Q2 2021 Natus Medical Inc Earnings Call
As Vice President and Chief Financial Officer.
Jonathan will begin today with a business overview of the second quarter 2021, then drew will discuss the second quarter financial performance. Finally drew will return the call to Jonathan for closing remarks.
Today's call will include forward looking statements within the meaning of the private Security Litigation Reform Act. These statements include management's beliefs and expectations about our future results actual results may differ materially from these forward looking statements a description of the relevant risk and uncertainties pertaining to our business. Please.
Yesterday's press release, and our periodic and annual reports filed with the SEC.
Management's presentation of the financial results will be on a GAAP and non-GAAP basis the non-GAAP.
Result, exclude image araceous expenses restructuring and certain other charges and their related tax effects management believes that the presentation of these non-GAAP measures along with GAAP financial statements prove provide more thorough and as to our ongoing financial performance.
You can find a reconciliation of our financial results on a GAAP versus non-GAAP basis in yesterday's earnings release.
I would now like to turn the conference over to Jonathan Kennedy, President and Chief Executive Officer of Natus Medical Mr. Kennedy.
Thank you Michelle and good morning, everyone.
During our call today.
We will discuss our second quarter 2021 financial results as well as our current business trends.
Yesterday, we reported the results for the second quarter of 'twenty 1.
Revenue for the quarter achieved the high end of our guidance $116 million non-GAAP earnings per share was 29 cents.
We are pleased with the recovery in our overall revenues and earnings compared to the second quarter of last year, which was the most challenging quarter for Natus and 2020.
Total revenues increased by 37% led by neuro, which increased 62 per cent.
And hearing and balance which increased by 34 per cent compared to the second quarter of last year.
We are optimistic and the pace of the revenue recovery in 'twenty, 1 compared to 2020.
And we continue to focus on average to increase margins and execute strategic investments in new products that will drive long term revenue growth and profitability.
In a few minutes drew will discuss more financial details, but first I'd like to provide some additional commentary on the quarter and each of our end markets.
And neuro Natus as the global leader in neuro diagnostic equipment solutions, our products and services are used by the majority of hospitals and neurologist worldwide.
We have the most comprehensive line of neuro diagnostic equipment offered by any global manufacturer today offering a full line of EG <unk>.
<unk> and PSG sleep solutions.
Overall, our neuro business recovered and grew by 62% year over year during the second quarter led by neuro diagnostic hardware and supplies, which increased 76 per cent and that was offset by about a 5% decline in neurosurgery and other products in the neuro category.
Overall, our neuro hardware business recovered and grew over 85 per cent.
While sales of neuro supplies increased from the prior year by approximately 59%.
For hearing and balance.
Our hearing a balanced products include <unk>.
Devices and supplies used by Audiologist hospitals, and E&ps to diagnose hearing disorders assist in the fitting and tuning appear needs and for the diagnosis of balance disorders.
Revenue from the hearing a balanced return to pre pandemic levels during the quarter and recovered and grew 34% versus the second quarter of 2020.
Natus market, leading newborn care product family is used by hospitals worldwide.
Is your product categories. In this family include a newborn hearing screening solutions neonatal eye imaging and brain injury monitoring video streaming services and phototherapy solutions.
Overall newborn care revenue declined by 3% versus the second quarter of 2020.
Revenue growth from our sales of our <unk> imaging systems and growth in our newborn hearing screening was offset by declines in video streaming and other newborn products and.
And recall that our newborn care business remains somewhat steady throughout 2020 and was the least impacted by the pandemic.
In summary, we're very pleased with the recovery and growth during the quarter.
Main focus on our strategy of investing to refresh our market, leading products and deliver new innovations, which we believe will drive growth.
And future financial performance we.
We experienced another quarter of very healthy cash flow from operations and we ended the quarter with no debt.
Now I'll turn the call over to drew Davies, our executive Vice President and Chief Financial Officer for a deeper dive into our financial results.
Thank you Jonathan.
As Jonathan stated, we reported second quarter 2021 revenue of $116 million.
36, 8% increase from the second quarter of 2020 as our business is recovering from the impact of COVID-19.
<unk> and hearing and balance drove the increase for the second quarter compared to last year growing 62% and.
From 34% respectively.
Newborn care, which was not materially impacted by the pandemic declined 2% compared to the second quarter last year looking.
