Cutera Inc (CUTR) 2006 Q3 法說會逐字稿

Good day, everyone, and welcome to the Cutera, Incorporated, Third quarter 2006 Earnings Conference Call. Today's call is being recording.

[OPERATORS INSTRUCTIONS]

It is now my pleasure to turn the floor over to your host, Mr. John Mills, of Integrated Corporate Relations. Please go ahead, sir.

Thank you. By now, everyone should have access to the third quarter 2006 earnings release, which went out today at approximately 4:00 p.m. eastern time. The release is available on the Investor Relations portion of Cutera's website at cutera.com, and with our Form 8-K, filed 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 future financial performance and guidance, including anticipated increase in revenue and expansion of Cutera's customer base, long-term domestic and international growth opportunities and strategies, and future spending on various aspects of our operations.

Also, management may make additional forward-looking statements in response to your questions. Factors that could cause Cutera's actual results to differ materially from these forward-looking statements include its ability to effectively continue to increase its sales performance worldwide, unforeseen events and circumstances relating to its operations, government regulatory actions, general economic conditions and those other factors described in the section entitled "Factors that may affect future results," and its most recent 10-Q and 10-K filed with the SEC.

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, especially those relating to guidance on future financial performance, which speaks 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.

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

Thank you, John. Good afternoon, everyone, and thanks for joining us today to discuss Cutera's results for the third quarter ended September 30, 2006. Today's call will provide some -- provide an overview for our third quarter results. And Ron Santilli, our CFO, will provide additional details on our operating and financial results, and comment on guidance. Finally, I will provide some closing comments and open the call to your questions.

We set a new record for quarterly revenue in the third quarter, and achieved significant operating improvements, resulting in improved profitability and operating cash flow. A number of factors, contributed to the strong third quarter results and our long-term growth. For example, in the third quarter, revenue in the United States increased by 20%, to $17.4 million. This reflects the continued demand for our product offerings and from sales force expansion investments made during the past year. We continue to see very positive market conditions. And we'll now focus our efforts on improving productivity of our expanded sales team.

Secondly, our international revenue increased by 70% when comparing Q3 2006 to Q3 2005. We experienced growth in all of our major overseas markets and are particularly pleased with the contributions from Canada, Japan and Switzerland. We believe the international markets offer us excellent long-term growth opportunity. And our investments, to date, in expanding our international distribution network is paying off. We are well positioned to continue reaping the rewards from this emerging market.

A third factor fueling our growth is our robust multi-application and upgradeable product offerings. We are continuing to increase our investments in research and development, and have many important projects in the pipeline. In October, we announced two new offerings, LimeLight and Navigation. LimeLight is the first programmable wavelength device that allows doctors the flexibility to customize treatments for skin rejuvenation, pigmented legions and facial vascular legions.

Our programmable spectrum technology has been very well received with our ProWave 770 hair removal offering. And we have heard very positive feedback with the LimeLight offering. LimeLight offers our customers customized treatments for their patients, which results in better clinical results, with fewer patient visits. Our new Navigation technology provides our customers with quick access to recommended operating parameters and storage of patient data on the Xeo platform. We are committed to making our product intuitive for our customers. And Navigation helps guide our customers through each treatment.

Our Xeo platform allows for a broad spectrum of operating parameters. And our Navigation technology helps guide our customers to the optimal treatment parameters for each patient treatment. This added feature is expected to improve treatment repeatability, reduce setup and administrative times during patient visits. We're continuing to experience growth across all the major physician markets, with particularly saw growth in the non-core specialties.

During the third quarter of 2006, we booked approximately 24% of our system orders from the traditional dermatologists and plastic surgeon specialties, 33% from family practice, 8% from OB/GYN, 23% from other physicians and approximately 12% from non-physicians. We've always approached our business with the long-term goal of positioning Cutera as a leading provider of laser and light-based systems to the aesthetic market. As a result of our strong product offerings, healthy balance sheet and sizable recurring cash flow from operations, we are well positioned to continue growing our business for many years to come.

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

Thanks, Kevin. And thanks to all of you for joining us today for our third quarter 2006 results. Before I begin, please note that all of our historical financial performance and guidance comments are expressed in GAAP numbers, which include the impact of the patent litigation, settlement charges and stock-based compensation charges.

