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Cutera, Inc. (NASDAQ:CUTR)

Q1 2010 Earnings Call Transcript

May 3, 2010 5:00 pm ET

Executives

John Mills – IR, Integrated Corporate Relations

Kevin Connors – President and CEO

Ron Santilli – EVP and CFO

Analysts

Anup Mehta – Canaccord Adams

Phil Nalbone – Wedbush

Anthony Vendetti – Maxim Group

Dalton Chandler – Needham & Company

Larry Haimovitch – HMTC

Operator

Greetings and welcome to the Cutera Incorporated first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Mills of Integrated Corporate Relations. Thank you. Mr. Mills, you may begin.

John Mills

Thank you. By now, everyone should have access to the first quarter 2010 earnings release, which went out today at approximately 4:00 PM Eastern Time. The release is available on the Investor Relations portion of Cutera’s website at cutera.com and with its Form 8-K filed today with the SEC and available on its website at sec.gov.

Before we begin, Cutera would like to remind everyone that these prepared remarks contain forward-looking statements, including statements concerning domestic and international growth opportunities and strategies, future spending, expense management and execution on various aspects of our operations and business, expectations for increasing revenue, generating cash and profitability, the development and commercialization of existing and planned products, and potential revenue growth from recently announced strategic alliances. Also, management may make additional forward-looking statements in response to your questions.

These forward-looking statements do not guarantee future performance and therefore you should not rely on them in making an investment decision without considering the risks associated with such statements. Cutera also cautions you to not place undue reliance on forward-looking statements, which speak only as of the date they were made. Cutera undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date they were made or to reflect the occurrence of unanticipated events.

For a complete list of risk factors that could cause Cutera’s actual results to differ materially from the forward-looking statements, please refer to the section entitled Risk Factors in our most recently filed 10-Q, filed today on May 3, 2010, with the Securities and Exchange Commission.

With that, I will turn the call over to the company’s President and Chief Executive Officer, Mr. Kevin Connors.

Kevin Connors

Thank you, John. Good afternoon, everyone, and thanks for joining us today to discuss Cutera’s results for the first quarter ended March 31, 2010. On today's call, I will provide an overview of our results. Then Ron Santilli, our CFO, will provide additional details on our operating and financial results. Finally, I will provide some closing comments and open the call to your questions.

Our revenue for the first quarter of 2010 was $13.7 million or 5% lower than the $14.4 million reported in the first quarter of 2009. We are pleased with our international growth rate of 14% when compared to the first quarter of 2009. This growth was primarily sourced from our direct markets in Canada and Japan, as well as from many countries where we are represented by distributors. Even though several reports indicate that our customers continued to experience strong demand. Patient demand was from our products.

The US market continues to be challenging as many of our prospective customers remain reluctant to purchase capital equipment. However, we are encouraged by the modest 5% revenue growth in the US during the six months ended March 31, 2010 compared to the preceding six months period ended September 30, 2009. We are continuing to closely monitor our US performance and remain focused on key initiatives to increase revenue. We will discuss some of these initiatives in my closing remarks.

International business accounted for 67% of our total revenue in the first quarter 2010. We are pleased with the results that the international infrastructure is producing, which is playing a more significant role in our performance during these challenging times in the US aesthetic industry. The international segment of our business has weathered the economic store fairly well because of the many years of continued investments and their historical and current focus on core physicians who are less impacted than the non-core physicians during the economic downturn.

As we have discussed on previous calls, we are continuing to target the core market segments of dermatologists and plastic surgeons, as well as other establish medical officers, because we believe they offer the best growth opportunities in the current market environment. During the first quarter of 2010, we sourced 25% of our US orders from core physicians. The non-core physician achievement was higher than normal due to a large national account order from a non-core business.

Turning to the business development matters, during the quarter, we made progress in the implementation of our strategic alliances with Obagi Medical Products and Sound Surgical Technologies. We trained our applicable sales and service teams, enhanced our marketing plans, invested in inventories, and established our infrastructure to integrate these exciting new products through the international side of our organization.

In February, we commenced shipments of Obagi Medical's physician dispensed cosmeceutical products in Japan and are planning to launch the Vaser ultra-sound assisted liposuction device in the second quarter of 2010. We believe these alliances will leverage our distribution network, enhance our product offering, and increase revenue in selected international markets.

