Q1 2021 Venus Concept Inc Earnings Call
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Yeah.
Okay.
Good afternoon, ladies and gentlemen, and welcome to the first quarter 2021 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.
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 <unk>.
Recent annual report on form 10-K, and 10-Q filed with the Securities and Exchange Commission such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events.
Or otherwise.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles for a GAAP generally refer to these non-GAAP financial measures reconciliations of these non-GAAP financial measures to be most comparable measures calculated and presented in accordance with GAAP are available in.
Our earnings press release issued today on the Investor Relations portion of our website.
I would now like to turn the call over to Mr. Dom Serafino, Chief Executive Officer of Venus concept. Please go ahead Sir.
Thank you operator, and welcome everyone to Venus Concept's first quarter of 2021 earnings Conference call.
I'm joined today on the call with our Chief Financial Officer, Domenic della Penna, and Chad Zaring, our chief commercial officer.
Let me start with a brief agenda of what we will cover during our prepared remarks, I will start with an overview of our better than expected revenue results in the first quarter, including an update on how our business trends continued to improve during the period, which gave us further confidence in our 2021 revenue guidance, which we increased in our press release.
This afternoon, Chad will then discuss for a strong system results in the first quarter and how we believe it was the direct result of both improving overall system adoption trends, particularly in North America, and a strong execution of all of our targeted commercial strategy.
I will then provide a brief update of our continued progress in the area of new product development and then Dominic will provide you with the more in depth review of our quarterly financial results, our balance sheet and financial condition of our updated guidance and updated guidance for 2021.
And then we will open up the call for questions.
With that overview in mind, let's get started with a review of our first quarter revenue performance and overall business trends.
We reported GAAP revenue of $22 6 million for the first quarter of 2021, representing an increase of 56% year over year.
Simply stated we are very encouraged by our first quarter performance and believe it reflects an improving system adoption of procedural trends, we experienced during the quarter first quarter total revenue growth was driven by 93% year over year of growth in sales to U S customers and 32% year over year growth.
In sales to international customers.
Our first quarter results reflect both the continued improvement of our aesthetic and hair restoration procedure trends and the pace of the system adoption.
Our strong year over year growth, we delivered in the first quarter is a direct result of the teams of strong execution of our near to intermediate term growth strategy, which we have discussed in our recent investor calls.
By way of reminder, there are two key tenants of this focused growth strategy.
One implementing of targeted commercial strategy and to consolidating of direct selling operations in certain international markets and reinvesting that capital primarily in the higher return more attractive U S market.
As discussed on prior calls our efforts to implement this growth strategy over the second half of 2020 as one of the primary reasons, we are off to such a strong start in 2021, we.
We believe that this strategy has us incredibly well positioned to return above market growth and as the global aesthetics and hair restoration markets continue to recover as we progressed from 2021.
The improvement in business trends is most evident when evaluating the improving procedure trends, we experienced during the first quarter.
Starting with the procedure trends for a set of customers.
Our real time Iot data on our systems gives us strong visibility into active device trends for a large portion of our installed base and this average per use system data reflects improving consumer activity and demand for product procedures. During the first quarter, specifically, we saw on average usage per system in.
North America increased about 20 of about 15% on a quarter over quarter basis.
Outside of the U S. We continue to see wide variation in average usage per system trends, depending on the region of the world in question EMEA continues to lag the pace of recovery. We are seeing in North America. However, after a difficult January customer usage increased in both February and March and average utilization.
The increase on a quarter over quarter basis in Q1, Latin America average usage for system trended.
The trends excuse me slowed in Q1 as compared to Q4 as the region continues to deal with COVID-19 related challenges and finally apacs recovery continued to be choppy through the first quarter of 2021.
In terms of procedure trends for our hair restoration customers in the first quarter.
We're very encouraged by the continued improvements in utilization trends among hair restoration customers as global procedures on our artist systems increased 6% year over year in the first quarter.
Most importantly, this global procedure growth was fueled by an impressive growth in North America, where procedures increased 33% year over year in Q1.
Providing further detail North America procedures increased on a year over year basis in each month of the quarter as well as culminating in the 76% procedure growth in the month of March.
The strong procedure growth in our U S hair restoration business in Q1 was driven by a combination of an improving procedure environment during the quarter and strong execution by our current commercial team towards our key strategy to Reengage with the U S customers, who have artist systems that we believe had been underutilized.
As discussed on prior calls we've made a concerted effort to engage with artist customers throughout North America over the last year and we could not be happier with the results. We posted record procedures in North America in the first quarter and utilization trends being driven primarily by existing installed base of customers.
We look forward to continued strong utilization of our hair restoration business going forward.
Now with respect of hair restoration procedure trends outside of the U S.
The international hair restoration procedures declined 24% year over year, we are seeing significant variability and recovery trends and depending on the region of the world in question.
Each region showed meaningful improvement in trends during the first quarter, culminating in the total international hair restoration of procedure declining just 2% year over year in the month of March.
