Q3 2023 Cutera Inc Earnings Call
Yes.
Thank you for standing by this is the conference operator welcome to the two Tera, Inc. Third quarter 2023 business update conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask question to join the question queue. You May Press Star then one on your telephone keypad.
Should you need assistance during the conference call.
You may signal, an operator by pressing Star then zero I would now like to turn the call over to Greg Parker, Vice President of Finance and Investor Relations. Please go ahead.
Great. Thank you gave me and thank you everyone for joining US with me today is Taylor Harris, Q terrorist Chief Executive Officer and.
George I'm, an interim CFO.
Following our prepared remarks, we'll take your questions.
Discussion today includes forward looking statements. These forward looking statements reflect management's current forecast or expectation of certain aspects of the companys future business.
Including but not limited to any financial guidance provided for modeling purposes.
Forward looking statements are based on information available to us at the time those statements are made which by its nature is dynamic and subject to change.
Well I imagine that's good faith belief as of that time with respect to future events.
Let's see.
Forward looking statements include among others statements regarding financial guidance for regulatory approval.
Activity in for events and plan to introduce new products and expand into additional geographies.
The words that may identify forward looking statements. We encourage you to refer to the safe Harbor statement in our press release earlier today.
All forward looking statements are subject to risks and uncertainties, including those risk factors described in the section entitled risk factors in our Form 10-K that's.
Filed with the Securities and Exchange Commission and updated in our Form 10-Q subsequently filed.
<unk> also cautions you not to place undue reliance on forward looking statements, which speak only as of the date they are made.
<unk> undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances or to reflect the occurrence of unanticipated events.
Results may differ materially from management's current expectations.
With that it's my pleasure to turn the call over to our CEO Taylor Harris.
Thank you Greg.
Afternoon, and welcome to the Q terrorists third quarter 2023 business update call.
I'll begin with an overview of our third quarter financial results and then take you through the actions that can return to tear out a stronger operational and financial performance.
Revenue for the third quarter of 2023 was $46 $5 million a.
Decrease of 26% compared to the third quarter of 2022.
Revenue related to capital equipment systems declined 36%, while recurring sources of revenue declined 7%.
This revenue performance was below what we had projected internally and assumed as part of our previous guidance.
Most of the shortfall came from our core capital business, where we faced heavier macroeconomic pressures and impact from a company specific operational challenges than we had anticipated.
As such we are adjusting our revenue guidance for the fourth full year of 2023 to approximately $205 million down 19% from 2022.
We're planning for tighter financing conditions and procedural slowdown to persist we.
We saw these dynamics build over the summer and gain steam through the third quarter.
We're also planning to be disciplined with pricing and distributor inventory levels, leading to less of a yearend bolus than normal.
The entire industry is facing the same macro pressures for true tear off our business has migrated into more economically sensitive practices over the past few years.
It creates more exposure to discretionary spending.
The challenges we've experienced some service and reliability have dampened our ability to grow and will likely continue to do so during 2024.
I'll speak later to how we're addressing these issues, but a reasonable expectation is that it will take some period of time after that improvement for us to win back Trust.
We are being patient, putting the customer first and adjusting our cost structure as we wait for the macro and company specific headwinds to pass.
Additionally, I'll be clear and our entire skin suite portfolio, including X L V plus and secret provide us an opportunity to migrate our business mix and Baxter core dermatology practices over time.
We finished Q3 with approximately $180 million of cash on the balance sheet with Q3 cash burn modestly below Q1 and Q2 levels.
We burned a little more cash in the quarter than we had planned.
Due to the reduced top line as well as a necessary catch up of late payments, particularly critical materials vendors that we depend on as part of our supply chain.
These same dynamics will also affect our Q4 cash burn outlook.
Due to an issue identify with inventory control and accounting we are unable to provide full financial statements today and we will be late filing. Our 10-Q, we believe that these issues will lead to the need to restate Q1, and Q2 results, which we will do prior to filing a third quarter 10-Q.
Although the near term challenges that we outlined on our second quarter call have proven to be stronger than we anticipated. There is significant momentum here at acute care in a positive direction and our team is excited about our future. We remain focused on three critical priorities returning to operational excellence.
Building and I'll be clear franchise, and achieving long term profitability and we have made strides in each of these areas, where the combination of improved operational performance, including service and reliability.
For La <unk> clear and aggressive cost management, which we have already begun we believe we can bring the business to cash flow breakeven at using the cash we currently have on our balance sheet.
Yeah.
