Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the EDAP TMS Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to John Fraunces, Managing Director of LifeSci Advisors. Thank you. Please go ahead.

John Fraunces

morning. Good joining operating EDAP results for XXXX second for and financial conference us you TMS the quarter Thank call.

Mobeck, Financial Joining Ryan me and Chief Subsidiary. Rhodes, are Officer Ken Officer; Chief Executive the on Officer; Francois today's U.S. Chief Financial call of Dietsch,

uncertainties could Exchange from Before company's in described such to not everyone to growth forward-looking based plans. statements remarks Commission. that and would and that that to are which cause differ include and on those cause like forward-looking risks those statements. the of actual materially company's are expectations may number a subject results may but expansion a contain statements, to, such I difference filings and management's statements include, described we management's begin, with remind today in limited regarding are current Securities the Factors the Such

would I Ryan call to Officer, EDAP's to Executive Chief the now like Ryan? over Rhodes. turn

Ryan Rhodes

John, highlights will Thank then call you, everyone. Mobeck, performance. call over the XXXX who then corresponding to financial the our turn present quarter from by of details and the will Ken I of today's start CFO, second U.S. and good morning, providing

that half technology. demand report record to pleased strong and for first achieved I'm quarter revenues, Focal second One we food underlying reflecting high

sales. was disposable Second well higher as as hospitals driven quarter procedure placements by leading of academic €XX.X to and community predominantly at from revenue million new leading U.S. capital volumes increased

the helped are HIFU revenue generate factors HIFU We quarter. our are strong very encouraged which for adoption. to utilization increased several of Focal the by EDAP There XX.X% contributing growth amongst of higher existing customers, trends One year-over-year

patient excellent with Robotic outpatient a One noninvasive not radiation. of procedure is minimal that does oncologic demonstrates As and use or require a surgery reminder, Focal control downtime HIFU

outcomes clinical strong demonstrate driving and that to are favorable and continues One both growth economics adoption. Focal

recent leading hospitals now U.S. therapy urology according and Focal prominent XX a best in to fact, for of out a the One focal is In X

News and World report.

Focal Focal of treatments becoming of Strong states both with in top Virginia. continued one first four units fastest-growing One also Kansas Robotic performance in One Focal the the capital One our within sales the U.S., placements the HIFU system management. of including line lead of sales category cancer and HIFU is West prostate the to

continue a recent we leading adoption sale we also While to at Cancer and to academic Kettering top-ranked cancer see institution. One urology Memorial Focal announce world-renowned to which regional Sloan is the of Center, centers, proud are

community practices hospitals HIFU for While necessary to be therapy, are proponents and large prominent HIFU adopting strong urology-focused urology Focal increasingly Focal patients. prostate cancer academic treatment hospitals continue One their option One of a as

also closely. an metric that growth important Procedure we is follow

the quarter, of attribute XXXX, noted, volumes rates. with of in representing Sequentially, to procedure the our Focal One XX% this experienced Focal grow robust clinical second combined double-digit XX% volumes to U.S. percentage growth. We first our improved strategic third consecutive to quarter in team, reimbursement One investments sales grew HIFU growth As acceleration the procedure in compared as quarter. procedure growth quarter second the the year-over-year in

Switzerland taken prostate combined reimbursement region, Zurich, U.S., DACH world effect use XXX is research the we X, in the Switzerland innovation favorable High-Intensity Universities best Germany, list million see leading prestigious hospitals the of institutions. member over in placing treatment in total to it we Newsweek's the Europe's for Ultrasound inhabitants. is World's including HIFU Hospitals in European for of the While country, Switzerland the the ranked of an the of demand continue amongst the Best to the Focused having this with a Switzerland has XXXX. of Included according many to cancer, active in for reimbursement announce center in and higher on impact approval member on July, XXXX. also a in pleased were University XXX July in among and Research League most site and of One Focal prominent the Austria

