Q2 2021 Cutera Inc Earnings Call
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Ladies and gentlemen, thank you for your patients of the conference will be starting in 1 minute. Once again the conference will be starting in 1 minute and thank you for your patience.
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Yes.
Thank you for joining the queue terrorist second quarter 2021 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 and 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 the current 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 the 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 this section entitled risk factors in our form 10-K as filed with the Securities and Exchange Commission and updated and our form 10, Qs and subsequently filed.
<unk> also cautions you not to place undue reliance on <unk>.
Future on forward looking statements, which speak only as of the day they are made.
<unk> undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances or to reflect the occurrence of.
[noise] unanticipated events.
Future results may differ materially from management's current expectations.
In addition, Carol will discuss non-GAAP financial measures, including results on adjusted basis.
<unk> believed to tear believes these financial measures can facilitate a more complete analysis and greater transparency and do you care to 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 and our earnings release, the 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 gave Mary.
For 2021 update today I am joined on the call my role handset, our Chief Financial Officer, I will begin today's call by providing a brief overview of our second quarter 2021 business results.
And then I will share our view of the underlying energy based aesthetic market trends as well as of few operational highlights from the period.
We're all on will then provide details around our financial results as well as our share.
As well as share our outlook for performance over the remainder of 2021 after which he will turn the call back to me for some final comments before we open the call to questions.
Turning now to our second quarter business results during the second quarter 2021, our business continue to improve largely as anticipated and slightly ahead of our expectations as the steady cadence of our commercial execution drove notable revenue growth across our business total revenue for the second quarter 2021.
1 was $58.6 million and increase of 122% over prior year results and 23% above our pre Covid second quarter 2019 performance.
This was the single best revenue quarter, and secures history, driven by the expanding and developing sales teams and both our international and domestic markets are improving the improving global energy based aesthetic treatment volumes and the corresponding increase and appetite for capital equipment purchases Despite regional variability.
City and end markets.
Notably capital equipment sales strengthened during the quarter to $35.6 million and increase of 26% sequentially and nearing normalized pre COVID-19.2019 net levels. We are pleased to see our efforts around our capital equipment uptake continue building strength over the quarter as revenue accelerate.
And sequentially across our different platforms.
<unk> teams efficiently executed their region specific plans focused on accommodating customers at varying stages of COVID-19 recovery around the world.
In addition to the positive trends, we have seen in the face and skin rejuvenation markets, we were especially pleased to see improving procedure volumes from the body sculpting business bolstering our confidence that the capital spending environment for body sculpting products will continue to strengthen as we move through the second half of 2021.
And the global markets returned to a more normal and more normalized routine.
On a regional basis, she tourist capital equipment sales were driven in particular by performances from our direct sales teams in North America.
Australia, New Zealand and Europe.
In North America, our teams highly focused efforts delivered another quarter of sequential capital equipment growth of 19% over first quarter 2021, well.
We have yet to completely close the gap to our pre Covid 2019 levels and North America I am generally pleased with this team's pace of improvements as they have been fueled by the investments and sales force expansion, increasing our head count as well as the density of coverage and several key metropolitan areas, we expect.
The increase the Rep Count will help drive late second half 2021 capital performance as newer reps worked to build their pipeline of equipment deals.
We also anticipate that there'll be some impact to North America energy based aesthetic volumes over the course of the mid to late summer as patients and practitioners take long awaited family vacations. While these planned breaks will modestly impact near term revenue. We do see this is of particular this particular activity is a positive.
<unk> of the long term health of the energy based aesthetic market.
Patients are returning to more normalized and predictable routines and the overbooked and somewhat fatigued aesthetic practitioners are growing more and more confident and the sustained patient traffic, allowing them to play and time away for those of you who have followed our company and this industry for a period of years, you will recognize the seasonal pattern and will regard it.
The emergent reemergence as a healthy rather than concerning development.
Our capital equipment sales in Australia, and New Zealand region delivered 90% sequential growth and 135% growth over pre Covid second quarter 2019 levels.
The standout performance followed of highly productive customer educational event in Australia. This past may the Terra University clinical forum or see UCF event was run by our local keturah team with great support from our global marketing staff the.
The event was exceptionally well attended by Australia, and aesthetic practitioners and we believe that second quarter 2021 revenue result for Australia reflected a portion of deals that were likely pulled forward from deals previously expected and the second half of 2021 as a result, we expect to see a small but corresponding dip.
And capital equipment revenue contribution from Australia during the third quarter of 2021.
And the second quarter.