As we continue to build of deeper training and post sales support.
In each region outside of the of North America, we expect to see procedure trends more closely mimic the north American performance in future quarters, given the strong demand we've experienced for artist systems overall.
I'm now going to ask Chuck to provide you an update on our first quarter performance on systems are the systems side of our business Chad.
Thanks, Tom.
The first quarter sales results reflect strong execution of our commercial strategy and improving overall system adoption trends, particularly in North America, we shipped 366 systems to global customers in the first quarter of 54% year over year fueled by U S system shipment growth of nearly.
150% year over year.
Well the capital equipment environment broadly showed improvements in Q1 as compared to Q for the strong growth in system shipments. We delivered in Q1 was really a result of our team's strong execution of.
As discussed on prior calls our targeted commercial strategy is the strategy is focused on optimizing our pipeline and sales process and opening new strategic sales channels, diversifying and tightening clinician targeting <unk>.
Tailoring, our selling strategies, depending on the geographic regions of the country and arming our direct sales team with programs and messaging focused on kicks C. Six key product launch Bliss artist the neo graft versa, Veeva Anglo four of which have meaningful recurring revenue streams.
We delivered total leases and systems revenue growth of 78% year over year in the first quarter.
Which gives us further confidence that we of the right strategy and we're executing that strategy very effectively which we also believe has us well positioned to drive continued above market growth as the global capital equipment market continues to recover as we progress through 2021.
Turning to a brief update on our Venus Bliss, we are happy with the continued strong market response to our differentiated noninvasive fat in body contouring platform.
Global sales of bless increase more than 200% year over year in the first quarter. We continue to expect Blitz to be a significant driver of growth. This year fueled by the investments in both of our commercial team and in our marketing strategy.
We continued our Blitz Road show in Q1 of multi city tour aimed at increasing the pipeline for Bliss and driving market development and consumer awareness. We plan to continue This road show throughout Q2, which will include of Blitz University Masters class as well as put preceptorships.
We also recently announced that we've added Venus Williams as a global brand ambassador for the Venus Bliss, which we believe will read quite well create significant brand awareness with consumers and provide significant patient lead generation given her global recognition and appeal.
We remain very confident the Venus Bliss offers a significant clinical and financial opportunity to the customers and patients that we serve and expect strong revenue contributions from this product throughout 2021.
Regarding artist performance in Q1 artist sales exceeded expectation in the first quarter and represented the largest contributor to our leases and systems revenue growth compared to the prior year, our new commercial strategy for artist is clearly working in addition to our targeted plan to engage with clinicians to dry.
The improved utilization of our installed base, which I discussed earlier, our new commercial strategy is maximizing the opportunity of having the most comprehensive hair restoration solutions offered offered in the market today.
With the artist the near graph, we have an end to end portfolio of minimally invasive solutions unique from any competitor in the $4 1 billion dollar global hair restoration market. We are seeing notable success with our customer targeting strategy as well and are driving strong new customer adoption, among dermatologists and plastic surgeons in recent months.
We expect to see accelerating the growth trends as we move through 2021, and our hair restoration business as we leverage our improved targeting strategies of these core doctors as well as large national accounts.
With that let me turn the call back to Dom.
Thanks, Chad.
I wanted to take a moment to highlight that while we are very proud of the early success. We've demonstrated today towards this near to intermediate term growth strategy. We have not lost sight of the core mission on the company, which was founded more than 10 years ago. Our mission is to develop and provide world class technologies to deliver clinical results in a safe.
The effective and easy way and to debt our company to dedicate our company to the best in class post sales support philosophy that can help enhance the probability of financial success of our customers. Despite all of the challenges in the operating environment over the last year. Our team has continued to operate with this mission in mind and our.
Our sales team has been further empowered by a key differentiator and quite frankly, a hallmark of Venus concept of story, specifically the flexibility we have in our commercial model with unique pricing and payment options via our industry for subscription model, which we use in certain product categories and in certain geographic markets our subscription model.
It was similar to that of a cellphone, where the plan you pay for and the technology over time and you can upgrade to the newest technology mid contract for an extended contract term or subscription contracts are typically three year agreements, where we capture typically 40% of the contract economics in the first year our customers enjoy of.
Seamless and cost effective upgrade opportunities in our program payment plan are protected by a monthly device activated code.
Activation code of excuse me.
The system shipped under the subscription model increased 40% year over year in the first quarter and represented more than 40% of our total global shipments in the period.
This is an incredible labor the we can have which as I said really empowers our commercial team to work with customers to identify not only the right technologies for their practice, but just as importantly, the right business model for partitioning participating clinics to meet their needs.
Importantly, not all systems are offered under the subscription model certain high demand systems, including our artist and most Venus Bliss systems are only offered on a traditional cash sale basis. This is intentional as the traditional cash sale features of more attractive cash flow profile for the company to go along with the strong growth profile as we.
