Venus Concept Inc.

Thank you, operator and welcome everyone to Venus Concept's fourth quarter 2020 earnings conference call. I'm joined on the call today by our Chief Financial Officer, Domenic Della Penna; and Chad Zaring, our Chief Commercial Officer.

Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with an overview of our revenue performance in the fourth quarter, including color on how our business trends have continued to significantly improve despite the continued challenges related to COVID-19 pandemic, Chad and I will then provide an update of our progress and key strategic areas, including our targeted commercial strategies.

Our initiatives focused on enhancing our competitive positioning, and our continued development work related to robotics. Then Domenic Della Penna will provide you with more in depth review of our quarterly financials, our balance sheet and financial condition and our guidance expectations for full-year 2021.

And then we’ll open up the call for your questions. So with that overview in mind, let's get started with the review of our fourth quarter revenue performance and overall business trends.

We reported GAAP revenue of $25.8 million for the fourth quarter of 2020, representing a decrease of 19% year-over-year. That said Q4 increased 25% on a quarter-over-quarter basis, reflecting the improving business trends in key markets that we experienced during the quarter.

Importantly, the 25% sequential growth in total sales we delivered in Q4 was driven mostly by 50% quarter-over-quarter growth in sales in the U.S. customers -- to U.S.

customers and 10% quarter-over-quarter growth in sales to international customers. This strong sequential growth we delivered in the fourth quarter gives us further confidence that we've developed a right to near to intermediate term growth strategy which has us well positioned for improving growth trends, as the global recovery continues to progress.

Specifically, as discussed in our recent investor calls, there are two key tenants of this focused growth strategy, first implementing a targeted commercial strategy; and second, consolidating the direct selling operations of certain international markets and reinvesting the capital primarily in higher return markets in the U.S. markets.

Chad, Domenic and I will provide additional color on our progress during the quarter later in this call. But in the interim, it’s important to understand that our fourth quarter results reflect both the continued improvement in our aesthetic and hair restoration procedure trends, and the pace of system adoption continue to improve in Q4 as compared to Q3.

We believe that these are encouraging indications that the environment is improving and that the results we deliver in Q4 are a direct result of our team's strong execution of our growth strategy specifically when you consider the challenging global capital equipment environment. The improvement in business trends is most evident when evaluating the growth and patient procedures we experienced during the quarter.

Starting with a procedure trends for our aesthetic customers. Our real time IoT data on our devices gives a strong visibility into the active trends for a large portion of our installed base.

This average usage per system data reflects improving consumer activity and demand for our product procedures during the fourth quarter. Specifically, we saw average usage per system trends in North America improve each month of the quarter, an increase in the high teens year-over-year in the fourth quarter.

Outside of the U.S., we continue to see a wide variation in average usage for system trends, depending on the region of the world in question. EMEA continues to lag the pace of recovery we’re seeing in North America, but we did see in our usage for system trends year-over-year improve in each month in the fourth quarter, as well.

And we were just down just approximately 1% year-over-year Latin America average usage for system trends increased into the high teens year-over-year. In terms of the procedure trends for our hair restoration customers, the significant improvement in procedure trends we experienced in key markets during Q4 was very encouraging as global procedures on our order systems were up mid single digits year-over-year.

In the U.S. procedures on our order systems increased 27% year-over-year in Q4 offsetting a 16% decline in international markets compared to the prior-year.

The strong procedures trends in our U.S. hair restoration business in Q4 was fueled by an improving procedure environment during the quarter and from strong expertise of our commercial team towards our key strategy to engage customers in the U.S.

who have order systems that we believe may have been underutilized in the past. While international procedures declined year-over-year, we did see low single digit growth in international procedures quarter-to-quarter, which better reflects the improving business trends we experienced in Q4 driven primarily by the recovery of hair restoration procedure trends in the EMEA continues our pace of you've seen in APAC and Latin America.

With respect to system adoption trends in Q4, despite the challenging global environment, we're very encouraged but continued improvement in system adoption, as evidenced by 24% sequentially increase in leases and system sales we delivered in the fourth quarter. I'm now going to ask Chad to share some additional color on our strong commercial execution in Q4, which was instrumental in our ability to drive strong growth performance, as the overall environments showed signs of recovery.

