Welcome to the Cutera, Inc. Investor Webinar. As a reminder, all participants are in listen-only mode until the Q&A session, and the meeting is also being recorded. I would now like to turn the meeting over to Taylor Harris, CEO of Cutera. Please go ahead. Thanks, Gaylene, and welcome, everyone. We're really excited that you're able to join us today for a discussion about AviClear, the technology, the data, the impact we're having in the market, as well as where we're going. Now, we will be making some forward-looking statements today, so I would just tell you to take a look at our risk factor language and our SEC filings for a discussion around the risks and uncertainties involved there. I'm happy to be joined today with some of the people that you can see on the screen, from the company, Shelby Eckerman, Steve Kreider, Michael Karavitis, as well as two distinguished, thought-leading dermatologists, Dr. David Goldberg, Dr. Sonia Batra, and we thank them in particular for their time today. So at Cutera, we are a mission-driven, we're a values-based organization, and our mission is to improve lives. We do that through a couple of ways: through our technologies, our innovation, as well as through our partnership and the power of partnership. And you're going to hear about both of those with respect to AviClear today. Went too fast there. So we've been at this for about 25 years. We participate in the medical aesthetics field. This field is large, it's growing, and we really do think that the growth drivers involved in our market are durable, that they're lasting and they're going to provide a long runway for growth. We've been innovators in this field, as I said, for a number of years, and our most recent innovation is AviClear. With all of our product lines, all of our laser-based devices, what we're doing is we're harnessing the power of light. So with Avi in particular, this is a natural, non-invasive, non-systemic, light-based therapy for the long-term treatment of acne. We're excited to talk about that today, and I'm going to turn it over now to Steve Kreider, our head of global marketing. Thank you, Taylor. All right, Taylor mentioned it. We've been around for 25 years. We've been a leader in medical aesthetics, specifically when it comes to laser technology. And so, but the next part of the horizon is really around acne. And we find that we have an awesome responsibility because not only are we changing the profile of Cutera, but we feel like we're creating a new vertical within medical aesthetics that's going to be highly, highly relevant to our core customers being aesthetic dermatologists. And you're going to hear from a couple of them today. One of the things also about the acne market I think is really important is you oftentimes hear dermatologists say, "Acne is a gateway in my practice." In other words, if I have somebody come in and I can treat them in adolescence, then I most oftentimes have a patient for life. We want to make sure that we at Cutera are along with our customers on that journey, that they bring AviClear into their practice, but that our other technologies can continue to serve their patients throughout their aesthetic journey and we're relevant with them throughout that entire time. Let's talk a little bit more about the acne market in the United States. It's often cited by the American Academy of Dermatology that there are 50 million Americans that are affected by acne each year. As we double-click a little bit further and talk about how it doesn't just affect teens, in fact, the majority of women in their 20s still suffer from acne. 82% of women who have acne suffer with it in adulthood. The other thing that I think is a little bit underappreciated, it's certainly in the zeitgeist today as we talk about the emotional toll of things. I think everyone's talking about social media and smartphones and the effect that it might be having on our young people. But acne also can be very, very devastating and cause people to pull back from life. 80% of moderate to severe acne sufferers admit that it holds them back from what they want to do. And in fact, 46%, or excuse me, of acne sufferers, 46% have a higher risk of depression than the general population. And so when we did this survey, we heard different testimonials, people saying that they don't go on dates because of their acne or they don't go to a family member's wedding, all because of their acne. So the emotional toll can definitely be devastating. So let's take a minute now and talk about the treatment landscape within dermatology and treating acne. I think the main takeaway here is that it has not fundamentally changed in about 40 years since the approval of Accutane or oral isotretinoin in the early 1980s. I think the easiest way to think about the treatments for acne is to think about them through the lens of mild, moderate, and severe. When it comes to mild acne, what's oftentimes used are over-the-counter products like benzoyl peroxide washes or prescription topicals like tretinoin. When you get into the moderate camp, that's when you're oftentimes talking about the introduction of oral antibiotics like minocycline and doxycycline. There's a newer one called sarecycline that's been out there. All these products are indicated for 12 weeks of use. But what is oftentimes the fact is that patients are on these for much longer than 12 weeks. So the American Academy of Dermatology has put out guidance about the appropriate stewardship of antibiotics and making sure that we limit exposure of antibiotics when possible. And so that's really a rate-limiting step when it comes to using antibiotics for too long. And then when you get over to the severe category, we're talking about Accutane or oral isotretinoin. And again, it's a highly effective product, but the AAD has put out warnings that for people who are pregnant or may become pregnant, that this can cause fetal harm. In fact, it's a pregnancy Category X from FDA. FDA has put in a REMS program that is a risk evaluation mitigation strategy to make sure that dermatologists, as well as their patients, are taking steps to make sure that people are not getting pregnant or become pregnant due to the risk of fetal harm. When you look at that moderate to severe camp, there's definitely some limitations to the current treatments. That's why we've got AviClear. We see this as a modern solution for acne patients who are looking for alternatives. It's really one of the reasons for me, as somebody who's been in the space nearly 20 years, why I decided to join Cutera is to launch AviClear and to work with my friend and colleague, Dr. Michael Karavitis, who's the developer of AviClear. And one thing I'll just say before I kick it over to Michael is he's just done an exceptional job with his team at looking at the problem and working backwards to get an optimal solution. Oftentimes in medical aesthetics, it is a lot of me-too products. And Michael and his team really came up with a targeted, sophisticated approach at getting at the root source of acne. And