CFMS - Earnings call transcript Q2 2018

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Operator

Good afternoon. My name is Jimmy. I will be your conference operator today. At this time, I would like to welcome everyone to the ConforMIS Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After

statements statements initiatives, by remind material would the and customized the the statements forward-looking impact this of Before of to uncertainties of assumptions. be and mix advantages product involve contained estimates These the commercial and upon forward-looking limited the various current and made I Any provisions on launch Securities business forward-looking could transitions forward-looking including the which including historical Securities that results to securities margin, should to gross the timing these market are events differ those using these those Commission. Accordingly, filings in revenue call revenue offering, guidance, geography, the our hip Exchange operations, you this actual are potential and statements and place about product to law, of federal All include based call margin, growth, risks Safe anticipated in of our anticipated of during financial by be we reliance operations, position and implied statements. discussed not or from begin, XXXX. in statements ConforMIS' section undue Risk forward-looking or limitation the Factors materially implants, pursuant public statements not Litigation cause statements, with like should you statements. future future statements, Reform that that without are considered of product strategy, meaning make management and that of Harbor trends, total facts within Private ConforMIS' will operating financial results, Act

Augusti, law, future, because some forward-looking forward-looking update may live whether the Mark? to and is statements call to information This turn of as only XXXX. ConforMIS by I or of will elect required Chief the X, in the President call now future accurate new While contains these statements any revise Executive as broadcast projections any and otherwise. obligation, conference to except financial disclaims today, time-sensitive company's ConforMIS or the Mark at and August events over update point information, Officer.

Mark Augusti

to Thank me With ConforMIS' CFO, the Paul call. quarter welcome earnings conference everyone is XXXX call and you, second on our Jim, today Weiner.

call, the quarter remarks second financial share I Paul a of and During topics, performance. will operating on our our and variety including prepared

the Paul Following prepared I your look remarks, to questions. forward and answering

quarter the of management mainly four we Germany, to to U.S. This in results. We marketing we growth a of field investments, the previous are and we impact commercial step-up products. in starting digital the continue in of suggest importantly headwinds publication that From perspective, representative positive are X% second that reimbursement-related sales face to challenges second note pleased health meaningful we continued over and due represents quarters, policy outcomes quarters. compared primarily to business our commercial with last although performance using favorable quarter our outlined activities, economic a OUS insurance clinical growth have see and investments changes, decisions

press prior did two a In performed achievement hip also ConforMIS Journal our issue yet, Surgery, on XXXX release of showing it that with to haven’t quarter Results to study better compared pleased products. tibial and fit patient the the total in tibial see you of read first knee this paper this procedures. I’m issue were call. report Knee orthopedic May leading yesterday had alignment published we CR the a funded patients of of achieved different just total arthroplasty journal. to instance, this the system a case For iTotal pleased to to rotation we replacement a peer-reviewed with knee a were off-the-shelf treated the that publication we treated three ConforMIS chance

who follows we is to-date ConforMIS company. knee everyone only been a As have arthroplasty aware,

Without too advance billion opportunity. few entry significant a X launch, of have growth segment into concepts total in the outline like we market the of much hip key I our a with would system provides offering plan. incorporated offer to patient-specific we with Our full ConforMIS brand. CT-driven utilizes our plan will that the factors into are Mainly are; of key XD adjust consistent to surgical iView the these planning ability the that proprietary surgical seven market

our implants, by reproduce replacement. growing is mention comprehensive for Our others, joint hip patient-specific off-the-shelf. including on concept to like have [ph] with surgeon’s without the again to demand of potential in and These the surgeon combined neck done for developed have and is length angle based compared we industry’s The efficient features for hip cup. incorporates to and type a acetabular large each multiple the plan. outpatient the cutting a hip with custom have stem We system an need knees won’t box ideal provide guide surgeons total use the trays and in most instrumentation a I hip meet more procedure now,

