cutr-20240331

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


☐			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
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3240 Bayshore Blvd., Brisbane, California 94005

(Address of principal executive offices)

(415) 657-5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.001 par value)	CUTR	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No x

The number of shares of Registrant’s common stock issued and outstanding as of May 8, 2024, was 20,072,096.

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CUTERA, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4	Controls and Procedures	44

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	47
Item 1A	Risk Factors	47
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3	Defaults Upon Senior Securities	47
Item 4	Mine Safety Disclosures	47
Item 5	Other Information	47
Item 6	Exhibits	48
	Signature	49

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In this Quarterly Report on Form 10-Q, “Cutera,” “the Company,” “we,” “us” and “its” refer to Cutera, Inc. and its consolidated subsidiaries.

This report may contain references to its proprietary intellectual property, including among others, trademarks for its systems and ancillary products, “ACUTIP 500®,” “AVI™,” “AVICLEAR®,” “AVICOOL®,” “AVIANALYTICS™,” “CUCF®,” “CUTERA®,” “CUTERA UNIVERSITY CLINICAL FORUM®,” “ENLIGHTEN®,” “EXCEL HR®,” “EXCEL V®,” “GENESIS™,” “LASER GENESIS™,” “LIMELIGHT®,” “PICO GENESIS®,” “PICO TONING®,” “PROWAVE 770®,” “SOLERA®,” “TITAN®,” “TRUBODY®,” “TRUSCULPT FLEX®,” “TRUFLEX™,” “TRUSCULPT®,” “TRUSCULPT ID®,” and “XEO®.”

These trademarks and trade names are the property of Cutera or the property of its consolidated subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, its trademarks and tradenames referred to in this Quarterly Report on Form 10-Q may appear without the ® or symbols, but such references are not intended to indicate in any way that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and tradenames.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CUTERA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share, per share data and par value)

(Unaudited)


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	105,444	$	143,612

Accounts receivable, net of allowance for credit losses of $12,059 and $9,878, respectively	37,019		43,121
Inventories	73,469		62,600
Other current assets and prepaid expenses	19,294		19,852

Total current assets	235,226		269,185
Long-term inventories	20,582		16,283
Property and equipment, net	31,964		37,275
Deferred tax assets	534		579
Goodwill	1,339		1,339
Operating lease right-of-use assets	12,034		10,055
Other long-term assets	10,313		11,575
Total assets	$	311,992	$	346,291

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	13,316	$	19,829
Accrued liabilities	47,119		55,055
Operating lease liabilities	3,231		2,441
Deferred revenue	9,038		10,422
Total current liabilities	72,704		87,747
Deferred revenue, net of current portion	1,417		1,494
Operating lease liabilities, net of current portion	10,046		8,887
Convertible notes, net of unamortized debt issuance costs of $9,859 and $10,430, respectively	419,266		418,695
Other long-term liabilities	1,122		1,298
Total liabilities	504,555		518,121
Commitments and Contingencies (Note 12)
Stockholders’ deficit:
Common stock, $0.001 par value; authorized: 50,000,000 shares; issued and outstanding: 20,067,941 and 19,960,622 shares at March 31, 2024 and December 31, 2023, respectively	20		20
Additional paid-in capital	133,541		131,496

Accumulated deficit	(326,124)		(303,346)
Total stockholders’ deficit	(192,563)		(171,830)
Total liabilities and stockholders’ deficit	$	311,992	$	346,291

See Accompanying Notes to Condensed Consolidated Financial Statements.

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CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net revenue:
Products	$	33,115	$	49,121
Service	5,678		5,405
Total net revenue	38,793		54,526
Cost of revenue:
Products	23,289		30,059
Service	3,085		2,835
Total cost of revenue	26,374		32,894
Gross profit	12,419		21,632

Operating expenses:
Sales and marketing	23,677		29,512
Research and development	5,001		6,468
General and administrative	12,881		12,253
Gain on early termination of distribution agreement	(9,708)		—
Total operating expenses	31,851		48,233
Loss from operations	(19,432)		(26,601)
Interest and other expense, net:
Amortization of debt issuance costs	(571)		(552)
Interest on convertible notes	(2,939)		(2,939)
Interest income	1,455		2,636
Other expense, net	(1,316)		(320)
Total interest and other expense, net	(3,371)		(1,175)
Loss before income taxes	(22,803)		(27,776)
Income tax (benefit) expense	(25)		272
Net loss	$	(22,778)	$	(28,048)

