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Conformis expects 50% drop in Q2 product revenue

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ConformisJoint replacement implant maker Conformis (NSDQ:CFMS) said today that it anticipates a COVID-19-influenced 50% year-over-year drop in second-quarter product revenue.

Releasing its preliminary results for the quarter ended June 30, the Billerica, Mass.-based company projected total revenue of $19.5 million for the quarter, which is down -1% year-over-year on a reported and constant currency basis. About half of that is made up of approximately $9.7 million in royalty revenue, including a royalty settlement of $9.6 million.

The other half was provided by $9.7 million in product revenue, which represents a 50% drop year-over-year. That total includes U.S. product revenue of approximately $8.3 million, which is down 52% from last year, and $1.4 million from the rest of the world, which is down 34% and 33$ on a reported basis and constant currency basis, respectively.

In March, Conformis announced that it was withdrawing its 2020 financial guidance while furloughing approximately 80 employees as a result of the COVID-19 pandemic and the deferral of elective procedures. In April, the company announced that it received more than $4.7 million through the U.S. Small Business Administration’s Paycheck Protection Program.

When reporting first-quarter losses in May, Conformis president & CEO Mark Augusti suggested that the second quarter would be heavily affected by the pandemic, even as elective procedures began to restart.

“As expected, the second quarter was impacted by the novel coronavirus pandemic,” Augusti said in a news release. “While we were pleased to see a fairly quick resumption of scheduled orthopedic procedures in May and June, we anticipate volumes to remain under pressure for the remainder of the year.
“It should be noted that we continue to withhold any comment about future performance. Clearly there was some correlation with the resumption of elective procedures; however, we cannot predict the pace of further resumption, the risk of further shutdowns in procedures and the geographic and regional uncertainty.”
Conformis also announced that it successfully amended its quarterly financial covenants in its loan and security agreement from June 25, 2019, with Innovatus Life Sciences Lending Fund, East West Bank and other lenders.
“For companies with credit facilities, the impact of COVID-19 on business operations has undoubtedly made it difficult for many of them to satisfy some or all of their financial covenants,” Augusti said. “We reported on March 23, 2020, that we may not be able to meet our 2Q revenue covenant and would work with Innovatus to modify our credit facility. I am pleased that we have been able to come to an agreement that better reflects current economic realities. This is an indication of the good and cooperative partnership we have with Innovatus.”
Conformis will host a webcast and conference call on Wednesday, Aug. 5, to discuss the financial results for the second quarter.

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