14% Revenue Growth Driven by Strong Recurring
Revenue and truSculpt® Product Sales
Raises Full Year Financial Guidance
Announces Planned Departure of Chief Financial
Officer Sandra Gardiner
Cutera, Inc. (NASDAQ: CUTR)
(“Cutera” or the “Company”), a leading provider of laser and other
energy-based aesthetic systems for practitioners worldwide, today
reported financial results for the third quarter ended September
30, 2019.
2019 Third Quarter Financial and Operational
Highlights
- Revenue was $46.1 million, an increase of 14% over the prior
year period.
- truSculpt portfolio revenue grew 43% over the prior year
period, driven in part by the successful launch of truSculpt flex,
the Company’s new muscle sculpting platform.
- Recurring revenue of $11.2 million grew 51% over the prior year
period, with growth balanced across service, skincare product, and
procedure-related consumable revenues.
- International revenue grew 21% over the prior year period,
reflecting continued momentum from the first half of 2019 and
strong performance in Japan and Australia.
- Gross Margin was 57% compared to 54% in the prior year period,
driven by top line leverage as well as product and channel
mix.
- Operating expenses represented 62% of revenue as compared to
56% in the prior year period, reflecting increased stock-based
compensation as well as CRM and ERP-related activities.
- Net loss was $2.6 million, or $0.19 per fully diluted share, as
compared to a net loss of $0.9 million, or $0.06 per fully diluted
share, in the prior year period.
“Our solid third quarter results were driven by a strong
commitment to our commercial and operational goals, underpinned by
our focus on achieving profitable growth,” commented Dave Mowry,
Chief Executive Officer. “Since joining Cutera four months ago, I
have engaged, and will continue to engage, with our key
stakeholders, including customers, employees, and shareholders. The
feedback I’ve received strengthens my belief that the Company is
well-positioned to shape the future of energy-based aesthetics. We
remain committed to continued execution in the near-term, while
putting the right plans in place to drive above-market growth,
enhance profitability, and achieve our vision of shaping the future
of the global aesthetic market over the next several years.”
Updated 2019 Financial Outlook:
- Full-year 2019 revenue is expected to be $177 million to $179
million, an increase of 9% to 10% over 2018, compared to prior
guidance of $165 million to $175 million.
- Full year 2019 non-GAAP* gross margin is expected to improve
over the full year 2018 non-GAAP gross margin.
- Full-year 2019 adjusted EBITDA* is expected to be $3.5 million
to $4.5 million, revised from prior guidance of $2 million to $4
million.
CFO Departure:
Sandra Gardiner, Cutera’s Chief Financial Officer, announced her
resignation from Cutera to pursue another opportunity. The Company
has retained Spencer Stuart to conduct a national search to
identify a replacement. Ms. Gardiner will continue as CFO through
November 15, 2019, and will assist in ensuring a smooth
transition.
“Sandy has been the Company’s CFO since December 2017 and has
been an integral part of our Executive Leadership team,” commented
Dave Mowry, Cutera’s Chief Executive Officer. “I want to thank her
for the contributions she made to the organization, and we wish her
success in her next assignment.”
Conference Call
The Company will host a live audio webcast for interested
parties commencing today at 1:30 p.m. PDT (4:30 p.m. EDT).
Participating in the call will be Dave Mowry, Chief Executive
Officer, and Jason Richey, President. The webcast can be found at
the Investor Relations section of Cutera's website at
http://www.cutera.com/ and will be available online within 24 hours
of its completion through December 7, 2019. In addition, you may
call 1-877-300-8521 to listen to the live broadcast.
About Cutera, Inc.
Brisbane, California-based Cutera is a leading provider of laser
and other energy-based aesthetic systems for practitioners
worldwide. Since 1998, Cutera has developed innovative, easy-to-use
products that enable physicians and other qualified practitioners
to offer safe and effective aesthetic treatments to their patients.