We the HIFU broadcasted and performed Clinical adopt Andre Professors to procedure Dr. One commensurate of Keck including California, educational Lebastchi School of at of Amir the live acquire also first in Medicine at Dr. by activities, ongoing Focal made have technology. Assistant Southern Abreu investments the University institution and Urology the EDAP

hospital procedure on who broadcasted had we view our available to its our category worldwide clinicians, productive last largest Urological success our In engagements replay live focal of stakeholders April, executives of In ever position presence at amongst call. other many the we April, therapy. our leading discussed focalone.com. at the event website, validated that Association and prominent With A and is Meeting. American in earnings this still

As One cancer Focal Martini-Klinik a The experience highlighted multiple presented years' Ultrasound were in cancer. Focal reminder, the the X One the presented patients by XXX has Germany. program largest several using prostate treatment abstracts High-Intensity institutions, including Hamburg, the abstract Martini-Klinik world. with The prestigious there AUA by scientific Focused prostate Martini-Klinik in in

All only treatments outcomes recurrence protocol. and significant definitions showed were X% oncologic very follow strict a infield excellent XX.X% radical and therapy X established survival as cancer monitoring at treatment-free The primary years. control with

further their were baseline Robotic functional One providers On clinicians, on and function. rectal continue maintaining impressive the of continence with results as their These few to the and we patients patients benefits complications very educate urinary were side, of HIFU. baseline XX.X% reported XX% Focal maintaining

positioning a fusion ability very use prescribed up giving procedure. ablation setting imaging plan. customers Additionally, in to a able the EDAP see while was to were advanced busy treatment throughout They the ablation AUA One numerous the capabilities in Focal meeting, simulated and prostate hands-on robotic system, action

on the present robotic only held a One Focal Annual recently, innovative in therapy Melbourne, was Meeting and invited participate More panel plenary in preeminent focal Society to Surgery at Robotic systems the the of Australia. of

to our business. like brief now update I'd a on provide distribution

the micro commercialization second men, enabling new XXX,XXX to remains during first Japan from in a advanced Japan's for EDAP with ultrasound ExactVu prostate prostate the cancer made emerge the most Agency EDAP cancer Medical device Japan. cancer Pharmaceutical of largest announced previously Devices as diagnosis cancer As quarter, over market prostate approval the received technology being major with medical player and in annually. in commonly diagnosed for market Japanese

approval, of Japanese EDAP strong in a this launched Meeting Urology which ultrasound has Annual the and showcased efficiently Association, Japan. Following XXXth presence the micro in ExactVu

quarter, ExactVu units. During sold the we nine

our continue targeted imaging in to HIFU are In We advanced demand One prostate development routinely programs becoming Focal cancer. see biopsies progressing this differentiated that used ongoing for well. technology parallel, performing clinical is for

reported experienced deep positive results debilitating we treated across endometriosis broad in where Phase study rectal X range of improvement quarter, infiltrating Last a with patients the from symptoms. One HIFU, measurable Endo-HIFU-RX Focal

for positive the we confirmatory comparative more patients Following results, now than across centers controlled report pleased been these that randomized double-blind to in trial. X are France XX% X have Phase our of enrolled

As pelvic noted, Phase acute the rectal from procedure. pain Phase post Focal infiltrating efficacy months deep trial strong level trial, possess primary support evidence X less we a the the of effective, assessed this as One to clinical treatment for would at X endpoint invasive If first-line from mirror X for study endometriosis. is as XX-patient a new, results those HIFU

patients options treatment to an associated resection become Focal are of few enabling new how bowel could option, with often treatment important rectum. Given complications morbidity One the surgical and or avoid HIFU the known available,

amongst Focal systems demand Looking our One as HIFU utilization customers. ahead, as new increased we existing expect both well growing for

will in and and and expansion short-term cash demand strategic minimis or support well our €XX.X education support One sales, US$XX the and With million in XXXX of to The investments continued U.S. positioned debt, technology. first for ongoing activities Focal development remain HIFU. in invest marketplace our the of million to de increased in we marketing, clinical made the investments the half

