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, 2020.
Third Quarter 2020 Financial and Operational
Highlights
- Revenue was $39.1 million, a 15% decrease from the prior-year
period, as COVID-19 disruptions led to a year-over-year decline in
capital equipment deals as well as overall energy-based aesthetic
procedures during the quarter, compared to a 45% year-on-year
decline in 2Q20.
- Capital Equipment revenue of $24.1 million decline of 31% over
prior-year period, compared to a 59% decline in 2Q20.
- Recurring revenue grew $3.9 million or 35% over prior-year
period, compared to 6% in 2Q20, driven primarily by Skin Care
revenue growth of 140% over third quarter 2019.
- Gross Margin was 56%, compared to 57% in the prior-year period,
driven by lower production levels and substantially lower overhead
absorption during the quarter, offset by reductions in
manufacturing overhead, increased manufacturing efficiencies and
continued pricing discipline.
- Operating Expenses were $23.0 million, down $5.7 million or 20%
from prior year period, delivering improved leverage in the
period.
- Net loss was $2.3 million, or $0.13 per fully diluted share, as
compared to a net loss of $2.6 million, or $0.19 per fully diluted
share, in the prior-year period.
“I am pleased with our third quarter financial performance, with
faster-than-expected sequential improvement in capital equipment
sales and exceptionally strong recurring revenue growth of 35%
year-over-year,” commented Dave Mowry, Chief Executive Officer of
Cutera, Inc. “Moreover, I am very proud of our team’s continued
expense discipline, which led to increased profitability in the
period and allowed us to achieve positive cash flow on a non-GAAP
basis a quarter earlier than expected. While we continue to
anticipate COVID-related headwinds to capital equipment sales in
the fourth quarter, our year-to-date operational focus and outlook
for sequential growth in both equipment sales and procedure volumes
will provide a pathway to stronger results in the near-term and a
solid foundation going into fiscal year 2021 and beyond.”
Conference Call
The Company’s management will host a conference call to the
discuss these results and related matters today at 1:30 p.m. PT
(4:30 p.m. ET) that same day. Participating on the call will be
Dave Mowry, Chief Executive Officer, Rohan Seth, Chief Financial
Officer, and, Jason Richey, President.
To participate in the conference call, dial 1-877-705-6003
(domestic) or + 1-201-493-6725 (international) and refer to the
Conference Code: 13711852.
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 and other non-recurring separation costs,
customer relationship management (“CRM”) and enterprise resource
planning (“ERP”) system costs, non-recurring legal and litigation
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
and other non-recurring separation costs, customer relationship
management (“CRM”) and enterprise resource planning (“ERP”) system
costs, and non-recurring legal and litigation 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 and other non-recurring separation costs. We
have excluded costs associated with the resignation of our former
Executive Officers in calculating our non-GAAP operating expenses
and net income measures. We exclude these and other non-recurring
costs related to Reduction–in-Force (“RIF”) 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;
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; and
Non-recurring legal and litigation costs. We have
excluded costs incurred related to third party litigation and
disputes, that are of a non-recurring nature.
