Cutera's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Cutera (CUTR)

Q3 2011 Earnings Call

November 07, 2011 5:00 pm ET

Executives

Ronald J. Santilli - Chief Financial Officer and Executive Vice President of Finance & Administration

John Mills - Senior Managing Director

Kevin P. Connors - Chief Executive Officer, President and Director

Analysts

Morris Ajzenman - Griffin Securities, Inc., Research Division

Larry Haimovitch - Haimovitch Medical Technology Consultants

Anthony V. Vendetti - Maxim Group LLC, Research Division

Presentation

Operator

Greetings, and welcome to the Cutera Incorporated Third 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. Thank you. Mr. Mills, you may begin.

John Mills

Thank you. By now, everyone should have access to the third quarter 2011 earnings release, which went out today at approximately 4:00 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; and potential revenue growth from strategic alliances and planned new products. 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 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 on November 7, 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 P. Connors

Thank you, John. Good afternoon everyone, and thanks for joining us today to discuss Cutera's results for the third quarter ended September 30, 2011. On today's call, I'll provide an overview of our company performance, and then Ron Santilli, our CFO, will provide an overview of our financial results. Finally, I'll provide some closing comments and open the call to your questions.

We are pleased with the third quarter 2011 revenue growth of 26%, with the U.S. growing at 43% and international growing at 17%, all compared to the third quarter 2010. This revenue improvement was a direct result of the following key initiatives: First, our GenesisPlus for toenail fungus targeted to podiatrists continues to perform well. In addition to toenail fungus, this product is also used for warts and other aesthetic procedures. During the quarter, we achieved record revenue contribution from this product, sourced primarily from the United States. Going forward, we plan to continue to increase our marketing efforts internationally. Second, our premier vascular system, Excel V, which provides practitioners the ability to treat all vascular conditions, both on the face and body, continue to gain traction on the marketplace. We are -- we remain in a continued launch and are building an installed base of reference sites. The third key contributor for revenue growth last quarter was the sales management changes we implemented earlier this year. Our recently assembled North American sales management team, under the leadership of Michael Poole, has been executing effectively. And their strategies are paying off, as proven by the 43% revenue growth in the United States and Canada contributing significantly as well. In addition, with Chris West returning to Japan to focus on the Pacific Rim countries, we're experiencing strong revenue growth from Japan, Australia and several of our Asian distributors this quarter. Lastly, during the third quarter, we continued to have success in combining Cutera products and upgrades with filler and cosmeceutical products from Merz and Obagi. Filler and cosmeceutical products complement our laser and light-based products and revenue from these product categories grew by 19% in the third quarter of 2011 compared to the third quarter of 2010. The strong performance was partially offset by a decline in our third quarter 2011 revenue from Europe due to restructuring of the European sales team. With the improvements being implemented there, we anticipate our European business to return to a growth trajectory in the near future. We believe that our strength in sales management teams and new product offerings, we are well positioned to -- for continued top line growth. We currently have 27 sales territories in the United States and Canada, and are anticipating territory expansion within the next 12 months.

Turning to research and development. We believe that strategic ongoing investments in product research and development are critical to our future success. In line with that principle, we are continuing to invest in R&D for the next generation of technology and have increased our engineering and clinical research expenditures to develop innovative solutions and expand the clinical understanding and applications of our current products. Earlier this year, we created the Cutera clinic, located in our headquarters in Brisbane, California, and we are pleased with how quickly we are able to perform controlled clinical studies for our new product and existing products. We're excited about the pipeline of new product opportunities in R&D and have augmented our team with top talent, and we believe will enable us to develop differentiated, exciting products for the years to come.

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