One with increasing of to system respect active growing strong for platform placements utilization. our anticipate pipeline continued technology business, With we and new new adoption Focal

quarter I Ken review Ken? call will that, performance. now With over the pass second to financial the to

Ken Mobeck

morning, good percentages, Thank except you, all in that figures, are note for Ryan, Please everyone. euros. and

conversion a purposes, was of average as of quarter almost XXXX Total a €XX.X for For XXXX the X.XXXX compared in the an for second exchange quarter. record million increase euro-dollar to second quarter same of million, X% level the revenue €XX.X revenue rate total XXXX. second and for for was our period of

second HIFU the XX.X% million increase quarter the revenue for year-over-year. €X second a as compared to by the million was Looking for in at XXXX, division. €X.X of revenue Total business quarter

quarter. million €X.X constraints less supply the of suppliers referenced, as during quarter The in LITHO with to for XXXX. sold as to of As second the second was revenue the versus in XXXX for the increase driven million four Focal unit by in units One six was the mainly year-over-year business one was chain key the well in as the XXXX. attributed €X.X year-over-year of quarter sold Total second quarter revenue LITHO second selling few units quarter a compared decline

to Total during during million €X.X distribution second the revenue by units primarily quarter business second as sold the period. the the profit for revenue nine quarter distribution in driven second was was compared compared to of decline to second million the the €X.X XX of million sold year second for €X.X of ExactVu for the quarter units million €X.X XXXX, quarter in XXXX. Gross was for quarter ago compared XXXX. The as

continued components on year-over-year Global margin pressure to in our investments The in product manufacturing clinical period. XX.X% mix, U.S. sales was and and in in revenue margin costs to due net HIFU year quarter increased gross primarily with long-term to compared price profit application and the growth. XX.X% profit Gross support was ago on second decrease service distribution the organizations inflationary

of Operating loss and million due Operating and €X.X to €X.X team the million of to €X.X of the the were same compensation period build-out was second was increase and The to increased second the expenses variable compared expenses compared quarter quarter commercial the an for operating XXXX. infrastructure, for million in second loss strategic operating quarter activities. primarily the €X.X planned million for in XXXX. marketing of U.S.

loss the share-based €X.X compared quarter the or have or year been diluted XXXX. €X.XX net Excluding the €X.XX to €X.X period. of second second loss loss as impact would noncash per €X.X compared million, of operating per for million quarter Net for compensation, million income QX ago an in was share in the diluted million to operating €X.X of share

cash and million US$XX.X equivalents compared cash €XX.X the QX of Total million of XXXX. QX or as end or US$XX was to million €XX.X at at end the million

while growth cash financial business performance. for also continue as invest remaining flow to monitor long-term short-term We of cognizant we closely

our the the fundamentally financial investments, of for Through of management emerging for confident the HIFU One we are Those paradigm XXXX. cancer. extraordinary the strategic quarter prostate treatment realizing Focal opportunity key in with our second to change are highlights

And to Ryan. to turn like I'd with call Ryan? that, the back

Ryan Rhodes

to Focal our in the growing quarter In One. Thank reinforce for our confidence continue you, Ken. summary, results second demand

Focal increased and One HIFU our unit education Focal adoption. to execution validating are strategy along as of drive and and placements well with One procedures. As growing Sales

optimistic as In One increased remain clinicians closing, entire option you and And we remainder management. is amongst of now patients like their Focal will an team important and the growing fall. turn the for I for about to back to and HIFU We look to hard thank Operator? the sharing work dedication would I cancer EDAP forward XXXX. driving again questions. of our it over the in for progress operator And with treatment that awareness prostate

Operator

is [Operator The today question of coming from Jefferies. Instructions] Michael Sarcone first

