Financial Data and Key Metrics Changes - Total worldwide revenue for Q2 2019 was $8.7 million, a 29% decrease compared to $12.2 million in Q2 2018 [26] - U.S. revenue decreased 18% year-over-year, with Waterlase sales impacted by a 30% decline due to vacant sales territories [26][27] - Gross margin for Q2 2019 was 39%, up 370 basis points from 35% in Q2 2018, reflecting a favorable product mix and better pricing discipline [30] - Operating loss for Q2 2019 was $3.3 million, a decrease of 29% year-over-year from $4.7 million in Q2 2018 [32] - Net loss for Q2 2019 was $3.9 million or $0.18 loss per share, compared to a net loss of $4.9 million or $0.24 loss per share in the prior year [32] Business Line Data and Key Metrics Changes - Consumables and other revenue in the U.S. increased 2% year-over-year, indicating increased utilization of lasers [28] - International revenue for Q2 2019 was $2 million, down about $2 million compared to the prior year, primarily due to pricing discipline efforts [28] Market Data and Key Metrics Changes - Revenue from the Model Market Initiative increased 31% compared to last year's second quarter, demonstrating growing interest in the technology [17] - The pediatric market in LA, Orange County, and Dallas showed success with new sales strategies, leading to higher customer acquisition rates [18] Company Strategy and Development Direction - The company is transitioning from an R&D-centric model to a disciplined commercial organization, focusing on rebuilding the sales team and improving sales processes [13][14] - Strategic decisions included exiting the unprofitable imaging business and enhancing pricing discipline with international distributors [15][16] - The company aims to achieve EBITDA positive status in Q4 2019 through cost reduction initiatives and improved operational efficiencies [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth prospects despite short-term revenue impacts from strategic changes [11][23] - The focus remains on expanding the adoption of all-tissue lasers and enhancing the commercial engine to drive growth [19][23] Other Important Information - The McGuire study aims to create a new standard of care for specialists, with interim data expected by the end of 2019 [22] - The company is actively pursuing working capital initiatives, particularly in managing international receivables and inventory [49][51] Q&A Session Summary Question: Can you break out the sales by bucket and laser, imaging, consumables, services? - Consumables were slightly up, while lasers were significantly down due to strategic decisions impacting sales [38] Question: What is the plan to recover the one-third of territories that were vacant in the quarter? - The company is actively searching for new hires and implementing a rigorous assessment process to find suitable candidates [40] Question: Can you provide insight into the DSO market and its potential? - The DSO market is the largest and fastest-growing segment in the dental industry, with significant opportunities for scaling technology adoption [42] Question: Where do you see the greatest opportunity for margin expansion? - Opportunities exist in manufacturing cost reductions and increased revenue in Q4, which is typically the best quarter [45] Question: What are some of the working capital initiatives underway? - The company is focusing on improving international DSO and managing inventory while exploring additional capital raise alternatives [48][52] Question: Can you elaborate on the sales force initiatives? - The company is enhancing its hiring and training processes to ensure the right talent is brought on board [53][56] Question: When might conversations with DSOs lead to expanded relationships? - The company is actively working on generating data to demonstrate the return on investment for DSOs, which is crucial for expanding relationships [57]

Revenue Performance - Revenue from products and services recognized at a single point in time accounted for 81% and 82% of net revenue for the three and six months ended June 30, 2019, respectively[39]. - Revenue from services recognized over time accounted for 19% and 18% of net revenue for the three and six months ended June 30, 2019, respectively[40]. - Revenue from the United States for the three months ended June 30, 2019, was $5.9 million, down from $7.2 million for the same period in 2018[50]. - International revenue for the three months ended June 30, 2019, was $2.7 million, down from $5.0 million for the same period in 2018[50]. - For the three months ended June 30, 2019, net revenue was $8,645,000, a decrease of 28.5% from $12,154,000 in the same period of 2018[121]. - Total net revenue decreased by $3.5 million, or 28.9%, during the three months ended June 30, 2019, compared to the same period in 2018[150]. - In the U.S., net revenue decreased by $1.3 million, or 17.7%, primarily from laser systems sales, which decreased by $0.9 million, or 31.0%[153]. - International net revenue declined by $2.2 million, or 44.9%, primarily due to a $2.0 million, or 50.0% decrease in laser product sales outside the U.S.