Cutera(CUTR) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2020 was $39.1 million, a decline of approximately 15% compared to $46.1 million in Q3 2019, attributed to reduced treatment volumes and lower capital equipment purchases due to COVID disruptions [27] - North American capital equipment revenue was $13.7 million, down from $24.1 million year-over-year, while international capital equipment revenue was $10.4 million, a 4% decline from $10.8 million in Q3 2019 [28] - Recurring revenue, defined as consumables, global service, and skincare revenue, increased by 35% to $15 million compared to $11.2 million in the same period last year [30] - GAAP gross profit for Q3 2020 was $21.7 million, with a gross margin of 56%, compared to 57% in the same period last year [31][32] - Total operating expenses decreased by 20% to $23 million from $28.6 million in Q3 2019, reflecting lower variable compensation and cost reduction measures [33] Business Line Data and Key Metrics Changes - Global service revenues increased by 27% sequentially from Q2 2020, returning to pre-COVID levels, driven by strong field service call volumes and increased revenue from extended warranties [18] - Consumer revenue grew by 62% sequentially over Q2 2020, nearly closing the gap to pre-COVID energy-based treatment volumes [19] - Skincare line in Japan achieved triple-digit growth for the second consecutive quarter, driven by customer base expansion and loyalty [16] Market Data and Key Metrics Changes - Energy-based treatment volumes improved to between 90% and 95% of pre-COVID levels by the end of Q3 2020, with steady progress observed in North America, Japan, and several European geographies [12][13] - The appetite for capital spending improved across many distributor markets as practices reopened and ramped up patient treatment volumes [14] Company Strategy and Development Direction - The company is focused on driving transformation through the introduction of disruptive technology, operational efficiencies, and sustained profitability [58] - New product launches include the truBody program and the Fraxis PRO platform, aimed at enhancing the company's aesthetic device portfolio [44][46] - The company plans to expand sales coverage and make thoughtful investments in key geographies despite ongoing uncertainty in capital equipment demand [49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trends, noting that many aesthetic practices are booked several months out, indicating strong patient demand [13] - The company anticipates continued pressure in the capital equipment demand environment but expects sequential improvement in Q4 2020 [22] - Management remains committed to maintaining operating expense discipline and improving cash generation [24] Other Important Information - The company ended Q3 2020 with approximately $42.4 million in cash and equivalents, up from $29.4 million a year ago [38] - Inventory decreased to $29.3 million, down $7.6 million from Q1 2020, with ongoing efforts to monetize inventory [40] Q&A Session Summary Question: Can you provide insight on the decision to add reps back and the number of reps involved? - Management indicated that they are cautiously bringing back reps based on productivity improvements and market recovery, without disclosing exact numbers [65] Question: What are customers doing to maintain operations during potential second COVID wave? - Management noted that practices are adapting by providing tools and training to help them stay open and continue operations [67] Question: Can you discuss the differences in customer wants between the U.S. and international markets? - Management highlighted that while there are no dramatic shifts, clinicians are focused on cost, treatment time, access, and return on investment [71] Question: What is the outlook for the skincare line and its margin profile? - Management confirmed that the skincare line has established a new foundational sales level and expects to moderate growth year-over-year, not on an absolute basis [75] Question: Any updates on the Fraxis PRO rollout? - The Fraxis PRO was launched late in the quarter, and initial traction has been positive, complementing existing products in the portfolio [80] Question: What is the status of the acne product development? - Management is currently working with regulatory agencies for approval and will provide updates as they progress [82]