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 third quarter ended September 30,
2020, 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,
2020
2020
2019
Assets Current assets: Cash and cash equivalents $
29,394
$
33,659
$
26,316
Marketable investments
13,046
12,894
7,605
Accounts receivable, net
17,597
13,826
21,556
Inventories
29,333
31,240
33,921
Other current assets and prepaid expenses
6,892
5,313
5,648
Total current assets
96,262
96,932
95,046
Property and equipment, net
2,391
2,417
2,817
Deferred tax asset
500
419
423
Goodwill
1,339
1,339
1,339
Operating lease right-of-use assets
17,645
7,577
7,702
Other long-term assets
5,290
4,733
6,411
Total assets $
123,427
$
113,417
$
113,738
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable $
6,799
$
11,681
$
12,685
Accrued liabilities
25,644
20,423
30,307
Operating leases liabilities
1,608
1,526
2,800
Extended warranty liabilities
1,497
1,660
1,999
Deferred revenue
9,580
9,345
10,831
Total current liabilities
45,128
44,635
58,622
Deferred revenue, net of current portion
2,244
2,434
3,391
Income tax liability
93
93
93
PPP Loan payable
7,167
7,149
-
Operating lease liabilities, net of current portion
16,497
6,262
5,112
Other long-term liabilities
292
345
578
Total liabilities
71,421
60,918
67,796
Stockholders’ equity: Common stock
18
18
14
Additional paid-in capital
114,410
112,644
82,346
Accumulated deficit
(62,423)
(60,166)
(36,358)
Accumulated other comprehensive loss
1
3
(60)
Total stockholders' equity
52,006
52,499
45,942
Total liabilities and stockholders' equity $
123,427
$
113,417
$
113,738
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,
2020
2019
2020
2019
Products $
33,254
40,315
81,390
$
113,045
Service
5,878
5,802
16,350
16,872
Total net revenue
39,132
46,117
97,740
129,917
Products
14,018
16,343
40,326
50,278
Service
3,369
3,541
9,708
10,266
Total cost of revenue
17,387
19,884
50,034
60,544
Gross profit
21,745
26,233
47,706
69,373
Gross margin %
56%
57%
49%
53%
Operating expenses: Sales and marketing
12,286
17,691
38,109
50,786
Research and development
3,432
3,643
10,294
10,622
General and administrative
7,239
7,308
23,575
18,100
Total operating expenses
22,957
28,642
71,978
79,508
Loss from operations
(1,211)
(2,409)
(24,272)
(10,135)
Interest and other expense, net
(382)
(146)
(586)
(180)
Loss before income taxes
(1,593)
(2,555)
(24,858)
(10,315)
Income tax expense (benefit)
664
73
1,207
(55)
Net loss $
(2,257)
$
(2,628)
$
(26,065)
$
(10,260)
Net loss per share: Basic $
(0.13)
$
(0.19)
$
(1.59)
$
(0.73)
Diluted $
(0.13)
$
(0.19)
$
(1.59)
$
(0.73)
Weighted-average number of shares used in per share
calculations: Basic
17,603
14,182
16,368
14,095
Diluted
17,603
14,182
16,368
14,095
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, 2020
Vs
2020
2019
2018
2020
2019
2019
Revenue By Geography: United States $
15,442
$
26,425
-42%
$
40,142
$
74,972
-46%
International
23,690
19,692
+20%
57,598
54,945
+5% Total Net Revenue $
39,132
$
46,117
-15%
$
97,740
$
129,917
-25%
International as a percentage of total revenue
61%
43%
59%
42%
Revenue By Product Category: Systems - North America
$
13,700
$
24,121
-43%
$
32,296
$
68,192
-53%
- Rest of World
10,421
10,837
-4%
28,325
31,514
-10%
Total Systems
24,121
34,958
-31%
60,621
99,706
-39%
Consumables
2,305
2,510
-8%
6,263
7,109
-12%
Skincare
6,828
2,847
+140%
14,506
6,230
+133% Total Products
33,254
40,315
-18%
81,390
113,045
-28%
Service
5,878
5,802
+1%
16,350
16,872
-3%
Total Net Revenue $
39,132
$
46,117
-15%
$
97,740
$
129,917
-25%
Three Months Ended Nine Months
Ended September 30, September 30, September
30, September 30,
2020
2019
2020
2019
