Edap Tms SA (EDAP) 2003 Q2 法說會逐字稿

Thank you for waiting on the conference line. You are in listen-only mode. If you should need assistance at any time, please press the star zero on your touchtone phone. At this time I will turn the call over to Ian Vawter. Go ahead, please.

Thank you, Cathy, and good morning, everyone. On behalf of EDAP TMS I would like to welcome you to the company's conference call to discuss the financial results for the second quarter 2003.

On the call with me today is Philippe Chauveau, Chairman and Chief Executive Officer of EDAP TMS. Before we begin, I would like to remind everyone that some of management's remarks today may contain forward-looking statements regarding the company's growth and expansion plans. These forward-looking statements are based on the management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described therein. Factors that may cause such differences include, but are no limited to, those described under the risk factors of the company's filings with the Securities & Exchange Commission. These forward-looking statements speak only as of today's date, and the company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the company's expectations or future events.

With that said, I now turn the call over to Philippe Chauveau.

Thank you and welcome to EDAP TMS second quarter 2003 financial results conference call. We will follow our normal format today. First Ian will review the results that we released yesterday, and he will add some financial comments. Then I will finish with a few comments relating to the quarter of the business. My comments, as usual, will then be followed by the question and answer session, and then that will be opened up to all of you.

With that, I'll turn back to Ian for comments on the results.

As always, please not that all the figures that I discuss here today are in euros, and that for your convenience, these numbers are translated to US dollars in the tables attached to the press release.

Revenues for the second quarter 2003 were 4.7m euros, compared to 4.7m euros in the same quarter of 2002. Revenues for the first six months ended June 30, 2003 were 9.1m euros, compared to 9.8m euros in the same period 2002.

Gross margin, as a percent of sales, remain consistent, sequentially, in the second quarter at 35% versus 43% in the second quarter of 2002.

As we mentioned in the press release, the primary reasons for the decrease in gross margins are related to continued strength in the euro, and strategic targeted decreases in average selling prices.

Operating loss for the second quarter of 2003 was 1.5m euros, compared to 800,000 euros in the second quarter of 2002. And 2.7m euros in the six months ended 30 June, 2003, compared to 1.5m euros in the same period 2002.

Net loss for the second quarter 2003 was 2.1m euros, versus a net loss of 1.2m euros in the second quarter of 2002, and was 3.5m euros in the six months ended 30 June, 2003, compared to 10,000 euros in the same period 2002.

The company's HIFU division continues on track. During the quarter, the division sold two machines, and received fixed asset financing for its first CPP unit from one of our new financing partners.

Total revenues in the second quarter 2003 for the HIFU division were 1.3m euros, with an operating loss of 1m euros. Total revenues for the first six months of 2003 for the division were 2.1m euros, with an operating loss of 1.9m euros.

The company's urology devices and services division continued to have strong unit placements during the quarter, with eight lithotripters sold and a backlog of seven machines.

The UDS division has been able to make inroads in the replacement of competitor installed base, and has been able to increase its own installed base by a net 10 machines in the first six months of 2003.

The division for the second quarter had 4.2m euros in total revenues, with operating income of 130,000 euros. And total revenues for the first six months of 2003 for the division were 8.3m euros, with an operating profit of 240,000 euros.

The overall decline in revenues versus the prior year, as we've mentioned in the press release, is primarily due to a 600,000 euros effect, caused by a strengthening of the euro and a decrease in TUMT revenues of 600,000 euros.

As a note, TUMT manufacturing revenues will be completely phased out over the balance of the year as our supply agreement with Urologix will terminate in October, and no new agreement is expected to be in place to continue manufacturing.

The company continues to actively manage its operating expenses, and is constantly reviewing its needs. It has decided that current projects warranted increases in sales and marketing expenses in our HIFU division as it proceeds into new markets. As we mentioned in the press release, one such strategic increase in these expenses came with the opening of a sales office in Germany.

Finally, the company's cash position at the end of the quarter remains strong with 12.8m euros in the bank. The company continues to manage its cash balances to ensure enough liquidity to realize our business plans and reach profitability.

One final note on the balance sheet: during the quarter, EDAP TMS divested itself of the final shares that it had held in Urologix.

With that, I'll turn the call over Philippe, for his comments on the business.

Thank you, Ian. Before we open the call to questions, I would like to give an update of the progress of the business.

We are very pleased with the quarter of our HIFU business. Even with the challenges in Italy, which we discussed in the press release, we were able to grow this business during the quarter. During our second quarter, the company sold two machines and was able to increase visibility in Europe, with a significant amount of media coverage and to confirm Ablatherm's leadership position in the treatment of localized prostate cancer, during the third HIFU annual congress held in Lyon on the 22nd - 25th of June this year.

