Q2 2023 BIOLASE Inc Earnings Call
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Good day and welcome to the BIOLASE second quarter 2023 financial results Conference call. Please note. This call is being recorded at this time all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation I would now like to turn the conference over to Todd currently of EDC.
You may begin.
Thank you operator, good afternoon, everyone and thank you for joining us today to discuss BIOLASE financial results for its second quarter ended June 32023.
On the call today from BIOLASE are John Beaver, President and Chief Executive Officer, and Jennifer Bright Chief Financial Officer.
John will review the company's operating performance for the second 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 statements that are not historical facts will be made during the presentation and subsequent Q&A session.
Including forward looking statements regarding the company's strategic initiatives and anticipated financial performance.
These forward looking statements are defined under the private Securities Litigation Reform Act of 1995 and are based on BIOLASE as 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 are only representative of the company's view as of today August 10 2023.
These risks are discussed in the company's filings with the Securities and Exchange Commission.
A replay of this conference call will be available on the company's 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 2023 in the second quarter financial results. If you do not have a copy of the news release. It is available on the investors section of the BIOLASE website.
At Www Dot BIOLASE dot com.
BIOLASE 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'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 deeper John .
Good afternoon to everyone. Thank you for joining us today to discuss our second quarter earnings results.
We reported another strong quarter and we're excited to share the significant highlights so let's get right into it.
Our revenue for the quarter was $14 3 million. This represents the highest quarterly revenue we've achieved since the fourth quarter of 2015.
It's also worth mentioning that the quarter's laser revenue was the highest we reported since 2012, taking into account the imaging products that we no longer sell.
These are important achievements because I believe they clearly demonstrate that tipping point is here for dental lasers to become the gold standard of care in dentistry.
Furthermore, we are proud to report another consumable revenue revenue record with $4 $1 million generated during the quarter. This figure is 36% better than our previous record of $3 million in the last quarter and is up year over year, demonstrating the growing demand for our consumable products.
Waterlase trial program or WTP is also contributing to experience.
Success with our year to date conversion success rate reached 56%. This is a 10% improvement compared to his success rate for all of 2022, which we believe showcases the effectiveness of our trial program and its positive impact on customer adoption.
We hosted seven Wtp's during the second quarter, we are on track to host about 24 for the full year 2023 due to the high level of interest.
Another key driver of our increased success is their focus on education and training.
We're witnessing rising interest from Denis and our novel training education programs, which is translating into higher WTP attendance and engagement rates.
Positive response from the dental community has led to increased sales of our state of the art lasers.
We continue to penetrate the market new customers accounted for about 69% of U S. Waterlase sales in the second quarter.
Additionally, almost a third of orderly sells in the U S for Dell specialist highlight.
Highlighting the appeal of our products to this product segment.
Our efforts to educate and train the dental community had been instrumental in raising awareness of our dental lasers within the market.
Through peer reviewed studies and targeted go to market efforts more dental practitioners are recognizing the benefits of upgrading their practices with our best in class dealt lasers.
Currently we command approximately 60% of the worldwide all tissue dental laser market with our Waterlase brand.
We have established ourselves as the go to brand for quality reliability. After self service and training, we estimate over 90% of dentists are still not using an all tissue laser and the practice represent a significant market opportunity for BIOLASE.
We are actively pursuing a three pronged strategy to engage tenants, who have not yet incorporated Dell lasers into the practice.
First we have significantly increased our efforts to engage dental specialists, such as Paradise pediatric dentists Endodontist in Delhi genus.
Chet academies for each of our product families Waterlase and epic we've simplified training for the specialist set.
Second we are actually engaging the over 150000 general practitioner dentists in the U S by increase in education training through initiatives like the Waterlase trial program and our recently opened a state of the art training facility. The BIOLASE Education Center, which provides delek clinicians with a comfortable engaging learning environment tailored around laser education.
The BIOLASE Education Center is also designed to host a variety of events and courses, including our Wtp's BIOLASE education centers also located adjacent to a state of the art Dental office laser smiles, which provides access to a lot of patient education through these initiatives, we are driving laser adoption and providing dennis with safer more advanced alternatives.
To improve patient outcomes.
As we look into the future our focus remains on fostering strong partnerships, where corporate Dennis and universities adoption of our Waterlase and epic lasers have gained substantial momentum on various dental schools and post graduate programs across the country, allowing aspiring dentists to embrace laser dentistry early in our careers and equip them with the central skills from residence.
Z to retirement and.
Additionally, the interest and enthusiasm for laser adoption within dental service organizations or Dsos has seen remarkable growth in the past quarter alone. We conducted over 30 dedicated training events for our DSO partners aid in the adoption of purchase Waterlase and epic laser brands, we envisioned the integration to continue expanding within their networks in the near future.
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Further elevate in the standard of care and propelling the advancement of laser dentistry in the industry.
