Cutera (CUTR) Q1 2022 Earnings Call Transcript

Cutera (CUTR 2.45%)
Q1 2022 Earnings Call
May 10, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for joining Cutera's first quarter 2022 earnings conference call. [Operator instructions] The discussion today includes forward-looking statements. Those forward-looking statements reflect management's current forecast and expectation of certain aspects of the company's future business, including, but not limited to, any financial guidance provided for modeling purposes. Forward-looking statements are based on current information that is, by its nature, dynamic and subject to change.

Forward-looking statements include, among others, statements regarding financial guidance, competitive landscape, patient and customer demand, and productivity improvements. For words that may identify forward-looking statements, we encourage you to refer to the safe harbor statement in our press release earlier today. All forward-looking statements are subject to risks and uncertainties, including those risk factors described in the section entitled Risk Factors in our Form 10-K as filed with the Securities and Exchange Commission and updated in our Form 10-Qs subsequently filed. Cutera also cautions you not to place undue reliance on forward-looking statements, which speak only as of the date they are made.

Cutera undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances or to reflect the occurrence of unanticipated events. Future results may differ materially from management's current expectations. In addition, we will discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Cutera's ongoing results of operations, particularly when comparing underlying results from period to period.

Please refer to the reconciliation from GAAP or non-GAAP measures in our earnings release. These non-GAAP financial measures should be considered along with, but not as alternatives to, the operating performance measures prescribed by GAAP. With that, I would like to turn the call over to our CEO, Dave Mowry.

Dave Mowry -- Chief Executive Officer

Thank you, Grant. We would like to welcome everyone to Cutera's first quarter 2022 earnings call, and we are glad that you can dial in for this update. Joining me on today's call is Rohan Seth, our chief financial officer. Over the course of the call, I will be providing an overview of our record first quarter revenue performance, along with some operational highlights and commercial insights.

Rohan will then provide a detailed review of our first quarter 2022 results as well as an update to our fiscal 2022 financial guidance. After which, I will provide some detail on AviClear, our recently FDA-cleared laser-based platform for the treatment of acne. I'll then hand the call back over to Grant so that we can take your questions. Before getting into the results, let me begin our prepared remarks with some general observations of the aesthetic market and a particular focus on our core customers and the patient patterns within their practices.

Global macroeconomic developments continue to make headlines and cast shadows over certain segments of consumer-driven healthcare. We're also aware that some -- that recently, some companies associated with elective medical procedures have reported softness in their current and near-term demand in light of these economic trends. To be clear, we have not observed these trends or conditions in our key markets at Cutera. In fact, the fundamental strength that we observed in patient treatment volumes translated into strong first quarter 2022 results for the company.

Additionally, these underlying market fundamentals have continued providing robust traffic treatment and serve as a positive leading indicator of future demand for capital equipment. We believe that the shifting demographic of the aesthetic patient over the past two and a half years has served to insulate many of our providers and their practices from economic pressures as they draw an increasing volume of new and fundamentally different patients into their practices. This growing patient segment is best defined as actively employed younger professionals with access to disposable income. As a group, the new segment is more resilient to external factors than the typical pre-Zoom era aesthetic patients.

Additionally, this young professional segment views energy-based aesthetic treatments as an investment in themselves and in their careers as the use of video conferencing continues to grow in their professional pursuits as well in their personal engagements. In addition to the patient demographic shift, we have gained deeper insights into practice patterns. Our ongoing investments in the key account management have enabled Cutera to build deeper relationships with practitioners and their staff. These relationships have, in turn, provided Cutera with greater visibility into practice schedules, treatment volumes and patient profiles.

Additionally, management has been able to engage with aesthetic practitioners over the course of three recent industry conferences, gathering direct feedback on practice patterns and treatment volumes. These data have reaffirmed to us a very robust pipeline of patient treatments that generally extend out for two to three months for our customers. We believe these trends will carry forward and enable us to continue to build momentum over the remainder of 2022 based on the underlying patient traffic and the known demand for capital equipment. Turning now to Cutera's first quarter 2022 results.

We demonstrated continued momentum in both the capital equipment and consumable products segments carrying forward from previous periods. Our results were once again defined by solid execution by our commercial teams around the world, leveraging great technology, robust underlying market fundamentals, and the increasing momentum from our key account manager strategy. Overall revenue for the first quarter was $58.0 million, representing approximately 17% growth over prior year as reported and 21% on a constant currency basis. Capital equipment sales was the most significant contributor to our year-over-year growth as we continued to see progress prospecting a greater volume of deals and effectively processing them through our sales pipeline.