In addition we our made will be build we new the realize in organization should opportunity, our arthroplasty and total to hip to us cost Most the franchise. leverage growth investments have customer leverage base. fixed field large will selling help importantly

that us from thank been to release incredible the be they the pleased that offer evidenced total we of of around solution usual. our the more time, in would to total ConforMIS and for color all into XXXX I provide our estimate program. previous as course high our fact effort To will Our to XXXX hip able At next evaluate the revenue this as like personally surgeon performance. product sales management representatives confirm early gives and we guidance XXXX hip year by is half of our and not this statements, have very field in ConforMIS limited put my colleagues and impact be material to hip time to are in our have early interest as to interest well, excited able achieve our more evaluators. The time second market clinical total we

still turn to over allowed work significant second is results. that, Paul for what XXXX detailed has for achieve this a their milestone our call remains, let much the the quarter to dedication review financial Paul? With of company. us While me

Paul Weiner

you, $XXX,XXX all X% quarter We of Thank joining on and representing million, year-over-year or second for an reported of increase us. revenue a Mark, thank you $XX.X reported basis.

revenue received the XXXX constant $XXX,XXX, positive of $XXX,XXX, X% in patent currency quarter of same prior of $XXX,XXX Excluding the the respectively, quarter The XXXX a related the XXXX. of impact revenue basis. to changes second includes in agreements. the XXXX in year in royalty in compared exchange foreign second on to second in Revenue and the timing rates of license payments of decrease revenue quarter increased quarter royalty of and the currency reflects

on or the U.S This in to same represented a basis revenue in to continue of for to on revenue CR Sales basis iTotal total second lines. quarter business. year increase and iTotal the last flat first we Second fourth quarter $X a $XX.X PS, a iDuo approximately reported revenue. have the and was of as of first quarter revenue well million over increased reported that in XXXX which X% trend X% as revenue product approximately that year increased strong in compared growth high quarter iTotal X% We with we driven and is shown product declined third XX% by currency was and $XXX,XXX a constant $XX.X increase percent currency quarter. believe in of currency business year-over-year basis constant a PS the of on million U.S. a product increased product due basis Sales or XX% our $XXX,XXX year-over-year. base and $XX.X XX% year-over-year the representing basis. a million a sales a OUS constant $X.X sequentially product year-over-year X% single on reported on a have shown weakness year. iTotal seasonally or $X.X quarter to our in million, over X% the XX% iUni year-over-year year-over-year or million revenue. a million of is digit of year-over-year sales growth to in product quarter basis. XX% PS on product an will X% This year-over-year this U.S.

direct a world product reimbursement for reported basis a sales Rest base prices constant of the from of the the end at decline product product a total $X.X transit year. quarter on revenue million, distributor U.S. sales currency basis. year-over-year was of Rest XX% revenue quarter affected at Second of last customer including XX% a world a was prices. to to business on change challenges same represented XX% weekday and line, by XX% and compared Germany product revenue of product or revenue $XXX,XXX

P&L. across results the Turning a to of rest the review of our

of result points average basis impact point revenue work vertical XX% from program. revenue been impact Second reduction emphasis by of and was gross the and see margin XX prices. increase. the basis basis driven margin was of exchange year, continue quarter higher year-over-year well XX% of increase the foreign and compared we The X,XXX a as selling points that positive to cost currency favorable reductions improvement in into cost has Gross gross a as as efficiencies, hard a has to XX gone manufacturing margin last mostly integration point

$X.XX increase million primarily with expenses non-cash average million per year-over-year. sales the expenses or in second Net foreign operating variable increase last connection revenue and million in quarter the higher the operating of XXXX related Net by year. $XXX,XXX basic same X% last expenses to or to primarily share million XX.X business to loss $XX.X currency The administrative in commercialization research Second loss for for second driven costs in impact. compared to quarter calculations of compared expenses. in period same development foreign share Net million currency income or exchange marketing, administrative and X.X to assume related X.X increased outstanding by due was for shares $X.XX the hip $X.X and lower expense same and period period the last patent offset million $XX.X weighted general exchange of year, million per to included to insurance, primarily negative $XX.X personnel and reductions of share costs, a the our million compared litigation, quarter other was XX.X year. basic loss of per product in

totaling million. cash of XX, cash and we As June investments XXXX, and had $XX.X equivalents

investments $XX.X and equivalents cash and was cash in million. change quarter Second

large achieving need plan savings expense equity and comment without With call of let pursue a In lower our will this we our financing plan and gross needs significantly margin reduce extend XXXX. We improvement, operating have developed plan the me runway our who to Mark cash on a possibility back over thoughts in turn offering. expenses our future profitability the will scale cash addition to starting our to another new believe more the to that, creating bit requirements.

Mark Augusti

Thank you, Paul.

