Q1 2020 Earnings Call

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Okay. Thank you.

Good day and welcome to the BIOLASE 2021st quarter Financial results Conference call. Today's conference is being recorded at this time as much during the conference over to Todd Curly up like E V C group.

Thank you operator, good afternoon, everyone and thank you for joining us today to discuss BIOLASE its financial results for their first quarter ended March 31st 2020.

On the call today from violates our Todd Norby, President and Chief Executive Officer, and John Beaver Executive Vice President and Chief Financial Officer.

And that's about all review the company's operating performance for the first quarter before opening the call for questions.

Before we begin I'd like to remind everyone that a number of forward looking statements, which are any statements that are not historical facts will be there will be discussed during this presentation, including Florida looking statements regarding the company's strategic initiatives and financial performance. These forward looking statements are based on BIOLASE as current expectations and are subject.

Sure variety of risk and uncertainties that could cause the company's actual results to differ materially from the statements contained in this presentation.

Such forward looking statements the only represent the company's view as of today May 720 Twond.

These risks or discuss some of the company's filings with the Securities Exchange Commission a replay of this conference call will be available on the BIOLASE website. Shortly after the completion of today's call when listening to this call. Please refer to the news release issued earlier today announcing the company's 2021st quarter results. If you do not have a copy of the news release.

Yes. It is available in the Investor section of the BIOLASE website.

At Www Dot BIOLASE dot com.

Ladies financial results can also be found in the company's quarterly report on form 10-Q, which will be filed with the FCC. The tables. We've provided in today's news release offer additional financial information. So we encourage you to review though.

The tables included the reconciliation of unaudited GAAP net loss and net loss per share to non-GAAP adjusted EBITDA loss and adjusted EBITDA loss per share as well as the details of the company's non-GAAP disclosures.

With that said I'm, please to turn the call over to BIOLASE, as President and Chief Executive Officer, Todd RV Todd.

Great. Thank everyone for joining us. This afternoon. We appreciate your interest we continue to report a buyer later.

I wondered again, it now again, [laughter] Corona virus and express or heart failure, because there is ever going to get affected directly or indirectly.

The safety of our employees customers their patients.

And our partners as.

For most concern and we continue to take every car care to treat sure or wellbeing. During this very difficult car.

While we go in active buyer is mitigated as soon as possible to here now is your name. So it is difficult to predict when commercial activities and more specifically your dental market, where we turn to normal levels.

We are going to unprecedented times for most.

It has had a significant negative impact on our first quarter operations.

Most careful offices in the U.S. and globally closed in March and remain closed.

Except for some emergency procedures.

Acting dental production.

80%.

So much we sold very few raises in March which spirits historically, our strongest month are the first quarter. However, the team.

Quick we pivoted to online do Webinars.

To reach our target audiences.

During his remarks, we launched our Webinars series hosting over 15 Webinars to date with over revenue thousand registered participates over 1300 request a follow up over 700 interested in R.W. on the trial Kroger.

We have another seven Webinars plan over the next few weeks.

Similar if not greater participation expected.

While this challenging environment has impacted our ability to sell lasers, we have not allowed it to diminish our ability to raise awareness or benefits of our products.

Post survey data from these webinars is helpful.

Build a healthy sales funnel.

Work, our sales team can interact.

These strong prospects on site.

I want to reaffirm that violated still well position, where the opportunity ahead, because general practitioners in dsos or large group practices are still you really look for ways to expand their services and keep as much revenue in house as possible and we believe this will even be more ordered for GP and.

Yes, so they look to expand for ways to recoup revenue they were losing during the period damage.

Furthermore, our technology is a better.

To meet new 88 guidelines in the reduction of aerosols within a dental office.

In addition to pivoting our commercial efforts, we took action to reduce our cost structure in this downturn.

The entire organization has been temporarily impacted through faro or salary doctor.

Yeah, I will discuss this more in his prepared remarks.

The much awaited landmark study performed Brian Maguire with too on the clinical efficacy as well that patient reported outcomes are the water lays assisted treatment paradigm guidance.

Versus traditional open flat John surgery is now expected to be released any day.

As previously mentioned this study will deliver the year procreate information for both the specialists.

And general practitioner not to mention to 65 million Americans, who suffer from carrier disease.

