Business Wire | Nov 4, 2020 04:01PM EST

Cutera, Inc. Announces Third Quarter 2020 Financial Results

Nov. 04, 2020

BRISBANE, Calif.--(BUSINESS WIRE)--Nov. 04, 2020--Cutera, Inc. (NASDAQ: CUTR) ("Cutera" or the "Company"), a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide, today reported financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial and Operational Highlights

* Revenue was $39.1 million, a 15% decrease from the prior-year period, as COVID-19 disruptions led to a year-over-year decline in capital equipment deals as well as overall energy-based aesthetic procedures during the quarter, compared to a 45% year-on-year decline in 2Q20. Capital Equipment revenue of $24.1 million decline of 31% over prior-year period, compared to a 59% decline in 2Q20. Recurring revenue grew $3.9 million or 35% over prior-year period, compared to 6% in 2Q20, driven primarily by Skin Care revenue growth of 140% over third quarter 2019. * Gross Margin was 56%, compared to 57% in the prior-year period, driven by lower production levels and substantially lower overhead absorption during the quarter, offset by reductions in manufacturing overhead, increased manufacturing efficiencies and continued pricing discipline. * Operating Expenses were $23.0 million, down $5.7 million or 20% from prior year period, delivering improved leverage in the period. * Net loss was $2.3 million, or $0.13 per fully diluted share, as compared to a net loss of $2.6 million, or $0.19 per fully diluted share, in the prior-year period.

"I am pleased with our third quarter financial performance, with faster-than-expected sequential improvement in capital equipment sales and exceptionally strong recurring revenue growth of 35% year-over-year," commented Dave Mowry, Chief Executive Officer of Cutera, Inc. "Moreover, I am very proud of our team's continued expense discipline, which led to increased profitability in the period and allowed us to achieve positive cash flow on a non-GAAP basis a quarter earlier than expected. While we continue to anticipate COVID-related headwinds to capital equipment sales in the fourth quarter, our year-to-date operational focus and outlook for sequential growth in both equipment sales and procedure volumes will provide a pathway to stronger results in the near-term and a solid foundation going into fiscal year 2021 and beyond."

Conference Call

The Company's management will host a conference call to the discuss these results and related matters today at 1:30 p.m. PT (4:30 p.m. ET) that same day. Participating on the call will be Dave Mowry, Chief Executive Officer, Rohan Seth, Chief Financial Officer, and, Jason Richey, President.

To participate in the conference call, dial 1-877-705-6003 (domestic) or + 1-201-493-6725 (international) and refer to the Conference Code: 13711852.

The call will also be webcast and can be accessed from the Investor Relations section of Cutera's website at http://www.cutera.com/. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

About Cutera, Inc.

Brisbane, California-based Cutera is a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide. Since 1998, Cutera has developed innovative, easy-to-use products that enable physicians and other qualified practitioners to offer safe and effective aesthetic treatments to their patients. For more information, call 1-888-4CUTERA or visit www.cutera.com.

*Use of Non-GAAP Financial Measures

In this press release, in order to supplement the Company's condensed consolidated financial statements presented in accordance with Generally Accepted Accounting Principles, or GAAP, management has disclosed certain non-GAAP financial measures for the statement of operations and net income (loss) per diluted share. Non-GAAP adjustments include stock-based compensation, depreciation, amortization, executive and other non-recurring separation costs, customer relationship management ("CRM") and enterprise resource planning ("ERP") system costs, non-recurring legal and litigation costs, as well as the net tax impact of excluding these items. From time to time in the future, there may be other items that we may exclude if the Company believes that doing so is consistent with the goal of providing useful information to investors and management. The Company has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. The Company has not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential significant variability, limited visibility, unpredictability, or unique non-recurring nature of the items. Forward-looking non-GAAP measures include adjusted EBITDA. The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, stock-based compensation, executive and other non-recurring separation costs, customer relationship management ("CRM") and enterprise resource planning ("ERP") system costs, and non-recurring legal and litigation costs.