Looking back to the second quarter of 2019 total revenue declined by 3% after adjusting for divestitures and discontinued products.
Revenue from our neuro end market was $70.5 million for 61% of total revenue during the second quarter of 2021 compared to $43.5 million for 51 percentage of total revenue during the same quarter last year.
Revenue from the neuro business increased 62% compared to the same quarter last year. The increase was mainly driven by the recovery of procedures in neuro capital purchases throughout our markets.
Revenue from our newborn care end market.
Decreased 2% to $26.3 million or 23 percentage of total revenue during the second quarter of 2021 compared to $26.9 million for 32% of total revenue during the same quarter last year.
The decrease was primarily attributable to the release of $2.5 million of the backlog in the second quarter of last year that did not repeat this year.
Revenue from our hearing and balance end market was $19.2 million for 17% of total revenue during the second quarter of 2021 compared to $14.3 million or 17% of total revenue during the same quarter last year.
Hearing imbalanced revenue recovered during the quarter, but remains below 2019 levels.
Further recovery as needed in our international markets.
Revenue from devices and systems contributed 74% of total revenue in the second quarter of 2021 compared to 72% in the 2020 period revenue from supplies and services was 26% of total revenue in the second quarter of 2021 compared to 28% in the 2020 per.
Period.
Revenue.
From domestic sales was approximately 61% of total revenue and 39% from international in the second quarter of 2021 compared to <unk> 60, and 40% for the same period last year.
On a non-GAAP basis, our gross margin increased by 8.6% in the second quarter of 2021% to 61% compared to 51, 5% in the second quarter of 2020.
The increase in gross margin is mainly attributable to improved operating leverage on the increase in revenues lower material costs and lower freight costs as compared to second quarter of 2020.
GAAP gross margin increased 9.4.
4% to 57, 3% in the second quarter of 2021 compared to 47, 8% in the same period last year. The increase in GAAP gross margin was also due to better operating leverage lower materials and freight costs.
Compared to the same quarter in 2019, non-GAAP gross margin increased 100 basis points to 59, 1% the improvement was mainly due to reductions.
In operations overhead costs, offset by higher material costs and higher freight costs as compared to the same quarter of 2019.
Second quarter non-GAAP operating expense increase.
<unk> increased by $7.8 million compared to the same quarter last year. The increase in operating expense versus second quarter last year was driven primarily by increases in employee expenses for the sales and marketing team and travel.
<unk> all Natus employees were asked to take 2 weeks of vacation in the second quarter of 2020 and that did not repeat this year.
Our non-GAAP operating margin increased by 17, 2% compared to the same quarter last year on higher revenues and gross margin and offset by increased operating expenses.
Other expense was $100000 in the second quarter, driven by a loss on equity investments Inc.
<unk> expense was $600000 during the quarter, we expect interest expense for the third quarter of 2021 to be approximately $400000 and for for the full year of 2021 to be approximately $1.7 million.
Our second quarter non-GAAP effective tax rate for <unk>.
3.8%.
Anticipate overall 2021, non-GAAP tax rate to be between 21% and 25%.
On a GAAP basis, our second quarter 2021, net income was $3.5 million for 10 cents per diluted share.
Per to net compared to a net loss of $8.9 million for the same quarter last year non-GAAP net income increased $14.3 million to $9.9 million compared to the same quarter last year non-GAAP earnings per diluted share was 29.
In the second quarter, we recorded $7.2 million of depreciation and amortization expense.
Share based compensation was $2.5 million during the second quarter.
Now, let's look at some of the highlights from the balance sheet and the statement of cash flow during the second quarter, we repaid the remaining balance on our outstanding debt of $37 million and we ended the quarter was $62.5 million in cash.
Cash flow provided by operations was $19.4 million during the quarter. Our day sales outstanding increased 2 days versus the same period in the prior year to 75 days non-GAAP diluted shares outstanding increased to $33.9 million shares compared to $33.8 million shares in the <unk>.
Same period last year.
Now turning to guidance during the second quarter of 2021.
Began to see or began to experience supply chain delays and constraints our guidance for the remainder of the year reflects similar impacts for the third quarter.
But also does not factor in any possible further delays or constraints with this in mind we.
We expect our revenues for the third quarter of 2021 to be between $113 million and $117 million for the full year of 2021, we expect revenues between $468 million and $475 million.
