Q2 2020 ViewRay Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the second quarter 2020 pure rate earnings conference call.
At this time, all participants' lines in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session only to press star one on your telephone. Please be advised to today's conference is being recorded if you require any further assistance. Please press star zero I would now like to camera conference over to your speaker today.
Okay look Alina. Please go ahead now.
Thank you operator, good afternoon, everyone and welcome to the rate second quarter 2020, <unk> financial results Conference call.
Joining me today, our Scott Drake, our President and Chief Executive Officer, and Jack staffing, our Chief Financial Officer.
Earlier today Vieri issued a press release and presentation for today's call. The presentation can be viewed live under webcasts or download it from the financial event and Webinars portion of our website at www dot investors dot the rate Dot com.
Today's call is being broadcast and webcast slide and a replay will be available on our website for 14 days.
Before we begin I would like to caution listeners that comments made by management. During this call may include forward looking statements within the meaning of federal Securities laws.
These statements involve material risks and uncertainties and actual results could differ from those projected in any forward looking statement due to numerous factors.
For a description of these risks and uncertainties. Please see the raised the annual report on form 10-K for the fiscal year ended December 31, 2019, and its quarterly reports on form 10-Q adapted periodically with the company's other SEC filings.
Furthermore, the content of this conference call contains time sensitive information accurate only as of today July 30 2020.
He ran undertakes no obligation to revise or other ways update any statements to reflect events or circumstances. After the date of this call I will now turn the call over to Scott.
Thanks, Mckay light and welcome to our Q2 call during our time together, we will first share the progress we've made over the last two years, we'll discuss our Q2 results in highlight actions taken to elongate our cash runway in light of the cold bit 19 pandemic.
Well clearly defined our clinical strategic and economic value propositions that set us apart in the marketplace.
We will delve more deeply into how we're driving the trend toward greater utilization of complex SPR T. What we call Meridian smart and our blueprint to become a first line therapy in certain cancer types.
Jack will grow more deeply into our financial results and then we look forward to answering your questions.
If you're not on the webcast I'll be referring to slides from the presentation on our Investor relations sites.
On slide three our mission is to treat improve what others can.
We anticipate that we will treat our 10000 patient next month.
Any pull milestones.
We also currently have more than 2200 published clinical experiences and outcomes, which represent the preponderance of patient literature on m. or guided radiation therapy.
This compelling and growing body of data is critical to our efforts to change and improve the paradigm of care.
Turning to slide four.
Two years ago or team set out to build the solid foundation that would drive therapy adoption improved cancer care and capitalize on the corresponding gross.
We set out to improve the lives of cancer patients. Then we had treated about 3000 patients and today, we're on the cost of our 10000.
We set out to increase the number of cancers treated by our customers then about 42 day over 65.
We set out to decrease install times back then we averaged about 90 days in a recent installations have been about half that timeframe.
Which drove to reduce fully adaptive treatment times for both more difficult and straightforward cancers.
I encourage treatments were in the 60 to 90 minute timeframe today Amsterdam U.M.C. is treating pancreas in 35 to 40 minutes.
Prostate cancer was being treated and 45 to 60 minutes now several customers are treating bridion smart in sub 30 minute fractions.
Two years ago, there was variability in terms of how customers were utilizing meridian.
Today, we're bringing customers up to speed. So they can treat in fully adapted fashion across cancer types upon commissioning.
Our innovation pipeline has driven great improvements with more to come in the future.
Similarly, our clinical pipeline has borne grapefruit proving the benefits of Meridian smart.
This is the subject of our deep dive today.
Let's turn to Q2 results on slide five.
We received four meridian orders in the quarter.
We're pleased with this result in the level of customer engagement in light of the challenging environment.
We've adapted and created new ways to interact such as our recent Webinars series in partnership with customers, we've highlighted the clinical strategic and economic value of Meridian.
The series has already resulted in over 3000 unique views.
We believe this example of customer and prospective customer engagement is evidence of growing interest.
Turning to revenue, we recognized approximately $14 million, primarily from two remnant of units.
Generally installations are moving forward, albeit a deferring speeds from market to market.
We are seeing modest progress into you Western Europe, while much of Asia remains on hold were significantly delayed due to the impact of cobot 19, including travel restrictions.
