Greetings, welcome to the Evolus first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Erickson, Vice President of Investor Relations.
Thank you, operator, and welcome to everyone joining us on today's call. With me today are David Moatazedi, President and Chief Executive Officer, and Lauren Silvernail, Chief Financial Officer and Executive Vice President, Corporate Development. Our prepared remarks today will include forward-looking statements within the meaning of United States securities laws, and 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 annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. 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 statement. Additionally, today's discussion will include non-GAAP financial measures, which should be considered in addition to and not as a substitute for or an isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC and on our investor relations website at evolus.com. Lastly, following the conclusion of today's call, a replay will be available on our website at evolus.com. With that, I'll turn the call over to David.
Thank you, David. We are pleased to share with you our results for the first quarter of 2022, which demonstrated continued robust growth, increased market share, and disciplined operating expense management. First quarter sales grew to nearly $34 million, reflecting continued year-over-year share gains. Our lead metrics achieved new all-time highs while the market continues to reflect a healthy growth rate. The first quarter marked the first full year since our relaunch, and we could not be more pleased with the rapid uptake of Jeuveau across the U.S. From an expense standpoint, we continue to thoughtfully manage our overhead costs and are investing a greater share of resources in brand building through our innovative co-branded marketing program or CBM. Evolus today remains in a strong cash position funded to beyond profitability.
Overall, we're off to a very good start, and we continue to expect another year of strong growth in 2022. Based on our performance in Q1 and our outlook for a strong aesthetics market, we are confident we can now achieve the upper end of our full year sales guidance range of $143 million-$150 million. This equates to a year-over-year growth rate approaching 50%, which is well above the projected industry growth rate. Now I'll get into some of the details. Sales this quarter grew 177% compared to the first quarter of 2021. Our sales of $34 million this quarter reflect year-over-year growth that is well above the estimated US toxin market rate.
On a sequential basis, our first quarter sales this year were comparable to sales in the fourth quarter of 2021 in what is typically a sequentially lower quarter due to seasonality. This strong growth supports our view of a robust aesthetics market that will continue to expand at a healthy pace. The key sales and marketing growth drivers we measure are new accounts, co-branded media adoption, and consumer engagement through our Evolus Rewards program. All of these metrics reach all-time highs this quarter and are evidence that momentum in our business continues to build. Starting with new accounts, we continue to expand our customer base by adding more than 575 new accounts, the highest quarterly increase in the past two years.
This brings our total account base since launch to more than 7,500 purchasing customers with a reorder rate that continues to run above 70%. Our millennial focus and unique co-branded marketing program is driving more customers to purchase at higher volumes in order to receive CBM benefits, which increases their visibility in the market and helps grow their practices. In turn, we benefit alongside our customers by expanding the awareness of the Jeuveau brand. In the quarter, we ran a total of nearly 800 digital billboard and streaming TV marketing campaigns that generated more than 400 million media impressions in the first quarter alone. Streaming TV is the latest addition to our CBM range of advertising options. These customized streaming television ads target a younger demographic within a small radius of a customer's practice.
These ads prompt consumers to take immediate action and book appointments for Jeuveau using their smartphones and a QR code. Following a successful pilot in Q4 for our largest customers, the majority of our top 200 customers are now on track to qualify for streaming TV. Increasingly, our customers are reporting that a growing number of consumers are asking for Jeuveau by name. This is evidence of the brand awareness our CBM advertising is creating and the power of our Evolus Rewards loyalty program to retain and motivate consumers. Participants in this program, of which nearly 40% are millennials or younger, receive quarterly appointment reminders along with savings on each treatment. By the end of the first quarter, our loyalty program had grown to more than 335,000 members who have redeemed approximately 475,000 rewards.
During the quarter, nearly 90,000 consumers were rewarded and half of the patients treated with Jeuveau were returning patients, which marked a new all-time high. Turning to our European expansion, we are putting the finishing touches on our launch plans, which remain on track for the third quarter. Initially, Nuceiva will be offered to customers in the U.K. and Germany, the two largest markets, before expanding next year to additional European countries as part of a phased rollout. We continue to expect Nuceiva to contribute modestly to sales in 2022, but be an important contributor to growth as we expand our European footprint. Additionally, this will form the foundation for a potential future portfolio of aesthetic products in this important and sizable market. Before I turn it over to Lauren, I'd like to provide a quick update on our Phase II Extra-Strength clinical study.
