Cutera, Inc. (CUTR) on Q3 2021 Results - Earnings Call Transcript
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Operator: 00:03 Thank you for joining Cutera’s Third Quarter twenty twenty one 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. 00:29 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. 00:57 All forward-looking statements are subject to risks and uncertainties, including those 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-Q subsequently filed. 01:14 Cutera also cautions you not to place undue reliance on forward-looking statements, which only speak as of 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 unanticipated events. Future results may differ materially from management’s current expectations. 01:38 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 Cutera’s ongoing results of operations, particularly when comparing underlying results from period-to-period. 01:58 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. 02:11 With that, I would like to turn the call over to our CEO, Dave Mowry. Please proceed.
Dave Mowry: 02:18 Thank you, operator. Today, I am joined on the call by Rohan Seth, our Chief Financial Officer. On today's call, I will provide a brief overview of our third quarter twenty twenty one business results, operational highlights and some commercial insights from the period. Rohan will then provide details of our financial results as well as share our updated outlook for performance over the remainder of twenty twenty one, before turning the call back to me for some final comments. I will then open the call to your questions. 02:52 During the third quarter of twenty twenty one, our business continued to perform well, delivering solid results across each category. Over the period, we did not see the negative impact from the Delta variant that many other businesses within the healthcare sector experienced. As an aesthetic procedure volumes and customer interest in capital equipment purchases remains strong and well above prior year levels. 03:16 As we anticipated many physician customers took well-earned vacations in North America and Europe over the course of the quarter. While physician vacations and family holidays had only a minimal impact on treatment volumes within the period, we note that demand for treatments in the fourth quarter of twenty twenty one remains strong, likely absorbing any pent up demand from the third quarter. 03:40 The physician vacations and associated treatment flow disruptions demonstrated a return to more normal routines and predictable patterns confirming the overall strength that continues across aesthetic practices. This is further confirmed by informal surveys of aesthetic practices which are reporting fully booked schedules through the end of the year. 04:02 Turning now to our performance for third quarter twenty twenty one. Total revenue for third quarter twenty one was fifty seven point four million dollars, an increase of forty seven percent over prior year results and twenty four percent above our pre-COVID third quarter twenty nineteen performance. 04:19 Notably, capital equipment sales continue to trend favorably during the quarter with capital equipment revenues of thirty two point two million dollars representing an increase of thirty three percent over prior levels. Cutera’s capital equipment sales were driven particularly strong performances from our direct sales teams in North America and Europe, as well as from strength in our distributor markets. 04:44 In North America, our capital equipment performance sequentially approved over second quarter twenty twenty one during the period. We were able to expand our capital equipment sales force, taking increased sales coverage into fourth quarter twenty twenty one and beyond. Our new North American sales reps are coming along very nicely and doing the work necessary to build robust deal pipelines in advance of twenty twenty two. 05:12 While we have yet to completely close the gap on pre-COVID twenty nineteen capital revenue levels in North America, we are pleased with the sales team's pace of improvement and excited to see how the newer sales reps will add to the collective. We consider third quarter twenty twenty one performance to be a positive leading indicator for future capital systems revenue growth as we fuel North American capital equipment sales with increased sales force coverage. 05:40 Despite an increasingly competitive energy based aesthetic equipment market, our sales teams across the U.S. and Canada have steadily delivered sequential growth, selling through competitive challenges by highlighting the features and benefits and economic value that the Cutera portfolio offers our customers. The revitalization and expansion of our North American sales force remains a positive driver of our business and coupled with investments in our key account managers, we are building strong and sustained momentum providing differentiated service and support to our customers. 06:18 In Europe, during the third quarter twenty twenty one, we saw continued improvement of our capital sales allowing us to overcome headwinds typically associated with the seasonality of Europe third quarter volumes. Our investments in recruiting and upgrading our sales talent along with increasing our robust and experienced European leadership team have delivered the desired results of accelerating our capital equipment growth. And all indicators point towards continued expansion of energy based equipment sales as we continue to cultivate deals and expand further into key European regions such as Germany. 