GAAP net income is expected to be in the range of $3.3 million to $5.7 million for the third quarter of 2021.
Or 10 to 16 per diluted share.
Non-GAAP net income is expected to be in the range of $8.8 million to $11 million or 26% to 32 per diluted share.
We expect GAAP and non-GAAP earnings per share for the full year to be between 55 and 67.
And between $1.13, and $1.25, respectively.
With that we will now open it up for questions.
Thank you if you have a question at this time. Please press Star then 1 on your Touchtone telephone. Thank for your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Jayson Bedford with Raymond James Your line is open. Please go ahead.
Thanks, and good morning, guys I guess a handful here.
On the quarter.
<unk> look very much like <unk> at least from the topline typically there is a bit of seasonality lift here in <unk>.
I'm just wondering if you could speak to that.
And is it just partly a function of 1 or 2 being being strong and coming in a little hot.
For.
You mentioned some supply chain delays mid quarter did that have an impact on revenue.
Yeah. So we had we had a little bit of tightness.
Hi, Nick our backlog did build a little bit this quarter on the tightness on the supply chain.
But we think that Q1.
Was was a little better than usual from some snapback from from Covid. We had had some orders that were probably pent up in prior quarters and then they came through in Q1, and we did a little bit better than we expected there.
But we did we did build.
Backlog, we have backlog of about $23 million that that grew $3 million. This quarter I think if you look back in prior quarters before Covid, we were running in kind of the $15 million to $20 million backlog level. So we've got a little bit higher backlog than we typically have.
Okay.
That's helpful.
Sure.
Can you talk about some of the the the strength.
The strength in neuro EMG I believe with strong year over year last quarter did you continue to see that strength from the new product launch.
We did this Jonathan.
Good.
We did it continues to do well EEG as well does well the whole device category as I mentioned.
Was up significantly in the quarter.
But supplies, where we're not too bad either.
Okay.
Where do we stand with with rent Cam and other were some supply issues on the 1 side can you just get.
It is up to speed as to where that launch stands today.
Yeah, Yeah, we've we're still working on it we've got 2 different lenders. The the premium lenses 130 degree lens and that's the 1 where we've had some manufacturing issues, we expect that to get them finished up this quarter.
In Q3, so that so that we can we can begin shipping that lands again, we did have a few sales of the 1.
100 degree lens in in the quarter and and so we had we did have some rent cam sales, but we didn't ship as many as we would expect.
And we look forward to that in Q3 for that that to get back to normal.
So can we say that if the full launch per for the new rep cameras as in 3 Q here.
Well, we launched it in.
At the beginning of the year and we sold a few units and then and then we slowed down and basically put the 130 degree lands on ship hold.
That that that delayed the launch.
And then subsequently that the first the first part in January was for the European market for the CE Mark countries and then we've subsequently you got in the 5.10-K approval and in Q3, we'll be able to ship in both geographies.
Okay.
Can you talk about the algo 7.
Launching in Europe, just the reception you're seeing there and then timing on a new newborn screen or here in the U S.
Sure. It's Jonathan So the August <unk> continues to be well received outside the U S. We expect to release that in the U S. <unk> before the end of the year.
There will be an odd new handheld device that will offer in the U S.
As far as.
You know the new.
The algo.
<unk> platform. This is something that is a 2023 type launch products is not something that's in the very near term, but the August 7 does continue to.
Did have quite a big of demand outside the U S.
Okay.
And then you had to release the other day and there might be mispronouncing that.
<unk>.
Electrodes.
What's the business case is there a higher ASP do you think you'll get more utilization of quantum.
Yeah, there is a higher ASP.
For a more acute situation that the exact roads are electrodes that actually go up under on the brain of under the under the skull and onto the brain.
Several thousand dollars for us out of the <unk> that would be used in.
On a per case basis, so from a business perspective at a very high ASP on a per patient basis from.
From a technology perspective, you just get a much more.
Much better fidelity on exactly where the issues are in the brain.
Or.
It's something we're working on for a while it's 1 of the more innovative supplies that we've come out with and we're excited it's a newer technology. So we would expect the ramp of it to be kind of in line with with what new brain surgery and brain monitoring techniques would be so I'd call. It slow to medium, but it is a very nice product, our clinicians and doctors.
