Q2 2021 Sientra Inc Earnings Call

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Yeah.

Good day, and thank you for standing by welcome to the fee interest second quarter 2021earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone please be advised on today's.

Conference is being recorded.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker, There Oliver Bennett General Counsel and Chief Compliance Officer. Please go ahead.

Thanks, operator, good afternoon, and welcome to the intra second quarter 2020.

1 earnings call.

I would like to remind everyone that in AB remarks. Today. We will include statements that are considered forward looking statements within the meaning of United States security laws.

In addition management may make additional forward looking statements in response to your questions.

Forward looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business strategy operations or financial performance.

A detailed discussion of the risks and uncertainties that the company faces is contained in its previously filed annual and quarterly reports on form 10-K, and 10-Q and its quarterly report on form 10-Q that the company filed this afternoon.

Actual results may differ materially from those expressed in or implied by the forward looking statements the.

The company undertakes no obligation to update or review any estimate projection or forward looking statement.

I would also like to note that she interviewed as its investor relations website to publish important information about the company, including information that may be deemed material to investors.

Financial and other information about <unk> is routinely posted and is accessible on the company's investor Relations website at Www Dot C intra dot com.

I'd now like to turn the call over to Ron <unk> interest President and Chief Executive Officer.

Brian.

Thanks Ali and thank you all for joining us today for our second quarter 2021 earnings call.

Let's begin by welcoming Andy Schmidt, our new Chief Financial Officer.

Andy joined US last month and has already hit the ground running assessing our financial performance.

Later, you will have an opportunity here from him on house, the Antares in great financial position to support our rapid growth.

On the call today I'd like to show some of the highlights of our recent progress on why we're very excited about where <unk> headed.

Once again, she anther has delivered outstanding results in the second quarter, which includes <unk>.

Our record revenue of $20.1 million from our breast products business respect, reflecting year over year growth of 116%.

We're especially encouraged by the increased acceleration of <unk>.

Sequential growth that resulted in almost 10% improvement over the first quarter of 2021, nearly 80% growth over pre COVID-19 levels in the second quarter of 2019.

We estimate the overall breast augmentation market to have grown 1.5% in second quarter 2021, compared to the second quarter 2019.

And it is encouraging to see a market recovery and demand for breast aesthetics start to surpass pre COVID-19 levels.

More importantly, it is exciting to see revenue growth from argumentation business significantly outpacing the market, increasing a 142% from second quarter 'twenty, 1 versus second quarter 2020.

121% versus second quarter 2019.

This results clearly demonstrate that we are making notable progress towards our goal of being a top 2 implant and expander company in 2 years by taking sizable market share.

Following the successful closing of the sale of our <unk> business <unk> is now only focus on the plastic surgery market.

Willing us to channel all of our resources into 1 dynamic and rapidly growing sector of aesthetics.

This focus is reflected in our results with our commercial execution in the second quarter generating the highest breast product revenue in the company history.

Additional commercial execution includes an increase in our sales rep productivity.

Our sales Rep territory revenue grew 25% in the first half of 2021, and we're seeing this trend continue to improve as we entered the second half of this year.

As you know our business today is focused on 2 primary plastic surgery markets.

First augmentation and breast reconstruction.

Argumentation as our primary growth driver today, leveraging a very strong market.

We will continue to build on our strong momentum from the first quarter with key high growth strategies extended through Q2 that are demonstrating traction substantially outperforming market growth as I noted earlier.

The number of accounts reached the highest level and see interest history growing 13% over Q1.2021 to a new base of over 2400 accounts.

However, most of our growth continues to come from existing accounts, demonstrating our ability to drive sustainable growth through execution of our commercial strategies.

During the second quarter, our mid to high tier accounts.

Which drove nearly 50% of our volume in the quarter grew almost 200% versus second quarter, 19, and 170% versus second quarter 2020.

As part of our strategy to get patients to ask for <unk> by name. We have been very successful for digital patient acquisition, which has referred over 10000 patients to plastic surgeons practice year to date.

In Q1, we referred over 3000 patients to surgeons and in the past quarter, we nearly doubled that number to over 6000 referrals.

