Venus cept (US:VERO)2022-11-10 21:15Revenue Performance - Revenue for the three months ended September 30, 2022, was $21.5 million, a decrease of 12.6% compared to $24.6 million for the same period in 2021[155] - Revenue for the nine months ended September 30, 2022, was $75.2 million, an increase of 3.0% compared to $73.0 million for the same period in 2021[155] - Total revenue decreased by $3.0 million, or 12.3%, to $21.5 million for the three months ended September 30, 2022, compared to $24.6 million for the same period in 2021[197] - Total revenue increased by $2.2 million, or 3.0%, to $75.2 million for the nine months ended September 30, 2022, compared to $73.0 million for the same period in 2021[212] Profit and Loss - Net loss attributable to the company for the three months ended September 30, 2022, was $14.6 million, compared to a net loss of $9.8 million for the same period in 2021[155] - Adjusted EBITDA loss for the three months ended September 30, 2022, was $7.7 million, compared to a loss of $3.5 million for the same period in 2021[155] - The company reported a net loss of $33.6 million and cash used in operating activities of $23.6 million in the nine months ended September 30, 2022[250] Revenue Sources - Approximately 41% of aesthetic revenues were derived from the subscription model in the three months ended September 30, 2022, down from 61% in the same period in 2021[150] - Subscription revenue from systems dropped by $5.4 million, or 43.1%, to $7.2 million, representing 33.4% of total revenue in Q3 2022, down from 51.4% in Q3 2021[197][198] - Approximately 41% of system revenues in Q3 2022 were derived from the subscription model, down from 61% in Q3 2021, reflecting a strategic shift to prioritize cash deals [172] - Approximately 48% of system revenues in Q3 2022 were derived from traditional sales, up from 27% in Q3 2021, indicating a focus on cash transactions [174] Expenses - Operating expenses increased by $2.1 million, or 9.3%, to $24.8 million in Q3 2022, with total operating expenses as a percentage of revenue rising to 115.1%[202] - General and administrative expenses increased by $9.5 million, or 29.7%, to $41.5 million, representing 55.1% of total revenues for the nine months ended September 30, 2022[219] - Research and development expenses are expected to increase in absolute dollars as the company invests in new technologies and product offerings [187] - Research and development expenses rose by $0.6 million, or 33.5%, to $2.6 million in Q3 2022, accounting for 12.0% of total revenue[202] - Research and development expenses increased by $1.2 million, or 20.1%, to $7.2 million, accounting for 9.6% of total revenues for the nine months ended September 30, 2022[220] Cash and Liquidity - Cash and cash equivalents were $6.8 million as of September 30, 2022, down from $30.9 million as of December 31, 2021[141] - The company reported a net decrease in cash and cash equivalents of $24.1 million for the nine months ended September 30, 2022[249] - The company anticipates that its current capital resources will enable it to fund operations for at least the next 12 months[243] - Cash used in investing activities for the nine months ended September 30, 2022, was $0.3 million for property and equipment purchases[252] Debt and Obligations - Total debt obligations were approximately $77.6 million as of September 30, 2022, including a MSLP Loan of $50.9 million[227] - Interest rates on long-term debt were 6.1% for the MSLP Loan and 8.0% for the Notes as of September 30, 2022, compared to 3.10% for the MSLP Loan as of December 31, 2021[188] - The company executed a $50.0 million MSLP Loan Agreement with CNB under the Main Street Priority Loan Facility[231] - The company issued $26.7 million in Secured Subordinated Convertible Notes with an initial interest rate of 8.0% per annum, convertible at $3.25 per share[230] Operational Changes - The company closed 9 direct offices since June 2020 and is focusing on the U.S. market while evaluating profitability in other regions post-COVID-19 [161] - The company experienced a decline in revenue in Q3 2022 due to a strategy shift prioritizing cash deals over subscription agreements to improve cash generation [165] - The company has developed and commercialized eleven technology platforms, including ARTAS and NeoGraft systems, which serve a broad segment of the market[152] - As of September 30, 2022, the company operated directly in 18 international markets through 15 direct offices[154] Financial Performance Metrics - Gross profit decreased by $3.9 million, or 22.6%, to $13.4 million in Q3 2022, with a gross margin of 62.1%, down from 70.5% in Q3 2021[201] - Gross profit decreased by $1.1 million, or 2.1%, to $50.2 million, with a gross margin of 66.7% for the nine months ended September 30, 2022[217] - Cost of goods sold increased by $0.9 million, or 13.0%, to $8.2 million in Q3 2022, contributing to the decline in gross profit[201] Foreign Exchange and Other Losses - The company experienced a foreign exchange loss of $2.0 million in Q3 2022, impacting overall financial performance[194] - Foreign exchange loss increased by $1.9 million to $4.4 million for the nine months ended September 30, 2022, compared to $2.5 million for the same period in 2021[222] Accounts and Receivables - Bad debt expense for Q3 2022 was $2.4 million, with an allowance for doubtful accounts increasing to $13.1 million, representing 17.0% of gross outstanding accounts receivable [163] - The allowance for doubtful accounts is based on the assessment of collectability and aging of invoices, reflecting the company's best estimate of probable credit losses[267] Stock and Compensation - The company sold 0.4 million shares of common stock to Lincoln Park, raising net cash proceeds of $0.3 million during the nine months ended September 30, 2022[144] - Stock-based compensation costs are recognized based on fair values, with the expense associated with options recognized over the requisite service period[269][270] Warranty and Receivables - The company offers warranties for all systems against defects for up to three years, with a liability recorded for accrued warranty costs at the time of sale[268] - The company has long-term receivables with an implicit interest rate of 9.7% for the nine months ended September 30, 2022[266] Regulatory and Compliance - The company is classified as an emerging growth company under the JOBS Act, allowing it to delay adopting new accounting standards[273]