Additionally, we have added a few new sales and marketing functions during the first four months in 2010 to increase our focus on our revenue growth. Those new positions include, one, business development to focus on our acquisition and strategic alliance strategy; two, clinical development to focus on clinical studies on existing products to increase their indications for use; and three, teller [ph] sales group to focus on increasing our penetration and strong relationships with our installed base. We believe these additional functions will contribute to our revenue growth in the future and leverage our overall business model.

Turning to research and development, we are continuing to develop innovative solutions and expand the clinical understanding and applications of our current products. In addition, we are actively pursuing a number of other development programs and look forward to announcing new application offerings in the upcoming quarters.

During the quarter, we added Ken Witte to head up our clinical research department. Ken comes with extensive experience in engineering and scientific research on a variety of laser applications. He has a proven track record and has already begun to make significant contributions to our team. We believe that strategic ongoing investments in product research and development are clinical to our future success. In line with that principle, we are continuing to invest in research development.

Now I’d like to turn the call over to Ron to discuss our financials in more detail.

Ron Santilli

Thanks, Kevin. And thanks to all of you for joining us today on our first quarter 2010 conference call. First quarter 2010 revenue declined by 5% to $13.7 million compared to the first quarter of 2009. Net loss for the first quarter was $2 million or $0.15 per diluted share. Product revenue decreased by 3% in the first quarter of 2010 when compared to the first quarter of 2009. We experienced a higher than normal level of distributed business during the quarter and had a large national account, both had a significant impact on our revenue during the quarter.

Upgrade revenue for the first quarter of 2010 decreased 31% when compared to the first quarter of 2009. The unit volume of upgrades sold in the first quarter of 2010 was at a similar level to the first quarter of 2009. They were at lower ASPs due primarily to fewer purchases of our higher priced Pearl Fractional upgrades.

Service revenue for the first quarter of 2010 compared to the first quarter of 2009 was relatively flat at approximately $3.3 million. This revenue has remained flat over the past several quarters, due primarily to fewer customers purchasing extended service contracts in response to the current economic environment and our strong product reliability.

Titan annuity revenue for the first quarter of 2010 compared to the first quarter of 2009 was relatively flat at approximately $1.3 million. This revenue has remained flat over the past several quarters. We believe this is primarily due to customers using fewer shots per procedure, which is allowing them to perform more procedures per handpiece before requiring a replacement.

Starting from the first quarter of 2010, we are reporting a new revenue category called fillers and cosmeceuticals. This category primarily includes revenue from the distribution of Obagi’s cosmeceutical products and BioForm’s Radiesse filler in Japan. We expect this revenue category to grow, as we further develop the infrastructure, marketing and selling efforts for these products, a significant percentage of our revenue source from existing customers.

During the first quarter of 2010, almost half of our revenue was derived from sale of service upgrades, Titan refills, filler and cosmeceutical products. We remain committed to strong customer satisfaction, and we will continue to realize revenue growth from our annuity revenue category once the economy becomes more stable.

I will now address our operating performance. Our gross margin was 58% in the first quarter of 2010 compared to 59% in the first quarter of 2009. We realized gross margin improvements from our 2009 restructuring efforts that were partially offset by an unusually higher level of distributor business, which yields lower gross margins in our direct business.

In addition, we had a non-recurring charge recorded in the first quarter of 2010 for the voluntary replacement of certain components in our Titan Excel handpieces. Backing out the non-recurring Titan Excel handpiece charge, our gross margin would have been approximately 60%.

Sales and marketing expenses were $6.4 million, or 46% of revenue, for the first quarter of 2010 compared to $7.0 million, or 49% of revenue, for the first quarter of 2009. This expense level represents a decrease of approximately $642,000 compared to the first quarter of 2009 and was due primarily to our 2009 restructuring efforts.

On a sequential basis, our sales and marketing expenses increased $261,000 from the fourth quarter of 2009, due primarily to seasonal expenses associated with our largest trade show of the year and our annual sales meeting. As Kevin mentioned in his opening remarks, we have added a few new sales and marketing functions in 2010 to focus on increasing our revenue and leveraging our overall business model.

For modeling purposes, if you assume similar revenues in Q1 2010, we would expect sales and marketing expenses to be approximately $6 million. For any increase or decrease in revenue, you would need to adjust the sales and marketing expenses accordingly.