Regarding cash utilization, we're executing on our previously announced plan to reduce spend any long data runway.
In the quarter, we use $10.7 million and believe we're striking the right balance of investing appropriately in our business while preserving capital.
Back in April we announced that are board and management team would take salary reductions and we furloughed a small percentage of our team.
We recently took additional action further reducing our workforce by approximately 20%.
We believe these are difficult, but necessary actions to take while our customers recover financially.
Importantly, we're prioritizing and budgeting increased investment in our innovation and clinical pipeline.
Driving therapy adoption, while preserving capital.
We expect that the market in our business will recover in advance to whats next phase of growth. However, it's difficult to predict the timeline.
As part of providing the company flexibility we implemented a program with several members of the senior leadership team, including our Chief operating Officer Sharma team with the goal of retaining key talent and providing optionality through the pandemic.
In summary, we believe these actions have positioned view rate to emerge from this period as a leaner and stronger organization.
Now, let me step through our three value propositions on slide six that are resonating with customers.
First and foremost our customers are able to deliver clinically better outcomes in bulk difficult to treat cancers, such as pancreas, central long and ligaments and ubiquitous cancers like breast and prostate.
Often the tough to treat cancers are deemed untreatable due to the lack of accuracy and precision of conventional Linux.
Meridian enables our customers to shrink margins spare healthy tissues and organs at risk re optimized on table to safely escalate dose and thus reduce fractions.
Second on the strategic front readiness, helping our customers differentiate their cancer programs and lead their respective markets by establishing new programs for patients generally not treated unconventional Linux.
They are benefiting from changes in referral patterns as patients are motivated to travel for meridian treatment.
We are driving the trend.
Hi, MRT to SBR T. All called this simple SPR Ti that others offer to next generation care Meridian smart.
Stereotactic Amar guided adaptive radiation therapy.
Just as to buy two X rays were obsoleted by conventional Linux our customers are driving another step function change to meridian smart.
Third on the economic front, our customers are realizing the ability to expand their total addressable market.
These economic improvements flow from new patients not generally candidates for conventional Linux new patients traveling from outside their catchment area.
Improvements in any will patient throughput and appropriate adaptive reimbursement.
We are seeing these value propositions prompts several current customers to install or purchase additional meridian systems.
Moving to slide seven today, we will deep dive into our clinical value proposition.
Our voice of customer work has led to clarity on what we believe will drive this new paradigm of care.
On slide eight you'll see the foundation of our clinical value proposition.
The early data our customers produced on Meridian.
This all hard data on lock the promise of treating patients that wouldn't be treated unconventional Linux and even in areas previously considered to be no fly zones.
For example, in central long and ultra central long Meridian deliberate ablative doses with only 8% grade three or higher toxicity, whereas clinical studies with conventional Linux have shown grade three or higher toxicities up to 33% and even great five toxicity or death.
Let me highlight just a few of the groundbreaking cases, our customers are doing to bring our clinical capabilities to life.
On slide nine this first cases, a cardiac sarcoma a tumor located within the connective tissue surrounding the heart.
Before meridian, the patient would typically either receive open heart surgery or undergo a heart transplant.
Treatment, even on a high end conventional enac would not likely have been considered but in this case, our customer was able to safely deliver and ablative dose via meridian smart to shrink the tumor.
The next case on slide 10 is a 15 month old child with a rare in deadly primary liver tumor.
The standard of care today, you surgery as prolonged courses of radiation therapy can come with the heavy complication rate and toll on quality of life.
Use of Meridian smart contributed to the tumor shrinking by over 40% and the patient is doing well with no signs of toxicity to date.
The last case on slide 11, as a patient with inoperable kidney cancer.
Tissue surrounding the kidney is extremely sensitive and radiation toxicity as a primary risk factor for this cancer type.
Our customer delivered curative intent radiation with Meridian smart via our latest technology upgrade that includes imaging at eight frames per second.
Tumor control was achieved with no toxicity in this patient was able to retain kidney function.
It's important to note that the current standard of care does not include radiation therapy for primary kidney cancer.
There are dozens of these kinds of cases being done on a weekly basis that are programs around the world, representing what meridian smart can deliver and achieve.
Noninvasive ablative doses short courses of treatment and no to low toxicity across tumor sites.
