Q4 2021 Sientra Inc Earnings Call
Hello, Thank you for standing by and welcome to the CN Trail fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised.
Today's conference is being recorded if you require any further assistance. Please press star zero I would now like the NFL for its over to your speaker today Oliver Bennett. Please.
Please go ahead.
Thank you operator.
Good afternoon, and welcome to the Yatra fourth quarter and full year 2021 earnings conference call.
I'd like to remind everyone that in our remarks today. We will include statements that are considered forward looking statements within the meaning of United States Securities laws.
In addition management may make additional forward looking statements in response to your questions.
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.
Actual results may differ materially from those expressed in or implied by the forward looking statements.
The company undertakes no obligation to update or review any estimate projection or forward looking statements.
A detailed discussion of the risks and uncertainties that the company faces is contained in its previously filed quarterly report on Form 10-Q , and annual report on Form 10-K for the year ended December 31, 2021 can be filed with the SEC and available on the company's website and at SEC.
Got it.
I would also like to note that the entry use its investor relations website to publish important information about the company, including information that may be deemed material to investors.
Financial and other information about Yatra is routinely posted and is accessible on the company's investor Relations website at www dot intra dot com.
Today on our call we have Rod medicine.
As President and Chief Executive Officer.
Andy Schmidt.
Interest Chief Financial Officer.
I will now turn the call over to Ron.
Right.
Thanks, Oliver and Hello, everyone.
2021 was a transformational year for central.
<unk> became the fastest growing breast implant company in U S with market share gains that nearly doubled both augmentation and reconstruction when compared to 2019.
This performance has set the foundation for 2022 and beyond for accelerated expansion, the plastic surgery market and sustainable long term growth.
We had record plastic surgery Q4 revenue of $22 6 million.
26% increase over Q4, 2020 and brought a running total to six consecutive quarters record revenue performance.
Total plastic surgery revenue for fiscal year, 'twenty, one was $80 7 million as compared to 55 million for fiscal year 2020.
An increase of 47%.
The decision to focus our business on the plastic surgery market accelerated share gains in U S breast products market separated center from the competition.
We started the year with the goal of advancing our position as the partner of choice for plastic surgeons by focusing on three key areas.
One taken action to shed non strategic assets.
To identifying and investing in and executing commercial strategies targeted at accelerating see interest growth breast augmentation and reconstruction.
And number three a total commitment to bring innovation superior technology for surgeons practices and hospitals.
As a result in 2021 center continued to rapidly gain market share, which has nearly doubled and both augmentation and reconstruction.
2019.
Our existing accounts continue to perform extremely well and drove more than 70% of our revenue in 2021.
New accounts also served as a leading indicator of our long term growth profile.
We added more than 100 accounts in the fourth quarter with 80% of them and the reconstruction area, reflecting our decision early in the year to focus on addressing this very important segment of the market.
As a reminder, when we're bringing new reconstruction accounts typically takes four to six months before we see significant sales volumes.
So we expect this new accounts to be accretive to see interest topline growth in 2022 and beyond.
Continue to drive patient demand through unique direct to consumer marketing initiatives, including.
Including training events. The result in high pull through on participating surgeons.
Now, let's look a little bit more specific by market.
Breast reconstruction was once again, an important driver of our sales in the quarter with 33% year over year growth for the full year growing 70% versus 2020.
Resulting in the best year ever for our reconstruction business.
While our market research estimates the reconstruction market actually declined 5% overall in <unk> 2021 versus 'twenty 'twenty due to hospital restrictions our market share actually increased by almost 4% exit the year with an estimated 14% market share.
Probably 2021, we made the decision to focus on reconstruction leveraged into great clinical data of our products the high GPO access, allowing us to bring in more hospital contracts.
This is a critical market for us supports our profitability goal due to its higher margins and long term hospital contracts.
To support this goal we launched last week the sixth App version of our Derma span tissue expander to address the surgeon need for greater fixation options.
This new version of Derma spend provides all the benefits of a traditional terms span tissue expander, while also providing a 360 degree tap orientation for additional placement support options.
