MSON - Earnings call transcript Q3 2018

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Operator

Good day, everyone, and welcome to the Misonix Third Quarter Fiscal Year 2018 Earnings Conference Call. Today's call is being recorded. And at this time, I'd like to turn the conference over to Norberto Aja, Investor Relations. Please go ahead.

Norberto Aja

Thank you, operator, and good afternoon, everyone. the XXXX joining Call. Quarter for you Misonix Third Fiscal Conference Thank harbor get as first, answers, safe momentarily management's I'll as the We'll comments and well to your questions review disclosure. but

anticipates, expects, by or terminology, and statements variations but addition discussions similar call Such estimates, forward-looking forward-looking will, or can uncertainties. believes, performance. results of Securities are These or within statements or XXXX, future these historical beliefs the such the Private events, acquisitions, identified reflect future future In statements meaning the Reform performance, other negative risks by of operating current statements contains should of of capital plans, to or strategies, the the Litigation intends, conditions, the uncertainties, expectations forward-looking and and including or not plans, seeks, this current of which as words, company. use strategies company's of conference and of facts Act projects, or involve guarantees of be risk may, developments, expenditures

CEO, website. to well I'd as that, turn like be in Vizirgianakis, go accordance measures Exchange filings meaning and calculated presented of the financial results announcement and today's the actual risk expectations. GAAP comparable and press The CEO today's our include Commission, required, also reconciliation assumes non-GAAP President including Form can the most ahead. now forward-looking measure the and financial Please forward-looking any associated reports the within publicly XX-K update With a described with materially the in of Misonix. all revise company's call from as such, may will XX-Q. statements and Regulation the news vary Securities are SEC As to Form to uncertainties found in measures on with company's no and the non-GAAP company's on Misonix financial of over the When Stavros or release to call G. obligation and in with statements. directly webcast Today's

Stavros Vizirgianakis

appreciate you you, progress growth XXXX call Thank third review to across Norberto, our and results and today's on us afternoon, initiatives. joining We everyone. fiscal our good quarter

Joining coupled sheet. strong another in income. a execution is third healthy today performance our management the Misonix of and quarter, The call a resulted period strategies ongoing fiscal successful continued our on Joe record grow with gross Chief and income Financial financial cost delivered line, while top to operating the in strong our fiscal quarter of Officer. and net me third the balance initiatives, revenue margins maintaining Dwyer, positive

equipment in in addition, surgical progress reflected growth ultrasonic U.S. year-to-date business across results the of we In performed been across driven by XX,XXX procedures, with our products. is standard have making markets. the well Overall, are as surgical quarter as third platform which international in robust our were positioning our care leading as sales our

In generate revenue double-digit with in we $X incremental the this to quarter made unique business in from million was continued in our Chinese our the addition, What consumables license agreement U.S. our somewhat revenue partner. growth

of fiscal basis, million a Misonix line of license by fiscal X-month grew of third for When product quarter to an of the with basis, by been even third still is on over to expectations. in results. $X important and to led it growth a revenues XXXX, third XX% revenue XX% fiscal increase that still revenue have license overall the the X-month of have and contribution, XX% record the would last on revenue, to While quarter the without note growth benefit would our our revenue generated quarter and compared in compared XX% quarterly year excluding this the

business our and the to SonaStar, Taking hold. bone all and and SonicOne, debridement wound cutting product market solution; is we growth a the in to BoneScalpel highlights at our As removal continues fiscal system. surgery. look made third X importance of soft our surgical performance across the tissue of product cutting, fiscal in in potential and various our quarter inherent market continue first financial the business, ultrasonic in and our in of line; take bone such, products: decompression we its implemented believe see sculpting. our BoneScalpel, BoneScalpel that progress and critical as lead leading the aspiration to the spinal bone reducing deformity blood for we're procedures, extremely while substantially is leaving underlying pleased initiatives largely continue something of with loss, strength XXXX including unaffected half our core and

is enjoying important of challenges growth system thus the its wound growth better by address allows surgeons wound sales bed ultrasonic healthy as treating healing is because to and debridement improving innovative and The the SonicOne revenue stability strength. in also wounds business' overall reflects preparing underlying process. the consumables chronic surgical it

success future the represents of our initiatives financial medical offering the while to into health revenue and of visibility products improved Consumables clear for organizations. XX% product of provides total and revenue performance consumables of our relevance practitioners approximately strategic Our evidence revenue.

