AVITA Medical Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 10, 2023

There are 9 speakers on the call.

Operator

And thank you for standing by. Welcome to Aveda Medical's Second Quarter 2023 Earnings Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Jessica Ekberg, Director of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Aveda Medical's Q2 2023 earnings call. Before we begin, let me remind you that this call will include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results most recent filings with the SEC, specifically the risk factors described within the Form 10 Q for the quarter ended June 30, 2023, For additional information, any forward looking statements provided during this call are based on management's expectations as of today. Aveda Medical's press release with Q2 2023 results is available on our website, www.avidamedical.

Speaker 1

Under the Investors section. A recording of today's call will be available on our website by 5 P. M. Pacific Time today. Joining me on today's call are Jim Corbett, Chief Executive Officer and David O'Toole, Chief Financial Officer.

Speaker 1

I will now turn the call over to Jim for his comments.

Speaker 2

Good afternoon and thank you for joining us today. I will begin today's call by discussing highlights of the Q2, followed by an update on 2023 priorities. Following this update, you will hear commentary on our financial performance from our new CFO, David O'Toole. David is an accomplished financial executive with extensive experience in both public company operations and capital markets. David most recently served as the CFO of Opiant Pharmaceuticals, a biopharmaceutical company Developing treatments for addiction and drug overdose, which was acquired by Indivior in March of 2023.

Speaker 2

Please join me in welcoming David. Now turning to the quarter. We had an extraordinary second quarter with 2 landmark FDA approvals And a pivotal FDA submission. These approvals and submission are critical to advancing our platform and will continue to enable us To unlock the growth potential of Aveda Medical, I will discuss these in more detail later on this call. In addition to our FDA successes, we continue to deliver strong financial results with commercial revenues of $11,700,000 which is a 42% increase over the same period in 2022 and was at the top end of our guidance of $10,700,000 to $11,700,000 This 42% growth is an acceleration of our first Quarter year over year growth of 40%, which itself was an acceleration of our 4th quarter Year over year growth of 37%.

Speaker 2

We have accomplished this with virtually no new burn center accounts, indicating increased adoption within our existing accounts. As mentioned on prior calls, our commercial revenue is comprised of 2 components: U. S. Revenue and foreign revenue. Japan represents a majority of the foreign revenue line item.

Speaker 2

With that overview of our recent performance, let's now move on to our 2023 priorities and activities that continue to transform our business. On June 7, we achieved a major milestone as we received FDA approval For the use of ReCell to treat full thickness skin defects. Although we had a high level of confidence in the FDA's approval Of the initial scope of the PMA supplement, which was based on our pivotal study for soft tissue repair and reconstruction, The FDA's approval represents a significantly broader label for ReCell than what we initially anticipated. This label further validates the effectiveness of ReCell and opens up new treatment options. To fully appreciate the indication for full thickness skin defects, We need to take a look back at the original soft tissue repair market.

Speaker 2

When we submitted our PMA supplement for soft tissue repair and reconstruction, We expected the approval to cover traumatic wounds like degloving and surgical wounds such as fasciotomy and necrotizing fasciitis. These wounds represent approximately 127,000 eligible procedures across the U. S. Trauma centers. The expansion into trauma centers allows our commercial team to capture the remaining portion of the burn market that exists outside of our existing burn center served market.

Speaker 2

Plus, our initial target market of approximately 127,000 eligible soft tissue repair procedures And 35,000 eligible burn procedures represent a TAM of over $1,200,000,000 As a reminder, this represents a 6 times increase of our existing burn center served market. The FDA approval for full thickness skin defects includes these 127,000 eligible procedures, plus Traumatic wounds like gunshot wounds and traumatic hematomas, surgical wounds such as muscle only flaps, laparotomies, chronic wounds that cover DFU and VLU, non pressure ulcers and pressure ulcers And surgical excisions of cancer. These wounds represent at least 264,000 eligible procedures. It is important to note that this market size is derived from 3rd party claims and internal analysis based on Skin graft CPT codes tied to diagnosis codes of specific wound types. Further, As a soft tissue repair indication uses the same reimbursement codes as burns, so does the broadened label of full thickness skin defects.

Speaker 2

In other words, our new FDA approval, our expanded indication has in hospital reimbursement through a DRG and Outpatient reimbursement through a transitional pass through code. Consequently, on June 8, The day after we received FDA approval, we initiated the commercial launch of full thickness skin defects and the additional eligible burn procedures with our expanded U. S. Commercial organization. To those new to the Avedis Medical story, in the Q2 of 2023, we initiated the expansion plan of our commercial organization, which would more than double our original team of 30 to 70.

