Q4 2021 BIOLASE Inc Earnings Call
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Good day and welcome to the BIOLASE 2021 fourth quarter and full year financial results Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. Todd Curly of E. V. C Group. Please go ahead Sir.
Thank you operator, good afternoon. Good afternoon, everyone and thank you for joining us today to discuss financial results for the fourth quarter and full year ended December 31st 2021 on the call today from BIOLASE are John Beaver, President and Chief Executive Officer, and Jennifer Bright Vice President of Finance John <unk>.
I'll review the company's operating performance and then turn the call over to Jennifer to review the financials in more detail before opening the call for questions before.
Before we begin I'd like to remind everyone that a number of forward looking statements, which are statements that are not historical facts will be made during this presentation and subsequent Q&A session, including forward looking statements regarding the company's strategic initiatives and financial performance.
Forward looking statements as defined under the private Securities Litigation Reform Act of 1995 and are based on BIOLASE. Its current expectations and assumptions and are subject to a variety of risks and uncertainties that could cause the company's actual results to differ materially from the statements made.
Such forward looking statements only represent the company's view as of today March 17th 2022.
These risks are discussed in the company's filings with the Securities Exchange Commission a replay of this conference call will be available on the BIOLASE website. Shortly after the completion of today's call.
When listening to this call. Please refer to the news release issued earlier today announcing the company's 2021 fourth quarter and full year financial results. If you do not have a copy of the news release. It is available in the Investor Relations section of the BIOLASE website at Www Dot BIOLASE dotcom.
Allegiance financial results can also be found in the company's report on Form 10-K, which will be filed with the SEC.
Tables, we've provided in today's news release offer additional financial information. So we encourage you to review them. The tables include the reconciliation of unaudited GAAP net loss and net loss per share to non-GAAP adjusted EBITDA loss and adjusted EBITDA loss per share as well as more information regarding the company's non-GAAP disclosures.
With that said I'll now turn the call over to BIOLASE, President and Chief Executive Officer, John Beaver John.
Thanks, Todd and thank you everyone for joining us. This afternoon. We appreciate your continued interest in BIOLASE.
Before we begin let me briefly address the situation in Ukraine, our thoughts are with the people suffering in flame from the violence, including the Ukrainian Dennis and trainers, who are part of the BIOLASE family.
I'll, let to step it up to help where we can and we hope that situation is resolved peacefully in the very near future.
Now, let's move onto our results the fourth quarter was another outstanding quarter for BIOLASE.
We had a solid end to a very successful year as we significantly exceeded our previously stated outlook for the quarter.
Our market, leading dental lasers delivered another quarter of strong revenue growth, primarily driven by continued new customer adoption.
Denis are migrating into our lasers, because they provide a better standard of care for dental procedures and ensure a safer environment for dental practitioners and patients and traditional procedures.
I expect this trend to continue as we put in place a well developed roadmap of strategies and investments that we believe will drive continued growth in 2022 and beyond.
Let's review the results, we reported fourth quarter revenue of $12 $4 million, representing 46% growth year over year and finished 2021 with a total revenue of $39 2 million up 72% year over year.
Our strong performance throughout 2021 is due to rising demand for our industry, leading dental lasers, which is being driven by our intensified focus on education and training and the benefits our lasers provide to Dennis and their patience.
We built the best in class dental lasers, and now with our focus efforts dental practitioners are coming to us as they look to upgrade the dental practices and improve patient outcomes.
BIOLASE owns approximately 60% of the all tissue laser dental market represented by our Waterlase brand. However, this still represents a small fraction of overall dental market is the penetration rate of dental lasers in the overall dental market is only about 7% in the U S and less than 2% worldwide.
Therefore, 93% of the U S dental market still isn't using all tissue lasers. So the opportunity remains vast and we aim to increase as market adoption in the coming years.
Many of you have heard me say this before but it bears repeating because of its significant impact each 1% increase in adoption of all tissue laser technology in the U S will equal our $50 million in additional revenue for BIOLASE, assuming we keep our same 60% historical market share.
