BIOLASE, Inc. (BIOL), a leader in dental laser technology, has reported a strong first quarter for 2024, with significant sales growth driven by new customer acquisition and robust sales of consumables.
The company is on a strategic path to expand its market share among dental specialists and general practitioners.
With a focus on operational efficiency and a comprehensive growth strategy, BIOLASE aims to achieve profitability by the end of the year and projects a revenue increase of 6% to 8% for the full year 2024.
Key Takeaways
- BIOLASE reports a successful first quarter with a surge in sales from new customers and consumables.
- The company aims for profitability by the end of 2024 and projects 6% to 8% revenue growth.
- Full-year revenue is expected to be between $52 million and $53 million.
- Positive adjusted EBITDA anticipated for the full year due to higher gross margins and cost-saving measures.
- Gross margins are expected to reach the mid-40s in Q2 and Q3, and near 50% by year-end.
Company Outlook
- BIOLASE is targeting a revenue range of $52 million to $53 million for full-year 2024.
- The company plans to achieve positive adjusted EBITDA through increased sales volume, price increases, and cost reduction initiatives.
- Gross margins are projected to improve significantly, reaching mid-40s percentage in Q2 and Q3, and the long-term goal of 50% by the end of the year.
Bearish Highlights
- The adoption of BIOLASE technology by dental service organizations (DSOs) has been slower than anticipated.
- Despite the slower adoption rate, dentists' decision-making time for purchasing the Waterlase system has remained stable.
Bullish Highlights
- Approximately 67% of U.S. Waterlase sales were to new customers.
- Sales of consumables marked the third strongest quarter in the company's history.
- Positive radiographic data from the McGuire study supports ongoing conversations with dental service organizations.
Misses
- There was no mention of specific misses in the earnings call summary provided.
Q&A Highlights
- John Beaver, a BIOLASE representative, addressed the slower than expected adoption by DSOs but remains optimistic about future awareness and acceptance.
- Dentists appear to be less concerned about the economy affecting their practices, and the purchasing pattern for Waterlase has not been impacted.
BIOLASE has shown resilience in the first quarter of 2024, with its dental laser technology gaining traction in the market.
The company's strategic initiatives appear to be paying off, as reflected in the strong sales figures and the optimistic outlook for profitability.
With an emphasis on cost-saving measures and operational efficiencies, BIOLASE is poised to strengthen its financial position and continue its growth trajectory in the dental industry.
InvestingPro Insights
BIOLASE, Inc. (BIOL) has demonstrated a notable first quarter in 2024, with promising sales growth and strategic movements towards profitability. To provide a deeper understanding of the company's financial health and market position, we present key insights with data sourced from InvestingPro.
InvestingPro Data indicates a market capitalization of $6.02 million, reflecting the company's current valuation in the market. Despite the positive sales outlook reported, BIOLASE operates with a significant debt burden, which is a critical factor for investors to consider. The company's revenue for the last twelve months as of Q4 2023 stands at $49.16 million, with a gross profit margin of 34.02%. These figures highlight the company's ability to generate profit from sales, an important metric as BIOLASE aims to improve operational efficiency.
From a performance perspective, BIOLASE has experienced a strong return over the last month and three months, with price total returns of 27.57% and 20.04% respectively. However, it's important to note that the stock has taken a substantial hit over the last six months, with a price total return of -85.17%. This volatility may concern some investors, but the recent upticks could indicate a turning point for the company's stock performance.
InvestingPro Tips provide additional context; BIOLASE is quickly burning through cash and analysts do not anticipate the company will be profitable this year. These insights may temper some of the optimism from the company's reported sales growth and targets for profitability.
For a more comprehensive analysis and additional InvestingPro Tips, readers can access a wealth of information tailored to BIOLASE at https://www.investing.com/pro/BIOL. There are 13 additional tips available, which can further guide investment decisions. To enhance your InvestingPro experience, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
The InvestingPro Insights offer a nuanced view of BIOLASE's financial journey, providing investors with a clearer picture of the company's strengths and areas of concern as it navigates the competitive landscape of dental technology.
Full transcript - BioLase Tech (BIOL) Q1 2024:
Operator: Good day, and welcome to the BIOLASE First Quarter 2024 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Michael Polyviou. Please go ahead, sir.
