Conformis Announces Actions to Mitigate COVID-19 Impact
Withdraws Previous 2020 Growth Outlook
- Implementing furlough of approximately 1/3 of its direct workforce and substantially all of its temporary workforce
- Furloughed employees will be immediately eligible for unemployment benefits and will maintain their existing healthcare coverage through
- Continuing to produce backlog orders and new orders; Interruptions in supply chain are not currently anticipated
- Continuing to progress new product development programs
“Our core product areas of knee and hip surgery are being impacted in unprecedented ways by COVID-19,” said
Business Performance Update
As a result of the various macroeconomic factors at play as a result of the COVID-19 pandemic, we are withdrawing the 2020 revenue guidance we announced on
Currently we are experiencing a significant drop off in orders as elective cases are deferred. It is too early to estimate the total slope of the decline and the duration. Barring a complete national ban on elective surgery, we do not expect it to come to a compete standstill. We are actively monitoring our incoming orders and plan to continue production.
We have also announced a furlough of approximately 80 employees and substantially all of our temporary workforce effective as of today. In preparing to implement this furlough, we reviewed the role of every
- Protect our employees and their families
- Protect our production capability
- Protect and support our patients and customers
- Communicate, communicate, communicate
The Company has taken and continues to take numerous proactive steps to mitigate the negative financial and operational impacts of COVID-19. In an effort to keep our focus on shareholder value, business contingency plans have been implemented and will continue to be adjusted in response to the global situation. We created a COVID-19 response team to monitor and develop plans and policies to address the COVID-19 threat. We also created a separate, commercially-focused COVID-19 team to proactively seek and capture intelligence from our hospital and physician customers. At our facilities, we have initiated increased frequency of cleaning, we are cross training employees, and we have restricted vendor and visitor access. We ensured that our remote networking capability was in operational readiness for increased capacity as we allowed employees who were able to work remotely and were concerned about coming to the office to work from home. We worked with our medical benefits provider to ensure we had appropriate coverage and we worked closely with our employees to understand and help address the impacts of school closings on their ability to work.
We immediately conducted a review of our supply chain and our partners, which revealed fairly low risk – with the only concerns related to the supply of mask and gown consumables used in our clean room processes. Importantly, we did order additional 3D printing powder to ensure we had additional supply on hand.
In addition, we have taken steps to reduce all operational expenses across the income statement, including sales, marketing, quality, clinical, regulatory and all general and administrative expense. Non-essential programs have been eliminated or deferred where possible.
Balance Sheet Update
In the current environment, a major priority is preserving liquidity. In addition to the furlough that we have implemented, we have eliminated, reduced, or are deferring significant non-essential expense. In addition, we are working with suppliers to help match future revenue and expense.
We currently have a
In the event we are unable to meet any quarterly revenue covenant, the terms of the credit facility provide a mechanism to adjust the revenue covenants to bring us back into compliance. We are initiating discussions with Innovatus with the goal of adjusting the revenue covenants as provided for under the credit facility.
New Product Timeline Impacts
Fortunately, the furloughs announced today have not impacted our core new product development talent. However, due to travel prohibitions, surgeon schedule impacts, and concerns regarding a potential increase in uncertainty around regulatory approval timings, we cannot provide a meaningful update to our new product launch schedule at this time. If conditions allow, we plan to host an investor day this summer to provide a more detailed update about our new product development plans. Though this pandemic has had a horrible financial, psychological and physical toll on our society, we see interesting opportunities for
No employee resources required for our Stryker development and supply partnership have been furloughed. We expect to successfully achieve each milestone in connection with this partnership.
2020 Outlook and Commentary
Given the current environment to date, the actions we have disclosed today and the continued business uncertainty, we are formally withdrawing our 3–6% product revenue growth target for 2020. Further,
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Cautionary Statement Regarding Forward-Looking Statements
Statements in this press release about our future expectations, plans and prospects, including statements about the anticipated impact of the novel coronavirus pandemic and the actions we are taking and planning in response, the anticipated timing of our product launches, our ability to continue production, our reliability of supply chain, our ability to meet obligations under loan agreements, the duration of decreased demand, our ability to recall employees, whether or when demand for procedures will increase, the anticipated achievement of Stryker milestones, and our financial position and results, total revenue, product revenue, gross margin, operations, as well as other statements containing the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," or "would" and similar expressions, constitute forward-looking statements within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. We may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual financial results could differ materially from the projections disclosed in the forward-looking statements we make as a result of a variety of risks and uncertainties, including risks related to the novel coronavirus pandemic and the response to the pandemic; whether our cash resources will be sufficient to fund our continuing operations for the periods anticipated; risks related to our estimates and expectations regarding our revenue, gross margin, expenses, revenue growth and other results of operations; and the other risks and uncertainties described in the "Risk Factors" sections of our public filings with the
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Source: Conformis, Inc.