Cutera Inc (CUTR) 2010 Q2 法說會逐字稿

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

By now, everyone should have access to the second-quarter 2010 earnings release which went out today at approximately 4 PM Eastern time. The release is available on the investor relations portion of Cutera's website at Cutera.com and with its Form 8-K filed today with the SEC and available on its website at SEC.gov.

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

These forward-looking statements do not guarantee future performance and therefore you should not rely on them in making an investment decision without considering the risks associated with such statements. Cutera also cautions you to not place undue reliance on forward-looking statements which speak only as of the day 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 more complete list of risk factors that could cause Cutera's actual results to differ materially from the forward-looking statements, please refer to the section entitled Risk Factors in our most recently 10-Q filed today on August 2, 2010 with the Securities and Exchange Commission. And with that, I'll turn the call 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 second quarter ended June 30, 2010. On today's call, I'll provide an overview of the results. Then Ron Santilli, our CFO, will provide additional details on our operating and financial results. Finally I'll provide some closing comments and open the call to your questions.

Our revenue for the second quarter 2010 was $12.2 million or 5% higher than the $11.7 million reported in the second quarter 2009. This was the result of our US revenue increasing 5% and our international revenue increasing 4%.

Our quarterly US revenue grew year over year for the first time in over two years. Though we're not satisfied with this level of revenue growth, we are encouraged by the positive year-over-year trend. We are continuing to monitor our US performance while we remain focused on key initiatives to increase revenue. We'll discuss new product introductions later in the call.

Historically, we have experienced positive revenue impact following new product introductions. We are certainly are looking to leverage this as a catalyst for increasing our US revenue.

Our international revenue increased 4% in the second quarter of 2010 compared to the second quarter 2009 representing 61% of our total revenue in both the second quarters of 2009 and 2010. The second quarter 2010 we achieved record revenue in Japan.

We have a strong presence in Canada where our revenue volume was lower than expected in the second quarter due to some local tax laws that made it advantageous for customers to defer their purchases into third quarter. As a result, we expect a stronger third quarter performance from our Canadian market. We are pleased with the geographic diversification that our international business is producing.

Turning to our cosmoceutical (inaudible) sales in the second quarter 2010, we sold approximately $800,000 of these products. As a reminder, in Japan we started distributing Obagi physician dispensed cosmeceutical products from February 2010, distributing BioForm's Radiesse product since late 2008.

These products augment our Cutera laser and light-based products. Currently the cosmeceutical filler and Cutera laser and light-based installed base has very little overlap.

This is providing us with a unique opportunity to cross sell cosmeceutical fillers to our light-based installed base as well as an opportunity to cross sell light-based equipment into the cosmeceutical filler customer base. We are pleased with the initial revenue contribution from this product category.

As we've discussed on previous calls, we are continuing to target the core market segments of dermatologists and plastic surgeons as well as other established medical office as we believe they offer the best growth opportunities in the current market environment. During the second quarter 2010, we sourced approximately 40% of our US and Canadian [owners] from core physicians. Our international business is largely comprised of core physicians.

Turning to research and development, we believe that strategic ongoing investments in product research and development are critical to our future success. In line with that principle, we are continuing to invest in research and development for the next generation of technology and have ramped up our engineering and clinical research headcount to develop innovative solutions and expand the clinical understanding and applications of our current products.

As we had made significant strides towards the commercialization of several engineering programs, we are now in a position to discuss some near-term opportunities in our R&D pipeline. In the next 18 months, we are planning on launching three new products, two of which we will discuss today.

Later this month, we will begin a stage launch of our product targeted at toenail fungus removal calls Genesis Plus. We believe the toenail fungus market is fast growing and this product will be primarily targeted at podiatrists and dermatology specialists.

We further believe this market could expand into family practice. Our new product utilizes our (inaudible) technology and has a handpiece delivery device with a temperature sensor to improve the practitioner and patient experience with the procedure.

We are finalizing our marketing and clinical launch plans now. We have current FDA clearances that allow us to sell this product to all licensed practitioners including dermatologists and podiatrists for skin rejuvenation, vascular lesions and warts. We have plans to pursue a specific FDA indication for toenail fungus removal but it is unclear when or if we'll be able to achieve this milestone given the current regulatory uncertainty.

