Syneron Medical's (ELOS) CEO Amit Meridor on Q4 2015 Results - Earnings Call Transcript

| About: Syneron Medical (ELOS)

Syneron Medical Ltd. (NASDAQ:ELOS)

Q4 2015 Earnings Conference Call

February 22, 2016 8:30 AM ET

Executives

Zack Kubow – Investor Relations-The Ruth Group

Amit Meridor – Chief Executive Officer

Bill Griffing – Chief Executive Officer-North America

Hugo Goldman – Chief Financial Officer

Shimon Eckhouse – Chairman

Analysts

Ravi Misra – Leerink Partners

Zack Ajzenman – Griffin Securities

Anthony Vendetti – Maxim Group

Difei Yang – Brean Capital

Operator

Good day and welcome to the Syneron Medical Q4 2015 Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Zack Kubow. Please go ahead, sir.

Zack Kubow

Thank you, operator. I’d like to welcome you to Syneron Medical’s fourth quarter and full year 2015 conference call. Statements on this call maybe forward-looking within the meanings of the U.S. Private Securities Litigation Reform Act of 1995, relating to the company’s future events or future performance, including statements with respect to Syneron’s expectations regarding, but not limited to, future growth prospects attributable to higher growth in North America due to our expanded sales team, development of our new dedicated Body Shaping team, and advancement of our new product pipeline, including UltraShape, PicoWay, Profound and CO2RE INTIMA, the positive market reception and benefits attributable to UltraShape, PicoWay, Profound, and CO2RE INTIMA, and the growth rate of UltraShape by 2017, and the anticipated global market share for our Body Shaping business by such time.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the company’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied in any forward-looking statements. These risks, uncertainties, and other factors may include, but are not limited to, the risk factors set forth under the heading Risk Factors in Syneron’s Annual Report on Form 20-F filed with the SEC.

These factors are updated from time-to-time through the filing of reports and registration statements with the Securities and Exchange Commission. These statements are only predictions, and Syneron cannot guarantee that they will, in fact, occur. The company does not assume any obligation to update the forward-looking statements discussed in today’s conference call.

Finally, this call will discuss non-GAAP financial measures. Syneron provides reconciliation information at the end of the fourth quarter and full year 2015 results press release on the Investor Relations page at www.syneron.com.

Speaking on the call today are Syneron’s CEO, Amit Meridor; Bill Griffing, CEO of the North America Business; and Syneron’s CFO, Hugo Goldman. Available during the Q&A session will be Syneron’s Chairman, Shimon Eckhouse.

Now I’d like to turn the call over to Amit.

Amit Meridor

Thank you, Zack, and good morning, everyone. Welcome to Syneron’s fourth quarter and full year 2015 conference call. The agenda for today will be as follows. I will cover our financial highlights and the key business updates, and then Bill Griffing will provide an update on our North American business strategy. Hugo will provide a full review of our financial results, and then we will open the call for questions.

We delivered a record revenue of $78.9 million in the fourth quarter of 2015, an 11% increase in constant currency. We also achieved record annual revenues of $277.9 million in 2015 a 13% increase in constant currency. We had strong results in North America and Asia-Pacific region, partially offset by softness in the EMEA region. For the quarter, North America product revenue was up 23% and Asia-Pacific product revenue was up 10% in constant currency.

For our key product, UltraShape North America revenue was $5.2 million, and PicoWay global revenue was $7.2 million. Non-GAAP constant currency gross margin improved to 58.1% and operating income was $5 million on the same basis. On the bottom-line we achieved a non-GAAP net income of $2.4 million or $0.10 per share in constant currency. In addition, we generated $15.2 million in cash from operation in the fourth quarter.

During the quarter, we repurchased shares worth of $6.7 million of our stocks. And in the first two months of 2016, we purchased additional shares of $3.9 million. We have now completed the Board authorized $20 million share repurchase program. Our Board continues to evaluate the most beneficial use of the company’s cash reserve. At this time, the Board does not intend to effect additional purchase of these shares, and it’s presently evaluating all options with respect to capital allocation.

We are confident in our strategy to transform Syneron into higher growth, higher margin company. We outlined this strategy along with three years revenue growth and margin targets in our Analyst Day meeting in December. As a reminder, our long-term goals include double-digit accelerate revenue growth, gross margin greater than 60%, and double-digit operating margin by 2018.

