Q2 2020 Evolus Inc Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the key to try to 20 elements on French calls after the speakers presentation. There will be a question answer session do you watch T. question. During this session you won't eat the perhaps chart.

On your child so.

If anyone should require assistance during the conference. Please press Star then zero out your migrated each gone for interest to be required I would now like to introduce your host for todays conference, which is actually <unk>, Vice President Finance Investor Relations and treachery. Sir. Please go ahead.

Thank you operator and welcome everyone participating on today's call. This call is also being broadcast live over the Internet at ABC Dot Com and a replay of the call will be available on the company's website for 30 days.

With me on today's call, our David Motors, Eddie President and Chief Executive Officer, Lauren Silvernail, Chief Financial Officer, and MVP Corporate development, Mike Jaafar, Chief Marketing Officer, Rehab alert, Chief Medical Officer, and head of R&D, and Jeff tumor Vice President of legal.

Our remarks today. We will include statements that are considered forward looking statements within the meaning of United States Security laws. In addition management may make additional forward looking statements in response to your question.

Forward looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business strategy operations or financial performance.

Detailed discussion of the risks and uncertainty that the company faces is contained in its annual report on form 10-K quarterly reports on form 10-Q, and current reports on form eight k. actual results may differ materially from those expressed in or implied by the forward looking statements. The company undertakes no obligation to update or have you any estimate.

Projection or forward looking statements.

Additionally, the discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or an isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our form 8-K filed today with the FCC. It may also be found on our Investor relations.

The web site at investors that have less dotcom and now let me hand, the call over to David.

Thank you Ashley on.

It goes without saying that the second quarter was a challenging quarter for the entire static industry and Atlas was no exception.

In the first half of the quarter practices were largely shutdown due to cope with 19 measures and spent that time rewiring their operations in speaking with customers. Most instituted measure is focused on patient safety and spacing appointments to minimize interaction between patients.

Although patient throughput decline due to these measures it was largely offset by extended office hours.

By June the large majority of practices reopened and benefited from a strong surgeon patient demand, reflecting the resilience of the toxin category similar to what had been observed during the 2008 I'm sure.

Many customers commented that June was the strongest month of this year and acknowledge that pent up demand was a key driver of the volume reinforcing our optimism about the continued underlying demand in the market.

I'm pleased by the progress we made in the second quarter during the first half of the quarter. We had an intense focus on rewiring Evelyn to create a more efficient operating model leaning further into our digital platform to support our customers. In addition, we introduced the stimulus program called Evolent Threefifty offering flat pricing to customers.

We also launched our consumer loyalty program, which offers greater savings for patients then competitive loyalty program and draw all of this activity through our proprietary digital platform.

As a result of these strategic initiatives, we reduced our non-GAAP operating expenses by approximately 37% over the prior quarter.

Orders taken via our digital App platform nearly doubled versus prior quarters, and we increased our purchasing account base to more than 4400.

In the quarter, we delivered 7.8 million in that revenue with approximately 90% of that generated in the second half of the quarter.

In the second quarter, we also celebrated the one year anniversary of the launch of Chabot.

On reflection the launch of abolition ansible has been a success across all measures.

We rapidly establish about cross the U.S. occupying the number three market share position and gaining ground as we continue to increase our account base and reorder rates, while optimizing spot.

We strategically position shovelled against a fast growing younger demographic of consumers with the provocative branding effort as a result, our patient base now over indexes against millennials.

Lastly, we decided unique business model with a highly specialized sales force and a proprietary digital platform designed to provide a frictionless customer experience.

I could not be proud of the apples team for their excellence in execution and focus.

Now, let me pass the call over to Mike will provide more color around our second quarter performance and promotional programs.

Thank you David and good afternoon, everyone from a commercial perspective, I'm very pleased with our teams responsiveness and second quarter performance. Our first to market stimulus program called tablet Street 50, what's key to our success, we extended payment terms out to 120 days locked in our customers loyalty status for the year and more importantly, leveraged our static.

