Neurometrix (NURO)

Thomas Higgins SVP, CFO & Treasurer
Shai Gozani Founder, Chairman, CEO, President & Secretary
Call transcript
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Good morning, and welcome to the NeuroMetrix Second Quarter 2019 Earnings Call. My name is Sonia and I'll be your moderator on the call. On this call, the company may make 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 the a number

does and including at the the heading intend under update website company's not in company's Investor uncertainties Factors sec.gov. the with neurometrix.com factors periodic described Relations Please refer on filings no and on SEC undertakes the website duty to information the risk the NeuroMetrix the this the SEC's Risk call. available conference and at on to disclosed

now Financial the Officer, I'd NeuroMetrix Chief Higgins. Thomas President Mr. Higgins? and introduce to Mr. Senior like Vice

Thomas Higgins

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

neuropathy. DPNCheck, level quarter pain primary test for are managing Our products of commercial peripheral chronic was an over-the-counter for the a second point-of-care activity device in There wearable a and XXXX. Quell, diabetic of high

interest. We maintained in Sciences a the monetizing of over revenue with the Life Quell of GSK Advisors well. In on previous and to QX, technology a for DPNCheck quarters a performing the Quell was continued trends earnings possibility the Bay topic last organize Development explore process calls. banker level. version investment we business, DPNCheck to we've several soliciting of Back mentioned high support Revenue took decline retained steps the at formal an

has recent margins a It line as revenue direct XX% on interest We This it a of with opportunity. to late is of bolt-on range highest generated last been in in an years. million in a nicely, product have XX% exceeding rate goal $X.X basis. EBITDA Our attractive growing cost growth in generates see the by year and sense QX. good

and operating workforce recent And improve areas conserve lower operating a CapEx our We force. quarter. with second in were by This lower Headcount combined should year, the costs was with initiated a XX%. in alignment Severance $XXX,XXX. over this were business addressed. step, restructuring activities, costs, through cash. in QX earlier reduced has in the reduction Three

the office labs. costs our will closing and of engineering with corporate lowered be Facility

these During manufacturing our QX for we will are offer at space. into $XXX,XXX. and the then Relocation local relocate vacated functions estimated facility sub-let costs

quarters We for excess the a X.X Quell $X.X business valued has with recorded value. $X.X which above a that lines supply beyond in The not electronics, typical is quarter stock was in was of realizable the million Quell inventory. sales us parts left X.X over extending -- in second excess million. a recent net total volume charge With restructuring year, reduction charge booked

issues advertising. sought resolve we Also, as the Federal that occasions several on met we Trade center to on Quell Commission with

the financials Quell of included million $X.X Turning $X.X this million that from year. $X.X was $X.X to morning's last release, million last was down from in million, QX of press were in down year. of QX total $XXX,XXX revenue revenue XX%

in measured acquisition year-on-year. XX% objective in acquiring on customers. Quell by change new Digital promotion. did discontinued as improve reduced Direct spending over or costs. quarters, advertising to million favor TV of promotion The profitability digital past of improved advertising was spending the was customer versus the yield terms was $X.X in the several efficiency of QX of

quarter or volume in expand ad drive to However, efficiency. the sacrificing to without spending we meaningfully were grow unable increased spending

continuing are our approach. refine to digital We

while both QX did last of the a strong last Sales with even $X.X was make year roughly QX Mexico DPNCheck year. QX Medicare was contribution. Japan particularly business revenue in million prior strong our revenue were up in XX% revenue U.S. not year, Advantage, flat of year-on-year. and with

in disarray Mexico in distributor government fiscal markets following government last Mexico year. economic with and change local Our sector is the in dealing the

from for over and to Legacy product of in prior year. was products These are lines is time. the flow older expected down sales cash decline $XXX,XXX volume diagnostic $XXX,XXX managed revenue of these

margin a of Our negative quarter -- the a result impairment inventory of profit million. the as was $X.X gross $XXX,XXX in charge gross

that of million of level Excluding of represented rate rate a XX% the profit margin impairment approximately last charge gross year. with QX margin XX% $X.X in

including in QX totaling totaled spending expense $XXX,XXX. severance Operating related charges $X and restructuring million of relocation, XXXX, to

from of reduction spending OpEx was charges, XX%. in about projects one-time R&D development these or spending GSK versus million last $X co-funding year, was of $X and OpEx $X.X million Excluding $X.X joint benefited Quell that from million effects of dropped $X.X totaling from largest GSK R&D prior a within million Sales million it The year. last Gross year. $XXX,XXX. QX funding and to advertising prior factor the $X.X was in spending. Quell million $XXX,XXX is of spending was reduced down contributing marketing

sorry, primarily legal. $X.X spending spending higher prior $X.X -- of $X.X million services professional totaled year million. costs, milestones quarter, G&A milestones performance under income total million remaining And Collaboration $X.X now GSK GSK year included ago in million versus $X.X million versus the GSK

million in $X.X QX net of compares in with loss $XXX,XXX net income Our XXXX.

