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Neurometrix (NURO)

Participants
Thomas Higgins SVP, CFO & Treasurer
Shai Gozani Founder, Chairman, CEO, President & Secretary
Jarrod Cohen J.M. Cohen & Company
Call transcript
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Operator

Good morning, and welcome to the NeuroMetrix First Quarter 2019 Earnings Call. My name is Demetria and I'll be your moderator on the call. On this call, the Company may make forward-looking statements which are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature that depend upon or refer to future events or conditions are forward-looking statements. Any forward-looking statements reflect current views of NeuroMetrix about future results of operations and other forward-looking information.

in on a because of result including set rely differ results important not issued those as release materially of forth should forward-looking actual statements may factors, earlier You today. earnings our a number and including at the the heading under website Company's in Company's investor uncertainties Factors sec.gov. the with neurometrix.com factors periodic described relations Please refer filings and on SEC the website to the risk the the SEC's Risk available at on undertake no on or to update NeuroMetrix disclosed intend does duty the information this not call. conference introduce now like NeuroMetrix I'd and President Chief Officer, to the Senior Vice Mr. Financial Thomas Higgins. you Sir, begin. may

Thomas Higgins

in Demetria. you, pain, diabetes. and health I'm Gozani, Shai sleep the CEO. a President and applied NeuroMetrix Thank technology proprietary call chronic by Dr. with is disorders joined on company our technology neurostimulation

products quarter. are care point a an were several note Quell, and device points peripheral There over-the-counter of pain chronic for neuropathy. primary of Our the commercial managing DPNCheck, test diabetic for wearable in

income or First, reported $X.XX $X.X net we share. a of million

we the attention discuss. a will business. I which This received significant Second, review Quell strategic of initiated

ongoing, review at advertising. While lower was with significantly the were reduced operations volume Quell levels, maintained

well strong last Fourth, was QX related Third, matched year. co-funded -- DPNCheck in $X.X income Quell of of addition, and R&D. and GSK million, GSK performed of the $XXX,XXX

QX Lastly, margins. $XXX,XXX provision inventory. for our of charge we depressed gross a This booked excess Quell non-cash classic

Advertising we down large reduced million $X.X Quell. XXXX. million. revenue financials was channels channels retail of to active $X.X of last the had tends $XXX,XXX have Advantage first from prior were XXXX able as This The in Quell a and our activity down year. retail DPNCheck Recall cut immediate was deliberately. QX sales XXXX between of year-earlier By $XXX,XXX, $X.X earlier. to four attached and we million Quell Medicare deliberately Turning in factors DRTV XX% revenue, below QX all year. and reduced our Also, in most markets spending. QX was affected million. of from promotion was that curtailed direct of with the link had $X.X ad of quarter preceding was in or in release. in strong expected. reacted with In quarters XX% response Japan. their the It was revenue uneconomic due was that earnings entirely we Sales that is revenue. of Two nearly increase this domestic consumer direct prior a QX revenue was revenue total spending particularly and $X.X the was to That a sustain from TV year, distribution performance. We $X.X in revenue the for business would DPNCheck and year. drop level XX% there and year. to from level sales. to internationally, businesses, steadily spending million QX were that million the both Total grow a this throughout year, jumped Also to business as ad cut

$XXX,XXX, Our of QX also legacy diagnostic was revenue prior level the year. with

reflects the charge XX%. charge profit sales product below That's realizable a sales of represents Quell year commitments. Quell products the year. of Classic gross The X.X of XX%. to $XXX,XXX value. Quell year. decline rate of down purchase and goods margin this book are It and I the in Quell expectations Classic The and parts margin $X,XXX,XXX these is sold been older of with flow, margin was managed of quarter a have last gross expected of time. of cash prior launch Classic compares to [ph] finished cost first Our current necessary volume prior-year over of value goods mentioned. lines to This inventory of charge $XXX,XXX the write as was a to Gross net margin about older rate XX% for since of $XXX,XXX

profit, $X.X sales channels Approximately e-commerce this went first exceeded a XX%.OpEx gain. and Excluding margin in and ago, gross in spending comparison XX% the year of goal this charge with QX quarter gross GSK year, R&D XX%. a a margin spending prior role $XXX,XXX. year, $X.X that prior generated year from that marketing R&D versus and first was dropped profit an reduction million Absent quarter year. was the in was $X.X of a about prior $X.X year. represented in our from XX% mentioned fees $X.X the totaled $XXX,XXX management again $X from G&A through in of Sales million million of GSK, was Distribution of lower from significant inventory offset down the XX%, in flat. Quell rate played our million million projects, which that related on Quell advertising Quell of co-development million certain of of the compensation. gross partially spending by $XXX,XXX spending co-funding review. the strategic of $X.X of primarily $XXX,XXX professional spending million and incremental reduction benefited offset equity to of spending I've spending

