MSON - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the Misonix Second Quarter Fiscal Year 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Norberto Aja, Investor Relations. Please go ahead, sir.

Norberto Aja

Thank you, operator. everyone. afternoon, good And joining call. the for second fiscal quarter conference us you Misonix on XXXX Thank started just get We'll in and management's comments. presentation a minute with to disclosure. doing the before so, me a But let Safe minute Harbor take read of Today's call forward-looking of Securities Harbor contain and XXXX. Private of US Reform the the the statements provision Litigation Safe within webcast meaning Act

similar periods. likely, as goal, believe, plan, of statements be may, will include make Forward-looking should, intend, statements can future results. identified to regarding anticipate, by references and statements forward-looking guidance other expect, Examples our words future, to such we estimate, financial relating

the our economy business, Forward-looking to are plans anticipated projections, nor are they other based circumstances, statements assurance and many expectations facts are our and they on the our Instead, Because beliefs, of and current and performance. future subject the future to relate forward-looking are changes, control. only and regarding which historical and events strategies, of of trends, neither statements future, assumptions inherent future risk of uncertainties, conditions. outside future

today's currently Misonix. XX-K required, on result is may all cause update results Securities most to the Exchange and solutions the publicly non-GAAP the and Today's as We time, Form company's conditions well rely call presented materially forward-looking products company's is our for these within calculated in of indicated financial to directly and time the solely to today among no statements. to measures accordance a of and financial statements as measures When may in speaks SEC call of be made materially developments the of can ahead. G. on include, company's the and to that condition that the demand should available in the information, only from include in based Regulation Mr. undertake which differ Therefore, I'd information us non-GAAP others, of results made or will ability described by obligation actual Any Our any the to in any XX-Q. reports from those operational us not future release, on factors CEO the Commission, financial Stavros announcement as with Important from forward-looking reconciliation those also financial forward-looking turn our With forward-looking statements. and actual and meet it could new the of date indicated and you to go to in statements differ Vizirgianakis, today's efficiencies today's a customer made. financial risks website. the conference over forward-looking filings now achieve webcast Form like with and statements as meaning including and on news Please whether President comparable GAAP that, be found in press in call measures and otherwise. and

Stavros Vizirgianakis

Good XXXX us to quarter Thank second for afternoon, on call you results. today's fiscal review everyone. joining our

Dwyer. Joe the call also is Joining our Officer, Financial me on today Chief

the medical Our the for for ongoing our results chemical XXXX strong physicians, fiscal patients. of strategies that demonstrated go-to-market quarter half second benefits recent as delivered demand as confirm benefits financial Misonix the well investments, and first hospital to ultrasonic and and of devices

first while fiscal of a the for on target our XX% year, to deliver us XXXX the the release, afternoon’s this pace in year-over-year approximately growth six in positions line fiscal months gross outlined solidly margin of maintaining of healthy full top total XX%. As growth XX% through revenue on

strong $XX.X lines, growth revenue wound BoneScalpel quarter SonaStar expectations. while performed million continued QX rise our XX% to to product platform reflects our and results, below the record Turning our second across in a SonicOne

XX% of total quarter revenue. for streams, revenue two grew revenue, and our XX% equipment sales while at Looking total sales XX% of and second accounted consumable XX% represented increased

We are compared consumables mix revenue to and period, of it including a the as revenue increase line our prior-year XX% pleased provides in our XX% continued driven recurring added XX% international nature the reflects by results. and momentum with Overall, revenue in gain grew top equipment China. Geographically, this growth a was sales very revenue. predictability to in

half in expect We slow year. slightly orders fiscal to Chinese second the of the

to will Chinese order market. do the Chinese so December, a changes implemented. shipped that for performance it As were the resulting only international consumables of other in take improved in We from late recently expect product the flow time bit key markets, was into

domestic total consumables in which the XX%, was driven revenue, lower partially equipment was domestic commercial expected XX% in by front, the year-over-year to our rise platform by revenue of approximately growth sales upcoming due of domestic new launch neXus. On the robust offset

