Conformis, Inc.

Product revenue was $12.7 million in Q1 2023, down 15% year over year on a reported basis and down 14% constant currency. Product gross margin was 39.1%, sequentially higher and above mid-30s guidance. Total operating expenses were $14.5 million, down $5.9 million, or 29%, from Q1 last year. Cash and cash equivalents were $37.8 million at quarter-end. For Q2, product revenue guidance is $11 million to $13 million. Management said Q2 gross margin should be similar to Q1, depending on where revenue lands, and OpEx should stay relatively stable to slightly down, with Q3 and Q4 dependent on top-line progress.

Mark Augusti framed the quarter as mixed: progress in hip, international, PSP, margins, and cost control, offset by weak U.S. knee growth and operational friction from the business model transition. He said the company believes it has the right model, but needs to reengage surgeons, win new customers, and convert patient leads into orders, especially as robotics pressure increases in the market. He also highlighted FDA clearance for the CS insert, continued work on cementless knee, and openness to licensing or partnership deals to create shareholder value.

Bob Howe emphasized the hard numbers: $12.7 million of product revenue, 39.1% product gross margin, $14.5 million of operating expenses, and $37.8 million of cash and equivalents. He said margin benefited sequentially but still faced headwinds from labor and materials costs, operational inefficiencies, and lower unit volume tied to the business model transition. He also said cost cuts are expected to keep OpEx roughly at current levels, and gave Q2 product revenue guidance of $11 million to $13 million, noting uncertainty remains elevated because Imprint and Platinum Services adoption is taking longer than expected.

Analysts focused on where revenue growth will come from in the rest of 2023, and management said it will likely be a combination of reengaging existing customers, winning new customers, and adding incremental growth from Actera and the CS launch. Questions on Platinum Services centered on whether patient demand or customer workflow is the bigger hurdle; Mark Augusti said patients generally understand the upgrade, but customers struggle more with the added bureaucracy and workflow changes. On partnerships and licensing, management said it remains open to deals that make sense for shareholders, including in hip, knee, and shoulder.