Chad?

Thanks, Dom. A way of background, we implemented a more targeted near-term commercial strategy during the second quarter of 2020, which is focused on optimizing our pipeline and sales process and opening new strategic sales channels, diversifying and tightening clinician targeting, tailoring our selling strategies depending on the geographic region of the country, and arming our direct sales team with programs and messaging focused on six key product lines.

Venus Bliss, ARTAS, NeoGraft, Versa, Viva and Venus Glow, four of which have meaningful recurring revenue streams. The results we delivered in Q4 clearly reflect that we are driving growth in the areas where we’re focused.

The largest contributors to our system sales results in Q4 were continued positive market response to our Venus Bliss non-invasive fat and body contouring platform and very strong system adoption of the ARTAS hair restoration business in Q4. On Bliss, we couldn't be happier with the strong market response to our differentiated non-invasive fat and body contouring platform and its first full-year of commercial launch.

As expected, sales of Bliss systems were the largest contributor to growth for the company in 2020. And we're particularly pleased with this performance given the backdrop of the global pandemic.

Additionally, we launched the Bliss Roadshow in Q4, a multi-city tour aimed at increasing the pipeline for Bliss and driving market development and consumer awareness. The Bliss Roadshow along with increased sales focus on ARTAS and NeoGraft allowed the sales team to call on more core physicians.

We think 2021 will be a big year for Bliss as these headwinds ease as we move through the year. We recently announced that we've added Venus Williams as a brand ambassador for the Venus Bliss, which we believe will create significant brand awareness with consumers and ultimately help the Venus Bliss gain even more traction throughout the balance of 2021 and into 2022.

Regarding ARTAS performance in Q4, the new commercial strategy for the ARTAS systems products and services is focused on driving broad based adoption and utilization. The new commercial strategy for ARTAS includes an improved pricing model focused on driving system adoption, a targeted plan to engage with clinicians to drive improve utilization of our installed base, including reinvigorating, underutilized ARTAS systems, and leveraging the most comprehensive hair restoration solutions offering available today.

With ARTAS and NeoGraft, we now have an end-to-end portfolio of minimally invasive solutions unique from any competitor in the $4.1 billion global hair restoration market. Simply stated, our new commercial strategy for ARTAS is clearly working.

We're proud to report that sales of ARTAS systems increased 75% year-over-year in the fourth quarter. We're also executing our strategic initiatives focused on enhancing our competitive positioning.

We have consolidated direct selling operations in certain international markets, and then reinvested a portion of that capital in the higher return more attractive U.S. market.

We’re also continuing to enhance our commercial team by eliminating multiple layers of sales management positions, and calling underperforming reps. And we’re reallocating a portion of these savings toward the expansion of our North America direct sales team, which we believe offers the highest return on investment for these investment dollars.

In Q4, we began to see the impact of the leadership changes in Q2 and Q3, and sales results from new territory managers that we hired and trained in Q3. Currently, we have a North American direct rep team of more than 50 and we expect to continue to invest strategically to increase this team to more than 70 in 2021.

These efforts cannot be overstated in terms of their potential impact on our improving growth and market share gains going forward. Our confidence in our outlook is based on our belief that we have the right product portfolio, and the right commercial strategy.

And we’re allocating capital to the highest growth, highest return market, which has us extremely well positioned for future success over the near to intermediate term. Importantly, the longer-term outlook for the company is equally compelling as we continue to make progress in the area of product development.

Specifically, our efforts to develop the next generation robotic technology for medical aesthetic applications. We believe the technology we are developing will offer dermatologists and plastic surgeons minimally invasive robotic solutions for medical aesthetic procedures that will improve the safety profile, provide better clinical predictability, significantly reduce operator fatigue, and help clinics reduce treatment variability, while also offering a significant competitive advantage in the areas of marketing and new customer acquisitions specifically benefiting the dermatology and plastic surgery community.

As previewed at our R&D Day last December, we’re excited about the prospects for our RoboCore device, a robotic non-surgical procedure with potential to disrupt the skin tightening market. We have completed animal trials and are very pleased with the clinical efficacy and are working through a small feasibility and safety study with hopes of beginning enrollment in our human clinical study in the coming months and are targeting completion by the end of Q3.