In addition, to supplement the GAAP numbers, we have provided non-GAAP net income and non-GAAP diluted income per share information, that excludes the impact of the patent litigation settlement and all stock-based compensation expenses, both net of their related tax effects. We believe that these non-GAAP numbers provide you with insight to conduct a more meaningful and consistent comparison of our on-going operating results and trends, compared with historical results. A table reconciling the GAAP financial information to the non-GAAP information is included in our earnings release.

Third quarter 2006 revenue was 25.1 million, a 32% increase compared to the same period last year. Net income for the third quarter of 2006 was $3 million, or $0.21 per diluted share. Non-GAAP net income for the third quarter was $4.2 million, or $0.30 per diluted share. Revenue for the first nine months ended September 30 was $70.2 million, a 36% increase from the $51.7 million recorded in the same period last year.

Net loss for the first nine months of 2006 was $5 million, or $0.40 per diluted share. Non-GAAP earnings for the first nine months of 2006 were $8.9 million, or $0.62 per diluted share. During the third quarter of 2006, our product revenue grew 29% to $20.9 million. This was driven primarily by sales of our premium multi-application Xeo platform and our Solera platform products. We are continuing to see the increasing number of multi-unit transactions from higher-volume practices.

Upgrade revenue increased 21% in the third quarter to 1.6 million from 1.3 million in Q3 of '05. Service revenue increased 52% to 1.6 million in the third quarter of 2006 as compared to the third quarter of 2005. We expect this revenue growth to remain strong as our install base increases, and customers continue to utilize our services to maintain their products after the initial warranty expires. Finally, our annuity revenue stream from Titan resales grew 112%, from 481,000 in the third quarter of 2005 to $1 million in the third quarter of 2006.

Just like our service revenue, as the install base of our Titan product increases, and as our customers continue to satisfy the fast-growing demand for Titan procedures, we expect revenue from this product line to continue growing at a faster rate than our other product categories. I will now address our operating performance. Our gross margin in the third quarter of 2006 was 68% compared to 75% in the third quarter of 2005. This decrease was primarily attributable to the patent license royalty expense, which was approximately 4% of this quarter's revenue, and $170,000 of stock-base compensation expense resulting from implementing the FAS 123R in 2006.

Our margins remain strong due to continuing demand for our premium multi-application Xeo products and higher gross margin associated with our Titan related products. Including the continuing royalty expense, we are expecting our gross margin to remain in the range of 68% to 70% for the fourth quarter of 2006. The blended royalty rate is expected to remain at approximately 4% of total revenue for the fourth quarter. Sales and marketing expenses for the third quarter of 2006 were $8.2 million, or 33% of revenue, compared to $6.2 million, or [33%] of revenue in the third quarter of 2005.

The growth in absolute dollars is due to our sales force expansion efforts and an increase in stock-based compensation expenses, resulting from the implementation of FAS 123R in 2006. For the next few quarters, we will be focusing on enhancing the productivity of our sales force. We expect sales and marketing expenses as the percentage of revenue to decline to a 29% to 31% range in the fourth quarter of 2006. Research and development expenses were 1.7 million, or 7% or revenue, in the third quarter.

Even though we will continue to increase our investment in this area, we believe our spending will remain in the range of 6% to 7% of revenue for the fourth quarter 2006. General administrative expenses for the third quarter were $3 million, or 12% of revenue, which includes the effects of implementing FAS 123R. We expect our G&A expenses to improve to a range of 10% to 12% of revenue in the fourth quarter. In accordance with the litigation settlement agreement with Palomar, there was an audit in the third quarter of 2006 of the settlement amount owed through March 31, 2006.

As a result of the audit, and after discussions with Palomar, we changed our estimate of the amount owed through March 31, 2006, and recorded an incremental expense of 544,000, or $0.03 per diluted share net of tax in the third quarter. The audit is expected to be completed by December 31, 2006. And the blended royalty rate is expected to remain at approximately 4% of total revenue for the fourth quarter.

Operating margin for the third quarter was 15%. We expect our operating margin to improve in the fourth quarter to be in the range of 20% to 25% due to higher expected revenue and increased leverage of our operating expenses. Our effective income tax rate for the third quarter of 2006 is 35%. We expect the effective income tax rate to be approximately 33% for the fourth quarter of 2006.

