Good afternoon, ladies and gentlemen, and welcome to the Quarter One 2021 Evolus Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference, Ms. Carol Ruth of The Ruth Group. Ma'am, please go ahead.

Thank you, operator, and welcome to everyone participating on today's call. This call is also being broadcast live over the Internet at evolus.com and a replay of the call will be available on the company's website for 30 days. With me on the call today are David Moatazedi, President and Chief Executive Officer; Lauren Silvernail, Chief Financial Officer and Executive Vice President, Corporate Development; and Rui Avelar, Chief Medical Officer and Head of R&D. In our remarks today, we will include statements that are considered forward-looking statements within the meaning of the United States securities laws. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations, or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection, or forward-looking statements. Additionally, the discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. The reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC, and they also can be found on our Investor Relations website at investors.evolus.com. Now, let me hand the call over to David. David?

Good afternoon and thank you, Carol. The first quarter of 2021 was a defining quarter for Evolus. We made significant strides in bringing clarity around our future for our shareholders, customers, and employees. The quarter was defined by three major events that set the stage for the continued success of Jeuveau in the United States. The first of that was the resolution of both the ITC case and all outstanding future litigation. Second, we recapitalized the company by eliminating senior and convertible debt and future milestones. We also completed an equity offering and received a settlement payment from our partner. These activities transformed our balance sheet, resulting in a pro forma cash position of $140 million on March 31st. Third, thanks to the strong showing support from our customers, our business has quickly bounced back since the settlement in mid-February. To provide additional color on our business in the first quarter of 2021, we generated $12.2 million of net revenues, with most of the sales occurring after the settlement in mid-February. We grew purchasing accounts to 5,800 from 5,600 at year-end, and our cumulative reorder rate grew to 73%. We are pleased to see the trends in the first quarter persist into the second, where we see an increasing reorder rate and, on average, these accounts are repurchasing at higher volume. Overall, we are pleased to have all outstanding litigation and legal issues resolved and the company well capitalized for the future. The second quarter marks the first quarter since launch in which we are free from all legacy challenges and for the first time, our customers can now partner with us for the long term and realize the full potential of our unique value proposition. We have proven that an aesthetic company positioned against the younger demographic with a focus on technology creates a unique differentiation. The combination of these elements has resulted in increasing trends across our business. In Q2, we believe Jeuveau achieved its highest sales quarter ever and reached an annualized net revenue run rate of $100 million. Lastly, this month we are celebrating the two-year anniversary since the launch of Jeuveau. The success we are seeing is directly related to the quality of this product and the extensive data generated over several years. And now I would like to turn it over to Rui Avelar to give you a quick update. Rui?

Thank you, David, and good afternoon. Jeuveau has been on the market now for two years, and we believe that over a million treatments will be completed. We have the benefit of having conducted three large Phase 3 clinical studies, including a head-to-head study against the market leader to support the approval of the product. Today, we announced the publication of two Phase 2 repeat dose open label one-year studies that were part of the transparency global clinical program. The data from these studies were used to support the safety and efficacy of Jeuveau. We wanted to share some interesting observations that we think will be helpful for our injectors and patients as well as investors. When treating patients with a biological drug, regulatory bodies such as the FDA want to see what happens to the duration of effect with each repeat treatment since a shortening of this interval can be a signal of building resistance against the drug or antibody formation. In both studies, the time interval between treatments did not shorten; instead, within treatment cohorts, the time interval actually trended longer after each successful treatment. Another interesting observation was the rate of adverse events after repeated treatments. It was noted that the rates of all adverse events and drug-related adverse events both decreased with each successive treatment. We believe that these safety observations will continue to build injector and patient confidence in our product. Now let me turn it over to Lauren for a financial update.