Lastly, we intend to launch a new muscle stimulation technology for body contouring and toning, which will be an add-on to our Venus Bliss system. We’re targeting a clearance by year-end 2021 and a commercial launch in early 2022.

With that, let me turn the call over to Domenic Della Penna who’ll provide a detailed review of our fourth quarter financial results and discuss our balance sheet and financial condition. Domenic?

Thanks, Chad. For the avoidance of doubt, unless otherwise noted my prepared remarks this afternoon will focus on the company's reported results on a GAAP basis and all growth related items are on a year-over-year basis.

Fourth quarter total GAAP revenue decreased $6 million or 19% to $25.8 million. As reported on our GAAP income statement, leases revenue decreased $6.6 million or 41% to $9.7 million and total products and services revenue increased $0.6 million or 4% to $16.1 million.

The decrease in lease revenue in the fourth quarter of 2020 was driven by the business disruption caused by the global pandemic. Total products and services revenue in the fourth quarter of 2020 included $5.4 million from the sale of ARTAS systems, products and services.

Sales of ARTAS systems products and services increased 34% on a pro forma basis and increased 94% year-on-year on a reported basis compared to the prior-year period, which only included contributions from the sale of ARTAS systems revenue, following the closing of our merger on November 7 2019. Turning to a brief review of our revenue performance by geography and by product line, which incidentally is how we report and discuss revenue results in our 10-K and 10-Q filings.

The year-over-year change in fourth quarter total GAAP revenue by geography was driven by a $4.7 million decrease or 29% in U.S. sales and a $1.3 million decrease or 8% in international sales compared to the prior-year period.

The year-on-year change in the fourth quarter total GAAP revenue by product category was driven by the aforementioned decrease of $6.6 million or 41% in leases revenue and a decrease of $0.9 million or 44% in service sales offset partially by an increase of $0.9 million or 32% in sales of procedure related products including our ARTAS kits and other consumable products and an increase of $0.7 million or 6% in system revenue which are cash sales or sales of systems with payments expected in less than 12 months driven by our strong ARTAS performance in the quarter. We had a split of subscription sales revenue to traditional sales revenue at a ratio of approximately 46% to 54% in the fourth quarter of 2020 compared to 61% to 39% last year.

This reflects the strategy for 2020 whereby we’re focused on our commercial efforts on six products which are more frequently sold as traditional sales versus under our subscription model which improves our cash flow. Turning to a review of our fourth quarter performance across the rest of the P&L, gross profit for the fourth quarter of 2020 decreased $3 million or 15% to $16.7 million representing a gross margin of 64.7% compared to gross margin of 62% last year.

The primary driver of the year-over-year decrease in gross profit was lower revenue as a result of COVID related business disruptions. The primary driver of the year-over-year increase in gross margin primarily related to initiatives directed at reducing manufacturing costs of our Robotic ARTAS systems, ARTAS gross margins were approximately 55% in Q4 2020 compared to approximately 37% in Q4 ’19.

This improvement reflects the early evidence of our strategic initiative to improve the long-term profitability of ARTAS related sales. Total GAAP operating expense decreased $10.6 million or 28% to $27 million.

The decrease in total operating expenses was driven primarily by a decrease of $4.9 million or 22% in general and administrative expenses, a decrease of $5 million or 41% in sales and marketing expenses and a decrease of $0.7 million or 28% in R&D expenses compared to the prior-year period. The decrease in GAAP operating expense in the fourth quarter of 2020 was partially offset by incremental bad debt expense of $5.4 million driven by COVID-19 reductions in the collection of accounts receivable from our subscription customers across the markets we operate.

Total GAAP OpEx in Q4 also included restructuring expenses of $0.5 million and non-recurring legal expenses of $0.3 million. Excluding these items, fourth quarter 2020 operating expenses declined 45% year-over-year.

With respect to the incremental bad debt expense in the fourth quarter after seeing marked improvements in collection trends in July, August and September fueled by repayment arrangements we made with the majority of non-paying customers and as government restrictions were lifted and businesses reopened, however we saw collections begin to decrease in October as a second wave hit. We have taken a conservative approach to our bad debt expense management and approximately 75% of the $5.4 million in bad debt expense write-offs in Q4 relates to active accounts that we are still working with.

