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spk13: Good day and thank you for standing by. Welcome to Aveda Medical's second quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Jessica Ekberg, Director of Investor Relations. Please go ahead.
spk01: Thank you, Operator.
spk00: Welcome to Avita Medical's second quarter 2023 earnings call. Before we begin, let me remind you that this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward-looking statement. Please review VITA Medical's most recent filings with the SEC, specifically the risk factors described within the Form 10-Q for the quarter ended June 30, 2023 for additional information. Any forward-looking statements provided during this call are based on management's expectations as of today. Aveda Medical's press release with second quarter 2023 results is available on our website, www.avedamedical.com, under the Investors section. A recording of today's call will be available on our website by 5 p.m. Pacific time today. Joining me on today's call are Jim Corbett, Chief Executive Officer, and David O'Toole, Chief Financial Officer. I will now turn the call over to Jim for his comments.
spk03: Good afternoon and thank you for joining us today. I will begin today's call by discussing highlights of the second quarter followed by an update on 2023 priorities. Following this update, you will hear commentary on our financial performance from our new CFO, David O'Toole. David is an accomplished financial executive with extensive experience in both public company operations, and capital markets. David most recently served as a CFO of Opiant Pharmaceuticals, a biopharmaceutical company developing treatments for addiction and drug overdose, which was acquired by Indivior in March of 2023. Please join me in welcoming David. Now, turning to the quarter, we had an extraordinary second quarter with two landmark FDA approvals and a pivotal FDA submission. These approvals and submission are critical to advancing our platform and will continue to enable us to unlock the growth potential of Aveda Medical. I will discuss these in more detail later on this call. In addition to our FDA successes, we continue to deliver strong financial results with commercial revenues of $11.7 million, which is a 42% increase over the same period in 2022 and was at the top end of our guidance of $10.7 million to $11.7 million. This 42% growth is an acceleration of our first quarter year-over-year growth of 40%, which itself was an acceleration of our fourth quarter year-over-year growth of 37%. We have accomplished this with virtually no new burn center accounts indicating increased adoption within our existing accounts. As mentioned on prior calls, our commercial revenue is comprised of two components, U.S. revenue and foreign revenue. Japan represents a majority of the foreign revenue lineup. With that overview of our recent performance, let's now move on to our 2023 priorities and activities that continue to transform our business. On June 7, we achieved a major milestone as we received FDA approval for the use of resell to treat full-thickness skin defects. Although we had a high level of confidence in the FDA's approval of the initial scope of the PMA supplement, which was based on our pivotal study for soft tissue repair and reconstruction, the FDA's approval represents a significantly broader label for resell than what we initially anticipated. This label further validates the effectiveness of resell and opens up new treatment options. To fully appreciate the indication for full thickness skin defects, we need to take a look back at the original soft tissue repair market. When we submitted our PMA supplement for soft tissue repair and reconstruction, we expected the approval to cover traumatic wounds like degloving and surgical wounds such as fasciotomy and necrotizing fasciitis. These wounds represent approximately 127,000 eligible procedures across the US trauma centers. The expansion into trauma centers allows our commercial team to capture the remaining portion of the burn market that exists outside of our existing burn center served market. Plus, our initial target market of approximately 127,000 eligible soft tissue repair procedures and 35,000 eligible burn procedures represents a TAM of over $1.2 billion. As a reminder, this represents a six times increase of our existing burn center served market. The FDA approval for full plate and the skin defects includes these 127,000 eligible procedures plus traumatic wounds like gunshot wounds and traumatic hematomas surgical wounds such as muscle-only flaps, laparotomies, chronic wounds that cover DFU and VLU, non-pressure ulcers and pressure ulcers, and surgical excisions of cancer. These wounds represent at least 264,000 eligible procedures. It is important to note that this market size is derived from third-party claims and internal analysis based on skin graft CPT codes tied to diagnosis codes of specific wound types. Further, as a soft tissue repair indication uses the same reimbursement codes as burns, so does the broadened label of full thickness skin defects. In other words, our new FDA approval, our expanded indication has in-hospital reimbursement through a DRG and outpatient reimbursement through a transitional pass-through code. On June 8, the day after we received FDA approval, we initiated the commercial launch of full thickness skin defects and the additional eligible burn procedures with our expanded US commercial organization. To those new to the Aveda medical story, in the second quarter of 2023, we initiated the expansion plan of our commercial organization, which would more than double our original team of 30 to 70. As previously noted, This will result in a peak operating expense as a percent of revenue in Q3 2023. However, I emphasize that our contribution margin on a new commercial professional is breakeven with approximately five resell kits sold per month per individual. Prior to this quarter, the average productivity of a direct rep exceeds 20 kits per month. Last quarter, I call this weaponizing our gross profit to enhance market adoption and penetration where the sales force pays for itself quickly. Turning to the additional 264,000 eligible procedures related to full thickness skin defects that I mentioned, we have analyzed third-party claims reports and conducted an internal analysis of these eligible procedures. Consequently, we are currently developing our strategic plans to pursue this significantly larger market. Similar to full-thickness skin defects, we expected a June FDA approval for vitiligo. In line with the 180-day review period through the Breakthrough Device Program, we received approval of Resel for the repigmentation of stable, depigmented vitiligo lesions on June 16th. This approval represents a first-in-class treatment of repigmentation through the delivery of normal, healthy skin cells. The approval was based on a pivotal trial for vitiligo, which met both safety and efficacy primary endpoints. However, the study did not evaluate the mental health benefits and the reduction of derivative healthcare costs associated with the treatment of vitiligo. While vitiligo is not contagious, nor is it fatal, it is an autoimmune disease. Patients with the highly visible chronic condition have a high prevalence of psychiatric issues including body dysmorphia. The mental health conditions and the derivative costs of treatment are often high and without a cure and recur throughout the patient's lifetime. For these reasons, we are conducting a post-market study of 100 patients called TONE, where we will seek to demonstrate both the repigmentation and mental health benefits of vitiligo treatment by resell and the reduction of associated healthcare costs. Following the completion of the six-month study analysis, we will pursue a commercial payer policy. To do this, we plan to combine the tone data with third-party broadly developed economic costs of treating vitiligo, which focus on the cascade of mental health issues to demonstrate that treating vitiligo with Resolve greatly reduces the lifetime healthcare costs of vitiligo. It is our goal to secure reimbursement in 2025. Now, an update on ResellGo. As previously promised, on June 30th, we submitted a PMA supplement for ResellGo, which maintains the FDA breakthrough device designation. ResellGo revolutionizes the current manually operated resell device by eliminating the need for manual desegregation of the autologous samples. Automating the process of cell desegregation will substantially reduce training requirements allowing us to leverage selling time more effectively. Additionally, it will ease the burden of additional training required by physicians and operating room staff to manually perform desegregation, which we predict will lead to an increased adoption across our indications, further amplifying our impact and transforming of the lives of patients. Moreover, Result Go is a critical component of our international strategy. which we will be discussing in more detail on our third quarter call. As such, ResellGo is arguably the most significant enabler for our platform, which we believe will greatly accelerate our growth. Lastly, given our June 30 submission under the Breakthrough Device Program, the submission will receive prioritized interactive review with an expected December 27 approval and subsequent launch on January 2nd, 2024. With respect to 2023 guidance for the third quarter of 2023, we expect commercial revenues to be between $13 million and $14 million. At midpoint of this guidance, this reflects a growth rate of approximately 50% over the prior year. To that end, we are increasing our 2023 annual revenue guidance from $49 million to $51 million to $51 million to $53 million, which at midpoint of guidance would reflect a 53% growth over 2022. Looking ahead, our intent is to provide 2024 guidance on our fourth quarter call in February 2024. In closing, we continue to execute the 2023 priorities We have laid out and remain committed to delivering strong results. With that, I'd like to turn the call over to David.
