Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen. Welcome to the Second Quarter 2023 Earnings Conference Call for Venus Concept. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and 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.

updated are in available be the filings may which SEC, on factors from our time-to-time with Such our website. obligation a information, no forward-looking undertake to or update We revise statements as events, result future new of or otherwise. publicly our to include not accordance accepted will generally measures or principles in financial references call that certain This GAAP. with accounting also are calculated

are comparable portion We available the accordance financial measures non-GAAP Reconciliations of generally those in press earnings refer to our website. Investor presented the in these measures most release as with on and non-GAAP GAAP of financial measures. today calculated to issued our Relations

I Silva, the Chief would call Please turn of De Officer Rajiv Concept. Venus Mr. now Executive sir. to go over like ahead to

Rajiv De Silva

Concept’s I’m Chief by conference Hemanth second quarter Thank and operator, Penna; Domenic Chief you, XXXX Innovation joined by Officer, our the Business Venus call. call Financial today Officer, President and and Della Dr. and welcome our to on earnings Varghese. everyone

an well we notable operating a recent and Let our and brief results agenda with Hemanth me QX months. of product overview in our begin priorities during recent share pipeline start will an our developments progress a Then programs, announced R&D progress, board. update our restructuring formation recently will remarks. on will what as with as of I prepared of advisory cover in our new medical

call today’s results questions. and well sheet press in of will you provide as then guidance, XXXX review which balance with an quarter your in-depth the our we will Then our we financial our financial Domenic quarter a open of condition review and release. for as end, at reaffirmed financial second

in get agenda started. that let’s mind, With

results today, second earnings our on within we would’ve are our provided press of These QX the revenue of release As XXXX, in $XX.X of seen we range in million. the expectations issued delivered total call. quarter you

on we are initiatives Similar the our a as result quarter strategic revenue year. versus the year decline this prior is what declines second to we year-over-year Our revenue executing notable discussed expected. direct QX the results reflect of call,

are international expected we and a flow markets, quality higher to enhance to activities, are the profile long-term growth. together the exiting profitability path and in implementing certain operations of series cash to accelerate Specifically, company unprofitable of which transitioning to direct restructuring the and revenues, the sustainable business

towards Our that strategic progress we results QX earlier year. continued these this in initiatives to point outlined key

we period. are XX% sales represented First, and to total subscription XX% to pleased system sales compared system year prior the that sales report cash of in

system more subscription the compared XX% towards initiative U.S. in system Cash significant evident this even as in given at system total systems Our U.S., represent. cash sales, when cash sales period. sales mix fueled year the higher generation, progress the looking QX, increased is XX% our year-over-year growth to QX represented the XX% in this of expected, in and and U.S. of prior the customers quality sales improvements of cash which in revenue

restructuring continue our to Second, progress. activities

representing expenses XX% the operating rightsizing We reduction the a our organization. We reducing are simplifying $X.X in business, delivered and a reduction year-over-year. of million costs, non-GAAP

in XX% a each a basis year-over-year in basis. operations reduction a in XX% reduction used used of on QX operations areas on cash Our progress in in these and drove cash in a quarter-over-quarter

enhancing the accelerating business We the track right and path our the to clearest profitability sustainable and that cash are believe represents the of on growth. flow this the we profile evidence long-term towards of goal

sales for quality our financing third-party particularly environment rely of a are This revenues for very that more our our our considering in on from difficult cash with pleased performance subscription relevant financing is higher customers. end even light shift system We customers. to

I hair has the economy business. to wanted related discuss. our as briefly such other to price items procedures addition, those two higher impacted inflationary There In are