Net loss per share:
Basic	$	(1.14)	$	(1.42)
Diluted	$	(1.14)	$	(1.42)
Weighted-average number of shares used in per share calculation:
Basic	19,991		19,776
Diluted	19,991		19,776

See Accompanying Notes to Condensed Consolidated Financial Statements.

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CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net loss	$	(22,778)	$	(28,048)
Other comprehensive income:

Net change in unrealized gain on available-for-sale investments, net of tax	—		86
Other comprehensive income, net of tax	—		86
Comprehensive loss	$	(22,778)	$	(27,962)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(In thousands, except share amounts)

(Unaudited)

Three Months Ended March 31, 2024 and 2023


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
	Shares	Amount
Balance at December 31, 2023	19,960,622	$	20	$	131,496	$	(303,346)	$	—	$	(171,830)


Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes	107,319	—		(64)		—		—		(64)
Stock-based compensation expense	—	—		2,109		—		—		2,109

Net loss	—	—		—		(22,778)		—		(22,778)
Balance at March 31, 2024	20,067,941	$	20	$	133,541	$	(326,124)	$	—	$	(192,563)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
	Shares	Amount
Balance at December 31, 2022	19,668,603	$	20	$	125,406	$	(140,513)	$	(94)	$	(15,181)
Exercise of stock options	5,775	—		109		—		—		109
Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes	110,729	—		(2,397)		—		—		(2,397)
Stock-based compensation expense	—	—		3,386		—		—		3,386
Net change in unrealized loss on available-for-sale investments	—	—		—		—		86		86
Net loss	—	—		—		(28,048)		—		(28,048)
Balance at March 31, 2023	19,785,107	$	20	$	126,504	$	(168,561)	$	(8)	$	(42,045)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net loss	$	(22,778)	$	(28,048)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	2,109		3,386
Depreciation and amortization	1,991		1,409
Amortization of contract acquisition costs	1,391		2,178
Amortization of debt issuance costs	571		552
Unrealized gain on foreign exchange forward	—		(623)
Accretion of discount on investment securities and investment income, net	—		(34)
Deferred tax assets	45		13
Provision for credit losses	2,181		225



Changes in assets and liabilities:
Accounts receivable	3,921		(6,410)
Inventories	(11,461)		(6,163)
Other current assets and prepaid expenses	560		(2,053)
Other long-term assets	(240)		(2,011)
Accounts payable	(6,513)		(1,330)
Accrued liabilities	(7,916)		1,706
Operating leases, net	(30)		(16)
Deferred revenue	(1,461)		201
Net cash used in operating activities	(37,630)		(37,018)
Cash flows from investing activities
Acquisition of property and equipment	(335)		(10,353)
Proceeds from disposal of property and equipment	57		—
Proceeds from maturities of marketable investments	—		94,154
Purchase of marketable investments	—		(23,467)
Net cash provided by (used in) investing activities	(278)		60,334
Cash flows from financing activities
Proceeds from exercise of stock options and employee stock purchase plan	—		109
Taxes paid related to net share settlement of equity awards	(64)		(2,397)
Payments on finance lease obligations	(196)		(124)
Net cash used in financing activities	(260)		(2,412)
Net increase (decrease) in cash, cash equivalents and restricted cash	(38,168)		20,904
Cash, cash equivalents, and restricted cash at beginning of period	143,612		146,624
Cash, cash equivalents, and restricted cash at end of period	$	105,444	$	167,528
Supplemental non-cash operating, investing, and financing activities:
Assets acquired under finance lease	$	—	$	33
Assets acquired under operating lease	$	2,749	$	57
Acquisition of property and equipment	$	—	$	6,894
Supplemental disclosure of cash flow information:
Cash paid for interest	$	817	$	778
Cash paid for income taxes	$	804	$	483

See Accompanying Notes to Condensed Consolidated Financial Statements.

