Please standby. Good day, ladies and gentlemen. Welcome to the Third Quarter 2023 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 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 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. Rajiv De Silva, Chief Executive Officer of Venus Concept. Please go ahead, sir.

Thank you, operator, and welcome everyone to Venus Concept's third quarter 2023 earnings conference call. I'm 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. I will begin with a brief overview of our Q3 results and notable operating developments in recent months. Then Hemanth will share an update on our recent progress in several key initiatives of our corporate turnaround strategy. Dominic will then provide you with an in-depth review of our third quarter financial results and our balance sheet and financial condition at quarter-end as well as a review of our 2023 financial guidance, which we reaffirmed in today's press release. Then we will open the call for your questions. With that agenda in mind, let's get started. As you would have seen in our press release issued today, in the third quarter of 2023, we delivered total revenue of $17.6 million. These results are within the range of preliminary revenue expectations we provided as part of our debt restructuring announcement on October 5. While our third quarter total revenue declined on a year-over-year basis, the majority of that decline can be attributed to our accelerated restructuring activities in certain international markets. We were pleased to see improvements in revenue trends in the US during the third quarter, where sales declined modestly on a year-over-year basis but increased 14% on a quarter-over-quarter basis in Q3. Similar to what we have discussed on our recent earnings calls, the year-over-year revenue decline is a direct result of the strategic initiatives we are executing this year. Specifically, we are transitioning the company to higher-quality cash revenues, exiting unprofitable direct operations in certain international markets and implementing a series of restructuring activities, which altogether are expected to enhance the cash flow profile of the business and accelerate the path to long-term sustainable profitability and growth. We are pleased with the progress we have made in our strategic turnaround plan in 2023. Macroeconomic headwinds continue to pressure the aesthetic sector as a whole, with higher interest rates affecting our customers' ability to finance new capital equipment purchases and deals are taking longer to close. In addition, the inflationary economy has impacted higher-priced procedures such as those related to our hair business. Despite the tougher operating environment, there are early signs, particularly in the US that our efforts to reposition the business and focus on key strategic and operational initiatives are beginning to bear fruit, including: first, we are pleased to report that cash system sales represented 69% of total systems and subscription sales compared to 59% in the prior year period. Our progress on this initiative is even more evident when looking at the mix of cash system sales in the US, which represented 76% of total US systems and subscription sales over the first nine months of 2023 compared to 44% in the prior year period. Cash system sales to US customers increased 12% year-over-year in Q3 and have increased more than 40% over the first nine months of 2023, which reflects the team's strong execution towards our strategic priority to transition the company to higher quality cash revenues. Second, our restructuring activities accelerated in certain international markets during the quarter. By way of reminder, one of our key strategic priorities in 2023 was to optimize our commercial and operations strategy in certain international markets and to reinvest those resources in higher-opportunity markets to enhance the company's longer-term growth and profitability profile. Our restructuring activities outside the US have included divesting our interest in smaller and less profitable markets and transitioning to partner with distributors. With a target of having our new distributor partners in key markets identified, signed up and operational in the majority of our key international markets by early next year, we expect to be well positioned for a return to growth in 2024. We recognize that much of the work we are doing this year has yet to show itself in our top-line results. This was largely expected when we outlined our plan earlier this year. Candidly, the macro environment has represented more of a headwind than we had contemplated. However, our team is executing well despite these unexpected challenges. Importantly, despite the softer-than-expected revenue results this year, the continued focus on restructuring and rightsizing the business, reducing costs and simplifying the organization are progressing well ahead of expectations. We have reduced our non-GAAP operating expenses by nearly $17 million over the first nine months of 2023, representing a 22% reduction year-over-year. We have reduced our cash used in operations by 49% over the first nine months of 2023 and continue to target a 50% reduction year-over-year for the full year 2023 period. We believe the reduction in expenses and cash used in operations to date represents the clearest evidence that we are on the right track towards our goal of enhancing the cash flow profile of the business and accelerating the path to long-term sustainable profitability and growth. One other noteworthy item I wanted to discuss briefly. On October 5, we announced an agreement with City National Bank of Florida and Madryn Asset Management to restructure our existing debt obligations. As discussed on our recent earnings calls, we have been actively engaged in discussions with our key lenders to ensure the requisite runway that allows us to execute our strategic plan and successfully achieve cash flow breakeven in the second half of 2024. Restructuring our debt obligations represents the achievement of an important milestone for the company, one that reduces our total debt, deferred principal and interest payments, and lowers our near-term cash needs. These debt restructuring activities provide Venus Concept with additional liquidity to support the maintenance of ongoing operations, execution of our near-to-medium-term strategic turnaround objectives and funding of priority investments in key R&D initiatives. We appreciate the valuable partnership and continued support from our lenders. We look forward to continuing to engage with our lenders as we execute our strategic plan. I would now like to turn the call over to Dr. Hemanth Varghese, who will share an update on recent progress in our restructuring programs, new product pipeline initiatives and our recent company-wide rebranding initiative, which marked an important inflection point in our strategic turnaround.

