Q3 2021 Misonix Inc Earnings Call
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Good day and walks of my Sonics third quarter of fiscal year 'twenty 'twenty. One earnings call. Today's conference is being recorded at this time I would like to turn the conference over to the perfect Pasha Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone.
Thank you for joining the mechanics of 2021 third quarter conference call.
We'll get started in just a minute with management's comments, but before doing so let me make take a minute to read the safe Harbor language.
Today's call and webcast taking place on May six 2021 contain forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995 and can be identified by words, such as anticipate believe estimate expect future likely may should.
Good will and other similar references to future periods. The examples of forward looking statements include statements regarding guidance.
Relating to our financial results.
Forward looking statements are neither historical facts, nor assurance of future performance.
And because forward looking statements relate to the future they are subject to inherent uncertainties risks to the changes in circumstances.
Therefore, you should not rely on any of these forward looking statements and the company undertakes no obligation to publicly update any forward looking statements that may be made from time to time. When there was the result of new information future developments or otherwise today's call and webcast will include non-GAAP financial measures.
Within the meaning of the SEC regulation G.
When required a reconciliation of the ball non-GAAP financial measures to the most directly comparable financial measures in accordance with GAAP can be found in today's press release as well as on the company's website.
With that I'd now like to turn the call over to Mr. Stavros <unk> CEO of my Sonics. Please go ahead Scott.
Thank you the boats and good afternoon, everyone. Thank you for joining us from the call today to review our full scope for into 'twenty, one third quarter results.
Joining me on the call is Joe Dwyer, Chief Financial Officer.
The result for the fiscal third quarter of 2021 return us to overall growth from thing that we're very pleased with and which reflects both the strong value proposition of of our products and solutions as well of the enormous talent, we have across the entire organization.
It is all for further proof that the overall operating backdrop is improving and we're in the early stages of returning to a more normalized environment.
Growing our top line by approximately three per fleet on a year over year basis, as well as sequentially compared to fiscal Q2 is something we're very proud of as market conditions remain largely the challenge during the quarter, while January and part of February of experience from the disruptions many of our markets began.
To show more funds of the improvement in March.
And I'm pleased to report that the strength of continued for March into April.
I'm, particularly pleased with the 14% growth across surgical including 15% growth domestically and 12% internationally. While this is a little below our read from run rate of domestic growth. It is important to keep in mind that we had a difficult comp this quarter as it was the third quarter fiscal 'twenty 'twenty.
That we launched mix of and had 41% growth domestically in surgical we have seen continued growth in this room in the segment, reflecting very strong mix of adoption rates as well as continued strong appeal of both bone scalpel and some of the store, which domestic the group 25 per cent and 21 per.
In respect of that is compelling growth for both.
With regard to mix with the platform of helping drive domestic revenue growth. Despite the headwinds brought on by the pandemic and as being critical of and our ability to secure from the significant wins in both the spot and your arenas.
Confident the room achieve our prior stated goal of placing over 180 units and for Sculpsure into 'twenty. One in fact, we are increasing our garden bar of the 10% to 200 units in the market by the end of the fiscal 2021 or by June 30th.
The success of mix of bodes well for continued hand piece of disposable sales, creating a flywheel effect the generate significant ongoing or recurring revenue from the sale of hand piece of the disposables bites of that business more stable and predictable and in turn more valuable.
We also saw trends improving across our wind business with total revenue down about 9%. This compares favorably to the over the 16% decline in the room during our prior quarter, reflecting our belief that these closure of an unprecedented constraints of wound care centers. The drove patients do alternate sites of care.
The including physicians offices with temporary.
Net patients will ultimately return back to the wound care for them because as that is where they can enjoy a much more diversified set of expertise to manage complex chronic wounds. We expect the wound business to continue to improve and return to growth in the coming months as the athene levels continue to ramp up of improving access to the.
The two facilities and physicians.
Our long term wound strategy remains firmly aligned with leveraging our best in class of ultrasonic technology to expand our footprint across hospitals and wound care centers I want to highlight that while overall wound revenue was down 9% wound debridement revenue led by Sonic one increased 26% during the.
Third quarter of the Sculpsure into 'twenty, one as compared to the third quarter of for Sculpsure in between.
Our views of the value proposition of our ultrasonic technology and wound care solutions do not go unrecognized by health care practitioners and that once patients are able to return to hospitals and wound care centers that we would see growth across our entire wound care segment in the coming months.
Just recently, we announced the new range of complementary products to address the author of plastics market inhibition drags of to wound debridement and regenerative product portfolio, including the sequel external fixation system, we're not of any significantly increase the average revenue per procedure, but all for further enhance physician.
The ability to ensure a positive patient outcomes.
