Greetings, and welcome to EDAP TMS Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Glenn Garmont, Investor Relations. Thank you. You may begin.

Thanks very much Laura. Good morning, and thank you for joining us for the EDAP TMS Second Quarter 2020 Financial and Operating Results Conference Call. On today's call, we will hear from Marc Oczachowski, Chairman and Chief Executive Officer; and François Dietsch, Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements, which include statements regarding the company's growth and expansion plans. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. With that, I would like to now turn the call over to EDAP's Chairman and Chief Executive Officer, Marc Oczachowski. Marc?

Thank you, Glenn, and good morning, everyone. As we continue to grapple with the global COVID-19 pandemic, we hope all of our listeners are safe and healthy. We appreciate you taking the time to join us this morning. I will start with a brief operational update and then turn the call over to François Dietsch, to review our financial performance. We made significant progress during the quarter and subsequent periods further solidifying our position as a leader in the field of High-intensity focused ultrasound. I would like to begin my comments this morning with a review of our most recent news. As we first discussed last quarter and in line with our expectations, the COVID-19 pandemic did impact our ability to call on doctors and hospitals during the second quarter and reduced treatment volume across our installed base as well, which affects our treatment-driven recurring revenue. Total revenue in the quarter was €9.3 million or $10.3 million as compared to €12.5 million or $14 million in the second quarter of 2019. The year-over-year decline was impart due to lower HIFU device sales, we sold three Focal One units and two Ablatherm units in the year ago period versus two Focal One units in the second quarter of this year. Sales of HIFU disposables also declined as we anticipated due to lower procedure volumes during the quarter. Despite the negative impacts in our revenue due to the challenging international business environment, we carefully managed our expenses and delivered a profitable quarter on an operating basis. As we recently announced, the clinical value of Focal One was further validated by a number of sales successes late in the second quarter, despite the impact of the ongoing COVID-19 pandemic. This is a testament to the entire EDAP team that we were able to maintain our focus during these challenging times. We recently announced four Focal One sales, three of which also included the ExactVu high resolution micro ultrasound solution that we are now marketing as a result of our partnership with Exact Imaging. Recall that this micro-ultrasound resolution is comparable or better than MRI and represents a 300% improvement over conventional ultrasound. Similar to MRI, it allows urologists to visualize and look at suspicious regions within the prostate and target biopsies in real time. Using this technology, urologists can see details that evade other imaging modalities. They can use the ExactVu system to perform targeted biopsies where the transrectal or transperineal to confirm with a high success rate in suspicious lesions seen on the image. During the second quarter, we added Edouard Herriot University Hospital in Lyon, France and Ochsner Medical Center in New Orleans, Louisiana to our roster of highly regarded Focal One hospital customers. Earlier in the first quarter, we completed other bundle sales to Mount Sinai Health System in New York, a well-renowned cancer center and influential reference site for the company. Also, earlier in the quarter, we sold a Focal One system to Keck Medical Center of University of South California, USC. Keck Medicine of USC was the first institution to adopt our first generation HIFU system, Ablatherm, when the technology was cleared by the FDA in 2015, and has decided to upgrade to the latest generation HIFU by acquiring Focal One. We also signed three standalone ExactVu purchase orders. This shall confirm that we are realizing the synergies that we envision when we announced the Exact Imaging partnership in May. Together, these solutions represent the first end-to-end urology solution that can be used all the way from diagnostics to equipment. Our growing pipeline shows the value that urologists continue this combined offering and we look forward to announcing many more similar deals in future. Prostate cancer diagnosis improvements can only be delayed following with ultimately – addressed. Therefore we remain optimistic that this short-term impact will not affect our long-term momentum of market adoption of HIFU and its numerous benefits for patients, most notably quality of life to the patient. Last quarter, we told you about the numerous online webinars and online training sessions that we had with urologists, agents and distributors. These have allowed us to stay in front of these key stakeholders. We are carefully monitoring our key markets in the U.S. and elsewhere for of loosening of the friction and to this cause different countries have different levels of success. But I believe that none of this will affect our long-term mission, which is to make these technologies available to the broadest possible patient population. We continue to build inventory so that we are in position to