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Cutera Inc.$37.60($2.15)(5.41%)

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 Cutera Reports Fourth Quarter and Full-Year 2016 Record Revenue and Financial Results
   Monday, February 13, 2017 4:01:17 PM ET

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, 2016.

Key operating highlights and financial performance for the fourth quarter and full year of 2016, when compared to the fourth quarter and full year of 2015, were as follows:

-- Revenue:

- Increased 26% for the fourth quarter to a record $37.9 million, due primarily to a 45% growth in North American product revenue

- Tenth consecutive quarter of double-digit revenue growth

- Increased 25% for the full year of 2016 to a record $118.1 million

- Two consecutive years of 20%+ year-over-year growth

-- Gross Margin of 58% was slightly lower than previous expectations due primarily to higher initial manufacturing costs and seeding of key opinion leader transactions to build reference sites with its enlighten III launch for PicoGenesis and tattoo removal treatments

-- Achieved $0.30 EPS and $4.7 million of operating cash flow in the fourth quarter

-- Cash, cash equivalents and marketable investments were $54.1 million, and no debt

-- Hired James Reinstein as its new President, CEO and eighth board member

Ron Santilli, Executive Vice President and Chief Financial Officer of Cutera, stated, "We are pleased with our tenth consecutive quarter of double-digit revenue growth, full year profitability and solid operating cash flow, illustrating the leverage in our business model. In the fourth quarter of 2016, our 26% revenue growth was driven by the breadth of our product portfolio throughout North America, with particular growth coming from our enlighten product."

In December 2016, the Company commenced shipments of its enlighten III platform that provides a new third visible "true red" 670nm wavelength, in addition to the 1064nm and 532nm wavelengths presently available. Initial market acceptance has been very positive and many practitioners believe it is the best-in-class three wavelength pico-laser in the market and will allow practitioners the ability to remove all tattoo ink colors, and provide PicoGenesis skin revitalization with improved efficacy and faster speeds than any products on the market.

Additionally, in December of 2016, the Company received 510(k) clearance from the Food and Drug Administration (FDA) to market its RF energy-based truSculpt system for the temporary reduction in circumference of the abdomen. truSculpt is based on the Company’s proprietary RF technology, which selectively heats subcutaneous adipose tissue making it ideally suited for treating fat. truSculpt will enable the company to participate in the fast growing body-sculpting market as well as adding a consumable revenue stream. In 2017 the company will work with key opinion leaders to gather additional clinical data to demonstrate superior fat burning capabilities.

Mr. James Reinstein, Chief Executive Officer stated, "We remain committed to advancing our technologies and providing our customers with an attractive path for upgrading their current systems to the new capabilities. Our financial performance in the fourth quarter, and overall trajectory, has the Company positioned well for continued growth in revenue, profits and cash generation."

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Guidance:</span>

The Company expects:

-- Revenue of $26.0 - $27.0 million in the first quarter of 2017 and $135.0 - $140.0 million for the full-year of 2017.

-- Earnings (Loss) Per Share of ($0.06) - ($0.08) for the first quarter 2017, given the seasonality of our business, and $0.45 - $0.50 for the full-year of 2017.

-- To Repurchase shares to a level that maintains the fully diluted share count at approximately 14.0 million for the full-year of 2017.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Conference Call </span>

The conference call to discuss these results is scheduled to begin at 2:00 p.m. PST (5:00 p.m. EST) on February 13, 2017. Participating in the call will be James Reinstein, 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 at http://ir.cutera.com/phoenix.zhtml?c=130892&p=irol-EventDetails&EventId=5247490, and will be archived online within one hour of its completion through 8:59 p.m. PST (11:59 p.m. EST) on February 27, 2017. In addition, you may call 1-877-705-6003 if you wish to participate on the live call.

About Cutera, Inc.