This doesn't include potential increased adoption in international markets, where historically approximately 40% of our revenue has been generated or the follow on consumable revenue generated from the procedures done with our laser systems.
The question is how do we get the other 93% of dentists use dental lasers, we have a three pronged strategy for growth that was implemented in 2021, that's created momentum we experienced in 'twenty, one and we believe will allow us to continue our growth trajectory in 2022 and beyond and drive further penetration into the overall dental market.
The first prong of our growth strategy is to get dental specialists onboard over the past 12 months BIOLASE has formed specialist academies to expand awareness of the benefits of dental lasers and these dental specialists communities, specifically, we launched specialists academies for Endodontist, Periodontist pediatric dentist and dental hygienist drive for.
The adoption of our laser.
The market opportunity that exists for BIOLASE within each of these specialists communities is very meaningful led by key opinion leaders in each of these specialties BIOLASE has increased education and training to drive expanded adoption.
Starting in the first quarter of 2021, and every quarter said specialists have made up at least a third of our total U S. Waterlase revenue.
Our focus on increase in education and training for these sales specialist is translating into higher demand for our products as they look for a safer more advanced alternatives to improve patient outcomes and improve their practices.
<unk> specialist repairing a saving implants is a very large opportunity.
About 20% of implants fell in the first three years without our laser the only way really to get an implant repair does it replace it however, our laser can address this issue and save them playing without having to replace it.
Another example is in the trading of root canals white with traditional treatment options Gil, 50% or so of bacteria, whereas use our laser or the doctor can get rid of 99% of bacteria. This is a big deal during the fourth quarter, we received FDA clearance for the new edge Pro laser, which we co develop with their agenda, a global leader in commercializing.
Products for the endodontics market.
This device offers ended on it's a new solution that provides a more effective cleaning and disinfection alternative for root canal procedures. The edge pro laser assisted microfluidic irrigation devices built on BIOLASE is patented improvement laser technology that has been shown to provide outstanding debridement cleaning and disinfection.
I won't go through every type of procedure, but these two examples demonstrate how and why our lasers are being adopted by Dallas specialist.
Carrying even a small percentage of each of these dental specialties by our calculations could generate over $150 million in additional revenue for BIOLASE from laser sales plus higher margin revenue associated with the follow on consumables.
The first prong of our growth strategy can generate meaningful results. However, it doesn't take into account the significant opportunity we have with the approximate 150000 general practitioner dentists in the U S.
This segment is the focus of the second prong of our growth strategy, if an additional 5% of gp's adopt our lasers, it would generate $225 million in laser revenue not including the consumables. So how do we penetrate this large growth opportunity for <unk>.
'twenty one we launch the Waterlase exclusive trial program or W. E T P, which puts a BIOLASE laser and the GPS offices for 25 days.
Ported by mentor and includes two days of in person training all at no cost at the end of the 45 days the G. P adoption to bar laser or not we held over 30 of these events in 2021, each of which had four to hep's participating I'm excited to say that we had a 40% success rate and sold over $2 million in lasers.
As a result of these events last year.
Our goal in 2020 twos to host 40 of these events and I believe we can increase our win rate over 50% as we gained valuable feedback with each event that can help facilitate our success.
While the cost of a waterlase is around $70000 GPS can finance this purchase for about $1100 a month, it's a win win for G. P's, because a big part of the Waterlase exclusive trial program is teaching. These G piece the additional procedures. They can do in house with our laser so they can keep more procedures and revenue in house.
One example is G. P is getting into <unk>, where they can charge $200 to $500 per quadrant to treat <unk> disease. Another example of an additional procedure G. P thing keep in house or Frenectomy, which they can charge 500 about $500 to $1000 to do with our laser.
These two examples of less invasive procedures, they exactly what G piece wont need to grow their business and they do just two additional procedures a week they will generate a 200% return on their investment in our laser and <unk>.
More training and education, we do through the WTP. The more success, we were going to have in driving laser adoption.
The third prong of our growth strategy is getting the corporate Dennis adopt our lasers. We currently have ongoing trials before the five largest dsos in the United States include a heartland, which is the largest heartland has over 2500 dentists and over 2000 offices today, most new dentists are employed by the Dsos right out of dental school.