I earlier, pleased mentioned results continues and performance. One our overall business OUS our the our commercial of As U.S. reimbursement operational be am area due with pressure in challenges. to to

place but guidance. likely in headwind to QX QX the a issues of to actions full as performance in us as have year OUS expect continue and these We our half well certainly lower probably address for landing

in indicated the recall the early would first would expectation for our that a performance XXXX deliver ConforMIS to be In was see that you investments I in and framework. begin accelerating If XXXX. results we XXXX, in year transition expectations new my growth we’d turn, XXXX then our from

second realize launch realize next laid returns I investments. total like our comment over that in few the performance to would early the are plans I with those the XXXX. the I Now back starting quarter, our to new end, our we growth on years. opportunity development out from we hip to have To believe with in journey Combined initial some product U.S.

In GX product ConforMIS. Today, growth opportunities. evolving are we our announcing releases were is we New that a in to market anticipate iTotal a programs for for and a long-term have change the limited XXXX. the activity and scheduled development iUni product our development indicated disclosed critical to GX ingredient due market we past,

launch a cementless in XXXX. femur order to arthroplasty. fast put release we total early We GX option option believe on approach and knee Taking an as hip track our changes, in hold launch into anticipated cementless on limited market iTotal these follows. or can have the to in press-fit are program our We for project new decided schedules account have the iUni

have would limited ConforMIS coming For or In iTotal and first of the the release full second iTotal fit release. in in be And into the be XXXX, we would femur the And GX tibia the half of limited GX half project iTotal the have hip in and release. market in, market XG. for for would come release provide GX release. in cementless XXXX, second in press our support iUni the We the XXXX, market the market market have we and as schedule the then for half GX market will XXXX, would growth first see would option iTotal In market we this second believe limited then half limited second a of would ConforMIS of ConforMIS XXXX. release in back in limited release market cementless of well hip GX full necessary into launch see hip a XXXX, we new iTotal the the full to half release fuel And second in the stem. stem we of release. full product

to operational Turning performance.

detailed We activity. of improvement have much our previously margin gross

the appreciation making express to greater teams gross QX are support goal than this again Once the operational I XX% significant like yet my progress again, to area. Our journey in of in ConforMIS continues margin. performance longer-term the our for at towards would

companywide equity have fund or now. team into planning. and operational addition, look identified margin over the we lead Thank that Paul with you. to efficiency it pleased enough for challenges offering, our need cash that about has made operations bar I’ll without have large-scale and ConforMIS XXXX any expense turn that results to us undertaken any comments Operator, In review. unforeseen will to we I we back to operational to have any the our have material a increased the continued improvement gross for all will expense That’s today. reductions Paul anticipate opportunities I’m combined our of earlier. announcements These operating We another questions comprehensive financing mentioned you. pursue the may you have XQ answering as forward roll

Operator

Understood. [Operator Instructions].

with Cowen. Our Jennings first question comes Josh from

is now Your line open.

Joshua Jennings

you Thanks half growth. able tailwind. but be with questions. other that seasonality. what outside you than about to wondering franchises Congratulations taking start just seem quarter? for of a may acceleration hoping initial PS play have the in you on U.S. nice afternoon. on to headwinds any complaining saw procedures. if U.S. the fourth takes growth Was puts Good iTotal for just the X% the Not about in and drive that? get Hi. the growth I And could better some talk just and of X% back the hip the U.S. setup I’d if weren’t the they do thinking better even any to been the quarter Can sales year about specifically and

Mark Augusti

Well, obviously, for is This the of is Josh, thanks question. Mark. Seasonality, course, a big one.

any had a like commented see bit I headwinds. little I that would I think our a as Paul patchiness. on as performance. that. there’s step bit for up say indicated instead don’t see And still slight to I particular I of

of better of where management – some the of behind. have you changes X% much U.S. are I overall I out the me doing this but talked than guys that I made have about and change our think other lagging growth, is some before. still have areas so areas have the we have country to I obviously the team

the unique I still So What performance say get only of higher as a growing across-the-board – try little of on wood at across bit to we regions all think just I that now. I see varied the rate. headwind just see a let’s don’t there’s knock operational them is really

