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 second quarter ended June 30, 2020.
Second Quarter 2020 Financial and Operational
Highlights
- Revenue was $26.4 million, a 45% decrease from the prior-year
period, as COVID-19 disruptions led to a year-over-year decline in
procedures during the quarter
- Capital Equipment revenue of $15.5 million, a decline of 59%
over prior-year period
- Recurring revenue grew 6% over prior-year period driven
primarily by Skin Care revenue growth of 169% year-over-year
offsetting declines in Service and Consumables revenue
- Gross Margin was 44%, compared to 54% in the prior-year period,
driven by lower production levels and substantially lower overhead
absorption during the quarter, partially offset by strong pricing
discipline and a reduction in manufacturing headcount
- Net loss was $11.4 million, or $0.67 per fully diluted share,
as compared to a net income of $0.6 million, or $0.04 per fully
diluted share, in the prior-year period
- Closed a public stock offering on April 21, 2020, resulting in
approximately $26.5 million in net proceeds
- Subsequent to the quarter, the Company secured a $30 million
credit facility with Silicon Valley Bank, replacing the Company’s
existing $25 million facility with Wells Fargo
“While our second quarter results were impacted by a decline in
patient volumes associated with COVID-related shutdowns; I am
encouraged by the recovery trends as patient volumes continue to
rebound toward pre-COVID levels,” commented Dave Mowry, Chief
Executive Officer of Cutera, Inc. “I am pleased with our increased
customer outreach efforts which we implemented during the quarter,
leading to improved customer engagement and enabled us to be highly
responsive, helping accounts increase their patient traffic. I am
amazed by the resilience and adaptability of our customers, and
proud of the Cutera team’s work to steer the company and our
clients through unprecedented adversity. We are continuing to
manage the impacts of the pandemic effectively, and, with a
recently strengthened balance sheet, we are well-positioned to
drive a continued recovery in our business through the second half
of the year despite the uncertain environment.”
2020 Financial Outlook
As previously announced on April 3, 2020, Cutera has withdrawn
its previously announced full-year 2020 guidance due to uncertainty
over the magnitude and duration of the impacts from the COVID-19
pandemic on its financial results. The Company will not be
providing updated guidance at this time.
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, 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: 13706585.
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
employee 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.
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 second quarter ended June 30, 2020,
as discussed in this release, is preliminary and unaudited, and
subject to adjustment.
CUTERA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited) June 30,
March 31, December 31,
2020
2020
2019
Assets Current assets: Cash and cash equivalents $
33,659
$
14,774
$
26,316
Marketable investments
12,894
4,746
7,605
Accounts receivable, net
13,826
15,660
21,556
Inventories
31,240
36,941
33,921
Other current assets and prepaid expenses
5,313
4,831
5,648
Total current assets
96,932
76,952
95,046
Property and equipment, net
2,417
2,687
2,817
Deferred tax asset