Company management uses these measurements as aids in monitoring the Company's ongoing financial performance from quarter to quarter, and year to year, on a regular basis and for benchmarking against other similar companies. Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP financial measures should be considered along with, but not as alternatives to, the operating performance measure as prescribed by GAAP. Non-GAAP financial measures for the statement of operations and net income per diluted share exclude the following:

Non-cash expenses for stock-based compensation.The Company has excluded the effect of stock-based compensation expenses in calculating its non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to its employees, the Company continues to evaluate its business performance excluding stock-based compensation expenses. The Company records stock-based compensation expense related to grants of options, employee stock purchase plan, and performance and restricted stock. Depending upon the size, timing and the terms of the grants, this expense may vary significantly but will recur in future periods. The Company believes that excluding stock-based compensation better allows for comparisons to its peer companies;

Depreciation and amortization.The Company has excluded depreciation and amortization expense in calculating its non-GAAP operating expenses and net income measures. Depreciation and amortization are non-cash charges to current operations;

Executive and other non-recurring separation costs.We have excluded costs associated with the resignation of our former Executive Officers in calculating our non-GAAP operating expenses and net income measures. We exclude these and other non-recurring costs related to Reduction-in-Force ("RIF") because we believe that these items do not reflect future operating expenses;

Customer Relationship Management.We have excluded CRM system costs related to direct and incremental costs incurred in connection with our multi-phase implementation of a new CRM solution and the related technology infrastructure costs. We exclude these costs because we believe that these items do not reflect future operating expenses and will be inconsistent in amounts and frequency making it difficult to contribute to a meaningful evaluation of our operating performance;

Enterprise Resource Planning.We have excluded ERP system costs related to direct and incremental costs incurred in connection with our multi-phase implementation of a new ERP solution and the related technology infrastructure costs. We exclude these costs because we believe that these items do not reflect future operating expenses and will be inconsistent in amounts and frequency making it difficult to contribute to a meaningful evaluation of our operating performance; and

Non-recurring legal and litigation costs. We have excluded costs incurred related to third party litigation and disputes, that are of a non-recurring nature.

The Company believes that excluding all of the items above allows users of its financial statements to better review and assess both current and historical results of operations.

Safe Harbor Statement

Certain statements in this press release, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, Cutera's plans, objectives, strategies, financial performance and outlook, CFO and other senior leadership searches, product launches and performance, trends, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, the Company's actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "seek," "guidance," "predict," "potential," "likely," "believe," "will," "should," "expect," "anticipate," "estimate," "plan," "intend," "forecast," "foresee" or variations of these terms and similar expressions, or the negative of these terms or similar expressions. 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. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond the Company's control, that could cause its actual results to differ materially from the forward-looking statements contained in this press release, including those described in the "Risk Factors" section of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, the Registration Statement on Form S-8, and other documents filed from time to time with the United States Securities and Exchange Commission by Cutera.

All information in this press release is as of the date of its release. Accordingly, undue reliance should not be placed on forward-looking statements. 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. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Cutera's financial performance for the third quarter ended September 30, 2020, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

CUTERA, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited) September June 30, December 30, 31, 2020 2020 2019

AssetsCurrent assets: Cash and cash equivalents $ 29,394 $ 33,659 $ 26,316

Marketable investments 13,046 12,894 7,605

Accounts receivable, net 17,597 13,826 21,556

Inventories 29,333 31,240 33,921

Other current assets and prepaid 6,892 5,313 5,648 expenses Total current assets 96,262 96,932 95,046

Property and equipment, net 2,391 2,417 2,817

Deferred tax asset 500 419 423

Goodwill 1,339 1,339 1,339

Operating lease right-of-use assets 17,645 7,577 7,702

Other long-term assets 5,290 4,733 6,411

Total assets $ 123,427 $ 113,417 $ 113,738

Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable $ 6,799 $ 11,681 $ 12,685

