Evolus, Inc. (EOLS) Earnings Call Transcript

Good afternoon, everyone, and thank you for standing by. Welcome to Evalyst's second quarter 2026 earnings call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, today's conference call is being rescheduled and webcast live. All participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. I would now like to turn the conference over to Narek Saharian, Vice President and Head of Global Vestor Relations in Corporate Communications. Please go ahead. Thank you.

Thank you, Operator, and welcome to everyone joining us on today's call to review Ellis' second quarter financial results. Our second quarter press release is now available on the investor relations section of our website at eveless.com. Joining me on today's call are David Morissette, President and Chief Executive Officer, Rui Avalar, Chief Medical Officer and Head of R&D, and Tiana Mitchell, Chief Financial Officer. Today's call will include forward-looking Actual results may differ materially due to risks and uncertainties outlined in our earnings, press release, and SEC filings. forward-looking statements are based on current assumptions and we undertake no obligation to update them. Additionally, we will discuss certain non-GAAP financial measures. These measures should be considered in addition to and not as a substitute for our GAAP results. A reconciliation of GAAP to non-GAAP measures is included in today's earnings release. As a reminder, our earnings release and SEC filings are available on the SEC's website and on our investor relations website. Following the conclusion of today's call, a replay will be available on our website at investors.evalus.com. With that, I'll turn the call over to our CEO, David Modazzetti. Thank you, Nart. And good afternoon, everyone.

The second quarter represents a meaningful inflection point for Evelus. We delivered 21% revenue growth. generated our third consecutive quarter of positive adjusted EBITDA, expanded our international footprint with the launch of ESTEEM in Europe, and announce two strategic licensing agreements that further strengthen our long-term portfolio. Importantly, Evelis gained significant share across the U.S. injectable aesthetics market during the quarter, underscoring the growing momentum of our portfolio strategy across both neurotoxins and hyaluronic acid gels. Reflecting the strength of our first half performance, we also raised our full year 2026 financial outlook. As we enter the second half of the year, we are well positioned to build on this momentum. Consumer demand continued to strengthen during the quarter. Treatment intervals remained stable and practitioners reported healthy patient traffic and engagement. We estimate the U.S. neurotoxin market grew at a faster-than-expected mid-single-digit growth rate during the quarter, while the hyaluronic acid gel market returned a positive growth following two consecutive years of declines. Consumers continue to prioritize aesthetic treatments, and practices remain focused on products that deliver predictable clinical outcomes and high patient satisfaction. Against this improving backdrop, we continued to meaningfully outpace the market through disciplined commercial execution, which led to market share gains across our portfolio. That execution is evident through our business performance. Global toxin revenue exceeded $75 million during the quarter, driven by double-digit toxin growth across both the United States and our international markets. As our portfolio continues to expand, we're seeing customers increasingly adopt our products within their practices. Portfolio Focus is delivering particularly strong results among accounts participating in our Avalos Portfolio Growth Bundle. In the first six months since we debuted the program, approximately 70% of these customers purchased Evelisse, compared with approximately 25% penetration of Evelisse across our overall customer base. Javot continues to strengthen its competitive position through growing customer loyalty and market share gains, while Avalis is following the same disciplined commercialization strategy that made Javot successful. During the quarter, Avalis revenue increased by more than $2 million sequentially, reflecting increased customer penetration, reorder rates, and utilization within existing accounts. Together, these trends reinforce our confidence that our portfolio focus is gaining traction, enabling us to increase share across both neurotoxins and injectable hyaluronic acid gels, while deepening customer relationships and expanding our share of wallet. As a result of the continued strength across our portfolio, we remain on track for both Evelisse and our international business to each contribute more than 10% of total company revenue this year. A key milestone in our evolution is our recent partnership with IFSA to exclusively develop and commercialize Profilo in the United States. Profilo is an asset we've been actively pursuing because it represents a gold standard in the rapidly emerging skin quality category. With the addition of Profilo, Evelis is expanding into a new third injectable aesthetics vertical of skin quality, further diversifying our differentiated portfolio and reinforcing our strategy of building a comprehensive injectable platform. Profilo defines the skin quality category globally and is widely recognized as a market-leading brand for skin quality in Europe. no directly comparable product currently available in the United States. Similar to Jibo, we will own the US regulatory filings and lead the clinical development and commercialization strategy for Profilo, creating long-term value on the asset, has the potential to generate more than $100 million in peak annual revenue. More broadly, our partnership with companies such as Ipsa, Cimetase, and Daewoong demonstrate that leading global innovators increasingly view Evalys as a partner of choice to develop and commercialize quality aesthetic products. proven execution, deep customer relationships, and expanding global platform position us to continue attracting high-quality assets from world-class partners as we build the next generation of injectable aesthetics. Our international business is also becoming an increasingly important contributor to our long-term strategy. During the quarter, we successfully launched the esteemed collection of injectable hyaluronic acid gels in Europe. where early customer response has been very encouraging. We also announced the expansion of our relationship with Cimetase to include Canada, Australia, and New Zealand. Strategically, this is an important milestone as we now hold exclusive rights to commercialize our injectable hyaluronic acid gel portfolio in every market where we maintain rights for Nuseva, while expanding our global addressable market by approximately 200 million annually. The combination of a broader portfolio and expanded geographical footprint make our international business an increasingly meaningful contributor to our long-term growth and revenue outlook. While we continue to invest in our long-term growth strategy, we remain disciplined in our financial execution. Our third consecutive quarter of positive adjusted EBITDA demonstrates that we can deliver profitable growth while funding the strategic initiatives that will drive the next phase of our evolution. Through the first six months of the year, we delivered 14% revenue growth ahead of the pace implied in our original guidance, giving us the confidence to raise our full year 2026 financial outlook. Our results this quarter reflect the strength of our expanding portfolio, the effectiveness of our commercial strategy, and the operating discipline of our team in executing against our long-term objectives. With that, I'd like to now turn the call over to Rui. Thank you, David.

