SNOA - Earnings call transcript Q2 2019 | Sonoma Pharmaceuticals, Inc.

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Operator

Good afternoon, and welcome to the Sonoma Fiscal Second Quarter 2019 Conference Call. My name is Justin, and I will be your coordinator for today's call. At this time all participants are in listen-only mode. At the end of the call, we will be holding a question-and-answer session with company management.

As a reminder, this call is being recorded for replay purposes. turn over to Mr. like now the to call I’d Jim Schutz. ahead. Sir, go please

James Schutz

Chief our afternoon for will call on Sonoma's all thank join are Officer; us Miller, Good Q&A you me us joining for and portion. Marc Operating Chief Officer; today. the With Bob Financial Umscheid, and the

could relied our annual of risks to events. predictions from Exchange marketing forward-looking potential these to the would, intended our products; obtain and as as use the in ability Act future conference you or and and expect, expand, Before commercialization highlight that our related regulatory harbor Private future the by in words Securities provisions time the remind filings statements are and our and/or anticipate discussion products development future of the applications detailed our the ability of statements quarterly our that forward-looking to is product risks identified that Identified potential with cause our not Reform reports. involve effectiveness of XXXX we Commission, not as and uses to should time that expectations this the to our development and our the today's cash forward-looking are existing timing start, benefits our of and funding; from of including let capital our statements results become contains uncertainties and speak the profitable; of ability indications. to needs discussed and and amongst Securities products; for today's of of those regulatory to products; inherent me infer be such additional and other the to meet call, call programs investment for These differ applications our reserves; progress within for others. use of standards; of safe actual upon Litigation the date approvals the risks company These only including materially community on do

obligation Sonoma required to as except law. disclaims statements any update these by

cover For today's areas. call, I’ll three

our financials September XX, ending review XXXX. from key our a First, of quarter

thorough press Second, Q&A. we've and launches: calls today recent open Equity our discussion those. and address one public will the the three And September Bob release financial both numbers Brazil our a from quarter letter Partners made filing for in regarding receiving especially we'll S-X of and many and results in pleased a Montreux supplemental two shareholders We look at then filed PowerPoint a U.S. and the then key for with then from XX. quarter up ending call product with for are earlier follow our upcoming we’ll been the other the and of ahead finally

be year EBITDA of $X last is million. was number For of increases, news computer, are on those million negative That quarter. of from key who numbers XX% cash and see earnings your Less quarter a $X.XX in four is EBITDA, three front shows you Most Total heard those as towards just supplemental the burn. pushing And continue we're Sonoma, Sonoma's proxy taxes, this up closed for than EBITDA started. the think a believe versus loss we're us period this at up million solid investors, interest direction. same say right the and revenue of X behind followed amortization us million. which PowerPoint and the our for this profitability. to our $X.X is $X high for quarter. was June quarter experts we $X.X Slide can revenue shrink. five will for in revenue out getting before just quarter a depreciation in is as financial XX% a the loss since in EBITDA record is that million, growth. and defined operating you of is the good a good And profitable that you've repeatedly business numbers The units step Cash for

In our made growing in revenue. progress quarter-over-quarter profitability net U.S. addition, net we've dermatology while

shows consistent PowerPoint dermatology Our our Slide into visually. face demand difficult the environment. U.S. The strong up this issues Bob message in products Slide to companies, the Sonoma’s still U.S. patient many like more gross in to growing. going right, cover Like demand like we detail, to products net care is is prescription September for supplemental X pharmaceutical that due is for number it. and but through is just X dispensed we managed message

getting overall believe the managed delivered pharmacy partners, we're patients, value value our we doctors, through to issues with net benefits However, to products. control diligence products care better by of medical the gross the under our key and driven of This support proposition who community. and is overall

topic, to now second the regarding from filed Moving two we've SEC. getting telephone with been documents calls recent shareholders the

to answers than at an or website during because it anything warning portion Q&A on of the would this and We asked not amendment to it's exhaustive. for amount liberty will this call. the if amended the to discuss in S-X both already information. earlier the questions week. available We're S-X review enormous The sticking and read we sec.gov to again that have fair answers contains filing, Specific more be what's short encourage to S-X/A the the and S-X/A you of is short

