APEN - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to Apollo Endosurgery's Second Quarter 2020 Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. I'd like to remind you that this conference is being recorded. It is now my pleasure to introduce Matt Kreps, Managing Director at Darrow Associates Investor Relations. Mr. begin. may you Kreps,

Matt Kreps

and Apollo's for and second Taren, call operating in to discuss quarter thanks, you, participating everyone, today's results. Thank XXXX financial

Chief Cavanaugh, on Officer; me the today Todd Joining call and Financial Chief Newton, Stefanie Officer. are Executive

and and to for federal Before listeners made Apollo's securities sales. conference will laws, that this product within statements outlook caution include we including during would forward-looking management Apollo's the comments timing I call begin, development plans like and by meaning financial of

is on there spread our the materially. the actual addition, statements and the In uncertainty impact material forward-looking of These chains for involve COVID-XX and about results ultimate economic risks the may it demand general. uncertainties activity products, supply differ virus, our and global may in have operations, and

I contains as of ending Form the most for revise to circumstances accurate conference encourage the to Apollo of no the date to discussion this Form report date of content of well review year by XX-Q annual Exchange any today a the risk this as the update our on XXXX, you X, Securities only broadcast, company's or For as undertakes information and with is Commission. XX-K August call the live law, XXXX. call. obligation as reflect Except that events statements The or filed recent time-sensitive December required XX, factors, of after

Todd. that, term now use to for and term interchangeably this and the the versa. for ESS vice turn call like call, I'd will we with During Orbera IGB OverStitch to over And the

Todd Newton

our details in results. On us healthy. the hope Stefanie for a thank moment, joining take the And our all Good just revenue safe second our highlights. of you Matt. we CFO, your today's second quarter through will of quarter. are today July Cavanaugh, preannounced and second and XX, call families and and you, joining remaining Thank discuss I to you everyone, XXXX quarter you afternoon,

I for announced to as application due our program. XXXk now the July an as tremendous had The hard regulatory of in This review restrictions, the does, But submitted the impact preservation open on of creation disruption because pandemic since took was March such were hard most on our product to sales spend, X-Tack on preserve of points stay-at-home of These persevered. XXXX. teamwork the a But make X-Tack been And best shutdown to key Three, XX% One, we were describe have here April path. she but important adaptation the care knew and development at to is June directives at back. and continued we point actions Before start it coming value to course, the we programs our liquidity midway the that the immediate COVID XXXX. but to team state of our decisions our pursue successful. the business the sales the and, the all of Directors sales company were close impacted shareholder were will and X, the U.S. second to travel to COVID investors, interest June, and sacrifices necessary plans. procedures, and and of have our process. impact significant in fully recovery shareholders, four in management's initial implement took with the in elective we In that have of health of supported quarter. team. Board positive actions investing the made and Two, procedures, we FDA by reduce on immediate

tracking States has than our been Four, shored United encouraging, liquidity also are slower the up. June but outside pace. in the trends recovery Our U.S.

financing equity will the immediate quarter the market recently this to disruption financial capital greater launch. detail. completed market now COVID-related results amendment us to through of continues accelerate provides to cloud in X-Tack that second from business to credit While period the fund our and risk with recovery and future simultaneous Stef? our I with the pause and turn the over cover COVID call uncertainty, Stephanie

Stefanie Cavanaugh

Thank you, afternoon, good Todd, everyone. and

products. As from resources our disruption second procedure filing, and volumes the release deferrable theme or has press elective been the quarter health in worldwide, the procedures and use earlier including addressed care dominant in that today COVID-XX XX-Q the our to

close in difference care the a declined XXXX and OUS quarter By second of a of XX% decline were OUS sales procedure decline of XX%. appears which XX%, includes to endoscopy U.S. quarter down U.S. the and while quicker XXXX. to ESS the health quarter the our recovering affected by As geographic by second channel, distributor XXXX. at XX% The rate, in volumes and second result, declined revenue our compared activity from IGB was sales be geography. worldwide Both COVID-XX. that to decreased sales the endoscopy is

result, a $X.X product total endoscopy XX% reduction. which were is As million, a sales