2021, <unk> capital equipment sales and Europe grew 229% over prior year period, and 79% over pre Covid second quarter 2019 levels. These results are reflective of the ongoing investment and sales talent and our European sales teams of renewed focus on capital equipment selling.
Processes.
We expect to see a continuation of these positive trends and believe that the recent investments in Germany, we will provide some additional lift and the fourth quarter of 2021, leading into 2022.
Within Europe, and similar to North America, we're seeing of returned to normal normal holiday schedules and we anticipate that while treatment volumes may step back slightly for a period patient traffic and treatment queues are both strengthening entering the second half of 2021, we expect the treatment volume growth will lead to capital demand.
Improvement over third and fourth quarters of 2021.
Regarding recurring revenue the business maintained positive momentum mentum, delivering 23.0 million in the second quarter of 2021, representing growth of 113% over prior year.
During the quarter all 3 of recurring revenue categories skincare consumable products and service contributed to a robust year over year growth.
Our skin care business continues to perform across the second quarter of 2021 with revenue of $11.8 million up 147% over prior year period, while our performance was slightly below the first quarter 2000, 22021 revenue number we are very confident and our position within skin care market and Japan.
Furthermore, we were delighted with the renewal of our distribution agreement with <unk> skin health, which took place in June.
Consumable product revenue was $4.4 million during the quarter, which represent a growth of 52% sequentially and 211% over prior year.
Revenue growth and consumables resulted from the strength and treatment volumes and both the U S and the international markets are North American performance stepped up over prior year and prior quarter because of the energy and effort we have put into building out our key account manager program.
Similar to our capital equipment sales team, we are expanding our key account manager team. So that in turn we can extend our reach and provide <unk> customers with differentiated post sales support.
Key account manager candidates are being sourced and selected for their previous experience executing revenue generating activities within the static practices. We believe that this strategic partnership approach between <unk> and our customers better aligns the company's resources with our customers and will result in greater treatment volumes.
Which benefit both of our customers and Futura.
Global service revenue, which include the income associated with time and material maintenance and repair as well as the sales of extended service agreements resulted and $6.8 million and the period, representing a growth of 11% sequentially and 47% over prior year period.
The growth of service revenue continues to be driven by higher volume of service agreement sales as well as increased volume of service repair and equipment maintenance requests coming from our active installed base of systems.
As we have stated previously service revenues are expected to grow at or slightly above capital placement rates as the business normalizes over the next few quarters.
Yeah.
Over the past few quarters, the energy based aesthetic market has continued to build positive momentum fueled by the steady pace of patients seeking treatment, new higher treatment volumes, along with stable patient traffic and growing appointment queues at the practitioners offices now averaging 1 and a half months have inspired the practitioners.
Confidence and fueled appetite for capital equipment purchase while there continues to be regional variability and the pace of customer recovery from the pandemic related restrictions the collective energy based aesthetic treatment volumes have continued to grow nicely and our teams around the globe have been able to take full advantage of the opportunity.
And delivering strong revenue performance.
And many region regions practice reopening have begun shifting towards practice expansions for many of our core customers of <unk>.
Along these lines, we have seen many entrepreneurial practice owners actively seeking to recruit new patients to their practices building our capabilities and.
Eric procedure demand, while some uncertainty remains and select regions. We believe that the increasing focus on our customer never goes out of style with regard to the delta variant to the Covid virus, we believe that while some small disruptions in certain regions may be experienced the.
Vast majority of patients now vaccinated will continue to seek treatments and practices will continue to utilize processes that protect and instill confidence among their patients, allowing higher treatment volumes to continue.
And this new environment <unk> has benefited most from our commercial team teams process discipline with an increased focus on serving our customers during the difficult and of the pandemic.
Since the early days of COVID-19, we have sought to better align ourselves with our customers and we intend to continue to take additional steps along these lines, we will make investments and our field based team to create the structures and processes that blend the best of the old with the new as we continue to provide best in class technology through <unk>.
Talented dedicated and highly motivated capital equipment sales force. This team will be strengthened by the addition of multiple resources within each region dedicated to post sale customer support and success. We believe that this increased field presence aligned with our customers' objectives will benefit them by helping bring greater patient.
Treatment volumes to their practices. In addition, we believe that our investment will also provide our company with increased recurring revenue over time and more importantly increase our opportunities to place new equipment into the market as customers find pathways to faster return on their investment.
With that I'd like to turn the call over to Ron.
Dave.
Before I begin. Please note 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, and we encourage listeners and readers to review of our non-GAAP metrics in conjunction with the GAAP results is contained in our earnings release.
Total revenue for the second quarter of 2021 was $58.6 million versus $47.8 million from the same period and claim and theme of pre COVID-19 levels.