The first few cases of being competed with fixed assets and we will continue a limited market release in Q4.
In summary, our wind business has improved improving providing us with.
Added confidence that this business will return to growth and do so profitably.
Regarding securing additional payer coverage, we now have coverage from two of the big for pilots and we continue to work diligently on that front and hope to be in a position to announce additional coverage over the coming months when we compete for Austin team.
And touching on our international business results kind of even better than expected with 13% growth over the prior year and showing significant quarterly sequential improvement the spa.
Lots of continued headwinds many international markets are experiencing <unk>.
Including Latin America, and Europe other markets, such as Canada, Australia, New Zealand, Portugal, and parts of the Middle East have shown marked improvements recently and we expect these improvements are spread across more and more markets of the progressive inhibition. We have commenced the limited rollout of mixes of.
From International markets, and we are very piece of it the reception you've gotten in the.
These positive trends to continue and expand the nexus rollout outside the U S. Regarding our sales force with hard fought of additional sales resources to further expand our reach and coverage and we continue to provide ample training and resources for the sales force to ensure that there are in the best position to communicate with health.
The practitioners and become valued partners and providing the highest quality of care possible to patients.
As we have done in the past with the launch of mixes of when bringing you wound care products to market final distribution agreements or more recently with the ortho plastics solutions. We are keenly focused on making sure. Our sales teams continue to have the highest level of understanding of knowledge of our products and solutions and we take a very strategic.
And thought out approach to how we leverage and utilize our sales resources to ensure that it is indeed the case.
In the head.
Trends continue to improve across both surgical and the mood and both domestically as well as internationally and barring any setbacks both of them by COVID-19, and expect our results to reflect that improvement in the coming quarters in summary, our results off of further proof that our strategy is working and that we have a bright future.
An important opportunities ahead as we move into the second half of calendar 2021 and beyond and the health care community for me recovered from the impact of COVID-19.
With that I'd like to now turn the call over to my CFO, Joe Dwyer Joe.
Thanks, Tom for Us and good afternoon, everyone.
Starting with the topline performance third quarter revenue increased by two 5% to $18 $3 million to $5 million.
Compared with $17 9 million in the third quarter of 2020.
This is the first quarter, we had posted a year over year quarterly increase since before the start of COVID-19 over a year ago.
Were pleased to return to growth.
And to be in a good position to leverage the important opportunities in front of us.
We're also pleased with our ability to generate top line improvement, while maintaining healthy margins with the gross margin percentage for the third quarter improving to 76%.
The 73% in the third quarter of last year.
Moving down to operating expenses the various expense reduction initiatives, we have implemented implemented over the last year have resulted in significant savings. The team has worked extremely hard to find additional opportunities to generate.
Yeah.
For tenet is to operate more efficiently and effectively across all aspects of the business.
Total operating expenses decreased by $2 $1 million during the third quarter of 2021 to $15 8 million or 11, 6% reduction.
There was the third quarter of last year.
We have returned to growth mode. We are now investing more heavily in our sales resources.
So while we expect to increase our investments of cross sales and marketing.
We're keenly focused on balancing that investing with revenue growth at a rate of 20 plus percent going for it.
The third quarter, we reported the net loss of $3 $8 million for 'twenty two.
Per share an improvement compared with the net loss of $5 6 million or 34 cents per share in the prior year period.
EBITDA for the third quarter was the loss of $1 $8 million also an improvement compared with a loss of $4 3 million in the prior year period.
While the adjusted EBITDA for the third quarter was the loss of 1.0 million marked improvement compared with the loss of $3 8 million in the third quarter of last year.
We have accomplished our goal of narrowing our adjusted EBITDA loss to a manageable level when taking into account our available cash.
While continuing to invest in our sales team to expand revenue growth.
Moving on to cash flow and the balance sheet, we had $39 million in cash at March 31, compared with $32 8 million at December 31, 2020.
For the third quarter cash used in operations was the only $1 $7 million.
Compared with cash used in our second quarter of one $4 million.
By comparison cash used in operations for the third quarter of last year was $7 9 million.
As you can see we've delivered on our goal of continuing to reduce the cash burn.
Preserving cash.
We feel very comfortable with our liquidity position and our ability to support the invest in our business.
The component of our use of cash is for consignments of Nexus and the legacy generators to U S customers for.
For the third quarter and year to date, our use of cash for the consignments was one.
$1 $5 million and $3 $5 million respectively.
Which is a sign of progress, we're making with our Nexus rollout.
As it relates to guidance, we're expecting our fiscal 'twenty, one revenue to be in the 72 8 million to $73 3 million dollar range.
This assumes that we do not have of new new headwinds with the COVID-19 1919 impact of procedures in hospitals the wound care centers.
We expect to provide full year of Fiske.
