Milestone Scientific (NYSE American: NYSE:MLSS), a leader in advanced injection technologies, reported their financial results for the second quarter of 2024, highlighting a net income of $0.2 million. The company announced a significant achievement with the Medicare Part B physician payment rate assignment for their CompuFlo Epidural System, covering an initial market potential of approximately $250 million among Medicare patients.
Furthermore, Milestone Scientific has expanded its business footprint by partnering with Axial Biologics and securing regulatory approval to sell CompuFlo in Brazil. Despite a decrease in overall revenue compared to the same period last year, U.S. e-commerce sales saw a slight increase, and the company's gross margins have improved.
Key Takeaways
- Milestone Scientific reported a net income of $0.2 million for Q2 2024.
- The company received Medicare Part B physician payment rate assignment for CompuFlo, targeting an initial market of $250 million.
- A partnership with Axial Biologics was announced to expand presence in key states.
- Regulatory approval was obtained to market CompuFlo in Brazil.
- U.S. e-commerce sales increased, contributing to improved gross margins.
- The company maintains a strong balance sheet with $5.8 million in cash and no long-term debt.
Company Outlook
- Milestone Scientific plans to focus on expanding sales and streamlining operations to achieve positive cash flow.
- The company expects higher dental sales in the second half of the year.
Bearish Highlights
- Revenue for Q2 2024 was $1.9 million, down from $2.9 million in Q2 2023.
- International revenue decreased by $710,000 due to freight forwarder issues.
- Revenue from China dropped to zero in Q2 2024.
Bullish Highlights
- Gross profit for Q2 2024 was $1.4 million, or 76% of revenue, an improvement from 65% in Q2 2023.
- Operating losses decreased to $1.8 million in Q2 2024 from $2.3 million in Q2 2023.
Misses
- The company faced unexpected issues with freight forwarders, leading to delayed shipments and lower international sales.
Q&A Highlights
- Arjan Haverhals discussed adjusting pricing if necessary and the submission of nearly 200 claims since the start.
- The company is not concerned about dental revenues this year and is focused on clinician engagement and patient case payments.
- Haverhals expressed confidence in improved sales for the remainder of the year despite Q2 setbacks.
Milestone Scientific's Q2 2024 earnings call emphasized the company's strategic moves to enhance their market position and financial stability. With the Medicare assignment for their CompuFlo system and expansion into new markets, the company is poised for growth. Despite some international sales challenges, the company's leadership remains confident in their ability to rebound in the latter half of the year and is committed to keeping stakeholders informed of their commercial progress.
InvestingPro Insights
Milestone Scientific's recent financial results for Q2 2024 have shown a mix of achievements and challenges. To better understand the company's current financial health and market potential, let's look at some key metrics and InvestingPro Tips.
The company's market capitalization stands at approximately $75.69 million, reflecting its current market valuation. Despite the reported net income, analysts are not expecting Milestone Scientific to be profitable this year, as the company is still navigating through growth and expansion phases. This aligns with the reported operating losses, which, although reduced from the previous year, still indicate that the company is in a transitional period.
An InvestingPro Tip notes that Milestone Scientific's liquid assets exceed its short-term obligations, which suggests that the company has a healthy level of liquidity to meet its immediate financial needs. This is an important factor for investors to consider, as it may offer some resilience in the face of operational challenges.
Another relevant metric is the company's Price / Book ratio, which at 9.52, indicates that the stock may be trading at a premium compared to its book value. This could be reflective of investor confidence in the company's future growth prospects, especially considering the positive developments such as the Medicare Part B physician payment rate assignment for their CompuFlo Epidural System.
InvestingPro also highlights that Milestone Scientific has experienced a strong return over the last three months, with a price total return of 44.07%. This could be indicative of growing investor optimism following the company's strategic initiatives and market expansions.
For readers interested in a deeper dive into Milestone Scientific's financials and market performance, InvestingPro offers additional tips. There are 7 more InvestingPro Tips available for MLSS, which can provide further insights into the company's operations, debt levels, and potential for dividend payouts.
In summary, while Milestone Scientific faces some headwinds with profitability and revenue growth, the company's liquidity position and recent stock performance paint a more nuanced picture of its potential for future success.
Full transcript - Milestone Scientific (MLSS) Q2 2024:
Operator: Good morning, and welcome to the Milestone Scientific Second Quarter 2024 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode and we will open for questions following the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. David Waldman, Investor Relations of Cresendo Communications. David, the floor is yours.