spk04: Thank you, Jim. It is a pleasure to be here and be part of the Aveda medical team. In the three months ended June 30th, 2023, our commercial revenue increased by 42% to $11.7 million, compared to $8.2 million in the same period in 2022. The increase in commercial revenue was largely driven by broader surge in usage as well as deeper penetration, particularly within smaller burn procedures, along with commercial sales with our partner Cosmotech in Japan. Although our expanded commercial team was in place for the launch of full thickness skin defects on June 8th, there was no meaningful revenue attributable to the commercial expansion in the quarter. We expect the expanded commercial team will begin to have an impact in the third quarter. Gross profit margin was 81% compared to 83% in the same period in 2022. The decline was primarily attributable to a decrease in product production in one month of the quarter caused by the need to qualify new vendors for certain manufacturing components. However, throughout the process of strengthening our supply chain, we maintained our perfect service level. Since then, we have resumed manufacturing volume to keep pace with our expected third and fourth quarter sales growth. As we have emphasized previously, approximately 50% of our product costs are fixed, attributable to the manufacturing facility, which means our gross margin will increase as product volume increases. Further, I would like to note that the decrease in gross margin for this quarter was unusual. and we fully expect our third quarter margin to show an increase compared to the gross margin in the third quarter of last year. Total operating expenses for the quarter were $21.2 million compared to $13.9 million in the same period in 2022. The increase in operating expenses was primarily due to the cost related to the significant increase of our commercial organization in preparation of the full-thickness skin defect launch during the quarter. The additional sales and marketing costs included approximately $2.9 million in employee-related expenses including wages, commissions, and benefits, $1.4 million in seminars, promotional costs, and travel expenses for both the existing and expanded commercial team, and $400,000 in recruiting expenses. In addition to the increased sales and marketing expenses noted, research and development expenses increased by approximately $2 million due to the ongoing development of ResellGo and costs associated with our medical science liaison team. As Jim noted previously, the expansion of our Salesforce team will result in peak operating expenses as a percentage of revenue in Q3 2023. Net loss in the quarter was 10.4 million, or a loss of 41 cents per share, compared to a net loss of 6.3 million, or a loss of 25 cents per share in the same period in 2022. As of June 30th, we had cash, cash equivalents, and marketable securities of approximately 68.8 million, compared to 86.3 million as of December 31st, 2022. Before we open the line up for questions, I'd like to emphasize our increased revenue guidance for 2023. For the third quarter, we expect commercial revenues to be between $13 and $14 million. Additionally, we are increasing by $2 million our annual revenue guidance for 2023 to now be in the range of $51 million to $53 million. With that, we thank you for your time, and now I will turn the call back to the operator for your questions.
spk13: If you'd like to ask a question at this time, please press star 1 1 on your touch-tone telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Our first question comes from the line of Joshua Jennings with TD Cowan.
spk19: Joshua Jennings Hi. Good afternoon. Thanks, Jim and Dave. It's great to see the FDA approvals. come in and the strong 2Q results. And Dave, congratulations on the CFO seat at Aveda. Thank you, Josh. Absolutely. I wanted to start off and just, I think, Jim, you talked about the broader label that you secured for the soft tissue data. Fantastic outcome. I think you mentioned that you're potentially rethinking the commercial organization structure with many more indications opened up. And anything you can build on that, out on that, just to help us understand how you're thinking?
spk03: Yeah, I think that's a terrific question because it was, you know, the label indication is significantly broader than what we anticipated. So, what we're doing, I think, first and foremost is staying focused. The previous understanding under what we believe was the soft tissue repair and reconstruction, which is 127,000 procedure expansion. For the time being, we're staying right focused on that because there's plenty there for us to grow and get the momentum we want and build the underlying adoption. On the other hand, there is a number of applications that come under full-thickness skin defects that create a much bigger opportunity for us. So rather than rush into that, because we have no need to, we're going to spend some time assessing the, so to speak, low-hanging fruit, in lack of a better word, and conduct some clinical research on some of these spots . We have some that's anecdotal, so we're bringing that all together. And I think by the time Q4, which really is Q3, the November call comes around, we'll have some of these new indications circled, and we'll have a strategy about how to go about them. So it's really just great news. It just fills our pipeline. We stay focused. I think for us to try to adjust at the final moment before launch might cause us to defocus and be less effective. And right now we've been rewarded by being a very focused organization about how we go about doing things. So look forward to some more insight as Q4, really Q3 call comes around.
spk18: Understood. Thanks for that. And
spk19: And just, I guess, a strategy question. I mean, just noticing you're moving from focus on burn centers to now incorporating hospitals, trauma centers, outpatient setting is on the list, and also potential physician office setting. I mean, is there an opportunity to not in the near term, we have a lot in front of you here in the short term, but over time to build out the portfolio and look at some external business development opportunities. Thanks for taking the questions.