Our criteria University clinical forum or see you see US held last weekend in Las Vegas captures what we are capable of we had over 700 attendees and I consistently heard stories of how much. These customers love their acute care devices. These are some of the top practices. They do their homework and they view cute.
Jaret technology, that's the best hands down.
We use this event to rollout our new branding for the next era of acute care of.
Which we have named a new energy anesthetics.
In my opening address that so you'll see us I highlighted our vision to provide not only the best technology, but also the best partnership oriented support for our customers.
And to help them transfer the energy of our team and technology to create transformative outcomes for their patients.
We acknowledged that we have fallen short in the ways. We have supported customers in recent years, but we highlighted the strides we're making and we're committed to more.
There's one customer remarks of moving <unk> always had great products. If you can get the post sales support model right. This company won't be stoppable.
And that is the plan.
As we turned to terror around I will continue to update you on the three priorities that I outlined on last quarter's call.
I am happy to say, but those are still the same priorities and we are making progress.
First operational excellence before we can return to growth, we must address our operational challenges.
Shortly after I started we brought in Jeff Jones, as our Chief operating officer, and we consolidated several functions underneath them, including production supply chain quality and field service.
Justice made some critical new hires and he and his team are making strong early progress. The team has identified the key root causes for challenges that we have in five areas product reliability field service delays lack of inventory control supply and they added mismatches and excessive cost of.
Patients.
They've also put an action plan together to remediate the most critical elements of these issues by the middle of 2024 with ongoing improvement opportunities beyond that point, particularly in the area of cost control.
A few examples in the area of field service our backlog of open cases had reached an all time high as of mid 2023.
Over the last few months, though that backlog has already been reduced by 80% with most of the remaining cases, depending on spare parts availability to resolve.
The team believes that it can substantially clear this backlog a year round. While also returning to industry standard response times for New service calls.
No not to exceed industry standards like the second quarter of 2024.
Inventory management, we have assembled a materials control team and a retraining operations personnel on utilization of our ERP system.
And Stuart will describe later, we identified a significant issue with how the company has been managing inventory during 2023.
We will conduct another physical inventory count at year end and plan to fully remediate our challenges by mid 2024.
On the cost front to Taro has been overspending and operations in recent periods due to a lack of process and discipline exacerbated by the stress that the RV clear launch placed on the organization and the supply chain.
The company has not had effective processes for either repairing and reusing component to get a return from field service calls.
Or for checking the quality of purchased materials and rejecting those that aren't usable.
We are implementing these processes in the fourth quarter.
The company has not done a good job of selecting vendors for certain components, resulting in the purchase of lower quality of materials that they need to be scrapped or replaced.
We have moved to outsource production of I'll be clear on X L E plus but it cost positions that were higher than what we can achieve in house. We are correcting those decisions and it brought in experienced talent in managing supply chains, and the medical device and a laser based aesthetics industry.
The operations team also see significant opportunity to manage better our freight and warehousing expense.
In the near term through Q1 of 2020 for these positive operational improvements will actually have an adverse effect on cost of goods and cash burn by resolving the backlog of service challenges, we were spending more on spare parts and service than we did during the time when service calls we're not being addressed.
In addition, we still have purchase commitments the vendors for the initial ramp up of I'll be clear that will persist into early next year.
However.
After we resolved the service backlog and fulfill these I'll be clear commitments, we should begin to see improvement in cost of goods as well as working capital.
Our second key priority is growing the I'll be clear franchise. As a reminder, we halted new placements of I'll be clear three months ago in order to catch up with demand and to rethink our go to market approach, we have done that and at <unk>. This past weekend, we introduced an enhanced avi clear offering that.
Provides greater flexibility and simplicity when utilizing this innovative first to market technology.
This new business model offers the option to purchase the device upfront with a corresponding reduction in ongoing treatment costs to the practitioner.
Along with greater business model flexibility, we will be offering a hardware and software upgrade that simplifies the user experience.
Significantly improve product reliability and moves billing from a birthday ship model to bang for individual treatment cycles.
As part of this transition the Avi clearer software will no longer require a patient specific QR codes, which had been a source of operational and billing complexity instead customers will be able to purchase packages of treatment cycles, which mirrors our model for terrorists true body platform.
And this has traditionally worked well both for customers and the company.
On the utilization front, we're planning enhanced programmatic support through cooperative marketing and.
In education, including a multi day University style training programs supported by the company's clinical training team.