December quarter product the movements not of quarter proportion in total second back second product XXXX, $X.X revenues last sold of line the is which included its in of related surgical did this of XXXX. quarter in we sales XXXX, currency the only transition equivalent of to The Foreign revenues quarter in Total to sales our in endoscopy affect to former of year ESS also million services the roughly sales trends. the year. revenue product $XXX,XXX of share were the in that in while service second materially were second transition XX% quarter

direct the gross our in resulted million consistent second quarter with $X.X year of we the with service end sales of $X.X the margin a quarter free pandemic. completely quarter expectations. second implemented The to liquidity We for preservation unabsorbed of was Gross been compared second the this the margin XXXX. XX% expect our by XX% program obligations early XXXX the to XX% in would cost for facilities series production for remaining were COVID-XX due to XXXX. and more charge have team the stages our postponements than quarter, in purchases. the of portion inventory of the of margin in response be And at second a the our any Without COVID-XX Total with of period. to of plan large pandemic second the operating quarter production reduced savings align expenses the product compared or to resulted overhead comparable million last percentage inventory and efforts also implemented expected in a to and we pre-COVID quarter to gross of of charge These for second reduced cancellations our the management in demand. more decline cost initiatives of idled

we the we the of pandemic beginning As to aggressive undertook have number discussed, cash. a actions preserve at of

with net the COVID cash was to use crisis, before we this met the goal second expected complete we Our quarter goal. and same the

the maintain We in Descriptions remainder XX. business a for cash our and April balance disruption dated were on Form these will XXXX our periodic XXXX continue first of improvements. to of reports the past XX-Q during to X-K Form between commitments cost and closely of the COVID-XX the detailed shareholder XX-K manage cash and quarter initiatives savings for

$XX at XXXX to that and to these pace increased the XXXX, the for disruption near-term to the readout an quarter existing our this was us warrants this of second to to But at million second $X.X for our million. agreement. down stock liquidity set and to risk. our million of Cash quarter to prefunded we quarter fund our on $XX.X by and of total second improve of our Our common to million. to and the turn expect, we any these launch any it that event, $X.X on Concurrently, will were XX% COVID-XX agreement and completed of modified to revenue somewhat XXXX The quarter in loan market of requirement credit depends reduces waive The from the from remainder was decreased requirement our transactions improved combination of XXXX trial which million the the X-Tack transactions quarter, $XX.X in of loss million transaction $XX.X our liquidity $X.X July with million in of continues $X.X length two operating covenant decreased XXXX for for back minimum net greatly runway Similarly, minimum XXXX proceeds the the liquidity of MERIT Todd. business past of the we the be improvement $XX quarter million as XXXX will million, well. second today, second get in our to to sell Subsequent in we quarter XX%. loss compliance of XX, end, from now end XXXX. year's through compared COVID-XX. in the the as sufficient increase gross I

Todd Newton

Stefanie. you, Thank

opportunities management Endosurgery these has year everyone. this of difficult equity us, front in unprecedented, and raise which and of existing of that And The team's Apollo focus. half an to base highlight first three I'll tremendous But we is and was the are for unpredictable current The been period has just entirely funded these these belief of today. completed, a our in shareholders, opportunities. support the testament shareholder opportunities opportunities by

designed story, the goal We've this endoscopic track, in an First, lower the of the And GI now for. to United core spoken flexible particularly suturing needs colon. of been GI benefits our in what GI OverStitch to core the is X-Tack has a important States. growth use for part is while of the bring especially

labs, colonoscopes and shaped the distinctive millimeter find to of to market. be to effectively closure OverStitch our like feature should will scope specifically very existing During also designed includes our a the should or the very close working challenging very which devices The is is case be in and gastroscopes has any larger endoscopist easily delivery today on doctor with address feedback market. it's pick defects, with and broad it any that work or economical. X-Tack for sales up or larger stands who Advanced organization. Every with fit development find the through application. irregularly positive. use endoscopist It designed endoscopists, which would channel, been with good to it easier those otherwise leading the use the out X.X

colonoscopies GI accounts. in top these rescue more for OverStitch acute our of generated think end than million anti-thrombotic last that between. OverStitch of expand tool strong XX% being X-Tack risk a at is core XXXk runs this because other XXX sales each patients market X-Tack customers spectrum in us guide, following closure our important in where and for and X-Tack for uses existing that we of X-Tack where large-sized large could the of States, With a or location core polyp cleared Our end perforations processing moves to of States unmet more being the will at accounts than for demand top If use size, prophylactic year, medications end mid at XX a in X-Tack will into the the many there the we use U.S. to will time range United one believe The addressable on to XXX market need same X-Tack delayed a performed need polyp spectrum the materially we of be of existing have typical our bleeding from address. XX% be year the higher either United of the GI. removal year. and by an

