Q2 2024 Venus Concept Inc Earnings Call

August 13, 2024

Speaker Change: [music].

Please standby good day, ladies and gentlemen, and welcome to the second quarter 2024 earnings Conference call for Venus concept, Inc. At this time, all participants have been placed in a listen only mode.

Operator: Please stand by. Good day, ladies and gentlemen, and welcome to the second quarter 2024 Earnings Conference Call for Venus Concepts, Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay. Before we begin, I would like to remind everyone that our remarks and responses to your questions may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factor section of our most recent 10-Q and our annual report on Form 10-K filed with the Securities and Exchange Commission.

Operator: Please stand by. Good day, ladies and gentlemen, and welcome to the second quarter 2024 earnings conference call for Venus Concepts Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay. Before we begin, I would like to remind everyone that our remarks and responses to your questions may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factor section of our most recent 10-Q and our annual report on Form 10-K filed with the Securities and Exchange Commission.

Please note that this conference call is being recorded and that's a recording will be available on the company's website for replay.

Operator: Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures.

Before we begin I would like to remind everyone that our remarks and responses to your questions may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including those identified in the risk factors section of <unk>.

Our most recent 10-Q and our annual report on Form 10-K filed with the Securities and Exchange Commission.

Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise.

This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures reconciliations to those non-GAAP financial measures to the most comparable measures calculated and presented an accord.

With GAAP are available in our earnings press release issued today on the Investor Relations portion of our website.

Speaker Change: I would now like to turn the call over to Mr. Rajiv de Silva Chief Executive Officer for Venus concept. Please go ahead Sir.

Operator: Reconciliations to those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in our Earnings Press Release issued today on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Rajiv Da Silva, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Operator: Reconciliations to those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in our Earnings Press Release issued today on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Rajiv Silva, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Speaker Change: Thank you operator, and welcome everyone to Venus Concept's second quarter 'twenty 'twenty four earnings conference call.

Rajiv Da Silva: Thank you, operator, and welcome everyone to Venus Concept's second quarter 2024 earnings conference call. I am joined on the call today by our Chief Financial Officer, Domenic Della Penna, and by our President and Chief Operating Officer, Dr. Hemanth Varghese. Let me start with an agenda of what we will cover during our prepared remarks.

Rajiv Silva: Thank you, operator, and welcome everyone to Venus Concept's second quarter 2024 earnings conference call. I am joined on the call today by our Chief Financial Officer, Domenic Della Penna, and by our President and Chief Operating Officer, Dr. Hemanth Varghese. Let me start with an agenda of what we will cover during our prepared remarks.

Speaker Change: I am joined on the call today by our Chief Financial Officer Domenic della Penna.

Speaker Change: And by our President and Chief operating Officer, Dr. Hemant Rockies.

Speaker Change: Let me start with an agenda of what we will call out during our prepared remarks.

Speaker Change: I will begin with a brief review of our second quarter results and operating developments in recent months.

Rajiv Da Silva: I will begin with a brief review of our second quarter results and operating developments in recent months. Hemanth will then share an update on our progress in several key operating areas. Following that, Domenic will provide you with an in-depth review of our second quarter financial results, as well as a balance sheet and financial condition at quarter end. Then we will open the call to your questions. With that agenda in mind, let's get started.

Rajiv Silva: I will begin with a brief review of our second quarter results and operating developments in recent months. Hemanth will then share an update on our progress in several key operating areas. Following that, Domenic will provide you with an in-depth review of our second quarter financial results, as well as a balance sheet and financial condition at quarter end. Then we will open the call to your questions. With that agenda in mind, let's get started.

Speaker Change: Yeah Man.

Speaker Change: So an update on our progress in several key operating areas.

Dominic: Following that Dominic.

Dominic: One year with an in depth review of our second quarter financial results as well as our balance sheet and financial condition at quarter end.

Speaker Change: Then we will open the call for your questions.

Speaker Change: With that agenda in mind, let's get started.

Dominic: As detailed in our press release issued today, we are pleased to deliver revenue for second quarter that modestly exceeded the expectations, we outlined on our first quarter earnings call.

Rajiv Da Silva: As detailed in our press release issued today, we are pleased to deliver revenue for the second quarter that modestly exceeded the expectations we outlined on our first quarter earnings call. While our total business results reflected a decrease of 17% on a year-over-year basis, we are encouraged by the continued improvement in the underlying trends in our business during the quarter, particularly in the U.S. Sales to U.S. customers posted only mid-single-digit

Rajiv Silva: As detailed in our press release issued today, we are pleased to deliver revenue for the second quarter that modestly exceeded the expectations we outlined on our first quarter earnings call. While our total business results reflected a decrease of 17% on a year-over-year basis, we are encouraged by the continued improvement in the underlying trends in our business during the quarter, particularly in the U.S. Sales to U.S. customers posted only mid-single-digit

Dominic: Well, our global business results reflect a decrease of 17% on a year over year basis were encourage by the continued improvement in the other.

Dominic: Trends in our business during the quarter.

Kelly: Hey, Kelly.

Kelly: The U S.

Kelly: Sales to U S customers will still only mid single digit declines year over year.

Kelly: Outside the U S revenue decreased 29% year over year.

Rajiv Da Silva: Outside the U.S., revenue decreased 29% year-over-year in the second quarter, reflecting impacts related to the strategic restructuring activities we executed last year. Additionally, our all-U.S. revenue results were impacted by fluctuations in ordering patterns from our new distribution partners in key international markets, as we had expected. While the business continues to be impacted by macroeconomic headwinds, which are pressuring the aesthetic sector as a whole, we are encouraged by the continued improvement in the underlying trends in our U.S. We believe this improvement represents further evidence that the strategy we've implemented to focus our resources on higher opportunity markets with the goal of enhancing the company's long-term growth and profitability profile is worthwhile.

Rajiv Silva: Outside the U.S., revenue decreased 29% year-over-year in the second quarter, reflecting impacts related to the strategic restructuring activities we executed last year. Additionally, our OUS revenue results were impacted by fluctuations in ordering patterns from our new distribution partners in key international markets, as we had expected. While the business continues to be impacted by macroeconomic headwinds, which are pressuring the aesthetic sector as a whole, we are encouraged by the continued improvement in the underlying trends in our U.S. economy.

Kelly: Current quarter, reflecting impacts related to the strategic restructuring activities, we executed last year.

Kelly: Additionally, our all U S revenue was also impacted by fluctuations in ordering patterns from our new distribution partners in key international markets as we had expected.

Kelly: While the business continues to be impacted by macroeconomic headwinds, which are pressuring the aesthetics sector as a whole I.

Kelly: We encourage by the continued improvement in the underlying trends in our U S business.

Rajiv Silva: We believe this improvement represents further evidence that the strategy we've implemented to focus our resources on higher opportunity markets with the goal of enhancing the company's long-term growth and profitability profile is working. That said, the operating environment remains challenging, customer financing pressures, higher interest rates, and tighter credit markets continue to impact customer systems adoption throughout our business. This is especially the case with high ASP systems deals, where time to close continues to lengthen.

Kelly: We believe this improvement is further evidenced that the strategies, we've implemented to focus our resources on higher opex in your market.

Kelly: The goal of enhancing the company's long term growth and profitability profile is working.

Kelly: That said the operating environment remains challenging.

Rajiv Da Silva: That said, the operating environment remains challenging; customer financing pressures, higher interest rates, and tighter credit markets continue to impact customer systems adoption throughout our business. This is especially the case with high ASP systems deals, where time to close continues to lengthen.

Kelly: Customer financing presses.

Kelly: Higher interest rates and tighter credit markets continued to impact customer systems adoption throughout our business.

Kelly: This is especially the case with high SP systems deals.

Linda: Time to close continues to Linda.

Linda: I am proud of our team's continued commitment to our strategy despite the challenging operating environment.

Rajiv Silva: I am proud of our team's continued commitment to our strategy despite the challenging operating environment. The positive energy and enthusiasm give me confidence that my expectation of continued solid execution and improving results over the balance of 2024 is appropriate. Before I turn the call over to Hemanth, I wanted to provide an update on some of the notable progress made in the second quarter with respect to three of our key strategic initiatives.

Rajiv Da Silva: I am proud of our team's continued commitment to our strategy despite the challenging operating environment. The positive energy and enthusiasm give me confidence that my expectation of continued solid execution and improving results over the balance of 2024 is appropriate. Before I turn the call over to Hemanth, I wanted to provide an update on a few areas of notable progress made in the second quarter with respect to three of our key strategic initiatives.

Linda: The positive energy and enthusiasm gives me confidence that my expectation for continued solid execution and improving results over the balance of play and plentiful is appropriate.

Speaker Change: Before I turn the call over to him I wanted to provide an update on a few areas of notable progress made in the second quarter with respect to see about key strategic initiatives.

Speaker Change: But.

Rajiv Silva: We remain focused on our strategic initiative to enhance the cash flow profile of the business and accelerate the path to long-term sustainable profitability and growth. Domenic will discuss a solid cash flow performance in Q2 later on the call, but I wanted to call out a few important highlights to underscore our recent progress on this front.

Rajiv Da Silva: We remain focused on our strategic initiative to enhance the cash flow profile of the business and accelerate the path to long-term sustainable profitability and growth. Domenic will discuss a solid cash flow performance in Q2 later on the call. But I wanted to call out a few important highlights to underscore our recent progress on the We achieved a 37% reduction in our cash used in operations year over year, which we view as particularly impressive given the continued headwinds to revenue growth that the aesthetic sector participants have faced over the last year.

Speaker Change: We remain focused on our strategic initiative to enhance the cash flow profile of the business and accelerate the path to long term sustainable profitability and growth.

Speaker Change: Dominic will discuss our solid cash flow performance in Q2 later on the call.

Speaker Change: But I wanted to call out a few important highlights to underscore our recent progress on this front.

Dominic: We achieved a 37% reduction in our cash used in operations year over year.

Rajiv Silva: We achieved a 37% reduction in our cash use in operations year over year, which we view as particularly impressive given the continued headwinds to revenue growth that the aesthetic sector participants have faced over the last year. We continue to believe that this performance represents the clearest evidence that we are making progress with respect to this important strategic initiative. As discussed on our first quarter call, we announced multiple transactions reflecting material progress towards our strategic initiative to restructure the company's debt obligations and secure bridge financing. On April 23rd, one of our largest lenders and investors, Madrin Asset Management, purchased the company's Main Street Lending Program loan, or MSLP loan, from City National Bank of Florida for an undisclosed amount.

Dominic: Which we view as particularly impressive given the continued headwinds to revenue growth, but as that sector participants are facing over the last year.

