Q1 2024 ReShape Lifesciences Inc Earnings Call

Okay.

Michael Miller: Good afternoon, and thank you for joining the ReShape Lifesciences first quarter 2024 conference call. I would like to turn the call over to Michael Miller from RX Communications.

Good afternoon, and thank you for joining the reshape life Sciences first quarter 2024 conference call I would like to turn the call over to Michael Miller from Rx Communications.

Michael Miller: Good afternoon, and thank you for joining the first quarter 2024 ReShape Lifesciences earnings call. I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer, and Thomas Stankovich, Chief Financial Officer. Paul will provide an overview and update on the company's activities, and Tom will review the financial results for the period. We will then turn the call back over to Paul for some closing remarks, after which we will open up the call to questions and answers.

Michael Miller: Good afternoon, and thank you for joining the first quarter 2024, reshape life Science's earnings call I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer, and Tom Stankovic, Chief Financial Officer.

Michael Miller: Paul will provide an overview and update on the company's activities and Tom will review the financial results for the period.

Paul F. Hickey: We'll then turn the call back over to Paul for some closing remarks, after which we will open up the call to question and answer section.

Michael Miller: As a reminder, this conference call, as well as ReShape Lifescience's SEC filings and website, including the investor information section of the website, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those discussed due to known and unknown risks, uncertainties, and other factors. These and additional risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, including those factors identified as risk factors in the company's most recent annual report on Form 10-K. As an additional reminder, ReShape's stock is listed on NASDAQ, trading under the symbol RSLS. I will now turn the call over to Paul Hickey, President and CEO of ReShape Lifesciences.

Speaker Change: As a reminder, this conference call as well as reshape life Sciences, SEC filings and website, including the Investor Information section of the website contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual results could differ materially from those discussed do you do now.

Speaker Change: Known and unknown risks uncertainties and other factors these and additional risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, including those factors identified as risk factors in the company's most recent annual report on Form 10-K.

Speaker Change: Additional reminder, reshape stock is listed on NASDAQ trading under the symbol our F. L X.

Speaker Change: I will now turn the call over to Paul Hickey, President and CEO of reshape life Sciences Paul.

Speaker Change: Okay.

Paul F. Hickey: Mike, and thanks to all of you for joining us this afternoon for our earnings call for the first quarter of 2024. During the first quarter and subsequently, we have remained focused on delivering shareholder value and have reshaped on a path to profitability and long-term sustainability. Key to our success is our efforts to stabilize revenues as well as our disciplined approach to continually leveraging resources and focus on reducing costs, as we outlined in March.

Paul F. Hickey: Thank you, Mike and thanks to all of you for joining US this afternoon for our earnings call for the first quarter of 2024.

Paul F. Hickey: During the first quarter and subsequently we have remained focused on delivering shareholder value.

Paul F. Hickey: And have reshape on our path to profitability and long term sustainability.

Speaker Change: Key to our success include our efforts to stabilize revenues as well as our disciplined approach to controlling overhead leveraging resources and focus on reducing costs as we outlined in March to that.

Paul F. Hickey: To that end, we continue to fine-tune our lead generation activities and invest in our growth drivers, including the commercial launch of our physician-led, redesigned LapBand 2.0 Flex. At the same time, we continue our high-priority search for strategic and synergistic M&A opportunities. As we have mentioned before, we have engaged the Maxim Group on an exclusive basis to assist in this process.

Speaker Change: And we continue to fine tune, our lead generation activities and invest in our growth drivers, including the commercial launch of our physician redesign lap and to point out flex.

Speaker Change: At the same time, we continue our high priority search for strategic and synergistic M&A opportunities.

Maxim group: As we had mentioned before we have engaged the Maxim group on an exclusive basis to assist in this process.

Paul F. Hickey: As one can imagine, we've had a high level of activity and will continue this effort to find the right partner to join us in our mission at ReShape to improve the quality of life for individuals fighting obesity worldwide. With the stigma around obesity and medical intervention being normalized by the surge of GLP-1 receptor agonist usage, we are steadfast in our confidence that the number of people seeking medical professionals, especially bariatric surgeons, will continue to increase.

