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cutr20181106_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

November 6, 2018

Date of Report (date of earliest event reported)

Cutera, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

000-50644

77-0492262

(State or other jurisdiction of

incorporation or organization)

(Commission File Number)

(I.R.S. Employer

Identification Number)

3240 Bayshore Blvd.

Brisbane, California 94005

(Address of principal executive offices)

(415) 657-5500

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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. ☐

Item 2.02. Results of Operations and Financial Condition.

On November 6, 2018, we are issuing a press release and holding a conference call regarding our financial results for the second quarter ended September 30, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description

99.1		Press Release of Cutera, Inc. dated as of November 6, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


				CUTERA, INC.

Date: November 6, 2018				/s/ SANDRA GARDNER
				Sandra Gardiner
				EVP and Chief Financial Officer

ex_128402.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

Cutera Reports Third Quarter 2018 Financial Results

truSculpt® iD Sets Company Record for New System Launch

Company Achieves Sequential Gross Margin Improvement

BRISBANE, California, November 6, 2018 ─ 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, 2018.

Key financial and operational highlights for the third quarter of 2018 include:

●

Revenue increased 6% to $40.6 million for the third quarter and 13% to $117.3 million for the nine months ended September 30, 2018. The United States and International operations reported 5% and 9% growth in the third quarter over the prior year period, and 15% and 10% growth year-to-date, respectively;

	o	Third quarter revenue performance continues to reflect strong demand for the Secret® RF system and a record performance for the newly launched next generation body sculpting system, truSculpt^® iD.
	o	In its launch quarter, truSculpt iD revenue exceeded any previous product launch and was 55% greater than truSculpt 3D’s second quarter of 2017 launch performance.
	o	Third quarter International results reflect strong performances in EMEA and Asia and positions the Company well for the upcoming launch of truSculpt iD in these respective regions.

●	Gross Margin of 54%, compared to 53% in the second quarter 2018 and 58% in the prior year period. Sequential improvement seen in the third quarter reflects a combination of product and channel mix and benefits from operational improvement initiatives.
●	Operating expenses were 56% of revenue compared to 42% in the prior year period. The third quarter of 2017 included a one-time $4 million facility lease termination benefit. *Non-GAAP operating expenses** were 51% of revenue compared to 50% in the prior year period, primarily reflecting $1.6 million in non-cash stock compensation in the current period vs. $1.0 million in the prior year period, and the one-time $4 million lease termination benefit.
●	GAAP Net Loss was $0.9 million, or $0.06 per fully-diluted share, while *non-GAAP net income** was $1.6 million, or $0.11 per fully-diluted share.

“We remain committed to expanding Cutera’s leadership in the energy based aesthetic space while delivering long-term shareholder value,” stated Cutera President and CEO, James Reinstein. “The Company has a clearly defined growth strategy built around product innovation and strong distribution channels. Our growth initiatives include launching at least two products a year through a reinforced and expanded capital sales team. In 2018, we launched four products, three of which generate high margin revenue from Cutera products used in each procedure. We are very excited about our most recent launch, truSculpt iD, which addresses the billion-dollar body sculpting market, and set a company record for revenue contribution in its launch quarter.”

“We are also committed to improving the scalability of our business and continue to execute on our operational improvement activities,” continued Reinstein. “These initiatives will enhance the Company’s efficiency and enable Cutera to achieve its overall long-term corporate objectives.”

2018 Financial Outlook

●	We reiterate our 2018 revenue guidance range of $165 to $170 million, a 9% - 12% increase over 2017;
●	Full year gross margin expected in a range 53% to 54% of total revenue;
●	With the revised annual revenue range issued on October 4, GAAP operating expenses are now expected to be in the range of 57% to 58% of 2018 revenue; and
●	Our non-GAAP* earnings per share is now expected to be in the range of $0.40 to $0.50.

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 James Reinstein, President and 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 archived online within 24 hours of its completion through November 30, 2018. 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, which exclude non-cash expenses for stock-based compensation, depreciation and amortization, 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 excluded items.

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 medical technology 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 non-cash compensation expense related to grants of options, performance and restricted stock. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods. We believe that excluding this item allows users of our financial statements to better review and assess both current and historical results of operations. We also believe that excluding non-cash expenses for stock-based compensation better allows for comparisons to our peer companies;

Non-recurring lease termination income. We incurred a one-time benefit with respect to a certain lease termination transaction. We exclude this benefit in calculating our non-GAAP operating expenses and net income measures as it relates to a unique, one-time event and has no direct impact or correlation to the operation of our on-going business. Additionally, we believe that its inclusion is potentially misleading to users of our financial statements given the lease termination income’s unique, non-recurring nature; and

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. We continue to evaluate our business performance excluding non-cash charges and believe that excluding these items 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 third quarter ended September 30, 2018, as discussed in this release, is preliminary and unaudited, and subject to adjustment.

CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

	September 30,			June 30,			December 31,
	2018			2018			2017⁽¹⁾
Assets
Current assets:
Cash and cash equivalents	$	21,866		$	18,432		$	14,184
Marketable investments		5,018			10,573			21,728
Accounts receivable, net		25,444			22,122			20,777
Inventories		31,322			30,138			28,782
Other current assets and prepaid expenses		3,716			3,469			2,903
Total current assets		87,366			84,734			88,374

Property and equipment, net		2,784			2,632			2,096
Deferred tax asset		21,402			21,219			19,055
Goodwill		1,339			1,339			1,339
Other long-term assets		6,048			5,807			374
Total assets	$	118,939		$	115,731		$	111,238

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	13,321		$	10,743		$	7,002
Accrued liabilities		22,904			22,756			26,848
Deferred revenue		8,939			9,288			9,461
Total current liabilities		45,164			42,787			43,311

Deferred revenue, net of current portion		2,380			2,519			2,195
Income tax liability		352			386			379
Other long-term liabilities		640			665			460
Total liabilities		48,536			46,357			46,345

Stockholders’ equity:
Common stock		14			14			13
Additional paid-in capital		68,180			66,291			62,025
Accumulated income		2,283			3,156			2,947
Accumulated other comprehensive loss		(74	)		(87	)		(92	)
Total stockholders' equity		70,403			69,374			64,893
Total liabilities and stockholders' equity	$	118,939		$	115,731		$	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						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017⁽¹⁾			2018			2017⁽¹⁾

Products	$	35,675		$	33,486		$	102,589		$	89,688
Service		4,898			4,687			14,662			14,173
Total net revenue		40,573			38,173			117,251			103,861

Products		15,909			13,859			46,876			38,843
Service		2,779			2,104			8,779			6,241
Total cost of revenue		18,688			15,963			55,655			45,084
Gross profit		21,885			22,210			61,596			58,777
Gross margin %		54	%		58	%		53	%		57	%

Operating expenses:
Sales and marketing		14,479			13,148			43,102			36,708
Research and development		3,244			3,467			10,895			9,393
General and administrative		5,160			3,379			15,501			10,143
Lease termination income		-			(4,000	)		-			(4,000	)
Total operating expenses		22,883			15,994			69,498			52,244
Income (loss) from operations		(998)			6,216			(7,902	)		6,533
Interest and other income (expense), net		(49)			197			(80	)		746
Income (loss) before income taxes		(1,047)			6,413			(7,982	)		7,279
Provision (benefit) for income taxes		(174)			225			(3,505	)		166
Net income (loss)	$	(873)		$	6,188		$	(4,477	)	$	7,113

Net income (loss) per share:
Basic	$	(0.06)		$	0.44		$	(0.33	)	$	0.51
Diluted	$	(0.06)		$	0.42		$	(0.33	)	$	0.48

Weighted-average number of shares used in per share calculations:
Basic		13,851			13,973			13,717			13,917
Diluted		13,851			14,767			13,717			14,733

(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		Nine Months Ended						% Change
	Q3			Q3			Q3 '18 Vs		Q3			Q3			Q3 '18 Vs
	2018			2017⁽¹⁾			Q3 '17		2018			2017⁽¹⁾			Q3 '17
Revenue By Geography:
United States	$	24,329		$	23,275		+5	%	$	73,597		$	64,058		+15	%
International		16,244			14,898		+9	%		43,654			39,803		+10	%
Total Net Revenue	$	40,573		$	38,173		+6	%	$	117,251		$	103,861		+13	%
International as a percentage of total revenue		40	%		39	%				37	%		38	%

Revenue By Product Category:
Systems
- North America	$	22,628		$	21,869		+3	%	$	67,458		$	58,955		+14	%
- Rest of World		10,569			9,993		+6	%		28,269			26,014		+9	%
Total Systems		33,197			31,862		+4	%		95,727			84,969		+13	%
Consumables		1,055			595		+77	%		2,881			1,743		+65	%
Skincare		1,423			1,029		+38	%		3,981			2,976		+34	%
Total Products		35,675			33,486		+7	%		102,589			89,688		+14	%

Service		4,898			4,687		+5	%		14,662			14,173		+3	%
Total Net Revenue	$	40,573		$	38,173		+6	%	$	117,251		$	103,861		+13	%