he's going to tell us a little bit more about that. Thank you, Steve. I'm Mike Karavitis, the Chief Technology Officer here at Cutera. What I'm going to do is walk you all through the technology behind AviClear, as well as some of the design considerations we made during the development of the product. Before I start with that, let me take a step back and talk a little bit about the condition itself and then how AviClear fits into that. AviClear's, excuse me, acne is often thought of as a cyclical process, and it has several things that initiate the process, including stress, diet, hormones, as shown in this case. When that happens, it creates an initial inflammation that alters sebum production. It not only increases sebum production, but also changes sebum composition, favoring squalene, which can catalyze the squalene peroxide. These peroxides then irritate the follicle, leading to an increase in keratin production or hyperkeratinization. That keratin then blocks the follicle. So now you have a blocked follicle that's rich in sebum, and there are bacteria there, C. acnes, which then feed on the excess sebum, creating a secondary inflammation. So that's how the process is initiated. Well, AviClear, what we do is we thermally damage the sebaceous gland, which limits the sebum production by that gland. So we're able to address the sebum production component all the way through the C. acnes proliferation component, which really means that we address both the non-inflammatory component as well as the inflammatory component of acne. Although that being said, we do a much better job on the inflammatory component. So how do we do this? We do this by exploiting the paradigm of selective photothermolysis. That is, we found a wavelength that selectively targets the sebaceous gland through targeting sebum directly. This wavelength is in the infrared, it's at 1726 nanometers, but also has a secondary property, and that is the absorption in water is correct to allow it to penetrate to the depth where the sebaceous glands lie. That's between 0.5-1.5 millimeters in the dermis. So it's not only enough to have the right wavelength, but we also have to deliver this safely. As I mentioned, there's a 2x selective absorption, which is not a lot. And when you look at the gland, there's water content, so that selectivity drops to about 1.5x. So in order to safely deliver it, we exploit contact cooling, sapphire-based contact cooling. Even that's not enough. We have to make sure we have complete contact. So we have proximity sensors surrounding the sapphire to ensure that the sapphire is making complete contact with the skin, as well as a force sensor to ensure a consistent pressure from imprint to imprint to imprint. We also suggest that the skin is wet with beaded water. The water acts as a gap filler, which aids in heat extraction. Those aren't the only design considerations we make. The laser light itself isn't the only thing that limits the depth. We also know that light scatters when it enters the dermis, which can also limit depth. We also know that light scattering is a function of spot size. So when the spot size gets to above three millimeters, the limitations due to scattering become negligible. So if you take this in conjunction with the fluids we need to effectively treat 30 joules per centimeter squared, as well as the thermal relaxation time of the smallest sebaceous glands, 20 milliseconds, that leads to a laser power of 100 watts. Very important quantity. Also, so I also show here some histology. And histology shows sebaceous glands down to 1.5 millimeters being damaged, indicating that we can target sebaceous glands throughout the full range of where they exist in the dermis. So let me show a little bit more histology. The picture in the middle here shows a healthy sebaceous gland. You can tell that it's healthy because the little purple spots in the center are nuclei. Those are intact as well as the cell walls. This is a healthy sebaceous gland. Right below that is a thermally damaged sebaceous gland. You can see the lack of nuclei as well as cellular structure. You can also see the vacuoles inside of the sebaceous gland, indicating that the sebaceous gland is damaged. Adjacent to that is a picture of several glands, indicating that we can really successfully target all glands underneath the beam. With that, let me introduce Dr. David Goldberg. Dr. Goldberg has over two decades of experience with lasers and light-based treatments for acne. He was also one of the investigators in our clinical study, or I should say our pivotal study. Dr. Goldberg. Thanks so much, Michael. And hi to everybody. So as Michael said, we do a lot of studies. I am the director of clinical research in cosmetic dermatology for the 110-office Schweiger Dermatology Group. Those of you on this call in the New York, New Jersey area, you certainly know who we are. And we've done a lot of studies over the years, frankly, for almost every company out there. We had done a lot of work on devices for acne. And Michael, I think it was probably around 2019, 2020 that you came to me and asked us to participate, where our major research program is in Hackensack, New Jersey, on this study. So I'm going to present to you the data. I'll weave into it some of my own personal clinical experience. As I said, we have the device in Hackensack, but we have multiple AviClear devices in multiple other Schweiger offices. So the pivotal study design, there were actually 104 subjects, a little bit over 100, ages 16 and above with really all kinds of acne. It was mild, moderate, and severe acne, although mild was the smallest portion of it. And this was defined as more than 15 inflammatory facial lesions. 99% of them, as I said, were moderate or severe inflammatory acne. I think the best way to understand that is, for the most part, we're not treating kids who have simply some blackheads and whiteheads. In real life now, we do treat some of that small group if their parents have acne scarring. But by and large, it's the stuff that we think about pus pimples, cysts, and nodules. There were 7 investigator sites. We were the primary site in northern New Jersey. In the treatment protocol and what we do now in real life, 3 treatments about a month apart, it was performed as monotherapy. So for FDA studies, it can only be the device treatment. In real life now, we often combine other things in the beginning, and I'll get to why in a little bit. But in the study, monotherapy and without any pain mitigation at all, so no topical anesthetic at all. The endpoints we were looking at really were threefold. 