Sientra, Inc.

Q3 2023 revenue was $19.5 million, down from $22.6 million in the prior-year period, a 13.7% decrease. Non-GAAP operating expense was $17.8 million versus $21.7 million a year ago, an 18% reduction. Non-GAAP EBITDA loss was $6.4 million versus an $8.6 million loss last year, a 25.6% improvement. Free cash flow usage was $3.6 million versus about $3.7 million last year. Pro forma gross margin was 58.4% versus 57.9% last year; GAAP gross margin was 51.3%. Cash at September 30, 2023 was $15 million, down $3.6 million from the prior quarter. Management withdrew guidance for now, citing macro uncertainty and the early stage of Viality and SimpliDerm launches. Andy Schmidt said the company still targets year-end free-cash-flow-positive performance, but Q4 timing is less certain because of revenue seasonality and some one-time costs tied to Deerfield advisory work and covenant-related issues.

Ron Menezes framed the quarter as challenged by stronger-than-usual seasonality, especially in augmentation, but said reconstruction was less affected and now accounts for over half of revenue. He stressed that the market for breast procedures remains durable, that early October trends are improving, and that the company’s diversified portfolio should be a competitive advantage. He also said Viality and SimpliDerm are early in controlled launches, but the response has been encouraging and 2024 could be a critical inflection point.

Andy Schmidt emphasized operating discipline and improving cash generation despite weaker revenue. He cited Q3 revenue of $19.5 million, non-GAAP operating expense of $17.8 million, non-GAAP EBITDA loss of $6.4 million, free cash flow usage of $3.6 million, and pro forma gross margin of 58.4%; he also noted GAAP gross margin of 51.3% was affected by $1.4 million of non-cash amortization. He said cash was $15 million at quarter-end, inventory was $39.3 million, and accounts receivable were $29.6 million; he also discussed a temporary waiver from Deerfield after a September 30 revenue covenant breach and the resulting $3.2 million non-cash derivative liability charge, plus a $58.8 million debt reclassification to short-term debt.

Analysts focused on the Viality hospital contracting rollout, reorder behavior, and the company’s ability to reach free cash flow positivity by year-end. Ron said hospital adoption is taking about 9 to 12 months because of RFP, surgeon support, and committee processes, but that adoption has accelerated in the last two to three months and reorder rates are already tracking tissue expanders and implants at the hospitals that have adopted. Andy said the company still targets year-end free-cash-flow-positive performance, but Q4 timing is harder to forecast due to ongoing seasonality and some one-time advisory costs linked to the Deerfield covenant situation. Management also said the launch strategy for Viality and SimpliDerm has not changed and reiterated confidence that new products could contribute 5% to 10% of revenue by year-end.