Cutera, Inc. (Nasdaq: CUTR) (“Cutera” or the “Company”), a
leading provider of aesthetic and dermatology solutions, today
reported financial results for the second quarter ended June 30,
2023.
Second Quarter 2023 Financial and Operational
Highlights
- Consolidated revenue of $61.2 million, a decrease of 5% as
reported and a decrease of 2% in constant currency from the
prior-year period, primarily driven by a decline in capital
equipment revenue, partially offset by AviClear revenue.
- AviClear Q2 2023 new bookings of just under 200 units, vs. over
350 in Q1 2023, in line with our strategy to drive a more measured
pace of new bookings.
- GAAP Gross margin of 45.8% in the quarter, compared to 54.6% in
the prior-year period.
- Non-GAAP Gross margin of 50.3% in the quarter, compared to
55.6% in the prior-year period.
- GAAP Operating expenses were $57.6 million in the quarter,
compared to $45.1 million in the prior-year period. Operating
expenses during the period included $10.6 million in AviClear
spending, up $3.6 million from the prior-year period.
- GAAP Net loss was $31.6 million, compared to a GAAP Net loss of
$47.3 million in the prior-year period.
- Adjusted EBITDA was a loss of $11.6 million, compared to a loss
of $1.6 million in the prior-year period.
- Core adjusted EBITDA was a loss of $4.3 million.
- AviClear adjusted EBITDA was a loss of $7.3 million.
Three Months
Ended June 30,
2023
% Change vs Three
Months
Ended June 30, 2022
Three Months
Ended June 30,
2023
Key Revenue Metrics
Reported
Constant
Currency
Key Profit Metrics
Capital Equipment
$37.9
-13%
-11%
GAAP Margin %
45.8%
Skincare
$9.4
-2%
5%
Non-GAAP Margin %
50.3%
Consumables
$4.3
-18%
-16%
Adjusted EBITDA - Core
($4.3)
Service
$5.7
0%
2%
Adjusted EBITDA - AviClear
($7.3)
AviClear
$4.0
nm
nm
Adjusted EBITDA - Total
($11.6)
Recurring
$23.3
13%
18%
Adjusted EBITDA Margin %
-19.0%
Total Revenue
$61.2
-5%
-2%
Six Months
Ended June 30,
2023
% Change vs Six Months Ended
June 30, 2022
Six Months
Ended June 30,
2023
Key Revenue Metrics
Reported
Constant
Currency
Key Profit Metrics
Capital Equipment
$71.2
-11%
-9%
GAAP Margin %
45.6%
Skincare
$17.6
-18%
-8%
Non-GAAP Margin %
49.7%
Consumables
$8.0
-12%
-9%
Adjusted EBITDA - Core
($12.9)
Service
$11.1
-5%
-2%
Adjusted EBITDA - AviClear
($13.3)
AviClear
$8.4
nm
nm
Adjusted EBITDA - Total
($26.1)
Recurring
$45.0
7%
13%
Adjusted EBITDA Margin %
-22.5%
Total Revenue
$116.2
-5%
-1%
“Second quarter results reflect that our business faces more
operational and market challenges than were apparent when I stepped
in as interim CEO. While we succeeded in refocusing our selling
organization on Core Capital, business performance in this area has
been negatively impacted by continued parts-driven service delays,
and a tightening credit environment which have made deal closing
more difficult, and placed pressure on our ASP’s. Addressing these
challenges is a top priority for the company and we are working
diligently to get Core Capital back on track,” commented Sheila
Hopkins, former interim Chief Executive Officer of Cutera Inc.
Hopkins continued, “On AviClear we have more work to do to
increase utilization and the percent of installed offices that are
contributing. We are working expeditiously on the playbook for
that. This will be a process; however, I am encouraged by progress
made in the quarter on AviClear. We moved forward with a more
measured pace of device bookings, and drove treatment volume that
was in-line with our expectations. Finally, AviClear became the
first acne therapy to obtain FDA clearance as a long-term
treatment for mild to severe acne vulgaris.”