In a recent survey with the 150 potential breaths odd patients see interest brand recognition has gone up from 16% to 22% versus last year's data putting us on a number 2 position among all brands in a survey of patients.

Those patients heard about Santa from surgeons.

Friends or family and our company website.

We also expect a physician loyalty program to increase the repeat purchases and expand market share from current accounts.

Now turning to our reconstruction business, our industry, leading product advantages in this space continue to be recognized and appreciated by surgeons hospitals and patients.

This past quarter, we added more than 140, New hospital accounts.

And our recurring revenue was 61% higher than Q2, 2019, and 100% higher than second quarter 2020.

In addition, as we announced last quarter, we're leveraging the butterfly ultrasound devices to gain new accounts.

This partnership has proven to be an advantage over our competition for a reconstruction clinical managers to get new contracts for local hospitals.

Now looking at the second half of this year.

We're excited because we see a strong augmentation market.

Our survey of 150 potential patients on covered the breast augmentation is on the top III aesthetic procedures, where they are choosing to spend money.

As a matter of fact, 75% of them are thinking about getting breast Agua within the next 12 months reinforcing the rebound on the market.

And during our most recent surge on the interactions they have.

Highlighted that despite some vacation plans many of them are booked for surgeries well into the fourth quarter.

And central continue to fuel this momentum in the second half through a range of initiatives that include <unk>.

Continued improvement on our surgeon loyalty program by adding on additional benefits and incentives to grow volume tiers.

We're going to be partnering a patient Inc. Lessors to expand our reach with real world stories that reinforce our position of safety Trust and differentiation.

We plan to increase our digital presence to generate more brand awareness and interest.

And we will be launching the <unk> Academy training to guide the patients path to the surgeons office and booking a procedure.

We'll also be adding additional support and our reconstruction business to highlight our products clinical advantage.

We'll be increasing our peer to peer education of physicians are once again participating life events.

We will be starting digital and social outreach targeting surgeons and hospital decision makers.

Before I turn the call over to Andy to cover our financial results in more detail I want to highlight. The addition of 3 dynamic women to the <unk> leadership team.

In June the new styles join us as Vice President of research and development.

Denise has already begun making exciting contributions to our product pipeline and will look forward to sharing more of those plans later this year.

In addition, we recently added Dr Arena Aaron Berg.

Eversole toward board of directors.

We expect that our experience in medical aesthetics will prove invaluable as we continue to take share overall breast products market.

Adding greater diversity to our organization continues to be a critical objective per center.

We're proud that half of our board of directors and have our executive leaders are female which is a competitive advantage for our company as we continue to focus on becoming the leaders are bringing transformative treatments to progress their auto plastic surgery.

I'll now turn the call over to Andy for a more detailed review of our second quarter financial results Andy.

Thanks, Ron.

First I'd like to note, how pleased I am to be representing interim as their new CFO from.

From my perspective fiscal 2021 has been a solid rebound year for the company's commercial operations, but more importantly, the work that has been accomplished during the first half of 'twenty 1 sets the stage for a great second half of the year and a great fiscal 2022.

Our current period financial results showcased not only an improving business model, but also critical structural changes at the company.

Before I dive into the financial results, let me address the key structural accounting item that is represented in our current period operating results.

Due to the sales of our mirror dry business. During Q2, we are reporting the mirror dry business as discontinued operations.

Going forward, then we will no longer be breaking out our breast products business, which comprises our breast implants tissue expanders and <unk> products and will be reported in the operating results Christy interest as a whole.

This is a great transition as a current period and comparative continuing operations results and presentation now represents the company as a pure play in the plastic surgery space.

Similarly, we no longer have a need to segment our financial results, creating the very clear presentation of our go forward business model.

Shifting to our Q2 'twenty 1 financial results.

As Ron noted Q2 is a record revenue quarter for Sandra.

<unk> posted breast product revenues of $20.1 million, which is up 116% as compared to Q2, 'twenty and up 9.8% from Q1 'twenty 1.

As Ron has covered the critical revenue market drivers I'll move forward to gross margins.

Gross margin for Q2, 'twenty, 1 was 56%.

