Avinger, Inc. (AVGR) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen, and welcome to the Avinger's First Quarter 2021 Results Call. At lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. At this time, it is now my pleasure to turn the floor over to your host, Matt Kreps. Sir, the floor is yours.
Matt Kreps: Thank you, and thank you everyone for participating in today’s call. I would like to welcome you to Avinger's first quarter 2021 conference call. Joining us today are Avinger's CEO, Jeff Soinski; and Chief Financial Officer, Mark Weinswig. Earlier today, Avinger released financial results for the first quarter ended March 31, 2020. A copy of the release is posted on the Avinger website under Investor Relations.
Jeff Soinski: Thank you, Matt. Good afternoon and thank you for all joining us. We're excited to report a strong first quarter driven by the early success of our Tigereye commercial launch and the continued market expansion of our Pantheris SV, small vessel atherectomy device. These innovative new devices have enabled us to make significant inroads into new accounts and secure a greater share of cases at existing user sites. At the same time, the rollout of COVID-19 vaccines and continued easing of pandemic related restrictions has put the market on a path to normalcy, and has enabled greater access for our sales and clinical support teams at customer sites. Our first quarter revenue increased 13% year-over-year, continuing a positive trend from the third and fourth quarters and putting us squarely back on our pre-pandemic growth curve. First quarter sales were the highest in the past four years as we drove top-line growth through the marketing of our expanded product line, the addition of new accounts and increased utilization at existing sites. During the first quarter, we opened eight new accounts adding to the nine accounts we launched in the fourth quarter of 2020. As we continue to advance our platform, physicians are seeking the unique benefits provided by our proprietary image guided technologies. Our three new catheter introductions over the past three years have created a compelling and differentiated product line that is delivering excellent clinical results.
Mark Weinswig: Thank you, Jeff. Total revenue for the first quarter of 2021 was $2.6 million, a 13% increase from the first quarter last year. It's important to note that we believe we are seeing a clear path back to normalcy, although many of our sites were still working to return to pre-COVID volumes in the first quarter. In the first quarter, catheter or disposable sales were at an almost four year high, driven by robust demand for Pantheris SV and Tigereye. Growing our high margin recurring disposable revenue streams is a core element of our growth strategy. Gross margin in the first quarter was 35%, up from 22% in the first quarter of last year. We continue to see opportunities to generate further operating efficiency. As we mentioned previously, Avinger's contribution margin from sales of disposable catheter products is significantly higher than our reported gross margin, providing important leverage in our operating model as we scale the business. Operating expenses for the first quarter were $5.5 million, down from $6 million in the first quarter a year ago. We have maintained a lower operating cost profile than prior to the COVID-19 pandemic and at the same time, we are directing increased investment in product development, clinical programs, and sales team expansion to fuel future growth. We believe these investments will improve our strategic position. Net loss attributable to common shareholders was $5.1 million in the first quarter, down from $5.9 million in the first quarter a year ago. Adjusted EBITDA, which is a non GAAP measure that excludes certain excess and obsolete inventory charges, depreciation, and amortization expenses, stock compensation and other items, as noted in the tables in today's press release, was a loss of $4 million, an improvement of $0.8 million compared to Q1 2020. The higher revenue and margins were a key contributor to our improved adjusted EBITDA. A copy of the reconciliation from net loss to adjusted EBITDA can be found in today's press release, which is also posted on our website at www.avinger.com under the Investor section. Cash and cash equivalents totaled $30.4 million at March 31st, up from $22.2 million at year end, which included $13.1 million in net proceeds from a bought deal offering in February. Avinger's cash levels relative to its operating burn, provides us with the runway we need to complete many of our strategic initiatives. Additionally, as announced previously, we amended our loan agreement in January 2021. This amendment significantly improved certain terms, including the extension of our interest-only period and maturity date of the term loan by two and a half years, with the maturity date extended to December 31st, 2025. Subsequent to the first quarter, in April 2021, Avinger received confirmation that it's $2.3 million Paycheck Protection Program loan and related interest fees were fully forgiven by the US Small Business Administration, improving our working capital. At this point, I'd like to turn the call back to Jeff for Q&A.
Jeff Soinski: Thanks Mark. The first quarter continued our positive momentum from the second half of 2020 as our business recovered from the effects of the COVID-19 pandemic, we've expanded on that success with the Tigereye commercial launch, strong results from Pantheris SV and record catheter sales since we relaunched with our Pantheris next generation device. News site activity remains strong and we are nearing 510-k submission for our next generation Lightbox 3 imaging system. We're actively growing our sales team and 2021 to drive scale with our expanded product set. As we seek to capture more sites and more cases at existing sites. We look forward to executing our strategy to build value for Avinger stockholders and fulfill our mission of radically changing the way vascular disease is treated. At this point, we'll be happy to take your questions.
Operator: And our first question comes from Nathan Weinstein from Aegis Capital. Go ahead, Nathan,
Nathan Weinstein: Hi Jeff and mark. Good afternoon and thanks for taking my questions.
Jeff Soinski: Hi Nathan.
Nathan Weinstein: So it's good to see that ongoing sustained growth in your topline and also the healthy margin expansion, now currently for yet another quarter. And so perhaps you could just start with a discussion on the Tigereye commercial launch. Any additional details you could share there on the progression? And also why are customers finding the product so appealing?
