Q4 2019 Earnings Call
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At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session and instructions will follow with that time.
As a reminder, this call is being recorded.
I would now like to turn the conference over to Bill Plovanic, President and Chief Executive Officer for Oh. The line. Mr. Plovanic you may begin sir.
Thank you operator, good morning, welcome to over one therapeutics fourth quarter and year end 2019 financial results Conference call with me on today's call or Bob Mcdonnell Chief Retail officer, who is responsible for driving future site expansion for the old one center for weight loss retail treat.
And center model.
A bunch in that similar to a role he played with so no Belo the largest acetic surgery trained in the United States.
Also on today's calls machine Hussainy every chief financial Officer.
This morning, the company issued a press release detailing our financial results for the three months in your ended December 31st 2019.
This release can be accessed through the Investor Relations section to the old one website at Www Dot Award Dot Com and you can also accessed the webcast of this call from there.
Where we get started I'd like to remind everyone that any statements made on today's call conference call expressed a belief expectation rejection forecast anticipation or intent regarding future events in the company's future performance, maybe considered forward looking statements as defined by the private Securities Litigation Reform Act.
Forward looking statements in this release include all want expectations regarding the near and long term growth potential of its business, including our company manage retail treatment centers.
These forward looking statements are based on information available to all one 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 with the FCC from time to time.
Including the form 10-K for the year ended December 31st 2019th.
Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements in listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof.
Oh, one specifically disclaims any intent drop location to update these forward looking statements except as required by law.
Archived webcast will be available for one year on the company's website www dot to one dot com.
For the benefit of those who maybe listening to the archived webcast. This call was held recorded on February 27, 2020, and since then full blown may abate announcements related to the topics discussed.
Oh, please reference the company's most recent press releases in FCC filings.
I will now provide an update on her business and review highlights from the recently reported quarter. We'll then have machine Cassini CFO Baldwin provide an overview of our financials for the quarter and for the full year of 29 team.
I'll, then provide some color and our current goals for the new retail treatment Center model, nor did help investors better understand the potential opportunity.
Overall I'm pleased with the fourth quarter 2018 operational results an accomplishment. It was the first full quarter operation for a first company match retail treatment Center, Oh, one center for weight loss.
Initial results from the San Diego say provide support for our belief that we maybe able to leverage the two plus years, a commercial experience with our position customers and create a service business model in a dedicated facility focused on weight loss program with the open billing system.
On our last call. We stated that we believed that the foundation could be laid for standardized repeatable retail treatment Center model in last week, we announced the opening of our second location in Orange County, California.
We have also entered into a lease for another site in California, which we expect to have operational within the next quarter.
We look forward to opening additional sites. This year will provide more information on our goals for 2020.
Although our primary commercial focus is on establishing the mobile in center for weight loss retail treatments. Our strategy. We have continued to provide billing systems to a few key high volume private practices.
Have signed a new one year distribution agreement with the distributor in Qatar did as experience with the old rumbling system.
We intend to support U.S. positions and our distributor in Qatar with a centralized model that does not require field based sales personnel.
We believe this may provide the flexibility to re entry these channels in the future. If we believe that to be complementary to our overall I'm branded store strategy.
At this time I'd like to describe in more detail the overland centre for weight loss.
These treatment facilities are over one managed in branded retail treatment centers, where a patient is able to receive a comprehensive weight loss treatment experience.
Including six month to treatment with the all bumbling system in 12 months of nutritional counseling and a high end med spot like setting.
The first fuel blend centers are located in California in suburbs of San Diego in Orange County, respectively.
Which have easy access to and for a major Roche in thoroughfares.
The centers are located in higher in medical buildings with other practices such as plastic surgery has make dentistry and orthodontics.
They have to look and feel of the high end medical Spa.
The centers are staffed to provide everything required for patients weight loss journey from initial interest through ballooned treatment to nutritional counseling and then to Scopic removal with all medical care provided by separate professional corporation owned by a physician.
Staffing at the center includes physicians, who are experienced a weight loss supported by a medical assistance to manage the medical aspects of treating a patient with the old one balloon system.
Registered dietician to provide nutritional counseling to drive the lifestyle changes that can help create and sustain meaningful weight loss for patients.
Professional office manager to oversee daily operations and a professional experience salesperson within that static medical background that seeks to convert initial patient interest into a treatment decision, including qualifying the patient financially.
Of course, the ultimate decision to treat any patient with the old rumbling system is made by a physician other professional medical Corporation.
