Good day, ladies and gentlemen. And welcome to the Second Quarter 2022 Earnings Conference Call for Venus Concept 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 today 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 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 the generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of 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. Dom Serafino, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Thank you, operator, and welcome, everyone, to Venus Concept's second quarter of 2022 earnings conference call. I'm pleased to be joined today by our Chief Financial Officer, Domenic Della Penna; and Ross Portaro, our President of Global Sales. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with an overview of our revenue results in the second quarter and a discussion of the initiatives we have implemented to focus our commercial strategy, streamline our global operations and enhance the cash flow profile of the company. Then Domenic will provide you with a more in-depth review of our quarterly financial results, our balance sheet and our guidance for full year 2022, which we updated in today's press release. And then we will open up the call to your questions. With that overview in mind, let's get started with a review of our second quarter revenue performance and overall business trends. We reported GAAP revenue of $27.3 million, up 6% year-over-year. The increase in total revenue year-over-year was driven by 7% growth in sales to U.S. customers and 5% growth to sales to international customers in that period. Total systems and subscription revenue increased 9% year-over-year in Q2, and our procedure-related disposal revenues increased 2% year-over-year, excluding our discontinued VeroGrafter revenues from the prior year period as we exited that business in Q4 2021. Importantly, our total revenue growth in Q2 was driven by the key franchises we prioritized as part of our commercial strategy we have discussed in recent investor calls. Specifically, excluding Bureau & Grafters program revenue, sales in our growth franchises increased 13% year-over-year in Q2, fueled by continued strong demand for our BlissMAX following the initial commercial launch in March. And our ARTAS iX robotic system adoption was strong this quarter, posting 58% growth year-over-year on system sales. While we are pleased to see continued strong demand for products in our growth franchise in Q2, our total revenue results were below expectations. We experienced significant sales force disruption in a key U.S. market that had a material impact on our results. This was a leadership issue in this key U.S. market, which unfortunately drove regrettable turnover in our sales team and lower sales force productivity in this U.S. market during the quarter. We have since consolidated sales leadership to address this issue and have rebuilt the sales team in this key U.S. market aligned with our core values and our sales strategy. That said, we are very encouraged by the strong results in the rest of the U.S. market in Q2. Our team outside of the market where we had disruption delivered growth in subscription and system sales of 24% year-over-year and continues to build a very strong qualified pipeline. The results validated our enthusiasm heading into the second quarter. We have experienced significant growth in qualified pipeline as we entered Q2, and we are ready to capitalize on the improving operating environment with confidence in our belief that we have the right product portfolio and the right commercial strategy, which has us extremely well positioned for our future success. The softer-than-expected total revenue in Q2 did not change our level of conviction and commitment to driving improving profitability and enhancing our cash flow profile of our business. In fact, we undertook a comprehensive review of our business and our updated expectations for potential growth and profitability in all regions of the world in which we operate. We have developed a series of strategic initiatives to further enhance the cash flow profile of our business and to accelerate our path to long-term sustainable profitability. These strategic initiatives are already being implemented, and we expect to realize benefits to our cash flow profile in the second half of 2022. The strategic initiatives we are implementing fall into two brackets - a more focused and targeted commercial strategy and streamlining of our global operations. With respect to the more focused commercial strategy, we will continue to monitor our direct sales team in the U.S. with programs and messaging focused on key product lines, including those with meaningful recurring revenue streams. We are prioritizing our cash system sales to maximize the potential profitability and cash flow that our highly differentiated technology should contribute as we address the continued strong demand in the U.S. market. Note, we are not shelving our industry-first subscription model. We will continue to offer this differentiated business model for certain products in certain geographic markets going forward. We will, however, bring a more disciplined approach to the subscription model going