Venus Concept Inc.

Good day, ladies and gentlemen, and welcome to the first quarter 2022 earnings conference call for Venus Concept, Inc. At this time, all participants have been placed in the listen-only mode. Please note that 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 10-Q and our annual report on Form 10-K 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 at 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. Dom Serafino, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Thank you very much, operator, and welcome, everyone, to Venus Concept's first quarter of 2022 earnings conference call. I'm joined today by our Chief Financial Officer, Dominic Della Pena, and Ross Furtaro, our President of Global Sales. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with an overview of our revenue results in the first quarter. I will then provide a summary of creating progress in key areas in recent months. Then Dominic will provide you with a more in-depth review of our quarterly financial results, our balance sheet, and our guidance for the full year 2022, which we reaffirmed in today's press release. Then Ross will provide an update on our commercial progress and priorities. And then we will open up the call for your questions. With that overview in mind, let's get started with the review of our first quarter revenue performance and overall business trends. We reported gap revenue of $26.4 million, up 17% year-over-year. The increase in total revenue year-over-year was driven by 25% growth in the sales in the U.S. customer base and 10% growth in international customers in the period. Total sales and subscription revenue increased 22% year-over-year in Q1 and and our procedure-related disposable revenue increased 14% year-over-year, excluding our discontinued Bureau Grafter program from the prior year period as we exited this business line in Q4 of 2021. Importantly, revenue growth in Q1 was driven by the key franchises we prioritized as part of our commercial strategy, which we discussed in recent investor calls. Specifically, excluding our Bureau Grafters program, revenue sales in our growth franchises increased 19% year-over-year in Q1, fueled by a sales force focus and execution continued with strong demand for Artist IX robotic systems and the early clearance and initial commercial launch of our BlissMax in March. The early market response to BlissMax has been notable, and sales of this highly differentiated body contouring workstation drove growth in sales of products of our body franchise by more than 60% in Q1. With respect to procedure trends in the first quarter, our real-time IoT data gives a strong visibility into the active device trends for large portions of our medical aesthetic install base. This average usage per system continues to reflect measured improvement in patient activity. Outside of the US, we continue to see varying usage trends depending on the region of the world and the respective pace of recovery from the pandemic. Procedure trends in our hair restoration customers in the first quarter reflect improving growth after a slower part of the quarter as well. North America procedures exceeded previous four years Q1 records, while Latin America and EMEA were at similar levels to Q1 2021, but this was not enough to cover loss of procedures in APAC. APAC did have increase in artist installs in Q1, so we hope to see utilization return to normalized levels in Q2. Turning to a brief update on operating highlights for the first quarter and in recent months. Overall, we've made significant progress in the areas of new product development, clinical validation, regulatory clearances, and commercialization. Our efforts to expand the Venus Bliss portfolio of systems and products continues to progress. We received 510 clearance for the Venus Bliss Max in January and started our initial commercial in March. In April, we're pleased to announce the receipt of the new 510K clearance to market the BlissMax with an expanded indication for use in new areas of the body and an increase in RF energy output. This new clearance further expands our single body contouring workstation's versatility and utility and its indication for use to include non-invasive lipolysis of the back and thighs in addition to abdomen and flanks and by increasing maximum RF energy output by 50%, BlissMax now offers physicians more efficiency and flexibility in treatments, which we believe will provide even stronger clinical results and ultimately increases the revenue for our customers. Finally, we are proud of the continued progress we've made in recent months to advance our development, regulatory, and clinical strategy for AMIE, our non-surgical robotic technology platform for medical aesthetic applications. We announced 510 submission for a general indication of tissue excision and skin resurfacing on March 31st, and we look forward to engaging with the FDA during their review period of our submission. We continue to believe that Amy has the potential to bring true innovation to the medical aesthetic market by changing the way procedures are performed and bringing a new level of speed, safety, and clinical predictability. The submission of this 510 brings us one step closer to our goal of commercializing Amy in the U.S., and we continue to expect that we will be in a position to begin limited release in the fourth quarter of 2022. The prospects for non-surgical robotic technology platform AAMI are very compelling, and we look forward to introducing this disruptive technology beginning later this year. It's important to remember that AAMI is a platform, is just that, a platform. And it has been designed to support numerous different clinical applications via a unique upgrade path for clinicians making it extremely cost effective and differentiated from any products currently available to aesthetic device market today. In parallel to the process of submitting for general indications for skin excision and skin resurfacing, we have also made progress towards our strategy to secure specific clinical indications for Amy for the treatments of the face. As discussed on prior calls, we are pursuing an IDE clinical study evaluating the safety and efficacy of using AMIE for the treatment of moderate to severe facial wrinkles. This study will support our FDA submissions, specific clinical indications for the treatment of wrinkles on the cheeks, and will further expand our annual addressable market opportunity and enhance our long-term growth profile. We recently announced that the first patients has been treated with, and our four clinical investigation sites are busy enrolling and treating 70 patients in the study. With that, let me turn the call over to Dominic Della Penna, who will provide a detailed review of our first quarter financial results and discuss our balance sheet, financial conditions, and our 2022 guidance, which we reaffirmed in today's press release.