Maxim group: One can imagine we've had a high level of activity and we will continue this effort to find the right partner to join US in our mission at reshape to improve the quality of life for individuals fighting obesity worldwide.

Speaker Change: With the stigma around obesity and medical intervention being normalized by the surge of <unk>. One receptor agonist usage, we are steadfast in our confidence that the numbers of people seeking medical professionals, especially bariatric surgeons will continue to increase.

Paul F. Hickey: The GLP-1's short-term impact on the market last year made it necessary for us to undertake additional strategic cost reductions, including a further reduction in staff, leading to a projected 55.4% decrease in operating expenses for 2024 as compared to last year. Tom and I will provide further details during this call, but this reorganization and decrease in expenses will allow us to focus on and optimize the commercialization of our LATBAN 2.0 Flex, created to improve the patient experience while continuing to market our current LATBAN. I'm happy to report that the limited launch of the LapBand 2.0 Flex continues to progress well, and the initial surge in feedback has been positive.

Speaker Change: G O P. Once short term impact on the market last year made it necessary for us to undertake additional strategic cost reductions, including a further reduction in staff.

Speaker Change: Leading to a projected 55, 4% decrease in operating expenses for 2024 as compared to last year.

Speaker Change: Tom and I will provide further details during this call, but this reorganization and decrease in expenses well allow us to focus on and optimize the commercialization of our <unk> flex created to improve the patient experience, while continuing to market our current market cap.

Speaker Change: I am happy to report that the limited launch of the lap band to point out Flex continues to progress well and the initial surgeon feedback has been positive.

Paul F. Hickey: Added to this, our revamped patient-friendly website is receiving meaningful traffic, while our co-op marketing program involving cost sharing with key lap band centers has proved effective and scalable. Before I recap our first quarter and subsequent highlights, I'd like to remind listeners about the important events occurring within the obesity market today. As most of you already understand, the global obesity market is growing at an alarming rate and carries with it significant medical repercussions and associated economic costs. Obesity remains a complex, lifelong disease that requires personalized treatment to ensure long-term weight loss goals are achieved.

Speaker Change: Added to that our revamped patient friendly website is receiving meaningful traffic.

Speaker Change: While our co op marketing program involving cost sharing with key lap band centers has proved effective and scalable.

Speaker Change: Before I recap, our first quarter and subsequent highlights I'd like to remind listeners about the important events occurring within the obesity market today.

Speaker Change: As most of you already understand the global obesity market is growing at an alarming rates and carries with it significant medical repercussions and associated economic costs.

Speaker Change: Obesity remains a complex lifelong disease that requires personalized treatment to ensure long term weight loss goals are achieved.

Paul F. Hickey: I'm sure you're also aware of the growing population of GLP-1 receptor agonists that have brought significant benefits to those suffering from type 2 diabetes and that help those who have obesity. We believe that GLP-1 adoption is expanding the medical weight loss market by vastly reducing the stigma that often occurs around obesity and medical intervention, including bariatric surgery. However, it's becoming very clear that weight loss due to GLP-1 drug usage has limitations, especially related to cost, accessibility, and the fact that weight loss plateaus by 12 to 18 months. Additionally, real-world long-term tolerability is low.

Speaker Change: I'm sure you're also aware of the growing popularity of GOP, one receptor agonists that have brought significant benefits to those suffering from type two diabetes.

Speaker Change: Those who have obesity.

Speaker Change: We believe that <unk> adoption is expanding the medical weight loss market by vascular reducing the stigma that often occurs around obesity and medical intervention, including bariatric surgery.

Speaker Change: However, it's becoming very clear that weight loss due to <unk> usage has limitations.

Speaker Change: Related to cost assessed ability and the fact that weight loss plateaus by 12 to 18 months.

Speaker Change: Additionally, the real World long term Tolerability is low and one large analysis only 27% of patients prescribed <unk> one receptor agonist for inherent after one year.

Paul F. Hickey: In one large analysis, only 27% of patients prescribed GLP-1 receptor agonists were adherent after one year. However, we continue to believe, based on this and other evidence, that the market opportunity for the lap band will increase over time, especially with the newly launched next generation lap band 2.0 flex. From a continuum of care perspective, individuals with obesity on GLP-1 therapy are likely potential candidates for lap-band bariatric surgery as the next viable anatomy-preserving weight loss treatment.