As minor we pose disruptions to fiscal call continue us that challenges the we prior anticipated, earnings on the second quarter. supply chain discussed our in for

largely supply initiatives a million. these its topline confident of have second-quarter our procurement overcome process, and to any these fiscal to distribution we’ll maintained in $X.X despite including to the are in double-digit supplies eliminate onboard addressed of first pleased record half year. of I'm In disruptions. the headwinds trajectory to potential However, gross a and short-term new generated XXXX, increase fiscal we our issues a that this diversifying prevent year-over-year the that undertook profit chain Misonix range challenges, we second and future growth Notably, share the inefficiencies and during regard, half XX% bringing of in

company, policies fulfillment and we significantly and of ERP capable and ensure While instituted to outcomes. levels oversight fully us the the affording elements new operational more optimal a to over also added inventory are system, we transitioned financial efficiency

unveiling incorporating enable growth the us the further growth By our one since to platform broader received significant we overwhelmingly confident a addressable Misonix. we provides expanding added ability we serve The accounts infrastructure power With neXus market in extensive are behind now rapid with demand our these into support modern the added place of launch us customer our business, benefit initiative new meet will for neXus commercial the our feedback neXus to from and largely interface, that as multiple including procedures. and upcoming have we of to including to us, positive have improved platform. in potential opportunities its penetrating and cross-selling by with an believe functionalities, modalities more to range engine current for of a confidence

tissue are tool and control, the medical powerful behind presents professionals efficiency. greater and neXus accuracy with surgeons a While driving remove successful outcomes, force to soft hard with

and result, clinical compelling outpatient a benefits neXus As requisite delivers addition believe demonstrated as be value patients. a it a the at for hospitals, we clinics room will operating to proposition

neXus second and has returns filed for pursuing and continue to XXXX financial sustainable ongoing With a operating XXX(k) long-term progress to we we fiscal growth half and our our half for with to across near Misonix will of solid confident in shareholders. the position benefits deliver foundation In investments our for positive application are the are for and momentum the second a that growth and range making of enhanced launch continue XXXX. FDA sheet, its highlight anticipate the business results first quarter and our profitability. have of recent summary, our a balance commercial Misonix We strong opportunities the of

expect XX% revenue we healthy fiscal a grow while to XXXX, of by for gross maintaining product Looking XX%. ahead, margin

turn product direct channel future With our line. to our call now Dwyer, our and Joe expand and to review results to neXus look launch like our also financial sales successfully to that, I'd over the CFO, will outlook. We

Joseph Dwyer

best XX.X% billion in Domestic record closer and top QX growth marking other revenue. increased consumables first or fiscal for quarter in increase continued healthy Thanks, by international equipment reflecting look mainly second our the reflecting by our increased quarter with to quarterly revenue. of second momentum the international at The increase Stavros. key a the in revenue, quarter. a XX.X% good afternoon, our sales domestic of increased XX.X% Revenue overall, XXXX recurring compared and higher-margin growth $X.X line, sales revenue, in $XX.X markets. product an increased $XXX,XXX in revenue attributable And and million products was to for everyone. a quarter consecutive XX.X% million, revenue to quarter, international months. XX.X% $X.X and increase in $X.X Consumables to the approximatelyXX.X% second XX.X% ever six revenue equipment China Taking representing stream, to consumables rose our XX% year's last for million fifth

second of gross buildout million was away last profit period of by third-party quarter to increase year. a or with compared of quarter prior-year resulting in with million was in second margin This year. team of compensation in sales expenses of by primarily the the as and XX.X% XX.X% XX.X% quarter the revenue second same $X.X our XX.X% compared half XX from the global force from Our driven We Selling total in $X.X The compared $XXX,XXX travel-related of the healthy costs second revenue, increased the our XXXX last the transition second we expenses period. the to in at XXXX. continued with represented members the first direct sales fiscal in end XX ended higher fiscal and the distributors. which related quarter largely with higher-margin consumables quarter is XX.X%

first half year, the and second selling fiscal that of with Looking restricted flat ahead severance $XXX,XXX of per year, for period. increased compensation a $X of mainly charge acceleration in $X.X existing the the expenses related charge were an the award XX.X% million non-cash investing connection of in $X.X million running the we see or million expenses to the with quarter. balance fiscal by of and of a G&A for the range to during XXXX compared $XXX,XXX stock quarter

$XXX,XXX to approximately expenses XXXX, neXus phase the the and as Looking in the expenses of second completed XX% million of the fiscal in that XXXX as decreased million Research quarter. design running to project. of range and see decreased development quarter development G&A we $X forward, per we in in investments by development $X.X $XXX,XXX $XXX,XXX or

by settle or expect $X first XX% into quarterly prior the increased year. R&D with R&D we about to run or quarters, expenses upcoming For the the rate expenses $X.X million In half, compared million less. of

quarter quarter for second of $X.XX net $X.X favorably or prior-year last with EBITDA year. was $XXX,XXX million over a $XXX,XXX our Taking share at the tax in second the a provision. period. adjusted was share, $XXX,XXX of $X.X million year’s EBITDA or of loss last positive $X.XX net comparing a to adjusted loss compared a second related per income quarter Our to per look loss EBITDA,

