Q3 2020 Milestone Scientific Inc Earnings Call
Well that's other conference over to your host David Levin, that's really since like you may begin.
Good morning, and thank you for joining milestone Scientifics third quarter 2020 Financial result conference call on the call. Other today are line officer interim Chief Executive Officer, Orient Overhauls President of milestone and see you know one central Inc. adjusted Yeah Casino Chief Financial Officer for the company issued a press for.
At least today Tuesday November 17th containing third quarter 2020 financial results, which is also posted on the company's website. If you have any questions. After the call or would like any additional information about the company. Please contact Crescendo communications at Q1 to 671 102 zero The company management will now provide prepared remark.
Reviewing the financial and operational results for the third quarter ended September Thirtyth 2020, before we get started we would like to remind everyone that during this conference call. We may make forward looking statements regarding timing and financial impact of my ability to implement its business plan expected revenue and future success. These statements involve a number.
Risks and uncertainties are based on assumptions, the Baltic dry index with respect to future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond milestones control.
The important factors that could cause actual results to differ materially from that indicated by the forward looking statements or general economic conditions failure to achieve expected revenue growth.
Changes in our operating expenses at first patent rulings.
Development competitive pressures changes in customer and market requirements and standards and the risk factors detailed from time to time in milestone periodic filings with the Securities and Exchange Commission, including without limitation milestones report on form 10-K for the year ended December 31st 2019, and Matsons report on form 10-Q for the third quarter ended September Thirtyth 2020.
The forward looking statements made during this call are based on managements reasonable belief as of today's date of November 17th 2020 milestone undertakes no obligation to revise or publicly update any forward looking statements for any reason for that well now turn the call <unk> interim CEO. Please go ahead line.
Good morning, Thank you, David and thanks to everyone joining us for the call today I'm pleased to report that our dental sales increased more than seven fold versus the second quarter of 2020 as dental offices began to reopen across the country and around the world, our marketing initiatives and back to work.
Promotions have been well received.
And we are working hard to address the needs of both centers and that patients during the pandemic.
Although we continue to witness the negative impact.
Holden 19 pandemic.
The dental business has proven quite resilient.
Illustrating the loyalty of our current users and reinforcing the long term positive outlook for the business.
Moreover, we have enhanced our sales and marketing activities, which should boost sales of our total instruments as the market recovers, which in turn should help drive incremental high margin recurring disposable sales.
Our sales and marketing initiatives around the comp you flow epidural system are also taking hold.
With a number of hospitals reopening to outside vendors, we are advancing our sales efforts around the comp you flow epidural system.
And the new cash <unk> technology, specifically, we are expanding our business development pipeline well concentrating all reference to close our first U.S. hospital.
Most recently, we were awarded a group purchasing agreement for comp your flow epidural system and cap check with Premier a leading group purchasing organization with approximately 4100, U.S. hospitals and 200000 other providers within their network. So.
Agreement provides us enhanced access to premier's members and we believe should help accelerate our mission to become the standard of care we.
We believe this agreement is further validation of the growing awareness for the importance of our instruments and improving health outcomes and significantly lowering cost for health care institutions.
Clinical and safety benefits of the comp you flow epidural system, all backed by extensive published clinical data demonstrating significant reductions in epidural punctures and complication rates. Moreover, the comp you flow instrument has been shown to significantly reduce total cost per day.
For hospital stay credit.
Providing a direct economic benefit to the health care institutions. Similarly, the capture technology has the potential to transform the monitoring of catheter placement following an epidural procedure by.
By confirming the placement other capital within two minutes versus 20 to 40 minutes using conventional methods. This will make a significant difference to cost.
And to the top line that a patient has to suffer pain after birth we.
We are expanding our trials for major hospitals and medical schools as well as partnering with anesthesiologists to approach them purchasing departments of hospitals together.
We're very encouraged with the feedback we received from anesthesiologists. The U.S. Most recently, we published the video interview on our web site with Dr. Amen Alia Division Chief.
Other obstetric I'm gonna call logical anesthesiology at the Yale School of Medicine.
Discuss the benefits of the comp gets low epidural system and cash check, including verification of epidaurus placement during an epidural procedure and confirmation of catheter placement.
GAAP Darwinian stated and I quote.
It does improve the block it does help you make a decision. It does decrease complications it does decrease length of stay and improved patient satisfaction unquote we.
