CFMS - Earnings call transcript Q1 2021

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Operator

Good afternoon, and welcome to the First Quarter 2021 earnings conference call for Conformis, Inc. My name is Valerie, and I will be your conference operator today [Operator Instructions].

Before we begin, I would like to remind you that this call will include forward-looking statements within the meaning of federal security law, which are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any statement made during the call that are not statements of historical facts should be considered forward-looking statements. These statements involve material with an uncertainty they could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements, including those discussed in the Risk Factors section of Conformis' public filings with the US Securities and Exchange Commission.

the of place forward-looking not should undo the reliance statements. You because required any projections to whether further obligation, disclaims by or or new otherwise. events except things, financial Conformis any as law, information, revise update forward-looking of or time-sensitive call XXXX. accurate X, as and conference last This information today, the broadcast, is include will May of Executive Conformis. I will over call of the to Mark Officer now turn Augusti, President, Chief

Mark Augusti

continues to related CFO, Conference our Bob welcome to to to as revenue We on near year today My our hospitals Call. industry Earnings we With expected growth we And inpatient strategy. XXXX COVID through call thus the The me right or to you, was at procedures. joining Thank manage is in a you to be capacity COVID, Quarter continue resulting our work Howe. and by appreciate to impacting be short, healthcare Conformis' us. the operating impacted relentlessly team, headwinds. on which continues First where it good thanks the In start. entire elective off is

half we rates addition, we to others, to COVID demand In making and we for XXXX. back normal the and less believe elective of office second we believe should levels feeling see anxiety continue will patients improve, realize we transition as the but visits has knee arthroplasty, Like in to demand undergoing believe vaccination affected procedures. the start

course, Of we that experience or this assumes unforeseen don't anything unexpected.

pain a update It I to fourth in been short our knee fourth our fourth Number a exceed would and This product as realized this time, been are is Since one: patients period extended been the growth strategy. discomfort residents. our to on knee of implants past over most only months. the likely abnormally that since however accounts grow business XX% is moment for over procedures their the core or knee take elective. deferred call, our levels have elective have XX XXXX. revenue of treated its dealing means of goal our quarter high to current has like product and an of Conformis with time business. known for current match the by you best for surgeries revenue of our quarter Our quarter we impacted has most

believe As we corresponding patients will in a we improvement knee return, business. see replacement

expect patients business. partial More our growth. importantly, we deliver our new market be and knee as the or as two, the model We our products Number the will our savings. hip we seeks efficiency needing And to full focus replacements. grow we procedure preferred those increasingly for launch outcomes on believe delivery knees believe achieve ASC, best efficient

This our During quarter the XXXX. internal fact like with the that business the quarter, the $XXX,XXX adjusted revenue, growth over of first was which line but has first expectations, off pandemic our in plan. put XX% us we original was hit performance don't pandemic we

efforts to our launching with are maintain the in and to activities product work expectations, and we franchise. back the good are and news our surgeons favor, Cordera Match model. interest, train December this our we grow Hip to about working at drive are are to driving R&D in with especially that hard commercial our incremental customer line committed excited products. able we remain the hip aggressive and is comparable internal, Number We investing three, as should of traction hip The to rates continue our offering, new XXXX in differentiated pre-pandemic are the with launch more We get to to System, more growth. getting commercial

once they products believe be our will we several particularly financial that impactful X to in the have performance We pipeline, including launch.

we which us have and first expected The system, penetrate well segment further is will compliment Imprint. outpatient extremely personalized the named new This total offering and system to for help knee is Identity arthroplasty. anticipated ASC our our knee knee

Our no to update the XXX(k) for application significant FDA report. review, is with with

update later to is sales we that on ensure our clearance our teams preparing year. new use train marketing and and we are attract are to of the pending, While surgeons ready this product

