CUTR - Cutera Reports Fourth Quarter and Full Year 2018 Financial Results

BRISBANE, Calif., Feb. 20, 2019 (GLOBE NEWSWIRE) -- Cutera, Inc. (NASDAQ: CUTR) (“Cutera” or the “Company”), a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide, today reports financial results for the fourth quarter and fiscal year ended December 31, 2018.

Key financial and operational highlights for the fourth quarter and full year 2018 include:

• Revenue for the fourth quarter increased 12% sequentially, though decreased 5% from the prior year fourth quarter, to $45.5 million. Revenue increased 7% to $162.7 million for the full year 2018; 
  -- Fourth quarter continues to reflect strong demand for the body sculpting product portfolio, truSculpt, with the number of systems sold growing strong double digits both sequentially and year over year. 
  -- Total recurring revenue, which includes service, skincare and consumable revenue, for the fourth quarter reached $8.6 million, or 28% growth over the fourth quarter 2017.  For the full year 2018, total recurring revenue was $30.1 million, or 18% growth over the full year 2017.
  -- US revenue declined by 7% in the fourth quarter over the prior year period, and increased 8% for the full year 2018. Results reflect strong demand for the truSculpt and Secret RF systems, primarily offset by softness in the overall women’s health market, competitive trends affecting certain legacy systems, and greater than expected turnover in our North American salesforce in the fourth quarter.
  -- International revenue grew 1% in the fourth quarter and 7% for the full year 2018. Full year results reflect double-digit growth in the Middle East and Asia (excluding Japan).
• Gross Margin for the fourth quarter was 41%, compared to 57% in the prior year period. For the full year 2018, gross margin was 49% versus 57% for the prior year. The decrease in fourth quarter gross margin reflects pricing headwinds across the portfolio of legacy systems, channel mix, and a $5.0 million charge, of which $1.1 million was utilized in the fourth quarter. This charge related to product remediation of one of our legacy systems. Non-GAAP gross margin* was 53% for both the fourth quarter and full year 2018, compared to 58% and 57% for the respective prior year periods.
• Operating expenses for the fourth quarter and full year 2018 were 53% and 58% of revenue, respectively. This compares to 48% and 50% for the prior year periods.  Non-GAAP* operating expenses for the fourth quarter and full year 2018 were 48% and 52% of revenue, respectively, as compared to 45% and 49% for the same prior year periods.
• GAAP Net Loss for the fourth quarter and full year 2018 was $26.3 million and $30.8 million, or $1.89 and $2.23 loss per share on a basic and fully-diluted basis.  GAAP net loss includes a valuation allowance of $16.9 million against certain U.S. deferred tax assets in the fourth quarter. The recording of the valuation allowance resulted in a GAAP income tax provision of $20.8 million in the fourth quarter of 2018.  Non-GAAP* net income for full year 2018 was $1.5 million, or $0.11 per fully-diluted share.

“2018 was a year of achievements and challenges. Cutera launched four new products, including our next-generation body contouring system, truSculpt iD, which we expect to be a meaningful platform in this billion-dollar market. In addition, we continue to make progress streamlining multiple manufacturing and inventory processes, further enhancing our future growth,’ stated Cutera Chief Operating Officer and Interim CEO, Jason Richey. “Like others in the aesthetic space, we encountered considerable headwinds affecting our overall results in the second half of 2018. As interim CEO, and with the full support of the Board of Directors, my priorities are clear --- position Cutera to grow faster than the market without sacrificing profitability, while improving the efficiencies of the Company’s infrastructure. We are executing on multiple initiatives in order to achieve these goals and I am optimistic about the Company’s future. I look forward to reporting our future progress.”

2019 Financial Outlook

• We expect full year revenue to be in the range of $165 to $175 million, a 2% - 8% increase over 2018;
• Full year Non-GAAP* gross margin is expected to improve over 2018 full year Non-GAAP* gross margin;
• Adjusted EBITDA* is expected to be in the range of $2 million to $4 million.

Conference Call

The Company will host a live audio webcast for interested parties commencing today at 1:30 p.m. PST (4:30 p.m. EST).  Participating in the call will be Jason Richey, Chief Operating Officer and Interim Chief Executive Officer and Sandra Gardiner, 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://www.cutera.com/, and will be available online within 24 hours of its completion through May 20, 2019. In addition, you may call 1-877-705-6003 to listen to the live broadcast.

CONTACTS:

Cutera, Inc.
Matthew Scalo
Vice President, Investor Relations & Corporate Development
415-657-5500
mscalo@cutera.com

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

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 developed 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.

*Use of Non-GAAP Financial Measures

In this press release, in order to supplement our condensed consolidated financial statements presented in accordance with Generally Accepted Accounting Principles, or GAAP, management has disclosed certain non-GAAP financial measures for the statement of operations and net income (loss) per diluted share.  Non-GAAP adjustments include stock-based compensation, depreciation, amortization, product remediation charges, and Enterprise Resource Planning (“ERP”) system implementation costs, as well as the net tax impact of excluding these items.  From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.  We have provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure.  We have not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential significant variability, limited visibility, unpredictability, or unique non-recurring nature of the items. Forward-looking non-GAAP measures include adjusted EBITDA.  We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, stock-based compensation, product remediation charges outside the scope of our typical recurring warranty and service costs, and charges related to ERP software implementation costs.

Company management uses these measurements as aids in monitoring the Company’s ongoing financial performance from quarter to quarter, and year to year, on a regular basis and for benchmarking against other similar companies. Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP financial measures should be considered along with, but not as alternatives to, the operating performance measure as prescribed by GAAP.  Non-GAAP financial measures for the statement of operations and net income per diluted share exclude the following:

Non-cash expenses for stock-based compensation. We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record stock-based compensation expense related to grants of options, performance and restricted stock. Depending upon the size, timing and the terms of the grants, this expense may vary significantly but will recur in future periods.  We believe that excluding stock-based compensation better allows for comparisons to our peer companies;

Depreciation and amortization. We have excluded depreciation and amortization expense in calculating our non-GAAP operating expenses and net income measures.  Depreciation and amortization are non-cash charges to current operations;

Product Remediation. We have excluded costs incurred to remediate an issue related to a legacy product.  These costs include the repair of products in use, in inventory, and in production, and are outside the scope of our typical recurring warranty and service costs; and

Enterprise Resource Planning. We have excluded ERP system costs related to direct and incremental costs incurred in connection with our multi-phase implementation of a new ERP solution and the related technology infrastructure costs.

We believe that excluding all of the items above allows users of our financial statements to better review and assess both current and historical results of operations.

Safe Harbor Statement

Certain statements in this press release, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, Cutera’s plans, objectives, strategies, financial performance and outlook, product launches and performance, trends, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “should,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” “foresee” or variations of these terms and similar expressions, or the negative of these terms or similar expressions.  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. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this press release, including those described in the “Risk Factors” section of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, the Registration Statement on Form S-8 and other documents filed from time to time with the United States Securities and Exchange Commission by Cutera.

All information in this press release is as of the date of its release.  Accordingly, undue reliance should not be placed on forward-looking statements. 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. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Cutera's financial performance for the fourth quarter and full year ended December 31, 2018, as discussed in this release, is preliminary and unaudited, and subject to adjustment.