Venus Concept Inc. (VERO) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, ladies and gentlemen, and welcome to the First Quarter 2021 Earnings Conference Call for Venus Concept, Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's Web site for replay. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our most recent annual report on Form 10-K and 10-Q filed with the Securities and Exchange Commission.
Domenic Serafino: Thank you, operator, and welcome everyone to Venus Concept's first quarter 2021 earnings conference call. I'm joined today on the call with 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 better than expected revenue results in the first quarter, including an update on how our business trends continued to improve during the period, which gave us further confidence in our 2021 revenue guidance, which we increased in our press release this afternoon. Chad will then discuss our strong system results in the first quarter and how we believe it was a direct result of both improving overall system adoption trends, particularly in North America, and a strong execution of our targeted commercial strategy. I will then provide a brief update of our continued progress in the area of new product development. And then Domenic will provide you with a more in-depth review of our quarterly financial results, our balance sheet and financial condition of our updated guide and updated guidance of 2021. And then, we will open up the call for questions. With that overview in mind, let's get started with a review of our first quarter revenue performance and overall business trends. We reported GAAP revenue of 22.6 million for the first quarter of 2021, representing an increase of 56% year-over-year. Simply stated, we are very encouraged by our first quarter performance and believe in reflection improving system adoption and procedural trends we experienced during the quarter.
Chad Zaring: Thanks, Tom. Our first quarter sales results reflect strong execution of our commercial strategy and improving overall system adoption trends, particularly in North America. We shipped 366 systems to global customers in the first quarter, up 54% year-over-year, fueled by U.S. system shipment growth of nearly 150% year-over-year. While the capital equipment environment broadly showed improvements in Q1 as compared to Q4, the strong growth in system shipments we delivered in Q1 was really a result of our team’s strong execution.
Domenic Serafino: Thanks, Chad. I want to take a moment to highlight that while we are very proud of the early success we've demonstrated today towards this near to intermediate term growth strategy, we have not lost sight of the core mission on the company which was founded more than 10 years ago. Our mission is to develop and provide world class technologies to deliver clinical results in a safe, effective and easy way and to dedicate our company to best-in-class post sales support philosophy that can help enhance the probability of financial success of our customers. Despite all of the challenges in the operating environment over the last year, our team has continued to operate with this mission in mind and our sales team has been further empowered by a key differentiator and quite frankly, a hallmark of Venus concept story, specifically, the flexibility we have in our commercial model with unique pricing and payment options via our industry first subscription model, which we use in certain product categories and in certain geographic markets. Our subscription model is similar to that of a cell phone, where the plan you pay for and the technology over time and you can upgrade to the newest technology mid contract for an extended contract term. Our subscription contracts are typically three-year agreements where we capture typically 40% of the contract economics in the first year. Our customers enjoy a seamless and cost effective upgrade opportunities and our program payment plan are protected by a monthly device activation code. Systems shipped under the subscription model increased 40% year-over-year in the first quarter and represented more than 40% of our total global shipments in the period. This is an incredible lever that we can have, which as I said really empowers our commercial team to work with customers to identify not only the right technologies for their practice, but just as importantly the right business model for participating clinics to meet their needs.