1, the primary endpoint for the FDA was a responder rate of greater than 50% reduction in inflammatory lesions. That's what the FDA wanted. The secondary endpoint was looking at the inflammatory lesion count reduction, again, not necessarily focusing on blackheads and whiteheads, but the red obvious pimples that lead to scar. We also looked at a nodule count reduction. So if you look at the ages, as Steve and Taylor both talked about, acne occurs really at lots of ages. But of interest, some 40% of the people we treated in the study were kids, really under the age of 20. In real life now, probably 60%-65% of the patients we treat are kids under the age of 20, where these parents don't want these kids on antibiotics forever, don't want them taking oral isotretinoin. And although I thought in the beginning that this would be a hard sell because acne historically is covered by insurance, it hasn't been because that's the same age group that tends to get braces. And when they look at the cost of braces and they compare it to the cost of AviClear, this is actually much less expensive. We treat a lot of kids. In the study, actually, more boys than girls, but in real life, probably more girls than boys. The acne severity, you can see there, the overwhelming majority was moderate and severe. Fitzpatrick skin types, this is very important. Acne is not unique to any one particular skin color or type. We treated everybody from the lightest pale complexion to the darkest of dark. The wavelength itself, as Michael would allude to, is not absorbed by pigments. It's absorbed by the sebaceous glands. We're not worried as to whether people have sun tans. We're not worried as to the color. We treated everybody in the study. As I said, the primary endpoint was looking at the responder rate. That is the percentage of patients achieving a greater than 50% reduction in the inflammatory lesion count. Those are responders. 51% of patients achieved a greater than 50% reduction at 52 weeks. So if you look at the responder rates here and you look at week 4, week 12, week 26, week 52, remember we started with 103, you always lose some. But you notice that there is continued slow, gradual improvement over time. So you've got this data that the FDA wanted, which was three months after treatment, that's week 12. That's where we were around 80%, but it actually gets better as we go over the course of the year. The secondary endpoints that I mentioned, the inflammatory lesion counts and the percentage reduction, where they parallel each other. There is an absolute median decrease in the inflammatory lesion count. That's the lighter blue line. And there's an absolute decrease in the actual number from baseline, and that's the darker line. 79% reduction in median inflammatory lesion counts demonstrated efficacy targeting and suppressing the sebaceous glands, the heart and soul of acne. Then looking at what I think is a fascinating table that I want to spend some time with you on, the inflammatory lesion count reduction by products, by all the things we've been using forever. This is not meant to be a comparison study between isotretinoin and AviClear and typical oral antibiotics, which are typically doxycycline or leading topical agents such as Retin-A, which has been around forever. It gives you some sense of the data in the literature as to how each of these work. So if you look at topicals, at best, you're getting down 58%, at best, and sometimes down 33%. Antibiotics, doxycycline, Stewart in this case, you're down to 52%. If you look at AviClear and you look at the 12-week after the third treatment, that's the first bar, 26 weeks after the third treatment, the second, and 52 weeks, you see that slow, gradual improvement. So you get to about 70%+, between 70% and 80% reduction from AviClear. Then if you look at oral isotretinoin, and we're talking about the 20-week course of oral isotretinoin, if you look at the typical dosage we use, which is on there as 0.5 milligram per kilogram per day, the data is nearly identical to isotretinoin. It is true that you get better results if you use a very high dosage of oral isotretinoin. But when that happens, you have all kinds of side effects, whether it's gastrointestinal or depression or dry eyes or dry skin. Some of you who know me know that some 15 years ago in one of our offices in New Jersey, we gave Accutane to a teenager who actually committed suicide. So it really gives you pause as a parent. But if you use the more typical Accutane dosage, still have to worry about pregnancy issues. And yet the results are the same from AviClear without any of those side effects. In terms of what happens after we treat people, the adverse events were mild, transient, self-resolving. You do tend to get some swelling, mostly in lighter skin types. Don't see much of that at all in the darker skin types. We do see acne flare-ups, particularly after the first treatment, no different than anybody being put on antibiotics or being put on Accutane. There can be some dryness. This study was done in northern New Jersey. I think the dryness was more related to when we were treating people in the wintertime. They tend to get dry, and that's also associated with itching. But by and large, the major things are some redness and some swelling. It can last from an hour to two days. Typically, by the time they get into the car after treatment, it's gone. And more importantly, we had no treatment-related pigmentation issues because the wavelength, the color of light coming out of AviClear, is not absorbed by pigment. So let's go through the managing of the patient, their journey, and their expectations because they do get flares early on. So here's someone who reported acne flare-up, which started six days after the first treatment. Again, this is in the FDA study. In real life now, when I see people, and if they're on antibiotics or they're on topicals, or even if they're on Accutane, I will continue them on those treatments until a little bit after that second treatment session with AviClear. But in the FDA study, we couldn't do that. So this person got an acne flare-up six days after the first treatment, still continued to have some of that even at the second treatment, but it pretty much disappears by the second treatment so that it's not an issue by the third treatment. And you can see here at one year, we go from moderate acne to moderate to mild to almost clear. And so the majority of patients that experience a post-treatment flare do experience that between treatments one and two. And the flare incidence decreased with each subsequent treatment. I want you to notice, though, that even sometimes in a year, there is some redness or discoloration because they had acne lesions there before. That's not the actual acne. It's almost like falling off a bike and scraping your knee. It takes time for that to go away. And one of the great things for us working with Cutera is that we have other Cutera devices. So for example, excel V, we use now to treat redness. We couldn't do that in the study. So across all skin types, the results, they frankly speak for themselves. At the top is someone who's pretty dark. The highest level of skin type in African-American is 6. This is 5. We have a lot of Latinos and Asians in our population in northern New Jersey. Moderate, mild to clear at a year. At the bottom, type 4, so more of an olive complexion. You see the baseline. Pretty severe acne in that baseline at the bottom there. Someone who would always be put on antibiotics. And Steve alluded to the 12 weeks. I mean, they're on them for years and/or Accutane. You can see almost clear 6 months after the final treatment. And then waiting out to 1 year, look at the clear and the great result. And you're changing the lives, particularly these kids. Some of these kids come into the office, and when I start, they don't look at me. And by the time we get done and we're at the half a year, 1-year mark, they're smiling and they're happy. Here you have here Fitzpatrick skin type 5, darker skin, moderate in the beginning. 