Milestone Scientific Inc. (MLSS) Earnings Call Transcript

Thanks, operator. I want to flag before we get started that this call is going to include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risks and uncertainties apply to those statements, and because of them, actual results might differ materially from what we project. For a discussion of those risks, please see our earnings press release and our SEC filings, which include our 2025 Form 10-K. A replay will be made available shortly after this call ends; at that point, I'll hand things over to Eric Hines, our CEO.

Thank you, James, and good morning to everyone, and I appreciate all of you joining today's call. I want to extend particular thanks to those who took part in our PIPE during April, as well as for your ongoing backing of Milestone. That means a great deal to us. The results for our first quarter show continuing advancement as we carry out the strategy we put in place during 2025. We stay committed to developing a rigorous operating framework in which costs match revenue production and demonstrable return on investment; our results demonstrate that commitment. We kept our revenue base fairly steady during the quarter even though we could not deliver certain booked orders into the Middle East because of the continuing global conflict in that region. Despite this obstacle, we cut operating expenses by roughly $1.3 million, equivalent to over 30% compared with the prior year, substantially shrinking our losses as we position the company for growth. Simultaneously, we are starting to observe initial indications of momentum in the areas we regard as our main growth drivers. Beginning with our dental business, which continues to be the company's core. We are continuing to carry out the nationwide expansion of our ambassador program after extending it in January, which has produced 173 applications, 73 active ambassadors and 25 new demos along with multiple new sales. Participation has been encouraging. And although we anticipate the financial effect will accumulate gradually, we think this effort is bolstering our commercial footprint and preparing us for better results during the second half of the year. Abroad, we keep seeking further registrations, which we think could unlock substantial new markets over time. Moving to the medical side. CompuFlo keeps building momentum and is turning into a more and more vital element of our growth plan; during the first quarter, medical revenue grew by more than double compared with a year earlier, which shows early-stage uptake and rising clinician interest. Although we remain at an early stage, this progress strengthens our conviction that CompuFlo offers a major long-term opportunity for the company. We are also continuing to develop the infrastructure needed to underpin that growth. After introducing our CompuFlo Advisor Program in February, we currently have over 8 physician partners actively involved in 6 pending, backed by a committed reimbursement infrastructure with more than 50 claims filed across 3 MACs, namely Novitas, Palmetto and First Coast. This represents an essential part of our approach, since uptake in the medical market depends heavily on both clinical validation and reimbursement support; beyond that, we continue concentrating on broadening Medicare coverage, bringing on 7 additional distribution partners and pursuing possibilities with national as well as local VA channels. In addition, we have begun a digital marketing effort spanning several channels for CompuFlo, which has generated 152 leads; these programs are meant to turn early clinical interest into lasting utilization over time. After the quarter closed, we reinforced our balance sheet via a $2.15 million financing. That gives us more room to put money into important growth efforts, such as expanding sales, inventory and digital marketing, all while sticking with the strict approach to capital allocation we've stressed since last year. Now for our outlook. We are reaffirming our guidance, our 2026 guidance. We still anticipate total revenue between $9.8 million and $10.2 million, which would mean double-digit year-over-year growth. Inside that, we expect CompuFlo revenue to increase at an even faster rate across the rest of over 2025. Along with the structural cost reductions made last year, growth at this level should produce better operating leverage and a significant decrease in cash burn. Our aim is to hit cash flow breakeven in early 2027 by executing with discipline, investing only where clear returns exist and building a business capable of delivering sustainable long-term shareholder value. I'll now hand the call to Keisha to go over our financials. Keisha?

Thanks, Eric, and hello everybody on this call. Revenue came in flat, at about $2.2 million across both the 3 months that closed on March 31, 2026 and the same stretch in 2025. We posted gross profit of $1.56 million, which was roughly comparable to the $1.65 million recorded a year earlier. The key point is that gross margins are still strong, sitting at 72.3% versus 73.8% during the earlier period. Operating losses came to $828,000, which is a 58% gain, or $1.2 million, against the $2 million of operating losses booked a year ago. Net losses were $840,000, compared with a net loss of $2 million in the year-ago period. That net loss shrank by 58%, or $1.2 million. With that said, I'll hand things back to the operator so we can take questions.

Before I turn to CompuFlo's medical growth sales, which I'm happy to see moving forward. I just wanted to — in your prepared remarks, you mentioned that some revenue got hit in the Middle East. Can you give a range for how much that revenue was, and are you able to get it shipped in Q2? Or given the ongoing conflict, is it kind of stuck?

Thanks, Anthony; good question, and as you can imagine, it's something we know well. So yes, roughly $200,000 in bookings couldn't go out because of the regional conflict over in the Strait of Hormuz. After that, we've now shipped most of it. I believe a small amount is still left for this quarter. But if those orders had gone out, we'd have posted higher sales than the prior quarter. So as you heard, revenues took a hit. And luckily, we've already gotten a sizable portion of it out the door here in Q2.