(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				Nine Months Ended
	Q3		Q3		Q3		Q3
	2018		2017		2018		2017
Pre-tax Stock-Based Compensation Expense:
Cost of revenue	$	196	$	101	$	576	$	377
Sales and marketing		541		394		1,744		1215
Research and development		163		157		617		633
General and administrative		731		345		2,587		1398
	$	1,631	$	997	$	5,524	$	3,623

CUTERA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2018			2017⁽¹⁾			2018			2017⁽¹⁾
Cash flows from operating activities:
Net income (loss)	$	(873)		$	6,188		$	(4,477)		$	7,113
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation		1,631			997			5,524			3,623
Depreciation of tangible assets		305			258			849			750
Amortization of contract acquisition costs		482			-			1,304			-
Change in deferred tax asset		(183)			-			(3,507)			-
Provision for doubtful accounts receivable		390			(6	)		877			(9)
Other		240			(16	)		215			(58)
Changes in assets and liabilities:
Accounts receivable		(3,712)			(1,407	)		(5,544)			(3,048)
Inventories		(1,184)			(6,815	)		(2,540)			(8,751)
Other current assets and prepaid expenses		(228)			(88	)		(797)			(633)
Other long-term assets		(723)			-			(2,301)			(1)
Accounts payable		2,578			1,512			6,319			3,207
Accrued liabilities		148			3,223			(4,177)			4,757
Other long-term liabilities		35			-			105			-
Deferred revenue		(488)			(132	)		58			652
Income tax liability		(34)			1			(27)			3
Net cash provided by (used in) operating activities		(1,616)			3,715			(8,119)			7,605

Cash flows from investing activities:
Acquisition of property, equipment and software		(633	)		(233	)		(1,214	)		(443)
Disposal of property and equipment		3			13			41			53
Proceeds from sales of marketable investments		-			2,400			13,044			9,154
Proceeds from maturities of marketable investments		5,550			14,800			8,050			39,612
Purchase of marketable investments		-			(18,293	)		(4,390	)		(44,156)
Net cash provided by (used in) investing activities		4,920			(1,313	)		15,531			4,220

Cash flows from financing activities:
Repurchases of common stock		-			(6,735)			-			(13,776)
Proceeds from exercise of stock options and employee stock purchase plan		565			695			3,603			4,566
Taxes paid related to net share settlement of equity awards		(307	)		(165)			(2,971	)		(1,332)
Payments on capital lease obligations		(128	)		(92)			(362	)		(274)
Net cash provided by (used in) financing activities		130			(6,297)			270			(10,816)

Net increase (decrease) in cash and cash equivalents		3,434			(3,895)			7,682			1,009
Cash and cash equivalents at beginning of period		18,432			18,679			14,184			13,775
Cash and cash equivalents at end of period	$	21,866		$	14,784		$	21,866		$	14,784

(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 September 30, 2018									Three Months Ended September 30, 2017
	GAAP			Adjustments*			Non-GAAP			GAAP⁽¹⁾			Adjustments*				Non-GAAP

Net revenue	$	40,573		$	-		$	40,573		$	38,173		$	-			$	38,173
Cost of revenue		18,688			(261)	(a)		18,427			15,963			(188	)	(a)		15,775
Gross profit		21,885			261			22,146			22,210			188				22,398
Gross margin %		54	%					55	%		58	%						59	%

Operating expenses:
Sales and marketing		14,479			(1,183)	(b)		13,296			13,148			(560)		(b)		12,588
Research and development		3,244			(182)	(c)		3,062			3,467			(162)		(c)		3,305
General and administrative		5,160			(792)	(d)		4,368			3,379			(345)		(d)		3,034
Lease termination income		-			-			-			(4,000)			4,000		(e)		-
Total operating expenses		22,883			(2,157)			20,726			15,994			2,933				18,927
Income (loss) from operations		(998)			2,418			1,420			6,216			(2,745)				3,471
Interest and other income (expense), net		(49)			-			(49)			197			-				197
Income (loss) before income taxes		(1,047)			2,418			1,371			6,413			(2,745)				3,668
Provision (benefit) for income taxes		(174)			(39)	(f)		(213)			225			(92)		(f)		133
Net income (loss)	$	(873)		$	2,457		$	1,584		$	6,188		$	(2,653)			$	3,535

Net income (loss) per share:
Basic	$	(0.06)					$	0.11		$	0.44						$	0.25
Diluted	$	(0.06)					$	0.11		$	0.42						$	0.24

Weighted-average number of shares used in per share calculations:
Basic		13,851						13,851			13,973							13,973
Diluted		13,851						14,258			14,767							14,767

