ReShape Lifesciences (RSLS) 12 Nov 202020 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the RSLS Third Quarter 2020 Earnings Call.

I will now turn the conference over to your host, Mr. James Salierno.

Good afternoon, and thank you for joining us on today's call. I'm pleased to be joined by Bart Bandy, Chief Executive Officer of ReShape Lifesciences, who will provide an overview of the company's recent activities and business highlights. Bart Officer the will then third call over Financial financial review turn Chief back for results quarter to Stankovich, of then ReShape, the the Tom finish. to XXXX and

and filings from the Act this the reminder, risks, on Form materially Private meaning additional could discussed as identified the filings Commission, described well and Lifesciences' www.reshapelifesciences.com, call As XX-K of XX-Q. in forward-looking to results and known unknown section factors. statements differ Exchange a at Form uncertainties of These conference quarterly on website factors company's risks Information more risk in and of Reform XXXX. our and factors contain the due as Actual with Securities as those ReShape other and those Litigation SEC are website, the in Investor Securities and the our including report uncertainties within including report fully annual

trading is As an additional RSLS. OTC, stock reminder, listed under ticker our the

I Bart? will CEO, Bart call Bandy. the now to over turn

Good afternoon, everyone, joining James. you thank today. us for and Thanks,

gains to second quarter as result our executed see be very are milestones traction of started our May global the successfully we for Despite at ReShape our proved to impacted quarter. in as deliver we and third The June on plan. pandemic, we strategic on quarter this team increased revenues continued seeing to pivotal the with a encouraged by and

million from to ability hard the difficult same quarter XXXX, market months in XX, growth our team work the a As pandemic for to our a environment. the year-over-year ended is result of for $X.X We global in were period compared increase efforts, a our the believe X the to and through revenues XXXX. as on revenues of to sales despite we $X.X execute initiatives million able to third headwinds the September testament

numbers LAP-BAND by with surgery for the quarter, the we U.S. return setting and acceleration result in elective from believe purchase the states. which patterns procedures the attention Specifically, associated some to ambulatory increased to in amplified an observe unique continued factors be obesity on the risk LAP-BAND, we demonstrated previous our of COVID increased of

have month we over continue patients come with supporting several accounts unique back option. fact, online previously the In withdrawn to seen this surgical venue past their

increased levels and We seen recently as conducted participation profiles have LAP-BAND clinical social demonstrated webinars digital of leaders safety our the and excellent educational marketing. data by in on also through media the on for interest efforts increased opinion factual key efficacy as well our

by where we We equally in prime enhance health were support encouraged in for also as our international their the the mention with their population, gastric of growth of large surgeries specific government have U.K. banding. provided Notably, the strong and continued more obesity minister growth to saw sales.

the the quarter, up continue and England Recently, we analyze restrictions, Greece, with on of large protocols Following number in These we domestic both follow spike on partial in Austria. the has tighter Germany, cases implementing European in countries. COVID-XX countries in sales a including several positive to foreign shutdown new began markets. those third trends controls France, and were a had the reporting and for impact monitor new

enters number will its anticipated sustained the may this internationally region, we as monitor and winter for While we headwinds this impact procedures the continue plan and potentially impact domestically. pandemic to of LAP-BAND season, in the

or concern BMI a put mindful defined higher illness The as The This impact assess X/X obesity have above, of roughly we the at COVID-XX. with for COVID-XX research severe of COVID-XX obesity, U.S. higher with the people mortality. As prevalence Centers conditions failure, hospitalizations that person's represents among for also are increases mechanical including need higher high population risk. this with Furthermore, a with is noted by of that from current public business, XX indicates those adult ventilation of and the that in Disease Control obesity. is of we risk our condition on a the emphasized COVID-XX recently the of risk very infection, population which respiratory

current for has surgical and international treatment Unfortunately, due obesity reduced or in to and complications countries many its postponed been states the pandemic.

