CFMS - Earnings call transcript Q3 2018

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Operator

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

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

Mark Augusti

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

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

we Paul and answering remarks, prepared OUS in your perspective look commercial our headwinds Germany. face related the to in primarily a business, Following quarter, questions. challenges forward continue I as noted From to last reimbursement

general were performance U.S. expectations. improvement a quarters X%, our over outlined Our previous growth of with

Fortunately, we patent had successfully a very time revenue, many Nephew quarter, resulting good with were to we Smith our business. $XX.X. of increase other aspects large the third our disputes royalty & able performance in a in of one In settle

Conformis Our next launch. for The are to hip ten towards anticipated launch a with now over commercial feedback implantations use forward continues valuable very surgeons We limited progress have our full performed the hip. surgeons in and system year. moving provided product and our pleased with

had have our implant months, results study years should XX% a In patients ACL positive compartments the value the technology. result additional for on to to received and above In out with addition rate iView a implants, evidence allows knee, the survivorship while knee. Retaining high surgeons contribute and preserve clinical of both this arthritic who Cruciate five growing benefits PCL, we our over treating of satisfaction of the last which the to of few published which peer-reviewed the

from patient low we nine peer-reviewed functional high and society addition, continue of high one knee different results for published rates, positive to data demonstrated manipulation at and XXX year. centers a level iTotal In see knee, In scores recently post-operative CR. patients satisfaction study at

survivorship rates years, Joint two this lower under our using just another of which similar co-work. U.K. existing Registry the XX.X% was National those point average adding to data is at an to from data Importantly,

Finally, expense management. once were again, operational results our and we margin able good in gross both to demonstrate

turn me for more now Paul review. the over financial call detailed Paul. to Let

Paul Weiner

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

rates royalty $XX.X $XX.X the foreign to & Excluding the changes and positive million. increased patent in third $XXX,XXX million Revenue and in revenue respectively currency includes agreements. quarter the of settlement XXXX of XX% includes on third revenue quarter the Smith of impact of in basis. revenue exchange currency of Nephew royalty of consequence a XXXX related license Royalty $XX,XXX, of XXXX

reported quarter a Sales reported million, reported on million to and XX% or PS the Sales year. $XXX,XXX constant basis. approximately in represented CR, to revenue XXXX product iTotal year-over-year year-over-year basis. XX% $XX.X quarter includes X% an was to represent iDuo and year-over-year declined basis. for of of or $XXX,XXX X% $X.X and a iTotal quarter of XX% product currency last Third iUni and currency currency or iTotal of a approximately $XX $XXX,XXX same revenue the on third on constant PS a constant million increase total compared the

or $XXX,XXX. XX% million to With sales which our was revenue the hip of beginning the year-over-year. U.S. lines. third PS, the launch sales $XX.X of in decrease product product X% year-over-year year-over-year, increased limited quarter, business $XXX,XXX system in by revenue product X% were iTotal base by U.S. Conformis driven offset sales increased a

of reported million, product including basis of total was quarter primarily XX% of line, business basis. sales XX% a World a Third was in product product constant represented Rest affected quarter or to XX% the challenges by product product revenue Rest on compared Germany. the of currency for same base U.S. $XXX,XXX revenue year. last decline World revenue $X.X XX% and revenue reimbursement a on year-over-year of

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

million basis the royalty point quarter increase. The royalty X,XXX revenue $XX.X a XX% of gross of Third margin year-over-year gross margin Without was the gross XX%. been year, to revenue increase settlement. XX% margin would settlement, be in includes the compared last

position. due integration, of the reductions hard million Total an related driven due million company's expenses. improvement programs. was partially manufacturing a $X.XX in exchange $X.X The expense administrative result emphasis year. share was of a royalty to year-over-year. driven point million general for of $X to as $XX.X for to been basic calculations of of of period point million of in $XX.X offset and period flow average continue third cash quarter gross currency increased quarter other foreign increase in Net to net year. exchange settlement, that assume the has right-off and an unused has write-off XXXX the a cost margin work cost and last positive period weighted an patent impairment included primarily same million improvement reduction third equipment market expenses Excluding the cost million per operating $X.X of the from impact expenses X,XXX $X.X or XX% of business insurance basic same expense, shares million into same to and vertical manufacturing last is of the loss $X.X income compared Gross $XXX,XXX the by million in foreign Net last expense, material we $XX.X the to or margin compared capitalization year. million million efficiencies the outstanding decreases. reductions non-cash basis Net see non-cash loss for compared loss by was for the costs gone by $X.X goodwill litigation increase administrative expense, to $XX.X in of and share This loss in to $X.XX the personnel or

