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:
-- 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 Companys 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 organizations 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, Id like to thank Ron for his 16 years of service and wish him well."
Initial market acceptance for the Companys 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 Cuteras 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 Cuteras plans to introduce and commercialize new products, ability to increase revenue, gather clinical data, reduce expenses, improve financial results, grow the Companys 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 managements current, preliminary expectations and are subject to risks and uncertainties, which may cause Cuteras actual results to differ materially from the statements contained herein. Potential risks and uncertainties that could affect Cuteras business and cause its financial results to differ materially from those contained in the forward-looking statements include those related to the Companys efforts to improve sales productivity, hire and retain qualified sales representatives, improve revenue growth, gross margins and profitability through leveraging operating expenses; the Companys 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 Companys 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. Cuteras financial performance for the first quarter ended March 31, 2017, as discussed in this release, is preliminary and unaudited, and subject to adjustment.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31, March 31,
Net revenue $ 29,299 $ 22,423
Cost of revenue 13,778 9,949
Gross profit 15,521 12,474
Gross margin % 53% 56%
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
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, March 31,
2017 2016 2016
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
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
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31, March 31,
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
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except percentage data)
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:
-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
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
Chief Financial Officer
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