SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 10, 2020
(Exact name of registrant as specified in its charter)
(State or other jurisdiction
(Commission File Number)
520 Newport Center Drive, Suite 1200
Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
|Title of Class||Trading Symbol(s)||Name of each exchange on which registered|
|Common Stock, par value $0.00001 per share||EOLS|
The Nasdaq Stock Market LLC
(Nasdaq Global Market)
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition.
On August 10, 2020, Evolus, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2020. The press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 10, 2020
/s/ David Moatazedi
President and Chief Executive Officer
Evolus Reports Second Quarter 2020 Results and Provides Business Update
Q2 2020 Net Revenue $7.8 Million, Up from $2.3 Million in Q2 2019
$40 Million Convertible Note Financing Closed in July 2020
Pro Forma June 30, 2020 Cash1 Position of $124.8 Million
Newport Beach, Calif., August 10, 2020 - Evolus, Inc. (Nasdaq: EOLS), a performance beauty company with a customer-centric approach focused on delivering breakthrough products, today reported financial results for the second quarter ended June 30, 2020 and provided a business update.
“We experienced a rapid recovery of our business in the second quarter. Approximately 90 percent of our net revenue was generated in the second half of the quarter as offices re-opened from COVID-19 related shutdowns,” said David Moatazedi, President and Chief Executive Officer. “In addition, we took decisive action to reset our expense base and rewire Evolus with greater leverage of our proprietary digital platform.”
Mr. Moatazedi continued, “The strength of our Jeuveau® launch continued in the second quarter. We increased our purchasing account base, grew our re-order rates and introduced Evolus Rewards, our new consumer loyalty program. We also launched a stimulus program to support customers as they re-opened their practices. We believe these programs drove our strong second quarter performance and will continue to be fundamental drivers of our growth in the back half of the year.”
Second Quarter 2020 Financial Results
•Net revenues were $7.8 million, up from $2.3 million in the second quarter of 2019.
◦Approximately 90% of net revenue was generated in the second half of the second quarter of 2020.
◦Jeuveau® launched in the second half of the second quarter of 2019.
•Gross margin percentage was approximately 75%, up from 71% in the second quarter of 2019.
•GAAP operating expenses decreased by 34% to $24.7 million from $37.6 million in the second quarter of 2019. Included in operating expenses in the second quarter of 2020 were $3.0 million of restructuring costs associated with headcount and other expense reductions announced in April 2020.
•Non-GAAP operating expenses decreased by 44% to $18.3 million from $32.9 million in the second quarter of 2019. Non-GAAP operating expenses for the second quarter of 2020 exclude expenses resulting from the revaluation of the contingent royalty obligation of $2.4 million, stock-based compensation of $2.4 million and depreciation and amortization of $1.7 million. Non-GAAP operating expenses in the second quarter 2019 exclude expenses resulting from the revaluation of the contingent royalty obligation of $1.3 million, stock-based compensation of $2.5 million and depreciation and amortization of $1.0 million.
•GAAP loss from operations decreased by 48% to $18.9 million from $36.0 million in the second quarter of 2019.
•Non-GAAP loss from operations decreased by 60% to $12.4 million down from $31.3 million in the second quarter of 2019.
•GAAP net loss decreased by 44% to $21.1 million from $37.6 million in the second quarter of 2019.
•Cash, cash equivalents and short-term investments as of June 30, 2020 were $84.8 million.
•In July 2020, the Company received a $40.0 million investment from its strategic partner, Daewoong Pharmaceutical Co. Ltd. In the form of a five-year, unsecured, subordinated, 3% convertible note at a conversion price of $13.00.
•Pro forma cash¹ position was $124.8 million as of June 30, 2020.
•As of June 30, 2020, the Company had 33.7 million shares of common stock outstanding.
Key 2020 Business Highlights
•Strong underlying market demand for Jeuveau® in the second quarter of 2020 driven by an 8% increase in purchasing accounts to over 4,400 accounts2 and re-order rates2 increased to 66%.
•Launched two key marketing initiatives in May:
◦Evolus Rewards, a consumer loyalty program providing patients with improved affordability and instant savings. As of June 30, 2020, greater than 1,300 purchasing accounts opted into the program and over 16,500 patients enrolled.
◦Evolus 350˚, a post COVID-19 promotional program offering customers a $350 per vial price when the purchase is made via the Evolus Practice app.
•On July 6, 2020, the Company announced that the Administrative Law Judge (ALJ) overseeing the United States International Trade Commission (USITC) case filed by Allergan and Medytox in January 2019 against Daewoong and Evolus released a Notice of Initial Determination. The non-binding initial decision by the ALJ finds a violation of Section 337 of the Tariff Act of 1930. All aspects of the ALJ’s ruling are subject to review by the Commission itself. The final determination is targeted for November 6, 2020. Jeuveau® launch and product supply are unaffected by the initial determination.
2020 Financial Outlook
•Evolus continues to anticipate its non-GAAP operating expenses for the second half of 2020 will be less than $42 million. See “Use of Non-GAAP Financial Measures” below for additional information about this forward-looking non-GAAP financial measure.
