Sientra Inc (SIEN) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Sientra's Second Quarter 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to Oliver Bennett, General Counsel and Chief Compliance Officer. Thank you, and please go ahead, sir.

Thanks, operator. Good afternoon, and welcome to the Sientra Second Quarter 2020 Earnings Conference Call. I would like to remind everyone that, in our remarks today, we will include statements that are considered forward-looking statements within the meaning of United States security laws. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its previously filed annual and quarterly reports on Form 10-K and 10-Q and its quarterly report on Form 10-Q that the company filed this afternoon. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statements.

I would also like to note that Sientra uses its Investor Relations website to publish important information about the company, including information that may be deemed material to investors. Financial and other information about Sientra is routinely posted and is accessible on the company's Investor Relations website at www.sientra.com.

Today on our call, we have Jeff Nugent, Sientra's and Chief Executive Officer; Paul Little, Chief Financial Officer, Senior Vice President and Treasurer; and Kirk Gunhus, Senior Vice President of Worldwide Sales.

I will now turn the call over to Jeff.

Good afternoon. Thanks, Oli, and thank you all for joining our call today. We'll first review our second quarter results and provide an update on our business strategies in the current COVID-19 environment as well as the trends we're seeing in the general aesthetics space going forward. We'll then review our go-forward strategy, which, as we previously shared, has increased our focus on our core Breast Products segment, while refocusing our miraDry segment on high-margin bioTip utilization. Finally, we'll discuss our ongoing initiatives to maintain financial flexibility and our vision for the months and quarters ahead.

As so many others are saying, I'd also like to reiterate our gratitude for all frontline workers and our commitment to the health and safety of our teams, our partners, our customers and their patients. We've maintained and even bolstered many of the measures enacted earlier this year to ensure the health and safety of everyone in the Sientra family and we'll continue to prioritize them moving forward. Our proven ability to quickly adapt to the evolving landscape where we operate has currently enabled us to forge ahead with critical corporate initiatives that we intend to continue to move forward.

With that said, I'll now shift to a review of our second quarter results. The second quarter, Sientra recorded total net sales of $12.4 million, a 39% decrease over prior year. This decrease was most acutely felt in our miraDry business segment with our Breast Products segment significantly less impacted. For our Breast Products segment, which includes both augmentation and reconstruction, we recorded second quarter net sales of $9.3 million, a 17% year-over-year decline, which is directly attributable to the COVID-19 pandemic.

For miraDry, we achieved second quarter net sales of $3.1 million, a 66% year-on-year decline, which we believe is also attributable to both the COVID-19 pandemic and our decision to refocus miraDry on high-margin bioTip sales. As a reminder, this refocus on bioTip utilization increases the overall profitability of the business while deemphasizing console sales that have historically accounted for approximately 50% of the miraDry revenue.

Overall, these results exceeded our initial expectations and confirmed our confidence in the strength within both of our businesses. Particularly, we are encouraged by the strength and durability of the aesthetics market as a whole and for surgical procedures specifically. As well as the effectiveness of our physician customers in adapting to drive the recovery versus waiting for it to happen, we continue to see that the demand for our products has remained robust despite the challenges our customers have faced throughout this pandemic.

Turning to our Breast Products segment first. Our results have been generally consistent within the broader market, in that April was a particularly low point with incremental improvements through May and June. In fact, excluding bioCorneum, our Breast Products sales declined only 13% year-over-year in the current fiscal quarter. And sales were approximately flat when looking at only the May and June time frame. That is flat versus prior year for the similar period. We believe that this performance is a standout in the aesthetic space with other aesthetic companies reporting high double-digit declines this quarter and shows the resilience of our product portfolio. We believe we are clearly taking share with the continued addition of new accounts as well as gaining deeper penetration within existing accounts.

Importantly, we have seen this improving trend continue into the third quarter with Breast Products specifically. While it is too early to tell if this trend will continue throughout Q3 or if it reflects a bolus of pent-up demand as a basis for our ongoing confidence in our Breast Products segment, we've begun adding a number of customer service, distribution and manufacturing positions in order to meet the growing demand for all of our products.

As expected, the reconstruction market remains strong throughout Q2. We continue to leverage our highly differentiated tissue expander portfolio and best-in-class breast OPUS implants to win new accounts, and we've also recently taken a number of initiatives to further strengthen our reconstruction portfolio. These include: we filed a PMA supplement for line extension to the company's portfolio of Sientra OPUS Gel Implants to include larger sizes up to 850 ccs; we've also filed a 510(k) for a next-generation Allox2 tissue expander; and also, we filed the 510(k) for the Sientra OPUS Gel Sizers to supplement the current OPUS Saline Sizer line of products. Finally, during the quarter, we entered into a national contract with HPG. We're very proud of this. It's the second largest GPO hospital organization in the country with over 1,600 hospitals, representing a significant market opportunity for Sientra.