Coming to EPS, it's possible to now refer to the non-GAAP reconciliation of our net income and EPS provided in our earnings release. On a GAAP basis, earnings per diluted share were $0.21 for the third quarter of 2006. Non-GAAP earnings per share for the third quarter were $0.30, which was calculated after adjusting for the following two items. First, non-cash stock-based compensation expense per FAS 123R of $1.2 million, adjusting for the income tax benefit of this expense, this represents $0.06 per diluted share.

Secondly, the incremental non-recurring litigation settlement expense of $544,000, adjusted for the income tax benefit of this expense, this represented $0.03 per diluted share. Year to date, through September 30, 2006, GAAP loss per share was $0.40. On a non-GAAP basis, after accounting for the net impact of the non-cash stock-based compensation and the non-recurring litigation expenses, earnings per diluted share for the first nine months of 2006 were $0.62.

Turning to the balance sheet, our financial position continues to remain very strong. As of September 30, 2006, we had over $90 million of cash and marketable securities. This represents over $7 per outstanding share. During the third quarter, cash generated from operations was 7.7 million. And accounts receivable net at the end of the third quarter was 9.1 million, and the DSOs were 33 days.

Moving to guidance. In the fourth quarter of 2006, we expect revenue of approximately $30 million, with GAAP earnings per share and non-GAAP earnings per share of approximately $0.35 and $0.41, respectively. For the full year of 2006, revenue guidance is approximately $100 million, representing a 33% increase when compared to 2005. EPS guidance for the full year of 2006 is breakeven. These EPS numbers include the impact of stock-based compensation charges and our litigation settlement expense.

Non-GAAP EPS for the full year of 2006, after adjusting for the non-recurring litigation settlement and non-cash stock-based compensation expenses, is approximately $1.03. Please refer to our detailed reconciliation of GAAP and non-GAAP numbers attached to the earnings release. We are in the process of finalizing our 2007 budget. And we will be providing guidance for 2007 during our fourth quarter conference call.

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

Thanks, Ron. So you can tell by our results, we're continuing to increase our revenue, and are now realizing improved leverage in our operating expenses, resulting in improved profitability and cash flow. In the past year, we expanded our sales force of North American to become one of the largest domestic sales teams in the light-based aesthetic market. In addition, our sales force expansion in the international market is now beginning to gain traction, as is shown by the 70% revenue growth in the third quarter 2006.

During the next few months, as we continue to experience increased productivity from our sales team and approved operating margins, we can expect this leverage to result in increased profitability. We also plan to increase our investments in R&D to bring new innovative products and applications to the market at a more rapid pace.

In summary, we're very excited about our future. And we have a very strong financial position and business model to continue our revenue growth. The light-based aesthetic market is growing at a robust rate. And we are continuing to capture market share in a healthy market. We have developed a strong portfolio of products, one of the largest direct sales organizations in North American, and are continuing to invest in international channels. We believe these investments, together with our business strategy, position Cutera for continued growth and profitability for the foreseeable future.

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

Thank you.

[OPERATOR INSTRUCTIONS]

We'll go first to Tom Gunderson with Piper Jaffray.

Good afternoon. Ron, maybe -- can give me -- I apologize. I haven't been able to get on line. Could you tell me what the US/OUS breakout was?

Sure, Tom, just give me one second. The U.S. revenue piece for this current quarter was 69%. And the outside U.S. was 41%.

Okay, thanks. And then, the tax rate of 33%, that's adjusting for the whole year, then? And what would you expect '07 to be?

Yes. For the fourth quarter, we're expecting 33%. And for '07, we're expecting kind of in the range of 33% to 35% as well.

Okay. And then, Kevin, the emphasis on new products and introducing them at a more rapid pace, you've gotten us comfortable with -- once a year, you'd have another break-through product. Are you saying that that's going to be more than once a year now? Is that the intention?

Well, we certainly are making those investments to expedite product introductions. So, we're doing our best to improve that rate. But I think we have had a nice track record of break-through products about every year.

