EDAP TMS S.A. (NASDAQ:EDAP) Q2 2023 Earnings Call Transcript

Jason Bednar : Perfect. Okay. That’s very helpful. I also wanted to ask Ken on the gross margins. They’re a little bit below what we were looking for. I know you called out some of the factors that were influencing some of that softness. But maybe if you could just add any more color on the distribution side. That was probably the bigger miss in our model. But then any other directional guidance you can give? I know you don’t offer formal guidance, but any color on how to think about whether it’s segment or company-wide gross margins going forward? And whether we’re at a trough here or if we need to contemplate additional services, that’s investments that may still then weigh on those gross margins going forward?

Ken Mobeck : Yes. So good question, Jason. The one big thing was our distribution mix this quarter. So I look at that as kind of timing related. We’re always going to continue to make investments to grow the company forward. Our operating expenses are — continue to grow but we’re monitoring them closely, right? We really need to invest in areas that’s really going to drive the sales funnel. As well as on the COGS line, we’ve got a build to support to get the tools installed and serviced as well. We did see a little bit of inflationary price pressures that we’re going to — that we’re monitoring. Obviously, we’re looking at solutions to that. And then just going forward, I do see when the mix gets stronger, as Ryan noted, we do expect Focal One to pick up here in the second half. And then as we noted earlier in the year, too, we increased our prices as well, our list prices for Focal One. So I do see margins picking back up versus where they ended up in Q2.

Operator: The next question is coming from Swayampakula Ramakanth of H.C. Wainwright.

Swayampakula Ramakanth : This is RK from H.C. Wainwright. With increasing volume growth, as you stated, about 85% year-over-year and 29-odd some percent quarter-over-quarter, when would we — when would you expect this to be reflected in your consumables revenue growth? Just trying to get an idea in terms of the cadence of that revenue flow?

Ryan Rhodes : Yes, RK. First thing, again, we build programs. So when the system is placed, there’s a train event for the team. We call it an onboarding process. And so that can take some time. It really depends on each hospital. They are individual, but we do everything to shorten that time line. So I think when we’ll see more of a notable impact over time is certainly as we place more systems, but also as systems get used to using the technology and have clinical use and patients treated clinically and successfully. I think just organically, you’re going to see an increase in same-store sales. And we have a dedicated team, both a clinical sales team and applications team that work very closely with our customers. So I think as you look outward, it takes a while.

But notably, based on percentage increase, we see an increase of procedures and that is both in our legacy accounts as well as we are placing more systems. So I think over time, that will be something to look closer at. And, again, we are very focused on our procedures as noted, and we continue to resource that team accordingly.

Swayampakula Ramakanth : I’m just trying to get an additional color on the sales cycle timing. With reimbursement in place, and you stated in an answer to the previous question that the sales cycle is becoming a little bit longer because we’re trying to take a closer look. Any additional color why that is? So is that more on the financing side of things? Or — I’m just trying to understand what is making that sales cycle longer? Is it more administrative stuff, anything at all?