After the first full quarter of operation for the whole blend branded retail center I'm encouraged with the initial results we have been able to successfully leverage the capabilities. We developed during our initial two plus years, a commercialization to stimulate consumer interest in over one.
The majority of our marketing efforts are through direct response digital advertising, mostly Facebook and Google utilizing our own in house organization.
As we have been doing since the Ocalan billing system was first commercialized in the U.S. in January 2017.
We have also executed on print traditional radio and digital radio advertising.
Our in House call Center. There was established in late 2018 is converting patient interest from our marketing efforts into book consultations with our store base sales consultant.
The benefits of the overall on branded center model become more tangible is a patient moves through the full patient journey with a standardized patient experience from initial interest to treatment.
Specifically, our in House call Center will book, a consultation for their perspective patient with a professional experience salesperson at one of our overland branded retail centers.
And then discusses the old nonmedical aspects of the treatment and financially qualifies the patient.
Since the patient is medically and financially proved opposition from the professional medical Corporation medically screens and qualifies the patient who has enabled to begin the treatment program.
One of the major benefits of the new branded retail treatment center model is speed to treatment.
Specifically the patients have been able to book a console purchase and complete their initial examination all in the same day.
First balloon placement the next day.
We have established to set a strict metrics to measure our performance. We continually review these metrics to determine the effectiveness of our marketing and patient conversion funnel.
From creating initial patient interest converting that interest do a consultation and ultimately to a patient choosing to receive treatment.
As a result, we believe were able to accurately and quickly measure the performance of our marketing efforts, which in turn allows us to adjust our demand generation efforts based on the learnings to invest in the most efficient marketing mix.
This is not something we could previously do when we were selling the balloon through more traditional physician practice channels.
As part of the comprehensive treatment program currently being offered at the center.
Nutritional counseling is available for up to 12 months through both in person and virtual sessions with the registered dietician.
It all who's at the center and also through mobile and branded phone based application and the phone App also includes unlimited access to on demand video content, including meal plans recipes and fitness classes.
Well no patient as yet completed the full six months at therapy at the whole blood center for weight loss. We are pleased with the initial clinical results for patients that are currently in treatment.
Safety and efficacy are trending in line with what was reported in our commercial registry data and we have not had a single device related event adverse event at the low blood center for weight loss.
As a reminder, we estimate that there are approximately 69 million adults in the U.S. to qualify for the goal bumbling systems that FDA approved indication.
Which is a BMI body mass index in the range of between 30 to 40 or those that can benefit by losing approximately 32 100 pounds.
We believe the OBL unbranded retail treatment center model will improve access to care for people with the Beastie our candidates for treatment with Youll bumbling system.
Overall I'm pleased with the initial results at the first full quarter of operations at the first center and that we now have our second sight operational.
With the opening in the second center, we continued to gain confidence we're developing a portable router replicable retail treatment center model that can be expanded into new market.
We have analyzed identified her next potential markets for expansion and believe that we're positioned to move quickly.
Encouraged by the initial results in trends of the first center or the initial stages that commercialization of that second center and we look forward to open additional sites this year.
I'd now like to have machine Hussainy, our chief financial Officer provide a brief financial recap for the quarter.
Ended December 30, Onest and here.
Thanks Bill.
Today, I would like to shape Dts on financially sound.
Are there.
December 31st when you think.
I was comparing fourth quarter 2019.
Quite at Keybanc.
As a funny sequential.
But the majority of and this is our most interest.
Steven event in our business model and the second part of that when you think.
Like Dan and fight that comparison.
2019 assist.
Financially.
Lastly, I will discuss our recently announced it pretty line.
Okay.
For quite a revenue.
At $786000.
Compared with 310 feet constant dollar isn't quite enough when you think.
Opinions.
2019 included first quite that occupations, something bps treatment sensitive models.
Yes physician SMS revenues.
Since our international CP, there as compared to seize R&D.
Position customers.
Thank you.
In the fourth quarter.
[laughter] proximity and it's pretty constant dollar revenue someday you can't see it sounds kind of model.
That's it.
I must say $50000.
Thanks, Steve has reflected in cash come on patients.
As I remind as that's happened you send the treatments handset models as pickup nice on line with attendant synthesis lifetime cash payment.
I think it's connected upfront.
So that the Nifi synthesis.
And the team Austin, It's nothing you and second over the course of doing placements heating foresi massive treatment.
The balance expected to be nice and Columbus has any south it's a nice cash collection and my sense.
