Cutera Inc (CUTR) 2012 Q4 法說會逐字稿

Greetings and welcome to the Cutera, Inc. fourth-quarter and fiscal year 2012 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, John Mills of ICR. Thank you, Mr. Mills. You may begin.

By now everyone should have access to the fourth-quarter 2012 earnings release which went out today at approximately 4.00 PM Eastern time. The release is available on the Investor Relations portion of Cutera's website at Cutera.com and with its Form 8-K filed today with the SEC and available on its website at SEC.gov.

Before we begin, we'd like to remind everyone that these prepared remarks contain forward-looking statements, including statements concerning financial guidance on future revenue growth; expense levels; gross and net margins; the result of cost improvement initiatives and other financial metrics; expectations for increasing revenue and development commercialization and revenue growth potential of existing and planned new products, including our recently-launched Excel V and truSculpt products. While we manage to commercialize new products and we attempt to launch products according to our plan, there is risk both from regulatory and technical challenges that our actual launch date could be delayed or the launch of certain products may never occur.

Also, management may make additional forward-looking statements in response to your questions. These forward-looking statements do not guarantee future performance, and therefore, you should not rely on them in making an investment decision without considering the risks associated with such statements.

Cutera also cautions you to not place undue reliance on forward-looking statements which speak only as of the date they were made. Cutera undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date they were made or to reflect the occurrence of unanticipated events. For a complete list of risk factors that could cause Cutera's actual results to differ materially from the forward-looking statements, please refer to the section entitled Risk Factors in the Company's most recent 10-Q filed on November 5, 2012, with the Securities and Exchange Commission.

I'd like to point out that all references to the current quarter relate to our fourth quarter of 2012, and all changes in financial performance are in comparison to the same quarter in the prior year, unless specified otherwise.

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

Thank you, John. Good afternoon, everyone, and thanks for joining us today to discuss Cutera's results for the fourth quarter ended December 31, 2012. On today's call, I will provide an overview of our Company performance, and then Ron Santilli, our CFO, will provide an overview of our financial results. Finally, I will provide some closing statements and open the call to your questions.

Our revenue grew 22% with our US revenue increasing 36% and international revenue improving 12%. This is the seventh consecutive quarter of revenue growth in excess of 22%. We are pleased with our continued improvement in gross margin and are happy to report that the Company returned to profitability and a $0.08 per diluted share. This achievement of GAAP profitability in excess of $1 million is particularly noteworthy for us as the last time we achieved this was in 2007. These improvements reflect the commitment of our team, many Company initiatives implemented over the past few years, and the leverage in our business model. We believe the aesthetic systems market has continued to strengthen, and our global sales team is well positioned to continue to generate improved revenue growth, profits, and cash generation for the coming year.

From a product line perspective, truSculpt and Excel V are the primary drivers of growth this quarter, while Xeo, our flagship product, and GenesisPlus, used for treating onychomycosis, remained strong revenue contributors.

Customer feedback from our truSculpt product continues to be positive as we gain momentum in the body contouring segment of the energy-based aesthetic market.

Another contributor to our revenue growth this quarter was an increase in our service business, which resulted primarily from our acquisition in February 2012. The recurring revenue stream from our service business is approximately expected to be $18 million in 2013. We have expanded our North American sales team from 26 territories one year ago to 35 territories today. None of these North American territories are dedicated to the podiatry market and remain focused on the sale of GenesisPlus.

Further, we have increased our direct sales teams in key international markets, including France and Japan. We will continue to monitor the size and productivity of our sales force, and we'll expand our sales force as performance metrics support it.

Turning to research and development, we continue to expand our team and believe we have built a strong, technically-diversified organization that is driving an exciting pipeline of future products. Let me comment on some recent developments and plans.

We will feature a hair removal product launch at the American Academy of Dermatology meeting next month. This product incorporates a significant design breakthrough where we can provide a high-performance, cost-effective hair removal technology to treat finer and lighter hair. This product delivers up to 10 kilowatts of peak power to the tissue, which we believe is more than twice any other leading pulse-like technology on the market. This technology, coupled with our laser hair removal technology, will allow practitioners to treat the widest range of hair and patient types in the market today. We expect to commence shipments in the second quarter of this year.

We plan to extend the functionality of our truSculpt product by introducing new delivery devices that will allow physicians to treat a broader range of body parts, including underneath the chin region and arms, subject to regulatory clearances. We plan to introduce a new delivery device in the second half of 2013.