Turning now to an operational update. In 2015, we made a solid progress with our initiative to transform our business to focus on high growth segments of the market. This includes investment in our North America infrastructure to support a new product launches and to build stronger partnership relationship with our customers.

We strengthened our leadership with the addition of Bill Griffing as the CEO of North America, and Jeff Nardoci as the President of North America body shaping team. We now have, under the leadership of Erik Dowell, a team of 53 direct sales reps in North America focused on our focused on our aesthetic business, including a small team focused on Profound. And under the leadership of Jeff Nardoci, a team of 45 capital equipment and PDP reps focus on our body shaping business.

In 2016, we will leverage our North American investment in these teams to drive profitable revenue growth. We will also leverage our learning from North America to expand our new businesses’ model into the international market in 2016.

In terms of our key growth drivers, we had a positive fourth-quarter for body shaping, PicoWay, and Profound. North America UltraShape revenue was $5.2 million including 54 systems sold. System utilization trends remained positive in the fourth quarter, with $0.9 million in FTZ revenues. This represents a practice performance averaging about two UltraShape treatments per week, so we are very pleased with utilization. UltraShape ASP in North America remained stable in the fourth quarter.

For the full year, we sold 190 UltraShape systems in North America, contributing to a revenue of $16.2 million. This includes around 20% from high-margin recurring revenue, supporting our new business model.

During the fourth quarter, we started to rebuild momentum in our North America body shaping business under the leadership of Jeff Nardoci. The team developed and delivered our new Five Cs messaging campaign to clearly highlight the benefits of UltraShape. We also benefited from targeted advertising, digital marketing, social media campaigns, and new marketing tools to share with our customers.

As we look into 2016, we will also expand our body shaping effort internationally. We think there’s a significant opportunity to leverage our strong global customer base, our new business model, and marketing campaigns to accelerate UltraShape sales outside of North America. We plan to launch UltraShape in select direct and indirect international markets during 2016. And in 2017, we expect to be fully launched across our international market, targeting 30,000 active Syneron customers in close to 100 countries.

Another key component of our body shaping strategy is our ability to offer combination therapy with VelaShape for a full body shaping offering. We also will leverage our large global installed base of 8,000 VelaShape systems to drive adoption of UltraShape. In 2015, total body shaping revenue was around $36 million, which represent around 13% of our total revenue for the year. This demonstrates the importance of this segment in 2015, and we plan to accelerate this segment in the next three years.

Going forward, we will be updating on the progress of the full body segment on a global basis. The global body shaping progress in 2016 will include UltraShape and VelaShape, as well as new products to be added to our body shaping portfolio.

Turning to the PicoWay, we finished the year with strong fourth-quarter revenue of $7.2 million. This contributed to a full-year PicoWay revenue of $18.7 million. We received positive early feedback on the international launch of PicoWay Resolve during the fourth quarter.

For Profound, fourth quarter revenue was $0.9 million. We remain very optimistic on the opportunity and we ramp activity in 2016 as our dedicated team gains traction. Profound is a well-positioned and versatile system that can treat a submental area along with facial rejuvenation.

In addition, we recently launched a new SubQ applicator. This is a new applicator that follows a deeper subdermal treatment with the same temperature control, highly reproducible energy delivered as with our original applicator.

In order to support the ongoing growth of our key product and overall business in North America, we engaged Accenture, a leading global professional service company to help build a three years’ plan to accelerate our business.

Our corporate management team and our North American leadership team have been working with the Accenture group for the last several months to finalize these plans, the highlights of which Bill will cover in his remarks. I feel confident that we have a very solid business plan for North America, including marketing initiatives, customer-centric programs, and targeted micro-DTC campaigns for our key products.

We are looking forward to the upcoming important opportunity to connect with customers at the AAD Meeting in March and other meetings throughout the year. At the AAD Meeting, we will highlight our key growth engine product, along with the launch of the CO2RE INTIMA. This new offering of the CO2RE INTIMA is designed for vaginal treatment. It is based on our CO2RE CO2 device, with a specific, single-use handpiece with a recurring revenue component.

