Venus Concept Inc.

Ladies and gentlemen, and welcome to the fourth 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 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, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with the 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.

Thank you, operator, and welcome everyone to Venus Concept's fourth 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 Q4 2023 results and notable operating developments in the recent months. Then, Hemant will share an update on our progress in several key initiatives of our corporate turnaround strategy. Dominic will then provide you with an in-depth review of our fourth quarter financial results and our balance sheet and financial condition at year end, as well as a review of our Q1 2024 financial outlook outlined 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, we are pleased that we achieved our primary goal of reducing cash burn by more than 50% in 2023. key elements of our transformation strategy cost reductions shift to cash sales and working capital management all contributed to this achievement i'm proud of the resilience shown by our organization in navigating through a difficult year of transition in the fourth quarter of 2023 we delivered total revenue of 18.1 million down 6.2 million or 25 year-over-year and up 0.5 million or 3% quarter over quarter. Our fourth quarter revenue results reflect softer than expected system sales in the U.S. due to macroeconomic conditions and tighter credit markets and by the impacts of our accelerated restructuring activities in certain international markets. Similar to what we discussed on our recent earnings calls, macroeconomic headwinds continue to pressure the aesthetic sector as a whole, while high interest rates affecting our customers' ability to finance new capital equipment purchases and deals are taking much longer to close. Our revenue results outside the U.S. continue to be impacted by the strategic initiatives we executed last 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 all together 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. Despite the continuing challenging operating environment, we remain encouraged by the signs that our efforts to reposition the business and to focus on key strategic and operational initiatives are well-founded. First, we are pleased to report that cash system sales represented 67% of total systems and subscription sales for fiscal year 2023 compared to 58% in fiscal year 2022. Our progress on this initiative is even more evident when looking at the mix of cash system sales in the U.S., which represented 71% of total U.S. systems and subscription sales in fiscal year 2023, compared to 53% in the prior year period. Cash system sales to U.S. customers increased 11% year over year in 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 in certain international markets have resulted in headwinds to our growth trends as expected. 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 high opportunity markets to enhance the company's longer-term growth and profitability profile. Our restructuring activities outside the U.S. have included winding down direct operations 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 2024. With that, we expect to be well positioned for a return to growth in our key international markets this year. Finally, while the macroeconomic environment had represented more of a headwind than we had contemplated, our team is executing well despite these unexpected challenges. As I mentioned, importantly, the company achieved its primary strategic objective for 2023 to reduce cash use in operations by more than 50%. Specifically, our team's strong execution towards the strategic objective resulted in a 52% reduction in cash use in operations in 2023. We believe that this 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. Two other noteworthy items I wanted to briefly discuss. On March 25th, we announced that we received a decision from the NASDAQ hearings panel granting our request for continued listing on the NASDAQ capital market, subject to the company demonstrating compliance with NASDAQ listing rule 5550b on or before may 28 2024 and certain other conditions we also announced on january 24th that the company's board of directors had authorized exploration of strategic options for the company this effort focused on maximizing value for all stakeholders is currently underway as part of this effort the company is engaging with its lenders and existing shareholders, as well as with external parties, to explore avenues to improve the financial profile of the company with a view to longer-term value creation. We look forward to providing an update on this initiative at the appropriate time. 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. Ahmed?

Thanks, Rajiv. As discussed in our last earnings call, we've made considerable progress against several key initiatives of our corporate turnaround strategy. Let me share a little color where we're making notable progress. First, our cost reduction and cash management initiatives designed to accelerate our path to cash flow break-even are progressing at or ahead of expectations. The targeted incremental cost containment initiatives implemented in the second half of the year has helped protect our near-term cash runway. Second, our efforts to rationalize our international infrastructure, reduce costs, and simplify the organization are progressing well as we endeavor to establish the optimal mix of direct presence and distribution partners in key international markets around the world. Discussions are ongoing with existing and several new distribution partners to align with our new international strategy. We were pleased to announce the expansion of our international distribution network in December with the signing of two new exclusive partnerships in the United Kingdom and India. Multiple new distribution agreements are under negotiation, which has us on track to be substantially complete with our international repositioning and ready to return to growth outside the U.S. in 2024. Fourth, our efforts to advance certain new product pipeline projects are ahead of expectations resulted, sorry, ahead of expectations resulted in strong momentum on new product introduction in recent months. After receiving 510 clearance in September, we were pleased to announce the U.S. commercial launch of our new multi-application platform, the Venus Versa Pro on November 1st. We were pleased to announce CE Mark from DECRA Certification BV to market the Venus Versapro system in European Union on February 22nd. Finally, we're very excited with the early feedback from our company-wide rebranding initiative last October. As discussed on our last earnings call, Venus Aesthetic Intelligence or 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. We want our customers to know that we're not just a product innovation company. Rather, we want to deliver more than meeting device performance. We're focused on delivering total practice performance from 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. To that end, we were excited to announce the Nextesthetics program in March. Nextesthetics is a new series of customer education and training events launched under our Venus AI rebrand. The Nextesthetics program represents a great example of how we are enhancing our focus on physician education, and practice enhancement by empowering professionals in the field of aesthetics with knowledge, tools, and support they need to grow their businesses. With that, let me turn the call over to Dominic for a review of our fourth quarter financial results and balance sheet as of year end 2023. Dominic.