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Cynosure, Inc. (CYNO)
UBS Global Healthcare Conference Call
May 21, 2013, 10:30 am ET
Michael Davin - Chairman, President & Chief Executive Officer
Timothy Baker - Executive Vice President and Chief Financial Officer
Natalia Medina - UBS
Natalia Medina - UBS
Previous Statements by CYNO
» Cynosure's CEO Discusses Q1 2013 Results - Earnings Call Transcript
» Cynosure's CEO Hosts Acquisition of Palomar Medical Technologies Conference (Transcript)
» Cynosure's CEO Discusses Q4 2012 Results - Earnings Call Transcript
» Cynosure CEO Discusses Q3 2010 Results - Earnings Call Transcript
Great, thank you. So we’ll jump right on the things. Lot’s of forward-looking statements in light of the pending acquisition of Palomar which I will talk about during the presentation. So very exciting first quarter going into 2013 coming off a very strong 2012. We announced on March 18th that we signed a definitive agreement to acquire Palomar. We do believe the combination of the two companies will take us to a world leader, premier leader in aesthetic and laser and light-based technologies of the combined companies. This excellent complementary product overlap as well as market opportunity; both companies have a strong 20-year history of international and global growth and product introductions. We expect the transaction to close at the end of this quarter.
As far as new flagship products that we’ll launch in 2013, we are very excited about the introduction of our PicoSure device which is the industry’s first ever Pico second laser which we launched at the American Academy of Dermatology in March and that product has begun shipping. We are also excited about our initiative with Unilever to introduce light-based technology into the home use market.
As far as our minimally invasive opportunity, we continue to lead the market significantly and market share with our product introduction such as Cellulase which we launched at the beginning of 2012 which is the industry’s first long-term solution for the treatment of cellulite. We just celebrated our first calendar year of having this technology in the market and this is doing extremely well. We also plan to continue to leverage our Smartlipo platform; we recently introduced the technology called Precision TX where doctors are now able to take a minimally invasive approach to treating hyperhidrosis which is sweat glands and also treating the face and neck area. So now physicians have the ability to utilize our Smartlipo Triplex platform to treat a wide variety of high volume cosmetic indications and the minimally invasive approach.
As far the quarter itself, it is a record first quarter for Cynosure in our 22-year history of about $41 million in revenue, up 19% year-over-year. Gross margin was at about 58.2% compared to 57.1% in Q1 of ’12. This is our sixth consecutive GAAP profitable quarter. North America was up 20% year-over-year in Q1 against ‘12 and once again 19%, combined revenues, global revenues compared to 2012.
As far as the market opportunity, we continue to see nice growth in demand for procedures and platform sales on an annual basis by 2016. This must be around $2 billion annually and as a variety of indications we now treat or compared to several years there were one or two indications now there are several to drive this growth and also the worldwide volume for light-based aesthetic treatments we’re seeing increase significantly, expected to be about 32 million procedures worldwide by 2016.
If you look at the analyst projected growth for our industry, about 13.5% compounded annual growth rate from now to 2016. The demand for aesthetic product sales, also there is a new category called skin tightening or body shaping which is growing at a similar rate of about 13% and we also play in that arena from now until 2016.
As far as the demand for our technology, the consumer is driving the demand for cosmetic procedures who wanted to keep a youthful appearance and looking at technology provide a long-term clinical result, certainly physicians as managed care continues to cut fees are looking to bring in revenue that is not capitated or managed by insurance and certainly cosmetic procedures are private paid. So these are real nice revenue vehicles in their practice and we're seeing a wide range of discipline, whether it's core derm and plastic surgeons but also OBGYN, internal medicine, family practice, etcetera, wanting to bring in cosmetic procedures in their practice. We will continue to see this trend, and we do believe that we will globally expand our market opportunities.
As it relates to our distribution we are a worldwide company. Last quarter, 52% of our revenue came from outside the United States, 48% came from North America. Really, on an annual average we're about 50-50 North America to OUS. We had strong; its distribution is very strong, international third-party distributors, 26% of our revenue last quarter consistent of about 27% in Q1 of ‘12. Our European and Asian subsidiaries contributed very nicely, and as we get additional regulatory clearances those markets are expanding and North America had an also an excellent quarter of about 20%.
So key initiatives for our company is certainly our complementary acquisition; I will talk about Palomar acquisition in a minute, but in 2011 we had three acquisitions that took place from February to October. We did an excellent job in integrating these acquisitions in to the Cynosure model. All three opportunities had yield excellent top line revenue contributions as well as excellent bottom line growth for the organization. Really has been a great experience for our sales and our management team to integrate these companies as we move towards the Palomar acquisition which is a transformational opportunity for the company and Palomar is one of the industry leaders. We have a lot of respect for the company, it has outstanding technology.