- Earnings call transcript Q3 2022

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Operator

Good day, ladies and gentlemen and welcome to the Third Quarter 2022 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. to result or events of obligation statements our or no a as new undertake publicly revise update forward-looking otherwise. We information, future measures in will are accounting call also references GAAP. certain This include principles or not with accordance financial calculated generally accepted to that refer these to generally non-GAAP financial We measures. as our to Relations non-GAAP issued in measures our website. press most release calculated portion GAAP and Reconciliations of the with available those presented on are Investor the today of financial measures comparable in accordance earnings like now call to would the I to over Mr. turn Rajiv De Silva, Chief Executive Officer of Venus Concept. ahead. go Please

Rajiv De Silva

welcome Thank you, joined to operator, by Domenic quarter third XXXX call the conference and our am everyone I Penna. Venus Financial Officer, Della Concept's call. Chief today earnings on

our prepared with remarks. me what agenda Let start during a brief cover of we will

appointed you Venus begin of in-depth recently a the end. financial thoughts Concept, brief and condition Officer provide Executive at remarks quarter review my our our the financial share Chief will with and will on Dominic introduction results, sheet some a and with quarterly balance more of Then, I company. As

provide at summary introduce Business now the your held healthcare to share will Pharma, before would Americas. to healthcare as in XX Pharmaceutical for distribution Canada and global XXXX, the building Asiri let's to the my the aesthetics little a further Endo call XXXX of I and get included expertise consumer President, I In with multinational recent managing Planning, on that on President of more continued products of Pharmaceuticals My Novartis positions McKinsey I years, therapeutic the dermatology, specialty versed world. developing points Skincare, served like responsibilities was Health, held and the With XXXX From experience industry networks, my care around President commercializing experience have a industry, be specialty a than multinational privately worked summarize, that, a XX of overall of in as we as during developed a my to leading To and Vaccines healthcare moment its Venus company. background to and co-founder Bausch serving as improve company, Specialty than dermatology the am well in the more Following CEO of held company. aesthetics, building Valeant CEO pharmaceutical of started. companies including Strategic businesses, overview global and career in few markets. and complex aspects and of Chairman open skincare Concept outcomes Head I me healthcare period involved quality multiple XXXX, senior privately a years in my Company a patients cosmetic surgery has Covis questions. on and you in the the business. publicly at of years a healthcare I and for team take healthcare USA traded as a My mind, ago, International, of known also multiple to Concept products. President as myself and thoughts joined topical initial joining its executive when I overview flagship high-level provided Venus company XXXX including as focused healthcare story. started Novartis I industry. with in serving a in Pharma, Director as and consultant the month leadership a I XXXX, Pharma where with &

of lead skills profitability significant efforts inorganic a these through with both suited make repositioning, means. I confident its I our the best Venus building key combination organic experience In development, relationships our part team, strategy, phase in challenges, and aspects to Concept the managing to markets determine and of through company am of gained colleagues. with sustainable, on evaluate focused our and to through opinion that in have next I physician position Concept Since going companies capital the how for To forward. and Venus me addition, profitable key joining the leaders. have dedicated growth well also colleagues, growth customers,

benefits structure extent the platform discussions have including in review potential medical Concept's other technologies, positioning things. in primary opportunities my pipeline with and and and reservation truly early the which market strategic this the recently passionate products takeaways its understanding aesthetics applications, kicked the in today, about the from platforms comprehensive appreciating customers industry, differentiated and financial to fact be One competitive future. aesthetic market technology disruptive innovative robotic the strategy, we finding, of among has hair a off of partnership processes, device on and the the commercial performance, been and of company, capital the are medical our product talent, robotic serving model of possible Venus including R&D systems Building and strategy, the operating to

its While my strategic been initial the review impressions have confirmed. is stages, initial still in

has enhance to business profit has Venus to the and infrastructure I of expect itself reposition my help has profitability accelerate never leverage considerable flow to sustainable Concept long-term been growth. a to and cash resulted $XXX the and plus in profile Concept the business P&L efforts improvement While the with Venus turnarounds path built global million to cashflow and business, model experience that positive.

and record leading experience We America and the as will President Business planning Dominic process we M&A strategic expected team and the And critical next review transformational navigate Concept appointed lead I'm performance me high also partner markets growth driving review the to with XX-year planning of North diverse in of complex with with was evolution. growth corporate managing and to initiatives, transformations, three and welcomed least XX. Officer development position October Chief company's track business business is of Venus strategic and continue Hemanth and to Varghese to the a to Hemanth The at in healthcare businesses the execution, strategy internationally, high phase next Dr. on executing activities. months. brings work Hemanth him and to process. excited the

be review turn call financial as third of team of the a let our XXXX. of by position will implementing first community fourth results our for strategic Dominic? the September quarter March and on quarter of of that, the progress investment balance the update part quarter earnings end to XX. to the begin With We develops to that call the in We over a as plan in XXXX. our intend Dominic me sheet

