U.S. Markets open in 2 hrs 38 mins

Edited Transcript of BIOL earnings conference call or presentation 13-Nov-18 3:30pm GMT

Q3 2018 BIOLASE Inc Earnings Call

IRVINE Jan 4, 2019 (Thomson StreetEvents) -- Edited Transcript of BIOLASE Inc earnings conference call or presentation Tuesday, November 13, 2018 at 3:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* John R. Beaver

BIOLASE, Inc. - Executive VP & CFO

* Todd A. Norbe

BIOLASE, Inc. - President, CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Edward Moon Woo

Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media

* Karthik Sagar Sunkesula

H.C. Wainwright & Co, LLC, Research Division - Research Analyst

* Lisa Springer

Singular Research, LLC - Research Analyst

* Paul Bornstein

* Steven Kohl

* Michael Polyviou

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2018 BIOLASE Earnings Conference Call. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Michael Polyviou of EVC Group. You may begin, sir.

--------------------------------------------------------------------------------

Michael Polyviou, [2]

--------------------------------------------------------------------------------

Thank you, Rob. Good morning, everyone, and thank you for joining us today to discuss BIOLASE's financial results for the 2018 third quarter and first 9 months ended September 30, 2018.

On the call today from BIOLASE are Todd Norbe, President and Chief Executive Officer; and John Beaver, Executive Vice President and Chief Financial Officer.

Management will review the company's operating performance for the third quarter before opening the call for your questions. Before we begin, I'd like to remind everyone that a number of forward-looking statements, which are statements that are not historical facts, will be made during this presentation, including forward-looking statements regarding the company's strategic initiatives and financial performance. These forward-looking statements are based on by BIOLASE's current expectations and are subject to a variety of risks and uncertainties that could cause the company's actual results to differ materially from the statements contained in this presentation.

Such forward-looking statements only represent the company's view as of today, Tuesday, November 13, 2018. These risks are discussed in the company's filings with the Securities and Exchange Commission. A replay of this conference call will be available on the BIOLASE website shortly after the completion of today's call.

When listening to this call, please refer to the news release issued earlier this morning, announcing the company's results for its third quarter ended September 30, 2018. If you do not have a copy of the news release, it is available in the Investors Relations section on the BIOLASE website at www.biolase.com. BIOLASE's financial results for its third quarter can also be found in the company's quarterly report on Form 10-Q, filed with the SEC.

The tables we've provided in today's news release offer additional financial information, so we encourage you to review them. The tables include the reconciliation of GAAP net loss, net loss per share to non-GAAP and net loss and net loss per share as well as details of the company's non-GAAP disclosures.

With that, I am pleased to turn the call over to BIOLASE President and Chief Executive Officer, Todd Norbe. Todd, please go ahead

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Michael, and thanks, everyone, for joining today and your interest in BIOLASE and for joining us, obviously, on this call this morning. As many of you know, this past August, the Board of Directors appointed me to assume the responsibility of President and CEO of BIOLASE. Since then, I continue to be impressed with the value of our technology, its ability to deliver on a new standard of care around dental procedures. And I have personally made a goal to speak to many of our users, and I'm pleased that our technology is being validated by a passionate and growing dental community who have paved the way for further adoption through peer-to-peer referrals. The significant potential of our products in the marketplace and the commitment of the entire BIOLASE team to perform at the highest level are beginning to have a favorable impact on our results.

Let me highlight some of our results for the third quarter. I'm pleased to report that the U.S. laser revenue increased 22% year-over-year, while our Southern California Model Market laser revenue was up 127% during the quarter and up 175% over the last 2 quarters. These are encouraging results that demonstrate a high level of interest in our technology and reflect the early success we are having as we test different go-to-market approaches.

Our leadership team continues to be dedicated to changing the way we do business here. And we've spent about 1.5 weeks on lessons learned to establish the appropriate KPIs and process improvements required to deliver on our goal of EBITDA positive in the fourth quarter of '19.

One of our key strategic goals is to build our customer base, increase utilization of our products, thus driving recurring higher-margin consumables revenue.

We continue to attract new customers with more than 62% of our total third quarter revenue coming from new customers, while at the same time, expanding our existing customer base. We are pleased to note that because of increased utilization, our consumables revenue for the quarter increased 9% year-over-year.

