BRISBANE, Calif., Aug. 7 /PRNewswire-FirstCall/ -- Cutera, Inc. , a leading provider of laser and other light-based aesthetic systems for practitioners worldwide, today reported financial results for the second quarter and six months ended June 30, 2006. Key financial highlights are as follows:
Second Quarter 2006: -- Revenue increased by $6.8 million, or 39%, to $24.4 million, compared to the second quarter of 2005. -- GAAP diluted loss per share, which included the patent litigation settlement and stock-based compensation expenses, was $(0.73). Non-GAAP (1) diluted earnings per share was $0.20. First Half 2006: -- Revenue increased by $12.4 million, or 38%, to $45.2 million, compared to the first half of 2005. -- Diluted loss per share, which included the patent litigation settlement and stock-based compensation expenses, was $(0.64). Non-GAAP(1) diluted earnings per share was $0.33.
“We are very pleased with our second quarter revenue growth, which exceeded our expectations and, we believe, outpaced the overall strong growth in our industry,” said Kevin Connors, President and Chief Executive Officer. “These results reflect the positive reception our products have been receiving in the marketplace and the investments we have been making in expanding and improving our sales force.”
“Our financial position remains very strong with $82.0 million of cash and marketable investments -- and no debt -- enabling us to make additional investments in new product development and sales force expansion,” added Mr. Connors. “We expect to continue improving the financial leverage in our operating expenses. And with the patent litigation behind us, we are very excited that our management efforts during the second half of 2006 will be focused sharply on expanding our market share and taking advantage of the long-term growth opportunities in light-based aesthetic systems.”
Guidance:
Management believes that revenue for the third quarter and full year of 2006 will be approximately $25.0 million and $100 million, respectively. GAAP diluted earnings per share for the third quarter and full year of 2006 are expected to be $0.21 (Non-GAAP(1) $0.27) and break-even (Non-GAAP(1) $1.00), respectively.
Non-GAAP Presentation: (1) Effective January 1, 2006, Cutera adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), which required the Company to recognize compensation expense relating to share-based payment transactions in the Statement of Operations. In June 2006, the Company settled its patent litigation. To supplement the consolidated condensed financial statements presented on a GAAP basis, management has provided Non-GAAP net income and Non-GAAP diluted income per share measures that exclude the impact of the litigation settlement and all stock-based compensation expenses, both net of income taxes. The Company believes that these Non-GAAP financial measures provide investors with insight into what is used by management to conduct a more meaningful and consistent comparison of the company’s ongoing operating results and trends, compared with historical results. This presentation is also consistent with management’s internal use of the measure, which it uses to measure the performance of ongoing operating results, against prior periods and against our internally developed targets. A table reconciling the GAAP financial measures to the Non-GAAP measures, is included in the condensed consolidated financial information attached to this release. Conference Call
The conference call is scheduled to begin at 2:00 p.m. PDT (5:00 p.m. EDT) on August 7, 2006. The call will be broadcast live over the Internet hosted at the Investor Relations section of the Company’s website at www.cutera.com and will be archived online within one hour of its completion. In addition, you may call 800-817-4887 to listen to the live broadcast. Participating in the call will be Kevin Connors, President and Chief Executive Officer, and Ron Santilli, Chief Financial Officer.
A telephonic playback of this call will be available from 5:00 p.m. PDT on August 7, 2006, through 11:59 p.m. PDT on August 21, 2006 by calling 888-203-1112. To access this playback, please enter pass code 4814163.
About Cutera, Inc.
