Q1 2020 Earnings Call
Greetings and welcome to Straka skin science, So that's cool CIT Twentytwenty earnings conference call.
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Thank you operator, and good morning, everyone. Thank you for participating in today's financial earnings Conference call. The company's first quarter ended March 31st 2020.
Leading the call today will be Dr., Dolev, Rafaeli, president and CEO striking joining him today will be Matt ill Chief financial officer at <unk>.
Earlier this morning, Strada issued a press release announcing its financial results for its first quarter ended March 30, 31, 2020, a copy of the release can be Jami virtualization page of the company's website.
Before we begin I'd like to remind everyone that the comments in various remarks about future expectations plans and prospects constitute forward looking statements for purposes of the state really under the private Securities Litigation Reform Act of night, you may be far.
These statements include but are not limited to plan objectives.
The patients and attention and other statements that contain words, such as expected contemplates anticipates plan intend believe seems predicts and variations of such words or similar expressions that predict where indicate further bench or trend that do not relate to this is stuart matter.
These statements are based on our current beliefs or expectations there certainly.
Subject to significant known and unknown uncertainties and changes in certain <unk>, many of which are beyond our control there could be no assurances that our beliefs or expectations will be on.
Okay.
Actual results may differ materially from our beliefs or expectations due to financial economic business.
The market regulatory and other political global pandemic events, such as the current koeppen, 19th and then it affecting the medical device industry in general given the uncertainties affecting companies in the medical device industry and he all of the company's forward looking statements may prove to be incorrect. Therefore, you should not real.
And he said.
Forward looking statements.
Maybe just some more specific risks and uncertainties facing the company or said.
For in the company's reports on form 10-Q, 10-K filed with Securities Exchange Commission.
Drives encourage you to carefully review and consider the disclosure Scott do you have to see filings, which are available at www Dot FCC Dot Gov companies' website. As a reminder, this conference call being recorded and where you get Belbel audio rebroadcast on Charlotte's web site. Furthermore, the content of this conference call contains time sensitive information that is accurate.
Only up to date live broadcast May 12, 2020 shutter undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date, that's cobbled school with that said I'd like to now turn the call over to Dr. dollar Abili, President and CEO straw dog.
Thank you, Matt and good morning, everyone and welcome to our 2021st quarter earnings call.
We're all very happy to be here My first earnings call for the fiscal year 2020.
Throughout these difficult times are number one concern is the health and safety of our employees.
Oh patients partner physicians and their staff.
During this period, we have remained focused on the execution of our strategy planning for the return up to a new normal and managing our business and employees Judy unprecedented times and are pleased to share with you today, our first quarter 2020 financial.
And operational results.
The first quarter of Twentytwenty was a tale of two half.
Well in the first half our revenue was trending at a strong double digit growth compared to 2019, driven by an increase in the number of patients entry tonnage growth in the installed base and extended margins.
The world today is looks very different.
Starting with San Francisco shelter in place order, we have seen a rapid succession of states locking down resulting in a rational and emotional draw in the number of elective procedures conducted and the appetite for continued business expansion decisions.
As we're all aware this was not impacting strata and its business alone, but was rather a global.
Outcome of government reaction to cover 90.
Up to the middle of March or reimbursement requests were up 117% over the same period in 2019.
Well, we have been trending upwards in the last two weeks.
Six weeks between mid March and the end of April reimbursement requests has been approximately 50% of the same period in 2019.
The social distancing.
And infectious nature of course with 19, coupled with guidelines that might make changes to the therapy decision as it pertains to patients.
That are currently treated by or are considered to be to be treated by systemic in biologic immunosuppressant drugs has caused most doctors and patients alike.
So we evaluate the selection of therapies that trend has the potential of increasing the number of patients treated by extract.
The American Academy of Dermatology has recently published guidelines for providers to follow for patients on biologic therapy. During the Corona virus endemic which advises that and I quote dermatologists must delicately balancing the risk of immunosuppression.
The risk of disease flare, requiring urgent intervention the advisors.
That when patients are considered for biologics that the and I quote physicians assess the risk versus benefit before initiating biologic therapy on a case by case basis, recognizing any one may develop serious.
Patients from called 19 infection and.
That's for high risk patients physicians should consider alternative therapies to biologics.
In addition.
In commentary published in March 2020, written by notable kill wells, including Dr. T. W. Tony of the department of Dermatology psoriasis and skin treatment Center.
