Milestone Scientific Inc. (MLSS) Q1 2026 Earnings Report, Transcript and Summary

Good day, everyone. Welcome to the Milestone Scientific Inc. First Quarter 2026 Financial Results and Business Update Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, James Carbonara from Hayden IR. The floor is yours.

Thank you, operator. Before we begin, please note that today's call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our earnings press release as well as our filings with the SEC, including our 2025 Form 10-K for a discussion of these risks. A replay of this call will be available shortly after its conclusion. With that, I'll turn the call over to our CEO, Eric Hines.

Thank you, James, and good morning, everybody, and thank you for joining our call today. I especially want to thank everybody who participated in our PIPE in April and your continued support for Milestone. It is greatly appreciated. Our first quarter results reflect continued progress as we execute on the foundation we established in 2025. We remain focused on building a disciplined operating model where spending is aligned with revenue generation and clear return on investment. That focus is reflected in our results. We maintained a relatively stable revenue base in the quarter despite the inability to ship certain booked orders to the Middle East due to the ongoing global conflict in the region. Even with that headwind, we reduced operating expenses by approximately $1.3 million or more than 30% year-over-year, significantly narrowing our losses while we align the company for growth. At the same time, we are beginning to see early signs of traction in the areas that we see as key growth drivers. Starting with our dental business, which remains the backbone of the company. We continue to execute on the national rollout of our ambassador program following its expansion in January, resulting in 173 applications, 73 active ambassadors and 25 new demos and multiple new sales. Engagement levels have been encouraging. And while we expect the financial impact to build over time, we believe this initiative is strengthening our commercial presence and positioning us for improved performance in the back half of the year. Internationally, we continue to pursue additional registrations, which we believe can open meaningful new markets over time. Turning to the medical side. CompuFlo continues to gain traction and is becoming an increasingly important part of our growth strategy. In the first quarter, medical revenue more than doubled year-over-year, reflecting early-stage adoption and growing interest from clinicians. While we are still in the early innings, the progress reinforces our view that the CompuFlo represents a significant long-term opportunity for the company. We also continue to build our infrastructure required to support that growth. Following the launch of our CompuFlo Advisor Program in February, we now have more than 8 physician partners actively engaged in 6 pending, supported by a dedicated reimbursement infrastructure with over 50 claims submitted across 3 MACs, specifically Novitas, Palmetto and First Coast. This is a critical component of our strategy as adoption in the medical market is closely tied to both clinical validation and reimbursement support. In addition, we remain focused on expanding Medicare coverage, onboarding 7 new distribution partners and advancing opportunities with both national and local VA channels. Furthermore, we have started a digital marketing campaign across multiple channels for CompuFlo, resulting in 152 leads. These initiatives are designed to convert early clinical interest into sustained utilization over time. Subsequent to the end of the quarter, we strengthened our balance sheet through a $2.15 million financing. This provides us with additional flexibility to invest in key growth initiatives, including sales expansion, inventory and digital marketing, while maintaining the disciplined approach to capital allocation that we've emphasized since last year. Turning to our outlook. We are reaffirming our guidance, our 2026 guidance. We continue to expect total revenue in the range of $9.8 million to $10.2 million, representing a double-digit year-over-year growth. Within that, we expect CompuFlo revenue to grow at an even greater pace over the remainder of over 2025. Combined with the structural cost reductions implemented last year, this level of growth is expected to drive improved operating leverage and a meaningful reduction in cash burn. Our goal is to reach cash flow breakeven in early 2027 through disciplined execution, investing only where we see clear returns and building a business that can deliver sustainable long-term shareholder value. I'll now turn the call over to Keisha to review our financials. Keisha?