David Waldman: Thank you, Jenny. Good morning, and thank you for joining Milestone Scientific's second quarter 2024 financial results conference call. On the call with us today are Arjan Haverhals, Chief Executive Officer; and Keisha Harcum, Vice President of Finance Milestone Scientific. The company issued a press release this morning containing second quarter 2024 financial results, which is also posted on the company's website. If you have any questions after the call, like any additional information about the company, please contact Cesendo Communications at 212-671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the second quarter ended June 30, 2024. Before we get started, we'd like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenues and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone's control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and market requirements and standards and the risk factors detailed from time to time and Milestone's periodic filings with the Securities and Exchange Commission, including without limitation, Milestone's report on Form 10-K for the year ended December 31, 2023, and Milestone's report on Form 10-Q for the second quarter ended June 30, 2024. These forward-looking statements made during this call are based upon management's reasonable belief as of today's date, August 15, 2024. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, we'll now turn the call over to Arjan Haverhals, Chief Executive Officer. Please go ahead, Arjan.
Arjan Haverhals: Thank you, David, and thanks to everyone for joining us today. This has been a momentous year for the company, as we recently achieved a major milestone with the grant of Medicare Part B physician payment rate assignment for our CompuFlo epidural system. As we have previously reported, our approach to reimbursement has been methodical and strategic. We've worked closely with clinicians to thoroughly document the medical necessity of our technology, and by engaging with Medicare jurisdictions, we have been able to educate payers on the clinical utility, safety, predictability, and efficacy of the CompuFlo system, ensuring that the jurisdictional Medicare administrative contractors, also known as JMAC, understanding full our technology prior to their pricing ruling. This favorable Medicare price assignment granted across multiple JMAC regions including key states such as Florida, Texas, Pennsylvania, New Jersey, Maryland, Colorado, Oklahoma, Louisiana, Arkansas, Mississippi, New Mexico, the District of Colombia and Delaware, represents a significant achievement. An estimated three million epidural steroid injection procedures are performed each year across these three jurisdictions, accounting for approximately one-third of the total epidural steroid injection procedures conducted in the United States for chronic back pain treatment. With Medicare believed to account for up to 40% of this clinical practice volume, these regions represent an initial addressable market of approximately $250 million among Medicare patients alone. The positive outcome from these JMAC’s is not only a significant validation of the safety benefits of our technology, but also a major step forward in increasing penetration and adoption of our technology. We recognize there's still more work ahead to introduce our technology across these jurisdictions and throughout the rest of the country. However, this achievement marks a crucial turning point in our journey. I'm extremely proud of our entire team who have worked tirelessly to reach this milestone and we are committed to continuing our efforts targeted at additional JMAC’s in the US. In tandem with this progress, we are excited to announce our partnership with Axial Biologics, whose extensive experience and deep relationships within the pain management sector, make them an ideal partner. This collaboration represents a strategic laser-focused and disciplined commercial approach to expanding our reach by leveraging Axial's established clinician relationships in the key states belonging to the JMAC’s of New Jersey, Texas and Florida. By aligning with a specialized partner instead of a large distributor of building our own sales force, we can accelerate the penetration and adoption of the CompuFlo Epidural System more effectively. This collaboration marks the next phase of our sales strategy, and we are confident that it will drive growth and enhance patient outcomes. We also believe there is a market opportunity for CompuFlo within federal and other government agencies. As we have discussed in the past, we are advancing initiatives following SAM approval and working to secure approval within the FSS, the Federal Supply Schedule. FSS approval would open up the sizable government market. Turning to the international front. We are expanding our network of distribution partners for CompuFlo. We are targeting independent distributors with existing relationships within key global markets and proven track records of introducing medical devices within their territories. I'm particularly pleased to announce that we have received regulatory approval from Brazil's National Health Surveillance Agency to market and sell the CompuFlo Epidural system in Brazil, covering the lumbar, thoracic and the cervical-thoracic junction of the spine. As the ninth largest economy globally, with over 200 million people, Brazil presents a significant opportunity for us. Ahead of this key approval, we've proactively established relationships with leading medical institutions and hospitals and commercial partners in Brazil, setting the stage for successful product launch. Final negotiations are ongoing and we look forward to announcing the new cooperation in the near future. Brazil has over 2.8 million births each year and 21 million people suffering from chronic back pain. However, with just 60% seeking treatment. Independent research estimates that 4 million to 5 million Epidural anesthesia procedures are performed annually in Brazil. We believe that with the right partners, we can expand addressable market by offering a safer alternative to traditional epidural procedures, especially in rural areas with limited resources and training. This approval in Brazil is also a significant milestone in our global expansion strategy, providing an entry point into Latin and South America by building on our previous FDA approval in the United States. Lastly, we remain focused on increasing the value of our intellectual property and patent portfolio. We recently announced receipt of multiple notices of allowance for key applications in both the US and Europe that broaden the IP protection around our injection and drug delivery systems. So