Joshua Jennings

fourth the second guidance the fourth tailwinds through but think be guess help particularly the you well should as contribution quarter? year. on thinking more the into other then any sounds the half baked laid any as us about It in quarter out, material [indiscernible] Paul we street could of half And we in just the that there that’s go coming back through the into about like in feet as I improvement Great. the thinking

Mark Augusti

bring point. probably You biggest up the a investment tailwind. good The is rep

would get guys goal growth the short We a So point people at recall, that little in out at on feet you of on with of still if to you lot at street first to growth or bit QX. and but we’re feet XX% we we We have like we XX%, are year-to-date. just the quarter street kind this Then the the behind selling on had be. were were the wanted there goal where way a we a in our did shy, we representatives. in you a bit that if XX% will, street, in of put

and And so earlier in quarter. maybe if our or that only you as that replaced extent the of we productive just would I 'XX. people tailwind additions taking all know and fourth the those along at in in the of be for really we Again, you to rep early way have previously added talk really were managers four of six underperforming early root, about some we doesn’t orthopedics become part it of of a will, in the quarters but 'XX, the have some came mentioned end some areas some

still need turn little So to a more areas around. their time they

to that I So help biggest think us would normal to the leverage continue that thing that Josh. seasonality, off be would

Okay.

Joshua Jennings

the Great. lot. a answers catch up. Thanks for Thanks and we’ll

Mark Augusti

Thanks.

Operator

Thank you.

next Our comes Bruce with Nudell SunTrust. from question

Your open. line now is

Bruce Nudell

Thanks taking two question. Mark, for three. I or the Hi. have actually questions

regards well first each question there. important from you the the iterations be you in you heard thought are priorities, as cementless just I and change highlight terms development I of of a in go how the at design? with – First, think do new won’t femoral knee as That’s could to to my

Mark Augusti

Sure, Bruce. Thanks.

about our the it point. changes. software But system under. development, because the stem third extensions. the this are I’ve that Previously big to important things some system, is new us of just iTotal had or So is of outlined and around we think thing some for There iUni incorporated generation product talked on basically I iTotal GX the first an question, working are

is will conversion to the our and tibia market with that’s where the feel change as into of something extensions offer the of guides. the we help which So guides, a patients as specific metal desired metal that guides in give some inserts stem well surgeon guides more

biggest more in small really we those So the move we if got point finally have. a feature felt we parking lot look you realizing will, because more when you of options. can option frankly was [indiscernible] had femur sense from a feasibility and iTotal been brand a the nuances looking our the our in to market started which but around and shareholder version GX. on could investment what are moving to a made [ph] Bruce, that the or to of, iTotal And out. it few that cementless probably there’s and to that is laid other things move things felt a was for iTotal quickly advanced, if we kind back way, as market with a really seen at consistent we perspective it We noodling I it’s because the on realized a standpoint like from we quickly cementless we to really get earlier, will,

disappointing iUni it’s you robust little is total as market. but as the the a as market So not know

great in I slightly a year of a or with that opportunity to deal. totals. offering there’s big able maybe more cementless a a a release think is I year we’ll fact femur And market into limited the think get in be that

you but hip And to into getting the of time can with on out do. it’s so we as really what the gave I’m it’s early you, pleased the imagine. and In time we’re reshuffling kind – able

changes. also the doing that, about make freed but resources it up some of expense by to the and we talked allowed R&D So changes us of some saving some

Okay.

Bruce Nudell

there’s there cementless so is? no tibia And or

Mark Augusti

will There so early the quarters the sorry. of that, quarters three would kind XXXX limited say from fast for the be tibia four femur. after the It whereas anywhere of follow XXXX is. talking femur. early for probably to We the I’m talking with cementless No, release we’re

Bruce Nudell

the values other the ASP even the talking is thing U.S. about And major that else think in doing. in of if me the about really of I you’re this an the struck I things strength you ASP And joint one market anybody and don’t know strategic was talked uptick

can so a average that knee for you comment in and just company hostile maintain a And the ASPs on environment? above how probably can pretty a primary

Paul Weiner

Paul. did quarter. so this up Hi, It Yes, quarter. Bruce. same It’s ASP last the year-over-year also our thing did go

just we’re price So two premium getting point we’ve now row had a getting price in a not quarters increases at also but where year-over-year.