As the hospital channel continues to open up, we're in a stronger position than ever to serve pent-up demand and continue making market share gains in this durable reconstruction segment. Our confidence in the strength of our Breast Products is grounded in the demonstrated resiliency for breast surgeries. Over the past few months, we've conducted several market pulse surveys with surgeons as well as patients. On the patient side, these surveys have confirmed our belief that once women make up their mind to get breast surgery, they typically don't change it and this has been established over time. Overall, our survey suggests that over 90% of women who have been considering breast augmentation are still planning on having surgery despite the COVID pandemic.

We're also hearing from numerous surgeons that they are booked months in advance on their breast augmentation surgeries as another sign of strong patient demand. To assist our customers in tapping into this demand, we have initiated several programs to drive the recovery at the individual practice level, some of which I outlined on our last call. Importantly, while making other organization adjustments, we kept our entire best-in-class plastic surgery consultant sales force intact -- completely intact and continued regular call cycles through video and face-to-face meetings wherever possible. We've developed exclusive partnerships with leading aesthetic societies and our customers and enabled our plastic surgery consultants to work safely with our practices to help them convert patient interest into procedures as well as ramped up our education programs to provide virtual assistance in navigating these changing times.

We've launched the drivetherecovery.com website, which provides our customers with frequently updated episodes of Sientra tech news as well as marketing, business and practice management resources to help accelerate their businesses. We believe that we are one of the most innovative users of new technology to help our cohort of loyal customers.

We've also recently announced the relaunch of our sientra.com website. This up-to-date platform provides separate and meaningful pathways for both augmentation and reconstruction procedures with the overall purpose of generating new patients for our practices. Our research confirms that this is one of the primary sources of information women use in their process of deciding upon the surgery.

Turning to the miraDry segment. We successfully transitioned from a bifurcated sales model of systems and consumable tips to refocus the business on recurring high-margin bioTip sales. While many of our miraDry accounts were transitioning to the COVID pandemic, we resized our sales force and retrained them to help our customers drive and convert consumer interest in miraDry into patient treatments. Our newly trained business consultants help our accounts benefit from the lifetime value of the miraDry patient, which, as we've discussed before, are an additive feature for their practice in terms of introducing them to the practice sooner than they otherwise would. We believe that our strategic decision to focus predominantly on bioTip utilization over core console sales served us extremely well in the second quarter.

Anecdotally, capital sales in the industry are significantly down overall. While practices that are reopening have been reengaging their base of patients with existing technology, we were pleased with miraDry performance in this quarter, particularly in the U.S., with some key international markets where utilization has followed more of a V-shaped recovery curve and returned to pre-COVID levels as we exited the quarter.

Importantly, in this business, we measure the results of our shift to high-margin consumables by 2 key metrics: first is bioTip utilization through our automated system tracking capability as well as by sell-in of new bioTip practice inventory. These key market utilization indicators reflect a more rapid recovery than initially expected. We believe this recovery has been driven by our earlier marketing initiatives built around creating and converting patient interest to drive utilization.

In addition to our core digital marketing strategy, we gained considerable traction from our micro and macro influencer program, an important part of the digital strategy that we've started. In second quarter, we treated a number of reality television stars who shared their treatment experiences publicly, generating pickup in top-tier media, including People magazine, Us Weekly, et cetera and these created over 25 million impressions for the miraDry brand. Typically, these programs create broad awareness, but we were also able to measure the impact at the practice level, with over 600 leads generated for our practices within the weeks of publication. Our business consultants are working closely with their accounts to convert this interest into treatments to drive the recovery as practices reopen.

The second quarter, approximately 70% of miraDry revenue came from outside North America, with Asia representing approximately 50% of our total revenue. BioTip revenue represented 85% of revenue during the quarter, consistent with our strategy, and this was also consistent with the geographic impact of the COVID pandemic with the Asian markets being the first to shut down in Q1 and the first to reopen; while the United States market shut down later and remained closed for longer into Q2. Of particular note, system utilization in Korea and Taiwan, in addition to the U.S., was better than expected serving as a favorable indicator for our strategy to drive utilization over system placements and supports our view that a utilization focused business model is the optimal long-term strategy for this segment.

