Continued momentum in Capital equipment sales, posting 27% growth as reported and 32% in constant currency;
Strong Consumable product growth reflecting robust underlying treatment volumes;
Moving to full North American AviClear launch following successful limited commercial release;
Reiterating full-year revenue guidance despite foreign exchange headwinds, implying year-over-year constant currency growth of approximately 20%
BRISBANE, Calif.–(BUSINESS WIRE)–Cutera, Inc. (Nasdaq: CUTR) (“Cutera” or the “Company”), a leading provider of aesthetic and dermatology solutions, today reported financial results for the third quarter ended September 30, 2022.
Third Quarter 2022 Financial and Operational Highlights
Consolidated revenue of $62.8 million driven by capital equipment and consumable product demand.
During Q3 2022, over 100 new active placements of AviClear devices, up from the over 50 in Q2 and slightly ahead of the previous 100 device Q3 commitment.
Strong Consumable Product Revenue, up 66% as reported and 74% on a constant currency basis, reflecting robust underlying treatment volumes and the inclusion of AviClear patient procedure revenue.
GAAP Gross margin of 54.5% in the quarter, compared to 58.2% in the prior-year period.
Excluding the 170 basis point impact from AviClear investments and foreign exchange headwinds of approximately 250 basis points, gross margin would have been 58.7%.
GAAP Operating expenses were $43.7 million in the quarter, compared to $32.8 million in the prior-year period. Operating expenses during the period included $8.1 million in AviClear spending in addition to $1.4 million in ERP implementation expenses.
GAAP Net loss was $12.1 million, compared to a Net loss of $1.4 million in the prior-year period.
Adjusted EBITDA was a loss of $2.0 million, compared to a gain of $5.1 million in the prior-year period.
Excluding AviClear impacts of $7.9 million in the quarter and foreign exchange headwinds of $3.1 million over the prior year period comparable adjusted EBITDA would have been $9.1 million.
Key Revenue Metrics
Three Months Ended Sep 30, 2022
% Change 2022 Vs 2021
Constant Currency
Key Profit Metrics
Three Months Ended Sep 30, 2022
Constant Currency
Capital Equipment
$41.0
27%
32%
GAAP Margin %
54.5%
57.0%
Skincare
$9.4
-36%
-21%
Non-GAAP Margin %
55.4%
57.8%
Consumables
$6.1
66%
74%
Adjusted EBITDA
($2.0)
$1.2
Service
$6.3
-6%
-1%
Adjusted EBITDA Margin %
-3.1%
1.9%
Recurring
$21.8
-13%
-2%
Total Revenue
$62.8
9%
17%
Key Revenue Metrics
Nine Months Ended Sep 30, 2021
% Change 2022 Vs 2021
Constant Currency
Key Profit Metrics
Nine Months Ended Sep 30, 2021
Constant Currency
Capital Equipment
$121.2
26%
30%
GAAP Margin %
54.6%
56.5%
Skincare
$30.7
-21%
-8%
Non-GAAP Margin %
55.6%
57.4%
Consumables
$15.3
39%
44%
Adjusted EBITDA
($7.4)
($0.3)
Service
$17.9
-9%
-5%
Adjusted EBITDA Margin %
-4.0%
-0.2%
Recurring
$63.9
-8%
1%
Total Revenue
$185.0
12%
18%
“I am pleased by the momentum we continue to see in our core business, as prior investments in sales force expansion deliver strong results in both our capital and consumables product segments across North America and other direct-sales markets. We remain watchful to the global macroeconomic conditions and are prepared to respond quickly if warranted. Based upon our current view, the strength of our third quarter performance, and our capital equipment pipeline, we remain encouraged by the resilience of our core markets,” commented Dave Mowry, Chief Executive Officer of Cutera, Inc.
“During the quarter, in addition to setting an all-time high for 3Q capital sales in North America, our sales team executed the second phase of our Limited Commercial Release, placing over 100 additional active AviClear devices into the field. These efforts enabled us to validate several new processes and as a result in November we will move to a full launch of this revolutionary product and procedure in North America, slightly ahead of our previous plans.”
2022 Outlook
Based upon our results year-to-date, despite unprecedented foreign exchange volatility Cutera expects to finish 2022 at the upper end of revenue guidance of $255 million to $260 million, fully absorbing the impact of approximately $17 million of currency headwinds. This implies constant currency growth of roughly 18% to 20% over the prior year.
