While the rampant speculation that underlines the meme-trading phenomenon may be viewed as problematic, this sector may also provide some hidden gems. The key is to consider fundamentally sound enterprises that happen to be trading below their intrinsic worth. Hence, we arrive at undervalued meme stocks. Of course, there will be some contrarianism involved and because of that, these ideas are super risky. If you can handle the heat, these are the undervalued meme stocks to consider. Western Alliance Bancorp ...

Core Insights - The article discusses the evolution of meme stocks and highlights three companies that may attract meme investors due to their market potential and current financial situations [1][3]. Group 1: Meme Stock Characteristics - Meme stocks often involve companies in poor financial positions, making them attractive for short squeezes [2][3]. - The community around meme stocks tends to focus on catchy tickers and high short interest, which can lead to significant price movements [5]. Group 2: Company Analysis - Cutera (CUTR) - Cutera operates in the nonsurgical cosmetics industry, which is projected to reach $12 billion by 2027 [6]. - The company has a short interest of 38.94%, making it a potential target for meme investors [5]. - Cutera's business model is seen as legitimate, with growth potential in its addressable market [7]. Group 3: Company Analysis - Trupanion (TRUP) - Trupanion has experienced a 45% growth in the last month, with 39.62% of its shares shorted [10]. - The company has shown consistent improvement, with subscription revenue increasing by 22% year-over-year for Q1 [11]. - Despite its growth, Trupanion faces challenges due to previous overvaluation during the pandemic [12]. Group 4: Company Analysis - Upstart Holdings (UPST) - Upstart has lost approximately 93% of its value from its peak price of $390, with 34.54% of its shares shorted [14][15]. - The company recently reported a 24% year-over-year growth in revenue, indicating potential for recovery [15][16]. - Upstart's performance may attract meme investors again if it continues to defy negative perceptions [16].

Drilling into the Short Squeeze Opportunity Trade of the Day: Buy CUTR Stock in the Open Market Yes, the aforementioned one-year drop of over 88% is worrying. Nevertheless, since November 2023, CUTR stock has "relatively" stabilized. It also appears that there's a reversion to the mean roughly around the $2 price. That's a big positive since it's a psychologically significant milestone. With a rough baseline established, the idea here is to set up camp before a potential bull wave materializes. Given the ex ...

SAN FRANCISCO, May 21, 2024 /PRNewswire/ -- Schubert Jonckheer & Kolbe LLP advises Cutera, Inc. investors that the firm is investigating potential legal claims arising from recent accounting issues, a restatement of the company's financials, and other potential wrongdoing. Current shareholders are encouraged to contact the firm regarding their rights. On November 8, 2023, Cutera announced that it would delay filing its quarterly financial results for the third quarter of 2023 "pending resolution of an issue ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to_____. Commission File Number: 000-50644 Cutera, Inc. (Exact name of registrant as specified in its charter) Delaware 77-0492262 (St ...

[PART I](index=5&type=section&id=PART%20I) [ITEM 1. BUSINESS](index=5&type=section&id=ITEM%201%2E%20BUSINESS) Cutera, Inc. develops and markets energy-based aesthetic and dermatology solutions, focusing on AviClear expansion and profitable core business growth - Cutera develops, manufactures, and markets energy-based product platforms for aesthetic and dermatology solutions, including treatments for acne, body contouring, skin resurfacing, hair/tattoo removal, and vascular conditions[20](index=20&type=chunk)[22](index=22&type=chunk)[25](index=25&type=chunk) - Key product platforms include AviClear (first FDA-cleared energy-based acne treatment), Secret PRO/DUO (RF microneedling and fractional laser), truSculpt ID/truFlex (non-surgical body sculpting), excel V/V+ (vascular/pigmented lesions), enlighten SR/III (tattoo removal), excel HR (hair removal), and xeo (multi-application platform)[20](index=20&type=chunk)[22](index=22&type=chunk)[25](index=25&type=chunk) - The company's business strategy focuses on operational excellence, global expansion of AviClear, and driving profitable growth in its core business, leveraging recurring revenue from consumables (e.g., AviClear treatment fees, Secret RF/PRO tips, truSculpt/truFlex cycles) and extended service contracts[45](index=45&type=chunk)[52](index=52&type=chunk)[56](index=56&type=chunk) - The aesthetic market is growing due to aging demographics, increased accessibility, broader range of safe treatments, and wider acceptance of aesthetic procedures, with non-invasive options like AviClear offering durable solutions for conditions like acne[27](index=27&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk) - Cutera operates in a highly competitive industry, competing with conventional treatments and other energy-based device providers, necessitating continuous innovation, product differentiation, and strong customer relationships[77](index=77&type=chunk)[79](index=79&type=chunk)[161](index=161&type=chunk) - The company relies on a combination of patents, trademarks, and trade secrets to protect its intellectual property, with **30 issued U.S. patents** and **9 pending U.S. applications** as of January 19, 2024[86](index=86&type=chunk)[87](index=87&type=chunk) - Cutera's products are Class II medical devices subject to extensive FDA and international regulations, requiring 510(k) clearance for commercial distribution and compliance with Quality System Regulations (QSR) and laser performance standards[90](index=90&type=chunk)[91](index=91&type=chunk)[98](index=98&type=chunk) - As of December 31, 2023, Cutera had **430 employees**, a decrease from **540 in 2022**, and emphasizes diversity, equity, inclusion, employee engagement, leadership development, and health/safety initiatives[112](index=112&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) [ITEM 1A. RISK FACTORS](index=24&type=section&id=ITEM%201A%2E%20RISK%20FACTORS) The company faces multiple risks in supply chain, regulations, and international trade, alongside leadership turnover and capital needs - Significant executive leadership and Board of Directors turnover in 2023 creates uncertainty and could negatively impact business execution and growth[129](index=129&type=chunk)[130](index=130&type=chunk) - The company may need to raise additional capital, which could result in stockholder dilution or restrictive debt covenants, and its ability to obtain favorable financing is uncertain[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - Global supply chain disruptions, inflation, and reliance on limited third-party suppliers pose risks to manufacturing, product availability, and costs[138](index=138&type=chunk)[139](index=139&type=chunk)[199](index=199&type=chunk) - The aesthetic equipment market is highly competitive and rapidly innovating; failure to develop new products or gain market acceptance for devices like AviClear could harm the business[157](index=157&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) - Extensive government regulation (FDA, international bodies) means non-compliance, delayed approvals, or product defects could lead to enforcement actions, recalls, and reputational damage[166](index=166&type=chunk)[173](index=173&type=chunk)[182](index=182&type=chunk) - The