BIOL - Earnings call transcript Q3 2019

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Operator

Good day everyone, and welcome to the BIOLASE 2019 Third Quarter Financial Results Conference Call. Today's call is being recorded.

At this time, I would like to turn the conference over to Todd Kehrli of the EVC Group. Please go ahead, sir.

Todd Kehrli

Thank you, Operator. thank Results joining Quarter for XX, and discuss today Ended everyone, XXXX. Financial BIOLASE's the afternoon, you us for to September Good XXXX Third

Chief are call the President Vice call before performance Financial review Norbe, from for the will Chief and BIOLASE for Management company's On President Beaver, question. today and and opening the Executive Officer. Executive the Officer; John quarter Todd operating third

any uncertainties company's I'd like are These this forward-looking forward-looking Such view the to with Commission. risks the remind that a cause facts, that from historical of BIOLASE's are as could statements Securities presentation, November regarding during begin, materially differ everyone statements, and the of initiatives number Exchange will which to forward-looking of These of actual XXXX. current the company's based to are statements we variety contained performance. statements statements risks this forward-looking the the made on today, company's not discussed filings and are only in representative a and expectations strategic subject Before company's in results be statements financial are presentation. and that including are X,

release call quarter conference earlier A third replay news on of Web the today BIOLASE's shortly XXXX be of this announcing company's result. after call. listening issued will refer to the please to available When site the today's completion the this call,

non-GAAP be provided found tables the BIOLASE reconciliation company's the details as offer on financial site loss a with today's report BIOLASE's have to disclosures. unaudited company's encourage information, on The Investors loss at of not loss do tables as the be additional GAAP the the include SEC. we've which Form you the release, XX-K, and of quarterly also is you of Web can to the well in results non-GAAP per will per we loss share net share, review on the If net filed net net them. news The it section and release so of copy available other news www.biolase.com. financial

to With turn Officer, that, I'm President call Todd to and Executive Norbe. BIOLASE's the Chief pleased over

Todd Norbe

Thanks, and appreciate interest afternoon. support of your continued and us joining We for this BIOLASE. thanks Todd, everyone

plan of line I Before shareholders, for to our week, are our an a weeks our in to new QX we sustainable, spend sheet of credit review improves and our does million and we convertible we it Last These shares also growth. to operating through recent this profitable, business stock developments execute results, giving our a as for positions us continue of moments offering we should raised want developments. trajectory. and which us and success additional discussing that, public our need to BIOLASE, few a with balance significantly $X.X and arise. further access drive working on ago, Two secured capital common million to existing $X a strengthens we private concurrent preferred placement significant revenue plan financing validates

report, and Techniques the our Report. leading symposium titled, highlighted speaker This utilize technology Need at Do integrate latest He that Clinical professionals, which the hosted from presentation Why? seamlessly. a What similar how had professional Dentistry San two-day of innovations dental they was is and and The we & keynote to industry benefits. by a into a Christensen, Symposium, month, of treatment and attended and was changing, our need recognize them to This and You to dental a was world-renowned Advancing their founder dentistry trends educator, successfully Gordon experts. Dr. XXX know in I'm practice dental Waterlase event the Technologies past Really influencer, was to as tools Clinicians goal over pleased in dental and learn it Diego. very latest Attendees its

Morrow, who on to included dentists and Dental, also patient integrating presenters overall Russ Other discussed improved from Dr. investment. Waterlase Heartland care their in return how should practice due be