“I continue to believe in the potential of Cutera, fueled by
excellent technologies, and a dedicated and talented team. The
challenges before us can and will be addressed, particularly with
Taylor at the helm given his deep industry experience. This will
place the Company firmly on the path to unlock inherent upside
value not only on AviClear, but also Core Capital. Cutera’s future
remains bright,” concluded Hopkins.
“I am very excited about the platform, the team, and the
opportunity ahead at Cutera. While we face a set of near-term
challenges, which our team will address, we have significant
potential to drive growth and profitability over time, not only
with our AviClear, our revolutionary solution for acne, but across
our entire portfolio,” commented Taylor Harris, Chief Executive
Officer of Cutera, Inc.
2023 Outlook
The company expects full-year 2023 revenue in the range of $220
million to $230 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 in the call will be Taylor Harris, Chief
Executive Officer; Sheila Hopkins, former Interim Chief Executive
Officer; Stuart Drummond, Interim Chief Financial Officer; and Greg
Barker, Vice President of FP&A and Investor Relations.
To participate in the conference call, dial 1-800-319-4610
(domestic) or +1-631-891-4304 (international).
The call will also be a 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
aesthetic and dermatology solutions for practitioners worldwide.
Since 1998, Cutera has been developing innovative, easy-to-use
products that harness the power of science and nature to enable
medical practitioners to offer safe and effective treatments to
their patients. For more information, call +1-415-657-5500 or
1-888-4CUTERA or visit www.cutera.com.
*Use of Non-GAAP Financial
Measures
In this press release, 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 gross margin,
gross margin rate, and operating income. Non-GAAP adjustments
include depreciation and amortization including contract
acquisition costs, stock-based compensation, enterprise resource
planning (“ERP”) implementation costs, certain legal and litigation
costs, executive and other non-recurring severance costs, costs
related to a retention plan, and legal and advisory fees related to
litigation and shareholder activism. From time to time in the
future, there may be other items that the Company 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 defines adjusted EBITDA as operating income before
depreciation and amortization, stock-based compensation, ERP
implementation costs, costs related to certain litigation,
executive and non-recurring severance costs, retention plan costs,
and legal and advisory fees related to litigation and shareholder
activism.
Company management uses non-GAAP measures as aids in monitoring
the Company’s ongoing financial performance from quarter to
quarter, and year to year, 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 share exclude the following:
Depreciation and amortization, including contract acquisition
costs. 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.
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 expenses related to grants
of options, employee stock purchase plans, and performance and
restricted stock. Depending upon the size, timing, and 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.
ERP implementation costs. The Company has excluded ERP
system costs related to direct and incremental costs incurred in
connection with its multi-phase implementation of a new ERP
solution and the related technology infrastructure costs. The
Company excludes these costs because it believes 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 the Company’s operating performance.
Certain legal and litigation costs. The Company has
excluded costs incurred related to its litigation against Lutronic
Aesthetics, which is not part of the Company’s ordinary course of
business. The Company’s complaint against Lutronic alleges
misappropriation of trade secrets, violation of the Racketeer
Influenced and Corrupt Organizations Act (RICO), interference with
contractual relations and other claims. The Company excludes these
costs because this litigation is a result of a discrete event that
was not part of the Company’s business strategy, but has a
significant effect on the results of operations. Its costs are
incidental to and do not reflect the efficiencies and effectiveness
of the Company’s core operations.
Executive and other non-recurring severance costs. The
Company has excluded costs associated with restructuring activities
and the separation of its officers and other executives in
calculating its non-GAAP operating expenses and non-GAAP Operating
Income. The Company has excluded restructuring costs because a
restructuring represents a discrete event that signifies a change
in the Company’s strategy, but its costs are not indicative of the
ongoing financial performance of the business. The Company excludes
executive separation costs because executive separations are
unpredictable and not part of the Company’s business strategy but
could have a significant impact on the results of operation.