As we look ahead, we expect to continue to benefit from a higher margin within this segment due to the shift in mix towards bioTips and believe we have more than sufficient inventory to support our forecasted demand. All in, while we emerge from Q2 more encouraged than before, I would like to remind us all that there is still significant uncertainty around this recovery. It remains to be seen how the aesthetic market will fare if the trajectory of COVID spread drives a wave of cancellations of elective procedures and if macro trends will result in a shift in patient demand.

That said, we will continue to work diligently to adapt and mitigate risk with telehealth solutions, market-leading professional support programs and other marketing initiatives where we have already been successful. We'll continue to leverage our unique nimbleness and our ability to adapt extremely quickly and hyper focus on our certified -- board-certified plastic surgeons to further market share gains and establish Sientra as a leader in the aesthetic medicine category.

With that, let me turn it over to Paul for a financial review. Paul?

Thanks, Jeff. As Jeff mentioned, in the second quarter of fiscal 2020, Sientra achieved consolidated net sales of $12.4 million, which equates to a 39% year-over-year decline. Net sales for the Breast Products segment totaled $9.3 million in the second quarter, a 17% decrease compared to $11.2 million for the same period in 2019. For the second quarter, net sales for miraDry were $3.1 million or a 66% decline year-over-year. Gross profit for the second quarter was $6.9 million or 55.4% of sales compared to gross profit of $12.7 million or 61.9% of sales for the same period in 2019. Gross margin in the second quarter of fiscal 2020 was lower versus the same period last year due to increased unit cost of our gel implants following the Vesta acquisition in 2019 and deleveraging our fixed costs on a lower sales volume in the current quarter. ASPs in our bulk business segments have remained steady.

Excluding noncash impairment charges and restructuring charges, operating expenses for the second quarter 2020 were $18.7 million compared to $37 million for the same period of 2019. This represents an $18.3 million or 49% reduction in operating costs year-over-year. The majority of these expense reductions are permanent, setting the stage for improved profitability as revenue continues to ramp up. Notably, we were able to successfully reduce expenses, while ensuring that our revenue generating operations were not impacted and continuing to invest in critical initiatives in line with our go-forward business and cash preservation strategies.

Net loss for the second quarter was $34.3 million or a net loss of $0.68 per share compared to a net loss of $37.7 million or a net loss of $1.10 per share for the same period in 2019. Net loss for the second quarter of fiscal 2020 includes an $18.4 million noncash change in fair value of derivative liability related to the convertible debt we announced in quarter 1 of this fiscal year and $500,000 in restructuring charges. On a non-GAAP basis, the company reported an adjusted EBITDA loss of $9.2 million for the second quarter of 2020 compared to an adjusted EBITDA loss of $20.4 million for the second quarter of last year.

Turning to our balance sheet. We ended the quarter with $71.8 million of cash and cash equivalents compared to $112 million at the end of March 31, 2020. In May, we disclosed the receipt of a payroll protection program, or PPP loan, in the amount of $6.7 million. In May, we also announced an amendment to our $40 million term agreement. As a result of this amendment, we paid down $25 million of the then outstanding debt balance, reduced the minimum unrestricted cash from $20 million to $5 million and reduced minimum net revenue requirements. The admitted increase -- the amendment increases our tranche 3 commitment from $10 million to $15 million and extends the tranche 3 termination date from December 31, 2020, to June 30, 2021, subject to the satisfaction of certain conditions, including future revenue milestones. We still maintain our revolving credit facility of up to $10 million. There are no borrowings on this facility as of quarter end.

To maintain our financial health in response to the COVID-19 pandemic and in conjunction with our previously announced organizational efficiency initiatives, we took a number of steps over the previous 3 quarters designed to simplify operations and reduce spending, ensuring our resources are prioritized on physician and patient-facing activities for our core Breast Products segment. Taking these initiatives into consideration and based on current market conditions, we are still forecasting 2020 annual operating expenses of approximately $105 million to $110 million, excluding impairment and restructuring charges. This compares to operating expenses of $140 million in fiscal 2019.

With that said, our balance sheet is in excellent shape, and we believe that the collective measures we've taken to date will provide us with sufficient cash balance going forward and greater financial flexibility to manage our operations through the remainder of the COVID-19 pandemic and thereafter. As previously disclosed, we have suspended full year 2020 guidance due to the uncertainty related to the pandemic.

I'll now turn the call back over to Jeff for his concluding remarks. Jeff?

Thanks, Paul. Let me close today by emphasizing that we remain very confident in Sientra's ability to emerge from these uncertain times in a position of real strength. The challenges we faced in the first half of the year were obviously trying, yet our team and our customers demonstrated their ability to adapt and overcome. Sientra continues to be an extremely nimble company, and we've taken the steps to build on our core advantages by filling an important real-time need among our Board-certified plastic surgeons. After our success in the second quarter, I believe strongly that Sientra is even more well positioned than expected just a few months ago, and I want to thank all of our employees, our customers, stakeholders for their support and I wish you all well as we come through this pandemic stronger than before.