Jeff Soinski: Thank you, Nathan for the question. We're very pleased with the initial transaction and most importantly the position response to our Tigereye product in the -- as we progress to full commercial launch. As I said on the call, we've already launched in over 30 accounts and we're shipping new accounts every week. We believe we're well on our track -- well on track to achieve our internal goal of launching Tigereye in 40 accounts by the end of the quarter. So good traction, good positive momentum and very pleased with the work that sales force is doing, not only to get Tigereye into our existing account base, but to prepare physicians for their first cases. So physician feedbacks been very positive related to the efficiency of the workflow. The Enhanced Imaging we provide due to the higher rotational speeds and versatility that's provided by the ability to precisely control deflection of the device in real time during a case. Overall, I think you'll see this in our business results, we're driving more CTA -- CTO case volume. Our total revenue for our CTO business which includes Tigereye and Ocelot increased over 60% compared to the year ago period. As we'd hoped, there'd been -- there's been limited cannibalization of our Ocelot business with most Tigereye volume being additive to our existing base of business. And as discussed in the call, this now enables us to grow across both our atherectomy and our CTO franchises. We're continuing to learn about the capabilities for the device in a real world clinical setting, you know, and also continuing to learn how to best sell, train and support the device. And as I mentioned, we're working with thought leading physicians to identify some near term clinical study opportunities for Tigereye, including potentially retrospective studies based on already available clinical data, so that we can document these outstanding clinical outcomes we're seeing in the field and keep this momentum going.
Nathan Weinstein: Thank you, Jeff. That's great. Maybe just turning to the organization, I understand that you're expanding the sales team. Any the other details you can share there maybe in terms of quantity or even the composition of your growing organization?
Jeff Soinski: Yes. So, we ended the year at 27 people in our sales organization including sales management. We've said on our last call and I think reasserted here that we intend to grow that group by about 20% in 2021, which would be five to six people. And end of the year, somewhere around 32 to 33 people. Our sales forces broken really into two primary groups, sales representatives, who are, of course supporting cases, but primarily tasked with developing new users, developing new accounts and clinical specialists who are supporting day-to-day utilization insights. We've added a new role in the organization in 2021, which is a sales associate role, which will work -- who will work with an established territory sales manager to help to develop a new market within their broader territory. Again, looking at not only going deeper in existing territories where we're getting more penetration and more accounts to cover, usually with the addition of a clinical specialist, but also looking at expanding our geographic reach efficiently into new markets or sub markets of a larger territory. In addition to that, we are adding TSM, Territory Sales Managers in new markets where we have some entree, maybe even one or two accounts, but don't have a strong sales presence to again, expand our geographic reach and drive more growth for the business.
Nathan Weinstein: Okay, thanks. That's helpful. And maybe just stepping back for a second and thinking about the market backdrop. What are you seeing, from your perspective, on the asset direct market overall, as we kind of come back from the pandemic lows?
Jeff Soinski: Yes. So I think the market overall and certainly, we saw an impact of COVID, early in the first quarter, and that was a carryover from the post-holiday surge that was well publicized in the media. Our business came back strong, and mid second half of the first quarter, resulting in the results we put out today with very strong quarter growth year-over-year. During a quarter that's typically, lighter quarter on a seasonal basis. So, with the widespread vaccination, especially in the healthcare community and continued lessening of restrictions and the healthcare facilities we work in around the country, failing an unexpected resurgence, we feel the worst of COVID is behind us. I also think we've been feeling the impact of our sales force maintaining a strong presence and engagement in the field throughout the whole COVID experience. I think you saw this and how quickly our business came back in the third and fourth quarters of last year. So we're building on that. On a personal basis, I'm very much enjoying getting back out in the field with our sales reps and physicians. Over the past few weeks alone, I was in Texas, Michigan, Florida, and I’ll spending most of next week in Pennsylvania. I'm thrilled with the quality of engagement from both our reps and the physicians, but also the quality of cases I've seen. I feel like we're really at the start of something terrific here. And COVID has been a horrible thing for the world, and certainly challenging for every medical device business through 2020. But I think it's provided an opportunity for us to really reset as we go forward into 2021, and bear fruit of the kind of forbearance of our team through a tough time.
Nathan Weinstein: Great, thanks. Jeff, it's good to hear your perspective on the market there and getting back into the normal swing. So, I guess just one more question from me. And this is turning back to the product side of the business. The Lightbox, obviously we can hear the enthusiasm in your team as you speak about this. But maybe just any details on timing, you can share kind of what your progress is with development?
Jeff Soinski: Yeah, so we are confident that we'll be in a position to file our 510(k) for U.S. pre-marketing clearance over the next few months. So sticking with the mid-year timing that we've been talking about. Based on a mid-year filing, we anticipate that will receive U.S. regulatory clearance in the second half of this year, which is really exciting because it gives us an opportunity to have our initial commercial launch, at least on a limited basis before the end of 2021, which sets up a terrific opportunity for Lightbox 3 to be a major growth driver for our business in 2022. So those are the U.S. activities in anticipation. We also will seek CE Marking for Lightbox in the third quarter. And as we've done with our new catheters in the past, we think this will provide an opportunity for us to get early experience in the field with our commercial Lightbox 3 in Europe, even prior to receiving U.S. clearance. So a couple of important milestones, filing U.S. clearance, CE Marking in Europe and then first cases both in Europe and in the U.S., potentially all prior to the end of this year.
Nathan Weinstein: Okay, great. Thanks for sharing the details there. Really appreciate the updates overall. I'm looking forward to watching the ongoing progress in your business.
Jeff Soinski: Thank you. Thank you very much, Nathan.
Operator: We have reached the allotted time for Q&A for this call. I would now like to turn the floor back over to Jeff Soinski. Sir, the floor is yours.
Jeff Soinski: Well, thank you for joining our call. We continue to advance the key growth drivers for our business and including three compelling and highly differentiated PAD solutions, a new Lightbox console that breaks through barriers to adoption, clinical work that continues to document outstanding outcomes for patients and our initial efforts to expand our platform into the coronary market, where we see an incredible opportunity for our technology. We very much appreciate your interest in our company and your support and look forward to an exciting your progress ahead. Thank you.
Operator: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
