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Cutera, Inc. Announces Second Quarter 2020 Financial Results

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:

...