Q2 2023 Axonics Modulation Technologies Inc Earnings Call
Yeah.
Good day, and thank you for standing by and welcome to the Exxon ex second quarter 2023 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session.
I ask a question during especially if you will need to press star one on your telephone you then.
The automated message you had this race to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Neil Blocker, Chris go ahead.
Thanks, Victor Good afternoon, and thank you for joining Exxon ex US second quarter 2023 results conference call presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Dearen, President and Chief Financial Officer before we begin I would like to remind listeners that statements made on this conference call that relate to.
Future plans events prospects or performance are forward looking statements.
Find under the private Securities Litigation Reform Act of 1995, while these forward looking statements are based on management's current expectations and beliefs. These statements are subject to a number of risks uncertainties assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call.
These risks and uncertainties are disclosed in more detail electronics as filings with the Securities and Exchange Commission all of which are available online at Www Dot SEC Dot Gov.
Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date July 27, 2023, except as required by law Exxon ex undertakes no obligation to update or revise any forward looking statements to reflect new information circumstances at an anticipated events that may.
With that I'd like now like to turn the call over to Ray.
Thanks Neil.
I'd like to welcome everyone joining this afternoon's call.
So with strong companywide execution Exxon X generated record results in the second quarter revenue was $92 $9 million in the second quarter, an overall increase of 35% compared to the prior year period more specifically second no modulation revenue was seven.
$74 $2 million, an increase of 33% compared to the prior year period, we are particularly proud of this level of growth. Considering this is the first quarter in which we anniversary last year's launch of the F 15, recharge free system, which is currently our top selling <unk> system revs.
Revenue growth is being driven by a combination of higher utilization and share of wallet in existing accounts as well as the addition of competitive accounts that have converted to Exxon ex <unk>.
Internationally, our S and EM revenue grew by over 50% compared to last year as a result of measurable measurable contribution from our recently deployed direct sales force in Australia.
Bulk of that revenue was $18 $7 million, an increase of 41% compared to the prior year period.
Results were driven by increasing reorder rates from existing accounts, the onboarding of new accounts and the addition of new sales reps, primarily focused on tri mode promoting bulk them at.
Our gross margin in the quarter was 75.6% up from 72, 8% in the prior year period.
The most exciting news for US is that we generated over $18 million of adjusted EBITDA in the quarter as we continue to benefit from the operating leverage inherent in our business model.
Dan will discuss our margin expectations and financial performance outlook in further detail in his prepared remarks.
I would.
Now I'd like to provide several other corporate updates.
On the reimbursement front CMS recently published proposed Medicare payment rates that will take effect in the calendar year 2024. In summary, the proposal includes S. N M facility fees that would increase by 1.5% and surgery centers and be flattish and hospital outpatient departments as.
For physician fees, while the conversion conversion factor was down 3.4% across the board for all specialties physicians performing sacral Neuromodulation would actually see an increase due to the work RV use increasing for implanting the neurostimulator more specifically physicians performing an external trial.
With a penny in their office, followed by a full implant and a facility would see a 50 basis point increase in reimbursement under the proposal, while physicians, who perform and advanced trial in a facility followed by an implant would see a 23% increase in reimbursement.
Our commercial team currently accounts for nearly 60% of Exxon X 725 person full time employee head count.
We have approximately 400 commercial team members in the United States of which 185 are directly involved in selling or sales management with the balance of the personnel being field clinical specialist field marketing specialist and remote therapy support specialists internationally, we now.
Have approximately 25 field based personnel and they're located in Western Europe and Australia.
We are well staffed at this time and expect only a modest increase in our commercial team head count for the balance of 2023.
Turning to the axon ex find real relief direct to consumer advertising campaign, we continue to generate more than 10000 qualified leads each month. A qualified lead is those individuals that complete a symptom questionnaire on our website, telling us about their symptoms and providing contact information.
In addition, many of our customers tell us that patients come into their practice asking about Exxon ex therapy after seeing our ads on television or on the internet the.
The campaign continues to generate goodwill within our physician customers as they are grateful that we are helping to ensure that adults with these conditions are seen by a clinician and advancing along the care pathway.
Now we continue to note that over half of the individuals filling out. These questionnaires are treatment naive underscoring the notion that people don't know that it is not normal and that's not a normal part of aging to leak urine and that advanced therapies exists to treat incontinence or call Center continues to work diligently to connect qualified leads with.
Physician specialist in their local community.
Now it's been about 18 months since the launch of the DTC program and as we anticipated. It is yielding measurable F N M and bulk of that revenue and an encouraging return on investment.