Domenic Della Penna: Thanks, Dom, and good afternoon, everyone. 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. First quarter total revenue increased by 8.1 million or 56% to 22.6 million. The year-over-year change in first quarter total revenue by geography was driven by a $5.2 million increase or 93% in U.S. sales and a 2.9 million increase or 32% in international sales compared to the prior year period. The year-over-year change in the first quarter total revenue by product category was driven by an increase of 6.3 million or 180% in systems revenue, which are cash sales or sales of systems with payments expected in less than 12 months, driven by strong sales of ARTAS and key aesthetics product lines, which we have prioritized in our commercial strategy, which Dom and Chad discussed earlier, and an increase of 1.7 million or 25% in leases revenue, which is where our subscription program is reported and represents all system sales with typical lease terms of 36 months, and an increase of 0.3 million or 12% in other products revenue due to an increase in sales of procedure-related products including our ARTAS kits, and other consumable products, offset partially by a decrease of 0.3 million or 19% in services revenue driven by the suspension of operations of the 2two5 marketing services in the second half of 2020. The percentage of systems revenue derived from our subscription model was approximately 47% in the three months ended March 31, 2021 compared to 66% in the three months ended March 31, 2020. Turning to a review of our first quarter performance across the rest of the P&L. Gross profit for the first quarter of 2021 increased 6 million or 64% to 15.2 million, representing a gross margin of 67.4% compared to a gross margin of 64% last year. The primary drivers of the year-over-year increase in gross margin were higher sales of our Venus consumables, improved revenue mix post the discontinuation of our 2two5 ad agency services and the non-recurrence of a purchase price adjustment impact related to the acquisition of Restoration Robotics in the prior year period. Total GAAP operating expense decreased 30.8 million or 58% to 22.1 million. The decrease in total operating expenses was driven by a goodwill impairment charge of 27.5 million, which impacted the prior year period only, and there was no impairment charge in the first quarter of 2021. Excluding this item, first quarter of 2021 operating expenses declined 13% year-over-year. Total operating loss in the first quarter of 2021 was 6.8 million compared to an operating loss of 43.6 million in the prior year period, an improvement in operating loss of 36.7 million or plus 84%. Net loss attributable to stockholders for the first quarter of 2021 was 9.3 million, or $0.17 per share, compared to net loss attributable to stockholders of 50.2 million, or $1.68 per share, for the first quarter of 2020. Weighted average shares used to compute net loss attributable to Venus Concept Inc. stockholders per share were 53.7 million and 29.8 million for the first quarters of 2021 and 2020, respectively. Non GAAP adjusted EBITDA loss for the first quarter of 2021 was 5 million compared to adjusted EBITDA loss of 13.7 million for the first quarter of 2020, an improvement of 8.7 million or 63% year-over-year. We have provided a full reconciliation of our GAAP net loss to adjusted EBITDA in our press release this afternoon. Turning to the balance sheet. The company had 27.1 million and 34.4 million of cash and cash equivalents on hand as of March 31, 2021 and December 31, 2020, respectively, and total debt obligations of approximately 80.1 million, including government assistance loans of 4.1 million compared to total debt obligations of approximately 79.6 million, including government assisted loans of 4.1 million as of December 31, 2020. The change in cash for the three months ended March 31, 2021 was driven primarily by 8.2 million of cash used in operating activities offset by 1 million of cash provided from financing activities, including approximately $903,000 of total proceeds received from the exercise of 361,000 December 2020 public offering warrants at the exercise price of $2.50 per share in February 2021. Turning to a review of our guidance. As detailed in our press release this afternoon, the company updated its revenue guidance for the full year 2021 period, which was originally introduced in our press release on January 14, 2021, and reaffirmed in our fourth quarter earnings press release on March 31, 2021. Assuming no significant and persistent resurgence of COVID-19 in key markets that would negatively impact the company's customer base and based on strong pipeline activity, the company now expects total revenue for the 12 months ending December 31, 2021 in the range of 100 million to 105 million, representing an increase of approximately 28% to 35% year-over-year compared to total revenue of 78 million for the 12 months ended December 31, 2020. While we are not providing formal profitability guidance for full year 2021, we would like to offer the following considerations for modeling purposes. First, we continue to expect our gross margins to be in the range of 66% to 68% in 2021, driven by favorable revenue mix, with the 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 continue to 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 exclude certain items that impacted our GAAP operating expenses in 2020, including a non-cash goodwill impairment charge of 27.5 million, incremental bad debt expense related to COVID-19 of approximately 11 million, non-operating non-recurring items related to retention, severance and other legal expenses, all of which were detailed in our non-GAAP adjusted EBITDA reconciliation tables in 2020, and together represented approximately 2.3 million of costs and expenses last year. Third, we expect our interest expense to be approximately 4.5 million given the lower borrowing costs and debt obligations compared to the prior year. Fourth, we continue to expect non-cash D&A of 5 million and non-cash stock comp of approximately 2.5 million. Fifth, we continue to expect our weighted average shares outstanding to be approximately 55 million. Finally, while it is not our standard guidance practice and we do not expect to provide quarterly guidance in the future, given a significant impact of the COVID-19 pandemic and our second quarter of 2020 and the related benefit to our Q2 '21 year-over-year growth rates, we expect our total revenue in the second quarter of 2021 to increase approximately 40% to 45% year-over-year. With that, operator, we will now open the call to your questions. Operator?
