Edap Tms SA (EDAP) 2004 Q1 法說會逐字稿

Good day, all sites are on-line. At this time, I'd to turn the call over to Ian Vawter.

Thank you, Joe 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 first quarter 2004.

On the call with me today is Philippe Chauveau, Chairman and Chief Executive Officer of EDAP TMS, and Hugues De Banterl, President of the Company's two operating divisions.

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 not limited to those described under the risk factor section of the company's filings with the Securities and 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 will now turn the call over to Philippe Chauveau.

Thank you, Ian. Thank you all and welcome to our first quarter 2004 financial results conference call.

First, before I turn over the call to Ian again for a review of the results that we released yesterday, I would like to say as Chairman and CEO that I am pleased with the results of the first quarter and I am very proud of Hugues - Hugues De Banterl and his team for orchestrating such a dramatic turn around.

There are still changes before us, but I truly believe that the first quarter shows that the Company is on the right track, and that Hugues is the man to lead EDAP TMS forward.

With that said, I will now turn the call back to Ian for a financial review with some additional comments and then Hugues will continue with comments relating to the operations of the business in the first quarter and conclude with a discussion of future course of the business in 2004 and beyond.

Following Hugues's comments, he will then open the call for a question and answer session where Ian and I will join Hugues in responding to your questions.

I'll now turn the call over to Ian for comments on the results. Ian?

Thank you. As Philippe mentioned, I'll begin with the review of the results released yesterday, and will then follow-up with some comments detailing some of the specific financial events that occurred during the first quarter.

As always, please note that all of the figures that I discuss here today are in euros. For your convenience, these numbers are translated into U.S. dollars in the tables attached to the press release of yesterday.

Revenues for the first quarter 2004 were 5.8 million euros, compared to 4.4 million euros in the same quarter of 2003. And versus 4.6 million euros in the fourth quarter of 2003.

This equates to a 32% increase over the prior year same period, and a 26% increase sequentially. As we mentioned in the press release, these increases were primarily due to an increase in the number of machines sold in the quarter versus the prior year.

Gross margins as a percent of sales were 37% in the first quarter of 2004 versus 36% in the first quarter of 2003 and 17% in the fourth quarter of 2003.

While the euro remained consistent to the budget during the quarter and therefore had a negligible budget effect, should the euro strengthen in the future, there would be a negative effect on future gross margins.

Operating loss for the first quarter of 2004 was .2 million euros, compared to 1.2 million euros in the first quarter of 2003. Even with the consolidated loss, the Company's operating divisions posted a combined 164,000 euro operating profit, a first in the history of the operating division.

Net loss for the first quarter of 2004 was near break even with a consolidated loss of 13,000 euros, versus a net loss of 1.4 million euros in the first quarter 2003.

At March 31, 2004, the Company had 9.3 million euros in cash and a net book value of 19 million euros. The Company's HIFU division had a very encouraging first quarter.

As we mentioned in the press release, the division achieved a very important milestone: Operating profit. The division also sold three units and added eight new sites with access to HIFU technology.

The success of the HIFU division in the quarter clearly confirmed the benefits expected from the restructuring.

Interest continues to grow in both the physician and patient communities in Europe, and now in the United States as well, as a result of the company's partnership with Healthtronics Surgical Services, Inc.

Total revenues in the first quarter for the division was 1.8 million euros. The Company's Urology Devices and Services Division experienced another strong quarter with 9 lithotripters sold, which includes the first units sold in the United States to Healthtronics.

The UDS division ended the quarter with a backlog of five machines, which positions the division to have another strong quarter. This further validates the division's plan to lower pricing to gain market share.

UDS division's results continue to be impacted by the strength of the euro, however, as I mentioned earlier, the euro stabilized during the quarter and had a negligible budget effect on the first quarter. The division for the first quarter had 4.6 million euros in total revenue.