Derma spend six times, there's not a key product in our portfolio to support our initiatives to further increase Sheraton the reconstruction market.
We also recently submitted a five 10-K application for next generation all ex to probe tissue expander with them.
The launch later this year.
We believe this dual port MRI compatible tissue expander with the first and only of its kind to be available in U S and it will be an important addition for patients and surgeons new reconstruction market.
We expect even stronger upside from this market in 2022.
We have already started to expansion of our sales force to continue to drive demand towards interesting leading reconstruction portfolio.
Now turning to the augmentation market.
According to data from both the aesthetic Society and the American Society of plastic surgeons breast augmentation remains one of the top procedures performed by plastic surgeons don't want it.
The highest revenue generator for them.
Market research indicates the breast augmentation market and 2021 reached an all time high and increasing more than 20% versus 2020, and plus 30% versus 2019.
And <unk> continued to outperform the market and wind up the year with approximately 11% share.
The main remained strong in the fourth quarter, resulting in 22% year over year growth for the full year increasing over 40%.
We also doubled our consumer awareness over the past two years growing at the highest rate in the category and putting us on the number two position most all brands.
The key drivers for success and augmentation business were the following.
First the shift towards consumer innovation building on our position of loyalty sales and marketing support.
Product advantages, specifically, our unmatched safety profile.
Continue to market directly to the consumer and we have seen through our market research the impact of our programs are consumer preference does viewpoints surgeon implant choice.
We had over 500000 web site visits and spend more than 20000 referrals to our surgeon partners.
The second thing we did we started physician loyalty program in 2021 include.
Included revenue driving benefits and we're rolling it out to a broader group of customers in 2022 based on the initial success of the program.
And finally, our safety message using advertising collateral is making a very positive impact on our performance.
The box warning put into place by the FDA last October now requires transparency and reporting complications among the manufacturers.
And very clearly highlights the interest on rival safety profile.
Safety remains a top driver and brand choice among patients.
I'm proud to see entrant unmatched safety profile, coupled with the 20 year patent 20 warranty program.
Cornerstone brand education, among patients seeking breast surgery.
To further advance our goal of making Sandra diversified Fedex company focus and plastic surgeons.
On January 5th announced a transformative acquisition origin stomach novel Fat grafting technology developed by leading researches and plastic surgeons at mass General Hospital.
This product has been clinically proven to provide superior fat retention and predictability.
Using a patient's own fat to augment the breast and other areas of the body.
The addition of fat grafting technology toward product portfolio is exciting for the present and future Sandra.
We have an opportunity to expand our Tam even further.
This product is a game changer for reconstruction, where almost 80% of the surgeries youth tobacco rafting.
We also expect expanded use of fat grafting documentations due to its unique patent retention predictability and ease of use properties.
Longer term, we plan to expand into additional statics applications, including a significant opportunity for face hands and gluteal augmentation.
Additionally, our new senior Vice President of R&D regulatory Denise Stiles, believing at 200 patient clinical study to further validate the benefits of the origin system and breath, while preparing for a commercial launch in the first quarter 2023.
On April 21, our team is planning to host our first R&D day in San Diego.
Plan to highlight our product pipeline.
And briefly on the international expansion, we have entered into agreements with distribution partners in Canada, China, and the middle East preparation for approval in those markets.
Our clinically superior portfolio continues to generate interest in a number of O U S markets.
And we will continue to strategically look for the right partners right markets for expansion.
In closing with strong momentum behind us we have many exciting catalysts on the horizon.
2022, we expect to continue to expand our market share the number of accounts in both the reconstruction and augmentation.
We are focused on driving towards profitability in 2023 with further growing our top line by optimizing expenses.
Plan to fuel future, but transforming <unk> into full aesthetics company.
Averaging the full potential of our existing products and new fat grafting platform.
Looking ahead I'm confident that we're on track to double revenue within the next three years.
With that I'll turn the call over to Andy.
Thanks, Ron.
Considering our Q4 'twenty one financial results.
We recorded record plastic surgery, Q4 revenue results, which brings our running total for six consecutive quarters of record revenue performance.