To summarize, we made solid progress in 2015 and re – and in an excellent position to build on this for 2016. Our key growth drivers – body shaping with UltraShape and VelaShape, PicoWay, and Profound – contributed about $54 million for the full year, or about 19% of our revenue. This is a significant achievement in the launch year for those product, and a major step forward in our new business model. It gives us a solid foundation to expand revenue from our high-margin products and consumable, all of which are a large growth market.

We are highly focused on accelerating revenue from these products, along with planned new product launches such as the CO2RE INTIMA. This will be the key for our ability to achieve our long-term goals of double-digit accelerate year-over-year revenue growth, of gross margin greater than 60%, and a double-digit operating margin.

I will now turn the call over for Bill for an update on our activity in North America. Bill?

Bill Griffing

Thank you, Amit, and good morning, everyone. Today I will provide an update on three main topics, the first, the performance and key highlights of our North American business in 2015, secondly, the strategic plan developed in conjunction with Accenture, and, finally, the key findings from a customer survey that highlights our strong position in the market and significant growth potential.

In 2015, we reinvigorated growth in our North American business and repositioned our sales and marketing infrastructure to support our customer partnership business model, with increased recurring revenue. As a result, total North American revenue increased 17% from $92 million to $108 million. Our total product sales grew 27% year-over-year. Our new body shaping division generated around $23 million for the year, or 21% of total revenue. And finally, our new growth engines, UltraShape, PicoWay, and Profound, generated more than 30% of revenue.

In the second half of 2015, we engaged Accenture to execute an in-depth analysis of our business, products, markets, and strategy in North America. During the research phase of the project, the Accenture team gathered input from a comprehensive survey across 356 North American practices. This included dermatologists, plastic surgeons, and med spas. In addition, they gathered input from more than 40 Syneron Candela North American customers and more than 60 of our North American employees.

They also completed an assessment of the market and the competitive dynamics across product categories, which was then analyzed against the Syneron Candela performance by customer segment and product line. The goal of the engagement was to utilize a value-based management approach, grounded in sound facts and analysis to develop our North American growth strategy for the next three years.

As a result, we have determined key revenue drivers over the next several years, and have a clear plan for optimized strategic business plans and efficient marketing strategies to support these products. The new plan will expand our customer partnership strategy that started with UltraShape across our entire North American business. This includes, first, specific strategies for product lines and corresponding customer targets, as well as investments in digital marketing and piloted micro-DTC programs. Additional services for our customers to help them optimize their business. And finally, customer-friendly programs, such as staff training and product bundles.

We are excited and confident in the strategy and mobilization plans, which were built on comprehensive understandings of our customers, the market, competitors, and Syneron Candela. And with our new North American leadership team established, we are poised to drive the business forward. Another important highlight from this project is the third-party customer survey of 356 dermatologists, plastic surgeons, and med spas in the U.S. The focus of the survey was to understand the company’s brand awareness and perception, procedural trends, customer segmentation, and purchasing decision drivers. The survey was anonymously administered on our behalf by the Wiser market research group, which is a Nielsen company.

I would now like to share with you a few highlights from the survey. 94% of dermatologists and plastic surgeons were aware of Syneron Candela, and 45% of them used Syneron Candela devices. We were ranked number one among all competitors in multiple segments, including skin tightening, hair removal, vascular treatment, and skin rejuvenation. We also scored exceptionally high among all purchasing criteria attributes, including quality and reliability, proven clinical efficacy, ease of use, and safety compared with the competition.

We were the highest ranked preferred brand among all major competitors. When asked which company, they would recommend to a peer, 39% of dermatologists, 21% of plastic surgeons, and 35% of med spas chose Syneron Candela. We were very proud of the findings from the survey, and were once again reassured of our strong position in the U.S. core aesthetic market. It also gave us confidence in the important role of energy-based devices in aesthetics, and the huge potential of our key strategic growth drivers. We plan to present the results from the survey in a more public way in the next few months.

I will now turn the call over to Hugo for a financial review. Hugo?

Hugo Goldman

Thank you, Bill, and good morning, everyone. Given that we have issued our news release this morning and Amit has addressed some of the top-line developments, I will focus my comments on some of the financial highlights for the quarter.

