CUTR - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the Cutera Incorporated First Quarter 2018 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. Investor Corporate of Head Scalo, Relations Development. & Matthew you, you begin. may Thank

Matthew Scalo

Cutera quarter to Scalo Conference joined Investor Welcome operator. Development. XXXX & and Head Corporate Relations Cutera’s recently Matt Thanks, is first Earnings of name Call. I as My

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

current guidance, improvements. statements new include, forward-looking by that productivity statements is, dynamic plans products others, and change. Forward-looking of its regarding statements to The based among are introduce financial information and as nature, subject to

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

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

James Reinstein

model. bring thanks of you, everyone, growth quarter platforms our of elevated Thank QX, a in truSculpt related them vibrant, results. Matt. which revenue quarter, XXXX. microneedling From XXXX. of RF prior with of high and In system into $XX.X to dermatologist first to to franchisees as three plastic performed system, American of believe first practices ASPs us component normally Keith contributed North the the are team first Secret first levels. to we North these slow newly expansion the VP drivers North to with American seasonally contribution looking surgeons Sales Consistent launched The quarter. across accounted North continuous our for have combination of XD systems % short, in well in at I’m recurring body this core segment revenue of XX% customer a our comprising in Women’s American over System with perspective, of system, ability to of company our quarter, patient on Good Larry Health their reach is the along non-core to XXXX physicians XX% broaden the afternoon, discuss sell most our quarter. our XX% over fact to usage. procedural joining the the continue orders to pay and Laber, the as Juliet over a growing our generating of We core today referring sculpting for our indicates strength in Adams, XX our sales or American with of growth revenue continue our customer Director sales, market executing what their a and this continues American very demonstrate of global physicians. million be along with Sales channel well a North quarter sales

Our remained which first unusual tends at XX higher North force not American sales reps turnover. the quarter constant is experience to considering

group We by reps expand XXXX. XX this to to expect XX in

a consumable approximately this sales of reps our XX addition, the we’ve In force year. expect end by higher commenced building and

in from region. programs Marina will later has were distraction are issue well Middle for University of of valuable As & Middle by and just Dubai that our Europe, Cutera marketing team were Japan which products issue Dubai these U.S. team regulatory was and the our that to we continue known an impacted double-digit this which from Australia offset in other and growth an registration full Kamenakis, other team first in key that Marketing a event year the in VP that quarter. country. East resolved an including in International The results, including her educational East regions in benefitted the Global confident orchestrated in been opinion Congress in growth to of will Marina programs, an for administrative the deliver Asia in solid ever March. and This Clinical Japanese expectation. prior flat provide event completely the expansion year-over-year Derma leaders held regions featured our the created the

operations expect this revenue We team includes of addition the in team continue where the quarter. generating reps to net direct quarter. a expansion we This with to sales international first Spain nine begin grow of in our the the

and a center of Cutera clinical Our for training will in course new our customers. center our facility mates and team Madrid a provide room show for be training

to investments this with XXXX XX% quarter in a company’s team our XX%. make growth line of order year the full long-term the gross our in margin in to late remains focus sustain manufacturing and service was goal to with and on talked effort XX% We short-term field Our in and about We’ve efficiency. began rates. need our structured

with earlier position VP long-term considerable cost service with This our management reduce investments the enhance in year and service is the made customers should recurring and right provide he of Palumbo progress operations. Dan grow joined their improve to of Our our times better adding immediately expect to the to productivity. being a will Mindlin, us with VP improvements the equipped He of identified revenue. parts ensuring are the service, is our response our rapid level talent, process team we of in Mike company make organization. Further and inventory new continues put effectively our manufacturing this that improve output, Operations, goods.

margins and We in in these positive expect service require made. the initiatives, to future, course investments impact of but being on have gross the a manufacturing

and a Turning Juliet improving function to in commenced the female product vaginal products, January laser, sexual best-in-class launch of for health. we the overall the

XXXX launch strongly mild also for platforms announced couldn’t with and to in device and more anticipate Secret systems our microneedling We wrinkles collagen, diminishes we the that beyond. radio and seeing remodels which scars. both RF, is the I these of contribute we improves demand a effectively will growth fractional new are frequency be strong pleased

provide update quarter additional and also our next this We we’ll progress the on Juliet expect geographies an launch our call. on in