Thank you, Eric, and good morning, everyone. Total revenue was flat at approximately $2.2 million for both the 3 months ended March 31, 2026 and 2025. Gross profit was $1.56 million, roughly in line with the $1.65 million for the prior year period. Importantly, our gross margins remain robust at 72.3% compared to 73.8% in the prior period. Operating losses was $828,000, an improvement of 58% or $1.2 million compared to the operating losses of $2 million in the prior period. Net losses was $840,000 compared to the net loss of $2 million for the prior period year in over year. The net loss was narrowed by 58% or $1.2 million. With that, I'd like to turn it back over to the operator for questions.

[Operator Instructions] Your first question is coming from Anthony Vendetti with Maxim Group.

Before I focus on the medical growth CompuFlo sales, which I'm glad to see the progress there. I wanted to just -- you said in the -- in your prepared remarks that there were some revenue that was impacted in the Middle East. Do you have a range of what that revenue was and where you're able to get that shipped in the second quarter? Or is it because of the ongoing conflict, it's sort of in limbo?

Thanks, Anthony. That's a good question and it's one that we're very familiar with, as you can imagine. So yes, we have about $200,000 in bookings that we were unable to ship due to the regional conflict over in the Strait of Hormuz. So subsequently to that, we have now shipped a majority of that. I think we've got a little bit remaining for this quarter. But had we been able to ship those orders, we would have seen an increase in sales over the prior quarter. So it did impact the revenues, as you heard. And fortunately, we've been able to ship a considerable amount of it here already in Q2.

Okay. Great. And then the doubling of CompuFlo medical revenue. That's great to hear. Do you have a -- and I know we're coming off a low base, but -- are you going to provide that number? And then just if you could get more into some of the numbers you mentioned, there's 152 leads. You have 8 physician partners. I missed the number that you said were pending. But in terms of the leads, can you talk about where that was before this quarter? And then the ability to turn those leads into partners? How long do you think that takes? What's the average conversion into a partner in terms of time?

Yes. So a lot of intersecting points there with the question. So first, I guess, on the CompuFlo side of the equation, as indicated in the earnings report, we generated about -- I believe it was $108,000 in revenue for Q1. We see that trend continuing through Q2. And then we see -- once we get through the Medicare reimbursement, which we plan to initiate formal discussions with Medicare based on the number of claims that we've now got in the system here in early June time frame. So that's sort of the critical point that we'll get to. We'll probably start with our friends down in Florida and First Coast. So we expect, again, the trend to continue on the growth cycle on the CompuFlo side. And if we're able to get through the Medicare reimbursement with a reasonable reimbursement number, we have nonlinear opportunities moving into the second half of the year, but again, mostly dependent on the Medicare reimbursement. As it relates to the number of leads that we're generating now, CompuFlo more or less from a digital marketing perspective in social media, was not even on the map, right? And so we launched the CompuFlo sort of, I guess, adjacent to the stuff that we're doing in dental. And we're frankly very surprised at the impact of digital marketing. So we're getting anesthesia, neurologists, all sorts of different people, neurosurgeons reaching out to us. And again, we were a little bit surprised to get 152 leads and probably generating anywhere from 20 to 30 new leads per week and following up with those folks, of course. So the impact on the digital marketing was a bit surprising. But it's all together with the distribution partners that we've signed on, with the direct sales person that we've got out there in the field, we are seeing a lot of activity across every front. And it's not -- it's in every aspect of epidural injections, from spinal stimulation to neurosurgeons to conventional interventional pain folks. And we are also seeing a lot of traction with the university community in academia. So we're seeing opportunities to meet with very large name brand institutions out there in the field. And I think you'll see that we continue to have research papers published. There was one recently that was published, UTMB, spinal stimulation. So we're getting traction all across the board. And I guess the last question that you asked was around just the timing. So in spite of Medicare reimbursement not being exactly where we want it to be, we are seeing orders that turn around as quickly as a week, right? And so as people go out, they'll demonstrate the solution. They'll see the enthusiasm. They'll identify the niche cases where this makes a lot of sense initially. And we're seeing purchases turn around that goes quickly as a week, which, again, is quite surprising in light of the fact that we're still not where we need to be with the Medicare reimbursement. So just a lot of really, really positive momentum. The trick here is obviously to convert that to revenue and then to be able to expand nonlinearly. And all of that comes in conjunction with getting the MACs approvals and reimbursement back where we it to be. Did I answer...

