Minerva Surgical, Inc. (NASDAQ:UTRS) Q2 2023 Earnings Call Transcript August 7, 2023
Operator: Greetings, and welcome to the Minerva Surgical Q2 2023 Earnings Call. At this time all participants are in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Caroline Corner, Investor Relations. Thank you, ma’am. You may begin.
Caroline Corner: Thank you, operator. Welcome to Minerva’s second quarter 2023 earnings call. Joining me on today’s call are Todd Usen, President and Chief Executive Officer; and Joel Jung, Chief Financial Officer. This call will provide forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Minerva Surgical operates; trends and expectations from Minerva’s products and technology; trends and demand for Minerva’s products; Minerva’s expected financial performance, expenses and position in the market and outlook for fiscal year 2023.
These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by the forward-looking statements. Please review Minerva’s most recent filings with the SEC for additional information, particularly the risk factors described in Minerva’s quarterly report on Form 10-Q for the quarter ended March 31, 2023, which was filed on May 3, 2023, and will be updated in the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2023, which is expected to be filed with the SEC on August 3, 2023. Any forward-looking statements provided during this call, including projections for future performance, are based on management’s expectations as of today.
Minerva undertakes no obligation to update these statements to reflect events that occur or circumstances that exist after today except as required by applicable law. Minerva’s press release for second quarter 2023 results is available on Minerva’s website, www.minervasurgical.com under the Investors section and includes additional details about Minerva’s financial results. Minerva’s website also has the latest SEC filings, which you are encouraged to review. A recording of today’s call will be available on Minerva’s website by 5 pm Pacific Time today. With that, I will hand the call over to Todd.
Todd Usen: Thank you, Caroline, and thanks to all of you for joining us on our second quarter earnings call. As I have now completed my first two quarters at Minerva Surgical, I continue to be optimistic about the company’s mission and future in meeting the distinct healthcare needs of women. Our commercial team has a deep level of talent that is responding to the changes introduced this past quarter to develop and deliver our products for the benefit of our customers and the women they serve, our investors and our employees. While there is still much work that lies ahead to build the company that we all believe we can be, I continue to be extremely impressed with the talent we have on board and the team’s willingness to change the playbook and implement new thoughts and ideas.
Last quarter, we completed a small reorganization of the commercial team to realign some of our operating costs, more effectively deliver our products to our customers and we have progressed our operational review of our production activities with the goal of improving costs and increasing our gross margins. We have continued to evaluate both internal and external opportunities to drive commercial success and I look forward to updating you on those efforts when we have more tangible results to report. I’ve spent a great deal of my time and effort meeting with our customers and society partners, as well as key suppliers, contract manufacturers while digging into our overall operations to identify areas and opportunities for efficiency improvements.
The entire organization is focused on aligning our internal resources with our external customer needs. And while it’s still early days, I’m pleased with how the team is progressing. In my time in the field, what I’m hearing from our customers, echoing my prior conversations, is Minerva’s technology provides outstanding solutions and outcomes and is solving real problems in uterine health. People are our number one asset and I have enjoyed spending time with small groups of employees throughout the organization from all functions to dig deep to understand what makes our individuals tick and to listen and hear some wonderful thoughts and ideas to continue to grow Minerva Surgical. Turning quickly to some financial highlights, this past quarter, we reported revenues of $13.4 million, increasing from $13 million in the same period of 2022 and from $12.5 million in the first quarter of 2023.
We believe that our Symphion System continues to outpace growth in the tissue resection market. Symphion revenue increased 7% this past quarter compared to the second quarter of 2022 and has increased 13% year-to-date during the first half of 2023 compared to the same period in 2022. We believe this indicates that we’re successfully increasing our market share in this important segment. Exclusive product efficiency and safety features unique to Symphion and our ability to compete with a full suite of products for abnormal uterine bleeding are continuing to show results. In the ablation market, we were pleased that revenue from Minerva ES this past quarter increased 7% compared to the same period of 2022. While outpacing the growth of the overall market, we believe this product has additional room to grow in coming quarters.
Our entire team today is keenly focused on execution and delivering value to our customers, shareholders and other stakeholders. I look forward to updating you all on our progress over future quarters. With that, I’ll hand things over to Joel for a deeper dive into our financial results. Joel?
Joel Jung: Thanks, Todd, and good afternoon, everyone. As Todd mentioned, we were pleased with the revenue growth we experienced for Minerva ES and Symphion. Despite the temporary distraction from a small reorganization this quarter, the commercial team has made progress with both customer retention and bringing on new customers in the ablation and tissue resection markets. Total revenue for the second quarter of 2023 was $13.4 million compared to $13 million in the second quarter of 2022. At the product level for the quarter, Minerva ES revenue was $6.1 million or 46% of total revenue, increasing 7% from $5.8 million in the second quarter of last year. Genesys HTA revenue was $3.6 million or 27% of total revenue in the second quarter of 2023, decreasing 8% from $3.9 million in the second quarter of last year .And Symphion revenue was $3.5 million or 26% of total revenue in the second quarter of 2023, increasing 7% from $3.3 million in the second quarter of last year.
Our gross margin in the second quarter of 2023 was 55.3%, which was a decrease from the gross margin of 59% reported in the second quarter of last year, but remaining relatively stable with the gross margin of 56% from the first quarter of this year. While we experienced a gross margin decline in the second quarter of 2023 compared to the same period of 2022, the gross margin for the first half of 2023 was 55.6% compared to 54.6% in the same period in 2022. We’re working to improve our gross margin through operational initiatives now that supply chains are stabilizing. Our margins in the second quarter of 2023 were negatively impacted by a product mix shift away from Genesys HTA to Symphion which currently has a lower gross margin. Additionally, we have experienced an increase in the transfer price for some of our products from our contract manufacturers, contributing to the challenges in our efforts to increase our overall gross margin.
Our product average selling prices have remained relatively stable over the past 12 months. Total operating expenses in the second quarter of 2023 were $15.1 million compared to $12.5 million in the same period of 2022. The comparable period in 2022 included a $3.9 million noncash reduction in the fair value of contingent consideration recorded in the second quarter of 2022 associated with a milestone payment due to Boston Scientific from our prior product acquisition. Absent this fair value adjustment, operating expenses decreased $1.4 million in the current quarter when compared to the second quarter of 2022. The net reduction was mainly driven by a decrease in stock-based compensation expenses, a reduction in depreciation and amortization charges and a reduction in insurance premiums.
Noncash depreciation and amortization expense included in operating expenses was approximately $1.5 million in the second quarter of 2023, which was a reduction of $0.6 million from the second quarter of 2022. Noncash stock-based compensation expense included in total operating expenses was $1.1 million in the second quarter of 2023 versus $1.6 million in the second quarter of 2022. Our reported net loss for the second quarter of 2023 was $8.7 million compared to a net loss of $5.6 million in the second quarter of 2022. On a non-GAAP basis, we reported negative $4.6 million in adjusted EBITDA for the second quarter of 2023 compared to negative $4.5 million in adjusted EBITDA in the second quarter of 2022. As a reminder, we have significant noncash expenses related to the amortization of intangibles from the May 2020 acquisition of the Genesys HTA, Symphion and Resectr assets as well as significant noncash stock-based compensation expenses.
Turning to the balance sheet, we finished the quarter with $15.7 million in unrestricted cash. Our long-term liabilities were substantially unchanged from the fourth quarter of 2021 following our IPO and the refinancing of our previous long-term debt facility. Turning now to guidance, we expect full year 2023 revenue to be in the range of $52 million to $55 million. With that, I’ll say thank you and turn the call back to the operator.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Q – :