Our goal is to have them learn to use our lasers, while they're at the DSO and make lasers in the central part of their practice moving forward, so that if and when they do go out on their own they become a new bar of our dental laser and our consumables.
Last year, we made solid inroads with some of the smaller dsos like one on the east coast that bought for Waterlase lasers, and 50 ethics.
These relationships are important and validate our laser technology and we believe that the large dsos can be a far greater revenue contributor in the future.
So in summary, we have a large market opportunity ahead in a well developed a roadmap for growth leveraging our industry, leading product offerings. Our three pronged growth Crane is generating positive results now I'm confident in our ability to drive sustainable and profitable revenue growth in 2022 and beyond.
With that I'll turn the call over to Jennifer to provide further details regarding our fourth quarter results and full year results.
Thank you John and good afternoon, everyone.
The goal during my prepared remarks is to provide more context around some of the numbers.
The highlights and the operational improvements we achieved during the fourth quarter and full year.
For further detail please refer to our financial results, which you can find in the financial tables of our earnings release and 10-K.
Our strong fourth quarter performance demonstrates the business momentum we have generated this year.
Fully rebounded from the lows of Covid as our full year 2021 revenue of $39 2 million were up 4% over 2019 pre pandemic level.
This increased traction reflects a return to a more normalized operating environment for dental practitioners as well as increased demand for our industry, leading dental lasers, because of our increased education and training.
For the fourth quarter, we delivered net revenue at $12 4 million, representing 46% growth year over year.
Compared to the fourth quarter of 2019, which for the purposes of today's call is more of an apples to apples comparison.
The last full quarter prior to the impact of the COVID-19 pandemic.
Our Q4 revenue increased 22% year over year.
Now, let me share some additional year over year fourth quarter highlights which include.
U S laser system sales increased 39% compared to 2020, and 16, 1% compared to 2019, which was our last full quarter prior to Covid.
U S consumable sales increased 40% compared to 2020, and 75% compared to 2019, driven by significantly increased volume of procedures.
International laser system sales increased 87% compared to 2020 were down 11% compared to 2019.
International consumable sales increased 29% compared to 2020 and 61% compared to 2019.
And we continued momentum with new customer adoption in 2021 with 82% of our U S laser sales coming from new customers and over 47% of Waterlase sales coming from dental specialists.
These are all positive indicators and the increased demand we are experiencing for our industry, leading dental laser dental offices in the U S and abroad reopened.
Fourth quarter gross margin improved significantly despite a higher contribution from international sales, which carry a lower margin since we sell through distributors.
The gross margin of 40% is a 'twenty 100 basis points of expansion year over year, reflecting an increase in sales favorable absorption of fixed expenses.
Average selling prices and fewer inventory write offs and reserve adjustments in 2021.
On the expense line total operating expenses were $9 3 million for the quarter, an increase from $7 1 million in the year ago quarter.
This increase was due to commission expenses for achieving sales targets.
Advertising expenses and related consulting costs.
And travel and trade show related expenses, driven by a normalization in such expenses as compared to 2020.
We also incurred higher costs for engineering projects, and we continue to invest in R&D to ensure our industry leading products, we made as such.
GAAP net loss for the quarter with $5 3 million or <unk> <unk> per share compared to a net loss of $6 1 million or seven cents per share for the fourth quarter of 2020.
Our adjusted EBITDA loss for the fourth quarter with $4 3 million or six.
<unk> three per share compared to an adjusted EBITDA loss of $4 5 million or five cents per share for the fourth quarter of 2020.
Now, let's turn to the balance sheet.
We finished the quarter with cash and cash equivalents $30 million.
Due to the proactive and strategic decisions, we took over the past year.
Dave balance sheet remains historically strong and we believe it will provide us with the resources to execute our growth strategy for several years without having to access the capital market.
Now moving on to guidance.
We are continuing to experience strong demand for our dental lasers and are currently forecasting revenue for the first quarter ending March 31, 2022 to exceed 9 million, which would represent growth of at least 11% year over year.
