Q3 2023 Tivic Health Systems Inc Earnings Call

Welcome to the <unk> systems third quarter 2023 shareholder update conference call.

All participants will be in a listen only mode.

Please note that the conference is being recorded.

Statements made during this call contain forward looking statements about <unk> business.

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Risks and uncertainties that could cause <unk> 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 the company's annual report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 31 2023.

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Now, let me hand, the call over to Jennifer Ernst <unk>, Chief Executive Officer.

Hello, everyone and thank you for joining us today I'm Jennifer C. E O today I'm joined today by our interim CFO Kimberley bond back.

And as usual before she goes over the details of the financial performance I'd like to start with a few comments on the quarter and a few highlights as we continue fight aimed to build a stronger today.

Over the past three quarters, we've had a number of initiatives that are starting to pay off.

As a reminder, earlier this year, we increased our pricing in response to durable increases in the underlying components of our product.

We also tightened our marketing spend while retooling of the marketing for a new price point and again opening up new healthcare centric channel.

To cut to the Chase. These moves resulted in a 71% increase in gross profit versus the same period last year.

Despite a decrease in revenue.

So net we made more dollars on fewer sale.

This is what I had hoped for as we worked through these programs and we can now start turning the marketing engine back up to increase volume.

You May also recall that we had to make difficult staffing decisions in Q2, requiring us to curtail some programs.

And maybe placing some potential opportunities into a holding pattern, but nonetheless through that we have maintained a focus on the critical business areas. So overall these changes.

Combined with improved gross profit resulted in a 30% decrease in operating expenses.

We successfully closed new financing under our shelf registration statement with net proceeds to the company of approximately $4 8 million.

And lastly.

It's no secret like many of the other companies in our space.

We have faced compliance issues with our NASDAQ listing beginning in early 2023, that's created enormous pressure on the share price necessitated a reverse split that was affected in August.

So I'd like to say, we greatly greatly appreciate our investors patients through this process.

Most importantly, I'm relieved to say that as of September 20th 2023.

10 days before the end of the quarter, we received confirmation from NASDAQ that we had regained compliance but our shows would continue trading on NASDAQ we closed the quarter in full compliance with $5 2 million in cash and a significantly stronger balance sheet.

Now we are positioned to fully focus on our business.

Now before I hand, it over to Kim I want to share just a couple of other highlights from this quarter.

On the commercial front one of our focus this year has been strengthening our collection points with health care providers.

So that means increasing H C. P. His knowledge of clear up supporting them with information for their patience.

And reaching more of the channels that serve the health care market.

So to that end, we partnered with in Sao Paulo.

Our marketing platform that reaches patients and medical professionals in their offices and the pharmacy and digitally. So this is one program I'm, particularly excited about and to see the results of.

We started what I consider a pilot program addressing 2500 health care professionals, providing both physician and patient education I'd like you to think about visiting your doctor's offices, you see posters brochures your doctor and the people in the office or fully briefed unclear up and able to answer your questions.

The first elements of this program are rolling out this week and the program will run for four months in the flu cold and allergy season.

Depending on the results of the pilot we may consider scaling. This program further within in step helps network, which includes over 250000 H C P as in pharmacies.

We've expanded our relationship with Cardinal Health earlier this year and are also participating now in a new Amerisourcebergen program.

This quarter Amerisourcebergen signed up with us to carry clear up.

As part of their initiatives with independent pharmacies.

The front of the house with a pharmacy.

So just recently in the last week or so our product went live on Amerisourcebergen site.

And we are expecting those connections to start to bear fruit realistically in 2024.

So this work with health care channels is additive to growing our direct to consumer sales.

Taken together these activities between in stopped Amerisourcebergen, Cardinal health and our B to B portal, which we also announced earlier this year.

Are all meant to open doors to reach a highly influential set of health care professional.

And their patient and consumer base.

On the innovation front we've.

We've had to be selective with our investments in future product areas, but I am excited about those we are making.

In Q3, we began enrolling the first patients in our study at the Feinstein Institute for Medical research.

This program is testing a new approach to more precisely control and targeting vagus nerve activity.

