Q2 2020 Sientra Inc Earnings Call
Ladies and gentlemen, please standby your conference will begin momentarily once again, thank you for your patience simply standby.
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I would now like the hand, the conference over to all of her Dennis.
General Counsel in Chief compliance officer. Thank you Maam. Please go ahead Sir.
Thanks, operator, good afternoon, and welcome to the Seattle second quarter 2020, <unk> earnings Conference call.
I would like to remind everyone in our remarks today, we will include.
That are considered forward looking statements in the meeting of United States Security at all.
Sure.
Management may make additional forward looking statements in response to your question.
Forward looking statements based.
Current assumptions and expectations of future events and trends, which may affect the company's business strategy operational financial performance.
A detailed discussion of risks and uncertainties that the company's spaces.
Okay. That's previously filed annual and quarterly reports on form 10-K and 10-Q.
Only report on form 10-Q, but the company's filed this off.
Actual results may differ materially.
Rescue or implied by the forward looking statements. The company undertakes no obligation to update for review and estimates projections or forward looking statements.
I would also like to note that she attribute it to Investor relations website to publish important information about the company, including information that may be deemed material to investors.
Financial and other information about scripture, it's routinely posted and it's accessible on the company's Investor Relations website at Www Dot net dot com.
Today, our coal object neutral interest chairman and Chief Executive Officer.
Oh.
Chief Financial Officer, Senior Vice President Treasurer, correct goodness senior Vice President of worldwide. So.
I'll now turn the call over to Jeff.
Good afternoon, Thanks Ali and thank you all for joining our call today.
Well first review, our second quarter results and provide an update on her business strategies in the current cobot 19 environment.
As well as the trends, we're seeing and the general acetic space going forward.
We will then review our go forward strategy, which as we previously shared.
Increased or focus on our core breast products segment.
Focusing on a mirror dry segment.
Hi margin bio tip utilization.
Finally, we will discuss our ongoing initiatives to maintain financial flexibility in our vision for them on some quarters.
So many others are saying I'd also like to reiterate our gratitude for all frontline workers and our commitment to the health and safety of our teams are partners.
Our customers and their patients.
We've maintained and even bolstered many of the measures and act in earlier this year to ensure the health and safety of everyone in the central family.
And we'll continue to prioritize them moving forward.
Our proven ability to quickly adapt to the evolving landscape, where we operate as currently enabled us to forge ahead with critical corporate initiatives should we intend to continue to move forward.
With that said Oh, no shift to review for second quarter results.
The second quarter. She untrue recorded total net sales of $12.4 million, 39% decrease.
Prior year.
This decrease was most acutely felt in our mirror dry business segment.
With her breast product segments significantly less impacted.
For breast products segment, which includes both augmentation and reconstruction.
We recorded second quarter net sales of $9.3 million, 17% year over year decline.
Which is directly attributable to the coping 19 endemic.
Premiered dry we achieve second quarter net sales of $3.1 million, 66% year on year decline.
Which we believe is also attributable.
Two boats covert 19 pandemic.
And our decision to refocus mirror dry.
Hi margin biotech sales.
As a reminder, this refocus on bio chip utilization.
Increases the overall profitability of the business well de emphasizing console sales have historically accounted for approximately 50% of the mirror dry revenue.
Overall these results exceeded our initial expectations and confirmed our confidence in the strength within both of our businesses.
Cheekily, we are encouraged by the strength and durability of use that as market as a whole.
And for surgical procedures specifically.
As well as the effectiveness of our physician customers in adapting to drive the recovery versus waiting for it to happen.
We continue to see the demand for products has remained robust despite the challenges our customers have faced throughout to spend dynamic.
Turning to or brush chronic segment first our results have been generally consistent within the broader market in that April was city, particularly low point.
Incremental improvements through May and June.
In fact, excluding biocorneum, our breast products sales declined only 13% year over year in the current fiscal quarter.
Sales were approximately flat when looking at only the May and June timeframe that is flat versus prior year for the similar period.
We believe that this performance is a standout in the acetic space with others that accompanies reporting high double digit declines this quarter.
And shows the resilience of our product portfolio.
We believe we are clearly taking share with the continued addition of new accounts as well as gaining deeper penetration within existing accounts.
Importantly, we have seen this improving trend continue into the third quarter with breast products specifically.
It's too early to tell if this trend will continue throughout Q3 or if it reflects a bolus of pent up demand.
As a basis for ongoing confidence in our breast products segment, we've begun adding a number of customer service distribution and manufacturing positions in order to meet growing demand for all of our products.
As expected the reconstruction market remained strong throughout Q2.
Continue to leverage our highly differentiated tissue expander portfolio and best in class breast opus implants to win new accounts.
And we've also recently taken a number of initiatives to further strengthen reconstruction portfolio.
These include.
We file DPM a supplement for line extension to the company's portfolio.
Andrew Opus Joel implants to include larger sizes.