Oh University of California, San Francisco.
The that said and I quote while the decision to treat a so why is this patient with a biologic is on a patient by patient basis.
Sectors favoring biologic.
It's continuation or reduction in immuno modulatory regimen, if the patient has mild to moderate underlying psoriasis.
We believe our unique.
Revenue recurring revenue business model, where there is nothing tangible for the physician.
Over which to make a purchase decision as they come.
Ladies and gentlemen, we have temporarily lost connection with the Speaker line. Please continue to hold and the conference will be commensurately.
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On the I I'm I'm, sorry, yes used here now.
Thank you Rachel all have don't speak now don't look you can pick up where you left off.
Thank you, we believe it or unique recurring revenue business model, where there is nothing tangible for the physicians over which to make a purchase decision and where it takes.
For clinics to be open and seeing patients and for patients to have confidence to enter clinics is where we can leverage our resources the patient data base and how school center reimbursement team and our clinical sales force to accelerate the bosses.
That would benefit our physician partners, our patience and strata.
As we have provided in recent updates individual states across the United States have begun announcing their steps of returning to a new normal. The company is is executing on a patient outreach program in which straddle provides unique advantage tweets partner.
Let me.
To quickly rebuild their patient referrals by Reengaging patients that were either you treatment or about to enter into treatment before the local.
The company as part of the service to its partners and using it in House call Center and reimbursement team has started performing outreach services on behalf of these clinics.
To their patients to bring them back into treatment.
As of this week. The company has reached out over 350 physician partners that are in 31 phase one states and you.
Oh.
Yeah.
Yeah I'm here.
We're here, but we dropped to one again.
No we did.
Okay. Additionally, we have conducted one on one online clinical training and our clinical team has been delivering clinical webinars with approximately 250 participants to date.
To continue engagement with our physician partners are leading non U.S. markets, China, Japan, South Korea, and the middle East of old preceded the United States the impact of covered 90 anywhere shutdown.
Most of the first quarter.
We are seeing cautious reopening as it pertains to our distributors managing new and existing customers.
During Q1, we saw extension of placements in South Korea, and recently, we are seeing orders for maintenance sports for South Korea and other beach.
We ended the quarter <unk> $8.2 million in unrestricted cash as of the ended the quarter. We had accounts receivable of $3.2 million in accounts payable of 2.1 million laws, we have undertaken cash conservation measures, including eight leave of absence of certain then.
<unk> reduction in discretionary spend in the late receipts of inventory purchases.
Management and the board of Directors has agreed to deferral payments owed to them.
We expected.
He steps would save us approximately $3 million per quarter in cash outlay.
That's trending level and without additional business generated we believe.
These cash resources would have been sufficient for approximately three quarters.
With the receipt of the a paycheck protection for Prime loan, India third week of April and.
Encouraging April sales and upward trend of reimbursement requests. We believe we have sufficient funding for us to see our way through the next four quarters.
As we bring our team back to support.
The reopening of the partner clinics.
In the last two weeks, we have been gradually bringing back many of our employees that were on leave of absence and or leveraging our call center and reimbursement team as part of our arc reach for.
Let me know take a look at our business in the first quarter of 2020.
Looking at.
Our important metrics include the recurring revenue growth installed base and margins.
We've seen growth across the board.
All of this is a direct result of laser focused strategy, we put in place in 2019 after the refinancing and change in management.
<unk> revenue was impacted by corporate banking, primarily internationally, we grew our recurring revenue by 7.3% over the first quarter of 2019, we grew our margins overall by 3.8% and the recurring revenue margins grew by 2.2%.
Having lost the momentum in the last three weeks of March we continue to grow our installed base domestically and internationally I would like to now turn the call over to match Hill will review of our first quarter 2020 financial results Mats.
Thank you don't 11.
While 2020 has presented its challenges as we work to the new normal and we do not yet no the future severity for the duration of the Cobot 19 pandemic, we're focused on the business and working with a partner clinics.
To get them back to treating patients with respect to the first quarter 2020 revenues for the first quarter were 6.7 million a decrease of 10.1% as compared to revenues of 7.5 million for the first quarter 2019.
As a result of our overseas capital equipment business being impacted by the co. Good 19 attendance.
Recurring revenues for the first quarter 20 25.7 million.
Up 7.3% as compared to five point Threemillion for the first quarter of 2019 due to an increase.
