at 81%. Sales of our vitamin fee based systems and products which included Obagi-C Rx and Professional-C increased nearly 52% to $4 million year-over-year. This strong growth was attributed to the introduction of two new skews in the CRX line which helped increased both the efficacy and the overall awareness in growth vitamin C based products.

ELASTIderm which includes Eye cream, Eye Gel and Decolletage

grew 32% to $2.8 million for the first quarter. Reorder rates for both Eye cream and eye gel were high at 89% and 79% respectively. Sales from our therapeutic products which includes CLENZIderm and Rosaclear decreased 40%, $1.6 million compared to the same quarter a year ago. This decrease was primarily attributed to large stocking orders of Rosaclear a year ago due to the products lines in the first quarter of 2009.

Much of this we have seen with other therapeutic products, the acceptance of these products and the build of repeat sales are slower than with the launch of our esthetic products. Reorder rates for CLENZIderm however were strong at 89% and the initial reorder rates for Rosaclear were pretty good at 70%.

Other product categories were up 37.8% year-over-year primarily due the addition of Refissa, our new Tretinoin in the third quarter of last year. Reorder rates for Refissa were 65% for the first quarter. Regarding our sales organization we now have about 117 sales people in United States. This is down 1 from the last quarter and up 3 from a year ago excluding the [Nesari] contract sales force.

Looking for the remainder of 2010, we are conservatively optimistic about opportunities ahead of us and we will manage our business forecasting expenses accordingly. We are on the right track with our marketing initiatives to expand our account base, improve patient retention and increase our international presence while leveraging our strong Obagi brand equity.

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