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Cutera (NASDAQ:CUTR)

Q2 2012 Earnings Call

August 06, 2012 5:00 pm ET

Executives

John Mills - Senior Managing Director

Kevin P. Connors - Chief Executive Officer, President and Director

Ronald J. Santilli - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance & Administration

Analysts

Dalton L. Chandler - Needham & Company, LLC, Research Division

Morris Ajzenman - Griffin Securities, Inc., Research Division

Michael A. Dinerman - Piper Jaffray Companies, Research Division

Anthony V. Vendetti - Maxim Group LLC, Research Division

Larry Haimovitch - Haimovitch Medical Technology Consultants

David Levy

Operator

Greetings, and welcome to the Cutera, Inc. Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills of ICR. Thank you, Mr. Mills. You may begin.

John Mills

Thank you. By now, everyone should have access to the second quarter 2012 earnings release, which went out at approximately 4:00 p.m. Eastern time today. 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 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 Cutera's operations and business; expectations for increasing revenue, generating cash, improving gross margins and profitability; the development and commercialization of existing and planned new products; potential revenue growth from strategic alliances and planned new products; and financial performance and integration risk associated with the Iridex aesthetic business unit acquisition.

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 risk 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 the company's most recent 10-Q, filed on August 6, 2012, with the Securities and Exchange Commission. And with that, it's my pleasure to turn the call over to company's President and Chief Executive Officer, Mr. Kevin Connors.

Kevin P. Connors

Thank you, John. Good afternoon, everyone. Thanks for joining us today to discuss Cutera's results for the second quarter ended June 30, 2012.

On today's call, I'll provide an overview of our company performance, and then Ron Santilli, our CFO, will provide an overview of our financial results. Finally, I'll provide some closing comments and open the call to your questions.

We are encouraged with our 32% second quarter 2012 revenue growth compared to the second quarter 2011 with our U.S. revenue increasing by 38% and international revenue improving by 28%. The U.S. market for prosthetic systems continues to improve, and we believe our North American sales organization is well-positioned to continue to generate improved record growth for the future.

Our international revenue growth was driven primarily from Canada, France and many countries in our Asia-Pacific region. From our product perspective, a significant amount of our growth this quarter was driven from continued increase and shipments of our Excel V product. Excel V is our premier vascular product that continues to gain traction in the marketplace. In addition, demand for our flagship Xeo platform also continues to remain strong and it contributed to the revenue growth this quarter.

Our Customer Service business experienced significant growth this quarter and Ron will discuss this in more detail shortly. We have expanded our North American sales team from 26 territories 1 year ago to 36 territories today. We have 9 U.S. territories dedicated to podiatry, the podiatry market, and to focus on the sales of our GenesisPlus. We will continue to monitor the size of this opportunity, and we will expand our territory size as our sales performance supports it.

Turning to research and development. Revenue shipments of our truSculpt product designed for the fast-growing non-invasive body contouring market commences in the third quarter 2012. The truSculpt radio frequency technology is the latest breakthrough in non-invasive body contouring that preferentially heats and destroys subcutaneous adipose tissue or fat sales without damage overlying skin. And one or more treatments, stubborn areas of fat are naturally eliminated to sculpt body contours with no downtime. This product received a CE Mark approval for fat reduction and body sculpting in January 2012, and has a 510(k) clearance for deep tissue heating and the treatment of cellulite for certain specific indications.

We are pleased with the initial market acceptance of this product and believe it will play an important role in our revenue growth in the future. Now I'd like to turn the call over to Ron to discuss our financials in more detail.

Ronald J. Santilli

Thanks, Kevin, and thanks to all of you for joining us today on our second quarter 2012 conference call. Second quarter 2012 revenue was $19.6 million or 32% higher than the second quarter of 2011. Net loss for the second quarter 2012 was $1.5 million or $0.10 per diluted share. Adjusting our $1.5 million loss for noncash, stock-based compensation of $787,000 and depreciation and amortization of $425,000, our net loss would have been $254,000 or $0.02 per diluted share.

Kevin already provided an overview of our revenue performance, I will now provide some additional detail. Product revenue increased in the second quarter by 44% when compared to second quarter of 2011. This increase was primarily driven by increased sales of Excel V into core specialties and our flagship Xeo platform. In addition, cross-selling opportunities is the newly acquired Iridex aesthetic installed base, primarily with our Excel V and Xeo platform also contributes to our revenue improvement.

