Q4 2021 Asensus Surgical Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the census, surgical Inc, fourth quarter and fiscal year, 2021 financial and operating results conference call.
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I would now like to turn the conference over to Mark Klausner from Westwick.
Please go ahead.
Afternoon, everyone and thank you for joining us for the census, surgical fourth quarter and full year 2021 business and financial update 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 covered under the safe Harbor provisions of the private six.
<unk> 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 and other geopolitical factors beyond our control.
The company undertakes no obligation to update the information provided on this call.
For a discussion of risks and uncertainties associated with the <unk> business I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2021 and Form 10-K 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 adjusted net loss attributable to common stockholders and 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 if census, Surgical's, President and Chief Executive Officer, Anthony Fernando.
Thanks, Mark and thank you all for joining us today.
On today's call I will provide an overview of our recent accomplishments and then asked to me is to review our financial performance.
The which I will discuss our priorities for 2022 before turning to Q&A.
But 2021 continued to be challenging with the macro headwinds associated with holding including hospital restrictions.
Seeing shortages and supply chain issues.
We accomplished a tremendous amount throughout the year.
We expanded our installed base by approximately 33%.
The 44% increase in procedure volumes.
Made great strides in the development of the <unk> surgical system and increased revenues by approximately 350% compared to 2020.
We finished the year on a high note during the fourth quarter, we had six new ascend has programs initiated and saw procedure volumes increased by approximately 30% versus the prior year fourth quarter.
Along those lines I would like to provide a more detailed update on recent performance and the progress we have made on our key focus areas over this past year.
As a reminder, these are but the continued market development for this enhanced system.
And second expanding our portfolio and continuing the technological advance but center.
Starting with our market development efforts.
It is crucial to our strategy that we continue to raise the awareness of sand has and follow up with health economic relevance data to support its adoption.
As we mentioned in the past we expected to have a number of key clinical papers published throughout 2021.
During the year, we had 21 peer reviewed manuscripts published the most significant of which was in April .
This publication in the International Journal of medical Robotics, and computer assisted surgery.
The first to compare health economic outcomes of Sin has well I said, another robotic system as well as traditional laparoscopy.
The study indicated that for certain gynecologic procedures the center system.
It's a cost but less than half of the course of compatible.
Robotic procedures and in line with traditional laparoscopic assisted.
Hysterectomy case costs.
The study also showed case times between send heads and the other robotic system compatible.
We continue to believe that the development of data related to the variety of benefits offered by Sen has allowed for greater adoption by surgeon in the future.
The next segment of our market development efforts is the growth of our global installed base and the acceleration of procedure volume.
During the fourth quarter, 6% has programs like initiated bringing the total to 10 programs for 2021 .
It was in line with our guidance for the year.
Now turning to procedure volumes in 2021 over 'twenty 100 procedures were performed representing the highest annual procedure volume quarter since the inception of center.
Which points to the continued momentum we have generated.
Importantly, we saw growth across each of our key geographies during the year.
With the U S growing 95%.
The EMEA region, growing, 42% and Asia growing 18% compared to 2020.
During the fourth quarter over 500 procedures were performed using sand heads representing an increase of approximately 30% over the previous year quarter.
In addition to the continued growth in utilization we are very encouraged by the continued broadening of the types of procedures being performed with tenants.
During the year General surgery made up 40% of case volumes with gynecology, urology, bariatric and colorectal procedures, making up the remaining 60%.
This is important as it points to the fact that St has continues to be utilized across the most common high volume specialties within soft tissue abdominal surgery.
Now turning to our second niche setting for the year.
The continued portfolio expansion and technological advancement of the <unk> system.
We reached two key regulatory milestones as we received five 10-K clearance for the expanded capabilities of the intelligent surgical unit issue, which will allow us to grow its capabilities with the same system as.
As well as five 10-K clearance for five millimeter articulating instruments, which will improve the dexterity of.
Our instrument platform offering better access to difficult to reach areas of the anatomy.
We also received CE Mark for the initial version of the ICU and expanded the U S indications for use of the <unk> system to include general surgery. Another technological development milestone during 2021 was the launch of <unk> connect their.