As a reminder, our revenues and 2020 were impacted meaningfully due to the Covid pandemic.
As market conditions continue to evolve and improve so do our results are.
Our international business led the way again, this quarter with 42% growth and systems versus 2019 at pre Covid levels.
Our North America business continues its steady march towards pre COVID-19 levels and ended at $19.9 million and systems revenue.
On a recurring revenue defined as consumables global service and skincare revenue was $23 million and the quarter.
Back to $10.8 million for the same period last year.
The representing 113% growth over the prior year quarter and 8% sequentially.
There has been the meaningful growth and this segment of the fr business versus pre COVID-19 levels, which stood at $10.2 million and <unk> 19.
Within recurring revenue are simple and revenue continued its strong growth second quarter revenue of 11.8 million grew 147% on a year over year basis.
Service revenue grew 47% over last year to $6.8 million of the result of having an increased number of systems under extended service contracts. Finally, global consumable revenue grew 211% to $4.4 million versus second quarter 2020.
Non-GAAP gross profit for the quarter was $34 million with the gross margin of 58, 1%, representing an improvement of more than 10 points compared to the same period last year.
And and improvement of nearly 3 points versus our pre COVID-19 levels and <unk> 19.
Moving to expenses.
And marketing expenses for the quarter were $18.4 million compared to $11 million for the same period last year on $32.2 million of the increase revenue.
This additional spending is driven by variable compensation due to strong revenue growth and from increased head count.
Total R&D expenses were up $1.9 million over prior year on increased head count and clinical spending.
Finally on to G&A expenses.
For the second quarter of 2021, G&A expenses were flat versus second quarter 2020.
For the second quarter of 2021 of.
Our non-GAAP operating income also called adjusted EBITDA was the profit of $6.8 million compared to a loss of $3.5 million for the same period last year, we experienced no material or significant changes to our tax positions.
1 final point on operating expense spending.
<unk> remains steadfast and our commitment to invest and key value drivers of this business as we have done faithfully throughout COVID-19 and into 2020.1 among.
Amongst these initiatives, we highlight of our acne program, along with other R&D programs and longer term and infrastructure projects and advance of our commercialization of acne.
Moving onto the balance sheet.
Cash and cash equivalents ended the year ended the quarter pardon me at $169.2 million versus the balance of $164.9 million of the start of the quarter the.
This was largely driven by the cash generated and the business is working capital remained materially unchanged versus Q1, 2020.1.
Before turning the call back to Dave I would like to provide you with the outlook for the FERC for the full year of 2021.
As we have progressed through the first half of the year, we see improvements continuing and the energy based aesthetic and markets. We're encouraged by the recurring revenue growth, we've seen and in our business, our expanding pipeline of capital equipment sales opportunities for the second half of the year and the improving sales efficiency as demonstrated by our commercial organization.
<unk>.
Despite potential near term impact from patient and practitioner of vacations possible restrictions from the Delta variant and ongoing leaves no patient traffic disruptions associated with under vaccinate the geographies.
Our market fundamentals remain strong.
As a result, we are issuing revenue guidance for the full year of 2021 and $215 million to $221 million with that I will return the call back to day for some closing remarks.
Thank you Ryan over the past 8 quarters that could tear we have worked hard to establish a reputation of steadily executing our plans and achieving our goals.
Despite the conditions of the market is thrown at us and doing so execution has become central to this team into our organization, we intend to leverage this tree as we turned the corner and moved from phase 1 to phase 2 of our long term transformation.
And during the back half of 2021, we plan to leverage the fundamental improvements that we have delivered thus far and the journey and begin to execute our game plan to further optimize our performance within the energy based aesthetic market.
And as a leadership team we have put in place several building blocks to prepare for our next phase of development business optimization.
These building blocks include people specifically, we have added the depth of talent on board, while also seeing benefit from and increased employee engagement of our skilled and tenured team.
Process, driving reliable repeatable profitability through focused execution.
Our products, which leverage innovative designs and market, leading quality technical distinction and lifecycle durability, our customers have come to expect from Tutera.
And our strong balance sheet capable of funding our organic programs, while providing optionality for future tuck in opportunities.
With these building blocks in place and fortified by a culture of customer Centricity, we intend to move purposely driving optimized business performance.
1 of our optimization objectives is to further enhance our relationship with core customers through improved field support as such we are making investments to construct and expand our key account manager team. As previously mentioned we are executing this plan concurrent with our efforts to expand and enhance the North America.
And capital equipment sales force the goal of the key account manager expansion effort is to reposition our commercial team to be more supportive of our customers' efforts to drive patient treatment volumes through their practices deploying our resources in this fashion and we hope to train clinicians and staff to enhance treatment outcomes.
