Q4 2023 Milestone Scientific Inc Earnings Call
Good morning, everyone and welcome to the milestone scientific 2023 year end financial results and business update conference call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host David Waldman Investor Relations of milestone scientific Sir the floor is yours.
David K. Waldman: Good morning, and thank you for joining milestone Scientifics 2023 year end financial results conference call on the call with US today are Orient <unk>, Chief Executive Officer, Keith <unk>, Vice President of Finance the milestone scientific company issued a press release today April one 2024 containing 2023 year end financial results.
David K. Waldman: Which is also posted on the company's website. If you have any questions. After the call I would like any additional information about the company. Please contact crescendo communications at 21267110 to zero. The Companys management will now provide prepared remarks, reviewing the financial and operational results for the year ended December 31, 2020, right before we get started we'd like to remind.
Everyone that during this conference call. We may make forward looking statements regarding timing and financial impact of milestones ability to implement its business plan expected revenues and future success. These statements involve a number of risks and uncertainties and are based upon assumptions involving judgments with respect to future economic competitive and market conditions and future business decisions, all of which are difficult or impossible.
David K. Waldman: But to predict accurately and many of which are beyond milestones control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward looking statements are general economic conditions failure to achieve expected revenue growth changes in our operating expenses adverse patent rulings FDA or legal developments competitive pressures changes in customer and market.
David K. Waldman: <unk> and standards and the risk factors detailed from time to time in milestones periodic filings with the Securities and Exchange Commission, including without limitation milestones report on Form 10-K for the year end December 31, 2023. The forward looking statements made during this call are based upon management's reasonable belief as of today's date April one 2024 milestone on Jake's no obligation.
Speaker Change: To revise or update publicly any forward looking statements for any reason with that we'll now turn the call over to Orient Overhauls Chief Executive Officer. Please go ahead.
Speaker Change: Thank you David and thanks to everyone for joining us today I'm pleased to report that we achieved solid financial results in 2023 with revenue, increasing 12% to $9 8 million.
Speaker Change: We also reported an increase in gross profit of 39% for the full year 2023 through $6 8 million and I'm, especially proud to report that identical operating income increased by 19% to $2 1 million in 2023.
Speaker Change: This strong margin improvement and improved profitability within our dental division, what's due in large part to a streamlined operations and the success of our new portal for selling and shipping the SDA single tooth anesthesia system and hand pieces directly to dental clinics and dental service.
Speaker Change: Actions or dsos within the U S.
Speaker Change: We achieved solid growth, despite 2023 being a transitional year, having terminated the agreement with our prior distributor of Henry Schein at the end of 2022.
Speaker Change: We also terminated all non exclusive agreements with other distributors, India and the U S. In September 'twenty to 'twenty, three we didn't make that decision lightly and in hindsight. This was the right decision.
Speaker Change: I'm confident our new strategy is working and anticipate enhanced benefits from this transition to a direct model in 2024.
Speaker Change: Establishing a closer and more direct relationship with our dental customers has not only improved margins, but has also allowed us to do a much better job selling and providing outstanding customer service, which has led to much greater stickiness and repeat orders within existing clients.
Speaker Change: Okay.
Speaker Change: Since the launch of the portal, we have been able to track sales data and conduct sales analysis, we now know the customer's identity and prototypes to patents, enabling us to really improve sales execution with existing customers and reactivate dormant customers in the U S.
Speaker Change: In addition, we have implemented educational programs to enhance the customer experience as well as maximize the relationship over time.
Speaker Change: Direct relationship allows us to provide the necessary training and ongoing support to ensure continued usage by dentists and hygienists.
Speaker Change: Importantly, this approach has proven effective within individual practices dental service organizations and large group practices.
Speaker Change: Direct sales model provides greater interaction with the customer and higher level of support for both large and small practices.
Speaker Change: This has helped attract premier customers.
Speaker Change: For example, we added main dental group to our growing rooster of dental practices, which includes 21 practices across the north eastern United States. Additionally, we commenced direct sales to meridian Endo in theory over locks endodontics, Peter advantage in implant dentistry practices.
Speaker Change: With three offices in Vince in Wisconsin.
Speaker Change: This includes the deployment of the SDA and needs of the Operatory rooms and across all the Endodontist and Peter you don't this within the practices.
Speaker Change: These latest agreements illustrate the benefits of our new sales strategy and our ability to cost effectively scale the business by adding large dental practices.
Speaker Change: We also believe that having such prestigious large group practices will help shorten our sales cycle and enable us to aim at further penetration of the DSO and large group practice market going forward. We are clearly executing on your sales strategy with a much leaner sales organization.