spk03: Yes, Josh. There certainly is. We're expanding immediately into the trauma center world, and that incorporates the burn centers. As you know, half of the burn centers are already Level 1 trauma center, so it helps us get off to a fast start, but it is in our gun sight so to speak that there is Technologies that are used with resell that are used before and after resell that are very important to the physicians who are treating the patients that resell is applicable to we have a I would describe a significant effort underway to identify some technologies that fit that category. And we have some work underway to choose them. And again, I think that will show some fruits of that labor by the November call. So it is a focus because, you know, we are a very consultative sales force. And as such, the physicians interact with our sales teams. For our sales team to have some other technologies that are applicable to their patients is very common sense from a portfolio business model point of view. And it will basically cost very little to execute in terms of cost of sales because it will be our same sales team. So I think your insight there is right on the money.
spk10: I appreciate those answers. Thanks, Jim.
spk13: Our next question comes from the line of Brooks O'Neill with Lake Street Capital Markets.
spk05: Good afternoon. I appreciate the comments you made to Josh, but I'm curious if there's any color at all with regard to the response or any approach you've made to level one and level two trauma centers and doctors who operate there.
spk03: Thanks, Brooks. I think it's On one hand, early, but on the other hand, we're six weeks in since we started our selling activity. What we are seeing is an increased activity in all the accounts that are outside burn centers, and we're achieving VAC approvals, and we're getting cases done. And one of the reasons we raised our guidance is because of that early momentum and And actually, the consequence of our early preparation, because when the approval came, we were ready. So I think we're feeling quite bullish about the remainder of the year and 24 ahead of beyond that. So without specifics, that's the experience we're having.
spk05: Great. And then I'm curious, I have some sense that there's been at least some opportunity opened for you to apply resell to smaller burns and pediatric burns. Have you had any success in those areas so far?
spk03: Well, we have, and it's a difficult thing to measure, right, because the hospital buys a resale kit. We don't get necessarily clear insight to who they use it on, but we do get it and we do receive that feedback anecdotally. And I think you can see it mostly on a macro level. For us who have been growing actually faster against a larger base the last three quarters, without adding new accounts is very reflective of a penetration event going on with this technology resale. So we are getting those cases. It's difficult to quantify them because of what I just described, but the macro numbers validate that there is just simply increased adoption of resale over time.
spk05: Great. And then I just wanted to ask you one more, and it really relates to your personal philosophy, Jim, about providing guidance. And, you know, in today's world, some people are trying to sandbag and put out numbers that you can easily beat. I think you've described a somewhat different approach of trying to build credibility. But could you just talk a little bit about how you view the provision of guidance for analysts and investors?
spk03: Yeah, it's a rather important question, Brooks. I appreciate you asking. We intend, when we set guidance, to hit the middle. That is what we believe when we set it. We're realistic, and that is why we bracket it. So, in this case, we finished well ahead of the middle. 11.2 million would have been the middle. We had a stronger end of the quarter. Some of that is obviously reflected of three weeks of June. We had the increased indication already and we were preparing. So we had some early adoption that contributed to that. So my, my personal philosophy is to be within the range of guidance for sure. Perfection is a dollar over the middle where we get the middle, but we're on the upper side of it. And, you know, The team said afterwards at the end of the quarter, they said, how do you feel the quarter went? I said, ah, we missed guidance. We didn't get it quite right. We set it too low. So you should expect us to be within guidance. In the middle is our goal. And that's how we think about it. And it is about credibility. I would like our investors and analysts who follow us to be able to depend on what we say and what we do and not believe that we're trying to play it easy. We're here to grow this company and not to hold back about it. So you won't find the sandbagging in our practice.
spk05: That's great. I'm pretty excited about the opportunity you have, so I look forward to seeing strong results in the back half of the year.
spk07: Thank you, Brooks.
spk13: Our next question comes from the line of Matthew O'Brien with Piper Sandler.
spk09: Hey, can you guys hear me okay?
spk03: Very well, Matt. How you doing?
spk17: Oh, good. Thanks. Thanks for taking the question. So Jim, maybe the starter for you to follow up on Brooks's question, the guidance raised, you know, you beat, you know, you just mentioned beating the midpoint by about, you know, half a million dollars. You're taking the guidance up by about 2 million in total. So there's an extra million five in there, roughly. for the year. And I'm just wondering, you know, you'd always expected trauma to be in there. It's not supposed to be in there, but what are you seeing that's giving you even more confidence in, you know, in the business? And then is it a training thing? Are you seeing a bunch of new centers you can really point to that are coming on faster than you thought you maybe you thought we would get into the back committee, just a little bit more detail on, on why the guidance raise and what exactly you're seeing from a, enthusiasm perspective on soft tissue?
spk03: You know, it's a multi-dimensional question, Matt, but let me try and take you through my thinking process here. First and foremost, when we set original guidance, yes, we were expecting approval in June. That said, despite having breakthrough device designation, you don't know for sure that you got it until you got it, although we were quite confident, as you know. So that is one element. The second element that led to the, so therefore when it comes, you can feel comfortable counting what you expect from it. Now, what reinforced that for us is we took the move, as you recall in Q2, to fully ramp up and train the team. And so when this approval came on time, there was actually no space between the approval and our showing up promoting the full thickness skin defect broader indication on the following day. So when you combine those and then the early response is very positive, again, wanting to be predictable, it was very clear to us that our prospects were stronger and that is reflected in the increase in guidance.
spk17: Okay. Just maybe just a little bit finer point on that, Jim. Is there anything running ahead of schedule versus, and I know you got the approval a little bit ahead of schedule, but like training or center ads or anything along those lines that's ahead of schedule you can point to specifically?
spk03: I'd say the most ahead of schedule definable element was having the team fully hired, fully trained. And in our market, you know, in our construct, we certify a salesperson to be able to support a case. And when June 7th came, every new rep was ready to do that. So being fully prepared, there's no ramp up. You're right out in the field. And I think that's the most tangible thing I can point to.
spk08: Okay. Fair enough.
spk17: And I'd love to get David involved here as well. And again, David, congrats on the new role. Thank you. Thank you. You've been very clear as far as the spend goes in the back half of this year. Do we get to a point where there's leverage on the P&L in 24, or is it still going to be a deleveraging situation as you're building this market next year? and just talk maybe a little bit about your cash position and potential needs there. Thanks.
