Cynosure, Inc. Q1 2009 Earnings Call Transcript

Cynosure, Inc. (CYNO)

Q1 2009 Earnings Call

May 5, 2009 9:00 am ET

Executives

Scott Solomon – Vice President, Sharon Merrill Associates

Michael R. Davin – Chairman, President, and Chief Executive Officer

Timothy W. Baker – Executive Vice President, Chief Financial Officer and Treasurer

Analysts

Anthony Vendetti – Maxim Group

Andrew Schopick – Nutmeg Securities

William Dezellem – Tieton Capital Management

Sasha Kostadinov – Shaker Investments

Presentation

Operator

Good day everyone and welcome to Cynosure’s first quarter 2009 conference call. Today's call is being recorded. There will be an opportunity for questions and comments after the prepared remarks. The question-and-answer session will be conducted electronically. (Operator Instructions). At this time for opening remarks and introductions, I would like to turn the call over to Mr. Scott Solomon, Vice President of Sharon Merrill Associates. Please, go ahead, sir.

Scott Solomon

Thank you, Jacky. Good morning everyone. With me on today's call are Cynosure President and Chief Executive Officer, Michael Davin and Executive Vice President and Chief Financial Officer, Tim Baker. We will begin today's call with Mike providing highlights of Cynosure's first quarter 2009 results and a business outlook. Tim will take you through the financials, after which management will take your questions.

Before we begin, please note that various remarks management makes on this conference call about future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties and actual results may differ materially from those indicated by such forward-looking statements and the results of various important factors including those discussed in Cynosure's Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2008 and subsequent reports filed with the SEC. These filings can be accessed on the Investor Relations section of the company's website, www.cynosure.com.

In addition, any forward-looking statements represent the company's views as of today May 5, 2009. These statements should not be relied upon as representing the company's views as of any subsequent date. While Cynosure may elect to update forward-looking statements at some point in the future. The company specifically disclaims any obligation to do so. With that I will turn the call over to Mike Davin.

Michael R. Davin

Thank you, Scott. Good morning everyone and thank you for joining us for our Q1 conference call. Clearly, the continued effects of the economic recession on the aesthetic laser industry were pronounced in the first quarter of 2009. Consistent with the guidance we provided to you in mid-April, first quarter revenues were down 60% quarter-over-quarter to $14.8 million. On the bottom-line we reported a net loss of $0.32 per basic share.

We attribute our performance primarily to two factors. The continued restrictive credit environment that we believe has made it difficult for many aesthetic practitioners to obtain financing. And decisions by physicians to defer their capital equipment spending until they see evidence of a sustained economic recovery. We felt the impact of the economic climate across all geographies and products. North America as our largest sales region was hit the hardest, accounting for 57% of laser revenue in Q1 versus 72% in the same period of 2008. Despite the hurdles facing our economy and our industry, we see a glimmer of light as we look ahead in 2009.

As we mentioned in our pre-announcement and again in this morning's news release, we saw pockets of order strength in March as our order volume picked up slightly. Although, in this environment it is difficult to know whether the order flow will be sustained. Gross margin was negatively affected year-over-year by a significantly lower revenue as well as a shift in geographic mix falling to 60.9% from 66.3% for the first quarter of 2009. But in Q1, our gross margin remained flat from Q4 2008 mainly attributed to our North American ASPs, which held firm from the fourth quarter of 2008.

Given the lower revenue and continued economic uncertainty, in Q1 we moved aggressively to further reduce our 2009 operating expenses, including the elimination of an additional 25 positions. We also continue to cut our sales and marketing budget, eliminate certain non-core clinical development expenses and impose other expense reduction measures. On a year-over-year basis, these additional actions are designed to save between $14 million and $18 million in annualized operating expenses in 2009 up from the estimate of $8 million to $10 million that we announced in January. These steps are important to our goal of managing the business back toward profitability for the long term.