In addition to these improving results, we also announced today in a separate press release that we've entered into a $12.5 million term loan agreement with SWK Funding and its partners. SWK is a highly regarded name in the healthcare segment, and its commitment to funding our growth reflects its confidence in our near- and long-term business execution. John will provide more details later in the call, but this loan will provide us sufficient working capital to support the business and our growth objectives until we meet our goal of EBITDA positive in the fourth quarter of '19.

We recently expanded our successful laser dentistry awareness initiative with the launch of a second Model Market in Dallas, Fort Worth. Several members of the BIOLASE team were in Dallas a few weeks ago, commenced on a similar awareness campaign to the one that was highly successful in the L.A., Orange County market. In the Model Market, employee volunteers have visited nearly 700 dental offices, contributing to 175% Model Market laser revenue growth I mentioned earlier. In Dallas, in just 1 week, we canvased almost 350 dental offices, and we're very encouraged by the early results that we're seeing from that activity.

As a result of these efforts, patients are educating themselves on dental care and the benefits of minimally invasive laser dentistry, resulting in more dentists having the information, support, resources they need to deliver the best possible care to their patients, which is ultimately our goal. We will continue to learn from these types of programs as we seek to unlock this much-needed technology.

After the end of the third quarter, we announced the addition of Dr. Elaine Wagner to the Board of Directors. Dr. Wagner is a renowned leader in the practice of pediatric dentistry and a retired Rear Admiral with 33 years of service in the U.S. Navy. Her vast experience, strong management skills will be invaluable to BIOLASE and our customers, as we continue to focus on making lasers the standard of care in pediatric dentistry and advancing dentistry through laser technology.

Looking ahead, we firmly believe that minimally invasive laser dentistry can become the standard of care in modern general dentistry, especially in growing markets like pediatric care and implant periodontitis. As we work to expand adoption of our new tissue lasers through the dental industry, we're focused on successfully executing on several initiatives that are top priorities for '19. These include: Developing a commercial growth engine that links lead gen to a robust sales funnel, supported by inside selling, with a weekly growth war room; implementing a new product introduction process to build competitive advantage for new and existing products, while leveraging open innovation; building a customer loyalty process to improve customer retention and satisfaction while increasing the referrals that we receive here in-house; and then leveraging peer-to-peer on a local and national level while expanding our podium presence.

We're also going to look to develop an outsourcing process that drives overall operational savings. And then taking advantage of a unique software we have called [BRAS] to establish a new revenue stream based on pay-per-click in select segments.

While there's still plenty of work ahead of us, we have a plan, a path forward and new processes that will keep the team accountable and on track. With that said, I look forward to speaking with you again in the coming weeks and months and reporting on our progress next quarter.

With that, I'll hand it over to John to review our financial results.

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [4]

--------------------------------------------------------------------------------

Thank you, Todd, and again, thank you all for joining us this morning. Since yesterday was Veterans Day, I also want to thank our veterans and military personnel for their service to our country. And I want to thank our entire team of employees for their hard work in achieving solid results in the third quarter. We believe we are building momentum, and if you take a closer look at our third quarter results, there are many reasons to be optimistic.

Now let me review the numbers. Total worldwide revenues for the third quarter were $10.9 million, a slight increase compared to $10.8 million in the third quarter a year ago. More importantly, excluding revenue from our non-core imaging business, revenue in the third quarter of 2018 increased 9% compared to the third quarter of 2017. Revenue from the company's core U.S. laser-related products for the third quarter increased 22% year-over-year. Net revenue from lasers in our first Model Market in Southern California increased 127% year-over-year. During the third quarter, 62% of our All-Tissue laser system sales were to new customers, reflecting early success with our new strategic priorities. These are positive indicators of progress and will lead to improve financial results in the future.

One of the most basic strategic goals is to build our customer base and increase the utilization of our product, thereby driving recurring higher-margin consumables revenue. The 9% increase in consumables and other revenue is due to our success in attracting new customers as well as expanding within our existing customer base. Internationally, revenue for the third quarter was $4 million, essentially flat compared to the prior year third quarter.

Gross profit as a percentage of revenue for the third quarter of 2018 was 36%, up from 26% in the third quarter of 2017. The increase in gross profit as a percentage of revenue for the third quarter compared to the third -- compared to the prior third quarter reflects new customer growth and a favorable change in product mix, with an increase in laser sales which has a higher margin.

