NVDQ

Novadaq Technologies Inc (NVDQ)

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Novadaq Technologies Inc. (NVDQ)

Q2 2013 Earnings Call

August 01, 2013 08:30 am ET

Executives

David Martin - Vice President for Business Development and Investor Relations

Arun Menawat - President and Chief Executive Officer

Steve Purcell - Chief Financial Officer

Analysts

Jason Mills - Canaccord Genuity

Matt Miksic - Piper Jaffray

Doug Miehm - RBC Capital Markets

Brian Gagnon - Gagnon Securities

Steve Crowley - Craig-Hallum

Spencer Nam - Janney Capital

Presentation

Operator

Greetings and welcome to the Novadaq's Second Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host David Martin, Vice President for Business Development and Investor Relations for Novadaq. Thank you, Mr. Martin. You may begin.

David Martin

Thank you, Kevin. Good morning everyone. Thank you for joining us today to review Novadaq Technologies Financial Results for the second quarter 2013. On the call today representing Novadaq are Arun Menawat, President and Chief Executive Officer; Steve Purcell, Chief Financial Officer; and myself, David Martin, Vice President, Investor Relations.

Before we start, I want to remind you that certain statements made in this conference call may be considered forward-looking. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements, and therefore these statements should not be read as guarantees of future performance or results.

All forward-looking statements are based on Novadaq's current beliefs as well as assumptions made by and information currently available to Novadaq and relate to, among other things, results of future clinical tests, the SPY, FIREFLY, PINPOINT, LUNA, and Trapper Imaging Systems, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance and future commitments.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by Novadaq in its public securities filings; actual events may differ materially from current expectations. Novadaq disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

With that said, I’ll now turn the call over to Dr. Arun Menawat.

Arun Menawat

Thank you, Dave. Good morning everyone. We are in stereo this morning because David in Toronto and Steve and I are in Vancouver, but the agenda today is as usual. Steve will highlight our second quarter financial results. After that, I will discuss Novadaq's Q2 achievements as well as the recent acquisition news we've announced this morning and then Dave will provide you overview of the latest clinical publications.

So with that, Steve, please?

Steve Purcell

Thank you, Arun, and good morning. Q2 revenues of $8.1 million exceeded Q2 '12 revenues by $2.7 million, a 50% increase. SPY product sales increased by $2.8 million due to a 108% increase in SPY capital and a 40% increase in recurrence SPY pack sales as compared to Q2 '12.

TMR product sales decreased to $191,000, mainly due to capital Laser sales. Royalty revenue increased by a $122,000 in comparison to same period last year and service sales also exceeded Q2 '12 by $20,000 due to increased service contract sales.

In comparison to Q1 '13, revenue increased by $820,000 due to an increase in SPY products and royalty sales offset by slight decrease in TMR product sales. Gross profit of $5.1 million in Q2 '13 increased from $3.3 million for the same period last year due to increased sales from our alliances with LifeCell and Intuitive offset by reduction in TMR kit margin.

Increase in SPY product sales continue to produce higher margins. In comparison to Q1 '13, gross profit is higher by $509,000 mainly due to increased SPY product margins and increased royalties.

Operating expenses of $7.3 million exceeded previous year Q2 expenses by $3.1 million. Selling and expenses increased by $2.3 million due to the direct sales personnel being hired to support our PINPOINT and LUNA sales program along with increased promotional expenditures.

Research and development expenses increased by $668,000 to support expanded operations, higher non-cash depreciation expense and equipments utilized in clinical trials, higher patent expenses for new and existing patents and higher PINPOINT product development cost.

In comparison to Q1 '13, operating expenses are higher by $2.1 million due to the increase in selling expenses by $1.2 million for direct sales personnel being hired along with increased promotional expenses, higher research and development expenses by $559,000 for PINPOINT product design and related expenses and non-cash equipment amortization.

Administrative expenses increased over last quarter by $381,000 due to non-cash stock option expense, professional fees and insurance. Q2 '13 non-cash warrant revaluation expense of $7.5 million was higher than Q2 in '12 warrant revaluation expense of $311,000 due to our quarterly increase in the company's share price.

For Q2 '13, the share price increase was $3.60 as compared to $0.20 for the same period last year. In comparison to Q1 '13, warrant revaluation expense increased by $5.4 million as the share price increase of $3.60 for Q2 '13 was greater than share price increase of $1 for Q1 '13.

Net loss of $9.7 million in Q2 '13 was $8.3 million higher than the net loss of $1.4 million in Q2 '12, due mainly to higher non-cash warrant revaluation expense of $7.2 million and higher operating expense by $3.1 million.

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