Cutera (CUTR) Q1 2020 Earnings Call Transcript

Cutera (CUTR 10.82%)
Q1 2020 Earnings Call
May 07, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for joining Cutera's first-quarter 2020 earnings conference call. [Operator instructions] The discussion today includes forward-looking statements. These forward-looking statements reflect management's current forecasts or expectations 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 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 that may identify forward-looking statements, we encourage you to refer to the safe harbor statement in our press release earlier today. All forward-looking statements are subject to risks and uncertainties, including those risk factors described in the section entitled Risk Factors in our Form 10-K as filed with the Securities and Exchange Commission and updated in our Form 10-Q subsequently filed. Cutera 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 unanticipated events. Future results may differ materially from management's current expectations. In addition, we will discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Cutera's ongoing results of operations, particularly when comparing underlying results from period to period.

Please refer to the reconciliation from GAAP to non-GAAP measures in our earnings release. These non-GAAP financial measures should be considered along with, but not as alternative to, operating performance measures prescribed by GAAP. With that, I would like to turn the call over to our CEO, Dave Mowry.

Dave Mowry -- Chief Executive Officer

Thank you, operator. And to those on the call, we appreciate you joining us today for this update. As you know, the COVID-19 pandemic is an unprecedented crisis that has placed tremendous pressure on our industry. So before we begin, I would like to take a moment to share my appreciation for our amazingly resilient customers and to extend my deepest gratitude to the global Cutera team for their selfless dedication and personal commitment throughout this challenging time.

Today, I'm joined on the call by Jason Richey, president and chief operating officer, as well as, Fuad Ahmad, our interim chief financial officer. I will begin today's call by providing a brief overview of our first quarter's business results and operational highlights, discuss the impacts of COVID-19 on our first quarter and quarter-to-date results and share steps we have taken to mitigate the financial impacts of COVID-19 on our business. Jason will then highlight some of the operational adjustments we have made in response to the pandemic and how these will carry through the rest of fiscal year 2020. Following Jason, Fuad will provide a high-level review of key financial performance indicators and detail the steps we have taken to strengthen our balance sheet.

We will then conclude with a question-and-answer session. Our first quarter of 2020 performance reflected the strength and balance of our business exiting fiscal year 2019, offset by the significant impact of COVID-19 late within the quarter. Through the first two months of 2020, Cutera demonstrated strong sales across all product categories versus prior periods and continued to deliver strong growth from our international business, providing great balance and fueling our bullishness for an overall business prospects. However, this balance was dramatically disrupted as aesthetic practices were rapidly and dramatically impacted by the COVID-19 outbreak and the subsequent shelter-in-place orders.

We initially experienced a slow decline of business associated with the initial COVID-19 impact in the Asia Pacific region, particularly China and Korea. However, this initial impact was relatively immaterial for us as these regions comprise a smaller portion of our overall global revenue mix. As the virus spreaded to Italy, other European countries and then in the Middle East, governments began to impose tighter restrictions on travel and gatherings. As a result, we canceled several end-of-period workshops, and many of our customers suspended capital equipment deals that we had planned to ship within the quarter.

The COVID-19 impact accelerated as the virus took hold in North America, causing a near-complete shutdown across the continent. These effects escalated in the final two weeks of March when a number of practices were forced to suspend procedures, and in many cases, completely shut down in response to shelter-in-place orders issued by state and local governments. Our capital sales were significantly impacted throughout the month of March, as travel restrictions and shelter-in-place orders unfolded. Capital equipment revenues represent approximately three-fourth of Cutera's total sales, and these deals are heavily back-end loaded within the quarter.

The U.S. shutdowns remained in effect throughout April, and while a few states have recently allowed certain practices to reopen, most of the larger geographies extended their shutdown orders well into May. Some of the international geographies remain open in a limited capacity, and we are starting to see additional countries move toward measured and staged reopenings that begin allowing procedures. As offices reopen, we expect patient traffic to be light initially, ramping steadily through the back half of the year as restrictions are lifted and patients become more comfortable in undergoing office procedures.

