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spk02: Greetings and welcome to Ascensus Surgical Inc. 2022 First Quarter Financial and Operating Results Conference Call. At this time, all participants are in listen-only mode. Our question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Now I'd like to turn the conference over to your host, Mark Klosner from Westwick Partners. Sir, please go ahead.
spk01: Good afternoon, everyone, and thank you for joining us for the Ascensus Surgical First Quarter 2022 Business and Financial Update Conference Call. On the call with me today are Anthony Fernando, President and Chief Executive Officer, and Shamiz Rampertab, Chief Financial Officer. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including any guidance provided, are forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business, including any impact from the COVID-19 pandemic and other geopolitical factors beyond our control. The company undertakes no obligation to update the information provided on this call. For discussion of risks and uncertainties associated with the Ascensus surgical business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2021 Form 10-K, filed in February 2022, and the Form 10-Q, expected to be filed later today, and any other filings we make with the SEC. During this call, we will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and the adjusted net loss per common share attributable to common stockholders. Management believes that these non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of the company's core operating results. Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions. Reconciliations from U.S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the investor relations section of our website. It is now my pleasure to turn the call over to Ascensus Surgical's President and Chief Executive Officer, Anthony Fernando.
spk04: Thanks, Mark, and thank you all for joining us today. On today's call, I will provide an overview of our recent accomplishments and then ask Shamice to review our financial performance, after which I will discuss our performance during the first quarter, as well as our priorities for the rest of 2022, before turning to Q&A. Before turning the call over to Shamice, I would like to provide an overview of our recent performance. Despite headwinds associated with COVID spikes early in the first quarter, as well as the ongoing political instability in Eastern Europe, we drove strong procedure volumes as a result of continued increase in system utilization globally, with total case volumes increasing 29% year over year and 16% sequentially over the fourth quarter. While we are disappointed by the slowdown in news enhanced program initiations, we have experienced thus far in the year, which in large part are due to the macro factors that I mentioned. During the quarter, we continued to leverage events aimed at driving awareness and growing our pipeline of hospital customers. During the first quarter, we attended multiple highly impactful industry events, including the Society of American Gastrointestinal and Endoscopic Surgeons, or SAGES, in March in Denver, Colorado, and the German Surgeons Congress, also known as DCK, in Leipzig, Germany, in April. Feedback at both events was extremely encouraging, as both surgeons and hospital administrators were highly engaged with Sennhans and our vision for performance-guided surgery. As we continue to focus on the development of SENHANCE and components of performance-guided surgery, during the first quarter, we announced the expansion of our Digital Solutions R&D Center in Yoknam, Israel. Since opening the center as part of our acquisition of MST in 2018, we have continued to put together an incredibly talented and growing team of engineers developers, and scientists who are working together to bring innovative augmented intelligence capabilities to the platform. And we look forward to updating you on our progress in the quarters to come. With that, I will turn the call over to Shamis for a financial update.
spk00: Thanks, Anthony. Turning to the first quarter, for the three months ended March 31, 2022, the company reported revenue of $1.1 million dollars as compared to revenue of $2.1 million in the three months ended March 31, 2021. Revenue in the first quarter of 2022 included $0.4 million in lease revenue, $0.4 million in instruments and accessories, and $0.3 million in services. Where the three months ended March 31, 2022, total operating expenses were $18.2 million as compared to $14.4 million in the three months ended March 31, 2021. Where the three months ended March 31, 2022, net loss attributable to common stockholders was $19.1 million or $0.08 per share as compared to net loss attributable to common stockholders of $17.3 million or $0.08 per share in the three months ended March 31, 2021. Where the three months ended March 31, 2022, The adjusted net loss attributable to common stockholders was $16.6 million, or $0.07 per share, as compared to an adjusted net loss of $12.2 million, or $0.06 per share, in the three months ended March 31, 2021. Adjusted net loss is GAAP net loss adjusted for the following items, amortization of intangible assets, change in fair value of contingent consideration, and change in fair value of warrant liabilities. all of which are non-cash charges. Adjusted net loss attributable to common stockholders is a non-GAAP financial measure. Reconciliation from GAAP to non-GAAP measures can be found in our earnings release. Turning to the balance sheet, the company had cash, cash equivalents, short-term and long-term investments, excluding restricted cash, of approximately $118.5 million and working capital of $110 million as of March 31, 2022. I would now like to turn the call back over to Anthony.