Brisbane, California-based Cutera is a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide. Since 1998, Cutera has 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 and commercialize new products, ability to increase revenue, reduce expenses, improve financial results, grow the Company’s market share, realize benefits from additional investment, achieve financial guidance, expand market penetration, generate cash from operations, plans for stock repurchase, 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 7, 2016. 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, 2016, 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                  Twelve Months Ended
                                                   December 31,      December 31,      December 31,       December 31,
                                                   2016              2015              2016               2015
 Net revenue                                       $    37,875       $    30,042       $    118,056       $    94,761
 Cost of revenue                                        15,962            12,145            49,921             40,478
                          Gross profit                  21,913            17,897            68,135             54,283
                          Gross margin %                58     %          60     %          58      %          57     %
 Operating expenses:
            Sales and marketing                         11,561            9,899             41,563             35,942
            Research and development                    2,897             2,812             11,232             10,733
            General and administrative                  3,010             3,189             12,943             12,129
                          Total operating expenses      17,468            15,900            65,738             58,804
 Income (loss) from operations                          4,445             1,997             2,397              (4,521 )
 Interest and other income, net                         (204   )          105               323                293
 Income (loss) before income taxes                      4,241             2,102             2,720              (4,228 )
 Provision for income taxes                             28                52                143                212
 Net income (loss)                                 $    4,213        $    2,050        $    2,577         $    (4,440 )
 Net income (loss) per share:
            Basic                                  $    0.31         $    0.16         $    0.19          $    (0.32  )
            Diluted                                $    0.30         $    0.15         $    0.19          $    (0.32  )
 Weighted-average number of shares
 used in per share calculations:
            Basic and diluted                           13,591            12,978            13,225             13,960
            Diluted                                     14,201            13,591            13,753             13,960
 CUTERA, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 (unaudited)
                                                                                                  December 31,     September 30,     December 31,
                                                                                                  2016             2016              2015
 Assets
 Current assets:
            Cash and cash equivalents                                                          $  13,775        $  11,275         $  10,868
            Marketable investments                                                                40,299           35,108            37,539
                          Cash, cash equivalents and marketable investments                       54,074           46,383            48,407
            Accounts receivable, net                                                              16,547           11,680            11,669
            Inventories                                                                           14,977           16,478            12,078
            Other current assets and prepaid expenses                                             2,251            2,507             1,675
                          Total current assets                                                    87,849           77,048            73,829
 Property and equipment, net                                                                      1,907            1,720             1,473
 Deferred tax asset, net of current portion                                                       377              410               350
 Intangibles, net                                                                                 2                16                143
 Goodwill                                                                                         1,339            1,339             1,339
 Other long-term assets                                                                           380              444               384
                                                   Total assets                                $  91,854        $  80,977         $  77,518
 Liabilities and Stockholders’ Equity
 Current liabilities:
            Accounts payable                                                                   $  2,598         $  3,283          $  1,959
            Accrued liabilities                                                                   17,397           14,786            13,834
            Deferred revenue                                                                      8,394            8,312             8,638
                          Total current liabilities                                               28,389           26,381            24,431
 Deferred revenue, net of current portion                                                         1,705            1,426             2,287
 Income tax liability                                                                             168              164               182
 Other long-term liabilities                                                                      582              597               584
                          Total liabilities                                                       30,844           28,568            27,484
 Stockholders’ equity                                                                             61,010           52,409            50,034
                                                   Total liabilities and stockholders’ equity  $  91,854        $  80,977         $  77,518
 CUTERA, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
                                                                                                                 Three Months Ended                                Twelve Months Ended
                                                                                                                 December 31,                    December 31,      December 31,      December 31,
                                                                                                                 2016                            2015              2016              2015
 Cash flows from operating activities:
 Net income (loss)                                                                                               $                  4,213        $    2,050        $    2,577        $    (4,440  )
 Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                               Stock-based compensation                                                                             1,061             1,097             3,713             4,084
