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Cutera Inc.$48.02$.821.74%

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 Cutera Reports Fourth Quarter 2015 Results
   Monday, February 08, 2016 4:03:06 PM ET

-- Sixth Consecutive Quarter of Double-Digit Revenue Growth

-- Revenue Increased 18% to $30.0 million

-- EPS: $0.15 and Non-GAAP EPS: $0.25

-- Generated $3.9 Million of Cash from Operations

-- Board Approved $10 million of Stock Repurchase Program

Cutera, Inc. (CUTR ) ("Cutera" or the "Company"), a leading provider of laser and energy-based aesthetic systems for practitioners worldwide, today reported financial results for the fourth quarter ended December 31, 2015.

Key highlights for the fourth quarter of 2015 were as follows:

-- Revenue increased 18% to $30.0 million and was driven by both product portfolio strength as well as global sales productivity improvements;

<p>-- Product revenue grew 24%, led by a 30% increase in North America and 14% in Rest of World ("ROW");

-- Product revenue grew 24%, led by a 30% increase in North America and 14% in Rest of World ("ROW");

-- For 2015, Product revenue grew by 49% in North America, compared to 2014;

-- Gross margin improved to 60% --the highest quarterly gross margin since 2009;

-- GAAP Net income was $2.1 million, or $0.15 per diluted share;

-- Non-GAAP* Net income was $3.4 million, or $0.25 per diluted share, after adjusting for $1.4 million of non-cash expenses related to stock-based compensation, depreciation and amortization of intangibles;

-- Cash and investments: generated $3.9 million of cash from operations during the quarter and used $3.5 million in the stock repurchase program bringing the balance as of December 31, 2015 to $48.4 million, or $3.73 per outstanding share;

-- Stock repurchase program: Board approved an incremental $10 million. In 2015, the Company repurchased $40 million of stock.

Kevin Connors, President and Chief Executive Officer of Cutera, stated, "We are pleased to conclude 2015 with our sixth consecutive quarter of double-digit revenue growth, and essentially on par with our highest revenue quarter in our history. Our return to profitability demonstrated our ability to expand revenue, while controlling operating expense levels, enabling us to realize operating leverage in our business model. Our steady improvement in gross margin during 2015 is an indicator of our ability to improve operating leverage through a balance of strong revenue growth and cost reduction initiatives by our Engineering and Operations teams."

Product revenue grew by $3.5 million, or 30%, in North America and $1.1 million, or 14%, in ROW despite continued currency headwinds, compared to the fourth quarter of 2014. The Company estimates that its international revenue was negatively impacted in the fourth quarter of 2015 by approximately $1.0-$1.5 million due to the appreciation of the US dollar, compared to the fourth quarter of 2014. From a product perspective, the Company experienced strong growth from several of its legacy products as well as the recently launched products. In particular, enLighten, the flagship picosecond and nanosecond tattoo removal and benign pigmented lesion treatment laser, continued to demonstrate global appeal and has become a major revenue contributor for the Company.

Gross margin improved to 60%, which was one of management’s key goals for 2015. The improved gross margin was a critical driver in the Company returning to profitability and generating cash from operations. In addition, a higher ratio of direct versus distributed business, contributed to improved fourth quarter 2015 gross margin performance.

"In 2015, we made very deliberate choices to drive revenue growth organically through investing internally in people and projects. The present strength and breadth of our product offering, as well as our commercial results, validate the path we chose. In 2016, we plan to make a new product announcement at the March American Academy of Dermatology meeting in Washington DC, expand the sales headcount to facilitate continued revenue growth, improve the productivity of our sales team further and continue to drive our product costs down to improve gross margins.

"We look forward to a strong 2016 as we continue to expand market share and improve financial results. I would like to take this opportunity to thank all of our global customers for their belief and partnership with Cutera, as well as our worldwide employees for their dedication and commitment to building our Company," concluded Mr. Connors.

Non-GAAP Income Statement Measures (Unaudited)

*To supplement our condensed consolidated financial statements presented in accordance with Generally Accepted Accounting Principles, or GAAP, Cutera has provided certain Non-GAAP income statement measures for net income and net income per diluted share, which exclude non-cash expenses for stock-based compensation, depreciation and amortization of intangibles. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management believes that the adjusted financial results are more reflective of the cash-basis results of operations as well as comparable to similar measures used by other companies.

Conference Call

The conference call to discuss these results is scheduled to begin at 2:00 p.m. PST (5:00 p.m. EST) on February 8, 2016. Participating in the call will be Kevin Connors, President and Chief Executive Officer, and Ron Santilli, Executive Vice President and Chief Financial Officer. The call will be broadcast live over the internet hosted at the Investor Relations section of Cutera’s website, and will be archived online within one hour of its completion through 8:59 p.m. PST (11:59 p.m. EST) on February 22, 2016. In addition, you may call 1-877-705-6003 to listen to the live broadcast.