850 Ccs.
We've also filed to five 10-K for next generation elevates to tissue expander.
And also we filed the five 10-K for the Central Opus, Joe size years to supplement the current opus see lean size or line of products.
Finally during the quarter, we entered into a national contract with HPG.
Very proud of this.
The second largest cheap you hospital organization in the country.
With over 1600 hospitals, representing a significant market opportunity foresee Andrew.
As the hospital channel continues to open up.
We're in a stronger position than ever to serve pent up demand and continue making market share gains in this durable reconstruction segment.
Our confidence in the strength of her breast products is grounded in the demonstrated resiliency for breast surgeries.
Over the past few months, we've conducted several market pull surveys with surgeons as well as patients.
On the patient side. These surveys have confirmed our belief that once women make up their mind to get breast surgery.
Typically don't change it.
This has been established overtime.
Overall, our surveys suggest that over 90% of women, who have been considering breast augmentation or still planning on having surgery despite difficult endemic.
We're also hearing from numerous surgeons that they are booked munson advance on their breast augmentation surgeries is another sign of strong patient demand.
To assist our customers and tapping into this demand we've initiated several programs to drive the recovery at the individual practice level.
Some of which I outlined on our last call.
Potently well, making other organization adjustments, we kept our entire best in class plastic surgery consultants salesforce intact completely intact.
And continued regular call cycles through video and face to face meetings wherever possible.
We have developed exclusive partnerships with leading acetic societies, and our customers and enabled our plastic surgery consultants to work safely with or practices to help them convert patient interest into procedures as well as ramped up our education programs.
Provide virtual assistance in navigating these changing times.
We've launched the drive to recovery Dotcom website.
Which provides our customers with frequently updated episodes of.
Andrew Tech news as well as marketing business in practice management resources to help accelerate their businesses. We believe that we are what are the most innovative.
Users of new technology to help our cohort of loyal customers.
We've also recently announced the relaunch oversee interim dotcom website.
This up to date platform provides separate and meaningful pathways for both augmentation and reconstruction procedures with the overall purpose of generating new patients for our practices.
Our research confirms that this is one of the primary sources of information women use in their process of deciding upon the surgery.
Turning to the merger I segment.
Yes.
We successfully transition from a bifurcated sales model of systems and consumable tips.
Refocus the business on recurring high margin biotech sales.
Well many of our mirror dry accounts, we're transitioning to the code pandemic.
We recycled or sales force and retrain them.
Help our customers drive and conferred consumer interest in mirror drive into patient treatments.
Our newly trained business consultants help or accounts benefit from the lifetime value of the mirror adroit patient.
Which as we've discussed before.
Our and additive feature for their practice in terms of introducing them to the practice sooner than they otherwise would.
We believe that our strategic decision to focused predominantly on bio to utilization overall core console sales served us extremely well in second quarter.
Anecdotally capital sales in the industry are significantly down overall.
Well practices that are reopening have been reengaging.
Base of patients with existing technology.
We were pleased with mere drive performance in this quarter, particularly in the US with some key international markets, where utilization is followed more of the V shaped recovery curve and returned to pre cope with levels as we exited the quarter.
Importantly in this business, we measure the results of our shift to high margin consumables by two key metrics.
First is bio tip utilization through our automated system tracking capability as well as buy sell in of new bio to practice inventory.
These key market utilization indicators reflect a more rapid recovery than initially expected.
We believe this recovery has been driven by our earlier marketing initiatives.
Built around creating and converting patient interest to drive utilization.
In addition to our core digital marketing strategy, we gained considerable traction from our micro and macro influence your program an important part of digital strategy that we've started.
In second quarter, we treated a number of reality television stars who shared their treatment experience is publicly.
Generating pickup in top tier media, including people magazine Us weekly et cetera.
These created over 25 million impressions for the mirror drive brand.
Typically these programs create broad awareness, but we were also able to measure the impact into practice level.
Over 600 leads generated four practices within weeks of publication.
Our business consultants are working closely with their accounts to convert disinterested in treatments to drive to recoveries practices reopened.
The second quarter.
Absolutely 70% of Mirror drive revenue came from outside North America.
With Asia, representing approximately 50%.
Total revenue.
Bio tip revenue represented 85% of revenue during the quarter consistent with our strategy.
This was also consistent with the geographic impact of the covert pandemic with the Asian markets being defers to shut down in Q1 and defers to reopened.
Well, the United States market should down leader and remain closed for longer into Q2.
Of particular note.
System utilization in Korea.
In Taiwan. In addition to use was better than expected.
Serving as a favorable indicator for a strategy to drive utilization.
Overall system placements and supports our view the utilization focused business model.
The optimal long term strategy for this segment.
As we look ahead, we expect to continued to benefit from a higher margin within the segment due to the shift in mix.
Bio tips.
I believe we have more than sufficient inventory.
To support our forecasted demand.
All in we emerge from Q2.
More encouraged than before I would like to remind us so theres still significant uncertainty around this recovery.
