Cutera(CUTR) - 2024 Q2 - Quarterly Results

Part I Q2 2024 Highlights & Management Commentary Cutera reported challenging Q2 results with $34.4 million revenue, offset by strong AviClear international growth and service revenue, prompting new leadership and cost reductions Q2 2024 Key Metrics | Metric | Value | Note | | :--- | :--- | :--- | | Consolidated Revenue | $34.4 million | - | | Cash, Cash Equivalents, and Restricted Cash | $84.3 million | - | | AviClear Growth | 41% YoY | Driven by international capital system sales | | Service Growth | 7% YoY | Highlighting improvements in field service | - CEO Taylor Harris acknowledged the challenging quarter, especially in North America, but highlighted the international momentum of AviClear and the promising start of the Xeo+ launch[1] - Strategic responses to the market challenges include appointing new commercial leadership in North America, implementing additional cost reductions, and focusing on building the AviClear franchise through training, marketing, and international expansion[1] Second Quarter 2024 Financial Performance Q2 2024 consolidated revenue declined 44% to $34.4 million due to a skincare agreement termination, with gross margin contracting to 22.2% and GAAP operating loss improving to $21.8 million Q2 2024 vs Q2 2023 Financial Comparison | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $34.4M | $61.8M | -44% | | Gross Profit (GAAP) | $7.6M | $26.1M | -71% | | Gross Margin (GAAP) | 22.2% | 42.2% | -20.0 p.p. | | Gross Profit (Non-GAAP) | $9.6M | $28.8M | -67% | | Gross Margin (Non-GAAP) | 28.0% | 46.6% | -18.6 p.p. | | Operating Expenses (GAAP) | $29.4M | $57.2M | -49% | | Operating Loss (GAAP) | ($21.8M) | ($31.2M) | +30% | | Operating Loss (Non-GAAP) | ($21.3M) | ($13.2M) | -61% | - The termination of the skincare distribution agreement in February 2024 resulted in no skincare revenue in Q2 2024, compared to $9.4 million in Q2 2023[2] - Revenue from capital systems sales declined by 39%, and recurring revenue sources (excluding skincare) decreased by 20% compared to Q2 2023[2] - Q2 2024 gross profit was negatively impacted by approximately $2.4 million in expenses related to excess and obsolete inventory[3] Cost Restructuring and 2024 Outlook Cutera completed its Q4 2023 restructuring, achieving $20 million in annualized savings, identified an additional $10 million for 2025, and revised 2024 revenue guidance to $140-$145 million with year-end cash of ~$40 million - The global restructuring program initiated in Q4 2023 is complete, resulting in annualized expense savings of about $20 million[5] - An additional cost reduction initiative of $10 million has been identified, with the full benefit expected to be realized in 2025[5] Revised Full Year 2024 Guidance | Metric | New Guidance (Millions) | Previous Guidance (Millions) | | :--- | :--- | :--- | | Full Year Revenue | $140M - $145M | $160M - $170M | | Year-End Cash | ~$40M | $55M - $60M | Financial Statements The financial statements show total assets of $276.3 million, a stockholders' deficit of $215.7 million, a Q2 2024 net loss of $24.7 million, and $20.2 million net cash used in operations Condensed Consolidated Statements of Operations Q2 2024 net revenue was $34.4 million, a 44.4% decrease, resulting in a gross profit of $7.6 million, an operating loss of $21.8 million, and a net loss of $24.7 million or ($1.23) per share Statement of Operations Highlights (Three Months Ended June 30) | Metric (in thousands, except per share) | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | Total Net Revenue | $34,377 | $61,825 | | Gross Profit | $7,644 | $26,083 | | Loss from Operations | ($21,804) | ($31,163) | | Net Loss | ($24,681) | ($33,278) | | Net Loss Per Share (Basic & Diluted) | ($1.23) | ($1.68) | Condensed Consolidated Balance Sheets As of June 30, 2024, Cutera reported cash of $83.1 million, total assets of $276.3 million, total liabilities of $492.0 million, and a stockholders' deficit of $215.7 million Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 (Thousands) | Dec 31, 2023 (Thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $83,115 | $143,612 | | Total current assets | $210,983 | $269,185 | | Total assets | $276,295 | $346,291 | | Total liabilities | $491,966 | $518,121 | | Total stockholders' deficit | ($215,671) | ($171,830) | Condensed Consolidated Statements of Cash Flows For H1 2024, net cash used in operating activities was $57.9 million, investing activities used $1.2 million, leading to a $59.3 million decrease in cash, ending at $84.3 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($57,874) | ($66,989) | | Net cash (used in) provided by investing activities | ($1,154) | $104,284 | | Net cash used in financing activities | ($273) | ($2,565) | | Net decrease in cash | ($59,301) | $34,730 | | Cash at end of period | $84,311 | $181,354 | Revenue Breakdown Q2 2024 revenue saw North America decline 50.7% to $16.0 million and Japan 70.1% to $3.8 million, while Systems revenue fell 39.1% to $23.9 million, offset by 6.5% growth in Service revenue to $6.0 million Q2 2024 Revenue by Geography (in thousands) | Region | Q2 2024 (Thousands) | Q2 2023 (Thousands) | % Change | | :--- | :--- | :--- | :--- | | North America | $15,980 | $32,437 | -50.7% | | Japan | $3,829 | $12,810 | -70.1% | | Rest of World | $14,568 | $16,578 | -12.1% | | Total | $34,377 | $61,825 | -44.4% | Q2 2024 Revenue by Product Category (in thousands) | Category | Q2 2024 (Thousands) | Q2 2023 (Thousands) | % Change | | :--- | :--- | :--- | :--- | | Systems | $23,900 | $39,262 | -39.1% | | Consumables | $4,457 | $7,491 | -40.5% | | Skincare | $0 | $9,422 | -100.0% | | Service | $6,020 | $5,650 | +6.5% | | Total | $34,377 | $61,825 | -44.4% | Reconciliation of GAAP to Non-GAAP Financial Measures Cutera provides non-GAAP measures, with Q2 2024 non-GAAP operating loss at $21.3 million (vs. GAAP $21.8 million), adjusted for items like depreciation, stock-based compensation, and a legal settlement gain - Management uses non-GAAP measures to monitor ongoing financial performance and for benchmarking. Adjustments include depreciation, stock-based compensation, ERP costs, legal costs, severance, retention plan costs, and gains on agreement terminations[10][11][12] Q2 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP (Thousands) | Adjustments (Thousands) | Non-GAAP (Thousands) | | :--- | :--- | :--- | :--- | | Gross Profit | $7,644 | $1,981 | $9,625 | | Gross Margin | 22.2% | 5.8% | 28.0% | | Operating Expenses | $29,448 | ($1,447) | $30,895 | | Operating Loss | ($21,804) | $534 | ($21,270) |