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Executives

Matt Clawson - Allen & Caron:

Jake St. Philip - Chief Executive Officer

Federico Pignatelli - President and Chairman Emeritus

Fred Capallo - Interim Chief Financial Officer

Analyst

Assaf Guterman - Lazard Capital Market

Dalton Chander - Needham & Company

Carlton Sabio - Princeton Capital Management

BIOLASE Technology, Inc. (BLTI) Q4 2007 Earnings Call March 11, 2008 4:30 PM ET

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the BIOLASE Technology, Incorporated 2007 Fourth Quarter and Year End Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for question. (Operator Instructions). This conference is being recorded March 11, 2008.

I would now like to turn the conference over to Matt Clawson of Allen & Caron. Please go ahead Sir.

Matt Clawson - Allen & Caron

Good afternoon, everyone, and thank you for joining us for the BIOLASE 2007 fourth quarter year end results conference call. You should have all received a copy by e-mail this morning of the release announcing the company’s results for the fourth quarter and year ended December 31, 2007. If any of you did not receive a copy of this news release, you can call our office after the conference call at 949-474-4300 and we will be happy to e-mail you a copy.

Before we get underway, I’ve been asked to make the following statement. The words or phrases “can” “be” “expect” “may affect” “may depend” “believes” “estimates and projects” and similar words and phrases are intended to identify forward-looking statements. Forward-looking statements are subject to various known and unknown risks and uncertainties and BIOLASE cautions you that any forward-looking information provided is not a guarantee of future performance. Actual results could differ materially from those anticipated in these forward-looking statements due to a number of factors, some of which are beyond BIOLASE’s control and may be discussed in BIOLASE’s filings with the Securities & Exchange Commission. All such forward-looking statements are current only as of the date on which these statements were made.

BIOLASE does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement was made or to reflect occurrence of unanticipated events. Also as a quick reminder, a replay of this conference call will be available on BIOLASE’s Web site at www.biolase.com. The company’s 2007 fourth quarter and year end results can also be found in the company’s Annual Report on Form 10-K, which will be filed by March 17th with the Securities and Exchange Commission.

With me on the call today from BIOLASE are Jake St. Philip, the CEO, Federico Pignatelli, President and Chairman Emeritus of the Board and Fred Capallo, Interim Chief Financial Officer.

To begin, I will be handing the call to Federico, who will say a few words of introduction. Following that, Jake will provide an update on the business operational performance and outlook. Fred will then provide a review of the financial results and the management team will then conducts Q&A session and end the call with the few closing remarks.

With that said, I would like to now turn the call over to Federico. Good afternoon.

Federico Pignatelli – President and Chairman Emeritus

Thank you, Matt. Good afternoon everyone and thank you for joining us for our year-end call. It has been an exciting few months of BIOLASE to say the least. It is important to recognize that the fourth quarter was a transitional period, a period in which we moved from the past into the future of a new BIOLASE.

Results in the quarter were impacted by a number of onetime restructuring charges, and in addition by number of commitments and expenditures put in placed before our management. Q4 was also a time of several positive changes and rapid progress. Beside the record revenues, among the many accomplishments we made since October was the identification recruitment of the new CEO Jake St. Philips. I strongly believe that Jake is the right man to lead the new BIOLASE towards future growth and the many opportunities that lie ahead.

Jake has more than 26 years healthcare experience in various positions including Executive Management, sales marketing and R&D leadership. Most recently, he was Senior Vice President with Cardinal Health, an $87 billion Global Company servicing the healthcare industry.

In that role, he was responsible for more than $4 billion in acute care product sales. Prior to that, he was President of Alaris Products, North America. Formerly, Alaris Medical Systems before being acquired by Cardinal Health. The Alaris North American Business was over $400 million in sales. In a short time, Jake is already making a real difference on the top of the organization and I welcome him to BIOLASE.

With that, I will hand over the call to him. Good afternoon Jake.

Jake St. Philip – Chief Executive Officer

Thank you Federico and good afternoon everyone. And also as Math mentioned, joining us on this call is Fred Capallo, our Interim CFO. And I would start by Personally on behalf of our Board of Directors, I would like to thank Federico who served as our Interim CEO and express a great deal of gratitude for his hard work during the difficult time at BIOLASE.