Speaker Change: <unk>, allowing us to enhance our margins and maximize profitability.
Speaker Change: We are also rolling out a variety of marketing initiatives to drive greater awareness of our technology among dental practices nationwide.
Speaker Change: Specifically, we have engaged in more direct to consumer marketing. These activities have resulted in leads from dentists contacting us directly to order our instruments because patients requested them to do so.
Speaker Change: We will continue to increase our marketing efforts with dedicated campaigns directly targeted at patients.
Speaker Change: While our international sales pulled back slightly this was largely due to the timing of orders certain distributors working through inventory and a focus on the domestic market.
Speaker Change: We also made the decision to pull back from China until market conditions improve that said, we expect to resume solid international business heading into 2024 and to continue to add new International partners, which should support our global expansion strategy.
Speaker Change: On a final note we are on track with our next generation dental instrument and look forward to unveiling it in the near future.
Speaker Change: It's also worth reminding everyone that our dental division continues to operate profitably.
Speaker Change: As I mentioned earlier, the dental business generated over $2 1 million of operating income, which is a 19% increase over the same period last year.
Speaker Change: So to summarize within our dental business through our new direct sales strategy and our increased marketing efforts. We aim to further grow our dental business in the coming quarters as we continue to grow our revenues, we expect to benefit from economies of scale as well as the recurring nature and high margins on our disposable.
Speaker Change: Yes.
Speaker Change: Turning to our medical Division. We are also advancing the rollout of our concrete flow epidural system. Specifically, we have made significant progress in penetrating key hospitals healthcare systems and pain management clinics. We are also witnessing existing customers expand their use of complex slow.
Speaker Change: An important example is U T M D.
Speaker Change: Health clearly campus hospital, which has commenced use of the content flow beyond labor and delivery to now include neuro stimulation spinal cord stimulator implantation procedures, illustrating the versatility and growth potential of our instrument.
Speaker Change: Spinal cord stimulator arisen implanted device that sense low levels of electricity directly into the spinal cord to relieve pain and.
Speaker Change: An estimated 60000 spinal cord stimulators implanted each year.
This implies a potential company revenue of $18 million alone in this segment, we need to remind ourselves that the total market of epidural injections is $11 million.
Speaker Change: Assuming a 20% penetration in this market that is the equivalent of $80 million and net profit on the consumables for the company on an annual basis.
Speaker Change: Approval and adoption of the technology for neuro stimulation spinal cord stimulator implementation, followed a successful well.
Speaker Change: Evaluation process by Doctor Patrick tariffs of full time faculty neurosurgeon at G. M. B, who operates at both the Galveston in clear Lake campuses Dr.
Speaker Change: Dr. <unk> completed 10 cases, using constant flow in which he reported 100% clinical success and no complications.
Pleased to report that further expansion of our technology at <unk> is on the way.
<unk> has proven to be of tremendous assistance and performing spinal cord stimulator cases, specifically conquer flow helps to minimize the risk of intra operative cerebral fluid leakage and trauma to underlying nerve roots, both potential complications of spinal cord stim.
Speaker Change: Emulator procedures.
Speaker Change: Cerebral fluid leakage can require a post operative blood patch, which while nerve route irritation can cause severe ready colitis, requiring extended post operative at mission and post operative steroid injections concrete flow has also decreased operates at a time.
Speaker Change: One of the major hospital cost drivers by around 20 minutes per procedure. According to clinicians feedback.
Speaker Change: Most recently, we commenced sales of concrete flow epidural disposables to Omaha pain physicians, a comprehensive medical pain management Center in Omaha, Nebraska. This approval follows an extensive trial and evaluation by Dr. Matthew Startle, its founder and medical director.
Speaker Change: Doctors, Stockholm completed 10 cases, using concrete flow in Omaha pains positions in which he reported 100% clinical success evaluation included epidural steroid injection procedures within the lumbar thoracic and surgical for Essex junction of spine.
Speaker Change: As more and more physicians and anesthesiology perform procedures and submit for reimbursement. Our goal is to secure coverage for our technology as we continue to execute on our goal of establishing comfy flow to become the standard of care and Abdul Mlg's, Yes.
None: I'd now like to take a moment to provide an update on our reimbursement strategy.
Abdul Mlg: We are making good progress in advancing our broad reimbursement strategy through a carefully staged approach. We are working closely with key pain management providers in the use of the new CPT tracking code for accurate and timely content flow claims submission. Additionally.
Abdul Mlg: Additionally, we are providing support to the clinical facilities for each individual claim to have an appropriate response.
