Q3 2021 Asensus Surgical Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the <unk> sensors third quarter financial and operating results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to Mark Klausner of Westwood Partners. Please go ahead.
Good afternoon, everyone and thank you for joining us for the Sensus third quarter 2021 conference call.
On the call with me today are Anthony Fernando President and Chief Executive Officer, and Chemise, Romper Tab Chief Financial Officer.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call, including any guidance provided are forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business, including any impact from the COVID-19 pandemic.
The company undertakes no obligation to update the information provided on this call.
For a discussion of risks and uncertainties associated with the census, surgical business I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2020 Form 10-K filed in March 2021 and the Form 10-Q expected to be filed later today and other filings we make with the SEC.
During this call. We will also present certain non-GAAP financial information related to the adjusted net loss attributable to common stockholders in the adjusted net loss per common share attributable to common stockholders management believes that these non-GAAP financial measures taken in conjunction with U S. GAAP financial measures provide useful information for both management.
And investors by excluding certain noncash and other expenses that are not indicative of the company's core operating results.
Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions reconciliations from U S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section.
Of our website.
It is now my pleasure to turn the call over to our census, Surgical's, President and Chief Executive Officer, Anthony Fernando.
Thanks, Bob and thank you all for joining us today.
On today's call I will provide a brief summary.
Recent accomplishments and then ask <unk> to review our financial performance after which I will discuss our performance during the third quarter as well as our priorities for the rest of 2021 before turning to Q&A.
Starting with a review of our recent performance despite.
Despite the headwinds associated with the recent COVID-19 desktop area and spike during the quarter.
We made tremendous progress too.
Many of our 2021 goals since our last call.
We signed lease agreements with three hospitals, and we sold one system, bringing the total number of new enhanced program initiation, thus far in 2021 to six.
We made progress with our regulatory milestones receiving FDA five 10-K clearance for both the five millimeter articulating instruments and the expanded capabilities of the intelligent surgical unit or I S. U in July and September respectively.
We are incredibly happy with what we've accomplished so far and we are excited to keep the momentum going in 2021.
With that I will turn the call over to <unk> for a financial update.
Thanks Anthony.
Turning to the third quarter for the three months ended September 32021, the company reported revenues of $2 $6 million as compared to revenue of zero point $8 million in the three months ended September 32020.
Revenue in the third quarter of 2021 included $1 $4 million in system revenue zero point $8 million in instruments, and accessories and zero point $4 million in services.
For the three months ended September 32021, total operating expenses were $16 $7 million as compared to $14.6 million in the three months ended September 32020.
For the three months ended September 32021, net loss attributable to common stockholders was $16 1 million or seven cents per share as compared to net loss attributable to common stock holders of $15 1 million or <unk> 15 per share in the three months ended September 32020.
For the three months ended September 32021, the adjusted net loss attributable to common stockholders was $14 $3 million or six cents per share as compared to an adjusted net loss of $11 9 million or 12 cents per share in the three months ended September 32020.
Adjusted net loss as GAAP net loss adjusted for the following items amortization of intangible assets.
And fair value of contingent consideration.
Gain on extinguishment of debt.
Employee retention tax credits and.
And for 2020 change in fair value of warrant liabilities, all of which are noncash charges.
Adjusted net loss attributable to common stockholders is a non-GAAP financial measures. The reconciliation from GAAP to non-GAAP measures can be found in our earnings release.
Turning to the balance sheet.
<unk> had cash cash equivalents short term and long term investments, excluding restricted cash of approximately $147 $9 million and working capital of $125 $4 million as of September 32021.
I'll turn the call back over to Anthony.
Thanks, Amit.
Now I'll provide an update on recent performance as well as the progress we have made on the key focus areas for 2021.
As a reminder, these are first the continued market development for the <unk> system, and second expanding our portfolio and continuing the technological advancement of Senate.
The primary focus.
All of our market development activity is the growth of our global installed base acceleration of procedure volumes and the increase in the number of foundational sites.
Spike the headwinds associated with Covid that impacted all of our major geographies during the quarter I'm very happy with what we were able to achieve.
Since August we have seen a material acceleration of the movement of customers through our pipeline.
Leading to one system purchase in Russia, and three leases to Japanese institutions.
As of today, we have had six newest enhanced program initiation.
And continue to expect to have a total of 10 to 12 by the end of 2021.
In September we announced the purchase of a <unk> system by logging now Moscow clinical scientific center, one of the largest and most innovative institutions funded by the Moscow Health Department.
This is the first in his surgical system to be used within Russia.
In Japan, we recently announced that Saputo Medical University Hospital Hero sake University hospital and seen much pseudo Central General Hospital have all initiated this enhanced programs.
This brings the total installations in Japan to seven.
Japan continues to be a key geography for Sen has because of the favorable landscape.
Japan is one of the highest concentrations of laparoscopic surgeons globally.
Lending itself to a quick adoption curve for a platform built on the fundamentals of laparoscopy.
In addition, <unk> has is widely reimbursed.
Salaries for over 98 procedures across a variety of specialty.
Because of this we opted to invest and to grow our footprint in Japan.
The establishment of a training center in late 2020.
