Cutera Announces Fourth Quarter and Full-Year 2023 Financial Results Along with 2024 Outlook

BRISBANE, Calif.--(BUSINESS WIRE)--Cutera, Inc. (Nasdaq: CUTR) ("Cutera" or the "Company"), a leading provider of aesthetic and dermatology solutions, today reported financial results for the fourth quarter and full-year ended December 31, 2023.

• Consolidated revenue for the fourth quarter of 2023 of $49.5 million
• Full-year 2023 revenue of $212.4 million, ahead of guidance of approximately $205 million
• Cash and marketable securities of $143.6 million as of December 31, 2023, ahead of guidance of approximately $135 million
• Completion of corporate restructuring program, allowing for both an improved cost structure and better organizational alignment
• Successful execution of the North American limited commercial release of the enhanced AviClear product and business model offering during the fourth quarter of 2023

"Thanks to the hard work of the team, Cutera finished a challenging year with fourth quarter financial performance ahead of our guidance range, and we have also completed the key elements of our corporate restructuring, including a reduction in force, bringing critical manufacturing operations in-house, and a transition of our Skincare business," commented Taylor Harris, Chief Executive Officer of Cutera, Inc. "We are now squarely focused on our most important priorities, which are operational excellence and building a successful AviClear franchise across the globe."

Fourth Quarter 2023 Financial Highlights

Consolidated revenue for the fourth quarter of 2023 was $49.5 million, a decrease of 26% compared to the fourth quarter of 2022. Revenue related to capital equipment systems declined 32%, while recurring sources of revenue declined 16%. AviClear revenue for the fourth quarter of 2023 was $3.9 million.

Gross profit was $6.2 million, or 12.6% of revenue, for the fourth quarter of 2023, compared to a gross profit of $38.7 million, or 57.5% of revenue, for the fourth quarter of 2022. On a non-GAAP basis, gross profit was $9.9 million, or 20.0% of revenue, for the fourth quarter of 2023, compared to $40.0 million, or 59.4% of revenue, for the fourth quarter of 2022. Gross profit in the fourth quarter, on both a GAAP and a non-GAAP basis, was negatively affected by approximately $8.4 million, or 16.9% of revenue, of non-cash expense related to excess and obsolete inventory.

Operating expenses were $50.6 million for the fourth quarter of 2023, compared to $44.3 million in the prior year period. On a non-GAAP basis, operating expenses were $36.0 million for the fourth quarter of 2023, compared to $39.7 million for the prior year period.

Non-GAAP operating income was a loss of $26.1 million for the fourth quarter of 2023, compared to a gain of $0.2 million in the fourth quarter of 2022.

Cash and marketable securities were $143.6 million as of December 31, 2023, compared to $317.3 million as of December 31, 2022, and $179.5 million as of September 30, 2023.

Full-Year 2023 Financial Highlights

Consolidated revenue for the full-year 2023 was $212.4 million, a decrease of 16% compared to the full-year 2022. Revenue related to capital equipment systems declined 21%, while recurring sources of revenue declined 7%. Revenue excluding Skincare was $178.4 million and decreased 15% versus the prior year period.

Gross profit was $60.4 million or 28.4% of revenue, for the full-year 2023, compared to a gross profit of $139.8 million, or 55.4% of revenue, for the full-year 2022. On a non-GAAP basis, gross profit was $71.4 million, or 33.6% of revenue, for the full-year 2023, compared to $142.8 million, or 56.6% of revenue, for the full-year 2022.

Operating expenses were $203.4 million for the full-year 2023, compared to $178.0 million in the prior year period. On a non-GAAP basis, operating expenses were $157.1 million for the full-year 2023, compared to $150.0 million for the prior year period.

Non-GAAP operating income was a loss of $85.7 million for the full-year 2023, compared to a loss of $7.2 million in the full-year 2022.

2024 Outlook

The Company expects 2024 annual revenue in the range of $160 million to $170 million, including $4 million of Skincare revenue recorded through the February transition date, and ending 2024 with cash and marketable securities of approximately $55 million to $60 million.

Conference Call

The Company's management will host a conference call to discuss these results and related matters today at 1:30 p.m. PT (4:30 p.m. ET). Participating in the call will be Taylor Harris, Chief Executive Officer, Stuart Drummond, Interim Chief Financial Officer, and Greg Barker, Vice President of FP&A and Investor Relations.