The company is beginning of North American limited commercial release in Q4, 2000, and twenty-three focused on existing customers followed by a broader launch in Q1 2024. Additionally, the company will began in international limited commercial release in select countries starting in Q1.
24.
Our third and final priority involves our management of the core business for this priority we are solely focused on improving the profitability profile of the business.
Given the macro and company specific headwinds we were facing on the top line. We think that is the right approach for the near term specifically, we were focused on a S. P management product mix and cost structure.
In October we initiated a global restructuring program, which will impact all functions and geographies across the company.
The goals of this program are to align and structure of the external facing portions of the company's business to better serve customers.
Prove communication and coordination.
And gain operational efficiencies and support of long term financial health.
The changes made in the organizational restructuring had been carefully planned to ensure that customers will not experience disruptions in the service that they receive.
Through the end of the fourth quarter. The restructuring program is expected to reduce head count by close to 25%, resulting in personnel related savings of over $20 million on an annualized basis.
We're going through a bottoms up zero base 2020 for budget process for cost of goods and non personnel operating expenses during the month of November.
And we were planning on additional belt tightening activities coming out of that process.
We are also focused on pricing and mix in the third quarter, our asp's improved relative to the first half of the year. This may have cost us some revenue, but we need to to preserve brand integrity.
And gross margin to allow for profitable growth over time.
We're also putting incentive structures and promotional activities behind our higher margin products opportunities.
And as part of our restructuring, we're creating more of an emphasis on driving utilization and growth of consumables, both or Avi clear and the court.
I'll now turn it over to Stuart to provide more detail.
Thanks, Taylor as Taylor mentioned revenue for the third quarter of 2023 was $46 5 million a decrease of 26% compared to the third quarter of 2022.
Related to capital equipment systems declined 36%, while recurring sources of revenue declined 7%.
Skincare and I'd be claimed businesses, we'd assume that revenue would be similar in Q3 compared to Q2.
Our skin care business in Japan declined $2 3 million sequentially, while revenue was relatively stable.
Most of that revenue shortfall came from the cole capital business, where we faced macroeconomic pressures and impact from that can be specific commercial challenges than we had anticipated.
We are unable to provide full financial results for the third quarter at this time due to an issue we identified was imagery counting.
The film the full physical count at September 30th 250 victim of it.
If it's to remediate the inventory related material weakness.
Please now 2022 10-K.
Unfortunately discounts indicated the value of inventory on hand was around eight to nine millions rather than ever quarterly family. We began the process of analyzing these inventory differences line by line, but at this stage. We believe has significant bullishness eight to 9 million difference relates to prior 2023 quarters.
We're still in the process of assessing the impact on prior quarters after that analysis, assuming the impact is material.
Would need to restate, our first and second quarter 10, Qs and then filed a 10-Q for the third quarter.
I believe this process could take up to a few weeks.
And so as I mentioned, our revised twin 33 revenue guidance is approximately $205 million.
So that cash outlook, we're now planning to end the year with approximately $135 million of cash this isn't without all the combination of the reduced revenue and therefore collections outlook. The corrective actions, we are taking with respect to late payments to vendors and activating the supply chain to meet a spiff at least in order to meet the service needs of our installed base.
We anticipate having high levels of spend on materials purchasing through the first quarter of 'twenty 'twenty four and related to these remediation actions and committed purchase orders with you obviously, a supply chain that cannot be cancelled.
There's good news CNI after we get through these cash outlays, we would have an energy and fixed asset that can be leveraged and turned into cash over time I'd be curious next notable.
That'd be end of the first quarter of 2024.
Significant I'd be clear related to inventory and fixed asset balances on our balance sheet, which should be sufficient for multiple years of supply.
What that means is that as we shift to an upfront purchase one or we should have a minimal incremental cash costs.
I stated was kept at a purchase price of the device as we convert those inventory and fixed asset balances in cash.
Oh inventory position for the Cole capital business will also be an elevated position, although not to the same degree as that'd be clear.
We shouldn't be a material ex working capital improvements as we move through 2024, as we do a better job going forward, a matching of supply and demand at the component level.
And as we do a better job with the materials management processes that we referenced earlier.
All of that gives us confidence in the adequacy of cash resources, even assuming continued softer demand for.
For 'twenty 'twenty four we plan for revenue to be below 200 million and we are building a cost structure and working capital assumptions accordingly.
Any assumptions on like revenue transfer a cool capital and consumables business for the second half of 2023 stay intact next year in other words, we're not planning for an improvement in the macroeconomic environment.