This is a mobile in all our surgeon communications system.
<unk> San has to connect up to six clinical and product specialists can remotely interact observed and communicate with the clinical team in the O R. Throughout a surgical procedure from any of that on the globe.
It has proven to be a valuable tool that we have quickly been able to rollout over the course of the year and utilization has continued to grow as more surgeons have interacted with the technology.
We're very proud of what we were able to accomplish in 2021, but also equally as proud of what we have been able to accomplish since late in 2019, when I stepped into the role of CEO and we implemented our market development strategy.
Since this time, we havent routinely deliver on the milestones we have set out to achieve on a quarterly and yearly basis and accumulative results have been very encouraging.
First we have more than doubled the size of our installed base around the world.
Second we have more than doubled the number of procedures performed and third we have rapidly accelerated the volume of clinical data related to sand has been published with.
With more than 30% of all publications under platform happening in the last 12 months.
Given the macro headwinds that have impacted healthcare systems globally throughout the last two years, our ability to achieve these feats is and even more validating outcome.
We have generated real momentum during 'twenty, 'twenty, and 2020 one kept off.
A very strong fourth quarter, and we look forward to accelerating that momentum as we move to 'twenty to 'twenty two.
Before turning the call over to <unk> to review, our financial performance I want to thank everybody with India census organization as well as our customers and partners for their extraordinary commitment during the year.
Without their dedication and effort, we would not be that VR today.
With that I will turn the call over to <unk> for a financial update.
Thanks Anthony.
Turning to the fourth quarter for the three months ended December 31, 2021, the company reported revenue of $2.5 million as compared to revenue of $1 $1 million in the three months ended December 30, <unk> 2020.
Revenue in the fourth quarter of 2021 included $1 $7 million in system revenue zero point $5 million in instruments and accessories.
And zero point $3 million in services for the three months ended December 31, 2021, total operating expenses were $15 $9 million as compared to $14 $2 million in the three months ended December 31 2020.
For the three months ended December 31, 2021, net loss attributable to common stockholders was $15 $9 million or seven cents per share as compared to net loss attributable to common stockholders of $13 $8 million or <unk> 13 per share in the three months ended December 31 2012.
<unk>.
For the three months ended December 31, 2021, the adjusted net loss attributable to common stockholders was $15 $7 million or seven cents per share as compared to an adjusted net loss of $9 $7 million or <unk> <unk> per share in the three months ended December 31 2020.
Adjusted net loss as GAAP net loss adjusted for the following items.
Amortization of intangible assets change.
Change in fair value of contingent consideration change in fair value of warrant liabilities and restructuring and other charges all of which are noncash charges.
Adjusted net loss attributable to common stockholders is a non-GAAP financial measure reconciliation from GAAP to non-GAAP measures can be found in our earnings release.
Turning to the balance sheet. The company had cash cash equivalents short term and long term investments excluding restricted cash of approximately $135 8 million working capital of $103 $4 million as of December 31, 2021.
I'll turn the call back over to Anthony.
Thanks, Jeremy.
I would now like to provide our perspectives on 2022.
In 2021 we generated significant momentum and put ourselves in a great position to drive the broad adoption of <unk>.
With the addition of a number of key clinical publications that support and validate the benefits of <unk> and the continued technological development of the platform.
We were able to drive a material, 33% expansion of our installed base and our records Sen has procedure volumes, which grew 44% year over year.
In 2022 we look to drive increased awareness of the platform.
Have impactful data published that reinforces the clinical benefits then has brings to patients surgeons and hospitals and expand the capabilities of the platform.
All with the goal of facilitating increased adoption and utilization across the globe.
In terms of what to expect from us in the near term.
Focus areas for 2022.
The continued market development of the Sen has system.
And the ongoing development of our portfolio.
Starting with market development.
Larry goes off our market development activities are the growth of our global installed base and the acceleration of procedure volumes.
In order to drive widespread adoption, we need to inform and educate our potential customer base of the benefits of Cintas and then follow up with clinical data to support our claims.
In order to further demonstrate the value of that system.