Speaker 2

As previously noted, this will result in a peak operating expense as a percent of revenue in Q3 2023. However, I emphasize that our contribution margin on a new commercial professional is breakeven with approximately five Resale kits sold per month per individual. Prior to this quarter, the average productivity of a direct rep Exceeds 20 kits per month. Last quarter, I called this weaponizing our gross profit To enhance market adoption and penetration where the sales force pays for itself quickly. Turning to the additional 2 164,000 eligible procedures related to full thickness skin defects that I mentioned.

Speaker 2

We have analyzed third party claims reports and conducted an internal analysis of these eligible procedures. Consequently, we are currently developing our strategic plans to pursue This is significantly larger market. Similar to full thickness skin defects, we expected a June FDA approval for Vitiligo, In line with the 180 day review period through the breakthrough device program, we received approval of ReCell For the repigmentation of stable, depigmented vitiligo lesions on June 16th. This approval represents a 1st in class treatment The approval Was based on our pivotal trial for Vitiligo, which met both safety and efficacy primary endpoints. However, the study did not evaluate the mental health benefits and the reduction of derivative healthcare costs associated with the treatment of vitiligo.

Speaker 2

While Vitiligo is not contagious nor is it fatal, it is an autoimmune disease. Patients with a highly visible chronic condition Have a high prevalence of psychiatric issues, including body dysmorphia. The mental health conditions and the derivative costs of treatment are often high and without a cure and recur throughout the patient's lifetime. For these reasons, we are conducting a post market study Of 100 patients called TONE, where we will seek to demonstrate both the repigmentation and mental health benefits Following the completion of the 6 month Study analysis. We will pursue a commercial payer policy.

Speaker 2

To do this, we plan to combine the TONE data With 3rd party broadly developed economic costs of treating vitiligo, which focus on the cascade of mental health issues To demonstrate that treating vitiligo with ReCell greatly reduces the lifetime healthcare costs of vitiligo, It is our goal to secure reimbursement in 2025. Now an update on Reselco. As previously promised, On June 30, we submitted a PMA supplement for ReCellGo, which maintains the FDA breakthrough device designation. ReCellGo revolutionizes the current manually operated ReCell device by eliminating the need for manual disaggregation of the autologous samples. Automating the process of sell to segregation will substantially reduce training requirements, allowing us to leverage selling time more effectively.

Speaker 2

Additionally, we will ease the burden of additional training required by physicians and operating room staff to manually perform disaggregation, which we predict will lead to an increased adoption across our indications, further amplifying our impact and transforming of the lives of patients. Moreover, Resell Go is a critical component of our international strategy, which we will be discussing in more detail on our Q3 call. As such, Resell Go is arguably the most significant enabler for our platform, which we believe will greatly accelerate our growth. Lastly, given our June 30 submission under the Breakthrough Device program, the submission will receive prioritized interactive review With respect to 2023 guidance, for the Q3 of 2023, we expect commercial revenues to be between $13,000,000 $14,000,000 At midpoint of this guidance, this reflects a growth rate of approximately 50% over the prior year. To that end, we are increasing our 2023 annual revenue guidance From $49,000,000 to $51,000,000 to $51,000,000 to $53,000,000 which at midpoint of guidance would reflect a 53% growth over 2022.

Speaker 2

Looking ahead, our intent is to provide 2024 guidance on our Q4 call in February 2024. In closing, we continue to execute the 2023 priorities. We have laid out and remain committed to delivering strong results. With that, I'd like to turn the call over to Dave.

Speaker 3

Thank you, Jim. It is a pleasure to be here and be part of the Aveda Medical team. In the 3 months ended June 30, 2023, Our commercial revenue increased by 42 percent to $11,700,000 compared to $8,200,000 in the same period in 2022. The increase in commercial revenue was largely driven by broader surgeon usage as well as deeper penetration, particularly within smaller burn procedures, along with commercial sales with our partner CosmoTek in Japan. Although our expanded commercial team was in place for the launch of full thickness skin defects on June 8, there was no meaningful revenue attributable to the commercial expansion in the quarter.

