Evolus, Inc. [EOLS] Filings

10-Q 1 eols-20240930.htm 10-Q eols-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________

FORM 10-Q

_________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-38381

_________________________________________________________________

EVOLUS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________________________________

Delaware

46-1385614

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

520 Newport Center Drive Suite 1200

Newport Beach, California

92660

(Address of Principal Executive Offices)

(Zip Code)

(949) 284-4555

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

EOLS

The Nasdaq Stock Market LLC

(Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 1, 2024, 63,321,493 shares of the registrant’s common stock, par value $0.00001, were outstanding.

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	TABLE OF CONTENTS
		Page
	Special Note Regarding Forward-Looking Statements	3
	Summary of Risk Factors	3

	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations and Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76
	Signatures	77

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Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, including statements regarding future events, our business, financial condition, results of operations and prospects, our plans and expectations regarding regulatory approval, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical or current facts are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, or other comparable terms intended to identify statements about the future. The forward-looking statements included herein are based on our current expectations, assumptions, estimates and projections, which we believe to be reasonable, and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond our control, include, but are not limited to, those made below under “Summary of Risk Factors” and in Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

You should carefully consider these risks, as well as the additional risks described in other documents we file with the U.S. Securities and Exchange Commission (“SEC”) in the future, including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, which may from time to time amend, supplement or supersede the risks and uncertainties we disclose. We also operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should read this Quarterly Report on Form 10-Q and the other documents we file with the SEC with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by the cautionary statements referenced above.

Summary of Risk Factors

An investment in our securities involves various risks and you are urged to carefully consider the risks discussed under Item 1A “Risk Factors,” in this Quarterly Report on Form 10-Q prior to making an investment in our securities. If any of the risks below or in Item 1A “Risk Factors” occurs, our business could be materially and adversely affected. As more fully described in Item 1A “Risk Factors”, the principal risks and uncertainties that may affect our business, financial condition and results of operations include, but are not limited to, the following:

•We currently depend entirely on the successful marketing of our only commercial product, Jeuveau®. If we are unable to continue to successfully market and sell Jeuveau®, we may not generate sufficient revenue to continue our business.

•We have a limited operating history and have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future. We have only one approved product, which, together with our limited operating history, makes it difficult to assess our future viability.

•We are reliant on Symatese to achieve regulatory approval for the Evolysse™ injectable hyaluronic acid product line in the United States. Failure to obtain approval or obtain approval on our estimated time frame for the Evolysse™ product line would negatively affect our ability to sell these products.

•We may require additional financing to fund our future operations or execute corporate development activities, which could dilute the ownership interest of our existing stockholders, and a failure to obtain additional capital when so needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our operations.

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•If we or our counterparties do not comply with the terms of our settlement agreements with Medytox, Inc. (“Medytox”), we may face litigation or lose our ability to market and sell Jeuveau®, which would materially and adversely affect our ability to carry out our business and our financial condition and ability to continue as a going concern.

•The terms of the Settlement Agreement with Medytox will continue to reduce our profitability until the royalty payment obligations expire.

•Our business, financial condition and operations have been, and may in the future be, adversely affected by a public health crisis or contagious disease outbreak.

•We rely on the license and supply agreement, as amended, with Daewoong, which we refer to as the Daewoong Agreement, to provide us with exclusive rights to distribute Jeuveau® in certain territories. Any termination or loss of significant rights, including exclusivity, under the Daewoong Agreement would materially and adversely affect our development and commercialization of Jeuveau®.

•Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products would impair our ability to grow our business.

•Jeuveau® faces, and any of our future product candidates will face, significant competition and our failure to effectively compete may prevent us from maintaining our market share and expansion.

•Jeuveau® may fail to continue to achieve the broad degree of aesthetic practitioners adoption and use or consumer demand necessary for commercial success.

•Our ability to market Jeuveau® is limited to use for the treatment of glabellar lines, and if we want to expand the indications for which we market Jeuveau®, we will need to obtain additional regulatory approvals, which will be expensive and may not be granted.

•Third party claims of intellectual property infringement may prevent or delay our commercialization efforts and interrupt our supply of products.

•If we or any of our current or future licensors, including Daewoong, are unable to maintain, obtain or protect intellectual property rights related to Jeuveau® or any of our future product candidates, we may not be able to compete effectively in our market.

•We may need to increase the size of our organization, including our sales and marketing capabilities, in order to further market and sell Jeuveau® and to commercialize any product candidates, if approved, and we may experience difficulties in managing this growth.

•We rely on our digital technology and applications and our business and operations could suffer in the event of information system failures or a cybersecurity incident.

•We are subject to extensive government regulation, and we may face delays in or not obtain regulatory approval of our product candidates and our compliance with ongoing regulatory requirements may result in significant additional expense, limit or delay regulatory approval or subject us to penalties if we fail to comply.

•We currently rely solely on Daewoong to manufacture Jeuveau® and on Symatese to manufacture Evolysse™ and as such, any production or other problems with either licensor could adversely affect us.

•Future sales of our common stock by us or others, or the perception that such sales may occur, could depress the market price of our common stock.

Additional Information

Unless the context indicates otherwise, as used in this Quarterly Report on Form 10-Q, the terms “Evolus,” “company,” “we,” “us” and “our” refer to Evolus, Inc., a Delaware corporation, and our subsidiaries taken as a whole, unless otherwise noted.

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EVOLUS®, Jeuveau®, Evolux® and Evolysse™ are trademarks of ours that are used in this Quarterly Report on Form 10-Q. Jeuveau® is the trade name in the United States for our approved product with non-proprietary name, prabotulinumtoxinA-xvfs. This product has different trade names outside of the United States, including Nuceiva® in Canada, Europe and Australia, but is referred to throughout this Quarterly Report on Form 10-Q as Jeuveau®. Our injectable hyaluronic acid products have different trade names outside of the United States, including Estyme® in Europe, but are referred to throughout this Quarterly Report on Form 10-Q as Evolysse™. This Quarterly Report on Form 10-Q also includes trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® and ™ symbols, but those references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Evolus, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


	September 30, 2024		December 31, 2023
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	85,035	$	62,838

Accounts receivable, net	44,642		30,529
Inventories	14,892		10,998
Prepaid expenses	3,399		5,700
Other current assets	2,393		2,356
Total current assets	150,361		112,421
Property and equipment, net	2,314		2,087
Operating lease right-of-use assets	8,280		5,763
Intangible assets, net	46,587		47,110
Goodwill	21,208		21,208
Other assets	858		409
Total assets	$	229,608	$	188,998
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	13,836	$	4,271
Accrued expenses	34,949		33,813
Operating lease liabilities	1,601		1,377
Contingent royalty obligation payable to Evolus Founders	10,429		8,830

Total current liabilities	60,815		48,291
Operating lease liabilities	7,066		4,810
Contingent royalty obligation payable to Evolus Founders	34,600		36,200
Term loan, net of discount and issuance costs	121,208		120,359
Deferred tax liability	29		27
Total liabilities	223,718		209,687
Commitments and contingencies (Note 8)
Stockholders’ equity (deficit)
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.00001 par value; 100,000,000 shares authorized; 63,251,148 and 56,820,621 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	1		1
Additional paid-in capital	609,186		538,716
Accumulated other comprehensive loss	(689)		(427)
Accumulated deficit	(602,608)		(558,979)
Total stockholders’ equity (deficit)	5,890		(20,689)
Total liabilities and stockholders’ equity (deficit)	$	229,608	$	188,998

See accompanying notes to these unaudited condensed consolidated financial statements.

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Evolus, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue:
Product revenue, net	$	60,164	$	49,323	$	185,350	$	139,050
Service revenue	921		696		1,977		2,036
Total net revenues	61,085		50,019		187,327		141,086

Operating expenses:
Product cost of sales (excludes amortization of intangible assets)	18,223		15,431		55,367		42,289
Selling, general and administrative	52,506		43,328		147,781		121,886
Research and development	2,314		1,587		6,742		4,176
In-process research and development	—		—		—		4,441
Revaluation of contingent royalty obligation payable to Evolus Founders	2,428		1,802		5,611		5,132
Depreciation and amortization	1,087		1,311		3,923		3,760
Total operating expenses	76,558		63,459		219,424		181,684
Loss from operations	(15,473)		(13,440)		(32,097)		(40,598)
Other income (expense):
Interest income	928		306		2,474		569
Interest expense	(4,764)		(3,786)		(14,162)		(9,757)
Other income (expense), net	273		21		380		2
Loss before income taxes:	(19,036)		(16,899)		(43,405)		(49,784)
Income tax expense	134		24		224		70
Net loss	$	(19,170)	$	(16,923)	$	(43,629)	$	(49,854)
Other comprehensive loss:
Unrealized loss, net of tax	(88)		(138)		(262)		(269)

Comprehensive loss	$	(19,258)	$	(17,061)	$	(43,891)	$	(50,123)
Net loss per share, basic and diluted	$	(0.30)	$	(0.30)	$	(0.71)	$	(0.88)
Weighted-average shares outstanding used to compute basic and diluted net loss per share	63,148,968		57,023,151		61,562,771		56,808,333

See accompanying notes to these unaudited condensed consolidated financial statements.

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Evolus, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)


	Common Stock		Additional Paid In Capital			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
		Shares			Amount
Balance at December 31, 2022		56,260,570	$	1		$	516,129	$	(337)	$	(497,294)	$	18,499
Issuance of common stock in connection with the incentive equity plan		622,701	—			26		—		—		26
Stock-based compensation		—	—			3,294		—		—		3,294
Net loss		—	—			—		—		(14,791)		(14,791)
Other comprehensive loss		—	—			—		(79)		—		(79)
Balance at March 31, 2023		56,883,271	$	1		$	519,449	$	(416)	$	(512,085)	$	6,949
Issuance of common stock in connection with the incentive equity plan		54,552	$	—		$	109	$	—	$	—	$	109
Stock-based compensation		—	—			4,171		—		—		4,171
Net loss		—	—			—		—		(18,140)		(18,140)
Other comprehensive loss		—	—			—		(52)		—		(52)
Balance at June 30, 2023		56,937,823	$	1		$	523,729	$	(468)	$	(530,225)	$	(6,963)
Issuance of common stock in connection with the incentive equity plan		154,657	$	—		$	60	$	—	$	—	$	60
Stock-based compensation		—	—			4,596		—		—		4,596
Net loss		—	—			—		—		(16,923)		(16,923)
Other comprehensive loss		—	—			—		(138)		—		(138)
Balance at September 30, 2023		57,092,480	$	1		$	528,385	$	(606)	$	(547,148)	$	(19,368)

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Evolus, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)


	Common Stock		Additional Paid In Capital			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
		Shares			Amount
Balance at December 31, 2023		57,820,621	$	1		$	538,716	$	(427)	$	(558,979)	$	(20,689)
Issuance of common stock upon follow-on offering, net of issuance costs		3,554,000	—			46,794		—		—		46,794
Issuance of common stock in connection with the incentive equity plan		899,411	—			487		—		—		487
Stock-based compensation		—	—			5,090		—		—		5,090
Net loss		—	—			—		—		(13,109)		(13,109)
Other comprehensive loss		—	—			—		(130)		—		(130)
Balance at March 31, 2024		62,274,032	$	1		$	591,087	$	(557)	$	(572,088)	$	18,443
Issuance of common stock upon follow-on offering, net of issuance costs		318,100	$	—		$	4,169	$	—	$	—	$	4,169
Issuance of common stock in connection with the incentive equity plan		460,466	—			2,300		—		—		2,300
Stock-based compensation		—	—			5,796		—		—		5,796
Net loss		—	—			—		—		(11,350)		(11,350)
Other comprehensive loss		—	—			—		(44)		—		(44)
Balance at June 30, 2024		63,052,598	$	1		$	603,352	$	(601)	$	(583,438)	$	19,314

Issuance of common stock in connection with the incentive equity plan		198,550	$	—		$	589	$	—	$	—	$	589
Stock-based compensation		—	—			5,245		—		—		5,245
Net loss		—	—			—		—		(19,170)		(19,170)
Other comprehensive loss		—	—			—		(88)		—		(88)
Balance at September 30, 2024		63,251,148	$	1		$	609,186	$	(689)	$	(602,608)	$	5,890

See accompanying notes to these unaudited condensed consolidated financial statements.