Given the success of the DTC program, we are in the process of launching new commercials related to the conditions of stress urinary incontinence, which is served by both of them at our fecal incontinence, which is part of our <unk> system in the second half of this year.
Now turning to the IP lawsuit with our competitor we will limit our comments on this topic to the following.
As we have previously said and continue to maintain we do not believe that <unk> infringes on any of our competitors patents and this cases simply litigation to create a financial and legal burden on Exxon X in an attempt to slow down our market penetration.
Now recently, the United States.
Court of Appeals for the Federal circuit reversed the decision of the PTA B that the time lead patents asserted against axon X were valid finding instead that the PTA be committed legal errors and its analysis the federal circuit remanded the matter to the PTA be for another review consistent with its.
Opinion and direction.
Now there are a few more patents under review by the Federal Circuit.
And we anticipate that the appeals court decision will be forthcoming in a couple of weeks.
Because of these developments the U S District Court for the Central District of California issued a stay on the litigation proceedings pending the outcome of the proceedings before the PTA b.
As a result, the jury trial previously scheduled for August has been postponed indefinitely.
Now turning to product development initiatives.
We're making really good progress on the frame and find our lead placement technology, we acquired from rate in in April and we continue to expect it to be commercially available in mid 2024.
Another project, we're working on internally as a new external trial system that aims to enhance the PMA trial experience, making it more comfortable for patients and more convenient for physicians.
Now in closing.
We feel like clothing from my perspective.
We feel like we're just scratching the surface.
Really what is possible in this underpenetrated and Undertreated patient population now with that said I'm going to turn the call over to Dan who has some prepared remarks with respect to the financial results. Thanks Ray.
As of right now.
<unk> net revenue of $92 $9 million in the second quarter of 2020.
This represented an increase of 35% compared to the prior year period.
April Neuromodulation revenue was $74 2 million.
Of which 97% was generated in the United States.
<unk> revenue was $18 7 million.
79% was generated in the United States.
Gross profit in the second quarter was $78 2 million representing.
Representing a gross margin of 75, 6%.
<unk> to 72, 8% in the prior year period.
In the first half of 2023 gross margin was 75%.
While we are pleased with this result, as you know gross margin is sensitive to overhead absorption manufacturing yields and supply chain disruption.
Taking these factors into account and given that we are continuing to ramp up the manufacturing line that would be our 20-F 15 products. We expect gross margin for 2023 to be within the 73% to 74% range for the remainder of the year as we've stated previously we expect.
Gross margin at scale could be in the mid seventies.
Operating expenses were $82 $3 million in the second quarter.
Note that this includes a one time $15 $4 million noncash charge for acquired in process research and development related to the Radiant technology acquisition for Raymond Finder, and a $600000 noncash charge for the change in fair.
Fair value of contingent consideration related to the bulk of that acquisition.
Excluding these noncash charges adjusted operating expenses were $66 $2 million in the second quarter of 2023.
We continue to expect adjusted operating expenses of $280 million in fiscal year 2023.
Net loss in the second quarter was $7 3 million.
Compared to a net loss in the prior year period of 21 4 million.
And the second quarter of 2023, exon X generated $18 4 million of adjusted EBITDA compared to $1 $6 million in the prior year period the.
The attractive financial profile of the company and the inherent operating leverage of our business model is becoming more evident in our financial results.
In fact this marks the first quarter that <unk> was profitable on an operating income basis, which included.
Stock based compensation, depreciation and amortization expense and only excludes noncash charges associated with the radian in process R&D and the change in the fair value of the contingent consideration related to the bulk of that acquisition.
Cash cash equivalents and short term investments totaled $331 $5 million as of June 30.
During the second quarter, <unk> made a $35 million milestone payment to Contura holding limited related to bulk of mad achieving over $15 million of sales.
The 12 month period ended March 31 2023.
Turning to fiscal 2023 guidance, our updated outlook is as follows.
Total company revenue of $358 million at.
An increase of $10 million compared to prior guidance. This represents an overall revenue increase of 31% compared to fiscal year 2022.
We now anticipate <unk> revenue of $285 5 million at.
An increase of 29% compared to fiscal year, 2022, and bulk net revenue of $72 5 million, an increase of 40% compared to fiscal year 2022.
This concludes our prepared remarks, and I will now turn the call back over to Neil.
Thanks, Dan at this time, we are ready to begin the Q&A session. We would like each analyst to have an opportunity to ask a question. So we request that you. Please limit yourself to one question only if you have an additional question. Please reenter the queue and we will take your second question if time permits with that Victor please begin.
The Q&A session.
As a reminder to ask a question. Please press star one on your telephone.
Wait for a name to be announced to withdraw your question just press star one again, please standby will compile the Q&A roster.