the markets, Regarding as to market, continue cultivate our expand to the momentum see continue trends healthy which in represents relationships And to product the approximately continue front, reach. we of domestic international and we our on positive revenue. we geographic expect XX% geographic

SonaStar great $X in million agreement, progress $X regarding partner quarter. revenue line to addition making product the third product recorded from with generated in our million We the this license in Chinese the have manufacturing and revenue during already over are

experiencing, leadership of in our device terms are is to reflects in we them market product success. future and importance of segment both proposition growth commencing then transition expect this The medical to SonaStar the as on Maintaining well annual an SonaStar in we market, the as to basis. venture undeniable our ultrasonic line product of in We continue the supplying manufacturing growth a then contributing royalties paying us position to with revenue overall from our products. fundamental value of as the

to and development vital strategically business to portfolio. design our million over advance the a our the R&D one product of of fiscal part and continue we quarter investing that and such, year-to-date third support, million during $X.X $X As is

of results derived nexUS. we've efforts is One these the from that

Our approximately will resources, domestic full-time sales this. we XX and to sales continue force now represents expand

progress to given future and our June XX%. annual and we're revenue strong our been. it excited revenue well ever our our strategic fiscal third third results, guidance performance growth the results in year-to-date meaningful which to for we increasing XX% quarter XXXX, have to quarter $XX revenue the implies guidance, are as summary, results for ending total and XXXX fiscal As $XX In demonstrate and between against the priorities, continued the year-to-date year we million, million as about as of XX,

as advantages, reach and results the they of turn substantial Joe I the are ease that and time, goal our and well that, and products of care their offer including believe achieving With increasing shareholder economics, practitioners these as opportunities grow position call treatment, which desired the Dwyer, use savings in help to procedures for financial now will result We that long-term future results We all providers to cost of health Joe? of by surgical our are relating placing patients to outlook. and will of effectiveness the devices our outcomes address attractive Misonix XXX,XXX as XXXX clear value relevance emphasis on achieve confident patients. utilizing CFO, our near-term creation would like as for review and end the annually growth over in profitability. we to health

Joseph Dwyer

greater results Stavros, I'll by in good detail. financial reviewing our begin afternoon, Thank everyone. and you,

highest at revenue Looking revenue history, third by revenue, $XX.X previous fiscal surpassing in is quarter the company's was to our XXXX record the quarter, XX% prior which quarter the revenue grew quarter. million, which

revenue, still best largely QX, revenue driven across quarter and $X.X million BoneScalpel. assets million by as of growth revenue. If by and grew to we Consumables to XX% healthy consumables was product the and you consumables by our redeploy drive sales, strong were record. this exclude or continued $X in revenue, our equipment growth supported license from Revenues recurring

quarter the as in domestically developing we've revenue, stream. $X.X important our the of was XX%, revenue represents lines and product healthy focus line gross growth million license revenue, continued in domestic expectations. across well to $X.X while devoted $X the revenue Domestic Excluding Overall, in Gross internationally, grew total sales with margin million. to fiscal and quarter $X XX% for The to to our by margin million, XX% driven our pleased third this alone to largely the strong see We're XX% of in by was $X.X maintaining XX% international result in XXX% expectations line SonaStar the increased consumables margins. revenue with gross while revenue grew and equipment XX% for profit XXXX revenue product of line. revenue million, [XXXX] growth international product our the the product markets, as our and and XX% very in revenue license revenue. third (sic) million back