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Evolus, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(43,629)	$	(49,854)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,923		3,760
Stock-based compensation	16,083		12,061
Provision for bad debts	1,659		1,354
Amortization of operating lease right-of-use assets	485		590
Amortization of debt discount and issuance costs	849		843
Deferred income taxes	2		—
Revaluation of contingent royalty obligation payable to Evolus Founders	5,611		5,132
Changes in assets and liabilities:
Accounts receivable	(15,773)		(9,370)
Inventories	2,273		(654)
Prepaid expenses	2,301		247
Other assets	(486)		110
Accounts payable	3,280		4,789
Accrued expenses	1,137		1,919
Accrued litigation settlement	—		(5,000)
Operating lease liabilities	(522)		(748)
Net cash used in operating activities	(22,807)		(34,821)
Cash flows from investing activities
Purchases of property and equipment	(1,034)		(264)
Additions to capitalized software	(2,427)		(1,002)
Net cash used in investing activities	(3,461)		(1,266)
Cash flows from financing activities

Payment of contingent royalty obligation to Evolus Founders	(5,612)		(4,038)
Proceeds from issuance of long-term debt, net of discounts	—		25,000
Payments for debt issuance costs	—		(38)
Proceeds from follow-on offering, net of underwriters fees	51,211		—
Payments for offering costs	(248)		—

Issuance of common stock in connection with incentive equity plan	3,376		195

Net cash provided by financing activities	48,727		21,119
Effect of exchange rates on cash	(262)		(269)
Change in cash and cash equivalents	22,197		(15,237)
Cash and cash equivalents, beginning of period	62,838		53,922
Cash and cash equivalents, end of period	$	85,035	$	38,685

See accompanying notes to these unaudited condensed consolidated financial statements.

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Evolus, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Supplemental disclosure of cash flow information
Cash paid for interest	$	13,311	$	8,908
Cash paid for income taxes	196		95
Non-cash information
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	3,002		4,550

See accompanying notes to these unaudited consolidated financial statements.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Note 1. Description of Business

Description of Business

Evolus, Inc., (“Evolus” or the “Company”) is a global performance beauty company focused on delivering products in the cash-pay aesthetic market. The Company received the approval of its first product Jeuveau® (prabotulinumtoxinA-xvfs) from the U.S. Food and Drug Administration (the “FDA”) in February 2019. The product was also approved by Health Canada in August 2018, the European Commission (“EC”) in September 2019, the Australian Therapeutics Good Administration (“TGA”) in January 2023, and Swissmedic in November 2023. Jeuveau® is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults. The Company commercially launched Jeuveau® in the United States in May 2019, in Canada through a distribution partner in October 2019, and began its launch in Europe in September 2022 and Australia in July 2024. In 2023, the Company entered into an agreement to be the exclusive distributor of Evolysse™, a line of injectable hyaluronic acid gels currently in late-stage development in the United States and Europe. In October 2024, regulatory approval was received in the European Union for four products in the Evolysse™ line. The Company currently generates all of its net revenues from Jeuveau®. The Company is headquartered in Newport Beach, California.

Liquidity and Financial Condition

The accompanying unaudited condensed consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of the Company’s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Since inception, the Company has incurred recurring net operating losses and negative cash flows from operating activities and management expects operating losses and negative cash flows to continue for at least the next twelve months. For the three and nine months ended September 30, 2024, the Company recorded loss from operations of $15,473 and $32,097, respectively, and a total net loss of $19,170 and $43,629, respectively. The Company used cash of $22,807 from operations during the nine months ended September 30, 2024. As of September 30, 2024, the Company had $85,035 in cash and cash equivalents and an accumulated deficit of $602,608.

In March 2024, the Company completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. The Company received net proceeds of $46,794 from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, the Company granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock (the “option shares”) at the purchase price. In April 2024, the underwriters exercised their option to purchase 318,100 of the allotted option shares. The net proceeds to the Company from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4,169.

On March 8, 2023, the Company entered into an “at-the-market” sales agreement (the “ATM Sales Agreement”) and filed a shelf registration statement on Form S-3 and corresponding prospectus with the Securities and Exchange Commission (“SEC”) to permit sales under the ATM Sales Agreement, which registration statement became effective on June 8, 2023. The Company has not sold any shares under the ATM Sales Agreement. See Note 9. Stockholders’ Equity for additional information.

The Company believes that its current capital resources, which consist of cash and cash equivalents, will be sufficient to fund its operations through at least the next twelve months from the date the accompanying condensed consolidated financial statements are issued based on its expected cash needs. The Company may need to raise additional capital to fund future operations or execute corporate development activities through entering into licensing or collaboration agreements with partners, grants or other sources of financing. Sufficient funds may not be available to the Company at all or on attractive terms when needed from equity or debt financings. If the Company is unable to obtain additional funding from these or other sources when needed, or to the extent needed, it may be necessary to reduce its scope of operations to reduce the current rate

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

of spending through actions such as reductions in staff and delaying, scaling back, or suspending certain research and development, sales and marketing programs and other operational goals.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the annual financial statements and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the SEC for interim reporting. Pursuant to these SEC rules and regulations, the Company has condensed or omitted certain financial information and disclosures normally included in annual financial statements prepared in accordance with GAAP. In the opinion of management, the interim consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, considered necessary for a fair statement of the interim periods. The interim results presented herein are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2024 or for any other interim period.

The accompanying unaudited condensed consolidated financial statements and related disclosures should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 7, 2024.

Principles of Consolidation

The Company’s unaudited condensed consolidated financial statements include the Company’s accounts and those of the Company’s wholly owned subsidiaries and have been prepared in conformity with GAAP. All intercompany transactions have been eliminated.

Use of Estimates

Management is required to make certain estimates and assumptions in order to prepare consolidated financial statements in conformity with GAAP. Such estimates and assumptions affect the reported consolidated financial statements. These estimates include, but are not limited to net revenues, allowance for doubtful accounts, fair value measurements, inventory valuations and stock-based compensation, among others. Management bases estimates on historical experience and on assumptions that management believes are reasonable. The Company’s actual results could differ materially from those estimates.

Risks and Uncertainties

The Company is party to an agreement (as amended, the “Daewoong Agreement”) with Daewoong Pharmaceutical Co. Ltd. (“Daewoong”), pursuant to which the Company received an exclusive distribution license to Jeuveau® from Daewoong for aesthetic indications in the United States, European Union, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, New Zealand, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan. Jeuveau® is manufactured by Daewoong in a facility in South Korea. The Company also has the option to negotiate first with Daewoong to secure a distribution license for any product that Daewoong directly or indirectly develops or commercializes that is classified as an injectable botulinum toxin (other than Jeuveau®) in a territory covered by the Daewoong Agreement. The Company relies on Daewoong, its exclusive and sole supplier, to manufacture Jeuveau®. Any termination or loss of significant rights, including exclusivity, under the Daewoong Agreement would materially and adversely affect the Company’s commercialization of Jeuveau®. See Note 8. Commitments and Contingencies and Note 10. Medytox Settlement Agreements for additional information.

The Company commercially launched Jeuveau® in the United States in May 2019 and in Canada through its distribution partner in October 2019. The Company also began commercially launching Jeuveau® in Europe in September 2022 and in Australia in July 2024 and, as such, has a limited history of sales in those markets. If any previously granted approval to market and sell Jeuveau® is retracted or the Company is denied approval or approval is delayed by regulators in any other jurisdictions, it may have a material adverse impact on the Company’s business and its consolidated financial statements.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

The Company is also subject to risks common to companies in the pharmaceutical industry including, but not limited to, dependency on the commercial success of Jeuveau®, the Company’s sole commercial product, significant competition within the medical aesthetics industry, its ability to maintain regulatory approval of Jeuveau®, its ability to obtain regulatory approval for Evolysse™, third party litigation and challenges to its intellectual property, uncertainty of broad adoption of its product by aesthetic practitioners and patients, its ability to in-license, acquire or develop additional product candidates and to obtain the necessary approvals for those product candidates, and the need to scale manufacturing capabilities over time.

Any disruption and volatility in the global capital markets, including caused by other events, such as public health crises, increased inflation and rising interest rates, and geopolitical conflicts, including the military conflict between Russia and Ukraine and the ongoing conflict in the Middle East, may increase the Company’s cost of capital and adversely affect its ability to access financing when and on terms that the Company desires. Any of these events could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker. The Company has determined that it operates in a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer who manages operations and reviews the financial information as a single operating segment for the purposes of allocating resources and evaluating its financial performance.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. Substantially all of the Company’s cash is held by financial institutions that management believes are of high credit quality. Such deposits may, at times, exceed federally insured limits. To date, the Company has not experienced any losses associated with this credit risk and continues to believe that this exposure is not significant. The Company invests, or plans to soon invest, its excess cash, in line with its investment policy, primarily in money market funds and debt instruments of U.S. government agencies.

The Company’s accounts receivable is derived from customers located principally in the United States. Concentrations of credit risk with respect to trade receivables are limited due to the Company’s credit evaluation process. The Company does not typically require collateral from its customers. Credit losses historically have not been material. The Company continuously monitors customer payments and maintains an allowance for credit losses based on its assessment of various factors including historical experience, age of the receivable balances, and other current economic conditions or other factors that may affect customers’ ability to pay.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with remaining maturities at purchase of three months or less that can be liquidated without prior notice or penalty. Cash and cash equivalents may include deposits, money market funds and debt securities. Amounts receivable from credit card issuers are typically converted to cash within two to four days of the original sales transaction and are considered to be cash equivalents.