In patient flow to our partner clinics equipment revenues. However for the first quarter of 2020 were down one point or down $1 million.
52%, 0.6% as compared to 2.2 million or the first quarter of 29 team.
Gross profit for the first quarter of 2020 was $4.4 million or 65.4% of revenues.
As compared to 4.6 million or 61.6% of revenues for the first quarter 20 my team.
Gross profit for recurring revenues, but first quarter 2020 was 3.9 million.
We're 68.4% of revenues as compared to 3.5 million.
Or 66.2% of revenues.
The increase in gross profit.
Our recurring revenues was the result of lower depreciation on placements.
Selling and marketing costs for the first quarter 2020 was what $3 million down slightly compared to $3.1 million first quarter 2019 I.
As a result of lower trade show costs commissions, and DTC spend offset by higher personnel costs.
General and administrative cost in the first quarter of 2020 were $2.1 million.
The decrease a point $4 million as compared to $2.5 million for the first quarter 29 team.
As a result of legal audit and accounting costs, we had in the first quarter 2019, when we changed auditors.
Research and development costs were flat at point $3 million for the first quarter is a 2020 and 2019.
Other income and expense for the first quarter of 2020 was net zero for the for.
As compared to an expense of $135000 and 29 team as a result of our refinancing our debt at the end of 2019.
Net loss for the first quarter 2020 was $1 million or three cents per basic and diluted common share as compared to a net loss for the first quarter 2019, $1.3 million or four cents per basic and diluted common share.
As of March 31, 2020, cash cash equivalents and restricted cash was $15.6 million the same it and some to 31 2019th.
In March of 2022, the impact of Coca 19 and in order.
You can sort of cash we put many of our employees going to leave of absence suspended discretionary spending delayed the payments of payables the labor the seat of outstanding purchase orders.
We would expect will say was approximately $3 million a cash outlays a quarter.
On April 21, 2020, we received $2 million and proceeds from the small business administration Paycheck protection program, we carefully consider old going under this program and are satisfied that were eligible I can demonstrate need for this long.
We never terminated our employees and in fact continue to pay the benefits during their leaves.
We have brought many of these employees back to work what falling CDC guidelines I never planned bring back the balance in a phased approach it states returned to work.
As of today, including proceeds from the PPP alone, we've just over $10 million in unrestricted cash and cash equivalent.
EBITDA for the first quarter 20, $21.6 million as compared to point $4 million.
Were 29 team.
As of March 31, 2020, we had 33 million seven her 14.
We had six 2 million shares outstanding.
I would like to conclude we're saying that we were pleased with the company's performance in the first quarter 2020 at this time, we cannot predict the impact and the virus will have in the business as a company that community.
We will.
Manage through this new normal.
Operator, please open up a call for kill that.
Thank you.
I will be conducting a question and answer session. If he would like to US. The question. Please press star one on your telephone keypad, a confirmation sorry, well indicate your line is in the question. Keith You May press, Okay. If he would like to really if your question from the Q.
That's it just depends he thinks they can equipment it may be necessary to be clear has that before placing the stockade.
Your first question is from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead.
Hi, Good morning. This is actually destiny on for Jeff I'm bogey for taking a question on my first one is just about how you guys. Just thinking about account that was that one of things like that or come back for systems that you would have been moved a are you guys still evaluating those customers <unk> and those are there.
<unk> partners.
So when you're ready to kinda, one thing thats kind of normalize again.
Yeah, I'll start with that one and I have a few more [laughter].
Good morning. Good afternoon. Thank you for the question I Hope everything is so would you guys down in Florida.
I'll take advantage of your question then speak a little bit about what we do now and what we were doing up to the up to the or to the middle of March. Indeed, we are evaluating via the prospects for accounts coming back in.
We we didn't have some changes happened over the last eight weeks as everybody else had a and we have the opportunity of looking at what's happened in two inflexion into clinic.
When when this pandemic took place and as I mentioned in my prepared remarks and in updates that we had over the last a few weeks or we are in continued contact with or without clinics, and we see whose open whose offering.
And at what levels. They operate in terms of a number of patients and be a the number of procedures. They can do.
Obviously, there was a big difference between between clinics that are open and operating and those that have decided to shut down and there's a.
At least subjectively, there's a difference between.
Types of ownership and management that that all these clinics and the decisions. They make oh, we have seen clinics that have completely shut down we are turning stuff.
Decided to minimize their operation and then a standard again and we've seen plenty to that.