As patient traffic begins to recover, we expect the consumable sales and service revenues to rebound first, a pattern that we have seen in our industry during previous disruptions to the economic cycle. Having stayed very close with our core customers throughout the pandemic-related slowdown, we believe that there is pent-up demand for aesthetic procedures associated with our core customers, specifically aesthetic dermatologists, dedicated aesthetic practitioners and plastic surgeons. We also know that a great many of these core customers have embraced telemedicine during their office shutdown period, using this tool to perform aesthetic consults with their patients. These consults were intentionally conducted to help accelerate their practices recovery by reducing the time between their office reopening and cash-pay procedures.

We are told that many of these core customers are fully booked for their expected reopenings. Office managers are scheduling procedures in anticipation of a May or June reopening, depending on location and other factors. And several customers in larger metropolitan areas are planning to run extended hours once reopen to satisfy pent-up demand and avoid loss of their clients. It is important to remember that this time line is fluid and wholly dependent on the lifting of stay-at-home orders, and other restrictions related to the COVID-19 pandemic.

Once offices reopen, core customers could see a surge in procedure volume over the course of a few months from patients that were unable to get treatments during the shutdown. We expect the procedure volume will ultimately flow through to Cutera's consumable revenues delayed slightly as customers attempt to deplete existing consumable stock on hand from the lower treatment volumes from mid-March through April and into May. In addition to the consumable revenue, we believe that service activities will return quickly as offices reopen as core customers will need to schedule typical preventative maintenance activities and occasional repair requests that keep their equipment running optimally. Overall, we believe that these core customers will see a quicker recovery in patient traffic than the noncore customers, such as med spas.

This is similar to the recovery trends from 2008 as noncore customers experienced a slower pathway back to precrisis levels. As all of our customers deal with the financial challenges from extended closures, the demand for new equipment will likely diminish over the near-term as practices keep a tight grip on their capital. While there will be equipment deals happening, as few did in April, these deals are expected to be highly competitive, very price-sensitive and coming in at a greatly reduced rate. Regardless, we are working hard to better position our resources to effectively partner with customers over the longer term.

You will hear a bit more about this from Jason shortly. Most customers will need some time to recover from the COVID-19 disruption before committing to any significant outlay of capital. The return of consistent patient traffic will rebuild both their balance sheet, as well as, their confidence in making future equipment purchases as we are spending our time in helping them achieve this shared goal. We have modeled the market recovery in phases, grouped by product category and by geography, taking a conservative viewpoint on the return of revenue.

Giving our revised plan and the remaining uncertainty over the duration of the slowdown, we have taken several steps to mitigate the financial and operational impact of COVID-19 on our business. These activities fit into 3 categories: first, cost-cutting and cash preservation efforts to right size our business and extend our operational runway; second, supply chain reliability and optimization; and third, strengthening our balance sheet to ensure we not only survive the downturn, but have the required capital to accelerate into and through the recovery phase. Turning first to our cost-cutting and cash preservation efforts. These measures included: furloughing the vast majority of our hourly workforce; consolidating back-office operations and eliminating redundant positions from the new structure; implementing tiered salary reductions across the organization up to and including our board of directors; and suspending several corporate projects and programs, which were no longer accretive within the near term.

Additionally, current shelter-in-place orders have allowed us to avoid significant expenses with the reduction of employee travel, cancellation of trade shows and the suspension of workshops and live promotional events. With respect to cash preservation, we have negotiated several amendments to service contracts, as well as, deferred noncritical facility support activities during this interim period of shutdowns. Some of the steps we have taken to ensure continuity of our supply chain and maximize the efficiency of our working capital include: reducing production volumes to accelerate the monetization of finished good inventories, advancing contract manufacturing efforts with lower cost U.S.-based operations, working with suppliers since the initial reports of COVID-19 in January to ensure uninterrupted supply of critical components, and engaging with our freight carriers, regional distribution centers and local sales teams to stock forward locations to avoid any potential customer delivery delays or shipment quarantine periods. Moving now to our focus on strengthening the balance sheet.