Inventories

Inventories consist of finished goods held for sale and distribution. Cost is determined based on the estimated amount payable to the Company’s supplier, using the first-in, first-out method with prioritization of the items with the earliest expiration dates. Inventory valuation reserves are established based on a number of factors including, but not limited to, finished goods not meeting product specifications, product excess and obsolescence, or application of the lower of cost or net realizable value concepts. The determination of events requiring the establishment of inventory valuation reserves, together with the calculation of the amount of such reserves may require judgment. No material inventory valuation reserves have been recorded for the periods presented. Adverse changes in assumptions utilized in the Company’s inventory reserve calculations could result in an increase to its inventory valuation reserves.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Product cost of sales, excluding amortization of intangible assets, consisted of the inventory cost and certain royalties on the sale of Jeuveau® payable to Medytox pursuant to the Medytox Settlement Agreements (as such term is defined in Note 10. Medytox Settlement Agreements).

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in an orderly transaction between market participants in a principal market on the measurement date.

The fair value hierarchy defines a three-tiered valuation hierarchy for disclosure of fair value measurement is classified and disclosed by the Company in one of the three categories as follows:

•Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, or can be corroborated by observable market data for substantially the full term of the asset or liability; and

•Level 3—Prices or valuation techniques that require inputs that are unobservable that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of approximately three to five years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the term of the related lease.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. The Company assesses goodwill for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company performs an annual qualitative assessment of its goodwill in the fourth quarter of each calendar year to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required. For the purpose of impairment testing, the Company has determined that it has one reporting unit. There was no impairment of goodwill for any of the periods presented.

Intangible Assets

The distribution right intangible asset related to Jeuveau® is amortized over the period the asset is expected to contribute to the future cash flows of the Company. The Company determined the pattern of this intangible asset’s future cash flows could not be readily determined with a high level of precision. As a result, the distribution right intangible asset is being amortized on a straight-line basis over the estimated useful life of 20 years.

On December 20, 2023, the Company entered into a License, Supply and Distribution Agreement (the “Symatese Europe Agreement”), pursuant to which Symatese granted to the Company an exclusive right to commercialize and distribute four injectable hyaluronic acid product candidates, which are referred to as: (i) Form; (ii) Smooth; (iii) Sculpt and (iv) Lips, in 50 countries in Europe for use in the aesthetics and dermatological fields. A portion of the Symatese Europe Agreement represents the license and distribution right to Evolysse™ in Europe. The definite-lived distribution right intangible asset

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

related to the Evolysse™ nasolabial fold product approved in Europe is amortized on a straight-line basis over the estimated useful life of 15 years.

The Company capitalizes certain internal-use software costs associated with the development of its mobile and web-based customer platforms. These costs include personnel expenses and external costs that are directly associated with the software projects. These costs are included as intangible assets in the accompanying condensed consolidated balance sheets. The capitalized internal-use software costs are amortized on a straight-line basis over the estimated useful life of two years upon being placed in service.

The Company reviews long-term and identifiable definite-lived intangible assets or asset groups for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or an asset group, further impairment analysis is performed. An impairment loss is measured as the amount by which the carrying amount of the asset or asset groups exceeds the fair value for assets to be held and used or fair value less cost to sell for assets to be disposed of. The Company also reviews the useful lives of its assets periodically to determine whether events and circumstances warrant a revision to the remaining useful life. Changes in the useful life are adjusted prospectively by revising the remaining period over which the asset is amortized. There was no material impairment of long-lived assets for any periods presented.

Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term. Operating lease assets and liabilities are included in ROU assets, current portion of operating lease liabilities and noncurrent operating lease liabilities in the accompanying condensed consolidated balance sheets.

Operating lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. The incremental borrowing rate, the ROU asset and the lease liability are reevaluated upon a lease modification. Operating lease ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received, if any. The Company determines the lease term as the noncancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company’s leases do not contain any residual value guarantees. Leases with a term of 12 months or less are not recognized on the condensed consolidated balance sheets. For operating leases, the Company recognized rent expense on a straight-line basis over the lease term. There were no significant finance leases as of September 30, 2024.

Contingent Royalty Obligation Payable to Evolus Founders

Payment obligations to the founders of Evolus (“Evolus Founders”) consist of quarterly royalty payments of a low-single digit percentage of net sales of Jeuveau®. The obligations terminate in the second quarter of 2029, which is the 10-year anniversary of the first commercial sale of Jeuveau® in the United States. Under an amended agreement with the Evolus Founders, the Company recorded the fair value of all revised payment obligations owed to the Evolus Founders.

The Company determines the fair value of the contingent royalty obligation payable at each reporting period end based on Level 3 inputs using a discounted cash flows method. Changes in the fair value of the contingent royalty obligation payable are determined at each reporting period end and recorded in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss and as a liability in the condensed consolidated balance sheets.

Long-Term Debt

Long-term debt represents the debt balance with Pharmakon (see Note 6. Term Loans), net of discount and issuance costs. Debt issuance costs represent legal, lender and consulting costs or fees associated with debt financing. Debt discounts and issuance costs are amortized into interest expense over the term of the debt.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Foreign Currency Translation

The financial statements of foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated into U.S. dollars at current exchange rates as of balance sheet date, and income and expense items are translated into U.S. dollars using the average rates of exchange prevailing during the period. Gains and losses arising from translation are recorded in other comprehensive loss as a separate component of stockholders’ equity. Foreign currency gains or losses on transactions denominated in a currency other than the Company’s functional currency are recorded in other expenses, net in the accompanying condensed consolidated statements of operations and comprehensive loss.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services. In order to achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when the Company satisfies the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.

General

The Company generates product revenue from the sale of Jeuveau® in the United States, Europe and Australia, and service revenue from the sale of Jeuveau® through a distribution partner in Canada.

For product revenue, the Company recognizes revenue when control of the promised goods under a contract is transferred to a customer, in an amount that reflects the consideration the Company expects to receive in exchange for those goods as specified in the customer contract. The transfer of control occurs upon receipt of the goods by the customer since that is when the customer has obtained control of the goods’ economic benefits. The Company does not provide any service-type warranties and does not accept product returns except under limited circumstances such as damages in transit or ineffective product. The Company also excludes any amounts related to taxes assessed by governmental authorities from revenue measurement. Shipping and handling costs associated with outbound product freight are accounted for as fulfillment costs and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

For service revenue, the Company evaluated the arrangement with the distribution partner in Canada and determined that it acts as an agent in the distribution of Jeuveau® in Canada as it does not control the product before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price. Accordingly, the Company records the sale as service revenue on a net basis. Revenue from services is recognized in the period the service is performed for the amount of consideration expected to be received.

Disaggregation of Revenue

The Company’s disaggregation of revenue is consistent with its operating segment as disclosed above.

Gross-to-Net Revenue Adjustments

The Company provides customers with discounts, such as trade and volume discounts and prompt pay discounts, that are directly reflected in the invoice price. Revenues are recorded net of sales-related adjustments, wherever applicable, primarily for the volume-based rebates, consumer loyalty programs and co-branded marketing programs.

•Volume-Based Rebates — Volume-based rebates are contractually offered to certain customers. The rebates payable to each customer are determined based on the contract and quarterly purchase volumes.

•Consumer Loyalty Program — The Company’s consumer loyalty program allows participating customers to earn rewards for qualifying treatments to their patients (i.e. consumers) using Jeuveau® and redeem the rewards for Jeuveau® in the future at no additional cost. The loyalty program represents a customer option that provides a

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

material right and, accordingly, is a performance obligation. At the time Jeuveau® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward (“Reward”) that the customer might redeem in the future. The standalone selling price of the Reward is measured based on estimated average selling price of Jeuveau® at the time of redemption and the expected redemption rate by customers based on historical sales data. The portion of invoice price allocated to the Reward is initially recorded as deferred revenue. Subsequently, when customers redeem the Reward and the related product is delivered, the deferred revenue is recognized in net revenues at that time.

•Co-Branded Marketing Programs — The Company offers eligible customers with a certain level of Jeuveau® purchases to receive advertising co-branded with the Company. The co-branded advertising represents a performance obligation. At the time Jeuveau® product is sold to customers, the invoice price is allocated between the product sold and the advertisement. The standalone selling price of the advertisement is measured based on the estimated market value of similar advertisement adjusted for the customer’s portion of the advertisement. The portion of invoice price allocated to the advertisement is initially recorded as deferred revenue. Subsequently, when the advertisement airs, the deferred revenue is recognized in net revenues at that time.

Contract Balances

A contract with a customer states the terms of the sale, including the description, quantity and price of each product purchased. Amounts are recorded as accounts receivable when the Company’s right to consideration becomes unconditional. The Company does not have any significant financing components in customer contracts given the expected time between transfer of the promised products and the payment of the associated consideration is less than one year. As of September 30, 2024 and December 31, 2023, all amounts included in accounts receivable, net on the accompanying condensed consolidated balance sheets are related to contracts with customers.

The Company did not have any contract assets nor unbilled receivables as of September 30, 2024 or December 31, 2023.

Contract liabilities reflect estimated amounts that the Company is obligated to pay to customers or patients primarily under the rebate and deferred revenue associated with Rewards under the consumer loyalty program and co-branded marketing programs. The Company’s contract liabilities are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

As of September 30, 2024 and December 31, 2023, the accrued revenue contract liabilities, primarily related to volume-based rebates, consumer loyalty program and co-branded marketing programs, were $13,231 and $11,033, respectively, which were recorded in accrued expenses in the accompanying condensed consolidated balance sheets.

For the three and nine months ended September 30, 2024, provisions for rebate, consumer loyalty programs and co-branded marketing programs were $8,732 and $26,728, respectively which were offset by related payments, redemptions and adjustments of $7,226 and $24,514, respectively, which were recorded as adjustments to gross revenues in the accompanying condensed consolidated statement of operations. For the three and nine months ended September 30, 2023, provisions for rebate, consumer loyalty programs and co-branded marketing programs were $6,762 and $22,264, respectively, which were offset by related payments, redemptions and adjustments of $6,924 and $22,495, respectively, which were recorded as adjustments to gross revenues in the accompanying condensed consolidated statement of operations.

During the nine months ended September 30, 2024 and 2023, the Company recognized $10,078 and $7,751, respectively, of revenue related to amounts included in contract liabilities at the beginning of the period and did not recognize any revenue related to changes in transaction prices regarding its contracts with customers from previous periods.

Collectability

Accounts receivable are recorded at the invoiced amount and do not bear interest. At the time of contract inception or new customer account set-up, the Company performs a collectability assessment of the customer’s creditworthiness. The Company assesses the probability that the Company will collect the entitled consideration in exchange for the goods sold, by considering the customer’s ability and intention to pay when consideration is due. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and periodic evaluation of customers’ receivables balances using relevant available information, from

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

internal and external sources, relating to past events, current conditions and forecasts. Historical credit loss experience provides the basis for estimation of expected credit losses and are adjusted as necessary using the relevant information available. The Company writes off accounts receivable balances when it is determined that there is no possibility of collection. As of September 30, 2024 and December 31, 2023, allowance for credit losses was $2,282 and $1,490, respectively. For the three and nine months ended September 30, 2024, the provision for bad debts was $889 and $1,659, respectively, and write-offs, net of recoveries was $665 and $866, respectively. For the three and nine months ended September 30, 2023, the provision for bad debts was $1,012 and $1,354, respectively, and the write-offs, net of recoveries was $1,057 and $955, respectively.