ship systems as soon as we are able to do take it. Turning now to reimbursements. You will recall last year we announced that the American Medical Association’s CPT Editorial Panel, at its May 2019 meeting, accepted our application to establish a new Category 1 CPT code that would facilitate reimbursement for the ablation of malignant prostate tissue with HIFU technology. On August 12, CMS released the proposed rules for hospital outpatient payments or HOPPS and physician’s fee for 2021. Although these are proposed rules and CMS has the opportunity to make adjustments by December when they will release the final rule based on the comments they receive in the mean time. The proposed rule usually gives a fair indication where the payments will be the following year. On the hospital payment side, CMS proposes to maintain the HIFU procedure in the level 5 urology APC in 2021. This translates into a payment for a hospital performing a HIFU procedure on a Medicare patient of around $4500 as a national average, as this could locally paid on the wage index. This represents an increase of $256 or 6% from the payment hospitals get today from Medicare for a HIFU procedure. In the physician fee schedule, proposed rule, CMS said for the first time that payments for physicians performing a HIFU procedure in the U.S. In the proposed rule CMS has said the physician’s work Relative Value Unit or RVU for performing HIFU at 17.73, which is slightly below the recommendation of 20 units made by the experts from the AMA’s RUC process. These proposed 17.73 units translates to an average payment of $940 or urologists performing a HIFU procedure on a patient under the Medicare program. As a reference, the comparable established therapy for prostate cancer prior therapy yields 13.6 work RVUs which translates to $730 for the urologist under the same patient condition. The radical prostatectomy would grant the urologist 21.36 work RVUs for a Medicare payment of $1096 or 26.8 RVUs and $1350 if performed laparoscopically with or without robotic assistance. In summary, according to this proposed rule, a physician performing a HIFU procedure after January 1, 2021, will obtain reimbursement that is slightly lower relative to radical surgery, but around 30% higher than when performing prior therapy. This is a very important development as it gives hospitals and urologists’ line of sight for reimbursement for procedure conducted with Focal One and will therefore the physician can catalyst to further adoption of the technology in the U.S. Turning to our endometriosis program, we are now getting full approval by French Health Authorities to initiate the Phase 2 clinical trial of HIFU for the treatment of deep invasive endometriosis. This form of endometriosis is painful and debilitating and the current standard of care is surgical resection to remove either a part of the uterus of scar tissue that maybe constrictive. We previously ran a Phase 1 study in this indication and found that 20 women treated with our HIFU technology benefited greatly. The detailed results were published in December of last year in Ultrasound in Obstetrics & Gynecology Journal. Needless to say we are moving quickly into the next development phase. The trial is being run by Professor Dubernard of the Croix-Rousse University Hospital in Lyon and we will expand to additional sites in France. The advancements of our endometriosis program is also consistent with our recent strategic shift from our legacy lithotripsy business and toward HIFU. Endometriosis is just one example of a condition that we believe can benefit from this non-invasive technology. So we see significant opportunities to expand our HIFU product line into very large global market opportunity. This trial will commence next month and we look forward to keeping you apprised of the progress. In the mean time, we continue our R&D efforts exploring HIFU for other applications. Our sales efforts are complemented by clinical papers that demonstrate the efficacy and safety of HIFU relative to other treatment options. Just last week, we announced the two papers have been accepted for publication in the Procedures and Peer-Reviewed Journal of Urology. The study is conducted at USC and the University of Miami report on outcomes and follow-ups of up to two years on the combined 152 patients. Importantly radical surgery was avoided in a vast majority of study participants and in confidence and importance were avoided or quickly returned to baseline levels. These were the first published U.S. studies and the results here are what we have observed in prior European studies that involved larger patient cohorts and longer follow-up periods. To further support our growth initiatives, we recently made key additions to our team and Board. We recently announced the appointment of Marie Meynadier to our Board of Directors. Marie brings more than 20 years of experience in medical technology operations and leadership and most recently served as Chief Executive Officer of EOS Imaging. And earlier in the quarter, we announced that Frank Van Hyfte as President of Global Sales and Marketing for ExactVu range of products. Frank joined us from Exact Imaging as he was playing a key role in the integration of our sales efforts. With these additions, round at what I consider to be a world-class team and build certainly capable of achieving our operational and financial goals. Lastly, I