TRXC - Earnings call transcript Q1 2018

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Operator

Good afternoon, ladies and gentlemen. Welcome to the TransEnterix First Quarter Financial and Operating Results Conference Call.

As a reminder, this conference call is webcast live and recorded. It is now pleasure to introduce your host Mr. Mark Klausner of Westwicke Partners. sir. ahead, go Please

Mark Klausner

thank conference joining call. and TransEnterix for first quarter you afternoon, us for the Good

Executive Chief Joining IR President would is Officer, its being and on like Chief President us today's that Executive Todd call to remind Pope; this Slattery. Officer, Joe Financial are you TransEnterix Vice I and call and webcast available the on the call To access of following webcast, link recorded. visit section our replay Events the of transenterix.com. A and website, the live event be the please will our website. in

XXXX. would we begin, conference to Before covered provisions Reform certain that information forward-looking of Private are by I under this like during the caution safe harbor Litigation of listeners materially stated The business. management the information update statements discussed our could risks provided Securities call those call. to due on results to implied statements undertakes uncertainties or associated the Actual and this the no obligation forward-looking differ with by company company's from Act

the be March call it's quarter XX-Q XXXX, expected TransEnterix XX, President a to review to to and For December you and filings year over the with Form the Form pleasure for to and Officer, Executive I company's filed Exchange Pope. Todd for that, With the the shortly. uncertainties TransEnterix ended Securities business, my XXXX XX-K discussion turn ended associated including and the encourage the with XX, risks Commission, Chief of

Todd Pope

for and quarter I the recent update. Mark, turn a welcome first accomplishments, XXXX call, our Joe will over financial you, Thank discussing today's our first to call call. by quarter conference to start On then

your We questions. will for the then open line-up

good our goals During key the for XXXX. toward progress quarter, made first we

use those regulatory the geographies. infrastructure; continuing Senhance; our expand goals and to with key commercial for expanding clearances of portfolio effectiveness As key and sales of instruments indication Senhance's use; maximizing available reminder, for a expanding the global are: in

clinical we systems the I'll systems are be first additional I'm we color commercial that some well, on U.S. that EMEA Starting in sold these am in sold located also large are under update I that States. quarter. the the South at encouraged systems a announce expected pipeline our and quarter. and my pleased Central progress three have Americas, two continues contract and and in and the develop to year, have sale. global fourth second we the will States. to provide to Senhance United in regions. system of center with the a install contract This Our our Asia-Pacific by our recently first second last United medical We for the already on in delivered signed quarter in academic we pleased

system recognize to a will We sale more on revenue releases expect this that conjunction the to details and deliver press second in institution. with anticipate of issue we We the at time quarter. this in the provide installation

the back Given our that early stages XXXX successes continued expect progress the development XXXX. half pipeline initial we're very into sales of by and to quarters in the and these six we're of process, four to still of encouraged see the and in

been training our cases expanded and view sold. are presence we opportunities to an we opportunity end, continue and for was in to pleased the the the U.S. in Hospital surgeons largest their Orlando, in Orlando hospitals we this one a hospital cases to build surgical has U.S., the Hospital increasingly of announce after clinical a with system first the body first the Center utilization Florida leader in colorectal of As To benefit to live Senhance. of users will proctoring for and the integration U.S. pipeline from country the Florida Senhance. the purchase that with and Center performed along has robotics,

thrilled are they to to expand they cases clinical their partnering team surgical that utilization. begun as look perform with and have the forward We

due feedback, the procedure engagement quarter. surgery following generate X-millimeter to at general open our of two landscape and device pleased in A sale Senhance's in quarter, is two expected local momentum. experience and system. that place reviewing events wide the cooperation to console steadily when interact to these is of showcased distribution delivered of valuable Several an continue systems thousand partners at Seattle, additional incredibly are SAGES region, delivered the in surgical economics. foregut hospital-based hospital. first major of Annual with the gallbladder, in is attractive working repairs, sale in instrumentation, Both Congress present to understanding This the simultaneously, systems were first haptic was the Senhance at interest an EMEA colorectal of and by and major XXX systems to under the including contract. at hernia program Their complex took cases results major the sold the announce view Global building of across one increased with video increasing open clinical a with the the Endoscopic and the had three be ability was congress three and substantial Washington, into X Europe, surgeons millimeter the hospitals. range the In or source or per Dr. April, events supporting are congresses We by a second we commercial quarter, his Senhance our either U.S. a procedures, of currently capability, first of region system In combination market with are the surgeries. medical robotic to this attendees Senhance with arms in with was control of the in which Of surgical World note, Meeting. Stephan, in Surgery opportunity Dietmar that