It remains to be seen static market will fare if the trajectory of coke.
Spread drives a wave of can cancellations of elective procedures and if macro trends will result in a shift in patient demand.
That said, we will continue to work diligently to adapt and mitigate risk.
Health solutions market, leading professional support programs and other marketing initiatives.
We have already been successful.
We will continue to leverage our unique nimbleness and our ability to adapt extremely quickly.
Hyper focus on our certified.
Board certified plastic surgeons.
To further market share gains and establish the interest as a leader in the acetic medicine category.
With that let me turn it over to pull for financial review Paul.
Thanks, Jeff.
As Jeff mentioned in the second quarter fiscal 2020, Sientra achieved consolidated net sales of 12.4 million.
Which equates to 39% year over year decline.
Net sales for the breast products segment.
Totaled 9.3 million in the second quarter.
18% decrease compared to 11.2 million for the same period in 2019.
The second quarter net sales are mirror dry were 3.1 million or 66% decline year over year.
Gross profit for the second quarter was 6.9 million.
5.4% of sales compared to gross profit 12.7 million or 61.9% of sales for the same period in 2019.
Gross margin in the second quarter fiscal 2020 was lower versus the same period last year due to increased cost of our Joe implants. Following the best acquisition in 2019, Andy leveraging of fixed costs on a lower sales volume in the current quarter.
ASP isn't a both business segments have remained steady.
Excluding noncash impairment charges and restructuring charges operating expenses for the second quarter 2020 were 18.7 million.
Compared to 37 million for the same period between 19.
This represents an 18.3 million or 49% reduction in operating costs year over year.
The majority of these expense reductions are permanent setting the stage for improved profitability as revenue continues to ramp up.
Notably we were able to successfully reduced expenses.
While ensuring that our revenue generating operations were not impacted and continuing to invest in critical initiatives inline with our go forward business and cash preservation strategies.
Net loss for the second quarter was 34.3 million.
Or a net loss of 60 cents per share.
Compared to a net loss of 37.7 million or net loss of $1.10 per share the same period in 2019.
Net loss in the second quarter fiscal 2020 includes an 18.4 million.
On cash change in fair value of derivative liability.
Due to the convertible debt, we announced in quarter, one of this fiscal year and $500000 and restructuring charges.
On a non-GAAP basis, the company reported and adjusted EBITDA loss of 9.2 million for the second quarter 2020.
Compared to an adjusted EBITDA loss of 20.4 million for the second quarter last year.
Turning to our balance sheet, we ended the quarter with 71.8 million of cash cash equivalents compared to 112 million at the end of March 30, Onest 2020 in May we disclosed the receipt of a payroll protection program or PPP alone.
Now to 6.7 million.
In May we also announced an amendment to our 40 million dollar term agreement as a result of this amendment, we paid down 25 million of the then outstanding debt balance.
Just a minimum unrestricted cash from 20 million to 5 million and reduce the minimum net revenue requirements. The admitted increase the amendment increases our challenge to be commitment from 10 going to 15 million in.
And extends its once its launched three termination date from December 30, Onest 2020 to June Thirtyth 2021, subject to the satisfaction of certain conditions, including future revenue milestones, we still maintain our revolving credit facility of up to $10 million. There are no borrowings on the facility as of quarter end.
To maintain our financial health response to the Kobe 19, pandemic Cana conjunction with our previously announced organizational efficiency initiatives. We took a number of steps over the previous three quarters designed to simplify operations.
Have reduced spending ensuring their resources or prioritize on physician and patient facing activities.
Our core breast products segment.
Taking these initiatives into consideration and based on current market conditions. We are still forecasting 2020 annual operating expenses of approximately 105 million.
The 110 million, excluding impairment and restructuring charges. This compares to operating expenses of $140 million in fiscal 2018.
With that said our balance sheet is in excellent shape and we believe that the collective measures we've taken to date.
Will provide us with sufficient cash balance going forward and greater financial flexibility to manage our operations through the remainder of the cobot 19 pandemic and thereafter.
As previously disclosed we have suspended full year 2020 guidance due to the uncertainty related to the pandemic.
I'll turn the call back over to Jeff for his concluding remarks John.
Thanks, Paul.
Let me close today by emphasizing that remain very confident its interests ability to emerge from these uncertain times in a position of real strength.
The challenges we faced in the first half of the year.
Actually trying.
Our team and our customers demonstrated their ability to adapt and overcome.
She entered continues to be an extremely nimble company.
We've taken steps to build on our core advantages by filling an important real time need among our board certified plastic surgeons.
After our success in the second quarter I.
I believe strongly that's true is even more will position than expected just a few months ago.
And I wanted to thank all of our employees are customers stakeholders for their support.
Well, we'll as we come through the spend demicks stronger than before.
With that let's open up the line for questions and answers operator.
As a reminder to ask your question at this time. Please press star in the number one you touched on telephone.
Your question has been answered your question, let yourself from the Q. Please press the pound King.