Exiting 2019, we had roughly $33 million in cash with no debt. As this is the case each year, first-quarter activities typically drive cash consumption with seasonally lower revenues on the same base of fixed expenses. First quarter 2020 liquidity was further challenged by inventories built in anticipation of equipment deals that did not close due to the COVID-related factors. The net outcome of our operations resulted in $19.5 million in cash at the close of first quarter.

As we constructed the various financial scenarios for the rest of fiscal year 2020 and considering the financial and liquidity challenges from COVID-19, we believe it important to have the capacity to weather the downside scenario of a protracted COVID-19 recovery. We assess top line impact, the various cost-saving efforts and the monetization of inventories, as well as, the likely expansion of receivables as customers push out their payments to us. In considering the liquidity requirements, we also made conscious decisions to protect critical assets and to retain the ability to advance the transformational initiatives already under way prior to COVID-19. Primarily, our pursuit of market leadership and body sculpting market, bolstered by the recent launch of truSculpt flex and our R&D program is focused on developing breakthrough products, such as our innovative approach to acne.

While many of these cost-cutting decisions were difficult and unfortunately impacted several amazing people, folks I consider closed teammates, they were choices necessary to ensure the long-term health of the business. I am very confident that the management team has executed a thoughtful and measured plan, which provides Cutera with the requisite cash runway, retains the needed access to critical recovery resources, and ensures our ability to deliver the services and support our customers need during this challenging time. I am confident that Cutera will move through the COVID-19 crisis and exit leaner, meaner and hungry to take share. And now, I will turn the call over to Jason.

Jason Richey -- President and Chief Operating Officer

Thanks, Dave. As we rapidly transitioned into the COVID-19 environment at the end of Q1, the Cutera team pivoted quickly to adapt to these new and unfamiliar conditions. In doing so, I was impressed with the agility of our team to align around clearly defined priorities to weather this storm and stay focused and primed to execute. As we established our priorities, we committed to the following: first, the health and safety of our employees, our partners and our customers; second, connecting daily with our active installed base of customers; third, reaching out to our medical advisory board to gain their input and ensure we were aligned with them on activities and messaging; fourth, staying hyper-focused on our core customers; fifth, remaining flexible; and finally, committing to the resources and programs necessary to accelerate us through the recovery period and assist our clinicians in getting up and running as quickly as possible.

Once we established our priorities and daily focus, we ensured that our commercial team's new working environment was organized and structured. Our sales, marketing and service teams have been working hand-in-hand to make sure no time is wasted during shelter-in-place. Each member of our commercial team has a tight daily schedule that is hyper-focused on connecting with our customers, listening to their concerns and leveraging our resources to assist our customers as they work to manage their practices, retain their employees and fill their schedules in preparation for reopening their practices. After consulting with our medical advisory board, we launched several important educational tools to assist our customers as they navigate this challenging time.

First, we created a long series of webinars led by global thought leaders, covering a wide array of topics that include everything from how to conduct virtual consultations to how to unleash your device portfolio to get up and running as quickly as possible. Second, we created the Cutera survival guide and trained our commercial team to effectively deliver this information to clinicians. The guide was developed to help physicians manage through COVID-19 by covering topics that include how to apply for a small business loan, how to renegotiate your lease on office space and capital equipment, how to market your practice using social media and how to align that patients for your clinic once you reopen your doors. Finally, we're working closely with our clinicians to help where we can.

We have extended discounts on our consumables that will help clinicians get back on their feet more quickly as their office procedures ramp up. We have also extended our service contracts to cover the time lost while clinicians were unable to treat patients in their offices. As we adjusted our daily activity, we accept the fact it will take some time to get back to the environment we were accustomed to. We have revisited our commercial strategy and made necessary adjustments to how we will work for the balance of 2020.