During the year, we will continue to work to publish additional peer reviewed papers that focus on the clinical economic and workflow benefits of digital laparoscopy performed with Sen has as compared to traditional laparoscopy and also showcase how digital technology.
And real time clinical intelligence can be helpful to surgeons and patients.
A tool we will continue to leverage to increase awareness of sand heads and educate the surgical community on its benefits.
His participation in major surgical meetings and congresses across our key geographies.
During 2022, we hope to have.
Podium presence at most of the major Congresses and industry events in the U S Europe and Japan.
The next segment of our market development efforts is the expansion of our global footprint, including the growth of our installed base.
Acceleration of procedure volumes and the increase in the number of foundational sites.
Turning to the growth in our installed base. Our goal for 2022 is to add an additional 10 to 12 new system initiations globally.
Similar to last year, we continue to focus on the acceleration of global procedure volumes.
With a substantially larger installed base and the potential for lessening COVID-19 headwinds during the year as well as the recent expansion of our portfolio. We believe we can continue to scale the volumes of procedures being performed with <unk>.
Yes.
Well at the variety of procedures being performed on a daily basis.
In support of our efforts to drive system utilization.
We have continued to invest in surgeon training and medical education.
We have implemented a variety of tools to create a holistic training environment focused on getting surgeons up to speed and performing sandhurst procedures rapidly.
These tools feature the sensors surgical learning Academy, which is a distance learning portal that provides surgeons with access to abundant interactive educational resources throughout the San has learning pathway such as extensive online training modules that will follow.
Based on our knowledge of the Sen has system in preparation for hands on training.
Procedural mapping guides that accelerate learning through knowledge sharing by San has clinical experts.
Quick reference guides to increase operating room efficiency.
In our surgical video archive of Sin has procedures for continuing education.
Other tools that we are leveraging.
Mobile surgical simulator, which is designed to enhance surgeon skill level with the same has interface.
Related environment.
Tim has connect a multi video digital collaboration solution that enables virtual real time best practice sharing among St has surgeon users from the operating room.
And global training centers located in the U S Europe and Japan.
We believe these tools in aggregate will allow us to continue to facilitate the adoption of <unk> by surgeons across the globe and provide clinical intelligence through our performance guided surgery framework.
Surgeons in performing consistently superior surgery.
As we continue to emphasize the training and Onboarding of new surgeon users and focus on increased utilization, we expect to see growth in the number of foundational sites during the year.
As a reminder foundation our sites are hospitals that are performing all on track to perform more than 100 procedures.
On an annualized basis.
While we expect Covid to continue to impact case volumes during the first half of 2022, resulting in lumpy utilization within specific hospitals in region. We are confident the number of foundational sites will expand as we progress through the year.
Turning to the expansion of our product portfolio.
We are excited to continue building upon our accomplishments in 2021 S seek to further develop this enhanced system technologically and broaden its applicability in.
In 2022, we are focused on a number of key milestones.
First the full scale commercial launch of five millimeter articulating instruments.
These instruments are currently in a pilot launch in the U S.
During which we are optimizing the functionality to provide the incremental dexterity that surgeons have been looking for.
We expect broader adoption following a full commercial launch globally during the second half of the yet.
Our second portfolio initiative is to seek pediatric clearance in the U S.
With the combination of three millimeter instruments session with a five millimeter camera scope and haptic feedback.
<unk> is uniquely positioned to bring these benefits of digital laparoscopy to pediatrics in a way that no other platform on the market can.
By offering a revolutionary and unmatched reduction in Invasiveness.
We have seen strong early clinical utilization in Europe and demand from the U S based searches.
In response to this we decided to pursue a pediatric indication in the U S and intend to submit a five 10-K application during the second half of the year.
Okay.
Lastly, we are seeking to continue to expand the applicability of the Ias <unk> globally.
Following the U S and Japanese regulatory approval is early feedback from surgeons have been excellent.
<unk> features introduce more advanced features such as three D measurement digitally tagging.
The enhancement and enhanced camera control based on real time data from the anatomical structures, while performing surgery.
We believe we are the first and only system to offer. These additional features to surge and giving them real time intra operative digital tools, which to this point they have never had access to.