We believe this study will establish new protocols for Perrigo surgery and drive further adoption of all tissue layers in our target markets.

We are equally excited about additional studies on treating perrigo disease expected to be released this year from Columbia Barter and you see all there.

As we closely monitor the industry getting back to work our actions to support these offices.

And we shared some of these plans for 2020 as we roll forward curve stack is acknowledging that many offices have lost revenue from the mandatory shutdown due to coded 19.

We understand this we have launched their financing program titled BPP, which is the violate partnership program to help offices get back on their feet. This program will allow dentists to use our technology.

Generate revenue in non make a single payment until 2021.

It will also provide in office training component that eliminates the need for those dentist to traveler.

The BPP program will also help us further penetrate the DSL market, which continues to be a focus for us.

With the aviate recommendation of aerosol reduction mini Dsos will look to incorporate more manual scaling with the use of diode lasers for treatment. The recent FDA clearance for laser bacterial reduction therapy is timely for us.

In 2020, we also plan to expand our phase two waterways trial, which was delayed due to co bid 19 with additional Heartlands Dennis.

Based on our success save one pilot program with Heartland, We now have other DSL pilot plan across North America clarity Royce is just one additional example.

In addition to our focus on the DFL market, we continue to develop our water lays mercury experience or W. Andy.

This program, which training onex by allowing dentist to have first hand experience with our technology in applications to the use of experienced mentors ICT group learning environment, showing it and the power of technology first hand, while allowing them to use our order rates technology post trading in their office prior to purchase.

Our recent Webinars series confirmed the popularity and demand for this program.

A key initiative.

Is to expand to February and the program to select cities during the year, we initiate it for definitely programs in the first quarter prior to covert 19 shutdown and expect to increase the through 2021 stains returned to normal based on our early success, we believe the WMD could generate.

Up to half of our us equipment sales by 2021.

Even in this current environment.

From home environment.

We continued to drain.

And ramp up our new sales reps I am pleased to report that prior to the pandemic, we had still or open territories and we look forward to the revenue mix. These new sales reps will produce once you have business returned to some level of normalcy.

In this time of global crisis. It is vital that we come together to support the fight against coded 19, leveraging every tool available and that is what we're doing.

So while most central office continue to be close for the most part we have joined fight against Cobot 19 by partnering with any K IC, yes.

In intensive care unit manufacture to supply IC you'd grade portable ventilators through BIOLASE is FDA registered facility in California.

Any K ventilator received the FDA approval for emergency use during this call. Good night team pandemic and BIOLASE received authorization to manufacture and supply that ventilator under the FDA emergency use authorization.

An exemption from the state of California to operate manufacture in market. This product was critical because of the need of this product.

We will leverage file these years experience in manufacturing and distributing FDA cleared medical equipment to help supply ventilators in support during the cold had 19 crisis.

To date, we have received $14 million and ventilator orders and we are hopeful that any K, we'll be able to over there a portion of these orders in the next mark.

As you can imagine with large players like GM now in this market the component supply chain is under pressure.

While it's impossible to know how the rest of 2020 will play out given current circumstances.

We continue to be very excited about end market opportunity in front of us and our glad to see some states are now opening up allowing for all dental services to be performed.

We believe that many positive changes we have made over the past year.

And at Ash, and a half to improve our cost structure and build our talent bench have created a healthier operating company and once you asked in international businesses returned to some level of normalcy, we're confident that violated physician for long term sustainable and profitable revenue growth.

With that said I'll now turn it over to John to review, our first quarter financial results in more detail John.

Thanks, Todd and thank you all again for joining US. This afternoon now let me review the numbers.

Total worldwide revenue for the first quarter of 2020 was 4.7 million a decrease of 54% when compared to 10.3 million in the first quarter a year ago.

You asked laser revenue for the first quarter 2020 decreased 62% year over year to $1 million compared to 2.6 main in the first quarter a year ago.

You asked consumables and other revenue for the first quarter 2020, which consists of revenues from consumable products, such as disposable tips decreased 28% compared to the first quarter of last year.

Internationally laser resident laser revenue for the first quarter of 2020 declined 68% to 1.1 million compared to 3.4 million in the first quarter of 2019 and consumables and other revenue decreased 28% year over year in all cases, a decline in revenue was primarily attributable to the cobot nineteenx.