On slide 13, Dr. Kelly at Orlando Health sums up his clinical experience is simply.
He says quote when I first started treating patients on meridian I was impressed by how the system allows you to treat patients so much more precisely and safely as I continued to treat with meridian I realize the precision in safety allows you to treat patients, whom you could never have treated before.
The meridian changes your practice it changes who you look at as a candidate for radiation therapy and quote.
On slide 14, with the backdrop of early clinical data and these inspiring cases I'll share our two primary clinical goals moving forward.
Our first goal is to expand the utilization of complex SPR Ti or meridian smart.
This expansion is both within current customers utilizing our therapy and new cancer types and opening new meridian programs second overtime. Our strategy is to replace less precise more invasive treatments and be considered a first line therapy in targeted cancers.
Our first goal is expanding the use of meridian smart.
Physicians require safety and efficacy data to unlock new patient treatment through cross specialty tumor boards. This data is also used to support pay your decisions.
We have over 30 sites with more than 30 ongoing studies across the cancer landscape.
There are four trials in three target areas I'll highlight to achieve our first goal.
First is our smart study for inoperable and borderline resectable pancreatic patients.
Our early feasibility data came in the form of the retrospective high low dose series, where their use of meridian about doubled median survival, while eliminating grade three toxicities.
Those favorable outcomes have now been repeated in a separate series of patients treated by Meridian smart at wash U.
Our prospective trial aimed at further validation and expansion of Meridian smart in this patient population.
Second is the study targeting the application of radiation therapy after prostatectomy.
Currently when radiation has recommended after prostatectomy conventional therapy requires long courses of treatment.
36, or more fractions over a seven to eight week period of time Meridian smart opens the door to short courses of treatment five fractions over the course of just one week.
We have a two pronged approach for changing this paradigm of care number one a feasibility study is currently enrolling at you CLA and we expect initial data sometime next year.
Number two a randomized controlled trial to help demonstrate that meridian smart delivers equal or better results than hypo fractionation unconventional Linux.
Finally, we're embarking on the cutting edge of cancer care with combination therapy.
Almost half the ball cancer patients are candidates for immunotherapy, but only about 20% respond to this treatment.
Early data has shown that radiation therapy may be able to shift the non responder into a responder.
However, lesions may require high doses and are often located their critical oregons. Thus radiation therapy again may be limited with conventional means.
Miami Cancer Institute has opened a phase two trial, which will seek to demonstrate that meridian smart has the ability to facilitate ablative doses to immunotherapy patients in order to improve their tumor response.
If successful we expect this will create new synergy between these treatment options.
Slide 16 highlights our second goal of making Meridian smart a first line therapy.
Peter I'd like to point out two important studies.
The first is for pancreatic cancer.
We have set up to show the benefits of pre operative Meridian smart for surgical candidates and convert borderline resectable patients into surgical candidates.
Multi institutional study in Europe will randomize patients to simple less PRT or meridian smart to best supportive care.
We view this trial as an important step toward establishing meridian as a first line option for both operable and inoperable patients.
Second in prostate I previously discussed our efforts to open up SPR Ti for post operative patients, but we're also taking aim at say for treatment for intact patients.
Amsterdam U.M.C. publish their one year data.
This robust study demonstrated sustained results observable grade three or higher toxicity and little to no great. Two at one your follow up.
It is not only the largest prospective trial in EMR guided radiation therapy generally, but also the first prospective edmar trial for prostate without the need for implanted fiduciary markers and invasive procedure with associated complications.
Tumor margins were smaller than comparable studies that used implanted markers also meridian patients were treated in five fractions versus about 20 fractions for hyper fractionation or up to 40 fractions with conventional treatment to be clear. These impressive results were obtained in a clinical cohort.
It with 58% high risk patients much tougher than others such studies.
Building on this data you CLA has opened to head to head randomized controlled trial to assess meridian smart versus simple SPR Ti on a conventional Linux.
These data would provide additional evidence for meridian as a first line therapy for intact prostate.
Now to slide 17.
My fundamentally changing the treatment offering meridian has the potential to add hundreds of thousands of new addressable patients in the next several years.
This work has the potential to greatly expand the use of radiation therapy and provide needed benefits to patients.
