Q2 2023 Tivic Health Systems Inc Earnings Call
Welcome to the <unk> Systems' second quarter 2023 shareholder update conference call.
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A question and answer session will follow the formal presentation.
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Statements made during this call contain forward looking statements about our business you should not place any undue reliance on forward looking statements. As these statements are based upon our current expectations forecasts and assumptions and are subject to significant risks and uncertainties.
These statements maybe identified by words, such as May will should could expect intend plan anticipate believe estimate predict potential forecast continue or the negative of these terms or other words or terms of similar nature.
Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward. Looking statements include but are not limited to the matters listed under risk factors in our Companys annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 31, 2022 as updated by.
The risk factors included in our registration statement on form S. One followed by the company equal with the Securities and Exchange Commission on October 26, 2022, and in our other filings with the Securities and Exchange Commission.
Statements and information, including forward looking statements speak only to the date that they are provided unless an earlier date has indicated and we do not undertake any obligation to publicly update any statements or information, including forward looking statements, whether as a result of new information future events or otherwise except as required by law.
Let me hand, the call over to Jennifer Ernst <unk>, Chief Executive Officer.
Hello, everyone and thank you for joining US today My name is Jennifer and I'm, the CEO of Catholic Health.
This is usually the part of the call where I will say I am pleased to have this opportunity to review the business results with you.
As you've seen from our dance announcements and recent transaction book has been a particularly challenging quarter, it's particularly challenging time period for the company.
So what this call today, we will focus on primarily and some of the steps that we've been taking them to move the company forward and to position the company better as we move into the next coming quarters and year.
I also I'm joined today by our interim CFO , Kimberley bombard who will be reviewing the financial performance and some of the internal restructuring steps that we've taken.
Now when I prepare for these calls.
I find myself reflected in both the current quarter.
Recent transactions and on the underpinnings of the business.
I'd like to take a step back with our investor community in that light.
In Q1 of this year, we entered the year with.
It's an open S. One if at all.
Transaction in an acquisition.
And we had a real got touch one in February it's very challenging environment, we were looking to close the transaction the $10 million.
We ended up well below that with the transaction that now there are only $3 6 million to the company now since that time, we have actually closed that gap additional transactions. We brought in a net proceeds to the company of approximately $4 8 million.
The Q2 is not a particularly hard time.
The one that came with some very tough decisions decisions necessary to move the company forward.
As part of being that going through that period, we held back on our marketing investments to retool to realign the marketing initiatives to segment that have the strongest likelihood to purchase the highest willingness to pay.
We implemented a pricing increase we increase the pricing to reflect durable increases in electronic component parts.
Things that are now part of a new economic reality for us and for many companies and these price increases while making the product sales more profitable directly impacted the Q2 sales topline revenue.
Well as I discussed in our letter to shareholders a few weeks ago.
We also have been battling through the compliance issues with our NASDAQ listing.
These are these issues are now on the verge of being resolved all right based on the recent vote, but we also have brought additional capital into the company and I will address further in our Q&A section.
We downplays the team in certain areas, we performed an internal reorganization to bring more focus to critical work efforts.
Well, so determined scenarios under which we needed increased strength and experience.
One of those is in the area of finance, having brought in an interim CFO Ken bond back.
As well as in our marketing leadership.
Been retained Elizabeth Jackson on a consulting agreement.
Both of whom have turnaround track records in the public markets.
Kim in particular brings over 30 years of financial leadership experience in both public and private industries.
Ground include financial leadership in medical retail markets manufacturing and wholesale distribution license of digital media and broadcasting and importantly, she has participated in the rollout process to be able to bring new value into investors through M&A processes.
We also added an adviser to the board Christina Laurie.
30 year Wall Street veteran with well respected by the street and ranked as the number one biotech biomedical analyst and Wall Street Journal's best of Wall Street.
She has extensive experience identifying and analyzing the commercial potential for breakthrough innovation.
We think it's going to be very valuable as we assess our next steps as a company.
We also had the experience mentoring and advising C suites of private and public early stage healthcare companies through product development regulatory or go to market strategies potential mergers and acquisitions and ipos.
So I am deeply grateful for Christina Hillary's experience coming to the board as an adviser.
Each of these team members, who have successfully developed and executed transformational business strategies to drive growth enhance operating performance and execute turnarounds.
So with this newly added talent and expertise we are a very different team than we were just even six months ago.
Certainly very different than we were two years ago.
But one thing has not changed though.
Our goal to build a diversified health care company anchored in novel Therapeutics, and specifically in the area of bio electronic medicine.
Therefore, the development pipeline is as important to the company out of the commercial traction that the outlets. We are building and in fact potentially more so.
So with that lens I'd like to go into looking at a few of the updates on our research and development programs from this quarter.
Earlier this year, we announced a research collaboration with the Feinstein Institute for medical research to conduct a small.