[153]. - For the six months ended June 30, 2019, total net revenue decreased by $3.2 million or 14.4% to $18.971 million compared to $22.174 million in the same period in 2018[165]. Product Sales Breakdown - For the three months ended June 30, 2019, laser systems accounted for 56.9% of total sales, down from 65.2% in the same period of 2018[54]. - Imaging systems represented only 0.7% of sales for the three months ended June 30, 2019, a decrease from 3.1% in the prior year[54]. - Consumables and other products increased to 24.2% of sales in the three months ended June 30, 2019, compared to 18.9% in the same period of 2018[54]. - Services contributed 18.2% to total sales for the three months ended June 30, 2019, up from 12.8% in the same period of 2018[54]. - Sales of laser systems accounted for 56.9% of total revenue in the three months ended June 30, 2019, down from 65.2% in the same period in 2018[150]. - The company experienced a significant decline in imaging systems revenue, which fell by 83.0% year-over-year[150]. - Imaging systems revenue decreased by $0.3 million or 83% during the three months ended June 30, 2019 compared to the same period in 2018, primarily driven by a focus on laser sales[154]. Financial Position - Total deferred revenue as of June 30, 2019, was approximately $2.5 million, compared to $2.5 million as of December 31, 2018[47]. - As of June 30, 2019, total inventory was valued at $12.334 million, slightly up from $12.248 million as of December 31, 2018[75]. - The company reported a net property, plant, and equipment value of $1.585 million as of June 30, 2019, down from $1.975 million at the end of 2018[76]. - Goodwill remained unchanged at $2.9 million as of both June 30, 2019, and December 31, 2018, with no impairment identified[78][79]. - Total accrued liabilities decreased to $4.899 million as of June 30, 2019, from $7.538 million at the end of 2018[80]. - Long-term debt increased to $13.328 million as of June 30, 2019, compared to $10.836 million at the end of 2018[83]. - The company maintains cash and cash equivalents with established commercial banks, which may exceed federally insured limits[29]. - The company has not had a significant amount of uninvoiced receivables at June 30, 2019, and December 31, 2018[46]. - Cash and cash equivalents decreased by $4.3 million at June 30, 2019, compared to December 31, 2018, primarily due to net cash used in operating activities of $6.6 million[177]. - As of June 30, 2019, working capital was approximately $13.8 million, consisting of $4.0 million in cash and $9.7 million in net accounts receivable[183]. Expenses and Losses - Gross profit for the three months ended June 30, 2019, was $3.38 million, representing 39.1% of net revenue, compared to $4.31 million, or 35.4%, for the same period in 2018[144]. - Total operating expenses for the three months ended June 30, 2019, were $6.72 million, or 77.7% of net revenue, compared to $8.99 million, or 73.9%, for the same period in 2018[144]. - The company reported a net loss of $3.90 million, or 45.1% of net revenue, for the three months ended June 30, 2019, compared to a net loss of $4.91 million, or 40.4%, for the same period in 2018[144]. - Non-GAAP net loss for the three months ended June 30, 2019, was $2.82 million, compared to a non-GAAP net loss of $4.06 million for the same period in 2018[149]. - Net loss totaled approximately $8.8 million for the six months ended June 30, 2019, compared to a net loss of $9.9 million for the same period in 2018[175]. - Cost of revenue for the six months ended June 30, 2019 was $12.070 million, a decrease of $2.763 million or 18.6% from $14.833 million in the same period in 2018[167]. - Gross profit for the six months ended June 30, 2019 was $6.901 million, down $440, or 6.0%, compared to $7.341 million in the same period in 2018[167]. - Sales and marketing expenses for the six months ended June 30, 2019 decreased by $1.4 million or 16.3% compared to the same period in 2018[170]. - General and administrative expenses decreased by $1.1 million or 18.4% for the six months ended June 30, 2019, compared to the same period in 2018[171]. Debt and Financing - The company entered into a five-year secured Credit