During the second quarter 2012, approximately 35% of our North American product orders came from core specialty and 36% from podiatry specialty. Outside the U.S. and Canada, that we primarily sell to core physicians. A significant percentage of our revenues is sourced from existing customers. During the second quarter of 2012, 40% of our revenue was derived from sales of upgrades, service, Titan annuity and fillers and cosmeceutical products. We remain committed to strong customer satisfaction and believe we will continue to realize revenue from these annuity revenue categories.

Upgrade revenue continues to remain low, because of the last 2 years we have introduced new platform systems versus a new application that would be an upgrade to customers' existing product.

Service revenue increased to $4.4 million in the second quarter 2012 compared to $3.6 million in the second quarter 2011. The primary reason for this growth was approximately $1.1 million of incremental revenue generated from the IRIDEX aesthetic business acquired in February 2012. We expect future quarterly service revenues to be in the range of $4.3 million to $4.5 million.

Titan annuity remains flat at $1.2 million when compared to the second quarter of 2012 to 2011. Fillers and cosmeceuticals revenue increased by 38% to $1.5 million in the second quarter of 2012, compared to $1.1 million in the second quarter of 2011. Growth of this revenue category was derived from sales of our Obagi and Merz distributed products in Japan. We remain excited about this opportunity and believe it will continue to increase our revenue penetration into the core market and will be accretive to our results.

The integration of the Iridex aesthetic business acquisition has gone according to plan. In particular, we are pleased with the cross-selling and service opportunity we have into this installed base. Additionally, our team in France continues to perform well and is expected to play a large role in our European operations.

Now I will address our second quarter 2012 operating performance. Our gross margin was 53% in the second quarter of 2012 compared to 57% in the second quarter of 2011. The decline in our gross margin was due primarily to a product mix shift towards lower margin products. Further, we experienced an increase in distributor revenue as a percentage of our total revenue, which contributed to the margin decline. With the commencement of shipments of our truSculpt system, we expect this will have a favorable growth margin impact. As our truSculpt revenue ramps up, and due to several other gross margin improvement initiatives underway, we believe that our consolidated gross margin will be higher than 53% going forward

Sales and marketing expenses were $7.1 million or 36% of revenue in the second quarter of 2012 compared to $6.3 million or 43% of revenue in the second quarter of 2011. Higher spending from a year ago was primarily related to the expansion of our U.S. sales force. Even though our spending increase, our percentage of revenue dramatically improved as a result of the higher revenue. We target sales and marketing expense to be in the range of 35% to 40% of revenue.

Research and development expenses were $1.9 million for the second quarter of 2012 and $2.3 million in the second quarter of 2011. We remain committed to investing in R&D and launching new products in the future and expect quarterly spending to be in the range of $2 million to $2.5 million per quarter.

General and administrative expenses were $2.9 million in the second quarter of 2012 compared to $2.6 million in the second quarter of 2011. The increase of these expenses were due primarily to higher legal expenses of a nonrecurring nature. As a result, as such, we expect G&A expenses to be in the range of approximately $2.6 million per quarter in 2012.

Interest and other income net was $144,000 in the second quarter 2012 compared to $199,000 in the second quarter of 2011. This decline was primarily attributable to a decline in investment yields and foreign exchange gains and losses. Income tax provision in the second quarter 2012 was $89,000. Our tax provision is primarily attributable to international taxes related to our foreign subsidiaries and small amounts of minimum, capital base tax in the U.S. As a reminder, we continue to maintain 100% valuation allowance for our U.S. deferred tax assets.

Going forward, for modeling purposes, we suggest using an effective income tax expense of approximately $75,000 per quarter for the remainder of 2012.

Turning to the balance sheet. Our financial position remains strong. As of June 30, 2012, we had $81.4 million of cash, marketable securities and long-term investments with no debt, which represents approximately $5.76 per outstanding share. Non-accounts receivable at the end of the second quarter 2012 were $6.2 million and our DSOs were 29 days.

Inventories at June 30 were $12.7 million, which represents a $712,000 reduction from the $13.4 million at March 31, 2012. Our inventories are turning approximately 3x per year.

