Biolase, Inc.

Good day and welcome to the Biolase 2021 Fourth Quarter and Full Year Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Todd Curley of EVC Group. Please go ahead, sir.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today to discuss Biolase's financial results for the fourth quarter and full year ended December 31st, 2021. On the call today from Biolase are John Beaver, President and Chief Executive Officer, and Jennifer Bright, Vice President of Finance. John will review the company's operating performance and then turn the call over to Jennifer to review the financials in more detail before opening the call for questions. Before we begin, I'd like to remind everyone that a number of forward-looking statements, which are statements that are not historical facts, will be made during this presentation and subsequent Q&A sessions. including forward-looking statements regarding the company's strategic initiatives and financial performance. These are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 and are based on Biolase's current expectations and assumptions and are subject to a variety of risks and uncertainties that could cause the company's actual results to differ materially from the statements made. Thus, forward-looking statements only represent the company's view as of today, March 17, 2022. These risks are discussed in the company's filings with the Securities Exchange Commission. A replay of this conference call will be available on the Biolase website shortly after the completion of today's call. When listening to this call, please refer to the news release issued earlier today announcing the company's 2021 fourth quarter and full year financial results. If you do not have a copy of the news release, it is available in the Investor Relations section of the Biolase website at www.biolase.com. Biolase's financial results can also be found in the company's report on Form 10-K, which will be filed with the SEC. The tables we've provided in today's news release offer additional financial information, so we encourage you to review them. The tables include the reconciliation of unaudited GAAP net loss and net loss per share to non-GAAP adjusted EBITDA loss and adjusted EBITDA loss per share, as well as more information regarding the company's non-GAAP disclosures. With that said, I'll now turn the call over to Biolase's President and Chief Executive Officer, John Beaver. John?

Thanks, Todd, and thank you, everyone, for joining us this afternoon. We appreciate your continued interest in Biolase. Before we begin, let me briefly address the situation in Ukraine. Our thoughts are with the people suffering and fleeing from the violence, including the Ukrainian dentists and trainers who are part of the Biolase family. BioLase is stepping up to help where we can, and we hope this situation is resolved peacefully in the very near future. Now let's move on to our results. The fourth quarter was another outstanding quarter for BioLase. We had a solid end to a very successful year, as we significantly exceeded our previously stated outlook for the quarter. Our market-leading dental lasers delivered another quarter of strong revenue growth, primarily driven by continued new customer adoption. Dentists are migrating to our lasers because they provide a better standard of care for dental procedures and ensure a safer environment for dental practitioners and patients than traditional procedures. I expect this trend to continue as we put in place a well-developed roadmap of strategies and investments that we believe will drive continued growth in 2022 and beyond. Now let's review the results. We reported fourth quarter revenue of $12.4 million, representing 46% growth year-over-year and finished 2021 with a total revenue of $39.2 million, up 72% year-over-year. Our strong performance throughout 2021 is due to rising demand for our industry-leading dental lasers, which is being driven by our intensified focus on education and training and the benefits our lasers provide to dentists and their patients. We built the best-in-class dental lasers, and now with our focused efforts, dental practitioners are coming to us as they look to upgrade their dental practices and improve patient outcomes. BioLase owns approximately 60% of the all-tissue laser dental market, represented by our WaterLase brand. However, this still represents a small fraction of overall dental market, as the penetration rate of dental lasers in the overall dental market is only about 7% in the US and less than 2% worldwide. Therefore, 93% of the US dental market still isn't using all-tissue lasers. So the opportunity remains vast, and we aim to increase this market adoption in the coming years. Many of you have heard me say this before, but it bears repeating because of its significant impact. Each 1% increase in the adoption of all-tissue laser technology in the U.S. will equal $50 million in additional revenue for BioLase, assuming we keep our same 60% historical market share. This doesn't include potential increased adoption in international markets, where historically approximately 40% of our revenue has been generated, or the follow-on consumable revenue generated from the procedures done with our laser systems. The question is, how do we get the other 93% of dentists to use dental lasers? We have a three-pronged strategy for growth that was implemented in 2021 that has created the momentum we experienced in 2021 and we believe will allow us to continue our growth trajectory in 2022 and beyond and drive further penetration into the overall dental market. The first prong of our growth strategy is to get dental specialists on board. Over the past 12 months, BioLase has formed specialist