06:57 As for our capital equipment sales in the direct markets of Australia, New Zealand and Japan, there were some impacts from the COVID travel restrictions and reduced patient treatment volumes due to lower vaccination rates respectively. Despite the regional headwinds from government imposed restrictions limiting people from venturing beyond five kilometers of their home in larger metropolitan centers of Australia, our team pushed through and delivered several deals in a very slow third quarter twenty twenty one market. 07:29 Looking forward, restrictions are lifting across Australia and we anticipate that our team will be active and aggressive closing out the year. Additionally, we are seeing increasing vaccination rates across Japan supporting our outlook for capital equipment revenue recoveries in both regions starting in the fourth quarter of twenty twenty one and carrying well into twenty twenty two. 07:53 As I previously noted, we remain confident that the global capital systems spending environment is strong and still improving. Customer interest for capital equipment purchases continues to climb and we anticipate a solid fourth quarter to close out the year carrying this strength into twenty twenty two. 08:14 Now moving to the recurring revenue. This business maintained the positive momentum coming off the prior quarter, delivering twenty five point two million dollars in third quarter of twenty twenty one representing a growth of sixty eight percent over prior year. During the quarter, all three recurring revenue categories, skincare, consumable products, and services contributed to our improved recurring revenue mix and the robust year-over-year growth. 08:42 During the third quarter of twenty twenty one, our skincare business delivered revenue of fourteen point eight million dollars, up one hundred and seventeen percent over prior year period. This performance was ahead of expectations, driven by greater volumes from physician customer restocking in advance of an announced price increase. Needless to say, we are pleased by the continued success, our skincare team in Japan has delivered, expanding active account basis, increasing penetration within the existing accounts. 09:16 Going forward, we anticipate that our normalized run rate for skincare will settle in below the third quarter levels as pre-price increased inventories work down and patients resume their routine skincare and aesthetic treatment patterns. Once run rate settle in, we expect to maintain revenues at market growth rates for this category. 09:40 With regard to consumables, third quarter of twenty twenty one revenue was three point seven million dollars representing a growth of sixty percent over the same period in prior year. Revenue growth in this category was driven by continued strength of patient traffic despite the seasonal disruption from summer holidays and physician vacations. 10:01 Notwithstanding the seasonality, North American performance was solid and steady driven by revenue generating activities carried out at practices by Cutera’s new and expanding key account manager presence. Over the third quarter, we continue to expand our key account manager team and have aggressively onboarded these new reps. Customer sentiment for these resources have been strong and we expect to see increasing consumer revenues for the business in the later part of fourth quarter twenty one and carrying into twenty twenty two as the impact of our TAM (ph) activities flow through our customers practices. 10:40 The third and final category within recurring revenue is our global services. This category includes income associated with time and material repair fees as well as the sale of service agreements to owners of our energy based aesthetic systems. Global service revenue was six point seven million dollars in the period, representing a growth of fourteen percent over the prior year period, driven by increased volumes of service agreements covering a growing installed base of systems. 11:10 We expect that global service revenues will continue to grow at a steady rate above capital as service agreement attach rates improve in addition to the growing volume of our active installed base of systems. 11:25 Before turning the call over to Rohan, I would like to the recognize the continued progress our team has made on one of our vital few initiatives, gross margin expansion. During the period like so many other businesses, we experienced some specific headwinds from increasing costs of critical components and high demand materials. Additionally, inbound and outbound freight expenses have increased more recently. 11:52 Nevertheless, our supply chain and engineering teams have continued to identify improvements to offset much of the impact of these costs being passed along. Meanwhile, our sales teams have been exceptionally strong in holding price in the face of competition, enabling us to not only maintain our margins but to expand from our other cost improvement efforts. 12:17 With that, I'd like to turn the call over to Rohan. Rohan?