Now that I have concluded my overview of Cutera's financial performance. I'll turn the call back to Kevin.

Kevin P. Connors

Thanks, Ron. As we enter the third quarter of 2012, we remain focused on the following key initiatives. One, launch of our truSculpt product in the fast-growing body contouring segment of the market. Two, continued growth from recently launched products, a, Excel V into the core market; b, GenesisPlus in the podiatry market and other physician categories. Three, improving gross margins through anticipated cost reductions, increasing average selling prices and the launch of truSculpt. Four, productivity improvements of our recently expanded North American sales team. Five, continued investment in our research and development activities to enable new product launches in the future. Six, achieving positive operating cash flow during the second half of this year.

Now I'd like to open up the call for your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Dalton Chandler with Needham & Company.

Dalton L. Chandler - Needham & Company, LLC, Research Division

I just want to start by asking a little bit about the sales force. Thanks for the update on the expansion, but could you just remind us what your goals are for the end of the year and for longer term there?

Kevin P. Connors

Yes, Dalton, we're essentially where we plan to be at this point. And as we've mentioned in the script, that as we did more experience in the marketplace with some these new product launches, we will monitor that very closely and make decisions about expanding even further if the data supports it.

Ronald J. Santilli

That's right, Dalton. Our current position is we have 36 territories out there in the U.S. and Canada, which 9 of them are dedicated to the podiatry specialty.

Dalton L. Chandler - Needham & Company, LLC, Research Division

Okay. And in the past few quarters, you've talked about the GenesisPlus as one of your growth drivers. You didn't really mention it this time. Could you talk about what's going on with that product?

Ronald J. Santilli

It's continuing to sell very well for us. Of course, with the year-over-year numbers are getting harder and harder to beat, because the FDA approval occurred a year ago at this point. But it continues to be a strong contributor to our revenue base.

Dalton L. Chandler - Needham & Company, LLC, Research Division

Okay. And then finally, it looks like you're very close to break even. If you get the margin expansion, you think you're going to get from the Genesis -- I'm sorry, from the truSculpt launch. I mean, is this about the break-even number now where you came in this quarter?

Ronald J. Santilli

Right. Dalton, we're positioned to be about at the lowest breakeven point in the industry. And our target is to get the gross margins back up into the upper 50% range, given the many pricing and cost initiatives we are implementing in the launch of truSculpt. If we get there and you can see at the $20 million mark, we're essentially at breakeven on a GAAP basis and of course, that would generate about $1.1 million in cash, given the stock-based compensation expenses and intangibles.

Operator

Our next question comes in the line of Morris Ajzenman with Griffin Securities.

Morris Ajzenman - Griffin Securities, Inc., Research Division

Can you give us a little more color, a better idea, what the revenue run rate was on organic basis year-over-year adjusting for Iridex?

Kevin P. Connors

Yes, there are parts of that business that make it difficult to isolate. The service business is one that we can get clear visibility on the Iridex contribution and that was in excess of $1 million. Is that right, Ron?

Ronald J. Santilli

About $1.1 million came from the service Iridex business. Most of the other portion of the Iridex business is cross-selling and it's difficult to measure, but it's included in our U.S. revenue growth.

Morris Ajzenman - Griffin Securities, Inc., Research Division

It's fair to say that the overall revenue was up, if we somehow could get a better feel for it in the mid-teen area. Is that a fair as guesstimate? Is that conservative? Is that aggressive?

Kevin P. Connors

I think, we're -- again, it's not a clear measurement, but we think that organically, we'd be somewhere in the 20% range. But again, take that with an asterisk.

Morris Ajzenman - Griffin Securities, Inc., Research Division

And last question here. Can you kind of walk through again -- you touched on it, but just a little better feel for gross margins. Again, this quarter, I think about 53%. You talked about product shift mix to lower margin product distribution. Can you give a better feel for that, because I think the key issue here going forward, and I know you guys will understand, if you can drive gross margin, say, the upper 50% level, would have a company that's operating much more profitably or clearly profitable versus being nonprofitable recently, though, that unprofitability is clearly improving. Could you kind of give us a roadmap, just give us a better explanation of how, again, this quarter and how that's transitions over next few quarters?

