Cutera Reports Fourth Quarter 2013 Results

Operations Generate $2.9 Million of Cash; and ExcelV Revenue Continues to Expand

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| Source: Cutera, Inc.

BRISBANE, Calif., Feb. 11, 2014 (GLOBE NEWSWIRE) -- Cutera, Inc. (Nasdaq:CUTR), a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide, today reported financial results for the fourth quarter ended December 31, 2013.

Key highlights for the fourth quarter of 2013 were as follows:

  • Revenue was $22.2 million and gross margin improved to 59% − reflecting the realization of cost reductions and improved margin contribution from our recently launched products.
  • Net loss was $278,000, or $0.02 per diluted share, which included the previously announced non-recurring consulting services charge of $800,000 and non-cash stock-based compensation, amortization and depreciation charges of $1.1 million.
  • Cash generated by operations was $2.9 million. As of December 31, 2013, we had $83.1 million in cash and investments following the $10 million of cash used for stock repurchases in 2013.
  • We received FDA 510(k) clearance for our new hair removal product and we completed a FDA 510(k) submission with clinical data for our picosecond product for the treatment of benign pigmented lesions and tattoo removal.

Kevin Connors, President and CEO of Cutera stated, "During the fourth quarter, we were pleased with the growth in our US business, many of our Asia Pacific distributors, and our European operations. Demand for our premier vascular product, ExcelV, was particularly strong, surpassing our flagship Xeo system for the first time. The success of ExcelV reflects our customers' satisfaction with the impressive clinical capabilities, broad treatment options and overall system innovation. We believe that our recently implemented product sales specialist structure provides a beneficial focus on specific products and has been instrumental to drive ExcelV volume.

"Excluding the decline in our Podiatry business, our US revenue grew in the fourth quarter of 2013 by 23%. We believe that our market is healthy and we are focused on improving our market share. As such, we are actively expanding our North American sales team to better represent our expanding portfolio of products.

"Our product development efforts remain on schedule to debut our new products, subject to regulatory approvals, at the American Academy of Dermatology meeting in March. We believe that continued product innovation will further enhance our product portfolio and will assist in our growth strategy.

"We repurchased 264,000 shares of common stock during the fourth quarter for $2.4 million. We also repurchased $7.6 million in the third quarter of 2013, for a total repurchase of 1,060,000 shares of common stock for $10.0 million in 2013."

Conference Call

The conference call to discuss these results is scheduled to begin at 2:00 p.m. PT (5:00 p.m. ET) on February 11, 2014. 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 at www.cutera.com, and will be archived online within one hour of its completion through 8:59 p.m. PT (11:59 p.m. ET) on February 25, 2014. In addition, you may call 877-407-3982 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 ability to increase revenue, improve cash generation from operations, improve gross and net operating margins, develop and commercialize existing and new products and applications, ability to leverage the specialist model to other products, expected launch date of planned new products, experience market adoption for its products, realize benefits from additional investment, expand its sales force 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 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; the length of the sales cycle process; 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 4, 2013. 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, 2013, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) 
 
  December 31,
2013
September 30,
2013
December 31,
2012
Assets      
Current assets:      
Cash and cash equivalents  $ 16,242  $ 15,160  $ 23,546
Marketable investments 66,831 67,121 62,026
Accounts receivable, net 9,679 7,494 8,841
Inventories 9,006 10,421 11,114
Deferred tax asset 31 38 40
Other current assets and prepaid expenses 1,507 1,583 1,439
Total current assets 103,296 101,817 107,006
       
Property and equipment, net 1,362 1,461 933
Deferred tax asset, net of current portion 329 503 553
Intangibles, net 2,019 2,044 2,566
Goodwill 1,339 1,339 1,339
Other long-term assets 324 348 397
Total assets  $ 108,669  $ 107,512  $ 112,794
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable  $ 1,820  $ 2,100  $ 2,107
Accrued liabilities 9,328 7,784 9,493
Deferred revenue 7,494 7,195 6,618
Total current liabilities 18,642 17,079 18,218
       
Deferred revenue, net of current portion 4,340 3,395 2,102
Income tax liability 108 69 412
Other long-term liabilities 1,314 1,353 1,288
Total liabilities 24,404 21,896 22,020
       
Stockholders' equity:      
Common stock 14 14 14
Additional paid-in capital 98,820 99,899 100,552
Accumulated deficit (14,620) (14,342) (9,873)
Accumulated other comprehensive income 51 45 81
Total stockholders' equity 84,265 85,616 90,774
Total liabilities and stockholders' equity  $ 108,669  $ 107,512  $ 112,794
 