to summarize our progress as it relates to the Medical division, we are advancing our nationwide reimbursement initiatives and executing a disciplined commercial rollout strategy both in the US and abroad. We look forward to providing further updates and continuing to build on this momentum, ensuring that more patients and practitioners benefit from the precision and safety of our technology. Turning to Dental division, US e-commerce sales increased to $1.3 million in the second quarter of 2024, compared to $1.2 million during the same period last year. This growth is a direct result of our strategic decision to transition from our previous distributors and instead channel our sales through our own online platform. By bringing this process in-house, we've been able to create a more direct line of communication with our customers, enhancing our ability to respond to their needs and preferences. This shift has also led to a significant improvement in our gross margins, which increased to 76.1% in the second quarter of this year, from 65% in the same quarter last year. This margin expansion reflects not only the cost efficiencies we have gained, but also the value that our customers place on the quality, reliability of our products and more importantly, the provided after sale service by our team. We believe that the foundation we have established will continue to support steady growth in domestic sales. Our renewed focus on e-commerce has been bolstered by targeted marketing campaigns designed to directly reach both customers and patients, reinforcing the benefits of purchasing through our online portal. As we continue to refine and expand these efforts, we expect to see further traction and increase market shares in the US. On the international front, while we did encounter some temporary challenges due to issues with our distributors' freight forwarders, these have since been resolved, allowing us to stabilize and resume normal operations. Additionally, our proactive decision to post sales in China based on the reassessment of our strategy in that market had an impact on our year-over-year comparisons. Nevertheless, we currently believe that international sales in the second half of this year will show improvement over both the second half of last year and first half of this year. Looking ahead, we are optimistic about future of our Dental business. The changes we have implemented have not only strengthened our current operations, but have also laid the foundation for a scalable, high-margin business model that is designed to generate positive cash flow. We are confident that our approach will continue to yield strong results, driving growth, profitability and customer satisfaction in the quarters and years to come. So to wrap up, we are at a pivotal inflection point following the grant of the first Medicare Part B physician payment rate assignment for our CompuFlo Epidural System, a milestone that underscores the value and safety of our technology. The combination of our reimbursement strategy, partnerships such as Axial Biologics, the start commercialization, our expansion into key markets like Brazil, as well as our growing e-commerce platform for the Dental division provide us with the necessary ingredients for success. We remain committed to enhancing patient outcomes and driving value for our shareholders, as we continue to build on this momentum. At this time, I'd like to turn the call over to Keisha Harcum, Vice President, Finance, to go over the financials in detail. Please go ahead, Keisha.
Keisha Harcum: Thank you, Arjan. Revenue for the three months ending June 30, 2024, and 2023 was approximately $1.9 million and $2.9 million, respectively. The U.S. e-commerce revenue for the three months ended June 30, 2024, was approximately $1.3 million, compared to $1.2 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, International revenue was approximately $490,000 [ph], a decrease of $710,000 compared to June 30, 2023. International sales decreased due to issues of freight forwarder carriers during the quarter. The company recorded no revenue for China for the three months ended June 30, 2024, compared to approximately $270,000 for the three months ended June 30, 2023. The gross profit for the second quarter ended June 30, 2024, was $1.4 million, or 76% of revenue versus $1.9 million, or 65% of revenue for the second quarter ended June 30, 2023. The decrease in gross profit was due to higher margins in sales associated with the launch of the e-commerce platform offset by a decrease in international sales. Operating losses for the three months ending June 30, 2024, was approximately $1.8 million versus $2.3 million for the second quarter ended June 30, 2023. The reduction in the operating loss reflects a decrease in the selling and general administrative expenses by $1.1 million. Net income was approximately $0.2 million, or $0.00 per share for the three months ended June 30, 2024 versus a loss of $1.3 million, or $0.02 per share for the comparable period in 2023. Net income for the three months ended June 30, 2024, included approximately $2 million net expenses for sales of the New Jersey net operating losses. For the six months ending June 30, 2024, and 2023, revenue was approximately $4.1 million and $5.5 million, respectively. The US e-commerce and digital service revenue for the six months ended June 30 was approximately $2.7 million, compared to $2.2 million at June 30, 2023. For the six months ending June 30, 2024, International revenue was approximately $1.4 million, a decrease of $1 million compared to June 30, 2023. International sales decreased due to issues with freight forward carriers during the six months. The company recorded no revenue for China for the six months ended June 30, 2024, compared to approximately $270,000 for the six months ending June 30, 2023. Gross profit for the first six months of 2024 was $3.1 million or 75% of revenue versus $3.8 million or 69% of revenue for the six months ending for the first six months of 2023. Operating losses for the first six months of 2024 was approximately $3.2 million versus $3.6 million for the first six months of 2023. Net loss for the first six months of 2024 was $1.2 million or $0.02 per share versus a net loss of $3.5 million or $0.05 per share for the comparable period in 2023. Now I'd like to turn your attention to the liquidity and the capital resource. We continue to carefully manage expenses to have maintained a solid balance sheet. At June 30, 2024, the company had cash and cash equivalents of approximately $5.8 million and working capital of $7.7 million and no long-term debt. At this point, I will turn the call back over to Arjan Haverhals.