Scale, new innovative and disruptive aesthetics, and hair restoration technologies and key markets around the world.
So to summarize our first quarter results, we delivered better than expected growth fueled by improving utilization trends and strong system adoption, particularly in North America, where system shipments increased nearly 150% year over year, our first quarter leases in system revenue results combined with a strong pipeline.
We actively manage today, we're primarily the primary drivers excuse me of this increase in our full 2021 guidance, which now calls for total revenue in the range of 102 of $105 million, representing an increase of approximately 28% to 35% year over year.
We are confident in our outlook for 2021 based on our belief that we have the right product portfolio and the right commercial strategy, which has us extremely well positioned for future success over the near to intermediate term.
Importantly, the longer term outlook for the company is equally compelling as we continue to make progress in new product development, specifically our efforts to develop next generation robotic technology for medical aesthetic applications.
We believe the technology, we are developing will offer dermatologists and plastic surgeons minimally invasive robotic solutions for medical aesthetic procedures that will improve the safety profile provide for greater clinical predictability.
Significantly reduce operator, fatigue and help clinicians reduce treatment variability, while also offering a significant competitive advantage in the areas of marketing of new customer acquisition, specifically benefiting the dermatology and plastic surgery community.
We are very excited about the prospects of our robo port device of robotic non surgical procedure with the potential to disrupt the skin tightening market.
We have completed our feasibility and safety studies with our handheld device, which included 15 patients and 90 treatment zones across six different body areas.
We will be conducting of small animal study in Israel to secure additional data to support our handheld five 10-K submission, which we are currently targeting by the end of third quarter.
We will also continue to make progress in the preparation for our human clinical study to evaluate the robo robotic coin we've identified three clinical investigator sites in the United States and expect to enroll up to 60 patients.
With the enrollment currently expected to begin by the end of the third quarter, we intend to submit for FDA clearance as soon as possible of Con completion of the study, which depending on the pace of mineral enrolment is expected sometime in the first quarter of 2022.
We're also excited about the prospects of our new product introductions, we expand as we expand the Venus Bliss portfolio of systems and products.
Specifically, the Venus Bliss, Max and new device the not only includes fat reduction and skin tightening capabilities, but also adds the muscle stimulation technology for body contouring and Tony.
We expect this new device will have a list price of $225000 and we intend on adding of modest but important utilization fee for this device.
We are still targeting FDA submission in late Q3 of 2021, and the which keeps us on track for the potential clearance by the end of 2021 and commercial launch in early 2022.
With that let me turn the call over to Domenic della Penna, who will provide a detailed review of our first quarter financial results and discuss our balance sheet and financial condition dominant.
Thanks, Tom and good afternoon, everyone for the avoidance of doubt unless otherwise noted my prepared remarks. This afternoon will focus on the company's reported results on a GAAP basis, and all growth related items are on a year over year basis.
First quarter total revenue increased by $8 1 million or <unk>, 56% to $22 6 million.
The year over year change in first quarter total revenue by geography was driven by a $5 $2 million increase or 93% in U S sales and of $2 9 million increase or 32% in your international sales compared to the prior year period, the year over year change in the first quarter total revs.
Byproduct category was driven by.
An increase of $6 3 million or of 180% and systems revenue, which are cash sales or sales of systems with payments expected in less than 12 months driven by strong sales of artists and key aesthetics product lines, which we are prioritizing our commercial strategy, which John and Chad discussed earlier.
And an increase of $1 7 million or 25% and leases revenue, which is where our subscription program is reported and represents all system sales with typical lease terms of 36 months and an increase of <unk> 3 million or 12% and other products revenue due to <unk>.
The increase in sales of procedure related products, including our artist kits and other consumable products.
Offset partially by a decrease of zero point $3 million or 19% and services revenue driven by the suspension of operations of the two to five marketing services in the second half of 2020.
The percentage of systems revenue derived from our subscription model was approximately 47%.
In the three months ended March 31, 2021 compared to 66% in the three months ended March 31 2020.
Turning to a review of our first quarter performance across the rest of the P&L.
Gross profit for the first quarter of 2021 increased $6 million or 64% to $15 2 million, representing a gross margin of 67, 4% compared to a gross margin of 64% last year.
The primary drivers of the year over year increase in gross margin were higher sales of our Venus consumables improved revenue mix post for the discontinuation of our 2% to five AD agency services and the non recurrence of of purchase price adjustment impact related to the acquisition of restoration robotics in the prior year period.
Total GAAP operating expense decreased $30 8 million or 58% to $22 1 million.
The decrease in total operating expenses was driven by a goodwill impairment charge of $27 5 million, which impacted the prior year period, only and there was no impairment charge in the first quarter of 2021.
Excluding this item first quarter of 2021 operating expenses declined 13% year over year.
Total operating loss in the first quarter of 2021 was $6 8 million compared to an operating loss of $43 6 million in the prior year period.