In addition, we are pursuing a CE mark approval for expanded machine vision capabilities in Europe , which we expect to receive in late 2022.
With the expanded ICU capabilities approved in the U S and Japan and with Europe to follow we plan to aggressively expand the utilization of the ISC throughout our global installed base as quickly as possible.
The commercial rollout of the ICU is our first significant technological push into what we call a performance guided surgery.
As it stands today San has has significant advantages over traditional laparoscopy and other robotic platforms, but we have a more ambitious vision for the level of clinical intelligence centers can bring to the health care system.
As an organization our goal is to revolutionize the way surgery is performed.
Fact that there are complications with one in five surgeries is unacceptable and more importantly avoidable.
As we build out performance guided surgery, yeah, helping unlock clinical intelligence and capabilities to reduce surgical variability and the complications associated with it.
We are pioneering a new standard of surgery with digital solutions that can greatly increase predictability and surgical proficiency, regardless of surgeons skill or experience.
We've made good progress towards developing some of the foundational component of performance guided surgery.
<unk> the ICU Ensign has connect.
During the year, we will continue to take steps towards the development of evolutionary capabilities, leveraging the ASU, which will allow us to deliver on the promise of performance guided surgery.
We believe that the future of surgery is data driven and our ability to collect analyze and extract insights from data is a foundational component of our strategy.
In order to harness the power of that data, we are investing to further develop our cloud and data management capabilities.
In addition, we will leverage our growing installed base, while at the same time partnering with hospitals and other institutions to work towards the population of a critical mass of surgical data.
Using this data.
And our analytics capabilities, we will be able to build the surgical infrastructure of the future, enabling surgeons and hospitals to deliver better more consistent outcomes.
As we look ahead to the future. We are very excited about the position. We are in to take advantage of the tremendous opportunity that exists to elevate surgery in ways that matter b.
We generated significant momentum during 2021, and we look forward to building upon that momentum to advance the capabilities of sand heads, making progress towards the promise of performance guided surgery and increasing the global adoption of centers.
With that I would like to open the line for questions.
Thank you we will.
Well now begin the question answer session.
But join the question queue you May Press Star then one on your telephone keypad.
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Two.
I'll pause for a moment as callers join the queue.
So.
Coming off of that.
What.
Great.
Whatever amount of detail you could provide.
How is the last.
60 days or so looking in terms of procedure volume.
And.
And how should we think about 'twenty two.
Thanks for the question.
With respect to cases, I think we are seeing.
Pretty steady volume.
And the goal is obviously to continue to grow.
Uh huh.
Significantly during the course of the year.
But you know the unfortunate part it is hard to be pretty predictable in terms from month to month or quarter to quarter in terms of volume because there is still.
Some level of fluctuation.
At certain sites.
Let's call it though.
The.
The staff shortages et cetera, but I think you call you could expect to see a continued growth in volume in terms of cases and I would also say that maybe earlier in the year.
It might be.
The smaller numbers in terms of growth.
Hoping to get caught up.
In the middle to the latter part of the.
The year.
Perfect.
My second question.
<unk>.
You're expecting 10 to 12 system initiations during 'twenty two at the same time.
Also wanting to file the 500 10-K for the pediatric indication.
So I'm assuming this does not take into account what you could gain from the pediatric market so for us to understand the market itself.
What's.
Is there something called the pediatric market and our sense is that it.
Is there.
Certain number of.
Hospitals that specifically want a machine for pediatrics.
Uh huh.
No.
And what work do you need to do before you even you can file the 10-K.
Sure. So I think again it depends on geography.
If you look at Europe , where we are now.
Several hospitals.
Have different departments or some institutions that are primarily focused on women's health.
In pediatrics.
Part of that women's health.
Group and in the U S. Obviously, you know again, there are some independent pediatrics, but otherwise it is.
It's a different.
Unit surgical unit.
Within some hospitals.
So days.
There is a need for pediatrics because not many.
<unk> cases.
Using robotics.
Uh huh.
Several reasons and then Thats the reason that we saw in Europe .