Importantly, while the collection trends slowed in Q4, we maintained level of 86% to 87% of subscription billings collected throughout the quarter materially better than the 35% level in May and 60% in June, we have seen collection trends in North America improve in Q1 with March collections at 97% and we expect to see significantly lower bad debt expense quarter-over-quarter in Q1 ’21. Returning to a review of our fourth quarter financial results, total operating loss in the fourth quarter of 2020 was $10.3 million compared to an operating loss of $17.9 million in the prior-year period, an improvement and loss of $7.6 million or 42%.

Net loss attributable to Venus Concept Inc, stockholders for the fourth quarter of 2020 was $14.7 million or $0.34 per share compared to net loss attributable to Venus Concept Inc. stockholders of $20.8 million, or $1.07 per share for the fourth quarter of 2019.

Weighted average shares used to compute net loss attributable to Venus Concept Inc. stockholders per share were $42.8 million and $19.5 million for the fourth quarters of 2020 and 2019 respectively.

Non-GAAP adjusted EBITDA loss for the fourth quarter of 2020 was $2.4 million compared to adjusted EBITDA loss of $11.5 million for the fourth quarter of 2019. We have provided a full reconciliation of our GAAP net loss to adjusted EBITDA in the press release this afternoon.

Turning to the balance sheet, the company had $34.4 million and $15.7 million of cash and cash equivalents as of December 31 2020 and December 31 2019, respectively, and total debt obligations of approximately $79.6 million, including government assistance loans of $4.1 million, compared to total debt obligations of approximately $69 million, including a line of credit borrowings of $7.8 million at December 31 2019. The change in cash for the full-year 2020 period was driven by an increase of $18.6 million in cash from financing activities, offset by use of cash from operating activities of $28.7 million and a $2.4 million use of cash from investing activities.

On December 10 2020, we announced a series of transactions that materially enhanced our balance sheet and financial condition. First, we amended our existing revolving credit facility with City National Bank Florida CNB and secured a new loan with CNB in the aggregate amount of $15 million as part of the Main Street priority loans facility.

The loan has a term of five years and bears interest at an annual rate of LIBOR plus 3%. A portion of the proceeds were used to fully pay down $3.2 million of outstanding debt under the revolving line of credit with CNB.

Second, we repaid $42.5 million of aggregate principal amount owed under the existing credit arrangement with Madryn and issued 8% secured subordinated convertible notes to Madryn for an aggregate principal amount of $26.7 million to exchange and retire the remaining debt obligations owed to Madryn that would have matured in 2022. Together these activities reduce our cost of debt from 9% to less than 5% based on current rates and the new loan agreement allowed us to refinance our long-term debt obligations, which provides us with greater flexibilities to support the execution of our growth strategy.

Turning to a review of our guidance, as detailed in our press release this afternoon, the company reaffirmed our revenue guidance expectations for the full-year 2021 period originally introduced in our press release on January 14 2021. Assuming no significant and persistent resurgence of COVID-19 in key markets, and based on a notable increase in pipeline activity, the company continues to expect total revenue for the 12 months ending December 31 2021 in the range of $98 million to $103 million, representing an increase of approximately 26% to 32% year-over-year, compared to total revenue of $78 million for the 12 months ended December 31 2020.

While we’re not providing formal profitability guidance for full-year 2021, we would like to offer the following considerations for modeling purposes. First, we expect our gross margins to be in the range of 66% to 68% in 2021, driven by favorable revenue mix with U.S.

growing faster than international markets in 2021 and from benefits related to our initiatives directed at reducing manufacturing costs of our Robotic ARTAS systems. Second, we expect GAAP operating expenses of approximately $88 million representing a 26% decrease year-over-year.

Importantly, this represents approximately 10% growth in our normalized operating expenses which excludes certain items that impacted our GAAP operating expenses in 2020, including non-cash goodwill impairment of $27.5 million, incremental bad debt expense related to COVID-19 of $11.1 million and non-operating non-recurring items related to retention, severance and other legal expenses, and together represented approximately $2.3 million of costs and expenses last year. Third, we expect our interest expense to be approximately $5 million, given a lower borrowing costs and debt obligations compared to the prior-year.