<unk> posted revenues of $22 6 million as compared to $17 9 million in Q4 of 'twenty, an increase of 26%.
Total revenue for fiscal year, 'twenty, one was $80 7 million as compared to 55 million for fiscal 'twenty, an increase of 47%.
Gross margin for Q4, 'twenty, one was 54, 4%, which is consistent with Q3 of 'twenty one.
The key driver for gross margins as product and channel mix.
<unk> to the first three quarters of 2021.
Q4 revenue was driven by augmentation, which has lower gross margins than the reconstruction space.
Consistent throughout 2021, we experienced price stability across our entire product line.
As expected product cost performance.
The intra continues to experience transition expenses in Q4 related to our distribution center move reducing our gross margins by approximately two percentage points in Q4.
Okay now switching to operating expense.
Total operating expense for Q4, 'twenty, one was $26 1 million, which is flat with Q4 of 'twenty.
Total operating expense for fiscal 'twenty, one was $90 7 million as compared to our operating expense guidance of $85 million to $90 million.
The slight increase above our guidance range is attributed to the incremental shipping expense associated with our $2 million plus Q4, 'twenty one consensus revenue piece.
Total GAAP loss from continuing operations for Q4, 'twenty, one was $15 9 million as compared to a $27 million loss for the previous year period.
Total year 2021 loss from continuing operations was $62 5 million as compared to a loss of $67 1 million in 2020.
Adjusted EBITDA for Q4, 'twenty, one was $9 $8 million loss as compared to a $9 $6 million loss for Q4 of 'twenty.
Adjusted EBITDA loss for total year 'twenty, one was $31 2 million as compared to a loss of $32 8 million in 2012.
Switching to key balance sheet items.
We ended the December 31, 2021 period with a cash balance of $51 8 million.
This compares to a balance of $55 million on December 31, 2020.
Year to date cash used in operations was $44 5 million.
However, $14 $7 million of that amount was attributed to an increase in accounts receivable due to increasing 2021 sales and are transitioning <unk> systems in Q3, which caused the delay in delivery of customer statements.
We expect to recapture much of that increase in accounts receivable in 2022.
We also increased inventories by approximately $13 8 million in 2021 to.
To address increasing sales and to support our growing reconstruction business that includes significant consignment inventory.
Total debt on December 31, 2021.
Was approximately $76 million and total outstanding shares totaled approximately 62 million shares.
Turning to guidance for 2022, we expect plastic surgery revenue in the range of 93 to 97 million, reflecting growth of 15% to 20% compared to sales of $87 million in 2021.
At this point I will turn the call back to Ron.
Thanks, Andy we will now open the call for questions operator.
Actually before that.
Q&A.
We're supposed to not be chunky text messages when youre in the call.
But I'm very excited to quickly go ahead.
And very excited to report that.
Health, Canada just approved.
Our submission for implants in Canada. So very very excited this is literally hot off the press the health, Canada, just improve our implants.
To be marketed.
In Canada, so very excited for that to be glad to share more specifics, but with that we'll now open up the call for Q&A.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
John Your question press the pound key.
Our first question comes from Jon Block with Stifel. You May proceed with your question.
Hey, guys. This is Tom Stefan on for John Thanks for the questions.
If I can start off with guidance, maybe in the context of the 15% to 20% growth.
Ron how should we be thinking about both market growth and also kind of the share gains youre expecting between both recurrent.
Should we still expect kind of accelerated share gains you've you've talked talked about.
Yes, so we're looking at as I shared in the past as Dror augmentation, we expect the market now at all time high versus 2021. So it will be single digit growth lots of them, which is exactly what the market was doing before COVID-19 . So expect that and therefore reconstruction we expect acceleration.
There will be construction market quite a bit because.
Share of the market was actually down 5% in 2021 versus 2020.
So our share growth, we expect continue to grow share.
Recall, we're closer to 42%.
It should be in the mid teens to upper teens here in the next 12 to 18 months and augmentation, which would accelerate the growth as well.
Don't have a specific number but we have seen in the beginning of this year as well a continuous share growth so no expectation of slowing down.
Got it Thats helpful.