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 been developing 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.

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning Cutera’s plans to introduce new products, expand its salesforce, ability to increase revenue, reduce expenses, improve financial results, make productivity improvements, grow the Company’s market share, realize benefits from additional investment, improve or maintain profitability, penetrate the market, generate cash from operations, plans for stock repurchases and statements regarding long-term prospects and opportunities in the laser and other energy-based equipment aesthetic market, are forward-looking statements within the meaning of the Safe Harbor. 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. Potential risks and uncertainties that could affect Cutera’s business and cause its financial results to differ materially from those contained in the forward-looking statements include those related to the Company’s efforts to improve sales productivity, hire and retain qualified sales representatives, improve revenue growth, gross margins and profitability through leveraging operating expenses; the Company’s ability to successfully develop and launch new products and applications and market them to both its installed base and new customers; unforeseen events and circumstances relating to the Company’s operations; government regulatory actions; and those other factors described in the section entitled, "Risk Factors" in its most recent Form 10-Q as filed with the Securities and Exchange Commission on November 2, 2015. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. 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. Cutera’s financial performance for the fourth quarter ended December 31, 2015, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

 CUTERA, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 (unaudited)
                                                                       Three Months Ended
                                                                       December 31,     December 31,
                                                                       2015             2014
 Net revenue                                                           $    30,042      $    25,499
 Cost of revenue                                                            12,145           11,679
                                             Gross profit                   17,897           13,820
                                             Gross margin %                 60     %         54     %
 Operating expenses:
                       Sales and marketing                                  9,899            9,356
                       Research and development                             2,812            2,649
                       General and administrative                           3,189            3,407
                                             Total operating expenses       15,900           15,412
 Income (Loss) from operations                                              1,997            (1,592 )
 Interest and other income, net                                             105              8
 Income (Loss) before income taxes                                          2,102            (1,584 )
 Provision for income taxes                                                 52               41
 Net income (loss)                                                     $    2,050       $    (1,625 )
 Net income (loss) per share:
                       Basic                                           $    0.16        $    (0.11  )
                       Diluted                                         $    0.15        $    (0.11  )
 Weighted-average number of shares used in per share calculations:
                       Basic                                                12,978           14,425
                       Diluted                                              13,591           14,425
 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 December 31, 2015
                                                                   GAAP                              Adjustments                                        Non-GAAP
                                                                                                                                                        As Adjusted*
 Net revenue                                                       $               30,042            $              --                                  $               30,042
 Cost of revenue                                                                   12,145                              (272           ) (a)                             11,873
 Gross profit                                                                      17,897                              272                                              18,169
 Gross margin %                                                                    60             %                                                                     60             %
 Operating expenses:
 Sales and marketing                                                               9,899                               (438           ) (b)                             9,461
 Research and development                                                          2,812                               (160           ) (c)                             2,652
 General and administrative                                                        3,189                               (501           ) (d)                             2,688
 Total operating expenses                                                          15,900                              (1,099         )                                 14,801
 Income from operations                                                            1,997                               1,371                                            3,368
 Interest and other income, net                                                    105                              --                                                  105
 Income before income taxes                                                        2,102                               1,371                                            3,473
 Provision for income taxes                                                        52                               --                  (e)                             52
 Net income                                                        $               2,050             $                 1,371                            $               3,421
 Net income per share:
 Basic                                                             $               0.16              $                 0.10                             $               0.26
 Diluted                                                           $               0.15              $                 0.10                             $               0.25
 Weighted-average number of shares used in per share calculations:
 Basic                                                                             12,978                              12,978                                           12,978
 Diluted                                                                           13,591                              13,591                                           13,591
 a) Adjustment of $272,000 included a non-cash charge of $154,000 related to depreciation and amortization expense and $118,000 of stock based compensation expense.
 b) Adjustment of $438,000 included a non-cash charge of $111,000 related to depreciation expense and $327,000 of stock based compensation expense.
 c) Adjustment of $160,000 included a non-cash charge of $8,000 related to depreciation expense and $152,000 of stock based compensation expense.
 d) Adjustment of $501,000 included a non-cash charge of $1,000 related to depreciation expense and $500,000 of stock based compensation expense.
 e) There was no material impact to the Company’s income tax provision resulting from the aforementioned adjustments, given the Company carries a full valuation allowance against its U.S. federal and state net deferred tax assets.
 * Fiscal fourth quarter 2015 Non-GAAP pro-forma results exclude the effect of the aforementioned adjustments.
 CUTERA, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 (unaudited)
                                                                                          December 31,     September 30,     December 31,
                                                                                          2015             2015              2014
 Assets
 Current assets:
            Cash and cash equivalents                                                  $  10,868        $  10,055         $  9,803
            Marketable investments                                                        37,539           37,689            71,343
                          Cash, cash equivalents and marketable investments               48,407           47,744            81,146
            Accounts receivable, net                                                      11,669           9,013             11,137