North America total revenue was up 16% at $34.4 million and international revenue was up slightly around 0.5% at $44.5 million. International results included 11% growth in Asia-Pacific, offset by a 6% decline in the EMEA region. Excluding the impact of changes in foreign currency exchange rates, international total revenue grew 6%, up 18% in Asia-Pacific, and down slightly in EMEA. Fourth quarter sales from North America corresponds to 44% of total revenue, with the balance of 56% coming from international markets.

Fourth quarter 2015 product revenue was $60.4 million, up 5%. In North America, product revenue increased 23% in the fourth quarter. EMEA product revenue was down 11% or 6% in constant currency, and Asia-Pacific product revenue was up 4% or 10% in constant currency. Recurring revenue, which includes service and consumables, was $18.5 million. Recurring revenue represented 23% of total revenue in the fourth quarter 2015, and was up 11% compared to the fourth quarter of 2014.

Non-GAAP gross margin for the fourth quarter 2015 was 56.5%, excluding stock-based compensation, amortization of acquired intangible assets, and other non-recurring expenses, compared to 55.7% in the fourth quarter 2014. On a constant currency basis, fourth quarter 2015 gross margin was 58.1%, up more than 2% versus the prior year. The year-over-year improvement in gross margin and more so in constant currency, reflects mainly the newly introduced high margin UltraShape in North America and PicoWay products worldwide. We are also benefiting from the high margin FTZ sales.

Non-GAAP operating expenses were $41.6 million, compared to $36.1 million in the fourth quarter of 2014. As discussed in previous calls, we made a decision to increase our investment in sales and marketing in North America in order to support our top-line growth. This includes of the planned increase to our Body Shaping sales force from 15 PDP reps at the beginning of the year to our team of 45 capital equipment and PDP reps exiting the year.

Non-GAAP operating income in the fourth quarter 2015 was $3 million or an operating margin of 3.8%, compared to $5.2 million or 7% in the fourth quarter of 2014. This reflects the company’s investment in sales and marketing expenses related to the significant expansion of the company’s North American sales force, including the establishment of the dedicated Body Shaping team and the UltraShape marketing campaign. It also reflects the foreign exchange impact. Out of the overall $3 million impact from foreign exchange rate changes to the top-line, very close to $3 million impacted gross margin and the net impact to the operating income line was a negative of $2 million. On a constant currency basis, fourth quarter 2015 operating margin was 6.1%.

On a non-GAAP basis, net income in the fourth quarter 2015 was $2.4 million or $0.07 per share. This compares to a net income in the fourth quarter of 2014 of $3.2 million or $0.09 per share. The foreign exchange impact on the non-GAAP net income was approximately $1.1 million. The non-GAAP operating income and net income results exclude expenses related to amortization of acquired intangible assets, stock-based compensation expense, remeasurement of contingent consideration fair value, impairment of intangible assets and goodwill, fair market value adjustment, tax benefit, changes in foreign currency exchange rates, and other nonrecurring expenses.

Turning to the balance sheet, our DSO were 61 days in the fourth quarter of 2015, an improvement from 68 days in the fourth quarter of 2014. During the quarter we generated $15.2 million in cash from operations. As of December 31, 2015, our overall cash position, including cash, short-term bank deposits, and marketable securities, were $86.7 million, with no debt.

During the quarter, we repurchased 915,982 shares of Syneron stock at an average price of $7.46 for $6.7 million under the Company’s previously authorized $20 million share repurchase program. Since December 2014, the Company has repurchased a total of 1,810,654 shares at an average price of $9 for $16.9 million under this program. As Amit mentioned, in February we completed the $20 million Board-approved share repurchase plan. So as of today, we have 34,710,935 shares outstanding, which is 35,274,577 shares as of December 31, 2015, less 563,642 shares bought back in the first quarter of 2016.

We continue to have a very strong balance sheet with no debt. With that, I will now turn the call over to the operator to answer any questions you might have. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We will now take our first question from Richard Newitter of Leerink Partners. Please go ahead. Your line is open.

Ravi Misra

Hi Good morning this is Ravi Misra in for Richard. Can you hear me okay?

Amit Meridor

Yes, Ravi. How are you?

