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Cutera Announces Record First Quarter 2022 Revenue Results

CUTR

Delivers 17% revenue growth as reported and 21% on a constant currency basis

AviClear investments were accelerated in 1Q22 ahead of FDA device clearance

New ERP system launched

Company reiterates full-year guidance at current exchange rates

Cutera, Inc. (Nasdaq: CUTR) (“Cutera” or the “Company”), a leading provider of aesthetic and dermatology solutions, today reported financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Financial and Operational Highlights

  • Revenue was $58.0 million, an increase of 17% from the prior-year period as reported and 21% on a constant currency basis, driven by robust performance across the business, with particular strength in North America;
    • Capital Equipment revenue of $36.5 million increased 29%over the prior-year period as reported and 32% on a constant currency basis;
    • Recurring revenue, defined as the combination of Skincare, Consumable Products, and Service, was $21.5 million, an increase of 1% as reported over the prior-year period and 7% on a constant currency basis;
      • Skincare revenue of $11.6 million decreased 5% over the prior-year period as reported and increased 4% on a constant currency basis;
      • Consumable Product revenue of $3.9 million increased 33% over the prior-year period as reported and 36% on a constant currency basis; and
      • Service revenue of $5.9 million decreased 3% over the prior-year period as reported and was flat on a constant currency basis.
  • Gross Margin was 54.8% compared to 55.8% in the prior-year period. Cost of Goods Sold during the period included $0.9 million in incremental spend related to Acne. Excluding these expenses, Gross Margin in the first quarter was 56.4%;
  • Operating Expenses were $44.9 million in the quarter, compared to $26.5 million in the prior-year period. Operating Expenses during the period included $7.3 million in spend associated with preparing for the launch of Acne in addition to $4.0 million of ERP implementation expense, culminating in our ERP go-live during the quarter;
  • GAAP Net loss was $15.1 million, or ($0.84) per fully diluted share, compared to a net loss of $0.4 million, or ($0.02) per fully diluted share in the prior-year period. Non-GAAP net loss was $5.8 million, as compared to a $3.0 million net profit in the prior-year period; and
  • Adjusted EBITDA was a loss of $3.8 million in the period, as compared to income of $4.6 million in the prior-year period. Excluding Acne program spend of $8.1 million in the quarter, adjusted EBITDA was income of $4.3 million.

“I am pleased with the strong North American capital equipment sales we delivered in the first quarter, as the momentum we built in the second half of 2021 carried into the new year. Our investments in capital equipment sales force expansion, along with increased practice support from our Key Account Manager strategy, continue to enhance our position in the marketplace and drive year-over-year growth in equipment and consumable products,” commented Dave Mowry, Chief Executive Officer of Cutera, Inc. “With the addition of the recent FDA 510(k) approved AviClearTM device for the treatment of mild, moderate, and severe acne, Cutera’s portfolio has been fortified with a bold first-mover product. AviClear addresses a significant unmet clinical need for patients seeking a non-drug solution for their acne and offers our physician customers an exciting new revenue stream. Our limited commercial release of AviClear is ongoing, and the insights we glean from this phase will inform and enhance our full launch later in 2022.”

2022 Outlook

Management is reiterating 2022 revenue guidance to be in the range of $255 million to $260 million at current foreign exchange rates. This guidance represents an underlying constant currency revenue growth rate of approximately 13%-15%, up from our prior issued guidance of 10%-12%, negating approximately $7 million of incremental currency headwinds. Our full-year revenue guidance does not include any contribution from AviClear.

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 1-800-381-7839 (domestic) or +1-416-981-0157 (international) and refer to the Conference Code: 22017471.

The call will be webcast live and be available for replay one hour after the end of the call from the Investor Relations section of Cutera’s website at http://www.cutera.com/.

