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Cutera Inc.$40.00($.85)(2.08%)

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 Cutera Reports Second Quarter 2017 Financial Performance, Increases Revenue and EPS Guidance and Expands Stock Buyback Program
   Monday, August 07, 2017 4:15:20 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 second quarter ended June 30, 2017.

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

-- Revenue:

-- Increased 32%, to a second quarter record of $36.4 million, due primarily to 63% growth in North America product revenue; International product revenue also grew by 7%

-- Twelfth consecutive quarter of double-digit revenue growth

-- Growth experienced by multiple products, with particular strength from the recently launched truSculpt 3D body-sculpting platform

-- Gross margin was 58%, exceeding guidance by approximately 2%, primarily driven by sales of truSculpt 3D body sculpting system

-- Operating expenses declined as a percent of revenue from 63% to 53%

-- Net income was $1.9 million, compared to a net loss of $1.2 million

-- Earnings per diluted share increased to $0.13, compared to a loss of $0.09

-- Cash generated by operations was $7.7 million. Cash, cash equivalents and investments totaled $53.2 million at June 30, 2017

-- Stock repurchase program Board approved an incremental $25 million to be added to the presently active stock repurchase program. In Q2’17, the Company repurchased $4.1 million of stock bringing the total stock repurchased since February 2015 to 3.6 million shares, or $52.0 million

James Reinstein, President and Chief Executive Officer of Cutera, stated, "We are pleased with the record level of second quarter revenue. This was coupled with significant improvement in several operating metrics, illustrating the organization’s ability to leverage the strong revenue. Our revenue growth of 32% was driven by multiple platforms within our product portfolio, with the launch of the truSculpt 3D product in North America being a significant driver of the growth and margin improvement this quarter. The truSculpt 3D also provides the Company with a new source of recurring revenue.

"Our Board’s approval to further expand our stock repurchase program reflects its confidence in our ability to build long-term value for shareholders. I believe that our financial performance in the second quarter of 2017, and our overall trajectory, demonstrates that Cutera is positioned to meet our short, medium and long term goals," concluded Mr. Reinstein.

Product Updates

Initial market acceptance for the Company’s truSculpt 3D system is robust. Many practitioners continue to communicate to the Company that they believe it to be the best-in-class system for body sculpting. truSculpt 3D offers a new treatment method and higher frequency resulting in increased efficacy and greater fat destruction and circumferential reduction. It also includes 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 and has already received FDA clearance for this new iteration. This next generation system will provide our customers with additional utility, efficacy and an improved return on their investment.

Full-Year 2017 Outlook

-- Revenue guidance is being increased from $140 million to $144 - $147 million

-- Gross margin is expected to be in the range of 58% - 59%

-- Earnings per Share guidance is being increased to approximately $0.50 - $0.54 compared to the previous range of $0.45 - $0.50

-- Repurchase sufficient shares to maintain the fully diluted share count at approximately 14.0 million for 2017

