Venus Concept Inc.

please stand by good day ladies and gentlemen and welcome to the third quarter 2023 earnings conference call for venus concept inc at this time all participants have been placed in a 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 10Q 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 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. Rajiv De Silva, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Rajiv De Silva, Chief Executive Officer of Venus Concept Thank you, operator, and welcome everyone to Venus Concept's third quarter 2023 earnings conference call. I'm joined on the call today by our Chief Financial Officer, Dominic Della Penna, and by our President and Chief Operating Officer, Dr. Hemant Vaghese. Let me start with an agenda of what we will cover during our prepared remarks. I will begin with a brief overview of our Q3 results and notable operating developments in recent months. Then, Hemant will share an update on our recent progress in several key initiatives of our corporate turnaround strategy. Dominic will then provide you with an in-depth review of our third quarter financial results and our balance sheet and financial condition at quarter end, as well as a review of our 2023 financial guidance, which we reaffirmed in today's press release. Then we will open the call for your questions. With that agenda in mind, let's get started. As you would have seen in our press release issued today, in the third quarter of 2023, we delivered total revenue of $17.6 million. These results are within the range of preliminary revenue expectations we provided as part of our debt restructuring announcement on October 5th. While our third quarter total revenue declined on a year-over-year basis, the majority of that decline can be attributed to our accelerated restructuring activities in certain international markets. We were pleased to see improvements in revenue trends in the U.S. during the third quarter, where sales declined modestly on a year-over-year basis, but increased 14% on a quarter-over-quarter basis in Q3. Similar to what we have discussed on our recent earnings calls, the year-over-year revenue decline is a direct result of the strategic initiatives we are executing this year. Specifically, we are transitioning the company to higher quality cash revenues, exiting unprofitable direct operations in certain international markets, and implementing a series of restructuring activities, which altogether are expected to enhance the cash flow profile of the business and accelerate the path to long-term sustainable profitability and growth. We are pleased with the progress we have made in our strategic turnaround plan in 2023. Macroeconomic headwinds continue to pressure the aesthetic sector as a whole, with higher interest rates affecting our customers' ability to finance new capital equipment purchases, and deals are taking longer to close. In addition, The inflationary economy has impacted higher price procedures, such as those related to our hair business. Despite the tougher operating environment, there are early signs, particularly in the U.S., that our efforts to reposition the business and to focus on key strategic and operational initiatives are beginning to bear fruit, including, first, we are pleased to report that cash system sales represented 69% of total systems and subscription sales. compared to 59% in the prior year period. Our progress on this initiative is even more evident when looking at the mix of cash system sales in the U.S., which represented 76% of total U.S. systems and subscription sales over the first nine months of 2023, compared to 44% in the prior year period. Cash system sales to U.S. customers increased 12% year over year in Q3 and have increased more than 40% over the first nine months of 2023, which reflects the team's strong execution towards our strategic priority to transition the company to higher quality cash revenues. Second, our restructuring activities accelerated in certain international markets during the quarter. By way of reminder, One of our key strategic priorities in 2023 was to optimize our commercial and operational strategy in certain international markets and to reinvest those resources in higher opportunity markets to enhance the company's longer-term growth and profitability profile. Our restructuring activities outside the U.S. have included divesting our interests in smaller and less profitable markets and transitioning to partner with distributors. With the target of having our new distributor partners in key markets identified, signed up, and up and running in the majority of our key international markets by early next year, we expect to be well positioned for a return to growth in 2024. We recognize that much of the work we are doing this year has yet to evidence itself in our top-line results. This was largely expected when we outlined our plan earlier this year. Candidly, the macro environment has represented more of a headwind than we had contemplated. However, our team is executing well despite these unexpected challenges. Importantly, despite the softer than expected revenue results this year, the continued focus on restructuring and right-sizing the business, reducing costs, and simplifying the organization are progressing well ahead of expectations. We have reduced our non-GAAP operating expenses by nearly 17 million over the first nine months of 2023, representing a 22% reduction year-over-year. We have reduced our cash use in operations by 49% over the first nine months of 2023 and continue to target a 50% reduction year-over-year for the full year 2023 period. We believe The reduction in expenses and cash use in operations to date represents the clearest evidence that we are on the right track towards our goal of enhancing the cash flow profile of the business and accelerating the path to long-term sustainable profitability and growth. One other noteworthy item I wanted to discuss briefly. On October 5th, we announced an agreement with City National Bank of Florida, and Madryn Asset Management to restructure our existing debt obligations. As discussed on our recent earnings calls, we have been actively engaged in discussions with our key lenders to ensure the requisite runway that allows us to execute our strategic plan and successfully achieve cash flow breakeven in the second half of 2024. Restructuring our debt obligations represents the achievement of an important milestone for the company. one that reduces our total debt, defers principal and interest payments, and lowers our near-term cash needs. These debt restructuring activities provide Venus Concept with additional liquidity to support the maintenance of ongoing operations, execution of our near-to-medium-term strategic turnaround objectives, and funding of priority investments in key R&D initiatives. We are appreciative of the valuable partnership and continued support from our lenders. We look forward to continue to engage with our lenders as we execute our strategic plan. I would now like to turn the call over to Dr. Hemant Wagis, who will share an update on recent progress in our restructuring programs, new product pipeline initiatives, and our recent company-wide rebranding initiative, which marked an important inflection point in our strategic turnaround. Hemant?