We are happy with the acceleration.
Adoption in this region in recent quarters and continue to expect growth in the future.
Our pipelines remain strong going into the end of 2021 COVID-19 has caused.
Varying levels of delays globally within hospitals.
Which have impacted our ability to visit customers install new systems and train new surgeon users.
However, we feel confident that these are simply matter of timing and not matters up in demand.
By year end, we expect to see multiple additional sand has program initiation across several geographies.
Moving on to procedures.
We continue to see consistent strong volume trends throughout 2021 despite the headwinds faced with the ongoing COVID-19 pandemic.
In the quarter.
Total procedure volume increased over 47% compared to the prior year quarter, and importantly grew over 5% compared to the second quarter of 2021 bringing year to date procedure volumes to over 1500.
The strong year over year growth was primarily driven by volumes in the EMEA and the U S.
Which grew 71% and 41% respectively.
Volumes in Asia, but roughly flat to 2020. This region saw the more significant COVID-19 related headwinds in the period.
Given the macro challenges we faced during the quarter, we are very happy with the procedure volumes, which continue to validate the desire of surgeons to utilize the same as system globally.
Now looking at foundation of sites.
As a reminder, foundational sites are hospitals that are performing.
All on track to perform clinical procedure with Sen has at an annualized rate of greater than 100 procedures, but yeah.
While we have made significant progress this year fostering expanded utilization within all our buying stores the effects from COVID-19 during the quarter has disrupted new sites from reaching the hundred procedures per year run rate.
Foundational sites still remain a key indication for.
For us and we expect to see improvements in the overall procedure environment by year end.
Now turning to our second initiative for the year.
Continued portfolio expansion and the technological advancement of the center and system.
During the quarter, we received FDA five 10-K clearance for both the five millimeter articulating instruments and the expanded capabilities of the intelligent surgical unit O I S U.
Both of which are key regulatory milestones, we had set at the beginning of the year.
As discussed on our last call up adding articulation broadens the clinical utility and value of our platform technology.
Better access to difficult to reach areas of their anatomy by providing two additional degrees of freedom.
We are currently planning for a limited market release in 2022.
We also received five 10-K clearance for an expansion of capabilities with the Ies you in September.
The newest I assume features introduce more advanced features including three D measurement digital tagging image enhancement and enhanced camera control based on real time data from that and tell me cost structures, while performing surgery.
The addition of these cutting edge digital capabilities to our existing surgical platform gives surgeons real time intra operative digital tools and demonstrates our commitment to our vision of plus almost guided surgery.
One feature that has been extremely well received is three D measurement.
Prior to the three D measurement feature being offered with the I S. U surgeons had two options.
One drop of paper tape, Michelle into the operating cavity and manually straightened out the tape and mischa using their surgical tools before passing to remove the Pip Michelle.
Oh use ultrasound imaging inter operatively and Mischa anatomy on the image.
Both of these options.
Completely antiquated and require the surgeon to spend a tremendous amount of time, completing a critical but relatively basic tough.
The three D. Michigan enabled by the I guess, you sort of evolution in the way surgeons interact with the surgical platform.
We are providing the surgeons with real time intra operative digital technology that allows them to be better informed while being more efficient and helping to reduce cognitive fatigue.
The three D, Michigan, along with the other set of feature are changing the landscape.
And have a surgeries being performed in a significant way.
We did see some supply chain issues related to one component of diet issue in the quarter.
This is pushing out the timing of broad application of the Ias U.
Once these issues are resolved, we expect to quickly ramp up the rollout of <unk> in the United States and Europe.
Now for an update on <unk> connect which connects experts and has surgeon users across the globe by streaming multiple camera views.
And then in this topic view simultaneously in conjunction with two way screen sharing and annotations.
We have completed several installations of sand has connect in both Europe and the United States This quarter and expect to see more installations before the close of the year.
These have facilitated collaboration events, we're supporting surgeons were able to remotely connect from their office to the O R and observe a procedure in real time.
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The increase in installations of our innovative communication system allows for progress towards reaching the full potential of our system.
Providing the opportunity for surgeons around the world to access and learn from their peers.
On the best practices for utilizing the same system.
In summary off the back of a successful first half of 'twenty 'twenty. One we are very pleased with the progress we have made in the third quarter given some of the COVID-19 disruption experienced.
We delivered strong procedure volume growth and an acceleration of new system installs.
We drove key regulatory milestones receiving two FDA five 10-K clearances, including the expanded capabilities of the I guess you in the U S, which represented a meaningful step forward towards our goal of delivering on the promise of performance guided surgery.
In addition, we strengthened our leadership by filling key roles across the organization, namely in clinical marketing and R&D.
We are excited about the future of our sense of surgical and believe all of the hard work. Our team has put in over the last year is coming to fruition.
Looking ahead, we are looking to carry this momentum into the final quarter of the year and expect to meet our goal of 10 to 12, new programming negotiations by the end of 2021 as well I see continued growth in procedure volumes.
With that I would like to open the line for questions.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear account acknowledging your request.
Youre using a speakerphone please pick up your handset before pressing any keys to best try. Your question. Please press Star then two.
