Q4 2019 Earnings Call
Thank you for joining Q terrorists fourth quarter and full year 2019 earnings conference call.
After the prepared remarks, there will be a question and answer session.
The discussion.
Discussion today includes forward looking statements. These forward looking statements reflect managements 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 plans to introduce new products regulatory approvals and productivity improvements.
For words I 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 his section entitled.
Risk factors in our form 10-K as filed with the Securities and Exchange Commission and updated in our form 10-Q's.
Subsequently filed.
Okay.
You Terror also cautions you not to place undue reliance on forward looking statements, which speak only as the date they are made.
Cutera undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances or to reflect the occurrence of.
On anticipated 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 bias.
We believe these financial measures can facilitate a more complete analysis and greater transparency into Q terrorists 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 alternative to the operating performance measures prescribed by gap.
With that I'd like to turn the call over to our CEO Jay its Mallory.
Thank you operator.
I'd like to welcome each of you took a terrorist fourth quarter and full year 2019 earnings conference call with me on the call today, our Jason Ritchie President.
That's what I would put terrorist interim chief financial Officer.
Since joining to tear eight months ago, we have made steady progress on our key initiatives and I'm extremely pleased with the results we have posted today.
With our strong fourth quarter performance, we effectively closed out a great year, we're carrying forward into 2020 strong and growing momentum for our products, an unmatched pipeline of new product development programs and the management alignment around a plan to deliver consistent and steady improvement in our cost structure over the new.
Next several quarters.
By all measures teacher is well positioned to create value for our employees and key stakeholders in fiscal year 2020 and beyond.
Regarding our specific fourth quarter 2019 result, I am pleased with our revenue and gross profit performance in particular and credit the amazing depth of talent across our global organization for the success.
Our revenue growth was well balanced across the business with contributions from three key areas.
Our troops scope body sculpting franchise.
Our international commercial team.
And the continued expansion of our recurring revenue streams.
These diverse sources of revenue growth and the strong underlying drivers of each have me excited about the opportunities at hand, as we continue to feel topline growth and increased profitability through steady execution against our plan.
Additionally, the Q terror team remains fully committed to delivering next generation innovation and evidence based technologies into the global statics market supported by the strength of our global commercial efforts.
In the fourth quarter, we demonstrated progress against four key business initiatives.
First we delivered strong results in our body sculpting growth initiative.
Well the last six quarters Kitamura has upgraded our body sculpting portfolio watching significantly upgraded product into the fat reduction market segment, and expanding our portfolio to address the rapidly growing muscle scoping segment.
In combination, we believe that Trusculpt I'd for fat reduction and Trusculpt flex for most is muscle sculpting represent the best body sculpting offering on the market.
Demand within the fourth quarter for Trusculpt I'd remained strong and the customer reception Trusculpt Plex only in its second full quarter of commercial release was exceptionally robust.
The second initiative, we generated strong result in key geography is where we had previously made strategic investments in our international commercial team.
Historically Q terrorists international business has been underpowered and delivered less than the desired growth. However, following a recent investments in talent and structure in key geographies, we have delivered international business growth at more than doubled the market rate.
Third our collective and cross functional attention on building recurring revenue is delivering a rapid improvements across the business.
Just a few short years, we have nearly doubled the percentage of total revenue coming from our active installed base of systems. As a reminder, recurring revenue is comprised of our global service contracts skin care products and the single use per procedure based consumable product sales.
Together these categories provided growth of 28% in fourth quarter over prior year.
And finally, our fourth initiative efforts spent on various activities within gross margin expansion were reflected in the continued improvements within the period.
Fourth quarter gross margins benefited from three items.
First product price and mix by way of continued commercial discipline.
Second freight expense reduction using our regional distribution centers and third early contributions from manufacturing immaterial cost saving efforts together. These improvements provided nearly 400 basis points of lift over prior year gross margin on a non-GAAP basis.
In combination our progress across all four of these key business initiatives put to Q tear in a strong position with positive momentum going into 2020.