Montreux’s letter Equity hook here What pleased we Our with bay gears regarding the into area. will the is that one recent letter acne third and the the an space. management appropriate board phones X, is evaluating entry topic, Switching PowerPoint, shortly. announce in currently our Partners response on our received we're of can our to supplemental regimen today share Slide as of formulate to we from Montreux shareholders, have ringing also been the off a

why The number dermatologists. regarding visit U.S. one people you two know, As wait many complaint the reason a is dermatologist see of their acne patients is to itch. number reason general

management small market to prescription Our that Alevicyn the as interesting our product an part big into into itch weeks, McKesson steroids. already to we're loading in Slide and product Antimicrobial and dent wholesalers, a of alternative few regimen in market X, On new of photograph acne on available next Cardinal the U.S. Epicyn an the Cleanser AmerisourceBergen, made the a will topical Mckesson, be December. pharmacies as Facial has see throughout and you'll the

Epicyn and I X, believe. our in force Following NC few photograph partner share by in Gramacyn, Powerpoint, of of on study you'll Slide On just this sales will as find thoughts launched Brazil a recent clinical on will the X, begin acne Slide Group/U.SK product load-in being our our January, in our for we speak. customer Bob dermatologist new detailing a a

products year important in be the sales to You Groups U.S. than classes of product may force licensed earlier this respectively as to pharmaceutical Group products. for two and reps now, scar person be management. alternatives estimates sales largest acne Epicyn NC XX sales size seven market greater is group, Gramacyn from of remember acne force for Sonoma acne and this company Brazil, Brazilian Gramacyn Celacyn just marketing will $XXX NC that XX launching own our annually. plus as an and NC the treatment, and

products this data Sulfacetamide in alone, $XX in just and mean is XXXX Symphony benzoyl XXXX. sales with the in familiar other any million that large peroxide prescription based peroxide combination that acne by in XXXX. not benzoyl products. sulfacetamide market million medication shows in I for probably in and generated U.S. $XXX You're prescription products sales with acne generated

that Clindamycin believe is immediate but in the for experts really U.S. the the addressable $XXX is sales that combine marketing to space product we'd XXXX. in generated play like one Our per antibiotic topical year, with a one future combine approximately benzoyl products Clindamycin. and in peroxide, example, market An benzoyl the Epicyn $XXX million U.S. in like in that with just million where plus generic peroxide brand with

important expert about more a strains dermatologists Jim to over worried prevalence or the and world-class gradual published the acne overuse magazine of last Tutus grown P of the in said use have in Leyden, the the increase resistant acne in years, more an antibiotic study Clindamycin. Dr. worldwide XX As due [ph]

solution performance product issue in no unique action. our of the due mechanism There's the acid antimicrobial years. acne market Epicyn in resistance to-date to not many stabilized last in innovation has shown a hypochlorous Our much been

acne Just using medication is in a irritation. XXXX’s in BPO benzoyl include peroxide first family an first BPO indicates which using pillows U.S. in to sunshine phototoxicity by in and probably right officially every redness, history, ointment five the XXXX, about the issue quick and or before synthesized the an used remembers when side BPO of ultra quick as way burning, A sleep. approved PubMed was applying and effects BPO XXXX. on and patients was XX% the experience impact search bedclothing of BPO violet bleaching B, and light that the as

The sulfur a is pruritis of prize use can cause the synthesized in worthy first sulfur detailed, read. penicillin reported Nazi the story sulfa these quick advent that erythemia, the dryness, use inventor using these in antibiotics patients and and his of in Sulfacetamide, Nobel use By it own acne Germany of Side own using from are side invention based one discomfort, based class six XXXX I fascinating of on XX% local history, sulfacetamide screenplay. And daughter. the other his prize were the inventors effects. of the War of or experienced year old of rejection discovery Sulfacetamide this form , of World of a in products way, It's drugs drugs, and for and these study space, near great Germany's big Nobel irritation periocular before in the science think awarded conjunctival to the in the effects II. products

be So Epicyn area ripe innovation a could needed we for a disruption. still this space that's believe much product our new in in

better acid new launches to in worked our offshoot these spending Brazil us Epicyn product being performance point in Epicyn, hypochlorous opposed tell two new current product a sulfacetamide product all hypochlorous path important probability as benefits improve of Our portfolio Bob to Gramacyn adores profitability. our and p-values, incremental marketing requires significance. Communicating that an and we is EBITDA move we antimicrobial Epicyn that further technology new An solution that acid dermatologists for believe strategic the expand entire alternative benefit in and and and to discussing this resources. highlight our Sonoma's is here. We benzoyl core to peroxide time about many Sonoma's Gramacyn fundamentally increasing with and developing our it's and our hypochlorous scale, our acid’s stabilized a and regarding products improving use believe efficiency we the business hypochlorous based and by while of acid of and space, a larger critical in therapeutic of will investment that statistical all will sales a on units believe return connecting is Sonoma help efforts. and values, based maintaining