Rohan Seth: 12:21 Thank you, Dave. As I review my prepared remarks, I want to note that I will primarily focus on non-GAAP results unless otherwise stated. A complete reconciliation of GAAP to non GAAP is included in the earnings release. We encourage listeners and readers to review our non-GAAP metrics in conjunction the GAAP results as contained in our earnings release. 12:43 Total revenue for the third quarter was fifty seven point four million dollars compared to thirty nine point one million for the same period in twenty twenty, representing growth of approximately forty seven percent. North American capital equipment revenue was twenty point seven million dollars compared to thirteen point seven million dollars for the same period last year, representing growth of fifty one percent over three Q twenty twenty. 13:07 International capital equipment revenue for the third quarter was eleven point five million dollars as compared to ten point four million dollars in the third quarter of twenty twenty, representing growth of ten percent. The year-over-year performance of our international capital sales benefited from our European sales team driving growth of fifty two percent. Our Australia and New Zealand team delivering sixteen percent growth in our Middle East and Asia Pacific distributable market delivering a growth of eleven percent over the prior year period. 13:38 Our teams within these markets continue to lay a strong foundation for sustainable growth over the next several years. Recurring revenue defined as consumables, global service and skincare revenue was twenty five point two million dollars compared to fifteen million dollars for the same period last year, representing sixty eight percent growth over prior year. 14:00 As Dave mentioned earlier, a source of pride for third quarter twenty twenty one was our gross margin performance. In the face of several economic headwinds within the third quarter of twenty twenty one, GAAP gross margin was fifty eight point two percent versus fifty five point six percent for the same period last year and non-GAAP gross margin finished at fifty eight point three percent versus fifty seven point two percent in Q3 twenty twenty. These improvements were driven by continued leverage on our fixed overhead cost base and consistent execution against our vital few initiatives. 14:35 Total non-GAAP operating expenses for the third quarter of twenty twenty one were twenty eight point four million dollars compared to twenty million dollars for the same period last year. Our results reflect higher variable compensation expenses as well as increased investments to continue to drive our top line growth. 14:53 Sales and marketing expenses for the third quarter of twenty twenty one were seventeen point nine million dollars compared to ten point nine million dollars for the same period last year. The higher expense was primarily driven by higher sales and investments in sales force expansion and optimization across multiple geographies. 15:11 R&D expenses for the third quarter of twenty twenty one were four point seven million dollars compared to three point one million dollars for the same period last year, driven by research and clinical investments in new technologies. 15:23 Finally, G&A expenses for the third quarter of twenty twenty one were five point seven million dollars compared to six point one million dollars in the prior year, driven by reductions in administration expenses. 15:36 For the third quarter of twenty twenty one, our non-GAAP adjusted EBITDA was five point one million dollars compared to two point four million dollars for the same period last year. This continued improvement in our profitability is the direct result for our global teams working in concert and bringing a laser focus in driving growth with a view to our bottom line. There were no material or significant changes to our tax positions. 15:59 Turning now to our balance sheet. We ended the quarter with approximately one hundred and sixty two point five million dollars of cash and equivalents compared to forty two point four million dollars at the same time last year and one hundred and sixty nine point two million dollars at the end of second quarter twenty twenty one. The reduction in cash from second quarter twenty twenty one is largely driven by AR expansion due to revenue mix and timing, as well as investments in our ERP program. 16:26 We ended the quarter with thirty five point five million dollars of inventory, up zero point nine million dollars from Q2 twenty twenty one. We expect our inventories will increase through year end driven by our efforts to continue to secure our supply chain. 16:41 As you may have picked up from my prepared remarks, a key word that I have used over and over is investments. And I'd like to take a moment to provide some further details on this front. We continue to prepare our company for the next phase of our growth. One area where we have been increasing our investment is in our information technology infrastructure more specifically our new ERP system. 17:05 With strong momentum in our core business and some pivotal growth initiatives on the horizon. We are at stage in our company's life cycle, where it's important to build a truly scalable architecture to support the next phase of our growth. We continue to chip away at this area, which is one of our vital few initiatives, and we plan to have the system in place in advance of some of our new product launches in the next year. 17:31 Finally, moving back to our top line performance and outlook. Given our strong performance in the quarter and solid outlook, we are increasing our guidance. We are raising full year twenty twenty one total revenue guidance to a range of two hundred and twenty four million dollars to two hundred and twenty eight million dollars, representing year-over-year adjusted revenue growth of fifty two percent to fifty four percent. 17:53 With that, I will turn the call back over to Dave for some closing remarks. Dave?
Dave Mowry: 18:00 Thanks, Ron. As we look ahead to the next several quarters, we are well positioned to execute our plans to accelerate growth through our reengineered and revitalize global direct sales force. We have made critical investments in expanding our capital sales coverage as well as improving our sales leadership in each of our global direct sales organizations. 18:20 Additionally, we have made investments in repositioning our business relationship with our customer through investments in our key account managers. These field based resources are tasked with driving activities, which increased practice revenues for our customers as well as drive Cutera consumable revenue. 18:38 We believe that our customers will recognize the benefit of our key account managers being fully aligned to the financial performance of their practice and elect to adopt other Cutera energy based equipment into their practices. Our sales force optimization and expansion investments set the stage for a strong finish to the year as well as building momentum going into twenty twenty two. 19:03 Internally, we have moved efficiently and effectively in the development of new and novel products representing first mover advantages, as new products come together with our revitalized and fully scaled sales organizations. We have the strength and capabilities to deliver amazing results. Our future is extremely bright as we continue to execute our plans and deliver strong sustainable results. 19:29 With that, I'd like to open the call to questions. Operator?
