Q1 2020 Earnings Call
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Comments made on this call may include statement better, but we're looking within the meaning of securities blocks East or Lookingstatements may include without limitation statements related to anticipated industry trends the company's Quinn.
Prospects and strategies, both Hello, Mary and protracted and managements expectation beliefs estimates or projections regarding which results of operation.
Actual results are trends could differ materially the company under takes no obligation surprise forward looking statements for new information or future events.
For more information please refer to the company's annual report on foreign 10, K. for the year ended December 31st 2019, which has been files with the Securities and Exchange Commission.
And the company's quarterly report on form 10, Q. for the core ended March 31st 2020, which the company intends to file with the Securities and Exchange Commission on or before maybe 15 2020.
All the companies filings, maybe obtained from the F.B.C. or the company's website at www Dot Clearpoint narrow dot com I will now turn the call over to joke Burnett Chief Executive Officer.
Thank you for hockey and thank you everyone for dialing in today.
The impact of the covert 19 crisis is widespread and it's touched many of our friends are families are patient then surgical site.
We believe it is important to characterize how clearpoint narrow has been impacted so that our investors understand the current status at the team as well as our outlook for the post to cope in future.
We will begin by focusing on our Q1 2020 results and then move on to a more qualitative outlook of the recovery as a significant uncertainty of the post coded recovery makes quantitative predictions impossible right now.
First and foremost our team has continue to support our hospital customers. During this crisis, albeit in a much more limited fashion.
Are frontline employees, who physically assistant surgeries in hospitals have continued to be viewed as essential employees for hospital Credentialing and today, we are not aware of any clearpoint neural employees, who have fallen hill I'm incredibly proud of our team for recognizing their important in the delivery of care to these very sick patients and I have heard personal.
<unk> from multiple surgeon on how much to appreciate art is willing to spend during this crisis.
Prior to March 15th clear pointing arrow with his for our sixth occurred in Europe.
Finish the quarter at revenues of 3.1 million.
26% wrote year over year.
After about March 15th Dot F. Hospital, we work with United States began cancelling or postponing all elective surgeries, which a store we have represented approximately 80% of our case volume and the final two weeks of the quarter I believe we only two cases, which were both humor related and deemed.
Active by the hospital.
In addition to cases being postponed all new Kathy <unk>. We're also immediately put on old and some of our biologics partners experience the ways in clinical trial in Roswell.
Oh, we believe our Q1 results were impacted by approximately 400, $500000, a person, which would've put our Q1 revenues at around 3.5 million for murder or about 40% growth year over year.
We <unk> 180 to so.
In an technology in the first quarter.
We're down pace, a complete optimally 225 to 230 cases for the corridor.
I see <unk>.
Oh <unk> sit here.
As a result of this impact your press, where we can mid April we suspend dark 2020 revenue encased forecast until more information isn't known about hospital and page willingness to resolve these procedures, which I will talk about a little bit later on the call.
To offer a bit more detail on the Cuban twentytwenty results.
<unk>, how her with R.C.F. Oh.
Thanks to.
Total revenues were $3.1 million for the three months ended March 31, 2020, and $2.5 million for the three months ended March 31, 2019, which represents an increase in $643000 or 26%.
Drilling down on these revenue numbers, one can see the effects of the covert 19 pandemic. The Joe described in his opening remarks.
Functional neurosurgery revenue, which consists of disposable products commercials sales related to cases, using our clear points system.
Increased 5% to $1.7 million for the three months ended March 31st 2020.
From $1.6 million for the same period and 2019.
Does increase was lower relative to refund quarterly year over year increases due to the effects of the Kobe 19 pandemic.
Biologics and drug delivery revenues, which include sales of disposable products and services related to customers sponsored clinical trials utilizing the clear points system.
Increased 169 consent to $1 million for the three months ended March 31, 2020 from $382000 for the same period in 2019.
This increase was due primarily to an increase in biological drug delivery service revenue.
Capital equipment.
Revenue consisting of sales of Clearpoint reusable hardware and software as well as these related to capital equipment decrease 29% to $345000 for the three months ended March 31, 2020 from $486000 for the same period in 2019, reflecting a decreasing cap.
A little equipment sales that were partially offset by an increase in the equipment service contracts.
Cost of revenues was $917000, representing a gross margin 71% because the three months ended March 31, 2020, and was $886000 representing a gross margin of 64% because the three months ended March 31 2019.
There's increasing gross margin is due primarily to a shift in the mixed with revenues by line of business.
Resulted in service revenues, which bear higher gross margins in comparison to other product lines.