To recap the value of meridian, our customers are delivering better patient outcomes, adding net new patients to their practice, adding additional patients from outside their catchment area and distinguishing their program within their competitive market.
Patients are benefiting with shorter courses of treatment fewer side effects and improved quality of life.
In summary, slide 18, we've come a long way, we've improved our customer service and training.
We've shortened treatment and installation times, we've driven or innovation and clinical pipelines, we believe exciting things lie ahead.
We capitalize the company and positioned ourselves to come out of this pandemic stronger and leaner.
And with that I'll now turn it over to Zach to review, our Q2 financials in more detail Zack.
Thank you Scott.
For the quarter ended June Thirtyth 2020, total revenue was $14.2 million, primarily from two revenue units.
As compared to $30.2 million, primarily from five revenue units in the same period last year.
Total gross profit was a loss of approximately $1 million compared to a profit of $3.2 million over the same period last year.
The decrease was attributable primarily to lower system revenue in 2020 versus prior year, which led to lower absorption over installation infrastructure.
Total operating expenses were 24, and a half million dollars as compared to 29 and a half million dollars for the same period last year.
The decrease in operating expenses reflects the full quarter impact of the cash savings program, we implemented at the beginning of the quarter. The overall decrease in expenses was partially offset by an increase in stock compensation expenses.
Finally, net loss for the quarter was $26.2 million or 18 cents per share compared to $30.8 million or 32 cents per share for the same period last year.
Turning now to orders and backlog.
As Scott mentioned earlier in the second quarter of 2020, we received four new orders for Meridian systems totaling approximately $24.6 million compared to three new orders totaling approximately $18.1 million in the same period last year.
As of June Thirtyth, 2020, or backlog stood at approximately $232 million as compared to approximately $219 million.
As of June Thirtyth 2019.
Two systems were removed from backlog in Q2.
We have not removed any orders from backlog due to covert 19.
Regarding cash flows we used approximately $10.7 million in the second quarter, we made important progress on our cash savings program.
The lower cash burn in the quarter reflects work being done on reducing operating expenses and working capital.
The recent reduction in the size of our team was inline with our 30 million.
Dollar cash savings goal for the year.
In addition, as these personnel costs annualized they represent savings in future years.
We finished the quarter with 179 and a half million dollars cash on hand.
Our investment priorities remain the same.
Importantly, we are prioritizing and budgeting and increased investment in our clinical and innovation pipeline and advancing our commercial efforts during these challenging times.
Our proactive cash conservation steps are intended to enhance our liquidity position over the near and medium term, while prioritizing our key initiatives as we navigate the current environment.
We will now open the line for questions.
Thank you as a reminder to ask the question you'll need to press star one on your telephone.
To withdraw your question press the pound key again, if you would like to ask a question press Star one.
First question comes from Anthony Petrone.
With Jefferies. Your line is open.
Thank you good afternoon.
Everyone's doing well and staying healthy.
Many thanks.
Hi, guys too.
Absolutely absolutely.
Maybe just to begin first with a treatment cycles.
Scott you mentioned that certainly in.
In some prostate cases that that treatment cycles are coming down I'm wondering if you have the average meridian treatment cycle on the systems that are currently using smart vision.
And how much of the benefit are they getting from smart vision.
And where do you think the treatment cycles can go you know say over the next 12 months and then I'll have a couple of follow ups.
Yeah, you got it Anthony.
I'll I'll take a cut here and maybe ashar to chime in as well I would start at a macro level by sharing that I think.
Dr. Dempsey made some incredibly smart choices early on developing.
This technology from the ground up.
As a therapy machine.
I think it's going to prove to be prescient, even more so over time, because there's virtually no ceiling that we face in terms of our ability to progress.
This technology forward.
I don't have a great average for you Anthony I don't think the and is quite high enough to give you a great average with our smart vision technology. Some of those customers have also gone to a high speed MLC. Some have just taken the soft.
Where upgrade without hardware, but what I would tell you is the aggregate effect.
Smart vision.
Hi, speed MLC and best practices is having a pretty significant effect on both difficult to treat cancers, such as pancreas I highlighted what Amsterdam U.M.C. is doing their 35 to 40 minute.
Pancreas cases, and we have multiple customers down below 30 minutes on.