We will pause for a moment as Congress is trying to kill.
Yeah.
The first question is from RK of.
<unk> H C. Wainwright. Please go ahead.
Thank you.
No Anthony and chemise.
Excellent quarter obviously.
Both on the top line and also on the procedures.
Just you know.
Just a quick question on the topline.
You know at 1.4 million systems booking I'm, just trying to make sure I didn't hear it but I just want to make sure.
As you know a capital purchase but most of that was basically on New York.
Leaves commercialization is that correct.
Okay.
Oh, okay.
Actually it's a it includes a capital budgets are the system to a fault, Russia was a sale.
So it was a sale plus a lease and service revenues.
Okay perfect.
And then you know the.
Obviously, it's great to hear.
47% increase in procedures.
And also a five person.
Hum against the second quarter.
So I'm just trying to understand you know war, what is helping that upswing in the number of procedures.
And.
You know if we really believe that.
Nation, that's going on in this country.
It seems like a day.
Recent past.
So should we.
Hum.
How does how should we think about you know getting to the end of the year. Obviously are already passed last year's 1400 onboard.
Procedures 200 mm.
And the first nine months.
And so that we can you can try to gauge how we should think about.
'twenty two.
Yeah, Okay. So I mean, great great question I think most of the cash growth that we've seen has come from the EMEA region.
As we've seen some of the restrictions lift and in cases kind of taking off.
And secondly in the U S S well, we've seen pretty good case volume growth.
In the U S and Europe, a lot of the a violation of us relatively flat.
So we are seeing more cases and also for this year. Another point I would make is if we look at quarter over quarter from the beginning of this year.
We've held pretty steady pace.
Growing each quarter from the previous quarters. So it's very.
Very difficult to predict how the Q4 numbers off because if we look at it from a institution basis, you will see ups and downs.
In some institutions picking up some are slowing down and then a month later, you'll see them ramping back up.
So it's kind of hard to predict but oh.
The hope is that if nothing changes then than.
We hope to continue this case growth momentum.
Into the fourth quarter and in there you know in the remaining two months, but all the signs that we're seeing so far is relatively positive.
From Asia from.
EMEA and from the U S and are.
Hoping to.
You know the seasonal changes that we can continue this.
Pace, but you'll have to wait and see how are you.
Any pandemic restrictions so anything that.
My impact, but right now things are you know, they're pretty bullish and see.
Really good momentum going into Q4.
Okay.
And then regarding.
The portfolio enhancement.
Yes, you undefined millimeter articulating arms.
How you know what what sort of benefit can can their daily work or is it more on the on the on the procedure side.
Or is it more on trying to try news I mean, I'm getting new centers to buy the device because you'll have more visits on the more bells and whistles on the on the system.
How how generally does this help.
Yeah, Great question. Okay. So I think that's you've kind of talked about this before olive goal is really to reduce the variability.
In surgery.
And also to.
Help reduce complications and improve outcomes, but that's that's that would go up.
In order to surgeries, we do so these tools.
Helping to accomplish that by by being able to be a lot more objective.
For the third then so that the surgeons can measure things they can see things they can put markers.
And and make them ergonomically and even from.
From a fatigue point of view.
Make it a simpler.
In terms of image and camera control. So the goal with the ultimate goal by all of this is it's less about the adding all these bets and we felt like it call. It four features but it's really trying to say how do we use digital technology to reduce the variability and reduce cogs.
The complications and improve the outcome for the patient at the end and we are seeing some good interest I mean from the surgeons, who have the I S. SKU that'd be highlight issues in you know in Japan.
In Europe.
In Europe and in the U S now and definitely seeing very good interest and very positive feedback because these are tools that surgeons have not seen before.
And for the first time, they are getting used to what they're trying to say okay. This is good we like this know how do we use it more and how do we benefit from D. C. Even more so it is really focused on being a lot more objective and also.
Providing some you.
Digital tools to help reduce the variability in surgery.
Perfect and then one last question from me before I get.
I'll get back into the queue.
Japan, obviously I guess, that's the big one for the year 2021 for you folks.
<unk>.
With that almost I believe you'll have seven units now in Japan. So it's seven units.
You know geography, it's not not I'm not quite big.
Do you foresee them, putting more resources, especially when you know when you have such a reimbursement friendly environment on potential.
Hum and if you are planning to do put some resources is that how is that going to impact you know.
Your financials going forward.
Our walked you already currently have is that good a good enough to expand even further.
Yeah.
Yes, Okay. So I think the the resources that we currently have our team in Japan.
You know can easily handle a more than the seven systems.
For a few reasons because most of the sites once we get them up the initial learning curve there.
Besides become independent.
They can operate the system.
Pretty independently we didn't staff.
And we don't need to support those sites are 100%. So we are kind of trying to stagger. The start off some of these sites are.
So that we can get each site up to speed, but the team there and the resource is there.
I think I'm very comfortably.
Support a few more systems and we'll continue to invest as well.
In trying to improve the surgeon experience and providing them the training tools and things like that so we will invest.
And I think it will change slightly the.
Ah the expense side of things, but I I think it would be somewhat in line with the.
The increase in cases and revenue as well.
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