Accrued liabilities 25,644 20,423 30,307

Operating leases liabilities 1,608 1,526 2,800

Extended warranty liabilities 1,497 1,660 1,999

Deferred revenue 9,580 9,345 10,831

Total current liabilities 45,128 44,635 58,622

Deferred revenue, net of current portion 2,244 2,434 3,391

Income tax liability 93 93 93

PPP Loan payable 7,167 7,149 -

Operating lease liabilities, net of 16,497 6,262 5,112current portionOther long-term liabilities 292 345 578

Total liabilities 71,421 60,918 67,796

Stockholders' equity: Common stock 18 18 14

Additional paid-in capital 114,410 112,644 82,346

Accumulated deficit (62,423) (60,166) (36,358)

Accumulated other comprehensive loss 1 3 (60)

Total stockholders' equity 52,006 52,499 45,942

Total liabilities and $ 123,427 $ 113,417 $ 113,738 stockholders' equity CUTERA, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)Three Months EndedNine Months EndedSeptember 30,September 30,September 30,September 30,2020

2019

2020

2019

Products$33,254

40,315

81,390

$113,045

Service5,878

5,802

16,350

16,872

Total net revenue39,132

46,117

97,740

129,917

Products14,018

16,343

40,326

50,278

Service3,369

3,541

9,708

10,266

Total cost of revenue17,387

19,884

50,034

60,544

Gross profit21,745

26,233

47,706

69,373

Gross margin %56%

57%

49%

53%

Operating expenses:Sales and marketing12,286

17,691

38,109

50,786

Research and development3,432

3,643

10,294

10,622

General and administrative7,239

7,308

23,575

18,100

Total operating expenses22,957

28,642

71,978

79,508

Loss from operations(1,211)

(2,409)

(24,272)

(10,135)

Interest and other expense, net(382)

(146)

(586)

(180)

Loss before income taxes(1,593)

(2,555)

(24,858)

(10,315)

Income tax expense (benefit)664

73

1,207

(55)

Net loss$(2,257)

$(2,628)

$(26,065)

$(10,260)

Net loss per share:Basic$(0.13)

$(0.19)

$(1.59)

$(0.73)

Diluted$(0.13)

$(0.19)

$(1.59)

$(0.73)

Weighted-average number of shares used in per share calculations:Basic17,603

14,182

16,368

14,095

Diluted17,603

14,182

16,368

14,095

CUTERA, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2020 2019 2020 2019

Products $ 33,254 40,315 81,390 $ 113,045

Service 5,878 5,802 16,350 16,872

Total net revenue 39,132 46,117 97,740 129,917

Products 14,018 16,343 40,326 50,278

Service 3,369 3,541 9,708 10,266

Total cost of revenue 17,387 19,884 50,034 60,544

Gross profit 21,745 26,233 47,706 69,373

Gross margin % 56% 57% 49% 53%

Operating expenses: Sales and marketing 12,286 17,691 38,109 50,786

Research and development 3,432 3,643 10,294 10,622

General and administrative 7,239 7,308 23,575 18,100

Total operating expenses 22,957 28,642 71,978 79,508

Loss from operations (1,211) (2,409) (24,272) (10,135)

Interest and other expense, net (382) (146) (586) (180)

Loss before income taxes (1,593) (2,555) (24,858) (10,315)

Income tax expense (benefit) 664 73 1,207 (55)

Net loss $ (2,257) $ (2,628) $ (26,065) $ (10,260)

Net loss per share: Basic $ (0.13) $ (0.19) $ (1.59) $ (0.73)

Diluted $ (0.13) $ (0.19) $ (1.59) $ (0.73)

Weighted-average number of shares used inper share calculations: Basic 17,603 14,182 16,368 14,095

Diluted 17,603 14,182 16,368 14,095

CUTERA, INC.CONSOLIDATED FINANCIAL HIGHLIGHTS(in thousands, except percentage data)(unaudited)Three Months Ended% ChangeNine Months Ended% ChangeSeptember 30,September 30,2019 VsSeptember 30,September 30,2020 Vs2020

