Venus Concept Announces Second Quarter and First Six Months of 2020 Financial Results

TORONTO, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Venus Concept Inc. (“Venus Concept” or the “Company”) (NASDAQ: VERO), a global medical aesthetic technology leader, announced financial results for the three and six months ended June 30, 2020.

Second Quarter 2020 Financial Summary:

Second Quarter 2020 Highlights:

Management Commentary:

“We delivered second quarter revenue results at the high-end of our preliminary revenue range announced on July 15^th,” said Domenic Serafino, Chief Executive Officer of Venus Concept. “As expected, our second quarter revenue performance was significantly impacted by the COVID-19 global pandemic, but we were encouraged by the improving business trends in key markets beginning in May, which resulted in a significant improvement in sales trends in the month of June, particularly in the U.S. and EMEA. Our new commercial targeting strategy, enhanced messaging for key product lines, including our Venus Bliss, and leveraging our unique pricing and payment options via our subscription model are providing us with early evidence that our strategic focus-areas represent multiple drivers of improving sales performance in the future. The strong second quarter results for our ARTAS iX^® and NeoGraft hair restoration systems, including strong adoption of our ARTAS iX^® by new customers, and, improving year-over-year procedure growth from existing customers, give us confidence that the new commercial strategy in the hair restoration market is on track as well.”  

Mr. Serafino continued: “While the near-term outlook has been challenged by this global pandemic, we continue to believe the long-term opportunity remains extremely compelling for us as a leading player in both the global minimally invasive/non-invasive medical aesthetics market and the minimally invasive surgical hair restoration market. Importantly, our efforts to reduce the operating expense profile of the combined company are progressing well. We continue to expect our restructuring program, combined with previously announced synergies and cost reductions, to result in cost savings of approximately $38 million in 2020 and continuing into 2021. Finally, the recently announced common stock purchase agreement with Lincoln Park Capital Fund, LLC for up to $31 million is available to continue to enhance our balance sheet and financial condition to support our future growth initiatives.”

Second Quarter and First Six Months of 2020 Revenue by Region and by Product Type:

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¹ Products other include ARTAS procedure kits, Venus Concept’s Venus Skin and hair products, and other consumables.
² Services include VeroGrafters™ technician services, 2two5 ad agency services and extended warranty sales.

Second Quarter 2020 Financial Results:

Total revenue for the second quarter of 2020 decreased $10.8 million, or 39%, to $17.0 million, compared to $27.8 million for the second quarter of 2019. Total leases revenue decreased $9.2 million, or 55%, to $7.5 million, compared to $16.6 million for the second quarter of 2019. Total products and services revenue for the second quarter of 2020 decreased $1.6 million, or 15%, to $9.5 million, compared to $11.2 million for the second quarter of 2019.

The decrease in total revenue, by geography, for the second quarter of 2020 was driven by a decrease of $8.0 million, or 50%, in international revenue and a decrease of $2.8 million, or 24%, in the U.S. revenue, compared to the prior year period. The decrease in revenue in the United States and international markets was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments in most countries and markets in which we operate. In both the United States and international markets, these business closures and the resultant uncertainty negatively impacted our ability to access and sell into our customary channels. Where accessibility was possible, selling efforts were hampered by target customer concerns over economic uncertainty.

The decrease in total revenue, by product category, for the second quarter of 2020 was driven by a decrease of $9.2 million, or 55%, in lease revenue, a decrease of $1.0 million, or 13%, in system revenue and a decrease of $0.8 million, or 45%, in service revenue, offset partially by an increase of $0.2 million, or 10%, in other products revenue, which includes ARTAS^® and ARTAS iX^® procedure kits, Venus Concept’s Venus Skin and hair products, and other consumables. The decrease in lease revenue for the second quarter of 2020 was driven primarily by COVID-19 related disruptions, lockdown restrictions and shelter-in-place orders imposed by federal and local governments. The percentage of systems revenue derived from our subscription model was approximately 52% in the three months ended June 30, 2020 compared to 68% in the three months ended June 30, 2019.  The decrease in system revenue for the second quarter of 2020 was driven by a 40% decrease in revenue from Venus Concept systems, offset partially by the contribution of revenue from the sale of ARTAS^® and ARTAS iX^® systems which did not contribute to system revenue in the second quarter of 2019. The decrease in service revenue for the second quarter of 2020 was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments and a corresponding decline in VeroGrafters™ technician services, offset by the contribution of warranty revenue on ARTAS^® systems which did not contribute to service revenue in the second quarter of 2019.

Gross profit for the second quarter of 2020 decreased $8.2 million, or 41%, to $11.9 million, compared to $20.1 million for the second quarter of 2019. The decrease in gross profit is primarily due to lower revenues caused by COVID-19 related disruptions, lockdown restrictions and shelter-in-place orders imposed by federal and local governments in countries and markets in which we operate. Gross margin was 70.0% of revenue for the second quarter of 2020, compared to 72.2% of revenue for the second quarter of 2019. The decrease in gross margin is primarily due to sales of ARTAS^® systems in 2020, which have lower margins than our other systems, and inventory fair value adjustments recognized on the business combination with Venus Concept Ltd. expensed through cost of goods sold during the three months ended June 30, 2020.