An improvement in operating loss of $36 7 million or plus 84%.
Net loss attributable to stockholders for the first quarter of 2021 was $9 3 million or zero point of one seven per share compared to net loss attributable to stockholders of $50 2 million or $1 68 per share for the first quarter of 2020.
Weighted average shares used to compute net loss attributable to Venus concept, Inc. Stockholders per share were <unk> $53 7 million and $29 8 million for the first quarters of 2021, and 2020, respectively non-GAAP adjusted EBITDA loss for the first quarter of 2021.
<unk> 5 million compared to adjusted EBITDA loss of $13 7 million for the first quarter of 2020 and improvement of $8 7 million or 63% year over year.
We have provided a full reconciliation of our GAAP net loss to adjusted EBITDA in our press release this afternoon.
Turning to the balance sheet.
The company had $27 1 million and $34 4 million of cash and cash equivalents on hand as of March 31, 2021, and December 31, 2020, respectively and.
And total debt obligations of approximately $80 1 million, including government assistance loans of $4 1 million compared to total debt obligations of approximately $79 6 million, including government assisted loans of $4 1 million as of December 31, 2020.
The change in cash for the three months ended March 31, 2021 was driven primarily by $8 2 million of cash used in operating activities offset by $1 million of cash provided from financing activities, including approximately $903000 of total proceeds received from the exercise of three.
261000 December 2020, public offering warrants that the exercised price of $2 50 per share in February 2021.
Turning to a review of our guidance.
As detailed in our press release this afternoon the company updated its revenue guidance for the full year 2021 period.
Which was originally introduced in our press release on January 14th 2021, and reaffirmed in our fourth quarter earnings press release on March 31 2021.
Assuming no significant and persistence persistent resurgence of COVID-19 in key markets that would negatively impact the company's customer base and based on strong pipeline activity. The company now expects total revenue for the 12 months ending December 31, 2021, and the range of $100 million to 105.
$5 million.
Representing an increase of approximately 28% to 35% year over year compared to total revenue of $78 million for the 12 months ended December 31 2020.
While we are not providing formal profitability guidance for full year 2021, we would like to offer the following considerations for modeling purposes.
First we continue to expect our gross margins to be in the range of 66% to 68% in 2021, driven by favorable revenue mix with the U S growing faster than international markets in 2021 and from benefits related to our initiatives directed at reducing manufacturing costs of our.
Of robotic artist systems.
Second we continue to expect GAAP operating expenses of approximately 88 million representing.
The representing a 26% decrease year over year.
Importantly, this represents approximately 10% growth in our normalized operating expenses, which exclude certain items that impacted our GAAP GAAP operating expenses in 2020, including a non cash goodwill impairment charge of $27 5 million.
Incremental bad debt expense related to COVID-19 of of approximately 11 million non.
Nonoperating nonrecurring items related to retention and severance and other legal expenses all of which were detailed in our non-GAAP. Adjusted EBITDA reconciliation tables in 2020, and together represented approximately $2 3 million of costs and expenses last year.
Third we expect our interest expense to be approximately $4 5 million, given the lower borrowing costs and debt obligations compared to the prior year.
Fourth we continue to expect non cash G&A of $5 million and noncash stock comp of approximately $2 5 million.
Fifth we continue to expect our weighted average shares outstanding to be approximately $55 million.
Finally, while it is not our standard guidance practice, and we do not expect to provide quarterly guidance in the future given the significant impact of COVID-19 of the COVID-19 pandemic in our second quarter of 2020, and the related benefit toward Q2, 21 year over year growth rates.
We expect our total revenue in the second quarter of 2021 to increase approximately 40% to 45% year over year.
With that operator, we will now open the call to your questions operator.
Yeah.
Thank you if you would like to ask the question. Please signal by pressing star one on your telephone keypad.
If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
We do ask that you limit yourself to one question and one follow up.
If he would like to ask additional questions. We invite you to add yourself to the queue again by pressing star one.
And our first question comes from <unk>.
Jeffrey Cohen of Ladenburg Thalmann. Please proceed with your question.
Oh, Hi, Tom Tom and the concern how are you.
Jeff how are you doing hey, Jeff Nice to see you recently churn. So just a couple of questions I wanted to start again to show the the systems shipped in Q1 of $3 66.
Would you say that approximately 40% of those are also leased along with your 40% of the commentary on the lease versus sort of sold.
Yes, the the the systems shift would be a slightly higher than that on a unit basis because of obviously the cash impact on the percentage of cash so you're in the ballpark.
Okay and could you give us some so for Q1 what were the top two or three of your four platforms.
Our platforms in Q1, where the the artist system the <unk> system.
And the versa system.
First of all platform.
Okay got it and then I wanted to speaking of first I wanted to ask you John What's your general sense as far as the are the derm area and you showed in the area that Chad and his team is directly going in two of them thinking about the.
Call It for 57.
The <unk> 50 nanometers between the Blue and Red light and how that may compete with some of the germs.