"Landmark Clem patient treatment is for McGuire benefit the This will invasive Don efficacy minimally treatment the treating surgery. by the perio the perio open general traditional surgery for disease. or Dr. periodontitis care clinical previewed study The improved important Study" reported for Additionally, allowing practitioner, without the McGuire on procedure. outcomes patents' flap tracked BIOLASE, first and both validating in also specialists extending an of Waterlase-assisted extensive or recovery Institute need gum for study patient The study versus time. of pros the each

anticipate six-month And we interim We study expect scientific be of the journal be the XXXX. XXXX. available first-half published full by the of in end the during that a data will will

protocols As we've before, and this our markets. will surgery believe perio for noted study establish in adoption we of target our new All-Tissue Lasers further drive

additional UCLA, the about perio Harvard, some excited disease will released equally Columbia, from and be next year. time that treat are studies We

the benefit During hundreds who symposium, Waterlase with interacted two-day can specialists the of technology. general from use and practitioners we of

of five A remove technology. received veneer in clearance lasers This dentists enables crown was the less regulatory our and Waterlase key of indication than topic minutes in interest U.S. crowns removal. and using for to and BIOLASE's our recent announcement Canada dental veneers

more for provide aligns a removal time patients only and the in of laser indication the dentist pleasant less patient. and variety directly chair. doubt there removal the can to mission This dentistry, BIOLASE way the of and invasive ongoing BIOLASE's advancing all clearance, including and in both veneer not minimally is experience crown veneer dental of offers that crown procedures, spending the dental with benefits the As bring lasers that company this encompasses

advance have dentistry, and device. the support of technology building reach our this We to infrastructure believe the the now on expand we and focus is best to commercial great

Mentoring market commercial the success. learning that achieve are past Heartland experienced model group is a can or A allowed innovative the of with from the been initiative learning This an necessary technology building have Experience, approach encouraged. align we to have environment BIOLASE's processes WME. and where experience key dentists in Waterlase our Over use that through case year, our mentors business pilot and sharing with individual program technology applications successfully firsthand includes our developments to of

have We continue this quarter, expand and cities this XXXX. select to initiative started will program in this to

continues While portion more short-term we substantial continue to to make progress, have significant impact our we work our our do goal, rebuild on sales QX have to our to decision as a ultimate in much a reach team revenue. to of strategic

actively commercial our recruit have new this to managers. to best an Since with R&D-centric is aligned from more we reps initiated driving we continue seven transition We new practices. a company talent sales hired change, disciplined, customer-centric organization that and more

BIOLASE that too to onboard. culture. it's is While measure the and The early this energy throughout is already enthusiasm and we are have high, changing new the company talent excited them success, to

good this progress with making initiative. are We

open first actively number the and quarter fill of remaining to of hiring XXXX. to We reduce the by are of positions territories, open expect end the the

initiative last extended pricing to margins. quarter with strategic began improve terms distributors DSOs of adherence discipline is implementing in the improve Another and we dealing our when international

short-term important over direction two made was In closing, decisions about to disruption, our business. for strategic to and remain contributed the it the some thing this we quarters. last excited right the the prospects. While revenue growth do We

the BIOLASE will and to are long-term the we We same future. position quarter ultimately although not are business easy, EBITDA growth for healthier of At have beginning those of confident adjusted initiatives implement us to reduction achieving continue some these reaffirm fourth the from the the future in build goal time, see decisions, in positive positive on cost decisions, for we to year. prudent track this put results our

call that I'll With results Thank to to now said, third over financial review turn quarter John detail. you. more in the our

John Beaver

you this afternoon. joining us Todd, for Thanks, all thank again and

our represents third the third result strategic U.S. ago. the compared a review million Again, Now, decrease a consistent year-over-year. around in made of our million XXXX year third the let for X.X decreased Revenue the numbers. me quarter of is commercial was XXXX this some of the quarter for of $XX.X results. revenue quarter organization. from decisions with QX to the Total This million million, $X $X.X a

we force. our As portion Todd U.S. in the strategic due revenues significant decline to sales a of to decisions made the discussed, U.S. the is realign

revenue third the XXX,XXX We're The discipline, the and of to held back which team for changing and actively organization fit accountability transparency The decline culture. recruiting during million, and our due in who sales the orders these in the XXX,XXX compared due better disciplined in of down We've throughout members been primarily new prior organization. quarter is third was terms XXXX direct Internationally revenue increasing the company revenue to to efforts the quarter. over promote year's our territories. international commercial to culture new customer-centric, open decreased pricing resulted was quarter. X.X

result in margin quarter. Gross to gross of XXXX, to quarter was to XXXX decrease about The the the gross compared in mix due the we a of margin XX%, ago continue a had improvement geographic When third entirely of for compared year-over-year reflects express margins On as on as margin the year Furthermore, margin relative was in lower higher second quarter X% lower basis. sales. of sales XX% year-over-year a the product overall of a and during mix percentage international quarter. saw percentage quarter. higher to units international basis, expand