Dominic: We continue to believe that this performance represents the clearest evidence that we are making progress with respect to this important strategic initiative.

Rajiv Da Silva: We continue to believe that this performance represents the clearest evidence that we are making progress with respect to this important strategic initiative. As discussed on our first quarter call, we announced multiple transactions reflecting material progress towards our strategic initiative to restructure the company's debt obligation through Secure Bridge Finance.

Dominic: Second.

Dominic: As discussed on our first quarter call, we announced multiple transactions, reflecting material progress towards our strategic initiative to restructure the company's debt obligations and secured financing.

Dominic: On April 23rd one of our largest lenders and investors Madrian asset management.

Rajiv Da Silva: On April 23rd, one of our largest lenders and investors, Madrin Asset Management, purchased the company's Main Street Lending Program loan, or MSLP loan, from City National Bank of Florida for an undisclosed amount. Following the close of the MSLP loan purchase, we entered into a loan and security agreement with Maverin for an aggregate principal amount of up to $5 million in debt financing to support our near-term liquidity requirements. And on May 28th, we announced the debt-to-equity exchange, which resulted in a net reduction in outstanding borrowings of $35 million.

Speaker Change: The company's main street lending program loan Oh, I myself belong.

Speaker Change: City National Bank of Florida for an undisclosed amount.

Rajiv Silva: Following the close of the MSLP loan purchase, we entered into a loan and security agreement with Madrin for an aggregate principal amount of up to $5 million in debt financing to support our near-term liquidity requirements. And on May 28, we announced the Debt-to-Equity Exchange, which resulted in a net reduction in outstanding borrowings of $35 million. These transactions facilitated a 39% reduction in our total debt outstanding for the first half of 2024 to approximately $46 million as of June 30, compared to $74.9 million as of December 31, 2023.

Speaker Change: Following the close of the M. S healthy loan purchase we entered into a loan and security agreement with Madden for an aggregate principal amount of up to $5 million in debt financing to support our near term liquidity requirements.

Speaker Change: And on May 28, we announced a debt to equity exchange, which resulted in a net reduction in outstanding borrowings of $35 million.

Speaker Change: These transactions facilitated at 39% reduction in our total debt outstanding over the first half of 'twenty 'twenty four.

Rajiv Da Silva: These transactions facilitated a 39% reduction in our total debt outstanding over the first half of 2024 to approximately $46 million as of June 30, compared to $74.9 million as of December 31, 2023. We are pleased that Madwin has demonstrated further commitment to Venus Concept's long-term prospects with this transaction and look forward to our continued engagement with them as we execute our strategic plan. Third, on June 6th, we announced that we were notified by the NASDAQ stock market that Venus Concept has regained continued listing compliance.

The monthly $46 million as of June 30th compared to $74 9 million at December 31st 2023.

Speaker Change: We're pleased that <unk> has demonstrated further commitment to Venus concept's long term prospects with these transactions.

Rajiv Silva: We are pleased that Madwin has demonstrated further commitment to Venus Concept's long-term prospects with these transactions and look forward to our continued engagement with them as we execute our strategic plan. Third, on June 6th, we announced that we were notified by the NASDAQ Stock Market that Venus Concept has regained continued listing compliance. The debt-to-equity transaction with Madrin served to bring the company above the minimum stockholders' equity requirements. I would now like to turn the call over to Dr. Hemanth Varghese, who will share an update on recent progress related to our other initiatives. Amen.

Speaker Change: Look forward to our continued engagement with them as we execute our strategic plan.

Speaker Change: On June 6th.

Speaker Change: Now that'd be notified we were notified by the NASDAQ stock market and Venus concept has regained continued listing compliance.

Rajiv Da Silva: The debt-to-equity transaction with Madrin served to bring the company above the minimum stockholders' equity requirements. I would now like to turn the call over to Dr. Hemanth Varghese, who will share an update on recent progress related to our other initiatives. Amen.

Speaker Change: The debt to equity transaction with Madden.

Speaker Change: The company above the minimum stockholders' equity requirement.

Speaker Change: I would now like to turn the call over to Dr. Hinrich luggage was sound and update on recent progress relate.

Speaker Change: Related to our other initiatives.

Speaker Change: Hey man.

Hinrich: Thanks Rajiv.

Hemanth Varghese: Thanks Rajiv. As outlined in our last earnings call, we are focused in 2024 on our restructuring programs as well as our commercial strategy, customer engagement, product development, and regulatory initiatives. Let me share a little color on our recent progress in each of these areas. First, our restructuring, cost reduction, and Cash Management Initiatives continue to progress well, and our focus on protecting near-term cash runway has been productive. Specifically, we delivered a 13% reduction in our operating expenses year-over-year, reflecting the significant restructuring activities we've executed as part of our corporate turnaround strategy over the last 18 months.

Speaker Change: As outlined on our last earnings call. We were focused in 'twenty 'twenty four on our restructuring programs as well as our commercial strategy customer engagement product development and regulatory initiatives, let me share a little color on our recent progress in each of these areas.

Hemanth Varghese: As outlined on our last earnings call, we were focused in 2024 on our restructuring programs as well as our commercial strategy, customer engagement, product development, and regulatory initiatives. Let me share a little color on our recent progress in each of these areas. First, restructuring, cost reduction, and Cash Management Initiatives continue to progress well, and our focus on protecting near-term cash runway has been productive. Specifically, we delivered a 13% reduction in our operating expenses year-over-year, reflecting the significant restructuring activities we've executed as part of our corporate turnaround strategy over the last 18 months.

Speaker Change: First our restructuring.

Speaker Change: Cost reduction and.

Speaker Change: And cash management initiatives continue to progress well and our focus on protecting near term cash runway has been productive.

Speaker Change: Specifically, we delivered a 13% reduction in our operating expenses year over year, reflecting the significant restructuring activities, we've executed as part of our corporate turnaround strategy over the last 18 months.

Hemanth Varghese: As part of this effort, it's important to understand that we are also focused on allocating our resources to high-priority strategic initiatives that will support our future growth. This includes our efforts to advance certain new product pipeline projects, such as the regulatory clearance and commercialization of our next body contouring system in early 2025. Our strategic focus on accelerating the company's path to cash flow breakeven and sustaining operations has resulted in difficult decisions, like pursuing the highly compelling R&D initiatives, including our AAMI robotics platform. We continue to believe that our AAMI robotics platform has the potential to revolutionize aesthetic medical treatment paradigms.

Hemanth Varghese: As part of this effort, it's important to understand that we are also focused on allocating our resources to high-priority strategic initiatives that will support our future growth. This includes our efforts to advance certain new product pipeline projects, such as the regulatory clearance and commercialization of our next body contouring system in early 2025. Our strategic focus on accelerating the company's path to cash flow breakeven and sustaining operations has resulted in difficult decisions, like delaying the highly compelling R&D initiatives, including our AIME robotics platform. We continue to believe that our AIME robotics platform has the potential to revolutionize the aesthetic medical treatment paradigm.

Speaker Change: As part of this effort it's important to understand that we are also focused on allocating our resources to high priority strategic initiatives that will support our future growth.

Speaker Change: This includes our efforts to advance certain new product our product pipeline projects.

Speaker Change: Such as the regulatory clearance and commercialization of our next body contouring system in early 2025.

Our strategic focus on accelerating the company's path to cash flow breakeven and sustaining operations has resulted in difficult decisions.

Speaker Change: I'd like to delay the highly compelling R&D initiatives.

Speaker Change: <unk>, our A&D robotics platform.

Speaker Change: We continue to believe that our Amy robotics platform has the potential to revolutionize aesthetic medical treatment paradigms.

Hemanth Varghese: The AIME technology will be critical to maximizing the synergy between our well-established medical aesthetics business and our pioneering robotics R&D capabilities. As we continue to stabilize the core business and enhance our overall financial security and investment flexibility, we look forward to returning to an expanded R&D program and new product development strategy, which will be an essential component of our long-term revenue growth. Second, our efforts to rationalize our international infrastructure, reduce costs, and simplify the organization continue to progress as well.

Hemanth Varghese: The AIME technology will be critical to maximizing the synergy between our well-established medical aesthetics business and our pioneering robotics R&D capability. As we continue to stabilize the core business and enhance our overall financial security and investment flexibility, we look forward to returning to an expanded R&D program and new product development strategy, which will be an essential component of our long-term revenue growth. Second, our efforts to rationalize our international infrastructure, reduce costs, and simplify the organization continue to progress as well.

Speaker Change: Amy technology will be critical to maximizing the synergy between our well established medical aesthetics business and our pioneering robotics R&D capability.

Speaker Change: As we continue to stabilize the core business and enhance our overall financial security and investment flexibility. We look forward to returning to an expanded R&D program and new product development strategy, which will be an essential component of our long term revenue growth.

Speaker Change: Second our efforts to rationalize our international infrastructure reduce costs and simplify the organization continues to progress as well.

Hemanth Varghese: As part of this initiative, we continue to engage with existing and several new distribution partners to align our new international strategy. Importantly, we remain on track to be substantially completed with our international repositioning in the coming months and ready to return to growth outside the U.S. in 2025 during the second quarter. We continue to drive progress with respect to our efforts to secure new regulatory clearances and execute successful commercial launches. Specifically, we secured TGA clearance in Australia for our Venus Versa Pro on April 3rd.

Speaker Change: As part of this initiative, we continue to engage with existing and several new distribution partners to align our new international strategy.

Speaker Change: Importantly, we remain on track to be substantially completed with our international repositioning in the coming months and ready to return to growth outside the U S. In 2025.

Speaker Change: Third.

Speaker Change: During the second quarter, we continued to drive progress with respect to our efforts to secure new regulatory clearances and execute successful commercial launches.

Speaker Change: <unk>, we secured T G a clearance in Australia for our munis versus a pro on April 3rd the initial launch in this important global market is progressing favorably.

Hemanth Varghese: The initial launch in this important global market is progressing favorably. In June, we announced the receipt of a medical device license to market Venus VersaPro in Canada. Venus Versa Pro continues to receive positive feedback from customers regarding its multimodal system capabilities and best-in-class skin treatments. We're pleased with the positive early market response from our company-wide rebranding initiative, Venus AI, and the encouraging feedback from physician participants in our Nextsthetics program. We've been pleased to see a significant increase in the popularity and attendance at our next Aesthetic events, which, as a reminder, bring together our network of aesthetic leaders and practitioners to learn about the science behind Venus AI Technologies and our Best-in-Class Practice Development Program.

Speaker Change: In June we announced the receipt of a medical device license to market Phoenix versus pro in Canada.

