CUTR - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to the Cutera Fourth Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] as a reminder this conference is being recorded. I would now like to turn the conference over to your host, Mr. Relations. Investor Mills, John go please ahead. you, Thank

John Mills

to Thanks, Conference quarter Earnings fourth operator. Welcome Call. XXXX Cutera’s

call President include modeling any company's forecast including future expectations Gardiner. On Officer, is will forward-looking but statements a today the purposes. Cutera's discussion financial The certain and comments, of not will current today Financial these question-and-answer prepared session. James and Chief Officer, the management's forward-looking Sandra to After there be guidance business, for Reinstein; Executive provided aspects statements, limited reflect or of Chief the

statements that to nature, Forward-looking are by based information on subject is, and current dynamic its change.

statements improvements Forward-looking plans productivity and guidance, plans financial for statements among include, stock regarding products, to introduce new purchases. others,

encourage materially Harbor All and the Form entitled statements, words to as SEC you XX-Qs as of reflect on speak in also events. subsequently described obligation For our no to March are the risk not in management's statements, occurrence unanticipated you publicly Cutera refer information, expectations. with forward-looking from to factors differ our new of or statement the Form earlier current Future the made. they undertakes which date today. were our only in to events the XXXX that Safe updated on press reflect reliance update forward-looking release filed. place undue to results or do any Cutera and statements including those forward-looking XX, cautions risks statements may circumstances subject section may identify uncertainties, we filed Factors in to Risk XX-K forward-looking

underlying discuss an more ongoing to from believe the alternative financial an period non-GAAP prescribed With considered reconciliation with, measured period. our and transparency complete performance to, non-GAAP refer measures financial non-GAAP operations, to as comparing as to will can I'd Please to results Cutera's over measures, but financial Reinstein. James addition, on measures We a the the earnings including by Mr. these our of turn measures like along when call into adjusted GAAP should to be analysis not operating from in greater particularly CEO facilitate results GAAP. release. basis. In These that, results we

James Reinstein

John. us Thank to quarter discuss Good everyone, for and thanks you, afternoon, and XXXX today fourth results. year joining our full

company’s this We are the recognized quarterly again $XX.X pleased XXth level double-digit highest to XX% record represents of consecutive of revenue This the the compared sales quarter. quarter revenue, million that and achieved growth. to the revenue is report history we quarter increase fourth of a XXXX. in revenue We revenue

we by during QX, in select body growth in During the sculpting European XD the U.S. driven system, fourth revenue was second quarter which launched truSculpt in primarily quarter. and the countries the

quarter which platform Geographically, our in we as the and well enlighten to markets. our meaningful our to contributors in continue grew our international both America very products, legacy performed be Additionally, did diversified portfolio. North

with of Laber North sales to the revenue in period XX% Larry Our led same compared and system delivered by Adams, another quarter impressive growth XXXX. Keith American

the improvements finished compared XX North quarter productivity in $X.X in million the growth. helping to XXXX. XX the end $X.X was America team, field quarter within see fourth the to the of our to XXXX. revenue million overall salespeople quarter fourth as approximately continue We In sales third of the per We field in with salesperson fuel productivity quarter, the compared

core certainly procedural model. as of to looking primary prior strength consistent broaden a ideal procedure is well surgeons to with America dermatologists physicians, ability our their these offers the as for of with physicians, Regarding XD the non-core our quarter. our physicians. orders, for this North customer patient to accounted reach body base, indicates continued expansion In an approximately to them. practices demonstrate our believe We with core XX% of to an solution new and channel short, interest sell practices pay plastic and we sculpting in continue truSculpt to physicians, The

serving markets throughout our and our fourth strong Japan, sales measurable well second improvements. Western XXXX XX% many $XX.X success, from direct international across both team make of the grew in international from The international This Australia a as teams alleviative continues revenue. revenue markets reaching the growth prior beyond. We strong level are international quarterly and which Europe, quarter Systems expect achieving to of demonstrating by distribution is our million. of saw continue as to Our operations quarter partners. straight record team's year the record from an traction we revenue

year principal the international ago a my gap international had my joined with multiple extensive the to I close performance. of on and based reasons that the over experience opportunities Cutera domestic between Cutera contention One

months a number XX we've with and leaders. and past reinforced in recruitment substantially the of the experienced of Over leadership Latin America Asia, our talented regional Europe

see in the to from these XXXX, most expected the quarters this believe the posted it of that just impressive is of possible. last is beginning changes the with evident we two While is over progress growth what