spk04: Yeah, so thank you for the question. I appreciate it. I'll take the second question first around cash. As of June 30th, we have a solid balance sheet. We've already indicated on a number of calls and discussions that we are in the process of developing our 2024 plan. which will include a number of things that we'll have to take into consideration as we move forward, and that is we will be launching, if it's approved, ResellGo, which will need additional working capital. We'll need to build inventory for that. We will also be looking at our strategy for Vitiligo, and we will have other working capital needs. All of those will come out of our 2024 operating plan, which we will give more guidance in February once we have that developed. But I can say right now that we have a solid balance sheet as of June 30. As far as leverage, we've talked about when we think a salesperson is crosses over as far as paying for himself, and that is himself or herself, and that is when they're selling around five units per month. And a fully trained salesperson is usually selling around 20 units per month. So as Jim indicated, we hit the ground running on June 7th. And so we think that we're going to get leverage from those new salespeople quickly. How quickly that will be, hard to say. It's still early days. But as we move into 2024, you would expect that all of the sales field professionals are selling at least enough to cover what their costs are.
spk09: Perfect. Thanks so much.
spk13: Our next question comes from the line of Ryan Zimmerman with BTIG.
spk16: Good afternoon. Thanks for taking the questions and congrats on the quarter. David, nice to speak with you. So maybe just to start. You know the margin guidance is encouraging, especially given the bounce back expectations in the back half of the year. But I'm just wondering, David, you can kind of talk about. you know, maybe margins longer term. We got Resell Go coming into the picture in 24, and just how you think about margins, you know, over the longer term, maybe trending towards the higher end of your guidance or potentially even above that as we think about gross margin.
spk04: Yeah, thank you for the question. I appreciate it, and thanks for following us. We've talked about this before, and... The biggest component of our cost of goods sold is the manufacturing facility that we have, and it's fixed, and it's 50% of our cost of goods sold. That's not going to change as we move into Resell Go with, you know, within percentages. It's, for the most part, 50%. So as we look forward, and we've talked about this, as our volume increases, and we would expect our volume to increase over the next 18 months with the sales force fully in the field. And so as it's either for the ease of use product that we have now or the resell go cartridges that we will when it is approved in 2024, that volume as we look into 2024 will increase. and our margins should go up accordingly. We will give more guidance in 2024 once we've developed our plan, but you can see a situation where we would be approaching a 90% margin as long as our volume, our sales, are in line with what our expectations are.
spk16: Okay, fair enough. It's very exciting. I mean, those are fantastic margins. I'm looking forward to it. Jim, turning to the early launch in full thickness skin defects, can you just share anecdotally, given that you have been able to see early case adoption, what specific cases are doctors, you know, most comfortable with, kind of, you know, if there's a trend in terms of utilization of this new you know, indication where you're seeing success. And then, you know, conversely where you may need to educate physicians about the potential and the latitude with which the label gives you for the new indication.
spk03: Ryan, that's a big question. No, but let me give it a shot. First, let me try and get specific. We are having a, multiplying week-over-week effect of both new accounts being added and new vac applications underway so every week the numbers move meaningfully in this short time we've had so that's a tangible way for me to speak about it the cases are still pretty broad because there is a a lot of differentiation among them. The ones the physicians, so to speak, capture most easily are cases like degloving, like necrotizing fasciitis. Those types of cases are very obvious resell cases, and they quickly gravitate to them. I don't have macro trends or numbers yet on those, because as you know, it's been just several weeks. But we see that they aren't, what's the right word? They're quite aware of resell. We've done some market prep during the time, because we had that Salesforce was principally in place and going through training and not promoting for in excess of four weeks on average before the launch. So they had time to condition the market, identify the high grafting physicians, because you can do that through CPT analysis. So I think the bullishness that we feel is reflected in A, But we did finish the high end of our guidance. As you know, I shoot for the middle, so high end means it went a little bit better than I planned for. And in the raising of guidance for the year, I think reflect that as well.
spk11: Okay. Good stuff. Looking forward to seeing this play out. Appreciate it.
spk06: Thank you. Thank you.
spk13: Our next question comes from the line of Ross Osborne with Cantor Fitzgerald.
spk12: Hi, guys. Congrats on the quarter, and thanks for taking our questions. So maybe just circling back to sales rep productivity, just want to make sure I'm on the same page. So in a prior question, you replied there's not really a ramp for new sales reps to cover their cost. But in terms of hitting your 1Q average productivity of about 20 kits per month, How long do you think it would take for these new reps to be at that more efficient level?
spk03: It's a good question. I have a different way to characterize that metric for you. So the first element is not time-based. It's just cost-based. So it takes five resale kits per month to cover the cost of the sales rep. So we look at that as an investment. So we hire a sales rep. We know getting to five, everything after that becomes contribution margin to the rest of the business. We do have a range of when that occurs. It ranges from as quickly as three or four months. It takes on some, in some cases in a very brand new territory with no prior resale might take six months. That's a range of when they get from cost break even to contribution margin positive. As far as the 20 reference, to put it in context, we have, when we went to this expansion, our average rep exceeded 20 per month. So that was shared to put in context that five. So once you get to five, on your way to 20, and when you get to 20, we're in really great shape. So what we expect is that this wave of Salesforce hiring will be contribution margin positive within the next four to six months. Is that helpful to your question?
spk12: Yes, much more clear. Thank you very much for that. And then one more, if I may, and apologies, we're juggling a couple calls, but are you able to break out, you know, Japan, Australia, and UK? I realize Japan's probably the highest contribution to revenue outside of the US? And if not, would you be able to tell us what percentage of total revenue the US accounted for? Okay.
spk03: So, in our international revenue, Japan is well over 90% of it. What we do in Australia is a rather strategic remnant that from a few users who we've kept supported in the same for Europe now there is an international strategy coming in the November call which will of course I don't want to say fourth quarter call because that's really the February call but in November I've been guiding to so I think you can expect that our revenue for the year in Japan will We have no reason to express other than the current year-to-date run rate as a way to think about that revenue.
spk10: Got it. Well, thanks again for taking our questions and congrats on the quarter. You bet. Thank you.
