Biolase, Inc.

Greetings. Welcome to the Biola's 2022 fourth quarter and full year financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Todd Curley of EVC Group. You may begin.

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 2022, end of December 31, 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 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 session, including forward-looking statements regarding the company's strategic initiatives and anticipated financial performance. These statements 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. Such forward-looking statements only represent the company's view as of today, March 28, 2023. 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 Biolay'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 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 company's website at Biolays.com. Biolays 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 a 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 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. 2022 was a great year for BioLase as we strengthened our business and positioned the company for continued growth and achieved our goal of improving profitability in 2023. Looking quickly at some of our results, total revenue for the year was $48.5 million, representing a 24% increase year over year. Our U.S. laser sales for 2022 increased 39% year-over-year, and our U.S. consumable sales increased 25% for the full year. Our strong performance this past year reflects continued positive momentum on several fronts, including continued progress with our innovative WardLase exclusive trial program, which puts a BioLase laser in the dentist's office for 45 days, supported by a mentor and two days of in-person training. When we started the WTP initiative pre-COVID, our success rate, the percentage of dentists who purchased after the trial, was about 30%. However, our success rate in 2021 improved almost 40%, and our success rate in 2022 was nearly 50% from the 32 WTP events we hosted. We have sold well over 100 water laser lasers through this program since the start of 2021, and in 2023, we expect to host about 35 WTP events and achieve a 60% success rate. Additionally, we will be hosting our first WTP events internationally, with four expected to be scheduled throughout the year. This initiative and our continued emphasis on dental specialists, including endodontists, periodontists, and pediatric dentists, continue to generate increased adoption of our laser technology by new customers, with a record 84% of our U.S. water-based sales during the year coming from new customers and 47% of US-wide late sales for the full year coming from dental specialists. It's important to note that our focus on dental specialists really didn't exist two years ago. So this momentum is quite encouraging and gives us confidence that we can attain even greater success in the future. Lastly, it's a testament to the entire BioLase team that we have no open sales territories and had no sales turnover during 2022 because our team is enthusiastic about our products, programs, and initiatives and the excitement they're creating in the dental community. As many of you already know, BioLase has approximately 60% share of the worldwide all-tissue laser dental market represented by our WaterLase brand. However, less than 10% of dentists in the US and less than 2% of dentists outside the US currently use dental lasers today. We plan to leverage our brand and grow the overall market by engaging with the other 90% of dentists while ensuring we continue to protect our position as a market leader. To reach this large and addressable market opportunity, we are focused on increasing education and training to build awareness of our industry-leading laser benefits to dentists and their patients. For example, in 2022, we held over 600 educational and training events in the U.S. alone. And because of these increased efforts, dental practitioners are now proactively approaching biolase as they look to upgrade their dental practices and improve their patient outcomes. Last year, the number of Marketing Qualified Leads, or MQLs, increased by 400% in the U.S. market compared to 2018. To put this into better perspective, the number of inbound leads a couple of years ago was less than 1,000 a year, and in 2022, they grew to 4,000. This is a phenomenal achievement, and if we convert half of these new leads to water-lazed cells, it would represent $150 million in new laser cells. 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% 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 of these is to get more dental specialists to use our lasers. In 2021, BioLase forms specialist academies to expand 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 obtain superior patient outcomes. Our plan in 2023 is to combine all these specialist academies into two academies, one for each of our product families, the Water Lase Academy and the Epic Academy. We believe that this will not only further improve and simplify training for the specialist, but also give the general practitioner who is interested in adding more specialty procedures to the practice an avenue to pursue further training. We believe the opportunity that exists for biolates within each of these specialist communities is very meaningful. Imagine a pediatric dentist who doesn't need to give a kid a shot to fill a cavity or an endodontist that can remove 99.5% of the bacteria from your root canal instead of just 50%. 