Cutera(CUTR) - 2023 Q3 - Quarterly Report

Financial Performance - Total net revenue for Q3 2023 was $46,478,000, a decrease of 26% compared to $62,808,000 in Q3 2022[15]. - Product revenue for Q3 2023 was $40,989,000, down 27% from $56,540,000 in Q3 2022[15]. - Gross profit for Q3 2023 was $6,457,000, significantly lower than $34,248,000 in Q3 2022, reflecting a gross margin decline[15]. - Net loss for Q3 2023 was $44,274,000, compared to a net loss of $12,134,000 in Q3 2022, indicating a worsening financial position[15]. - The company reported a net loss of $105.6 million for the nine months ended September 30, 2023, compared to a net loss of $74.6 million for the same period in 2022, indicating a significant increase in losses[28]. Cash and Liquidity - Cash and cash equivalents as of September 30, 2023, were $179,516,000, up from $145,924,000 at the end of 2022[12]. - The company generated $139.8 million in net cash from investing activities in 2023, a significant improvement compared to a net cash outflow of $219.4 million in 2022[28]. - Cash used in operating activities was $103.9 million for the nine months ended September 30, 2023, compared to $50.0 million in the prior year, highlighting ongoing operational challenges[28]. - Cash, cash equivalents, and restricted cash at the end of the period were $180.2 million, up from $46.6 million at the end of September 2022, indicating improved liquidity[28]. Assets and Liabilities - Total assets decreased to $406,633,000 as of September 30, 2023, down from $520,988,000 at the end of 2022[12]. - Total liabilities were $522,718,000 as of September 30, 2023, slightly down from $536,169,000 at the end of 2022[12]. - The company reported an accumulated deficit of $246,113,000 as of September 30, 2023, compared to $140,513,000 at the end of 2022[12]. - The company experienced a decrease in accounts receivable by $9.8 million in 2023, compared to a decrease of $5.1 million in 2022, suggesting better receivables management[28]. Revenue Sources and Business Segments - The Company derives revenue from various sources, including Systems revenue, AviClear revenue, Consumables revenue, and Skincare revenue, with a focus on product sales and leasing[191][195]. - Revenue from performance obligations satisfied over time accounted for approximately 13% of total revenue for the three months ended September 30, 2023, compared to 8% for the same period in 2022, showing a growth of 62.5%[66]. - Revenue from the Cutera Core segment was $42.6 million in Q3 2023, down 31% from $61.7 million in Q3 2022[175]. - AviClear revenue increased to $3.9 million in Q3 2023 from $1.2 million in Q3 2022, representing a growth of 237%[175]. Operating Expenses and Cost Management - Operating expenses increased to $47,404,000 in Q3 2023, compared to $43,681,000 in Q3 2022, driven by higher sales and marketing costs[15]. - Stock-based compensation expenses decreased to $6.6 million in 2023 from $13.0 million in 2022, reflecting cost management efforts[28]. - The company is implementing workforce reductions and restructuring supplier relationships to achieve cost savings[33]. Debt and Financing - The Company issued $138.3 million in convertible notes due in 2026, with an interest rate of 2.25% per year[123]. - The Company issued $120.0 million aggregate principal amount of 2029 Notes with a 4.00% annual interest rate, resulting in net proceeds of approximately $115.8 million after issuance costs[128]. - The carrying value of convertible notes as of September 30, 2023, was $418.129 million, compared to $416.459 million as of December 31, 2022[122]. - The Company recorded a loss on debt extinguishment of $34.423 million related to the 2026 Notes Exchange[131]. Future Outlook and Strategic Initiatives - The company plans to focus on revenue growth from its revised business model for AviClear and maintaining revenues from legacy systems and consumables[33]. - The company plans to realign its operating segments into one consolidated reportable segment starting Q4 2023[176]. - The Company aims to capture market share in the acne treatment space with AviClear and plans to expand its product offerings through internal development and partnerships[198]. - The Company is facing challenges due to inflation, which may reduce consumer spending on aesthetic treatments and subsequently affect product demand[202].