Executive him leadership team, overall sales effective we of throughout Pardos, Vice XXth President this professionalism appreciate Miguel's have his come the Miguel for this with the We to will thank his who and mutual resign agreement of February process. of contributions role international Regarding a year. as International

mentioned during leaders As team international the were year. must consisted of the put past place leadership in regional whom of

they continue mission fragrances the Cutera and them will gains through expect globally to We that and continue expansion. market share our grow confident are to geographical

the as $X.X million in operations by interim for quarter. million, top quarters of or high of cash record but will be income two levels. compared pleased line of $X.XX revenue I'm structure I detail provide share rates XX% ability last XXXX. in on breaking the moments, to their fourth quarter of And the reporting an announcing We will and me. our a fourth new for quarter near per adjusted fourth more Sandy results this evident $X.X group non-GAAP diluted are to very our confident of growth report strong generated deliver but a net increase in with directly of as will a few in their the record by future, to they

Turning to development. and research

of superior the period spending demonstrating XXXX Cutera's improvement. technology. Overall, of One our was to and same is commitment commitment the R&D continuous XX% to cornerstones the offering quarter in culture up from our

projects During that integrated the from our multiple functions ensuring into year, product to for while are we process be simultaneously, processors run development the enhanced of company all the allow inception. project to

We're this process new update under the projects out with rolling nice was this line The product operating process first up XD, will in about which now a launched under development shortly. to truSculpt I new product provide be of XXXX. an

faster entry improving new women's selected announced segment We vaginal strategic decision of also Cutera's into January, and alternatives the made health with sexual the launch the the American represents function offers we health. via get In and technologies. to overall esthetics patients the that external market the first Juliet North into to markets laser best-in-class

to products also distribution these from whom team the and in frequency microneedling sales Secret These which is new we systems. wrinkles sourced early manufacturers of in January are collagen, We scars. diminishes effectively actively rights license launch RF, from selling device and launch remodels the a for announced mild that the America. were improves We external North fractional radio now

PICO skin generating one the for enlighten technology and growth. by tattoo revitalization revenue and our highest PICO introducing of Genesis American with fuels lower and our signature and continues the skin on cost to Genesis represent of of We're product indications FX, to in removal expand North Our in market. a revitalization enlighten platforms expanding version offering nano much procedures our for platform our PICO continuing XXXX, while focused use

XD. a the that launch product are Now turning expanding to geographically, recent we truSculpt

products, be by expectations. revenue CAMPsite, quarter recently global global expanding and team we May of systems our rollout catalyst innovation support Cutera. for will is American Sandy us grow commercial turn our along disposal According XXth Systems say marking the which for with growth, era words analysis, to of in the of in into procedure at new commitment continue Academy we platforms like launch truSculpt growth international the decades allowing the the portal customer creation to internal markets a of to and new markets efforts our teams also awareness train truSculpt to high response XD We've symposium and to XD coming this practices $XX.X two launch a existing CAMPsite continues medical XD tip revenue over about represents like recurring truSculpt the very will During our would expanded of now Secrete personnel. physicians' to was to physician of require billion at customers. this steady the will based the enhanced truSculpt support fueling esthetic I'd to to XXXX hand meet system we our various generate offering. XXXX, offerings. and America and Dermatology. years. organization, call piece. innovation at product XD entering few in our range that been be staff conferences now in milestone and every CFO. our XXXX. called procedure weekend patient to this new commercial a material Cutera consumable feel Juliet new the provides to market of dedicated our physicians and broaden any similar of support Cutera the expects ability select and North has participate to a Cutera's to of XXXX and and launched and light our strong develop the the for The fourth to Gardiner, the RF energy we starting development of now will events, to of After this announced European based are industry anniversary, pace. the highest our announced reach continues very expected of commercial programs The external positive. accounted we the revenue of to the we for In in just level their esthetics marketing XXXX. fourth provide I quarter Accompanying

Sandy Gardiner

Thanks, James.