One moment for our first question.
Our first question will.
Come from the line of Chris.
Chris Pasquale from Nephron Research your line is open.
Thanks, and congrats on a great quarter guys.
I thought the comments around the DTC campaign were interesting it seems like the focus there is shifting a little bit maybe getting a little bit more specific on the stress and fecal indications.
One of the advantages you guys had there was the ability to be somewhat generic in the way you advertise because you covered the full spectrum. So just curious.
How youre thinking about optimizing that program longer term and if you could quantify in any way what kind of return you've gotten thus far off of the work you've done there.
Sure. Thanks, Chris I appreciate your comments and question.
So our commercials now whether they'd be found on Facebook or on television.
They are generic in the sense that we're just talking about if you have the symptoms you're leaking urine. As an example, then we'd like to help you get a consult with a specialized or with or without.
Physician.
In your area.
We're not we're not selling anything in 32nd television commercials, we're not talking about sacral neuromodulation.
We're not talking about Bocom, Ed, we're not being too specific at all about the condition.
It's basically urinary incontinence has been the focus so.
Commercial has been pretty much geared towards overactive bladder patients.
The responses as you've seen have been really amazing in the first six months of this year 1 million people unique visitors went to find real relief dot com and about 8% of them.
Filled out a questionnaire and told US who they are and indicated an interest in getting with the physician now of course. The challenge of course is getting those interested people actually booked with an appointment and im sure everybody can appreciate that's not a simple process, having said that we.
<unk> now 18 months later.
Are able to measure a return on investment on a named to name basis that we can easily match the person who responded on our questionnaire to actually a patient who has an implant in their body. This.
This is very encouraging for us.
And it is exactly what we had hoped but we knew it was going to take some time before we could actually measure a return so given that we're encouraged by this we want to know.
Increase if you may the messages that we're providing.
Let's just say on television or on the Internet. It doesn't imply an increase in expenditure per se, but we're going to have some different messages out there. So one of the things that we're going to do and I'll try not to be too worried about all of this is that we're going to be running an AD on TV on Facebook, where we have a patient who is young.
<unk>.
A woman in her thirties, who had some children and had stress urinary incontinence and so she is going to say.
When I laugh, when I lift when I exercise or cough or sneeze I leak.
And then I found <unk>.
And I got Bocom at so we're going to it's going to be a bulk of med commercial alright.
Which we haven't done before.
So even though we're getting a lot of patients getting bulk of meta as a result of our OE commercial so we're going to be a little more specific and then of course you know their questionnaires, we'll identify the symptoms that they have and so much of it. So that's going to that we're excited about that we think that makes a lot of sense for us to do that we're also going to do a commercial for fecal incontinence. So we have a.
Patient and by the way. These are all volunteers. These are not paid actors or actresses. These these are patients who volunteered to do these commercials. So we think that's a more powerful approach.
Then, having a celebrity or so on and so forth. So in any event. So we've got a gentleman who's got fecal incontinence, and we'll be very specific about his condition and the fact that <unk> therapy can help resolve this so so that's what we're talking about when we say.
<unk> and <unk> and so on and so forth. So we're going to run OSB commercials, soi commercials, and fecal incontinence commercials, and they'll all be running kind of simultaneously, but once again, we're not we're not talking about tripling our spend or even doubling our spend we may spend a few more dollars incrementally, but we're getting a nice return so hopefully Chris that's a super full.
Some answers to your questions.
Okay. That's great. Thank you Ray.
And Dan one for you.
Operating leverage has been very impressive.
Especially when you exclude some of the onetime items here.
It certainly doesn't seem like mid seventies needs to be a final resting place for gross margin given the progress you've already made.
Why can't you push it further than that particularly as the portfolio overtime shifts I think entirely to <unk> or 'twenty versus carrying three products.
We agree with you.
And we can we're just not providing guidance for 2024, yet, but we've picked mid seventy's as the target going back a couple of years now.
And the messaging, we just wanted to keep it on point that we're clearly trending in that direction, especially when you see 75, 6% in the quarter and we're just trying to.
Keep everything in check as we ramp production. So you are correct look we don't have to change the product. We don't have to change anything in the supply chain. We just have to keep executing and have longer production runs and and we see it trending the way you do.
Great. Thank you.
One moment for our next question.
Our next question comes from the line of Larry <unk> from Wells Fargo. Your line is open.
Hi, This is Nathan trade by calling for Larry how are you.
So in the past you've talked about your <unk> sales growing at 25% and the market itself growing at 15%. How do you still feel about these targets considering you know strong growth you posted in the first half.
Any change with regards to market growth and if so why.
Well look I think that the.