Thanks, Rajiv. As Rajiv described earlier, we've already made considerable progress against several key initiatives of our corporate turnaround strategy. We are executing the strategic plan we outlined at the start of the year on or ahead of expectations. Let me share a little color in key areas where we're making notable progress. First, our cost reduction and cash management initiatives designed to accelerate our path to cash flow breakeven are progressing at or ahead of expectations. Notably, the decision we made in Q2 to target additional cost containment initiatives, including identifying areas where we can implement phased R&D investments has helped protect our near-term cash runway and accelerate our path to cash flow breakeven in the second half of 2024. Second, we are encouraged by the early momentum we are seeing as a result of the targeted programs implemented in Q2 to provide more operational flexibility to our US commercial teams, including new financial tools and transaction support needed to provide an enhanced level of customer and deal support. We continue to expect improvements to overall sales productivity and customer responsiveness in the challenging environment that many of our customers are facing. Third, aside from the US, our efforts to rightsize the business have been accelerated in recent months. We are rationalizing our international infrastructure, reducing costs and simplifying the organization with a keen focus on establishing the optimal mix of direct presence with distribution partners in key international markets around the world. Discussions are ongoing with both existing and several new distribution partners to align with our new international strategy. Multiple new distribution agreements are under negotiation, which has us on track to be substantially completed with our international repositioning by early 2024 and ready to return to growth outside the US in 2024. Fourth, as discussed on our second quarter call, we've advanced certain new product pipeline projects ahead of expectations and are pleased with the significant progress made in new product introductions in recent months. After receiving FDA 510(k) clearance in September, we are pleased to announce the US commercial launch of our new multi-application platform, the Venus Versa Pro on November 1. The Versa Pro is the next-generation version of the Venus Versa, one of the company's flagship products with more than 2,200 systems sold globally since introduction. The new Versa Pro provides our customers with an enhanced user experience and superior clinical performance. The system's ability to support 10 different applicators addresses the growing demand for multimodal solutions in aesthetic clinics and med spas and offers a complete rejuvenation solution for addressing tone, texture, and tightness. We see this as an important near-term growth opportunity for new customers and an attractive upgrade opportunity for existing users. Finally, we are pleased to announce a company-wide rebranding initiative in October. We introduced our new branding called Venus Aesthetic Intelligence or Venus AI. Venus AI captures our strong commitment toward growing our global brand, focusing on emerging technologies and services, partnering with customers to build smarter practices and customizable treatments. The new Venus AI branding represents a forward-looking approach to aesthetics innovation that is core to Venus' future aspirations. Our product portfolio will continue to evolve and deliver more than just leading device performance, but with a shift towards total practice performance from the moment the patient enters the clinic to post-treatment recovery. Further, by staying connected to our customers, we can start to leverage real-time data across our growing network of connected devices to uncover the meaningful business insights that define the best in practice performance and fuel the next generation of aesthetic device technologies. Customers will see Venus AI branding in all of our new product launches, including the Versa Pro launch earlier this month and importantly, with the launch of our next-generation aesthetics robotics platform, AI.ME in late 2024. With that, let me turn the call over to Domenic for a review of our third quarter financial results and balance sheet as of September 30.