Speaker Change: We continue to believe based on this and other evidence that the market opportunity for the lap band will increase over time, especially with the newly launched next generation My parents, who cannot flex.

Speaker Change: From a continuum of care perspective individuals with obesity and <unk> one therapy.

Speaker Change: Our likely potential candidates for lap and bariatric surgery as the next viable anatomies preserving weight loss treatment.

Paul F. Hickey: In other words, once CLP1 patients get a taste of weight loss, yet have issues with the drug's accessibility, durability, or tolerance, they will contemplate bariatric surgery, especially a minimally invasive procedure like the lap band. Furthermore, as the safest and only adjustable and reversible bariatric surgery, the lap band is ideal for several specific types of patients, like women in childbearing years who are not able to utilize GLP-1 drugs.

Speaker Change: In other words once <unk> patients get a taste of weight loss.

Speaker Change: Issues with the drags accessibility durability, our tolerance, they will contemplate bariatric surgery, especially in Midland laser procedure like the lapping.

Speaker Change: Furthermore, as the safest and only adjustable and reversible bariatric surgery.

Speaker Change: <unk> is ideal for simple specific types of patients like women in childbearing years, who are not able to utilize <unk> drugs.

Paul F. Hickey: Now, let me take a few minutes to update you on our progress related to our primary growth pillars. As I mentioned earlier in the call, I want to provide more specifics on the progress made toward our first pillar, to deliver shareholder value and, ultimately, profitability. Specifically, as we consider the impact of GLP-1 receptor agonist prescriptions for weight loss treatment, which has put pressure on the bariatric industry, it was imperative to conduct a thorough evaluation of our operations and swiftly implement substantial cost-cutting measures.

Speaker Change: Now let me take a few minutes to update you on our progress related to our primary growth pillars.

Speaker Change: As I mentioned earlier in the call I want to provide more specifics on the progress made toward our first pillar to deliver shareholder value and ultimately profitability.

Speaker Change: Specifically as we consider the impact of <unk>, one receptor agonist prescriptions for weight loss treatment, which has put pressure on the <unk> industry.

Speaker Change: It is imperative to conduct a thorough evaluation of our operations and swiftly implemented substantial cost cutting measures at the same time, we were channeling investments into the most promising part strategy to drive growth and maintained adherence to critical P&L metrics within our organization.

Paul F. Hickey: At the same time, we were channeling investments into the most promising part of our strategy to drive growth and maintain adherence to critical PNL metrics within our organization. A later post will detail the expense savings we have identified, realized, and are planning for. In summary, we have identified and implemented additional cost reductions expected to result in lower operating expenses of approximately $8 million in 2024, a more than 50% reduction over 2023, excluding one-time costs. We are optimizing our marketing spending while making additional reductions in consulting services totaling approximately $2.4 million.

Tom: Tom will detail the expense savings, we have identified realized and are planning for.

Tom: In summary, we have identified and implemented additional cost reductions are expected to result in lower operating expenses of approximately $8 million in 2024 and more than 50% reduction of our 2023, excluding one time costs.

Tom: We are optimizing our marketing spending while making additional reductions in consulting services totaling approximately $2 4 million.

Paul F. Hickey: We have also executed a reduction in force, equating to approximately 1.2 million. We've decided to temporarily pause our ReShape Care program and achieve estimated savings of $0.8 million while we work to augment the ReShape Care platform and secure a self-insured employer to provide ReShape Care to their employees. We have also planned for 0.9 million in reductions for incentive compensation and other payer-related amounts, all a part of streamlining our team significantly but without affecting revenue.

Tom: We have also executed a reduction in force equating to approximately $1 2 million.

Speaker Change: We've decided to temporarily pause our reshape care program and achieved estimated savings of <unk> 8 million, while we work to augment to reshape care platform and secure a self insured employer to provide reshape care to their employees.

Speaker Change: We have also planned $4 9 million of reductions for incentive compensation and other payer related amounts all or part of streamlining our teams significantly but without affecting revenue.