The market growth is going to continue.
Unfortunately, only <unk> is involved in the market growth game.
Our other competitor seems not to be too keen, let's just say on.
Doing some of the things that we're doing so having said that we're the ones carrying the water.
We see that the market is growing and you know in any given quarter, it's going to be up or down or whatever but 10% to 15% is certainly in the range and we think over time, 15% is what we would expect to see which is consistent with what we've been saying since 2018.
And the market has been growing.
So.
We're just focused on putting our heads down and executing the plan.
And we've got a lot of initiatives that are happening are.
In accounts to help identify additional patients that could benefit from the therapy and the issue is and I've said this many times before.
Every single Urology and gynecology practice in the United States has anywhere from hundreds to thousands of untreated patients in their paper filing cabinets or their electronic EMR system.
And it's just simply a matter of activating those individuals and having somebody speak to them about the notion of advance and advanced therapy. Like we have that provides a fundamentally permanent or long term solution and measured in a couple of decades to these chronic problems. We don't believe that botox, which is.
Four to six months treatment for OA is appropriate.
Patients drop out after two injections.
We know that adherence to medications is terrible and that 70 or 80% of the patients will stop their medications certainly within a year. So these are these are all the reasons why we believe that in the end of the day sacral Neuromodulation is the way to go it's going to provide long term therapy relief for patients who have a chronic problem. So.
The difference here is despite the fact that there was a product in the marketplace for two decades, okay with a person with a company that had a monopoly we're overcoming that the notion that sacral nerve modulation is the therapy of last resort that attitude is now changing amongst our physician customers and so on so.
So we're extremely bullish about the future.
And we expect to continue to grow our revenue in sacral neuromodulation.
For many years into the future and I have to tell you a bulk of med certainly is helping us as well because we're able to get more mind share from these customers by providing additional therapies and one last comment about that in that is that these are not discrete persons who show up it's not like a woman shows up today and she's got urinary.
Urge incontinence and.
And nobody has fecal incontinence or nobody has a stress urinary incontinence. The reality is a third of our urinary urge incontinence patients have fecal incontinence and almost a third of those patients who have urinary urge incontinence have stress urinary incontinence. So that's the reason why <unk> is such an important part of our product line, because we are able to treat the whole person and.
And that's that's that's that's where we're up to.
Thank you one moment for our next question.
Our next.
Comes from the line of Michael <unk> from Wolfe Research. Your line is open.
Hi, good afternoon. Thank you for taking the questions.
I think we know the why behind it the Exxon its value proposition and the innovation you've introduced into the market, but I'm curious.
For.
Your perspective on recent account conversions.
Order of magnitude.
I have the numbers.
Bigger again.
Maybe the other way to ask the question is.
Okay.
Say, 30%, 35%.
<unk>.
Growth in the U S.
How much how much of that do you perceive to be from accounts that are freshly nu.
<unk>.
No.
Mike Thanks for the question.
So as we've said.
And I think everybody is acknowledged and certainly yourself and other analysts have had been writing about it.
Is that 60% of all the peoples practicing sacral nerve modulation in the United States I mean, I'm, giving you a round number.
Are not our customers today.
Okay, now I Dare say that we're helping some of those accounts that are not our customers because people are walking in their office to asking about electronics therapy and they go Oh, yeah, well, we got that too, but it's call it something else.
So that's kind of what's going on out there. The first time, we're creating awareness in the marketplace.
So.
It's this awareness that's being created and the tools that we're providing in other words something as simple as.
A symptom questionnaire that is handed to new patients when they walk into the existing patients when they walk in the door. So that the patient can fit there and in two minutes can score themselves. So if they are moderate to severe in terms of incontinence than the physician and the staff can talk to them about about this this is never been done before so I mean this is basic.
Brock blocking and tackling.
We're talking the most basic now have we've been able to get every account that we have to implement this no. Okay. We're still working through those processes, but what we're seeing is.
Better utilization in these accounts than we've seen before.
And we've called it same store sales I think thats, a good way to refer to it so.
So they are increasing.
And that is really what is driving the revenue of the company now are we picking up new accounts, absolutely and we're going to continue to pick up new accounts and I would dare tells you that until we have them all.
Continue to hammer on everybody to get our message across and so the words out right. The word is out the docs are popping their head up out of the sand and they're hearing from their other colleagues Hey, These Exxon X folks man they've got the technology, we've got great people. They provide great support and these products last a really really long time, so I think.
We're doing all the right stuff and it's just going to be a matter of time now.
Before we continue to have more and more share of wallet.
And more and more share of this market.