That compares to 56, 5% for Q2, 'twenty and 55, 4% for Q1 'twenty 1.

As the company has previously communicated.

We have a clear line of sight to upper <unk> gross margins.

The key driver to gross margins as product and channel mix.

As Ron also discussed our current quarter showcased great performance from our augmentation business.

Given the timing of the overall industry recovery from Covid shutdowns, we are not yet at overall expected mix between augmentation and reconstruction procedures.

Similarly, while difficult to forecast the timing of the recon market recovery, we feel that we have not lost sales due to the COVID-19 shutdowns, but are experiencing a deferred sales dynamic.

The further comment on our confidence and our gross margin opportunity is that the company utilizes a standard costing methodology.

As such gains and productivity are not realized immediately.

Rather they are capitalized and amortized over future periods.

Sandra is sitting on a significant positive cost variance that will be realized over the next 3 quarters. Additionally.

Additionally, we added to our positive variance this period, which is indicative of continued productivity gains in our Franklin manufacturing facility.

Continued production improvements in our 2021 relocation of our distribution center from Santa Barbara to Franklin, Wisconsin, Likewise creates future efficiency opportunities.

Switching to operating expense.

Total operating expense for Q2, 'twenty, 1 was $20.4 million as compared to $14.5 million in Q2 of 'twenty.

The primary increase in expense was due to sales and marketing, which represented 5 million from the $5.9 million increase.

This increase is as expected as the company has invested in our go to market assets to capitalize on the reopening of the economy and future market opportunity that lies ahead.

Our 2020 sales and marketing expense was curtailed due to Covid shutdowns and we have now resumed planned revenue growth initiatives.

As compared to Q1, 'twenty, 1 operating expenses decreased $1.5 million from $21.9 million as a result of reduced sales expenses, which had a variable cost component.

Total GAAP loss from continuing operations for the current period was $18.5 million or <unk> 32 per share. However, this includes a noncash charge of $7.3 million related to the derivative accounting treatment associated with our convertible debt instrument.

Adjusted EBITDA for Q2, 'twenty, 1, which we believe is a more accurate reflection of the company's performance due to these noncash items was a $5.5 million loss or <unk> <unk> per share as compared to a $6.7 million loss or <unk>.

<unk> per share for Q2, 'twenty and an 18% improvement.

Switching to key balance sheet items.

We ended the June 32021 period with a cash balance of $82.4 million. This compares to a balance of $55 million at December 31, 2020.

The net increase of cash is due to our Q1 'twenty 1 capital raised and other finance activities that netted $34.4 million in cash this year.

Year to day cash used in operations was $15.1 million. However, $8.7 of that amount was attributed to an increase in accounts receivables.

Due to increase in 2021 sales and an increase in the inventories to address future market demand.

Finally, the sale of mirror dry resulted in an inflow of $11.3 million during the period.

Which was partially offset by a $7 million milestone payment from our initial purchase of mirror dry.

Total debt at June 32021 was $82.7 million and total outstanding shares were $57.9 million.

This debt consists of our convertible notes and term loans as well as the Companys Paycheck protection plan loan of $6.6 million for which the company applied for full forgiveness during the second quarter.

I'm very pleased to report that at the time of this call. The company has received approval for full forgiveness of the $6.6 million loan.

Our Q3.2021 results will recognize the full PPP loan forgiveness.

Turning to guidance for 2021, we are raising our guidance to expect revenue in the range of $74 million to $78 million, reflecting growth of 34% to 41%.

Compared to sales of $55.4 million in 2020.

This guidance does not include revenue from our discontinued operations.

We continue to expect 2021 annual operating expenses to be in the range of $85 million to $90 million.

Finally in terms of housekeeping we.

We'll be filing our Q2.2021 form 10-Q today.

And now Ron <unk>, our controller, Valerie Miller, and I would like to open up the call for Q&A.

Operator.

Thank you.

As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Jon Block with Stifel. Your line is now open.

Great. Thanks, guys and good afternoon, maybe the first 1 Ron or Andy embedded in the guidance you talked about the momentum ongoing within augmentation, maybe if you can just talk about what the expectations are for the recon market last quarter, you talked about it accelerating in the third quarter or fourth quarter expecting to accelerated in <unk>.