Last, we're very excited about the progress with our research and a dual-wavelength picosecond laser development program. When we launch this product, we will be able to participate in the tattoo removal and pigment improvement markets. For years, dermatologists have been asking for much shorter pulse duration lasers over the existing technology in the market, and we believe multiple wavelengths are valuable for treating various tattoo colors. Our technology innovation will allow this system to deliver high-energy, short-laser pulses with sufficiently large spot sizes.

Our novel laser topology allows for a solution, which we believe, will provide improved efficacy with a superior patient experience. We will update on this exciting program as we progress. We are pleased with the performance of our engineering team and are excited about the new innovative solutions that are in the pipeline. We look forward to sharing more details about these upcoming product releases later this year.

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 on the fourth-quarter 2012 conference call. I'd like to remind everyone that all references to the current quarter relate to our fourth quarter of 2012 and all changes in financial performance are in comparison to the same quarter in the prior year unless otherwise specified.

Our revenue grew by 22% to $22.5 million. Net income was $1.1 million or $0.08 per diluted share. Adjusting for non-cash stock-based compensation, amortization, and depreciation expense of $1.2 million, we had a net income of $2.3 million or $0.16 per diluted share.

Our cash and investment balances increased by $4.4 million during the quarter, of which $3.7 million was generated by operations.

Product revenue increased by 30% and was primarily driven by increased sales of our truSculpt body contouring product and of Excel V, our premium vascular product targeted at the core specialties. Approximately 33% of our North American product orders came from core specialties; 38% came from podiatrist specialty.

Outside the US and Canada, we sell primarily to core physicians.

Service revenue increased by $1.4 million to $4.6 million. The primary reason for this growth was revenue generated from the IRIDEX acetic business acquired in February 2012. We expect future quarterly service revenue to be approximately $4.5 million.

Fillers and cosmeceuticals revenue was derived from sales of Obagi and Merz distributed products in Japan. Revenue from this product category declined slightly to $1.4 million. We remain pleased with these product offerings, which allows us to not only generate incremental revenue but also helps us to penetrate our laser business into an expanded customer base.

From a geographical perspective, our US revenue growth was due primarily to the recent expansion of our sales force and the introduction of the truSculpt product. Our international revenue growth this quarter was sourced primarily from France, Japan, and many of the distributor countries in our Asia Pacific region.

Now I will address our fourth-quarter 2012 operating performance.

Our gross margin was 53% in the second quarter, 55% in the third quarter, and 57% in the fourth quarter of this year, which is a positive trend upward. This improvement was due primarily to the full-quarter performance of our high-margin truSculpt product, cost improvement initiatives, the result of the leverage in our model with higher volume. We remain focused on improving our gross margins, and we have several initiatives that are currently in progress. We expect our gross margin percentage to range in the mid to upper 50%s in 2013.

Sales and marketing expenses were $7.1 million or 32% of revenue compared to $6.8 million or 37% of revenue in the fourth quarter of 2011. This increase in spending was attributable to higher personnel costs associated with the expansion of our US sales force and higher commissions due to the increased revenue. Our expense ratio improved due to the leverage of our model. We are targeting sales and marketing expenses to be in the range of 30% to 35% of revenue.

Research and development expenses declined by $200,000 to $2.1 million due to reduced prototype material expenses resulting from the timing of product development activities. 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 decreased by $400,000 to $2.4 million. As a percent of revenue, G&A expenses declined from 16% in Q4 2011 to 11% in Q4 2012. As a result of the expense reduction and increase in revenue, our reduced spending in G&A was primarily related to lower legal, accounting, and insurance-related costs.

We expect G&A expenses to be approximately $2.7 million per quarter in the future. The slight increase from the previous year's targets is due to the medical manufacturer's excise tax, which went into effect January 1, 2013.

Interest and other income net decreased to $105,000 from $140,000. This decrease was primarily attributable to some foreign exchange transaction losses and slightly reduced yields on our investment portfolio.

Income tax provision, our tax provision is primarily attributable to international taxes related to our foreign subsidiaries and small amounts of minimum and capital-based taxes in the US. As a reminder, we continue to maintain 100% valuation allowance for our US-deferred tax asset.

In the fourth quarter of 2012, we recorded a net tax expense of $93,000. This resulted primarily from foreign taxes and the dislodging of the tax expense from other comprehensive loss related to an auction rate securities sold during the quarter.

