Q2 2020 BIOLASE Inc Earnings Call
Excuse me everyone. Thank you for your patience and holdings. Please continue to remain holding on the line just conference well begin momentarily again. Please continue to remain holding on the line. This conference will begin momentarily. Thank you.
[music].
Good day and welcome to the BIOLASE 2022nd quarter Financial results Conference call. Today's conference is being recorded and at this time I would like to turn the conference over to talk Curly EBC group. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining us today to discuss BIOLASE its financial results for them second quarter ended June 30 2020.
On the call today from violence, or Todd Barbie, President and Chief Executive Officer, John Beaver Executive Vice President and Chief Financial Officer.
Management will review the company's operating performance for the second quarter before opening the call for questions.
Before we begin I'd like to remind everyone that a number of forward looking statements, which are statements that are not historical facts will be made during this presentation, including forward looking statements regarding the company's strategic initiatives and financial performance. These forward looking statements are based on BIOLASE is current expectations and are subject to a variety of restaurants.
To that could cause actual the company's actual results to differ materially from the statements contained in this presentation.
Such forward looking statements or only representative of the company's view as of today August 13th Twentytwenty.
These risks are discussing the company's filings with the Securities Exchange Commission.
A replay of this conference call will be available on the BIOLASE website. Shortly after the completion of today's call when listening to this call. Please refer to the news release issued earlier today announcing the companys 2022nd quarter financial result.
If you do not have a copy of the news release. It is available in the Investor section of the BIOLASE website by Moodys Dot com.
Ladies financial results can also be found in the company's quarterly report on form 10-Q, which will be filed with the FCC.
The tables, we provided in today's news release offer additional financial information. So we encourage you to review that the tables included provided a reconciliation of unaudited GAAP net loss net loss per share.
To non-GAAP adjusted EBITDA loss, and adjusted EBITDA loss per share as well as the details of the company's non-GAAP disclosures.
With that said I turn the call over the ball is president and Chief Executive Officer, Todd RV Huh.
Thanks, Todd. Thank you everyone for joining us. This afternoon. We appreciate your interest in 15, you support BIOLASE.
First I want to get an express or heartfelt concern to those have been affected either directly or indirectly by the ongoing covert 19 pandemic.
Our foremost concerned continues to be the health and safety of Bylines community.
Putting our employees customers their patients and our partners.
We continue to take every precaution to ensure they are well being during its very difficult time.
Since we last talk to you in May our team has continued to adjust how we operate the business to maximize our opportunities in a matter that is both safe for employees and our customers.
We are now several months into the situation, while it limits our ability to visit our customers and potential customers. We remain focused on strengthening our opportunities. During this unprecedented period until we can resume normal business practices.
Before I discuss our second quarter operating results I believe it's important to highlight the successful registered direct offering we completed in June.
And our oversubscribed rights offering in July.
I believe this is a strong level of interest reflected.
In a validation of our business plan. In addition, the higher than expected level investor participation.
Doors that we have the necessary resources to execute our growth strategy.
Which if you recall was beginning to generate desired results just prior to cope with 19 pandemic.
This is also a vote of investor confidence in the capabilities of the current team to execute and deliver meaningful results.
Now, let's talk about some of the accomplishments during the quarter.
During the second quarter, we announced our epic hygiene dental laser which meets guidelines to minimize the risk of cobot 19 transmission set by the center for disease control prevention or C. D C.
Which recommends against using ultrasonic scalar as to prevent the terms transmission of covert 19.
Specifically traditional ultrasonic scholars create a visible water spray that contain particle droplets of water saliva blood.
And micro organisms and other debris that can serve as a conduit to spread infectious passive pathogens such as Kogut 19.
As dental professionals start opening their practices in all 50 states, we can rely on our epic hygiene laser for leisure bacterial reduction therapy for those who are not familiar with this new indication. It allows fight janis to perform gentler.
Highly effective treatments for bacterial reduction and managing periodontal disease without using water.
The new BIOLASE laser system.
It was cleared by the FDA in March was designed by dental hygienist, specifically for dental hygienist and is the only hygiene device cleared to effectively manage nonsurgical paradigm Titus through laser bacterial reduction.
Our all tissue water, ladies dental lasers also create 98% less aerosols and traditional dental hand pieces.
Meeting the American dental associations recommendation of reduced aerosol production to limit the spread of covert 19.
Now with epic hygiene, we're able to offer another product that meets unique needs of dentists and patients during these challenging times.