That has that have stayed open throughout the whole time period.
That allows us to evaluate or what would be the white targets to come back now as as we all know are the most of the.
Most of these decisions business expansion decisions have been happening towards the end of of quarters. It's it's a history in medical devices, regardless of our unique approach of going with would recurring revenue. These decisions tend to happen towards the ended the quarter mostly.
Most of it agreement in the first quarter, where in the first few weeks of a quarter. We are very busy resetting a patient benefits would be insurance company.
And and only then region, which in a focus on on expansion. So.
I can I can say very.
Very confidently that we had more placements in the pipeline lined up for the end of the first quarter, which were which would have been either.
Backs or or new accounts, but these did not take place and this from our perspective is there is a good thing because ah because by not doing them and not just play seem to be likes healthier and having our inventories felt there without usage, because we can't because they can't do that.
They they don't have the first patients they don't have the training in place. We just didn't go ahead and execute the a the placement.
That is evident from our eaten away, which you'll be able to the breakdown in the 10-Q, but yes. There are finished goods inventory ended up higher than the previous quarter. Because we had these units are ready to go.
And I'm happy that we did not go ahead and and and execute these were the placement because of doing this sometime in the beginning of March or middle of March and then getting to launch them in July or August would not have been a good thing for us not from a financial perspective not from a.
Business perspective.
So I hope I answered the first question, let's take the next one.
Yes, definitely okay that was very clear.
Well I'm also curious based on the guideline published by the American Academy of Dermatology have you received any greater interest.
Some physicians are you hosting any kind of physician info sessions or training sessions or anything like that and then.
Beyond that I could you also think that prescribing biologic could be negatively impacted for a longer durations and just for the duration of the pandemic.
Great question or the or be a prescription of biologics and systemic drugs.
Our immuno suppressant.
Even before the pandemic took a turn in the last few years, where physicians were prescribing the more and more to patients that were mild to moderate in their disease stage, which is not fully supported by the a insurance companies in the vitamin their guideline.
Thanks.
But that was a trend.
With the pandemic hitting and Immunosuppressant drugs.
Affecting or potentially affecting a patients capability with dealing with infections infections.
He at first there was a lot of confusion and there was a lot of an emotional reaction, which would follow by guidelines specifically put out by the FDA The American Academy of dermatology.
And the Oh pharma companies themselves are putting the oh the responsibility of of deciding.
The city of using a drug that's going to suppress the immune system of the patients on the ER physicians and then that was followed by.
Clinical webinars conducted by a key opinion leaders and bite and papers that were published that specifically said physicians should consider whether the continuation of treatment of patients with immunosuppressive drugs is med.
The necessary in light of the risks out there and in light of their condition and should reconsider the start of.
Each month for new patients most specifically for.
For non severe patients we have seen a lot of and lot of a communication slump patients.
Through social media and interest through social media and we have seen a lot of questions coming from or ER physician partners in the clinics during the last six weeks we have conducted.
Six Oh clinical Webinars with our physician partners, we had a more than 250 participants, which you one third of our install base. That's that's a very significant participation lives. We have had a many many others that have a followed up there.
And and logging to look at the.
At the recorded a webinars and then the Webinars we recover all worked guidelines in the you American Academy of Dermatology guidelines.
So definitely there is a a there is a oh, we thought about to be a necessity of putting mild to moderate patients on a immunosuppressant drugs.
That's true Oh that will not go away in the in the short period of time him because I think until and that's that's my personal opinion until Cleveland team is put into a into an end by either having a a medication to treat it or a vaccination.
Two units from that that would be a concern or by the physicians, but once called my team is he is gone up there's gonna be the risk of having the.
The next wave of of virus that would <unk> effect, a immunosuppressed patients more and I think that would put things in perspective and would that be up the other treatment modalities other than the unison drugs and at the as a a more viable solution.
Specifically for the mild to moderate patients, which are 90% of the patient population.
Okay got it yes, that's a really to point.
Right. Okay. So my last one and then I'll jump back into queue and it's more related to the patient I'm wondering are you able to kind of leverage.
The patient volumes that you pad from previous quarters, you know that you've kind of generated from their online platform are you able to kind of leverage that you see and get a feel for what patient volumes could be a following reopening or do you and then when you figure that out do you also have to maybe reduce it by a third or how to be compliant.
Social there's nothing guideline and then what how is the messaging changed if it maybe you could talk about that's the little bit. Thank you.
