Q1 2022 BIOLASE Inc Earnings Call
[music].
Good day and welcome to the BIOLASE first quarter 2022 results conference call.
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Now I'd like to turn the call over to Todd currently.
Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining us today to discuss violate its financial results for its first quarter ended March 31 2022.
On the call today from BIOLASE are gone be Burke, President and Chief Executive Officer, and Jennifer Bright Vice President of Finance.
John will review the company's operating performance for the first quarter, and then turn the call over to Jennifer to review the financials in more detail before opening the call for questions.
Before we begin I'd like to remind everyone that a number of forward looking statements, which are any 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 anticipated financial results.
These forward looking statements are forward looking statements as defined under the private Securities Litigation Reform Act of $19 95, and are based on BIOLASE and its current expectations and assumptions and are subject to a variety of blips 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 May 12 2022.
These risks are discussed in the company's filings with Securities and Exchange Commission.
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 2022 first quarter financial results. If you do not have a copy of the news release. It is available on the investors section of the BIOLASE.
Site at Www Dot Dot com.
<unk> financial results can also be found in the company's report on Form 10-Q, which will be filed with the SEC.
The tables, we provided in today's news release offer additional financial information. So we encourage you to review them the tables included.
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 financial 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 Biolife.
The first quarter was another outstanding quarter at BIOLASE, we maintained our growth momentum with our total revenue increasing 25% year over year.
Our continued strong performance reflects positive momentum on several fronts during.
During the first quarter, we saw continued progress with our Waterlase exclusive trial program as our success rate the percentage of dentists, who purchased after the trial surpassed 50% year to date.
This program along with the launch of our specialists academies branded honest periodontist pediatric dentists and dental hygienist generated increased adoption of our laser technology in the U S. In the first quarter with 81% of our U S. Waterlase sales coming from new customers and 65% of sales coming from dental specialists. Additionally, we had 14.
<unk> territory managers exceed their sales quota in the first quarter, which is significant given that the first quarter is historically, our softest quarter.
Our strong performance is due to rising demand for our industry, leading dental lasers, which is being driven by our intensified focus on education training and the benefits of our lasers provide dentists and their patients.
We have built and we have built.
Best in class dental lasers backed by peer reviewed papers and now with our focused efforts dental practitioners or come into BIOLASE as they look to upgrade the dental practices and improved patient outcomes.
We 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.
<unk> currently has an approximately 60% share of the all tissue laser dental market represented by water lines brand. However, this still represents a small fraction of the overall dental market as the penetration rate of dental lasers in the overall dental market is only between 7% to 8% in the U S and less than 2% worldwide with our.
90%.
With over 90% of U S and that's still not using all tissue lasers, the opportunity for BIOLASE remains vast and we aim aim and we aim to increase market adoption through our well developed growth strategy.
Many of you've heard me say this before but it bears repeating because it has significant potential impact on our revenue. We believe each 1% increase in adoption of all tissue laser technology in the U S will equal approximately $50 million in additional revenue for BIOLASE, assuming we keep our same 60% market share.
This doesn't include potential increased adoption outside the U S, where historically approximately 40% of our revenue that's been generated or the consumable revenue generated from the procedures done with our laser systems.
So how do we get dentists use our dental lasers, we have a three pronged strategy, which we began implementing in 2021 and has created the growth momentum we are experiencing today.
The first prong of our growth strategy is to get down specialists onboard in 2021, BIOLASE foreign specialists academies to expand awareness of the benefits of dental lasers, and dental specialist communities Spa.
Specifically, we launched specialist academies for Paradise, Endodontist, pediatric dentists, and dental hygienist to drive further adoption of our lasers.
The opportunity that exists for BIOLASE within each of these specialist communities is very meaningful led by key opinion leaders or kols in each of these specialties BIOLASE is increasing education training to drive expanded adoption. During the first quarter. We saw a significant increase in sales to specialists with 65% of our U S wireless.
Sales coming from these specialties.
Our focus on increasing education and training for these dental specialists is translating into higher demand for our products as they look for safer more advanced alternatives to improve patient outcomes and improve their practices.
