CUTR - Earnings call transcript Q3 2019

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Operator

Good afternoon, and welcome to the Cutera Third Quarter 2019 Earnings Conference Call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matthew Scalo, Vice President of Investor Relations and Corporate Development. Mr. Scalo, please go ahead.

Matthew Scalo

operator. Thanks, third conference Cutera's XXXX quarter to call. earnings Welcome Cutera's of investor name is and president Scalo, Matt My relations vice corporate development. call and president. And chief the today Dave have on Mowry, executive officer; Jason Cutera's Richey, we Cutera's

modeling The guidance After the will or reflect includes but there purposes. future prepared expectation statements limited provided of statements. forward-looking any current of not discussion the business, question-and-answer These company's be forward-looking management's today a remarks, for session. financial forecast certain to, aspects including,

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

Forward-looking plans statements and products, including, productivity among introduce approvals others, statements regarding financial regulatory to guidance, improvements. new

as our For on as also in harbor statements to date risks words subsequently you safe statement encourage made. Form in in risk XX-Q we and uncertainties, Form Factors our are they subject of including earlier to forward-looking described entitled that Risk forward-looking undue with not section XX-K may those updated and speak in are the press the statements, only our All statements, which the to you place refer Cutera SEC factors to filed. the filed cautions forward-looking release identify reliance today.

statements obligation occurrence or Cutera publicly undertakes from or expectations. current Future materially management's unanticipated to to reflect results events any events. to no information, forward-looking of new the update circumstances reflect may differ

to non-GAAP greater financial operations, results discuss measures, results adjusted period. period transparency including will of ongoing we financial facilitate complete Cutera's results comparing can particularly measures these addition, a underlying analysis We into In believe from on an when more basis. and

measures not be release. to to, prescribed reconciliations operating as These performance GAAP. considered non-GAAP along Please non-GAAP measures in from but the our GAAP refer by measures the alternatives with, earnings should financial to

to With would the to that, over CEO, call like Mowry. our Dave turn I

David Mowry

Thank us you, you afternoon, and for Good today. Matt. thank joining

our who the by would reflecting against of financial results, joined quarter team before I'm mentioned, details call begin quarter review our for during delivering the congratulating performance Jason, Cutera I third initiatives. the another like by company's to entire execution key will operational additional Matt performance. ongoing provide As the on strong I

Since I various external amount our and and and ago, stakeholders, to months considerable customers, me exercise of company joining understanding spent insight observations. provided into within to listening our initial needs grow time from aesthetics many internal our market. of like has would some differentiate and with including dynamic learning opportunities the This the the investors. energy-based improve my Cutera in space, four employees share unmet the and this to I significant a

shared, as the depth energy-based commitment passion market Cutera. I I'm the and of team's collective talent, First, previously have our customers aesthetics here the at serve impressed to to by the

we who to available an insight our guidance had excited respected to business. amazing and and specialties, and multiple Second, are across influential cadre clinicians of provide

a industry providing market. there innovative these differentiate as leader We a Cutera Third, targeted, energy-based plan service. remains support to superior aesthetics establish within opportunity strengths great and lean as on by to to ourselves and the well within technologies the as evidence-based

of shareholder lie long-term recognize I deliver to that value, the ability our in confident immediate our I'm tasks ahead While also company.

previously installed installed of per the few sculpting focused increased portfolio overall engaging also expansion performance to our market that truSculpt remain existing that of above-market the the the flex, on operational will innovative regions improve revenue share customer commercial increase efficiency investments must growth commercial supporting directly continued in like while We of as base. sustained, and These procedure the business. executing these our body objectives, recurring drive fuel Increasing our across growth platforms products Cutera's our then systems. team deliver current and well base customers' our international to on vital generate of other Leveraging applying include, as and our which learnings key previous through patient expand geographies. initiatives revenue, introduction driving flow through