Thank you, Rui. Good afternoon, everyone. Earlier this year, we embarked on a strategy to recapitalize the company. We started the transformation of our balance sheet by eliminating $127 million of senior and convertible debt and future milestones. Next, we received a $25 million payment from our partner Daewoong and successfully completed a $92 million equity offering. The end result is that on March 3, 2021, the pro forma cash position was $140 million, which is expected to fund us for at least the next 12 months. As David mentioned, we posted strong net revenues for the first quarter of 2021of $12.2 million, up 16% over the first quarter of 2020 despite the headwinds from the ITC bonds. We recorded most of our Q1 2021 revenue in the second half of the quarter as we continued to sell under a bond until mid-February. Moving down the P&L, our first quarter of 2021 adjusted gross margin percentage was 60%, excluding the $25.5 million settlement payment. We continue to expect our gross margin percentage for fiscal year 2021 to be in the range of 50% to 55%, including the royalties owed under the ITC settlement agreement. Consistent with commentary provided on prior calls, our gross margin will depend on sales levels, promotional activity, and other factors. Our first quarter 2021 non-GAAP operating expenses were $24.8 million, reduced 26% from $33.4 million in the first quarter of 2020. Expenses were lower in 2021 due to operating with a leaner organization during COVID-19 and reduced spending on programs delayed in the first quarter prior to settling the ITC litigation. We do expect our non-GAAP operating expenses may vary quarterly depending on promotional activity and other factors. The first quarter of 2021 was profitable on a net income basis due to the $25.5 million settlement payment received from our partner. Please note, this is a one-time payment impacting only the first quarter of 2021. As a result of the settlement agreement and equity offering, as of May 7, 2021, we had $54.1 million shares of common stock outstanding. To help with your models, our basic weighted average shares outstanding for the first quarter of 2021 were $37.1 million, and our fully diluted weighted average shares outstanding for the first quarter of 2021 were $41.1 million. With that, I'll turn the call back over to David.

Thank you, Lauren. Last week, we brought together our selling team for our first live meeting since COVID-19 shutdowns, and the energy across the sales force was palpable. The field is seeing firsthand the value of our aesthetic only focus and investment in one-on-one marketing with their practices and our digital focus on millennials. Currently, we have more than 500 volume neurotoxin accounts earning our co-branded media investment, and in less than a year, we have enrolled 160,000 patients into our consumer loyalty program. In partnership with our customers, we are committed to building a brand that resonates with the millennial demographic. In closing, I would like to take a moment to thank our customers for their rapid bounce back. Our commitment to them has never been stronger. We invest in their growth, improve their profit margins, and we do this with a brand built from the ground up to appeal to the millennial segment. Lastly, I would like to extend my thanks to all levels of employees, who know that customer-centricity powers this company, and we would not be off to such a strong restart without their unwavering commitment. With that, I'll turn the call over for Q&A. Operator.

Your first question comes from Marc Goodman from SVB Leerink. Your line is now open.

Hi David, can you give us a flavor for what's going on in the broader market? Previously you had talked about $1.5 billion as I was thinking about the market for this year. Is that still a number you're thinking about? Is it trending higher or lower? Are the competitors getting back out there doing the same thing as you are? Just trying to understand what's happening behind the scenes? Thanks.

Sure. Thanks for the question, Marc. As we enter now into the second quarter, it's been very impressive to see this market rebound back as quickly as it has. As you heard, the fourth quarter was likely the strongest quarter the neurotoxin market ever had, and we saw that continue into the first quarter of 2021. Whereas you look at the market leader, as an example, their revenue continued to hit all-time highs, whereas in the first quarter, you would typically see a dip in revenue relative to the seasonal high period of the core, you didn't see that this year and I think that speaks to the strength of this market. As you pointed out, we estimate the 2022 market value will be $1.5 billion, and we estimate that the 2021 neurotoxin market will be roughly $1.3 billion. We'll continue to watch those trends as we see the year progress, but we feel very good about the market having not only rebounded but that the overall market values will achieve all-time highs this year, which is certainly playing a role in the overall category growth this year.

And then Lauren, should we expect SG&A to trend up as the year progresses?