•Evolus expects its cash, cash equivalents and short-term investments will be sufficient to fund its operations for at least the next twelve months.
The Company’s financial outlook is based on a number of assumptions and subject to uncertainties. In the event that USITC affirms the initial determination of the ALJ by entering a limited exclusion order preventing us from importing Jeuveau® into the United States and a cease and desist order that would prevent us from selling Jeuveau® in the United States, the Company’s financial outlook would be materially and negatively impacted.
Conference Call Information
Management will host a conference call and webcast to discuss Evolus’ financial results today at 4:30 p.m. ET. The dial-in numbers are +1 (866) 916-2317 for domestic callers and +1 (703) 925-2662 for international callers, and the conference ID is 7575816.
A replay of the call will be available following its completion through August 17, 2020. To access the replay, dial +1 (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers and use the replay conference ID 7575816.
A live audio webcast of the call will be available on the Investor Relations page of the Evolus, Inc. website, investors.evolus.com. A replay of the webcast will be archived on Evolus’ website for 30 days following the completion of the call.
About Evolus, Inc.
Evolus is a performance beauty company with a customer-centric approach focused on delivering breakthrough products. In 2019, the U.S. Food and Drug Administration approved Jeuveau® (prabotulinumtoxinA-xvfs), the first and only neurotoxin dedicated exclusively to aesthetics and manufactured in a state-of-the-art facility using Hi-Pure™ technology. Jeuveau® is powered by Evolus’ unique technology platform and is designed to transform the aesthetic market by eliminating the friction points existing for customers today. Visit us at: www.evolus.com.
This press release contains forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements that relate to the status of regulatory processes, future plans, events, prospects or performance and statements containing the words “plans,” “expects,” “believes,” “strategy,” “opportunity,” “anticipates,” “outlook,” “designed,” or other forms of these words or similar expressions, although not all forward-looking statements contain these identifying words. The company’s forward-looking statements include, but are not limited to, statements made by Mr. Moatazedi related to the effectiveness of our customer and consumer programs, the efficiency of the company’s business model and expectations for share gain and our financial outlook as well as the company’s expectation that it has cash, cash equivalents and short term investments that will be sufficient to fund its operations for at least the next twelve months.
Forward-looking statements are based on current estimates and assumptions made by management of the company and are believed to be reasonable, though they are inherently uncertain and difficult to predict.
Forward-looking statements involve risks and uncertainties that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements. Other factors that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements include uncertainties associated with our ability to continue to import Jeuveau® into, and sell Jeuveau® within, the United States if the USITC affirms, in whole or in part, the initial determination issued by the ALJ in a final determination and imposes a limited exclusion order preventing us from importing Jeuveau® into the United States and a cease and desist order that would prevent us from marketing and selling Jeuveau® in the United States; the continued impact of COVID-19 on our business and the economy generally; the success of the launch of Jeuveau®, customer and consumer adoption of Jeuveau®, the efficiency and operability of our digital platform, competition and market dynamics, our ongoing legal proceedings and our ability to maintain regulatory approval of Jeuveau® and other risks described in the section entitled “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on May 11, 2020, which is available online at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, Evolus undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events. If the company does update or revise one or more of these statements, investors and others should not conclude that the company will make additional updates or corrections.
Use of Non-GAAP Financial Measures
Evolus’ financial results are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This press release and the reconciliation tables included in the financial schedules below include non-GAAP operating expenses and non-GAAP loss from operations, which are calculated as GAAP operating expenses and GAAP loss from operations, excluding: (i) the revaluation of contingent royalty obligations, (ii) stock-based compensation expense, and (iii) depreciation and amortization. Management believes that non-GAAP operating expenses and non-GAAP loss from operations are useful in helping to identify the company’s core operating performance and enables management to consistently analyze the period-to-period financial performance of the core business operations. Management also believes that non-GAAP operating expenses and non-GAAP loss from operations will enable investors to assess the company in the same
way that management assesses the company’s current and future operations. The company’s definitions of non-GAAP operating expenses and non-GAAP loss from operations have limitations as an analytical tool and may differ from other companies reporting similarly named measures. Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results.
For a reconciliation of our historical non-GAAP operating expenses and non-GAAP loss from operations presented herein to GAAP operating expenses and GAAP loss from operations, the most directly comparable GAAP financial measures, please see “Reconciliation of GAAP Operating Expenses and GAAP Loss from Operations to Non-GAAP Operating Expenses and Non-GAAP Loss from Operations” in the financial schedules below. In addition, this press release includes information regarding the company’s expected non-GAAP operating expenses for the third and fourth quarters of 2020. Evolus has not provided a reconciliation of such forward-looking non-GAAP operating expenses to GAAP operating expenses, the most directly comparable GAAP financial measure, because, without unreasonable efforts, it is unable to predict with reasonable certainty the amount or timing of the non-GAAP adjustments that are used to calculate non-GAAP operating expenses, including any revaluation of contingent royalty obligation, stock-based compensation expense and depreciation and amortization. These adjustments are uncertain, depend on various factors that are beyond our control and could have a material impact on the company’s forward-looking GAAP operating expenses.