Research and development expenses decreased by approximately $300,000 from $1.7 million in the first quarter of 2009 to $1.4 million in the first quarter of 2010. This expense reduction was due primarily to a high level of material spending for our True Sculpt product during the first quarter of 2009 that was not replicated in the first quarter of 2010.

General and administrative expenses declined by approximately $300,000 from $2.5 million for the first quarter of 2009 to $2.2 million in the first quarter of 2010. This decrease was primarily attributable to our restructuring efforts implemented in 2009.

Interest and other income net was $166,000 for the first quarter of 2010 compared to $599,000 in the first quarter of 2009. The lower income is due primarily to extremely low yield in our investment portfolio and some foreign exchange losses. The low yields on our investment portfolio reflect our focus on capital preservation during the recent uncertain financial markets. We generally have invested in lower risk government agency and municipal bonds.

In the first quarter of 2010, even though we had loss before taxes, we reported a tax expense of $47,000. This compares to an income tax benefit for the first quarter of 2009 of $1.2 million. Even though we had our loss before tax in the first quarter of 2010, we were not able to tax effect our loss because we have a valuation allowance against our US deferred tax assets. For modeling purposes, we suggest using an effective income tax expense of $75,000 per quarter until we have fully utilized our US valuation allowance.

Turning to the balance sheet, our financial position remains strong. As of March 31, 2010, we had $103.4 million in cash, marketable securities, and long-term investments with no debt. This represents almost $8 per outstanding share. During the first quarter, our operations consumed $2.7 million of cash. Of this amount, approximately $800,000 related to investment in inventories for our fillers and cosmeceutical fitness.

Also historically, we consumed cash in our seasonally slower first quarter each year. As a reminder, we consumed $3 million of cash in the first quarter of 2009, yet still generated a modest amount of cash for the full year of 2009.

Net accounts receivable at the end of the fourth quarter of 2009 were $3.5 million, and the DSOs were 23 days. Our DSOs continue to remain strong even during these challenging economic times. Inventories increased by approximately $500,000, which is comprised of the $800,000 related to investments in inventories for our fillers and cosmeceuticals business, offset by a $300,000 reduction in Cutera product inventory from December 31, 2009 to March 31, 2010. We are pleased with this management of this important asset.

Now that I’ve concluded my overview of Cutera’s financial performance, I’ll turn the call back to Kevin.

Kevin Connors

Thanks, Ron. During the next few quarters, we remain focused on the following key initiatives. One, improving sales productivity through increased reference selling and targeted marketing initiatives to core physicians in established medical offices. Two, continue our efforts on multiple R&D projects with an expectation to enter these new applications in the future. Three, evaluating other complementary strategic alliances to further enhance our product offering and leverage our distribution channels.

While the near-term prospects for our industry are difficult to predict due to an economic uncertainty for the industry, we believe that our worldwide distribution network, strong balance sheet with over $103 million in cash and investments with no debt, broad portfolio of products, and various research and development products underway, offer continuing long-term growth opportunities for our company.

Now, I’d like to open the call for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question is from the line of Anup Mehta with Canaccord Adams. Please go ahead.

Anup Mehta – Canaccord Adams

Can you break out the revenues by distributor versus direct, internationally?

Ron Santilli

We don’t typically break it down by the individual distributor, but we did have a much higher percentage of distributor business than we have had historically.

Anup Mehta – Canaccord Adams

Was that out of a specific geographic?

Ron Santilli

It actually was in multiple areas anywhere from the Middle East, Korea, Brazil, a couple that come to mind. But many of our distributor countries contributed well.

Anup Mehta – Canaccord Adams

And how much of a difference was it relative to previous quarters? I mean, was it staggeringly different or are you perhaps going to – you are going direct in certain of those geographies?

Ron Santilli

Maybe think of that as 2X, kind of double the distributor level of business.

Anup Mehta – Canaccord Adams

Okay. And then can you give us an update on the sales headcount? Has there been any change or maybe a little more detail regarding the roll that you brought in in the first quarter?

Ron Santilli

Really no significant changes in headcount. We are still targeting around the 30 territories in North America and there is about 25 internationally, no changes.

Anup Mehta – Canaccord Adams

And can you talk a little more about the folks that you brought in during the first quarter?