the those for be best life-threatening However, Surgery Bariatric and is with disease or resumed a banding weight bariatric life-limiting for necessary loss should our the associated treatment in American is and laparoscopic of and surgery FDA-approved Metabolic with medically as metabolic for argues it U.S. insurance-covered that adjustable LAP-BAND Society gastric Currently, the outpatient, XX higher BMI obesity. indicated device system the only and

patient unique and the reimbursed place provides physicians a type and procedure progress accelerating and ReShapeCare patients by on for LAP-BAND provides continued that's the we live of patient ReShapeCare our loss we -- a clinicians resource encouraged very is and for support medically aftercare improved regardless the engagement recently with patient's resource emphasis therapy. we virtual or launching telehealth-enabled of growth, outcomes. customizable that achieved their are weight service. in model Its managed platform enhanced reimbursed a While

have and loss program of the patients to health in non-surgically, care may to support weight necessary hurdles. surgery, their supervised lost loss supporting facilitating changes to patient This needs: providing lifestyle reducing previous contact access garners patients after potential helping key medically patients several address with who by simplifying professionals, adjust patients programs, weight enrolled engagement

for an in growing June we the of speak XXXX, increased environment. to safe and the a After need as health ReShapeCare current virtual launching a continue virtual for demand their has care climate given services physicians see patients to in to pandemic created

and benefits far paradigm to that confident are adoption continue continue this post-COVID to and We benefits demonstrate will demonstrate the into future. new

program with care quarter, believe to early have the health enrolled and impact During the quickly positive with launch first XX top on full care the our providers, launch loss We this soft health the as we excited enhance incorporation see overall will momentum professionals ReShapeCare. relationships market in the were this immediate these help our service our in line. position physician of an and strengthen weight continued

quarter. X proud company completed to X financial audits And Our and had our past very the separate over teams nonconformities that announce identified. are operations, regulatory we quality,

operations to that On continue LAP-BAND technology on following make acquisition. the manufacturing front, progress of excellent we the transfer the

to track process finish on year end QX are at of the independent We in this first production of our this XXXX. with

expansion a offer product research Our remain services to also development offerings. our through and were and of efforts able area where shareholder an focus we key an additional value and

device particularly be tolerated, safe treatment diabetes, September. study. X meeting end of the points We shown and demonstrated for by by for the Neuromodulation preclinical which was results all device to are well investigational type announced in encouraged The Bloc-Stim positive Diabetes our the we

of the these diabetes to further results the on and successfully diseases. exploration Based from strong Business I of investigating pipeline, for National portfolio positive neuromodulation study, provides this Institutes and Small complement Research completed the Health of a our grant. believe We metabolic to Phase focused obesity the and on we goals Innovation have improving our look preclinical innovation unique treatment forward of

sites during a We're trial. a closed also trials its Vest ReShape COVID-XX. our the European clinical very we -- to did optimistic about due as we as the clinical offers the for ReShape hospital-based to investigation in being experience the slowdown continue Gastric result of clinical Unfortunately, potential support Vest

milestone continued expect be to patients monitored to virtually, in and However, reports currently we trial this have coming have enrolled months. the in

as with trial, to soon and to have are Spain, preparations them as continue continuing that patients available ensure additional return those of sites will maintained prepared these work necessary outside engaged sites to We that elective countries. and keep for the the to are surgeries

costs. in revenue a we addition In and manage and on continued driving to we to expenses made clinical reduce the efforts programs, our and our advancing have progress initiatives emphasis maintain

and total million able operating on without expenses During this on research year-over-year and significantly initiative development the reducing quarter, a by $X.X reduced execute we expenses. our basis were to approximately

believe have by well coming platform, into milestones gained We product company remains the during growth as continued the and of these are time lines months on XXXX encouraged year. we executing third and remaining and of associated our the quarter and we the for service positioned the efficiently head momentum

over turn financial for now I'll our Tom that, with to And it results. detailed

and Bart, everyone. afternoon, Thanks, good

quarter COVID-XX. slowdown mentioned, Bart by growth were year-over-year encouraged despite As our from third the in we very revenue

operations reduce cash Additionally, financial we our continue our condition. and burn overall improve to to