want to comment brief on our balance sheet before turning the call over to François. We ended the second quarter with cash and cash equivalents of €15.7 million or $17.6 million. Subsequent to June 30, we received an additional €4 million in COVID-related assistance from France regulators. As François will explain this amount adds to COVID-related funds already received during Q2 from several jurisdictions in which we operate. These funds carries favorable terms and needless to say we were very pleased to have received these non-diluted funding, which will help us achieve our clinical and commercial objectives. And now our CFO, François Dietsch will provide some further details of our financial results. François? François Dietsch: Thank you, Marc, and good morning, everyone. Before getting into the numbers, I would like to comment on our new accounting feature that we are initiating this quarter. Recall that we recently announced the strategic hits in both our research and development efforts and commercial initiatives to our HIFU and away from lithotripsy. As a result of the system as well as our exclusive business and agreements with Exact Imaging in fact we needed to refine our reporting segments to better reflect our review of our businesses internally and how we measure our progress. Going forward, we will report in three distinct segments. First, HIFU, which includes Focal One, Ablatherm and relate to consumables and services. Second, lithotripsy, which includes revenue generated from the existing Sonolith brands and third distribution, which includes the sale of complementary products such as lasers and micro-ultrasound systems and products from third-parties. Now turning to the results. Note that all figures, except for percentages, are in euros. For conversion purposes, our average euro-dollar exchange rate was $1.1093 for the second quarter of 2020 and $1.1063 for the first half of 2020. Total revenue for the Q2 2020 was €9.3 million, a 25.9% decrease, compared to total revenue €12.5 million for the same period in 2019. Second quarter 2020 revenue reflects the impact of the ongoing COVID-19 pandemic on both procedure volumes and equipment sales. Total revenue in the HIFU business for the second quarter of 2020 was €2.6 million, a 44.2% increase compared to €4.6 million for the second quarter of 2019. During the quarter, we sold two Focal One and five HIFU devices. The total revenue in the LITHO business for the second quarter of 2020 was €2.9 million, a 22.8% decrease compared to €2.8 million for the second quarter of 2019. And total revenue in the Distribution business for Q2 2020 was €3.8 million, a 8.3% decrease compared to €4.1 million for the second quarter of 2019. Gross profit for Q2 2020 was €4.3 million, compared to €6.3 million for the year-ago period. Gross profit margin on net sales was 46.8% in the second quarter of 2020, compared to 50.7% in the year-ago period. The decline in gross profit year-over-year was mainly due to in part to lower sales in HIFU business driven primarily by COVID-19. Operating profit for the second quarter of 2020 was €0.3 million, compared to an operating profit of €1.7 million in the second quarter of 2019. In spite of the impact of the COVID-19 pandemic, we are pleased to report a profitable quarter. Net loss for the second quarter of 2020 was €0.2 million, or €0.01 per diluted share, as compared to a net loss of €1.4 million, or €0.05 per diluted share in the year-ago period. Turning to the first half of 2020, total revenue for the first six months of 2020 was €16.9 million, a decrease of 25.4% compared to total revenue of €22.6 million for the same period in 2019. As mentioned, first half 2020 revenue reflects the impact of the ongoing COVID-19 pandemic on the company’s activities. Gross profit for the first six months of 2020 was €7.4 million, compared to €11.2 million for the year-ago period. Gross profit margin on net sales was 43.9% for the first six months of 2020, compared to 49.5% in the year-ago period. The decline in gross profit year-over-year was mainly due to lower sales in the HIFU business driven by COVID-19. Operating loss for the first six months of 2020 were €1.2 million compared to an operating profit of €1.9 million for the same period of 2019. Net loss for the first six months of 2020 was €1.5 million or €0.05 per diluted share, as compared to a net income of €1.7 million or €0.06 per diluted share in the year-ago period. Finally, we finished the second quarter with a very strong cash balance. Cash and cash equivalents including short-term investments were €15.7 million or $17.7 million using a euro-dollar exchange of $1.1237. As Marc indicated, subsequent to June 30, we received two COVID-related loans granted by the French government totaling $4 million. These loans carry very favorable terms and interest rates ranging from 0.25% to 1% with a repayment term between 1 and 12 years. This French loan added towards the assistance already received during the second quarter and we received €0.2 million from the U.S. patient protection program that as you probably know and so I’ll give the assumptions on it. And we received another loan of €0.4 million from a Japanese COVID related assistance program, which carries an interest rate of 1.8% and is repayable beginning in two years. As a result, our Q1 pro forma cash balance is €19.7 million. And we now turn the call back to Marc.