And their patients to drive greater treatment volumes and increased consumable purchases and coach practices and staff for improved economic outcomes, increasing opportunities for additional capital equipment purchase.
Thus far the <unk> journey has been a true team effort and never has care had the extent of talent the alignment of functions and the singleness of mind across our entire organization that has come from the company wide focus on our vital few initiatives.
And we're excited to have come this far over the past few quarters, the leadership and I remain far from satisfied knowing full well that there is so much more of the <unk> can and will accomplish.
I am energized and excited for what the future holds for <unk>.
With that I'd like to open the call to questions Doug.
Thank you, ladies and gentlemen at this time and will be conducting a question and answer session. If you'd like to ask the question you May press star 1 on your telephone keypad, a confirmation tone will indicate your line is and the question queue.
You May press Star 2 if you would like to remove your question from the Q4.
And for participants using speaker equipment and may be necessary to pick up your handset before pressing the snarky.
Our first question comes from the line of Louise Chen with Cantor Fitzgerald. Please proceed with your question.
Hi, congratulations on the quarter and thanks for taking my questions. So first question I have for you was if you had any updates on the acne market opportunity and you had mentioned some tuck in opportunities that you might look at you know what are you interested in there and then the second question I have was just the modeling questions. You know how should we think about that but you know sort of.
Slow down and third quarter 'twenty, 1 and then versus the fourth quarter 'twenty..1 just the we get the nuance of rent when we model. It and then also just on Opex in the second quarter, a good run rate from third and fourth quarter. Thank you.
Great. Thanks Louise.
Yeah, let me kind of take those in order as you presented them, you know and and.
In regards to the acne program, we continue to work exceptionally diligently internal to the business to move our efforts forward and be ready and and waiting if you will.
And we are when we get the okay to launch so.
So we continue to work diligently where we have not provided nor are we providing any update on timing of launch sequence or scheduling at this time. However, it continues to occupy occupy a significant portion of the management's time and refocus on what will be a very transformative event for the company.
In regards to the.
The the kind of the the longer term tuck in opportunities. We've always said that if things could be it could be tucked in that leverage existing infrastructure.
Would not be disruptive to our business or potential augmenting our kind of our presence we would look at those type of things, obviously, we distribute the skincare line and Japan.
The we have a distribution agreement with the we would look at license agreements. Similarly.
But at this point Theres nothing thats actively being looked at nor do we anticipate looking at something actively from an M&A perspective, even though we have of balance sheet that allows us to be opportunistic.
And and kind of moving to your second question, which was more around the the third quarter. You know we look at this as a little bit of a speed bump and and opportunity for a lot of these practitioners to take a breath they've been straight out since COVID-19 and we're actually in very employees. If you will by the fact that there.
Take a little bit of vacation time, because it tells us that they're very thoughtful and have very high confidence and the resilience of the patient traffic and they don't think they're missing out on anything is people will just adapt to kind of missing a week and their schedule. So we see it as a favorable thing and while it might be a little bit of a loss of selling.
Days for consumable or or something like that and it may delay of a few deals we see this as something that actually refreshes the market and fresh as the industry and it gets us back to more regular and routine I would say historical seasonality.
So those are all positive things from my perspective.
On the runs if you want to add on to that at all Yeah. I was just going to the Opex question.
And.
I'll start off by saying well first of all.
Purposefully chosen to not guide on adjusted EBITDA, which is which is ultimately what's the.
Question is I guess the at the end of the day and I would say first of all of the entire team and Qatar on right has worked extremely hard to start delivering a consistent and repeatable adjusted EBITDA performance.
And as we mentioned earlier on the call, we have certain infrastructure and accelerated investments that we're making and our business and Ah.
I believe as we do all of that of our adjusted EBITDA performance will continue to underscore the the inherent opportunity and leverage and potential that's available in our business.
So we're not yet guiding on EBITDA profitability, and we remain extremely confident and our ability to true continue to unlock the potential of this business and the P&L.
Thank you.
Yeah.
Your next question comes from the line of Matthew O'brien with Piper Sandler. Please proceed with your question.
Hi, good afternoon.
And then Brian on for Matt Thanks for taking the questions.
So I have the.
Starting with your strong results on the adjusted EBITDA and gross margin line on a year over year basis. This quarter, just curious a little bit as we see that rides and capital going forward and the back half of the year any concerns on your ability to generate strong year over year of growth and adjusted EBITDA and you maybe.
And you get a little bit of pressure on that gross margin line.