First, we manage for our further capital focused the debt near-to-intermediate-term and on longer-term to achieving we Company’s to remain enhance our resources as our highly obligations foundation goals. work maximizing

by As of the and million beginning outlined annual on structure in our cash half pretax total recent the of achieving calls, our million a $XX breakeven strategic the to targeted $XX plan savings in second in cost company’s originally XXXX, flow XXXX. reduction

series initiatives XXXX a the evaluating objectives. XXXX We’re to to of half continue impacting breakeven path our flow our of second in incremental cash without

execute We a with achieve flow year. the key and lenders ensure successfully us allows are that actively to engaged runway cash breakeven strategic in discussions next also requisite plan to

of relationship appreciative the have constructive we We’re primary lenders. that our with

which approved for Nasdaq compliance provided of listing Nasdaq regaining through us exchange. the period extension Second, continued with an the November was XXXX. we plan by a compliance, developed of

Hemanth I formation of a the medical Dr. Varghese, on will call recently programs, progress who R&D turn and would pipeline our to new in update an now initiatives, board. product announced our to share investments restructuring including over Hemanth? recent like advisory

Hemanth Varghese

Thanks, Rajiv.

initiatives As considerable or turnaround progress believe executing balance, the we we strategic of of described of our we’ve on made strategy. outlined corporate expectations. year the plan key the we Rajiv ahead earlier, On against several are at already start

share Let notable areas color key a little in progress. me making where we’re

Concept a to cash our our work contributed designed and at all credit of performance. to to accelerate business First, the in progressing improving are management who’ve path ahead greatly expectations. or flow breakeven organization entire of initiatives It dedication the reduction to Venus cost cash is hard

phased made identifying the during to protect and including addition, runway where our decision flow accelerate to implement path can we cash areas to QX, breakeven. target additional cost R&D initiatives, investments cash we In containment

the to the commercial greater in to recognizing are and plans internationally Second, balance the headwinds taken XXXX. environment of that implementing are and move to through many steps we as provide responsive U.S. of customers momentum our market challenging facing. We’ve stay proactive

improving an commercial conditions. while our productivity new programs several enhanced initiated level to market targeted support. customer measures have needed We provide transaction respond to believe provide and and support ability We tools to overall more to of that our flexibility these to financial enhance operational teams, including deal will an sales evolving

technical expanding customers. we’re streamlining processes, our programs, to incentive level service as commitments perform the financing U.S., efforts our U.S., sales Outside demos, the and In onsite are well. capacity enhancing to internal business rightsize progressing our of our new to well introducing promotions our as the

our of reducing optimal infrastructure, rationalizing on establishing presence the world. the and distribution around costs direct mix focus with international in simplifying international keen and are the organization a We markets partners key

as refocusing of projects cash expectations. portfolio our to Third, advance efforts R&D resulted to able of phasing has manage to broad mentioned technology been better some and project earlier, leverage product ahead we’ve while spent also our pipeline of burn, IP new certain in

nano in a one new medical initial with MP quarter in that generation of systems leverages XXX(k) expect X,XXX and squared, The the fourth of we XX exist that products FDA quarter a company’s IPL, Specifically, now introduction is face since that clearance our texture and body Versa, the RF hand Versa more flagship Pro the devices sold the Pro. treats introduction. globally The Versa, pieces. and than of the next generation the Venus for of color, and novel choice Pro technology version the second Versa our fractional third commercial with Versa is tightening

important existing growth for customers. have adding provide skin been power with an optimal an for near-term deeper higher attractive advances opportunity customers this We’re as to new that the results. Viva penetration opportunity MD for and see We made and upgrade

accelerated to goals, our of development execution and which strong an process. proud commitment R&D the are product in We resulted team’s

The exciting introduction fourth of team original XXXX has the timeline. in for quarter us poised ahead an product our of new

Our new well. in terms expect in as progress product XXXX continues pipeline to favorably we of what

And commercial our the in the commercial next plan for we by support on for our aesthetic the are robotics we of we second importantly, in making of the system body introduction progress generation of accelerated XXXX. an AI.ME, half continued target Specifically, are XXXX. our encouraged half next of introduction platform the are of in first

for As studies potential medical to announced forward established an are months. to full physicians AI.ME’s over attracted we us fortunate clinically. initiate to a we of engaging new the group group have of with month, We to board the to several series excited help support AI.ME, are our look industry-leading realize next clinical this of very last advisory