Thanks. Thanks for the question. I think if you look at the fourth quarter of last year, Marc, and I think we talked about this on the year-end call. It's a range that we're really comfortable with, and that was in the middle '20s and a little bit higher on a non-GAAP operating expense basis to be clear.

Your next question comes from the line of Annabel Samimy from Stifel. Your line is now open.

Hi, everyone. I appreciate you taking my question, and congratulations on a strong quarter. Can you clarify if the $12.2 million was primarily due to restocking, as it seems that companies might be depleting their inventories amid uncertainty? How much of this was restocking compared to on-demand ordering? Also, now that you have more flexibility to invest your capital, what programs are you planning to focus on this year? Additionally, how should we approach the actions of your competitors, particularly regarding the Sintex investment? I've noticed that others are exploring different platforms using social media, so any insights on that would be helpful. Lastly, it’s great to see that Daewoong provided a $25 million settlement payment. Is there any ongoing support from them related to the royalty payments you are required to make? I'd love to hear your thoughts on this. Thank you.

Yes, we dropped off the call, Annabel. We had a disconnect on this side. Do you mind repeating your question? I'm sorry.

Okay. Sure. All three of them. Great. So I guess the first one was of the $12.2 million, how much of that was restocking by the practices given the uncertainty? The second was if you could provide us with any idea on some investment programs that you're going to have going into the year now that you have available capital and are free and clear of any legal overhangs. And then finally, I know that Daewoong had paid a good portion of the settlement fees, given their indemnification. Is there any further assistance that we should expect with regard to the royalty payment that you have to make to Medytox? Thanks.

Sure. Thanks. I'll take the first two. This is David, and I'll turn it over to Lauren to address the Daewoong settlement fee portion. Starting out with the revenue in the first quarter, the $12.2 million in revenue was a sharp bounce back for us in terms of our customer base beginning to place orders once the settlement took place. We continue to watch the reorder patterns and the existing account purchasing rates relative to the fourth quarter, and that will give us confidence in the overall performance of the business going into the second quarter. What we are seeing here is more than just an initial restock. As customers now have clarity around the future of our company, these customers are making larger commitments in terms of the order sizes that they're placing and the number of times that they're ordering with us. That’s why we are confident in our second quarter run rate achieving that $100 million level based on the fact that we're continuing to see the order rates persist beyond the initial March orders well into the second quarter. Separately, as far as the programs are concerned, the Evolus program is our physician loyalty program. What makes it unique is that as customers purchase more Jeuveau, they receive an investment from Evolus into marketing for their practice. As we've now entered the second quarter, more accounts purchasing larger quantities will earn a greater investment from us. At the highest levels, accounts are earning up to $24,000 a year in marketing investment directly from us, and that's taking place in the form of digital, co-branded media on social media and search. It's also happening out of home where we are putting up billboards around the country, as well as other forms of advertisement. We are measuring every aspect of that advertising. The early results are very encouraging, and we are continuing to optimize our efforts. Now I'll turn it over to Lauren to talk about the settlement fee.

Annabel, on the settlement, that's right. Daewoong paid us $25.5 million, which we booked in the first quarter. As you note, they provided us great support going forward on the royalty basis. What we're reporting to you is our gross margin guidance, this is inclusive of paying Medytox and AbbVie and letting out what they wound reimburse us. You'll note in the first quarter, we ran very favorably to our annual 50% to 55% guidance, and our business is doing very well with our marketing programs proving successful right now.

Thank you. And your next question comes from the line of Louise Chen from Cantor. Your line is now open.

Hi, congratulations on all the progress this quarter, and thanks for taking my questions. So, I had a few here. First question I had was, do you have any plans to expand your sales force or marketing efforts given the pickup in sales that you're seeing that are coming for the remainder of the year? Second question is, how do you see sales unfolding beyond the second quarter '21? And then last one is just on product expansion, where are you with that? Would you expect us to potentially see a new product added to our portfolio by the end of this year? Thank you.