Operator: Thank you. . Our first question comes from Jeffrey Cohen of Ladenburg Thalmann. Please proceed with your questions.
Jeffrey Cohen: Hi, Dom, Domenic and Chad. How are you?
Domenic Serafino: Good, Jeff. How are you doing?
Chad Zaring: Hi, Jeff.
Jeffrey Cohen: It was nice to see you recently, Chad. So just a couple of questions I wanted to dive into. So the systems shipped in Q1 of 366, would you say that approximately 40% of those are also leased along with your 40% commentary on the lease versus sold?
Domenic Serafino: Yes, the systems shipped would be slightly higher than that on a unit basis because of obviously the cash impact on the percentage of cash. So you're in the ballpark.
Jeffrey Cohen: Okay. And could you give us to Q1 what were the top two or three or four platforms?
Domenic Serafino: Top platforms in Q1 were the ARTAS system, the Bliss system and the Versa platform.
Jeffrey Cohen: Okay, got it. And then I wanted to speak -- I wanted to ask you, Dom, what's your general sense as far as the derm area? And is that an area that Chad and his team is directly going into? And I'm thinking about the, call it 450 to 750 nanometers between the blue and red light and how they compete with some of the derms and the lower wavelengths?
Domenic Serafino: Are you talking to acne treatments?
Jeffrey Cohen: Yes.
Domenic Serafino: Okay. These wavelengths are nothing new. I think that the biggest issue for the derm community when it comes to treating acne is not the efficacy of the devices that a variety of companies, us included, can provide. It's really more the customer base, because the derms have to make strategic decisions as to what is their rate of return for treatment room and can they charge teenagers and their parents those kind of rates to offset what they may be able to do using -- doing other treatments in those treatment rooms, like fat or hair restoration. So I think that that category is still somewhat challenged overall. As I said, we have a good solution -- we have an excellent solution clinically, but in terms of the market opportunity I think it's somewhat limited overall for all the companies, not just us, simply because of the demographic profile of the majority of the patients that are taking advantage of the treatment.
Jeffrey Cohen: Okay, got it. And then lastly for me, just give us a ballpark flavor of how procedure volumes, which have grown dramatically year-over-year, how does that feel versus last January and February and any commentary into April or May? Thanks very much.
Domenic Serafino: Yes. I think it's tough. What we have to look at is really the -- I’ll call it the sequential month-over-month growth. And our IoT data that we pull in real time really gives us optimism, because we see this steady continued improvement in the activation of the devices and the procedures being done globally. Now, obviously, every area gets affected a little bit differently. Latin America still lags simply because they were kind of late getting to the COVID issue in terms of dealing with it. So they're a little bit behind. But that said, we're really pleased with what we're seeing, especially in the key categories, like fat reduction and hair removal, and a few others like cellulite. And we're well beyond pre-pandemic numbers in terms of utilization at this point. And the most important part of this is that we're seeing a very significant, as I said, month-over-month improvement. So as we pull out of this COVID hangover, we feel pretty good about the fact that we're back in the saddle, if you will, and our customers more importantly are monetizing their investments.
Jeffrey Cohen: Thanks for the commentary and nice quarter. Thank you.
Domenic Serafino: Thanks, Jeff.
Operator: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer. Please proceed with your questions.
Suraj Kalia: Hi, Dom, Chad, Domenic. Can you hear me alright?
Domenic Serafino: Yes. Great. Hi, Suraj. How are you doing?
Chad Zaring: Hi, Suraj.
Suraj Kalia: So Dom, Chad or whoever is comfortable, let them take it. So I thought I heard Chad say the global sales of Bliss were up 200% year-over-year. Maybe you can help us drill down on the details a bit more? What are the actual numbers? And especially how is Bliss faring relative to where CoolSculpt was at this point in its lifecycle? And if I could just tack on a subpart to this question, Dom, the 25k for Bliss Max, what does your internal price sensitivity of demand suggests?