Paul F. Hickey: Taken together, these reductions will allow us to focus on and invest in our growth drivers, while at the same time, extending our cash runway. These changes are bold, necessary, and indicative of our commitment to our first pillar, which I established in late 2022. In point of fact, with these 2024 reductions, the company's core operating expenses will be reduced between 2022 and 2024 by an estimated 24 million or 75%. In addition to the necessary cost reduction initiatives related to our first growth pillar, we are continuing to make progress with our cost-effective digital lead generation and patient engagement campaign through our partnership with Ive Medical. This platform allows us to access advanced lead optimization software that enhances patient engagement and increases patient value. The software utilizes an AI SMS platform.

Speaker Change: Taken together these reductions will allow us to focus and invest in our growth drivers while at the same time extend our cash runway.

Speaker Change: These changes are bolt.

Speaker Change: Necessary and indicative of our commitment to our first pillar.

Speaker Change: Which I established in late 2022.

Speaker Change: In point of fact, with these 2024 reductions the company's core operating expenses.

Speaker Change: <unk> between 2022, and 2020 for an estimated $24 million or 75%.

Speaker Change: In addition to the necessary cost reduction initiatives related to our first growth pillar, we are continuing to make progress with our cost effective digital lead generation and patient engagement campaigns through our partnership with <unk> medical.

Speaker Change: This platform allows us to access advanced lead optimization software that enhances patient engagement and increases patient volume.

Speaker Change: The software utilizes AI SMS platform.

Paul F. Hickey: Unknown Attendee, Thomas Stankovich, Caroline Apovian, ReShape Lifescie, This has led to an increase in the quality of patient needs and cost reduction in targeted markets. Let's now discuss our progress in executing our second growth pillar to expand our portfolio and distribution. In February, the first surgeries using ReShape's enhanced lap band 2.0 flex were successfully performed. Since then, additional surgeries have taken place, and the initial limited launch has gained momentum. This launch represents a significant advancement in improving the overall experience for left-band patients. While we're now only approved to market in the U.S., we are working to obtain regulatory approvals in both Canada and the EU.

Speaker Change: <unk>, along with our direct to consumer marketing campaign to help individuals easily book appointments with medical professionals.

Speaker Change: This has led to an increase in the quality of patient needs and cost reduction in targeted markets.

Speaker Change: Let's now discuss our progress executing our second growth pillar to expand our portfolio and distribution.

Speaker Change: In February the first surgeries using reshaped enhanced lap band to pronounce flex for successfully performed since then additional surgeries have taken place and the initial limited launch has gained momentum.

Speaker Change: This launch represents a significant advancement in improving the overall experience for Latam patients.

Speaker Change: While we are now only approved to market in the U S. We are working to obtain regulatory approvals in both Canada and the EU.

Paul F. Hickey: The new Flex technology serves as a relief valve, alleviating discomfort caused by swallowing large pieces of food and designed to eliminate the need for in-office band emergent adjustments as the band temporarily relaxes before returning to its original diameter. Now, earlier this year, we had the opportunity to train surgical fellows on the lap band, and we also introduced them to the Lap Band 2.0 Flex. This was an exciting event because the future of the lap band depends on its continued adoption by surgeons and surgical fellows, who are the next generation of bariatric surgeons.

Speaker Change: The new Flex technology serves as a relief valve alleviating discomfort caused by swallowing large pieces of food and designed to eliminate the need for in office band emergence adjustments as the band temporarily relaxes before returning to its original diameter.

Speaker Change: Now earlier this year, we had the.

Speaker Change: The opportunity to train surgical fellows on the Latam and we also introduce them to the left hand to put out flex. This was an exciting event because the future of Blackburn relies on its continued adoption by surgeons and surgical fellows, who are the next generation of bariatric surgeons.

Paul F. Hickey: Based on feedback from current surgeons, including those who have already used the LATVAN 2.0 Flex, we believe that the new Flex technology will enable us to engage more surgeons and attract new and existing LATVAN patients. In June, in San Diego, at this year's annual American Society for Metabolic and Bariatric Surgery meeting, or the ASMS meeting, we are excited to showcase the FLEX technology to the largest gathering of surgeons and integrated health professionals.