With that, let's open up the line for questions and answers. Operator?

(Operator Instructions) Our first question comes from the line of Margaret Kaczor with William Blair.

Congrats on a good quarter. I wanted to follow up on some of the trends that you guys had in Q3. This is maybe better than a lot of the folks within med tech. So that -- when you suggested that May and June were flat, did you also then suggest that July remains flat year-over-year? And then can you give us a sense in terms of how big July is usually as a percentage of sales in the third quarter?

Well, I think one of the ways to look at this, Margaret, is that if you look at April in particular, it was significantly depressed. I think May improved dramatically, declined only about 6% versus a year ago. But moving into the end of the quarter and into Q3, we're seeing positive growth continue, which has given us the positive year-to-date numbers that we're posting.

I think the real issue here is that we have found a couple of things. I think one is that we've reacted quickly to adapt to this situation, and we formed a much closer relationship with our Board-certified plastic surgeons. I think miraDry also showed a faster response to the bioTip high-margin portion of the strategy, and I think that, overall, the categories that we're dealing with are more resilient to the factors affecting us, and it's resulted in a positive trend that really plays well to Sientra's advantages. Does that help?

It does. And really, what we're trying to get at is, as we look towards the second half of the year at each of the businesses, both Breast and miraDry, knowing that you guys aren't providing guidance, why shouldn't we think the second quarter isn't a low watermark for both the businesses.

Well, it's like we're all looking at the same data and the daily reports. There's still some significant uncertainty going into the back half. So that's the fundamental reason that we're not in a position to give guidance. But I think, overall, we have a renewed sense of confidence that what we've done so far has worked so far, that we're continuing to take significant market share on the breast side. I think that's more practical and more easily described. I think that we're also encouraged by the miraDry transition into the high-margin tips. So I'd love to be able to give you a more clear picture of what the back half looks like other than looking at the trajectory we have coming out of the second quarter. So I'm waffling a bit on you here, Margaret, but I don't know how else to answer it without giving guidance.

Yes, no problem. That makes sense. And I just wanted to follow up on the HPG contract. That looks like a pretty nice sized material contract frankly. So can you give us any more color around there, whether you're in any of those 1,600 hospitals or not? And what are the next steps in terms of turning this contract into sales or penetration growth?

Well, I could tell you that it was a long-term process to gain that relationship with HPG. But I know we have Kirk on the line and I know he is much closer to the details. Kirk, do you want to fill in some of the detail?

Sure, Jeff. Margaret, we're very excited about this contract because right now we're less than 5% market share within HPG. And the contract opens us up to getting into all of their hospitals and we have as many rights as the other competitors. And so now we can sell our exclusive expanders that we have as well as bring in our award-winning implants into the hospital framework and really work with their group. We've already had several of their hospital groupings, their networks already reach out to us to begin to build business plans, to get our PSCs to work with different doctors in each of their hospitals. And they have truly given us a red carpet to walk in and work with them, so we're very excited about the opportunities this adds for over the next few years.

Our next question comes from the line of Jon Block with Stifel.

Hoping you can hear me okay.

Yes. You're fine, Jon.

The first one for you, Jeff. Some, call it, big aesthetic states are the ones that most commonly have been in the news just around resurgence of COVID, I'll call it, Florida, Texas, California. Your numbers are great in Breast Products and beat handily relative to expectations. But I'm just curious, as we sit here in early August and what you experienced throughout July, are you seeing your business fluctuate based on some of these aesthetic-rich COVID hotspots? Maybe if you can just talk to what you're experiencing recently in some of those states. And then I just got a follow-up.

Sure. I can give you more of a general perspective because we look at this very closely. And I think as the debate rages across the country, not all states are created equal. But we are seeing some significant advances in some of these hotspots. I think Texas, Florida in particular, are surprisingly strong within select practices. We've got some of the most productive plastic surgeons in those states for example. But again, let me defer to Kirk, who is spending an enormous amount of time out face to face with these people. So without describing any further, let me let Kirk answer that.

Yes. It's not surprising that our revenue mix is consistent with the state population ranked by California, Texas, Florida and New York. Give you some clarity into that, recon alone, it's faring better in August than it is in Q2, which speaks to the surgeries are not -- are being delayed and we're seeing that continue even into Q3 and Q4.

Another example is -- California is the perfect one. It's -- we're declining in revenue there, but in the Midwest, we're seeing increases. Even in Texas alone, we saw a major increase. A lot of it has to do because of the flexibility of their economy and the consistency that the -- indeed, the politicians allow for those states.