Domenic Della Penna

Rajiv. you, Thank

unless are prepared of will the remarks the XXXX on my a company's basis. avoidance and of GAAP reported results doubt, otherwise a focus all the for year-over-year items on on noted, basis, growth-related and For reported third year-over-year a down million revenue GAAP in of international year-over-year the XX% States revenue X% region XX% in decrease year-over-year, driven by We revenue revenue. United decrease in decrease XX.X total was a by quarter

cash in Excluding rates increase third percentage the The systems the in subscription third in of Revenue derived revenue. constant impact was total the products of in XX% on in was foreign cash changes dollar, to the deals prioritize model revenue services total prior and company's XXXX and is to XXXX. and total the generation decline approximately driven quarter of XX% total XX% in due recent of and a to X% revenue decrease systems decrease respectively, over in primary revenue XX% revenue from a the X% by in category deals strategy quarter a year revenue product currency our U.S. exchange period. lease a compared The in revenue revenue decrease compared currency XX% The in international offset versus States to year-over-year and partially a by liquidity. the improve the decreased to of XX% basis in preserve by United increase order subscription driver

in X.X million gross two the then third primarily of X.X expenses If operating million X.X items, inventory, of compared increase The for revenue primarily non-GAAP review XXXX the quarter rest XX% or points our an XXXX basis marketing was XX.X% third decreased the period. to or XXXX. was expenses. general driven by of XX% which million, to Gross in increased Turning total in offset as down from an of revenue million QX to in the decline million The a XX.X%, well XX.X mix the by by compared third the negative down were million margin P&L. inventory of to or in of in a sales XX% and gross due revenue of of administrative change relative operating driven partially year-over-year of in gross impact effects X.X gross our the and X% approximately XX.X higher a U.S. quarter decline margins write expenses of financial margin and profit period. driven million change was or in dollar representing total currencies and research a decrease to and The expenses, million increase across in in by XXX changes these in development life results to the effect parts XX.X U.S. and devices and is the we year-over-year X.X expenses, as of XX% in profit Total to foreign revenue, depreciated write quarter the million movement. adjust end X.X the a combined

expenses and workforce include in in with expenses, severance Third a X.X X.X of of incurred GAAP Venus we debt for Venus payments bad quarter Canada. X.X administrative SOX million million SOX preparation Spain general and expenses being million XXX(b) of compliant, in XXXX associated reduction related and

a the months debt South million administrative X.X a three included of the ended general expenses of XXXX, on GAAP, of bad and in X.X loss sale approximately a million For September Africa. XX, expenses, subsidiary and

in provisions, of restructuring costs in and Excluding impacts related activities severance bad the QX periods, debt both other XXXX. and SOX the

key our essentially declined were our year-over-year The and expenses our generation. on non-GAAP expenses to initiatives efforts expenses related and making the series flat operating operating in operating growth non-GAAP to a are is global sequential of the reduce streamline basis. operations, prudently of manage Our early our quarter-over-quarter our we investments strategic expenses. decline our and progress a cash result initiatives improve Prioritize to support to XX%

of to stockholders compared quarter attributable to the XXXX. XXXX for to for X.X of compared share EBITDA million, loss or third X.X third loss $X.XX XXXX. of per was of XXXX $X.XX of While million total to third Net quarter million quarter quarter third our intended the early for to X.X third in a benefits realize as began XXXX. XX.X our million multi-year million Returning expected, these XXXX. was review initiatives of financial these of profile the operating quarter to third of in third we compared results, enhance loss quarter quarter are or Adjusted XX.X the for financial the X.X share, million activities was per to the

a As full reminder, loss release. have loss we earnings press GAAP of adjusted reconciliation net our our a to EBITDA provided in

and the XX.X operations million, as to XX, ended the balance used company cash million million, cash for used X.X debt sheet and total in Turning three compared decrease XX% the The and Cash September as cash in million in of improvements total XXXX. revenue the our XX% XX% focus operations equivalents months by of Despite XX% obligations of in system having XXXX, to cash burn in of of cash quarter-over-quarter. revenue result XX.X was a approximately generation of year-over-year XX reducing reduction strategy a XX.X December of and year-over-year million used the our XX, was respectively cash a QX, driven rate. through benefits period. targets improve X.X September improvement cash had XX% generation cash positive sale in in and increased our to approximately subscriptions working year on higher as systems clearly in flow a QX, decline to which to impact is in prior XX% compared representing sales, and year-over-year initiative capital a