One of the things that we're keenly focused on in these accounts that we've converted is to get them to give us more of that business right. So we still have people that are splitting their business and there may be early in the conversion to <unk>. So we still have a long way to go even in the accounts that have recently converted so.
I understand the question I understand that there's a lot of folks out there that are thinking Oh Wow is this just a share shift game.
And it's not I mean, the fact is it's not like these are budgets not like say Kona modulation as budgeted.
Many patients that are going to get it I mean, this is about patients walking in coming to the realization between their physician in themselves that this is the right therapy for them and we're going to continue to see.
Stay focused on that.
Okay.
Thank you one moment our next question.
Yes.
Okay.
Our next question comes from the line of Sugar and sing from RBC capital markets. Your line is open.
Thank you for taking the question. This one from me could you discuss where utilization could go for SLM procedures longer term and perhaps you can share the current range within your customer base, you know what that looks like and what you are doing to really expand that you did touch on DTC, but just curious if there's anything else we should be focused on.
You.
So we have so.
I understand the question I appreciate the question.
I think that everyone would be surprised.
And how low the utilization of <unk> and on a per account basis.
Average.
Let's just say the average is in the neighborhood of 12 to 15 per year.
Okay. I mean this is abysmal.
In terms of what is what is reasonable what is possible et cetera et cetera. So we're dealing with.
A whole lot of Dabbler as as we refer to them out there.
Okay. So that's the state of the state.
What we've kind of.
Come into this market and that's what we find.
Now are we satisfied with that no. It's ridiculous. It's ridiculous low now there are plenty of accounts that we have that they do 15% to 50, a year and those are those are some really really nice accounts and then there is the less that do more than say 50 implants in a year.
Alright, Nice prize if you can get those accounts, obviously and we're keenly focused on the smaller and larger accounts. So what are we doing.
Theres too many things that were up to for me to describe on a conference call like we have today, but I'll give you one of the most basic things that we do which is the single most effective marketing program and that is getting the account with our help to send a letter to.
There are customers that have already been.
Differentially diagnosed with let's just say overactive bladder a frequent continents, whatever the case might be simple letter goes out.
From the Doctor personalized electronically signed by them and included in the letter it says basically hey.
Dan We've got new technology for your for your chronic condition.
Why don't you fill out the symptom questionnaire and put it in this pre stamped return envelope and send it back to our office okay.
Simple as that so all HIPAA compliance stuff and it gets great response.
From the existing patient base. This is back to my comment about name.
Names in their file cabinets or in their EMR system that is that is the number one thing and it really surprises our customers because they're like Oh I thought I was doing a really good job and then they realize they sent 500 letters out next thing you know, there's 30 or 40 people that have raised their hand, and said, yes, yes, yes, yes, I want to come in and I want.
To talk about this advanced therapy. So that's one example, we also spent a lot of time with the AP piece. These advanced practice providers the nursing staff the <unk> Rins and the account so that we can help them with their top tracks. How do you communicate about sacral neuromodulation normal commit to your or to your patients getting enrolling them.
In this process because physicians have very little time, and I'm sure everybody on the call understands this the average Doc spends maybe 10 minutes.
With a patient so you can't rely on the physician.
To be explaining.
All these things to these patients they are very limited on time. So we realize this and we've been working on all kinds of different programs.
Where we can we can help utilize the staff and so on so forth to get more patients into the into the therapy. So this is just one of a whole list of various different marketing programs that we have available.
Basic stuff, even things like making sure that on the physician's website that they actually have information about sacral neuromodulation a bulk of it you'd be surprised.
Very small percentage of them even have invested in these types of basic thing. So it's not and this is the point I've been trying to get across for number of years now that in order to grow this business in order to for us to continue to see increases in utilization and for us to grow year over year. It is not.
Rocket Science this is all basic stuff.
101, marketing right that we're talking about and so forth now the fact that none of this has ever been done before okay. This is not what was happening for axon ex showed up on the scene.
Is the time that it's taking now we have to overcome the legacy.
Our situations. So I appreciate the question hopefully that this was a.
Good enough answer so you get a sense about the kinds of things that we're doing.
Thank you one moment for our next question.
Our next question will come from the line of Richard <unk> from <unk> Securities. Your line is open.
Hi, Thanks for taking the question.
So.
Congrats on the on the operating performance, particularly the the margin improvement in profitability here. This quarter I guess my question is really just about how you balance.
<unk>.
Pursuing revenue growth from here and you are clearly at an inflection point of sorts on the profitability curve. So I'd love to hear Ray just.
How youre prioritizing those two especially as we think out a little further and particularly if you could put into context.
Where the investment goes with respect to reps, maybe even M&A in addition to DTC.
Yes.
For the.
A question and thanks for acknowledging the superb.
