Sientra(SIEN) - 2022 Q4 - Annual Report

Financial Performance - Net sales increased by $9.9 million, or 12.2%, to $90.6 million for the year ended December 31, 2022, compared to $80.7 million in 2021, driven by higher domestic and international sales of gel implants and expanders [409]. - The company incurred a net loss of $73.3 million for the year ended December 31, 2022, compared to a net loss of $62.5 million in 2021 [408]. - Cash used in operating activities was $34.9 million for the year ended December 31, 2022, a decrease from $44.5 million in 2021, primarily due to improved working capital [424]. - As of December 31, 2022, the company had cash and cash equivalents of $26.1 million, raising substantial doubt about its ability to continue as a going concern for at least one year [419]. Debt and Financing - The company reported a total debt reduction of approximately $10 million, bringing the total debt load to $73 million, with maturity dates extended to March 2026 and beyond [348]. - The company completed an equity financing on October 25, 2022, raising approximately $14.0 million from the sale of 1,778,500 shares of common stock at an offering price of $3.80 per share [352]. - The company issued 1,778,500 shares of common stock and raised approximately $14.0 million in net proceeds on October 25, 2022 [421]. Product Development and Market Expansion - The company received approval from the UAE Ministry of Health and Prevention to market its silicone gel breast implants on December 13, 2022, and began commercialization through its distribution partner [353]. - The company launched the Viality Fat Transfer System on March 1, 2023, following its acquisition from AuraGen Aesthetics LLC [346]. - The company has expanded its market presence internationally, with approvals in Japan, Saudi Arabia, Canada, and the UAE since 2020 [344]. - The company’s breast implants are offered in approximately 350 variations, incorporating technologies that differentiate them from competitors, including High-Strength Cohesive silicone gel [364]. - The company’s clinical trial data demonstrated comparable or better rupture rates, capsular contracture rates, and reoperation rates compared to competitors [365]. - The company’s breast implants were approved by the FDA in 2012, based on a long-term clinical trial involving 1,788 women across 36 investigational sites [365]. Revenue and Cost Management - The company’s revenue recognition for breast implants and tissue expanders is net of sales discounts and estimated returns, with a standard six-month return window for customers [370]. - The overall gross margin is anticipated to fluctuate due to factors such as unit sales quantity, manufacturing price increases, and warranty costs [374]. - Gross margin decreased to 45.9% in 2022 from 54.9% in 2021, mainly due to increased reserves for excess inventory; adjusted gross margin was 52.0% excluding inventory reserve adjustments [411]. - Cost of goods sold rose by $12.6 million, or 34.7%, to $49.0 million for the year ended December 31, 2022, primarily due to increased sales activity and higher reserves for warranty and excess inventory [410]. Expenses and Liabilities - Sales and marketing expenses increased by $6.6 million, or 13.6%, to $55.0 million for the year ended December 31, 2022, attributed to higher payroll, travel, and marketing initiatives [412]. - Research and development expenses rose by $3.6 million, or 34.5%, to $14.1 million for the year ended December 31, 2022, due to increased product development and regulatory expenses [413]. - General and administrative expenses increased by $9.8 million, or 30.7%, to $41.5 million for the year ended December 31, 2022, driven by higher legal and consulting fees [414]. - The company held total warranty liabilities of $8.8 million as of December 31, 2022, compared to $2.5 million in 2021 [393]. - As of December 31, 2022, the liability for unsatisfied performance obligations under the service warranty was $3.508 million, with a long-term portion of $2.646 million [388]. - The sales return liability increased to $15.773 million as of December 31, 2022, from $13.399 million in 2021, reflecting changes in estimated sales returns [390]. Research and Development - Research and development expenses are expected to vary based on the initiation of different development projects, including improvements to existing products and new product acquisitions [376]. Warranty and Customer Support - The company introduced the Platinum20 warranty program in May 2018, which includes financial assistance for revision surgeries and no-charge contralateral replacement implants [387]. - The company expects sales and marketing expenses to fluctuate due to headcount changes and the timing of marketing programs [375]. Acquisitions - Acquisitions are evaluated to determine if they should be accounted for as business combinations or asset acquisitions based on the concentration of fair value in identifiable assets [399].