As virtual meetings, consults, demonstrations and educational programs will certainly play a big role in our new normal, we are actively evaluating additional ways in which we can pivot as an organization to partner with our physicians and bring patients through their doors. Specifically, we are preparing for or evaluating the following scenarios: first, evolving our demonstration in workshops to smaller, more localized events that allow virtual participation; second, working with practices to drive procedure volume with a focus on skin revitalization and body sculpting by driving lower cost, high-impact procedures like laser genesis and microneedling. In addition, we are leveraging our body sculpting portfolio to promote losing the COVID-19 by driving packages for truSculpt iD and Flex. By doing this, we feel increased patient traffic will present opportunities to conduct increasing capital transactions along the way.

And third, we are evaluating select utilization of alternative models, which lower the initial capital commitment, enabling customers the time needed to rebuild their practices and balance sheets without compromising their equipment choices. While we have an idea of the activities that need to take place in order to drive recovery via patient demand, we have limited visibility into the exact timing by region as restrictions are amended, but not yet consistently understood or embraced, but rest assured, in both North America and internationally, we have a team in place that is executing daily and is eager to get back in front of customers as soon as shelter-in-place is behind us. Finally, I'd like to touch on our R&D focus. Despite the COVID-19 pandemic, our focus remains on long-term portfolio differentiation through two key initiatives: one, continuing to evaluate opportunities to introduce practice expansion capabilities by refreshing our legacy portfolio and complementing our verticals with best-in-class devices that introduce disruptive technology; and two, a commitment and focus on bringing energy-based solutions to treating some of the blue-ocean opportunities within the aesthetic space, including a permanent cure for chronic and recurring acne.

As we continue to advance through the product development and clinical research processes, we're hopeful to launch our acne solution in 2021 with our core physicians. I'll conclude by saying that despite all the challenges COVID-19 has created for the global aesthetics space, I'm incredibly proud of our team and how they have reacted to this new normal. I am confident the changes we have implemented will position us well exiting this challenging time, and I believe we will emerge from this pandemic lean, mean and ready to execute. The team is hungry, and eager to get back in front of our customers.

And now I would like to turn the call over to Fuad to review first-quarter financial highlights. Fuad?

Fuad Ahmad -- Interim Chief Financial Officer

Thank you, Jason. 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 our non-GAAP metrics in conjunction with the GAAP results as contained in our earnings release. I will now go over our results for the first quarter of fiscal 2020.

As Dave and Jason discussed, the first quarter of fiscal '20 was a difficult one as we were severely impacted by COVID-19 pandemic. Shelter-in-place or similar orders all but halted our sales activities in North America and rest of the world during the most productive part of our quarter. We entered fiscal '20 with tremendous momentum by virtue of achieving well above-market revenue growth rate for both the fourth quarter of fiscal '19 and full year '19. Despite these challenges, our commercial team displayed great tenacity in the first quarter, and we continue to reap benefits of their hard work into the second quarter.

Now to the numbers. Total revenue for the first quarter of fiscal '20 was $32.2 million compared to $36 million for the same period last year, an 11% decline. This decline is attributed entirely to our inability to conduct meaningful sales activities for much of March. U.S.

revenues saw a particularly steep 32% decline compared to the same period in '19 while international revenue grew 18% to $18.5 million. International revenue growth was a result of our ongoing efforts to build out our international commercial team. We also saw strong growth in skin care business in Japan which grew nearly 80% over '19. Global consumable revenue grew 30% year over year to $2.5 million while consumable revenue grew over same period last year, it was well below our expectations due to closures of physicians' offices in the first quarter because of COVID-19-related shutdowns.

Service revenue grew 11% over last year to $5.8 million as a result of having an increasing number of systems under extended service contracts. For the first quarter of fiscal '20, total recurring revenue including consumables, global service and skin care categories grew 28% over the same period last year to $11.3 million. Recurring revenue represented 30% of the total revenue in the first quarter of fiscal '20 versus 25% in the first quarter of '19. We remain committed to driving increased recurring revenue streams in order to improve our visibility, durability and profitability over the long-term as our revenue mix continues to balance.