Pre-tax Stock-Based Compensation Expense: Cost of revenue $
326
$
430
$
1,359
$
1103
Sales and marketing
648
1,365
2,617
3080
Research and development
254
443
1,344
1076
General and administrative
754
940
2,736
1745
$
1,982
$
3,178
$
8,057
$
7,004
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,
2020
2019
2020
2019
Cash flows from operating activities: Net loss $
(2,257)
$
(2,628)
$
(26,065)
$
(10,260)
Adjustments to reconcile net loss to net cash used in operating
activities: Stock-based compensation
1,982
3,178
8,057
7,004
Depreciation of tangible assets
341
369
1,056
1,184
Amortization of contract acquisition costs
625
757
2,017
2,169
Impairment of intangible assets
-
-
805
-
Change in deferred tax asset
(81)
(1)
(77)
(2)
Provision for doubtful accounts receivable
54
666
1,750
647
Change in right-of-use asset/liability
249
250
-
Other
129
(96)
327
55
Changes in assets and liabilities: Accounts receivable
(5,064)
1,031
2,209
(4,232)
Inventories
1,907
(7,153)
4,588
(6,028)
Other current assets and prepaid expenses
(350)
(809)
(1,273)
(1,423)
Other long-term assets
(1,182)
(856)
(1,701)
(2,608)
Accounts payable
(4,882)
2,699
(5,886)
2,861
Accrued liabilities
5,196
1,121
(4,559)
4,900
Extended warranty liabilities
(163)
(167)
(502)
(927)
Other long-term liabilities
-
-
-
(140)
Deferred revenue
45
(386)
(2,398)
907
Income tax liability
(0)
-
-
(301)
Net cash used in operating activities
(3,451)
(2,275)
(21,402)
(6,194)
Cash flows from investing activities: Acquisition of
property, equipment and software
(339)
(208)
(774)
(524)
Disposal of property and equipment
-
25
-
45
Proceeds from maturities of marketable investments
8,100
1,850
19,000
11,450
Purchase of marketable investments
(8,244)
(4,284)
(24,411)
(8,304)
Net cash provided by (used in) investing activities
(483)
(2,617)
(6,185)
2,667
Cash flows from financing activities: Proceeds from
exercise of stock options and employee stock purchase plan
8
437
856
1,600
Proceeds from long-term debt
18
-
7,167
-
Gross proceeds from equity offering
(1)
-
28,798
-
Offering costs on the equity offering
-
-
(2,303)
-
Taxes paid related to net share settlement of equity awards
(223)
(180)
(3,340)
(750)
Payments on finance lease obligations
(133)
(154)
(513)
(496)
Net cash (used) provided by financing activities
(331)
103
30,665
354
Net increase (decrease) in cash and cash equivalents
(4,265)
(4,789)
3,078
(3,173)
Cash and cash equivalents at beginning of period
33,659
27,668
26,316
26,052
Cash and cash equivalents at end of period $
29,394
$
22,879
$
29,394
$
22,879
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, 2020 Three Months Ended September
30, 2019 GAAP DepreciationandAmortization
Stock-BasedCompensation CRM and
ERPImplementation/write-off Severance (RIF) Legal
-Former CFO Settlement/Lutronic Taxes andOther
Adjustments Non-GAAP GAAP
DepreciationandAmortization Stock-BasedCompensation
CRM and ERPImplementation Taxes andOther Adjustments
Non-GAAP Net revenue
$ 39,132
-
-
-
-
-
-
$ 39,132
$ 46,117
-
-
-
-
$ 46,117
Cost of revenue
17,387
(140)
(326)
-
(186)
-
-
16,735
19,884
(134)
(430)
-
-
19,320
Gross profit
21,746
140
326
-
186
-
-
22,398
26,233
134
430
-
-
26,797
Gross margin %
56%
57.2%
57%
58%
Operating expenses: Sales and marketing
12,286
(756)
(648)
-
(25)
-
-
10,857
17,691
(936)
(1,365)
(90)
-
15,300
Research and development
3,432
(39)
(254)
-
(67)
-
-
3,072
3,643
(27)
(443)
-
-
3,173
General and administrative
7,239
(28)
(754)
-
(27)
(341)
-
6,089
7,308
(29)
(940)
(430)
-
5,909
Total operating expenses
22,957
(823)
(1,656)
-
(119)
(341)
-
20,018
28,642
(992)
(2,748)
(520)
-
24,382
Income (loss) from operations
(1,211)
963
1,982
-
305
341
-
2,380
(2,409)
1,126