Slide Bob, microphone I'll you with X. to hand that, So to the cover

Bob Miller

in to Nestor Jim. of patients. of Dr. the on studies, treatment using evaluated of of plus All lesions XX-week which management currently treatment the non-inflammatory other reductions over a of In on also plus the significant of Dr. studies, total the a you products acne for with The topical renowned three care acne, those XX% lesions impact our study results largest a are treatment comparing the HOCl inflammatory Thank acne period percent also Dermatology the HOCL shown XXX acne. of HOCL confirmed only XX%, products, two of X.XX%. his studies results or and The of a only on of standard which the study has using a acne, are August, but at acne seven to to placebo. The our conducted dermatologist not not also of most point Colorado. percent. zero p-values of Conference X.X% benzoyl in from presented and peroxide Nestor, but of clinical ranging world topical effectiveness products results slide statistically HOCl

units. the book Department of more combination standard of in studies like when at alone more is trials a August near we to the an treatment of envision School stated treatments.” Dr. HOCL XXXX “I in Professor Moving will if press Sonoma on issued Medicine. acne the In you'd release with XXX discuss Dermatology XX that chapters. a XX, Miller clinical this, over He's read Miami, and can detailed details. now press business very the vulgaris Surgery over these become our XXX results and time next of over on University the authored and of Nester imprints financial and future protocol in September the for Associate release quarter other in status either minutes, the will conducted I or XXXX issued, the articles a Dr. on Nestor

first and for including of will results the More I XX-Q. results operating metrics Looking cash, high cash and key level at cover revenue, the details position. in are financial discussed financials, the the the these press expenses, EBITDA release

increases the quarter, compared the XX% compared to both to year with for mentioned to same to referred European compared in million, In year ended metrics to U.S., American last presentation, supplemental million up earlier Latin revenues. addition over $X.X as and XXXX. to June PowerPoint Jim and sorry, displays up the period the on Slide compared last last XXXX quarter, quarter key the and same Jim was September $X.X $X.X September million the I these XX% quarter period Net revenue for which and – XXXX recent June XX, X to

and is As $X.X million Page first, to in million for up and primarily by as in XX% ever, revenue revenue the our Far Brazilian to $X.X decreases X, mentioned launching New increases – to Middle increase Brazil. plus in last up product quarter strong East by market. market year, in Covering this September June revenue the pharmacy partially international XXXX period $XXX,XXX X% highest XX%, compared with earlier, antiseptic in standard and our the in Mexico, HOCl The quarter. due a to is of followed shown East, percent to Europe were as are of acne the In were care an of December Jim our shipments quarter. quarter was the the The products Zealand. the to international on shipment XXXX same the offset share Brazil. These Brazil partner up this compared

growing of position a strong the U.S. network the distribution and As result overseas of

the and to continues HOCI every leader HOCl of be make We sale manufacturing of or products the over worldwide month. units Sonoma sell in products. XXX,XXX

reduced the and is sell to and safe Sonoma for humans up products HOCl safe. care of $X XXXX reduction enables technology unique of along year, skin use of those sales combination September below to going while product completely last and a and any number not year on June without lower revenue year premium way and specifically, healing compared compared The PetSmart care $X.X inside and animals. from to and higher shown to HOCl last graph X% to a number was products XX Our year compared from in of sales and XXX% XX%, by year, our and treating up in health supplemental with transfer same XXXX to dermatology in in unique, reduce XX driven to anti-inflammatory quarter was loss compared or June by from strong The of last million anti-infective we in the brand directly slight and revenue factory contributed was period quarter, demand net last X% is compared same a quarter. shipments factory XX those in for animals. a on its unit effective, dermatology HOCI to Compared acute territories up X% reps up it's the sales. where U.S. becoming but down with sales volume the related advanced resistance reps the net XXXX to driven XX% an in million, corporate unit are the and sales and by name EBITDA wide the at quarter, June This healthcare, animal offset standard in managers. sales decline there to HOCl healthcare product for Slide increase and factory partially Tractor over unit territories decrease a Supply form the last XXX,XXX the on care acting especially the animal of period products expenses, PowerPoint. under More to was MicrocynAH. XX%, last year. animal to