Moving to expenses. For the first quarter of fiscal '20, we recorded non-GAAP gross profit of $14.8 million compared to $17.7 million for the same period in '19. Non-GAAP gross margin in the first quarter of '20 was 45.8% versus 49.1% for the same period last year. The reduction in gross margin is a result of significantly lower overhead absorption due to lower revenue.

Non-GAAP sales and marketing expenses for the quarter were $13 million compared to $14.4 million for the same period last year. This decline is a result of substantially lower variable compensation and suspension of all marketing activities in the second half of Q1. Total non-GAAP R&D expenses were essentially flat year over year. Finally, on to G&A expenses.

For the first quarter of fiscal '20, non-GAAP G&A expenses were $6.6 million compared to $4.5 million in the same period last year. Growth from the prior period was a result of significantly higher bad debt reserve in the wake of the current situation, as well as, higher compensation expense associated with key leadership additions in fiscal '19. For the first quarter of fiscal '20, our non-GAAP operating income, also called adjusted EBITDA, was a loss of $8.3 million compared to the loss of $4.7 million for the same period last year. We experienced no material or significant changes to our tax positions.

I will now discuss our balance sheet and liquidity position with a focus on our ongoing cost reduction and cash conservation efforts. We ended the quarter with approximately $19.5 million of cash and equivalents compared to $27 million at the same time last year. In response to continuing uncertainties around COVID-19 and its impact on business, we were forced to make some difficult decisions in order to materially reduce our cost structure. We furloughed most of our production staff along with some sales and marketing position.

By furloughing these employees, we retain the option to bring them back as the business conditions improve. We also eliminated certain positions in our sales and marketing department in addition to reducing third-party promotional and marketing spend. While the reductions were deep, we feel we have created the right structure to not only survive this crisis, but also preserving company's core drivers of long-term value such as key R&D staff and projects. Please note that our first quarter results didn't include the impact of these cost reductions which will materialize beginning in Q2 of fiscal '20.

We are working with our vendor partners to conserve cash by extending payments, deferring purchases and limiting future cash exposures on materials spend. We ended the quarter with $37 million of inventory. We have suspended much of our material purchases and have plans to burn through our inventory over the next two to three quarters. We believe our available liquidity and cost reduction efforts provide us the runway we need to withstand this current crisis without needing any additional capital.

However, as a company, we felt it prudent to bolster our liquidity to help withstand a potential prolonged shutdown and to be well-positioned once the business begins to improve. In April, we closed on an equity offering raising approximately $27 million in net proceeds. Additionally, we also received Payroll Protection Program or PPP loan in the amount of $7.1 million, with the specific purpose of preserving key positions and keep employees in payroll who would have been released otherwise. Our pro forma cash position following our financing efforts is $53.5 million, and that, combined with our sensible cost reduction efforts, puts us in an enviable position relative to the market and several of our impacted competitors. Turning now to guidance.

Due to lack of visibility in to the magnitude and duration of the impacts around COVID-19, we have withdrawn our previously issued guidance, and we'll not be issuing revised guidance at this time. With that, I will now turn the call back over to Dave for some closing comments.

Dave Mowry -- Chief Executive Officer

Thanks, Fuad. We will open the call to questions in a moment. But first, I would like to provide some additional color on our financial outlook. While we took strong and decisive action in reducing expenses, the net effect of the reduced revenue expectations will not be fully offset in the short term.

Additionally, some of the cash preservation activities such as monetizing inventories will have a direct impact on our gross margin performance. Therefore, we expect to consume cash during both Q2 and Q3 and see a reversal starting in Q4. Our cash generation will continue to improve throughout the remainder of fiscal 2020 as system revenue stabilizes and contributions from cost-cutting activities normalize. We will also be burning off inventories sitting in our finished goods warehouse.

Additionally, we believe that many of the cost-cutting steps taken to date will provide a step forward in our pursuit of higher profitability as we work from a much leaner, more scalable structure. With that, I would like to turn the call back to the operator for Q&A. Operator?

Questions & Answers:

Operator

Certainly. [Operator instructions] Our first question comes from the line of Jon Block from Stifel.