Speaker Change: Based on feedback from current surgeons, including those who have already used the lap entrepreneur flex we believe that the new flex technology will enable us to engage more surgeons and attract new and existing Latam patients.

Speaker Change: In June in San Diego at this year's annual American Society for metabolic and bariatric surgery meeting or the Asml's, meaning we are excited to showcase the flex technology to the largest gathering of surgeons and integrated health professionals.

Paul F. Hickey: All combined, we feel there is momentum building; there is momentum building and increasing demand for lap-band 2 penile flex surgery, making it a true catalyst for growth in the lap-band franchise and the company as a whole. Now, it's also important to note that in March, we significantly strengthened ReShape's intellectual property portfolio surrounding the Integrastic Balloon System, having received a notice of allowance from the U.S. Patent Office and Trademark Office and last week having the patent issued.

Speaker Change: All combined we feel there is a mentally building there is momentum building and increasing demand for lab and <unk> flex surgery, making it a true catalyst for growth and lap band franchise and the company as a whole.

Speaker Change: Now it's also important to note that in March we significantly strengthened reshaped intellectual property portfolio surrounding the <unk> balloon system.

Speaker Change: Having received a notice of allowance from the U S patent office and trademark office and last week had the patent issue.

Paul F. Hickey: We will continue to build a defensive moat around our product portfolio, innovation, and commercialization efforts and take offensive action to defend our position utilizing non-dilutive funding. Before I turn the call over to Tom, I want to reiterate that with our LapBand 2.0 Flex and Legacy LapBand, we are uniquely positioned with the safest and most durable organ sparing and reversible weight loss option for those patients that have historically had an aversion to medically managed weight loss and surgery.

Speaker Change: We'll continue to build a defensive moats around our product portfolio innovation and commercialization efforts and take offensive action to defend our position utilizing non dilutive funding.

Speaker Change: Before I turn the call over to Tom I want to reiterate that we remain confident that with our <unk> flex and legacy lap band.

Speaker Change: And uniquely positions.

Speaker Change: With the safest and most durable organ sparing and reversible weight loss option for those patients that have historically had an aversion to medically manage weight loss and surgery.

Paul F. Hickey: Given the growing body of evidence pointing to the fact that weight loss due to GLP-1 receptor agonist usage has limitations related to co-morbidities and accessibility, we believe that the market opportunity for LAPBAN 2.0 Flex and LAPBAN will increase over time. From a continuum of care perspective, these patients are likely potential candidates for bariatric surgery as the next viable weight loss treatment. I'd like to now turn the call over to Tom Stankovich to provide a recap of our financial performance.

Tom: Given the growing body of evidence points to the fact that weight loss students <unk> one receptor agonist usage has limitations related to comorbidities and accessibility, we believe that the market opportunity for Latam <unk> flex and Latam will increase over time.

I'm a continuum of care perspective, these patients are likely potential candidates for bariatric surgery as the next fiber weight loss treatment.

Tom: I'd like to now turn the call over to Tom Stankevich to provide a recap of our financial performance Tom.

Thomas Stankovich: Paul. And once again, thank you all for joining our webcast this afternoon. As Paul mentioned earlier, we provided an update in March that, in response to the short-term impact and adoption of GLP-1s, we have reorganized the company and have identified cost reductions of approximately $8 million, or 55%, for 2024 alone. Specifically, a reduction in force of approximately 1.2 million, which began in November and December of 2023, and 900,000 in reductions and incentive compensation and other payroll-related amounts have been implemented across all expense categories.

Thomas Stankovich: Thanks, Paul and once again, thank you all for joining our webcast. This afternoon.

Thomas Stankovich: As Paul mentioned earlier, we provided an update in March that in response to the short term impact on adoption of <unk>.

Thomas Stankovich: We have reorganized the company and have identified cost reductions of approximately $8 million or 55% for 2024 alone.

Thomas Stankovich: Specifically reduction in force of approximately $1 2 million, which began in November and December of 2023.

Thomas Stankovich: And 900000 of reductions in incentive compensation and other payroll related amounts have been implemented across all expense categories.