We presently have a pending CE Mark clearance with the proposed indication including treatment of toenail fungus. We plan to launch another product at the American Academy of Dermatology meeting in February 2011.

Our launch plan is to introduce an exciting laser technology designed with core physicians in mind. We believe we have developed a best-in-class vascular laser and we look to introduce the product to key opinion leaders and begin building our clinical experience in the coming months. We will share more with you as we near the AAD meeting in 2010.

Lastly, we plan to add another product launch in the second half of 2011 and we will discuss this in more detail as we approach our launch. Now I'd like to turn the call over to Rob to discuss our financials in more detail.

Thanks, Kevin, and thanks to you all for joining us today on our second-quarter 2010 conference call. Second-quarter 2010 revenue increased by 5% to $12.2 million compared to the second quarter of 2009.

This is our first quarterly year-over-year revenue growth since the second quarter of 2008. Net loss for the second quarter was $3.8 million or $0.28 per diluted share.

Product revenue increased by 10% for the second quarter of 2010 when compared to the first quarter of 2009. We sold more systems than we did in the same quarter a year ago.

This is particularly exciting because each new product sale expands our installed base of customers which provides us with the opportunity to sell and upgrade service or tighten refill in the future. Upgrade revenue for the second quarter of 2010 increased 11% when compared to the same quarter 2009. We're seeing customers purchase a variety of our upgrade products without any one product upgrade dominating.

Service revenue for the second quarter of 2010 compared to the second quarter of 2009 was relatively flat at approximately $3.4 million. The primary components of our service revenue are the revenues associated with extended service contract amortization.

This revenue has remained flat over the past several quarters due primarily to lower service contract amortization as a result of lower ASPs on our service contracts, offset by higher revenue from consumable and [timing] material purchases. Titan annuity revenue for the second quarter 2010 was $960,000, down from the same quarter in the prior year.

This decrease was primarily due to the voluntary recall of certain Titan XL handpieces in the second quarter 2010. We provided our eligible customers with a fully refilled Titan XL handpiece which resulted in a lower than normal Titan refill revenue.

We expect the third quarter 2010 will be a similar revenue level to that of the second quarter and expect this revenue category to begin ramping up in the fourth quarter and return to the historical run rate level of approximately $1.4 million in the first quarter of 2011. Revenue derived from fillers and cosmeceuticals revenue was $806,000 for the second quarter of 2010 which was up 54% from the second quarter of 2009.

We started selling Obagi products in Japan in February 2010 and are pleased with the ramp up of this revenue source in addition to the cross-selling opportunities this provides. A significant percentage of our revenues is sourced from existing customers.

During the second quarter of 2010, 54% of our revenue was derived from sales of service, upgrades, Titan refills, filler and cosmeceutical products. We remain committed to strong customer satisfaction and believe there is an opportunity to realize revenue growth from our annuity revenue categories.

I will now address our operating performance. Our gross margin was 56% in the second quarter of 2009 and 2010.

Our margin remained flat due to continued improvements from product reliability offset by reduced margin on our cosmeceutical business during the quarter. We typically target 60% gross margin at quarterly revenue levels in the $14 million range.

Below the $14 million revenue level, we would expect the gross margin level to be -- to decline due to absorption of fixed costs. Alternatively, we expect the gross margin rate to increase about 60% [when] quarterly revenue rise above $14 million.

Sales and marketing expenses were $6.5 million or 53% of revenue for the second quarter of 2010 compared to $6.1 million or 52% of revenue for the second quarter of 2009. Key reasons for the expense growth include an increase in expenses associated with establishing our cosmeceutical business in Japan and expenses associated with our new sales and marketing functions that occurred in 2010 but not in 2009 to increase our focus on revenue growth.

The new departments include business development to focus on our acquisition and strategic alliance strategy and evaluating new opportunities, clinical development to focus on clinical studies on existing products to increase their indications for use and ability and improve our ability to market them and a telesales group to focus on increasing our penetration and strong relationships with our installed base. We expect to improve the leverage of these expenses and reduce their ratio to revenue as our revenue increases.

