Good afternoon, and thank you for joining the ReShape Lifesciences First Quarter 2023 Conference Call. I would like to turn the call over to Michael Miller from Rx Communications.

Good afternoon, and thank you for joining the ReShape Lifesciences first quarter 2023 earnings call. I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer; and Tom Stankovich, Chief Financial Officer. Paul will provide an overview and update on the company's activities, and Tom will review the financial results for the period. He will then turn the call back over to Paul for some closing remarks, after which, we'll open the call to a question-and-answer session. As a reminder, this conference call as well as ReShape Lifesciences' SEC filings and website, including the Investor Information section of the website, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those discussed due to known and unknown risks, uncertainties and other factors. These and additional risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, including those factors identified as risk factors in the company's most recent annual report on Form 10-K. As an additional reminder, ReShape stock is listed on NASDAQ, trading under the symbol RSLS. I will now turn the call over to Paul Hickey, President and CEO, ReShape. Paul?

Thank you, Mike. I'd like to thank all of you for joining us this afternoon for our first quarter 2023 earnings call. In the first quarter of 2023, we have continued to execute our strategies to become a sustainable and scalable organization on a path towards growth and profitability. Before I delve into our first quarter highlights, I'd like to briefly remind you of our three growth strategies or pillars for growth. Our first pillar is to operate our business with a disciplined metrics-driven approach to drive predictable revenue growth through a sustainable and scalable business model. Key to this first strategy is the revamping of our lead generation initiatives. The second pillar is to continue to expand our product portfolio and pipeline across the care continuum. And our last pillar is to continue to validate our evidence-based weight loss solutions leveraging our scientific advisory board for key insights on strategic initiatives. I'm proud to say that during the first quarter, we had many successes, in particular, before onetime adjustments, we significantly reduced operating expenses by 43% as compared to the first quarter of 2022, allowing us to invest in our growth initiatives, including marketing and R&D. Additionally, these cost reductions, combined with our laser focus on executing on our growth pillars to drive revenue, put us in a strong position to achieve our goals. Before I further detail our highlights and upcoming initiatives, I'd like to mention the enormous market opportunity before us. The global multibillion dollar obesity market opportunity remains largely untapped. Currently, 2.5 billion people or more than 30% of the global population is considered overweight or obese, a figure that's expected to grow by 50% by 2030. The global weight loss and obesity management market is expected to rise an estimated value of $300 billion, representing…

Thanks, Paul. And once again, thank you all for joining our webcast this afternoon. As a reminder, a full discussion of our financials is available in our press release and 10-Q. Before I discuss some of our financial details, I want to point out that before onetime adjustments, our $4 million or 43% reduction in operating expenses reported in the first quarter of 2023 as compared to the first quarter of 2022 and was consistent across all expense categories and is evidence of our focus on achieving greater operating efficiencies. These reductions, combined with our expectation for increased revenue resulting from our targeted digital media campaign focused on geographies near bariatric surgery centers that sell the Lap-Band system and the recently launched and redesigned reshape calibration tubes are expected to positively impact revenue for the remainder of 2023 and move ReShape closer to cash flow breakeven. Moving on to other key financial metrics for the first quarter ended March 31, 2023. Our revenue totaled $2.3 million for the three months ended March 31, 2023, which represents a contraction of 6.3% or $200,000 compared to the same period in 2022. The primary reason for the slight decline is a decrease in sales throughout Europe. Our expectation that revenue will continue to increase through the remainder of 2023 and as we focus on a targeted digital media campaign near bariatric surgical centers that sell the Lap-Band system and have fully launched the three new sizes of calibration tubes. Gross profit for the three months ended March 31, 2023, and 2022 was $1.2 million. Gross profit as a percentage of total revenue for the three months ended March 31, 2023, and with 53.5% compared to 49.9% for the same period in 2022. The increase in gross profit percentage is due to the company…

