Strong fourth quarter results conclude year
of balanced growth and expanding margins
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 fourth quarter and full year ended December 31, 2019.
Fourth Quarter 2019 Financial and Operational
Highlights
- Revenue was $51.8 million, an increase of 14% over the
prior-year period, driven by:
- truSculpt portfolio revenue growth of 52%
- Recurring revenue growth of 28%, and
- International revenue growth of 19%.
- Gross Margin was 56%, compared to 41% in the prior-year period,
driven by commercial discipline, favorable product mix and period
cost improvements.
- Net loss was $2.1 million, or $0.15 per fully diluted share, as
compared to a net loss of $26.3 million, or $1.89 per fully diluted
share, in the prior-year period.
Full-Year 2019 Financial and Operational Highlights
- Revenue was $181.7 million, an increase of 12% over the
prior-year period, driven by:
- truSculpt portfolio revenue growth of 44%
- Recurring revenue growth of 37%, and
- International revenue growth of 24%.
- Gross Margin was 54%, compared to 49% in the prior-year period,
driven by commercial pricing discipline, favorable product mix and
other cost of sales expense reductions.
- Net loss was $12.3 million, or $0.88 per fully diluted share,
as compared to a net loss of $30.8 million, or $2.23 per fully
diluted share, in the prior-year period.
“Our strong fourth quarter results reflect the entire
organization’s commitment to the execution of our commercial and
operational initiatives,” commented Dave Mowry, Chief Executive
Officer. “The Cutera team delivered solid results across multiple
commercial segments, with particular strength in our Body Sculpting
franchise, the International business, and recurring revenue, which
saw continued expansion during the fourth quarter. Additionally,
the team has established a strong foundation for sustained gross
margin expansion and improved profitability moving forward. As we
move into 2020, we look to build upon the solid momentum created in
2019 with focus, energy, and a commitment to excellence.”
2020 Financial Outlook
- Full-year 2020 revenue is expected in the range of $194 million
to $200 million, an increase of 7% to 10% over 2019.
- Full-year 2020 non-GAAP* gross margin is expected to improve
over the-full year 2019 non-GAAP gross margin.
- Full-year 2020 adjusted EBITDA* is expected in the range of $6
million to $7 million.
Conference Call
The Company’s management will host a conference call to discuss
these results and related matters today at 1:30 p.m. PT (4:30 p.m.
ET). Participating on the call will be Dave Mowry, Chief Executive
Officer, Jason Richey, President, and Fuad Ahmad, Interim Chief
Financial Officer.
To participate in the conference call, dial 1-877-705-6003
(domestic) or +1 201-493-6725 (international) and refer to the
Conference Code: 13699205.
The call will also be webcast and can be accessed from the
Investor Relations section of Cutera’s website at
http://www.cutera.com/. The webcast replay of the call will be
available at the same site approximately one hour after the end of
the call.
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 the Company believes that doing so is
consistent with the goal of providing useful information to
investors and management. The Company has provided a reconciliation
of each non-GAAP financial measure used in this earnings release to
the most directly comparable GAAP financial measure. The Company
has 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. The
Company defines 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. The
Company has excluded the effect of stock-based compensation
expenses in calculating its non-GAAP operating expenses and net
income measures. Although stock-based compensation is a key
incentive offered to its employees, the Company continues to
evaluate its business performance excluding stock-based
compensation expenses. The Company records stock-based compensation
expense related to grants of options, employee stock purchase plan,
and 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. The Company
believes that excluding stock-based compensation better allows for
comparisons to its peer companies;
Depreciation and amortization. The Company has excluded
depreciation and amortization expense in calculating its 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.
The Company believes that excluding all of the items above
allows users of its 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 and
other senior leadership searches, product launches and performance,
trends, prospects or future events and involve known and unknown
risks that are difficult to predict. As a result, the Company’s
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 the Company’s control,
that could cause its 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 the
Company updates one or more forward-looking statements, no
inference should be drawn that it will make additional updates with
respect to those or other forward-looking statements. Cutera's
financial performance for the fourth quarter and full year ended
December 31, 2019, as discussed in this release, is preliminary and
unaudited, and subject to adjustment.
