CFMS - Earnings call transcript Q2 2020

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Operator

Good afternoon, my name is Chris, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Conformis, Inc.

Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

federal would statements remind include safe during within meaning I management that forward-looking harbor begin, are of the make which XXXX. Private will this of Reform provisions we of like to Securities you to Conformis’ statements made the Before pursuant laws, Litigation the Act securities call that statements. Any be considered should of historical statements contained fact in this be call forward-looking that are not statements to the prospects, future All operating including and the future ambulatory the various limitation offering implants, using and expectations, results, about and statements product surgeries are and at will trends, customized market assumptions. hospital growth, surgery margin, strategy, future of our commercial estimates forward-looking total revenue Conformis’ operations, pandemic, restrictions gross replacement for geography, and about based targeted revenue demand launches, time potential and businesses, statements, without increase the product guidance, and operations product upon of position the initiatives, financial expectations centers, procedures on including current impact and when knee and will plans margin, impact be elective by transitions anticipated coronavirus mix financial in novel of new outpatient advantages relaxed Conformis’ including risks statements, could filings those differ or with events discussed from These the and to public uncertainties statements forward-looking cause in involve Factors materially by the implied those material that actual of section those results U.S. anticipated Risk or Securities and Exchange Commission. undue you reliance these should on Accordingly, not forward-looking place statements.

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

Mark Augusti

conference everyone Thank CFO, me you, welcome Chris, the on and Bob earnings today our to second call Howe. quarter call. With XXXX Conformis’ is

will well COVID-XX a variety second as related remarks During of as to the performance quarter prepared topics, impact our comments and financial on operating our the call, we including pandemic’s operations. on share

revenue prepared orthopedic our look are your XXXX, was remarks, questions. and consistent noted are March year we and answering numbers targets with withdrew we XXXX, scheduled second On our July Following On we due to those forward surgeries. today. X, pandemic quarter impact pre-released and to growth on what it we its that the XX, full our reporting

see product by of towards expected, revenue joint when the quarter, we QX results, any recall the second XX% to improve we and anticipate for not down down fairly As of year. pressure essential total we or does scheduled May, were that going but then low resumption impacted pleased in in the June. quarter orthopedic Please procedures to a being were down XX% pandemic, the to was in April in the from quick considered Conformis QX results Therefore, orthopedic are to under that to primary remainder we products have oncology we elective QX expect Though are weighted heavily replacement. trauma revision, remain the pure surgery. relative and volumes X%

to result a any the XXXX has we due country, to ongoing on adapted and While infections and worked of to COVID-XX as professionals could that uncertainty a employees of new possible the lead track. just deferring of Conformis’ county surgical safe state, team Despite city policies, resurgence in parts of interruptions. for keep renewed to production the about challenging hard related surgeries not resumption of guidance concerned scheduled many and providing will course, and pandemic, has continued of be

prepared well respond feel elective to if surgeries and For improve increased this normalize. number orders to continues we of to the reason,

has Stryker are and I’m pleased quarter. today the covenants satisfy Instrumentation, think Nephew, reached would from manufacturing operations is made The Conformis’ otherwise like credit has of successful performance with or agreement PSI. it reflects pleased point good we PSI Wright facility and covenants. amendment and of for all and companies amended XXXX. notable our agreement expertise on Medical, many Stryker their with in Novartis. June known have COVID-XX cooperative Smith to undoubtedly agreement We financial strategic the as the indication other dated a our the Zimmer economic Biomet all realities Specific development I the on MicroPort, an loan impact some licensees company items come out successfully We of we our difficult COVID-XX of we’re business of security able that the to XX, that of the now The business, Moving to fact Zimmer contained and were & to regarding recognition Patient report Novartis. partnership some to In products technology. also with the on quarterly reach economic clinical Biomet with past impact current of validate this the services. our financial of settlement and to better and

and product would growth believe as are industry. new participants acknowledge the to that medical in device introductions we think Finally, critical industry most

replacements ever outpatient past targeted our pandemic, challenges. is centers. why maintain to surgery This at despite this strived for our growth the the are hip announce ambulatory our we is we product programs That product why pleased medical for to and new clocked quarter, obvious throughout at demand growth hospital knee arguably, our hip financial future expansion quarter XX%. worst and have procedures, at device in look for Just

replacement for Conformis. standardized polyethylene increased inserts, will inter-operative have something consistently knee allow was flexibility, surgeons system new which Our from requested

the PSI systems. need new capital with this for preplanning iView our existing Unlike will of Importantly, will and competitors’ builds system surgeons be of efficient, the typically standard eliminating using knee that’s knee our highly benefit system, massive required our new have system replacement instrumentation. accurate the replacement instruments

knee our system. knee to us offering a new at selling knee efficient deliver replacement personalized will profitably and package fully complete allow price a lower Our than

to also will be weeks product five it to personalizing. for expect the able six provide in weeks We versus three currently to takes this

further plan, for now to on future expansions, detailed the financial provide review. more me call our I over Before comment turn product Bob let Bob?