As we announced in March, we enrolled the first of a total of 150 patients. Enrollment across the five study sites is making good progress, which keeps us on track to complete the study and have interim results by the first half of next year. Upon success, the study will add to the body of strong Jeuveau clinical data while giving us the flexibility to pursue a longer duration indication on label. Being able to offer two strengths of Jeuveau, original and extra strength, and leveraging our ability to optimize pricing with our aesthetic-only strategy, puts Evolus in a unique competitive position. Our recent study of Evolus customers found that while 86% would like to have extra strength as part of their product offering, they still believe the original strength would be used most often.
In short, having an extra strength option would give injectors the ability to customize treatment plans for their patients, which represents a potential additional revenue stream for Evolus. With that, I'll turn the call over to Lauren, who you all know will be retiring in a few weeks and is conducting her last quarterly conference call as Evolus' CFO. Lauren?
Thank you, David. I'd like to express my gratitude to you and our stakeholders for your support over the past four years. I've thoroughly enjoyed my time working with you at Evolus on such a strong set of results, knowing this company is on solid financial footing and very well positioned for continued success. As David mentioned earlier, net revenues for the first quarter were $33.9 million, up 177% from a year ago when sales were impacted by the ITC proceedings. Included in sales this quarter was $700,000 of net service revenue related to sales in Canada. Year-over-year, sales were driven primarily by higher volumes and a slightly higher average selling price. Overall, the pricing environment for neurotoxin products in the U.S. remains quite healthy.
Our reported gross margin for the first quarter was 59%, and our adjusted gross margin, which excludes the amortization of intangibles, was 61%. As a reminder, in mid-September, our settlement royalty obligations to AbbVie will end. Also at that time, our settlement royalty obligations to Medytox will decrease significantly to a mid-single-digit royalty on global net sales. These changes are expected to dramatically lift our fourth quarter adjusted gross margin to the range of 68%-71%. This fourth quarter step-up will result in a blended full-year adjusted gross margin of 58%-61%. Selling general administrative expenses on a GAAP basis for the first quarter were $33.4 million, comparable to our fourth quarter SG&A expenses of $33.3 million, and evidence of our disciplined approach to expense management.
For the first quarter this year, SG&A expense on a GAAP basis included $3.0 million of non-cash stock-based compensation. Our reported GAAP operating expenses for the first quarter of 2022 were $49.4 million, reduced from $52.7 million in the fourth quarter of 2021. Non-GAAP operating expenses for the first quarter of 2022 were $31.0 million, consistent with $31.1 million in the prior quarter. We expect non-GAAP operating expenses to step up to the mid-$30 million level in the second quarter as we invest in our European launch and continued growth of our U.S. business. This keeps us on track with our full-year non-GAAP operating expense guidance of $135 million-$140 million. We are continuing to make solid progress towards profitability.
Our non-GAAP loss from operations in the first quarter of 2022 was $10.3 million, improved from $12.2 million in the fourth quarter of 2021. Non-GAAP loss from operations excludes stock-based compensation, revaluation of the contingent royalty obligation, and depreciation and amortization. Achieving cash flow breakeven is an important goal for Evolus, and we continue to carefully manage cash. During the first quarter, cash used to operate the business was approximately $2 million.
We ended the first quarter with $107 million in cash compared to $146 million at December 31, 2021. The major changes from last quarter included a combined $23 million of settlement and net royalty payments, $12 million of inventory payments to support the growth of the business and interest payments of $2 million with the remaining $2 million of cash used to operate the business. We continue to expect that our existing cash balance will fund our current operations through cash flow breakeven. As a reminder, the $50 million tranche on our Pharmakon debt facility is available and we can borrow it at any time during 2022 with no additional restrictions or covenants. This second tranche provides us with financial flexibility as we explore opportunities to expand our product portfolio.
Included in the $23 million combined settlement and net royalties paid in the first quarter was our next to last settlement payment of $15 million. The final installment of $5 million is due to be paid in the first quarter of 2023, which will fully satisfy our total milestone settlement obligations. Before I turn back to David, I'd like to summarize our 2022 guidance and other modeling information. Based on our performance in Q1 and our outlook for a strong aesthetics market, we are confident we can now achieve the upper end of our full year sales guidance range of $143 million-$150 million. This assumes a minimal contribution from international markets.