He provided significant leadership when it was needed and kept our organization focus during the important Q4 finish. I would also like to thank Fred for taking the interim CFO role during my transition and continuing to play a major role in our organization going forward. I would also like to acknowledge those in the investment and research communities who’ve have taken the time to introduce themselves in the past few weeks, both at the Needham Conference and since then by phone.

As I have mentioned in most conversation, I’ve shared my assessment of BIOLASE through my diligence prior to joining the company, which maybe very similar to your analysis as an investor. I recognized a large enrolling worldwide market opportunity, clearly superior technology, first mover advantage, leading brand in the industry and the team of people in place that would focus leadership are capable of making BIOLASE a world class organization.

Adversely, one of the critical challenges in the company has been its poor track record of driving consistent performance largely due to the capital equipment sales process. In my assessment however, the company now faces more of an execution challenge rather than one of invention. That said though, as we look at the organization and getting it to where we want it to be, it’s going to take sometime and some hard work throughout 2008.

I should expect that in quickly getting my arms around the operations here at BIOLASE in my first two months, listening to employees, meeting with end user, key suppliers, strategic partners, to begin to prioritize key initiatives. During this time, my opinions and enthusiasm for the future have only gotten stronger. I’ve convinced our technology has the ability to transform the dental experience for the patient as well as the dental practices. It provides a better patient experience and re-energizes dental practice and allow more patient throughput and additional procedures, which ultimately deliver an excellent return on investment for the dentist. All of these factors provide a very strong foundation for us to build on.

My focus now is execution. Making sure the organization is aligned on the top priorities and ensuring we are blocking intactly in a way that will produce improved performance as we progress through 2008.

I recognized that we haven't delivered consistently in the past, but must do so, in order to rebuild our credibility with our shareholders and the investment community. My plan is to lay the foundation throughout the year to drive to that goal.

My operational assessment has been very helpful in understanding that we have broader market opportunities here at BIOLASE. However, in the short-term we will not stray from our core dental business and improving our go-to-market strategies and effectiveness.

My goal in the months ahead is to deliver new messaging to our customers and a refined value proposition. It's also critical that we rebuild our sales process to deliver more consistently with our key strategic partner Henry Schein.

As we get these elements a place a thorough strategic plan will allow us to step back and make strategy choices and then share our long-term vision for the future with you later in the year.

Our leadership team though really recognizes that job one, is executing and delivering on our core dental business and breaking through the next level of market adoption. What I can promise to you is to communicate in a straight forward manner. We will over the coming months have successes and challenges as we strive to become a great organization. We'll set our goals to build a more focused organization and strategies to achieve those goals. I'm confident that this team and this technology will prevail in the marketplace.

Now I'd like to touch on a few highlights from the fourth quarter. The most important aspect of the fourth quarter was the strong top line results, as well as the improved operating performance in key areas. The top line performance was a promising rebound 62% over Q3. What this tells me is that we can deliver excellent performance when properly aligned with our strategic partner Henry Schein.

The next most important item was our North American distribution strategy. Just this past week we announced that we renewed and strengthened our partnership in North America with Henry Schein based on the work that was started back in Q4.

I've spent a significant amount of time finalizing this agreement with Federico Pignatelli and the Schein leadership team. I firmly believe this strategic partnership is the right move for both party's. We did just put the press release out on that, but I will reiterate a few critical points of our agreement going forward.

We have concrete performance guidelines for both parties. Henry Schein has continued to commit to help leverage their scale and improve our efficiencies in our distribution channel. And BIOLASE will promote Henry Schein Finical as its exclusive finance partner to improve customer support, as well as improving sales force alignment between our organizations.

My assessment is BIOLASE continued to operate in a direct sales and marketing mode. Although we have lots of examples where we been very successful with our Schein partners, we haven't done it consistently across North America, as well as we should. We're quickly working to make those improvements from the ground up.

I'm personally reaching out and calling the Schein field leadership team as the new BIOLASE CEO to reinforce our commitment to this partnership and open the dialogue at all levels to our organizations. I'm also working closely with their President Tim Sullivan and his team at Henry Schein to build more consistency in our field level coordination.