So far have have had good experience with it and we expect it to be something that just continues to grow and add to the profitability of the neuro supplies line.
Okay.
And then.
Getting back to the earlier comment for just on the supply chain delays a little unclear.
Impacting margins or are your sales impacted by these sales.
Supply chain for life.
Well I think it's it's part of the reason the backlog is built so it's it's you know it's.
Impacted sales to a certain extent.
Margins are still impacted by.
Supply chain.
In the form of trade expenses, I'm, having to pay expedite charges.
I'm, having to maybe pay a premium to get to get things done and get things ship. So there is some impact there. So we look for that to be hopefully in future quarters. When these things get cleared up to be.
Somewhat of a tailwind to our gross margin.
Okay.
Just just on the cost side.
Looked like there was a lot better leverage in <unk> versus <unk>, you added what they call it a $1 billion in sales and.
Opex was down on a non-GAAP basis by about $4 million is the business do you feel kind of right sized at this cost level here in <unk>.
It kind of grows with sales going forward.
Yeah, it's getting there.
To pick up.
On the operating overhead.
In cost of goods sold.
With the task for a facility closure.
So that helped us that's getting a little bit better so that gave us a little bit more leverage.
And you know our spending.
Our spending will.
It has been coming down with MTR, and we expect that to.
To continue with completing all the MTR requirements that we've had to go through for Europe.
And which is.
Essentially you kind of a sustaining of remedial activity to keep our products in the market in Europe.
And that's going to be a nice opportunity for us going forward to reallocate those dollars to innovation and growth products and then.
You know some of that should go to the bottom line as well.
Okay I think that's.
That's it for me I appreciate the time guys.
Thanks, Jason Thanks, Jason.
Thank you and that concludes our question and answer session and I would like to turn the conference back over to Jonathan Kennedy for any further remarks.
Sure.
Well. Thank you everybody for participating on our call today I'd like to thank all of our employees, our partners and customers for their outstanding efforts and partnerships throughout the quarter. Thank you, everyone and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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Good morning, everyone and thank you for joining us today to review our results for the second quarter 2021.
On the call today from Natus is Jonathan Kennedy Natus, as President and Chief Executive Officer, Andrew Davies, Natus as executive Vice President and Chief Financial Officer, Jonathan will begin today with a business overview of the second quarter 2021, then drew will discuss the second quarter financial performance finally drill rig.
Turn the call to Jonathan for closing remarks.
Today's call will include forward looking statements within the meaning of the private Security Litigation Reform Act. These statements include management's beliefs and expectations about our future results actual results may differ materially from these forward looking statements a description of the relevant risk and uncertainties pertaining to our business.
Yesterday's press release, and our periodic and annual reports filed with the SEC.
Management's presentation of the financial results will be on a GAAP and non-GAAP basis for non-GAAP.
Result, exclude imager ration expenses restructuring and certain other charges and their related tax effects management believes that the presentation of these non-GAAP measures along with GAAP financial statements provide more thorough and as to our ongoing financial performance.
You can find a reconciliation of our financial results on a GAAP versus non-GAAP basis in yesterday's earnings release.
I would now like to turn the conference over to Jonathan Kennedy, President and Chief Executive Officer of Natus Medical Mr. Kennedy.
Thank you Michelle and good morning to everyone.
During our call today.
We will discuss our second quarter 2021 financial results as well as our current business trends.
Yesterday, we reported the results for the second quarter of 'twenty 1.
Revenue for the quarter achieved the high end of our guidance at $116 million non-GAAP earnings per share was 29 cents.
We are pleased with the recovery in our overall revenues and earnings compared to the second quarter of last year, which was the most challenging quarter for Natus and 2020.
Total revenues increased by 37% led by neuro, which increased 62 per cent.
And hearing and balance which increased by 34% compared to the second quarter of last year.
We are optimistic and the pace of the revenue recovery in 'twenty, 1 compared to 2020, and we continue to focus on average to increase margins and execute strategic investments in new products that will drive long term revenue growth and profitability.
In a few minutes drew will discuss more financial details, but first I'd like to provide some additional commentary on the quarter and each of our end markets.
It's zero Natus as the global leader in neuro diagnostic equipment solutions, our products and services are used by the majority of hospitals and neurologist worldwide.
