Urologix's CEO Discusses F2Q2012 Results - Earnings Call Transcript

Urologix, Inc. ( ULGX)

F2Q2012 Earnings Call

January 24, 2012 5:00 PM ET

Executives

Stryker Warren, Jr. – Chief Executive Officer

Brian Smrdel – Chief Financial Officer

Greg Fluet – Executive Vice President and COO

Analysts

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Urologix Incorporated Fiscal Year 2012 Second Quarter Conference Call. My name is Ann, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. As a reminder, this conference is being recorded for replay purposes.

Certain information discussed during this conference call, including answers to your questions, may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those stated or implied in any forward-looking statements due to risks and uncertainties. A detailed discussion of risks and uncertainties maybe found in Urologix’s recent annual report on Form 10-K for the year ended June 30, 2011 and other documents filed with the Securities and Exchange Commission. Urologix disclaims any obligation to update any forward-looking statements made during the course of this call.

At this time, I will turn the call over to Mr. Stryker Warren, Jr., Chief Executive Officer. Please proceed, sir.

Stryker Warren Jr.

Thank you, Ann, and good afternoon to all those joining us today to discuss the company's results for the second quarter of fiscal year 2012. With me are Brian Smrdel, the company's Chief Financial Officer; and Greg Fluet, the company’s Executive Vice President and Chief Operating Officer.

Today's call we’ll begin with a brief summary of the highlights from our first full quarter as the new Urologix. Brian will then review the financial results for the second fiscal quarter in detail. Finally, I will share an update on the progress we are making on our growth strategy that I shared with you last quarter and review our near-term priorities before opening up the call for questions.

The second quarter this fiscal year was encouraging on multiple levels. None more so than our ability to execute on our strategic growth objectives, integrate our Prostiva RF therapy business and drive improvements in utilization amidst a difficult economic environment which continues to pressure elective procedures.

We believe our strong second quarter performance represents a glimpse into the potential power of the new Urologix story. The combination of the Prostiva RF therapy system with our Cooled ThermoTherapy technology has made Urologix the clear leader for the in-office treatment of BPH with an expanded population of men whom we can effectively treat.

We have two complimentary in-office technologies which combined have more than 50% market share. Both products have demonstrated durable clinical effectiveness for the treatment of BPH and we have a focus sales growth strategy to drive financial and operating performance fueled by market development initiatives and patient education programs.

Urologix’s products serve the BPH treatment market, a segment of Urology marketplace with very favorable growth characteristics. The addressable patient population is both large and growing comprised of aging men with symptoms of bother caused by a progressive condition which left untreated can cause serious health issues.

Urologist, the company’s target customers and their patients are questioning the merits of chronic medication for BPH in light of the marginal benefit and building evidence of the risk associated with long-term drug management. The company is demonstrating that when patients are made aware of Urologix’s in-office treatment options many are seeking to avoid drugs in favor of a more definitive therapy.

In addition, and as I will discuss later, the competitive landscape in the in-office treatment space is changing with the pending withdrawal of one the low energy microwave treatments for the market which presents an opportunity to further consolidate our position as the leader in the in-office treatment of BPH.

Simply stated, we see opportunities for growth. Our technologies are safe, effective and durable, they treat a large and growing patient population, and we are targeting a group of physicians who are increasingly aware of the need for a change in the treatment paradigm. Each of this will benefit our company’s future growth.

I will now turn the call over to Brian to review the second quarter’s financial results. Brian?

Brian Smrdel

Thank you, Stryker. Our revenue for the second quarter of fiscal 2012 was $4.7 million, up 40% year-over-year and up 48%, sequentially. Revenue growth on a year-over-year basis was driven by the contribution of Prostiva RF therapy product revenue for a full fiscal quarter, following the acquisition of the exclusive license of that product line on September 6, 2011.

Sequential was driven by an 11% sequential increase in our CTT product, as well as the additional benefit of the inclusion of a full quarter of the Prostiva product line. We are particularly encouraged by the CTT business, which experienced sequential growth for the first time in four quarters.

Gross profit for the second quarter of fiscal 2012 was $2.3 million or 49% of revenue, compared to $1.4 million or 45% of revenue in the prior quarter and $1.8 million or 56% of revenue last year.

Gross margin for the second quarter of 2012 was lower than the prior year quarter due to the 45% gross margin reported for the Prostiva product line, which included $86,000 of non-cash charges or 2% of total company revenue, primarily for the amortization of intangible assets.

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