The second knee. cementless is our

are I've and As are to this to get last working to its outlined product back expected was and Those product to for infusions due original due constraints. timeline. constraints the of before, recent gone timing delayed cementless now summer capital, resource we hard

with our XXXX, For now, view of we earnings plan on is we product consistent the QX by call. which last the on shared this launch of

million implant under ankle us, replacement $XX These additional third number strong pleased is a an million The from Conformis number that and date to receive zealously protect Stryker Stryker bring can XXXX. our continue of XX use introduce for Through Paragon do restructured the have leader we with growth to this property have patient-specific licensed hip Having and from technology development and million necessary, dedicated has to off-the-shelf are we imperative place total now XD so more when agreement, Conformis' to a generated team this. licenses we and $X.X the making supplying successfully program, as milestone Stryker. strategic granted our to on and will complement the IP team and lastly, four, in system. that agreements Because technology. APEX systems on recently will in development have completed is hip strategy. patient-specific our and position And successfully We we mutual license Paragon subset property. resources implants litigation, their have to the instrumentation a are our plan successfully $XX Protecting over and progress a can summary, their we companies. patents, our we we respected strategically our In development our to our to with instrumentation will XX. in final intellectual payment to hip manufacturing a focus in our intellectual a to monetize instrumentation specific Conformis non-exclusive programs. Stryker patient achieved portfolio research receive continue of

turn to I $XX our it headwinds. with This Bob, over nearly face operate proceeds us necessary us we of million of to the drive gives mid Before cash I'd net touch provides runway on capital growth reasonable and the February. infusion of in like in the as call cushion strategy COVID our to

is we where in invest to area this organization. sales first The our cash started marketing and have significantly

new Specifically, activities commercial sales lead space. targeting ASC leader we've added a to dedicated the

increase and Imprint two surgeons. in resources number to marketing efforts, to Conformis' more In that new surgeons addition, of knee the education support the calendar events knee adding to medical We believe more adding system to we hip who aggressively of products. and three order launch the we these our are use new through will train

The second is area of investment R&D.

R&D proper partial timelines, for resourcing schedule to are improvements incremental forward in technologies. complimentary knee restart appropriately as meet goals explore program, implants, investment follows: in hip third bring and new and generation software ensure Our our

So financial over for to turn the call let detailed me now Bob review. a Bob? more

Bob Howe

And Thank afternoon, good you, everyone. Mark.

public with Although was highlights, recent the will quarter. event of offerings, start significant I financial it Mark already the most has since first hit the our

well We of was positions to provides our and offering price the cashflow breakeven. net a to this $X.XX on XX us execute a per and February growth shares As believe $XX.X closed just The capital for reach proceeds strategy million share runway infusion the at on million. reminder, XX. under were needed

development recently FDA receiving On the Stryker milestone of clearance. remaining achievement front, the was last which we announced the contingent on

million an this of in we result meeting $XX expect a milestone, payment quarter. now should received be second As Stryker, which from the

not we with loyalty licensing date the agreement. to in revenue As a and yet reminder, have recognized Stryker connection

Stryker, our which the royalty distribution of licensing manufacturing is in XXXX. milestone, will a This the our with final second look about area to significant are instrumentation. to quarter and forward expertise on quality we the With $XX plays supply and executing the of next successful million high our Stryker. phase completion of of testament expertise, long-term excited now Conformis' revenue third agreement we another in We development with and patient-specific recognize milestone to relationship

during reminder, Innovatus amend we as X. Lastly, our quarter with term our worked on a March the loan agreement to partner

of the on of that XX% for did move the reported a lowered of that Mark first waived a year and part As were remainder I the quarter decrease to year highlights We now cover. amendment, financial on representing revenue will currency not for basis. XX% XXXX. million covenants and revenue XXXX over basis a $XX.X of constant reported

million over of reported year $XX.X new currency year and constant our over new and both representing million, was over product of products our representing of year XX% on $XX.X a sales products Sales basis. revenue our US year of reported million reported US a basis constant an decrease of XX% year. decrease were basis. currency over year product decline XX% XX% were basis. basis year XX% and an currency of System reported $XX.X on constant were a on currency of year a increase $XXX,XXX, over on on a $XX.X XX% over revenue First world product a constant a year quarter basis. year and representing XX% $X.X year. a approximately million, was of million decrease Rest XX% decrease revenue was year Conformis basis of Hip on a on Sales XX% a