Please standby Ali compiled accumulate roster.
Our first question comes from the line of migrate.
Cancer with William Blair. Your line is open.
Hey, good afternoon, guys. Thanks for taking the questions and congrats on a quarter.
I wanted to follow up on.
Some of the trends that you guys had in Q3.
Is that maybe better than a lot of the folks within med tech so.
When you suggested that May and June were flat that she also then suggests that July remained flat year over year, and then can you give us a sense in terms of how big July is usually the percentage itself in the third quarter.
Well I think one of the ways to look at the smart grid is that if you look at.
April in particular it was.
Just to.
Significantly depressed I think may improve dramatically declined only about 6% versus year ago.
But moving into the ended the quarter and into Q3.
We're seeing positive growth continue which has given us supposed of year to date.
Numbers that were posting.
I think the real issue here is that.
We have found a couple of things I think one is.
We have reacted quickly to adapt to this situation and we formed a much closer relationship with our board certified plastic surgeons.
I think your dry also showed a faster response to the bio to high margin portion of the strategy.
And I think the overall.
Categories that were dealing with.
Our more resilient to the factors affecting us.
This resulted in a.
Positive trend that really plays well to see interest advantages.
Does that help.
And it does and really what we're trying to get out is that as we look towards the second half the year you know at each of the businesses, both breast and add near try knowing that you guys aren't providing guidance yeah why shouldn't we think the second quarter isn't low watermark for both.
Well, it's like we're all looking at the same data in the daily reports Theres still some significant uncertainty going into the back half so.
Thats the fundamental reason that we're not in a position to give guidance, but I think overall.
We have a renewed sense of confidence that.
What we've done so far.
So far.
We're continuing to take significant market share.
Yes.
I think this.
Sure.
More.
More practical and more easily.
Described I think that we're also encouraged by the marriage right transition into the high margin tips. So.
I would love to be able to give you a more clear picture what the back half looks like.
Other than looking at the trajectory you have coming out of second quarter. So I'm waffling a bit on year, Margaret I don't know host answered without giving guidance.
Yep no problem that makes sense.
And I just wanted to follow up on HPG contracts add that looks like a pretty nice sized material contract frankly, so can you give us any more color around there.
Yeah, whether you're in any of those 1600 household cannot and what are the next steps in terms of turning this contract sales or penetration Greg. Thanks, well I can tell you that it was a long term process to gain that.
That relationship with HPG, but I know, we have kirker the line.
I know he's much closer to the details Kurt you want to fill in some of the some of the detail.
Sure Jeff.
Market, we're very excited about this contracts because.
Right now were less than 5%.
Market share within within EPG, and the contract open that up to getting into all of their hospitals and we added the as many Reits as the other competitors and so now weekend.
Our.
To the standards that we have as well as bringing our award winning implant and see into the hospital framework in really worked with with their group we've already had.
Several of their hospital groupings their networks already recalculate.
To begin to build billed business plan to get our PSB you work with different doctors in each of their hospital and they have.
Surely given us a red carpet walk in and work with them. So we're very excited about the opportunities that we're over the next few years.
Got it.
I really appreciate and congrats on a quarter young.
Thank you Mark.
Yes. Thanks.
Thank you. Our next question comes from the line of Jon Block with Stifel. Your line is open.
Hey, guys. Good afternoon, hoping you can hear me okay.
Yes.
Hey, Jeff Berson for years.
Got big aesthetics they.
Or the ones that most commonly had been in the news just around resurgence of coal, but you know a club Florida, Texas.
California, your numbers for grade and brass products and B.
Handily relative to expectations, but I'm just curious as we sit here in early August. So what you experienced throughout July are you seeing your business fluctuate based on some of these you know a static rich cobot hotspot, maybe if you can just talk to what you're experiencing recently in some of those days are but I just got a follow up.
Sure I can give you a.
More of a general perspective, because we look at this very closely and I think is the.
The debate rages across the country.
Not all states are created equal.
But.
We are seeing some significant advantage advances.
Some of these us from US I think Texas.
Florida in particular.
Our surprisingly strong within select practices.
We've got some of the most productive plastic surgeons in those states for example, but again, let me refer to two Kirk.
Spending.
This amount of time face to face with these people.
So without described you further led to let me, let Kirk answer that.
Yes, it's not surprising that our revenue because it's consistent with the state population rate by California, Texas, Florida, and New York.
It is.
Layer unit that are required alone.
It is faring better in August and they need the Q, which speaks to the surgeries are not being delayed.
And we're seeing that seem to be leaving it in.
Thank you for.
Another example is California the purpose of what it.
Declining in revenue there, but in the Midwest Wolf Creek, even in Texas alone, we saw major and create a lot of it back with you because of the flexibility of their economy and the consistency that he he.
He also allow for those states.
In the recurrent bag.
It's sort of the different mix, where California now on the Recon, Florida, and New York are down and a lot of it that you were.