At the same time, we are committed to taking steps necessary to further position the company for success and to sustain our leadership position in the industry. As I have noted in the past, the growth we experienced until the fourth quarter of last year was due to our outstanding direct sales force, comprehensive product portfolio, and great technology assets. We continue to strengthen our competitive advantage not by just selling laser systems, but by providing physicians and other practitioners with a complete solution. We continue to earn our reputation as an industry leader by engaging with our customers in a partnership design to help them broaden and deepen their patient base and therefore help to optimize their business opportunity.

In the first quarter, we continued our track record of innovation with the introduction of three new products at the American Academy of Dermatology. The Elite MPX workstation and two new intelligent delivery systems for use with our Smartlipo MPX laser lipolysis workstation, the ThermaView, thermal camera system and SmartSense with ThermaGuide.

Elite MPX is a versatile multi-energy platform equipped with three energy sources; Alexandrite, Nd:YAG and xenon pulse light for comprehensive vascular treatment, hair removal, and skin rejuvenation. The workstation offers several unique benefits. first it incorporates our multiplex technology, which enables the user to fire two wavelengths sequentially for greater efficacy than a single wavelength system. The system also features a built-in Zimmer Skin Cooling System exclusive to Cynosure. In addition, the workstation comes with eight different spot sizes, including an 18-millimeter spot size capable of treating 44% more area per pulse than standard spot sizes.

We expect to begin shipping revenue units in the second quarter of this year. Both ThermaGuide and ThermaView expand the intelligent energy delivery capabilities of our Smartlipo MPX workstation. ThermaView is a thermal camera system that provides a heat signature map of temperatures within the treatment area to provide a homogeneous delivery of thermal energy.

ThermaGuide is the world's first subcutaneous temperature control device for laser lipolysis. ThermaGuide is unique for several reasons. First, it allows physicians to measure the temperature under the skin in real time. Second, it enables physicians to control the delivery of energy by setting temperature thresholds. Just as SmartSense will automatically stop the Smartlipo laser from firing when the motion of the laser handpiece stops, ThermaGuide will do the same when a targeted temperature is reached.

ThermaGuide is already being put through its phases by a number of industry luminaries. They have been overwhelmingly positive in their feedback about the device, which not only expands our technology advantage, but also opens a host of new opportunities for product development. We are the only company that offers intelligent delivery systems for laser lipolysis. We believe these systems not only improve treatment outcomes, but add an additional layer of security that is extremely valuable to both the practitioner and the patient.

On our Q4 call, I mentioned that we expected a number of clinical research papers to be presented on Smartlipo. I’m pleased to report that data from two favorable post-marketing studies of Smartlipo MPX represented at the recent 2009 American Society for Laser Medicine and Surgery Annual Conference. These studies were conducted by Dr. Barry DiBernardo and Dr. Bruce Katz highly respected physicians in the fields of plastic surgery and dermatologic medicine. The research demonstrates the statistical significance that Smartlipo MPX tightens skin and shrinks skin tissue more efficaciously than skin treated with liposuction alone.

The data is strong scientific validation of the workstation's unique power to both liquify and remove unwanted fat and tighten skin. Our laser lipolysis technology has also been the subject of seven other peer-reviewed scientific research papers. In the coming months, Smartlipo is scheduled to be included in a number of additional peer-reviewed papers as well as additional white papers. In summary, while the economic climate continued to prove challenging in Q1, we continue to have confidence in the long-term prospects for our industry.

We expect the recent actions we've taken to generate between $14 million and $18 million in savings to the company in 2009, compared to 2008 will help us to maintain our strong financial position and enable us to capitalize on opportunities when the market recovers. At the same time, we remain committed to what we believe are the keys to our long-term success, powerful new workstation such as Elite MPX, which advance our leadership in the core market with strong growth potential, intelligent delivery systems like ThermaView and ThermaGuide, which give us an unmatched edge in terms of safety to patients and physicians. And an experienced global sales force that has made us one of the industry's premiere company.

Now, let me turn the call over to Tim for his financial review.

Timothy W. Baker

Thanks Mike and thanks everyone for joining us this morning. As Mike noted, our Q1 revenue of $14.8 million represented a 60% decline from the same period in 2008, reflecting the impact of the recession on the aesthetic laser industry and us.