Research and development expenses were relatively flat at $1.5 million in the second quarter of 2010 and 2009. As Kevin mentioned earlier, we plan to increase our investments in R&D and expect to launch three new products in the next 18 months. As a result, we expect R&D expenses to increase, however as our revenue improves, we expect that R&D expenses should decrease from the 12% of revenue in the second quarter of 2010.

General and administrative expenses were $2.7 million or 22% of revenue for the second quarter of 2010 compared to $3.6 million or 31% of revenue for the second quarter of 2009. This $900,000 decrease in general and administrative expenses was primarily due to $550,000 in lower bad debt expenses and $350,000 in other cost reductions as a result of our restructuring efforts and lower professional fees.

Note that traditionally our second quarter has a higher stock-based compensation expense than other quarters due to annual equity grants to our employees and directors and officers. For modeling purposes, we expect our quarterly general and administrative expenses to be approximately $2.3 million in the second half of 2010. We expect to improve the leverage of our G&A expense once our revenue increases.

Interest and other income net was $141,000 for the second quarter 2010 compared to $511,000 in the second quarter 2009. The lower income is due primarily to extremely low yields on our investment portfolio which is managed with a focus on principal preservation and had some foreign exchange losses.

In the second quarter of 2010 we recorded tax expense of $82,000. This compares to an income tax benefit for the second quarter of 2009 of $1.8 million. Even though we had a loss before taxes in the second quarter 2010, we were not able to tax effect our loss because we have a valuation allowance against our US deferred tax assets.

This valuation allowance was established in the third quarter of 2009. For modeling purposes, we suggest using an effective income tax expense of approximately $75,000 per quarter until we have fully utilized our US valuation allowance.

Turning to the balance sheet, our financial position remains strong. As of June 30, 2010 we had $99.1 million in cash, marketable securities and long-term investments with no debt. This represents approximately $7.30 per outstanding share.

During the second quarter, our operations consumed $3.9 million of cash. Of this amount, approximately $750,000 will be used to pay down our TCPA lawsuit liability net of insurance proceeds.

Net accounts receivable at the end of the second quarter 2010 were $3.8 million and the DSOs were 29 days. Our DSOs continued to remain strong. Inventories as of the end of the second quarter were flat compared to the first quarter as we continued to aggressively manage this asset.

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

Thanks, Ron. During the next few quarters, we remain focused on the following key initiatives. One, improving sales productivity through improved sales training and focusing our sales and marketing efforts on physicians in the core market.

Two, continuing our efforts on multiple R&D projects that include the following -- [a stage] launch of our toenail fungus removal product with the initial launch occurring before the end of the third quarter, a new best-in-class laser targeted at the core market to be launched at the AAD in February 2011, and then a new product launch planned for the second half of 2011. We are continuing to evaluate other complementary strategic alliances to further enhance our product offering and leverage our distribution channels.

While the nearer term prospects for our industry are difficult to predict, we believe that our broad portfolio of products, planned new product launches for the next 18 months, worldwide distribution network and a strong balance sheet with approximately $100 million in cash and investments with no debt offer continuing long-term growth opportunities for our Company. Now I'd like to open up the call for your questions. Operator?

(Operator Instructions) Thom Gunderson, Piper Jaffray.

Let's just jump right into the new products. On the toenail fungus one, I understand that you have what, a more general 510(k) and looking to get a specific later. Is that right, Kevin?

That's right. For our US market launch, that is the strategy. Obviously most of our revenue now comes from outside the United States. So getting the CE Mark with that indication cleared I think is something we're very excited about.

All right and then for sales whether they're in Europe or in the United States, what kind of clinical data exists today for the doctor to use in their own marketing?

Well the category has gotten a lot of attention. Lots of derms and podiatrists have adopted other technology in the market and that got our attention attention. So there have been published data that supports that they're seeing improvement with other devices on the market, not ours.

Got it. And then the product that's coming out at AAD, that's a new and improved light-based product or is there a new indication in there as well?

It's a whole new platforms. So we're launching a laser platform that has been designed with a tremendous amount of input from key opinion leaders and we've really spent a lot of time researching it and we think we have got some of the key characteristics that they are looking for in a laser platform for treating a broad range of vascular lesions. So we'll be able to put more details around that as we prepare for the launch.