Great, thank you, Louise. I'll take the first two and I'll hand over the last question to Lauren. As far as our plans to expand, we have made investments throughout the organization since the settlement took place. We have filled various gaps in the sales force and have expanded by a handful of sales reps as well as our inside sales team. We've also made investments in medical affairs that we believe will continue to drive our long-term growth. As we said on prior calls, we will continue to make selective investments in areas where we see the market is underserved or the opportunity supports it. On the marketing side, the Evolus program is our long-term investment proposition. As accounts purchase more, you can expect our investment in marketing to go up commensurate with our revenue. Based on early results, as we invest more, these accounts are growing faster. Last year, we added nearly 2,000 new customers to Evolus, and in the first part of this year, you should expect that growth of new accounts to slow a bit as we focus on our existing customer base. This really sets the stage for how we think about the back half of the year. The second quarter with a $100 million run rate annualized serves as a strong baseline. The market is seasonal, with the third quarter typically being the slowest. We expect procedural volume to be at an all-time high in the fourth quarter, which should reflect in sales as we continue into the back half of the year. With that being said, I'll turn it over to Lauren.

Great. Louise, thanks for the question on new product expansion. So if you think about it, we have today Jeuveau, approved in the United States and Nuceiva approved in Canada and 31 countries across greater Europe. Our expansion plans there are of course to get the launch ready early next year in Europe. Additionally, on Nuceiva, we're planning to file in additional countries, among them Australia, so that's part of the pipeline growth plan. Your question also leads to business development. We're very singularly focused on the United States and getting ready for that European launch next year. When it comes to business development, there probably isn't a deal in the space over the last couple of years that we haven't seen. The deal flow is very strong. We believe in the quality of our assets, very high quality in terms of data, the branding, and the positioning of it. We are continuing to screen and look, but I would expect something from us would probably be next year, not this year. Thank you.

Your next question comes from the line of Greg Fraser from Truist Securities. Your line is now open.

Thank you. It's Greg Fraser on for Gregg Gilbert. For patients who have gotten Jeuveau, can you give us a sense of the mix between those who are toxin-naive and those who switched from another toxin? And for the folks that have switched from a different toxin, what would you say tend to be the key drivers?

Sure. Thanks for the question. We have been tracking our user demographic very closely through our consumer loyalty program, which, as I mentioned earlier, we have over 160,000 consumers now in that program and the results are very encouraging. The first is we continue to have a very strong presence of millennial users within our loyalty program. To date, a little over a third of consumers are millennials that are in that Evolus consumer loyalty program, and of those millennials, half of them are naive to the category, which gives us a lot of confidence in our ability to continue to drive these new patients into the office. Now putting that aside, what's interesting as we get into the second quarter is that as our media investment dollars are rising because of accounts purchasing at higher volumes to gain our advertising dollars. We expect that will continue to drive more new patients into these offices. We're hearing it firsthand from the accounts that are benefiting from our advertising dollars and we're tracking those results as well in terms of consumer interest in the product. We'll continue to keep you updated on those numbers, but early results are very promising.

Thank you. And your next question comes from the line of Douglas Chow from HCW. Your line is now open.

Hi, good afternoon. Thanks for taking the questions. Just obviously the bulk of the selling took place I presume after the settlement, I mean, when we look at that $12.2 million. Is it fair to think of that you would have sold double what you sold if you had had a more normal quarter, say if the settlement happened on December 31?

Yes. The large majority of sales in the first quarter occurred after the settlement on February 19th. So, the latter part of the quarter, and as we stated earlier, what surprised us was that the momentum has continued and has continued well into the second quarter with our customer orders.

Right. And it really allows us to get to, Doug, this is Lauren. How are you? It allows us to get to an annualized net revenue run rate of $100 million, really setting up some nice momentum for that.

Okay. Yes, I'm just trying to understand. I think Annabel asked about sort of restocking that may or may not have taken place. But it sounds like this was really just a resumption of demand and there weren't people trying to build up inventory; it sounds like it was really going out the door from you and indications.