One example of this is for parallel specialists, we're repairing a statement implants is a very large opportunity because an estimated 20% of implants fell in the first three years without our laser the only way to get an implant reparative to replace it.
However, our laser can address this issue and save them plant without having to replace it but this is only one example demonstrates why our lasers are being adopted by perrier specialist securing even a small percentage of each of these.
Dental specialists, our calculations could generate over $150 million of additional revenue for BIOLASE from bodies yourself plus higher margin revenue associated with the follow on consumables.
The second prong of our growth strategy is focused on the significant opportunity we have with approximately 150000.
General practitioner dentists.
If an additional 5% of gp's adopt our laser in the U S, who would generate $225 million in laser revenue not including consumables to how.
Do we penetrate this large growth opportunity in 2021, we expanded the Waterlase exclusive trial program, which puts a BIOLASE laser in the Gp's office for 45 days supported by mentor and includes two days of in person training all at no cost at the end of the 45 days the GPS option to buy the laser or not we held over 30.
He mentioned 2021 and 12 events so far this year each of which had four to hep's participating.
As I mentioned earlier, we saw Waterlase exclusive trial program success rate increased significantly from almost 40% during 2021 to an excess of 50% during the first four months of 2022.
Our goal in 2020 twos to host 35 to 40 of these programs and we're on track to do that it's a win win for GPS because a big part of the Waterlase exclusive trial program is teaching these general practitioners the additional procedures. They can do in house with our laser so they can keep more procedures have revenue in house and they choose and they just do two additional <unk>.
<unk> a week it will generate a 200% return on their investment in our laser.
That along with a better patient experience is motivating Dennis to incorporate waterlase technology into the practice more training education, we do through our wireless exclusive trial program. The more success, we are going to have in driving laser adoption.
The third prong of our growth strategy is getting the corporate dentists to adopt our lasers. We currently have ongoing trials with four of the five largest dsos in the United States today, most new dentists are employed by the Dsos right out of the dental school. Our goal is to add them learn to use our lasers, while they're at the DSO and make lasers and central part of their practice moving forward.
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So that when they do go out on their own they become new borrowers are our dental lasers in our consumables.
Over the last few quarters, we made solid inroads with some of these dsos. These relationships are important and validate.
Our laser technology, and we believe that the large dsos can be a far greater revenue contributor going forward.
As we look to continue our growth momentum and execute our growth strategy. We are always looking for ways to further improve our sales engine one new approach that we implemented at the end of last year as the sales part strategy that focus on specific geographies that represent large growth opportunities our first pod and the upper Midwest area is focused on expanding our penetration.
Yeah in that geography currently deposit is fully staff with a five person sales team, including a territory manager to account specialists I feel to engineer and inside account specialists. The results. Even at this early stage are quite encouraging and we plan to expand the pod system to other territories that also represent large growth opportunities.
So in summary, we have a large growth opportunity in the world to develop.
Roadmap for growth as we leverage our industry, leading product offerings. Our three pronged growth plan is generating positive results and we are confident in our ability to drive sustainable and profitable revenue growth in 2022 and beyond.
Before I turn the call over to Jennifer I want to thank our investors for bone and to approve a reverse stock split over 70% of our shareholders who voted on the proposal voted for the proposal. So again. Thank you for that support the primary purpose of the reverse stock split was to raise our per share trading price to maintain our NASDAQ listing.
We also believe the higher share price will allow us to attract institutional investors that will promote greater liquidity for our stockholders and with that I'll turn the call over to Jennifer to provide further details regarding our first quarter results.
Thank you John and good afternoon, everyone.
I'm going to provide more context around some of the numbers as well as highlight some of the operational improvements we achieved during the first quarter.
For further detail please refer to our financial results, which you can find in the financial table tables of our earnings release and 10-Q.
Our strong first quarter performance demonstrates the continued business momentum we built in 2021 <unk>.
This increased traction reflects higher demand for our industry, leading dental lasers, because of our increased education and training.
For the first quarter, we delivered net revenue of $10 2 million, representing 25% growth year over year.
