Cynosure, Inc. (CYNO)

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Cynosure, Inc. (CYNO)

Q4 2012 Results Earnings Call

February 12, 2013 9:00 AM ET


Scott Solomon - Vice President, Sharon Merrill Associates, IR

Michael Davin - President and CEO

Tim Baker - Executive Vice President and CFO


Anthony Vendetti - Maxim Group

Richard Newitter - Leerink Swann

Bill Plovanic - Canaccord Genuity

Paul Nouri - Noble Equity Fund



Good day. And welcome to Cynosure’s Fourth Quarter 2012 Conference Call. Today’s call is being recorded. There will be an opportunity for questions at the end of the call. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Scott Solomon, Vice President for Sharon Merrill Associates. Please go ahead, sir.

Scott Solomon

Thank you, Dan, and good morning, everyone. Thank you for joining us today. With me on this morning’s call are Michael Davin, Cynosure’s President and Chief Executive Officer; and Tim Baker, Executive Vice President and Chief Financial Officer.

Michael will begin today’s call with a discussion of Cynosure’s fourth quarter results and a business overview. Tim will take you through the financials, after which management will take your questions.

Before we begin, please note that various remarks management makes on this conference call about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those discussed in Cynosure’s most recent quarterly report on Form 10-Q, which is filed with the SEC. These filings can be accessed on the Investor Relations section of the company’s website,

In addition, any forward-looking statements represent the company’s views as of today, February 12, 2013. These statements should not be relied upon as representing the company’s views as of any subsequent date. While Cynosure may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so.

With that, I’ll turn the call over to Michael Davin.

Michael Davin

Thank you, Scott, and good morning, everyone. Cynosure posted record revenue for the fourth quarter and full year of 2012, reflecting gains across all geographic regions. Our Q4 topline revenue of $42.7 million increased 25% from the same period of 2011. This was our 12th consecutive quarter of year-over-year revenue growth. For the year, revenue climbed 39% to $153.5 million.

As revenues have increased, we have maintained our focus on expense control, resulting in continued operating leverage. Operating expenses decreased to 48% of revenue in the current quarter as compared to 52% for the fourth quarter of 2011.

This leverage combined with higher revenue and favorable product mix help to increase our net income in the quarter to $4 million, nearly four times greater than net income from the fourth quarter of 2011.

Turning to our domestic performance, North American laser product revenue grew 44% for the quarter and 66% for the year compared with the same period of 2011. These results were driven by the U.S. launch of our new Cellulaze Cellulite Laser Workstation early in 2012.

As well as a strong demand for established aesthetic treatments such as our Elite family of products or laser hair removal, the MedLite C6 and RevLite Workstation for skin rejuvenation and the Smartlipo system for laser lipolysis.

On our third quarter call in late October, I talked about the favorable reception that Cellulaze was enjoying in the U.S. market from aesthetic plastic surgeons and their patients.

Three and half months later, sales of Cellulaze have remained on an upward trajectory, demand is strong both from our installed base of Smartlipo MPX and Triplex customers and from those that are new to Cynosure’s minimally invasive products. Majority of Cellulaze sales in the quarter were new systems to new customers.

The feedback on this program remains very positive. In addition, Cellulaze continues to receive industry accolades. Last month, Cellulaze received the MyFaceMyBody Award for most innovative aesthetic treatment of 2012.

The award recognizes brands for product innovation, exceptional consumer experiences and outstanding customer service. Three elements that are essential to our core philosophy. Wining this award is rewarding because it is based on nominations by experts in the aesthetic, beauty and dental industry, and voted on by consumers.

International laser product revenue is up 14% for the quarter and 29% for the year as compared to the same period in 2011. The increase was largely driven by strong quarters from our direct distribution channels and our subsidiaries in both Europe and Asia.

Our ConBio products, the Q-switched MedLite C6 and RevLite lasers continue to perform nicely in the international and domestic markets. Additional road for currencies have continued to fuel our international growth.

In recent months, we have secured a mix of international marketing clearances that broaden the presence of our products in key markets. Recent clearances include approval of the Cellulaze and Elite+ systems in Saudi Arabia, the Acclaim and the Elite MPX systems in Taiwan, the RevLite and MedLite systems in Australia and the SmoothShapes system in Singapore. We expect to receive additional marketing clearances in the quarters ahead.

Both on operational and financial perspective, we believe the milestones we achieved in 2012 strengthen our position as an industry leader. We believe these achievements position us for continued growth as we move to 2013 and beyond.

The FDA 510(k) clearance of Cellulaze, the world’s first and only minimally invasive treatment of Cellulite, marches one of three significant FDA 510(k) clearances we received last year. We believe each clearance opens a new and underserved market for our laser and light-based devices.

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