                               Depreciation and amortization                                                                        249               274               982               1,186
                               Other                                                                                                60                14                15                227
 Changes in assets and liabilities:
                               Accounts receivable                                                                                  (4,838 )          (2,660 )          (4,899 )          (536    )
                               Inventories                                                                                          1,501             1,401             (2,899 )          (1,090  )
                               Accounts payable                                                                                     (685   )          (700   )          639               (1,124  )
                               Accrued liabilities                                                                                  2,575             2,143             3,461             2,687
                               Deferred revenue                                                                                     361               (40    )          (826   )          (2,319  )
                               Other                                                                                                244               310               (771   )          (34     )
                                                             Net cash provided by (used in) operating activities                    4,741             3,889             1,992             (1,359  )
 Cash flows from investing activities:
 Acquisition of property, equipment and software                                                                                    (226   )          (43    )          (537   )          (746    )
 Disposal of property and equipment                                                                                                 3                 -                 20                -
 Net change in marketable investments                                                                                               (5,219 )          (16    )          (2,875 )          33,392
                                                             Net cash provided by (used) in investing activities                    (5,442 )          (59    )          (3,392 )          32,646
 Cash flows from financing activities:
 Repurchases of common stock                                                                                                        --                (3,469 )          (4,873 )          (40,085 )
 Proceeds from exercise of stock options and employee stock purchase plan                                                           3,296             507               9,493             10,061
 Payments on capital lease obligations                                                                                              (95    )          (55    )          (313   )          (198    )
                                                             Net cash provided by (used in) financing activities                    3,201             (3,017 )          4,307             (30,222 )
 Net increase in cash and cash equivalents                                                                                          2,500             813               2,907             1,065
 Cash and cash equivalents at beginning of period                                                                                   11,275            10,055            10,868            9,803
 Cash and cash equivalents at end of period                                                                      $                  13,775       $    10,868       $    13,775       $    10,868
 CUTERA, INC.
 CONSOLIDATED FINANCIAL HIGHLIGHTS
 (in thousands, except percentage data)
 (unaudited)
                                                                             Three Months Ended           % Change   Twelve Months Ended           % Change
                                                                             Q4             Q4            Q4 ’16 Vs  FY              FY            FY ’16 Vs
                                                                             2016           2015          Q4 ’15     2016            2015          FY ’15
 Revenue By Geography:
                             United States                                   $  23,297      $  16,882     +38  %     $  65,513       $  48,916     +34  %
                             International                                      14,578         13,160     +11  %        52,543          45,845     +15  %
                                                                             $  37,875      $  30,042     +26  %     $  118,056      $  94,761     +25  %
                             International as a percentage of total revenue     38     %       44     %                 45      %       48     %
 Revenue By Product Category:
               Products
                             -North America                                  $  21,787      $  15,048     +45  %     $  58,595       $  40,528     +45  %
                             -International                                     9,678          8,926      +8   %        34,126          30,695     +11  %
                             Total Products                                     31,465         23,974     +31  %        92,721          71,223     +30  %
               Service                                                          4,750          4,562      +4   %        19,028          17,739     +7   %
               Hand Piece Refills                                               612            706        -13  %        2,498           2,910      -14  %
               Skincare                                                         1,048          800        +31  %        3,809           2,889      +32  %
                                                                             $  37,875      $  30,042     +26  %     $  118,056      $  94,761     +25  %
                                                                             Three Months Ended                      Twelve Months Ended
                                                                             Q4             Q4                       FY              FY
                                                                             2016           2015                     2016            2015
 Pre-tax Stock-Based Compensation Expense:
                             Cost of revenue                                 $  87          $  118                   $  341          $  447
                             Sales and marketing                                335            327                      1,179           1,054
                             Research and development                           180            152                      596             662
                             General and administrative                         459            500                      1,597           1,921
                                                                             $  1,061       $  1,097                 $  3,713        $  4,084
CONTACTS:

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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