number XX end $X.XX shares outstanding an million. simple as all Our Common Capital converted common remains share free. the and million. equity-only cash convertible the quarter currently be balance preferred Adjusting would million. structure shares X.X was are count at for debt on that basis, of the

Dr. overall Gozani our strategy. now address will

Shai Gozani

and By has value. of the company Tom. NeuroMetrix product real overview technology, and Thank has good is management’s strong you, more that lines broadly, way belief

value engaged to this has we help us and We to and not in realize optimistic. business towards, remain expertise are, worked hoped disappointed, process. the had working but we outside however, progressed overall have this as We're hard

in three topics my I will cover specifically, comments. More

results quarters, was the our and of decision the simply from year competitive that build Quell to that the U.S. three comprehensive and over-the-counter findings commercial do This came research in attempts program. successful key second the not scale the advertising our to commissioned incorporate status. experience a product several determination large and business First, have direct we as the resources, to Quell quarter pain the study equity past we market. market in in relief and our marketing over informed research to We earlier this by consumer brand the

As fundamentally approach a we are our Quell the technology. reassessing to result, commercializing

assessment and a reassessment level continues, the decided with reduce cost effective to only spending we of have marketing. low promotion to As Quell -- digital

Our customer acquisition in nominally Quell business costs becoming a at the profitable basis promotion. level have of much dropped, direct resulting lower on this

revenues. spending reduced Lower, customer has more also efficient acquisition, volumes shipment promotional and new

in to several our result, sales. weeks ago. a necessary we that structure was to the reduction led As to right operating This a it restructuring force announced and expected size

for technology. several evaluating the We Quell are in the directions process of potential

that to refined has bedded market platform for unique clinical and over and is continue the by believe well customers. We use XXX,XXX attributes vetted and

share likely this primary healthcare specifics focus be time, are not we with platform third-party successful we entirely the market defined early the consumer. may we position that on in providers believe the than Although of to technology, clinical in rather to reimbursement, at a and applications direct

several business resources have two the on may is currently that to decisions. along front trials further some It and will these ideas Quell clinical reset with model. a ultimately financial inform this take that We time process

sell commitment to some parallel, property. in options evaluate Consistent to are with business, options intellectual exploring we our business’ the for Quell or the all of all

the continue Health technology support meantime, U.S. launch GSK we the to In will their Consumer towards the outside of Quell

effort success efforts. impressed We around the their of their scale the It for world about their through chronic health. optimistic potential and consumer to deep the pre-launch sufferers and quality GSK's given technology may expertise is know are by benefit have gratifying that been in Quell pain

in milestones outstanding several also we to the are there hope attain. Importantly, agreement that

through FTC As been working we dialogue Quell the since of advertising. matter and with an XXXX, resolution. related to a FTC to working disclosed have third We’ve we're negotiate had quarter have

any component. on provide are magnitude potential a We monetary unable of to timeline

details. current our monetary material suggest XX-Q eventual there a filing our quarter that an for expectation is However, reviewing in second element resolution. be I will further

in and U.S. is to diagnostic data DPNCheck, late competition, no contribution on significant DPNCheck This markets, both long-term quarter posted extensive growing commercialized well space, revenue relatively established a has has is for margin. Advantage XXXX Mexico market in clinical with and China in Japan. direct strong another new and Medicare was potential. us test Moving

explore divestiture to The direction this could We the underway Sciences monetizing Back obviate address seek business If and we cash sale well our is believe to Life need in the near-term potential time. under it of product potential DPNCheck Bay processes makes sense financing the Advisors. to near-term. asset are that the needs a evaluate of line at successful, the

we may as Speaking company. a specific about time not to have timeline retained potential press possibilities, including several strategic described to create and shareholder that strategic all explore advisor as the an for now merger process to has it the value. ago, commit various outcome. weeks a Thalmann to Ladenburg this legitimate at a We're if financial options now, yield We're unable exploring a options release we in

enhance products possible. of value So in effectively summary, our operations that, doing we're as taking all steps to the and cost commercial manage as to our while potential

expertise balance year. We the of progress outside the and we necessary on have forward our over engaged look reporting to where

Those take be were our prepared questions now. to We’d comments. happy


I Shai remarks. showing any I'm this turn time. for to And Gozani at the now now questions would back closing Dr. over conference like to

Shai Gozani

And balance Thank you we this very updating of us for we year. you joining forward the look conference call. the move much on through to as


conference. This thank gentlemen, program. in and Ladies participating today's you for conclude today's

great a disconnect. day. all may You have Everyone,