Jeuveau® is a registered trademark of Evolus, Inc.
Hi-Pure™ is a trademark of Daewoong Pharmaceutical Co, Ltd
1 Represents June 30, 2020 cash, cash equivalents and short-term investments of $84.8 million plus gross proceeds received in July 2020 from the closing of the $40.0 million convertible debt offering.
2 Represents cumulative statistics from the launch of Jeuveau® in May 2019.
Evolus, Inc. Contacts:
Ashwin Agarwal, Evolus, Inc.
Vice President, Finance, Investor Relations & Treasury
Crystal Muilenburg, Evolus, Inc.
Vice President, Corporate Communications & Public Relations
Statements of Operations and Comprehensive Loss
(Unaudited, in thousands, except loss per share data)
|Three Months Ended|
|Six Months Ended|
|Net revenues||$||7,806 || ||$||2,311 || ||$||18,302 || ||$||2,311 || |
|Cost of sales (excludes amortization of intangible assets)||1,948 || ||660 || ||6,167 || ||660 || |
|Gross profit||5,858 || ||1,651 || ||12,135 || ||1,651 || |
Selling, general and administrative
|17,553 || ||34,892 || ||48,852 || ||52,411 || |
Research and development
|145 || ||509 || ||653 || ||2,862 || |
Revaluation of contingent royalty obligation payable to Evolus Founders
|2,433 || ||1,269 || ||(7,451)|| ||6,182 || |
Depreciation and amortization
|1,658 || ||978 || ||3,407 || ||1,462 || |
|Restructuring costs||2,956 || ||— || ||2,956 || ||— || |
Total operating expenses
|24,745 || ||37,648 || ||48,417 || ||62,917 || |
|Loss from operations||(18,887)|| ||(35,997)|| ||(36,282)|| ||(61,266)|| |
|Other income (expense):|
|224 || ||615 || ||598 || ||1,004 || |
|(2,464)|| ||(2,412)|| ||(4,922)|| ||(3,030)|| |
|Loss before income taxes:||(21,127)|| ||(37,794)|| ||(40,606)|| ||(63,292)|| |
|Income tax expense (benefit)||(2)|| ||(227)|| ||254 || ||(14,750)|| |
|Net loss||$||(21,125)|| ||$||(37,567)|| ||$||(40,860)|| ||$||(48,542)|| |
Other comprehensive gain (loss):
Unrealized gain (loss) on available-for-sale securities, net of tax
|(206)|| ||52 || ||13 || ||43 || |
|$||(21,331)|| ||$||(37,515)|| ||$||(40,847)|| ||$||(48,499)|| |
Net loss per share, basic and diluted
|$||(0.63)|| ||$||(1.37)|| ||$||(1.21)|| ||$||(1.77)|| |
Weighted-average shares outstanding used to compute basic and diluted net loss per share
|33,733 || ||27,409 || ||33,727 || ||27,370 || |
Summary of Balance Sheet Data
(Unaudited, in thousands)
|June 30, 2020||December 31, 2019|
|Balance Sheet Data:|
|Cash and cash equivalents||$||29,772 || ||$||109,892 || |
|Short-term investments||54,982 || ||19,911 || |
|Total cash, cash equivalents and short-term investments||$||84,754 || ||$||129,803 || |
|Working capital||$||88,536 || ||$||127,758 || |
|Total assets||$||194,544 || ||$||240,442 || |
|Total current liabilities||$||19,462 || ||$||24,439 || |
|Total liabilities||$||150,941 || ||$||160,985 || |
|Accumulated deficit||$||(253,919)|| ||$||(213,059)|| |
|Total stockholders’ equity||$||43,603 || ||$||79,457 || |
Reconciliation of GAAP Operating Expenses and GAAP Loss from Operations to
Non-GAAP Operating Expenses and Non-GAAP Loss from Operations
|Three Months Ended|
|Six Months Ended|
|GAAP operating expenses||$||24,745 || ||$||37,648 || ||$||48,417 || ||$||62,917 || |
|GAAP loss from operations||$||18,887 || ||$||35,997 || ||$||36,282 || ||$||61,266 || |
|Revaluation of contingent royalty obligation||2,433 || ||1,269 || ||(7,451)|| ||6,182 || |
Included in selling, general and administrative
|2,338 || ||2,282 || ||4,878 || ||4,026 || |
Included in research and development
|36 || ||175 || ||124 || ||429 || |
Depreciation and amortization
|1,658 || ||978 || ||3,407 || ||1,462 || |
Non-GAAP operating expenses
|$||18,280 || ||$||32,944 || ||$||47,459 || ||$||50,818 || |
Non-GAAP loss from operations
|$||12,422 || ||$||31,293 || ||$||35,324 || ||$||49,167 || |