Speaker 3

We expect the expanded commercial team will begin to have an impact in the 3rd quarter. Gross profit margin was 81% compared to 83% in the same period in 2022. The decline was primarily attributable to a decrease in product production in 1 month of the quarter caused by the need qualify new vendors for certain manufacturing components. However, throughout the process of strengthening our supply chain, We maintained our perfect service level. Since then, we have resumed manufacturing volume to keep pace With our expected 3rd and 4th quarter sales growth.

Speaker 3

As we have emphasized previously, approximately 50% of our product costs are fixed, Attributable to the manufacturing facility, which means our gross margin will increase as product volume increases. Further, I would like to note that the decrease in gross margin for this quarter was unusual and we fully expect our 3rd quarter margin to show an increase compared to the gross margin in the Q3 of last year. Total operating expenses For the quarter were $21,200,000 compared to $13,900,000 in the same period in 2022. The increase in operating expenses was primarily due to the costs related to the significant increase of our commercial organization in preparation of the full thickness skin defect launch during the quarter. The additional sales and marketing costs included approximately $2,900,000 in employee related expenses, including wages, Commissions and benefits.

Speaker 3

Dollars 1,400,000 in seminars, promotional costs and travel expenses For both the existing and expanded commercial team and $400,000 in recruiting expenses. In addition to the increased sales and marketing expenses noted, research and development expenses increased by approximately 2,000,000 Due to the ongoing development of ResellGo and costs associated with our medical science liaison team. As Jim noted previously, the expansion of our sales force team will result in peak operating expenses As a percentage of revenue in Q3 2023. Net loss in the quarter was $10,400,000 or a loss of $0.41 per share compared to a net loss of $6,300,000 or a loss of $0.25 per share in the same period in 2022. As of June 30, we had cash, cash equivalents and marketable securities of approximately $68,800,000 compared to $86,300,000 as of December 31, 2022.

Speaker 3

Before we open the line up for questions, I'd like to emphasize our increased revenue guidance for 2023. For the Q3, we expect commercial revenues to be between $13,000,000 $14,000,000 Additionally, we are increasing by $2,000,000 Our annual revenue guidance for 2023 to now be in the range of $51,000,000 to 53,000,000 With that, we thank you for your time. And now I will turn the call back to the operator for your questions.

Operator

Our first question comes from the line of Joshua Jennings with T. D. Cowen.

Speaker 4

Hi, good afternoon. Thanks, Jim and Dave. It's great to see the FDA approvals Come in and the strong 2Q results. And Dave, congratulations on the CFO seat at Aveda. Absolutely.

Speaker 4

I wanted to start off and just, I think, Jim, you talked about the broader Label that you secured off of the soft tissue data, fantastic outcome. I I think you mentioned that you're potentially rethinking the commercial organization structure with many more indications opened up. And anything you can build on that, Out on that just to help us understand how you're thinking?

Speaker 2

Yes. I think that's a terrific question because It was the label indication is significantly broader than what we anticipated. So What we're doing, I think, 1st and foremost is staying focused. The previous Understanding that under the what we believe was the soft tissue repair and reconstruction, which is 127,000 Procedure expansion, for the time being, we're staying right focused on that, because There's plenty there for us to grow and get the momentum we want and build the underlying adoption. On the other hand, there is a number of applications that come under full thickness skin defects That create a much bigger opportunity for us.

Speaker 2

So rather than rush into that because we have no need to, we're going to spend some time assessing So to speak, low hanging fruit, so in lack of a better word, and Conduct some clinical research on some of these spots indications. We have some that's anecdotal, so we're bringing up that altogether. And I think by the time Q4, which really is Q3, the November call comes around, We'll have some of these new indications circled, and we'll have a strategy about how to go about them. So It's really just great news. It just fills our pipeline.

Speaker 2

We stay focused. I think for us to try to adjust at the final moment before launch Might cause us to defocus and be less effective. And right now, we've been rewarded by being a very focused organization about how we go about doing things. So look forward to some more Insight as Q4 really Q3 call comes around.

Speaker 4

Understood. Thanks for that. And just I guess a strategy question. I mean just noticing you're moving from Focus on burn centers to now incorporating hospitals, trauma centers, outpatient setting is On the list and also potential physician office setting, I mean, is there an opportunity as not in the near term, you have a In the short term, but over time to kind of build out the portfolio and look at some external business development opportunities. Thanks for taking the questions.

Speaker 2

Yes, Josh. There certainly is. We're expanding immediately into the trauma center world That incorporates the burn centers. As you know, half of the burn centers are already Level 1 trauma centers. So it helped us get off to a fast start.