Total operating expenses for the third quarter of 2018 were $8.5 million compared to $7.6 million for the third quarter of 2017. Sales and marketing expenses increased by $0.5 million, primarily due to an increase in advertising and payroll and consulting-related expenses. General and administrative expenses increased $0.7 million, primarily as a result of increased legal fees.

Engineering and development expenses decreased by $0.3 million, primarily due to a decrease in payroll and consulting-related expenses.

Net loss for the third quarter of 2018 was $4.7 million or $0.23 loss per share compared to a net loss of $4.6 million or $0.30 loss per share for the prior year third quarter. The non-GAAP net loss for the third quarter of 2018 was $3.8 million or a loss of $0.19 per share compared to a non-GAAP net loss of $3.8 million or $0.25 per share during the third quarter of 2017. Our cash, cash equivalents and investments totaled $2.4 million as of September 30, 2018.

However, as Todd noted earlier, we have entered into a $12.5 million term loan agreement with SWK Holdings. We used a portion of the proceeds to retire our Western Alliance Bank debt and plan to use the remaining proceeds to fund our growth initiatives. We believe this is a win-win for all stakeholders as it provides BIOLASE with sufficient liquidity to execute our long-term plan to further our current growth trajectory and drive towards profitability without the need for additional capital raises.

We remain focused on wisely investing our cash on products and programs to drive future growth, revenue and profitability. And as always, cost containment and prudent cash management continues to be and will be a top priority.

Before I turn the call over to the operator for questions, let me summarize our remarks. Todd and I remain very focused on solid execution and growing and expanding the adoption of All-Tissue lasers throughout the dental industry. Overall, BIOLASE is experiencing significant increases in both adoption and utilization of All-Tissue lasers, and increasing the speed of getting our lasers in the hands of more dentists is our goal. I believe we have the most loyal and energized group of employees and that BIOLASE is well positioned to achieve sustained growth and profitability.

Lastly, on our investor relations front, in addition to planning several investor roadshows in the next few months, we are also scheduled to present at the 11th Annual LD Micro Main Event Investor Conference taking place December 4 through 6 in Los Angeles, and the Singular Research Conference taking place in San Francisco on December 13. We look forward to seeing many of you there.

This concludes our prepared remarks. I'll turn the call back to the operator to open the call for questions. Rob, operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Lisa Springer with Singular Research.

--------------------------------------------------------------------------------

Lisa Springer, Singular Research, LLC - Research Analyst [2]

--------------------------------------------------------------------------------

Could you give us a little additional color around the decline in non-core imaging revenues? And what your expectations are for that segment of the business going forward?

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Sure, Lisa. Thank you for the question. This is Todd. Our focus, as you've heard, is around laser technology. The sales team is focused around that portion of it when the opportunity is there. It's not a key focus on a daily basis for our team, considering that it's not a differentiator for us in the marketplace and there's many outlets for that technology today.

--------------------------------------------------------------------------------

Lisa Springer, Singular Research, LLC - Research Analyst [4]

--------------------------------------------------------------------------------

Okay. And could you give us a sense of what contribution that made the revenues, what percentage?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [5]

--------------------------------------------------------------------------------

Yes, Lisa. That will be in the 10-K -- 10-Q that we file tomorrow, so you'll have that as part of the breakdown.

--------------------------------------------------------------------------------

Lisa Springer, Singular Research, LLC - Research Analyst [6]

--------------------------------------------------------------------------------

Okay. Great. And in the Southern California market, could you give us a sense of what you think your market penetration is currently? And what you target for market penetration next year?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [7]

--------------------------------------------------------------------------------

Yes. So Lisa, currently, we have, in the All-Tissue space, about just under 3% market penetration. We believe that that's about 2/3 of the total All-Tissue space in the market, though we can't be for sure on that. But we know that about 3% of L.A., Orange County dentists have our All-Tissue laser. It's interesting that the penetration and the improvement in the penetration doesn't have to be great to have significant results to our bottom line. If we were able to get that to even in the 5% to 10% range, that would greatly exceed our internal forecast, for instance, and exceed our forecast that went into coming up with a EBITDA positive for 2019 fourth quarter. So it doesn't take a lot to proverbially move the needle.