Adjusted EBIT result in the quarter.
Which I think really as Dan said, it really underscores the leverage that we have in this in this business model. So here's the thing.
We'll make this comment we are not holding back on spending money.
Let us be clear about that we are doing everything that we think makes sense to help us grow. This business. We are not holding back on hiring salespeople, we're not holding back on trading them, we're not holding back on HQ visits from our physicians, our ATP events or DTC. We are not holding back. This is not about squeezing blood out of Iraq to make it make it make it look good from a <unk>.
Financial standpoint, this is natural because it just what's occurring in naturally occurring in our business. So I mean, that's the comment if we see an opportunity where if.
If we have underserved.
In other words, we're not making a penetration in a given part of the United States. Then we're going to add the additional people that we need to get to those accounts that we're not getting too so.
I think that I think that's important for us to get that message out yes, we're at an inflection point, but it is a good one because we've got leverage in the business and money is dropping to the bottom line and this is what we had predicted all along so Dan and I are not surprised that this is actually what's occurring.
The margin Okay, a point here a point there one way or another is going to be variable, but other than that I think.
We've turned the corner now and this is going to be a fast growing profitable company for years to come.
Thank you one moment for your next question.
Okay.
Our next question comes from the line of Adam meter from Piper Sandler Your line is open.
Hi, Ray Hi, Dan Congrats on a nice quarter and thank you for taking the questions here.
Keep it to one.
Wanted to ask about the updated guidance for the full year, we increased the guide by 10 million it looks like that increases evenly split between Saco and bulk Madden.
For Q2, I think you beat by $6 5 million or so so you're raising by more than you beat can you just talk a little bit about what's informing that decision.
In broad strokes any more color that you can provide on the second half cadence in 2023 Q3 versus Q4. Thank you.
Sure Hi, Adam Thanks, I'm always good to hear from.
Yes, the thing Thats driving the change in the guidance is look we obviously meet regularly with the entire field team and they basically come back with what they see each of their accounts doing we roll it up to the area director level.
And then we have a discussion and so look we're just being transparent and changing the guidance as we see fit to be as accurate as possible and so really it's just basic blocking and tackling we have 725 plus employees in the company with over 400 of the field.
But.
As you would expect we have.
A very capable and large infrastructure of people and sales management and <unk>, including the Chief commercial officer of the area directors and the key account managers and so.
We have very detailed granular insight into each of our accounts. So one thing that ray talked about earlier was the same store sales we've seen high teens growth in same store sales from year to year and so for us to adjust guidance is just an indication it's going well what we predicted.
Guided at the beginning of the year was that we would have a big step up from Q1 to Q2 Q3 would look a lot like Q2 and then there is.
The seasonality step up in Q4 when patients have met their deductible. So really no change in the guidance other than business is going well and we just want to.
Key messaging that everything is tracking according to plan.
Yes.
Thank you one moment for the next question.
Our next question comes from the line of Mike Matson from Needham Your line is open.
Yes. Thanks.
So.
Just given the strong adjusted EBITDA in the quarter and kind of what.
Yes.
Consensus is modeling that supplies for the second half I mean, your revenues should be even higher. So I mean is there any reason that you're kind of adjusted EBITA margin at all or at least stay at this level or even potentially go higher over the rest of the year.
Now Youre reading it I have a high bar.
Good to hear from you now Youre reading it correctly, which is when we look forward at the Opex we're still.
Confirming the guidance we provided earlier in the year in terms of total Opex for 2023.
And Youre right as revenue steps up even with.
A point or 0.5 change in the gross margin percentage Youre, absolutely right, which is it should continue to trend as you are estimating which is they should look very similar or even better as we go into Q3 and Q4, we're continuing to add to the sales team are continuing to add some expenses and G&A.
Back of house operations to support the field team and to support the customers.
But just to lay it on the line there is no significant opex expenditure thats coming down.
Down the lane in the near future that we see that's going to impact our path to profitability.
Thank you.
One moment for our next question.
Our next question comes from the line of Anthony Petrone from Mizuho. Your line is open.
Great and congrats on a great quarter here too.
Two quick ones from our and just kind of high level views on the CMS proposal for <unk> in the ASC setting just just early views there from from Exxon X if that were to be finalized.
How do you think that influences the decision between.
Tibial in sacral Neuromodulation next year and the other one I'll quickly put it in there as you know intuitive surgical report a couple of weeks ago opened up the idea that <unk> could.
We're seeing some impact in U S bariatric surgeries.
One of the behavioral recommendations for overactive bladder is weight loss and I think there is a higher incidence in 32 plus BMI. So.
Any any thoughts on.
Could could GOP ones.