spk04: Thanks, Shamis. I would now like to provide an update on recent performance as well as the progress we have made on the key focus areas for 2022. As a reminder, those are, first, the continued market development of the Senhan system, and second, the ongoing development of our product portfolio and continuing the technological advancements of Senhan. Starting with market development, As one of our key focus areas is raising awareness of the SENHANCE system and the health economic benefits of digital laparoscopy, we continue to seek out publications that provide relevant data to support increased adoption. During the year, we will continue to work to publish additional peer-reviewed papers that focus on the clinical, economic, and workflow benefits of digital laparoscopy performed with SENHANCE as compared to traditional laparoscopy and also showcase how digital technology and real-time clinical intelligence can be helpful to surgeons and patients. During the quarter, we had four papers published, which further demonstrate the safety and feasibility of SENHANCE across gynecology, urology, and colorectal procedures. In addition to focusing on expanding our list of clinical publications, We have continued to leverage our growing body of real-world clinical data through the utilization of our clinical case registry that we refer to as TRUST. We believe that TRUST is the largest robotic-assisted laparoscopic registry in the industry with more than 1,700 patients enrolled as of the end of the first quarter. The registry includes a variety of procedural specialties including abdominal, thoracic, urologic, and gynecological procedures performed at select sites across Europe. The primary purpose of the registry is to collect safety and efficacy data from procedures performed using Senhance, as well as build a unique collection of intraoperative and 12-month postoperative follow-up data. We expect to continue to grow this body of clinical data to facilitate an increased number of high-quality clinical publications demonstrating the value of Senhance and performance-guided surgery and support our commercial adoption strategy. These publications and the trust registry are incredibly important in order to provide data that supports and validates the benefits of Senhance and the continued technological development of the platform. The next segment of our market development efforts is the expansion of our global footprint, including the growth of our install base, the acceleration of procedure volume, and the increase in the number of foundational sites. Beginning with new program initiations, the first quarter was very challenging given the macro headwinds associated with COVID. In particular, the resulting reduction in hospital access across all of our key geographies during January and February. These challenges were compounded by the ongoing unanticipated political instability impacting Russia and Eastern Europe, which has negatively impacted us and our commercialization partners' ability to access hospitals and grow our installed base in that part of the world. A portion of our commercial pipeline for 2022 had ties to Russia and the CIS region. as we had recently secured the necessary regulatory approvals to commercialize in Russia and had worked over a period of years with our distribution partner in that region. Given the political climate, we believe it is unlikely those accounts will convert anytime soon. As a result, we have shifted our commercial organization's focus to other areas within the EMEA region including countries in Western Europe, to help further strengthen our pipeline for the year. While we are disappointed with the slower than expected start in 2022, we continue to build our global pipeline of hospitals and surgeons, and we continue to expect to have 10 to 12 new program initiations by the end of the year. Now turning to procedure volumes. Despite the backdrop of an unstable macro environment, we drove very strong volume trends, performing over 650 procedures, our highest quarter to date. Total procedure volumes increased 29% compared to the prior year and 16% compared to the fourth quarter of 2021, representing the third consecutive quarter of growth. primarily driven by volumes in EMEA, which grew 43% compared to the prior year, as well as low single-digit growth in both U.S. and Asia, which were both heavily impacted by COVID spikes early in the year. This quarter, we were pleased to see significant milestone accomplishments from surgeons in Europe and the United States. Dr. Narimantas Samalavakias and his team at Klaipeda University Hospital in Lithuania performed their 100th colorectal surgery. Dr. James Redman at Southern Surgical Hospital in Louisiana reached their 100th SYNHANSE case. And Dr. Amit Trivedi and the team at Hackensack Meridian Health at Pascak Valley Medical Center in New Jersey performed their 300th procedure with the SYNHANSE system. I would like to take a minute to help you understand why we are so focused on increasing procedure volume in a wide variety of surgical specialty. When a case is performed with a Sennheis system, we have the ability to collect system data and surgical video. Over time, as we accumulate this rich digital library of surgical data, we will have the ability to generate powerful clinical insights that will enable performance-guided surgery to help surgeons reduce surgical variability and drive consistently superior surgical outcomes. We are also focused on increasing awareness of SENHANCE and educate the surgical community on the benefits by leveraging industry events. We had a strong start to the year on this objective. This quarter, we attended the annual Sagers meeting where we received very positive responses and audience engagement from surgeon presentations. Dr. Amit Trivedi of Hackensack Meridian Health, Pasquack Valley Hospital, discussed the clinical utility of SennHeR system and augmented intelligence in the operating room. Dr. Francesco Bianco of Mount Sinai Hospital in Chicago and Dr. Michael Cook of LSU Health New Orleans both emphasized the advantage of being able to transition from laparoscopy to the Sennheis system effortlessly due to the Sennheis system's deliberate design and replicate laparoscopic methods, a unique advantage over alternative robotic solutions. We also attended the DCA Congress