Participants can register for the conference call at the following registration link. Upon registering, a calendar booking will be provided by email including the dial-in details and a unique PIN to access the call. Using this process will by-pass the operator and avoid the call queue. Registration will remain open until the end of the live conference call.

If participants prefer to dial in and speak with an operator, dial Canada/USA Toll Free: 1-800-319-4610 or [phone]. It's recommended that you call in 10 minutes prior to the scheduled start time if you are using one of these operator-assisted phone numbers.

The call will also be webcast and can be accessed from the Investor Relations section of Cutera's website at http://www.cutera.com/. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

About Cutera, Inc.

Brisbane, California-based Cutera is a leading provider of aesthetic and dermatology solutions for practitioners worldwide. Since 1998, Cutera has been developing innovative, easy-to-use products that harness the power of science and nature to enable medical practitioners to offer safe and effective treatments to their patients. For more information, call [phone] or 1-888-4CUTERA or visit www.cutera.com.

*Use of Non-GAAP Financial Measures

In this press release, to supplement the Company's condensed consolidated financial statements presented in accordance with Generally Accepted Accounting Principles, or GAAP, management has disclosed certain non-GAAP financial measures for gross margin, gross margin rate, and operating income. Non-GAAP adjustments include depreciation and amortization including contract acquisition costs, stock-based compensation, enterprise resource planning ("ERP") implementation costs, certain legal and litigation costs, executive and other non-recurring severance costs, retention plan costs, expenses related to manufacturing agreement termination, and Board of Director legal and advisory fees. From time to time in the future, there may be other items that the Company may exclude if the Company believes that doing so is consistent with the goal of providing useful information to investors and management. The Company has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure.

The Company defines non-GAAP financial measure, also commonly known as adjusted EBITDA, as operating income before depreciation and amortization, stock-based compensation, ERP implementation costs, costs related to certain litigation, executive and non-recurring severance costs, retention plan costs, expenses related to manufacturing agreement termination, and legal and advisory fees related to litigation and shareholder activism.

Company management uses non-GAAP measures as aids in monitoring the Company's ongoing financial performance from quarter to quarter, and year to year, 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 share exclude the following:

Depreciation and amortization, including contract acquisition costs. The Company has excluded depreciation and amortization expense in calculating its non-GAAP operating expenses and net income measures. Depreciation and amortization are non-cash charges to current operations;

Stock-based compensation. The Company has excluded the effect of stock-based compensation expenses in calculating its non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to the Company's employees, the Company continues to evaluate its business performance excluding stock-based compensation expenses. The Company records stock-based compensation expenses related to grants of options, employee stock purchase plans, and performance and restricted stock. Depending upon the size, timing, and terms of the grants, this expense may vary significantly but will recur in future periods. The Company believes that excluding stock-based compensation better allows for comparisons to its peer companies;

ERP implementation costs. The Company has excluded ERP system costs related to direct and incremental costs incurred in connection with its multi-phase implementation of a new ERP solution and the related technology infrastructure costs. The Company excludes these costs because it believes that these items do not reflect future operating expenses and will be inconsistent in amounts and frequency making it difficult to contribute to a meaningful evaluation of the Company's operating performance;

Certain legal and litigation costs. The Company has excluded costs incurred related to its litigation against Lutronic Aesthetics, which is not part of the Company's ordinary course of business. The Company's complaint against Lutronic alleges misappropriation of trade secrets, violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), interference with contractual relations and other claims. The Company excludes these costs because this litigation is a result of a discrete event that was not part of the Company's business strategy, but has a significant effect on the results of operations. Its costs are incidental to and do not reflect the efficiencies and effectiveness of the Company's core operations;

Executive and other non-recurring severance costs. The Company has excluded costs associated with restructuring activities and the separation of its officers and other executives in calculating its non-GAAP operating expenses and non-GAAP Operating Income. The Company has excluded restructuring costs because a restructuring represents a discrete event that signifies a change in the Company's strategy, but its costs are not indicative of the ongoing financial performance of the business. The Company excludes executive separation costs because executive separations are unpredictable and not part of the Company's business strategy but could have a significant impact on the results of operation;