operating at expenses. Looking

to Hong The A revenue. third Offsetting of $X XX% sales coming line in $XXX,XXX a led share million XX% of to brief quarter fiscal build loss paid This distribution XXXX, selling million our 'XX with fiscal last pleased ended manufacturing to to by manufactured compared driven we development Stavros them manufacturing from already, of the fees. third operations the note we product year-to-date a quarter and to into operations $XXX,XXX in license receive our our increase a expense which to of $X.XX in in third next-generation been share important during $X.X our quarter million per to R&D with and from Kong from net products $X year $X licensed, entered will transferred share per operating for third recorded last year of to the we that an share minimum is our of compared with in from a license -- primarily SonaStar or royalty October We saw income The quarter per professional of the million as payments the to mentioned, total a million $X.XX an which year. It's increase of for million, of a for technology net of minimum quarter. adjusted the reported net and for on million. expenses In million or of tax the the a we China, period. first organization reduction background, the million in G&A an XXXX revenue Chinese in higher the EBITDA. our revenue -- our of rights $X second earnings licensed has a Macau. another exchange, lesser a and balance for XXXX -- loss a of agreement expenses, ongoing at related from we're principally quarter and we increase of The for these payment compared and on of per report resulting for represents year, X license was we by Taking variable across our increase quarter. our related $XX $X.X brief of the degree $XXX,XXX months and -- agreement $X.XX in basis, look includes in commissions loss and XX% impact fiscal quarter loss EBITDA, per $X.X $X.X in decrease prior 'XX. the a expenses $X.XX And of as adjusted third income distributor. with positive -- of of recorded partner

quarter significant million, third improvement The of EBITDA over $XXX,XXX. EBITDA fiscal third quarter a XXXX adjusted $X was

earnings run quarter, nexUS-related part as interest, expenses As compensation rate non-cash an company's quite taxes, income show amortization, We introduced R&D important before first the statement EBITDA we expenses the mentioned adjusted contains EBITDA a as are measure second cash define it's We of we not that R&D our metric, believe the for to run adjusted exclude given the expense they depreciation, non-cash our project. earnings and we few items. nexUS typically in rate. when

also As raising XXXX. revenue guidance Stavros mentioned, our we're for fiscal

$XX between performance million guidance between results, total guidance On and from growth for and -- million or increasing XX%. our and improving we're prior of the of revenue rate the strong our million $XX back revenue $XX an annual XX% continued to prior

Moving onto quarter ended debt. the $XX.X the and million we in with balance sheet, cash no

improve us capital $XXX,XXX And the year. operations used Xx, allowed cash The proofs obligations. of or Misonix sheet last in during prudent operations our short-term business, of third every discipline on of we meet our hard operational aspect to and of cash hyper-focused way. people. while results financial closing, in quarter balance $XXX,XXX recent quarter, capital our tremendous increased comparing further ability of business reflecting $XX.X working to healthy team from that And generate In performance reflect worked to remain working of the improving the favorably million to a in investing sustainable our has a in and but our and Our disciplined, the third our effort. to ratio

forward, we focused growth. profitable in right future look drive we believe As is to the areas Misonix Stavros? continue to

Stavros Vizirgianakis

I think session. Q&A now we'd move to our

Operator

Instructions] Please [Operator And a Kaufman go ahead. do comes from MK Investments. with and you. Thank that have question, we Michael

Michael Kaufman

Hi, of a activities in have lot you Stavros. for is, have on new Great quarter. And a I a hit going terms question product. of $XXX,XXX transient

the reach revenue have moving that kind what the are some is, when that And over question is likely the what you royalty yourself onetime towards? You expense-to-revenue payment. start you steady-state And time, activities? you're of model you having see to as levels driving

Joseph Dwyer

that. to speak could I

year, given revenue do Michael, we we but fiscal think I growth. we next guidance for double-digit our expect -- haven't

you $XX going a end year, we maybe nexUS, be $XX in operating as this of which beginning million, our current expense at lumpy running essentially next. the but be from of a million investments, If at times That's million. year, next-gen will run fiscal product, rate, look the $XX around finished our investment make little is to