Comic shutdown.

Gross margin for the first quarter 2020 was 28% compared to 34% in a year ago quarter. The lower gross margin reflects the impact of the decline in revenues relative to our fixed cost.

Total operating expenses for the first quarter of 2020 were 6.7 million compared to 7.5 million in the fourth quarter and $7.9 million in the first quarter a year ago.

The continued reduction in operating expenses, both sequentially and year over year Revpor that represent the benefits of the cost rationalization efforts that we've been implementing throughout 2019 and early part of 2020.

Sales and marketing expenses declined 1 million or 28% sequentially 1.2 million or 30% year over year in the first quarter due to reduced compensation related expenses, mainly due to lower sales volume.

General and administrative expenses increase point, 4 million or 14% sequentially and point $6 million or 26% year over year in the first quarter. This increase was due to a $1 million reserve for allowance for doubtful accounts, we booked during the first quarter 2020, as we assess a potential impact that cobot 19 on the collective below.

We have our accounts receivable.

Engineering and development expenses decreased 0.1 million or 10% sequentially and 0.4 main or 30% year over year on the first quarter.

Operating loss for the first quarter 2020 was 5.4 million compared to an operating loss of 4.4 million in the first quarter of 2019, an increase of 23% year over year.

Net loss for the first quarter 2020 was 6 million or 19 cents loss per share compared to net loss of 4.9 million or 23 cents loss per share for the prior years first quarter.

As a reminder, our earnings release includes a reconciliation between unaudited GAAP net loss and adjusted EBITDA.

We believe adjusted EBITDA provides a useful measure of the company's operating results by excluding depreciation amortization expense stock compensation expense and change allowance for doubtful accounts.

The adjusted EBITDA loss for the first quarter of 2020, which excludes these items increased 11% year over year to 3.6 million or 11 cents per share based.

Diluted share count at the end of the first quarter of 2020 was 31 and a half million shares compared to 21.1 million shares in a year ago quarter.

Now turning to the balance sheet cash cash equivalents unrestricted cash totaled 1.8 million as of March 30, Onest 2020.

As we face the challenges posed by Tobin 19, we're focused on liquidity cost containment and prudent cash management.

As such we reduced a compensation of senior executives and other salaried employees and also furloughed about two thirds of our us workforce in April.

We also applied for and received a 3 million dollar loan from the Paycheck protection program or PDP.

The PPP was established to help small businesses with under 500 employees. We have approximately 150 employees and the DPP helps us keep as many people employed as possible. Despite the significant loss of business, we have experienced due to the coded 19 economic shutdown.

These employees are vital to our future success as we outlined earlier, we worked hard to get the current team in place to ensure we can execute our longer term growth plan.

Given the current economic situation. It was unlikely that we could access and public equity markets to raise cash to help make up for the significant loss of revenue we experienced during the first quarter 2020, and likely to continue into the second quarter of 2020.

In closing I want to reiterate the prior that prior to the krona virus pandemic, we were confident our actions to strengthen buys we're working with Phil all of our open U.S. sales territories, which had a normal economic environment would have led to year over year revenue improvement the last three quarters of 2020.

However, the remain too many unknowns and when we aim when we can achieve this now depends on how quickly the USA international markets return to some level of normalcy.

This includes our prepared remarks, I'll turn the call back over to the operator to open the call for questions.

Thank you.

We'll take questions.

Yes. Good question. Please.

Sorry.

Okay.

Yeah.

Sure.

Let's turn Bob.

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Yes.

Darren.

A question.

Your first question.

Okay.

Okay.

Thank you for taking my question.

With regard to the ventilator business.

Congratulations on getting the additional orders are you still receiving new orders for ventilators and then what Ken is on gross margins should we expect relative to the rest of the business for that for those sales.

This is Bruce up I'll take that question. This is Todd so.

We expect more orders to come through year, the gating issue right now truly is components.

Specifically around some sensor components coming out of Honeywell.

Seems like that the the challenge for many of the ventilator manufacturers. So we're hopeful that will clear up here. So we'll be able to ship so units this month.

Reference to our margins, it's going to be accretive to what we view now as an organization.

Okay, Great and then I'm.

