Twilio Inc

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Good morning, everyone. Welcome to the Milestone Scientific Third Quarter 2024 Financial Results and Business Update Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, David Waldman, Crescendo Communications. David, the floor is yours.

Thank you, Jenny. Good morning, and thank you all for joining Milestone Scientific's Third Quarter 2024 Financial Results Conference Call. On the call with us today are Neil Goldman, Chairman of the Board; are Arjan Haverhals, Chief Executive Officer; and Keisha Harcum, Vice President, Finance of Milestone Scientific.

The company issued a press release yesterday afternoon containing third quarter 2024 financial results, which is also posted on the company's website. If you have any questions after the call, would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020.

Company's management will now provide prepared remarks for you in the financial and operational results for the third quarter ended September 30, 2024. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenues and future success.

These statements involve a number of risks and uncertainties and [indiscernible] assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone's control.

Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general echo conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent [indiscernible], FDA or legal developments, competitive pressures, changes in customer and market requirements and standards and the risk factors detailed from time to time in Milestone's periodic filings with the Securities and Exchange Commission, [indiscernible] without limitation Milestone's report on Form 10-K at the year ended December 31, 2023, and milestones report on Form 10-Q for the third quarter ended September 30, 2024.

Forward-looking statements made during this call are based upon management's reasonable belief as of today's date, November 15, 2024. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we'll now turn the call over to Arjan Haverhals, Chief Executive Officer. Please go ahead, Arjan.

Thank you, David, and thanks to everyone joining us on the call today. This quarter was an important one for Milestone Scientific as we achieved a 22% increase in year-over-year revenue, reaching $2.5 million, primarily driven by strong growth in our Dental division. In particular, international dental sales increased by 57% as logistics freight forward challenges seen in the second quarter of 2024 were resolved.

Domestically, our shift to an e-commerce sales model is paying off by allowing us to connect directly with our customers and offer a streamlined responsive experience that enhances customer loyalty and satisfaction. This approach has strengthened our gross margins, which remain high at 73%.

In our Medical division, we continue to see substantial progress rolling out the CompuFlo Epidural System. This technology, which offers real-time pressure feedback to assist physicians with precise needle placement and verification addresses a critical need in pain management and anesthesiology.

Earlier this year, we achieved a Medicare Part B physician payment rate assignment for CompuFlo Epidural System, which applies across several major jurisdictional Medicare administrative contractors, JMAC regions, including New Jersey, Texas and Florida. This assignment has catalyzed interest in our system, and we are excited to share that respected clinics such as Hudson Specialty Care, led by Dr. Albas and the iHealPain Center in Texas have now adopted the CompuFlo Epidural System, demonstrating the traction we are gaining among top pain management providers.

Both clinics are renowned for their expertise in pain management and their decision to adopt CompuFlo reflects the recognition of the system's value in improving patient safety, predictability, procedure efficacy and provider efficiency. Expanding Medicare reimbursement has been a cornerstone of our U.S. strategy as it addresses a significant barrier to adoption by making the system financially accessible to more providers and patients.

Through our collaboration with Medicare jurisdictions and the engagement of JMAC's, we are continuously working to educate payers on CompuFlo clinical utility, safety benefit and predictive reliability. By doing so, we aim to build a foundation that will enable broader adoption across the country.

Currently, additional JMAC regions are evaluating the system, and we are optimistic about expanding our coverage. Notably, CompuFlo already serves a large addressable market with 3 million epidural steroid injection procedures performed each year in the JMAC regions, where we have received Medicare payment rate assignment.

Medicare patients alone represent an estimated $250 million market opportunity for these procedures, offering us a robust entry point for growth. Our strategic partnership with actual biologics is a key component of our commercial approach.

[indiscernible] has a strong presence and deep relationship in the pain management space, particularly in the JMAC regions of New Jersey, Texas and Florida. By partnering with a specialized distributor like [indiscernible], we can target key clinics more efficiently and deepen our footprint within these critical markets. This partnership enables us to deploy CompuFlo into the hands of providers who are best positioned to advocate for its benefits and build awareness among patients.

In line with our commercial strategy, we are encouraged by the growing bills pipeline for CompuFlo. We have additional pilot programs underway with pain management clinics across the United States which are designed to further validate the systems utility and showcases value to practitioners. These pilots have provided valuable real-world insights and allow clinics to experience firsthand the clinical advantages and safety profile that CompuFlo brings to Epidural procedures.

With positive results from these pilots, we anticipate that clinics will continue to move from trial to full-scale adoption contributing to increased sales in the coming quarters. On the international front, we recently secured, as you know, regulatory approval from Brazil's health agency to market CompuFlo for use in Epidural procedures. Brazil represents a significant opportunity with over 2.8 million births annual and a large population experiencing chronic back pain.