We have the most comprehensive lineup neuro diagnostic equipment offered by any global manufacturer today offering a full line of EDG.
M G N P S. She sleep solutions.
Overall, our neuro business recovered and grew by 62% year over year during the second quarter led by neuro diagnostic hardware and supplies, which increased 76% and that was offset by about 5 per cent decline in neurosurgery and other products in the neuro category.
Overall, our neuro hardware business recovered and grew over 85 per cent, while sales of neuro supplies increased from the prior year by approximately 59 per cent.
For hearing and balance.
Our hearing a balanced products include.
Devices and supplies used by Audiologist hospitals, I mean to used to diagnose hearing disorders assist in the fitting and tuning of hearing AIDS and for the diagnosis of balance disorders.
Revenue from the hearing a balanced return to pre pandemic levels during the quarter and recovered and grew 34% versus the second quarter of 2020.
Natus is market, leading newborn care product family is used by hospitals worldwide.
Major product categories and his family to include a newborn hearing screening solutions neonatal eye imaging and brain injury monitoring.
For a streaming services and phototherapy solutions.
Overall newborn care revenue declined by 3% versus the second quarter of 2020.
Revenue growth from our sales of our <unk> imaging systems and growth in our newborn hearing screening was offset by declines in video streaming and other new products.
And recall that our newborn care business remains somewhat steady throughout 2020 and was the least impacted by the pandemic.
In summary, we're very pleased for the recovery and growth during the quarter.
We remain focused on our strategy of investing to refresh our market, leading products and deliver new innovations, which we believe will drive growth and future financial performance.
We experienced another quarter of very healthy cash flow from operations and we ended the quarter with no debt.
Now I'll turn the call over to drew Davies, our executive Vice President and Chief Financial Officer for a deeper dive into our financial results true.
Thank you Jonathan.
As Jonathan stated, we reported second quarter 2021 revenue of $116 million.
36, 8% increase from the second quarter of 2020 as our business is recovering from the impact of COVID-19.
In euro and hearing and balance drove the increase for the second quarter compared to last year growing 62 per cent.
34% respectively.
Newborn care, which was not materially impacted by the pandemic declined 2% compared to the second quarter last year.
Looking back to the second quarter of 2019 total revenue declined by 3% after adjusting for divestitures and discontinued products.
Revenue from our neuro end market was $75 million for 61% of total revenue during the second quarter of 2021 compared to $43.5 million for 51 percentage of total revenue during the same quarter last year.
Revenue from the neuro business increased 62% compared to the same quarter last year. The increase was mainly driven by the recovery of procedures in neuro capital purchases throughout our markets.
Revenue from our newborn care end market.
Decreased 2% to $26.3 million or 23 percentage of total revenue during the second quarter of 2021 compared to $26.9 million or <unk> 32 per cent of total revenue during the same quarter last year.
The.
Greece was primarily attributable to the release of $2.5 million of Nick the backlog in the second quarter of last year that did not repeat this year.
Revenue from our hearing <unk> balance end market was $19.2 million for 17% of total revenue during the second quarter of 2021 compared to $14.3 million or 17% of total revenue during the same quarter last year.
Hearing and balance revenue recovered during the quarter, but remains below 2019 levels.
Further recovery as needed in our international markets.
Revenue from devices and systems contributed 74% of total revenue in the second quarter of 2021 compared to 72% in the 2020 period revenue from supplies and services was 26 percentage of total revenue in the second quarter of 2021 compared to 28% in the 2020 per.
Period.
Revenue.
From domestic sales was approximately 61 per cent of total revenue and 39% from international in the second quarter of 2021 compared to 60 and 40% for the same period last year.
On a non-GAAP basis, our gross margin increased by 8.6% in the second quarter of 2021 to 61 per cent compared to 51, 5% in the second quarter of 2020.
The increase in gross margin is mainly attributable to improved operating leverage on the increase in revenues lower material costs and lower freight costs as compared to second quarter of 2020.
GAAP gross margin increased 9.4.
4% to 57, 3% in the second quarter of 2021 compared to 47, 8% in the same period last year. The income increase in GAAP gross margin was also due to better operating leverage lower materials and freight costs.
Compared to the same quarter in 2019, non-GAAP gross margin increased 100 basis points to 59, 1% the improvement was mainly due to reductions.