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

Turning to the balance sheet, net accounts receivable at the end of the fourth quarter of 2012 were $8.8 million and our DSOs were 36 days. We have experienced higher-than-normal DSOs during the past two quarters, primarily related to the increase in our US revenue to customers who traditionally get payment terms. We have not changed our credit practices or policies and expect our DSOs to remain within the mid-30s range, which is among the best in the industry.

Inventories at December 31, 2012, were $11.1 million, which represents a $1.4 million reduction from $12.5 million at September 30, 2012. We are pleased with the progress we are making on reducing our inventory levels, but we will remain vigilant in reducing further where appropriate. Our inventories are turning approximately 3 times per year, and our goal is to increase this to 4 times per year.

Our financial position remains strong. Our cash and marketable securities balance increased by $4.4 million this quarter to $85.6 million with no debt. This represents over $6 per outstanding share.

Cash generated by operations for the quarter was $3.7 million, driven primarily by our profit adjusted for non-cash expenses for stock-based compensation, amortization of intangibles, and depreciation. The last time we generated such a significant quarterly cash from operations was in 2007.

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

Thanks, Ron. In concluding, we are pleased to return to profitability. Market data supports that our industry is growing at a healthy pace. In 2013 we plan for our revenue growth to outpace the growth in the energy-based aesthetic market and to be profitable with cash generation. We remain opportunistic, and we will continue to value new business development opportunities that would be advantageous to our business model.

I'd like to thank our employees and partners around the world for their commitment and dedication. Now I'd like to open up the call for your questions. Operator?

(Operator Instructions). Thom Gunderson, Piper Jaffray.

Kevin, maybe on the sales productivity, if you've got 26 sales guys, I think, working on the non-podiatry side, if we look back, at one point their job was to sell Xeo and the accoutrements around that. Now they are asked to sell Xeo and Excel V and truSculpt and launch a new hair removal product sometime in the next few months. Can you talk about how that change is being managed and whether they are able to keep the balance and at the same time go for the biggest opportunities in a given quarter?

Thom, that is something that certainly comes with an expanding portfolio of products. And we are actively engaged in dialogue with self-management to strategize ways of keeping focus on all the products, not just this year's model but the products that continue to sell well. And so things like sales specialty managers -- that's an open discussion. And then we really believe that there's an opportunity there to structurally organize the sales team such that we don't lose focus on the entire portfolio.

And for the US, do you feel like you have the right-size sales team as we head into 2013 here?

Well, I think the market growth rate suggests that continued investments in sales force expansion make sense. And as we mentioned on the call, we are focused on growing faster than the market, so that implies that we will have to make additional investments and more feet on the street.

Okay. And then second question or set of questions. And truSculpt, you have noninvasive, fat-reducing competitors out there. Is selling truSculpt a matter of being first to the customer, or can you give us any examples or trends where the customer is actually looking at two or three products and you guys win?

Well, I'd say in general, not just limited to this category, but typically when a physician invests in a given application, they tend to be very good prospects for talking about an alternative technology for that same application. And in the case of truSculpt, we are finding that in the market as well where there is an installed base of existing technology that we're able to talk about the unique benefits of our technology. So we've already sold into practices that have existing competitive technologies.

Just for clarification, people have bought more than one -- more than one brand of noninvasive fat-reducing product?

Yes.

Interesting. And I'll leave it at that, Kevin. Thanks.

Okay. Thanks, Thom.

Anthony Vendetti, Maxim Group.

Just a little more color on the timing. It seems like you have a lot of new products coming out. The hair removal product, will that be demonstrated or on display at AAD at the beginning of March?

Yes.

Okay, great. And the picosecond product. which one of your competitors already has FDA approval for, can you talk a little bit more about that -- the timeframe for that? And is there anything that you believe will be different about your product there, or is it this is the newest and best way to remove colored tattoos and having a product in this space is an important part of your product portfolio?

And then lastly, did you also mention another product that you haven't named for the second half of 2013 because I missed that?

Well, getting back to pico, we aren't in a position to talk about when it's available for delivery because we don't have an FDA clearance for it. We are working with the Agency to pursue that strategy and have done some early clinical work with that that we believe will be helpful in our discussions with the FDA. But until we get an FDA clearance, we won't talk about when we will be able to release it to the marketplace.