Management now anticipates the placement and activation of an additional 200 AviClear devices during the fourth quarter of 2022, bringing the total number of active AviClear platforms entering FY 2023 to approximately 350.
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 Dave Mowry, Chief Executive Officer, and Rohan Seth, Chief Financial Officer.
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 the statement of operations and net income (loss) per share. Non-GAAP adjustments include stock-based compensation, depreciation, amortization, executive and other non-recurring severance costs, customer relationship management (“CRM”) and enterprise resource planning (“ERP”) system costs, non-recurring legal and litigation costs, and the loss on extinguishment of convertible notes. 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, non-recurring legal and litigation costs, and losses on the extinguishment of convertible notes.
Company management uses these measurements as aids in monitoring the Company’s ongoing financial performance from quarter to quarter, and year to year, regularly 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:
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 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;
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 severance 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;
Non-recurring legal and litigation costs. We have excluded costs incurred related to third-party litigation and disputes, that are non-recurring; and
Loss on extinguishment of convertible notes. We have excluded the loss on extinguishment of convertible notes. We excluded this loss because we believe it is non-recurring.
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, 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 concerning those or other forward-looking statements. Cutera’s financial performance for the third quarter ended September 30, 2022, as discussed in this release, is preliminary and unaudited, and subject to adjustment.
CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30,
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
45,880
$
164,164
Marketable investments
204,946
–
Accounts receivable, net
35,876
31,449
Inventories, net
55,938
39,503
Other current assets and prepaid expenses
23,672
14,545
Total current assets
366,312
249,661
Property and equipment, net
34,479
3,019
Deferred tax assets
626
778
Goodwill
1,339
1,339
Operating lease right-of-use assets
13,033
14,627
Other long-term assets
11,668
10,169
Restricted cash
700
700
Total assets
$
428,157
$
280,293
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
34,176
$
7,891
Accrued liabilities
50,791
54,100
Operating leases liabilities
2,712
2,419
Deferred revenue
10,579
9,490
Total current liabilities
98,258
73,900
Deferred revenue, net of current portion
1,822
1,335
Operating lease liabilities, net of current portion
11,642
13,483
Convertible notes, net of unamortized debt issuance costs
300,256
134,243
Other long-term liabilities
685
763
Total liabilities
412,663
223,724
Stockholders’ equity:
Common stock
20
18
Additional paid-in capital
148,535
114,724
Accumulated other comprehensive loss
(336
)
–
Accumulated deficit
(132,725
)
(58,173
)
Total stockholders’ equity
15,494
56,569
Total liabilities and stockholders’ equity
$
428,157
$
280,293
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,
2022
2021
2022
2021
Products
$
56,540
$
50,694
$
167,195
$
146,056
Service
6,268
6,690
17,851
19,585
Total net revenue
62,808
57,384
185,046
165,641
Products
25,255
20,259
74,066
59,483
Service
3,305
3,700
9,900
11,234
Total cost of revenue
28,560
23,959
83,966
70,717
Gross profit
34,248
33,425
101,080
94,924
Gross margin %
54.5
%
58.2
%
54.6
%
57.3
%
Operating expenses:
Sales and marketing