In operations overhead costs, offset by higher material costs and higher freight costs as compared to the same quarter of 2019.
Second quarter non-GAAP operating expense increase.
Increased by $7.8 million compared to the same quarter last year. The increase in operating expense versus second quarter last year was driven primarily by increases in employee expenses for the sales and marketing team and travel.
Also all Natus employees were asked to take 2 weeks of vacation in the second quarter of 2020 and that did not repeat this year.
Our non-GAAP operating margin increased by 17, 2% compared to the same quarter last year on higher revenues and gross margin and offset by increased operating expenses.
Other expense was $100000 in the second quarter, driven by a loss on equity investments interest expense was $600000. During the quarter. We expect interest expense for the third quarter of 2021 to be approximately $400000 and for for the full year of 2021 to be approximately $1.7.
A million dollars.
Our second quarter non-GAAP effective tax rate for <unk>.
3.8%, we anticipate overall 2021, non-GAAP tax rate to be between 21% and 25%.
On a GAAP basis, our second quarter 2021, net income was $3.5 million for 10 cents per diluted share compared to net loss compared to a net loss of $8.9 million for the same quarter last year non-GAAP net income increased $14.3 million to $9.9 million compared to the same quarter.
Last year non-GAAP earnings per diluted share was 29.
In the second quarter, we recorded $7.2 million from depreciation and amortization expense.
Share based compensation was $2.5 million during the second quarter.
Now, let's look at some of the highlights from the balance sheet and the statement of cash flow during the second quarter, we repaid the remaining balance on our outstanding debt of $37 million and we ended the quarter was $62.5 million in cash.
Cash flow provided by operations was $19.4 million during the quarter. Our day sales outstanding increased 2 days versus the same period.
In the prior year to 75 days non-GAAP diluted shares outstanding increased to $33.9 million shares compared to $33.8 million shares in the same period last year.
Now turning to guidance during the second quarter of 2021.
We began to see or began to experience supply chain delays and constraints our guidance for the remainder of the year reflects similar impacts for the third quarter.
But also does not factor in any possible further delays or constraints with this in mind we.
We expect our revenues for the third quarter of 2021 to be between $113 million and $117 million for the full year of 2021, we expect revenues between $468 million and $475 million.
Yes.
GAAP net income is expected to be in the range of $3.3 million to $5.7 million for the third quarter of 2021.
Or 10 to 16 cents per diluted share.
Non-GAAP net income is expected to be in the range of $8.8 million to $11 million for 26 to 32 per diluted share.
We expect GAAP and non-GAAP earnings per share for the full year to be between 55 and 67.
And between $1.13, and $1.25, respectively.
And with that we'll now open it up for questions.
Yeah.
Thank you hope you have a question at this time. Please press Star then 1 on your Touchtone telephone if for your question has been answered or you wish your loved yourself from the queue. Please press the pound key.
And our first question comes from the line of Jayson Bedford with Raymond James Your line is open. Please go ahead.
Thanks, and good morning, guys I guess a handful here.
On the quarter.
<unk> looked very much like <unk> at least from the topline typically theres a bit of seasonality lift here in <unk>.
I was just wondering if you can speak to that.
And is it just partly a function of 1 or 2 being being strong and coming in a little hot.
For drew.
You mentioned some supply chain delays mid quarter did that have an impact on revenue.
Yeah. So we had we had a little bit of a kindness.
Kindness, our backlog did build a little bit this quarter on the tightness on the supply chain, but we think that Q1.
Was was a little better than usual from some snapback from from Covid. We had had some orders that were probably pent up in prior quarters and they they came through in Q1, and we did a little bit better than we expected there.
But we did we did build.
Backlog, we have backlog of about $23 million that that grew $3 million. This quarter I think if you look back in prior quarters before Covid, we were running in kind of the $15 million to $20 million backlog level. So we've got a little bit higher backlog than we typically have.
Okay.
That's helpful.
Sure.
Can you talk about some of the the <unk> the <unk>.
Strength in neuro EMG I believe with strong year over year last quarter did you continue to see that strength from the new product launch.
We did this Jonathan we get.
We did it continues to do well EG as well does well the whole device category as I mentioned.
It was up significantly in the quarter.
Supplies, where we're not too bad either.
Okay.
And then where do we stand with with rent Cam and other were some supply issues on the loan side can you just.