company is exposed to various litigations, including securities fraud and intellectual property infringement, which can be costly, divert management attention, and negatively affect financial performance[191](index=191&type=chunk)[193](index=193&type=chunk)[272](index=272&type=chunk) - International sales (**50% of total revenue in 2023**) are subject to risks like foreign regulations, currency fluctuations, political instability, and reliance on distributor networks[196](index=196&type=chunk)[248](index=248&type=chunk)[253](index=253&type=chunk) - Material weaknesses in internal control over financial reporting (ITGCs, inventory, equity-based awards, risk assessment) could lead to financial misstatements if not remediated[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=53&type=section&id=ITEM%201B%2E%20UNRESOLVED%20STAFF%20COMMENTS) This item indicates that there are no unresolved staff comments from the SEC [ITEM 1C. Cybersecurity](index=53&type=section&id=ITEM%201C%2E%20Cybersecurity) Cutera manages cybersecurity risks through recognized frameworks, with Board oversight, and has identified no material threats to date - Cutera employs information security processes aligned with CIS and NIST frameworks to manage cybersecurity threats to its critical IT infrastructure and data[304](index=304&type=chunk)[305](index=305&type=chunk) - The Board of Directors, supported by experienced internal teams, is responsible for cybersecurity risk oversight, with no material impacts from known threats identified to date[306](index=306&type=chunk)[307](index=307&type=chunk) [ITEM 2. PROPERTIES](index=54&type=section&id=ITEM%202%2E%20PROPERTIES) Cutera's primary U.S. operations are in a leased Brisbane, CA facility, supplemented by a new Hayward warehouse and international leased offices - The company's main U.S. operations are in a **66,000 sq ft** leased facility in Brisbane, California, with the lease extended to January 31, 2028[309](index=309&type=chunk) - A new **53,000 sq ft** warehouse in Hayward, California, was leased in January 2024 for inventory consolidation, with the lease expiring February 28, 2027[310](index=310&type=chunk)[680](index=680&type=chunk) International Leased Office Facilities | Country | Square Footage | Lease Termination or Expiration | | :-------- | :----------------- | :------------------------------ | | Japan | Approximately 10,760 | March 2025 - March 2027 | | France | Approximately 2,239 | June 2031 | | Belgium | Approximately 151 | February 2026 | [ITEM 3. LEGAL PROCEEDINGS](index=54&type=section&id=ITEM%203%2E%20LEGAL%20PROCEEDINGS) Cutera is involved in various legal and administrative proceedings, accruing $3.3 million for pending lawsuits as of December 31, 2023 - Cutera is subject to various legal proceedings, including product liability, intellectual property, and commercial disputes[312](index=312&type=chunk)[625](index=625&type=chunk) - As of December 31, 2023, the company accrued **$3.3 million** for pending commercial and product liability lawsuits, not expecting a material loss in excess of this amount[626](index=626&type=chunk) - Recent settlements include patent infringement complaints by Serendia LLC regarding Secret RF and Secret Pro systems (terminated April 2024) and a SOX whistleblower claim and arbitration demand by former Executive Chairperson J. Daniel Plants (settled for approximately **$1 million** and closed April 2024)[628](index=628&type=chunk)[631](index=631&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=54&type=section&id=ITEM%204%2E%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Cutera, Inc [PART II](index=55&type=section&id=PART%20II) [ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=55&type=section&id=ITEM%205%2E%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Cutera's common stock trades on NASDAQ under "CUTR," with no repurchases in 2023 and no anticipated cash dividends - Cutera's common stock (CUTR) is listed on the NASDAQ Global Select Market[316](index=316&type=chunk) Common Stock Information | Metric | Value | | :----------------------------------- | :-------------- | | Closing Price (May 8, 2024) | $2.51 per share | | Stockholders of Record (Dec 31, 2023) | ~150 | | Shares Outstanding (May 8, 2024) | 20,072,096 | - No common stock repurchases were made in 2023, and no cash dividends are expected in the foreseeable future[318](index=318&type=chunk)[320](index=320&type=chunk) [ITEM 6. Reserved](index=56&type=section&id=ITEM%206%2E%20Reserved) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=57&type=section&id=ITEM%207%2E%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Cutera experienced significant revenue and gross profit declines in 2023, but management expects sufficient liquidity for the next 12 months [Executive Summary](index=57&type=section&id=Executive%20Summary) Cutera's core business involves energy-based aesthetic platforms, with revenue from system sales, consumables, and services - Cutera's core business involves energy-based aesthetic platforms (AviClear, enlighten, excel, truSculpt, Secret PRO/RF, xeo) for various medical aesthetic procedures[330](index=330&type=chunk)[335](index=335&type=chunk) - Revenue is derived from system sales, hand pieces, upgrades, AviClear leasing/direct sales, consumables (e.g., cycle refills, treatment fees, disposable tips), and historically, third-party skincare products in Japan (terminated Feb 2024)[334](index=334&type=chunk)[337](index=337&type=chunk)[496](index=496&type=chunk) - Significant business trends include capitalizing on AviClear momentum, expanding product offerings, investing in global sales/marketing, using clinical results, and generating recurring revenue from the installed customer base[339](index=339&type=chunk) [Critical Accounting Policies and Use of Estimates](index=59&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) Financial statement preparation requires significant judgments, particularly for inventory valuation and income tax estimates - Critical accounting policies involve significant estimates and assumptions, particularly for inventory valuation and income taxes[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk) - Inventory valuation relies on estimates of future demand, obsolescence, and market conditions, with a reserve for excess and obsolete inventory[344](index=344&type=chunk) - Income tax estimates involve assessing the need for a valuation allowance against deferred tax assets, primarily related to **$290.1 million** in accumulated net operating losses and **$23.6 million** in unutilized tax credits as of December 31, 2023[345](index=345&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) Total net revenue decreased by 15.9% in 2023, leading to a significant decline in gross margin and a substantial operating loss Consolidated Financial Data (Percentage of Net Revenue) | Metric | 2023 | 2022 | 2021 | | :------------------------- | :---- | :---- | :---- | | Net revenue | 100 % | 100 % | 100 % | | Cost of revenue | 80 % | 45 % | 42 % | | Gross margin | 20 % | 55 % | 58 % | | Sales and marketing | 53 % | 42 % | 33 % | | Research and development | 10 % | 10 % | 9 % | | General and administrative | 30 % | 18 % | 14 % | | Total operating expenses | 93 % | 71 % | 57 % | | Income (loss) from operations | (74)% | (15)% | 1 % | | Net income (loss) | (77)% | (33)% | 1 % | Consolidated Revenue by Geography and Product Category (in thousands) | Category / Year | 2023 | % Change (YoY) | 2022 | % Change (YoY) | 2021 | | :------------------------ | :---------- | :------------- | :---------- | :------------- | :---------- | | **Revenue by Geography:** | | | | | | | North America | $106,786 | (17)% | $128,418 | 15 % | $111,621 | | Japan | $52,134 | (20)% | $64,921 | (8)% | $70,235 | | Rest of World | $53,449 | (10)% | $59,060 | 20 % | $49,414 | | **Total Net Revenue** | **$212,369**| **(16)%** | **$252,399**| **9 %** | **$231,270**| | **Revenue by Product:** | | | | | | | Total Systems | $130,528 | (21)% | $164,559 | 18 % | $139,633 | | Consumables | $25,302 | 16 % | $21,737 | 33 % | $16,401 | | Skincare | $33,983 | (20)% | $42,500 | (14)% | $49,669 | | Service | $22,556 | (4)% | $23,603 | (8)% | $25,567 | - Total net revenue decreased by **$40.0 million (15.9%)** in 2023, driven by a **$34.0 million** decrease in System sales and an **$8.5 million** decrease in Skincare revenue, partially offset by a **$3.6 million** increase in Consumables revenue (AviClear treatment volumes up **$6.9 million**)[351](index=351&type=chunk)[352](index=352&type=chunk) - Gross profit margin declined significantly from **55.4% in 2022 to 19.5% in 2023**, impacted by revenue mix (**5.0 ppt**), increased material costs and lower cost absorption (**11.3 ppt**), and increased excess inventory reserve (**13.3 ppt**)[361](index=361&type=chunk)[362](index=362&type=chunk) - Sales and marketing expenses increased by **$6.1 million (5.7%)** in 2023, primarily due to higher sales commissions (**$4.7 million**) and consulting services (**$2.9 million**) related to AviClear[364](index=364&type=chunk)[365](index=365&type=chunk) - General and administrative expenses increased by **$17.4 million (37.9%)** in 2023, mainly due to **$12.3 million** in litigation/shareholder activism costs and a **$6.4 million** increase in allowance for credit losses[368](index=368&type=chunk)[369](index=369&type=chunk) - Net loss for 2023 was **$162.8 million**, compared to **$82.3 million in 2022**, reflecting the decline in revenue and gross profit, and increased operating expenses[448](index=448&type=chunk)[458](index=458&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) Cutera's liquidity is primarily from convertible notes, with management expecting current cash to be sufficient for the next 12 months despite net losses - Primary liquidity source is cash generated from the issuance of convertible notes[373](index=373&type=chunk)[385](index=385&type=chunk) Cash and Working Capital (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Working Capital | $181,400 | $345,400 | | Cash and Cash Equivalents | $143,612 | $145,924 | | Marketable Investments | $0 | $171,390 | | Restricted Cash | $0 | $700 | - Net losses were **$162.8 million in 2023** and **$82.3 million in 2022**, impacting overall liquidity[375](index=375&type=chunk)[458](index=458&type=chunk) - Management believes current cash and cash equivalents are sufficient for the next 12 months, supported by a revised AviClear business model, workforce reductions, supplier restructuring, and improved inventory/receivables management[376](index=376&type=chunk)[377](index=377&type=chunk)[386](index=386&type=chunk) [Debt](index=65&type=section&id=Debt) Cutera has $429.1 million in convertible notes outstanding, with its revolving line of credit terminated in April 2024 Convertible Notes Outstanding (in thousands) | Note Series | Outstanding Principal (Dec 31, 2023) | | :---------- | :----------------------------------- | | 2026 Notes | $69,125 | | 2028 Notes | $240,000 | | 2029 Notes | $120,000 | | **Total** | **$429,125** | - The 2026 Notes, 2028 Notes, and 2029 Notes bear interest at **2.25%**, **2.25%**, and **4.00%** per year, respectively, payable semiannually[387](index=387&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk) - The company's **$30.0 million** secured revolving loan facility with Silicon Valley Bank was terminated on April 3, 2024, and was undrawn as of December 31, 2023[392](index=392&type=chunk)[676](index=676&type=chunk) [Purchase Commitments](index=66&type=section&id=Purchase%20Commitments) Cutera maintains open inventory purchase commitments with suppliers and expects to meet these obligations with adequate funds - Cutera has open inventory purchase commitments with suppliers for key components, with liabilities generally restricted to agreed-upon periods[393](index=393&type=chunk)[622](index=622&type=chunk) - The company believes it has sufficient funds to fulfill these commitments[393](index=393&type=chunk) [Other](index=66&type=section&id=Other) Cutera has indemnification agreements with directors and officers, with unknown and unestimable exposure, thus no accruals have been made - Cutera has indemnification agreements with its directors and executive officers[394](index=394&type=chunk)[624](index=624&type=chunk) - The company's exposure under these indemnification obligations is unknown and not reasonably estimable, so no accruals have been made[394](index=394&type=chunk)[624](index=624&type=chunk) - The independent auditor issued an unqualified opinion on the consolidated financial statements but an adverse opinion on internal control over financial reporting as of December 31, 2023[422](index=422&type=chunk)[423](index=423&type=chunk)[435](index=435&type=chunk) - Critical audit matters included the accounting for revenue recognition in contracts with international distributors (due to non-standard payment and control transfer terms) and the valuation of long-term inventories (due to significant judgments in obsolescence and future demand)[428](index=428&type=chunk)[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :------------------------- | :----------- | :----------- | | Total Current Assets | $269,185 | $451,240 | | Total Assets | $346,291 | $520,988 | | Total Current Liabilities | $87,747 | $105,839 | | Total Liabilities | $518,121 | $536,169 | | Total Stockholders' Deficit | $(171,830) | $(15,181) | Consolidated Statements of Operations Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :------------------------- | :----------- | :----------- | :----------- | | Total Net Revenue | $212,369 | $252,399 | $231,270 | | Gross Profit | $41,494 | $139,829 | $133,105 | | Total Operating Expenses | $197,724 | $178,019 | $131,275 | | Income (Loss) from Operations | $(156,230) | $(38,190) | $1,830 | | Net Income (Loss) | $(162,833) | $(82,340) | $2,062 | | Basic EPS | $(8.19) | $(4.39) | $0.12 | Consolidated Cash Flow Data (in thousands) | Activity | 2023 | 2022 | 2021 | | :------------------------- | :----------- | :----------- | :----------- | | Operating Activities | $(137,870) | $(66,995) | $1,235 | | Investing Activities | $137,426 | $(194,182) | $(944) | | Financing Activities | $(2,568) | $242,937 | $117,526 | | Net Change in Cash | $(3,012) | $(18,240) | $117,817 | [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=71&type=section&id=ITEM%207A%2E%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Cutera is exposed to market risks from convertible notes, interest rates, inflation, and foreign exchange fluctuations, which significantly impacted 2023 results [Conditional Conversion Feature of Convertible Notes](index=71&type=section&id=Conditional%20Conversion%20Feature%20of%20Convertible%20Notes) Convertible notes have conditional conversion features that could impact liquidity if triggered, though the company intends to settle in shares - Convertible notes (2026, 2028, 2029) have conditional conversion features that, if triggered, could require cash settlement, impacting liquidity[399](index=399&type=chunk)[284](index=284&type=chunk) - As