not we are the for formal modeling we considerations. XXXX, providing guidance following Finally, financial are while providing

our million, OpEx approximately EBITDA total bad QX expenses First, incremental as of assume related GAAP full this to prior the in our expenses improvement The is approximately in quarter, guidance. continues of to year-over-year. EBITDA loss growth increase sequential were year not operating for to guidance prior target XXXX we which the third XXXX severance costs, and XX% adjusted target in in representing compared assumed recognizing continue XX for and to debt quarter, adjusted fourth

our modeling we last operating of X initiatives half expense roughly earnings have to estimate streamline on for benefits shared we of implemented which represent early of global changes the XXXX X reflects XXXX. our other our also we Importantly, the operations, to over call. million to strategic target considerations the savings are There material million no second together

approximately million We million. stock X.X of non-cash X.X continue -- of to be and to expect approximately shares X.X comp non-cash outstanding weighted approximately average interest of million expense million G&A XX

growth continue evaluate We to capital fund secure requisite opportunities strategic to to initiatives. our all

sales the continue will prioritize sales. to We transition to from subscription cash

as to fund operations review streamline company This the strategic cost addition, strategic partnering for the Rajiv, opportunities initiatives, priority R&D well financing, that balance to the opportunities will include your the call range and efforts we operations company's With initiatives. of our through secure outlined high we includes In to and possible questions. ongoing potential of evaluating the operator, growth a as are of Operator? factoring on open to the long-term a may sheet. reductions, part by as non-dilutive of which trade further full portion potentially receivables company's current now

Operator

[Operator Thank Instructions]. you.

Jeff proceed Ladenburg of your question. Our line first from with the with Cohen Please question Thalmann. comes

Jeff Cohen

DDP. are Hello, Rajiv and you? How

Rajiv De Silva

Hi, Jeff.

thank well, are We you.

Domenic Della Penna

are Good, Jeff. How you?

Jeff Cohen

Good.

guess, color looking what for converting existing subscriptions? pull toward you better is year. might of are also a of new sales diminishes just out with Or further I period? within cash for as just were and to so toward instead trying customers the cash subscriptions a subscription these fact expect you there to you And early transition are out understanding that some next So for through QX going -- get ads and coupled that the on subscriptions there

Domenic Della Penna

Yes.

they're primarily new So towards Jeff, customers. targeted

time to existing that of subscription that track on a good opportunities mostly established We transaction. pay is remains will the focus record secured, that paying available to on customers into to whereby open we've if at we make obligations, put that still want the have their outstanding that entering new record a of program existing do we But have, track deals a customers them. off have program that

Rajiv De Silva

on build that to just And answer.

seeing we subscription increase As we to out did fourth cash expect the in the into trend going script, improvements the in encouraging see well. Dominic that in as very keep pointed and the a ratio quarter in versus quarter third

Jeff Cohen

is as a total [indiscernible] us Okay. perhaps little third Could did discuss how related the sense There in versus subscription. you about of cash a give as those a of the follow business bit a hair equipment Thank placements business you. well, up. and quarter the to and

Domenic Della Penna

basis. all Jeff, a our on ARTAS so Yes, of devices are cash

subscription. we really put -- don't them they So on

ARTAS to market, relation quarter for soft sell it international the a your bit us we particular it to robot, was certain anytime it ARTAS So an a in in is and we cash. markets In on deals. longer question for close experienced where tightening credit took

quarter, in to So some difficulties. And off fourth those we the had we've robot challenges I'm happy in the international sales decent of terms that a but start to we're some in QX, the in in of quarter, report third particularly cycled through markets.

Jeff Cohen

X.X if more ramifications some falling QX? FX from you fourth One quick, FX some real of the expect Okay. the I do quarter, on follow could as for as far on negative the

Domenic Della Penna

to Yes. U.S. strength, U.S. the than continue in certainly don't into QX. the ago, the dollar headwinds expecting I to a of we mean, worse will be in not to I term. to But year I to any them see relative strengthening I'm some we currencies a where run immediate other expect in extent dollars that we expect some are QX. relative

Jeff Cohen

Perfect. Thanks our for taking questions.