Operating to $X year. million X% and related and the XXXX due Total the an and bad compared quarter $X.X were for XXXX. compared million $X.X XXX,XXX incurred compensation reduced reduced of operating $X increased sales XXXX General Engineering XXXX increase XX% expenses lower decreased expenses development loss open revenue, quarter. expenses, of an and quarter to the of debt administrative almost the quarter declined in for of year-over-year to expenses year-over-year for reduction. million, direct third million million the of due million, third or or year-over-year we and in last XX% to expenses quarter, $X.X at that third in of marketing was the Sales marketing third $X.X in XX% expenses to quarter third due to operating patient third loss territories expense.

compared for was loss loss million third per or of million of quarter. $X.XX third quarter the $X.X XXXX a prior Net net share $X.XX year's $X.X per for loss loss or share the to

adjusted amortization change accounts. reminder, our a useful believe a measure EBITDA compared EBITDA provides and XXXX, adjusted companies' As results or depreciation, in stock doubtful allowance per XXXX. quarter We when of adjusted by excluding comp adjusted $X.X decreased reconciliation GAAP of $X.X with the expense, the third earnings The between of share EBITDA includes these for items, million EBITDA. which loss and unaudited $X.XX operating expense, to the release $X.XX XX% per year-over-year for loss to million during quarter share excludes an third or

third Our the to XXXX at the the XX.X of basic XX.X was in quarter. quarter and end count compared shares diluted shares, of million year-ago million share

and equivalents, million as focused cash We cash on cash, sheet, remain drive to balance the restricted totaled investing to XX, XXXX. programs turning our Now, wisely future of September $X.X in cash growth.

$X.X mentioned, exercised placement, end in offering, week, Todd over-allotment $X a equity we the proceeds As $X.X cost. concurrent $XXX,XXX quarter full total in underwriters the net of an and raised BIOLASE This million through net before transaction million proceeds in successfully private received from and after million. approximately option resulting their another

of week addition, In a the access which gives another arise. should line Pacific need credit with Mercantile to last announced company the $X we million Bank new revolving

confidence raise which want their and growth a improved profitability. to sufficient sheet deliver and and investors and BIOLASE support. capital We provides thank equity recent line credit from balance our working The lenders of drive with and for to significantly

I'll remarks. the This call operator prepared call to concludes the to our questions. open Operator? for turn the back

Operator

will [Operator Dougherty. you. first, And go Instructions] Thank with Bauser to Kyle we

line is Your open.

Kyle Bauser

Can Hi, little bit talk Maybe more Todd, taking thanks progress finding questions. you start on potential with off for and you're for and the the filling that's kind than before? about what of a you're looking how territories. different open I'll John, candidates

Todd Norbe

clinically so the we're make that folks opportunity Brooks definitely and you Group guide John give territory, a did provide place. end through DNA getting and and of of the understand in best lot we we the front over better organization also the Yes, of our and a the build to the to And number We for place million an sales can needs put generate we've around specifics profile, we an best some sure our as is in right in interview. what that training sure team then of on interviewing looked works what currently more with so territories looked as front to meet $X The in that that, take well have other on organization of the program that in a us can called open Kyle, I'll that that per maybe process to can the work at make they field. of

sure process, evaluation And can front two-step a to hire that still be the do them during end, assessment it get for training to the process side once beneficial on sure there's make there's to organization. making clinically meets obviously we needs the then the of So this customers. they our speed