Now I'd like to spend just a moment discussing changes to our north American sales organization subsequent to the close of the fourth quarter 2019.
Earlier this quarter, our vice President of North American sales and a small number sales employees departed the company.
While our typical forecasting process anticipates, a routine level of attrition or sales rep turnover. We took the time to assess these departures and their impact on our 2020 revenue outlook.
Based upon our assessment, we made appropriate revisions to our North American revenue plan as well is implementing steps to prevent further attrition.
Additionally, we have adopted a fun, but measured posture regarding our legal defense of the business from for the threat.
In summary, I am pleased with the teams collective performance in the fourth quarter and for the full year 29 team.
We're seeing strong revenue growth across our portfolio supported by strong underlying drivers and a rich pipeline of new product development programs.
We feel good about our international commercial plans and have confidence in the prospects every U.S. commercial organization going forward.
I will now turn the call over adjacent Richie our President for review of fourth quarter and full year 2019 operational performance Jason.
Thank you Dave.
I'd like to Echo Daves initial comments and thank the global Cutera team for delivering an outstanding fourth quarter to cap off a strong 2019.
Together this team accomplished a tremendous amount in a very short period of time and has set our company up for even greater success in the future.
You terrorists fourth quarter total revenue grew 14% over the prior year driven by three key areas of contribution.
I think my body sculpting franchise.
Increased penetration of the international markets.
And expansion of our recurring revenue streams.
With respect to our body sculpting franchise, we continue to gain share in the growing 1.1 billion dollar body sculpting market.
Total crude scope revenue, which includes our fat reduction systems, Trusculpt greedy and I'd as well as our muscle sculpting system to scope flex grew 52% over fourth quarter 2018.
Well met him from the North American launch of the Trusculpt <unk> third quarter carried forward into the fourth quarter with increased flex system sales.
Customer feedback has been very positive.
In fact, we've had nice success with multiple competitive accounts, adding trusculpt flex to their practice to provide take next level offering that muscle stimulation delivers.
In addition to competitive account penetration a body sculpting systems Trusculpt I M. Flex continued to be used by certain customers in combination therapy offering their patients fat reduction and muscle sculpting in a single one hour treatment.
Together these systems to provide conditions with an unmatched suite a body sculpting capabilities.
We're extremely pleased with our international systems revenue, which grew 18% over the prior year period.
During the quarter, we saw a benefit from previous investments in both commercial talent and sales infrastructure within key geographies.
Over the course of the second half of 29 team, we applied many of our learnings from top performing international regions to our direct E U markets and we have already begun to realize a return on these investments.
Going forward, we remain bullish on our international opportunities as we continue to improve our global commercial team and layer in new products, such as true scope flex, which we recently launched into several international regions earlier this month.
The third major contributor to growth in fourth quarter 2019, what's a continued expansion of our recurring revenue streams.
As previously mentioned recurring revenue is an area of focus for the company has it further accelerates our topline growth and provide the key library and our improved profitability strategy.
We estimate that exiting 2019, roughly 30% of our active installed base was generating consumable revenue, which is up from approximately 22% at the end of 2018.
We're defining the active installed base as they system at systems that were sold within the previous five years.
Systems with an extended warranty in place as well as systems, having been serviced in the previous 24 months.
Procedure related revenue grew nearly triple digits over the fourth quarter of 2018, driven by increasing patient flows through our true scope family of products as well as our secret RF micro needling system.
We remain bullish on consumable growth in particular with over 50% of system sold during the quarter, providing access to longer term recurring revenue in the form of consumables.
The final here I'd like to review is our focus on gross margin expansion.
We're pleased with the continued improvements in our gross margin performance over the prior year period during the fourth quarter 2019, our gross margins were 57% on a non-GAAP basis versus 53% for fourth quarter 2018. These results reflect our focus on commercial pricing discipline favorable product mix.
And cost improvements coming through our continuous improvement initiatives within our manufacturing and distribution environment.