of December 31, 2023, conversion conditions were not met for any series, and the company intends to settle future conversion requests in common stock[398](index=398&type=chunk)[402](index=402&type=chunk)[407](index=407&type=chunk) - The notes are general senior unsecured obligations, ranking equally with other unsecured debt but junior to secured debt[405](index=405&type=chunk)[410](index=410&type=chunk) Estimated Fair Value of Convertible Notes (Dec 31, 2023, in millions) | Note Series | Estimated Fair Value | | :---------- | :------------------- | | 2026 Notes | $29.9 | | 2028 Notes | $60.7 | | 2029 Notes | $27.4 | [Interest Rate and Market Risk](index=78&type=section&id=Interest%20Rate%20and%20Market%20Risk) Cutera's revolving line of credit, previously subject to a floating Prime rate, was terminated, reducing interest rate sensitivity from that facility - The revolving line of credit, which had a floating Prime rate (**8.50%** as of Dec 31, 2023), was terminated on April 3, 2024[414](index=414&type=chunk)[676](index=676&type=chunk) - Interest rate sensitivity is primarily influenced by any amounts borrowed on the line of credit and the prevailing interest rate[414](index=414&type=chunk) [Inflation](index=78&type=section&id=Inflation) Cutera mitigated inflationary pressures through cost improvement initiatives, but future unoffset pressures could harm the business - Inflationary pressures were mitigated by cost improvement initiatives[415](index=415&type=chunk) - Inability to offset significant future inflationary costs through price increases could harm the business[415](index=415&type=chunk) [Foreign Exchange Fluctuations](index=78&type=section&id=Foreign%20Exchange%20Fluctuations) Foreign exchange devaluations negatively impacted 2023 revenue by $5 million and net loss by $6 million, with potential future impacts - Foreign currency devaluations in Japan, Europe, and Australia adversely impacted total revenue by approximately **$5 million** and net loss by **$6 million** in 2023[417](index=417&type=chunk) - A hypothetical **10% unfavorable change** in exchange rates could reduce future revenue by approximately **$5 million** and increase net loss by **$1 million**[417](index=417&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=79&type=section&id=ITEM%208%2E%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents Cutera's audited financial statements for 2023, with an unqualified opinion on financials but an adverse opinion on internal controls [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=81&type=section&id=NOTE%201%2E%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details Cutera's revenue recognition, critical estimates, and the termination of its Japan skincare distribution agreement - Revenue is recognized upon transfer of control, with systems, accessories, and training recognized at a point in time, and extended service contracts and marketing services recognized over time[469](index=469&type=chunk)[471](index=471&type=chunk)[475](index=475&type=chunk)[481](index=481&type=chunk)[482](index=482&type=chunk) - AviClear devices are leased to customers, generating fixed annual license fees (recognized straight-line) and variable treatment fees (recognized as consumable revenue when initiated); the business model shifted to direct sales in Q4 2023[476](index=476&type=chunk)[613](index=613&type=chunk)[614](index=614&type=chunk) - Critical accounting estimates include warranty obligations, sales commissions, allowance for credit losses, inventory valuation (lower of cost or net realizable value), and income taxes (valuation allowance for deferred tax assets)[466](index=466&type=chunk)[489](index=489&type=chunk)[500](index=500&type=chunk)[524](index=524&type=chunk) - The company terminated its skincare distribution agreement with ZO in Japan on February 28, 2024, which represented **16% of consolidated revenue in 2023**[495](index=495&type=chunk)[496](index=496&type=chunk)[681](index=681&type=chunk)[682](index=682&type=chunk) - Cutera operates in one reportable segment, with revenue disaggregated by geography and product type[534](index=534&type=chunk)[600](index=600&type=chunk) [NOTE 2. CASH, CASH EQUIVALENTS, MARKETABLE SECURITIES, AND RESTRICTED CASH](index=91&type=section&id=NOTE%202%2E%20CASH%2C%20CASH%20EQUIVALENTS%2C%20MARKETABLE%20SECURITIES%2C%20AND%20RESTRICTED%20CASH) As of December 31, 2023, Cutera held $143.6 million in cash and cash equivalents, with no marketable investments or restricted cash Cash, Cash Equivalents, and Marketable Investments (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Cash and cash equivalents | $143,612 | $145,924 | | Restricted cash | $0 | $700 | | Marketable investments | $0 | $171,390 | | **Total** | **$143,612** | **$318,014** | - The company's cash and cash equivalents are primarily held in U.S. banks, with foreign subsidiaries maintaining limited local cash[486](index=486&type=chunk) - Marketable investments at December 31, 2022, were U.S. Treasury securities with net unrealized losses of **$0.1 million** due to interest rate changes[537](index=537&type=chunk) [NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=92&type=section&id=NOTE%203%2E%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) Cutera measures financial assets at fair value using a three-level hierarchy, with $123.4 million in Level 1 cash equivalents as of December 31, 2023 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[487](index=487&type=chunk) Financial Assets at Fair Value (in thousands) | Category | Dec 31, 2023 (Level 1) | Dec 31, 2022 (Level 1) | Dec 31, 2022 (Level 2) | | :--------------------------- | :--------------------- | :--------------------- | :--------------------- | | Cash equivalents: Money market funds | $123,387 | $26,408 | — | | Marketable investments: Available-for-sale securities | — | $171,390 | — | | Derivative liabilities: Foreign exchange forward | — | — | $(558) | | **Total** | **$123,387** | **$197,798** | **$(558)** | - Money market funds and available-for-sale securities are classified as Level 1, while derivative financial instruments are classified as Level 2[540](index=540&type=chunk) [NOTE 4. DERIVATIVE INSTRUMENTS](index=93&type=section&id=NOTE%204%2E%20DERIVATIVE%20INSTRUMENTS) Cutera uses foreign currency exchange forward contracts to manage currency risk, with no outstanding derivatives as of December 31, 2023 - Cutera uses foreign currency exchange forward contracts to manage currency risk, not for speculation[542](index=542&type=chunk) - No derivative instruments were outstanding as of December 31, 2023[543](index=543&type=chunk) Derivative Instruments (Dec 31, 2022, in thousands) | Metric | Value | | :------------------ | :------ | | Gross Notional Amount | $6,128 | | Fair Value (Unrealized Loss) | $(558) | [NOTE 5. BALANCE SHEET DETAIL](index=94&type=section&id=NOTE%205%2E%20BALANCE%20SHEET%20DETAIL) Inventory valuation adjustments significantly increased in 2023, with AviClear devices reclassified to inventory due to a business model change Inventory Valuation Adjustments (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------- | :----------- | :----------- | | Valuation adjustments for excess and obsolete inventory | $13,000 | $3,600 | Inventories (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------- | :----------- | :----------- | | Raw materials | $36,970 | $36,323 | | Work in process | $889 | $2,117 | | Finished goods | $24,741 | $25,188 | | **Total** | **$62,600** | **$63,628** | - Long-term inventories, primarily AviClear devices