This was particularly evident in North America. The overall strength of our North American capital equipment sales continued to build over the period as we made additional investments in the expansion and ongoing training and development of this team. During the period, the North American team posted strong results, growing 35% over prior year, driven by our body-contouring products, truSculpt iD, and truSculpt flex. We also saw strong demand in North America for skin and face rejuvenation solutions, reflected in increased sales for both our ZO and excel V platforms.

International capital equipment sales were led by impressive recoveries in both Australia and New Zealand as well as Japan during the first quarter, with those geographies growing to 41% and 49%, respectively, as reported versus prior year. We believe our Australian market benefited from some pent-up demand in the second half of 2021 lockdowns, while our Japanese results reflect an incremental increase of patients returning to their pre-COVID routines, offset slightly by FX rates. In Europe, capital equipment sales of $3.6 million declined $700,000 from prior-year levels as the business worked through the short-term disruptions caused by events in the Ukraine. Looking ahead, we have line of sight to a near-term return to growth based upon the cadence of second quarter 2022 orders in hand as we anticipate double-digit growth year over year for that region.

Recurring revenue, defined as the combination of skincare, consumable products and service, was $21.5 million in the period, an increase of 1% over prior year as reported but representing a 7% growth on a constant currency basis. Strength in our consumable products offset sales declines within our skincare business directly impacted by the weakness of the yen. Regarding consumables, our first quarter results provide a strong start to 2022, and we anticipate that these results will set the tone for consumable revenues for the rest of the year. Our consumable volumes are being driven higher by the success we are seeing in North America, in particular, from the revenue-generating activities that we plan, schedule, and run at our customer accounts through our key account managers.

We were pleased with the service contract attach rates during the quarter as well. The Service team began working also to resolve prior period open orders previously discussed. While we made meaningful strides in building up subassembly inventory for Service components, we have not yet significantly reduced this backlog and expect to clear all Service part backlogs by the end of 3Q 2022. Finally, on skincare, our revenue for the quarter was $11.6 million, a decline of 5% from the prior year on an as-reported basis, but also representing growth of 4% versus prior year on a constant currency basis.

We have seen our skin care levels normalize following the disruptions from the price increase we implemented in the second half of 2021. We believe that the quarterly run rate for our skincare business in Japan is approximately $12 million and anticipate finishing fiscal 2022 with a constant currency growth rate for skincare in the mid-to-upper single digits. Looking now at the bottom line, I want to first reaffirm this organization's commitment to the long-term sustained profitability as well as remaining disciplined to expense management. This has been evident since the onset of COVID as we cut spending, resized the business, and built a much leaner operation.

However, Cutera is currently poised for transformation as we enter into a new market segment for Cutera, acne. We have created an opportunity for ourselves to take the unique first-mover device into a market very much in need of innovation. We are choosing to be bold and temporarily break from our string of profitable quarters, going back to the -- back to mid-2020 during the height of COVID. We intend to make timely investments into our commercial and R&D functions over the next two to three quarters to grow faster and shorten the time frame to accretive growth from our acne programs.

I will speak more around the AviClear product following Rohan's comments. With that, let me turn the call over to Rohan to provide some additional color on our financial performances as well as our outlook for full year 2022. Rohan?

Rohan Seth -- Chief Financial Officer

Thank you, Dave. As I review my prepared remarks, I want to note that I will be discussing some non-GAAP results. A complete reconciliation of GAAP to non-GAAP is included in our earnings release. We encourage listeners and readers to review our non-GAAP metrics in conjunction with the GAAP results as contained in this earnings release.

Starting with revenue. Our sales for the first quarter were $58.0 million, compared to $49.7 million for the same period in 2021, representing an increase of approximately 17% on an as-reported basis. Excluding the FX headwinds we faced during the quarter, our constant currency revenue growth was approximately 21% over prior year. First quarter North American capital equipment revenue of $22.7 million increased 35% over the prior year.

International capital equipment revenue for the first quarter was $13.8 million, up 20% as reported and 27% in constant currency from the first quarter of 2021. Recurring revenue, defined to include our consumables, global service, and skincare product lines, was $21.5 million in the first quarter, up 1% as reported and up 7% in constant currency. The increase over the prior year was driven by growth in our consumables products, up 33% as reported and 36% in constant currency. Our skincare segment was particularly impacted by negative foreign currency fluctuation in the yen, down 5% as reported, but up 4% in constant currency.

