| Small & micro cap project / Activism insight

Cutera (NASDAQ: CUTR): Signs of moat

by | Apr 9, 2020


.M. Cap: $182 million

The Company designs, develops, manufactures, distributes and markets light and energy-based product platforms for use by physicians and other qualified practitioners (collectively, “practitioners”), enabling them to offer safe and effective aesthetic treatments to their customers. In addition, the Company distributes third-party manufactured skincare products.

Impact of coronavirus pandemic

During the current COVID-19 pandemic, elective aesthetic procedures have been postponed or cancelled. This could directly affect the sales of consumables and skin care products. Moreover, it could be tough for the company’s sales team to sell the products to the practitioners during this period.

What we like / Signs of moat

+ Negligible debt (debt: $9 million, cash: $33.9 million)

+ In the recent 4th quarter, revenue grew by 14%, the recurring revenue stream grew 28%, and the gross margin improved to 56% from 41% in the prior quarter.

+ Recurring revenue:  Recurring revenue accounted for 22.7% of total revenue for the F.Y. 2019. This includes the sale of disposable products, service and skincare.

+ Patents: The company had 32 issued US patents and five pending US patent applications.

+Notable shareholders: (1) Voce Capital, an activist fund, owns 2.3% of o/s stock – which accounts for 10% of its portfolio. Daniel Plants, PM of Voce capital, serves as the chairman of the board. (2) Cloverdale Capital owns 1.5% – which accounts for 5% of its portfolio.

+ As you can see from the two images below, (taken from the I.R. presentation deck), the company enjoys an edge over its competitors.





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