The the.
The lower wavelengths.
In terms of actual shipments I mean, when you say, okay I mean the.
These wavelengths are nothing new I think that the biggest issue for the derm community. When it comes to treating acne is not the efficacy of the devices that a variety of companies US included can provide it's really more of the customer base because of the dermis half to make strategic decisions as to what is the rate of return per tree.
And room, and 10 day charge teenagers and their parents are those kind of range to offset what they may be able to do in using doing other treatments and those treatment rooms, like fat or hair restoration.
I think that that category is still somewhat challenged overall.
As I said, we have a good solution, we have an excellent solution clinically, but in terms of the market opportunity I think it's somewhat.
Somewhat limited overall for all of the companies not just us simply because of the demographic profile of the majority of the patients that are taking advantage of the treatment.
Okay got it and then lastly for me just to give us sort of.
Ballpark flavor of how procedure volumes, which have grown dramatically year over year, how does that fuel versus the last January and February and any commentary into April or may thanks very much.
Yeah, I think it's tough what we have to look at is really the I'll call. It the sequential month over month growth and our our Iot data that we pull in real time really gives us optimism because we see the steady continued.
Improvement in the activation of the devices and the procedures being done globally. Now obviously every area of gets affected a little bit differently Latin America still lags simply because they were kind of late.
Getting to the COVID-19 issue in terms of dealing with it so.
So there are a little bit behind but that said, we're really pleased with what we're seeing and especially in the key categories like fat reduction in fat soya and hair removal and a few others like cellulite.
And we're well beyond pre pandemic numbers in terms of utilization at this point and the most important part of this is that we're seeing a very significant as I said month over month improvement so as we pull out of this.
COVID-19 hangover, we feel pretty good about the fact that we are.
Back in the back in the saddle, if you will and our customers more importantly are monetizing their investments.
Thanks for the commentary and a nice quarter. Thank you. Thanks.
Thanks, Jeff.
Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer. Please proceed with your questions.
Hey, Don Chad Dominic can you hear me all right.
Hey, Great, Hey, Suraj, Hi, Suraj.
So Dom Chad.
Whoever is comfortable and let them take it so I.
I thought I heard Chad say the global sales of splits were up 200 percentage year over year, maybe you could help us drill down on the details of a bit more.
For the actual numbers and especially how is fairing relative to crude sculpt what's at this point in its lifecycle and if I could just tack on the sub part of this question too.
225 key for Blitz, Max what does your internal price sensitivity of demand suggests.
Yeah. So let me I'll answer the first well I'll sort of take the last part of your question first and then and then I'll hand, it over to chat about commentary around the 200%, but as I compare the.
The the Venus Bliss rollout compared to the early days of Zelle peak I think the one of the things that we're doing a very good job of right now aside from the fact that we've been able to hire people that have left the allergan and of joined us.
And the reason they did so because they saw the compelling economic value to customers. So it's not uncommon for us today to be calling on our call points, becoming what I call. The educated.
User in other words, the use of that had started using the cool sculpt did very well in the early days, but as the competitive pressures with a variety of other companies coming to market in the area of fat the.
Doctors became acutely sensitive to the.
The cost profile of using the device and so the fact that we intentionally kept the disposable cost out of the fat treatment category has really bode well for us because it just makes a lot of sense and when you combine that with the predictive of outcome of clinical results and very <unk>.
Highly satisfied customers, who are having treatments with this device we feel we're developing the perfect storm in the Fac category as I call. It sort of the 2.0 journey for clearing extent of.
<unk> already been in <unk> for a number of years start to recognize that even if they do have to do touch of treatments with patients etcetera.
The economic opportunity using our device is far better than some of our competitors, who have a pretty expense of disposable element to each and every treatment.
Chad, maybe you sort of I'll touch on the price sensitivity question as well, we believe that having a three in one solution, where we're treating fat with a product that is already well proven over the last year and that's reflected in the incremental sales growth, which is pretty meaningful along with R.
Our continued product development in that area combined that with the ability to do skin tightening and cellulite in our platform and adding a third element, which is muscle stimulation bear in mind that most of these products are sold standalone. So doctors could be into three four of $500000 in some cases, depending on the mix of products they choose from competitors.
In our case, we believe the 225 is the list price.
North America is a very compelling price point did not only provides a real value proposition for the customers who are using a proven technology, but just as importantly allow.
Allow the.
The return on investment to be made very very quickly and for us It actually helps us improve our gross profit margins in that particular category Chad.
Chad maybe you can touch on the.
I'm sure the 100% Yahoo sales.
Yeah, Hey, Suraj, if you recall, our Q1 2020, we were in the really the first inning of the full commercial launch on Bliss, and then COVID-19 hit and we made the decision.
The beginning of Q for really the planning of happened in Q3, well many markets were still shut down to do a very geographically selective roadshow picking markets that were somewhat open and that really showed the results of that showed in.
