Q1 2021 Milestone Scientific Inc Earnings Call
Greetings and welcome to the milestone scientific first quarter conference call at.
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I would now like to turn the conference over to your host David Waldman Investor Relations. Thank you you may begin.
Good morning, everyone and thank you for joining milestone Scientifics first quarter 2021 financial results conference call on the call with US today are Lynn Officer interim Chief Executive Officer, Orient Hobbyhorse President of milestone and CEO of one dental Inc, and Keisha Harcum controller the.
The company issued a press release today Monday may 17th containing first quarter 2021 financial results, which is also posted on the company's website and you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications at two one to 67 110 to zero the comps.
<unk> management will now provide prepared remarks, reviewing the financial and operating and operational results for the first quarter ended March 31, 2021 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 milestones ability to implement its business plan expected revenues and future success.
These statements involve a number of risks and uncertainties and are based on assumptions involving judgments 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. Some of the important factors that could cause actual results to differ materially from those indicated by the forward looking statements.
Our general economic conditions failure to achieve expected revenue growth changes and our operating expenses adverse patent rulings FDA or legal developments competitive pressures changes in customer and market requirements and standards and the risk factors detailed from time to time and milestone periodic filings with the securities and exchange Commission, including without limitation.
Without milestones report on form 10-K for the three months ended December 31, 2020 of milestones report on form 10-Q for the first quarter ended March 31 2021. The forward looking statements are made during this major and this call on based upon management's reasonable belief as of todays date May 17, 2021 milestone on undertakes no obligation to.
Revise or update publicly any forward looking statements for any reason with that we'll now turn the call over to Lynn Oster interim Chief Executive Officer. Please go ahead Len.
Thank you, David and thanks to everyone for joining us today the <unk>.
First quarter and subsequent period have been highly productive for the company first and I am pleased to report that our revenue for the first quarter of 2021 increased more than 61% to $2 9 million versus $1 8 million for the same period last year.
We also achieved the strong sequential increase and sales of.
And 32% versus the fourth quarter of 2020, and importantly, our dental segment remains cash flow positive on a standalone basis with continued growth opportunities clearly.
Dental business is back on track and.
In terms of our comp you flow epidural and cash check systems, we have already added new.
New hospitals.
And that have purchased all of the disposables with the prospects of increased business on the coming months.
And many more.
Net of starting trials and others that are at the latest stage of this.
The development.
The existing trials and we expect to convert to commercial orders during the first quarter of 'twenty. One we began selling comp you flow epidural and catheter <unk> disposables and two three premier medical centers, and the United States and one in Europe.
These hospitals include regional Medical center for Premier Regional healthcare system, and South Carolina for you.
University of Texas Medical branch of Galveston, and institution of the University of Texas system and agency of the state of Texas and the nationally recognized medical University of South Carolina and of leading German hospital of University hospitals.
Of wurzburg.
The purchase of orders received and these for medical centers reinforces the confidence and the outlook for both cash and check and comp your flow and the value proposition to other healthcare systems across Europe, and the United States.
As we strive to become the new standard of care, and epidural procedures and labor and delivery.
It is also a validation that our technology provides the level of safety and efficiency non currently available to medical professionals.
The clinical and safety benefits of the comp flow epidural and cash systems backed by extensive published clinical data demonstrating significant reductions and epidural procedures as well as the complication rates and contributes to the savings of time on the part of anesthesiologists.
Moreover, the comp you flow instrument has the potential for significantly reduced costs associated with morbidity and providing a direct economic benefit to health care institutions.
And the lead to cash check technology has the potential to transform the monitoring of catheter placement for.
Following and epidural procedure.
And I confirming the placement of the catheter within one to two minutes versus the 20 to 40 minutes using the presence of method.
In summary, we are aggressively accelerating on commercialization efforts in both the domestic and global markets as we pursue our goal to become the new standard of care for epidural procedures, and the labor and delivery.
The key element of our sales strategy focuses on the disposable components of our system, which we believe will contribute to high margins and recurring revenue.