We are also assuming that our skin care business in Japan will go away. After the second quarter of 2024 as a manufacturer it takes over the distribution business.
Offsetting these reductions in revenue should be crews have been clear franchise with strong cash conversion dynamics as Pedro Richards before.
Although we expect next year's revenue to be at 2023 level, we've just like cash flow to be significantly reduce weeks here due to a combination of the cost reduction activities cause used one time expenses and working capital improvements a meaningful portion of that expected cash burn in 'twenty 'twenty four will still be related to one time at least.
Including the obviously the inventory build for our committed purchase orders in the early part of the year as well as nonrecurring expenses.
So the retention payments.
On a run rate basis that means we would be entering 2025 at a much more manageable than right.
Which we should be able to further mitigate through gross and abbvie.
Continued work down of inventory and unfavorable working capital benefits.
I'll turn the call over to Taylor for closing comments.
Thanks Stuart.
I just want to say thank you to the team at Q Terra we're going through a number of challenges as a company, but we have a great team, which we've supplemented recently with some high caliber new hires.
<unk>, our C O O, Jeff Jones, and Brent Hauser, our president of international both of whom have significant laser aesthetics industry experience, but.
Team has a lot of energy and we're committed to the success of our companies and our of our customers and our company.
Operator, we're now ready for the question and answer session.
Thank you we will now begin the question and answer session.
Join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
He can speaker phone please pick up your handset before pressing any key to withdraw your question. Please press Star then two.
Yeah.
Our first question is from George Kelly with Stephens, Inc. Please go ahead.
Hey, good afternoon, and thanks for taking the question.
We did start to have a clear commercial strategy and the changes there could you give some additional details on maybe what you're expecting in terms of your existing.
Asian customers, how many you're hoping to purchase ethically or maybe what the breakdown could look like between Oh, I have a clear devices versus the.
The license I have it clear.
This is a strategy that you have currently and any details on pricing.
It would be helpful.
Thank you.
Yeah sure. Thanks, George So, let's let me start just with the business model and pricing and then we'll move into some thoughts around our existing customer base. So on the business model just to be clear, we're gonna be going to our existing customers and tele.
Them that they have an option and the option is they can stay on their current model, which is a least model with approximately $500 list price per cycle. So 1500, it for a session of three cycles for a paycheck or they could purchase.
The device and the on the purchase if they take that option then the price per cycle per treatment would go down to a list price of 250, so that starts to get the.
Procedural economics more in line with other products other procedures in the aesthetic industry.
And with the opportunities that we're looking at for cooperative marketing.
Additional support we think that that will be an attractive option. So that's the the the different business model options now, let's talk about the the existing customer base.
So a little too early to give specific numbers on leased versus owned but if you look at our overall base. We still have about 250 devices I'll be clear devices in the field. That's about the same level as at the end of the second quarter. So there were some.
Additional installations, but there were some returns we already have 200 scheduled returns and I think it's possible that up to 50% would.
What ended up coming back.
Due to just lack of engagement and so then then you're left with call. It half of that 12, 50, and Oh, well, we'll see I think there's there will be a mix, it's not gonna be uniform in terms of lease versus purchase, but but we think that both options.
Can work for customers when we did the market research it would indicate that more customers over time would want to own versus lease, but well, we'll let the data speak for itself as we as we go out to customers.
Okay. That's really helpful. Thank you for walking through some of those details maybe one.
Simple quick clarifying question for that I have a clear devices that a return, but now you have on inventory when you go out to new customers with those is is there still the option to either purchase or license those devices or going forward for new customers is it primarily.
Just a purchase them commercial strategy.
Good question right now for new customers, we're not planning on offering the lease model, but where we're first going to focus on the existing customer base and so we do have a little bit more time to assess response here and so you know open were opened my.
And at about that but right now the plan would be just to go forward with a capital purchase model with new sales.
Okay, great thanks for that as well and I'll.
Leave it to just those two questions and hop back in the queue. Thank you all for the time.
Thank you.
The next question is from Jon Block with Stifel. Please go ahead.
Thanks, guys good.
Good afternoon, maybe the first one just to continue to be obviously a ton of trap.
Hmm.
<unk> 50 option for the treatment.
I know if I missed it but arguably what would be the accompany a S. P.
The capital is it.
What do you choose that option and then may be just talk zoom out a little bit.
How did you handle it from a sales rep perspective.
Or you are driving customers into practices, because what you might be left with.
Is it a situation where you drive a customer into a certain practice and the dollars back to acute care or get pretty to one door versus another door and how you were able to manage that depending on how the docs select lease versus buy and then I'll ask my follow up.