And the next area, I'd like to talk about is international. In Q4 39% of our total sales came from international and also represented a strong rebound of 134% growth sequentially over Q3. Improvements were broad based over Europe, Australia, New Zealand and Korea. Q4 also represented a 26% growth over 2006.

I'm optimistic regarding our opportunities in our international markets. Certain new markets in Asia present significant opportunities for us in 2008. We will announce expansion plans as soon as our marketing strategies are finalized. Also in April, there will be a significant users conference in Taiwan, and we do anticipate strong attendance and interest throughout the region.

In Q4, we did a number of things to focus on fundamental operational improvements. And in that quarter important spending initiatives were identified including items like the reduction of non-essential trade shows, shipment of demonstration equipment among a few. A reduction in force was initiated in the process to analyze all aspects of our operations to improve performance has been well underway. The spending improvements will begin to benefit BIOLASE beginning this year and as part of this operational focus, we’ll also assess where we can redeploy some of that spending and improve our market impact and finalize those decisions in the near-term.

Additionally due to the slow fails in the third quarter, inventories increased to 10.8 million at the end of the period. A management decision was made to reduce inventories in Q4. We finished the year with an inventory of 7.6 million. That had a negative effect on our Q4 margins due to the reduced manufacturing, which called lower overhead absorption. But going forward provides a stronger balance sheet into 2008. We will continue throughout 2008 to identify way to eliminate costs or redeploy other spending to substantially strengthen our performance.

Many of you have asked me since I have started about the ongoing program with Procter & Gamble. First, these are P&G proprietary development programs, because of that we are not in a position to give you any color on the progress to date. With that said, I can tell you that we are active – there are active development programs going on that could one day be meaningful to BIOLASE. We will not provide regular updates unless public statements are made by our partner. If the relationship changes in anyway or plans for developments are altered we will let you know.

On the regulatory front, we received FDA clearance on using the Waterlase for several dermatological and general surgical procedures. This clearance will allow us to seek strategic partners in the form of licensing or marketing agreements in those important areas. At this time, our intention is to remain focused on our core dental market, but we are beginning to explore our market opportunities here.

One more doubt, before I turn the call over to Fred, the permanent CFO search is progressing well and I have been pleased with the caliber of candidates that I have seen so far. We cannot predict when we will hire the right candidate and continue to process until we feel we have the right person for the job. And till then we appreciate Fred stepping up and overseeing the responsibilities during his interim period.

Now I will turn the call over to Fred.

Frederick Capallo - Interim Chief Financial Officer

Thanks Jake and good afternoon everybody.

Total net revenue for the quarter ended December 31 rose by 5% to $20.8 million, versus $19.8 million reported in the fourth quarter of 2006. Net domestic revenue decreased by 5% to $12.8 million compared to 13.4 million in Q4 of ’06, while net international revenues were 8.1 million and 6.4 million in the fourth quarter of 2007 and 2006 respectively. This resulted in an increase of 1.7 million or 26%.

Q4 sales of our Waterlase System, which include both the original Waterlase and the Waterlase MD represented 68% of our total revenues and sales of our Diode Laser Systems represented 17%. In the fourth quarter of 2006 these percentages were 82% for Waterlase, and 3% for Diolase or Diode. The change in mix reflects the introduction of our new ezlase diode laser system in the first quarter of 2007.

Our gross margins as a percentage of net revenue decreased to 47% in the fourth quarter of 2007 from 58% in the 2006 fourth quarter. Gross profit in the 2007 fourth quarter was impacted by management’s decision during the period to work through inventory levels that we had build up principally in the third quarter of 2007. Results of this reduction in inventory from 10.8 million at September 30th to 7.6 million at year end.

Financial impacts of lowering the manufacturing throughput, as well as sales incentive and demonstration unit sold during the first quarter of 2007 represented more than $2 million reduction in gross profit.

Turning now to operating expenses. We had an increase in operating expenses in the fourth quarter of 17% compared to the fourth quarter of 2006. Sales and marketing expenses increased slightly in the 2007 fourth quarter compared to the fourth quarter of 2006.