6 months after treatment, still a little bit left. I would argue most of that is not even acne. It's perceived as acne by the patient. It's mostly redness. And then, 12 months after that final treatment, and you can see the great result. And we actually just presented this patient a couple of months ago at the American Laser Society meeting, the annual meeting. We're now beginning to get really long-term data. Here is someone who's 4 years after the final treatment. And just start at the top left, go to the right, go down to the bottom left, which is 2 years after treatment, go down to the bottom right, 4 years after final treatment. And I think the pictures speak for themselves. Steve, all yours. Thank you, Dr. Goldberg. All right. Let's talk a little bit about market strategy and our approach here. So first off, I alluded to some of the missed moments data that we had before and our current PR campaign that we're rolling out here in June as part of Acne Awareness Month is living in the moment. People can live in the moment if they have acne-free skin and they're able to enjoy life. We did a survey of 500 acne patients as part of this new campaign. I just want to share three really important takeaways from it. First off is that laser therapy is the number one therapy that sufferers are considering. We see a tremendous opportunity as people are seeking out alternatives and probably haven't heard a lot about lasers in the past. In fact, 81% of sufferers wish they knew more about in-office treatments like lasers. Half of those surveyed who have heard about AviClear want to try AviClear. Just to put a bow a little bit on some of the benefits here and the progress and what we're doing in acne treatment. Obviously, we have a safe, effective, non-systemic option. Something that I think is important not to lose sight of is that it significantly reduces acne, but just with 3 treatment sessions. Everything else that we're talking about in treating acne, whether you're talking about topical products or oral products, and you're looking at that data as Dr. Goldberg did, those are products that need to be taken every single day as they're being evaluated. This is 3 treatments and done. When you think about a disease state like acne and how important patient compliance is, it's a huge benefit. It's safe for all skin types. We're getting lasting results. In fact, we're able to state that as now part of our product labeling as part of our clearance based on the validity of our 12-month data. You can treat any time of year, and the side effects are mild and transient. I want to bring this chart back up because now that we talked a little bit about mild, moderate, and severe acne and the common approaches, just to talk about where we're focusing in on. Because as a marker, excuse me, as a marketer, I always find you have to have a very clear position of where you want to go and then expand from there. For us, we are laser-like focused on this moderate to severe population. These are the people who are oftentimes exhausted, who've been on this treatment merry-go-round of trial and error for many, many years, and they're looking for something different. And that's what we have with AviClear. You also have people that in the moderate camp that don't want to stay on antibiotics too long. Some never want to get on antibiotics. And then there's people who may have severe acne, but they don't want to go on oral isotretinoin for whatever reason, whether it's side effects, the compliance requirements, or anything like that. So we feel like we've got an excellent position here where AviClear can play a really important role for moderate to severe patients. And as we look more specifically into this market, I know we have a lot from the investor community about where we're really focused in on. It's about 10% of the U.S. market that really are moderate to severe that meet the income feasibility that are willing to pay cash for a treatment. That is really, I think, our short-term effective market that we're really focused on. So we're doing a lot when it comes to building out the clinical resources for AviClear, and we're doing a lot of real-world type studies. And we're looking forward to sharing that this year and in subsequent years. But in the meantime, we needed a consensus document, one version of the truth, if you will, that we can use to train our AviClear accounts on some of these questions that come up from time to time about patient selection, mitigating pain, how to handle a non-responder, managing flares, as Dr. Goldberg alluded to, and how to deal with concomitant therapies or what the appropriate use of concomitant therapies are. So we convened an expert group, people who are not just leaders in the acne space, but have practical hands-on experience with AviClear. The output was this white paper that was published in March in Dermatology Digest. So not only is it great to get this in the hands of the people who are out there who have AviClear may consider bringing on AviClear, but it really has served as the basis for a lot of the training that we're doing with existing accounts. I'd be remiss if I don't mention Cutera Academy because it's a huge program that we've just launched this year. I just came back from the third academy program that we've executed in Denver. Megan Monfre and her team have done a phenomenal job at putting together an immersive two-day course that really gives everybody the tips and tricks that they need to be successful in integrating AviClear into their practice. You can see some of the results that we've gotten from the surveys. It's really, really been flawless. It's a stepwise approach. At its foundation is clinical training. We then moved to practice integration. We talk about patient conversion. We talk about engaging existing patients. The dermatologists out there have thousands and thousands of patients. How do we work through that group and make sure that they understand that a practice just brought on AviClear? Then finally, kind of the cherry on top is acquiring new patients. You only want to do that after you've gone through this stepwise approach and you've made sure that your office is fully well-versed in AviClear. So we're accelerating that with our academy programs. Then finally, awareness has been growing. We're really proud that searches grew in 2023, 450%. We've got a great Worth It rating on RealSelf, so many patient testimonials, and we've got over a dozen leading beauty