Pilot clinical study on a novel Noninvasive bio electronic device.
This device targets, the vagus nerve and we're utilizing a newest stimulation approach that is expected to enable more precise targeting of vagus nerve activity.
This is important because one of the areas that's been called vagus nerve back from broader adoption, there's the potential for unintended side effects.
With more precise targeting we expect to be able to open up applications in neurologic cardiac and the autoimmune areas.
Enrollment has begun for that study and we will be looking forward to sharing results on the outcomes of that as we move forward.
We continued expanding our IP portfolio and that includes expanding the clinical targets.
As well as the issuance of new new patents on our previously filed patent.
So as a company, we're looking not only at the bulk when we have today, but how we take the bio electronic expertise, we have and create a broader portfolio of offerings.
We expanded our collaboration with renowned international hospital on a sham controlled clinical trial, that's evaluating our bio electronic medicine, one of our devices for post surgical pain relief.
There's 60 person study is currently ongoing.
And this year. It was brought in to go beyond the onto learn geology Department to also include the facial plastic surgery area.
This study aims to investigate potential benefits of a drug free alternative to traditional postoperative pain management, which the traditional method is to use opioids. So our collaborator on this just looking specifically for opportunities to reduce dependence on opioids as part of the treatment regimens.
In Q2, 'twenty two 'twenty three we also advanced our commercial roadmap, we launched our B to B portal now that portal increases the streamline that even for the ordering and fulfillment process for professional customers and reduces our company is logistical complexity.
We implemented a price increase this quarter after completing marketing research that indicated customers would be willing to pay more for the unit.
And this quarter, we also expanded the target market for clear up to include consumers that links their allergy and congestion issues to deprivation of sleep exercise and concentration.
Oh at the end of Q2, we signed a distribution agreement with Cardinal health, the first or one of several that we expect with a healthcare oriented focus with Cardinal health is a leading distributor of medical products worldwide.
Execution of this agreement is one of our key steps in expanding distribution and marketing targeted at the health care professional networks.
In short.
From a business standpoint, this quarter was all about ensuring cost cutting measures were implemented and processes are streamlined we reduced our operating overhead we reset our marketing programs to drive efficiency and to begin repositioning our products.
This resulted in a significant revenue dip this quarter, but we expect to see growth and improved targeting in the second half of 2023.
Now, let me hand over the call to Kevin really bombed back specific health interim CFO to go over the specifics of the financial results for the quarter ended June 30th 'twenty to 'twenty three.
Thanks, Jennifer and good afternoon, everyone as Jennifer stated the second quarter was a challenging one for the company and is reflected in our financial results for the quarter ending June 32023.
We posted second quarter revenue of 161000, a decrease of 367000 or 69, 5% compared to the same quarter last year, primarily due to significant reductions in unprofitable marketing expense. This resulted in an 82% decrease in unit sales offset by a 69%.
Increase in the per unit average sales price.
For the three months ended June 30 cost of sales decreased by 303000 or 75% compared to the same period in 2022, primarily driven by the decrease in sales volume.
Variable cost was $64 per unit for the three months ended June 30, compared to $80 <unk> 10 per unit for the same period in 2022.
The decrease in variable costs was primarily driven by lower manufacturing and fulfillment costs.
Fixed costs were $60.48 per unit for the three months ended June 30, compared to $10 16 per unit for the same period in 2020 to the.
The increase in the fixed cost was due to the lower sales volume to absorb the fixed expenses, we expect to see that improve as sales increase.
Our second quarter gross margin was 37, 5% as compared to first quarter up 31, and 23, 4% in the same quarter last year, we expect our gross margin to increase with increasing sales volume over which fixed and semi fixed costs are allocated.
Research and development expenses decreased by 29000 compared to the same period in 2022.
Research and development activities in 2023 are related to the Feinstein vagus nerve stimulation study.
The segmentation study to identify additional incremental market segments for our products.
Design for our next generation device as well as enhancements of our intellectual property protection.
Sales and marketing expenses decreased by 673000 compared to the same period in 2022.
The decrease was due to discontinuing unprofitable advertising and causing other campaigns to reset messaging positioning and creative with in the second quarter, whereas third quarter will be focused on optimization and expansion of campaigns with improved performance and conversion efforts, while bringing new distribution partners online.
General and administrative expenses decreased by 255000 compared to the same period in 2022.
The overall decrease was attributable to a decrease in personnel costs professional fees and other overhead costs offset by one time severance expense.
As a result, our second quarter net loss was $2 1 million compared to 3 million in the same quarter last year.
Lastly, our cash balance at the end of the quarter was $2 7 million and we continue to maintain a no debt balance sheets.
From July 11, 2023 to August nine we sold an aggregate of 116.923 million shares of common stock to certain investors at prices ranging from five and a half cents to <unk> <unk> per share and a series of registered public offering resulting in aggregate proceeds to the company.