Influence the.
Overactive bladder space. Thanks again.
So Eric this is ray thanks for the question.
Look at this.
This <unk> one phenomenon.
I think anybody really knows what the impact is going to be over time, and how long anybody's going to stay on that <unk> or maduro whatever it might be so we will see.
What that means that we have tens of millions of patients with moderate to severe overactive bladder. We've got I think the latest number was like $22 million, specifically moderate to severe stress urinary incontinence patients.
<unk>.
This is a huge.
An underpenetrated and untapped market. So we're nonplussed.
I wish everybody out there who wants to lose a few pounds. Good luck.
Doing that right. So that's great.
In terms of implantable tibial nerve stimulation I think the most recent.
Comments or.
Also of the from CMS I think just simply underscore what we've been saying all along.
And.
Let me just be clear we are in the second no modulation business, we think sacral nerve modulation is the way to go these are permanent long term implants to provide.
Symptom relief and the 98%.
Symptom relief for patients.
We are not in the <unk> business, we don't intend to get into the <unk> and we don't see it as having any impact on our business going any measurable impact on our business going forward. So I appreciate the questions.
One moment for our next question.
Our next question comes from the line of Ken Catch March from Morgan Stanley . Your line is open.
Hey, guys I. Appreciate you taking the question just on <unk> could you maybe share. Some initial takes from any engagement you've had here with docs about the check and we spoke with one recently and you seem pretty excited about the placement solution, but I would assume your sample size is a bit bigger than us and then maybe if you could share some thoughts on any further enhancements you'd like to add to the <unk>.
<unk> portfolio in the long time, thanks, a lot.
What was the second part of the question any other enhancements to <unk> system.
So I think that I alluded to it in my prepared remarks that we also have a new external trial system that is forthcoming and we think this is going to make it more comfortable for patients.
And and more convenient for physicians. So that's kind of included and kind of sort of combined with the.
Lead finding or the sacrum finding technology.
But two discrete things.
Just so we're clear we did quite a bit of diligence with respect to the frame and finder.
We discuss it when <unk> come to visit us.
And we get a lot of very positive feedback from them, but just to be clear. This product is not in anybody's hands.
Okay. So.
We're in the process of hardening.
Finalizing the hardware design and hardening the software package and all that stuff and then we'll start to later this year, we will get the product.
Under.
Let's just say a non significant risk kind of study concept into the hands of a few customers. So that we can do some usability testing and so forth. So.
Look people are enthusiastic about it but just in fairness I don't want to oversell. It because the fact is we haven't put it in the hands of physicians yet.
But people get the concept and they think this could be helpful.
Back back to talking about that I mean, just the elimination of having to use life fluoro.
I think is a big thing because.
Just less exposure to Florida is a good thing and if we can help people save a few minutes.
By doing an external trial and getting that lead placed in the right place then it's a winner.
And the beautiful part about the product as it is not expensive.
A little piece of hardware and some software. So it's not like this is something that is costly or is going to increase.
Create a burden financially or anything else. So we're excited about it we think it makes sense, we're going to keep our eyes open anything that we can do that could enhance the SNF portfolio.
We're certainly keen on doing it but at the moment I think we've got.
Two big projects that are forthcoming in 2024, and that's keeping us busy internally.
Okay. Thank you one moment for your next.
<unk>.
Our next question will come from the line of David risks from Baird. Your line is open.
Oh, great. Thanks.
Thanks for taking the questions and congrats on the strong quarter.
Ray I appreciate the comments that you provided just around this.
15% it kind of market growth outlook, you touched them.
On some of the kind of account share basis.
Gross that's been going on in the quarter.
Thus far so far.
You get a lot of questions just around the <unk>.
<unk> kind of growth implications for us and them and when I look at <unk>.
Just today in our model I think 'twenty 'twenty, four maybe 20 plus percent or so and that.
That assumes probably some of those share gains in some of those market growth outlooks that you have.
Talked about and I'm really just wondering here.
If you could provide any color at least maybe more around specifically that level of visibility that you do have that again gives you just this confidence in a longer term rising adoption trends for us and them as a whole. Thank you.
Sure.
Think.
Think folks know that.
Personally as CEO of the company I'm, probably a little bit more involved than most Ceos are in terms of customer facing activities and talking with our customers.
I enjoy it be it's helpful to have these kinds of conversations where I'm not relying on information that got filtered through five different layers.
So I can tell you that every single doctor that I've spoken to and I, probably spoken to at least 100 of them personally this year.
Every one of them says theyre not doing anywhere near the volume and SM that they could be doing they all will admit it now that we've been doing a lousy job and only a very small percentage I mean, we're talking less than 5% of the patients who are in their practice have actually gotten advanced therapies.