Evans is committed to building a best-in-class aesthetic portfolio. We started with Javeau, a neurotoxin manufactured under the high-pure manufacturing process supported by Phase III data against the industry standard that was subsequently validated by an independent study demonstrating that Javeau had a fast onset, the highest peak effect, and the longest duration among the toxins tested. Then we brought in Nevelis, a hyaluronic acid injectable manufactured with a novel cold X cross-linking technology. The pivotal registration studies demonstrated both non-inferiority and statistical superiority against an established comparator. The first two HA products, I believe Form and Smooth, have launched. Sculpt, our premium mid-face HA injectable, has an anticipated approval in the fourth quarter and is expected to commercially launch in 2027. Evelisse Lips is on track to be submitted to the FDA by the end of this year with an anticipated launch in 2028. Recently, we further expanded our portfolio and are very excited about the partnership with IPSA, the developer of Profilo. IPSA is a private Swiss multinational pharmaceutical company founded in 1945 and operates across 10 therapeutic areas in over 90 countries worldwide. Profilo is made of a unique blend of high and low molecular weight hyaluronic acid. And instead of the traditional cross-linking, it undergoes a patented thermal production process to create a hybrid matrix designed to address skin quality. age, the components of skin break down and becomes less dynamic. Profilo helps rebuild the quality of the skin. It stimulates extracellular remodeling, improves the elasticity of the skin and its supporting function by stimulating fibroblasts and keratinocytes. Evelis will lead the U.S. clinical and regulatory approval process and then own the PMA. At this time, we anticipate approval around 2030 and will provide updates as the program progresses. With the addition of Profilo, we continue to expand our portfolio and expect to introduce three new products over the next four years. Lastly, as David mentioned, we have further expanded our geographical reach with esteem and now also have Canada, Australia and New Zealand. the registration timelines we expect to launch in these regions in 2028. With that, I'll turn the call over to Tatjana.