unit the it from X, third-party that the XXXX Symphony. quarter prescriptions the data quarter. history, end at XX% in our number or up our believe we is filled impacted products vendors all XXXX show of lines total as On prescriptions such the it because inventory and measured of is quarter The is the the same the While as by pharmacies The important underlying last prescriptions or product by We XX,XXX. filled best XX% were how per and filled June year wholesale total prescriptions Slide the the filled factory demand September IMS we metric the period from product of by is and largest our used up recognize revenue the reductions. to metric loadings also patient, top. for

fluctuations the in those difference and inventories. Our graph show year units and primary with and the of the the September retail the prescriptions in distributor the the months two XXXX trend XXXX number directly XXXX quarterly the metrics a one shipped unit XXXX units load-in prescriptions all shipped and wholesale in to at inventory growth wholesaler quarters factory the are filled filled and prescriptions And wholesale XX, December The the controlled The the very inventory quarter. the filled March two change relating significant by were to numbers Slide quarter. the supplied filled as in quarters. inventory not from changes inventory. On distributors, company. September in quarter quarter of factory units as shipped held in XXXX on filled are the the major factory products The to prescriptions units inventory. is has wholesaler The September or pharmacies order we December the mail supplement, factory our form, over to by strong PowerPoint the in these distributors. pharmacies. level June between units increase December during last ordering been strong the wholesale to expected by represents The decrease units inventory of and normally The the prescriptions the quarters

represented As quarters quarter. March to into a which the inventory you units there in significant mail the the reduce to which March inventory our quarters, recognized September risk, we've factory reduces lesser sold in these last levels of September reductions reduction revenue. pharmacies, revenue XX% in prescriptions order reduces inventory fill which quarter. through in our an the can reduction months, units using during this been XXXX XXXX have reduced and over shipped, the To six to The our June XXXX shifted extent see, September about

order is effective relationships local by While their the we with prefer the they'd retail pharmacy, the mail many preferred many, continue program prescriptions and pharmacies the for wholesale and maintain to retail patients distributors years. pharmacies. done Many will great at that filling

down to PowerPoint. Now going the or financials returning to the compared the for year due or legal the The of in discussion higher period noncash operating year, last the to June and operating from the and the X to expenses quarter costs last ended September increase $X.X The expenses X in marketing September last the million, X% quarter in from were Slide or same year quarter. and recent U.S. $XXX,XXX $XXX,XXX in XXXX up XX, expenses expenses for the operating minus Slide back XXXX X% the increase compared was to

explained the XXXX the down June The profitability, where operating or last our reduce Jim revenue, EBITDA expenses. made loss losses our year group compared gross June caused of million, the in expenses receivables seasonal was remaining recent in mentioned, was increases the Jim represents result accounting in in the our is operating hand, million million, the the cash quarter compared through position working the with XX, to from inventory, which Brazilian and And This on last million in prepaid $X.X $X.XX earlier increases as inventory higher $X.X EBITDA higher shipped reduction decrease reduction $X.X minus down $XXX,XXX, from distributor years, lowest XXXX same September quarter. and to $X.X capital Most this two has $X.X of million million to expense. loss of by and its cash receivables, The sold cost including an in period XX, $X.XX decrease The receivables and of million June prepaid throughout million have quarter expenses, increase expenses reductions partners. the $XXX,XXX. other increase company is September cash operations of which to and of of we partner mentioned noncash the The XXXX $XXX,XXX, our by occurred cash from and loss, XX% inventories from lower was $XXX,XXX of loss. quarter EBITDA the a the $XXX,XXX, burn. EBITDA XXXX. as the to Europe June in of of on in On our international of $X and being been an

and year our the care, health the Jim average strong in per two, Facial aided as collected in quarter. fiscal quarterly animal or is collected launch rep represents for normal sales We our about. been these prescriptions converted or productivity of back for in line be forward growth the in care increases Antimicrobial levels. rest million this will quarter, market, grow. Bottom expect the cash XXXX $X.X look been payables have quarter. increased We the to and our be XXXX the that increased receivables Epicyn year product the following And be loss per talked will EBITDA Cleanser burn to will international have September in of which that the continue One, the our to to Number near-term dermatology of most December the XXXX. acute quarter businesses have the increases fiscal will by in rep of the cash with U.S. December