In summary, we are pleased with our strong second quarter performance and are confident in our ability to capture the substantial growth opportunities ahead. We are successfully executing our growth plan as evidenced by our 10 consecutive quarters of revenue growth, but the vast majority of our substantial market opportunities still in front of us increased education and training. The continued success of the.
Waterlase trial program will propel us toward achieving our revenue and profitability objectives.
At this point I will turn the call over to Jennifer O'brien, our Chief financial officer to provide more in depth insights into our financial results for the quarter and talk about our guidance for the right near the year. Thank you again for your participation and we look forward to addressing your questions Jennifer.
Thank you John and good afternoon, everyone I'm going to provide more context around some of the numbers I'll highlight some of the operational improvements we achieved during the second quarter.
Further detail please refer to our financial results, which you can find in the financial tables of our earnings release and our 10-Q.
Our second quarter performance reflects continued demand for our industry, leading dental lasers and consumables because of our increased education and training for.
For the second quarter, we delivered net revenue of $14 3 million, representing 17% growth year over year. This is our 10th consecutive quarter of year over year growth.
Some additional second quarter highlights include record consumable sales, increasing 36% year over year, driven by increased procedures using BIOLASE lasers.
We continued momentum with new customer adoption in the second quarter was 69% of our U S. Waterlase sales coming from new customers approximately one third of Waterlase sale coming from dental specialists.
Lastly, the sales conversion rate of our Waterlase trial programs continue to rise this quarter with our year to date success rate, increasing more than 10% compared to the full year of 2020 to approximately 56% highlighting the success of the program.
These are all positive indicators at the increased demand we are experiencing for our industry, leading dental lasers and consumable.
During the second quarter, our gross margin was 43% compared to 42% in the year ago quarter.
This represents improvement from changing the new suppliers, which has resulted in lower warranty expenses.
At the end of 2022, we completed an acquisition of a chunk fiber supplier.
<unk> just stop on that third party key component with our own in house manufactured components.
This has helped us reduce overall cost of goods for those key component.
On the expense line total operating expenses were $10 million for the quarter down from $10 2 million in the year ago quarter.
This decrease was mainly due to less spending on legal and consulting services for our recent annual shareholder meeting and a decrease in stock based compensation expense for missing this year's financial performance target.
These decreases were partially offset by higher depreciation expense on equipment used in sales and marketing.
Demonstrations training and educational purposes and.
It was 800000 was nonrecurring in the current year.
GAAP net loss for the quarter was $4 9 million compared to a net loss of $5 6 million for the second quarter of 2022.
GAAP net loss per share for the quarter was $8.93 compared to $91 98.
For the second quarter of 2022 as adjusted for the reverse stock split.
Our adjusted EBITDA loss for the second quarter with $2 3 million compared to an adjusted EBITDA loss of $4 1 million for the second quarter 2022.
Adjusted EBITDA loss per share for the quarter was $4.24 compared to $66 87.
The second quarter of 2022, and adjusted for the reverse stock split.
These positive trends indicate our continued progress toward achieving profitability.
Now turning to the balance sheet, we finished the quarter with cash and cash equivalents of approximately $6 9 million.
And looking ahead as we drive toward profitability.
Getting price increases to contribute to our topline growth, while we expect to have lower cost of goods sold due to the trunk fiber acquisition completed in 2022 and lower W. T T expenses.
Our in house trunk fiber made up approximately 45% of the fiber we shipped in the first half of 2023, well ahead of our own internal projections.
This cost savings is driving increased gross margins and we expect we will get us close to this 50% needed to reach profitability.
We expect to drive lower WTP expenses.
This year by using our own centralized training facility, the BIOLASE education, better which celebrated its grand opening at the end of July .
We now have four denniston staff trained perspective customers.
We also continue to work with educational facilities around the country to host W. T T events at their locations at little to no cost.
As John mentioned, we expect to host about 24 W. T. P. This year, so the expense savings will be quite meaningful.
Additionally, during the second quarter, we implemented cost saving initiatives that we expect to generate approximately $5 million to $6 million of annualized cost savings starting in the third quarter.
Cost saving initiatives included a roughly 20% reduction in BIOLASE with U S workforce.
The workforce reduction as part of the company's broader effort to gain greater efficiencies throughout the organization without impacting our revenue generating strategy or the company's ability to can you continue delivering unparalleled quality and value to it.
Our global customer base.
We now expect revenue for the second half of the year to be 15% to 20% higher than the comparable period a year ago.
With higher gross margins expected W. T P savings.
Cost savings initiatives I, just mentioned and the continued revenue growth. We expect we believe we will significantly improve our profitability and achieve positive adjusted EBITDA for the second half of the year.
With that I'll turn the call back to the operator to open the call for questions.
Operator.
Thanks.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participating using speaker equipment. It may be necessary to pick up your handset before pressing the.