Our urology devices and services division sold eight machines during the quarter, and continues on track for another record-breaking year. Even with the strength of the euro, we are seeing the benefit of strategically decreasing prices so as to gain additional market share. This market share increase in our installed base will only strengthen the future earnings potential of this division, particularly on the service side.

Lastly, I'd like to reiterate that we continue to track with our internal projections, and plan crossing over to profitability and cash flow positive for the whole business over the course of the next several quarters.

With that, I'll now happily turn the call back to the operator and open the conference to questions. Cathy?

Okay. If you would like to register for a question, please press the star one on your touchtone phone. If you need to withdraw your question, you can do so by pressing the pound key. Once again, to register for a question, press the star one on your touchtone phone.

We'll take our first question from [Mark Winderling] from [Tim Allen Financial].

Hi, how are you?

Good morning, Mark.

I guess my question is really singular. First of the year, you mentioned that you would have an announcement concerning an American partner, or at least some sort of a relationship. I was wondering if that was still on track, that you would still have that announcement forthcoming this year?

Let me tackle that, Mark. The comments that we made at the beginning of the year don't change, as it relates to the US partner. It is an ongoing process, and it is dependent on several factors. As soon as we have something of a material public nature to announce, we will make that announcement.

Okay. Our next question comes from [Julianna Nager] from [Mercovia Securities]. Go ahead.

Good morning, Julianna.

My question is about when the company's target date for reaching profitability is. I know it was briefly mentioned that it would be within the next several quarters, however, I wondered if there was a specific quarter of the next year, or possibly next year?

Could you repeat that question because it wasn't clear to me? Although I think I've got it, could you have another go?

No problem. When does the company--? What is the target date of reaching profitability? I know you briefly mentioned it would be over the next couple of quarters.

Let me address that because, in fact, I address this virtually every quarter. We have, internally, an approved plan by our board of directors, to cross over the line of both profitability and cash flow positive. We have also mentioned, over the last few quarters, that we do not wish to release that date, on the basis that we do not give forward-announcing statements. However, let me reassure you that we are on plan to that crossover line, both in terms of cash and profitability. And we're happy to report this quarter that we are tracking to this plan. I cannot give you the specific date because we cannot give that one to you. But as soon as I have it, I will let you know.

But if you remember, [Ralph Brian] also brought up that question. We gave him that response when Ian saw him in [La Jolla] not so long ago, and also in the last conference call.

Once again, if you'd like to register for a question, please press the star one on your touchtone phone. Our next question comes from Ralph Brian, Mercovia Securities.

Good morning, Ralph. Are you guys not in the same place?

Yeah, we're sitting across from each other. But she has different questions than I have. I just have one question. I didn't have time to dig through the press release because it came out late last night. I'm wondering if you can address the total number of procedures in the HIFU division that you did in the first quarter, and if you have any projections for the total number of procedures for the year? This is pretty important in our model.

Let me address this, Ralph. Firstly, we are tracking this on a quarter to quarter basis. But, as you know, we are not releasing quarter to quarter numbers. I can respond to your question by saying we are trending to expectations in our second quarter, we expect a big acceleration in the second half, and our growth of numbers of treatments, versus previous years, is also on track.

Okay. Can you tell me how many machines you actually have out in the field right now that are doing procedures?

26.

26?

Yes.

Okay. Then previously, you said your target was to have 20 procedures per month per machine. Does that seem appropriate?

I do not recall that number. Ian, do you want to comment?

I think that's a number that came from what we would be looking at for each machine to have as a normal profit. So that placing the machine makes sense, and that number doesn't change.

Thank you very much.

We now have a follow up question from Mark Winderling from Tim Allen Financial. Go ahead, please.

I was wondering if you had made any Ablatherm sales in Canada yet?

Ian, do you want to respond?

No, we have not. That is a market that we have just received approval in. With that type of large capital equipment sales, there's a pretty good lead time to it. But as of today, there are no sales to announce in Canada.

There are no further questions.

We have a lady called Clare Allen, is she on the line?

She is on the line, but she didn't register for a question. Would you like me to open her line?

Well, you can ask her if she wants to ask a question, but if she doesn't want to open the line, that's up to her.

Miss Allen does not wish to register for a question.

Very good. Thank you very much, Cathy. Thank you for participating and either listening, or those who ask questions - the questions you've raised, we welcome them and it keeps us on track with what your expectations are in terms of how you want us to go. Thank you very much, and I will talk to you at our next conference call in November. Thank you and goodbye.