Apollo Endosurgery, Inc. (APEN) on Q2 2021 Results - Earnings Call Transcript
Operator: Good afternoon, ladies and gentlemen, and welcome to Apollo Endosurgery's Second Quarter 2021 Results. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Matt Kreps. Sir, the floor is yours.
Matt Kreps: Thank you, Catherine, and thanks, everyone, for participating in today's call to discuss Apollo's second quarter 2021 financial and operating results. Joining me on the call are Chas McKhann, Chief Executive Officer; Stefanie Cavanaugh, our Chief Financial Officer. And also joining today's call is Jeff Black, our Incoming Chief Financial Officer, who will officially assume his duty upon filing of our second quarter Form 10-Q. Before we begin, I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of Federal Securities laws, including Apollo's financial outlook and Apollo's plans and timing for product development and sales. In addition, there is uncertainty about the continued spread of the COVID-19 virus and the ongoing impact it may have on our operations, the demand for our products, global supply chain and economic activity in general. These forward-looking statements involve material risks and uncertainties and cause actual results may differ materially. For a discussion of risk factors, I encourage you to review the company's Annual Report on Form 10-K for the year ending December 31, 2020, filed previously with the Securities and Exchange Commission and our most recent Form 10-Q. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, August 3, 2021. Except as required by law, Apollo undertakes no obligation to revise or update any statement to reflect events or circumstances after the date of this call. And now with that, I'd like to turn the call over to Chas.
Chas McKhann: Good afternoon, everyone, and thank you for joining today's call. Our strong momentum continued into the second quarter, driving our fourth straight quarter of sales growth. In the release that just crossed the wire, we reported record sales for endoscopy products of $16.6 million for the second quarter, leading us to increase our revenue guidance for the full year from $55 million to $57 million to now $61 million to $63 million. You may remember that my first call with you in May, I laid out a growth strategy with three phases: to energize the business, accelerate growth and lead from the front. Our investor deck available online includes a slide describing the three phases in more detail. The results are reported a clearly aligned with the first phase, energize as we seek to deliver transformational growth at Apollo. The energized phase is all about building momentum by driving near-term performance and achieving strategic milestones that will lay the foundation for years of sustainable growth. Customer demand for our products is increasing around the world, and we are seeing that reflected in our performance despite ongoing challenges presented by the pandemic. In addition to delivering record revenue for our Endoscopic Suturing and Intragastric Balloon businesses, we made substantial progress on many key initiatives. These include: first, transforming our senior leadership team with the recent appointments of Kirk Ellis, our VP of U.S. Sales: Steve Bosrock, our VP of Marketing and Medical Education; and Jeff Black, our Incoming CFO, who started this week and is with us on today's call. Second, strengthen and expanding our sales team. In the U.S., we have hired back 4 experienced sales reps, all of whom are fully trained on our products and were previously top performers. In addition, we have recently opened 6 additional new U.S. sales positions and some key positions in our international team to further improve coverage and allow our sales team to focus on driving growth in high priority geographies. Third, announcing that the MERIT study investigators have reported that in a preliminary analysis, the trial has achieved its primary efficacy and safety endpoints. And fourth, continuing the successful launch of our novel X-Tack Helix Tacking System with more than 120 active sites at the end of Q2. Since starting at Apollo earlier this year, I've been engaging with customers continually as have many on our leadership team. We consistently are feedback that physicians love our products, and now they also show our excitement for the revitalization that is taking place in Apollo. Turning now to updates on each of our product lines, starting with OverStitch. We continue to see strong OverStitch demand from our core users. We are very pleased to see that in Q2, growth of OverStitch was driven by an increase in both the total number of accounts ordering and the average revenue per account. This tells me that we are successfully growing the base of physicians who are trained and using OverStitch while also increasing adoption among our experienced users. Our mobile learning lab is back on the road training physicians on our products and our training programs continue to evolve to best meet the needs of physicians. We work closely with physician societies, such as the American