million fees as expense, lower by commissions XX expenses flat the from call expenses of expenses, revenue sales quarter by marketing product XX% property. were to increased first expenses expenses. continue and variances $XXX,XXX This and to compared resulting Sales by that quarter as the first same XX% to driven year, by were variances were marketing partially R&D lower was as travel were driven primarily expenses increase like an inventory primarily a production due there functions pipeline. for primarily few Total personnel up $XXX,XXX due to gross points. to year lower event, protection advertising in canceled of basis case operating of by well higher of program $X.X intellectual G&A our the over I'd and legal our was quarter revenue to the costs down Our margin the for related different year, lower prior manufacturing were offset invest up we volume. out. but within

organizations outlined, our strategy. marketing, and incremental our As we some Mark are growth planning to investments for R&D drive in sales,

our $X expect to intellectual protect an million quarters the next our of in property. over we litigation-related further Additionally, $X three activity to increase

As million, between to year these anticipate R&D and and expected to a $XX be be we for million million increases, $XX sales marketing between $XX expense million between $XX $XX and G&A million million. $XX result and and and of XXXX, fiscal to be

currency foreign loss exchange March to $X.X same the and of to of for million million significantly period $XXX.X million $X.X or of first foreign compared $X.X share had million as compared equivalents period of sheet the million our XXXX. performance, the net line of loss last XX, the first loss per bottom net year. per same We or quarter. last our to quarter during was year. strengthened as in included December share cents XX, cents currency in cash $X.XX exchange Moving loss loss million $XX.X to balance of $XX.X compared $X.XX XXXX, We cash Net

would I provide some Lastly, on outlook. thoughts our like to

heightened providing Our full and year suspended the by unpredictability level of caused practice volatility remains of guidance due COVID. to

improvement However, quarter some be a we the our $XX guidance performance million, and our between and revenue year. the product May sequential giving half we the is million are next our to of which June, quarter. second on modest forecast $XX.X to for first Based for total expect thoughts from April on and

exited in we scans, and our April, which seen weekly is through the improvement have sequential As CT month we encouraging. of QX

However, the time by negatively and between be given we scan elective surgery decline expect date, to procedures, actual overall well lag visits revenue date QX seen QX. as QX continue and market the in in office decline impacted in to the the as

in the well about We seen progress scans, made as optimistic are as the adoption been we've our worldwide. that cautiously positive has in vaccination trend

vaccinations this or and office that the visits unanticipated of to We year, no to procedures second course, half elective continue new and of complications COVID improve believe into variants. QX there's assuming that will with through continue

the we anticipated the do the where procedure sequentially to expect grow and exceed we in as earlier, With I'll existing are over overall product to goal the turn back quarter is or have quarter call that, fourth realized market, business in and of our improvement today, quarters. to match third our fourth XXXX. Mark of in fourth base In the Mark. both With revenue revenue elective light stated

Mark Augusti

Thank you, Bob.

For COVID regain feel since pandemic I began, the the starting first we momentum. like time to are

We have while visits, below improve. levels, seen office still XXXX generally

and a on May, expertise specific physician There's people of Stryker global key surgeons employees, The work programs, new Stryker on the forward Conformis' testament now live our imprint well XXXX, as Recall the that, product I in in non-physician goals achieved able the to XXXX engage XXXX. effort with the business conformance we project October, with and I We happy One remains timeline. capital we and of both our we better like I and their half This to take and we partners as knee store pain. your close. now feeling progress to to the second of move patient FDA confidence. the work the launch progressing. about and organization this as of with for is track Stryker no deliver more to seems year. of remotely, not knowing have people's to and transaction closing, of Conformis' been rest would aggressive do this, Most We're the vaccine successfully our with and questions. than without are importantly, ASC market or for make clearance partners area development the hard excited of in a the In thank organizations, what's be continue very our We and additional announced in are for Bob entire could instrumentation. with competency rollout to lives have With I targeting. who to of clear to appreciative XXXX the delivered better. we tremendous and before be here point to more in help customers help continue April. our proud

Operator

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

Eric Anderson

This is Eric on for Josh.

you to we're through through can able you've of almost accrued volume there then and now what sort anything thinking point? backlog that May? at that? observed is to And early April point, has you Would quantify halfway think on do trends that XQ, Just be this share you that