Cutera. skin Our expand PICO in on SR FX. the with latest to a and skin version April. laser At was was recent as medicine in we at enlighten enlighten the conference enormous society introduce levels franchise for our for PICO line of expanding product and customer record continues me surgery SR the to tattoo removal April, signature revitalization fresh American Genesis Genesis and of enthusiasm opportunity focuses for revitalization The and market reminder procedures

our a update the well an I the day at plans company pipeline provide corporate later year. the our to product now general detail would Lastly, call to over CFO. on in Sandy more to like analyst turn as Gardiner, as

Sandy Gardiner

Thanks, James.

systems believe sales force our first segments in experience by Japan. market a a the this to quarter XX% these quarter XD the first prices was that over First and it and the core America continue to systems. North excel price growth we our successful versus and for XXXX. systems execution note basically by system the $XX.X both Juliet we driven great quarter reflects or We continue XXXX. the first our increased and core continued non-core laser grew saw at points, but for demand offset selling by quarter of outside average this truSculpt mid-teens a second, system as premium. two million key revenue in revenue robust our Europe RF strong flat the XX% launches revenue of of look International to was products, is Xeo demand Secret was growth decline XXXX. three and over of healthy important first When

of As for impacted end in portion and sell deliver confident first James of the full of portfolio mentioned we the an quarter administrative ability by the first to our would This XXXX. remain Japan. issue products the quarter our in team was resolved a

to portion recurring revenue for in total quarter, total revenue service on the quarter. revenue sales revenue in of the care our In skin revenue addition our recurring approximately XX% as for healthy Cutera In the systems, of accounted is expanding demand plus first first focused revenue. the defined consumable

going first of forward. to our in dedicated become We our over quarter time see will by team. supported revenue consumable meaningful more continue generate sold XX% consumable growing over will commercial This the revenue strong, expanding as systems

talked Moving and margin of than operating towards organization of end in XX% of basis the and invest gross the quarter more first past the the first XXX points we couple in heavily have to on over plan lower manufacturing In was margin quarter, to Gross our expenses. XXXX. XXXX and quarters service processes our about XXXX.

of support accelerate to We going the forward. team the activities growth, expanding were and with forward incremental U.S. strong schedule. these activities global markets continue These service to other projects ahead outfitting especially include appropriate in move

coverage. provide level the to in on select order In service longer-term We markets, we incremental along cost with in increase addition, to to goods. manufacturing our to in activities focus to of these efficiencies continue the of projects contributed expanding contract two service quarter improve estimate first highest

committed of remain The administrative reflects enable expense the will XX% our percentage share million XX% was audit U.S. well XXXX. or our consumable XXXX, of compared investments clinical channels, the general deferred of quarter XXXX. tax term. and development of to of build period sales in team We out a to the the the market loss the a expenses quarter XX% quarter, tax to up XXXX first infrastructure the these reach million in XXXX quarter, $X.X of million first and the continued Operating cost increased revenue, compared compared portion of fees in XX% release ongoing allowance innovation. or quarter longer in and and ago. quarter to range investing in XXX the in in and to result an million compared XXXX. first for in quarter of was gross year new adoption to to be in that XX% percent terms our the XX%. assets in and revenue was marketing research to product quarter Sales margin as margins of year improvement expect drives expenses million of the $X.X in as in and of the $X.X The revenue to investments increase of commercial the full a a $X.X General to including us significant We expense as or revenue certain of administrative in the Research same ASC XX% of evaluation as first engineering longer gain to loss build which first related flat the in out a the also were first increase to gross XX% and expect global $X.X in fiscal against over revenue revenue. of higher of

expense. share. or loss million Our $XX.X loss or per XXXX versus was stock quarter for in diluted was outstanding include average the $X the Weighted ago $X.X GAAP share. of $X.XX Non-GAAP based adjustments Non-GAAP compensation, $XX.X year million fully amortization first $X.XX adjusted period. and was shares per million diluted million depreciation non-cash for net net the period same

of quarter quarter X.X times balance Turning a DSOs and days XX increase million an of Inventories from compared finished $XX.X XX, Cash from first the the first and the an turn million XXXX. to used a cash first below driven was in quarter $XX to $X.X of quarter were our future year at representing receivable goods sheet in by net December figure higher for inventory our inventory level by during The million quarter XXXX ago flow, operations XXXX anticipation sales. in ago in X awards accounts was the and XXXX, increased infrastructure very $X XX, of year $XX XXXX. to inventory commissions This increase finished million successful on our days. in of the at achievement of is first by million goods inventory sales change time cost, was XXXX. from a improved driven and were payment four or the the end increase ratio March bonuses, which a historical the of

as Our position cash March of was with cash capital we and XX, strong, remained of working no $XX end held $XX.X. and the investments XXXX, of debt, while million

million to guidance to we reiterate XXXX, XX% of XXXX financial target representing over range for $XXX an guidance increase XXXX. our a revenue XX% $XXX Turning with to million,

in the fully turn closing a to of to we continue comments. revenue and product net $X.XX unchanged range Non-GAAP XX%. as percent earnings call share over XX% for in to expect our to range the to invest James of like is of diluted as of in to forecast would We be expenses development gross operations. XXXX the of range scalability in the to $X.XX. remain operating now his to the to XX% XX% per I We margin be expected