Society for Gastrointestinal Endoscopy, the ASGE, who just last week, hosted an excellent training program focused on Endoscopic Suturing with OverStitch. Outside the U.S., we are seeing strong results despite periodic COVID flare-ups in various markets around the world. Mike Gutteridge and our international team have done a remarkable job navigating these complex market dynamics in the first half of the year and conditions continue to improve in most of our markets. We do anticipate the disruptions from COVID will continue to pop up, but we are seeing broad basis of improvements in both our direct and distributor markets that we expect will continue to build in the second half of the year. Perhaps one of the most significant OverStitch milestones to date came in June at the Surgical Disruptive Technology Summit, where the MERIT study investigators announced that based on a preliminary analysis, the study has achieved its primary endpoints for both efficacy and safety. I'm pleased to now report that the MERIT study results have been accepted for a presentation by the International Federation for the Surgery of Obesity and Metabolic Disorders, otherwise known as IFSO, at their annual meeting in Miami in October. Based on the positive announcement about the MERIT trial endpoints, we anticipate filing a de novo submission with the FDA for a new indication for weight loss, most likely in the third quarter. In addition, we are initiating preparation for a comprehensive launch of the ESG procedure at the time of a new indication. We are very excited about this milestone because we believe ESG has the potential to be transformative, not just for our business but also to the millions of patients worldwide looking for weight loss solution that better fits their needs. As a reminder, there are more than 100 million adults in the U.S. alone with a BMI greater than 30 and there is a vast unmet clinical need for new treatment options. Our sense of optimism for ESG stems directly from what we hear from our customers who are expressing rising enthusiasm on 2 dimensions: first, that the ESG value proposition resonates very well with patients. And second, that they have been experienced success offering both provider-driven cash pay solutions as well as some positive case-by-case reimbursement decisions by private payers. Turning to X-Tack. The customer response continues to be very promising. On our May call, we announced that we had added over 50 accounts in the first quarter, and I'm pleased to say that we are now more than 120 accounts in the U.S. We also have initiated our OUS launch in select countries, including Hong Kong, Chile and Israel and are making plans for additional markets. Our OUS X-Tack launch will be targeted to select markets initially, while we work through the new procedures to gain CE Mark in Europe, which we believe will be a 2022 event. Our U.S. X-Tack rollout initially targeted experienced OverStitch users, which made good sense and generated initial interest in the product. Awareness about X-Tack continues to build in the GI community. And at the end of the second quarter, we have a pipeline of approximately 80 additional prospective accounts worth approximately $650,000 of initial orders to be delivered upon completion. That said, under the direction of Kirk Ellis and Steve Bosrock, our new commercial leadership team in the U.S. is increasingly focusing sales activities on driving additional utilization with any key targeted institutions rather than simply opening up a large number of new accounts. We believe this approach can generate more sustainable success by having multiple users at each hospital, including many who are not existing OverStitch users and create highly experienced advocates who see X-Tack as a vital tool that they rely on frequently for their closure needs. We are also supporting multiple clinical evaluations of X-Tack with several papers in development based on initial cases that have already been completed, and we look forward to the first clinical publications in the months ahead. We anticipate that these studies will further document X-Tack unique benefits and ease of use in the closure applications for which it was specifically designed. In short, we are very pleased with the initial clinical performance of this highly differentiated and effective product, and we look forward to building on its initial success going forward. Recognizing that these are simply anecdotes allow me to share some additional comments that we've just recently received about X-Tack. A physician within a large VA hospital shared, “X-Tack is going to be the new normal in endoscopic repairs.” From a user at a major medical center said, “X-Tack has good applications and can replace the need for a lot of endocrips.” And finally, a message from another KOL physician after their first case. “I absolutely love the X-Tack device. I used it last week for the first time on a very challenging case, the X-Tack system worked beautifully, I'm 100% obsessed.” This enthusiasm from our customers, driven by delivering better patient care and real