Evolus, Inc.

Greetings and welcome to the EvoList third quarter 2022 earnings conference call. At this time, all participants are on 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Erickson. Thank you. You may begin.

Thank you, Operator, and welcome to everyone joining us on today's call. With me today are David Modizetti, President and Chief Executive Officer, and Sandra Beaver, Chief Financial Officer. Our prepared remarks today will include forward-looking statements within the meaning of United States securities laws, and management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations, or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection, or forward-looking statement. Additionally, today's discussion will include non-GAAP financial measures which should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8K filed today with the SEC, and on our investor relations website at evelis.com. Lastly, following the conclusion of today's call, a replay will be available on our website at evelis.com. And with that, I'll turn the call over to David. Thank you, David.

We are very pleased to share with you our results for the third quarter. But before we get into the detail, I'd like to highlight four key takeaways. First, we are reiterating the top end of revenue guidance for the year, coming off of a very strong quarter of growth, where we believe our unit market share is now approaching 10%. Second, our reduction in operating losses was driven by the significant drop in royalty rates and disciplined operating expense management, clearing the path to profitability with our current cash on hand. Third, we launched in Great Britain this past quarter, and our European expansion is well underway. And lastly, we are uniquely positioned to attract commercial and development stage assets as we build out our product portfolio. Now let's get into the results of the quarter. As reported, revenue this quarter grew at an above-market 27% rate over last year. And when taking into account the above-normal incremental deferred revenue that resulted from the success of our Switch Your Talks campaign, year-over-year growth was much stronger. Demand for GVO remains strong this quarter, even with anticipated seasonality and the return of summer travel. And this positive momentum is continuing into the fourth quarter. We continue to expect 2022 to be another year of strong growth for Avalis and remain confident in the resilience of the aesthetic neurotoxin market. For this reason, we are reiterating the top end of our full year 2022 sales guidance range of $143 to $150 million. This equates to a year-over-year growth rate approaching 50%, which is roughly triple the projected toxin market growth rate. Perhaps the most significant highlight of the third quarter was a highly successful launch of our Switch Your Talks promotional campaign, which helped generate the largest number of new purchasing accounts since our initial product launch period and drove a record 100,000 consumer redemptions in our loyalty program. We expect Switch Your Talks to result in as many as 70,000 new Jevo patients, which could represent additional market share. The switch program began in September, and patients will continue to redeem their initial $80 switch savings by the December 31st deadline. This will drive continued momentum into the fourth quarter, which gives us confidence in a strong finish to the year. The success of the Switch Your Tox program required that we defer a higher-than-normal amount of revenue to account for the rewards that customers earned. As reported, sales for the third quarter grew 27% over last year to $33.9 million. If you consider the additional revenue we deferred, our year-over-year growth rate would have been even stronger than our reported rate. This performance clearly demonstrates that we are continuing to gain market share. Aided by Switch, in the third quarter, we added nearly 650 new accounts, the highest number of new accounts since our initial product launch period. This brings our total account base to more than 8,800 purchasing customers with a reorder rate that remains steady at above 70%. Our Eveless Rewards program grew by almost 50,000 in the quarter to nearly 450,000 members, which puts us on track to exceed a half a million total members by year end. Reward redemptions among new and existing members were evenly split. which demonstrates strong loyalty to Jouveau and illustrates the power of this program to motivate consumers. One of the things that continues to set Eblis apart is our co-branded marketing, and we are continuing to use this program to strengthen partnerships with our customers while building the Jouveau brand. Through a combination of mediums, including billboard, digital, and streaming television, customers can tailor their advertising program to maximize awareness of their practices and generate patient interest in Juveau. As we continue to expand this offering, we not only benefit from economies of scale, but we also improve the effectiveness of the program. Looking at the overall market, during the third quarter, Many of our customers reported lower procedural volumes in the summer as patients took vacations, but saw toxin appointments begin to ramp back up towards the end of the quarter as people returned. This suggests that we are beginning to see the return of the historical seasonal trends that are typical in the aesthetics industry. Against an uncertain economic backdrop, we are continuing to closely monitor the degree to which our customers might be impacted by changes in consumer behavior and continue to see favorable demand for neurotoxins despite softening trends for other aesthetic procedures. Although aesthetic toxin procedures are discretionary, we are reassured by two things. First, Neurotoxins remain one of the most affordable aesthetic procedures, and historical data shows that even during challenging economic times, toxin use continues to grow. Second, the toxin market is significantly under-penetrated, and the key growth driver of the future is the millennial demographic, which is an audience approaching the 40s and one that Evelis is specifically targeting with our Jevaux brand and extensive digital capabilities. Today, Evelis is in an enviable position with strong performance and a clear pathway to profitability. In the seven short quarters since our relaunch, we have grown to nearly 10% of the U.S. aesthetic toxin market and started building our footprint in Europe. We believe this has uniquely positioned us to attract both commercial and development stage assets that can expand our aesthetic footprint beyond neurotoxins. Now turning to our international business. Last month, we announced the launch of Nuceva in Europe, beginning in Great Britain, and the team is off to a great start. Interest among clinicians is strong. We are the newest company to enter in nearly a decade and believe customers are ready to embrace our unique approach to the aesthetic market. Most recently, we had a major presence at the CCR meeting in London, which is the UK's flagship event for medical aesthetics. Over the course of the two-day event, we engaged with a large number of potential customers and conducted several scientific symposia and presentations. Expanding into Europe is a significant milestone for Evelis, and we look forward to broadening our overall geographic presence even further. Before I turn the call over to Sandra, I'd like to provide a brief update on our Phase II Extra Strength Study. As previously reported, the last patient was enrolled at the end of the second quarter, and patient follow-up is ongoing at our study site. Based on our progress, we now plan to present an interim data analysis in early 2023. An abstract has been accepted for a podium presentation at MCAS in Paris, one of the largest aesthetic meetings in the world, which will take place at the end of January. We look forward to demonstrating the longevity of our extra-strength dose within the next 90 days. With that, I'll hand it over to our CFO, Sandra Beaver, who, as you know, joined Evelis about 10 weeks ago. With her strong operational experience, Sandra has been able to hit the ground running and quickly learn our business. She's already become an integral part of the team, and we're thrilled to have her on board. Sandra?