Retention plan costs. The Company has excluded the
expense related to a retention plan implemented in April 2023.
Approximately $11 million was made available to sales personnel and
key employees and will be paid in quarterly installments through
October 2024. The Company has excluded expense related to this
retention plan as such costs are not considered part of ongoing
operations.
Board of Director legal and advisory fees. The Company
has excluded costs associated with the litigation and shareholder
activism related to its 2023 annual meeting of shareholders. The
Company has excluded these costs as the costs do not relate to
ongoing operations.
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, 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 several 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, 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
concerning those or other forward-looking statements. Cutera's
financial performance for the second quarter ended June 30, 2023,
as discussed in this release, is preliminary and unaudited, and
subject to adjustment.
CUTERA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited) June 30,
December 31,
2023
2022
Assets Current assets: Cash and cash equivalents
$
180,654
$
145,924
Marketable investments
41,949
171,390
Accounts receivable, net
53,079
45,562
Inventories, net
68,668
63,628
Other current assets and prepaid expenses
24,900
24,036
Restricted cash
700
700
Total current assets
369,950
451,240
Property and equipment, net
65,511
40,368
Deferred tax asset
547
590
Goodwill
1,339
1,339
Operating lease right-of-use assets
11,370
12,831
Other long-term assets
15,113
14,620
Total assets
$
463,830
$
520,988
Liabilities and Stockholders' Deficit Current
liabilities: Accounts payable
$
34,240
$
33,736
Accrued liabilities
53,764
57,452
Operating leases liabilities
2,602
2,810
Deferred revenue
12,457
11,841
Total current liabilities
103,063
105,839
Deferred revenue, net of current portion
1,690
1,657
Operating lease liabilities, net of current portion
10,069
11,352
Convertible notes, net of unamortized debt issuance costs
417,568
416,459
Other long-term liabilities
575
862
Total liabilities
532,965
536,169
Stockholders’ deficit: Common stock
20
20
Additional paid-in capital
128,014
125,406
Accumulated other comprehensive income (loss)
4
(94
)
Accumulated deficit
(197,173
)
(140,513
)
Total stockholders' deficit
(69,135
)
(15,181
)
Total liabilities and stockholders' deficit
$
463,830
$
520,988
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,
2023
2022
2023
2022
Products $
55,568
$
58,589
$
105,156
$
110,655
Service
5,650
5,635
11,055
11,583
Total net revenue
61,218
64,224
116,211
122,238
Products
29,473
25,899
56,704
48,811
Service
3,691
3,281
6,526
6,595
Total cost of revenue
33,164
29,180
63,230
55,406
Gross profit
28,054
35,044
52,981
66,832
Gross margin %
45.8
%
54.6
%
45.6
%
54.7
%
Operating expenses: Sales and marketing
33,271
27,001
62,783
51,945
Research and development
5,784
6,859
12,252
13,358
General and administrative
18,528
11,248
31,044
24,750
Total operating expenses
57,583
45,108
106,079
90,053
Loss from operations
(29,529
)
(10,064
)
(53,098
)
(23,221
)
Amortization of debt issuance costs
(557
)
(298
)
(1,109
)
(517
)
Interest on convertible notes
(2,958
)
(1,149
)
(5,897
)
(1,927
)
Loss on extinguishment of convertible notes