September $XX.X of June compared and the cash million XXXX. $XX.X royalty million XXXX is as it of as not XX, of at quarter October. cash we XX, included XX, The totaling million investments $XX.X received and As to of to in and third as had XXXX December XXXX, the was in related end cash the equivalents settlement $XX.X

Turning this to press guidance, financial to release. the afternoon's XXXX of we discussion in update introduced which our

year XXXX, $XX.X company For the revenue to range the expects the total million. of full $XX.X in

expects in $XX.X million approximately to previous million a guidance related settlement. revenue to of The of XXXX million million $XX.X revenue $XX the of license million. royalty the payments. to total This updated following. range revenue from the patent $XX.X ongoing guidance is the the range million compared guidance guidance range range This $XX the $XX.X in $XX.X of million. Product million previous of including royalty revenue royalty to Excluding of $XXX,XXX Royalty million. company's from in to updated is previous million approximately the $XX.X $XX assumes in $XX.X company to $XX.X settlement,

sometime of margin of are the to remaining call in the Excluding be X% that XXXX turn launch million margin With be will directionally the the XXXX With believed revealing year well will meantime, hip the year-over-year gross that policy. first let revenue our ahead in we commercial In guidance full royalty in gross targeted half our launch and Mark. will total our half total we of through guidance back me we and to ahead the thinking transition product XXXX, growth second finish our we range. a over of the XXXX to limited XX% settlement, XX% and $XX.X to system XX%. of

Mark Augusti

innovation you, will our I namely that and ConforMIS, Thank at improvement, commercial Paul. we execution, margin my imperatives in tenure, four have in people. Early announced gross investment

these of third from quarter, patent as positive had metrics evidence areas gross the expense and publication such in see resolution. can clinical margin financial other you management in many we as performances areas such and As litigation

better the in U.S. The meet However, performance earlier, expected as our expectations. we mentioned our in QX not performance commercial anticipated headwinds, U.S. did

may quarterly slightly seen revenue improvement in year-over-year a I year improvement. result that previous have some As performance not future, lower in while guidance. result, U.S. commentary growth in have quarterly line we full mentioned straight our we

realizing. the should given I commercial we've believe investments better sales, we in are we be growth made However, than seeing

in leadership. As such our change mean a I sales

believe better regional basis consistency with account national to change our good This we leadership the thereby while search As field drive growth reporting SVP percentage geographies decision said, and with help to offsetting in work performance our made declining progress our also have has is have delivering directly each Sales. led even team some varied change make allow marking delivering market new on my to a is geographic certain that will be leadership. should among for to which in commercial performance U.S. sales of consumer ensure alignment revenue have growth. a last representative to a with closer every including in but commercial activities, of to to support digit few programs. good sales double I access That with sales U.S. direct regions fair, we To in the growth. me and we we our activities me a contracting, week, and

margin our previously of gross We've to detailed improvement. margin Turning much activity. gross

performance hip turn in this in excellent in our that was area had launch. we given order operating to QX processes Our new limited to on support

our to In as expense in believe control expenses we going addition, performance rate forward manage material our demonstrates lower ability at QX quarter. last a mentioned I

our iTotal as progress. innovation, to GX for replacement our [indiscernible] As well \program knee continue as next generation make

operator. Our Instructions] questions then be with comes commercial we the able to early today. results a you of need results at QX for the while and latter have That's Bruce XXXX. that made with us give areas any about that the may I'll I answering and confidence now. to And number back SunTrust. achieve [Operator forward first have our identifying Thank launch, comments question I full have hip in Nudell from from turn should your you. this announcements over improvement launch And point half limited it Thank you. of even all of look we

Your line is open.