<unk> anything to call out around the Delta Varian in certain markets like Florida, where maybe you're tempering thoughts around recon in the back part of the year.

Thanks, Sean.

It is going to be a very regional.

Very unlike probably latter part of 'twenty.

Tony <unk>.

Impacted every state in this case, yes, you said, Florida, we're still we're seeing a very strong California is strong.

North East and Texas as well so Florida is the 1 we heard maybe 1 hospital closing down not all hospitals, so that is our expectation.

That's part of the guidance that you have a range of 74 to 78.

If things are not back as we expect maybe in the low end if things accelerate as this is a different environment with vaccinations out there increase vaccination coming up.

So that we are keeping that range you were very confident on that range, though even with what may be happening in the next couple of months.

Okay, that's great and then maybe I'll stick to 2 questions, but I'll make this 1 on 2 parts. So the pipeline on anything to call out on your progress with the agency on the nextgen tissue expand or additional markets like cash.

Canada et cetera, and then Andy maybe for you you commented on gross margin beat us on the quarter, you're also talking about a really good line of sight to the high Fifty's I just wanted to be clear is that high 50% range as early as the back half of 2021 or was that some commentary into the early part of 2022. Thanks for your time guys.

Yeah.

John in regards to the pipeline, we are progressing well with the <unk> Pro is continue to move forward. We do have expectations submission before the end of year 2022 launch in regards to health, Canada. We are in negotiations and discussions with health, Canada, We're hoping for a late.

'twenty 1 approval like I stated before this is will be a 2022 launch and health, Canada sure and just commenting on the <unk>.

Gross margin dynamic.

The key again is going to be mix and as we looked at this current period were heavily skewed for us in terms of augmentation versus <unk>. If that next day is identical then will be ticking up let's say 1 point a quarter and that's just basically from the accounting amortization of the gains that we have.

Already received.

Again, if that mix actually moves more towards our expectation between AGH and recon.

At that point, then the gross margins will move to the upper fifties in a faster manner, but again it should be incremental and again the other side of the equation is if for whatever reason August even a bigger piece.

Piece of the mix overall mix in the next period or 2.

<unk> been talking about on the recon market.

Well, then maybe it's going to be 50, 556, so it can be quarter to quarter, but at some point, we're going to get at that product mix, that's expected and day definitely upper fifty's.

Great. Thanks, guys.

Thank you. Our next question comes from Alex Nowak with Craig Hallum. Your line is now open.

Great. Good afternoon, everyone. Following up on the pipeline question, maybe expand on that on items that you would expect to detail later this year, just where else could you go within the breast space what other products. If you add on top of that and then going beyond breast what other solutions here could you bring to the plastic surgeons.

Thanks, Alex Yes, we're looking at from organic perspective.

Additional products, obviously, we discussed in the past large sizes and missing skus that we are need to be in the market. So those are the things. We're looking at right now, but we're also looking at areas that enhances our commercial team ability and presence in that plastic surgeon and those are things that can't get into specifics, but there are.

Related right now to breast augmentation and reconstruction.

We are looking from opportunistic.

No.

<unk>.

Within plastic surgery, but it's not our focus right now on the next 6 to 12 months, we're still very focused on our core business and that's something we're going to be looking at in 2022, and that's some of the things that the needs we'll be discussing what do we do at R&D day, where right now big focus is still our core business.

And filling the gaps or products or may not have existing.

Existing.

Products right now so.

Yeah understood that makes sense and then just the.

Another question on for Andy on the cost side, you've had a couple of weeks now to understand the cost structure.

Where else do you see cost of good reduction initiatives and potentially on the opex side as well going out more so in 2022, where else can you take costs out of the system and then how are you thinking about the opex spend into 2022.

Sure So let's talk Cogs first.

Again, we expect continue efficiencies out of our Franklin site.

But just this period that we're in right now, which just finished relocating our distribution center from Santa Barbara to Wisconsin.

Debt single move saves near $1 million in shipping costs, where previously we had to ship finished goods from Wisconsin to Santa Barbara and then the points beyond so thats, great Thats, just coming from right straight to the bottom right away. The other part is now we're going to be essentially located in Wisconsin, and we have an on.