Thank you, François. In closing, the second quarter was a challenging one again in the backdrop of COVID-19, but we were able to maintain our focus and continue to build our HIFU pipeline while also advancing developments of new indications. We will now open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Andrew D'Silva with B. Riley FBR. You may proceed with your question. Andrew D'Silva: Good morning. Thanks for taking my question. Glad to hear everybody sounds well. Just a couple of quick ones for me. We ran a series of channel checks and that indicated as the second quarter which come into the close just into the – beginning of the third quarter, procedure volumes were approaching pre-pandemic levels, at least in certain regions and I was curious if that was aligning with what you are seeing across your segments effectively as the second quarter was coming to an end and into the third quarter or are you seeing volumes kind of snap back at pre-pandemic levels?

Hello, Andy. Good to talk to you. Actually, we saw definitely more activity, I mean, more close to normal activity in the third quarter than we had during the second quarter where in the lot of countries confinement was observed. So, at the same time, as you know, at least in Europe, but also little bit in the U.S. the summer, I mean the months of July and August in the middle of summer are not the most active time in terms of treatments and business activity. But at least we’ve seen that some – more normal activity – close to normal Q3 activity after the – at the end of the second quarter. Andrew D'Silva: Okay. That’s good to hear. And could you repeat what the facilities that you look for HIFU? And was it APC level 5 or level 6 payment? And just because the timing is a little bit off as it relates to most years in the past, we should sort of assume that the reimbursement will be in place starting at January 1, 2021, correct?

Yes. Absolutely, absolutely, and as I explained today, what we got is the proposed rule which is again only a proposed rule and that may change. But as I said, unusually as we see it gives a fair indication of what will be the level of reimbursement for the next year. And as I said as well on the technical parts of the reimbursement, the proposed rule maintains the level 5 that we had this year and last year for HIFU reimbursement with the real new thing that we got this year on the proposal is because we are starting to CPT code next year from the C code this year is that we got that physician fee and RVU as a safety to that physician fee which actually delivered a bit below what was the recommendation given by the American Medical Association RUC panel which is where they give the recommendation on the values. And – but it was pretty well positioned and again, as I said, 30% higher than what prior surgery and other established minimal invasive therapy for prostate cancer has in the U.S. and it’s a little bit below what surgery – what radical surgery can be done virtually. This now definitely will be – the reimbursement will be in execution in next year on January 1, but now this needs to be confirmed by the final rule and usually they give the final rule somewhere in November, but we see – we’ve seen some delays in the proposed rule of this year. So we might expect some delays as well in the final rule, because there is a time trend in which there could be some permanent questions – requests from the proposed rule. So we are expecting to get the final rule somewhere in December. Andrew D'Silva: Perfect. And has there been any discussions with commercial payers yet or is that’s going to be starting subsequent to be final rules being implemented?

No, I mean, of course, we are trying to maintain some discussion, but real discussion about payments will certainly happen when the strategic growth will be more final in terms of the rule and also the – we’ve not been given yet the code – the number of the code for the CPT and that should happen probably in September, October. So, once we have the value, the final rule and of course then we can really get started into a negotiation with the commercial payer. Andrew D'Silva: Okay. Perfect. And just a last question for me, just couple of balance sheet items. Could you just let me know how much debt you had outstanding at the end of the quarter? And, as far as the $4 million that you received subsequent to the second quarter, is that forgivable or do you expect to have to pay that back?