forward, specifically stricter pricing and credit qualifications to ensure our total company financial results are not overexposed to fluctuations in the global macro and interest rate environment. We expect these commercial initiatives to result in a material shift in our mix of systems and subscription revenues, and we are targeting more than a 75% system sales to be cash sales in the second half of 2022 compared to 49% in the first half of the year. We have aligned our sales force compensation plan to support this, and we expect the team to fully embrace this important strategic initiative. While the expected shift towards cash sales has an impact on our total revenue expectations for 2022, the improvement in our cash flow conversion in the second half of '22 justifies our efforts in this area. Now with respect to our efforts of streamlining our global operations, based on comprehensive review of our international markets, we plan a series of actions that may include closing offices, investing, reorganizing, and eliminating redundant operations over the balance of 2022. Our growth and profitability objectives in the coming years cannot support unprofitable operations in international markets. While these activities are expected to represent a modest impact on our total revenue results in 2022, they will reduce our operating expenses in the second half of the year and materially reduce our annualized expenses in 2023. As you may recall, we implemented a restructuring of our global commercial footprint in 2020, including divesting our interest in smaller, less profitable international markets and reinvesting those resources in higher opportunity markets like North America and key countries dire in EMEA. Domenic will provide you additional financial detail on these initiatives, as well as additional areas of where we are working to optimize our go-forward operating expense and cash flow profile to support our focus on becoming a sustainably profitable entity in the future. Before I turn the call over to Domenic, I wanted to provide you an update on the progress we are making in the areas of new product development, clinical validation, regulatory clearances, and commercialization. In April, we announced the receipt of a new 510(k) clearance to market the BlissMAX with an expanded indication for use in new areas of the body and an increased RF energy output. This new clearance further expands our single body contouring workstation versatility and utility with its indications for use to include non-invasive lipolysis of the back and sides in addition to the abdomen and flanks and by increasing the maximum RF energy output by 50%, BlissMAX offers physicians more efficiency and flexibility in treatments, which we believe will provide even stronger clinical results and ultimately increase the revenue for our customers. The early market response to BlissMAX has been notable, and sales of this highly differentiated body contouring workstation have been strong during the initial commercial launch. We continue to expect sales of BlissMAX in the U.S. and Bliss outside of the U.S. to drive strong contributions to total company growth in 2022. Finally, we are proud of the continued progress we have made in recent months to advance our development, regulatory, and clinical strategy for Aime, our non-surgical robotic technology platform for medical aesthetic applications. We announced the 510(k) submission for the general indication of tissue excision and skin resurfacing on March 31 and have been engaging with the FDA during the review of our submission. We continue to believe that Aime has the potential to bring true innovation to the medical aesthetics market by changing the way procedures are performed and bringing a new level of speed, safety, and clinical predictability to our customers. The prospects for Aime are very compelling, and we look forward to introducing this disruptive technology. It is important to remember that Aime - the platform, excuse me, is just a platform that has been designed to support numerous different clinical indications via a unique upgrade path for the clinicians, making it extremely cost-effective and differentiated from any products currently available in the aesthetic device market today. In parallel to the process of submitting for general indication for tissue excision and skin resurfacing, we have also made progress towards the strategy to secure specific clinical indications for Aime for treatments on the face. We are pursuing an IDE clinical study evaluating the safety and efficacy of using Aime for the treatment of moderate to severe facial wrinkles. We announced first patient treatments in April and our clinical investigation sites are busy enrolling and treating 70 patients for the study. This study will support our 510(k) submission for specific clinical indications for the treatment of wrinkles and cheeks, which will further expand our annual addressable market opportunity to enhance our long-term growth profile. Now with that, let me turn the call over to Domenic Della Penna who will provide a detailed review of our second quarter financial results and discuss our balance sheet, financial condition, and our updated 2022 guidance.