Services revenues continued to be impacted by inconsistent component supplies, down 3% as reported and flat in constant currency. Non-GAAP gross profit for the first quarter of fiscal 2022 was $32.3 million, with a gross margin of 55.7% representing a decline of approximately 70 basis points compared to the same period last year. Excluding acne costs of $0.9 million, non-GAAP gross margin in the first quarter was 57.3%, an approximately 90 basis points improvement as compared to the same period last year. Within the quarter, our gross margins were impacted by supply chain and macroeconomic inflationary pressures as well as FX headwinds.

Nevertheless, we offset these factors with ongoing cost-improvement initiatives as well as the increased leverage of our fixed cost base. We note that FX rates represented a headwind of a little over 300 basis points to gross margins in the quarter. Total non-GAAP operating expenses for the first quarter of 2022 were $36.1 million, compared to $23.4 million for the same period last year. This increase was largely driven by a conscious acceleration in AviClear spend totaling $7.2 million, as the regulatory approval became more likely to occur within the quarter.

The increased acne expenses versus 4Q '21 were largely due to accelerating spend in areas such as training as well as sales and marketing. Non-GAAP sales and marketing expense for the first quarter of 2022 was $23.5 million, compared to $13.5 million for the same period last year, driven by continued expansion in our sales force, higher commissions, increased travel as well as expenses associated with the launch of AviClear. Non-GAAP R&D expense for the first quarter of 2022 was $5.5 million, compared to $3.8 million for the same period last year driven by increased investments in AviClear and additional clinical studies. Rounding out our operating expense commentary.

Non-GAAP G&A expense for the first quarter of 2022 was $7.1 million, compared to $6.2 million in the same period last year driven by inflation and an expansion in our headcount. For the first quarter of 2022, our non-GAAP operating income, commonly referred to as adjusted EBITDA, was a loss of $3.8 million, compared to a profit of $4.6 million in the prior-year period. As anticipated, our investment in AviClear was the most significant driver of this decline on a year-over-year basis. Excluding acne investments of $8.1 million for the first quarter of 2022, adjusted EBITDA was $4.3 million.

As I mentioned earlier, embedded within our non-GAAP opex is a $7.2 million spend on our acne program, approximately 75% of which is in sales and marketing investments, with most of the rest in R&D. Additionally, you will see in our reconciliation of GAAP to non-GAAP statement of operations that we spent about $4 million in taking our new ERP system live in the quarter. While implementation spending will continue throughout 2022, we are already seeing expenses taper down as we move past the heavy lift of going live in Q1. Finally, there were no material or significant changes to our tax position.

Turning now to our balance sheet. We ended the quarter with $131.8 million of unrestricted cash and marketable securities, compared to $164.9 million at the same time last year and $164.2 million at the end of the fourth quarter 2021. This sequential decline of approximately $32 million was driven primarily by the following factors: firstly, investments of $12.5 million in inventory and $5.6 million in prepaids and deposits to support the launch of AviClear as well as to secure our overall supply chain; secondly, the cash net loss of $8.6 million, which was mainly driven by acne spend and ERP-related investments. The rest of our cash usage was mostly driven by typical first quarter seasonal factors, including annual incentive compensation payouts.

Over the remainder of the year, we expect additional cash burn to be approximately $10 million per quarter. We do not expect cash consumption to be linear as we build and place initial inventories to launch AviClear. With AviClear, we have a strong first-mover advantage and broadening customer acceptance based on exceptional clinical data. Given our strong balance sheet, we are well-positioned to continue supporting the growth of our core business while ensuring the successful launch of AviClear.

Before I turn the call back over to Dave, I would like to provide you with an update on our outlook for the full year of 2022. While we are encouraged by our first quarter results and the demand trends that we've seen thus far through April and into early May, we are also faced with foreign exchange headwinds. Based on how we see 2022 evolving, we are reiterating our original revenue guidance of $255 million to $260 million, but at the updated FX rates, implying underlying constant currency growth of approximately 13% to 15%, an increase from our prior constant currency growth rates of 10% to 12%. As a reminder, this guidance does not include any revenue from our recently approved AviClear product.

