Q1 2020 Earnings Call

Excuse me because you admit this is the operator today's conferences schedules too began momentarily until that time. Your line. So they can be placed on me say code. Thank you <unk>.

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Welcome to the X. on it's cute 120 20 results conference call. At this time of participants there are no listen only method later, we look at that day question and answer session and instructions will follow at that time, if anyone should require assistance during the compress. Please press start didn't see right on your touch tone telephone answering my.

This conference call, maybe you recorded Oh and now like turn the comprehensive over to your host Mr. Neil allows correct. Sir. Please go ahead.

Thank you and thanks, everyone for joining the X. Sonics quarterly results in update call presenting on the call. This afternoon, or Raymond Cohen, Chief Executive Officer, and Dan Deer in President and Chief Financial Officer ran Danville provide prepared remarks and commentary on the first quarter financial results <unk> commercial progress in a general.

And this update followed by a cue in a session before we begin I would like to remind listeners that statements made on this conference call that relate to future plans events prospects are performance or forward looking statements as defined under private Securities Litigation Reform Act of 1995.

Forward looking statements are based on management's current expectations and believe these statements are subject to a number risks uncertainties assumptions and other factors that could cause results to defer materially from the expectations expressed in the conference call putting the risks in uncertainties disclosed the next sonics filings with the Securities and Exchange Commission.

All of which are available online at W.W.W. Dot F.C.C. dot Gov listeners are cautioned not to place undo reliance on these forward looking statements, which speak only as of today's date may 5th 2020.

Except as required by law Exxon X. undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances unanticipated events that may arise would that said I'd like to now turn the call over to re for his remarks.

Neil and I'd like to think everyone, who dialing in for today's call in to those of you who will be joining by web cast.

As you know this was like phonics first full quarter in the United States is a commercial stage company were incredibly proud to report this quarter X. This quarter's exceptional revenue result of 26.3 million of which 25 million was generated in the United States. In fact, our results a result tops product.

Launches by Nevro and I read them.

With one having to go all the way back to 2008, and Boston Scientifics promos.

Stent launch.

To find a company, whose first full quarter following if the approval generated hire us rather you total.

The results are testament to or to the quality of our product at 170% <unk> commercial team and were driven by overwhelmingly positive response from the second all modulation implanting community and their patience, it's clear that implanting physicians appreciate the professionalism over a field team and that <unk>.

Providing an excellent product at a competitive price. They also appreciate our be spoke second no modulation device given that it is intuitive first free long lived full body M.R.I. compatible and has been proven to be safe and clinically effective in both our pivotal clinical study and more importantly in every day.

Clinical practice.

In addition to executing one of the most impressive commercial launches in Med Tech history, X. Onyx continues to invest in product development and innovation for the benefit of positions and their patients for example in January the F.D.A. approved and enhance second enhanced second generation programmer for the at Phonics.

S.N.M. system that incorporates among other things a predictive programming algorithm that translates into operative responses and suggest how to program the patient for optimum therapy, thereby reducing the need to adjust therapy post implant.

In mid April the F.D.A. approved a next generation rechargeable implantable neural stimulator under a P.M.A. supplement.

Our new I.P.G. decreases how frequently a patient needs to recharge their implanted device to only once a month for an hour or for some patients one only once every two months.

We began manufacturing this new I.P.G. in late April and expect to begin shipping. This next generation device U.S. customers early in the third quarter.

Of 2020.

Also in April exotic submitted a P.M.A. supplement to the F.D.A. for the purpose of gaining full body M.R.I. conditional labeling for three P.M.R. I scanned in the United States just to remind folks we already have full body labeling for 1.5, M.R.I. scanners approved in the United States by the F.D.A.

In Europe, we have both 1.5 and three T. full body labeling.

So I plan to provide some more color and information on today's call, but first similar to our past quarterly calls Dan Dearen, our president and CFPO will start by reviewing the first quarter 2020 financial results Dan.

Thank you re.

For the first quarter of 2020, we reported net revenue of $26.3 million. This compares to $1.1 million in the first quarter of 2019.

Net revenue from the United States accounted for 25 million with certain European markets in Canada accounting for the balance the first quarter 2020 revenue.

There were no stocking orders in the corridor.

<unk> gross profit for the first quarter of 2020 was $9.9 million.

Representing a gross margin of 62.4%. We are pleased with the gross margin. We have seen at this level of cells and continue to expect gross margin to expand to the low to mid seventies over the next few years.

Total operating expenses for the first quarter of 2020 or $31.1 million, which is an increase of $17 million compared to the same period and 2019.

This increase was primarily due to higher personnel costs for the <unk> commercial team and other parts of the organization.

And the first quarter, we hired 22 additional filled days clinical specialist for the U.S. market and numerous other internal support personnel to interfere physicians and their patients received besting class service and clinical support for Mcdonald's.

We also added manufacturing personnel to increase capacity and keep up with demand that has exceeded initial launch expectations.

At this point, we've substantially completed the build out of our commercial and manufacturing infrastructure to a scale that can support the level of business. We anticipate once elective procedures return to the levels seen pre tova 19.

Net locked for the first quarter of 2020 was $14.6 million as compared to a net lots of $13.1 million and the first quarter of 2019.

Driven by the same factors.

Mentioned before.

And cash equivalent on the balance sheet.

Or approximately $159.8 million as of March 31, 2020.

I will touch on covered 19 before re provides more color on this quarter's commercial and operational progress.

