Venus Concept Inc. Q3 FY2024 earnings call

• Third quarter revenue was softer than expected; international business showed improving trends with sales to distributors up nearly 60% in Q3, benefiting from APAC and EMEA regions. - US business impacted by macroeconomic headwinds, with longer deal cycles and focus on cash system sales (76% of US system sales in Q3). - Strategic initiatives: 25% reduction in cash used in operations YOY, debt restructuring with exchange of senior debt for preferred stock reducing total debt to ~$34.6 million, and NASDAQ granted 180-day extension to regain compliance. - Operational highlights: Expanded aesthetic events internationally, added new distribution partners (Paragon, Spectra), obtained regulatory clearances in key markets, and completed regulatory submission for new body platform targeting Q1 2025 launch.

Total revenue for the third quarter was $15 million, down $2.6 million or 15% year-over-year. International revenues were flat year-over-year, while US revenue decreased 23%. By product category, lease revenue decreased 39% and products system revenue decreased 10%. Gross profit decreased $2.3 million or 19% to $9.9 million, with gross margin at 66.1% of revenue compared to 69.2% in Q3 2023. The change in revenue mix, particularly more international sales and distributor partners, contributed to the gross margin decline.

• Expect total revenue for Q4 2024 to be at least $17 million. - Target cash system sales to be 70%-75% of total system sales. - New body platform targeted for launch in Q1 2025 in the US.

• Macro-economic headwinds impacting the aesthetic sector, including tight credit markets and longer deal cycles. - Impact on lease revenue due to focus on cash system sales. - Uncertainties related to international market ordering patterns and regulatory clearances for new products.

Q: On the Prime program, do you expect things to level off at a Q3 level or increase?

A: Domenic Della Penna stated cash proportion of business should be 70%-75%, with in-house financing (Prime) in 25%-30% range, expecting it to fall in that range going forward.

Q: Was the body platform referred to AI.ME? When will it launch?

A: Hemanth Varghese clarified it's not AI.ME, a new energy-based body platform targeting Q1 2025 launch in US.

Q: Strength in EMEA/APAC countries?

A: Hemanth Varghese mentioned strength in Australia, Mexico; India new distributor helped with registrations, potential growth in 2025.

Q: Demand environment and product categories?

A: Tight credit markets impact larger purchases, longer selling cycles for expensive items like hair Robot; energy-based products also affected by higher priced procedures.

Q: Cash flow outlook for Q4 and breakeven?

A: Rajiv De Silva said Q4 is usually strong cash flow, but sustained breakeven likely in 2025 back end due to macroeconomic headwinds.

Q: Debt situation and MSLP loan?

A: Rajiv De Silva mentioned working with Madryn on debt reduction, MSLP loan covenants extended month-to-month until final capital structure solution found.