We believe for support from Dr., Alison and other anesthesiologists is further validation of our technology and advances towards our goal of comp EWP low end cap, Jack becoming the new standard of care, replacing the 18 60 technology about hypodermic syringe and the procedure.
Sure. It came for the 19 twenties Morrow.
Moreover, we are in late stage discussions at the committee levels with the number of hospitals and we'll provide further updates as soon as they unfold.
At this point I'd like to turn the call over to Orient our vertical wells.
Executive officer of one dental.
To describe the sales and marketing activities around the one day instrument in more detail. Please go ahead our income.
[noise]. Thank you Leonard.
As Linda mentioned, a one dental business has begun to recover as dental offices reopened across the country and around the world as well.
While we are not back to Prefund damage levels I'm pleased to report non sales are trending into right direction.
An important revenue driver in our business model is the recurring sales were about disposables.
However to drive further growth we are working aggressively to expand our installed unit base for this reason we have launched a series of back to went back to work promotions on both a wound instrument and disposables to incentivize, our distributors and dentists as well as support them into this.
Isn't practice growth during this difficult period.
The initial feedback has been promising and both the domestic and international fronts. As an example, I'm pleased to report we recently signed an important new agreement in Russia as a result of our assets.
It is important to note debt the wound instruments Oh for significant benefits in terms of establishing a safe environment for patients and stuff. That's for you steer on single use disposables.
In addition, when using to want a dental procedure can start in this little 60 seconds after making the injection.
For this reason unlike conventional procedures dentist does not need to move from one off growth Operatory room to another unchanged protective gear, while waiting for the under Steves, Yeah two sets in.
Accordingly, we believe there is significantly less risk of cross contamination, which has been reinforced based on the feedback we received from dentists.
Our enhanced marketing efforts around the one focused on the significant value drivers of our instruments, including safety efficiency and importantly, supporting the growth of dental practices.
That said I am pleased to report that sales for the dental business are trending into right direction. This positive trend continues and we expect sales for the dental business to be a minimum of $1.7 million in Q4.
This does not include sales to China for hundreds $50000 because we can only recognize these sales once sold through by our Chinese distributor.
Rick hospitals reopening to outside vendors, we are advancing sales efforts around to constant flow epidural system and cash checks for technology.
To support the hospitals in performing procedures doing to pandemic, we decided to make the company flow instruments more readily available to hospitals by lending the instrument to the hospital in exchange for a commitment to current shapes, a minimum number of disposables debt.
This offering is limited to the first hospitals that sign up for this program.
At the same time, we are partnering with anesthesiologists in order to approach the current chasing department. So for the hospitals together, we believe our current strategy allows us to streamline the value analysis screen approval process and thereby shortening the sales cycle.
The response, thus far has been encouraging and we are increasing new trials in major hospitals over the coming weeks.
Sales five line is more robust than ever and we look forward to finalizing agreements with several premiere hospitals in the near future.
At this point I'd like to turn the call over to our CFO, Joe since D. I could see note to go local financial details.
Detail.
Thank you for you.
Revenue for the three months ended September Thirtyth 2020 is 1.2 million versus 1.9 million for the third quarter 2019.
Dental revenue decreased by approximately $644000 due to the impact of the Cobi 19 pandemic other companies' customers suppliers vendors and other business partners.
Medical revenues for the three months ended September Thirtyth 2020, and 2019 were non though we're expecting our strategy to place the interest with Kale wells at no cost to drive awareness and adoption of the instrument.
Gross profit for the third quarter ended September Thirtyth 2020 was approximately $836000 for 67% of revenue.
Versus approximately 1.4 million or 72% of revenue for.
For the third quarter of September 2019.
Operating loss for the three months ended September Thirtyth 2020 was approximately 1.5 million versus approximately 1 million for the quarter ended September Thirtyth 2019.
The increase in loss is the result of decrease in dental revenues.
Net loss for the three months ended September Thirtyth 2020 was approximately 1.5 million for two cents per share vs.
Versus a net loss of $2.8 million or six cents per share in the prior period.
Now I'd like to turn your attention to liquidity and capital resources.
At September Thirtyth 2020, the company had cash and cash equivalents of 14.1 billion compared to cash and cash equivalents of approximately 1.5 million as of December Thirtyth 2019.