In the recon bag, it's sort of -- it's a different mix, where California now is up on the recon. Florida and New York are down. And a lot of it has to do with the decisions that are made by our politicians. And so we're monitoring this in many different aspects regionally and making sure that we direct it. When it's ready to go, we're there; and when we're on hold, we are doing a lot more training and other things to keep us ready.

Got it. Great. Very helpful color. And then my second one is sort of high level and I'll tack on a specific question at the end. But high level, Jeff, maybe you want to opine about this recession versus what occurred back in '08, '09. And I bring that up because on one hand, the unemployment rate this go around are what? They're just so much more severe, but yet here we are hearing about aesthetic practices booked up and booked out for months. So maybe you can discuss what part of the market this is hitting versus last time and your conviction that aesthetics will be more insulated going forward. And then the quick end question is just if the Japan approval that you guys brought up last conference call is still on track for year-end 2020 approval.

Yes. Last in, first out, Jon. The Japan introduction is on track. We're very pleased with that. And as far as the comparison of this economic jolt compared to the earlier ones, certainly going back to the mid-2000s, we've done a considerable amount of research. And I had gotten into that earlier even before Sientra days, and one of the things that we found that came out in our recent market research is that particularly women who have made up their minds for certain procedures, be they minimally invasive or topical or surgical, are highly indicated to complete that. There may be some delay, but once the patient makes up their mind to have this done, it gets done. And this goes back for decades.

So I'd love to share some of that research with you, but this is based on a combination of things from the aesthetic societies as well as there are direct responses coming back from what we're seeing right now. And it's a pleasant surprise that women view this as a very high priority in their Maslovian hierarchy. So what we're seeing is, thus far, they are not being dissuaded from completing those procedures. So let's remember, reconstruction, which is an increasing portion of our business, is much less susceptible to some of the other thoughts that are affecting other procedures where women can wait. You do not wait on follow-up mastectomy procedures, which we have a significant advantage of and taking very large chunks of market share based on our advantages and better products. We can talk about this further. Does that help?

It does.

Our next question comes from the line of Kyle Rose with Canaccord.

Great. I just wondered if we could go into a little bit more detail, specifically about the rebound you saw in the quarter with respect to recon versus primary augmentation. Appreciate the commentary just regarding the durability of the recon business, but maybe you can just kind of frame out those 2 specific business units there. And then secondarily, Jeff, you talked about a 510(k) submission for next gen and on the Allox2. Could you just help us understand what's new about the product features that are going to be -- that were submitted and that we'll see on the market and the expectations as far as the specific launch timing there?

Sure. I think that, overall, what we are seeing is that the rebound that we've seen is a function of a couple of things. For a relatively uncomplicated nonpharmaceutical biosimilar category, this can be a fairly complicated business. But one of the things that we've seen and what's encouraging us so much is the increased relationship and closeness that we have with our Board-certified plastic surgeons. And we are laser-focused on helping them drive this recovery faster than it would otherwise take place. So that's a large part of it, and we're gaining increased credibility on both aug and reconstruction.

But to your question specifically, on reconstruction, it's like -- I think Kirk was explaining, it's a mixed bag because depending on region, there are -- there's more availability within some regions' hospitals to take on some of these cases, particularly with reconstruction. And I know that Massachusetts is an example where they were delayed in opening up their hospital facilities to be able to take on some of these recon cases. So in any event, part of what we're looking at is that there is a higher level of pent-up demand on reconstruction that we expect to unfold going into the back half, beginning in third quarter, but we expect to see it continue to go through the end of the year. So I think that's one particular piece. Kirk, do you want to add anything to that?

Yes. I think if you take a look at this year, and we start out in Q1, that there was a real momentum shift that occurred where our year-over-year was up over 32%, and our competitor was down 32%. And that momentum then continued into Q2 with our recon business holding and our cosmetic business really growing. And where we saw that growth is we added in the COVID time, where people were not wanting to see new people or new salespeople, we were able to add 110 accounts, and in those 110 accounts, many of those were Mentor loyalists and Allergan loyalists that have switched over 80% to 90% of their business to Sientra now. So we believe there is -- that gives us optimism for continuing to take market share back in many of these individual accounts.

And there are a number of initiatives and marketing programs, including our welcome back program for lapsed Sientra customers that's been proving to be very successful. We're just being more aggressive. That's the bottom line.

And then just one question that I wanted to follow up is on the contract with the GPO in the quarter. Obviously, there's a big cross-selling opportunity there. So I appreciate the commentary about the market share. But just any commentary with respect to getting on that contract? Did you have to sacrifice price for any sort of contracting or volumes? And then what we should expect from a pricing standpoint longer term just as that contract flows through the business.

