Venus Concept Inc.

Good morning, ladies and gentlemen, and welcome to the second quarter 2021 earnings conference call for Venus Concept. At this time, all participants have been placed in listen-only mode. Please note this conference call is being recorded and that the recording will be available on the company's website for replay. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our most recent annual report on Form 10-K and 10-Q, filed with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in our earnings press release issued today on the investor relations portion of our website. I would now like to turn the call over to Mr. Tom Serafino, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Thank you, Operator, and welcome everyone to Venus Concept's second quarter of 2021 Earnings Conference Call. I'm pleased to be joined today on the call with our Chief Financial Officer, Dominic Della Penna, and Chad Ziering, our Chief Commercial Officer. Let me start with a brief agenda of what we will be covering during our prepared remarks. I will start with an overview of our better-than-expected revenue results in the second quarter, including an update on how our business trends continued to improve during the period, which gives us further confidence in our 2021 revenue guidance, which we increased in our press release this morning. Chad will then discuss our strong system shipment results in the second quarter and how we believe it was a direct result of both improving overall system adoption trends, particularly in North America, and strong execution of our targeted commercial strategy. I will then provide a brief update of our continued progress in the area of new product development, and then Dominic Della Pena will provide you with a more in-depth review of our quarterly financial results, our balance sheet, and financial condition, and our updated guidance for the full year of 2021. Then we will open up the call for your questions. With that in mind, let's get started with a review of our second quarter revenue performance and overall business trends. We reported gap revenue of $25.8 million, up 52% year-over-year, exceeding the expectations we provided in our Q1 call, which assumed a growth of 40% to 45% year-over-year. We are very encouraged by our second quarter revenue performance and believe it reflects the improving system adoption and procedural trends we experienced during the quarter. Importantly, our second quarter growth reflects both the continued improvement in our aesthetic and hair restoration procedure trends and the pace of system adoption. We are very encouraged by the strong execution of our global sales team in the quarter. The team was also able to substantially increase the qualified pipeline of new prospects across the full product portfolio, which gives us confidence in our increased revenue growth expectations for the balance of 2021. Diving deeper into our growth performance and improving trends we experienced in the second quarter. Q2 sales increased 14% on a quarter-over-quarter basis driven by 50% growth in revenue from sales of our subscription systems and 17% sequential increase in total leases and systems revenue. Our systems shipped increased 8% sequentially in Q2, reflecting continued improvement in the capital equipment environment. System shipments under the subscription model increased 32% on a quarter-over-quarter basis in Q2, and represent more than 52% of our total global shipments in the period. As discussed on prior calls, the flexibility we have in our commercial model with unique pricing and payment options via our industry-first subscription model is an incredible lever that we have which differentiates us from our competitors. Importantly, this lever really empowers our commercial team to work with customers to identify not only the right technologies for their practices, but also the right business model for each clinic depending on their needs. With respect to the improving procedure trends we experienced in the second quarter, our real-time IoT data on our devices gives us strong visibility into the active device trends for a large portion of our medical aesthetics install base. This average usage per system data reflects improving consumer activity demand for our product procedures during the second quarter. In terms of the procedure trends for our hair restoration customers in the second quarter, we are very encouraged by the continued improvements in utilization trends among our hair restoration customers as global procedures on our artist systems increased 37% year over year in the second quarter. Importantly, this global procedure growth was fueled by an impressive growth in North America where procedures increased 67% year over year in Q2. Artist customers in North America performed the largest number of procedures in the second quarter in the last four years. We believe the strong procedure growth in our U.S. hair restoration business in Q2 was driven by a combination of an improving procedure environment during the quarter and strong execution by our commercial team towards our key strategy to reengage with U.S. customers who have artist systems that we believe have been underutilized. We have made a concerted effort to engage with artist customers throughout North America over the last 18 months, and we could not be happier with the results. We look forward to continued strong utilization in the hair restoration systems part of our business going forward. I'm going to ask Chad to provide an update to our second quarter performance on the system side of the business. Chad?

Thanks, Tom. Our second system sales results reflect improving system adoption trends in certain key markets around the world and strong execution of our commercial strategy. As you recall from earlier discussions, we've spent the past 12 months restructuring our global commercial strategy to divest our interests in smaller and less profitable markets and reinvesting those resources in higher opportunity markets like North America and key direct countries in EMEA. Those efforts reflect in positive Q2 system revenue trends. Stripping out the effects of COVID, and comparing Q2 2021 system revenue to pre-COVID levels in Q2 2019, we're up 10% and 25% in North America and EMEA respectively. Turning to a brief update on our Venus Bliss. We are happy with the continued strong market response to our differentiated non-invasive fat and body contouring platform. Global sales of Bliss increased 85% year over year in the quarter. Venus Bliss offers a significant clinical and financial opportunity to the customers and patients that we serve, and the feedback we are receiving from the field continues to support these key points of differentiation. As expected, the investments in both our commercial team and in our marketing strategy continue to drive strong adoption of Bliss. We continued our Bliss Roadshow in Q2, a multi-city tour aimed at increasing the pipeline for Bliss and driving market development and consumer awareness. We also launched our Bliss University Master Class and focused the attention of our practice enhancement team to helping customers develop successful programs with the technology. We are also quite thrilled with the positive response from our customers, prospects, and patients on our collaboration with Venus Williams for the Venus Bliss. We expected that adding Venus Williams as a global brand ambassador for the Venus Bliss would create significant brand awareness with consumers and provide significant patient lead generation given her global recognition and appeal. The initial response from the market following the announcement has exceeded all of our expectations. We have experienced a significant increase in visits to both our B2B and B2C websites. This initiative has also engaged our prospects and accelerated the sales process. Since the announcement, Bliss sales in North America have increased 64% year-over-year And we have been especially pleased with the adoption trends we've seen from existing Venus customers as a result of this collaboration. Our customers are excited to capitalize on this partnership with our branded assets, growing their Venus Bliss utilization and overall patient base. Notably, these key investments in our Bliss marketing strategy combined with strong execution of our sales team resulted in global sales of Bliss increasing more than 122% quarter over quarter in Q2. We remain very confident that we have a product that customers want and the right strategy to drive continued adoption and utilization and expect strong revenue contributions from this product throughout 2021. With respect to our second strategic product line hair restoration, sales of artists and NeoGraph are up 90% year over year during the first half of 2021. And the qualified pipeline is up over 100% year over year. Our new commercial strategy is maximizing the opportunity of having the most comprehensive hair restoration solutions offering available today. With Artis and Neograph, we have an end-to-end portfolio of minimally invasive solutions unique from any competitor in the $4.1 billion hair restoration market. We are seeing notable success with our customer targeting strategy as well and are driving strong new customer adoption among dermatologists and plastic surgeons. We expect to see accelerating growth trends in our hair restoration business as we move through 2021 as we leverage our improved targeting strategy of these core doctors, as well as large national accounts. We're also exploring key partnerships with nationally recognized brands to drive procedure adoption. With that, let me turn the call back to Dom.