Our market entry strategy in Brazil involves establishing relationships with leading medical institutions and local commercial partners who will help us launch CompuFlo effectively within the region. As the ninth largest economy globally, Brazil opens the door to Latin and South America, providing a promising growth avenue for Milestone Scientific.

In addition to Brazil, we are expanding our global reach by forging relationships with distributors in key markets, each selected for the proven ability to introduce innovative medical devices within their territories. By targeting these independent distributors, we are strategically entering markets where there is demand for safe and effective alternatives to traditional epidural procedures particularly in regions with limited training and resources.

As we look ahead, our focus remains on advancing reimbursement initiatives, strengthening our commercial infrastructure and deepening our market penetration. With the traction we're seeing from Medicare coverage, respected clinics like Hudson Specialty Care and IV pain center, adopting our CompuFlo Epidural system and ongoing pilot programs contributing to a growing sales pipeline, we are confident in our ability to drive further adoption of CompuFlo in both the United States and international markets.

Lastly, I'd like to briefly touch on our Dental division, where the positive effect of our e-commerce transition continue to be felt. By selling directly through our online platform, we've created a seamless purchasing experience, resulting in increased customer engagement and improve margins.

This e-commerce model has set a strong foundation for steady growth in the domestic market. Over the 9 months period for this year, we were able to grow the e-commerce business by 11.4%, and we are complementing this with targeted marketing campaigns aimed at expanding our customer base further.

As I approach my retirement as CEO of Milestone Scientific at the end of this year, I want to express how duly fulfilling it has been to lead Milestone Scientific during this transformative period. Together, we have made substantial strides securing a stable financial and operational foundation and achieving significant advancements including the Medicare Part B physician payment rate assignment for a CompuFlo epidural system.

This milestone, along with our strengthened partnerships and broadened commercial reach has positioned milestone on solid footing for continued growth and innovation. While I'm looking forward to spending more time with family and pursuing other interest, I remain committed to Milestone's success.

I'm honored to continue contributing to the company's future as a member of the Board where I will work closely with our leadership team to support the full realization of our shared vision for Milestone's role in enhancing patient care and take drug delivery from the 1900s to the 21st century.

With the remarkable groundwork we have laid, I'm confident that Milestone Scientific is well equipped to achieve its next phase of growth and I'm excited for what lies ahead. Thank you. Now I'd like to turn the call over to Keisha Harcum, our Vice President of Finance, to go over the financials in more detail. Keisha, please go ahead.

Thank you, Arjan. Revenue for the 3 months ending September 30, 2024, and 2023 was approximately $2.5 million and $2.1 million, respectively. The U.S. e-commerce and dental service revenue for the 3 months ending September 30, 2024, and 2023 was approximately $1.2 million. For the 3 months ending September 30, 2024, international revenue was approximately $1.3 million, an increase of $0.5 million compared to September 30, 2023.

International sales increased due to the company resolving the freight forward delays in the second quarter of 2024. The company recorded no revenue from China for the 3 months ending September 30, 2024, and 2023. Gross profit for the third quarter ended September 30, 2024, was $1.8 million or 73% of revenue versus $1.5 million and 73% of revenue for the third quarter ending September 30, 2023.

The increase in gross profit was due to higher international sales. Operating loss for the 3 months ending September 30, 2024, and 2023 was approximately $1.5 million, a decrease of approximately $38,000. Net loss was approximately $1.5 million or $0.02 per share for the 3 months ending September 30, 2024, and 2023.

With the 9 months ending September 30, 2024, 2023, revenue was approximately $6.6 million and $7.6 million, respectively. The U.S. e-commerce and digital service revenue for the 9 months ending September 30, 2024, was approximately $3.9 million compared to $3.5 million at September 30, 2023.

For the 9 months ending September 30, 2024, international revenue was approximately $2.7 million, a decrease of $0.6 million compared to September 30, 2023. International sales decreased due to issues with freight forward carriers during the second quarter of 2024. The company recorded no revenue for the 9 months ended September 30, 2024, compared to approximately $270,000 for the 9 months ended September 30, 2023.

The gross profit for the first 9 months of 2024 was $4.9 million or 74% of revenue versus $5.3 million or 70% of revenue for the first 9 months of 2023. Operating losses for the 9 months of 2024 was approximately $4.7 million versus approximately $5.1 million for the first 9 months of 2023. Net loss for the 9 months for 2024 was $2.7 million or $0.03 per share versus a net loss of $5 million and $0.07 per share for the comparable period in 2023.

The decrease net loss was primarily driven by the company's receipt of approximately $2 million net of expenses for the sale of New Jersey net operator losses. Now I would like to turn your attention to the liquidity and capital resources. We continue to carefully manage expenses and have maintained a solid balance sheet.