These with and patients AI.ME needs to we product studies ensuring inform technologies to evolving continue strong are our clinical impact. providers of the robotics clinical aesthetic strategy, development and advanced and designed meet

for first note commercial consistent required HX that to for of use built been launch off will the kick clearances planned be to December XXXX. important have with the QX. expect received AI.ME shipped of AI.ME Our to the be clearance is in initial FDA XXX(k) XXXX. launch clinical to commercial three support study we and It further systems we activities are in No

June our me review over second let Domenic that, to of XX. call turn balance quarter a sheet With for of financial results Domenic? and the as

Domenic Della Penna

Hemanth. Thanks,

and on a focus basis. avoidance of total quarter growth basis prepared on the noted, of and results unless the the reported $XX.X in revenue GAAP XX% otherwise revenue decrease year-over-year a lease reported in services decrease will doubt, product second driven by products XX% total for of partially XXXX items region related For company’s remarks in by increase and are million, decrease revenue on revenue. decrease XX% revenue, a X% XX% revenue increase international revenue was year-over-year revenue other product a in XX% a U.S. in year-over-year a a driven in decrease XX% category in by decrease and The systems by in year-over-year, was down GAAP a my all revenue. We by the offset

our of strategic results right focus second in P&L, de-emphasizing on and the United across exiting by of the revenue million. gross to sales decline unprofitable markets. revenue direct sizing $X.X change was driven the The review quarter the year-over-year primarily $XX.X – million to in and in financial Turning profit to profit XX% or down international a driven and/or rest quality decreased decision the subscription markets, by of States by by gross

XX.X% of primarily offset lower to to change lower depreciating U.S. a was changes the margin including a compared of artist headwind by our than sales, as XX.X% product system due partially currencies million gross certain second was margin to in of devices energy dollar. quarter result exchange revenue $X.X foreign XXXX. have margin relative a mix, in the gross in Gross which based The

in expenses XX% a to was $X.X decreased include decrease to quarter approximately operating and costs The and or of expenses, in expenses million expenses total administrative general XX% sales by cost activities $X.X XX% $X.X operations operating primarily $XX of change expenses. of driven the improve related company’s GAAP or and general second million. decrease million or $X.X Total a designed structure. million of restructuring administrative and to XXXX And million in marketing

costs restructuring are declined million these Excluding non-GAAP or $X.X XX% year-over-year. expenses operating

XXXX. items year-over-year. million declined debt operating loss total $X.X $X.X quarter in Excluding million expenses million non-cash and to The was in G&A expense operating XX% stock periods cash both the are $X.X second aforementioned compensation of non-GAAP non-GAAP and the expenses bad or compared

million $X.X change other in the which $X.X were expenses XXXX. $XXX,XXX loss in driven interest of other net quarter compared to The XXXX to year. and quarter year-over-year in gain foreign loss, was $X.X by interest non-cash Net million last of gain of the million second second and was a exchange compared expenses

or second million and to to quarter to the calculations share million the attributable share $X.X quarter loss XXXX reflect was current $X.XX the second a second quarter compared stockholders loss year our for the Net EBITDA and Adjusted split million loss reverse May $X.X of $X.XX XXXX. was or Note, X-for-XX for per per of XXXX. of for prior in stock share XXXX the million XXXX. of periods $X second for the $XX.X net quarter per compared

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

balance the to sheet. Turning

in $XX.X year-over-year. As million the as $XX.X approximately equivalents respectively operations of cash and XXXX, used the months December three million compared XXXX. total to million of XX of cash use obligations debt was XX% June million, Cash decrease a $XX.X had and ended and June company million of $X.X in for XX, XX, $X.X cash

expense on of to and The sales cash efforts, initiative by subscription as a was used an focus our credit sales, to in restructuring cash tracing credit a improvement capital driven improvements and significant system cash reduction practices challenged for to debt operations our the market. bad screening tighten in result working plan in including our in benefits otherwise generation flow