Mark Augusti

an as days It's first the early And through We're So April. we definitely trajectory. the pretty for said, seen in continued still here. scans pleased on increase we've May that's May. few of

back. that for arthroplasty think goes knee demand patient to I So coming

and for surgery patient be I go people arthroplasty goes We as willing in to population, the to alluded to come progressing, in vaccines again, age we visits CT think especially Bob that his the those scan. the office need to need And to section, back. population. then in be come assessed and

thing that we're So seeing. that's early sort of that

our those and to back. is scan see all far delayed uptick as of backlog but about we I then recall, an that's category basically some have to uptick will backlog, they came as need trickle patient's what quantifying slight we're positive have were business. to As And in because, we that you volumes. talking a the in. we momentum a don't we're business, in And say continuing get seen drive And real think but surgeries a we I just know going we've seen it, cases that comment built and scheduled, on can along return, quantifying

around that's QX. so positive And us making

Eric Anderson

down we it? I an Is that years could included portion total that And be thinking way a your expect think the company's just few more previously targets XX% appropriate XXXX wondering, few road? LRP in then the to for do supply agreement a a were of LRP said be to of the And Stryker to should that, we LRP with the those? and range? you you've some Or for milestones margin. revenue should about that I'm initial of anticipating the what around And meet set expectations partnership question refresh that still one XX% that as revenue. still the at point? be previously just Was you've

Bob Howe

we're Eric. XX% Yes, your And on our XX% and is those signaled, that's changed. still had then right, what to that's ranges, still sticking We meet it. comment ranges. to we and believe that's with to hasn't achievable goal that the

on. still that's So

Mark Augusti

on to had we say, fair I part not the into first when those, crystal COVID, in think published a some ball but mean, the the ranges we I purpose. it's gave of insight second, look, we

stewards stuff, of an move in part we at believe credibly signal to obligation we as certainly, speak, responsibility LRP. we'll our look the if that we still that but have And that, so ship, So our we always and that of to we're range. off

is to other ranges. I we're and from see that's think and we those with importantly, in our that but have business slow we just in talked still that exciting we comes, things But the do opportunity ranges. with those new us we the shareholders, where point partial that be And do -- these money. to in product the guess hits and contemplated together. XXXX, is, a to the of still product in funding that And had my support when knee obviously will of and So take thing comment it why about, to continue programs. But my adding, put some to refresh programs. drive I the start signal we fact progress instance, committed here because invest to appropriately but a commitment new we're is now for allows And we one wasn't

as said be within partial that on doing So which knee signaled signal will as program, going more to a of this call, well. but we'll later, we're the I we've XXXX timeline happen

Operator

Our comes Marcus line next question the of from JPMorgan. Robbie with

Sarin Murlidar

Robbie for here. on Sarin

XQ in reaching 'XX. I saw coming line your So XQ you in what with on and comments saw

sure you're over much to I'm to lower than visits the or mean in of these kind to implies of scans a getting in and you're do ensure how so XQ? get half XQ I And this for but in happen understand next needs what to XQ. going in close need a make that in of it, not trying what is here improve that trajectory? XQ number 'XX? line that Does scans month to of come new that to So sense to And with terms kind and that that office so quantifying it's

Mark Augusti

could color. to that's the to things we QX don't be XXXX, continue can and this they levels will expect are, think we at QX But they progress anything will of in hope 'XX think we do going. -- to have if some see I add maybe here expectation for actually way to I Bob might is because thinking we're able just how I they an which point, the that and contrary,

answer that's trajectory that sets comments, out of in question, both coming And nice your up could in to again, the So actually to we of see sequential improvement sort and expect said we I QX a QX that for see QX. us we think, our QX.