2019

2018

2020

2019

2019

Revenue By Geography:United States$15,442

$26,425

-42%

$40,142

$74,972

-46%

International23,690

19,692

+20%57,598

54,945

+5%Total Net Revenue$39,132

$46,117

-15%

$97,740

$129,917

-25%

International as a percentage of total revenue61%

43%

59%

42%

Revenue By Product Category:Systems- North America$13,700

$24,121

-43%

$32,296

$68,192

-53%

- Rest of World10,421

10,837

-4%

28,325

31,514

-10%

Total Systems24,121

34,958

-31%

60,621

99,706

-39%

Consumables2,305

2,510

-8%

6,263

7,109

-12%

Skincare6,828

2,847

+140%14,506

6,230

+133%Total Products33,254

40,315

-18%

81,390

113,045

-28%

Service5,878

5,802

+1%16,350

16,872

-3%

Total Net Revenue$39,132

$46,117

-15%

$97,740

$129,917

-25%

Three Months EndedNine Months EndedSeptember 30,September 30,September 30,September 30,2020

2019

2020

2019

Pre-tax Stock-Based Compensation Expense:Cost of revenue$326

$430

$1,359

$1103

Sales and marketing648

1,365

2,617

3080

Research and development254

443

1,344

1076

General and administrative754

940

2,736

1745

$1,982

$3,178

$8,057

$7,004

CUTERA, INC.CONSOLIDATED FINANCIAL HIGHLIGHTS(in thousands, except percentage data)(unaudited) Three Months Ended % Nine Months Ended % Change Change September September 2019 September September 2020 30, 30, Vs 30, 30, Vs 2020 2019 2018 2020 2019 2019

Revenue ByGeography: United States $ 15,442 $ 26,425 -42% $ 40,142 $ 74,972 -46%

International 23,690 19,692 +20% 57,598 54,945 +5%

Total Net Revenue $ 39,132 $ 46,117 -15% $ 97,740 $ 129,917 -25%

International as a 61% 43% 59% 42% percentage of total revenue Revenue By ProductCategory: Systems - North America $ 13,700 $ 24,121 -43% $ 32,296 $ 68,192 -53%

- Rest of World 10,421 10,837 -4% 28,325 31,514 -10%

Total Systems 24,121 34,958 -31% 60,621 99,706 -39%

Consumables 2,305 2,510 -8% 6,263 7,109 -12%

Skincare 6,828 2,847 +140% 14,506 6,230 +133%

Total Products 33,254 40,315 -18% 81,390 113,045 -28%

Service 5,878 5,802 +1% 16,350 16,872 -3%

Total Net Revenue $ 39,132 $ 46,117 -15% $ 97,740 $ 129,917 -25%

Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2020 2019 2020 2019

Pre-tax Stock-BasedCompensationExpense: Cost of revenue $ 326 $ 430 $ 1,359 $ 1103

Sales and 648 1,365 2,617 3080 marketing Research and 254 443 1,344 1076 development General and 754 940 2,736 1745 administrative $ 1,982 $ 3,178 $ 8,057 $ 7,004

CUTERA, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Three Months EndedNine Months EndedSeptember 30,September 30,September 30,September 30,2020

2019

2020

2019

Cash flows from operating activities:Net loss$(2,257)

$(2,628)

$(26,065)

$(10,260)

Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation1,982

3,178

8,057

7,004

Depreciation of tangible assets341

369

1,056

1,184

Amortization of contract acquisition costs625

757

2,017

2,169

Impairment of intangible assets-

-

805

-

Change in deferred tax asset(81)

(1)

(77)

(2)

Provision for doubtful accounts receivable54

666

1,750

647

Change in right-of-use asset/liability249

250

-

Other129

(96)

327

55

Changes in assets and liabilities:Accounts receivable(5,064)

1,031

2,209

(4,232)

Inventories1,907

(7,153)

4,588

(6,028)

Other current assets and prepaid expenses(350)

(809)

(1,273)

(1,423)

Other long-term assets(1,182)

(856)

(1,701)

(2,608)

Accounts payable(4,882)

2,699

(5,886)