Our G&A expenses increased 574,000 primarily due to professional fees. Engineering and development expenses increase between the two periods by $318,000 due to increased manpower and consulting in those areas.

During the fourth quarter of 2007 we’ve recorded a restructuring charge of $802,000 related to the previously announced workforce reduction and management changes.

Operating loss for the 2007 fourth quarter was 2.6 million compared to an operating profit of $953,000 in the same 2006 quarter. During the fourth quarter of 2007, we recorded a $1.4 million gain on foreign currency transaction related to the inter-company balances with our foreign subsidiaries. These balances are treated as short-term in nature. During 2007, the weakening of the US dollar compared to the currency used at our foreign subsidiaries caused this gain.

Net loss for the fourth quarter of 2007 was 1.1 million or $0.05 per diluted share, compared to net income in the same period of 2006 of 1 million or $0.04 per diluted share.

For the year total net revenue was 66.9 million in 2007 versus 69.7 million in the prior year. Gross margin as a percentage of net revenue remained especially unchanged at 52%. Our net loss increased from 4.7 million or $0.20 per diluted shares in 2006 to 7.3 million or $0.31 per diluted share in 2007.

At December 31, 2007 we had approximately 14.6 million in cash and the availability of 6.4 million on our $10 million line of credit. The quarter end cash balance was down only slightly from the approximate 14.7 million at the end of 2006.

During the year we used approximately 3.4 million in cash from operations from our net loss partially offset by reduced accounts receivable balances. We remained in solid financial condition with the cash and credit resources that are necessary to run and grow our business and we continue to have no current plans to raise additional capital.

Now I’d like to turn the call back over to Jake for some additional comments.

Jake St. Philip - Chief Executive Officer

Thanks Fred. Let’s take a step back and look at the Q4 performance and what’s inside the numbers. If you take the one-time benefit of the currency adjustment out of the discussion, our operating loss for Q4 was 2.6 million. Inside of that the key drivers were: the $2 million reduction in margin is driven by overhead absorption impact and reductions to ASP’s due to demo units and promotional activities coming off of a difficult Q3.

802,000 in restructuring charges due to the reduction in force and the leadership termination and $174,000 of new professional fees for recruiting, all of this adds up to over 2.9 million in significant costs all of which were driven by management decisions to begin to restart and reshape the company after a difficult third quarter.

Overall I am very optimistic about our performance opportunities in 2008, but as I said the progress of evolving from a good company to a great company will take time and a good deal of work on our part. (God) want us to create an effective sustainable distribution model with our largest strategic partners Henry Schein. We need to build for the long-term while we hit our interim goals. While we strengthen our sales process together to deliver a more predictable operations model, we may continue to show quarterly variability going forward.

With strong management and sales process discipline with Henry Schein, we will work towards minimizing that variability in the future. We got to identify and execute a new overall sales and marketing strategy. Every aspect of our historical approach to the market is under review. That analysis has already driven fundamental changes in certain areas, such as our sales force alignment and improvement to sales compensation. We are not finished with the work and over the coming months new go-to-market strategies will be refined and put to work.

I am happy to beginning the work here at BIOLASE and taking on the challenges as well as the significant opportunities we have. And now, I’d like to turn the call over to the operator and begin the Q&A period.

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from the line of Assaf Guterman. Please state your company followed by your question.

Assaf Guterman

Hi, it’s Assaf from Lazard Capital Market.

Jake St. Philip

Good afternoon.

Assaf Guterman

Hi, how are you good afternoon. Just I want to start with the gross margin. And, could you comment as to how much of it is the result of inventory reduction plan and the manufacturing scale down, and how much is it actually has to do with the reduced pricing or sales promotion that you had during the quarter?

Jake St. Philip

Yeah, the reduction in the manufacturing process had led to low our overhead absorption was approximately a million dollar out of the two.

Assaf Guterman

Okay. So basically it’s half of it?

Jake St. Philip

Yeah.

Assaf Guterman

So, half of it has to do with the pricing and half of it has to do with inventory reduction. And I assume that inventory reduction part is onetime in nature and I mean, are you comfortable with inventory level that you had at the end of the quarter or do you intend to keep going in that initiative?