In addition to hiring more salespeople and expanding our sales funnel as I mentioned earlier several advanced trials are already underway with hospitals that we believe will convert to commercial orders at this point I'd like to turn the call over to our and have a whole president of milestone science of.
And Chief Executive Officer.
One of the link to describe the sales and marketing activities around the one of the instruments and more detail. Please go ahead all of them.
Thank you for Lam.
All of our dental business is recovering nicely and continues to generate strong cash flow as a result of successful sales and marketing initiatives as well as dental offices reopening across the country and around the world.
We have begun the implementing of three year strategy to expand the worldwide global dental market.
We believe our rapid progress illustrates the positive response and growing market demand for our dental instrument.
Through our decentralized sales strategy, we accomplished our goal of building a robust distribution network covering important territories and the United States and Canada.
We are now accelerating our efforts into new global markets, while supporting our present distributors.
We believe we have the violence of highly cost effective and scalable platform to help drive on dental instrument and handpiece of sales in the coming years.
In regards to our medical business, we were saddened by the tragic loss of our vice President of sales average Gilbert.
I would like to express our condolences to his family and we continue to support his family and these difficult times.
Although the sudden passing of Eric close does the temporary setback, we are now, adding new sales territory managers with the necessary sales skills and experience that will help propel us moving forward.
We have increased our sales team to nine territory managers, covering the central and northeast and southeast area. We've also with point of the territory manager and California, assisting us to penetrate the major hospitals and this state.
We continued the execution of our digital marketing strategy and recently launched on your website presence. Furthermore, we increased the social media communication activities. All of these activities are focused on increasing our brand awareness and should result in additional lead generation.
And for our sales team.
I'd also like to take a moment on behalf of myself the.
The milestone team and the board of directors to personally thank <unk> for his immeasurable contributions to the company over the years.
He has been the visionary and guiding for us for the company since its inception.
He has helped milestone and navigate through both good and difficult market environments investing is on capital when needed.
Gasoline managing expenses and serving as the strong steward looking.
And looking after and protecting shareholder interest.
We truly appreciate everything he has done for the company building a foundation for growth and success and the years to come.
We truly look forward to is on the go and contributions to the success of the company.
At this point I'd like to turn the call over to our control of Keisha hard for them.
Go over the financials in detail. Please go ahead of the Keisha.
The origin.
Total revenue for the three months ended March 30 for 2021 was $2 9 million versus one 8 million for the same period last year.
Rental revenues increased approximately $1 million.
Medical revenue for the three months ended March 31, 2021 increased by approximately 63000 to 71000 as compared to the three months ended March 31, 2020 gross profit for the three months ended March 31, and 2021 on ones.
$1 8 million or 62% of revenue versus $1 3 million or 71% of revenue for the three months ended March 31, and 2020 the decrease in gross profit margin.
And the lower margins and sales in China off.
The rate of losses, but the three months ended March 31, 2021, with approximately $1 million versus approximately $1 6 million for three months ended March 31 2020.
Net loss is one of the approximately $1 million or point of zero one per share of three months and at March 31, 2021 versus net loss of $1 6 million or point of zero and per share for the comparable period in 2020 now I would like to turning our attention to the.
<unk> and capital resources at March 31, and 2021, the company had cash and cash equivalents of approximately $17 million and working capital of approximately $18 6 million working capital of $15 7 million on December 31, and 2000 and planning at this point.
Turn the call back over to Lance.
Okay.
Thank you Keisha and thank you all rooms of the client comments earlier.
Our strong balance sheet with approximately $17 million of the cash and cash equivalents as of March 31, 21 provides a substantial resources and the ability to accelerate our sales and marketing activities around both of our dental and medical instruments, we are very well.
London and have no plans and no need to raise additional capital.
Included in the 17 million of cash we generated over $3 million from the exercise of warrants and nearly 700000 from the exercise of options and our strong balance sheet also allows us to advance the development and commercialization of other indications for our proprietary Dps.