is with far year-over-year a quarter. during price would not that which sure mix team to if I’m decrease continue be We’d going are stayed do ordering national of sales as expect I But as very to they Some that have that to where do has to works particular if trend executives or average flat with strong increase. at hospitals our slightly. C-level continue a accounts the happy even we hospitals.

of maintain work implants the be hospital increase hard as where a advantages savings to prices and have lot Our cost can. or far we as able we even system within to

Bruce Nudell

And --

Paul Weiner

Bruce. ahead Go

Mark Augusti

them, because all customers recognize the that industry This they’re performance is got really experience has the the a and that especially operational Mark. add realizing with some that obviously it’s work to just support and have ConforMIS I to demonstration are we to to there over savings. I savings the want national because it. operational are of They seeing team, done people a, are the think we’ve accounts price headwind a recognizing

first in I evaluate it unit those we’re opportunities we happy growth the the every our hard. we one. volume Now, to we can think be discussions. work get engage some And get tradeoff pricing want to growth. And and I’d concessions, look, right if we day for

So anybody other I the it. that But also thinking hand call price this to we’re don’t wise people. very want putting somehow leaving we’re on about

the ConforMIS is steadfast probably factor have diligent pretty our good products to way. more in a are they’re competitors day that if from and of a end driving the little out deciding there other commoditized the At those value interested for in and obviously are not of customers there. that and only be and customer The price go we

Bruce Nudell

you the robot, place. knee would in well, how in optionality and up and respond majors is all and counter-detailed robotic I’m remaining the assistance fit and I and question use and wondering only rotation with put planning if wind you put if it my in said, you. guess just paper saw I a Stryker the and you’d Thank persona with the the same tibial

Mark Augusti

the so surgeon them a robot [indiscernible] and that one At only wholeheartedly importantly challenge the packages. is is surfaces of answer triathlon the there and at has to that cut day cortical it I’ll in most may tibias, I look all disagree day tibia Yes, less that the anatomy the shape of the variation tibia changed. per hasn’t we got want. the are There patients’ is of with building rotation way slope to plans take if matching and And they to you is the no at surgical [ph]. do to Stryker’s at end the our the look you into end and the the

the compromise the off-the-shelf and no day ConforMIS make between world. in compromise has that is every they system to there surgeon to have So size make alignment the and with

Bruce Nudell

much. so Thanks

Operator

Thank you.

Robbie Marcus comes next from JPMorgan. Our with question

Your now line is open.

Christian Kern

at going the much Thanks. of how seen to expecting? Maybe one product the Hi. outpatient Robbie. you what This setting? knee Christian well is larger that on shift suited on billion the hip and target to least you’re Any continues And see do just there, in market you market than as earlier $X the color being first better as for this your being then in do have on? outpatient a seeing that year you’re

Mark Augusti

of be want estimates we’re a outpatient as number great anecdotally as in around lot don’t question. ball tell interest as have accounts a to kinds seeing have give we about able talk I’m unfortunately outpatient. nice and to I – crystal good pricing that. and seeing to can requests agreements, it good market stake I to hard far we we’re It’s that we as more a would seeing anecdotally that story all a feel lot more you in Christian, and you [ph] the national because really Yes, of to a

the is So interest there.

I outpatient two And Medicare far we’re and we ConforMIS patient the a we’ve feel knee one hip. know, ASC as of outpatient a the same As still that way a in the opportunity knee after you for versus because with to we’ve outpatient done point. and at going our paradigm it’s this kind for know as commercial for got get same good box then hip, really

Christian Kern

Maybe iTotal just quarter, initial And was greater margin and building touching continued I people year? percentage expecting. above international in bring should of XX% by for Thanks. the PS? sales by than was think that your of driven gross would then of gross lower margin then which well how was driven were How one sequential better the that, much on much we outlook expect improvements you much

Mark Augusti

Sure. Paul?

