Q3 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the overall on Therapeutics first quarter 2019 financial results Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will follow at that time.
If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call is being recorded.
I would I like to turn the conference over to build Lumonics, Chief Executive Officer for Overlong Mr. Lavante can meet began.
Thank you operator, good morning, welcome to over one Therapeutics third quarter financial results Conference call with me on today's call, our Bob Mcdonnell Chief retail officer into Sheen, Husseini, Chief Financial Officer.
This morning, the company issued a press release detailing our financial results for the three months ended September Thirtyth 2019.
This release can be accessed through the Investor Relations section of the over one website and over one dot com you can also accessed a webcast of this call from there.
Before we get started I'd like to remind everyone that any statements made on today's conference call did expressed a belief expectation projection for cats anticipation or intent regarding future events and the company's future performance, maybe considered forward looking statements as defined by the private Securities Litigation Reform Act working statement.
And this release include old ones expectations regarding the near and long term growth potential of its business, including the company owned retail treatment centers.
These forward looking statements are based on information available to on management as of today and involve risks and uncertainties, which include but are not limited to the risk factors disclosed in the periodic and current reports filed by the company filed with the FCC from time to time, including the Form 10-Q for the year for the quarter September Thirtyth 29 team.
Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof, Oman, specifically disclaims any intent or obligation to update these forward looking state.
Except as required by law.
The archived webcast will be available for one year on the company's website old one dotcom for the benefit of those who maybe listening to the archive webcast. This call was held and recorded on November 28 2019.
Then on May have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings that went that I'll now provide an update on our business and review highlights from the recently reported corner.
The third quarter of 2019, but the transitional quarter for the company.
We successfully refinanced the company paid off our debt, which provides a runway to be in executing on the revised commercial strategy.
We further streamlined operations and have significantly reduced our quarterly operating expenses, especially as compared to the first quarter of 2019.
Our new commercial model allows us to eliminate the expensive direct field force and the costs associated with supporting them.
We still maintain all of our other capabilities, such as manufacturing marketing research and development clinical regulatory and quality assurance.
Although our primary commercial focus is on establishing the Oban centre for weight loss retail treatment Center strategy. We have continued to provide product to key high volume private practices.
We have done so with the centralized support model no field sales personnel.
We believe this keeps the door open to expand back into that channel in the future. If we believe it to be complementary to our Obama branded store strategy.
Importantly, we opened the first Oman center for weight loss in San Diego, California, and successfully treated the first patients.
We have also laid the groundwork to allow us to rapidly open additional OSV on centers for weight loss. Once we believe we have a repeatable store model.
At this time I'd like to describe in more detail told one center for weight loss.
The whole blood center for weight loss is the first on branded center, where a patient is able to receive a comprehensive weight loss treatment experience, including six months or the Obama balloon system, and 12 months nutritional counseling and high end medical spot like setting.
The first centre is located in a relatively appfluent, San Diego suburb with easy access to and from major roads and thoroughfares.
The center itself is in a high end medical building with other practices, such as plastic surgery cosmetic dentistry and orthodontics.
It looks more like a high in medical spa than a bariatrics surgery office.
The personal blood center for weight loss Euro CW out ISCA provide everything required for a patient's weight loss journey. This includes a physician who has experienced in weight loss supported by a medical assistant to manage the medical aspects of treating a patient with the old bumbling system.
Professional experience salesperson within a static medical background that handles initial patient interest in financially qualifies the patient and registered dietician to provide nutritional counseling to drive the lifestyle changes that can help create and sustain meaningful weight loss for patients.
We are leveraging their prior experience.
The centralized interest creation in conversion model to drive the patient bundle more efficiently. We believe this model can be expanded to support future Oban centers.
Model includes one a tactical marketing team to drive patient interest in the formal leads to our in House call Center. This is primarily accomplished through digital and social media. It May also include radio and print.
Which capitalizes on our prior experience of creating strong topline patient interest.
Two essential call center, which had previously been utilized to support a private practice positions. The goal of the call center is to properly respond to patient interest or leads and convert that interest and a consultation with our sales professional at the center.