On prostate so it's very significant progress in the last couple of years and I believe there's more progress.
That's going to happen over time with their innovation pipeline that we have in front of US why don't I pause there and then by charged to to wash share any thoughts that you might have.
Yeah, I think I think Scott to your point the ranges that you gave an example of AMC is what we're seeing elsewhere as well I'd say over the next 12 months Anthony a lot of the hardware, where we're going to put in for for a variety of customers and then we're going to learn from best practices. So we think the hardware software is one component.
And then the other component is best practice sharing between sites. So I think over the next 12 months, you'll see those activities helped improve the number and get a better.
Prior to our next software upgrade as well so I.
I think that's a journey there but.
I think you'll see this downward movement as we become smarter and our customers become smarter.
That's helpful and then the pharma and follow himself.
Both here and I'm, just going back to our interaction at our conference a few weeks ago, Scott and so the surprise shift for US is certainly that they were installations in the quarter as well as the four orders and going back to our discussion.
The salesforce intended to a virtual sort of you know setting there seems to be a lot of activity there and there was it seems there was fall through so let me just high level on.
Are you feeling about the installation cycle going forward.
And sort of the the the making shape of the funnel as it stands today.
Thanks again.
Yeah happy to Anthony Thanks for the questions.
So while I'll touch on both of those topics installations and kind of the commercial pipeline and let me let me provide content, it's going back to the last quarterly call as you mentioned Anthony.
Last quarter, we shared that we had five installs in process.
Three of which at that time were delayed with various stages bulk prep for the others contrast that to today. We currently have nine installations in process I would follow that up very quickly with five of them have already been Rev Rec and.
The forward that remain to be Rev. Rec are also in various stages and moving at different speeds.
From market to market given the dynamics with co bid in particular, our inability to travel or challenge is traveling.
To certain markets. So I would anticipate that of those four remaining Rev. Rec units, we have a solid opportunity at three of them in the back half of the you.
But the situation is highly dynamic and I would put in Nash Ricks next to that we have an opportunity for those three.
But the situation is such that it's difficult to project that with certainty.
What we're doing our best to give investors a deep level of transparency during this time.
From an orders perspective, I think theres a few things that are are clearly apparent number one our customers are delivering extraordinary clinical outcomes.
Reference the cases that I shared with you here today and interest in Meridian is increasing.
The webinars.
The six or seven Webinars and a 3000 unique views I think is a good example of that.
Second our customers are pleased not only with the clinical but also the economic outcomes and the fact that meridian is helping them stand out in their respective marketplaces.
Not sure if you had the opportunity to.
Here are the Webinars that Dana Farber, Brigham and women's put on here recently.
But just a world renowned cancer program talking about how meridian is helping them stand out on a local national and international level, a humbling complement coming from an institution of that level of prestige and those benefits that were highlighting our.
Why multiple current customers are in various stages of either installing or purchasing another system and if we were just kind of a shiny object I don't think you would see repeat orders from customers.
Finally, I would share that we have clarity from customers and prospects if customers on what will drive faster therapy adoption going forward in the market and that's exactly where our innovation and clinical pipeline is targeted so all of that said I want to counterbalance it and.
Walk down the center of the fairway.
Our customers have their hands full with cobot 19, and the impact to their PML is non trivial. So I want to give you bull the positive news and the things that are happening that are readily apparent and balance that with the fact that our customers in many instances are struggling financially.
Lee due to the pandemic.
Hopefully that's a responsive Anthony.
Thanks, again I'll get back in queue. Thank you.
Thank you. Our next question comes from Jason Butler with Piper Sandler Your line is open.
Good afternoon, all thanks for taking the questions here Scott appreciate all the updates you gave your wanted to start maybe a hospital capex side I know, probably maybe a hard question to really answer here just looking.
Today versus three months ago, but just wondering how you maybe characterize the conversations you've been having with the pipeline of customer leads here you've had just the past few months.
Any sense in the a change in the tone or visibility on on Capex budgets versus just a few months ago.
When I got a couple of follow ups.
Yeah, you got to Jason I think you're right I think it's difficult.
Because the answer is in a one size fits all we have certain customers.
That.
Clearly are hurting.
It wouldn't surprise me, if they were going to push out capital decisions and significant purchases we have others.