Retention plan costs. The Company has excluded the expense related to a retention plan implemented in April 2023. Approximately $11 million was made available to sales personnel and key employees and will be paid in quarterly installments through October 2024. The Company has excluded expense related to this retention plan as such costs are not considered part of ongoing operations;

Expenses related to manufacturing agreement termination. The Company has excluded expenses related to a manufacturing agreement termination incurred as part of a settlement agreement related to the non-renewal of a manufacturing service agreement with Jabil Inc., a third-party manufacturing provider that manufactured excel V+ and AviClear devices for the Company. The Company excluded these costs because it believes that these items do not reflect future operating expenses and will be inconsistent in amounts and frequency making it difficult to contribute to a meaningful evaluation of the Company's operating performance; and

Board of Director legal and advisory fees. The Company has excluded costs associated with the litigation and shareholder activism related to its 2023 annual meeting of shareholders. The Company excluded these costs as the costs do not relate to ongoing operations.

The Company believes that excluding all of the items above allows users of its 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, guidance 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, the Company's 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 several risks, uncertainties, and other important factors, many of which are beyond the Company's control, that could cause its 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, and other documents filed from time to time with the United States Securities and Exchange Commission by Cutera.

All statements made in this release are made only as of the date set forth at the beginning of this release. We undertake no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this release. Our audited consolidated financial statements for the year ended December 31, 2023 are not yet available. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file our Form 10-K.

CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
	December 31,				December 31,
	2023				2022
Assets
Current assets:
Cash and cash equivalents	$	143,612			$	145,924
Marketable securities		-				171,390
Accounts receivable, net		43,371				45,562
Inventories, net		61,725				63,628
Other current assets and prepaid expenses		19,627				24,036
Restricted cash		-				700
Total current assets		268,335				451,240
Long-term inventories, net		26,011				-
Property and equipment, net		37,275				40,368
Deferred tax asset		579				590
Goodwill		1,339				1,339
Operating lease right-of-use assets		10,055				12,831
Other long-term assets		11,575				14,620
Total assets	$	355,169			$	520,988
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable	$	19,829			$	33,736
Accrued liabilities		51,930				57,452
Operating leases liabilities		2,441				2,810
Deferred revenue		10,422				11,841
Total current liabilities		84,622				105,839
Deferred revenue, net of current portion		1,494				1,657
Operating lease liabilities, net of current portion		8,887				11,352
Convertible notes, net of unamortized debt issuance costs		418,695				416,459
Other long-term liabilities		1,298				862
Total liabilities		514,996				536,169
Stockholders' deficit:
Common stock		20				20
Additional paid-in capital		131,496				125,406
Accumulated other comprehensive loss		-				(94	)
Accumulated deficit		(291,343	)			(140,513	)
Total stockholders' deficit		(159,827	)			(15,181	)
Total liabilities and stockholders' deficit	$	355,169			$	520,988

CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
	Three Months Ended								Twelve Months Ended
	December 31,				December 31,				December 31,				December 31,
	2023				2022				2023				2022
Products	$	43,528			$	61,601			$	189,813			$	228,796
Service		6,012				5,752				22,556				23,603
Total net revenue		49,540				67,353				212,369				252,399
Products		40,684				26,188				139,380				100,254
Service		2,615				2,416				12,576				12,316
Total cost of revenue		43,299				28,604				151,956				112,570
Gross margin		6,241				38,749				60,413				139,829
Gross margin %		12.6	%			57.5	%			28.4	%			55.4	%
Operating expenses:
Sales and marketing		24,412				28,514				113,003				106,947
Research and development		4,564				5,408				21,408				25,155
General and administrative		21,581				10,363				69,029				45,917
Total operating expenses		50,557				44,285				203,440				178,019
Loss from operations		(44,316	)			(5,536	)			(143,027	)			(38,190	)
Interest and other income (expense), net
Interest on convertible notes		(2,944	)			(1,992	)			(11,780	)			(5,658	)
Loss on extinguishment of convertible notes		-				-				-				(34,423	)
Amortization of debt issuance costs		(566	)			(438	)			(2,236	)			(1,355	)
Interest income, net		1,761				1,535				8,707				2,914
Other income (expense), net		1,604				(593	)			(960	)			(3,990	)
Loss before income taxes		(44,461	)			(7,024	)			(149,296	)			(80,702	)
Income tax expense		769				764				1,534				1,638
Net loss	$	(45,230	)		$	(7,788	)		$	(150,830	)		$	(82,340	)
Net loss per share:
Basic	$	(2.27	)		$	(0.40	)		$	(7.59	)		$	(4.39	)
Diluted	$	(2.27	)		$	(0.40	)		$	(7.59	)		$	(4.39	)
Weighted-average number of shares used in per share calculations:
Basic		19,958				19,642				19,885				18,747
Diluted		19,958				19,642				19,885				18,747

CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
	Three Months Ended								Twelve Months Ended
	December 31,				December 31,				December 31,				December 31,
	2023				2022				2023				2022
Cash flows from operating activities:
Net loss	$	(45,230	)		$	(7,788	)		$	(150,830	)		$	(82,340	)
Adjustments to reconcile net loss to net cash provided used in operating activities:
Stock-based compensation		1,512				1,379				8,064				14,400
Depreciation and amortization		3,350				1,018				8,575				2,621
Amortization of contract acquisition costs		1,762				1,385				8,847				3,200
Amortization of debt issuance costs		566				438				2,236				1,355
Deferred tax assets		(51	)			36				11				188
Provision for credit losses		1,893				1,110				7,381				1,787
Loss on sale of property and equipment		-				82				-				168
Accretion of discount on investment securities and investment income, net		-				-				1,048				-
Loss on extinguishment of convertible notes		-				-				-				34,423
Changes in assets and liabilities:
Accounts receivable		4,565				(10,796	)			(5,190	)			(15,900	)
Inventories, net		5,171				(7,690	)			6,952				(36,305	)
Other current assets and prepaid expenses		10				(364	)			4,362				(9,491	)
Other long-term assets		(601	)			(4,447	)			(6,243	)			(8,091	)
Accounts payable		(10,131	)			537				(14,866	)			20,979
Accrued liabilities		4,617				6,966				(6,346	)			3,282
Operating leases, net		(14	)			10				(58	)			56
Deferred revenue		(1,192	)			1,097				(1,582	)			2,673
Net cash used in operating activities		(33,773	)			(17,027	)			(137,639	)			(66,995	)
Cash flows from investing activities:
Acquisition of property and equipment		(2,599	)			(8,591	)			(33,241	)			(22,698	)
Purchase of marketable investments		-				(77,202	)			(23,467	)			(233,511	)
Proceeds from maturities of marketable investments		-				111,000				193,903				62,027
Net cash provided by (used in) investing activities		(2,599	)			25,207				137,195				(194,182	)
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan		-				1,036				1,323				2,723
Proceeds from issuance of convertible notes		-				120,000				-				360,000
Purchase of capped call		-				-				-				(31,671	)
Payment of issuance costs of capped call		-				(25,009	)			-				(25,362	)
Payment of issuance costs of convertible notes		-				(3,600	)			-				(11,202	)
Extinguishment of convertible notes		-				-				-				(45,777	)
Taxes paid related to net share settlement of equity awards		(24	)			(436	)			(3,297	)			(5,256	)
Payments on capital lease obligations		(208	)			(127	)			(594	)			(518	)
Net cash provided by (used in) financing activities		(232	)			91,864				(2,568	)			242,937
Net increase (decrease) in cash, cash equivalents and restricted cash		(36,604	)			100,044				(3,012	)			(18,240	)
Cash, cash equivalents, and restricted cash at beginning of period		180,216				46,580				146,624				164,864
Cash, cash equivalents, and restricted cash at end of period	$	143,612			$	146,624			$	143,612			$	146,624

