Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACTS:
Cutera, Inc.
Ron Santilli
Chief Financial Officer
| 415-657-5500 |
Investor Relations
John Mills
| Integrated | Corporate Relations, Inc. |
310-395-2215
jmills@icrinc.com
CUTERA ACHIEVES RECORD REVENUE AND EARNINGS GROWTH IN FOURTH
QUARTER AND YEAR ENDED DECEMBER 31, 2005
Brisbane, California, February 13, 2006 – Cutera, Inc.(Nasdaq: CUTR), a leading provider of laser and other light-based aesthetic systems for practitioners worldwide, today reported financial results for the fourth quarter and year ended December 31, 2005. Key financial highlights are as follows:
Fourth quarter 2005, compared with the same quarter in 2004:
| • | Revenue increased by 49% from $16.1 million to $24.0 million |
| • | Operating margins improved from 17% to 29% |
| • | Earnings per diluted share climbed from $0.16 to $0.41 |
| • | Cash generated by operations improved from $3.9 million to $7.6 million |
Full year 2005, compared with full year 2004:
| • | Revenue increased by 44% from $52.6 million to $75.6 million |
| • | Operating margins improved from 10% to 22% |
| • | Earnings per diluted share climbed from $0.31 to $1.00 |
| • | Cash generated by operations more than doubled, from $9.2 million to $20.4 million |
| • | Cash and marketable investments increased by $25.7 million from $66.3 to $92.0 million. |
“These impressive results are attributable to the positive reception that our products have been receiving in the marketplace and to the expansion of our sales force,” said Kevin Connors, President and Chief Executive Officer. “In 2005, we experienced significant financial leverage in our business model. We increased gross margins and decreased each of our operating expenses, as a percent of revenue.
“We remain committed to aggressively investing in our business to exploit the growth opportunities in this robust market. Specifically, we are focused on the following key initiatives, which are yielding measurable returns as proven by our results in 2005: (i) worldwide sales force
expansion- we ended 2005 with 47 direct sales territories in North America, up from 32 territories at the end of 2004; (ii) new aesthetic solutions and product introductions; and, (iii) marketing to the broad and expanding market of physicians outside of the traditional dermatology and plastic surgery physician specialties, including the emerging medi-spa market. That market is comprised of physicians who offer aesthetic treatments in a spa environment.”
Revenue highlights for the full year 2005, compared with the full year 2004, are as follows:
| • | U.S. and international revenue increased by 57% and 19%, respectively. |
| • | Product revenue grew by 46%, primarily due to our premium multi-application Xeo product and the newly introduced Solera platform products. |
| • | Service revenue increased by 60%, primarily due to the sales of post-warranty service contracts to an increasing number of customers. |
| • | Revenue from Titan refills- an annuity business line introduced in late 2004 - contributed $1.8 million in 2005. |
Mr. Connors concluded, “We are very pleased with the results of our key initiatives. Our strong financial position, together with the fast-paced growth of our company, strategically position Cutera as a leading global provider of light-based aesthetic systems.”
Guidance
The following is management’s guidance excluding and including the impact of adopting SFAS 123(R):
| Impact of Expensing Employee Stock Options-SFAS 123(R) | ||||||||||||
| Three months ended 3/31/2006 | Year Ended 12/31/2006 | |||||||||||
| Including | Excluding | Including | Excluding | |||||||||
Revenue | $ | 19,000 | $ | 19,000 | $ | 94,300 | $ | 94,300 | ||||
Stock-based compensation | $ | 1,000 | $ | 230 | $ | 4,500 | $ | 940 | ||||
Net Income | $ | 1,110 | $ | 1,580 | $ | 12,330 | $ | 14,490 | ||||
Diluted EPS | $ | 0.08 | $ | 0.11 | $ | 0.85 | $ | 1.00 | ||||
Effective January 1, 2006, Cutera will be adopting Statement of Financial Accounting Standards (SFAS) No. 123(R), which requires the Company to begin recognizing compensation expense relating to share-based payment transactions in the Statement of Operations. In the above guidance, for the benefit of investors, management has provided summary non-GAAP information that is consistent and comparable with the company’s historical performance. A table reconciling the non-GAAP financial measure of excluding the impact of SFAS 123(R), to the appropriate GAAP measure, is included in the condensed consolidated financial statements attached to this release.
Conference Call
Cutera, Inc. will host a conference call on February 13, 2006, at 2:00 p.m. PST (5:00 p.m. EST) to discuss its fourth-quarter and year-ended 2005 results. The earnings call will be broadcast live over the internet hosted at the Investor Relations section of the company’s website athttp://www.cutera.com and will be archived online within one hour of the completion of the conference call. In addition, you may dial 800-811-8824 to access that call. 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. PST on February 13, 2006, through 9:00 p.m. PST on February 27, 2006 by calling 888-203-1112. International callers may call 719-457-0820. To access this playback, please enter pass code 6044919.