Kirk, you want to comment on that?

Yes. The greatness of, we have no sacrifice whatsoever to pricing or anything of that nature. The HPG does about $55 million in breast products, total business, and we're 5% of that. So there's plenty of opportunity for us to take back some of that market share for Sientra. Our ASP does not change at all working with that group. So it's a benefit for both of us that they get the best-in-class products. They get the ability to use our expanders and we are able to service them correctly.

Our next question comes from the line of Richard Newitter with SVB Leerink.

I just want go back to -- wanted to go back to what kind of visibility, where you do have it, exists with respect to trying to decipher kind of backlog work down and what kind of -- what's coming into the funnel. And I'm curious if you could -- where directionally are things leading you to? As you look, now you have July under your belt and some early trends in August. Can you comment on consultations, especially with telehealth? Are consultations generally back to normal levels? And what does that potentially say about the outlook going forward? And same kind of comments on the breast reconstruction side. Anything on cancer diagnostics or what your customers are telling you about people addressing their serious health issues?

No. I think the caveat that we use necessarily is that it varies. It varies widely. But again, Kirk, is much closer to the actual accounts in the field. So I'll let him talk to it. But I think the range goes from what we said in our earlier remarks that there are a number of accounts who are sharing that they are booked months in advance and this is just on augmentation. And I think on the reconstruction side, it really is more of a function of hospitals opening up capacity within their institutions to be able to take on some of these reconstruction cases. Kirk, you want to add anything to that?

Yes. What I may do is give you some top line to a marketing survey that we just finished with over 212 consumers. And some of the information that came back will help with answering this question, the one that the female goes on a journey from start to finish for about 40 months. And when she starts that journey and is starting to look at breast implants, she knows that -- we know that 91% will eventually do it. So it's not a matter of if they're going to do it. It's a matter of when they're going to do it.

And that speaks to then also what are happening in the marketplace is, depending on our local governments, whether they can shut down the economy or not, with inconsistencies in there, it's hard to determine how that will play off in Q3 and Q4. But we know that this journey that every female is on, they will do it. It's just a matter of when. It could be later in Q4. It could be early Q1. So it's hard to give you a clear picture from a forecast for the back half or even '21 until we see economic consistencies. But our surveys are showing that women are going to continue to do this, and that speaks to the resiliency of this market that we are in, is that this market will not go away, but it may even get stronger as we add more DTC marketing in the back half and early into next year.

Okay. And then just a follow-up. Jeff, I'm just curious. I'm sure it's tough to figure out underlying market versus share gains and the incremental trends for each in this environment. But has anything dramatically changed within the last few months with the competitive landscape? I mean do you feel like your competitors are even more distracted potentially because -- in a post-COVID world than they were previously? And maybe just comment on the share gain component relative to 2 months ago versus today.

Well, I think that it's fairly common knowledge that when an organization like Allergan, and I'm not even coming close to criticizing anyone, but the impact of being acquired by a larger company has an impact not only on priorities, strategic direction as well as the position of individuals within the organization. So from an Allergan standpoint, who I have great respect for, they're under a significant transition right now. And we have gotten feedback that, that is being manifested in terms of the aggressiveness and the amount of contact that they're making with their accounts.

Mentor, who we know less well, but I have a number of years' experience within the J&J community, it's very hard to tell. But we don't see much activity, and this is a qualitative comment. I wish there was a better way to describe it. But from an overall aggressiveness index, which company with their primary representatives are being more aggressive in helping our accounts be successful and providing them the tools to, like we keep saying, help them drive the recovery, the feedback that we get and my opinion is that we're significantly in the lead and more aggressive in trying to help those practices return to normal. And in many cases, we're already at pre-COVID levels, which I think is a very encouraging sign. And that's speaking for Sientra only.

And our next question comes from the line of Chris Cooley with Stephens.

Maybe we switch gears a little bit and refocus on miraDry in the quarter. Obviously, the shift to the bioTip focus is a key driver as you think about generating positive cash as we get into '21. So I was hoping maybe you could help us, as you've done in the past, to parse out that 66% decline between COVID and maybe what you would assess by the transition away from having capital sales reps, maybe some color on utilization at the fresh connect accounts and also the geographic split because obviously that would weigh from an ASP perspective on the overall growth. Just trying to get a little bit better understanding about the components behind the decline and then, as a result, how we can look at that business going forward here in the second half. And I've got a quick follow-up on the breast business.