Operator

Please BTIG. question. proceed from question Thibault next with comes line Marie with the of Our your

Marie Thibault

discussion the we leadership. wanted Rajiv challenge my questions. on the first get a good I you to or us like there the most your know I of cash little wanted runway, the it and that runway? progress on agreement facing Hi, comfort me little there. quarter, give DDP. see the efforts to immediate And any a could the factoring for with to here was ask some receivables, there the evening, last trade I Thank anything seems new more if on updates of taking of to detail cash more a immediate

Rajiv De Silva

you, Marie. Thank

fruit. quarter. see And guidance not for expect step the providing see to up year in this. the third initiatives I'll fourth then lot do this place we Dominic have we the that quarter is the in expect start the that are consistent before in news me fourth earlier team a the with bear company year beginning put quarter. good efforts to of and let the the add We bear to our the So in that beginning in a And versus burn reduction typical is we that my trends, in right? So do to early encouraging had are Now, also the subscription in in a in why cash about in cash cost arrival We right? increasing. to talked sales addition pretty place reduction the fact fruit, to mix put in are

additional Now effort going saving we on are forward. quarter and cost increasing our measures this

some whole talk reduce cash all that So there's agreements, operations. all flow towards factoring our moving continuing done factoring potentially complex AR, about -- of of customers. And going with long the to process. the pointing a customers factoring because series but a continue the of burn are from practices. individual is efforts institutional of is to effort are it can Dominic processes the typical individuals, it's our are Most

So take answer. Dominic add will of longer. arrangements But to those that factoring types I typically let

Domenic Della Penna

Yes. That's correct.

success ongoing. Venus and improvement for still mentioned. continued QX Raji Marie, driver, other addition in fourth which host industry to patterns big be improvement relative on an And expect driver initiatives historical which sequential in the how a to getting we the the terms trends the are in quarters. of primary of some to going QX that cash in for QX the activities trajectory and and that's is deals. is QX, whole of getting going we burn to we again, primary our quarter, those on So And down had we've in like And is But very are immediate just converting already. a relying see

of work again, we the that in a burned of in on QX. in of to similar two really And impact QX. cash we do plans year, significant have as place our So dropped amount significantly on burn money combination we the half those QX have beneficial we first the to will continue down in substantially continue back in a And to

Marie Thibault

aesthetic that. a Maybe to my here your question. ask macro understood, Would love for And are how just pricing more terms seeing Okay. procedures thank in hear metrics they're of well. what up as holding and environment? follow-up commercial And for in this of thank you saying, like can on the are demand you what customers patient the volume some Well for taking I questions.

Rajiv De Silva

Again, me and start add let Sure. have to Dominic it.

have the hair the robot, ARTAS We also standpoint. patient The relatively business. between procedure aesthetics generally as cited dynamics price is high-priced and from you procedure know, is a business And a different the item. high

being financing companies with in consistent for is environment other tighter, pressure are a So And the more dynamics also right? the So said, the that terms of ARTAS robot. on while quarter what Dominic fourth driver has customers procedures, price in primary seeing not there's the with little pointed bit affected are the has getting out, quarter those somewhat, trends encouraging seeing third may we them. that's high have

from our around full those devices And you for to seeing there And range see for any devices aesthetics we're And as continued lower And both a we major what buying face we for hear priced side, procedures. think, products. as demand patterns our the the overall, demand not products. On that's have customer we know, change the of continued expect customers. as I in well body. is

Marie Thibault

so it. you much. Thank Got

Operator

[Operator Instructions].

Maxim comes with Anthony question of question. Our Please proceed the with next Vendetti your Group. from line

Anthony Vendetti

Thanks.

up distributors. follow to the Just on

still sales? distributor So sales salespeople How direct direct U.S. the in it's moving or and do I whether model. managers you're internationally, you know the have many to toward more

Domenic Della Penna

Yes.

specific to around as to this So And -- past from Tony, to underperforming headcount last in Spain XX-Q, we especially provide distributor. model. we revert in quarter we to very and certain type typically mentioned, a our we exit read they look direct But don't that France, particular, quarter, to will in and relation distributor convert international. you'll details subsidiaries can we continue

running that result distributor the So a we are are revenue total by until force. there impacted yes, sales as a we bit material not to decline get relative people in that. model interim, that It's quarter. number a in the of up see and of our fourth will But a

Anthony Vendetti

then, the million million, mentioned we quarter, as you I now in operating number? in And fourth about in a right expense XX Okay. fourth guess, couple modeling assume is Is quarter? approximately we're the should severance the payments that

Domenic Della Penna

X in to don't fourth a did but QX. as We terms XXX,XXX It QX be There material shouldn't in minimal severance, expect be not QX. QX. in we some be in high million, some booked book may we'll quarter. the I in it overly But have amount in of but as

Anthony Vendetti

Thanks. back it. jump Okay, All great. in. right. I'll Appreciate

Operator

are queue. There teleconference. today's for your further does no the Thank participation. This you conclude questions in

day. at may You time have and lines disconnect wonderful your this a

Rajiv De Silva

you. Thank

Domenic Della Penna

Thank you.

Venus Concept (VERO) 11 Nov 222022 Q3 Earnings call transcript