About Cutera, Inc.
Brisbane, California-based Cutera is a leading provider of laser and other light-based aesthetic systems to the professional aesthetic market. 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 visitwww.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 carry out key initiatives for 2006, including sales force expansion, introduction of new aesthetic solutions and product introductions, and broadening of its customer base, as well as Cutera’s financial guidance for the first 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 fourth quarter and year ended December 31, 2005 financial performance, as discussed in this release, are preliminary and unaudited, and subject to adjustment. Estimates for the first 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.
—Financial Tables Follow—
CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| December 31, | ||||||||
| 2005 | 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 5,260 | $ | 7,070 | ||||
Marketable investments | 86,736 | 59,200 | ||||||
Accounts receivable, net | 6,478 | 6,643 | ||||||
Inventory | 5,245 | 3,004 | ||||||
Deferred tax asset | 3,027 | 2,284 | ||||||
Other current assets | 3,728 | 878 | ||||||
Total current assets | 110,474 | 79,079 | ||||||
Property and equipment, net | 1,015 | 1,071 | ||||||
Intangibles, net | 469 | 399 | ||||||
Total assets | $ | 111,958 | $ | 80,549 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Accounts payable | $ | 1,352 | $ | 1,195 | ||||
Accrued liabilities | 9,131 | 8,194 | ||||||
Deferred revenue | 1,673 | 1,171 | ||||||
Total current liabilities | 12,156 | 10,560 | ||||||
Deferred rent | 1,096 | 648 | ||||||
Deferred revenue, net of current portion | 1,469 | 833 | ||||||
Deferred tax liability | 60 | 52 | ||||||
Total liabilities | 14,781 | 12,093 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 12 | 11 | ||||||
Additional paid-in capital | 77,705 | 62,738 | ||||||
Deferred stock-based compensation | (2,171 | ) | (2,226 | ) | ||||
Retained earnings | 21,743 | 7,942 | ||||||
Other comprehensive loss | (112 | ) | (9 | ) | ||||
Total stockholders’ equity | 97,177 | 68,456 | ||||||
Total liabilities and stockholders’ equity | $ | 111,958 | $ | 80,549 | ||||
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net revenue | $ | 23,953 | $ | 16,094 | $ | 75,620 | $ | 52,641 | ||||||||
Cost of revenue(1) | 6,149 | 4,235 | 19,792 | 14,689 | ||||||||||||
Gross profit | 17,804 | 11,859 | 55,828 | 37,952 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 7,106 | 5,473 | 24,801 | 19,052 | ||||||||||||
Research and development | 1,374 | 1,150 | 5,065 | 4,136 | ||||||||||||
General and administrative | 2,164 | 2,195 | 7,983 | 8,344 | ||||||||||||
Amortization of stock-based compensation(2) | 207 | 313 | 1,307 | 1,267 | ||||||||||||
Total operating expenses | 10,851 | 9,131 | 39,156 | 32,799 | ||||||||||||
Income from operations | 6,953 | 2,728 | 16,672 | 5,153 | ||||||||||||
Interest and other income, net | 683 | 378 | 2,034 | 632 | ||||||||||||
Income before income taxes | 7,636 | 3,106 | 18,706 | 5,785 | ||||||||||||
Provision for income taxes | (1,825 | ) | (1,034 | ) | (4,905 | ) | (2,025 | ) | ||||||||
Net income | $ | 5,811 | $ | 2,072 | $ | 13,801 | $ | 3,760 | ||||||||
Net income per diluted share | $ | 0.41 | $ | 0.16 | $ | 1.00 | $ | 0.31 | ||||||||
Weighted-average number of shares used in diluted per share calculations | 14,291 | 13,167 | 13,864 | 12,222 | ||||||||||||
| ||||||||||||||||
(1) Cost of revenue includes amortization of stock-based compensation of: | $ | 33 | $ | 39 | $ | 135 | $ | 168 | ||||||||
(2) Amortization of stock-based compensation is attributable to the following operating expense categories: | ||||||||||||||||
Sales and marketing | 61 | 63 | 220 | 274 | ||||||||||||
Research and development | 47 | 104 | 288 | 413 | ||||||||||||
General and administrative | 99 | 146 | 799 | 580 | ||||||||||||
| 207 | 313 | 1,307 | 1,267 | |||||||||||||
Total amortization of stock-based compensation | $ | 240 | $ | 352 | $ | 1,442 | $ | 1,435 | ||||||||
CUTERA, INC.