And then, on the existing products, I'm wondering about penetration. What do you think of the -- whether it's hair removal or skin tightening or skin tone -- what do you think is the least penetrated of the products you have out on the market?

Least penetrated. Well, being that we're selling to -- a lion's share of our business is outside of dermatology and plastic surgery -- plastic surgery specialties. It's about 70% of our business, and the number of physicians we're calling on in North American, is in excess of 130,000 physicians. And it's been estimated that, globally, it represents about 0.5 million physicians that we're calling on, so very low single-digit penetration.

Okay. And then, last question, you want to leverage the sales force and get more productivity in Q4. Were there any additions or deletions in Q3, U.S. or International?

Ron, do you have that?

The headcount remained fairly constant. We still have 55 territories in North America. And the international headcount remains constant at around 21, 22 direct people.

And were any of those 50 -- I know the headcount's the same. But were any of them replaced during the quarter?

Not -- the turnover was very small.

Okay. Thanks a lot.

We'll go next to Phil Nalbone with RBC.

Good afternoon, guys. I think Tom Gunderson tried valiantly. I'm going to try again and see where we get with this. Kevin, on the new products front, what should are expectation be for the coming year? Traditionally -- the new, new thing has been rolled out at the AAD Conference, which will be in early February of '07. should we be expecting just one new product or more than one?

Well, we just launched two new products in the third quarter. And we plan to have a new offering -- at least one new offering at the AAD in the first quarter.

Okay. And would you characterize this as kind of a line extension, or is it likely to be a new application?

A new application.

Okay. Do you care to elaborate?

No. For competitive reasons, we've not done that, Phil. And I think you can appreciate the sensitivity that we have when we're talking about new applications.

Absolutely understood. I just thought I'd try. More than $90 million in cash, that's a lot of cash. What are your expectations for the use of cash? And at what point do you use that for share repurchases?

It certainly is a topic that we've had with our board, some price threshold. I think that's something that we would certainly entertain. We are also stepping up our efforts for new development activities. So we're looking to explore both of those opportunities.

Okay. And as you contemplate new business opportunities, are you looking beyond light and laser-based technologies at this point?

Absolutely.

Okay. You've made a number of illusions, throughout the call, to the productivity of the sales force. Can you give us a little more color on that? Were you in any way, disappointed with the level of productivity that you're seeing from some of the newest people. A lot of those people came on board roughly six months ago. Can you just kind of characterize your impression of the overall productivity, and where there might be room for additional leverage?

Right. On one hand, we are seeing that the sales and marketing expenses really come down to low levels, in the low 30s now. So it's clear evidence that we are leveraging that. However, we did make a major expansion about six months ago, as you pointed out, Phil. And we're looking to improve upon the sales productivity of that most recent class. So the people that have been with the company for at least one year have had a very solid sales productivity levels.

Okay. And I apologize. But let me ask just a housekeeping matter. Would you mind, Kevin, going through the mix of revenues by physician or customer category again in the quarter?

Sure.

And point out where there might have been any sort of meaningful divergence from recent patterns.

Well, it does bump around a bit from quarter to quarter. But I think, if we look at a longer timeframe, it does stay fairly consistent. So in Q3, we had 33% of our business sold to family practice GPs, 8% into OB/GYNs, Derms at 12%, Plastic Surgeons at 12, other physician categories is 23%, and then non-physicians, med spas, is 12%.

Okay. All right, I think I will go back into the queue. Thank you, very much.

Thank you, Phil.

Thank you, Phil.

We'll take our next question from Anthony Vendetti with Maxim Group.

Thanks.

Good afternoon, Kevin.

Good afternoon, Ron.

Good afternoon.

Hi, Anthony.

First, for Ron, if you could explain the add-back. Since the audit's not going to be completed until 12/30/06, what's the $0.03, 540,000 add-back?

Right. There was an interpretation issue with the agreement, Anthony, that the issue revolved primarily around upgrades sold in 2003 and 2004. After further discussions with Palomar, we decided to adjust our estimates. We do expect the on-going rate to remain at approximately 4%. And we do expect this audit to be concluded by the end of this year.

Okay, so the add-back was for prior year upgrades that you discovered early on in your audit?