Trevor Brown -- Stifel Financial Corp. -- Analyst

Hi. This is Trevor on for John. Thank you for the question. You had a really strong quarter in the international business, and just wondering if we're thinking about the international segment in the absence of COVID-19, where do you think this could have been in terms of year-over-year growth? Thanks.

Dave Mowry -- Chief Executive Officer

Yes. Thanks, Trevor. It's a great question. Listen, we remain very bullish during the first part of the quarter and that was propped up quite a bit by the strength of our international performance.

The investments that we had made back a year, a year and a half ago in new management, new structures, were continuing to pay dividends not only in Japan and Australia, New Zealand, we will continue to do amazing work. But we're starting to see the same performance results escalate in the European environment, as well as, new teams are being developed and new techniques and new processes are taking hold. So I think that we still have a long way to go with international. We're significantly underpenetrated as a company in our international market as compared to how we perform in the U.S.

And I think that we will continue to see that significant strong growth from the international component over an extended period.

Trevor Brown -- Stifel Financial Corp. -- Analyst

Great. And maybe just a follow-up on the APAC business specifically. Any color on what you're seeing in these markets just in terms of leading indicators of what we could see in the U.S. as we move forward?

Dave Mowry -- Chief Executive Officer

Jason, maybe you can kind of just highlight your view in Japan and Korea and China.

Jason Richey -- President and Chief Operating Officer

Yes. It's a great question. Looking at Japan, Korea and China, it's still a peak of haven. There's a lot of energy and enthusiasm around PicoGenesis for skin lightening, if you will.

However, I think we're going to see some growth in the body sculpting business, specifically as we're seeing a lot of momentum and enthusiasm around that. Our goal is to launch our Flex device, hopefully, latter part of this year in many of these key markets. And I think there's a lot of enthusiasm around that. So we've got the inventory in place.

I think we've got the team in place, and our goal is to get Flex over to AsiaPac as soon as possible because I think that's going to be one of the key products to really drive for at least the next, call it, 12 to 24 months.

Dave Mowry -- Chief Executive Officer

Yes. I would just add, from a behavior perspective, we know that Korea came back online with kind of a lower participation rate as things started to ramp back up similar in China. This is less of an economic issue, I think, for customers as it is an awareness and an exposure. But the thing that we're realizing, and I think is kind of a telling factor is that we don't believe this to be a patient flow or patient traffic issue.

We actually think that the -- if you're the governor on patient traffic, in a lot of cases, it may reside within the practice, being able to provide social distancing within their waiting rooms, being able to wipe down and clean out rooms after a patient comes through there in order to protect may have kind of an immediate impact on their capacity. And I think we're certainly anticipating that from what we've witnessed in other geography. That's why in the comments, we said we believe it will be light initially until these routines become more habitual, more regular, more understood within the practices, and then they'll be able to ramp a little bit more aggressively. I hope that helps you, Trevor.

Trevor Brown -- Stifel Financial Corp. -- Analyst

Great. That's a good response. Thank you.

Operator

Thank you. Our next question comes from the line of Matthew O'Brien from Piper Sandler.

Matthew O'Brien -- Piper Sandler -- Analyst

Good afternoon, everyone. Thanks for taking my questions. Either Dave or Jason, you mentioned the push on the new system side of things, some are probably in the $8 million to $10 million range globally. How do we think about those orders specifically? Are they just outright canceled? Or do you have any kind of line of sight as far as deferrals? And when they may come back? And then what you may need to do from a pricing, financing flexibility perspective in order to reacquire those customers and those sales?

Dave Mowry -- Chief Executive Officer

Yes. Let me hit that at a high level, Matt, and we'll let Jason kind of give you some specifics. First of all, I wanted to kind of thank you for dialing in and being part of this. The big picture here is that we know that several of the capital deals were probably more deferral than they are a cancellation.

We know that there's a need. In some of the distributor markets, they know that there's a need, but they also know that they can't be exposed from a cash perspective either. So this is going to be probably a little bit more of an individual decision for them as they pick up the deals that they had previously committed to. We're working individually with those distributors.