Opportunity to reduced outbound expense, which actually hits done on the sales and marketing line, which gets down into operating expense.

Kind of add into that the way I look at it as the company has gone through quite a bit of work in terms of.

Getting a level set as being a pure play in the plastic surgery space and that takes many forms 1 such form is the company used to work on 3 different ERP systems. So that created a great deal of inefficiency and we just finished the final migration to 1 ERP system, which then should Korea.

It's more opportunity Likewise, we're now a pure play so we're not focused on multiple businesses. So when we look at the backend more again on an operating expense, we should be looking for efficiencies and what that means in order to support this business.

That's great I appreciate the update thank you.

Yes.

Thank you and our next question comes from Mark <unk> with William Blair. Your line is now open.

Hey, guys. Good afternoon, thanks for taking the question.

I wanted to start a little bit with guidance.

I can get a better sense of what's being implied and correct me if I'm wrong, but it looks like maybe you're assuming a bit of a deceleration or a down sequential in kind of the second half of the year. So.

Or at least maybe passing through the day. So I was curious if you could break that down by odd recon or some of the other things.

Japan, or otherwise and whether you're assuming impacted delta in those numbers.

At this point.

Hey, Margaret I'll start on our funds over to Andy but.

As we are preparing now to a robust Q3 Q4.2020.

And when you compare those numbers, obviously, it's no longer comparing to second quarter, but we are assuming seasonality while augmentation in the third quarter I did state that talking to surgeons, they're busy they are booked into fourth quarter on the same time. They are all taking a vacation or have been taking vacation day last year.

3.4 weeks, which didn't happen in the third quarter. So thats why youll see that little slowdown from recall from our side, we expect to come back, but we expect to build slowly on I did share in the past, it's a slow build but we did add 140, new accounts, we're still seeing robust.

Hospitals coming on board.

Our tissue expander.

Whole thing takes 4 to 6 months as we bring new accounts. If there are some parts of the country to have a little slow down such as Florida and.

Louisiana, Mississippi, then youre going to have slowed down so thats why were thinking.

But we're very comfortable on that range of 74 to 78 insurance. It is kind of add on what Ron said.

We're actually very bullish on the second half here I think 1 of the key messages.

Even though our checks are showing.

Plastic surgeons are really focused on bringing this year back considering last year, everyone has had a down down year on the whole ecosystem.

They are very motivated to let's say it takes shorter vacations or what have you, but we still expect them to take vacations.

They are significantly backlog in a positive way so that we expect to have continuing demand from the market.

But Q2 excuse me Q3 should show a little bit of seasonality and all that really means is the second half of the year is it going to be very solid.

I'll leave the 2 quarters together are going to hit the numbers that we need to hit Q3 is going to compare well year over year, it's going to be positive, but Q3's arguably is in a normal seasonality space, it's going to be a little less in Q2, and then we bounce back in a hard robust Q4, so that's our expectation in terms of the market again.

It can surprise us and it just keep driving without that seasonality but are.

Our message is the second half is it going to be strong, but let's assume from seasonality in Q3 as expected and then Q4 again very strong traditional traditionally a quarter.

So again overall bullish again, whether it comes from the <unk> space coming back are the odd space continuing to charge hard.

We have many different levers that we think are going to be pulled.

Okay, that's very helpful.

And all.

On slide into things like China.

Second follow up versus the true follow up on the first question. So if I'm understanding correctly you would.

Apply a little bit more than traditional seasonality in the third quarter. So could we see something thats kind of down double digits and then like you said rip Roaring back into Q4 as folks come back and then they add.

The second question I had was really just longer term right. So as you go into 'twenty.

Q underlying dynamics, you've got the current Covid recovery and then you've got the investments you guys are making strategically long term and now from slide from the from the numbers. It doesn't look like Covid really impacted you that much.

Heard Rob's comments upfront, but Andy you did talk about that some delays maybe to some of those strategic investments. So I was curious what those investments were how material it cannot be on what is that need for 'twenty..2 thanks guys.

Yes, I would say Mark I'll start on a mood relative andi know so there's no delay in strategic investment and we are.

