Cutera's CEO Discusses Q2 2011 Results - Earnings Call Transcript

Cutera (CUTR)

Q2 2011 Earnings Call

August 01, 2011 5:00 pm ET

Executives

John Mills - Senior Managing Director

Ronald Santilli - Chief Financial Officer and Executive Vice President

Kevin Connors - Chief Executive Officer, President and Director

Analysts

Larry Haimovitch - HMTC

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 Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Mills of ICR. Thank you, Mr. Mills. You may begin.

John Mills

Thank you. By now, everyone should have access to the second 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 and 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; obtaining regulatory clearances; and the impact of natural disasters, including the disastrous earthquake in Japan in March of this year.

Also, management may make additional forward-looking statements in response to your questions. These forward-looking statements do not guarantee future performance and therefore, you shall 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 on August 1, 2011, with the Securities and Exchange Commission.

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 second quarter ended June 30, 2011. On today's call, I'll provide an overview of our company's performance. Then Ron Santilli, our CFO, will provide an overview of our financial results. Finally, I will provide some closing comments and open the call to your questions.

We are pleased with the 22% revenue growth achieved during the past quarter when compared to the second quarter of 2010. This improvement is a direct result of key initiatives associated with realigning our U.S. sales organization and recent new product introductions. In April, our GenesisPlus system received an FDA clearance for toenail fungus. As a result, we focused our sales and marketing efforts related to this product on the approximate 15,000 podiatrists in the United States. We received Health Canada clearance for toenail fungus in July of this year, which we expect will contribute to our third quarter performance. We are encouraged with the early market response over GenesisPlus product, which can be promoted for toenail fungus, warts and other procedures. With the recently granted FDA clearance, we believe PSS, our distribution partner in the United States, who has a strong channel in the podiatry specialty market, will enable us to expand our presence. We also believe that dermatologists are interested in this product, as there is significant patient demand for the treatment of this condition.

We continue to expand the clinical research for our Excel V vascular system, as this require support for successfully penetrating core physicians. During the second quarter, we commenced revenue shipments and are pleased with the response from global key opinion in leaders of vascular surgery as well as our customers and expect this to be an important part of our future revenue growth. As a reminder, we believe this to be a premier vascular system in this market, as it provides practitioners an ability to treat all vascular conditions both on the face and body. The Excel V was designed with input from thought leaders in dermatology and plastic surgery.

Shifting to our revenue distribution, we are pleased to experience a balanced geographic mix. In the United States, we are pleased with the initiatives that our sales management are driving, as a result of which experienced 19% growth in the United States in the second quarter 2011. We believe our strengthened team in the United States has us well positioned for continued top line growth. We currently have 27 sales territories in the United States and Canada.

Our business outside the United States grew 24% in the second quarter 2011 when compared to the same period in 2010, with particularly strong performance from Canada, Australia and our network distributors in the Asia Pacific and European markets. We are encouraged with an apparent rebound of our Japanese business, given the uncertainty associated with the March disaster.

During the second quarter, we continued to have success in combining Cutera products and upgrades with the filler and cosmeceutical products with Merz and Obagi. These filler and cosmeceutical products continue to complement our laser and light-based products and have provided us with a growing and recurring revenue stream.

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