Thank you, Dom. Given Dom's detailed review of our revenue results, I will begin with a review of our financial performance across the rest of the P&L. For avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the second quarter of 2022 on a GAAP basis and all growth-related items are on a year-over-year basis. Gross profit increased $0.3 million or 2% to $19 million. Gross margin was 70% compared to 72.5% of revenue in the second quarter of 2021. The change in gross margin was driven by changes in mix as well as by changes in foreign currencies, which depreciated relative to the U.S. dollar in the period. Total operating expenses were $26.2 million compared to $17.2 million in the second quarter of 2021. The change in total operating expenses was driven by an increase of $6.4 million or 82% in general and administrative expenses, an increase of $0.4 million or 20% in research and development expenses, offset partially by a decrease of $0.6 million or 6% in sales and marketing expenses. In addition, in the three months ended June 30, 2021, operating expenses included a bad debt recovery of $3.2 million due to a reactivation of accounts impacted by COVID-19, which did not repeat in the three months ended June 30, 2022. In fact, our GAAP operating expenses include an additional $2 million reserve for bad debt expense compared to what our prior guidance had assumed. The prior year period also included a $2.8 million non-cash gain on forgiveness of government assistance loans, which did not benefit our GAAP OpEx in the second quarter of 2022. Excluding the impacts of bad debt expense and recovery in both periods, as well as the non-cash gain last year, our non-GAAP operating expenses increased $1 million or 4% year-over-year. We believe this better reflects our efforts to prudently manage our expenses in the current high inflation environment. In addition, we continue to prioritize the strategic investments we are making in support of our key growth initiatives, including our commercial launch of the BlissMAX and our development, regulatory, and clinical programs for Aime. As Dom mentioned earlier, we've implemented a series of initiatives to streamline our global operations, reduce our operating expenses, and improve our cash generation. While these initiatives are intended to enhance our multi-year financial profile, we expect to realize early benefits of these activities in the second half of 2022. Specifically, by prioritizing cash system sales, we significantly improved cash flow in the second half while minimizing the economic risks we face in this high inflation setting. We now expect GAAP operating expenses of approximately $95 million to $97 million for the full year 2022 compared to our prior guidance, which had assumed GAAP OpEx in the range of $98 million to $101 million. Returning to a review of our second quarter financial results. Total operating loss was $7.1 million compared to income of $1.5 million in the second quarter of 2021. Net loss attributable to stockholders for the second quarter of 2022 was $10.6 million or $0.16 per share compared to net income of $0.4 million for the second quarter of 2021. Adjusted EBITDA loss for the second quarter of 2022 was $5.5 million compared to adjusted EBITDA of $0.5 million for the second quarter of 2021. 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 30, 2022, the company had $10.5 million of cash and cash equivalents and total debt obligations of approximately $77.5 million compared to $30.9 million and $77.8 million, respectively, as of December 31, 2021. Cash used in operations for the six months ended June 30 was $19.8 million, which is flat compared to the prior year period. As discussed on our recent calls, the use of cash to date is directly related to our strategic initiative, which prioritized investments in inventory and advances to suppliers to ensure our ability to meet customer demand as we move through 2022, given the realities of ongoing supply chain challenges. We continue to expect improved working capital trends as we move through 2022. Turning to a review of our updated guidance. As detailed in our press release, we updated our revenue guidance for the full year 2022 period. The company now expects total revenue for the 12 months ending December 31, 2022, in the range of $110 million to $113 million, representing an increase of approximately 4% to 7% year-over-year compared to total revenue of $105.6 million for the 12 months ended December 31, 2021. For modeling purposes, we would like to offer the following considerations to help investors understand the underlying assumptions driving our 2022 growth and profitability targets. First, our updated total revenue range reflects the following, the largest driver of the change in our guidance range, representing roughly two-thirds of the total revision comes from our strategic initiative to drive more cash flow from the sale of our systems, specifically in shifting our revenue mix towards cash sales versus subscription sales. As Dom mentioned earlier, while the expected shift towards cash sales has an impact on our total revenue expectations for 2022, the improvement in our cash flow conversion in the second half of 2022 justifies our efforts in this area. The remaining one-third of the revision to our 2022 revenue guidance range comes from the combination of the softer-than-expected sales results in the second quarter and the impact of our strategic initiatives to streamline our global operations, specifically the transition from a direct to distributor-based sales model in certain international markets during the second half of 2022. With respect to the updated assumptions supporting our P&L expectations for 2022, we now expect our gross margins of approximately 67% compared to 70% in 2021. The year-over-year change in gross margins continues to reflect impacts from changes in mix, as well as the inflationary headwinds discussed on our prior calls, our updated gross margin range also includes the impact of changes in exchange rates compared to the prior year period. We now expect total GAAP operating expenses of approximately $95 million to $97 million representing growth of 7% to 9% year-over-year compared to our prior guidance range of $98 million to $101 million. The revised GAAP operating expense range reflects the incremental bad debt expense realized in Q2 2022, which was not contemplated in our prior guidance range and continued prudent expense management of our expenses in order to prioritize the strategic investments we are making to support our key growth initiatives. It also reflects the early benefits of the strategic initiatives we have implemented to streamline our global operations, which we estimate together represent roughly $5 million to $6 million of savings over the second half of 2022. Importantly, these initiatives were designed to enhance our multi-year financial profile and thus we expect to realize approximately $10 million of GAAP operating expense reduction on a full year basis in 2023. We now expect interest expense of approximately $4.5 million compared to $4 million previously, driven by higher interest rate assumptions on our variable-rate debt. There are no material changes to other modeling considerations we shared on our last earnings call. We continue to expect non-cash G&A of $4.5 million, non-cash stock comp of approximately $2.4 million and weighted average shares outstanding to be approximately 64 million. Finally, our updated total revenue guidance range for the full year 2022 includes the assumption that third quarter total revenue will be in the range of $24 million to $25 million.