Well, let me – let’s François check for you the debt at the end of June, but as far as for the loan that we got the €4 million loan that we got granted by French government, these are loans. So they are not forgivable. But as François said, it’s a very favorable conditions and terms as we will start repaying them only within a year from now and we have the choice in paying them back from one year to five year period with an interest rate between 0.25% to 1% annual rate. So, it’s very favorable. Andrew D'Silva: Okay. Perfect. Wonderful. Hey, go ahead.

Yes. Just - François will just give you the level of debt that we had at the end of June. François Dietsch: Yes. Our financial debt remains low at the end of June of between €2 million and €3 million and on top of that, we have then this €4 million.

And it’s mainly, I mean, the debt we have at the end of June is like, usually mainly operational, nothing else. Andrew D'Silva: Okay. So, it actually went down from the end of last year, the financial debt that you had? François Dietsch: Yes.

Yes. Andrew D'Silva: Okay. Perfect. Great. Hey, thank you very, very much and best of luck going forward.

Thank you, Andy.

Our next question comes from the line of Brooks O'Neil with Lake Street Capital Markets. You may proceed with your question. Brooks O'Neil: Good morning. I hope you guys are safe and well over there in France.

Hey, Brooks, yes, we are doing good. I hope you are doing good too. Brooks O'Neil: Yes, so far so good. Everything fine. Appreciate your asking. I want to follow-on with Andy’s last – well, not last question, almost last question about the commercial payers, I was curious what you both expect and hope for from the conventional payers as it relates to reimbursement for the hospitals, as well as reimbursement for the doctors? Is it – I mean, specifically, is it reasonable to expect that commercial payers might pay more than Medicare? Or would you expect commercial payers to pay less?

That’s a very good question and I would love to have the accurate answer on that, but basically the – the usual game is that, commercial payer will pay more. They will usually use the - on the basis of the CMS payments value and then utilize and it’s great variable from one payer to the other and even from one region from the other. So, it’s very difficult. I think the most important thing is to get registered and to get into the program of those commercial payers and then, again, like as I usually did, there is a notification decision that is used by the commercial payer. So usually it’s more. Brooks O'Neil: Sure. That’s good. And just sort of thinking along the same lines, obviously, the Medicare, the traditional Medicare program is big here in the United States. Have you got any feel for the Medicare advantage payers? I mean, obviously, same basic population, elderly people, relatively high problem with prostate cancer. Do you think – do you see any indication that any of the big Medicare advantage guys are – see this as a really important development?

I am not sure I get your question, but, yes indeed, I mean, Medicare patients are usually patients over 65. So there is a strong population with prostate cancer at this concerns and need of treatments. Brooks O'Neil: Sure. Okay, let me just switch gears for a second and say, I am not as aware of the reimbursement for the exact yield. Can you just give us a quick sense for where you are at in terms of reimbursement there?

Absolutely, so, today there is no specific reimbursements for the - exactly with the micro-ultrasound application itself. But the exact new machine can apply for the same reimbursement level as the targeted biopsy devices. So, we are using that and at the time we are working on, as you know, we just get – we just started with that technology in May and June. And we will definitely also work in trying to continue using that targeted biopsy reimbursement level, but also build a specific reimbursement for the micro-ultrasound diagnostic itself. It’s going to take – it may take some time to get there. Brooks O'Neil: Sure, of course. So, all of that, obviously, we are very interested in your progress on the prostate side, but I am also pretty interested in the endometriosis. What do you think is timing as it relates to the next few key milestones in endometriosis? Are we thinking – we might see some significant progress with the trial in 2021 or is that going to take longer?