Okay and then I keep reading in the papers that the economy is still not back but if we look at market dynamics a little bit, it seems interesting to me that on a sequential basis, US sales were up, service overall sales were up, upgrades were up. Are you sensing from your customers that they are doing a little better from a demand standpoint, more patients coming in?

We are once removed from it as you know, Tom, but I think people are adapting to the new environment that we are in in terms of the broader economic concerns. But we are hearing from the core physicians in particular that they are feeling more optimistic about the future.

Got it. Thanks, Kevin.

Dalton Chandler, Needham & Co.

I guess let's stick with the new products for a minute. On the Genesis Plus, do you have any thoughts on how that will be priced yet and is there a disposable component?

We have been working on the pricing strategy and we are pretty close to launching that. But it will be something in the $60,000 range. There are no disposables associated with that technology.

Did I understand correctly that the CE Mark is pending but you haven't yet filed a a 510(k)?

We have a general surgical clearance with that product today. We have not filed an additional toenail fungus application at this time. The CE Mark we're expecting that file to be completed any day now.

So, are you going to wait to launch in the US until you -- I guess maybe you are selling it for these other indications.

We will be limited to promote it for the indications that have been granted by the FDA. So we will not promote it for a toenail fungus application until we get that clearance.

Okay, when you re-entered the new product list, you didn't say anything about the True Sculpt. Is there any update on that?

There is no update on it but it is still an engineering program. But one of the action items after the disappointment with the lack of that launch was that we wanted to really build our R&D pipeline with some near-term applications that we could get to market with a reasonable level of risk. So I think that's what we have done with the R&D resources. We've really focused them on three products that we're looking to launch between now and the end of next year.

Okay, and I think you also launched the VASER during the quarter. How did that go?

It's still early. We are learning more about it. I think in Canada for example, it is limited to physicians that have an operating room. So that is something we didn't know about until we got into that market. But we will update in the coming quarters as we continue to roll out VASER.

Okay, and I just wanted to clarify one thing. Ron, in your guidance, you said $2.3 million G&A in the second half. Did you mean for both -- you have $2.3 million per quarter?

Yes, I think I said per quarter for the second half.

Oh, okay.

It probably wasn't perfectly clear.

And then on the sales and marketing, I know you have got some special initiatives to sort of redirect the salesforce. But could you give us a sense of what you spent on that versus the traditional sales and marketing activity? Because it was 53% of revenue for the quarter.

Yes, but it's not significantly different from the previous quarter. So that we have been investing in the other initiative with business development, additional clinical development and then of course we added the telesales group. In addition to that, we have added a few extra people in Japan to help us with our cosmoceutical business.

Okay, all right, thanks a lot.

Anthony Vendetti, Maxim Group.

Sure, thanks. So, you said I think, Kevin, you said core was 40% this quarter, is that right?

That's correct.

What was the US and international breakout as a percent of revenues?

61% international.

61% international?

That's correct.

Okay, Ron, I missed what you said about the Titan refills. What happened this quarter? And you said by the first quarter of 2011 that should pick back up to the $1.4 million run rate?

Yes, we said that clearly the number is down. It was $970,000 I believe, somewhere in that range for the quarter which is significantly down from our $1.3 million, $1.4 million run rate and that is due to the voluntary recall that we have down where we replaced the handpieces. So, we expect next quarter to be a similar type revenue level and then it will be ramping up from there in Q4 and by the time you get to Q1 2011, we should be back to where we were.

Okay, and, Ron, while I have you, can you break out the stock-based compensation by line item?

Sure, okay. So on cost of sales is about $228,000. Sales and marketing, about $357,000, R&D $166,000 and just over $1 million in G&A.

And right now, is there anything that you are seeing right now in the customer base that indicates that they are looking to start purchasing? Certainly I'm hearing that through our survey that procedures among the derms and plastics are starting to pick up. Are you seeing that translate into orders or is the credit market still limiting that, those actual sales?

Yes, I read your report and I'm hopeful that your findings come to fruition because it indicated that a significant number of derms and plastics are planning to buy equipment in the next 18 months. So we're hopeful that that's a true statement.