During this past seven week period, X. Sonics is focused on protecting the health of our employees and their families.

At the same time continuing to manufacture product for inventory.

We have made certain accommodations, such as splitting our manufacturing and quality personnel into three ship to limit the number of folks in the facility at any one time and of course, we have provided the appropriate personal protective equipment.

Suppliers have delivered in accordance with our purchase orders and our team has managed to be very productive building inventory during this period.

Well the crew to our benefit as product demand comes back on line.

Moreover, as outlined in our eight K. issued in mid April we determined that in light of the disruption created by the covered 19 pandemic and it's anticipated impact on the company's operations. Most employees will take a 20% reduction and compensation for the remainder of the second quarter of 2020.

The reductions apply to the majority of our workforce, including senior management as well as worldwide cells and clinical personnel <unk>.

Certain manufacturing employees, who are working full time are getting a 10% increase in their hourly wages.

The board of Directors will also see their cash retainer temporarily reduced by 20%.

These reductions in compensation, where effective as of April 16th and are expected to last through June 32020.

I will now turn the call back over to right.

Stand in the first quarter, our sales momentum accelerated throughout the quarter.

In mid March prior to cope with 19 related postponement of elective procedures.

And as you've heard from many other medical device companies sales dropped off considerably for Exxon X. in the last two weeks of March.

During the quarter, we we're averaging approximately $3 million per week in new sales orders.

In the first.

Gaze of of April, particularly the first 23 days or calendar days of April new sales were very light.

However, we have seen new orders during the last few days, particularly last week and a number of procedures being rescheduled in the month of Meg.

When an exactly how quickly things recover will depend on the scope intensity and duration of the pandemic and the shape of the recovery.

As everyone understand there are external covert 19 related factors, which are out of our control.

Europe for instance, which accounts for less than 5% of our business went dark earlier in March and appears to be on a much slower on appears to be much slower coming back online than in the U.S.

Our field or U.S. field team reports that as of May 4th approximately 35% of cases, we originally had on the calendar in q. to have been rescheduled.

These include external trials, along with permanent or full implants.

The location of this activity varies widely there's very little activity in the northeast as compared to say, Florida, Texas parts of the Midwest and the Rocky Mountain region.

We do not see New York, New Jersey, Massachusetts, Louisiana opening up until June.

<unk> also looks to be slow to reopen although we would just notified that U.C. Irvine will begin doing a modest number of elective procedures on may 13th.

In any case, we are ready to support physicians and their patients as facilities continue to reopen and elective procedures come back on line.

Despite.

These encouraging signs.

We expect revenue in the second quarter to be significantly reduced given the modest number of schedule procedures and in addition, we expect gross Morgan margin to be negatively impacted due to the lack of manufacturing overhead absorption.

With all that said given that approximately 65% of our procedures are in Ambled Tory surgery centres and approximately 50 per cent of our patients are of Medicare age and that take when all modulation is one of the most profitable procedures for your all just than you are going to call. Just we believe X. Sonics is in.

Good shape to recover quickly.

Moreover, we know that our customers are anxious to begin generating income for their practices and hospitals.

And assuming the recovery is in full bloom in June <unk> as well positioned to continue to grow during the second half of 2020 and into 2021.

So back to talking about the first quarter and our results, which in fact validate the feedback we had received from positions since our commercial launch in November of 2019, as many sulfide analysts saw firsthand at the seminar series, we <unk> or seminar series.

Oh the series of seminars that we held in Q. for 2019 are entry into the U.S. market was met with great enthusiasm from physicians. In fact, we're pleased to report that approximately two thirds of the 325 physicians that attended the seminar series have already purchased products from X. Sonics.

With more waiting I Dare say impatiently for their institutions to complete an agreement with us.

Needless to say this was a very successful program that provided a significant to return on our investment of time and capital.

Implanting physicians tell us that because of our product they are more confident and enthusiastic and highlighting the benefits of and recommending cycle no modulation therapy to their patients. Their staff members report a high level of satisfaction with our product, meaning that charging is perceived by patients to be easy due to our.

Than current stimulation and easy to use patient remote.

There is little to no reprogramming required by the nursing staff at the office so.

This gives positions more confidence to recommend segment on modulation.

And this is an important consideration in that for some physician implanters prior to X. Sonics Psycho no modulation was being used only as a last resort therapy.

However, based on the attractiveness of our embodiment and the level of confidence being projected by physicians to their patients.

Additions are telling us that more of their patients are saying, yes to sake, when all modulation therapy than ever before.

So this quarter's results reinforce our confidence that the sake when all modulation market is poised for meaningful expansion in the years ahead, driven to a large extent bike sonics his commitment to innovation and increasing patient awareness, we're bullish about the future and fully expect sacred on modulation to become.

Preferred third line therapy for patients suffering from overactive bladder and fecal incontinence.

So some additional information that I trust people will find interesting. So we've made great progress on the customer acquisition and contracting front and during the first quarter over 350 ambulatory surgery centres and hospitals in the United States implanted patients with the <unk>.

Relation system.

That represents about one third of the top 1000 centres that practice <unk> not.

Practice, that's an m. and and those.

Centres, if you may account for about 80% of all.

Implantations.

Further over 110 facility agreements with both national and regional IDN as well as large urology group and ambulatory surgery centres have been find since our U.S. launch in 2019.

Now included in this group executed in March or three of the largest I'd ends in the United States now we have another 85 agreements that are currently in approximately 85 agreements that are currently in progress or in process and we've continued to execute agreements during.