-- So just be. in we to that We describe when and that much away. so believe positive territory. will a how we're where as be that EBITDA really to guidance without get we'll And goes will that can't point consistently

Michael Kaufman

that Just a further point on one.

kind be where to do likely to If uptick, course, but a see you're the new-generation to transition forward going product, R&D Of is going finish the expense -- probably When that of looking generator, to I'm an you which you transition, moving? with going from what it's new to generators steady-state do be? have current is the the And or sell you're toward product? current going segment over? markets is, third-tier sure replace the sort generators generators in old generators? customer generator or either would much then some you of use think could them and charge the whole having kind And the of about then a impact customers new for with turning new the fee and some question more of the them selling of generators robust. And high-use all or the the to you by your moderate the putting base to

Stavros Vizirgianakis

Michael, answer to I'll of attempt question. most the

would $X I terms in around would along steady-state a year. of probably forward. see expense, be think R&D lines, million we going about it the That historical

is replace not installed although to currently everything in I a that this think today. it's the with is nexUS, revolutionary marketplace product, going

stage, So color that in give existing like. I it's going little it's think to look to exist rollout alongside a difficult products to what the market. as will At this bit

We product to are going in which October year. the this nexUS portfolio planning is NAS, to of at launch be

nexUS wouldn't with some cannibalizing a I outline think the before it I about we've close, we that on regards to of probably that, strategies existing to the will worry call, So come up that product. products. that we But think have

functionality may are going a existing to the be where instances going more lot people numerous it's think stay alongside but to platforms. on offer to users, products. I is It going exist to there

Michael Kaufman

Thank you very Sounds much. good. very

Stavros Vizirgianakis

Pleasure. you Thank and support. you your interest for

Operator

is And no have queue a we in question [Operator Lowen. from Instructions] at this Roger one else time. the And

Unidentified Analyst

wonder if explain your I concerning thinking could shelf your you filing.

Joseph Dwyer

debt, could the or to we in shelf we able to of fund the fund is companies it this it a to company fund was in not we in is shareholder, of deal future. which Joe. The to particular guess, good balance Sure, other working expensive that to quite for shareholder to the previously use possibly don't for need shares had want than company if capital raise view, M&A We I housekeeping point believe issue be for place. so. or any for felt be money, We do or investments -- best our shelf a to had to losses is market. do size, activity that the the from what public registration

may need but plans. and some tap have So it, current we've if we there there. any got it we it at on It's don't out point

Stavros Vizirgianakis

you question. thank for your Roger,

Just has Joe had say. reiterating what to on

for we we've looking market strategic that, are started augment indicating acquisitions. growth, organic in I think to some order to the

So have I to ready the options us. an a think that marketplace really it's in company of available the seeing should we opportunity arise question just is that

think future for anything was ready getting I and the than So it housekeeping else. more

Unidentified Analyst

me, another some sounds have SonicOne that do the like forward question. tremendous Well good I wonder planning and how potential diabetic the to for with doing I is people.

Stavros Vizirgianakis

Absolutely.

up SonicOne significantly. has picked

in look And, when number in modifications that debridement If made. we at the I before we the wound, with prepare how fact, of from wound think, look was we in product, now the we at is two as the debridement. be and since because, at fact, perform debridement a we that to heavy order -- what wounds, a a remove to been had what the as the I the SonicVac then we actually we've SharpVac were bed, management of care develop learnt need tools to product, would we've we the debridement, wound second believed was step there've do market, have using you'd launched exudate to think look range that -- then in product. our you and

think with a marketing stage in now other, in of seeing really a marketplace. that this young the mid-teens, We're sales setting new force. the standard wound we're growth care conjunction a at So result the in products for is having and each as I

published of There's evaluations a I think moment. lot our go the a we've data in of of number on devices couple that on months. the we've got at the last

to phased But market Again, in the very, response we're strategically and international mid-teens as been of the and domestic more device, the expect also a it's significantly. markets, can to very market, of market certainly growing the this taken gains awareness couple in market terms that the the the this we've has marketplace. there of I in the business launched pretty strategy So we think We've over at moment. acceptance accelerate encouraging. a been