clinical success is very roto our entire team, but especially to our R&D engineers who develop this outstanding product. And completing the product update, ORBERA continues to demonstrate very compelling performance on a global basis, achieving the best revenue quarter since the very early days of the launch of the U.S. I continue to believe that this is a potentially underappreciated asset. We're seeing growing market adoption of IGB as a less invasive but effective weight loss solution for those needing something more effective than diet and exercise alone. ORBERA is the leading IGB the market leader globally with an unmatched body of clinical evidence, excellent weight loss results and excellent value for the patient. A recent publication of new clinical practice guidelines by the American Gastroenterology Association have been very well received, and there were many positive sessions about the lower balloon therapy at the 2021 Digestive Disease Week meeting in May. Looking ahead, we believe the recent positive announcement of new Category I CPT codes for IGB procedures and the FDA breakthrough designation for the treatment of NASH further bolster the potential value of this franchise. We are now seeing rapidly rising interest among physicians in building dedicated endobariatric practices, another development in favor of ORBERA. The ASGE has created a specialty group called the Association of Bariatric Endoscopy that is focused on developing this emerging field. In addition, there were multiple sessions of the DBL view meeting about developing successful endobariatric practices, which include the placement of Intragastric Balloon such as ORBERA as one of the cornerstone procedures offered to patients. Over time, we believe that Endoscopic Suturing, including both primary ESG procedures and endoscopic revisions of prior bariatric surgeries could become the second cornerstone. Apollo's product lines are uniquely positioned to support this emerging field. And briefly an update on our ORBERA for NASH. Recall that non-alcoholic steatohepatitis, or NASH, is a debilitating condition that impacts millions of patients and is one of the leading conditions that cause the need for a liver transplant. In February, we received a breakthrough designation for ORBERA for this new indication of NASH. We continue to work on potential designs for a NASH pivotal trial, and we'll continue to make additional updates on this as it becomes in a better focus. FDA's breakthrough designation was a seminal event for us and an affirmation of IGB's full potential as a therapeutic solution. With this update, I hope to have conveyed the tremendous sense of excitement and momentum that permeates Apollo right now. In my first two quarters as CEO, I've had the pleasure of hearing directly from our customers how positively they view Apollo's products. And in addition, our team here at Apollo has a passion for improving patient care and a dedication to advancing the field of therapeutic endoscopy. We are well positioned to deliver continued growth with large opportunities across all 3 of our product lines. We continue to build our capabilities, including addition to our sales and marketing team, and we work to scale supply and expand our volumes across all 3 platforms and move towards the accelerate phase of our growth strategy. With that, I'll turn the call over to Stefanie to cover the second quarter financial results. Stef?
Stefanie Cavanaugh: Thank you, Chas, and good afternoon, everyone. The second quarter of 2021 demonstrated strong growth, leading to record endoscopy revenue. This is indicative of our strong momentum as well as our recovery from the COVID-19 pandemic, even with some U.S. states and OUS countries continuing to experience periodic COVID surges, which has continued to limit access in certain health care systems. Total revenue was $16.6 million, up 20% sequentially from the first quarter and 194% over the second quarter of 2020. ESS revenue increased 196% and IGB revenue increased 220% versus the prior year. Both product lines demonstrated large increases in both the U.S. and OUS markets, as demand for our products has continued to increase exiting the pandemic. As a reminder, X-Tack sales are included in our ESS results, which we don't intend to disclose separately at this time, but we did cross the $1 million mark in X-Tack sales since the launch in Q1. OUS markets performed well in the quarter as activity continued to increase as more of our markets recover from the effects of the pandemic. In particular, we are very pleased with performance of our direct markets in Europe. Despite COVID-related shutdowns in a number of countries in Q2, our European direct markets delivered 190% growth compared to the prior year quarter and 24% sequential growth as both OverStitch and ORBERA demand improved. This strong Q2 performance gives us confidence in the growing market opportunities for both product lines in key markets around the world. Gross margin also continued to improve, increasing to 55% due to higher sales and the accretive contribution from X-Tack, which