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Cutera, Inc. Announces First Quarter 2021 Financial Results

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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 first quarter ended March 31, 2021.

First Quarter 2021 Financial and Operational Highlights

  • Revenue was $49.7 million, an increase of 54.1% from the prior-year period, driven by strong performance across the business, with particular strength in capital equipment and skincare sales.

    • Capital Equipment revenue of $28.3 million increased 35.1% over the prior-year period.

    • Recurring revenue, defined by the combination of Skincare, Consumable Products, and Service, was $21.3 million, an increase of 89.2% over the prior-year period:

      • Skincare revenue of $12.3 million increased 324.4% over the prior-year period;

      • Consumable Product revenue of $2.9 million grew 15.5% over prior-year period, reflecting the continued recovery of energy-based treatment volumes; and

      • Service revenue of $6.1 million increased 4.6% over the prior-year period.

  • Gross Margin was 55.8%, compared to 44.5% in the prior-year period, due to ongoing improvements in manufacturing efficiencies, offset by mix shift associated with growth of skincare during the quarter;

  • Operating Expenses were $26.5 million in the quarter, flat to prior-year period;

  • Adjusted EBITDA was $4.6 million in the period as compared to $(8.3) million, a $12.9 million improvement over prior-year period; and

  • Net loss was ($0.4) million, or ($0.02) per fully diluted share, compared to a net loss of ($12.4) million, or ($0.86) per fully diluted share, in the prior-year period;

  • Announced pricing of offering of $138.3 million of convertible senior notes.

"I am pleased with our first-quarter results, which reflect the continued progress we have made since the onset of the COVID-19 pandemic," commented Dave Mowry, Chief Executive Officer of Cutera, Inc. "In the first-quarter, we achieved broad strength across our business, driven by consistent execution from our commercial teams, strength in the skincare business, and a slow but steady improvement in our end markets. Building upon the tremendous work from our team, in 2021 we plan to continue to improve gross margins by reducing manufacturing costs; increase sales and sales productivity with our focus on people and process; and deliver innovative products through our increased R&D investments. As we execute these vital few initiatives, our objective is to deliver strong performance despite the remaining pandemic uncertainties that will likely be headwinds for many of us in this market."

2021 Outlook

Company management remains cautious with the lingering uncertainty related to COVID-19. Global Energy-based Aesthetics end markets continued to improve over the course of the first quarter, but the pace and extent of customer recovery varied by geography. With several geographies still under activity restrictions, management is not issuing full-year guidance at this time.

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 and Rohan Seth, 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: 13719080.

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 Companys 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 and enterprise resource planning system costs, and non-recurring legal and litigation costs.

Company management uses these measurements as aids in monitoring the Companys 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 the Company's 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;

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, Cuteras 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 Companys 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 Companys 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 first quarter ended March 31, 2021, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

CUTERA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

March 31

December 31,

Reporting Unit Balance Sheet

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

164,932

$

47,047

Accounts receivable, net

24,151

21,962

Inventories

34,578

28,508

Other current assets and prepaid expenses

10,339

8,779

Total current assets

234,000

106,296

Property and equipment, net

2,373

2,299

Deferred tax asset

598

643

Goodwill

1,339

1,339

Operating lease right-of-use assets

16,570

17,076

Other long-term assets

4,853

5,080

Total assets

$

259,733

$

132,733

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

5,031

$

6,684

Accrued liabilities

41,329

31,079

Operating leases liabilities

2,351

2,260

PPP Loan Payable

6,352

3,630

Extended warranty liabilities

1,039

1,216

Deferred revenue

10,019

9,489

Total current liabilities

66,121

54,358

Deferred revenue, net of current portion

1,718

1,748

PPP Loan payable, net of current portion

851

3,555

Operating lease liabilities, net of current portion

15,394

15,950

Convertible note, net of unamortized debt issuance costs of $4,665

133,585

-

Other long-term liabilities

434

242

Total liabilities

218,103

75,853

Stockholders’ equity:

Common stock

18

18

Additional paid-in capital

102,206

117,097

Accumulated deficit

(60,594)

(60,235)