On the bottom line, on a GAAP basis, our net loss was $4 million or $0.32 per basic share for the first quarter versus GAAP net income of $4.9 million or $0.38 per diluted share for Q1 of 2008. On a non-GAAP basis, excluding stock-based compensation expense of $1.8 million and using an effective tax rate of 36%, the net loss for the first quarter was $3.3 million or $0.26 per basic share. This compares with non-GAAP net income of $5.7 million or $0.45 per diluted share in the first quarter of 2008, which excluded approximately $1.7 million in stock-based compensation and also used an effective tax rate of 36%.

We used approximately $12.7 million weighted average shares outstanding in computing basic earnings per share for the first quarter of 2009. Reflecting the lower sales volume, laser sales accounted for approximately 73% of our total revenue in the first quarter of 2009, down from 89% for the same period in 2008. Laser revenue decreased 67% in Q1 of '09 to $10.9 million from $32.8 million for the comparable period in 2008. North American laser revenue fell 73%, while international laser revenue was up 50% for the first quarter of 2008. Looking at our laser revenue by region, as Mike mentioned, North America accounted for 57% of total laser revenue in the first quarter of 2009 down from 72% in the same period of 2008.

International contribution was 43% of total laser revenue in the first quarter of '09, compared with 28% in the same period in 2008. Gross profit for the first quarter of '09 was 60.9% of total revenues, compared with 66.3% for the first quarter of 2008. As in Q4, the decrease in gross margin as compared to the first quarter of '08 reflected pricing pressure primarily in North America and a lower North American sales volume as a percentage of total revenue. But as Mike mentioned, in Q1 our gross margin remained flat from Q4 of 2008 mainly attributable to our North American ASPs, which held firm from the fourth quarter of '08.

Turning to operating expenses. Total operating expenses were down 13% in Q1 to $16.2 million from $18.5 million for the first quarter of 2008, reflecting the impact of the cost reduction initiatives we initiated at the end of 2008. However, the lower top line in the ’09 quarter again had the effect of skewing expenses higher as a percentage of revenue. Q1 selling and marketing expenses decreased $2.7 million to $10.5 million from $13.2 million a year earlier, but increased as a percentage of revenue to 71% from 36%.

As we discussed in our April pre-announcement, in Q1 we eliminated a total of 25 positions. This number included 10 sales representatives in North America. Offsetting the headcount reduction, we opened a direct sales office in Korea in February, which brought the total worldwide headcount to 271 at the end of the quarter from 285 at year-end. First quarter research and development expenses were $1.7 million or approximately 12% of revenue for the quarter, compared with $1.8 million or 5% of revenue for the first quarter of 2008.

General and administrative expenses for the first quarter were $3.9 million or 26% of revenue, compared with $3.5 million or 9.5% of revenue in Q1 of 2008. The net increase in G&A expenses reflected increased legal expenses partially offset by cost savings initiatives. Approximately, $800,000 or 21% of total G&A expenses for the quarter are for costs associated with our patent infringement litigation against CoolTouch.

The case is progressing in U.S. District Court in Massachusetts. In the first quarter, we announced a receipt of a positive set of rulings in the pre-trial Markman hearing. The purpose of the Markman hearing is for the judge to determine the meaning and scope of the patent claims we assert are being infringed by CoolTouch, which is filed for reexamination of the laser lipolysis patented issue. To-date, since January 2008, we have spent approximately 1.5 million of legal expenses related to this litigation and anticipate spending around $350,000 in the current quarter.