James Reinstein

quality enables Cutera summary, level provide Thanks, portfolio them of and the Sandy. their patients serve innovative our In customers products to physician a of striving needs. highest is constantly that most service premier a best with to with

growth advantage returns are ahead. on Management investments shareholders. operational attractive the and positioned tremendous also to on execute take the and relevant date, research offer better mission our that With opportunities strategically focused decisions of Cutera is making made is to allocation this to

in increased open would questions. cash to our gross I for I operations. call Operator? to As execute up growth the like drive and XXXX, company and with continues profitability double along revenue to margins expect from the strong improve digit now from the levels

Operator

Our your state question. Thank is you. [Operator Instructions] first from Chris Stephens. question Please Cooley with

Chris Cooley

hear you good afternoon, everyone. Hey, Could me, okay?

James Reinstein

afternoon. Very Good Chris. well,

Chris Cooley

impact Good the us afternoon. here talk be at with the Japanese start. for the you quarter regulatory what Could And then first to curious from about issue? maybe I'd Couple as actually me for your during PICO quantify well, think associated you was the not Juliet pressure some ASPs quarter We here Secret. also on holding but increasing actually up there's and core actually only that demand the the recently. and space the business. with strong do truSculpt, heard you

we to thoughts love much. category so just within So Thanks overall about and I on competitive think see would when it how those by the respective get Cutera demand, the your you segments? position for

James Reinstein

Okay. Sure, Chris.

PICO compared Let me pricing our within first. an category that there's We in of increase we What with that still selling all the question realized do price mentioned. price a basically in maintain that categories take average category premium to you exception competition. the the of

is in in a there where However of a ASPs. pressure decline quite we did pricing our bit the category, own

larger the more able as direct price selling team xeo, in by sales markets to is testament great in that a However to a all premium price. or North increase either well teams are as American slightly the which reasonably V excel, some HR of appreciated slight and command international markets average being our

seen in I getting record issue. for to as regards have without question say shipping well manufacturing to which Japan. that reinstated, really this focused international actually and want products was I first really was quantify which time the growth as Your the on the Don't that us probably a doing the destruction license specific start they to products, need will with that to team double-digit manufacturing -- would allowed say really did exchange and number. would without again.

Chris Cooley

then one in more get tease you and volume equation? Are if in Okay. up will basically I color provide lift maybe could I pricing the to versus able queue. quarter of the just ASP, of from type trying kind a just terms in any at in so to growth squeeze step And total a

Sandy Gardiner

as volume pricing a certainly come contribution did actually the increase the well. of most indication on as percentage, Well, but there from nice a was

Chris Cooley

you much. very Thank Okay.

James Reinstein

Yes.

a – to we think I increase which pricing is shows shows I more the importantly we our didn't able maintain pricing that just decline. just slightly are that the think ASPs

Chris Cooley

it. Thanks much. so Got

Operator

Block your question. question Our Jon next with from comes Please state Stifel.

Jon Block

Couple Great. We the me. overall thoughts for of there. North environment afternoon. hear love maybe America high-level, question Thanks. Good James, just from your to equipment.

at competitor least of You reps the approaching and a talking one got about lot hiring of maybe aggressive integrating them getting they're market. recently terms how more and in

sort hearing thoughts step North the America? to a taking just on embedded So right up environment your back, out well, now there of in

James Reinstein

organization of level years, at this sales as few handle, outpacing that Well, the competition performing When market get high has just American private, are which but last the we North a real north hard over growth I at quarter. certainly I at a quarters, is of think XX% to look the lot you a so XX% assure were can you it's several been growing very rate.

demand the we number sales hire covered the we and with XX a question. did Hopefully few but remained certainly is we were let for expected, at fully that our not well. some your as organization people go which quite we sales net-net but within and Given I certainly surprising also what