academies to expand the awareness of the benefits of dental lasers in these dental specialist communities. Specifically, we launched specialist academies for endodontists, periodontists, pediatric dentists, and dental hygienists to drive further adoption of our laser. The market opportunity that exists for BioLase within each of these specialist communities is very meaningful. Led by key opinion leaders in each of these specialties, BioLase is increasing education and training to drive expanded adoption. Starting in the first quarter of 2021 and every quarter since, specialists have made up at least a third of our total U.S. Water Lays revenue. Our focus on increasing education and training for these dental specialists is translating into higher demand for our products as they look for safer, more advanced alternatives to improve patient outcomes and improve their practices. For perio specialists, repairing and saving implants is a very large opportunity. About 20% of implants fell in the first three years. Without our laser, the only way really to get an implant repaired is to replace it. However, our laser can address this issue and save the implant without having to replace it. Another example is in the treating of root canals. Traditional treatment options kill 50% or so of bacteria, whereas using our laser, the doctor can get rid of 99% of bacteria. This is a big deal. During the fourth quarter, we received FDA clearance for the new Edge Pro laser, which we co-developed with Edge Endo, a global leader in commercializing products for the endodontics market. This device offers endodontics a new solution that provides a more effective cleaning and disinfection alternative for root canal procedures. The Edge Pro laser-assisted microfluidic irrigation device is built on BioLase's patented and proven laser technology that has been shown to provide outstanding debridement, cleaning, and disinfection. I won't go through every type of procedure, but these two examples demonstrate how and why our lasers are being adopted by dental specialists. Securing even a small percentage of each of these dental specialties by our calculations could generate over $150 million in additional revenue for biolays from laser sales, plus higher margin revenue associated with the follow-on consumables. The first prong of our growth strategy can generate meaningful results. However, it doesn't take into account the significant opportunity we have with approximately 150,000 general practitioner dentists in the U.S. This segment is the focus of the second prong of our growth strategy. If an additional 5% of GPs adopt our lasers, it would generate $225 million in laser revenue, not including the consumables. So how do we penetrate this large growth opportunity? In 2021, we launched the Water Lase Exclusive Trial Program, or WETP. which puts a BioLase laser in the GP's offices for 25 days, supported by a mentor, and includes two days of in-person training, all at no cost. At the end of the 45 days, the GP has the option to buy our laser or not. We held over 30 of these events in 2021, each of which had four to eight GPs participating. I'm excited to say that we had a 40% success rate and sold over $2 million in lasers as a result of these events last year. Our goal in 2022 is to host 40 of these events, and I believe we can increase our win rate to over 50% as we gain valuable feedback with each event that can help facilitate our success. While the cost of a water laser is around $70,000, GPs can finance this purchase for about $1,100 a month. It's a win-win for GPs because a big part of the Water Laser Exclusive Trial Program is teaching these GPs the additional procedures they can do in-house with our laser so they can keep more procedures and revenue in-house. One example is GPs getting into perio, where they can charge $1,200 to $1,500 per quadrant to treat perio disease. Another example of an additional procedure GPs can keep in-house are frenectomies, which they can charge $500 to $1,000 to do with our laser. These two examples of less invasive procedures are exactly what GPs want and need to grow their business and they do just two additional procedures a week, they will generate a 200% return on their investment in our laser. The more training and education we do through the WTP, the more success we are going to have in driving laser adoption. The third prong of our growth strategy is getting the corporate dentists to adopt our lasers. We currently have ongoing trials with four of the five largest DSOs in the United States, including Heartland, which is the largest. Heartland has over 2,500 dentists and over 2,000 offices. Today, most new dentists are employed by the DSOs right out of dental school. Our goal is to have them learn to use our lasers while they're at the DSO and make lasers an essential part of their practice moving forward so that if and when they do go out on their own, they become a new buyer of our dental laser and our consumables. Last year, we made solid inroads with some of the smaller DSOs, like one on the East Coast that bought four WaterLase lasers and 50 Epics. These relationships are important and validate our laser technology, and we believe that the large DSOs can be a far greater revenue contributor in the future. So in summary, we have a large market opportunity ahead and a well-developed roadmap for growth, leveraging our industry-leading product offerings. Our three-pronged growth plan is generating positive results, and I'm confident in our ability to drive sustainable and profitable revenue growth in 2022 and beyond. With that, I'll turn the call over to Jennifer to provide further details regarding our fourth quarter results and four-year results.