and parts not expected to be sold within 12 months, totaled **$16.3 million** in 2023, with a **$12.8 million** valuation adjustment[545](index=545&type=chunk)[546](index=546&type=chunk) - AviClear devices not yet leased were reclassified from property and equipment to inventories in 2023 due to a shift to a direct sales model[549](index=549&type=chunk) Accrued Liabilities (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :----------------------------- | :----------- | :----------- | | Bonus and payroll-related accruals | $13,949 | $18,951 | | Accrued sales tax | $6,325 | $9,066 | | Liability for inventory in transit | $5,461 | $7,028 | | Sales and marketing accruals | $4,929 | $5,347 | | Product warranty | $2,593 | $3,254 | | Jabil settlement obligation, net | $8,908 | — | | Other accrued liabilities | $12,890 | $13,806 | | **Total** | **$55,055** | **$57,452** | [NOTE 6. PRODUCT WARRANTY](index=96&type=section&id=NOTE%206%2E%20PRODUCT%20WARRANTY) Cutera provides 12-14 month product warranties, with the accrual decreasing to $2.6 million in 2023 - Cutera offers a **12-month warranty** for direct sales and a **14-month parts-only warranty** for distributors[507](index=507&type=chunk) Product Standard Warranty Accrual (in thousands) | Metric | 2023 | 2022 | | :------------------------- | :---------- | :---------- | | Balance at beginning of year | $3,254 | $3,947 | | Accruals for warranties issued | $4,987 | $3,710 | | Settlements made | $(5,648) | $(4,403) | | Balance at end of year | $2,593 | $3,254 | [NOTE 7. DEFERRED REVENUE](index=97&type=section&id=NOTE%207%2E%20DEFERRED%20REVENUE) Deferred revenue, primarily from extended service contracts and AviClear leases, totaled $11.9 million as of December 31, 2023, with 87% expected to be recognized within 12 months - Deferred revenue primarily stems from extended service contracts and AviClear fixed annual license fees[556](index=556&type=chunk)[557](index=557&type=chunk) - Approximately **87%** of the **$11.9 million** deferred revenue balance as of December 31, 2023, is expected to be recognized within the next 12 months[556](index=556&type=chunk) Deferred Revenue Balance (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Beginning balance | $13,498 | $10,825 | | Payments received from current period sales | $21,040 | $21,984 | | Revenue recognized from current period sales | $(11,732) | $(9,928) | | Revenue recognized from beginning balance | $(10,890) | $(9,383) | | **Ending balance** | **$11,916** | **$13,498** | - AviClear deferred license fees were **$2.1 million in 2023**, down from **$2.3 million in 2022**[557](index=557&type=chunk) [NOTE 8. STOCKHOLDERS' EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE](index=98&type=section&id=NOTE%208%2E%20STOCKHOLDERS%27%20EQUITY%2C%20STOCK%20PLANS%20AND%20STOCK-BASED%20COMPENSATION%20EXPENSE) Stock-based compensation expense decreased to $8.1 million in 2023, reflecting reduced PSU vesting estimates and forfeiture reversals - Cutera operates under the 2019 Equity Incentive Plan (amended from 2004 Plan), 2023 Inducement Equity Incentive Plan, and 2004 Employee Stock Purchase Plan (ESPP)[561](index=561&type=chunk)[563](index=563&type=chunk)[571](index=571&type=chunk)[572](index=572&type=chunk) - Awards include incentive stock options, non-statutory stock options, RSAs, RSUs, stock appreciation rights, and PSUs, with vesting periods typically 1-4 years[565](index=565&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk)[803](index=803&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Category | 2023 | 2022 | 2021 | | :------------------------- | :--------- | :--------- | :--------- | | Stock options | $2,227 | $2,175 | $782 | | RSUs | $6,100 | $6,979 | $5,305 | | PSUs | $(586) | $4,430 | $6,591 | | ESPP | $323 | $816 | $494 | | **Total Expense** | **$8,064** | **$14,400**| **$13,172**| - Stock-based compensation expense decreased in 2023 due to reduced estimates for PSU vesting probability and reversals from unvested equity award forfeitures[580](index=580&type=chunk) - The ESPP was suspended in Q3 2023 due to the late filing of the Quarterly Report on Form 10-Q[573](index=573&type=chunk)[808](index=808&type=chunk) [NOTE 9. INCOME TAXES](index=103&type=section&id=NOTE%209%2E%20INCOME%20TAXES) Cutera's income tax provision decreased slightly in 2023, with a $97.3 million valuation allowance against deferred tax assets Income (Loss) Before Income Taxes (in thousands) | Geography | 2023 | 2022 | 2021 | | :-------- | :------------ | :------------ | :---------- | | U.S. | $(165,784) | $(84,189) | $(356) | | Foreign | $4,485 | $3,487 | $3,741 | | **Total** | **$(161,299)**| **$(80,702)** | **$3,385** | Income Tax Provision (in thousands) | Category | 2023 | 2022 | 2021 | | :------- | :--------- | :--------- | :--------- | | Current | $1,517 | $1,453 | $1,425 | | Deferred | $17 | $185 | $(102) | | **Total**| **$1,534** | **$1,638** | **$1,323** | - A valuation allowance of **$97.3 million** was recorded against deferred tax assets as of December 31, 2023, an increase of **$44.2 million** from 2022[585](index=585&type=chunk) - The company has **$190.7 million** in federal and **$99.4 million** in state net operating loss carryforwards, and **$23.6 million** in R&D tax credits[586](index=586&type=chunk) Effective Tax Rate Reconciliation | Item | 2023 | 2022 | 2021 | | :--------------------------------- | :------ | :------ | :------ | | U.S. federal statutory income tax rate | 21.00 % | 21.00 % | 21.00 % | | Valuation allowance | (21.52)%| (11.41)%| 72.82 % | | **Effective tax rate** | **(1.17)%**| **(2.04)%**| **39.11 %**| [NOTE 10. NET INCOME (LOSS) PER SHARE](index=106&type=section&id=NOTE%2010%2E%20NET%20INCOME%20%28LOSS%29%20PER%20SHARE) Cutera reported identical basic and diluted net loss per share of $(8.19) in 2023 and $(4.39) in 2022 due to anti-dilutive effects Net Income (Loss) Per Share | Metric | 2023 | 2022 | 2021 | | :------------------------- | :------ | :------ | :------ | | Net income (loss) | $(162,833)| $(82,340) | $2,062 | | Basic EPS | $(8.19) | $(4.39) | $0.12 | | Diluted EPS | $(8.19) | $(4.39) | $0.11 | | Weighted-average shares (Basic) | 19,885 | 18,747 | 17,891 | | Weighted-average shares (Diluted) | 19,885 | 18,747 | 18,362 | - Basic and diluted net loss per share were identical in 2023 and 2022 because potentially dilutive shares were anti-dilutive due to net losses[595](index=595&type=chunk) - The company uses the if-converted method for convertible notes in diluted EPS calculation, assuming settlement in shares if dilutive[530](index=530&type=chunk)[593](index=593&type=chunk) [NOTE 11. DEFINED CONTRIBUTION PLAN](index=107&type=section&id=NOTE%2011%2E%20DEFINED%20CONTRIBUTION%20PLAN) Cutera made discretionary 401(k) contributions of $0.5 million in both 2023 and 2022 for its U.S. employees - Cutera's U.S. 401(k) Plan allows voluntary employee contributions[596](index=596&type=chunk) 401(k) Plan Discretionary Contributions (in millions) | Year | Contribution | | :--- | :----------- | | 2023 | $0.5 | | 2022 | $0.5 | | 2021 | $0.3 | - Foreign subsidiaries maintain discretionary retirement plans, with obligations fully funded or accrued[597](index=597&type=chunk) [NOTE 12. SEGMENT INFORMATION AND REVENUE BY GEOGRAPHY AND PRODUCTS](index=108&type=section&id=NOTE%2012%2E%20SEGMENT%20INFORMATION%20AND%20REVENUE%20BY%20GEOGRAPHY%20AND%20PRODUCTS) Cutera realigned to a single reportable segment in Q4 2023, with total consolidated revenue decreasing to $212.4 million in 2023 - Cutera realigned to one consolidated reportable