Cutera's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Cutera (CUTR)

Q4 2011 Earnings Call

February 13, 2012 5:00 pm ET


John Mills - Senior Managing Director

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


Thomas J. Gunderson - Piper Jaffray Companies, Research Division

Dalton L. Chandler - Needham & Company, LLC, Research Division

Anthony V. Vendetti - Maxim Group LLC, Research Division

Morris Ajzenman - Griffin Securities, Inc., Research Division



Greetings, and welcome to the Cutera Incorporated Fourth Quarter and Fiscal Year 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 fourth 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 and with its form 8-K filed today with the SEC and available on its website at

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 Cutera's 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 financial performance and integration risk associated with the Iridex aesthetic business unit acquisition.

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 risk 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 the company's 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 fourth quarter ended December 31, 2011. On today's call, I'll provide an overview of our company performance, then Ron Santilli, our CFO, will provide an overview of the financial results. Finally, I will provide some closing comments and open the call to your questions.

We are pleased with our fourth quarter 2011 revenue growth of 22%. Our U.S. revenue increased by 27%, and our international revenue improved by 19% compared to the fourth quarter 2010. This revenue improvement was a direct result of the following key initiatives. The first key contributor to our revenue growth last quarter was the sales management changes that we implemented earlier in 2011. Our recently assembled North American sales management team under the leadership of Michael Poole has been executing effectively, and their strategies are generating improved performance. On an annual basis, our U.S. revenue increased 21% compared to 2010. Our 19% international growth was primarily sourced from our performance in Australia, Japan and Canada. Our international revenue growth during the fourth quarter was partially offset by a decline in our revenue from Europe due to restructuring of our European sales team. With the improvements being implemented there, we anticipate our European business to be back on a growth trajectory in 2012.

The second key contributor was the recent introduction of new products. Our GenesisPlus for toenail fungus targeted to podiatrists continues to perform well. In addition, the toenail fungus product is also used for warts and other rejuvenation procedures. During the quarter, we continued to see significant revenue contribution from this product sourced primarily from the U.S. business. Our premier vascular system, Excel V, that provides practitioners with the ability to treat all vascular conditions, both on the face and body, continues to gain traction in the marketplace. We remain in early-stage launch of this product and are expanding our installed base of reference sites.

The final contributor to our revenue growth was the continued growth of our filler and topical products from Merz and Obagi. Revenue from this product category grew $370,000 or 31% in the fourth quarter 2011 compared to fourth quarter of 2010. The improvement in this product category is also having a favorable impact on the Cutera business as this type of product complements our laser and light-based products.

We believe that with our strength in sales management teams and new product offerings, we're well positioned for continued revenue growth. We currently have 29 sales territories in the United States and Canada and are planning to increase this team to approximately 34 by the end of 2012. We'll expand our team further if our sales performance supports it.

We closed the acquisition of Iridex's aesthetic business on February 2, and we welcome the Iridex employees to the Cutera family. We believe this business combination provides a great opportunity for us and are in the process of fully integrating this business into Cutera.

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