Moving on to the balance sheet, the Company's cash position at the end of the quarter was 9.3 million euros. The Company continues to manage its cash balances to ensure enough liquidity to realize our business plans and reach profitability.

I will now turn the call over to Hugues De Banterl to give more specifics on the results of 2003 from an operation view, and to discuss the prospects for the business of 2004 and beyond.

Hugues?

Thank you, Ian and good morning, everyone. The first quarter was a very, very rewarding quarter for both myself and the team of managers and employees that work so diligently to produce the result that we see today.

I would like to take the opportunity of this conference call to congratulate all our team for the huge work they performed over this crucial quarter.

I'm convinced that we now have the right organization to grow our two businesses while remaining tentative toward strong control of our operational costs. This is the good stuff, but more is yet to come.

Each division has total restructuring at the end of 2003, is now in a position to maintain the result of the first quarter as we moved in to the balance of the year.

The UDS division continued to successfully implement its strategy to aggressively take market shares against competition. Thanks to a good acceptance of our superior technology. I am particularly pleased with the strong demand for our high-end products that [inaudible].

This is the first time high-end units sold are greater than low-end. With a clear strategy in place to reduce our cost of sales, I'm confident that UDS division is on target to increase its financial results by the end of the year.

EDAP, the HIFU division, is focusing on continuing to increase awareness of the Ablatherm technology in our key markets. Consistent, scientific provocation from leading centers in Europe contribute to establishing HIFU with Ablatherm a solid option to cure localized prostate cancer.

Our clinical credibility is now widely accepted and will greatly contribute to securing our growth. Our goal is now to start spreading HIFU with Ablatherm to more centers in Europe while preserving the quality of work done so far.

We believe that our strong clinical credibility built over the years, combined with a very professional training, places us well ahead of competition.

And just back from the AUA held in San Francisco and for me, the [inaudible]. This year, for many doctors, the only thing new was HIFU. The urology world in U.S. is now really interested in HIFU.

Our partnership with [inaudible] in the U. S. shows we work well as a team and should [inaudible] in our working relationship with the ADA.

With that, I turn the call back over to the operator for questions. Joe?

Yes, thank you. At this time, if you'd like to ask a question, please press the star and 1 on your touch-tone telephone.

If your question has already been answered, you can withdraw your question from the queue by pressing the pound key. Once again, to ask a question, please press the star and 1 on your touch-tone phone.

Our first question comes from [Mark Windling] with [Gun Allen] Financial.

Good morning, or afternoon to you. I was very pleased with the results, as well. But it does give rise to a couple of different questions, if I may. I guess the first question I would have is, can you tell us if you have sold any machines in Canada yet?

No, we haven't sold any machines in Canada yet.

Will you emphasize that or is that an - is that a geographic area that perhaps Healthtronics may be interested in pursuing, given their geographic location?

We've gone through lengthy discussions with Healthtronics about this - reducing the product in Canada. But really as we have discussed, the Company has begun to forecast its efforts on growing. It's called business in Europe first. And really for us at this point in time, Canada is a secondary market as it relates to the Company's current plan.

Okay. In the press release, one of the other - items that was mentioned as it relates to Healthtronics and filings with the FDA brings to mind a question.

Will Healthtronics have the ability to use the results of the years that EDAP has had with the Ablatherm machine, to, you know, to use that as many pharmaceutical companies will? Or are they going to have to start from ground zero?

I mean, I - I believe that it's too soon to tell. At Healthtronics it's currently in discussion with the FDA and preparing to submit an I.D. So, what they do at the moment is really having altered discussion with the I. D., and see with them what will be the best protocol for a trial in the U.S.

So, it's too soon to give additional information on that at the moment.

Okay, thank you very much.

Thank you. If there are further questions, please press the star and 1 on your touch-tone phone, please. Our next question comes from [David Ginter] with Oak Ridge Financial. Please go ahead.

Congratulations.

Thank you.