Agreement with SWK Funding LLC, borrowing $12.5 million to support growth initiatives[94]. - Interest expense related to the SWK Loan was approximately $0.5 million for the period ended June 30, 2019, with a weighted-average interest rate of 12.7%[98]. - The company plans to use proceeds from the SWK Loan to broaden its customer base and increase product utilization for higher margin consumables revenue[94]. - The company has maintained compliance with financial and non-financial covenants under the Credit Agreement, including maintaining unencumbered liquid assets of no less than $1.5 million[95]. - An amendment to the Credit Agreement increased the total commitment from $12.5 million to $15.0 million, with warrants issued for 115,175 shares of common stock[141]. - The company’s total future payments for interest are estimated at $6.721 million as of June 30, 2019[106]. - The company must maintain minimum liquidity of $1.5 million, increasing to $3.0 million if certain revenue and EBITDA levels are not achieved by September 30, 2019[186]. Strategic Plans - The company plans to expand its product line and clinical applications, focusing on new clinical solutions for dental and adjacent medical applications[139]. - The company aims to increase consumables revenue by promoting single-use accessories used with its laser systems[138]. - The company intends to improve financial results by increasing revenues through product expansion and reducing expenses[188].

Financial Performance - Total net revenue for Q1 2019 was $10,326,000, a 3% increase from $10,020,000 in Q1 2018[9] - Gross profit for Q1 2019 was $3,522,000, compared to $3,033,000 in Q1 2018, reflecting a 16% increase[9] - The net loss for Q1 2019 was $4,900,000, slightly improved from a net loss of $5,021,000 in Q1 2018[9] - The Company reported total revenue of $10.3 million for the three months ended March 31, 2019, up from $10.0 million for the same period in 2018[50] - The Company’s revenue from end customers was $6.3 million for the three months ended March 31, 2019, compared to $6.1 million for the same period in 2018[53] - The Company’s international revenue was $4.2 million for the three months ended March 31, 2019, down from $4.3 million for the same period in 2018[50] - BIOLASE reported net revenue of $10.326 million for March 2019, a 3.1% increase from $10.020 million in March 2018[143] - Gross profit margin improved to 34.1% in March 2019, compared to 30.3% in March 2018[143] - The company experienced a net loss of $4.900 million, or 47.4% of net revenue, compared to a net loss of $5.021 million, or 50.1% of net revenue, in the prior year[143] Operating Expenses - Operating expenses decreased to $7,886,000 in Q1 2019 from $8,217,000 in Q1 2018, a reduction of approximately 4%[9] - Total operating expenses decreased to $7.886 million, representing 76.4% of net revenue, down from 82.0% in the previous year[143] - General and administrative expenses decreased by $0.6 million, or 21.2%, to $2.393 million for the three months ended March 31, 2019[156] - Engineering and development expenses increased by $0.1 million, or 10.5%, to $1.424 million for the three months ended March 31, 2019[157] Cash and Liquidity - Cash and cash equivalents decreased to $2,956,000 as of March 31, 2019, down from $8,044,000 at the end of 2018[5] - The company had working capital of approximately $13.7 million as of March 31, 2019[21] - Cash, cash equivalents, and restricted cash decreased by $5.1 million to approximately $3.3 million at March 31, 2019, primarily due to net cash used in operating activities[164] - Net cash used in operating activities for the three months ended March 31, 2019 totaled $5.0 million, primarily due to a net loss of $4.9 million[166] Debt and Financing - The company has a total long-term debt of $10.906 million as of March 31, 2019, slightly up from $10.836 million on December 31, 2018[82] - The company entered into a five-year secured Credit Agreement with SWK Funding LLC for $12.5 million, with interest-only payments for the first two years[93] - The weighted-average interest rate for the SWK Loan for the period ended March 31, 2019, was 12.7%[97] - The company recognized approximately $0.5 million in interest expense related to the SWK Loan for the period ended March 31, 2019[97] - The company entered into a Credit Agreement with SWK, increasing the loan from $12.5 million to $15.0 million, with revised financial covenants[172][185] Compliance and Covenants - As of March 31, 2019, the company was not in compliance with certain loan covenants but received a waiver from SWK Funding, LLC[20] - The company was not in compliance with