U.S. physician revenue was approximately $370000.
Since our international.
Keeping that $300000 could flip quite at that.
I think it was on staffing and.
In Q4 to $786000.
Compared to approximately three.
Andy Johnson on a some chance oneq physician customers.
Thank you.
Revenue was $626000 and two floors.
To $626000.
Lets profits by the flick quite enough 2019 was $238000, which was an improvement coming to us deficit that $79000 and that that's quite that if anything.
Increased volume an assumption of all the has contributed to the sequential improvement in gross profit.
Research and development expense for the flip.
19, slowdowns Proximately 1 billion.
All this past weekend.
Convenient $200000.
What this company making.
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8 million 600, Sleepy Thomson honest outcome convenient for $489000 and had quite than if you think.
Increase and.
Ian known Anthony Insurance Saints marketing expenses for that San Diego Obalon, sometimes it's not begun and other onetime expenses contributed to the sequential increase.
Operating loss for the why that was a talks.
Hi million dollars, which was up.
Two.
Hey, Matt again $660000 into Q T 20 name.
Net loss for the fourth quarter than if 2018 lot Proximately 4 million constant dollar 64 cents per machine.
Based on seven maybe 7000 weighted average common shares outstanding.
As compared to that net loss south approximately $8.007 million.
61 cents a shade based on 61000 weighted can do it affects how much chance on something like.
Right and if anything.
Slide 29 keen to revenue lessee put it at approximately 3 billion.
Hasn't dollars compared to 9 million one.
Thousand dollars.
And.
A seven year committing input on that.
I wasn't piece from $4.700 million.
International revenue of $1 million, and plenty 19 campaigns conflicting against $100000 off internationally.
Thanks.
Gross profit side.
When you think he was $351000, it's nothing anything less like enough person ask.
You mean.
[laughter] thousands dollars.
Slide 10 to 20.
Gross margin of 40% basic and development expense Philadelphia.
Oxybate 86 million and had a constant dollars fund to fund yeah, that's 2018 as compared to $10.700 million.
2018.
Selling general and administrative.
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Approximately 16 million seven on a constant dollars that's funny enough when do you mean team.
He has to $29.900 million.
Yes.
Outpacing and stuff like a funny enough 2018 was.
Some of it can be $23.200 million compared to an operating loss of $37 million.
I mean.
Net loss lessee pulled it at 23 men again $700000 for the funny enough 2019.
Net loss south.
The 7 million in $400000 that funny enough 20, and that's not a shame plus $5 and see sense, but you know.
As compared to the net loss, a shade and $19.64 funny enough.
Lastly, I look like protection.
He said financing agreement and then can pack.
Which could enable us to access.
$10 million over the next 36 months and pension funds disagreement as to how to fund expansion I thought because treatment center model, we have to fight.
Fine I suppose thats disagreement and that expected to go effective next month.
It's important to note that the equity line.
Our.
Yes.
Politique assessed shares of common socs that purchase price that's based on prevailing market things.
Not in Florence, and if its financial or business.
Business cabinets and provides us flexibility to these capital Opportunistically and cost effective me, most importantly, and bond as not obligated to set shares and can pop, but has the ability to at our discretion subject based condition.
As it he might there be and that Q4 2018.
10 million.
It doesn't hold less cash and cash exempt from them and short term investments and know what.
And but that make comments I company and I.
And the cutback.
I would now like to share our goals with you to provide a better understanding of how we measure the business internally.
As for expansion plans for the number of overland branded retail treatment centers.
Our current goal is to have between five and eight sites operational by the end of this year.
We currently have two sites operational and have a signed lease for an additional site, which we are targeting to have operational within the next four month.
In terms of patient flow per court per center.
Our goal is an average of 15 to 30 new patients per month.
After initial ramp up period of a few months.
The 15 to 30 average new patient sold per month at steady state is equivalent to the performance that was experienced at our top accounts top sites best month.
For patient pricing. Our current goal is to achieve average net revenue recognized per patient and the range of five to $6000 over the term at the patient treatment. Just currently 12 month.
As you. She noted in her comments revenue from the treatment Center model are recognized inline with delivery of services, while full payment for the treatment packages collected prior to delivery of services.
Creating a lag between new patient sales and recognize revenue.
The fourth quarter 2019 was an important quarter for what it was the first full quarter of operation Perverse company manage retail treatment center and initial results from that San Diego say continues to support our belief that we may be able to leverage our two plus years, a commercial experience in the U.S. and create a service business model in a dedicated facility.