Get us up to speed as to where that launched stands today.
Yeah, Yeah, we've we're still working on it we've got 2 different lenses the the.
Premium lenses and 130 degree loans and that's the 1 where we've had some manufacturing issues, we expect that to get finished up this quarter.
In Q3, so that so that we can we can begin shipping that lands again, we did have a few sales of the 1.
100 degree lens in in the quarter and and so we had we did have some rent cam sales, but we didn't ship as many as we would expect.
And we look forward to that in Q3 for that that to get back to normal.
So can we say that if the full launch per for the new rep cameras as in <unk> here.
Well, we launched it in.
At the beginning of the year and we sold a few units and then and then we slowed down and basically put the 130 degree lands on ship hold and that that that delayed the launch and then subsequently that the first the first part in January was for the European market for the CE Mark countries and.
Then we've subsequently you've gotten a 5.10-K approval.
And and Q3 will be able to ship in both geographies.
Okay.
Can you talk about the algo 7.
Launching in Europe, just the reception you're seeing there and then timing on a new newborn screen or here in the U S.
Sure. It's Jonathan So the August 7 continues to be well received outside the U S. We expect to release that in the U S. A year or 2 before the end of the year.
There'll be other odd new handheld device that will offer in the U S.
As far as.
The new.
The algo.
<unk> platform. This is something that is a 2023 type launch products is not something that's in the very near term, but the other 7 does continue to.
Did have quite a big of demand outside the U S.
Okay.
And then you had to release the other day and there might be mispronouncing that.
<unk> trolled electrodes.
What's the.
For the business cases are higher ASP do you think you'll get more utilization of quantum.
Yeah, there is a higher ASP.
This is for a more acute situation that the exact roads are electrodes that actually go up under on the brain of under the under the skull and onto the brain.
$1000 for us out of the <unk> that would be used per.
Per case basis, so from a business perspective, there's a very high ASP on a per patient basis for.
From a technology perspective, you just get a much more.
Yeah, much better fidelity on exactly where the issues are in the brain.
Where it gets.
It's something we're working on for a while it's 1 of the more innovative supplies that we've come out with and we're excited it's a newer technology. So we would expect the ramp of it to be kind of in line with what new brain surgery and brain monitoring techniques would be so I'd call. It slow to medium, but it is a very nice product, our clinicians and doctors.
So far have have had good experience with it and we expect it to be something that just continues to grow and add to the profitability of the neuro supplies line.
Okay.
And then.
Getting back to the earlier comment drew just on the supply chain delays a little unclear.
Is that.
Packaging margins or are your sales impacted by these sales support.
Supply chain for life.
Well I think it's it's part of the reason the backlog is built so it's it's you know it's.
Impacted sales to a certain extent and margins are still impacted by.
Supply chain.
In the form of freight expenses I'm, having to pay expedite charges.
Having to maybe pay a premium to get to get things done and getting ships. So there. There is some impact there. So we look for that to be hopefully in future quarters. When these things get cleared up to be.
Somewhat of a tailwind to our gross margin.
Okay.
Just on the cost side.
It looked like there was a lot better leverage in <unk> versus <unk>, you added let's call it $1 billion in sales ops.
Opex was down on a non-GAAP basis by about $4 million is the business do you feel kind of right sized at this cost level here in <unk>.
It kind of grows with sales going forward.
Yeah, it's getting there we had a pick up.
On the operating overhead.
In in cost of goods sold.
With the task for a facility closure.
So that helped us that's getting a little bit better so that gave us a little bit more leverage.
And you know our spending.
Our spending.
Will.
It has been coming down with M. D R and we expect that to.
To continue with completing all the MTR requirements that we've had to go through for Europe.
And which is.
Essentially kind of a sustaining of remedial activity to keep our products in the market in Europe.
And that's going to be a nice opportunity for us going forward to reallocate those dollars to innovation and growth products and then.
You know some of that should go to the bottom line as well.
Okay I think that's.
That's it for me I appreciate the time guys.
Thanks, Jason Thanks, Jason.
Thank you and this concludes our question and answer session and I would like to turn the conference back over to Jonathan Kennedy for any further remarks.
Sure.
Well. Thank you everybody for participating on our call today I'd like to thank all of our employees and partners and customers for their outstanding efforts and partnerships throughout the quarter. Thank you, everyone and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.