Bob Howe

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

of foreign and related $X.X agreements. in Excluding royalty exchange impact patent respectively currency license decreased to $X.X changes on revenue Revenue and quarter rates licensing negative and XXXX million a million basis. the of X% includes second of $XX,XXX, of XXXX revenue the in constant currency

The of licensing $X.X and revenue royalty disclosed second Zimmer XXXX million settlement with quarter and previously includes agreement Biomet. licensing the

$X.X million or was decrease XX% on System our XX% on reported to a sales million $X.X million year-over-year. a Hip increase Second U.S. of and or year-over-year the million million million, representing and knee $X.X million Sales knee or year-over-year. product $X.X revenue year-over-year a $X.X an quarter reported products U.S. of and million both XX% XX% $X.X constant constant to reported decreased products our of or decreased on Conformis of product our $X.X XX% Sales $X.X of currency revenue decreased to constant and basis. million, basis. then was $X.X currency year-over-year currency basis.

on Rest XX% P&L. move currency a a the for XX% or world revenue compared was the basis. product same I’ll U.S. basis reported constant year. product represented to total $X.X on $X.X and of of now XX% revenue product of of across XX% last the million to quarter year-over-year decrease our quarter results Second revenue million, rest a review on

agreement. margin driven gross was of by margin license compared to Zimmer and points. the recognized royalty the of last Biomet same revenue basis increase in This a XX% an quarter $X.X million increase was revenue the of as quarter of Second result for revenue XX% gross year, of XXX settlement

revenue, product increase unused COVID-XX to $X.X expenses related surgeries million pandemic. in This gross to decrease well as an The and expenses, as decrease result to the margin, result last in in was the recorded well by royalty decreased goods expenses which significantly XX% Our decline. costs in as a million as quarter as due from XX% lower year, second gross $XX.X in than operating licensing was inventory the the selling of the product settlement XX% same Total normal revenue. driven compared lower costs, the of was litigation in a basis factors by volumes, delayed cost for decrease quarter higher X,XXX year-over-year. excludes variable in reserves point in margin reserves an driven product. or primarily increase The of lower primarily patent as

and operating well Net overall and $X.X $X.X meeting operating share to same income the of in due last as share $XXX,XXX expenses, million year-over-year increase million XXXX same as $X.XX weighted litigation period expenses. expenses quarter XX.X to XX% as currency loss and cash quarter Partially, was administrative second cash the compared year. offsetting compared expense realized equivalents assume general personnel, due XX, XXXX second shares XXXX. last million last for or $X.X $XX.X in We average net reductions shares and to Additional expenses, primarily declines same approximately per legal period to million of Net $XXX,XXX of higher of loss and XXXX as administrative shares XX.X year-over-year. loss calculations of income these $XXX,XXX for in exchange to $X.XX – Net per income June of year. the March or loss other totaling travel, of share foreign million of other XX, to expense. compared discretionary million foreign of the was This currency the or $X.X our for period XX, had general to $XX.X outstanding million December per exchange compared million year. in severance increased $XX.X were million included as lower

finance the few to liquidity and continuing close some to the progress our made want I we’ve Lastly, towards highlight efforts with of comments a company. on

First, agreement XXXX, covenants for as with covenants Novartis. which through With procedures moving the the Mark revenue revenue impact to we’re from we’ve time successful additional provide the that company amendment, recover as mentioned, security of in the and amended remainder financial revenue elective COVID-XX. were the in quarterly loan we of the this contained normalize pleased

quarter. These our patient discussed employees of quickly Protection able we we call, in we continue furloughed could funds secure company back allow to the to the loan that to during produce second as respond million majority earnings volumes so the $X.X orders, the allowing procedure Paycheck had Second, to recover. we bring company Program were last as

patent during continue development make to Third, settle great the the Zimmer with quarter, were for next our to financing to will Fourth, with non-dilutive our progress provide which Biomet we relating dispute over able additional $X.X quarters. we million to three efforts Stryker. respect

– remaining two remaining two million milestones, for mid-XXXX will the we reminder, a which an the additional $XX of provide As complete to expect financing. non-dilutive

new Lastly, to XX add distribution agreement that in back or to This of new and disclosed aggregate our the million plan at-the-market other that equity belief reflects from in Mark our common call company entered of represents sources in shares agreement ATM reduction have sales Company. previous XX agreement a turn value XX-Q up our sell With stock our to me with supports color. lower long-range ATM available over a million. this its and aggregate agreement we Cowen new This the value. combination to our financing additional with let that into today ATM and allows we replaced of value existing ATM an

Mark Augusti

Thanks Bob.

