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Cutera Reports Fourth Quarter and Full Year 2018 Financial Results

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BRISBANE, Calif., Feb. 20, 2019 (GLOBE NEWSWIRE) -- Cutera, Inc. (NASDAQ: CUTR) ("Cutera" or the "Company"), a leading provider of laser and other energy-based aesthetic systems for practitioners worldwide, today reports financial results for the fourth quarter and fiscal year ended December 31, 2018.

Key financial and operational highlights for the fourth quarter and full year 2018 include:

  • Revenue for the fourth quarter increased 12% sequentially, though decreased 5% from the prior year fourth quarter, to $45.5 million. Revenue increased 7% to $162.7 million for the full year 2018; 
    -- Fourth quarter continues to reflect strong demand for the body sculpting product portfolio, truSculpt, with the number of systems sold growing strong double digits both sequentially and year over year. 
    -- Total recurring revenue, which includes service, skincare and consumable revenue, for the fourth quarter reached $8.6 million, or 28% growth over the fourth quarter 2017.  For the full year 2018, total recurring revenue was $30.1 million, or 18% growth over the full year 2017.
    -- US revenue declined by 7% in the fourth quarter over the prior year period, and increased 8% for the full year 2018. Results reflect strong demand for the truSculpt and Secret RF systems, primarily offset by softness in the overall women's health market, competitive trends affecting certain legacy systems, and greater than expected turnover in our North American salesforce in the fourth quarter.
    -- International revenue grew 1% in the fourth quarter and 7% for the full year 2018. Full year results reflect double-digit growth in the Middle East and Asia (excluding Japan).
  • Gross Margin for the fourth quarter was 41%, compared to 57% in the prior year period. For the full year 2018, gross margin was 49% versus 57% for the prior year. The decrease in fourth quarter gross margin reflects pricing headwinds across the portfolio of legacy systems, channel mix, and a $5.0 million charge, of which $1.1 million was utilized in the fourth quarter. This charge related to product remediation of one of our legacy systems. Non-GAAP gross margin* was 53% for both the fourth quarter and full year 2018, compared to 58% and 57% for the respective prior year periods.
  • Operating expenses for the fourth quarter and full year 2018 were 53% and 58% of revenue, respectively. This compares to 48% and 50% for the prior year periods.  Non-GAAP* operating expenses for the fourth quarter and full year 2018 were 48% and 52% of revenue, respectively, as compared to 45% and 49% for the same prior year periods.
  • GAAP Net Loss for the fourth quarter and full year 2018 was $26.3 million and $30.8 million, or $1.89 and $2.23 loss per share on a basic and fully-diluted basis.  GAAP net loss includes a valuation allowance of $16.9 million against certain U.S. deferred tax assets in the fourth quarter. The recording of the valuation allowance resulted in a GAAP income tax provision of $20.8 million in the fourth quarter of 2018.  Non-GAAP* net income for full year 2018 was $1.5 million, or $0.11 per fully-diluted share.

"2018 was a year of achievements and challenges. Cutera launched four new products, including our next-generation body contouring system, truSculpt iD, which we expect to be a meaningful platform in this billion-dollar market. In addition, we continue to make progress streamlining multiple manufacturing and inventory processes, further enhancing our future growth,' stated Cutera Chief Operating Officer and Interim CEO, Jason Richey. "Like others in the aesthetic space, we encountered considerable headwinds affecting our overall results in the second half of 2018. As interim CEO, and with the full support of the Board of Directors, my priorities are clear --- position Cutera to grow faster than the market without sacrificing profitability, while improving the efficiencies of the Company's infrastructure. We are executing on multiple initiatives in order to achieve these goals and I am optimistic about the Company's future. I look forward to reporting our future progress."

2019 Financial Outlook

  • We expect full year revenue to be in the range of $165 to $175 million, a 2% - 8% increase over 2018;
  • Full year Non-GAAP* gross margin is expected to improve over 2018 full year Non-GAAP* gross margin;
  • Adjusted EBITDA* is expected to be in the range of $2 million to $4 million.

Conference Call

The Company will host a live audio webcast for interested parties commencing today at 1:30 p.m. PST (4:30 p.m. EST).  Participating in the call will be Jason Richey, Chief Operating Officer and Interim Chief Executive Officer and Sandra Gardiner, Executive Vice President and Chief Financial Officer.  The call will be broadcast live over the Internet, hosted at the Investor Relations section of Cutera's website at http://www.cutera.com/, and will be available online within 24 hours of its completion through May 20, 2019. In addition, you may call 1-877-705-6003 to listen to the live broadcast.