spk13: That concludes today's question and answer session. This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you. you Thank you. Thank you. music music Thank you. Thank you. Good day and thank you for standing by. Welcome to Abita Medical's second quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Jessica Eckberg, Director of Investor Relations. Please go ahead.
spk01: Thank you, Operator.
spk00: Welcome to Avita Medical's second quarter 2020 earnings call. Before we begin, let me remind you that this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward-looking statement. Please review VITA Medical's most recent filings with the SEC, specifically the risk factors described within the Form 10-Q for the quarter ended June 30, 2023 for additional information. Any forward-looking statements provided during this call are based on management's expectations as of today. Aveda Medical's press release with second quarter 2023 results is available on our website, www.avedamedical.com, under the Investors section. A recording of today's call will be available on our website by 5 p.m. Pacific time today. Joining me on today's call are Jim Corbett, Chief Executive Officer, and David O'Toole, Chief Financial Officer. I will now turn the call over to Jim for his comments.
spk03: Good afternoon, and thank you for joining us today. I will begin today's call by discussing highlights of the second quarter, followed by an update on 2023 priorities. Following this update, you will hear commentary on our financial performance from our new CFO, David O'Toole. David is an accomplished financial executive with extensive experience in both public company operations, and capital markets. David most recently served as a CFO of Opiant Pharmaceuticals, a biopharmaceutical company developing treatments for addiction and drug overdose, which was acquired by Indivior in March of 2023. Please join me in welcoming David. Now, turning to the quarter, we had an extraordinary second quarter with two landmark FDA approvals and a pivotal FDA submission. These approvals and submission are critical to advancing our platform and will continue to enable us to unlock the growth potential of Aveda Medical. I will discuss these in more detail later on this call. In addition to our FDA successes, we continue to deliver strong financial results with commercial revenues of $11.7 million, which is a 42% increase over the same period in 2022 and was at the top end of our guidance of $10.7 million to $11.7 million. This 42% growth is an acceleration of our first quarter year-over-year growth of 40%, which itself was an acceleration of our fourth quarter year-over-year growth of 37%. We have accomplished this with virtually no new burn center accounts indicating increased adoption within our existing accounts. As mentioned on prior calls, our commercial revenue is comprised of two components, U.S. revenue and foreign revenue. Japan represents a majority of the foreign revenue line item. With that overview of our recent performance, let's now move on to our 2023 priorities and activities that continue to transform our business. On June 7, we achieved a major milestone as we received FDA approval for the use of resell to treat full-thickness skin defects. Although we had a high level of confidence in the FDA's approval of the initial scope of the PMA supplement, which was based on our pivotal study for soft tissue repair and reconstruction, the FDA's approval represents a significantly broader label for resell than what we initially anticipated. This label further validates the effectiveness of resell and opens up new treatment options. To fully appreciate the indication for full thickness skin defects, we need to take a look back at the original soft tissue repair market. When we submitted our PMA supplement for soft tissue repair and reconstruction, we expected the approval to cover traumatic wounds like degloving and surgical wounds such as fasciotomy and necrotizing fasciitis. These wounds represent approximately 127,000 eligible procedures across the U.S. trauma centers. The expansion into trauma centers allows our commercial team to capture the remaining portion of the burn market that exists outside of our existing burn center served market. Thus, our initial target market of approximately 127,000 eligible soft tissue repair procedures and 35,000 eligible burn procedures represents a TAM of over $1.2 billion. As a reminder, this represents a six times increase of our existing burn center served market. The FDA approval for full plate in the skin defects includes these 127,000 eligible procedures plus traumatic wounds like gunshot wounds and traumatic hematomas surgical wounds such as muscle-only flaps, laparotomies, chronic wounds that cover DFU and VLU, non-pressure ulcers and pressure ulcers, and surgical excisions of cancer. These wounds represent at least 264,000 eligible procedures. It is important to note that this market size is derived from third-party claims and internal analysis based on skin graft CPT codes tied to diagnosis codes of specific wound types. Further, as a soft tissue repair indication uses the same reimbursement codes as burns, so does the broadened label of full thickness skin defects. In other words, our new FDA approval, our expanded indication has in-hospital reimbursement through a DRG and outpatient reimbursement through a transitional pass-through code. On June 8, the day after we received FDA approval, we initiated the commercial launch of full thickness skin defects and the additional eligible burn procedures with our expanded US commercial organization. For those new to the Aveda medical story, in the second quarter of 2023, we initiated the expansion plan of our commercial organization, which would more than double our original team of 30 to 70. As previously noted, This will result in a peak operating expense as a percent of revenue in Q3 2023. However, I emphasize that our contribution margin on a new commercial professional is breakeven with approximately five resell kits sold per month per individual. Prior to this quarter, the average productivity of a direct rep exceeds 20 kits per month. Last quarter, I called this weaponizing our gross profit to enhance market adoption and penetration where the sales force pays for itself quickly. Turning to the additional 264,000 eligible procedures related to full thickness skin defects that I mentioned, we have analyzed third-party claims reports and conducted an internal analysis of these eligible procedures. Consequently, we are currently developing our strategic plans to pursue this significantly larger market. Similar to full-thickness skin defects, we expected a June FDA approval for vitiligo. In line with the 180-day review period through the Breakthrough Device Program, we received approval of Resel for the repigmentation of stable, depigmented vitiligo lesions on June 16th. This approval represents a first-in-class treatment of repigmentation through the delivery of normal, healthy skin cells. The approval was based on a pivotal trial for vitiligo, which met both safety and efficacy primary endpoints. However, the study did not evaluate the mental health benefits and the reduction of derivative healthcare costs associated with the treatment of vitiligo. While vitiligo is not contagious, nor is it fatal, it is an autoimmune disease. Patients with the highly visible chronic condition have a high prevalence of psychiatric issues including body dysmorphia. The mental health conditions and the derivative costs of treatment are often high and without a cure and recur throughout the patient's lifetime. For these reasons, we are conducting a post-market study of 100 patients called TONE, where we will seek to demonstrate both the repigmentation and mental health benefits of vitiligo treatment by resell and the reduction of associated healthcare costs. Following the completion of the six-month study analysis, we will pursue a commercial payer policy. To do this, we plan to combine the tone data with third-party broadly developed economic costs of treating vitiligo, which focus on the cascade of mental health issues to demonstrate that treating vitiligo with Resolve greatly reduces the lifetime healthcare costs of vitiligo. It is our goal to secure reimbursement in 2025. Now, an update on ResellGo. As previously promised, on June 30th, we submitted a PMA supplement for ResellGo, which maintains the FDA breakthrough device designation. ResellGo revolutionizes the current manually operated resell device by eliminating the need for manual desegregation of the autologous samples. Automating the process of cell desegregation will substantially reduce training requirements allowing us to leverage selling time more effectively. Additionally, it will ease the burden of additional training required by physicians and operating room staff to manually perform desegregation, which we predict will lead to an increased adoption across our indications, further amplifying our impact and transforming of the lives of patients. Moreover, Result Go is a critical component of our international strategy. which we will be discussing in more detail on our third quarter call. As such, ResaleGo is arguably the most significant enabler for our platform, which we believe will greatly accelerate our growth. Lastly, given our June 30 submission under the Breakthrough Device Program, the submission will receive prioritized interactive review with an expected December 27 approval and subsequent launch on January 2nd, 2024. With respect to 2023 guidance for the third quarter of 2023, we expect commercial revenues to be between $13 million and $14 million. At midpoint of this guidance, this reflects a growth rate of approximately 50% over the prior year. To that end, we are increasing our 2023 annual revenue guidance from $49 million to $51 million to $51 million to $53 million, which at midpoint of guidance would reflect a 53% growth over 2022. Looking ahead, our intent is to provide 2024 guidance on our fourth quarter call in February 2024. In closing, we continue to execute the 2023 priorities We have laid out and remain committed to delivering strong results. With that, I'd like to turn the call over to David.
