Biolase, Inc.

Good day and welcome to the BioLase second quarter 2022 financial results conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Todd Curley of the EVC group. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today to discuss BioLase's financial results for its second quarter-ended June 30, 2022. On the call today from Biolase are John Beaver, President and Chief Executive Officer, and Jennifer Bright, Chief Financial Officer. John will review the company's operating performance for the quarter 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 any 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 anticipated financial performance. These forward-looking statements are 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. Such forward-looking statements only represent the company's view as of today, August 11, 2022. These risks are discussed in the risk factors section of the company's most recent Form 10-K filed with the Securities and Exchange Commission. A replay of this conference call will be available on the company's 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 2022 second quarter financial results. If you do not have a copy of the news release, it is available in the investor section of the Biolase website at Biolase.com. Biolase's financial results can also be found in the company's report on Form 10-Q, 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. I'm pleased to report that continued execution of our growth strategy enabled us to deliver one of our best second quarters ever for laser and laser-related cells. In fact, our second best second quarter since 2013. Driven by increasing demand for our industry-leading lasers, our total revenue increased 34% year-over-year, and our consumable sales surpassed $3 million for the first time ever in a single quarter. Our strong performance reflects positive momentum on several fronts, including continued progress with the Waterlays exclusive trial program. As our success rate, the percentage of dentists who purchased after the trial improved over 55% in the second quarter and over 50% year-to-date in 2022. Additionally, our specialist academies for endodontists, periodontists, pediatric dentists, and dental hygienists continue to generate increased adoption of our laser technology in the U.S. in the second quarter with 80% of our U.S. water-laze sales coming from new customers and over 50% of U.S. water-laze sales coming from dental specialists in the quarter. And last but definitely not least, we had 16 territory managers exceed their sales quotas in the second quarter, up from 14 last quarter. We are extremely proud of our sales force and the incredible job they are doing. I'm also very pleased to report that we currently have no open territories and we've had no sales turnover during this year. The rise in demand for our industry-leading dental lasers is being driven by our intensified focus on education and training that is building increased awareness of the benefits our lasers provide to both dentists and their patients. As these efforts continue to pay off, we held 150 educational and training events in the second quarter, a 50% increase from last year's second quarter. And the combination of our best-in-class dental lasers, backed by peer-reviewed papers, is complementing our increased education and training efforts. As a result, dental practitioners are coming to Biolase as they look to upgrade their dental practices and improve their patient outcomes. We expect this positive trend to continue as we continue to successfully execute on the well-developed roadmap of strategies and investments we put in place that we believe will drive continued growth in 2022 and beyond. BioLase currently has an approximately 60% worldwide share of the all-tissue laser dental market, represented by our WaterLase brand. However, this still represents less than 10% of the overall U.S. dental market and less than 3% of the dental markets outside the U.S. As we target the remaining 90-plus percent of U.S. dentists not yet using all-tissue laser, we believe that the continued solid execution of our growth strategy will enable us to accelerate market adoption. Many of you have heard me say this before, but it bears repeating because of its significant potential impact on our revenue. We believe each 1% increase in adoption of our all-tissue laser technology in the U.S. will equal approximately $50 million in additional revenue for biolase, assuming we keep our same 60% historical market share. This doesn't include potential increased adoption outside the U.S., where historically biolase Approximately 40% of our revenue has been generated or the consumable revenue that is generated from the procedures done with our laser systems. We have a three-pronged strategy which we began implementing in 2021 and has created the growth momentum we are experiencing today. The first prong of our growth strategy is to get dental specialists on board. In 2021, BioLase forms specialist academies to expand the awareness of the benefits of dental lasers in dental specialist communities. Specifically, we launched specialist academies for periodontists, endodontists, pediatric dentists, and dental hygienists to drive further adoption of our lasers and superior outcomes for patients. The opportunity to exist for BioLase within each of these specialist communities is very meaningful. Led by key opinion leaders, or KOLs, in each of these specialties, BioLase is increasing education and training to drive expanded awareness and adoption. Now that we have launched the specialist academies, we believe it is the right time to launch our water laser academy that will give both specialists and general practitioners opportunities for continuing education and training pathways in many dental procedures. During the second quarter, we saw continued strength in sales to specialists with over 50% of our U.S. ward-laid sales coming from those specialists. Our focus on increasing education and training for these dental specialists is translating to higher demand for our products as they look for safer, more advanced alternatives to improve patient outcomes and improve their practices. One of my favorite examples of a specialist use