was designed from the beginning to be accretive to our historical consolidated gross margin. In addition, we continue to make progress on our internal program of gross margin improvement projects. Operating expenses increased as we expanded investment in growth initiatives, including strategic hiring in our marketing and sales organization as well as higher stock-based compensation expense as compared to the cost controls we implemented during the pandemic in the prior year. Operating loss also increased to $5.2 million, primarily as a result of the non-cash stock compensation expense I just mentioned. We recorded a $2.9 million benefit on the forgiveness of the PPP loan this quarter, resulting in a net loss of $3 million or $0.11 per share. Excluding the non-cash stock compensation and loan forgiveness, our net loss improved 42% compared to the second quarter of 2020 and 14% on a sequential basis this year. Turning to the balance sheet. Our cash position remained strong at $31.2 million compared with $32.6 million at the end of the first quarter, a decline of just over $1 million as the $2 million used for operations this quarter was offset by $1 million of stock option proceeds. As Chas mentioned at the beginning, we are pleased to have delivered a solid first half and increased our full year revenue target from the $55 million to $57 million estimated on our last call to the $61 million to $63 million today, representing a $6 million increase and annual revenue growth of 45% to 50%. A number of continued uncertainties are reflected in that range. We continue to anticipate ongoing uncertainty around the impact of COVID-19 variance in certain markets, particularly OUS in the second half of 2021. We also anticipate a typical seasonal summer slowdown in procedure volumes in the third quarter. And finally, we are still in the early days of our X-Tack product launch and continue to learn about the likely growth in new accounts and X-Tack utilization over time.
Chas McKhann: Thanks, Stefanie. And before we move to Q&A, I would like to officially welcome and introduce Jeff Black, who joins Apollo as CFO this week. Jeff brings 30 years of experience to Apollo Endosurgery, most recently, he served as Chief Financial Officer at Alphatec Holdings, a medical technology company providing spinal fusion solutions. Jeff played a key role in the successful turnaround of the company, securing nearly $500 million in financing to support accelerated growth, transform the balance sheet and execute strategic acquisitions. Under his leadership, Alphatec grew from a market capitalization of $20 million to more than $1.5 billion. I would also like to thank Stefanie for an invaluable contribution to Apollo over the past 6 years, and I'm very pleased that Steph will be continuing on with us as we position the company for the next phase of growth. Stefanie, thank you, and Jeff, welcome to Apollo.
Jeffrey Black: Thank you, Chas, and good afternoon, everybody. I could not be happier to be joining Chas and the team during a very exciting time for the company. There's a tremendous opportunity ahead of us to improve patient lives, to transform and even expand a very large and growing market with truly differentiated technology and all with the eye toward continuing to build shareholder value. Stef's built a very strong finance foundation here at Apollo. I look forward to partnering her with her as we prudently scale the organization to support our plans for accelerated growth. Many of you on this call, I know and looking forward to getting reconnected and reacquainted. Others, I don't, and looking forward to getting to know you in the coming days and weeks. With that, that concludes our prepared remarks, and I'll turn it back over to the operator for questions.
Operator: Ladies and gentlemen, the floor is now open for questions. Your first question is coming from Matt Hewitt with Craig-Hallum. Your line is live.
Matt Hewitt: Good afternoon, and congratulations on the very strong quarter and welcome, Jeff.
Chas McKhann: Thanks, Matt.
Jeffrey Black: Thank you.
Matt Hewitt: First off, obviously, a big bounce back from where we were a year ago, a relatively easy comp, given what happened a year ago, but we're still seeing pockets that you were able to put up some really strong numbers. How much of that do you think was some pent-up demand versus just the growth that you're seeing in new sites offering X-Tack, OverStitch, ORBERA coming back? Is there a way to kind of parse through it and see where that growth is coming from?
Chas McKhann: Yeah, Matt. We actually think this is real growth, right? As you recall, we had a little bit of a bounce back in Q3 of last year, and it had by our circular terms, a very strong Q3, especially when you factor in seasonality. Since then, we've been growing quarter-on-quarter since then. And so, the underlying demand across all 3 products is really driving that growth. Yes, of course, X-Tack is incremental, and we're happy about that. But we're also seeing really strong performances with both OverStitch and with the blue franchise.