milestones at $X.XX earnings On million $X.X of the share million performance prior Remaining share year. Cash $X.XX with $X.X about $X.XX, income Collaboration the QX increase $X.X quarter. GSK per income million. about basic, $X.X $X.XX milestones per of $X.X diluted million.Net basis, year-ago year-ago versus compares compares totaled with a net quarter, diluted, million million million an in quarter-end. was down statement. income total of GSK $X $X.X Moving quarter under income

million. debt-free. simple, outstanding Common equity-only, Our remains are capital currently shares structure X.X

the unchanged address Dr. share preferred recognized an converted our is XX common now on strategy. quarter. shares are convertible as basis, overall Assuming the million, Gozani will count approximately during

Shai Gozani

I will topics covering Tom. my in you, three comments. Thank be

update Quell review. First, our on an strategy

Second, collaboration. third, And our the status of our on DPNCheck update GSK an business.

strategy review. Quell our with out starting So

costs earnings the of in in Quell year-end call Quell with and quarter February, and we fourth customer profitability satisfied not business our during general. noted we are As acquisition the

As pricing, Quell product and considering major recently were be number the to the a potential promotional we segmentation, been Their with surprises. But a are that evaluated leading The model. there observations we a is and beneficial project analysis [indiscernible] may Overall, conducting analysis firm. no project Also, recommendations the to changes and a connection result, been in business competitive tests. have completed that digesting global findings strategy we various position initiated with our market and and consulting of this research, perspective have made in-market configuration. business.

by scientific to meantime, review substantially ASP business growing X.X, strong We We're from peer Recent implement positive if the expect conferences and, with quarter. we during evidence on and changes the our Quell X.X Quell reviewed receive believe journals gross that chronic feedback clinical publications compared we to margins necessary, continue aftermarket have model at confirmed indicating user also of pain of are body complete of and this Quell electrodes. attractive pain. medicine in could further and our in lead people engagement Quell. In to to the suffering sales original presentations encouraged long-term up benefits the

reported pain bullish reviews significant trial The in in catastrophizing Brigham results good comparison Brigham expanding with group & Boston we study about us Quell back initiated particularly the quite body a and Quell the recently, combination the of The statistically clinical the interference Quell in fibromyalgia. pain user remain randomized sham-controlled Hospital that of Center prospects schedule this recently trial of the with might & in we in XXXX. conducted in reductions intensity, Pain at Practice patients indicates As commercial clinical complete Management see causes pain Women's with for this and half Pain Women's review. low and one as published of feedback reduced control. on pain in study chronic second example, function to

modest advertising are strategy, we momentum. while have levels brand reduced we Tom our as to our maintaining While spending, cash to preserve reviewing noted,

Moving GSK update. on to a

joint in We the of continue GSK funding relationship made technology reductions continuing receive, of market major Quell we The We're our GSK functionality and DPNCheck Medicare which on XXXX added update. our value with quarter, inherent development to In U.S. progress which pain of business this Japan, took Quell business the development activity for payment first milestone asset our new the particular. with but to of by and The beyond. partner We consumer with global under we we business Advantage well. We're and R&D on Healthcare also working our a also continues major focus product closely actively a the in the companies the the Denshi, collaborating beyond $X cost major million. for their the year. DPNCheck the learning leading the further accounts, last support segment with ambitious view Company span a objectives where of several as that X.X that since the outside perform and launch first GSK agreement, received certainly both incorporates healthcare from for in in pleased the quarter achieved initiated year of we and in Omron collaboration Fukuda they in one over in shipments with expect

opportunities We in bullish and Mexico. quite also optimistic about remain

potential recognize timing funding. establishes government also the central unpredictable is and of we a priority sales new that now allocates However, as

transition. Mexico in are with our We touch partner this during close

device growth should is which margins in capabilities. above in of This often early an and new operating in is We a the XXXX. project this although asset adoption and to XXXX late valuable, DPNCheck or unrecognized foresee encourage expected project reporting be existing of a We markets have timing million The cycle business. be business, to replacement users. maintained for among upgrade $X.X DPNCheck initiated achieved our may we R&D the technology at revenues XXXX, refresher levels expect DPNCheck product and facilitate XX%. to of completion continued