March and April.

And while there may be some delays due to cope with 19, we fully expect that the remaining agreements will be wrapped up by summer 2020.

In addition, our data is showing that nearly 90% of the patients trial with our ex turtle trial system are implanted with a permanent device.

This is running about 10% to 15% higher than what has historically been reported in clinical literature.

And while we were not expecting to participate meaningful meaningfully.

In the Interstim I.P.G. replacement market at the time of our U.S. launch.

We have been pleasantly surprised that over 20% of all of our implants to date had been associated with physicians, replacing Interstim would take sonics.

So this is the main reason why we decided to get our new I.P.G. with the extended interval between recharging completed and approved by the F.D.A. in lieu of moving forward with an I.P.G. that is compatible with an already implanted interstim lead.

And on the are different we are we're we continue to work diligently on a number of incremental advancements to the existing system as well as a non rechargeable device to round out our cycle no modulation line.

So in closing.

We're very proud of this quarter's results were grateful for the trust physicians in their patients had placed an exotic and.

And in addition to the strong commercial execution, we continue to make excellent progress on product development and regulatory initiatives.

Then and I have said many times in the past and has supported by numerous independent physician surveys conducted by analysts and investors. We believe the global Sacred all modulation market in particular in the United States will expand meaningful meaningfully and can double in size over the next three to five years.

So with that said, we are confident and bullish about the future prospects of exotic and.

And we continue to work diligently every day to fulfill our vision.

So I'm happy to answer down an ideal are happy to answer questions. At this time and we're gonna pass it the operator to open it up.

Ladies and gentlemen, if you have a question at this time. Please press start and then a bottle of wine on your touch tone telephone.

If your question has been answered our <unk> from the keys. Please press the pound key.

You are first question comes from David Lewis with Morgan Stanley.

Oh.

Gave each airline is open if your thumbs down you. Please I'm your debt.

[noise], Hi, <unk> on pretty the noise Ryan Dan. Thank you so much for for the commentary I just wanted to touch on it I know, you're not providing guidance and that would be almost selling to do so but earlier on here you had expressed some level of comfort well consensus.

I'm, sorry that were out there could either <unk>, you're various levels of comfort what the numbers that today and part of how that aligned with your recovery models. Thanks.

Yeah, So look I I appreciate the.

I appreciate the question I think the issue really depends upon how quickly we can see a recovery.

You know in the in the economy, I mean, it's pretty clear that elective procedures or.

Now being allowed in a lot of the states around the United States, but.

No I I'm I.

I I qualified my remarks earlier with saying you know if things come back on line in June.

Then you know we're very coffin in about you know, making some you know pretty impressive numbers in the second half of the year and I really think it depends on the timing. So if if things continue to be sluggish and we don't get back on the beam in June then obviously, it's going to be you know tougher.

But.

We feel pretty good about it but once again it isn't the this is very very difficult for us too.

You know to project how quickly you know things come back on line you know at this point so I.

I think the hopefully that is a reasonable enough answer.

Okay. Great. Thanks. Thanks again in just a quick fall a lot I know you touched on that's like the inner can lead commentary, but I just wanted to ask given Kroger 19 have your views on the competitive landscape changed in any other detailer on you know how are you evaluating the competitive opportunity in light of Coca 19. Thanks.

Well I mean, I'm not sure how to answer that question.

It's not that any of us could have ever anticipated a a pandemic in the middle of our you know March towards.

Towards becoming a major player in this in this segment so.

You know I think it's look it's a setback for everybody in in a medical business, but on the other hand, you know our team is you know is motivated we're ready to go we've used the time.

Inbetween to make sure that you know we've got our knives, a shopper sharpened their swords sharpened does the expression might go we have developed a lot of very loyal customers.

We don't anticipate any change in their view you know because of the he's external factors and in fact, you know we're starting to see you know new orders come in to the company now clearly there spotty based upon geography.

But we have no you know we have no reason to believe that really anything has changed.

And we've always anticipated a competitive response from the incumbent if you may so all of that is factored into our thinking so thank you for the question.

Your next question has from Robert Hopkins with Bank of America.

Hi, This is a travesty it on for Bob Congratulations on a a great first quarter out of the gate plus F.D.A. approval I didn't want to get a little more color on the the trends.

Two two so far.

You know April probably close to zero and and you said you know may so far what things are around 35% original expectations, just any or any other color you can provide on on the may trends and what the original expectations words, So we can kind of going to censor or how to model q. too.

Well.

So just to be clear what I indicated was that we have approximately 35% of cases being rescheduled that were on the calendar at the end of Q1.

But the same as saying we have 35% of our anticipated orders.

Coming in the door. So just just so we're clear.

We we are not bullish about q. too.

Let me, let me just super clear about that right. There is there is no doubt.

That cute too is going to be you know dramatically lower than what we thought in Q1 and you know we don't have an absolute crystal ball. The good news is we've got some water is coming in right. So we're not dead in the water things are happening cases are getting rescheduled some new orders are coming in but there are far cry from where we.

We're.

You know experiencing a $3 million average per week right. We're we're nowhere near that right. Now. So we believe that once again may is going to be a a light April was you know was virtually nonexistent in terms of water flow may is going to be light. Although it's the first day of man you know we've got a lot of time ahead of us yet.

It depends on how June shapes up so I you know we are not bullish about you too.

Do we think that by two three.

Things will be back and we'll we'll be in much better shape and can be back on a historical growth.