Kevin Connors

Well, Ken Witte, we mentioned in the script, and Ken has been in the industry for quite some time and he has done a number of different things from the research side to even broader roles in sales and marketing. And one of the things that we talked about True Sculpt is the need for us to have more senior capabilities on the clinical research front. So we’re pleased to have Ken join the team. And then some of the other things that we think are important are to continue to maintain close contact with our customers. So we talked about the teller [ph] sales function in the script as well.

Anup Mehta – Canaccord Adams

How many total sales folks did you bring in?

Kevin Connors

We’ve got a team of three.

Anup Mehta – Canaccord Adams

And they are purely servicing existing accounts, correct?

Kevin Connors

That’s right. That’s right. And then the – we think that continuing to work with the clinical research part is going to be important for us going forward, as well as new business development. So we have a dedicated resource to that.

Anup Mehta – Canaccord Adams

Okay. Three more questions. One, you mentioned a recall of the Titan Excel handpiece. Can you give us a little more detail on what happened there? Is it a going concern or can we kind of take that off the table going forward?

Ron Santilli

Yes. This is a voluntary situation where we’ve elected to go in. And for reliability purposes, there are many issues by which why we are doing this, one of them being reliability. But as such, we’re going to go in and replace these components. We’ve taken the charge in the current quarter, and it will probably be completed within the next two to three months.

Anup Mehta – Canaccord Adams

How much again did you say that was, or you say it would have been – G&A would have been 50%?

Ron Santilli

Right. The charge for the quarter was $425,000.

Anup Mehta – Canaccord Adams

Okay. And then last one, I’ll jump back in the queue, your G&A expenses in the quarter picked up sequentially. Are we now at a more normalized rate? I mean, you were declining each quarter – almost each quarter of last year and picked up in the first quarter ’10. Is that going to be a steady rate going forward?

Ron Santilli

Yes. Nothing significant, but we do have seasonal expenses for G&A associated with our annual audits that occur in Q1.

Anup Mehta – Canaccord Adams

And that makes up most of the difference?

Ron Santilli

That’s probably a big piece of it, yes.

Anup Mehta – Canaccord Adams

Okay. But there is no adjustments in headcount internally that we should know about?

Ron Santilli

No. No change.

Anup Mehta – Canaccord Adams

Okay. I’ll jump back in queue. Thanks.

Ron Santilli

Thanks.

Operator

Thank you. Our next question is from the line of Phil Nalbone with Wedbush. Please go ahead.

Phil Nalbone – Wedbush

Thank you. Ron, the first question relates to that gross margin 60% adjusted for the Titan charge. What should we be taking in terms of a gross margin level going forward?

Ron Santilli

Yes. I think as at the current level of revenue volumes of $13.7 million for the quarter, our gross margins would have been more in the 60% to 61% range have we not had that charge. And I think that’s the right way to look at it.

Phil Nalbone – Wedbush

Okay, fine. And I just wanted to be very clear on the remark that you or Kevin made regarding ASPs in Q1. They were somewhat lower than the norm. Is that a function of Cutera’s own mix or industry-wide pricing issues?

Ron Santilli

Regarding the – in the upgrade section, it’s lower because of product mix, we sold fewer Pearl Fractional upgrades and instead sold other upgrades that go for lower prices. And then on the product – in the product section, slightly lower ASPs due to product mix where we sold more Soleras in the quarter as opposed to the Xeo products or still the higher mix toward, still significantly greater Xeo, but we sold more Solera than usual.

Kevin Connors

As well as our distribution mix being unusually high that has lower transfer pricing.

Phil Nalbone – Wedbush

Right. Okay. Thanks for clarifying. And then, Kevin, you stated in the script that you are expecting to announce new application offerings in the coming quarters. Does that include True Sculpt? Can you give us any color around new product expectations over, say, the balance of the calendar year?

Kevin Connors

True Sculpt, as we’ve talked about in previous calls, is an active research program for us. And obviously by staffing the clinical research function is one of the things that we are focused on. We can’t give any more visibility in terms of when and if it will be launched, but we are working on other things as well that we look forward to sharing [ph] in future quarters.

Phil Nalbone – Wedbush

And those things that you look forward to sharing, should we think about those as 2010 product opportunities or further out?

Kevin Connors

Further out.

Phil Nalbone – Wedbush

Okay. Thank you very much.

Operator

Thank you. Our next question is from Anthony Vendetti with Maxim Group. Please go ahead.