And then Andy a couple kind of below the revenue line and maybe just on gross margins in 2022 do you still feel good about that line of sight into.
Into the high 50% range and maybe quarterly cadence. If you can also help us there.
And then moving a bit lower just on Opex I think for the quarter. It was 26 million there was maybe some elevated shipping in there but.
At a basic level can we kind of extrapolate that out for full year 2022, or how should we be thinking about opex for the year. Thanks guys.
Sure. So I'll start with the first part on gross margins.
As I noted.
It's really going to be subject to <unk>.
Product mix and as Ron has been consistently communicating we're highly motivated.
Incentivize to really build the reconstruction business.
Product mix dynamic alone brings us into the high Fifty's, we feel.
When we look at the first half of 'twenty, two we're going to continue optimizing our distribution center, which basically costs a little bit of money.
Experience as expense in Q3, Q4 being conservative we expect to see some of that expense in Q1, possibly Q2. So the back half of 'twenty. Two is really where we get our wind in our sales in terms of not just product mix, but in terms of having optimized our operations. So we feel still feel very <unk>.
Strong about that.
In terms of op expense.
Q4.
We're unique in terms of very very strong revenue performance again, our outbound shipping to customers, we true that expenses sales and marketing line Opex. So that was elevated in Q4 I'll let place.
Very positive way, we had some great milestones.
Accelerators in terms of commission plans and so that's specialized expense for Q4 that very happy to pay out it was a very strong quarter.
As we consider 2022.
2021, if you look ahead to 2020 year over year, we were flat in terms of Opex, we expect in 2020 to be investing in sales and marketing.
They are communicating that.
And that's going to be a net increase in Opex. We expect also to increase incrementally and R&D in terms of new product launch opportunities and so on we sit with Denise on board, we want to make sure. She has the tools and the opportunity to actually deliver.
The other part that's going to be a net add will be.
Purchase of origin.
We've said, it's going to be probably about $2 million.
Worth of launch prep in 2022 launch in 2023, Thats going to BNS.
Possible add G&A, we expect to be flat or down which is great. We were flat year over year 'twenty one to 'twenty, we expect it to be flat or down with the possible exception of investment in Q4, and Sarbanes Oxley preparation.
Would be a high class.
So to speak and that we would be doing that in anticipation of <unk> $100 billion in revenue in 2022. So those are the different items in play we expect our Q1 announcement, which will be in may of course.
To talk more in terms of very specific guidance guidance range for Opex, but I will say this we will be building it.
Using non-GAAP operating expense, our non-GAAP operating expense in 2021 with $78 million. So we will provide a range on top of that $78 million. It will be a larger number based on what they've said in terms of where we expect to operate again. The reason why were waiting until that timeline as we are having typical.
Q1 meetings in terms of how we looked at the market. How do we look in terms of different projects, we're going to pursue both in terms of the <unk> side, but also insurance. Most most importantly in terms of R&D. So we're basically looking at that plan for 2022, and that's going to drive Opex, one way or another so.
Stay tuned in may for that Opex specific guidance.
That was great. Thanks, Andy Thanks, Ron.
Thank you. Our next question comes from Margaret because all of it.
William Blair you May proceed with your question.
Hey, guys. This is Matthew bouley on for Margaret today.
I know you're doing given the fact good thanks, just given the fact that.
We're mostly through the first quarter I wanted to see if you guys could give us an idea what the trends you've been seeing so far and how you expect that to continue into the second quarter.
Hey, Matt I was in the field in long Island, New York in January and so actually what we saw in November December are met with a lot of reconstruction surgeons doing very busy.
In the beginning of many lot of surgeries. However, a lot of the patients had to cancel last minute because they tested positive home across the morning. After surgery. So what we saw in November and December for Recon, What's happening also January and February , but just like everything else. We're seeing a very strong latter part of the quarter. So we expect a rebound to come back.
Augmentations, but we didn't see anything this slowdown augmentation. However, keep in mind Q1, and Q3 are usually the lower quarters from a seasonality.
In Q2, and Q4, the higher quarters from seasonality and we expect that the site.