Part of their commitment to bring day needs on board is to think about the feature.

We're doing I think the story of this year force. The answer is it's all about execution day in 2021 and how.

Sales and the marketing team took a fantastic group of strategies. The sales team took debt and executed and now will be transition with the needs to come and our board about what products what missing areas will have how do we enhance the products who have $4.22 and 23. So there is no slowdown and as I discussed in the past.

Our commitment is to invest more this year and next year into 3 key areas 1 commercial to R&D 3 manufacturing.

We plan to keep Opex kind of flattish for next year, but those 3 areas we will grow.

No plans to slow down there so sure just adding just making sure on that.

On that being confusing here.

Q3 last year as Ralph said Q3, and Q4 were recovery quarters Q3 last year for breast products was $15.3 million, we expect to perform very favorably to that number.

Again will it be 'twenty, 1 or 'twenty 2 again this year as we did this quarter.

Possibly not but it's going to be a very positive number and the key is the second half is going to perform very strongly overall, so again, we're expecting the market to perform in a matter. We've got the right inventory. We've got the right sales force out there we've got the great recurring orders as Ron talked to in his prepared remarks.

We've got everything in place from that perspective, and we put the investment in and Thats why you see sales and marketing.

Kind of jumping up to $10.4 million this period versus $5.4 million last year, that's a real significant commitment in terms of our belief in the market and what we can do and we think we're executing very well.

This market is offering us.

Thank you.

Our next question comes from Richard <unk> with SBB.

Leerink Your line is now open.

Hi, This is Jamie on for rich Thanks for taking my question.

I guess I wanted to start you highlighted that the mid to high tier accounts are driving 50% of the volume into Q could you just remind us how that's trended over the past 1 to 2 quarters, and where you see that net settling out.

Over the coming quarters.

Yes, we can.

Kind of went through a new way of setting up.

The account so we.

Set up a certain level of dollars. So we have TSA TSB CND different dollar amounts and we will get into the details of the dollar amounts.

What is amazing is that.

And the tier a which is our highest volume accounts.

Those are really the drive probably about 30% of overall business.

Keep in mind.

First.

Dr. <unk> second quarter of 2020, we had 19 accounts, we have now 50 of those accounts.

And the next here with the combined with a b and tier that drive almost 50% overall volume.

Back in second quarter last year, we had 32 accounts, we almost have 90 accounts. So we're seeing an acceleration on.

<unk> mid tier accounts into the high volume driving accounts, which goes back to expanding our market share. So we're expanding our share on existing accounts.

We're proud of is that same store sales those accounts have been with us for more than 6 months.

They have ordered.

On board for the last 6 months 60.

65% of them order in this quarter. So we're seeing an improvement of those accounts ordering.

A quarter later 2 quarters later and Thats why you see the high volume coming from the high to mid to high tier accounts, So thats, where were seeing that and right now the growth will be driven by that now we are adding a lot of new accounts those accounts are usually.

Low volume to begin with eventually they may become a high volume.

Got it that's helpful. And then just because you brought up.

Provide any color on just how the tissue standard business performed in the quarter end.

You guys are talking about your expectations between augmentation.

Breast reconstruction business in the context of growth margin could you just give us a sense of where what the mix is now and really where you see that settling out over the longer term. Thank you, yes, because now at 62% of our business is the breast augmentation debt in the past with about 52% to 55.

Obviously, it has impacted our recon business.

And Alex to tissue expander drives our penetration of hospitals, we have seen some.

Lower sales than we wanted but that's part of what we expect in the second quarter as hospitals are coming online and Thats why for the second half, we'll put some extra incentives for our sales team and our marketing team to drive our tissue Expanders, specifically not just the implants that are hot.

Keep in mind in the hospitals, both in plants and have done very very well and tissue expanders and those are hospitals. So we've put some extra incentives we developed some new strategies debt marketed teams already rolled out.

All the reps came out from a meeting last week in Chicago, and there's additional things to drive the tissue Expanders.

And that really helps them generate additional sales a lot of times. We have seen is a great houses coming on board and then the rep. So focused adding new accounts, we need them to go back to those existing accounts on the hospital and drive further share in those hospitals insurance, just adding to what Ron said in terms of why we're so excited about that market.