419
408
423
Goodwill
1,339
1,339
1,339
Operating lease right-of-use assets
7,577
7,143
7,702
Other long-term assets
4,733
5,901
6,411
Total assets $
113,417
$
94,430
$
113,738
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable $
11,681
$
14,604
$
12,685
Accrued liabilities
20,423
23,663
30,307
Operating leases liabilities
1,526
2,204
2,800
Extended warranty liabilities
1,660
1,765
1,999
Deferred revenue
9,345
10,180
10,831
Total current liabilities
44,635
52,416
58,622
Deferred revenue, net of current portion
2,434
2,789
3,391
Income tax liability
93
93
93
Long-Term Debt
7,149
-
-
Operating lease liabilities, net of current portion
6,262
5,149
5,112
Other long-term liabilities
345
447
578
Total liabilities
60,918
60,894
67,796
Stockholders’ equity: Common stock
18
15
14
Additional paid-in capital
112,644
82,292
82,346
Accumulated deficit
(60,166
)
(48,772
)
(36,358
)
Accumulated other comprehensive loss
3
1
(60
)
Total stockholders' equity
52,499
33,536
45,942
Total liabilities and stockholders' equity $
113,417
$
94,430
$
113,738
CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share data)
(unaudited) Three Months Ended Six Months
Ended
June 30,
June 30, June 30, June 30,
2020
2019
2020
2019
Products $
21,745
41,968
48,136
$
72,730
Service
4,624
5,806
10,472
11,070
Total net revenue
26,369
47,774
58,608
83,800
Products
12,206
18,393
26,309
33,935
Service
2,539
3,550
6,339
6,725
Total cost of revenue
14,745
21,943
32,648
40,660
Gross profit
11,624
25,831
25,960
43,140
Gross margin %
44
%
54
%
44
%
51
%
Operating expenses: Sales and marketing
11,035
16,992
25,823
33,096
Research and development
2,991
3,273
6,862
6,979
General and administrative
8,529
5,267
16,336
10,792
Total operating expenses
22,555
25,532
49,021
50,867
Income (loss) from operations
(10,931
)
299
(23,061
)
(7,727
)
Interest and other income (expense), net
3
46
(204
)
(33
)
Income (loss) before income taxes
(10,928
)
345
(23,265
)
(7,760
)
Income tax benefit
466
(243
)
543
(128
)
Net income (loss) $
(11,394
)
$
588
$
(23,808
)
$
(7,632
)
Net income (loss) per share: Basic $
(0.67
)
$
0.04
$
(1.51
)
$
(0.54
)
Diluted $
(0.67
)
$
0.04
$
(1.51
)
$
(0.54
)
Weighted-average number of shares used in per share
calculations: Basic
17,055
14,086
15,744
14,051
Diluted
17,055
14,356
15,744
14,051
CUTERA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (in
thousands, except percentage data) (unaudited)
Three Months Ended % Change Six Months Ended
% Change
June 30,
June 30,
2020 Vs
June 30,
June 30,
2020 Vs
2020
2019
2019
2020
2019
2019
Revenue By Geography: United States $
10,915
$
28,147
-61%
$
24,699
$
48,547
-49%
International
15,454
19,627
-21%
33,909
35,253
-4%
Total Net Revenue $
26,369
$
47,774
-45%
$
58,608
$
83,800
-30%
International as a percentage of total revenue
59%
41%
58%
42%
Revenue By Product Category: Systems - North America
$
8,214
$
26,491
-69%
$
18,596
$
44,071
-58%
- Rest of World
7,328
11,048
-34%
17,904
20,677
-13%
Total Systems
15,542
37,539
-59%
36,500
64,748
-44%
Consumables
1,425
2,654
-46%
3,958
4,599
-14%
Skincare
4,778
1,775
+169%
7,678
3,383
+127%
Total Products
21,745
41,968
-48%
48,136
72,730
-34%
Service
4,624
5,806
-20%
10,472
11,070
-5%
Total Net Revenue $
26,369
$
47,774
-45%
$
58,608
$
83,800
-30%
Three Months Ended Six Months
Ended June 30, June 30, June 30, June
30,
2020
2019
2020
2019
Pre-tax Stock-Based Compensation Expense: Cost of revenue $
743
$