Paul Weiner

help Yes, U.S. so that margin, States to as does was are expected. of overall States. are OUS sales gross be sales and highest far in naturally But in in the United percentage in the in they higher United the That more the as gross margins. selling our by keep mind that

iTotal iTotal giving does of your with factor more when PS As in that’s our than the in our actually PS today guidance question iTotal overall cost as increase that far iTotal gross margin. PS, CR. headwind We the a on because

and bit software as high on side as was into iTotal develop our the right now next will XX%. outlook we closer the come to cost the PS as our going year, for of as far it but far is guidance the And CR year, more a As is where headwind. a

the that expect said As XX%. for already and around last at I the near higher of end quarter, the to be than we’re certainly we lower guidance year end would

year. that continue we exceed even this to possible throughout it’s as So

Christian Kern

more year. we what that earlier the were Thank are you. the from And product laid development kind then hearing timelines getting It one does of pushed on just out sound pipeline out. that you in slightly the

is If much by on raise of Thank much just great? you’re how your is on the to would you just color that how seeing incremental and to opportunity that could decision more capital more then desire you field, not just provide marketing have to how in the that any you. driven be came on any color

Paul Weiner

in out talked I GX as far second of think we second -- half timing so Yes, Mark, – the next or about it, was as coming the half of the iTotal

Mark Augusti

'XX

Paul Weiner

'XX.

the as on is So iUni because that to or We’ve market The press 'XX. save as schedule of bandwidth. that fit but That replaced we’re of size. that’s scheduled holding out to product far cost half still concerned. on, the because come first in was the for the only GX our of cementless not with we’re now back that potential

was that to products. the exchange just So decision

we to So had you the add do timeline on that? still with Mark, out. are that to we want schedule laid

Mark Augusti

we we’d that’s I that. think to if in we had Actually we’ve past what certainly certainly this we Paul than detailed address we’re schedule, answered more different a the can look that. having. But have perfectly call and tried somehow and be at in question

market ready version or in for good getting some a from in the of sense and question a an we make analyze to And frankly to we to lot investment to to cementless committed sense. to just and getting we’re decision and for no hip gotten the that ourselves we it’s bandwidth of knee to expense things GX arthroplasty iTotal an be And is to a obviously, be of what’s projects the what lot excited are a much go better quicker follow on given Clearly savings. this better we that. for that on any ahead we do to And us funds and some would before, going ready of make committed up adding it and I after. I’m just so keep was we’d announcement. had noodling list So was about the a didn’t it It’s of our today here about the We’ve that we like going a opened plans have questions were be of GX. can’t think only had those on able team pretty makes around unlimited to agree just want the longer move certainly we around option been in stuff by cementless hip, sense announcement. case, I to And the was made to change said not that able delaying projects. GX. don’t be news and femur an that ask balanced real If standpoint in just a was of out weren’t due for try and we room there the was ourselves and necessarily that opportunity? would it you The

is there so track So limited as that well, to a to that’s a our available around for this femur why clarify the there. only the release will little it be reason There GX, we gating is just way. option had and

femur to option We’re products. kind not waste our current a resources for doing GX going of

Operator

Thank you.

next from Biegelsen Wells comes Our with question Fargo. Larry

Your now line is open.

Adam Maeder

on Maeder Adam I said time you that follow update operationalize, about think be some impact? so for the Hi, take up. it there I And a thinking before some we should might have the we so are guys. an Larry. provide then question and color? My in for that to I how It’s I on didn’t hear is Thanks Sigma, reimbursement. U.S. hoping taking could questions. for first you just

Mark Augusti

I we take a say lot will and thing exactly piece good that your comment on operationalize I announce it right. that did did we’re and will to and before is memory Sigma seeing the because frankly. Yes,

Some back to where There go a had that. to Sigma we’ve been have change couple and fine. sites work actively are

and good So for been it news the remains and that part even policy is Sigma has before.

in reflect national their updated some positive the movement coverage positive to have seen The have Blues. policy Blues also ConforMIS. of We

as just But help to around a That that the another an goes here of positive happy we’re We news. called so that haven’t continue technology indicated the over specifically and story. last But positive coverage to waiting because ConforMIS coming still that for Blues And but would continue to exact health month economic we’ll more just from operational is I’ve that continue of the the I more our it standpoint. results out good happened how economic. option have and expect decentralized see to us. I’m before, We literally kind within forget date. have didn’t – mention months as

Adam Maeder

forward iTotal that half That’s think during some key what you’re in full helpful. is Thank the looking coming are you. period? learnings I I launch And of the of if heard XXXX. limited on launch the then hip, the second correctly

you on Thanks focusing of wondering what the for interim? in So just guys questions. are the taking kind

Mark Augusti

Yes, exactly.