Sure. It's obviously an answer to a question regarding transition, so there's a clear transition going on right now. And again, I think Kirk is the closest to the miraDry business and how those accounts vary geographically as well as the impact of COVID. And in spite of that -- and I'll just make one comment that can, I think, lead into what Kirk's going to say. It's obvious that capital equipment sales have dropped significantly during the quarter. So from that standpoint, our timing in making this change was a good one. But also, if you look at the balance between growth and profitability, we've talked a number of times about having the resources necessary to achieve our aggressive goals on Breast Products and be able to focus on what is the optimal strategy going forward to be able to contribute margin and the profitability and cash resources necessary to do that.

With that, Kirk, can you address this in some more specific terms?

Yes. With over 90% of the miraDry offices open and running, what we've seen is a V effect. We are back with our fresh connect accounts. We are back to where we were before COVID, which was 4 treatments per machine per month. One of the things that is really sticking out about miraDry is the durability of this particular medical device. When you think about it, it's been around for 9 years. And when a device has been around for 9 years, it's boring and everybody sort of puts it to the side. And what we've realized when we started this new campaign going after millennials last year, we spent money to develop this market, and we really have created a completely new device with a new group of people coming in.

Just recently, we've done where -- celebrity Housewives of Miami, Housewives of Dallas, Housewives of New Jersey have contacted us to get this procedure done and to talk about it. And it's been picked up by People magazine. It's been picked up by Us Weekly, where, just in those alone, we received 25 million eyeball impressions just on a system that's 9 years old. And so it tells you the durability of this particular market and the potential growth that we have when we are able to get rid of sweat, odor and hair on a permanent basis.

So our accounts are back to where they were pre-COVID, and we are continuing our marketing to drive leads to our offices to continue to convert them. And in our last -- since we've gotten back in April, our conversion rate from a lead to an actual treatment is 32%, which is comparable to last year, that was 4%. So we see real strong conversion that's happening in our miraDry business.

Appreciate all the additional color. And then let me just be the fifth one to try and go at this a different way, but on the Breast Product business, clearly, you're outperforming relative to the end market based upon your best-in-class products and your relationships. But can you help us think about where you were seeing the growth or where you saw the better performance, whether it was recon or aug? And I'm really just trying to get behind kind of a growth number for the expander business. Just trying to think about maybe a higher-margin business there again on the recon side versus the aug side. So maybe just any additional color you could provide us there would be helpful.

No, that's a good insight. Paul, do you want to answer that?

I mean we don't break out our numbers not since, but in the quarter, both businesses did well. We think recon did slightly better than augmentations for the quarter. And we also think, in the back half, there's going to be some pent-up demand on that because there has been some hindrance on the hospital side for patients to get in there for the reconstructive surgery. But in terms of which one's going to do better, I think it just depends. Again, I think a lot of people are getting the augmentation procedures now, and it's not -- we're not seeing it slow down at least at this point, and then recon is still there in the back half. So I think they're both going to grow. Which one grows faster? We have to be see -- has to be seen.

If you look at the last recession, recon never went down, whereas the breast implant business went down up to about 17%, depending on which -- on the augmentation side, which the side you looked at, either ASAPS or ASPS. So I think it's just going to depend on really what hospitals are going to do for the patients and what states are opening and closing back and forth. But we see growth -- sorry, on our side, we're going to take share on both those segments, period, at the end of the year, continuing into this year as well into the next year as well.

Our next question comes from the line of Alex Nowak with Craig-Hallum.

Great. Jeff, just want to get your comment that some practices are booked out for months. There's been some articles out there just recently that there could be a boom in plastic surgery caused by the stimulus, higher unemployment benefit and then just less discretionary items to spend money on right now. So when you go out there and speak with the clinics, is more of the boom due to people are just getting procedures done now because they have more cash? Or is this more of a fulfillment of a backlog?

Well, it's a combination, and it splits demographically, psychographically certainly by region. And not all regions, territories are created the same, but there's a significant number of people. And I don't know if you're referring to the Bloomberg article just the last couple of days. Have you read that?

Yes, that's what I'm referring to, correct.

Yes, exactly. No, it's very encouraging and in a way, not a surprise because if you go back with the specialty several decades at least, there have been a number of things that have been challenges that may have a -- in fact, I'm quite surprised that some of these things with recessions and some of the safety issues that came up years ago that the rebound has been very strong. So in this case, we're not seeing -- let me back up. We don't have a clear picture on not only the overall impact on the markets by procedure, and we don't have any further granular information in terms of where are the positive spots and where are the negative spots. But -- so I'm not trying to offer excuses other than the fact that real-time data is very hard to get your arms around.