Anthony Vendetti – Maxim Group

Thanks. First, Ron, if you could just give us the update comp breakout across the expense lines?

Ron Santilli

Sure. It was a total of $828,000, of which $147,000 was in cost of sales; $231,000 in sales and marketing; $96,000 in R&D; and $354,000 in G&A.

Anthony Vendetti – Maxim Group

Okay, great. And did you say that the Titan refills were flat due to some of the – some of your customers just using less pulses per procedure. Is that what you said?

Ron Santilli

Yes. We believe – from recent discussions with our customers, we are learning that they are using fewer shots for their procedures, which of course in that senses, each handpiece has a limited shot life, gives the handpiece a longer life. So we believe that’s part of why they are getting longer use than originally expected.

Anthony Vendetti – Maxim Group

Is that because they are paying per shot and you’re trying to conserve that? And the second question is, how did you come about this? Is it just a couple customers that are doing this or do you think this is pretty widespread? And if so, are they still able to get the efficacy with few shots?

Kevin Connors

We think that the protocols that are established require a significant number of pulses. There is a trade-off, we believe, in terms of efficacy if they are not delivering it according to the published protocols. But I don’t think that the trend is a material change from what we had. It’s somewhat in the noise level. So it’s – I wouldn’t try to read and see these too closely on what’s happening with the Titan annuity business.

Anthony Vendetti – Maxim Group

Okay. So it’s not the norm, but you can count the instances or heard cases where this has occurred?

Kevin Connors

That’s right.

Anthony Vendetti – Maxim Group

Okay. International revenues, Kevin, you mentioned, Canada, Japan, as being particularly strong this quarter. Any other areas was – because I know Australia has been typically strong for you as well. Any others that you want to highlight?

Kevin Connors

Yes, I think the business in Brazil is very good for us, the Middle East business and South Korea. We’ve also seen nice performance there. So it’s spread out very nicely from a geographic perspective.

Anthony Vendetti – Maxim Group

Okay. And then any other investments that you are making to expedite the launch of Sound Surgical or Obagi’s products? Are these new job functions mostly focused on internal development?

Kevin Connors

In the case of Obagi, there were some Obagi specialists in Japan that we will hire two people for that in the direct sales role. And we think that there is no dovetail with our existing capital equipment sales force certainly. And there is some additional administrative support required for that, but the costs are pretty modest.

Anthony Vendetti – Maxim Group

Okay. And these are all – these relationships with Obagi and Sound Surgical are for just international? Here in the US, they have exclusive in the US? Is that correct?

Kevin Connors

That’s right. Both of those organizations have a direct sales team here than the US. So in the case of Sound, we distributed Vaser in Canada and in many territories of Europe.

Anthony Vendetti – Maxim Group

Okay, great. Okay, thanks.

Operator

Thank you. Our next question is from the line of Dalton Chandler with Needham & Company. Please go ahead.

Dalton Chandler – Needham & Company

Good afternoon. Hi. I want to ask about the one large national order you mentioned. Is that a spa [ph] quarter?

Kevin Connors

It’s amid spa type environment, but somewhat of a unique customer.

Dalton Chandler – Needham & Company

Okay. And so I assume this is really an unusually large order since you’ve specifically singled that out. Is that – and it’s probably not a recurring type number. Is that fair to say?

Kevin Connors

It’s possible. They may have expressed in pristine other similar size orders, but we’re able to get this one buttoned-down in the quarter. And it was the Solera platform. So that’s one of the things we’d possibly wanted to draw some attention to that type of typical Xeo that we sell to most of our customers.

Dalton Chandler – Needham & Company

Okay. And then I think you said you expect to launch Sound Surgical this quarter?

Kevin Connors

That’s right.

Dalton Chandler – Needham & Company

Okay. So would you expect to have revenue this quarter or do you think that’s going to take some time to ramp up?

Kevin Connors

Well, we expect to see it start to ramp up this quarter. So we don’t expect a huge inrush of orders, but we think this will be gradually done into a nice business for us.

Dalton Chandler – Needham & Company

And on these products where you are acting as a distributor, how did the margins compare to your own business?

Ron Santilli

They will be certainly lower than the 60% that we are accustomed to on a consolidated basis. But somewhere in 50% level is where I would see it falling.

Dalton Chandler – Needham & Company

Okay. Thanks a lot.