For full year, we anticipate net revenue to increase the minimum of 10% from 2021 level.
In summary, we had another strong quarter with significant revenue growth and solid margin expansion and we're confident that our actions to strengthen BIOLASE are working.
Furthermore, the combination of our performance and our capital resources, we have in place gives us flexibility to execute the multi year growth strategy that John outlined.
Before I open the call to questions from our covering analysts we'd like to take this opportunity to address a few questions from our retail shareholders.
It is true to say technologies platform.
John the first and one of the most asked question.
Whether the company is still considering a reverse stock split to reach the minimum stock price required by NASDAQ.
Thanks, Jennifer Yes, we are planning on again ask our shareholders for approval of a reverse stock split. So we can achieve the minimum stock price required by NASDAQ just a couple of weeks ago, We announced the declaration of series G preferred stock dividend to our common stockholders. The outstanding shares of series G preferred stock will vote together without.
Standing shares of the company's common stock as a single class exclusively with respect to a reverse stock split and will not be entitled to vote on the matter except to the extent required under the Delaware General Corporation law.
We believe this will allow us to obtain shareholder approval for the reverse stock split allowed us to remain listed on NASDAQ as well as increase our share price appreciably, which we feel is imperative as we look to attract more institutional shareholders.
Given our expectations of continued revenue growth in our March toward profitability, we believe we'll be able to support the reverse split and attract more institutional investors.
Thank you John.
Second must ask question is a two parter first what's the company's plans for five years next five years and second what is your strategy to increase revenue.
Well I think I covered that one in significant detail in my prepared remarks, but to sum. It up we believe we have a large market opportunity ahead of us given the low penetration of all tissue lasers in the overall dental market and then we have a well developed roadmap for growth leveraging our industry, leading product offerings. We believe the three pronged growth plan, which align.
Doubt, which we began to implement in 2021 is already generating positive results will drive sustainable and profitable profitable revenue growth in 2022 and beyond.
That sounds great.
We have one more question you are going to stay technology platform, what's the plan to increase shareholder return.
Our plan to increase shareholder value is to continue to execute our growth plan to increase the penetration of our all tissue lasers into the large dental market opportunity is.
Mentioned before every 1% increase in adoption rate just in the U S alone.
Equates to about $50 million of revenue for us, which is significant we expect to do this in a profitable manner and achieve profitability by the end of 2023 edition.
In addition to executing our establish sell strategy and accelerating the adoption curve for all tissue lasers will be continue we'll continue to be proactive and telling our story to investors and communicate the significant opportunity. We have ahead of us.
Thanks, John.
With that I'll turn the call back to the operator to open the call for questions.
Operator.
Thank you.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad and if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
And we will go to our first question from Bruce Jackson of the benchmark company.
Hi, good afternoon, and thank you for taking my questions.
So I've already great questions about.
Hi, a few questions about the sales force. So we had the Democrat on ways, we late in the fourth quarter.
How have you been finding access to the dental offices, where your sales force.
Yes, so that's really a two part question and in the U S. We're getting very good access today.
Did it in the first quarter, we had some I think.
No pushback from going into offices in January and February were really not seeing that now.
You know as I mentioned, the second prong of our strategy is around the Waterlase exclusive trial program and Bruce we were a little disappointed in January and February and that we had to cancel a handful of events simply because I believe.
Omicron variant.
Rightfully so scared people away from attending in person events, but I believe we're back on track now.
The second part of that is around the international and that continues to be on a country by country case by case basis.
We did see our international business.
And do you expect it to be picking back up in the first quarter.
Though we still have pockets of.
Areas that we just can't hold it against that because of the current.
Pandemic situation.
Okay. Okay.
And then the.
The other question if I can ask about the guidance for 2022. So in 2021, you were able to generate 11% growth without the contribution from edge krill.
What are the additional events so it.
It seems like if you could continue with that same growth rate that there's there's upside.
So the base business.
Maybe you could just comment on how you put together the guidance for 2022 and with the contribution of <unk> is expected to be.