And then secondly, no people slow down their spend in 2020, so how much of the strength and the quarter and catch up and how do you expect that to play out sequentially here in Q3 and Q4.
Okay, well, so let me try and unpack that question. So first of all of all I'll talk about gross margin and what we see over there.
And Q4, we had talked about getting margin to the the very low <unk> as we exit the year and obviously since then we've seen a lot of growth and our skin care business versus our outlook and and it has materially shifted our mix given.
And given the fact that that skin care and margins are.
Below our overall corporate margins.
And also have some headwinds in terms of material cost, which I'd say, our operations leadership and team continue to do an amazing job of handling, but this will create a little bit of near term pressure of the gross margin level. So with all of that taken into account I'd say, we expect that our margin guidance is a little bit delayed by a few quarters.
But we expect to stay and the current gross margin zone of approximately 60% and the near term.
Also I'd add that we remain very committed to our long term goal of low to mid sixties.
What was the what was the other follow ups and we're on can you remind me sorry.
Yeah. So we know people slow down their spend and 2020, so how much of the strength on the corner and catch up and how do you expect that to play out sequentially in Q3 and Q4.
Yeah, let me take that and <unk>.
For the question.
Well I think as we think of technology and in the energy based aesthetics space on while people may have pent up demand.
For our systems, you know that plays out relatively quickly.
And what they're really looking for are things that they can put it in their practice that allow them to drive.
You know I guess protection from reimbursement.
Structures as well as give them opportunities to monetize current patient flows and patient traffic.
So very little of it is actually about pent up demand and the pent up demand maybe from.
On the older unit and they think they now have to replace and frankly with the the lower patient volumes for 2020 that probably nets out and the amount of lifecycle the distress that they put on the the product. So we think this is an ongoing regular run rate type of of capital business with small small disruptions based upon.
You know the the things we've mentioned historically here around Covid and cash constraints within the practice, which for the most part of it are in the rearview mirror.
And to your question on on our concern around.
On being able to grow adjusted EBITDA versus prior year I would just stress again that we're choosing not to guide adjusted EBITDA for the rest of the year.
I'm confident that that will continue to deliver good results the given the trajectory of of.
Our business and P&L.
Okay got it and.
In terms of would be of commercial effort can you talk about the momentum you're seeing from changes to the European team that you expect to carry into 2022 and then following that same line on the North American side as well do you expect that group to be positioned to sell more effectively on the 22.
Yeah, I think that's a thoughtful question.
In the U S.
I think we have been underserved and Underpenetrated as a company in terms of the quality of our product and our ability to sell effectively are we made a leadership change for Europe as well as we've made some country leadership changes under the new structure. Additionally, we've been able to recruit back or recruit.
2 of the team some exceptionally talented salespeople that I think will continue to grow building their pipeline throughout the rest of this year. So I think these are sustainable we also will be investing and expanding our sales organization and and I, specifically called out of Germany as the huge opportunity for us as 1 of the larger markets and <unk>.
Europe for aesthetics.
Our ability to further penetrate and bring a great team to the field in those spaces. So I think there's legs on the the improvement we're seeing in Europe and into the back half of this year and and into the early part of 'twenty 2 before that anniversaries itself.
In terms of North America, I indicated 2 investment patterns that were making first expanding the capital sales force.
Well you know unfortunately, we've furloughed people and 2020, we've been able to bring back and exceptionally high quality highly motivated and very talented capital sales force that has continued to make great strides sequentially for us as they built their pipeline rebuilt their processes and refined.
Their go to market.
Approach.
We've been adding to that staff fairly.
<unk> and in the in the first half of this year and we believe that that staff that we've added will deliver benefits in the back half of 2021 as they build their pipelines I think we'll see that continue into next year. If you were to think about it from the standpoint of Anniversarying. These new ads and have them now.
Tribute Inc. At a full level after about a year of being on the ground. So we're very excited about debt. Additionally, as I indicated in the in the prepared remarks, we've added some key account managers and we believe that this will not only drive utilization, but it will drive greater return of investment for our customer.
Which then opens up opportunities for us to sell additional capital.
These are really key things.
And and things that are very differentiated unfortunately in and this is Ed.
G based aesthetics industry, but we think that level of differentiation will be well received by our customers and it will put us in a very good position over a longer term to sell capital.
Got it and if I can squeeze 1 last 1 here and on phase 2 and Anthony I know you guys have been pretty close to the vast what's the timing, but any details you can share about the program and maybe what stage and then are you still doing some clinical work are you pushing forward on regulatory approval.
Any detail on when we can expect that the rollout.
Yeah.