Well, they were in 2003, 2004. And we had -- our interpretation of the agreement was to affect them one way. There's was to affect them another. And as a result, we sat down and we went over that in more detail. And we decided then to adjust our estimate.

Okay, so they could be -- there could be some minor adjustments at the end of the audit. But his is one that you guys agreed on already.

Yes. I don't expect anything else. The audit is, for the most part, completed. We do have a few months, like I said, until it will be finalized. But we recognized that, during this part of the audit, that there was an adjustment that we would make as a result of this. But I think, for the most part, I don't expect any significant light-based aesthetic adjustments from here.

Okay.

And, Kevin, just in terms of the competitive landscape, we have Thermage coming public probably this week. In terms of Titan and the tissue-tightening market, can you talk about -- a little bit how the Titan competes? And then, in terms of some of the new products, the LimeLight and so forth, can you talk about how -- I know they're programmable wavelengths, but how they different themselves from some of the competition that's out there?

sure. The skin-tightening market contains a very strong part of our business. And Thermage has experienced a nice growth in this space as well. Thermage has been around for quite some time. I think they started somewhere in 1996 or so. So they've been in the market for quite some time. And they haven't focused on the skin-tightening market exclusively.

And I think that we're unique in that we used a light-based technology versus radio frequency energy that Thermage employs. So there's clearly room for more than one technology in this space. And I think the benefits we see with light is -- the results tend to be more predictable. And we think there's some benefits in terms of the safety profile.

With regards to the new offering, LimeLight, we've gotten very good feedback from our early customers that have used it. And, again, our customers like the flexibility of programming the right spectrum of light for each application and for each patient. So it gives our customers the ability to have optimal treatment preferences for each procedure. And that's something that is unique to Cutera.

Okay. And lastly, Kevin, you were talking about the international markets, in particular, that you were pleased with. One was Canada, another Switzerland. You mentioned another one. Can you talk about what, this quarter specifically, was done differently or what happened this quarter, you think, to show growth in those markets?

Yes. The other region I eluded to was Japan. We acquired a distributorship in Switzerland just over a year ago. And we liked that model. In fact, we're open to replicating that with potential acquisitions in the future. But they have excellent contacts in the market there. And we've been able to get a significant share of the -- relative market, but the market has been very healthy for us in Switzerland.

The same is true for Canada. We've really made it a priority to focus on the Canadian market, and actually aligned our sales management to capture that market specifically. And that's paid off for us. And then, Japan is the largest single market outside of the United States. And we've built a very strong direct-sales organization there that we're continuing to expand.

How many direct sales people do you have in Japan?

Six.

Six. Okay, great. All right, thanks.

We'll go next to Dalton Chandler with Needham & Company.

Good afternoon.

Good afternoon, Dalton.

Hi, Dalton.

I apologize. I'm still just a little confused over this $544,000 payment. You're saying that is a pure adjustment. It's not related to the cost of the audit itself. Is that right?

That's correct. We're adjusting our original estimate that we had last quarter of $18.4 million due to these upgrades that were performed in '03 and '04.

Right. So in -- I assume there will an on-going annual audit related expense. Is that right?

Yes. But that would be nothing like $500,000 for the annual cost of the audit.

Okay. And then, I was just wondering, the non-physician market, I think you said, was -- did you say it was 12% this quarter?

I believe that was the right amount.

Yes. Yes.

Yes. Could you just comment on the characteristics of that market? Who exactly you're selling those products to and what they're interested in?

Right. It is a little confusing because we refer to the med-spa market as a non-physician market. But we only sell our products where physicians are involved. So we are selling to doctors that are setting practices in a more retail environment. And that's been relatively consistent at that 12% level.

Yes. 10% to 12%, in that range.

Right.

Okay. And are they interested in the broad spectrum of products or is it pretty much on one procedure?

Absolutely.

Okay.

The whole spectrum of applications that we offer.

Okay. All right, thanks very much.

[OPERATOR INSTRUCTIONS]

We'll go next to Jose Haresco with Merriman.

Hi, Kevin. Hi, Ron.

Hi, Jose.

Hi, Jose.

A quick -- just a couple of housekeeping things. Ron, is it possible for you to break out that 1.2 million in that stock option expense among the different line items?