Fourth, we expect non-cash D&A of $5 million and non-cash stock comp of approximately $2.5 million, and fifth, we expect our weighted average shares outstanding to be approximately 55 million. Finally, while it is not our practice to provide quarterly guidance, given that we are reporting in the last week of the fiscal first quarter of 2021, we thought it would be helpful to share our range of expectations for total revenue in the interest of transparency.

As such, our full-year guidance includes the assumption that our Q1 ‘21 total revenue will increase in the range of 44% to 50% year-over-year. With that operator, we’ll now open the call to your questions.

Operator?

So I'll try to be, I guess I wanted to kind of drill into the commercial organization, generally speaking, described it, and it's looking like and it's becoming I know Chad you mentioned up to going from 50 to 70, I think your case of 140 to a worldwide commercial? And where does that fill out in the U.S.

And then also talk to us a little bit about the international markets and where you're seeing some strengths and weaknesses and where you expect to pull back and press forward? Thank you.

Okay, thanks, Jeff for that question. Just to be clear, we talk about the 70 going from 50 to 70, that is a U.S.

base number, sorry, North American base number that will be incremental to the 142. So you can assume that we will grow from the 142 in the aggregate.

The strengths that we're seeing right now and how we define strength is really by two metric. First one is basically how we use our Internet of Things to determine the uptake of our devices being turned on globally, we see a very, very positive trend in North America in particular.

And the second thing quite frankly, is our qualified pipeline. I'll let Chad touch a little bit on that.

And perhaps he can give you a little bit more color as to where the focus is there and how we're trending, Chad?

Sure, yes. We've seen a growth, we looked at our qualified pipeline 50% to 100% deals, not just tire kickers across products.

We’re up from March 2019 like where we are currently. And we had a big increase over 50% increase in the qualified pipeline from the pandemic, when it first hit us last March, and that's globally.

So we're looking at the global qualified pipeline. Now we are seeing the U.S.

really open up with respects to the products we've talked about in the past Jeff Bliss, ARTAS and NeoGraft, three of the top six focus areas, we're getting a lot of traction with those in the U.S. hence the interest in adding these incremental reps in the U.S.

But we're also OUS looking to make really strategic hires. We're having good traction with our ARTAS business in EMEA and so the idea there is to add people that can support the growth of robotics across the region.

And then furthermore, we talked about divesting some of our interests moving from less direct international markets to fewer key markets, I would say, setting a baseline like if it's not going to be a $5 million OUS market, we're not going to be there direct. And so we're adding sales personnel in those markets, Australia.

Mexico, Germany, U.K., places where we can feel like we can generate significant traction with our hair restoration business with the Venus Bliss and then with our other three core products.

Okay that does. Just as a follow-up for me, could you talk a little bit about the muscle stim competition and talk about the form factor that you're thinking about, and perhaps give us a flavor for some of the energies that you'll be able to offer?

Yes, I think that for competitive reasons, we want to be careful on how we describe the technology, what I will share with the audience is that, it becomes the third leg, if you will, of the Venus Bliss, it'll be known probably as the Venus Zeus, this will be the only device in the market that will actually be able to have a significant meaningful impact on the fat layer, be able to contour the body simultaneously with the use of RF. So you've done laser for fat, RF for the contouring, and a muscle stimulation vehicle that will allow us to body tone and sculpt all within one session, that'll be the protocol that we'll be using.

What I’ll share with you is that we do intend to have a disposable element to the muscle stimulation portion of the device and we do expect that this product will sell in the range of somewhere between $175,000 and $200,000 as an ASP.

So Dom, first let me throw out some questions to you and or Chad. Dom at this stage of the launch, can you compare and contrast specifically what Venus Concept is doing on the Bliss product line compared to what Zeltiq did on CoolSculpt?

So first that's a great question, Suraj. What I will tell you is that our market acceptance in this product really does resonate into the CoolSculpting customer base.

And I think what we're really encouraged with right now is the quality educated market, the market that's already been in the fat category for a few years, having been there with the Zeltiq technology. So this is an educated market that understands the ROI benefit of the Venus Bliss in terms of the speed of procedure, patient compliance, so the treatments because there the patient tolerates these treatments very, very well.