Okay, yes, no -- that sounds -- yes, no, yes, almost -- yes, I think you answered all of it, but I'm just going to do a follow-up on the -- on 2 points. One is it sounds like your DTC marketing is, like you said, maybe even surprised you working really well, 20 to 30 new leads per week. Is there -- do you need to put more effort behind that or that's -- it's working perfectly, no change there? And then you said you're going to initiate formal claims to submit to Medicare. Can you just elaborate a little bit more on what you can do from your end as a company to try to -- and I know it's the government, so it's not necessary that you can expedite it, but to make sure that you're checking all the boxes to get this reimbursement as soon as possible and then whatever time frame you can outline for when you expect that to happen?

It always amazes me how the analysts seem to get it right. I used to work for this software company, to Gartner. You would think that they didn't know exactly what was going on and then they would ask these questions and they would just be spot on. So you asked about the 152-odd leads that we've been receiving. We're getting an equal amount on the dental side. And so one of the challenges on following up on the leads is all these doctors are working during the day, the dentists included, and most of the dentists are off, for instance, on either Wednesday or Friday. So following up on the leads, we haven't skinned that cat, so to speak yet because it's very difficult, even though they fill out 2 or 3 pages of forms and show a clear interest, getting back in touch with them is difficult, right? And so it's been a little bit tricky to follow up on the leads just from the standpoint of these folks are doing procedures usually during the workday. So we're working on that. And yes, we do need more horsepower to chase after those leads. As far as Medicare reimbursement, I think as I indicated in our last call, we've got a dedicated team led by a lady by the name of Evelyn Gittinger, who has 20-plus-plus years in prosecuting opportunities on the Medicare side of the equation along with the call center. And we've got a very outlined plan that, again, puts us back in front physically of probably First Coast in June. And then we've got an entire road map that leads us to our submission for a Category I authorization for the February meeting of next year. And so that requires submission probably in the November time frame. So they really look at 3 different things. They look at utilization, which is why we're generating the claims. They look at the clinical need and they look at physicians that are supporting you and willing to be -- to come in with you to talk about why there's a clinical need. And then finally, they look at the different societies that are also engaged in this process. And to an extent, some of the research that's happening soon at the University of Kansas, University of Minnesota and already at University of Texas Medical Branch. So -- and there's more coming on that front as far as opportunities at some name brand institutions.

Your next question is coming from Bruce Jackson with StoneX.

Just a couple of follow-up questions on the dental ambassador program. So this is fairly new. Are you seeing anything in terms of like repeat sales? Or how do you feel about the trajectory here? Should we be thinking it's going to be kind of a slow trajectory and then building later in the year? Or could we see something as soon as the second quarter?

It's a question I asked my sales team yesterday, but a good question. Thanks, Bruce. Good to hear your voice. The ambassador program, we launched it a pilot, I believe it was in December, then we kind of full-fledged launched it in January. And again, we were surprised that we got so many applications. In fact, we were -- each of them is a W-9 employee, and there's opportunity for them to earn money if they generate demos and so forth. And so we had more than we expected. And so we did a couple of training sessions. We had some follow-ups and so forth. But what we've learned is it's probably -- it's the Pareto principles, right? We got 20% of them are having an impact. The other 80% are either putting it on their LinkedIn page that they're ambassador. So we are hiring a person to take over that program. One of the actual ambassadors, we're going to bring on and have her really spearhead leading that team. And we expect that like anything else, 20% to 30% of those people will be active and engaged in really driving demos and results. So it's still a little bit early days as it relates to that, but we fully expect that, that will be a significant contribution in the second half of the year, and it's already showing results even with just having launched it just a few months ago.

Okay. Great. And then looking at the international business, I believe you've got some new product registrations in process and I think Japan is one of the countries. What's the -- what are the countries where you've got new product registrations in process? And what might be the timing on getting those approved?