John Beaver

go open five the have territories, at XX of me territories let have to to start Not same fill territories open to three year, so the specifics the year. had hope to QX, reps, territories. three the of territories QX eight end territories have now XX XX Kyle, We next and into the And hire the We -- the open hired the territories. about And open Since and the same of number. in those sales right, add another then hope the the QX, QX. of open another open that by but in in remaining and some on-boarded would open two quarter cut end from fill end gap year. at so the territories would we open

Kyle Bauser

Got territories, you XX on have at XXXX, probably that keep settled it of number? it, and throughout kind

John Beaver

next that right that knowing Yes, territories be are I'd process present we our what Board, as would there. some forecast well. XXX year, we'll budget that's We'll of the through and seriously next then, a but open say will kind we now good And always there matter now. the have fully XX of right but go where months territories. in pretty a to that's I that days mean, we'll have you filled no goal, always I doubt some have transition do couple for

Kyle Bauser

do kind And On mentioned update their removal for Thanks. that veneer crown had perhaps high this you this opportunity a and okay. were us, of can many off-label of indication. month own you level, removal? a quantify think nice crown using kind guys you the and and Right, last Sure. on for counts regarding Waterlase veneer

Todd Norbe

I dental early technology, have is would when population adopters. tell they the you, that Kyle, creative fairly especially

So have using very to sure but them may prior approval, when not current make to a right clinical off wanted I and appropriate, based this to were fair remove portion veneers would the say probably that been that crown of say our of they're so technology. it's all we our settings through doing feel would FDA, comfortable anyway in as in and as testing users that this using patient potential users the new the this we're impact and well way, to

is XX is of not creates to probably the your the almost answer only crown. it's answer great the up but opens in minimally The So, question, experience of patient, invasive this think, for and to save a very do part a a practitioner it the way, this industry I minutes, can for if removal yes. the rest great the

Kyle Bauser

that's you can just to this know move somewhere updates front? understood. cost Thank plan more remind I a then XXXX me exploring in And any been on you. you've lastly, Okay, -- effective,

Todd Norbe

Yes.

continue lease options, in expires our So XXXX. April to explore of Kyle, we

expense have next we about by increases building here half. that costs expect absent the that from square this in today. believe that in lease we XX,XXX do year. in we that money can We but that one-time at Offsetting I We will lease, moving net-net, signed we're save down about rate is get when any feet

Kyle Bauser

Okay, thanks so for the got much updates. it. Hey,

Todd Norbe

you, Kyle. Thank

Operator

go Jackson Company. to Bruce And next we will The Benchmark from

is line Your open.

Bruce Jackson

to and is tell you dental it Study couple provide organization, going the the if you I McGuire kind terms talk of my for of to us have practical technology? of them for them in a what to in could about and question. thank kind talk order data adopt just service Hi, minutes, Waterlase for taking wanted it know about

John Beaver

Yes.

tip are of sharing we past So, what we broad sure disinfect not really this severe why I willing peer-review is in you is that treated to mean, in it, surrounding it around to and laser because laser and keys that energy compared one the tissue. Bruce, as periodontal Waterlase, tissue outcomes. rejuvenate minimally-invasive to to reaction to if a go nutshell, that and a were And is clean protocol it weekend, that but disclose we And what our a talked in helps Academy the ultimately, think otherwise. laser cases our know, to out you're you're procedure, you're wavelength, double-blind there's between comparing, laser the the at are because here, that you the patient to just and where same the gets without to right to really we're about supports AAP, clean to to peri-oral out, go broad Perio, and was we you a the find study a and a comparing and can when because in cases, are positive procedure what lot these be off results, probably study the procedure was with surrounding that it American gum provides that treat traditional subjectively in, we expected, tissue but the going in a that and the results in study. area, really also unique laser small one just what traditional really lasers, patient to of only and on what to find other, structure our track here ability surgery, a these this what make reason enough back shared journal; slap not on much way care I a believe not based entire that look very that know, minimally-invasive around we that a literally that that a area our there the now, scalpel, at soft going laser that and meaning versus we're abuse tissue, can the without way go we with and at take is conversations visualize really reported and this therapy that the you you around, had procedure, this want in without results, which then in gum, we have with clean to was area and specifically

full we at So I not point. share much detail probably can we'd as this but probably as is that's know that's like, as