Our Q1 sales customers may not have been as quick to pull the trigger because they still had concerns about clinic shutdowns and procedures went back to normal, but we really started to see the results of those closed sales in Q1.
Continued the roadshow in Q1 and we remain.
Susie ASIC about the revenue opportunity for <unk> for the remainder of the year and the Apis and the economic opportunity what I'm seeing in the marketplace and it ties to even the question about some of the core doctors as some of the alternatives to Bliss I'd say are it's a pretty established space now for the brand name recognition of some of the prior.
In that space.
What the customers are looking for is patients are coming in the door, how do I maximize the profit potential which the Bliss business model was perfect for so we expect strong performance for the product throughout the remainder of the year.
And just just to add one more point to that Suraj. The addition of of Venus Williams has been extremely well received by our customer base and the all of the collateral materials I mean, we announced it mid quarter that we had signed an agreement with her but we did complete a very extensive per.
Preparation package, if you will of marketing with the collateral marketing materials that will be released at.
At various stages through Q2 and into Q3 and beyond but we think that that's going to have a very meaningful impact on our on our trajectory with this particular product as well.
Got it.
One other question and I'll hop back in the queue again, the subpart questions, Don maybe you or Chad could walk us through the utilization metrics.
The U S. How the procedures per system per months look like.
Does the credo of rules still apply how would the Alco book.
And Dominic for you, maybe if you could give us a little more granular detail of the guidance the components of guidance.
Uh huh.
How are you thinking about legacy verse so blaise.
Blaise.
Any additional goalposts that you could provide us would be greatly appreciate it gentlemen, thank you for taking my questions. Congrats again.
Okay. So thank you Suraj I'll I'll I'll I'll take.
Take a shot of the first part of it and then Chad you can add a little bit more color.
I think that it's important to recognize that we have dedicated a team to be focused on the utilization and the measurement of utilization because it gives us a good roadmap as to which products, we should focus on and which geographies Chad perhaps you can touch on one of the key utilization metrics, which is our.
<unk>.
Our artist of Neo graft combination therapies for hair restoration and the trends that we're getting there while we don't release actual numbers I think Chad you can sort of speak to the to the trends in North America.
Sure the trends in North America.
There were very good.
The 33% increase year over year in North America artist procedures, and as we reported primarily driven by Reengagement of underutilized systems, meaning an improvement and.
Same store sales you know among active artists accounts many of the new sales. We've made you know obviously in Q4 Q1.
Still challenges with getting the there were still challenges with getting into the clinics and training people and doing a five day quick start programs. So a lot of the growth. We're seeing is in the same store sales, which is really promising we can we've seen some choppiness O U S. You know with the artist sales.
As a result of the same issue getting people into markets to be able to onboard new programs.
But we think of that Choppiness goes away and we're selling new systems.
The utilization trends are going to continue to improve with artists overall.
And the dominant can you just touch on the rationale for the guidance.
Yes, Suraj I think you wanted to better understand the components in relation to what makes up the the split of the systems.
We don't disclose it by system, but you should be thinking about artists representing approximately 25% of our revenues.
At a high level.
And we continue to improve on that in terms of.
The lately the.
The percentage mix of artist relative to the rest of the business is is improving as we are.
Put growth drivers behind the robotics capability and have our sales team globally.
Truly understand the the potential there.
So we expect that possibly had north of 25% as we continue to focus on artists but.
Again, we still one of reinforced the fact that.
The base Venus business is very important to us and has high margins and we continue to.
Just to make sure that we capitalize on that with the benefit of the subscription plan that we have.
I share with diverse that part of it.
In particular versus yes.
Sure.
Thank you. Our next question is coming from the line of Jon Block with Stifel. Please proceed with your questions.
Great. Thanks, guys. Good afternoon, nice quarter, I guess, just a small handful for me. The first of just centered on hiring and how thats going I think last quarter Chad.
You called out roughly 50 reps in North America I believe you wanted to take the to 70 in a pretty ambitious numbers there, but maybe if you can just give us an update on how the onboarding of the reps have gone to day, just when you look out over the next several months if you think of it.
70 number of Rep revenue number here in the U S and what.
Yes, John Great question could the speak with you both both areas are going really well.
We remain very optimistic about getting to 70 and part of the business you know if there's an opportunity to get beyond that we'll make strategic decisions, but we remain on pace for that we're very bullish. We've also gone back to in person training. So I've attended of myself. So we're back to getting reps hands on on the devices for the last two <unk>.
Losses, and that's significant because the more hands on we can do with devices role plays the more we can take them through the traditional sales model and sales approach the the.
The short of the Onboarding time is especially for higher price products like Bliss.
We have the opportunity of they're trained the reps hands on versus doing it remotely. So both areas. John we remain bullish on the hiring side and sure Dan and let me add all of them sorry.
Go ahead, Sean let me do it.
Oh go ahead.