We've always pointed out that the credit certainly is much more developed now than it has been. But the overall issue of confidence is probably the biggest factor that we see and we see the world different in different parts of our distribution.

I mean, we did indicate that we had a record quarter in Japan and we have had strong performance out of Australia and Canada. We had a bit of a bump in the road due to the tax change up there. But business feels healthy in certain parts of our geographic distribution.

Just to follow up on the credit market, so are you saying right now, Kevin, that you are not seeing any material improvement there at this point?

Maybe on the margin but we are finding other leasing companies starting to get involved with this space again. So that's a good sign. But I can't say that it has a significantly improved feel to it.

And we are continuing to see customers continue to get business loans to buy the equipment, particularly the people we're targeting with is the core market as well as physicians in established practices. They typically have access to money. Maybe it's not through a lease, but through a loan of some type.

Okay, so you're seeing some pockets of strength. You said record quarter in Japan, Australia up.

What do you think the opportunity is with some of these joint ventures that you have here? Any one in particular you think more helpful to the sale of Cutera type products whether it be Obagi, Sound Surgical's VASER lipo or Radiesse, what kind of synergies do you see at this point?

Well there are a couple of them that are particularly exciting for us. I think that in the case of the filler product or the cosmoceutical product manufactured by Obagi, it gives us access to that existing installed base and we can introduce our capital equipment to the Obagi users as well as Radiesse users.

We like the fact that it is a different model than a capital equipment model. The issues like financing and major capital outlays are not an obstacle to us.

So we think the fact that we did have a record quarter there in Japan is due in part to those relationships being successful for us. It's too early to say on VASER. There was an earlier question regarding how's that going. We will have more to comment on that in the coming quarters.

And lastly on the product at the end of 2011, what you're saying so far on that is that it's not True Sculpt, that is another product. These three products are independent of Two Sculpt (multiple speakers)

That's correct, that's correct.

Great, thanks very much.

Thanks, Anthony.

Phil Nalbone, Wedbush Morgan.

We're pleased to see growth return in the US but international sales growth looked a little light in the June quarter compared to what we have been accustomed to. Can you talk a little bit about what went on in the overseas markets and can you give us a guesstimate as to what the Canadian tax matter might have cost in terms of Q2 revenue?

Sure, I mean, Ron, maybe can look at the Canadian [fall-off] there, but we've been -- it's been a fairly predictable business out of Canada. In Europe, with some of the developments in Europe over the past quarter, that became kind of an uncertain environment for us.

And so we think things have settled down there. We're hopeful for improved performance out of Europe. But some of it is just our international business can be somewhat lumpy, Phil. And I think you have to take the longer-term trends to get a better sense of what that true trajectory is. Ron, you want to talk about Canada?

Yes, with regard to the Canadian situation, there was some harmonization regarding their tax situation of the GST and PST which makes it advantageous to actually purchase in this quarter versus last quarter. So we found a lot of our customers at that period of time in Q2 willing to purchase but just waiting to push the purchase into Q3. We have already started to see some of that now but our Q2 number for Canada was off and it was approximately half of what it had been running. So I hope that helps to provide some color on it.

Okay, thanks. Ron, can you give us some sense for what your expectations are for operating cash flows during the remainder of the year or do you think you're going to use more cash or is the opportunity there to add to the cash balance through the end of the year?

Our target is to remain cash neutral I think in the second half here. Everything of course is dependent upon the topline and if we can get the topline where we want to, we would be accretive. But it's going to be very dependent and our goal at this point is to be breakeven in the second half.

Okay, finally, Kevin, if we could go back to the first new product in the pipeline, can you talk a little bit about the prospective label in the US? Are you going for improvement in the cosmetic appearance of toenail fungus, are you aiming toward more of an underlying disease treatment label of fungicidal or fungistatic kind of label?

There are lots of discussions within the agency right now regarding what is required for manufacturers to get the clearance. There are a number of companies that we understand have submissions under review right now and we are looking for clarification from the FDA in terms of what standards they're looking for and what indications for use that they're willing to grant and we will design our clinical study to achieve that.