Michael Polyviou: Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today to discuss BIOLASE's financial results for its first quarter ended March 31, 2024. On the call today from BIOLASE are John Beaver, President and Chief Executive Officer; and Jennifer Bright, Chief Financial Officer. John will review the company's operating performance for the first quarter and then turn the call over to Jennifer to review the financials in more detail before opening the call for questions. Before we begin, I'd like to remind everyone that a number of forward-looking statements, which are any statements that are not historical facts will be made during this presentation and subsequent Q&A session, including forward-looking statements regarding the company's strategic initiatives and anticipated financial performance. These forward-looking statements are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 and based on BIOLASE's current expectations and assumptions and are subject to a variety of risks and uncertainties that could cause the company's actual results to differ materially from the statements made. Such forward-looking statements only represent the company's view as of today, May 13, 2024. These risks are discussed in the company's filings with the Securities and Exchange Commission. A replay of this conference call will be available on BIOLASE's website shortly after the completion of today's call. When listening to this call, please refer to the news release issued earlier today announcing the company's 2024 first quarter financial results. If you do not have a copy of the news release, it is available in the Investors section of BIOLASE website at www.biolase.com. BIOLASE's financial results can also be found in the company's report on Form 10-Q, which will be filed with the SEC just a few minutes ago. The tables we provided in today's news release offer additional financial information, so we encourage you to review them. The tables include the reconciliation of unaudited GAAP net loss and net loss per share to non-GAAP adjusted EBITDA loss and adjusted EBITDA loss per share as well as more information regarding the company's non-GAAP disclosures. With that, I'll turn the call over to John Beaver, BIOLASE's President, Chief Executive Officer. John, please go ahead.
John Beaver: Thanks, Michael, and thank you, everyone, for joining us this afternoon. We appreciate your continued interest in BIOLASE. I want to start by restating our primary objective, which is to ensure our industry-leading dental lasers continue to attract heightened interest and demand. Everything we do at BIOLASE is to help accelerate the adoption curve of lasers which we believe will become the gold standard of dental care. I'm pleased to share the progress we made over the past quarter. The increased adoption of our industry-leading laser technology, with approximately 67% of our U.S. Waterlase sales during the first quarter coming from new customers, is a testament to the value and efficacy of our products. Furthermore, approximately 42% of these sales were from dental specialists indicating a growing recognition among this important contingent as we assess our ability to penetrate the market further. As we've cited on prior calls, there remains a significant untapped opportunity in the dental market for our BIOLASE lasers, with more than 90% of dentists yet to embrace all-tissue laser technology. As many of you already are aware, the dental community is among the slowest in terms of adopting new technologies, compared to other health care-related technologies. So it does take time to make an impact, and I believe our efforts are working. We are already the predominant brand in this space with approximately 60% market share globally under our Waterlase brand, and we continue to actively engage the remaining 90% of the market since this represents a majority of our growth opportunity. Our targeted sales and marketing initiatives and the enhanced training programs are expanding our reach among dental specialists and general practitioners as we emphasize the benefits of laser dental solutions to practitioners and patients alike. In the first quarter, we continued to increase awareness of the benefits of laser dentistry by holding over 100 webinar, study clubs, trade shows and training events. Our strategy to grow market adoption of our lasers includes bolstering our unique education and training programs, which we continue to implement in the first quarter through our Waterlase and EPIC academies. We have simplified training on our products for dental specialists and dental hygienists, and have articulated the significant return on investment that they can achieve with our lasers, not to mention, in the significant patient benefits. The state-of-the-art BIOLASE Education Center also provides dental clinicians with an engaging hands-on learning environment tailored around laser education. We remain committed to all of these revenue-generating activities as we believe these investments of time and resources will yield revenue opportunities in the future. As a result of these efforts, we continue to generate a strong number of marketing qualified leads during the quarter and are focused on converting these MQLs to sales. It's important to repeat in what we said in the past, each 1% increase in adoption of all-tissue laser in the U.S. will equal approximately $50 million in additional revenue for BIOLASE, assuming we maintain our estimated 60% market share. This doesn't include potential increased adoption outside the U.S. where historically approximately 30% to 40% of our revenue has been generated or the consumable revenue generated from the procedures performed with our laser systems. On that note, sales of our consumables experienced remarkable growth this quarter, representing the third strongest quarter for consumable sales in our company's history. Remarkable as the first quarter of the year historically has been our seasonally slowest quarter, with a 14% increase year-over-year driven largely by over 600 memberships, we're thrilled of the momentum we've gained in this area. Additionally, our purposeful and prudent actions have significantly improved our operations. One of the most significant achievements during the quarter was a substantial reduction in our adjusted EBITDA loss. Our relentless focus on cost reduction initiatives enabled us to lower our adjusted EBITDA loss by 21%, compared to the same quarter last year. This underscores our commitment to operational efficiency and financial discipline as we drive towards profitability, which we are on track to achieve by year-end. These initiatives, coupled with our revenue expansion plans position us for success in the quarters ahead. In summary, I believe the accomplishments in the first quarter point to a brighter future. Our performance reflects our unwavering commitment to growth and profitability. As we move forward, we remain focused on delivering value to our customers, driving growth and maximizing shareholder value. With that, I'll turn the call over to Jennifer to provide further details regarding our first quarter results. Jen?