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CUTERA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Description of Operations and Principles of Consolidation

Cutera, Inc. (“Cutera” or the “Company”) develops, manufactures, distributes, and markets energy-based product platforms for medical practitioners, enabling them to offer treatments to their customers. In addition, the Company distributes third-party manufactured skincare products, until the termination of distribution agreement in February 2024, and Secret PRO and Secret RF systems and consumables. The Company currently markets the following system platforms: AviClear, enlighten, excel HR, excel V/V+, truSculpt, Secret PRO, Secret DUO, Secret RF, xeo, and xeo+ — each of which enables medical practitioners to perform procedures including treatment for acne, body contouring, skin resurfacing and revitalization, hair and tattoo removal, removal of benign pigmented lesions, and vascular conditions. Several of the Company’s systems offer multiple hand pieces and applications, providing customers the flexibility to upgrade their systems.

The sale of systems, hand pieces, upgrade of systems, and leasing and direct sales of AviClear devices (collectively “Systems” revenue); replacement hand pieces, truSculpt cycle refills, truFlex cycle refills, AviClear treatment fees, and single use disposable tips applicable to Secret systems (collectively “Consumables” revenue); and the distribution of third-party manufactured skincare products (“Skincare”) revenue are collectively classified as “Products” revenue. In addition to Products revenue, the Company generates revenue from the sale of post-warranty service contracts and service parts and labor for the repair and maintenance of products that are out of warranty, all of which are collectively classified as “Service” revenue.

The Company’s corporate headquarters and U.S. operations are located in Brisbane, California, where the Company conducts manufacturing, warehousing, research and development, regulatory, sales and marketing, service, and administrative activities. The Company also maintains regional distribution centers (“RDCs”) in select locations across the U.S. These RDCs serve as forward warehousing for systems and service parts in various geographies. The Company markets, sells and services the Company’s products through direct sales and service employees in North America (including Canada), Australia, New Zealand, Austria, France, Germany, Hong Kong, Japan, Switzerland, the United Kingdom and the Repblic of Ireland. Sales and services outside of these direct markets are made through a worldwide distributor network in over 38 countries. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

Liquidity and Management’s Plans

When preparing financial statements, management has the responsibility to evaluate if the Company has adequate liquidity to continue to operate for the next twelve months. In performing this assessment, management considered the Company's current financial condition and liquidity sources, including current funds, forecasted future cash flows and unconditional obligations due over the next twelve months. In addition, management evaluated the history of the Company's financial performance, and determined that the Company has had a historic trend of operating losses, which continues to have an unfavorable impact on the Company's overall liquidity. Most recently, the Company reported net losses of $22.8 million for the three months ended March 31, 2024 and $162.8 million for the year ended December 31, 2023.

The Company believes that it will continue as a going concern for the twelve months from the issuance of its condensed consolidated financial statements. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company’s continued operations will depend on several factors, including but not limited to, growth of revenues from its revised business model for AviClear, which entails transitioning from a lease model to a direct sales model, maintaining or increasing revenues from sales of legacy systems, consumables and services, achieving cost savings as a result of workforce reductions implemented in the fourth quarter of 2023, restructuring of supplier and manufacturing relationships, and initiatives to improve inventory and receivables management. Failure to increase revenue, achieve cost savings, raise additional financing or re-finance the existing convertible notes when they become due, would adversely affect the Company’s ability to achieve its intended business objectives. There can be no assurances that financing will be available on terms favorable to the Company, if at all, and delays may occur in completing the operating activities.

Basis of Presentation

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements included in this report reflect all adjustments necessary for a fair statement of its condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, and its condensed consolidated statements of operations, condensed consolidated statements of

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comprehensive loss, condensed consolidated statements of changes in stockholders' deficit, and condensed consolidated statements of cash flows, for the three months ended March 31, 2024, and 2023, respectively. The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The results for interim periods are not necessarily indicative of results for the entire year or any other interim period. All intercompany accounts and transactions have been eliminated upon consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s previously filed audited financial statements and the related notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed

SEC Form 10-Q filed by Cutera Inc.