In terms of how it compares, again, it's early for us, but we see the benefit of having a multi-wavelength technology. I think there is some speculation years ago that these extremely short pulse durations, that it is the color independent, and it's our belief that maybe that may not be the case. So we think having that capability of offering multiple wavelengths we think is going to be advantageous. And there are some other things that we're not quite in a position to share it, but we think we've got some potential benefits relative to what has been discussed so far.

Okay. And then were you talking about another product in the second half of 2013, or these were the products you were talking about?

Yes, Anthony. There is another want with regard to truSculpt, and we are looking at other delivery devices to treat other body parts.

Okay. And when was the chin and arms which you mentioned, and you are going to continue to explore others? Is that what you were saying?

Yes. With truSculpt, one of the unique, distinguishing elements of that offering relative to the competition is that we think that it is a platform that will allow us to continually roll out new applicators that can enable our customers to treat different parts of the body, as well as we are looking at other applications altogether.

Okay. And then lastly, on the sales question, so 26 non-podiatry salesman. Can you remind us how many podiatry salespeople that you currently have?

Nine.

Nine, okay. And I didn't get a chance to look at the whole release, but Ron, did you give the breakout of stock-based comp across the line items?

Yes, that's in the press release.

Perfect. All right, guys. Thanks.

Okay. Thanks, Anthony.

Okay, Anthony.

Morris Ajzenman, Griffin Securities.

Well, you're starting to get some traction on the top line, I guess, following through with the rest of the industry. The question, going back to gross margins, again, clearly an improvement sequentially, up a couple of hundred basis points. And then you gave us, Ron, guidance into next year ranging anywhere from the mid to up 50% range.

The first quarter traditionally is the slow quarter, the low quarter on a revenue base for the Company. Can I take it from that guidance that the first quarter would then be in the mid-50% gross margin based on that guidance you gave us?

Yes, I think -- obviously, it depends on where the revenue falls in, but Q1 is traditionally the lowest revenue quarter of the year. And I think from a gross margins side, it's probably going to be closer to the mid-50%s, in that range.

Okay. And then clearly as revenues ramp up throughout the year, depending on -- I guess the revenue mix is 60% obtainable or not during 2013?

Yes, we believe it is. It certainly is our target to be in excess of 60%. It is the target.

Okay. And just switching gears quickly, in your highlights on the front page of your release, you talk about revenues being driven by truSculpt and Excel V. And then you talk about Xeo and then GenesisPlus. Is GenesisPlus -- am I inferring that's a slower momentum, or should I not infer that?

I wouldn't inferred that.

What should I infer?

Well, just what we articulated. We are seeing growth across the board. We are seeing accelerated growth with the new product categories, including truSculpt and Excel V. But the fact that we have a dedicated podiatry sales team and we're keeping with that investment should give you some indication of how we are looking at that opportunity.

Is nine the headcount for salespeople that you're comfortable with for the time being for podiatry, for GenesisPlus?

Well, as I mentioned earlier, more generally speaking, we think that the salesforce expansion is going to make sense as the market continues to grow, and we will look at that in terms of how we lay out the overall strategy with sales specialists in the future.

Okay. One last question and I will pull back here. Dermal fillers and cosmeceuticals, again, Ron, you touched on it being down year over year. Can you just put a little more meat on that, on what was that decline resultant of, and do you expect that to regain traction as 2013 unfolds?

Yes, Morris, we are very happy with that business to augment our laser business because it helps with cross-selling opportunities. It helps utilize the infrastructure that's in Japan. Again, the filler and cosmeceutical business is only sold in Japan. So we're not seeing a lot of growth with that business, but again, we don't invest in that business. We just distribute those products. So it still has been a very good situation for us and is profitable for us, as well.

So the decline is just a reflection of the environment in Japan, nothing more than that?

Again, we don't have newer products. We are not investing in newer products. We just distribute what, in this case, what Merz and Obagi are providing us, and we are using it to augment our laser business.

Thank you.

(Operator Instructions). Jack Wallace, Sidoti & Company.

Most of my other questions were answered, but I was hoping you could give me a little bit more color on the DSO question answered earlier. I was wondering if -- maybe the comment was that this was a small increase from historical norms was mainly due to a shift in revenue mix to sales in the US. Would that be fair to say?

Yes, it is, and a lot of it being back-ended. We are getting more -- increasing our US business, and a lot of it in that third month of a quarter with providing net 30-day terms you don't collect until the subsequent quarter. We've already seen a lot of those cash collections here in January of 2013.