And obviously, the no cost of and this was strategic on our part to no cost of an ongoing disposable cost each time they turn on the device. It could have been easy for us to add that to the device.

But we felt for competitive reasons, we wanted to avoid that to create cost certainty for customers. So we think that we're quite frankly, ahead of the curve from where Zeltiq was in its early days of launching fat.

And bear in mind that where Zeltiq was five, six, seven years ago. Now, they were the only player in the space.

So what we're encouraged by is that not only we believe making very significant impact on customers who are already in the fat category, but we're able to leverage this as part of sort of referral sites that we can convince people that have never been in the fat category, to adopt fat into their practice. And last but not least, one of the things that's really encouraging and compelling to us is that with our real time data, our Internet of Things, consistently, we are seeing a payback period in other words, an ROI to the customer of about a 35, 36 weeks from an ASP in the range of $120,000.

So when clinics can show a return on their investment in less than a year, that's quite compelling economics. And I think that a combination of all the things I've just described is really leading to a very nice market acceptance.

Got it. Dom, Chad, you guys gave out a lot of metrics on sales reps and the outlook for FY ‘21.

Maybe I'll ask it a little differently. Where does sales rep productivity for Venus or rather how does it stack up relative to industry averages?

Right, Chad, you want to cover that one?

Sure. I think that the goal we put forward is we're getting traction with ARTAS and NeoGraft and based on higher ASPs, and now the traction we're having with Bliss, our production per rep, the quotas that we distributed to them in 2021 across these buckets, the hair restoration bucket, the Venus Bliss bucket, which has significantly higher ASPs than historical products and then the all other buckets puts them into a comparable range with what other industry representatives we hear market to market anecdotally Suraj.

Got it, yes.

I think just to expand on that, Suraj, the typical rep is between 1.5 and 1.7 million which is pretty consistent with pretty much every other company that's in our category. The group of reps that we do anticipate bringing on to expand our salesforce we have a very strategic plan related to how we’ll deploy those and they will have a smaller quota but will be very strategic in terms of creating additional leads et cetera for the company and higher ASP products.

Yes, and one more Suraj, one more point on that, that Robotic specialist team that we deployed that sells specifically the ARTAS and NeoGraft bundle, the national strategic account people that focused on these large dermatology chains, we would obviously expect significantly more revenue from them because they're focused solely on a higher ASP product line. So that's the way we stratify it.

Got it, okay. Domenic, one last question and I'll hop back in queue, lease revenue was down 41% year-over-year.

You obviously mentioned about some bad debt expense in the quarter and I was trying to quickly write down some numbers you said 86% of the accounts were still active maybe I'll just kind of frame it within the context of FY ’21, what percent of FY ’21 outlook, are you looking at it from a pro forma bad debt expense, how should we think about that specific line item of your FY ’21 revenue guidance? Gentlemen, thank you for taking my questions.

Suraj, good question. I think under the assumption that the worst is behind us, I think we can look to 2021 as being certainly more normalized and again that's notwithstanding any impact of a third wave et cetera.

But our assumption and the guidance that we've given going forward is that we're going to continue to pull out of this and on that basis I think we'll see a bad debt expense which is more in line with sort of normalized reporting in the 4% to 5% of sales range is where I would expect and again what the number I referenced for Q4 was that 75% of the bad debt expense in Q4, we reserved for what I refer to as active accounts therefore not accounts that had fully defaulted. But we're active in the sense that they hadn't made payments in a few months and were problematic but we believe that they'll come back to us based on interactions we've had with them, they're not completely shut down, they're trying to get restarted again and reactivated but we've taken a very conservative approach and fully provided for those accounts.

So to the extent that we can resurrect and resuscitate those accounts, that's good news for 2021.

Good afternoon, maybe a small handful, Dom the muscle stim offering that you talked about, will you be able to decouple that if you would and if your practice just purchased the stimulation component or is that only going to be bundled with Bliss going forward?

Yes, at this point we're bundling with Bliss because we think that the market opportunity is quite compelling given what our competitors are selling one dimensional technologies for, we can always sort of bifurcate it, if you will and make it a standalone unit but we feel that we have a very specific protocol in mind, it will allow for optimal results for patients by taking advantage of all three. Now that said, Jon if the clinic only wants to do a muscle stimulation treatment, body toning treatment they can do that on that platform.