You're exactly right, we've been very close to the vest and we will continue to be that for some time, we know that competitors are eager to get an update from us and we just thought it best to keep this information to ourselves until we get to a point of being able to kind of have a little bit more freedom to operate.
That said I would tell you that we continue to be exceptionally excited about the results and and the status that we have we are moving aggressively and working diligently internally across multiple departments to be prepared when we get the opportunity to go into the market.
Perfect. Thank you very much.
Our next question comes from the line of Jon Block with Stifel. Please proceed with your question.
Hey, guys good afternoon of Paul as well.
Dave maybe just on the first 1 and it could take a step back can you give us some more track some more color pardon me on the capital traction at the top line be seem more diverse and in the past capital play the bigger role and.
I'm just curious if it was primarily body oriented or what other areas of the portfolio saw increasing momentum into the second quarter.
That's great Great point, John and and.
I'd highlight it this way we had projected.
<unk> debt, we would see of back half of 2021 recovery on capital and and I think we started to see it a little earlier than we had anticipated, but you know I wouldn't want to say, it's the wholesale free for all out there I think it is still opportunistic and you have to be diligent in prospecting on.
<unk>.
That said, we saw a very consistent multi platform. The approach here I think you know face and skin has become a key element and I think specifically with many of our non core practitioners. They are trying to find a way to monetize and keep patients or get patients.
The revenue into their practices so.
So we see a lot of the secret micro needling opportunities and and some of the noncore practitioners and particular we've.
We've seen a resurgence and around the body, though in particular during the quarter versus previous quarters, where it had been much more I'd say pressured and.
So we were very pleased to see growth across the body for of the body sculpting platform for both flex and Friday.
And I think we were also very pleased with the.
Another measure of success is our ability the whole price, which we did.
Were been very very effective in kind of revitalizing that effort holding our price and finding the right accounts to bring that too. So I would say it was very measured geographically and very measured across platforms, whereas maybe the a few months back it was heavily face and it was kind of.
Some of the International Department of the international teams that were really driving the improvement.
Got it great color and thanks for that and maybe just to shift.
And the skincare renewal on the filing that you put out on that I guess it was a month or so ago. You gave some details on call of the duration around the contract but is there anything that you can provide from a margin perspective, or Egypt or even on a regional basis.
And where maybe the contract gives you guys a little bit of flexibility I guess the differently could you have more favorable terms from a margin perspective, just considering the amount of value you're bringing to the table with the recent run rate.
Well I don't want to be very careful not to divulge something that Oh, we have confidentiality around with the supplier.
And first and foremost to tell you that we believe that it was a more significant drag on our on our gross margins and we've been able to improve that position marginally its still of distributed product and certainly you know youre not going to have the same revenues and margin.
Sales, we'd have of and organically developed 1.
That said I think that we do see great partnership with <unk> with our distribution our manufacturer of the product and we're very and I guess enlightened and engaged by the fact that they are willing to work with us aggressively over the next 3 years with this distribution agreement.
Fair enough of it and last 1 from me and just to keep and somewhat tight umbrella to take a different approach I'll stay away from adjusted EBITDA, but it may be a couple of questions. Your your 2 wage revenue implied in your guidance is not too dissimilar than your 1 inch revenue and you're speaking to the seasonality so could 3 Q and for Q look somewhat like what we.
You experienced in <unk> and <unk> and then the follow up to that would just be the stay away on the specific on the acne does the annual guidance that you provided at the $2.15 to $2.21.
Assuming that.
Joe asked me embedded in it and thanks for your time guys.
And so.
I'll start with the easy 1 first and there's no acme embedded and and our outlook for the year.
And like we had called out and in our prepared remarks, there is a little bit of a pull forward that happened and and Oh Q3, there's a little bit and Q2 pardon me.
There's a little bit of seasonality. So yes, you are right. We've also kind of factored and.
Some of the the.
The stumbling blocks, if you will the.
And we see on the horizon with the Delta of varied and.
And with vacations et cetera into our outlook.
And just a round that question out before we turn it over.
And my view here is that there's still a lot of unknowns are still of lot of things that are going on and we felt that we felt very much compelled to share and outlook with the street based upon our view of the market's recovery. However, we just want to remind the the market that theres still under vaccinated geographies and they're on.
Are you the Delta Varian is creating a little bit of concern and we just wanted to be very mindful of some of these other issues.
We continue to move forward. Nevertheless, less we're exceptionally pleased with the momentum that we're building as an organization and very very thoughtful around continuing that momentum.
And a very thoughtful and measured way.
Perfect. Thanks for the color guys.
Yeah.
Our next question comes from the line of Chris Cooley with Stephens. Please proceed with your question.
Good afternoon, everyone and congrats on the record performance during the quarter.
