Venus Concept Inc.

Please stand by. Good day, ladies and gentlemen, and welcome to the first quarter 2024 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 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 FCC, 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.

Thank you, operator, and welcome everyone to Venus Concepts' first quarter 2024 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 Wageek. Let me start with an agenda of what we will cover during our prepared remarks. I will begin with a brief review of our Q1 2024 results and notable operating developments in the recent months. Then, Hemant will share an update on our progress in several key operating areas. Dominic will then provide you with an in-depth review of our first quarter financial results and our balance sheet and financial condition at quarter end, as well as a review of our Q2 2024 revenue 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 detailed in our press release issued today, we are pleased to deliver revenue for Q1 2024 that exceeded the expectations we outlined in our fourth quarter earnings report. While our revenue results reflect a decline of 15% on a year-over-year basis, We are encouraged by the underlying trends we are seeing in the business to start 2024. While the business continues to be impacted by macroeconomic headwinds, which are pressuring the aesthetic sector as a whole, we were pleased to deliver growth in cash system sales on a quarter-over-quarter basis in both the US and international markets in the first quarter. Notably, we are seeing early indications that our strategic initiatives to exit unprofitable direct markets outside the US are bearing fruit. International revenue increased more than 30% sequentially in the first quarter, driven by strong initial demand from new distribution partners added in late 2023, and stronger than expected artist system sales in the period. As discussed in recent calls, the challenging macroeconomic environment and tighter credit markets have impacted systems adoption throughout our business in recent quarters. The hair restoration business in particular has experienced notable increases in time to close systems deals given the higher ASP associated with these robotic capital equipment purchases. We remain cautiously optimistic that the operating environment will show improvement as we move through 2024. That said, we're encouraged by the continued evidence that our efforts to reposition the business and to focus on key strategic and operational initiatives are well-founded. We are pleased to report that cash system sales represented 75% of total systems, subscription, and lease program sales in the first quarter compared to 66% in the prior year period. Notably, global cash system sales increased more than 20% on a quarter-over-quarter basis in Q1, with particular strength in markets outside of the U.S., which posted cash systems growth compared to the prior quarter and prior year periods. 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. We continue to execute towards our goal of having our new distribution partners identified, signed up, and ordering in the majority of our key international markets in early 2024. We were pleased to see solid initial demand from these new distributors and continue to believe we are well positioned for profitable growth in these key markets in 2024. Importantly, our first quarter financial results support our belief that the key elements of our transformational strategy, cost reductions, prioritizing cash system sales, and restructuring initiatives in the U.S. and international markets are enhancing the cash flow profile of the business. We delivered a double-digit decrease in operating expenses in Q1 and generated three and a half times more cash from working capital compared to the first quarter of 2023, which together helped drive a 51% reduction in cash used in operations year over year. We continue to believe that our expense and cash flow performance 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. Before I turn the call over to Hemant, I wanted to highlight multiple important developments subsequent to quarter end. Specifically, the company announced multiple transactions reflecting material progress towards the company's strategic initiative to restructure our debt obligations and secure bridge financing. On April 23rd, 2024, one of the company's largest lenders and investors, Madryn Asset Management, purchased its Main Street Lending Program loan or MSLP loan from the City National Bank of Florida for an undisclosed amount. As of December 31, 2023, the MSLP loan had an outstanding balance of $51.3 million. Following the close of the MSLP loan program, the company and Madrid entered into a loan and security agreement for an aggregate principal amount of up to $5 million in debt financing to support near-term liquidity requirements. We appreciate the support and partnership from Citi National Bank since we entered into the loan agreement in December 2020. We're also very pleased that Mandarin has demonstrated further commitment to the company's longer-term prospects with these transactions. We look forward to their continued support as we work towards our goal of returning to growth and sustained profitability in the future. 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 and our commercial product development and regulatory initiatives. Hemant.

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 in areas where we're making notable progress. First, Our cost reduction and cash management initiatives continue to progress well. Our focus on protecting our near-term cash runway has been productive and the targeted incremental cost containment initiatives implemented in the second half of 2023 have further enhanced our ability to execute on our high priority strategic initiatives while still preserving liquidity. Second, as Rajiv mentioned earlier, our efforts to rationalize our international infrastructure reduce costs and simplify the organization continues to progress. We continue to engage with both existing and several new distribution partners to align with our new international strategy, and we are pleased to see the initial demand from two new exclusive partnerships we announced in December in the United Kingdom and in India. We are tracking towards our goal of finalizing terms with additional new distribution agreements, which we intend to announce publicly upon completion. and remain on track to be substantially completed with our international repositioning in the coming months and ready to return to growth outside the U.S. in 2024. Third, our efforts to advance certain new product pipeline projects, secure regulatory clearances, and execute initial commercial launches are tracking favorably in early 2024. The U.S. commercial launch of our new multi-application platform, the Venus Versa Pro, is going well and feedback from customers is very positive. We launched in the EU in the first quarter, and we were pleased to receive TGA clearance in Australia on April 3rd. We were also pleased to announce regulatory approval for the Venus Bliss Max on April 8th from the State of Israel Ministry of Health. Fourth, we are pleased with the positive early response from our company-wide rebranding initiative, Venus AI, and encouraging feedback from physician participants in our next program recently hosted in March. By way of reminder, Nexthetics is a new series of customer education and training events launched under our Venus AI rebrand. The Nexthetics program represents a great example of how we are enhancing our focus on physician education and practice enhancement by empowering professionals in the aesthetics field with the knowledge, tools and support they need to grow their businesses. We've had some great success in this past quarter in expanding our commercial strategy to target corporate accounts. We secured a recent win with a fast-growing multi-center account, which contributed solid system demand for Venus Viva. And more importantly, we'll deliver attractive recurring revenue from ongoing procedure-related demand for Viva Tips. More details to follow. With that, let me turn the call over to Dominic for a review of our first quarter financial results and balance sheet at quarter end.