And like I said, we believe that the vast majority of this is deferral by a quarter or two and not necessarily a cancellation. So we think international will rebound as well, similar to the U.S. It's a matter of confidence -- economic confidence and seeing the patient traffic. I think the second part to your question though is really more about what's it really take and how do you get there.

And I think Jason has got a great program laid out, and maybe you can walk through that, Jason.

Jason Richey -- President and Chief Operating Officer

Yes. I mean, what we're looking through step-by-step, what we're doing by country in order to make sure that we get them back online. We look at a couple of different scenarios in which we can better place capital within some of these key markets and really get our customers up and using this technology. And so we're evaluating a lot of that now.

To Dave's point, I think a lot of this is just deferral. The enthusiasm for the portfolio is quite high internationally. And I think a lot of this is just a matter of getting some of the consumer confidence back in place. As they start to see patients coming through their doors, they're going to get more confident to potentially pull the trigger on that.

So when -- in our discussions with our distributors and with our international clinicians, it's really more around just, hey, can we push this up until the summer or maybe early fall in order to just sort of get some of these things sorted. I mean, we had a conference in Australia right before shelter-in-place, we had 140 clinicians there, and all of them very eager to to get into pieces of the portfolio, but it's just a matter of saying, OK, when am I going to feel comfortable to do that. So we're working with clinicians and country-by-country specifics in terms of trying to find ways to ease them into capital and find ways in which they can utilize this technology to help bolster their practice and drive volume.

Dave Mowry -- Chief Executive Officer

Yes.

Matthew O'Brien -- Piper Sandler -- Analyst

OK. That's really helpful. And then can you just help frame up maybe a little bit as far as the thought process, I mean, every metric that I was modeling for Q1, you actually hit or beat except for North America. So there's good momentum in a lot of the business outside of what happened here in North America.

How do we think about Q2, just some air bars around just what the revenue could look like maybe versus Q1, how bad could it be? What you see maybe in April? And then same kind of question on the opex side of things, how much are you going to be able to save? And my apologies, I have one more question after that.

Dave Mowry -- Chief Executive Officer

OK. Let's take these one at a time. That's a really deep question, and I think it's an appropriate one to answer to the folks on the call. So thanks for putting that out on the table.

From my perspective, Matt, I think revenues in the quarter are still yet to be understood. We know for a fact that April was near shutdown type of behaviors for our customers. Even in that environment, there were still some capital deals to be had. They were few and far between, unfortunately, as a result of the environment, but I think there is capital to be had and capital deals to be had.

And the thing we want to be very cautious of is to not fall prey to letting it be a drop-your-price mentality and let people be too opportunistic to take advantage if they have capital to pay relatively low prices because that would be a long-term impact on the business that we think needs to be more transitory, right? So we want to be careful, Matt, not to kind of fall prey to that kind of an outcome. So that's the first point I guess I'd make. The second thing is we also know that those near close -- near shutdowns, if you will, prohibited 2 things. It prohibited patients from getting treated which didn't allow the consumables to uptick.

So those things sat on the shelf in the physicians' offices. And then secondarily, it didn't allow us to provide service. So a lot of the equipment is sitting in the office needing preventive maintenance, and all that schedule is going to have to be caught up with a very finite amount of resource. So our challenge is kind of twofold here.

It's to make sure that we are triaging while getting our customers up and running as quick as possible, allowing them and helping them bring their patients into the practice. And then secondarily, and probably most importantly from our perspective, is making sure that we're not doing anything that causes long-term harm to our company by how we're kind of moving through these next several weeks. On the opex side, I would say that, look, the shelter in place came in kind of a 3-stage approach, right? They came out first with a kind of a little bit of a -- this is going to be problematic, and we really think you should slow down or not travel, etc. Then it became a shelter-in-place.

And then the shelter-in-place got extended, and then even in Northern California, they get extended again. So as we look at that, we're very cautious to know that we believe it's -- we know it's coming back, we just don't know the date or the time, and I want to be very careful. So as we went through that time line, you wanted to be careful not to overcut or get too far ahead of yourself. So we've kind of gone through our belt-tightening exercises here with a view to save on the long term.