So we break them down into the tiers, Tier 1, 2 and 3. And so probably the 3 that you're referring to are India, Mexico and Japan. We expect India and Mexico here in the next quarter. Japan might be a little bit longer, probably more in the September time frame. So any impact from those 3 will be at best in Q4. But these are major markets with especially large cosmetic dentistry opportunities in them. And so those are the 3. There's Turkey and a handful of others that are also being pursued. But we're trying to be very selective because the registration process in itself is time-consuming and there's costs associated with it. So we're trying to be a little bit more selective. There's a handful of others that are out there that are already in process. Some of the -- we call them the stans, Uzbekistan and Kazakhstan and a handful of others, which were probably more like Tier 2 or Tier 3 markets.

Okay. And then getting back to the Medicare reimbursement road map. So going to sit down with First Coast this summer and then submit November. And then would February be like the official -- you have reimbursement, it's loaded in the system and you're ready to go out. When is everything in place where the physician doesn't have to think about whether or not this is covered?

So we will receive reimbursement well prior to moving to a Cat I authorization. So it will still be under a CPT code probably, let's call it, July through March or April of next year. So it will still be a Cat III approval, but the reimbursement hopefully will be in a much better spot than it is right now back to the -- hopefully, to the 325 range that it was prior to no utilization taking place. And so the company was a little bit fortunate to get the reimbursement. The good news is it did. So there's precedent, but then they didn't follow through with supporting the doctors to submit cases and so forth and didn't have the infrastructure in place to do that and the utilization was not what it needed to be. So we're focused -- we kind of flipped the script, and we're focused on utilization and submission to drive reimbursement. And again, I think they were a little bit fortunate to get it so quickly and then didn't follow through on keeping the utilization up where it needed to happen. So we will be able to see what the reimbursement will be well prior to moving to a Cat I. And once it gets to a Cat I, then it's a bit more of a rubber stamp. Even with the Cat III reimbursement, there's still some work that needs to be done and thus the call center that we've enlisted to help us for the office managers to lean on when they're submitting under a Cat III code. Does that make sense?

Yes, absolutely. And then last question for me. The expense control has been very tight. And I'm just kind of wondering going forward with -- you have a number of initiatives in place that may have some cost implications. What's your outlook for operating expenses over the next couple of quarters?

Yes. I don't think we're going to have the big results that we've had in the first handful of quarters. I do think you'll see some modest continued reduction in expenses. There's still some things that we have an opportunity to cut. And we are on track and on budget across almost every single aspect of the business as far as expense reduction, and we're really not seeing much of an impact on it sort of inhibiting us from continuing to put some of the initiatives in place. And so with all the stuff that we've cut and the people that we're adding and the initiatives that we're adding, we're still within the budget for 2026. You'll see additional expense cuts, but not to the magnitude that you've seen in the first 2 quarters.

Your next question is coming from John Korb.

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

Well, I'll be kind again this time. Let me start off by saying I'm delighted that you're at the helm. I get the feeling that if anybody can put this together, you can. You took this job at a time when Milestone was up against it. So I don't think you would have taken the job unless you had really a strong conviction of the open-ended possibilities for the company, both in CompuFlo and the dental side. Needless to say, it hasn't unfolded the way I might have envisioned some time ago where somebody -- some clinician would use this product at CompuFlo and say, where has this been all my life? Get together all the clinicians in the company and say, you're all going to use this. And then there'd be a huge launch. It hasn't worked out that way. Could you just elucidate a little bit on your vision for the company and how it might unfold even if it's inaccurate. Does the CompuFlo side depend on this adviser program? Is that what it is? And how does that work with physicians and adviser program? Why is that needed? And let's say one is successful, how will that translate to wider adoption or will it not? I'm just having a little bit of trouble getting my head wrapped around of how this might all unfold in the future.