Unidentified Analyst

that devices, and Well, Intuitive medical students really my relates where if work able matters. question also universities of last to to And are university and is the with various to which wonder BoneScalpel observed given course well. introducing were they encouraging. very who with learning Surgical, use SonicOne to thought what And to I've their extremely work to on there's any students I did

Stavros Vizirgianakis

Absolutely.

we than of that were we success critical the program. stage I week, over with the as of BoneScalpel an And actually later. expose Singapore use technology rather speak, new think this incorporate it's earlier really to at it people to Institute to AR spinal working any training the we into in

going we're young now coming the training step looking think through we opportunities -- be And really wound So same products the surgeons part because exposed are I wound as ranks for to management. think of BoneScalpel the the debridement to the regimen. in first is at

from programs of we doing we number a we're a us a But more catch when give on got color can time. big as the because be the again, will to can What a we certainly, earlier update focus our to go. investors easier believe for try influence bit the little behavior we've So and training what is, deck over area it perspective. surgeons, do to the I is

Unidentified Analyst

very much. you is encouraging. thank Well, That

Stavros Vizirgianakis

Thank you, Roger.

Operator

Kaufman a has with MK Investments follow-up question. And Michael

Michael Kaufman

Hi, Stavros.

wound just jogged the kind On my side, of mind.

in justify healing the drive package good progress BoneScalpel. efficacy the and care the lot of terms stand the and because preparation help wound products, success payment adoption could of of product having work done to, and on potential you had maybe course, that rate the do providers by bed of around You Where a of both a savings? wound

Stavros Vizirgianakis

under development of Actually, for initiatives wound. a the number

of over the of these product we've product, a XX% study shown we We that wound ultrasonic heal, actually success We've debridement these rate with a previous that -- which significant which rate for debridement. has been just had are wouldn't our wounds university [PIN] where we've the recently where X-year just weeks a the used wound use shown a graft has in There's have last using higher wounds couple done. debridement. published study uptake of have over been that the have of also are that old, literally -- on

representative So into be the the together the in putting I and we're that easily and format different VAC think of can a data committees. it our one understood to can actually everybody process by that show getting all

on, again, deck and hope the So onto quite we and website update the as put a bit to that going well.

the the recently latest wound publications, you'll bits of that got we've information very but see on So X meaningful side. out

Michael Kaufman

anything the some bones helpful I, product the at and key peek future attributes do I the of could terms be the but deck, kind products in would of, meat add to to new think to investors? you

Stavros Vizirgianakis

that. look add Sure, we'll on some at can things. sure I'm we definitely

Joseph Dwyer

website We'll new on deck the you, evening. have a later Thank this Michael.

Operator

it no And appears Instructions] questions. [Operator there are other

it to like for closing or back any to turn the I'd remarks. CEO Misonix So additional of

Stavros Vizirgianakis

date Thank are growth you. our right track and with the summary, shareholder in XXXX fiscal in quarter the we improvement results continue to as progress the enhancing on the our pleased achieving growth and the goal opportunities fiscal profitability value. we fourth made many confirms capitalize to third the quarter of our further while strength financial In that meeting We're successfully sustainable platforms. on towards across long-term for fiscal expect on we've

dedication, in I'd to customers our their us to thank their like for team you interest for and this business, you much. our for you've Thank Misonix for our company. the thank with for placed hard confidence in talented opportunity our we work take your your always, and constructiveness partners investment. their very As dedicated shareholders our and

Operator

now conference very I'd that our may Thank your today. you and much. everyone participation, like And for thank you to disconnect. for does conclude

Misonix (MSON) 7 May 182018 Q3 Earnings call transcript