Speaker Change: Venus versus a pro continues to receive positive feedback from customers regarding its multimodal system capabilities and best in class skin treatments.

Speaker Change: Fourth.

Speaker Change: We're pleased with positive early market response from our company wide rebranding initiative venous AI.

Hemanth Varghese: We're pleased with the positive early market response from our company-wide rebranding initiative, Venus AI, and the encouraging feedback from physician participants in our Nextsthetics program. We've been pleased to see a significant increase in the popularity and attendance at our next Aesthetic events, which, as a reminder, bring together our network of Aesthetic leaders and practitioners to learn about the science behind Venus AI technologies and our Best-in-Class Practice The Next Aesthetics program represents a great example of how we are enhancing our focus on physician education and practice enhancement by empowering professionals in the aesthetics field with the knowledge, tools, and support they need to grow their business. Since launching the first event in March, we've hosted thousands of registrants, including our largest gathering to date, which was held in Houston, Texas, in June.

And the encouraging feedback from physician participants in our next Fedex programs.

Speaker Change: We've been pleased to see a significant increase in the popularity and attendance at our next set of events, which as a reminder, bring together our network of aesthetic leaders and practitioners to learn about the science.

A hygienist AI technologies, and our best in class practice development programs.

Hemanth Varghese: The Next Aesthetics program represents a great example of how we are enhancing our focus on physician education and practice enhancement by empowering professionals in the aesthetics field with the knowledge, tools, and support they need to grow their business. Since launching the first event in March, we've hosted thousands of registrants, including our largest gathering to date, which was held in Houston, Texas, in June. Looking ahead to the remainder of 2024, Nexthetic events will continue to expand across the United States with upcoming events in Phoenix, New York City, Atlanta, Dallas, and Minneapolis. With that, I will turn the call over to Domenic for a review of our second quarter financial results and balance sheet at quarter end. Domenic?

Speaker Change: <unk> program represents a great example of how we are enhancing our focus on physician education and practice enhancement by empowering professionals in aesthetics field with the knowledge tools and support they need to grow their businesses since.

Speaker Change: Since launching the first event in March we hosted thousands of registrants, including our largest gathering to date, which was held in Houston, Texas in June.

Domenic Penna: Looking ahead to the remainder of 2024, Nexthetic events will continue to expand across the United States with upcoming events in Phoenix, New York City, Atlanta, Dallas, and Minneapolis. With that, I will turn the call over to Domenic for a review of our second quarter financial results and balance sheet at quarter end. Thanks, Hemanth. For the avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the second quarter of 2024 on a gap basis, and all growth-related items are on a year-over-year basis.

Speaker Change: Looking ahead to the remainder of 2020 for next set of events will continue to expand across the United States without cutting events in Phoenix, New York City, Atlanta, Dallas and Minneapolis.

Domenic Penna: We've reported total revenue of $16.6 million, down $3.5 million, or 17% year-over-year. The decrease in total revenue by region was driven by a 29% decrease year-over-year in international revenue and a 5% decrease year-over-year in United States revenue.

Dominic: With that let me turn the call over to Dominic for a review of our second quarter financial results and balance sheet at quarter end.

Dominic: Thanks payment for.

Domenic Penna: The decrease in total revenue by product category was driven by a 30% decrease in products systems revenue, and a 4% decrease in services revenue. The decrease was offset partially by a 5% increase in lease revenue and a 2% increase in products other revenue. The percentage of total systems revenue derived from the company's internal lease programs, Venus Prime, and our legacy subscription model was approximately 34% in the second quarter of 2024 compared to 26% in the prior year period.

Domenic Penna: For the avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the second quarter of 2024 on a gap basis, and all growth-related items are on a year-over-year basis. We've reported total revenue of $16.6 million, down $3.5 million, or 17% year-over-year. The decrease in total revenue by region was driven by a 29% decrease year over year in international revenue and a 5% decrease year over year in United States revenue.

Dominic: For the avoidance of doubt unless otherwise noted my prepared remarks will focus on the company's reported results for the second quarter of 2024 on a GAAP basis, and all growth related items are on a year over year basis.

Dominic: We reported total revenue of $16 6 million down $3 5 million or 17% year over year did.

Dominic: The decrease in total revenue by region was driven by a 29% decrease year over year and international revenue and a 5% decrease year over year in United States revenue.

Dominic: The decrease in total revenue byproduct category was driven by a 30% decrease in products systems revenue.

Dominic: A 4% decrease in services revenue.

Dominic: The decrease was offset partially by a 5% increase in lease revenue and a 2% increase in products other revenue.

Dominic: The percentage of total systems revenue derived from the company's internal lease programs venous prime and our legacy subscription model was approximately 34% in the second quarter of 2024 compared to 26% in the prior year period.

Domenic Penna: Note, this represents a change in the trend demonstrated over the last 18 months. Our focus on prioritizing cash system sales has resulted in the overall percentage of total systems revenue derived from our internal lease programs declined from approximately 42% in fiscal year 2022 to 33% in fiscal year 2023, to a low of 25% in Q1 2024. As discussed in our recent investor calls, this strategic initiative has been a key driver of the significant improvements in our cash generation given the higher quality of revenue cash system sales represent. For avoidance of doubt, this strategy remains a priority for the company.

Note. This represents a change in the trend demonstrated over the last 18 months our focus on prioritizing cash system sales has resulted in the overall percentage of total systems revenue derived from our internal lease programs declined from approximately 42% in fiscal year 2022.

Domenic Penna: Our focus on prioritizing cash system sales has resulted in the overall percentage of total systems revenue derived from our internal lease programs declining from approximately 42% in fiscal year 2022 to 33% in fiscal year 2023, to a low of 25% in Q1 2024. As discussed in our recent investor calls, this strategic initiative has been a key driver of the significant improvements in our cash generation given the higher quality of revenue cash system sales represent. For avoidance of doubt, this strategy remains a priority for the company.

Dominic: 2% to 33% in fiscal year 2023 to a low of 25% in Q1 2024.

Dominic: As discussed in our recent Investor calls this strategic initiative has been a key driver of the significant improvements in our cash generation given the higher quality of revenue cash system sales represent.

Dominic: For avoidance of doubt this strategy remains a priority for the company.

Domenic Penna: We continue to prioritize cash system sales and believe the appropriate mix of our system sales revenue should be in the 70% cash, 30% lease mix going forward. That said, it is important to realize that the company's lease revenue profile in 2024 will be very different and materially higher quality than at any time in the company's history. Specifically, in January, we introduced Venus Prime, our structured in-house financing program which replaced the legacy subscription program for new customers in North America.

Dominic: We continue to prioritize cash system sales and believe the appropriate mix of our system sales revenue to be in the 70% cash 30% lease mix going forward.

Dominic: That said it is important to realize that the company's lease revenue profile in 'twenty 'twenty four is very different and materially higher quality than at any time in the company's history.

Dominic: Specifically in January we introduced Venus Prime are structured in house financing program, which replaced the legacy subscription program for new customers in North America.

Domenic Penna: Venus Prime has been very well received in the marketplace and has given Venus Concept a competitive differentiator during this challenging capital equipment environment. In the current macro environment, third-party lending has tightened, and so has access to capital. With this in mind, the ability to offer Venus Prime represents a valuable option to help with new system adoption.

Dominic: <unk> Prime has been very well received in the marketplace and is given Venus concept a competitive differentiator journey.

Dominic: In the current macro environment third party lending has tightened and so has access to capital.

Domenic Penna: With this in mind, the ability to offer Venus Prime represents a valuable option to help with new system adoption. Importantly, the Venus Prime program is characterized by adherence to strict credit screening practices, a tiered risk assessment for each customer, and consistent monitoring of payment trends, which has resulted in significantly lower bad debt expense versus our legacy subscription program. While we continue to favor cash system sales, with a target of roughly 70% of total systems revenue coming from cash sales, we are very pleased to have the unique lever of our Venus Prime program as a key differentiator from our competitors.

Dominic: With this in mind the ability to offer venous prime represents a valuable option to help with new system adoption.

Dominic: Importantly, the Venus Prime program is characterized by adherence to strict credit screening practices.

Domenic Penna: Importantly, the Venus Prime program is characterized by adherence to strict credit screening practices, a tiered risk assessment for each customer, and consistent monitoring of payment trends, which has resulted in significantly lower bad debt expense versus our legacy subscription program. While we continue to favor cash system sales, with a target of roughly 70% of total systems revenue coming from cash sales, we are very pleased to have the unique lever of our Venus Prime program as a key differentiator from our competitors.

Dominic: <unk> risk assessment for each customer and consistent monitoring of payment trends, which has resulted in significantly lower bad debt expense versus our legs legacy subscription program.

Dominic: While we continue to favor cash system sales with a target of roughly 70% of total systems revenue coming from cash sales.

Dominic: We are very pleased to have the unique lever of our venous Prime program as a key differentiator from our competitors.

Dominic: Turning to a review of our second quarter financial results across the rest of the P&L.

Domenic Penna: Turning to a review of our second quarter financial results across the rest of the P&L, gross profit decreased $2.4 million, or 17%, to $11.8 million. The change in gross profit was primarily due to a decrease in revenue in international markets driven by the accelerated exit from unprofitable direct markets and the effects of tighter third-party lending practices, which negatively impacted capital equipment sales in both the U.S. and international markets. Gross margin was 71.5% of revenue compared to 70.8% of revenue for the second quarter of 2023. While margin management and the exit from unprofitable direct markets are the primary contributors to this improvement, the company has also improved margins on its artist systems through manufacturing efficiencies.

Dominic: Gross profit decreased $2 4 million or 17% to $11 8 million. The change in gross profit was primarily due to a decrease in revenue in international markets driven by the accelerated exit from unprofitable direct markets and the effects of tighter third party lending practices, which.

Dominic: <unk> impacted capital equipment sales in both the U S and international markets.

Domenic Penna: Gross margin was 71.5% of revenue compared to 70.8% of revenue for the second quarter of 2023. While margin management and the exit from unprofitable direct markets are the primary contributors to this improvement, the company has also improved margins on its artist systems through manufacturing efficiencies. Total operating expenses decreased $2.5 million, or 13%, to $17.4 million.

Dominic: Gross margin was 71.15% of revenue compared to 78% of revenue for the second quarter of 2023.

Dominic: While margin management and the exit from unprofitable direct markets are the primary contributors of this improvement. The company has also improved margins on our artist systems through manufacturing efficiencies.