spk04: Thank you, Jim. It is a pleasure to be here and be part of the Aveda medical team. In the three months ended June 30th, 2023, our commercial revenue increased by 42% to $11.7 million, compared to $8.2 million in the same period in 2022. The increase in commercial revenue was largely driven by broader surge in usage as well as deeper penetration, particularly within smaller burn procedures, along with commercial sales with our partner Cosmotech in Japan. Although our expanded commercial team was in place for the launch of full thickness skin defects on June 8th, there was no meaningful revenue attributable to the commercial expansion in the quarter. We expect the expanded commercial team will begin to have an impact in the third quarter. Gross profit margin was 81% compared to 83% in the same period in 2022. The decline was primarily attributable to a decrease in product production in one month of the quarter caused by the need to qualify new vendors for certain manufacturing components. However, throughout the process of strengthening our supply chain, we maintained our perfect service level. Since then, we have resumed manufacturing volume to keep pace with our expected third and fourth quarter sales growth. As we have emphasized previously, approximately 50% of our product costs are fixed, attributable to the manufacturing facility, which means our gross margin will increase as product volume increases. Further, I would like to note that the decrease in gross margin for this quarter was unusual. and we fully expect our third quarter margin to show an increase compared to the gross margin in the third quarter of last year. Total operating expenses for the quarter were $21.2 million compared to $13.9 million in the same period in 2022. The increase in operating expenses was primarily due to the cost related to the significant increase of our commercial organization in preparation of the full-thickness skin defect launch during the quarter. The additional sales and marketing costs included approximately $2.9 million in employee-related expenses, including wages, commissions, and benefits, $1.4 million in seminars, promotional costs, and travel expenses for both the existing and expanded commercial team, and $400,000 in recruiting expenses. In addition to the increased sales and marketing expenses noted, research and development expenses increased by approximately $2 million due to the ongoing development of ResellGo and costs associated with our medical science liaison team. As Jim noted previously, the expansion of our Salesforce team will result in peak operating expenses as a percentage of revenue in Q3 2023. Net loss in the quarter was $10.4 million or a loss of $0.41 per share compared to a net loss of $6.3 million or a loss of $0.25 per share in the same period in 2022. As of June 30th, we had cash, cash equivalents, and marketable securities of approximately $68.8 million compared to $86.3 million as of December 31st Before we open the line up for questions, I'd like to emphasize our increased revenue guidance for 2023. For the third quarter, we expect commercial revenues to be between $13 and $14 million. Additionally, we are increasing by $2 million our annual revenue guidance for 2023 to now be in the range of $51 million to $53 million. With that, we thank you for your time. And now I will turn the call back to the operator for your questions.
spk13: If you'd like to ask a question at this time, please press star 1 1 on your touch tone telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Our first question comes from the line of Joshua Jennings with TD Cowan. Hi.
spk19: Good afternoon. Thanks, Jim and Dave. It's great to see the FDA approvals come in and the strong 2Q results. And Dave, congratulations on the CFO seat at Aveda. Thank you, Josh. Absolutely. I wanted to start off and just think, Jim, you talked about the broader label that you secured for the soft tissue data. Fantastic outcome at I think you mentioned that you're potentially rethinking the commercial organization structure with many more indications opened up. And anything you can build on that, out on that, just to help us understand how you're thinking?
spk03: Yeah, I think that's a terrific question because it was, you know, the label indication is significantly broader than what we anticipated. So what we're doing, I think, first and foremost is staying focused. the previous understanding that under the, what we believe was the, you know, soft tissue repair and reconstruction, which is 127,000 procedure expansion for the time being, we're staying right focused on that because there's plenty there for us to grow and get the momentum we want and, and build the underlying adoption. On the other hand, There is a number of applications that come under full thickness skin defects that create a much bigger opportunity for us. So rather than rush into that, because we have no need to, we're going to spend some time assessing the, so to speak, low-hanging fruit, in lack of a better word, and conduct some clinical research on some of these spots' indications. We have some that's anecdotal, so we're bringing that all together. And I think by the time Q4, which really is Q3, the November call comes around, we'll have some of these new indications circled, and we'll have a strategy about how to go about them. So it's really just great news. It just fills our pipeline. We stay focused. I think for us to try to adjust at the final moment before launch might cause us to defocus and be less effective. And right now we've been rewarded by being a very focused organization about how we go about doing things. So look forward to some more insight as Q4, really Q3, call comes around.
spk18: Understood. Thanks for that.
spk19: And just, I guess, a strategy question. I mean, just noticing you're moving from focus on burn centers to now incorporating hospitals, trauma centers, outpatient setting is on the list, and also potential physician office setting. I mean, is there an opportunity to not in the near term, we have a lot in front of you here in the short term, but over time to build out the portfolio and look at some external business development opportunities. Thanks for taking the questions.