certain covenants in the Credit Agreement as of March 31, 2019, but received a waiver in May 2019[123] - The company must maintain minimum liquidity of $1.5 million, increasing to $3.0 million if revenue and EBITDA levels are not achieved by September 30, 2019[173][185] Revenue Sources and Product Lines - Revenue from products and services recognized at a single point in time accounted for 84% of net revenue for the three months ended March 31, 2019, compared to 83% for the same period in 2018[39] - For the three months ended March 31, 2019, the sales percentages by product line were: Waterlase (31.8%), Diodes (26.0%), Imaging systems (5.3%), Consumables and other (20.5%), Services (16.4%) compared to the previous year[54] - Revenue from laser systems was $5.964 million, representing 57.8% of total revenue for the three months ended March 31, 2019[116] - Laser systems revenue increased by $0.4 million, or 18%, during the three months ended March 31, 2019, compared to the same period in 2018[151] Strategic Initiatives - The Company aims to improve its financial condition by increasing revenues through product expansion and developing sales force and distributor relationships domestically and internationally[22] - The company plans to expand its product line and clinical applications, targeting adjacent medical fields such as ophthalmology and orthopedics[138] - The company aims to increase consumables revenue by promoting single-use accessories for its laser systems[136] - The company plans to use proceeds from the SWK Loan to fund growth initiatives, including broadening its customer base and increasing product utilization[172] Inventory and Assets - Inventory as of March 31, 2019, was valued at $12.023 million, a slight decrease from $12.248 million as of December 31, 2018[74] - Property, plant, and equipment, net as of March 31, 2019, was $1.733 million, down from $1.975 million as of December 31, 2018[75] - As of March 31, 2019, the company reported goodwill of $2.9 million, with all intangible assets fully amortized[78] Stock and Compensation - The Company recognized stock-based compensation expense of $0.8 million for the three months ended March 31, 2019, an increase from $0.7 million in the same period of 2018[61] - As of March 31, 2019, the Company had approximately $2.1 million of total unrecognized compensation expense related to unvested share-based compensation arrangements, expected to be recognized over a weighted-average period of 2.0 years[61] - The Company had approximately 5.7 million outstanding stock options, RSUs, and warrants not included in the calculation of diluted loss per share for the three months ended March 31, 2019, as their effect would have been anti-dilutive[73] Market and User Data - User data showed an increase in active users, reaching Z million, which is a W% increase compared to the previous quarter[2] - Market expansion efforts are underway, with plans to enter F new markets by the end of the year[6] - The company has completed a strategic acquisition, enhancing its capabilities and expected to add $G million in annual revenue[7]

Financial Performance - The company reported net revenues of $46.2 million, $46.9 million, and $51.8 million for the years 2018, 2017, and 2016, respectively, with net losses of $21.5 million, $16.9 million, and $15.4 million during the same periods[10]. - In 2018, net revenue from laser systems was $29.733 million, accounting for 64.4% of total revenue, while consumables and other generated $8.287 million, representing 18.0%[71]. - International revenue accounted for approximately 38% of total net revenue in 2018, with the U.S. generating $28.661 million and international sales at $17.494 million[73]. - Seasonal fluctuations in revenue are observed, with typically lower sales in the first quarter and higher sales in the fourth quarter due to dentists' purchasing patterns[80]. Product Development and Innovation - The company is focused on expanding its product line and clinical applications to meet future demand for improved dental care[5]. - The company aims to broaden its customer base and increase the utilization of its products to drive higher margin consumables revenue[21]. - The company plans to expand its product line and clinical applications by developing enhancements and transformational innovations, particularly in dental and adjacent medical applications[61]. - The company is exploring collaborations to expand FDA-cleared indications for its proprietary laser technologies in various medical fields, including ophthalmology and pain management[61]. - The company has entered into a development and distribution agreement with