Arjan Haverhals: Thank you. And as Keisha mentioned, we continue to maintain a strong balance sheet with approximately $5.8 million of cash and cash equivalents at hand as of June 30, 2024, which we believe provides us sufficient resources support supporting our growth within both the Dental and Medical divisions without the need for additional outside capital. In addition to our improved gross margins, we have taken steps to further streamline operations across the organization, most notably, we reduced selling, general and administrative expenses by over $1.1 million compared to the same period last year, further aligning us with our goal of achieving positive cash flow company-wide. Overall, we believe we have developed an efficient and scalable platform to help drive high-margin recurring sales in the coming years and look forward to reporting further developments in our Medical division as we advance initiatives on both the e-commercial and reimbursement fronts. I'd like to thank you for joining the call today. And at this point, we would like to open the call up to questions. Operator?
Operator: Thank you very much. [Operator Instructions] Thank you. Your first question is coming from Anthony Vendetti of The Maxim (NASDAQ:MXIM) Group. Anthony, your line is live.
Anthony Vendetti: Thank you. Good morning. So I agree to Arjan, a great milestone to have the MAC coverage starting in Florida? Can you talk about the potential for broadening adoption, getting other MAC coverage? Are you in discussions with our other MAC at this point? And then, what this means for the -- in terms of the price assignment and what your internal plans are to expand the sales force and drive adoption. I know there's a lot in there, but...
Arjan Haverhals: Yes, I count 4 questions in one sentence. Good morning, Anthony. Thank you for asking the question. Just let me make a small slight correction. The JMAC, it's not only in Florida, it's the JMAC in Florida, New Jersey and Texas, right? So like we stated always, that gigantic for Company. It's one-third of total epidural injection procedures in the United States performed annually. So following your questions, the pricing, the sales expansion and the rollout. So on purpose, as we are restricted by rules and regulations, we cannot in writing, share what the pricing is, but it is publicly available, and we are allowed to share with the investment community, with the reimbursement price when clinicians send in the claims and show medical necessity. So then these Medicare jurisdictions, all 3 Medicare jurisdictions have granted payment despite the physician payment rate of $325. In addition to primary code which is roughly about $280. So that is the fee that has been granted by these jurisdictions for procedures, ESI procedures when our technology is used after sending-in the claims and the necessary documents. So, your question about sales force expansion and what it would mean for the company. So what we have been doing, and I keep everybody in mind, our focus is strong execution. So, if I look at the time line, I'm pretty proud of what the team, including myself, have been able to perform. On July 10, we had the first Florida release, on July 23, we had New Jersey and Texas. We got on July 30, the patent release, on August 7, we have been able to finally negotiate and announce the relationship with Actual Biologics. So everything in 3 weeks' time, we have been able to make a tremendous step forward, in preparing for the commercialization. In addition, what we have been doing is we have expanded our team towards 3 clinical service specialists and eye specialists, because we own and we know and we have the insight know-how about our technology, that that means we can train commercial partners. So at the same time, we have trained the representatives of Actual Biologics. We have been in contact with lawyers to set up the right sales agreement and sales approach is really that we are focusing what I call sort of The Big Fish Strategy, meaning that we are focusing on larger institutions, larger clinicians that do not have a problem, so to say, to commit to a reasonable number of consumables per year, and that is in the range of 100 to 200, 200 consumable per year as a minimum in return. We will not sell the instruments at a high price. So it is actually a payback on the instrument or the capital equipment cost for the clinicians. And then taking into account that these clinicians, of course, need to have a price below that $325 because otherwise, there would not be an interest to purchase the product. So there is a whole I call it a discount percentage scheme dependent on the volume that the clinicians are able and willing to purchase our products, that will trigger then a scale of pricing for these clinicians. Now what it means for revenues, look, it is very simple. On purpose, we are focusing on the business plan at what I say, bring a book of business. They know the pain market. They know the players, they know the larger chains, they know the physicians, I would almost say, inside out, they have more than 20 years of experience in this field. And in all fairness, that is not what our company is having. So that's the reason why we are leasing and engaging with Axial Biologic because they bring the know-how, the customer and the client know-how and the client base that we that we are currently not having. So actually this year -- this week, we started with the