Domenic Serafino: Yes. So let me -- I'll answer the -- well, I'll sort of take the last part of your question first, and then I'll hand it over to Chad about commentary around the 200%. But as I compare the Venus Bliss rollout compared to the early days of Zeltiq, I think that one of the things that we're doing a very good job of right now, aside from the fact that we've been able to hire people that have left Allergan and have joined us, and the reason they did so is because they saw the compelling economic value to customers. So it's not uncommon for us today to be calling on -- our call points becoming what I call the educated user. In other words, the user that had started using the CoolSculpt, did very well in the early days but as the competitive pressures with a variety of other companies coming to market in the area of fat, the doctors became acutely sensitive to the cost profile of using the device. And so the fact that we intentionally kept the disposable cost out of the fat treatment category has really bode well for us, because it just makes a lot of sense. And when you combine that with the predictive outcome of clinical results, and very highly satisfied customers who are having treatments with this device, we feel we're developing the perfect storm in the fat category, as I call it, sort of the 2.0 journey for clinics that have already been in thought for a number of years, but start to recognize that even if they do have to do touch-up treatments with patients, et cetera, the economic opportunity using our device is far better than some of our competitors who have a pretty expensive disposable element to each and every treatment. Chad, maybe you can -- sorry, I'll touch on the price sensitivity question as well. We believe that having a three-in-one solution where we're treating fat with a product that is already well proven over the last year, and that's reflected in the incremental sales growth, which is pretty meaningful, along with our continued product development in that area, combine that with the ability to do skin tightening and cellulite in our platform and adding a third element which is muscle stimulation. Bear in mind that most of these products are sold standalone. So doctors could be into $300,000, $400,000 or $500,000 in some cases, depending on the mix of products they choose from competitors. In our case, we believe that 225 as a list price in North America is a very compelling price point that not only provides a real value proposition for the customers who are using a proven technology, but just as importantly allows the return on investment to be made very, very quickly. And for us, it actually helps us improve our gross profit margins in that particular category. Chad, maybe you can touch on the --
Chad Zaring: Sure, Dom. Yes. Hi, Suraj. If you recall, Q1 2020, we were in really the first inning of the full commercial launch on Bliss. And then COVID hit. And we made the decision in beginning of Q4 -- really the planning happened in Q3, while many markets were still shut down, to do a very geographically selective Roadshow, picking markets that were somewhat open. And that really showed -- the results of that showed -- our Q1 sales customers may not have been as quick to pull the trigger, because they still had concerns about clinic shutdowns and procedures weren't back to normal. But we really started to see the results of those closed sales in Q1. We continue to Roadshow in Q1. And we remain enthusiastic about the revenue opportunity for Bliss for the remainder of the year. And the economic opportunity, what I'm seeing in the marketplace, and it ties to even the question about some of the core doctors, is some of the alternatives to Bliss, I'd say, are -- it's a pretty established space now. So the brand name recognition of some of the prior leaders in that space, really what the customers are looking for is patients are coming in the door, how do I maximize the profit potential, which the Bliss business model is perfect for. So we expect strong performance for the product throughout the remainder of the year.
Domenic Serafino: And just to add one more point to that, Suraj. The addition of Venus Williams has been extremely well received by our customer base. And all of the collateral materials, we announced it mid quarter that we had signed an agreement with her but we did complete a very extensive preparation package, if you will, of collateral marketing materials that will be released at various stages through Q2 and into Q3 and beyond that we think that that's going to have a very meaningful impact on our trajectory with this particular product as well.
Suraj Kalia: Got it. Dom, one other question and I’ll hop back in the queue. Again, a subpart question. Dom, maybe you or Chad could walk us through the utilization metrics, especially in the U.S., how do procedures per system per month look like? Does the rules still apply? How would the bell curve look? And Domenic for you, maybe if you could give us a little more granular detail of the guide -- components of guidance, how you're thinking about legacy Versa, Bliss, ARTAS? Just any additional goalposts that you could provide us would be greatly appreciated. Gentlemen, thank you for taking my questions. Congrats again.
Domenic Serafino: Okay. So thank you, Suraj. I'll take a shot at the first part of it and then Chad you can add a little bit more color. I think that it's important to recognize that we have dedicated a team to be focused on the utilization and the measurement of utilization because it gives us a good roadmap as to which products we should focus on in which geographies. Chad, perhaps you can touch on one of the key utilization metrics, which is our ARTAS and NeoGraft combination therapies for hair restoration, and the trends that we're getting there? While we don't release actual numbers, I think Chad you can sort of speak to the trends in North America.