--------------------------------------------------------------------------------

Lisa Springer, Singular Research, LLC - Research Analyst [8]

--------------------------------------------------------------------------------

Okay. And regarding operating expenses, should we think of the operating expenses for Q3 as kind of a run rate going forward? Or were they higher than normal or how would you comment on that?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [9]

--------------------------------------------------------------------------------

I would say they were a little bit higher than normal. We would expect the operating expenses to certainly be reduced in 2019 for the full year on a run rate. And that also, as Todd mentioned, will be one of the key factors in achieving that EBITDA positive in the fourth quarter and into 2020.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Next question comes from the line of Yi Chen with H.C. Wainwright.

--------------------------------------------------------------------------------

Karthik Sagar Sunkesula, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [11]

--------------------------------------------------------------------------------

This is Karthik on Yi. Can you provide more insight into how the company plans to use its newly announced debt facility to broaden the customer base and increase product utilization?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [12]

--------------------------------------------------------------------------------

So you want to be -- let me talk to the debt facility at first and then I'll turn it over to Todd on some of the initiatives. On the debt facility, as you know, we have been EBITDA negative for a while, right? And so this facility will allow us to -- really, time without raising any additional capital to implement a lot of the initiatives that Todd highlighted in his speech. And so really it's just supporting that effort versus any individual initiatives. And with that, I'll turn it over to Todd to talk about some of the initiatives.

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [13]

--------------------------------------------------------------------------------

One of the things that we need to build here is a more robust growth engine to understand lead gen to closure, discipline around funnel management. And what we're building here and we spent 4.5 days as a leadership team to put together the priorities, understand what went well and what hasn't gone well in the past is really making sure we had the right priorities and focus. And what I would call discipline around the commercial piece of that. And we started and had 2 runs at it on a weekly basis to look at our commercial growth engine, understand all the inputs that drive ultimately the results and the outputs that come along with that, and make sure that we understand what's working, what's not so that we can fund more of what's working and less of what's not. So you're going to see more of that from us as we roll forward, and that's not only on the commercial side, it's also on the new product introduction side to make sure that we're chasing what we need to do there. And then to John's point, on the cost side, operationally we've got another war room set up to understand where we can take some cost out, where is opportunities for purchase price variance savings and many other areas within the business to eliminate waste where it exists, so that we can meet our goal in Q4 of next year to be EBITDA positive and then roll forward to 2020 and start to be, obviously, EBITDA positive from a cash standpoint.

--------------------------------------------------------------------------------

Karthik Sagar Sunkesula, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [14]

--------------------------------------------------------------------------------

Great. And as a follow-up, can you detail the financial metrics that need to be achieved to extend the interest-only period on the loan agreement?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [15]

--------------------------------------------------------------------------------

Yes, those are revenue-based and once again I won't get into details yet on that. We'll file with the facility as part of our 10-Q tomorrow. But they are revenue-based to extend that another 12 months.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

(Operator Instructions) The next question comes from the line of Paul Bornstein with Black Diamond.

--------------------------------------------------------------------------------

Paul Bornstein, [17]

--------------------------------------------------------------------------------

Yes. I'm glad the new management team is at least being a little more focused in terms of delivering sales, because the previous team, before you guys joined, went through $30 million and nothing dropped to the bottom line. So I applaud you at least trying to make the effort. I'm just curious on the sales efforts. What is the main reason, why a dentist after you make a call decides not to go on to buy a dental laser? Is it price? Is it just don't want to handle it rather than just use Novocain? I'm trying to understand the -- what kind of hurdles you are looking to get over to increase the sales? And obviously, you don't need a huge amount of sales, but you just need some momentum to show the market that this great technology is going to be used by the dentists out there.

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [18]

--------------------------------------------------------------------------------

Thanks, Paul, this is Todd. You know, there's different reason codes in reference to why that decision may not be made. In general, your average GP has not been trained on lasers coming out of dental school, so it's not intuitive to them, it's not tactile in the field to them. So it's just a change in the way they use this technology, right? And as you know, change is never easy. And that's why we're spending a lot of time here figuring out how we get the right referral base from other colleagues in the peer-to-peer, because ultimately, they listen to their peers and the dental industry has been built on that either at a podium power present or just from a local referral and what we look at our business and really break it down and understand where our success comes from, the majority of our successful folks in the field, it comes from other peer-to-peer referrals and that's how our territories grow with our more experienced reps. The other opportunity, I think, we have here is, as I mentioned, to drive the right lead gen opportunities to right personas to understand what message resonates with what customer group so that we can be more targeted in our messaging and be more successful in our overall funnel management and the conversion of that to ultimate revenue and then drive the consumable piece along with that.