The loss from operations in the first quarter of 2009 were $7.1 million, compared with income from operations of $5.9 million or 16% of revenue for Q1 of 2008. Operating results for the first quarter of 2009 included $1.8 million in stock compensation expense, compared with $1.7 million in stock compensation expense for Q1 of 2008. On a non-GAAP basis, excluding the effect of stock-based compensation, our loss from operations was $5.3 million in the first quarter of '09, compared with non-GAAP income from operations of $7.6 million in Q1 of '08. For more information on our non-GAAP financial measures, please see the table for reconciliation of GAAP results to non-GAAP measures included at the end of our earnings release. The table has more details of the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

Turning to the balance sheet. Our cash, cash equivalents, marketable securities, long-term investments and related instruments were approximately $89 million at the end of the quarter, compared with the year-end balance of $95.5 million. The decrease in the first quarter largely reflects a number of cash expenditures paid in the first quarter related to 2008 expenses. These include payment for inventory purchased in 2008, payment of year-end accruals as well as the funding of our new direct office in Korea. We do not expect similar payments in Q2 of 2009. As a result of these payments, net cash used in operating activities was $4.5 million for the first quarter.

Our goal is to be cash flow break-even for 2009. We continue to have no other long-term debt other than capitalized lease obligations. Reflecting a higher percentage of sales from the international market, our DSOs at the end of the quarter were 108 days, as compared to 91 at 12/31/08. Our DSOs for laser sales in North America at March 31 improved to 50 days down from 59 days in Q4. With that we are ready to open the call to your questions. Operator?

Question-and-Answer-Session

Operator

Thank you. (Operator Instructions). Our first question is coming from Anthony Vendetti of the Maxim Group.

Anthony Vendetti – Maxim Group

Thanks. Good morning guys.

Michael R. Davin

Good morning, Anthony.

Timothy W. Baker

Good morning, Anthony.

Anthony Vendetti – Maxim Group

You had mentioned the sales force you had in addition to total reduction of 25 that included 10 sales people. Can you remind us where you are at in terms of the number of North American sales people?

Michael R. Davin

Yeah. Our total distribution in North America sits at 44 now, Anthony. Of that 44, 5 are management and we've 39 Territory Managers.

Anthony Vendetti – Maxim Group

Okay. And you talked about increasing the cost savings at an annual run rate of $14 million to $18 million that was up, I missed where that was up from?

Timothy W. Baker

That was up from 2008 actually.

Anthony Vendetti – Maxim Group

Okay, okay. And in terms of what you see for the rest of the year. I know Mike you had said, you see a glimmer of hope, I was wondering if you can quantify that in any way, what gives you that glimmer of hope, is it March and April kind of activity or anything in specific?

Michael R. Davin

As I mentioned in March, we did see an increase in the uptake of orders, the credit seemed a little more available although, I will tell you the credit is still a major issue, it is the most significant issue we're having especially in North America, where we have doctors that had good to excellent credit scores not able to get leases for technology. We had a number of orders that came in that we could not book because the doctors could not get credit. April, I can tell you was better than January, but as we mentioned January and February were very concerning months and therefore we are happy to see March show signs of improvement and so we are hopeful that as we even saw yesterday with the stock market behaving a little bit better and maybe some confidence being restored. From the consumer that were going to start to see some momentum, but right now we are still very concerned about the lack of credit availability to our customers.

Anthony Vendetti – Maxim Group

Okay. And can you talk a little bit more about the Smartlipo MPX, now that you have these new additions, the ThermaView and ThermaGuide, how much are they sold for as a package with the Smartlipo MPX or separately?

Michael R. Davin

Yeah, but first, I think as we mentioned in past calls Anthony, as we have accelerated the platform in terms of increasing power and multiple wavelengths, as, the MPX goes as high as 32 watts of total power right now, with 20 watts of Nd:YAG and 12 watts of 1320 with multiplex you can blend those for a total power of 32 watts. As we were introducing higher powers and looking at the device clinically we knew that we were able to increase the temperature under the skin more rapidly and we needed to control the safety side of that, because if we get, if temperature spikes too quickly we can actually create necrosis of tissue, we are burning. So, the introduction of both ThermaGuide and ThermaView; ThermaGuide gives the doctor real-time readings of temperature under the skin, which is very important, not only to optimize safety, but also to optimize the efficacy. Then ThermaView gives them temperature exteriorly. So, ThermaView sells for about $50,000 and ThermaGuide sells for $12,500, added on to the price of the Smartlipo MPX and it depends on how the physician buys it, whether it’s a fully loaded system with these delivery systems or whether they buy it individually and buy maybe just ThermaView or ThermaGuide. The key though is as I mentioned in the script, the physicians, the luminaries that will evaluate the technology that have been using Smartlipo for over two years now are extremely impressed with the ability to be able to monitor the temperature real-time. So, they can optimize number one, safety and number two, the clinical outcome as we’ve introduced these higher-powered multi-wavelength systems.

