Cutera fires CEO and executive chair for cause in dispute over succession plan

By Ciara Linnane

Stock of skin-care and body-sculpting equipment maker slides 27% in biggest one-day decline in six years

Cutera Inc., a Brisbane, Calif.-based provider of equipment for beauty treatments such as body sculpting, fired its executive chair Daniel Plants and its chief executive David Mowry for cause on Wednesday in a dispute about the company's CEO succession plan.

The news sent the stock (CUTR) down 27% to put it on track for its biggest one-day percentage decline since May of 2018. In the first hour, 1.1 million shares traded, compared with a daily average turnover of 601,000 shares over the past 65 days.

The unusual boardroom brawl led the company to withdraw its guidance for $277 million to $292 million in revenue in 2023.

The ouster of the two executives, made on the recommendation of a special committee and the majority of the company's board, comes just days after Plants and Mowry issued a statement seeking the removal of five members of the board over concerns that they hadn't made progress on devising a CEO succession plan.

The board said Wednesday it had appointed one of those members, Sheila A. Hopkins, as interim CEO, and another, Janet D. Widmann, as independent chair, effective immediately. A search for a permanent CEO has begun. Plants and Mowry had called for the removal of Gregory Barrett, Timothy O'Shea and Juliane Park, along with Hopkins and Widmann.

The dispute centers around a CEO succession plan that the board began to explore last November, according to Wednesday's release.

At that time, "Mr. Plants strongly recommended the immediate termination of Mr. Mowry and indicated that he wanted to succeed him as the Company's next CEO," said the release. "This followed a previous attempt by Mr. Plants to gain the CEO role in February 2021 by recommending removing Mr. Mowry."

The board instead decided to seek an external candidate, at which point, "in an apparent campaign to seize control of the Company, Mr. Mowry and Mr. Plants issued a press release in which they disclosed -- and blatantly mischaracterized in a defamatory manner -- highly confidential internal deliberations of the Board in direct violation of their employment agreements and their fiduciary duties as directors and officers under Delaware law," said the release.

Plants and Mowry, who own about 7% of Cutera's stock, responded by filing a lawsuit in Delaware against the five directors. The suit calls on the board to reopen the nomination window to allow shareholders to decide who should run the company or allow a special meeting to go ahead.

"One way or another, shareholders must have a say in who represents them," they wrote in a statement.

The pair on Tuesday shared a letter with the board showing they have the support of 10 executives, including all of the commercial leadership, for their current plans for the company.

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The letter, with signatories including Chief Financial Officer Rohan Seth and Chief Information Officer Guy Thier, said that the company's strategy is working, that Mowry and Plants are a "highly cohesive and effective" executive team and that the physician-customers and patients Cutera's products serve "should come first."

"While we believe change takes time to seep into the market, shifting our R&D investments to have "First mover" devices such as AviClear, aligns our business with that of our customers," they wrote.

Hopkins said Wednesday she would move ahead with the AviClear strategy "in order to realize the value inherent in this groundbreaking innovation, while also maintaining laser focus on our core business."

Cutera reported a net loss of $7.8 million, or 40 cents a share, for the fourth quarter, wider than the loss of $3.9 million, or 22 cents a share, posted in the year-earlier period. Revenue rose to $67.4 million from $65.6 million. The FactSet consensus was for a loss of 13 cents and revenue of $74.1 million.

The stock has fallen 71% in the last 12 months, while the S&P 500 has fallen 7%.

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-Ciara Linnane

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04-13-23 0737ET

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