As of September Thirtyth 2022, total current assets were approximately 18.9 million and working capital was 15.4 million.
Revenue for the nine months ended September Thirtyth, 2000, 23.2 million versus 6.1 million for the nine months ended September Thirtyth 2019.
Dental revenues decreased by approximately 2.8 million, which was related to the decrease in sales of hand pieces and devices throughout the country internationally due to the COVID-19 pandemic.
Gross profit for the nine months of 2020 was 2.2 million or 16% of revenue.
First is 4.2 million were 69% of revenue for the nine months of 2019.
Operating loss for the nine months for 2020 was approximately 6.3 million versus approximately 2.9 million for the nine months of 2019.
This increase in losses due to the result of decrease in dental revenues.
Net loss for the nine months for 2000 26.3 million or 11 cents per share.
Versus a net loss of 4.7 or 11 cents per share for the comparable period in 2019.
At this point I'd like to turn the call back over to Leonard Officer Leonard.
Thank you Joseph.
We remain encouraged by the outlook for the business as the dental business is starting to bounce back. In addition, we remain confident in the market potential for the comp you flow weapon Durrell and the cash Jack which we believe will to transform the industry and ultimately become the standards of care.
Overall, we are in a strong financial position given the fact that we had over 14 million in cash on hand as of September Thirtyth 2020.
In the meantime, gross margin from the dental business held steady in the high 60% range. We continue to carefully monitor expenses and we have maintained appropriate inventory levels to ensure available song as dental offices begin to return to more normal levels given day.
The increase in dental sales, which contribute substantial margin our burn.
Hi, Matt.
[noise] has remained approximately the same for the quarter for the precedent in the present quarter, we are committed to driving shareholder value and look forward to providing further updates as developments unfold I'd like to thank you for joining the call today at this point, we'd like to open the call.
For questions.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, except for Mason Tele indicate your line is in the question you May Press Star two if he would like to remove your question for you and for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star.
He is our first question is from Anthony Vendetti with Maxim Group. Please proceed.
Thank you good morning.
Good morning, Anthony you hope you're well.
Hi, I'm. Thanks, so hopefully everyone there as well.
I just wanted to talk a little bit about the agreement did you say that was announced it was agreement in Russia. Just if you can talk a little bit about.
The magnitude of that or what the implications are and then.
Talk a little bit about premier.
And how how being on their their preferred list.
Either has started to open doors for it.
If COVID-19 is is making that a slow go at this point.
Thank you for the question Anthony.
In regards to Russia.
We have signed a renewed for year agreement with our distributor without going too much into the details. There is a significant growth of the business in the order of 20% to 25% year over year compared to the previous agreement and that's definitely.
Encouraging as is that moving forward.
The second point of your question in relation to Graham Your of course, we're very delighted that we have been awarded that agreement for.
Prior to signing or being rewarded the agreement we already were active with demos and trials and were targeting hospitals that.
The loan to defend your group and it's definitely the agreement has definitely helped us in low risk a threshold answering these hospitals and also performing the non good old demos and trials so.
We remain positive or other.
About the first the commercial so one of the hospitals belonging to the credit group.
Okay, Great and then just you know in terms of COVID-19, obviously you had a seven fold increase in dental sales sequentially. So things have picked back up.
Would you say based on what's going on in the country right now has that has that slowed or or.
Have happier customers as well as as milestone figured out a way.
To see.
Still conduct.
Meetings and still be able to consummate sales in this environment.
Yeah.
The moment Anthony.
We are in a position and the dental.
Where we will increase sales or maintain margin.
In the dental division in the us in the quarter that we're in right now we will increase sales.
Sales to China.
We have a we have started sales again as I mentioned earlier.
So we can't for that is already mentioned earlier, so until there is a we sell to our distributor and they're obligated.
To pay for it obviously, oh, we cannot focus because we own 20, approximately 28% of that distributor. So we cannot book that until they have to sell through but putting that aside.
The number where we are today has given us the opportunity.
[laughter] to let our shareholders know that this quarter the fourth quarter is significantly better than the third quarter.
How that will continue in the first quarter next year, we have no idea we believe.
But given the efforts that dentists are making both.
Both here and around the world and keeping that patient safety remaining some sales themselves is significantly enhanced this day use our products.
So.
Without having a crystal ball going forward. It would seem that we would maintain the level of the fourth quarter, which significantly which is significantly better than the.