So it's not like they got to activate one to activate the other. So it's ala carte if you will within the device and they don't have to add it right away, so if they want to buy the standalone Bliss, they can add the muscle stim after as well.

So there is some flexibility there but having said that I think that what we've done is decided to take a very strategic approach here understanding the magnitude of the opportunity with a device that is all encompassing.

Okay, got it. And just want to think about timelines.

And I apologize if I'm incorrect, but it seems like muscle stim was pushed from ‘21, maybe to ‘22. And maybe RoboCore was pulled forward, or can you talk to Dom the timeline?

Are they unchanged? Or did muscle stim experience maybe a slight delay, as you strategically thought about the plan, and is RoboCore actually pulled forward somewhat, if you could elaborate?

Yes, RoboCore is still on target exactly, as we had originally discussed it back in December, the muscle stim, the only reason that we've actually talked about contributions in 2022 at this point, is because of our FDA strategy, and we think that we can get the product to market sooner than that. But we don't want to promise that at this point.

And we haven't factored in any muscle stim revenues into our 2021 plan, just to be clear. So anything that we would be able to do by pulling that up even a few months in the busiest quarter of the year, which is Q4, we feel will have some certainly some positive impact on helping us continue to increase or improve our performance quarter-over-quarter.

So there's no real delay in that product, we're moving forward according to our original plan. We just want to make sure that we have very clear understanding as to where we'll be with the FDA process.

Got it. And actually, that was one of my follow-up.

So just to be clear that the 2021 guidance assumes no muscle stim, no [RoboCore] no contribution from either of those products in 2021?

That's correct.

Okay, got it. Last one or two for me, Chad or Domenic, the ARTAS implantation feature, I didn't hear a lot about that.

Can you just provide us with an update there? How's that going, maybe the receptivity out in the field and then I've got one small follow-up.

Chad, go ahead.

Yes, sure. Thanks for the question, Jon, we've made some substantial improvements to the mechanism, the speed, the efficiency, the cartridge loading process, we're in a commercial relaunch with a few sites in the U.S.

that seems to be going well. The next plan is to identify and activate more commercial sites in the U.S., for each of our regions, so that they can become quote the teacher, so that we can bring on more sites, current customers that have harvest only to implant.

But most of the new sites going out most of the new sales, we're starting to transition to selling the implant feature, which obviously improves our ASP, and doesn't significantly affect our margin profile. So it's going pretty well, we're cautiously optimistic that we're going to have good uptake of the implant technology, the implant feature.

Got it, perfect. And last one for me if we can take this offline, it's one of those accounting questions, but I'm just trying to think about the moving parts.

So when you place the system, you book it as revenue, if you don't collect, you have the bad debt expense, which you guys exclude from your EBITDA calculation, but the account might still be active, if you were to go ahead and collect from that account in a subsequent quarter, does it come back in as revenue maybe, let me know if that makes sense if you can clarify that?

No, Jon it wouldn't come back as revenue, but it would come back as a credit to bad debt expense. So, let's just say in Q1, I record a million dollars of bad debt expense.

But I get an account that comes back and they're back online, and they're paying again, then I could credit that million dollars of expense by the amount that they're contributing back against that. So let's say $50,000, I'd reduce my bad debt expense by that amount of recovery.

Okay, got it. In either way, it's excluded from the EBITDA calculation to your guide?

Correct.

Thanks. Just a couple of questions.

On the revenue guidance for the first quarter of 44% to 50% year-over-year growth, should we or how could we think about ARTAS in relation to that, is ARTAS a significant part of that growth, is ARTAS growing faster than that in line with that?

I think the way you should look at it Anthony is that the trends that we've experienced in Q2 or Q3, Q4 with the ARTAS is continuing in Q1.

Okay, great.

If you look at year-over-year percentages that we've disclosed in the past in Q3 and Q4 as we did in Q4, I think it's safe for you as your model this to do that in Q1.

