Misonix, Inc.
Q3 2015 Earnings Call Transcript

Published: 9 May 2015

[Operator:]

Good day and welcome to the Misonix Inc. Third Quarter Fiscal Year 2015 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead.

[Joe Diaz:]

Thank you, Andrew, and thank you for joining us today to review the financial results of Misonix Incorporated for the third quarter of fiscal year 2015, which ended on March 31, 2015. As the conference call operator indicated, my name is Joe Diaz. I’m with Lytham Partners. We are the Investor Relations consulting firm for Misonix. With us on the call representing the company today are Michael A. McManus Jr., President and Chief Executive Officer; and Richard Zaremba, Senior Vice President and Chief Financial Officer. At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today’s call does not have a full text copy of the release, you can retrieve it from the company’s website at misonix.com. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Misonix Incorporated during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify forward-looking statements. These statements are based on management’s current expectations subject to uncertainty and changes and circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include but are not limited to general economic conditions, risks associated with international sales and currency fluctuations, uncertainties as a result of research and development, acceptable results from clinical studies including publication of results and patient procedure data with varying levels of statistical relevancy, risks involved in introducing and marketing new product, potential acquisition, consumer and industry acceptance, litigation and/or court proceedings including the timing and monetary requirements to such activities, regulatory risk including approvals pending and/or contemplated five 10-K filings, the ability to achieve and maintain profitability and other factors discussed in the company’s Annual Report on Form 10-K, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. The company disclaims any obligations to update forward-looking statements. With that, let me turn the call over to Michael A. McManus Jr., President and Chief Executive Officer of Misonix Incorporated. Mike?

[Michael McManus:]

Thank you, Joe. I’d like to welcome all of you to the call and thank you for your participation. Today, we announced the financial results for our third quarter and nine months of fiscal 2015. Results were very strong across the board, which is continuing the momentum realized in the first half. Total revenues were up 24% for the third quarter and 35% for the first nine months. We had solid double-digit revenue growth across our BoneScalpel, SonaStar and SonicOne O.R. product lines to the quarter. For the nine months, BoneScalpel worldwide revenue increased 42% versus the same period last year. The number of units sold or consigned worldwide totaled 50 units. SonaStar revenues increased 35% and SonicOne revenue increased 35%. In the United States, where we primarily consign our products, third quarter BoneScalpel revenue increased 36%, SonaStar increased 30% and SonicOne by 62%, rather consistent impressive growth in our minds. On a year-to-year basis, we continue to make progress in growing our international businesses as well. Outside the United States you’ll remember we sell our products directly to our distributors who have longstanding relationships with surgeons and hospitals. International revenue for the nine months increased 33%. I’m pleased to report these increases reflect both more system sold and a firm pricing policy. It’s been especially important in this economic environment. These international markets continue to represent great opportunities for continued growth in the coming years for the company. During the quarter, we were pleased by the opportunity that featured the SonicOne presentations and the Wound conference in March demonstrating the benefits of the SonicOne to increasing length time win time and to reduce leading and biofilm presence in severe diabetic ulcers. In addition, Dr. Abraham Houng of Saint Barnabas hospital in New Jersey, fifth largest burn center in the United States delivered a presentation entitled Making Debridement of Large Wounds and Burns Easier at the American Burn Association meeting. Dr. Houng stated to more than 200 wound care clinicians that are expanding experience with the SonicOne system continues to support a growing body of evidence that debridement with SonicOne O.R. is safer, results in significantly less blood loss and SonicOne appears to be a new standard of burn care. These are the kinds of reinforcements that we’re seeing across the board not only in the United States with regard to the SonicOne O.R. and particular recently, but outside the United States with both the BoneScalpel and the SonaStar as well. We’re very pleased to continue to see the increased level of acceptance of the benefits of the BoneScalpel by surgeons around the world for surgeries up and down the spine. All of our products continue to grow rapidly in their use. We back our family of employees and distributors who continue the education training and followings necessary to grow our market share in these large categories of critical medical procedures. Now let me just turn it over to Rich now to bring us up the data on the financials and then we’ll take your questions. Rich?

[Richard Zaremba:]