Matt Hewitt: That's great. And then, I guess, pointing to X-Tack, obviously, a fantastic quarter of additions to the sites. And I'm curious, have you - is there a learning curve on getting through some of these hospital committees that you've kind of figured out, now it should enable you to get through the next 80 quicker? Or is it just every site is different and you kind of got to go through a different process with each of them?
Chas McKhann: It's a little bit of both, Matt. We certainly can learn some best practices as we've been through it now. But you are right, every hospital has their own processes. And some of them that we thought would go quickly, have taken longer and others have moved really rapidly. It's hard to predict. This is an area that it helps as we continue to build the team just to have more folks available to sort of shepherd that and manage the process. But I'd also reiterate, we also are very much focusing the team and we're happy to continue to take on additional customers and work through the process. But we're really focusing our sales team, especially with the new commercial leadership on depth of utilization. We want to make sure not only get the product on the shelf, but to make sure that we're targeting multiple users in each account and have it become part of the practice. And that takes some work, right? That's changing behavior in medicine and getting them used to using the product and incorporating in their day-today practice. But we're seeing positive examples of that, and that's going to be really our primary focus.
Matt Hewitt: Okay. That's great. Maybe one last one and then I'll hop back in the queue. Regarding the new salespeople. So you added 4 domestic here in the quarter. It sounds like you've got a few more openings that you're going to be hopefully filling. Could you give us an update what is your current headcount for both the domestic sales team and then the international direct markets? Thank you.
Chas McKhann: For the domestic sales team, we have - with the four additions, we have 20 sales reps and then a total team of about 25 people, many account managers and another role. The…
Stefanie Cavanaugh: OUS is similar.
Chas McKhann: Yeah, OUS is a similar size, would give you the exact number, but it's very similar in scale.
Matt Hewitt: That's great. Thank you very much, and congratulations.
Chas McKhann: Thanks, Matt.
Operator: Your next question is coming from Adam Maeder with Piper Sandler. Your line is live.
Adam Maeder: Hey, guys. Thanks for taking the question, and congrats on the great quarter and echo Matt's comments. Jeff, welcome aboard. And congrats on the new role and Stef kudos to you on a job well done. Maybe just to start with one on the guidance. I was hoping you could kind of rehash that a little bit for us. Just walk through the different components there, assumptions for the different segments in the business. I think, Stefanie, you talked a little bit about seasonality in Q3 and maybe some conservatism around the delta variant or COVID. So, is it reasonable to assume that there's something baked in there for those items? And then just broad strokes, thinking about the cadence in the back half of the year, Q3 versus Q4, I would be curious in getting some color there as well. And I had a follow-up or two.
Chas McKhann: Sure. Thanks, Adam. As we look to the back half of the year, we don't break out the individual products, but as you can see from our results, we're seeing growth across all three product lines. So we're excited about that. We - as I said in the comments, we absolutely are expecting recepted a seasonal effect. I mean, last year is obviously a little bit of an outlier. But if you go back to 2019 and even before that, we have historically shown a seasonal impact. And if anything, it may be more pronounced this year, right? Think about just vacations and schedules. We have a big international business, as you know. And so, European holidays in August, all indications are, if they used to take two weeks, they might take three, right? Just - so the seasonal impact is real, and we're certainly planning for some of that I think the COVID piece, as I mentioned in my comments, I've been very impressed with how the team has managed through it, but we certainly see examples. And I think we used to talk about coming out of COVID. I'm not sure what the new norm will be in terms of COVID going forward, but we're certainly watching that carefully primarily outside the U.S., but occasional pockets here, so far, not a major impact in the U.S., but Louisiana, Florida are markets that all of us are watching for obvious reasons. And then just on the learning curve of X-Tack, it hadn't been in humans before six months ago. So we're still learning the uptake in both new accounts and utilization. So, all of those are factored into the range and certainly would see a seasonal impact in Q3. And historically, Q4 is a strong quarter for us.