Yes, there may buyer file.
So we're monitoring that in many different assets regionally and making sure that we address it when it when they're ready to go over there and we're we're on hold.
Given a lot more trade and another thing but ready.
Got it great job very helpful color and then my second one is sort of a high level and I'm not going to specific question of the habit.
You know, maybe you want to opine about.
This recession versus what occurred back in a wedo died and I bring that up because I'm, one and the unemployment rate Cisco router or what they're just so much more severe but yet here. We are hearing about aesthetic practices booked all been booked alper for more and so maybe you can discuss what part of the market. This is heading versus last time and your conviction.
In that aesthetics will be more insulated going forward and the quick question is is if the Japan approval that you guys bought up last conference call still.
On track for yearend 2020, but thanks guys.
Yeah.
Last question first John.
The Japan.
Introduction is on track.
We're very pleased with that.
And as far as the.
The comparison.
This economic jolt.
Compared to the earlier ones certainly going back into the mid two thousands.
We've done.
Sure alone considerable amount of research and I had gotten into that earlier even before.
She entered days.
And what are the things that we found that came out in our recent market research.
Is that particularly women, who have made up their minds for certain procedures.
Dave.
Minimally invasive or or topical or surgical.
Our.
Our highly.
Indicated to complete that.
There may be some delay but ones.
Joe the patient makes up their mind to have this done.
It gets done and this goes back.
For for decades, So I'd love to share some of that research with you, but this is based on a combination of things from the Citic societies.
As well is there.
Direct response is coming back from what we're seeing right now.
It's a pleasant surprise that women viewed as a very high priority in their Mezz Levine.
Hierarchy.
So what we're seeing is thus far.
We're not being dissuaded from completing.
Those procedure, so, let's remember reconstruction, which is.
Creasing portion of our business is much less susceptible.
Two.
Some of the.
The other thoughts.
Our affecting other procedures, where women can wait.
You do not wait on follow a mistake to me procedures.
Which we have a significant advantage of and taking a and taking very large chunks of market share.
Center advantages and better products.
But then we can talk perhaps further.
Does that help.
It does thanks, Jeff I'll take the right.
Great. Thank you for John.
Our next question comes from the line of Kyle rounds were Canaccord. Your line is open.
Great. Thank you very much I just wondered if we could go into a little bit more detailed as rich specifically about.
The rebound you saw in the quarter with respect to have recon versus.
Primary augmentation.
Appreciate the commentary just regarding the durability of the recoveries is that maybe you can just kind of frame how those two specific business unit. There and then secondarily, Jeff you talked about a I think a submission for next gen. The Alex you could use.
And help us understand whats new about the product features that are going to be ever that were submitted that once the on the marketing than expectations as far as Vic launch timing there.
Sure I think that overall, what we are seeing is that.
The.
The rebound that we've seen is a function of couple of things.
For relatively.
Uncomplicated non pharmaceutical bio similar category this can be a fairly complicated business.
But what are the things that we've seen.
What's encouraging us so much is the increased relationship and close says that we have with our board certified plastic surgeons and we are.
Laser focused on helping them.
Drive this recovery faster than it would otherwise take place. So that's a large part of it and we're we're gaining increased credibility.
On both August and reconstruction, but to your question specifically.
Reconstruction, it's like I think Kirk was explaining is see some mixed bag.
Because depending on region.
There are theres more availability within some regions hospitals to take on some of these cases, particularly with reconstruction.
And I know that Massachusetts, as an example, where.
They were delayed in opening up.
Their hospital facilities to be able to take on some of these recon cases, so in any event part of what we're looking at is that there is a higher level of pent up demand.
On reconstruction that we expect to unfold going into the back half beginning in third quarter, but we expect to see it continued to go through the end of year.
So I think Thats, one particular piece Kirk do on anything.
Yeah, I think if you take a look at this year and we started out in Q1, there with a real momentum shift that occurred where.
Our year over year was up over 32% in our competitor was down 32% ad.
That momentum they continued into Q.
With our recurring business, holding and our cosmetic business really growing and where we sell though that growth is we added in the cold a time where people.
We're not wanting to if people are new salespeople, we are able to add 110 accounts.
And in those tenants and account many of those were mentor loyalty and elegant loyalty that have switched over 80% to 90% of their business. The answer now. So we believe there is it that gives us optimism for continuing to take market share back in many of these individual.
Well counts.
And there was very positive.
There are number of initiatives marketing programs, including are welcome back program.
Sure lapsed sientra customers.
Been proving to be very successful.
That's the that's very helpful. Thank you.
We're just being more aggressive thus bottom line.
Thank you were just just one question that I wanted to follow up is on the on the contract with the GP during the quarter.
Obviously, there's a big cross selling opportunity there. So I appreciate the commentary about the market share, but just any commentary with respect.
Getting on that contract you did you have to sacrifice price ready for any any.
Sort of contracting or volumes and then what we should expect from a pricing standpoint longer terms as that contract you flows through the business.