But we know that Kirk's team is very flexible and adaptable, and they're pivoting to where these high potential markets, territories are. And part of it is, please don't quote me on this, but it's really fishing where the fish are. So with that, what we've seen is 1/4 with some very encouraging indicators going into third quarter that there's going to be a solid demand going forward absent anything more dire happening with this COVID situation. That's clearly the overwhelming headwind. So it gets back to -- we're just not in a position to offer any guidance because this is very difficult to predict. Sounds more like excuses, and that's what I'm trying to do, but that's what we're dealing with.

No, understood. It's very helpful. And then just, Paul, you reduced OpEx nicely in this quarter, and Jeff did speak to hiring some more personnel to support efforts for Q3. So just as Breast Products ramp into the second half as procedures come back online, how are you thinking about OpEx increasing during that time? And are you still guiding to positive cash flow in 2021?

Yes. Great questions. Thanks. So for the current year, we -- I gave guidance for the full year on expenses, $105 million to $110 million, so you know what we did year-to-date, and you should be able to see what we're assuming in the back half. That does assume some increased spend definitely on the breast business. I would say, for the most part, quarter 2, the overall reduction, 75% was coming from the miraDry business and G&A costs. Some of that started when we did the restructuring back in November last year and the changes we made this year with the new strategy on bioTips. The back half -- I'm sorry, going back into quarter 2. And we also shifted quarter 2 spend from the breast business to the back half just because quarter 2 was still relatively quiet for the first weeks of April and part of May.

So I gave guidance for the year. You'll be able to figure out kind of what the run rates are going to be. But if you look at the year-over-year decline, what I'm showing, about 90% of that is related to miraDry and G&A. So we've left the marketing spend on breast intact. Actually, we shifted spend from miraDry to breast during this time period. And we've kept that business intact, and we're going to continue to invest in the breast business as we see fit, as we see such growth opportunity in that business.

And then just on cash flow, 2021?

Cash flow, yes, given the uncertainty with the guidance and so forth, I have not given out any additional insights into -- in our -- into our cash flow breakeven other than if you just look at the steps we've taken, right? So we've announced multiple programs in place starting with November last year, into this first year -- first quarter this year, into the second quarter, improved efficiencies, speed up decision-making, take costs away from G&A, put it back into the field. We reset our debt. We changed our cash -- minimum cash balances from $20 million to $5 million. We reset our revenue milestones that we needed to hit. So we -- I believe we've made tremendous changes to give us the flexibility that we need in this business to move on. But until I see a way to forecast revenue and give guidance, it's -- that's where I'll stop.

Our next question comes from the line of Anthony Vendetti with Maxim Group.

Just a quick follow-up on miraDry. So I understand, obviously, the focus on bioTip. And with 90% of your offices open, there's opportunity to get back in there and sell the tips. But as we move through the rest of this year, is it possible that the demand for additional systems, either into your current base or new systems, will be out there? And how do you plan to address that? Are the salespeople that are calling on the dermatologists and plastic surgeons that have a miraDry -- and I know it's mostly derms and medi spas. Are they able to sell the system? Or is it really right now 100% focused on the bioTip?

I'll let Kirk answer that because it's a global -- they're global decisions. And there are obviously markets where that mix differs. Kirk, do you want to comment on that?

Yes. So we're sticking with the strategy of a controlled placement of systems. And so with the United States market, our BCs, business consultants, have the ability to sell the systems, but we are only placing the systems where we will see this utilization growth. We are reserving more of our systems for the international market. If you look at our breakdown, 60% of our business comes from the international side, and we are seeing demand in countries like Taiwan, Japan, Korea, and even in Europe, where we are reserving machines to be sold there to continue our utilization strength that we have built within the international market.

Okay. So basically, you are selling the systems but reserving them for your -- where there's more demand, particularly international, in the countries such as you mentioned. And I guess there'll be some placements in the U.S. where there's -- where they demonstrate the demand for the bioTips, you'll agree to sell them a system. Is that correct?

That's correct.

And I'm not showing any further questions. I'll now turn the call back to management for closing remarks.

Great. Thank you very much. Again, thank you all for joining the call this afternoon. I hope we've communicated the stronger results and frankly, we expected a month or 2 ago. I think this is a great demonstration of how we're continuing to drive momentum on the Breast Products category. We're also very pleased with how quickly the shift in strategy on miraDry has responded to the utilization approach. And I think the overall credibility and aggressiveness of this company has positioned us for continued gains and we are confident that we are going to overcome whatever this presents us.

So with that, I appreciate your interest and look forward to talking to as many of you as we can. So please stay safe and healthy. And we look forward to further talk. Enjoy the rest of your evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.