Bob Howe

need improvement. improvement seen do, QX. mentioned, but our we mean, see We've I as some get early on direction. heading right the way to in still April, to to those But we're May. and levels we to we're in work Still through

Sarin Murlidar

what's the as ASC top-line, guidance? assumed to Or for in contribution here the with the now both your launch, affect the knee of the upcoming And right as back what P&L? expectations year, well the does this are being half here? your this in margins How

Mark Augusti

out breaking is not of the when specifically. happen. will we exactly part don't And know approval that We're challenge

predict uptake. it, release but to have and we're We limited launch a the tough it's going to

significant X we our sort and have as well to we we've think beginning And of value have we of Early longer it's efficiencies. get under it because huge for increases, improvement, not production production belt it's as as will be term sort driving appropriately in X improvement. days, cycle. quarters going term, longer of the margin said, But or going have to it's I after the opportunity baked and margin upside.

sort talked here. see mover we've we've in don't indicated Right, being margin I huge gross it previous the about beyond past And what comments. So a in of we that think Bob?

Bob Howe

impact a 'XX. It's more 'XX than of a

Operator

Instructions] with Our Steven comes from next Lichtman [Operator line question the of Oppenheimer.

Unidentified Analyst

This for Steve. on is Amir,

ASC? create can Are to target you quickly there looking a like wanted on standard hoping as question to just a I any the for another guys how are metrics be So salesforce followup, separate initially? provide you to on many you knee. AFCs And ask will

Mark Augusti

answer create a me to order. reverse separate Let not We're looking in salesforce.

twist, we in importantly, to However, rollout or support model, to things ASC and still more comments, indicated it's how probably there economic on as of agents hired more and add them, support the have little salesforce. We but as and time. a people go to our in we'll them I with launch on, sell, salesforce as we're person we market, one use actually going where to the the agents lead It's identification the have bit separate a dedicated the the as with existing the closer a good we project different training on other two a marketing see of the around not relationships sales local our ASC. execution. focusing to the as well some a product get we We'll that and around and

as far As question. metrics, that's a great

share you just then product some I that if about may metrics and product to about get think later, we ourselves launch the could we've adoption. conversations let's what defer had

You'll more we we'll that launch kind us to it get closer from what about you insight and leave the that. give at after we'll of around hear

Unidentified Analyst

my side? progress mentioned on COVID, like And any products or during updates side the on just last then launching last, training the difficulties in last hip quarter question you new

Mark Augusti

understand monthly April. seeing May to from here. bit than industry hoping we're I we're than than a rest market, can think in March. better better think reiterate even down reports I subsequent see, seeing, there. arthroplasty going it movement was is the was that my and market would come the little of that, but down as improving, fact It's March talked and January, February, fellow was our to primarily competitors, want I April as be improvement. that I a was knee that seeing we we're And the We're be And we're down. better even good Yes, you And knee had as company think comments, I and in arthroplasty to docs, I in the reported, QX. the US

So that's good.

still hard are on travel, resistance to train providers, as most first now there vaccinated the into a to early to is, vaccinated but healthcare the training, good As was in because surgeons got willing travel, -- they it as they quarter more train. news to seem to was far train because

the a For participation big course out we quarters. west example, we've we six most of in just had and had sort had

excited. to So out quarters cadaver We were it work, to got we we're I'm third three able also were able knee. live that two very really were to And -- was interesting, able hip the hands-on thinking to to we loud, of people then trained about do, were to didactic sessions, about do both then a training, people XX% had virtual through had that another cadaver session the right on didactic at time, going a was so available session virtual XX% a up in the the And camera so could same were we session. and set IP equipment. we the actually then with drop on that

well. well. proctors So that that's worked we out one I by cadaver our gone could surgery mean, a of actually do and remote

can more I think med interest hip, we to That's but good one travel. had we to comments,, drive to late product that I participation. continuing half a that events to ASC hip I half the training feel get really performance, the amount comfortable of nice add more actually in good a the model better, as early the second But see as be the news able we're to indicated my ed of second could importantly, in, for in here of forward going people specifically were why reasons we our launches towards QX, and new help do the knee. our But as hip. is year, want but long

the going question. that ed component be critical is a the of that's remainder through of yeah, So great a Med to year.

Operator

further this concludes for gentlemen, participation. conference you your Ladies call. today's are There and thank questions. We no

You may now disconnect.

Mark Augusti

Thank you, Valerie. Take care.

Conformis (CFMS) 9 May 212021 Q1 Earnings call transcript