Correct.
Yes, the greatness out we have no sacrifice whatsoever pricing or anything of that nature.
[music].
The H.P.G.
That's about 55 million in breast products total business.
And you know were 5% it so there's plenty of opportunity for us.
You take back some of that market share for CNG dropped.
Our eight feet at that same get all working with with that group.
So it's a benefit for both of us that they get the best in class product.
They get the ability to use our expanders than we are able to service them correctly.
Great. Thank you for taking the question.
Thank you.
Our next question comes from Atlanta, Richard Newitter within SVB Leerink. Your line is open.
Hi, Thanks for taking the questions.
Hi differential back to hi, how are you.
Until back.
You.
What kind of visibility where you do have it.
With respect to trying to try to decipher kind of backlog worked down and you know what what kind of what's coming into the funnel and I'm curious if you could you know where directionally are things leading you as you as you look you know that you have July under your belt in some.
Early trends in August.
Can you comment on consultations.
Especially with Tele health.
Our complications generally back to back to normal levels, and what what does that potentially say.
About the outlook going forward and thinking habit comments on the breast reconstruction side anything on cancer diagnostics or what your but your customers are telling you about people addressing their serious health self help patients.
I think to.
We use.
Necessarily is that.
[music].
It varies it varies widely.
But again Kirk is much closer to the actual.
Accounts.
In the field, so let him talk to it but I think the the range goes from.
We said in an earlier remarks.
There are number of accounts were sharing that they are booked months in advance and this is just on augmentation.
I think on the reconstruction side. It really is more of a function of hospitals opening up.
Pasadena.
Within their institutions to be able to take on some of these reconstruction cases curcumin anything that.
Yeah I would have made you give you some top line marketing survey that we just finished with over 212 consumers and some of the information that came back will help with the answering the question launch at.
The email does Donny journey.
I'm starting to finish for about 40 months and when he starts that journey and it's starting to look at Bristol breast implants.
Those that we know that 91% will eventually doing.
So it's not a matter of.
Well, yes, they're going to do it it's a matter of when they're going to doing and that's the key then also what are happening in the marketplace is.
Depending on our local governments, whether they can shut down the economy are not inconsistent season, there it's hard to determine how that will play off in Q3 Q4.
But we know that the this journey that every female design. They will really it's just a matter of when it could be later in Q4. It could be early Q1. So it's hard to give you a clear picture from a forecast for the back half or even 21, it's that we economic consistency.
But our surveys are showing that limit our can that continue to do this and that speaks to the resiliency.
Mark.
Is that this market like all night.
Let me add more marketing in the back in early in the next year.
Okay, Thanks, and just to follow up there.
I'm just curious you know.
I'm sure, it's tough to figure out underlying market versus share gains and the incremental trends for each in this environment, but is there anything dramatically changed.
Within the last few months with the competitive landscape I mean do you feel like your competitors are even more distracted potentially.
In the post called the World and they were previously and maybe just comment on the share gain component relative to two months ago versus today. Thanks.
Well I thinks is fairly common knowledge that.
When it organizations like Hell again and I'm not.
Even coming close to criticizing anyone.
The.
The impact of being acquired by larger company.
As an impact not only on priorities strategic direction as well as the position of individuals within the organization.
So from an l. against standpoint.
Great respect for.
They are under a significant transition right now.
We have gotten feedback that that is being manifested in terms of the aggressiveness in the amount of context that they're making with or accounts.
Mentor, who we know.
[music].
Less well.
I have a number of years experience.
Within the JNJ community.
It's very hard to tell.
But we don't see much activity.
And this is a qualitative comment I wish there is a better way to describe it but.
From a.
And over all aggressiveness into index.
Which company.
With their primary representatives.
Being more aggressive in helping our accounts.
Be successful and providing them the tools to like we keep saying help them drive to recovery the feedback that we get.
My opinion is that we're significantly.
In the lead and more aggressive and trying to help those practices.
Returned to normal and in many cases, we're already at pre covert levels.
Which I think is very encouraging sign.
And that speaking for CN strongly.
Thank you.
Sure.
And our next question comes from the line of Chris Cooley with Stephens. Your line is open.
Good afternoon, and appreciate you taking the questions.
Let me.
Good afternoon, maybe we switch gears, a little bit and refocus on bone marrow dry in the quarter.
Obviously the shift to the budget focus is a key driver as you think about generating positive cash as we get into 21.
So I was hoping maybe you could help us as you've done in the past ourselves that 66% decline between.
Cobot and maybe what you would assess by the transition away from having capital sales reps, maybe some color on utilization at the fresh connect accounts and also the geographic split because obviously that would weigh promote U.S.P. perspective on on the overall growth just just trying to get little bit better understand.
And about the components behind the decline in it as a result, how we can look at that business going forward here in the second half and I've got a quick follow up on the breast business.
Sure.
It's obviously.
The answer to a question regarding transition so there's a clear transition going on right now.