Practical Expedients

The Company expenses sales commissions when incurred as the amortization period is one year or less. These costs are recorded within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company does not adjust the amount of promised consideration for the effects of the time value of money for contracts in which the anticipated period between when the Company transfers the goods or services to the customer and when the customer pays within one year.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses include personnel-related costs, costs associated with pre-clinical and clinical development activities, costs associated with and costs for prototype products that are manufactured prior to market approval for that prototype product, internal and external costs associated with the Company’s regulatory compliance and quality assurance functions, including the costs of outside consultants and contractors that assist in the process of submitting and maintaining regulatory filings, and overhead costs, including allocated facility related expenses.

In-process Research and Development

Intangible assets acquired that are used for research and development, do not yet have regulatory approval for commercialization, and have no future alternative use are expensed as in-process research and development.

Symatese U.S. Agreement

On May 9, 2023, the Company and Symatese entered into a License, Supply and Distribution Agreement (the “Symatese U.S. Agreement”), pursuant to which Symatese granted to the Company an exclusive right to commercialize and distribute its five injectable hyaluronic acid product candidates, including the products referred to as: (i) Form; (ii) Smooth; (iii) Sculpt; (iv) Lips; and (v) Eye (collectively, the “Products”), in the United States for use in the aesthetics and dermatological field of use. The Company also has the right of first negotiation to obtain a license from Symatese to commercialize and distribute any new products developed using the same technology as the Evolysse™ line of injectable hyaluronic acid gels.

As consideration for the rights granted under the Symatese U.S. Agreement, the Company is required to make up to €16,200 in milestone payments to Symatese, including an initial payment of €4,100 within 30 days of execution of the Symatese U.S. Agreement, and additional annual payments of €1,600 in June 2025, €4,100 in June 2026, €3,200 in June 2027, and €3,200 in June 2028, in each case subject to three of the Products gaining approval prior to that date. In June 2023, the Company paid $4,441 as an upfront payment upon the signing of the Symatese U.S. Agreement and has developmental costs, ongoing milestone and royalty payment obligations. The Symatese U.S. Agreement is also subject to minimum purchase requirements and failure to meet such requirements may result in a reduction or termination of the Company’s exclusive rights, subject to certain exceptions. Additionally, the Company agreed to a specified cost-sharing agreement with Symatese related to the registration of the Lips and Eye Products with the FDA.

The initial term of the Symatese U.S. Agreement is fifteen (15) years from the first FDA approval of a Product, with automatic renewals for successive five (5)-year terms subject to the terms of the Symatese U.S. Agreement. The upfront payment of $4,441 was recorded as in-process research and development expense.

Symatese Europe Agreement

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

On December 20, 2023, the Company entered into the Symatese Europe Agreement, pursuant to which Symatese granted to us an exclusive right to commercialize and distribute four injectable hyaluronic acid gel candidates, which are referred to as: (i) Form; (ii) Smooth; (iii) Sculpt and (iv) Lips, in 50 countries in Europe for use in the aesthetics and dermatological fields.

In exchange for the rights granted under the Symatese Europe Agreement, the Company issued 610,000 shares of common stock and is required to pay two milestone payments: (i) €1,200 on the second anniversary of certain regulatory approvals, and (ii) €1,900 on the earlier of the third anniversary of certain regulatory approvals or following a year in which the Company achieves €25,000 in revenue in Europe. In October 2024, regulatory approval was received in the European Union for four products in the Evolysse™ line. The Symatese Europe Agreement is also subject to minimum purchase requirements and failure to meet such requirements may result in a reduction or termination of the Company’s exclusive rights, subject to certain exceptions.

The initial agreement is for a term of fifteen (15) years, with automatic year renewal provisions. Upon the receiving of regulatory approval for the Evolysse™ nasolabial fold product in Europe, the Company recorded $4,429 in in-process research and development expense and $1,476 in intangible assets in December 2023 for the stock issuance of 610,000 shares. The intangible assets of $1,476 represents the value of the approved nasolabial fold product in Europe and is amortized over its estimated useful life.

Litigation Settlement

In connection with a litigation settlement, $5,000 was paid in the first quarter of 2023 and for the period from September 17, 2022 to September 16, 2032, the Company agreed to pay Medytox a mid-single digit royalty percentage on all net sales of Jeuveau®. The royalty payments are made quarterly and recorded as product cost of sales on the accompanying condensed consolidated statements of operations and comprehensive loss in the periods the royalties are incurred.

See Note 10. Medytox Settlement Agreements for the details of all litigation settlement agreements.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for employees, consultants and members of the Board of Directors based on the fair value at the date of grant.

The Company uses the Black-Scholes option pricing model to value stock option grants. The Black-Scholes option pricing model requires the input of subjective assumptions, including the expected volatility of the Company’s common stock, expected risk-free interest rate, and the option’s expected life. The fair value of the Company’s restricted stock units (“RSUs”) is based on the fair value on the grant date of the Company’s common stock. The Company also evaluates the impact of modifications made to the original terms of equity awards when they occur.

The Company uses a Monte Carlo simulation model to determine the fair value of performance units with market conditions at the grant date. The Monte Carlo simulation model involves the generation of a large number of possible stock price outcomes for the Company’s stock which is assumed to follow a Geometric Brownian Motion. The use of the Monte Carlo simulation model requires the input of a number of assumptions including expected volatility of the Company’s stock price, which is based on the historical volatility of its stock; risk-free interest rate, which is based on the treasury zero-coupon yield commensurate with the term of the performance unit as of the grant date; and expected dividends as applicable, which is zero, as the Company has never paid any cash dividends.

The fair value of stock options and RSUs with service conditions that are expected to vest is amortized on a straight-line basis over the requisite service period. Stock-based compensation for RSUs with performance or market conditions is recorded over the requisite service period using the accelerated attribution method. The Company recognizes stock-based compensation for RSUs with performance conditions when it is probable that those performance conditions will be met. Stock-based compensation expense is recognized net of actual forfeitures when they occur, as an increase to additional paid-in capital in the condensed consolidated balance sheets and in the selling, general and administrative or research and development expenses in the condensed consolidated statements of operations and comprehensive loss.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Income Taxes

The Company applies an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision or benefit for interim periods, as required under GAAP. The Company recorded an income tax expense of $134 and $24 for the three months ended September 30, 2024 and 2023, respectively, and an income tax expense of $224 and $70 for the nine months ended September 30, 2024 and 2023, respectively. The Company’s ETR differs from the U.S. federal statutory tax rate of 21% for the three and nine months ended September 30, 2024 and 2023, primarily as a result of the impact of the change of the valuation allowance to offset its deferred tax assets.

A valuation allowance is recorded against deferred tax assets to reduce the net carrying value when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.

Additionally, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. Accordingly, the Company establishes reserves for uncertain tax positions.

The Company monitors changes to the tax laws in the states it conducts business and files corporate income tax returns. The Company does not expect that changes to state tax laws through September 30, 2024 to materially impact its condensed consolidated financial statements.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period including contingently issuable shares. Diluted earnings per share is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and the vesting of restricted stock units. Because the impact of the options and non-vested RSUs are anti-dilutive during periods of net loss, there was no difference between the weighted-average number of shares used to calculate basic and diluted net loss per common share for the periods presented. Excluded from the dilutive net loss per share computation for the three and nine months ended September 30, 2024 and 2023 were stock options of 6,188,670 and 5,810,702, respectively, and non-vested RSUs of 4,117,747 and 4,035,380, respectively, because their inclusion would have been anti-dilutive. Although these securities were anti-dilutive for these periods, they could be dilutive in future periods.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Issued But Not Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU No. 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future financial position, results of operations or cash flows.

Note 3. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company measures and reports certain financial instruments as assets and liabilities at fair value on a recurring basis. The fair value of these instruments was as follows:


	As of September 30, 2024
	Fair Value		Level 1		Level 2		Level 3
Liabilities
Contingent royalty obligation payable to Evolus Founders	$	45,029	$	—	$	—	$	45,029


	As of December 31, 2023
	Fair Value		Level 1		Level 2		Level 3
Liabilities
Contingent royalty obligation payable to Evolus Founders	$	45,030	$	—	$	—	$	45,030

The Company did not transfer any assets or liabilities measured at fair value on a recurring basis between levels during the nine months ended September 30, 2024 or 2023.

The Company determines the fair value of the contingent royalty obligation payable to Evolus Founders based on Level 3 inputs using a discounted cash flows method. The significant unobservable input assumptions that can significantly change the fair value include (i) projected amount and timing of net revenues during the payment period, which terminates at the end of the second quarter of 2029, (ii) the discount rate, and (iii) the timing of payments. As of September 30, 2024 and December 31, 2023, the Company utilized a discount rate of 14.0% and 15.0%, respectively. Net revenue projections are also updated to reflect changes in the timing of expected sales. Significant increases (decreases) in the discount rate and to the projected net revenues would result in a significantly lower (higher) fair value measurement, which could materially impact their fair value reported on the unaudited consolidated balance sheet.

The following table shows a reconciliation of the beginning and ending fair value measurements of the contingent royalty obligation payable:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fair value, beginning of period	$	44,606	$	47,081	$	45,030	$	46,310
Payments	(2,005)		(1,479)		(5,612)		(4,038)
Change in fair value recorded in operating expenses	2,428		1,802		5,611		5,132
Fair value, end of period	$	45,029	$	47,404	$	45,029	$	47,404

Other Financial Assets and Liabilities

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, lease liabilities, and long-term debt. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates their fair value because of the short-term maturity of such instruments.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

The Company estimates the fair value of long-term debt and operating lease liabilities using the discounted cash flow analysis based on the interest rates for similar rated debt securities (Level 2). As of September 30, 2024 and December 31, 2023, the fair value of long-term debt was $138,501 and $140,241, respectively. The fair value of operating lease liabilities as of September 30, 2024 and December 31, 2023 approximated their carrying value.

Note 4. Goodwill and Intangible Assets

The table below shows the weighted-average life, original cost, accumulated amortization and net book value by major intangible asset classification:


	Weighted-Average Life (Years)	Original Cost		Accumulated Amortization		Net Book Value
Definite-lived intangible assets
Distribution rights	20	$	60,552	$	(16,791)	$	43,761
Capitalized software	2	12,397		(9,571)		2,826
Intangible assets, net		72,949		(26,362)		46,587
Indefinite-lived intangible asset
Goodwill	*	21,208		—		21,208
Total as of September 30, 2024		$	94,157	$	(26,362)	$	67,795


	Weighted-Average Life (Years)	Original Cost		Accumulated Amortization		Net Book Value
Definite-lived intangible assets
Distribution rights	20	$	60,552	$	(14,500)	$	46,052
Capitalized software	2	9,804		(8,746)		1,058
Intangible assets, net		70,356		(23,246)		47,110
Indefinite-lived intangible asset
Goodwill	*	21,208		—		21,208
Total as of December 31, 2023		$	91,564	$	(23,246)	$	68,318

* Intangible assets with indefinite lives have an indeterminable average life.

