Biolase Technology, Inc.
(NASDAQ: BLTI)
CEO: Federico Pignatelli
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Interview Transcripts:
Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Reporter and joining us today is Federico Pignatelli, the CEO for Biolase Technology. The company trades on NASDAQ and the ticker symbol BLTI. Thanks for joining us today Federico.
Federico Pignatelli: Thank you. It’s a pleasure.
Juan Costello: Great. Now starting off, give us a brief history and overview of Biolase for some of our listeners here that are new to your story?
Federico Pignatelli: Biolase has been a very stressful company in the past. And I became the Chairman, the Executive Chairman in 1994 when the company was a three million dollar market value company. And we developed the finest laser technology for application in dentistry and some medical applications.
And the company has grown into a real success story from basically a million dollar in sales to 70 million dollars in sales in 2006. And the stock has gone from essentially half a dollar to 21 and a half dollars in 2004, and with a market value of 430-plus million dollars.
Then in 2006, I stepped down from being the chairman and being involved in the company. And the company since then has been unfortunately very badly managed by three different CEOs in a row. And so I stepped back in into the company in August of 2010. I became the CEO of the company and back in being the chairman.
And since then, we enjoyed a very rapid turnaround in business of the company. And we just completed a 4th quarter with sales much greater than the previous quarters. And the company has lost money every quarter in 2010 and in Q4 2010 when we made a profit of around 750,000 dollars. So the company had lost millions of dollars in the previous three quarters.
And as I became the CEO of the company, I regrouped the entire team, restructured the company, relaunched the company also with new products. And now we are in a position where we are profitable. And so this is a very, very important milestone that’s been accomplished.
Juan Costello: Well great. And so what were some of the drivers behind the company’s Q4 results which saw the turnaround to profitability?
Federico Pignatelli: Well the main driver I would say is being the fact that we changed the entire business modeling and how we would sell our products. Until August, we were, past management decided to just sell through one distributor only. That is Henry Schein that is a very large distributor in North America. And so basically they gave the worldwide rights of distribution of our products to Henry Schein.
Unfortunately, it didn’t work out as they wished. And so I for that reason, basically, Henry Schein is a very fine company. It’s an eight billion dollar company but selling high tech equipment is a very specialized kind or type of transaction. You have to really spend your time in making doctors, in this case dentists understand the advantages of the technology. And so you need very high-end sales people to make this kind of sales and Schein was not equipped with it.
So in essence, we went on to go back to the original model, sales marketing model that has been working very well and that has made the company a real success. Like I said, we grew sales within a few years from one million to 70 million. And so by changing the business model in Q4, we had a very drastic increase in sales and coupled with a restructuring of the company where 20 people had lost their jobs. And we went from 160 to 140 people and restructured the entire cost structure of the company, we managed to go from a few million dollars in loss the previous quarter to a profitability of 750,000 dollars more or less in Q4 2010. And as we are in 2011, we foresee a very strong growth in the order of 120 to 140% compared to 2010 in revenues and clearly a very substantial profitability for the year.
Juan Costello: Well good. So in terms of the new launch, talk about the iPlus.
Federico Pignatelli: Yes. A milestone for 2011, beginning of 2011 has been the launch of the iPlus. The iPlus is now our flagship product. It is the finest and most advanced medical laser ever produced by anyone. And we are selling it to dentists. It is a laser that allows dental surgery for all tissues, meaning teeth and gum. It has the same speed than the high-speed drill. It’s even faster than that but with none of the inconveniences of the high speed drill, that is pain because we’re talking about friction and heat so damage to the tissue, micro-fractures and cross contamination. Because when a patient goes to a dentist, the same burr that is used in the mouth of a patient has been used several times on other patients before. And there is no way to really sterilize a burr 100% so there is always the high chance, a high risk of cross contamination.
With the Waterlase iPlus, that is a combination of water and laser. Number one, there is no conflict. Number two, there is absolutely no risk of cross contamination because the laser source actually kills any bacteria or virus. So it’s a very biological way to perform surgery in dentistry and overall in the human body, on human tissue but it’s also extremely safe. And there is no pain. So it’s extremely patient friendly.
And from the point of view of the dentist, it allows a greater opportunity to perform more surgeries in one session than with a traditional dental drill because when no anesthesia is needed, the dentist can give surgeries on both sides of the mouth. And also, because of the characteristics of the Waterlase technology, he can actually perform more surgeries than he could perform with a dental drill, with a traditional dental drill.
Juan Costello: Certainly. So you also began the new division which shall be now Biolase Imaging.
Federico Pignatelli: Yes. Biolase Imaging is another great advancement in safe and biological approach to dentistry. Digital imaging radiology is the new type of radiology and compared to film, traditional film radiology that produces only 10% of the radiation that film radiology would produce. So it’s very patient friendly. And clearly, it is a strong advancement in overall healthcare and particularly for dental care that requires high precision and high quality of surgery.
So Biolase is all about a biological approach to dental surgery and to overall surgery in the human body and so digital imaging radiology is a natural step for us. So we will be offering such products from Q3 of 2011. And also, that will be a creative to already our guidance of plus 120% to 140% that we have given just for the laser business. And in 2012, we have the potential even in doubling our total overall equipment sales. So as much as laser sales, we can have also imaging sales in 2012. So a very dramatic growth for the company. And again, very, very patient-friendly and also very dentist-oriented for the dentist that wants to become modern dentists, away from traditional medicine and embrace high tech basically. Modern technology, new approaches, and biological approaches to surgery.
Juan Costello: Certainly and perhaps you can walk us through your background experience Federico and talk a little bit about the strength of the management team?
