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MAKO Surgical Corp. (MAKO)

Q1 2010 Earnings Call Transcript

May 6, 2010 4:30 pm ET

Executives

Mark Klausner – IR, Westwicke Partners

Maurice Ferré – President, CEO and Chairman

Fritz LaPorte – SVP of Finance and Administration, CFO and Treasurer

Analysts

Matt Miksic – Piper Jaffray

Kim Gillan – JPMorgan

Patrick Clingan – Lazard

Rich Newton [ph] – Leerink Swann

Michael Matson – Wells Fargo Securities

Presentation

Operator

Good afternoon, ladies and gentlemen and welcome to the MAKO Surgical Corp.'s 2010 first quarter results conference call. As a reminder, this conference is being recorded and will be available for replay on the company's website at www.makosurgical.com under the Investor Relations section after the completion of this call.

It is now my pleasure to introduce your host Mr. Mark Klausner of Westwicke Partners.

Mark Klausner

Thank you, operator. Joining us on today's call are MAKO's President and CEO, Dr. Maurice Ferré, and the company's Senior VP and Chief Financial Officer, Fritz LaPorte.

The company's press release of financial results has been released via Globe Newswire. Mr. LaPorte will detail the contents of this release following remarks by Dr. Ferré. If you have not received a copy of the press release, it is available in the Investor Relations section of MAKO's website www.makosurgical.com. I would also like to remind you that this call is being webcast live and recorded. A replay of the event will be available later today on our website and will be available for at least 30 days following the call.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including answers to your questions, will include forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. For a discussion of risks and uncertainties associated with MAKO's business, I encourage you to review the company's periodic reports filed from time to time with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2009, Form 10-Q for the quarter ended March 31, 2010, and the Form 8-K filed with our earnings release. MAKO disclaims any obligation to update any forward-looking statements made during the course of this call.

With that, it's my pleasure to turn the call over to MAKO's President and CEO, Maurice Ferré.

Maurice Ferré

Thank you, Mark and good afternoon and thank you for joining us today to discuss MAKO's first quarter results. On today's call, I will provide you with an update on our business and Fritz will provide you with the details of our financial results.

I am pleased with the progress we've made in the first quarter and in particular, by the continued increase in utilization trends we are experiencing in the market. Specifically, we installed the RIO system at four new commercial sites in the quarter, bringing the total number of commercial systems in the field to 40 from 36 at the end of the fourth quarter of 2009.

Our customers performed 731 MAKOplasty procedures in the first quarter, representing a 30% increase over the prior quarter and a 176% increase over the first quarter of 2009. Our average monthly utilization per commercial site system increased from 6.6, up from 6.0 in the previous quarter. We attended four medical meetings this quarter including one of the most important meetings, the 77th Annual Meeting of the American Academy of Orthopedic Surgeons or AAOS. We had four peer reviewed posters and one presentation at AAOS and one presentation at the Specialty Day, expanding on our base of the clinical evidence.

We completed two BioSkill meetings and experienced strong interest from existing and prospective surgeons in these meetings. And we received a third 510(k) marketing clearance for the FDA for our anticipated future application that assists a surgeon in performing all components of the total hip arthroplasty using the RIO system.

Overall, the first quarter was another positive one for MAKO. Our team continues to do a great job executing against our business plan as demonstrated by continued system placement and importantly, the increase in procedure volume and utilization trends.

Now, I'd like to turn the call over to Fritz to review our financial results for the first quarter. Fritz?

Fritz LaPorte

Thank you, Maurice, and good afternoon everyone. On today's call, I will provide an overview of our financial results for the first quarter of 2010, highlighting the charge that we took during the quarter, and explain certain items that have been reclassified in our financial statements.

In the first quarter of 2010, we recognized procedure, system, and other revenue of $7.2 million compared to $3.7 million in the first quarter of 2009. Revenue in the quarter was primarily comprised of $3.6 million in procedure revenue as a result of the 731 MAKOplasty procedures performed in the quarter and $3.4 million in RIO system revenue generated from the four RIO systems sold in the quarter.

Total gross profit for the first quarter of 2010 was $3.3 million compared to a gross profit of $697,000 in the same period in 2009. Total gross margin for the period was approximately 45%, comprised of a 46% gross margin on procedure revenue and a 49% gross margin on RIO system revenue, partially offset by a negative margin on service and other revenue.

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