The following table outlines the estimated future amortization expense related to intangible assets held as of September 30, 2024 that are subject to amortization:


Fiscal year
Remaining in 2024	$	1,019
2025	4,498
2026	4,179
2027	3,054
2028	3,054
Thereafter	30,783
	$	46,587

The Company capitalized $1,116 and $349 for the three months ended September 30, 2024 and 2023, respectively, and $2,593 and $919 for the nine months ended September 30, 2024 and 2023, respectively, related to costs of computer software developed for internal use. The software is amortized over a two-year period using the straight-line method. The Company recorded total intangible assets amortization expense of $803 and $1,053 for the three months ended September 30, 2024 and

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

2023, respectively, and $3,115 and $3,005 for the nine months ended September 30, 2024 and 2023, respectively, within depreciation and amortization on the accompanying condensed consolidated statements of operations and comprehensive loss.

Note 5. Accrued Expenses

Accrued expenses consisted of:


	September 30,		December 31,
	2024		2023
Accrued revenue contract liabilities	$	13,231	$	11,033
Accrued payroll and related benefits	10,907		13,433
Accrued royalties under the Medytox Settlement Agreement	3,658		3,657
Other accrued expenses	7,153		5,690

	$	34,949	$	33,813

Note 6. Term Loans

Pharmakon Term Loans

On December 14, 2021, the Company entered into a loan agreement with Pharmakon. Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to the Company in two tranches (the “Pharmakon Term Loans”). The first tranche of $75,000 was funded on December 29, 2021. On December 5, 2022, the Company entered into a Second Amendment to the loan agreement to extend the Company’s option to draw down the second tranche of $50,000 until December 31, 2023, and paid an amendment fee of $500 to Pharmakon. The Pharmakon Term Loans will mature on the sixth-year anniversary of the closing date of the first tranche (the “Maturity Date”).

On May 9, 2023, the Company entered into the Third Amendment to the loan agreement. Under the Third Amendment, Pharmakon agreed to advance the second tranche of $50,000 to the Company in two installments: (i) $25,000 advanced on May 31, 2023 and (ii) $25,000 advanced on December 15, 2023. The Third Amendment amended the principal payment terms to seven quarterly payments, each in an amount equal to 1/12th of the outstanding principal amount of the Pharmakon Term Loans following the 51st-month anniversary of the closing date of the first tranche and the remaining principal balance of the Pharmakon Term Loans on the Maturity Date. The Third Amendment replaced the interest rates based on London Interbank Offered Rate (“LIBOR”) with interest rates based on the Secured Overnight Financing Rate (“SOFR”) throughout the remaining term of the Pharmakon Term Loans.

Initially, the Pharmakon Term Loans accrued interest at a per annum rate equal to the 3-month U.S. Dollar LIBOR rate (subject to a LIBOR rate floor of 1.0%) plus 8.5% per annum. Beginning May 2023, the Pharmakon Term Loans accrue interest at a per annum rate equal to the 3-month SOFR rate (subject to a SOFR rate floor of 1.0%) plus 8.5% per annum.

The Company may elect to prepay all amounts, not less than $20,000, owed prior to the Maturity Date. Prepayments of the second tranche installment prior to the second anniversary of the date on which the second tranche installment is drawn by the Company will be accompanied by a make whole amount equal to the sum of all interest that would have accrued through such second anniversary. Prepayments of the Pharmakon Term Loans will also be accompanied by a prepayment premium equal to the principal amount so prepaid multiplied by 3.0% if made prior to the third anniversary of the closing date of the first tranche, 2.0% if made on or after the third anniversary of the closing date of the first tranche but prior to the fourth anniversary of the closing date of the first tranche, and 1.0% if made on or after the fourth anniversary of the closing date of the first tranche but prior to the Maturity Date. If the Pharmakon Term Loans are accelerated following the occurrence of an event of default, including a material adverse change, the Company is required to immediately pay Pharmakon an amount equal to the sum of all outstanding principal, unpaid interest, and applicable make whole and prepayment premiums.

The Pharmakon Term Loans are secured by substantially all of the Company’s assets. The Pharmakon Term Loans contain customary affirmative and restrictive covenants and representations and warranties. The affirmative covenants include, among others, certain information delivery requirements, obligations to maintain certain insurance, and certain notice requirements. The restrictive covenants include, among others, incurring certain additional indebtedness, consummating

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

certain change in control transactions, or incurring any non- permitted lien or other encumbrance on the Company’s assets, without Pharmakon’s prior written consent. The Pharmakon Term Loans do not contain covenants requiring the Company to maintain a minimum cash threshold or minimum revenues or earnings. As of September 30, 2024, the Company was in compliance with its debt covenants.

At the closing date of the first tranche, the Company incurred $3,042 and $3,263 in debt discounts and issuance costs related to the Pharmakon Term Loans, respectively. Debt discounts and issuance costs related to the entire Pharmakon Term Loans have been allocated pro rata between the funded and unfunded portions. Debt discounts and issuance costs allocated to the first tranche of $75,000 have been presented as a deduction to the debt balance and amortized into interest expense using the effective interest method. Debt discounts and issuance costs associated with the unfunded second tranche are deferred as assets until the tranche is drawn and are amortized into interest expense using the straight-line method over the term of the debt. Upon the first draw of the second tranche in May 2023, debt discounts and issuance costs associated with the second tranche were reclassified from assets to debt as a deduction to the debt balance.

As of September 30, 2024, the borrowings outstanding under the Pharmakon Term Loans were classified as long-term debt in the accompanying condensed consolidated balance sheets. The overall effective interest rate was approximately 15.27% and 13.95% for the first and second tranche, respectively, as of September 30, 2024.

As of September 30, 2024, the principal amounts of long-term debt maturities for each of the next five fiscal years are as follows:


Fiscal year



2026	$	41,667
2027	83,333

Total principal payments	125,000
Unamortized debt discounts and issuance costs	(3,792)
Long term debt, net of discounts and issuance costs	$	121,208

Note 7. Operating Leases

On May 15, 2019, the Company entered into a five-year non-cancelable operating lease (the “Lease Agreement”), which was set to expire January 31, 2025, for its corporate headquarters in Newport Beach, California. Lease payments increase each year on February 1 based on an annual rent escalation clause. The Company has an option to extend the term of the lease for an additional 60 months, which was not recognized as part of its ROU assets and lease liabilities.

On July 27, 2023, the Company entered into the First Amendment to the Lease Agreement (the “First Lease Amendment”) for its corporate headquarters. The First Lease Amendment includes a lease extension to January 31, 2030 with a three-month rent abatement period and additional office space. On July 27, 2023, the effective date of the First Lease Amendment, the Company recognized additional ROU assets and lease liabilities in the amount of $4,550. On August 1, 2024, the lease commencement date for the additional office space, the Company recognized additional ROU assets and lease liabilities in the amount of $3,002.

On October 16, 2024, the Company entered into the Second Amendment to the Lease Agreement (the “Second Lease Amendment”) to acquire additional office space for its corporate headquarters.

The Company’s lease agreement does not contain any residual value guarantees or material restrictive covenants. The payments associated with the renewal will only be included in the measurement of the lease liability and ROU assets if the exercise of the renewal option is determined to be reasonably certain. The Company considers the timing of the renewal period and other economic factors such as the financial implications of a decision to extend or not to extend a lease in determining if the renewal option is reasonably certain to be exercised.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

The components of operating lease expense are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fixed operating lease expense	$	387	$	286	$	1,055	$	833
Variable operating lease expense	26		48		96		110

	$	413	$	334	$	1,151	$	943

The weighted-average remaining lease term and discount rate are as follows:


	As of September 30,
	2024		2023
Weighted-average remaining lease term (years)	5.3		6.3
Weighted-average discount rate	9.6	%	11.0	%

Operating lease expenses were included in the selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Operating lease right-of-use assets and related current and noncurrent operating lease liabilities are presented in the accompanying condensed consolidated balance sheets.

The following table presents the future minimum payments under the operating lease agreements with non-cancelable terms as of September 30, 2024:


Fiscal year
Remaining in 2024	$	388
2025	1,714
2026	2,138
2027	2,212
2028	2,290
Thereafter	2,569
Total operating lease payments	11,311
Less: imputed interest	(2,644)
Present value of operating lease liabilities	$	8,667

Note 8. Commitments and Contingencies

Purchase Commitments

As of September 30, 2024, the Company has entered into commitments to purchase services and products for an aggregate amount of approximately $4,652. Certain minimum purchase commitments related to the purchase of Jeuveau® and Evolysse™ are described below.

Daewoong Agreement

The Daewoong Agreement includes certain minimum annual purchases that the Company is required to make in order to maintain the exclusivity of the license. The Company may, however, meet these minimum purchase obligations by achieving certain market share in the licensed territories. These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and the Company’s future market share in various jurisdictions.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Total inventory payments to Daewoong were $17,648 and $44,268 for the three and nine months ended September 30, 2024, respectively, and $8,785 and $36,537 for the three and nine months ended September 30, 2023, respectively.

Symatese U.S. Agreement and Symatese Europe Agreement

The Symatese U.S. Agreement and the Symatese Europe Agreement include certain minimum purchase requirements, and failure to meet such requirements may result in a reduction or termination of the Company’s rights to exclusivity, subject to certain exceptions. These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and the Company’s future market share in various jurisdictions.

Legal Proceedings

Securities Class Action Lawsuit

On October 16 and 28, 2020, two putative securities class action complaints were filed in the U.S. District Court for the Southern District of New York by Evolus shareholders Armin Malakouti and Clinton Cox, respectively, naming the Company and certain of its officers as defendants. The complaints assert violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements and failed to disclose material adverse facts related to the Company’s acquisition of the right to sell Jeuveau®, the complaint against the Company filed by Allergan and Medytox in the U.S. International Trade Commission related to Jeuveau® (the “ITC Action”), and risks related to the ITC Action. The complaints assert a putative class period of February 1, 2019 to July 6, 2020. The court consolidated the actions on November 13, 2020, under the caption In re Evolus Inc. Securities Litigation, No. 1:20-cv-08647 (PGG). On September 17, 2021, the court appointed a lead plaintiff and lead counsel. On November 17, 2021, the lead plaintiff filed an amended class action complaint against the Company, three of its officers, and Alphaeon Corporation, the Company’s former majority shareholder. On January 18, 2022, the Company and the officer defendants served their motion to dismiss the amended complaint. The motion was fully briefed on June 16, 2022.

On September 26, 2024, the court granted the Company’s motion to dismiss the amended complaint and provided plaintiffs with the ability to move to amend their complaint by October 17, 2024. Plaintiffs did not submit a motion to amend their complaint by October 17, 2024, and on October 18, 2024, the court entered final judgment in favor of the defendants. Plaintiffs’ deadline to file a notice of appeal is November 18, 2024. The outcome of the legal proceeding is uncertain at this point. Based on information available to the Company at present, management cannot reasonably estimate a range of loss with respect to this matter.