We continue to expect our full year adjusted gross margin to be between 58% and 61%, with a fourth quarter step up to 68%-71%, concurrent with the decrease in settlement royalty rates. We continue to expect full year non-GAAP operating expenses of between $135 million and $140 million, which consists mainly of continued investments in the growth of Jeuveau in the U.S. plus Nuceiva launch expenses in Europe. Quarterly interest expense is anticipated to be $2 million, and we suggest to use approximately 56 million weighted average shares outstanding for the full year. With that, David, back to you.
Thank you, Lauren. Three years ago this month, we launched Jeuveau in the U.S. Thanks to the hard work and commitment of our dedicated employees and the unwavering support of our customers, Jeuveau is now the highest selling aesthetic product launched since 2019. Back then, we were the first neurotoxin to launch in more than a decade, and we remain the only neurotoxin to take advantage of an aesthetic only strategy. This has enabled Evolus to unlock the benefits of pricing flexibility and marketing innovation, resulting in true partnership with our customers. With Jeuveau, we are building a powerful and recognizable brand designed to drive the younger generation to enter the category and receive aesthetic treatments. We intentionally created a Jeuveau brand to appeal to the millennial consumer, the growth driver of the aesthetic industry.
This has enabled us to increase our market share and will continue to drive long-term growth in our business. We look forward to sharing the results of our continued success in the coming quarters. With that, we're ready to take questions.
Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question is from Annabel Samimy with Stifel. Please proceed.
Hi, this is Stacey calling for Annabel. Congrats on the great quarter and thanks for taking our question. Talking about the market dynamics right now, we are two years past pandemic, past any rebound, and even BOTOX is growing at a 31% year-over-year, and this is in a seasonally light quarter. Has the aesthetics finally reached that point with millennials where the floodgates have opened, and are you actually taking shares from anyone or just benefiting from the rising tides? Secondly, has the state of the capital markets possibly accelerated some conversations that were potentially looking for funding of programs through the public markets? It feels like Jeuveau has reached some really good strides. Thank you.
Great. Thank you for the question, Stacey. It certainly has been incredible to watch the growth of this market now two years post the pandemic. As you saw in our first quarter, we grew 177%. I really don't want to focus so much on one quarter because obviously that's significant growth for us. On the year, we're forecasting 50% growth. You're right, it's a combination of a younger generation that's entering this market at a very fast clip with fewer barriers to access and a brand, in the case of Jeuveau, that's positioned against that younger segment. You're seeing the over-indexing against that group in our Evolus Rewards program.
I do believe that that's a strong contributor to our 50%, roughly, growth that we anticipate on the year against a market backdrop that's going to grow roughly somewhere in the 10%-20%. There you get a sense for what we're seeing in the market relative to how we're doing as a product. Keep in mind, it's reasonable to assume that in the sense that we're just a year into the relaunch of Jeuveau, and we're seeing very strong uptake as we're adding a combination of new accounts and seeing faster growth within existing customers. Fortunately, as you pointed out, the market overall is very healthy, and for us, we're gaining not only from the market growth, but also from share within the category.
Then lastly, as it relates to your question around funding needs. We're clearly watching the markets that you're observing as well. I know that it's a challenging market environment for companies to raise capital. We're fortunate that we raised capital in the fourth quarter of last year, and we funded this company and built the company to profitability and beyond with the cash that you see on our balance sheet. Of course, that does not include the additional $50 million tranche that's available to us through Pharmakon through year-end. We feel very good about the fact that our business is continuing to execute, and you can see the growth accelerating on the business overall and the strong trends that we spoke to earlier.
The fact that we're funding the company now to launch into the second-largest market in the world internationally, which is gonna be a key growth driver for us next year. Of course, that includes funding the Phase II study, and we expect to get a data readout early next year. We feel very good about our cash position and our ability to just focus on execution.
Thank you. Again, congrats on a great quarter.
Thank you.
Our next question is from Marc Goodman with SVB Securities. Please proceed.
David, what's your sense of how the market was in the first quarter? I mean, BOTOX was unusually large, number. Do you think the revenues for the whole market was up versus the fourth quarter? I mean, I know your numbers were, you know, practically the same, which is very unusual just 'cause of seasonality. As far as market share, do you think you gained share and how you thought about that? Then just broadly, on your programs and stuff, can you talk about, you know, some of the interesting programs you're gonna be kicking in this year that'll be new and exciting that can drive the business? Thanks.