We are pleased with our efforts to date, we remain vigilant to unlock the full benefit of our cost reduction efforts.
Before I turn the call over to flawed I wanted to follow up on Dave's earlier remarks regarding the North American commercial team.
We're working closely with our sales leaders and have great confidence in the strength in ability of this organization. We have a strong sales management team that possesses significant depth of experience in the energy basis static market.
Together, we have successfully navigated choppy waters before and we have already leveraged our learnings to work through these issues and execute our strategy.
And now to provide additional details on the company's performance I'd like to turn the call over two for one.
Thank you Jason.
Before I begin. Please note that our prepared remarks will focus primarily on non-GAAP results unless otherwise noted.
A reconciliation of GAAP to non-GAAP is included in our earnings release, we encourage listeners and readers to review our non-GAAP metrics in conjunction with the GAAP results as contained <unk> earnings release.
I will now go over full year results for fiscal 2019, and fourth quarter ending December 31st 2019.
Well fiscal 19, we recorded total revenue 181.7 million, a 12% growth or fiscal 18, we recorded total revenue growth of 4% in the U.S. and 24% internationally in fiscal 19 compared to fiscal 18.
Well from body sculpting and micro needling products are both systems and recurring revenue streams offset expected declines from legacy platforms.
Internationally, we experienced particularly strong growth in Japan, Australia, New Zealand and European direct.
Well the fourth quarter fiscal 19 total revenue grew 14% to 51.8 million from 45.5 million for the same period in fiscal 18.
We recorded 11% revenue grew up in the U.S. main growth drivers being truce crop family of products and secret our.
Total international revenue grew 19% for the quarter as was the case with a full year, we experienced particularly stall strong growth in our European direct markets and from an expanding business in the middle East as well as growth in Japan, and Australia New Zealand.
This was a result, a previous investments intelligence structure that have started to take hold.
Overall, our crews gold product portfolio remains very strong and generated 44% worldwide revenue growth for the fiscal year 19, what's this fiscal 18.
Well full year fiscal 19 recurring revenue define as consumables global service and skin care revenue grew 37% over fiscal 18 to 41.2 million.
Recurring revenue represented 23% of a total fiscal revenue in fiscal 19 West is 19% in fiscal 18.
Consumable revenue growth in fiscal 19 accelerated consistent with the expansion of our installed base, so systems and associated with single use and procedure based products.
As a result consumable revenue grew 232% in fiscal 19 to 9.6 million.
Revenue from consumables are expected to continue to expand and become a more meaningful contributor to our revenue.
Overtime as increasing number of our active installed base of systems will have a consumable revenue stream.
For the fourth quarter fiscal 19 recurring revenue grew 28% over the same period in fiscal 18 and accounted for approximately 21% of total fourth quarter revenue of 11 million.
Consumable revenue growth in fiscal 19 demonstrates system utilization and is reflective of commitment our customers have to our platform.
It was a result consumer revenue grew over 98% to 2.5 million in the fourth quarter fiscal 19 compared to the same period last year.
Moving to expenses beginning with gross profit in gross margin to then to operating expenses.
Fiscal 19 recorded non-GAAP gross profit up 100.2 million compared to 86.4 million in fiscal 18.
Non-GAAP gross margin in fiscal 19 was 55.2% versus 53.1 person, but the same period last year.
In over 200 basis point improvement.
This improvement is primarily attributed to superior execution and user pricing favorable product mix associated with our rapidly expanding consumer revenue component that garners higher gross margin as well as improved overhead absorption.
For the fourth quarter fiscal 19, our non-GAAP gross profit was 29.4 million compared to 24 million for the same period last year.
The significant improvement is worth noting.
As was the case for fiscal 19, non-GAAP gross margin reflect a substantial improvement over the prior period, our non-GAAP gross margin fourth quarter fiscal 19 was 56.7 per cent compared to 52.8% for the same period last year.