Shareholder Derivative Lawsuit

On November 27, 2020 and December 2, 2020, two putative Evolus shareholders filed substantially similar shareholder derivative actions in the U.S. District Court for the Southern District of New York against certain of the Company’s officers and directors as defendants. The complaints alleged substantially similar facts as those in the Securities Class Action and assert claims for, among other things, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and violations of Section 14(a) of the Exchange Act and for contribution under Sections 10(b) and 21(D) of the Exchange Act. On December 29, 2020, the plaintiffs filed a joint stipulation to consolidate their actions and on February 5, 2021, the court consolidated the action under the caption In re Evolus, Inc. Derivative Litigation, No. 1:20-cv-09986-PPG, and adjourned defendants’ time to move, answer or otherwise respond to the complaints. On September 20, 2021, the court so-ordered the parties’ stipulated stay of the consolidated derivative suit pending the court’s decision on the defendants’ motion to dismiss the Securities Class Action.

It is possible that additional suits will be filed, or additional allegations will be made by stockholders, with respect to these same or similar or other matters and also naming the Company and/or its officers and directors as defendants. The Company believes that the complaints are without merit and intends to vigorously defend against it. However, the outcome of the legal proceeding is uncertain at this point. Based on information available to the Company at present, management cannot reasonably estimate a range of loss with respect to this matter.

Books and Records Demand

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

On March 5, 2021, the Company received a letter from a putative stockholder demanding inspection of specified categories of the Company’s books and records under Section 220 of the Delaware General Corporations Law. The Company was subsequently informed that the stockholder sold his shares of the Company’s common stock. On October 13, 2021, the Company received a substantially similar demand to inspect specified categories of the Company’s books and records under Section 220 of the Delaware General Corporations Law from another putative stockholder. The subject of the demand is substantially similar to the allegations in the putative securities class action and derivative complaints described above. The Company responded to the demand in December 2021. The outcome of this matter is uncertain at this point. Based on information available to the Company at present, management cannot reasonably estimate a range of loss with respect to this matter.

Other Legal Matters

The Company is, from time to time, involved in various litigation matters or regulatory encounters arising in the ordinary course of business that could result in unasserted or asserted claims or litigation. These other matters may raise difficult and complex legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit or regulatory encounter is brought, and differences in applicable laws and regulations. Except as set forth above, the Company does not believe that these other matters would have a material adverse effect on its accompanying financial position, results of operations or cash flows. However, the resolution of one or more of the other matters in any reporting period could have a material adverse impact on the Company’s financial results for that period.

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because they involve claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. No amounts were accrued as of September 30, 2024 and December 31, 2023.

Note 9. Stockholders’ Equity

Preferred Stock

The Company has 10,000,000 authorized shares of preferred stock with a par value of $0.00001 per share. As of September 30, 2024, no shares of its preferred stock were issued and outstanding.

Common Stock

The Company has 100,000,000 authorized shares of common stock with a par value of $0.00001 per share. As of September 30, 2024, 63,251,148 shares of its common stock were issued and outstanding.

In March 2024, the Company completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. The Company received net proceeds of $46,794 from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, the Company granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock (“option shares”) at the purchase price. In April 2024, the underwriters elected to exercise their option to purchase 318,100 of the allotted option shares. The net proceeds to the Company from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4,169.

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

2024 Employee Stock Purchase Plan (“ESPP”)

On June 6, 2024, the Company approved the adoption of the 2024 Employee Stock Purchase Plan. The 2024 ESPP provides an opportunity to purchase shares of the Company’s common stock at a favorable price and upon favorable terms in consideration of the participating employees’ continued services. Eligible employees will be entitled to purchase, by means of payroll deductions, limited amounts of the Company’s common stock at a discount during periodic offering periods. There were 579,648 shares initially reserved for issuance under the 2024 ESPP, which shall automatically increase on March 5 of each calendar year, by an amount equal to the lesser of (i) 1.0% of the total number of shares of common stock issued and outstanding on March 4 of the year in which such increase is to occur, (ii) 579,648 shares of common stock, or (iii) such number of shares of common stock as may be established by the Board of Directors. There were no shares issued under the 2024 ESPP during the nine months ended September 30, 2024.

“At-the-market” Offerings of Common Stock

On March 8, 2023, the Company entered into the ATM Sales Agreement with Leerink Partners LLC (formerly known as SVB Securities LLC) (the “Sales Agent”) pursuant to which shares of the Company’s common stock can be sold from time to time for aggregate gross proceeds of up to $50,000 (the “ATM Program”). Under the ATM Sales Agreement, the Sales Agent is entitled to compensation, at a commission rate equal to 3.0% of the gross proceeds from sales of the Company’s common shares under the ATM Program. The Company has not sold any shares under the ATM Sales Agreement.

2017 Omnibus Incentive Plan

The Company’s 2017 Omnibus Incentive Plan (the “Plan”) provides for the grant of incentive options to employees of the Company, and for the grant of non-statutory options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to the Company’s officers, directors, consultants and employees of the Company. The maximum number of shares of common stock that may be issued under the Plan is 4,361,291 shares, plus an annual increase on each anniversary of November 21, 2017 equal to 4.0% of the total issued and outstanding shares of the Company’s common stock as of such anniversary (or such lesser number of shares as may be determined by the Company’s Board of Directors). As of September 30, 2024, the Company had an aggregate of 1,336,000 shares of its common stock available for future issuance under the Plan.

2023 Inducement Incentive Plan

In September 2023, the Company’s Board of Directors adopted the Company’s 2023 Inducement Incentive Plan (the “Inducement Plan”) in accordance with Nasdaq Listing Rule 5635(c)(4). The Company’s Inducement Plan provides for the grant of equity awards to selected individuals in connection with their commencing employment with the Company as an inducement material to their accepting such employment. The Board of Directors reserved 1,000,000 shares of common stock for issuance under the Inducement Plan. As of September 30, 2024, the Company had an aggregate of 265,548 shares of its common stock available for future issuance under the Inducement Plan.

Inducement Grants

From time to time, the Company has granted equity awards to its newly hired employees, including executives, in accordance with Nasdaq Listing Rule 5635(c)(4) and outside of the Company’s Plan and Inducement Plan. Such grants were made pursuant to a stand-alone nonstatutory stock option agreement and a stand-alone RSU agreement, which were approved by the Compensation Committee of the Board of Directors. Any shares underlying the inducement grants are not, upon forfeiture, cancellation or expiration, returned to a pool of shares reserved for future issuance.

Stock Options

Options to purchase the Company’s stock are granted at exercise prices based on the Company’s common stock price on the date of grant. The option grants generally vest over a one- to four-year period. The options have a contractual term of ten years. The fair value of options is estimated using the Black-Scholes option pricing model, which has various inputs, including the grant date common share price, exercise price, risk-free interest rate, volatility, expected life and dividend yield. The change of any of these inputs could significantly impact the determination of the fair value of the Company’s options as

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

well as significantly impact its results of operations. The Company records stock-based compensation expense net of actual forfeitures when they occur.

The weighted-average assumptions used in determining the fair value of stock options granted were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Volatility	81.8	%	86.7	%	84.2	%	83.5	%
Risk-free interest rate	3.84	%	4.39	%	4.09	%	3.64	%
Expected life (years)	6.25		6.25		6.21		6.20
Dividend yield rate	—	%	—	%	—	%	—	%

A summary of stock option activity for the nine months ended September 30, 2024, is presented below:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Stock	Exercise		Contractual	Intrinsic
	Options	Per Share		Terms (Years)	Value
Outstanding, December 31, 2023	5,753,466	$	9.46	6.69	$	11,111
Granted	1,061,390	12.83
Exercised	(472,207)	7.15
Canceled/forfeited	(153,979)	10.68
Outstanding, September 30, 2024	6,188,670	$	10.18	6.36	$	38,022
Exercisable, September 30, 2024	3,612,214	$	9.97	4.81	$	23,296

The aggregate intrinsic value of outstanding and exercisable options represents the excess of the fair market value of the Company’s common stock over the exercise price of underlying options as of September 30, 2024 and December 31, 2023.

Restricted Stock Units

RSU grants generally vest over a one- to four-year period. The fair value of RSU grants is determined at the grant date based on the common share price.

A summary of RSU activity for the nine months ended September 30, 2024, is presented below:


		Weighted Average
		Grant Date
	Restricted	Fair Value
	Stock Units	Per Share
Outstanding, December 31, 2023	3,281,045	$	8.88
Granted	1,167,127	12.76
Vested	(988,769)	8.79
Forfeited	(257,570)	9.84
Outstanding, September 30, 2024	3,201,833	$	10.25

Performance Restricted Stock Units

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

In January 2023, the Company’s Board of Directors granted 292,349 shares of performance restricted stock units (“PRSUs”) to certain executive officers under the Plan. The PRSU awards function in the same manner as restricted stock units except that vesting terms are based on achievement of certain pre-established performance measures. As of September 30, 2024, all of the pre-established performance measures were met, and stock-based compensation expense has been recognized for these awards using the accelerated attribution model, based on the fair value of the awards as of the date of grant.

In February 2024, the Company’s Board of Directors granted 219,485 shares of PRSUs to certain executive officers under the Plan. The PRSU awards are measured on a cumulative two-year period ending in 2025. The performance measure milestones have not been met, and all were outstanding as of September 30, 2024. As of September 30, 2024, the achievement of the performance measure milestones was considered probable.

A summary of PRSU activity for the nine months ended September 30, 2024, is presented below:


	Performance	Weighted Average
	Restricted	Grant Date
	Stock	Fair Value
	Units	Per Share
Outstanding, December 31, 2023	233,880	$	10.25
Granted	219,485	13.15
Vested	(97,451)	10.25
Forfeited	—	—
Outstanding, September 30, 2024	355,914	$	12.04

CEO Performance Award

For RSUs granted to employees that vest based on market conditions, such as the trading price of the Company’s common stock exceeding certain price targets, the Company uses a Monte Carlo Simulation in estimating the fair value at grant date and recognizes compensation cost over the requisite service period. On May 8, 2023, the Company granted the Company’s Chief Executive Officer (“CEO”) an award of 560,000 PRSUs under the Plan.

The stock units subject to the award are subject to both performance- and time-based vesting requirements. 40% of the stock units subject to the award are eligible to vest if the average of the closing prices for a share of the Company’s common stock over a period of 20 consecutive trading days is $30 or more and an additional 60% of the stock units subject to the award are eligible to vest if the average of the closing prices for a share of the Company’s common stock over a period of 20 consecutive trading days is $50 or more, in each case within five years after the grant of the award and while the CEO is employed by the Company (or, in certain circumstances, within 20 days following a termination of his employment). Any stock units that become eligible to vest based on stock price will vest, subject to the CEO’s continued service, over the four-year period after the grant date.

The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was $3,774. Compensation expense is recorded if the service condition is met regardless of whether the market condition is satisfied.

The following table summarizes stock-based compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Selling, general and administrative	$	4,955	$	4,295	$	15,370	$	11,445
Research and development	265		301		713		616
	$	5,220	$	4,596	$	16,083	$	12,061

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Evolus, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Note 10. Medytox Settlement Agreements

Medytox Settlement Agreements

In February 2021, the Company settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S. International Trade Commission related to Jeuveau® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan (the “U.S. Settlement Agreement”), and another Settlement and License Agreement with Medytox (the “ROW Settlement Agreement”). The Company refers to the U.S. Settlement Agreement and the ROW Settlement Agreement collectively as the “Medytox Settlement Agreements”. In the first quarter of 2023, the Company made a final milestone payment of $5,000. From September 17, 2022 to September 16, 2032, the Company pays Medytox a quarterly, mid-single digit royalty on net sales of Jeuveau® sold in other Evolus territories pursuant to the Medytox Settlement Agreements.