Thanks, Hemanth. For the avoidance of doubt, unless otherwise noted, my prepared remarks will focus on the company's reported results for the third quarter of 2023 on a GAAP basis, and all growth-related items are on a year-over-year basis. We reported GAAP revenue of $17.6 million, down 18% year-over-year. The decrease in total revenue by region was driven by a 34% year-over-year decline in international revenue and a 5% decrease year-over-year in United States revenue. Our international revenue results were impacted by the company's decision to exit three unprofitable direct markets in the past year, as well as the general macroeconomic headwinds that impacted customer access to capital. The decrease in total revenue by product category was driven by a 39% decrease in lease revenue, a 20% decrease in products other revenue, a 6% decrease in products systems revenue, partially offset by a 15% increase in services revenue. As Rajiv mentioned earlier, we continue to deliver on our stated goal of shifting our mix of systems revenue. Cash system sales represented 69% of revenue in the third quarter of 2023 compared to 59% last year. We continue to target cash system sales to represent approximately 70% of total subscription and system sales for full year 2023 compared to approximately 58% for full year 2022. Turning to a review of our third quarter financial results across the rest of the P&L. Gross profit decreased $1.2 million or 9% to $12.2 million. The change in gross profit was primarily due to a decrease in revenue in our international markets driven by the accelerated exit from unprofitable direct markets. Gross margin was 69.2% of revenue compared to 62.1% of revenue for the third quarter of 2022. The change in gross margin was primarily due to significant inventory write-offs in the third quarter of 2022, which should not repeat this quarter, and a $0.8 million foreign exchange headwind as a result of certain foreign currencies depreciating relative to the US dollar. Excluding the inventory write-offs in the third quarter of 2022 and the impact of changes in foreign exchange, third quarter gross margin was 73.6% compared to 72.1% last year, an increase of 150 basis points year-over-year. On a regional level, the improved margin speaks to our continued focus on higher-margin US operations. Total operating expenses decreased $5.9 million or 24% to $18.9 million. The change in total operating expenses was driven primarily by a decrease of $2.5 million or 26% in selling and marketing expenses, a decrease of $2.3 million or 19% in general and administrative expenses, and a decrease of $1.1 million or 36% in research and development expenses. In the third quarter of 2023, GAAP general and administrative expenses included approximately $0.8 million of costs related to debt restructuring activities designed to improve the company's liquidity and overall ability to execute our near-term strategic initiatives. The total operating loss was $6.8 million compared to $11.4 million in the third quarter of 2022. Net interest and other expenses were $2.5 million, compared to $3.2 million in the third quarter of 2022. The year-over-year change in net interest and other expenses was driven primarily by a reduction in non-cash foreign exchange loss, which was $0.9 million in the third quarter of 2023, compared to a loss of $2 million last year. Net loss attributable to stockholders for the third quarter of 2023 was $9.1 million or $1.64 per share, compared to $14.6 million or $3.36 per share for the third quarter of 2022. Note our net loss per share calculations in the current and prior year periods reflect the 1-for-15 reverse stock split in May 2023. Adjusted EBITDA loss for the third quarter of 2023 was $4.6 million, compared to $7.7 million for the third quarter of 2022. 