Jake St. Philip

I think we’re in the right spot Assaf.

Assaf Guterman

Okay. And what about the promotion, the sales promotion that took place during the quarter, is that something that we should expect in the future quarters as well?

Jake St. Philip

Well, I think clearly, there were some significant promotional activities that we put in place in Q4 after a very difficult Q3. We always have some promotional activity each quarter to revitalize and keep offers fresh to our sales people and our customers with certainly not at the levels that we saw in Q4.

Assaf Guterman

Okay. Can you comment on your ASPs during the quarter?

Jake St. Philip

The ASPs, some of the ASPs, we had some slight reduction in our ASPs, we had some demo units that we acquired by our Henry Schein and that put a little downward pressure on our ASPs, but that was the bulk of it Assaf.

Assaf Guterman

Okay. I am just trying to – if you could refresh my memory the transfer price, which you are using now to sell the product to Henry Schein, versus the original selling price in which, you use to sell your products directly to the end user, prior to the agreement with Henry Schein, what’s the delta there?

Jake St. Philip

Well, the actual transfer pricing, and what we sell to Henry Schein is really confidential part of our agreement. We really don’t want to disclose that publicly.

Assaf Guterman

Okay. But, is it safe to assume that it’s a significant, it’s materially below the previous selling price which you used in the past?

Jake St. Philip

The previous selling price, could you clarify?

Assaf Guterman

Yeah, I mean prior to the agreement with Henry Schein the selling price?

Jake St. Philip

Market price?

Assaf Guterman

Exactly?

Jake St. Philip

It was approximately the same.

Assaf Guterman

Approximately the same. Okay. Could you -- just to make sure that I understand, in the press release that you issued last week, you talked about some kind of the sales and marketing and commitment in the revised agreement with Henry Schein, could you give some color on those commitments, what exactly you were talking about?

Jake St. Philip

We have spent a significant amount of time with Henry Schein leadership team really from the strategic side, really evaluating our relationship and what we can do going forward. There are a number of areas that we have specific improvements, concrete improvements in place to drive performance. And I think we have terrific, solid alignment at the top level. It’s our job now to drive all of those commitments down throughout the organization down into the field level. Beyond that Assaf, I really, don’t want to get into specific contract terms. I will say as part of that, Henry Schein has made some significant investments in this partnership in terms of buying demo units to improve our sales process and help make provide efficiencies in our system, and have done a number of things that really demonstrates their commitment and believe that this technology can create a new standard of care in the industry.

Assaf Guterman

And, I mean, but the fact from now on to some extent Henry Schein is going to be more involved in the whole promotion and sales and marketing of the products. Is that going to take some of the load off, half of BIOLASE’s holders? I mean, is it going to help your G&A margin in anyway?

Jake St. Philip

It certainly has the potential to do that Assaf. If you work strategically with a partner like Henry Schein, you may certainly have leverage and reach and ability to touch the market in ways that would be much more costly to us and those are the kind of things that we will be evaluating all year as we go forward working with them.

Assaf Guterman

Okay. Under current assumption is there any sales amount figure that you see as a break-even target. I mean the revenue that you have to reach in order to break even?

Jake St. Philip

Well. We absolutely are working toward driving our break-even point now. It's absolutely the right thing to do and we have some aggressive goals internally. We are focused on looking at every aspect of our operation right now. So I am not going to point right now to give you a specific number, can do so later in the year. But we are also as part of that process going to be looking at how we may be redeploying spending to bolster our position in the market place and strengthen our performance. So we will be making those trade-offs and making those final decisions in the weeks ahead.

Assaf Guterman

Okay. Thank you very much.

Jake St. Philip

Thank you.

Operator

Thank you. Our next question is from the line of Dalton Chandler. Please state your company followed by your question.

Dalton Chandler

Hi, Needham & Company. Let me start by just asking Jake you mention that right now it's a matter of execution not a matter of invention. Beyond the obvious one of getting the Schein relationship right what other areas do you feel like you need to improve execution?