404
$
1,033
$
673
Sales and marketing
1,251
997
1,969
1715
Research and development
769
370
1,090
633
General and administrative
1,332
748
1,982
805
$
4,095
$
2,519
$
6,075
$
3,826
CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in thousands) (unaudited) Three
Months Ended Six Months Ended June 30, June
30,
June 30,
June 30,
2020
2019
2020
2019
Cash flows from operating activities: Net income (loss) $
(11,394
)
$
588
$
(23,808
)
$
(7,632
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Stock-based compensation
4,095
2,519
6,075
3,826
Depreciation of tangible assets
355
404
715
815
Amortization of contract acquisition costs
675
722
1,392
1,412
Impairment of cloud computing costs
805
-
805
-
Change in deferred tax asset
(11
)
(7
)
4
(1
)
Provision for doubtful accounts receivable
1,106
(117
)
1,696
(19
)
Other
163
48
198
151
Changes in assets and liabilities:
-
Accounts receivable
728
(5,666
)
6,034
(5,263
)
Inventories
5,701
(230
)
2,681
1,125
Other current assets and prepaid expenses
(491
)
302
316
(614
)
Other long-term assets
(312
)
(1,073
)
(519
)
(1,752
)
Accounts payable
(2,923
)
1,104
(1,004
)
162
Accrued liabilities
(3,187
)
5,246
(9,754
)
3,779
Extended warranty liabilities
(105
)
(268
)
(339
)
(760
)
PPP Loan Payable
-
-
Other long-term liabilities
-
-
-
(140
)
Deferred revenue
(1,190
)
768
(2,443
)
1,293
Income tax liability
-
(306
)
-
(301
)
Net cash provided by (used in) operating activities
(5,985
)
4,034
(17,951
)
(3,919
)
Cash flows from investing activities: Acquisition of
property, equipment and software
(205
)
(251
)
(435
)
(316
)
Disposal of Property and equipment
-
20
-
20
Proceeds from maturities of marketable investments
4,100
6,400
10,900
9,600
Purchase of marketable investments
(12,237
)
(2,434
)
(16,167
)
(4,020
)
Net cash provided by (used in) investing activities
(8,342
)
3,735
(5,702
)
5,284
Cash flows from financing activities: Proceeds from
exercise of stock options and employee stock purchase plan
647
1,032
848
1,163
Proceeds from PPP Loan
7,149
7,149
Proceeds from equity offering
26,496
-
26,496
-
Taxes paid related to net share settlement of equity awards
(883
)
(80
)
(3,117
)
(570
)
Payments on finance lease obligations
(197
)
(211
)
(380
)
(342
)
Net cash provided by financing activities
33,212
741
30,996
251
Net increase in cash and cash equivalents
18,885
8,510
7,343
1,616
Cash and cash equivalents at beginning of period
14,774
19,158
26,316
26,052
Cash and cash equivalents at end of period $
33,659
$
27,668
$
33,659
$
27,668
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 June 30, 2020 Three Months Ended June 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
$
26,369
-
-
-
-
$
26,369
$
47,774
-
-
-
$
47,774
Cost of revenue
14,745
(136
)
(743
)
-
-
13,866
21,943
(123
)
(404
)
-
21,416
Gross profit
11,624
136
743
-
-
12,503
25,831
123
404
-
26,358
Gross margin %
44
%
47
%
54
%
55
%
Operating expenses: Sales and marketing
11,035
(827
)
(1,251
)
-
-
8,957
16,992
(912
)
(997
)
(27
)
-
15,056
Research and development
2,991
(38
)
(769
)
-
-
2,184
3,273
(26
)
(370
)
-
-
2,877
General and administrative
8,529
(29
)
(1,332
)
(729
)
(518
)
(1,018
)
-
4,903
5,267
(65
)
(748
)
(460
)
-
3,994
Total operating expenses
22,555
(894
)
(3,352
)
(729
)
(518
)
(1,018
)
-
16,044
25,532
(1,003
)
(2,115
)
(487
)
-
21,927
Income (loss) from operations
(10,931
)
1,030
4,095
729
518
1,018
-
(3,541
)
299
1,126
2,519
487
-
4,431