awards launched to date. So now I'd love to bring over Dr. Sonia Batra. Dr. Batra was one of the earliest adopters of AviClear. She is a very, very well-regarded dermatologist in Santa Monica, California, extremely well-credentialed. She's also been on the show, The Doctors, so you may notice her from her regular appearances as the resident dermatologist there. Dr. Batra, take it away. Well, thank you so much for having me. I'm here to sort of round out the real-world experience with AviClear because I wasn't part of the clinical trial, but was a relatively early adopter, have had the device in my practice for well over a year now, and just wanted to share some of the considerations where it's played out in my practice as an essential tool and part of my armamentarium for acne. I think you've all heard a lot about the kind of backdrop of acne in terms of its incidence. I gave the leading case that one of the typical patient profiles for my practice well before I saw the slides as to who was adopting AviClear. Interestingly, I think far and away the number one reason in my practice people adopt AviClear is people seeking a non-pharmacologic solution. So as everyone has already mentioned on this panel, we've had an armamentarium for acne for decades. It hasn't changed much, and it does require an ongoing commitment. There is a growing body of people out there who really don't necessarily want to take pills for some indefinite amount of time. As Dr. Goldberg alluded to, certainly in my patient population in Santa Monica, there's a lot of concern, especially in younger patients, about the mental health goals sometimes taking Accutane in a very idiosyncratic way can take. I'm very sorry to hear about his patient. I think that's why many people sort of come in and may seek out a non-pharmacologic option. Then interestingly, the second bullet point I came up with is patients who really have a hard time sticking with a regimen. Because as you saw in these slides, many of these options like oral antibiotics and topicals do work. But the problem is you really have to stick with them. You have to be on a regimen for them to continue to work. And that's not really viable for many people. They really would rather just come in and have an in-office treatment that they come in, they know it's taken care of properly, and it doesn't require an extended commitment on their part. And then lastly, as they already alluded to in prior parts of the presentation, I think what's really impressive about Avi is the durable improvement with relatively little time commitment. So three treatments that take about a half hour, plus minus, in the office with an ongoing improvement for a year. And that's really interesting, especially because in those clinical trials, it was a monotherapy. Interestingly, in the real world in my practice, I've done over 100 treatments over in the past year. I very rarely in real-life practice will deploy it as a single therapy. As Dr. Goldberg mentioned, one of the big concerns, especially early with any more robust treatment for acne, is this concern about flaring. So in my practice, one of the learning curves was really being able to deploy it as part of an arsenal where we optimize their medical management, really mitigate and prevent a lot of the flare by optimizing their medical treatments with these other tools, get them into the treatment regimen with AviClear, and then as they improve, start to taper them off of these other modalities, pills, topicals, etc. So that actually has been really beneficial because when people do read about this potential for purging or potential for flare, in real-world practice, we actually have a lot of tools we deploy. And one of the learning curves in my practice was making it kind of a multifactorial approach, even something as simple as doing a facial as part of our treatment regimen the day before each round of Avi really cleared out those outflow tracts so that when the sebum and the damaged contents of those oil glands come to the surface, that outflow tract is nice and clear, and you get a lot less inflammatory purging after the fact. In terms of my practice in the past year, interestingly, about 75% of the patients who I presented AviClear to do tend to adopt it. And I think Dr. Goldberg already alluded to that because the people suffering from this, they spend a lot of money out of pocket on their medications. Braces for that teenager are going to be about as much or even a little more than doing a round of AviClear. The durable result, actually, I was very pleasantly surprised with the conversion rate of people adopting this treatment. And then interestingly, because of the buzz, because of the online chatter, the social media, about 25% of my AviClear patients all found me either through online searches or through referrals from other dermatologists. Another very pleasant thing about AviClear as a tool in this practice is because the treatment actually takes some time, you're in the room with the patient for 20 to 30 minutes each time, they have a lot of time to chat with you, and it has a tremendous halo effect where then you do start asking and talking about the red spots, the souvenirs, any discoloration or scarring from prior acne. One of the more interesting halo effects in my practice is the teenagers' parents almost all converted to becoming my patients for other cosmetic concerns. I won't promise that for people, but I think that was kind of very interesting to me too because if a parent came in with that teenager and they have unfettered access to you as a practitioner to someone in your staff for a half hour, they're going to ask all their questions, all those burning questions they don't really have that audience for. And then interestingly, that also converts to other cosmetic treatments that may not even be acne-related. So that has been a nice halo effect in my practice. As I mentioned, I think the keys in my practice have been just really learning the overall regimen. It's not just a laser. It's part of an approach to acne. So optimizing the medical treatment alongside of it, having everyone on my staff all hands on deck, including my esthetician helping pre-treat these patients, really having all the staff on board has been essential for the success. Then one case example just to briefly share, which I think is really kind of a nice representative example of why Avi has continued to grow and has been very successful, is it is a really nice tool for people who are frustrated by other options. One recent patient who I treated last year was a well-known 32-year-old woman who interestingly has a huge social media following, about a million followers, and has been very public about her struggles with acne, came in frustrated because she couldn't take Accutane due to side effects, had insufficiently been treated with doxycycline and spironolactone with inadequate control. One thing about AviClear is it's not a cure-all forever. I think you saw that really nicely in the before and after slides. I'm very transparent