Moving on to adjusted EBITDA guidance. With an earlier-than-expected approval and bolstered by the physician response to our data, we now expect an acceleration in our acne spend, taking our range to $25 million to $30 million versus the previous range of $15 million to $20 million of acne spend. Excluding investments associated with our acne program, we continue to expect our adjusted EBITDA on a constant currency basis to be in the range of $33 million to $35 million. Therefore, for 2022, we now expect our full year adjusted EBITDA to be in the range of $5 million to $10 million, as compared to our prior guidance of at or near $20 million.

In line with this update, we anticipate that there will be a period of incremental investment as we ramp placements of our system with lower margins as this occurs. However, we anticipate that our AviClear product line and its associated infrastructure to be accretive to consolidated results going into full year 2023. With that, I will now pass the call back over to Dave to provide further detail on the launch of AviClear.

Dave Mowry -- Chief Executive Officer

Thank you, Rohan. As we have shared, Cutera received U.S. FDA 510(k) clearance on March 24th, 2022, for acne treatment. We believe that the AviClear offering is well-positioned to play a meaningful role in the clinician's [Inaudible] of acne treatment options as it achieves gold standard results with a vastly improved safety profile for patients suffering from mild, moderate, and severe acne.

As compared to isotretinoin, AviClear delivered similar clinical outcomes at three-month and six-month follow-up without the challenging safety profile, daily patient compliance requirement, or the inconvenience of the monthly trips to complete lab work, retrieve medications, perform checkups with the dermatologist over the seven- to nine-month course of treatment. In contrast, the AviClear patient journey is completed in just three, 30-minute office visits over a two-month period. We are already hearing feedback from the AviClear practitioners as well as patients and their parents that they've been looking for an alternative treatment option to isotretinoin for several reasons, and they are eager to try this new device. Starting with the first commercial treatment conducted on April 3rd, 2022, we initiated our limited commercial release for this breakthrough product.

Since this introduction of AviClear, Cutera has spent time meeting and discussing the technology with selected key opinion leaders, installing devices into their practices, training physicians and their staff as well as coaching back-office support personnel on patient identification and conversion processes. We are committed to executing a very deliberate rollout of this product to a predefined set of dermatology and aesthetic practitioners. These key opinion leaders have agreed to provide the company with insights gained while using our product during the limited commercial release. We will utilize their feedback to define our plans and optimize the execution of a comprehensive full North American commercial launch for AviClear later in the year.

The long-term success of AviClear, like other first-mover medical devices, will come from executing an effective launch plan built on the knowledge gained through the limited commercial release to ensure that we deliver both provider and patient satisfaction in this new treatment paradigm. Beginning with our limited commercial release, we are exclusively offering the AviClear device through our AviClear partnership agreement. In addition to the radical technological innovations that the AviClear product represents, our partnership agreement defines a new and innovative business arrangement, structuring the relationship between the company and the AviClear practice. This new agreement will serve to perfectly align the goals and objectives of the company with those of the practice over the long term.

At a high level, the partnership model works as follows. In consideration of the company's placement of an AviClear device into the practice, the provider will pay the company an annual license fee as well as a fee for each patient treated with the device. Additionally, the company agrees to provide ongoing service and maintenance, upfront and future clinical training as required for qualified users and ongoing account management support for the office staff assisting with the integration of AviClear into the practice and optimizing patient conversions. While we are very early in the limited commercial release, we are pleased with the feedback received thus far.

Coming out of the recent American Society for Laser Medicine and Surgery Conference, our partnership model resonated well with key opinion leaders and practitioners as they see the many benefits of it. Since the start of our limited commercial release, we have already executed dozens of AviClear partnership agreements and subsequently shipped and installed devices into practices. This volume of placements has enabled us to concurrently test and validate the various logistical back-office and functional processes built into our novel AviClear partnership program. Most importantly, practices have begun treating patients in their offices.

Early results have confirmed our views on ease of use, patient tolerance of the procedure and the ability for providers to integrate AviClear easily into their practices. Over the course of the limited commercial release, we will continue to gather insights. We can already see how these learnings will enable Cutera to refine account selection, accelerate account onboarding and staff training as well as increase conversion rates of potential patients. We look forward to providing you with more updates regarding AviClear rollout in subsequent briefings.

With that, I'd like to turn the call over to the operator to open the call to your questions. Grant?

Questions & Answers:

Operator

Thank you. [Operator instructions] First question comes from the line of Jon Block with Stifel. Please proceed with your question.