(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		35.7%		32.8%		34.4%		33.0%
Research and development		8.0%		7.5%		9.1%		8.7%
General and administrative		12.7%		10.8%		8.9%		7.9%
Lease termination income		0.0%		0.0%		-10.5%		0.0%
		56.4%		51.1%		41.9%		49.6%

* Fiscal third quarter of 2018 and 2017 Non-GAAP results exclude the effect of the below mentioned adjustments ($000s):

a) Adjustment of $261 and $188 for 2018 and 2017, respectively, included non-cash expenses of $65 and $87 related to depreciation, and $196 and $101 of stock-based compensation.

b) Adjustment of $1,183 and $560 for 2018 and 2017, respectively, included non-cash expenses of $642 and $166 related to depreciation and amortization, and $541 and $394 of stock-based compensation.

c) Adjustment of $182 and $162 for 2018 and 2017, respectively, included non-cash expenses of $19 and $5 related to depreciation, and $163 and $157 of stock-based compensation.

d) Adjustment of $792 and $345 for 2018 and 2017, respectively, included non-cash expenses of $61 and $0 related to depreciation and $731 and $345 for stock-based compensation.

e) Adjustment of $4,000 represents non-recurring lease termination income.

f) Adjustment of $39 and $92 for 2018 and 2017, respectively, relates to the net impact of excluding the Non-GAAP adjustments from our tax provision. The 2018 adjustment excludes a discrete tax benefit of $0.25M related to excess stock deduction activity in the quarter.

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)

	Nine Months Ended September 30, 2018								Nine Months Ended September 30, 2017
	GAAP		Adjustments*				Non-GAAP		GAAP⁽¹⁾		Adjustments*				Non-GAAP

Net revenue	$	117,251	$	-			$	117,251	$	103,861	$	-			$	103,861
Cost of revenue		55,655		(802	)	(a)		54,853		45,084		(612	)	(a)		44,472
Gross profit		61,596		802				62,398		58,777		612				59,389
Gross margin %		53%						53%		57%						57%

Operating expenses:
Sales and marketing		43,102		(3,509)		(b)		39,593		36,708		(1,714)		(b)		34,994
Research and development		10,895		(668)		(c)		10,227		9,393		(648)		(c)		8,745
General and administrative		15,501		(2,698)		(d)		12,803		10,143		(1,399)		(d)		8,744
Lease termination income		-		-				-		(4,000)		4,000		(e)		-
Total operating expenses		69,498		(6,875)				62,623		52,244		239				52,483
Income (loss) from operations		(7,902)		7,677				(225)		6,533		373				6,906
Interest and other income (expense), net		(80)		-				(80)		746		-				746
Income (loss) before income taxes		(7,982)		7,677				(305)		7,279		373				7,652
Provision (benefit) for income taxes		(3,505)		130		(f)		(3,375)		166		(80)		(f)		86
Net income (loss)	$	(4,477)	$	7,547			$	3,070	$	7,113	$	453			$	7,566

Net income (loss) per share:
Basic	$	(0.33)					$	0.22	$	0.51					$	0.54
Diluted	$	(0.33)					$	0.21	$	0.48					$	0.51

Weighted-average number of shares used in per share calculations:
Basic		13,717						13,717		13,917						13,917
Diluted		13,717						14,285		14,733						14,733

(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		36.8%		33.8%		35.3%		33.7%
Research and development		9.3%		8.7%		9.0%		8.4%
General and administrative		13.2%		10.9%		9.8%		8.4%
Lease termination income		0.0%		0.0%		-3.9%		0.0%
		59.3%		53.4%		50.3%		50.5%

* Year-to-date September 30, 2018 and 2017 Non-GAAP results exclude the effect of the below mentioned adjustments ($000s):

a) Adjustment of $802 and $612 for 2018 and 2017, respectively, included non-cash expenses of $226 and $235 related to depreciation, and $576 and $377 of stock-based compensation.

b) Adjustment of $3,509 and $1,714 for 2018 and 2017, respectively, included non-cash expenses of $1,765 and $499 related to depreciation and amortization, and $1,744 and $1,215 of stock-based compensation.

c) Adjustment of $668 and $648 for 2018 and 2017, respectively, included non-cash expenses of $51 and $15 related to depreciation, and $617 and $633 of stock-based compensation.

d) Adjustment of $2,698 and $1,399 for 2018 and 2017, respectively, included non-cash expenses of $111 and $1 related to depreciation and $2,587 and $1,398 for stock-based compensation.

e) Adjustment of $4,000 represents non-recurring lease termination income.

f) Adjustment of ($130) and $80 for 2018 and 2017, respectively, relates to the net impact of excluding the Non-GAAP adjustments from our tax provision. The 2018 adjustment excludes a discrete tax benefit of $2.85M related to excess stock deduction activity.