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 September 30, 2023, the company had cash and cash equivalents of $4.9 million and total debt obligations of approximately $79 million compared to $11.6 million and $77.7 million, respectively, as of December 31, 2022. Cash used in operations for the three months ended September 30 was $4.2 million, compared to $2.1 million in the second quarter and $3.9 million used in the prior year period. The sequential increase in cash used in operations was driven almost entirely by the timing of restructuring payments and changes in third-party lending cycles, creating delays in payment receipts. Nonetheless, we delivered another strong quarter of working capital performance with more than $2.5 million of cash generated from working capital in the period. Cash used in operating and investing activities during the third quarter of 2023 was partially offset by $2.8 million of cash from financing activities in the period driven by the net proceeds of $2.8 million from the sale of senior preferred stock from the second and third tranches in the 2023 multi-tranche private placement, which occurred on July 12, 2023, and September 8, 2023. Turning to a review of our guidance. As detailed in our press release, we reaffirmed our revenue guidance for the full year 2023 period, which was previously updated in our press release on October 5. The company continues to expect total revenue for the 12 months ending December 31, 2023, in the range of $80 million to $82 million, representing a decrease in the range of approximately 18% to 20% year-over-year. While we are not providing formal profitability guidance for the full year 2023, we are providing the following modeling considerations for use in evaluating our outlook for 2023. First, the 20% decline in revenue at the low end of our full-year guidance range continues to reflect the expectation that cash system sales represent approximately 70% of total subscription and system sales for full year 2023 compared to approximately 58% for full year 2022. Our total revenue guidance for 2023 now assumes year-over-year headwinds to our revenue growth from lower lease revenue in favor of cash system sales of approximately $15 million versus $16 million previously and the impact related to the acceleration of strategic initiatives we are implementing in our international business this year of approximately $17 million compared to an $8 million headwind assumed at the low end of our prior guidance range. Excluding the impacts from prioritizing cash system sales and the strategic changes in certain international markets this year, we believe our total revenue growth would be 13% year-over-year on a normalized basis. Second, at the low end of our full-year 2023 revenue range, we now expect gross margins of approximately 68%, up roughly 200 basis points year-over-year as compared to prior guidance assumptions, which called for 67% gross margins year-over-year in 2023. Based on better-than-expected expense performance in the first nine months of 2023 and our updated expense assumptions for Q4, we now expect GAAP operating expenses for the full year 2023 period in the range of approximately $81 million to $83 million compared to our prior guidance of $87 million to $89 million. Note, this updated GAAP operating expense guidance range includes approximately $2.4 million of restructuring, severance, and other non-operating expenses compared to $1.9 million previously. The updated GAAP operating expense guidance range also includes approximately $7 million of non-cash expenses, including stock compensation, G&A and bad debt expenses compared to $9 million previously. Excluding the aforementioned non-operating items and non-cash expenses, we now expect our cash operating expense target to be approximately $72 million to $74 million for 2023, down $5 million from our prior guidance range. Fourth, we expect interest expense of approximately $6.6 million. Finally, we continue to expect our updated total revenue guidance and supporting modeling assumptions across the P&L for 2023 to result in a reduction in our cash used from operations of more than 50% year-over-year.