Yes, so certainly <unk> will provide additional revenue to us in 2022 versus 2021.
2021, we only sold a handful of units it late in the fourth quarter and we expect a more robust rollout in 2022 in particular after the annual <unk> show in.
In April.
Having said that I did hedge somewhat Bruce on our guidance.
Given given where we are in the world today.
With the Russia.
Russia Ukrainian conflict going on right now.
The.
The situation, we have with our supply chain and wanted to be what I believe somewhat conservative and looking forward I'll. Just give you. One example, we rollout for example that we came up with yesterday.
We had a dentist in the in the middle part of the country Central region that was ready to buy a waterlase and.
They had family in Ukraine and they.
Ended up sending money over to the Ukrainian family and decided to take a hold on buying.
Waterlase just one example, but there are other examples like that out there. In addition, you had the overall economy with the inflation rate going up which I think has given some pause to some dennis.
To make capital purchases. So I wanted to be cognizant of that in <unk>, given our guidance, which as I said hopefully as conservative.
Alright, that's it for me thank you very much.
Thank you Bruce.
And we'll go next to Matt Bulwark of Maxim Group.
Hi, yes, thanks for taking my question.
Just a few from me it.
It seems like <unk> doing a pretty great job driving procedure volumes at existing customer sites. I think you've mentioned there was a 40% increase year over year in U S consumable sales.
What do you attribute this to and what is the company focusing on in terms of utilization driving utilization for 2022.
Yes, you're right and when I look at.
Consumable revenue for the company.
It's good to look at year over year, that's fine, but I'm actually looking at sequential quarterly revenue and as you put your q's and k's together you can see that that we've had sequential growth regardless of the seasonality in the business, which I am very happy with why that is I believe is because we are leading with.
And training.
We've talked in the past that BIOLASE sold to the.
Innovators in the market the first 5% to 7% of dentists, who.
Really want to be the first Dennis on their block with the latest technology.
It may not even use it but they like having it.
That is not where we are today, we're in to the early adopter segment of the population and that early adopter segment needs to have a laser that works. All the time that is intuitive to use you know it doesn't take a physics degree I think we've achieved that they also need continuous education and training around procedures Newport.
Seizures and as I mentioned in the past I think that's the area that we've done the best job of improving over the last year or two is there any been sent around the education I think that's driving consumables.
Understood. Thank you and then if you could just provide a little bit more color on the reception of the edge growth so far in the market and maybe whether or not that is kind of opening doors at some endo doctors that are maybe more interested in buying some of your other lasers as well.
Yeah. Good question, so in the first quarter.
Once again, we're not really involved in the marketing or the sales of the.
Edge Pro unit, but I believe that edge Endo took a soft launch.
Strategy with this so in the first quarter.
They wanted to be sure. They they want before they ran and so it was a number of units that went out to the key opinion leaders some of their better customers and so forth.
I think they're planning a more.
You know a significant launch at a meeting in San Diego in April.
But you're right I think that is that noise in the market is helping both edge pro selling our edge endo selling edge pro units, but also allowing BIOLASE to have some conversations that we normally wouldn't have had before.
With a potential endodontist, but even more importantly, the GPS who are doing.
<unk>.
And looking at water life as a new technology for them.
Excellent I appreciate that color I'm going to pass it on thank you.
Okay. Thanks for that.
And as a reminder, you May press star one on your telephone keypad. If you have a question at this time.
We'll go next to Ed Woo of <unk> capital.
Yes, congratulations on the quarter, you touched a little bit about <unk>.
<unk> affecting January February office visits, but what about on the supply chain and also any impact from inflation of rising raw material costs.
Yes, so good questions Ed.
From a supply chain standpoint, it is a day to day activity, making sure we have all of the.
Necessary raw materials.
For the balance of the year I feel like we're in good shape now for the balance of 2022, and we already began securing raw materials for 2023 based upon our growth projections, so feel pretty good about that but you never can fill overly confident given today's environment from an inflation standpoint.
Yes, that's an interesting topic, we certainly have seen inflation hit us.
Impacting not only our cost of goods sold and boat.
Part.
