Call it denial or wishful thinking, but the reasons for the "very disappointing" [DO] Q124 results that were provided by the Company doesn't quite stack up for me either. Below are my notes from the calls and my misinterpretations regarding the Q1 revenue miss ($4M):
1.“Slower-than-expected conversion rate of new accounts for our expanded level of full-thickness skin defects”
[JC Q124 Call]:“We only added a total of 73 new accounts of which 22 accounts were closed in the first quarter. However, we had expected an average of 15 new accounts per month for a total of 135 new accounts at the end of the first quarter.” [DO Q124 Briefing]:“The new accounts that we had expected to drive the revenue growth in the first quarter, just didn’t happen” They’re waiting to see if GO will be approved so they don’t have to train staff with a soon to be outdated device just like the possible international distributors are apparently doing: [JC Q124 call]:“a couple of the distributors we're talking about have identified that they prefer to launch with RECELL GO then switch after 2 or 3 months” 2. “Burns business was significantly below our historical expectations in the quarter”They rely on external claims data: Burn admissions are typically predictable and flat. January data revealed a 20% lower admission rate for burn wounds compared to the 3 previous Januaries. They don’t have data on Feb & Mar due to data breach in United Health Group. What that looks like based on the expected 15.2M: 20% reduction in 1/3 quarters = 5.9% ~ $0.85M less revenue (likely) 20% reduction in 2/3 quarters = 12.5% ~ $1.7M less revenue (unlikely) 20% reduction in 3/3 quarters = 20% ~ $2.5M less revenue (very unlikely) ~ may have had attributed to some reduced revenue but not the full amount.
Q224 Burns: [JC Q1 Call]:“we're not seeing that same effect currently (21/5/24)” Sounds promising but I’ve fallen for that trick before 3. [Brooks O’Neil Q1 Call]: Do you see any evidence that accounts are waiting for the approval for RECELL GO before ordering product?
[JC Q124 call]:“I did thoroughly look at that. And I don't think so. I don't think there's accounts that are waiting for that. That said, there is strong anticipation for it in many of our larger accounts.”Larger accounts are not necessarily “waiting” for GO, but they’re using existing inventory prior to the possible GO approval. If approved, they’ll place orders for GO. If not, they’ll place orders for the current device.4. [JC Q124 call]: “We have retained an executive search firm to find a replacement for our Senior Vice President of Global Sales, who is no longer with the company”
February 2024:
May 2024:
[DO Q124 Briefing]: Looking for a replacement who is“focussed on execution and managing large sales organisations” [JC Q124 call]:“To supplement our understanding of burn accounts, our team of 29 clinical training specialists will be physically present at our burn account sites, dedicating at least 60% of their time in burn centers. We believe that this approach will reinvigorate our burns business.”
(20min delay)