CONTACTS:

Cutera, Inc.
Matthew Scalo
Vice President, Investor Relations & Corporate Development
415-657-5500
mscalo@cutera.com

Investor Relations
John Mills
Partner, ICR, Inc.
646-277-1254
john.mills@icrinc.com

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 our 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, product remediation charges, and Enterprise Resource Planning ("ERP") system implementation 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 we believe that doing so is consistent with the goal of providing useful information to investors and management.  We have provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure.  We have 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.  We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, stock-based compensation, product remediation charges outside the scope of our typical recurring warranty and service costs, and charges related to ERP software implementation 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. We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record stock-based compensation expense related to grants of options, 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.  We believe that excluding stock-based compensation better allows for comparisons to our peer companies;

Depreciation and amortization. We have excluded depreciation and amortization expense in calculating our non-GAAP operating expenses and net income measures.  Depreciation and amortization are non-cash charges to current operations;

Product Remediation. We have excluded costs incurred to remediate an issue related to a legacy product.  These costs include the repair of products in use, in inventory, and in production, and are outside the scope of our typical recurring warranty and service costs; and

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 believe that excluding all of the items above allows users of our 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, product launches and performance, trends, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our 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 our control, that could cause our 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 we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Cutera's financial performance for the fourth quarter and full year ended December 31, 2018, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

  CUTERA, INC.
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (in thousands)
  (unaudited)
                         
            December 31,     September 30,     December 31,
            2018     2018     2017(1)
  Assets                  
  Current assets:                  
    Cash and cash equivalents   $ 26,052   $ 21,866   $ 14,184
    Marketable investments     9,523     5,018     21,728
    Accounts receivable, net     19,637     25,444     20,777
    Inventories     28,014     31,322     28,782
    Other current assets and prepaid expenses     3,972     3,716     2,903
      Total current assets     87,198     87,366     88,374
                         
  Property and equipment, net     2,672     2,784     2,096
  Deferred tax asset     457     21,402     19,055
  Goodwill     1,339     1,339     1,339
  Other long-term assets     5,971     6,048     374
      Total assets   $ 97,637   $ 118,939   $ 111,238
                         
    Liabilities and Stockholders' Equity                  
  Current liabilities:                  
    Accounts payable   $ 11,279   $ 13,321   $ 7,002
    Accrued liabilities     23,300     22,904     26,848
    Extended warranty liabilities     3,159     -     -
    Deferred revenue     9,882     8,939     9,461
      Total current liabilities     47,620     45,164     43,311
                         
  Deferred revenue, net of current portion     2,684     2,380     2,195
  Income tax liability     394     352     379
  Other long-term liabilities     553     640     460
      Total liabilities     51,251     48,536     46,345
                         
  Stockholders' equity:                  
    Common stock     14     14     13
    Additional paid-in capital     70,451     68,180     62,025
    Accumulated income/(loss)     (24,010)     2,283     2,947
    Accumulated other comprehensive loss     (69)     (74)     (92)
      Total stockholders' equity     46,386     70,403     64,893
      Total liabilities and stockholders' equity   $ 97,637   $ 118,939   $ 111,238
                         
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to the prior periods presented.


  CUTERA, INC.  
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
  (in thousands, except per share data)  
  (unaudited)  
                               
        Three Months Ended   Twelve Months Ended  
        December 31,   December 31,   December 31,   December 31,  
        2018   2017(1)   2018   2017(1)  
                               
  Products $   39,946   $   42,972   $   142,535   $   132,660  
  Service     5,523       4,660       20,185       18,833  
    Total net revenue     45,469       47,632       162,720       151,493  
                               
  Products     19,967       17,520       66,843       56,363  
  Service     6,716       2,779       15,495       9,020  
    Total cost of revenue     26,683       20,299       82,338       65,383  
      Gross profit     18,786       27,333       80,382       86,110  
      Gross margin %   41%     57%     49%     57%  
                               
  Operating expenses:                        
    Sales and marketing     15,318       15,362       58,420       52,070  
    Research and development     3,464       3,481       14,359       12,874  
    General and administrative     5,494       3,947       20,995       14,090  
    Lease termination income     -       -       -       (4,000)  
      Total operating expenses     24,276       22,790       93,774       75,034  
  Income (loss) from operations     (5,490)       4,543       (13,392)       11,076  
  Interest and other income (expense), net     (44)       138       (123)       884  
  Income (loss) before income taxes     (5,534)       4,681       (13,515)       11,960  
  Provision (benefit) for income taxes     20,759       (18,199)       17,255       (18,033)  
  Net income (loss) $   (26,293)   $   22,880   $   (30,770)   $   29,993  
                               
  Net income (loss) per share:                        
    Basic $   (1.89)    $   1.66    $   (2.23)    $   2.16  
    Diluted $   (1.89)    $   1.57    $   (2.23)    $   2.04  
                               
  Weighted-average number of shares used in per share calculations:              
    Basic     13,932       13,744       13,771       13,873  
    Diluted     13,932       14,569       13,771       14,728  
                               
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to the prior periods presented.


