SOURCE: Cutera, Inc.

Cutera, Inc.

November 07, 2017 16:05 ET

Cutera Reports Third Quarter 2017 Financial Results

Generates Record Quarterly Revenue of $38.2 Million; Increase of 26% North America System Revenue Grows by 57%

truSculpt® Leads North American Product Platform Revenue; Initial International Introduction in 3rd Quarter 2017 with Further Geographic Expansion Expected in 4th Quarter 2017

Achieves 13th Consecutive Quarter of Year-over-Year Double-Digit Revenue Growth

BRISBANE, CA--(Marketwired - Nov 7, 2017) - 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 and nine months ended September 30, 2017. 

James Reinstein, President and Chief Executive Officer stated, "We are pleased with our third quarter financial and operational performance and the continued progress of our commercial teams. Our 26% revenue growth in the third quarter was again driven primarily by North American product sales. In addition, our International team produced systems revenue of $10 million - a single quarter record for this team. Much of our growth was fueled by recent product launches, including enlighten III and truSculpt 3D, however we continue to see growth in some of our legacy platforms such as xeo. We expect this momentum to continue throughout the fourth quarter." 

Key operating highlights for the third quarter of 2017, compared to the third quarter of 2016:

  • Revenue increased 26%, to a record $38.2 million, primarily due to 57% growth in North America Systems revenue;
    • 13th consecutive quarter of year-over-year double-digit revenue growth;
  • Gross margin of 58%, consistent with previous guidance;
  • Research and Development increased 19% as we continue to invest in our product portfolio;
  • Operating income was $6.2 million, including a one-time $4 million benefit from our facility lease cancellation;
    • Excluding the one-time $4 million benefit, operating income was $2.2 million, an increase of 44% over the third quarter 2016;
  • Cash generated by operations was $3.7 million, including the one-time $4 million benefit from our facility lease cancellation;
    • Excluding the one-time $4 million benefit, cash used by operations was $300,000 due primarily to increased working capital investment to support higher revenue levels;
  • Net income was $6.2 million, or $0.42 per fully diluted share (including the $4 million income benefit from our previously announced facility lease cancellation); 
    • Adjusted net income (non-GAAP*) was $3.5 million, or $0.24 per fully diluted share excluding non-cash stock based compensation, depreciation and the facility lease cancellation benefit (refer to the GAAP to Non-GAAP reconciliation provided).

Product Updates
Market acceptance for the Company's truSculpt 3D system continues to be robust in North America as many practitioners believe it is the best-in-class system for body sculpting. The Company introduced truSculpt 3D in select International markets in September 2017, and plans to continue to execute regional expansion of the launch throughout the fourth quarter. This latest version of the truSculpt family includes a consumable product enabling the Company to participate in the procedure income with its customers. Although only launched in mid-May of this year, truSculpt leads all platforms in revenue generation during the quarter and year-to-date periods ended September 30, 2017, highlighting the importance of new products and new markets.

Sandra Gardiner, Consultant Chief Financial Officer, commented, "Our continued quarterly success allows us to invest in new product platform opportunities, as reflected in our increased research and development investments. We also continue to purchase our stock in the open market and have now repurchased $13.8 million of stock through the nine months ended September 30, 2017. We ended the third quarter with over $50 million in cash, cash equivalents and investments. Based on our strong third quarter results, we are reiterating our guidance ranges for the full year."

Full-Year 2017 Outlook

  • We expect to be at the upper end of our previously announced revenue guidance range of $144 - $147 million;
  • Gross margin is expected to be in the range of 58% - 59%;
  • GAAP earnings per share is expected to be in the range of $0.77 - $0.81. This includes the benefit from the $4 million facility cancellation income received.

Conference Call
The conference call to discuss these results is scheduled to begin today at 1:30 p.m. PST (4:30 p.m. EST). Participating in the call will be James Reinstein, President and Chief Executive Officer and Sandra Gardiner, Consultant Chief Financial Officer. The call will be broadcast live over the Internet, hosted at the Investor Relations section of Cutera's website at http://www.cutera.com/, and will be archived online within one hour of its completion through November 21, 2017. 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.

Use of Non-GAAP Financial Measures
* To supplement our 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 per diluted share, which exclude non-cash expenses for stock-based compensation, depreciation and a non-recurring lease termination income. 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 medical technology 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.

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, 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.