Anthony Vendetti – Maxim Group

Okay. And any plans for use of the cash I know you have some cash in long-term investments. I guess it’s a little bit greater than 12-months in terms of duration, but, a combination obviously of your cash and equivalents and your long-term cash, you obviously have a significant amount of cash at your disposal, any plans for it at this point, whether share buybacks, tuck-in acquisitions?

Michael R. Davin

Anthony, I think as I mentioned in past calls, I mean we are pleased to have a strong cash position that we are evaluating potential activities whether they're acquisition related or also alignments, we are also very focused on driving our own internal research and development, we are very excited about some projects that we are working on that should lend to some very exciting new technology introduced in the market in the next one to two years, and we are evaluating pretty much everything you mentioned in terms of stock the buyback. At this particular time, we do not have a plan in place, that does not mean that we won't in the future.

Anthony Vendetti – Maxim Group

Okay, great. Thanks a lot.

Operator

Thank you. Our next question is coming from Andy Schopick of Nutmeg Securities.

Andrew Schopick – Nutmeg Securities

Thank you. Good morning. I wonder if you can repeat something for me Tim, the patent litigation cost of G&A in 1Q, I missed that number?

Timothy W. Baker

It's about 800,000 Andy.

Andrew Schopick – Nutmeg Securities

And you expect it to be about 350,000 in the current quarter?

Timothy W. Baker

That's correct.

Andrew Schopick – Nutmeg Securities

Okay, thanks. Mike, I'm probably more alarmed right now by the very aggressive actions I see the management taking in response to these market conditions and I'm to the actual marketing conditions themselves, I think it became very clear, that we were headed into a deep recession, and you were probably the last ones to really see it reflected in your results within the industry, but you're reacting very aggressively now in terms of cost cutting and I wonder, to what extent this suggests that you expect this to be a fairly prolonged downturn in the aesthetic laser market?

Michael R. Davin

It's a great question, I wish I had the crystal ball to give you the answer. I mean, as you know, we were aggressive in growing the company, when we took it from 40 million as our first year as a public company to a 140 million exiting last year, when we probably grew our infrastructure from a 120 employees up to as high as almost 340.

Andrew Schopick – Nutmeg Securities

Yeah.

Michael R. Davin

And then we had to take those similar types of measures, we have tried to be as strategic as possible in a very rapid moving downturn economy and I think many executive teams have been in face, whether it's our industry or other industries with the same challenges of, trying to be as thorough as possible, but knowing that this thing had moved so fast in terms of when we saw, Andy when we saw October, November, December, and certainly January and February even being worse, we just felt, so we didn't know where the bottom was going to be, we still don't know, and we do believe we have got the company in a position now, where we can still hit our core objectives and that's continue to innovate technologies.

I mentioned we rolled up three new pieces of technology last quarter to continue to keep a strong distribution in North America, one-time our North American distribution was 80, we are down to 44, we believe we are at a level right now where it can be successful, but also began to take off when things do get better, which we are not clear when that will be. And we are continuing to internally keep our key management team intact. We have not lost one single member of our management team and as you know, that’s extremely important when things turnaround, but are we done, we don’t know, we’re somewhat pleased at least what we saw in March and certainly the dynamics of the overall economy seem to be maybe as President Obama says, glimmers of positive things that have been happening, although we’re not sure that will sustain. So, we’re watching it very closely and we’re trying to do the best we can to keep the company still very strong when things do turnaround.

Andrew Schopick – Nutmeg Securities

Okay. One last one to come back to Tim. Did I hear you correctly that the goal is to remain cash flow neutral in 2009 similar to what Palomar has expressed the other day?

Timothy W. Baker

That’s correct Andy, yes, yes. Great.