Got it. Thank you that's helpful.
And I'm just kind of building on.
Previous questioner asked about.
You guys continuing to expand your market share so.
You've seen that both the augmentation in the recon share expand pretty quickly. So just with all of the momentum, particularly within the augmentation market. How do you ensure you can capitalize on that momentum and grow your market share at sustainable level. Thank you.
What are the things we focus a lot on Q4 is.
Since the majority of our growth is coming from existing customers about 70% coming from existing cloud customers. The decision was made to how do we accelerate share within existing customers. It's allow you to go from a $10 50 share to $4 50 from a zero to 10. So we saw a lot of doubled down and going back to some of the current.
Find ways to expand leveraging that a lot of great marketing initiatives and projects that we have that bring that ability for the surgeon to expense amortization.
Users of the <unk> products.
From a central Academy and auto programs that will be done we starting viability those surgeons to attend those programs. So that's what somebody thinking you saw so that's our plan is still for this year.
Continuing to focus existing customer, we're not going to stop and new customers will continue to add.
New customers, but there is a much faster return on investment on getting our current customers to accelerate the documentation.
Got it thanks, so much.
Thank you. Our next question comes from Alex Nowak with Craig Hallum Capital You May proceed with your question.
Great. Good afternoon, everyone. This is connor on for Alex Congrats on the great quarter.
I guess first off.
When we think about that 15% to 20% growth in 2022, how much of that growth is going to come from new accounts as opposed to gaining share in existing accounts.
Yes.
I would say that.
The changed 70% will come from existing accounts still from both argumentation Recon Recon will continue to add new accounts, but I don't see that changing this year based on what are the signals very successful we saw in 2021.
Sure. Okay. That's helpful.
You know there were some changes at the FDA regarding labeling you spoke on that during the prepared remarks, but can you give any other updates on the regulatory environment.
Kind of where your larger sizes stand in the review process.
Yes, those changes were very positive for <unk>, because one of the things. We're very proud of is our safety profile. If you look at.
Capsular contracture look at risk of ruptures or we can.
The <unk> plant across our 10 year data.
Competition will have one of the lowest one if not the lowest one so we support the FDA changes support the recommendation that the patients have full disclosure of any kind of risk at the same time, our unrivaled safety, it's very clear when somebody looks at our implants versus the competition.
We're very comfortable with those changes.
Large sizes, we are in conversations with the FDA right now and we will look forward to something to share in the future.
Great sounds good thank you.
Yes.
Thank you. Our next question comes from Chris Cooley with Stephens You May proceed with your question.
Good afternoon, and thanks for taking the questions maybe just to come in at this point.
There was a record year.
Congratulations by the way on the health, Canada approval as well just now so as we just think a little bit about the momentum going into 'twenty two.
Can you help us think a little bit more about the seasonality I know you referenced the historical seasonality on the hog side in the prior question, but just with the growth that we saw in 'twenty, one and the normalization that youre talking about.
Org and we coupled that with an acceleration in recon.
Just help us think a little bit more about just kind of the gating first half second half is that different.
As a result, do we see sounds like still kind of a flattish adjusted EBITDA number for the full year year over year, but does that to have more of those.
Second half loading if I'm thinking about this correctly and then I've got a quick follow up.
So let me start on this one.
As you point out what's going to be interesting to see how it plays out in 2022 is going to be the comeback in recon.
<unk> follows the typical patterns, we would expect to see us.
First half second half really about equal maybe 49% first half 51% second half however, as Ron has mentioned before Q1 and Q3, our weakest quarters.
So if you consider all four quarters at 25% no seasonality, we would view Q1 to Q3 as perhaps at this time, 22% of the total with basically the balance being picked up in Q2 and Q4.
Okay. Thank you.
And then maybe just simply just from a longer term perspective, as we think through the year.
Obviously, there's <unk>.
Additional competitive entrants expected coming in around calendar year end or early into 'twenty three.
Can you speak to just how you are able to calm clients.
In particular on the on the reconstructive side, both from the expander as well as from an implant perspective and just.
How defensible do you think that.
Or what type of those do you have the.
That can help you sustain well above market growth.