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, 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 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. 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 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, 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, 2022, 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,

2022

2021

Assets
Current assets:
Cash and cash equivalents

$

57,732

$

164,164

Marketable investments

74,047

-

Accounts receivable, net

33,169

31,449

Inventories

51,680

39,503

Other current assets and prepaid expenses

20,156

14,545

Total current assets

236,784

249,661

Property and equipment, net

3,009

3,019

Deferred tax asset

737

778

Goodwill

1,339

1,339

Operating lease right-of-use assets

14,330

14,627

Other long-term assets

9,792

10,169

Restricted cash

700

700

Total assets

$

266,691

$

280,293

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable

$

13,646

$

7,891

Accrued liabilities

48,044

54,100

Operating leases liabilities

2,628

2,419

Deferred revenue

9,719

9,490

Total current liabilities

74,037

73,900

Deferred revenue, net of current portion

1,345

1,335

Operating lease liabilities, net of current portion

13,007

13,483

Convertible notes, net of unamortized debt issuance costs

134,462

134,243

Other long-term liabilities

680

763

Total liabilities

223,531

223,724

Stockholders’ equity:
Common stock

18

18

Additional paid-in capital

116,468

114,724

Accumulated other comprehensive loss

(11

)

-

Accumulated deficit

(73,315

)

(58,173

)

Total stockholders' equity

43,160

56,569

Total liabilities and stockholders' equity

$

266,691

$

280,293

CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

March 31,

March 31,

2022

2021

Products $

52,066

$

43,551

Service

5,948

6,117

Total net revenue

58,014

49,668

Products

22,912

18,331

Service

3,314

3,627

Total cost of revenue

26,226

21,958

Gross margin

31,788

27,710

Gross margin %

54.8

%

55.8

%

Operating expenses:
Sales and marketing

24,944

15,068

Research and development

6,499

4,112

General and administrative

13,502

7,365

Total operating expenses

44,945

26,545

(Loss) income from operations

(13,157

)

1,165

Interest and other expense, net
Amortization of debt issuance costs

(219

)

(52

)

Interest on convertible notes

(778

)

(191

)

Other expense, net

(755

)

(1,023

)

Loss before income taxes

(14,909

)

(101

)

Income tax expense

233

258

Net loss $

(15,142

)

$

(359

)

Net loss per share:
Basic $

(0.84

)

$

(0.02

)

Diluted $

(0.84

)

$

(0.02

)

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

18,080

17,768

Diluted

18,080

17,768

CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

March 31,

March 31,

2022

2021

Cash flows from operating activities:
Net loss

$

(15,142

)

$

(359

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock-based compensation

4,043

1,846

Depreciation and amortization

427

361

Amortization of contract acquisition costs

652

545

Amortization of debt issuance costs

219

52

Impairment of capitalized cloud computing costs

-

182

Change in deferred tax asset

41

45

Provision for excess and obsolete inventories

358

193

Provision for credit losses

192

218

Loss (gain) on sale of property and equipment

14

(59

)

Change in right-of-use asset

638

604

Changes in assets and liabilities:
Accounts receivable

(1,912

)

(2,407

)

Inventories

(12,535

)

(6,214

)

Other current assets and prepaid expenses

(5,611

)

(1,560

)

Other long-term assets

(385

)

(500

)

Accounts payable

5,755

(1,653

)

Accrued liabilities

(5,989

)

10,022

Operating lease liabilities

(608

)

(563

)

Deferred revenue

239

500

Net cash (used in) provided by operating activities

(29,604

)

1,253

Cash flows from investing activities:
Acquisition of property, equipment and software

(321

)

(101

)

Disposal of property and equipment

-

52

Purchase of marketable investments

(74,058

)

-

Net cash used in investing activities

(74,379

)

(49

)

Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan

151

396

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

(2,450

)

(999

)

Payments on capital lease obligation

(150

)

(115

)

Net cash (used in) provided by financing activities

(2,449

)

116,681

Net (decrease) increase in cash, cash equivalents and restricted cash

(106,432

)

117,885

Cash, cash equivalents, and restricted cash at beginning of period

164,864

47,047

Cash, cash equivalents, and restricted cash at end of period

$

58,432

$

164,932

CUTERA, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in thousands, except percentage data)

(unaudited)

Three Months Ended

% Change

March 31,

March 31,

2022 Vs

2022

2021

2021

Revenue By Geography:
North Amrerica $ 28,853 $ 22,402 +28.8%
Japan 17,503 16,555 +5.7%
Rest of World 11,658 10,711 +8.8%
Total Net Revenue $ 58,014 $ 49,668 +16.8%