That's exactly right, Doug. As you know, we launched Jeuveau in May of 2019, and the ramp we had in the back half of 2019 exiting with just about $19 million in revenue was a very strong ramp, one of the top five launches in aesthetics as we messaged at the time. We believe what you're seeing now as we enter the second quarter is the resumption of a trend that we left behind, due to COVID in the front half of last year and somewhat impacted by the ITC in the back half of last year. We're now starting to see the momentum regaining where we left off from the launch.

And just one final question, I mean, when you think about the different customer segments. You've obviously historically focused on millennials. Are you hearing anything about the market sounds to be really strong right now, any particular customer segments that are driving the market right now?

As you said, the overall market is very strong. There isn't a customer segment that you could look at that isn’t rebounding very strongly, and we're starting to see it's not just related to toxins; it's all aesthetic procedures. You could argue it's bigger than aesthetic - all beauty products are seeing a 'zoom boom' is sort of the industry speak that I hear consistently, and we're hearing it from practices. But what's also important here is that following COVID, there was a rebound of new patients just coming back to get treated. Once we got past that initial rebound, this growth has persisted, and we're continuing to see it. This growth is fueled by the millennial segment, which will be the largest segment in aesthetics over the next two to five years. This demographic is more ready and willing to take action than any of the prior demographics in aesthetics as we've measured them. We believe this tailwind is driven by this demographic entering this market at a faster rate than we've ever seen.

And we are now down to our last question for today, Vamil Divan from Mizuho Securities. Your line is now open.

Great, thanks for taking the question. So maybe a couple of just to build a little bit on what you've already discussed, but one, could you give us a sense of what you think your share is of the market? We've obviously heard from the other public companies, but just kind of overall maybe for the month of March or exiting March. And then previously, you sort of comments before COVID about being number two in market share. Is that still something you think maybe within the next year or something you can achieve? Maybe you can just kind of update us on your thinking there. And then just on the commercial situation, could you sort of compare where things are now in terms of in-person versus virtual interactions with providers relative to where you were maybe a year ago and where things are now and how you see that evolving over the next few months or quarters?

Great, thank you, Vamil. Let me just point out, earlier, because of the bond period, our revenue was significantly impacted in the front end of the year, which is why a large majority of the revenue came into the back half of the quarter. We expect that our share will trade back into the mid-to-high single digits as we had exited prior to the ITC, and we'll continue to build from there. That being said, last year was clearly a setback due to COVID and the ITC, and we're very pleased now in less than 90 days of having settled the case that our business has come back on as strongly as it has. We're going to continue to invest in these trends, which we believe are very durable and built on long-term partnerships with these practices, given the growth that we're driving in partnership with them. We'll give you an update in terms of how we see those long-term trends playing out in the future quarters.

Yes, I think that Vamil will help us here. I think the last question was how much our practices are back to operating versus being virtual. Is that right?

Yes, I guess you had the practices or your interactions with the practice, how much virtual, how much is in-person and do you expect a lot more in-person going forward or do you think you’re already in sort of a steady state for the next few months or quarters?

Yes, we think business is back to normal course. We're following all the proper COVID protocols within our sales force, but we do have open access into these accounts. It would be on exception that an office is not comfortable with the sales rep in there supporting them. Some of the programs we have require that one-on-one time with these practices, and since they're open, they prefer to do that in person over the phone. That being said, we have a digital platform that powers this company, and since COVID, we've seen the majority of the transactions for Jeuveau coming directly through our Evolus app, which has enabled us to continue to drive our revenue and do that on a lower expense base than what we had pre-COVID. We've redirected some of the incremental expense we put back into the company directly into marketing expenses to drive growth. On one hand, practices are open and they’re open to seeing our reps, and on the other hand, we have a very efficient model that doesn't require us to physically be in the office regularly to take orders. When we do make sales calls, we spend more time focusing on how we grow their practice, rather than taking orders because our digital platform is managing that.

Thank you, and no further questions at this time. That concludes today's conference call. You may now disconnect.