Dynamic pressure sensing technology.
Which we believe represents further growth opportunities for our company.
We believe the potential for this technology platform is quite robust with multiple opportunities available and launch and underserved markets, such as botox and peripheral nerve blocks.
To name just a couple.
Additionally, last week, we announced that we are promoting all ran half of holds the CEO and hired Scott Con as our new CFO since joining the company last June already and has been instrumental and implementing successful sales and marketing activities around the dental instrument.
And accelerating the commercialization of compute flow and cash drag.
As he described earlier.
Taking bold steps to further accelerate on medical sales going forward.
Already and strong leadership will be invaluable as we work towards our goal of establishing on technology as standard of care and epidural procedures during labor and delivery around the world and.
In addition to the many contributions he has already made to the milestone organization. He brings more than 30 years of senior management experience and an impressive track record leading rapid growth initiatives across a broad range of industries, including dental and medical.
We believe having such a strategic leader will support our transition from a research and development of organization to a commercially focused medical device company.
We are also excited to welcome Scott Con to the management team Scott brings more than 40 years of leadership with the proven track record and corporate and finance operations and Scott will be instrumental not only overseeing all financial infrastructure, but also helping us to increase the investor.
The awareness as we execute on key milestones.
In terms of my own involvement I'll look forward to playing an active role and the growth and success of the company going forward.
And as vice chairman as well as spearheading some of our international expansion opportunities, especially within China.
And I have a very deep long standing relationships.
So to wrap up I truly believe 2021 will be a transformative year for our medical business and an important turning point.
As we move to our goal of establishing on medical instruments and disposables as the new standard of care for epidural procedures and labor and delivery.
And committed to driving shareholder value and look forward to providing further updates as.
And developments unfold.
I'd like to thank you for joining the call today for our company at this point, we would like to open the call for questions.
Operator.
Thank you at this time, we'll be conducting a question and answer session.
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Our first question comes from Anthony Vendetti with Maxim Group. Please state your question.
Thank you.
So congrats on on the promotion and learn.
On.
Continued success and.
Thanks, Thanks for all of your contributions.
Just wanted to.
To ask some questions on the medical side.
Obviously, this could be an important year and.
The ramping up by by adding some salespeople can we talk about.
How many sales reps have you added and <unk>.
When they were added because of theirs.
There is.
Our cycle of training period, and get them up to speed before they can probably contribute right away.
Just curious as debt and debt three months or is it longer before they can hit the ground running.
And it's a very good question and thank you Anthony.
So we already started the the recruitment and earlier this year doing the first quarter.
And by the end of the first quarter, we had about for territory.
Managers or the sales team of for and then of course and.
The tragic news and you know we.
We are with the passing of Eric that was the situation that we had two two of Handel.
And then.
We we expanded on the sales organization so as of today and.
We have now with sales organization of mine individuals on the one sales director.
The territory managers.
And they all started primarily end of March beginning of April as we speak we have trained.
Three of the new reps already during the course of the April and the seconds.
On boarding.
Starting right now and how to your question is it going to take three months no because the whole goal and the objective of the on boarding is to get the people up to speed as soon as possible and that is for me. The three weeks lead time, including the on boarding and floating the the technicality.
Each of the product knowledge is.
More importantly, including and building up the sales funnel because the people that we have recruited as well.
They are experiencing.
And in light of pain management and worked in anesthesiology departments, There's actually one territory manager that was a director of the surgery Department. So and we have focused also on.
And the skill set that is required to be successful.
And in the end of the industry and the the field of expertise that we owe a debt we are working and does it answer your question.
So it sounds like.
You've been able the compressed the training period.
And the people you've hired.
Have had some experience already and the industry and and you feel that within three weeks. They can be trained and ready to go out and sell so that's that is helpful.
Can you talk about the hospitals that you are trying to access.
We've heard over the last several weeks that most of the hospitals have opened up and then.
Easier to access and they were during the pandemic, but there is still a percentage that.