Total stockholders' equity

41,630

56,880

Total liabilities and stockholders' equity

$

259,733

$

132,733

-

-

CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

March 31,

March 31,

2021

2020

Products

$

43,551

$

26,391

Service

6,117

5,848

Total net revenue

49,668

32,239

Products

18,331

14,103

Service

3,627

3,800

Total cost of revenue

21,958

17,903

Gross profit

27,710

14,336

Gross margin %

56%

44%

Operating expenses:

Sales and marketing

15,068

14,789

Research and development

4,112

3,870

General and administrative

7,365

7,806

Total operating expenses

26,545

26,465

Income (loss) from operations

1,165

(12,129)

Interest and other expense, net

Amortization of debt issuance costs

(52)

-

Interest on convertible notes

(191)

-

Other expense, net

(1,023)

(207)

Total Interest and other expense, net

(1,266)

(207)

Loss before income taxes

(101)

(12,336)

Income tax expense

258

78

Net loss

$

(359)

$

(12,414)

Net loss per share:

Basic

$

(0.02)

$

(0.86)

Diluted

$

(0.02)

$

(0.86)

Weighted-average number of shares used in per share calculations:

Basic

17,768

14,433

Diluted

17,768

14,433

CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

March 31,

March 31,

2021

2020

Cash flows from operating activities:

Net loss

$

(359)

$

(12,414)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Stock-based compensation

1,846

1,980

Depreciation of tangible assets

361

360

Amortization of contract acquisition costs

545

717

Amortization of debt issuance costs

52

-

Impairment of capitalized cloud computing costs

182

-

Change in deferred tax asset

45

15

Provision for credit losses

218

590

Gain on sale of property and equipment

(59)

-

Change in right-of-use asset

604

645

Other

-

35

Changes in assets and liabilities:

Accounts receivable

(2,407)

5,306

Inventories

(6,021)

(3,020)

Other current assets and prepaid expenses

(1,560)

807

Other long-term assets

(500)

(207)

Accounts payable

(1,653)

1,919

Accrued liabilities

10,199

(6,567)

Extended warranty liabilities

(177)

(234)

Operating lease liabilities

(563)

(645)

Deferred revenue

500

(1,253)

Net cash provided by (used in) operating activities

1,253

(11,966)

Cash flows from investing activities:

Acquisition of property, equipment and software

(101)

(230)

Proceeds from disposal of property and equipment

52

-

Proceeds from sales of marketable investments

-

6,800

Purchase of marketable investments

-

(3,930)

Net cash provided by (used in) investing activities

(49)

2,640

Cash flows from financing activities:

Proceeds from exercise of stock options and employee stock purchase plan

396

201

Purchase of capped call

(16,134)

-

Proceeds from issuance of convertible notes

138,250

-

Payment of issuance costs of convertible notes

(4,717)

-

Taxes paid related to net share settlement of equity awards

(999)

(2,234)

Payments on finance lease obligations

(115)

(183)

Net cash provided by (used in) financing activities

116,681

(2,216)

Net increase (decrease) in cash and cash equivalents

117,885

(11,542)

Cash and cash equivalents at beginning of period

47,047

26,316

Cash and cash equivalents at end of period

$

164,932

$

14,774

CUTERA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in thousands, except percentage data)

(unaudited)

Three Months Ended

% Change

March 31,

March 31,

2021 Vs

2021

2020

2020

Revenue By Geography:

North America

$

22,396

$

15,373

+46%

Japan

16,555

7,162

+131%

Rest of World

10,717

9,704

+10%

Total Net Revenue

$

49,668

$

32,239

+54%

Rest of World (including Japan) as a percentage of total revenue

55%

52%

Revenue By Product Category:

Systems

- North America

$

16,785

$

10,382

+62%

- Rest of World (including Japan)

11,536

10,576

+9%

Total Systems

28,321

20,958

+35%

Consumables

2,925

2,533

+15%

Skincare

12,306

2,900

+324%

Total Products

43,552

26,391

+65%

Service

6,116

5,848

+5%

Total Net Revenue

$

49,668

$

32,239

+54%

Three Months Ended

March 31,

March 31,

2021

2020

Pre-tax Stock-Based Compensation Expense:

Cost of revenue

$

144

$

290

Sales and marketing

721

719

Research and development

301

321

General and administrative

680

650

$

1,846

$

1,980

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 March 31, 2021

Three Months Ended March 31, 2020

GAAP

Depreciation
and
Amortization

Stock-Based
Compensation

CRM and ERP
Implementation
/write-off

Legal - Lutronic

Taxes and
Other
Adjustments

Non-GAAP

GAAP

Depreciation
and
Amortization

Stock-Based
Compensation

CRM and ERP
Implementation/
write-off

Taxes and
Other
Adjustments

Non-GAAP

Net revenue

$

49,668

-

-

-

-

-

$

49,668

$

32,239

-

-

-

-

$

32,239

Cost of revenue

21,958

(162

)

(144

)

-

-

-

21,652

17,903

(140

)

(290

)

-

-

17,473

Gross profit

27,710

162

144

-

-

-

28,016

14,336

140

290

-

-

14,766

Gross margin %

56%

56%

44%

46%

Operating expenses:

Sales and marketing

15,068

(678

)

(721

)

(182

)

-

-

13,487

14,789

(871

)

(718

)

(165

)

-

13,035

Research and development

4,112

(39

)

(301

)

-

-

-

3,772

3,870

(38

)

(321

)

-

-

3,511

General and administrative

7,365

(27

)

(680

)

(70

)

(401

)

-

6,187

7,806

(28

)

(651

)

(244

)

(324

)

6,559

Total operating expenses

26,545

(744

)

(1,702

)

(252

)

(401

)

-

23,446

26,465

(937

)

(1,690

)

(409

)

(324

)

23,105

Income (loss) from operations

1,165

906

1,846

252

401

-

4,570

(12,129

)

1,077

1,980

409

324

(8,339

)

Interest and other expense, net

Amortization of debt issuance costs

(52

)

-

-

-

-

-

(52

)

-

-

-

-

-

-

Interest on convertible notes

(191

)

-

-

-

-

-

(191

)

-

-

-

-

-

-

Other expense, net

(1,023

)

-

-

-

-

-

(1,023

)

(207

)

-

-

-

-

(207

)

Total interest and other expense, net

(1,266

)

-

-

-

-

-

(1,266

)

(207

)

-

-

-

-

(207

)

Income (loss) before income taxes

(101

)

906

1,846

252

401

-

3,304

(12,336

)

1,077

1,980

409

324

(8,546

)

Provision for income taxes

258

-

-

-

-

-

258

78

-

-

-

5

83

Net income (loss)

$

(359

)

$

906

$

1,846

$

252

$

401

$

-

$

3,046

$

(12,414

)

1,077

1,980

409

319

$

(8,629

)

Net income (loss) per share:

Basic

$

(0.02

)

$

0.17

$

(0.86

)

$

(0.60

)

Diluted

$

(0.02

)

$

0.15

$

(0.86

)

$

(0.60

)

Weighted-average number of shares used in per share calculations:

Basic

17,768

17,768

14,433

14,433

Diluted

17,768

22,266

14,433

14,433

Operating expenses as a % of net revenue

GAAP

Non-GAAP

GAAP

Non-GAAP

Sales and marketing

30.3%

27.2%

45.9%

40.4%

Research and development

8.3%

7.6%

12.0%

10.9%

General and administrative

14.8%

12.5%

24.2%

20.3%

53.4%

47.2%

82.1%

71.7%

CUTERA, INC.

RECONCILIATION OF LOSS TO ADJUSTED EBITDA

(in thousands)

(unaudited)

Three Months
Ended

March 31, 2021

Net loss

$

(359

)

Adjustments:

Stock-based compensation

1,846

Depreciation and amortization

906

CRM and ERP implementation/ write off

252

Legal - Lutronic

401

Interest and other expense, net

1,266

Provision for income taxes

258

Total adjustments

$

4,929

Adjusted EBITDA

$

4,570

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005970/en/

Contacts

Cutera, Inc.
Anne Werdan
Director, Investor Relations
415-657-5500
awerdan@cutera.com