with patients about this. It is a durable, at least 50% reduction in the severity and duration of acne. I think setting that expectation that it's not that you'll never get a pimple again, but you'll have a substantial durable reduction that often even makes other treatments more effective, makes it worth it for patients. This patient had the three rounds of AviClear, posted about how happy she was. It had a tremendous halo effect to the practice. I think what was really beneficial is she didn't show photos of herself 100% airbrush filtered clear. She showed that the treatment really made a huge impact in the severity, the duration, how often she broke out. I think really setting that expectation and that communication with patients has been very beneficial in my practice. This patient sort of bore that out as well. That's been my real-world experience over the past year. I'd be happy to answer any questions when we get to the Q&A part of it. Thank you. I'm going to talk about the future direction of AviClear. One of the things we're working on is optimizing AviClear for the acne treatment. That is, we're exploring how we can integrate concomitant therapies into AviClear. That is, we want to meet doctors where they're at. One good example is if the patient is on oral antibiotics, they can continue those oral antibiotics while they're being treated with AviClear. That can help minimize post-treatment flares. We're also looking at synergies within other treatments that are offered within our Skin Suite family of products. A couple of examples are Laser Genesis goes well with this procedure, again, to minimize post-treatment flares, as well as microneedling to address acne scarring. We're also developing new handpieces to streamline the procedure, but also to allow us to get to areas and regions that are not accessible with the existing handpiece. And we're hoping these activities will help our practitioners focus as well as empower them to treat with AviClear. We're also looking at new indications as well that involve the sebaceous gland. These include sebaceous hyperplasia, hidradenitis suppurativa, as well as additional indications including acne rosacea, skin quality or scarring, as well as other glandular conditions such as hyperhidrosis. We've observed in our histology that we were able to damage eccrine glands. So we think we have a shot at that as well. So let me focus on some of the nearer-term activities, one being sebaceous hyperplasia. This is a very common condition. It's benign. It results from the sebaceous glands replicating around the hair follicle and manifests itself as a raised bump, usually a donut-shaped bump with the hair protruding out the center. It affects approximately 1% of our healthy populations, very common in aging adults, more common in males over females. There are traditional treatments, including oral isotretinoin, CO2 lasers, that is, ablative therapies, cryotherapies. You can also do electrodesiccation. But these therapies have limitations, and some of them can result in hyperpigmentation or scarring. So we believe we've got a really good shot at this with AviClear. We've actually conducted a few studies. We've treated a few patients already. We've seen a median improvement of two on a three-point scale. We've not seen any adverse events. This one, we think we have a high probability of success with this treatment. Also, we're looking at hidradenitis suppurativa. This is a chronic inflammatory skin condition. It's characterized by deep skin nodules that can rupture and also form sinus tracts underneath the skin. The traditional treatments aren't great. There are biologics out there now, but some of the common techniques still used are things called de roofing, which involves really creating scar tissue. It's quite common. It affects between 1%-4% of the population. It's more prevalent in men than women. And it often has a delayed diagnosis. But there is a reason we believe we can treat it. Again, it involves the sebaceous gland as well as apocrine gland. And the apocrine gland is a specialized sweat gland. Since we, as I've mentioned previously, have seen thermally damaged eccrine glands, we think we've got a really good shot at it. So with that. All right. So we're excited. We're excited about AviClear. We're excited about what we're doing and able to do as a new treatment option for patients with acne, whereas Steve and others talked about there's clearly such a need, such a need for new options, as well as, as Michael just referenced, where we see a future for AviClear and other conditions of the sebaceous gland. So that's it for our formal presentation. Gaylene, we'll turn it back to you to start the Q&A. Thank you. If you wish to ask a question, please click the Q&A icon on the left-hand side of your screen, and you'll see options to raise your hand to join the queue and ask your question verbally or write a question to submit your question in writing. When you're introduced, you will see a prompt on screen and should click Continue to confirm that you are ready to be announced. That's if you're on the webinar. If you dialed into the conference call, please press Star then 1 on your telephone keypad to join the question queue. We'll pause for a moment while participants join the queue. And while we're waiting, I think I'm going to hand the meeting over to Shelby Eckerman, who can take us through questions submitted in writing. Over to you, Shelby. Thanks, Gaylene. We have a few written questions that were submitted. The first one is for Dr. Goldberg. How long do you think it will take to get adoption of AviClear by the dermatology community? Shelby, that's a great question. When I think about adoption of AviClear for acne, it kind of reminds me going back 25+ years ago as we started developing lasers for hair removal. Lasers for hair removal, I think that's the most common non-invasive aesthetic procedure in the world. We did some of the original studies, frankly, before Cutera even existed. And I remember presenting that data, which showed that we were going to get long-term results, and having fellow physicians saying, "We don't believe a word you're saying. We know electrolysis works. If it doesn't work forever, we don't want to have any interest in it." And it took 2-5 years for that technology to really be accepted. That's going to happen with AviClear and acne. This is a huge market, a lot of potential patients, but it will take patients by us and the financial community. We have a question from the audio line. If you'd like me to proceed, the first question is from Joe Federico with Stifel. Please go ahead. Hey, guys. It's Jon Block at Stifel. Good to see you. Thanks, obviously, for the webinar and the teaching. I'll start for the doctors, Dr. Goldberg and Dr. Batra. So just to be clear, will the approach going forward for AviClear largely be using this in conjunction with another solution? It sounded like oral therapy, in your opinion, to limit the flare-ups. Maybe that's the first question. The second one would be, how many