With respect to our efforts to secure non-dilutive financing, we are in discussions with potential partners interested in the more than $73 million of current and long-term trade receivables on our balance sheet. By way of reminder, current subscription agreements are reported as part of accounts receivable on our balance sheet each quarter. These accounts receivable do not bear interest and are typically not collateralized. We believe the potential cash infusion from a factoring agreement represents an attractive non-dilutive financing option for the company. With that, operator, we will now open the call to your questions.

Thank you. Our first question will come from Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Good morning, Dom, Domenic, and Ross. How are you doing?

Good morning, Jeff. We're good.

Good morning.

I guess first question is, could you dive in a little bit on the sales force disruption? It was one geography within the U.S. representing 1% of the U.S. and how many individuals? And where are you on the - as far as advancing a new sales force into that territory?

Yes. So, thank you, Jeff. Hold on, Ross… Just for competitive reasons, we're not going to get into the specifics of the geography. We will say that we were disappointed with the leader didn't really fit with sort of the direction and the consistency in the company's desires to continue to grow the business. It did impact the number of sales reps. Once we identified this issue, it was unfortunately late in the quarter. And it did significantly impact the overall performance of that particular region. That said, I think it's really important to highlight that the team outside of this particular market did show a very significant 24% year-over-year growth and has continued to build a very strong pipeline. The leadership that was running at that particular region has now been aligned with the entire U.S. territory. And we feel very comfortable based on where we are right now with the team, and I'm happy to say that the majority of the team that exited during this very difficult period of time has been replaced in the region, and we do feel confident as we go forward that these individuals will get their feet under them and will be able to contribute certainly in the back half of 2022.

Okay. Got it. Can you talk a little bit about supply chain challenges? It looks like your margins for the second quarter held up rather well. And it sounds like you do have some challenges in the back half. Could you talk to us a little bit about what's going on out there and why it didn't impact Q2, but you expect it to impact the latter part of the year?

You will handle that.

So Jeff, what we're anticipating in the second quarter is - sorry, the second half is more of the same in terms of FX. So we had a roughly a $1 million FX impact in Q2 with most major currencies depreciating vis-a-vis the U.S. dollar. So we expect that to continue, and the impact of exchange is worth about 100 basis points. In addition, we expect inflation to have an impact of between 80 and 100 basis points. And then thirdly, we're expecting mix to have an impact of between 100 and 120 basis points. So that collectively is about 300 basis points relative to the 70% we experienced in Q2. Now I can offer the additional insight in relation to cash versus subscription split. So we pulled down our revenue guidance in the second half, but that guidance has not necessarily been pulled down for the hair side of the business. So the ARTAS in particular is not impacted because that's a fully cash business anyway. But because ARTAS has slightly lower margins than the subscription side of the business, when you pull the one lever down and you hold the ARTAS side, which is still continuing to perform very strong, that's where you see a slight bit of mix impact of approximately 100 basis points. And then the balance is inflationary impact, which up to date, we've managed pretty well, but that sort of is how we're looking at it and how we've hedged in the second half.