You and I have a lot of the same questions, right? But I think we're uncovering them. You're absolutely right that I believed in the technology, and that's part of the reason -- it was an investor, as you know, and why I came back to join the company because I just couldn't understand how something that made so much sense wasn't more widely adopted. And so when I jumped on board, I found the water a little bit deeper than I expected, but that's okay. That's normal in this world of microcaps. The good news is the technology still speaks for itself, and it does all the things that were advertised. I think the challenge for the company was that they saw this great product and they thought it made so much sense and they sort of sprayed in a shotgun approach, and we're talking about standard of care and sort of getting ahead of their skis. And I think, again, sort of stepping back and looking at the relaunch of the adviser program, where we find people that get excited about CompuFlo is probably a little bit more on the academic side. So it's not necessarily at this point, I would say, mainstream folks that are sort of treating epidurals as a bit of a -- not a commodity, but they're running epidurals through the pain clinics, 10, 20, 30, 40, 50 a day. What we're seeing is, in some cases, in some of the more complex cases, thoracic, cervical, spine stim and unique anatomy, scoliosis, all these OB/GYN, right, where they started in labor and delivery. That it just makes a lot of sense. So I don't think that they kind of started focusing, okay, let's do labor and delivery. No, let's not do labor and delivery because that's complicated. Now let's go over to interventional pain and focus. I think what we will find over time is that there is an opportunity, a substantial opportunity in every aspect of the spine and to an extent, the brain. And we will find that we become a very big player or niche player within many different aspects of pain. And so I think the story unfolds that the people that embrace this first are usually the academics. And I don't know if this is okay to say, but the younger doctors who are very interested in new technology, not that the older ones are not. But sometimes the academic community kind of pushes the limits. I'm fortunate enough here to have a person here that is very familiar with some of this stuff and how things get pushed at the academic level. Her father passed away from ALS and she's here with me taking notes. But the academic community really pushes the envelope, and that's where we're going to, I think, see the initial traction. And then I think it's just going to grow because it just makes sense. I mean Dr. Sayed on our Board will tell you, it just is crazy for doctors that are going into the epidural space not to use a flashlight when they're walking into a cave. The fluoroscopy helps. So I don't know that I have the answer for you at this moment, but the feeling right now is it's very broad. We see applications across all aspects of pain. And where it ends up landing most heavily, I'm not exactly sure. I just know that the people that see it and use it believe in it. And the research supports that the reduction in problems is significant. So that was a long-winded answer with a lot of commentary, but I don't know, John, if that helps.

It was a long-winded question. So I appreciate. I just wanted to get your feel for what you were thinking. We're thinking along the same lines. And I'm sure the water has been a little deeper, but I just really appreciate your diligence and the way you're handling the Milestone so far. So I'll be following you and talk to you again in 3 months.

Your next question is coming from Gary Carroll.

The pain man is on board here. Listen, I have a couple of questions for you. Just you've mentioned a couple of times the distribution partners. So who are they exactly? Do we have distributors on board? And are they helping us round up docs? Or what's the story on that?

100%. We've got, I believe it's 8 distribution partners on board now with a handful in the hopper. Typically, these organizations are -- like Axial was back in the day, there are a handful of folks with their own respective networks. So we have distributors on board with quotas, if you will, and we're already seeing activity. In fact, we just had an order come through for one here recently. So yes, we've got 8. So the total number is anywhere from 2 to 5 people per distribution company. So call it, 20 to 30 people out there that are -- have quotas. And Josh Walker, our salesperson is sort of leading that campaign. And those will only grow.

Who, by the way, is doing a fantastic job. He is an exuberant, just a great -- that's a great asset. Josh is doing a fantastic job for you. I know we got a lot of activity here in Florida. You said there's 8 docs so far on board with about 50 cases submitted. Has Evelyn given us any indication of what she thinks we need to have submitted as far as numbers for her to go meet with First Coast and sit down and say, it's being utilized and where that takes us time line-wise to get the T-code, some reimbursement back? Do we have any idea on that numbers-wise?