Abdul Mlg: We have established sites across the U S that are actively utilizing comp with flow and.
<unk> claims to payers across the country, rather than spreading ourselves thin by bringing on too many hospitals in pain clinics before reimbursement approval. We realized it was better to focus on working closely with a handful of pain clinics and provide them the necessary professional support to help them.
Abdul Mlg: Sure positive payer reimbursement.
Abdul Mlg: We are supporting these clinicians utilization of the concrete flow across a variety of use cases, which is important in demonstrating widespread utilization of the technology user.
Abdul Mlg: Use of our system by these providers fallout successful evaluation periods by the clinic sense physicians and in each case, they reported 100% success with zero zero punches.
Abdul Mlg: I am pleased to report that our clinical sites have submitted claims for over 45 patient procedures in the first three months of 2024 alone which is nearly half of the <unk> resubmitted in all of 2023.
Abdul Mlg: All claims submitted to date using the CPT tripled 70 codes have been uploaded by payer systems for protesting claims are being submitted to Medicare as well as commercial payers.
Abdul Mlg: We are encouraged by the high level of claim activity that is being generated by pain management providers, which provides milestone the opportunity to indirectly engage with payers to educate them on the concrete flow technology and helping build support for the appropriate level of reimbursement from insurance provide.
Abdul Mlg: Yes.
A review and analysis of hundred claims data indicated that roughly one third of claims have already received payment more than half of these payments were paid by commercial payers followed by Medicare.
Abdul Mlg: Moreover, we have initiatives underway that we believe will help build support for broad reimbursement of the comp flow clinicians have the opportunity to engage with Medicare jurisdictions prior to final payment position of the jurisdiction.
Abdul Mlg: Turning to the international front, we are expanding our network of distribution partners for concrete flow.
Abdul Mlg: <unk>, we announced a distribution agreement with buyer lines supply to distribute the content flow and disposables across Spain.
Abdul Mlg: Spain represents an important market for us with a population in excess of 48 million people and a growing number of epidural procedures each year in pain management and anesthesiology.
Abdul Mlg: Overall, we are targeting independent distributors with existing relationships within key global markets and proven track records of introducing medical devices within their territories, we look forward to announcing additional partners as we expand our global footprint.
Abdul Mlg: We also believe there is a market opportunity for comp with flow within federal and northern and other government agencies as our system can contribute to both improve patient outcomes as well as increased efficiencies.
Abdul Mlg: As we have discussed in the past we are advancing initiatives following SCM approval and work closely to secure approval within the federal supply schedule.
Abdul Mlg: S S approval would open up the sizeable government market.
Abdul Mlg: So to summarize we are continuing our efforts to seed the market with our technology among key physicians, which we believe will ultimately translate into adoption. We remain committed to our goal of establishing the constant flow as the new standard of care and epidural anesthesia by providing patients with effect.
Abdul Mlg: With pain relief, while reducing the risk of complications.
Abdul Mlg: At this point I'd like to turn the call over to Keisha, Hakan Vice President finance to go over the financials in detail. Please go ahead keisha.
Keisha: Are you, arguing for the year ended December 31, 2023, and 2022 revenues was approximately $9 8 million and $8 8 million, respectively, an increase of approximately $1 million.
None: Company launched an e-commerce platform selling and shipping the FCA.
Keisha: Anesthesia system and hand piece into directly to end users, including dental office and dental groups within the U S. E Commerce revenue for the year ended December 31, 2023 was approximately $4 8 million.
Keisha: The company ended the agreement with a major U S distributor Henry Schein as of December 31, 2022. The company recorded no revenue for Henry Schein for the year ended December 31, 2020, compared to approximately $2 6 million recorded for the year ended December 31 two.
Keisha: 'twenty two.
Keisha: Revenue from other U S distribution was approximately 485000 for the year ended December 31, 2023, a decrease of 97000 compared to December 31, 2022. The company also terminated all non disclosed non exclusive agreements with other distributors.
Keisha: In the U S in September of 2023.
Keisha: For the year ended December 31, 2023 International revenue was approximately $4 1 million a day.
Keisha: Decrease of 724000 compared to December 31, 2022.
Keisha: Gross profit for the year ended December 31, 2023 was $6 8 million versus $4 9 million for the year ended December 31, 2022, the increase in gross profit was due to higher margin sales with the launch of the new online portal operating losses for the year ended.
Keisha: As of May 31, 2023 was $7 1 million versus $8 8 million for the year ended December 31, 2022. The decrease in loss from operations was driven by higher sales and increased margins was offset by higher selling general and administrative expenses during the period.