Only indication by offering the entire market once flat price of $350 through our app.

The program has been a tremendous success as measured by the number of purchasing accounts and revenue generated.

Stepping back from all of this I'd like to comment on our strategic differentiation and drivers of success.

We launched a ball with anesthetic only focus a highly specialized salesforce and a proprietary digital platform.

Our singularity and focus has been our competitive advantage and the second quarter was the first quarter, where the entire Apple is value proposition was unveiled to the market.

The customer can now fully appreciate our unique patient acquisition strategy, our simple and highly effective consumer loyalty program and lastly, the benefits of our technology platform.

Allow me to elaborate.

Well. This is unique patient acquisition strategy is designed to answer two fundamental questions for consumers first one is what options do I have to treat my frown lines.

And where can I go to get treated our co branded media strategy hit the market in the second quarter and as a reminder, any platinum and above customer can qualify for co branded AD featuring chabot alongside their practice.

Our co branding media strategy generate over 5 million impressions through July.

And more currently driving leads directly so participating so both practices.

Shifting gears to the launch of our consumer loyalty program called Eplus rewards I'm pleased to share. The program has been adopted at a rate well beyond our internal expectation.

Within 30 days of launch nearly 30% of customers base opt in and over 16000 patients enrolled into the program.

The credit to the Salesforce and our product team, we deployed a simple easy to use an effective program.

Lastly, our investment in technology continues to prove out our unique operating model during the second quarter over 80% of our orders were generated through at the analyst practice out, giving our sales representatives flexibility expanded reach and more importantly efficiency.

In closing I'd like to think the sales and marketing organization for their passion and commitment to making her beauty experience delightful and achievable I could not be more pleased with the continued momentum of our launch and success observed over the last four quarters.

I'll now pass the call to Laurent for additional remarks, and our second quarter financial performance born.

Thank you, Mike and good afternoon, everyone. As we indicated on our Q1 Colonsay our business climate change dramatically in the middle of March as a result of cobot 19 since that time, we have taken actions, which have resulted in a stronger nevertheless today.

In April we retired our business to conserve cash significantly reduce our operating expense base and leverage our digital platform.

These decisive actions resulted in a 37% reduction in our Q2 2020, non-GAAP operating expenses compared to the prior quarter. As a result, we expect to become profitable on a lower revenue base in July we closed a 40 million dollar financing on attractive terms.

Which resulted in a strong June 30, 2020 pro forma cash position of $124.8 million.

Today, we exceeded expectations by reporting second quarter net revenue was 7.8 million. We are pleased with the strength and the piece of the recovery of our business during the second quarter. However, due to the ongoing cobot 19 crisis, we do not plan to provide U.S. revenue guidance at this time.

As we previously stated we do not expect to launch in Europe until 2021.

Moving down the piano, our second quarter gross margin percentage was strong at 75% during the second quarter, we launched consumer loyalty and reduced coupon activity going forward. Our gross margin will depend on sales level promotional activity and other factors our non-GAAP.

Operating expenses for Q2, Twentytwenty were 18 point threemillion reduced by 44% from 32.9 million during the second quarter of last year, when we launched or both.

Q2, 2020, non-GAAP operating expenses include $3 million, a cash severance and related expenses associated with our restructuring.

Non-GAAP operating expenses for the second quarter of 2020 excluded three noncash items $2.4 million for stock based compensation $1.7 million for depreciation and amortization and $2.4 million related to the devaluation of the contingency contingent.

Royalty obligation.

We continue to anticipate our non-GAAP operating expenses for the second half of Twentytwenty will be less than $42 million. We believe we will incur higher non-GAAP operating expenses in the third and fourth quarters of Twentytwenty as compared to the second quarter of this year as promotional.

And other activity increases.

Our non-GAAP net loss for the second quarter of 20 to one was 12.4 million at least 46% from $22.9 million supplier corridor.