official rollout. We have a list of institutions that we are targeting at. And like I said, it's a disciplined commercial launch. And I'm very positive and confident that we will be able to get also clinicians that already have used the technology to get them over on that longer term commitment. Now the question will come up about revenues. You all know my style; I will not make any forward-looking statements. But, of course, for me, sincerely hope that we can, and that's what we are working on that we will be able to have revenues in the third and the fourth quarter this year. I think it's a little bit tricky to say what that revenue is going to be because it depends on the first sales feedback, and it depends on the institutional and clinician feedback. But I do foresee that we will get contributions this year. That's the goal. And I think we are in a good shape. We've done our homework. We're making long hours, as always, but we are positive enthusiastic and comfortable with where we are. And let's get start selling the inventory that we have at hand, and then in the next quarter we can share more in detail, I would say what the projections will be, but I think it is a fair ask and comment to make that let's first do our work. Let's first be in the marketplace, get the first feedback, might be that we have to adjust the pricing if that is needed, that's the phase that we are currently in. Does that answer your question, Anthony?
Anthony Vendetti: Yes, Arjan. So maybe it's a little early, but have any claims been submitted yet? And if so, what does that look like so far?
Arjan Haverhals: No, we have submitted more than or close to 200 claims since the start. Now it is, of course, different, right? Like I said, the clinicians now, we don't have an advisory site in this jurisdiction. Now it is to get these clinicians over with that with that sales agreement the new pricing, like I said, we have launched this week to start doing patient cases and get payments that we are in the midst of that process Anthony.
Anthony Vendetti: That's right, okay. I know it's early, but it sounds like you'll give us an update following the third quarter results. Just shifting gears, one question on the dental business. I know there were no sales from China this quarter. But the international sales that has been resolved. It was there lost revenue this quarter that you believe will be recovered in 3Q 2024 or shifted to 3Q 2024 or is it just -- that was lost revenue in 3Q, we shouldn't expect any revenue to shift over into the third quarter that was potentially lost in the second quarter. Thanks.
Arjan Haverhals: Yes. So what I meant also in this call are not concerned at all about, let's say, the dental revenues this year. I know what the internal planning has always been in the first quarter and the second quarter this year, we had foreseen let's say, lower sales than what we anticipate in the second half of the year. Several reasons, seasonality, second quarter seasonality feedback from the distributors that we actively reached out to. While it is fair to say that, of course, the second quarter results were a little bit lower than we anticipated. But just for everybody to understand what we mean by freight forwarder issues, those are issues that are in a way out of our control. Just to give you a flavor, by the end of the second quarter, we had about $250,000 of products that were finally taxed that were on the dock that were believed or planned to be picked up by the freight forwarder that is directed by the distributor. So in the last five days of the month back and forth, back and forth, the distributor was not able to get his or her specific freight work forwarder to get to the dock and to pick up the shipments or to pick of the packages and the products that were already packed. So in other words, if that would come in, then we would be “as far as the initial plans that we had for the second quarter”. I can share with you that we had a very strong month of July. And therefore, I'm also making that statement that our sales international, both international and domestic will and has to be approved – improved by the third quarter or in the third quarter and the fourth quarter this year. So we are on a good trajectory there.
Anthony Vendetti: Okay. I appreciate all that color, Arjan. I will hop back in the queue. Thank you.
Arjan Haverhals: You're welcome, Anthony.
Operator: Thank you very much. Well, there appear to be no further questions in the queue. I can now hand back over to Arjan for any further comments.
Arjan Haverhals: Yes, well, first of all, thank you for your time today. Like we have said, and I will repeat what we have stated before, we as management of the company, we are still in that period that we have celebrated the success internally on the reimbursement news. We are 100% aware that the expectations have been created to roll this out further commercially. Full focus, full attention, full support, and full energy on that. And we absolutely will keep you posted in the next couple of months about any news that we will and are able to share with you. And thank you for your time today. In case you have any questions, you always can reach out to me directly. I'm easy, accessible, and stay safe and looking forward to seeing you or hearing you soon. Have a great day. Thank you.
Operator: Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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