For more information, call 1-888-4CUTERA or visit
www.cutera.com.
*Use of Non-GAAP Financial
Measures
In this press release, in order to supplement the Company’s
condensed consolidated financial statements presented in accordance
with Generally Accepted Accounting Principles, or GAAP, management
has disclosed certain non-GAAP financial measures for the statement
of operations and net income (loss) per diluted share. Non-GAAP
adjustments include stock-based compensation, depreciation,
amortization, executive separation costs, customer relationship
management (“CRM”) and enterprise resource planning (“ERP”) system
implementation costs, as well as the net tax impact of excluding
these items. From time to time in the future, there may be other
items that we may exclude if we believe that doing so is consistent
with the goal of providing useful information to investors and
management. We have provided a reconciliation of each non-GAAP
financial measure used in this earnings release to the most
directly comparable GAAP financial measure. We have not provided a
reconciliation of non-GAAP guidance measures to the corresponding
GAAP measures on a forward-looking basis due to the potential
significant variability, limited visibility, unpredictability, or
unique non-recurring nature of the items. Forward-looking non-GAAP
measures include adjusted EBITDA. We define adjusted EBITDA as
earnings before interest, taxes, depreciation and amortization,
stock-based compensation, executive separation costs, and charges
related to CRM and ERP software implementation costs.
Company management uses these measurements as aids in monitoring
the Company’s ongoing financial performance from quarter to
quarter, and year to year, on a regular basis and for benchmarking
against other similar companies. Non-GAAP financial measures used
by the Company may be calculated differently from, and therefore
may not be comparable to, similarly titled measures used by other
companies. These non-GAAP financial measures should be considered
along with, but not as alternatives to, the operating performance
measure as prescribed by GAAP. Non-GAAP financial measures for the
statement of operations and net income per diluted share exclude
the following:
Non-cash expenses for stock-based compensation. We have
excluded the effect of stock-based compensation expenses in
calculating our non-GAAP operating expenses and net income
measures. Although stock-based compensation is a key incentive
offered to our employees, we continue to evaluate our business
performance excluding stock-based compensation expenses. We record
stock-based compensation expense related to grants of options,
employee stock purchase plan, performance and restricted stock.
Depending upon the size, timing and the terms of the grants, this
expense may vary significantly but will recur in future periods. We
believe that excluding stock-based compensation better allows for
comparisons to our peer companies;
Depreciation and amortization. We have excluded
depreciation and amortization expense in calculating our non-GAAP
operating expenses and net income measures. Depreciation and
amortization are non-cash charges to current operations;
Executive separation. We have excluded costs associated
with the resignation of our former Chief Executive Officer in
calculating our non-GAAP operating expenses and net income
measures. We exclude these non-recurring separation costs because
we believe that these items do not reflect future operating
expenses;
Customer Relationship Management. We have excluded CRM
system costs related to direct and incremental costs incurred in
connection with our multi-phase implementation of a new CRM
solution and the related technology infrastructure costs. We
exclude these costs because we believe that these items do not
reflect future operating expenses and will be inconsistent in
amounts and frequency making it difficult to contribute to a
meaningful evaluation of our operating performance; and
Enterprise Resource Planning. We have excluded ERP system
costs related to direct and incremental costs incurred in
connection with our multi-phase implementation of a new ERP
solution and the related technology infrastructure costs. We
exclude these costs because we believe that these items do not
reflect future operating expenses and will be inconsistent in
amounts and frequency making it difficult to contribute to a
meaningful evaluation of our operating performance.
We believe that excluding all of the items above allows users of
our financial statements to better review and assess both current
and historical results of operations.