CONSOLIDATED REVENUE HIGHLIGHTS
(in thousands, except percentage data)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||
| $ | $ | % | $ | $ | % | |||||||||||||
Revenue By Geography: | ||||||||||||||||||
United States | $ | 18,274 | $ | 10,894 | +68 | % | $ | 54,506 | $ | 34,824 | +57 | % | ||||||
International | 5,679 | 5,200 | +9 | % | 21,114 | 17,817 | +19 | % | ||||||||||
| $ | 23,953 | $ | 16,094 | +49 | % | $ | 75,620 | $ | 52,641 | +44 | % | |||||||
Revenue By Product Category: | ||||||||||||||||||
Products | $ | 19,939 | $ | 13,325 | +50 | % | $ | 63,349 | $ | 43,525 | +46 | % | ||||||
Product upgrades | 2,060 | 2,038 | +1 | % | 6,630 | 6,615 | 0 | % | ||||||||||
Service | 1,222 | 659 | +85 | % | 3,881 | 2,429 | +60 | % | ||||||||||
Titan refills | 732 | 72 | +917 | % | 1,760 | 72 | +2344 | % | ||||||||||
| $ | 23,953 | $ | 16,094 | +49 | % | $ | 75,620 | $ | 52,641 | +44 | % | |||||||
CUTERA, INC.
Reconciliations of Non-GAAP guidance measures to the nearest comparable GAAP guidance measures
(in thousands, except per share data)
(unaudited)
| Three Months Ended 3/31/2006 | Year Ended 12/31/2006 | |||||||||||||||||||
| GAAP Guidance | Adjustment | Non-GAAP Guidance | GAAP Guidance | Adjustment | Non-GAAP Guidance | |||||||||||||||
Revenue | $ | 19,000 | $ | 19,000 | $ | 94,300 | $ | 94,300 | ||||||||||||
| $ | 770 | (a) | $ | 3,560 | (a) | |||||||||||||||
Net income | $ | 1,110 | $ | (300 | )(b) | $ | 1,580 | $ | 12,330 | $ | (1,400 | )(b) | $ | 14,490 | ||||||
Net income per diluted share | $ | 0.08 | $ | 0.03 | $ | 0.11 | $ | 0.85 | $ | 0.15 | $ | 1.00 | ||||||||
| (a)— | To eliminate incremental stock-based compensation charges resulting from adopting SFAS 123(R) with effect from January 1, 2006. |
| (b)— | To eliminate the tax benefit related to the incremental stock-based compensation charges resulting from adopting SFAS 123(R) with effect from January 1, 2006. |
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Year Ended December 31, | ||||||||
| 2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 13,801 | $ | 3,760 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 689 | 524 | ||||||
Change in allowance for doubtful accounts | (311 | ) | 293 | |||||
Change in excess and obsolete inventory | 614 | 300 | ||||||
Change in deferred tax asset/liability | (735 | ) | (476 | ) | ||||
Stock-based compensation | 1,442 | 1,435 | ||||||
Tax benefit related to employee stock options | 7,437 | 674 | ||||||
Loss on disposal of assets | — | 47 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 476 | 661 | ||||||
Inventory | (2,855 | ) | (1,065 | ) | ||||
Other current assets | (2,850 | ) | 1 | |||||
Accounts payable | 157 | (720 | ) | |||||
Accrued liabilities | 937 | 2,485 | ||||||
Deferred rent | 448 | 648 | ||||||
Deferred revenue | 1,138 | 677 | ||||||
Net cash provided by operating activities | 20,388 | 9,244 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of property and equipment | (539 | ) | (854 | ) | ||||
Purchase of intangibles | (165 | ) | — | |||||
Proceeds from sales of marketable investments | 18,324 | 9,133 | ||||||
Proceeds from maturities of marketable investments | 49,948 | 14,310 | ||||||
Purchase of marketable investments, net | (95,910 | ) | (82,652 | ) | ||||
Change in restricted cash | — | 250 | ||||||
Net cash used in investing activities | (28,342 | ) | (59,813 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options and employee stock purchase plan | 6,144 | 1,037 | ||||||
Proceeds from issuance of common stock, net | — | 46,312 | ||||||
Net cash provided by financing activities | 6,144 | 47,349 | ||||||
Net decrease in cash and cash equivalents | (1,810 | ) | (3,220 | ) | ||||
Cash and cash equivalents at beginning of year | 7,070 | 10,290 | ||||||
Cash and cash equivalents at end of year | $ | 5,260 | $ | 7,070 | ||||
Supplemental and non-cash disclosure of cash flow information: | ||||||||
Conversion of preferred stock to common stock | $ | — | $ | 7,372 | ||||
Change in deferred stock-based compensation, net of terminations | $ | 1,387 | $ | (227 | ) | |||
Cash paid for income taxes | $ | 1,837 | $ | 2,526 | ||||