Representing a greater contribution to total sales for the three months ended March 31, 2020 relative to the same period in 2019.
The pandemic, we believe partially contributed to a higher gross margin as a result of the lower the normal contribution of product sales to the overall rubbing your next.
Turning to operating expenses.
Total operating expenses for the three months ended March 31, 2020 were $3.4 million, 33% increase from operating expenses, a $2.6 million for the same period and 29.
Breaking down the components of operating expenses.
Research and development costs were $830000 for the three months ended March 31, 2020 compared to $585000 for the same period and 2019.
An increase of $245000 or 42%.
Increase was due primarily to increases in head count in compensation intellectual property costs, resulting primarily from new project initiation and software development costs related increases in project activity.
Sales and marketing expenses were $1.3 million for the three months ended March 31, 2020, compared to $1 million for the same period, and 2019 and increase is $258000 or 28%.
This increase was primarily due to an increase in our clinical and marketing teams, which was partially offset by reductions in travel costs in sales incentive compensation consistent and still mentioned with reduced number of cases covered in the latter half of March.
General and administrative expenses were $1.3 million for the three months ended March 31, 2020 compared to $933000 for the same period in 2019 and increase or $345000 or 37%.
Increase was due primarily to increases and sharebased compensation and professional fees.
Net interest expense for the three months ended March 31, 2021, $813000 compared with $254000 for the same period in 2019.
This increase was primarily due to the charge to interest expense and the first quarter of 2020, Oh, the unamortized balance of the discount associated with the secured notes we issued in 20 channels that we repaid and retired in January 2020, with the portion to the proceeds raised in the January 2020.
In January 2020 from the issuance of the $17.5 million at senior secured convertible notes.
Cass she used in operations for the three months ended March 31, 2020 was $2.3 million Oh. This amount the accrued interest that was paid along with the note repayment in retirement I previously mentioned amounted to $960000.
Our cash balance at March 31, 2020 was $17 million I will now turn the call back from Joe.
Thank you huh.
As you can see from the details Q1 was shaken up being.
Before about revenue encased volume standpoint. Furthermore, we did a lot of clean up of our balance sheet.
Holidaying all remaining into it and <unk>.
I've until January 2025.
Of course, there's a page dramatically around the world and want to provide wants me to deal with Maria.
Asian to plan.
The most important question for us to answer is <unk>.
The crisis began more than 85% of our total case volume has been cancelled that were postponed as they spend a lot to into it.
[noise] drinks, we as far as an incentive crisis has primarily been cancer or tumor related <unk> see at work <unk>.
Maybe we can certainly odd Hopkins.
HM.
To provide the most up to date information as possible in April of this year, we completed 11 until he says versus forecasted 80 for them.
Again, the vast majority of cases completed in April where tumor laser ablation or tumor biopsy with deep brain stimulation and being Turkey cases, effectively beating and altogether.
<unk> volume.
Significant impact on revenue, but also inventory as well you see increasing score will likely in the second quarter as well.
[noise] a recovery of a seizure west hospital, it's apparent for our country.
<unk> certainly not one I said Oh.
Cities are dealing with different challenges and stages of the pandemic.
<unk>, Hey place to a pre <unk> volume, we see a few crucial challenges that need to be over top.
Number one hospitals need to have a surplus of personal protective equipment.
And then places available.
The mind, our patients are put under general anesthesia.
Hospital uses a ventilator for one of our elective surgeries, they will have to be surplus available for potential covered patients.
Number two one at the hospitals return to allowing elective procedures, which has gone south parts of the country the patient needs to feel comfortable staying in the hospital that is treated code patients as well I.
I can tell you that we have had a number of cases postponed not because the hospital was unwilling but because the patient was not comfortable moving forward it.
You can you just feel safety issues now they do not red eye catching the virus at a time bin are going through such complex surgery.
Number three undergoing a neurosurgery is not a small decision in the eyes as many patients some had been surprised that even if they haven't heard sounds good the surgery. It learned that their family in their support network.
<unk>.
Some cases patients will continue to postpone surgery until that network is allowed to help them to cover.
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The more we do not believe that our collective doesn't burgers and pretend, it's probably effort, but Nike that may well correct no Logan many experts have warned about the potential second and third of the pen.
Cause start and stop in different parts of the country and around the world.
Not being sat there a number of things that work in our favor as well first off procedures are viewed as minimally invasive compare your twins.
I think like three times or shorter because of the smaller incision.
<unk>, you're using Clearpoint can we <unk>, we use a shorter recovery time, the hospitals days rubino resources than a reading room time.