As of September 30, 2024, the Company accrued $3,658 for royalties to Medytox under the Medytox Settlement Agreements. As of December 31, 2023, the Company accrued $3,657 for royalties to Medytox under the Medytox Settlement Agreements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 and other documents previously filed with the SEC. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in Item 1A “Risk Factors” of Part II of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” and Item 1A “Risk Factors” of Part II of this Quarterly Report on Form 10-Q.

Overview

We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada, certain European countries and Australia. We have commercial launch plans in additional countries which we expect to implement in the next few years. We are also actively pursuing regulatory approval of Evolysse™, a line of injectable hyaluronic acid gels that includes mid face, nasolabial folds, lips and eyes. In October 2024, regulatory approval was received in the European Union for four products in the Evolysse™ line: Evolysse™ Form, Evolysse™ Smooth, Evolysse™ Sculpt and Evolysse™ Lips. In June 2024, we submitted a premarket approval (“PMA”) application to the U.S. Food and Drug Administration (the “FDA”) for Evolysse™ Form and Evolysse™ Smooth injectable hyaluronic acid gels for wrinkles and folds, such as nasolabial folds. We anticipate obtaining regulatory approvals in the United States for Evolysse™ Form and Evolysse™ Smooth by September 2025.

Jeuveau® is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults. Evolysse™, a line of injectable hyaluronic acid gels, is a first-generation cold technology line of hyaluronic acid gels for products including mid face, nasolabial folds, lips and eyes. Our primary market is the cash-pay aesthetic market, which consists of medical products that consumers pay for directly out of pocket. Our customers are aesthetic practitioners who are properly licensed to deliver our products. By avoiding the regulatory burdens that accompany reimbursed products and pursuing an aesthetic-only non-reimbursed product strategy, we create flexibility to deliver a unique value proposition to our customers. We utilize this flexibility to drive customer adoption through programs such as our consumer loyalty program, co-branded marketing programs, promotional events and pricing strategies.

Recent Developments

Economic Trends and Uncertainties

The global economy, including the financial and credit markets, has recently experienced volatility and disruptions, including increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.

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Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our consolidated results of operations for the periods indicated:


	Three Months Ended September 30,
(in millions)	2024		2023
Revenue:
Product revenue, net	$	60.2	$	49.3
Service revenue	0.9		0.7
Total net revenues	61.1		50.0

Operating expenses:
Product cost of sales (excludes amortization of intangible assets)	18.2		15.4

Selling, general and administrative	52.5		43.3
Research and development	2.3		1.6

Revaluation of contingent royalty obligation payable to Evolus Founders	2.4		1.8
Depreciation and amortization	1.1		1.3

Total operating expenses	76.6		63.5
Loss from operations	(15.5)		(13.4)
Other income (expense):
Non-operating expense, net	(3.8)		(3.5)

Other income (expense), net	0.3		0.0
Loss before income taxes:	(19.0)		(16.9)
Income tax expense	0.1		0.0
Net loss	(19.2)		(16.9)
Unrealized loss, net of tax	(0.1)		(0.1)
Comprehensive loss	$	(19.3)	$	(17.1)

The following table summarizes our gross profit margin for the periods indicated:


	Three Months Ended September 30,
(in millions)	2024			2023
Total net revenues	$	61.1		$	50.0
Cost of sales:
Product cost of sales (excludes amortization of intangible assets)	18.2			15.4
Amortization of distribution right intangible asset	0.8			0.7
Total cost of sales	19.0			16.2
Gross profit	$	42.1		$	33.9
Gross profit margin	68.9		%	67.7		%

Net Revenues

We currently operate in one reportable segment, and all of our net revenues are derived from sales of Jeuveau®, our sole commercial product to date. Net revenues consist of revenues, net of adjustments primarily for customer rebates, rewards related to the consumer loyalty program and co-branded marketing programs. Revenues are recognized when the control of

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the promised goods is transferred to the customer in an amount that reflects the consideration allocated to the related performance obligations and to which we expect to be entitled in exchange for those products or services.

Net revenues of Jeuveau® sales increased by $11.1 million, or 22.2%, to $61.1 million for the three months ended September 30, 2024 from $50.0 million for the three months ended September 30, 2023, primarily due to higher sales volumes. Net revenues during the three months ended September 30, 2024 and 2023 consisted of $0.9 million and $0.7 million, respectively, of service revenue from the sale of Jeuveau® through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to successfully continue to penetrate the market, grow our customer base and increase purchases by our current customers in the competitive medical aesthetic market, as well as on obtaining regulatory approval for the Evolysse™ injectable hyaluronic acid gel line in the United States by Symatese and subsequent successful commercial launch of these products.

Cost of Sales

Product Cost of Sales

Product cost of sales, excluding amortization of intangible assets, primarily consisted of the cost of inventory purchased from Daewoong and our royalty obligations to Medytox at a mid-single digit percentage of net revenue through the expiration of our Medytox royalty obligation in September 2032.

Product cost of sales, excluding amortization of intangible assets, increased by $2.8 million, or 18.2%, to $18.2 million for the three months ended September 30, 2024 from $15.4 million for the three months ended September 30, 2023, primarily due to higher sales volume. We anticipate that our product cost of sales will fluctuate in line with changes in revenues until the expiration of the Medytox royalty obligation in September 2032.

Gross Profit Margin

Our gross profit margin was 68.9% and 67.7% for the three months ended September 30, 2024 and 2023, respectively. Our gross profit margin has been and will continue to be negatively impacted from September 2022 to September 2032 as we pay royalty obligations related to our litigation settlement agreement. See “—Liquidity and Capital Resources—Litigation Settlement” for further information. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we continue to expand internationally.

Selling, General and Administrative

Selling, general and administrative expenses increased by $9.2 million, or 21.2%, to $52.5 million for the three months ended September 30, 2024 from $43.3 million for the three months ended September 30, 2023, primarily resulting from increasing personnel costs related to our commercial activities. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Research and Development

Research and development expenses increased by $0.7 million to $2.3 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023. The increase was primarily attributable to our clinical operations and research and development expenses related to obtaining regulatory approvals of Evolysse™ in the United States and European countries. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions for our current products.

Revaluation of Contingent Royalty Obligation Payable to Evolus Founders

The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period. During the three months ended September 30, 2024 and 2023, the revaluation charges of $2.4 million and $1.8 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the timing of cash flows.

Depreciation and Amortization

Depreciation and amortization decreased by $0.2 million, or 15.4%, to $1.1 million for the three months ended September 30, 2024 from $1.3 million for the three months ended September 30, 2023.

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Non-Operating Expense, Net

Non-operating expense, net, increased by $0.3 million, or 8.6%, to $3.8 million for the three months ended September 30, 2024 from $3.5 million for the three months ended September 30, 2023, primarily due to higher interest expense for our term loans. Interest on our term loans is based on a variable interest rate, which we expect will continue to fluctuate with the market. See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information.

Income Tax Expense

There was minimal income tax expense for each of the three months ended September 30, 2024 and 2023.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our consolidated results of operations for the periods indicated:


	Nine Months Ended September 30,
(in millions)	2024		2023
Product revenue, net	$	185.4	$	139.1
Service revenue	2.0		2.0
Total net revenues	187.3		141.1

Operating expenses:
Product cost of sales (excludes amortization of intangible assets)	55.4		42.3
Selling, general and administrative	147.8		121.9
Research and development	6.7		4.2
In-process research and development	—		4.4
Revaluation of contingent royalty obligation payable to Evolus Founders	5.6		5.1
Depreciation and amortization	3.9		3.8
Total operating expenses	219.4		181.7
Loss from operations	(32.1)		(40.6)
Other income (expense):
Non-operating expense, net	(11.7)		(9.2)
Other income (expense), net	0.4		0.0
Loss before income taxes:	(43.4)		(49.8)
Income tax expense	0.2		0.1
Net loss	(43.6)		(49.9)
Unrealized loss, net of tax	(0.3)		(0.3)
Comprehensive loss	$	(43.9)	$	(50.1)

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The following table summarizes our gross profit margin for the periods indicated:


	Nine Months Ended September 30,
(in millions)	2024			2023
Total net revenues	$	187.3		$	141.1
Cost of sales:
Product cost of sales (excludes amortization of intangible assets)	55.4			42.3
Amortization of distribution right intangible asset	2.3			2.2
Total cost of sales	57.7			44.5
Gross profit	$	129.7		$	96.6
Gross profit margin	69.2		%	68.5		%

Net Revenues

Net revenues of Jeuveau® sales increased by $46.3 million, or 32.8%, to $187.3 million for the nine months ended September 30, 2024 from $141.1 million for the nine months ended September 30, 2023, primarily due to higher sales volumes. Net revenues during the nine months ended September 30, 2024 and 2023 consisted of $2.0 million and $2.0 million, respectively, of service revenue from the sale of Jeuveau® through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive medical aesthetic market as well as on regulatory approval for the Evolysse™ injectable hyaluronic acid gel line in the United States by Symatese and subsequent commercial launch of these products.

Cost of Sales

Product Cost of Sales

Product cost of sales, excluding amortization of intangible assets, increased by $13.1 million, or 31.0%, to $55.4 million for the nine months ended September 30, 2024 from $42.3 million for the nine months ended September 30, 2023, primarily due to higher sales volume. We anticipate that our product cost of sales will fluctuate in line with changes in revenues until the expiration of the Medytox royalty obligation in September 2032.

Gross Profit Margin

Our gross profit margin was 69.2% and 68.5% for the nine months ended September 30, 2024 and 2023, respectively. Our gross profit margin has been and will continue to be negatively impacted from September 2022 to September 2032 as we pay royalty obligations related to our litigation settlement agreement. See “—Liquidity and Capital Resources—Litigation Settlement” for further information. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we continue to expand internationally.

Selling, General and Administrative

Selling, general and administrative expenses increased by $25.9 million, or 21.2%, to $147.8 million for the nine months ended September 30, 2024 from $121.9 million for the nine months ended September 30, 2023, primarily resulting from increasing personnel costs related to our commercial expansion. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Research and Development

Research and development expenses increased by $2.5 million to $6.7 million for the nine months ended September 30, 2024 from $4.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to our clinical operations and research and development expenses related to obtaining regulatory approvals of Evolysse™ in the United States and European countries. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions.

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In-process Research and Development

For the nine months ended September 30, 2023, we recorded $4.4 million of in-process research and development expense in connection with the Symatese Agreement. Refer to Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional information.

Revaluation of Contingent Royalty Obligation Payable to Evolus Founders

The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period. During the nine months ended September 30, 2024 and 2023, the revaluation charges of $5.6 million and $5.1 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the timing of cash flows.

Depreciation and Amortization

Depreciation and amortization increased by $0.1 million, or 2.6%, to $3.9 million for the nine months ended September 30, 2024 from $3.8 million for the nine months ended September 30, 2023.