Alright, that's excellent. Then there's the doubling of revenue for CompuFlo medical. Fantastic to hear that. Do you — and I realize we're starting from a small base — will you be sharing that figure? Also, if you wouldn't mind elaborating on a few figures you brought up: there are 152 leads, plus 8 physician partners. I didn't catch how many you said were still pending. Regarding those leads, could you describe what the situation looked like prior to this quarter? And what about converting those leads into partners? How much time do you figure that requires? On average, how long does it take for a lead to become a partner?

Sure. There are many overlapping threads in that question. Starting with CompuFlo, then, as the earnings report showed, we brought in roughly — I think the figure was $108,000 in revenue during Q1. That pattern should carry into Q2. After that, we see — once Medicare reimbursement is sorted out, and we intend to begin formal talks with Medicare around early June, based on how many claims we now have in the system — that becomes the key milestone we'll reach. Likely we'll begin with our colleagues in Florida at First Coast. So on the CompuFlo side, we expect that growth trend to persist; and should we secure Medicare reimbursement at a sensible level, nonlinear possibilities open up as we move into the second half of the year — though that still hinges mostly on Medicare reimbursement. Turning to how many leads we're bringing in right now, from a digital marketing standpoint on social media, CompuFlo was essentially absent, correct? So we introduced CompuFlo, I'd say, alongside what we're already doing in dental. Honestly, the response to digital marketing caught us off guard. We're hearing from anesthesia providers, neurologists, a whole range of people, neurosurgeons contacting us; and once more, getting 152 leads was somewhat unexpected, with somewhere between 20 and 30 fresh leads coming in each week, which we of course follow up on. So digital marketing's effect was somewhat unexpected. Still, alongside the distribution partners we've brought on board, and the direct sales representative we have working in the field, we're witnessing substantial activity on all sides. And it isn't — it spans every area of epidural injections, from spinal stimulation to neurosurgeons to standard interventional pain specialists. Beyond that, we're experiencing significant pull from the academic side—the university crowd. So there are chances for us to sit down with some really prominent, well-known institutions operating in this space, and I believe you'll keep seeing research papers from us get released. One came out not long ago—UTMB, focused on spinal stimulation. So momentum is building everywhere you look. And regarding that final thing you brought up—the timing—even though Medicare reimbursement isn't yet at the level we'd like, we're witnessing orders that can move through in as little as seven days, correct? So when folks head out, they'll show the solution. They'll pick up on the excitement; they'll spot the specific niche cases where this really clicks right away. And we're observing purchases that cycle through in as little as a week, which, once more, is pretty striking given that we still aren't where we need to be on the Medicare reimbursement front. So there's just a great deal of genuinely strong momentum. The challenge, clearly, is turning that into revenue and then managing to scale in a nonlinear fashion. And every bit of that happens alongside securing the MACs approvals and restoring reimbursement to the level we want it at. Did I cover...

All right, yeah, no — that makes sense — yeah, no, yeah, pretty much — yeah, I believe you covered everything, but I want to ask a quick follow-up on — on a couple of items. First, it sounds like the DTC marketing is, as you put it, possibly even caught you off guard with how well it's performing, bringing in 20 to 30 new leads each week. Do you all need to invest more resources there, or is — is it functioning ideally, nothing to change? And second, you mentioned that you plan to file formal claims with Medicare. Could you expand a bit more on what your company can do on its side to try to — and I realize it's the government, so you can't necessarily speed it up, but to ensure you're crossing every t and dotting every i so the reimbursement comes through as quickly as possible, and then any timeline you could lay out for when you anticipate that happening?

It never ceases to impress me how the analysts always seem to nail it. I previously worked at a software firm, for Gartner. You'd figure they had no clue what was actually happening, and then they'd pose these questions and they'd be completely on target. So you brought up the 152-odd leads that we've been getting. We're receiving a comparable number on the dental side. And so one of the difficulties with following up on those leads is that all these doctors are seeing patients during the day, dentists too, and the majority of dentists are off, say, either Wednesday or Friday; so when it comes to following up on the leads, we haven't cracked that nut, if you will, as of yet since it's quite hard, even though they complete 2 or 3 pages of paperwork and demonstrate obvious interest, reconnecting with them proves difficult, correct? And so it's been somewhat challenging to follow up on the leads simply because these individuals are typically performing procedures throughout the workday. So we're addressing that. And yes, we do require additional manpower to pursue those leads. Regarding Medicare reimbursement, I believe as I mentioned on our prior call, we have a dedicated team headed by a woman named Evelyn Gittinger, who brings 20-plus-plus years of pursuing opportunities on the Medicare side of things together with the call center. And we have a well-defined plan that, once again, places us physically in front of probably First Coast in June. And then we have a complete road map guiding us toward our submission for a Category I authorization for the February meeting next year. And so that necessitates submission likely around the November time frame. So they truly examine 3 distinct things. Their review covers utilization — that's the reason claims are being produced — plus clinical necessity, and doctors who back you and are ready to join you in explaining the case for that necessity. Then, last of all, they consider the various societies taking part in this effort. And partly, certain studies getting underway shortly at the University of Kansas and the University of Minnesota, along with work already being done at University of Texas Medical Branch. So — and additional developments are on the way there regarding chances at a few well-known institutions.