is Second, OverStitch, growth market has gastroplasty, procedure capabilities endoscopic enabled States or needed. United XXX,XXX that is full-thickness procedure adverse due patients, the attractive system in and we low proposition revise roughly The ESG physicians at procedure, when the large year event revision its of bariatric per care very ahead. the bariatric a and to market by sleeve effectiveness, still ease substantial and to for have a alone health the potential value suturing rate is

we've spoken past this market a continues has procedure have The share market. and performed grow to been While provide bariatrics momentum MERIT to that ESG. procedures OverStitch we our part growth data. worldwide is have before, the tap probably or bigger around potential of of the worldwide the build the required somewhere an to GI, we core estimate about of important yet X,XXX as were there into bariatric to intended trial, many break But is times last ESG And to year. data which generation ESG

expansion across multiple randomized experiences. that optimism times the the safety effectiveness achieve the globe. consistent the for prospective key procedure conducted by for were of results studied a piece study reminder, sites strategy various MERIT a label will of for centers pooled our has over goals. a the the on is multiple MERIT reimbursement ESG confident of United procedure its States already there ESG the And study the and remain reason X,XXX being at were reported in is patient highly trial ESG We and and to the multicenter our meta-analysis In with results there been is As OverStitch. and simple. published, three XXXX very

MERIT be performed. reimbursement, of disruptive XXXX. some readout experienced COVID-XX-related believe delays. primary procedure the last to middle will The procedures anticipate with data marketplace. But we as bariatric week, by be Some the ESG the remain than And MERIT to XX less activities the site of today's of crossover PIs

expanding Third, of meetings our the products us. leveraged medical to travel to disruptive and COVID-XX for physician we historically a priority have education remains many physician address planned demand. access in-person has

endoluminal webinars two ways more address physician remains interest this learn to to the suturing. second benefits have we international the of held and strong However, there OverStitch, In found a about interest. on alternative we quarter,

focused endoluminal procedures attended basket of was by persons. as webinar XXX on of suturing the core benefits and GI part first The the of

discussed first to XX on the past for At States. core almost subsequently was test GI, since to July, of of two might also end bariatric one applications, And of had one as Friday of for this endoluminal didactic we our each classes. Again, and in attended participants. second just hosted our aspects session COVID bariatric designed here we XXX how these registrants more The training programs. that hands lab activity. and reopen than beginning suturing the precursors hands-on training United training on education the conducted the We sessions by in-person

accounts making level strategy access the beyond not minor endoscope. education the seen feel or we goes makes products interest of experience new to pre have year, have we SX In avail user as all our the physicians locations COVID. will this physician launch, technology those we part us a end to that did account the SX. that note. OverStitch to XXXX, be interest OverStitch be were suturing device our we of SX as returns, third on user of to are dual-channel users. as new engagement by platforms normalcy And of a virtual with improve high medical to launched modifications Since Expanding As our the that confident further about will globally experiencing

for securing by products in These In the either existing during our of multiple succeeded products year These programs. couple COVID, expand more new say our markets. put as program. Apollo approvals will or second to one our and be of or about of markets addition, Regulatory as quarter team market well this business new remain we of on countries. further of part in ahead words the gross new despite our Indeed, served of third-party following COVID-XX hold preservation had want or recovery. I availability endoscopic liquidity to drivers to growth important, have our a efforts clearances improvement margin but regulatory our inside be seven distributors. are ongoing to for

Of is expect at project our our margin. be X-Tack important X-Tack to course, most improvement we launch gross as kept X-Tack we accretive probably to moving gross margin its forward. overall And

dictates recovery organizational We projects margin will gross reasonable. resume as other business as improvement and our bandwidth

a soft the Finally, ahead. quarter for third outlook

as recovery States, as quarter, team growing very in good In business. business United area built Western to second in to coming recovery and second COVID-XX we and throughout elective are United Still has good well the behind. States, come trailed the the and recover markets Mid-Atlantic, the quickly Our the allowed the solid Germany, as United United States, such Italy signs And and the have quarter. as during back. while is back direct had sizable quarter, states. showed a Southeast in was This procedures Spain by France severely Kingdom business, of as Northeast the second we a hit the the Southwest of where slower outside

sales what overall, we of as July increased from States on we United yet distributor third In Middle recovery. Orbera. both the to But like OverStitch market signs so States outside such to quarter East, larger Some our the markets, compared far our direct United July in the seeing and based of both endoscopy have July, are XXXX. the and of in show product

had in In to XXXX markets months same fact, sales June product July of increased together, compared those we our and XXXX. if endoscopy two direct

seasonally all The third sequentially but quarter quarter. indications that to is quarter traditionally quarter, right third the be will soft a now are second up compared sales the

third we'll levels. planning However, see a be and And last lines for quarter, to quarter that, much the return year. With perhaps, below risks we procedure the of questions. Taren, COVID by the now please up for are proceed. end the still to the we'll pre-COVID remain of quarter fourth open third

Operator

Thank for Craig-Hallum questions. Capital [Operator Group. the take floor and from first go with ahead, Instructions] Ladies is Please sir. gentlemen you. question Hewitt Matt We'll now our open

Matt Hewitt

taking Good the afternoon thanks for and for the update and questions.