  CUTERA, INC.
  CONSOLIDATED FINANCIAL HIGHLIGHTS
  (in thousands, except percentage data)
  (unaudited)
                         
          Three Months Ended   % Change   Twelve Months Ended   % Change
          December 31,     December 31,   2018 Vs   December 31,     December 31,   2018 Vs
          2018     2017(1)   2017   2018     2017(1)   2017
  Revenue By Geography:                                    
      United States   $ 28,265     $ 30,524   -7%   $ 101,862     $ 94,581   +8%
      International     17,204       17,108   +1%     60,858       56,912   +7%
      Total Net Revenue   $ 45,469     $ 47,632   -5%   $ 162,720     $ 151,493   +7%
      International as a percentage of total revenue     38%       36%         37%       38%    
                                           
  Revenue By Product Category:                                    
    Systems                                    
      - North America   $ 26,519     $ 29,383   -10%   $ 93,977     $ 88,338   +6%
      - Rest of World     10,349       11,531   -10%     38,618       37,544   +3%
      Total Systems     36,868       40,914   -10%     132,595       125,882   +5%
    Consumables     1,281       692   +85%     4,162       2,436   +71%
    Skincare     1,797       1,366   +32%     5,778       4,342   +33%
      Total Products     39,946       42,972   -7%     142,535       132,660   +7%
                                           
    Service     5,523       4,660   +19%     20,185       18,833   +7%
      Total Net Revenue   $ 45,469     $ 47,632   -5%   $ 162,720     $ 151,493   +7%
                                           
                                           
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to the prior periods presented.
                                           
                                           
          Three Months Ended       Twelve Months Ended    
          December 31,     December 31,       December 31,     December 31,    
          2018     2017       2018     2017    
  Pre-tax Stock-Based Compensation Expense:                                    
      Cost of revenue   $ 167     $ 283       $ 743     $ 660    
      Sales and marketing     360       427         2,104       1642    
      Research and development     208       303         825       936    
      General and administrative     897       474         3,484       1872    
          $ 1,632     $ 1,487       $ 7,156     $ 5,110    
                                           
                                           


  CUTERA, INC.
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  (in thousands)
  (unaudited)
   
          Three Months Ended     Twelve Months Ended
          December 31,   December 31,     December 31,   December 31,
          2018   2017(1)     2018   2017(1)
  Cash flows from operating activities:                          
  Net income (loss)   $   (26,293)   $   22,880     $   (30,770)   $   29,993
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                      
    Stock-based compensation       1,632       1,487         7,156       5,110
    Depreciation of tangible assets       360       266         1,209       1,016
    Amortization of contract acquisition costs       530       -         1,834       -
    Change in deferred tax asset       20,945       (18,678)         17,438       (18,678)
    Provision for doubtful accounts receivable       380       8         1,257       (1)
    Other       26       7         241       (51)
  Changes in assets and liabilities:                          
    Accounts receivable       5,427       (1,181)         (117)       (4,229)
    Inventories       3,308       (5,054)         768       (13,805)
    Other current assets and prepaid expenses       (273)       42         (1,070)       (591)
    Other long-term assets       (453)       7         (2,754)       6
    Accounts payable       (2,042)       1,197         4,277       4,404
    Accrued liabilities       396       4,588         (3,781)       9,345
    Extended warranty liabilities       3,159       -         3,159       -
    Other long-term liabilities       35       -         140       -
    Deferred revenue       1,247       905         1,305       1,557
    Income tax liability       42       208         15       211
      Net cash provided by operating activities       8,426       6,682         307       14,287
                                 
  Cash flows from investing activities:                          
  Acquisition of property, equipment and software       (274)       (412)         (1,488)       (855)
  Disposal of property and equipment       -       -         41       53
  Proceeds from sales of marketable investments       -       24,486         13,044       33,640
  Proceeds from maturities of marketable investments       2,000       6,200         10,050       45,812
  Purchase of marketable investments       (6,484)       (16,800)         (10,874)       (60,956)
      Net cash provided by (used in) investing activities       (4,758)       13,474         10,773       17,694
                                 
  Cash flows from financing activities:                          
  Repurchases of common stock       -       (21,391)         -       (35,167)
  Proceeds from exercise of stock options and employee stock purchase plan       796       869         4,399       5,435
  Taxes paid related to net share settlement of equity awards       (157)       (137)         (3,128)       (1,469)
  Payments on capital lease obligations       (121)       (97)         (483)       (371)
      Net cash provided by (used in) financing activities       518       (20,756)         788       (31,572)
                                 
  Net increase (decrease) in cash and cash equivalents       4,186       (600)         11,868       409
  Cash and cash equivalents at beginning of period       21,866       14,784         14,184       13,775
  Cash and cash equivalents at end of period   $   26,052    $   14,184     $   26,052    $   14,184
                                 
                                 
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to the prior periods presented.


