Biolase, Inc.

Good day and welcome to the Biolaids third quarter 2022 financial results conference call. Please note this call is being recorded. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call 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 the third quarter ended September 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 third 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 statements that are not historical facts, will be made during this presentation and subsequent Q&A session, including forward-looking statements regarding the company's strategic initiatives and anticipated financial performance. These forward-looking statements are 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, November 10, 2022. These risks are discussed in the risk factors section of the company's most recent Form 10-K and Form 10-Q filed with the Securities and 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 2022 third 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 www.biolase.com. Biolase's financial results can also be found in the company's report on Form 10-Q and 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 an audited 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 Bayerle'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 I start, I'd like to congratulate the 2022 World Champion Houston Astros. I'm sure everyone on the call is as big of an Astros fan as I am. Now to our results. I'm pleased to say that we reported continued increasing demand for our industry-leading dental lasers in the third quarter, generating a 26% increase year over year. in our total revenue. Our U.S. laser sales increased 35% year-over-year, while U.S. consumable sales increased 22% during the quarter. Our strong performance, which we have consistently maintained now for the last two years, reflects continued positive momentum on several fronts, including continued progress with the Water Lays exclusive trial program, as our success rate, the percentage of dentists who purchase after the trial, remains at over 50% year-to-date in 2022, We now have sold approximately 100 water-lazed lasers via this program since the start of 2021. This initiative, along with our continued emphasis on endodontists, periodontists, pediatric dentists, and dental hygienists, continue to generate increased adoption of our laser technology by new customers, with over 90% of our U.S. water-lazed sales during the quarter coming from new customers and close to 40% of U.S. water-lazed sales coming from dental specialists. It's important to note that these initiatives didn't exist until recently, so momentum is quite encouraging and gives us greater confidence for even greater success in the future. During the third quarter, more than half of our territory managers exceeded their sales quota. This is a testament to the entire BioLase team that we currently have no open sales territories and have had no sales turnover during 2022. The first time this has occurred in quite some time as our sales team is excited and enthusiastic because our products, programs, and initiatives that create excitement in the dental community. BioLase has an approximately 60% worldwide share of the all-tissue dental laser market, represented by our WaterLase brand. However, despite this penetration level, it still represents less than 10% of the overall U.S. dental market and less than 2% of the dental market outside the U.S. Our objective is to grow the overall market, engage with the other 90%, and while ensuring we continue to protect our position as a market leader. To reach this untapped market opportunity, we are intently focused on increasing education and training to build awareness of the benefits of industry-leading laser provides to dentists and their patients. In the third quarter, we held 150 educational and training events, a 46% increase from last year's third quarter. As a result of these increased efforts, dental practitioners are coming to Biolase as they look to upgrade their dental practices and improve their patient outcomes. As I mentioned earlier, over 90% of our sales this quarter came from new customers, which represents the highest percentage of water-laze sales to new customers since I joined the company in 2017. We believe each 1% increase in the 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 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 well-established three-pronged strategy to grow market adoption of our lasers, which 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 formed 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 their patients. Our plan in 2023 is to combine these specialist academies into a single water laser academy and an epic academy. We believe that this will not only further improve and simplify training for the specialists, but also give general practitioners who are interested in adding more specialty procedures to the practices an avenue to pursue further training. The opportunity that exists 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. 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. Combined, these dental specialist markets represent hundreds of millions of dollars of potential laser system revenue each year, not including the potential for recurring revenue from the sale of our consumables. The second prong of our growth strategy is focused on the significant opportunity we have with over 150,000 general practitioner dentists in the U.S. alone. If an additional 5% of U.S. GPs adopt our lasers, It would generate 225 million in laser revenue, not including consumables. Our water laser exclusive trial program permits GPs who do not have prior experience with our product to evaluate and assess our laser for a 45-day evaluation period at no cost, and includes in-person training on the device. At the end of the 45 days, the GP has the option to buy our laser or not. We have held approximately 30 of these programs so far this year, and as I mentioned earlier, more than half of the program participants have purchased a BioLase laser today. It's a win-win for GPs because a big part of the Water Laser Exclusive Trial Program is teaching additional procedures they can do in-house with our laser so they can keep more procedures and revenues in their practice and achieve superior patient outcomes. If they just do 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 US. Today, most new 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 consumables customers when they go out on their own. Over the last few quarters, we made solid inroads with some of those DSOs. These relationships are important, and we believe that the large DSOs can lead to a far greater revenue for BioLase in the future. In addition, we have continued to develop stronger relationships with key dental schools across the country. During the third quarter, we announced a strategic plan to partner with postgraduate dental specialty programs throughout North America to expose new dentists to the benefits of Water Lase technology. The programs range from one to four years and are generally dentistry and specialty programs. We have integrated our Water Lase laser into several postgraduate programs already, and plan to expand into many more programs over the next few years. There is a large appetite among dental residents to utilize state-of-the-art technology in treating patients, and we believe the introduction and reinforcement of technology during postgraduate training is key to the adoption of laser dentistry with this new generation of dentists. Speaking of increased education, during the quarter, we began construction of our new training facility and first-ever model dental office named Laser Smiles, both of which are expected to open in the first quarter of 2023. 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. We also are inviting leading international dentists to spend time at our facility next year to work with us as we help to ensure that the international voice of customer is heard. Lastly, I'm happy to report that we continue to strengthen our management team by attracting the latest quality dental professionals. Dr. Russ Morrow, who we recently announced as our new chief dental officer, brings extensive clinical, dental, and DSO experience to BioLase to help expand laser adoption globally. Dr. Morrow's clinical expertise and knowledge of the dental industry, combined with his significant role at the nation's largest DSO, making him particularly well positioned to lead BioLaser's clinical team as we pursue our goal of growing laser adoption across the dental industry. Dr. Morrow is a strong advocate for laser dentistry and has already worked with hundreds of dentists to adopt laser technology while at Heartland. And we look forward to his continued role in expanding the use of lasers within DSOs and with all of dentists. I would like to personally thank Dr. Samuel Lau, who has served as our Chief Dental Officer since 2016 for the critical role he has played in developing and expanding laser dentistry globally. Dr. Lau continues to bring a strong commitment and dedication to laser dentistry, and in his new role as Vice President of Clinical Strategic Alliances, he will continue to be a great asset to BioLase as he focuses on building partnerships with expanding adoption of our industry-leading dental laser technology. Dr. Morrow and Dr. Lau work closely with the board's clinical committee headed by Dr. Martha Summerman, to continue to identify and develop strategic approaches to clinical research and product development and to help oversee the company's R&D efforts. In summary, our growth plan has been generating positive results, and we have a very large opportunity and a well-developed roadmap for growth. The success and continued performance of our sales team gives us continued confidence in our ability to achieve our operating objectives for 2022 and beyond as we set our sights higher. With that, I'll turn the call over to Jennifer to provide further details regarding our third quarter financial results. Jen?