And profitability reducing and to the our material cost improved over expansion supply term. longer margin chain enable expenses gross and

pleased none efforts, execution light against our of that continue is its albeit current Cutera to initiatives the of immediate to cumulative objectives will our XX will line of bottom step-function to and and deliver execution, our at the deliver these times, change While to lumpy few performance sustainability XX top confidence these increased performance. next financial performance, of raising previous XXXX my In these improvement guidance. both our ongoing I'm impact vital over to and incremental, announce months

million deliver to $XXX guidance million $XXX range to in compared million. XXXX year expect We for of to the of $XXX $XXX revenues full previous million to our

over the XXXX I accurately Jason believe to but will we I'd the like guidance greater I later proper detail our call to in beyond. that, Richey. planning for President and sets provide organization's momentum the tone reflects and our turn call, begin new With the as

Jason Richey

start off expressing proud am another of for entire growth. to above-market like I'd by Dave. Thanks, how of our delivering team I quarter

year XX% and following by factors. Third the was over prior driven revenue quarter grew

the First, billion continue growing we to sculpting market. gain $X body share in

encouraging Overall with treating in flex, These in revenue, customer now we as a believe truSculpt many quarter of formal third was followed extremely fat unmatched grew an truSculpt The capabilities. users clinician provide as launch combination truSculpt XX% flex reduction systems, iD our start which been of in early truSculpt two cases, a the truSculpt and has America combination, the well platform. with our treatment positive. are feedback North suite results. quarter first with sculpting And new includes for a sculpting body the system, XXXX. great over in using iD to systems, be muscle patients flex, Total differentiated XD of very truSculpt truly third what by

digits Second, truSculpt third over triple procedure-related quarter. prior-year revenue grew

mentioned earlier, on increasing our revenue As are focused recurring Dave we streams.

goal. truSculpt family revenues, products of Secret us will our to objectives RF, our like toward provide is to that of access which One launch systems and this procedure-related advance

current up XX% consumable XXXX. We installed our revenues, of estimate active of XX% generates that from the at base end approximately

over Our to the commercial accelerate the of efforts of third longer-term objective sold form base consumables. in access XX% with systems quarter installed revenue in recurring providing in the further quarter this

factor sales American our North and third team. leadership is The

continue matures. to progress significant We continuity this improved as see team and

and have these the structure the performance right and now reflects We place, in leaders improvements. quarter scale-able our financial this

pricing helping As second we new team, margins. quarter our deliver on mentioned this gross earnings see continue to call, products leadership across improved from legacy to stability

our customers sales practice of sustained to we an These managers with improvement partner development strategy out to flow. their to the patient in with ensure development investments in revenues. is assist to addition our practice leadership made field-based to driving recurring, In procedure-related whose and component early task a team, building investment are team, success of essential

we still are our has international commercial team, of returns value the pleased effective with had The specific it's which while reasons this like thus on far. the efforts investment final factor the And within early, demonstrated is restructuring outline to targeted. I'd we

and especially Middle learnings to strong structures bifurcated of were to distracting results management continues apply revenues where European to and and Japan, and force East drive taken without business. and strategies. New care quarter our Zealand sales some our direct Australia from distributor and our We've Japan steps skin in shifting energy-based equipment our Third regions, our aesthetic capital

global as streams. launch as We truSculpt as new expansion quarter, XXXX. opportunities the well to of product pleased also of products and the first remain gross international our flex, our of systems coming the reflects bullish within such we with commercial revenue our half This to team the We're in as expect during during result to layer on XX%. revenue which margins revenue we from percentage continue of an consumable mix improved which combination our a increasing improve

momentum continues our at American direct prior as a international Additionally, sales percentage our periods. gain we geographic benefited and to favorable by higher mix over North team contributed

in to In addition from the on chain had cost in benefit we some mix, and initiatives. improvement making our team improvement geographic period, progress product supply our key contributions from the operational some minor

to cost quarters full see While our more before efforts efforts. of few pleased a we we have date, reduction our we'll are the impact with

the on and outline now back financials company's to Dave. call our to the And increase additional turn over to I'd guidance, provide to like details