Thank you, Mike. Revenue for the three months ended March 31, 2015 was $5.3 million, a 24% increase when compared to revenues of $4.3 million for the same period in fiscal 2014. BoneScalpel revenues increased 27% to $2.2 million, SonicOne revenues increased 16% to $847,000, and SonaStar revenues increased 30% to $2 million. Operating expenses for the three months ended March 31, 2015 increased by approximately $1 million from that as the same period of fiscal 2014, primarily due to investments in our IT infrastructure, which a majority of those expenses are nonrecurring, and sales and marketing primarily through the hiring of clinical applications specialists which are recurring expenses. The company reported net income for the three months ended March 31, 2015 of $454, 000 or $0.05 earnings per share for diluted share as compared to earnings of $429,000 or $0.05 earnings per diluted share for the same period in fiscal 2014. Revenue for the nine months ended March 31, 2015 was $15.4 million, a 35% increase, when compared to $11.5 million for the same period in fiscal 2014. BoneScalpel revenues were up 42% to $7.4 million, SonaStar revenues were up 35% to $5.3 million and SonicOne revenues were up 32% to $2.3 million. The company reported net income of $1.7 million or $0.21 earnings per diluted share for the nine months ended March 31, 2015 compared to net income of $4,000 or $0.00 per diluted share for the same period in 2014 fiscal year. The company’s cash position as of March 31, 2015 was $8.9 million. Days sales outstanding of 61 days. Inventory turnover is 1.6 times and the company continues to add no long-term debt. The company’s backlog of unfilled orders as of March 31, 2015 was $147,000. Most orders are shipped when received. I’d like to turn it back to Mike.

[Michael McManus:]

Thank you, Rich. Thank you very much. Operator, we’ll take questions now if we have some. Thank you. Question-and-Answer Session

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Michael Kaufman of MK Investments. Please go ahead.

[Michael Kaufman:]

Hi, Mike and Rich. Congratulations on a good quarter and continuing momentum. I have two questions. One, you announced recently a deal, well, I guess that a reseller to sell to most of the hospitals in the U.S. Can you kind of give us some priority on what that means? The way these salesmen sell to different hospitals now or they help…

[Michael McManus:]

Yeah, Mike. MedAssets is one of the largest GPOs in the country. Basically, they are a company that helps hospitals to identify, distinguish quality products that…

[Michael Kaufman:]

So this is like being on a GSA list in a sense…?

[Michael McManus:]

Well, if you want to say that, yeah, it’s not a government purchasing organization, but basically they are purchasing organizations that hospitals use to get some benefit out of volume. And MedAssets is one of the largest ones. It’s prestigious, very difficult to…

[Michael Kaufman:]

Significant to the Gold Seal of Approval, but you still have to sell to the individual docs at the hospital.

[Michael McManus:]

You sure do. But they, as you say, it’s not exactly Seal of Approval, but it is a recognition by MedAssets of the quality of the products. And MedAssets does…

[Michael Kaufman:]

Probably a personal list.

[Michael McManus:]

Yeah. So, let me just add to your question. The benefit addition is that MedAssets will help you get access to hospitals that perhaps you have not had as great an access to before. So it’s a wonderful opportunity for Misonix. We’re also in the premier system, which is another very large system. And we believe we’ll have some opportunities to add some additional similar kinds of systems in the future.

[Michael Kaufman:]

Thank you very much. Just one another question, and I’m sure timing. The selling expense was up 29%, and G&A was up 34%, and revenue was up 24%, and thus far pretty much the earnings were relatively flat. Is that some frontend loading, some stuff that’s going to allow you to grow faster in the future rather than a continuing plenty of growth of expenses?

[Michael McManus:]

Yeah. It’s a variety of things, Mike, as you know. I mean, we’re continuing to invest in the business to be able to add value and grow faster. At the same time, it is quarter-by-quarter depending upon different things that we do in terms of shows and travels and conferences and consulting work and things like that. One of the items that Rich mentioned that was in the period was an upgrading of our IT system which was very important for us. I mean, one of the things about growing fast is if you have to have the infrastructure to support to be able to deliver good customer service and be able to process your orders. So, we are investing over time and we’ll continue to do so in people and clinical labs people and infrastructure to make sure that we have a solid foundation for the kind of growth that we’re realizing.

[Michael Kaufman:]

Sounds very good. Thank you very much.

[Michael McManus:]

Thank you.

[Operator:]

[Operator Instructions]

[Michael McManus:]

Okay. So, there are no questions, Andrew?

[Operator:]

That is correct. So I’d like to turn the call back over to you Mr. McManus for any closing remarks.

[Michael McManus:]

Thank you so much. So, one of the things that we appreciate about this is the opportunity to talk with those of you on the call, and to leave a record of transcript for people that can pick up later on to get more information about our company, your company. For those of you on the call, if you think of a question, don’t hesitate to call me personally or to call Rich. We’re happy to talk to you all the time. We’re working very hard to grow your company. We’re finding continued success, great acceptance around the world, leading surgeons and some very large areas of practice of great concern to the aging of the population in particular. We will continue to talk with key opinion leaders to appear at conferences to work with doctors from the podium talking about Misonix products, doing clinical work. Those are the kinds of things that we have to do continually day-in and day-out to continue to grow this company with the kind of impressive leaps that we’ve seen over the last nine months. So we appreciate your support very much and we’re happy to talk to you at any point in time. Please pick up the phone and call. We thank you for participating today, have a good evening and we’ll talk to you soon. Thank you. Good night.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.