Cutera, Inc.

Thank you for joining QTERRA's fourth quarter 2020 earnings conference call. After the prepared remarks, there will be a question and answer session. The discussion today includes forward-looking statements. These forward-looking statements reflect management's current forecast or expectation of certain aspects of the company's future business including, but not limited to, any financial guidance provided for modeling purposes. Forward-looking statements are based on current information that is, by its nature, dynamic and subject to change. Forward-looking statements include, among others, statements regarding financial guidance, regulatory approvals, productivity improvements, and plans to introduce new products and expand into additional geographies. For words that may identify forward-looking statements, we encourage you to refer to the Safe Harbor Statement in our press release earlier today. All forward-looking statements are subject to risks and uncertainties, including those risk factors described in the section entitled Risk Factors in our Form 10-K as filed with the Securities and Exchange Commission and updated in our Form 10-Qs subsequently filed. QTERRA also cautions you not to place undue reliance on forward-looking statements which speak only as of the date they are made. QTERRA undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances, or to reflect the occurrence of unanticipated events. Future results may differ materially from management's current expectations. In addition, we will discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into QTERA's ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the reconciliation from GAAP to non-GAAP measures in our earnings release. These non-GAAP financial measures should be considered along with, but not as alternatives to, the operating performance measures prescribed by GAAP. With that, I'd like to turn the call over to our CEO, Dave Mowry. Please go ahead, sir.

Thank you, Operator. Today I am joined on the call by Jason Ritchie, President and Chief Operating Officer, as well as Rohan Seth, our Chief Financial Officer. I will begin today's call by providing a brief overview of our fourth quarter and full year 2020 business results. Jason will then provide operational highlights and commercial updates on the business and then turn the call over to Rohan, who will provide more detail around our fourth quarter and full-year financial results, as well as the near-term outlook. Before opening the call to questions, I will then highlight progress on our long-term initiatives. Now, I'd like to turn to the fourth quarter highlights. I am pleased with our overall performance during the fourth quarter of 2020. While the COVID pandemic continued to impact our end markets, particularly on the capital equipment side of the business, We continue to execute our plans and made significant sequential improvement in both our top line and bottom line performances. As I have discussed in the past, I'm very proud of the way the entire QTERRA team has responded to the challenges presented by COVID-19 to us and to the market in whole. I believe our strong results are the direct reflection of the hard work, commitment, and creativity shown by our team in supporting our customers through this challenging time. During the quarter, we continued to see an overall improvement in our demand environment as the COVID-19 recovery progressed. The pace and the extent of this recovery continues to vary by region, and the magnitude of the impact of the virus remains localized as state and local governments impose restrictions of varying degrees. As you know, since the early days of COVID-19, we have worked with our core customers to track patient traffic and specific treatment volumes, as a leading indicator of the recovery. While the fourth quarter trends reflected sequential improvement in both body sculpting and skin and facial rejuvenation procedures, patients have sought facial rejuvenation treatments in particular. This increased patient trend appears to be driven by the increased volume of video conferencing being conducted during the pandemic. In total, core customers are sharing data that suggests total procedure volumes exiting the fourth quarter of 2020 is approaching or exceeding those in the same period of 2019. More specifically, the most impacted regions within North America were Canada, Southern and Northern California, Illinois, and the New York metropolitan area. Each of these areas were, at various times, highly impacted by limited access. Regarding the international markets, treatment volumes appear to be most highly impacted in the UK, Western Europe, and the Middle Eastern markets. Looking ahead, we expect that the pace of recovery will continue to vary on a regional basis due to the localized impact of COVID-19. While we believe the introduction of vaccines has provided a source of optimism for patients in scheduling procedures, some practitioners in the U.S. have expressed concern that with a known timeline to vaccination, patients who were previously unwilling to delay procedures now may be willing to delay their treatments until the vaccine has created a more safe environment. We will continue to track volumes, treatment types, and customer as well as patient trends so that we may continue to adjust our course and our processes accordingly. Revenue for the fourth quarter of 2020 was $49.9 million, a 4% decline compared to the prior year, but up 28% sequentially. Revenue for the full year was $147.7 million, a 19% decline from 2019. Fourth quarter capital equipment revenue was down 26% compared to prior year, but posted a 25% sequential improvement over the third quarter of 2020. North American capital revenue was down versus prior year, but showed strong sequential improvement, posting 35% growth over the third quarter of 2020. I am pleased that our capital sales continue to trend in the right direction and process improvements and future staffing increases will drive continued improvement in this category as the effects of COVID-19 begin to subside. Meanwhile, as Jason will discuss in more detail, our North American sales leadership team has continued to focus on making improvements to our sales process, our client support capabilities, and our ability to generate and leverage high-quality capital sale leads. These durable efficiency improvements will help us establish a strong foundation from which we can expand our team through the addition of high-quality reps. I am encouraged by our North American results and optimistic with the progress this team has made on their initiatives during the fourth quarter, as this will continue to be an area of management focus heading into 2021. On the international sales front, Japan and Australia and New Zealand continue to be bright spots for Kuterra, as both teams posted year-over-year systems revenue growth for the fourth quarter. Our fourth quarter recurring revenue was exceptionally strong, providing 80% growth over prior year period and a 32% sequential growth over the third quarter of 2020, accounting for approximately 40% of our fourth quarter 2020 revenues. As a reminder, we define recurring as the combination of revenues received from service, contracts, and field service repairs, the sales of our skincare products, and the sale of our consumable products used in the delivery of a Kutera energy-based aesthetic treatment. During the period, skincare remained strong, posting year-over-year growth of 363%, driven by near equal parts of new account expansion and increased penetration or same-store sales. Also contributing to recurring revenue growth was consumables, delivering year-over-year growth of 19%, which is reflective of increases in treatment volumes with our customers. We were pleased to see the consumable product sales growth outpace sequential treatment volume improvement. The Cutera consumable performance was driven on greater secret RF tip cells in particular. As mentioned earlier, we saw a marked increase in skin and facial rejuvenation procedures within the market. Looking forward, we are bullish on body contouring procedures and expect to see increases throughout 2021 as patients look to regain body image as they move into the new year prepare for long-awaited summer vacations, and resume a greater volume of on-site work and direct social interactions post-vaccination. Before turning the call over to Jason, I would like to point out the team's results in pushing towards sustained profitability. As part of the company's vital few initiatives, we are actively working to expand the gross margin profile of our business. Despite the drag that increased skincare volumes have on our overall gross margin performance, our efforts to remove fixed overhead costs improved manufacturing efficiencies, and reduced material costs are showing the desired result. During the period, we delivered non-GAAP growth margin of 56.6 percent, which was on par with 2019 at 56.7. Regarding operating expenses, like most other companies, Kuterra benefited from the reduced spending associated with restricted travel and trade show cancellations throughout 2020. Unlike other companies, though, We invested internal resources into improving our sales and marketing processes to deliver greater sales efficiencies and, in turn, productivity, making more of our savings durable as reflected in our fourth quarter 2020 results. Research and development expenses during the quarter reflected the lumpiness of spend associated with the timing of engineering, clinical, and regulatory events. R&D remains a priority for the company, and we will not constrain nor delay any of our critical development projects such as acne, in any way. Now, let me turn the call over to Jason to cover some of our fourth quarter and full year 2020 operational highlights.