And again I think are because the closest to the mirror business and.
Of those accounts very geographically.
As was the impact of covert.
In spite of that.
And I'll just make one comment.
And I think lead into occurs.
It's obvious that capital equipment sales have.
Drop significantly during the quarter.
So from that standpoint, our timing in making this change.
Was was it goodland.
But also if you look into balance between growth and profitability.
We've talked a number of times about.
Having the resources necessary to achieve our aggressive goals on breast products.
And and be able to focus on.
What is the optimal.
Strategy going forward to be able to contribute margin and.
In the profitability and cash resources necessary to do that.
With that Kirk can you address this and in some more specific terms.
Yes with over 90% of the mere dry office opened.
And Ryan.
What we've seen is a b b that we are back with our rest connect accounts we are back to.
Where we were before Kobe, which was four treatments per machine per month.
What I think that.
<unk>.
Really sticking out about nearing dri is the durability of this particular medical device. When you think about it's been around for nine years and when a device it's been around for nine years boring and everybody sort of but yes side and what we realize.
When we started that.
You can't pull going after millennials last year, we spent the money you develop this market and we really have created a completely new device.
With a new grip of people coming in.
Just recently, we've done where celebrity a housewives of Miami Housewives of Dallas Housewives, New Jersey have contacted US do you get this procedure done and do you talk about it and it's been picked up by people magazine.
It's been picked up by Us weekly where different those alone you 25 million I fall in pricing.
Yes on a on a system that that nine years old and tell you that your ability at this particular market and the and the potential growth that we have when we are able to get rid of sweat older and hair on the permanent base.
So our our how are back to where they were pretty Kobe and we are continuing our marketing to drive leads to our off it did you continue to convert them and in our last.
We've gotten back in April.
Conversion rate from a a lead to an actual.
Treatment, 32%, which is compared to comparable to last year that was 4%. So we see real strong conversion that's happening in our mirror business.
Thank you appreciate all the difficult and then.
We just need you to fits wanted to try and get this a different way, but on the on the broadest product business you know clearly you're outperforming relative to the end market.
Based upon your best in class products and your relationships, but.
Can you help us think about where you are seeing the gross or where you saw a better performance.
Was it was recon are all getting a really just trying to get behind that kind of a growth number for what do you expand or business. Just trying to think about you know maybe a higher margin business. There again on the other recon side versus.
The oxides. So maybe just any additional color you could provide us there would be helpful. Thank you again.
And so bold units.
I mean, we don't break out our numbers that sense, but in the quarter both businesses did what we think.
Recounted slightly better than augmentation for the quarter.
We also think of the back half is going to be some pent up demand on that because there has been some.
Hindrance on the hospital side for patients to get in there for the reconstruction surgery.
But in terms of which one's going to do better I think it just depends again I think a lot of people are getting the augmentation procedures now and it's not we're not seeing it slowed down at least at this point of the recon still there the back half. So I think they're both gonna grow which one goes faster you got to be see it to be seen if you look at the last recession.
Recon never went down rise of breast implant business went down about 70%, depending on which takes inside which decide you looked at either South Korea, yes. So I think it's it's going to depend on on really.
What hospitals are going to do for the patients and what what states are opening and closing.
Fourth, but we see growth.
And our cyber it take share in both those segments period ending the year.
Continuing into this year as well into the next year as well.
Yes.
Thank you.
Our next question comes from the line of the Alex Miller with Craig Hallum. Your line open.
Great Good afternoon, everyone.
I was going against your Hey, I'm, just going to get your comment that some practices are booked out from month theres been some articles out there just recently that there could be a boom in plastic surgery caused by the stimulus higher unemployment benefits and then just less discretionary items and spend money on right now. So when you go out there and speak with the clinics is more of the boom.
Due to people are just getting procedures done now because they have more cash or is this more of a fulfillment up a backlog.
Well, it's it's a combination in it.
Splits demographically sector graphically.
Certainly by region.
And not all regions territories are accrued the same.
But theres a significant number of people and I don't know if you're referring to the Bloomberg article just last couple of days.
If you read the.
Yes, that's what I'm, referring to correct yeah exactly.
No, it's very encouraging and in a way not a surprise because if you go back.
With the specialty.
Several decades at least.
There's been a number of things that have been challenges that.
May have.
In fact.
Im.
Quite surprised that some of these things with recessions and.
Some of the safety issues that came up years ago.
Rebound has been.
Yes, very strong.
So in this case.
Seeing.
Let me back up we don't have a clear picture.
On not only the overall.
Impact on the markets by procedure.
And we don't have any further granular information in terms of.
Where the positive.
Spots and where the negative spas.
Yeah.
So im not trying to offer excuses and the fact that.
Real time data is very hard to ditch or just your arms around.
But we know that.
Thanks team.
As very flexible and adaptable and their pivoting.
Two where these.
Hi potential.
Markets territories.
Our.
And.
Part of it is.