Speaker 2

But it is in our gun sites, so to speak, that there is technologies that are used With ReCell, they are used before and after ReCell that are very important to The physicians who are treating the patients that ReCell is applicable to. We have, I would describe a significant effort underway to identify some technologies that fit that category and we have some Work underway to choose them. And again, I think that will show some fruits of that labor By the November call. So it is a focus because we are a very consultative sales force And as such, the physicians interact with our sales team. For our sales team to have some other technologies that are applicable to their patients It's a very common sense from a portfolio business models point of view and it will Basically, it costs very little to execute in terms of cost of sales because it will be our same sales team.

Speaker 2

So I think your insight there is right on the money.

Speaker 4

Appreciate those answers. Thanks, Jim.

Operator

Our next question comes from the line of Brooks O'Neil with Lake Street Capital Markets.

Speaker 5

Good afternoon. I appreciate the comments you made to Josh, but I'm curious if there's any color at all with regard to The response or any approach you've made to Level 1 and Level 2 trauma centers and doctors who operate there?

Speaker 2

Thanks, Brooks. I think it's on one hand early, but on the other hand, we're 6 weeks in since we started our selling activity, what we are seeing is a Increased activity in all the accounts that are outside burn centers and we're achieving VAC approvals and we're getting cases done. And one of the reasons we raised our guidance is because of that early momentum. And actually, the consequence of our early preparation, because when the approval came, we were ready. So I think we're feeling quite bullish about the remainder of the year and 24 ahead of beyond that.

Speaker 2

So without specifics, that's the experience we're having.

Speaker 5

Great. And then I'm curious, I have some sense that there's been at least some opportunity opened for you to Apply resell to smaller burns and pediatric burns, have you had any success in those areas so

Speaker 2

Well, we have and it's a difficult thing to measure, right, because the hospital buys a resale kit. We don't get necessarily clear insight to who they use it on, but we do get it and we do receive that feedback Anecdotally. And I think you can see it mostly on a macro level. For us to have been growing Actually faster against a larger base the last three quarters without adding new accounts It's very reflective of a penetration event going on with this technology resell. So We are getting those cases.

Speaker 2

It's difficult to quantify them because of what I just described, but the macro numbers validate That there is just simply increased adoption of resell over time.

Speaker 5

Great. And then I just wanted to ask you one more and It really relates to your personal philosophy, Jim, about providing guidance. In today's world, some people are trying to sandbag and put out numbers That you can easily beat. I think you've described a somewhat different approach of trying to build credibility. But could you just talk a little bit about How you view the provision of guidance for analysts and investors at AvedaNet?

Speaker 5

Sure.

Speaker 2

Yes. It's a rather important question, Brooks. I appreciate you asking. We intend when we set guidance To hit the middle, that is what we believe when we said it. We're realistic and that is why we bracket it.

Speaker 2

So in This case, we finished well ahead of the middle, dollars 11,200,000 would have been the middle. We had a stronger end of the quarter. Some of that is obviously reflected of 3 weeks of June, we had the increased indication already and we were preparing. So we have some early adoption that have contributed to that. So My personal philosophy is to be within the range of guidance for sure.

Speaker 2

Perfection is a dollar over the middle, We get the middle, but we're on the upper side of it. And The team said afterwards at the end of the quarter, he said, how do you feel the quarter went? I said, we missed guidance. We didn't get it quite right. We set it too low.

Speaker 2

So the you should expect us to be within guidance and the middle is our goal And that's how we think about it. And it is about credibility. I would like our investors and analysts who follow us To be able to depend on what we say and what we do and not believe that we're trying to play it easy, We're here to grow this company and not to hold back about it. So you won't find the sandbagging in our practice.

Speaker 5

That's great. I'm pretty excited about the opportunity you have. So I look forward to seeing strong results in the back half of the year.

Speaker 2

Thank you, Brooks.

Operator

Our next question comes from the line of Matthew O'Brien with Piper Sandler.

Speaker 6

Hey, can you guys hear me okay?

Speaker 2

Very well, Matt. How are you doing?

Speaker 6

Good. Thanks. Thanks for taking the question. So Jim, maybe the starter for you to follow-up on Brooks' question. The guidance raise, you beat you just mentioned beating The midpoint by about $500,000 you're taking the guidance up by about $2,000,000 in total.