Operator: 19:33 Thank you. We will now be conducting a question-and-answer session. Our first question is from Matt O’Brien with Piper Sandler. Please proceed with your question.
Simran Kaur: 20:14 Hi. Good afternoon, guys. This is Sam on for Matt. Thank you for taking the questions. So, first, I want to start on skincare, again, really solid performance here. I think you guys mentioned that the run rate going forward will be lower than obviously the implied rate here. And on previous calls that kind of run rate you also mentioned wasn't really maintainable, but it continues to outperform. So how do we think about this franchise going forward and is fifteen million dollars is the new base? And then also, if you could expand on any of the trends that you might be seeing that suggests that this kind of growth is sustainable maybe even in markets outside of Japan?
Dave Mowry: 21:06 Yeah. Thank you so much for the call, Simran and give our best to Matt. Hey. Thanks for the questions skincare. During the prepared remarks, we mentioned a little bit of a pull forward due to an announced price increase that we delivered during the period. It's hard to kind of estimate what that really is but we do believe that the run rate for this business on a more normalized rate is somewhere between twelve or around twelve million dollars not certainly not fifteen and certainly not fourteen point eight which we saw in the period. 21:40 So, we think that there's probably going to be a knock on effect in the fourth quarter of some kind of pullback because people bought ahead. And so we're kind of still working through that. The things we tracked on this and the reason why we do believe that there is some sustainability to this growth is the fact that we see growth coming from two elements here. We see new accounts and our account expansion. We also continue to see penetrations within accounts, where existing accounts are doing more altogether. 22:15 So, like all-in, we think that there's some sustainability that comes from further expansion to new accounts. We also think there's a ability to continue to penetrate newer accounts that have been fully penetrated yet. And that gives us kind of the hope for the sustainability, but that run rate does need to come back down to something that doesn't reflect a pull forward or a customer behavior that's not consistent with the run rate closer to kind of like twelve million dollars.
Simran Kaur: 22:45 Okay, perfect. And then real quick on the capital environment, we see North America saw a sequential step up, which you mentioned was really driven by the sales force here. So from that standpoint, how do you expect the momentum to carry forward into Q4 and then twenty twenty two?
Dave Mowry: 23:12 Yeah. I think what's important for everyone on the call to understand and it's another great question is that North America has continued to have sequential improvement actually starting from third quarter last year to fourth to the first quarter of this year, second and then third, and they have continued to step forward. Some of this is the result of a focused on process and some of this is a focus on expanding the sales force itself, which has been obviously beneficial. More recently, we've hired a number of new territory managers and now territory managers are the entry level physicians within our sales organization. 23:49 And they do require a little bit longer time for training and development as well as building their pipeline. But we do think that this will continue to move forward in North America and have another kind of projection of sequential improvement, as these folks continue to deliver greater kind of rep productivity.
Simran Kaur: 24:10 Okay. Got it. Thanks, Dave. Just if I could squeeze a quick one in here. Acne, do we have any updates there or timing of when we can see any data or what we will get an update?
Dave Mowry: 24:24 So, Simran, I'm going to give you credit for not asking that as the first question. I just want to point out to everybody. We remained very tight lift on acne for obvious reasons around protecting our competitive advantages that we believe that we're building internally to the business. So, we're not really talking about timing. We're not talking about technology and we're certainly not talking about the data. 24:47 I would share with everyone's listening that we continue to have an increasing level of confidence as we build experience inside the building with the product, the technology and kind of what we see from kind of engagements with clinicians. Once we reach a point that we believe that it's appropriate for us to share with the market, we will -- but for now, we're going to just say that we're making good steady progress and the things remain on track for our internal plans.
Simran Kaur: 25:19 Okay. All good. Thank you for being a good.
Operator: 25:28 Thank you. Our next question is from Jon Block with Stifel. Please proceed with your question.
Jon Block: 25:34 Great. Thanks guys and good afternoon. Maybe first one, Dave. In North American sales force, I don't think we're going to be able to get an actual rep number from you, but where you guys going to end the year versus call it, the goal of the plan and when we think about twenty two, do you expect that North American sales force to sort of be where you really wanted it to be by earlier or mid next year as some of these new products come in the fold?