Well there you remains too many kogut 19 variables to predict when the dental market will return to normal levels, we're confident that our water, ladies and epic hygiene products will be covered it but that's just as they align their mission of advancing dentistry to treat patients in the safest possible way.
As we discussed on our Q1 call in May the shutdown, which began in mid March has had a significant negative impact on our operations. During this time, most most dental offices in the U.S. globally suspended procedures, except for certain emergency procedures and remain.
Okay and close most of my <unk>.
The impact that this impacted dental production by as much as 70% and as a result, we sold very few lasers in April and May in only a handful in June.
Despite dental office is being closed for most the quarter. Our sales team continued to be very active reaching our target audiences with zoom webinars starting in March we launched our Webinars series and have hosted over 30 Webinars to date with over 11000 registered participants and over 3000 requesting follow.
Up on our technology.
Furthermore, at the same time, we reduced our operational footprint and moved our corporate facility, reducing our annual lease costs by over half a million dollars.
I want to reaffirm that BIOLASE remains well positioned for the opportunity ahead as general practitioners and Dsos are equally looking for ways to provide safe services and keep as much revenue in house as possible.
Optimism is reflective of several growth drivers, including the following.
First we believe our product portfolio will be even more important to GPS in dsos.
They look for safer ways.
Recoup revenue that they lost during the pandemic.
Yes, its can certainly differentiate their practice in this environment by using our lasers insurance saved her patient experience.
<unk> significant benefits and positive outcomes, they get with our lasers.
Second the most anticipated landmark study performed by Mcguire incident to clinical efficacy as well as patient reported outcomes of water assist the treatment appeared and tie. This was electronically published in the journal period apology in July.
We expect this to be in print come November.
Acquire study unequivocally confirms that patient reported outcomes were significantly better after laser procedures.
This was the first of a kind study designed to meet the stringent American Associate Association appeared and policies best evidenced consensus standards.
Study found that the water lays repair protocol.
And shorter <unk> procedure times that opened flap surgery as well as less bruising swelling and post operative bleeding demonstrating that repair is as effective as open flat procedures, but with significantly better patient reported outcomes.
We believe this study will establish new protocols for Appirio surgery and drive further adoption of waterways in our target markets.
With 65 million Americans suffering from does Parago disease today. The findings from this study are significant and determining the best course of treatment for these patients.
Studies continue to suggest that periodontal health is essential for overall health as it relates to severe sepsis ability of infection, including Kobin 19.
Third there is ongoing studies on treatment or concerning parent disease from Columbia, Harvard and you see L.A., which we expect to be published later this year.
Given the challenging times at all dentist have faced since the mandatory shutdown in mid March.
We launched a new financing program during the quarter called B P P or to BIOLASE partnership program to help that does get back on their feet. This program allows a dentist to use our technology generate revenue and make a single and not make a single payment until 2021. It also provides an office training that eliminates the need.
Travel.
In addition to the BPP program, we continue to offer our water lease mentoring experience, where w. I made this program puts training first by allowing dentist debt first hand experience with our technology and applications through the use of experience mentors intergroup learning environment showing them the power of technology first hand.
While allowing them to use the Warner laser technology and post training in their office prior to purchasing we initiate it for W. Many programs during the first quarter of 2020 prior to covert 19 shut down and we expect to increase these through 2020.
One of our key initiatives is expanded up yummy program to more cities during the year. If you recall. This program was born out of our Dsos trial with Harlan.
With the Dsos second segment coming back on line, we now have a phase two trials scheduled with Heartland also a recent webinars with clear choice has explained the benefits of what delays in has turned into an additional debt so trial.
We're excited about this segment and its potential to accelerate markets adoption curve.
Now as an update to our direct sales team, we have almost all of the territories back up and running along with our service teams. So we look forward to revenue lift collectively this will generate once you've us business has returned to some level of normalcy well covert 19 presents uncertainty we continue to.
I'm very excited about the market opportunity in front of us and glad to see that all 50 states are allowing for all dental services performed.
We believe the safety benefits of our lasers put us in a perfect position to advance dentistry and treat patients in a safe as possible way.
We have created a healthier operating company with many positive changes we have made over the past your and a half to improve our cost structure and build our talent bench.
We have BIOLASE remain committed to offering solutions for dental professionals looking to treat their patients in a safe as possible way.
With that said I'll now turn the call over to John for the review over second quarter financial results in more detail. Thank you.
