Sientra(SIEN) - 2021 Q4 - Annual Report

Business Focus - The company focuses on the Plastic Surgery segment, which includes silicone gel breast implants, tissue expanders, and scar management products, with a direct sales organization of 65 employees as of December 31, 2021[317]. - The company completed the sale of the miraDry business on June 10, 2021, to concentrate investments on its core Plastic Surgery segment[319]. - The company acquired assets from AuraGen Aesthetics, LLC on December 31, 2021, related to fat grafting technology, which is expected to expand its total addressable market[318]. - The company offers approximately 350 variations of breast implants, which are primarily used in elective procedures and are sold exclusively to board-certified plastic surgeons[326]. Regulatory Approvals - The company received Health Canada approval on March 23, 2022, to commercialize its smooth round HSC and HSC+ silicone gel breast implants in Canada, planning to start sales through a distribution partner[322]. - The company’s breast implants were approved by the FDA in 2012, based on a clinical trial involving 1,788 women, demonstrating competitive safety and effectiveness[327]. Financial Performance - Net sales increased by $25.7 million, or 46.7%, to $80.7 million for the year ended December 31, 2021, compared to $55.0 million for 2020[376]. - Cost of goods sold rose by $12.7 million, or 54.0%, to $36.3 million for the year ended December 31, 2021, compared to $23.6 million for 2020[378]. - Gross margin decreased to 54.9% in 2021 from 57.1% in 2020, primarily due to increased distribution and production costs[379]. - The net loss for the year ended December 31, 2021, was $62.5 million, an improvement from a net loss of $89.9 million in 2020[375]. Expenses - Sales and marketing expenses increased by $11.1 million, or 29.5%, to $48.5 million for the year ended December 31, 2021[380]. - Research and development expenses rose by $1.8 million, or 20.1%, to $10.5 million for the year ended December 31, 2021[381]. - General and administrative expenses decreased by $0.5 million, or 1.7%, to $31.8 million for the year ended December 31, 2021[382]. - Total non-cash stock-based compensation expense recorded was $10.4 million for the year ended December 31, 2021, compared to $8.2 million in 2020[363]. Cash and Financing - Cash and cash equivalents as of December 31, 2021, totaled $51.8 million[398]. - Net cash provided by financing activities increased by $4.4 million to $35.9 million for the year ended December 31, 2021[403]. - The company completed the sale of the miraDry business for an aggregate purchase price of $10.0 million, resulting in net cash proceeds of approximately $8.1 million[389]. - The company has $51.8 million in cash and cash equivalents as of December 31, 2021[408]. Liabilities and Provisions - As of December 31, 2021, the liability for unsatisfied performance obligations under the service warranty was $3.237 million, up from $1.945 million at the end of 2020[349]. - The sales return liability increased to $13.399 million as of December 31, 2021, compared to $9.192 million at the end of 2020, with actual returns of $152.773 million in 2021[351]. - The company held total warranty liabilities of $2.5 million and $1.9 million as of December 31, 2021, and 2020, respectively[358]. - The company recognized revenue from service warranties ratably over the term of the agreements, with performance obligations expected to be satisfied over 3 to 24 months for financial assistance and 20 years for product replacement[349]. Operational Insights - The company expects net sales to fluctuate quarterly due to factors such as seasonality and the ongoing impact of the COVID-19 pandemic[333]. - The company anticipates its overall gross margin to fluctuate due to unit sales volume, manufacturing costs, and product mix[337]. - Research and development expenses are expected to vary based on new product initiatives and improvements to existing products[339]. - The company is focused on maintaining unit costs to drive gross margin through its implant manufacturing facility in Franklin, Wisconsin[406]. - The company is expanding its sales force and marketing programs, which will incur associated costs[406]. - The company is investing in inventory to meet customer demands[406]. - The company is developing and commercializing proposed products or technologies, which will involve costs[406]. - The company is focused on new product acquisition and development efforts[406]. Tax and Valuation - The company maintains a full valuation allowance on its net deferred tax assets due to cumulative net losses and uncertainty regarding realization[342]. - The company evaluates acquisitions to determine if they should be accounted for as business combinations or asset acquisitions, with significant estimates involved in the valuation process[365]. - An immediate 100 basis point change in interest rates would not materially affect the fair market value of the company's cash equivalents[408]. Goodwill and Impairment - The company performed a qualitative analysis for goodwill impairment testing on October 1, 2021, concluding that the fair value of the reporting unit was likely greater than its carrying value, resulting in no impairment charges[357]. Warranty and Compensation - Stock-based compensation costs are recognized over the requisite service period, with unrecognized compensation costs related to unvested stock options totaling $1.5 million as of December 31, 2021[363].