TearLab's CEO Discusses Q1 2013 Results - Earnings Call Transcript
May 13 2013, 19:30
TearLab Corporation (TEAR) Q1 2013 Earnings Call May 13, 2013 4:30 PM ET
Operator
Good day ladies and gentlemen and welcome to TearLab First Quarter 2013 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.
At this time, I would like to hand the conference over to Mr. Dumencu, Chief Financial Officer and Treasurer. Sir, you may begin.
William G. Dumencu
As we discussed a few weeks ago in our year-end call, the unexpected increase in demand that we‘re seeing across the board has left us in the back order position with our device manufacturer. To address this, we now have more than tripled our manufacturing capacity and are currently producing more than 240 units per month.
So we will probably produce somewhere between 7,300 units in Q2. While I think this will likely clear the manufacturing back order situation by the end of the quarter, given those manufacturing grades, if we’re still backward at the end of June, I think we’ll all be very happy.
A point to note, that the manufacturing back order situation is not significantly impacting our relationships with our customers. The traditional lag associated with Clear license [redact] and the timing and flexibility that’s built-in our Master sales process allows us to manage the situation, allowing us to live up to reasonable delivery dates for our systems.
Having said that, as I mentioned in the last call, we have been looking at securing effective system manufacturer to provide us with greater production level flexibility and of course with back up and I'm happy to report that we have chosen Minnetronix of St. Paul and Minnesota as a second manufacturer.
To give a little bit of back on Minnetronix, the 17-year-old company, 200 employees in their site in St. Paul they are of course FDA approved and ISO 13485 certified and they are approved to build, Class II and Class III medical devices. In addition to being a high quality manufacturer though, we are also able to design and manufacture highly complex medical products. We have a good range of medical products produced and currently in production. And this was very important to us as we look at design capabilities and enhancements to our current platform. We welcome the Minnesota new TearLab team and look forward to building a strong relationship with them.
One other area, we’ve increased focus for us in the past few months, it has been balancing our success and building our installed system base, we are trying to maximize utilization as much and as quickly as possible. As we have discussed in the past our primary goal is not to just build doctor awareness, because we know that once a doctor seize the potential opportunity that is inherent in managing dry disease. And experiences of our task to really understand our value and our value proposition and integrate the task into their normal practice patterns.
While this may take a little while once integrated, TearLab becomes critical to their success and the utilization of device increases significantly. So our sales organization is expected to do a lot more than just sell devices. We see ourselves in partnership with doctors and believe that it’s very important for us to provide them with the two other supporting need to fully incorporate TearLab into their practice. Part of that has been a recent addition of implementations specialist to our sales team. We call them eye lash and their techs would become experts in using and integrating TearLab into large practices.
We originally designed the role to help large practices properly implement TearLab into the testing protocol but based on earlier sponsor from our customers we see it’s a very important role and are working to expand the number of our access. We have to help drive integration and adoption at more customer sites. That’s the extent of my update and as with previous calls let me close off my introductory remarks by sharing with you what you spend with respect to both our sales infrastructure and our installed base. So as of today there are 53 people in our sales organization, that would consist of one Vice President, 4 Regional Sales Directors, 27 of our own direct sales people that we call Territory Managers, plus 13 independent reps, 4 professional relations coordinators and as I mentioned earlier four ISS implementation specialist.
Turning to device tallies, all the numbers that I am about to give you as of the close of Q1 2013 and exclude devices and cards been used strictly for research and or educational purposes. At the end of the first quarter, we had 1,101 commercial units ordered in the US, of those 867 were part of a used master’s program, 212 US units had been ordered but had are not yet activated. 173 of those are part of a used or access program, 37 were part of a Masters program and 2 were purchased units, and the rest of the world calendar quarter we had 443 devices.
Thank you again for taking the time to join us and I will turn the call over for questions.
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Thank you, Syed. Just to remind everyone, certain matters discussed in today’s conference call or answers that maybe given to questions asked are forward-looking statements that are subject to risks and uncertainties related to future events and to other future financial performance of the company.
Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in the company’s most recent public filings with the U.S. Securities and Exchange Commission and the Canadian Provincial Securities Administrators and can be accessed through the EDGAR and SEDAR data basis found at www.sec.gov and www.sedar.com respectively.
Please note that the company is under no obligation to update any forward-looking statements discussed today and investors are cautioned not to place undue reliance on these statements.
I’d like to now turn the call over to Elias Vamvakas, TearLab’s Chairman and CEO.
Elias Vamvakas
Thanks Bill and good afternoon everyone. As in the previous calls, I want to update you on our progress with respect to the commercialization of the TearLab system.
Total revenues in Q1 in Q1 2013 were $2.5 million, up more than six fold from Q4 2012 and up 54% sequentially from the previous quarter. Excluding non-cash charges associated with the continual revaluation of outstanding loans, our adjusted net loss was $0.11 per share and that’s about $0.01 better than analysts’ estimates.