I would use operating expense footprint allows us to become profitable on a lower revenue base and assuming continued strong sales of jumbo. We believe we have a clear path to profitability.

Cash burn during the second quarter was cut in half to $15 million from $30 million during the prior quarter.

During the second quarter of Twentytwenty, we made no cash payments for inventory, we do expect our cash burn rate will be higher in Q3, Q2, 2020 due to inventory purchases and other activity. Our cash balance is expected to fund our operations for at least the next 12 months.

Potentially longer assuming an increasing revenue trajectory.

I'd like to take a moment to thank you Evan lids team for their tireless dedication and accomplishments during Q2.

We reported Q2 sales above expectation have a highly efficient business model, our and our in a strong cash position and with that I'll turn the call back to David.

Thank you Lord before I close the call I'd like to provide an update on the international Trade Commission or ITC case on July six we announced that the administrative law judge or a lj assigned to our case issued in the initial determination. This non binding initial decision recommended to.

The ITC imposition of an exclusion and they cease and desist order.

We respectfully I strongly disagree with the L. Jays initial view on July Twentyth, we issued our petition to the ITC to review the initial determination and set forth in our brief a number of ground, where the L. Jay had missed applied the law, including issues related to an overreach on jurisdiction and trade secret law.

We have also submitted a public interested into the ITC as has our partner day. One we remain confident in our case, we will continue our challenge and look forward to the Commission's final determination, which is scheduled for November six.

As we look ahead to the back half of 2020, several catalysts remain that will enable outlets to drive meaningful shareholder value first we look forward to a successful resolution of the ITC case by November sick.

Second our differentiated value proposition will drive the next phase of our growth starting with consumer loyalty analyst Threefifty and our proprietary digital platform.

Lastly, we remain optimistic that the U.S. toxin category will continue to recover in the back half of the year. The combination of these catalysts in our more efficient structure will enable apple us to reach profitability on a lower revenue base.

With that I'll turn the call over for couponing operator.

As a reminder to ask a question. Please press Star then the number one on your attached on telephone. If your question has to be answered you wish to remove yourself from the key Reston town.

Your first question comes to the light up a Marc Goodman from SVB, leaving your line is still open.

Hi, I'm I was wondering if you've had a flavor for marketshare, obviously, we know what at the reported I was curious if you had any flavor for.

The other two guys reported until the market actually did in the quarter.

Your thoughts about how quickly the market kind of comes back in the fourth quarter. I mean was it down 40 ish percent in the second quarter and you're expecting it to be less than that in the third and.

You know.

Turning positive in the fourth quarter, maybe just give us a sense of how you view the market rest of year. Thanks you.

Great. Thanks to the question Mark up well, let me start with our view on the market looking at the second quarter.

You have now the second public company to report out on on the volume returning back in the back half of the quarter, a and that we do believe that the overall category in the second quarter was likely down roughly in that neighborhood of 50 or so per sat on the full quarter largely driven by the fact that the front half of the quarter.

It was shutdown as we look to the back half of the year, we expect a gradual recovery a into the third and fourth quarter, but we don't expect that the markets will return back to 2019 levels in the back half of the year now of course, that's our internal operating assumption, we pointed as a chain salary.

Coverage and part of that is because.

It's going to vary state by state depending on what the public policy is in and we're starting to see that now as we entered the third quarter and into the latter part of the year that being said when you step even further back the overall trend is still a favorable one and the penetration rate in this category is very low of consumers entering the market its.

Roughly just a few percent of consumers interested that are getting treated and that younger demographic of millennials is predisposed to aesthetic procedures and we believe that that trend is a favorable one overtime and as we pointed out the passive price point of an neurotoxin procedures also favorable in the three to 500 range. So combination of those things gives us a lot of confidence on.

Holding that the toxin market will be the fastest to recover anesthetics, it's already proving that but also that the long term trends or are intact as it relates to market share as you know, it's it's challenging to triangulate shares, especially in such a short window of time, but what we do see affords you bow is that our account base is expanding reorder rates are growing.