Domenic Penna: Total operating expenses decreased $2.5 million, or 13%, to $17.4 million. The change in total operating expenses was driven primarily by a decrease of 1.3 million, or 16%, in selling and marketing expenses, and a decrease of 1 million, or 10%, in general and administrative expenses. Second quarter of 2024 GAAP general and administrative expenses include approximately $0.2 million of costs related to restructuring activities designed to improve the company's operations and cost structure, compared to approximately $0.4 million for the second quarter of 2023.

Dominic: Total operating expenses decreased $2 5 million or 13% to $17 4 million.

Domenic Penna: The change in total operating expenses was driven primarily by a decrease of 1.3 million, or 16%, in selling and marketing expenses and a decrease of 1 million, or 10%, in general and administrative expenses. The second quarter of 2024 GAAP general and administrative expenses include approximately $0.2 million of costs related to restructuring activities designed to improve the company's operations and cost structure, compared to approximately $0.4 million for the second quarter of 2023. The total operating loss was $5.6 million, down $0.2 million, or 3% year over year.

Dominic: The change in total operating expenses was driven primarily by a decrease of $1 3 million or 16% in selling and marketing expenses.

Dominic: A decrease of 1 million or 10% in general and administrative expenses.

Dominic: Second quarter of 2024, GAAP General and administrative expenses include approximately <unk> 2 million of costs related to restructuring activities designed to improve the company's operations and cost structure.

Dominic: Impaired to approximately 0.4 million for the second quarter of 2023.

Dominic: The total operating loss was $5 6 million down 0.2 million or 3% year over year.

Domenic Penna: The total operating loss was $5.6 million, down $0.2 million, or 3% year over year. Net interest and other expenses were $14.1 million compared to income of $1.4 million in the second quarter of 2023. The year-over-year change in net interest and other expenses was driven primarily by a $10.9 million non-cash pre-tax loss on debt extinguishment due to the extinguishment of debt as a result of the Debt-to-Equity Exchange transaction with Madren in May 2024.

Domenic Penna: Net interest and other expenses were $14.1 million compared to income of $1.4 million in the second quarter of 2023. The year-over-year change in net interest and other expenses was driven primarily by a $10.9 million non-cash pre-tax loss on debt extinguishment due to the extinguishment of debt as a result of the debt-to-equity exchange transaction with Madren in May 2024. The increase in second quarter net interest and other expenses was also driven by higher interest expense on outstanding borrowings and a non-cash foreign exchange loss of $0.8 million compared to a non-cash gain of $0.2 million in the prior year period.

Dominic: Net interest and other expenses were $14 1 million compared to income of $1 4 million in the second quarter of 2023, the year over year change in net interest and other expenses was driven primarily by a $10 9 million noncash pretax loss on debt extinguishment due to the extinguishment.

Net debt as a result of the debt to equity exchange transaction with imagine and May 2020 for the.

Domenic Penna: The increase in second quarter net interest and other expenses was also driven by higher interest expense on outstanding borrowings and a non-cash foreign exchange loss of $0.8 million compared to a non-cash gain of $0.2 million in the prior year period. The net loss attributable to stockholders for the second quarter of 2024 was $20 million, or $3.05 per share, compared to a net loss of $7.4 million, or $1.35 per share, for the second quarter of 2023. Adjusted EBITDA losses for the second quarter of 2024 increased 4% year-over-year to $4.1 million.

Dominic: The increase in second quarter net interest and other expenses was also driven by higher interest expense on our outstanding borrowings and a non cash foreign exchange loss of zero point $8 million compared to a noncash gain of 0.2 million in the prior year period.

Domenic Penna: Net loss attributable to stockholders for the second quarter of 2024 was $20 million, or $3.05 per share, compared to a net loss of $7.4 million, or $1.35 per share, for the second quarter of 2023. Adjusted EBITDA loss for the second quarter of 2024 increased 4% year-over-year to $4.1 million.

Dominic: Net loss attributable to stockholders for the second quarter of 2024 was $20 million or $3 <unk> per share compared to net loss of $7 4 million or <unk> dollars 35 per share for the second quarter of 2023.

Dominic: Adjusted EBITDA loss for the second quarter of 2024 increased 4% year over year to $4 1 million.

Domenic Penna: As a reminder, we have provided a full reconciliation of our GAAP net loss to adjusted EBITDA loss in our earnings press release. Turning to the balance sheet. As of June 2024, the company had cash and cash equivalents of $5.7 million and total debt obligations of approximately $46 million, compared to $5.4 million and $74.9 million, respectively, as of December 31, 2023. Cash used in operations for the three months ended June 30th was $1.3 million, a 37% decrease in cash use year over year.

Dominic: As a reminder, we have provided a full reconciliation of our GAAP net loss to adjusted EBITDA loss in our earnings press release.

Dominic: Turning to the balance sheet.

Dominic: As of June 2024, the company had cash and cash equivalents of $5 7 million and total debt obligations of approximately $46 million compared to $5 4 million and $74 9 million respectively. As of December 31, 2023.

Dominic: Cash used in operations for the three months ended June 30th was $1 3 million.

Speaker Change: A 37% decrease in cash used year over year, we are very proud of the continued improvement in reducing our cash used in operations. Despite the challenging operating environment.

Domenic Penna: We are very proud of the continued improvement in reducing our cash used in operations despite the challenging operating environment. Specifically, we delivered a 47% reduction in cash used in operations over the first six months of 2024, continuing the strong performance towards this important strategic initiative in fiscal year 2023 when we reduced our cash used in operations by 52%. With respect to the year over year decrease in cash used in operations during the second quarter, the largest driver of change was strong working capital performance, with more than $3.8 million of cash generated from working capital in the period.

Speaker Change: Specifically, we have delivered a 47% reduction in cash used in operations over the first six months of 2024.

Speaker Change: Continuing the strong performance towards this important strategic initiatives in fiscal year 2023, when we reduced our cash used in operations by 52%.

Speaker Change: With respect to the euro year over year decrease in cash used in operations during the second quarter. The largest driver of change was strong working capital performance with more than $3 8 million of cash generated from working capital in the period.

Speaker Change: Well multiple items are contributing to our working capital improvement.

Domenic Penna: While multiple items are contributing to our working capital improvement, we are particularly proud of the notable reduction in cash tied up in accounts receivable. Our efforts to enhance the quality of our internal lease programs, specifically the enhanced credit profile of customers in our Venus Prime program, have resulted in better collections and lower bad debt expense. We remain intently focused on further enhancement of the cash flow profile of our business and believe we have the right strategy to build the requisite foundation to support our growth and profitability goals in the year ahead.

Speaker Change: We are particularly proud of the notable reduction in cash tied up in accounts receivable our efforts to enhance the quality of our internal lease programs specifically the enhanced credit profile of customers in our venous Prime program has resulted in better collections and lower bad debt expense.

Speaker Change: We remain intently focused on further enhancement of the cash flow profile of our business and believe we have the right strategy to build the requisite foundation to support our growth and profitability goals in the year to come.

Domenic Penna: As outlined in our press release, given the company's active dialogue with its existing lender and investors and the ongoing evaluation of strategic alternatives with various interested parties to maximize shareholder value, the company is not providing full-year 2024 financial guidance at this time. However, for modeling purposes, the company expects total revenue for the three months ending September 30, 2024, of at least $17 million. With that, I'll turn the call over to the operator to open the call for your questions. Operator?

Domenic Penna: As outlined in our press release, given the company's active dialogue with its existing lender and investors and the ongoing evaluation of strategic alternatives with various interested parties to maximize shareholder value, the company is not providing full-year 2024 financial guidance at this time. However, for modeling purposes, the company expects total revenue for the three months ending September 30th, 2024 of at least $17 million. With that, I'll turn the call over to the operator to open the call for your questions. Operator?

Speaker Change: As outlined in our press release, given the company's active dialogue with our existing lender and.

Operator: Please note that this conference call is being recorded and that the recording will be available on the company's website for replay. Before we begin, I would like to remind everyone that our remarks and responses to your questions may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the risk factor section of our most recent 10Q and our annual report on form 10K filed with the Securities and Exchange Commission.

Speaker Change: And investors in the ongoing evaluation of strategic alternatives with various interested parties to maximize shareholder value. The company is not providing full year 2024 financial guidance at this time.

Speaker Change: For modeling purposes, the company expects total revenue for the three months ending September 30th 2024 of at least 17 million.

Speaker Change: With that I'll turn the call over to the operator to open the call for your questions operator.

Speaker Change: Thank you.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 to ask a question. The first question is from Marie Thibault from BTIG. Please go ahead.

Speaker Change: If he would like to ask a question. Please press star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your technology to reach our equipment again that is star one to ask a question.

Operator: Again, that is Star 1 to ask a question. The first question is from Marie Thibault from BTIG, please go ahead. Hi, good morning. Thanks for taking the questions. Good morning, Marie. Hey, good morning.

Operator: This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAP. We generally refer to these as non-GAP financial measures. Reconciliation to those non-GAP financial measures to the most comparable measures calculated and presented in accordance with GAP are available in our earnings press release issue today on the investor relations portion of our website.

Speaker Change: The first question is from Mary T. Both I'm B T. I G. Please go ahead.

Marie Thibault: Hi, good morning. Thanks for taking the question.

Speaker Change: Hi, good morning, Thanks for taking the questions.

Marie Thibault: I wanted to ask my first question here on the macroeconomic outlook. It looks like U.S. revenue certainly is stabilizing despite some of the longer selling cycles, and I wondered if that was sort of the stable level we are at now, if that's something that you think is relatively sustainable going forward. And then, on OUS, there was mention of ordering patterns with the new distributors, new distribution partners. I was wondering how long that will take to sort of settle into a routine if you could just kind of elaborate on what you meant by some of those ordering patterns.

Good morning, Larry.

Speaker Change: Hey, Good morning wanted to ask my first question here on the macroeconomic outlook you know it looks like U S. Revenue certainly is stabilizing despite some of the longer selling.

Rajiv Silva: I wanted to ask my first question here on the macroeconomic outlook. It looks like U.S. revenue certainly is stabilizing despite some of the longer selling cycles, and I wondered if that was sort of the stable level we are at now, if that's something that you think is relatively sustainable going forward. And then, on OUS, there was mention of ordering patterns with the new distributors, new distribution partners. I'm wondering how long that will take to sort of settle into a routine, if you could just kind of elaborate on what you meant by some of those ordering patterns.

Speaker Change: Selling cycles and I Wonder if that was you know a sort of a stable level. We are at now is that something that you think is relatively sustainable going forward and then second part there on the O U S. A there was mention of ordering patterns with the new distributors.