  CUTERA, INC.
  RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  TO  NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  (in thousands, except per share data)
  (unaudited)
                                   
               
          Three Months Ended December 31, 2018   Three Months Ended December 31, 2017
          GAAP   Adjustments*   Non-GAAP   GAAP(1)   Adjustments*     Non-GAAP
                                   
  Net revenue    $  45,469    $  -      $  45,469    $  47,632    $  -      $  47,632
  Cost of revenue     26,683     (5,217)  (a)     21,466     20,299     (377)  (a)     19,922
      Gross profit     18,786     5,217       24,003     27,333     377       27,710
      Gross margin %   41%         53%   57%         58%
                                   
  Operating expenses:                            
    Sales and marketing     15,318     (1,052)  (b)     14,266     15,362     (586)  (b)     14,776
    Research and development     3,464     (231)  (c)     3,233     3,481     (314)  (c)     3,167
    General and administrative     5,494     (1,194)  (d)     4,300     3,947     (476)  (d)     3,471
      Total operating expenses     24,276     (2,477)       21,799     22,790     (1,376)       21,414
  Income (loss) from operations      (5,490)     7,694       2,204     4,543     1,753       6,296
  Interest and other income (expense), net     (44)      -       (44)     138     -       138
  Income (loss) before income taxes     (5,534)     7,694       2,160     4,681     1,753       6,434
  Provision (benefit) for income taxes     20,759     (17,037)  (e)     3,722     (18,199)     18,491  (e)     292
  Net income (loss)    $  (26,293)    $  24,731      $  (1,562)    $  22,880    $  (16,738)      $  6,142
                                   
  Net income (loss) per share:                            
    Basic    $  (1.89)          $  (0.11)    $  1.66          $  0.45
    Diluted    $  (1.89)          $  (0.11)    $  1.57          $  0.42
                                   
  Weighted-average number of shares used in per share calculations:                            
    Basic     13,932           13,932     13,744           13,744
    Diluted     13,932           13,932     14,569           14,569
                                   
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to
  the prior periods presented.
                                   
                                   
  Operating expenses as a % of net revenue    GAAP         Non-GAAP   GAAP(1)         Non-GAAP
    Sales and marketing    33.7%         31.4%   32.3%         31.0%
    Research and development    7.6%         7.1%   7.3%         6.6%
    General and administrative    12.1%         9.5%   8.3%         7.3%
          53.4%         47.9%   47.8%         45.0%
                                   
                                   
  * Fiscal fourth quarter of 2018 and 2017 Non-GAAP results exclude the effect of the below mentioned adjustments ($000s): 
  a) Adjustment of $5,217 and $377 for 2018 and 2017, respectively, included non-cash expenses of $94 and $94 related to depreciation, and $167 and $283 of stock-based compensation.  The 2018 adjustment also included $4,956 related to a component replacement in one of our legacy systems.
  b) Adjustment of $1,052 and $586 for 2018 and 2017, respectively, included non-cash expenses of $692 and $159 related to depreciation and amortization, and $360 and $427 of stock-based compensation.
  c) Adjustment of $231 and $314 for 2018 and 2017, respectively, included non-cash expenses of $23 and $11 related to depreciation, and $208 and $303 of stock-based compensation.
  d) Adjustment of $1,194 and $476 for 2018 and 2017, respectively, included non-cash expenses of $81 and $2 related to depreciation and $897 and $474 for stock-based  compensation.  The 2018 adjustment also included $216 for costs related to ERP implementation.
  e) The 2018 adjustment of $17,037 included recording a valuation allowance of $16,906 against certain U.S. deferred tax assets and net impact of excluding the Non-GAAP adjustments from our tax provision.  As a result of recording a valuation allowance in Q4'2018, the 2018 adjustment also includes the reversal of $2.85M in discrete tax benefits related to excess stock deduction activity for the nine months ended September 30, 2018.  The 2017 adjustment of ($18,491) included $18,741 for the release of a significant portion of our valuation allowance against certain U.S. deferred tax assets, partially offset by our revised measurement of U.S. deferred tax assets resulting from the 2017 US Tax Reform; offset by $248 for establishing a foreign transfer pricing contingency reserve and the net impact of excluding the Non-GAAP adjustments from our tax provision.