26,488
19,190
78,433
52,668
Research and development
6,389
5,802
19,747
14,764
General and administrative
10,804
7,807
35,554
23,633
Total operating expenses
43,681
32,799
133,734
91,065
(Loss) income from operations
(9,433
)
626
(32,654
)
3,859
Interest and other (expense) income, net
Amortization of debt issuance costs
(400
)
(225
)
(917
)
(492
)
Interest on convertible notes
(1,739
)
(768
)
(3,666
)
(1,737
)
Loss on extinguishment of convertible notes
–
–
(34,423
)
–
Gain on extinguishment of PPP loan
–
–
–
7,185
Other income (expense), net
265
(561
)
(2,018
)
(1,976
)
(Loss) income before income taxes
(11,307
)
(928
)
(73,678
)
6,839
Income tax expense
827
462
874
842
Net (loss) income
$
(12,134
)
$
(1,390
)
$
(74,552
)
$
5,997
Net (loss) income per share:
Basic
$
(0.62
)
$
(0.08
)
$
(3.95
)
$
0.34
Diluted
$
(0.62
)
$
(0.08
)
$
(3.95
)
$
0.33
Weighted-average number of shares used in per share calculations:
Basic
19,593
17,945
18,897
17,860
Diluted
19,593
17,945
18,897
18,327
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,
2022
2021
2022
2021
Cash flows from operating activities:
Net (loss) income
$
(12,134
)
$
(1,390
)
$
(74,552
)
$
5,997
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation
4,245
3,742
13,021
8,507
Depreciation and amortization
674
307
1,603
1,014
Amortization of contract acquisition costs
596
427
1,815
1,430
Amortization of debt issuance costs
400
225
917
492
Unrealized gain on foreign exchange forward
(292
)
–
(292
)
–
Impairment of capitalized cloud computing costs
–
–
–
182
Change in deferred tax assets
72
3
152
54
Provision for excess and obsolete inventories
(448
)
636
110
1,335
Provision for credit losses
268
(391
)
677
101
Loss (gain) on sale of property and equipment
23
37
86
(45
)
PPP loan forgiveness
–
–
–
(7,185
)
Change in right-of-use asset
668
1,077
1,976
1,681
Loss on extinguishment of convertible notes
–
–
34,423
–
Changes in assets and liabilities:
Accounts receivable
(3,996
)
(4,466
)
(5,104
)
(8,899
)
Inventories, net
(10,666
)
(1,604
)
(28,725
)
(8,261
)
Other current assets and prepaid expenses
(5,801
)
(4,494
)
(8,835
)
(4,571
)
Other long-term assets
(2,573
)
(1,767
)
(3,644
)
(3,487
)
Accounts payable
5,671
1,049
20,442
575
Accrued liabilities
3,194
2,129
(3,684
)
11,782
Operating lease liabilities
(658
)
(1,043
)
(1,930
)
(1,573
)
Deferred revenue
874
(723
)
1,576
(557
)
Net cash used in operating activities
(19,883
)
(6,246
)
(49,968
)
(1,428
)
Cash flows from investing activities:
Acquisition of property and equipment
(5,869
)
(12
)
(14,107
)
(382
)
Disposal of property and equipment
–
–
–
71
Proceeds from maturities of marketable investments
47,000
–
47,000
–
Purchase of marketable securities and long-term investments
(48,973
)
–
(252,282
)
–
Net cash used in investing activities
(7,842
)
(12
)
(219,389
)
(311
)
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan
248
158
1,687
2,056
Taxes paid related to net share settlement of equity awards
(586
)
(511
)
(4,820
)
(1,963
)
Purchase of capped call
–
–
(31,671
)
(16,134
)
Payment of issuance costs of capped call
(353
)
–
(353
)
–
Proceeds from issuance of convertible notes
–
–
240,000
138,250
Payment of issuance costs of convertible notes
(646
)
–
(7,602
)
(4,717
)
Extinguishment of convertible notes
–
–
(45,777
)
–
Payments on capital lease obligation
(108
)
(103
)
(391
)
(314
)
Net cash (used in) provided by financing activities
(1,445
)
(456
)
151,073
117,178
Net increase (decrease) in cash, cash equivalents and restricted cash
(29,170
)
(6,714
)
(118,284
)
115,439
Cash, cash equivalents, and restricted cash at beginning of period
75,750
169,200
164,864
47,047
Cash, cash equivalents, and restricted cash at end of period
$
46,580
$
162,486
$
46,580
$
162,486
CUTERA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except percentage data)