We believe our continued commitment to pricing discipline expansion for consumable revenue streams and renewed focus on cost improvements.
Has delivered really meaningful results to that end, we recorded significant gross margin improvement throughout fiscal 19.
Moving to operating expenses.
Well fiscal 19 reporting non-GAAP sales and marketing expenses 62.6 million compared to 53.9 million fiscal 18.
The year over year increase is primarily attributed to personnel and related expenses as a result of our investment sales and marketing expense as a percentage of total revenue grew slightly to 34.5% in fiscal 19 from 33.1% in fiscal 18.
For the fourth quarter fiscal 19, our non-GAAP sales and marketing expenses were 17.9 million compared to 14.3 million for the same period in fiscal 18. The reason for growth from the prior is essentially the same as mentioned before.
Sales and marketing expenses as a percentage of revenue what 34.5% into fourth quarter fiscal 19 compared to 31.4% of revenue in the fourth quarter fiscal 18.
For fiscal 19, a total non-GAAP R&D expenses remained essentially flat year over year.
As is the case what project related expenses there are some lumpiness to flow expenses, our non-GAAP R&D expenses totaled 30.4 million in fiscal 19 compared to 13.5 million in fiscal 18.
As a result, our non-GAAP R&D expenses were 7.4% of total revenue in fiscal 19 compared to 8.2% in fiscal 18.
However, our non-GAAP R&D expenses were 4 million in the fourth quarter fiscal 19, compared to 3.2 million, but the same period and fiscal 18.
This increase was the result of increased staffing for active development projects. Consequently, total non-GAAP R&D expense as a percentage of revenue increased to 7.7% in the fourth quarter fiscal 19 from 7.1% for the same period in fiscal 18.
Looking ahead, we would like to reiterate our commitment to investing in engineering and clinical research to drive new product innovation existing product enhancement increased indications and coverage as well as expanded regulatory approval of our technology.
Finally on GNS expenses will fiscal 19.
Our non-GAAP Genie expenses were 19.9 million compared to 17.1 million well the same period in fiscal 18.
Growth from the prior record was the result of higher compensation expense in fiscal 19 as fiscal 18 didn't contain management incentive bonus as well with addition of key leadership roles, including Dave Our CEO.
Additionally, we also incurred additional credit card processing fees on higher revenue and higher legal and accounting fees.
Well the fourth quarter fiscal 19, our non-GAAP operating expenses were 5.5 million compared to 4.3 million for the same period in fiscal 18.
The reason for the increasing expenses are the same as mentioned earlier.
Well fiscal 19, our non-GAAP operating income also called adjusted EBITDA was 4.3 million compared to 2 million fiscal 18.
The improvement is essentially the result of higher revenue on improving gross margin offset by highlighted investment in sales organization and DNA.
We expect these investments to lead to significant operating leverage in fiscal 20 M. beyond.
Yes, or no material significant tax liabilities in the period.
Turning to balance sheet cash flow and liquidity.
We had approximately 33.9 million of cash and equivalents.
December 31st 2019, compared to 35 point Sixmillion at the end of fiscal 18, However, our working capital decreased only slightly to 39.4 million at December 31, 2019 from 39 point Sixmillion at the end of same at the end of the same period last year.
Well 12 months ended fiscal 19 casual from operation was a net use of cash of 2.2 million compared to 300000 of net cash provided over the same period last year.
Net increase in cash use is primarily due to us employing a regional distribution center strategy, resulting in higher initial inventory levels of finished goods and service inventory.
We believe these investments are necessary has keeping inventory close to customers, resulting nor fulfillment and freight costs better execution and higher level of customer service.
I will now provide for your guidance for fiscal 20.
Well first of all 2020, we're targeting total revenue in the range of 194 million to 200 million, representing 7% to 10% increase over fiscal 2019.
As mentioned earlier, we have considered a recent factors as well as the growth trajectory is coming out of 2019 in developing this range.