The vagus nerve itself is one of the most significant neuro structures in the body.

As of this date the team has enrolled and completed approximately half of the patients in the study.

We are seeing quite encouraging results from the first data readouts and I am looking forward to being able to share more about those results in the coming quarters.

As a reminder, we also have a study that is ongoing for treatment of pain associated with Sino some classic facial surgery.

And this quarter I'm also pleased to note that we continue to expand our IP portfolio, receiving our very first international patent allowance.

So when we look at the total of the year overall and this quarter.

The company completed a strategic reason.

One that involve reductions in operating overhead and internal reorganization.

And the holding of our focused a critical strategic business and innovation areas.

As these continuous improvements pay off we are building a stronger base for the company to grow from moving forward.

And with that let me hand, it over to Ken to go over the financial results for the quarter ended September 30th 2023.

Thanks, Jennifer and good afternoon, everyone I'm pleased to report the financial results for the quarter ending September 30th 2023.

We posted third quarter revenue of 282000, a decrease of 195000 or 41% compared to the same quarter last year, primarily due to your price point increase in the second quarter.

This resulted in a 58% decrease in unit sales offset by a 54% increase in the per unit average sale price.

For the three months ended September 32023, the cost of sales decreased by 240000 or 58% compared to the same period in 2022, primarily driven by the decrease in sales volume.

Variable cost was $73 57 per unit for the three months ended September 32023, compared to $95.04 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 $33 five per unit for the three months ended September 32023, compared to $10.48 per unit for the same period in 2022.

The increase in the fixed cost was primarily due to lower sales volume to absorb the fixed costs.

Gross profit for the third quarter was 108000, an increase of 45000 or 71% compared to 63000 in the same period 2022.

The increase was due to price increases optimization supply chain and product design as well as sales volume over which fixed and semi fixed costs were allocated.

Total operating expenses were $1 8 million in the third quarter 2023.

Compared to $2 six 5 million in the same period of 2022 a.

A decrease of 779000 or 35% is attributed to lower consulting and professional fee expenses.

Well other reduced general and administrative expenses.

As a result, our second quarter net loss was $1 8 million compared to $2 6 million in the same quarter last year.

From July 11th 2023 to August 9th 2023 we sold an aggregate of 116 9 million shares of common stock to certain investors at prices ranging from $4 to $5 50 per share and a series of registered public offerings, resulting in aggregate gross proceeds to the company of approximately five points.

2 million.

Aggregate net proceeds to the company after expenses was approximately $4 8 million.

As a result, our cash balance at the end of the quarter was $5 2 million and we continued to maintain a no debt balance sheet.

On August 23rd we implemented a one for 100 reverse stock split and on September 15th 2023, we received confirmation from NASDAQ on are regaining compliance with the minimum bid price requirement.

I will now hand, the call back to Jennifer for ending remarks.

Okay. Thank you Kim.

So to recap.

Q2 was a reset.

Q3 is the start of a recovery.

We've realigned the team.

We've revamped the cost structure of the business, we've reduced overhead expenses.

We've undertaken a more focused marketing strategy and we've continued to see improvements in our gross margin.

We've taken the first steps in opening a new health care focused channels and between those commercial efforts are clear up and our research programs. We are increasing the engagement with the health care community generally around the use of bio electronic medicine in the management of inflammation and inflammatory conditions.

Our research pipeline now has begun moving forward at a bit brisker pace, we did experience delays in clinical enrollment in 'twenty, two and 'twenty three.

But we now have a brisker pace of enrollment and a continued focus on new product outcomes and breakthrough opportunities.

We are continuing to evaluate M&A opportunities that have expanded the lens a bit.

And then thinking both about the diversification of the portfolio and in terms of strengthening the execution capabilities of the organization.

Measures, we took in the first three quarters involve the tough decisions.

So I'll, let Ed fairly painful short term consequences.

But we believe that they are important they were important choices to make and setting the company on track to a stronger to that going forward.

And I hope that our investors are seeing the start of that payback.

And with that.

I. Thank you for taking the time with US today, we appreciate your patience throughout this year.

And I look forward to speaking with you again.

Q4 in the new year.

Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.