And we hear from accounts that are purchasing products from us that they're increasing their utilization of your vote in the practice in terms of the overall share and that in combination with new accounts is continuing to drive our penetration into the market and as we get a better sense for how shares play out in the future will give you more color around that.

So your expectation just for the market overall is is probably down year over year in the third quarter still double digits. Whatever it is and then fourth quarter, you think it'll be down as well or do you think you've actually can.

You'll see the market turned positive year over year.

Yeah, we're expecting there relative to prior year the market will continue to be depressed that it won't get back to 2019 levels in the back half of this year. Thanks.

Your next question comes to the nine after the machines from Cantor. Your line is now open.

Hi, Thanks for taking my questions here congratulations on the corridor.

So first question I had for you is basically our initial determination by the ITC ever first and if so under what circumstances.

Second question, Lauren you were talking about a clear path to profitability.

And I'm just curious if that means that there's the potential to reach profitability without any more additional capital raises.

And then third one here is just are you thinking about adding any additional products to your portfolio in the near term and if so what areas are you looking at thank you.

Great Luis I'll take the first part of the question related ITC and turned over to Lauren on the the second.

First as it relates to the overturning cases, it's not uncommon that the commission will rule against the ale Jay the administrative law judge on one or several issues are this case in particular is unprecedented because there's an extension of jurisdiction here by the ITC.

See that makes this a entirely unique and you see that represented in our petition to the ITC that adopted made public without going any further into the case I'll turn it over to Lorne the common.

Great. Thanks, David Hi, Louise on profitability, we've reduced our operating expense base tremendously as you saw from a year over year Q2, Q2, and also Q1 Q2. This year a and so we're able to go profitable on a much lower expense base could before we've guided in.

The second half that we will have less than 42 billion of non-GAAP operating expense. So when you do the math that what historically for us except for first quarter has been 70% plus gross margin, we really artist spot, where we can go profitable much more quickly what we're fully depended on is is really the first question that they would address which is how.

Since the market come back so we're waiting to see how that market develops obviously, we were thrilled with how aging timeframe that it was really over our expectations I think many folks on but it's hard to tell the exact timing at this point.

On business development on our focus continues to be aesthetics, and adding either marketed a set of products or products for our pipeline that movie adelaar can develop for us.

Thank you.

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Your next question comes to the line of Annabel Samimy from Stifel. Your line is now open.

Hi, guys. Thanks for taking my question congrats on.

Resilience on a quarter on so I have a few first I want to ask about sure needs of your your couponing program or the consumer loyalty program. I think you mentioned that there was about 30% you're talking about 15 million I'm, sorry, 60000 signed up.

What do you what do you expect for steady state and know what what what would you expect for net cost or a compression I mean, that's price show Perjuring that time.

The second question I had is related to the ITC case also like you mentioned your disputing the extent extension of their jurisdiction, but not necessarily just eating the underlying case I was just curious when you've got the 40 million from Taiwan, how should we read into that investment that's based on what they know and feel about there.

Okay with many talk in Korea.

And then finally I want to get your.

And you think anything will change and the new competitive landscape, obviously, that's not what player coming on the market with interesting you show right now, but you got essentially with the new toxin and with a new.

Fintech service platform. So what do you think you might need to adapt and that she thinks that environment. Thanks.

Great Annabel <unk>. Thanks for the questions why do we start with the consumer loyalty program because that was such an important launch for US you know we talked about that from the early launch of UBS Your bow and I'm going to turn over to Mike to give you a little bit more color around the launch of that program. How it's been received on how we think about the continued.

The uptake there in <unk> Lorne speaks to the financial side of it and then I'll take the ITC question that.

Hey in about how are Ya.

I'd say the of lets rewards program for us it's been a tremendous success.

We spent.

