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Cutera Inc.$47.00$2.104.68%

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 Cutera Reports First Quarter 2017 Financial Performance
   Monday, May 01, 2017 4:05:07 PM ET

Cutera, Inc. (CUTR ) ("Cutera" or the "Company"), a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide, today reported financial results for the first quarter ended March 31, 2017.

Key operating highlights and financial performance for the first quarter of 2017, when compared to the first quarter of 2016, were as follows:

? Revenue:

-- Increased 31% to a record first quarter $29.3 million, due primarily to 60% growth in North America product revenue. International product revenue also contributed growth of 14%.

-- Eleventh consecutive quarter of double-digit revenue growth.

-- Growth experienced by multiple products with particular strength from enlighten, the Company’s pico technology platform for tattoo removal and facial revitalization.

? Gross Margin was 53%, lower than previous expectations, due primarily to a greater percentage of revenue coming from our enlighten systems and associated upgrades. Key reasons for the lower gross margin associated with enlighten products include:

-- Normal market seeding during the early launch phase inclusive of favorable pricing offered to our installed base to upgrade to enlighten III. The Company expects such upgrades to decline throughout the year;

-- Higher initial costs of our enlighten III system, that are expected to decline throughout the year; and

-- Continued increasing level of bundled transactions.

? Continued discipline on expense and leveraging as Operating Expenses declined as a percent of revenue from 65% to 58%.

? Profitability improved by $1.1 million, from a net loss of $2.1 million to a net loss of $1.0 million.

? Cash, cash equivalents and marketable investments were $48.4 million, and the Company remains debt-free.

? Repurchased $2.9 million of stock under our Board approved $10.0 million stock repurchase program.

James Reinstein, President and Chief Executive Officer of Cutera, stated, "We are very pleased to achieve a record level of revenue this past quarter resulting in our eleventh consecutive quarter of double-digit revenue growth, compared to the same period in the prior year. The growth is coupled with significant improvement in several operating metrics, illustrating the organization’s ability to leverage the strong revenue. Our 31% revenue growth was driven by multiple platforms within our product portfolio, with particular strength coming from our enlighten product in North America. Our financial performance in the first quarter of 2017, and overall trajectory, has the Company well positioned for continued growth in revenue, profits and cash generation.

"Lastly, I would be remiss if I did not mention my regret that Ron Santilli, EVP and Chief Financial Officer, informed me of his decision to resign. I greatly appreciate the short time that we have worked together as Ron has been very collaborative and welcoming of me in my early days at Cutera. Ron will remain with the Company until we find his successor and a smooth transition is complete. On behalf of everyone at Cutera, I’d like to thank Ron for his 16 years of service and wish him well."

Product Updates

Initial market acceptance for the Company’s enlighten III system has been very positive and many practitioners believe it is the best-in-class three wavelength pico-laser on the market allowing them to remove all tattoo ink colors, enlighten III also provides PicoGenesis skin revitalization with improved efficacy and faster speeds than any other product on the market. The Company plans to continue to seek additional indications on its enlighten platform to increase the functionality and treatment options for our customers.

The Company continues to enhance its truSculpt system for body sculpting. At the American Society for Laser Medicine & Surgery meeting in early April 2017, truSculpt 3D was launched with a new treatment method and higher frequency, resulting in increased efficacy and greater fat destruction. The truSculpt 3D will include a consumable revenue stream enabling the Company to share in the procedure income with its customers. This important technology improvement is critical for the Company to enable the truSculpt platform to become a more competitive offering in the body sculpting market. The Company expects to further enhance the platform in the second-half of this year to provide our customers with additional utility, efficacy and an improved return on their investment.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">2017 Guidance:</span>

The Company expects:

-- Revenue of approximately $32.0 million in the second quarter of 2017, and approximately $140.0 million for the full-year of 2017, compared to previous guidance of approximately $135.0 - $140.0 million.

-- Earnings Per Share: approximately $0.03 for the second quarter 2017, and $0.45 - $0.50 for the full year of 2017.

