Evolus(EOLS) - 2024 Q1 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section warns that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements regarding future events, business, financial condition, and prospects, which are based on current expectations and are subject to significant risks and uncertainties[8] - The company operates in a very competitive and rapidly changing environment, and management cannot predict all risks or assess their impact on the business[9] Summary of Risk Factors This section outlines principal risks including dependence on Jeuveau®, a history of losses, and reliance on partners - The company's business is entirely dependent on the successful commercialization of its only product, Jeuveau®[12] - Evolus has a history of significant losses and anticipates continued losses for the foreseeable future[12] - The company relies on Symatese for regulatory approval of the Evolysse™ dermal filler line and on Daewoong for the supply of Jeuveau®[12] - Future operations or corporate development may require additional financing, which could be dilutive to stockholders[12] - The settlement agreement with Medytox includes royalty payments that will continue to reduce profitability[12] PART I - FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024 Condensed Consolidated Balance Sheets The balance sheet shows increased cash and total assets, shifting from a stockholders' deficit to positive equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $96,958 | $62,838 | | Total current assets | $150,265 | $112,421 | | Total assets | $226,176 | $188,998 | | Liabilities & Equity | | | | Total current liabilities | $46,801 | $48,291 | | Total liabilities | $207,733 | $209,687 | | Total stockholders' equity (deficit) | $18,443 | $(20,689) | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a 42.2% revenue increase and a narrowed net loss for Q1 2024 compared to the prior year Q1 2024 vs. Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total net revenues | $59,333 | $41,721 | | Loss from operations | $(8,922) | $(12,040) | | Net loss | $(13,109) | $(14,791) | | Net loss per share, basic and diluted | $(0.22) | $(0.26) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) A follow-on offering provided $46.8 million in net proceeds, transforming the stockholders' deficit into positive equity - The company's total stockholders' equity increased from a deficit of $(20.7) million at the end of 2023 to a positive equity of $18.4 million as of March 31, 2024[25] - The primary driver of the equity increase was the issuance of 3,554,000 shares of common stock in a follow-on offering, which generated net proceeds of $46.8 million[25] Condensed Consolidated Statements of Cash Flows Operating cash use improved, and financing activities provided $45.7 million, resulting in a net cash increase of $34.1 million Q1 2024 vs. Q1 2023 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,615) | $(20,587) | | Net cash used in investing activities | $(797) | $(511) | | Net cash provided by (used in) financing activities | $45,662 | $(1,282) | | Change in cash and cash equivalents | $34,120 | $(22,459) | Notes to Condensed Consolidated Financial Statements The notes detail the company's liquidity, revenue policies, debt structure, and contingent legal obligations - In March 2024, the company completed a follow-on offering, receiving net proceeds of $46.8 million, and believes its current capital is sufficient to fund operations for at least the next twelve months[36][39] - The company is obligated to make quarterly royalty payments to its founders based on a percentage of Jeuveau® net sales until Q2 2029, with a fair value of $44.8 million as of March 31, 2024[66][110] - The company has $125 million in term loans from Pharmakon, which accrue interest at SOFR + 8.5% and mature in December 2027[121][122][129] - The company is involved in ongoing legal proceedings, including a securities class action lawsuit and a shareholder derivative lawsuit, for which it cannot reasonably estimate a range of loss[141][142] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 42.2% revenue increase, operating expense drivers, and a strengthened liquidity position Q1 2024 vs. Q1 2023 Results of Operations (in millions) | Metric | Q1 2024 | Q1 2023 | % Change | Key Driver | | :--- | :--- | :--- | :--- | :--- | | Total Net Revenues | $59.3 | $41.7 | +42.2% | Higher sales volumes of Jeuveau® | | Gross Profit Margin | 68.3% | 69.1% | -0.8 p.p. | Impacted by royalty obligations | | SG&A Expenses | $45.1 | $37.4 | +20.6% | Increased personnel costs for commercial activities | | Loss from Operations | $(8.9) | $(12.0) | -25.8% | Revenue growth outpacing expense growth | - In March 2024, the company raised $46.8 million in net proceeds from a follow-on equity offering, strengthening its cash position to $97.0 million as of March 31, 2024[179][195][198] - Net cash used in operating activities improved to $10.6 million in Q1 2024 from $20.6 million in Q1 2023, driven by improved collections and timing of vendor payments[214][215][216] - The company anticipates obtaining regulatory approval for the Evolysse™ line of dermal fillers in Europe in the second half of 2024 and in the United States beginning in 2025[178] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks relate to interest rate and foreign currency fluctuations, with no material changes reported - The company's main market risks stem from fluctuations in interest rates and foreign currency exchange rates[224] - There were no material changes in the company's financial market risks from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[225] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024[226] - There were no changes in internal control over financial reporting during Q1 2024 that have materially affected, or are reasonably likely to materially affect, internal controls[228] PART II - OTHER INFORMATION Legal Proceedings The company details ongoing securities and shareholder lawsuits for which a potential loss cannot be reasonably estimated - The company is a defendant in a securities class action lawsuit and a nominal defendant in a shareholder derivative action, both related to the ITC Action concerning Jeuveau®[141][142] - The outcome of these legal proceedings is uncertain, and management cannot reasonably estimate a range of potential loss[141][145] Risk Factors This section details risks including dependence on Jeuveau®, significant competition, and reliance on key partners - The company is entirely dependent on the successful commercialization of its only product, Jeuveau®, and has a limited operating history with significant losses[235][236] - Significant competition exists from large, experienced companies like AbbVie and Galderma, which have greater financial resources, brand recognition, and broader product portfolios[252] - The business relies on key partners: Daewoong for manufacturing Jeuveau® and Symatese for manufacturing and achieving regulatory approval for the Evolysse™ dermal filler line[238][294][295] - The business is subject to extensive government regulation, and failure to obtain or maintain approvals, or improperly promoting off-label uses, could result in significant penalties and harm the business[267][322] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - There were no unregistered sales of equity securities in the quarter[364] Defaults Upon Senior Securities The company reported that this item is not applicable - Not applicable[365] Mine Safety Disclosures The company reported that this item is not applicable - Not applicable[366] Other Information The company reported no other information required to be disclosed in this section - None[367] Exhibits This section lists exhibits filed with the Form 10-Q, including key agreements and officer certifications - Lists all exhibits filed with the report, including the Underwriting Agreement for the March 2024 offering, an amendment to the Daewoong Supply Agreement, and officer certifications[370]