Cutera Announces Fourth Quarter and Full-Year 2022 Financial Results along with 2023 Outlook

Full-year 2022 revenue of $252.4 million, growing 16% in constant currency

Placed greater than 600 AviClear devices during 2022, and generated $4.5M in AviClear revenue in 2022

Full-year 2023 revenue outlook of $277 million to $292 million, implying 10% to 16% constant currency growth

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, 2022.

Fourth Quarter 2022 Financial and Operational Highlights

• Consolidated revenue of $67.4 million driven by AviClear treatment revenue and strength in Skincare, an increase of 3% as reported and 10% in constant currency from the prior-year period.
• During Q4 2022, the Company generated $3.2 million in AviClear revenue, consisting of treatment revenue and device license fees.
• Strong Skincare revenue of $11.8 million in the quarter, an increase of 10% as reported and 37% in constant currency over 4Q 2021.
• During Q4 2022, the company had consumable product revenues of $4.2 million, a drop off of nearly 18% in constant currency over the prior year, as Key Account Managers (KAMs) were engaged with the account onboarding activities associated with the over-performance of AviClear placements.
• GAAP Gross margin of 57.5% in the quarter, compared to 58.2% in the prior-year period.
  • In constant currency terms, Q4 2022 GAAP Gross Margin was 59.8% and non-GAAP Gross Margin was 61.5%
• GAAP Operating expenses were $44.3 million in the quarter, compared to $40.2 million in the prior-year period. Operating expenses during the period included $7.6 million in AviClear spending and $1.5 million in ERP implementation expenses.
• GAAP Net loss was $7.8 million, compared to a Net loss of $3.9 million in the prior-year period.
• Adjusted EBITDA was $0.2 million, compared to $4.3 million in the prior-year period.
  • Core adjusted EBITDA was $4.7 million as reported and $8.2 million in constant currency.
  • AviClear adjusted EBITDA was a loss of $4.4 million and a loss of $4.5 million in constant currency.

Full-Year 2022 Financial and Operational Highlights

• Consolidated revenue of $252.4 million, an increase of 9% as reported and 16% in constant currency from the prior year period, driven by capital equipment, consumable product demand, and the launch of AviClear.
• Cumulative AviClear placements exceeded 600 units exiting 2022
  • Despite device installation, staff training, and account onboarding backlogs, AviClear generated $4.5M in revenue for the full-year 2022
• GAAP Gross margin of 55.4%, compared to 57.6% in the prior-year period.
  • In constant currency terms, GAAP Gross Margin was 57.4% for the full year.
• GAAP Operating expenses were $178.0 million, compared to $131.3 million in the prior year period. Full-year operating expenses included $30.0 million in AviClear spending and $9.2 million in ERP implementation expenses.
• GAAP Net loss was $82.3 million, inclusive of a non-recurring charge of $34.4 million for the extinguishment of 50% of the 2026 convertible notes, compared to a Net profit of $2.1 million in the prior-year period.
• Adjusted EBITDA was a loss of $7.2 million, compared to income of $20.7 million in the prior-year period.
  • Core adjusted EBITDA was a gain of $20.9 million as reported and $31.5 million in constant currency.
  • AviClear adjusted EBITDA was a loss of $28.0 million and a loss of $28.1 million in constant currency.

“2022 was a year to be remembered for Cutera, as the sales teams delivered mid-teens full-year growth on a constant currency basis in the face of global macro-economic pressures. Meanwhile, we successfully launched and scaled operations for AviClear, our first-to-market revolutionary laser device for the treatment of acne. In just three quarters since our North American introduction we have begun to see green shoots of the financial profile transformation we envision with the application of our novel AviClear business model,” commented Dave Mowry, Chief Executive Officer of Cutera, Inc.

Mowry continued, “Looking back over fourth quarter 2022 AviClear results, I was especially pleased to see the broad acceptance and significant ramp of AviClear bookings in the period. Our focus on leading with clinical results; supporting practice expansion; and delivering improved patient outcomes with reduced patient risk profile is resonating with the dermatologists as market demand outpaced expectations and our ability to fulfill it, at least in the short-term. We intend to continue our efforts to place the customer at the center of our partnership approach, as illustrated by the recent introduction of the AviClear Rewards customer loyalty program which tightly aligns our interests with those of our customers. This program will unlock even greater practice profitability with increased treatments. Additionally, practices owners will be able to leverage their AviClear patient volumes to access cooperative marketing dollars to promote their practice as well as our AviClear procedure.”

2023 Outlook

The company expects full-year 2023 revenue in the range of $277 million to $292 million, implying 10% to 16% constant currency growth over the prior year. The company also expects adjusted EBITDA to be in the low single-digit millions of dollars with consistent, sequential improvement as we progress through the year. Finally, the company anticipates steady placements of the AviClear device each quarter at a rate between 200 – 300 units per quarter over the course of 2023.

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 Dave Mowry, Chief Executive Officer, and Rohan Seth, Chief Financial Officer.

To participate in the conference call, dial 1-800-319-4610 (domestic) or + 1-631-891-4304 (international).

The call will also be a 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 +1-415-657-5500 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 stock-based compensation, depreciation and amortization including contract acquisition costs, executive and other non-recurring severance costs, enterprise resource planning (“ERP”) implementation costs, and certain legal and litigation costs. From time to time in the future, there may be other items that we 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 adjusted EBITDA as operating income before depreciation and amortization, stock-based compensation, executive and non-recurring severance costs, ERP implementataion costs, and costs related to a specific litigation.

Company management uses non-GAAP measurements as aids in monitoring the Company’s ongoing financial performance from quarter to quarter, and year to year, regularly 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:

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;

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;

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

ERP implementation costs. 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 exclude these costs because we believe 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 our operating performance; and

Certain legal and litigation costs. We have excluded costs incurred related to our litigation against Lutronic Aesthetics, which is not part of our ordinary course of business. Our 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. We exclude these costs because this litigation is a result of a discrete event that was not part of our 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 our core 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 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, 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 the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates concerning those or other forward-looking statements. Cutera's financial performance for the fourth quarter and full-year ended December 31, 2022, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

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