Bruce Nudell

Paul. Hi

going of you know of are the U.S. unexpected and the investors co-marketing you idea the headwinds a market as an clearly problematic very unique provide with kind know to given majors outlandish of the offset agreement know to idea? explored toughness You or and that a the have proof the is technology, some for you concept be just of just of by like

Mark Augusti

have. and that I asked is Hello, before as this questions I been Mark. I'll respond I've similar take Bruce, question. that

have you not if feel You out got to them. I remain of portfolio types of those share the really the discussions. actually well open X% big our great There's from the no having press you we've incumbents that to I product know I would no well players And given from overall moment done that luminaries it's and There's larger distribution a doubt take know you and market big sharing here, power that. to limited explore I sales doubt know centers training forces. than fit, the the a primary great back

So I'm I've of a announce of as nothing to answer, those that's and know it's opportunities. But we that. today answer have a long to open say that for you types the yes to same while on further given

Bruce Nudell

more the the performing color that successful performing the regions what's just some low missing in between the disparity the And successful? on what's regions, mean you and formula I give difference, in that are are and high kind know not are of what regions regions elements

Mark Augusti

you there's multi-factorial, just know kind but of to. it's contribute few out Well, things a

that, being be feel But frankly than health and like any The other grow have number more changes, matters experience buffeted day able that bigger I a being type on disparity - when access losses. we a unlock, by that of I where targeting sites to in contracting we mean pricing, various the and I But get reasons a I there's surgeons regions standpoint the insurance, a then regions distribution mean distribution playbook way been couple quite it we competitive mean have some reference there. regions of challenge a said, then surgeons actually lose and hurts get whether have that really get really retirements that business. do us of well. just side, it's can around it's to we a stuff we and things us is Bruce, reference affect the of That execute to the more like regional and sometimes that the are out to areas starting from geographic it to

So are have frankly. to we get aggressive more on ones those

Bruce Nudell

make those And Are I would regions region successful as or just could underperforming guess those a of impossible adherence to is a structurally playbook proven follow-up. this those kind well? greater make -

Mark Augusti

we And is previous the been of find will go what and good, focus we positive being once more a by you next to distributor tell No, very conformist you Bruce is them good the but frankly think issues we are we level a contributors. we're only you sell one non-competes of good next structurally renewed I challenging, are not I don't do end tractable. I it know like our tell getting hip company really some net mean they why that to about the impossible. the the full a evidence regions. structurally I clinical and into it's not. rest a as three on. I product The ability are being the really handicapped get technology's or know two market And have of have very, distribution get be a contributors our market shows you stuff forward areas are we that's roughly of frankly ten I've product, on be And actually get because limited the aggressively ones At of that calls, help can it's they that little the now that going that bit can launch, impediment all that's probably think And net able them kind that to has level part, excited we mentioned the more doesn't sell of it's impossible, set get day of that us may that distributor. the biggest some because need of actually some speaking challenging

every you're So dealing the this company these exacerbate is levels that has we're when I revenue at do themselves. and really know operational this at but

Bruce Nudell

so Thanks much.

Operator

Thank you.

Fargo. Larry Biegelsen question with Your comes from Wells next

is line open. Your

Larry Biegelsen

Paul, modeling I XX% the about asked. Hey, think a this calls question. this if I little at it's But aggressive, XXXX, seems sorry fair? apologize commentary it point, streets I jumping color that any taking the on mean was guys. I'm Thanks for between

Paul Weiner

They Yeah, gave total so yeah, for year on that X%. next direction range thinking I about growth since main you the miss somewhere call. part basically commentary, this product year-over-year of of revenue were in

our on thinking. right you're line with in yes So

Larry Biegelsen

feel market, about surgeons talk off XXXX guys I'll in learned launch with hip earlier Could But okay. offline? of XX what I half any if you changes And you comments and the the you used are hear and you it. second you about confident then launch how of to and kind need a on before hip then to you it did your like make drop you've