XXXX, amortization, we they part typically EBITDA not neXus of year. define EBITDA rate. meaning of half fiscal R&D adjusted we first exclude the point this EBITDA as reported neXus-related the of before are earnings R&D expense and as compensation expenses We taxes, interest, company's project. for run the depreciation, non-cash loss adjusted expenses to the the an are in We close at running $XXX,XXX, During neutral

would possibilities closing, a we’re invest improve deploying at In our all to practitioners gross half. was as both and no value guidance, Healthcare domestically we for well internationally loss reiterate to Stavros on cash of to of encouraged our quarter recovery us ahead mainly avoid efficacy $XX.X across efficiencies proposition XXXX due to at in order for Operator? shareholder as cash in Moving times, $XX of sheet, in was the million, to June patient $XX.X fiscal the to improve million these first as open which six by turn call technologies XXXX XXXX. overall bring XX%, value ended approximately to to net the million cash December compares remains product lines. and XX, making for expect capital directly mentioned, first of unchanged second $X.X as for our XX% relatively in fiscal products it positions very margins the balance and for address million story. like forecast This revenues to And and with issues. and at remain by compelling given fiscal our We complications for continue us cash very grow I flow XXXX outcomes, with the to cost, the months and in to used and debt. Working XX, treatment the working all half. shorten our capital operations questions. minimize first well, the XXXX of relates now

Operator

first our go Thank Rose you will Canaccord. from from Please very much. [Operator Kyle take Instructions]. And we ahead. question

Kyle Rose

very all Thank Great. me you you hear Can right? much.

Stavros Vizirgianakis

question a on on to touch Thanks for first. and another quarter. taking the I the good congrats business Yeah, little bit US wanted sure.

that call. the on sort the been what, Specifically, just growth implementation us you It a headwinds about have any or good commentary I impact can if the on understand and issue. there been better help like any, there? on and quarter if supply organization the a I'm in for Just of the impacts the the maybe shortfall is numbers, particular? supply But have you how to but has quarter it was maybe side. US then, And much understand had inventory this with, think was quo to status of was begin understand, everything the the trying ERP sounds everything faced?

Stavros Vizirgianakis

Yeah. Kyle. This is Thank you, Stavros.

I at most inventory, is the we think that impacted looking really area disposables. the the are the on

look that those BoneScalpel, we inventory if to items the of meant like when evaluation. at disposables, we a wanted new evaluations So, couldn't the we start impact have lot

on a during on product amount the it came we significant I customer as customer cases think we were in quarter lost literally of certainly out by a basis. because allocating

week. ordered probes, would that they two XX customer a that three get literally for or for probes So,

for the cases. we I are all not So, that the and technology only sporadically think using

the So, BoneScalpel on side. we had momentum obviously, down of especially new some the that built it up, evaluations slowed with

On shortfalls, would has of been couple that of more still quarters. saw taken XX% the even off spite second really in the the it of in side well the because but we side, growth the growth wound engine last business, probably really supply

that So, the team sales frustration meant of the I domestic with we think not inventory. This having side, a prioritize. lot adequate had on to just also

So, so market of and Chinese then the perspective, after domestic the because have a bigger. much was the first, much obviously to supply first pretty of we margin is look then market supply the rest the side from the because, domestic world margin it supply

customers lot about interventions in XX because inventory blades. item manual by basis, a an closely, we of was do what of is just you find mm had terms it where item think for to blades would the Also, I managing So, allocations. on substitute XX hard happening mm

typically even from You was running on ended out up a line, backward of forecast onto sync which find they another perspective.

getting momentum slowed domestically frustrations. of given number that of the down I bad, we wasn’t I number think that some But that think had. a had still Certainly, up. we the that built that headwinds XX%

Kyle Rose

I follow-up leadership X-K add XX saw you sales business? state through the rate the then and I to Great. force? one Just continue that the combined about just the third with expect some about that another the to then, it, about the we giving on the next talk force headwinds business, then had and talk of continuing to the unconstrained model. you weeks, I and is trying sales rep appreciate about to do over sales to there, low on And to trying and number look the turnover the when grow state to issues of of thinking just think of that when at you equipment you’re supply long capital persist see I the there. hiring you How couple that. understand guess, how talk gave really was the quarter teens at over what understand, ending I kind affect? strength at and secondly, months. Can force a X and the supply – consignment understand the I of to transition and to mid an past side, it US environment, year. But, X sales or you sales the of talked call expect I’m just I and question. maybe whole the is, the to some reps XX% maybe about business above we reasonable the the US senior