Then yeah sure, but you know I think there shouldn't be a lot of expectations for us.

Into too.

Okay.

Helpful and just as a follow up you know what portion of the the procedures that were cancelled you think can come back. This year do you think you can recapture all those procedures for canceling cute you know at some point this year and then also the the strong do you want to results you know any.

Sense for how much it out was market expansion versus versus shared game.

So.

Let me let me take the.

Picked up the last part of your question first.

So it's it's extremely difficult for us to be able to answer the question about market expansion as we are a new entrant into the market.

We will know in about a year from the existing customers that we have who told us what their volume was when they started with us.

What they actually wound up doing in buying and how many procedures. They did so will then have you know firsthand information. The problem is there is no public information about the size of the sacred on modulation market or how things are occurring in real time, you know the data that we have quoted in the past is is from third party claims data, but it's.

Typically two years old. So this is very difficult to measure in real time, what I will tell you is that the physicians are telling us which is granted it's anecdotal, but they're telling us that patients are saying, yes, more often to the therapy when they presented and that too often say clear cut.

Example, or evidence that the market is definitely growing can we put a number two it no and of course, we have no idea what the competition is doing in in how their first quarter wife, and I would doubt that we're going to know that yeah, maybe maybe the honest, we'll we'll fair at that information out so.

Anyway, that's that's that's as much as a as I really can say the big surprise for us as I mentioned in my prepared remarks worthy.

The number of replacements that we participated in which was clearly something that we we didn't believe that we would be meaningfully participating in that part of the market. So that's the good news now. The question you asked about you know what percentage of the.

Of the procedures do I think we'll come back and be rescheduled, it's really an unanswerable question for us as a company.

We we went out we did some surveys if you may have our team and our customers to get a sense about the.

Percentage that I quoted to you right. So we know in actual numbers and by whom how many of their patients have been reschedule, but it's it's it's very much a real time situation right. This is a dynamic and fluid it's happening every day.

And you know we heard as an example, I use that one example, where University, California, Irvine indicated in California, they're they're going to start doing some elective procedures are customer was the one who told us that but on the other hand, we did not get a specific number.

How many of my patients I've been able to reschedule. So it's dynamic we're going to be obviously paying attention to.

To this and you know it's inevitable that some of.

Of these patients won't be back because they've lost their job they've lost their insurance and so forth. This is why I wanted to point out that you know 50 per cent of our patients or Medicare age or approximately 50%.

We should be unaffected by this from a financial standpoint so.

We're we've been very transparent will continue to be transparent and we'll let people know as much information as we can as as we gathered.

Thanks, very very helpful.

Pleasure Travis Thank you.

Yeah, <unk> Wells Fargo.

Hi, guys.

So much for taking the questions and congratulations on the results few quick ones here. So.

350 accounts, it's an impressive number I'm just curious if you can provide any color on how clinicians or using the device across town.

Typically can you touch on what type of.

Seeing what type of estimated conversion you'd expect I'm curious trending any differently than you expected last corner.

Then looking at had you know understanding jitsu in some accuse three maybe talk.

Many incremental dish and do you think you can expect it converts some shared your product in 2020 anything meaningful along with getting those agreements wrapped up and then I have one followed thanks.

Yeah.

So there were a number of almost assumptions that you've made in your question. So I'm try to unwind it.

The fact, the fact is that.

You know getting 350 customers on board in five months I think is pretty amazing result for the company.

As we have said many many times, we we really have focused on those pop implanting centres, who you know who do the most volume and I think that you know it's fair to say that about a third of them are on board.

It's also fair to say that there are quite a number of physicians or centers I, we want to I want to convert the language to centres because.

Centers have multiple positions were implanting.

They want to work with our product, but you know need to get the Green card. If you made from the hospital organization.

Or that.

Or that idea and the <unk> regional or national idea. So so we think that is it's not a handful that's like hundreds.

Of of new accounts that would be forthcoming. So you know we we believed that the the kind of uptake that we've demonstrated in five months once we get back a everybody gets back to work here, we think that would continue.

And we have we have seen that accounts and maybe this gets more to your question, but accounts that switch to act sonics, they switch wholesale to us.

We are not in a situation where people are dabbling with our product you're either in the boat or you're not in the boat that has been we have been thrilled that that's the case and and why is it because in their own hands their replicating or pivotal clinical study results because.

Their their patients are coming back in and they're into facing when they interface with the nursing staff. The nursing staff is saying to those doctors.

This product works better this is easier the patience or not not having a difficult time using their patient remote the charging is he is easy. They appreciate the frequency now we've obviously raise the bar there as well so it's going to make it a lot easier for patients imagine a rechargeable product that you only have to recharge once a month or in some cases.

Once every two months. This is this is pretty amazing.

And so forth. So the feedback has been really positive.

From patients back to the nursing staff and then the nursing staff back to the physician because the physician's honestly you know they do the implants. You know we've designed our implant kit to be similar to what they're used to so there's no learning there's no training that's the easy part, but they don't usually interface with the patience.

Afterwards, once they've got a full implant on a regular basis, it's the staff.

Who is dealing with those patients and if they're happy and they say they see a difference than that gives the the doctor even more confidence to talk to the next patient about fake when all modulation and that's what we're seeing so you know hopefully I've I've I've, given you know a reasonable answer to that question.

No perfect that great. Thank you so much I just have one last one.

Financial side.

That is a quarter with $160 million in cash on the balance sheet can you talk broadly.