Thank you, Rui. The second quarter represented another strong step forward in the execution of our financial strategy. As I approach one year as CFO, I am proud of the foundation we have set and our proven ability to deliver double-digit revenue growth across the portfolio while driving significant operating leverage and profitability. In the second quarter, we posted revenue growth above 20%, delivered our third consecutive quarter of positive adjusted EBITDA, and strengthened our confidence in Outlook for the remainder of the year. We achieved these results while continuing to invest in customer experience and education, consumer rewards, and the launch of the Esteem portfolio in Europe. Beginning with revenue, our global net revenue for the second quarter was $84.1 million, representing an increase of 21% compared to the prior year. This performance reflects continued strength across our diversified portfolio, with global toxin revenue of $75.2 million and injectable hyaluronic acid gel revenue of $8.9 million. As expected, the recent launch of a steam in Europe contributed modestly during the second quarter. From a geographic standpoint, we continue to see balanced performance across both our U.S. and international business. Jouveau and Nesteva delivered another quarter of healthy growth, supported by improving procedure volumes and continued market share gains. Idle Evelisse continued to build momentum through increasing customer adoption and reorder behavior. Turning to gross margin, reported gross margin for the second quarter was 68%, while adjusted gross margin, which excludes the amortization of intangibles, was 69%. Gross margin benefited by approximately 120 basis points from a tariff refund recognized during the quarter. Adjusting for the tariff refund, our first half gross margin remained flat year over year. reflecting a modest improvement in U.S. gross margin that was offset by a higher mix of our international business. Moving to operating expenses. GAAP operating expenses for the second quarter were 61.7 million compared to 55.7 million in the first quarter. Non-GAAP operating expenses for the second quarter were $53.3 million, compared to $49.1 million in the first quarter. As expected, operating expenses increased sequentially from the first quarter as we continued to invest in customer education, marketing programs, and international portfolio expansion. These investments remain very disciplined, allowing us to efficiently scale the business while maintaining our profitability objectives. As a reminder, non-GAAP operating expenses exclude stock-based compensation, revaluation of the contingent's royalty obligation, and depreciation and amortization. Within operating expenses, selling general and administrative expenses for the second quarter were $57.1 million compared to $52 million in the first quarter. This included $5.2 million of non-cash stock-based compensation, similar to the prior quarter. In the second quarter, our adjusted EBITDA improved by $12.6 million compared to the prior year period, resulting in positive adjusted EBITDA of $4.7 million and marking our third consecutive quarter with positive adjusted EBITDA. As we've discussed, our commercial infrastructure was intentionally built to support a broader portfolio. As additional products contribute to revenue, we expect that scalability to become increasingly evident through improving profitability. Turning to the balance sheet, we ended the quarter with $45.2 million in cash and cash equivalents, compared to $49.8 million at the end of the first quarter. Cash used during the quarter primarily reflected interest expense and planned capital expenditure investments. We believe that our cash position, profitability trajectory, and the capacity under our revolving credit facility ample financial flexibility to support our commercial priorities, invest in portfolio expansion, and execute on our long-term growth strategy. We continue to have access to $100 million of additional liquidity under our Pharmacon debt facility. is intended for potential transformative business investments. As we've said previously, we remain funded to profitability and do not anticipate the need for additional equity financing. Another important point regarding the balance sheet. While our position on the announced tariffs remains unchanged, as with the prudent measure, we expect to bring approximately one year's worth of Chivot inventory into the U.S. we will effectively be relocating Zhigou safety stock from South Korea to the U.S. This will be reflected as an increase in inventory and an increase in accounts payable on our balance sheet, but will not impact our cash use, given the negotiated payment terms. Turning now to guidance. Our first half performance provides us with increased confidence in the trajectory of the business. As a result, we are updating our full-year 2026 financial outlook. Through the first six months of 2026, we delivered 14% year-over-year growth in revenue, exceeding the pace implied by our original four-year outlook. we are raising the lower end of our revenue guidance to 330 million, while maintaining the upper end of 337 million, effectively raising the midpoint of our guidance range to 333.5 million. We are also raising our full-year adjusted gross profit margin guidance. between 67.0 and 67.5%. This reflects our first top performance in confidence in the margin trajectory of the business. We are narrowing our non-GAAP operating expense guidance range to between $212 million to $216 million. This reflects our continued disciplined approach to expense management while incorporating incremental strategic investments. including upfront payments for the recently announced expansion of our esteemed partnership into Canada, Australia, and New Zealand. Our previously announced partnership with IPSA reflects the same disciplined, capital-efficient approach to business development, with no upfront or milestone payments. As a result, we are reaffirming our low-to-mid single-digit adjusted EBITDA margin outlook for the full year 2026. Finally, I'd like to emphasize that our long-term financial framework remains unchanged. We continue to believe Evelis is well positioned to achieve $450 million to $500 million in annual revenue and 13% to 15% adjusted EBITDA margin in 2028. The progress we have demonstrated over the past three quarters reinforces our confidence that we're on track to achieve these long-term objectives.