Adam Maeder: That's really helpful, Chas. Thanks for all the color there. And then if I can sneak in two more. There were a handful of positive updates given on the call today. So, maybe just starting with OverStitch and the MERIT study. I guess, the question here is, really on how do you think about a potential impact from a reimbursement or a payer perspective? When could that come to fruition? Is that a 2022 or 2023 event? And then you gave the update on the de novo submission for a weight loss indication. I think you said that's most likely a Q3 filing. I'm assuming that means ESG-specific label. Do I have that right? And is that potentially kind of a mid-2022 item? And then I'll sneak in one more, if that's okay, after that.
Chas McKhann: Sure. The - so ESG in the development, you're right, the two major milestones in front of us will be the presentation of the MERIT data itself and then using that towards an indication. And as I mentioned on the call, we are working feverishly and would hope to have that the submission for the novo potentially this quarter. That's a 6- to 12-month process depending on the level of questions. And so, in our investor deck, we have a kind of wide range of first half of next year, and we'll update it as we learn more on that. And I focus on the indication because I think it's an important part of the answer to your question about reimbursement. As I mentioned in my comments, we're already seeing examples of our customers. And again, we're not promoting it, right? This is our customers independently following two models, both a cash pay model as well as a case-by-case reimbursement model, prior authorizations using existing unlisted codes and do it quite successfully. And I would say, especially for revisions of bariatric surgeries. And so, we're in the learning stage right now to seeing what they are doing and where they're having success and then what actions we can then would be able to appropriately take if and when we have the indication. And those two models, both cash pay and the case-by-case reimbursement with an indication, we think can be very successful in driving a lot of growth. While we would have been working on, I think the basis of your question, the broader coding coverage and payment that will need to also take place. And so we have plans in place to pursue the procedural codes, so things like new APC codes and as well as inpatient, but it is primarily an outpatient procedure. So the new codes there. Those can happen pretty quickly in terms of the filing after the indications, but then often take a fair amount of time to again put into place, so probably more of a 2023 kind of event. And then the CPT coding, the societies drive that, and they're working through it, but that also will take some time. As you know, the balloon codes we just got approvals for, they don't go into place until 2023. And so, if anything, ESG will probably be at least a year later than that just because you need the data, we needed to work through the processes. But again, summarizing, I'd say we've got a lot of opportunities in hearing now even using the existing practices that our customers are already pursuing.
Adam Maeder: That's a great update. Thanks for that. And if I can sneak in just one more. Maybe transitioning to ORBERA and the NASH indication. It sounds like the path forward there in terms of trial design is still a little bit in progress or development. Can you give us any flavor at this point in time in terms of kind of what you think will be required from a clinical trial standpoint in terms of number of patients or follow-up? Just trying to get some sort of rough sense for when this could be on label in the States. Thanks, again, and congrats on the strong performance.
Chas McKhann: Yeah. Thanks, Adam. The - not much of an update, honestly, on the NASH just because we're still working through - I think I mentioned on the last call, there are a lot of benefits to the breakthrough designation. But one of the elements we get is that we end up working with not one of the two agencies on the design of the trial because they both have a say in what it looks like. And so, we're working with them on the design, and I'm optimistic that we'll get that work through in a reasonable course. But it's hard to speculate on exactly what the trial will look like until we're a little further along in that process. And so we're working on it, and we'll provide an update once we have something tangible.
Adam Maeder: Sounds good. Thank you.
Operator: Your next question is coming from Frank Takkinen from Lake Street.
Frank Takkinen: Hey, thanks for taking my questions. And I echo previous comments about welcome, Jeff, and thanks for everything you've done, Stef. It's been a fantastic run and glad to see you sticking on board for the remainder of the year at the minimum. Couple questions from me. I wanted to first start with X-Tack. I heard your comments about both new accounts as well as utilization. I was hoping, one, you could kind of help us frame the broader total account opportunity beyond the 200 - 120 plus 80 so far as well as some of the utilization trends you are seeing in the early days and how you believe utilization can trend over time and to what level some of your higher-level users may get to?