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 their practices. Combined, these dental specialist markets represent hundreds of millions of dollars of potential laser systems revenue each year, not including the potential for recurring revenue from the sale of our consumables. The second of these is focused on the significant opportunity we have with over 150,000 general practitioner dentists in the U.S. alone. We believe that if an additional 5% of U.S. GPs adopt our lasers, it would generate 225 million in laser revenue, not including the follow-on consumables. The success we are seeing with our award-raised exclusive trial program is driving our continued penetration of this key target market. We believe it's a win-win for GPs because a big part of the WaterLase exclusive trial program is teaching them additional procedures they can do in-house with our laser so they can keep more procedures and more revenue in the practice and achieve superior patient outcomes. Doing just two extra procedures a week could potentially generate a 200% return on their investment in our laser. We believe that, along with a better patient experience, is motivating dentists to incorporate WaterLase 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. Our Water Laser has over 80 FDA-cleared indications or procedures that dentists can perform using our laser. We recently announced a new handpiece for the Water Laser that will allow dentists to perform skin resurfacing procedures. Did you know dentists administer more Botox shots in the U.S. than dermatologists? The new WaterLase fractional handpiece is FDA cleared and can deliver both ablative and non-ablative fractional treatments and provide the user with control over the penetration depth with different parameters and treatment techniques. It can create a uniform, one-dimensional pattern of micro-perforations on the tissue surface for maximum efficacy, offering patients comfortable and effective skin resurfacing treatments with faster healing and quicker recovery time. This is just one example of the multiple use cases that exist for dentists to increase their revenue using our laser technology. I believe this launch will further accelerate the adoption of our water laser technology in the dental industry, and is consistent with our commitment to providing less invasive, patient-friendly technology for both patients and clinicians, while at the same time expanding our access to the skin resurfacing market worldwide, which is projected to reach $650 million by 2031. More we can do to raise awareness of the many procedures dentists can use our laser for and the benefits of doing these procedures with the laser, the faster we can drive increased adoption of all-tissue lasers. While less than 10% of dentists in the U.S. use an all-tissue today, a recent survey indicated that almost 80% of the recent purchases of water laser use it daily. The WTP is just one way we are looking to drive increased awareness. As I mentioned before, We hosted over 600 webinars, study clubs, and training events in the U.S. during 2022, including our BioLase Advancing Dentistry podcast launch. Due to the overwhelmingly positive response from the dental community and the rise in interest and popular demand, we recently announced our plans to launch a second season in 2023. Season two will continue to provide world-class education in a readily accessible and visually appealing format, focusing on trending topics for dental clinicians. New episodes will feature engaging stories from clinicians about the benefits of laser technology. The podcast will continue to be available on Spotify and Apple podcast platforms. Speaking of increased education, during the fourth quarter, we began constructing our new training facility and first-ever model dental office named Laser Smiles, and we expect both to open in April. These new spaces are conveniently located next to our corporate headquarters and will expand our ability to drive revenue in laser adoption by training practitioners in a hands-on dental environment. This is a novel opportunity to educate, train, produce marketing materials, create content, perform studies, and test new equipment. We're also inviting leading international dentists to spend time at our facility this year to work with us as we help ensure that our customers' international voice is heard as well. We also recently announced that we are further advancing our market awareness and educational initiatives with the launch of our new education web portal, education.biolase.com, which allows us to offer tailored education pathways through our Water Lase Academy and Epic Diode Academy, which are designed to offer dental clinicians an easy-to-navigate solution for laser education. Finally, the third prong of our growth strategy is getting corporate dentists and universities to adopt our lasers. We continue to develop stronger relationships with key dental schools across the country, and we have lasers in about one-third of the dental schools now. We have also integrated our water laser lasers into several postgraduate programs and plan to expand into many more programs over the next few years. We believe there is a large appetite among dental residents to utilize state-of-the-art technology in treating patients, and the introduction and reinforcement of technology during training are key to the adoption of laser dentistry with this new generation of dentists. Also, today, most new dentists are employed by corporate dentists or DSOs right out of dental school. We have ongoing trials with four of the five largest DSOs in the U.S. Our goal is for these new dentists to begin using our lasers while employed at the DSO, and for them to 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. We just completed the second phase of our trial with Heartland, and the results were, again, very positive. We continue to make solid inroads with the DSOs, and we believe that the DSOs can lead to far greater revenue for violets in the coming years. In summary, our growth plan is generating positive results, as evidenced by our strong revenue this year. Further, we have a very large opportunity and well-developed roadmap for future growth. Our sales team's success and continued performance give us continued confidence that we can achieve our operating objectives for 2023 and beyond as we set our sights even higher. I have one final comment before I hand the call over to Jennifer. I would like to congratulate the entire Biolase team for their two top Top Workplace Awards for 2022. The awards announced earlier this year and based solely on employee feedback, reaffirmed the cultural tone that runs throughout the organization. Our team genuinely cares about our customers and each other, and they are incredibly passionate about their role in advancing our objectives. I'm truly grateful for our exceptional team and their daily efforts. With that, I'll turn the call over to Jennifer to provide further details regarding our fourth quarter and full year financial results.