Well perfect I will so we have been busy for the first a few weeks of that and then they are building up what we call the patient outreach program in which we we come up to water Oh partners and offer than a service that frankly, nobody else can offer them.
In most of them or not equipped to with their own resources to handle and that has to reach out to their patients that are in where inc. treatment. Prior to covert 19 piece of that were considered to be in treatment or to be considered to be decide to be treatment. Prior to covert 19 as well as patients that were scheduled for.
First transportation during the time period.
The beauty of March until.
Whenever this thing is going to hand at the end of May we had to come up with a methodology.
Totally first before we go to them on what do we do with these patients. So we have the tools we have the capability of doing this we're probably the only ones in the industry that have the capability of doing that but we also need the other two elements are too to cooperate today. The first the first of the two elements is.
The physician in the clinic and the second element is the outpatient so we wanted to know what will be.
The state of the physician clinic or when we <unk>, we are attempting to help them to reopen and by that I mean would they have yeah sufficient elements would they have the from debt. That's person would they have the clinician would they have the a clinician extension to give the nurse would they have the billing person in place.
Granted some clinics had many many employees and most of them were put on leave of absence or were terminated some of them cannot come back because they don't have schools for their children. Some of them would not come back is there still afraid.
And so that was the first element. The second element is the patient itself what are they going to be concerned what they're going to be concerned emotionally from social distancing that would be consent concerned rationally from.
Titled The space inside the Pennington, what does it need to go through a procedural and how does that relate to their although conditions pre existing conditions as they can.
And we used to sell it scripts that are addressing each one of your patient population and we have reached out first to a very specific plenty for each one of the regions to get their feedback on the process see how would they like to see the patients.
Just as reminder, some of these patients have been out of treatment for two months do they need to does this is there a need for the doctor to see them again and re prescribers. There can they go right back into treatment with the nurse without having to Super Barker what would be the specific guidelines of video treating physician.
The into specific region based on on the guidance they have from the American Academy of dermatology and and the specific patient conditions.
Once we have developed up the program Weve reached out to a two partner clinics at first this was a small number in the last.
Two weeks, leading reaching out.
Gradually as states in the announced their phase one opening we were reaching out to over 350 clinics in 31.
Individual states and we gauge there Oh openness, so are they open or not.
Physically or they open are they taking patients today and and if they do.
What are the restrictions they have and then we take from them.
Your specific guidelines for the patients and we applied them to the patient list. So we started making calls two weeks ago to two clinics and then we started approaching the patients at the the capacity in the clinic is not the is not the concern because the number of expectations.
Per day is not.
He's not be a limiting factor that would would or would you.
Limiting the growth of our business in their business.
Actually if if if it and that's that's the one of the email updates we sent to our division partners. If they would be seeing a very small number of patients only only 10 patients.
That would mean that they would generate probably from our.
Our procedure more cash flow than they would be generating for most of their other activities in the clinic, but the the limiting factor would be the the number of overall patients are gonna be seen coming into the clinic. We are oh, I'll give a little bit color. We've just spoke into one of or.
Bigger players bigger clinics yesterday, and they had a they had over 100 patients show up in one day or on Friday, when they open up so it's a it's there's a lot of pent up demand and that's going to be that's gonna have to be managed individually by the clinics, we are going to be.
Helping them by reaching out to their specifically grew specific patients that are relevant for extract before.
That were treated before that are in the middle of treatment or that were considered to be or to be treated.
That that approach will it was very welcome by our partner physicians, we have a a waiting list now for clinics that are giving us the their specifics and we are using our in house resources to bring these patients back it's a little bit too early.
We to gauge the the actual success rate because as we've noted being or in our updates.
April or the or the the last six weeks for the six weeks from the middle of March until the end of April we had.
About 50% of the reimbursement requests we had in the equivalent time in 2019.
Which which means that.
Many of the clinical open many of them are receiving extract patients, but the patient census is lower in a deep the month of April or revenue.
Wars.
Somewhat sub 50% and we hope that our revenue in May is going to come closer to 250% of its equivalent revenue in 2019.
But I think that we will be able to I believe we will be able to gauge the.
The actual capacity and the ability to take care of that pent up demand towards the end of June.
I would also remind that the 31 states that and now it was one opening.
He is great news, but we're still waiting on the two biggest regions the northeast.
And the west.
Were among the two California show signs of opening and we have.