While as Conformis has to prior the endeavored development and of commentary, releases the maintain activities. effects pandemic in its to challenging be mentioned continue

lower-cost we’ve such result, that work on in significant as a are our the continued the related mentioned, to activities performed centers partnership announcing As to product There’s our well today. And United knees This to years. facilities, knee some the shifts market more planned three knee programs. as of these outpatient to States, arthroplasty new new development be offering Stryker hospital to as as progress than basis total Bob in care just an aimed solutions or ambulatory primary in might includes we site-of-care that provide five and performed projects the the next XXX,XXX indicate XX% reports to in centers. outpatient annually on response so both strength. best-in-class are the Of

collected this better continue capitalize order as will knee knee XXX,XXX COVID-XX than and software any will that replacements. more provide to than knees system conjunction serve are based a From a the developing coverage perform better with utilizing we we’ve In market on will knee on set new designing this to is be believe researchers techniques on believe and experience personalized that advanced and of Conformis existing we shift the the ASC. standard developing and today. standard of the only pandemic We result to a to trend, accelerate a data

Importantly, defined we polyethylene quickly we’ll be able than a because fully the range interruptive surgeons expect the of will of inserts flexibility standard manufacture knee we to existing will sizes, sizes more which tissue when this customary handle a deemed And is standard system more knee. medically give as balancing system The what able number needed will provide will have of personalized to a efficiently provide necessary range full to size knee. a and to systems to be be typically soft of inserts comparable in implementing industry. and and

XXXX. system available this expect will new knee We half second the of be in

before timeline, our our range is this an this launch iTotal personalized aggressive is system. we for approval of is and within we knee because achievable it noted of off based current system believe While as

entered previously is Knee collaboration, leading and market guides System. strategic designing Conformis Conformis a whereby As supplying reported for and Triathlon have PSI into Stryker’s Stryker Total

making program and the our We’re milestones in of progress expect good achieve time. development to on each

developing offering PSI of PSI Stryker. to sets system the for Stryker, Stryker. Triathlon of up knee manufactured addition the combine also be a commercial supplying to actual Stryker’s In we availability and PSI the system will The Conformis’ will be to

with explains for its in However, valuable supply three knee think investor we and of exciting announcement, surgery, In that to and us This Along corporate time. sales. found a company through shareholders. on years expected we website. represent within can I revenue and Investor increase this this ASC Clearly advisors from that have again, our product new given laid-out and today’s customers XX% this acknowledge presentation, overall our agreement the is we to presentation like released employees, launch XX% soldier would financial presentation continue could updated our cadence opportunity Conformis and overall thinking. the this the anticipated page company. for XXXX all challenging of new with the to and be the Once that Relations targets thank consultants Conformis’ on replacement

efforts you back any the I’ll your turn and much. and over to take of the questions. All we’ll greatly goodwill Thank With call operator appreciated. very that are

Operator

Josh first question Jennings Our Cowen. from Instructions] [Operator you. Thank of with comes the line

is line Your open. now

Josh Jennings

today. from offering going just good is Hi, make Mark imaged high-level, just knee I to standard going patient. differential and knee, the is understanding and patients the not the and that announcing you’re more wanted sizes particular sure just CT afternoon. for be a I’m a it’s I’m be to Bob so, a on that questions. so taking with for will ASC to want get the this implant that Thanks here to non-accustomed start off need And scan clear to optimize to

Mark Augusti

we scan and where answer the be going PSI Yes, a be CT the or standard Josh, standard need size and to put it. It do to there’s do plan, the great we’ll Appreciate able that to off will do get in the be question. knee, going But value image, standard sense sizes. we’re to to Yes. to imaged question the of knee. there’ll still in about and surgical because think we’re instrumentation what is, your

so you’ll And in a replacement that have in kit one knee still kit. –

out putting will to won’t of think still it We big capability technique. have sizing put surgical of We actually out that’s the and we’ll inventory with CT to have to the won’t have because a of preplanning sets. a deal be our model. bunch case So We instruments the determine the offering. each efficient a scan to the of be bunch