Ravi Misra

Hi, good morning. Thanks for taking the call. I have a couple of questions. If I can maybe start, big-picture, with the Accenture plan, just curious, how does this fit in with some of the marketing strategies that you guys put together and presented to us last December? Is there a chance that the plan will maybe require re-focusing those strategies or change? A little bit more detail on that would be helpful. Thanks. And then I have some follow-ups.

Hugo Goldman

Bill.

Bill Griffing

Yes. So, thanks for your question, Ravi. With respect to the Accenture work, we looked at, as I had mentioned, our business, our products, markets, and the strategies associated with North America specifically. We do believe that a number of the strategies that we have in place, and changes that we made with respect to body with the Five C message platform, will be enhanced through the work that we’ve conducted with the Accenture team. We also looked at the other strategic growth drivers within the portfolio, which have been previously mentioned, in terms of our focus on channel marketing, digital, as well as micro-DTC.

So, we do anticipate some adjustments to the marketing strategies going forward, and we will be leveraging the good work that was developed in 2015 across the portfolio.

Ravi Misra

Great, thanks. And then maybe on the P&L one. In terms of R&D expense, that came in a little bit higher than what we were modeling. I’m wondering if there was any one-time items in that area, or there are investments that you are doing. And that may be drawing that forward to 2016, could you give us maybe some signposts on where you see operating margin in 2016? Is a mid to high-single-digit the right way to think about it, given that you did about 6%, constant currency?

Hugo Goldman

Just to make the short answer is that, indeed, we had several special or one-time expenses above our regular run rate. So if you look at the full-year, you should take the average, quarterly average, will be more better way to modeling going forward.

Ravi Misra

Okay. Sorry, Hugo, I didn’t fully understand [indiscernible].

Hugo Goldman

Q4 is higher than the average R&D run rate.

Amit Meridor

Due to one-time expenses that we had in Q4, and looking forward, we’re getting back to our normal level of R&D.

Ravi Misra

Okay. And then can you maybe comment on 2016, what sort of operating margin level do you guys see? Mid-single-digit? How [indiscernible] against that double-digit operating margin by 2018?

Hugo Goldman

We are not giving that guidance, but I can tell you that we – after all these investments in 2015, we should see some improvement in the – due to the high-margin products and consumables, the operational leverage in the OpEx, so we should see improvement in 2016.

Ravi Misra

Okay, thank you.

Hugo Goldman

You’re welcome.

Operator

Thank you. [Operator Instructions] We will now take our next question from Zack Ajzenman of Griffin Securities. Please go ahead, your line is open.

Zack Ajzenman

Thanks, good morning. First on UltraShape, can you maybe comment – I think the ASP in Q3 was about $80,000 the device. So can you comment for the ASP in Q4?

Amit Meridor

Bill?

Bill Griffing

Yes. So, Zack, thank you for your question. With respect to ASPs on UltraShape for 4Q, we have not disclosed a specific dollar amount, but we have remained steady with respect to the year in 2015 with UltraShape and ASP.

Zack Ajzenman

Okay. And another one on UltraShape. The specialty salesforce, sounds like there was 45 capital reps and PDPs to close out 2015. How should we think about that number evolving in 2016?

Amit Meridor

Go ahead Bill.

Bill Griffing

So, we believe that we do have an appropriate number of territory managers for our business, Zack. And we do not feel we have a need to expand our PDP or TM, territory manager, ranks, until potentially the end of the year, as we do believe that they have the right balance of capacity to the number that we have deployed here in North America.

Zack Ajzenman

Okay. Just a couple more. This one on gross margin. In constant currency terms, it actually seemed like gross margin somewhat declined sequentially, from 58.9% in Q3 to 58.1% this quarter. Typically, Q4 is seasonally the strongest. And assuming – or the implication that there was a growing contribution of new product revenues and higher-margin business, can you help us better understand why maybe constant currency gross margin declined sequentially?

Hugo Goldman

Hi, Zack. Good morning. We have – if you look at Q4 versus year-over-year, we have a nice improvement. In Q3, we have some contributors that enabled us to get higher than usual gross margin. So I would say that this Q4, gross margin is the more reflecting the actual gross margin. The so it is still an improvement, as I said, when you go year-over-year, of close to about 2%.

Zack Ajzenman

Okay. And then lastly, can you just update us with what’s going on with the CoolTouch business? Maybe give us an idea of how should we think about the annual run rates going forward, and any color or commentary on CoolTouch? Thank you.