And so forth. So we see what how this is happening with bulk amend this is very interesting look at this phenomenon I think nobody used bulking bulking scrap is trash fibre blah blah blah. It was all about slings right, we'll look what's happened.
Just in this last quarter alone 20000 people got Bocom at 20000 people got Bocom it.
For a product that hereto for nobody was using okay. So that speaks to the power of what happens when people get behind our new therapy and realize these great results were overcoming a legacy.
That existed for over two decades, where sacral neuromodulation was perceived as a therapy of less resort because it wasn't MRI compatible it didn't last long and it was fussy. Okay. So it's going to take some time and we're three five years into the game with a global pandemic in the middle of it.
<unk> changing the way people view this technology. So I can tell you every data point, we look at whether it is same store sales whether its response to DTC, whether its response to mailers that go from the office or whether it's our attendance at the at the events that we that we put on the interest is high their patients are plentiful.
All we need to do is have people open their mouth and say hey.
So technology is going to last a long time that could solve this problem once and forever for Ya.
It's working with stress urinary incontinence, nobody wants to sling.
But they want relief and Theyre signing up for Bocom and left and right same thing is starting now to happen there little shoots.
That are springing up all across the United States with respect to this so we can't be more bullish I don't know how to explain it.
Or what words I can use to explain how enthusiastic we are and how bullish we are about the future for this technology.
Thank you one moment for your next question.
Our next question comes from the line of Brett.
Fishman from Keybanc Your line is open.
Alright, Hey, Ray and Dan. Thanks, So much for taking the question I thought I'd throw one in on Bocom, Ed I think you mentioned on the last conference call that you were planning to start to look at placing some more focus on calling on Gis practices as a potential channel for bulk mid procedures. Just curious if you could touch on if you think the team has started to make some <unk>.
<unk> on that initiative and QQ and then overall, how do you look at the process for eventually bringing more of these doctors on board as potential customers given the scope of that opportunity.
Yes, Thanks, Thats a really good question I appreciate that question so.
A couple of comments, so I've talked about two initiatives to kind of new marketing initiatives. If you may one is a focus on botox injectors people that dropped out of the sacral nerve modulation game or or never got behind.
Behind sacral Neuromodulation for the reasons I've already described.
That is our number one kind of focus in terms of the new marketing approach, where we're now have just started literally in Q3 now marketing to physicians that do a lot of botox to try to get them.
Listen take a meeting with us and listen to why they should consider doing less botox in more cyclical modulation. So.
As we said in the past I mean, we think about in 2022, our data suggests that nearly around 150000 patients got botox.
So and when you combine the two companies in the space for <unk>. It was only 52000 implants. So we see botox is the big competitor quite frankly for US equity modulation know that wasn't your question, but going to Bocom Ed right now, we're only selling to urologists and youre going to college.
<unk>.
And more euro gynecologist or doing more bulk commit then the urologist because we have a lot of urologists that are focused on male urology right. So they're into the all the other stuff okay.
So gyn's are huge potential opportunity for us because they are the primary care physician for most women and it makes no sense that these people. These women are walking in the door for their standard.
Care and they're not being offered a solution for incontinence, we know that theyre all walking in that door first before they ever show up at a euro gynecologist office there.
<unk> office right. So.
We haven't gotten around yet to a marketing initiatives geared specifically towards that patient population because we've had other kind of bigger fish to fry so to speak and the bulk of that business is going so well.
But we're going to do it and.
I think maybe it's best I say that we'll get something going this year, but really it's a 2024 initiative I think that's the best way for us to frame it.
But you can see a lot of opportunity out there for revenue growth on the bulk of med side as well.
Thank you and I'm not showing any further questions in the queue.
I'd like to turn the call back over to Raymond Cohen for any closing remarks.
Alright, well. Thank you. Thank you for everybody's questions are really good questions. Today. We appreciate the questions always gives us a chance to give a little more color on these calls so I just want to say that look we're very thankful for the trust that our physician customers.
And patients have put in to US we really appreciate the support from shareholders.
Who have stuck with Exxon X.
Through thick and thin so to speak and I want to thank all my colleagues here in Irvine, who.
<unk> got their heads down every day trying to make things happen and building our products with care and quality and then obviously for our sales team in the field not only in the United States, but also internationally and down in Australia for their efforts and dedication to helping us fulfill our mission of improving the lives of.
More adults with within continent. So I, thank everybody for joining the call today and your continued interest in <unk> and we look forward to speaking with you again in the near future.
This does concludes today's conference call. Thank you for participating.
You may now disconnect everyone have a great day.
Okay.
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