David Mowry

Jason. Thanks,

third ago. North includes now the over period driven third As into gains same year quarter year, of revenue $XX.X which portfolio was the up year X% from stated our revenue truSculpt quarter. grew share quarter continued the XX% moved This our by the in third a for U.S. portfolio. earlier, launch truSculpt flex, million, commercial America sculpting body in full

up as In Secret truSculpt microneedling well as performance from RF V+, system, strong vascular system our worldwide quarter third year-ago year. as defined the skin of The revenue the quarter launched earlier approximately XX% total quarter, growth XX% and In upgraded the saw over XX% for XXXX grew third and revenue generated in this XXXX. portfolio excel laser addition, care in remains we third solid the of from and the quarter third revenue, consumable, XX% revenue service accounted recurring period.

growth of past utilization Management teams. as in installed quarter compared revenue Development with those positive service as momentum systems revenue per and expansion International the XX% with year shown to the Practice investments grew Recurring of the systems date third continued revenue to procedure has and stream well our a our XXXX. global

XX% growth of XX% direct mentioned the mix, Australia in international and product quarter third efforts earlier, period. XX% in As quarter in second Japan quarter accounted significant the to for compared drove and channel year-ago sales regarding the revenue,

the into focus our underlying on or and insights discussion to I'll the our business. my into gross move margin provide non-GAAP expense, on As comments in results I adjusted our operating trends

today's growth, non-GAAP the year-ago supply gross mix, solid the channel selling points product XX% Non-GAAP in detailed and improvements quarter combination within The the or and Please press quarter prices. chain increased margin in margin to results. changes total revenue than expansion release reflects gross basis in stability of the XXX of description approximately and a third mainly select incremental cost system third the period. higher refer GAAP for year-on-year was

percent to in of third Moving revenue third XXXX. of and sales quarter, a XX% XX% non-GAAP same the as marketing quarter to the was in operating on of revenue compared the expenses, expense

of rate. activities, committed increased well dollars quarter the million nominal and variable can development million XXXX executed investments with business studies in in the The Non-GAAP third due XXXX. over the of new some managers the research as and the XX% a certain $X.X a as company the first reflecting of growth. spend R&D research the increased in engineering and year-ago marketing remains clinical quarter and the expenses current revenue sales be On product this practice in timing basis, spend investing leadership $X third at to expenses introductions. associated the bit to development year-over-year clinical period, lumpy quarter structure were approximately of development in and

year of period administrative in compared same XXXX, expense sequential $X.X increased and G&A XXXX. general to to quarter of lever to in the expense levels this to Contributors personnel-related $X.X in allowances and include quarter accounts for million card higher Non-GAAP in fees million including costs, expenses, -- change increased from revenue third the a third the ago. credit recruitment legal due fees, doubtful

CRM In our expenses, operating costs. addition the to non-GAAP expense million and and same compared depreciation was of excludes compensation, million ERP also $X.X the in implementation stock-based in quarter, to amortization customary $X.X period income XXXX. Non-GAAP

third of for per $X.X million Non-GAAP diluted outstanding XX.X used non-GAAP million average was was the quarter fully net weighted or diluted $X.XX to shares. share. approximately compute shares XXXX EPS Fully income

full offset provisions periods. have As we tax in valuation previous calls, a our on allowance to future mentioned

million, third the second flow, quarter sheet and one of quarter our end balance DSOs XX XXXX. and receivable net decreased days to at $XX.X from cash to Turning XXXX by were accounts day the

third to related our million driver $XX increased from increase the an levels efforts the The representing quarter activities of sustained reflects get in out demand of supply compared center, to of good. our our million of $X.X partially demand period. and million September processes levels, $X.X key load streamlined additional XXXX, were historical third by period, for advance new XXXX, $X.X and recently in This lower production XXXX, products, in in and inventory launched inventory reflecting Inventories the our expense. front prior-year distribution activation increased offset plants of of is change XX, the our of to at strongest million finished approximately retail enhanced in was level credit used operating policies. quarter collections to freight of the chain the the enabling Cash

of cash Our and held strong, of of $XX.X XX, working and with investments and capital cash no approximately remains million we position as debt, XXXX, million. September with $XX.X

guidance we to to focused guidance; initiatives. are turning are our initiatives, financial raising continuing our on against year-to-date, Now reflected our these performance. Considering our reflect XXXX our to third execute XXXX and we which performance in progress commercial quarter remain our overall operational continued