Rajiv D'Silva: I would now like to turn the call over to Mr. Rajiv D'Silva, Chief Executive Officer for Venus Concept. Please go ahead, sir. Thank you, Operator, and welcome everyone to Venus Concept's second quarter, 2024 earnings conference call. I am joined on the call today by Chief Financial Officer, Dominic Della Penna, and by our President and Chief Operating Officer Dr. Hemant Varghis. Let me start with an agenda of what we will cover during our prepared remarks.

Rajiv D'Silva: I will begin with a brief review of our second quarter results and operating developments in recent months. Hemant will then share an update on our progress in several key operating areas. Following that, Dominic will provide you with an in-depth review of our second quarter financial results, as well as our balance sheet and financial condition at quarter end. Then we will open the call for your questions.

Speaker Change: Distribution partners wondering how long that will take to sort of settle into a routine. If you can just kind of.

Speaker Change: You know I'll elaborate on what you meant by some of those ordering patterns.

Rajiv Da Silva: Marie, as you pointed out, we are encouraged by the performance of U.S. business. It is declining at a much lower rate and approaching a point of stability. We are cautiously optimistic as we look into the back half of the year that we should be getting to a point where it is flattish to growing versus last year. I think that some of that is, I think the benefit of our very diverse portfolio because, as you know, we have products that span a full spectrum of different types of procedures, different price points, and that diversity is certainly likely helping us in this environment despite the tight credit environment, and obviously, So, that's my view on the U.S., and Hemanth can probably add to it when I'm done.

Speaker Change: Sure.

Rajiv Silva: Sure. Marie, look, I think, as you pointed out, I think, you know, we are encouraged by the performance of U.S. business. And it is, you know, declining at a much lower rate and, you know, approaching a point of stability. And we are, you know, cautiously optimistic as we look into the back half of the year, that we should be getting to a point where it is, you know, flattish to growing versus last year.

Speaker Change: I think as you pointed out I think you know we are encouraged by the.

Speaker Change: But the performance of the U S business.

It is.

Speaker Change: Declining at a much lower rate and putting a point of stability and we are.

Speaker Change: And are cautiously optimistic as we look into the back half of the year that we should be getting to a point ways, you know flattish to growing versus last year.

Speaker Change: I think that some of that is in the benefit of a very diverse portfolio because as you know we have.

Rajiv Silva: I think that some of that is, I think, the benefit of our very diverse portfolio, because, as you know, we have products that span a full spectrum of different types of procedures and different price points. And that diversity is certainly helping us in this environment, despite the tight credit environment. And obviously, our Venus Prime program is also helpful because Venus Prime probably plays more of a role in the U.S. than most other markets. So, that's my view on the U.S., and Hemanth can probably add to it when I'm done.

Speaker Change: Products that span the full spectrum of different types of procedures different price points.

Rajiv D'Silva: With that agenda in mind, let's get started. As detailed in our press release issue today, we are pleased to deliver revenue for second quarter that modestly exceeded the expectations we outlined on our first quarter earnings call. While our total business results reflected decrease of 17% on a year-to-year basis, we are encouraged by the continued improvement in the online trends in our business during the quarter, particularly in the US. Sales US customers hosted only mid-single-digit declines year-over-year.

And that diversity is certainly a likely helping us.

Speaker Change: In this in this environment despite the.

Speaker Change: Right.

Speaker Change: The credit environment.

Brian: Environment, and obviously that would be the prime program. That's also helpful. Because I mean, it's Brian publically smoke or all in the U S and there most of the markets.

Speaker Change: So the the view on the U S and humans can probably add to it whenever when I'm done.

Rajiv Da Silva: On all U.S. markets, we made great progress in winding down our unprofitable subs, and then the process of signing on new distributors has taken time, and probably intentionally so because, you know, what we didn't want to do was just sign up a bunch of distributors and start selling. We wanted to make sure we got the right distribution partners and the right terms in place, so that has gone on over the course of the last few months.

Rajiv Silva: On the all-U.S. markets, we made great progress in winding down our unprofitable subs, and then the process of signing on new distributors has taken time, and probably intentionally so, because what we didn't want to do was just sign up a bunch of distributors and start selling. We wanted to make sure we got the right distribution partners, and the right terms in place. So, that has gone on over the course of the last few months.

Speaker Change: All U S markets.

Speaker Change: We made great progress in winding down our.

Speaker Change: Subs are.

Speaker Change: And then the pros the signing on new distributors has taken time and probably intentionally so because you know what we didn't want to do is to just go sign up a bunch of distributors and and stopped selling we wanted to make sure. We've got the right distribution partners. The right terms in place so that has gone.

Rajiv D'Silva: Outside the US, revenue decreased 29% year-over-year in the second quarter. Reflecting impacts related to the strategic restructuring activities, we executed last year. Additionally, our O.U.S, revenue results were impacted by fluctuations in ordering patterns from our new distribution partners in key international markets, as we had expected. While the business continues to be impacted by macroeconomic headwinds, which are pressuring the aesthetic sector as a whole, we are encouraged by the continued improvement in the underlying trends in our U.S, business.

Speaker Change: Going on over the course of the last few months.

Rajiv Silva: My guess, and again, Hemanth will correct me if I'm wrong, is that we should be done with signing up new distributors by the second half of this year. And it's just a little lumpy in terms of when they actually placed their first order, which is kind of what we were referring to.

Rajiv Da Silva: My guess, and again, Hemanth will correct me if I'm wrong, is that we should be done with signing up new distributors by the second half of this year, and it's just a little lumpy in terms of when they actually placed their first order, which is kind of what we were referring to. My view is that it will be 2025 before this is all kind of in steady state. There will continue to be a little bit more lumpiness in the back half of 2024. Hemanth, do you have anything to add to that?

Speaker Change: My guess and again humans will correct me if I'm wrong is that we should be done with signing up new distributors by the second half of this year and it's just a little lumpy in terms of when they actually placed their first order I was just kind of what we were referring to.

Speaker Change: And in my view is that the it would be 2025 before this is all signed up and steady state there'll be continued to be a little bit more lumpiness in the back half of 'twenty 'twenty four.

Rajiv Silva: My view is that it will be 2025 before this is all kind of in steady state, and there will continue to be a little bit more lumpiness in the back half of 2024. Hemanth, do you have anything to add to that? No, I think you said it well.

Rajiv D'Silva: We believe this improvement that presents further evidence that the strategy we've implemented to focus our resources on higher opportunity markets with the goal of enhancing the company's long-term growth and profitability profile is working. That said, the operating environment remains challenging. Customer finance and pressures, higher interest rates, and tighter credit markets continue to impact customer systems adoption throughout our business. This is especially the case that higher ASP systems deals where time to close continues to lengthen.

Speaker Change: Do you anything to add to that.

Hemanth Varghese: No, I think you said it well. When you look at, starting on the second, our new distribution partners, as Rajiv mentioned, we've taken a different approach to what was done in the past. We really look for proper partners in each region that can grow our products in that market. In a lot of cases, they're actually registering our products for the first time in those markets. If you look at markets like India, we're having our products registered for the first time.

Hemanth Varghese: When you look at, starting with the second, our new distribution partners, as Rajiv mentioned, we've taken a different approach to what was done in the past. We really look for proper partners in each region that can grow our products in that market. So in a lot of cases, they're actually registering our products for the first time in those markets. If you look at markets like India, we're having our products registered for the first time.

Speaker Change: No I think he said it well when you look at started on a second new distribution partners as Rajeev mentioned.

Speaker Change: You can have a different approach to what was done in the past, we really look for proper partners in each region that can grow our products in that market. So in a lot of cases, there they're actually registering our products for the first time in those markets. If you look at markets like India, We're having our products registered for the first time. So some of those things whoever's registration process. Once those get approved we will have additional growth these new con.

Hemanth Varghese: So some of those things, the registration process, once those get approved, we'll have additional growth. These new contracts are true partnerships, meaning they'll have contractual minimums. There are incentives to essentially not only hit your minimums but actually grow your sales in each market. So those ordering patterns take a little bit of time.

Speaker Change: Tracks are true partnerships, meaning they'll have contractual minimums theres, a theres a incentives to essentially not only hit your minimums, but actually grow your sales in each market. So those ordering patterns or what take a little bit of time right Eagle going from your first order for them to entering into the market potentially with new regulatory approvals and then starting to grow but we are seeing.

Rajiv D'Silva: I am proud of our team's continued commitment to our strategy, despite the challenging operating environment. The positive energy and enthusiasm give me confidence that my expectation for continued solid execution and improving results over the balance of 2024 is appropriate.

Hemanth Varghese: You go on from your first order for them entering the market, potentially with new regulatory approvals, and then starting to grow. But we are seeing positive trends across the board in the markets that we've brought on board. And as we mentioned, we have additional ones that we're hoping to complete before the end of the year. On the U.S., I think Rajiv said it well; I honestly think we're uniquely positioned with the breadth of the portfolio we have and our customer base. We target both core and non-core physicians with a very broad portfolio of products, and that really does let us compete attractively within this market, even with all the challenges we have. Very useful detail.

Speaker Change: Positive trends across the board in the markets that we've brought on board and as we mentioned we have additional ones that we were hoping to complete before the end of the year.

Rajiv D'Silva: Before I turn the call over to Hamens, I wanted to provide an update on a few areas of notable progress made in the second quarter, with respect to three of our key strategic initiatives. First, we remain focused on our strategic initiative to enhance the cash flow profile of the business and accelerate the path to long-term sustainable profitability and growth. Dominic will discuss our solid cash flow performance in Q2 later on in the call.

Speaker Change: On the U S. I think he said it well I honestly I think we're uniquely positioned with the breadth of the portfolio, we have and our customer base, we target both core and non core physicians and with a very broad portfolio of products and that that really does let us compete.

Rajiv D'Silva: But I wanted to call out a few important highlights to underscore our recent progress on this front. We achieved a 37% reduction in our cash use in operations year over year, which we view as particularly impressive given the continued headwinds to revenue growth that the study sector participants are facing over the last year. We continue to believe that this performance represents the clearest evidence that we are making progress with respect to this important strategic initiative.

Speaker Change: [noise] attractively within this market, even with all the challenges of that.

Marie Thibault: Okay, very useful detail. A quick follow-up here, your cash usage continues to shrink, and you've done a nice job with working capital improvements. Any way to sort of think about the outlook for your cash runway, about $6 million in cash and equivalents here on the balance sheet? What should we think about the next couple months?

Speaker Change: Okay very useful detail.