Just in terms of general dental market and the reopening of that market. What are you seeing rate now out in the fields and can you give us a little bit of color.

How quickly the states are opening up and.

Just what's going on.

Yeah that SRAX typically through the FDA they heavy heat map.

Obviously at a map of the U.S.

There is north of 20 states now that are open up for all dental services.

And we expect that to continue and probably speed up here in the next couple of weeks.

Every state is a little bit different in reference to how their handling that start up.

One of the gating issues continues to be for many offices opening up and under new Ada guideline in reference to PDP.

Making sure that they can access enough PB to support the new guidelines so I.

I would expect that we'll continue to see positive momentum there and again every office is handling this differently in reference to how they accept.

You know folk walking into that office as I mentioned grew as we are very successful in reaching a lot of these offices now electronically through zoo and doing do lunch and learns and so forth I would expect that that will continue here in the short term.

As offer to get more comfortable and having somebody physically walk ins that office.

Okay, that's great.

So those are my questions for today, Thank you very much.

Thank you Bruce Thank you.

Well take our next question.

From.

Sorry.

Hey, John John Thanks for taking the questions here.

So great you've been able to pay that hearing utilized the facility to supply ventilators, maybe just following up on the prepared remarks.

And previous question I, just about how you'll be able to supply them I think in the short term so.

It sounds like you waiting on some components, but can you talk about kind of the status of being able to tweak the operations to be able to produce and validate ventilators, maybe timing of that and then any sort of line of sight you might have on being.

The supply.

Some of that commitment to the 14 million from existing inventory that and that cash on hand.

Yes, so I think that's what we're trying to sort through right now Kyle.

You know.

Currently we are dependent on any K to get units for the current orders that we have just because they don't have.

Right now our capacity issue, it's a component issue.

So for us to manufacture right now in Irvine is not providing an advantage to them as a longer term, we're going to look at that as being a manufacturer stateside for them.

Once things here will settle down a little bit here and also depending on what we believe that future demand curve looks like.

So we should hopefully have a better.

Decision or.

Acknowledgement from and the K.

This week in reference to their ability to get some ship us in units this month.

That was the plan.

We're hopeful that bill fall through on that commitment.

Got it and to the nice step up in commitments from $10 million at 14 million now within a month.

Just kind of curious where some of these orders are coming from what you know hospital systems distributors, I guess any sort of color as to sources. These would be great.

Yeah, Great as I mentioned I believe previously we are fortunate to have two individuals who in their past career and alike.

We're in the ventilator space so through their contact they were able to and relationships connect with.

Distributors, who supply us hospitals and specialized in ventilators. So.

Primarily where these orders are coming from today.

We would anticipate.

Being that once we start shipping these units and facilities in the distributors get to experience. This unit.

You additional orders would be forthcoming as well.

Okay.

And nice update you're able to secure.

Some money from PPP program and that you're taking initiatives to cut overhead.

Just in modeling I mean, how should we think about preserving cash or that burn rate kind of over the coming in Montana, it's hard to forecast what.

Sales will will be but.

Any sort of.

Color around how we should thinking about that burn rate would be great.

Oh, certainly keep an eye out for that thanks for all the updates today.

[noise] right here.

Yeah, let's take our next question from AD will send it capital.

Yeah. They can protect my question or my question was do you see any differences in Oh geographic areas that didn't have as a stick of a locked down either domestically in the U.S. or internationally.

And I don't I don't think we we are seeing hey thing huh there from perino on that's specifically at least at this point in time.

Gray and do you have any ideas of weather international will pick up earlier or later or you think it's going to be the same time as the U.S.

I don't have a point of view there I think it also depends on what portion of you know rest of world. We're we're talking about here I think certain markets will recover faster based off of guidelines and you know being.

On the early and.

You know coded 19, so from a timeline standpoint.

<unk>, we're seeing demand and inserted country now I started to pick up.

Specifically chip Pan as just one example, and will also be missing more around Japan in the next couple of weeks as well.

Right well thanks for the color no definitely wish you guys. Good luck. Thank you.

Yeah.

That's getting twice his age question answered portion.

Well now.

I go there for closing remarks.

Thank you operator, and thank you everyone for your interest in BIOLASE.

Concludes our call have a great day.