Operator

Thank you. Our next question is from Anup Mehta. Please go ahead.

Kevin Connors

Hello?

Anup Mehta – Canaccord Adams

Sorry about that. That margin you just mentioned, is that 50% for both Obagi and for Vaser?

Ron Santilli

Yes. When we are in a distributor type – when we are operating as a distributor, yes. So, in both cases, it would be approximately 50%.

Anup Mehta – Canaccord Adams

Okay. And then touching – going back to the research and development efforts, are you doing – are there any changes that are going on within the company that would accelerate timelines so that once you have an idea in the shop, you can get it to market a little bit faster. Is that part of the effort that’s currently underway?

Kevin Connors

Absolutely. We are constantly trying to figure out ways that we can shorten our development period, and in some cases, we have added additional talent in order to expedite. So it certainly got our attention.

Anup Mehta – Canaccord Adams

Is Ken going to be working on that as well?

Kevin Connors

Yes, absolutely. It’s pulled into new product development. And so it’s a nice combination to have a clinical understanding coupled with a strong technical background in the core technologies. I think it’s going to be a nice combination for us.

Anup Mehta – Canaccord Adams

Is Ken also working on business development efforts or is that separate?

Kevin Connors

That’s separate, and that’s really the full-time job. So we really don’t expect Ken to get involved with all the things that we’re trying to accomplish.

Anup Mehta – Canaccord Adams

Okay. And do you care to comment at all on the quarterly question about cash use and any maybe developments on that front?

Kevin Connors

I can’t say that anything has changed on that front. We are spending a lot of time looking at opportunities out there, and some small companies are out there in the marketplace. So we are constantly looking at anything that would be exciting out there that would be a potential acquisition target or a potential distribution agreement. So it’s a nice environment to look over a lot of opportunities.

Anup Mehta – Canaccord Adams

Okay. And the last question just on the US sales, going back to the teller idea, you not only have a lot of disposables necessary for the Titan rebuild. Are they going to be more focused on selling upgrades or what service are they really providing to existing accounts?

Kevin Connors

In Ron’s comments, he mentioned that half of our business comes from existing customers. So we see tremendous value in keeping very close to our customers. And our sales force is obviously calling on existing customers, but oftentimes they are looking at new accounts. And so we don’t always get the level of customer support that we’d like. And with this in-house team, we think that it will help us to provide that.

Ron Santilli

So that would include things like service contracts as well as the Titan refills and totaling up with upgrade opportunities as well?

Anup Mehta – Canaccord Adams

Okay. All right, great. Thanks for taking the question, guys.

Kevin Connors

Sure, Anup.

Operator

Thank you. We have one final question, is from the line of Larry Haimovitch with HMTC. Please go ahead.

Larry Haimovitch – HMTC

Good afternoon, Kevin. Hi, Ron.

Kevin Connors

Hi, Larry.

Larry Haimovitch – HMTC

I just wanted to get a sense, it appears that relative to the other companies that have reported so far that perhaps your US sales weren’t as strong as theirs, I don’t know if that impression is correct, just wanted to get a sense if you feel like perhaps you’ve had some market share loss, and if so, maybe discuss some of the programs. I guess you have talked about some of them, but maybe just give us a sense about the US market.

Kevin Connors

I think we were pleased with how we wrapped up 2009. And in the fourth quarter we saw a 27% sequential growth and we had modest sequential growth in the third quarter. So I think – with the context that where we’ve been, we think they’ve made some progress on that front. And then when we compare the six-month comparisons, those also look positive to us. So we are certainly evaluating ourselves relative to how we are performing on a share basis, and there are a number of initiatives that we are focused on to improve our market share.

The company history is one where we, at one point, had 80% of our business outside of dermatology and plastic surgery. And that strategy was a winning when the macro environment was different. But as we’ve seen a tougher industry backdrop, we’ve been focusing on our efforts to get more in front of the derms and plastics. And so we have lots of initiatives to that end. So it has our attention, Larry. And we want to be on a market share perspective.

Larry Haimovitch – HMTC

Great. Thank you, Kevin.

Kevin Connors

Thank you very much. Thank you for participating in our call today. We look forward to seeing you at various investor events during the quarter and to updating you on our second quarter conference call in August. Good afternoon, and thanks for your continuing interest in Cutera.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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