$X.X primary in reason The Revenue months XX, was million to increase XXXX, compared XXXX. for $X.X the September Europe. revenue in the XX, revenue for million ended increased the for was X sales September ended to in months X due

$X.X Gross selling profit for XX.X% period margin $X.X a the X was primarily of due prices third months the to margin gross in a expenses. average XXXX, reduced The representing for gross quarter million margin at XXXX was ended increased increase XX, profit to September compared gross XX.X%. and of of million,

$X.X to were expenses marketing X primarily The September compensation. September months from months COVID-XX higher increase $X expenses and million for to offset XXXX. X XXXX, for in the reduced million due ended due sales the compared were to pandemic. XX, XX, ended by a travel was payroll-related expenses $XXX,XXX Sales expenses, reduction of These travel approximately the stock-based and global commissions partially

an of of audit, offset million and continued fees quarter stock-based $XXX,XXX expenses reduction primarily in other administrative and by to September professional million the decrease XXXX million compensation and of decreasing for legal related XX, consulting General a in million, compared was increase were The partially our $X.X of emphasis $X.X $X.X for third expense. X expense expenses driven XXXX. the debt specifically ended costs our by provider service $X.X in bad to and months

XXXX. $XXX,XXX due the partially quarter of slowdown the by X to XX, in September result to development its development trials the $XXX,XXX The in the months and increase as clinical Vest expenses. Research expenses pandemic, an payroll-related expenses were research ReShape of ended company decreased and for COVID-XX third compared offset for for a XXXX the

Total for an ended reduction the for of compared XXXX, the quarter million XXXX operating of $X.X million September third expenses $X.X X $X.X for to overall million. XX, were months

of back XXXX. a third On amongst basis, XX, loss of where amortization the $X.X expense, EBITDA adjusted X million compensation non-GAAP we and ended other September $X.X depreciation expense, add the XXXX for stock-based to million months compared warrant was loss quarter the items, and for a

Our a operating the for to be we reduction programs. in cost-cutting expenses company. were significantly priority And achieve key to this initiatives our compromising excited development without continue

sheet. to balance Turning the

entered had XXXX, $X an by million an $X.X existing under September to of increased of company cash to delayed-draw XX, $X agreement into available September amendment was XX, which of the On amount December XXXX. XX, million the million, term XXXX, of we million as credit total upfront. compared that received As loans $X

in XX from In to including amendment, to March the extended under was the those term under increase the under the addition the of date loans, September loans XXXX. delayed-draw the maturity available credit XX, amount agreement,

this during continue to time of third our expenses position burn successfully we to company Looking future the quarter, better reduce operating cash to back savings related the uncertainty at COVID. for and

For overall to we growing condition. the further of strengthen our operating this we sheet, improve year, balance revenues expect financial to while our prioritize to remainder continue expenses and will monitoring

back With will to that, turn call I over the Bart.

Tom. Thanks,

by As company's we remain pleased We to in these optimistic head persistent extremely see believe in third are final beginning will with value which cases continue XXXX. the into to upon situation, challenging adjust that to objectives adaptations a and subsequent to Europe we in restrictions, am our impact. as the of and I confident is shareholder will to monitor we fluid vigilance this and towards strategy will that market and driving remain dynamics to continue and diligence quarter overcome as execute ReShape months that COVID-XX ability our require spikes execution and needed.

as We clinicians will and patients. trusted weight work our determinedly we everyone clinical updated keep company the loss of towards preferred being to for goal continue and

your support. to Thank investors, continued for to you. sharing with you forward look our Board, and our We future customers employees

does and Ladies Thank this participating. gentlemen, for conclude you all conference. today's

You great Have may day. all disconnect. a