--------------------------------------------------------------------------------

Paul Bornstein, [19]

--------------------------------------------------------------------------------

Okay. So your team is really focused on the dentists that you have a better shot at versus this blanketing whole group. So -- and then once you get some of them on board, word spreads and then, hopefully, some other dentists will be looking at it if they see a launch of bigger amount of patients going to those dentists with the lasers. So -- because you only have maybe $10 million left to go out to do sales and marketing. So you got to be real focused, and it seems like that's what you're doing. So -- because the last team wasn't focused at all. So I applaud you for that because you're under the gun right now. And it's hard to keep borrowing money to be cash flow positive. So -- and you understand that, which is a real positive also. So it's nice to see a little momentum and not just talk, which was coming through for years. So keep up the good work and hopefully, we can see the results.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

The next question is from the line of Ed Woo with Ascendiant Capital.

--------------------------------------------------------------------------------

Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [21]

--------------------------------------------------------------------------------

My question is do you have any early feedback from the Dallas initiative? And also, are you doing anything in this market initiative that's different than what you did in Southern California?

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [22]

--------------------------------------------------------------------------------

Yes. Ed, this is John, let me take that question. It's too early to see the early results from this initiative. You may recall that for Model Market One or the L.A., Orange County, we started in the first quarter and we did not see results in terms of revenue increase until the second quarter. I would expect that, I mean I'd love to see results, tangible results of revenue in the fourth quarter. But however, since we just started that in October, I don't want to expect to see improvement in bottom line revenue until the first quarter of next year, and we'll, obviously, be reporting on that as we get into that. In terms of doing things differently, we are doing some things differently. For instance, we are focused in the visits to the dental office that we made to initiate the Model Market Initiative to, as Todd alluded to, the high-priority candidates. One of the things that we learned is that having employees go out and visit dentists and get the awareness up is much more beneficial to do that to our high-priority list then just do it randomly like we started doing initially in L.A., Orange County. So that's one example of something that we've done differently.

--------------------------------------------------------------------------------

Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [23]

--------------------------------------------------------------------------------

Great. And is it too early to think about your next potential market?

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [24]

--------------------------------------------------------------------------------

Yes. I believe it is too early to think about that. As we talked about, Ed, we started this Model Market Initiative to really learn on how to increase awareness and increase sales in area. We've only been doing it in L.A., Orange County now for about half a year and only about 6 weeks in Dallas. So I'd certainly like to see a little bit more learnings in those markets before we invest in a third market, so that we really hit the ground running and have a solid playbook in future markets. Whether or not that's 3 months, 6 months, 9 months, I don't know that yet, but obviously, we would like to expedite as much as possible.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

Our next question is from the line of Steve Kohl with Mangrove.

--------------------------------------------------------------------------------

Steven Kohl, [26]

--------------------------------------------------------------------------------

Couple of things. Could you -- obviously, the promised land that we're all shooting for is cash flow breakeven, as you know it's been a moving bogey for a while. I guess, I'm just curious -- and I applaud you, John, on the new facility, but if you can run through some of the key assumptions on how we're getting there, for example, domestic versus international, we talked about international as being a great opportunity for a number of years now, and you've made some changes, I think, overseas, but I see it flat year-over-year. Do we need that to kick in? So I guess, the first question is, from a top line, what are we building in? How important are the Model Markets in getting us there? And the third part of that equation is looking at the approach to market, I think, Todd, you mentioned peer-to-peer. I'm just curious, when we look at bottom-up versus top-down, what are you finding as the most cost advantageous way to get there? So I've always thought peer-to-peer is a good way with awareness to the consumer, since we are on limited resources, how do we commit those resources to which channel?

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [27]

--------------------------------------------------------------------------------

Yes. So I think, from a top line standpoint, there's just a matter of discipline here that we need to make sure that we instill in reference to the time that we're spending in the street with the customers, with the right customers, as I mentioned early, with the right persona. We're spending a lot of time today with our field resources, cold calling, which is not productive time. And the growth engine that I'm referring to is making sure that we're getting enough of the right marketing-qualified leads that are funneled through an inside sales team and then converted over into an outside sales team where required. And this includes, not only our All-Tissue laser sales, but also our diode sales as well, where we haven't spent a lot of time and energy around that. And inside selling and outside selling have not been operating in harmony, and that's going to change.