The second or third.
However, there is no no price itself, because we don't we don't know what will happen with the pandemic, but we do offer the inventors of Ben.
Other way of doing anesthesia, then using the eighteensix the competitor.
Understood.
Yeah, and we also believe obviously and that's why we raised the free capital.
That we have a balance sheet that now helps us mitigate any risks going forward for at least the next 12 months, regardless of what happens with COVID-19, that's why we raised the capital and that's why we no longer need to raise capital or we have enough to withstand.
Whatever the virus does over the next 12 months.
Or even non.
24 months.
Which we don't obviously hope [laughter].
I think our hope would happen but.
But we also have enough in the system with the money that we raised to also move ahead with other products that are out with that we're in various stages of development. So the money that we have on hand can both give us.
The money that we need to do the marketing and sales and increased the dental business significantly, which we haven't had for the last four years or so but will also allow us to bring for other technology and also allow us to do the necessary marketing and sales both.
Both in the United States and out of the United States for both the comp you flow and the cash Jack.
Okay, No that's helpful Latin and it sounds like in terms of where you are with the products and with your balance sheet.
It's arguably the best position you've been in even in face of the pandemic correct.
Yeah, absolutely I think that were.
In the best position that we've been in many years given the patent portfolio. The team that we presently have working with us and the enormity of the success that we've had with key opinion leaders throughout the world on the present technology. So yeah I think that we are in the best position.
We've been in many years.
And then just lastly, and then I'll hop back in the queue on the hospitals that have been given the comp you flow system what has been the reception.
And it helps.
Is it too early yet or have they made commitments based on on how well, it's performing to make to make additional purchases.
Yep.
Definitely has helped the the sales proceeds on the potentials are shortening the sales cycle because the value analysis. The normally we opt to go through to hospitals for debt value analysis team assessment weights and especially for the capital equipment is.
Along with gross and so we eliminate that part and it is easier with short of gross is to go through the value analysis team for the new products, which is going to be that the disposables. So that is that's definitely a benefit and the feedback will so as.
As we said we have increased the number of demos and trials as we speak for the feedback has been very.
Very promising because the initial good or of the cost of the equipment capital equipment, it's not longer existing anymore also based on the demos ended trials, we are doing in particular.
Also based on the cash Jack.
Let's say unique selling proposition and also in a way to ease off using that cash Jack with immediately gave into confirmation of do like the positioning of the catheter.
It is very well as per day.
C N received by the clinicians once we are doing to trials and and the demonstration.
So my comment also to get to your question is that as we speak for all.
Our individual sales.
People.
Our in that field and are conducting trials and demonstrations and that is a daily activity.
For the next coming weeks as his Orient has said Anthony the.
The product is continuing to perform as it has over the last year the anesthesiologists recognize the value.
They certainly recognized the value of cash Jack because it's blatantly obvious how much time, they can save and avoid the pain of the patient and the.
The old way Oh analyzing for 20 to 40 minutes can be reduced to two minutes or less so as far as the anesthesiologists. They they recognize its very quickly and the fact that we have.
Such a broad array of clinical studies published in the major journals throughout the World Oh sure spend that they should try it but then once they try it they're convinced with themselves.
That's not the issue the issue at the moment and once delayed the sales is the pandemic is the is the budget committees in the hospitals are engaged at the moment and where we're getting around that game now.
In the way that RPM has explained by removing the capital equipment for.
For one unit as a loner to the institution when they commit to a free determined the mountains disposables over a 12 month period. So there is no issue that we've had with the anesthesiologists. It's all based on the unfortunate situation with GAAP.
But line team.
Understood understood. Thanks, I'll hop back in the queue appreciate it.
Welcome.
As a reminder, just star one on your telephone keypad. If you would like to ask a question. Our next question is from James Terwilliger with Northland Capital markets. Please proceed.
Hey line can you hear me.
Yes, James I can how are you.
I'm well thanks, Thanks for asking very quickly in a nice quarter.
Just for some housekeeping it in the prepared remarks did you say 1.7 million for the fourth quarter revenue of 2020 for revenue is that correct.
Our our projection at the moment and obviously.
We never did this in the past, but Kevin Kolb at 19, we've decided to give.
Some forward looking information.
So obviously were being extremely extraordinarily conservative a yacht.
Iran is projecting a minimum.