Kevin P. Connors

Well, again, we -- in the script, we talked about 20% of our revenue approximately went through distributors, and of course, the service business is now a larger part of our business. Some are annualized $17 million, $18 million a year with the Iridex acquisition. And product mix that moves around from quarter-to-quarter, but as we're seeing the top line expand, we're seeing margins improve with that typically. And we think with truSculpt, being an exciting new category that has really nice margins, we think all those should result in improved gross margin.

Morris Ajzenman - Griffin Securities, Inc., Research Division

So let me ask -- let me just restate it in another way. The target of upper 50% range, can we see that by the end of this year? Is that a more realistic target sometime into 2013?

Ronald J. Santilli

It certainly is our plan and it's largely dependent upon the truSculpt launch, because that obviously will have an impact. But then as Kevin says, the other product mix shifts from quarter-to-quarter and those are harder to detect and to manage.

Kevin P. Connors

But those other categories, we are -- we have a number of initiatives on the service side. The Iridex business we acquired, I think, they had that business, or the fees structure in that lower than we think is justified the markets. So we made some price increases with that and also price increases with some other products. And then, as Ron alluded to, we have a number of active programs to get our cost structure and our products at a lower level.

Operator

Our next question comes from the line of Misha Dinerman with Piper Jaffray.

Michael A. Dinerman - Piper Jaffray Companies, Research Division

I was just wondering on the truSculpt, if you guys have any more information as far as the timing of the launch? And just an update of how it might have done at the annual meeting of the Academy of Dermatology?

Kevin P. Connors

Well, we're excited to be where we are with truSculpt. The Q2 numbers don't have any truSculpt revenue in it, and we anticipate commercial shipments in the current active quarter. And we've already started demonstration activities with the product and so far, we're very pleased with both physician response to it and the success we're having by getting this equipment in front of new prospects.

Michael A. Dinerman - Piper Jaffray Companies, Research Division

Okay, great. And then, can you also remind us how many sales reps you have divided, I guess, between the podiatry and the non-podiatry territories?

Ronald J. Santilli

Right now, we have about 36 territories in the U.S. and Canada, which 9 are dedicated to podiatry specialty.

Michael A. Dinerman - Piper Jaffray Companies, Research Division

But on a wrap basis, is there any info?

Ronald J. Santilli

On a wrap basis, I'm sorry?

Michael A. Dinerman - Piper Jaffray Companies, Research Division

Yes, how many people are detailing to each of those territories?

Kevin P. Connors

We're a little confused here. We have 9 dedicated podiatry reps.

Michael A. Dinerman - Piper Jaffray Companies, Research Division

Okay, all right. And then just one last question for me. I'm wondering what your thoughts are related to share repurchases, given that the share price has been trading so near cash lately?

Kevin P. Connors

There's a strong argument that, at this price, that, that is justified and we have many investors that have expressed that view and every time we have opinions from shareholders, we take it up to the board level just to make sure that these views are vetted and that we're responsive to those kinds of questions. But with that said, there's also a lot of consolidation in acquisition going on in the space right now. And so that the other side of that, is that some companies are opting to keep dry powder in order to have the ability to execute a transaction.

Operator

Our next question comes from Anthony Vendetti with Maxim Group.

Anthony V. Vendetti - Maxim Group LLC, Research Division

Just a couple of questions on truSculpt. So commercial launch this quarter, did you say you already started shipping or you will be shipping?

Kevin P. Connors

We plan to have revenue shipments in the third quarter.

Anthony V. Vendetti - Maxim Group LLC, Research Division

And can you talk about how you're pricing that, and if there's a consumable with it?

Kevin P. Connors

The list price is what, $85,000?

Ronald J. Santilli

$88,000.

Kevin P. Connors

$88,000. And there is a consumable. So somewhere to that Titan annuity revenue, we're excited to have that modeled. As we think the benefits for both the physician and the patient with this technology really support the direction that we're pursuing with it. And we see future new applications. Of course, we'll have to get expanded FDA clearances, but we think the platform really lends itself to many new treatment categories in aesthetics.

Anthony V. Vendetti - Maxim Group LLC, Research Division

And did the technology or energy sources is RF, what kind of RF is it?