At September 30, 2024, the company had cash and cash equivalents of approximately $4.8 million and working capital of $6.9 million and no long-term debt. At this point, I'll turn the call back over to Arjun Haverhals.

Thank you, Keisha. And as Keisha mentioned, we continue to maintain a strong balance sheet with approximately $4.8 million of cash and cash equivalents as of September 30 this year, which we believe provides us sufficient resources to support our growth within both the dental and medical divisions without the need for additional outside capital. We have maintained a lean operating structure and remain committed to driving shareholder value.

On the medical side, we remain encouraged by the outlook for the business given our sales pipeline, the addition of new pain management clinics as well as expansion of our international distribution partners. Most importantly, we're making progress advancing our reimbursement strategy around the CompuFlo Epidural system. We are advancing discussions with additional JMAC regions to further expand our coverage, and we look forward to providing further updates.

The Medical segment represents a large addressable market, and we remain confident in our belief that CompuFlo will ultimately become the standard of care in epidural procedures with a focus on clinical precision and safety. So to wrap up, we believe we have developed an efficient and scalable platform to help drive high-margin recurring dental sales in coming years and look forward to announcing further developments in our Medical segment on both the commercial and reimbursement fronts. I'd like to thank you for joining the call today. And at this point, we would like to open the call up to questions. Operator?

[Operator Instructions]

Your first question is come from Nick Sherwood of the Maxim Group.

How are discussions going with pain clinics and hospitals following the positive reimbursement decisions?

Thank you for your question, Nick. I am pleased with the initiatives that we undertook since we launched after the reimbursement refresh our minds a little bit. On July 23, we got our last reimbursement of positive price assignments by the Medicare jurisdictions. In the middle of August, [indiscernible] , I think on the top of my head, we were able to sign the partnership with AxolBiologics. We finalized our pricing strategy in the week after Labor Day, so it was the second of September, we officially launched the product, thereby providing the different pricing options for patients and actively reaching out to clinics in the 3 jurisdictions where we received the positive Medicare price assignment.

And in particular, through the knowledge that actual provided, we have, I think, of now about a 40-plus leads which are hot leads, and I would like to express that and explain that to you because our company did not have any background and history and try to [indiscernible]. Actual biologics knows them in all these 3 jurisdictions.

So that resulted immediately our opportunity to provide what we call pilots. So the sales process is that we will do a number of cases with the clinicians with support from our people and actual people, clinicians then we'll do a number of procedures themselves. And then based on their patient schedule and their decision-making process, then they will decide to purchase the equipment and purchase the components.

So that has actually resulted in the 2 clinics that has already adopted this technology. as we speak, last week, we had a major event in New York and New Jersey that was very successful where we were able to sign up additional clinics for demos and pilot. So I'm pleased with the activities that we are undertaking, and I do not have any complaints based on the activity.

Look, it's very simple. It's 6 days a week. We are in clinic, doing demos, doing trials and to get people more interested in the technology that we provide.

Understood. And kind of following up on that a little bit. You mentioned that you have a growing sales pipeline. How are you balancing growing that sales pipeline, but also sort of converting on those leads? And like what the balance is there? Were are -- you trying to build -- keep converting it at the same rate but build a large backlog? Or can you kind of just give a little bit of insight into your process there?

Yes, I think this is the basic principles of sales management, right? And I don't want to sound arrogant here. That's not my point. But my comment is based on, of course, when we follow sales process, you have to build up the funnel. And on a daily basis, I track which clinics are in an evaluation phase of which clinics have received quotes. So it is a combination. On a daily basis, we want to increase the sales funnel.

I'm not calling it a backlog. These sales funnels that I said, those are clinics that have confirmed to us that they would like to receive a demo. And then, of course, at the same time, we are focusing on once we have been in the clinic in a very short period thereafter, to convert these clinics into buying the products based on that patient schedule.

So it's not that one day we focus on this and the next day, we focus on the other thing. Now continuously, we're focusing on 2 things. A, to increase the sales funnel, to increase the quality of the sales funnel, to perform our demos and trials and pilots and then last but not least, to make sure that we can convert those clinics as well.

Okay. Understood. And then if you allow me a third question. Can you share any information on utilization and reorder rates from clinics who have been using the CompuFlo for some time now?

Yes. No, absolutely. I think those clinics that has been part of the advisory board or advisory clinics that we used in the beginning. I think our flagship is definitely the clinic of Dr. Dinesman in New Jersey that has a very strong reordering pattern. And as we speak, also increases the utilization of our technology. So that's probably the fifth tier, right, in the sales process that I already explained to you.