Thomas Stankovich: Other core operating costs in total have been reduced, which includes reductions in selling and marketing costs of $2.4 million without affecting our continued marketing spend optimization. Costs related to the pause in our ReShape Care Program totaled $800,000, expenses related to GNA totaling $1.3 million, primarily in professional consulting fees and insurance costs, and R&D expenses of approximately $900,000, which primarily include reduced patent fees and consulting costs.

Thomas Stankovich: Other core operating costs in total have been reduced which includes reductions in selling and marketing costs of $2 4 million without affecting our continued marketing spend optimization.

Thomas Stankovich: Costs related to the pause of a reshape care program totaling 800000.

Thomas Stankovich: Expenses related to G&A totaling $1 $3 million, primarily in professional consulting fees and insurance costs.

Thomas Stankovich: <unk> expenses of approximately 900000, which primarily included reduced patent fees and consulting costs.

Thomas Stankovich: Taken together with actions thus far, we have made significant progress reducing our core operating expenses, cutting approximately 24 million, or 75%, between 2022 and 2024. In fact, during the first quarter of this year, we had a significant reduction in overall operating expenses of 51% compared to the first quarter of 2023. A full discussion of our actual financials is available in today's press release and 10Q.

Thomas Stankovich: Taken together with actions thus far we have made significant progress, reducing our core operating expenses cutting approximately $24 million or <unk>, 75% between 2022 and 2024.

Thomas Stankovich: In fact during the first quarter of this year, we had a significant reduction in overall operating expenses of 51% compared to the first quarter of 2023.

Thomas Stankovich: A full discussion of our actual financials is available in today's press release and 10-Q.

Thomas Stankovich: I will just take a moment to review key financial metrics from the first quarter ended March 31st, 2024. Our revenue totaled $1.9 million for the three months ended March 31, 2024, which represents a contraction of 15%, or $300,000, compared to the same period in 2023. The primary reason is a decrease in sales volume, primarily due to GLP-1 drugs. We continue to focus our new marketing strategy through targeted and AI-supported digital media campaigns near bariatric surgical centers around the U.S., while reducing costs and increasing efficiency. We expect that these efforts will continue to come to fruition throughout 2024.

Thomas Stankovich: I will just take a moment to review key financial metrics for the first quarter ended March 31 2024.

Thomas Stankovich: Our revenue totaled $1 9 million for the three months ended March 31, 2024, which represents a contraction of 15% or 300000 compared to the same period in 2023.

Thomas Stankovich: The primary reason is a decrease in sales volume primarily due to <unk> one drugs.

Thomas Stankovich: We continue to focus our new marketing strategy through targeted and AI supported digital media campaigns in your bariatric surgical centers around the U S, while reducing costs and increasing our efficiencies.

Thomas Stankovich: We expect that these efforts will continue to come to fruition throughout 2024.

Thomas Stankovich: Additionally, we anticipate the full U.S. launch of the LapBand 2.0 Flex in 2024, which should contribute to increased sales going forward during 2024 and into 2025. Gross profit for both the three months ended March 31, 2024, and 2023 was $1.2 million. Gross profit as a percentage of total revenue for the three months ended March 31st, 2024 was 60% compared to 54% for the same period in 2023. The increase in gross profit percentage is due to a reduction in overhead-related costs, primarily payroll, as the company had a reduction of employees late in 2023.

Thomas Stankovich: Additionally, we anticipate the full U S launch of the lap and two point of flex in 2024 that should contribute to increased sales going forward during 2024 and into 2025.

Thomas Stankovich: Gross profit for both the three months ended March 31, 2024, and 2023 was $1 2 million.

Thomas Stankovich: Gross profit as a percentage of total revenue for the three months ended March 31, 2024 was 60% compared to 54% for the same period in 2023.

Thomas Stankovich: The increase in gross profit percentage.

Thomas Stankovich: As due to the reduction in overhead related costs, primarily payroll as a company had a reduction of employees late in 2023.