Hugo Goldman

Well, we don’t give any special commentary on CoolTouch. But I can say that it’s a very small amount in our total revenues, so not something we are giving any details. So we also shouldn’t expect any major change.

Zack Ajzenman

Thanks.

Operator

Our next question ladies and gentlemen comes from Anthony Vendetti of Maxim Group. Please go ahead.

Anthony Vendetti

Good morning. I just wanted to touch on some of the updates you expect to have, or new product introductions in 2016. Should we expect anything at AAD or ASLMS upcoming here in the next month, month and a half?

Amit Meridor

Shimon?

Shimon Eckhouse

Yes, as Amit pointed out in his script, we will present at the AAD our leading product, including of course UltraShape and PicoWay. And of course, PicoWay result, which is a new addition to our picosecond laser portfolio. In addition to that, we plan to also show the CO2RE INTIMA. So this is, at least at this point in time, our plans for AAD. Regarding the rest of the year, yes, we have – we plan to introduce more products. But for competitive reasons, I wouldn’t go into any details at this point in time.

Anthony Vendetti

Okay, thanks. I’ll hop back into the queue.

Shimon Eckhouse

Thank you, Anthony.

Amit Meridor

Thank you.

Operator

Our next question ladies and gentlemen comes from Difei Yang of Brean Capital. Please go ahead.

Difei Yang

Hi, good morning, and thanks for taking my question.

Shimon Eckhouse

Good morning.

Difei Yang

Good morning, everyone. A quick question on Accenture’s study. What is the key takeaway? We know the product works. We know on some elect from the survey, the customers like the products. And then, what went wrong?

Amit Meridor

Bill?

Bill Griffing

Can you just clarify what you mean by what went wrong?

Difei Yang

So, what can be improved to drive the revenue upside?

Bill Griffing

Well, I think key finding was a greater level of customer-centricity in terms of building partnership across our recurring revenue strategic growth drivers within the portfolio, going forward. The micro-DTC approach with respect to customer/consumer patient activation was also another key finding for us. And also the fact that we scored exceptionally high with the key core customers, the dermatologists, plastic surgeons, and med spas was reassuring in terms of our core target, going forward.

Amit Meridor

And just I will add for my side. The Accenture work was not a focus only on the UltraShape. We definitely wanted to take the launch that we did within UltraShape for the new business model, and to explore with them how to expand it to our other product line and to make sure that, looking forward, we are not only having this business model in the UltraShape, but we are supporting of the recurring revenue, the relationship with the customers, customer-centric in all our product line and not only on the UltraShape product.

Difei Yang

Yes, thank you. And so, just if you could, Bill, if you could translate the learnings for me. Does that mean increase the frequency of the sales rep calling? Or what does it mean, in terms of improved, customer-centric service? So what does – how do you translate that into action?

Bill Griffing

So, via our PDP sales organization, it’s a greater level of interaction with the customer, and building partnerships and forming relationships, and supporting them in a marketing approach to create patient activation.

Difei Yang

Okay. Okay, I get it. Thank you. So moving on to the next question, macroeconomics. So we started to hear people just chatter about the slowing of economical conditions outside of the United States, and maybe there are concerns within the United States, as well. So how do you see that impact the Syneron business globally?

Amit Meridor

As you are well aware, it’s very difficult for greater people than us to project what’s going to happen in 2016. So I’m not going to try to take their – and be much clearer in what’s going to happen in 2016. I can just say that changes in the global macro economy, can affect at the end of the day. Syneron is well-established in three regions very nicely, from the EMEA, from Asia-Pacific, and North America. So as we happened in 2015, something that it can happen in exchange rate. We can balance it, if one in economy is going down and the other one, like what we have in North America.

So our infrastructure and our three region activities is definitely helping us to balance some of the macro economy, but I can’t know exactly what’s going to happen. Definitely even if you look on Q1, it’s a soft quarter. As we all know, and especially in what happened in January and February, the general economy in the Far East and in North America, that can definitely affect the Q1 seasonality. But in the general, for the full year, and we are holding our projections. And we feel that we will be able to leverage, like we said, a 2015 investment and still bring a very nice growth to our Company.