Are still difficult to access can you talk about in terms of your target market your ability to access and has that been helped.
By the relationship with the GPO.
And can you talk about her.
How that's going to play in.
With your with your non person sales force 88 direct sales reps.
Yes so.
Thank you you raised a couple of questions here. So let me, let me try to answer them in the chronological order.
GPO focus of course.
The endorsement that we got last year and November by being awarded the contract with Premier.
And it has helped those and and also the hospitals that we are active and and.
A couple of them that have purchased of products from us belonged to the Premier group.
That is and the endorsement, but you're still has to on the go and followed the sales growth for us within these hospitals anyhow.
But we continue to.
And to tie that hopes for those that belong to the Premier group.
Because like I said, its lowest of thresholds and it lowers the barrier of getting the foods and the door of the hospital. So so that's the walnut specs and absolutely.
And secondly.
We are now in the process also that the hospitals that we have been in contact with prior to the pandemic and they're on.
For a number of larger of accounts that we have been in contact with and more than a year ago.
It was okay, and you'll have to wait a year until the situation is back on the control you can return and that's actually taking place as we speak so since the month, we have been going back to accounts our.
Debt was more than a year ago not to come that showed interest of initial interest.
And that have made.
Made it possible for us to revisit them again.
And then the third tier of course is.
And.
Mix of I would say regional and smaller hospitals and larger accounts.
Debt come through on a net work that come through on marketing activities and debt Cuomo and so through the salespeople that.
And we bring these accounts with them.
And so that's also the reason why we remain positive and also as we speak of the.
There is a high activity level from a demo and trial of perspective going on and.
And that also.
And Yeah allows me to say here as well that we remain positive that that's.
Turning point as we are as we have mentioned several time did that actually is taking place and.
And that we have to work hard to execute on all of the plans and all of these accounts that we are having.
Okay. No that's very helpful and just just in terms of looking at the pipeline.
Compared to last year like you said.
It was a difficult year to access hospitals.
But.
How would you quantify the pipeline today.
First is <unk>.
12 months ago is the pipeline of potential customers based on.
On the sales leads you have plus based on hospitals opening up would you say that that pipeline is two ex what it was last year, one and a half ex <unk> how should we how should we look at the potential <unk>.
Customer opportunities.
Yes, so I will refrain from mentioning of number where it is a factor of one and a half two of three my my comment on my answer to this question would be that we are and a better situation than 12 months ago in relation and in regards to the pipeline and the contract that we.
Have established with the hospitals.
And would say no the only national nationally, but definitely from and international point of view as well, where we have been able and a lot of short periods of time.
To come in from the of the number of key universities and in Europe as well so of the situation is definitely better than the.
Compared to the situation 12 months ago.
Okay and last question is on on China.
Put a little bit pressure on on the gross margin this quarter I know the sales can be.
And it somewhat.
Volatile and the sense that sometimes a day there.
They come in and of particular quarter and.
And certain quarters, they don't come in at all and they are much slower.
Or are you are you expecting gross margins to move back up or are in the second quarter or is China going to be and more of a consistent contributor on a quarter to quarter basis.
Well this is Len and we're hoping that they will be as China has a significantly opened over the last 90 days.
So even though.
On the margins.
Far less of it brings down on margin.
It does bring and money, we do we do double of our money.
On the containers, which we send to China.
So it.
It is important that they've reopened and.
And we're certainly hoping debt.
That will have on quarter by quarter contained and delivery.
Because of the way because of shipments.
We don't we cannot.
We cannot guarantee that we will come and quarter by quarter.
We are looking to a minimum.
For containers to China this year.
However, and.
As I say because of the shipments and the form of payment.
And because they're on.
Variable interest entity and the way the way we deal with that it may not come and you may not see it quarter by quarter, but I believe we will see a minimum of for for the year.
Okay, Great. That's helpful. All right I'll jump back in the queue. Thanks I appreciate it. Thank you Anthony all the best.