Focused solely on a weight loss treatment program with the old one balloon system.
With the opening of the second location in Orange County, California. This month, we believe the foundation has been laid for a standardized repeatable Street retail treatment Center model.
We look forward to opening additional sites and improved access to care for an estimated 69 million adults with obesity in eight states that are candidates for treatment with your blood billing system.
With that are prepared comments are complete operator will you. Please now open the line for questions.
I'd like to ask a question. Please press star one on your telephone keypad again that is star one to ask the question.
Well pause for just a Mexican potty training roster.
And your first question comes from the line of Kyle Rose with Canaccord.
Great. Thank you very much for taking the questions. Good morning, good morning.
So I wanted to see if we can just get a little more information regarding the treatment centers.
Particularly just the overall experience thus far.
How are you seeing the patient conversion rates now that you control the whole I guess patient experience from the marketing to the actual delivery I have you seen the improvements in the conversion rates to that you were expecting and then any insights just as far as you know what you've learned the first center that our baby going to change or improve.
Potential productivity at centers two three and then eventually five to eight.
Yeah. Thank you for the question.
In terms of the marketing as we mentioned we are taking the capabilities, we had and leveraging those in including our marketing abilities and advertising and our call Center.
Accrete that lead generation.
Then we generate those leads that are the book to point, our call center transfers, Eric or converts into booked appointments at the call at the.
At the treatment center.
We are where it and once they.
Show up to the treatment centers, we you know that our sales person has the opportunity to convert that person into a sold patient and somebody to go through treatment. So we are measuring and analyzing all the layers of that lead generation fadil and have the ability in the granularity to go back.
Called away to the initial.
Advertising that to utilize to dry that lead so as we look at that from lead generation to reaching out to a booking the console to come people that show up and then convert into a sale.
We've been very pleased with that we measure all that analyze it and are looking to a pull levers of which to improve different areas of that funnel.
We have been very pleased in our meeting or exceeding our goals in several of those metrics it and looking to optimize at all times throughout the process.
In terms of the patient experience and the learnings.
We we obviously, we got the first center up and going at the end of September and then we took those learnings to apply it to the second centre and very encouraged by the initial results is the second test center in terms of not just from the marketing standpoint of turning that on in driving the leads in the and the conversion that.
Second setter, but also from an operational standpoint.
I think from our standpoint started out with a model and we continue to execute on that model and are very very encouraged im pleased with what those results are I would say very minor changes to what we're doing nothing significant that we have come cross at this point.
Okay. That's very helpful. And then this is the first quarter that you.
Reengage revenues from the international markets can you just maybe maybe your goals are pretty clear in the United States help us understand how we should think about that Oh U.S. line on a go forward basis.
It was that an initial stocking order and then we should expect it to pull back or is that kind of a consistent steady as she goes number that we should contemplate moving forward.
I think as you think of our international distributors are set our primary focus is the one center for weight loss in the us.
We do continue to provide the balloon systems to a few key physicians high volume in the U.S. and also our international distributor now in Qatar.
This was a distributed that was a very familiar with the old one balloon system and had been distributing it in that country and had a.
Demand for us to continue to supply the new generation of product I think is we think of that business.
We've signed a one year agreement.
It's a pretty straightforward agreement I mean, the revenue should be very similar on a quarter, but it may be a little less.
As each we go each quarter.
From the current was but it won't be significantly different.
Okay. Thank you very much taking the question.
Your next question comes from Ryan Zimmerman with BP I G.
Great. Thank you so wanted to just ask I.
I think I heard this correctly, but I apologize.
The Shane.
Said of the total revenue I think there was about 340000 and physician revenue and kind of those high volume accounts.
Other thousand from your international distributor, so we've backed that out and plus the revenues that.
It's still yet to be recognized kind of where it just help us understand where that puts the center at and and more so the bigger question is.
From a productivity standpoint.
That I think would imply is similar to some of the metrics you gave out bill, but how do you feel.
About the capacity of the centers today, and what you saw this quarter and what it could ultimately translate to overtime.
As you scale.
Okay. Okay.
Do you mind.
To Pete.
Last question for me then.
Yes.
Sure.
So so my question is just specifically that the components of revenue.
What what does the incident revenue look like when you that out high volume physician accounts and as we think about that from a capacity standpoint, where can that go are you feeling.
Just based on the metrics you provided that it seems like that would be in line with kind of where you expect it to go but do you have capacity for.