As a reminder, there are approximately 69 million adults in the U.S. that are in our FDA approved indication, which is a body mass index Ranger 30 to 40 or those people that need to lose between 30 to 100 pounds.
We believe the over one owned treatment center model make the old bumbling system more accessible to many individuals with obesity.
I'd now like to turn the call over to Bob Mcdonnell Our Chief retail officer, who is responsible for driving the Oban center for weight loss strategy. As a reminder, Bob previously function in a similar ROE would show no Belo the largest a static surgery chain in the United States and was instrumental in expanding shown a bones footprint from 16 sites to over.
40 sites in a little over two years.
Thank you Bill overall I'm pleased with our initial results in a few weeks in our per center has been open I'm very impressed with how quickly. The team was able to opened the first overblown center for weight loss and I believe it we have established an initial model the could allow us to span expand to other markets quickly.
Currently we are focused on making the first center successful and maximizing our operational efficiency with the goal to create a portable and replicable store model. We've analyzed in identified our next potential markets for expansion and believe that we're positioned to move quickly. Once we're confident that we've established the correct Overland Center model. We've also a staff.
Able to set of strict metrics to measure our performance and we view these on a daily basis, especially those metrics related to the efficiency and effectiveness of the patient funnel from creating initial patient interest converting that interest to a consultation and ultimately a patient receiving treatment. We're encouraged by the initial read.
Holds in the current trends however, because we've only been operational a few weeks, we're not sharing those key metrics at this time, but expect to provide them in the future. So with that I'll turn the call back to bill.
Thanks, Bob I'd now like to have Nietzschean Husseini, our chief financial Officer provide a brief financial recap for the quarter.
Thanks, Bill to download thank you Shannon Dts on our financial disaster that kind of content.
Dave COVID-19.
And that compares to decline at 29 keen to conclude that can maintain.
As I believe sequentially as want a majority of investors on us interest given deletion.
Business model.
This quarter of annualized component.
Sito 19 million content.
See opined fund and the second quarter that up 29.
Revenues from that kind of quarter of 2019 included next south but navigation console.
Our that Ken as campaign on deep.
That kits and the second quite that 20.
Okay.
And could quantify.
The 19, we shipped six navigation cost concessions.
Physician customized who wanted to offset the most current generation up that mobile on sensitive patients. We did not recognize and event than you fund, but I'm just kind of remain constant core that at the site became operational did gate and Thats the clock.
Come from revenue was 94 million that could cause content casino Im 7 million and that second quarter 2019 gross deficit.
At quarter of 2019 launch.
And 1 million, which was an improvement comic cons deficit that.
See mevion into second quarter, 2018, onetime charges associated with changes in the business and the second quarter than if 2019 contributed to the sequential improvement R&D expenses for the question of 2019 code on to 1.2 million compared to 1.8 million in the second quarter than a tiny bank.
We have continued to make investment to support improvements on decently approved.
Overland navigation system, and mobile unattached dispenser as well that's continued development on a large new product pipeline since marketing and teen expenses for the quarter totaled 2.5 million.
Don how for Pine team met in the second quarter 2018, as a reminder, the beginning of the second quarter 2018, we change our commercial strategy, which included emanation elimination of fans phones and a significant detection all down quickly the headcount the quarterly.
Continued to see nine patients and expenses.
The new company on decamped treatment franchise strategy.
Operating loss fundamental Kwan, then was 3.7 million, which is down significantly from operating costs from explained for many and and the.
Second question Tony Inc.
Anthony operating expenses of 2.7 million in quarter 2018, as representative office baseline level.
We will grow as the business expands.
Not quite enough to 19 was 2.7 billion 61 cents per share based on 6.1 million weighted diluted average common shares outstanding as compared to a net loss of $6.8 million $2.52 per machine.
Based on 2.7 million weighted diluted average common shares outstanding and second quarter 2018.
We ended September 32018, 19.4 million and cash cash equivalent and short term investments and no debt as of October 10th 2019, we had 7.7 million.