Yes. No, I think we hit that mark already, right? I mean so I think 53 -- not unfortunately, but probably half of those are commercial payers versus Medicare. And then there's a timing aspect of it, right? So generally, the submissions don't necessarily happen in the day of the procedure. So they get flipped over to the back office at the respective pain clinic, which you know more than most of us about. And then sometimes it takes 2 weeks, it can take up to a month, depending on the backlog to get those submitted. And then once they get submitted, there's another lag of anywhere from 30 to 45 days to receive the EOBs back. So it's a bit of a process. It takes probably 60 days between procedure and actually getting some information back from Medicare. So 50, call it, 25 that have actually been Medicare claims is probably enough. We'll probably wait until the first part of June, as we pointed out, to reengage there. And we're already getting some indications that things are progressing. But yes, so sometime in early June, we'll reengage with the folks at First Coast.

Do we have anybody on board, Eric, that is actually working with the billing people at the various ambassadors that we currently have on board to help them expedite the claims being submitted into Medicare?

Yes. We've got a call center of 3 people that are there to answer questions, to help with the submissions in the Medicare respective billing people at the offices.

Okay. And I want to -- just something else that was mentioned about academia. 5 years ago, when Eric Gilbert was the Vice President, rest in peace, Eric, I took him to Boca Regional Hospital to a group of very, very experienced anesthesiologists. They loved the device. They said, well, we never had -- we haven't had a wet tap in 10 years, we don't need it. But this should be in every teaching institution in the country. You're right. They had young doctors who will use this in a heartbeat. They want something new. They love it. So are we focused on any big medical schools right now trying to get in and get this thing in there?

I'll just say that Josh will be up next week in the East Coast. And I think we all know where a lot of the big academic universities are up in the East Coast. So yes, it is one pillar of our strategy, it includes the teaching hospitals. And we've heard that from every single doctor that we've spoken with that this makes total sense to have this in the teaching hospitals.

100% because then they leave school, they go into a practice and say, where is my CompuFlo?

Yes. Well, and they're also not so concerned about the Medicare reimbursement when you're going into a university that wants to purchase equipment for their students. And we're in the process. There's a budget cycle, obviously, that's part of the university system, and we're in the process of being part of that, right? So you got to get into the budget so that they can procure and everything else. So it's a little bit of a process, but it's foundational because as you point out, these folks leave and they want to continue to use the unit.

All right. Listen, it sounds like you're making great progress. I have just one more question for you. What's our inventory like? Do you have -- do we have a bunch of boxes? I mean, the CompuFlos themselves and disposables, do we have an adequate inventory, get us down the road a ways, looking at China and all this bull crap as far as supply? Are we comfortable with the inventory we have on hand?

Yes. We've got plenty of inventory. We're watching it very closely because it's a chicken and egg sort of thing because if we do get the reimbursement back to where we want it, it could go pretty quickly. So yes, we're monitoring that, trying to conserve dollars at the same time, making sure we have enough. Each unit, if used at 50 cases per month, it represents about $75,000 to $125,000 per unit. So we're careful with where we put the units because we want them to be in reasonably high-volume opportunities, but we've got plenty of inventory to get us to much bigger numbers than we have now.

Okay. I don't want to take up any more of your time. Listen, you guys are doing a hell of a job. I think this company has a future when it was getting ready to go over the cliff. So we're here. I appreciate you guys, support you 100%. Keep up the good work, buddy.

Appreciate your help, Gary.

There appear to be no further questions in queue. I would now like to turn the floor back over to Eric Hines, Chief Executive Officer, for closing remarks.

Thank you. No, I just want to again thank the shareholders for being such great shareholders and say that we're trying to do everything that we can. We appreciate your help. Any insight that you can bring along the way is helpful. So if there's opportunities that you think we should be pursuing, my phone is mostly on all the time. So please reach out. And again, and we're making progress. We're not quite there yet, but encouraged by the momentum that we see across all aspects of the business. So thank you, and have a great day.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.