Chad Zaring: Sure. The trends in North America were very good, 33% increase year-over-year in North America ARTAS procedures and as we reported, primarily driven by reengagement of underutilized systems, meaning an improvement in same-store sales among active ARTAS accounts. Many of the new sales we've made, obviously, in Q4, Q1, there's still challenges with getting in -- there were still challenges with getting into the clinics and training people and doing our five-day quick-start programs. So a lot of the growth we're seeing is in same-store sales, which is really promising. We see some choppiness OUS with ARTAS sales as a result of the same issue, getting people into markets to be able to onboard new programs. But we think as that choppiness goes away and we're selling new systems, that utilization trends are going to continue to improve with ARTAS overall.
Domenic Serafino: And Domenic, can you just touch on rationale for the guidance?
Domenic Della Penna: Yes. Suraj, I think you wanted to better understand the components in relation to what makes up the split of the systems. We don't disclose it by system. But you should be thinking about ARTAS representing approximately 25% of our revenues at a high level. And we continue to improve on that in terms of -- lately the percentage mix of ARTAS relative to the rest of the business is improving as we put growth drivers behind the robotics capability and have our sales team globally truly understand the potential there. So we expect that to possibly head north of 25% as we continue to focus on ARTAS. But, again, we still want to reinforce the fact that the base Venus business is very important to us and has high margins, and we continue to make sure that we capitalize on that with the benefit of this subscription plan that we have, especially with the Versa product. In particular, Versa, yes.
Operator: Thank you. Our next question comes from the line of Jon Block with Stifel. Please proceed with your questions.
Jonathan Block: Great. Thanks, guys. Good afternoon. Nice quarter. Just a small handful for me. The first is just centered on hiring and how that's going. I think last quarter, Chad, you called out roughly 50 reps in North America. I believe you wanted to take that to 70. Pretty ambitious numbers there. But maybe if you can just give us an update on how the onboarding of the reps have gone to date? And just when you look out over the next several months, if you're thinking like that 70 rep number here in the U.S. and what?
Chad Zaring: Yes. Jon, great question. Good to speak with you. Both areas are going really well. We remain very optimistic about getting to 70. And per the business, if there's an opportunity to get beyond that, we'll make strategic decisions. But we remain on pace for that. We're very bullish. We've also gone back to in-person training. So I've attended them myself. So we're back to getting reps hands on, on the devices the last two classes. And that's significant because the more hands on we can do with devices role plays, the more we can take them through the traditional sales model and sales approach, the shorter the onboarding time is especially for higher priced products like Bliss, when we have the opportunity to train the reps hands on versus doing it remotely. So both areas, Jon, we're bullish on the hiring side.
Domenic Serafino: And let me add – I’m sorry. No, go ahead, Chad.
Jonathan Block: I was going to ask -- I'm sorry. I was going to ask where you ended the quarter, pardon me out. Out of the 50, where you ended up?
Chad Zaring: I’m sorry. Approximately 60 and we remain on target for more than 70 by year end.
Domenic Serafino: Yes. We're just over 60 right now, Jon, and are fiercely hiring and getting people trained.
Jonathan Block: Okay, great. And then, Dom, second one for you and just sort of market share thoughts or comments. I know it's difficult in terms of different geographies and some guys are all capital and some guys are capital to recurring. But I think just broadly looking across aesthetics, you did see the market come back and come back pretty strong from end of '20 to '21. So if you were to try to pinpoint or isolate from a market share perspective, how you think Venus is performing relative to what you deem to be your closest peers? And then I’ve just got one last one.
Domenic Serafino: Yes. Look, that is a tough question because I think it's how you define market share in the sense that if you're defining market share, like most of our peers, taking a piece out of each other every quarter in the dermatology, plastic surgery professional market, that's one number. If you're talking about actually creating new market and expanding the size of the market, which is really what the primary motivation of Venus was from day one with our subscription model, and originally targeting a very significant portion of our business outside of the core. We're still in single digits if you define it by the traditional market. But I think that as each quarter goes by and we continue to sort of adjust I guess or reset the sales organization to what we were going to do pre-COVID with a dedicated team focusing on the professional market of dermatology and plastic surgery and a continuation of our business with the subscription and mostly in the non-core audience, we think that we can get our overall market share into double digits, but that's going to take a bit of time. But right now, without having the exact numbers, we would be in the single digits at this point.