3,178
520
-
2,415
Interest and other expense, net
(382)
-
-
-
-
-
-
(382)
(146)
-
-
-
-
(146)
Income (loss) before income taxes
(1,593)
963
1,982
-
305
341
-
1,998
(2,555)
1,126
3,178
520
-
2,269
Provision (benefit) for income taxes
664
-
-
-
-
-
2
666
73
-
-
-
6
79
Net income (loss)
$ (2,257)
963
1,982
-
305
341
(2)
$ 1,332
$ (2,628)
1,126
3,178
520
(6)
$ 2,190
Net income (loss) per share: Basic
$ (0.13)
$ 0.08
$ (0.19)
$ 0.15
Diluted
$ (0.13)
$ 0.08
$ (0.19)
$ 0.15
Weighted-average number of shares used in per share
calculations: Basic
17,603
17,603
14,182
14,182
Diluted
17,603
17,603
14,182
14,751
Operating expenses as a % of net
revenue GAAP Non-GAAP GAAP Non-GAAP
Sales and marketing
31.4%
27.7%
38.4%
33.2%
Research and development
8.8%
7.9%
7.9%
6.9%
General and administrative
18.5%
15.6%
15.8%
12.8%
58.7%
51.2%
62.1%
52.9%
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, 2020 Nine Months Ended September 30,
2019 GAAP DepreciationandAmortization
Stock-BasedCompensation CRM and
ERPImplementation/write-off Severance(RIF) Legal
-FormerCFOSettlement/Lutronic Taxes andOtherAdjustments
Non-GAAP GAAP DepreciationandAmortization
Stock-BasedCompensation CRM and ERPImplementation
Taxes andOtherAdjustments Non-GAAP Net revenue
$ 97,740
-
-
-
-
$ 97,740
$ 129,917
-
-
-
-
$ 129,917
Cost of revenue
50,034
(417)
(1,359)
-
(318)
-
-
47,940
60,544
(385)
(1,103)
-
-
59,056
Gross profit
47,706
417
1,359
-
318
-
-
49,800
69,373
385
1,103
-
-
70,861
Gross margin %
49%
51%
53%
55%
Operating expenses: Sales and marketing
38,109
(2,454)
(2,617)
-
(274)
-
-
32,764
50,786
(2,718)
(3,080)
(201)
-
44,787
Research and development
10,294
(115)
(1,344)
-
(130)
-
-
8,705
10,622
(74)
(1,076)
-
-
9,472
General and administrative
23,575
(84)
(2,736)
(1,139)
(101)
(1,359)
(324)
17,832
18,100
(176)
(1,745)
(1,129)
(614)
14,435
Total operating expenses
71,978
(2,653)
(6,698)
(1,139)
(505)
(1,359)
(324)
59,300
79,508
(2,968)
(5,901)
(1,331)
(614)
68,694
Income (loss) from operations
(24,272)
3,070
8,057
1,139
823
1,359
324
(9,500)
(10,135)
3,353
7,004
1,331
614
2,167
Interest and other expense, net
(586)
-
-
-
-
-
(586)
(180)
-
-
-
-
(180)
Income (loss) before income taxes
(24,858)
3,070
8,057
1,139
823
1,359
324
(10,086)
(10,315)
3,353
7,004
1,331
614
1,987
Provision (benefit) for income taxes
1,207
-
-
-
-
-
9
1,216
(55)
-
-
-
288
233
Net income (loss)
$ (26,065)
3,070
8,057
1,139
823
1,359
315
$ (11,302)
$ (10,260)
3,353
7,004
1,331
326
$ 1,754
Net income (loss) per share: Basic
$ (1.59)
$ (0.69)
$ (0.73)
$ 0.12
Diluted
$ (1.59)
$ (0.69)
$ (0.73)
$ 0.12
Weighted-average number of shares used in per share
calculations: Basic
16,368
16,368
14,095
14,095
Diluted
16,368
16,368
14,095
14,417
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
39.0%
33.5%
39.1%
34.5%
Research and development
10.5%
8.9%
8.2%
7.3%
General and administrative
24.1%
18.2%
13.9%
11.1%
73.6%
60.7%
61.2%
52.9%
CUTERA, INC. RECONCILIATION OF LOSS TO ADJUSTED
EBITDA (in thousands) (unaudited)
Three MonthsEnded Nine MonthsEnded September 30, 2020 Net
loss
$ (2,257)
$ (26,065)
Adjustments: Stock-based compensation
1,982
8,057
Depreciation and amortization
963
3,070
CRM and ERP implementation costs
-
1,139
Severance (RIF)
305
823
Legal -Former CFO Settlement/Lutronic
341
1,359
Other adjustments
-
324
Interest and other expense, net
382
586
Provision (benefit) for income taxes
664
1,207
Total adjustments
$ 4,637
$ 16,565
Adjusted EBITDA
$ 2,380
$ (9,500)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005601/en/
Cutera, Inc. Anne Werdan Director, Investor Relations
415-657-5500 awerdan@cutera.com
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