Jon Block -- Stifel Financial Corp. -- Analyst

Great. Thanks, guys, and good afternoon. I'll start on the core business, maybe just two questions in total. But Dave, can you talk about the increased revenue expectations on the core business? In other words, when you look at the constant currency, I think you're making up at in around $7 million from the FX headwind.

Where are you seeing it? Mostly capital? That seems to have a lot of traction. Is it North American capital? And maybe sort of as a pipe product with that long question. You've gotten a really good return from the increased sales reps here in North America. Are there any pockets internationally where you can see sort of augmenting some of the countries with additional reps to find a similar ROI? And then I'll ask a follow-up on acne.

Dave Mowry -- Chief Executive Officer

That's a great question, Jon. Thanks. I think the strength definitely is being seen and felt from North America. We were a little slower in ramping that a year or so ago, but we've built a lot of momentum over the last three or four quarters, and you can see that continuing to carry forward.

I also think there's a little bit of air in the -- if you will, air in the sales or wind in the sales with the AviClear launch and the fact that they've got something new, novel and interesting to go talk to physicians about. So I think that's certainly bolstering and potentially could have a halo effect on our call points here. I would not underestimate the value in our consumable growth as well in North America. The investments we've made in the key account managers have continued to pay off and I think will be benefited not only -- will benefit us not only with the core business, but also with the AviClear as we continue to drive utilization once devices get placed.

In regards to the second part of your question, internationally, look, I think Australia continues to be an opportunity for us to invest and grow. They deliver great numbers. I think, unfortunately, they were quite restricted in the back half of '21. But we can see what they can do when they start to come clear of that in the first quarter.

And I predict that we'll see a strong second quarter from them as well as they kind of come out of hibernation, post restrictions. In terms of other areas, look, I think Japan is still a little bit of a question mark due to the nature of the economics going on there, in particular. But I mean, we're bullish, and we think we have the right people and the right team. But it's not something that we would be aggressive investing in right now.

And I think in Europe, I think there may be some submarkets within Europe that we would be interested in doubling down on like the U.K., where we've had great success. But I wouldn't want to say Europe in general right now due to the nature of the somewhat destabilized Eastern Europe.

Jon Block -- Stifel Financial Corp. -- Analyst

Great. A lot of great detail there. And let me see if I can -- be sort of just saying with my second question and get it across. But on acne, Dave, maybe just talk about the early learnings from sort of this partnership model.

It's very different. It's a very different model than traditional capital. What are the reactions? What are the reactions of the med derms? And maybe -- you said dozens of boxes are out there. Where are the early utilization trends? And then just as a follow-up on the numbers side.

I mean you guys said it will be accretive going into 2023. So just help us with that for a second. The spend is sort of $7 million to $8 million per quarter. So do we say accretive as in think revenues, 60% to 70% gross margin, maybe I'm low there? And then all in with expenses were accretive down to EBITDA.

I hope that made some sense there. And let me know if you need me to clarify. Thank you.

Dave Mowry -- Chief Executive Officer

Yes. First of all, taking those in reverse order, I think from a kind of a perspective of being accretive leaving the year, we're not certainly suggesting that fourth quarter would be accretive itself. But we do believe that this is like a flywheel. As you place the device, you build momentum with patient traffic.

And as that continues to build within the practice, they get more and more comfortable with it. You get greater and greater returns from that placed box. So we're very excited about how that model, we think, can take shape not just for us, but actually for the practitioner and the patient. And it will get utilized.

And I think that's the beauty of the model, frankly, is it puts us in a position to be directly and fully aligned to the practice. And that's really a unique situation where we're not fighting and wrestling over things. We both want great things, and I think we've got a great product to utilize this on. And I think the physicians and the practitioners recognize that.

In fact, to be quite frank, many of them have been the ones that suggested it to us early on in the process as we thought about breaking into a segment that has a significant portion of physicians without a lot of capital in their practices. So while we know that we're working through a new model, we also recognize it's one that fully aligns practice to company, and we're both aligned to having great patient outcomes. So I think there's a win-win-win here from this model, and I'm pretty excited about it.

Jon Block -- Stifel Financial Corp. -- Analyst

Sounds good. Thanks for your time, guys.

Dave Mowry -- Chief Executive Officer

Thank you.

Operator

And the next question comes from the line of Chris Cooley with Stephens. Please proceed with your question.