Keisha: Net loss was approximately $6 9 million or <unk>.
Keisha: <unk> per share for the year ended December 31, 2023 versus net loss of $8 7 million or 12 cents per share for the comparable period in 2022, now I would like to turn your attention to the liquidity and capital resources. We continue to carefully manage expenses and has maintained a solid.
Keisha: Balance sheet.
Keisha: And with 31 2023, the company had cash and cash outflows and marketable securities of approximately 6 million working capital of $7 7 million and no long term debt.
None: At this point I would like to turn the call over to the origin have evolved.
Origin: Thank you Tricia.
None: <unk> mentioned, we continue to maintain a strong balance sheet with approximately $6 million of cash cash equivalents and marketable securities as of December 31, 2023, which we believe provides us more than sufficient capital to execute on our sales and marketing activities around both our dental.
And medical instrument without the need for additional funds we also.
None: We expect to receive a large payments from the tech selling on the New Jersey operating loss program. We expect this will further enhance our balance sheet.
None: In addition to our revenue growth and improved margins. We also reduced our loss from operations by over $1 $7 million through a new dental sales strategy, including our online store and our enhanced marketing efforts, we are increasing domestic sales at higher margins.
None: Although our primary focus in 2023 was on the domestic front, we have renewed our international focus heading into 2024 that said, we expect to resume solid business going forward.
None: Our dental business continues to generate positive cash flow on a standalone basis and as we continue to grow our revenues, we expect to benefit from economies of scales due to the recurring nature and high margins on our disposables. We believe we have developed a scalable platform to drive on.
None: Dental instrument and Handpiece sales in the coming year.
None: The medical segment represents the largest addressable market as I said 11 million procedures.
None: 3% penetration would result in $80 million of net profit on the consumables alone on an annual basis for the company and.
None: And we remain confident and I believe that concrete floor will ultimately become the standard of care given both the safety advantages as well as cost savings to the providers and payers.
None: These factors coupled with our reimbursement strategy should ultimately lead to increased sales and adoption of the comp with flow system.
None: Within our medical segment, we continue to add prominent hospitals in pain management clinics as well as expand our international business partners.
None: Most importantly, we are making progress advancing our reimbursement strategy around the comp flow system.
None: We are also advancing initiatives following the Sam approval and leading up to potential federal supply system approval, which would open up the sizeable Gulf of middle market.
None: So to wrap up we are witnessing growing interest in both our dental and medical instruments and we believe we are well positioned to take advantage of the opportunities available in the market.
None: At the same time, we continued to streamline our operating structure and remain committed to driving shareholder value. We look forward to providing further updates as developments unfold.
None: Overall, we are encouraged by the outlook for the business and look forward to executing on a number of key initiatives in 2024 that we believe will drive significant value for our shareholders.
None: Like to thank you for joining the call today and at this point, we would like to open the call up to questions operator.
None: Certainly everyone. At this time, we will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
None: We do ask that while posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
None: Once again, if you have any questions or comments. Please press star one on your phone please.
None: Please hold while we poll for questions.
None: <unk>.
None: Your first question is coming from Anthony Vendetti from Maxim Group. Your line is live.
None: Hi. Thank you this is actually Jeremy on the line for Anthony Good morning. So just two questions. Firstly on the dental side I know you mentioned multiple times on the call that you are planning to reintroduce or push forward back into the international markets does that include a re entering the China market and also maybe if you could just talk a little bit of and maybe some more detail around the strategy going forward.
None: We entered the room.
None: A bigger push into these international markets. Thank you.
None: Thank you.
None: Jeremy and good morning.
None: The strategy for the dental business as we eluded all nice to continue.
None: To grow the platform business in the United States because for reasons that I have alluded on there is a there is a high uptake potential and thats, where the growth in the dental business domestically should come from that's also the reason why we have terminated at the end of September last year, All know next.
None: <unk> distributors.
None: And in the United States, because that would bring us more revenues moving forward.
None: Simply due to a price volume mix.
None: Correct.
None: The international business strategy is actually.
None: Based on two things first what you have to do and what we have been doing in the past, but even more so last year.
None: Looking in the segmentation of the distributors, we have to divide them into groups. So you'll have an a b and C segment.
None: In a that's the highest tier where let's say 90% of our business is coming from that's about 15000.
None: <unk> distributors and Middle group, we have developed programs to develop those distributors and growth dose distributors from smaller revenues or two larger revenues. Then your question on re entering China I do not foresee that we have any commercial activities in China.