Much more patients overtime.
To give us better yeah, right I'll answer the second part of the questions here and then the handed over to machine for the first part but in in the second part of the question, it's really you're asking a capacity question and just.
Just the way to think about capacity is at this current time, we believe there's a peak capacity is beyond our current monthly new patient goals that we provided.
Remember, it's approximately 15 minutes for delivery of a balloon.
And our staffing model is variable with our with medical delivery. So we're able to tight trader optimize the staffing in the medical to meet demand.
But we're we're currently not maximizing that the office hours and we do have office hours are currently only five days a week eight hours a day basically so he could be able to adjust that to support additional demand if needed I.
I think in terms of the revenue you're asking machine had mentioned are stated the hundred and about 140000 was recognized.
And we there is a lag between the revenue collected upfront in the net recognized revenue over time, because delivery of services and.
The cash flow from operations from that.
Recognize revenue was approximately $350000 so.
The net revenue would be collected over time as the delivery of services.
Okay. That's that's very helpful on and then.
The pricing.
I think back to when Youre selling.
Say that balloons direct to physician.
And what the end consumer price it as it was a little higher now you're you're doing patient price in that five to $6000 rich what what impact have you seen.
Betty from that.
As you think about kind of the right way to pricing.
Yes in terms of patient pricing I mean, we've seen our physician customers hit on average price between six and 8000 nurse or six to $9000 with an average of about $8000 across the us.
Our more high volume physician customers tended to price.
Towards below the midpoint in towards the bottom end to that range. So when they were we set our goals are to meet or exceed the volumes of what our high volume customers were doing on a monthly basis at their best months best sites and so we're looking to drive that volume levels. So thats what our goal is.
Got it thanks for taking my questions.
That's right.
And your next question comes from Ben Haynor with Alliance Global partners.
Good morning, guys. Thanks for taking my questions you all here it looks very hard I saw on a couple of calls here.
But it looks to me like you've started a couple of different marketing strategy is in terms of offering rebates for a certain amount of weight loss and slots occupations to attract.
Attracts people so far.
Anything that.
You have learned or anything that you can share on that and this do you feel like you have something that's kind of locked to having now all of those us.
It'd be hard to do better that then or anything you can share on that front.
Yes, Thanks, Ben Yeah, we you remember when we are physician customers. We had there were different promotional programs at our physician customers would it would utilize that we were providing outlines for as they were.
Driving patient flow into their physician practices.
We've leveraged separate those learnings into the programs, we're doing now they're up and different.
Different incentive programs available since September the overall intent of these programs is to drive that patient interesting conversion and we're looking at different points in the lead to treatment conversion funnel and looking to optimize so we continue to take those learnings from the different programs that are run and a leverage.
Those learnings into the next program.
Okay, and then just looking at lower than you leave open now are located.
Yes, it does that kind of what we should expect.
Expectation in the future in terms of ill ask your branch out.
You know kind of in terms of population centers.
Or fast is there anything you could share on that front.
Yes. Thank you for the question. So our growth strategy is predicated on the fact that approximately one third of the U.S. population is between 30 and 40 BMI. So theres a huge market out there obviously being located in San Diego, We thought it made sense to open our first center here locally.
And then as Bill had mentioned we have a second center now open in Orange County, So as we spread out we want to we want to balance the need not to travel to far along with addressing those large markets where most of the people are so we're very optimistic.
But theres, a big huge opportunity out there and we'll proceed accordingly.
So so it sounds like you and then Alburger model not too far from elsewhere.
[laughter].
Thank you you phrase it that way and I think that makes you look at it.
There's a lot of examples out there you can look ticket top top down approach a bottoms up approach, but we look at the different geographies that population income and several other different layers that we filter through it we analyze that data we've looked at similar players in the space as well you can look at where a clear choices Abbas.
The air restoration, so no Belo and just gives you an idea but looking at it at this point, we're still believed that the NFL cities strategy is really the way to go.
Given the prevalence of obesity the target market that we're indicated for.
It's really looking at those larger city populations.
You can move into.
And I think the other thing that is.
Leveraging the physician Corporation, we have in place and all the assets we have put together for the first sight makes a lot of a sense as well.
Okay great.
That's very helpful. Thats, all I thought thanks, a lot gentlemen.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
We have no questions in queue, you have any closing remarks.
Just like to thank everybody for joining the call today and we look forward to our next call. Thank you very much having today.
This does conclude today's conference call you may now disconnect.
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