IPG Medical to collaborate on new dental laser products and applications[84]. Regulatory and Compliance - The company’s products are subject to extensive FDA regulations, requiring compliance with safety and efficacy standards, which can extend the development process significantly[90][92]. - Medical devices marketed in the U.S. must obtain either a Section 510(k) premarket notification clearance or a premarket approval (PMA), which can take several years[91]. - The company is subject to various federal, state, and local laws regarding safe working conditions and environmental protection, which may incur significant compliance costs[107]. - The company’s manufacturing processes involve hazardous materials, and compliance with environmental laws is critical to avoid potential liabilities[108]. - The company operates under extensive federal and state laws, including anti-kickback statutes, which impose significant penalties for violations, including criminal fines up to $25,000 and civil fines up to $74,792 per violation[109]. Intellectual Property - The company has approximately 255 issued and 73 pending U.S. and international patents, primarily related to Waterlase technology[9]. - The company intends to expand its patent portfolio to protect its technology leadership and enhance its product offerings to dental practitioners[60]. - The majority of existing patents related to core technology are set to expire between 2025 and 2036, with only 4 patents expiring in 2019 and 2020[85]. - The company believes that the number of new patent grants will exceed the number of patents expiring, mitigating potential adverse effects on business operations[85]. Market Strategy - The company formed a Southern California Dental Advisory Board to enhance local market efforts and plans to replicate this initiative in the Dallas/Fort Worth area[19]. - The company aims to increase awareness and demand for its products through education and participation in industry events, targeting both dental practitioners and patients[53]. - The company plans to strengthen its sales and distribution capabilities, expanding its presence in group practices and government channels to drive revenue growth[57]. - The company markets its laser systems through various channels, including educational events and digital media, targeting dental practitioners and patients[66][68]. Operational Challenges - The company relies on a limited group of suppliers for key components, with three critical components supplied by single-source suppliers, posing a risk of manufacturing delays[64]. - The company recorded a contingent loss of $1.5 million related to a settlement agreement with CAO Group, Inc. concerning intellectual property litigation[22]. - The company is focused on improving product quality and achieving high standards for defect-free delivery of products, supported by dedicated maintenance services[59]. - The company operates in a competitive market where traditional tools are generally less expensive than its laser systems, which can cost significantly more than $2,500[88]. Workforce and Leadership - The Company employed approximately 190 people as of December 31, 2018, with no collective bargaining agreements in place[135]. - The executive team includes Todd A. Norbe as President and CEO, John R. Beaver as Executive Vice President and CFO, Ryan T. Meardon as VP of U.S. Sales, and Richard R. Whipp as VP of Operations[136][137][138][139]. Legal and Financial Risks - Future legislation and reimbursement policies may adversely affect product demand, particularly due to potential cuts in Medicare reimbursements, including a 2% cut extended through fiscal year 2025[130]. - The Affordable Care Act mandates coverage of essential health benefits, which may increase third-party reimbursement availability for certain medical procedures using the Company's products[131]. - The Company cannot guarantee that government or private payers will cover procedures using its products in the future, which could impact financial performance[132]. - Third-party payments may not cover providers' actual costs, leading to potential challenges in product adoption despite clinical benefits[134].

BIOLASE, Inc. (OTCQB:BIOL) Q4 2018 Earnings Conference Call March 5, 2019 4:30 PM ET Company Participants Todd Kehrli - Investor Relations, EVC Group Todd Norbe - President & Chief Executive Officer John Beaver - Executive Vice President & Chief Financial Officer Conference Call Participants Ed Woo - Ascendiant Capital Lisa Springer - Singular Research Brooks O’Neil - Lake Street Capital Markets Operator Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2018 BIOLASE Earni ...