Cutera(US:CUTR)2020-05-10 17:54Financial Data and Key Metrics Changes - Total revenue for Q1 2020 was $32 million, a decline of 11% compared to $36 million in the same period last year, primarily due to COVID-19 impacts [36] - US revenues experienced a significant decline of 32%, while international revenue grew by 18% to $18.5 million, driven by efforts to build the international commercial team [36] - Non-GAAP gross profit was $14.8 million with a gross margin of 45.8%, down from 49.1% in the previous year due to lower overhead absorption [38] - Non-GAAP operating income (adjusted EBITDA) was a loss of $8.3 million, compared to a loss of $4.7 million in the same period last year [39] - Cash and equivalents at the end of Q1 2020 were approximately $19.5 million, down from $27 million a year ago [40] Business Line Data and Key Metrics Changes - Global consumable revenue grew 30% year-over-year to $2.5 million, although it was below expectations due to office closures [36] - Service revenue increased by 11% to $5.8 million, attributed to a growing number of systems under extended service contracts [36] - Total recurring revenue, including consumables, service, and skincare categories, grew 28% year-over-year to $11.3 million, representing 30% of total revenue [37] Market Data and Key Metrics Changes - The Asia-Pacific region initially saw a slow decline in business, but the impact escalated as COVID-19 spread, leading to significant disruptions in North America [9][10] - International markets, particularly Japan, showed strong growth in skincare, with nearly 80% growth over 2019 [36] Company Strategy and Development Direction - The company is focused on cost-cutting and cash preservation to extend operational runway during the pandemic [16] - Plans to strengthen the balance sheet include negotiating service contract amendments and deferring non-critical expenses [17][19] - The company aims to maintain its market leadership in body sculpting and continue R&D initiatives for new product launches, including an innovative acne treatment expected in 2021 [21][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by COVID-19 but expressed confidence in the company's ability to recover and emerge stronger [5][22] - There is an expectation of pent-up demand for aesthetic procedures as practices reopen, with a quicker recovery anticipated for core customers compared to non-core customers [11][14] - The timeline for recovery is fluid and dependent on the lifting of restrictions, but management believes that patient traffic will gradually increase [13][30] Other Important Information - The company ended Q1 2020 with $37 million in inventory and plans to reduce this inventory over the next two to three quarters [42] - An equity offering raised approximately $27 million in net proceeds, and a PPP loan of $7.1 million was received to preserve key positions [43] Q&A Session Summary Question: What could the international segment's growth have been without COVID-19? - Management noted that international performance was strong and investments made in management and structure were paying off, indicating significant growth potential in international markets [47][48] Question: What are the leading indicators in APAC markets? - Management highlighted enthusiasm for body sculpting and the upcoming launch of the flex device in key markets, indicating positive growth prospects [50] Question: How are capital orders being affected? - Management indicated that many capital deals are likely deferred rather than canceled, with ongoing discussions with distributors to facilitate future orders [54][55] Question: What is the revenue outlook for Q2? - Management expressed caution regarding revenue expectations for Q2, noting that April was heavily impacted by shutdowns, but there is optimism for recovery as restrictions ease [60][61] Question: What is the launch strategy for the acne treatment in 2021? - Management emphasized a measured launch strategy focused on building clinical evidence and ensuring robust outcomes, with a target for a successful rollout [66][68]