(unaudited)
Three Months Ended
% Change
Nine Months Ended
% Change
September 30,
September 30,
2022 Vs
September 30,
September 30,
2022 Vs
2022
2021
2021
2022
2021
2021
Revenue By Geography:
North America
$
33,258
$
26,710
+24.5%
$
94,350
$
75,794
+24.5%
Japan
15,263
19,335
-21.1%
47,940
53,311
-10.1%
Rest of World
14,287
11,339
+26.0%
42,756
36,536
+17.0%
Total Net Revenue
$
62,808
$
57,384
+9.5%
$
185,046
$
165,641
+11.7%
International as a percentage of total revenue
47.0
%
53.5
%
49.0
%
54.2
%
Revenue By Product Category:
Systems
– North America
$
25,359
$
20,680
+22.6%
$
73,298
$
57,353
+27.8%
– Rest of World (including Japan)
15,626
11,511
+35.7%
47,854
38,726
+23.6%
Total Systems
40,985
32,191
+27.3%
121,152
96,079
+26.1%
Consumables
6,119
3,684
+66.1%
15,320
11,040
+38.8%
Skincare
9,436
14,819
-36.3%
30,723
38,937
-21.1%
Total Products
56,540
50,694
+11.5%
167,195
146,056
+14.5%
Service
6,268
6,690
-6.3%
17,851
19,585
-8.9%
Total Net Revenue
$
62,808
$
57,384
+9.5%
$
185,046
$
165,641
+11.7%
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2022
2021
2022
2021
Pre-tax Stock-Based Compensation Expense:
Cost of revenue
$
471
$
330
$
1,430
$
908
Sales and marketing
1,641
711
3,855
1,954
Research and development
466
1,020
2,513
1,628
General and administrative
1,667
1,681
5,223
4,017
$
4,245
$
3,742
$
13,021
$
8,507
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, 2022
Three Months Ended September 30, 2021
GAAP
Depreciation
and
Amortization
Stock-Based
Compensation
ERP
Implementation
Legal – Lutronic
Severance
Other Adjustments
Non-GAAP
GAAP
Depreciation
and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Legal – Lutronic
Other
Adjustments
Non-GAAP
Net revenue
$
62,808
–
–
–
–
–
–
$
62,808
$
57,384
–
–
–
–
$
57,384
Cost of revenue
28,560
(359
)
(471
)
–
–
(26
)
290
27,994
23,959
(132
)
(330
)
–
–
445
23,942
Gross profit
34,248
359
471
–
–
26
(290
)
34,814
33,425
132
330
–
–
(445
)
33,442
Gross margin %
54.5
%
55.4
%
58.2
%
58.3
%
Operating expenses:
Sales and marketing
26,488
(715
)
(1,641
)
–
–
(262
)
–
23,870
19,190
(549
)
(711
)
–
–
–
17,930
Research and development
6,389
(67
)
(466
)
–
–
(88
)
–
5,768
5,802
(49
)
(1,020
)
–
–
–
4,733
General and administrative
10,804
(54
)
(1,667
)
(1,351
)
(566
)
(39
)
–
7,127
7,807
(8
)
(1,681
)
(128
)
(288
)
–
5,702
Total operating expenses
43,681
(836
)
(3,774
)
(1,351
)
(566
)
(389
)
–
36,765
32,799
(606
)
(3,412
)
(128
)
(288
)
–
28,365
(Loss) income from operations
(9,433
)
1,195
4,245
1,351
566
415
(290
)
(1,951
)
626
738
3,742
128
288
(445
)
5,077
Interest and other income (expense), net
Amortization of debt issuance costs
(400
)
–
–
–
–
–
–
(400
)
(225
)
–
–
–
–
–
(225
)
Interest on convertible notes
(1,739
)
–
–
–
–
–
–
(1,739
)
(768
)
–
–
–
–
–
(768
)
Other income (expense)
265
–
–
–
–
–
–
265
(561
)
–
–
–
–
–
(561
)
Total interest and other expense, net
(1,874
)
–
–
–
–
–
–
(1,874
)
(1,554
)
–
–
–
–
–
(1,554
)
(Loss) income before income taxes
(11,307
)
1,195
4,245
1,351
566
415
(290
)
(3,825
)
(928
)
738
3,742
128
288
(445
)
3,523
Income tax expense
827
–
–
–
–
–
–
827
462
–
–
–
–
–
462
Net (loss) income
$
(12,134
)
$
1,195
$
4,245
$
1,351
$
566
$
415
$
(290
)
$
(4,652
)
$
(1,390
)
$
738
$
3,742
$
128
$
288
$
(445
)
$
3,061
Net (loss) income per share:
Basic
$
(0.62
)
$
(0.24
)
$
(0.08
)
$
0.17
Weighted-average number of shares used in per share calculations:
Basic
19,593
19,593
17,945
17,945
Operating expenses as a % of net revenue
GAAP
Non-GAAP
GAAP
Non-GAAP
Sales and marketing
42.2
%
38.0
%
33.4
%
31.2
%
Research and development
10.2
%
9.2
%
10.1
%
8.2
%
General and administrative
17.2
%
11.3
%
13.6
%
9.9
%
69.6
%
58.5
%
57.1
%
49.3
%
Contacts
Cutera, Inc.
Greg Barker
VP, Corporate FP&A
415-657-5500
[email protected]