Speaker 6

So there's an extra $1,500,000 in there roughly For the year, and I'm just wondering, you had always expected trauma to be in there, soft tissue to be in there. But what are you seeing that's giving you even more confidence in the business? And then is it a training thing? Are you seeing a bunch of new centers you can really point to that are coming on faster than you thought maybe you thought maybe getting through the back committee? Just a little bit more Detail on why the guidance raise and what exactly you're seeing from an enthusiasm perspective on soft tissue?

Speaker 2

It's a multi dimensional question, Matt, but let me try and take you through my thinking process here. 1st and foremost, when we set original guidance, Yes, we were expecting approval in June. That said, despite having breakthrough device designation, You don't know for sure that you got it till you got it, although I was although we were quite confident as you know. So that is one element. The second element that led to the so therefore, when it comes, You can feel comfortable counting what you expect from it.

Speaker 2

Now what reinforced that for us As we took the move, as you recall in Q2, to fully ramp up and train the team. And so when this approval came on time, there was actually No space between the approval and our showing up promoting the full thickness skin defect Broader indication on the following day. So when you combine those and then the Early response is very positive. Again, wanting to be predictable, It was very clear to us that our prospects were stronger and that is reflected in the increase in guidance.

Speaker 6

Okay. Just maybe just a little bit finer point on that, Jim. Is there anything running ahead of schedule And I know you got the approval a little bit ahead of schedule, but like training or center ads or anything along those lines that's ahead of schedule you can point to specifically.

Speaker 2

I'd say the most ahead of schedule definable element was having the team fully hired, Fully trained and in our market in our construct, we certify a salesperson to be able to support a case. And when June 7 came, every new rep was ready to do that. So being fully prepared, There's no ramp up. You're right out in the field. And I think that's the most tangible thing I can point to.

Speaker 6

Okay. Fair enough. And I'd love to get David involved here as well. And again, David, congrats on the new role. Thank you.

Speaker 6

You've been very clear as far as the spend goes in the back half of this year. Do we get to a point where there is leverage in the On the P and L in 2024 or is it still going to be a deleveraging situation as you're building this market next year? And just talk maybe a little bit about your cash position and potential needs there. Thanks.

Speaker 3

Yes. So, thank you for the question. I appreciate it. I'll take the second question first, around cash. As of June 30, we have a solid balance sheet.

Speaker 3

We've already indicated on a number of calls and discussions that we are in the process of developing our 2024 plan, which will include a number of Things that we'll have to take into consideration as we move forward and that is we will be launching, if it's approved, resalego, which We'll need additional working capital. We'll need to build inventory for that. We will also be looking at our strategy for Vitiligo and we will have other working capital needs. All of those will Come out of our 2024 operating plan, which we will give more guidance in February, once we have that developed. But I can tell you right now that we have a solid balance sheet as of June 30.

Speaker 3

As far as leverage, we've talked about when we think a salesperson is crosses over as far as paying for himself and that is himself or herself and that is when they're selling Around 5 units per month and a fully trained salesperson It's usually selling around 20 units per month. So we as Jim indicated, we were we hit the ground running on June 7. And so we think that we're going to get leverage from those new salespeople quickly. How quickly that will be? Hard to say, it's still early days.

Speaker 3

But as we move into 2024, you would expect that all of the sales field Professionals are selling at least enough to get to cover what their costs are.

Speaker 6

Perfect. Thanks so much.

Operator

Our next question comes from the line of Ryan Zimmerman with BTIG.

Speaker 7

Good afternoon. Thanks for taking the questions and congrats on the quarter. David, nice to speak with you So maybe just to start, the margin guidance is encouraging, Especially given the bounce back expectations in the back half of the year. But I'm just wondering, David, if you can kind of talk about maybe margins longer term. We got Resell Go coming into the picture in 2024 and just how you think about margins over the longer term Maybe trending towards the higher end of your guidance or potentially even above that, as we think about gross margin.

Speaker 3

Yes. Thank you for the question. I appreciate it. And thanks for following us. We've talked about this before and The biggest component of our cost of goods sold is the manufacturing facility that we have and it's fixed And it's 50% of our cost of goods sold.

Speaker 3

That's not going to change as we move into resale go Within percentages, it's for the most part 50%. So as we look forward, And we've talked about this. As our volume increases and we would expect our volume to increase over The next 18 months with the sales force fully in the field. And so as It's either for the ease of use product that we have now or the Resell Go cartridges that we will when it is approved In 2024, that volume as we look into 2024 should will increase And our margins should go up accordingly. We will give more guidance In 2024, once we've developed our plan, but you can see a situation where we would be approaching A 90% margin as long as our volume, our sales are in line with what our expectations are.