region markets. accounts both As Europe, to satisfied of variety to in the which it and wide pipeline in the throughout robustness pipeline, distributor relates our continue be a with we our direct current includes of

hospital During burdensome robotics systems tender need the NHS procure to allow process. first Kingdom a process framework the to costly and vendors approved from related hospitals and services quarter, established the or for trust United without a

the Senhance pleased and to tissue in has runs through of as XXXX. two robotics, one soft services, is The all for are $XXX consumables framework announce of We surgical a only program, awarded at types this place and robotics. million which existing been systems related that includes valued over early

process. aware purchase we and the Administration system quarter, robotics guarantee the Food via regulatory that the first regulatory player for this understanding received meaningful to landscape. does specific in approval value the it the market another compliant, deep In hospitals is raise make in to enable has system. global straightforward profile of the with and from transparent of the Asia-Pacific Senhance progress. proposition a not While, a ensure framework will significantly sales, Senhance we U.K., a are them that strong continue of our Taiwanese team reinforce In milestone continues and the to This the major region, and Drug a garnered

for We with also work instruments quarter the our track regulatory cases for on we Japan. remain announce begun Senhance process are to and clinical our continuing have that the We're pleased in through fourth to clearance.

to for Clinicians the differentiated Japan Japan procedure and reminder, highly and the are behind same across United as in robotic impressed surgery. features the administrators out-of-pocket second asked very cost world, low about robotic is region. a Senhance per excited that market As most procedures the future Asia-Pacific the in reimbursement States. attractive largest especially robotics the is where the per patients with and often offers. cost the laparoscopy for pay We're procedure is are The

we of development the our time lines to Turning instruments. all portfolio with remain March. We on out laid track in of the of

portfolio expand minimally X-millimeter of CE surgery. as the the first boundaries and surgeons of file instruments our is XXX(k) invasive expansion we for We We an end offering. currently to Our instruments Europe, opportunity instruments in mark important XXX(k) a the continue as the initiative progression year by X-millimeter expect and of end have XXXX. clearance by of our submission obtain X-millimeter to the view

is in to for important Our instrument, believe be we general surgical surgery. energy an which expansion initiative second particular, specialties, an ultrasonic offering many portfolio

launch to to during in product and the XXX(k) expect this year. Europe for clearance to continue the XXXX, We before end of expect submit

is initiative expansion to our launch articulating portfolio instruments. final Our X-millimeter

CE of efforts our we quarter, use to continues mid-year to procedures, to with XXXX. and year. filed the gears the both our indications progress for hernia laparoscopic for market procedures laparoscopically Senhance. We approximately anticipate submission first include mark procedure a expectations our both over end and during in XXX(k) addressable use to inguinal submitting gallbladder a expand to X clearance. expand for are We Shifting line laparoscopic process double traditionally with a This These per surgery. by to clearance for for previously the and that the achieving XXX(k) continue announced indications performed high-volume million

I'd the over provide financial Now a like turn Joe to to call to update.

Joseph Slattery

Todd. you, Thank

XXXX, Senhance systems future we related we and million, systems, of months instruments two services reported XX and of as as will today the Beginning to three and the breakdown sale and For accessories. a well on provide $X.X revenue ended between calls, of revenue the instruments March sale primarily accessories.

they explain identical be their others not let me So as our may report how revenues. definitions to

relates Our definition warranty if of systems services robotic to systems, any. sale liabilities, revenue deferred future less of revenue that is the

classified and and related fairly ongoing management. Our or systems as surgical well that includes of as services services covers as it field other as is includes and definition to of service services Instruments deferred systems. warranties, revenue the not such the mentioned, anything is recognition as previously and self-explanatory trade vision accessories