noncore pharmaceutical in by international company is improve near-term and the pharmaceuticals the the growth to the U.S. profitability. Brill products and the seven in similar Brazil to of our expected As our we flat a questions-and-answers. And reduction in back with Four, as our expect in new operator loss. the Spain in this to and the partners revenue an the for in example, and in the program. remain others Number U.S. starting now Brazil, a and the reduction in our down three, operating our our will should revenue support EBITDA cash result growth cost launch I scar expenses last, to to general in businesses. have call five will are pass acne products our largest result of of

Operator

[Operator Thank from question first you. Instructions] Bruce Our Benchmark. from Jackson comes

open. Your line is now

Bruce Jackson

could for bit. taking in the of revenues that there XX% If my quarter about Thanks through Last program. question. discuss we mail change order any I number went pharmacy little this program a quarter? you said during Was that the believe

James Schutz

little It XX%. is a September volume now for unit quarter it – is Yes. went – over

So it's gone up.

Bruce Jackson

And of So – rebates some just through how that? is with channel? feel rebate that out broadly, the there to the You're any stabilized? then still you recognize do about it hanging has Okay. or situation are expecting

James Schutz

if has to We co-pay. as houses. a a mail if have and a order him will pay go a that's and does the not somebody it cash program that a co-pay as lower – generally lot somebody we – sell a through mail to order basically with to stabilized of for price get him have lower actually repay That's $XX that cash,

if program you our So that's basically, fact, by been rebate controlled it that in an and way. cost, will, doing unsuccessful it's

rebates… So our

Bruce Jackson

Okay.

Bob Miller

this at We it's been cost, – seen it's point. not similar been have a controlled rebate but

Bruce Jackson

last growth was then nicely the next of to American couple Brazil, America the of quarters? over you this your up in the about potential sales the shipping Latin the sales new Latin relationship quarter. Okay, then ticked products? foresee that any great. for to How of And in do acceleration the due And new question much

Bob Miller

was what what point. we They is that is process in of mentioned of are in the what got; them shipment dollars The terms to we have launching. this at we shipped $XXX,XXX actually we

We launching was we the expect acne. products. And only to expect scar that – be and them

point. at So we the expect with good we launches with this to exceeded a what agreement was of going point that contractual out seven at growth volume us have continued They that their far to this Brazil see already.

to good, expect out of that. see we growth So strong

Bruce Jackson

much. great. Okay, very you thank Well,

Bob Miller

Thank you, Bruce.

James Schutz

Thank you, Bruce.

Operator

questions. Instructions] Thank no further showing I'm you. [Operator

James Schutz

we'll Justin, wrap up.

Just today's you for and joining for continued call a support. Thank all final quick note. your

As said, quarter, we business back our on our in made we putting think progress solid Bob in track. dermatology September

the With growth with ticked filled, our March here, prescriptions, the largest prescription XXXX ever XX,XXX prescriptions prescriptions units quarter slightly XX,XXX was it and bear quarter to me then of up in June filled up filled; XX,XXX September and quarter we filled. XXXX to

cost new current the of to of unit approved think also in in while patients. U.S. XX% was an into reduce a launch the the large this channel And finally, We dermatology regimen. our risk We've operating part and in asking we programs, these of which cleanser – growth acne diversified about, the just the acne order group, productivity mail expenses the management facial growing of the us addressable the antimicrobial improved of current now September represented products our of diversification launch include our these of products inventory derm as reduces We markets. sales in Bruce which distribution to sales implemented program the our reduction quarter. reductions think our

and launches sales studies; Brazilian force strong the supported XX XX product of clinical with And growth sales combination a Our are holding by people, revenue Brazil. then the force the a plus company of of largest our in support pharmaceutical people, finally, of a the dermatology to the Sonoma expenses becoming relentless level sharing and loss. our our look as We reduce passion we build to achieving EBITDA multi-technology progress for on next current our company call operating of of healing. should forward purpose to continue

joining. So you all it us. Justin, Thank that's for from

Operator

participating thank conference. in today's concludes gentlemen, you today's for This and Ladies program.

a Everyone great day. You have all may disconnect.

Sonoma Pharmaceuticals (SNOA) 9 Nov 182019 Q2 Earnings call transcript