Operating expenses for the second quarter of 2020 decreased $2.9 million, or 12%, to $21.1 million, compared to $24.0 million for the second quarter of 2019. The year-over-year decrease in operating expenses was primarily driven by a decrease of $5.7 million, or 56%, in sales and marketing expenses and a decrease of $0.4 million, or 18%, in R&D expenses, partially offset by a $3.1 million increase in general & administrative expenses or 26%. The year-over-year increase in general and administrative expenses was driven primarily by increased costs related to public company reporting obligations, a $3.0 million increase in COVID-related bad debt expense and additional amortization of intangible assets recognized on the business combination with Venus Concept Ltd. The Company realized more than $7.0 million, of the projected $20.0 million for full year 2020, in cost savings from the new restructuring program in response to the challenging business environment from COVID-19, which was previously announced.

Operating loss for the second quarter of 2020 was $9.2 million, compared to operating loss of $3.9 million for the second quarter of 2019.

Net loss attributable to Venus Concept Inc. stockholders for the second quarter of 2020 was $13.2 million, or $0.39 per share, compared to net loss attributable to Venus Concept Inc. stockholders of $5.9 million, or $1.24 per share, for the second quarter of 2019. Weighted average shares used to compute net loss attributable to Venus Concept Inc. stockholders per share were 33.3 million and 4.8 million for the second quarters of 2020 and 2019, respectively. 

Adjusted EBITDA loss for the second quarter of 2020 was $2.6 million, compared to adjusted EBITDA of $0.2 million for the second quarter of 2019.  

First Six Months of 2020 Financial Results:

Total revenue for the first six months of 2020 decreased $20.9 million, or 40%, to $31.5 million, compared to $52.4 million for the first six months of 2019. Total leases revenue decreased $18.1 million, or 56%, to $14.3 million, compared to $32.4 million for the first six months of 2019. Total products and services revenue for the first six months of 2020 decreased $2.8 million, or 14%, to $17.2 million, compared to $20.0 million for the first six months of 2019. The decrease in total revenue, by geography, for the first six months of 2020 was driven by a decrease of $14.2 million, or 46%, in international revenue and a decrease of $6.7 million, or 31%, in the U.S. revenue, compared to the prior year period. The decrease in revenue in the United States was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state and local governments. The decrease in revenue in international markets is largely due to disruptions in supply chain caused by restrictions imposed by the Chinese government due to the COVID-19 pandemic in January and February of 2020 followed by lockdown restrictions and shelter-in-place orders imposed subsequently by federal, state and local governments in other countries and markets in which we operate.

Net loss attributable to Venus Concept Inc. stockholders for the first six months of 2020 was $63.3 million, or $2.01 per share, compared to net loss attributable to Venus Concept Inc. stockholders of $11.2 million, or $2.34 per share, for the first six months of 2019. Weighted average shares used to compute net loss attributable to Venus Concept Inc. stockholders per share were 31.6 million and 4.8 million for the first six months of 2020 and 2019, respectively. 

Adjusted EBITDA loss for the first six months of 2020 was $16.4 million, compared to adjusted EBITDA loss of $1.0 million for the first six months of 2019.  

Fiscal Year 2020 Revenue Guidance:

On March 30, 2020, due to the rapidly evolving market conditions and continued uncertainties from the impact of COVID-19, the Company withdrew its previously announced fiscal year 2020 revenue guidance which was issued on January 13, 2020. At this date the Company cannot predict the specific extent or duration of the impact of the COVID-19 outbreak on its financial and operating results for the fiscal year 2020. The Company plans to provide additional information, to the extent practicable, during its third quarter of 2020 earnings call in November.

Conference Call Details:

Management will host a conference call at 5:00 p.m. Eastern Time on August 13, 2020 to discuss the results of the second quarter with a question and answer session. Those who would like to participate may dial 877-407-2991 (201-389-0925 for international callers) and provide access code 13706095. A live webcast of the call will also be provided on the investor relations section of the Company's website at ir.venusconcept.com.

For those unable to participate, a replay of the call will be available for two weeks at 877-660-6853 (201-612-7415 for international callers); access code 13706095. The webcast will be archived at ir.venusconcept.com.

About Venus Concept

Venus Concept is an innovative global medical aesthetic technology leader with a broad product portfolio of minimally invasive and non-invasive medical aesthetic and hair restoration technologies and reach in over 60 countries and 26 direct markets. Venus Concept focuses its product sales strategy on a subscription-based business model in North America and in its well-established direct global markets. Venus Concept’s product portfolio consists of aesthetic device platforms, including Venus Versa, Venus Legacy, Venus Velocity, Venus Fiore, Venus Viva, Venus Freeze Plus, Venus Heal, Venus Glow, Venus Bliss, Venus Epileve and Venus Viva MD. Venus Concept’s hair restoration systems includes NeoGraft^®, an automated hair restoration system that facilitates the harvesting of follicles during a FUE process and the ARTAS^® and ARTAS iX^® Robotic Hair Restoration systems, which harvest follicular units directly from the scalp and create recipient implant sites using proprietary algorithms. Venus Concept has been backed by leading healthcare industry growth equity investors including EW Healthcare Partners (formerly Essex Woodlands), HealthQuest Capital, Longitude Capital Management, and Aperture Venture Partners.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. In some cases, you can identify these statements by words such as such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,” “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance,” and other similar expressions that are predictions of or indicate future events and fu