Approximately five 2 million.
Net proceeds to the company after expenses was approximately $4 8 million for a total of $7 5 million in cash available.
On August 11th we held a special meeting of the stockholders for the purpose of obtaining stockholder approval to authorize a reverse stock split.
Our stockholders approved the proposal of the special meeting and we currently expect that we will implement a reverse stock split at a ratio within the approved range.
The NASDAQ hearing date in order to regain compliance with the minimum bid price requirement.
I will now hand, the call back to Jennifer for ending remarks and to begin the QA portion of the call.
Thank you Kim now to recap.
Q2 was a reset for the company.
We have realigned the team.
Revamped the cost structure of the business reduced overhead expenses.
Undertaking a more focused marketing strategy.
And continue to see improvements in gross margin.
We have taken the first steps in opening new health care focused channels.
And look to be increasing engagement with the health care community around uses of bio electronic medicine, particularly in the management of inflammatory conditions.
Our research pipeline began moving forward at a brisker pace after delays in clinical enrollment in 2022 in early 'twenty three.
With a continued focus on new product outcomes and breakthrough opportunities.
And we are continuing to evaluate M&A opportunities.
But with an expanded lens to allow for stronger diversification.
These measures involved and tough decisions, but they are important in setting the company on the track to rebuild shareholder value and trust.
So in that context, I'd like to move into the Q&A portion of the call.
One of the key questions. We've received in recent weeks that's been around the series of back to back equity issuances.
In one way shape or form the question has been along these lines the company.
Recently done an unusual series of back to back equity issuances.
Why have you raise capital this way and what should investors expect that going forward.
So to answer this I think it'll be helpful. For me to go back to earlier in the year again back to Q1.
We entered the year with an open us one for $10 million capital raising transaction that ended up as I said earlier closing only $5 million and none of the company only $3 6 million of that at a value at a share price value below the NASDAQ minimum listing price.
Yeah.
This was lost as a bit of a rock and a hard place to place nosy whoever wants to be with not enough capital to spend on building our sales funnel executing R&D to develop stronger products and not particularly interesting yet as an acquisition target or as an acquirer.
Very difficult spot to be in the series of transactions. We've just completed brings us closer to the needs communicated at the start of the year.
The new capital plus a restructuring or cost reduction measures realignment of the team.
It gives us the foundation from which to start rebuilding and executing on three legs of a turnaround strategy.
I'll go into that a bit more.
Now to the question of the structure why did we do it in the format we did.
That was really a multipart format was a result of various SEC and NASDAQ rules without the manage as we moved through the NASDAQ listing compliance measures.
Also dictated in part by the market appetite for smaller bites.
Where are we could we provided all investors both early investors new ones. The same information that was used by the Maxim to market. The deal. Some of our earliest recorders came in alongside new investors actually seen it as a great opportunity to do some dollar cost averaging.
And one of the critical issues and structure and all of the financing has been something I mentioned in a recent letter to the shareholders.
Regarding NASDAQ listing compliance.
I'm pleased to say that as of Friday shareholders have voted and authorized the board to execute a reverse split that will bring us into compliance with all the speed requirements within the very near term.
Both price and common stock available in the public market float.
Next question was does the company plan to delist no. It's not a consideration at this time, we have taken extraordinary measures to protect the listening.
We believe that the company is better positioned to execute a turnaround with a public market vehicles as part of our toolkit.
I was also asked to say more about our M&A strategy as well as how the company plans to regain shareholder volume.
So first and foremost regaining listing compliance.
That I've discussed extensively in our recent communication and I know, it's not like this answer but it's a critical first step.
We have been doing repair work now with the share of shortly to be back into a healthy price range.
We have no outstanding warrants of any magnitude we have no debt and we have sufficient shares in the public float to meet our listing requirements and provide liquidity opportunity all of that I hope will be coming together to create a share vehicle that itself is a more attractive vehicle.
That is separate from the Companys growth strategy, which focuses on three areas you've heard us talk about improving the profitability and the scalability of the line of business, we have today with strengthening our engagements in the health care field.
We are expanding the number of organically developed products through strong clinical pipeline.
And we are looking to diversify through acquisition merger and licensing alongside those organic developments into high value therapeutic areas, particularly where chronic inflammatory mechanisms are a key driver of the disease.
This is an area I'll look forward to sharing more details with you in each of these as over the remainder of the year and through next as we execute.
So to close out the call, let me say as always but I recognize and appreciate the support of the investment community of the internal and external thing and working so diligently through the recent matters.
And then frankly, the persistence of dogged determination of specific team I won't why it's been brutal in the public market and we have at the same time made important progress on the fundamentals of the business and it is with that same dog and spirit.
We'll continue to embrace whatever challenges lie ahead.
Well. Thank you for the time today and for your continued interest in dental.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.