Rajiv Silva: A quick follow-up here. Your cash usage continues to shrink, and you've done a nice job with working capital improvements. Any way to sort of think about the outlook for your cash runway, about $6 million in cash and equivalents here on the balance sheet? How should we think about the next couple quarters in terms of cash usage? Thanks again. Let me start, and then Domenic can add to it.

Speaker Change: A quick follow up here your cash usage continues to shrink and you've done a nice job with working capital improvement and any way to sort of think about the outlook for your cash runway about 6 million in cash and equivalents here on the balance sheet. How we should think about the next couple of quarters in terms of cash usage. Thanks again.

Speaker Change: Yeah, I mean, we have the.

Rajiv Da Silva: Let me start and then Domenic can add to it. I think we are reaching a somewhat steady state, Marie. My guess is that the third quarter will be similar, though it may have a little bit of an uptick because there are some R&D spends and things like that that we're going to have to incur. The fourth quarter, as you know, is generally, because of seasonality, the best quarter for our businesses. So there might be some improvement going into the fourth quarter.

Speaker Change: Let me start and the dominant cannot do it so.

Rajiv Silva: I think we are reaching a somewhat steady state, Marie. My guess is that the third quarter will be similar, though it may have a little bit of an uptick because there are some R&D spends and things like that that we're going to have to incur. The fourth quarter, as you know, is generally, because of seasonality, the best quarter for our businesses.

Speaker Change: No I think we've hum.

Speaker Change: Are you seeing a somewhat steady state marine.

Speaker Change: You know my guess is the third quarter, we will be similar to what may have a little bit I'll say uptick because there are some.

Rajiv D'Silva: Second, as discussed on our first quarter call, we announced multiple transactions reflecting material progress towards our strategic initiative to re-structure the company's debt obligations and secure bridge financing. On April 23rd, one of our largest lenders and investors, Madrin Asset Management, purchase the company's main street lending program loan, or MSLP loan, from City National Bank of Florida for an undisclosed summary. Following the close of the MSLP loan purchase, we entered into a loan and security agreement with Madrin for an aggregate principal amount of up to $5 million in debt financing to support our near-term liquidity requirements.

Speaker Change: R&D expense and things like that that that'd be gonna have to incur a.

Speaker Change: Fourth quarter as you know it generally because of the seasonality of the best quarter for our businesses. So.

Rajiv Silva: So there might be some improvement going into the fourth quarter. And then, as we look into 2025, it really is a function of growth and the pace of our new product introductions and how those will impact the revenue line. But we are still focused on getting the company to cash flow break-even in the second half of 2025, and I think we are moving on the right trajectory to get there. Thank you, Domenic.

Rajiv Da Silva: And then as we look into 2025, it really is a function of growth and the pace of our new product introductions and how those will impact the revenue line. But we are still focused on getting the company to cash flow breakeven in the second half of 2025. And I think we are moving on the right trajectory to get there. Thank you.

Speaker Change: There might be some improvement going into the fourth quarter.

Speaker Change: And then as we look into 2020 five it really is a function of.

Speaker Change: Function of growth and how are the peers.

Speaker Change: So a lot of new product introductions, and how those will impact.

Speaker Change: The revenue line.

Speaker Change: But we are still focused on getting the company to cash flow breakeven in the second half of 'twenty 'twenty Four island I think we are moving in the right.

Speaker Change: On the right trajectory to get there.

Rajiv D'Silva: And on May 28th, we announced a debt equity exchange with resulted in a net reduction in outstanding borrowings of $35 million. These transactions facilitated a 39 percent reduction in our total debt outstanding over the first half of 2024 to approximately 46 million as of June 30th compared to 74.9 million as of December 31st, 2023. We are pleased that Madrid has demonstrated further commitment to Venus Concept's long-term prospects with these transactions and look forward to continuing engagement with them as the execute that strategic plan.

Speaker Change: Dominic.

Dominic: Yeah, I think Rajiv said it well.

Domenic Penna: Yeah, I think Rajiv said it well, you know, we'll see some continued burn, but towards the fourth quarter, we are generally not burning much in the fourth quarter. But there will be some burn in Q3, consistent with what we've seen in Q2, more or less.

Rajiv Silva: Yeah, I think Rajiv said it well, you know, we'll see some continued burn, but towards the fourth quarter, we are generally not burning much in the fourth quarter, but there will be some burn in Q3, consistent with what we've seen in Q2, more or less.

Dominic: We will see some continued burn but towards the fourth quarter.

Dominic: We are generally are not burning much in the fourth quarter.

Speaker Change: But there will be some burn in Q3, consistent with what we've seen in Q2 more or less.

Marie Thibault: All right. Very helpful. Thank you.

Domenic Penna: All right, very helpful, thank you. Thank you, Marie. As a reminder, it is star number one to ask a question. The next question is from Thomas McGovern from Maxim Group. Please go ahead.

Speaker Change: Alright very helpful. Thank you.

Marie: Thank you Marie.

Speaker Change: As a reminder, it is star one to ask a question.

Marie Thibault: All right, very helpful. Thank you.

Speaker Change: The next question is from Thomas Mccaffrey from Maxim Group. Please go ahead.

Operator: As a reminder, it is star number one to ask a question. The next question is from Thomas McGovern from Maxim Group. Please go ahead.

Thomas Mccaffrey: Hi, guys. Thanks for taking my question. So my first question is on the remaining debt on the balance sheets of following this debt to equity exchange. When you guys did in the quarter.

Thomas Mcgovern: Hi guys, thanks for taking my question. So my first question is on the remaining debt on the balance sheet. Following this debt-to-equity exchange that you guys did in the quarter, I just curious kind of what your strategic approach is to addressing the remaining $46 million in debt on the balance sheet. Thanks.

Operator: Hi guys, thanks for taking my question. So, my first question is on the remaining debt on the balance sheet. Following this debt-to-equity exchange that you guys did in the quarter, I'm just curious kind of what your strategic approach is to addressing the remaining $46 million in debt on the balance sheet. Thanks.

Rajiv D'Silva: Third, on June 6th, we announced that we were notified by the NASCAR stock market that Venus Concept has regained continued listing compliance. The debt to equity transaction with Madrid served to bring the company above the minimum stockholders equity requirement.

Thomas Mccaffrey: Just curious kind of what's your strategic approaches to addressing the remaining $46 million in debt on the balance sheet.

Speaker Change: Yeah, So and thank you for the question. We are we're very pleased with the the partnership that we've had with with modern.

Rajiv Da Silva: Yeah, so thank you for the question. We are very pleased with the partnership that we have had with Madryn. They've been very constructive in helping the company think through strategic options, and obviously, their continued investment is a sign of their continued belief in the company and its potential. We continue to work with Madryn as well as our largest shareholders to work towards what we think a sustainable capital structure would be for the company.

Rajiv Silva: Yeah, so thank you for the question. We are very pleased with the partnership that we've had with Mattering. They've been very constructive in helping the company think through our strategic options, and obviously, their continued investment is a sign of their continued belief in the company and its potential. We continue to work with Mattering as well as our largest shareholders to work towards what we think a sustainable capital structure would be for the company.

Hemanth Varghese: I would now like to turn the call over to Dr. Hemanth Varghese with seven updates on recent progress related to other initiatives. Hemanth. Thanks, Rajiv. As outlined on our last earnings call, we were focused in 2024 on our restructuring programs as well as our commercial strategy, customer engagement, product development, and regulatory initiatives. Let me share a little color on our recent progress in each of these areas. First, our restructuring, cost reduction, and cash management initiatives continue to progress well and our focus on protecting near-term cash runway has been productive.

Speaker Change: They've been very constructive.

Speaker Change: And helping the company think through our strategic options and obviously.

Speaker Change: There are continued investment.

Speaker Change: It was a sign up their continued belief in the company and its and its potential. We are we continue to work with Mad reading as well as our largest shareholders is due to walk towards what we think is sustainable capital structure would be for the company.

Rajiv Silva: And certainly, there is ongoing discussion about the remaining $46 million of debt and what that ideally should look like going forward. We don't have a definitive answer on that yet, but that's certainly a part of an ongoing discussion with Mattering and other stakeholders, which we expect to continue over the course of the third quarter. Gotcha. I appreciate that, Culler.

Speaker Change: Certainly there is ongoing discussion about the remaining 46 million and that and what that ideally should look like going forward. We don't have a definitely do answer on that yet, but that's certainly a part of our ongoing discussion with modern and all the stakeholders, which we expect to.

Rajiv Da Silva: And certainly, there is ongoing discussion about the remaining $46 million of debt and what that ideally should look like going forward. We don't have a definitive answer on that yet, but that's a part of an ongoing discussion with Madryn and other stakeholders which we expect to continue over the course of the third quarter.

Hemanth Varghese: Specifically, we delivered a 13 percent reduction in our operating expenses year-over-year reflecting the significant restructuring activities we've executed as part of our corporate turnaround strategy over the last 18 months. As part of this effort, it's important to understand that we are also focused on allocating our resources to high-priority strategic initiatives that will support our future growth. This includes our efforts to advance certain new product pipeline projects such as the regulatory clearance and commercialization of our next body contouring system in early 2025.

Speaker Change: Continue.

Speaker Change: Over the course of the third quarter.

Speaker Change: Got you I appreciate the color and my second question is just kind of more on a high level you guys were talking about how your revisiting your strategic approach to reestablishing yourselves in international markets and I know, you're just kind of briefly touched on it but maybe if you could discuss on a higher level of kind of what what's changed.

Thomas Mcgovern: Got you, I appreciate that, Culler. And then my second question is just kind of more on the high level you guys are talking about how you're revisiting your strategic approach to, you know, reestablishing yourselves in international markets. And I know you just kind of briefly touched on it, but maybe if you could discuss at a higher level kind of what's changed from, you know, the last time you entered some of these international markets and what do you kind of hope to improve upon as you move forward with this strategic expansion plan?

Rajiv Silva: And then my second question is just kind of more on, you know, high level. You guys are talking about how you're revisiting your strategic approach to, you know, reestablishing yourselves in international markets. And I know you just kind of briefly touched on it, but maybe if you could discuss at a higher level kind of what's changed from the last time you entered some of these international markets and what you kind of hope to improve upon as you move forward with the strategic expansion plan? Sure. Hemanth, do you want to pick that up?

Hemanth Varghese: Our strategic focus on accelerating the company's path to cash flowbreak even and sustaining operations has resulted in difficult decisions. Like to delay the highly compelling R&D initiatives, including our Amy Robotics platform, we continue to believe that our Amy Robotics platform has the potential to revolutionize aesthetic medical treatment paradigms. The Amy technology will be critical to maximizing the synergy between our well-established medical aesthetics business and our pioneering Robotics R&D capability. As we continue to stabilize the core business and enhance our overall financial security and investment flexibility, we look forward to returning to an expanded R&D program and new product development strategy, which will be an essential component of our long-term revenue growth.

