Biolase, Inc.

Good day and welcome to the Biolace first quarter 2023 financial results conference call. Please note this call is being recorded. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. If you would like to enter the queue at any time, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from queue at any time. I would now like to turn the conference over to Todd Furley 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 its first quarter ended March 31st, 2023. On the call today from BioLaser, John Beaver, President and Chief Executive Officer, and Jennifer Bright, Chief Financial Officer. John will review the company's operating performance for the first 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 session. including forward-looking statements regarding the company's strategic initiatives and anticipated financial performance. These forward-looking 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, May 11, 2023. These risks are discussed in the company's filings with the Securities and Exchange Commission. A replay of this conference call will be available on the Biola'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 2023 first 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, which will be filed with the SEC. The tables we've provided in today's news release offer additional 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 and support in Biolase. Coming off the year in which we excelled and achieved significant year-over-year growth, our in-line first quarter results demonstrate our continued business momentum, even in this tough environment. We believe the continued efforts and investments that we are making are and will continue to pay off in the coming quarters, as is evidenced by the rising demand and increasing number of dentists that are attending and benefiting from our novel training and education programs. The level of enthusiasm can be felt throughout the organization, which is a byproduct of success we are seeing from our go-to-market initiatives. The positive response from the dental community is leading to increased sales of our industry-leading lasers. Despite the challenging economy and the capital equipment headwinds many companies are experiencing, we continued our growth momentum with total revenue increase in 3% year-over-year. This represents our ninth consecutive quarter of year-over-year growth. During the quarter, we experienced a return of international revenue growth, with our international laser sales increasing 22% year-over-year, the first time this has occurred since the pandemic. We also reported record consumable sales during the quarter, with U.S. consumable sales up 19% year-over-year, driven by increased procedures using our BioLase laser systems. Moreover, in addition to new dentists coming on board, we also experienced a historic shift in increased utilization among existing dentists as they migrate more procedures to our lasers. This record quarter in consumable sales further demonstrates the impact more frequent, higher quality training and pre-sale training programs, such as our wire laser exclusive trial program, or WTP, can have on our consumable business. During the quarter, we continue to see success with our WTP as a percentage of dentists purchasing after the trial grew to over 60%, representing a 20% year-over-year increase. This program, along with the rollout of our Water Laser Academy and Epic Academies, generated increased adoption of our laser technology in the U.S. in the first quarter, with 58% of our sales coming from new customers and 33% of sales coming from dental specialists. We are demonstrating growth across all of our key performance metrics, so our strategy of investing now to accelerate adoption and utilization is growing our top line, and we believe the rate of recurring revenue and higher margins will translate to the bottom line as well, which is why we continue to expect full-year revenue growth of at least 25% and to achieve profitability on an adjusted EBITDA basis. Rise in demand for industry-leading dental lasers is being driven by our intensified focus on education and training and the benefits our lasers provide to dentists and their patients. Over the past few years, our goal has been to raise awareness of our dental lasers to the overwhelmingly large part of the market not currently using lasers. Not because they said no, but because they're just not familiar with our best-in-class dental lasers. With several peer-reviewed papers and studies and our focused go-to-market efforts, dental practitioners are now coming to BioLase as they look to upgrade the dental practices and improve patient outcomes. I believe this represents a real inflection point and will drive our growth for many years to come. BioLase currently has approximately 60% share of the worldwide all-tissue dental laser market, represented by our WaterLase brand. We are the go-to brand that represents quality, reliability, and after-sales service, training, and education. However, with less than 10% of dentists in the U.S. and less than 2% of dentists outside the U.S. currently using dental lasers, we need to do a better job to reach the rest of the dentists, and I believe our results demonstrate that we are moving the needle. 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 building awareness of our industry-leading laser's benefits to dentists and their patients through increased education and training. During 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. In the first quarter, we held over 150 educational and training events, an increase of over 25% from the first quarter of 2022. As a result of these initiatives, we are generating increased marketing qualified leads, and the sales team is hard at work to convert these to sales. Since 2018, the number of marketing qualified leads, or NPULs, increased by 400% to over 4,000 in the US in 2022, the bulk of which has been more recent due to our increased efforts. During the first quarter of 2023, the number of MQLs continued to increase, approaching a 50% increase from the year-ago period. 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 the adoption of 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 generated from the procedures done with our laser systems. We have a well-established three-pronged strategy to increase market adoption of our lasers. The first is to get more dental specialists to use our lasers. In 2021, BioLase formed 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 superior patient outcomes. In 2023, we combined all of these specialist academies into two academies, one for each of our product families, the Water Lase Academy and the Epic Academy. We believe this will not only further improve and simplify training for the specialist, but also give the general practitioner who's interested in adding more specialty procedures to the practice an avenue to pursue further training. Combined, these dental specialist markets represents 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. 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 their practices. 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 USGPs adopt our lasers, it would generate $225 million in laser revenue, not including the follow-on consumables. Our Water Laser has over 80 FDA cleared indications or procedures that dentists can perform using our laser. Doing just two additional procedures a week would generate a 200% return on the investment in our laser. The more training and education we do through Water Laser's exclusive trial program, the more success we believe we'll have in driving laser adoption. As I mentioned earlier, we saw our Ward Laser Exclusive Trial Program success rate increase over 20% year-over-year to over 60% so far this year. Our goal in 2023 is to host approximately 35 of these programs. It's a win-win for GPs because a big part of the Ward 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. That along with better patient experience is motivating dentists to incorporate water laser technology into the practice. The more training and education we do through water laser exclusive trial program or other events, the more success we will have in driving laser adoption. Speaking of increased education, last month we opened our new training facility and plan on opening our first ever model dental office named Laser Smiles in the third quarter. These new spaces are 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, train, produce marketing materials, create content, perform studies, and test new equipment. 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 We have lasers in about a third of the dental schools right now. We've integrated our water laser lasers into several postgraduate programs and plan to expand into 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 a corporate dentist or DSO 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 continue to make solid inroads with the DSOs and believe that DSOs can lead to even a far greater revenue for biolays in the coming years. In summary, we have a very large opportunity and our well-developed plan to capture this growth is generating the desired positive results. We are the industry leader, and I believe the increased education training programs will enable us to succeed well into the future as the level of inbound interest is rising. Furthermore, the success of the waterways exclusive trial program gives us continued confidence that we can achieve our revenue and profitability objectives for 2023. With that, I'll turn the call over to Jennifer to provide further details regarding our first quarter results.