Andrew Schopick – Nutmeg Securities

And the cash flow used in operations was 4.5 million in?

Timothy W. Baker

That's correct.

Andrew Schopick – Nutmeg Securities

Okay. What were you going to say Tim?

Timothy W. Baker

I would just say just to add on to Mike’s comment, I mean I think the cuts that we've made Andy are really focusing first on those variable cost components, which really drove up and down with the volume and I think, as Mike said the key now is keeping the core competencies and keeping the core infrastructure, which will enable us to take advantage of the economy when it comes back. So, really the cuts were rapid, we really focused on the variable cost more than fixed cost.

Andrew Schopick – Nutmeg Securities

Thank you.

Michael R. Davin

Thanks Andy.

Operator

Thank you. Our next question is coming from Bill Dezellem of Tieton Capital.

William Dezellem – Tieton Capital Management

Thank you. It's Tieton Capital Management. The first question is relative to the expenses that you took out in the first quarter, did that lead to any special costs or restructuring any one-time items?

Timothy W. Baker

Bill, hi it's Tim. No, there were no non-recurring one-time charges in Q1.

William Dezellem – Tieton Capital Management

Thank you. And then secondarily I believe that earlier this year we saw that Syneron was indicating that they were going to be moving more to an annuity-based model, number one did we interpret that correctly? And secondarily if so how do you view that potentially impacting the industry or somehow changing the scope of how the medical community looks at the aesthetic laser companies?

Michael R. Davin

Yeah, hi Bill it's Michael. I'm not completely familiar with Syneron's approach. I do know that we have heard they did some type of a rental program where physicians could rent-to-buy the technology. We don't believe that model, first of all, as you know, we are capital equipment companies and 80% of our revenue comes from selling capital equipment, certainly as you can imagine I believe Tim could comment on this, but recording revenue with a model like that, we have to spread that out over the term, so if you're renting or leasing the technology to the doctor directly and we need to look at that, you have to, if you take a box a $100,000 box over 36 months, you kind of record the revenue 1.36 at a time. So, certainly that's not going to bode well for driving revenue levels that you need to drive in this particular business. And also we've learnt that most doctors do not like to rent technology, they'd prefer to own it, and as I mentioned our issue really is not with the doctors wanting to buy the technology, they're not coming to say, and I like the rent, they would like to buy the technology they just can't get the credit to buy the technology. But I am not intimate there with the Syneron model.

William Dezellem – Tieton Capital Management

Now, when we think of the rent-to-own model in the consumer space, furniture for example that, that's truly the low-end customer that's going to that sort of a store. Is that how you would view the type of docs that would be interested in the rent-to-own those are just basically on the cusp and trying to survive and maybe squeak out little additional revenue?

Michael R. Davin

Potentially that probably is, it could be the model, as I mentioned, with the physicians that we deal, if you look at the plastic surgeons, dermatologists and the core group of doctors we deal with, historically they’ve never wanted to rent the technology, they would rather own it, they control it, they are able to control their revenues, keep the majority of that inside and it rather just makes the lease payment to buy it out right. Historically, a rental model has not worked in our industry.

William Dezellem – Tieton Capital Management

Thank you both.

Michael R. Davin

You’re welcome.

Timothy W. Baker

Thanks.

Operator

Thank you. (Operator Instructions). Our next question is coming from Sasha Kostadinov of Shaker Investments.

Sasha Kostadinov – Shaker Investments

Hi guys. Good morning.

Michael R. Davin

Good morning, Sasha.

Sasha Kostadinov – Shaker Investments

Thanks. I calculate your break-even level to be about $25 million on revenue now is that an accurate statement?

Timothy W. Baker

Sasha, we haven't given that number, I think it's, right now it is really going to depend on the volume and the cost that are there. I mean we do feel that we could still make additional cuts in cost if we needed to and was the decision we had made. So, right now it's still a moving target in terms of what that break-even number would be.

Sasha Kostadinov – Shaker Investments

Okay. Can you talk about a little more finer term, you mentioned that the sales improved in March and also April was better than January and February. I'm assuming from that comments that, April sales were not as good as March sales. Can you talk about what the dynamic there would be?