We will now open the call to your questions.

Hi, Rajiv, Hemanth and Domenic, how are you?

Hi, Jeff, everything all right. Thank you.

Good. Thank you.

So I guess I'll start from when I heard latest and Domenic, talk a little bit about the margin and some of the assumptions that are getting to the 68% for this year and aspirationally in 2024, would you anticipate that that could be held?

Yes. We're pretty comfortable with the 68% range. We're trending a little higher than that now. So there's a little bit of room for slippage in the fourth quarter, but we're pretty confident in the 68%. And in terms of maintaining it going forward in 2024, we think somewhere between 66% and 69% is probably where we will sort of target. We have a fair bit of confidence in that sort of range for 2024.

Yes, Jeff, obviously, we will finalize that when we get to guidance call early next year for 2024. But we are pleased with how the gross margins are progressing.

Super. Thanks. And could you talk a little bit about the Versa and the equipment that's getting out there now, are you expecting that existing users will upgrade? Or would you anticipate that they'd be purchasing second units? And in the case of upgrading, could those systems be refurbished and reused or sent elsewhere?

Yes, I believe both options present opportunities. As we mentioned, there is a significant installed base with over 2,200 units in use. Existing systems have an upgrade option to access new functionalities even without the updated color. Additionally, there are excellent opportunities for those with initial systems to expand with the new system or enhance their capabilities through MD and BC Incorporated, or to further develop their practice. This installed base provides a solid foundation. For those with a Versa, there is also an upgrade option available if they choose to transition to the Versa Pro.

Okay. Got it. That's helpful. And then lastly for us, could you talk a little bit about some of the other territories and now that you are now completing some of the divestitures in the smaller markets by early 2024. Could you give us a sense of geography and perhaps how much of that work has concluded thus far and how much is more to do in the coming couple or few quarters?

Yes, Jeff. So the geographies are focused in our EMEA region, which is primarily Europe and APAC and within APAC, primarily in East Asia. So, I would say we are probably about 80% to 90% through our various wind down and restructuring efforts. What is a little bit off cycle is the onboarding of new distributors, right, which is always difficult to time, especially because we are working on making sure that we have the right distribution partners in each of these markets. So, that part of it is a little bit more fluid. We expect a large amount of that to be done by year-end, but some of it may slip into the first quarter. But we would expect all of this to be concluded by the first quarter of 2024.

Okay. That does it for us for now. Perfect. Thank you very much for taking the questions.

Great. Thanks, Jeff.

Thanks, Jeff.

Our next question comes from Marie Thibault with BTIG. Please proceed with your question.

Hey, good afternoon everyone. You've got Sam Eiber on for Marie. Thanks for taking the questions. Maybe starting on the US numbers that fared a bit better this quarter. I'm wondering what's driving maybe some of the resiliency there? And you mentioned some macroeconomic headwinds that are starting to impact customer access to capital. Is that something we could start seeing elongating purchasing cycles in the US?

In the US, we have several factors at play. There has been a significant positive impact on revenue quality due to the shift to cash systems and subscription sales, and this is starting to gain momentum. We've also implemented several changes to our US field organization, which are ongoing to enhance performance. Regarding the macroeconomic challenges, these have been present throughout the year and are not particularly new. However, what is changing is that customer purchasing patterns, especially the deal cycle, are becoming increasingly prolonged as many customers are comparing deals. We noticed that cash collections have slipped from the third quarter into the fourth quarter, and we expect this phasing to continue. While we're collecting the cash that wasn't collected in the third quarter in the fourth quarter, we do not anticipate any improvement in customer buying patterns in the fourth quarter. Nonetheless, the effects of those challenges were evident in our third quarter results.

Okay. Understood. Maybe I can use my follow-up here on Astera. I didn't catch it on the call. Just wondering an update on that platform for next year?

Sure. Yes, Astera was an internal name for what the actual name will be going into next year, probably still to be determined. But we have discussed, I believe, on our last call, that we are still planning to launch a new body system by mid-next year, and that is still planned ahead. So, as we discussed, phased some R&D investments. But in doing that, we've actually still been able to maintain and accelerate others. So, the Versa Pro actually was accelerated. We were able to launch that this year, and the body system that we're planning on launching is still anticipated for mid-next year.

Okay. Sounds good looking forward to that. And maybe if I could just squeeze in a last clarification question. You mentioned OUS being able to grow year-over-year in 2024. Is that on a year-over-year basis, 2024 or 2023? Or is that just meant to mean a quarter in 2024 growing over 2023?

We would expect to see some growth for the full year in 2024. But as we've described, the distributor onboarding will continue into the first quarter, right? So I think the trajectory of that return to growth is slightly more in the second half.

Got it. Thanks for taking the question.

Thank you.

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