times are three treatments enough to date? How often, if you are at all, using that fourth treatment? Then Taylor knows. I always try to jam in a lot of questions. Maybe just to conclude, Dr. Goldberg, to be pretty direct, you mentioned, I think it was 110 Schweiger practices, and clearly Avi's at some, but I still think the vast minority. So why are we here 2 years post-FDA approval? And if this is such a game changer in the gateway, if you would, that I think Steve talked about it earlier, why don't we see it more prominently across other Schweiger practices? Thank you. The question, I'm not going to hog. You can start and I'll finish. I'm unmuting. So to start with the question about how does the Avi go along with other therapies, it actually depends on the patient. So it's not necessarily always going to be alongside normal medication. Because the interesting thing about Avi is it's for mild, moderate, and severe acne. So when the patient comes in for that initial consultation, I may see more extensive mild but very stubborn acne. And in that case, I wouldn't necessarily put them on an oral medication. I don't expect a huge inflammatory flare. I do find, though, that that pre-treatment facial that I bundle in with my treatment is actually very helpful, whatever the severity of the acne, because, as I said, I think clearing that outflow tract prior to the laser treatment has helped a lot in my practice. So basically, I think in my practice, I definitely position it as part of the arsenal. And I kind of position it as something that's going to give a more durable clearance for someone who's frustrated and wants kind of a longer-term investment in their skin and their long-term reduction in acne. So I think that would be my two cents on that. And then as to why maybe it hasn't been adopted as yet, it's just like Dr. Goldberg said, dermatologists by nature are skeptics, right? It does take a while anytime you introduce any new technology or treatment for it to make the rounds at all the meetings for the word of mouth and for the data to be disseminated. So I think I tend to be an early adopter of tech. I love lasers. I did a laser fellowship, but I think not everybody is in that same category. It's medical practitioners vary. Our comfort level with different technologies vary as well. So I think as the word gets out and there's more demand, there will be more adoption, but it's just trickling into the meetings now. And Dr. Goldberg, you can certainly expand on that. So my two cents. So first of all, patients coming into the office, as Dr. Batra said, have all kinds of different acne. So let's exclude the patients who come in specifically asking for AviClear. They just come in with acne. If they have comedonal, blackhead and whitehead acne, again, we try the topicals. Even if they have these pus pimples and they've never been treated, and I know they're going to do well with AviClear, I don't jump to that. We actually will put them on topicals and even oral antibiotics for a couple of months. But the idea of keeping them on oral antibiotics month after month after month, because they are coming in every single month, is something a lot of patients and parents don't want anymore. As I alluded to, Accutane, I just don't, I swear to God, I don't use it at all. So there's a whole wide audience, and not everybody's going to get AviClear. And then as I alluded to the fact, those people who get AviClear, just like she's doing peels or whatever you're doing, we do HydraFacials ahead of time just to clean out the pores for the blackheads and whiteheads. To the great, I love that question. Why is it 110 Schweiger offices don't have it? So you should know that Taylor and Steve ask me the same question all the time. And the answer is very clear-cut. We have a spoke and wheel pattern with our offices. We have central offices that do a lot of the laser technologies, whether it's hair removal, whether it's treating things that are red or brown or tattoos, and then a lot of surrounding offices referring in. But to Sonia's point of view, I mean, with time, more and more will have it. But that's why we have, I think we have probably somewhere around 10 devices now, so one in every 10 offices, because if I have it in Hackensack, New Jersey, Paramus is 10 minutes away, they're going to refer to us, and that's how we do it. That was really helpful. Thank you, doctors. And maybe one more for the doctors, and then I can get back in queue and maybe redirect toward management. But the company Cutera is pursuing a different business model currently versus what the initial plan was 12 or so months ago, right? Initially, it was more place the box, more economics that they would garner on the consumable. And now they're trying to sell AviClear or the laser for, I don't know, roughly $100,000, give or take, and taking less of the economics and the consumable. When you think about your peers, how do you feel like that business model is going to resonate? Is there going to be a willingness to go out of pocket for that laser around that price point? And if so, who do you think it most notably applies to? Is it the med derm, the aesthetic derm? Maybe you can speak to that as well. Thank you, doctors. I'll start on this one, Sonia, and let you finish. And so Taylor knows this. I was never a huge fan of the revenue-sharing agreement. Not that there couldn't be revenue-sharing agreements that work, but the notion of putting a device in somebody's office where there's kind of no incentive for them to use it, it's just simply revenue-sharing, never made a lot of sense to me. I think the new model makes total sense. $100,000 is pretty typical for all the different laser energy-based devices we use. It's the model, certainly in the aesthetic derm market, which they're going to first with AviClear that we're used to. And I think that's a very comfortable model for me and for really my peers to do the kind of work I do. And I would echo that. I think people who have a lot of lasers and already practice in this niche of dermatology, that that price point is fairly average and maybe even lower than quite a few of the devices in my practice, quite frankly. But I think the original model was really sort of more targeted at someone who isn't quite as comfortable with that type of a capital expenditure. And I believe that model is still available for some who may not want to have the outlay. And so that is meant to kind of appeal to both of those markets within the dermatology world. To finalize that point, if you go back again, 25, 30 years ago, laser hair removal, in the beginning, the only practices that bought them were laser practices who were comfortable with lasers. And now look where they are. I mean, they're in spas everywhere. So that's going to happen with AviClear, and that's going to happen with acne. Perfect. Thanks for the caller, doctors. Appreciate it. The next question is from Joe, sorry, Phil Dantoin with Piper Sandler. Please go ahead. Hey, Phil Dantoin, Piper Sandler. Thanks for the webinar and taking our