Sure so.
On the capital price the list price John is going to be over $100000, we're not ready to to predict what the E. S. P is gonna be I will say that it's going to be lower in this initial phase, where we're going out to existing customers that will be when we when we go new and the reason for.
That is pretty simple you had customers already buy into their device through lease payments as well as the higher cost treatment sessions.
So.
That's the that's the current thought on the E. S. P on capital and then it's a good it's a good question on utilization and would there be different incentives, but really what we know and our team knows that for anyone to be any customer to be.
Buyable longterm whichever model, they're on it they're going to need support and they're going to need to see utilization of the device. So I think that there for for the sake of growth there is going to be the incentive to for us to help customers succeed no matter what business model they are under.
Yeah.
Okay.
But people tend to be one of my typical squeeze two into one but if you are the first one I'm pretty sure I heard you on 2024 revenues down versus the revised 23, maybe just a clarity question is that inclusive of skincare, what's sort of taking the skin care out of the equation.
That's an all in.
I know you did a great job laying out the challenges that I thought you were very transparent about that and what needs to get done, but I mean, it was a lot and at the same time, you're trying to take down the employee count by 25% and seemingly you leave a lot of the sales force intact. So yeah. Your conviction that you can do those keeping simultaneous.
So you'll get that laundry list of critical things done within the organization.
With just a much smaller.
They kind of behind it.
Hi, guys.
Absolutely I'll start on the 2020 for revenue. So the revenue does include a stub period of skin care.
Just as you think about 2024 relative to 'twenty three skin care will be lower than then in 'twenty three and it goes away because it's a partial year and it goes away after mid June.
With the core business, we're assuming that the business trends from the second half of this year are reflective of the operating environment for next year, which just means youre going to have a difficult comp year over year in the first half of next year. So that business would also be down year over year.
But then we've got Avi clear, which we're excited about with our new offering driving growth. So that's just directionally. The way we thought about the different parts of the business and then John I got I will tell you on your question regarding the challenges and what at the same time.
Having a reduced workforce.
I feel really good about where the organization is the and this doesn't show up right now in the numbers that we're reporting but if you could be here I think you could feel the energy so that the operations team for example.
Are there totally committed to getting <unk> back to great operational performance and that includes the people who have been here for a while as well as some of the some of the new people. So this is a mountain they're ready to go climb and the same would be true and in all other parts of the company and a lot of what we do.
Did in the restructuring was to address some complexities that didn't need to be in our business that that created confusion or lack of accountability. So we've consolidated functions, creating single point of accountability and I think that there really is a renewed energy.
Because theres clarity of priority and clarity of ownership and everybody knows that what they do can and will have an impact on the success of the company and we're also really rallying around the success of the customer so.
So yeah. It is something that we are keeping our eye on absolutely, but I feel really good about right now.
That's great color thanks, guys.
The next question is from Margaret Kalvar with William Blair. Please go ahead.
Hey, good afternoon, guys. Thanks for taking the question.
I, maybe wanted to start a little bit on the macroeconomic factors that you referenced at the beginning of the call and I'm kind of throughout.
I'm curious you know is it Florida on demand that has surprised you still coming from the med Spa channel or is it starting to expand.
That into Germany, and plastics and Hot and then I don't know.
Was there a U S O U S split them capital.
Alright.
Yeah.
Okay I'll answer the first part and then.
I'll see if stewart or Greg can chime in if we have that detail yet on your second question.
So Margaret we're in the third quarter, we saw reduced capital purchasing activity across all segments of the customer base and I'm hearing from customers that of all stripes that they were seeing a procedural or a patient.
Slow down as well.
However, what I would say is that we are we have shifted our business over time to be about 75%, what you might call noncore in other words outside of dermatology and plastic that is largely the med Spa channel, but does include other other elements.
And so we do think that that is a more economically sensitive portion of the market and we're more heavily exposed here.
What was it sorry in market I think the second question was on the capital sales the split of International and North America.
We were down in <unk>.
In both North America, and internationally and Greg just looking to see if we have any numbers for you.
Sequentially.
Yeah, and part of that follow up I'll have them, yet we were down in both actually.
So we can talk about that involved.
And then you know I wanted to hit the cash burn and it was helpful color both on the column in the front any comments on that.
But yeah.
Yeah, I think I'm doing a quick math right, where you know maybe you're sending a 45 million burn in the fourth quarter and I know, there's some one time restructuring cost and that but yeah, let's call. It something like 170 ish million annualized right. So and then you've got the restructuring savings of $20 million annualized so maybe we're down to 156.
