Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the First Quarter 2023 Earnings Conference Call for Conformis, Incorporated. My name is Tanya, and I will be your conference operator today. All lines have been placed on listen-only mode to prevent any background noise. After management's remarks, there will be a question-and-answer session.

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

XXXX. any obligation, to reliance or You these will forward-looking information, revise any place update the is disclaims and law, by undue new on time-sensitive only projections include statements, except not otherwise. forward-looking required live as should Conformis as of X, call or whether of financial or today, statements. broadcast accurate information This because conference events future May

the to and now Conformis. over of Officer will Augusti, Executive Mark I Chief turn President call

Mark Augusti

morning. Bob CFO, Thank me you, Howe. and good is this morning our With

a We offering our increasing we growth. patients delivered of gross results, revenue many with lagging our demand improving had balance. cash performance by And results. OpEx saw margin a positive improved reduced mixed offset Services and international Platinum markets, quarter we for franchise and revenue a positive From and from performance operationally, perspective, higher-than-planned hip within

Program. we this revenue on knee of important However, our have drive and Services part the patient model our surgeons The endeavor and to our business to have returned to the business right we pressure will awareness effects growth. of not Nevertheless, U.S. has from yet lingering new shift model, challenges believe reengage we our our Platinum kept and business. operational

This our of direction. in is business elected approximately customers continue to over under Services have enroll And Platinum to XXX we all not our while move the are to or hard. right now our in having XX% now of our Services Platinum With that the new orders that Program, disappointed facilities Change have to U.S. we have Program, being PSP. access contract our Platinum access represents service. Services

orders In PSP and it is PSP from We proposition XXX around XXX the the continues orders, QX offering. in believe QX, the trend QX. reflect from our to had up value which strong and the in of we XXX like XX% growth orders

continues to team interest competitive increasingly environment our ASC ways and program seek effective a system is to challenging and commercial drive creative on and Our economic and focused sell to hospital robotics. in today's engagement climate that to

of benefits patients campaign knee. February, recent launched One that signs of our the is We in action is launch to truly advertising explore back personalized a showing surgery-ready targeted we this campaign. positive Conformis the TV where

The first around two the markets yielded many in in a impressions, lift X.X This most saw as results commercial leads reach is challenge The converting the markets. those TV and now leads XX.X million surgical patient media Xx. surgeons in households million in into patient households social for and TV orders.

We monitor will this it. advertising campaign the performance with overall move we continue forward of to as

hip business nice had Our quarter. a

feedback outstanding surgeon general to of advantage which has the and still working driven hip stem. of our Surgeon STEM interest product, recent is smaller in opportunity to off we newest new launch organization it been supply address was there. growth We the is and take some need across better see the constraints commercial did this Although by Actera. execute base, chain a favorable the

few Bob, to updates. I Before a turn important to I briefly other cover over the like would call

we system. option Imprint near provide will to on the total to poly received knee insert future. able for April are We Cruciate or for announce, a be our FDA new are and pleased growing segment clearance we surgeons is knee this stabilizing stabilizing cruciate in to we our arthroplasty, CS XX, pleased in

runway. operating our improve have two past extend we implemented cash many cost-reduction to the measures position Over our quarters, and

to will gross closely cost margin this will as performance structure revenue current We needed. extremely and align and with further continue our our manage

is times On-time strides making performing operations. order improving, are is lead our are becoming and with better. We delivery the more plant predictable

new workflows, model transition which introduced processes business to and inefficient. new new remain However, the the

many we the these, and Although historical taken anticipated. of our from ways things than of plan longer for changes doing has additions

actively expect are managing We future. and realize these improvement the activities in to

Our to that and company return way looking has possible at our a always been every today. shareholders, focused on continues deliver for

product we introductions, options our to create deals, value. our incremental explore model all the and recent past with licensing done available we us As have to business change will new