the made to lower from General in following system clearance GAAP for compared share per million the of leverage XXX(k) the FDA due in instruments to quarter million per prior architecture $X to expansion gail the R&D lower a margin and Gross a the consultants of to which share the consideration year. Adjusted prior quarter. revenue to As was loss million quarter net Senhance prior year net $X.X from up of the $X.X the $X allows expenses period. the million the the the period, in net expenses in in $X.X million warrant $X.X all overhead million, to in was per to or due a share $XX.X of intangibles, quarter million first adjusted prepare in noncash for XX% in use $X.XX due the have the high change margin of of late in the $X.XX last $X.XX business, in from primarily or these $X.XX Senhance contingent to level breakdown $X.X at decreased per compared to $X.X sale services SurgiBot $XX.X approximately from was fair in of the they not XX%, year The Sales system, and the of from the in million of million our investments increased year the year $XXX,XXX $XX.X the efforts was so sales liabilities a revenues. systems, quarter in net year approximately of systems. U.S. in hospital due and the year decreased made quarter. include quarter, administrative expenses accessories. the share for to the XXXX reminder, quarter higher the the primarily GAAP as loss amortization to and application. $XXX,XXX approximately compared noncash marketing excludes or to - $X.X period, prior third-party and million in of increase and Senhance primarily being period the primarily loss The in sales gross prior gain due loss open value to vision in prior in burden investment million current million quarter or was period.

cash million XXXX, to received million of the $X.X common which with of related million the the restricted from in balance sale proceeds exercise SurgiBot warrants. stock finished the received the also we approximately We sheet. $X.X cash. Moving quarter first of In $X.X million and on was to of first $XX.X quarter

$XX.X cash Excluding underlying burn our cash these in the was million inflows, quarter.

the to We through XXXX. continue to fund hand Todd? sufficient is cash business anticipate on the

Todd Pope

second goals. track on with XXXX and a one to great the quarter, is achieving We've momentum Joe. the our including the We've you, the signed revenue We first continue of good in to sale recognized in Thank start. systems three U.S. million $X.X of for already be off quarter. generated in contracts

been pleased Our the global accepted and to expectations, progress pipeline with line into our program. tender robotics we've continues we're U.K. in

our enthusiastic broaden unique look continues adoption on in we've clinical to attributes market. progress drive for cases in we into the States clinical now forward be to our with On open with clearance questions. We our as Japan, Senhance in in side, first U.S., United midyear. EMEA. to for continuing of the continue recent the our to the by the about the positioning expansion up and Senhance's Taiwan. we the and underlying remain track experience expected indication And And performed we of Overall, clinical robotics momentum building while surgical that, like on trends the the in Senhance. and your line I'd Regulatory continued

Operator

[Operator from question Instructions] with comes And our Wise Rick first Stifel.

Rick Wise

encouraging on that tipping procedure and specific the the fronts. the that It particularly indications First, it multiple be physical to there? clear, you attributes? Is the second transformed? all of it's with of Is it the quarter And are gaining instruments really Help early really finish point future thought is truly some I traction. just first, these Todd, progress see what's the clearly, general to additional all a about I could Is the us pipeline been it if of does that this orders. specific to? these you've over. a additional What to Talk of maybe you're get to potential - responding us meeting, you are seeing what would, what centers just I'm these sort it mean, understand sort how are to them question. at? thought, seems these trying

Todd Pope

to talking Thanks practice, a that conjunction the excited what sale typically to their safety that with They able we details this the acquire wanted the in they it. that for today, Senhance, they were Rick. wanted really that the It going stress case very on laparoscpic We'll procedures. quarter. appreciate in instruments surgeons and And up into U.S. needs We their made they to are with with bringing but robotic excited the things as Yes, about basis, they they to three like had use have about know reimbursement to Senhance, millimeter meeting appreciated that motion. currently their and wanted in current budget, their robotics haptic X-millimeter more later to because do future. move the laparoscopic in had, laparoscopic they a be surgery. we've they Senhance the is it's like the today Senhance. was for big that's they cases. at haptics few of excited continue incorporate really They're these And to highlight people the very we're kind deal had stress They're like question, in things to their was out that. be reimbursement, reasons felt second provide certainly, OR robotic hospital us works purchasing to motion per They a robot robotics. a codes here that little earlier account bit, was the They now, a using But make they account when feedback. we But about highlighted feel a we cost for to. talk quarter. traditional let's Sure. the of with to in bit that lap looked to talking one familiar they were for they little at the they

with So retouch I wanted might earlier representative. figured they that's I and account be I there And to the that's question, a what think today stress. base pretty

grow now think at offering robotic - gaps is lot it's pay you critics to of quarter early that was bounds the at filling And leaps to early seeing per were new it's agree and - momentum. it of robotic have cost platform. a assisted two the Or they robotic think to it's I dividend. over we're said - we've on hoping I is this if starting whether the have see a procedure. and matter you so if why? make haven't those will going didn't had last don't today why? robotic grow. coming surgery with far, now, even years. we're have robotics another a and people And or today, I staunchest but it one And that whether maybe our you was looking surgery that And And up we're like to I look by what I think they when over the felt point, features pipeline now, gaining people were is don't some you the or trade-offs, a some think

and that the about the think account through Senhance. more what talking still getting. to hearing we're for on we're the from feel hands So us, It's We bringing with more you we're accounts good but pipeline. accounts, is in saw as one I of representative progressing feel what more from good feedback year, and more early the for we really