$XXX X% stabilize to of Total level over to full or as begin revenue XX% anticipate and legacy investments. in will be of non-GAAP margins year our XXXX. in the gross XXXX benefits growth We non-GAAP full infrastructure early to million XXXX improve over to approximately see million of the year range business $XXX the we

team EBITDA million. many adjusted reiterating It $X.X now efforts not of I range and $X.X will to quarter remiss XXXX $X performance be in delivering entire team reflected results was Lastly, the thanks of estimated Cutera from prior effort. million, that in for their million truly the third to up commitments million be were $X guidance my a would to to numbers. these

my over to quarter to Sandy call I'd Gardiner, the thank for our Cutera. open I Before with questions, leadership a take to support minute CFO, her your first and like

has we on decided decision. move know, your As to reasons, many Sandy respect personal you and for of

Sandy processes. contributions has we organization her Appointed many in great of improvements tenure am focus future her wish been endeavors. the I thank of at During her wish and December her internal processes. for success our Cutera, in period share Sandy's on thankful and across strengthening enhancing helped to overlap did that for CFO the XXXX, and deliver

now, call let's open for And the Operator? questions.

Operator

question first today Instructions] [Operator with The Please Stephens. ahead. Cooley from comes Chris go

Chris Cooley

continued you and on progress, my Congratulations the thank afternoon, for Good questions. taking sir.

David Mowry

Great, We're seeing appreciate -- to just say you conference question. at your next guys week going your looking forward thanks. to and I'm we're

Chris Cooley

as well. Look forward to seeing you

this continued States? United top flex I'll first, line leveraging just as really installed the there. realizing whole. related as here total get maybe bit try in I so far what you the guess have in flex of from us of the little well? just installed is then Just now for queue. talk about And versus How by growth encouraged a body the a two And were for rollout the perspective, much to follow-up. a a date you sculpting quick and expansion me, in maybe segment more of Could back with and base help with base parse I -- existing the plans

David Mowry

plans. little great to talk and Jason, Yes. you just want It's about your truSculpt maybe flex question. the bit a a

Jason Richey

Sure.

hear As America. your -- now within I now -- right release are to Right Chris, North question. market full good in we

first sculpting is looks But rest go process terms the to of to North We flex still is of are encouraged hot America. really in full now right Zealand world, in XXXX. in far. plan us half now. go particular, The by early pretty thus waiting what right Europe, roll Australia, term. for there. seen New Muscle of still and long in to the regulatory it's Middle East out that like through we've But in the we're what We're

utilizing many totally And flex iD. it's And truSculpt has preliminary early, that the strong. of things So the also purchased far so a fact clinicians that response quite are but the are truSculpt encouraging. the from incredibly we physicians been one that didn't the results iD was of have the expect with

have and or but protocol anecdotal just far, information, encouraging. So, just that anything, where clinical so we we keep we'll a see land. pressing And so on really good. it's but forward But don't

I think we nice a product. have

think I be differentiated time. around this there at a products the point from other market. seems in buzz quite it's bit that in And of to

Chris Cooley

meeting surgery continuing I anyway. don't my total progress earlier at as but pleased There yet sales. always for I XXXX, other plastic increase [indiscernible]. this the obviously was know can percentage a you revenue, I recurring also the have Agreed. here, to as a to on ask defined, I guidance my of definitely was -- guess see just by buzz follow-up Agreed. year quick

us can as to a think continued a we picture about, to XX% just what see does would the in continue talk quarter of what bit had said than it. think progress you help think as little there But to you then a about operating me one, the systems mix of momentum, think with percentage of that maybe during that assume you perspective? And sales, of looks two, terms how would So I greater sold build from the over overall the bigger consumable associated company, component profile time? that a I