spk03: Yes, Josh. There certainly is. We're expanding immediately into the trauma center world, and that incorporates the burn centers. As you know, half of the burn centers are already Level one trauma center, so it helped us get off to a fast start, but it is in our gun sight so to speak that there is Technologies that are used with resell that are used before and after resell that are very important to The physicians who are treating the patients that resell is applicable to we have a I would describe a significant effort underway to identify some technologies that fit that category. And we have some work underway to choose them. And again, I think that will show some fruits of that labor by the November call. So it is a focus because, you know, we are a very consultative sales force. And as such, the physicians interact with our sales teams. For our sales team to have some other technologies that are applicable to their patients is very common sense from a portfolio business model point of view. And it will basically cost very little to execute in terms of cost of sales because it will be our same sales team. So I think your insight there is right on the money.
spk10: I appreciate those answers. Thanks, Jim.
spk13: Our next question comes from the line of Brooks O'Neill with Lake Street Capital Markets.
spk05: Good afternoon. I appreciate the comments you made to Josh, but I'm curious if there's any color at all with regard to the response or any approach you've made to level one and level two trauma centers and doctors who operate there.
spk03: Thanks, Brooks. I think it's On one hand, early, but on the other hand, we're six weeks in since we started our selling activity. What we are seeing is an increased activity in all the accounts that are outside burn centers, and we're achieving VAC approvals, and we're getting cases done. And one of the reasons we raised our guidance is because of that early momentum and And actually, the consequence of our early preparation, because when the approval came, we were ready. So I think we're feeling quite bullish about the remainder of the year and 24 ahead of beyond that. So without specifics, that's the experience we're having.
spk05: Great. And then I'm curious, I have some sense that there's been at least some opportunity opened for you to apply resell to smaller burns and pediatric burns. Have you had any success in those areas so far?
spk03: Well, we have, and it's a difficult thing to measure, right, because the hospital buys a resale kit. We don't get necessarily clear insight to who they use it on, but we do get it and we do receive that feedback anecdotally. And I think you can see it mostly on a macro level. For us who have been growing actually faster against a larger base the last three quarters, without adding new accounts is very reflective of a penetration event going on with this technology resale. So we are getting those cases. It's difficult to quantify them because of what I just described, but the macro numbers validate that there is just simply increased adoption of resale over time.
spk05: Great. And then I just wanted to ask you one more, and it really relates to your personal philosophy, Jim, about providing guidance. And, you know, in today's world, some people are trying to sandbag and put out numbers that you can easily beat. I think you've described a somewhat different approach of trying to build credibility. But could you just talk a little bit about how you view the provision of guidance for analysts and investors at AvedaNet?
spk03: Sure. Yeah, it's a rather important question, Brooks. I appreciate you asking. We intend, when we set guidance, to hit the middle. That is what we believe when we set it. We're realistic, and that is why we bracket it. So, in this case, we finished well ahead of the middle. 11.2 million would have been the middle. We had a stronger end of the quarter. Some of that is obviously reflected of three weeks of June. We had the increased indication already and we were preparing. So we have some early adoption that contributed to that. So my personal philosophy is to be within the range of guidance for sure. Perfection is a dollar over the middle where we get the middle, but we're on the upper side of it. And, you know, The team said afterwards at the end of the quarter, he said, how do you feel quarter went? I said, ah, we missed guidance. We didn't get it quite right. We set it too low. So you should expect us to be within guidance. In the middle is our goal. And that's how we think about it. And it is about credibility. I would like our investors and analysts who follow us to be able to depend on what we say and what we do. and not believe that we're trying to play it easy. We're here to grow this company and not to hold back about it. So you won't find the sandbagging in our practice.
spk05: That's great. I'm pretty excited about the opportunity you have. So I look forward to seeing strong results in the back half of the year.
spk07: Thank you, Brooks.
spk13: Our next question comes from the line of Matthew O'Brien with Piper Sandler.
spk09: Hey, can you guys hear me okay?
spk17: Very well, Matt.
spk03: How are you doing?
spk17: Oh, good. Thanks. Thanks for taking the question. So, Jim, maybe the starter for you to follow up on Brooks's question, the guidance raised, you know, you beat, you know, you just mentioned beating the midpoint by about, you know, half a million dollars. You're taking the guidance up by about two million in total. So there's an extra million five in there, roughly. for the year. And I'm just wondering, you know, you'd always expected trauma to be in there. It's not supposed to be in there, but what are you seeing that's giving you even more confidence in, you know, in the business? And then is it a training thing? Are you seeing a bunch of new centers you can really point to that are coming on faster than you thought you maybe you thought we would get into the back committee, just a little bit more detail on, on why the guidance raise and what exactly you're seeing from a, enthusiasm, perspective on soft tissue.
spk03: You know, it's a multi-dimensional question, Matt, but let me try and take you through my thinking process here. First and foremost, when we set original guidance, yes, we were expecting approval in June. That said, despite having breakthrough device designation, you don't know for sure that you got it until you got it, although we were quite confident, as you know. So that is one element. The second element that led to the, so therefore when it comes, you can feel comfortable counting what you expect from it. Now, what reinforced that for us is we took the move, as you recall, in Q2 to fully ramp up and train the team. And so when this approval came on time, there was actually, no space between the approval and our showing up promoting the full thickness skin defect broader indication on the following day. So when you combine those and then the early response is very positive, again, wanting to be predictable, it was very clear to us that our prospects were stronger and that is reflected in the increase in guidance.
spk17: Okay. Just maybe just a little bit finer point on that, Jim. Is there anything running ahead of schedule versus, and I know you got the approval a little bit ahead of schedule, but like training or center ads or anything along those lines that's ahead of schedule you can point to specifically?
spk03: I'd say the most ahead of schedule definable element was having the team fully hired, fully trained. And in our market, you know, in our construct, we certify a salesperson to be able to support a case. And when June 7th came, every new rep was ready to do that. So being fully prepared, there's no ramp up. You're right out in the field. And I think that's the most tangible thing I can point to. Okay.
spk08: Fair enough.
spk17: And I'd love to get David involved here as well. And again, David, congrats on the new role. Thank you. Thank you. You've been very clear as far as the spend goes in the back half of this year. Do we get to a point where there's leverage on the P&L in 24, or is it still going to be a deleveraging situation as you're building this market next year? And just talk maybe a little bit about your cash position and potential needs there. Thanks.