Safe Harbor Statement
Certain statements in this press release, other than purely
historical information, are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These statements include, but are not limited to, Cutera’s plans,
objectives, strategies, financial performance and outlook, CFO
search, product launches and performance, trends, prospects or
future events and involve known and unknown risks that are
difficult to predict. As a result, our actual financial results,
performance, achievements or prospects may differ materially from
those expressed or implied by these forward-looking statements. In
some cases, you can identify forward-looking statements by the use
of words such as “may,” “could,” “seek,” “guidance,” “predict,”
“potential,” “likely,” “believe,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “plan,” “intend,” “forecast,” “foresee”
or variations of these terms and similar expressions, or the
negative of these terms or similar expressions. Forward-looking
statements are based on management's current, preliminary
expectations and are subject to risks and uncertainties, which may
cause Cutera's actual results to differ materially from the
statements contained herein. These statements are not guarantees of
future performance, and stockholders should not place undue
reliance on forward-looking statements. There are a number of
risks, uncertainties and other important factors, many of which are
beyond our control, that could cause our actual results to differ
materially from the forward-looking statements contained in this
press release, including those described in the “Risk Factors”
section of Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, the Registration Statement on
Form S-8 and other documents filed from time to time with the
United States Securities and Exchange Commission by Cutera.
All information in this press release is as of the date of its
release. Accordingly, undue reliance should not be placed on
forward-looking statements. Cutera undertakes no obligation to
update publicly any forward-looking statements to reflect new
information, events or circumstances after the date they were made,
or to reflect the occurrence of unanticipated events. If we update
one or more forward-looking statements, no inference should be
drawn that we will make additional updates with respect to those or
other forward-looking statements. Cutera's financial performance
for the third quarter ended September 30, 2019, as discussed in
this release, is preliminary and unaudited, and subject to
adjustment.
CUTERA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
September 30,
June 30,
December 31,
2019
2019
2018(1)(2)
Assets Current assets: Cash and cash equivalents
$
22,879
$
27,668
$
26,052
Marketable investments
6,448
4,002
9,523
Accounts receivable, net
23,222
24,919
19,637
Inventories
34,042
26,889
28,014
Other current assets and prepaid expenses
5,334
4,536
3,972
Total current assets
91,925
88,014
87,198
Property and equipment, net
2,771
2,834
2,672
Deferred tax asset
459
458
457
Goodwill
1,339
1,339
1,339
Operating lease right-of-use assets
8,332
8,990
-
Other long-term assets
6,410
6,311
5,971
Total assets
$
111,236
$
107,946
$
97,637
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable
$
14,140
$
11,441
$
11,279
Accrued liabilities
28,096
27,026
23,300
Operating leases liabilities
634
1,276
-
Extended warranty liabilities
2,232
2,399
3,159
Deferred revenue
10,164
10,717
9,882
Total current liabilities
55,266
52,859
47,620
Deferred revenue, net of current portion
3,309
3,142
2,684
Income tax liability
93
93
394
Operating lease liabilities, net of current portion
7,888
7,888
-
Other long-term liabilities
690
782
553
Total liabilities
67,246
64,764
51,251
Stockholders’ equity: Common stock
14
14
14
Additional paid-in capital
78,305
74,870
70,451
Accumulated deficit
(34,270)
(31,642)
(24,010)
Accumulated other comprehensive loss
(59)
(60)
(69)
Total stockholders' equity
43,990
43,182
46,386
Total liabilities and stockholders' equity
$
111,236
$
107,946
$
97,637
(1)
As of January 1, 2019, the
Company adopted the requirements of ASC 842 using the modified
retrospective method, and as a result, there is a lack of
comparability to the prior periods presented.
(2)
As of April 1, 2019, the Company
adopted the requirements of Intangibles Topic 350 on a prospective
basis, and as a result, there is a lack of comparability to the
prior periods presented.
CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
Products
$
40,315
35,675
113,046
$
102,589
Service
5,802
4,898
16,871
14,662
Total net revenue
46,117
40,573
129,917
117,251
Products
16,343
15,909
50,278
46,876
Service
3,541
2,779
10,266
8,779
Total cost of revenue
19,884
18,688
60,544
55,655
Gross profit
26,233
21,885
69,373
61,596
Gross margin %
57%
54%
53%
53%
Operating expenses: Sales and marketing
17,691
14,479
50,786
43,102
Research and development
3,643
3,244
10,622
10,895
General and administrative
7,308
5,160
18,100
15,501
Total operating expenses
28,642
22,883
79,508
69,498
Loss from operations
(2,409)
(998)
(10,135)
(7,902)
Interest and other expense, net
(146)
(49)
(180)
(80)
Loss before income taxes
(2,555)
(1,047)
(10,315)
(7,982)
Income tax expense (benefit)
73
(174)
(55)
(3,505)
Net loss
$
(2,628)
$
(873)
$
(10,260)
$
(4,477)
Net loss per share: Basic
$
(0.19)
$
(0.06)
$
(0.73)
$
(0.33)
Diluted
$
(0.19)
$
(0.06)
$
(0.73)
$
(0.33)
Weighted-average number of shares used in per share
calculations: Basic
14,182
13,851
14,095
13,717
Diluted
14,182
13,851
14,095
13,717
CUTERA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (in
thousands, except percentage data) (unaudited)
Three Months Ended
% Change
Nine Months Ended
% Change
September 30,
September 30,
2019 Vs
September 30,
September 30,
2019 Vs
2019
2018
2018
2019
2018
2018
Revenue By Geography: United States
$
26,425
$
24,329
+9%
$
74,972
$
73,597
+2%
International
19,692
16,244
+21%
54,945
43,654
+26%
Total Net Revenue
$
46,117
$
40,573
+14%
$
129,917
$
117,251
+11%
International as a percentage of total revenue
43%
40%
42%
37%
Revenue By Product Category: Systems - North America
$
24,121
$
22,628
+7%
$
68,192
$
67,458
+1%
- Rest of World
10,837
10,569
+3%
31,514
28,269
+11%
Total Systems
34,958
33,197
+5%
99,706
95,727
+4%
Consumables
2,510
1,055
+138%
7,109
2,881
+147%
Skincare
2,847
1,423
+100%
6,230
3,981
+56%
Total Products
40,315
35,675
+13%
113,045
102,589
+10%
Service
5,802
4,898
+18%
16,872
14,662
+15%
Total Net Revenue
$
46,117
$
40,573
+14%
$
129,917
$
117,251
+11%
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
Pre-tax Stock-Based Compensation Expense: Cost of revenue
$
430
$
196
$
1,103
$
576
Sales and marketing
1,365
541
3,080
1,745
Research and development
443
163
1,076
616
General and administrative
940
731
1,745
2587
$
3,178
$
1,631
$
7,004
$
5,524
CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (in thousands) (unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
Cash flows from operating activities: Net loss
$
(2,628)
$
(873)
$
(10,260)
$
(4,477)
Adjustments to reconcile net loss to net cash used in operating
activities: Stock-based compensation
3,178
1,631
7,004
5,524
Depreciation of tangible assets
369
305
1,184
849
Amortization of contract acquisition costs
757
482
2,169
1,304
Change in deferred tax asset
(1)
(183)
(2)
(3,507)
Provision for doubtful accounts receivable
666
390
647
877
Other
(96)
240
55
215
Changes in assets and liabilities: Accounts receivable
1,031
(3,712)
(4,232)
(5,544)
Inventories
(7,153)
(1,184)
(6,028)
(2,540)
Other current assets and prepaid expenses
(809)
(228)