CUTERA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
December 31,
December 31,
2019
2018(1)(2)
Assets Current assets: Cash and cash equivalents
$
26,316
$
26,052
Marketable investments
7,605
9,523
Accounts receivable, net
21,556
19,637
Inventories
33,921
28,014
Other current assets and prepaid expenses
5,648
3,972
Total current assets
95,046
87,198
Property and equipment, net
2,817
2,672
Deferred tax asset
423
457
Goodwill
1,339
1,339
Operating lease right-of-use assets
7,702
-
Other long-term assets
6,411
5,971
Total assets
$
113,738
$
97,637
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable
$
12,685
$
11,279
Accrued liabilities
30,307
23,300
Operating leases liabilities
24
-
Extended warranty liabilities
1,999
3,159
Deferred revenue
10,831
9,882
Total current liabilities
55,846
47,620
Deferred revenue, net of current portion
3,391
2,684
Income tax liability
93
394
Operating lease liabilities, net of current portion
7,888
-
Other long-term liabilities
578
553
Total liabilities
67,796
51,251
Stockholders’ equity: Common stock
14
14
Additional paid-in capital
82,346
70,451
Accumulated deficit
(36,358)
(24,010)
Accumulated other comprehensive loss
(60)
(69)
Total stockholders' equity
45,942
46,386
Total liabilities and stockholders' equity
$
113,738
$
97,637
(1) As of January 1, 2019, the Company adopted the requirements of
ASC 842 Leases 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 ASU 2018-15 Intangible - Goodwill and Other -
Customer’s Accounting for Implementation Costs Incurred in a Cloud
Computing Arrangement That Is a Service Contract 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 Twelve Months Ended
December 31,
December 31,
December 31,
December 31,
2019
2018
2019
2018
Products
$
45,593
39,946
158,638
142,535
Service
6,202
5,523
23,074
20,185
Total net revenue
51,795
45,469
181,712
162,720
Products
18,415
19,967
64,693
66,843
Service
4,590
6,716
18,856
15,495
Total cost of revenue
23,005
26,683
83,549
82,338
Gross profit
28,790
18,786
98,163
80,382
Gross margin %
56%
41%
54%
49%
Operating expenses: Sales and marketing
20,323
15,318
71,109
58,420
Research and development
4,463
3,464
15,085
14,359
General and administrative
5,933
5,494
24,033
20,995
Total operating expenses
30,719
24,276
110,227
93,774
Loss from operations
(1,929
)
(5,490
)
(12,064
)
(13,392
)
Interest and other expense, net
(20
)
(44
)
(199
)
(123
)
Loss before income taxes
(1,949
)
(5,534
)
(12,263
)
(13,515
)
Income tax expense (benefit)
139
20,759
85
17,255
Net loss
(2,088
)
(26,293
)
(12,348
)
(30,770
)
Net loss per share: Basic
(0.15
)
(1.89
)
(0.88
)
(2.23
)
Diluted
(0.15
)
(1.89
)
(0.88
)
(2.23
)
Weighted-average number of shares used in per share
calculations: Basic
14,261
13,932
14,096
13,771
Diluted
14,261
13,932
14,096
13,771
CUTERA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (in
thousands, except percentage data) (unaudited)
Three Months Ended % Change Twelve Months
Ended % Change
December 31,
December 31,
2019 Vs
December 31,
December 31,
2019 Vs
2019
2018
2018
2019
2018
2018
Revenue By Geography: United States
$
31,271
$
28,265
+11%
$
106,243
$
101,862
+4%
International
20,524
17,204
+19%
75,469
60,858
+24%
Total Net Revenue
$
51,795
$
45,469
+14%
$
181,712
$
162,720
+12%
International as a percentage of total revenue
40%
38%
42%
37%
Revenue By Product Category: Systems - North America
$
28,526
$
26,519
+8%
$
96,718
$
93,977
+3%
- Rest of World
12,246
10,349
+18%
43,760
38,618
+13%
Total Systems
40,772
36,868
+11%
140,478
132,595
+6%
Consumables
2,539
1,281
+98%
9,648
4,162
+132%
Skincare
2,282
1,797
+27%
8,512
5,778
+47%
Total Products