            Inventories                                                                   12,078           13,479            10,988
            Deferred tax asset                                                            -                69                26
            Other current assets and prepaid expenses                                     1,675            1,977             1,591
                          Total current assets                                            73,829           72,282            104,888
 Property and equipment, net                                                              1,473            1,386             1,461
 Deferred tax asset, net of current portion                                               350              291               269
 Intangibles, net                                                                         143              227               595
 Goodwill                                                                                 1,339            1,339             1,339
 Other long-term assets                                                                   384              392               361
                                           Total assets                                $  77,518        $  75,917         $  108,913
 Liabilities and Stockholders’ Equity
 Current liabilities:
            Accounts payable                                                           $  1,959         $  2,659          $  3,083
            Accrued liabilities                                                           13,834           12,234            11,007
            Deferred revenue                                                              8,638            8,470             8,898
                          Total current liabilities                                       24,431           23,363            22,988
 Deferred revenue, net of current portion                                                 2,287            2,495             4,346
 Income tax liability                                                                     182              187               145
 Other long-term liabilities                                                              584              538               926
                          Total liabilities                                               27,484           26,583            28,405
 Stockholders’ equity                                                                     50,034           49,334            80,508
                                           Total liabilities and stockholders’ equity  $  77,518        $  75,917         $  108,913
 CUTERA, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
                                                                                                               Three Months Ended
                                                                                                               December 31,        December 31,
                                                                                                               2015                2014
 Cash flows from operating activities:
 Net income (loss)                                                                                             $       2,050       $       (1,625 )
 Adjustments to reconcile net income (loss) to net cash used in operating activities:
                              Stock-based compensation                                                                 1,097               1,001
                              Depreciation and amortization                                                            274                 347
                              Impairment of intangible assets                                                      --                      650
                              Other                                                                                    14                  (16    )
 Changes in assets and liabilities:
                              Accounts receivable                                                                      (2,660 )            (2,305 )
                              Inventories                                                                              1,401               118
                              Accounts payable                                                                         (700   )            365
                              Accrued liabilities                                                                      2,143               2,035
                              Deferred revenue                                                                         (40    )            (97    )
                              Other                                                                                    310                 (5     )
                                                           Net cash provided by operating activities                   3,889               468
 Cash flows from investing activities:
 Acquisition of property, equipment and software                                                                       (43    )            (344   )
 Net change in marketable investments                                                                                  (16    )            (2,099 )
                                                           Net cash used in investing activities                       (59    )            (2,443 )
 Cash flows from financing activities:
 Repurchases of common stock                                                                                           (3,469 )        --
 Proceeds from exercise of stock options and employee stock purchase plan                                              507                 436
 Payments on capital lease obligations                                                                                 (55    )            (35    )
                                                           Net cash provided by (used in) financing activities         (3,017 )            401
 Net increase (decrease) in cash and cash equivalents                                                                  813                 (1,574 )
 Cash and cash equivalents at beginning of period                                                                      10,055              11,377
 Cash and cash equivalents at end of period                                                                    $       10,868      $       9,803
 CUTERA, INC.
 CONSOLIDATED FINANCIAL HIGHLIGHTS
 (in thousands, except percentage data)
 (unaudited)
                                                                             Three Months Ended             % Change
                                                                             Q4              Q4             Q4 ’15 Vs
                                                                             2015            2014           Q4 ’14
 Revenue By Geography:
                             United States                                   $   16,882      $   13,761         +23 %
                             International                                       13,160          11,738         +12 %
                                                                             $   30,042      $   25,499         +18 %
                             International as a percentage of total revenue      44     %        46     %
 Revenue By Product Category:
               Products
                             -North America                                  $   15,048      $   11,538         +30 %
                             -Rest of the World                                  8,926           7,796          +14 %
                             Total Products                                      23,974          19,334         +24 %
               Service                                                           4,562           4,532          +1  %
               Hand Piece Refills                                                706             844            -16 %
               Skincare                                                          800             789            +1  %
                                                                             $   30,042      $   25,499         +18 %
                                                                             Three Months Ended
                                                                             Q4              Q4
                                                                             2015            2014
 Pre-tax Stock-Based Compensation Expense:
                             Cost of revenue                                 $   118         $   144
                             Sales and marketing                                 327             227
                             Research and development                            152             175
                             General and administrative                          500             455
                                                                             $   1,097       $   1,001
Cutera, Inc.
Ron Santilli
Chief Financial Officer
415-657-5500

Investor Relations
John Mills
ICR, Inc.
646-277-1254
john.mills@icrinc.com

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