Thanks, Todd and thank you all again for joining US. This afternoon now let me review the numbers as anticipated the continuing coated 19 disruption impact our business as total revenue for the second quarter of 2020 was 2.9 million a decrease of 66% when compared to 8.6 million in the second quarter a year ago.
You asked laser revenue for the second quarter 2020 decreased 72% over year to 0.8 million compared to 2.9 million in the second quarter a year ago.
U.S. consumables and other revenue for the second quarter 2020, which consists of revenue from consumable products, such as disposable tips decreased 68% compared to the second quarter 2019.
Internationally revenue for the second quarter of 2020 declined 73% to 0.7 million compared to 2.7 may in the second quarter 2019 again the decline in revenue was attributable to the cobot 19 economic shutdown.
Gross margin for the second quarter, 2020 was 32% compared to 39% in a year ago quarter lower gross margin reflects the impact of the decline in revenue relative to our fixed cost.
Total operating expenses for the second quarter of 2020 were 4.9 million compared to 6.7 million in both the first quarter of 2020, and the second quarter a year ago continued reduction in operating expenses, both sequentially and year over year represents the benefits of the cost rationalization efforts that we have been implementing throughout 2019.
Chain and into 2020, along with reduced business activity during the second quarter 2020.
Sales and marketing expenses decline 0.6 million or 23% sequentially, and 1.2 million or 36% year over year in the second quarter due to reduced compensation related expenses due to lower sales as well as reduced travel and travel related expenses and reduce trade show related expenses.
General and administrative expenses decreased 0.9 million or 29% sequentially in 0.4 million or 15% year over year in the second quarter two year over year decrease was primarily due to decrease in payroll and benefit cost.
Engineering development expenses decreased 0.3 million or 30% sequentially 0.4 million or 39% year over year in the second quarter operating loss for the second quarter 2020 was $4 million compared to an operating loss of 3.3 million in the second quarter of 2019, an increase of 19% year over year.
Net loss for the second quarter, 2020 was 4.7 million or 12 cents loss per share competitor in that loss of 3.9 man or 18 cents loss per share for the prior year second quarter.
As a reminder earnings release includes a reconciliation between unaudited GAAP net loss in adjusted EBITDA.
We believe adjusted EBITDA provides a useful measure of the company's operating results by excluding depreciation and amortization expense stock comp expense changing allowance for doubtful accounts and expenses related to disposal. The internally developed software and the cost of our patent litigation settlement last year.
The adjusted EBITDA loss for the second quarter 2020 was 2.9 million, which excludes these items was essentially the same as last year's second quarter. Despite the significant revenue reduction.
Our basic and diluted share count. It ended the second quarter 2020, 37.9 million shares compared to 21.6 million shares in a year ago quarter.
Now turning to the balance sheet.
Cash cash equivalents unrestricted cash totaled 5.7 million as of June Thirtyth 2020, and includes the proceeds of the registered direct offering of our common stock. We completed in June following the close of the quarter. We also completed or announced rights offering which was oversubscribed and resulting gross proceeds of the company of $18 million before.
Deducting fees and expenses relate to the rights offering. They 10 million does not include proceeds that may be received by the company for the future exercise of warrants included in these units.
We have taken action to strengthen our balance sheet. The current situation still challenging and we remain focused on liquidity cost containment and prudent cash management strategies.
In closing I wanted to reiterate we are confident their actions to strengthen BIOLASE prior to the krona buyers pandemic, we're working with filled nearly all of our open U.S. sales territories, which a normal economic environment would have led to year over year revenue improvement for the first half a 2020, we believe our current liquidity position and our cost containment efforts provide us with.
Sufficient liquidity and capital to effectively execute on our growth strategy in this environment.
Having said that would cobot 19, there remain too many unknowns and when we can't achieved this growth now depends on how quickly the U.S. and international markets returned to some level normalcy.
This concludes our prepared remarks, I'll turn it back over to the operator to open the call for questions. Thank you.
Thank you and ladies and gentlemen at this time of will open the floor for questions. If you would like to ask a question. Please take note by pressing star one on your telephone keypad now if you're using to speakerphone. Please make sure that your mute function is turned off to allow your signal to reach our equipment and again that is star one if he would like to ask a question.
We'll pause for just a moment to allow everyone an opportunity to signal for questions.
And our first question comes from Kyle Boller, let's call your securities.
[laughter].
Hi, Todd and John Thanks for that updates today.
First off congratulations on a very impressive Mcguire study results clearly patients prefer widely used to.