Michael R. Davin

Well, historically the beginning of the quarter is not as strong as the way we had it, it's, so we do find in this quarter, which historically is a good quarter, the second quarter it's probably the second best to Q4 in our industry and keep in mind Q1 is always the worst quarter in our industry, it usually is heavily loaded to the back end of the quarter. So, we usually expect a very strong end of May and June. In April, typical of any first month of the quarter would start off a little bit slower as momentum picks up from reps coming off of the end of the prior quarter and really driving their activity to fruition more in that second and third month of the quarter.

Sasha Kostadinov – Shaker Investments

Okay. And that was good commentary you gave on the reasons that your customers are giving for the lack of willingness to buy and I am assuming that given nor you gave then the credit is the more restrictive item right now rather than the reluctance to invest, if credit were to, do your clients say that if credit were to ease for them that they would be more willing to spend?

Michael R. Davin

Absolutely. And as I mentioned, at the end of month, end of month of March and we saw this in April as well that doctors had gone through the process to evaluate technology, had signed sales orders to buy technology and then the deal stopped there because they could not or we could not even supply to them a credit resource. So, we do believe when the credit loosens up, and 95% of our revenue comes from physicians, we don't do much in terms of non-physician business that we will see that transcend a very positive outcome for our ability to drive stronger revenues.

Sasha Kostadinov – Shaker Investments

Okay. Thanks.

Michael R. Davin

Thank you.

Operator

Thank you. We have a follow-up question coming from Bill Dezellem of Tieton Capital.

William Dezellem – Tieton Capital Management

Thank you. I'd actually like to follow-up on that last comment and relative to the docs that signed orders, but were not able to find credit, would you please quantify the dollar amount of revenues that that would have translated into in the first quarter?

Michael R. Davin

Yeah Bill for a lot of reasons, I wouldn’t comment on that, all I can tell you though is that we certainly had a list of physicians that were ready to go in-house, but were not able to get credit.

William Dezellem – Tieton Capital Management

And then secondarily AAD came up in terms of introducing new products, but I don’t think that you shared with us just your perspective of what the docs were saying at AAD and so would you provide a broad brush overview of how that trade show went for you please?

Michael R. Davin

Sure. Actually, we had two, our two most significant trade shows have been held through the end of April, AAD was in March in San Francisco, and ASLMS was in Washington D.C. in April. These are two very important shows for us and really kind of give us somewhat of an indication of what the year ahead looks like. The AAD was well attended and we had excellent booth presence, a great location. We launched these three new products, but I would tell you, there is a lot of tire ticking, there were people coming to the booth they were very interested, but once again the comments were similar to what we said in the scripts where they wanted to see the economy get a little more stable. They wanted to see the stock market react a little better, even though they had patients coming in and their activity was decent, they did see a drop-off in the demand for procedures. And they were showing interest in understanding the new technology we have introduced and wanting to potentially bring them into their practice, but really were more of a wait and see, in terms of the AAD, that's kind of a wait and see approach to making a move to buying any additional technology in this current environment.

ASLMS was also a very good meeting for us, it was decently attended a little bit down over the prior year and that's more of a specialty meeting, a society meeting, it really focuses on light-based technology. Once again the products, we have a lot of doctors come up to us, they're very excited about Elite MPX, ThermaView, and ThermaGuide as well as Smartlipo MPX, but also similar concerns were expressed, keep in mind these meetings were only about three weeks apart from each other, that they were concerned about the environment right now as it pertains to their ability to drive revenues, but we are also very excited about the technology, were lead that we generated, but certainly they're moving much slower than they normally would have done in the past based on the economic environment.

William Dezellem – Tieton Capital Management

Thank you again.

Michael R. Davin

You're welcome Bill.

Operator

Thank you. There are no further questions at this time I would like to hand the floor back over to Mr. Davin for any closing comments.

Michael R. Davin

Thank you, operator. Thank you everyone and we look forward to keeping you updated on our progress. Have a nice day.

Operator

And that concludes our conference call. Thank you for joining us today.

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