Okay. And on the 3.2% bad debt recovery is reflected where?

So the $3.2 million relates to a bad debt expense recovery that we experienced in the second quarter of 2021 which did not repeat in the second quarter of 2022. So it was a onetime benefit because when we experienced the dramatic COVID shutdown in 2020 and 2021, a lot of our customers stopped paying and then we were able to reactivate those customers. Many of them were reactivated in the first half of 2021. And in particular, in Q2, we realized a bad debt expense recovery with the activation of several hundred accounts, and that is a one-off benefit in Q1 of 2021, whereas in Q2, we actually experienced some negative impact on the bad debt side. So instead of a recovery, we ended up booking about $2 million more than we would normally book.

Okay. Perfect. I'll jump back in queue.

Great. Thank you.

Thank you. Our next question has come from the line of Marie Thibault with BTIG. Please proceed with your questions.

Morning. Thanks for taking the question. I understand the shift to prioritize cash sales and help your cash flow profile, but I wanted to hear a little bit about what you're seeing on patient demand and appetite for discretionary spending. I'm trying to dig into customer willingness to pay upfront for system at a time that we're hearing a lot more pressure on the CapEx environment. So any commentary there would be helpful.

Yes. Look, I think that there's ebbs and flows, Marie, and good morning. I think overall, the thing that we're really focused on right now is we spent the first 12 years of the company's life, focusing a lot on promoting the differentiated subscription model. And so the impact it's moving to cash versus subscription is more based in efforts than it is the realities of the market demand. Our pipeline has grown exponentially in the last 30 to 60 days, and we feel very good about that. And especially quarter is sort of following the performance of the region in the U.S. that grew 24%. We don't see a real slowing down per se of demand. Now having said that, there's always the credit challenges and risks associated with dealing with third-party lenders. But to this point - and it's early, but to this point, we have not really seen any issues there. As far as patient traffic, based on our IoT data that we see on a routine basis, I can tell you that patient activity has consistently outperformed pre-COVID trends into clinics around the world. So I think that this is more for us anyway, an issue of getting our sales reps rightsized in terms of their messaging and what they focus on day in and day out when they talk to our customers and taking full advantage of the significantly increasing pipeline, especially in our hair franchise and in our body franchise.

Okay, that's very helpful, Dom. I'll ask my follow-up regarding the improvements in cash flow conversion expected in the second half. Can you quantify that as we consider the improvement cadence? Also, do you have any updates on the goal of achieving positive cash flow? I remember that was previously targeted for Q4, but I'm not sure if that goal has changed. Thank you.

So Marie, we're expecting that the conversion to previously, we said that we'd be cash flow positive in the fourth quarter. We're still on that track with this conversion. And in fact, we expect that a good proportion of those cash - of the subscription sales will, in fact, convert to cash, but not all of them. So when we pulled down our guidance, we've referenced that approximately two-thirds of that impact is related to this shift. And based on early results and thus far to the - almost the midpoint of August, we're in line with those expectations as far as that trajectory to convert over from subscription to more cash deals, which doesn't mean we're abandoning subscription. But we feel that the combination of that incremental cash that previously was not in any of our plans is a cash benefit to us in the second half. But the other reminder is that we continue to have $73 million of receivables on our books, and we'll continue to pay even though we're deemphasizing the subscription business. So in effect, you have the benefit of the previous model continuing to pay dividends in the form of an annuity and then you've got this cash conversion that are coming in, which were never anticipated. So this is the fundamental shift in benefit that we're going to have over the next year, 1.5 years before that $73 million starts to really dwindle down. So we're looking at this inflection point as being a substantial pivot in the business that will significantly help us. But we don't want to give any specific cash targets at this point. Okay. Understood. I'll get back in queue. Best of luck. Thank you, Marie.

Thank you. Our next question has come from the line of John Block with Stifel. Please proceed with your question.