questions. I guess one for Steve, can you give an update on the capital environment you're seeing in the space? Sure. Yeah, happy to do so. Yeah. I mean, look, we haven't been immune from the high-interest rate environment. It seems to be working its way through the economy. Certainly not an economist, but I think this really got on our radar, and we saw it affect medical aesthetics in Q3 of last year. I think the worst of it was probably somewhere between Q4 into Q1. I think everyone's just getting used to the new rules of the road. And frankly, when I look at everything, especially in the macro environment that's affecting medical aesthetics right now, it just reinforces our strategy for being focused on the aesthetic dermatologists. Because you're talking about these well-credentialed, high-end aesthetic dermatologists who run very, very lucrative and busy practices, they're oftentimes not held back by a higher interest rate environment or don't need financing in order to bring on a $100,000 device. So it really just reinforces our strategy, and I think everyone's just kind of getting used to the new normal. No, that's super helpful. And then I guess pivoting really fast, a question for the doctors. I mean, you both talked about AviClear being perhaps a durable solution, but might not be necessarily permanent. Any thoughts on AviClear being a type of procedure that patients might come back and re-up, say, every five or so years? So I'm going to start with that because I think I'm doing it longer than Sonia. As the Cutera people know, I have actually presented at several meetings now, our experience on the first 75 patients post-FDA approval, 18 months out. And it's a very honest analysis because it showed one patient actually did not respond at all. So there's always going to be a failure, just like oral isotretinoin. She's a young woman who had been on steroids, who had all kinds of hormonal issues. And we also, out of the 75, had two people at 18 months who wanted a second treatment. And so this is analogous to oral isotretinoin. There is no magic bullet that makes you never break out again. And I specifically tell my patients all the time, I mean, look at me. I still break out. So that's not the goal. The goal, as Dr. Batra said, is really to change their lives. And we can do that. And if they have to do it several times over the course of their life, this is harmless. And I would just echo that in my clinical experience that there are patients who see enough reduction but still want more, right? In fact, I shared this with the Cutera folks. One of the earliest patients I treated was my teenage daughter, who was then 14. And she definitely got at least a 50% reduction in her acne, but the difference is in people's minds. 50% is not 100%. So if someone continues to get the occasional breakout, it's nice to have a tool that they remember worked well to come back and maybe do a maintenance round a year or so later. Because it really brought home the point to me, a substantial reduction is not 100% clear forever because every time that girl got one pimple, I heard about it. So I think it's important to frame it to patients that way, that it is a substantial, durable reduction. It's not going to cure them for the rest of their life. And it is safe and appropriate in my hands, and I'm sure Dr. Karavitis and Dr. Goldberg would agree that it's fine if they need to come back a year or two later and do a maintenance treatment. I encourage that if they feel like it's beneficial for them. So Sonia, my 30-year-old daughter, à la your daughter, says to me, "If I can have Botox every 3 months, why can't I have AviClear every 3 months?" And I can't argue with her. So yeah. That's very helpful. I'll jump back in queue. Thank you so much. Yeah. One thing I would just add to that, to put a bow on it, I think that's one of the more underappreciated aspects of the new business model is going to the cycle model. It just puts more flexibility back into the dermatologist's hands. And that's one thing we heard over and over again. You have your clinical protocol, and that's great, but things are dynamic. And we like to have the tools that are flexible with us. And that was definitely a consideration. I'd now like to hand the meeting back over to Shelby Eckerman, who will take us through additional questions received in writing. Okay. This question is for the doctors. With already successful practices, what was the business reason that initially inspired you to incorporate AviClear? And has the opportunity you've seen with AviClear in your practice changed over time? We'll start with Dr. Batra. Sure. So yes, I mean, I think for us, we, like I said, are pretty tech-forward. And where I practiced in Santa Monica, it's a very educated community, so they like having access to new technology. And for me to incorporate this, I did look at the data pretty closely, those 104 patients that Dr. Goldberg walked you through. And it seemed compelling enough for me to take a chance on it. And then the proof is in the pudding, right? When you start with a device and you're optimizing your protocols for us, there was a learning curve, like I said, because we really had to learn how to mitigate flares, how to set patient expectations appropriately. And once we did that, we felt like people felt like it was worth their while. And the feedback we've gotten has definitely been gratifying and worth it. But as with any new technology, there is a kind of activation energy and a learning curve in deciding if it fits in one's practice. In our case, it really met the needs of our patient population. I think on the west side of Los Angeles, especially, there's more concerns about toxicity of medications. So we probably had a higher uptick right out of the gate. So I think for us, it was easier because we were involved in the FDA studies. And so when Michael Karavitis came to me with this device, I rolled my eyes because we had been down this road so many times before with other technologies. So one, it was easy to get excited because we saw it worked. And two, one of the things I looked at was, remember, 40% of the people we treated were kids. Kids are impossible. And of that 40%, if you look, a lot of them were boys. There were more boys than girls. And those of you who have teenage sons, you know they are total wusses. And we got them through it. And that made it very exciting and clearly made it clear we were going to have this as part of our practice. All right. I think I'd like to hand the call back over to Taylor Harris for some closing remarks. All right. Well, thanks, Gaylene. I just want to thank Dr. Batra, Dr. Goldberg for your time, for the unique insights that you shared today, and also for your partnership. Pleasure to have you join us today. Thanks to everybody for joining. If you have any additional questions, feel free to follow up with us. Have a great rest of your day. Thanks. Thank you. This concludes today's webinar. You may disconnect your line. Thank you for participating, and have a pleasant day.