Jake St. Philip

Well Dalton. The Schein relationship as you said is job one. My next area of focus is really looking at our marketing message, the value proposition we deliver to our customers and the effectiveness of our story going to the market. I have been very impressed with the young users that I have talked to about the impact of our technology on their practice both personally and professionally and we are going to step back and really look at our messaging, return on investment and how we get that message out to the broader market.

As part of that effort, that's a critical element. Beyond that and I just mention that we talked about really focused on cost reduction, spending properly making sure, we are eliminating non-value spending in our area and making sure the fundamentals of our operation are improved over 2007.

In the last item, I probably mentioned we feel optimistic about international sales. We think that the fourth quarter was a nice rebound for international. We think we have some market opportunity expansion there and are looking forward to that in the future too.

Dalton Chandler

Okay. With regard to the messaging and the value proposition, you also mentioned that sales and marketing in every aspect is under review and you have already made some changes. Can you talk about what you have changed already and why?

Jake St. Philip

We have added a new Vice President of Customer Service Operations for Global Operations to really focus on our post sale support. We are in the process of changing internal processes around new product development and working with our marketing organization and we will be doing as part of the assessed when I say redeploy spending, you know we will be looking at adding critical positions in the company to strengthen our performance in those areas.

Dalton Chandler

Okay. And then also you mention in the press release and in your prepared remarks that demonstration unit sales to Schein, can you quantify what that was for the quarter?

Jake St. Philip

It was about 8% of the revenue in Q4, Dalton in terms of those demo units and we will have some additional units that will go out and complete the process here in Q1. The significance of that is, I think two folds, one, it demonstrates a very strong commitment by Schein to this partnership and our process. It will also significantly help our local selling efforts, demo units will be right at the centers much easier to get for our sales people and the Schein reps to have access to and provide demos. And ultimately what that means to us takes a significant amount of cost out of the system in terms of our shipping units back and forth across country and doing what we did last year, which was acting like a direct company. Here is a place that it is a perfect example, simple as it is that we can really leverage our relationship with Schein and improve our process while we take cost out of the system.

Dalton Chandler

So you think this first quarter is the last that you will see any meaningful demo unit sales?

Jake St. Philip

Yes, based on where we stand right now in terms of the current arrangements, yeah.

Dalton Chandler

Okay. And then when you talked in the press release that a substantial reduction in operating cost associated with that. Was that what you're just referring to in terms of shipping costs and that sort of thing or is there more to it than that?

Jake St. Philip

That's one of the primary drivers, yeah.

Dalton Chandler

Okay. And then, if I could just get a couple of housekeeping things? I want to make sure I got some numbers right. Did you say international was 36% of total revenue for the quarter?

Jake St. Philip

39.

Dalton Chandler

39, okay. And then I think you went through the Waterlase and the diode percentages of total. I didn't quite get that?

Fred Capallo

The Waterlase for the quarter was…. hang with me one second here.

Operator

Thank you. Our next question is from the line (Carlton Sabio) with Princeton Capital Management. Please go ahead.

Carlton Sabio

Good afternoon. I have two questions. The first one would be in our cosmetics applications. I haven't been much interested in that because they're already several well established companies out there. What applications will you have and how would you differ from the established companies in terms of excellence?

Jake St. Philip

I'm sorry were you talking about our derma… I missed that part of your question?

Carlton Sabio

Yes Dermatology. Yes.

Jake St. Philip

Dermatology. Yeah, we received clearance for the use of the laser on dermatological procedures and certain surgical procedures. We're not commercializing that effort right now. We're going to be looking and considering potential for partners, but the unique applications of our technology do provide some benefits.

Carlton Sabio

Will it be Waterlase or (ezlase).

Jake St. Philip

It's Waterlase.

Carlton Sabio

Okay. And so then you do have a distinction. So you would be in the upper end of -- you wouldn't be so much competing for pure cosmetic percent or a more surgical than cosmetic is that right?

Jake St. Philip

Well, you know that’s potentially. I mean we don't have a commercial application that we're really talking about. So there would have to be a lot of work done to determine where would we would segment and position that kind of capability.