Some additional first quarter highlights include U S laser system sales increased 43% year over year.
U S consumable sales increased 35% year over year, driven by increased procedures using violate lasers.
International laser system sales increased 15% year over year.
Our national consumable sales remained consistent with the first quarter of last year.
We continued momentum with new customer adoption in the first quarter with 81% of our U S. Waterlase sales coming from new customers and approximately 65% of U S. Waterlase sales coming from dental specialists.
Lastly, as John mentioned the success rate of our Waterlase exclusive trial program increased significantly during the quarter at over 50% year to date highlighting the success of this program.
These are all positive indicators at the increased demand we are experiencing for our industry, leading dental lasers in the U S and abroad.
First quarter gross margin increased significantly to 47% versus 34% a year ago and 34% in the first quarter of 2019 prior to the impact of the COVID-19 pandemic.
Higher gross margin reflects the increase in sales and higher average selling prices in the quarter as well as favorable absorption of fixed expenses.
On the expense line total operating expenses were $8 9 million for the quarter. So only a slight increase from $8 8 million in the year ago quarter.
This increase was due to commission expense for achieving sales targets and travel related expenses and they were partially offset by a decrease in general and administrative expenses from compensation and severance as well as decreased legal and consulting expenses incurred by engineering and development in the first quarter of 2022.
GAAP net loss for the quarter with $4 8 million compared to a net loss of $6 9 million for the first quarter of 2021.
When adjusted retrospectively for the reverse stock split GAAP net loss per share for the quarter was <unk> 77, compared to $1 28 for the first quarter of 2021.
Our adjusted EBITDA loss for the first quarter with $3 9 million compared to an adjusted EBITDA loss of $5 3 million for the first quarter of 2021.
When adjusted retrospectively for the reverse stock split adjusted EBITDA loss per share for the quarter was 64 cents compared to <unk> 97 for the first quarter of 2021.
Now, let's turn to the balance sheet.
We finished the quarter with cash and cash equivalents of approximately $22 million. We believe our healthy balance sheet provides us with the resources to execute our growth strategies for several years without having to access the capital markets.
Now moving onto guidance.
We are continuing to experience strong demand for our dental lasers and are currently forecasting revenues for the second quarter ending June 30 of 2020 to $610 5 million, which would represent growth of at least 15% year over year and over 21% when compared to the second quarter 2019 pre COVID-19 results.
For the full year, we continue to expect net revenue to increase at least 10% from 2021 level.
In summary, we had a 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 give us flexibility to execute the multi year growth strategy that John outlined.
And with that I'll turn the call back to the operator to open the call for questions.
Operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you're using a speaker phone we ask you. Please pickup your handset before pressing the keys to enjoy your question. Please press Star then two.
Today's first question comes from Bruce Jackson with the Benchmark Company. Please go ahead.
Hi, good afternoon, and thanks for taking my questions.
I was wondering if you could first just a little bit of color on the.
Partnership with edge Endo, Mr contributed during the quarter.
Yes, how are you doing Bruce it did so you may recall that we made the first I would say a handful of shipments.
They edge pro device.
In late December So first quarter was really the first full quarter of us having the device available for <unk>. After our FDA approval in December so it did have.
I would say meaningful maybe not material, but meaningful.
Impact on our revenue.
We continue to sell the endodontist, both through that channel with our OEM and also with our own waterlase. So it's a combination of the two.
Yeah.
Okay, Great and then my second question is around the Dsos and the corporate dentistry groups. So you've got you've had a number of trials going with the scripts for some time I understand that take a while to work through their processes, but.
Do you have any line of sight on whether or not you might get some some contracts sometime this year.
Well, we certainly are selling to dsos today and that is a pretty nice part of our business.
We are we do have line of sight on one particular DSO that I'm not at Liberty to disclose at this point due to confidentiality arrangements.
But I will tell you that that particular DSO is implementing a number of I would say a couple of other technologies this year.
And we will look to implement our technology next year, starting maybe in the fourth quarter.
As they want to roll this out in a very.