Raw materials, but also in labor the labor market as we all know is much harder now than and then certainly I think ever seen in my career.
And so we've had inflationary pressures there that goes to other services that are below the cost of goods sold line as well.
We've had a lot of talks internally about pricing and does it make sense to pass this on to our customers now.
We have taken a stance to hold pricing firm in 2022.
I believe that our most important thing we can do today is to accelerate that adoption of laser used in dentistry and I don't want to do anything that's going to jeopardize or slowdown that adoption acceleration.
So at this point, where we're fighting those inflationary pressures may.
<unk> taken a little bit less margin, but they believe in the long run it will benefit us.
Great. Thank you and I wish you guys. Good luck this year.
Thank you Ed.
And we'll go to a follow up question from Bruce Jackson of the benchmark company.
Hi, Thank you just a follow up question on.
The dental service organization, so I know you've been.
Talking them for a while now.
Maybe you could just remind us about the <unk>.
Process that you're going through with these dsos and <unk>.
What are what are the remaining hurdles that you need to get over.
Order to get.
Onto some of there.
Contracts.
Bruce It sounds like an easy question, but it would probably take me three hours to fully answer it because each one is different but let me try to generalize.
So a few things one is I would love to be able to highlight every.
Cell that we make to a DSO publicly obviously.
For selfish reasons, but sometimes we're precluded from doing that because the DSO themselves don't necessarily want that publicity. So there's a two way street in terms of communication.
Where we are we continue to work with Heartland as we publicly stated before right.
Right now we're in the process they have.
They have bought practices that had.
I would say a legacy laser.
At that practice and that Doctor may not have even bought the laser themselves. They may come with the practice. So we're in the process now of identifying a handful of.
<unk>.
Of cases, like that and retraining them and getting them back up and running that's kind of the next step with heartland.
We have another DSO this very large I can share their name at this point, but we just.
Signed a pricing agreement with them.
Probably we will not be significant revenue until next year.
But it took us two years to get on the pricing formulary as an example, we're there now.
Doesn't mean necessarily they are buying from us today, but thats it.
We had to get that step done to take the next step which is actually the purchase.
Okay great.
That's very helpful. And then last question for me is just on the sales force generally I mean, you mentioned.
The employment situation.
Tell us about.
If your sales force has been stable and if theres been any changes in the head count.
So it's been very stable.
Probably the most stable during the four and a half years I've been with the company that I can remember.
We have.
I believe as of today, one opening which as you know given our history not very much and so we're really happy with that.
We had a our first since COVID-19 in person commercial team meeting in February and I was just.
It was a two day event I was yeah I'll, let there just invigorated with the team that we have.
<unk> commercial team meeting, where you had awards given out but there's also a lot of training that and sharing of success stories. So.
I can't tell you is that how excited I was when I left there I think overall from the feedback I had you know the wholesales team was also excited it's really a cohesive group now and I think more so than we've ever had.
Alright, Thats it for me and congratulations on all the progress.
Thanks Bruce.
And with no other questions in queue I would now like to turn the call back over to John Beaver for closing comments.
Thank you and I want I want to thank everyone for being on today's call. I also want to thank the BIOLASE team for their continued commitment and dedication throughout the last couple of years.
Each of them has worked tirelessly to make our customers successful and delivering an elevated gold standard of care and safety through laser dentistry.
So to wrap it up with the many positive changes we made over the past year BIOLASE has a much healthier company today, we have the commercial infrastructure in place and financial flexibility to capitalize on the multiple growth opportunities ahead of US we are confident in our well developed strategy and our ability to achieve sustained profitability and revenue growth.
Jennifer and I look forward to reviewing our first quarter results with you in May and in the meantime, we will be participating in several investor events, including the maximum Investor Conference on March 28, if you are participating in this event. Please contact Todd currently at T. Curley at EDC group Dot com to help facilitate a meeting with us.
Operator, Thank you everyone for your interest in BIOLASE. This concludes our call have a great St. Patrick's day. Thank you.
And again this concludes today's call. Thank you for your participation you may now disconnect.
Yes.
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Yeah.
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