There was a very good interest.
Given that we had three millimeter.
Instruments, coupled that with.
Haptic feedback.
And then also using a five millimeter scopes.
In Europe , So I just thought that it would it's going to be a really good.
Solution.
And then there was some preliminary.
Publication on that as well and that kind of got picked up by some of the U S.
Surgeons also expressing interest.
In.
Enquiring about.
If they could have that solution.
I wouldn't say that there's a.
Very large market in comparison to.
Population, but data relatively significant opex.
Opportunity, there, especially because there's no solution that's.
Caters to the pediatric patient population offering some direct line benefits and we believe that with the instrumentation that we have haptic feedback that this would be a very.
Appropriate and suitable solution for that population and thus be able to.
<unk> be a good solution for them. So we do we do think there is an opportunity there.
And in Europe , you already there and then in the U S. We've kind of do the same in focusing on.
Either.
Institutions that only do pediatric so.
Other hospitals that also have a pediatric.
Department.
Perfect. Thank you. Thank you very much for taking my questions.
Thanks RK.
Once again, if you have a question. Please press Star then one.
The next question comes from Ross Osborne with Cantor Fitzgerald.
Please go ahead.
Hi, good afternoon, Thanks for taking my questions and congratulations on a productive 2021.
So starting off could you guys, maybe just discuss the financial impact from Russia as invasion of Ukraine, given your presence in both countries.
And then as a follow up how do you see outright sales or sale and leaseback of evolving this year given what it is hopefully going to be a more normal operating environment.
Hey, Ross Thanks for the question, so starting with Russia, and Ukraine, I think yes, we do have a presence there.
And again the impact is.
Obviously, that's going to be an impact but to what extent is not being quite determined yet.
So we'll have to wait and see how are you.
Everything pans out, but those are our two focus.
Our focus areas of last year.
Going into that area.
That's fine it and what's the second part of your question. If you don't mind repeating please.
Just how you see the sale of your stake in terms of outright sales versus the sale and leaseback strategy. You know do you see it returning to more outright sales given hospital budgets hopefully.
Coming back this year as Covid headwinds subside.
Yeah.
Yeah, Ross I think we would see both I think in some of the.
Distributor countries and even some of the eastern European countries I think.
Sales is something direct fairly something we have seen and I think we'll continue to see that and in our direct markets. Obviously, a lease and then a lease conversion.
It's something that we'll also see but I think even in the western European.
And other direct markets.
I think there are some preferences in some countries.
<unk> prefer to buy buses.
A lease so I think we're going to see a mix.
But really really focusing on the leasing opportunities or flexibility that we are trying to bring to offer in order to.
Uh huh.
Move through the capital process.
Foster and more effectively.
Pat do going through different committees et cetera, we're trying to get Capex approved.
So I was trying to go through the lease process in order to begin the program in Denmark.
A lot of that program is ongoing and they see the value then it becomes even.
Yeah. So I think we're going to see a mix and I I would say that that's.
Might be slightly change to having slightly more sales direct sales compared to leases, but I wouldn't be surprised if it continues to be leases and didn't convert as well.
Okay, Great that makes sense and then just lastly for me spy.
By changing a bit of a headwind starting in the fourth quarter.
Yeah.
Two months in 2022.
Have you seen the supply chain to improve at all.
Actually we've not seen a improvement I would say I mean, we have some we've had some challenges on the semiconductor front.
And also some challenges on the plastics.
Medical grade plastics front as well.
So those all are.
They continue but at the same time there are we've found alternate ways to move through them.
In trying to get us some more time, so we've not seen a very clear improvement I would say that's still kind of working through those challenges, but kind of found alternate means to work through that.
Got it. Thank you for taking my questions and congrats again on 2020 one.
Thank you Ross.
That concludes our question and answer session for today.
I will now turn the call back to Anthony Fernando for closing remarks.
Yeah.
Thank you again for your interest in Sensus surgical and we look forward to updating you on our progress on our next quarterly call.
This concludes today's conference call you.
You may disconnect your lines.
Thank you for participating and have a pleasant Paul.
Yes.
Yeah.
Yeah.