Federico Pignatelli: Well I am very fortunate because at Biolase, there is a tremendous team of dedicated people, very knowledgeable people, not only from the point of view of technology obviously. We have a very, very strong R&D Department. And we are one of the most prolific companies in North America in new patents awards. We have 200 patents between approved patents and patent-pending. And so we are very active in innovation. And I am very dedicated to keep the R&D strong, the R&D efforts of the company strong, and actually [indiscernible] [0:12:51] increase them to move now to other medical applications outside of dentistry because our technology offers the incredible opportunity for also other medical applications.
But also, our team is very strong in sales marketing. And so it’s a formidable team to have behind me. And regarding myself, I’ve been an investment banker for many years and for several of the Wall Street firms, some of the most prestigious ones. And then in the past, I decided to go on my own, out of the investment bank. And that’s how I got introduced to Biolase and made Biolase at a certain point when I decided to move away from investment banking and get involved actually in management. I made Biolase a great success story.
And then when I moved away unfortunately management and the new chairman and the new board sort of didn’t managed to continue that success story. So I came back. I entirely changed the board. I became the Chairman of the Board and I became the CEO. And I relaunched the company and within four months, it is already a great success story and way more to come.
Juan Costello: Right and so what are some of the other goals and milestones that investors could look forward to over the next year?
Federico Pignatelli: Well clearly execution and like I said, we expect 55 to 60 million dollars with upside now because 55 to 60 in revenues with upside because of the imaging business versus 26 ½, 27 million dollars in 2010. So clearly very strong performance in growth in revenues in 2011. And a very strong turnaround in bottomline. We go from big losses in 2010 even though we had the profitability in Q4 2010 to a substantial profitability in 2011. Regarding 2012, Biolase management expectations are that we are going to be able to break a hundred million dollar in sales and obviously increase profitability.
Juan Costello: Great. So when it comes to investors and the financial community, do you believe that story and your message are completely understood and appreciated by the financial community?
Federico Pignatelli: No. I don’t think so. Stock is now around three dollars and that represents a 75 million dollar market value. I think that Wall Street does not know yet the story and it’s full…in its entirety. And so it is a story to tell. We need the investors to know what is happening at Biolase and some of the old investors that have been involved in the company before. They already have been starting to look again at the company.
Some, they’re already been buying. The stock has performed quite well because we’re up 60 cents in August. Now it’s three dollars and over. And we had millions and millions of shares trading and our trading activity has increased dramatically. In one day alone, we had eight million dollars trading of shares. So it is clearly a big advancement compared to where the company was a few months ago but it is much more to do in making Wall Street and new investors understand and appreciate the Biolase story and jump on board.
Again, we are at three dollar stock. We used to be over 20. And we have a base that is much stronger than a few years ago from which to build on to become again a very successful company. And the record sales of the company that had been 70 million, just in 2012, we’re going to break the 70 million dollar. We expect to break the 70 million dollar in sales, all time sales past handsomely and eventually break the hundred million dollar overall sales. So there is a wide room for shareholders to enjoy a very interesting ride in the stock price and the stock appreciation of Biolase.
Also, something that I would like to bring to the attention of the investors is that I am, I’m a believer as the CEO of increasing shareholder value and not depleting the company resources with handsomely paying CEOs and Chairmen of the Board.
So my total compensation as the Chairman of the Board and as the CEO of the company is one dollar a year. And I committed to keep that compensation for all 2011. and the reason why I am at one dollar a year is because I have over one and a half million shares myself. And that is where I see the potential of return for my efforts. I am on the side of the shareholders. So other shareholders will make money by having a stock appreciation, I will make money too. So my interests, they’re aligned with the interest of the shareholders.
And I believe, strongly believe that overall management in the United States should function really as I do. There’s been a great debate about overcompensation of management to the detriment of shareholders. And I’m completely aligned with shareholders. I agree. We have a great example in Mr. Buffett who is also a one dollar man in salary a year. And look at the fortune that he has made for himself.
So that’s what I believe in. I believe in the CEO of a company and the chairman of a company be entirely aligned with the interest of the shareholders to create shareholder value. And that’s exactly what I intend to do.
Juan Costello: Excellent. And so once again, joining us today is Federico Pignatelli, CEO for Biolase Technology which trades on NASDAQ. Ticker symbol is BLTI. Currently trading at 3.06 a share as I mentioned. Market cap slightly north of 75 million. And we were just discussing the company’s record Q4 results as well as the launch of iPlus and a new division, Biolase Imaging.
And so before we conclude Federico, to quickly briefly recap some of your key points here, why do you believe investors should consider the company as a good long term investment opportunity?
Federico Pignatelli: Well again, increased revenues, profitability. We turned around in just four months entirely the financial position of the company. The company had debts, no cash. Now we have cash. And we paid off all debts. So it’s a completely different situation from a few months ago. A few months ago, we got de-listed from National Market System, the global market, that large NASDAQ. And so we now trading currently on small NASDAQ.
And by end of Q1, we will have enough capital. I foresee we will have enough capital to ask again for relisting, to be relisted on the NASDAQ global market that is a major NASDAQ. And so once we are again back on the NASDAQ global market, a lot of institutions that cannot buy in the small cap NASDAQ, they will be free again in accumulating stock in Biolase.
So I think these are tremendous opportunities for a lot of individual shareholders to capture this opportunity and start looking at Biolase and investing in Biolase.
Juan Costello: Well we certainly look forward to continue to track the company’s growth and report on your upcoming progress. And I’d like to thank you for taking the time to join us today and update our investors on Biolase. It’s always good to have you on Federico.
Federico Pignatelli: Thank you. It was a great pleasure talking to you.