Kevin P. Connors

Well, we've got a lot of flexibility where we're able to actually vary the frequency of the radio frequency source while maintaining constant power output, and we have the ability to drive more than one active electrode. And so, again, the hopes for future expansion of both application and speed and improving the patient experience in any way we can, we see lots of future products coming from this platform.

Anthony V. Vendetti - Maxim Group LLC, Research Division

Okay. And then on Iridex, I know you said there was some good cross-selling in this particular quarter. Is that predominantly the VariLite and then if you could talk about the impact it had in terms of revenues or -- on margins this quarter versus last quarter?

Kevin P. Connors

Well, they've got a substantial installed base. We believe it somewhere around 6,000 devices and what we're finding is that many of those customers are looking to get into newer technology like the Excel V. So we've had a number of Gemini customers that have reached out to us. And what we're able to do is to recondition the Gemini product and sell an Excel V and then have a second market at different price point. So there's lots of unique opportunities for us, and of course, the service business is something that continues to expand and it's become a large portion of our revenue today.

Anthony V. Vendetti - Maxim Group LLC, Research Division

So just as a follow-up on the example on Gemini. So for example, you may take a Gemini back in the trade, charge an upgrade to Excel V, possibly repackage Gemini and sell that in another country. Is that about right?

Kevin P. Connors

That's right.

Anthony V. Vendetti - Maxim Group LLC, Research Division

Okay. Okay. Do you had -- in this quarter, did you have any outstanding legal cost or settlements?

Ronald J. Santilli

Yes, we did, Anthony. We had a nonrecurring charge for this quarter that will not be continuing in the future, related to a settlement.

Kevin P. Connors

And that was somewhere in excess of $300,000.

Anthony V. Vendetti - Maxim Group LLC, Research Division

Do you want to disclose what company you settled with or what was that regarding?

Kevin P. Connors

It's not material. It's one of these unusual lawsuits that unfortunately we see too many of them.

Operator

[Operator Instructions] Our next question comes the line of Larry Haimovitch with HMTC Group.

Larry Haimovitch - Haimovitch Medical Technology Consultants

Several of my questions have been asked already, but a couple that I wanted to raise. You talked about distributors and distributor inventories. One of the things we've seen in a couple of companies this quarter that have already reported is, they reported problems with distributor inventories for various reason, problems as in reduced distributor inventory levels. Can you discuss whether you think your distributor inventory levels are higher than normal, lower than normal or just right where you feel they should be?

Kevin P. Connors

Yes, well, our philosophy has always been to keep our distributors at -- revenue -- at inventory levels that are really driven by the current business, we don't think it's a good practice to ask distributors to take large orders at the end of the quarter when we don't drive for a quarter or 2. And I think that's reflected in our accounts receivable level. We really want to keep the inventory fresh and so we just haven't -- we have no -- we don't have tremendous visibility in how many machines they have in the warehouse, but we try to stay very close to the way they're transacting their business and provide the product when the customer needs it.

Ronald J. Santilli

Our distributors primarily stopped for service parts and maybe have some demo equipment that they purchase, they use for demo purposes. But sales transactions are pretty much passed right through to the end user.

Larry Haimovitch - Haimovitch Medical Technology Consultants

So they don't -- the distributor inventory levels don't move very much, except if sales grow, then maybe they move commensurate with sales growth?

Ronald J. Santilli

That's correct, and very minor.

Larry Haimovitch - Haimovitch Medical Technology Consultants

Okay. Ron, for you, looks like the medical device tax, which we all just so much love is going to be a reality beginning January 1. Have you given a lot of thought to how this is going to impact Cutera, what the impact would be? And for Kevin, one CEO talked about raising prices to offset the medical device tax, wondering how you guys are looking at this?

Kevin P. Connors

Well, on the price side, it sounds nice. But I think we might have a hard time dealing with that. So we're going to do what we can, Larry, to mitigate it, but it is material. And as you know, it's not dependent on whether the company's profitable or not. This is a majority our U.S. business, which is about 40% of our total revenues. We need to dig in to it some more. And if it's just related to product sales and not the service sale, I mean, we -- with the service revenue, I mean, we're going to look to high-level of detail, and make sure that we're not leaving money on the table.