Specific areas within California that are already open active depicts our our active and are seeing patients and a new York just yesterday or Cuomo, the governor of New York announced the stages for opening and.
In some areas not New York City, but in some areas of New York, we have clinics that are already open and seeing patients.
Okay perfect. Thank you.
Well I guess my question.
Comes enjoy pettiness Fahrenheit C. Wainwright. Please go ahead.
Hey, guys. Good morning, Thanks for all the out information in glad to see your all well don't live I wanted to go back to your comments regarding the a the recommendations or commentary regarding immunosuppression and I'm glad to see that you know you're having all these webinars and making sure people are educated about that so I wanted to focus on the other ended the equation.
And specifically what the tone is and how the messages being received by these physicians regarding the messaging around immunosuppression.
Thank you Joe and good morning I.
The minute are the messaging isn't hours, we have adopted the messaging coming from the physician group B B and their own guidelines. We have we have taken the concern they have with their patients.
And we have prepared or a comeback advertisements.
In in the tone of we ever solution, but there's not suppress the immune system. So that's the messaging to the to the patients. The a the patients themselves are confused or looking for guidance and they would like to have a solution that is good for them clinically, but not not putting them at risk as.
Some of the other solutions might so that is ready that did that did not start yet to be over the last few weeks. We were very very active engaging ER physicians in clinics in giving them the clinical guidance on how to use our solution safely and providing them with.
We are the dotted lines coming from the American Academy of Dermatology and other sources because as you might appreciate some of the physicians are not.
Absolutely into armed with the latest and greatest in terms of clinical updates they were managing the business and and very focused on their day to day working suddenly just happens when they need to to get updates of the of the concerns coming from both physicians and patients.
Is it across the board you can you can see this on social media you can see this through the our own though the webinars that are run by key well voicing. These concerns. They don't have answers. There is no answer about the food safety profile Uh huh.
Individual drugs the dollar assumptions and there is a definite knowledge that our solution is safe and effective. There's also the knowledge that we can reach and in the clinic, we can see the patient in and out without more.
For a exposure than any other in clinic visit would or would cause military people to disinfectant surfaces of the of the a tip of the a of the device and besides that it's a it's a minimal union out for a.
For a patient.
Obviously staying at home for eight weeks at with different died no exercise and Ah in stress does not help patients will have a that have ultra immune disease conditions like a like for life is a bit like go there actually gets more.
They actually get higher instances of of the disease and so there's there's more insights from the patient population, there's more interest from the physician population and we are.
Now to in the process of combining the two and bringing them to a 2 billion to the outcome, which is there's going to be we believe more patients in the appendix being as these clinics opened up gradually obviously and we hope that so you know the north east and West.
Well, we'll come to the phase one opening he had boosted list.
No. That's helpful. Thank you and then tied to that up with regard to your comment on bringing back employees and a scaled fashion. The ones that you have brought back now are these the ones that are going to be directly involved in delivering that message.
We have we have.
Three groups of employees, we have employees in the factory, we have employees in the field and we have we have back office employees in the East coast. The a factory was a shutdown only for a few days until the a shelter in place guidelines.
The from the state of California, and the County of San Diego were clarified the what we have what we have done in terms of of or keeping employees at home was that.
Almost all of our field team and almost all of our patient facing team both the call center and the reimbursement team have been at home for a few weeks and and only a small number of them either either if they were in states that were never.
Shutdown or if.
The the coal volume or the business volume justified in the call center and the reimbursement side stayed at work at the at the highest point.
We were.
Just over 80% of employees were not we're not in the company. They were and we're in a a union and leave of absence or furlough, we've started bringing them back as we saw the business reopening even before the TPP loan was approved.
And we've he's brought back the relevant people anytime we saw a region open up.
And we increased the capacity in the call center and the reimbursement team. As this was this was happening we anticipate.
By the end.
End of May we will have almost all of our employees' pre pre the middle of March so below normal surface of employees back at work.
And that is that isn't like inline with the reopening of the state.
He employees that are coming back and they're focused on bringing these techniques that we see of a growing demand for training, we see a growing demand for field service, we see a growing demand for support Oh, all these clinics, even if they were open.
At a much lower volume through the last eight weeks are now see more patience and they need and they need more support.
Got it got it thanks for all that and stay well guys.
Thank you.
Thank you next question comes from Mike from <unk>. Please go ahead.
Good morning are good morning.