Nothing short of three quarters designing this thing to be a simple in this flawless of an execution standpoint, which is the reason why we're seeing the adoption rate as high as 30% on its way North if you step back and look at most loyalty programs at any industry you never get a 100% penetration into any program. That's just never the case and in the right.

Range of call. It 30, 40, 50%, we'd be and even the higher end most industries loyalty programs for us the hard part of calling a steady state right now or is this really dramatically so far they thought our position in our launch. It's so early in our launch phase, we're still adding a significant amount of accounts in any given year.

That will change the denominator, but to be at 30% penetration call. It six weeks into a loyal to launch is something I haven't seen before and again all attributed to the way that Pori I'm, a design and how efficiently to put it that you've gone closer to it as a consumer and I encourage all of you to sign up you'll notice there's no need to download an app or remember.

Our password or whatnot that digital handshake as all tech space in its done at the office. So very pleased with the way it's been rolling out and our customers are excited about about the program probably equally as much as we are.

Great Hi, Annabel this is lower than with regard to the financial impact you know coupons are a direct a reduction of revenue.

In the current period, when they're redeemed for us on the D.

Loyalty program is actually a deferral and because you do have practice meeting dumped into consumers' needs on.

When it is playing through the financials for this year, we anticipate that we'll have a higher gross to nets conversion into higher gross margins as compared to prior quarters, and you actually see that with us at 75% versus most of last year. When we were couponing, we were in the with seven low seventys. So it's.

Playing out nicely for us could be coupon in the future sure. That's why I mentioned in my remarks, you know it will vary quarter to quarter, a little bit depending on what our promotions bar, but overall the scalable. He left from the program well are likely to result in a higher gross margin in the rest of this year than we've seen during coupon.

Let me turn it back to David on items.

Thank you Lorne.

On the question around the 40 million dollar investment from day, one clearly that that signals they ones confidence in the strength of this case and our ability to overturn the decision through the commission and also speaks to the value. They see in the long term partnership with analysts as evidenced by the conversion price of $13. The share. So we're very pleased.

To see our partner support us through this this time period and and on the last question regarding the role of of Technology. As you mentioned, a revamp made a move into Fintech I think first just stepping back there's no doubt the technology is playing a more important role across.

Costs industries Anesthetics is no exception as you heard earlier from Mike Greater than 80, 80% of our orders are transacting to the digital platform and our platform isn't just there for the transactional value borders that same platform now powers, our consumer platform, where consumers get immediate reward.

And the accounts have immediate access to that level of information that same platform also powers, our co branding efforts and as we continue to build on that platform. It becomes an extension between the company and the consumer and we do believe that were the first aesthetic company with an injectable that has an entirely frictionless platform.

That powers the company digitally and that's enabling our sales force to be more effective in front of the customer as was observed in our performance this quarter on a lower revenue base, our reps can be far more efficient and the way that we operate and it continues to be an important part that we will invest in and I suspect the industry as a whole we'll continue to move in that direction.

Okay, great. Thank you.

Okay.

Your next question comes into line Racking Gilbert from Trust Securities. Your line is single thing [noise].

Thanks, Good afternoon, its Greg Gilbert from Truest, just two I'll ask one of the time first.

David is your larger competitors are doing anything to help consumers or practices in a way. That's caused you to be more generous and you were planning to even if that's just adjusting terms or any other programs.

[noise] so Greg.

Nice to hear for me It took me a minute there to recalibrate against the name truest. So congratulations on [laughter].

[laughter] like this landscape is always dynamic.

We support small customers and the industry stays very close to these customers. So that we can address their needs and when cobiz, yes, I'm very pleased by the Big quick response IR team. We believe it was the first to launch a stimulus measure for these accounts in order to help them whether through this period with no minimums required.

On the purchasing given that procedural volume was unpredictable at the time that in combination with the loyalty program that we had planned on launching even prior to cobot, obviously delivered some meaningful value to the customers everything that we introduced a over the quarter. We believe we led the way on and we continue to focus on our core.