Got you. So it's really just going to be a cutoff date maybe issue making some of these numbers look a little higher than they really are.

That's correct. It is just a matter of a snapshot, and you have to snap that shot at 12/31.

Great. Thank you. And then just going back to truSculpt, it's a situation where there is a specific frequency or pulse or wavelength that is needed to go after certain other areas other than say the waste and the thighs, or is it a matter of getting an actual indication from the FDA to go after certain areas?

It's both. We certainly are compliant with the indications for use that we have from the FDA, and we have other submissions underway. And we've got the development efforts for applicators coupled with those submissions. So both are vital to successfully launching new applicators.

Great. And thank you. That will be all for me.

All right. Thank you.

Orin Hirschman, AIGH Investment.

Mr. Orin Hirschman, your line is live.

It looks like you'll have to go to the next.

Bill Plovanic, Canaccord.

I have a couple of questions here. First, on the picosystem that you plan on coming out, I believe that the pricing is going to be pretty high for the competitive products. Do you plan it going to that level?, or will you commit at a competitive pricing?

Bill, as I said, we can't quote specific pricing without an FDA clearance, but we think we've got flexibility on that front. And we have embraced the strategy of moving toward higher price devices as we're seeing with the Excel V. In fact, we've raised prices on that since launching it, and truSculpt is also commanding a nice premium in the marketplace. So we certainly don't want to price this at the low end of the spectrum, and we think that we are able to establish the features and benefits associated with our unique technology we can demand a nice premium for it.

Okay. But do you think you have a manufacturing advantage over the competitive products?

We have not see the competitive products, so I can't comment on that. But internally we strive to design products with cost structures that allow us a competitive advantage.

All right. And then my follow-up question is, just on the truSculpt, what is your disposable pricing per treatment, and then what body area are you currently focused on?

It is about $200 per procedure, and our indication from the FDA is a cellulite clearance. So we are focusing on the thigh area. Anywhere there is cellulite, we are able to promote it for that.

Great. Thanks. That's all I had. See you in a couple of weeks at AAD. Thank you.

Look forward to it, Bill.

See you then.

Jack Ripstein, PCAP.

I had a question on the guidance that you are giving. Informally on the top line, you mentioned you wanted to grow in line -- actually, exceed the growth of the category. Can you just tell us what the category is slated to grow at? I think you gave a pretty specific market that you were calling out as opposed to just aesthetic laser.

Yes, we are always 90 days behind because not all of our competitors give us the snapshot of what's going on in the market. So if we could speak to the Q3 growth rates, which we have -- if we are just looking at the publicly-traded companies, we believe it's in the 20% range.

Okay. So run rate of 20%, and you expect to exceed that as 2013 top-line growth targets.

Well, that's certainly how we are going to measure ourselves. If we are not growing as fast as the market is growing, then we're underperforming, and obviously we don't want to do that. So we can't predict what the industry growth rate looks like a year from now, but barring having a crystal ball, we will assume that it's more of the same, which is in the 20% range.

Great. Thank you.

Thanks, Jack.

Larry Haimovitch, HMTC.

Congratulations on a very good year.

Thank you.

Thanks, Larry.

On the stock buyback, I don't know if you said it on the conference call, the actual call itself, I didn't catch it, did you say how many shares you bought back in Q4?

No, we didn't, not in the early announcement.

Okay.

We entered it in a 10b51 plan, so it's the typical -- it is designed with thresholds and that kind of thing. And since the last quarter, the stock has moved in the right direction. So we're not going to comment on what the thresholds are, but we designed the plan to be opportunistic as we did with the last plan we did several years back.

So did you buy any shares back at all?

Not going to comment on that.

Okay. All right.

Second question. Ron, you did mention the medical device tax. I'm sorry, I didn't catch the amount you are estimating for the year.

Yes, it's going to depend on a few things. Just so you're aware, it is the 2.3% statute tax, but it's about 1.725% when factoring back the sales to distributors. And that is on US revenue only or product revenue.

It will be in G&A. I'm going to estimate in the $150,000 to $250,000 per quarter, but it depends upon the revenue.

And so you will put it in G&A.

Yes.

Will be a separate line item?

I wasn't planning to, but we will make sure we give enough disclosure and break out on that.

Yes, I think on the calls we will probably specifically break that out so investors know.

Yes. It's very interesting, every company, well, not every company, but different companies are doing it differently. Some of them are putting it in SG&A. You are putting it, obviously, there. Some of them are putting it in cost of goods. Some of them are putting it is a separate line item for taxes. So it seems to be many different ways to go.