  CUTERA, INC.
  RECONCILIATION OF GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  TO  NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  (in thousands, except per share data)
  (unaudited)
                                   
               
          Twelve Months Ended December 31, 2018   Twelve Months Ended December 31, 2017
          GAAP   Adjustments*   Non-GAAP   GAAP(1)   Adjustments*     Non-GAAP
                                   
  Net revenue    $  162,720    $  -      $  162,720    $  151,493    $  -      $  151,493
  Cost of revenue     82,338     (6,018)  (a)     76,320     65,383     (989)  (a)     64,394
      Gross profit     80,382     6,018       86,400     86,110     989       87,099
      Gross margin %   49%         53%   57%         57%
                                   
  Operating expenses:                            
    Sales and marketing     58,420     (4,562)  (b)     53,858     52,070     (2,300)  (b)     49,770
    Research and development     14,359     (899)  (c)     13,460     12,874     (961)  (c)     11,913
    General and administrative     20,995     (3,892)  (d)     17,103     14,090     (1,876)  (d)     12,214
    Lease termination income     -     -       -     (4,000)     4,000  (e)     -
      Total operating expenses     93,774     (9,353)       84,421     75,034     (1,137)       73,897
  Income (loss) from operations       (13,392)     15,371       1,979     11,076     2,126       13,202
  Interest and other income (expense), net     (123)      -       (123)     884     -       884
  Income (loss) before income taxes     (13,515)     15,371       1,856     11,960     2,126       14,086
  Provision (benefit) for income taxes     17,255      (16,906)  (f)     349     (18,033)     18,411  (f)     378
  Net income (loss)    $  (30,770)    $  32,277      $  1,507    $  29,993    $  (16,285)      $  13,708
                                   
  Net income (loss) per share:                            
    Basic    $  (2.23)          $  0.11    $  2.16          $  0.99
    Diluted    $  (2.23)          $  0.11    $  2.04          $  0.93
                                   
  Weighted-average number of shares used in per share calculations:                            
    Basic     13,771           13,771     13,873           13,873
    Diluted     13,771           14,305     14,728           14,728
                                   
  (1) As of January 1, 2018, the Company adopted the requirements of ASC 606 using the modified retrospective method, and as a result, there is a lack of comparability to the prior periods presented.
                                   
                                   
  Operating expenses as a % of net revenue    GAAP         Non-GAAP   GAAP(1)         Non-GAAP
    Sales and marketing    35.9%         33.1%   34.4%         32.9%
    Research and development    8.8%         8.3%   8.5%         7.9%
    General and administrative    12.9%         10.5%   9.3%         8.1%
    Lease termination income    0.0%         0.0%   -2.6%         0.0%
          57.6%         51.9%   49.5%         48.8%
                                   
                                   
  * Year-to-date December 31, 2018 and 2017 Non-GAAP results exclude the effect of the below mentioned adjustments ($000s): 
  a) Adjustment of $6,018 and $989 for 2018 and 2017, respectively, included non-cash expenses of $319 and $329 related to depreciation, and $743 and $660 of stock-based compensation.  The 2018 adjustment also included $4,956 recorded in Q4'2018 related to a component replacement in one of our legacy systems.
  b) Adjustment of $4,562 and $2,300 for 2018 and 2017, respectively, included non-cash expenses of $2,458 and $658 related to depreciation and amortization, and $2,104 and $1,642 of stock-based compensation.
  c) Adjustment of $899 and $961 for 2018 and 2017, respectively, included non-cash expenses of $74 and $25 related to depreciation, and $825 and $936 of stock-based compensation.
  d) Adjustment of $3,892 and $1,876 for 2018 and 2017, respectively, included non-cash expenses of $192 and $4 related to depreciation and $3,484 and $1,872 for stock-based compensation. The 2018 adjustment also included $216 for costs related to ERP implementation.
  e) Adjustment of $4,000 represents non-recurring lease termination income.
  f) The 2018 adjustment of $16,906 represents a valuation allowance against certain U.S. deferred tax assets.  The 2017 adjustment of ($18,411) included $18,741 for the release of a significant portion of our valuation allowance against certain U.S. deferred tax assets, partially offset by our revised measurement of U.S. deferred tax assets resulting from the 2017 US Tax Reform; offset by $248 for establishing a foreign transfer pricing contingency reserve and the net impact of excluding the Non-GAAP adjustments from our tax provision.


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