On the for profit side that.
May be able to continue to deploy capital and then customers everywhere in between.
I would reiterate really what I shared with Anthony and that is two to really complement the team that the customer engagement. Even in this challenged environment is very pleasing to me.
But you know I think we need to be equally candid on the other side a bit that there is a challenge here that you point out.
With our customers TNL and and capital budgets and as you can see from a capital preservation standpoint, and the 10.7 million that we utilized in Q2.
We're very serious about that balance of driving our business forward and concurrently preserving capital.
Okay and that all makes sense. Thanks for that and then maybe on the trials side.
All the updates here New studies, you highlighted you're really helpful and thinking about the clinical development pathway, but im sorry, I missed that if there is there anything you're willing to discuss here and maybe when investors should expect updates on these studies are you planning to give regular updates or should we expect these that the virtual industry conferences that might be coming up just I guess, what's the best way to think.
About when those updates might be coming.
Yeah, I think we have some of some of the information I would anticipate.
From an outcome standpoint early outcome standpoint as quickly as sometime in 2021 and other studies will follow and take a longer period of time.
I do want to be a little bit careful here.
Because I would say predicting enrollment.
Generally is challenging enough predicting enrollment in this environment is incrementally more challenging but I do feel pretty good that we'll have some of the data.
That we've talked about today in the 21 time frame.
Okay, Perfect and then maybe I could just squeeze in one more and build the on one of Anthony's question is there.
Yeah lack of in person conference efforts here, just a astro industrial both being virtual I mean, these tend to be probably important events for you in prime in the order come for the company.
Plants in the early seeds for the business that is really harvested in years down the line, but but with those events virtual I mean, what's the approach here and making sure those early lead state plentiful.
Yeah, it's really a lot of what you know I've highlighted I think the the webinars that we have these zoo meetings, which can be one off or smaller group meetings with customers.
I think are very important to us we have had a here recently some life interaction with customers and I anticipate that we'll see a little bit more of that as we go forward, but it may be in fits and starts as as we see hot spots pop up from market to market. So.
You know it it is it's unfortunate that these events have to be virtual for this period of time, but I'd give I give our team a lot of credit Jason there, they're keeping customer engagement very high there plugging our executive team in and you know, we're having a lot of activity and a lot of interest.
But I want to be very sober here in terms of expectation setting.
In this environment I think forward visibility is poor.
Very helpful. Thanks, Scott I'll jump back into here.
Thanks, Jason.
Thank you. Our next question comes from Serasa Calia with Oppenheimer. Your line is open.
Good afternoon, everyone. Thank you for taking my questions.
Scott. Thank you so right.
We sure can perfect. So first and foremost congrats for the quarter and appreciate your commentary about the lack of visibility and just to the overall uncertainty.
Scott Let me address this from a different perspective, you and I talked to offline about this at least briefly a few weeks ago.
Love to get you color on the speed of the market right now.
Especially given changes ongoing changes at one of your key competitors.
Is that changing any of the competitive dynamics any of the competitive noise and you have to you in a static.
Thank you guys.
Fighting earlier, and now with settling down or is it too early to say.
Well you know on that front surcharge and thanks for the question I would say what feels good is having two players in the market, stating full throat that they both believe that mark guided radiation therapy is the future of the space.
I I believe that fervently and I think our customers are really showing the way in many instances now, they're leading us and and you know it's gone from feeling like a push to starting to feel like little bit of a pole in the marketplace and it's also good to have.
A collaboration on identifying the right reimbursement in markets all around the world.
Given the time it takes a and the amount of work in effort to do more guided radiation therapy.
That said we are.
Very stiff competitors out there in the marketplace. So it's it's very much a balance.
But within that Surajit I would say with do humility I think the differences between the two systems is becoming more and better understood.
And there are now.
Theres at least one customer that has both a competitive system and a meridian system and I think they'll be able to see first hand, you know the puts and takes up a beach technology and and what they represent in the marketplace. So.
Hopefully that that is responsive to your question.
Its Scott has trended terms.
Changed you Miss versus Oh, you as obviously due to coed and you own is that.
A lever that you guys can pull.
Zach how about if I ask you to touch on that one.
Yeah, I think survives were ER.