Thank you just sort of minor to asking the question Press star one on your telephone keypad.
Remove yourself from the queue press star two.
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Our next question comes from James The Vista. Please state your question.
Thank you.
The piggyback on the.
Gross crop, but that was kind of disturbing that has decreased from 71%.
For the 62% on a.
Yes.
You've kind of answered that.
The.
Second question I have is with.
The need to get the.
Pharmaceutical sales people in there for.
For the medical sales.
And any thought given to.
We're working with a large pharmaceutical organization to either.
The utilized some of their sales force or purchase of portion of <unk>.
Milestone and order too.
Uh huh.
Extend the air.
And the improved.
Sales of abilities worldwide.
Yes. This is this is the iron answering your question.
Yes, it has been given of soda and also.
We have to remind ourselves that we are.
And historically also.
Worked with of but I would call the hybrid model and in terms of we add our own direct sales people.
But we also worked with and other.
The other just stupid to companies in the United States that debt.
Gave us the lead and gave us access to the hospitals.
And we have not and.
Made any attempt to reach out to larger pharmaceutical host pixels and to look at debt for all of my global perspective, because we strongly believe.
On that we first have to create the baseline and the platform from where we can act and.
From and then overtime, we first have to eat to deserved it plays into the market.
And the creative basis built that baseline food without expand on that until we have a reasonable revenues and.
And then perhaps and.
And at the latest stage reach out to other companies and I Wouldnt use the pharmaceutical company.
All of the medical device company debt.
And that can be seen.
But we do get from time to time also requests and we continue having discussions with organizations that see it as the benefit.
Including from the distribution point of view.
And our concept our instruments into their sales activities, but for the time being day is no.
Formal agreements in the.
The make or even consider with any other larger entities like you mentioned.
Just to add to that.
The.
The integrity of the margins has held pretty much as it has been and rest of world other than China.
So.
But as China.
Plays a smaller and larger role and you'll see.
And we'll certainly see that effect the blended margins.
We are we have we have.
The capped or increased our on margins to rest of world.
Alright, Thank you both.
Youre welcome.
Our next question comes from Gary Carroll. Please state your question.
Hey, guys how are you.
We're doing well and we're very fortunate and thank you.
Good to hear all right and I'm glad I'm glad to hear you're.
Your.
Consideration moving forward into.
The expanding into the further distribution network, perhaps so in the interim what what do you think you guys out for a target.
Of employing direct people I think now we're at eight plus.
Our sales director do you have plans any further this year to add some more direct sales reps and the and the U S.
Yes, we have we have more plans. It's if you asked the number we are not.
Going to expand and into the sales team of 20 or 25 of 30 people and I think where we are currently.
That's the right level.
But I do foresee that we will add two to three additional positions and particular also.
You know dependent on territory to territory and Thats the plan moving forward so.
With the eight plus one and.
We will probably end up in the first phase ramp adopt two of 10 10, plus 110th of the stew type of sales organization too.
To establish the baseline that I mentioned earlier and the coal.
Okay and land.
For the connection with China do we have any issues at all with the chips regarding our instruments.
As far as getting us all.
Yeah, we would have but the company has taken the move to.
Two.
And so the inventory wood chips for the next perhaps two years. So we feel very confident that that will not be an issue for us.
Okay excellent because I know that as we close the couch the instruments are going to be going out the door fairly quickly on whether on consignment are being purchased so I know going forward if we open.
A fair number of accounts that we need enough instruments to go into the hospital, let's say need six or eight instruments. So that's the.
That's good to know that we have an adequate supply.
Yeah, we have a.
And we've taken that we've.
We've had the pressing and students.
To take care of that and any of the problem with the develop if it does develop into a problem with the amount that we just water that would be extraordinarily good news.
Yeah, Alright, well, thanks, guys and continued good luck and success of good to hear the growth and the plant sounds like it's something together and.
And we look forward to some sort of announcements on some more new accounts.
As the week, Thank you very much Gary.