Chris Cooley -- Stephens Inc. -- Analyst

Good afternoon and thanks for taking the questions and congrats on the record quarter. If I could just follow up on where Jon left off there, maybe start my first question on acne. I would really appreciate if we could get some additional detail there just in terms of these initial early learnings when you think about the sales conversion cycle here. Obviously, at ASLMS, there was tremendous enthusiasm for AviClear.

But just kind of curious if we kind of contrast AviClear versus, let's say, truSculpt iD. Just help us kind of walk through the sales process as this is a new model and then how we should think about kind of, I guess, Phase II and Phase III in '23 and beyond as you start to really commercialize this in terms of the ramp? And I've got a quick follow-up.

Dave Mowry -- Chief Executive Officer

Well, Chris, I think that's a really insightful question. Frankly, we're being very, very thoughtful in the rollout here. So as you think about the sales process, it's one where we have joint -- if you will, joint arrival at the practice between the consumable and the capital rep, right? This is really a full company sale process. Not only are we showing up to get the deal closed around the license agreement, but we're showing them the full packet of what we can do to support them as a practice.

And the AviClear 360, which we've talked about previously, is a complete set of marketing materials and promotional as well as things like patient financing that allow this practice to easily and quickly integrate AviClear into their normal operations and hopefully affect -- significantly affect the pathway for so many patients that suffer from acne. So the sales process, we've got it. We've aligned it. We're working through it.

We've trained to it. But I think it's still a little bit evolving as we work through a limited commercial release, and that's the value of doing a limited commercial release. We're learning as our reps are, as our physicians are through this process. And I think there's always questions of something that's new and novel, but the level of commitment and the amount of embracing of this new process that we're seeing from the physician is quite rewarding, frankly.

Chris Cooley -- Stephens Inc. -- Analyst

Understood.

Dave Mowry -- Chief Executive Officer

In regards to the rest of your question around like -- more or less like how patients or how practices are going to integrate this, if I understood your question correctly, I think they're trying to figure out specifically how they want to utilize the product because it is a little bit different than anything they've had. So we're going to really spend some time doing the training and the development of -- or the training and the development of their staff to make sure that this really has the desired effect. At the end of the day, Chris, this product is not only a great product in terms of the outcome for patients. We believe it to be a very, very effective, delegable procedure within the practice.

And we now take a patient that maybe I see seven, eight, nine times a year and I get a co-pay from and I write a script for, and I'm now able to monetize them and give them a much better outcome. So we think it's a win-win-win across all three: company; practice; and especially, the patient.

Chris Cooley -- Stephens Inc. -- Analyst

I appreciate all that color. Thank you. And maybe if I could just squeeze one other quick follow-up, and then I'll get back in queue. Maybe just kind of similarly along these same lines, I realize this is a controlled launch right now at this juncture.

But as you start to scale to more of a national level or more of a formal rollout, help us think about the incremental spend there from a missionary sale. Obviously, the average patient today doesn't know that AviClear exists. And so just trying to get a better understanding on kind of your go-to-market strategy there as it starts to make more sense with a broader offering in terms of getting the word out and helping drive growth to these practices in relation to AviClear. Thanks so much.

Dave Mowry -- Chief Executive Officer

Thanks, Chris. Well, I think first and foremost, I think for those people on the call, I think one of the things that's really quite compelling about this opportunity is that the vast majority of patients are already in the waiting room. So the amount of outreach you have to do fundamentally is really quite moderate at best or at worst, I should say. It's really how do we convince them to try something different.

Additionally, we know that each of the practices has prescribed Accutane or isotretinoin for a lot of their patients with less-than-desired results. So they already have names and people within their practice that we can do outreach to and with the practice in order to recruit them back in. So there's quite a large patient population already available to us without going outside of those parameters. That said, we do envision doing very, very localized promotion of the product in and around the physician.

We intend to obviously create some brand awareness nationally and use things like physician locators and information available on our website to make sure physicians get -- or patients get directed to the right places. But as we roll this out, the real beauty here is that the patients are already in queue. And we know that there's 8 million patients roughly that seek some sort of solution from the dermatologist or their care provider around the moderate or severe acne. So I think we feel very confident that this is not a huge market spend, but rather an awareness issue and then a promotion of the physician and the practice within their own patient pool.

Chris Cooley -- Stephens Inc. -- Analyst

Thanks and congratulations.

