Cynosure, Inc. (CYNO)
Q1 2009 Earnings Call
May 5, 2009 9:00 am ET
Scott Solomon – Vice President, Sharon Merrill Associates
Michael R. Davin – Chairman, President, and Chief Executive Officer
Timothy W. Baker – Executive Vice President, Chief Financial Officer and Treasurer
Anthony Vendetti – Maxim Group
Andrew Schopick – Nutmeg Securities
William Dezellem – Tieton Capital Management
Sasha Kostadinov – Shaker Investments
Previous Statements by CYNO
» Cynosure Inc. Q4 2008 Earnings Call Transcript
» Cynosure, Inc. Q3 2008 Earnings Call Transcript
» Cynosure, Inc., Q2 2008 Earnings Call Transcript
Thank you, Jacky. Good morning everyone. With me on today's call are Cynosure President and Chief Executive Officer, Michael Davin and Executive Vice President and Chief Financial Officer, Tim Baker. We will begin today's call with Mike providing highlights of Cynosure's first quarter 2009 results and a business outlook. 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 the purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties and actual results may differ materially from those indicated by such forward-looking statements and the results of various important factors including those discussed in Cynosure's Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2008 and subsequent reports filed with the SEC. These filings can be accessed on the Investor Relations section of the company's website, www.cynosure.com.
In addition, any forward-looking statements represent the company's views as of today May 5, 2009. 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 will turn the call over to Mike Davin.
Michael R. Davin
Thank you, Scott. Good morning everyone and thank you for joining us for our Q1 conference call. Clearly, the continued effects of the economic recession on the aesthetic laser industry were pronounced in the first quarter of 2009. Consistent with the guidance we provided to you in mid-April, first quarter revenues were down 60% quarter-over-quarter to $14.8 million. On the bottom-line we reported a net loss of $0.32 per basic share.
We attribute our performance primarily to two factors. The continued restrictive credit environment that we believe has made it difficult for many aesthetic practitioners to obtain financing. And decisions by physicians to defer their capital equipment spending until they see evidence of a sustained economic recovery. We felt the impact of the economic climate across all geographies and products. North America as our largest sales region was hit the hardest, accounting for 57% of laser revenue in Q1 versus 72% in the same period of 2008. Despite the hurdles facing our economy and our industry, we see a glimmer of light as we look ahead in 2009.
As we mentioned in our pre-announcement and again in this morning's news release, we saw pockets of order strength in March as our order volume picked up slightly. Although, in this environment it is difficult to know whether the order flow will be sustained. Gross margin was negatively affected year-over-year by a significantly lower revenue as well as a shift in geographic mix falling to 60.9% from 66.3% for the first quarter of 2009. But in Q1, our gross margin remained flat from Q4 2008 mainly attributed to our North American ASPs, which held firm from the fourth quarter of 2008.
Given the lower revenue and continued economic uncertainty, in Q1 we moved aggressively to further reduce our 2009 operating expenses, including the elimination of an additional 25 positions. We also continue to cut our sales and marketing budget, eliminate certain non-core clinical development expenses and impose other expense reduction measures. On a year-over-year basis, these additional actions are designed to save between $14 million and $18 million in annualized operating expenses in 2009 up from the estimate of $8 million to $10 million that we announced in January. These steps are important to our goal of managing the business back toward profitability for the long term.
At the same time, we are committed to taking steps necessary to further position the company for success and to sustain our leadership position in the industry. As I have noted in the past, the growth we experienced until the fourth quarter of last year was due to our outstanding direct sales force, comprehensive product portfolio, and great technology assets. We continue to strengthen our competitive advantage not by just selling laser systems, but by providing physicians and other practitioners with a complete solution. We continue to earn our reputation as an industry leader by engaging with our customers in a partnership design to help them broaden and deepen their patient base and therefore help to optimize their business opportunity.
In the first quarter, we continued our track record of innovation with the introduction of three new products at the American Academy of Dermatology. The Elite MPX workstation and two new intelligent delivery systems for use with our Smartlipo MPX laser lipolysis workstation, the ThermaView, thermal camera system and SmartSense with ThermaGuide.