Starkey well.
One moment, please while we poll for questions.
We do have our first question it comes from Bruce Jackson with Benchmark company.
Hi, good afternoon, and thank you for taking my questions.
Wanted to start off with a a macro question about just the general credit conditions. Among your customers does that had any impact on sales or are those the types of products that they're looking at.
Yeah, Yeah Bruce.
Thank you for your question, we believe it has.
While we experienced tremendous revenue growth in the second quarter and you had mentioned some of the benchmarks against prior quarters.
And the fact that this is our.
Best quarter from revenue standpoint are in many years.
It could have been even better without the macroeconomic conditions that we're facing.
I think it did hurt sales with the higher interest rates.
I will tell you that you know as I look back to where we were a year ago or six months ago.
I, probably underestimated the impact it had on the not necessarily on the on the sales you know versus yes, or no whether or not I want to buy a laser but the time it takes to complete a sale. So I think our you know the time the pipeline has become longer.
I don't think we've lost any of those sales I think doctors are just taking a little bit more time than they normally would of underwrite.
Different interest rate scenario.
Okay and then.
Offsetting that heard about increases in physician office traffic is that also true in dentist's offices or are they still having any kind of staffing issues that might.
Maybe you gave that.
Well I I believe they still have from what I hear a staffing issues, but it has been.
I think it's been tempered somewhat I think it's better than it was certainly a year ago in terms of their staffing.
Issues from.
From all of the numbers I've seen in a you know from an industry standpoint, the patient foot traffic is about the same as it was last year.
But that has changed that much.
Okay and then one last question the the revenue guide in terms of how that plays out quarter by quarter, sometimes you can have very.
Very strong fourth quarter results, depending upon the purchase patterns would you is that the pattern that you might see this year or will the third and fourth quarters.
Quarter of speed.
Fairly evenly matched.
Yeah, we believe the third and fourth quarter will continue the same seasonality patterns that they have historically and so the fourth quarter should be our strongest quarter for the year and higher than the third quarter.
Okay, great. Thank you very much for taking my questions.
Thank you Bruce.
We now hear from Ed Woo with <unk> capital.
Yeah. Thank you congratulations on open your educational Centre. My question is your pricing strategy, how receptive has it been to raise prices.
And do you see yourself being able to do that heading into the holidays your strongest quarter.
And so Ed Thanks for the comment on the Education Center.
Our pricing has increased for the first half of this year compared to the first half of last year. You may recall, a couple of quarters ago, We announced that we were implementing price increases and that would help our gross margins I think you saw the impact of that in the second quarter.
First quarter, we had a lot of I would say existing discussions going on with Dennis carryover from the prior year and so we held the pricing that we had previously quoted to those Dennis.
So it took about a quarter to actually get the price increases in.
As we look at the second half of the year.
I don't see us having necessarily.
No necessarily price increases for the second half of the year is more around pricing discipline for us and creating more value for our customers, thereby getting more revenue from each sell.
For instance.
We talked about the consumable.
Record quarter that we had in Q2.
All of that was driven by some of our some price increases on the consumables. There was also kind of the value. We placed on education training talking to those customers on an ongoing basis and I think that led to a higher consumable seller as well so to make long story short shorter I don't believe.
We're gonna have any stated price increases in the second half of the year, though we're always looking.
Looking at that Baidu blade will get more from each customer from a revenue standpoint, as we balance as we can this year.
Is that pricing strategy are across all your products in the consumer book as well as your what or at least device. What do you guys have different strategies for pricing on those.
It is pretty.
Pretty consistent strategy, the only difference I would say is that.
We have not raised prices in the international market as high as quickly as we did in the U S market and that was largely driven by some of the headwinds we have internationally that we're still saying with the strong U S. Dollar are obviously that increases the the in local currency.
The price of our products in those markets and so because we sell in U S. Dollar. It just makes the equipment that much.
A higher price to our distributors. So we take a more measured approach to price increases internationally than we have in the U S.
Great well, thanks for answering my question and I wish you guys. Good luck. Thank you.
Thank you Ed.
A reminder, that if you would like to ask a question or participate at this time to press star one on your phone.
We'll wait a moment for questions before we turn the call back over to your host.
Yeah.
Okay, operator, if there are no more questions.
That is correct.
Okay. So now I'd like to turn it back over to the host for closing remarks.
I want to thank everyone for being on today's call also I wanted to thank the.
The Gray bar lays team for their continued commitment and dedication each of them has worked tirelessly to to make our customer successful and delivering an elevated standard of care through laser dentistry, if you'd like to learn more about <unk> of our technology technology directly from patient and physician testimonials. Please go.
<unk> dot com to view, our investor presentation updated to include a informative video and additional company details.
Thank you operator, and thank everyone for their interest in BIOLASE. This concludes our call have a great day.
This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.