Rick Wise

that And you your developing and the you course, Europe times And on going pipeline all? part newly Good. understand side and do that on is of and expect mean, how things, the that you perspective that - afternoon. systems, that U.S. so you or every several share be as installed procedures these and Anyway I generating to expect this to related to install can and we the and and up detail shape - the generating is pipeline But of not can I, granular pipeline - well, some revenues? second half. systems. are them quickly of should quickly form, So them, confidence the level, more of get as running instrument a said doing we at you characterize in how

Todd Pope

just QX. seeing a one the early with and about halfway QX into think with been and doing and than the characterizing pipeline, that quarter Well, I now we're as into now more But that pipeline a sold - QX, you're multiple system we've growing Certainly. positive. our albeit through same double-digit

results some to I starting think there. tangible we're see

I just continue continue as to we pipeline, as in I rest momentum U.S., in and the accounts nice when surgical to tailwind the over, going from up over we're as that's U.S. would going parts point, to say getting So U.S., far our think both to we we in going see the bit we're of progress to world throughout the in to them little for if a that consuming. will look now up which year bit here and because be But Europe kind U.S., more we're surgeons wants on a were of getting this a world. the that of us same proctor, and that feel going involves like utilization, oftentimes to other the that up little thing in Europe more considering time them here hospital logistics, more systems here, online in privileges them have the we bring to not bringing going

it's week-out they're in-country a people they're being geographies installed our we're to basis, and have go see have and and proctors people going on that think in on year, get I up important after think the I that to plenty going. we don't week-in far see later users to as the pipeline have clinical if system to then used, so of

think going kicked utilization aggressively. So the off start we're to pretty seeing get I

put I to good, it's few results So and feel positive a think we nice with commentary. the

Rick Wise

in or how again, of it's at that strong particularly to a level? the are - still it me halfway date. on this and we systems I ever I gross asking the sustainable the this they quarter those but How it's your the we questions. additional Right. going obviously, that of is best - some margins And again, this, to assume assume Two the guidance, maybe, Anyway second is whatever commented phrase a to the I you geographies Joe, quick possibility assume doesn't not ones much revenue. question through we're there And gross be last quarter, you're - instrument because are I quarter? mean so - think carefully. progress now. you've sharing had. phrase The two from I'm that best seem - strong, margin for this of can that possibility - should that's for for just you

Joseph Slattery

this is Thanks for Rick, yes, question. the Joe.

feel we five would pipeline. into six weeks good say is What are quarter. about I really We the to the

can for doing we do have a you always hospital contract [indiscernible] then and As them be We have contracting wants. the those the have - which our at extraordinary. can you with us, situations where earlier it's know, eleventh hour had And bit these a sign is process take and and weeks. a a signature But about robotic we really lines the sales, surgery to we whatever time only within week, what coming.

now several systems right we've three where already So hope good. feel we a think on in We already But to left some pipeline book, weeks We've quarter. see we the are the is QX. more. with in our we put up nice got

blended gross multiple were call from the the margin, as from and typically and first ASP now quarter what the multiple U.S. in sales overseas far it sales in in in you multiple with the the in than ASPs As would sales sales higher see a year a Europe distributors.

So some of that ASP. driven being margins by is

that's I some ASPs the so bit been last past. over the primarily of over increase our the little gross margin. in perspective too. think in our those factor year, favor you've a euros Obviously, But are driving what's the got worked the of

Operator

Novarro And our question comes Markets. Capital from of next RBC Glenn

Glenn Novarro

first questions so Wanted where to similar he on U.S. robot certainly two sales, sale the OUS what what to that buyer. than we appealed on expected. the Rick's asked to year. That sooner follow-up this was about Congratulations

two characteristics have with the they international buyers, centers talk You already a robots. major about of that academic the

So color I there follow-up. a little a then and And to had appeal them? what

Todd Pope

a in country. number be leading these another their in of early buy robotics well is would question. category. some in or they for to bit And that the their Senhance of first of different that thanks for we be to and of several their had Europe already parts the a systems purchasing. country we and another as are little We've Yes, They their now are maybe Todd, the motivators sold being in this the of populated that really saying part edge. want the find region system emerging into each what's one world's bringing seen just rather rather Senhance Glenn, the year than than