(1,423)
(797)
Other long-term assets
(856)
(723)
(2,608)
(2,301)
Accounts payable
2,699
2,578
2,861
6,319
Accrued liabilities
1,121
148
4,900
(4,177)
Extended warranty liabilities
(167)
-
(927)
-
Other long-term liabilities
-
35
(140)
105
Deferred revenue
(386)
(488)
907
58
Income tax liability
-
(34)
(301)
(27)
Net cash used in operating activities
(2,275)
(1,616)
(6,194)
(8,119)
Cash flows from investing activities: Acquisition of
property, equipment and software
(208)
(633)
(524)
(1,214)
Disposal of property and equipment
25
3
45
41
Proceeds from sales of marketable investments
-
-
-
13,044
Proceeds from maturities of marketable investments
1,850
5,550
11,450
8,050
Purchase of marketable investments
(4,284)
-
(8,304)
(4,390)
Net cash provided by (used in) investing activities
(2,617)
4,920
2,667
15,531
Cash flows from financing activities: Proceeds from
exercise of stock options and employee stock purchase plan
437
565
1,600
3,603
Taxes paid related to net share settlement of equity awards
(180)
(307)
(750)
(2,971)
Payments on finance lease obligations
(154)
(128)
(496)
(362)
Net cash provided by financing activities
103
130
354
270
Net increase (decrease) in cash and cash equivalents
(4,789)
3,434
(3,173)
7,682
Cash and cash equivalents at beginning of period
27,668
18,432
26,052
14,184
Cash and cash equivalents at end of period
$
22,879
$
21,866
$
22,879
$
21,866
CUTERA, INC. RECONCILIATION OF GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS TO NON-GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except
per share data) (unaudited) Three
Months Ended September 30, 2019 Three Months Ended September
30, 2018 GAAP DepreciationandAmortization
Stock-BasedCompensation CRM and ERPImplementation
Taxes andOtherAdjustments Non-GAAP GAAP
DepreciationandAmortization Stock-BasedCompensation
Taxes andOtherAdjustments Non-GAAP Net revenue
$
46,117
-
-
-
-
$
46,117
$
40,573
-
-
-
$
40,573
Cost of revenue
19,884
(134
)
(430
)
-
-
19,320
18,688
(65
)
(196
)
-
18,427
Gross profit
26,233
134
430
-
-
26,797
21,885
65
196
-
22,146
Gross margin %
57
%
58
%
54
%
55
%
Operating expenses: Sales and marketing
17,691
(936
)
(1,365
)
(90
)
-
15,300
14,479
(642
)
(541
)
-
13,296
Research and development
3,643
(27
)
(443
)
-
-
3,173
3,244
(19
)
(163
)
-
3,062
General and administrative
7,308
(29
)
(940
)
(430
)
-
5,909
5,160
(61
)
(731
)
-
4,368
Total operating expenses
28,642
(992
)
(2,748
)
(520
)
-
24,382
22,883
(722
)
(1,435
)
-
20,726
Income (loss) from operations
(2,409
)
1,126
3,178
520
-
2,415
(998
)
787
1,631
-
1,420
Interest and other expense, net
(146
)
-
-
-
-
(146
)
(49
)
-
-
-
(49
)
Income (loss) before income taxes
(2,555
)
1,126
3,178
520
-
2,269
(1,047
)
787
1,631
-
1,371
Provision (benefit) for income taxes
73
-
-
-
6
79
(174
)
-
-
(39
)
(213
)
Net income (loss)
$
(2,628
)
1,126
3,178
520
(6
)
$
2,190
$
(873
)
787
1,631
39
$
1,584
Net income (loss) per share: Basic
$
(0.19
)
$
0.15
$
(0.06
)
$
0.11
Diluted
$
(0.19
)
$
0.15
$
(0.06
)
$
0.11
Weighted-average number of shares used in per share
calculations: Basic
14,182
14,182
13,851
13,851
Diluted
14,182
14,751
13,851
14,258
Operating expenses as a % of net
