Sientra, Inc.

Good afternoon, and welcome to the Cientra Second Quarter 2023 Financial Results Conference Call. My name is Keith. At this time, all participants are in listen-only mode. After the Cientra executives provide their business updates, there will be a question and answer session. As a reminder, today's conference call is being recorded. I now would like to turn the conference over to the host, Oliver Bennett, Cientra's Chief Legal, Compliance, and Corporate Development Officer. Mr. Bennett, you may begin.

Welcome, and thank you for joining us on today's call to discuss Cientra's second quarter 2023 financial results. On our call today, we have Ron Menezes, Cientra's President and Chief Executive Officer, Dr. Denise Dylas, Cientra's Chief Technical Officer, and Andy Schmidt, Cientra's Chief Financial Officer. We are pleased to have reported earlier today another quarter of record results for revenue, EBITDA, and pre-cash flow performance. we achieved our 12th successive quarter of year-over-year revenue growth, with revenues of $23.1 million, representing 7.5% growth over the prior period. Significantly, we achieved these results while also attaining a 63% year-over-year improvement in non-GAAP EBITDA and a 95% improvement in free cash usage of under $700,000 this quarter. As Ron and Andy will describe, these results give us confidence of meeting our goal of positive free cash flow performance by Q4 of this year. Before I turn the call over to Ron, I must remind everyone that we will include forward-looking statements in our prepared remarks and in response to any questions you may ask. These forward-looking statements are based on management's current assumptions and expectations of future events and trends. Our 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. For more detailed discussion of the company's risks and uncertainties, I would refer you to our SEC filings, including our Form 10-K and Form 10-Q to be filed later this month, available on the company's website. With that, I'll ask our President and Chief Executive Officer, Ron, to comment on our second quarter results.