Okay. And then just in terms of a different product to switch gears before I just ask one question on the muscle stim one, so Venus Glow, I know competes with HydraFacial, and HydraFacial just went public through a spec, I was just wondering if you could talk about the market opportunity for Venus Glow?

Yes, look I think that this is one of the sort of I hate to call it the best kept secret within the company, I think that one of the challenges that we've had in the past was because this is typically a $20,000 to $25,000 ASP, people that are used to selling $65,000 to $250,000 platforms may ignore. So one of the strategies and one of the reasons why we intend to significantly add to the sales organization for the balance of this year is exactly that Anthony is that the opportunity is quite large, for HydraFacial it's a $200 million business and most importantly in that number, 50% of it is in the recurring utilization of the serums for which we have with ours which is very comparable in terms of pricing and certainly clinical efficacy.

So the incremental growth that we will bring into the sales organization in North America will be dedicated not exclusively but virtually exclusively to the Glow and to the Venus Viva product because we think that these price points are perfectly set up for an audience that can go out and specifically sales organization that can specifically target customers in this category because in the Venus Glow as an example, the primary goal of our business as we move forward has been dermatology and plastic surgery that has a much broader appeal across all channels including med spas and so we think that we'll be able to take advantage of that in a meaningful way for the balance of 2021. That said, the Venus Glow, there's approximately 300 systems in play globally and we’re just starting now to have a meaningful impact leveraging that customer base with the various serums that we introduced late in 2020.

Okay, great. That's definitely helpful color.

Just in terms of what you need to do from an FDA standpoint for the muscle stim, is there a trial you're doing before you submit for that or what needs to happen to move forward with the muscle stim and potentially commercialize that before?

Right, sorry. Ironically enough Venus was the first company to bring muscle stim to the market in 2010, 2011 with one of our smaller devices so we feel that and this is one of the reasons why we sort of been somewhat cautious about the FDA, we think that there's a significant number of predicates out there that will allow us to bring the product forward in terms of releasing to the market.

Having said that, obviously predicate devices are predicate devices and we want to make sure that we're properly aligned, that doesn't mean that we won't continue to do and will do clinical trials sort of in parallel to ensure that either way with the FDA we'll be able to meet whatever their requirements are. But this is typically a 30 to 40 patient study to be able to demonstrate safety profile as well as obviously efficacy.

But we think that we may be able to predicate not only our own device but other devices as well.

Okay, great. And then last on ARTAS, just one last thing on ARTAS, so I know that when you first basically purchase through their reverse merger into Restoration Robotics, the ARTAS system.

That typical procedure would still take seven, eight hours or so I believe you've brought that down to five, can you talk about where you're at exactly with that. And do you believe you can get one of these procedures down to four hours at some point mid-‘21?

Yes, that's a really good question. So you're absolutely right that a typical 2000 follicle transplant like under a manual system, you're typically talking about eight hours.

What Restoration Robotics did even prior to our acquiring the company did a really great job of being able to harvest hairs at a rate of somewhere around 1,000 an hour. So for argument sake, they could harvest 2,000 follicles in, the problem that ARTAS or the Restoration team had before when they prematurely launched the implantation features every minute that they saved on the harvesting, they reinvested in the implantation.

So it frustrated many clinics, and ultimately, that led to a lot of clinics being dark, because they were oversold on the technology. When we acquired the company, we strategically took that implantation feature off the market.

So behind the scenes, we continue to improve it. And what that's led to now is a typical 2000 follicle procedure from start to finish is just around five hours, we think that we can get the procedure down to four and that's a very critical number, because at four hours, a typical clinic, especially a busy hair restoration clinic, can do two patients a day.

And that's quite important at the clinic level. So that's kind of our target.

We're not there yet. But we believe we can get there, but it's going to take us a bit of time.

Okay, very helpful. Thanks very much.

I appreciate it. I'll hop back in the queue.

No problem, Anthony.

Dom, I would just like to clarify on Jon's point around the bad debt expense. So there's two components, the bad debt expense, that would be normalized, that is not an EBITDA addback, but it's only the COVID-19 portion that is an EBITDA exclusion or an add back.

So I hope that's clear. So on a normal basis, it is excluded from that, that formulation but where we have identified COVID as an impact that has been isolated in the EBITDA calculation.

Thanks everybody.