clearance to and we So, the sure in the and our board surgeons working the want. are kind the want you the make get and make want hands in the end day we’ve designed look, validations of at that across sure for the to things that of we can results of we

as specific We like performance surgical and we’re to that’s we stem to based surgeons that’s so we’re of we have data matching with the So compare shelf, we off things want right standard the up. and to make time sure make to very want fit femur and things collecting planning the kind off customized that able the go a fill expect. software our sure like the

are our about on We’re And procedure we side. been won’t doing become as clearly just we excited interest the that works of that evaluators. so lot innovation we’ve works that and of acetabulum there’s we’re on all that technique got that to types. a doing. we some other the enough done I want are now. offering they’re for make is it I all sure surgeons that what clinical we just get surgeries jigs and pretty it because I’m surgeon go of stuff of to And better much the sure have into things but to hip very better, good that acetabulum true We making a kind And and down sure said, the to very make patient in be a have it’s excited than kind to

the going feedback of feel be to we we comfortable that get able so need. we’re kind to pretty And

be has – product Now question something the to other is, something tweaked. development always in

call? is can has it it. year which half So which maybe more it as it the about question kind is where So lead that maybe stuff market second only is result we’ve said is a of is, on be end towards or middle from launch some to now tweak might and the some last something year I as the the full a time put we the that kind average of of or

a around and So our as guess of and expect give more in to this how know to prepared come. we’re We answer hip lot about those we XXXX. each the my in we said questions expect going think to of to I to certainly best color, you in our on of kind comments get your models

Adam Maeder

you. Thank

Operator

Thank you.

Rose comes question with Canaccord Kyle next Genuity. from Our

is line Your open. now

Brandon Vazquez

actually Brandon the This Kyle. for Thanks on Hi. question. is taking for

reduction speak as sounds same bit start had I kind was in give mentioned. that’s a off bit maybe and new hoping dovetailing ongoing guys little It First, OpEx the to going And the point we into can an operating a reductions color what us maybe then that cadence base you expect little focus expenses for any like maybe I your of operating just that we reducing business expense through that wanted confidence of the the plans year. won’t you to XXXX? on maybe moving to subject, as inflection on turnaround? move right disruptive to be at should

Mark Augusti

potential detailed we to to our He’ll big your that’s debate frankly just And really the Yes, around a again, give fact we’ve we numbers you. inflection so because Paul and time. noodle question’s here. would around in we’re important insightful much get point at. but a reached that the on guidance the OpEx, more had XXXX future an it’s And I’ll obviously let you expect where

the leader standpoint. probably business thing So the from that’s toughest

as can’t you we’ve as that made we’ve some it. investments things the but we’ve balance systems You in right But done, said we’ve try comfortable we’ve some be the have. can’t expense get interest want feel the investments kind discretionary say to more we about things the the behind able of forward. still performance decisions. to but to comfortable we’ve that of balancing we Yes, going we We’ll things that the that I of the in-house, that the feel we’ll got brought made, I the that of some when it we that benefit have I well you’re that plans People to we us. some think the have maybe of these those achieve doing hired, on street, those other be add given of feet able all been the cut

Paul Weiner

all develop we through way did the detailed have not of a we 'XX reductions achieve years. We plan And forward but that and just that the comfortable rest cost for outlined feel all we internally. through, that to the carry very the way can then 'XX

break we the go when we guidance more the when in in a out As reductions said to those detailed far little XXXX through as really the start XXXX. communications, like I we’ll for in and see cost detail bit

Brandon Vazquez

team we some it on speak you. or inflection maybe Germany. can Okay. and what the some an plateau? international second we to in those business was start that reimbursement Thank might a like Thanks. at focusing in to some And were can particularly of those when had you – just when losses stem to question headwinds the of second, of actions international – is my actions maybe some for point expect some least Can made help sounded taking

Mark Augusti

surgeries some mentioned reimbursement as ConforMIS impact of review reinsurance the totals in MDK many the the the the slush with but in the I’ve recall specifically challenging a in done. we if or so that is you particular, in Yes, case-by-case our the called stuff, of the past, medical client had obviously parts organization necessity got basis on that’s that we’ve of Germany are and

headwind us nonetheless some in And it’s you after but way. been the dealing the so can deal a very support We’ve hospitals. for them in and after challenge it successful that to imagine hospitals that a as with created with fact fact,

to rotation the in we actually things in reviewed you necessity and to help just fit is are justify the by example given our one surgeon that’s of an doing the alignment, and the medical MDK. data it advance we’re providing So give have of file to

or surgeons a So least is with provide that our that from team as a advance impact on will. at ConforMIS we’re this, will. that think is iView there the trend the Actually you their if going to working to to local the plan, in reverse result you and documentation that thinks be on if helping on their significant we based is

we’re – in see that we’ll putting So place. literally

not. probably because I’d challenge it fourth maybe If you’re first QX. in business. our reimbursement quarter, but sometime a to change to the that opportunity to probably see we’ll a fortunes continues had there’s time in I see say to talking had it on affects maintain it’s part an the any to it, But we’re guess, in significant So of