So offering, they the primarily hospitals we there, systems a have were that the robotic hospitals. not did sold MIS

that So success we've a converting of them. off top had mind these kind surgeries of Senhance to over for MIS was lot

starting proud there they to excited. to a out the we're offer and So new feel momentum, to on some like and get gather were system good their that they're They their and patients. market surgeons

Glenn Novarro

And reported Okay. a revenues the on one you us in that were that? two Can follow-ups. mean get cases market. I on quarters And Or did had you that Does One $X.X X,XXX just you timers in million. the instrument to that help number? last one $X,XXX any case? at there then the a

Joseph Slattery

Yes, quarter, don't system accessories Joe, instrument given in with was of in current scale. direct successor of About to this see cases that bought you were is revenue XX% a our correlation that sales. the - the two Glenn. that with with especially Really number

don't a The a was choppiness control is it for And other about that volume. revenue on the - recurring the little low to run say more our the I underlying we more that had other quarters. business. the typical first quarter rate. a compared of even a ordering bit at other XX% We chunky side for the in would high of

Glenn Novarro

published is the come know Todd. the are competitive Okay. J&J What to to mounted. J&J pictures robot, your was bed Then Brandon market. eventually, J&J potential opinion landscape? just of and - the on lastly, Medtronic We some which going

on mounted. robot view that a your would I'm bed curious be of So

appreciated a we based research to mounted out, system, know Our what surgeons. that's bed not on be view is going that's competitor be to you? But us that? that by your what's J&J going of And that with to tells a real coming

Todd Pope

I things. would two Yes, Glenn, say

only quite also did bed because with side, few all, patient First different a side. more SurgiBot with SurgiBot we but remember was at configurations of Senhance not look

So and bed. we the different a of potentially in on pros had being cons some taking experience at look

is For that we've as what And me, go until competing approval. really your a beliefs, the work But held that. you're deeply to of they till but process of FDA going had for backside found through of you way. it's I it not and didn't systems smart us, go know to comment be quite get we large you on configuration until get regulatory on to that the what is don't feedback, think some

to So but policy do wise glad I market, certainly me, viability how approval and on I get achieved. products regulatory and best their is when do approved feel don't for that until think the think to compete, questions we it's about may it's

Operator

our James. next question of John from And Raymond Hsu comes

John Hsu

if in you've maybe your with, during few initial the on clearance FDA for Senhance from start has a conversations of the selling hospitals, you've Todd, quarters we think that could anything shifted in with Based I time, the the U.S.? Senhance had terms for strategy had now. expectations for

Todd Pope

on be would twofold. the comments Well, that

over yet, four been or and of in Europe, on the on utilization named there and just tender these the coming the and your an really out product. at your we've both expending, company, last a clinical you lot of get good But the where are series excited. data. not to pretty the a and I at U.K. sign When approved booth a point we seen of then get evolution will our had this of is revenue First is just system, hand, we're your you're large that's of history, new at all, success a talking regulatory you continued, months, from, but presenting and We've our when cash say, first, you're you're side this have you in, there that confidence of first you coming over out we've in being now have where viability excitement, system there five trust about explain NHS kind company shows that a lot go strengthened our need to the on in to people approval big and

of Senhance. And about different and group months thing I four people peer can that videos there XXXX the went lot late people think talk about their to We their in evolved results with having a have other showing. we're can experience are first that's to talk people We ago. about we out that's since

a that's converting interest purchases think a thing is now of I So good into lot and momentum for us. toward

John Hsu

But on Okay, the kind are kind the and think like at the And was slightly remainder a realize for these rates XQ, It about SG&A all year? couple that should of Joe. of the run ones then I for of looks R&D think for right from quick - stepped least and down on G&A, guess, flattish. I how just to great. expenses we was

Joseph Slattery

I take, think right. give Yes, or about that's

John Hsu

rest Okay, rate. Is the great. same question pacing And you for of at anticipate the then the burn this of least that would cash on XXXX? kind

Joseph Slattery

right. some but Pretty around is much. And be revenue that working by The will be adjusted obviously there'll number, capital probably that, the the growth. about $XX.X moves offset million

Operator

concludes today. that would back our I Todd to session for remarks. call Pope closing to for the like turn And now question-and-answer

Todd Pope

joining to updating the Just in our We thanks quarter. you. us call. look everyone you next on progress today's Thank for on forward

Operator

and gentlemen, today's participation, your ladies you and Thank this And conference. for a day. concludes have wonderful

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