Interest and other income (expense), net
3
-
-
-
-
-
-
3
46
-
-
-
-
46
Loss before income taxes
(10,928
)
1,030
4,095
729
518
1,018
-
(3,538
)
345
1,126
2,519
487
-
4,477
Provision (benefit) for income taxes
466
-
-
-
-
-
(3
)
463
(243
)
-
-
-
(397
)
(640
)
Net income (loss)
$
(11,394
)
1,030
4,095
729
518
1,018
3
$
(4,001
)
$
588
1,126
2,519
487
397
$
5,117
Net income (loss) per share: Basic
$
(0.67
)
$
(0.23
)
$
0.04
$
0.36
Diluted
$
(0.67
)
$
(0.23
)
$
0.04
$
0.36
Weighted-average number of shares used in per share
calculations: Basic
17,055
17,055
14,086
14,086
Diluted
17,055
17,055
14,356
14,311
Operating expenses as a % of net
revenue GAAP Non-GAAP GAAP Non-GAAP
Sales and marketing
41.8%
34.0%
35.6%
31.5%
Research and development
11.3%
8.3%
6.9%
6.0%
General and administrative
32.3%
18.6%
11.0%
8.4%
85.5%
60.8%
53.4%
45.9%
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) Six Months
Ended June 30, 2020 Six Months Ended June 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
$
58,608
-
-
-
-
-
-
$
58,608
$
83,800
-
-
-
$
83,800
Cost of revenue
32,648
(277
)
(1,033
)
-
-
-
-
31,338
40,660
(251
)
(673
)
-
39,736
Gross profit
25,960
277
1,033
-
-
-
-
27,270
43,140
251
673
-
44,064
Gross margin %
44
%
47
%
51
%
53
%
Operating expenses: Sales and marketing
25,823
(1,698
)
(1,969
)
-
-
-
-
22,156
33,096
(1,783
)
(1,715
)
(112
)
-
29,486
Research and development
6,862
(76
)
(1,090
)
-
-
-
-
5,696
6,979
(46
)
(633
)
-
-
6,300
General and administrative
16,336
(56
)
(1,982
)
(729
)
(518
)
(1,018
)
-
9,387
10,792
(147
)
(805
)
(699
)
(614
)
(a)
8,526
Total operating expenses
49,021
(1,830
)
(5,042
)
(729
)
(518
)
(1,018
)
-
37,238
50,867
(1,976
)
(3,153
)
(811
)
(614
)
44,313
Loss from operations
(23,061
)
2,107
5,042
729
518
1,018
-
(9,968
)
(7,727
)
2,227
3,826
811
614
(249
)
Interest and other income (expense), net
(204
)
-
-
-
-
-
-
(204
)
(33
)
-
-
-
-
(33
)
Loss before income taxes
(23,265
)
2,107
5,042
729
518
1,018
-
(10,172
)
(7,760
)
2,227
3,826
811
614
(282
)
Provision (benefit) for income taxes
543
-
-
-
-
-
2
545
(128
)
-
-
-
282
154
Net income (loss)
$
(23,808
)
2,107
5,042
729
518
1,018
(2
)
$
(10,717
)
$
(7,632
)
2,227
3,826
811
332
$
(436
)
Net income (loss) per share: Basic
$
(1.51
)
$
(0.68
)
$
(0.54
)
$
(0.03
)
Diluted
$
(1.51
)
$
(0.68
)
$
(0.54
)
$
(0.03
)
Weighted-average number of shares used in per share
calculations: Basic
15,744
15,744
14,051
14,051
Diluted
15,744
15,744
14,051
14,298
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
44.1%
37.8%
39.5%
35.2%
Research and development
11.7%
9.7%
8.3%
7.5%
General and administrative
27.9%
16.0%
12.9%
10.2%
83.6%
63.5%
60.7%
52.9%
CUTERA, INC. RECONCILIATION OF NET INCOME (LOSS)
TO ADJUSTED EBITDA (in thousands) (unaudited)
Three MonthsEnded Six MonthsEnded June 30, 2020
Net loss
$
(11,394
)
$
(23,808
)
Adjustments: Stock-based compensation
4,095
6,075
Depreciation and amortization
1,030
2,107
CRM and ERP Implementation/write-off
729
1,139
Severance (RIF)
518
518
Taxes and Other Adjustments
-
324
Legal-Former CFO Settlement/Lutronic
1,018
1,018
Interest and other (income) expense, net
(3
)
204
Benefit for income taxes
466
543
Total adjustments
$
7,853
$
11,928
Adjusted EBITDA
$
(3,541
)
$
(11,880
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005844/en/
Cutera, Inc. Anne Werdan Director, Investor Relations
415-657-5500 awerdan@cutera.com
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