So Model Market, to your second question, it contributes to it but it's not the answer for us to necessarily meet the overall commitment that we're making here by Q4 '19. It's still a learning for us. There's still a lot of analytics and data that we want to look at to understand what's truly working, what's contributing, so that when we do make those bets, we make the right bets because of the limited resources that you've mentioned.

And I think the peer-to-peer thing, when we really sat down and reflected on, what I would call, best of the best. As I mentioned earlier, what's contributed to consistent high-performing sales in certain marketplaces. Peer-to-peer was a big Pareto for us in reference to that success. So we want to continue to learn from the Model Market and a lot of the direct-to-patient awareness that's been done. But ultimately, I think when you look at where we want to make more bets is making sure that we've got the peer-to-peer thing working and even provide some incentive for that to occur at a larger percentage than is happening today.

--------------------------------------------------------------------------------

Steven Kohl, [28]

--------------------------------------------------------------------------------

Can I ask one follow-up, just out of curiosity. I think a couple of years ago or maybe it was a year ago, you guys started working on some kind of supporting research out in the field, looking at the efficacy of lasers. Where is that -- is that continuing to proceed? I can't remember what the timetable of that was and when it was going to be released. But wouldn't that also contribute to the peer-to-peer channel?

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [29]

--------------------------------------------------------------------------------

It does. And I just got back from the AAP up in Vancouver, and we're doing a pretty extensive study with the McGuire Group, I met with those folks and principals up there. That's progressing as we expect. We should get some results and committed results in '19, probably midyear. The early indication is that, that is going to be some additional evidence and validation, especially from the periodontist community that lasers is a better minimally invasive procedure than what had been traditionally used and taught in a lot of the schools. So we're really optimistic around what we're seeing there -- or hearing early and should have hopefully something published, sometime latter part of '19 around that.

--------------------------------------------------------------------------------

Steven Kohl, [30]

--------------------------------------------------------------------------------

Okay. And when you look at -- I know you guys have looked at the pediatric and periodontist -- periodontal market, periodontitis as a target application, is that still where you're seeing the greatest opportunity? And when you look at that '19 bogey, is that -- are we going to be more focused -- streamlined on those 2 initiatives, those 2 market initiatives to get us there?

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [31]

--------------------------------------------------------------------------------

I think, the answer is yes. But also, you're seeing more GPs treating perio because of the issue in the olding -- elder population. And as you know, the average GP is looking for additional procedures that they can do in-house. You saw that happen with endodontics, you saw that happen with orthodontics, I think you're going to see that happen more with perio. So the GP will continue to be a growth opportunity for us. And then also in the DSO segment, you're seeing those large groups looking to add on additional services. So perio will be a focus for sure. And then pedo is, obviously, a key focus as we roll forward.

--------------------------------------------------------------------------------

Steven Kohl, [32]

--------------------------------------------------------------------------------

Great. And the last question, as you hit another big topic for me, DSOs, I mean, I'm sure it's not lost on you guys, there is a massive consolidation that appears within the individual dentist getting rolled up. How are you guys positioned to pursue those? And are they -- I don't know who owns these, I presume some PE firms own some, but they should be focused on profits. How is that playing into your strategy as well over the next couple of...

--------------------------------------------------------------------------------

John R. Beaver, BIOLASE, Inc. - Executive VP & CFO [33]

--------------------------------------------------------------------------------

It's one of our strategic initiatives. As we roll forward, we have a team focused on that. We've got some active trials going on right now in that segment. And there may be an opportunity there too, as I mentioned, with our [BRAS] software, we're pretty unique and that it allows us to see every procedure that's being used within a dental office. So there may be other revenue models here that we look at as well as we roll forward.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

(Operator Instructions) At this time, I'll turn the floor back to Todd Norbe for closing remarks.

--------------------------------------------------------------------------------

Todd A. Norbe, BIOLASE, Inc. - President, CEO & Director [35]

--------------------------------------------------------------------------------

Well, I appreciate everybody on the call. I understand that we've got some work ahead of us here as an organization. Looking forward to updating you along the way as we roll through Q4. So thank you, and have a good day.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.