It's my understanding that most toenail fungus is treated by podiatrists as opposed to dermatologists or any other group of physician. What does that suggest about your ability to implement a strong sales and marketing program right off the bat? Can your existing salespeople target podiatrists effectively or are you going to need more resources to make this product really work?

We think we can target podiatrists effectively. And we do find from the dermatologists that we have spoken to that they do perform those procedures themselves. So, we think there is a high level of interest.

Just to be crystal clear here on the three new products, True Sculpt is not that third new product?

That's correct.

Okay. And is there any likelihood that we could see that product within that 18 month window?

We are hopeful but what we're trying to do is communicate what we have in the near term and we still can't make a commitment in terms of the True Sculpt launch at this time.

Thank you very much.

Chris Sassouni, Eagle Asset Management.

I just wanted to to understand at this point what is the total number of reps that you have in the US?

At this point we still have a target of 30 territories, some open at the moment, but 30 territories in US and Canada. I'm sorry, so it's US and Canada.

We have a similar number of headcount outside of North America, Chris.

Okay and just so I'm clear, when you say that headcount, that's your reps or are those distributors?

Those are our direct reps.

Okay, fine. And then -- so I'm just trying to envision -- so they are calling on -- they are calling on the core market. They have been focusing primarily on the derms and plastics.

There had been this primary care market that they had been targeting in the past and now the podiatrist market will come on board. So does that mean that you will have to add additional reps or does that mean that they will just have to call on more people in a given territory?

Well, we're really looking to get improved productivity from our North American sales team. That's the first thing we are looking to achieve, Chris, and I think you probably recall that we also had a relationship in the United States with PSS.

Yes.

That's 700 strong reps out there and I think they can be a factor (inaudible) ultimately.

Okay, so that relationship is still ongoing and still productive?

Yes.

Very effective and I think in particular, they're good outside the core group which for podiatrists could be a very good spot for them.

All right and then the other thing I missed was, what was the total revenues from Obagi and nutraceuticals and fillers and all of that?

The fillers and cosmeceuticals total revenue was in the $800,000 range. The Obagi piece of that was I think about $570,000, somewhere in that range.

Okay, thank you very much.

Larry Haimovitch, Haimovitch Medical Technology Consultants.

What is your sense about your market share in this market? Obviously the market has been very, very tough. We have seen some other companies report already and their results have been pretty soft and mediocre. Do you have any sense about are you gaining share in this market or are you losing share or holding share?

Globally we're 8%, Larry. We think we have lost share here in the United States and that certainly has our attention. We need to turn that around.

We think these new product launches can be a factor in that. But we have the whole organization under scrutiny right now to improve that performance. And then OUS, we had been gaining share but we're kind of staying with the market right now.

Okay, second question and it's an obvious question, I guess when one looks at the balance sheet. You've had plenty of cash for a long time. You haven't spent it.

I know when we visited several months ago, you mentioned you were looking at different opportunities. Could you describe your corporate strategic plans as far as the cash part of the business is concerned, Kevin?

Sure, Larry, and I think when we chatted, we did indicate that a couple years back, we did buy back $25 million worth of shares.

Right.

So there's been a willingness from the Board to evaluate that and I certainly share those sentiments from investors with my Board just so that they are aware of what I'm hearing. We did as, Ron, alluded to it, but new business development is something we're taking very seriously and we have a dedicated resource to look at the various opportunities out there and we are actively doing that.

If we find something that we really like, we think we are well positioned to incorporate that technology into Cutera. But it's hard to find the right opportunity that allows us to check all the important boxes we think this opportunity would have to represent for us.

And what about a buyback? Is the buyback now done, Kevin, or is the buyback still in place?

We completed a $25 million buyback, so we don't have an active buyback program at this time.

So the Board would have to re-authorize a new program, I am assuming?

That's right, that's right.

I would presume with the stock at 10% or less above cash, that could be an interesting point for you to reinitiate a buyback.

And it's an active discussion at every Board meeting.

Great, thanks, Kevin.

We have reached the end of our time. I would like to turn the call back to Kevin Connors for closing remarks.

Thank you, operator. Thank you for participating on our call today. We look forward to seeing you at various investor events during the quarter and to updating on our third-quarter conference call in November. Good afternoon and thanks for your continued interest in Cutera.

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