Michael Sarcone

placements in through how first system just guess, how there? up the of funnel Focal One sales the you more and think the trajectory sales year? shaping remainder can one about the out maybe talk the is you might So just four U.S. is And the I of on the shake demand system

Ryan Rhodes

Yes.

to So our continue growing. active pipeline we see

added head And additional building again, count. to pipeline coverage broader a model. grow. have We're we continues noted, As our

both and a in and play, We in have expect sales projects QX. we QX have of to number notable

openly, say the of stronger would year be year. back of should we So the a half the portion

we've again, got active. currently, team So our

QX. We excited and to and out in close some both deals process, have QX we're

Michael Sarcone

Great. Maybe just a follow-up on that.

about XX above on commentary, XH, system means based we just had in for that you that see could placements if XH? So your

Ryan Rhodes

our active we the structure. hospitals, say number would would we I I broadened commercial And of with continue above pipeline. that, that, say, for Definitely, to grow as the again, sure. in And

Michael Sarcone

just number the one annualized XX% the utilization U.S. you or color procedures ballpark pretty seems last quantify on in if per That's strong. terms a you're trends give quarterly of And And either can the thenm seeing environment, there U.S.? really for what more helpful. in any seeing just the little you procedures procedure system? Can growth it's way then in or in even of you're is me.

Ryan Rhodes

technology. customers Yes, actual acquiring to I out that Michael, customers numbers. What utilization, procedure we just the in are we our even our new don't say see would and give continue installed increased base both is

to metrics time to case case track XX first include beyond. for X We to and case, time

impact looking other we but surgery in is that prostate I clinical sales again, also So radiation. team with options patients our and I men the making, our diagnosed treatment think is for a the consumer just seeing we're think And noninvasive seeing cancer. we're option beyond message, have for

I So into momentum we awareness, market continue think story. our to that also and breathe create additional more will

Operator

The is Takkinen Capital from Lake Markets. question coming of next Frank Street

Frank Takkinen

one fourth as update seasonality majority pronounced expect summer a I you Ryan, that quarter those just than the second could you for asked more the year. placement expectation? well, on regular and last if more wanted the was of months up half looking about question sometimes implants I to in with U.S. of being an was pronounced an seasonality hoping this follow QX just know greater in comment OUS seasonality trends. I I the I call, XX but on expectations more as

Ryan Rhodes

Yes, see, summer quarter, typically the that. as we're don't we Frank, at We a the in, least say, would don't through going see seasonality slowdown. we experience

see I second as momentum focused, would we again, stronger the and a pipeline of our got down half think develop year. the and We've head continues I grow. building. team and mentioned our to earlier, expect And

again common so may don't I QX the be -- see technologies. other other slower or companies And that for

the as half I year. think walk the of momentum we back that we have into

So I we think that's stand. where

Frank Takkinen

renewed you've of there's and know about to us go flexibility with at slowly think maybe this related a number related And over of update year or having Got little helpful. the years. that it. and past ASP disposables? maybe Can more dynamic a on increase of the in on ASP to that procedure whether beginning That's or to that the one you you increase ASP then on the room side. the I disposable the is still ASP thing bit spoken reimbursement not

Ryan Rhodes

I ASP been in the yes, there has would question. And the say, would is opportunity. say, great So company, I an procedures gone up. since I've historically, on

had We closely. look going it our call continue accounts. continue legacy at price notably sales to work procedure with that average increases, up. some per it, we've see price -- and to average closely very We with certain And customers,

that attention to also for close true And that accounts pay we again, Now our and plays acquire the that. technology. we monitor, new

some And in place. advantages again, say we I from for say grow reimbursement there's I'd think So we would enjoy the room to that's sure. additional