We're looking at all kinds of different options I I think credit is generally still available and.
We haven't historically used a lot of third party type financing vehicles, and I think thats a push for us as we look at new acquisition vehicles, and definitely an attractive rate environment to do so so I think to trying to look at all options to.
Make sure we'd make forward progress on the commercial side.
Got it and Scott one final and I'll hop back in Q.
Okay and forgive me if you you expanded on this just being hopping in between called so I might have missed your commentary when you won't see temporarily retain select senior management professionals.
Can you expand doesn't tell me what that means specifically.
I understand that the desire to conserve costs in this environment and be prudent totally understand that but in terms of temporarily retain how that fits within the whole jigsaw puzzle. If you can kindly help us out that'd be great. Thank you for taking my questions.
What would be happy to answer that once you Raj I think this represents another step.
In what we began doing right when the pandemic.
Struck and we immediately went into scenario planning role.
I think we were pretty quick.
To take salary reductions from a board and management team perspective, and then we've taken this incremental step of reducing the size of our workforce by about 20% and as it relates to the senior leadership.
There's there's a number of folks at the VP or higher level Shire included where we've put a program in place.
That that has nice incentive for them to stick around for at least a 12 month period of time, but if the pandemic goes longer than we anticipate that there's some built in flexibility there too if we.
We had to take any further action, we very much hope that we don't have to do that but we want to build in all of the flexibility that reflects all of this scenario planning.
That we have done.
Give schar a lot of credit in that because he was the one of the primary architects of it and just stood up a beautiful job, helping lead us through what is a challenging environment.
Thank you.
And then the interest of time, please limit yourself to one question and one follow up our next question comes from Brendan folks with Cantor Fitzgerald. Your line is open.
[laughter].
Hi, Thanks, taking my question.
Congratulations on the caution just to target [laughter].
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[noise] I'm, having a hard time here in new there my apologies.
Oh, hi, because it can you haven't.
I can [noise].
All right.
If you break can you just talk a little bit about the potential that the pandemic has created for you to government accounts that maybe we historically not high use is really drive that service revenue and whether you saw any of this during the quarter. Thank you.
Yeah happy to hopefully I understand the question Mackay, let your you're welcome to redirect me here I think what what we've seen during the pandemic from multiple customers is moving patients toward what we call Meridian smart high dose.
SPR HTI five or fewer fractions, even single fraction treatment on the meridian system, and we heard from Dana Farber, Brigham and women's on their web cast that during the pandemic they've had patients that were very reticent to come into contact with the health care.
System.
Say for 20 to 40 fractions, but we're very happy to do so can be treated on meridian in fiber fewer so I think there has been a positive impact in that specific way as it relates to the pandemic and the economic.
Value that the system has proven in this very challenging period of time Michela did I get that right.
Yeah, and I think branding you had also mentioned maybe how we're driving service margins throughout the pandemic is that correct.
That's correct.
Yeah, perfect showed you want to take that one.
Sure I from Oh.
I think service and service margin.
All the customers that have system generally have a service contract with us so none of that is change per se.
I think what we have done is as our install base has improved and as we add as you know we've got about 30 and systems and installed as we've become better at both training our field service team.
And also the support staff to support some in house, we've just become more efficient and as you can see we're getting leverage and it's.
Our service margins are trending up.
They were positive this quarter. So again, it's a combination of both scale as well as our ability to service our customers more effectively.
And supporting our field team internally without having to travel as much as we did historically.
Thank you and our next question comes from Murray see ball with BT I'd. Your line is open.
Hi, Thank you for taking the questions I Hope you are all doing very well.
You too Maria Thank you.
Hey, just big picture, one to start off Websphere Ivor Scott when you took the how much you Ray you had one focused on training and helping new centers kind of get up to speed with the mridian system listening to the Dana Farber Webinars. The other day and it was impressive the amount of coordinate.
And in planning they put into their investment and it's clearly paid off for them and their patients.
I'm curious whether you think there's anything additional viread should be doing in terms of making that process. The ramp process for new centers a lot easier.
Yeah, I'm happy to touch on that and I can invite shard to suit maybe make some comments as well to your point I think we have made.
Significant strides over that period of time, putting a team in place that is dedicated to training new customer starts very rapidly and getting them to treat multiple forms of cancer very quickly upon commissioning in fully adaptive.