segment in Q4 2023, with the CEO as the chief operating decision maker[599](index=599&type=chunk)[600](index=600&type=chunk) - Substantially all of the company's long-lived assets are located in the U.S[601](index=601&type=chunk) Revenue by Geography and Product Category (in thousands) | Category / Year | 2023 | 2022 | 2021 | | :------------------------ | :---------- | :---------- | :---------- | | **Revenue by Geography:** | | | | | United States | $88,378 | $107,453 | $96,629 | | Japan | $52,135 | $64,920 | $70,235 | | Asia, excluding Japan | $18,702 | $21,873 | $12,649 | | Europe | $20,330 | $20,882 | $19,444 | | Rest of the world | $32,824 | $37,271 | $32,313 | | **Total Consolidated Revenue**| **$212,369**| **$252,399**| **$231,270**| | **Revenue by Product Category:** | | | | | Systems | $130,528 | $164,559 | $139,633 | | Consumables | $25,302 | $21,737 | $16,401 | | Skincare | $33,983 | $42,500 | $49,669 | | Service | $22,556 | $23,603 | $25,567 | [NOTE 13. COMMITMENTS AND CONTINGENCIES](index=109&type=section&id=NOTE%2013%2E%20COMMITMENTS%20AND%20CONTINGENCIES) Cutera has various operating and finance leases, $10.7 million in 2024 purchase commitments, and $3.3 million accrued for legal contingencies - Cutera is a party to operating and finance leases for vehicles, office space, and storage facilities, with remaining terms of 1 to 7 years[603](index=603&type=chunk) Lease Liabilities (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Total Operating Lease Liabilities | $11,328 | $14,162 | | Total Finance Lease Liabilities | $1,889 | $1,310 | - The company leases AviClear devices to customers, generating operating lease income from fixed annual license fees and variable treatment revenue[611](index=611&type=chunk)[614](index=614&type=chunk) AviClear Operating Lease Income (in thousands) | Category | 2023 | 2022 | | :----------------------------- | :---------- | :--------- | | AviClear operating lease license fee revenue | $5,386 | $922 | | AviClear operating lease treatment revenue | $10,451 | $3,534 | | **Total AviClear revenue** | **$15,837** | **$4,456** | - As of December 31, 2023, Cutera had **$10.7 million** in non-cancelable inventory purchase obligations due in 2024[623](index=623&type=chunk) - The company accrued **$3.3 million** for various pending commercial and product liability lawsuits as of December 31, 2023[626](index=626&type=chunk) [NOTE 14. DEBT](index=113&type=section&id=NOTE%2014%2E%20DEBT) Cutera's debt primarily consists of $429.1 million in convertible notes, with capped call transactions to mitigate dilution Convertible Notes Carrying Value (in thousands) | Note Series | Outstanding Principal (Dec 31, 2023) | Carrying Value (Dec 31, 2023) | | :---------- | :----------------------------------- | :---------------------------- | | 2026 Notes | $69,125 | $68,041 | | 2028 Notes | $240,000 | $234,286 | | 2029 Notes | $120,000 | $116,368 | | **Total** | **$429,125** | **$418,695** | - The 2026 Notes (**2.25%**), 2028 Notes (**2.25%**), and 2029 Notes (**4.00%**) are senior unsecured obligations with conditional conversion features[634](index=634&type=chunk)[637](index=637&type=chunk)[638](index=638&type=chunk)[648](index=648&type=chunk)[656](index=656&type=chunk)[662](index=662&type=chunk) - In May 2022, **$69.1 million** of 2026 Notes were exchanged for cash and common stock, resulting in a **$34.4 million** loss on extinguishment of debt[640](index=640&type=chunk)[641](index=641&type=chunk) - Capped call transactions were entered into for each series of notes to reduce potential dilution upon conversion, with strike prices equal to conversion prices and initial cap prices representing **75-100% premiums**[668](index=668&type=chunk)[669](index=669&type=chunk)[670](index=670&type=chunk)[671](index=671&type=chunk) - Total interest expense for 2023, including debt issuance cost amortization, was approximately **$14.0 million**, up from **$7.0 million in 2022**[675](index=675&type=chunk) [NOTE 15. QUARTERLY INFORMATION (UNAUDITED)](index=121&type=section&id=NOTE%2015%2E%20QUARTERLY%20INFORMATION%20%28UNAUDITED%29) Unaudited quarterly financial data for 2023 and 2022 shows fluctuating net revenue and consistent net losses across all quarters - Unaudited quarterly financial data for 2023 and 2022 is presented, reflecting a restatement for Q1 and Q2 2023[678](index=678&type=chunk) Unaudited Quarterly Financial Data (in thousands, except per share data) | Metric | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | | :--------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net revenue | $49,540 | $46,478 | $61,825 | $54,526 | $67,353 | $62,808 | $64,224 | $58,014 | | Gross profit | $(12,678) | $6,457 | $26,083 | $21,632 | $38,749 | $34,248 | $35,044 | $31,788 | | Net loss | $(57,233) | $(44,274) | $(33,278) | $(28,048) | $(7,788) | $(12,134) | $(47,276) | $(15,142) | | Basic EPS | $(2.87) | $(2.22) | $(1.68) | $(1.42) | $(0.40) | $(0.62) | $(2.53) | $(0.84) | [NOTE 16. SUBSEQUENT EVENTS](index=122&type=section&id=NOTE%2016%2E%20SUBSEQUENT%20EVENTS) Key subsequent events include a new warehouse lease, termination of the Japan skincare agreement, and a $19.5 million settlement with Jabil Inc - A new **53,000 sq ft** warehouse in Hayward, CA, was leased on January 16, 2024, for inventory consolidation[680](index=680&type=chunk) - The skincare distribution agreement with ZO in Japan was terminated on February 28, 2024, with ZO paying Cutera **$11.5 million** in two installments (**$5.75 million** received Feb 29, 2024, and **$2.37 million** received April 1, 2024, net of **$1.6 million** owed by Cutera)[681](index=681&type=chunk) - The manufacturing service agreement with Jabil Inc. was not renewed, resulting in a **$19.5 million** settlement payment by Cutera to Jabil in February 2024, including **$5.7 million** for Jabil's incurred expenses and a **$4.6 million** accrued loss on excess inventory[683](index=683&type=chunk)[684](index=684&type=chunk)[685](index=685&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=137&type=section&id=ITEM%209%2E%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure [ITEM 9A. CONTROLS AND PROCEDURES](index=137&type=section&id=ITEM%209A%2E%20CONTROLS%20AND%20PROCEDURES) Cutera's disclosure controls were ineffective as of December 31, 2023, due to material weaknesses in internal control over financial reporting, with remediation ongoing - Disclosure controls and procedures were deemed ineffective as of December 31, 2023, due to material weaknesses in internal control over financial reporting[691](index=691&type=chunk)[698](index=698&type=chunk) - Identified material weaknesses include ITGCs (segregation of duties, user access, ERP system reports), inventory controls (completeness, existence, cut-off, obsolescence adjustments), completeness/accuracy of equity-based award expense, and deficiencies in the risk assessment program[697](index=697&type=chunk) - Management believes the consolidated financial statements fairly present financial condition despite the material weaknesses[691](index=691&type=chunk) - Remediation efforts are underway, focusing on ITGC training, enhanced risk assessment, global inventory count policies, and improved review controls for equity compensation expense[699](index=699&type=chunk)[700](index=700&type=chunk)[701](index=701&type=chunk)[703](index=703&type=chunk) [ITEM 9B. OTHER INFORMATION](index=139&type=section&id=ITEM%209B%2E%20OTHER%20INFORMATION) This item reports that there is no other information required to be disclosed [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=139&type=section&id=ITEM%209C%2E%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to Cutera, Inc [PART III](index=140&type=section&id=PART%20III) [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=140&type=section&id=ITEM%2010%2E%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section details Cutera's Board and executive officers, corporate governance practices, and commitment to ESG initiatives, noting late Section 16(a) filings - The Board of Directors consists of Taylor C. Harris (CEO), Kevin J. Cameron (Executive Chairman), Sheila A. Hopkins, Nicholas S. Lewin, and Keith J. Sullivan, with a majority being independent directors[713](index=713&type=chunk)[729](index=729&type=chunk) - Executive officers include Taylor C. Harris (CEO), Stuart D. Drummond (Interim CFO), Jeffrey S. Jones (COO), Michael A. Karavitis (CTO), and Stephana E. Patton (CLO)[720](index=720&type=chunk) - The Board's leadership structure separates the roles of Chairperson (Kevin Cameron) and CEO (Taylor Harris) to allow the CEO to focus on business strategy[730](index=730&type=chunk) - The Board oversees risk management through its Audit, Compensation, and Governance and Corporate Responsibility Committees, which are composed of independent directors[731](index=731&type=chunk)[735](index=735&type=chunk)[737](index=737&type=chunk) - Key governance policies include a Code of Business Conduct and Ethics, a Clawback Policy for executive officers, and an Insider Trading Compliance Program that discourages derivatives trading[747](index=747&type=chunk)[748](index=748&type=chunk)[749](index=749&type=chunk) - The company is committed to diversity, equity, and inclusion, and has formalized environmental, social, and corporate responsibility policies, including an Enterprise-Level Environmental Policy and Human Rights Policy[113](index=113&type=chunk)[754](index=754&type=chunk) - Several Section 16(a) reports for directors and executive officers were filed late in 2023[758](index=758&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=148&type=section&id=ITEM%2011%2E%20EXECUTIVE%20COMPENSATION) Cutera's executive compensation aligns with stockholder interests through base salary, bonuses, and equity, with no cash bonuses paid in 2023 due to unachieved performance - Executive compensation is designed to attract, retain, motivate, and reward key personnel, balancing fixed base pay with performance-based incentives tied to business goals and stockholder value[763](index=763&type=chunk)[764](index=764&type=chunk)[775](index=775&type=chunk) - The Compensation Committee, with an independent consultant (Alpine Rewards replacing Compensia in 2024), reviews and approves executive compensation, benchmarking against a peer group of medical device and healthcare companies[768](index=768&type=chunk)[769](index=769&type=chunk)[770](index=770&type=chunk)[772](index=772&type=chunk) - In 2023, no payments were made under the Management Bonus Plan as corporate performance measures (AviClear revenue, Non-AviClear revenue, Non-GAAP gross margin, Non-GAAP operating income) were not achieved[797](index=797&type=chunk)[800](index=800&type=chunk) - Long-term incentive compensation, primarily equity awards (RSUs, PSUs, options), promotes long-term performance and stockholder alignment, with specific performance targets for PSUs (e.g., AviClear commercial goals, truBody growth, product development, cash/inventory/receivables targets)[801](index=801&type=chunk)[803](index=803&type=chunk)[805](index=805&type=chunk) - The company provides health and welfare benefits, and post-employment compensation through an Executive Change in Control and Severance Policy, which offers severance payments and equity acceleration under specific termination or change-in-control scenarios[808](index=808&type=chunk)[809](index=809&type=chunk)[853](index=853&type=chunk)[854](index=854&type=chunk)[855](index=855&type=chunk) - Stock ownership guidelines require the CEO to hold shares valued at **3x annual base salary** and other executives at **1x**, with a five-year period to attain these levels[813](index=813&type=chunk) 2023 Summary Compensation Table (Selected Named Executive Officers, in $) | Name | Salary | Option Awards | Stock Awards | Non-Equity Incentive Plan Compensation | | :--------------- | :---------- | :------------ | :----------- | :------------------------------------- | | Taylor C. Harris | $271,023 | $4,250,008 | $2,747,683 | $0 | | Stuart D. Drummond | $293,030 | $27,500 | $209,087 | $94,368 | | Jeffrey S. Jones | $128,472 | $187,505 | $45,163 | $0 | | Michael A. Karavitis | $457,496 | $125,000 | $268,622 | $248,218 | | Stephana E. Patton | $57,955 | $0 | $0 | $0 | 2023 Director Compensation Table (Selected Non-Employee Directors, in $) | Name | Fees Earned or Paid in Cash | Option Awards | Stock Awards | | :--------------- | :-------------------------- | :------------ | :----------- | | Gregory A. Barrett | $97,500 | $0 | $0 | | Kevin J. Cameron | $35,397 | $250,003 | $0 | | Nicholas S. Lewin | $187,784 | $250,003 | $0 | | Keith J. Sullivan | $19,750 | $0 | $200,295 | [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=176&type=section&id=ITEM%2012%2E%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details beneficial ownership of Cutera's common stock by major stockholders, directors, and executive officers, and securities authorized under equity plans - As of March 31, 2024, **20,013,041 shares** of common stock were outstanding[906](index=906&type=chunk) Beneficial Ownership of Common Stock (as of March 31, 2024) | Beneficial Owner | Number of Shares Beneficially Owned | Approximate Percent Owned | | :--------------------------- | :---------------------------------- | :------------------------ | | RTW Investments, LP | 1,817,585 | 9.1 % | | GAMCO Investors, Inc | 1,526,026 | 7.6 % | | BlackRock, Inc | 1,323,489 | 6.6 % | | Pura Vida Investments, LLC | 1,270,494 | 6.3 % | | The Vanguard Group | 1,012,287 | 5.1 % | | All other directors and executive officers as a group (13 persons) | 111,966 | * | Securities Authorized for Issuance Under Equity Compensation Plans (Dec 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance (c) | | :------------------------------------------ | :-------------------------------------------------------------------------------- | :-------------------------------------------------------------- | :--------------------------------------------------------------- | | Equity compensation plans approved by security holders | 127,863 | 27.54 | 1,397,725 | | Equity compensation plan not approved by security holders | — | — | — | | **Total** | **127,863** | **27.54** | **1,397,725** | [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=178&type=section&id=ITEM%2013%2E%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) No material related party transactions occurred, and a policy requires Audit Committee approval for transactions exceeding $120,000 - No material related party transactions occurred since the beginning of the last fiscal year[913](index=913&type=chunk) - A written policy requires Audit Committee approval for related person transactions exceeding **$120,000**, ensuring fair terms and considering the related person's interest[914](index=914&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=179&type=section&id=ITEM%2014%2E%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Audit fees incurred by BDO USA, P.C. increased to $4.1 million in 2023, with all services pre-approved by the Audit Committee - The Audit Committee pre-approves