2,861

Accrued liabilities5,196

1,121

(4,559)

4,900

Extended warranty liabilities(163)

(167)

(502)

(927)

Other long-term liabilities-

-

-

(140)

Deferred revenue45

(386)

(2,398)

907

Income tax liability(0)

-

-

(301)

Net cash used in operating activities(3,451)

(2,275)

(21,402)

(6,194)

Cash flows from investing activities:Acquisition of property, equipment and software(339)

(208)

(774)

(524)

Disposal of property and equipment-

25

-

45

Proceeds from maturities of marketable investments8,100

1,850

19,000

11,450

Purchase of marketable investments(8,244)

(4,284)

(24,411)

(8,304)

Net cash provided by (used in) investing activities(483)

(2,617)

(6,185)

2,667

Cash flows from financing activities:Proceeds from exercise of stock options and employee stock purchase plan8

437

856

1,600

Proceeds from long-term debt18

-

7,167

-

Gross proceeds from equity offering(1)

-

28,798

-

Offering costs on the equity offering-

-

(2,303)

-

Taxes paid related to net share settlement of equity awards(223)

(180)

(3,340)

(750)

Payments on finance lease obligations(133)

(154)

(513)

(496)

Net cash (used) provided by financing activities(331)

103

30,665

354

Net increase (decrease) in cash and cash equivalents(4,265)

(4,789)

3,078

(3,173)

Cash and cash equivalents at beginning of period33,659

27,668

26,316

26,052

Cash and cash equivalents at end of period$29,394

$22,879

$29,394

$22,879

CUTERA, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2020 2019 2020 2019

Cash flows from operatingactivities:Net loss $ (2,257) $ (2,628) $ (26,065) $ (10,260)

Adjustments to reconcile net lossto net cash used in operatingactivities: Stock-based compensation 1,982 3,178 8,057 7,004

Depreciation of tangible 341 369 1,056 1,184 assets Amortization of contract 625 757 2,017 2,169 acquisition costs Impairment of intangible - - 805 - assets Change in deferred tax asset (81) (1) (77) (2)

Provision for doubtful 54 666 1,750 647 accounts receivable Change in right-of-use asset/ 249 250 - liability Other 129 (96) 327 55

Changes in assets andliabilities: Accounts receivable (5,064) 1,031 2,209 (4,232)

Inventories 1,907 (7,153) 4,588 (6,028)

Other current assets and (350) (809) (1,273) (1,423) prepaid expenses Other long-term assets (1,182) (856) (1,701) (2,608)

Accounts payable (4,882) 2,699 (5,886) 2,861

Accrued liabilities 5,196 1,121 (4,559) 4,900

Extended warranty liabilities (163) (167) (502) (927)

Other long-term liabilities - - - (140)

Deferred revenue 45 (386) (2,398) 907

Income tax liability (0) - - (301)

Net cash used in operating (3,451) (2,275) (21,402) (6,194) activities Cash flows from investingactivities:Acquisition of property, (339) (208) (774) (524)equipment and softwareDisposal of property and - 25 - 45equipmentProceeds from maturities of 8,100 1,850 19,000 11,450marketable investmentsPurchase of marketable (8,244) (4,284) (24,411) (8,304)investments Net cash provided by (used (483) (2,617) (6,185) 2,667 in) investing activities Cash flows from financingactivities:Proceeds from exercise of stock 8 437 856 1,600options and employee stockpurchase planProceeds from long-term debt 18 - 7,167 -

Gross proceeds from equity (1) - 28,798 -offeringOffering costs on the equity - - (2,303) -offeringTaxes paid related to net share (223) (180) (3,340) (750)settlement of equity awardsPayments on finance lease (133) (154) (513) (496)obligations Net cash (used) provided by (331) 103 30,665 354 financing activities Net increase (decrease) in cash (4,265) (4,789) 3,078 (3,173)and cash equivalentsCash and cash equivalents at 33,659 27,668 26,316 26,052beginning of periodCash and cash equivalents at $ 29,394 $ 22,879 $ 29,394 $ 22,879end of period CUTERA, INC.RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)Three Months Ended September 30, 2020Three Months Ended September 30, 2019GAAPDepreciationandAmortizationStock-BasedCompensationCRM and ERPImplementation/write-offSeverance (RIF)Legal -Former CFO Settlement/LutronicTaxes andOther AdjustmentsNon-GAAPGAAPDepreciationandAmortizationStock-BasedCompensationCRM and ERPImplementationTaxes andOther AdjustmentsNon-GAAPNet revenue$ 39,132

