CUTR Cutera Inc

Cutera, Inc. (NASDAQ:CUTR) (“Cutera” or the “Company”), a leading provider of laser and energy-based aesthetic systems for practitioners worldwide, today reported financial results for the fourth quarter ended December 31, 2015. 

Key highlights for the fourth quarter of 2015 were as follows:

• Revenue increased 18% to $30.0 million and was driven by both product portfolio strength as well as global sales productivity improvements;
  • Product revenue grew 24%, led by a 30% increase in North America and 14% in Rest of World (“ROW”);
  • For 2015, Product revenue grew by 49% in North America, compared to 2014;  
• Gross margin improved to 60% —the highest quarterly gross margin since 2009;
• GAAP Net income was $2.1 million, or $0.15 per diluted share;
• Non-GAAP* Net income was $3.4 million, or $0.25 per diluted share, after adjusting for $1.4 million of non-cash expenses related to stock-based compensation, depreciation and amortization of intangibles;   
• Cash and investments: generated $3.9 million of cash from operations during the quarter and used $3.5 million in the stock repurchase program bringing the balance as of December 31, 2015 to $48.4 million, or $3.73 per outstanding share; 
• Stock repurchase program: Board approved an incremental $10 million. In 2015, the Company repurchased $40 million of stock.

Kevin Connors, President and Chief Executive Officer of Cutera, stated, “We are pleased to conclude 2015 with our sixth consecutive quarter of double-digit revenue growth, and essentially on par with our highest revenue quarter in our history. Our return to profitability demonstrated our ability to expand revenue, while controlling operating expense levels, enabling us to realize operating leverage in our business model. Our steady improvement in gross margin during 2015 is an indicator of our ability to improve operating leverage through a balance of strong revenue growth and cost reduction initiatives by our Engineering and Operations teams.”

Product revenue grew by $3.5 million, or 30%, in North America and $1.1 million, or 14%, in ROW despite continued currency headwinds, compared to the fourth quarter of 2014. The Company estimates that its international revenue was negatively impacted in the fourth quarter of 2015 by approximately $1.0-$1.5 million due to the appreciation of the US dollar, compared to the fourth quarter of 2014. From a product perspective, the Company experienced strong growth from several of its legacy products as well as the recently launched products. In particular, enLightenTM, the flagship picosecond and nanosecond tattoo removal and benign pigmented lesion treatment laser, continued to demonstrate global appeal and has become a major revenue contributor for the Company.

Gross margin improved to 60%, which was one of management’s key goals for 2015. The improved gross margin was a critical driver in the Company returning to profitability and generating cash from operations. In addition, a higher ratio of direct versus distributed business, contributed to improved fourth quarter 2015 gross margin performance.

“In 2015, we made very deliberate choices to drive revenue growth organically through investing internally in people and projects. The present strength and breadth of our product offering, as well as our commercial results, validate the path we chose. In 2016, we plan to make a new product announcement at the March American Academy of Dermatology meeting in Washington DC, expand the sales headcount to facilitate continued revenue growth, improve the productivity of our sales team further and continue to drive our product costs down to improve gross margins.

“We look forward to a strong 2016 as we continue to expand market share and improve financial results. I would like to take this opportunity to thank all of our global customers for their belief and partnership with Cutera, as well as our worldwide employees for their dedication and commitment to building our Company,” concluded Mr. Connors.

Non-GAAP Income Statement Measures (Unaudited)

*To supplement our condensed consolidated financial statements presented in accordance with Generally Accepted Accounting Principles, or GAAP, Cutera has provided certain Non-GAAP income statement measures for net income and net income per diluted share, which exclude non-cash expenses for stock-based compensation, depreciation and amortization of intangibles. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management believes that the adjusted financial results are more reflective of the cash-basis results of operations as well as comparable to similar measures used by other companies.

Conference Call

The conference call to discuss these results is scheduled to begin at 2:00 p.m. PST (5:00 p.m. EST) on February 8, 2016. Participating in the call will be Kevin Connors, President and Chief Executive Officer, and Ron Santilli, Executive Vice President and Chief Financial Officer. The call will be broadcast live over the internet hosted at the Investor Relations section of Cutera's website, and will be archived online within one hour of its completion through 8:59 p.m. PST (11:59 p.m. EST) on February 22, 2016.  In addition, you may call 1-877-705-6003 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 been developing 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.