That's right. There is no clear accounting guidance on it, and that seems to be fairly open. We will certainly make sure there's enough disclosure, although the body of the income statement, we don't expect to break it out.

Ron, I'm sure you weren't surprised by this, but I was surprised about a month ago to find out that the government was requiring biweekly payments estimated -- based on estimated sales. So even before you were collecting the sales, the money for the sales, you were already having to pay the government.

That's correct. We are making those regular payments now on an estimated basis, and then at the end of each quarter, we will be truing it up.

Yes. So they get the money pretty quickly, don't they?

They are getting it very fast -- before we get it, as you mentioned.

Yes, exactly. All right, guys. Thanks very much.

Thanks, Larry.

Thank you.

Orin Hirschman, AIGH Investment.

Congratulations on the progress and sorry about that before with the phone.

Can you just highlight again, just in terms of the tattoo removal, because there's been a lot of noise made by one of your competitors in terms of the priority of picopulse, etc. Can you just do a recap of what you started to say in terms of what you believe from a technological point of you, a scientific point of view?

Well, I think this has been an area of active discussion with key opinion leaders and dermatology. And I think the belief is that there's some real benefits to having dramatically shorter pulse durations in terms of the patient experience. There is some discomfort with longer pulse duration products. And I think there's hope that with the short-pulse duration products that we can have a better result, some improved efficacy meaning fewer treatments, and there's hope that you can treat some tattoo colors that might be more problematic.

And so, I think there's a general consensus that the portion of the population that has tattoos has gone through the roof. But I think the existing alternatives for removing tattoos haven't really changed much from a technology perspective for probably 20 years. So I think we're hopeful that we can demonstrate the clinical benefits with our technology. But we're excited about the potential of not just the go-to-market strategy, but where this technology can go for even other exciting versions of that in the future.

Okay. Thank you very much.

One follow-up if I may?

Yes.

Just in terms of the typical seasonality from Q4 to Q1, should we expect it, or is there a potential to beat it just because of the momentum with truSculpt and some of the other products?

Well, we're not going to provide guidance for the quarter, but other than we've indicated that we set our goal at growing faster than the market is growing, and we do see that seasonality even when we have strong momentum. I think this is quarter number eight?

Seven -- at least through seven.

Seven, okay. Quarter number seven where our growth has been in excess of 20%. So we are going to compare Q1 this year from a growth rate perspective to how we performed a year ago.

Okay. Thanks so much.

All right. Thanks.

Thank you.

Anthony Vendetti, Maxim Group.

Just a quick question on the international front. International sales were up 12%. I just wanted to see if that was product sales or all sales.

And then if you could just talk a little bit more about the international strategy going forward. Are there markets where you are looking to go direct in still, potentially look for other distributor relationships?

And then if you could just give a little more color on what markets were stronger and what markets were weaker this quarter?

Okay. Well, first of all, just about every revenue category we have, whether it be geographically or by source of revenue, moves around quarter to quarter, and our international growth in 2012 relative to the previous year is 23%. And we're pleased with that.

And in terms of where we're making investments going forward, we, as you recall, about a year ago, we required the aesthetic assets of the IRIDEX business, and one of the things that was attractive to us was the business in France. We had been direct in much of Europe. And at the time of the uncertain financial condition, we actually pared back our commitment there. And after the IRIDEX acquisition, we found a very strong organization with a great installed base. And we've actually augmented that sales team, and now we are in discussions of expanding from our Paris hub to other parts of Europe where we can go direct.

In the script, we mentioned that we've added to our organization in Japan, and we'll continue to look at that.

But we haven't talked about salesforce expansion until last year, and we stopped expanding for many years. This is the first time that we've made significant investments in expansion in our direct business abroad, and we look to do that in an intelligent way. And you can only be successful if you've got the top people leading that.

Okay. And the sales numbers you posted internationally, were they overall sales or product sales?

They were overall sales. Overall.

Overall.

Thank you. We have no further questions at this time. I would like to turn the floor back over to Mr. Connors for any additional remarks.

Thank you for participating in our call today. This is a little longer than we usually go, but we wanted to be sure we filled everybody's questions. We will be attending a number of investor events in the coming months, and we will update you on our business progress in the first-quarter conference call in May 2013.

Good afternoon and thanks for your continued interest in Cutera.

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