We expect full year 20, non-GAAP gross margin to improve over the full year 19 level and adjusted EBIT da to be in the range of six to 7 million as we see initial benefits of operating leverage with that.
I will now turn the call back over to Dave for some closing comments.
Thank you for what.
We're really excited and encouraged going into 2020 with momentum in several key areas.
Steady execution of our plan is delivering the intended results in revenue growth across our body sculpting portfolio, our international commercial operation and across the recurring revenue streams.
The team has made significant strides in our gross margin performance with plans in place to steadily improve upon this performance going forward.
And finally, we are moving into new era of leveraging process and system investments to deliver operating improvements and increased profitability.
While we were working through any temporary disruptions, we will remain focused on the long term goals and objectives of our business leveraging a vital few initiatives to focus our energies and advance the company toward our vision of shaping the future of energy based to statics and delivering value to our key stakeholders.
Operator at this time would you please open the lines for questions.
Thank you.
Well now be conducting a question and answer session. If you'd like to ask your question you May Press star one on the telephone keypad a confirmation total indicate your line is into question Q you May Press Star too if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing starkey.
Our first question comes from the line of Jon Block with Stifel. Please proceed with your question.
Great. Thanks, guys. Good afternoon, maybe a small handful for me.
I mean, you're guiding to 7% to 10% year over year any color on how that May look you as first is international in other words international grew at a big premium to the U.S. in 2019, Jason I think you said Youre flexes first rolling out in international markets sort of as we speak. So this international outpaced the U.S. trophic 2020, similar to what we.
So last year.
Yeah, I think that's a body weight John Thanks to the question I think that's a fair assessment. Obviously you know we took the time to think through this and a lot of the drove growth driver. So the business are quite positive yeah, we talked about the body contouring <unk> portfolio and now with the full offering.
We expect field offer not just the I.D., but the flex in European markets a it launched earlier this month as Jason indicated and we're seeing exceptionally strong. The you know obviously interested in that product that will continue to roll out into other international markets. It of course, the year and make major contributions. In addition, we see strong.
On execution from our International group in particular, and I think you know this is a a little bit around.
Yes, certainly some of the investments we've made jeez I don't know if you want to add any color to that yeah, no I think you're thinking about it the right way. It just because number one of installed base, we're definitely going to see international outpaced. The U.S. in terms of growth is we continue to layer in additional products and I mentioned earlier. The you know we're really starting to see some of the investments that we made early.
Your last year and even at the exiting 2018 that are really starting to give us a nice return on that investment in a couple other areas, where we're seeing some nice growth to is in our skin care language has distributed in Japan as well as our consumable business, which we're seeing globally and also our service component, which is growing a nice double digits at this point in time.
Okay, Great I'm very helpful. Thank you and sort of second question just on the margins are going be adjusted EBITDA margins were.
Around 2.4% for 2019, it seemed to imply up 100, they're still like to read out three ish and 2020 I guess the question is is that somewhat shared between the gross margin in opex leverage because you alluded to gross margin expansion and then Dave just stepping away from that from a moment. If you could talk to just how you view.
Reinvesting in the business in other words, if you've got some up you're going to redeploy that into the opex infrastructure. So arguably the balance sheet pretty strong in the.
The pad the cash theoretically.
Great Great questions, John as always so first let me take goes in sequence. So what I think first about margin gross margin versus operating more margin. I think you know we see a stronger contribution probably in in in operating margin, we see some leverage on the sales and marketing side, but not a lot.
Fundamentally we just see a little bit that's coming through <unk> through the natural growth of the topline right. So you know weve endeavored to continue to take very good care of our sales organization in particular and as such you know you'll see the variable comp associated to that as a funding.
Really not changed year over year.
So you know, we don't expect to get a lot of leverage our out of the sales a function on a global basis. This year. However, I think we do see a little bit of leverage on the marketing side, and we see a little bit of leverage coming <unk> very small amount, perhaps from gionee a in the back half of the year from some of the investments. So most of this is coming out of grow.