Paul Weiner

to as of history Yeah, to a with people I'll really comment and it color expectations we such we've little a done put surgical is really have for are be challenges no and should really that. more so feel I've We bar that us. parcel sure longer of about knee just to kind we had first dialed where technique in a farther this making the will of hip a total have good frankly to be you that on religious right. conformance good number Jobs I a that, I I suggested to is wanted we first so trying knee. important when proud. job as along our different speak the would a but place far high really make myself with presents this our is tell did Steve that were And Having fervor than as we and are on much because kind I'm said approach say

would decision some good our we're be ability to approved going have further launch. is just approve about get invention, a not to a in get than we couple more got that and few going for fixed ideas balance even some standpoint - There's that that has from that tiny have done. and you we what things really to where things Larry and to tell make a work they're few regulatory the improvement require things get a so, but And that require to I are they're that need

certain to the nothing also we're this again thing final second and off half and the going I trade slide, hit but that our have is of confident, looks around package like confident I'm balance up. So what ramp that. The that year I'm pretty ability in to to that time in pretty

the we're few dialed really good the feel pieces But I some about we're So can you of we're jigs there. bringing doing. most there's in guidance tell femur, what moving market, the little set I to comprehensive

than the to some giving it it it's we little do used, doubt easier have have that no more in works. when but a we're make work We to information to use, There's past. surgeons

So I'm with pleased this. opportunity about on really - actually I'm the have us we really

Larry Biegelsen

the taking questions. for Thanks

Operator

you. Thank

comes question Morgan. with Robert next from JP Your Marcus

Your line is open.

Allen Gong

actually Hi, Robby. this is Alan for on

first I my just [Technical So was about guess had I question Difficulty] it just

Mark Augusti

Are Who's we back? that?

Allen Gong

Yeah, Alan for Robby. on me? this you is Can hear

Mark Augusti

Yeah, Mark. Maybe on down is year-end. went something Alan, or know our thank you. don't that lost end, I if we on This you happened

repeat you could the So question?

Allen Gong

would new twelve on just of qualification new like of what your and SVP to impact and the really that? what going Sales, for of have like and that want six kind in looking months beyond you're and be Yeah you hire for what of looking first hired you this to kind you're to

Mark Augusti

these are jobs. challenging look Yeah,

foremost that can passion of level and Difficulty] think I of energy first ahead and think bring capacity of with a our us. I kind [Technical we the opportunity in and is commensurate have

we make inbound it rush news lot think will great us is two shows of going the there's than So right and [Technical this. I already I got in up question. old had what line sounds going weeks to of this we be still AVPs obviously sure why level that with operator. kind that in a calls, I'm to love So not a out I'm it the to I two we're different that now get from interest. rolled a want Difficulty] like we work a region there's But energy some taking forward to feedback that I especially we've some this so and you tell I I that's that standpoint, said the less getting it's like do a so and we've have. opportunity.

I'm dropping sure. the call and keeps hear, in not you out, If

apologize to technical the want try shoulder to of we're as those we'll to Operator? So the call, we on difficulty. but can, same on you I having

Operator

apologize. I here. I'm Yeah,

Mark Augusti

Okay. Who's next?

Operator

comes question with Cowen. next Jennings from Josh Your

Your line is open.

Josh Jennings

any you taking the the you on for on just Hi, Mark departure get off more in start the and the leadership, Thanks there? just sales just I hoping and reps sales was on bulling of update quarter, in can U.S. ads to business an XX% had XQ, I update think provide with questions. if net maybe Paul. this there's

Mark Augusti

first rightly, horrible and would X% going necessarily drag. lot forward off, some know a of bigger concern under liked and should mean where a Yeah, I that I from so these so my market the this. little the areas the of where been is, I be itself about focus and we in know is look on is the think have have certainly you space just in energy given to around problem

I range trying think, indicate we I there's and that So from just of I that the XX% get but a this quality team question, to we an of answer as acknowledgment standpoint. that working To still find did your XX% keeps target ahead end to have a that. of in hope representation. growth At we're start directly and shy that QX, of kind were want additional we say we little XX% to to the we're

Josh Jennings

QX did would in was that and impacted So in quarter mean the attrition I was in is there there in net the addition - attrition about, the you but that U.S.? always thinking results

Mark Augusti

Paul answer let that. I'll

Paul Weiner

have of you are on track does bit wouldn't grow while little were would if a productive. take from to say looking percent impact I talking get where any attrition a couple to it to ads really that it a and we related for There's of the no a them but it's

quarter. third any check to in our want I on line the fact a in changes top force of sales So the having

Mark Augusti

say, changes I just was some that issue of of in going other standpoint. from dynamics That's exactly more what to