spk04: Yeah, so thank you for the question. I appreciate it. I'll take the second question first around cash. As of June 30th, we have a solid balance sheet. We've already indicated on a number of calls and discussions that we are in the process of developing our 2024 plan, which will include a number of things that we'll have to take into consideration as we move forward, and that is we will be launching, if it's approved, ResellGo, which will need additional working capital. We'll need to build inventory for that. We will also be looking at our strategy for Vitiligo, and we will have other working capital needs. All of those will come out of our 2024 operating plan, which we will give more guidance in February. once we have that developed. But I can tell you right now that we have a solid balance sheet as of June 30th. As far as leverage, we've talked about when we think a salesperson crosses over as far as paying for himself, and that is himself or herself, and that is when they're selling around $500 five units per month and a fully trained, um, salesperson is, um, is usually selling around 20 units per month. So we, as Jim indicated, we, we were, we hit the ground running on June 7th. And so we think that we're going to get leverage from those new salespeople quickly, how quickly that will be. Um, hard to say it's still early days, But as we move into 2024, you would expect that all of the sales field professionals are selling at least enough to cover what their costs are.
spk10: Perfect.
spk09: Thanks so much.
spk13: Our next question comes from the line of Ryan Zimmerman with BTIG.
spk16: Good afternoon. Thanks for taking the questions and congrats on the quarter. David, nice to speak with you on the call. So maybe just to start, you know, the margin guidance is encouraging, especially given, you know, the bounce back expectations in the back half of the year. But I'm just wondering, David, if you can kind of talk about, you know, maybe margins longer term. We got Resell Go coming into the picture in 24. and just how you think about margins, you know, over the longer term, maybe trending towards the higher end of your guidance or potentially even above that as we think about gross margin.
spk04: Yeah, thank you for the question. I appreciate it, and thanks for following us. We've talked about this before, and the biggest component of our cost of goods sold is the manufacturing facility that we have, and it's fixed, and it's 50% of our cost of goods sold. That's not going to change as we move into Resell Go within percentages. It's, for the most part, 50%. So as we look forward, and we've talked about this, as our volume increases, and we would expect our volume to increase over the next 18 months with the sales force fully in the field. And so as it's either for the ease of use product that we have now or the resell go cartridges that we will when it is approved in 2024, that volume as we look into 2024 will increase. And our margins should go up accordingly. We will give more guidance in 2024 once we've developed our plan. But you can see a situation where we would be approaching a 90% margin as long as our volume, our sales, are in line with what our expectations are.
spk16: OK, fair enough. It's very exciting. I mean, those are fantastic margins. I'm looking forward to it. Jim, turning to the early launch in full thickness skin defects, can you just share anecdotally, given that you have been able to see early case adoption, what specific cases are doctors most comfortable with? If there's a trend in terms of utilization of this new you know, indication where you're seeing success. And then, you know, conversely, where you may need to educate physicians about the potential and the latitude with which the label gives you for the new indication.
spk02: Ryan, that's a big question.
spk03: But let me give it a shot. First, let me try and get specific. We are having a multiplying week over week effect of both new accounts being added and new VAC applications underway. So every week the numbers move meaningfully in this short time we've had. So that's a tangible way for me to speak about it. The cases are still pretty broad because there is a a lot of differentiation among them. The ones the physicians, so to speak, capture most easily are cases like degloving, like necrotizing fasciitis. Those types of cases are very obvious resell cases, and they quickly gravitate to them. I don't have macro trends or numbers yet on those because, as you know, it's been just several weeks. But we see that they aren't, what's the right word? They're quite aware of resell. We've done some market prep when we, you know, during the time because we had that Salesforce was principally in place and going through training and not promoting. for in excess of four weeks on average before the launch. So they had time to condition the market, identify the high grafting positions, because you can do that through CPT analysis. So I think the bullishness that we feel is reflected in A, we did finish the high end of our guidance, as you know. I shoot for the middle, so high end means it went a little bit better than I planned for. And in the raising of guidance for the year, I think reflect that as well.
spk11: Okay. Good stuff. Looking forward to seeing this play out. Appreciate it.
spk06: Thank you.
spk11: Thank you.
spk13: Our next question comes from the line of Ross Osborne with Cantor Fitzgeralds.
spk12: Hi guys, congrats on the quarter and thanks for taking our questions. So maybe just circling back to sales rep productivity, just want to make sure I'm on the same page. So in a prior question you replied, there's not really a ramp for new sales reps to cover their cost, but in terms of hitting your one Q average productivity of about 20.
spk08: How long do you think it would take for these new reps at that more efficient level?
spk03: It's a good question. I have a different way to characterize that metric for you. So the first element is not time-based, it's just cost-based. So it takes five resale kits per month to cover the cost of the sales rep. So we look at that as an investment. So we hire a sales rep, we know getting to five everything after that becomes contribution margin to the rest of the business. We do have a range of when that occurs. It ranges from as quickly as three or four months. It takes on some, in some cases in a very brand new territory with no prior resale might take six months. That's a range of when they get from cost break even to contribution margin positive. As far as the 20 reference, to put it in context, we have, when we went to this expansion, our average rep exceeded 20 per month. So that was shared to put in context that five. So once you get to five, on your way to 20, and when you get to 20, we're in really great shape. So what we expect is that this wave of Salesforce hiring will be contribution margin positive within the next four to six months. Is that helpful to your question?
spk12: Yes, much more clear. Thank you very much for that. And then one more, if I may, and apologies, we're juggling a couple calls, but are you able to break out, you know, Japan, Australia, and UK? I realize Japan's probably the highest contribution to revenue outside of the US? And if not, would you be able to tell us what percentage of total revenue the US accounted for?
spk03: Okay. So, in our international revenue, Japan is well over 90% of it. What we do in Australia is a rather strategic remnant that from a few users who we've kept supported in the same for Europe now there is an international strategy coming in the November call which will of course I don't want to say fourth quarter call because that's really the February call but in November I've been guiding to so I think you can expect that our revenue for the year in Japan will We have no reason to express other than the current year-to-date run rate as a way to think about that revenue.
spk10: Got it. Well, thanks again for taking our questions and congrats on the quarter. You bet. Thank you.
spk13: That concludes today's question and answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.
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