I'm sorry, guys. The question I was just kind of I was going to ask I'm, sorry, I was going to ask where you are.
Ended the quarter pardon me out of the 50 <unk>.
Oh I'm sorry approximately.
Approximately 60.
We remain on target for more than 70 by year end.
Yeah, we're just over 60, right now John and are feverishly hiring and getting people trained.
Okay, Great and then the second one for you just sort of market share of thoughts or comments I know, it's difficult in terms of different geographies of some guys are all capital and some guys are capital of the recurring but I think just broadly looking across the statics you did see the market come back and come back pretty strong from end of 'twenty into 'twenty one so.
If you were to try to pinpoint are isolated from a market share perspective, how you think Venus is performing relative to what you deem to be your closest peers and then I've just got one last one.
Yes look I.
That is a tough question because I think it's how you define market share in the sense that if you're if you're defining market share like most of our peers, taking a piece out of each other every quarter in the dermatology plastic surgery professional market. That's one number if youre talking about actually creating new market and expanding the size of the market, which is really what the primary motivation of Venus.
This was from day, one with our subscription model and originally targeting a very significant portion of our business outside of the core. So I mean, we're still in single digits. If you define it by.
The traditional market, but I think that as each quarter goes by and we continue to sort of.
The adjusted against the reset the sales organization.
What we were going to do pre COVID-19 with debt.
Dedicated team focusing on the professional market of.
Dermatology and plastic surgery, and a continuation of our of our business with the subscription and mostly in the non core audience. We think the we can get our overall market share into double digits, but that's going to take a bit of time, but right now.
Without having the exact numbers, we would be in the double in the single digits at this point okay.
Okay, Great fair enough and last one maybe for you you know from the <unk> revenue growth of 56% of <unk> guidance 40 45 per cent.
Seems like one H is in and around are knocking on the door of 50% growth. The guide for the full year I believe in the low 30% range. You've got these new products ish with Blessed and art is doing well.
One of which seems like the pretty pronounced deceleration implied in the back part of 'twenty. One of you can just talk to that if it's anything more just beyond comps of thanks Scott.
Deceleration you said.
Yeah Yeah.
Because we're we're calling for 35 per cent for the full year right. So the first half is going to be stronger, but what were up against from the second half of 2020.
John as we our business did show recovery in the second half of 2020. So we're up against a second half that is still relatively weak so to speak but.
We think we can still grow significantly relative to the second half of 2020, John I mean, we've taken a very conservative approach for this we feel that there are two elements that may help improve.
The outcome in the second half and specifically as you know as you hire new people in this industry. It typically takes two and sometimes three quarters for them to start to monetize on a consistent basis. So we've been on is obviously a bit of of hiring terror and especially in North America, and we have a national sales.
The meeting the first one and two year is scheduled for May.
Mid July to make sure that everybody is aligned for the back half of the year. So while on the surface. It may look like of deceleration I think the we feel pretty good about.
How we're going to be able to compare against the previous year and maintaining that growth that growth profile.
Perfect very helpful. Thanks, guys.
Okay.
Thank you. Our next question is coming from the line of Marie Thibault with <unk>. Please proceed with your questions Hi.
Hi, Yes, just two quick questions.
On the geographic shift moving from you know from international markets Andrey <unk>.
Devoting some resources to the U S is that shift mostly done at this point I know there were some detailing your filings about the countries that you were exiting but would love to hear of where you are in that process. Yeah. We're we're pretty much done we've got a couple of smaller I'll call it non material.
The decisions that we need to make in terms of closures and sort of realignment, but I think that the most important thing for US right. Now is the continued to focus our direct investments in North America.
Clearly the strategy that Chad and his team of putting together is working.
We think that Theres, a huge amount of additional opportunity there.
And given the long relatively long lead times it takes to get sales reps to be.
Contributing in a meaningful way you know that's why we're accelerating this process right now, but essentially the I'll call. It the operational challenges of closing offices and reallocating those resources and so on that's pretty much been completed to this point.
Okay. That's helpful. And then maybe a question on the split between subscription and.
Direct kind of systems revenue.
Prior to COVID-19, we were seeing something more like <unk> 60.
Maybe the.
30, or 60 40 kind of split there on maybe it was even higher maybe 70 30.
Towards subscription.
And I know what the artist since some of the strength there.
Possibly that shifted but curious the way you see that sort of split trending long term.
I think the one of the things that we need to be really aware of and quite frankly, we need to do a better job of of reporting with you guys is there is.
There's a big difference between the percentage of subscription to cash business on a unit basis and the percentage.
Our subscription to cash on a cash basis, obviously with a product like artist debt.
Sales for in the area of $250000 in the Venus Bliss themselves in the area of the $120000 and those are predominantly on a cash basis, that's going to skew typical products to sell in the area of 60 or $70000 was only done under description for a variety of different reasons, not the least margin and so on so right.
Now the split is $45 50, 545 subscription 55 cash because of the disproportion of contributions in Q1 of of artists and Bliss.