With that, I'll turn it back to David for closing remarks. Thank you, Tatiana. As you heard today, ELVIS is on track to deliver our seventh consecutive year of above-market performance double-digit top-line growth and we've continued to gain market share for both Javeau and Evelisse I'm particularly pleased with the debut and early success of our portfolio growth bundle, which resulted in customers committing more of their injectable business to Avalos and driving the highest overall growth across our customer base. Over the past 18 months, we have transformed Evalys into a diversified injectable aesthetics company with three distinct growth verticals. We began by establishing Javot as one of the fastest growing neurotoxin brands in the market. We continued that momentum with the launch of Evelisse, the first new injectable hyaluronic acid gel in more than a decade. and most recently entered the skin quality space with Profilo. At the same time, we've built a commercial platform that is increasingly scalable, increasingly diversified, and increasingly attractive to both customers and strategic partners. Before I close, I want to thank our employees for their relentless focus on execution. I also want to thank our customers for their continued trust in Evalus and our strategic partners for their collaboration. and last, in Evelis. Our progress this quarter reflects what we can accomplish when we work together with a shared commitment to innovation, operational excellence, and delivering long-term value. Operator, you may now begin the Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before you ask a question. for pressing the star keys. Our first question is from Annabel Samimi with Stifo. Please proceed.

Hi, guys. Thanks for taking my question. Congratulations on a good quarter. I'm really interested in your new licensing of Profilo for skin quality. As usual, U.S. is catching up with international markets. I want to understand this product a little better. What is it going to require clinically to get on the market here? Do you still expect to maintain profitability with the additional R&D here? And second, would you – view this maybe I guess a little bit more like a filler light to perhaps expand a category or be a sort of gateway into fillers, or is this a completely different market, different price point, different commitment altogether?.

Great Annabel, thanks for the questions. I'll have Rui comment on the clinical development and then Tatiana comment on the expense associated with Profilo. I'll just open with this last weekend we had an advisory board meeting with a number of key customers from both the US and international markets. Interestingly, the US doctors were all very well aware of Profilo. They've heard of this brand because it's well known as the gold standard for skin quality. And the international doctors made a simple comment. They use toxins to relax muscle. You use our injectable hyaluronic acid gels like Evalis to replace lost volume in the tissue. And products like Profilo are used as more like a moisturizer on the skin surface. So it's not adding volume, it's changing the overall texture of the skin. So I'll let Rui talk a little bit more about clinical development and what you would see going on. Sure, maybe I'll touch on kind of what you also touched on. It is a different product. When we think about HAs,.

mechanism of action is they take up space. That's why they're regulated as a device. This is a different way of actually creating an HA gel. As I mentioned, it doesn't undergo the traditional cross-linking. It has like a special thermal process and you end up with these light hydrogen bonds. And what it does is it actually hydrates the skin internally. So what you do is you actually put it in. And if you look at kind of the DFU from Europe, you can actually see where the injection points are correlate where the skin quality is deteriorating. The skin turgurs low, there's kind of more redundancy and looseness in even the skin tone is low. Those are all components of skin quality, and this is what this works on. So, mechanistically, it works effectively by hydrating the skin from within. In terms of the process and how we get it through, this will be a full PMA. It's considered a class three device, and it will go through a full PMA process, which is where we kind of tie in those timelines. So we're talking about 2030 right now. I think I've captured most of your components, Annabelle. Great. And maybe I will add. All right.