Operator

of The next question Piper is coming from Jason Sandler. Bednar

Jason Bednar

One follow wanted placements. really just up I the Focal to on

rate out And how see community sorry ask side the macro another and but academic to just attitude centers. on here, influencing the are I to dynamics and wanted one check large to of just or both the environment there whether broader the the hospitals,

might just responded the pace Are business know may question the your what if just I what even just you're seeing prospects you've answer to to Frank's business actually for macro having historically? the if as on quarter, you're check at forward whether quarter. I the to stronger same not influencing the But wanted moving you how of be based some third factors? all in dynamic here there seen in strength a regarding that's third conversations see and that's at than

Ryan Rhodes

-- Yes. going. really don't we the related I with I see interest any we rates that. see -- don't headwinds they're know going to direction in don't

have are that. disruptive seen of we on It's We -- in category a capital not equipment. impact the

capital. strategic the in also category of we're However,

closely One work hospitals, as and again, Robotic strategic process. equipment. we hospital move in that as buy So we adding as through with our adding case, very it routinely or see Focal you customers initiative, a our But capital buying again, know, therapy and HIFU, Focal we Focal

don't category capital. us I of operational put in So the again,

capital. strategic are We

of, therapy in necessary we the strong in clinically something state offer today, And economic strategic bring for hey, it's can can also you back focal to it's hospital, it up again, believe, it a and reward.

our narrative. So we that in have

Ken Mobeck

Yes. okay? in QX. in improving time add and their regarding have Jason, seen the is the other purchases, a in only systems through stuck going hospital in your the process see we taking I'd few We thing QX. had buying the get question environment purchase in We environment

buy good look before taking purchases if they're they really these at just So anything, a them.

Jason Bednar

Okay.

no just maybe the sales not cycle, a but So actually decision? or yes influencing longer

Ken Mobeck

Exactly.

Jason Bednar

Perfect.

gross a to for. know model. very gross can directional what more influencing could I But some color then you guidance how wanted but segment I on in looking was margins. company-wide That's were the any helpful. some of or our below formal factors out miss whether other ask color I to They're That Okay. were But also little you the forward? distribution probably you on it's we the give? that bit softness. think you know that if guidance, any don't of margins Ken called just add on offer the about bigger any going side. maybe

additional And whether that's trough gross weigh if we're or investments that to at contemplate may forward? those then here we need a still services, going on margins

Ken Mobeck

Yes.

Jason. question, The this big good quarter. mix was distribution So thing one our

So look always grow that investments to to going company to at make timing forward. We're as the related. continue of kind I

grow we're We in Our operating continue funnel. invest really going really expenses are but that's them closely, to to drive -- to the right? need areas monitoring sales

well build as tools support to line, we've and as a the get well. the got on serviced As installed COGS to

We second as stronger, as then too, we're in the expect going then earlier we're up prices of our Obviously, list -- One. that One we we're just pressures solutions looking we that. year, Focal for a at bit the prices well, Ryan when going price And did inflationary our Focal noted do half. pick to in the noted, here as increased we I mix see And to forward, monitoring. do that little gets to see

they QX. see I do up versus in margins up So picking where ended back

Operator

H.C. is question from of Ramakanth Wainwright. next coming The Swayampakula

Swayampakula Ramakanth

about from you and terms in consumables an increasing idea we this year-over-year get when of quarter-over-quarter, XX-odd in revenue of This would -- Just Wainwright. your trying when growth, some volume be that expect revenue stated, H.C. With cadence percent you would RK as XX% flow? reflected to is to growth? the

Ryan Rhodes

Yes, RK.

thing, First programs. again, build we

So for onboarding process. a We the is when an event system train placed, team. there's it call the

can that we each to some time but really take so And are shorten time. on individual, It do everything line. that depends They hospital.

and of and as clinically when as think is used more impact place see systems, also but we patients have we'll clinical systems and get time more over the I certainly using use technology treated to So notable successfully. a