Non-Operating Expense, Net

Non-operating expense, net, increased by $2.5 million, or 27.2%, to $11.7 million for the nine months ended September 30, 2024 from $9.2 million for the nine months ended September 30, 2023, primarily due to the advancement of the $50.0 million of term loans in 2023 and higher interest expense for our term loans. Interest on our term loans is based on a variable interest rate, which we expect will continue to fluctuate with the market. See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information.

Income Taxes Expense

There was minimal income tax expense for each of the nine months ended September 30, 2024 and 2023.

Liquidity and Capital Resources

As of September 30, 2024 we had cash and cash equivalents of $85.0 million, positive working capital of $89.5 million and stockholders’ equity of $5.9 million.

We began selling Jeuveau® in May 2019 and have a relatively limited history of generating revenues. Since inception, we have incurred recurring net operating losses and have an accumulated deficit of $602.6 million as of September 30, 2024 as a result of ongoing efforts to develop and commercialize Jeuveau®, including providing selling, general and administrative support for our operations. We had net loss of $43.6 million and $49.9 million for the nine months ended September 30, 2024 and 2023, respectively. We had loss from operations of $32.1 million and $40.6 million for the nine months ended September 30, 2024 and 2023, respectively. We used net cash of $22.8 million and $34.8 million in operating activities for the nine months ended September 30, 2024 and 2023, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau® in the U.S., Europe, Canada, and Australia and prepare to commercially launch Jeuveau® in other jurisdictions where we have obtained regulatory approval pursue regulatory approvals in other jurisdictions and prepare to commercially launch Evolysse™ Form, Smooth, and Sculpt injectable hyaluronic acid gel line.

Impact of Inflation

The markets in which we operate are currently experiencing increased inflation. While we do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented, a prolonged inflationary environment could impact consumer discretionary spending for aesthetic medical procedures, increase our cash required for operations and impact our liquidity position.

Follow-On Offering

In March 2024, we completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. We received net proceeds of $46.8 million from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock (the “option shares”) at the purchase price, which the underwriters

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exercised in April 2024 with respect to 318,100 of the allotted option shares. The net proceeds to us from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4.2 million.

“At-the-market” Offerings of Common Stock

On March 8, 2023, we entered into an “at-the-market” sales agreement (the “ATM Sales Agreement”) and filed a shelf registration statement on Form S-3 and corresponding prospectus with the SEC to permit sales under the ATM Sales Agreement, which registration statement became effective on June 8, 2023. We have not sold any shares under the ATM Sales Agreement. See Note 9. Stockholders’ Equity in the Notes to the Condensed Consolidated Financial Statements in Part I, Item of this Quarterly Report on Form 10-Q for additional information.

The Pharmakon Term Loans

On December 14, 2021, we entered into a loan agreement with BPCR Limited Partnership, BioPharma Credit Investments V (Master) LP, and Biopharma Credit PLC (collectively, “Pharmakon”). The loan agreement, as amended, provided for Pharmakon to make multiple term loans to us totaling $125.0 million (“Pharmakon Term Loans”). The first tranche of $75.0 million was advanced on December 29, 2021. A second tranche of $25.0 million was advanced on May 31, 2023. The final tranche of $25.0 million was advanced on December 15, 2023. We are required to pay interest only under the loan agreement until March 2026, after which we make seven equal quarterly payments, each in an amount equal to 1/12th of the outstanding principal amount of the loan. We pay the remaining principal of the loan on the maturity date. The Pharmakon Term Loans will mature on the sixth-year anniversary of the closing date of the first tranche. The term loan bears an annual interest rate equal to the 3-month secured overnight financing rate (“SOFR”) (subject to a SOFR rate floor of 1.0%) plus 8.5% per annum. The proceeds of the Pharmakon Term Loans are used to fund our general corporate and working capital requirements.

Contingent Royalties to Evolus Founders

We are obligated to make quarterly royalty payments of a low-single digit percentage of net sales of Jeuveau® to the founders of Evolus (“Evolus Founders”). These obligations terminate at the end of the second quarter of 2029. The fair value of the obligations is valued quarterly and is referred to in our condensed consolidated financial statements as the contingent royalty obligation.

As of September 30, 2024, we recorded an aggregate balance of $45.0 million on our balance sheet for the future royalty payment obligation to Evolus Founders.

Litigation Settlement

In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S. International Trade Commission related to Jeuveau® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox which we refer to as the Medytox Settlement Agreement. We refer to the U.S. Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox. In the first quarter of 2023, we made a final milestone payment of $5.0 million. Going forward, from September 17, 2022 to September 16, 2032, we will pay to Medytox a quarterly, mid-single digit royalty on net sales of Jeuveau® sold in other Evolus territories pursuant to the Medytox Settlement Agreement.

Daewoong Agreement

Our agreement (as amended, the “Daewoong Agreement”) with Daewoong Pharmaceutical Co. Ltd. (“Daewoong”), provides us with an exclusive distribution license to Jeuveau® from Daewoong for aesthetic indications in the United States, European Union, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, New Zealand, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan. The Daewoong Agreement includes certain minimum annual purchases we are required to make in order to maintain the exclusivity of the license. We may, however, meet these minimum purchase obligations by achieving certain market share in our licensed territories. These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share in various jurisdictions.

Symatese Agreements

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In 2023, we entered into two agreements with Symatese S.A.S. and its affiliates (“Symatese”), which granted us exclusive rights to commercialize and distribute the Evolysse™ line of injectable hyaluronic acid gels in the United States and 50 countries in Europe for aesthetic and dermatological uses. We refer to the agreement conveying rights in the United States as the “Symatese U.S. Agreement” and the agreement conveying rights in Europe as the “Symatese Europe Agreement.” In the United States, we obtained the rights to the Evolysse™ products referred to as (i) Form; (ii) Smooth; (iii) Sculpt; (iv) Lips; and (v) Eye and in Europe we obtained the rights to (i) Form; (ii) Smooth; (iii) Sculpt; and (iv) Lips.

Symatese U.S. Agreement

The Symatese U.S. Agreement includes certain milestone payments, development cost-sharing arrangements, and minimum annual purchases we are required to make in order to maintain the exclusivity of the license. We may, however, meet these minimum purchase obligations by achieving certain market share in our licensed territory. These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share.

Symatese Europe Agreement

The Symatese Europe Agreement includes certain milestone payments and minimum annual purchases we are required to make in order to maintain the exclusivity of the license. We may, however, meet these minimum purchase obligations by achieving certain market share in our licensed territory. These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share.

Operating Leases

Our corporate headquarters in Newport Beach, California is under a non-cancelable operating lease, which expires on January 31, 2030 with an option to extend the term for an additional 60 months. Lease payments increase based on an annual rent escalation clause that occurs on each February 1 anniversary.

Current and Future Capital Requirements

We believe that our current capital resources, which consist of cash and cash equivalents, future cash generated from operations, and existing liquidity, will be sufficient to satisfy our cash requirements for at least the next twelve months for working capital to support our daily operations and meet commitments under our contractual obligations with third parties, although we may wish to access the debt and equity markets or other sources of financing to satisfy our long-term cash requirements as further discussed below.

We have based our projections of capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash and cash equivalents and cash generated from operations, sooner than we expect. Our cash requirements depend on numerous factors, including but not limited to, the impact of any potential disruptions to our supply chain, inflation or other economic conditions, uncertainty regarding the stability of certain financial institutions, and other long-term commitments and contingencies. Because of the numerous risks and uncertainties associated with research, development and commercialization of our products, we are unable to estimate the exact amount of our operating capital requirements, including our requirements beyond the next twelve months. In such case, we may be required to raise additional capital to fund future operations through the incurrence of debt, the entry into licensing or collaboration agreements with partners, sale of equity securities, grants or other sources of financing. However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all. The global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including severely diminished liquidity and credit availability and rising interest rates. These conditions may adversely impact our ability to raise additional capital on acceptable terms, or at all.

Our future funding requirements will depend on many factors, including, but not limited to:

•the rate of revenue growth for Jeuveau® in the United States and international markets where we have launched, as well as the success of planned international launches;

•the timing of regulatory approval for the Evolysse™ injectable hyaluronic acid gel line in the United States by Symatese and our ability to successfully launch, commercialize and market these products;

•development costs and milestone payments related to the Evolysse™ injectable hyaluronic acid gels;

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•our ability to forecast demand for our products, scale our supply to meet that demand and manage working capital effectively;

•corporate development activities including the purchase, license, or other acquisition of products and services to add to our product or service offerings;

•the number, characteristics, and development stage of any future product candidates we may develop or acquire;

•the timing and costs of any ongoing clinical programs or any future clinical studies we may conduct;

•the cost of manufacturing our product or any future product candidates and any products we successfully commercialize, including costs associated with our supply chain;

•the timing and amounts of the royalty and other payments payable in connection with the Medytox Settlement Agreement;

•the amounts of the royalty payable to the Evolus Founders;

•the cost of commercialization activities for Jeuveau®, the Evolysse™ injectable hyaluronic acid gel line or any future product candidates that are approved or cleared for commercialization, including marketing, sales and distribution costs;

•the cost of maintaining a sales force, the productivity of that sales force, the market acceptance of our products and the actions and product introductions of our competitors;

•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such agreements that we may enter into;

•any product liability or other lawsuits related to our products;

•the cost of any current litigation, including our ongoing securities class action lawsuit and shareholder derivative lawsuit;

•the expenses needed to attract and retain skilled personnel;

•the costs associated with being a public company;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property and any other future intellectual litigation we may be involved in; and

•the timing, receipt and amount of sales of any future approved or cleared products, if any.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


	Nine Months Ended September 30,
(in millions)	2024		2023
Net cash provided by (used in):
Operating activities	$	(22.8)	$	(34.8)
Investing activities	(3.5)		(1.3)
Financing activities	48.7		21.1
Effect of exchange rates on cash	(0.3)		(0.3)
Change in cash and cash equivalents	22.2		(15.2)
Cash and cash equivalents, beginning of period	62.8		53.9
Cash and cash equivalents, end of period	$	85.0	$	38.7

Evolus, Inc. [EOLS] Filings
10-Q	[2024-11-06]
10-Q	[2024-07-31]
10-Q	[2024-05-07]
10-K	[2024-03-07]
10-Q	[2023-11-07]
10-Q	[2023-08-02]
10-Q	[2023-05-09]
10-K	[2023-03-08]
10-Q	[2022-11-08]
10-Q	[2022-08-02]
10-Q	[2022-05-10]
10-K	[2022-03-03]
10-Q	[2021-11-02]
10-Q	[2021-08-04]
10-Q	[2021-05-12]
10-K	[2021-03-25]
10-Q	[2020-10-29]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-02-25]
10-Q	[2019-11-04]
10-Q	[2019-08-12]
10-Q	[2019-05-01]
10-K	[2019-03-20]
10-Q	[2018-11-05]
10-Q	[2018-08-02]
S-1	[2018-07-16]
10-Q	[2018-05-10]
10-K	[2018-03-29]
S-1	[2018-01-09]