We happy take is market reflected sense not in point. be that that adequately our prepared at this comments. capitalization. would questions Our represents is our And to

Operator

from first question Cohen with Company. [Operator Instructions]. And Jarrod J.M. & Cohen comes our

proceed. may You

Jarrod Cohen

question. strategic more a Just

things of in Is In user is get your surgeries, the consulting to some customers, of I the terms trying because the chronic it from terms more be seems from feedback -- different with the they do customer who've what to customers acquisition try of things, you the your of firm, the tried mostly solve the of the -- see pain. to and after reviews other the have Quell acquisition base their just of you were the sort -- review people it customers. good that go -- like seems Quell

trying last resort. [Indiscernible] a get? to Is to? you need did type Or it's of review go of so? So those types to it you what customers

Shai Gozani

for Thanks was Jarrod. broad. quite the review question, The

to with the that we share investors in accounting the of position will we're think although the shareholders give full now I not right and a review, shortly.

and market most -- segment trying -- line to market we're think of I this into you're characteristics adopt which sort review those to is an the the what apt ready in to adopt are those what Quell. with asking, the with really and identify do segments, understand most and

all really also at pain. looked and of the demographics experience we their medical so and and chronic So of prior kind individuals the psychographics, of history the profile

that of marketing I and into chronic of pain in went are analysis several that all on. think, focus particular our attractive resources and identified for So most, the segments energy population and segments identified the to us

experiences So of definitely pain that a in that kind and are enter do terms kind their they've chronic but their specifically managing of I to wouldn't say what of resort those last in analysis. tried mindset, date

Jarrod Cohen

that doing anything then seems on things. before it people turns try they solve else. other -- it. probably go will of like And doesn't, it it Yes, and kind want Okay. think it to surgery They out to

Shai Gozani

our think either have from that represent that either down that's -- chronic suffering part people general, want with I that seen -- and have path, to we does failed part mean, the of -- Yes, people well-stated. chronic surgery don't I or pain of pain or in go focus.

insight sort this coming analysis. is of So out of that

Jarrod Cohen

the product anymore? And then get still last to is price? sort resistant Do Or Okay. because people people aren't that, as the of thing. you resistant of,

Shai Gozani

detailed elasticity. definitely pricing that study. the We a We've since did before a strong we price -- pretty there's product. Well, there's a known launched

lower than higher points. at points acquire are price technology so to the obviously more And at going people price

us that think yes, adoption, is and price extensive now market that I we a the of datasets important points. -- think this in allow have implications consideration curve But the very analysis, good different in quantitative and price we -- course have understand the I better. important data an to understand price doing lot elasticity of particular that now to

Jarrod Cohen

Okay. All Thank right. you.

Shai Gozani

you, Thank Jarrod.

Operator

Asset next Robert with our comes And question from Blemisher Management Blemisher [ph].

Unidentified Analyst

out Can me on tell price? got the you warrants and traded hanging exercise you what are that there? those terms Expiration publicly

Thomas Higgins

minute Those ago. warrants four here. years I a just We may issued, to you. Give be us that get able believe, to were

-- left of in X exercise may it's is those that probably price on the be price. I term. this, Exercise $XX I about there wrong believe warrants terms of but So year and

[ph] So that's just been internally. burned

Unidentified Analyst

Okay. of about And then $XXX,XXX GSK to was in had half $XXX,XXX. on on do with you neighborhood DPNCheck? know next the Can I from my on half R&D Quell other the of of spend that. just -- was that I question kind about R&D of that that and said the your deduce spending

Shai Gozani

was No. It although that more GSK, -- is offset but definitely a large more the Quell. -- quarter, portion by necessarily it there in it will towards GSK. of I -- A heavily of -- offset say was everything is. heavy answer: it it was significant is more R&D be DPNCheck XX/XX DPNCheck. our it in by heavily Not Quell -- portion would than Not it first spending, is was everything was tilted

Unidentified Analyst

Okay. and my That questions. a great it have for was Thanks, day.

Shai Gozani

Thank you.

you. do So

Operator

closing Instructions]. concludes our portion over for that Dr. you, would now turn and [Operator any Gozani remarks. to Thank Q&A call of conference. back now the like to today's I

Shai Gozani

look us for on and year. over today, balance of the updating you joining you thank to the call forward Well, the we

Operator

today's gentlemen, great for and conference. disconnect. all does day. Ladies you attending thank may the have Everyone, conclude program, a and you This