Correct My math I'm not talking about no abbvie is going to be better from a cash burn perspective, but maybe you can bridge that gap, but by how much.
And is there a possibility where that burn can go down about $100 million relaxed for 'twenty 'twenty four thank you guys.
Sure Yeah, so to jump to the end of your question. The answer is yes, and it just maybe let me give you some color from the third quarter that would be helpful. Here. So in the third quarter, we burned at 43 million of cash and all of that it was about 20 million.
Is that related to the core losses of the business with the remainder being primarily working capital changes and that's.
Both the buildup of inventory with all with I'll be clear, primarily but also with the core as well as this issue that we referenced of being late with our payables and needing to needing to pay that down so that we're being a good partner to our vendors and that's actually critical as we try to address.
Yes, our inventory and our service parts challenge, we need to be on good terms with our vendors. So that we're getting in the parts that we need so hopefully what that what that shows you just from the Q3 analysis is that a substantial part of our burn in 2023 was related to.
To either working capital or nonrecurring items. So just.
Just one more comment on upfront Q4, as well as Q1 of next year, we'll have the similar dynamics.
But after that we do believe that we're going to be able to shift into a different mode with respect to working capital, where we're able to start working down I'll.
I'll be clear as well as the core.
Core inventory positions and will be caught up on our on our payables. So that's gonna be that plus the new business model that we have for RV clear should result in more favorable cash dynamics Q2 on word of next year.
Thank you guys I appreciate it.
Our next question is from Matthew O'brien with Piper Sandler. Please go ahead.
Okay.
Hi, This is Amanda on for Matt.
Hi, Thanks for taking our question when I used the first one for Tim.
Now that you've been there for a few months. So we're just wondering.
I think you characterized it as healthy Barbara.
Our expectations are they significantly worse than when you walked through the door.
Well.
I would I would say that there's a mix of good.
And bad relative to our favorable unfavorable relative to expectations, but it skews favorable and let me let me just start with that I I think I.
I would go back to the same comments I made earlier.
What really will matter here in the medium and longer term is do we do we have the right technology and the right team and on the technology front, that's always been clear with Q2, we've got great products and what I'm, even more encouraged about and when I started is.
The quality and the commitment level of the team and that too is going to go make this happen. So that that is absolutely the overriding since that I have however.
It is that there are more headwinds facing the business. Then then we realised three months ago, and certainly than we realized nine months ago and those are both and I'd say largely in the macroeconomic category, but we have continued on earth.
Some fragility and in the foundation.
Processes that were that have not been working miscommunication and those those did get to a you.
A breaking point and so for example, we we identified this inventory management issue that were that we're gonna have to address but where we're taking these in stride and I think we've got the right team to take care of them. So we're gonna get through those and then and then move on it.
Is returning the business to growth.
Great. Thank you for that I guess, one more on that inventory issue.
Just provide a little bit more in detail.
And maybe timing on when you expect that to kind of be ethos.
Yeah, Hi, it's Joe speaking thanks for the question Yeah. So we did account at September 30th.
Three locations covering about 80, 90% of our total inventory.
So the amount we counter it was around eight to 9 million lower than what was being recorded and now our ERP system.
It's going through the process of assigning the eight to 9 million to prior quarters.
So typically that there is a material misstatement in previously filed quarterly numbers in 2023.
When you think about half of that difference we've identified it relates to our process happening in the ERP system, whereby he returns were ending up being doubled up in values.
And then the residual balances.
It's really a laundry list of individual items that were still facing so we think to your second question around timing.
We indicated it could take up to three weeks.
An estimate.
As I say, we need to continue this assessment and then we need to get the order. It is true our six months as well.
Thank you.
Yeah.
The next question is from Anthony Vendetti with Maxim Group. Please go ahead.
Yeah.
Yeah.
Yeah.
It appears Mr. Hu and Debbie has us on hold [laughter] iberdrola.
Just mute his line.
And this concludes the question and answer session I'd like to turn the meeting back over to Taylor Harris for any closing remarks.
Yes.
Great. Thank you in closing I would like to thank two members of our board, who have recently announced their resignations, Janet Widmann and Julia Park.
Thanks, so much to Janet and Julie Ann for their years of service turkeys here I think we youre, leaving us in a in a good spot and then to the to the rest of the team. Thanks for all the hard work and dedication thanks to everyone for joining us today and have a good evening.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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