Jennifer Bright: Thank you, John, and good afternoon, everyone. I'm going to provide more context around some of the numbers, as well as highlight some of the operational improvements we achieved during the first quarter. For further details, please refer to our financial results, which are included in the financial tables of our earnings release and our 10-Q. The challenging economic environment, including elevated interest rates continue to impact our sales in the first quarter, although we were able to increase laser dentistry awareness through our education and training initiatives. We continued our momentum with new customer adoption, with 67% of our U.S. Waterlase sales coming from new customers and 42% of U.S. Waterlase sales coming from dental specialists. Additionally, as John mentioned, we reported the third highest consumable sales quarter in company history, with consumable sales increasing 14% year-over-year driven by the increased utilization of our laser systems, from our education and training pathways and the benefit of over 600 consumable memberships during the quarter. These are positive indicators of the increased demand we are experiencing for our industry-leading dental lasers in the U.S. and abroad, setting the stage for accelerated growth as the economic environment improves. Our gross margin, although relatively flat compared to the year ago quarter, improved by 1% of net revenue from lower warranty expenses, reflecting the benefit of in-house manufacturing for our trunk fiber component which was partially offset by severance expenses incurred in the first quarter of 2024 as cost reduction initiatives were implemented this year. As a result of the trunk fiber acquisition at the end of 2022, our in-house trunk fiber now makes up 100% of the trunk fiber we will be shipping in 2024. We expect these cost savings to increase gross margin, improve cash flow and get us closer to the 50% margin needed to reach profitability. On the expense line, total operating expenses were $7.9 million for the quarter, down from $8.6 million in the year ago quarter. This 9% decrease was mainly due to the cost savings initiatives we implemented during 2023, which included a roughly 20% reduction in BIOLASE's U.S. workforce in June 2023. The workforce reduction is part of the company's broader efforts to gain greater efficiencies throughout the organization without impacting our revenue-generating strategies or the company's ability to continue delivering unparalleled quality and value to its global customer base. We expect to generate approximately $5 million to $6 million of annualized cost savings due to these initiatives. We also expect to significantly lower WTP expenses for the full year 2024 by utilizing our centralized training and education facility. We have 2 dentists on staff to train prospective customers, and we continue to work with educational facilities nationwide to host WTP events at their location at little to no cost. During the remainder of 2024, we expect to host about 50 to 100 practitioners at WTP events, so the expense savings will be quite meaningful. While we cannot control the macro environment, we can control certain manufacturing costs and operating expenses. And these improvements in gross margin and operating expenses are positive indicators of our ongoing efforts to optimize operational efficiency and drive profitability. Our continued efforts to drive further operating improvements and efficiencies also reduced our first quarter adjusted EBITDA loss by 21% to $3.5 million compared to $4.4 million in the prior year first quarter. Now let's turn to the balance sheet. We finished the first quarter with cash and cash equivalents at $6.4 million, and we believe we have sufficient liquidity to execute our near-term growth strategy and reach positive adjusted EBITDA for the full year 2024. We believe we can achieve this goal through the combination of top line growth, due to projected sales volume increases and certain price increases, expected lower cost of goods due to the trunk fiber acquisition and the positive impact of our cost reduction initiatives. Now moving on to guidance. We are reiterating our full-year 2024 guidance, which includes expected revenue growth of between 6% and 8% year-over-year to between $52 million and $53 million in full year revenue. This reflects the continued adoption of lasers and consumables by the dental community, including general dentists, dental specialists, dental hygienists and group practice entities, DSO, offset by a challenging business environment. Additionally, as I mentioned earlier, with a higher gross margin, expected WTP savings and the cost savings initiatives I referenced, we continue to expect to achieve positive adjusted EBITDA for the full-year 2024. In summary, we believe our growth strategy combined with our focus on improved operational efficiency, has positioned BIOLASE for long-term sustained success. With that, I'd like to turn the call over to the operator to open the call with questions. Chuck?