-
(34,423
)
-
(34,423
)
Interest income
2,179
382
4,658
395
Other expense, net
(453
)
(1,910
)
(616
)
(2,678
)
Loss before income taxes
(31,318
)
(47,462
)
(56,062
)
(62,371
)
Income tax expense (benefit)
326
(186
)
598
47
Net loss $
(31,644
)
$
(47,276
)
(56,660
)
$
(62,418
)
Net loss per share: Basic $
(1.59
)
$
(2.53
)
(2.86
)
$
(3.39
)
Diluted $
(1.59
)
$
(2.53
)
(2.86
)
$
(3.39
)
Weighted-average number of shares used in per share
calculations: Basic
19,858
18,700
19,819
18,392
Diluted
19,858
18,700
19,819
18,392
CUTERA, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except percentage data) (unaudited)
Three Months Ended % Change Six Months
Ended % Change June 30, June 30, 2023
Vs June 30, June 30, 2023 Vs
2023
2022
2022
2023
2022
2022
Revenue By Geography: North America $
31,830
$
32,239
-1.3
%
$
59,499
$
61,092
-2.6
%
Japan
12,810
15,174
-15.6
%
25,718
32,677
-21.3
%
Rest of World
16,578
16,811
-1.4
%
30,994
28,469
+8.9% Total Net Revenue $
61,218
$
64,224
-4.7
%
$
116,211
$
122,238
-4.9
%
International as a percentage of total revenue
48.0
%
49.8
%
48.8
%
50.0
%
Revenue By Product Category: Systems - North America
$
22,243
$
25,232
-11.8
%
$
40,203
$
47,939
-16.1
%
- Rest of World (including Japan)
15,652
18,421
-15.0
%
31,010
32,228
-3.8
%
Total Systems
37,895
43,653
-13.2
%
71,213
80,167
-11.2
%
AviClear
3,996
136
nm
8,391
136
nm
Consumables
4,255
5,162
-17.6
%
7,998
9,065
-11.8
%
Skincare
9,422
9,638
-2.2
%
17,554
21,287
-17.5
%
Total Products
55,568
58,589
-5.2
%
105,156
110,655
-5.0
%
Service
5,650
5,635
+0.3%
11,055
11,583
-4.6
%
Total Net Revenue $
61,218
$
64,224
-4.7
%
$
116,211
$
122,238
-4.9
%
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2023
2022
2023
2022
Pre-tax Stock-Based Compensation Expense: Cost of revenue $
361
$
500
$
725
$
959
Sales and marketing
1,283
1,638
2,431
2,214
Research and development
415
1,067
1,108
2,047
General and administrative
(509
)
1,528
672
3,556
$
1,550
$
4,733
$
4,936
$
8,776
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,
2023
2022
2023
2022
Cash flows from operating activities: Net loss
$
(31,644
)
$
(47,276
)
$
(56,660
)
$
(62,418
)
Adjustments to reconcile net loss to net cash provided used in
operating activities:
-
Stock-based compensation
1,550
4,733
4,936
8,776
Depreciation and amortization
1,829
502
3,238
929
Amortization of contract acquisition costs
1,891
567
4,069
1,219
Amortization of debt issuance costs
557
298
1,109
517
Deferred tax assets
30
39
43
80
Provision for credit losses
2,026
217
2,514
409
Loss on sale of property and equipment
-
49
-
63
Loss on extinguishment of convertible notes
-
34,423
-
34,423
Unrealized gain on foreign exchange forward
623
-
-
-
Non-cash interest income
(1,115
)
-
(1,995
)
-
Changes in assets and liabilities:
-
Accounts receivable
(2,967
)
804
(10,031
)
(1,108
)
Inventories, net
3,151
(5,324
)
(5,040
)
(17,501
)
Other current assets and prepaid expenses
1,175
2,577
(878
)
(3,034
)
Other long-term assets
(2,771
)
(686
)
(4,782
)
(1,071
)
Accounts payable
(336
)
9,016
(1,666
)
14,771
Accrued liabilities
(5,512
)
(889
)
(3,806
)
(6,878
)
Operating leases ,net
(14
)
6
(30
)
36
Deferred revenue
261
463
649
702
Net cash used in operating activities
(31,266
)
(481
)
(68,330
)
(30,085
)
Cash flows from investing activities: Acquisition of
property and equipment
(14,755
)
(7,917
)
(25,908