Last time, you entered some of these international markets and what do you kind of hope to improve upon.

Speaker Change: As you move forward with the strategic expansion plan.

Rajiv Da Silva: Sure. Hemanth, do you want to pick that up?

Speaker Change: Sure Hey, Mike do you want to pick that up.

Hemanth Varghese: Sure, yeah, at a high level, and again we've talked about this before as part of the overall restructuring, the legacy Venus business was in a lot of direct, was direct in a lot of markets, meaning we had infrastructure and while we might have been generating revenue we generally weren't profitable in a lot of those markets, and so as part of the restructuring the first thing we did was, you know, remain focused in markets with a direct presence where we are profitable, so you look at markets like Australia and Mexico and Israel, where we're very strong and profitable, those are direct markets, those make sense for us to maintain and continue to grow. In other markets where we're not, we're either subscale or it just doesn't make sense at this time, what we've done is found strong distribution partners, and again not just any distribution partner, a partner that actually has a strong presence in that market and wants to partner with us to introduce our products, and so what we've done over the past year has been to transition to strong distributors, and both in existing markets where we were direct and into new markets, as I mentioned India, we're in discussions around a number of areas in Southeast Asia and continue to expand that way, so I'd say the distribution partnerships we're entering into are new and different from the ones we had before, as I described previously, with more strict terms and, you know, purchase minimums as well as incentive structures to kind of grow, and with a commitment to kind of introduce more and more of our products in that market, so a real marketing and commercial partner. Does that answer your question?

Hemanth Varghese: Sure, yeah. At a high level, and again, we've talked about this before as part of the overall restructuring, the legacy Venus business was in a lot of direct, was direct in a lot of markets, meaning we had infrastructure, and while we might have been generating revenue, we generally weren't profitable in a lot of those markets. And so, as part of the restructuring, the first thing we did was, you know, remain focused on markets with a direct presence where we are profitable.

Sure Yeah at a high level and again, we've talked about this before as part of the overall restructuring.

Mike: The legacy Venus business was in a lot of direct was direct and a lot of markets, meaning we had infrastructure and while we might have been generating revenue, we generally weren't profitable and a lot of those markets and so as part of the restructuring. The first thing we did was.

We remain focused in markets with a direct presence where we are profitable. So you look at markets like Australia, and Mexico, and Israel, where we're very strong and profitable those are direct markets those make sense for us to maintain and continue to grow in other markets, where we're not we're either subscale or.

Hemanth Varghese: So you look at markets like Australia and Mexico and Israel, where we're very strong and profitable. Those are direct markets. Those make sense for us to maintain and continue to grow. In other markets where we're not, we're either subscale, or it just doesn't make sense at this time.

Hemanth Varghese: Second, our efforts to rationalize our international infrastructure, reduce costs, and simplify the organization continues to progress as well. As part of this initiative, we continue to engage with existing and several new distribution partners to align our new international strategy. Importantly, we remain on track to be substantially completed with our international repositioning in the coming months and ready to return to growth outside the US in 2025. Third, during the second quarter, we continued to drive progress with respect to our efforts to secure new regulatory clearances and execute successful commercial launches.

Mike: It just doesn't make sense at this time, what we've done is found strong distribution partners and again not just any distribution partner a partner that actually has a strong presence in that market and wants to partner with us to introduce our products and so what we've done over the past year has been to transition to strong distributors and both.

Hemanth Varghese: What we've done is found strong distribution partners, and again, not just any distribution partner, a partner that actually has a strong presence in that market and wants to partner with us to introduce our products. And so what we've done over the past year has been to transition to strong distributors, both in existing markets where we were direct and into new markets. As I mentioned, India and we are in discussions around a number of areas in Southeast Asia and will continue to expand that way.

Mike: In existing markets, where we were direct and into new markets as I mentioned, India.

Mike: We're in discussions around.

Mike: Number of areas in Southeast Asia and.

Mike: And continue to expand that way so I'd say the distribution partners partnerships, we're entering into are new and different from the ones. We had before as I described previously with more more strict terms.

Hemanth Varghese: So I'd say the distribution partnerships we're entering into are new and different from the ones we had before, as I described previously, with more strict terms and, you know, purchase minimums as well as incentive structures to kind of grow, and with a commitment to kind of introduce more and more of our products into that market. So a real marketing and commercial partnership.

Hemanth Varghese: Specifically, we secured TGA clearance in Australia for our Venus Varsapro on April 3rd, the initial launch in this important global market is progressing favorably. In June, we announced the receipt of a medical device license to market Venus Varsapro in Canada, Venus Varsapro continues to receive positive feedback from customers regarding its multimodal system capabilities and best in classic treatments. Fourth, we're pleased with positive early market response from our company-wide rebranding initiative, Venus AI, and the encouraging feedback from physician participants in our next FedEx programs.

Mike: And.

Mike: Purchase minimums as well as incentive structures to kind of grow and with a commitment to kind of introduce more and more of our products in that market. So our real our marketing and commercial partnerships.

Hemanth Varghese: Does that answer your question? Absolutely. I appreciate you guys taking the time, and I can open up the call to further questions. Thanks. Thank you. We are currently showing no additional participants in the queue. That does conclude our conference for today. Thank you for your participation. Thank you, thank you. BF-WATCH TV 2021, BF-WATCH TV 2021 BF-WATCH TV 2021 [music] Domenic Vendetti, Domenic Penna, Hemanth Varghese, Sam Eiber, Rajiv Silva.

That answer your question.

Speaker Change: Absolutely I appreciate you guys, taking the time and up.

Thomas Mcgovern: Yeah, absolutely. I appreciate you guys taking the time, and I can open up the call to further questions. Thanks.

Hemanth Varghese: We've been pleased to see a significant increase in the popularity and attendance at our next FedEx events, which as a reminder, bring together our network of aesthetic leaders and practitioners to learn about the science, behind Venus AI technologies, and our best in class practice development programs. The next FedEx program represents a great example of how we're enhancing our focus on physician education and practice enhancement by empowering professionals in the FedEx field with the knowledge, tools, and support they need to grow their businesses. Since launching the first event in March, we've hosted thousands of registrants, including our largest gathering to date, which was held in Houston, Texas, and June.

Speaker Change: The call two further questions. Thanks.

Speaker Change: Thank you.

Speaker Change: We are currently showing no additional participants in the queue that does conclude our conference for today. Thank you for your participation.

Operator: We are currently showing no additional participants in the queue. That does conclude our conference for today. Thank you for your participation.

Rajiv Da Silva: Thank you. Thank you. We are very grateful. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: [music].

Hemanth Varghese: Looking ahead to the remainder of 2024, next FedEx events will continue to expand across the United States with upcoming events in Phoenix, New York City, Atlanta, Dallas, and Minneapolis.

Dominic Della Penna: With that, let me turn the call over to Dominic for a review of our second quarter financial results and balance sheet at quarter end. Dominic? Thanks, Salmon.

Dominic Della Penna: For the avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the second quarter of 2024 on a gap basis and all growth-related items are on a year-over-year basis. We've reported total revenue of $16.6 million down $3.5 million or $17% year-over-year. The decrease in total revenue by region was driven by a 29% decrease year-over-year in international revenue and a 5% decrease year-over-year in United States revenue.

Operator: Alright. Bye-bye. Bye-bye. Good-bye. See you later.

Operator: Bye-bye. Bye-bye. Take care. Be careful. Be careful. Be happy. Be happy. Be happy!

Dominic Della Penna: The decrease in total revenue by product category was driven by a 30% decrease in products systems revenue, a 4% decrease in services revenue. The decrease was offset partially by a 5% increase in lease revenue and a 2% increase in products other revenue. The percentage of total systems revenue derived from the company's internal lease programs, Venus Prime and our legacy subscription model, was approximately 34% in the second quarter of 2024, compared to 26% in the prior year period.

Speaker Change: Yeah.

Speaker Change:

Operator: Goodbye. Bye. Goodbye. Goodbye. Goodbye. Goodbye. Bye, everybody. Good-bye. Bye-bye. Goodbye. Bye-bye. Goodbye. [inaudible] followed-up to the Domenici.

Speaker Change:

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Dominic Della Penna: Note, this represents a change in the trend demonstrated over the last 18 months. Our focus on prioritizing cash system sales has resulted in the overall percentage of total systems revenue derived from our internal lease programs declined from approximately 42% in fiscal year 2022 to 33% in fiscal year 2023 to a low of 25% in Q1 2024. As discussed in our recent investor calls, this strategic initiative has been a key driver of the significant improvements in our cash generation given the higher quality of revenue cash system sales represent.

Speaker Change: Yes.

Speaker Change: [music].

Dominic Della Penna: For avoidance of doubt, this strategy remains a priority for the company. We continue to prioritize cash system sales and believe the appropriate mix of our system sales revenue to be in the 70% cash 30% lease mix going forward. That said, it is important to realize that the company's lease revenue profile in 2024 is very different and materially higher quality than at any time in the company's history. Specifically, in January, we introduced Venus Prime, our structured in-house financing program which replaced the legacy subscription program for new customers in North America.

Speaker Change: Okay.

Speaker Change: [music].

Dominic Della Penna: Venus Prime has been very well received in the marketplace and has given Venus Concept a competitive differentiator during this challenging capital equipment environment. In the current macro environment, third party lending has tightened and so has access to capital. With this in mind, the ability to offer Venus Prime represents a valuable option to help with new system adoption. Importantly, the Venus Prime program is characterized by adherence to strict credit screening practices, adhered risk assessment for each customer, and consistent monitoring of payment trends which has resulted in significantly lower bad debt expense versus our legacy subscription program.

Dominic Della Penna: While we continue to favor cash system sales with a target of roughly 70% of total system's revenue coming from cash sales, we are very pleased to have the unique lever of our Venus Prime program as a key differentiator for our competitors.

Dominic Della Penna: Turning to a review of our second quarter financial results across the rest of the PNL, gross profit decreased 2.4 million or 17% to 11.8 million. The change in gross profit was primarily due to a decrease in revenue in international markets driven by the accelerated exit for unprofitable direct markets and the effects of tighter third party lending practices which negatively impacted capital equipment sales in both the U.S, and international markets. Gross margin was 71.5% of revenue compared to 70.8% of revenue for the second quarter of 2023.