After converting, then, of course, is making sure that we are able to increase the reordering pattern. Like for example, I'm very pleased with one of the clinics that we recently appointed or purchased products that immediately purchased 5 boxes of consumables, which is material for first 50 patients. I talked with the doctor in a couple of days, he already did 15.

That is very encouraging for us and also is committed to pricing based on the volumes that is very encouraging and very positive for us. I think another question could be, do we get any feedback or pressure on the price proposal for the consumable. And the answer is no.

So it tells us that the strategy that we have chosen, the sales strategy that we have defined and identified, is "accepted" by the clinicians as they see the immediate benefit also of getting the reimbursement fee once they have submitted the documentation and the medical necessity confirmation to the Medicare insurance providers within their region.

I guess maybe just one last one. You mentioned that the International Dental had a really strong quarter. what are the specific drivers of that? And how do you plan on maintaining that momentum?

Yes. So as I explained on the call, in the second quarter, there were, let's say, logistic, I call it, hiccups and challenges with freight forwarder. Those have been solved. So it's not that, that's only the reason. Another reason is that we were able to close the gap, I think on the top of my head, that was an additional difference of about $0.5 million of sales compared to the quarter last year. So the business is growing.

And as we continue in the fourth quarter, the goal is, of course, to surpass the international dental sales in the fourth quarter of last year, and we made good progress on that. So again, I'm positive that the international sales will continue caveat being, of course, is that we have not sold anything to China this year compared to last year, which was $270,000. E-commerce is going fantastic.

So the strategy that we had in the United States by terminating the current agreements with other distributors as of September last year plays off. So it seems that the strategies that we have chosen are working out. And at the end of the day, it's very simple. It's all about execution, and that's what we are focusing on and what we are focusing on lay in part from other things, of course, that we are focusing on.

Your next question is coming from Bruce Jackson of the Benchmark Company.

If we could just talk a little bit more about the JMACs and the strategy for getting additional JMAC, of course, there's like a process involved.

Yes. we are approved or we got the price assignment in the 3, Texas, Florida and New Jersey. We are in advanced steps in for other JMAC. We have reached out to the JMAC, that goes back to part of your question what the process is because based on the positive response because we got from the first 3, we reached out to the other 4.

That has resulted that without going into details who they are, that we will have meetings similar to what we did with the first 3, where we are able to explain, educate and explain in detail what the technology is about with the support of clinicians in those JMACs and then the clock starts ticking again, depending on the JMACs whether and how fast they will make their decision on the positive pricing assignment for our technology. So again there as well with a limited team that we are having on positive and I'm encouraged that we are able to move forward with that process as well.

And then a follow-up to that. In conjunction with that process, do you have do you have distributors and other partners identified for those JMACs so that once you get the JMAC reimbursement, are you able to commercialize quickly?

Yes, we have what I always call a target list of distributors in those JMACs. I think in all fairness, these distributors will only want to jump on that once there is a positivity and a confirmation that there is a price assignment. That's sort of a little bit the situation in into that. But yes, we know where they are, and it's up to us then to make sure that, again, we identified the right partners.

Like I explained in the past, we are interested in those distributors that have a very sticky relationship with the customers that know the pain segment that know the pain clinics that can provide leads, what I would call hot leads to us in those JMACs. Instead of having a national or a larger distributor where you have to fight to be from top of mind or to have a seat on the first row, I always say to be able to execute on the commercialization.

Okay. And then moving over to the revenue numbers. You mentioned that you've addressed the freight forwarding issue internationally and that revenue there should be up year-on-year for the fourth quarter. In general, for the total revenue number, will that also be up year-over-year?

Well, the goal, of course, is without making a forward-looking statement. The goal for us is, of course, to reduce that gap that we have seen compared to the 9 months last year, and we're trying to reduce that gap with all efforts and all resources that we are having. We are pushing it also domestically. Again, we will have a special Thanksgiving campaign that was very successful last year. So we are doing whatever we can to not only, I would say, develop existing customer base.

We actively reach out to reactivating customers dormant customers, so to say, and at the same time, also to acquire new customers. So there is an array of an Apple of activities to further support and enhance the total year results for 2024.

Thank you very much. Well, we are pleased to have reached the end of our question-and-answer session. I will now hand back over to Arjan for any closing remarks.

Again, thank you for joining the call today. As I said, our purpose and our goal is to continue to put pressure on the market on the clinicians, in you to put pressure on the organization. So that we can obtain the results that not only I'm looking for, but I think more importantly, also that all the shareholders and the investors are looking for.

If you have any questions, you know where to find me. Please do reach out to me, and I would be available to answer any further questions that you might have. And I wish you a good and safe day, and we talk soon. Thank you. Have a good day. Bye-bye.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day and a wonderful weekend. Thank you for your participation.