Conference Call

The conference call to discuss these results is scheduled to begin at 1:30 p.m. PDT (4:30 p.m. EDT) on August 7, 2017. Participating in the call will be James Reinstein, President and Chief Executive Officer, Sandra Gardiner, Consultant CFO, and Ron Santilli, outgoing CFO. The call will be broadcast live over the internet hosted at the Investor Relations section of Cutera’s website at http://www.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 August 21, 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, improve financial results, grow the Company’s market share, realize benefits from additional investment, achieve financial guidance, plans for stock repurchase, 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-K filed with the Securities and Exchange Commission ("SEC") on March 15, 2017 as well as subsequent reports and registration statements filed and furnished to the SEC from time to time. 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 second quarter ended June 30, 2017, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                                                                            June 30,     March 31,     June 30,
                                                                                            2017         2017          2016
Assets
Current assets:
           Cash and cash equivalents                                                     $  18,679    $  11,443     $  7,420
           Marketable investments                                                           32,270       36,990        35,902
           Restricted investments                                                           2,290        -             -
                         Cash, cash equivalents and investments                             53,239       48,433        43,322
           Accounts receivable, net                                                         18,191       17,859        11,181
           Inventories                                                                      16,913       15,672        14,702
           Other current assets and prepaid expenses                                        2,840        2,403         2,619
                         Total current assets                                               91,183       84,367        71,824
Property and equipment, net                                                                 1,867        1,802         1,577
Deferred tax asset                                                                          381          394           401
Intangibles, net                                                                            -            -             44
Goodwill                                                                                    1,339        1,339         1,339
Other long-term assets                                                                      381          389           448
                                             Total assets                                $  95,151    $  88,291     $  75,633
Liabilities and Stockholders’ Equity
Current liabilities:
           Accounts payable                                                              $  4,293     $  3,089      $  2,752
           Accrued liabilities                                                              18,973       14,950        13,201
           Deferred revenue                                                                 8,901        8,275         8,919
                         Total current liabilities                                          32,167       26,314        24,872
Deferred revenue, net of current portion                                                    1,982        1,801         1,685
Income tax liability                                                                        170          169           157
Other long-term liabilities                                                                 604          565           587
                         Total liabilities                                                  34,923       28,849        27,301
Stockholders’ equity                                                                        60,228       59,442        48,332
                                             Total liabilities and stockholders’ equity  $  95,151    $  88,291     $  75,633
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                                     Three Months Ended          Six Months Ended
                                                     June 30,      June 30,      June 30,      June 30,
                                                     2017          2016          2017          2016
Net revenue                                          $  36,389     $  27,477     $  65,688     $  49,900
Cost of revenue                                         15,343        11,472        29,121        21,421
                           Gross profit                 21,046        16,005        36,567        28,479
                           Gross margin %               58     %      58     %      56     %      57     %
Operating expenses:
             Sales and marketing                        12,787        10,712        23,560        19,428
             Research and development                   2,981         2,712         5,926         5,421
             General and administrative                 3,548         3,997         6,764         7,217
                           Total operating expenses     19,316        17,421        36,250        32,066
Income (loss) from operations                           1,730         (1,416 )      317           (3,587 )
Interest and other income, net                          276           217           549           361
Income (loss) before income taxes                       2,006         (1,199 )      866           (3,226 )
Provision (benefit) for income taxes                    59            30            (59    )      54
Net income (loss)                                    $  1,947      $  (1,229 )   $  925        $  (3,280 )
Net income (loss) per share:
             Basic                                   $  0.14       $  (0.09  )   $  0.07       $  (0.25  )
             Diluted                                 $  0.13       $  (0.09  )   $  0.06       $  (0.25  )
Weighted-average number of shares
used in per share calculations:
             Basic and diluted                          13,935        13,131        13,888        13,071
             Diluted                                    14,629        13,131        14,633        13,071
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                                                                      Three Months Ended                          Six Months Ended
                                                                                                                      June 30,                      June 30,      June 30,      June 30,
                                                                                                                      2017                          2016          2017          2016
Cash flows from operating activities:
Net income (loss)                                                                                                     $                  1,947      $  (1,229 )   $  925        $  (3,280 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                                 Stock-based compensation                                                                                1,231         750           2,626         2,082
                                 Depreciation and amortization                                                                           244           244           492           484
                                 Other                                                                                                   6             (75    )      (45    )      (63    )
Changes in assets and liabilities:
                                 Accounts receivable                                                                                     (336   )      (8     )      (1,641 )      464
                                 Inventories                                                                                             (1,241 )      (1,227 )      (1,936 )      (2,624 )
                                 Accounts payable                                                                                        1,204         182           1,695         793
                                 Accrued liabilities                                                                                     4,191         1,985         1,534         (773   )
                                 Deferred revenue                                                                                        807           (218   )      784           (321   )
                                 Other                                                                                                   (378   )      (712   )      (544   )      (1,114 )
                                                                  Net cash provided by (used in) operating activities                    7,675         (308   )      3,890         (4,352 )
Cash flows from investing activities:
Acquisition of property, equipment and software                                                                                          (141   )      (40    )      (210   )      (137   )
Disposal of property and equipment                                                                                                       15            6             40            6
Net change in marketable investments                                                                                                     2,385         2,257         5,703         1,633
                                                                  Net cash provided by investing activities                              2,259         2,223         5,533         1,502
Cash flows from financing activities:
Repurchases of common stock                                                                                                              (4,341 )      (2,586 )      (7,041 )      (2,865 )
Proceeds from exercise of stock options and employee stock purchase plan                                                                 2,120         2,206         3,871         2,950
Taxes paid related to net share settlement of equity awards                                                                              (383   )      (323   )      (1,167 )      (556   )
Payments on capital lease obligations                                                                                                    (94    )      (57    )      (182   )      (127   )
Excess tax benefit related to stock-based compensation                                                                                   --            --            --            --
                                                                  Net cash used in financing activities                                  (2,698 )      (760   )      (4,519 )      (598   )
Net increase (decrease) in cash and cash equivalents                                                                                     7,236         1,155         4,904         (3,448 )
Cash and cash equivalents at beginning of period                                                                                         11,443        6,265         13,775        10,868
Cash and cash equivalents at end of period                                                                            $                  18,679     $  7,420      $  18,679     $  7,420
 CUTERA, INC.
 CONSOLIDATED FINANCIAL HIGHLIGHTS
 (in thousands, except percentage data)
 (unaudited)
                                                                             Three Months Ended           % Change   Six Months Ended                % Change
                                                                             Q2             Q2            Q2 ’17 Vs  Q2             Q2               YTD Q2 ’17 Vs
                                                                             2017           2016          Q2 ’16     2017           2016         YTD Q2 ’16
 Revenue By Geography:
                             United States                                   $  24,239      $  15,806     +53  %     $  40,783      $  26,860        +52    %
                             International                                      12,150         11,671     +4   %        24,905         23,040        +8     %
                                                                             $  36,389      $  27,477     +32  %     $  65,688      $  49,900        +32    %
                             International as a percentage of total revenue     33     %       42     %                 38     %       46     %
 Revenue By Product Category:
               Products
                             -North America                                  $  22,626      $  13,888     +63  %     $  37,086      $  22,912        +62    %
                             -International                                     7,489          6,976      +7   %        16,021         14,465        +11    %
                             Total Products                                     30,115         20,864     +44  %        53,107         37,377        +42    %
               Service                                                          4,662          5,023      -7   %        9,486          9,490         -0     %
               Hand Piece Refills                                               649            720        -10  %        1,148          1,284         -11    %
               Skincare                                                         963            870        +11  %        1,947          1,749         +11    %
                                                                             $  36,389      $  27,477     +32  %     $  65,688      $  49,900        +32    %
                                                                             Three Months Ended                      Six Months Ended
                                                                             Q2             Q2                       Q2             Q2
                                                                             2017           2016                     2017           2016
 Pre-tax Stock-Based Compensation Expense:
                             Cost of revenue                                 $  147         $  40                    $  276         $  181
                             Sales and marketing                                401            229                      821            605
                             Research and development                           239            105                      476            285
                             General and administrative                         444            376                      1,053          1,011
                                                                             $  1,231       $  750                   $  2,626       $  2,082
CONTACTS:

Cutera, Inc.
Sandra Gardiner
Consultant Chief Financial Officer
415-657-5500

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

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