From a finance perspective, it's a more homogenous or structured market. So from just basic pricing and cost of goods sold it's a market that can perform 5% to 10% higher in terms of gross margin than the on market and again, it's just basically the nature of the customer set so again very important market for.

US and we think we're really well positioned to answer the demand when they actually get back fully on tap.

That's helpful. Thank you so much on the color.

Thank you and our next question comes from Anthony Vendetti with Maxim Group. Your line is open.

Thank you, yes, just 2 quick questions on.

On the referrals, you mentioned something about generating.

10000 referrals to plastic surgeons, how are those how are those referrals.

Generated.

And.

When they are generated what's the.

At least from what you can tell the conversion into an actual appointment in net and then an actual procedure whether that's within.

I don't know how you measure it fits within 6 months within 12 months.

Then Anthony how are you doing what are we where we can see is.

Who made phone calls who search on the.

We went to the physicians surgeons website, who actually.

The location of that surgeon what are we don't see is debt.

Surgeons appointment some half fill out a form of debt lot of times to fill out a form within a surgeon. We have had conversations with surgeons have told us that it had several individuals call on your office and let them know that there from the central refer them et cetera, but we were found is a lot of those surgeons website.

In a little bit work and it will also found is a lot of the office staff in health and retaining and capturing dose prospective patients. So we rolled out our first <unk> Academy that was 2 weeks ago, and we had a pilot program with 10 surgeons and their staff the idea for the central cash.

From the surgeons side, they're going to be learning new techniques, new skills from well known surgeons from the staff, they're going to be learning from well known.

The visuals that do marketing and retained perspective.

Customers into our website, how the retained debt however, flipped at customer how to answer phone calls.

Ask the right questions et cetera.

We're very impressed because that was a pilot program and we received 10 across 10 out of 10 across a lot of the survey actually a majority of them because they felt so.

Helpful for them with their practice.

Remember they are surgeons are experts in there.

<unk> set and the staff it doesn't have a lot of times. They don't have a marketing plan some of the big on.

Accounts on some of the big offices do have a marketing side, but with large inventories did not so we're trying to help them keep and retain those referrals, but we actually see people ask me why do you think is driving a lot of our growth. It's a combination of manufacturers, including referrals to surgeons to ask for <unk> by name.

Okay. That's helpful. And then just lastly, maybe for Andy.

This was.

Just kind of like a follow up on the on.

On the costs.

Is there Andy anything or.

It sticks out or anything that you think could be a clear cost savings that you are targeting here at the.

The remainder of this year or is it still going to take a little bit more of an evaluation to see if there is some costs that can be.

Got saved here.

Sure. So first of all I'll put it this way we already have a fair amount of savings than earned that are in the bank debt are going to roll out here over the next couple of quarters and that basically is back on that cost of goods sold line.

We have definitely more opportunity in that space in terms of what we're doing in terms of distribution.

And basically shipping costs et cetera et cetera.

We're just scratching the surface on.

So that's definitely an opportunity.

When we look at operating expense the key is going to be just a simplification of the business just being a pure play now in multiple businesses.

Condensing on a number of locations for instance helps quite a bit.

So we're going to see that incrementally on the G&A line.

And again like I said the company has gone through a lot of different transitions, including the ERP transition. So that's a 1 and done so as we go forward with that we start seeing the expense of that type of effort roll off so there's a number of different areas, where we expect to see efficiencies and it will be incremental but we'll see it on a consistent basis.

Yes.

Okay, Great. That's helpful. Thanks, I'll hop back in the queue I appreciate it.

Thank you.

At this time Im showing no further questions I'd like to hand, the conference back over to Juan <unk>.

<unk> comments.

Thanks, operator.

You all for joining us for our second quarter 'twenty, 1 earnings call in the coming months, we'll be participating several conferences virtual conferences.

Canaccord on August 25, <unk> 21, Investor Conference on September 9.

As well, we are going to be attending the Sps.

On meeting in Atlanta in late October I hope to meet many of you at the upcoming meetings on a thank you.

And wish you a great evening.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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