Paul Weiner

we countries. of as help quarter, is to on hired an the we also mentioned other we offset and Yes, now in working manager headwinds expanding marketing who have last sales to and any Germany international

actively beyond that Australia starting that think there’s and additional we’re into that like countries help countries. XXXX other countries to and in of into there’s as again far entering a go us as So should selling number looking to I we’re and start

Mark Augusti

Any questions? Okay.

Operator

Thank you.

question next with Steve Lichtman comes Oppenheimer. from Our

open. now line is Your

Jia Min

Hi. Jia This Steve. on for is

gross full to complete cost impact update front, on you you growth the mentioned us year. your an reduction Just margin printing you CAD realize the on expect vertical and when remaining from be pieces that expect XD suggests give offshore those integration on you of progress initiatives this and the just Could program the to design margin?

Paul Weiner

and again like that Those done the end you vertically be second will towards to year. got need in of partial inserts. the poly components of this so said, more vertical be the Yes, integration still a half couple the like we’ve integrated

release it’s iTotal the half As PS, amount first to the release year launched year, going helping on will and also looking at in release that’s just time the CR, quarter really fourth design a off-shoring software end that of improvement. CAD end the the that It year. next we’re help us will of will CAD quarter. next us the help of And this iTotal to so a end this the done year. by offshore third towards big year so that the the We so – until to the and of process. towards into the this far reduce also us that’s be last of But as Also, revisions recently it’s continuous through needed. started

And that’s So of manufacturing we to out cadence of the improvements some and move on. kind we continue above process. as the of lean then that, beyond these

Jia Min

question the sales you. growth. then on Thank a great. And Okay, just force

expected. I the just Can seeing attrition just more about there trend you think sales as talked little than you you provide stabilize? on perhaps a quarter last things force update an

Mark Augusti

the reps time but we a Yes, so and last in terminated did at of quarter number reps. we new bring also released same

obviously have We’re we to want our there. to strongest the don’t sales and want and reps really to force lose trying in we opportunities geographies strengthen

we’re just adding So we’re not also replacing. but

got So the did were that were bringing number first but to new we of a we second point quarter quarter This where behind the achieve XX% we net again we in reps. almost the know I and we’re throughout of targeting second the so street the stopping year continue on at we’re we not this full reps for the half to this year. or on point, bring additional feet

Jia Min

you. Thank Great.

Operator

Thank you.

BTIG. question comes Zimmerman final from with Ryan Our

now open. Your line is

Ryan Zimmerman

just about I Thanks. the you kind when thus the to hopping sales force make headwinds you the you’re how should if the Great. growth year of of And we be first anticipate that outside the that can so, been of and thinking the for additions half material between Thank U.S.? this apologize asked. eclipse those been you. I’ve added that indicating the calls. do you’re to has rate year? But impacts that have guiding rest the given where through

Mark Augusti

to a – it our and minimum little six think guy productive in as quarters Ryan, that’s earlier bit detail four takes and average on I takes or kind and Yes, I look, think become probably the it a to traditional stated I a of And a little at for represent. model’s model. harder

eight us. So six talking I think to about quarters probably with we’re

came more hit going me, a in, 'XX And impact. the they half. the second it’s So second But opportunities they’re the some I provide – year. in first will really and to depending hit will when half half in in think some more excuse more of on next

Ryan Zimmerman

you, guys. Thank Understood.

Operator

today. no your this conclude time. Thank am today’s you. in Thank I gentlemen, the And in queue this and questions showing for participating does further for Ladies conference. at program you

day. You great may Everyone, all disconnect. have a

Mark Augusti

you. Thank

Conformis (CFMS) 1 Aug 182018 Q2 Earnings call transcript