Finally, I'd like to entire organization. my extend the appreciation to

months. We a feel going The XX transformation help energy and to the we on better pushing forward we market, the complex the with Conformis. daily shows have basis past patients solution team a will lives leading have We through our through on over keep been incredible. is hip-and-knee

turn over the more for as performance about now will the I Bob quarter to call outlook. as provide financial to our share thoughts our details on well

Bob Howe

everyone. you, Thank morning, and Mark, good

start the the will I which for of last a on do, as was on quarter to and XX% first usually XX% million $XX.X quarter and down reported year. currency basis basis compared a product revenue, I with constant As

this of from Although it still headwinds our fell at our guidance reflected challenges. our business and model end the range, operational transition high

quarters. the few of we in the just only Our in was believe X% hip a first past for November hip growth which up reverses be had quarter, in the will business We business. Actera, catalyst launched our declines XXXX, recently which seen

to look once our We our surgeons and are improve. support to existing surgeon build continuing our base to expand levels inventory inventory

first was margin improvement above a the and Product gross guidance. in XX.X% quarter, mid-XXs quarter fourth sequential the from our

and lower new face gross product to to hard to the labor increased unit operational costs, but that inefficiencies important to to working right material headwinds We in are and we we as note our due business direction, transition it's continue model. margin volume moving keep our

in first a reduction year. significant were consecutive reduction line $X.X and previously Total of quarter the XX% impacted a or quarter were prior our reductions plan. all quarter the relative with with million, The is $XX.X expense first to for of operating second the year. functions communicated expenses million from decline last cost This

top As challenges. will line continue our we expenses through mentioned, work as actively our Mark manage to we

balance our to sheet. Moving

cash equivalents of end We quarter. of have cash million at $XX.X the the first and

prudently and current certainly We like manage in regard. continue our helped finally, our reductions to this outline cash, cost I'd have our And outlook. to recent

our adoption second than expanded given Platinum challenges revenue product fact expect operational the our We to Services This uncertainty to business reduced due be to is Imprint million greater reflects taking quarter range the our expected. and million. between and of that model $XX longer predictability transformation, $XX

your With that, Mark take to happy I and questions. are

Operator

question Eric from our first come Cowen. Anderson [Operator Instructions] And will of TD

open. Your line is

Eric Anderson

taking reaching you growth How're question. your get base? of within Or think surgeon the guys. Thanks the increased be XXXX. remainder going your I within you thoughts revenue to existing is customers on with utilization coming wanted the that new going from from portfolio? for is Hi that to mostly to for doing? be Do

Mark Augusti

this morning, is good Well, Mark.

think combination of there'll I be a both.

to Platinum plans definitely support Program around have and and do We in Services we efforts and have the existing interest how that We want Obviously, that. both. to our to continued with reengage customers. that launch

get little to we're get And from think new growth With But come growth new back have business, the to to that going from the clearly, bit CS incremental reinvigorate of some real and will to we get that. customers. a customers. we'll launch,

Our agents have to do that.

support going them. So we're to continue to

it price with hope customers that got we have, Imprint ASCs, taking nice way. we've we've to Again, times, a reduced box. the got that where new model that point, should be searching advantage shift lead would able the of to I a we engage

distracted trying a little think deal the customers. existing to been has I PSP to implement

really, then have customers. in now get is So as to to new bringing sets. new we customers sort reengage And some We're Actera and investing of us well. going new some

definitely new here hip quarter, customers and the we'll in come add with they'll in So second later Actera.

be be that So Do fine. -- will you... that should

Bob Howe

agree I with Yes, that.

Mark Augusti

the Okay. Thanks for Eric. question,

Eric Anderson

how one intrigue And was if forward? something the in. to thinking Are the course. more guys opportunity going that or potential curious squeeze you establish year I going partnerships signed you're about partnership Stryker Of two ago. partnership You I a could forward? just

Mark Augusti

Yes.

to in and we're things are open stated shareholders. all that I I prepared As options for my make looking for always mean, remarks, sense considering at

done Our track you with that. one, is, as the we've Stryker record mentioned,

shoulder. other which royalty and are pursuing to and We will actively look knee hip, do continued deals, areas, licensing that deals. discussing in We're

So there's certainly the and think of a some it's other say, with tougher remains And I those to themselves, mean, portfolio we'll opportunities that. the we'll now license strong, little IP opportunity partnership there. I things, explore those. as do present but you other, our if

Eric Anderson

Thank you. Understood.