Difei Yang

Yes, thank you. So that leads to my last question. One of your competitors just launched the – into non-invasive fat reduction market. And it appears to be, based on one quarter of data, appears to be a very strong launch. And do you see that might potentially challenge UltraShape in the marketplace? Or do you think the market is large enough so it can accommodate all of you guys?

Shimon Eckhouse

Bill?

Bill Griffing

Yes, so thanks again for that question. With respect to the market, we do believe that the market is large enough to support the three main players, as well as some other minor players, within the space. So we do remain confident that we can be extremely competitive within the space. We will be enhancing our marketing execution. As we discussed last quarter, we made a number of changes to our body shaping leadership by bringing Jeff Nardoci on board. And we feel very confident in the recently introduced Five C message platform to allow us to perform at a greater level of execution.

Difei Yang

Thank you.

Shimon Eckhouse

Thank you.

Hugo Goldman

Thank you, Difei.

Operator

We will now take a follow-up question from Anthony Vendetti of Maxim Group. Please go ahead.

Bill Griffing

Hi, Anthony.

Hugo Goldman

Yes, Anthony.

Anthony Vendetti

Yes, I’m here. Sorry about that.

Bill Griffing

Okay.

Anthony Vendetti

How much have you spent on the Accenture project? Is that finished? Is that completed? Or when do you expect that to be completed? It sounds like it’s an evaluation of the whole business. When do you expect to have the final results, or is everything all done, at this point?

Amit Meridor

We concluded and finished it, and we presented it to the Board last week. It went through the Q4 to Q1, so the cost was split between Q1 and Q4. But it was focused on the North America business, and we completed it and we have all the recommendation. And we already started to take actions by the end of Q4, by the recommendation that the full team presented to us.

Anthony Vendetti

Okay. Was there any cost reduction recommendations, or was it all focused on product, surveys, and stuff like that?

Hugo Goldman

Bill.

Bill Griffing

So hi Anthony how are you today?

Anthony Vendetti

Good.

Bill Griffing

It was truly an in-depth analysis, as Amit had said, across the North American business. We looked at our business specifically, our products, the market, and the strategies that we had in place here in the market. So, it was a comprehensive assessment analysis across the business, not only to optimize top line but to also improve bottom line, with specific recommendations, as Amit had suggested.

Anthony Vendetti

Okay. And then just a question a little bit for Hugo on the sales and marketing. It sounds like, based on Bill’s comments, that at the 45 for the body shaping division, a combination of the direct and the support staff, that that right now is at the right level.

Hugo Goldman

Yes.

Anthony Vendetti

Should we expect the current run rate for sales and marketing as a percent of revenue to be at the current rate? Is that a good go-forward rate? Or are there any additional, outside of body shaping, that you expect to have to add to, or any other marketing expenses in 2016 that we should be expecting?

Hugo Goldman

Anthony, indeed, we reached the 45 people. That’s the infrastructure that we planned for, for 2016. So we pretty much going to be at this rate going forward as a percent of sales, maybe some minor fine tunings. But the investment was made in 2015, and we built the full team. And now we are going to – and we need to start seeing the leverage on this investment.

Anthony Vendetti

And then just lastly on the share repurchase, Hugo, you gave a lot of details on that.

Hugo Goldman

Yes.

Anthony Vendetti

There’s still some more. Obviously you have more dry powder. With the stock down here at these levels, below the average share price that you repurchased in the fourth quarter, as well as the average that you repurchased since the program began, can we expect to see a continued accelerated effort to repurchase shares here in 2016 at these levels?

Shimon Eckhouse

Yes, as Amit pointed out, the Board has discussed the potential for what we want to do. And we would probably discuss it again in the near future, and decide how to move forward.

Anthony Vendetti

Okay, great. Thanks, guys. See you at AAD.

Shimon Eckhouse

Thank you.

Hugo Goldman

Thank you.

Operator

As there are no further questions, I would now like to turn the call back to the speakers for any additional or closing remarks.

Amit Meridor

Okay. I want to thank everybody for participating on our annual 2015 call. And we will see you soon, all of you, at the AAD. Thank you very much.

Bill Griffing

Thank you.

Hugo Goldman

Thank you.

Operator

Thank you. That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

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