enlighten history. growth earlier, quarter quarter experienced of growth James XXXX. of North XX% performance fourth levels our revenue existing was XX% of quarter third sequential by XX million, grew XXXX. XD margin warranty both driving was XX% revenue Gross which from in year-over-year Fourth saw double-digit where basis highest consecutive in quarter had the lines product we XX XX% expanding fueled existing growth. company growth the XX% the in marked and growth. with fourth quarters stated also is organization margin investments As to support service the fourth points quarter and America Gross revenue a representing driving international The revenues and quarter and the XXXX. with primarily our our new product and compared quarter, new by $XX.X to than impacted systems on increased product fourth growth growth base. lower a record truSculpt extends to of our This revenue We increase was customer costs

the the number to of on This steadily coming been growth have mid-QX providing for also Michael We our service is headcount additional well as includes engineers support direction largely headcount as revenue, warranty. focused in hand up service by investment Palumbo’s contract on parts XXXX. efficiently organization greater systems the additional more service field customers. since of The under investing driven a

result service the the will We revenue provided. due the as higher services over quarters, revenue expect period are contract the sold of future the to now service in amortization in future revenue

will In gross by lead a operating in expenses expense improvements Total address in of XXXX, operating to now as will begin results. the margin will leverage our which in investment addition, believe we I revenue to fourth we the future. percent these increase quarter quarter in expansion to our an new in costs, product sales of fourth this attributed commercial XXXX, to driven and XXXX, compares marketing of and higher XX% were team. the launches with XX% of mainly

revenue $X.X of to from a X% can continued growth side to fourth see quarter XXXX.As supports out our continue in R&D. global as our rate. in in percent Research quarter, existing from of of to revenue clinical our the and we new to represents above of market research quarter enabling and fourth Juliet XXXX, the X% our quarter market development investing remain engineering the our innovation and year address investments addition, Secret in consumable Sales continue prior XX% investments In commercial business, quarter was increased and revenue channels, of We clinical with expense marketing us the compared continued commercial to we new recent in and XX% in of the revenue compared of million team of increase in to $X.X including fourth XXXX. The that introductions the to and product of build expanding you XX% share gain to is expand superiority. new the portfolio million RF, that drives or revenue fourth of the of committed or products our increase markets.

allowance fourth our investments of and providing to quarter same commensurate the to of and other and are our on deferred you compared the December quarter XX, the profits investments of was mentioned of September XXXX. $X.X benefit and million fourth our million compared well tax we that valuation for of a X% recorded We was of million of in X.X revenue quarter of to in federal expenses of to that assets, U.S., certain same tax were $X Income revenue new in activities $XX.X $XXX,XXX our fourth most increase be it significant quarter in allowance the in a deferred full was future moderately U.S. as growth XXXX. California. allowance income $XX.X recent of tax we’ve portion are revenue, not the We expected recent against our than that returns. tax U.S. XXXX, planning or except we in as cumulative Therefore, against in of quarter million U.S. in X% to the realized Interest fourth targeted million, General quarter, administrative the assets. million states, third likely period XXXX. of Operating profits assets XXXX income XXXX. the R&D the $X.X had a more history determined XXXX, as XX, our as of and a representing is as deferred valuation U.S. portion would release due valuation call

State a release partially primarily our for allowance relating The based assets, maintain the the fourth to current to U.S. recording in allowance of the against quarter, continue We tax valuation income of the provision operations. and an valuation tax by in the full tax deferred net California. resulted foreign benefit offset

tax a no have full into As to in provision periods. we enter we future allowance XXXX, longer our valuation offset

effect to the As rates for expect reform. result tax resulting approximately a combined includes which a worldwide effective XXXX corporate the XXXX rate decreased of XX%, in tax XX% tax our the we operations of federal from

December you're turning to Xst. well all Jobs January as became Now tax signed Cuts effective into the the and aware was Tax reform, Act and law in on late

to net tax required have In changes our deferred tax deferred the recorded consist carryforwards. are such We U.S. million we effect period in and of the $X.X fourth accordance tax credit U.S. tax assets remeasuring to losses the liabilities as and quarter primarily U.S. our the law GAAP. with assets, adjustment in which recognize of a enactment, of operating

had future impact not tax expect the flow are our expected reform that the significantly operating At is we lowers there near-term. the federal million carryforwards, net We XX, of future to While the December carryforward offset rate. available cash $XX to of business approximately in loss moving loss tax income. many our to key state taxable million $XX pieces, and meaningfully operating impact net XXXX, do

of because We in their carryforwards be utilize of clarified. tax legislation of reform and beginning these analysis Please this is impact into subject the XXXX. further net note overall dates U.S. changes in the able advance to the expiration that interpreted as is law, expect loss to operating the to significant

of a offset U.S. fully the was diluted assets, expense income diluted the the allowance valuation the partially tax the release revised Non-GAAP $X.XX per share. for or stock-based XXXX against U.S. by quarter for million U.S. million Our was GAAP or include same tax period certain net Non-GAAP share. portion per depreciation $X.X and compensation, non-cash of significant adjustments deferred deferred our from $XX.X the income fourth resulting adjusted of assets, of reform. tax measurement $X.XX

