Cutera's CEO Discusses Q1 2011 Results - Earnings Call Transcript

Cutera (CUTR)

Q1 2011 Earnings Call

May 02, 2011 5:00 pm ET

Executives

Ronald Santilli - Chief Financial Officer and Executive Vice President

Kevin Connors - Chief Executive Officer, President and Director

John Mills - ICR

Analysts

Phillip Nalbone - Wedbush Securities Inc.

Thomas Gunderson - Piper Jaffray Companies

Dalton Chandler - Needham & Company, LLC

Anthony Vendetti - Maxim Group LLC

Morris Ajzenman - Griffin Securities, Inc.

Presentation

Operator

Greetings, and welcome to the Cutera, Inc. First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills of ICR.

John Mills

Thank you. By now, everyone should have access to the first quarter 2011 earnings release, which went out today at approximately 4 p.m. Eastern Time. The release is available on the Investor Relations portion of Cutera's website at cutera.com and with its Form 8-K filed today with the SEC is available on its website at sec.gov.

Before we begin, Cutera would like to remind everyone that these prepared remarks contain forward-looking statements, including statements concerning domestic and international growth opportunities and strategies; future spending, expense management and execution on various aspects of our operations and business; expectations for increasing revenue, generating cash and improving profitability; the development and commercialization of existing and planned new products; potential revenue growth from strategic alliances and planned new products and obtaining regulatory clearances; natural disasters, including the unfortunate situation in Japan.

Also, management may make additional forward-looking statements in response to your questions. These forward-looking statements do not guarantee future performance and therefore, should not be relied on -- should not rely on them in making an investment decision without considering the risks associated with such statements.

Cutera also cautions you to not place undue reliance on forward-looking statements, which speak only as of the date they were made. Cutera undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.

For a complete list of risk factors that could cause Cutera’s actual results to differ materially from the forward-looking statements, please refer to the section entitled Risk Factors in our most recent 10-Q filed today, on May 2, 2011, with the Securities and Exchange Commission.

And with that, I’ll turn the call over to the company’s President and Chief Executive Officer, Mr. Kevin Connors. Go ahead, Kevin.

Kevin Connors

Thank you, John. Good afternoon, everyone, and thanks for joining us today to discuss Cutera's results for the first quarter ended March 31, 2011. On today's call, I'll provide an overview of the results, and then Ron Santilli, our CFO, will provide additional details on our operating and financial results. Finally, I will provide some closing comments and open the call to your questions.

Our first quarter revenue was $11.6 million, and our net loss was $3.9 million or $0.28 per share. Our revenue in the United States declined by $340,000 or 7% compared to the first quarter of 2010, due primarily to the time needed to ramp up our new North American sales management team and Titan refill -- reduce Titan refill volume due to the voluntary recall in the second quarter of 2011.

Our international revenue during the same period declined by $1.8 million or 19% due primarily to the recent earthquake disaster in Japan and lower revenue from our European distributor countries. This was partially offset by strength in our Asia Pacific distributors.

In the first quarter, we launched our Excel V, vascular laser system at the American Academy of Dermatology meeting. We did not have revenue associated with this product in the first quarter, but during the second quarter, we initiated commercial shipments in April. We look forward to a continued ramp-up of sales and marketing activities that include shipments of demonstration equipment to our sales organization and continued development of reference sites. We are encouraged by the results from the evaluation systems that have been in the hands of well-respected luminary physicians and look forward to rolling it out on a larger scale; first, in the United States, then internationally.

In the first quarter 2011, we estimated that the unfortunate events in Japan had a negative impact on our revenue by approximately $1 million. The Japanese market has been a strong growth opportunity for us over the past few years and represents approximately 25% of our revenue in 2010. The first quarter shortfall was the result of both of our inability to complete deliveries to certain customers, as well as our inability to solicit new orders in the second half of March. It is our belief, however, that the annuity revenue streams of filler, cosmeceuticals, Titan refill and service business in Japan has been impacted to a lesser degree during this challenging time. We will continue to closely monitor the market conditions.

We believe the following initiatives will put us in a stronger performance trajectory beginning in the second quarter of 2011. One, the commercial -- commencement of the commercial shipments of our Excel V laser system. Two, the recent FDA clearance of our GenesisPlus product for toenail fungus. We have been unable to initiate sales and marketing activities in our domestic market for this indication until receiving this clearance in March and April. As a result, we are now able to target approximately 15,000 podiatrists in the United States, and we believe the dermatology specialty will be interested in this product as many of them will -- do treat this condition on their practice. Our strategic alliance with PSS will allow us to ramp up and reach this in an expedient manner.

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