In conjunction with that could you maybe elaborate a little bit more on the physician loyalty program. How that's been modified if at all here in 'twenty two thanks, so much and again congrats on a record year.
Thanks, Chris.
The great thing about the hospital stay.
Stated as a three year contract.
So it really is blocked that no. One is also one of the critical thing to hospitals look forward clinical data what is your clinical data in this case on our Alex to probe tissue expander and ability to provide clinical data to hospitals, we would have that opportunity to add more and more publications coming out this year on a tissue expander in places.
So you have that three year contract can you talk about a competitor entering our competitor then maybe entering what is their projects or their tissue expander I would ask that question to that is I don't think we have clarity on that if theyre really come into 2000, and I don't want them. So.
So that protects us from the.
From a program so we have four surgeons.
Royalty program is more in the augmentation side.
And those are the kind of programs, we found to be very effective our marketing team did an outstanding job pressure tests down last year as to which ones work.
<unk> added more onetime.
One time, only had 10% to 20% of our surgeons in those programs now we have close to 50% and that's why you see more and more share acceleration with existing customers and again that protects us from any current competitors and possible new ones.
Keep in mind I did state, we have 11% sure an augmentation with 89% of the market to go. So we're very excited to move forward and continue to steal share away from the two giants were competing with that's my main focus here in the next 12 months in the next 24 months.
Thank you.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Anthony Vendetti with Maxim You May proceed with your question.
Thanks, Yes.
I know it's early since you said the news is basically hot off the press about health, Canada, just improving.
Your implants, but do you have.
Our plan in place what do you think that.
Contribution could be in 2022.
How do you.
Ramping up the sales force is there going to be a direct force there you're going to go to distributor is maybe a little bit of color around that.
Yes.
Anthony.
All set to go we have a fantastic.
Came up there that's going to help us roll it out there and we're waiting for approval with Dolby make a month ago, so they're ready to go.
It's going to be a what we call a distributor of light approach, where we send the products a consignment and obviously that's a cell.
<unk>.
It can reimburse us for that amount of money. So we are going to build slowly there are two major competitors at the same ones are competing here in U S and we expect to really nice contribution probably 'twenty three but we will start building a latter part of second quarter into the rest of the year.
Andy can you give a little more color on the total contribution from international.
Sure so.
As all are aware, obviously were in Japan.
Canada.
Even later in Puerto Rico.
Again, we're starting small horse. This is early for US Canada earliest launches Q2.
And as Ron said, it will build as we go starting with new accounts, but it's going to be under 5% of total revenue when you consider our guidance in 2022.
It's a nice contributor and basically its foothold that builds for the future.
Okay, Great and then just just a couple of quick follow ups in terms of the sales force expansion.
I think the comment during your prepared remarks can you just remind us where where that is in terms of direct.
Feet on the Street right now and what's the goal by the end of 'twenty two.
Yes, we added 11 total representatives at the beginning of this year.
We obviously found with their current performance and some states such as California, Florida and other states we needed more help so divided some territories in half we went from 48.
Called the PSC to 55, and then we added three more X 56 added three more of our reconstruction managers, who has for the cover the whole country. We now have seven to cover the whole country.
Obvious reasons because of the big focus for construction, but keep in mind there are psc's column both reconstruction.
And both the augmentation because 80% of the <unk>.
Six surgeons out there to both recon in August so they call them. Both so that's about 11. Total addition in addition to also international director.
Because of obvious reasons as we continued to expand and have.
Goals to get into China in the next two plus years.
Markets as well.
Okay, and then just the last verification market share you said.
Is that 14% up 4% from the last quarter.
From the last 2021 total went up almost 4% to almost 14% for reconstruction.
Within.
Augmentation that we actually close to 11% at the end of last year.
Okay perfect. Thank you I'll hop back in the queue appreciate it.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Rob <unk> for any further remarks.
Well, thanks, everyone look forward to our first quarter call. So on top of a two months from now, but thank you for being joining us.
Everyone have a safe and a wonderful 2022.
Thank you.
Today's conference call. Thank you for participating you may now disconnect.
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