Thank you, Tom. Before we open the call up for Q&A, it's important to reiterate that we are committed to continuously improving our marketing systems and bringing critical components in-house to ensure optimal lead generation, lead nurturing, and lead conversion, while further reducing lead generation costs. And finally, we will work closely with our world-class Scientific Advisory Board to continue executing on our plan for success in a global market that is changing in historic fashion to normalize safe and effective treatments for obesity. As Tom detailed, we have significantly reduced operating expenses across all categories, so we can invest in growth initiatives. We're laser focused on executing on our growth pillars to drive revenue with an expanded portfolio of transformative technologies that consists of a selection of patient-friendly, not anatomy changing lifestyle enhancing products, programs and services to treat obesity and metabolic diseases across the entire care continuum. This concludes our prepared remarks. So now we'd like to open the call for your questions. Operator?

Certainly. [Operator Instructions] And our first question will come from Jeremy Pearlman of Maxim. Your line is open.

Hi. This is -- I'm actually on the line for Anthony Vendetti. Thank you for taking my question. So the first question is, if you could share any of the metrics that you're using to gauge the success of this new marketing campaign and how can we see, may when can we see maybe -- I know you said earlier on earlier calls, there was about a six-month weight until from when a patient goes into the doctor to you actually has the surgery. When can we see some of that the benefits of this new marketing approach?

Great question, Jeremy. Thanks for joining today. I think you'll hear updates every quarter going forward. As you bring, for example, the call center in-house, it allows us to have metrics to whatever level of detail that we need to have to manage the program and improve it on an ongoing basis. And then as appropriate, we'll share those metrics with you and others. I know on our website as well to look at or before and after as we launched our patient-centric website here in the third quarter as we watch the improvements, we'll be able to track those measurements and again share those. Probably most importantly, it gets into the overall marketing cost as a part of our P&L. And as you watch -- as we watch revenue grow and we watch our marketing dollars stay consistent or increased less than obviously revenue, we've hit the sort of the sweet spot, if you will. So yeah, I can't emphasize enough moving the marketing competencies inside how much that allows us to track patient leads from initial contact through the nurturing process ultimately to the transfer to the physician. And the last metric that you'll hear out in the industry, it's the warm transfer. It's the percent of needs that you have on the top of funnel that you ultimately get down to where they want to be transferred to a physician. And we've seen with our most recent marketing enhancements that we've actually had an increase -- a substantial increase in our lead transfer warmly transfers to physician practices in a pilot study that we did with an SMS texting technology. So in other words, as we engage a lead instead of calling them or sending them an e-mail, they get a text message like whether if you went to a dentist or some other appointment. That same technology used in bariatrics allows us to catch that patient when they're ready to make that decision. And that's the key with any leads just making sure you're -- when they want to make the decision to see the surgeon that they have the chance to do that with a click of a button or a response yes to attacks.

Okay. Great. And then I know you mentioned earlier on the call in the beginning of the call about the new weight loss drugs and how popular they are in the media, and it's opened the conversation to many patients, I guess, about how they could lose waiter and help attack or help their obesity. Question is, have you spoken to any bariatric surgeons and have they seen any hesitation from some of the patients because now this is such a popular option and maybe patients who would want to do the surgery, but maybe are holding off or would like to try, let's say, the drugs before they go -- takes on surgery? Is there anything you could share that you've been hearing from the surgery?