Dave Mowry: 26:01 Yeah, John, it's a great question and thanks for that. Look I think you're hitting the right point. We've been slow and steady in our growth our process improvement in North America, I think we've added to the collective effectively in each quarter over the last four or five quarters and I think we're going to exit this year with probably the right number of people in the right seats on the bus. They're still building their pipeline. They're still coming down the development curve. But I think you're exactly right as we think about twenty twenty two our intent is, but we'll say mid-twenty twenty two, we're hitting our stride with this sales organization in North America and we're delivering on kind of our expectations. So, we'll continue to add reps as opportunities exist. But I think going into early part of twenty twenty two, I think we have the right people. We just need to move them through the development process.
Jon Block: 26:59 Got it. Perfect. Thanks, David. And Ron, just to shift gears over to you, you use to talk about gross margins of sixty percent -- sixty percent plus, low to mid at one point sixties and then, of course, skincare was ripping and so you sort of reconfigured that a little bit, but still talk to sixty percent plus, what you're seeing with the supply chain and freight and obviously, it's not specific to you guys and so global in nature. Can we still get there over the next twelve to twenty four months or just with what you're experiencing? Is there enough slack in the system where you're able to pull out costs from other parts of the equation, where you still feel good on that low to mid sixty over time to be clear?
Rohan Seth: 27:38 So, I think that's a great question, Jon, and thanks for kind of summarizing what we talked about in the past. So, first of all, I'd say, I'm really pleased with the progress that we've made so far year-to-date and my congratulations and thanks to our operations teams for all their efforts and getting us to the place that we are at. We're not immune to the supply chain challenges that the rest of the world and the market has faced. But I say that it hasn't impacted our growth. It is not deterring us from that previously stated non-GAAP margin goal of mid-sixties. 28:17 I would say it impacts our timing a little bit. But I continue to be very confident in our ability to get there I'd say over the next couple of years, and there are several catalysts that are still in our bag to continue to deliver further expansion. I would add that we saw a step change in our margin in twenty twenty one. And going forward, the expansion and the changes would be more gradual.
Jon Block: 28:51 Got it. Okay. Great. And lastly one for me, I'll sort of throw a quick third one. So, Rohan, on to your doc track, you said paying particular attention to your wording, you were calling on investments. I was paying attention to one other one. I thought you said, product launches next year in twenty twenty two being plural, not singular. So, maybe you guys, Dave if you could just talk to we're all so fixated on acting that and I get it from a timing perspective of what you're willing to disclose. But just when we think about that pipeline, are there going to be other offerings? Is it going to be new platforms or side to acne should we think about maybe just refreshers across some of the other platforms that Cutera currently has? Thanks, guys.
Dave Mowry: 29:32 Thanks, Jon. Great question. I'm not going to give you an update on acne and I'm not trying to be coy. I do believe that there's reason to going to be very tight to the vest. That said, R&D work continues to be ongoing with other projects. These are addressing other innovative spaces or markets that I think will be delivered as we continue to update our portfolio. 29:58 I think there's probably a mix of programs in that in our portfolio right now of projects. Some of them being more innovative and others being kind of updates to existing systems and our intent will be to kind of get through some of the development in activities we have outstanding with acne, but also to follow that up with some additional products going into the core business that we have. So we're anticipating bringing some other things out. And once we get into twenty twenty two, we provide guidance, we'll give a little bit more insight into what we'll be delivering and when.
Jon Block: 30:36 Perfect. Thanks guys. Appreciate it.
Operator: 30:40 Thank you. Our next question comes from Chris Cooley with Stephens. Please proceed with your question.
Chris Cooley: 30:56 Afternoon and thanks so much for taking the questions As much as I'd like to ask about, but it sounds like I should pass. So I will spare you. Maybe Dave though and I really would appreciate if you could just give us a little bit of color when you think about the domestic market And also when you look internationally, talk to us about maybe how you're seeing the various channels, exhibit growth and kind of trying to look at traditional cosmetic derm or mid-derm type channel relative to the and how your portfolio plays to that? And then I have a quick follow-up. Thanks so much.