I think see in an just organically, going you're increase sales. same-store to

have clinical and applications closely team team, sales work a customers. a team that our we both dedicated very with And

outward, So think look notably, that a we our increase, But see is of both legacy procedures as more you I as on we it in based takes as well accounts and placing systems. while. are an percentage increase

over something procedures on team to as we focused I time, again, are we very So noted, And, will that and to be at. closer resource our continue think that accordingly. look

Swayampakula Ramakanth

color that reimbursement anything an a longer take why on So to timing. that is color it because in financing that stuff, the to that just side becoming longer? just I'm a understand Or in is what at trying the the closer cycle stated all? making cycle on more cycle sales administrative answer trying little trying is? -- sales additional bit the place, we're to is more you additional sales look. Any an Is I'm things? to and get question With previous of

Ryan Rhodes

pro investments forma analysis. at today, say through equipment, in capital their be typically they own to making looking innovative that hospitals are Yes. It'd new fair go

by vary analyses forma pro institution. those So

do move want some And down. to some may others, faster They than slow due institutions diligence. their just

with at calculations. that to it's in a and line. service look again, some And numbers said, adding revenue-enhancing many we're want the And just they new cases, run

ultimately when in said economics. process, sale. favorable that go it typically, a we have have leads to the we through we As past, And

had by think it institution and referenced. Ken again, So I as varies

not And for every it's hospital.

make them through to shoulder help we faster answer any down, we their going understand I can kind think But customers slows move always it some attention than shoulder appreciate from working active of the to financial we're questions where that investment. and have and pay sure If with will they fully process, others. we to return accustomed lot to we're of a it. our or

Swayampakula Ramakanth

on you or long is how Swiss in your reflect take big on the sales? could Swiss? market the With Swiss with it or reimbursement. then how associated place, Swiss it And And countries that do think along for to

Ryan Rhodes

So cantons, we the You a have X have you French as even and German of is an with noted, side the right? side, Switzerland area Italian and first off, country -- Zurich the influence. essentially then languages,

we've so over I been And Switzerland the years. think reimbursement, back in the to active

have -- of the As the program Professor And had cetera. other have a Geneva Eberle]. placed systems we in University [Daniel have prominent we mentioned, Zurich we very some at market, et with

a I a the known those So with. is, to our handful in I mean, really market some give hospitals the this, are that working but are market. there's of well hard sales prominent say say would of can't how and number, I teams we're big and actively you active

customer that know our well I'm after We our base, go base, target and both to resourced the we're and excited. business. customers, legacy And

Switzerland is I is country is influence that small, has notable this big country, but a Europe. country -- a in that think a that not is in

Swayampakula Ramakanth

Last me. question for

you how think other within the the long last to bleed LITHO limited was chain And issues. it the supply do well? chain On Is stated as Or the pretty how -- you business? divisions some much LITHO can business? that would into supply issue LITHO there business,

Ryan Rhodes

Yes.

chain alongside technologies. it's and componentry that supply it's they or the proprietary to bring not lithotripsy -- of would So so us, our much is purchase the related together

thing. it's don't think I So a long-term

In other to just they technology. fact, have work components ability sales delayed we that the our -- alongside are the those until purchase lithotripsy

don't and any spillover really see areas into today, as -- other our of any today. I business stated So

sales impact they distribution in that components other the to at get ready, And noted. as additional added some So our don't any need we we point. this again, just were I it -- think had business but see

Operator

to like I'd time, over this the turn back At Rhodes comments. for floor to Mr. closing

Ryan Rhodes

in participated today's call. thank I who want to all

in investment to the we we Jefferies in we again In in And London. November, Global H.C. York Wainwright in As our presenting New both and speaking quarter the you conferences Conference a you. participate look in third to earnings. reminder, all Thank plan at on Stanley to forward will Healthcare September. of Morgan be November

Operator

Ladies and thank This today's event. for gentlemen, participation. concludes you your

You and log may the this at off time, of the or your enjoy day. lines disconnect webcast your rest

EDAP TMS (EDAP) 24 Aug 232023 Q2 Earnings call transcript