Stavros Vizirgianakis

to address A couple sure. things there. Sure, of

out during supply be think new quarter, that, of third completely taking I the and on would backorder of I evaluations. rapidly we’ll of product, terms in say

at March. end will by it of think probably the state be So, a normalized I

off going be to seeing to that We’re kicked I to mean time X given beginning are back the and our really force. that big probably swing. the do evaluations to January April, should of is March, we’ll sales end say full some really from but by which X of situation onwards, months What already be would improvements that going March restructure in to this kicking of to normal is the ago from have is is to

got So, ones. new brought representatives we and in of few have a rid some

What So, seven we five is add. regions wanted we haven't to added we’ve as regions. we we’ve from as to quickly gone done

the if of the – over been So, literally in sales us we joined terms management last have four months, we at territories. our look of so way the there's changes the there managers of six structure that some

new of people, the adding In four the first training, terms sales of next which scheduled of backfills. three hires is at week we’re the to addition off and March, new kick hire in

coming people So, there be another seven board quarter. on will this

the X-K as adding we which And change, was in leadership had of a thought maybe well a of of terms sales VP another the had some we complexity VP of that a to as In sales. heavy, the that domestic of was a organization. top and senior announcement structure layer little we this

when to with opportunity, and direct of our taking we was domestic control with sales result let SVP position sales replace this individual eliminate So, the another force. feeling in decided a basically communication came and not that layer go the with him force, to this us because more the direct would that,

see quite that position. overall, positive, that's it organization. a We in about removing the that need we as layer that So, that are pressing change. And feel to to a we’re the we upbeat didn't replace

of your So, I Kyle. that hope all questions, answers

Kyle Rose

Thank queue. \ very in And does. much. I’ll the absolutely you It hop back

Stavros Vizirgianakis

Excellent.

Operator

much. Thank you [Operator very Instructions].

from We go Michael with will next Kaufman Please question Investments. our MK take ahead.

Michael Kaufman

do moving how to Very rollout from China. little on base a you see product encouraging product get and switch you quarter. in At do granularity forward? selling point what the a And wanted this royalty just to

Stavros Vizirgianakis

Michael. Right,

as systems have product quantity up validated Chinese a FDA. because clarity has Chinese the approval from on product with That don't it probably been comes Chinese the on XX the producing things from that and the and line a that, the and of manufacturers are lot intent line. product think that months away start control the We SonaStar are to receive switch royalty. to as SonaStar opaque XX soon China, the but would when that, on I government, to have happening pretty we’re running,

Michael Kaufman

related not from first product? question when do is, another to you guess revenue I see China your neXus new expect to

Stavros Vizirgianakis

June get fourth bit in potential if approval we we July not last would hoping, onwards. from a month have things again May, the little basically have the will of Again, We're what delayed. of that, government the revenue the year, fiscal will quarter. Failing FDA end impact that if sure of so be by still we’re shutdown the of on this

that clockwork it’s normal. assuming goes that we’re everything So, and to

Our estimate some are is hoping we commercial due on see July, efforts. to

Michael Kaufman

any Will be the products granularity wound in reporting reports? quarterly the BoneScalpel you and between the

Stavros Vizirgianakis

At it’s feel this competitors we'd more our than our stage, like. into We giving not. business insight

by So, product. at we’re not this down it stage, breaking

Michael Kaufman

All and sounds And work. all, very good encouraged. in up good I'm keep the

Stavros Vizirgianakis

much, Thank you very Michael.

Operator

much. take next with very ahead. Craig-Hallum from you We’ll Thank question Nowak Capital go Group. our Please Alex

Alexander Nowak

great. everyone. quarter on great Congrats the afternoon, here. Good Hey,

up after free go much on team, any customer reign have to. the to Just really people now, pretty the sales until sales type wanted they

to allowing after group the neuro, about team goes spine you while sales wound? bifurcating at expand you one all, As go to have continue thought other after neXus, launch and here the and

Stavros Vizirgianakis

limited time team Alex, stage, really some between spent if their amount time think today, of on is this neuro. XX% at would a and given you At wound. is the spent Only sales thought. of look spine I we’ve I it probably say,