But those get executed at a point where we've incurred a vast majority of our expenses early in the quarter for the people that we thought we would need for the recovery that was still to happen in May. Now that that's been pushed off a period and the speed of that recovery may be delayed, we were able to make a little bit more aggressive decisions and put those in place. But the benefit of those really aren't going to come to the late part of this quarter and really be shown on our balance sheet and on the P&L probably in Q3, in particular.

Matthew O'Brien -- Piper Sandler -- Analyst

Got it. And again, thanks for the third question here. I know everybody is worried about what's going on here in the near term, and I understand that. But the commentary from Jason on the launch of acne in 2021 certainly is very appealing or compelling to me.

Anyway, can you just talk about how that launch will look? Will it be a real measured launch second half of the year? And then any thoughts as far as what the indications may look like as you do roll that technology out?

Dave Mowry -- Chief Executive Officer

Well, let me hit a couple of points. And then certainly, Jason, if you have additional comments, maybe come over the top of that. But first of all, I think you're thinking about it right. Jason said 2021.

We're doing everything in our power to accelerate those time lines, as you would imagine. We were hopeful that that would be a kind of a much earlier '21 launch. However, shelter-in-place and delays in practices have kind of suspended our ability to enroll patients, right? So that has kind of delayed us a little bit day for day at this point, unfortunately. But I can tell you that we've taken that extra time to really make sure that we're honing not only the product, but the protocol necessary to get the optimal outcomes.

So this may not be -- this may end up being a silver lining for us and the company to make sure that as we do roll this out, it's being rolled out in a way that has very robust and durable outcomes. As we launch this and bring it into the market, it will be kind of an approval that allows us to get to the market with an acne treatment that folks feel good about with good clinical data. But this is really a very different type of launch than most aesthetic products because we believe the depth of not just the clinical data, but the clinical evidence, and the appeal not just to the aesthetic dermatologists but to the med derms in particular could be quite critical in having a successful launch here. So we're taking the time to build this structure, to build the foundation of clinical evidence, and using kind of an evidence-based technology approach to launching this into the marketplace.

So like I said, this could be a little bit of a silver lining for us to slow down enough to make sure that we have better and deeper data sets that allow us to be a lot more focused in the launch. I will tell you that our view here is that this is a core customer product. It is not a product that the dentist is going to put into his practice and treat acne patients. Acne is a significant portion of the dermatology practice.

Roughly one in three patients are there for acne or some form of acne. And we want to make sure that what we provide is really focused on allowing the dermatologist to treat that acne with high degrees of success at a low friction point, if you will, for both the patient and the customer, our doctor, right?

Matthew O'Brien -- Piper Sandler -- Analyst

Very helpful. Thanks for taking all the questions.

Operator

Thank you. [Operator instructions]

Dave Mowry -- Chief Executive Officer

Well, operator, I guess, if there are no more questions, we can just close. I do have a couple of comments just in closure. First of all, I want to wish each and every one of you on the call to stay safe and do the right thing. I think we're obviously flattening the curve with our behaviors, and I really appreciate the way everyone has amended their behaviors to do so.I also want to just say that we recognize that the current situation is transitory, right? This is -- we're here for the long term, and we're committed to the long term.

And the premise of that long-term has been what's informed our decisions and allowed us to ensure that Cutera will be well-positioned to not only recover quickly, but provide an unmatched level of support to our customers around the world. I'm a special thankful to our team and professionals who are working alongside a very resilient group of customers, and we are equally committed to rebuilding our businesses together.So thank you for tuning in today and look forward to future updates.

Operator

[Operator sign-off]

Duration: 47 minutes

Call participants:

Dave Mowry -- Chief Executive Officer

Jason Richey -- President and Chief Operating Officer

Fuad Ahmad -- Interim Chief Financial Officer

Trevor Brown -- Stifel Financial Corp. -- Analyst

Matthew O'Brien -- Piper Sandler -- Analyst

More CUTR analysis

All earnings call transcripts