$X.X of million operating Cash the investing the the million from net by offset activities financing used proceeds activities in of of quarter and driven the of $X.X during agreement million. by second XXXX from private XXXX purchase the sale May on our period cash in preferred the and and of was with which Park partially from sale $X.X XX, proceeds multi-tranche senior pursuant XXXX, Lincoln occurred to from stock stock placement, Capital issuance common of equity

of guidance. Turning our to a review

period. XXXX of in our million, approximately reaffirmed we release, representing $XX year-over-year. full company total The revenue months the press of range ending for XX, a the our in revenue December the in X.X% $XX X.X% million detailed guidance XXXX for continues As year the range to expect to to XX decrease

the formal are we modeling the we providing XXXX, considerations not evaluating our While following providing in profitability for XXXX. use are for full guidance for outlook year

revenue in XXXX revenue in decline of our full year first continues Total of X.X% we in in the revenue the offset to the at to end First, declines year-over-year half low transition quality guidance assume. half the of second complete the by growth XXXX as range revenues. of

single sales end the of driven more growth of second cash digit XXXX, low XX% the primarily in high growth half Note, year-over-year guidance system our implies year-over-year. than by of

XXXX. XXXX year compared represent more XX% approximately of system and sales total for year for XX% system subscription than expect full full to We to cash sales

continues headwinds system of approximately revenue are sales our in aforementioned we the revenue guidance from lower million. of XXXX approximately and revenue this the year-over-year to reflect strategic cash $XX international $X growth of changes impact business total year related in implementing to lease for favor Our million, to our

changes would be markets Excluding cash basis. believe from and the year-over-year impacts on this growth certain our in system revenue we XX% year, total a international the sales strategic prioritizing normalized

$XX revenue XXXX year full revenue will range be our the that Second, third million our total assumption of includes guidance in million. $XX to the quarter

to now flat revenue roughly low guidance for year-over-year approximately of relatively margins as in the at of gross called full Third, gross range, end which basis assumptions, up year margins points our year-over-year, XXXX compared we XXX XX%, XXXX. expect prior

Based to guidance in of on performance compared operating $XX XXXX, half we expenses expense million now than approximately first million. expect our of of $XX better expected the $XX million the range GAAP $XX in to the prior million to

range other GAAP guidance includes includes G&A and million million updated approximately Note operating approximately also expenses. and The severance debt bad stock operating of compensation, guidance of range non-cash GAAP this updated restructuring $X.X expense including $X expenses. non-operating expense expenses,

million aforementioned non-operating to range, guidance expect we the better $X target prior in from by expenses, driven expense items $XX than for our expected now million QX. to and performance $XX cash approximately non-cash Excluding operating down our XXXX million be

interest of expense $X Fourth, expect we continue to approximately million.

more which XXXX used Finally, our our more modeling than and result prior year-over-year from are a operations total P&L than for to XX% our across XX% expected for supporting now year-over-year. revenue of a guidance to our compared cash assumptions in in the reduction called of reduction assumption, modeling

that your we call will With operator, now the open to questions. Operator?

Operator

comes with Thank proceed you. Jeff [Operator with from Please Instructions] Cohen Thalmann. Our question. first your question Ladenburg

Jeff Cohen

are Hi, Hemanth. Rajiv, and Domenic How you?

Rajiv De Silva

Jeff. Hey,

We’re well, thank you.

Domenic Della Penna

Hey, Jeff.

Jeff Cohen

as work complicated compare previous the in the then Domenic, OpEx so to back million, $XX half you about going $XX question, talk I’m million million lastly, I cash OpEx million-ish, guess, backwards on you to $XX that million. $XX $XX the and it and a

whether trimming and through could that GAAP, the into that of OpEx mostly process let I’m correlate you. then how mostly or guess tie between cash us or that process. And that XX to and XX-ishapproximately. I maybe And So about just trying as differential through as sounds you you’re the to thinking concluded know like preliminary Thank you’re through spend? process far business

Domenic Della Penna

I between off, of $X million about the primarily metrics, Jeff, mean, bad first difference of comp million of expense. the expense debt $X.X stock G&A, two and $X million

non-GAAP the and are GAAP the piece. then the key drivers and So cash those between the

a that primarily far of ongoing through – as our In some continue the we’ve is sort far may as to restructuring what modifications There make largely, we half. terms as is subject announced as continually strategy of our of but second – they to that certain in the we year. in where earlier look bulk the and as adjust as goes stand, we unleash we on behind we for we’re tweaking efforts it opportunities,

Rajiv De Silva

and some Jeff, our further I than bit particularly North That’s international a think in we we Israel. will make that America little taken continue made to in longer changes adjustments, regions.