Josh Jennings

some international a to how the targets you any much hip you're bit can as just kind well? add down just little revenue a growth XXXX help Can want break that of setting. U.S. that and the versus And growth of us to Understood. about just outlook in terms to of just ask terms

Paul Weiner

U.S. growth how the it reason mean go the geographies don't for to something said can management full have the some do to time, I we when model And change want so. for too us a because to appreciate I we standpoint might obviously is there. Josh I is U.S. it flavor to a I able to trying have knee comment And this it only the know, position in XXX,XXX, challenge to the But turn going we've don't you I launch little off like have guys give it's be the and or of stuff. I materiality get part you ahead know in mean going into quarter is really arguments hip. of I don't exactly in ever want - questions want lot you to I this where about and was hip signal. next about one is be how get challenges think well about some bigger we help earliest of challenge in but a that previous the and deep commercial like and to it, changes to around the retractable the get challenging guess about I it to this the these for And right we Yeah, little on. feel we we of be quarter it don't introduce into going a we're variability and structurally forward of then want we these and like it's of little bit I of

Mark Augusti

we penetrate even accounts takes we X%, since the include if hip as so for to Yeah, surgeons in to anything XXXX hit relates limited have XXXX, about far logic clear really be top to that thinking but guidance a while I one, you it it revenue does again on-board target on not the our want to such that our but is related the their as half of that line. around for given directionally second meaningful the commercial and because directionally launch, the full still

wouldn't if the affected second full be again and to successful beginning our in by top hitting the hit XXXX. we're half, depending really second first we expect until So target on of launch positively line in half the we when the commercial half of it

the As negative U.S. if had bit as a little about to U.S. we're on other O-U.S. and we're and grow we O-U.S., while we're continue our overall, on the business add far biggest issue directionally that reimbursement O-U.S. talking part of X% talking is above continued in resolve Germany. X% probably versus countries in talking Germany the

Josh Jennings

incremental the in of And then like it have cetera. just some decree helpful. progress up that's you're tracking Any programs take for Great. media know you I social et questions. moving and or or you're this outreach, whether direct ramped guys not And you to patient lastly, update it having as terms the success there you're we're how feel through year? Thanks

Mark Augusti

right. that's Josh, no Yeah

analytics behind a putting that. So getting the much we're better

mark us. just have conformist we in that from still that we've and really one, more that it's been that surgeons test of those I difference one, look of And the success our - one like there's digital the actually liked good feedback kind the really of moving really, of concentration a done, the the technology personally we're feel standpoint, at on the espouse the I locator patient market the needle, suggests marketing candid and being marketing. I another very when for think marketing that questionable

the The other little is more sparse.

it's get to So for I harder, think patients the us that. to work

continue do plans, that there's and our around XXXX we of But our spend. efforts. to that's to kind learning put into there that So that of processing a part we're

Josh Jennings

Great. Thank you.

Operator

you. Thank

question next comes Your from Kyle Rose of Canaccord.

line is Your open.

Kyle Rose

me, hear very Do much. all Thank Great. you right? you

Mark Augusti

good. hear you We Mark. it's Kyle, Yeah,

Kyle Rose

I I'm of dynamics slowing the quarters? what's the productive. them or the in reps just commercial Josh's hiring So about of longer I I on trying some want business is kind the down for just guess we just of the year. questions you you U.S. were this understand really than to taking about previous us to slowing expected in become help were understand, of –some that to seeing build talking it seemingly the business mean momentum

Mark Augusti

Yeah, thing harder that's tease to out.

I there the process sure surgeons just of well. miss think the I couple that boarding there's kind execute that. funnel making think like some really on and in But of geographies a the right around I goes is said and

struggle So it's couple if but But a we've about going you is before. of question a and a rebuild kind some being - not which of believe that's getting distribution kind about got and a does some thing that. got There to hardest hard done the programs we're think some them of believe to - and like ads every one, it's I don't win take we've to well asked productive that areas - challenges that departures up of where while. don't continue that feel of in as surgeon I I there and is just to through in we I