Some of those shares of common stock outstanding.
We will not be providing guidance at this time given that the first of all on sometimes on maintenance has been I'll finish now kind of only a few weeks, we would expect to provide more detail <expletive> I think on expectations, including performance metrics and the future.
With that ill turn the call back although it does for final comments.
The third quarter of 2019 was a transitional quarter for Obama.
We began to lay the foundation for our new commercial strategy of developing company owned retail treatment centers in a very short time, we created the required corporate structure engaged a professional medical corporation to oversee medical care hired the necessary staff to run day to day operations in entered into a lease and built out the physical.
Space all of which culminated in the opening of the first Oman owned retail treatment center and initial patient treatments.
We believe this groundwork will allow us to rapidly open additional oman centers for weight loss at the appropriate time.
As a reminder, we will be participating in two upcoming conferences. The Stifel 2019 Healthcare conference in New York City on Wednesday November Twentyth, and the Canaccord Genuity Med Tech in Diagnostics Forum in New York City on Thursday November 20, Onest with that are prepared comments are complete operator, we have please now open the line for question.
Yes.
Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on near Touchstone telephone. If your question has been answered or you wish to remove yourself from Q. Please press the pound Keith.
The slate while collars further question.
Your first question comes from the line as Ben Haynor with Alliance Global Let me ask your question.
Good morning, guys. Thanks for taking the questions.
First off for me.
Congrats on opening the first center and I know there are some things that you have to do prior to opening in the first century pursuit ready not procedures to and things of that nature, but can you talk about what.
Opening expenses looks like.
And whether there's kind of a good metric that we can think about in terms of build out cost is it.
1000 Bucks a square foot, what's a good way for us to think about that.
Yep and thanks for the question so.
We obviously model this outgoing and based on my prior experience in a similar type business.
We were able to I think at a pretty good handle on what the expectations were.
And proportionally in terms of square footage. These are a little smaller facilities than than what I had done before but proportionally.
The the expenses came in line and as we continue to refine mess and look at future stores. We think we'll get some more efficiencies there, but we're quite pleased with where we're at today.
Okay, Great and then just thinking about the training that goes into the personnel that you hire I mean, if that's something that you can do over the course so.
A handful of days or weeks of the depend on when they come on and getting them. All the work together or any thoughts there that you can share yeah. I mean, you know we kind of design the operating model.
Before we open and establish what those procedures are there's obviously some learnings as you get into it and as patient flow increases you get better at it and we've kind of continually refined and updated some of those protocols and procedures over the first few weeks.
We expect that that will settle in and we'll capture those learnings and then replicate those.
Bed and this is bill Plovanic, just remember from a physician a medical training standpoint, we've been working with the physician customers for almost three years now so in terms of the policies and procedures for training the medical staff on the administration of balloons and.
That's well scripted and we've been doing it for a long time three years I said, so that was in place prior keven opening the center.
Okay. That's it that's definitely helpful. And then you mentioned that you continue to streamline some of the operating expenses in Q3, and I know you said, you're not providing guidance I don't know whether to take that as revenue guidance or guidance period, but thought I'd ask on.
The <unk> on the operating expense line items, what what should we kind of expect through the end of the year I mentioned that we look at it as similar to Q3 with some of the.
Expenses with the center being life or is there anything that you can share that that might be helpful for us.
Yes, I think if you look at the financial results for the third quarter bed Neo operating expenses were.
Actually 3.7 million for the third quarter 2019, and we think Thats representative of a baseline level as we springboard off of as we start expanding and building the company.
Okay.
And then lastly for sorry go ahead, obviously, then as we as you add additional sites each additional site would be incremental with the objective obviously of driving.
Most of profitability those individual sites to profitability.
Yes.
So you have your baseline in terms of the operating expenses today, and then you'd have whatever you add incrementally with each additional treatment center.
Okay.
And then I guess, one last one for me.
Probably to directed at Bob here.
I know, it's early days, but.