CUTERA, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except percentage data)
(unaudited)
	Three Months Ended								% Change			Twelve Months Ended								% Change
	December 31,				December 31,				2023 Vs			December 31,				December 31,				2023 Vs
	2023				2022				2022			2023				2022				2022
Revenue By Geography:
North America	$	22,292			$	34,076			-34.6	%		$	106,786			$	128,426			-16.9	%
Japan		14,887				16,980			-12.3	%			52,134				64,920			-19.7	%
Rest of World		12,361				16,297			-24.2	%			53,449				59,053			-9.5	%
Total Net Revenue	$	49,540			$	67,353			-26.4	%		$	212,369			$	252,399			-15.9	%
International as a percentage of total revenue		55.0	%			49.4	%						49.7	%			49.1	%
Revenue By Product Category:
Systems
- North America	$	15,456			$	25,684			-39.8	%		$	75,206			$	99,267			-24.2	%
- Rest of World (including Japan)		13,668				17,438			-21.6	%			55,322				65,292			-15.3	%
Total Systems		29,124				43,122			-32.5	%			130,528				164,559			-20.7	%
Consumables		5,116				6,702			-23.7	%			25,302				21,737			+16.4%
Skincare		9,288				11,777			-21.1	%			33,983				42,500			-20.0	%
Total Products		43,528				61,601			-29.3	%			189,813				228,796			-17.0	%
Service		6,012				5,752			+4.5%				22,556				23,603			-4.4	%
Total Net Revenue	$	49,540			$	67,353			-26.4	%		$	212,369			$	252,399			-15.9	%
	Three Months Ended											Twelve Months Ended
	December 31,				December 31,							December 31,				December 31,
	2023				2022							2023				2022
Pre-tax Stock-Based Compensation Expense:
Cost of revenue	$	45			$	235						$	751			$	1,665
Sales and marketing		363				1,143							3,388				4,998
Research and development		152				(108	)						1,082				2,405
General and administrative		952				109							2,843				5,332
	$	1,512			$	1,379						$	8,064			$	14,400

CUTERA, INC.
RECONCILIATION OF GAAP GROSS PROFIT, GROSS MARGIN AND OPERATING INCOME TO NON-GAAP GROSS PROFIT, GROSS MARGIN AND OPERATING INCOME
(in thousands)
(unaudited)
Three Months Ended December 31, 2023		Gross Profit			Gross Margin			Operating Income					Twelve Months Ended December 31, 2023				Gross Profit				Gross Margin			Operating Income
Reported		$	6,241		12.6	%		$	(44,316	)			Reported				$	60,413			28.4	%		$	(143,027	)
Adjustments:													Adjustments:
Depreciation and amortization including contract acquisition costs			3,237		6.5	%			5,112				Depreciation and amortization including contract acquisition costs					9,205			4.3	%			17,422
Stock-based compensation			45		0.1	%			1,512				Stock-based compensation					751			0.4	%			8,064
ERP implementation costs			-		-				780				ERP implementation costs					-			-				3,525
Legal			-		-				864				Legal					-			-				2,472
Severance			337		0.7	%			1,132				Severance					607			0.3	%			2,023
Retention plan costs			34		0.1	%			1,029				Retention plan costs					129			0.1	%			5,367
Expenses related to manufacturing agreement termination			-		-				5,724				Expenses related to manufacturing agreement termination					-			-				5,724
Board of Directors legal and advisory fees			-		-				1,827				Board of Directors legal and advisory fees					-			-				11,566
Other adjustments			-		-				227				Other adjustments					307			0.1	%			1,213
Total adjustments			3,653		7.4	%			18,207				Total adjustments					10,999			5.2	%			57,376
Adjusted		$	9,894		20.0	%		$	(26,109	)			Adjusted				$	71,412			33.6	%		$	(85,651	)
Three Months Ended December 31, 2022		Gross Profit			Gross Margin			Operating Income					Twelve Months Ended December 31, 2022				Gross Profit				Gross Margin			Operating Income
Reported		$	38,749		57.5	%		$	(5,536	)			Reported				$	139,829			55.4	%		$	(38,190	)
Adjustments:													Adjustments:
Depreciation and amortization including contract acquisition costs			997		1.5	%			2,479				Depreciation and amortization including contract acquisition costs					1,593			0.6	%			5,821
Stock-based compensation			235		0.3	%			1,379				Stock-based compensation					1,665			0.7	%			14,400
ERP implementation costs			-		-				1,498				ERP implementation costs					-			-				9,210
Legal			-		-				222				Legal					-			-				1,284
Severance			-		-				200				Severance					26			0.0	%			615
Other adjustments			-		-				-				Other adjustments					(290	)		-0.1	%			(290	)
Total adjustments			1,232		1.8	%			5,778				Total adjustments					2,994			1.2	%			31,040
Adjusted		$	39,981		59.4	%		$	242				Adjusted				$	142,823			56.6	%		$	(7,150	)

Contacts

Cutera, Inc.
Greg Barker
VP, Corporate FP&A and Investor Relations
415-657-5500
[e-mail]