Jonathan Block: Okay, great. Fair enough. And last one, DDP, maybe for you. The 1Q revenue growth of 56%, 2Q guidance 40%, 45%. I think that 1H is in and around or knocking on the door of 50% growth. The guide for the full year I believe is in the low 30% range and you’ve got these new products with Bliss and ARTAS doing well. seems like a pretty pronounced deceleration implied in the back part of '21, if you can just talk to that if it's anything more just beyond comps? Thanks, guys.
Domenic Della Penna: A deceleration you said? I just didn't -- because we're calling 35% for the full year, right. So the first half is going to be stronger. But what we're up against in the second half of 2020, Jon, is we -- our business did show recovery in the second half of 2020. So we're up against a second half that is still relatively weak, so to speak. But we think we can still grow significantly relative to the second half of 2020.
Domenic Serafino: Jon, we've taken a very conservative approach to this. We feel that there are two elements that may help improve the outcome in the second half. And specifically, as you know, as you hire new people in this industry, it typically takes two and sometimes three quarters for them to start to monetize on a consistent basis. So we've been on as obviously a bit of a hiring tear , especially in North America. And we have a national sales meeting, the first one in two years scheduled for mid July to make sure that everybody's aligned for the back half of the year. So while on the surface that may look like a deceleration, I think that we feel pretty good about how we're going to be able to compare against the previous year and maintaining that growth profile.
Jonathan Block: Perfect. Very helpful. Thanks, guys.
Operator: Thank you. Our next question comes from the line of Marie Thibault with BTIG. Please proceed with your questions.
Marie Thibault: Hi. Just two quick questions. On your geographic shift moving from some international markets and re-devoting some resources to the U.S., is that shift mostly done at this point? I know there were some details in your filings about the countries that you were exiting, but would love to hear where you are in that process?
Domenic Serafino: Yes, we're pretty much done. We've got a couple of smaller, I’ll call it non-material decisions that we need to make in terms of closures and sort of realignment. But I think that the most important thing for us right now is to continue to focus our direct investments in North America. Clearly, the strategy that Chad and his team are putting together is working. We think that there's a huge amount of additional opportunity there. And given the relatively long lead times it takes to get sales reps to be contributing in a meaningful way, that's why we're accelerating this process right now. But essentially, the -- I’ll call it the operational challenges of closing offices and reallocating those resources and so on, that's pretty much been completed to this point.
Marie Thibault: Okay, that's helpful. And then maybe a question on the split between subscription and direct kind of systems revenue. Prior to COVID, we were seeing something more like a 60, maybe 30 or 60-40 kind of split there on -- maybe it was even higher, maybe 70-30 towards subscription. And I know with ARTAS and some of the strength there, possibly that's shifted, but curious where you see that sort of split trending long term?
Domenic Serafino: Yes. I think that one of the things that we need to be really aware of, and quite frankly we need to do a better job of reporting with you guys, is there's a big difference between the percentage of subscription to cash business on a unit basis and the percentage of subscription to cash on a cash basis. Obviously, with a product like ARTAS that sells from the area of $250,000 and the Venus Bliss that sells in the area of $120,000, and those are predominately on a cash basis, that's going to skew typical products to sell in the area of $60,000 or $70,000 done under for a variety of different reasons, not the least margin and so on. So, right now, the split is 45-55; 45 subscription, 55 cash, because of this proportion of contributions in Q1 of ARTAS and Bliss and obviously disposables, and by the way also a renewed interest at the distributor level, which are all done on a cash basis. We do think though that when this sort of flattens out, we're going to be closer to a 50-50, 55-45 depending on the given quarter and depending on the mix. But I think the way you should model this, and for a whole lot of reasons, we think that 50-50, 55-45 is the right balance in terms of managing inflows of cash and still providing what I think best in industry our business opportunity for customers who are looking to get into this sector.
Operator: Thank you. Our next questions come from the line of Anthony Vendetti with Maxim Group. Please proceed with your questions.
Anthony Vendetti: Thanks. Just a couple of quick questions on RoboCore, just wondering what that commercial opportunity -- how would you gauge the commercial opportunity there? How that's going? And then I know you don't give product splits, but I know you said ARTAS is about 25% of revenues. If you could just talk a little bit about Venus Glow and how that product is selling or what percent of sales that could be?