Speaker 7

Okay. Fair enough. No, it's very exciting. I mean, those are fantastic margins. I'm looking forward to it.

Speaker 7

Jim, turning to the early launch in full thickness skin defect. Can you just share anecdotally, given that you have early case adoption. What specific cases are doctors most comfortable with? Kind of if there's a trend in terms of utilization of this new indication, where you're seeing success? And then Conversely, where you may need to educate physicians about the potential and the latitude with which the label gives you for the new indication.

Speaker 2

Ryan, that's a big question. No.

Speaker 4

But let

Speaker 2

me give it a shot. First, let me try and get specific. We are having a Multiplying week over week effect of both new accounts being added And new vac applications underway. So every week, the numbers move meaningfully In this short time we've had. So that's a tangible way for me to speak about it.

Speaker 2

The cases are still pretty broad because there is a lot of differentiation among them. The ones the physicians, So to speak, capture most easily are cases like degloving, Like necrotizing fasciitis, those types of cases are very obvious resell cases and they quickly gravitate to them. So I don't have macro trends or numbers yet on those because as you know, it's been Just several weeks. But we see that they aren't What's the right word? They're quite aware of resell.

Speaker 2

We've done some market prep when During the time, because we had that sales force was principally in place and going through training and not promoting For in excess of 4 weeks on average before the launch. So they had time To condition the market, identify the high grafting physicians because we you can do that through CPT analysis. So the I think the bullishness that we feel is reflected in A, We did finish at the high end of our guidance. As you know, I shoot for the middle. So high end is a it means it went a little bit better than I planned for.

Speaker 2

And in the raising of guidance for the year, I think reflect that as well.

Speaker 7

Okay. Good stuff. Looking forward to seeing this play out. Appreciate it.

Speaker 2

Thank you.

Speaker 3

Thank you.

Operator

Our next question comes from the line of Ross Osborne with Cantor Fitzgerald.

Speaker 8

Hi, guys. Congrats on the quarter and thanks for taking my questions. So maybe just circling back to sales rep productivity, just want to make sure I'm on the same page. So in a prior question, you replied there's not really a ramp for new sales reps to cover their cost. But in terms of hitting your 1Q average productivity of about 20 kits per month, how long do you think it would take for these new reps to be at that more efficient level?

Speaker 2

It's a good question. I have a different way to characterize that metric for you. So the first element is not time based, it's just cost based. So it takes 5 resale kits per month To cover the cost of the sales rep. So once so we look at that as an investment.

Speaker 2

So we hire a sales rep, We know getting to 5, everything after that becomes contribution margin to the rest of the business. We do have a range of when that occurs. It ranges From as quickly as 3 or 4 months, it takes on some in some cases in a very brand new territory With no prior resell might take 6 months. That's a range of when they get From cost breakeven to contribution margin positive. As far as the 2020 referenced, to Put it in context, we have when we went to this expansion, our average rep Exceeded 20 per month.

Speaker 2

So that was shared to put in context That 5. So once you get to 5 on your way to 20 and when you get to 20, we're in really great shape. So what we expect is that this Wave of sales force hiring will be contribution margin positive Within the next 4 to 6 months. Is that helpful to your question?

Speaker 6

Yes,

Speaker 8

Much more clear. Thank you very much for that. And then one more, if I may, and apologies, we're juggling a couple of calls. But are you able to break out Japan, Australia and U. K, I realize Japan is probably the highest contribution to revenue outside of the U.

Speaker 8

S. And if not, would you be able to tell us what percentage of total revenue the U. S. Accounted for?

Speaker 2

Okay. So in our international revenue, Japan is well over 90% of it. What we do in Australia is a rather a strategic remnant from a few users who we've kept Supported and the same for Europe. Now there is an international strategy coming In the November call, which will of course, I don't want to say Q4 call because that's really the February call, but in November, I've been guiding to. So I think you can expect that our revenue for the year in Japan will We have no reason to express other than the current year to date run rate As a way to think about debt revenue.

Speaker 8

Got it. Thanks again for taking our questions and congrats on the quarter.

Speaker 2

You bet. Thank you.

Operator

That concludes today's question and answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.

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