It took a while! Could you compare the focus equipment, the focused HIFU equipment to yours?

Well, it's quite difficult to do that at the moment. What we can say is that EDAP has been treating more than 5,000 patients in Europe with the Ablatherm. We've got long-term [inaudible] on the Ablatherm, more than five years result.

Where we simply had a [Nautical Urology] showing their results at five years, and focused surgery seems to be at a very early stage compared to us.

Now, as far as the technology is concerned, we're still waiting for them to come to Europe to really analyze where they stand compared to us.

So, again, to summarize that, I will say that clinically speaking, we are far ahead compared to them, and as far as technology is concerned, we'll see in the next few months if and when they come to Europe.

Okay. Possibly could you address is there -- is one easier to use than the other? One procedure easier done?

Well, at least what I saw from -- from the product at the moment -- it's quite difficult to tell.

I mean, our product is easy to use, I can commit to that. It's very rarely we shift in Europe. Our training program is in place in Europe.

New centers using the device find is very convenient to treat localized prostate cancer and I cannot comment their product at the moment.

Okay.

Could you comment on the stock? Just in regards to the current price, the activity that took place, you know, a few weeks ago a million shares traded one day? And then also Ian, you told me that you thought if the Company ever become profitable, a more realistic value for the stock would be approximately $8, the offering price you stated?

Did I? Let me - let me come in here and answer some of your questions. The first is what happened on that famous Thursday when a million shares changed hands.

Yes.

Secondly, what is the price -- what is our view of the price today?

Yes.

And thirdly, what is our view of the price at some stage.

Yes.

Okay. Let me answer question number one. Last Thursday, over 1 million shares were exchanged, and normally we run in terms of liquidity in terms of number of shares sold per day between 20 and 40,000.

So, this was an enormous amount of trading. We asked all the right questions to all the right people in terms of who was in - behind, if anyone was specifically behind these trades? And was there any view of somebody buying a block of shares?

And we went up and down on this, in fact, on the Friday after that, and lo and Bo hold, there is no one.

We believe -- and the market will tell, but that there were a lot of shareholders who, in there minds, have a certain price in terms of where they wanted to go and when that happened, they sold and others bought.

So, that's what happened on that Thursday.

Subsequently, the trading has gone back to what I would call more usual sort of liquidities of the past. In terms of our comments on today's price, frankly I can't comment on that, I can only give you one valuation and that is if you multiply the number of shares, which is 8 million by $3, which is roughly the -- the trading mid point, that equates to our revenue for the -- for the following year.

Whether that's a valuation that makes sense or not is for the market to decide.

Your third question in terms of the future value of the share, frankly I can't comment on that and maybe you, as a buyer of shares and seller of shares could give us more - of a view on that. Does that answer your questions?

Yeah, I guess it's -- it's interesting when you -- what day did you bring out the article saying you're going to meet your expectations for the quarter?

Yes.

It seems that anytime the market is made aware of your company or what goes on, the activity picks up.

But what's strange is you come out with the earnings last night and we're back to 4600 shares of trades today.

Well, that's only -- I believe that maybe after the conference call there may be further reaction to this, I don't know.

Well, I think as the public becomes more educated with exactly what you're doing, you'll see a greater stock price. But, what I want to say is congratulations for a good quarter.

Thank you.

Thank you.

Okay, thank you.

Once again, if there are any further questions, press the star and 1 on your touch-tone phone at this time. Gentlemen, it appears we have no further questions.

Okay. Ian, do you want to close the call?

Okay, on behalf of the management of EDAP TMS we thank you very much for participating in today's call, and we look forward to reporting to you in the future on the successes of the company.

If you have any questions, as we move forward, Philippe, Hugues, and myself remain available to field those phone calls.

Thank you and have a good day.

Thank you, Ian. Goodbye.

Thank you, gentlemen. That does conclude today's presentation. You may disconnect your lines at this time and have a great day.