I do will neuro. on probably think be an when is reevaluate added launch focus will with there will neXus, because, neXus we what we we

are What a think I with have don’t we’ll force. say is to huge what sales do. we early it’s we constrained

are itself neuro on a stage, rollout focus split then I certainly doing to on much of how bit But to in at neXus wound to neuro and to thought the by benefits adding spend we and on So, going this. spine, to are individual specialties, and have time there early think, it further effort little terms we of side. and this

have got we are something it’s about a talking will We evaluating the that lot we enough. time I scaling keep quarter. this a people, fast right think approach, number we internally, we of got of have spend every So,

salespeople little learned to those we’ve year. network well that that constantly last fully longer something bit have think to dissolve think to the to of had. productive. to number market. questions bit the has longer outlet it’s asking the a the It I take lessons than be I longer the we Those But ourselves certainly taken expected. reviewing as tales distribution a optimal most in gone us and little we’re get find and It a trying distribution does

Alexander Nowak

have seems neXus then, a sales Okay. coming close That’s And together pretty team helpful. to you approval. here.

Stavros Vizirgianakis

Yes.

Alexander Nowak

like sounds fixed. It the largely is fulfillment

at on think XX to next are you months, work? you your investments put focus the where you need Over to the do Where Misonix? going dollars

Stavros Vizirgianakis

like do would is offering. we neXus the really What to enhance

that big platform. one As we us resect is We cross more on the soft the we see and hard to said, gives same specialties. tissue of into sell believe neXus to benefits opportunity big ability the

is So, a disc, us allow to we of the our that, it the bone product really introduce discectomy the would customers because could the also we and customers opportunity line cut haven't right base on existing I the tissue, offer would when dollars we likes for with we think fusions, and of be soft we’re now, significant bone. cutting. picked are we the lot in space If us that at installed just of the think we up yet to spinal that at think remove technology one look cutting development of that of bone areas spending

the shaver would say in as really for the as that near-term objectives spinal will the XX on side. neXus enhancing be with doing product offering well the soft So, more next tissue, I months

opportunity more I ultrasonic to do with platform powerful a with shavers. us think more there's for an

the probably dollars. the So, will really are be those areas we that spending

Alexander Nowak

to heard slowed you you comments And back Okay, anything on the made But they did or you the down have directly neXus find they any the then, filing. sent shutdown submission? When it? has since not I’m the have comments some – understood. have you XXX(k) miss I sure things.

Stavros Vizirgianakis

XX on heard anything. filed not We We’ve January.

literally is week it So, ago. a

get the FDA. So, we in what can from are of we waiting anticipation back

is So, clock the running.

Alexander Nowak

Okay, understand. And last question from me.

what on like updates even can that? M&A? your some use thoughts think technology acquire on larger in the products organization bag, any additional you you Just sense do to additional more makes anything some And add-ons, here, neXus, to

Stavros Vizirgianakis

on are We certainly front. we looking think business I different that are at development. of active areas

I to think that want be in of view our do hasn't the something changed. to complementary we what We silos. one

So, we’re spine. to look the neuro, space by wound and I in followed think more inclined

So, pretty I organization. the are to those areas think add-on be and bag, that additional we we are And technology the actively looking. an it whether are open, channel

I faster. we think I out like would looking we grow but are days, actively to early there because certainly think

well We think critical prerogative mass. got working think organic more to need more do at but engine just forward. that’s I to the we Misonix, even we’ve growth a establish going

Alexander Nowak

on Congrats great understood. the quarter. Okay,

Stavros Vizirgianakis

you, Thank Alex.

Operator

or Stavros Thank are Vizirgianakis appears remarks. any back like very would for to no It to at additional you the there much. turn further this And I conference questions closing time.

Stavros Vizirgianakis

you. Thank

Misonix. As I for said, this is exciting an time

to we've turn of how past worked XX we business. I now, around the manage And growth matter a to smart it’s During well the hard, think XX months, our possibilities. we've worked

we've year how our beyond. is there in the shareholder momentum work significant create be pleased While towards to and positioned meeting lot goals of value. like our We rest for made with the future business a XXXX continue still we’re to we done, are of fiscal progress the and

can is vagaries this profitability I’d we for general talented macroeconomic to us dedicated to also success. very And, quarter Thank additional contributions. Misonix improved Jennifer. results. I and that or arise Norberto that can all the their meantime, continue this questions the that opportunity at when forward relations our like chat take and from overall and you deliver if and again is XXX-XXX-XXXX of gives to and growing fiscal reflection insulated much. please you facing, well JCIR, confidence to to our look a contact our political really, fairly revenue, any you of investor we’re valuable XXXX in firm, thanks extend Goodbye. special team to to a the results. speaking And there the margins, also We’re success environment our report third

Operator

gentlemen, you call. this today's Thank concludes Ladies participation. and your for

disconnect. You may now

Misonix (MSON) 6 Feb 192019 Q2 Earnings call transcript