Good morning, Dolev, Matt. This is Raj sorry, my other line was busy so I am calling in through Mikes line I hope everyone is say more <unk>.
Hum So I think if we're providing a lot of information and specifically you know the cash preservation that you guys highlighted about three quarters, three or four quarters, what does that predicated on terms at the top line outlook. However, you're done there or should I say.
Breakeven or.
Worst case, most likely today scenario, how are you thinking through that.
The cash outlay I'll answer one half of the question and the met is going to jump in but the big determination of a three quarters and four quarters of runway was was predicated on the business. We had the at the beginning of April which was a very low.
Hello business, mostly coming from.
Leftovers of the the international business that we were providing at the beginning of April and the Oh, beginning signs of what's happening in the U.S., we had to analyze the worst case scenario of both from a financial perspective or what's the what's the sustainability of the business.
As well as from how much can we how much can we cut down on expenses and and create a longer runway and we've put out a an update at that point in time, saying that.
We have a cut back on all of our.
Discretionary spend.
We have delayed all of our inventory purchases.
We knew were not needed because there was not going to be in placements and towards the end of March him and the beginning of April and we Didnt know how long that's going to last and.
And we have furloughed employees and when we have done. This he assumption was that we're gonna be furloughing as they as close we're gonna be reopening only when we know reopening happens so at the at the lowest point of employees.
Of employees being a full employment.
And the lowest point of revenue coming in and knowing what our cash outlays should have been for inventory and discretionary spend the calculation was that we had on hand.
8 million of of unrestricted cash we had about a million difference between accounts receivable and accounts payable and and we had to be a cash.
Outlay.
Run rate of the previous quarter, which was Q4 two to calculate to base our calculation based on and that these assumptions. If you take the cage cash outlay and how much we had on hand with assuming very minimal business coming in that gave us a one way of three quarters.
Then we have applied for the PPP loan and for the SBH disaster recovery loan.
And we knew that if we if we get any one of the too so it's going to give us approximately.
Another quarter of a have a runway without having any parts of the business rebound.
Since then we had parts of the business rebound and on the one hand, and we had to be.
The PPP loan approved.
Which.
At this point in time based on the on the business at the beginning of the beginning or the business of April gives us about a fourth quarter runway.
And I hope I give you the the broad picture math, if you want to jumping in and provide some more color on than on the numbers.
No delivered I think you a couple of things I think you covered it exactly I'm our methodology for evaluating the.
Just a cash in addition that we have.
You know what the could be loan and having right now over $10 million unrestricted cash available to us that were and what the business starting to take an uptick again is were whereas we're watching the key indicators and offices opening in states opening.
I think you've covered everything go up thank you.
So let me add one more thing we have domestically, we have almost a thousand different clients with with 822.
Individual clinics and other clients that are buying from us some of the on the so capital equipment side and the service for that.
Our when we looked at our accounts receivable.
Oh entering or exiting Q1.
We had to put an estimate internally on the collectability of that have that a accounts receivable and we had to look at our accounts payable and assume what can we what we then we delay and and the balance the two while still operating we ended up or no.
Not feeling too much and we ended up collecting more than we anticipate that mostly because the clinics that we are working with the the individual amount per clinic is very small the of an open a amount and ER and also because if if if they want to continue do.
Business than they would end up having to to pay that.
So overall, there was no need to extend.
Further credit terms to our customers.
Everyone that goes back to business actually opens up the door ends up pain on time or slightly after the time.
Got it.
A couple of quick follow ups and I'll hop back in Q.
So our understanding of the acquisition cost per patient is received $200 per range, but you can just.
You know if youre kaleidoscope right now in terms of what's going on in the market you know when things will hopefully returned to normal they do you see acquisition costs per patient.
Going let's say in the rest of the calendar year.
And also if you can just kinda give us I'm not asking for guidance, but just some delta you know last area. Okay. Let's say you know pulled through 25000 patients.
Looking to see where do you see roughly things lining up based on what you see isn't that different markets I'm not asking for precision I'm, just asking relative basis, how do you see it any color would be great gentlemen, stay safe and second for taking my questions.
Thank you said was so I'll try and so it's it's it's honestly a question out of my out of my Kaleidoscope and knocked out of any business book.
We what we what we know is that we have shut down all of our advertisement after the second week of March.
And that patients that came in as well as needs much we were almost not capable to place into into first concentration appointment.