Let's see. It's -- the 1.2 million that we had this quarter was approximately 170,000 in cost of goods sold, 406,000 in sales and marketing, 189,000 in research and development, and 468,000 in G&A.

How much of those values can we carry forward as we look into '07, as we start to model GAAP versus non-GAAP in '07?

I would use -- I think those numbers would be very close to use for modeling.

For both fourth quarter and for all of '07 on a quarterly basis?

Yes, that's correct.

Okay. Thank you. Could you give us a little bit more insight into the LimeLight that just got introduced in the market place? Is it fully launching your sales force? Is it still being introduced at some level? Can you give us some guidance as to where in the ramp that is?

Yes. We fully launched it, Jose. And, again, the benefit of this device is the programmable spectrum that allows our customers to have more customized facial rejuvenation treatments, as well [inaudible] brown spots or pigmented lesions.

All right, thank you.

We'll take our next question from Mike Bosman with Peninsula Capital.

Hi, good afternoon. Ron, I was wondering if you could maybe just explain the accounts receivable increase sequentially. I know international revenues grew faster. But it looks like that was actually down sequentially. Can you just give me a little color on why it increased so much?

Sure. First of all, if you calculate into the $9.1 million, it's about a 33 day DSO, which is still, I think, the best that I've seen, according to my calculations. But they were higher than we been sequentially. And that's primarily related to the summer months. In July and August, it seemed we had fewer people who wanted to take delivery of their product in those months, I guess, evidently, to vacationing. And we had a larger share being shipped in the third month, September, which is being paid in October or was to be paid in October.

And is that consistent with year-over-year patterns for you guys?

Yes. I think you would find Q3 tends to be a little bit more back-ended on the shipment side because of the July and August summer months.

So you obviously see your Q4 inventories probably coming down even with increased revenues?

[Could] very well.

All right, thanks, guys.

We'll take our next question from Alex Arrow with Lazard Capital Markets.

Thanks. I apologize if this has already been asked. But the progress that you've been making towards reducing the fraction of total revenue that is susceptible to royalty payments to Palomar, can you comment? I know that's a moving target. In past quarters, you've commented how that's going to be progressing. Can you tell us anything quantitative about how far that's come so far and how far you expect it to go in '07, perhaps?

Like I said, we haven't quantified any targets for 2007 in terms of what is subject to the royalty amount. And we're continuing to offer all of our products independent of whether it's subject to royalties, to the market place. The new applications that does not incorporated laser or light-based hair removal [aren't] subject this royalty expense. So the new applications that we're developing in that category, are going to have a beneficial impact on the gross margin line.

Yes. I recognize. And I guess my question is, how much progress towards the new applications being a larger portion of the revenue has been made so far? I think it was a 3.5% blended rate. And you were aiming to get that down into the twos. And can you say anything about how far along that's coming perhaps? The LimeLight is one of the steps in that direction, if that's not a hair removal device.

That's right. It's new applications, Alex. And with the AAD coming in the first quarter, we look forward to launching new applications that aren't subject to the royalty amount. So, really it ties up new product launches.

But, I mean, as of the end of this quarter, can you comment on -- where you below the 3.5%? Is there, like, a run-rate as of September 30?

You know, Alex, our last few quarters, we've been running about 4% of total revenue. And that's what we're projecting on a go-forward basis until, of course, the product launches that Kevin was just talking about.

Alex Arrow. I see. Okay. Okay, can you comment on whether you've got a buyback in your future?

As I mentioned earlier, we have discussed it with the board. And we're continuing to monitor it. But we are generating a tremendous amount of cash. And that's something that seems to make a lot of sense for us.

Can you comment on whether it seems to make a lot of sense next quarter or next year?

Well, it really depends on the reprice of the stock, Alex.

Good. Okay, thanks.

Thanks.

And that concludes the question and answer session. Mr. Connors, I'd like to turn the conference back to you for concluding remarks.

Well, thank you for participating in our call today. We look forward to updating you with our progress next quarter. And as a reminder, we'll be attending a number of conferences, including RBC, Lazard, Piper Jaffray and Needham conferences in the coming months. I hope to see you there. Good afternoon, and thanks in your interest in Cutera.

This concludes today's Cutera conference call. Thank you for participating. And you may disconnect your phone lines at this time.