Mark Augusti

Thank you, Eric.

Operator

Steve our And question for next from come of will moment our Oppenheimer. Lichtman next one And question.

Your line open. is

Steve Lichtman

patients Thank what for color provide could guys. the you have a been how just morning, wondering who plus, I if some you. on Good sort of on Platinum Services was customers hearing quarter some you're and you're from in the in seeing to that challenges terms in of quarter-to-quarter terms model? interest? trends patient go terms of what And getting through of positives them of

Mark Augusti

when talk patients. add the through workflow bigger have -- I to with the to the the really flow I existing challenges customers Well, because the and the interesting, physicians, it's some agents, challenge bit. are of this they our The just a bureaucracies not personally, talk of a to little

patients with do. struggle than more they it, a So little the frankly,

messages our to has the do standard The that And clear, can real I is got. been hump we've adding in actually like, to, that's story. We've hey, of workflow, to getting custom. easy customers I speak. the And pretty choose implant. this the pretty XX% been XX% understand for process, pays over patients if is a And pretty for that It's experience in they their and see that they hard. And it's patients has strong. pretty new pay. to to because The Steve, the the step a real-world the of problem. a patients want market insurance routinely. is understand something marketing they to so research about And want they made how clear. patients, not upgrade The that a to and challenge upgrade. it do

Steven Lichtman

Is that Are end I'm update knee. if you deal you're year? something provide that the limited the launch -- around an on a the targeting cementless you wondering of could

Mark Augusti

mightily I it With mean, sure make year project, days. and any to Yes, we bad there's stays the Steve, are. window. days in we're good struggling

or as But it's to pull been we're of be positive. As you schedule far know, recently, it's push going the in out. to generally sort able

anyway, we so won't had -- ability sausage was keep we're week, sure we to that team So track. because to actually the think the still We that and that into on make have we just get on still working I hard that. meeting could do last some -- we project

you So and in interest plan but cementless. product that is assured, today. plan today. to a We'll the the it's And team that is growth rest critical updated, knows keep given the the launch

Steven Lichtman

then I guess, wondering bit Got here quarter of little us on And if year? margin in And of, this level, a also this OpEx, go sequentially I the give exiting guys it. Bob, you think from you we few sort this -- then color you gross next how same much and see can over on quarters? the do is mean, a level can further

Bob Howe

Yes.

So let me OpEx. with start just

results think Obviously, quarterly. you've similar with be will know, that dynamic as -- I a seen the will that variable probably OpEx change you there's revenue. there's

wild a manage, But can we that's the little of So QX, dramatic. a we but in that that as little as card. saw what nothing potentially a far relatively you seen down stable rate I should bit to be think bit, have the stuff

obviously far on impact where As again, as we a go. margin revenue huge and has margin,

improvement. I and down QX of this if similar little top I But I something on right? and we're you at low some and I'd tricky the lot revenue there, it's say to QX we're point. very QX could line. going higher then it So QX, exit the end at If the a how mean Really, depends similar, at end I touch, I trajectory. the see a in would would I if dependent a progressing are range, of being how of we're we're but see to the look range, the at expecting range that say could on expect think be on

Steven Lichtman

Understood. Thanks guys.