Chas McKhann: Yes. The - so first, on the account universe, one of the exercises that we've done with the new - since the new team has come on board is, we purchased very detailed level data on procedures and we get to by account and by physician of relevant procedures, for example, mucosal resection procedures that are being done in the goal. And from that, we can glean a pretty good understanding of where the procedure volumes are both within the hospital setting as well as within the ASC setting. And based off of those data, we've got a pretty good indication that there could be as many as 1,500 to 2,000 accounts in the U.S. Now that all remains to be seen, but that's based off of real data with - and with a pretty high cutoff in terms of how many procedures they're doing each year. So, we're still in the early days of this. And more importantly, we're going to focus, as I said, on the high - and even within that data, I mentioned the sort of broader universe at the top levels of that universe to get depth in those institutions. To the second question, the utilization, frankly, we're still learning on that. I mean, what we continue to hear is that X-Tack has applicability to a broader user base than OverStitch. It's pretty common for OverStitch to have, say, a couple of users within - even a pretty large account because of the learning curve involved with OverStitch. And - but in some of our early accounts with X-Tack, we see examples of the four or five physicians or more who are already interested and others who are learning about it. So, at an account level, the utilization potential will really be dependent on our ability to identify and train and engage multiple users who then incorporate into their practice. And so, as we get more data and more experience than we may be decision to give you sort of firmer numbers on that, but that's what we're focused on right now.
Frank Takkinen: Got it. That makes sense. And then transitioning over to OverStitch, could you - or ESS in general, could you break out a little bit more the - some of the puts and takes driving the strength in the quarter? And specifically, could you maybe speak to ESG trends, growth rates, if you have anything of that nature you could share with us?
Chas McKhann: Well, what I said in the opening comments broadly is we have seen a growth in the number of accounts using in the quarter as well as the average per account. And so the number of accounts, which in the U.S. is now at 400 accounts who are actively using in Q3 - sorry, Q2. And that's driven by both our core GI, so call it non-bariatric. In fact, that's where a lot of people often start using OverStitch, especially if they are GIs. And I mentioned, we're doing a lot of training programs, you've seen bring people on there. And then we also are growing in the revenue per account, and that can be both from the core GI side as well as from the bariatric practices. I think we want to get a little bit more experience and certainly get into the zone of having a new indication to really be able to talk through the sort of endobariatric opportunity. But suffice it to say that we certainly have examples of a number of customers who have embraced that opportunity and being quite successful using both of the payment models that I mentioned before.
Frank Takkinen: Got it. And then last one for me. OpEx is a little bit elevated. That makes sense with a strong quarter. I applaud spending to grow the business, establish as a standard of care. I was curious if we should look at Q2 as a run rate on a go-forward basis or if there is anything specific in the operating expense, we should know about that may not recur on a go-forward basis.
Stefanie Cavanaugh: No, I think you're right. It is indicative of the future moving forward. What I would point out, however, is a fair amount of the increase from Q1 to Q2 is a noncash stock comp related item. And when you get to our Q filing, you'll be able to see all that broken out in the footprint in our cash flow reports. But essentially, that went up quite a bit from Q1 to Q2 for all of the performance-related options and stock units given our good performance. So, we expect that trend to continue move into the moving forward quarters.
Frank Takkinen: Perfect. Thank you for taking all my questions.
Operator: We have no further questions from the lines at this time. I would now like to turn the floor back to Chas McKhann for closing remarks.
Chas McKhann: Thank you, Catherine, and thank you, everyone, for joining us today. It's been a busy and rewarding second quarter, and we've got even more excitement for the second half of the year as we continue to energize the business and pursue attractive opportunities. If you have any questions you would like to arrange a call with us, please contact Matt Kreps from Darrow Associates. Thank you, and have a great evening.
Operator: Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time, and a wonderful day. Thank you for your participation.