Dominic Della Penna: While margin management and the exit from unprofitable direct markets are the primary contributors of this improvement, the company has also improved margins on our artist systems through manufacturing efficiencies. Total operating expenses decreased 2.5 million or 13% to 17.4 million. The change in total operating expenses was driven primarily by a decrease of 1.3 million or 16% in selling and marketing expenses, a decrease of 1 million or 10% in general and administrative expenses.

Dominic Della Penna: Second quarter of 2024 gap general and administrative expenses include approximately 0.2 million of costs related to restructuring activities designed to improve the company's operations and cost structures. Compared to approximately 0.4 million for the second quarter of 2023. The total operating loss was 5.6 million, down 0.2 million or 3% year-over-year.

Dominic Della Penna: Net interest and other expenses were 14.1 million compared to income of 1.4 million in the second quarter of 2023. The year-over-year change in net interest and other expenses was driven primarily by a 10.9 million non-cash pre-tax loss on debt extinguishment due to the extinguishment of debt as a result of the debt to equity exchange transaction with Madron in May 2024. The increase in second quarter net interest and other expenses was also driven by higher interest expense on outstanding borrowings and a non-cash foreign exchange loss of 0.8 million compared to a non-cash gain of 0.2 million in the prior year period.

Dominic Della Penna: Net loss attributable to stockholders for the second quarter of 2024 was 20 million or $3.5 per share compared to net loss of $7.4 million or $1.35 per share for the second quarter of 2023. Adjusted EBITDA loss for the second quarter of 2024 increased 4% year-over-year to 4.1 million. As a reminder, we have provided a full reconciliation of our gap net loss to adjust the EBITDA loss in our earnings press release. Turning to the balance sheet, as of June 2024, the company had cash and cash equivalents of 5.7 million and total debt obligations of approximately $46 million compared to $5.4 million and $74.9 million respectively as of December 31st, 2023.

Dominic Della Penna: Cash used in operations for the three months ended June 30th was $1.3 million at $37 per cent decrease in cash used year-over-year. We are very proud of the continued improvement in reducing our cash used in operations despite the challenging operating environment. Specifically, we have delivered a 47% reduction in cash used in operations over the first six months of 2024, continuing the strong performance towards this important strategic initiative in fiscal year 2023 when we reduced our cash used in operations by 52%.

Dominic Della Penna: With respect to the year-over-year decrease in cash used in operations during the second quarter, the largest driver of change was strong working capital performance with more than 3.8 million of cash generated from working capital in the period. While multiple items are contributing to our working capital improvement, we are particularly proud of the notable reduction in cash in accounts receivable. Our efforts to enhance the quality of our internal lease programs, specifically the enhanced credit profile of customers in our Venus Prime program has resulted in better collections and lower bad debt expense.

Dominic Della Penna: We remain intently focused on further enhancement of the cash low profile of our business and believe we have the right strategy to build the requisite foundation to support our growth and profitability goals in the year to come.

Dominic Della Penna: As outlined in our press release, given the company's active dialogue with our existing lender and investors and the ongoing evaluation of strategic alternatives with various interested parties to maximize shareholder value, the company is not providing full-year 2024 financial guidance at this time. For modeling purposes, the company expects total revenue for the three-month sending September 30th, 2024, of at least 17 million.

Operator: With that, I'll turn the call over to the operator to open the call for your questions. Operator? Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask a question.

Marie Thibault: The first question is from Marie Thibault from BTIG. Please go ahead. Hi, good morning. Thanks for taking the questions. Good morning. Hey, good morning.

Rajiv D'Silva: I wanted to ask my first question here on the macroeconomic outlook. You know, it looks like U.S, revenue certainly is stabilizing despite some of the longer selling cycles. I wondered if that was, you know, sort of a stable level we are at now, if that's something that you think is relatively sustainable going forward. Then second part there on OUS, there is mention of ordering patterns with the new distributors, new distribution partners.

Rajiv D'Silva: Wondering how long that will take to sort of settle into a routine if you can just kind of, you know, elaborate on what you meant by some of those ordering patterns. Sure. Marie, look, I think I should point it out. I think, you know, we are encouraged by the, by the performance of the U.S, business. You know, it is, it is, you know, declining at a much lower rate and you know, approaching a point of stability and we are, you know, cautiously optimistic as we look into the back half of the year that, you know, we should be getting to a point where it is, you know, flatish to growing versus last year.

Rajiv D'Silva: I think the sum of that is, I think the benefit of our very diverse portfolio because, you know, we have, you know, products that span a full spectrum of different types of procedures, different price points and that diversity is certainly likely helping us in this environment, despite the tight credit environment. And obviously, I will be in a prime program. It's also helpful because we in a prime probably plays more for all in the U.S, than the most of the markets.

Rajiv D'Silva: So that's the, the view on the U.S, and the humans and probably I do it when I'm done. On the O.U.S, markets, we make great progress in winding down our unprofitable subs and then the process of signing on new distributors has taken time and probably intentionally so because, you know, what we didn't want to do was to just go sign up a bunch of distributors and, and, and start selling. We want to make sure we got the right distribution partners, the right terms in place.

Rajiv D'Silva: So that has, you know, gone on over the course of the last few months. You know, my guess and again, humans will correct it from wrong is that we should be done with signing up new distributors by the second half of this year. And it's just a little lumpy in terms of when they actually placed their first order, which is kind of what we were referring to. You know, my view is that there, the, it will be 2025 before this is all kind of in steady state.

Rajiv D'Silva: There will continue a little bit more lumpiness in the back half of 2024. Tim, do you have anything to add to that? No, I think you said it well. When you look at starting on a second, our new distribution partners, as Rajiv mentioned, we're taking a different approach to what was done in the past. We really look for proper partners in each region that can grow our products in that market. So in a lot of cases, they're actually registering our products for the first time in those markets.

Rajiv D'Silva: If you look at markets like India, we're having our products registered for the first time. So some of those things that have a registration process, once those get approved, will have additional growth. These new contracts are true partnerships, meaning they'll have contractual minimums. There's incentives to essentially not only hit your minimums, but actually grow your sales in each market. So those ordering patterns are what take a little bit of time. You go and going from your first order for them entering into the market, potentially with new regulatory approvals, and then starting to grow.

Rajiv D'Silva: But we are seeing a positive trend across the board in the markets that we've brought on board. As we mentioned, we have additional ones that we're hoping to complete before the end of the year. On the US, I think Rajiv said it well. I honestly think we're uniquely positioned with the breadth of the portfolio we have, and our customer base. We target both core and non-core physicians, and with a very broad portfolio of products, and that really does let us compete attractively within this market, even with all the challenges that we have. Okay, very useful detail.

Rajiv D'Silva: Quick follow-up here. Your cash usage continues to shrink, and you've done a nice job with working capital improvements. Any way to sort of think about the outlook for your cash runway, about 6 million in cash and equivalence here on the balance sheet, how we should think about the next couple quarters in terms of cash usage. Thanks again. Let me start, and Dominic can add to it. I think we are reaching a somewhat steady state, Marie.

Rajiv D'Silva: My guess is that third quarter will be similar, though we have a little bit of an uptake because there are some R&D funds and things like that that we're going to have to incur. Fourth quarter, as you know, is generally because of seasonality, the best quarter for our businesses, so there might be some improvement going into the fourth quarter. And then as we look in the 2025, it really is a function of growth and how the pace of our new product interactions and how those will impact the revenue line.

Rajiv D'Silva: But we are still focused on getting the company to cash will break even in the second half of 2025, and I think we are moving on the right projected to get there. Dominic? Yeah, I think Regis said it well. We'll see some continued burn, but towards the fourth quarter, we are generally not burning much in the fourth quarter. But there will be some burn in Q3 consistent with what we've seen in Q2 more or less. All right, very helpful. Thank you. Thank you, Marie. As a reminder, it is star one to ask a question.

Thomas Mcgovern: The next question is from Thomas McGovern from Maxim Group. Please go ahead. Hi guys, thanks for taking my question. So my first question is on the remaining debt on the balance sheet. So following this debt to equity exchange that you guys did in the quarter, just here is kind of what your teacher approaches to addressing the remaining $46 million in debt on the balance sheet. Thanks. Yeah, so thank you for the question.

Thomas Mcgovern: We hope to be very pleased with the partnership that you've had with Madden. They've been very constructive in helping the company think through our strategic options and obviously they are continuing investment is a sign of their continued belief in the company and its potential. We continue to work with Madden as well as our largest shareholders is to work towards what we think is sustainable capital structure would be for the company and certainly there is ongoing discussion about the remaining $46 million of debt and what that ideally should look like going forward.

Rajiv D'Silva: But we don't have a definitive answer on that yet, but that's certainly a part of ongoing discussion with Madden and other stakeholders which are going to be expected to continue over the course of the third quarter. Guys, I appreciate that color.

Hemanth Varghese: And my second question is just kind of more on a high level you guys are talking about how you're revisiting your strategic approach to reestablishing yourselves in international markets. I know you just kind of briefly touched on it, but maybe if you could discuss on a higher level kind of what's changed from you know last time you ended some of these international markets and what do you kind of hope to improve upon as you move forward with the strategic expansion plan.

Hemanth Varghese: Sure, Hamlet, you want to pick that up? Sure, yeah at a high level and again we've talked about this before as part of the overall restructuring the legacy Venus business was in a lot of direct that was direct in a lot of markets meaning we had infrastructure and while we might have been generating revenue we generally weren't profitable in a lot of those markets. And so as part of the restructuring the first thing we did was you know remain focused in markets with a direct presence where we are profitable.

Hemanth Varghese: So you look at markets like Australia and Mexico and Israel where we're very strong and profitable those are direct markets those make sense for us to maintain and continue to grow. So in other markets where we're not where other subscale or it just doesn't make sense at this time what we've done is found strong distribution partners and again not just any distribution partner a partner that actually has a strong presence in that market and wants to partner with us to introduce our products and so what we've done over the past year has been to transition to strong distributors and both in existing markets where we were direct and into new markets as I mentioned India.

Hemanth Varghese: We're in discussions around a number of areas in Southeast Asia and continue to expand that way. So I'd say the distribution partnerships we're entering into are new and different from the ones we had before as I described previously with more strict terms and you know purchase minimums as well as incentive structures to kind of grow and with a commitment to kind of introduce more and more of our products in that market so a real marketing and commercial partners, to answer your question? Absolutely, I appreciate you had taken the time and I've opened up the call to further questions. Thanks. Thank you.

Operator: We are currently showing no additional participants in the queue that does conclude our conference for today. Thank you for your participation. Thank you. Anthony Vendetti, Domenic Penna, Marie Thibault, Jeffrey Cohen

Q2 2024 Venus Concept Inc Earnings Call

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