VERO - Venus Concept Announces Third Quarter of Fiscal Year 2022 Financial Results

TORONTO, Nov. 10, 2022 (GLOBE NEWSWIRE) -- Venus Concept Inc. (“Venus Concept” or the “Company”) (NASDAQ: VERO), a global medical aesthetic technology leader, announced financial results for the three and nine months ended September 30, 2022.

Third Quarter 2022 Summary & Operating Highlights:

• Total revenue of $21.5 million, down $3.0 million, or 12%, year-over-year.
  • U.S. revenue down 4% year-over-year.
  • Cash system revenue up 30% year-over-year, representing approximately 59% of total systems and subscriptions revenue, compared to 39% in the prior year period.
• GAAP net loss attributable to stockholders of $14.6 million, compared to GAAP net loss attributable to stockholders of $9.8 million last year.
• Adjusted EBITDA loss of $7.7 million, compared to Adjusted EBITDA loss of $3.5 million last year.
• On October 3, 2022, the Company announced that Rajiv De Silva has been appointed as the Company’s Chief Executive Officer and a member of the Board of Directors, effective October 2, 2022.
• On October 11, 2022, the Company announced the appointment of Dr. Hemanth Varghese to the position of President & Chief Business Officer, effective October 17, 2022.
  

Management Commentary:

“Venus Concept delivered third quarter revenue results that were in line with the preliminary revenue expectations provided on October 3rd,” said Rajiv De Silva, Chief Executive Officer of Venus Concept. “While revenue declined on a year-over-year basis in Q3, our strategic initiative to prioritize cash systems sales resulted in a notably higher mix of cash system sales and stronger cash flow from the sale of our highly-differentiated technologies, compared to the prior year period. We also made progress on our strategic initiative to optimize our international operations including closing underperforming direct sales offices in countries which are not anticipated to produce sustainable results. The organization remains highly focused on our key strategic initiatives to further enhance the cash flow profile of our business and to accelerate our path to long-term, sustainable, profitability.”

Third Quarter and First Nine Months of 2022 Revenue by Region and by Product Type:

Third Quarter 2022 Financial Results:

Total revenue for the third quarter of 2022 decreased $3.0 million, or 12.3%, to $21.5 million, compared to the third quarter of 2021. The decrease in total revenue, by region, was driven by a 21% decrease year-over-year in international revenue and a 4% decrease year-over-year in United States revenue. Excluding the impact of changes in foreign currency exchange rates versus the U.S. dollar, total revenue and international revenue, on a constant currency basis, decreased 9% and 15%, respectively, compared to the third quarter of 2021. The decrease in total revenue, by product category, was driven by a 43% decrease in lease revenue and a 15% decrease in services revenue, offset partially by a 30% increase in systems revenue and a 6% increase in products revenue. The percentage of total systems revenue derived from the Company’s subscription model was approximately 41% in the third quarter of 2022, compared to 61% in the prior year period.

Gross profit for the third quarter of 2022 decreased $3.9 million, or 23%, to $13.4 million compared to the third quarter of 2021. Gross margin was 62.1%, compared to 70.5% of revenue for the third quarter of 2021. The change in gross margin was driven primarily by the year-over-year decline in revenue as well as a $1.4 million write-down of end-of-life devices and parts inventory, and a $0.8 million impact from changes in foreign currencies which depreciated relative to the U.S. dollar in the period.

Operating expenses for the third quarter of 2022 increased $2.1 million, or 9%, to $24.8 million, compared to the third quarter of 2021. The change in total operating expenses was driven by an increase of $2.1 million, or 18%, in general and administrative expenses and an increase of $0.6 million, or 33%, in research and development expenses, offset partially by a decrease of $0.7 million, or 8%, in sales and marketing expenses. Third quarter of 2022 general and administrative expenses include approximately $0.7 million of severance payments associated with a workforce reduction in Venus Spain and Venus Canada. For the three months ended September 30, 2021, general and administrative expenses included loss on the sale of a subsidiary in South Africa of approximately $0.2 million.

Operating loss for the third quarter of 2022 was $11.4 million, compared to operating loss of $5.4 million for the third quarter of 2021.

Net loss attributable to stockholders for the third quarter of 2022 was $14.6 million, or $0.22 per share, compared to net loss of $9.8 million for the third quarter of 2021. Adjusted EBITDA loss for the third quarter of 2022 was $7.7 million, compared to adjusted EBITDA loss of $3.5 million for the third quarter of 2021.

As of September 30, 2022, the Company had cash and cash equivalents of $6.8 million and total debt obligations of approximately $77.6 million, compared to $30.9 million and $77.3 million, respectively, as of December 31, 2021.