Domenic Serafino: Yes, I'll let Chad deal with the Venus Glow part of the question. But as far as the RoboCore, we think that this category of directional skin tightening and lifting is I'm going to call it a blue ocean kind of category. There are a lot of non-invasive technologies with a variety of different companies, us included, that can provide decent results, but the predictability from one patient to the next is somewhat challenged, regardless of which company is selling that solution. So that's at the low end of the spectrum. At the high end, it's a fully invasive procedure, like a facelift or a breast lift or a brachioplasty in the back of the arm, which is a full surgical intervention that a lot of patients are afraid to do. We think that there's a sweet spot in between in the minimally invasive category. And we think that RoboCore will fill that spot very nicely and give us a tremendous variety of treatment areas that we can create lifting and tightening with a minimally invasive solution. Our initial safety feasibility studies, we did 90 treatments in 15 patients over six different body areas. We were quite happy with what we saw in the early stages in terms of the performance of the coring and the directional lifting and tightening. We now are moving to do some animal trials in Israel, so that we can get some histological evidence of tightening and directional lifting, which we should be able to do fairly quickly. And in parallel, we're preparing for a 60 patient study, three sites to be able and using the fully loaded system with the robot as part of that process. So I think that this is a market that a few companies out there have been trying to enter with a coring, microneedling type of application. But all of these applications are done manually. And we think that there's a compelling reason for it to be robotic, because of the nature of the treatment and the -- I’ll call it the predictability of where you do the coring to ensure that you maximize not only the clinical outcome, but the safety profile. And we think that the robots can actually provide us that. Chad, maybe you can touch on the initiatives on Venus Glow, Viva and so on.
Chad Zaring: Sure. Yes, no problem. Anthony, good to talk with you. So we know from what companies like HydraFacial have done in the market that there’s a huge opportunity with this product class, and then the downstream sales of serums. What we've seen is, it's hard to get the reps when they can focus on maybe $300,000 to $400,000 bundles with core doctors to give that product a lot of focus. It's a volume business based on how many doors you knock on. And those larger deals just take more time and focus as the quarters progress. So what we've done is we've kind of bifurcated where we allow our more senior reps to focus on those large deals. And some of the more junior reps we're bringing in now focused on high call frequency. We're asking them to really focus on and sell -- build the pipeline and do demos and sell products like Venus Glow where there's an initial sale and a downstream consumable component as well as our Venus Viva, which is a great product. And again, it does get bundled into deals, but just doesn't get the same standalone focus perhaps that the larger products like Bliss or ARTAS would get, and we feel pretty optimistic. And we've set call plan targets and objectives, how many doors you knock on. So we think we're going to be able to really take advantage of that strategy. And if it works, we'll continue to do more of that bifurcation.
Anthony Vendetti: Thanks, Chad. That's helpful. But just in terms of the junior reps, are they just the reps that are coming in right now? And then they graduate up to the more expensive products, or are you specifically targeting reps that will focus on Venus Glow and stay with that product?
Domenic Serafino: They're going to stay with that product. Now at some point, they may be promoted. But they're going to stay with that product. Now the good thing about this strategy is it does go both ways. So we'll give these reps an opportunity to sell Venus Glow, Venus Viva and get a higher percentage commission. So it's worth their time. But then there'll be a sharing model where if they create leads for some of the higher dollar products. What you don't want is for one of these reps to be in a selling situation and not sell it because of the commission plan. So they'll have good financial opportunity on the other side as well to create leads. But we intend to have -- just because of this huge consumable component, we intend to have long-term focus on Glow and Viva. And if we end up pushing somebody, they do really well and let's say they become a robotic sales specialists, we will backfill them with somebody that's going to focus on Viva and Glow. So we always have that blanket.
Anthony Vendetti: Understood. Okay, great. Thanks very much.
Domenic Serafino: No problem.
Operator: Thank you. We are currently showing no additional questions in the queue. That does conclude our conference for tonight. Thank you for your time this evening. And have a good night.
Domenic Serafino: Thanks, everybody.
Chad Zaring: Thank you.
Domenic Della Penna: Thank you.