Oh 1.7 million, excluding the China sales, we believe that the China sales this quarter will be oh around $450000, but we can't book it as salary and.
Explained earlier until they have their or their own sell through a China has been.
Oh, I'm not calling for a long period of time. They are now through their inventory and China. Fortunately is pretty much through is as you know with the virus.
But also of course, having lived through the virus economically they're coming back very strongly so they're not where they were last year at this period.
Our GDP, but the trajectory trajectory is very very good in China. So we will be able to project, we have internal projections for China for next year as they come back into the fold, having not had any sales in the first second and third quarter in China, but yet the the information that.
Our indicate of the 1.7 is where we believe at a minimum we will end up in the fourth quarter.
No.
Thank you that's a nice number and it's a little bit higher than what I was looking for and it's a nice bounce from that.
Covert bottom there and in Q2 in terms of revenue. My next question. Then is on EPS DNA expenses, you did a very nice job sequentially controlling expenses much lower than my my my estimates how should I think I don't want to get too far into guidance and I know you don't want to get there either but how should I think of SGN expenses going forward can you share.
Maintain the level of 2.3 million that that you're at here I know you've got to expand as come that allows you to but how should I think of ex DNA expenses going forward in actual dollars well.
Where we are now would be the run of the business or our burn rate to use very round numbers.
And the third quarter was approximately 350000 net it's different timelines when certain things that but it was about 350000 burn in the third quarter given the increased sales in the fourth quarter, we anticipate that number two obviously to be about the same.
Now as we go forward next year, we will be working on on various projects that are not yet finished.
Project development projects for other instruments and other areas of medicine, but the burn.
Should remain relatively the same because at the same time, we expect increase in sales for both our medical products. The epidural the GAAP, Jack and the dental product as well so if we look at that.
The fact that.
Our CFO for many years just the items Dino.
Does what my father suggested many years ago, which is basically to squeeze the nickel until the Buffalo yells out I think that will be successful.
And then lastly with that.
I had two more then I'll jump back in queue. So remind me again of what your U.S. sales and marketing platform looks like and then with cash balance sheet and I know you you you kind of tighten the belt here what else are you looking at in R&D, because you do have a platform technology that has some very attractive.
Other clinical indication so I'll jump back in queue. After that thanks, Thanks, you get a nice quarter.
Thank you. Thank you very much James.
Okay.
Sales and marketing.
Activities and organization and when I look at the at the medical the Epidural segment that we are serving for the time being we have.
Three dedicated sales people in the field and we have one vacancy in one territory.
In the marketplace. So what we also items are doing a force prior to expand a duty to the sales organization. We first one so happy for moves show success than we first want to have the let's say the results that we all believe in debt.
We will GAAP prior to invest that money down individually or expansion of the sales organization. So that's more to sales side of the marketing and sales activities based on low question on the marketing side, we continue.
To to build on our web presence we.
We continue to it too.
To have research before and also to have a an.
They're not similar on the spending of the target groups in terms both of them done for London medical deals. The target group that we are communicating with and communicating too I think that would be my answer to your question about the market's immune cells now on the research and development pipeline.
Pipeline.
We are always looking to using the technologies in other indications and other areas.
And we as we have said earlier as well in the last few other previous years, we are looking into a cosmetic injector for both EPS injections, we do not have finalized or identify the details of that project, but that's definitely an area, where we will bundle.
Our forces and for these assets into India.
In the way moving forward priorities.
Priorities really for.
For us based on our technology and our current portfolio is it's further really accelerates if I can use that terminology on the epidural business growing food and the dental business or at least as a minimum bringing that back to the levels prior to depend on a day.
And then on the day derived activities to use our technology into future applications.
Hi, nice quarter guys. Thanks, good job with with your operations underneath the covert cloud and thanks for taking my questions. Thank you.
Thank you very much.
As a reminder to star one on your telephone keypad. If you would like to ask a question will just pause for a brief moment to see if there's any final questions.
Yes.
Okay. There don't appear to be any more questions. At this time I would like to turn the conference back over to management for closing remarks.
I'd like to thank you very much for joining the call today.
I know everyone is certainly eager for us to close off for as possible and hospitals in the United States.
Sure you that we're working every day tenaciously to make that happen and as soon as we do certainly like for you know Walt.
All the best stay safe. Thank you very much for your support.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.