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning Cutera's plans to introduce new products, expand its salesforce, ability to increase revenue, reduce expenses, improve financial results, make productivity improvements, grow the Company’s market share, realize benefits from additional investment, improve or maintain profitability, penetrate the market, generate cash from operations, plans for stock repurchases and statements regarding long-term prospects and opportunities in the laser and other energy-based equipment aesthetic market, are forward-looking statements within the meaning of the Safe Harbor. 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. Potential risks and uncertainties that could affect Cutera's business and cause its financial results to differ materially from those contained in the forward-looking statements include those related to the Company’s efforts to improve sales productivity, hire and retain qualified sales representatives, improve revenue growth, gross margins and profitability through leveraging operating expenses; the Company’s ability to successfully develop and launch new products and applications and market them to both its installed base and new customers; unforeseen events and circumstances relating to the Company’s operations; government regulatory actions; and those other factors described in the section entitled, “Risk Factors” in its most recent Form 10-Q as filed with the Securities and Exchange Commission on November 2nd, 2015. Undue reliance should not be placed on forward-looking statements, which speak only 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 after the date they were made, or to reflect the occurrence of unanticipated events. Cutera's financial performance for the fourth quarter ended December 31, 2015, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

	CUTERA, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	(in thousands, except per share data)
	(unaudited)
					Three Months Ended
					December 31,					December 31,
					2015					2014
	Net revenue				$		30,042			$		25,499
	Cost of revenue						12,145					11,679
			Gross profit				17,897					13,820
			Gross margin %				60	%				54	%
	Operating expenses:
		Sales and marketing					9,899					9,356
		Research and development					2,812					2,649
		General and administrative					3,189					3,407
			Total operating expenses				15,900					15,412
	Income (Loss) from operations						1,997					(1,592	)
	Interest and other income, net						105					8
	Income (Loss) before income taxes						2,102					(1,584	)
	Provision for income taxes						52					41
	Net income (loss)				$		2,050			$		(1,625	)
	Net income (loss) per share:
		Basic			$		0.16			$		(0.11	)
		Diluted			$		0.15			$		(0.11	)
	Weighted-average number of shares used in per share calculations:
		Basic					12,978					14,425
		Diluted					13,591					14,425

 

	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 December 31, 2015
		GAAP					Adjustments						Non-GAAP As Adjusted*
	Net revenue	$		30,042			$	—					$		30,042
	Cost of revenue			12,145					(272	)	(a)				11,873
	Gross profit			17,897					272						18,169
	Gross margin %			60	%										60	%
	Operating expenses:
	Sales and marketing			9,899					(438	)	(b)				9,461
	Research and development			2,812					(160	)	(c)				2,652
	General and administrative			3,189					(501	)	(d)				2,688
	Total operating expenses			15,900					(1,099	)					14,801
	Income from operations			1,997					1,371						3,368
	Interest and other income, net			105				—							105
	Income before income taxes			2,102					1,371						3,473
	Provision for income taxes			52				—			(e)				52
	Net income	$		2,050			$		1,371				$		3,421
	Net income per share:
	Basic	$		0.16			$		0.10				$		0.26
	Diluted	$		0.15			$		0.10				$		0.25
	Weighted-average number of shares used in per share calculations:
	Basic			12,978					12,978						12,978
	Diluted			13,591					13,591						13,591
	a) Adjustment of $272,000 included a non-cash charge of $154,000 related to depreciation and amortization expense and $118,000 of stock based compensation expense.
	b) Adjustment of $438,000 included a non-cash charge of $111,000 related to depreciation expense and $327,000 of stock based compensation expense.
	c) Adjustment of $160,000 included a non-cash charge of $8,000 related to depreciation expense and $152,000 of stock based compensation expense.
	d) Adjustment of $501,000 included a non-cash charge of $1,000 related to depreciation expense and $500,000 of stock based compensation expense.
	e) There was no material impact to the Company's income tax provision resulting from the aforementioned adjustments, given the Company carries a full valuation allowance against its U.S. federal and state net deferred tax assets.
	* Fiscal fourth quarter 2015 Non-GAAP pro-forma results exclude the effect of the aforementioned adjustments.