Josh Jennings

expecting, on industry inpatient thoughts the procedures on priced similar any, incremental offering, today? your ambulatory procedures? sit would headwinds and you’re due where any it knee knee that. I as I be where be just also surgical any into perennial say iTotal outpatient should guess on for premium delta that reimbursement move the could Appreciate pricing between to And centers, piggyback a whether just just a to to priced, Understood. just then commentary And that

Mark Augusti

Right.

well there’s patients both Medicare don’t to the So payers point any from that. as codes as there’s and Everybody think I commercial price a secret. knows different related

to industry really actually so And done fully-customized always getting knee been pressure is question conscious the a the with always we I’ll the the as good or our price there’s looking the certain a for the walk-through call We’ve sort been is flexible that for job extent. more premium. exacerbate segment to have priced pricing, to what at and going people in of only ASC price Challenge recognize there’s Conformis are there. ability that trend is

premium base it’s think have surgical segment a that’s will point compete, to knee going be because to us to standard very us ways because to our – and price will knee offerings standard help what our new and a going call maintain Josh, priced going a continue be knee get frankly family to but have those subset to offering and price, clearance to standard – as a continue the open made. similar I to is again, more closed up that than it’ll definitely of price can’t offering. custom ASC or actually current us, because of our the be to we So And premium that couple as this fully personalized implant, a we sort well it’s want I’ll one a to will off, our help current a technique feel design, personalized will of offering for there’s

the two they for want it’d surgeons to be easy to. So the between extent choose to

flexibility inter-operative us competitive for us lead a has been this us. lets as something well surgeons, three in for very to adoption surgeon always think has week and conversions, it gives get a time. us as Because creates it it news price that for is I been points, headwind exciting So different very, which

So been and can’t than weeks can, quicker number, everybody three people someone but always five that have says we you really bad, three – what six the really any to isn’t is surgery even we said into because weeks, anyway. that’s want reasonable is consent

in there So can that’s the standardized that’s fully-customized after. there we a can be if get not weeks, three offering, with the a offering plan. could deliver and be we target absolutely but we’d just going with We

we’re So excited very that. about

Josh Jennings

supplying supply That come on supplied could those sales all to Thanks supply, PSI Stryker. for make mentioned corporate And of the incremental be from sense. to XX% details. that is Stryker you exciting some overall those I instruments into mentioned time. mean, you’ll agreement, have you XX% you’re to at knees, a could over run mean, rate guys suggesting that million, this see $XXX just coming back running $XX million want math, you been $XX million to I so from revenue agreement you in close at you’ve to

Mark Augusti

excited Absolutely. amount day that, personally Stryker. launch we shareholders. think understanding have achieve I’d for control the we’ve be would absolutely good announcement we opinion that’s to progress the feel schedule about revenue in the frankly, them potential very good math but – and sometime don’t we that year, end we put got we of of at will about we we’ve to the I in wanted potential, very and indicated made, while I if And it’s my my hope up don’t but really I this that, at with a there’s we’re have opinion, don’t to that And next revenue people least Conformis today, think collaboration it make key launch a the and and as – disappointed, because

Josh Jennings

update iTotal on offering I I’m may development but it, and Excellent. there. any and just just missed not Last knee offering question, cementless the have sure efforts

Mark Augusti

Right.

mentioned we’re sets, for continuing both quarters identity has I’ve stuff. iTotal roll previous CR PS the and in and as flavors to out So launched

projects. second have going quarter year to we’re cadavers probably next the in cementless activities done are we’ve make that as have to well, now can two gear sure cementless with Having We with that’s do half ASC able to pretty cementless, both we of on we the of on a as the our have delay knees, actually in you ASC we the launch because said that project pivot lab progressed to and work knee, aggressive. quarter sort but towards imagine in

So, goes ASC a have we don’t without where it offering. awhile cementless want for to situation a knee have our

really sort really, So a addition decision Josh, sort over knee the of prioritizing ASC cadence. in that significant if the beyond of only new we’ve taken you the our in change tough of investor cementless, to look presentation, ASC the that’s launch

Josh Jennings

queue And Great. Thank Thanks as those offline. for you. I’ll the details of and well. follow-up step out

Mark Augusti

Josh. Thank you,

Operator

this remarks. now Thank I question-and-answer turn back for Mark does call would the today’s to you. like And conclude closing session. to

Mark Augusti

fine, the Thank on to I you. your look Operator. Nope, Thank forward call and we’re you. quarter. attendance appreciate next we’ll

Operator

participating. this you, concludes call. you Thank for and gentlemen, today’s Thank ladies conference

may You now disconnect.

Conformis (CFMS) 5 Aug 202020 Q2 Earnings call transcript