'twenty two guidance when we reported fourth quarter results in August.
Yeah.
In closing, we enter our fourth quarter of fiscal 2021, where the healthy balance sheet with $31 million in cash and increasingly efficient operating structure kind of returned to growth.
Providing us with the confidence.
We're well positioned to both invest and leverage the long term prospects of our business and to create.
The shareholder value.
With that I'd like to turn the call over to the operator for questions.
Operator.
Thank you if you would like to ask the question at this time, please signal of by pressing star one on your telephone keypad Chinese insurance to meet some of you kind of from is switched off to know your signals from each of them.
Again, Please press star one to ask the question.
I mean, you can now take our first question from Alex Nowak of Craig Hallum Capital Group. Please go ahead.
Great. Good afternoon, everyone. Thanks for the update on the Nexus placements I was just hoping you could go through the mix of where you're getting the most the most.
As of the usage for nexis, whether it's spine wound versus narrow and then they can explain or are these new to my size of customers or some of these drop in replacements are you seeing them on a high volume complex cases or more on the routine side and the.
Then also just on the pulp for that you're seeing is it is the higher the legacy box in terms of pull through of a couple of questions. There. Thanks.
Yeah. Thank you Alex. Thank you very much for your question I think we're seeing a couple of things with mix of as markets open up and we have more access to the ore we can certainly leverage mix into more speciality. So you know in euro as you know has been a big focus for us.
Most of the about neuro wins have been when the competitive accounts. So when you look of the 29% growth that we put out of them sort of in store for us that's pretty significant and that's more competitive business that we're taking on the bone scalpel fond of it really is the combination of upgrading legacy customers and also of converting.
The jump from traditional tools to mix of but you know while we look at the metrics I think it's still too early to quantify how much upside we get when we place the mix within the comp.
Started looking at the early metrics of Muslims, the very encouraging but I think we haven't been in the state where we have no disruption and you know of free entry into the or sort of seeing that the OSM restrictions in terms of getting people into the or and I think it'll probably be another two or three quarters. So we can really quantify what the upside is.
As we leverage the entire portfolio, but we've seen good uptake really on all three speciality is on the wound fraud on the neuro side as one of the bone cutting side.
Alright, that's great I know you had a variety of new products that were waiting to go into the clinic really across the entire portfolio, but you're waiting for the rep access to improve so do you think you're there maybe in March or April or May where rep. Access is at the point, where you can start to put those new product from the bag.
Absolutely I think what we saw Alex if we look at the last two weeks of March we launched off of plastics and the limit of.
The rollout of couple of accounts, we did the same with my credit risk. We identify the first mine accounts are actually in April we were able to move surgeons around to get from training for <unk>.
Very early days a strategy with all of our theory on product and the how the product is literally going to market next week. So we've got a whole backlog of products to launch out there of the Genesis similar situation. We started doing a couple of more cases in April as well, but we're certainly seeing that access is improving on a nationwide.
Based on some of those exits improves I think bodes well for a bit of conditions to liquid launching the new product.
Okay understood and then just last question there.
Going on the wound side I know, there's a ruling out by F. D. A I think it's gathering more steam recently of requiring amniotic wound products to the complete a randomized control trial by I think the deadlines may 31st otherwise there is the potential thinking of pull from the market. So just curious does that open up any sort of competitive win for the scanner.
The third of Genesis price and then the same question I guess, just what does that mean for the theory of product that you mentioned.
Yeah, I think if we look at the new proposed.
<unk> I think will really affect the parts of the amniotic market I think you know the sheets.
Manufacturers of managed to change the claims over the last couple of months of years. So I think it really the biggest impact is going to be more on the Microsoft products. So we're not.
It is really a big change to our business I think.
It makes them a very small portion of the bond market. We don't think that this will be not disrupt the amniotic market around the launch in any way.
The whether there is of significant opportunity for products like the risky and time will tell I don't think that they're asking as well positioned as we you know.
Increase the number of of insurance companies that reimburse the product I think that that's a bigger opportunity quite frankly than the change in regulation, but I think for us. It's a net positive because if we look at the mix of our business right. Now you know theaters can make up the vast majority of all of the two.
<unk> sales in the third of Genesis wouldn't be impacted by the students.
We looked at the end of the impact to our business already looks to be miniscule.
Okay, that's great and I appreciate the update thank you.
Yeah.
Thank you Alex.
As a reminder, if you do wish to ask the question at this time, please signal by pressing star one.
We can now take our next question from Brian Zimmerman of the P. T. I T. Please go ahead.
Good afternoon, thanks for taking the questions.
Maybe the start Syros, if you could talk about your confidence level in terms of getting the tissue business working again over the next few months I mean is this a common is this the dynamic where.