-

-

-

-

-

-

$ 39,132

$ 46,117

-

-

-

-

$ 46,117

Cost of revenue17,387

(140)

(326)

-

(186)

-

-

16,735

19,884

(134)

(430)

-

-

19,320

Gross profit21,746

140

326

-

186

-

-

22,398

26,233

134

430

-

-

26,797

Gross margin %56%

57.2%

57%

58%

Operating expenses:Sales and marketing12,286

(756)

(648)

-

(25)

-

-

10,857

17,691

(936)

(1,365)

(90)

-

15,300

Research and development3,432

(39)

(254)

-

(67)

-

-

3,072

3,643

(27)

(443)

-

-

3,173

General and administrative7,239

(28)

(754)

-

(27)

(341)

-

6,089

7,308

(29)

(940)

(430)

-

5,909

Total operating expenses22,957

(823)

(1,656)

-

(119)

(341)

-

20,018

28,642

(992)

(2,748)

(520)

-

24,382

Income (loss) from operations(1,211)

963

1,982

-

305

341

-

2,380

(2,409)

1,126

3,178

520

-

2,415

Interest and other expense, net(382)

-

-

-

-

-

-

(382)

(146)

-

-

-

-

(146)

Income (loss) before income taxes(1,593)

963

1,982

-

305

341

-

1,998

(2,555)

1,126

3,178

520

-

2,269

Provision (benefit) for income taxes664

-

-

-

-

-

2

666

73

-

-

-

6

79

Net income (loss)$ (2,257)

963

1,982

-

305

341

(2)

$ 1,332

$ (2,628)

1,126

3,178

520

(6)

$ 2,190

Net income (loss) per share:Basic$ (0.13)

$ 0.08

$ (0.19)

$ 0.15

Diluted$ (0.13)

$ 0.08

$ (0.19)

$ 0.15

Weighted-average number of shares used in per share calculations:Basic17,603

17,603

14,182

14,182

Diluted17,603

17,603

14,182

14,751

Operating expenses as a % of net revenueGAAPNon-GAAPGAAPNon-GAAPSales and marketing31.4%

27.7%

38.4%

33.2%

Research and development8.8%

7.9%

7.9%

6.9%

General and administrative18.5%

15.6%

15.8%

12.8%

58.7%

51.2%

62.1%

52.9%

CUTERA, INC.RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited) Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 CRM and ERP Legal Depreciation Stock-Based Implementation Severance -Former Taxes and Depreciation Stock-Based CRM and ERP Taxes and GAAP and Compensation / (RIF) CFO Other Non-GAAP GAAP and Compensation Implementation Other Non-GAAP Amortization write-off Settlement Adjustments Amortization Adjustments /Lutronic $ - - - - - - $ 39,132 $ - - - - $ 46,117Net revenue 39,132 46,117

Cost of revenue 17,387 (140) (326) - (186) - - 16,735 19,884 (134) (430) - - 19,320

Gross profit 21,746 140 326 - 186 - - 22,398 26,233 134 430 - - 26,797

Gross margin % 56% 57.2% 57% 58%

Operating expenses:Sales and marketing 12,286 (756) (648) - (25) - - 10,857 17,691 (936) (1,365) (90) - 15,300

