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Cutera, Inc. Announces Third Quarter 2021 Financial Results; Raises Full-year Revenue Guidance

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BRISBANE, Calif., November 03, 2021--(BUSINESS WIRE)--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, 2021.

Third Quarter 2021 Financial and Operational Highlights

  • Revenue was $57.4 million, an increase of 47% from the prior-year period, driven by strong performance across the business, with strength occurring in capital equipment and recurring revenue.

    • Capital Equipment revenue of $32.2 million increased 33% over the prior-year period.

    • Recurring revenue, defined as the combination of Skincare, Consumable Products, and Service, was $25.2 million, an increase of 68% over the prior-year period:

      • Skincare revenue of $14.8 million increased 117% over the prior-year period;

      • Consumable Product revenue of $3.7 million grew 60% over prior-year period, reflecting the continued recovery of energy-based treatment volumes; and

      • Service revenue of $6.7 million increased 14% over the prior-year period.

  • Gross Margin was 58.2%, compared to 55.6% in the prior-year period, driven by capital equipment and consumable volumes, reduced fixed overhead expenses and the continual progression of our margin expansion efforts;

  • Net loss was $1.4 million, or ($0.08) per fully diluted share, compared to a net loss of $2.3 million, or ($0.13) per fully diluted share, in the prior-year period; and

  • Adjusted EBITDA more than doubled to $5.1 million in the period as compared to $2.4 million in the prior-year period.

"I am pleased with the strong results achieved by our team during the third quarter, as we expand our commercial team, drive improved profitability, and maintain our laser-focus on our vital few initiatives," commented Dave Mowry, Chief Executive Officer of Cutera, Inc. "We are encouraged by the positive momentum in capital equipment demand and the continuing improvement in global treatment volumes, despite the anticipated seasonality. Looking to the balance of 2021 and into early 2022, we are confident in the strength of our business as we continue onboarding new members of our commercial team and executing on our robust pipeline of capital equipment deals as patient volumes trend above pre-COVID levels."

2021 Outlook
Given the strength of our results in the third quarter of 2021 and management’s confidence in our fourth quarter outlook, management is raising full-year 2021 revenue guidance to be in the range of $224 million to $228 million, up from our prior expectation of $215 million to $221 million.

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: 13723851.

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 basic and 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, and non-recurring legal and litigation costs. 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.

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 second quarter ended June 30, 2021, 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,

2021

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

162,486

$

169,200

$

47,047

Accounts receivable, net

30,760

25,903

21,962

Inventories

35,493

34,591

28,508

Other current assets and prepaid expenses

13,350

8,856

8,779

Total current assets

242,089

238,550

106,296

Property and equipment, net

2,205

2,148

2,299

Deferred tax asset

589

592

643

Goodwill

1,339

1,339

1,339

Operating lease right-of-use assets

15,269

15,919

17,076

Other long-term assets

6,955

5,615

5,080

Total assets

$

268,446

$

264,163

$

132,733

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

7,259

$

6,210

$

6,684

Accrued liabilities

44,295

41,995

32,295

Operating leases liabilities

2,394

2,422

2,260

PPP loan payable

-

-

3,630

Deferred revenue

9,188

9,695

9,489

Total current liabilities

63,136

60,322

54,358

Deferred revenue, net of current portion

1,492

1,708

1,748

PPP loan payable, net of current portion

-

-

3,555

Operating lease liabilities, net of current portion

14,117

14,705

15,950

Convertible notes, net of unamortized debt issuance costs

134,025

133,800

-

Other long-term liabilities

333

285

242

Total liabilities

213,103

210,820

75,853

Stockholders’ equity:

Common stock

18

18

18

Additional paid-in capital

109,563

106,173

117,097

Accumulated deficit

(54,238

)

(52,848

)

(60,235

)

Total stockholders' equity

55,343

53,343

56,880

Total liabilities and stockholders' equity

$

268,446

$

264,163

$

132,733

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,

2021

2020

2021

2020

Products

$

50,694

$

33,254

$

146,056

$

81,390

Service

6,690

5,878

19,585

16,350

Total net revenue

57,384

39,132

165,641

97,740

Products

20,259

14,017

59,483

40,326

Service

3,700

3,369

11,234

9,708

Total cost of revenue

23,959

17,386

70,717

50,034

Gross margin

33,425

21,746

94,924

47,706

Gross margin %

58.2

%

55.6

%

57.3

%

48.8

%

Operating expenses:

Sales and marketing

19,190

12,286

52,668

38,109

Research and development

5,802

3,432

14,764

10,294

General and administrative

7,807

7,239

23,633

23,575

Total operating expenses

32,799

22,957

91,065

71,978

Income (loss) from operations

626

(1,211

)

3,859

(24,272

)

Interest and other income (expense), net

Amortization of debt issuance costs

(225

)

-

(492

)

-

Interest on Convertible notes

(768

)

-

(1,737

)

-

Gain on extinguishment of PPP loan

-

-

7,185

-

Other expense, net

(561

)

(382

)

(1,976

)

(586

)

Income (loss) before income taxes

(928

)

(1,593

)

6,839

(24,858

)

Income tax expense

462

664

842

1,207

Net income (loss)

$

(1,390

)

$

(2,257

)

$

5,997

$

(26,065

)

Net Income (loss) per share:

Basic

$

(0.08

)

$

(0.13

)

$

0.34

$

(1.59

)

Diluted

$

(0.08

)

$

(0.13

)

$

0.33

$

(1.59

)

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

Basic

17,945

17,603

17,860

16,368

Diluted

17,945

17,603

18,327

16,368

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,

2021

2020

2021

2020

Cash flows from operating activities:

Net income (loss)

$

(1,390

)

$

(2,257

)

$

5,997

$

(26,065

)

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

Stock-based compensation

3,742

1,982

8,507

8,057

Depreciation and amortization

307

341

1,014

1,056

Amortization of contract acquisition costs

427

625

1,430

2,017

Amortization of debt issuance costs

225

-

492

-

Impairment of capitalized cloud computing costs

-

-

182

805

Change in deferred tax asset

3

(81

)

54

(77

)

Provision for credit losses

(391

)

54

101

1,750

Loss on sale of property and equipment

37

-

(45

)

-

PPP loan forgiveness

-

-

(7,185

)

-

Change in right-of-use asset

1,077

249

1,681

250

Other

-

129

-

327

Changes in assets and liabilities:

Accounts receivable

(4,466

)

(5,064

)

(8,899

)

2,209

Inventories

(968

)

1,907

(6,926

)

4,588

Other current assets and prepaid expenses

(4,494

)

(350

)

(4,571

)

(1,273

)

Other long-term assets

(1,767

)

(1,182

)

(3,487

)

...

(1,701

)

Accounts payable

1,049

(4,882

)

575

(5,886

)

Accrued liabilities

2,129

5,033

11,782