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Bruce Jackson with The Benchmark Company. Please go ahead.
Bruce Jackson: Hi. Good afternoon. Thanks for taking the questions. So with regard to the seasonality in the business, are we expecting revenue to be up sequentially in the second quarter?
John Beaver: Yes, we are, Bruce. Historically, if you rank our quarters by best revenue to lowest revenue, it would be Q4, Q2, Q3 and Q1. And I don't see any reason that this year would not follow that same seasonality.
Bruce Jackson: Okay. And then we had the positive radiographic data come out from the McGuire study, has that helped you at all with any of the dental service organizations?
John Beaver: You would think it would, Bruce. I think it has allowed us to continue conversations with those DSOs. But I think what we're finding is that just the presence of the study, it's not going to make anybody buy laser. The study, as you know, and you've seen the study show that the clinical efficacy was equivalent, if you will, to a traditional minimally invasive surgical technique, periodontal surgery. But the benefits were really in the patient reported outcomes, less pain and so forth. I think as more and more dentists, including the DSOs, see patient acceptance of the periodontal surgery with a laser, more and more will get on board here because that's really from a financial standpoint, I think where the benefit is, is that patient case acceptance. Nobody wants to have traditional perio surgery. And certainly, nobody will have it twice if they've gone through it once. I think as more patients become aware of -- it's not bad and is certainly a ton better from a pain standpoint than traditional surgery, I think the DSOs will get on board, but it's been -- it's taken longer than what I thought, frankly.
Operator: The next question will come from Ed Woo with Ascendiant Capital. Please go ahead.
Ed Woo: Yes, congratulations on the quarter. My question is, have you noticed any significant change in the economic outlook from your dental customers? Are they more concerned about the economy, less concerned or about the same as it was last quarter?
John Beaver: Yes. I would put that needle somewhere between the same or less concerned. I don't hear as many dentists talking about fear of losing patients, patient traffic going down. So I think it is, in general, most dentists are not thinking it's going to get worse, I'm assuming it would stay the same or get better. But, Ed, that's anecdotal, it's just based upon our conversations with dentists.
Ed Woo: Have you noticed any significant changes in how long it takes for them to think about it and decide whether to move forward to buy a Waterlase system or not?
John Beaver: I think if we go back maybe four to five quarters, that's where we started seeing the delay in decision-making time, if you will, on purchasing an all-tissue laser, less so on diodes because they're much -- they sell for much less. But for the Waterlase, we saw a ramp-up in that decision-making time. That stayed pretty consistent over the course of 2023, hasn't really -- did not go up through the course of the year from kind of the tick up they had in the first-half of '23. And so far this year, I think it's remained pretty constant.
Ed Woo: Great. Well, thank you for answering my questions, and I wish you guys good luck. Thank you.
John Beaver: Thank you, Ed.
Operator: [Operator Instructions] Our next question is a follow-up from Bruce Jackson with the Benchmark Company. Please go ahead.
Bruce Jackson: Great. Thank you. Just one more for me. Congratulations on the trunk fiber being brought in-house. That's been a big project, I know. You've got the price increases coming up, you should be getting some scale on the business. Where do you think that the gross margins could end up for the year?
John Beaver: Yes. So Bruce, I believe that in the middle part of the year, say, second and third quarters, we'll be approaching kind of that mid-40s type gross margin. And I think we can close the year in the fourth quarter right at or very near 50%, which is really our long-term target.
Bruce Jackson: Okay, great. That's it for me. Thank you.
John Beaver: Thank you, Bruce.
Operator: We have reached our allotted time for today, and this will end our question-and-answer session. I would like to turn the conference back over to Mr. John Beaver for any closing remarks. Please go ahead, sir.
John Beaver: Thank you, operator. I want to thank everyone for being on today's call and the BIOLASE team for their continued commitment and dedication. Each of them have worked tirelessly to help our customers deliver an elevated standard of care and safety through laser dentistry. Thank you, operator, and thank you, everyone, for your interest in BIOLASE. This concludes our call. Have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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