Article manner, so more to come on that.
Okay, Great and then last question for me is just around gross margins as you continue to scale up the revenue.
Should we be expecting to see some scale efficiencies in.
Would you care to hazard, a guess as to where you might exit the year in terms of gross margins.
Yes, so I think.
What we've said in the past is for us to get to EBITDA positive, which we expect to be for the full year in 2023 and in the fourth quarter of this year, we need to have gross margins.
A little bit about 50% call it $50 to 52%. So I would expect us to have fourth quarter margins in that.
In that general area, this year and the fourth quarter.
Alright.
Excellent congratulations on all the progress.
Bruce.
Thank you and our next question today comes from Anthony Vendetti with Maxim Group. Please go ahead.
Hi, This is Matt on for Anthony Thanks for taking my questions.
It seems like you guys are making a ton of progress with the specialists with a 65% of your waterlase sales coming from specialist this quarter I'm curious do you see a difference in terms of utilization trends between the GP and the specialist.
From utilization trends.
Not necessarily I would say every dentist is different right. There are GPS that use our water lays on every single patient.
And there are certainly specialists that do the same as well.
What we have found though is specialist, especially coming out of COVID-19 seem to have.
Not that as much in patient volume during 2020 in 2021 is maybe gp's did and so there might be an even better.
<unk> overall financial situation to invest in new technology. So I think some of that may be playing a part in our success in the specialist area.
Got it understood and then a quick follow up on the DSO, it's great to hear that you've got ongoing trials with four and five of the largest in the U S.
So you get a sense that if you were able to land, maybe the largest or second largest DSO that would impact the decision making of the other DSO in other words could there be kind of avalanche impact if the DSO start to adopt your technology.
So very good question I think that the.
There would be a domino impact and.
That's not just in the Dsos, though is also for the non dsos as this.
As this technology gets adopted by more and more we will hit a tipping point, where every dentist will be forced to adopt similar to what happened in <unk> many years ago right.
And they just won't be drawn the patients won't be as competitive.
Without this technology, so I see that both in the DSO space and frankly in the non DSO space as well.
Got it that's helpful. And then lastly for me you talked a little about that this new sales pod strategy, you're implementing or trialling at least in one area. I was hoping you could provide a little bit of additional context into how that specific geographies performing.
Versus let's say last year, when you werent implementing that sales cloud strategy.
Just in terms of the potential for this this transition in sales organization. Thank you.
Got it.
Thank you for your question.
<unk>.
The Midwest pod really began in the fourth quarter and it had.
I would say significant improvement.
The improvement year over year quarter over quarter from first quarter excuse me fourth quarter of 2020. However.
We were still in the midst of Covid. There. So that that comparison is it's difficult to make first quarter.
Results in that pond, we are better than they were a year ago.
So that was encouraging and to the point, where just this quarter. We are launching the pod in New York City, and so that will be our second pod I think we will monitor.
Both the revenue generation the consumable demand increase.
And also just the profitability.
I'm looking at it it's like a mini P&L.
Those pods over probably the next two to three quarters to finally determine is this something that we want to just leave in those two parts of those two geographical areas is this something that we want to expand even further as we look into 2023. So once again too early to draw any conclusions firm conclusions on.
The pod idea.
Success.
But so far so good.
Awesome. Thank you very much I'll hop back in the queue.
Thank you. Our next question comes from Kyle Boser with Lake Street. Please go ahead.
Great. Thanks, so much for taking my questions and thanks for all the updates here.
Apologies if I missed this I'm jumping between calls here. So maybe I'll just ask both my questions upfront.
John .
Can you talk a little bit about head.
Head count the sales reps are.
Sure.
How you envision that changing or staying the same.
What is the.
What does the top reps do annually and.
Then.
The next question is it just.
Just kind of curious are you bumping into any particular company more than others in the field.
Who are you competing with the most.
Or is it kind of just a mix of a everyone. Thanks so much.
Good questions call. So from a territory manager standpoint in the U S. Remember, we sell through distributors in the international countries, we sell to but in the U S. Today, we only have one open territory.