Research and 3,432 (39) (254) - (67) - - 3,072 3,643 (27) (443) - - 3,173developmentGeneral and 7,239 (28) (754) - (27) (341) - 6,089 7,308 (29) (940) (430) - 5,909administrativeTotal operating 22,957 (823) (1,656) - (119) (341) - 20,018 28,642 (992) (2,748) (520) - 24,382expensesIncome (loss) from (1,211) 963 1,982 - 305 341 - 2,380 (2,409) 1,126 3,178 520 - 2,415operationsInterest and other (382) - - - - - - (382) (146) - - - - (146)expense, netIncome (loss) before (1,593) 963 1,982 - 305 341 - 1,998 (2,555) 1,126 3,178 520 - 2,269income taxesProvision (benefit) for 664 - - - - - 2 666 73 - - - 6 79income taxes $ 963 1,982 - 305 341 (2) $ 1,332 $ 1,126 3,178 520 (6) $ 2,190Net income (loss) (2,257) (2,628)

Net income (loss) pershare: $ $ 0.08 $ $ 0.15Basic (0.13) (0.19)

$ $ 0.08 $ $ 0.15Diluted (0.13) (0.19)

Weighted-average numberof shares used in pershare calculations:Basic 17,603 17,603 14,182 14,182

Diluted 17,603 17,603 14,182 14,751

Operating expenses as a GAAP Non-GAAP GAAP Non-GAAP% of net revenueSales and marketing 31.4% 27.7% 38.4% 33.2%

Research and 8.8% 7.9% 7.9% 6.9%developmentGeneral and 18.5% 15.6% 15.8% 12.8%administrative 58.7% 51.2% 62.1% 52.9%

CUTERA, INC.RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019GAAPDepreciationandAmortizationStock-BasedCompensationCRM and ERPImplementation/write-offSeverance(RIF)Legal -FormerCFOSettlement/LutronicTaxes andOtherAdjustmentsNon-GAAPGAAPDepreciationandAmortizationStock-BasedCompensationCRM and ERPImplementationTaxes andOtherAdjustmentsNon-GAAPNet revenue$ 97,740

-

-

-

-

$ 97,740

$ 129,917

-

-

-

-

$ 129,917

Cost of revenue50,034

(417)

(1,359)

-

(318)

-

-

47,940

60,544

(385)

(1,103)

-

-

59,056

Gross profit47,706

417

1,359

-

318

-

-

49,800

69,373

385

1,103

-

-

70,861

Gross margin %49%

51%

53%

55%

Operating expenses:Sales and marketing38,109

(2,454)

(2,617)

-

(274)

-

-

32,764

50,786

(2,718)

(3,080)

(201)

-

44,787

Research and development10,294

(115)

(1,344)

-

(130)

-

-

8,705

10,622

(74)

(1,076)

-

-

9,472

General and administrative23,575

(84)

(2,736)

(1,139)

(101)

(1,359)

(324)

17,832

18,100

(176)

(1,745)

(1,129)

(614)

14,435

Total operating expenses71,978

(2,653)

(6,698)

(1,139)

(505)

(1,359)

(324)

59,300

79,508

(2,968)

(5,901)

(1,331)

(614)

68,694

Income (loss) from operations(24,272)

3,070

8,057

1,139

823

1,359

324

(9,500)

(10,135)

3,353

7,004

1,331

614

2,167

Interest and other expense, net(586)

-

-

-

-

-

(586)

(180)

-

-

-

-

(180)

Income (loss) before income taxes(24,858)

3,070

8,057

1,139

823

1,359

324

(10,086)

(10,315)

3,353

7,004

1,331

614

1,987

Provision (benefit) for income taxes1,207

-

-

-

-

-

9

1,216

(55)

-

-

-

288

233

Net income (loss)$ (26,065)

3,070

8,057

1,139

823

1,359

315

$ (11,302)

$ (10,260)

3,353

7,004

1,331

326

$ 1,754

Net income (loss) per share:Basic$ (1.59)

$ (0.69)

$ (0.73)

$ 0.12

Diluted$ (1.59)

$ (0.69)

$ (0.73)

$ 0.12

Weighted-average number of shares used in per share calculations:Basic16,368

16,368

14,095

14,095

Diluted16,368

16,368

14,095

14,417

a) Other adjustment of $614 related to Executive separation costs.