The patients in fact patients back into wound clinics out of the office.
Yes, I'd love to understand kind of your confidence all of the that can happen because we have had it's been challenged for a couple of quarters now.
Absolutely I think Ron we've been very encouraged by the trends that we'd be the team I would say that wound care centers of a month back to you know of.
Food capacity I think that's a little away from that but I think what we are seeing certainly with the more complex wounds that more people are showing up at the wound care centers and with it you know historically of being a strong call point for months now we've seen the significant uptick in revenue. So if we look at out of there.
The skin revenue I think we really probably hit the low in January and from then the.
The rods in terms of income has been pretty significant so.
I think they slow down to be a portion of the market that it's going to be serviced in the physician's office. There's no doubt about that COVID-19 has made certain shifts to the market and how people receive treatment for the.
Ultimately, we still think of the wound care centers is going to provide us the big opportunity and we're well positioned to win in that space, but I think we both look for the adjusting strategies. So that we can be more competitive and of the 15th of Kid because they're the theres no doubt that the physician office is not going away, but it does require.
For the company's deposits and I mean, the value proposition of accordingly.
Okay I appreciate that and then Joe for you I really appreciate that metric you gave around.
The cash for consignment on Nexus system, the $1 5 million in this quarter in the three five year to date and so maybe maybe if well for both of you really.
Is it your belief that if if you are able to say flex up that cash the.
Demand is there to place more systems I.
I guess, what what was the deciding factor in the place to say $1 5 million this quarter versus 2 million or $2 five and is the demand. There if you were able to.
The move that kind of spend that kind of cash to consign systems. Thank you.
Yes.
Sure.
If we look at the.
Yeah, I'm I'm I'm happy to take the Brian I think if we look at the overall demand for mixed with the it really is robust I think what we wanted to do is not on the.
Confined units into the market, but trying to get the utilization across the platform. So I think right now it's not necessarily about pricing.
As many units as we can in the market, but we want to do is drive deeper penetration within the accounts. We've also temporarily last year, we suspended the the growth of the sales force. That's the only really been over the last two quarters of which started hiring of game.
We've been very very cognizant of the fact of we don't want to run into supply issues supply chain issues. So we want to control of the growth, but I think short answer to your question is we see robust demand I think we can put the foot on the accelerator, but what we wanted to be able to do is to service the entire market with us going into markets like neuro.
Of that we traditionally haven't contested the business and we've seen that it does take a lot more selling time to not on the.
Convert those accounts, but the good people really comfortable with using the product when you're rips of pasta evaluation stage. So I think what makes us we're still learning, but the encouraging thing is that the pipeline is robust and overcome the dcs the accelerating more so I still see a little bit of hesitancy there.
There's a lot of demand from overseas that we need to take care of and you know with kind of the travel restrictions have been difficult to service those customers as well, but we've also seen that your corn.
The hold back on the launch internationally too long because people are aware that the products out there and they want the support as well for more.
More resources could you go for stuff I, absolutely think he could.
And that will probably happen in the coming quarters, but we are very very encouraged by the robot.
The pipeline that we see.
At the back of House.
Got it Okay, and then if I could just squeeze one more in.
And I'll take a shot at this I don't know if Ive got an answer on it but as you think about the installed base of Nexus systems that you have.
You're honing in on 200 this year.
Ken is it fair to think that we can.
The target of similar incremental amount of systems for next year or is that something that youre going to kind of wait and see on and you know as you as you get to the 200.
But I'm thinking of without getting ahead of ourselves.
We raised the guidance to the 200 level as I said the pipeline looks really robust so barring any major slowdown.
If we look at the market and the totality of we'd look to grow off that base I think that you know for the foreseeable future we can continuing to.
The increase that installed base I don't know what it is I'm unable to guide to what the number is going to be for next year, but internally.
We'd be sitting in the gearing up to exceed that number in the new yeah.
I appreciate the I appreciate the time thank you.
Sure. Thank you Ron.
This concludes the question answer session I would now like to hand, the call over to management for closing remarks.
Thank you operator.
The confusion, we see the entire my some of its value proposition rhythm 19, with debridement bone cutting tissue in hardware and picking up momentum in the second half of 2021 and validating our strategy. We look forward with optimism for what the future of holds before closing I'm extremely proud of the muscle index team and what we've come to.
While much of the World has changed in the past year. So much of what makes my Sonics exceptional has remained the same we leverage on our cutting edge technology and research our talented team to be been a best in class of products and solutions that improve the standard of care.
Thank you everyone for spending time with us today and for your interest and ongoing support we look forward to updating you on our fiscal 2021 full year results in August Thank you.
This concludes today's call. Thank you for your participation you may now disconnect.
Okay.
Yeah.
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