Looking at the funnel conversion rate that you've seen with the overall I'm centers.
Yeah, maybe compare and contrast or or maybe tell us if that conversion rate is relatively similar to what you you saw your prior firm.
Well the businesses are little bit different in the marketing strategies are different and with respect to some things, but our marketing focus right now is largely driven by digital and social media. So we have the ability to measure conversion at each step of that funnel on a fairly granular basis and we are.
Looking at that every day and.
We're we're testing we are doing some may be tests, and otherwise optimizing it but.
Again, keeping a sharp eye on that on a daily basis.
And then as we look at those metrics and develop those metrics.
Not only from.
Bob's prior experience, but also remember we have almost three years of experience with our physician customers that we are providing.
That same digital marketing social media and driving the that same channel Leach.
The difference now is in the call center that we already had.
Put in place ourselves to help even conversion and book those appointments for those physicians.
At this point the differences were now doing that into our own center. So we have more clarity and granularity into the lower end of the funnel, which is that appointment through conversion to treatment. So we have it a lot of data from the last couple of years of which we benchmark. This center off of and continue to evaluate as Bob said on a day.
Only basis.
See you now have the bottom of the funnel as well.
Correct.
Excellent.
Does it for me Thanks, a lot Justin guys. Thanks Beth.
Again, ladies and gentlemen, if you have the question at this time. Please press star vendor number one key on your Thats don't telephone. If your question has been answered or with Terry move yourself from the Q. Please press the pound key. Your next question comes from the line as Kyle referrals with Canaccord you may ask.
A question.
Great. Thank you for taking the question just just one for me and I. Appreciate it's still early on on a center side since you're not going to give any.
In terms of metrics, but maybe just help us understand on the customers that you are still servicing.
I mean is it a fair read through that.
You sold six navigation councils and the Q3, you got six major active accounts or how should we just think about that the business that you are still servicing and still recognizing revenues on in the near term just from a.
Most of what the historical or legacy businesses, how many accounts do you have there.
Yes. Good question Kyle So yes, we shipped 16 units in the first quarter, we Didnt ship any in the second now we shipped an additional six in the third so weve shipped.
26 navigation units.
Some customers have first multiple and we continue to work with the physicians that are interested in building the market with us.
Okay.
And then is it fair to think that.
From a without asking without providing guidance, but is it fair to think kind of what the Q2 Q3 looked like it that thats kind of steady state on the underlying business and then anything as far as you know what's happening at the actual center is going to be upside from here.
I think if you go back you mean, the past six months has been very transitional for the company and I think given what was going on there might have been some questions on the sustainability at one point, we've obviously.
Raise the capital that we believe gives us the runway to drive the business, which has also provided.
Some level of comfort to those physicians as well that this is a long term sustainable business with over one so I think we've seen some of that were in the summer months there might have been some concerns and those have definitely we believe as.
Subsided.
Okay terrific. Thank you very much will help a bridge us great. Thanks.
Again, ladies and gentlemen, if you have questions at this time. Please press. The Star then the number one key on your attached I will tell us balance. If your question is an answer to request to remove yourself from the Q. Please press the town's key.
Im showing no further questions at this time I would like to turn the conference back to Bill.
Yes. Thanks. So this was a transitional quarter for the company we have laid the foundation for our new strategy developing the company owned retail treatment centers in a very short time, we could create their acquired corporate structure. We engage the professional medical corporation to oversee the medical care, we hired the necessary staff to run the day to day ops and we entered into a.
At least and built out the physical space all of this culminated in the opening of the first overland owned retail center and the initial patient treatments Hey, we've laid the groundwork were very we're very pleased with the progress. We made we think that ground work will allow us to rapidly opened additional centers at the appropriate time.
As a reminder, is we met we will be FX being two upcoming conferences, we have to Stifel Conference in New York City on Wednesday, the Twentyth of November and then we have the Canaccord Genuity Medtech Conference in New York City on the 20, Onest and with that.
I'd like to close the call. It. Thank you for your time.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day to me all disconnect.