And obviously, the disposables and by the way also of renewed interest at the distributor level.
Which are all done on a cash basis, we do think though that when this sort of flattens out we're going to be closer to the $50 50, 50 545, depending on the given quarter and depending on the mix, but I think the way you should model. This.
For a whole lot of reasons, we think the $50 $50 $55 45 is the right balance.
In terms of managing inflows of cash and still providing of what I think best in industry.
Business opportunity for customers, who are looking to get into the sector.
Thank you our next questions come from the line of Anthony Vendetti with Maxim Group. Please proceed with your questions.
Thanks.
Quick questions on.
Hey, Anthony Robo core just wondering what the commercial opportunity how would you gauge the commercial opportunity there how that how that's going and then.
I know you don't give product splits, but I know you said artist is about 25 per cent of revenues.
If you could just talk a little bit about Venus, Clos and how that how that.
Product is selling or what percentage of sales that could be the I'll, let <unk> deal with the Venus glow question part of the question, but as far as the ruble core.
We think that this category of directional skin tightening and lifting is is I'm going to call. It a blue ocean kind of category. There were a lot of noninvasive technologies with a variety of different companies US included that can provide a decent results, but the predictability of the predictability from one patient for the next is somewhat.
Challenged regardless of which company is selling that solution. So that's at the low end of the spectrum of the high end, it's a fully invasive procedure like a face lift or a breast lift or a brachioplasty in the back of the arm, which is a full surgical intervention.
A lot of patients are afraid to do we think that there is a sweet spot in between in the minimally invasive category and we think that ruble core will fill that spot very nicely and give us a tremendous a.
A variety of treatment areas that we can create lifting and tightening with the minimally invasive solution.
Our initial safety.
The feasibility studies, we did 90 treatments.
In 15 patients over 60 different body areas.
We're quite happy with what we saw.
In the early stages in terms of the performance of the coring and the direction of lifting and tightening we have now are moving to do some animal trials in Israel. So that we can get some some histological evidence of tightening of directional lifting which we should be.
Should be able to do a fairly quickly and in parallel we are preparing for a 60 patient study three.
<unk> sites.
To be able and using the fully loaded system with the robot.
As part of that process. So I think that this is a market that a few companies out there have been.
Trying to enter with the with a Korean micro needling type of application, but all of these applications are done manually and we think that there is a compelling reason for it to be robotic because of the nature of the treatment and the I'll call. It the predictability of where you do the coring to ensure that you maximize not only of the clinical out.
But the safety profile and we think that the robots can actually provide us that Chad maybe you can touch on the initiatives on the Venus glow sure of.
And so on.
Sure Yeah, Yeah, no problem Anthony.
Good to talk with you. So we know from what companies like How'd you face you have done in the market the district huge opportunity with this product class and then the downstream sales of share of what we've seen is it's hard to get the reps when they can focus on maybe three to $400000 bundles with core doctors to give that product.
Lot of focus it's the volume business based on how many doors you knock on and those of those larger deals just take more time and focus as the quarters progress. So what we've done is.
We've kind of bifurcated, where we allow our most senior reps to focus on those large deals and some of the more junior reps, we're bringing in now focused on the high call frequency.
We're asking them to really focus on and sell build the pipeline and do demos and sell products like Venus glow, where theres, a initial sale and the downstream consumable component as well as our Venus Veeva, which is of great product and again does get bundled into deals with just doesn't get the same.
Standalone focus perhaps that the larger products like bliss or artist would get and we feel pretty optimistic I mean, we've set call planned targets and objectives.
How many doors you knock on so we think we're going to be able to really take advantage of that strategy and if it works, we'll continue to do more of that bifurcation.
Yeah.
Thanks, Chad that's helpful. But just in terms of of the junior reps or are they the just the reps that are coming in.
Right now.
And then and then they graduate up to the.
The more expensive products for you specifically targeting.
Reps that will focus on Venus glow and stay with that product.
They're going to they're going to stay with that product now at some point they may be promoted.
But theyre going to stay with that product now now the the good thing about the strategy is it does go both ways. So we will give these reps an opportunity to sell a Venus Guo Venus fever, and get a higher percentage commissions. So it's worth their time, but then there'll be of sharing model, where if they create leads for some of the higher dollar products. What you don't want is for.
One of these reps to be in the selling situation and not sell it because of the commission plan. So they'll have a good financial opportunity on the other side as well to create leads but we intend to have just because of the huge consumable component. We intend to have long term focus on growth in vivo and if we end up pushing somebody they do really.
Well and let's say they become of robotic sales specialists, we'll backfill them with somebody that's going to focus on veeva and gloves. So we always have that blanket.
Understood Okay, great. Thanks very much.
No problem.
Thank you.
Currently it's showing no additional questions in the queue.
That does conclude our conference for Tonight. Thank you for your time this evening.
And have a good night.
Thanks, everybody.
Thank you.