Will have the ability to kind of take that amounts real cash flow positive or any sort of sense of cash.

It should be expecting enlightened circumstances. Thanks, so much.

Hi, This is down we believe that the cache of $159.8 million at the end of the quarter is sufficient to carry the company through to positive cash flow.

Even with this setback, but covered nights in.

Think it's we recorded previously and Q4 of 2000 <unk>. We had operating expenses of I think it was $28.1 million and then for the quarter ending March 31st 2020, it was $31.1 million.

Which is what we had you know not provided from a guidance, but directed toward which is we'd see an increase quarter of recorder slight increase is an op acts as we added additional people to the commercial and the manufacturing teams, but certainly no large incremental increase and AAPEX over the course of the year and then I think as you would expect in Q. too.

You know look it's where all expecting this to be you know.

A very slow quarter on the revenue side in the same vein look we're also not going to is likely spend as much money because there's just a lot less activity.

In terms of conferences travel another activity.

But I would add just that you know operating expenses is not necessarily cash burn.

Right Yeah.

I mean, you know we actually we build inventory now we we sell it and then we have receivables and we collect some money back. So it's not you know to new day, it's a bit much more exciting day for us.

Exotic.

Some of that money comes back.

[laughter] thanks to the question.

Thanks, guys and congrats.

Thank you.

You're nights question <unk>, Adam made her with high per se.

<unk>.

She guys can grab Sunday, yeah, great start to the year I'm, thanks for taking the questions.

My first question is just on the group of patients that had procedures pushed out what's the process for you know ultimately getting them back into the the <unk>.

They need to repeat any part of the process to just doing another trial or are they just green lighted for implant once the the or time opens up and.

And then you know just an adjacent question just curious.

Company or you know physician base using tele medicine in recent weeks and could this be.

Another lover that brings more patients you know on mine once once stuff starts to open up more than I'd follow up.

Yeah, I mean, I think I understand the question, but you know.

As you might imagine that.

The process by which position bring patients back in or reschedule patients.

If I gave you. One example, I'd have to give you. Another 200 examples because there is no consistency across.

Cross the market as to know whether you know it are you you know in a hospital system are you an employee or your privacy position. I mean are you working in in A.S.C. I mean, there's so many variable.

It's it's it's really impossible to describe exactly what any anybody's going to do now having said that.

There are hundreds of patients who've had an external trial and they've been successful.

And you know they don't need to do anything more they've had their external trial. They were out in the world for three or five days. They had a success. They are ready for a full implant or permanent implant as as we say.

There's nothing to do there's no other testing or any other qualification. So it's just a matter of.

Those.

Centers, you know contact he knows patients and you know getting them back on the calendar.

We have really good visibility through our patient care management system.

No who all the you know obviously patients have to opt into the system, but we found the you know high 90 percentile day opt in they they you know they would like support from the company.

So we know who they are we know which positions they're associated with and obviously are people are offering you know to do whatever they can to support their customers in this regard, but it's all over the board.

But there's nothing particular than anybody needs to do and I know that there's been because I am avid reader of your research and others.

That are on this call today, I mean, I know, there's a lot of talk about tell the medicine, but you know this is not really it's not really something that that we have seen or is would be you know specific are applicable to take one on modulation is it a good idea, yes, it's a good idea.

I mean everybody's learned how to use zoom, even if you've never done it before so you know did a good idea for you know doctor daring to reach out to his customers and have somebody on his staff reach out to his patience and have a chit chat with them see how they're doing.

Et cetera, So and please don't take this in the wrong way, but you know covert 19 does not cure urinary incontinence are frequent continent. So these patients are not getting any better.

That are out there you know we just hope that you know they've gotten sure ends and that they're not afraid to come back in and I do believe that this 35% number you know will grow dramatically over the next you know four to six week. So I think that's about as much as as we could say.

Okay. That's really helpful color rape appreciate it just for the follow up on the competitive side of things and anything new in the field that you're seeing seeing or hearing from you know your competitor there I guess boasts Oh U.S.N. and then here in the U.S. market Thanksgiving guys. Yeah. Thanks look O.O.U.S. in terms.

You know.

We thought we knew three centres that did one procedure with the new micro product from from our competitor of that's all we know and then Europe went dark and so there's been nothing coming out of Europe not nothing at all.

And so there's really there's really not not much we can say about it because nothing has changed.

From the beginning of March and you know when or from even from the beginning or went in January I think was that was the time that that product got to see you Mark so.

I'd I'd love to provide color I just don't have any.

Okay no.

I guess no.

Change to the competitive landscape here in the U.S. or you know from a marketing message from a competitor price seen et cetera right.

No not at all.

Okay got it thank you.

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You're nice clashing catch him k. like come much soundtrack.

Oh.

Great. Thank you high ran down thanks for taking our question.

You mentioned that I you know these facility agreements with national and regional I.D. ends in that as well as I guess, you're allergy groups and and and <unk> keeps give us a little bit more detail on what those agreements look like in in what they'll do for you in strengthening your position as we come out at the <unk>.

Yeah, So I mean, I I well keep it somewhat brief mean, here's the bottom line.

If you are national regional I.D.N. or I'll, just start just focus on them.

These are you know facilities that are that are managed by you know professional management teams right and they have processes in place and you know vendors just can't Willy Nilly walk in the door and get purchase orders I mean doesn't happen not in the you know I mean, there wasn't time I've I've been at the at this.

40 years, there was a time, where you can do these things, but not any longer.