Thanks, Rajiv. As Rajiv described earlier, we've already made considerable progress against several key initiatives of our corporate turnaround strategy. We're executing the strategic plan we outlined at the start of the year on or ahead of expectations. Let me share a little colour in key areas where we're making notable progress. First, our cost reduction and cash management initiatives designed to accelerate our path to cash flow breakeven are progressing at or ahead of expectations. Notably, the decision we made in Q2 to target additional cost containment initiatives, including identifying areas where we can implement phased R&D investments, has helped protect our near-term cash runway and accelerate our path to cash flow breakeven in the second half of 2024. Second, we are encouraged by the early momentum we're seeing as a result of the targeted programs implemented in Q2 to provide more operational flexibility to our US commercial teams including new financial tools and transaction support needed to provide an enhanced level of customer and deal support. We continue to expect improvements to overall sales productivity and customer responsiveness in the challenging environment that many of our customers are facing. Third, outside the US, our efforts to right-size the business have been accelerated in recent months. We are rationalizing our international infrastructure, reducing costs, and simplifying the organization. with a keen focus on establishing the optimal mix of direct presence with distribution partners in key international markets around the world. Discussions are ongoing with both existing and several new distribution partners to align with our new international strategy. Multiple new distribution agreements are under negotiation, which has us on track to be substantially completed with our international repositioning by early 2024. and ready to return to growth outside the U.S. in 2024. Fourth, as discussed on our second quarter call, we've advanced certain new product pipeline projects ahead of expectations and are pleased with the significant progress made in new product introductions in recent months. After receiving FDA 510 clearance in September, we are pleased to announce the U.S. commercial launch of our new multi-application platform, the Venus Versa Pro, on November 1st. The Versapro is a next generation version of the Venus Versa, one of the company's flagship products with more than 2,200 systems sold globally since introduction. The new Versapro provides our customers with an enhanced user experience and superior clinical performance. The system's ability to support 10 different applicators addresses the growing demand for multimodal solutions in aesthetic clinics and med spas. and offers a complete rejuvenation solution for addressing tone, texture, and tightness. We see this as an important near-term growth opportunity for new customers and an attractive upgrade opportunity for existing users. Finally, we were pleased to announce a company-wide rebranding initiative in October. We introduced our new branding called Venus Aesthetic Intelligence or Venus AI. Venus AI captures our strong commitment towards growing our global brand. focusing on emerging technologies and services, partnering with customers to build smarter practices and customizable treatments. The new Venus AI branding represents a forward-looking approach to aesthetics innovation that is core to Venus' future aspirations. Our product portfolio will continue to evolve and deliver more than just leading device performance, but with a shift towards total practice performance. The moment the patient enters the clinic to post-treatment recovery, Further, by staying connected to our customers, we can start to leverage real-time data across our growing network of connected devices to uncover the meaningful business insights that define the best in-practice performance and fuel the next generation of aesthetic device technologies. Customers will see Venus AI branding in all of our new product launches, including the Versa Pro launch earlier this month. And importantly, with the launch of our next generation aesthetics robotics platform, aiming in late 2024. With that, let me turn the call over to Dominic for a review of our third quarter financial results and balance sheet as of September 30th.