Operator

And the next question comes from the line of Louise Chen with Cantor. Please proceed with your question.

Louise Chen -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my question and congratulations on all the progress this quarter. So I had a few questions for you. We've been getting a lot of people asking us about how to think about revenues for AviClear this year and how that breaks up into the different segments of your business.

And then how do you think about the peak sales potential of the device? Maybe I'll start there.

Dave Mowry -- Chief Executive Officer

Well, those are very loaded questions, Louise, but I appreciate them because I think you're thinking about it the way we are. And we're quite bold about what this could mean for the company. And we do believe it to be transformative in the long run. But I think that's exactly why we're being very cautious in the short term, is we want to learn and grow and understand how to best position this product, how to make sure that we're supporting our physician practice partners as we roll this thing out effectively.

And we want to make sure that patients are getting the outcomes that they deserve from this treatment. So we're taking the time to train and develop and place and manage and monitor. And all these things are going to be critically important in the short term. So I'm trying not to raise anybody's appetite for near-term revenue because I think it's really important that we learn so that we can execute a very effective full North American launch later this year.

And I think as a flywheel turns later in the year and into next year, I think the potential is quite, quite large. So just a small amount of penetration into an 8 million patient population could drive a pretty significant change to our financials. And I think there's been a few models put out there, and I'm certainly not excited or willing to put guidance out at this point. But I think we're all very much excited about what the potential could be.

And like I said, it would be truly transformative for this company.

Louise Chen -- Cantor Fitzgerald -- Analyst

OK. Thank you. And my next question is on AviClear for wrinkles. Is there any evidence that it could work there just because that's obviously another big opportunity as well.

Dave Mowry -- Chief Executive Officer

Well, we have presented some information at the ASLMS study, our conference in San Diego, where physicians retrospectively went back and looked at acne scarring. And much similar to acne scarring resolution, which we have seen anecdotally through the data, is that we're hitting peak temperatures at a point where we're indicating or creating a demand for collagen. And I think as a result, we're seeing some benefits. And we've seen some physicians who have looked at the histology and immediately jumped to the conclusion that this would work as a regenerative device as well.

Now we are not claiming that, and we have not done any studies to confirm that. So I want to be very careful in not jumping the gun, but we will likely be testing and evaluating other benefits from this device in the future. But we think it will start with acne and it will extend to truncal acne and then scarring or reduction of scarring. And then we'll see where else the opportunity takes us.

But we're pretty excited about what we've seen in the data. And I'd tell you, the physicians are overjoyed with what they're seeing and how they think that this could implement significant change to the paradigm of acne treatment.

Louise Chen -- Cantor Fitzgerald -- Analyst

OK. Thank you. And then just one last question, if I may. You had mentioned something about a tamp down in SG&A spend over the course of the year.

So just curious if you could walk us through the cadence of opex for the remainder of the year.

Dave Mowry -- Chief Executive Officer

Yeah. I want to make sure that we're really clear. What we said was that we thought that the ERP spend was waning and tapering down over the course of the year after going live in first quarter. We're actually expecting that we will likely be making investments in AviClear, both in the commercial front as well as in the R&D and clinical environments.

Rohan Seth -- Chief Financial Officer

That's right, Dave.

Dave Mowry -- Chief Executive Officer

I just want to make sure that -- that was the message. So I wanted to make sure we're very clear about that. We haven't given a whole lot of sizing to the tapering on the ERP, but we have indicated that we expect our spend on acne to increase over the course of the year.

Rohan Seth -- Chief Financial Officer

In total of $25 million to $30 million.

Dave Mowry -- Chief Executive Officer

Yes.

Louise Chen -- Cantor Fitzgerald -- Analyst

Thank you very much.

Dave Mowry -- Chief Executive Officer

OK. Thank you.

Operator

And the next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

Anthony Vendetti -- Maxim Group -- Analyst

Thanks. Just to follow on the question. So the acne spend is now going to be $25 million to $30 million. The adjusted EBITDA guidance of $5 million to $10 million, does that include the acne spend? Or is the acne spend on top of that?

Rohan Seth -- Chief Financial Officer

That's included.

Dave Mowry -- Chief Executive Officer

Yeah. Let's be really explicit here.

Rohan Seth -- Chief Financial Officer

Yep.

Dave Mowry -- Chief Executive Officer

The AviClear spend that we anticipate in opex that we've now reforecasted to be $25 million to $30 million is reflected in that new adjusted EBIT number. But we still have not put any revenue into our guidance, OK?