Jon Block

of gross but margins were should to the expecting Yes. years. if or but Certainly for give lower James, any you in expectations improvement was it, did. year. your held then want what I for just Sandy don't the on you And XQ, than for the color we cadence the

see one then versus one? throughout XQ versus should step quick got and I XQ Thanks. the XQ. unfolding maybe we more XXXX So How just

Sandy Gardiner

XQ for making I in manufacturing. and think both talked these service So, investments we're about we've

products we have over but the because the for successful completing quarter So Secret long-term investments to we've largely say the well. accelerated completing the the of we in growth gross but that of QX but very talked with rest mix make first both course margin the suffices also over to drives or we some and then the expect always of still see year the of as in the launch that about and improve lift expect the as investments Juliet gross the and we margin these X-D year will higher were the investment of to continue

James Reinstein

add efficiently while think goods cost more products to as service. And I significant well contributor investments on not are these a improving and the focused of really either the to or That years ability our as on probably – truSculpt manufacture these the the selling as Julliet, XD. selling start but the products now, as see that products the in on we'll we'll see consumable to outer system Secret we're and that,

Jon Block

share any that And bit one believe XXX because was the we from that the previously you non-GAAP I share Okay. of were was count. million last that Is reiterate little EPS, XQ guidance little just XX Thanks in XXXX remember XXX lower what than the thinking to count just same about? for me, bit a the ask guys. and I

Sandy Gardiner

Yes.

is it expect divesting through RSUs both go weighted still average we a as PSUs, the with tick we also XX, see up that So the to shares because do the but. we year little

So X compensation still close stock-based to to as does well. the X include million the million million and XX also of

Jon Block

Thanks.

James Reinstein

Jon. Thanks

Operator

state Vendetti comes Group. question from Maxim next Our your with Please Anthony question.

Anthony Vendetti

Thanks. Yes.

a picosecond in there you indications new indications if pricing expect laser, useful to are little guess launch wondering ASP and pressure some be? SR, about what you will enlighten talk general or April. under in FDA this What what expended cleared bit obviously expanded the I picsecond because could indications, with you globally more Just be

James Reinstein

for So discuss ASPs, it. specific probably won't

going wavelengths PICO within fewer there to are of price power still on was this competitors with to less However, trying the and other really out launch with this where category. answer what's product devices

removal within any revitalization that is skin enlighten or is offering premier family. its versus that's SR tattoo just indication, being and an expansion the So not the on it X enlighten There really what for. geared focused devices the is just the

Anthony Vendetti

more a will do do to then just it one scale where down So, the it it other going James, more of is is skin more whereas revitalization or? –

James Reinstein

market? that's probably what more it's the towards for. international Absolutely, Anthony, Yes. exactly geared And

Anthony Vendetti

wait international. More on for the do And Okay. Analyst hands-free going XD, then status? update are an truSculpt to the to Day towards you on

James Reinstein

would I an can that QX give for is of inline be year. you which this is original in timing there which update launch still with

look the And hasn't and that to having during third forward so that quarter. changed launch we

Anthony Vendetti

for Okay. And then I'll good now. jump Thanks. – okay, that's it. back. Appreciate

James Reinstein

Anthony. Thanks Okay.

your Jim state comes Sidoti question next Please Our with Sidoti Company. and from question.

Jim Sidoti

can Good hear me? you afternoon,

James Reinstein

we Jim. Yes, can

Jim Sidoti

Great.

your kind for you the year? that spending have the we because On expenses auditors a for tax rest Should some good said changing you one G&A the due the and some line time level consultant of what's to you a G&A and item of status. are consider

Sandy Gardiner

Yes.

to it was the related a So of first year that quarter closing was in is all of one-time the on. the event when that going

So last in thinking the that it I about considered is to guidance expect same the we year event. time for say, year. one discussed we level have as as our the And as maintain would

to XX% X% as roughly So a percentage revenue.

Jim Sidoti

Okay. million sheet balance in Then went about you was? tell other can quarter, up a X what on the that assets

Sandy Gardiner

Yes.

actually in it go to it and to your capitalized and and of places. retained flow put cost we XXX you have relation are appropriate earnings implementation So in ASC back the the through –

the to lot So with sheet. of to do needed has take that that the back of the commissions balance capitalization we that to

Jim Sidoti

about of ago? you XX% How consumables were that noted then, does quarter. revenue the the compared in And that year Okay. with

Sandy Gardiner

was it XX%. ago Year

Jim Sidoti

And… Okay.