Sure. Yeah, look, on the market, you generally see as you know, Marc, you've followed this market for many years, sequential decline that's double digits. It could get high, as high as 20%, depending on the year. We do believe that this market was flattish. We have third-party reports that show, you know, mid-single-digit decline. We saw a flattish business, and of course, we look at the competitors' reporting as well. That being said, it's hard to focus in on a single quarter versus looking over multiple quarters, just the way that product flows in and out of customers. I think we feel very good about the early strong demand in the market for the toxin market.
We expect that to persist, and that explains why we felt confident to guide to the upper end of our range because we're seeing that strong demand in these practices, and we're also seeing very favorable trends, as we continue to expand our business within these customers.
Marketing programs, 22.
Yeah. As far as marketing programs, you saw the first quarter was a meaningful step up in terms of streaming TV being a new addition to our marketing program. Those TV spots have just started going live later in the first quarter and will continue to into the year. The number of accounts that we're seeing that are interested are very significant, which creates a big opportunity for us in terms of continuing to produce these spots for the demand that we're receiving. That gives you an indication of the level of interest we have overall in co-branded media. We're the first company to offer this sort of partnership with customers, and that's of course because we have a cash pay only strategy that enables us to do that. We expect that that's gonna continue to build.
We're seeing that playing out just as we did in the back half of last year. It built up. We expect it to continue to do the same this year.
Thanks, David.
Our next question is from Louise Chen with Cantor Fitzgerald. Please proceed.
Hi, this is Wayne on for Louise. Congrats on all the progress this quarter, and thank you for taking our questions here. Lauren, thank you for all your contributions to the company, and we will really miss working with you. First question I have for you is, can you maybe give us some more new perspective on how you see your market share evolving over time, given we are sort of like entering the pandemic phase? Then the second question is, do you expect any of the macro headwinds like inflation, supply chain issues, et cetera, to impact your business for the remainder of 2022? Thank you.
Sure. Look, on the market share side, we expect to continue to expand our share. It's evidenced by 50% growth rate on our business that we anticipate this year relative to a market that we expect to grow roughly in the teens or slightly above it. That'll continue to point towards share gains for us, and we expect that to persist for some time. As it relates to inflation, fortunately for us, we have a fixed transfer price in our agreement with our partner. Our cost of goods are fixed costs. We have seen our ASP go up over time, so we feel good about pricing power within the category. We're not seeing meaningful changes to consumer pricing when they're going into these practices.
In the end, this is an affordable entry point treatment for aesthetic consumers. It's $300-$500 on average, in line with what they would spend to get their hair colored. I think that affordability factor relative to the quality of the outcomes they're getting is what's made this the gateway treatment to entering this category and why this category has been so resilient in growing consistently for the last 20 years. We feel very good about the fact that we're in the largest category in aesthetics with toxins and the most resilient category that's been tested over time and has continued to grow despite macroeconomic challenges in the past. I think overall, that's a favorable backdrop to continue to be gaining share in.
Thank you.
Our next question is from Vamil Divan with Mizuho. Please proceed.
Yeah. Hi, this is Sean on for Vamil. Just one question on the loyalty program that you guys are moving ahead with. How is the loyalty program progressing? Specifically, what are you learning from the program in terms of your customer base as compared to those who may prefer other toxins? Thank you.
Great. Sean, thanks for the question. Our view is that loyalty program is really the key metric to view for the long-term durability of this space. We launched our loyalty program just about 6 quarters ago in the middle of the pandemic. In a short period of time, we've enrolled nearly 400,000 consumers into the program. You can see that we have roughly almost 500,000 total treatments in the program as well. We feel very good about the uptake of both new patients as well as the patients that were enrolled coming back in with frequency for repeat treatments. For the first time this quarter, you can see here that repeat treatments hit an all-time high and represented the majority of the total users.
That's gonna be a clip that we'll watch very closely because it speaks to how satisfied consumers are when they get Jeuveau, that they're satisfied and they're coming back, and they're coming back more often. We're following these patients out now. Of course, it's only been, as we talked about, half a dozen quarters. As you can imagine, over time, this is clipping up at a very fast pace. If you look at our investor deck, what you'll see is a meaningful clip up in terms of our Evolus Rewards program, both enrollment and redemption that started in the fourth quarter, and it persisted into the first quarter. We think that's a very strong and favorable trend that speaks to what we're seeing in our underlying business. We feel very good about that investment.