And that is.
Certainly in almost five years I've been here that is the only time I could to set that.
The turnover has been.
Pretty much nonexistent.
Since the fourth quarter of last year, So that's that all points to great signs right.
Very few open territories, only one and we hope to fill that in the second quarter and no turnover. So I think that that means a couple of things one is.
I think our comp structure very competitive in place, but I also think we're creating an environment and have created an environment, where the territory managers feel like they are a little bit closer to the overall.
Corporate culture and organization they are not on an island alone and we've done a tremendous job in improving the support that they get from.
From corporate events and education programs I've talked before that was probably the one area that was broken the most a few years ago and it's probably the one that we've made the greatest strides in improving so I think all of that has led to <unk>.
Proved rep tenure.
In terms of.
How much of a rep can sell.
We had one rep that I've stated publicly before that made over $2 million that generated over $2 million in revenue last year and that includes in laser sales and consumables as well.
So that is certainly a an outlier but are are better.
Performing reps.
Certainly achieve over a million dollars and that's the reason we talked about.
The number of reps that we had go over 200000 in first quarter, which is historically, our weakest seasonal quarter in sales that was really encouraging for me.
The second question in terms of competition.
Yes, I'll go back to the to the survey that we did last year and we'll be doing a new survey this summer and updating it but when we asked do.
Dentists, who are non laser users.
When they thought of a laser company don't laser company, who they think of an 80% said BIOLASE.
So do we see competition in various.
Markets or segments sure, but thats really not our competition our competition is share of wallet.
And can we convince the dentists that they have 50 to $100000 to spend this year in capital equipment.
Can we convince them that the best choice is investing in laser technology I think so far we've been doing a good job in doing that and hopefully we will continue to do that but that's really the competition not necessarily another laser company.
No that's great.
<unk>.
I'll jump back in queue.
Thank you and once again, ladies and gentlemen, and storms and one of your another question. Our next question comes from Ralph Thanks, Alicia, whereas the Serbian capital markets. Please go ahead.
Hi, This is a real faith for Edward Woo of ascending capital. Thanks for taking my call.
I wanted to ask are there any changes in the competitive landscape.
No there haven't been.
It's been pretty pretty constant with the other laser companies out there they are selling to the dental space really no new market entries entrants.
So it's been fairly consistent.
Okay, Great and are you seeing any macroeconomic slowdowns in the business.
No macroeconomic slowdowns.
Internationally, we still continue.
To fight.
Various lockdowns and quarantines from a COVID-19 standpoint, that's becoming less and less but its still.
An issue in some countries.
I'll give you an example.
We just added.
A couple of years ago finally, after six years of going through regulatory.
Process.
We became the first non Japanese company to get approval to sell lasers in Japan.
And of course, we got that approval in the first quarter 2020, right when Covid hit and so all of the training that normally would go into that distributor. We couldnt do because we can travel there. We're just now beginning to see an opening in the door for there.
To be able to.
To really.
Get over there and train the distributor.
Give some events there that I think will drive those sales as we move forward into 2022.
Great. Thank you very much.
And once again, ladies and gentlemen, if you have a question. Please press Star then one at this time, we'll pause momentarily to assemble our roster.
And ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to John Beaver for any closing remarks.
Thank you Rocco I want to thank everyone for being on today's call also I want to thank the BIOLASE team for their continued commitment and dedication.
<unk> said this before but it bears repeating this is the best team I've ever worked for.
Each of them has worked tirelessly to make our customers successful and delivering to elevate the standard of care and safety through laser dentistry.
Jennifer and I look forward to reviewing our second quarter results with you in August and in the meantime, we are participating in several investor events, including the LD Micro conference on June 7% to eight if you are participating in this event. Please contact Todd currently S. T. K E. H R. L. I N E D C group Dot com to help facilitate.
In meeting with us. Thank you operator, and thank you everyone for your interest in BIOLASE. This concludes our call have a great day.
Thank you Sir This concludes today's conference. Thank you all for attending today's presentation. You may now disconnect. Your lines will have a wonderful day.
Okay.