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 third quarter ended September 30, 2017, 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,   September 30,
    2017   2017   2016
Assets                  
Current assets:                  
  Cash and cash equivalents   $ 14,784   $ 18,679   $ 11,275
  Marketable investments     35,692     32,270     35,108
  Restricted investments     -     2,290     -
    Cash, cash equivalents and investments     50,476     53,239     46,383
                   
  Accounts receivable, net     19,604     18,191     11,680
  Inventories     23,728     16,913     16,478
  Other current assets and prepaid expenses     2,894     2,840     2,507
    Total current assets     96,702     91,183     77,048
                   
Property and equipment, net     1,842     1,867     1,720
Deferred tax asset     384     381     410
Intangibles, net     -     -     16
Goodwill     1,339     1,339     1,339
Other long-term assets     381     381     444
      Total assets   $ 100,648   $ 95,151   $ 80,977
                   
Liabilities and Stockholders' Equity                  
Current liabilities:                  
  Accounts payable   $ 5,805   $ 4,293   $ 3,283
  Accrued liabilities     22,203     18,973     14,786
  Deferred revenue     8,801     8,901     8,312
    Total current liabilities     36,809     32,167     26,381
                   
Deferred revenue, net of current portion     1,950     1,982     1,426
Income tax liability     171     170     164
Other long-term liabilities     505     604     597
    Total liabilities     39,435     34,923     28,568
                   
Stockholders' equity     61,213     60,228     52,409
      Total liabilities and stockholders' equity   $ 100,648   $ 95,151   $ 80,977
                   
   
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,  
    2017     2016     2017     2016  
Net revenue   $ 38,173     $ 30,281     $ 103,861     $ 80,181  
Cost of revenue     15,963       12,538       45,084       33,959  
    Gross profit     22,210       17,743       58,777       46,222  
    Gross margin %     58 %     59 %     57 %     58 %
                                 
Operating expenses:                                
  Sales and marketing     13,148       10,574       36,708       30,002  
  Research and development     3,467       2,914       9,393       8,335  
  General and administrative     3,379       2,716       10,143       9,933  
  Lease termination     (4,000 )     -       (4,000 )     -  
    Total operating expenses     15,994       16,204       52,244       48,270  
Income (loss) from operations     6,216       1,539       6,533       (2,048 )
Interest and other income, net     197       166       746       527  
Income (loss) before income taxes     6,413       1,705       7,279       (1,521 )
Provision for income taxes     225       61       166       115  
Net income (loss)   $ 6,188     $ 1,644     $ 7,113     $ (1,636 )
                                 
Net income (loss) per share:                                
  Basic   $ 0.44     $ 0.12     $ 0.51     $ (0.12 )
  Diluted   $ 0.42     $ 0.12     $ 0.48     $ (0.12 )
                                 
Weighted-average number of shares                                
  used in per share calculations:                                
  Basic and diluted     13,973       13,163       13,917       13,102  
  Diluted     14,767       13,544       14,733       13,102  
                                 
                                 
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, 2017  
    GAAP     Adjustments* Non-GAAP*  
Net revenue   $ 38,173     $ -       $ 38,173  
Cost of revenue     15,963       (188 )   (a)   15,775  
Gross profit     22,210       188         22,398  
Gross margin %     58 %               59 %
                           
Operating expenses:                          
Sales and marketing     13,148       (560 )   (b)   12,588  
Research and development     3,467       (162 )   (c)   3,305  
General and administrative     3,379       (345 )   (d)   3,034  
Lease termination     (4,000 )     4,000     (e)   -  
Total operating expenses     15,994       2,933         18,927  
Income from operations     6,216       (2,745 )       3,471  
Interest and other income, net     197       -         197  
Income before income taxes     6,413       (2,745 )       3,668  
Provision for income taxes     225       (92 )   (f)   133  
Net income   $ 6,188     $ (2,653 )     $ 3,535  
      -                    
Net income per share:                          
Basic   $ 0.44     $ (0.19 )     $ 0.25  
Diluted   $ 0.42     $ (0.18 )     $ 0.24  
                           
Weighted-average number of shares used in per share calculations:                          
Basic:     13,973       13,973         13,973  
Diluted     14,767       14,767         14,767  
 
* Fiscal third quarter 2017 Non-GAAP results exclude the effect of the below mentioned adjustments ($000s):
(a) Adjustment of $188 included non-cash expenses of $87 related to depreciation and $101 of stock based compensation.
(b) Adjustment of $560 included a non-cash expenses of $166 related to depreciation and $394 of stock based compensation.
(c) Adjustment of $162 included a non-cash expenses of $5 related to depreciation and $157 of stock based compensation.
(d) Adjustment of $345 related to stock based compensation.
(e) Adjustment of $4,000 represents non-recurring lease termination income  
(f) Adjustment of $92 for income tax benefit relates to the net impact of excluding the Non-GAAP adjustments from our year-to-date tax provision.
   