Jeff Cohen

also us side Pro, you of then as were difference is Versa you form versus the And I’m Okay. system. factor to technological pieces with Got on referring and the hand AI.ME up cost the it and then body assuming now, system, it. follow mentioned the goods, system follow-up potentially what Versa

Rajiv De Silva

more expect So time. but third Again, XXX(k) what that systems. the Viva terms industrial RF we design on soon. the of developed that an MD the of didn’t be in to updates you the updates with this as is at technology Versa which of we’re can quarter, our yes, pro, previously in we’ll to based key feature any well – this and in speak expecting bringing very NanoFractional clearance updates energy have the you’d There will upgrade the onto it have Versa are system, we some for as our

body The is year. AI.ME systems upcoming new the – system, out body an to at calls this we’re expecting year. AI.ME, a to to on detail to we’re will respect With the body is we’ll come energy-based be incremental new in doing update system right? with So what HX have system, next our which actually of AI.ME more actually actually have system, again, next in

Jeff Cohen

Got it.

helps perhaps. for That the Okay. Thanks taking questions.

Rajiv De Silva

Thanks, Jeff.

Operator

Thank you.

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

Marie Thibault

environments. maybe about should about and your think on what offered you as a those are of us we we customers sheet they give detail balance financing be here. think try your tougher financial questions. Thank to Good transaction taking tools mention, support the ask help and Wanted U.S. those and programs to you to provide evening. for to go one I will tools? the more who facing try targeted out sales sort Can anything heard teams you financing to we tools and little considering as to be

Rajiv De Silva

Yes.

provide that details. some allows let add and high Hemanth me answer a level to Marie, just So

products, balance nothing on are learned with We’ve create are some changed These that about quite techniques operational to in how in there’s we a bit quite helping price that well, the do internal our our subscription major tools particularly in any them tweaked financing have with our here obviously also should and sales approach force obviously field look, impact to a sheet. bundles. and model, we which combination have of given So our with how heritage we bit.

the are providing so And tools are field that we those force. types our of

our to that if Hemanth, you should balance impact sheet, want nothing further but So add any maybe detail.

Hemanth Varghese

Yes.

that in of time here that terms in shift transaction, things said there’s think do. to either close right. long fundamental In or a of be help it of any right? anything you profitability. sheet our or of I Think it type speed nothing – Nothing the would would accelerate environment, take balance up these financing a terms tough of

expanded demos. in we’ve onsite capacity demo of our able So being terms do to

As at there’s see look ways internal to Rajiv processes financing that. and our to around taken a streamline we’ve mentioned, if internal our

field So commercial force we all give that bundles, leadership decisions organization move to pricing transactions available. are can and and the need what incentives to be able of when get they faster tools to the quickly

Marie Thibault

Okay.

change be would front? Just to revenue everything recognition any clarify, recognized wouldn’t to there be up

Domenic Della Penna

No.

Rajiv De Silva

no Yes, No. changes.

Marie Thibault

then might a but And doing well on about might earlier potential systems going about for partnering quite on call might about we alone partnering what R&D think talked more be you on? seems I partnering hear specific which wanted Certainly side. ask and hear now, you’re Perfect. you Okay. When to we that? the like it on

Rajiv De Silva

lot we it that, of open to capital system on. but concept under advance think So to to particularly built focused that right? want have we as our – sure be AI.ME we possible we of we I we that’s Marie, what much – the continue make partnering, and steam, own are intellectual as a into look, our – The are really our

on other with But system there the calls, as which AI.ME could the in ways we described new evolve are indications. in multiple future have

get our we from partnerships. our So benefit we around getting arms once initial really beyond, would launch, wrapped certainly other

remain advance iterations so AI.ME. idea really if us some open And no future but certainly it’ll of of timeline the to our there’s to we this, partnering allow to

Marie Thibault

Very Okay. questions. Thanks the helpful. for taking

Rajiv De Silva

Thank you, Marie.

