Cutera's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Cutera (CUTR)

Q1 2012 Earnings Call

May 10, 2012 5:00 pm ET

Executives

John Mills - Senior Managing Director

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

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

Analysts

Michael A. Dinerman - Piper Jaffray Companies, Research Division

Morris Ajzenman - Griffin Securities, Inc., Research Division

Anthony V. Vendetti - Maxim Group LLC, Research Division

Larry Haimovitch

Presentation

Operator

Greetings, and welcome to the Cutera Incorporated First Quarter 2012 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 first quarter 2012 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 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 recently filed 10-Q, filed on May 10, 2012, 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.

Kevin P. 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, 2012. 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 first quarter revenue growth of 35%. Our U.S. revenue increased by 50%, and international revenue improved by 27% compared to the first quarter of 2011. This revenue improvement was a direct result of the following key initiatives. The first key contributor to our revenue growth in the first quarter was the sales management changes that we successfully implemented a year ago. Our North American sales management team under the leadership of Michael Poole, has been executing effectively, and their strategies are generating improved performance. The 27% international growth was primarily driven from expansion in Canada, Japan and Australia. The second key contributors are the 2 most recent new product introductions, GenesisPlus and Excel V. Both of these products are continuing to be well-received by the market and are playing a strong role in our revenue growth.

The third, albeit smaller contributor, was the acquisition of Iridex's aesthetic business unit that was closed on February 2, 2012. During the first 2 months of the first quarter of 2012, we recognized $627,000 of revenue associated with this transaction, which represents a start-up revenue level. We are expecting to see significant growth from this revenue level in the second quarter when we experience the results of the fully integrated business.

The final contributor to our revenue growth was our legacy Cutera products with the primary contribution coming from our flagship Xeo product. We believe with our strength in sales management teams our new product offerings position us for continued revenue growth in the growing market for energy-based aesthetic equipment.

We concluded the quarter with 32 sales territories in the United States and Canada, and are planning to increase this team to approximately 39 by the end of 2012, or sooner. We believe our recent expansion into the podiatry market will continue to perform well, and as such, we are in the process of dedicating a group of sales specialists in the United States to the podiatry specialty to focus on the sale of our GenesisPlus product for the primary treatment of onychomycosis. Once our sales force's expansion is complete, we will have 29 aesthetic sales representatives and 10 podiatry sales representatives in North America. We'll continue to monitor the size of our sales force, and we'll consider additional expansion as our sales performance support it.

We closed the acquisition of Iridex's aesthetic business on February 2, 2012, and are pleased with the progress made in integrating this business with Cutera's. As a reminder, we believe the benefits of this acquisition are as follows: one, the VariLite product, a small, compact vascular product that complements our Excel V and other vascular products; two, a significant, existing customer service business that we are equipped to service and leverage with our existing team; three, cross-selling opportunities of Cutera products into the Iridex installed base of core physicians. Four, a strong, direct organization in France that will contribute to strengthening our European organization.

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