Financial Performance - As of March 31, 2025, the company reported an accumulated deficit of $321.3 million, up from $308.9 million as of December 31, 2024[199]. - Revenues for the three months ended March 31, 2025, were $13.6 million, a decrease of 22.3% compared to $17.5 million for the same period in 2024[232]. - The net loss attributable to the company for the three months ended March 31, 2025, was $12.4 million, compared to a net loss of $9.8 million in the same period of 2024[232]. - Adjusted EBITDA loss for the three months ended March 31, 2025, was $8.3 million, an increase from a loss of $5.1 million in the same period of 2024[232]. - Total revenue decreased by $3.8 million, or 21.9%, to $13.6 million for the three months ended March 31, 2025, from $17.5 million for the same period in 2024[274]. - Gross profit for the three months ended March 31, 2025, was $8.8 million, down from $11.6 million in 2024, reflecting a gross profit margin of 64.2% compared to 66.6%[272]. - Loss from operations increased to $9.5 million for the three months ended March 31, 2025, compared to a loss of $7.8 million in 2024[272]. Cash and Financing - The company had cash and cash equivalents of $3.2 million as of March 31, 2025, compared to $4.3 million as of December 31, 2024[199]. - Cash provided by financing activities for the three months ended March 31, 2025, was $5.3 million, primarily from short-term bridge financing[315]. - The company expects to use proceeds from various financing activities for general working capital purposes[301]. - The company entered into a Loan and Security Agreement on April 23, 2024, providing for a term loan of $2.2 million and additional delayed draw term loans of up to $2.8 million[216]. - The company generated gross proceeds of $6.7 million from the 2022 Private Placement, completed on November 18, 2022[206]. - The company completed multiple placements under the 2023 Multi-Tranche Private Placement, raising a total of $5.0 million through various transactions[209][210][211]. - The company may issue up to $9.0 million in shares of Senior Preferred Stock under the 2023 Multi-Tranche Private Placement, with the initial placement generating $2.0 million from the sale of 280,899 shares[298]. Operational Challenges - The company has incurred recurring net operating losses and negative cash flows from operations, indicating ongoing financial challenges[199]. - The company anticipates supply challenges during 2025 due to geopolitical disruptions and inflationary pressures affecting production lead times[245]. - The U.S. Federal administration has increased tariffs on goods imported from Israel to 10%, impacting the company's cost of goods and potentially leading to margin erosion[243][245]. - The company has ceased direct sales operations in 14 countries since June 2020, focusing on the U.S. market to improve profitability[239]. - The decline in lease program revenues in the first three months of 2025 was attributed to a strategy prioritizing cash deals and economic uncertainty impacting customers' financing capabilities[252]. Sales and Revenue Sources - Approximately 25% of the company's aesthetic system revenues were derived from internal lease programs in the three months ended March 31, 2025, consistent with the same period in 2024[226]. - Approximately 68% of total system revenues for the three months ended March 31, 2025, were derived from traditional sales, compared to 62% for the same period in 2024[253]. - Revenues from internal financing programs accounted for approximately 25% of total system revenues for both the three months ended March 31, 2025, and 2024[252]. - Revenues from distributor sales decreased to approximately 7% of total system revenues for the three months ended March 31, 2025, down from 13% in 2024[256]. - A total of 196 systems were delivered in the three months ended March 31, 2025, down from 314 systems delivered in the same period of 2024, representing a decline of 37.5%[238]. - The company sold 196 systems in Q1 2025, a decrease of 37.5% from 314 systems sold in Q1 2024, with systems revenue from internal lease programs remaining at approximately 25%[275]. Expenses and Cost Management - Operating expenses totaled $18.3 million for the three months ended March 31, 2025, compared to $19.4 million in 2024, with selling and marketing expenses at $7.0 million[272]. - Total operating expenses were $18.3 million in Q1 2025, a decrease of $1.1 million, or 5.8%, compared to $19.4 million in Q1 2024[279]. - Selling and marketing expenses decreased by $0.4 million, or 5.2%, in Q1 2025, but as a percentage of total revenues, they increased from 42.2% to 51.2%[280]. - General and administrative expenses decreased by $0.5 million, or 5.0%, in Q1 2025, but increased as a percentage of total revenues from 58.6% to 71.4%[281]. - Research and development expenses are expected to increase in absolute dollars as the company continues to invest in new products and technologies[265]. - Research and development expenses decreased by $0.2 million, or 12.8%, in Q1 2025, with an increase in percentage of total revenues from 10.2% to 11.4%[282]. Regulatory and Compliance - The company has received regulatory clearance for twelve novel aesthetic technology platforms, including ARTAS and NeoGraft systems, enhancing its product offerings[229]. - The allowance for expected credit losses as of March 31, 2025, was $3.1 million, representing approximately 11% of gross outstanding accounts receivable, down from $5.3 million or 13% as of March 31, 2024[241][248]. - The allowance for expected credit losses is based on customer account collectability assessments and aging of invoices, reflecting the company's best estimate of probable credit losses[327]. - Warranty accruals are recorded at the time of sale, based on historical costs and management estimates, with a one-year warranty period for systems sold[328]. - Stock-based compensation costs are recognized based on fair values, using the Black-Scholes option-pricing model for estimating stock options[329][330]. Market and Economic Conditions - The company operates directly in 11 international markets through 9 offices, including the United States, Canada, and China[231]. - The company expects a shift in the ratio of lease program sales to traditional sales to approximately 30:70 for the remainder of 2025 and beyond[286]. - The company anticipates that inventory levels will remain relatively flat in the short term but will increase at a lower rate than revenue growth over the longer term[286]. - The company is restricted by covenants in its loan agreements, which may limit its ability to incur additional indebtedness[306]. Accounting and Reporting - Revenue is recognized based on ASC 606, which includes five steps for contract identification and performance obligation satisfaction[323]. - Long-term receivables are related to internal lease programs with payment terms exceeding one year, discounted at implicit interest rates between 8% and 10%[325]. - Recent accounting pronouncements are detailed in the quarterly report, affecting financial statement presentation and recognition[333]. - As a smaller reporting company, the company is not required to provide disclosures about market risk[334].
Venus cept (VERO) - 2025 Q1 - Quarterly Report