CUTERA, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited) 
 
  Three Months Ended
  December 31,
2013
September 30,
2013
December 31,
2012
Net revenue  $ 22,239  $ 16,828  $ 22,533
Cost of revenue 9,202 7,651 9,790
Gross profit 13,037 9,177 12,743
       
Operating expenses:      
Sales and marketing 7,804 6,554 7,101
Research and development 2,438 2,440 2,122
General and administrative 3,135 2,160 2,452
       
Total operating expenses 13,377 11,154 11,675
Income (loss) from operations (340) (1,977) 1,068
Interest and other income, net 105 140 105
Income (loss) before income taxes  (235)  (1,837)  1,173
Provision (benefit) for income taxes  43  (169)  96
Net income (loss)  $ (278)  $ (1,668)  $ 1,077
       
Net income (loss) per share:      
Basic   $ (0.02)  $ (0.11)  $ 0.08
Diluted  $ (0.02)  $ (0.11)  $ 0.08
       
Weighted-average number of shares used in per share calculations:    
Basic 14,016 14,541 14,173
Diluted 14,016 14,541 14,272
 
CUTERA, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
(unaudited) 
 
  Three Months Ended
  December 31,
2013
September 30,
2013
December 31,
2012
Cash flows from operating activities:      
Net income (loss)  $ (278)  $ (1,668)  $ 1,077
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Stock-based compensation 740 748 826
Tax benefit from stock-based compensation —  —  6
Excess tax benefit related to stock-based compensation —  —  (6)
Depreciation and amortization 331 327 420
Other 200 (7) 26
Changes in assets and liabilities:      
Accounts receivable (2,204) 48 (992)
Inventories 1,415 97 1,363
Other current assets and prepaid expenses 133 (30) 142
Other long-term assets 24 120
Accounts payable (280) (330) (190)
Accrued liabilities 1,506 75 (14)
Other long-term liabilities (1) 8 (38)
Deferred revenue 1,244 753 1,010
Income tax liability 39 (256) (59)
Net cash provided by (used in) operating activities 2,869 (235) 3,691
       
Cash flows from investing activities:      
Acquisition of property, equipment and software (115) (276) (158)
Disposal of property and equipment 63 —  — 
Acquisition of intangible (155) —  — 
Proceeds from sales of marketable investments 3,470 7,133 5,203
Proceeds from maturities of marketable investments 9,715 10,115 8,564
Purchase of marketable investments (12,946) (6,658) (18,949)
Net cash provided by (used in) investing activities 32 10,314 (5,340)
       
Cash flows from financing activities:      
Repurchases of common stock (2,407) (7,623) — 
Proceeds from exercise of stock options and employee stock purchase plan 588 819 855
Excess tax benefit related to stock-based compensation —  —  6
Net cash provided by (used in) financing activities (1,819) (6,804) 861
       
Net increase (decrease) in cash and cash equivalents 1,082 3,275 (788)
Cash and cash equivalents at beginning of period 15,160 11,885 24,334
Cash and cash equivalents at end of period  $ 16,242  $ 15,160  $ 23,546
 
CUTERA, INC. 
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except percentage data)
(unaudited) 
 
  Three Months Ended  % Change
  Q4
2013
Q3
2013
Q4
2012
Q4 '13 Vs.
Q3 '13
Q4 '13 Vs
Q4 '12
Revenue By Geography:          
United States $ 10,338 $ 7,001 $ 10,008 +48% +3%
International  11,901  9,827  12,525 +21% -5%
  $ 22,239  $ 16,828  $ 22,533 +32% -1%
International as a percentage of total revenue 54% 58% 56%    
Revenue By Product Category:          
Products and upgrades $ 15,703 $ 10,440 $ 15,326 +50% +2%
Service   4,390  4,348  4,614 +1% -5%
Titan and truSculpt hand piece refills  1,044  927  1,235 +13% -15%
Dermal fillers and cosmeceuticals  1,102  1,113  1,358 -1% -19%
  $ 22,239 $ 16,828 $ 22,533 +32% -1%
           
           
           
  Three Months Ended     
  Q4
2013
Q3
2013
Q4
2012
   
Pre-tax Stock-Based Compensation Expense:          
Cost of revenue $ 154 $ 159 $ 178    
Sales and marketing  165  182  181    
Research and development  104  103  95    
General and administrative  317  304  372    
  $ 740 $ 748 $ 826    
Cutera, Inc.
Ron Santilli
Chief Financial Officer
415-657-5500

Investor Relations
John Mills
Integrated Corporate Relations, Inc.
310-954-1105