Bruce Jackson

that's the Okay, one program, success mean, thought other that perhaps I there, Then, other had helpful. about some market question to you markets? on model and you've extending have some

Todd Norbe

Bruce. Yes,

You're right.

we terms gave for We XX% there one of cases. did second appears in have -- cell We successful. -- a dentists where This want little what very we is in found the those based we and provided in two that we very who local of training, Heartland the program quarter after. had success of help a did with laser strategically-focused the to them out, successful that XX introduction were provided to Waterlase the key a mentor, of We learnings dentist marketing and a in of into was biweekly model turning we also over and the also bit dentists that of a a them days, webinars, go the them Experience. gave had we the from some on from QX there, things Mentoring -- in

the and QX we that QX, country, roll rollout. to spent rest the in that we started planning So, of to out

events every Our up different of have these Mentoring cities Waterlase goal to ultimately Experience in is is quarter. XX to or

in I we the XX have got to And in fourth first so, XX quite quarter, hope when the quarter. but

if up could really of maybe really out of throughout it. type those the something and focusing these model market we're U.S. excited forward. We the programs efforts to of And laser from country, we're half about our experience, will, now think example we've had so, in in the that you going that this an learned the sales come rolling we're we that in that's market model

Bruce Jackson

you me. for for my Thank Right, taking that's questions. it

Todd Norbe

Thank you.

John Beaver

Bruce. Thanks,

Operator

to Woo from Ascendiant Next we'll go Ed Capital.

open. is line Your

Ed Woo

quarters, is on promotion. also pricing you my to Yes, and My you going last know had issues thank and international taking China, you the that's do question. some in stabilize? question I couple When international with for think of that

Todd Norbe

one pricing to line continued putting sand we you're the the mentioned not did in on promotion, to was problem necessarily think overnight. think, -- there. I we we've the the and quarter the line I drawing call, right, think and And our going solve last in as this So hold of

turning very, in away We continue both to payment ad and terms I be would aggressive and terms, pricing. say,

And and and at so, would The really as that have orders I if that year back same September international was been of that kind believing XX usual, revenue it had walking our away, business, us as hence and have historically, will business we I about we a as ago. was all the due in XXX,XXX to knowing done mentioned at QX. least from come that back think

So smooth will so. or think itself next that quarter I out over the

And see really into issue a big being that so, would XXXX. going not as

year, China we're been In I'll of is new issue, not this distributors were a QX that we'll we to transition that It transition. confident in the but you tell that, able XXXX. distributor separate smooth, has we to in be completely through changed working and China.

probably a solved. of if I months get so, would fully another was China if before you I of say situation, that guess, a And have will, we six to we

Ed Woo

more market is [indiscernible] the Great. incremental, already and mentorship the the programs, see LA? going done them, initiatives model then you investments And are you given it increasing -- to significantly Dallas kind you guys markets then, of that that or in do back have in versus

Todd Norbe

I what QX. pulling the investments market. see model I'm from in we as QX direct in That's -- did really and back

Experience. And out. we roll QX Mentoring plan model all the Our investment then, in that the to around was to market used Waterlase

that County, around. see in having se. in in QX We any So markets Orange we're -- don't initiatives it's a per Experience specific I Mentoring have Waterlase these do initiatives have LA large model planning another city I the here on but just

a I on investing So back standpoint, really the the WME country. investment pulling model longwinded there of think from we're market it, throughout in and way saying

hit metropolitan least XXXX would this I hope every at big much And in with city so, to pretty once area major program.

