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Solta Medical, Inc. (SLTM)
Q1 2013 Earnings Call
May, 01, 2013, 04:30 pm ET
Jenifer Kirtland - IR, Managing Director, EVC Group
Steve Fanning - Chairman, President & CEO
Jack Glenn - CFO
Dan Ferrari - VP, Finance
Richard Newitter - Leerink Swann
Jeremy Feffer - Cantor Fitzgerald
Matt Dolan - Roth Capital Partners
Keay Nakae - Ascendiant Capital Markets
Anthony Vendetti - Maxim Group
Previous Statements by SLTM
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And I would now like to turn the conference over to Jenifer Kirtland of EVC Group. Please go ahead.
Thank you, operator, and good afternoon, everyone. By now everyone should have accessed to the first quarter 2013 financial results release, which was distributed this afternoon after the market closed. The release is available on the Investor Relations section of Solta Medical’s website at solta.com and with our Form 8-K filed with the SEC.
Before we get started, during the course of this conference call, the company will make projections and may make other statements about the company’s business that are forward-looking and are subject to many risks and uncertainties that could cause actual results to differ materially from expectations.
A detailed discussion of the risks and uncertainties that affect our business is contained in the company’s SEC filings, particularly under the heading Risk Factors. Copies of these filings are available online from the SEC or on the Solta Medical website. The company’s projections and forward-looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given. The company does not undertake to update any projection or forward-looking statement.
In addition, to supplement the GAAP numbers, we have provided non-GAAP gross margin, operating income and loss, EBITDA, net income and loss and non-GAAP income and loss per share information that excludes the impact of non-cash acquisition related charges and other acquisition related charges and non-cash stock-based compensation charges.
We believe that these non-GAAP numbers provides you with insight to conduct a more meaningful and consistent comparison of our ongoing operating results and trends, compared with historical results. A table reconciling the GAAP financial information to the non-GAAP information is included in our financial results release.
And with that, I would like to turn the call over to Steve Fanning, Chairman, President and CEO of Solta Medical.
Thank you, Jennifer and good afternoon everyone. With me today is our Chief Financial Officer, Jack Glenn; our Vice President of Finance, Dan Ferrari. Let me begin by acknowledging that our first quarter didn’t start off the way we had envisioned. While the issues impacting the first quarter are behind us and the second quarter is of to a good start, let me walk you through what happened to our less than expected sales growth for the quarter.
The first issue was the disruption to our overall sales effort in North America resulting from the Sound Surgical acquisition. We closed the acquisition in late February and joined the critical last month of the first quarter we didn’t do an effective job as successfully communicating with our two sales forces. The sales reps of both the Solta and our new Surgical sales force were distracted by concerns over job security.
Now let me explain how this happened and how we have corrected the situation. With all of our previous acquisitions, we use the existing Solta sales force to sell the newly acquired products. However, while we communicated to both sales team that we had no intention of following that model with the Sound Surgical acquisition, we were not successful in convincing either sales organizations that we were deviating from our previous approach. Importantly, we lack the entire number of Surgical sales force intact and going forward we plan to maintain this level of Surgical sales reps.
We have also put in place a management team to run the Surgical business. We believe we have addressed the concerns of both sales teams and they are now focused on presenting physicians with the broadest, most efficacious product portfolio in the aesthetic device industry.
The second issue had to do with our Liposonix system. During the first quarter, we experienced a significant failure rate of our Liposonix transducer treatment tips which impacted our ability to sell those systems and related consumables particularly in North America. In order to meet increased demand, we move the sourcing of transducer components to a vendor capable of handling higher production volumes. The transition led to a high rate of leaks from the sealed fluid compartment containing the transducer. We have implemented changes in the manufacturing process and design of the transducer cartridges and subsequently have not experienced leakage issues related to the product. We are once again shipping and expect to regain our momentum with Liposonix as the year progresses.
With both of these issues reduced our growth rate in the first quarter, we did have some bright spots from a topline perspective. Our international business generated strong year-over-year results. International revenues grew by 34% to $20.7 million for the quarter and every major international region experience significant year-over-year growth. Asia Pacific grew by 40%, Europe and the Middle East rose by 20% and Latin America was up by 30%.