Given the relatively short time between the reporting year-end 2012 and the first quarter 2013 results, there isn’t a huge amount to update you since our last call. But we do have at least one or two exciting things to talk about.
I closed on for the call by giving everyone a brief preview of our new Masters multiunit program rollout. As a reminder, the rationale behind Masters is that depending on the size of the practice in terms of the number of doctors, admissions and patients, some of our customers need to significantly increase the number of devices they have in order to maximize efficiency. With these growths, the trend seems to be having a TearLab in each lane or each examination room.
The main difference between Masters and our 3/15 and 3/24 program is the number of units placed under the Masters program is based on practice protocols, means that utilization parameters rather than a minimum cog requirement. Importantly, this takes TearLab to the next level. If it incorporates our cash into routine patient evaluation protocols and accordingly makes a standard of care for their practice.
The rollout of our Masters program is still in its initial stages. That being said, our initial success obviously contributed towards achieving stronger than expected system orders in Q1. Of the 388 systems that were booked in the first quarter, 162 or 42% were under the Masters program, 195 were through our access programs, 11 were direct purchases and 20 were purchased outside the U.S. Keeping in mind that in order for us to count the Masters unit in total, the practice has already taken delivery of the reader, cash to utilization levels against protocols and committed to incorporating it into the practice going forward as per our agreement.
As we discussed a few weeks ago in our year-end call, the unexpected increase in demand that we‘re seeing across the board has left us in the back order position with our device manufacturer. To address this, we now have more than tripled our manufacturing capacity and are currently producing more than 240 units per month.
So we will probably produce somewhere between 7,300 units in Q2. While I think this will likely clear the manufacturing back order situation by the end of the quarter, given those manufacturing grades, if we’re still backward at the end of June, I think we’ll all be very happy.
A point to note, that the manufacturing back order situation is not significantly impacting our relationships with our customers. The traditional lag associated with Clear license [redact] and the timing and flexibility that’s built-in our Master sales process allows us to manage the situation, allowing us to live up to reasonable delivery dates for our systems.
Having said that, as I mentioned in the last call, we have been looking at securing effective system manufacturer to provide us with greater production level flexibility and of course with back up and I'm happy to report that we have chosen Minnetronix of St. Paul and Minnesota as a second manufacturer.
To give a little bit of back on Minnetronix, the 17-year-old company, 200 employees in their site in St. Paul they are of course FDA approved and ISO 13485 certified and they are approved to build, Class II and Class III medical devices. In addition to being a high quality manufacturer though, we are also able to design and manufacture highly complex medical products. We have a good range of medical products produced and currently in production. And this was very important to us as we look at design capabilities and enhancements to our current platform. We welcome the Minnesota new TearLab team and look forward to building a strong relationship with them.
One other area, we’ve increased focus for us in the past few months, it has been balancing our success and building our installed system base, we are trying to maximize utilization as much and as quickly as possible. As we have discussed in the past our primary goal is not to just build doctor awareness, because we know that once a doctor seize the potential opportunity that is inherent in managing dry disease. And experiences of our task to really understand our value and our value proposition and integrate the task into their normal practice patterns.
While this may take a little while once integrated, TearLab becomes critical to their success and the utilization of device increases significantly. So our sales organization is expected to do a lot more than just sell devices. We see ourselves in partnership with doctors and believe that it’s very important for us to provide them with the two other supporting need to fully incorporate TearLab into their practice. Part of that has been a recent addition of implementations specialist to our sales team. We call them eye lash and their techs would become experts in using and integrating TearLab into large practices.
We originally designed the role to help large practices properly implement TearLab into the testing protocol but based on earlier sponsor from our customers we see it’s a very important role and are working to expand the number of our access. We have to help drive integration and adoption at more customer sites. That’s the extent of my update and as with previous calls let me close off my introductory remarks by sharing with you what you spend with respect to both our sales infrastructure and our installed base. So as of today there are 53 people in our sales organization, that would consist of one Vice President, 4 Regional Sales Directors, 27 of our own direct sales people that we call Territory Managers, plus 13 independent reps, 4 professional relations coordinators and as I mentioned earlier four ISS implementation specialist.
Turning to device tallies, all the numbers that I am about to give you as of the close of Q1 2013 and exclude devices and cards been used strictly for research and or educational purposes. At the end of the first quarter, we had 1,101 commercial units ordered in the US, of those 867 were part of a used master’s program, 212 US units had been ordered but had are not yet activated. 173 of those are part of a used or access program, 37 were part of a Masters program and 2 were purchased units, and the rest of the world calendar quarter we had 443 devices.
Thank you again for taking the time to join us and I will turn the call over for questions.