You have to have an agreement and these agreements are very straightforward, they're very simple, but they're necessary and they deal with hip compliance they deal with payment terms. They deal with you know is it Fob origin. You know the these kinds of things there's nothing acrimonious about any of this.

Is not difficult. It's just that we have to work with the supply chain personnel in these institutions to get these agreements they are in effect hunting licenses.

There's no guarantee we're not negotiating from contracts with delivery schedules in minimums and things of that nature. You know if we did that.

Take two years to be able to get these things done so they're just fundamental agreements. They include the price of the product the payment terms things of that nature and you know they they want proof of insurance from us and things of that nature. They want us to agree to to help a compliance items.

But it's a necessary evil they got you'd just have to have them.

We have you know were dedicated to this we have a function in the company focused on this our field team works with our inside people. We get these contracts I personally C. review and find every single one of 'em. So this is not some obscure thing that's happening in the background that I don't know about.

Agreements that I mentioned that are in process, there's like seven doesn't or some of those they're they're in process, we are back and forth to some red lines and so forth. So.

You know that's that's really the story and you know in in today's World. You you just that's part of the business and.

And then last comment is from our standpoint, it's important that our terms and conditions.

You know are spelled out right. So you know we we as a company we also need some protection.

When you do business with somebody because if you don't have an agreement then.

How do how do you you know how do you operate you need everybody needs to know what the parameters on the rules to the road so.

Nothing controversial just standard part of business.

Perfect. Okay, great that main stands and then I guess second question Scottish site. Yeah. I mean, you have a a decently high percentage of your business coming from ASCII is.

Thinking about recovery and you know your early early conversations about rescheduling cases, you know are you finding you know more E.S.T. is are sort of prioritizing procedures do you think that 65 per cent of your business couldn't move higher in the second part of this year or just.

<unk> out of recovery process.

Thanks, that's a good question so.

Fortunate that K.F.C.'s or the predominant you know centers that we do business and it it absolutely is the fact.

That the A.S.C.'s.

In certain geography is are coming back on line very quickly.

It's still about.

More about geography, right now than it is about the type of center.

I think that's a fair statement to make as you might imagine.

No in Nebraska, South Dakota, North Dakota.

Parts of Florida, Tennessee, Arkansas.

Man, they're ready to go there that we got cases scheduled we got reps in facilities doing procedures, we got new orders coming in.

But it is spotty in terms of geography, and it's not complicated because all of us have been listening to the news and.

Looking at the at this data and you can basically look at a map and.

Sure sure as Hell, where there are less cases, four covert 19, there's more activity from a commercial standpoint so.

And then you know as things start to open up we'll we'll we'll start to see it there I think there's one consistent point here and I Trust and I'm not the first.

Person from Anybody's management team is said this.

The reality is physician, they're not making any money right now I mean, unless they're an employee of a of a hospital right now there. They are in trouble as much as anybody else. So they need revenue they need they need to make profit they need to feed their families. The hospitals have been you know hard hit by this as well so they're highly motivated.

An elective procedures back on and and we take solace in the fact that for urology and you're Gonna ecology, we have one of the most profitable procedures that there is so you know we're bullish about it it's just going to take some time and I think everybody's.

Kind of anxious to have a perfect formula or perfect answer, but it's it's it's difficult you know to to say exactly how quickly it's gonna happen, but I think you know the fact that we are levered towards A.S.C.'s.

It is certainly an advantage for us I'd hate to be in the capital equipment business about right now.

<unk>.

Thank you guys.

Thank you.

You're nice crashes caused some Christians do it with Barclays.

Hey, guys. Thanks for have neon and congratulations on a quarter I promise I won't asked many questions. This time around.

I know I know Larry was particularly annoying.

Oh, let me last night.

Then if you ask them one at a time it's okay.

Alright.

Wondering he mentioned early on the call that you know two thirds of the positions that you know when to all these <unk> seminars that you did before well mostly before the launches had already started to order and about one third are really waiting I was just kind of curious if you had <unk>.

The reason why they hadn't yet ordered if it was just simply a matter.

In fact that they were just so tied to Medtronic and and you're just not going to ever got them, which is fine needle eventually you know or whether it was product availability or just hospital contracts at the point I'm just trying to understand the one third and maybe how meaningful if it is still really meaningful value at all this <unk>.

Chargeable aspect is <unk> gotten over to ready.

Oh, so Kristin so first thing is that I think one has to start with the same Wow you guys got 65% of these people who attended a seminar to buy your product that's unbelievable right. So.

So I I should just stop there okay.

But you know <unk> with respect to your question I'll give you more color.

So it's an incredible results, we we didn't anticipate that would be the case right.

It was no special requirement for somebody to come you know two in seminar. They were just interested and they came and they and they listened and you know I know you intended. So you you know what was said the point is that there are many of them that you know just are not able to implant our product or haven't been able to because there instead.

<unk> you know weren't quick enough to be able to get an agreement in place that allowed us to have a green card so to speak to go into that center.

And I think it's more about that now is there a percentage of people that you know may have.

Without any anticipation of switching but they were curious sure I'm sure. There's a few.

But you know it's not as if we'd forgotten about all the people who have attended we continue to communicate with them, we mailed to them.

We keep them updated you know they received the personal message from me a couple of days ago, letting them know that we're ready to go things of that nature. So I don't I don't see it and I would say this if you were not intending to do business with the Sonics you didn't take time out from your practice to fly to a city and sitting in fit with us for a day so.

I don't think you know that you know there's many of those individuals.