Gross margin and but he's investments that we're making below the line are things that we think we'll reap long term benefit of future leverage you know as we continue to grow and these are the infrastructure investments that we've talked about the last two quarters.
T to your other question you know if we Overperform what do we do look at I think this is an R&D engine that I think is unrivaled in this space and fundamentally I think we have the boards approval and focus and support in making key R&D investments that accelerate topline growth and I think you'll see that from.
Yes, as we go for it we intend to shape the future the market anesthetics and I think that come through innovation and introducing new technologies that outpaced all of our competitors got it variable at last one quarter, one I just got Astronova virus.
Just maybe if you could talk about overall exposure remember just from a supply chain perspective, how do you guys feel if you're comfortable and just update us there. Thanks guys.
Yeah, John that's a great question and you know we thought about putting in the script frankly in and we opted not to only because we see it currently is relatively non material to us currently that doesn't mean that were not looking if this thing on a very routine basis.
So some of this is the result of where we have strengthened market.
What we see the impact in those markets from a supply chain basis, we've actually not only looked at our suppliers. We've looked at their suppliers and you know unlike some companies that have a strong Asian sub component, we have a strong them out of our components that had been sourced in the U.S. and as a result, we have limited exposure.
There we are managing some of the Asian sub components that serve some of the suppliers we have in the U.S. and right now we feel we're very comfortably through even though.
[laughter] so as we go forward.
And you still hear me a that slipped my line cut up for second sorry [laughter].
You know our supply chain I think is continues to improve not only in its performance, but its depth and control that we haven't had so I feel very good about it from that perspective, okay. Great. Thanks, Dave Thanks for your time.
As a reminder, ladies and gentlemen, it is star one to ask a question.
Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.
Thanks first this is a finished question I think Dave you said on [noise].
The call recurring revenues.
Include three things global service contracts, what your your maintenance contracts consumables I missed the third piece.
Skincare skin and skin care line that we distributed out of Japan right right. Just curious if the skincare line [laughter].
<unk> percent of total revenues. It's it's it's what percent is just a couple of percent. That's it's a relatively small percent I think total recurring revenues or are you kind of in in the the upper twentys percent and that's a smaller even component of that so you know roughly you know.
It's a you know four or 5% I think of total revenues. They so you know, it's it's not significantly material from that perspective, what but what it really important for US is it allows us to make key investments in the jet Japanese sales structure that have allowed us to have great uptake on system.
On this as well as service I'm. So you know we look at it as an opportunity to kind of spread the overhead if you will and have a stronger presence in that market and we've been able to leverage that present, I think pretty effectively.
Okay. Yeah, that's helpful and then.
But the majority of that lets say, let's call it 27% to 29% of recurring revenues are your global service maintenance contracts that probably makes up.
You know I'm right around 20%, 18% to 20%. So it so that the one time consumables is about is about five or 6% is that about right.
Yeah, Yeah, we break that out on the on on the sheets. You can you can see that that you're in the right ballpark there, but I think what's interesting is that component is what grew 134% year over year. So we see that is probably being one of the fastest growing segments in our business and while it relative represents a relatively small component.
That's the component that's going to carry us over the next few years up into those 40% of revenue being recurring revenue.
And can you just talk about the true scope lacks particularly that that that business obviously.
You know based on your comments. That's that's obviously the you know the fastest growing segment of the true scope portfolio.
Can you talk about.
The price point on an A.S.P. standpoint for the system and then the.
Consumable piece there.
Yeah, I know T that up and then I'm going to have Jason kind of bring that home the way I look at first of all its the fastest growing because it's the newest segments right. So so I don't want a habit overshadow really exceptionally strong view, we have around Trusculpt I'd, which is still receiving you know very very poor.
Was it is customer sentiment and and when you do your channel checks as I'm sure you do you get a lot of favorable response from our current users. So you know our view of it is that ideas is an equally strong component of that probably <unk> of that portfolio and that flex wallets, new and novel complements I'd and gives us.