Carlton Sabio

Alright. And the second question, as you just said your relationship with Schein, how did you shift the relative compensation between Schein's salesmen and your salesmen?

Jake St. Philip

Well, Schein significantly increased their compensation to their reps associated to the sale of our products. They've also put special bonus criteria in for their management team. So they've put some significant strategic steps in place to reinforce the importance of our product to their team. We as part of a totally separate effort in the fourth quarter we configured our comp plan to make sure we have a very aggressive comp plan in place to support our capital equipment sales force. So, I feel after analyzing it from the Schein standpoint and our standpoint that we have a very good compensation structure in place for both parties.

Carlton Sabio

Well that’s very good to hear. I think that’s very good to hear. Now the other thing I call out your company once over a year ago. And I judge you've got a lot of opportunity with as volume goes to the flexible and adaptive adjusting your price over your Waterlase unit. I mean you've got a very good mark up on it now to say the least I would guess. Is that correct?

Jake St. Philip

Yeah, our margins are very strong on the Waterlase.

Carlton Sabio

So it makes you adaptive to this Schein compensation scheme too doesn't it?

Jake St. Philip

Yes, it gives us a flexibility to work with a strategic partner like that.

Carlton Sabio

Alright. If I stop talking, you can start executing.

Jake St. Philip

Well, thank you for your questions.

Carlton Sabio

Thank you.

Jake St. Philip

Yeah, we missed, could we go back to Dalton’s question about the product mix.

Fred Capallo

Dalton for Q4 2007, Waterlase including both the MD and the original Waterlase made up an approximately 68% of our total net revenues. While the diodes made up 17.4%. And for 2006, if you need those quarters as well it was 82% for the Waterlase and about 3.4% for the diodes. Yeah, I think we are ready for the next question.

Operator

Okay, thank you. (Operator Instructions). Your next question is from the line of Carlton Sabio with Princeton Capital Management. Please go ahead.

Carlton Sabio

Yes, just a follow-on, on LED lasers, do you really need that land for private center or do you need it for a relationship basis?

Jake St. Philip

The ezlase is a growing part of our product line, we think it has a number of positive impact on us as we go forward. #1, It certainly introduces the dentist into the laser technology and our sales team has been effectively using that on tray to use that to talk to dentist about moving up to hard tissue laser. So we think it's very complimentary, as well as takes advantage of a good strong market opportunity.

Carlton Sabio

Thanks

Operator

Thank you. Our next question is from the line of Dalton Chandler. Please go ahead.

Dalton Chandler

Yeah, hi again. And thanks for those product breakouts by the way, Last year, I know there are couple of new product launched, the MD Gold handpiece and Zip Tips, so I was just wondering if you could comment on those have been progressing?

Jake St. Philip

Our consumables Dalton Zip Tips have caught on well. Our overall consumables are about 6% of our total. We are working right now on ways that we can accelerate the growth of our consumables and from a number of different angles and get that moving. In terms of the Gold handpiece has been very successful. Every unit that now goes out the door has the two Gold handpieces included. So the cutting speed, performance, all of those things and the advantages that the technology has brought has definitely helped. In terms of the specifics on the Gold handpieces on the actual sales, do we have that with us Fred?

Fred Capallo

We don’t have the exact numbers for the Gold handpieces or the Tips, just overall consumables as Jake has mentioned is about 6% of our sales and that's consistent with 2006 for the entire year.

Dalton Chandler

Okay.

Jake St. Philip

But we can provide that to you on the follow up

Dalton Chandler

Okay. Just to clarify, the revenue from the handpieces is that in the Waterlase line and the other consumables or the consumables would be in the other revenue line?

Jake St. Philip

The handpieces if they are included with the Waterlase MD, as part of the Waterlase MD price. If they are sold separately to existing Waterlase customers, then that would be shown under the consumable line.

Dalton Chandler

Okay. Alright. Thanks a lot.

Operator

Okay. And at this time, there are no further questions. Ladies and gentleman, this concludes the BIOLASE Technology Incorporated 2007 fourth quarter and year-end conference call. Thank you for your participation and you may now disconnect.

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Source: BIOLASE Technology, Inc. Q4 2007 Earning Call Transcript
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