Go ahead. I will just add on the question around, does this impact profitability? And the short answer is no. Roo and his team have a great track record and will be supporting the clinical development and regulatory approval of this product. this is already contemplated in our guidance for just to be adopted 2028 of 13 to 15%. Got it.

And if I could just ask a follow-up, can you talk about, I mean, I heard in your comments how you're feeling about the state of the filler market. It does look like we've got a bit of a tale of two cities here with, you know, I guess one player seeing declines, another player seeing stabilization. What are you seeing as far as interest levels and I guess being a new player on the market, do you feel like you're reframing the conversation around fillers right now and any impact that you're seeing yet from GLP-1s? I know that Galdorma is starting to talk about it, so how are you seeing that play out in the market?.

Yes, this is David. Overall, we're hearing improving conditions from clinicians all around in the HA market specifically. In our cases, you saw the step up in Q2. Part of that was driven by our ability to talk about these weight loss patients, and we've incorporated that into our co-op. We saw a lot of interest from accounts that want to capitalize on what they're seeing, which is the increasing number of patients coming into their clinics and the ability to advertise to that segment with and the mention of weight loss that we currently have in our patient label. So we've been able to capitalize on it. We do have a lot of interest in that segment. believe it's a very early innings of both the market recovery and that GLP patient entering clinics, but that's exactly where these practices are focused, and that's something we'll continue to take advantage of as we get into the back half of the year, as that's a unique differentiation in the Evelisse line from a consumer standpoint.

Great, thank you. Our next question is from Mark Goodman with Learing Partners. Please proceed.

Yes, just one additional question on this profilo. Is it safe to use that product at the same time as a filler and at the same time as Juveau? I'm just wondering if you need studies to kind of show that it's safe, or is it just going to be well understood by the doctors? And then the second question is just on the performance of the toxin model. just throughout the quarter. Was it improving throughout the quarter and like July is a continuation of that improvement? Was it kind of steady throughout the, I'm just trying to get a sense of like, what has been going on this year? I think you said at the first quarter you thought that the market grew low to mid, and now you're saying the second quarter was mid. So it does feel like it's getting better as time goes on. Just wondering if you're seeing that improvement into July as well. Thanks. Thank you.

Well, I mark, I'll start with your question. Yes. When you look at where this is used, they're you simultaneously with the other products. So this product is put into, if you will, more superficially in the skin. If we think about how it works, if you look at a toxin that usually goes into a muscle, so it's a different layer. And generally, when you're using an HA injectable and you're trying to take up space for a wrinkle or fold, that's usually put in a different plane. So we see them used quite similarly. And then if we think about, you know, part of the reason why there was a lot of excitement here in the U.S. as we had our advisory board is they really like the concept of the cadence of the sprays. product. It brings patients in with another excuse to get a treatment, and then it helps them with kind of managing, you know, the other treatments such as aging injectables and toxins. So, it's a very synergistic treatment for all the stuff that we currently offer.

That's right. As a matter of fact, when we had conversations with the team at Profilo, they did not view hyaluronic acid injectable products as competitors. They very much viewed them as complementary in the European market and had a lot of success with that. And then go to your second question, Mark. We saw a sequential improvement in the market. You see that reflected in both technology. toxin procedures, NHAs turning to positive growth. Underneath that, we're also seeing that segments of the consumer are also strengthening and that younger demographic, which is well into her 40s now, the millennial, the Gen Z, they both show that their spend on beauty and healthcare only rising, and we do believe that contributes. And we expect that to carry forward into the back half of the year. So we have no reason to believe that the momentum doesn't continue, and that's reflected in the guidance that we've provided.

Thanks. Our next question is from Navantai with BNB Paribas Asset Management. Please proceed.

Hi. Question on your market commentary, which sounded more positive than the market leaders. So can you clarify whether the comments are U.S. or global for toxins and fillers? And if possible, can you let us know? know your current US and global market shares in toxins and figures and what drove the significant share gains. Thank you.