Now, on your last question around share, that's not something we track through the rewards program. What we really focus on for rewards is the idea of retention once they get treated, and that's exactly what we're seeing in the market. Of course, we're getting a combination of naive patients. As we pointed out, over 40% of our rewards patients are millennial or younger. As you can imagine, the majority of those are not prior toxin users. Then we're, of course, getting in existing patients that are getting treated with other neurotoxins that are trying Jeuveau and sticking with us as well. We feel really good about the balance of that composition as we continue to build that consumer loyalty program.
Our next question comes from Doug Tsao with H.C. Wainwright. Please proceed.
Hi, good afternoon, and congrats on the great results. Just maybe as a starting point, I'm just curious, David, you know, what the business development environment is like. Obviously as someone, you know, a question was about sort of the capital markets and funding, which obviously it's become challenging in healthcare. Just curious, has that made it easier potentially to transact something, or is it becoming more difficult because people feel that their valuations are depressed and so therefore they're gonna try to wait around to see some kind of recovery?
Sure. Yeah. It's a great question, Doug. I think the market's evolving fairly quickly here. We've been, of course, focused on corporate development for some time, looking at assets that we think are durable, assets that could help build our business over time as we aspire to be a company with a portfolio of aesthetic products to meet the consumer's needs. That's both commercial-stage assets as well as potential pipeline assets that are differentiated. What we're seeing, of course, is a market that's evolving a bit from where it was one or two years ago. Frankly, we've evolved. We're now funded to profitability.
We're proving that our commercial model is very different, and we have a singularity and focus that's driving a really high growth level for us, and that's attractive, as we talk to companies that are considering what they might do with their assets. It's giving us the opportunity to have a look at different assets, and it's giving us a chance to consider what would be the right next move. We're gonna continue to scrutinize any decision we make around corporate development because it's always gonna get weighed against our singularity and focus, which appears to be driving a lot of value, and we don't see that slowing down anytime soon. That being said, we have a long-term aspiration to build a portfolio.
As we see opportunities, you know, we're in a position to make decisions if in fact we see the right one in the market. We'll continue to do that, and we'll give you an update if, you know, as we make progress on it.
I think you noted this was one of the strongest quarters in terms of it adding new accounts. I'm just curious, is there any sort of theme in terms of the types of accounts that were added in the quarter and sort of what led them to sort of come around at this point? Thank you.
Yeah, that's a great question. It's one that we spend a lot of time looking at the data, the type of customers we're gaining and also how the overall business is performing. One of the metrics is new accounts, and it's hard to isolate any one variable. I can tell you that the positive messaging in the market across the U.S. around Jeuveau is continuing to rise, and it's rising for a few reasons. Number one, from the podium, thanks to Rui's great work and our medical affairs team, the noise around the precision of Jeuveau is starting to reach an all-time high. Even those who haven't used the product are recognizing there's something unique about this brand, and the publications have helped support that dynamic.
The second is, you'd be pretty hard-pressed in any major city not to drive around and see a few of our billboards or get targeted by one of our television spots or alternatively, turn on your computer and see a TV ad unit from Facebook or some other social media site with one of your peers potentially that's using our Jeuveau product. For those that aren't using our brand, they know that partnership with other companies doesn't come with those benefits. It doesn't because they're not able to as a company that is both reimbursed and cash pay. I think the combination of the product and the marketing story is very compelling in the face of practices that are looking to grow their business on the back of a younger generation of millennials.
We built the company from the ground up to be appealing to that younger demographic. Practices that are thinking about long-term growth see us as a great partner that's committed to helping build practices with them. I think that story is just starting to come to life. It started in the back half of last year, but it's really gaining momentum now.
Okay, great. Thank you so much, and congrats on the results.
Thank you. This concludes the question and answer session. I would like to turn the call back to management for any closing remarks.
Thank you, operator. If you missed any portion of this call, a replay will be posted to our website later today. Thanks to everyone for joining us. We appreciate your interest in Evolus and we'll be available if you have additional questions.
This concludes today's conference. Thank you for your participation. You may now disconnect.