Operator

of to come And One our Joshua question. question Jennings next going TD from Cowen. moment next our is for

Your open. line is

Joshua Jennings

ask follow-ups. of couple Hi, gentlemen. just to good a Wanted morning,

First Program. on Services PSP or Platinum

I now, But the just XXX to to they think has over process before, has if we've kind called I PSP. completed? you customers be out work base of clear, think that -- work gone you are through that historical accounts surgeon more are work this and adopted historical through but been your

Mark Augusti

have little more, probably customers there's nature give your customers, different. understand, say, would but to a I the recently. -- ordered a got past, from Well, We've lot from have us haven't our we but to question, to you of details of being Josh, have right? ordered that it's business in historical The maybe us

of word we historical, use call you that what from like active. if sort I differentiate the So like

certainly that contracting the customers. there's with an [co-pay], do still the back we and go So with have historical in room story to PSP customer database

And that. through exact so we're the I number. working forgot

I may signed overall includes customers, that of XX% But sort we've of PSP. our and so or out got Bob -- right I think certainly know. we've customer got over the think all to list, historical

Bob Howe

Right.

Mark Augusti

think successful pretty we've there. I been So

customers you we long got time you PSP letting new the time it's as But as have And Now a lead is mentioned But new earlier I get capital where transition is we'll get the got got Like as I think to they a to well It's customers bit key active keep through that just is mean you're them reality account we'll longer bit pushing. -- is going. get even That's interest longer of a as got I is access, because mean, little next before, was is, indicated this. continue trying step, like and it's sale. it's Josh, little being PSP. be process. to orthopedics, think a -- wouldn't the a and any there, bit you're that. a engage as engaging it to we little I've with. by to otherwise us we've in -- think thing. next I we with do they to I the now Eric, to with to the

Joshua Jennings

Understood. I on that you've and about to drive Is that guess, base growth force Wanted I your we focused so Imprint be And just, with update I it just follow-up to Thanks the early should maybe know of felt PSP like opportunity How thinking Imprint. seamless trying where to your the is or just the self-worth XXXX. more converting model. probably is for adding line? subtracting to your engagement also And and ask about, ASC sales than with much rate Mark. on that product with an guess, stands. customer it the attrition in far been days this

Mark Augusti

maybe I know, early reverse the days taking we've added, Yes, as been as of actually and if has say, Bob, and we seen I much haven't certainly have the new sense right? And the growth away, activity think experience added much well. -- past, exits any And I would I'm probably you XXXX, we've the over that as been order, as starts. -- my flat, is taken slightly. don't and there's of actually color, relatively actually seeing doing some less I couple than in agents a We

is as is the ASC far -- hospital a your can far of seeing coming we're to going we from growing, as as business, tell, right, we can Then shift in are business the actually next our percentage right, and at least base. as question, we the perfect. this But versus tell, not

means That, ASCs, are of obviously, numbers, that Josh. getting think sense more our sales we because you and that. right, in from the hurt with we're than robotic the the hospital I that in deduct can trend, So makes

in So I it's is said questions one of ASCs believe the opportunity What the the before, in I answers real. there. to

to very been pushed transition ASCs I to the as think PSP or imprint really current the because fully our field that as inward not have Imprint we busy and has model. the opportunity realized well looking customers

and taken getting so customers. frankly, new And confidence going that's away after time

that, so not the we I'm lead we the operational And Imprint some much right. time challenges that rightly only right getting of With wanted. had behind so because available,

worked through most So those. of we've

half into And really we're the especially in the year, then some second good back stuff like opportunity now all good So a a the that Imprint Porous with CS delivery product. them, of -- we sales It's for ASC launching road. our after the the as it's and think to do have just sense. makes in confidence building we model the we'll go model, we solution the really business because And customers really agent the force. for for those ASC head have I'd new down

some So half. in opportunities hopefully, we'll here the engagement new with get more second

Joshua Jennings

so much Thanks Great. Mark.

Mark Augusti

Thank you, Jeff.

Operator

further And conference for I'm questions. concludes today's call. no Thank This showing participating. you

disconnect. may You now

Mark Augusti

Thank operator. you,

Bob Howe

care. Take

Conformis (CFMS) 8 May 232023 Q1 Earnings call transcript