Rohan Seth -- Chief Financial Officer

That's right. That's right. And Anthony, the other thing I'd add to that is you'll note that we called out our constant currency core adjusted EBITDA separately, which continues to be in the low to mid-teens. That's where we exited in '21, and that's where we maintain that portion of our business to be at.

I'd say that our margin -- our EBITDA margins are taking a bit of a pause in 2022 to make investments within the space of acne, which has the potential to radically transform the profile and size of our company. It's a little bit of a detour. I fully expect that we'll earn a very attractive return on these investments for our shareholders. And beyond the short term, you should expect to see us return to that very solid underlying progression that we had seen in 2021 from an adjusted EBITDA standpoint.

Anthony Vendetti -- Maxim Group -- Analyst

OK. And the revenue guidance, which you reiterated for '22, excludes any AviClear revenues. And if I can read through the tea leaves there, you commercially could launch this in the fourth quarter. Is that correct?

Dave Mowry -- Chief Executive Officer

Yeah. I think I've even tipped my hand to say we will do a full launch within the year. You can go back to the script, I actually said within the year.

Anthony Vendetti -- Maxim Group -- Analyst

Yeah. OK. And then the gross margin for AviClear, is that expected to be in the 60%-plus range?

Rohan Seth -- Chief Financial Officer

I would expect it to be very accretive to our overall gross margin profile. I don't want to put a number on it just yet because we need the business to scale first. But I do fully expect it to be accretive to our overall gross margin profile.

Anthony Vendetti -- Maxim Group -- Analyst

Right. Over time, so that's probably more of a mid-to-late '23 kind of situation as you build? Or is that the best way to look at it?

Rohan Seth -- Chief Financial Officer

Again, there's a lot of factors in there. A lot of the spend around acne has more of a fixed profile as opposed to an incremental COGS profile. So I don't want to put a time or a number out there. We're still in our limited commercial release.

We're still figuring out things around our go-to-market strategy, our commercial model, etc. Over the long term, I'd say still plan for it to be very accretive to our margin profile.

Dave Mowry -- Chief Executive Officer

And just reiterating exactly what we said, Anthony. I just want to reparaphrase this back to you one more time. We said that we anticipated entering 2023 with acne or AviClear being accretive to the company in total.

Anthony Vendetti -- Maxim Group -- Analyst

Last question on the revenue share/utilization. So if it's a placement, can you give a little more color on what that would look like? What would be the upfront payment for the customer? And then revenue share and then a small, more of a minimal utilization fee baked on the consumable piece or the disposable piece? A little more color on kind of how that -- or the range of how that may look.

Dave Mowry -- Chief Executive Officer

Well, we're trying to work through that very, very thoughtfully with our physician partners as we go through this limited commercial release. And I think we struck a very strong and effective balance that allows there to be skin in the game from both parties, while we think about the right way to charge on a per procedure basis as well. So I'd rather not get into the details until we get a little bit further into the commercial release, but I think the way I'm thinking about it is the practice has to have some skin in the game, which we get with their licensing. And because we don't charge in the upfront capital and because we don't have a consumable product they have to pay us for in the procedure, we set this thing up where we can participate at a probably -- a more aggressive rate than a normal consumable.

Anthony Vendetti -- Maxim Group -- Analyst

OK. That's helpful. All right. I'll jump back in the queue.

Thanks. Appreciate it.

Operator

And there are no further questions at this time. I will now turn the presentation back to the host.

Dave Mowry -- Chief Executive Officer

Thank you, Grant. I just want to thank everyone for their time and attention today on the call. This is an exciting time for the company, and we're exceptionally bullish on this new opportunity. So we're going to keep our heads down and really work hard over the next few quarters, getting this limited commercial release through, learning what we can, and applying it to a full release of the AviClear later this year.

So please stay tuned for further updates in future periods. Thank you.

Operator

[Operator signoff]

Duration: 50 minutes

Call participants:

Dave Mowry -- Chief Executive Officer

Rohan Seth -- Chief Financial Officer

Jon Block -- Stifel Financial Corp. -- Analyst

Chris Cooley -- Stephens Inc. -- Analyst

Louise Chen -- Cantor Fitzgerald -- Analyst

Anthony Vendetti -- Maxim Group -- Analyst

More CUTR analysis

All earnings call transcripts