Great. Thanks, guys. Good morning, The first question is the emphasis on the cash sales. I guess maybe a couple of questions to that. Are there concerns about, call it, further sales force disruption with the change in strategy that might necessitate a different type of web or just a change in behavior? And then I would think the subscription model is what's really needed in this type of environment? Just give the docs a little bit more flexibility. I know you're not abandoning it because you said several times, but you're arguably deemphasizing. So maybe if you could just talk to that. Should we be concerned about further sales force disruption with this move? And then why this move of that gives the docs a little bit more of a flex if you would, in proceeding with the purchase in this type of uncertain environment. Then I've got a follow-up.

Yes, that's a great question. There are several parts to this answer. First, we don't believe this will have any significant impact on our sales force. We've done a good job replacing those who left due to challenges in one region, and Ross can provide more details on that. Now is the right time for us to make this change for a few reasons. As we continue to develop robotic technologies focused mainly on dermatology and plastic surgery, it's crucial that we concentrate our efforts on the technical advantages of our technology rather than solely on ROI, which was the primary focus when we discussed the subscription model previously. This aspect is less critical for our core audience compared to the non-core or medical spa market, where we have historically performed very well. We believe maintaining both programs gives us the flexibility to initiate conversations around traditional cash transactions, similar to our competitors. We leverage what we consider to be best-in-class technologies and demonstrate this consistently through side-by-side evaluations with competitive products. Additionally, we can cater to new physicians starting practices who may not have an established credit history. This gives us control and discipline that were lacking in the past when offering subscription models. By shifting our approach, we're managing our own financial future and ensuring we avoid situations that could lead to unwanted dilution. We're making this transition with a focus on achieving profitable outcomes for both the company and our shareholders.

Got it. Very helpful. Could you provide an update on the patients completed in the first part of the pivotal study? Has that information been submitted to the FDA? What are your expectations regarding the Freedom timeline? Also, concerning cash flow, you mentioned a positive cash flow in Q4, which I believe the Street estimates to be around $39 million to $40 million. Can you elaborate on new revenue and how it will affect operational expense streamlining and the shift towards more cash sales?

We are in the final stages of completing Phase 1 of the Aime clinical trial. There is a waiting period between the last treatment and the measurement, after which we submit to the FDA. We expect that initial submission to happen soon, as we are in communication with the FDA regarding the timeline for clearance. The patient trials are ongoing, and we are almost finished with the first 12 patients as requested by the FDA. There will be a mandatory waiting period before we can submit that data, which should occur before the end of the year. We anticipate reengaging with the remaining treatments in early 2023, aiming for a full commercial release later in the year. This full commercial release will have an on-label specific indication for the face, and we expect to receive general clearance that will allow us to begin limited commercialization of this product later this year.

It does. Sorry. And then I was just going to ask anything that made a lot of sense. Anything on freedom or the cash flow?

Yes. As part of the restructuring, we carefully evaluated our position and decided to streamline some of our product offerings. The Freedom category is a good example; however, we cannot allocate resources to it at this time because it operates in a niche market. We committed to focusing mainly on the OB/GYN community when we eventually engage with this category. We have strategically chosen to concentrate on what we're currently excelling at and are exploring various alternatives to introduce that product to the market, potentially through a third party rather than directly. At this stage, we are not pursuing that project as we prefer to concentrate on initiatives that provide the greatest return in the short to midterm, and we will reassess that specific project later. Dom, would you like to address the second part? Jon, could you please repeat your question? You covered a lot, and I just want to ensure I understood it correctly.

Sure. You’re correct. I included a lot in my previous statements. I was referencing the earlier guidance that indicated we would be cash flow positive in the fourth quarter, and I believe the market expectation was around $39 million to $40 million. At a high level, I'm trying to reconsider, given that some of our operating expenses are decreasing and we're transitioning to more cash sales, the revenue needed to achieve cash flow positivity might not be as high. Do you have any benchmarks or insights related to this thought process?