Value proposition, which is to improve profitability for the practice and to make this product more accessible to the consumer that right. There presents a challenge I think in that space as you know for competitors that have both anesthetic as well as a therapeutic.

A form of their toxin and we continue to lean into that in combination with our digital platform to drive value to our customers and we're seeing the results of that here in the back half of the quarter.

Great sorry to confuse the on the name it took a while for the merger.

Name to to kick in my second question is about I see see from a different perspective, David I imagine a lot of investors that may be interested really can't.

Ticker interest to the next level, if they think the company's hanging in the balance and heading into november's decision regardless of your confidence on the matter. What can you tell us about your confidence in and potentially resolving are having having others resolve this issue before we get to November.

Well, Greg it's clearly in our best interest to get this case resolved sooner rather than later that became apparent following the July six decision and it's probably important when you step back from this case to realize that most cases weather in the federal circuit and the ITC image.

40 of them ultimately settle before a final decision now I'm not position to speak about settlement.

But at the same time out we look forward to bringing this to closure by November six and that's ultimately a meaningful catalyst we recognized for shareholders and for our employees and we're very much focused on getting that done.

Thanks, a lot.

Your next question comes into line, if a dog of child from teachers C. Wainwright. Your line is simple thing.

Hi, good afternoon, Thanks for taking my questions just.

In terms of the recovery in the market today are there.

Any particular sort of demographic groups that are over or under sort of indexing.

Obviously, you've been targeting millennials.

Just trying to sort of think through some of the sort of economic impacts of both of the pad that back then.

Versus subgroups might have sort of more stable economic situations, which might let them you know.

Engage in sort of aesthetic treatments more so than others. Thank you.

Hey, Doug already this is Mike.

It's a great. Great question are you calling into covered the first theory that was out there that millennials are going to suffer from this disproportionately because of the.

The unemployment rate and then the stimulus package hit and everybody wants to jump on the unemployment and bandwagon and start cashing out that there was a check so as you step back and look back to see if this demographic was affected negatively and disproportionately. The answer is no if anything the mindset of that consumer going into this and going into any other year.

Or is that they spend more on their discretion more of their discretionary income into areas like skin and beauty health and wellness and you see it all around wood pellets on sales you see it through skincare, especially online retail skincare the shift of of spend just went from brick and mortar into online.

Not necessarily from one demographics of the others. So so we're not seeing a negative impact on the on the demographic and the focus if anything we do believe this a this demographic will represent a larger portion of this category in the coming year into and we're well positioned within that group.

Okay, Great that's really helpful.

Your next question comes to delight BAML Divan from Mizuho Securities. Your line is now a little thing.

Great. Thanks, so much for taking my questions. Maybe one just following up on the millennials comment there just can you give us a sense of how much of your sales just maybe coming more from the millennials demographic versus other he said it's more of I'm just trying to maybe get some numbers behind that relative to other demographics and then the second.

Question I know someone asked earlier about advancing as they enter that market here soon with the pillar and then obviously your talks and I'm just curious how that May impact your marketing efforts you talked about the technology impact here and now there's more of a role for technology, but just you would no longer be even the newest talks and on the markets don't I'm just.

To get a sense of how I'm thinking how that might impact how you think about promoting your product to both consumers and Oh I guess, you know patient then providers. Thanks.

That will love Great question, I'll address both of them up from the millennial standpoint.

No we book sales directly with customers not consumers and so that the best tracker. We have today is our awareness and we do over index and awareness, where the market by and large on an aided basis has about a 30% to 32% aided awareness of this product, meaning jumbo and when you get closer to the millennial segment.

It's closer to 40%. So we have a good call. It 10 basis point difference from an awareness level and that's obviously by design as consumer loyalty takes a deeper foothold in the marketplace will be able to segment the consumer transaction and back back channel that into that and some data that you're looking for which is how do we over index and all.

Summit sales, but since we sell to customers be hard to get that I'd answer just just as of today.