First Nine Months of 2022 Financial Results:

Total revenue for the nine months ended September 30, 2022, increased $2.2 million, or 3%, to $75.2 million. The increase in total revenue, by region, was driven by an 8% increase in United States revenue and a 2% decrease in international revenue. Excluding the impact of changes in foreign currency exchanges rates versus the U.S. dollar, total revenue and international revenue, on a constant currency basis, increased 6% and 3%, respectively, compared to the nine months ended September 30, 2021. The increase in total revenue, by product category, was driven by a 28% increase in systems revenue and a 4% increase in products revenue, offset partially by a 13% decrease in lease revenue and a 31% decrease in services revenue. The percentage of total systems revenue derived from our subscription model was approximately 47%, compared to approximately 56% for the nine months ended September 30, 2021.

Net loss attributable to stockholders for the nine months ended September 30, 2022 decreased $15.1 million, or 81%, to $33.8 million, or $0.52 per share. Adjusted EBITDA loss for the nine months ended September 30, 2022 decreased $10.9 million, or 134%, to $19.0 million.

Conference Call Details:

Management will host a conference call at 5:00 p.m. Eastern Time on November 10, 2022, to discuss the results of the quarter with a question and answer session. Those who would like to participate may dial 877-407-2991 (201-389-0925 for international callers) and provide access code 13733044. A live webcast of the call will also be provided on the investor relations section of the Company's website at ir.venusconcept.com.

For those unable to participate, a replay of the call will be available for two weeks at 877-660-6853 (201-612-7415 for international callers); access code 13733044. The webcast will be archived at ir.venusconcept.com.

About Venus Concept

Venus Concept is an innovative global medical aesthetic technology leader with a broad product portfolio of minimally invasive and non-invasive medical aesthetic and hair restoration technologies and reach in over 60 countries and 18 direct markets. Venus Concept’s product portfolio consists of aesthetic device platforms, including Venus Versa, Venus Legacy, Venus Velocity, Venus Fiore, Venus Viva, Venus Glow, Venus Bliss, Venus BlissMAX, Venus Epileve and Venus Viva MD. Venus Concept’s hair restoration systems include NeoGraft ^® and the ARTAS ^® and ARTAS iX ^® Robotic Hair Restoration systems. Venus Concept has been backed by leading healthcare industry growth equity investors including EW Healthcare Partners (formerly Essex Woodlands), HealthQuest Capital, Longitude Capital Management, Aperture Venture Partners, and Masters Special Situations.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. In some cases, you can identify these statements by words such as such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,” “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance,” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements include, but are not limited to, statements about our financial performance; the growth in demand for our systems and other products; and general economic conditions, including the global economic impact of COVID-19 , and involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business and the industry in which the Company operates and management's beliefs and assumptions and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this communication may turn out to be inaccurate. Factors that could materially affect our business operations and financial performance and condition include, but are not limited to, those risks and uncertainties described under Part II Item 1A—“Risk Factors” in our Quarterly Reports on Form 10-Q and Part I Item 1A—“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. You are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are based on information available to us as of the date of this communication. Unless required by law, the Company does not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise.

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Use of Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before foreign exchange loss (gain), financial expenses, income tax expense (benefit), depreciation and amortization, stock-based compensation and non-recurring items for a given period. Adjusted EBITDA is not a measure of our financial performance under U.S. GAAP and should not be considered an alternative to net income or any other performance measures derived in accordance with U.S. GAAP. Accordingly, you should consider Adjusted EBITDA along with other financial performance measures, including net income, and our financial results presented in accordance with U.S. GAAP. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces its usefulness as a comparative measure. We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are: Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and although depreciation and amortization are non-cash charges, the assets being depreciated will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

We believe that Adjusted EBITDA is a useful measure for analyzing the performance of our core business because it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by changes in foreign exchange rates that impact financial assets and liabilities denominated in currencies other than the U.S. dollar, tax positions (such as the impact on periods or companies of changes in effective tax rates), the age and book depreciation of fixed assets (affecting relative depreciation expense), amortization of intangible assets, stock-based compensation expense (because it is a non-cash expense) and non-recurring items as explained below.

The following reconciliation of net (loss) income to Adjusted EBITDA for the periods presented:

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Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA

(1) For the three and nine months ended September 30, 2022, the inventory provision represents a strategic review of our product offerings which culminated in a decision to discontinue production and sale of certain models and component parts, resulting in an inventory adjustment of $1.4 million.

(2) For the three and nine months ended September 30, 2022, the other adjustments are represented by severance payments associated with a workforce reduction in Venus Spain and Venus Canada of $0.7 million. For the three and nine months ended September 30, 2021, the other adjustments are represented by a loss on the sale of a subsidiary in South Africa ($0.2 and $0.2 million, respectively).

Investor Relations Contact:ICR Westwicke on behalf of Venus Concept:Mike Piccinino, CFAVenusConceptIR@westwicke.com