Larry Haimovitch - Haimovitch Medical Technology Consultants

So at this point, it sound like -- unless I should let Ron probably pipe in, it doesn't sounds like you have an estimate at this point about what it might cost you?

Ronald J. Santilli

We haven't put any guidance out there in any way about what that would be, no. Not yet. Not yet.

Larry Haimovitch - Haimovitch Medical Technology Consultants

Okay. And one last question and I'll jump back on the queue, and that is on the share buyback. I wasn't -- I can't remember, do you actually have a share buyback in place now, Kevin?

Kevin P. Connors

We don't Larry, not at that time.

Larry Haimovitch - Haimovitch Medical Technology Consultants

Wouldn't it make sense to just have the board put something in place. Obviously, it doesn't obligate you to buy anything, but in any event the market gets really worse than it's been, it gives you the opportunity at least to step in, if you choose to, and perhaps pick up some stock at a price you deemed to be very, very attractive.

Kevin P. Connors

Well, as I said early in the call, this is an active discussion with my board and philosophically, we have it before, as you know, Larry. And if we were to approve a plan, it would be with the intent of actually buying a stock that we talked about. It wouldn't for external objects. We really -- I do see that the argument that the stock is so inexpensive at this level relative to what we have in the bank, that it's getting louder. I'm hearing this more and more.

Larry Haimovitch - Haimovitch Medical Technology Consultants

Well, I second that motion.

Operator

Our next question comes from the line of David Levy with Senvest.

David Levy

I just had a couple of questions for you. On the service side, you broke out $1.1 million coming from Iridex, so if I back that out, it looks like your service revenues will be down year-on-year. Can you explain why that might be the case in the context of the core business growing?

Ronald J. Santilli

It would have declined a couple of hundred thousand dollars and it does fluctuate. That service revenue if you watch it over the past couple of years on a quarterly basis, it fluctuates between $3.2 million and maybe $3.6 million per quarter. So I don't know if I consider that to be material, just a fluctuation that's occurred.

David Levy

Okay. And on Titan, it seems to be the opposite. It seems to be very steady and you got about $1.1 million, $1.2 million every quarter. How should we think about that going forward, is that going to get tired at some point or do you think that, that's sustainable in the coming quarters and even years?

Kevin P. Connors

Well, it means that the trends are very predictable and we've got some plans to augment that. We are committed to significant investments in R&D and, I think, the Titan business has been one that we really like. And so I don't see that going away. In fact, with the introduction of another recurring revenue stream, it allows us to start to evaluate whether we want to make more investments from a distribution perspective, meaning a sales specialist that actually are focused on procedure volume whereby we're participating in that. So I think with these 2 products in our bag, it makes that argument even more justified in my mind. So in that case, there is possible -- there's an argument that we could actually leverage that Titan business, if we were to build that in our sales team.

David Levy

Right. And then just last one for me. Can you give us a little bit of a report card around the world where you saw pockets of weakness and where you saw pockets of particular strength? Everyone's obviously concerned about Europe. You seem to be executing well in France with Iridex. Just any color you can provide, country by country or region by region, will be helpful.

Kevin P. Connors

Sure. With the Iridex acquisition, we really looked at France as one of the key assets, and they've got a really nice installed base and a great team on the ground. And we're happy to have that group contributing and, in fact, we've made some additional investments in our sales team on the ground in France, and with the hopes of growing that business even more. But with the challenging environment, we did cut some of our other expenses in Europe over the past year, and so we've done some expense reductions there that we think were the right things to do. And we're happy to see that the addition of the business in France was able to make the revenue net flat relative to past periods.

Ronald J. Santilli

Actually, even slightly up.

Kevin P. Connors

Even slightly up. Canada, we're seeing great strength in Canada. Record performance levels there. Asia seems pretty stable with Japan consistently being about a quarter of our business, anywhere from 20% to 25%. And then Australia and New Zealand, more strength there. So recent quarters, Latin America has been a little soft, but we've had a pretty good track record down there over the years.

Operator

There are no further questions in the queue at this time. I would now like to turn the floor back over to Mr. Connors for closing comments.

Kevin P. Connors

Thank you for participating in our call today. We will be attending a number of investor events in the coming months, and we will update you on our business progress on the third quarter conference call in November 2012. Good afternoon, and thanks for your continued interest in Cutera.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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