Thomas Stankovich: Sales and marketing expenses for the three months ended March 31, 2024 decreased by 1.2 million, or 53%, to 1 million compared to 2.2 million for the same period in 2023. There was a decrease of $700,000 in advertising and marketing expenses as we re-evaluated our marketing approach and have moved to a targeted and AI-supported direct digital marketing campaign. There were also $500,000 in reductions in payroll-related expenditures, including commissions, stock, compensation expense, and travel of $500,000 due to changes in sales personnel and lower sales.

Thomas Stankovich: Sales and marketing expenses for the three months ended March 31, 2024 decreased by $1 2 million or 53% to $1 million compared to $2 2 million for the same period in 2023.

Thomas Stankovich: There was a decrease of 700000 in advertising and marketing expenses as we evaluated our marketing approach and it moved to a targeted and AI supported direct digital marketing campaign.

Thomas Stankovich: There were also 500000 or reductions in payroll related expenditures, including commissions stock compensation expense and travel a 500000.

Thomas Stankovich: Due to changes in sales personnel and lower sales.

Thomas Stankovich: General and Administrative expenses for the three months ended March 31, 2024 decreased by $2.3 million, or 56%, to approximately 1.9 million compared to 4.2 million for the same period in 2023. The decrease is primarily due to a reduction in professional services, such as audit and legal fees, of 1.3 million, primarily due to the fiscal year 2022 restatement that occurred during the first quarter of 2023. Unknown Attendee, Thomas Stankovich, Caroline Apovian, ReShape Lifescie, including a reduction in stock-based compensation of approximately $500,000 due to changes within personnel.

Thomas Stankovich: General and administrative expenses for the three months ended March 31, 2024 decreased by $2 3 million or <unk>, 56% to approximately $1 9 million compared to $4 2 million for the same period in 2023.

Thomas Stankovich: The decrease is primarily due to a reduction in professional services, such as audit and legal fees of $1 3 million, primarily due to the fiscal year 2022 restatement that occurred during the first quarter of 2023.

Thomas Stankovich: Public stock offering costs and a reduction in payroll related expenses, including a reduction in stock based compensation of approximately 500000.

Thomas Stankovich: Due to changes within personnel.

Thomas Stankovich: The company also had a decrease in rent and insurance of $100,000 as it moved to its headquarters during the second quarter of 2023 to a smaller facility to reduce costs. Research and development expenses were $500,000 for the three months ended March 31, 2024, remaining consistent with the same period in 2023, with a slight decrease primarily in stock-based compensation. Non-GAAP-adjusted EBITDA loss was $2.1 million for the three months ended March 31, 2024, compared to a loss of $5.3 million for the same period last year, a reduction of $3.2 million, primarily due to our continued efforts to reduce overall operating costs.

Thomas Stankovich: The company also had a decrease in rent and insurance of 100000 100000 Hasnt moved its headquarters during the second quarter of 2023 to a smaller facility to reduce costs.

Thomas Stankovich: Research and development expenses were 500000 for the three months ended March 31, 2024 remaining consistent with the same period in 2023 with a slight decrease primarily in stock based compensation.

Thomas Stankovich: non-GAAP adjusted EBITDA loss was $2 1 million for the three months ended March 31, 2024, compared to a loss of $5 3 million for the same period last year.

Thomas Stankovich: Adduction of $3 2 million, primarily due to our continued efforts to reduce overall operating costs.

Thomas Stankovich: We ended the quarter with a net working capital of approximately 4.4 million, primarily due to cash and cash equivalents of 2.5 million and 1.6 million of accounts receivable, and we remain debt-free on our balance sheet. For the remainder of 2024, we anticipate our revenues increasing and a continued reduction in our operating expenses. With that, I will now turn the call back over to Paul.

Thomas Stankovich: We ended the quarter with a networking capital of approximately $4 4 million, primarily due to cash and cash equivalents of $2 5 billion and $1 $6 million of accounts receivable and remain debt free on our balance sheet.

Thomas Stankovich: For the remainder of 2024, we anticipate our revenues increasing and a continued reduction in our operating expenses.

Paul F. Hickey: With that I will now turn the call back over to Paul.