International as a percentage of total revenue

50.3 % 54.9 %
Revenue By Product Category:
Systems
- North America $ 22,707 $ 16,785 +35.3%
- Rest of World (including Japan) 13,807 11,535 +19.7%
Total Systems 36,514 28,320 +28.9%
Consumables 3,903 2,925 +33.4%
Skincare 11,649 12,306

-5.3%

Total Products 52,066 43,551 +19.5%
Service 5,948 6,117

-2.7%

Total Net Revenue $ 58,014 $ 49,668

+16.8%

Three Months Ended

March 31,

March 31,

2022

2021

Pre-tax Stock-Based Compensation Expense:
Cost of revenue $ 459 $ 144
Sales and marketing 576 721
Research and development 980 301
General and administrative

2,028

680

$ 4,043 $ 1,846
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, 2022 Three Months Ended March 31, 2021
GAAP Depreciation
and
Amortization
Stock-Based
Compensation
ERP
Implementation
Legal - Lutronic Non-GAAP GAAP Depreciation
and
Amortization
Stock-Based
Compensation
CRM and ERP
Implementation
Legal - Lutronic Non-GAAP
Net revenue

$

58,014

-

-

-

-

$

58,014

$

49,668

-

-

-

-

$

49,668

Cost of revenue

26,226

(76

)

(459

)

-

-

25,691

21,958

(162

)

(144

)

-

-

21,652

Gross margin

31,788

76

459

-

-

32,323

27,710

162

144

-

-

28,016

Gross margin %

54.8

%

55.7

%

55.8

%

56.4

%

Operating expenses:
Sales and marketing

24,944

(820

)

(576

)

-

-

23,548

15,068

(678

)

(721

)

(182

)

-

13,487

Research and development

6,499

(45

)

(980

)

-

-

5,474

4,112

(39

)

(301

)

-

-

3,772

General and administrative

13,502

(138

)

(2,028

)

(3,976

)

(254

)

7,106

7,365

(27

)

(680

)

(70

)

(401

)

6,187

Total operating expenses

44,945

(1,003

)

(3,584

)

(3,976

)

(254

)

36,128

26,545

(744

)

(1,702

)

(252

)

(401

)

23,446

(Loss) income from operations

(13,157

)

1,079

4,043

3,976

254

(3,805

)

1,165

906

1,846

252

401

4,570

Interest and other expense, net
Amortization of debt issuance costs

(219

)

-

-

-

-

(219

)

(52

)

-

-

-

-

(52

)

Interest on convertible notes

(778

)

-

-

-

-

(778

)

(191

)

-

-

-

-

(191

)

Other expense

(755

)

-

-

-

-

(755

)

(1,023

)

-

-

-

-

(1,023

)

Total interest and other expense, net

(1,752

)

-

-

-

-

(1,752

)

(1,266

)

-

-

-

-

(1,266

)

(Loss) income before income taxes

(14,909

)

1,079

4,043

3,976

254

(5,557

)

(101

)

906

1,846

252

401

3,304

Provision for income taxes

233

-

-

-

-

233

258

-

-

-

-

258

Net (loss) income

$

(15,142

)

$

1,079

$

4,043

$

3,976

$

254

$

(5,790

)

$

(359

)

$

906

$

1,846

$

252

$

401

$

3,046

Net (loss) income per share:
Basic

$

(0.84

)

$

(0.32

)

$

(0.02

)

$

0.17

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

18,080

18,080

17,768

17,768

Operating expenses as a % of net revenue

GAAP

Non-GAAP

GAAP

Non-GAAP

Sales and marketing

43.0

%

40.6

%

30.3

%

27.2

%

Research and development

11.2

%

9.4

%

8.3

%

7.6

%

General and administrative

23.3

%

12.2

%

14.8

%

12.5

%

77.5

%

62.2

%

53.4

%

47.3

%

CUTERA, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ended
March 31, 2022
Net loss

$

(15,142

)

Adjustments:
Stock-based compensation

4,043

ERP implementation cost

3,976

Interest and other expense, net

1,752

Depreciation and amortization

1,079

Legal - Lutronic

254

Provision for income taxes

233

Total adjustments

11,337

Adjusted EBITDA

$

(3,805

)

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