Whether because we placed them into her appointment and data from the never happened or because by the time, we got to take them into an appointment that clinic ones, though was shutdown or sharper in place was was the situation in order to turn.
[laughter] advertisement, we would need the markets to be active all markets to be active and as I pointed out, though we have 350, some clinics in 31 stage, but each one each one of the state's each one of the counties operate differently so that.
It would not happen so that the actual spend on advertisement would not happen before these clinics are back in business in our cleaning up some of the some of their backlog of patients that they had that we're in treatment them and were scheduled for conservation and and so on and so forth. It just doesn't make sense from our perspective, because we can't.
We can't even scheduled them into an appointment before the Clinton open and if we schedule going into an appointment I would read their first schedule a patient that was easily coming before we get a a new patients.
[laughter] hypothetically if.
As the markets Rebalances by the summer and there is no second wave of Covidien Gene then we will be able to turn advertisement back on in a in Q3 and run it through the them the middle of Q4 it so.
Finally, we we shut it off out just before Thanksgiving because the last few weeks of the year or meaningless for us. So thats from a in perspective from a patient acquisition perspective of there has been some changes in the markets.
Uh huh.
I went through the the emotional changes for patients and physicians regarding a biologic some systemic drugs, which would.
We believe increased media interest levels would be would decrease via the acquisition cost of I believe and increase the a conversion of a patient into an appointment on the one hand, there is the situation of having as of last week 30 million people are unemployed and.
How much does that affect the 15% unemployment how much does that affect the medical insurance coverage, how many of them or have you back of work towards the third quarter, a and b covered.
New medical insurance and weather.
Whether they're under Cobra or does it have continued coverage of the benefits like our employees had.
So that might affect either via the clinic traffic negatively. So we have the positive effect of patients being more interested physicians being more prone to two to convert and we have the negative effect of how many patients are in the India available markets are covered by by private payers or the Gulf.
Women.
And we also have the the fact that are major.
Competition on on on the pension, which is the the new suppression drugs have ER toned down their advertisements are so there's there's less of a competing messaging going in our space. We are not yet in a place to measure.
These three very big effects on on whats happening, we will be able to do that as soon as we start opening up where they are within within area. There are benefits as we can you can advertise locally we don't advertise nationally so HM hypothetically, a florida opens up we.
Opens up and business is back to normal we can we can start doing things in just in Florida, We don't need to do this in being a in other places.
And at that point in time, we'll know whether our acquisition cost overall acquisition cost went down or went up in two <unk> to have some kind of an internal guidelines guideline and guidance on in regards to be a number of <unk> of patients, we anticipate a to put into treatment.
Having said all of that I, just want to remind you that.
We contribute or at any given year, we contribute 15% to 20% of we are the new patients in in treatment, specifically for 2019 or out of 23000, you patients 22000.
And in some new patients that are where they're considered for treatment by the physician physicians we contributed.
About 4000.
So that's the direct appointments that weve sets, so feel the bigger effect on what's going to happen in the second half of the here without providing guidance is gonna be two things one when and how the northeast and the West are then open.
And true.
Whether there's going to be a second wave. These are the two.
Most most critical factors because if there is no second wave them.
In northeast and the and the rest of opening.
We do anticipate that on a on a on an apples to apples comparison or small same store comparison, we will be able to get to to 2019 levels.
By the beginning of Q3, so if we take individual clinics in areas that are open now.
We will be able to.
Yes, two though 2019 level of operation or higher.
The.
By the end of the second quarter and.
Having said that I don't know how many things are going to built that is how many states are going to be open as a reference to watch.
Just just Oh two weeks ago, we published an update on a business and.
At that point in time, the Midwest and the southeast will still almost fully open in the Midwest in the southeast we're operating.
As the region. They were operating at about 100% of 2019 and the difference was not individual clinic productivity. It was clinics in the shutdown was areas in the Midwest in areas in the southeast that were shutdown, where the northeast and.
Yes.
Where.
At that point in time, almost completely closed so I hope I answered the question source.
Thank you once again, if he wants to ask a question.
Press Star one on your telephone and might seem to be now.
Ill pause momentarily any question to answer that Q.
Thank you we have reached the end of the question and answer session and I would like to kind of cool that ticked up did all of my family for closing remarks.
Thank you operator, and thank you everyone for joining us today apologize for what happened on the coolers line through the call. We look forward to updating you again in our next quarterly cool. Thank you.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you see all participate.
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