David Mowry

great Thanks I'd for question. answer Chris. like it. that, That's to a

think First and sculpting, we that mistake everyone a think I of company, we're all, the in. particular, for something drive. much we recognizes revenue have that This those the by that big find thoughtful it [ph] many isn't situation of body the and that that in company recurring help stating, invest And that is ourselves accident are continue has it by a streams, typically the boyee of left been said, been this I think listen, has some this we plan things That legs very cycles to in or economic lever think we consumable, or against by presented. in inoculate and that focused it. in legs specifically execution and

So a continue presenting, it's aggressive those that in and to you move result, consumables. be products for will, to been if the us forward focus a as promoting have

results the expected. all are kind So of

that hasn't fast put our We base installed in the range that usage and a is and ramp. lag when really know And this lot speed customers' that year. And they between the But in generated see we unit. we start this depending that place installed there's recognize of we a consumables. also how to probably consumables year upon

truSculpt and of Secret this truSculpt the some continue specifically around that, are of dividends year. excited flex, and very really platforms pay to will leading future, seen the we're that consumable those so And iD we've products hopeful that in which RF,

Operator

comes question go Block Please with next from Jon ahead. The Stifel.

Jon Block

and you, afternoon, guys. Thank good

gross of are a really number with helping It's aiding gross margins trends. solid percent pricing the good a also increasing, mentioned which you in quarter. sales recurring one, margins, first The as

margins compelling do high At a a were talked the etc. I term. out around how lot GM's, at gross longer of that we year and ago, about laid so about initiatives just you there really guys think Analyst or level, Day a procurement, think, So

opportunities, those going -- they increasing forward? they are margin still think when we gross So are about there,

David Mowry

question, Jon. Yes, great

long-term is So first to margin gross the to of the low all, think I into mid-XXs. get

But is don't to there that immediate XX and it XX, We believe that the to it next I really can think aspirational. haven't We're a controls get execution -- the thing. not think the months. -- story be we going believe not say in this of an chain supplier be to in an value what I'd delivered component Historically, management specifically, supply work cost and here. supply we of through. lot chain, investments we

our had a and lot of pricing products. you've to So the some some shuffling investments We can quickly I We've made in staff. we hustling of pressures and that get out offset products think legacy of manage think in move we in help the needle can and how folks in things aggressively that. front on we recent vendors. some We in the position order how the brought

of that improvement. think in legs I there's a lot that

pricing cost. the That controls, are but more cost can and in we're benefited designed have been by we that being we more a quarter, thoughtfulness have around the to to that with going one, some by of do specifically mix the heavily new products newer mix. pressure we driven And number said, you you launching is bit little outpace. price, by command only also etc., saw also a And technologies being but do that not shifting constant there by it

Jon Block

I same from be you're one different forward they thought just is for love are reduction this flex. for practices and reduction just consumer. there there. standpoint, you. thoughts Jason, late fat the for maybe the would I'm in from field interested flex moving muscle some mean weren't is a toning by maybe important, practice what in with previously And but a more And might fat -- And curious consumer that in to helpful. early, the know because a or consumer were iD game. I your they very that it's what it seeing I standpoint, it, Got

Jason Richey

if game, flex a been little of that customers cryolipolysis device I that truSculpt that seeing with something comprehensive to treat They desired to to We're technology some the Yes. approach the a say it because would vertical, have open have And are now. of the also outcome. They it's will. that either stimulates just drive Jon. adopting nice a got something with earlier form bit patient's or fat of complement you muscle. a into gives iD. that more customers the everything, can flex have Both them most very

we to go in brand-new the haven't very where installed been can But into been flex, provide before. technology. with customers really going, that that's, access in I say customers majority been to which terms we've with done this there we the didn't XX% terms door would And to In have transactions we've few going We've with before. the of I what that -- base, going least this? that a differentiated that sold also quite open technology I been that dramatically it's not opened has in with are our to we And to before. the competition we at think of customers the from obviously, we've say, of flex would or well,