revenue GAAP Non-GAAP GAAP Non-GAAP
Sales and marketing
38.4
%
33.2
%
35.7
%
32.8
%
Research and development
7.9
%
6.9
%
8.0
%
7.5
%
General and administrative
15.8
%
12.8
%
12.7
%
10.8
%
62.1
%
52.9
%
56.4
%
51.1
%
CUTERA, INC. RECONCILIATION OF GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS TO NON-GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except
per share data) (unaudited) Nine Months
Ended September 30, 2019 Nine Months Ended September 30,
2018 GAAP DepreciationandAmortization
Stock-BasedCompensation CRM and ERPImplementation
Taxes andOtherAdjustments Non-GAAP GAAP
DepreciationandAmortization Stock-BasedCompensation
Taxes andOtherAdjustments Non-GAAP Net revenue
$
129,917
-
-
-
-
$
129,917
$
117,251
-
-
-
$
117,251
Cost of revenue
60,544
(385
)
(1,103
)
-
-
59,056
55,655
(226
)
(576
)
-
54,853
Gross profit
69,373
385
1,103
-
-
70,861
61,596
226
576
-
62,398
Gross margin %
53
%
55
%
53
%
53
%
Operating expenses: Sales and marketing
50,786
(2,718
)
(3,080
)
(201
)
-
44,787
43,102
(1,765
)
(1,744
)
-
39,593
Research and development
10,622
(74
)
(1,076
)
-
-
9,472
10,895
(51
)
(617
)
-
10,227
General and administrative
18,100
(176
)
(1,745
)
(1,129
)
(614
)
(a)
14,435
15,501
(111
)
(2,587
)
-
12,803
Total operating expenses
79,508
(2,968
)
(5,901
)
(1,331
)
(614
)
68,694
69,498
(1,927
)
(4,948
)
-
62,623
Income (loss) from operations
(10,135
)
3,353
7,004
1,331
614
2,167
(7,902
)
2,153
5,524
-
(225
)
Interest and other expense, net
(180
)
-
-
-
-
(180
)
(80
)
-
-
-
(80
)
Income (loss) before income taxes
(10,315
)
3,353
7,004
1,331
614
1,987
(7,982
)
2,153
5,524
-
(305
)
Provision (benefit) for income taxes
(55
)
-
-
-
288
233
(3,505
)
-
-
130
(3,375
)
Net income (loss)
$
(10,260
)
3,353
7,004
1,331
326
$
1,754
$
(4,477
)
2,153
5,524
(130
)
$
3,070
Net income (loss) per share: Basic
$
(0.73
)
$
0.12
$
(0.33
)
$
0.22
Diluted
$
(0.73
)
$
0.12
$
(0.33
)
$
0.21
Weighted-average number of shares used in per share
calculations: Basic
14,095
14,095
13,717
13,717
Diluted
14,095
14,417
13,717
14,285
a) Other adjustment of $614
related to Executive separation costs.
Operating expenses as a % of net revenue
GAAP Non-GAAP GAAP Non-GAAP Sales and
marketing
39.1
%
34.5
%
36.8
%
33.8
%
Research and development
8.2
%
7.3
%
9.3
%
8.7
%
General and administrative
13.9
%
11.1
%
13.2
%
10.9
%
61.2
%
52.9
%
59.3
%
53.4
%
CUTERA, INC. RECONCILIATION OF LOSS TO ADJUSTED
EBITDA (in thousands) (unaudited)
Three MonthsEnded Nine MonthsEnded September 30, 2019 Net
loss
$
(2,628
)
$
(10,260
)
Adjustments: Stock-based compensation
3,178
7,004
Depreciation and amortization
1,126
3,353
CRM and ERP implementation costs
520
1,331
Other adjustments
-
614
(a) Interest and other expense, net
146
180
Provision (benefit) for income taxes
73
(55
)
Total adjustments
$
5,043
$
12,427
Adjusted EBITDA
$
2,415
$
2,167
a) Other adjustment of $614 related to Executive separation
costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107005896/en/
Cutera, Inc. Matthew Scalo Vice
President, Investor Relations & Corporate Development
415-657-5500 mscalo@cutera.com
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