all audit and non-audit services by the Independent Registered Public Accounting Firm, BDO USA, P.C[916](index=916&type=chunk) Aggregate Fees for Audit and Non-Audit Services (in $) | Service Category | 2023 | 2022 | | :--------------- | :------------ | :------------ | | Audit Fees | $4,060,323 | $3,558,176 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | Non-Audit Fees | $0 | $0 | | **Total** | **$4,060,323**| **$3,558,176**| - Audit fees increased by approximately **$0.5 million** from 2022 to 2023[918](index=918&type=chunk) [PART IV](index=180&type=section&id=PART%20IV) [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES](index=180&type=section&id=ITEM%2015%2E%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and exhibits filed or incorporated by reference in the Form 10-K - The report includes consolidated financial statements and schedules[920](index=920&type=chunk) - A comprehensive list of exhibits is provided, including corporate governance documents, debt agreements, and compensation plans[921](index=921&type=chunk)[922](index=922&type=chunk)[923](index=923&type=chunk)[924](index=924&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=182&type=section&id=ITEM%2016%2E%20FORM%2010-K%20SUMMARY) This item indicates that no Form 10-K summary is provided

Cutera, Inc. (NASDAQ:CUTR) Q1 2024 Earnings Conference Call May 9, 2024 4:30 PM ET Company Participants Greg Barker - VP of Finance and IR Taylor Harris - CEO Stuart Drummond - Interim CFO Conference Call Participants George Sellers - Stephens Jon Block - Stifel James Beer - William Blair Nick Sherwood - Maxim Group Operator Thank you for standing by. This is the conference operator. Welcome to the Cutera, Inc. First Quarter 2024 Results Conference Call. [Operator Instructions] I would now like to turn the ...

Cutera (CUTR) came out with a quarterly loss of $1.02 per share versus the Zacks Consensus Estimate of a loss of $1.09. This compares to loss of $0.80 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 6.42%. A quarter ago, it was expected that this maker of laser skin treatments would post a loss of $0.91 per share when it actually produced a loss of $1.36, delivering a surprise of -49.45%.Over the last four quarters, the compan ...

Exhibit 99.1 BRISBANE, California, May 9, 2024 ─ Cutera, Inc. (Nasdaq: CUTR) ("Cutera" or the "Company"), a leading provider of aesthetic and dermatology solutions, today reported financial results for the first quarter ended March 31, 2024. "I am pleased with our progress in the first quarter of 2024, highlighted by a strong sequential gain in our AviClear revenue, as well as improvement in our gross margin relative to the second half of 2023, reflecting our clear focus on building a culture of operational ...

Financial Data and Key Metrics - Total revenue for Q4 2023 was $49.5 million, a 26% decrease from $67.4 million in Q4 2022, primarily due to a $14 million decline in capital equipment revenue [21][49] - Non-GAAP gross profit for Q4 2023 was $9.9 million with a gross margin rate of 20%, compared to 59.4% in Q4 2022, driven by a 19 percentage point impact from increased inventory reserves [22] - Non-GAAP operating loss for Q4 2023 was $26.1 million, compared to an operating income of $0.2 million in Q4 2022 [52] - Cash and cash equivalents decreased by $36 million sequentially to $143.6 million at the end of Q4 2023, primarily due to a net loss of $28 million and working capital changes [24] Business Line Data and Key Metrics - AviClear revenue was stable at $3.9 million in Q4 2023, with capital revenue from the enhanced product offering offsetting a decline in treatment revenue [7][50] - International business improved sequentially from Q3 to Q4 2023, while North American business experienced a modest sequential decline [7] - Utilization rates at dermatology practices are approximately 50% higher than other specialties, with dermatologists being a disproportionate percentage of the most successful accounts [8] Market Data and Key Metrics - International markets showed strength in capital equipment sales and skincare, contributing to the sequential revenue increase from Q3 to Q4 2023 [49] - The company expects international markets to contribute around 55% of revenue in 2024, similar to 2023, with direct businesses in major European markets, Japan, and Australia [74][93] Company Strategy and Industry Competition - The company is focused on operational excellence, building a global AviClear franchise, and driving long-term profitability [39] - A new business model for AviClear offers greater flexibility, including a hardware and software upgrade and a shift from a per-patient model to paying for individual treatments [14] - The company plans to launch a refreshed product platform in 2024 and is conducting pilot studies on expanded indications for AviClear, such as sebaceous hyperplasia and hidradenitis suppurativa [46][64] Management Commentary on Operating Environment and Future Outlook - Management noted stabilization in the business in Q4 2023, with better-than-expected revenue and cash burn results [35] - The company expects to consume cash more heavily in the first half of 2024 due to supply obligations related to AviClear, with a projected cash balance of $55 million to $60 million at the end of 2024 [25] - Management remains cautious about the macroeconomic environment but is optimistic about improving operational efficiency and gross margins over time [9][86] Other Important Information - The company has completed a global restructuring program, reducing headcount by close to 25%, leading to annualized personnel-related savings of over $20 million [18] - Cutera Academy, a two-day training program, will launch in April 2024 to support customer growth and utilization of AviClear [15] - The company has transitioned AviClear and excel V+ manufacturing in-house, improving quality and reducing costs [13][102] Q&A Session Summary Question: Revenue guidance breakdown for 2024 - Revenue guidance for 2024 is $160 million to $170 million, including $4 million of skincare revenue in Q1, with systems and consumables revenue expected to be slightly down year-over-year [25][56] Question: Cash burn and inventory management - Cash burn in 2024 will be heavily weighted towards the first half, with inventory expected to become a cash tailwind in the second half as the company works down excess inventory [57][58] Question: AviClear procedural revenue and international launch learnings - AviClear procedural revenue was impacted by dormant accounts, with 55% of the account base not performing procedures in Q4 2023 [30] - International launch learnings indicate that disciplined, methodical market entry and strong customer support are key to building successful AviClear practices [62][84] Question: New product launches and expanded indications for AviClear - The company plans to launch a refreshed product platform in 2024 and is exploring expanded indications for AviClear, including sebaceous hyperplasia and hidradenitis suppurativa [46][64] Question: Rep productivity and field organization expansion - Rep productivity has remained consistent, with plans to increase the North American field organization by adding 15 or more capital reps and expanding the key account manager (CAM) team to 25 [88][89] Question: Convertible debt maturities - The company has three tranches of convertible debt, with the first maturity in March 2026 ($70 million face value), and is focused on addressing its capital structure after advancing key AviClear initiatives [108][115]