Dominic? Thank you, Dom. Given Dom's detailed review of our revenue results, I will begin with a review of our financial performance across the rest of the P&L. For the avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the first quarter of 2022 on a gap basis and all growth-related items are on a year-over-year basis. Gross profit increased 2.5 million or 17% to 17.8 million. Gross margin was 67.3% compared to 67.4% of revenue in the first quarter of 2021. The change in gross margin was driven primarily by changes in mix, partially offset by higher shipping costs compared to the prior year period. Total operating expenses were $25.2 million compared to $22.1 million in the first quarter of 2021. The change in total operating expenses was driven by an increase of $2 million, or 26%, in sales and marketing expenses and an increase of $0.9 million, or 8% in general and administrative expenses, and an increase of $0.2 million, or 7%, in R&D expenses. First quarter operating expense growth reflects the strategic investments we are making to support our key growth initiatives, including our commercial launch of the BlissMax and our development, regulatory, and clinical programs for AIMEE. We continue to expect GAAP operating expenses in the range of 98 to 101 million for the full year 2022 period. Total operating loss was 7.4 million compared to 6.8 million in the first quarter of 2021. Net loss attributable to stockholders decreased 0.6 million or 7% to 8.6 million. Non-GAAP adjusted EBITDA loss increased 0.9 million, or 17% year-over-year, to 5.9 million. As a reminder, we have provided a full reconciliation of our GAAP net loss to adjusted EBITDA loss in our earnings press release. Turning to the balance sheet, as of March 31, 2022, the company had $17.9 million of cash and cash equivalents, and total debt obligations of approximately 77.5 million compared to 30.9 million and 77.8 million respectively as of December 31st, 2021. The year-over-year increase in cash operations is directly related to our strategic initiative which prioritized investments in inventory our ability to meet customer demand as we move through 2022 given the realities of ongoing supply chain challenges. Note, part of the increase in working capital related to incremental cash invested for advances to suppliers as part of this initiative. This strategic initiative is expected to result in additional cash investment in the second quarter. However, we continue to expect improving working capital trends as we move through 2022 and we continue to expect cash flow positive in the fourth quarter of 2022. Turning to a review of our guidance, as detailed in our press release, we reaffirmed our revenue guidance for the full year 2022 period. The company continues to expect total revenue for the 12 months ending December 31st, 2022, in the range of $126 million to $130 million, representing an increase of approximately 20% to 23% year-over-year compared to total revenue of $105.6 million for the 12 months ended December 31, 2021. While we are not providing formal profitability guidance for the full year 2022, our outlook continues to assume that we deliver another year of material profitability improvement including a target of achieving cash flow positivity in the fourth quarter of 2022. For modeling purposes, we would like to offer the following considerations to help investors understand the underlying assumptions driving our 2022 profitability targets. First, we expect our gross margins to be in the range of 68% to 71%, as we see continued improvement in gross margins driven by mix, but also expect inflationary headwinds to pressure our COGS in 2022. Second, we expect continued expense management to drive notable operating leverage in 2022. Specifically, we expect gap operating expenses in the range of $98 million to $101 million, representing growth of 10% to 13% year-over-year, compared to our total revenue growth range of 20% to 23% this year. Third, we expect our interest expense to be approximately $4 million and we expect non-cash CNA of 4.5 million and non-cash stock comp of approximately 2.4 million. Fourth, we continue to expect our weighted average shares outstanding to be approximately 64 million. There are two additional items to bear in mind when evaluating our full year 2022 revenue growth expectations. First, We continue to expect our body franchise to be a material driver of total company growth this year, fueled by commercialization of our Venus Bliss in OUS markets and the commercialization of our Venus Bliss Max in the U.S. We do expect growth in our body franchise to be stronger over second half of 2022, given the timing and expected ramp from our recent introduction of the Bliss Max. Second, our 2022 total revenue guidance does not assume material contributions related to the limited release of AMI and Q4 2022. We intend to update the investment community on the potential contributions from the initial commercial release of AMI following the receipt of 510K clearance. While AMI is not expected to materially impact our 2022 growth, it is fair to assume that we will be highly focused on ensuring that we are well prepared to execute our commercial strategy for this highly differentiated robotic technology as soon as possible following receipt of regulatory clearance and would expect Amy to be a material contributor to our total company growth beginning in fiscal year 2023 and beyond. With that, let me turn the call over to Ross for an update on our commercial progress and priorities. Ross?