Brisbane, California-based Cutera is a leading provider of laser and other light-based aesthetic systems for practitioners worldwide. Since 1998, Cutera has been developing innovative, easy-to-use products that enable dermatologists, plastic surgeons, gynecologists, primary care physicians and other qualified practitioners to offer safe, effective and non-invasive 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 continue to rapidly grow its business, its ability to successfully expand its market share, as well as Cutera’s financial guidance for the third quarter and fiscal year 2006, 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. Cutera’s second quarter and six-months ended June 30, 2006 financial performance, as discussed in this release, is preliminary and unaudited, and subject to adjustment. Estimates for the third quarter and fiscal year 2006 financial performance are subject to a number of assumptions regarding the future operation of our business. Further information on potential risk factors that could affect Cutera’s business and its financial results are detailed in its most recent 10-K and 10-Q as filed with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks 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, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) June 30, December 31, 2006 2005 Assets Current assets: Cash and cash equivalents $1,923 $5,260 Marketable investments 80,042 86,736 Accounts receivable, net 5,651 6,478 Inventory 6,449 5,245 Deferred tax asset 7,611 3,027 Other current assets 5,661 3,728 Total current assets 107,337 110,474 Property and equipment, net 956 1,015 Intangibles, net 1,536 469 Total assets $109,829 $111,958 Liabilities and Stockholders’ Equity Liabilities: Accounts payable $1,316 $1,352 Accrued liabilities 10,410 9,131 Deferred revenue 2,637 1,673 Total current liabilities 14,363 12,156 Deferred rent 1,260 1,096 Deferred revenue, net of current portion 1,743 1,469 Deferred tax liability 60 60 Total liabilities 17,426 14,781 Stockholders’ equity: Common stock 13 12 Additional paid-in capital 79,369 77,705 Deferred stock-based compensation (629) (2,171) Retained earnings 13,801 21,743 Accumulated other comprehensive loss (151) (112) Total stockholders’ equity 92,403 97,177 Total liabilities and stockholders’ equity $109,829 $111,958 CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net revenue $24,395 $17,570 $45,152 $32,717 Cost of revenue 7,768 4,883 13,579 8,896 Gross profit 16,627 12,687 31,573 23,821 Operating expenses: Sales and marketing 8,305 5,832 16,851 11,632 Research and development 1,552 1,412 2,859 2,597 General and administrative 4,248 2,283 8,623 4,596 Litigation settlement 18,391 -- 18,391 -- Total operating expenses 32,496 9,527 46,724 18,825 Income (loss) from operations (15,869) 3,160 (15,151) 4,996 Interest and other income, net 830 516 1,786 802 Income (loss) before income taxes (15,039) 3,676 (13,365) 5,798 Provision (benefit) for income taxes (5,990) 972 (5,423) 1,608 Net income (loss) $(9,049) $2,704 $(7,942) $4,190 Net income (loss) per diluted share $(0.73) $0.20 $(0.64) $0.31 Weighted-average number of shares used in diluted per share calculations 12,444 13,585 12,352 13,536 CUTERA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Cash flows from operating activities: Net income (loss) $(9,049) $2,704 $(7,942) $4,190 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 214 157 413 318 Change in allowance for doubtful accounts (87) (46) (4) (85) Provision for excess and obsolete inventory 32 143 32 393 Change in deferred taxes (4,606) 6 (4,584) 8 Stock-based compensation 911 303 1,997 729 Tax benefit from stock option exercises (1,006) 761 -- 1,314 Excess tax benefit related to stock- based compensation expense 999 -- -- -- Changes in assets and liabilities: Accounts receivable 1,083 96 831 853 Inventory 203 (406) (1,236) (1,395) Other current assets (1,721) (444) (1,933) (676) Accounts payable (1,071) 276 (36) 48 Accrued liabilities 1,537 1,007 1,279 348 Deferred rent 82 112 164 224 Deferred revenue 586 211 1,238 226 Net cash provided by (used in) operating activities (11,893) 4,880 (9,781) 6,495 Cash flows from investing activities: Acquisition of property and equipment (137) (127) (251) (257) Acquisition of intangibles (1,170) -- (1,170) -- Proceeds from sales of marketable investments 11,021 9,500 11,460 13,450 