case for our lasers is in endodontics. Endos perform over 15 million root canals per year in the U.S. The traditional way of treating root canals kills about 50% of the bacteria in the root canal. Using our laser, an endo can get rid of 99 plus percent of bacteria. This is very important to both patients and endos as the risk of infection is substantially reduced using a laser. By our calculations, securing even a small percentage of each of these dental specialist markets we are targeting could generate over $150 million in additional revenue for biolase from laser cells, plus higher margin revenue associated with the follow-on consumables. The second prong of our growth strategy is focused on the significant opportunity we have with the approximately 150,000 general practitioner dentists. If an additional 5% of GPs adopt our laser, it would generate $225 million in laser revenue, not including consumables. The Water Laser Exclusive Trial Program puts BioLase Laser in a GP's office for 45 days, supported by a mentor, and includes two days of in-person training, all at no cost to the dentist. At the end of the 45 days, a GP has the option to buy our laser or not. With increasing success, we held over 30 of these programs in 2021 and 24 of these programs so far this year, averaging five GPs participating in each program. As I mentioned earlier, we saw our Waterlays Exclusive Trial Program success rate increase from just under 50% in the first quarter to over 55% in the second quarter. Our goal for the full year 2022 is to host approximately 40 of these programs. It's a win-win for GPs because a big part of the Waterlays 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 revenues in-house and achieve superior patient outcomes. If they do just two additional procedures a week, they will generate a 200% return on their investment in our laser. That, along with a better patient experience, is motivating dentists to incorporate water laser technology into their practices. The more training and education we do through our water laser-exclusive trial program, the more success we believe we'll have in driving laser adoption. The third prong of our growth strategy is getting the corporate dentists and universities to adopt our lasers. We currently have ongoing trials with four of the five largest DSOs in the U.S. Today, most dentists are employed by the DSO right out of dental school. Our goal is for them to learn about and begin using our lasers while employed at the DSO and then make our lasers an essential part of their practices moving forward, becoming new dental laser and consumable customers when they go out on their own. Over the last few quarters, we've made solid inroads with some of these DSOs. These relationships are important, and we believe that the large DSOs can lead to far greater revenue for BioLase in the future. In addition, we continue to develop stronger relationships with key dental schools across the country. For example, last quarter, we sold five Water Lace units to postgraduate programs, and we expect this number to increase during the balance of 2022. The progress we are making in the dental schools by selling, not donating, equipment further validates my belief that our technology will be the gold standard of dentistry in the future. To further advance our growth strategy, we're always evaluating additional opportunities to strengthen our products and marketing efforts. For example, the CEO on the Go program was created to get direct feedback from dentists, including on how we can continue to innovate our market-leading dental laser technology. To date, the program has allowed me to visit over 100 dentists and their respective teams. During one of those visits, I watched a dentist use a WaterLase iPlus to remove 19 veneers in one setting in less than 30 minutes. The dentist told me that without the laser, this would have been an all-day affair, resulting in much more patient discomfort. I am always amazed at the benefits our water-laced technology provides in real-life settings and the value of these in-person visits. I plan to visit over 50 more U.S.-based dentists in the second half of the year and plan to visit many of our international customers starting next year. During the quarter, we also signed a new lease in Foothill Ranch to expand our training and education operations and establish our first ever model dental office. This new space is conveniently located next to our corporate headquarters and will expand our ability to drive revenue and laser adoption by training practitioners in a hands-on dental environment. This is a novel opportunity to educate and train, as well as produce marketing materials, create content, perform studies, and test new equipment. I'm also very happy to report that during the quarter, we strengthened our management team with a promotion of two key team members. Steve Sandor, our new chief operating officer, and Jennifer Bright, our new chief financial officer. Both Steve and Jennifer have been integral in the planning and execution of our long-term strategy for growth, and I'm excited to further leverage their robust experience as we continue to execute our growth plan. We also strengthened our board of directors during the quarter with an additional seasoned healthcare executive with the election of Dr. Kenneth Yell. Dr. Yell brings health plan and dental insurance expertise to the board. Dr. Yell, along with other currently, recently elected board members, Drs. Kathleen Laughlin, Dr. Carol Gomez-Summerhays, and Dr. Martha Summerman, continue to provide insight and support the implementation of the company's business plan, which has demonstrated significant growth over the past year and a half. So in summary, we have a very large opportunity in front of us and a well-developed roadmap for growth as we leverage our industry-leading product offerings. Our three-pronged growth plan is generating positive results, as evidenced by our sales team's great performance this quarter, which has given us continued confidence in our ability to drive sustainable and profitable revenue growth in 2022 and beyond. With that, I'll turn the call over to Jen to provide further details regarding our second quarter financial results.