None: Simply based on the fact that the market conditions are not.
None: In favor for us and historically.
None: We have been in China for instruments, and hand pieces, but the market situation changed to that extent.
None: That we are not entering low margin business in the Chinese market does that answer your question.
None: Yes that was very helpful. Thank you for that information and then jumping to the to the medical side and it's really good news that the claim submissions that seems to be picking up some speed and especially in the first quarter of 2024 and I assume that we could expect that to continue through the rest of 2024.
None: You mentioned one third of the claims submitted have receive payments maybe you can provide a little information around what are the other two thirds are you waiting for that have some of those have been denied and if and if they had been denied and what's your strategy for appeal.
None: Okay. So so and the others like I said all claims have been uploaded so that means that theres coverage by insurance providers for these procedures, we have not received a 100% permanent denials by by any of these insurance providers.
None: Two to your point the audit to search that is still in the process and what we did with the first 100 claims.
None: You'll have to you'll have to take that over time, we were very encouraged about the feedback when we did the data analysis and we see an increase of the number of cases.
None: Of these homeless claims plus 200 and plus the 42 claims moving forward. So long story short they have been uploaded the code has been uploaded in the system of which we are aware of yes, we are continuously adding other clinics and clinicians because we want to increase the utilization and the volume.
None: In case of your last part of the question a denial or appeal of course, what we do every time when the office manager or the coding manager of the clinicians reaching out to us and they want to appeal an appeal can be providing more information about the technology.
None: <unk>.
None: Sending in duplicate of the invoices that they have.
None: We have to submit to the insurance providers all to come to a final position of one of these jurisdictions to state that they are willing to pay for our technology for the cases use cases on steroid injection at a certain price. We are following the process thats very.
None: We are following the process and I'm extremely pleased and positive.
None: And confidence and also impressed by our team and our organization how they have been able to drive this forward as alone as a smaller entity because there are numerous companies that have not been.
None: Following depopulated we are doing and have not had the success. The initial success that we are facing today. So.
None: I remain very confident about this whole process.
None: And getting at <unk>.
None: Payment at a certain price level by the body provide us.
None: Right. Okay. And then just last question is that is the plan for 2020 four to start approaching commercial payer coverage and try and use the data that youre getting from these claims submissions and.
None: The data that you have already about the saving you know that the money that <unk> no absolutely.
None: Absolutely. So it's a twofold I think what people need to honor.
None: The stand.
None: The acceptance.
None: Spinal cord stimulators at <unk> following the entire process that is tremendous.
None: Because it is not related to any reimbursement in the hospital for these procedures because the neurosurgeons see a direct clinical financial and efficiency benefits of using our technology. So as we speak.
None: I know that we have applied in other hospitals as well for these procedures, but based on previous calls like I always said there isn't a value assessment committee.
None: But having said that.
None: But it has been accepted by <unk> GMP <unk>. It will have a triggering effect of them other hospitals as well the second part is the commercial approach absolutely on the.
None: For example, just motor vehicle cases is a tremendous source.
None: <unk> revenue for clinicians I cannot.
Blaine the amount of money because I'm not entitled to do so, but I would say covering one or two motor vehicle cases will potentially cover the cost of one box of consumables of of.
None: The comp flow epidural system. So in other words, we are using that as well in the commercial rollout, where we can get more sites to actively engage in helping us in assisting us in driving volume and driving utilization moving forward I know that we are.
None: In a number of of clinics that we have currently.
None: We're running trials with AR and also hospital system. So.
None: There will be more to come and we will share that.
None: In the future.
None: Everybody on the phone and with all the shareholders.
None: Of the company and investors as well.
None: Oh, great. Thank you so much for all that information and I'll hop back in the queue I have a great day.
None: Yes.
None: Thank you once again, everyone. If you have any questions or comments. Please press star then one on your phone.
None: Please hold while we poll for questions.
None: Okay.
None: Thank you that concludes our Q&A session I will now hand, the conference back to David Waldman for closing remarks. Please go ahead.
David K. Waldman: Well actually turn the call back over to management for that thank you.
None: Thank you all for taking the time and listening to this.
None: This conference call are highly appreciated your support.
None: <unk> do not hesitate to reach out to us directly in any.
None: Any questions you might have like we said management as positive about the outlook is proud of what we have been able to establish we are following the process.
None: And we look forward to share more news with you.
None: You enter into distance not too distant future excuse me.
None: When these developments unfold, so having said that I have a great day stay safe and looking.
None: Looking forward to talk to you at the end.
None: The near future Bye bye.
None: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.