45,593
39,946
+14%
158,638
142,535
+11%
Service
6,202
5,523
+12%
23,074
20,185
+14%
Total Net Revenue
$
51,795
$
45,469
+14%
$
181,712
$
162,720
+12%
Three Months Ended Twelve Months
Ended
December 31,
December 31,
December 31,
December 31,
2019
2018
2019
2018
Pre-tax Stock-Based Compensation Expense: Cost of revenue
$
469
$
167
$
1,572
$
743
Sales and marketing
1,430
360
4,510
2,105
Research and development
460
208
1,536
824
General and administrative
469
897
2,214
3484
$
2,828
$
1,632
$
9,832
$
7,156
CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (in thousands) (unaudited) Three
Months Ended Twelve Months Ended
December 31,
December 31,
December 31,
December 31,
2019
2018
2019
2018
Cash flows from operating activities: Net loss
$
(2,088)
$
(26,293)
$
(12,348)
$
(30,770)
Adjustments to reconcile net loss to net cash used in operating
activities: Stock-based compensation
2,828
1,632
9,832
7,156
Depreciation of tangible assets
364
360
1,548
1,209
Amortization of contract acquisition costs
746
530
2,915
1,834
Change in deferred tax asset
36
20,945
34
17,438
Provision for doubtful accounts receivable
(57)
380
590
1,257
Other
72
26
127
241
Changes in assets and liabilities: Accounts receivable
1,723
5,427
(2,509)
(117)
Inventories
121
3,308
(5,907)
768
Other current assets and prepaid expenses
(339)
(273)
(1,762)
(1,070)
Other long-term assets
(747)
(453)
(3,355)
(2,754)
Accounts payable
(1,455)
(2,042)
1,406
4,277
Accrued liabilities
2,257
396
7,157
(3,781)
Extended warranty liabilities
(233)
3,159
(1,160)
3,159
Other long-term liabilities
-
35
(140)
140
Deferred revenue
749
1,247
1,656
1,305
Income tax liability
-
42
(301)
15
Net cash provided by (used in) operating activities
3,977
8,426
(2,217)
307
Cash flows from investing activities: Acquisition of
property, equipment and software
(467)
(274)
(991)
(1,488)
Disposal of property and equipment
-
-
45
41
Proceeds from sales of marketable investments
-
-
-
13,044
Proceeds from maturities of marketable investments
3,250
2,000
14,700
10,050
Purchase of marketable investments
(4,383)
(6,484)
(12,687)
(10,874)
Net cash provided by (used in) investing activities
(1,600)
(4,758)
1,067
10,773
Cash flows from financing activities: Proceeds from
exercise of stock options and employee stock purchase plan
1,294
796
2,894
4,399
Taxes paid related to net share settlement of equity awards
(81)
(157)
(831)
(3,128)
Payments on finance lease obligations
(153)
(121)
(649)
(483)
Net cash provided by financing activities
1,060
518
1,414
788
Net increase in cash and cash equivalents
3,437
4,186
264
11,868
Cash and cash equivalents at beginning of period
22,879
21,866
26,052
14,184
Cash and cash equivalents at end of period
$
26,316
$
26,052
$
26,316
$
26,052
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, 2019 Three Months Ended December
31, 2018
GAAP
Depreciation and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Taxes and Other
Adjustments
Non-GAAP
GAAP
Depreciation and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Taxes and Other
Adjustments
Non-GAAP
Net revenue
$
51,795
-
-
-
-
$
51,795
$
45,469
-
-
-
-
$
45,469
Cost of revenue
23,005
(136)
(469)
-
-
22,400
26,683
(94)
(167)
-
(4,956)
21,466
Gross profit
28,790
136
469
-
-
29,395
18,786
94
167
-
4,956
24,003
Gross margin %
56%
57%
41%
53%
Operating expenses: Sales and marketing
20,323
(910)
(1,430)
(124)
-
17,859
15,318
(692)
(360)
-
-
14,266
Research and development
4,463
(35)
(460)
-
-
3,968
3,464
(23)
(208)
-
-
3,233
General and administrative
5,933
(29)
(469)
41
-
5,476
5,494
(81)
(897)
(216)
-
4,300
Total operating expenses
30,719
(974)
(2,359)
(83)
-