As far as revenge impact on on their launch to us there's a lot of unknown to make a statement right now about revenge, we don't have the label, we'd all the price.

We don't know the final positioning and their go to market strategy. So the one thing I will say, though is more noise around this category is.

As preferred you're seeing that with our entrance right. The the a focus on this category from both consumer and customer as you step back and look at all the players and this has has only increased because of our launch and I suspect that we'll continue to increase where they fit player. It's a market and so so we welcome that because more noise around this category.

This is beneficial to all but like I said earlier in our call our our aesthetic only indication keeps us very nimble in flexible and that's a favorable backdrop for the company.

Okay. Thank you.

Our last question comes to the light biologic facade from Barclays. Your line is there okay.

Hi, good afternoon, Thanks for taking my questions. So couple of.

Question for me to kind of schools of thought as to Nols.

Oh Fusty due to have any recent update on you'll see bars. This told against that.

Looking at launched as in Europe next year.

Sake, and I also want to understand David how you're thinking about a cash spend in light of Idcs determination as it may do change the way you would have been businesses and or think about dollar spend an opex.

On the last question is fun, Jeff when you spoke last month, you spoke off the jurisdiction and belt is fundamentally and there are and I think one of the things we discuss with also deceived do I need a president says where you had two non U.S. companies battling old and I'd see Oh.

Just drawing on knowledge into that Oh definitely helpful. Thanks.

[noise] Gray biology, thank you for the questions a I'm going to turn it over to Lauren here to answer the first two and then and then Jeff on your RTC question before we [noise].

Jump into the question that you had a around cash and you see but I did want to make one one common here that we have a high degree of operating discipline in this company I could not be more impressed by our ability to focus on execution, a time, where the markets largely or unstable and the noise around the <unk>.

He see of course has increased and at the same applies to the discipline, though that we have on our spend as well weve been very deliberate about the investments we've made thus far and I'm very pleased by the worked at Warner team have done to create a more efficient operating model against what's been a very successful launches. We entered this next phase enabling us.

To make strategic investments to help grow this business even further as we enter into the future. So I'll, let worn speak a little bit more into how we think about that.

Great. Thank David and Hello, once you get to talk to you.

On the seat Oh, we announced earlier this year, we would be launching in Europe next year I mean, our plan that's really unchanged.

In aimed at restructuring the business, we really thought about where we could most impactful Brent lists a host could actually during that overtime and we just investing in the U.S. market rather than also investing in launching in Europe. During cold that made the most sense and there's no change to that.

Strategy I'm on the cash spend at the same time, we also looked at what we should be spending in the U.S. This year to hit the numbers that we thought it and it's all worked out very well through second quarter. As you saw our financial results for the second half we plan a burn rate.

Non-GAAP operating expense of about 40 million a and that's really also unchanged from the last quarter. We think that's the best way to approach or pre I T time.

During covidien.

Thanks, I'm going to turn it back to David and Jeff Nike question.

So biology on your question around jurisdiction. It does happen that the ITC will hear cases between two four in company what unprecedented here is that normally one of those foreign companies also has a domestic industry here in the United States here, maybe talk Hasnt.

Dick industry in the United States and instead, it's relying on a separate.

Domestic industry, a botox, which is completely unrelated then to the trade secrets, where it's you're at issue in the K and so overall if the full commission was to except if they'd be taking a giant leap forward and unprecedented manner in expanding their own jurisdiction.

Thanks, Jeff final one from me maybe would then be any update before do you find I did a determination date from nicely.

On this case.

So what we would expect the ITC to issue next is in September they would indicate which portion of the initial determination. They plan to review beyond that they have a lot of powers about whether they ask for additional briefings, whether they are remained anything back to the administrative law judge, but I think we're exposed.

Acting just there will be processing towards the November six decision after they get that interim look in September.

That's it thank you.

I'm showing no further questions, ladies and gentlemen, I know this concludes today's conference. Thank you all for your participation have a wonderful thing you may all this.

<unk>.

[music].