The days at Now $XX.X approximately XXXX. were our projected is million revenue Cash flow plans. from XX days. to at representing higher from were fourth XXXX sheet XXXX, Inventories sequentially fourth level growth XXXX. of improved and full accounts million million $X.X per cash at operations quarter receivable a million net million, X $XX.X to XXXX typically our turning $XX.X the inventory December September to XX, was in cash XX, the end the flow, increase needed million $X.X up $XX.X meet balance level year. operating times DSOs X turn Inventories the for of and the million from was quarter, year $XX.X

held December as representing cash $X.XX position of and of no per with we $XX.X Our approximately debt, cash strong, share. XX, XXXX, and remained outstanding investments million

quarter of per price share. fourth for shares XXX,XXX XXXX, $XX.X of total we million of the During average a approximately an $XX.XX at repurchased

repurchases authorization. the million outstanding utilized $XX.XX ended for shares ended our for repurchase XX, December these XXXX. With the fully quarter, the in and XX, we share Fully December diluted year three XXXX million were months $XX.XX

XXXX, to we increase expect XX% to for million XX% million, Turning XXXX. to the over of revenue an in $XXX guidance range representing $XXX

gross of invest development range XXXX XX% consistent in of the to in margin in to continue of revenue as operation. to the scalability product and remain XX% of percentages we operating XX% with expect our We to the expenses range XX% the levels and

be $X.XX to $X.XX for the per year compared share full for full a earnings expected XXXX. year of diluted is fully XXXX, compared of the Non-GAAP $X.XX as tax in an range XXXX. adjusted Lastly, as rate result previously to $XX EBITDA million $XX.X stated, effective to This we $XX million of as to the approximately in XX%. of in expect an to to XX% net the range in million

I compensation the call back $X average outstanding shares comments. turn weighted over like and to assumed the now million XXXX. million James $X approximately closing non-cash and between to million full year for his for XX would have stock-based We

James Reinstein

Thanks, Sandy.

We with of entered strongest have offerings about year opportunities portfolio the front are We very excited the growth company's in product the us. XXXX we history. and the of in

a commercial of sales service expansion our focused have solely recently opportunities recurring We the revenue global team offering. and on

over position team to expect thank revenue like As XXXX, expansion cash in annual we I us of year-over-year share for continued the for increased as as our would great indicates questions. strong from profitability now and well guidance I the Operator? enter to for we and have and like would operations. in Cutera a market as the call year gains we all XXXX. turn XXXX,

Operator

Instructions] first Jim question. Please is Our Company. [Operator Sidoti you. from Thank with state question your Sidoti &

Jim Sidoti

can afternoon, Good you me? hear

James Reinstein

Yes, Jim.

Jim Sidoti

Great.

Just details going the was the guidance If half for to in about that the I revenue you weighted do toward XX%, in be in through the XXXX. year at some half for the XXXX, the in back the of the XX% of expect look same XXXX, back came revenue XXXX?

James Reinstein

consecutively most XX% part, record, on quarter we've though QX, largest grow how QX the from our that's For quarter-over-quarter did been we over QX. generally in to quarter Jim yes, that growing even QX -- was grow

it is hate the of element say in stick weighting year rollout it, second to how a it hockey half we’ll XXXX. to towards to but tends So certainly the revenue

Jim Sidoti

And us removal fat you then that is in update product of the hands-free for status and included the XXXX? if guidance can the on

James Reinstein

you with the of continue to we it we So as having actually of success with make that, truSculpt we’re XD. launch the delay the because headway know

expect add time as of in launch some holding basically to our in changing. And that that be probably to we half. as the could well taking we're second rollout product we on XXXX, game think features So

Jim Sidoti

guidance there the gave from today? revenue the included you And contribution is that in Okay. significant

James Reinstein

be against we'll -- of up contribute the XD. I truSculpt the The comps mean,

up we be the comps expect overall So, against do XD. we the but going of to growth, truSculpt are

into XXXX of assumption of that the revenue and sure. pickup built a guidance revenue for is However,

Jim Sidoti

tax? of $X Okay. And to stock-based you you expense Is after million the Sandy or the in that have before the non-GAAP non that from guidance. -- $X million excluded tax

Sandy Gardiner

actually That is before tax.