that was held in Germany, where Sennheis surgeons Dr. Olaf Hansen, Dr. Florian Schilcher, and Dr. Dietmar Stephan also highlighted the clinical value of our digital laparoscopy system and importance of innovative technology in all fields of surgery. Turning to the expansion of our product portfolio, we are excited to build upon our accomplishments and reach additional regulatory milestones which will further develop the SYNHANCE system and broaden its applicability. We continue to expect commercial launch of 5mm articulating instruments in the second half of the year, which is currently in a pilot launch in the U.S. and Europe. We also expect to submit a 510K application for pediatric clearance in the U.S. following strong early clinical utilization in Europe and increasing demand from U.S. surgeons. This will broaden the applicability of the SENHANCE system's unique combination of 3-millimeter instrumentation with 5-millimeter camera scope combined with haptic feedback to benefit more patients with digital laparoscopic options in pediatrics and minimally invasive surgical solutions. More broadly, we continue to expand the utilization and applicability of the Intelligent Surgical Unit, or ISU, globally, and we expect to receive CE mark approval for expanded machine vision capabilities in Europe in late 2022. While the macro landscape has continued to present unique challenges, we've made good progress towards our 2022 goals, such as the ongoing growth in enhanced utilization, the development of high-quality clinical data, and the progression of our innovative product portfolio. We believe we are very well positioned to continue to execute on our strategy and drive the long-term adoption of CENHEC. Before I open the line for Q&A, I'd like to express gratitude to all of our employees throughout the world for their tireless efforts and dedication. With that, I would like to open the line for questions.
spk02: Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. We have a first question from the line of Swayampakula Ramakant with HC Wainwright. Please go ahead.
spk03: Thank you. This is RK from HC Wainwright. Good afternoon, Anthony and Shamice. Certainly on the volume front, you know, it was a great quarter, as you said. You know, you probably the first quarter where you had a huge increase in the procedures. And, you know, thinking through that number, it also seems that, you know, most of the procedures came from EMEA. Having said what you said regarding the macro situation in Europe, going forward, do you think... you know, that situation could impact the growth in procedures in the European region. I mean, obviously, we have all kinds of other things going on, including COVID and shutting down of, you know, some of the places around the world. But just on the macro on the European front, you know, what do you think?
spk04: Hi, RK. Thank you for your question. From the European front, I think we are seeing some of the COVID-related issues that transpired in the early part of the January, February timeframe is definitely settling down and seeing good procedure traction. So I don't think even at a macro level, looking at the US and even Asia, feeling pretty good that the COVID impact is continuing to reduce, at least the way that we see it now. So we're not hoping to have a greater impact than we had earlier in the year from the COVID front. But on the Eastern European political front, that is a challenge. But again, from a system point of view, We do have our largest installed base in the European region, and they're mostly in Western Europe. So we are not anticipating any big impact in terms of volume, because all the other hospitals are continuing to perform, with some hospitals in the Eastern European region that have slowed down. In a global sense, we're not anticipating it to impact us negatively, and we hope to continue the growth trend that we've been looking for.
spk03: Perfect. On the revenue front, yes, you did not achieve as much of a revenue base as you had seen in the first quarter of 2021. However, there was, I think, at least one conversion or maybe even two conversions during that time period in 21. Now that you have some of these machines out there on the leasing front for a while, I'm not asking for a specific number, but I'm just trying to understand, is there a certain... percentage of missions that potentially could get to the stage where they could convert over the next three to six months?
spk04: Yeah, I think trying to nail down a number of what's going to convert, it's a bit difficult because they're all situational. Different hospitals have different criteria and they're trying to make a decision to convert, but The only thing that I'd say is that it is part of our strategy and we are actively speaking with these hospitals to find the right time to make that conversion. But I couldn't give you a percentage to say that this percentage is going to convert other than say that it is our intent and that's what we are continuing to pursue.
spk03: Perfect. And then the last question from me on the clinical registry, which you call trust. So that the information that you collect, the data that you collect, as I said, it is, you know, it is digital, it is rich, you know, you have the, you know, complete data, you know, starting from the procedure to the metrics of how the system operates. Is that database, can you use it in your regulatory filings, or is it only for publications and commercial side of things where you can show folks, potential customers, what these machines can do?
spk04: Yeah, great question, Ake. It can be used for regulatory and or customer issues. related matters or whatever it may be. It's a CRO-controlled mechanism that we put data into. So it's a managed database, and we can use it for any purpose that we want to use the data for.
spk03: Perfect. Thank you for taking my questions.
spk04: Thank you, Akhil.
spk02: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I'd like to turn the call back to Anthony Fernando, President and CEO, for closing remarks. Over to you, sir.
spk04: Thank you again for your interest in Ascensus Surgical, and we look forward to updating you on our progress on our next quarterly call. Thank you.
spk02: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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