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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (75217)	3/1/2024 10:51:42 AM
From: Harshu Vyas	Read Replies (1) \| Respond to of 78752

Someone made an interesting point online. At the time they report FY 2023 earnings, they will basically already have a solid idea for Q1 results. CEO Mr Harris has also previously said that Q1 will be the "peak" in terms of cash-burn and after Q1, Cutera will be more steady. By having the conference call at (effectively) the end of Q1, the guidance will likely be accurate and the "riskiest" part of the transformation will already be done (if his timeline has been stuck to, that is). There's a short-term (speculative) catalyst somewhere in there. Just some food for thought.

To: Elroy who wrote (75217)	3/5/2024 4:57:48 PM
From: Sean Collett	Read Replies (2) \| Respond to of 78752

Some Cutera news today. They're ending a supplier agreement with Jabil (third party manufacturer for Excel V+ & AviClear devices) and will need to pay $19.5MM to end it; it will be offset by a $1.3MM amount owed by Jabil. Looks like the impacts to ZO Skin will come into play now and not in June 2024. If you recall ZO is a partnership Cutera had to resell ZO skin products in Japan which gave Cutera about 15% of their revenue. Looks like ZO will have to pay $11.5MM to terminate this agreement and assist in transferring assets to ZO from Cutera. Cash and equivalents increased from $145MM to $179MM but revenue took some huge hits going from $62.8MM in the September 2022 quarter to $46.5MM in this recent September 2023 quarter. I think the concern I see here is their cost of revenue has increased a ton dropping gross margins from 55% to 14%. Skincare still made up 15% of their revenue so we know for a fact further revenue hits will be coming in future releases due to the end of ZO distribution so this is a big concern as they need any revenue they can grab. Cutera core systems revenue declined from $41MM in September 2022 to $26MM in September 2023 which is pretty large. We have an operating expense of $47.4MM on revenue of $46.5MM. In the end we get an EPS of a loss of ($2.22)/s vs. a loss of ($0.62) in September 2022. I have them somewhere around ($31MM) FCF for the three month period. They stated in their 10-Q that they are going to need to increase revenue, cut costs more, and raise additional financing or refi their existing convertible notes and failure to do so will affect their ability to achieve intended business objectives. They should be able to weather the storm for a bit with their cash and working capital but unless revenue in their core systems turns around ASAP there is severe risks here. They basically need AviClear to take off and it's still only a small part of their revenue (8%) right now. Most likely outcome is CEO Harris flips the company but I am not sure how that works right now given declining revenue and capital needed to make AviClear a leader. A lot to digest so I will continue to dig in but these are the high level call outs I have taken from reading their filing so far. -Sean