Traditional methods when when fixing gum disease and the clinical outcomes are arguably better with water lays at the very least.
Outcomes are just as good bye.
Can you talk about how you plan to leverage this data and and maybe maybe it's too early to tell but have you already seen some tailwinds from this.
Thanks, Kyle this is Todd I'll address that we're just getting the campaign off the ground here as I mentioned.
The Maguire study was published in the Journal Paradise ontology, but only in electronic version, which gets you know a certain level exposure, but when it hits print later this fall, we'll see a lot more activity around this but we're also doing is putting together a fee.
Full blown campaign here targeting a the perry of specialty with multiple.
Touch points and reach activities to make sure that the message has surround sound for that audience and we expect a that's going to provide some really nice dividends for us.
Got it and in kind of sticking on the topic of tailwind here, you talked a little bit about how water leases a nice benefit over traditional tools when it comes to.
Minimizing water usage in the aerosol effect.
And then called at 19 here has it's helped a adoption and and our practices following the new guidelines.
Yeah, I think it really depends Kyle on the marketplace. Your end. So we've got a program in place right now in Texas and the answer is absolutely yes.
I'm, where we've seen a shift from traditional aerosol producing products like a cavitron.
Unit to dilute using our diode laser bacterial reductions phase.
And we're looking to probably scale up that in other markets, where specifically high Janice have freedom to operate because they don't necessarily have freedom operate in every state.
But at least yeah, probably in two thirds of the states in the meaningful states in reference to size and a population base.
Sure sure Okay.
That's helpful and Hartland dental and it's been a big champion of water lace to the extent you can share.
Can you talk about what the installed base of lasers is within this clients in perhaps.
How you see this relationship.
All the particularly as it relates to international sales I correct me, if I'm wrong I believe they had a pretty large presence.
Yes markets.
Yeah, I'm Heartland, primarily is a domestic based I mean, I think thats, where we want to win here you as you know the first trial went extremely well with a 100% acquisition of the technology and return on investment a literally anywhere from three to seven months for a complete.
Return on the cost of the unit. So you know then cobot head and then we had a little bit of a pause as you know a lot of their offices I would assume if not most of their offices shut down. So we're rebuilding that now I'm. So the goal here is to validate that with another set of practitioners you know within.
The Heartland group. So we're really optimistic a that that'll go positively well as the first one did and a we're seeing additional traction from them as well on the hygiene diodes side. So it's not just a water lays today. It's also the diode in reference to reducing aerosolization as well.
Okay got it and maybe just one more here.
I made so following that the equity raises I think pro forma cash balance is about 21 and a half million.
Can you talk a little bit about how we should be thinking about that burn over the next couple of quarters overhead is it's come down considerably and we've seen some very nice progress here.
Do you think the cash balance should be sufficient to get you to EBITDA breakeven. Thank you.
Yes, Thank you Alan I'll answer that.
Yeah. The reason that we haven't given guidance during this period and I won't hear either it's because we just don't know what the impact of Koby 19 will have in the third and fourth quarters as the year on the dual industry and you know any.
Any set backs in terms of our fight against a pandemic you know.
Certainly the impact us as well I will tell you that we believe the cost rationalization efforts that we underwent last year and this year.
Sets us up well.
I will tell you that.
When I joined the company three years ago.
Everybody told me that we had to have revenue of about 75 million to get to EBITDA breakeven under our current cost structure that number is closer to 40 million now so that kind of thing tells you how much heavy lift and we've done on the cost side.
Having said that cash cash burn will be all dependent on on that revenue number I think you can.
Pretty much depending on the cost side being in control.
But having said that with the.
[music].
With the July a rights offering raise being oversubscribed.
In addition that the shelf registration that we took down in June I'm highly confident that unless we have just a complete shutdown evolve industry.
Because of co bid.
We're well positioned to have enough cash to I get to that EBITDA breakeven.
Toward the end of next year.
Okay got it great progress here and things probably updates.
Thank you go.
Huh.
And our next question comes from Bruce Jackson with Benchmark company.
Hi, Thank you for taking my questions first a general market question Dentist's offices are now mostly open can you comment a little bit on their level of confidence. So are they spending on new equipment or they are they looking at the dental is based on the infection control benefits and.
They don't if they don't go for the benefits is the BPP program getting them over the hump to a purchase decision.
Yes, Bruce let me start with the BPP I think it's obviously, making the transaction a lot easier because I'm not thinking about putting any cash out at this stage as their you know obviously recouping their patient base coming back in and getting revenue back online.