)
(8,238
)
Purchase of marketable investments
-
(129,251
)
(23,467
)
(203,309
)
Proceeds from maturities of marketable investments
60,000
-
155,000
-
Net provided by (used in) cash used in investing activities
45,245
(137,168
)
105,625
(211,547
)
Cash flows from financing activities: Proceeds from
exercise of stock options and employee stock purchase plan
749
1,288
858
1,440
Purchase of capped call
-
(31,671
)
-
(31,671
)
Proceeds from issuance of convertible notes
-
240,000
-
240,000
Payment of issuance costs of convertible notes
-
(6,956
)
-
(6,956
)
Extinguishment of convertible notes
-
(45,777
)
-
(45,777
)
Taxes paid related to net share settlement of equity awards
(789
)
(1,784
)
(3,186
)
(4,234
)
Payments on finance lease obligation
(113
)
(133
)
(237
)
(284
)
Net cash provided by (used in) financing activities
(153
)
154,967
(2,565
)
152,518
Net increase (decrease) in cash, cash equivalents and
restricted cash
13,826
17,318
34,730
(89,114
)
Cash, cash equivalents, and restricted cash at beginning of period
167,528
58,432
146,624
164,864
Cash, cash equivalents, and restricted cash at end of period
$
181,354
$
75,750
$
181,354
$
75,750
CUTERA, INC.
Reconciliation of Non-GAAP
Financial Measures to the Most Directly Comparable GAAP Financial
Measure
(in thousands)
(unaudited)
Three Months Ended June 30, 2023
Gross Profit
Gross Margin
Operating
Income
Reported
$
28,054
45.8
%
$
(29,529
)
Adjustments: Depreciation and amortization including contract
acquisition costs
1,998
3.3
%
3,991
Stock-based compensation
361
0.6
%
1,550
ERP implementation costs
-
-
770
Legal
-
-
394
Severance
-
-
234
Retention plan costs
65
0.1
%
2,972
Board of Director legal and advisory fees
-
-
7,709
Other adjustments
307
0.5
%
307
Total adjustments
2,731
4.5
%
17,927
Adjusted
$
30,785
50.3
%
$
(11,602
)
Three Months Ended June 30, 2022
Gross Profit
Gross Margin
Operating
Income
Reported
$
35,044
54.6
%
$
(10,064
)
Adjustments: Depreciation and amortization including contract
acquisition costs
161
0.3
%
1,068
Stock-based compensation
500
0.8
%
4,733
ERP implementation costs
-
-
2,385
Legal
-
-
242
Severance
-
-
-
Other adjustments
-
-
-
Total adjustments
661
1.0
%
8,428
Adjusted
$
35,705
55.6
%
$
(1,636
)
Six Months Ended June 30, 2023
Gross Profit
Gross Margin
Operating
Income
Reported
$
52,981
45.6
%
$
(53,098
)
Adjustments: Depreciation and amortization including contract
acquisition costs
3,597
3.1
%
7,578
Stock-based compensation
725
0.6
%
4,936
ERP implementation costs
-
-
1,288
Legal
-
-
1,046
Severance
119
0.1
%
549
Retention plan costs
65
0.1
%
2,972
Board of Director legal and advisory fees
-
-
7,709
Other adjustments
307
0.3
%
892
Total adjustments
4,813
4.1
%
26,970
Adjusted
$
57,794
49.7
%
$
(26,128
)
Six Months Ended June 30, 2022
Gross Profit
Gross Margin
Operating
Income
Reported
$
66,832
54.7
%
$
(23,221
)
Adjustments: Depreciation and amortization including contract
acquisition costs
237
0.2
%
2,147
Stock-based compensation
959
0.8
%
8,776
ERP implementation costs
-
-
6,361
Legal
-
-
496
Severance
-
-
-
Other adjustments
-
-
-
Total adjustments
1,196
1.0
%
17,780
Adjusted
$
68,028
55.7
%
$
(5,441
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808834483/en/
Cutera, Inc. Greg Barker VP, Corporate FP&A and
Investor Relations 415-657-5500 IR@cutera.com
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