Proceeds from maturities of marketable investments 28,717 1,000 47,405 2,010 Purchase of marketable investments (27,221) (19,405) (52,210) (24,025) Net cash (used in) provide by investing activities 11,210 (9,032) 5,234 (8,822) Cash flows from financing activities: Proceeds from exercise of stock options and employee stock purchase plan 654 847 1,210 2,214 Excess tax benefit related to stock-based compensation expense (999) -- -- -- Net cash provided by financing activities (345) 847 1,210 2,214 Net decrease in cash and cash equivalents (1,028) (3,305) (3,337) (113) Cash and cash equivalents at beginning of period 2,951 10,262 5,260 7,070 Cash and cash equivalents at end of period $1,923 $6,957 $1,923 $6,957 Supplemental and non-cash disclosure of cash flow information: Change in deferred stock-based compensation, net of terminations $-- $(118) $(1,255) $(55) CUTERA, INC. CONSOLIDATED REVENUE HIGHLIGHTS (in thousands, except percentage data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2006 2005 Change 2006 2005 Change Revenue By Geography: United States $16,428 $11,415 +44% $31,337 $21,795 +44% International 7,967 6,155 +29% 13,815 10,922 +26% $24,395 $17,570 +39% $45,152 $32,717 +38% Revenue By Product Category: Products $20,311 $14,634 +39% $37,867 $27,295 +39% Product upgrades 1,573 1,671 -6% 2,709 3,265 -17% Service 1,401 860 +63% 2,522 1,610 +57% Titan refills 1,110 405 +174% 2,054 547 +276% $24,395 $17,570 +39% $45,152 $32,717 +38% CUTERA, INC. NON-GAAP RECONCILIATION OF NET INCOME AND NET INCOME PER SHARE (in thousands, except per share data) (unaudited) Three Months Six Months Ended Ended 6/30/2006 6/30/2006 GAAP net loss $(9,049) $(7,942) Non-GAAP adjustments to net loss Litigation settlement (a) 18,391 18,391 Income tax effect of litigation settlement (c) (7,114) (7,114) Stock-based compensation (b) 911 1,997 Income tax effect of stock- based compensation (c) (301) (659) Total non-GAAP adjustments to net loss 11,888 12,615 Non-GAAP net earnings $2,839 $4,673 GAAP diluted loss per share $(0.73) $(0.64) Non-GAAP adjustments to diluted loss per share Anti-dilutive impact of higher weighted-average shares used to compute non-GAAP diluted income per share 0.09 0.08 Litigation settlement, net of income tax effect (a)(c) 0.80 0.80 Stock-based compensation, net of income tax effect (b)(c) 0.04 0.09 Non-GAAP diluted net income per share $0.20 $0.33 Weighted-average shares used to compute GAAP net loss per share 12,444 12,352 Weighted-average shares used to compute non-GAAP diluted net income per share 14,162 14,174 (a) Litigation settlement expense incurred in June 2006. (b) Non-cash stock-based compensation charges recorded in accordance with SFAS 123 (R) with effect from January 1, 2006. (c) Reduced tax benefit at the marginal tax impact of excluding the litigation expense and the stock based compensation expense. CUTERA, INC. NON-GAAP RECONCILIATION OF GUIDANCE NET INCOME AND NET INCOME PER SHARE (in thousands, except per share data) (unaudited) Three Months Ended Year Ended 9/30/2006 12/31/2006 Guidance GAAP net income $3,070 $-- Non-GAAP adjustments to net income Litigation settlement (a) 18,391 Income tax effect of litigation settlement (c) (7,114) Stock-based compensation (b) 1,250 4,500 Income tax effect of stock- based compensation (c) (413) (1,485) Total non-GAAP adjustments to net income 838 14,292 Guidance Non-GAAP net income $3,908 $14,292 Guidance GAAP diluted net income per share $0.21 $-- Non-GAAP adjustments to GAAP diluted net income per share Litigation settlement, net of income tax effect (a) -- 0.79 Stock-based compensation, net of income tax effect (b)(c) 0.06 0.21 Guidance Non-GAAP diluted net income per share $0.27 $1.00 Weighted-average shares used to compute both GAAP and non-GAAP diluted net income per share 14,300 14,260 (a) Litigation settlement expense incurred in June 2006. (b) Non-cash stock-based compensation charges recorded in accordance with SFAS 123 (R) with effect from January 1, 2006. (c) Reduced tax benefit at the marginal tax impact of excluding the litigation expense and the stock based compensation expense.
Cutera, Inc.
CONTACT: Ron Santilli, Chief Financial Officer of Cutera, Inc.,+1-415-657-5500; or John Mills, Investor Relations of Integrated CorporateRelations, Inc., +1-310-954-1105, or john.mills@icrinc.com, for Cutera,Inc.
Web site: http://www.cutera.com/