Thanks, Dave. 2020 introduced many challenges and forced our team to evolve our ways of doing business on multiple levels. As we move into 2021, I think we've set a solid benchmark for our team to improve upon as markets continue to recover through the year. In North America, our fourth quarter sequential improvement was driven by the continued improvement in rep productivity. This is encouraging given the challenges of the present selling environment and the necessity to continuously evolve our methods in this ever-changing landscape. Through the calendar year, we've developed new processes and created a foundation that I feel will facilitate the scaling of our business going forward. As we head into 2021, We intend to continue driving sales expansion by adding additional high quality sales reps while sharpening our efforts to generate high quality customer leads to fuel the growth. We are also continuing to invest resources into our capital sales training program to accelerate the uptake of new reps and hone the skills of recent additions. We expect these improvements will help drive results in the back half of 2021 as customer appetite for capital continues to recover. Internationally, our capital business underperformed versus prior year due to significant COVID headwinds in the EU and several distributor markets. In regards to the EU, we commenced a restructuring within our sales force, namely in Southern Europe, as we improve our talent pool and consolidate sales leadership roles to improve efficiencies across the region. Additionally, we have improved our connectivity and tracking to duplicate many of the changes we made in the UK earlier, which have already begun to bear fruit. We are optimistic we will achieve a similar result in other key geographies within the EU over the course of 2021. Despite continued lockdowns due to the global pandemic, our Australian New Zealand team and our Japanese team both posted significant capital revenue growth year over year. These numbers reflect the depth and focus of leadership as well as the quality of sales representatives we have in place. Early investments in these regions continue to pay off, and we are following a similar roadmap for our EU geographies. Our product marketing plans for first half of 2021 will, in many ways, continue the efforts we launched during the fourth quarter of 2020. Our TrueSculpt portfolio remains our flagship product in the body sculpting market as we feel it gives aesthetic practitioners the competitive edge they need to drive best-in-class body sculpting results. We will continue to leverage the marketing and efforts around the TrueBody program, demonstrating the benefit of sequential utilization of RF fat reduction and direct muscle stimulation in the patient's pursuit of achieving their desired outcome. Marketing efforts within the face and skin rejuvenation space will center around the continued support of our XLV Plus vascular laser and our Secret family of products. This includes our Secret RF microneedling device, as well as the Secret Pro device, formerly known as Fraxis Pro. As mentioned before, this product combines the capabilities of the Secret RF device with the addition of a fractional ablative CO2 laser to induce thermal remodeling, addressing skin tone and texture, resurfacing, deep wrinkles, and scars, just to name a few. The Secret Pro device was launched in the third quarter of 2020 and is still in the early innings of its availability. Initial customer feedback for Secret Pro has been positive, and we expect to see increasing demand for this product during the 2021 calendar year. Lastly, we have focused on increasing the effectivity of our marketing spend through the back half of 2020 and intend to expand upon these learnings throughout 2021. One particular area we are committed to investing in is the acquisition, qualification, and deployment of high-quality leads for our sales organization. This focus and investment is actively underway as we are committed to having the structure and process in place in advance of the recovering capital equipment appetite of our customer base. Before I turn the call over to Rohan, I would like to share my appreciation for the hard work and dedication we have witnessed from our operational and commercial teams around the world. Their hard work and dedication, irrespective of market conditions, is inspiring and forms a strong foundation from which to build our long-term scalable organization. And with that, I'll turn the call over to Rohan to discuss our financials.