I would tell you that you know patient volumes you know have been.
Pretty robust and I think some of that's due to pent up demand being closed as long as they were.
Technology depends on the persona of the customer and reference to why they're buying some are looking to obviously reinvent themselves and finding other ways to compete now with other dental offices in Poland more patients as patients or look at you know better alternatives in may.
Somebody invasive care. So I think there's a segment that is buying due to that and then there's a segment I'm also to that are really a stake in the cove it to hard and want to create a very safe environment, plus better patient outcomes by using a technology and they get both a with either our.
You would or award delays system.
And we you know recently conducted two W. Emmys, one in Atlanta, and one Chicago.
That was the feedback that we received from the participating dentists at those events.
Okay. That's that's very helpful. And then with the the Mcguire study one of the interesting findings was that Theres a productivity advantage is that something that the a video so.
Customers are our I'm interested in in responding to.
Yeah. So the D.S. So is always interested in productivity, but probably more so I'm just the return on investment on procedures that they're GPS can do a without necessarily passing onto the specialist so.
The beauty of the Mcguire study is is that it showed using our technology in a minimally invasive way without using a scalpel and drawing a flat and then having that you sutures, which most GPS prefer not to do a the ability to use this technology go in to the.
He soak is sub gingerly with our laser tip and really get a very similar if not superior result from a patient reported outcomes standpoint, and that's really get the attractiveness here for the Dsos because now that's all incremental dollars that they keep in house where that they.
Can generate that normally they couldn't because they didnt have the technology slashed tools to be able to deliver that to their patients.
Okay, Great and then last question for me.
With the sales territories in the sales staffing do we have everyone back out in the field and have you sold all of the deal can territories.
Yeah. So we as I mentioned, we've got to came back online there was some folks that we [laughter] furloughed through our cost initiatives.
As well as our service techs, so everybody's back and it depends on the marketplace. Some are more receptive to seen reps and service reps. Some markets are a little more challenged you know and that and we have right now I believe one open territory or cross.
Our field selling team.
Alright, Thank you for taking my questions.
Thanks Bruce.
Thank you Bruce.
And once again.
He said he would like to ask a question I signaled by pressing star one on your telephone keypad now.
Our next question comes from Atlanta with Ascendiant capital.
Yeah. Thank you for taking my question. My question is you know in terms of have you seen any big differences in geography, I know you mentioned that you know some of those sales people are having you know a little bit more traction in certain areas is that the same as you're seeing in terms of revenues.
Yeah, I think there would be related add on reference to where there's better access a there's better opportunity in the US you know closure surprisingly Chicago right. We got a w. I mean, we had you know I would say a fairly a solid booked room with social distance.
Okay, and the same thing in Atlanta, and it was in the outskirts of Atlanta, It wasn't downtown Atlanta So.
You know those those were very positive and there wasn't a resistance from dentist coming together to learn and be educated around the technology.
Right, well, what about or you see any big differences between Europe, and the U.S. or even in Canada.
Yeah, Canada has a coming back strong now we're working with another D.S., so up there, which we started.
Well end of last year, it's the largest here so in Canada, and there's a call with them. This Friday, so they're back to about 90% levels based off of the information they provided us a two days ago. So that's really positive I'm you know rest of world I think depending on pockets, it's coming back a little slower than.
We would probably like or anybody would like but I would say you know you asked is probably leading that recovery effort, Canada would follow suit and then different pockets within the rest of world.
Great and then moving onto a you know in terms of a you know the cost cuts in your new lower cost structure low breakeven.
How much you know can you leverage data revenue grows back can you maintain your cost structure as is or will you have to wrap it back up if revenue recovers.
So Ed we believed that the current cost structure and when I talk about the cost structure in this context on talking about the infrastructure headcount. So for that we can support you know that revenue in the 40 $50 million range. So as it ramps back up for sure. The current cost structure is supportive of that obviously variable costs will go up.
The operating costs, we think we're in the right place right now.
Great well, thanks for answering my questions and I wish you guys. Good luck. Thank you.
Thanks again.
And at this time there were no further questions I'll now turn it back to the company for friends for closing remarks.
Thank you operator, and thank you everyone for your interest of BIOLASE. This concludes our call have a great day.
Ladies and gentlemen. This concludes today's teleconference. Thank you for your participation you may now disconnect your phone lines.
[noise].
[noise] [noise].
[noise].