Paul F. Hickey: Before we open the call for Q&A, it is important to reiterate, as both Tom and I have detailed, that we have and will continue to significantly reduce apronate expenses across all categories so we can invest in our growth initiatives, including the full launch of our lap and 2.0 flex. The swift and bold steps we have taken to restructure the company will help to ensure sustainability and scalability. We continue to prioritize investments, including marketing automation to support scalable lead acquisition, segmented consumer-centric messaging via an updated website for improved patient engagement, and a frictionless appointment scheduling system with qualified providers while further reducing lead generation costs.

Paul F. Hickey: Thanks, Tom.

Paul F. Hickey: Before we open the call for Q&A.

Paul F. Hickey: To reiterate as both Tom and I have detailed.

Speaker Change: That we have and will continue to significantly reduce operating expenses across all categories. So we can invest in our growth initiatives, including the full launch of our Latam to point out flex.

Speaker Change: The Swift and bold steps, we have taken to restructure the company will help to ensure sustainability and scalability.

Speaker Change: We continue to prioritize investments, including marketing automation to support Skirball lead acquisition.

Speaker Change: Segment of consumer centric messaging being an updated website for improve patient engagement and a frictionless appointment scheduling system with qualified providers, while further reducing lead generation costs.

Paul F. Hickey: Taken together, we expect to increase LATPAM procedures and ultimately revenue. We will continue to work with the Maxim group and aggressively search for and evaluate our M&A opportunities with the intention of expanding our portfolio that is differentiated from the competition with transformative technology. We provide a selection of safe, non-anatomy-changing, lifestyle-enhancing products that are an attractive alternative to pharmacological therapy or more invasive therapies. Lastly, we will continue to work with our world-class scientific advisory board to continue to execute our plan for success in a global market that is changing in a historic fashion to normalize safe and effective treatments for obesity. This concludes our prepared remarks. So now we'd like to open the call to your questions. Operator.

Speaker Change: Taken together, we expect to increase Latam procedures and ultimately revenue.

Speaker Change: We will continue to work with the Maxim group and aggressively search and evaluate our M&A opportunities with intention of expanding our portfolio that is differentiated from the competition with transformative technologies.

Speaker Change: Can you provide a selection of safe non anatomy changing lifestyle enhancing products that are attractive alternative to pharmacological therapy are more invasive therapies.

Speaker Change: Lastly, we will continue to work with our World class.

Speaker Change: Scientific Advisory Board to continue to execute our plan for success in a global market that is changing in a historic fashion to normalized safe and effective treatments for obesity.

Speaker Change: This concludes our prepared remarks, so now we'd like to open the call to your questions operator.

Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. If there are no questions, I would like to turn the conference back over to Paul Hickey for any closing remarks. Please go ahead.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced so withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Paul F. Hickey: We are on a path to profitability, having a restructured organization, focusing on increased shareholder value, and establishing a sustainable and scalable business. And we'll continue our high priority search for synergistic M&A opportunities while continuing the adoption of the Lapp Antipano Flex, which is projected to be a growth catalyst for the company. As always, I want to thank our employees, board members, customers, consultant advisors, suppliers, existing and new shareholders for your continued support of ReShape as we progress on our mission to become the premier physician-led weight loss company. I look forward to continuing to engage with our stakeholders, healthcare partners, and shareholders. Thank you all.

Paul F. Hickey: Seeing no questions I would like to turn the conference back over to Paul <unk> for any closing remarks. Please go ahead.

Operator: This conference has now concluded. Thank you for attending today's call. You may now disconnect.

Paul F. Hickey: Thank you.

Paul F. Hickey: We are on a path to profitability, having restructured organization focusing on increase shareholder value and establishing a sustainable and scalable business.

Paul F. Hickey: And we will continue our high priority search for synergistic M&A opportunities while continue the adoption of the <unk> flex is projected to be a growth catalyst for the company.

Paul F. Hickey: As always I want to thank our employees board members customers consultant advisors suppliers.

Paul F. Hickey: Existing and new shareholders for your continued support of reshape as we progress on our mission to become the Premier physician led weight loss company.

Paul F. Hickey: I look forward to continuing to engage with our stakeholders.

Paul F. Hickey: Care partners and shareholders. Thank you all.

Speaker Change: This conference has now concluded. Thank you for attending today's call you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].