Dave Mowry: 31:36 Thanks, Chris. So first of all, I think it's important for those on the call that maybe don't realize this is. We look at our portfolio from a perspective of not only offering broad procedural coverage to the practitioner, but also doing so and what we think is an economic advantage procedure fee. So our intent, well the capital is expensive from a standpoint of features and benefits we offer. They covers the vast majority of procedures that can be done within the practice. 32:08 In addition, we look at things that allow us to do procedures in the less time, returning treatment rooms and labor within the practice back to the practitioner for them to use in other ways. So our intent is to be a very economically advantaged provider to the practice and we see that across both terms and mid-spas. 32:33 I think what we see in terms of growth is we see a continued evaluation in growth within the derm practices into incorporating aesthetics more broadly. We're seeing some of that -- as some of the older derms retire and younger derms come into the practice that they're incorporating smaller components into the practice that include cash pay procedures. And so we continue to see that as a growth potential into existing practices as well as new practices being set up. 33:05 In terms of the meds spas, we think that they continue to the ones that survived, the prices and had good cash flows continue to invest broadly in doing more and greater procedures, and they're looking for a low cost, high profitability procedures to incorporate into their offerings as well. So, I think in both cases, we have a portfolio that blends well into providing good coverage across multiple procedures and with the med spas offering them certain products such as our truSculpt flex that now can do a kind of an exercise in fifteen minutes instead of what was forty minutes. 33:46 So those type of things that we can produce and provide to the marketplace that allows them to collect similar or higher fees in shorter periods of time gives us that economic advantage for procedure fees.
Chris Cooley: 34:00 Super thanks. And just to maybe clarify there as well, when you think about growth and each of those respective channels as you've defined and are you seeing it relatively balanced right now is one growing faster than the other just want to clarify that before do my follow-up.
Dave Mowry: 34:18 Great question. I think we see a little bit more growth right now in our portfolio with the derm practices. And I think this is primarily driven by the investments we're making with our key account managers. I think they blend very well into a derm practice, not that they don't provide great support to med spas as well. But I think in particular, we found greater uptake out of the gate with the key account managers due to the nature of those practices and how they've worked with other, I'll say providers not capital providers, but with other providers on their key account managers, and they know how to engage with us and how to work to drive their revenues. So, I think that's helping a great deal in particular. 35:03 And I think we also find that our portfolio lends to more clinical selling, right. And with our key account managers in particular being onboard, we've hired people that have been in the aesthetics space but understand the clinical value of what we're providing. And I think that indeed helps and kind of reinforces and supports our capital sales reps and what they're doing. So I think we see slightly more growth in the derm than the core business side. However, we do see strong growth in those med spas that are extending and expanding their operations.
Chris Cooley: 35:38 Perfect. Appreciate that. And then just lastly for me, when you look at the business here, extremely strong third quarter, guidance raise, gain a favorable mix shift there. And as a result, profitability looks much improved as you're going forward and the company has a strong balance sheet as well. When you look out into calendar twenty two, you're talking about launches plural, I guess that includes acne, but you are not going to talk about that. Does it also maybe include in licensing agreement or acquisitions or should we think about deploying that capital just for continued sales force expansion, DTC and investment internally there in R&D. Just kind of curious, how you're thinking about other opportunities that may or may not be in the marketplace today?
Dave Mowry: 36:32 Let me hit it at a high level on kind of the way we're looking at the business and then maybe Rohan can talk about some of the other investments that we want to continue to fund. But from a growth perspective, we think that some of the best things that we could do is from an R&D perspective is organic. We have more ideas than we have the ability to deliver right now. There are great, great people here in our R&D organization, our technical organization. And I think we want to continue to fund their ideas and their development efforts. And I think that we'll be well served in doing so. 37:12 I think the second thing is we believe that while -- there's plenty of opportunities out there to go out and pick some up and tuck it in. It doesn't really represent our portfolio and what we've built here. We think we're building something very special and we want to continue to invest in that in particular, not that we won't look at opportunities when they come across. But I think right now we're not out shopping. We're out really focused on building and developing our own. 37:42 So Rohan, do you have anything you want to add to the investments?
Rohan Seth: 37:44 Yeah. I think what I want to Dave is that the inherent opportunity that's available at Cutera, we were still a growth mindset business right. We're focused on the P&L for sure, but our primary focus is investing for growth and that's how we're setting everything out trying to make everything scalable and we're really building a platform here to be able to launch into our next phase in terms of infrastructure, in terms of sales structure and as Dave mentioned R&D obviously.
Chris Cooley: 38:23 Thank you so much.
Dave Mowry: 38:26 Thanks, Chris.
Operator: 38:30 There are no further questions at this time. I would like to turn the floor back over to Dave Mowry for closing comments.
Dave Mowry: 38:37 Thank you, Maria. For those of you on the call, we want to thank you for your continued interest in Cutera. We remain excited and excited and poised for growth, and we look forward to providing you with an update to our full year twenty twenty one results at our next update during the first quarter of twenty twenty two, till then take care. Thank you.
Operator: 38:59 This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