Yes, the next milestone is really to conclude the inclusion of patients and as I said just earlier, we will get started in treating the first patient next month, which is almost next week. And again, I mean, there is a lot of enthusiasm from the clinical team led by Professor Dubernard and again, a lot of enthusiasm based on the results of the feedback we got from the patients from the Phase 1 trial. So, we have strong expectation that we might be able to go quick in recruiting. Though, as I said also, we will start with Professor Dubernard, who is the Chairman of Gynecology in Croix-Rousse and then we will extend the trial to other sites in some. So, there will be some training minute as well. So it might take some time. But again, we expect to be extremely active and working hard and fast in recruiting and treating patients by the end of 2020 and in 2021, as well. So that we can go quick into the follow-up phase. Brooks O'Neil: Great. Thank you very much. Keep up the work. I know it’s a strange time. But just keep the pedal to the metal.

Thank you very much.

[Operator Instructions] Our next question comes from the line of Ramakanth Swayampakula with H.C. Wainwright. You may proceed with your question.

Thank you. This is RK from H.C. Wainwright.

Hello, RK.

Good afternoon, Marc and François. Hope you guys are doing fine and staying healthy.

Sure. Thank you, RK.

Yes. Couple of questions. So, now that you have Exact Imaging product ExactVu and you are commercializing that along with your Focal One. Are you seeing any increase in leads or previous leads converting into clients, because now that you have a better mousetrap and it’s an end-to-end solution?

Yes. Actually, we can feel that this is definitely helping us to get into new prospects and in both aspects people doing Exact Imaging, these are some from Exact Imaging, obviously it’s interesting to Focal treatment, so we can really bring them a solution with Focal One and also it helps like we did and we saw that it was a great success in the four machines we sold lately. Three of them were bundle deals. So, people are getting our – urology department or hospital that really wants to get started into a new prostate cancer focal program really needs to get – if you want to be posted on that, we need to get to the devices to be complete and really to manage the machine from scratch to the end. So that’s – as we can see that brings more interest of that increasing interest and motivation to get the deals done. So, we can really feel the added value of getting the two products together.

Okay. And then, also with the CMS proposing a dollar reimbursement both for the HIFU procedure and the urologist. So, there are two questions, one is like, what percentage of eligible patients who could go through your procedure have been waiting for such an announcement in the sense try and get a good feel for the reimbursement. And also for the doctors, do you see some of these doctors becoming more enthusiastic now that they can also dip into this and at a little better dollar number than what they will get with trial surgery or other things. Whether it is anecdotal information or real? How would you sensing the enthusiasm if there is any from the hospitals and also from the doctors itself?

No, it’s difficult and again, I mean, the proposed rule was just announced less than two weeks ago. So it’s pretty new and it’s a proposed rule still. So it’s not reality in its proposition. So, we have to wait until the planned rule is developed. Certainly, it will at least give a clear path to both the patients and the urologists in terms of the dollar amount to be spent or to be received for the procedure. So, it will really give a frame to the treatment that will sort of normalizes or come valid and that will definitely help adoption and at the same time, it will stress with the R&D that will also help us to get started when it’s the right time into commercial payer negotiation, which again might interest a lot of patients.

,:

So, for the timeline it’s very difficult and it’s usually difficult, because it’s very related to the inclusion of the patient to the way the training of the new centers and all that. And in the current context, it is very difficult to have any expectation or any view of the planning. I mean, if we get back to sort of do some product confinement, I mean, hospitals just start clearing those studies. So, it’s very difficult. But like I said before, I mean we have a leader on the clinical study, Professor Dubernard, who is extremely motivated and so just he knows the technology well because he has ran the Phase 1 trial. And we also have among the best centers in France that are joining the trial and everybody really see that as a great opportunity. So, there is strong motivation. You may see moving forward tests, but now it’s difficult to give some real timeline expectation. And your second question was on the technology. Today the study was approved to be performed with the Focal One. That’s the exact same team as we use for prostate. So there is no technical development could be done so far.

Okay. Thank you very much and talk to you soon.

Thank you, RK.

Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn this call back over to Mr. Marc Oczachowski for closing remarks.

Well, again, thank you for joining us today. Stay safe. And we hope to give you updates on our development very soon. Again, stay safe and thank you for joining us today. Have a good day. Bye-bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.