27,303
24,276
(796)
(1,465)
(216)
-
21,799
Income (loss) from operations
(1,929)
1,110
2,828
83
-
2,092
(5,490)
890
1,632
216
4,956
2,204
Interest and other expense, net
(20)
-
-
-
-
(20)
(44)
-
-
-
-
(44)
Income (loss) before income taxes
(1,949)
1,110
2,828
83
-
2,072
(5,534)
890
1,632
216
4,956
2,160
Provision (benefit) for income taxes
139
-
-
-
(201)
(62)
20,759
-
-
-
(17,037)
3,722
Net income (loss)
$
(2,088)
1,110
2,828
83
201
$
2,134
$
(26,293)
890
1,632
216
21,993
$
(1,562)
Net income (loss) per share: Basic
$
(0.15)
$
0.15
$
(1.89)
$
(0.11)
Diluted
$
(0.15)
$
0.14
$
(1.89)
$
(0.11)
Weighted-average number of shares used in per share
calculations: Basic
14,261
14,261
13,932
13,932
Diluted
14,261
14,904
13,932
13,932
Operating expenses as a % of net
revenue GAAP Non-GAAP GAAP Non-GAAP
Sales and marketing
39.2%
34.5%
33.7%
31.4%
Research and development
8.6%
7.7%
7.6%
7.1%
General and administrative
11.5%
10.6%
12.1%
9.5%
59.3%
52.7%
53.4%
47.9%
(in thousands, except per share data) (unaudited)
Twelve Months Ended December 31, 2019
Twelve Months Ended December 31, 2018
GAAP
Depreciation and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Taxes and Other
Adjustments
Non-GAAP
GAAP
Depreciation and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Taxes and Other
Adjustments
Non-GAAP
Net revenue
$
181,712
-
-
-
-
$
181,712
$
162,720
-
-
-
-
$
162,720
Cost of revenue
83,549
(522)
(1,572)
-
-
81,455
82,338
(319)
(743)
-
(4,956)
76,320
Gross profit
98,163
522
1,572
-
-
100,257
80,382
319
743
-
4,956
86,400
Gross margin %
54%
55%
49%
53%
Operating expenses: Sales and marketing
71,109
(3,627)
(4,510)
(325)
-
62,647
58,420
(2,458)
(2,104)
-
-
53,858
Research and development
15,085
(109)
(1,536)
-
-
13,440
14,359
(74)
(825)
-
-
13,460
General and administrative
24,033
(205)
(2,214)
(1,089)
(614)
(a)
19,911
20,995
(192)
(3,484)
(216)
-
17,103
Total operating expenses
110,227
(3,941)
(8,260)
(1,414)
(614)
95,998
93,774
(2,724)
(6,413)
(216)
-
84,421
Income (loss) from operations
(12,064)
4,463
9,832
1,414
614
4,259
(13,392)
3,043
7,156
216
4,956
1,979
Interest and other expense, net
(199)
-
-
-
-
(199)
(123)
-
-
-
-
(123)
Income (loss) before income taxes
(12,263)
4,463
9,832
1,414
614
4,060
(13,515)
3,043
7,156
216
4,956
1,856
Provision (benefit) for income taxes
85
-
-
-
87
172
17,255
-
-
-
(16,906)
349
Net income (loss)
$
(12,348)
4,463
9,832
1,414
527
$
3,888
$
(30,770)
3,043
7,156
216
21,862
$
1,507
Net income (loss) per share: Basic
$
(0.88)
$
0.28
$
(2.23)
$
0.11
Diluted
$
(0.88)
$
0.27
$
(2.23)
$
0.11
Weighted-average number of shares used in per share
calculations: Basic
14,096
14,096
13,771
13,771
Diluted
14,096
14,512
13,771
14,305
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%
35.9%
33.1%
Research and development
8.3%
7.4%
8.8%
8.3%
General and administrative
13.2%
11.0%
12.9%
10.5%
60.7%
52.8%
57.6%
51.9%
CUTERA, INC. RECONCILIATION OF LOSS TO ADJUSTED
EBITDA (in thousands) (unaudited)
Three MonthsEnded TwelveMonths Ended December 31, 2019 Net
loss
$
(2,088)
$
(12,348)
Adjustments: Stock-based compensation
2,828
9,832
Depreciation and amortization
1,110
4,463
CRM and ERP implementation costs
83
1,414
Other adjustments
-
614
(a) Interest and other expense, net
20
199
Provision (benefit) for income taxes
139
85
Total adjustments
$
4,180
$
16,607
Adjusted EBITDA
$
2,092
$
4,259
a) Other adjustment of $614
related to Executive separation costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200226005932/en/
Cutera, Inc. Anne Werdan Director, Investor Relations
415-657-5500 awerdan@cutera.com
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