Probably the faster growing component because that's a new segment to the market, Jason I mean, you and I I think it's a great question, Anthony we don't really breakout asps by product what I would tell you is that we're still in the six figure range on our muscle scoping technology and I'm really happy with the way we went about delivering this piece of technology to really come from.
And the body vertical that were in what true scope I'd and you know I mentioned earlier in the call that conditions. Using these together has been able to really deliver some fantastic results for their patients and so it's a nice complimentary piece when it comes the consumable that goes with that we're really focused on a procedure related revenue which is a.
A little bit of a shift from what we've done with some of our other devices, where it's been a consumable per year per treatment. This is more of a procedure related consumable piece, but it's still something that I think is really complimentary to to the consumable strategy that we have in its still putting us in that high double to low triple digit growth perspective.
Okay, and then and then just shifting gears a little bit there, but maybe Jason this is.
You can probably answer so from what I understand right. So since.
That the head of sales departed with a with a few salespeople Jason your you're right now.
Adding the sales division.
Is there is that is data is that a long term plan or are you looking for a new head of sales and then as a follow up to that.
How many of the salespeople that that departed.
And in January have you replaced at this point.
Yeah, a couple of things number one no I'm not leading the commercial team I'm actually working very closely with them. We have an interim vice president of sales who was our former national sales director who stepped into the role you know this is a very important positions. So we have engaged a formal process of sourcing. This individual we have a couple of internal candidate.
It's that have expressed a deep interest for the position, but you know based on the importance of this position, we're looking internally as well as looking externally to see what is available you know in terms of what we're looking for a more really trying to evaluate externally if there's people to have a strong industry experience in.
The aesthetics in energy based market and we want to make sure that if we are able to find somebody that has that type of experienced that you know there are aligned with our long term value strategy. So it's it's an important role and what I tell you is right now we've got a structure in place that you know is is I'm really impressed with the agility that the team has demonstrated an order.
To to quickly ramp to this and we're in the process of executing a full formal search both internally and externally to find that candidate that Dave anything you want to add to that yeah. I think you know as you think about this what's really been kind of interesting to US is you know I'm frankly, our ability to backfill on it.
I've been very interesting to see the number of competitive.
Reps that have reached to us with the openings and you know without naming names or companies I'll tell you that we've actually had a several last year award winners from competitors reach out to us where some of the vacancies as they like the portfolio. They like the technology and they know what's coming through Aart.
And then program so you know.
We've been pleased with the speed at which the company's reacted you know I I think frankly.
It's it's hard not disappointed in some regards but I also view this as an opportunity for us to continue to upgrade the told team and some of the great players that we have with US and are still with US are really amazing folks and this has created an opportunity for some of them to step up into bigger roles and have greater impact in this organization.
So you know while it's disruptive in the short term I think it's going to play out very favorably for us in the long term and we got the growth drivers of both international and the recurring revenue streams to help kind of tie this through and hence the guidance we provided.
Okay, Yeah, but just as a follow up just in terms of did did people step up internally for the territories not just for the head of sales right, but but for the territories that also lost.
Salespeople have people stepped up internally or have you already been able to hire some of those people that have left.
Yeah. The short answer is yes, and yes. We the you know this has created an opportunity to really look deep within the organization and Weve.
I've been really excited with the people that have raised their hand that wanted to move into leadership positions and so we've had a chance two to promote from within on many levels and we've also to Dave's point had a chance to ER to look outside of the organization and have found some really unique and qualified people to that our interim.
Did in joining the company based off of the pipeline based off of the structure and based off of the future, where we're going so I've been really pleased with both on both fronts.
Okay, Great that was helpful. Thank you.
Yep.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Thank you operator, I just want to thank everyone for joining the call today I'm very excited about where this company is heading I think we have alignment focus and energy.
And a full commitment to great excellence here, so with that will end the call and I'd just say thank you for all of you joining us and your support for our long term outcomes. Thank you.
Ladies and gentlemen, this does conclude todays teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.