Kyle Rose

increasingly then I business hip Paul, Can slowdown these like. put your in help seems if your XXXX, growing off when as guidance, appropriately And but that our to verses kind in marketing the the because accounts or commercial be turn more directional around O-U.S. imply is productive new a interpret guidance on leadership time of levels continued hires guess I that a and issues. in when the some shot? it of this guess that national there I previous just become as about hopefully bring U.S. much is you Okay. included the got of what's it think together just, might X% initiatives some become conservatism is looks to first just and of us productive, mean potentially should of not this still it thoughts how on and and even understand that think same it you've U.S. XXXX potentially your I and the you small, it's then the year thoughts you'll you've bit I of what far comment at got your

Paul Weiner

last this they I talking issue, looking group would put in implant. which quarter, out bigger reimbursement we keep thing investment far called when mean primarily which O-U.S. we the pushing you're issue back business, partial of But with our get anniversary as one talked the we this so do for MBK, are we on U.S. that customized this thought in year Yeah, higher that came we are we as are about they in did. about mind, know this issue then

So into working year. resolve but expected continue that it year ways larger .We certainly we affected on can't is part a our are of resolving to issue point and time. this to that this next at on even business count

headwinds we continue next into to do those expect So year.

As States concerned, in growth the numbers far higher these we've U.S. have had do rates United XXXX. the in we as then in is

as at early limited growth launch half be of hip, launch until positively over and the hip like the And are commercial So in to a that new for when level. won't this revenue time to the looking we expect will just rate commercial the too half full revenue, determine get that to regarding we in to we not launch productivity as far able of from surgeon the next activate coming the it's point first impacting said from the XXXX. programs the step-up to the say in revenue for we as I or the will our wouldn't the whether new XXXX onboarding envision and be XXXX, the do that year, be second of reps

Kyle Rose

Okay. for Thank the taking questions. you

Operator

you. Thank

Steven Your Oppenheimer. next question from with Lichtman comes

Your line is open.

Steven Lichtman

line just you new there, stabilization the last other that? Germany, know Hi, this terms follow-up Thank what's to on quarter on in personnel want types working and what what of I to you. internationally a of bringing help in your talked about to when and anniversary side situation, help improve some guys. issue does of I'm initiatives the you on Germany

Mark Augusti

Yeah.

outside This is because really million and that specific So going forward. happened XXXX, it there's a the place in reimbursed guidelines out, with it if in by businesses issue, just that is different, was slightly two $X.X grow the was cost for it we things put well that's to we've part in and helping strategy new The to better in surgeons Germany. issue going the certain of revenue there successful XXXX. through QX, issue Germany work going to work when us we're person, a of parcel this this Germany, headwind the actually that's know into is big anniversary which challenge. million is was In issue, the already significant first that's to been - $X on

we we it's when QX uncertainty be So doesn't partial today, but an will announcement don't change, back do clearly table. are if we something our have just the we where we won't know. more from information then And business coming

that of On is give strategy me. an can to them to affecting done customers business. in get willingness customers to put of proactive the stands, versus these we their hard conformist and proactively to hopefully denials challenge continue historically which templates with how And to MDK early various have where are It's patients, hopefully is work gauge justify against in me a with where but use we'll what successful that we've are, QX, understanding through then we too more see it's need we've reimbursement for know that been issue is we our that which is a the off-the-shelf defend so the that supportive total with personalized us. place business, working what's conformists where us the that as of experience process to

Paul Weiner

just Steve, out. on to we when asked do you anniversary follow-up question about, And quarterly

after said, the as talked partial we first as we out So regarding before about quarter. Mark it implant anniversary

isn't With the the and that as until impacting an pushback this group. on MBK more revenues anniversary regarded because much to reinvestment continues resolve it total our is negatively implant revenues negatively this impact we issue, date, continue collaborator potentially there from our could necessarily

too our no but early might working happen. we different still it's this hopefully that strategies there's turn alleviate on for day specific around, So issues to when tell anniversary totals, to the these and

Steven Lichtman

year-over-year then remind have to you're gross And here working ahead? driven initiatives to Thanks. seeing of on are can margin and margin benefits expand it. on what Paul that and you are that that looking the continue what the gross us Got of wave that things you have primary next were the sort

Paul Weiner

basis, for vertically been that this we've a as to doing is our big thing, the mode final far that Yeah, into components that the still of part-by-part some manufacturing as our vertical in integrating on year. integration the getting specific without details a while; are we

we're even vertically help integrated inserts into that decrease were be the than that For instance, even items were search partial other our the implant it past. and implants on PS a done, faster working takes the deliver the drive might to we process which in for poly we the cost deliver and will out time few have able to

of initiatives. other manufacturing we facility lean those of the so So the plan, the working leaning the just really and vertical cost main our dedicated main are have couple on on the also then that through resources area areas slowly the integration and down some of is the out driving those

Steven Lichtman

it. Got Thanks, guys.