Todd Newton

Good afternoon Matt.

Matt Hewitt

created regarding Maybe one just that and getting how sounds And versus your getting of there? new of backlog it GI does seen rebound maybe back what was any like pipeline is and March first July, thoughts for now June, -- kind much the the you like to if that have that opportunities today through on the through you've April May that or customers? pipeline in late look

Todd Newton

see right concerns, we unemployment do can normal rates others, that latter higher now, current beyond more recovery insurance we we potentially could versus dealing degree have health I It's a to this look July, our of care impact Matt. we really uncertainties, year. of back a June is half the good at in in degree that are of loss right would It's what one especially backlog, of to to say, think, we impact and the Undoubtedly, knowing pattern. rates question, as now, with business Yes. utilization backlog I have been as what the and

difficult So the likely of we month, levels. conservative. still answer. before third a below longer good quarter one it's we quarter to we even anticipate that third has bit the return pre-COVID being really question, see of very procedure be will been last a We reasons anticipating little And be we're a are though why that satisfactory too it'll very year. It's the still to July that a hope

Matt Hewitt

procedures. your seeing key Thank tweets other that for lifted of the something for is coronavirus lockdown customers -- then little patients is you? once a bit become bariatric were the it's talking the just think helpful. number I'm environment, and that been ESG I some about obesity. for categories risk you tailwind of factor, of does you demand tough That's create and opportunities for of one could risk orders curious, is There's an incremental realize -- that a that a that here? risk given but a from

Todd Newton

a question it's good Matt, again.

our exceedingly were opportunities marketplace. think large in I always bariatric the

into potential tremendous a per As growth arise. as see this thesis one attractive on any we a goal study. if But worth in it market and United risk the one obese tapped reimbursed basis, is we the in and And was something COVID year able is compete even mentioned is, reimbursement. the we once procedures way. to the is of associated MERIT that, in and meaningful just And I address. the a the it market aspire market bariatric remarks, higher behind factors very prepared that XXX,XXX think grows of States, to that pre-COVID we're our with we whole us investment the for going are and course, tap we a see patients, haven't pursuing This market result help of to already

Matt Hewitt

I'll that to I able into least than to when that term one lab control that at mobile remarks, Great. bit that the And training was in one in circulating? you'd be think a customers' in-person Or looking guess, last exploit, about there's over your lab? a hop prepared little Is mobile facility? The you facilities. you're then that of near customer even was environment that maybe spoke using coronavirus still better I your something would that And back Okay. one, your queue.

Todd Newton

as they at of I that conducted a a the course what mentioned was facility in training fantastic actually Friday. I was facility. since They at That ASGE. this the first on done as think that COVID beginning that lab at ours. Chicago Well, well hosted And was actually have their

So facility, always had we've physician always the facility. is we've with very with such enjoyed just their and good relationship a really good societies, a success which as top-notch ASGE,

continuing second have yet the here turn to on, we're to that year. We speak, mobile lab, the and to of back be so the evaluate half to going in

Matt Hewitt

it. you. Got Thank

Operator

Adam We'll Sandler. with sir. go Please take Piper Maeder our question next from ahead,

Andrew Stafford

you Drew was to quantitatively your the I this taking Adam. a exposure. a or of guys you cash bit sizable wondering and pay you guys a the speak mindset on some customers, is for have questions Hi little quarter. could congrats for if on given qualitatively, that Thank nice of either

couple You some feel insurance health just of as mentioned things And at the little patient or the financial But to due something just concerns all in that as of hearing to that you're as coming clear, far? cautious your then COVID? more a on is customers. so be far a question of previous any as far

Todd Newton

Yes.