Second we have started to hear the term pseudo elective describing certain procedures, including deep brain stimulation Parkinson's disease.
One thing to postpone a a deep brain stimulation for a few weeks until the situation at the hospital fruits. However, if a surgeon.
<unk> <unk> <unk>.
<unk> get much higher and postponing a very beneficial surgery for long. These stations you move to the front as a lot.
In fact.
We do not <unk>, probably recovery will be like flipping a switch by any stretch rather we believe that will be a month by month improvement in volumes with the potential of some starts and stops along the way.
The most recent months of April we did we did not see that recovery be get however, we have seen hospitals begin to schedule elective cages in May June and July.
We will be watching very closely how many of these elected cases stay on the schedule or end up being postponed for one or more of the reasons already mentioned.
The company, we've done what we tend to reduce expenditures and cash burn. This includes eliminating trade shows in advertising stopping travel pretty much all together, except for surgical case support and slowing hiring for key development and field clinical roles.
Are looking at every sand in our budget and identifying which ones are essential to keep our overall strategy.
And continue to make progress on our four pillar growth strategy, which remains our company during that time.
I'm, sorry, if I leave your key messages that are strategy.
<unk>.
In 19 is not.
We hope to calm and it will not be our last.
We believe it has certainly impacted our current best.
However, it doesn't go from the long term potential of the strategy of the company.
To some extent, we have simply had to hit the pause button free yet to be determined about Uh huh.
However, we very much look forward to the day when weird take thank drop the pause button and start off reading speed once again.
That I will turn the call over to our operator to begin our question.
Thank you.
This time, we will be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation channel indicate your line isn't the question Q. you May press start to actually would like to remove your question from the <unk>.
Disappearance, using speaker equipment, it may be necessary to pick up your handset before pressing the stark each one moment, please while they pulled for questions.
The first question is from Sally I guess as Brooklyn capital. Please go ahead.
Oh, Hi, Joe Thanks for during the call.
So I'm curious you know you're biologics and drug delivery revenue.
It was really strong this quarter can you talk about specific clinical trials that are going on that have fueled this.
No specific programs that are ordering a lot of the candles.
Yeah sure I can give as much common Tory as possible Sally.
Thank you that are important question that you ask.
You try to keep some of this information.
On behalf of our partners, but.
Yeah.
When when we were putting our plans together for 2020.
Actually a very <unk> <unk> <unk> revenue.
Good directly to clinical trials involvement.
Number companies.
Some of these patients are very expensive parts look clinical trial and <unk> not only it'd be complex procedure, but also it rest at one of fear one of the shouldn't you're probably catches the virus and somehow can the result in a different way, okay, it'd be a bit challenging that being said a lot of the.
<unk> are doing and the biologics.
Our product development.
As far as pre clinical work city studies.
Not really <unk> do we into that.
Some stayed home ordinary Oh, Yeah lab.
But.
I think it's about a million dollars in the first quarter. We thought was was was from a lot of these actually development activities. We here in your eyebrows.
Oh, okay. Good okay.
Hmm.
And I think you you just said that.
On the nor procedures, you've seen cases rescheduled cases that we're supposed to happen in.
March and April have been we schedule for May June and July is that is that correct is trying to make sure I have that right.
That's correct now there's still some hospitals that'd be work with that have not they they feel sad it'd be fun <unk> postponements our definite.
<unk>.
<unk> hospitals have start and end Julian elective procedures again.
You know some portion in May some portion in June in temp worse than though that's sort of cases for now in July.
Okay, Alright, I mean, no that's promising I mean.
Yeah, because these are.
You're procedures or I mean, they're not totally elective I mean.
You know they're.
Not like.
Cosmetic surgery procedure anyways.
Necessary, but.
Anyways, okay, well, thanks very much.
Half of their patients to to get them into the hospital again, no yeah of course yeah.
Okay, well. Thank you so much and good luck with everything.
Okay. Thanks, you thought was working hard okay. Thanks.
[noise]. This concludes feed question and answer session I would like to turn the call back over to Joe burned extra closing remarks.
Okay. Thank you Saatchi and thank you again to your interests your support and you're confident in this pain and I strategy.
<unk> 19 crisis will be overcome that there was nothing about our business that leads us to leave the current impact is permanent.
We for today, the claims three tomorrow or very ill and very much need our help these treatments are not incremental improvements, but the bullet truly changed you know hey, and and their families quality of life in a very meaningful way.
This need an impact the care that would help provide is something that the current crisis can diminish.
Thank you very much and I look forward to speaking you in in in the future.
This conclude saves conference you may disconnect your lines at this time. Thank you for your participation.
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