Yes. So we've guided the full year $110 million to $113 million and then for Q3 in and around the $24 million to $25 million range. So if you do that math, you're sort of left with the difference, which is in the lower end of the 30s for Q4. That guidance combined with the OpEx cuts that we're making in the second half of between $5 million and $6 million, we should render us profitable in that fourth quarter based on revenue and our gross margins in around 67%. So that's what we're guiding. That's what we're aiming for. And in addition, in 2023, the annualized impact of the restructuring savings amounts to about $10 million in that year. So that will put us in a much better position in 2023. Notwithstanding that we're calling down the revenues for this year based on the shift and subscription being more geared towards cash without necessarily abandoning subscription. It's a combination of the cash shift as well as the OpEx cut and refocusing the business.

That's perfect.

Our next question comes from Anthony Vendetti with the Maxim Group.

Thanks, and good morning. I would like to follow up on a strategic shift. Can you provide some insight on average selling prices? Are they remaining stable in the current environment? Considering the transition to a cash alternative, do you anticipate average selling prices to decrease somewhat? Additionally, in this environment, we could potentially see some reduction. Looking back at the financial crisis from 2007 to 2009, we observed revenue declines in some instances quite sharply. How do you plan to navigate through this if we enter a recession? What is your strategy or plan?

Let me address the second part of the question, and then I'll turn it over to DDP for the first part, if that's alright, Anthony. I founded this company in 2009 and 2010, and we established a business model aimed at protecting customer opportunities by implementing a subscription model. This is the primary reason we continue with the subscription approach. However, you might recall that during 2007, 2008, and 2009, the device business experienced a downturn, leading to significant pricing pressure. This was largely due to lenders being reluctant to provide credit, or if they did, it was under very restrictive terms with various guarantees. Interestingly, during that period, patient traffic remained relatively steady, and in some areas, it actually rose, as people sought to improve their well-being during tough times, utilizing whatever disposable income they had. In today's market, where the job sector is quite healthy, we are not witnessing any adverse effects at the consumer level. We are committed to maintaining our subscription model, but with a refined approach that emphasizes a cash-first conversation driven by technological advantages, setting us apart from competitors. If a customer faces situations like entering a new clinic, we have strategies to retain them, unlike our competitors who may hesitate to offer such options due to their reluctance to guarantee the technology’s capacity to generate consistent revenue over the three years of our subscription model compared to traditional leasing arrangements. DDP, would you like to discuss the other points?

So Anthony, on the ASP side, in the second quarter, our ASPs by device actually held up very well. In fact, on the artist side, we were actually slightly above our own internal targets on ASPs. Where we have the challenge is that for the rest of the world, where we've got currency impacts, although the ASP in local currency in markets like Spain and Germany, etc., or the euro, when we convert to U.S. dollars, that's where we get hit on the ASP side. So currencies we're holding, but we're not able to get that extra bit to offset the currency impact, which we estimate to be about 8% on Rest of World in Q2. And we've modeled that in the second half, which causes a bit of the margin compression that I spoke about earlier.

Anthony, there is one other thing to consider here as well. As we take a look at some of the non-performing OUS markets, we will be converting from direct operations to distributor operations, and that by itself has a bit of an impact on the ASPs because we're selling to distributors at obviously lower pricing. So these are modest shifts. But to DDP's point, we've been able to maintain pretty consistent ASPs across the product portfolio, especially in North America.

Okay. Great. And then just lastly for DDP. One of the things mentioned in the press release was you're exploring non-dilutive financing. Maybe just talk about what is available to you at this point? And what type of nondilutive financing, if you were to seek that, what it may look like?

Yes, we can't share too much on that topic, Anthony, but there are several options for non-dilutive financing. One key opportunity is to utilize our significant receivables balance, which exceeds $70 million, encompassing both long-term and current receivables. This is clearly an area we are closely examining and actively pursuing. Additionally, there are other avenues for non-dilutive financing, such as partnerships. These efforts are currently in progress. Alongside our restructuring plan, we feel optimistic about our direction.

Anthony, the only thing I'll add to that is that we do have a few opportunities that we're exploring that could bring to DDP's point strategic partnerships to help develop certain categories, especially in the robotics area on behalf of these entities, and that would represent, I call it, a cash injection that would be non-dilutive.

Okay. Great. That's helpful.

Thank you. We are currently showing no additional participants in the queue. With that, that does conclude our conference for today. Thank you for your participation. Have a great weekend.

Thanks, everybody. Thank you.