There are many other physicians who.

Maybe medtronic wireless as an example, and they're not coming our way, they're never going to come our way we could stand on her head and give it away good the product for free and they probably wouldn't do it. So you know, but God. Good news is that's a small percentage of the market.

You know the game is going to be look in the end you know of all the implanting physicians is is is a simple way to think about it.

25% of the market is 100 per cent all in with X. Sonics, they're never going anywhere they love us They love the product their patients love our product, 25%, maybe it's 25% maybe it's 20, maybe it's 30 I don't know, they're they're they may never come to us.

We win or lose the game by the 50% of the folks in the middle and that's what we're that's what we're focused on and.

You know if we can get you know more than half of the implanting physicians in America Implanting centres in America, you know to come our way, we're going to be a very successful company.

Yeah I'm just curious if if the reason because at one point the reason seemed to be.

At least hypothesize, maybe a little bit by Medtronic. This this perception of the need has been the non rechargeable one I'm just curious at that still out there immediate that was blind maybe a third into the extent that you've you lost that product. If he can sway that other third just not sure.

That was one out or.

Actually appreciate you bring this up yeah, because I guess I get to say the following work that that has just died and people realize that hey, we don't need that any more because his products. So great.

Right I mean, I'm you'd just answered it I mean, the fact of the matters. This whole concept that people are going to be don't want to recharge or were afraid our patients are not going to be able or want to recharge.

It is just propaganda.

That was said by wrapped who were afraid to lose business and so it's propaganda.

Facts do not support it.

At all and it has gone away completely <unk>. The fact of the matter is that people find that reach first of all the <unk>. The a a spinal cord stimulation businesses dominated by rechargeable products never boy rechargeable nor simulators.

I mean, it's a it's by far the majority of sales in in that market.

No nobody who implants, a spinal cord simulator would say I'm worried my patients are not going to want to recharge you know so I think it's it's just it's not relevant and and what's happened in five months. This whole conversation about recharge ability has gone out the window.

And it's not something we're we're we're getting as an objection if somebody you know has been.

He you know not listening not not open to to to understanding or to talking to any other physicians are used our product and and they still have this perception that's been put in their mind, well, maybe we haven't dissuaded them of that yet, but you know.

This is not a reason just like the other 15 reasons that some of the competitive reps have put forth turned out not to be the case as well. So and then you know when the competition is running around saying, Hey, we're going to have a rechargeable product to just wait and see it's going to be great.

You know how to how does that play against and nobody wants to recharge and I would say this if you can't recharge our device with a simple pop that you put in his cool lemon type belt.

And you know you walk around you know now once a month for an hour.

Mean that is that's a lot easier than taking their.

Patient remote which has two elements associated with the both which needs to be recharged I mean, the fact of the matter is recharging is either plugging something on the wall or attaching it to your body recharging as recharging. So there is no such thing as a non rechargeable system that doesn't require a human to do something.

To keep their system operating.

Oh.

Just on the inventory that you're building or are you going to be building the inventory for the new product launch I seem and and will there be some sort of right off for the.

Existing generation nice at some plant.

But the I pod.

No you know I think one of the good things about us having the robust quarter that we had is.

Oh.

Hold everything remade.

So it wasn't a problem and.

They mentioned, we're we're building the you know the other product.

So we we don't anticipate any issues there and.

So that that that that's that's not going to be a concern for us. Okay. Thank you guys.

Thank you shed appreciate it.

Yeah next question Gosh, I might might simply Nina.

Mm.

Yeah, Hi, reading damn thanks for taking the questions and congratulated impressive quarter I just gave it on for my I.

Just wanted to clarify when at the comments you made the 350 accounts.

That that you have.

You mentioned that they're not dabbling into does this mean that they're 100%.

<unk> I mean as best you can tell.

I I can't answer their question I mean, I'm sure, there's a procedure here or there that flips through the cracks but.

It's the way we set it all along is that what we're seeing is substantially all of the business from these accounts are coming our way.

Okay, Great and then I mean, I I get that you know the dark.

Want to come back to work in this is a really profitable procedure.

Given that 50% of the patients are Medicare age what have you been hearing from the doctors about patients willingness.

Come back and get the procedure done.

You know it once again it's.

You know, we only have certain let's just I'll I'll I'll make a political common it it was certain precincts that are reporting in right. So you know I mean, that's the reality so in in in you know the early returns that we're seeing from these.

States are that you know people are rescheduling and they're coming back end.

I mean, we had one account.

His anecdotes story.

Love These stories, but.

You know we have one account they did 10.

10 external trials.

Implants for external trials on 10 patients in one day in Central Florida, I mean unbelievable. That's that's a great day, that's a phenomenal pre covert 19 day you know for any company. So I think it's really spotty. It just depends on where they're located I mean, let's face it in some parts of the country as everybody has.

Been reading and doing on television. The fact is that some people are not fuss about this at all others or you know scared to death right. So it's all over the board and I I think we we really hard pressed generalized.

And you know our experience is really not that different than some of the other reports I've been reading.

You know patients are coming back.

And I think smart facilities are doing everything they can to provide information to patients to provide them comfort. So they know they're coming into a safe environment than you know people are wearing P.P.E. and things of that nature. So there's ways to mitigate this I think just like anything else.

The smart docks, the smart centers, you're going to see them come back and they're going to come back fast and the others, who you know don't have a clue about marketing dark very good at dealing with a their their patients in this way that maybe had fallen into that category of you know I show up and people walk in the door.