Yeah. Again, we're watching this very closely. And I think in the last update we did a similar question from Anthony. We did reach out to, I think, our top 25 accounts and ask them, did they feel like the weight loss drugs were affecting their practice and all but I think one or two said no, they didn't feel like the weight loss drugs were impacting their procedure volume, okay? That said, we're getting anecdotal information from other physicians that are not part of our lead generation programs that say that they've been feeling a slowdown. And I think there's going to be articles out to look at the overall impact of the weight loss drugs, but I think I stand by my position that there's going to be an overall increase in the pool of patients that is a result of the marketing efforts. In other words, people are getting off the sidelines and approaching health care professionals, which just wasn't done. I mean I know a few people on the weight loss drugs, they would have a number of contemplated that, certainly weren't contemplating surgery. So I think engaging in the discussions a healthy component. The one interesting piece for me, Jeremy, is that I did mention like some that are not related to our call centers and our lead generation are seeing an impact on ours are not. I think it kind of leads me to believe that the marketing efforts are paying off in a way that we have headwind potentially with the weight loss drugs. But because we're engaging leads with e-mails, texts and/or live sort of customer service calls. We're able to retain those patients and get them to see a surgeon to ultimately be considered for surgery. And then the longer term, I think what we're going to find is most all of the surgeons are going to be trying combination therapies where you may be on the weight loss drug, but you're plateauing or it's cost prohibitive, so you might have the surgery. And as you end up plateauing on your weight loss goals for whatever surgery may have, surgeons have been contemplating how to -- as they do today, but with the new drugs, they can get patients back on their weight loss plan with a combination therapy with surgery and prescription drugs.

All right. Okay. Understood. Great. And actually, that egress my last question about the ReShapeCare. So I don't know how many do you have any patients that are signed up what has been the reception? And I know you're focused more on the -- on private health company health insurers. But are you -- when you do speak to a surgeon about the Lap-Band, is it a cross-selling opportunity, do the sales reps also bring up how that can be combined with the ReShapeCare to be a really powerful weight loss tool?

Yeah. And I think I've been transparent in the past about ReShapeCare was kind of surprised us with the interest that the larger self-insured employers have, and I'm not going to say caused by surprise, but in the end, it offers one sort of call point in terms of selling ReShapeCare with an employer and their health and wellness director whoever that leadership decision maker is. And once we pitch ReShapeCare, it allows us to have during their annual enrollment time frame allows ReShapeCare to be positioned in some of these employers that vary in size. And so kind of the midrange employers are -- seem to be a really good target for us where they don't have the resources to come up with programs like this and ours is fairly comprehensive. And that doesn't mean that we're not doing the ReShapeCare marketing efforts for individuals who are just looking for something else in weight loss and and/or part of our Lap-Band lead nurturing program. Specific to accounts. There's -- we find several accounts of ours have their own dietitians and their own sort of coaches, if you will, and they're not needing -- there's no gap to fill, but ReShapeCare. So we're being sensitive and appropriately so with making sure that we're -- when we approach our physicians that are partnering with us on the lead nurturing efforts that if they need to have ReShapeCare to augment their either parapet or sort of postoperative support for their patients it's there for them. So in terms of quantities and a number of patients, I think we're in the early stages. And honestly, there's -- if it's not weight loss strikes, you're also seeing a lot of things on television commercial ads and whatnot for Noon or whatever other type of virtual weight loss management tools. We're still differentiated by all that's offered out there in the industry by the fact that we have actually live coaches and the other programs do not. So I would say stay tuned on the numbers as we continue to build both the employer base side of the business and the individual or I guess, it would be just the average Joe and Jane public part of the business.

Understood. Okay, great. Thank you for all that information. I'll hop back in queue.

[Operator Instructions] And I'm showing no further questions. I would now like to hand the call back to Paul Hickey for closing remarks.

Thank you. Well, I hope we've been successful in relaying the progress we have made towards rightsizing organization to be a sustainable, scalable company and how excited we are to remain excited to remain about the future. We'll continue to work diligently to build our commitment to provide evidence-based personalized devices and therapeutics, including the FDA-approved minimal base Lap-Band. I want to. Thank our employees, our board members, our customers, vendors, existing and new shareholders for your continued support of ReShape. It is truly an exciting time as we continue to solidify our position as a premier physician-led weight loss and metabolic health solutions company. I look forward to further engaging all of our stakeholders, health care partners and shareholders. Thank you.

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