James Reinstein

Yes.

parts So service does and agreements --and the that labor. include

Jim Sidoti

year and this last both In year?

James Reinstein

Yes. Correct.

of So growth an that that percentage is the the upside go addition in one agreement did year, call purchase the system is, uptick it, have the did to service this up. we did that

to we'll basically every see month clocking start kind every of However that quarter. or reported revenue

first time revenue real we've for participating As of consumable revenue. well the meaning in got as procedures the

and hand or truSculpt. for needle So the tip we're piece either selling or for a cartridge the Juliet

Jim Sidoti

said Is add you you have reps the were have systems. Okay. that's for And to addition to for that correct? add XX in to plans consumables, – going that you you XX

James Reinstein

downstairs training got three correct. That's as them and And they we we've already Yes. of on are speak. board

Jim Sidoti

Okay.

as where we see four, a revenue? consumables So would of like you to percentage look years if five out

James Reinstein

Yes.

out north would XX% taking of be XX% XX% it to XXXX. we're to maybe to should closer number. be we call think that I

Jim Sidoti

Thank Okay. you.

James Reinstein

All right. Thanks Jim.

Operator

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

Anthony Vendetti

Yes.

did of couple this follow-up, bundled that percentage? that a have give Just did you or percentage quarter, you sales

Sandy Gardiner

We prior the our about but it remains bundled actually sales XX% in didn't quarters Yes. with give in of roughly it, are line transactions.

Anthony Vendetti

you how reps Okay. reps you many do hired internationally, mentioned now? direct direct some you internationally And know I have right then,

James Reinstein

just going that are there. Sorry, XX to one look reps direct XX up at in countries. There

Anthony Vendetti

Okay.

have So no [ph] someone international there doing Miguel what or is Pardos – Do you doing February. Miguel actuary for as some longer in it guess that's is someone is different I that role sales? has replaced him a is in

James Reinstein

replaced we narrowing list. in point This And ongoing regional to the we are five leaders reporting the certainly haven't me. him, is interim search and directly but are the

Anthony Vendetti

Okay. XXs? Is All help still reps two sales direct And increase? that has then of changed? target that know that reps internal recruitment for – here direct on with around in people I the the have it for target you end U.S. to that number Is Has As of right. sales hired XXXX the the XXXX?

James Reinstein

We to – to this probably XX if we want forward Yes. going even XX year so should better. land year and [ph], add it XX% XX% around its we XX, for remain

Anthony Vendetti

me. right. All was it Thanks. Great. That from Okay.

James Reinstein

Okay. Thanks. Sure.

Operator

you. Haimovitch from HMTC. Thank our question with your next Please question. and comes Larry state

Larry Haimovitch

Block the a asked. that Good afternoon. this Jon to is follow-up question Sandy,

hear I XX%. For quarter the going gross thought XX. you Did said that was was for the correct? the gross first I to year margin

Sandy Gardiner

the XX% for correct. XX% is full to year. That

Larry Haimovitch

Full year.

XX%. the fourth gross of would excess imply quarter margins in probably that So by

exit math very the through penciled haven't correct? approximately step-up in the but Is would over margins that you'd nice up a exactly, Now sound certainly at math where it I to year gross imply XX%.

Sandy Gardiner

for we also but been the that these we're of that's the efficiencies has should and our target goods. manufacturing that investments the with mix always with cost in XX% Our what product in and continue both putting lower to are strive to internally actually

Larry Haimovitch

Okay.

So XX% realistic. never means

James Reinstein

just XX% stated. which reiterating We're to which you the Yes. XX% implication has

Larry Haimovitch

Okay, James Hey, for big Thanks. the get [Indiscernible]. great. ready

James Reinstein

You I know I'm what not warriors. sure there. to Houston about know, going

Larry Haimovitch

tonight. till Wait Yes.

James Reinstein

Larry. it, forward Okay. to We look

Larry Haimovitch

quarter. Me too. Congrats on the

James Reinstein

much. very Thanks Okay.

Operator

appears there questions back it time. Ladies and gentlemen, are I'll Thank no remarks. this for turn further that to at you. closing management it

James Reinstein

We appreciate much. day. forward joining Investor very year. Thanks at later well in you and you the healthcare upcoming Day as thank seeing today have Analyst the look good to as call will and the at So conference everyone

Operator

disconnect. This participants Have great concludes today's conference. can Thank All a day. you.

Cutera (CUTR) 8 May 182018 Q1 Earnings call transcript