Please don't quote me on this but it's really of fishing, where the Fisher.
So.
With that.
What we've seen is one quarter.
With some very encouraging.
Indicators going into third quarter.
Theres going to be.
So the demand.
Going forward.
Absent anything more dire happening with the scope it situation that's clearly.
Overwhelming headwind.
So that gets back to.
Just on to position offer any guidance because it is very difficult to predict.
Sounds more like a conscious and that's what I'm trying to do.
That's what we're dealing with.
No I understood. The it's very helpful. And then just Paul you reduced opex nicely in this quarter and Jeff did speak to the hiring some more smart personnel to support efforts for Q3, so just as a breast products from ramp into the second half as procedures from back on line. How are you thinking about opex increasing.
During that time and are you still guiding to positive cash flow in 2021.
Yeah, great questions. Thanks.
So for the current year, we gave guidance for the full year on expenses when applied to one intense you know we did year to date tend to be able to see what we're assuming in the back half that it doesn't that does assume some increased spend duffy on the breast business I'd say for the most part quarter to the overall reduction 75% was coming from the mayor drive business and Gionee costs.
Started we did the restructuring back in November last year, and so in the changes we made this year with the new strategy on bio tips.
On the back half were you know in sorry going back in quarter, two and we also shipped a quarter to spend from the breast business at the back half just because quarter two was still relatively quiet for the first of these through April and part of May.
So I gave guidance for the year, you've got to figure out.
End of what you run rates are going to be if you look at the year over year decline what I'm showing.
90% of that is related to mirror dry NGL day, So weve left the marketing spend.
Yes intact actually shifted span from nearby to breast or in this business.
Time period.
And we've kept that business attack that weren't continue invest in the breast business as we see fit because we see such growth opportunity in that business.
And then just on cash flow 20, Twond cash.
Given the uncertainty with guidance and so forth I'm, not giving out any any additional insights into our and our into a cash flow breakeven other than if you just look at the steps we've taken right. So we've announced multiple.
Programs in place starting with November last year end of this first year first quarter this year into the second quarter.
For the efficiencies speed of decision, making to take cost away from Gionee put it back into the field, we reset our debt we changed our.
Our cash minimum cash balances from 20 million, a $5 million, where we set our revenue milestones that we needed to hit so we I believe we've made tremendous changes to give us some flexibility that we need in this business.
Due to move on but until I see a way to forecast revenue and give guidance, that's where I'll stop.
Okay understood. Thank you sure. Thank you.
Thank you and your next question comes from the line of Anthony Vendetti with Maxim Group. Your line is open.
Thank you Anthony.
Hey, Jeff Hey, Paul how are you good good.
Bob.
Just a quick follow up on married dry so I understand obviously to focus on a biopsy.
With 90% of the offices open.
There's opportunity to get back in there and sell the quick.
Right.
As we move for the rest of this year.
Is it possible that the demand for four additional system there into your current face or new system.
We'll be out there and then how do you how do you quite regret that is funding salespeople that are calling on.
The dermatologists and plastic surgeons that have a mirror dry and I know its muscles are medifast.
Are they able to.
Tell the system.
Or is it really break now 100% focus on the biotech.
I'll, let Kirk answer that because it's a global.
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Global decisions and obviously.
Markets.
Where that mix differs Kurt you want to comment on that.
Yes, so we're sticking with the strategy of a control placement of systems, and so with the United States market with RBC.
Sultans had the ability to sell the systems, but we are only placing the systems, where we will this.
Like nascent girl.
No we are reserving more of our systems for the international market. If you look at our breakdown.
None of our visit comes from the Internet No side, and we are seeing demand in in countries like Taiwan, Japan Korea.
And even in Europe, where we are reserving machines to be sold there. We continue our utilization strength that we have built within the international market.
Okay. So so basically you are you are selling the systems, but reserving them for your for your Ah, where there's more demand, particularly international and the countries such as you mentioned and I guess.
There'll be some placements in the U.S., where there's where they demonstrate the demand for the buyout tips will agree to sell them assess them as that is that correct.
Thats correct.
Great. That's helpful. Thank you.
Thank you. Thank you.
Thank you and I'm not showing any further questions I'll now turn the call back in your Smith for closing remarks.
Great. Thank you very much.
Again, thank you all for joining the call. This afternoon.
I hope we've communicated the.
Stronger results and frankly, we expected a month or two ago.
I think this is a great demonstration of how we're continuing to drive momentum on the fresh products category.
We're also very pleased with how quickly the.
Shifting strategy on mirror dry has responded.
The utilization of approach.
And I think the overall credibility and aggressiveness of this company.
Position us for continued gains and.
We are confident that we're going to overcome whatever.
Yes.
Presents us.
So with that.
I appreciate your interest and look forward to talking to as many of you should Ken.
So please stay safe and healthy.
And we look forward to further talk.
During the rest roofing. Thank you.
[noise], ladies and gentlemen, this incident.
Thank you for participating you may now disconnect.
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