And that's just the way medicine as you know, they're going to do worse in this recovery than than the others, who a proactive.

Okay. That's helpful. And then you mentioned 35%.

Cases that were rescheduled from I guess was the back half as March had been rescheduled what's the size about backlog and thanks so much.

So we can't speak to a dollar amount associated with that it just to explain you know at any given time.

As if that now we're five months you know have well let me be careful <unk> April you know, it's hard for me to Count April but you know we were five months into the market.

And each.

Representative.

Then rolls up into a region. We have 11 regions keeps track very closely of their calendars of cases, because that's how we deploy are re re human resources to support. These cases, that's the reason why we added more clinical specialist and we now have 68 clinical specialist on the team because we need the.

Personnel to support the cases in there. So you know each of our sales people each of our sales managers they keep.

An electronic count if you may have what's going on so but those cases on the calendar. There. They include both new patients coming in for external trials. They include.

Patients for full implants, and so forth. So it's a mixed bag.

And.

You know at this point you know, we we haven't tried to like monetize it because the 35%.

You know, we'll quickly become 45% and so on and on so you know I think that it's fair to say.

And what we're trying to signal here is that certainly we would expect all things being equal.

By July you know things are back in in kind of a normal cadence and we're really counting on June right. We're just assuming may is going to be spotty.

And but if things come back on June and we think will come Rip Roaring back in the second half of the year.

Mm.

Yeah.

Yeah.

Comes from Rebecca language STB Lake.

Hi, guys <unk> Oh congratulations.

Very strong long Harry specially in the U.S.

Sorry.

<unk> I want to ask from patient <unk>.

So.

<unk> <unk>, they oh, and how shall we think that was I wait for change how fast can.

<unk> pose to cold dead.

Because it.

They want your imagination, <unk> therapy, and <unk> gone through all those other therapies before data bank.

Those page and I don't see it going yeah modulation. So I'm I'm wondering <unk> provide any thinking Oh is that I made for all not work.

So Rebecca it's interesting question I I think one has to go back to understanding Billy where and how many patients are out there.

You know this is not <unk>. This is an underserved market.

Fast it's been 1% to 2% penetrated there are millions literally millions of Americans right now suffering I mean tens of millions of Americans suffering from urinary incontinence from fecal incontinence from doing continents.

Smaller numbers for urinary retention and so forth so.

There there are so many patients that are out there and I would say to you that if not one fresh patient got referred to a urology more you're an ecology office there are more than enough patience for right now in each of those practices, who have not gotten sacred <unk>.

<unk>, who are candidates who have been differentially diagnosed already with this condition, who just have never been they never even been presented to them and and the big part of what we've been trying to do with our customers is to is to remind them that you know they.

I have so many patients already in their practices and you should first thing before you do anything else is go back to those patients and say look we have a device now that's M.R.I. compatible full body and more compatible that last 15, or maybe 20 or maybe 25 years in your body. You know that you don't have to worry.

About getting a kid x. planted on and on and on you know that my <unk>. If they just go back to their existing patients and share that with them. We believe there's a virtually unlimited supply of these candidates. So we honestly not relying on you know a bunch of fresh.

Referrals in order for us to.

Be successful as a company and far implanters to have plenty to do.

Alright, Yeah. That's very helpful. Thank you and that I want to ask another noncovered quite share Oh.

<unk> you guys started <unk> <unk> <unk> <unk> <unk> not I have four <unk>. So how should we think about the Rand I'll.

Kimmy, K. and I commend may well.

<unk>.

<unk> lab, well, what what what what's a number of from either at those dollar amount or not <unk> <unk> <unk>.

The liver.

So what we said in the past is that.

If you look at the productivity of the incumbent.

And we did the math they were running it about $3.5 million of revenue per head.

Okay. Okay. So I mean that is ultimately.

You know the number that we we think is is possible from a productivity per sales person now that would imply you know.

Process 300 million dollar you know revenue the revenue line now we're not going to be there yet obviously.

But.

That's what's possible and you know in any sales force there is a bell shaped curve.

And you know it's that way it works right and you know some people are unbelievably productive.

And who you know they're they're they're.

They're the ones that are that are out in front and setting the pace. So to speak for the rest of the sales force and then you have others, who are laggards for maybe some good reason maybe their territory was underpenetrated to begin with.

And it's more of a development territory, we have to be patient as a company to support those individuals.

In those particular territories. So it's it's it is as you could imagine all over the board the key metric for us.

Is number one is we want the sales people to be able to pay for themselves right. That's that's the number one metric for US right. You know you take the revenue take 60% you know just round number 6% margin, we look at what it costs too you know to pay those individuals and you know we look for productivity.

At least above that level that that's kind of what we're after and.

We you know we have shrunk our team just barely right. So yeah. Yeah. We we believed that we have the appropriate staffing and you know with between say 90, and 95 sales people. We think that's great and we will continue to add more clinical specialist as the case volume grows so ultimately.

We'll have a few hundred people.

And only you know pretty well split between clinical specialist and and sales people.

That's very helpful. Thank you.

Welcomed thank you.

I am showing no further questions at this time I, one now 10, a conference back to Raymond Cohen for closing remarks.

Thank you operator appreciate your help.

This afternoon and thank you everyone for listening. We appreciate your interest in support of electronics is always and look forward to talking to again soon.

Ladies and gentlemen, this conclude stays calm French. Thank you for your participation unhappy wonderful day, you may I'll just cannot.