David Mowry

The Yes. the I way, a great answer, that's thing by add, would Jason. one

was surgeons was present to procedure just a Cutera a And opinion of And bit panelist, plastic for often, faculty forum University meeting are we clear about that promoting We iD members little Clinical the paired clamoring in got Forum, for. basically so, somebody the of a of we than setting. telling put don't some panelist, is more a together. XXX XXX where the a people the or on think very flex of had this that with the benefit mentality that one same technology treatment but me, that leaders fact was talk We it's from our or our it I was is customers. we that Jon, really -- a that's back differentiated key too using their customers this conduct which cases.

then before you'd in, and you home. get flex come went get words, you So iD you'd other in

benefit from the And was but that of reduction, the you was not flex accelerate the get only that do from fat the and benefit the further that, rise fat creates intent help I and compelling a And metabolic iD that he that would no the you you can point. results. that's evidence at tell produced sharing or was very accelerate this that pretty clinical exciting and to reduction were photos presented us. been there's But now the get

we're So going want continue then explore potentially it's to promote. to something to and further

Operator

[Operator from Company. Sidoti Instructions] comes The next ahead. with Sidoti & go Jim Please question

Jim Sidoti

Good quick question guidance. afternoon. A on the year - fourth quarter

revenue looking a at at bit up few past been Just even has least the years, and million QX $X between more. or little QX

end the for a million take you $X you Can little from why If give QX. you us rate high is? today, to color as guidance on of increase that looking the a provided you're about

David Mowry

thanks of the Jim, look, Well, first for all, question. Yes.

know be knew that I going we thoughtful flex, far the very knew ourselves. had and was out the big of you think quarter. not third just Remember, that we getting hit being was around in by and to that, to we're too a now launch in of that we launch, front going

with and of think longer-term lot timing may the that than and aggressively so a or capital do the in the about the to being to listen, in Jason So, are not knowing think fourth prudent this with went take be We it's and both think we means that timing as launch, product in about very about may the thoughtful a on business, basis. lumpiness we launches more capital sales. that and quarter. wanted is what what very third But and quarter, of place excited period-over-period. it That I availability product of product about said, we

out Jim, ourselves. be the bullish terms Jason launches in on be not team around bullish wanted get and things We're sales the But of as we the the we're thoughtful will mentioned American well. North of that on portfolio. coming So, international and too that, front far to in that

trying just be So to thoughtful.

Jim Sidoti

Yes. increase, at QX. expecting it Okay. inventory in you a looking No, definitely pickup the are seems

about a the guidance. little was confused So just I bit

I question -- sorry. other had The I'm

David Mowry

have -- centers because just that Jim. if about out I lower of established regional is we've taken to them advantage getting when or I forward-stock and level-load in comment I our demand to freight advance that inventory, to you doing the we fourth just allow distribution stress place the of you us wanted it address surge. which and quarter I long-term the sure quarter make the it production want to could, facilities part into it, build third in inventory costs. And to not that have in better

Jim Sidoti

XXXX? all the last significant I And And real wasn't question the year-ago then all right. Juliet, Okay, it was assume material at me. that just period. in for in

Jason Richey

Yes.

that I We much This we think better previous quarter material. sales you're thinking it about not year. way. the right had -- definitely quarter, same had last was

Jim Sidoti

what a you the sense on was? it Can us million Is give headwind some much? over couple of or that not

David Mowry

a the there. magnitude on little probably bit think you're off I

Jason Richey

that. than bit A Yes. little less

Operator

the question-and-answer to closing our Dave turn now I remarks. session. Mowry like for back will conference to concludes any This over

David Mowry

on early your you, with providing Thank Cutera. I year for thank their full- participation. fourth just was operator. everyone quarter in appreciate continued We on a lovely day. interest Well, thank for our to XXXX. Have in results update look and an that attention wanted we the forward call you your and today to you certainly

Operator

has now Thank This concluded. for conference you presentation. today's attending

You may now disconnect.

Cutera (CUTR) 10 Nov 192019 Q3 Earnings call transcript