-- To Repurchase sufficient shares to maintain the fully diluted share count at approximately 14.0 million during 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. PDT (5:00 p.m. EDT) on May 1, 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, and will be archived online within one hour of its completion through 8:59 p.m. PDT (11:59 p.m. EDT) on May 15, 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, gather clinical data, 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, 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 May 1, 2017. 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 first quarter ended March 31, 2017, 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
                                                                      March 31,         March 31,
                                                                      2017              2016
 Net revenue                                                          $    29,299       $    22,423
 Cost of revenue                                                           13,778            9,949
 Gross profit                                                              15,521            12,474
 Gross margin %                                                            53%               56%
 Operating expenses:
 Sales and marketing                                                       10,773            8,716
 Research and development                                                  2,945             2,709
 General and administrative                                                3,216             3,220
 Total operating expenses                                                  16,934            14,645
 Loss from operations                                                      (1,413 )          (2,171 )
 Interest and other income, net                                            273               144
 Loss before income taxes                                                  (1,140 )          (2,027 )
 Provision (benefit) for income taxes                                      (118   )          24
 Net loss                                                             $    (1,022 )     $    (2,051 )
 Net loss per share:
 Basic and diluted                                                    $    (0.07  )     $    (0.16  )
 Weighted-average number of shares used in per share calculations:
 Basic and diluted                                                         13,840            13,010
 CUTERA, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 (unaudited)
                                                                                                  March 31,     December 31,     March 31,
                                                                                                  2017          2016             2016
 Assets
 Current assets:
            Cash and cash equivalents                                                          $  11,443     $  13,775        $  6,265
            Marketable investments                                                                36,990        40,299           38,184
                          Cash, cash equivalents and marketable investments                       48,433        54,074           44,449
            Accounts receivable, net                                                              17,859        16,547           11,168
            Inventories                                                                           15,672        14,977           13,475
            Other current assets and prepaid expenses                                             2,403         2,251            1,953
                          Total current assets                                                    84,367        87,849           71,045
 Property and equipment, net                                                                      1,802         1,907            1,428
 Deferred tax asset, net of current portion                                                       394           377              376
 Intangibles, net                                                                                 -             2                87
 Goodwill                                                                                         1,339         1,339            1,339
 Other long-term assets                                                                           389           380              419
                                                   Total assets                                $  88,291     $  91,854        $  74,694
 Liabilities and Stockholders’ Equity
 Current liabilities:
            Accounts payable                                                                   $  3,089      $  2,598         $  2,570
            Accrued liabilities                                                                   14,950        17,397           11,079
            Deferred revenue                                                                      8,275         8,394            8,836
                          Total current liabilities                                               26,314        28,389           22,485
 Deferred revenue, net of current portion                                                         1,801         1,705            1,986
 Income tax liability                                                                             169           168              127
 Other long-term liabilities                                                                      565           582              507
                          Total liabilities                                                       28,849        30,844           25,105
 Stockholders’ equity                                                                             59,442        61,010           49,589
                                                   Total liabilities and stockholders’ equity  $  88,291     $  91,854        $  74,694
 CUTERA, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
                                                                                                         Three Months Ended
                                                                                                         March 31,                       March 31,
                                                                                                         2017                            2016
 Cash flows from operating activities:
 Net loss                                                                                                $                  (1,022 )     $    (2,051 )
 Adjustments to reconcile net loss to net cash used in operating activities:
                           Stock-based compensation                                                                         1,395             1,332
                           Depreciation and amortization                                                                    248               240
                           Other                                                                                            (51    )          12
 Changes in assets and liabilities:
                           Accounts receivable                                                                              (1,305 )          472
                           Inventories                                                                                      (695   )          (1,397 )
                           Accounts payable                                                                                 491               611
                           Accrued liabilities                                                                              (2,657 )          (2,758 )
                           Deferred revenue                                                                                 (23    )          (103   )
                           Other                                                                                            (166   )          (402   )
                                                     Net cash used in operating activities                                  (3,785 )          (4,044 )
 Cash flows from investing activities:
 Acquisition of property, equipment and software                                                                            (69    )          (97    )
 Disposal of property and equipment                                                                                         25                -
 Net change in marketable investments                                                                                       3,318             (624   )
                                                     Net cash provided by (used) in investing activities                    3,274             (721   )
 Cash flows from financing activities:
 Repurchases of common stock                                                                                                (2,700 )          (279   )
 Proceeds from exercise of stock options and employee stock purchase plan                                                   1,751             744
 Taxes paid related to net share settlement of equity awards                                                                (784   )          (233   )
 Payments on capital lease obligations                                                                                      (88    )          (70    )
                                                     Net cash (used in) provided by financing activities                    (1,821 )          162
 Net decrease in cash and cash equivalents                                                                                  (2,332 )          (4,603 )
 Cash and cash equivalents at beginning of period                                                                           13,775            10,868
 Cash and cash equivalents at end of period                                                              $                  11,443       $    6,265
 CUTERA, INC.
 CONSOLIDATED FINANCIAL HIGHLIGHTS
 (in thousands, except percentage data)
 (unaudited)
                                                                             Three Months Ended       % Change
                                                                             Q1           Q1          Q1 ’17 Vs
                                                                             2017         2016        Q1 ’16
 Revenue By Geography:
                             United States                                   $  16,544    $  11,054   +50  %
                             International                                      12,755       11,369   +12  %
                                                                             $  29,299    $  22,423   +31  %
                             International as a percentage of total revenue     44%          51%
 Revenue By Product Category:
               Products
                             -North America                                  $  14,460    $  9,024    +60  %
                             -International                                     8,532        7,489    +14  %
                             Total Products                                     22,992       16,513   +39  %
               Service                                                          4,824        4,467    +8   %
               Hand Piece Refills                                               499          564      -12  %
               Skincare                                                         984          879      +12  %
                                                                             $  29,299    $  22,423   +31  %
                                                                             Three Months Ended
                                                                             Q1           Q1
                                                                             2017         2016
 Pre-tax Stock-Based Compensation Expense:
                             Cost of revenue                                 $  129       $  141
                             Sales and marketing                                420          376
                             Research and development                           237          180
                             General and administrative                         609          635
                                                                             $  1,395     $  1,332
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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