A few more questions regarding the dental ambassador initiative. It's relatively fresh. Do you notice anything when it comes to repeat purchases? Or what's your sense of where this is heading? Should we assume the path will be somewhat gradual before picking up speed later in the year? Or might we see results as early as Q2?

That's something I posed to my sales team yesterday, but it's a fair question. Thanks, Bruce. Great to hear from you. Regarding the ambassador program, we kicked it off as a pilot, I think that was in December, and then we rolled it out more fully in January. Once again, we were caught off guard by the volume of applications we received. In fact, we were — every one of them is a W-9 employee, and they have a chance to make money if they bring in demos and similar activities. So the number exceeded our expectations. As a result, we held a few training sessions. We did some follow-ups and things like that. But what we've come to understand is it's likely — it follows the Pareto principles, correct? We have 20% of them making a difference. The remaining 80% are either simply posting on their LinkedIn page that they're an ambassador; so we're bringing on someone to run that program. One of the current ambassadors, we plan to hire and have her truly take the lead in heading up that team. And we anticipate that, like everything else, 20% to 30% of those individuals will be active and engaged in genuinely generating demos and results. So it's still somewhat early in terms of that, but we absolutely anticipate that it will be a meaningful contribution in the second half of the year, and it's already delivering results even though we only launched it a few months back.

All right, that's helpful. Now, turning to what you're doing overseas — from what I understand, you have some fresh product approvals working their way through, and Japan is among them, I think. Which countries currently have new registrations pending? And when do you expect those to clear?

We group them by tier — 1, 2, and 3. The three you're probably thinking of are India, Mexico, and Japan. For India and Mexico, we're looking at the upcoming quarter. Japan could take somewhat longer — likely closer to September. So whatever benefit comes from those three would only show up in Q4 at the earliest. Still, these are significant markets, and each offers particularly big chances in cosmetic dentistry. Those are the three. Turkey is in the mix too, along with several other places we're chasing. We're deliberately keeping the list tight, since going through registration takes a lot of time and comes with expenses. That's why we're being fairly choosy. A number of additional countries are already in the pipeline. Some of them — what we refer to as the stans, meaning Uzbekistan and Kazakhstan, plus several more — would fall more into the Tier 2 or Tier 3 category.

All right. And now circling back to that Medicare reimbursement timeline: we're going to meet with First Coast during the summer, and then file in November. So would February be the point where it's official — you've got reimbursement, it's in the system, and you can start billing? At what stage is everything set so a physician never has to wonder if this is covered?

We'll be getting reimbursement long before we move to a Cat I authorization. So it'll likely still sit under a CPT code, say, from July through March or April of next year. That means it stays a Cat III approval, but with luck the payment will be in far better shape than today — back, hopefully, to that 325 range seen before zero utilization occurred. The company was somewhat lucky to secure the reimbursement. Fortunately it did. So precedent exists, yet they failed to support physicians in submitting cases and so on, lacked the infrastructure for it, and utilization fell short of what was required. Our focus — we essentially reversed the approach — is on utilization and submission to push reimbursement forward. Again, I believe they were somewhat lucky to obtain it so fast, then failed to sustain utilization at the level needed. We'll know what the reimbursement looks like long before transitioning to a Cat I; and once Cat I is reached, it becomes closer to a formality. Even under Cat III reimbursement, work remains, which is why we brought in the call center so office managers have someone to rely on while submitting under a Cat III code. Does that make sense?

Yes, definitely. So, my final question. Cost management has been really strict. And I'm simply curious, looking ahead — you've got several initiatives underway that could carry some expense impact. How do you see operating expenses shaping up across the coming 2 quarters?

Yes. My sense is we won't deliver the large outcomes we posted during the opening few quarters. I do believe you'll observe a slight ongoing trimming of costs. There remain certain areas where we have room to make cuts. And regarding expense reduction, we're on schedule and within budget in virtually every area of the business, and honestly we aren't seeing much of anything holding us back from keeping some of those initiatives moving forward. So given everything we've trimmed, the staff we're bringing on, and the initiatives we're launching, we remain inside the 2026 budget. You'll see further cost reductions, though not at the scale witnessed during the first 2 quarters.

I was waiting for you, John. You were very kind last time.

Okay, I'll go easy on you once more. First, let me say how happy I am that you're leading the company. My sense is that if anyone is capable of pulling this off, it's you. You came aboard when Milestone was really struggling. So my thinking is you wouldn't have accepted the role without a deep belief in the boundless opportunities ahead for the business, on both the CompuFlo front and the dental front. Of course, things haven't played out the way I pictured them a while back, where a clinician somewhere would try this product at CompuFlo and ask, where has this been my whole life? Then you'd gather every clinician in the company and tell them all to use it, and a massive launch would follow. That's not how it happened. Could you shed a little light on what you see for the company and how it could play out, even if that picture turns out to be wrong? Is the CompuFlo side dependent on this adviser program? Is that the situation? And what does that look like with physicians and the adviser program? Why is it necessary? And suppose one succeeds — how does that lead to broader adoption, or does it not? I'm simply struggling a bit to wrap my head around how all of this could develop going forward.