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,  
    2017     2016     2017     2016  
Cash flows from operating activities:                                
Net income (loss)   $ 6,188     $ 1,644     $ 7,113     $ (1,636 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                                
  Stock-based compensation     997       570       3,623       2,652  
  Depreciation and amortization     258       249       750       733  
  Other     (22 )     18       (67 )     (45 )
Changes in assets and liabilities:                                
  Accounts receivable     (1,407 )     (525 )     (3,048 )     (61 )
  Inventories     (6,815 )     (1,776 )     (8,751 )     (4,400 )
  Accounts payable     1,512       531       3,207       1,324  
  Accrued liabilities     3,223       1,659       4,757       886  
  Deferred revenue     (132 )     (866 )     652       (1,187 )
  Other     (87 )     99       (631 )     (1,015 )
    Net cash provided by (used in) operating activities     3,715       1,603       7,605       (2,749 )
                                 
Cash flows from investing activities:                                
Acquisition of property, equipment and software     (233 )     (174 )     (443 )     (311 )
Disposal of property and equipment     13       11       53       17  
Net change in marketable investments     (1,093 )     711       4,610       2,344  
    Net cash provided by (used in) investing activities     (1,313 )     548       4,220       2,050  
                                 
Cash flows from financing activities:                                
Repurchases of common stock     (6,735 )     (2,008 )     (13,776 )     (4,873 )
Proceeds from exercise of stock options and employee stock purchase plan     695       3,848       4,566       6,798  
Taxes paid related to net share settlement of equity awards     (165 )     (45 )     (1,332 )     (601 )
Payments on capital lease obligations     (92 )     (91 )     (274 )     (218 )
    Net cash provided by (used in) financing activities     (6,297 )     1,704       (10,816 )     1,106  
                                 
Net increase (decrease) in cash and cash equivalents     (3,895 )     3,855       1,009       407  
Cash and cash equivalents at beginning of period     18,679       7,420       13,775       10,868  
Cash and cash equivalents at end of period   $ 14,784     $ 11,275     $ 14,784     $ 11,275  
                                 
   
CUTERA, INC.  
CONSOLIDATED FINANCIAL HIGHLIGHTS  
(in thousands, except percentage data)  
(unaudited)  
                 
    Three Months Ended   % Change     Nine Months Ended   % Change  
    Q3   Q3   Q3 '17 Vs     Q3   Q3   YTD Q3 '17 Vs  
    2017   2016   Q3 '16     2017   2016   YTD Q3 '16  
Revenue By Geography:                                    
    United States   $ 23,275   $ 15,356   +52 %   $ 64,058   $ 42,216   +52 %
    Rest of World     14,898     14,925   -       39,803     37,965   +5 %
    $ 38,173   $ 30,281   +26 %   $ 103,861   $ 80,181   +30 %
    Rest of World as a percentage of total revenue     39 %   49 %         38 %   47 %    
                                     
Revenue By Product Category:                                    
  Systems                                    
    - North America   $ 21,869   $ 13,896   +57 %   $ 58,955   $ 36,808   +60 %
    - International     9,993     9,983   -       26,014     24,448   +6 %
    Total Systems     31,862     23,879   +33 %     84,969     61,256   +39 %
  Service     4,687     4,788   -2 %     14,173     14,278   -1 %
  Hand Piece Refills     595     602   -1 %     1,743     1,886   -8 %
  Skincare     1,029     1,012   +2 %     2,976     2,761   +8 %
    $ 38,173   $ 30,281   +26 %   $ 103,861   $ 80,181   +30 %
                                     
                                     
                                     
    Three Months Ended   Nine Months Ended
    Q3   Q3   Q3   Q3
    2017   2016   2017   2016
Pre-tax Stock-Based Compensation Expense:                        
  Cost of revenue   $ 101   $ 73   $ 377   $ 254
  Sales and marketing     394     239     1,215     844
  Research and development     157     131     633     416
  General and administrative     345     127     1,398     1,138
    $ 997   $ 570   $ 3,623   $ 2,652
                         

Contact Information

  • CONTACTS:

    Cutera, Inc.
    Sandra Gardiner
    Consultant Chief Financial Officer
    415-657-5500

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