Brooks,
The company held a conference call after the close of the market today, at which President Dan Martin presided and the new CFO was introduced. It was his first day on the job, and beyond introducing himself, giving his credentials, and expressing his enthusiasm going foward, it was clear that he hadn't had a chance to dig into the company's books, records, or accounting policies. Aside from an inability to adequately field questions relating to accounting for returns and for units shipped at the end of last year's fourth quarter, the session was pretty upbeat, and I hope they replay it, for a more widespread audience.
The questions you raise are critical ones. The company spent the first quarter, and all of April, catching up with the pent up demand from early adopters. Initial interest on the part of early customers was greater than management anticipated, and the company's customer distributors were back ordered for a number of weeks. Now that the inventories in the hands of customers are balanced and the company's production capacity has been expanded, it remains to be seen how strong the sell-through will develope? May and June should give an early indication of this, when the company reports again next July.
Another question relates to product returns. I don't know what the return rate should be, nor do I think the company knows either. However, for accounting purposes, they are reserving 10% of sales for future returns, although the return rate, so far, is well below this. The problem is that the company has offered end users (through their distributors) a satisfaction guaranteed 30 day free trial, and they don't know how many dentists will end up sending the product back. One thing is clear though. Customer sales and service is very important. Dentists have to be properly instructed in the various facets of the Wand's usage, including even what novacaine to use. Not all dentists take the trouble to read the instructions or watch the video tape. The company believes these factors account for most of those Wands that have been returned, after being purchased. The company now has 10-11 sales representatives going around with the distributors' sales people to educate dentists in the the correct usage of the Wand.
This, I believe, is also why the stock is so controversial. Subjective opinions on the future of the Wand depends on who you talk to. Time will tell whether the Wand is an exciting new revolutionary device which will become widely adopted among dentists, or will end up as another flash-in-the pan medical device, along with many others that have not succeeded after signs of early promise.
Step right up folks and place your bets.
|