 

	CUTERA, INC.
	CONDENSED CONSOLIDATED BALANCE SHEETS
	(in thousands)
	(unaudited)
							December 31,			September 30,			December 31,
							2015			2015			2014
	Assets
	Current assets:
		Cash and cash equivalents				$	10,868		$	10,055		$	9,803
		Marketable investments					37,539			37,689			71,343
			Cash, cash equivalents and marketable investments				48,407			47,744			81,146
		Accounts receivable, net					11,669			9,013			11,137
		Inventories					12,078			13,479			10,988
		Deferred tax asset					-			69			26
		Other current assets and prepaid expenses					1,675			1,977			1,591
			Total current assets				73,829			72,282			104,888
	Property and equipment, net						1,473			1,386			1,461
	Deferred tax asset, net of current portion						350			291			269
	Intangibles, net						143			227			595
	Goodwill						1,339			1,339			1,339
	Other long-term assets						384			392			361
				Total assets		$	77,518		$	75,917		$	108,913
	Liabilities and Stockholders' Equity
	Current liabilities:
		Accounts payable				$	1,959		$	2,659		$	3,083
		Accrued liabilities					13,834			12,234			11,007
		Deferred revenue					8,638			8,470			8,898
			Total current liabilities				24,431			23,363			22,988
	Deferred revenue, net of current portion						2,287			2,495			4,346
	Income tax liability						182			187			145
	Other long-term liabilities						584			538			926
			Total liabilities				27,484			26,583			28,405
	Stockholders' equity						50,034			49,334			80,508
				Total liabilities and stockholders' equity		$	77,518		$	75,917		$	108,913

 

	CUTERA, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	(in thousands)
	(unaudited)
				Three Months Ended
				December 31,					December 31,
				2015					2014
	Cash flows from operating activities:
	Net income (loss)			$		2,050			$		(1,625	)
	Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Stock-based compensation				1,097					1,001
		Depreciation and amortization				274					347
		Impairment of intangible assets			—						650
		Other				14					(16	)
	Changes in assets and liabilities:
		Accounts receivable				(2,660	)				(2,305	)
		Inventories				1,401					118
		Accounts payable				(700	)				365
		Accrued liabilities				2,143					2,035
		Deferred revenue				(40	)				(97	)
		Other				310					(5	)
			Net cash provided by operating activities			3,889					468
	Cash flows from investing activities:
	Acquisition of property, equipment and software					(43	)				(344	)
	Net change in marketable investments					(16	)				(2,099	)
			Net cash used in investing activities			(59	)				(2,443	)
	Cash flows from financing activities:
	Repurchases of common stock					(3,469	)			—
	Proceeds from exercise of stock options and employee stock purchase plan					507					436
	Payments on capital lease obligations					(55	)				(35	)
			Net cash provided by (used in) financing activities			(3,017	)				401
	Net increase (decrease) in cash and cash equivalents					813					(1,574	)
	Cash and cash equivalents at beginning of period					10,055					11,377
	Cash and cash equivalents at end of period			$		10,868			$		9,803

 

	CUTERA, INC.
	CONSOLIDATED FINANCIAL HIGHLIGHTS
	(in thousands, except percentage data)
	(unaudited)
					Three Months Ended											% Change
					Q4						Q4					Q4 '15 Vs
					2015						2014					Q4 '14
	Revenue By Geography:
			United States		$		16,882				$		13,761				+23	%
			International				13,160						11,738				+12	%
					$		30,042				$		25,499				+18	%
			International as a percentage of total revenue				44	%					46	%
	Revenue By Product Category:
		Products
			-North America		$		15,048				$		11,538				+30	%
			-Rest of the World				8,926						7,796				+14	%
			Total Products				23,974						19,334				+24	%
		Service					4,562						4,532				+1	%
		Hand Piece Refills					706						844				-16	%
		Skincare					800						789				+1	%
					$		30,042				$		25,499				+18	%
					Three Months Ended
					Q4						Q4
					2015						2014
	Pre-tax Stock-Based Compensation Expense:
			Cost of revenue		$		118				$		144
			Sales and marketing				327						227
			Research and development				152						175
			General and administrative				500						455
					$		1,097				$		1,001

Cutera, Inc.
Ron Santilli
Chief Financial Officer
415-657-5500

Investor Relations 
John Mills
ICR, Inc.       
646-277-1254
john.mills@icrinc.com