Thank you, Oliver. Sientra has reached a critical inflection point that supports a strategic direction of becoming a profitable and diversified surgical aesthetics company. As we reported earlier today, we recorded the lowest ever free cash flow usage in the history of the company. With this near break-even performance, combined with a continued market growth and disciplined financial management, we're confident we'll achieve positive free cash flow in the fourth quarter of 2023. Entering the second half of 2023 with a fully built-out leadership team and a new product suite of high-value products, Sientra is in the best fundamental position in our company's history. Importantly, for investors, we're committed to rewarding their patients. Here at the midpoint of the year, I'm confident that Cientra is a tipping point with market-leading top-line revenue at a scale where it can be leveraged to generate highly attractive, sustainable operating profit growth. It was just last year when Cientra was reporting an average of $10 million free cash flow usage each quarter. As we explained at that time, some of this was tied to necessary investments in Cientra's infrastructure and operations to support our path to profitability. Today's results are the product of those investments combined with the disciplined financial management that we have instilled as we have consistently reduced the free cash flow usage over the past several quarters, and in the most recent quarter, we reduced it again, coming in under $700,000, representing a 95% year-over-year improvement. A strong financial performance has not come at the expense of growth, and we have reported another record quarterly revenue result representing a 12-consecutive quarter of year-over-year growth. What is exciting about these results is that the growth was fueled by our core business, implants and expanders. It does not yet reflect the acceleration of growth we expect to see in the coming quarters from the new products we're introducing to the market. We're single-minded in our drive for long-term profitable growth. Our success is driven by three areas that differentiate Cientra in the market. our comprehensive product platform to serve the needs of board-certified plastic surgeons, our transformative products backed by robust clinical data, and a clear strategy for growth and disciplined financial management steering us to profitability. Let me elaborate. Cientra is a surgical aesthetics company with a platform of high-value products focused on board-certified plastic surgeons. We're positioning ourselves as a preferred partner for plastic surgeons, with a platform of products and services to meet their needs in both augmentation and reconstruction. We know that plastic surgeons value partners who can meet their needs, and Sientra has demonstrated its agility and capacity to evolve alongside them. This has shown Cientra's evolution of the past several years from a single product company to one that has expanded rapidly into reconstruction with interesting leading expanders, hat grafting, and other technologies to assist plastic surgeons in this complex area of care. A focus in reconstruction shows that we are not driving growth at any cost, but we are driving profitable growth, creating a clear line of sight to positive free cash flow performance by next quarter. I'm extremely proud of our accomplishment this quarter in obtaining FDA clearance of our AlloX2 Pro Tissue Expander, the first and only FDA cleared tissue expander that is MRI compatible. We expect that this product will be a game changer in the standard of care for reconstruction patients, as Denise will explain a little bit later in the call. This clearance, which is the first new tissue expander cleared by the FDA in many years, demonstrate Cientra's commitment to innovation and bringing transformative products to the market. While other companies may talk about getting products to the FDA, Cientra is one of the select companies with a proven track record of doing so, having had three new products cleared or approved by the FDA in the past 15 months. We have also introduced two new products to the market, Violity and SimplyDerm, and have additional new products launches planned for 2024. This level of innovation set us apart from the competition and will fuel our growth and profitability going forward. One example of that growth would be our fat grafting product, Violity. We began the early commercial launch of this product in the past quarter. While we continue to work through the contracting process of getting this product into hospitals, we're encouraged by what we're seeing in the early stages of the launch. Most hospitals that had placed their first orders for violin at the beginning of the quarter have already reordered products. We expect to see an acceleration of orders in the coming quarters as more hospitals begin ordering and reordering. In addition to this innovation, we have also expanded to three new international markets in the last 12 months. We're seeing solid growth in these new markets as we take share away from the existing companies in those countries. Physician interest in our products continue to grow internationally, as demonstrated by the recent scientific presentation on sanitary implants held at the ICOPLAST conference in Dubai. The event earned two Guinness World Records, one for the most attended plastic surgery lesson ever, and another for the most nationalities present at a plastic surgery conference. Looking forward to the balance of 2023, it is important to remember that augmentation and reconstruction are two different segments in plastic surgery with very unique market dynamics. The augmentation segment is cyclical and more sensitive to changes in consumer buying behavior. As a result, we're seeing softness in the augmentation segment this year, But as is typical of a cyclical market, we expect to see an upswing in augmentation in the future as our market research continues to indicate that interest in breast augmentation remains strong. The reconstruction market, on the other hand, is less sensitive to market fluctuations. Reconstruction cases also represent a higher revenue opportunity per procedure given the price points and use of multiple products. As a reminder, with the recent launch of Violet and Simpliderm, Sientra has more than doubled its total addressable market from more than $600 million to close to $3 billion. Our focus in both reconstruction and augmentation has been the foundation of our growth. We continue to add new accounts, and just this quarter, added close to 240 new accounts. During the past three years, we have doubled our market share in our core business of implants and expanders. Moving forward, we aim to enhance our penetration with existing accounts as they are more productive and drive most of our growth. As we look forward to the balance of the year, we're revising our full-year revenue guidance to $98 million to $102 million from the previous announced of $104 million to $109 million. The new guidance is an increase of 8% to 13% over 22 full-year revenues. This revision reflects our expectation that we'll see continuous softness in the augmentation segment. While we expect the softness to be offset by our continued double-digit reconstruction growth, we're also seeing the cadence of adoption of our Violet and SimplyDerm products follow the normal hospital contracting process. Achieving steady adoption in a hospital can take up to six months from getting the product or contract before we start to see meaningful revenue contributions. Given the number of accounts that are adding both products to their contracts, we believe that this will set us up for strong acceleration as we head into 2024 and beyond. As we continue to leverage our infrastructure and generate operating efficiencies, we're revising our no-gap operating expense guidance to $75 million to $78 million, a decrease of 16.5 at the midpoint versus 2022. On a gap basis, our guidance is $84 million to $87 million, a decrease of 23% versus last year at the midpoint. This reflects our confidence that Sanford can be cash flow positive by the end of this year. I'll now turn the call over to Denise Dials, our Chief Technology Officer, to share more about our product and clinical data.