Operating expenses as a % of net revenueGAAPNon-GAAPGAAPNon-GAAPSales and marketing39.0%

33.5%

39.1%

34.5%

Research and development10.5%

8.9%

8.2%

7.3%

General and administrative24.1%

18.2%

13.9%

11.1%

73.6%

60.7%

61.2%

52.9%

CUTERA, INC.RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTO NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited) Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Legal Depreciation Stock-Based CRM and ERP Severance -Former Taxes and Depreciation Stock-Based CRM and ERP Taxes and GAAP and Compensation Implementation (RIF) CFO Other Non-GAAP GAAP and Compensation Implementation Other Non-GAAP Amortization /write-off Settlement Adjustments Amortization Adjustments /Lutronic $ 97,740 - - - - $ 97,740 $ - - - - $Net revenue 129,917 129,917

Cost of revenue 50,034 (417) (1,359) - (318) - - 47,940 60,544 (385) (1,103) - - 59,056

Gross profit 47,706 417 1,359 - 318 - - 49,800 69,373 385 1,103 - - 70,861

Gross margin % 49% 51% 53% 55%

Operating expenses:Sales and marketing 38,109 (2,454) (2,617) - (274) - - 32,764 50,786 (2,718) (3,080) (201) - 44,787

Research and development 10,294 (115) (1,344) - (130) - - 8,705 10,622 (74) (1,076) - - 9,472

General and administrative 23,575 (84) (2,736) (1,139) (101) (1,359) (324) 17,832 18,100 (176) (1,745) (1,129) (614) 14,435

Total operating expenses 71,978 (2,653) (6,698) (1,139) (505) (1,359) (324) 59,300 79,508 (2,968) (5,901) (1,331) (614) 68,694

Income (loss) from (24,272) 3,070 8,057 1,139 823 1,359 324 (9,500) (10,135) 3,353 7,004 1,331 614 2,167operationsInterest and other expense, (586) - - - - - (586) (180) - - - - (180)netIncome (loss) before income (24,858) 3,070 8,057 1,139 823 1,359 324 (10,086) (10,315) 3,353 7,004 1,331 614 1,987taxesProvision (benefit) for 1,207 - - - - - 9 1,216 (55) - - - 288 233income taxes $ 3,070 8,057 1,139 823 1,359 315 $ $ 3,353 7,004 1,331 326 $ 1,754Net income (loss) (26,065) (11,302) (10,260)

Net income (loss) pershare:Basic $ (1.59) $ (0.69) $ (0.73) $ 0.12

Diluted $ (1.59) $ (0.69) $ (0.73) $ 0.12

Weighted-average number ofshares used in per sharecalculations:Basic 16,368 16,368 14,095 14,095

Diluted 16,368 16,368 14,095 14,417

a) Other adjustment of $614related to Executiveseparation costs.

Operating expenses as a % GAAP Non-GAAP GAAP Non-GAAPof net revenue Sales and marketing 39.0% 33.5% 39.1% 34.5%

Research and development 10.5% 8.9% 8.2% 7.3%

General and 24.1% 18.2% 13.9% 11.1% administrative 73.6% 60.7% 61.2% 52.9%

CUTERA, INC.RECONCILIATION OF LOSS TO ADJUSTED EBITDA(in thousands)(unaudited)Three MonthsEndedNine MonthsEndedSeptember 30, 2020Net loss$ (2,257)

$ (26,065)

Adjustments:Stock-based compensation1,982

8,057

Depreciation and amortization963

3,070

CRM and ERP implementation costs-

1,139

Severance (RIF)305

823

Legal -Former CFO Settlement/Lutronic341

1,359

Other adjustments-

324

Interest and other expense, net382

586

Provision (benefit) for income taxes664

1,207

Total adjustments$ 4,637

$ 16,565

Adjusted EBITDA$ 2,380

$ (9,500)

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005601/en/

CONTACT: Cutera, Inc. Anne Werdan Director, Investor Relations 415-657-5500 awerdan@cutera.com