Ways.
Do I think we can do better I do I.
I think the answer lies in not only how we're training customers, but also our innovation pipeline that I think will help us.
Makes the utilization of the system.
From a work flow perspective easier and treatment times faster.
And the other thing that I think we're doing a reasonable job bump that we can always improve upon is having our customers interact with one another.
We we have people that are specializing in one or two kinds of cancer in one account and maybe two or three kinds of cancer in another account and having them speak with one another.
And share with one another their clinical experiences is proving very interesting and beneficial.
Both from a clinical outcome standpoint, but I think from an economics economic outcome standpoint, as well a sharp is there anything you'd want to add to that question.
Sure just to add to what Scott stated the other thing that we're doing and we're in the early days of it is for all the different treatment modalities, we're learning from each one of our customers and figuring out best practices and starting to transfer that from site to site so doing that.
Earlier in the process, having that be part of the kick off of a new center.
With best practice, guys for the different tumors and indications I think that that's something that we think will help accelerate process and perhaps simplified from what you saw.
I would say, we did a little bit of that would Dana farber. They did a lot of that on their own as they shared that they visited multiple sites before they got going we think we can package that up and really going to site to get to that same level without having to do all of that work on their own by traveling to other side. So so that.
As one key element that we're working on moving forwards.
Perfect that's really helpful.
My follow up is really just a clarification I think you said earlier there were there are now nine installs and process five of which have already been revenue recognized where those all prior quarters or were there any revenue recognitions already in the third quarter.
Zach you want to touch on that please.
I think.
Without getting into too much of the current quarter most of the all those systems were recognized in prior quarters.
Perfect very helpful. Thank you.
Thank you.
Our next question comes from Andrew Dsilva with B. Riley FBR. Your line is open.
Hey, good afternoon, Thanks for taking my questions and sorry, if you answered any of these I was hopping between calls.
Just as it relates to new orders I believe on your Q1 call a at that time during the second quarter you didn't receive any orders well can you.
Help me understand what changed in the back half of the quarter from your point of view and then just not to not to beat on the subject with pressure in hospital Capex spend are you are you looking at any different models that better align with health system Opex spend what.
Other options can you leverage in the current landscape.
Yes, Andy Thanks for the question.
I'll touch on both of them here I think it as it relates to your first question you know I think our team is just doing a really good job of articulating our three value propositions clinical strategic and economic and it's very difficult to.
Predict you know whether something is going to come at one point in a quarter or another.
And there tends to be a relatively long sales cycle to.
Meridian program. So I you know I think it's it it would be false precision for me to tell you that you know something changed inside of the quarter.
The sales cycle tends to be very long, but I would share with you that I think our team is doing a better and better job over time.
Sharing the value propositions and frankly, some of our best salespeople happened to be our current customers evidenced by the the Webinars series and the level of interest.
Associated with it so.
That would be my first answer to your first part of your question and as it relates to the second part of your question. We are in continue to pilot various acquisition models with our customers.
Without going into too much detail here I do feel like some of those models are.
Keeping customers engaged.
Even during this difficult time, and so we'll see what transpires as we move forward.
But I do think our customers are interested.
For the comment that exact made earlier in some kind of optionality from from US, we're offering that to them and we'll keep you apprised how that goes moving forward.
Okay, and my follow up I'm just related to the ATM.
It's still in the a and B process I recall, you were optimistic that we should be able to hear something.
This year, just curious we stand right now.
Sure sure do you want to touch on that one.
Sure Happy too I think at this point in time, we're still anticipating I'll say a January effective date. So the announcement of the rules would would occur some point.
This year for implementation.
And that first quarter next year, we haven't heard anything otherwise, but again.
We do know that PLM be is backed up with with pandemic. Another priority. So that's the best thinking we've gotten from the various industry groups so that.
I'd say that that's our latest information.
Great. Thank you very much best of luck close enough to back up there.
Thanks Sandy.
Thank you and I'm showing no further questions at this time I'd like to turn the call back to Mr., Scott drink for any closing remarks.
Well. Thank you everybody for attending to call here. Thanks for your interest in view Ray we look forward to our Q3 call in a few months hope you all stay safe and healthy take care.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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