Operator

Thank you.

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

Anthony Vendetti

business, think you could ARTAS? talk on the to that’s what although it, And going purchase what Thanks. the and is Vendetti. customer ARTAS, then reason you’re wants Yes, purchase do now subscription What split you ideal more outright think from sales from not forward? of moving do. terms know of completely the do versus is But if about, you what the for in mix subscription is just of away a – terms in softer I if the ending

Rajiv De Silva

Anthony. Sure,

So we’ll let ARTAS the question. start me, with

a it I one the devices, is think, of ARTAS described couple So And look, So our longer. sales it get finding is driving the – we and priced right? just then is in softness device script, for that’s is customers in price what look, So $XXX,XXX, are incrementally I harder our we this, and above higher any reasons to business. are cycle becomes the one it as longer there financing, think that takes right? of becoming

the finding of it itself, our that shift customer is inflationary upwards reflection certain terms a that are softness of the now, – devices it a in getting. there’s current actual is these then customer higher number probably we indication we And are – procedure on a Right a economy. $XX,XXX depending transplants And certainly there comes procedures. also the but is procedures higher price the to no higher of is of more of what useful that it is one price permanent the this when that is being to

add further any that? to Hemanth, details

Hemanth Varghese

and believe seeing something I both think level, the level at exactly see said I as at we’re you it, No, not the – cycles a we do and it’s that permanent. business customer this consumer but

Rajiv De Silva

cash overindexed sales. your at in we at sales sales. was you about the so subscription system XX% if were The look On quarter, system versus over XX% U.S. cash second question,

it about As we and XX% subscription. XX% was said,

modeling XX/XX bad trying is think manage particular but this forward for split a split not not kind I if to to going guess are number, a about to We would purposes. of

more have time, we that long we What what sales the understanding that a pretty works do for tweak the effectively right? So way our us. I to of continue do a that’s at internal our that and would it profile we sales, financing financing, say split our split, to becomes done that, expect we can XX/XX effective, expense of debt of down, subscription for way keeps though very we going have that the internal pretty subscription do one advantages customer bad period a for in is to good a if having a is that, decent

Anthony Vendetti

just company the sells SmartGraft over there around price a a ARTAS, been know the Is competition? about might on And thinking SmartGraft some hair product XXX, system somewhat – from customers the XXX,XXX of option it’s brought a still a Okay. follow-up the or any that any but do down for an I also – transplant you has you are system? of over called called a that there’s that, XXX. robotic for Is there of be feel that,

Rajiv De Silva

The customers. as pointed also manual are there out – I think you There’s other procedures. options for obviously

lot business, this for I robot Because into offers devices text. getting the customer a it’s to repeatability right? new that benefits a way reality provides inexperienced for It though is the techniques. of the don’t, a overcome think other

pretty getting consumer has But into to said, expand that still for to wouldn’t unique for opt as robot competition the do some the though play. I cost for manual for I I still a first that looking time procedures offering. And So right? is like role practices practices looks this do their the less, we people the offerings, pricing, dramatically is would important say it the cheaper different, an say end

Anthony Vendetti

queue. back hop will it. I Thanks. Appreciate into Okay.

Rajiv De Silva

Thank you, Anthony.

Operator

additional [Operator you. does currently queue. participation. Thank the for conclude our no you We’re participants Instructions] in your Thank showing conference today. for That

Rajiv De Silva

Thank you, everyone.

Domenic Della Penna

you. Thank

Venus Concept (VERO) 14 Aug 232023 Q2 Earnings call transcript