Ed Woo

mentioned last be you quickly how a Great. that, these reach couple And hope quarters, or sales be will maturity, quarter filled by territories quarters? of the you open year, you will question all know, people new have of to it first it my next four your will is,

Todd Norbe

Yes, Ed.

historically think months. you productivity, dental on the define I in as it's but depends six nine space, it typically to what

As around a it would really you recall, also a weekly hired would be we on be purely training, someone I because process focused perpetual to had a we never someone of you focused in a on sales way training more basis. training, tell

a also there's deploy would we reference they first, well. right with individuals who sales as but in put our sales of it, that productivity And under at place bullpen the in ability and we're new as time. the well, process the learn place to mention have put and we're the in that ability "Tollgates," could point parts didn't six-month We in and at the DNA a we move them say, at force as inside outside in hires of we thing then that So, also certain sales call, which I'd expect we've who also attributes question, based runs this are doing what what look department, leader the to well, conduct other to the the later we right along inside for, pre-screen then, to looking probably I mark. door, on front-end way in their get off the with and people certain

months So about process ago. that started two-and-a-half

Ed Woo

good Well, Great. you thank answering questions my you. Thank luck. and for

Todd Norbe

Thank you, Ed.

John Beaver

Thank you, Ed.

Operator

Instructions] we'll Singular [Operator Lisa Next, Research. from go Springer to

Your open. line is

Lisa Springer

Todd and Hi, you. Thank John.

John Beaver

Lisa. Hi,

Lisa Springer

the curious the in did model in see market, or In quarter? restructuring quarter, sales affected model you third third in performance those of markets the I revenue the during was markets the of the if terms sales performance growth actually

John Beaver

Yes.

Dallas while So affected. quarter. growth Diego, San California, were in the that group slightly. and see not LA the markets They model Southern really changeover and We down we've in did The for same still sales had Orange County have Lisa, not and a fortunately we was revenue the there. third

that. Also with at of that did fortunate as for we the that QX, in that were very group was nationwide. WME have but QX we're reason a like not we part looking the in was program large QX, a So successful planning think

Lisa Springer

practice, Okay. And I'm of curious, mini they the part is that that a important the the day many dentists would veneer the is crown and do procedures tell clearance, removal or on those how practice? something are of to how us

John Beaver

Yes. Lisa, it a really different. little depends practice and on the every is practice,

I highly So that you it's that full doing revenue. offices their are tell would of portion a a veneer case remake, big cosmetic

York do soft in some customers alone, technology So we and forth, are buy so LA procedure goes it have well, then literally New as tissue for and to hand-in-hand that there. and just that the now management starting obviously

cut to be really these a look older population, potentially to and or On the have material at replaced, diamond look difficult other off the side, and you lot of are very today than past, lot I they mean remove when you start crowns a so crowns [indiscernible]. in a to at harder your with to too GP, average were an difficult

through can't assistant procedure, imagine of that that you it's then any do the off. worst because the they'll one patient difficult that they So can They have that very to themselves, sitting along the gone that those to has proceed procedures and if it's you, potentially And cut it tell dentist chair you do, process. and speak it. to do could in

and patient's regarded easier. it highly makes answer. and is guess life So the the a their technology really the At level, I is certain depends,

to it's an situation for. adjunct our they procedures Another technology that use other

Lisa Springer

Thank Okay. you.

Operator

to for with any closing turn And it remarks. no further questions the back at I'd time, company like to this

Todd Norbe

Thank you, Operator.

conferences investor be in upcoming two Investor BIOLASE year. the participating of the On Relations front, will the before end

XXth Discovery December on We Main in day. some you great will December Annual York XXth. there. Have concludes BIOLASE. be our one-on-one on of Event Los to the see in call. for conference Angeles X, participating Thank and and in hope LD Micro in you We New Benchmark's City a This interest everyone your

Operator

Thank your our And call for that today. does participation. you for conclude

You may now disconnect.

Biolase (BIOLQ) 6 Nov 192019 Q3 Earnings call transcript