Jim Sidoti

Okay.

shares, tax of I that's if it’s EPS? million XX% I assume and so about about that $X.XX effect So XX

Sandy Gardiner

and is appropriate in but that how we more the why not is the that's to to tax also the so parts of moving stock-based mention guiding non-GAAP Yes, felt significant reform increase the us, EPS going have affect because to that compensation. a

provide going we'd to it’s so a So, with like forward year-over-year. non-GAAP you comparable EPS better for

Jim Sidoti

Okay.

XXXX, that expense? and you So for and the excluded marketing gave assume for sales the G&A I stock based metrics

Sandy Gardiner

The measures of GAAP No, those the and well only expense per are are the XX% to share operating XX% as range adjusted actually guidance margin, gross non-GAAP as two were measures. earnings that GAAP, the EBITDA. is

Jim Sidoti

Thank Okay, right, all for right, you. great. me. that's you clearing that up. Thank All it for

James Reinstein

Thanks, Jim.

Operator

Maxim [Operator questions. Instructions] next comes proceed with Please from Vendetti question your Our with Anthony Group.

Anthony Vendetti

Thanks. for in how products, royalty the to can Yes, new thank two of some account terms you're or I talk wanted work you going the arrangement to about just you. how of going talk that's the to about it?

James Reinstein

arrangements price. then essentially the off So is to the product with manufacturers margin a have have it's of transfer costs-of-goods. at America the import North we And And we gross that price. a OEM we as the that transfer build for basically accounted

Anthony Vendetti

Costs-to-goods. And U.S., correct? the distribution exclusive you have in

James Reinstein

for America, in products North both so In Canada. U.S.,

Anthony Vendetti

North Across America.

believe is not, pressure a Okay, And then the pricing pricing the you product. And or on if seeing hearing just seeing that with great. been any has technology not do several over competition. you just you're why competition that we've in And space. price quarters was wondering some There of pressure. And I been are lot there enlighten? enlighten the last picosecond

James Reinstein

it seeing nanosecond deals the more technology. absolutely competitive to we're far comes PICO, No, when

we the prices able even While have as -- versus tell head-to-head I execution technology still revenue you XX%. in our the out the been that been with win our nice deals field, able we've because the can price competitive eroded a to overall as to bit, sometimes a of higher of a maintain high because on premium

Anthony Vendetti

quarter of more talked the in or bundled sales beginning a fourth into percentage were product sold your you of any I the sales the where the one didn’t then know what client. call, about you if sales, And Okay. than I missed this

James Reinstein

bundled about revenue estimating the were -- didn't XX% we're We looking of it comment America. or sales in we're North at we're on is And basically that. our number

Anthony Vendetti

to of sales the this, has expedited the I force. the XX% of goal year-end you American people quarter the fourth North know bundled. build of help hires to out How that thought in the quarter. XXXX? accelerate number fourth but for in I I internally you hire was and hire force many what's the caught just build did would wondering the the end sales I And

James Reinstein

with we did definitely about helping beginning the recruiting call on there about we the in as what North well in the it two for able R&D add our the facility the Brisbane. here hire looking then call They're individuals were to for facility And QX. America. that Two So here recruiters. internal for in joined XX we're a nine also -- goals individuals in XXXX, we in sales net North And our America. add of company headquarters to net R&D

growing XXXX. from the by of about end So XX to XX

Anthony Vendetti

I'll great. Okay, in you. the back hop Thank queue.

James Reinstein

Anthony. Thanks,

Operator

If are there comments. turn like closing further to Mr. questions, [Operator the no Instructions] to I'd Reinstein call for back James

James Reinstein

today. call Thank in our everyone participating you much. thanks for And very

featuring investor new in hope and We be Cutera. number will you this there. for in of events American San you We at weekend next few Diego to see attending And Academy your continued the interest thank Dermatology. of a the be products months. our we'll Good afternoon in

Operator

concludes This today's conference.

this a at participation lines day. your time. disconnect wonderful Thank and may for you You have

Cutera (CUTR) 14 Feb 182017 Q4 Earnings call transcript