But may to but them large there just part from to secure just heard work. ambulatory to environment surgical us work. the But it, with procedures. this your and I quarter, Drew. contagious me do they was to a related you the second it the I'm than the more situation. And procedures as really how prominent, part not to our hospital it, desire highly wanted quarter a of anything need get back message address or with or get had take repeat and second keep throughout lesser second do call the from question, now, it let's patient that things Let so was intake to have to such of had to It to was your the throughout back to sure question, first customers

started. and were ready a our for that had some go they customers get time we've to so from And communication

is August a think But is maybe I they would period while these that's what seasonal because I we're right accounts that think lower of the now more done. seasonally in from than QX rates that through probably to hearing not they hearing think the quarter be intake period third so continue QX, a of tends would to is now, somewhat that In been capacity our be have places, in forward, to reduced. that working is what the have because lot disruption, taken typical. right move the plan may suggests that have of place past, And more of I things type -- at may at the past, that we're marketplace procedures perhaps interesting safeguards continue although because vacation in been slightly put in of that

Andrew Stafford

Okay. That sense. make

Todd Newton

And the part question, missed second I what your of Drew, was it?

Andrew Stafford

Yes.

I was at the side. in think I your all mean, think, too. answer that helpful, COVID? to about the is some the would second from be just of of side Are patient question, the more the part on anything I your based coming you to on but So your patients answer hearing customers due on are patient question previous their concerned no,

Todd Newton

Yes.

I That's your just good I'll Drew, with go think no. a answer, answer.

Stefanie Cavanaugh

we're what That's experiencing.

Andrew Stafford

sounds of very That's your then it some like for submission the And on X-Tack. complementary pretty be could Okay. congrats helpful. to It products.

there probably of perspective, months of approval I late this far model as from spoke full a year large early in you if the assuming get next? a about? what is missed expect you And can a or accounts limited bundling or me Forgive we couple sales launch down as those a then opportunity some into road, but this, a

Stefanie Cavanaugh

by plans this year, submission -- of we XXXk will rate So normal this the late I'll with believe launch at point. this at if the start progresses that our with end approval of have We the year. everything

And for limited begin couple will carry our so when we limited a small months. a And experience meeting the our with point, in we would of then people the a from out lessons force. launch group at we have expect sales quarter, of then full sales that forward roll launch learned first through would to launch to that middle-ish that our begin we and a national of full

a far opportunity, aware lines. as those discussion of along As I'm not bundling any

Todd Newton

-- yes. No, I don't

I think on bundling.

We very have are innovative. products two that

seem there need. less to be would so And

Let improve for me to in reuse that consider us access. word, bundling order less to need

to right I to product at time when now, point the market. looking get can closer to So this pricing introduce be anticipate strategies we'll don't we that we but as continue in the

Andrew Stafford

Okay. sense. That makes complete

Just me one here. quick from one more

you preservation with the recent more on questions. capital cash you you right stay took raise, COVID. of guess, the of expense the for should you're until mode we side, the do out on happens how offensive away? go business about particularly do obviously, quickly the good place the of chunks there's feel due Thank And I sales marketing a to here? to as taking to portion, like Just in investment you the in kind COVID a Or then, some business, recovery a some and return that on little bit think clarity with

Stefanie Cavanaugh

Adam. comes the you, how question. back Appreciate expenses revenue quickly back. will our Thank our by come How be entirely gated quickly

and return returning well like. marketing board in So reductions activities what match for sales to our we will be that revenue looks our very across judicious as employees, as salary to furloughed expenses the

getting in pleased So very From it there counsel we that perspective, would I And your be our are to for liquidity order thought just through that the daily year that decisions with we're X-Tack equity how and and you the MERIT nice us end through us runway giving fund our launch readout a us of this and raised, sometime the process. helping the right watching make we -- XXXX. in we this in would weekly disruption, see effect.

decreased. significantly been has risk our So

Stefanie Cavanaugh

Adam. you Thank

Operator

that Mr. floor Ladies gentlemen, now for turn I'll apologies. and question-and-answer the Difficulty] today. [Technical conclude over will our My session to back

Newton. the floor Sir, is yours.

Todd Newton

a And Matt contact have everyone, you Kreps questions for please to you, Associates. call thank the at call. today or like thank Taren. would asked, to And have Well, arrange us on any Darrow joining should you, questions

the We September others. H.C. participate through September in Micro September include and also to XXth in moment. conferences during the through and plan several September LD for Wainwright quarter, on the potentially event virtual And X investor all XXth X the the the early these on in and Conference third

welcome a chance one to you visit of So those of we would events. with part as

please would Stay request like everyone, meeting. And to again so Matt a and if contact safe, you you again. thank

Operator

and participation. Ladies today's you this teleconference. gentlemen, for does We thank conclude your

this disconnect day. your and have time, at may great a You lines

Apollo Endosurgery (APEN) 5 Aug 202020 Q2 Earnings call transcript