Paul Weiner

Thanks.

Operator

you. Thank

Your next comes Zimmerman from with BTIG. Ryan question

line open. Your is

Ryan Zimmerman

Halloween. happy Alright,

dedicate level time the you previous what to they to your say? you Paul, responsibilities necessary begin. that dedicate find you're a feel given force role. other just me, to and two to sales as taking can at your a you is Paul of with sales just Head we've new I not from going do time differently So around seen - distributors this can the time hearing at Mark excuse what to work sales, lot it commentary suspect your and And of inch the at head mean multiple I

Mark Augusti

and of the I have I people the that don't really about to the outcome summarize get is want gross Chair, company you'd when And to I the but I some the I of would liked first person to the also I AVPs and question, have person that. great to the would well personally involved know level detail know time that we're I be - said form that just more going if me choose turn at you the inside fit want a to by do got contributions of and all issues, where because progressing, answer team I our for that's And company earlier, that, lot lot and But feel right back think actually think I takes really of level, try to And ask to a I amount we're good I'm to That's the of margin time but we more of like a about operational trying it - got energy first before of have for have I look it other going the the can needs suggest here, them even I lot I around because so a an operational things. be to the as but of our to to in won't spend a hip I CFO. travel physician company getting great I knee But the be course the good good have attention take is know that. the in business. the relation Ryan. it of as place around hoping the firmly don't actually with not launch The of to lot things. I'm that don't support. any started in can of such absolutely there I'm I got complicated on one approval. I'm place, to this, feel to we in be go some I need questions don't a not that a I've evolved

there like and feedback work, to other needs just physicians a companies hip approval. their with the with the PSI On be

Paul about if little will, this. build that process now thoughtful hip and we things got, reps As we talk said to and of how the around a a got capability that. lot so that train need out difference physicians the to with go be you you've We've

other I question like that what expectation make stuff can sooner on that stuff. to leadership guess some for the point to marketing well. comfortable a the the And the I is guess the all my there's what up around I field. answer other reactionary. disappointed, the like by the nature that what really going certain of I I to and doing rather just I the positive kind But just of able that's and bring what comment feel want alignment lot I like energy And setting office feel thought the with than of will really are with company. I you I geographies about hip of all and later. have. don't And I so just if be coordination I feel

fit to the don't for want want deep dig role. reactionary, and right to the I overly get be really So I

Ryan Zimmerman

then in few the we're think did staying quarter appreciate last than color I there. you Okay. And quarters. better expenses your I manage this

so on or just forward, are understand you to and do expense kind that you what do in pulling given the the on on investor going expense of may what understand And management back your P&L? help me need help pull back management

Paul Weiner

so XXXX. a necessarily so quarter, Yeah, starting as last some to focused we our start XXXX reducing projects really on to we are didn't think working did starting starting we we end plan to with which successful pull in at as completing expenses who this the weren't spending we talked on successful before together We obviously of this about already. we year. those those operating into year, decrease would came were QX, actually We be back expenses

to relate that litigation reducing So expense and that.

settlement & that positive royalty seeing are of Smith the the So Nephew to we related impact litigation.

as in continuing to future are already as to see We that quarters. we quarter fourth to in the starting the look third that continue quarter and see well

in said I to some areas such insurance lower we that other starting already call, were rates to and negotiate are in as expected the able As take.

for our looking starting we're step-up XXXX that to far So cash expense really to see reductions burn. we're as even as materially a further impact, but positive starting from decrease

Ryan Zimmerman

guys you thank the for questions. Okay,

Operator

as this you have participation today's so concludes question-and-answer Everyone our now you. and session Thank well day. much wonderful your conference. you as may And We thank disconnect. a for

Conformis (CFMS) 31 Oct 182018 Q3 Earnings call transcript