Just to 2 quick ones from me, if I may and will keep with the core of them.
If we think about the investment can you help us just think maybe either in the aggregate of or maybe in terms of timing and.
And we think about these incremental investments that you're planning here for the back half of realizing you're not guiding to.
Adjusted EBITDA for the full year, but just any color on as it pertains to the timing of these incremental investments sort of yet to take place or maybe and absolute magnitude of traveling.
Would be of benefit and then I've got 1 other quick follow up thanks much.
Yeah I'll take that.
A little bit and then maybe Dave you can chime in and so I'd say.
Right like you rightly pointed out we are not guiding towards adjusted EBITDA.
But there are.
Several of them.
And the investments I'd say and systems processes and people that were making.
We believe we need to do this and.
And advance of would we expect to be of transformational launch and event for us and Acme to give us scalability to give us process maturity to set us up for the next phase of our our evolution and growth.
So there's a lot here that that will be somewhat variable.
And I I'm I'm, a bit hesitant to give out and amount that that might change materially Chris.
Yes.
Let me spend a minute okay, yes.
It would be spread over the next.
The 4 quarters, 2 to 4 quarters or so okay.
And I would say the the infrastructure is probably more of a 4 quarter.
I think the sales investments that we're making and building out. These teams are relatively low risk exposures for the company as most of the revenue and most of the expense comes and variable comp and we've seen pretty rapid recovery.
And from our sales team of of creating kind of a self funding mechanism here. So I feel very confident and the the head count we're adding into the sales organization that it will kind of be relatively neutral on an adjusted EBIT basis to.
And to the business.
The infrastructure expense expectations are a little bit more of like what what raw and shared where they're probably more evenly spread over the next 4 quarters or so right because of just just maybe just to clarify before it and my follow up just thinking about the sales investments really that's primarily here in the back half of this calendar year.
Maybe taper and a little bit into the early part of 2020.2 routes and the infrastructure investments that you're talking about or that's correctly over the network.
And next year Okay.
And that's a good that's exactly correct, Chris you've got it right got it thanks and then.
And let me follow up on on John's question as well when we think about the capital of growth, which was very impressive here and of course of the quarter.
You mentioned the.
The body contouring.
And fat reduction, both or I should say muscle, contrary and I'm, sorry, and fat reduction.
Both came back and the quarter can you help us think just broadly about relative growth rates and we think about the platform I know in the past you've you.
<unk> spoken to.
To the body.
More broadly I'm, just trying to get a feel for the continued uptake of the of.
And the combo device relative to maybe a resurgence and growth in the body contouring and.
Yes, so just to be explicit we do not have of combo device. However, we do use our device in combination.
The idea and it might.
And the Oh, okay. Okay.
She wasn't clear thanks, Okay no no the forgive.
Forgive me, Chris I jump to the conclusion. There. So you know in terms of of of of body sculpting, We did see a nice recovery and and I think that the strength and that recovery is underscored by our ability to preserve our average selling price, which tells me. It's not you know we're not going to the discount store to kind of make these things.
Happen.
Give me a lot of confidence that there's under.
On underlying equipment or capital demand that we're servicing.
And even the up until right now we continue to see people that are reaching out looking for information and want to get access to the to the true body.
The portfolio, if you will both flex and <unk>.
I think the Theres strength, there that will continue and the back half of this year and certainly it's an area that we like to focus on because we think we have differentiated technology and both of those products in terms of the combination device the secret pro which reflect has both the ablative C. O 2 laser on board with its micro needling, we think this probe.
The fits and exceptionally well and our portfolio of its the only a blade of laser debt. We have a fraction of all of ablative laser that we have in the portfolio and we think that it's really a great product for the core business in particular, the germs on when they treat scars and and deep wrinkles and this is an opportunity to not only recruit the caller.
And with the micro needling, but also.
Do a little bit of ablation on the surface to lessen the extent of the wrinkling. So we've seen great results of that product, we have not really been overly aggressive and positioning the product at this point, we'd use it solely as kind of and on augment to the secret of practice.
Practitioner that may want a little bit more power and maybe a little bit more energy to deal with with more aggressive wrinkling, but.
As we think about the product going forward, we think that those should continue to grow at or above market rates and we believe that our staff and our team is putting us and are positioned to win with the those products as well as our body products. So I think those are probably the the 4 and most solid products from a.
The Ocean perspective, following very very closely with our ex L V line and and our even our zero of multi platform product. I think these are all very good products that have very good receptor reception and the marketplace and and almost a renewed sense of demand from the the core customers. So.
And we're very pleased with the way our portfolio is positioned across all of these platforms for.