Thank you and just sort of minor tests of the question at this time press Star one on your telephone keypad will pause for a moment, while we poll for questions.
Our next question comes from John Corbett. Please state your question.
Oh, Hi on high land got the talk of your balls.
Good morning.
Congratulations on the on their position on all of the best going forward.
I have a question for both of you.
And I'm going to start with one person and thank you Yvonne and for your efforts over the arrows are true.
Talk to you and many times and as.
The shareholder vote.
Many years.
<unk>.
When you first talked about China.
And as I recall, it was a while back.
You kind of centered China, the have really opened the under the possibilities on the basketball arena.
Because of their culture of there are extreme.
Some of them to go toward panels, and our share of of that bump up.
Procedures.
And all of the over time and they're all of it from a number of changes on setbacks.
But as of today, how do you view.
The dental prospects on China do you still feel as confident as you would get and the beginning or of things change and how do you look at milestones possibility of yours on China.
I think they're very strong I think the.
What has occurred is a huge investment.
And the move towards route practices and China.
It's grown from.
Actually 20 years ago zero to about an 18% market share at this point with the extraordinarily high investment.
Opening up offices with.
12 to 20.
The operatory.
The best equipment available.
Our.
Partner, there has sold to quite a number of these and.
Of those instruments are and each operatory so as.
As the economy comes back with great strength in China over the last few months, we look forward to increase and increase sales.
And given the.
The change and the amount of people that would be viewed as middle and upper middle class.
The importance of the dental care.
<unk> is certainly recognize so on and I'm very optimistic regarding China and dentistry.
Got it thanks for them at all of the bus.
Alright, and then I have a crush on for you also on the dental.
And the change and.
The strategy for milestone from one.
A big distributor, maybe shine or whoever to the.
The smaller.
The distributor of shifts were more of a local relationship with dentists.
You mentioned there were a few of our number of them signed on with the.
The sugars distributor of shift for a milestone.
My question is how many of the smaller.
Our distributors are there and North America.
And how many do you have on the harmony or you look on forward to.
Two possibly signing on with milestone as distributors.
Yeah. Thank you for your question. So currently we have since the beginning of this year, where we have the food.
Pendency prior to that on Henry Schein.
The added seven distributors and the United States.
And one in Canada, so that brings the total number of distributors and.
Canada and the two two and in the United States to eight but we continue to add distributors.
To that and.
Call it portfolio of distribution channels.
We are currently in discussions with a couple of them and as we additionally, or continue on to to have additional distributors.
And two food or expand the sales activities and.
To make it possible that we increase our footprint in terms of the number of new customer acquisitions and number of new instruments are placed in the marketplace because as we have said and all the other calls as well that's the one of the main growth drivers.
For our business moving forward now if that's going to be I do not have the tiger if it's going to be 14, and 15 or 20 I'm more looking at the quality of the distributor.
In terms of you know having their own sales team having feet on the ground, having the experience with the sales of <unk> and call. It the medium to high Tech capital equipment has the similarly familiarity with.
On the razor and the razor blade business model.
Having their own marketing activity. So the different set of criteria is that apply to the final selection of of distributors. So it is not just adding a distributor wherever we move we.
And we might feel that we need one it is and the it is of continuous selection process, but what was the imports and Florida also of course, the earlier in the year as possible.
To have the number of distributors because of that.
Net.
That is important for our for growing the business moving forward.
Okay, well thank her for her and thanks, Leila and thank you both for your kind of tenure.
Excellent stewardship for the milestone on the relentless efforts to make of success out of the company.
Appreciate it all and all of the best.
Thank you very much John and stay safe.
Yeah.
Thank you.
And there are no further questions at this time I'll now turn it back to Lennar and author for closing remarks.
Well I'd like to thank the investors for all of the support they have given the company over the years I feel very very confident that with our new staff and the RM and charge of the company that we will move forward rapidly all.
All of the best.
Stay safe.
Thank you. This concludes today's conference all parties may disconnect have a great day.