And for the dish and practitioners that we're serving.
That's helpful. If I could maybe squeeze 1 other quick 1 and I mean, just looking at the the contributions to growth here as well and and the margin profile of the additional color that you provided there as it pertains to gross margin.
Also on maybe and.
Update on the LR of P. R. I realize this is the let's call it the transitional year here coming out of the.
And the Covid suppressed and 2020 and you have a transformational launch with acne.
At some point here and the future, but any thoughts on updating this either.
And or early next year just in terms of your thoughts on on the ORP here for the future because clearly you've generated a tremendous result lots of material improvement both on top line growth and margin just just kind of wanting to think about maybe level setting that longer term like and again, yeah and I think it's of great great great.
Great question and a good comment.
I think at this point, we're working diligently on on thinking through the.
And the acting launch plan and what that means what the timing is and and we will be working aggressively through the the kind of the fall time line on what our budget for 2020, 2 looks like et cetera for the company and working with our board to kind of look at what of 5 year plan may look like for the for the business I think at some point thereafter.
We'd probably be and are positioned to express that and have a little bit better line of sight for how acne plays into that as well as some other key products and expansion of ideas that we have.
Thank you.
Yeah.
Our last question comes from the line of Anthony Vendetti from Maxim Group. Please proceed with your question.
Thanks.
2 quick questions.
And on the skin care business, you know that.
It continues to perform well I think you had mentioned David and the last call that you didn't know if it would be sustainable.
And.
And so so again and that's it.
He used to perform well here.
Should we start to think about this as the new quarterly run rate.
Or is this still performing.
Above expectations, and we shouldn't expect it to stay at this and the next question is just on the.
On the post sale customer success reps or key account managers or would sell peak and others called Pbms and it.
Are you looking to hire enough of those.
Reps, where managers to be at almost 1 to 1 ratio with your sales reps or is that it is that it's too many account managers to help support.
The after sales process.
The 2.2 very thoughtful questions. So first of all on skincare.
What we've said and just to remind everybody on the call. What we've said about skincare as we believe it to be somewhat elevated due to the nature of the Japanese market and the fact that it's been under vaccinated, which means a little bit of suppression of patient traffic into the the derm offices and as a result of many many patients.
Taken to buying additional skincare lines I serum wrinkle reduction moisturizer is S. P F.
And stuff that all helped them avoid kind of or get some of the benefits that they were seeing through through procedures.
And we think that that will at some point have a terminal and the point of in terms of the vaccination and we think that there's probably some new normal debt will result, as a result of of kind of that change.
Even if it does we feel very comfortable and the analysis. We've done that there's this is a sustainable business. It may not be the exact right. It is right now, but it's a very healthy business and and what we had projected earlier was high single digit millions per quarter and I think we're probably feeling and it may be low does.
Digits millions, but I think we don't yet know fully yet Anthony on how much we will see recover or retract when more patients are having procedures and the 1 thing we hear from our customers in Japan, though is that as people get more and more of associated are comfortable with.
The using the skincare lines, it's much more difficult for them to give that up and and some of the feedback has been these become habitual in terms of routines and regular routines and in a very disciplined culture. So so.
We're excited about where it is we want to be mindful that it may have a small step back at some point, but we also believe that this has long term legs.
And has opportunities for continued growth with additional penetration into new accounts as well as deeper penetration in the existing accounts.
And as we continue to grow and develop those markets.
And on your second question around the the the key account managers and I.
Thank you.
And we've certainly learned a lot from others in this industry.
And as you would imagine we've gleaned everything we can from what drove success for others and and we're trying to steal the best of their ideas and combine it with some of our own as we think about the new market dynamics.
We're not going to necessarily say, it's gonna be of 1 to 1 ratio between capital and and key accounts, but I think what we would say is we know the right number of accounts for any given.
Key account manager that they can handle the effectively and we'll be watching and using that metric as our throttle to add people or processes and we'll add them based upon the account locations. So I think we have all of the rate metrics I don't know, if we're ready to yet rollout of our deep and longer range plans around the staffing.
But I will tell you that we know that there is the right number of accounts that any given person can manage well and drive the right level of activity and certainly we have more mile markers out there from <unk> and others that have done it well.
Okay, Great. That's helpful. Thanks, very much appreciate it.
This concludes our question and answer session I would like to hand, it back to Mr. Dave Mallory for closing remarks.
Thank you Doug and thank you for everyone attending we very much look forward to providing you with another update later this fall until then and be well.
Ladies and gentlemen, and this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Okay.
[noise] [noise]. Thank you Doug.
Thank you.
No.
Okay.
Yeah.